UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
(Amendment Number 2)
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) or (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Lexon, Inc.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1533326
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8908 South Yale Avenue
Suite 409
Tulsa, OK 74137
(Address of principal executive offices, including zip code)
(918) 492-4125
(Registrant's Telephone Number, Including Area Code)
(918) 492-2560
(Registrant's Facsimile Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
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Information Required in Registration Statement
Certain Forward-Looking Information
Certain statements included in this report which are not historical facts
are forward looking statements, including the information provided with respect
to future business opportunities, expected financing sources and related
matters. These forward looking statements are based on current expectations,
estimates, assumptions and beliefs of management, and words such as "expects,"
"anticipates," "intends," "believes," "estimates" and similar expressions are
intended to identify such forward looking statements. Since this information is
based on current expectations that involve risks and uncertainties, actual
results could differ materially from those expressed in the forward-looking
statements.
Part I.
Item 1. Description of Business
(a) Business Development
1. Form and Year of Organization
Lexon, Inc., an Oklahoma Corporation ("Lexon" or the "Company"), is a
development stage corporation organized on December 16, 1997 to identify and
commercialize proprietary medical biotechnology opportunities.
2. Bankruptcy or Receivership
Lexon has never been in bankruptcy or receivership.
3. Mergers, Reclassifications and Purchases of Assets
Under the terms of the Agreement and Plan of Merger dated May 11, 1998,
the Company issued to UTEK Corporation ("UTEK"), the sole shareholder of
Gentest, 1,000,000 shares of common stock of the Company. Gentest ceased to
exist by reason of the Merger, and the assets and liabilities of Gentest became
assets and liabilities of Lexon. The Merger was accounted for by the Company as
a purchase. The 1,000,000 shares of common stock of the Company were valued at
par value of $0.001 per share, which the Board of Directors determined to be the
fair value of the common stock.
The assets of Gentest were (1) an exclusive worldwide license agreement
with the University of South Florida Research Foundation ("USFRF"), a not for
profit corporation and a university direct support organization of the
University of South Florida ("USF"), the ("License Agreement"); and (2) a
Research and License Agreement with North Shore University Hospital Research
Corporation ("North Shore"), the ("Sponsored Research Agreement"). The License
Agreement and Sponsored Research Agreement are attached hereto as Exhibit 6.1
and 6.2, respectively. The License Agreement granted Gentest the exclusive
worldwide rights to develop products based on a patented-pending discovery
linking the ebaf protein to colon cancer and certain forms of ovarian and
testicular cancer. The License Agreement contains royalty payment provisions
which are discussed in Item 1, paragraph 7 "Patent, trademarks, licenses,
royalty agreements or labor contracts." The Sponsored Research Agreement
provides for a 24-month research and development program to develop laboratory
assay kits for the screening of colon cancer. Development of the test kits is
being conducted at North Shore under the direction of Dr. Siamak Tabibzadeh.
The liabilities of Gentest were to pay USFRF $100,000 for the exclusive
license, to pay North Shore $311,250 to develop the test kit and $5,000 for the
exclusive license to any improvements and to pay UTEK $55,000 for its services
in locating and reviewing the technology and negotiating the agreements. The
liabilities were paid in full by Lexon on July 8, 1998.
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By reason of the Merger, Lexon owns the exclusive worldwide license to
develop, manufacture and market the Ebaf Assay TM, a blood test that allows for
the early screening for colon cancer and certain types of ovarian and testicular
cancers. The Ebaf Assay test kit, which is being developed for general
laboratory use, can detect elevated levels of the Ebaf protein in a patient's
blood. Preliminary research indicates that elevated levels of the Ebaf protein
is an indicator of colon cancer and certain forms of ovarian and testicular
cancer.
The discovery linking the Ebaf protein to colon, ovarian and
testicular cancers was made by Dr. Siamak Tabibzadeh, M.D., while he was a
professor in the Department of Pathology at the University of South Florida
("USF") and an attending pathologist at the Moffitt Cancer Center at USF. Dr.
Tabibzadeh is now Chief of Experimental Pathology and Professor in Pathology at
North Shore Long Island Jewish Medical Center in Manhasset, New York ("North
Shore"), where the blood test kit is being developed.
On July 8, 1998 and pursuant to the Sponsored Research Agreement
attached as Exhibit 6.2 hereto, Lexon paid $311,250 to North Shore to develop
the Ebaf Assay. Through June 30, 1999, Lexon paid $10,000 for Dr. Tabibzadeh to
purchase equipment and order supplies and has committed to pay an additional
$81,162 in 6 installments of $13,527 each,payable on or before October 1, 1999,
December 1, 1999, February 1, 2000, April 1, 2000, June 1, 2000 and August 1,
2000, to expand Dr. Tabibzadeh's research staff to expedite the development of
the prototype test kit. A copy of the agreement for additional funding is
attached as Exhibit 6.3.
Lexon has no operating history prior to December 16, 1997. Lexon has
had no revenues from the sale of products to date and has funded its activities
through the sale of its common stock and through loans by shareholders. Lexon
does not anticipate any revenues from the sale of product in 1999. Lexon's
corporate headquarters is located in Tulsa, Oklahoma. Lexon presently leases its
office space, which it shares with other development stage technology companies.
Lexon has no full time employees and no payroll. The officers and other
part-time employees of Lexon serve without salary or other non-equity
compensation.
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(b) Business of Issuer
1. Principal Products and Services of Lexon and Their Markets
Lexon has no products or services for sale at this time. It is
anticipated that the Ebaf Assay will be marketed when development is completed
and FDA approval is secured, either directly by Lexon or by a corporate
marketing partner, to laboratories, research institutions, hospitals, clinics,
doctors and other medical professionals throughout the world. The colon cancer
blood screening test using the Ebaf Assay is the only product Lexon has in
development.
The Lexon blood test to screen for colon cancer is based on the finding
that cancers of the colon contain large amounts of the Ebaf protein. The Ebaf
protein is a member of the TGF beta family of regulatory proteins. It has been
found to be present in colon cancer and in some forms of ovarian and testicular
cancer, but its role in these tumors is not known. The Ebaf protein is "shed"
into the bloodstream by the tumor and can be detected in the blood through the
Lexon Ebaf Assay. Approximately 27 other types of malignant tumors have been
tested for the presence of Ebaf. However, the protein was not demonstrable in
any of these tumors except colon cancer and some forms of testicular and ovarian
cancer. Therefore, the Ebaf protein marker seems to be unique to colon cancer
and some forms of ovarian and testicular cancer. Since colon cancer is the
second leading cause of cancer deaths in the U.S. after lung cancer, the major
use for the Ebaf Assay is to provide screening of patients in general for the
presence of Ebaf as a marker for potential colon, ovarian or testicular cancer.
The Lexon Ebaf Assay is based on the Enzyme Linked Immunosorbent Assay
or ELISA format, a generally recognized and widely used immunological testing
platform. The test involves a monoclonal antibody to Ebaf with which the ELISA
plate is coated. When the plate is exposed to a sample of blood containing the
Ebaf protein, the monoclonal antibody captures the Ebaf protein and locks it
onto the surface of the plate. The plate is then rinsed and exposed to a
polyclonal antibody which has an enzyme ligand attached to it. The polyclonal
antibody also binds to the Ebaf protein if it is present. This technique is
called a "sandwich" ELISA format, because the substance being analyzed is
"sandwiched" between a polyclonal and a monoclonal antibody. The entire plate is
then exposed to an indicator solution which changes color in the presence of the
enzyme ligand. The degree of color change is dependent on the amount of enzyme
present and hence on the amount of Ebaf protein on the surface of the plate. The
degree of color change can then be read in a standard laboratory colorimeter.
The level of Ebaf measured by the Lexon ELISA assay will be compared to blood
levels of the Ebaf protein in normal healthy subjects. If the level of the Ebaf
protein in the blood is increased relative to the base level, it is indicative
that cancer of the colon or possibly of the ovaries or testis is present. In
this case, further diagnostic testing would be indicated in order to locate and
delineate the type of tumor producing the elevated Ebaf levels.
2. Distribution Method of Products and Services
Lexon has not yet determined how the colon cancer blood screening test
using the Ebaf Assay will be distributed. Lexon is in the process of seeking a
corporate marketing partner to aid in the marketing and distribution of the Ebaf
Assay. Lexon does not presently have any manufacturing or distribution capacity.
Lexon has not determined the commercial arrangements under which it would be
willing to engage such a corporate marketing partner.
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3. Status of Publicly Announced Products or Services
The Ebaf Assay is still in development. Dr. Tabibzadeh has identified
and classified the monoclonal and polyclonal antibodies, and is presently
testing monoclonal antibodies to determine which one will be most effective in
the prototype Ebaf Assay test kit. Lexon expects that research will be completed
in early 2000. As soon as the best monoclonal antibody is selected, Dr.
Tabibzadeh will make a small number of prototype test kits that will then be
used to gather sufficient data to support the pre-application in-person
conference with the FDA staff. The pre-application in-person conference , which
Lexon expects to have with the FDA staff in mid-2000, determines the range and
scope of the clinical test data needed to obtain FDA approval. At this time,
Lexon expects that an FDA application will be submitted during 2000 and approved
in 2001, though no assurance is given to that effect. The schedule will depend
in large part upon the pre-application meeting, the range and scope of the
clinical tests required, and the results of the clinical tests. The science and
the results of the clinical tests will govern the timing of regulatory approval.
Lexon plans to seek FDA approval for the Ebaf Assay as a screening test and does
not plan to seek approval for the test as a monitoring device.
4. Competitive Business Conditions, Competitive Position and Methods of
Competition
Competition in the medical products and services industry is intense.
Although growth in the medical industry in general and sales of medical cancer
screening tests in particular is expected to expand as the population ages and
cancer awareness increases, the number of potential competitors in the
marketplace makes competitive pressures severe. The medical screening and
diagnostic industry has attracted large and sophisticated potential competitors
with established brand names who have already successfully developed and
marketed products and who have greater financial, technical, manufacturing,
marketing, regulatory and distribution resources than Lexon.
There is no known blood test currently available to screen for colon
cancer. Current methods to screen for colon cancer include the CEA test, the
fecal occult home test, and colonoscopy. These methods have significant
disadvantages as compared to the Ebaf Assay. Lexon believes the Ebaf Assay can
also have some utility in monitoring colon cancer patients, but has no plans to
market the test as a monitoring device. Presently, the carcinoembryonic antigen
or CEA test is the only one other viable monitoring test on the market, however,
the CEA test yields positive results in a variety of conditions other than colon
cancer and has a very high false positive rate. The CEA test has some utility in
monitoring colon cancer patients, but is of no use as a diagnostic screening
test.
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Regulation by governmental authorities in the United States and other
countries could be a significant factor in ongoing research and product
development activities. Lexon's diagnostic products will require regulatory
approval by the FDA and possibly other governmental agencies prior to
commercialization. Various statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, recordkeeping and marketing of such
products. The lengthy process of seeking these approvals, and the subsequent
compliance with applicable statutes and regulations, requires the expenditure of
substantial resources. Any failure by Lexon to obtain, or any delay in
obtaining, regulatory approvals could materially adversely affect Lexon.
In the United States and elsewhere, sales of diagnostic, therapeutic
and other pharmaceutical products are dependent, in part, on the availability of
reimbursement to the consumer from third-party payors, such as government and
private insurance plans. Third-party payors are increasingly challenging the
prices charged for medical products and services. There is no assurance that any
of Lexon's products will be considered cost effective and that reimbursement to
the consumer will be available, or will be sufficient to allow Lexon to sell its
products on a competitive and profitable basis.
The levels of revenues and profitability of Lexon may be affected by
the continuing efforts of government and third party payors to contain or reduce
the costs of healthcare. While Lexon cannot predict whether any such legislative
or regulatory proposals will be adopted, the adoption of such proposals could
have a material adverse effect on Lexon.
Lexon's main potential competitors are the major diagnostic
pharmaceutical corporations, such as Abbott Pharmaceuticals, Roche,
SmithKlineBeecham, Johnson & Johnson and Bayer. These companies have substantial
marketing, distribution, regulatory compliance, financial, and research and
development capabilities. If any of these competitors were to develop a colon
cancer blood screening test not involving the Ebaf Assay, such an event may have
a material adverse effect on Lexon's ability to compete in the medical screening
and diagnostic field.
5. Sources of Raw Materials and the Names of Principal Suppliers
Lexon does not manufacture any products, so it has no raw materials.
The Ebaf Assay is a simple product to manufacture, its main components being a
plastic plate, monoclonal and polyclonal antibodies to the Ebaf protein, and 9
fluorescent markers, each of which is commercially available. The identification
and classification of the antibodies and the precise structure are keys to the
Lexon test kit.
6. Dependence on one of a few major customers
Lexon anticipates marketing its test kits to the entire field of
medical professionals and does not anticipate being dependent on any particular
customer. Because historical information is not yet available due to Lexon's
short operating history, it is premature to estimate if any customer will
account for more than 1% of Lexon's yearly anticipated sales volume when its
test kit is commercially available for sale.
7. Patents, trademarks, licenses, royalty agreements or labor contracts
Dr. Tabibzadeh was employed at the University of South Florida ("USF")
when the discovery of the Ebaf Assay was first made. USF owns the US Patent,
No.5,916,751, which was published on June 29, 1999, related to the Ebaf Assay.
Lexon has an exclusive license agreement with South Florida Research Foundation
("USFRF") whereby Lexon agreed to pay a royalty equal to the greater of (a) five
percent (5%) of revenue from the sale of products based on the concept for the
diagnosis of selected adenocarcinomas and any additions, extensions and
improvements thereto or as a minimum (b) zero (0) dollars through April 9, 2000;
$75,000 at the end of year three; $100,000 at the end of year four; $125,000 at
the end of year five; $150,000 at the end of year six and for each successive
year thereafter during the term of the exclusive license agreement. The royalty
obligation will expire after the longer of twenty (20) years or the expiration
of the last to expire patent that covers the licensed intellectual property.
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In June, 1998, Dr. Tabibzadeh joined North Shore University Hospital,
where he continues to develop the Ebaf Assay. It is the new developments and
discoveries he has made and will make while at North Shore that are covered by
Lexon's License Agreement with North Shore (see Exhibit 6.2). Lexon agreed to
pay to North Shore a royalty equal to one-half of one percent (0.5%) of revenue
from the sale of such products and ten percent (10%) of any consideration
received by the Company from granting sublicenses. No minimum royalty payments
are required under the License Agreement with North Shore. The royalty
obligation will expire after the longer of fifteen (15) years or the expiration
of the last to expire patent that covers the licensed intellectual property.
USF owns the US Patent, No.5,916,751, on the Ebaf Assay published on
June 29, 1999. Lexon has no information that has lead it to believe that the
patent infringes the intellectual property rights of another, but it gives no
assurance to that effect. The filing, prosecution and maintenance of all patent
rights regarding the Ebaf screening process are within the sole discretion of
USF. Lexon has the right to request that USF seek, obtain and maintain such
patent and other protection to the extent that USF is lawfully entitled to do
so, at Lexon's sole expense. There is no assurance that USF will seek, obtain or
maintain such patent and other protection to which it is lawfully entitled.
Further, there is no assurance that Lexon will have sufficient working capital
to fund USF's efforts in those activities.
Dr. Tabibzadeh's research was funded in part with grants from the
National Institutes of Health. The Patent & Trademark Act (Public Law 96-517),
also known as the Bayh- Dole Act, created a uniform patent policy among Federal
agencies that fund research. Bayh-Dole enables small businesses and non-profit
organizations, including universities, to retain title to materials and products
they invent with Federal funding. In return, the U.S. government retains a
perpetual, non-exclusive right to use for government purposes any invention that
results from its funding without having to pay license fees and royalties. In
addition, the U.S. government is protected from lawsuits and infringement
claims. There is no assurance that the interests of NIH will not materially
adversely affect Lexon or its business.
There is presently no foreign patent protection for the test kit,
however,a PCT application has been filed by USF. There is no assurance that any
foreign patents will issue. The lack of foreign patent protection could result
in the manufacturing and sale of test kits copied by competitors who are not
obligated to pay royalties. As a result, these competitors could achieve
superior operating margins, which could adversely affect Lexon's ability to
compete.
8. Need for Governmental Approval
Sale of Lexon's test kit is regulated by the United States Food and
Drug Administration ("FDA"), whose approval is required prior to sale in the
United States. The process of seeking these approvals, and the subsequent
compliance with applicable statues and regulations, is lengthy and requires the
expenditure of substantial resources. Any failure by Lexon to obtain, or any
delay in obtaining, regulatory approvals could materially adversely affect
Lexon. The FDA regulates the research, design, testing, manufacture, safety,
labeling, storage, record-keeping, advertising and promotion, distribution, and
production of medical devices in the United States. In-vitro reagents of the
type used in the Lexon test kit when used in screening and diagnostic products
are medical devices subject to FDA regulation.
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In-vitro diagnostic devices may fall into any one of the three
classifications of devices, depending on the degree of regulatory controls the
FDA deems appropriate to protect the public health. Most in-vitro diagnostic
devices on the market today fall into Class I or Class II, with a few high-risk
diagnostic devices subject to the more rigorous regulation of Class III.
Generally, before a new device can be introduced into the market in
the United States, the manufacturer must obtain FDA clearance of a 510(k)
pre-market notification ("510(k)") or approval of a pre-market approval
application "PMA"). If the device is "substantially equivalent" to a legally
marketed Class I or Class II device or to a Class III device for which the FDA
has not called for a PMA, the manufacturer may seek clearance from the FDA to
market the device by filing a 510(k). The 510(k) will need to be supported by
appropriate data establishing the claim of substantial equivalence to the
satisfaction of the FDA.
FDA Approval Process. In the United States, medical devices and
diagnostics are classified into one of three classes (class I, II or III) on the
basis of the controls deemed necessary to the FDA to reasonably assure their
safety and effectiveness. Under FDA regulations, class I devices are subject to
general controls (e.g. labeling, premarket notification and adherence to QSRegs)
and class II devices are subject to general and special controls (e.g.
performance standards, postmarket surveillance, patient registries and FDA
guidelines). Generally, class III devices are those which must receive a PMA by
the FDA to ensure their safety and effectiveness (e.g. life sustaining, life
supporting and implantable devices or new devices which have not been found
substantially equivalent to legally marketed devices).
Before a new device can be introduced into the market, the manufacturer
generally must obtain marketing clearance through the filing of either a 510 (k)
notification or a PMA application. A 510 (k) clearance will be granted if the
submitted information establishes that the proposed device is "substantially
equivalent" to a legally marketed class I or II medical device or to a class III
medical device for which the FDA has not called for a PMA. It generally takes
from four to twelve months from submission to obtain a 510 (k) clearance, but it
may take longer. The FDA may determine that a proposed device is not
substantially equivalent to a legally marketed device or that additional
information or data is needed before a substantial equivalence determination can
be made, either of which could delay market introduction of a new product. A
request for additional data may require that clinical studies of the device's
safety and efficacy be performed. Additionally, modifications or enhancements
that could significantly affect the safety of efficacy of the device, or that
constitute a major change to the intended use of the device, will require new
501 (k) submissions.
A PMA application must be filed if a proposed device is not
substantially equivalent to a legally marketed class I or class II device or if
it is a class III device for which the FDA has called for a PMA. A PMA
application must be supported by valid scientific evidence, including
preclinical and clinical trial data, to demonstrate the safety and effectiveness
of the device. The PMA application must also contain the results of all relevant
bench tests, laboratory and animal studies, a complete description of the device
and its components, a detailed description of the methods, facilities and
controls used to manufacture the device in addition to the device labeling and
advertising literature.
If a PMA application is accepted for filing, the FDA begins an in-depth
review of the submission. FDA review of a PMA application generally takes one to
two years from the date the PMA application is accepted for filing, but it may
take significantly longer. The PMA review process includes an inspection of the
manufacturer's facilities to ensure that the facilities are in compliance with
the applicable QSRegs requirements. In addition, an advisory committee made up
of clinicians and/or other appropriate experts is typically convened to evaluate
the application and make recommendations to the FDA as to whether the device
should be approved. The PMA process can be expensive, uncertain and lengthy, and
a number of devices for which FDA approval has been sought by other companies
have never been approved for marketing.
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Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of in vitro diagnostic ("IVD") are exempt from the IDE requirements, including
FDA approval of investigations, provided the testing meets certain exemption
criteria. IVD manufacturers must also establish distribution controls to assure
the IVDs distributed for the purpose of conducting clinical investigations are
used only for that purpose. Pursuant to current FDA policy, manufacturers of
IVDs labeled for investigational use only ("IUO") or research under which
investigational IVDs are distributed to or utilized only by individuals,
laboratories, or healthcare facilities that have provided the manufacturer with
a written certification of compliance indicating that the IUO or RUO product
will be restricted in use and will, among other things, meet institutional
review board and informed consent requirements.
Exports of products subject to 501 (k) notification requirements, but
not yet cleared to market, are permitted without FDA export approval, provided
that certain requirements are met. Unapproved products subject to PMA
requirements can be exported to any country without prior FDA approval,
provided, among other things, they are not contrary to the laws of the country
to which they are intended for import, they have been manufactured in
substantial compliance with the QSRegs and have been granted valid marketing
authorization by the member country of the European Union, Australia, Canada,
Israel, Japan, New Zealand, Switzerland or South Africa. The Company must also
provide the FDA with simple notification indicating the products to be exported
and the countries to which they will be exported.
FDA approval must be obtained for exports of products subject to the
PMA requirements if these export conditions are not met. To obtain export
approval, when required, certain requirements must be met and information must
be provided to the FDA, including, with some exceptions, documentation
demonstrating that the product is approved for import into the country to which
it is to be exported and, in some cases, safety data for the device.
Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and are
subject to periodic inspections by the FDA and certain state agencies. The FDC
Act requires devices to be manufactured in accordance with QSRegs, which impose
certain procedural and documentation requirements upon the Company with respect
to manufacturing and quality assurance activities.
It is not clear which class the cancer screening test is in or what
will be the extent of applications required for the screening test kit. There is
no assurance that FDA and other approvals will be obtained or that the Company
will have the funds available to complete the field and other tests and
successfully file and prosecute the required applications.
Lexon believes that it will be able to establish substantial
equivalence based upon the 27 other ELISA-based tests currently approved by the
FDA, among other reasons. If Lexon cannot establish that its Ebaf Assay is
substantially equivalent to a legally marketed predicate device, the Company
must seek pre-market approval through submission of a PMA application. The PMA
application must be supported by valid scientific evidence, including
pre-clinical and clinical trial data, as well as extensive literature to
demonstrate a reasonable assurance of safety and effectiveness of the device.
The PMA represents the most vigorous form of FDA regulatory review.
The use for which a product is intended dictates the FDA's
determination of its classification. A device intended for the quantitative
measurement of tumor-associated antigen levels in body fluids by immunoassay
methodologies will likely fall into Class II and be subject to 510(k) clearance,
but only if it is intended to be used to monitor patients for disease
progression, response to therapy, or detection of recurrent or residual illness.
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Tumor-associated antigen immunoassay systems intended for use in
screening for the early detection or diagnosis of cancer may fall into Class III
and be subject to the rigorous PMA approval process.
There may be regulatory requirements, other than those FDA
requirements, applicable to Lexon's test kit prior to its sale in other
countries. If Lexon chooses to market its test kit in countries outside of the
US, it will have to comply with any applicable requirements before such sales
can be made.
The Ebaf Assay is still in development. Dr. Tabibzadeh has identified
and classified the monoclonal and polyclonal antibodies, and is presently
testing monoclonal antibodies to determine which one will be most effective in
the prototype Ebaf Assay test kit. Lexon expects that research will be completed
in early 2000. As soon as the best monoclonal antibody is selected, Dr.
Tabibzadeh will make a small number of prototype test kits that will then be
used to gather sufficient data to support the pre-application in-person
conference with the FDA staff. The pre-application in-person conference , which
Lexon expects to have with the FDA staff in mid-2000, determines the range and
scope of the clinical test data needed to obtain FDA approval. At this time,
Lexon expects that an FDA application will be submitted during 2000 and approved
in 2001, though no assurance is given to that effect. The schedule will depend
in large part upon the pre-application meeting, the range and scope of the
clinical tests required, and the results of the clinical tests. The science and
the results of the clinical tests will govern the timing of regulatory approval.
Lexon plans to seek FDA approval for the Ebaf Assay as a screening test and does
not plan to seek approval for the test as a monitoring device.
9. Effect of Existing or Probable Governmental Regulation
It is quite possible that new regulations which may become effective
and be applicable to blood screening tests for cancer could be proposed and
adopted which could restrict marketing the Ebaf Assay. Lexon is not aware of any
such pending or proposed regulations, however, there is no assurance that they
will not be imposed.
10. Estimate of the amount spent on research and development
Through June 30, 1999, Lexon had funded approximately $321,250 on
research and development expenses and has committed to fund an additional
$81,162. No customer has or is expected to bear any direct research and
development expense.
11. Costs and effects of environmental compliance
Lexon has incurred no costs associated with environmental compliance
and expects not to have to spend any sums on environmental compliance.
12. Number of total employees and number of full time employees
Lexon has no full time employees. Lexon has one officer and director
and four key employees, each of whom are engaged in other business activities
and each of whom do not receive cash compensation for their services to Lexon.
There is no assurance that these individuals will continue to serve without cash
compensation. There are no written employment agreements.
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13. Year 2000 Disclosure
The computer hardware and software used by the Company are made or
licensed by various name-brand companies and are less than one year old. The
computer hardware consists of a network server and six personal computers and
the computer software consists of an operating system and word processing,
spreadsheet and accounting applications. The Company has been advised by each
vendor, either directly in writing or indirectly through information obtained at
their web site, that their hardware and/or software is Year 2000 compliant. On
September 30, 1999, the Company tested these assertions by setting the date on
the network server and on each computer to January 1, 2000. Each software
application on each computer was used and no problems were encountered. The
Company does not use any proprietary computer software.
The Company is dependent on the computer systems at North Shore
University Hospital which support Dr. Tabibzadeh's ongoing product development
efforts. The Company is also dependent on other vendors for banking, telephone,
internet and utility services. The Company has contacted North Shore and the
other vendors to assess their Year 2000 readiness. Each has informed the
Company, either directly in writing or indirectly through information obtained
at their web site, that their hardware and/or software is Year 2000 compliant.
Because the Company's product is still in development, the Company does not yet
have customers or suppliers and does not anticipate having customers or
suppliers in the near future. To date, the costs to the Company to address Year
2000 issues have been immaterial.
The Company believes that the most likely worst case scenario related
to Year 2000 is a significant delay in the development of its product. Such an
interruption could occur due to a breakdown in the systems of third parties. The
Company currently does not have a contingency plan in the event a particular
system or vendor is not Year 2000 ready. There can be no assurance that
unexpected Year 2000 readiness problems of the Company or its vendors and
service providers will not materially adversely affect the Company's business,
operating results and financial condition. The foregoing assessment represents
management's best estimates at the present time, which could change
significantly in the future.
Item 2. Management Discussion and Analysis
(a) Plan of Operation
1. Plan of Operation Over the Next Twelve Months
Lexon is seeking to consummate a business combination by way of
tax-free merger, exchange of stock, sale of assets or other business combination
with a pharmaceutical company or manufacturing and distribution company with
existing manufacturing, quality control, marketing, distribution and regulatory
compliance capabilities in place. Alternatively but simultaneously, Lexon is
seeking strategic alliances with pharmaceutical and other companies willing to
provide Lexon with manufacturing, marketing and distribution capacities. Lexon
has no such agreements at this time. There is no assurance that Lexon will be
successful in making acceptable arrangements for a business combination or
strategic alliances.
11
<PAGE>
Lexon plans to continue to develop and improve the Ebaf Assay and to
commence and complete standardization testing, to complete field testing and
data gathering for its FDA 510(k) application., and to seek strategic alliances
or business combination partners. Lexon plans to capture market share in the
colon cancer screening business by combining with such strategic partners or by
producing and distributing the Ebaf Assay directly to medical professional,
medical specialists, medical laboratories, medical insurance companies,
diagnostic laboratories and educational facilities. Should Lexon decide to
manufacture, market and distribute the Ebaf Assay without the assistance of a
business partner, the Company will require significant capital.
Lexon plans to continue to participate in public information campaigns
regarding the need for early detection of colon cancer by providing sponsorship
of colon cancer awareness. One such program the Company sponsors is the Eric
Davis Score Against Colon Cancer Event, conducted by Eric Davis, the St. Louis
Cardinal's All-Star outfielder, pursuant to the agreement attached hereto as
Exhibit 6.6. Lexon believes that its efforts to educate the public about the
risks of colon cancer and the benefits of early detection will begin to develop
relationships with potential purchasers, marketing partners and research
institutions.
Lexon plans to continue to develop the Ebaf Assay. Dr. Tabibzadeh has
identified and classified the monoclonal and polyclonal antibodies, and is
presently testing monoclonal antibodies to determine which one will be most
effective in the prototype Ebaf Assay test kit. Lexon expects that research will
be completed in early 2000. As soon as the best monoclonal antibody is selected,
Dr. Tabibzadeh will make a small number of prototype test kits that will then be
used to gather sufficient data to support the pre-application in-person
conference with the FDA staff. The pre-application in-person conference , which
Lexon expects to have with the FDA staff in mid-2000, determines the range and
scope of the clinical test data needed to obtain FDA approval. At this time,
Lexon expects that an FDA application will be submitted during 2000 and approved
in 2001, though no assurance is given to that effect. The schedule will depend
in large part upon the pre-application meeting, the range and scope of the
clinical tests required, and the results of the clinical tests. The science and
the results of the clinical tests will govern the timing of regulatory approval.
Lexon plans to acquire new technologies. On August 4, 1999, the Company
entered into an Agreement with UTEK CORPORATION ("UTEK"), attached hereto as
Exhibit 6.18, whereby UTEK will provide technology merchant consulting services
to the Company. Such services include identifying, evaluating and recommending
potential technology acquisitions that are synergistic with Lexon's existing
cancer diagnostic testing technologies. UTEK owns 1,000,000 shares (or 14.7% of
the outstanding shares) of Lexon Common Stock.
The $132,000 consulting fee is payable in three equal installments of
$44,000 each, due on April 1, 2000, September 1, 2000 and December 1, 2000. If
Lexon is unable to pay this fee in cash, then Lexon may issue shares of its
restricted common stock to UTEK equal to 200% of the amount owed divided by the
price of the shares on the date the payment is due.
On August 5, 1999, the Company entered into an Agreement and Plan of
Merger ("Merger") with Cancer Diagnostics, Inc. ("CDI"), attached hereto as
Exhibit 6.17. The terms of the Merger are for Lexon to issue 500,000 shares of
its common stock in exchange for all of the issued and outstanding common stock
of CDI. The Merger is subject to various conditions, some of which have not yet
occurred, but all of which are expected to be fulfilled by the Closing, which is
expected in early January 2000. There is no assurance that the Merger will
close.
If the Merger is completed, all the assets and liabilities of CDI will
become assets and liabilities of Lexon. The CDI assets consist of (1) an
exclusive worldwide license to a patent-pending blood test for lung cancer,
known as the Telomerase AssayTM, which was developed at the University of
Maryland, Baltimore, and (2) a two-year sponsored research agreement to fund the
development of the Telomerase Assay for the ELISA format. The development of the
Telomerase Assay will be conducted at the University of Maryland, Baltimore. The
liabilities of CDI consist of $124,537 payable in cash, on or before January 1,
2001, to the University of Maryland, Baltimore, under the terms of the sponsored
research agreement.
If the Merger is completed, the Company will be obligated to pay a
royalty of 4% of Net Sales of products sold by Lexon under the terms of the
exclusive license agreement ("Agreement"). The Agreement provides for minimum
annual royalties for the life of the Agreement, which coincides with the life of
the last to expire patent covering the licensed technology. Such minimum annual
royalties range from $2,500 per year beginning in year 3 of the Agreement to a
maximum of $4,000 beginning in year 7 and continuing each year thereafter for
the life of the Agreement. In addition, the Agreement provides for royalties of
2% of Net Sales of products sold by sublicensees and 50% of all consideration
received by the Company for up-front, milestone or other payments from
sublicensees.
12
<PAGE>
(i) Cash Requirements
Management believes that Lexon can satisfy its current cash needs out
of available cash and will not have to engage in any sale of Lexon's securities
during the next three months. Lexon intends to engage in an offering of its
common stock to fund the costs associated with required field tests, file and
process applications for FDA approval, identify manufacturers to mass produce
the test kits, and identify and consummate strategic business alliances. There
is no assurance that any additional capital needed will be available to Lexon on
acceptable terms when needed, if at all. Any additional capital may involve
substantial dilution to the interests of Lexon's then existing stockholders.
(ii) Product Development and Research Plan for the Next Twelve Months
To date, Lexon has paid North Shore $321,500 and anticipates spending
another $81,162 over the next twelve months to complete the Ebaf Assay
development. The development of the Ebaf Assay for the ELISA platform requires
that both a polyclonal and a monoclonal antibody to the Ebaf protein be
produced. These antibodies must be specific for Ebaf, and must be tested
extensively to make sure that they do not react with any other similar proteins.
Dr. Tabibzadeh has identified an adequate polyclonal antibody for use
in the ELISA test. This antibody has been tested in a comprehensive fashion and
will be used as the carrier for the enzyme ligand in the ELISA test. Dr.
Tabibzadeh is currently analyzing and characterizing more than 30 monoclonal
antibodies to find an adequate prospect for use in the ELISA test. The ideal
candidate for the monoclonal selection will be a monoclonal antibody which is
highly specific for Ebaf and does not react with any other proteins. Once the
monoclonal antibody is identified and characterized, a small number of prototype
ELISA test kits will be made. These test kits will be used to collect data for
submission of an FDA application.
Research relating to the blood test for lung cancer, the Telomerase
Assay, has been ongoing at the University of Baltimore, Maryland. During 2000,
after the CDI Merger closes, scientists will continue research into the
identification and classification of both a polyclonal and monoclonal antibody
for the Telomerase Assay for use in an ELISA-based test. As soon as both of
these antibodies have been identified and classified and test data relating
thereto has been collected, Lexon expects to confer with the FDA staff in a
pre-application conference. Lexon believes that a conference will likely be held
in mid-2001 with the submission of an FDA application in late 2001.
(iii) Expected Purchase or Sale of Plant and Significant Equipment
None.
(iv) Expected Significant changes in number of employees.
None.
Item 3. Description of Property
(a) Location and Description of Property
Lexon leases its executive offices, which are currently shared with
other companies controlled by its officer and director. These companies share
the $4,000 per month lease payment. Lexon's portion of the lease is
approximately $800 per month.
13
<PAGE>
Item 4. Security Ownership of Certain Beneficial Owners and Management
(a) Beneficial Owners of More than Five Percent
The following table shows the persons known to the Company to be the
benefical owner of more than 5% of the Company's common stock. The number of
shares owned includes the shares which the listed beneficial owner has the right
to acquire within sixty days from options to purchase common stock. The
percentage of outstanding shares was calculated based on the 6,802,013 shares
issued and outstanding at June 30, 1999 plus the shares which the listed
beneficial owner has the right to acquire within sixty days:
<TABLE>
<CAPTION>
Percent of
Relationship to Common Shares Outstanding
Name and Address Company Owned Shares
---------------- --------------- ------------- -----------
<S> <C> <C> <C>
UTEK Corporation Beneficial Owner 1,000,000 14.7%
202 Wheeler Street
Plant City, FL 33566
Gifford M. Mabie Officer, Director 750,000(1) 10.6%
8908 S. Yale Ave. #409
Tulsa, OK 74137
Rhonda R. Vincent Key Employee 750,000(2) 10.6%
8908 S. Yale Ave. #409
Tulsa, OK 74137
Frederick K. Slicker Key Employee 770,000(3) 10.8%
8908 S. Yale Ave. #410
Tulsa, OK 74137
Northside Trust Beneficial Owner 366,500(5) 5.4%
Pamela K. Lambillotte,
Trustee
P.O. Box 383
Broken Arrow, OK 74013
Thomas R. Coughlin Key Employee 937,500(4) 12.6%
8908 S. Yale Ave. #409
Tulsa, OK 74137
Vicki L. Pippin Employee 598,500(6) 8.5%
8908 S. Yale Ave. #409
Tulsa, OK 74137
Mabie Childrens' Trust Beneficial Owner 424,400(7) 6.1%
A. Martin Keating, Trustee
P.O. Box
Tulsa, OK 741
------------ ------
Officers and Directors, as a group (1 person) 750,000 10.6%
------------ ------
Beneficial Owners, as a group (7 persons) 4,846,900 57.6%
------------ ------
Officers, Directors and Beneficial Owners,
as a group (8 persons) 5,596,900 64.6%
------------ ------
<FN>
(1) Includes 500,000 shares owned directly by Mr. Mabie and his right to acquire
250,000 shares of common stock at $1.5625 per share.
(2) Includes 500,000 shares owned directly by Ms. Vincent and her right to
acquire 250,000 shares of common stock at $1.5625 per share.
(3) Includes 185,000 shares owned directly by Mr. Slicker, 285,000 shares owned
by his wife, and Mr. Slicker's rights to acquire 50,000 shares of common stock
at $1.200 per share and 250,000 shares of common stock at $1.5625 per share.
14
<PAGE>
(4) Includes 300,000 shares owned directly by Dr. Coughlin and his right to
acquire 637,500 shares of common stock at $1.5625 per share.
(5) The trustee of the Northside Trust is Pamela Lambillotte. The beneficiary of
the Trust is the minor son of Vicki Pippin, the Trust grantor and
an employee of the Company. Northside Trust is an Irrevocable Trust and Ms.
Pippin disclaims any beneficial ownership thereof.
(6) Includes 348,5000 shares owned directly by Ms. Pippin and her right to
acquire 250,000 shares of common stock at $1.5625 per share.
(7) Includes 244,400 shares owned directly by the Trust and its right to acquire
180,000 shares of common stock at $1.20 per share. The trustee of the Mabie
Childrens' Trust is A. Martin Keating, author. The beneficiaries of the Trust
are the adult children of Gifford and Sheryl Mabie, the Trust grantors. The
Mabie Childrens' Trust is an Irrevocable Trust and Mr. Mabie disclaims any
beneficial ownership thereof.
</FN>
</TABLE>
Common Stock Options.
At June 30, 1999, Lexon had outstanding and exercisable options to
purchase shares of its common stock as follows:
Options Options Range of
Outstanding at Exercisable at Exercise
June 30, 1999 June 30, 1999 Prices
-------------- -------------- -------------
Lexon Stock Option Plan:
Employees................ 1,687,500 1,687,500 $1.20-$1.5625
Non-Employees............ 780,000 780,000 $1.20-$1.5625
-------------- -------------- -------------
2,467,500 2,467,500 $1.20-$1.5625
Other Options:
Morgan-Phillips, Inc..... 955,000 70,000 $1.50
-------------- -------------- -------------
Total........................ 3,422,500 2,537,500 $1.20-$1.5625
-------------- -------------- -------------
Lexon Stock Option Plan. Lexon has reserved 3,000,000 shares of common
stock pursuant to its Stock Option Plan. At June 30, 1999, the Plan had
outstanding a total of 2,467,500 options at exercise prices ranging from $1.20
per share to $1.5625 per share. The options expire ten years from the date of
grant if not sooner exercised. The exercise price is equal to the closing price
of the common stock on the date of grant. Prior to trading, the exercise was
determined by the Board of Directors.
15
<PAGE>
The following table details the options outstanding in the Plan as of
June 30, 1999:
Date of Relationship Options Exercise Expira-
Grant Grantee to Company Granted Price tion
- -------- --------------------- ------------ ------- -------- --------
10/15/98 Dr. Siamak Tabibzadeh Consultant 50,000 $1.2000(1) 10/14/08
10/15/98 Fred Slicker Officer/Lender 50,000 $1.2000(1) 10/14/08
10/15/98 Mabie Childrens Trust Lender 180,000 $1.2000(1) 10/14/08
10/15/98 Viking Group Consultant 300,000 $1.2000(1) 10/14/08
03/04/99 Gifford Mabie Officer 250,000 $1.5625(2) 03/03/09
03/04/99 Rhonda Vincent Employee 250,000 $1.5625(2) 03/03/09
03/04/99 Dr. Thomas Coughlin Employee 637,500 $1.5625(2) 03/03/09
03/04/99 Vicki Pippin Employee 250,000 $1.5625(2) 03/03/09
03/04/99 Fred Slicker Employee 250,000 $1.5625(2) 03/03/09
03/04/99 Dr. Siamak Tabibzadeh Consultant 250,000 $1.5625(2) 03/03/09
---------
Total Options Outstanding in Plan 2,467,500
---------
(1) No trading market for common stock existed on date of grant. Exercise price
was determined by the Board of Directors based on the most recent offering
price of $2.00 per share discounted by 40% because the common stock to be
issued pursuant to exercise of these options would be restricted.
(2) Exercise price is equal to the closing price of the Company's common stock,
as quoted on the OTC Bulletin Board, on the date of grant.
Other Options Outstanding. On November 1, 1998, the Company entered
into an agreement with Morgan-Phillips, Inc. ("MPI") to provide various
stockbroker, shareholder relations and public information services for Lexon for
a two year period. These services are listed in the Consulting Agreement at
Exhibit 6.4. In connection with that agreement, the Board granted MPI the right
to purchase up to 1,000,000 shares of common stock at prices ranging from $1.20
to $3.00 per share during the period from January 1, 1999 through December 31,
2000, subject to certain vesting conditions that are based upon market
performance of the common stock of Lexon. The variables are time, actual float,
market price and exercise price. See Exhibit A to the Option Agreement which is
Exhibit 6.4 to the Form 10-SB. At June 30, 1999, 70,000 options at $1.50 per
share were vested and exercisable and 45,000 options at $1.20 per share were
forfeited because the vesting conditions were not met. The remaining 885,000
options outstanding may later become vested. It is unclear whether the remaining
options will vest. All vested but unexercised options expire on October 27,
2008.
Item 5. Directors, Officers and Control Persons
(a) Identify Directors and Executive Officers
(1)-(4) Names, ages, positions, offices, business experience
Gifford M. Mabie, age 58, is President, CEO and a Director of Lexon.
Mr. Mabie has been the President and CEO of Lexon since March 1, 1998. He serves
at the pleasure of the Board of Directors. He serves without cash compensation
and without an employment agreement. From 1982 to 1994, Mr. Mabie was Senior
Vice President of CIS Technologies, Inc. (NASD: CISI), a leading healthcare
information company that was purchased by National Data Corporation (NYSE: NDC)
in 1996. Mr. Mabie was instrumental in raising over $40 million in capital that
funded acquisitions and new product development. As a result, that company's
revenues grew from $105,000 in 1987 to over $40 million in 1995. Prior to CIS,
Mr. Mabie was with Honeywell Information Systems, Inc., where he ranked as one
of its top five salesmen worldwide. Prior to joining Honeywell, he was corporate
controller with W.B. Dunavant & Company, one of the world's largest cotton
brokers. He holds degrees in accounting and economics from Memphis State
University and served for eight years in the United States Navy.
(5) Other Directorships
Mr. Mabie is an officer and director of Maxxon, Inc. (OTC Bulletin
Board: MXON). Mr. Mabie is also an officer and director of the following
privately-held emerging technology companies:
16
<PAGE>
Image Analysis, Inc., a color magnetic resonance imaging technology
company; Centrex, Inc., an e.coli detection and measurement company; and Nubar
Enterprises, Inc., a laminated carbon fiber reinforcing bar company.
(b) Other significant employees
The following persons are key employees of Lexon but none of them is an
officer or director:
Thomas R. Coughlin, M.D., age 50, is Medical Director for Lexon. Prior
to joining Lexon, Dr. Coughlin was a cardiovascular surgeon. From 1992 to 1995,
he was Medical Director of Cardiovascular Surgical Services at Alexandria
Hospital in Alexandria Virginia and from 1991 to 1995, was Assistant Clinical
Professor, Thoracic and Cardiovascular Surgery at George Washington University
Medical Center in Washington, D.C. He has received numerous professional honors
and has published 25 research papers. He is a graduate of the University of
Rochester School of Medicine and Dentistry, Rochester, New York (M.D.) and of
Seton Hall University (B.S.).
Frederick K. Slicker, age 55, is General Counsel for Lexon. From April
1, 1998 until July 16, 1999 when he resigned as an officer of Lexon, Mr. Slicker
was Vice President and General Counsel of Lexon. He has practiced law for more
than 30 years, primarily in the areas of mergers and acquisitions, securities
law compliance and general business. He holds a Master of Laws degree from
Harvard Law School and a Juris Doctor degree with highest distinction and
Bachelor of Arts in Mathematics from the University of Kansas. He served in the
US Army for seven years. He is a frequent speaker to professional groups on
legal and other subjects.
Rhonda R. Vincent, age 35, is Financial Reporting Manager for Lexon.
From incorporation until July 16, 1999, when she resigned as an officer and
director of Lexon, Ms. Vincent was Vice President, Secretary and Treasurer of
Lexon. From 1994 to 1997, Ms. Vincent was Vice President, Secretary, Treasurer
and Director of Corporate Vision, Inc. (OTCBB: CVIA), a multimedia software
development company. For five years prior thereto, Ms. Vincent held various
accounting, finance and investor relations positions with CIS Technologies,
Inc., a leading healthcare information processing company that was purchased by
National Data Corporation in 1996. She began her career as an audit associate
with the public accounting firm of Coopers & Lybrand. Ms. Vincent is a Certified
Public Accountant and holds a Bachelor of Science degree in accounting from Oral
Roberts University.
Vicki L. Pippin, age 40, is an Administrative Manager for Lexon. She
has had more than 20 years in senior executive administration for various public
companies in the aerospace and healthcare software industries, including
McDonnell Douglas, Burtek Industries and CIS Technologies.
(c) Family Relationships
None.
(d) Involvement in Legal Proceedings of Officers, Directors and Control Persons
None.
Item 6. Executive Compensation
No cash compensation was received by any officer or director since
inception. On March 4, 1999, Mr. Mabie was granted an option to purchase 250,000
shares of common stock at $1.5625 per share. Such option was granted at fair
market value and expires ten years from the date of grant.
17
<PAGE>
Item 7. Certain Relationships and Related Transactions
(a) Describe Related Party Transactions
On July 1, 1998, the Company borrowed $50,000 from Fred Slicker, then
Vice President and General Counsel of the Company and $180,000 from a
non-affiliated shareholder. The Notes accrued interest at 12% per annum through
December 31, 1998 and at 14% per annum thereafter. The Notes, including accrued
interest, were paid in full in February, 1999. In connection with these loans,
the Board granted options to purchase 230,000 shares of common stock at $1.20
per share. The exercise price was deemed by the Board to be the fair market
value of the stock on the date of grant. The options expire ten years from the
date of grant. See "Common Stock Options."
On August 4, 1999, the Company entered into an Agreement with UTEK
CORPORATION ("UTEK"), whereby UTEK will provide technology merchant consulting
services to the Company. Such services include identifying, evaluating and
recommending potential technology acquisitions that are synergistic with Lexon's
existing cancer diagnostic testing technologies. UTEK owns 1,000,000 shares (or
14.7% of the outstanding shares) of Lexon Common Stock.
The $132,000 consulting fee is payable in three equal installments of
$44,000 each, due on April 1, 2000, September 1, 2000 and December 1, 2000. If
Lexon is unable to pay this fee in cash, then Lexon may issue shares of its
restricted common stock to UTEK equal to 200% of the amount owed divided by the
price of the shares on the date the payment is due.
On August 5, 1999, the Company entered into an Agreement and Plan of
Merger ("Merger") with Cancer Diagnostics, Inc. ("CDI"), attached hereto as
Exhibit 6.17. The sole shareholder of CDI is UTEK Corporation. UTEK owns
1,000,000 shares (or 14.7% of the outstanding shares) of Lexon Common Stock.The
terms of the Merger are for Lexon to issue 500,000 shares of its common stock in
exchange for all of the issued and outstanding common stock of CDI. The Merger
is subject to various conditions, some of which have not yet occurred, but all
of which are expected to be fulfilled by the Closing, which is expected in early
January 2000. There is no assurance that the Merger will close.
If the Merger is closed, all the assets and liabilities of CDI will
become assets and liabilities of Lexon. The CDI assets consist of (1) an
exclusive worldwide license to a patent-pending blood test for lung cancer,
known as the Telomerase AssayTM, which was developed at the University of
Maryland, Baltimore, and (2) a two-year sponsored research agreement to fund the
development of the Telomerase Assay for the ELISA format. The development of the
Telomerase Assay will be conducted at the University of Maryland, Baltimore. The
liabilities of CDI consist of $124,537 payable in cash, on or before January 1,
2001, to the University of Maryland, Baltimore, under the terms of the sponsored
research agreement.
Item 8. Description of Securities
The following summary of certain provisions of the Common Stock is
subject to, and qualified in its entirety by, the provisions of applicable law
and the provisions of Lexon's Certificate of Incorporation, which is included as
an exhibit to this Registration Statement.
Lexon is authorized to issue 45,000,000 Shares of Common Stock, par
value $0.001 per share, of which 6,802,013 shares were outstanding as of the
date hereof. Lexon is also authorized to issue 5,000,000 Shares of Preferred
Stock, par value $0.001 per share, of which there are no shares presently
outstanding. There is no present intent to issue any Preferred Stock.
Voting Rights. Holders of shares of Common Stock are entitled to one
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
18
<PAGE>
Dividend Rights. Holders of record of shares of Common Stock are
entitled to receive dividends when and if declared by the Board of Directors. To
date, Lexon has not paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors out of funds legally available therefor.
Lexon intends to retain any earnings for the operation and expansion of its
business and does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend
upon future earnings, results of operations, capital requirements, Lexon's
financial condition and such other factors as the Board of Directors may
consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Lexon, holders of shares of Common Stock are entitled to receive pro rata all of
the assets of Lexon available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Lexon.
Part II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity
(a) Market information
Identify principal market or markets where common stock is traded.
Lexon's common stock is actively traded on the NASD's Over-
The-Counter Bulletin Board.
The high and low prices for Lexon's common stock during the
calendar quarters ended were:
Quarter ended High Low
------------- ------- -------
December 31, 1998 $3.2500 $2.0000
March 31, 1999 $2.2812 $1.1250
June 30, 1999 $5.5000 $2.4375
Quotations on the OTC Bulletin Board reflect bid and ask quotations,
may reflect inter-dealer prices, without retail markup, mark-down or commission,
and may not represent actual transactions.
(b) Holders
As of June 30, 1999, there were 46 holders of record of Lexon's common
stock, this figure does not take into account those shareholders whose
certificates are held in the name of broker-dealers or other nominees. Lexon
estimates there are approximately 300 owners who hold their shares in brokerage
accounts.
(c) Dividend Policy
Lexon has not declared any dividends in the past and there is no
intention to declare dividends in the future.
19
<PAGE>
Item 2. Legal Proceedings
None.
Item 3. Changes in and Disagreements with Accountants.
None.
Item 4. Recent Sales of Unregistered Securities
(a) Securities Sold
On April 1, 1998, Lexon sold 5,000,000 shares of its common stock to
its founders. These sales were made at par value pursuant to Rule 504 of
Regulation D and Section 4(2) of the Securities Act of 1933.
On July 8, 1998, Lexon issued 1,000,000 shares of common stock to the
shareholders of Gentest, Inc., pursuant to the Merger of Gentest into Lexon in
accordance with the Agreement and Plan of Merger. These shares were issued at
par value pursuant to Rule 504 of Regulation D and Section 4(2) of the
Securities Act of 1933.
On May 18, 1998, Lexon commenced its Rule 504 private offering at $2.00
per share. This price was determined by the Board of Directors. There were
125,205 shares of common stock sold to third-party investors for $250,410 in
cash. The $2.00 offering was terminated on July 31, 1998, when Lexon's 15c211
application was filed with the NASD. The Company's common stock began trading on
November 4, 1999 at $2.50 per share. On November 6, 1998, Lexon commenced a Rule
504 private offering at $3.00 per share, which price was greater than the
closing price of the Company's common stock on November 6, 1998 (the date of the
offering memorandum). There were 39,416 shares of common stock sold to
third-party investors for $118,248 in cash. The Company incurred expenses of
$48,287 in connection with the offerings. On January 18, 1999, the Company
terminated the $3.00 offering and commenced an offering at $1.50 per share,
which was equal to the closing price of the Company's common stock on January
19, 1999. Although there were no obligations to do so, the Board determined that
the investors who paid cash in the $2.00 and $3.00 private offerings should be
treated as if they had purchased their shares at $1.50 per share. Accordingly,
the Company issued an additional 81,151 shares to those investors (41,735 shares
to the $2.00 investors and 39,416 shares to the $3.00 investors.) The issuance
of the additional shares was treated as a capital transaction, with no effect on
stockholders' equity. The shares were issued at par value pursuant to Rule 504
of Regulation D and Section 4(2) of the Securities Act of 1933.
During 1998, the Company issued 33,541 shares of its Common Stock at
$2.00 per share for services rendered in connection with the Offering. The $2.00
per share value was determined by the Board of Directors based on the most
recent offering price of $2.00 per share. The shares were issued at par value
pursuant to Rule 504 of Regulation D and Section 4(2) of the Securities Act of
1933.
During the six months ended June 30, 1999, the Company sold 385,700
shares of common stock to third-party investors for $557,549 in cash, pursuant
to Rule 504 of Regulation D and Section 4(2) of the Securities Act of 1933.
During the six months ended June 30, 1999, the Company issued a total
of 82,000 shares of common stock for services rendered by outside consultants.
The shares were valued based on the closing price of the Company's common stock
on the date the services were rendered or agreements were signed. Of the shares
issued, 80,000 were issued at $2.50 per share to a consultant to develop and
market an Internet web site and to prepare and distribute via e-mail a detailed
profile report on the Company (See Exhibit 6.7). The remaining 2,000 shares were
issued at $4.875 per share for legal services. The Company recorded $200,000 and
$9,750, respectively, as G&A expense. The shares mentioned in this paragraph
were issued pursuant to Rule 701.
During the six months ended June 30, 1999, the Company issued 55,000
shares of common stock to an employee who exercised stock options at $1.5625 per
share. The Company received $85,938 in cash when the options were exercised. The
exercise price was equal to the closing price of the Company's common stock on
the date the options were granted. The shares mentioned in this paragraph were
issued pursuant to Rule 701.
(b) Underwriters and Other Purchasers
There was no public offering of the shares. The shares were sold to
officers, directors and key consultants, to Gentest in connection with its
Merger into Lexon, and to purchasers in compliance with Regulation D, Rule 504
of the Securities Exchange Act of 1933 or in compliance with Rule 701.
20
<PAGE>
(c) Consideration
Lexon paid commissions of $100,360 to RichMark Capital Corporation, a
registered broker-dealer. Such commissions were for sales by the broker-dealer
and consisted of 10% of the gross proceeds received. In addition to these
commissions, Lexon paid a due diligence fee of 6% and a 4% fee for unallocated
expense reimbursement.
Lexon paid $13,000 and $2,500, respectively, to two non-affiliates as
finder's fees, which fees represented up to 10% of the gross proceeds received
by the Company from the purchase of Lexon common stock by persons first
identified as prospective investors by the finders. The finders did not act as
broker-dealers. Lexon dealt directly with such prospective investors and did not
pay a brokerage commission or other fees. Lexon believes that these finders fees
did not exceed customary fees paid to finders in these circumstances.
Under the terms of the Agreement and Plan of Merger, the Company issued
to UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000 shares
of Common Stock of the Company at par value.
(d) Section under which exemption from registration was claimed
The issuance of the securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) and SEC
Regulation D, Rule 504, among other exemptions. Each recipient of securities in
each such transaction represented his or her intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and, where applicable, appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had access to information about the Lexon. See Exhibits 12.1 to 12.3.
Item 5. Indemnification of Officers and Directors
Lexon's Certificate of Incorporation provides for indemnification to
the full extent permitted by Oklahoma law of all persons it has the power to
indemnify under Oklahoma law. In addition, Lexon's Bylaws provide for
indemnification to the full extent permitted by Oklahoma law of all persons it
has the power to indemnify under Oklahoma law. Such indemnification is not
deemed to be exclusive of any other rights to which those indemnified may be
entitled, under any bylaw, agreement, vote of stockholders or otherwise. The
provisions of Lexon's Certificate of Incorporation and By Laws which provide
indemnification may reduce the likelihood of derivative litigation against
Lexon's directors and officers for breach of their fiduciary duties, even though
such action, if successful, might otherwise benefit Lexon and its stockholders.
In addition, Lexon has entered into indemnification agreements with its
officer and director, key consultants and others. These agreements provide that
Lexon will indemnify each person for acts committed in their capacities and for
virtually all other claims for which a contractual indemnity might be
enforceable.
21
<PAGE>
Part F/S
INDEX TO FINANCIAL STATEMENTS AND RELATED NOTES
INTERIM UNAUDITED FINANCIAL STATEMENTS
Balance Sheet (Unaudited) at June 30, 1999...................................F-1
Statements of Operations (Unaudited)
from inception (December 16, 1997) through
June 30, 1999 and for the six months ended
June 30, 1999 and 1998 ......................................................F-2
Statements of Cash Flows (Unaudited)
from inception (December 16, 1997) through
June 30, 1999 and for the six months ended
June 30, 1999 and 1998 ......................................................F-3
Notes to Financial Statements (Unaudited) at June 30, 1999 ..................F-4
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report ...............................................F-15
Balance Sheet at December 31, 1998 .........................................F-16
Statement of Operations from inception
(December 16, 1997) through December 31, 1998 ..............................F-17
Statement of Cash Flows from inception
(December 16, 1997) through December 31, 1998 ..............................F-18
Statement of Stockholders' Equity from inception
(December 16, 1997) through December 31, 1998 ..............................F-19
Notes to Financial Statements from inception
(December 16, 1997) through December 31, 1998 ..............................F-20
22
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Balance Sheet
June 30, 1999
(Unaudited)
ASSETS
Current Assets
Cash ............................................................ $ 31,801
Prepaid Consulting Expense ...................................... 206,095
Other Receivable ................................................ 10,683
-----------
Total Current Assets ........................................ 248,579
-----------
Other Assets
Exclusive License, net .......................................... 151,530
Sponsored Research Contract, net ................................ 155,625
-----------
Total Other Assets ......................................... 307,155
-----------
TOTAL ASSETS .................................................... $ 555,734
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities ........................ $ 34,705
Stockholders' Equity
Preferred Stock, $0.001 par value, 5,000,000 shares authorized
No shares issued and outstanding ........................... 0
Common Stock, $0.001 par value, 45,000,000 shares authorized
6,802,013 shares issued and outstanding at June 30, 1999 ... 6,802
Paid in Capital ................................................. 3,112,016
Loss accumulated during the development stage ................... (2,597,789)
-----------
Total Stockholders' Equity ................................. 521,029
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 555,734
-----------
The accompanying notes are an integral part of the financial statements
F-1
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Statement of Operations
From Inception (December 16, 1997) through June 30, 1999
and for the six months ended June 30, 1999 and 1998
(Unaudited)
From
inception Six months Six months
through ended ended
June 30, June 30, June 30,
1999 1999 1998
----------- ----------- -----------
Revenue ...............................$ 0 $ 0 $ 0
Expenses
Research and development ........... 638,324 456,791 0
General and administration ......... 1,582,963 1,184,414 114,800
----------- ----------- -----------
Total Operating Expenses ...... 2,221,287 1,641,205 114,800
----------- ----------- -----------
Operating Loss ........................ (2,221,287) (1,641,205) (114,800)
Interest Expense ....................... 376,502 3,418 0
----------- ----------- -----------
Net Loss .............................. (2,597,789) (1,644,623) (114,800)
----------- ----------- -----------
Weighted Average Shares Outstanding ... 5,002,482 6,585,907 3,555,468
----------- ----------- -----------
Loss per Share ........................$ (0.52) $ (0.25) $ (0.03)
----------- ----------- -----------
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Statement of Cash Flows
From Inception (December 16, 1997) through June 30, 1999
and for the six months ended June 30, 1999 and 1998
(Unaudited)
From
inception Six months Six months
through ended ended
June 30, June 30, June 30,
1999 1999 1998
----------- ----------- -----------
Operating Activities
Net Loss ............................ (2,597,789) (1,644,623) 114,800
Noncash Charges to Earnings
Amortization of License and
Sponsored Research ................ 165,096 82,547 0
Amortization of stock options
issued to non-employees
for services ................... 1,095,625 897,655 0
Amortization of stock options
issued to non-employees
lenders..... ................... 356,346 0 0
Common stock issued for services .. 209,750 209,750 0
Services contributed by officers
and employees................... 361,479 140,000 110,000
Changes in Operating Assets and Liabilities
Increase in Prepaid Expenses ...... (8,125) (8,125) 0
Increase in Other Receivables ..... (10,683) (10,683) 0
Increase (Decrease) in Accounts
Payable and Accrued Liabilities .. 34,705 9,579 4,800
Increase (Decrease) in Interest
Payable .......................... 0 (16,739) 0
----------- ----------- -----------
Total Operating Activities ........... (393,596) (340,639) 0
----------- ----------- -----------
Financing Activities
Loans from Officers and Directors .... 230,000 0 0
Payment of Loans from Officers and
Directors .......................... (230,000) (230,000) 0
Sale of common stock:
To Founders......................... 5,000 0 5,000
To Third-party investors............ 1,012,145 643,487 106,810
Less: issue costs ................. (120,498) (72,211) (971)
----------- ----------- -----------
Total Financing Activities ........... 896,647 341,276 110,839
----------- ----------- -----------
Investing Activities
Purchase of exclusive licenses ....... (160,000) 0 0
Payment of sponsored research
contract .......................... (311,250) 0 0
----------- ----------- -----------
Total Investing Activities ........... (471,250) 0 0
----------- ----------- -----------
Net change in cash ................... 31,801 637 110,839
Cash at beginning of period .......... 0 31,164 0
----------- ----------- -----------
Cash at end of period ................ 31,801 31,801 $ 110,839
----------- ----------- -----------
Supplemental Disclosure of Cash Flow Information
Cash paid for interest and taxes
during the period .................$ 20,156 $ 20,156 $ 0
----------- ----------- -----------
Non-cash Financing and Investing Activities
Common stock issued in
Gentest Merger ....................$ 1,000 $ 0 $ 0
----------- ----------- -----------
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1999
Note 1- Organization and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, the information furnished reflects all adjustments, consisting only of
normal recurring adjustments which are, in the opinion of management, necessary
in order to make the financial statements not misleading.
Organization and Nature of Operations
Lexon, Inc. ("Lexon" or "the Company") is a development stage
corporation that own the exclusive worldwide license to develop, manufacture,
obtain FDA approval for, and market a cancer screening test kit for detecting
the ebaf protein, which allows for early, non-invasive screening for colon
cancer and certain types of ovarian and testicular cancers.
Development Stage Operations
The Company was incorporated on December 16, 1997 under the laws of the
state of Oklahoma. Since inception, the Company's primary focus has been raising
capital and developing the Ebaf blood screening process.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of
three months or less to be cash equivalents.
Income Taxes
The Company uses the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under the liability method, deferred taxes are determined
based on the differences between the financial statements and tax bases of
assets and liabilities at enacted tax rates in effect in the years in which the
differences are expected to reverse.
Compensation of Officers and Employees
The Company's officers and other employees serve without pay or other
non-equity compensation. The fair value of these services is estimated by
management and is recognized as a capital contribution. For the six months ended
June 30, 1999 and 1998 and for the period from inception (December 16, 1997) to
June 30, 1999 the Company recorded $140,000, 110,000, and $361,479,
respectively, as a capital contribution by the officers and other employees.
Fair Market Value of Stock Options and Stock Issued for Services
The fair market value of stock options granted or stock issued as
payment for services is equal to the closing price of the Company's common stock
on the date options are granted or on the date agreements for services are
signed. On November 4, 1998, the Company's common stock began trading on the OTC
Bulletin Board under the symbol "LXXN". Prior to trading, the fair market value
of stock options granted or stock issued as payment for services was determined
by the Board of Directors.
Stock-based Compensation
The Company accounts for stock-based compensation arrangements in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and complies with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based on the difference, if any, on the date of grant,
between the fair value of the Company's stock and the exercise price. The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and the Emerging Issues Task Force Consensus in Issue
No. 96-18.
F-4
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
Research and Development ("R&D") Costs
The Company is amortizing the $311,250 paid pursuant to the Sponsored
Research Agreement over two years, which is the life of the service agreement.
Any other costs related to developing the Ebaf Assay are expensed as incurred.
Compensation cost associated with stock options granted to Dr. Tabibzadeh, the
inventor of the Ebaf Assay, is recorded by the Company as R&D expense.
New Accounting Standards
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" during 1998. The Company has no comprehensive income items during
1998. Therefore, net loss equals comprehensive income. The Company operates in
only one business segment. The Company will adopt SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities" during 1999. Currently, the
Company does not engage in hedging activities or transactions involving
derivatives.
Note 2- Gentest Merger
On May 11, 1998, the Company entered into an Agreement and Plan of
Merger with Gentest, Inc., a Florida corporation, whereby the Company agreed to
issue 1,000,000 shares of its common stock for all the issued and outstanding
common stock of Gentest, Inc. Gentest was formed in March, 1998 for the purpose
of securing the License Agreement and Sponsored Research Agreement related to
the Ebaf Assay. Under the terms of the Agreement and Plan of Merger, the Company
issued to UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000
shares of common stock of Lexon. Gentest ceased to exist by reason of the
merger, and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, became assets and liabilities of Lexon. The obligations of
Gentest were to pay $105,000 for the exclusive license, $311,250 to develop the
test kit and $55,000 for services rendered in connection with securing the
agreements. The obligations were paid in full by Lexon on July 8, 1998. The
Gentest merger was accounted for as a purchase. The purchase price of $1,000 was
based on the number of shares issued at par value of $0.001 per share.
Par value per share was used to value the purchase because all previous
share issuances, consisting solely of issuances to founders, were based on par
value, and there was no public market for the Company's stock. Gentest had only
recently been formed for the purpose of entering into the License and Sponsored
Research Agreements. The value assigned to the License and Sponsored Research
Agreements and the related obligations, were therefore based on Gentest's cost.
Since Gentest had no prior operations, no pro forma financial information is
presented.
The Gentest assets acquired and liabilities assumed are summarized as
follows:
License Agreements $161,000
Sponsored Research Agreement 311,250
--------
Total Cost of Assets Acquired 472,250
Obligations Assumed (471,250)
--------
Purchase Cost $ 1,000
--------
F-5
<PAGE>
Note 3- Exclusive License
On July 8, 1998, the Company paid $100,000 to the University of South
Florida Research Foundation ("USFRF") and $5,000 to North Shore University
Hospital Research Foundation ("North Shore") for the exclusive worldwide license
to develop and market the cancer screening test kits. In addition, the Company
paid $55,000 to UTEK for services rendered in connection with securing the
license agreements. The exclusive license is being amortized over 17 years using
the straight-line method. At June 30, 1999, the amount of accumulated
amortization related to the Exclusive License was $9,470.
Note 4- Sponsored Research Contract
On July 8, 1998, the Company paid $311,250 to North Shore under the
terms of a Sponsored Research Agreement to develop the cancer screening test
kits. The contract specifies a 24-month development period with costs not to
exceed $311,250. The Sponsored Research Agreement is amortized over 2 years
using the straight-line method, with amortization costs recorded as R&D
expenses. At June 30, 1999, the amount of accumulated amortization related to
the Sponsored Research Agreement was $155,625.
Note 5-Notes Payable
On July 1, 1998, the Company borrowed $50,000 from an officer and
$180,000 from a shareholder. The Company executed notes payable which were due
December 31, 1998 at an interest rate of 12% per year, which increased to 14%
per year after the due date. As of June 30, 1999, the notes payable and accrued
interest were paid in full.
In connection with the loans, the Board granted 50,000 options to the
officer and 180,000 options to the shareholder, each at an exercise price of
$1.20 per share. Because no trading market for the common stock was yet
established, the option exercise price of $1.20 per share was determined by the
Board based on the most recent offering price of $2.00 per share less a 40%
discount. The discount was determined to be appropriate as stock issued when
these options are exercised may be restricted.
The Company recorded no compensation cost for the options granted to
the officer. For the year ended December 31, 1998, the Company recorded $356,346
as interest expense for the options granted to the shareholder based on an
estimated fair value of $1.98 per share. The fair value of $1.98 per share was
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: exercise price of $1.20 per share, stock price of
$2.00 per share, risk-free interest rate of 6.0%, expected dividend yield of
0.0; expected life of ten years; and estimated volatility of 151%.
Note 6- Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement, the Company agreed
to pay to USFRF a royalty equal to the greater of (a) five percent (5%) of
revenue from the sale of products based on the concept for the diagnosis of
selected adenocarcinomas and any additions, extensions and improvements thereto
or as a minimum (b) zero (0) dollars for the first twenty four (24) months;
$75,000 at the end of year three (3); $100,000 at the end of year four (4);
$125,000 at the end of year five (5); $150,000 at the end of year six (6) and
for each successive year thereafter during the term of the exclusive license
agreement. The royalty obligation will expire after the longer of twenty (20)
years or the expiration of the last to expire patent that covers the licensed
intellectual property. The Company also agreed to pay to North Shore a royalty
equal to one-half percent (0.5%) of revenue from the sale of such products and
ten percent (10%) of any consideration received by the Company from granting
sublicenses. No minimum royalty payments are required under the License
Agreement with North Shore.
Future Obligations to North Shore University
On March 8, 1999, the Company agreed to fund an additional $81,162 to
North Shore in six equal installments of $13,257 each, payable on or before
October 1, 1999, December 1, 1999, February 1, 2000, April 1, 2000, June 1, 2000
and August 1, 2000.
F-6
<PAGE>
Statutory Rights of the National Institutes of Health ("NIH")
The Patent & Trademark Act (Public Law 96-517), also known as the Bayh-
Dole Act, created a uniform patent policy among Federal agencies that fund
research. Bayh-Dole enables small businesses and non-profit organizations,
including universities, to retain title to materials and products they invent
with Federal funding. In return, the U.S. government retains a nonexclusive
right to make or use the invention for government purposes. Dr. Tabibzadeh's
research was funded in part with grants from the National Institutes of Health.
If the U.S. government decided to make or use Dr. Tabibzadeh's invention for
government purposes, then it would not be obligated to pay license fees or
royalties. In addition, the U.S. government is protected from lawsuits and
infringement claims.
Foreign Patent Protection
The U.S. patent covering the Ebaf Assay does not extend to foreign
countries and the Company does not presently have any foreign patent protection
for its product.
Leases
The Company's executive office is leased from a third-party under the
terms of a lease agreement that expires March 31, 2002. The office is shared
with other companies controlled by the officers and directors of the Company.
The minimum annual lease payments pursuant to the Agreement and the Company's
estimated share are scheduled as follows:
Minimum
Annual Company's
Lease Estimated
Period Payments Share
------- ------- ---------
For the year ended December 31, 1999 $40,265 $13,422
For the year ended December 31, 2000 $44,594 $14,865
For the year ended December 31, 2001 $45,587 $15,196
For the period ended March 31, 2002 $11,462 $3,821
Note 7- Common Stock and Paid in Capital
During the six months ended June 30, 1999, the following common stock
transactions occurred:
1. The Company sold 385,700 shares of common stock to third-party
investors for $557,549 in cash.
2. The Company issued a total of 82,000 shares of common stock for
services rendered by outside consultants. The shares were valued based
on the closing price of the Company's common stock on the date the
services were rendered or agreements were signed. Of the shares
issued, 80,000 were issued at $2.50 per share to a consultant to
develop and market an Internet web site and to prepare and distribute
via e-mail a detailed profile report on the Company (See Exhibit 6.7).
The remaining 2,000 shares were issued at $4.875 per share for legal
services. The Company recorded $200,000 and $9,750, respectively, as
G&A expense.
3. The Company issued 55,000 shares of common stock to an employee who
exercised stock options at $1.5625 per share. The Company received
$85,938 in cash when the options were exercised. The exercise price
was equal to the closing price of the Company's common stock on the
date the options were granted.
F-7
<PAGE>
Lexon is authorized to issue 45,000,000 Shares of Common Stock, par
value $0.001 per share, of which 6,802,013 shares were outstanding as of June
30, 1999. Lexon is also authorized to issue 5,000,000 Shares of Preferred Stock,
par value $0.001 per share, of which there are no shares presently outstanding.
There is no present intent to issue any Preferred Stock.
Voting Rights. Holders of shares of Common Stock are entitled to one
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are
entitled to receive dividends when and if declared by the Board of Directors. To
date, Lexon has not paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors out of funds legally available therefor.
Lexon intends to retain any earnings for the operation and expansion of its
business and does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend
upon future earnings, results of operations, capital requirements, Lexon's
financial condition and such other factors as the Board of Directors may
consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Lexon, holders of shares of Common Stock are entitled to receive pro rata all of
the assets of Lexon available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Lexon.
Note 8- Stock Options
On August 15, 1998, the Board of Directors and shareholders approved
the adoption of the Lexon Option Plan, pursuant to which 3,000,000 shares of
Common Stock were reserved. Stock options granted under the Plan expire ten
years from the date of grant.
On October 15, 1998, the Board granted 300,000 options to a consultant
at an exercise price of $1.20 per share. In exchange for the options, the
consultant will provide the Company financial and investment consulting services
for a one year period beginning October 29, 1998. Compensation cost was based on
an estimated fair value of $1.98 per share, which was calculated using the
Black-Scholes option pricing model with the following assumptions: exercise
price of $1.20 per share; stock price of $2.00 per share; risk-free interest
rate of 6.0%; expected dividend yield of 0.0; expected life of ten years; and
estimated volatility of 151%. During 1998 the Company recorded $593,910 as a
prepaid consulting expense and an increase to paid in capital. The Company is
amortizing the prepaid expense over a 12 month period, which is the life of the
agreement. For the six months ended June 30, 1999, the Company recorded $296,955
as G&A expense for the consultant's services.
On March 4, 1999, the Board granted 1,692,500 options to purchase
common stock at an exercise price of $1.5625 per share to certain officers,
directors and employees of the Company. The exercise price was equal to the
closing price of the Company's common stock on the date of grant. No
compensation cost was recorded.
F-8
<PAGE>
On March 4, 1999, the Board granted 250,000 options to purchase common
stock at an exercise price of $1.5625 per share to Dr. Tabibzadeh, inventor of
the Ebaf Assay screening process. The exercise price was equal to the closing
price of the common stock on the date of grant. The options were valued at $1.49
per share based on the Black-Scholes option pricing model and the Company
recorded $372,500 as R&D expense. The following assumptions for the
Black-Scholes option pricing model were used: exercise price of $1.5625, market
price of $1.5265, risk- free interest rate of 5.87%, expected dividend yield of
0.0; expected life of ten years; and estimated volatility of 117%
During 1998, the Company entered into an agreement with an investor
relations firm whereby the Board granted them an option to purchase up to
1,000,000 shares of common stock over a two year period. Amounts and exercise
prices are as follows:
Exercise
Number of Price
Vesting Period Options Per Share
-------------- --------- ---------
January 1, 1999 to March 31, 1999...... 45,000 $1.20
April 1, 1999 to June 30, 1999......... 70,000 $1.50
July 1, 1999 to September 30, 1999..... 95,000 $1.75
October 1, 1999 to December 31, 1999... 120,000 $2.00
January 1, 2000 to March 31, 2000...... 135,000 $2.25
April 1, 2000 to June 30, 2000......... 160,000 $2.50
July 1, 2000 to September 30, 2000..... 175,000 $2.75
October 1, 2000 to December 31, 2000... 200,000 $3.00
Options are eligible to vest on a quarterly basis, subject to the
achievement of certain market conditions surrounding the Company's stock. If the
vesting conditions are not met, the options eligible for vesting are forfeited.
Compensation cost will be recorded for the options when and if they become
vested. Only vested options are exercisable. All vested options are exercisable
until October 27, 2008.
During the six months ended June 30, 1999, 45,000 options at $1.20 per
share were forfeited. On June 30, 1999, 70,000 options exercisable at $1.50 per
share became vested. To determine compensation cost, the 70,000 vested options
were valued at $3.26 per share based on the Black-Scholes option pricing model
and the Company recorded $228,200 as G&A expense. The following assumptions for
the Black-Scholes option pricing model were used: exercise price of $1.50 per
share, market price on vesting date of $3.375, risk- free interest rate of
5.87%, expected dividend yield of 0.0; expected life of ten years; and estimated
volatility of 117%.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
provides an alternative method of determining compensation cost for employee
stock options, which alternative method may be adopted at the option of the
Company. Had compensation cost for the 1,692,500 options granted to employees on
March 4, 1999 been determined consistent with SFAS 123, the Company's net loss
and EPS would have been reduced to the following pro forma amounts:
Net loss:
As reported ................. $ (1,644,623)
Pro forma ................... $ (3,208,155)
Basic and diluted EPS:
As reported ................. $ (0.25)
Pro forma ................... $ (0.49)
F-9
<PAGE>
A summary of the status of the Company's stock options at June 30,
1999, and changes during the period then ended is presented below:
Weighted
Average
Shares Exercise Price
---------- ---------------
Employees:
Outstanding, beginning of period .. 50,000 $ 1.20
Granted ........................... 1,692,500 $ 1.5625
Exercised ......................... (55,000) $ 1.5625
Canceled .......................... -- --
---------- ---------------
Outstanding, June 30, 1999 ........... 1,687,500 $ 1.5518
---------- ---------------
Exercisable, June 30, 1999 ........... 1,687,500 $ 1.5518
---------- ---------------
Weighted average grant-date fair value
of options granted during period..................$ 1.49
---------------
Non-Employees:
Outstanding, beginning of period .. 1,530,000 $ 1.95
Granted............................ 250,000 $ 1.5625
Exercised ......................... -- --
Canceled or Forfeited.............. (45,000) $ 1.20
---------- ---------------
Outstanding, June 30, 1999 ........ 1,735,000 $ 1.9152
---------- ---------------
Exercisable, June 30, 1999 ........ 850,000 $ 1.3313
---------- ---------------
Weighted average grant-date fair value
of options granted during period..................$ 1.49
---------------
The following table summarizes information about fixed stock options
outstanding at June 30, 1999:
Options Outstanding Options Exercisable
------------------------------------ -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 6/30/99 Life Price at 6/30/99 Price
- --------------- ----------- ----------- -------- ----------- ---------
Employees
$1.20-$1.5625... 1,687,500 9.67 years $1.5518 1,687,500 $1.5518
----------- ----------- -------- ----------- ---------
Consultants
$1.20-$1.5625... 1,735,000 9.37 years $1.9152 850,000 $1.3313
----------- ----------- -------- ----------- ---------
F-10
<PAGE>
Note 9- Income Taxes
The components of deferred income tax are as follows:
Six Six
Inception months months
to ended ended
June 30, June 30, June 30,
1999 1999 1998
---------- --------- ---------
Net operating loss $195,000 $135,000 $1,600
Stock-based compensation 494,000 305,000 0
Valuation allowance (684,000) (440,000) (1,600)
---------- --------- ---------
Net deferred tax asset $ 0 $ 0 $ 0
---------- --------- ---------
From inception to June 30, 1999 the Company had a net operating tax
loss of approximately $2,598,000, which expires December 31, 2013, and temporary
differences related to stock-based compensation of $1,452,000. A valuation
allowance fully offsets the benefit of the net operating loss, since the Company
does not meet the "more probable than not" criteria of FASB 109.
Note 10- Earnings per Share
Basic and diluted EPS for the periods ended June 30, 1999 and 1998 were
computed as follows:
Six Months Six Months
Ended Ended
Basic and Diluted EPS Computation: June 30, 1999 June 30, 1998
-------------- -------------
Net loss applicable to common
stockholders..................... $(1,641,205) $(114,800)
-------------- -------------
Weighted average shares outstanding... 6,585,907 3,555,468
-------------- -------------
Basic and Diluted EPS................. $ (0.25) $ (0.03)
-------------- -------------
For the six months ended June 30, 1999 and 1998, all options were
excluded from the EPS calculation as their effect was anti-dilutive.
F-11
<PAGE>
Note 11- Adjustments to Previously Issued Financial Statements
The Company issued financial statements as of the same date and periods
included in these financial statements in its Form 10-SB filed as of August 3,
1999 and amended October 25, 1999. The accompanying financial statements have
been adjusted from those originally filed as follows:
June 30,
1999
------------
Prepaid Consulting Expense reported in Form 10-SB filed as of
August 3, 1999 and amended October 25, 1999........................ $128,125
Record additional 1998 compensation cost for stock options
granted to non-employees based on change to stock price from
$1.20 to $2.00 per share in Black-Scholes calculation.............. 194,925
Expense additional compensation cost recorded above................ (116,955)
------------
Prepaid Consulting Expense reported in Form 10-SB amended
December 13, 1999.................................................. $206,095
============
Accounts Payable and Accrued Liabilities reported in Form 10-SB
filed as of August 3, 1999......................................... $20,065
Accrue additional G&A expense:
for 1997........................................................ 240
for 1998........................................................ 9,600
for 1999........................................................ 4,800
------------
Accounts Payable and Accrued Liabilities reported in Form 10-SB
amended October 25, 1999........................................... $34,705
============
Additional Paid in Capital reported in Form 10-SB filed as of
August 3, 1999..................................................... $2,121,296
Accrue the value of services contributed by officers and employees:
in 1997........................................................ 1,479
in 1998........................................................ 220,000
in 1999........................................................ 140,000
Accrue interest expense for stock options granted to shareholder
for loans to the Company in 1998................................... 216,000
------------
Additional Paid in Capital reported in Form 10-SB as amended
October 25, 1999................................................... $2,698,775
Accrue additional 1998 compensation cost for stock options granted
to non-employees based on change to stock price from $1.20 to
$2.00 per share in Black-Scholes calculation:
Prepaid expense (Consultant options)........................... 194,925
R&D expense (Inventor options)................................. 38,985
G&A expense (Consultant options)............................... 38,985
Interest expense (Shareholder loan options....)................ 140,346
------------
Additional Paid in Capital reported in Form 10-SB as amended
December 13, 1999.................................................. $3,112,016
============
F-12
<PAGE>
From
Inception
(12/16/97) Six Months Six Months
through Ended Ended
June 30, June 30, June 30,
1999 1999 1998
------------ ------------ ------------
Net loss reported in Form 10-SB
filed as of August 3, 1999.......... (1,670,399) (1,382,868) 0
Accrue the value of services
contributed by officers and
employees:
for 1997........................... 1,479 0 0
for 1998........................... 220,000 0 110,000
for 1999 .......................... 140,000 140,000 0
Accrue additional G&A expenses:
for 1997......................... 240 0 0
for 1998......................... 9,600 0 4,800
for 1999......................... 4,800 4,800 0
Accrue interest expense for stock
options granted to shareholder
for loans to the Company in 1998.... 216,000 0 0
------------ ------------ ------------
Net loss reported in Form 10-SB
amended on October 25, 1999......... (2,262,518) (1,527,668) (114,800)
Accrue additional 1998 compensation
cost for stock options granted to
non-employees based on change to stock
price from $1.20 to $2.00 per share
in Black-Scholes calculation:
R&D expense...................... 38,985 0 0
G&A expense...................... 155,940 116,955 0
Interest expense................. 140,346 0 0
------------ ------------ ------------
Net loss reported in Form 10-SB
amended on December 13, 1999........ (2,597,789) (1,644,623) (114,800)
============ ============ ============
Note 12- Subsequent Events
On August 4, 1999, the Company entered into an Agreement with UTEK
CORPORATION ("UTEK"), whereby UTEK will provide technology merchant consulting
services to the Company. Such services include identifying, evaluating and
recommending potential technology acquisitions that are synergistic with Lexon's
existing cancer diagnostic testing technologies. UTEK owns 1,000,000 shares (or
14.7% of the outstanding shares) of Lexon Common Stock.
The $132,000 consulting fee is payable in three equal installments of
$44,000 each, due on April 1, 2000, September 1, 2000 and December 1, 2000. If
Lexon is unable to pay this fee in cash, then Lexon may issue shares of its
restricted common stock to UTEK equal to 200% of the amount owed divided by the
price of the shares on the date the payment is due.
On August 5, 1999, the Company entered into an Agreement and Plan of
Merger ("Merger") with Cancer Diagnostics, Inc. ("CDI"), attached hereto as
Exhibit 2.1. The terms of the Merger are for Lexon to issue 500,000 shares of
its common stock in exchange for all of the issued and outstanding common stock
of CDI. UTEK, a shareholder of Lexon, Inc., is the sole shareholder of CDI.
F-13
<PAGE>
The Merger is subject to various conditions, some of which have not yet
occurred. Closing of the Merger is expected to occur in early January 2000.
There is no assurance that the Merger will close.
If the Merger closes, all the assets and liabilities of CDI will become
assets and liabilities of Lexon. The CDI assets consist of an exclusive
worldwide license to a patent-pending blood test for lung cancer, known as the
Telomerase AssayTM, which was developed at the University of Maryland,
Baltimore, and a two-year sponsored research agreement to fund the development
and commercialization of the Telomerase Assay for the ELISA format at the
University of Maryland, Baltimore. The liabilities consist of $124,537 payable
in cash, on or before January 1, 2001, to the University of Maryland, Baltimore,
under the terms of the sponsored research agreement.
If the Merger closes, the Company will be obligated to pay a royalty of
4% of Net Sales of products sold by Lexon under the terms of the exclusive
license agreement ("Agreement"). The Agreement provides for minimum annual
royalties for the life of the Agreement, which coincides with the life of the
last to expire patent covering the licensed technology. Such minimum annual
royalties range from $2,500 per year beginning in year 3 of the Agreement to a
maximum of $4,000 beginning in year 7 and continuing each year thereafter for
the life of the Agreement. In addition, the Agreement provides for royalties of
2% of Net Sales of products sold by sublicensees and 50% of all consideration
received by the Company for up-front, milestone or other payments from
sublicensees.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Lexon, Inc.
We have audited the accompanying balance sheet of Lexon, Inc., a Development
Stage Company, as of December 31, 1998, and the related statements of
operations, cash flows and stockholders' equity, for the period from inception,
December 16, 1997, to December 31, 1998, for the year ended December 31, 1998,
and for the period from inception to December 31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lexon, Inc. as of December 31,
1998, and the results of its operations and its cash flows for the period from
inception, December 16, 1997, to December 31, 1998, for the year ended December
31, 1998, and for the period from inception to December 31, 1997, in conformity
with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, the Company's previously
issued financial statements for the year ended December 31, 1998 have been
adjusted to accrue certain additional expenses.
/s/ Tullius Taylor Sartain & Sartain LLP
Tulsa, Oklahoma
December 6, 1999
F-15
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1998
ASSETS
Current Assets
Cash .......................................................... $ 31,164
Prepaid Consulting Expense .................................... 494,925
-----------
Total Current Assets ...................................... 526,089
-----------
Other Assets
Exclusive License, net ........................................ 156,265
Sponsored Research Contract, net .............................. 233,437
-----------
Total Other Assets ....................................... 389,702
-----------
TOTAL ASSETS .................................................. $ 915,791
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Liabilities ...................... $ 25,127
Interest Payable .............................................. 16,739
Notes Payable to Officer and Shareholder ...................... 230,000
-----------
Total Current Liabilities ................................ 271,866
-----------
Stockholders' Equity
Preferred Stock, $0.001 par value, 5,000,000 shares
authorized, No shares issued and outstanding ............. 0
Common Stock, $0.001 par value, 45,000,000 shares
authorized, 6,279,313 and 0 shares issued and
outstanding at December 31, 1998 and 1997 ................ 6,279
Paid in Capital ............................................... 1,590,812
Loss accumulated during the development stage ................. (953,166)
-----------
Total Stockholders' Equity ............................... 643,925
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 915,791
-----------
The accompanying notes are an integral part of the financial statements
F-16
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Statement of Operations
From Inception (December 16, 1997) through December 31, 1998,
for the year ended December 31, 1998, and
from Inception (December 16, 1997)
through December 31, 1997
From From
Inception Inception
(12/16/97) (12/16/97)
through Year Ended through
December 31, December 31, December 31,
1998 1998 1997
------------ ------------ ------------
Revenue .............................$ 0 $ 0 $ 0
Expenses
Research and development .........$ 181,533 $ 181,533 $ 0
General and administration ....... 398,549 396,830 1,719
------------ ------------ ------------
Total Operating Expenses .... 580,082 578,363 1,719
------------ ------------ ------------
Operating Loss ...................... (580,082) (578,363) (1,719)
Interest Expense .................... 373,084 373,084 0
------------ ------------ ------------
Net Loss ............................$ (953,166) $ (951,447) $ (1,719)
------------ ------------ ------------
Weighted Average Shares Outstanding.. 4,253,702 4,253,702 0
------------ ------------ ------------
Loss per Share ......................$ (0.22) $ (0.22) $ 0.00
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements
F-17
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Statement of Cash Flows
From Inception (December 16, 1997) through December 31, 1998,
for the year ended December 31, 1998, and
from Inception (December 16, 1997)
through December 31, 1997
From From
Inception Inception
(12/16/97) (12/16/97)
through Year Ended through
December 31, December 31, December 31,
1998 1998 1997
------------ ------------ ------------
Operating Activities
Net Loss ............................$ (953,166) $ (951,447) $ (1,719)
Amortization of License and
Sponsored Research ............. 82,549 82,549 0
Amortization of Stock Options
Issued to Non-employees......... 197,970 197,970 0
Services contributed by officers
and employees................... 221,479 220,000 1,479
Amortization of Stock Options
Issued to Non-employee Lenders.. 356,346 356,346 0
Increase in Accounts Payable
and Accrued Liabilities......... 25,127 24,887 240
Increase in Interest Payable ........ 16,739 16,739 0
------------ ------------ ------------
Total Operating Activities .......... (52,956) (52,956) 0
------------ ------------ ------------
Financing Activities
Loans from Officer and
Shareholder..................... 230,000 230,000 0
Sale of common stock for cash
To Founders..................... 5,000 5,000 0
To Third Party Investors........ 368,658 368,658 0
Less: issue costs ............. (48,288) (48,288) 0
------------ ------------ ------------
Total Financing Activities ..... 555,370 555,370 0
------------ ------------ ------------
Investing Activities
Purchase of exclusive licenses ...... (160,000) (160,000) 0
Payment of sponsored research
contract ....................... (311,250) (311,250) 0
------------ ------------ ------------
Total Investing Activities ..... (471,250) (471,250) 0
------------ ------------ ------------
Net change in cash .................. 31,164 31,164 0
Cash at beginning of period ......... 0 0 0
------------ ------------ ------------
Cash at end of period ............... $ 31,164 $ 31,164 $ 0
------------ ------------ ------------
Supplemental Disclosure of Cash Flow Information
Cash paid for interest and
taxes during the period ........ $ 0 $ 0 $ 0
------------ ------------ ------------
Non-cash Financing and Investing Activities
Common stock issued in
Gentest Merger ................. $ 1,000 $ 1,000 $ 0
------------ ------------ ------------
The accompanying notes are an integral part of the financial statements
F-18
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
From Inception (December 16, 1997) through December 31, 1997
and for the year ended December 31, 1998
<TABLE>
<CAPTION>
Loss
Accumulated
During
Shares of Common Paid In Development
Stock Stock Capital Stage Total
----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 16, 1997 (Inception)....... 0 $0 $0 $0 $0
Services contributed by officer................ 0 0 1,479 0 1,479
Net Loss through December 31, 1997............. 0 0 0 (1,719) (1,719)
----------- --------- -------- ----------- -----------
Balance at December 31, 1997................... 0 $0 $1,479 $(1,719) $(240)
Common stock issued for cash:
To Founders............................... 5,000,000 5,000 0 0 5,000
To Third-Party Investors.................. 164,621 165 368,494 0 368,659
Issuance of additional shares to
Third Party Investors.................. 81,151 81 (81) 0 0
Less issue costs.......................... 0 0 (48,288) 0 (48,288)
Common stock issued for services............... 33,541 33 (33) 0 0
Common stock issued in Gentest Merger.......... 1,000,000 1,000 0 0 1,000
Value of stock options to Non-employees........ 0 0 1,049,241 0 1,049,241
Services contributed by officer and employees.. 0 0 220,000 0 220,000
Net Loss through December 31, 1998............. 0 0 0 (951,447) (951,447)
----------- --------- ---------- ------------ -----------
Balance at December 31, 1998................... 6,279,313 $6,279 $1,590,812 $(953,166) $643,925
----------- --------- ---------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-19
<PAGE>
Lexon, Inc.
(A Development Stage Company)
Notes to Financial Statements
From Inception (December 16, 1997) through December 31, 1998
Note 1- Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
Lexon, Inc. ("Lexon" or "the Company") is a development stage
corporation that has the exclusive worldwide license to develop, manufacture,
obtain FDA approval for, and market a cancer screening test kit for detecting
the ebaf protein, which allows for early, non-invasive screening for colon
cancer and certain types of ovarian and testicular cancers.
Development Stage Operations
The Company was incorporated on December 16, 1997 under the laws of the
state of Oklahoma. Since inception, the Company's primary focus has been raising
capital and developing the Ebaf blood screening process.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of
three months or less to be cash equivalents.
Income Taxes
The Company uses the liability method of accounting for income taxes as
set forth in Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Under the liability method, deferred taxes are determined
based on the differences between the financial statements and tax bases of
assets and liabilities at enacted tax rates in effect in the years in which the
differences are expected to reverse.
Compensation of Officers and Employees
The Company's officers and other employees serve without pay or other
non-equity compensation. The fair value of these services is estimated by
management and is recognized as a capital contribution. For the year ended
December 31, 1998 and the period from inception to December 31, 1997, the
Company recorded $220,000 and $1,479, respectively, as a capital contribution
by the officers and other employees.
Fair Market Value of Stock Options and Stock Issued for Services
The fair market value of stock options granted or stock issued as
payment for services is equal to the closing price of the Company's common stock
on the date options are granted or on the date agreements for services are
signed. On November 4, 1998, the Company's common stock began trading on the OTC
Bulletin Board under the symbol "LXXN". Prior to trading, the fair market value
of stock options granted or stock issued as payment for services was determined
by the Board of Directors.
Stock-based Compensation
The Company accounts for stock-based compensation arrangements in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and complies with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based on the difference, if any, on the date of grant,
between the fair value of the Company's stock and the exercise price. The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and the Emerging Issues Task Force Consensus in Issue
No. 96-18.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
Research and Development ("R&D") Costs
The Company is amortizing the $311,250 paid pursuant to the Sponsored
Research Agreement over two years, which is the life of the service agreement.
Any other costs related to developing the Ebaf Assay are expensed as incurred.
Compensation cost associated with stock options granted to Dr. Tabibzadeh, the
inventor of the Ebaf Assay, are recorded by the Company as R&D expense.
F-20
<PAGE>
New Accounting Standards
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" during 1998. The Company has no comprehensive income items during
1998. Therefore, net loss equals comprehensive income. The Company operates in
only one business segment. The Company will adopt SFAS No. 133, "Accounting for
Derivative Investments and Hedging Activities" during 1999. Currently, the
Company does not engage in hedging activities or transactions involving
derivatives.
Note 2- Gentest Merger
On May 11, 1998, the Company entered into an Agreement and Plan of
Merger with Gentest, Inc., a Florida corporation, whereby the Company agreed to
issue 1,000,000 shares of its common stock for all the issued and outstanding
common stock of Gentest, Inc. Gentest was formed in March, 1998 for the purpose
of securing the License Agreement and Sponsored Research Agreement related to
the Ebaf Assay. Under the terms of the Agreement and Plan of Merger, the Company
issued to UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000
shares of common stock of Lexon. Gentest ceased to exist by reason of the
merger, and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, became assets and liabilities of Lexon. The obligations of
Gentest were to pay $105,000 for the exclusive license, $311,250 to develop the
test kit and $55,000 for services rendered in connection with securing the
agreements. The obligations were paid in full by Lexon on July 8, 1998. The
Gentest merger was accounted for as a purchase. The purchase price of $1,000 was
based on the number of shares issued at par value of $0.001 per share.
Par value per share was used to value the purchase because all previous
share issuances, consisting solely of issuances to founders, were based on par
value, and there was no public market for the Company's stock. Gentest had only
recently been formed for the purpose of entering into the License and Sponsored
Research Agreements. The value assigned to the License and Sponsored Research
Agreements and the related obligations, were therefore based on Gentest's cost.
Since Gentest had no prior operations, no pro forma financial information is
presented.
The Gentest assets acquired and liabilities assumed are summarized as
follows:
License Agreements $161,000
Sponsored Research Agreement 311,250
--------
Total Cost of Assets Acquired 472,250
Obligations Assumed (471,250)
--------
Purchase Cost $ 1,000
--------
Note 3- Exclusive License
On July 8, 1998, the Company paid $100,000 to the University of South
Florida Research Foundation ("USFRF") and $5,000 to North Shore University
Hospital Research Foundation ("North Shore") for the exclusive worldwide license
to develop and market the cancer screening test kits. In addition, the Company
paid $55,000 to UTEK for services rendered in connection with securing the
license agreements. The exclusive license is being amortized over 17 years using
the straight-line method. At December 31, 1998, the amount of accumulated
amortization related to the Exclusive License was $4,735.
F-21
<PAGE>
Note 4- Sponsored Research Contract
On July 8, 1998, the Company paid $311,250 to North Shore under the
terms of a Sponsored Research Agreement to develop the cancer screening test
kits. The contract specifies a 24-month development period. The Sponsored
Research Agreement is amortized over 2 years using the straight-line method,
with amortization costs recorded as R&D expenses. At December 31, 1998, the
amount of accumulated amortization related to the Sponsored Research Agreement
was $77,812.
Note 5-Notes Payable
On July 1, 1998, the Company borrowed $50,000 from an officer and
$180,000 from a shareholder. The Company executed notes payable which are due
December 31, 1998 and bear interest of 12% per year. The notes are unsecured
obligations of the Company. As of December 31, 1998, the notes payable were in
default. Under the terms of the note payable, the interest rate during the
default period is 14% per year.
In connection with the loans, the Board granted 50,000 options to the
officer and 180,000 options to the shareholder, each at an exercise price of
$1.20 per share. Because no trading market for the common stock was yet
established, the option exercise price of $1.20 per share was determined by the
Board based on the most recent offering price of $2.00 per share less a 40%
discount. The discount was determined to be appropriate as stock issued when
these options are exercised may be restricted.
The Company recorded no compensation cost for the options granted to
the officer. The Company recorded $356,346 as interest expense for the options
granted to the shareholder based on an estimated fair value of $1.98 per share.
The fair value of $1.98 per share was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: exercise
price of $1.20 per share, stock price of $2.00 per share, risk-free interest
rate of 6.0%, expected dividend yield of 0.0; expected life of ten years; and
estimated volatility of 151%.
Note 6- Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement, the Company agreed
to pay to USFRF a royalty equal to the greater of (a) five percent (5%) of
revenue from the sale of products based on the concept for the diagnosis of
selected adenocarcinomas and any additions, extensions and improvements thereto
or as a minimum (b) zero (0) dollars for the first twenty four (24) months;
$75,000 at the end of year three (3); $100,000 at the end of year four (4);
$125,000 at the end of year five (5); $150,000 at the end of year six (6) and
for each successive year thereafter during the term of the exclusive license
agreement. The royalty obligation will expire after the longer of twenty (20)
years or the expiration of the last to expire patent that covers the licensed
intellectual property. The Company also agreed to pay to North Shore a royalty
equal to one-half percent (0.5%) of revenue from the sale of such products and
ten percent (10%) of any consideration received by the Company from granting
sublicenses. No minimum royalty payments are required under the License
Agreement with North Shore.
Commitment of Additional Funds for Development Subsequent to Year End
On March 8, 1999 the Company committed to fund an additional $81,162 in
6 installments of $13,527 each, payable on or before October 1, 1999, December
1, 1999, February 1, 2000, April 1, 2000, June 1, 2000 and August 1, 2000, to
expand Dr. Tabibzadeh's research staff to expedite the development of the
prototype test kit.
Statutory Rights of the National Institutes of Health ("NIH")
The Patent & Trademark Act (Public Law 96-517), also known as the Bayh-
Dole Act, created a uniform patent policy among Federal agencies that fund
research. Bayh-Dole enables small businesses and non-profit organizations,
including universities, to retain title to materials and products they invent
with Federal funding. In return, the U.S. government retains a nonexclusive
right to make or use the invention for government purposes. Dr. Tabibzadeh's
research was funded in part with grants from the National Institutes of Health.
If the U.S. government decided to make or use Dr. Tabibzadeh's invention for
government purposes, then it would not be obligated to pay license fees or
royalties. In addition, the U.S. government is protected from lawsuits and
infringement claims.
F-22
<PAGE>
Foreign Patent Protection
The U.S. patent covering the Ebaf Assay does not extend to foreign
countries and the Company does not presently have any foreign patent protection
for its product.
Leases
The Company's executive office is leased from a third-party under the
terms of a lease agreement that expires March 31, 2002. The office is shared
with other companies controlled by the officers and directors of the Company.
The minimum annual lease payments pursuant to the Agreement and the Company's
estimated share are scheduled as follows:
Minimum
Annual Company's
Lease Estimated
Period Payments Share
------- ------- ---------
For the year ended December 31, 1999 $40,265 $13,422
For the year ended December 31, 2000 $44,594 $14,865
For the year ended December 31, 2001 $45,587 $15,196
For the period ended March 31, 2002 $11,462 $3,821
Note 7- Common Stock and Paid in Capital
Under the terms of an offering dated April 1, 1998, the Company sold
5,000,000 shares of its common stock to the founders at par value for $5,000
cash.
On July 8, 1998, the Company issued 1,000,000 shares of its common
stock in connection with the Gentest merger.
On May 18, 1998, Lexon commenced its Rule 504 private offering at $2.00
per share. This price was determined by the Board of Directors. There were
125,205 shares of common stock sold to third-party investors for $250,410 in
cash. The $2.00 offering was terminated on July 31, 1998, when Lexon's 15c211
application was filed with the NASD. The Company's common stock began trading on
November 4, 1999 at $2.50 per share. On November 6, 1998, Lexon commenced a Rule
504 private offering at $3.00 per share, which price was greater than the
closing price of the Company's common stock on November 6, 1998 (the date of the
offering memorandum). There were 39,416 shares of common stock sold to
third-party investors for $118,248 in cash. The Company incurred expenses of
$48,287 in connection with the offerings. On January 18, 1999, the Company
terminated the $3.00 offering and commenced an offering at $1.50 per share,
which was equal to the closing price of the Company's common stock on January
19, 1999. Although there were no obligations to do so, the Board determined that
the investors who paid cash in the $2.00 and $3.00 private offerings should be
treated as if they had purchased their shares at $1.50 per share. Accordingly,
the Company issued an additional 81,151 shares to those investors (41,735 shares
to the $2.00 investors and 39,416 shares to the $3.00 investors.) The issuance
of the additional shares was treated as a capital transaction, with no effect on
stockholders' equity.
During 1998, the Company issued 33,541 shares of its Common Stock at
$2.00 per share for services rendered in connection with the Offering. The $2.00
per share value was determined by the Board of Directors based on the most
recent offering price of $2.00 per share.
Lexon is authorized to issue 45,000,000 Shares of Common Stock, par
value $0.001 per share, of which 6,279,313 shares were outstanding as of
December 31, 1998. Lexon is also authorized to issue 5,000,000 Shares of
Preferred Stock, par value $0.001 per share, of which there are no shares
presently outstanding. There is no present intent to issue any Preferred Stock.
Voting Rights. Holders of shares of Common Stock are entitled to one
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
F-23
<PAGE>
Dividend Rights. Holders of record of shares of Common Stock are
entitled to receive dividends when and if declared by the Board of Directors. To
date, Lexon has not paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors out of funds legally available therefor.
Lexon intends to retain any earnings for the operation and expansion of its
business and does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend
upon future earnings, results of operations, capital requirements, Lexon's
financial condition and such other factors as the Board of Directors may
consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Lexon, holders of shares of Common Stock are entitled to receive pro rata all of
the assets of Lexon available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Lexon.
Note 8- Stock Options
On August 15, 1998, the Board of Directors and shareholders approved
the adoption of the Lexon Option Plan, pursuant to which 3,000,000 shares of
Common Stock were reserved. Stock options granted under the Plan expire ten
years from the date of grant.
On October 15, 1998, the Board granted options described in the
following three paragraphs based on an exercise price of $1.20 per share.
Because no trading market for the common stock was yet established, the option
exercise price of $1.20 per share was determined by the Board based on the most
recent offering price of $2.00 per share less a 40% discount. The discount was
determined to be appropriate as stock issued when these options are exercised
may be restricted. Compensation cost, if applicable, was based on an estimated
fair value of $1.98 per share. The fair value of $1.98 per share was estimated
on the date of grant using the Black-Scholes option pricing model with the
following assumptions: exercise price of $1.20 per share, stock price of $2.00
per share, risk-free interest rate of 6.0%, expected dividend yield of 0.0;
expected life of ten years; and estimated volatility of 151%:
On October 15, 1998, the Board granted 300,000 options at an exercise price
of $1.20 per share to a consultant for financial and investment consulting
services for a one year period beginning October 29, 1998, pursuant to a written
agreement. The Company recorded $593,910 as a prepaid consulting expense and an
increase to paid in capital for the options granted to the consultant based on
an estimated fair value of $1.98 per share. The Company is amortizing the cost
over 12 months, which is the life of the agreement. For the period ended
December 31, 1998, the Company recorded $98,985 in expense for the consultant's
services.
On October 15, 1998, the Board granted 50,000 options at an exercise price
of $1.20 per share to Dr. Tabibzadeh, inventor of the Ebaf Assay screening
process, for past services. The Company recorded $98,985 as R&D expense and an
increase to paid in capital for the options granted to Dr. Tabibzadeh based on
an estimated fair value of $1.98 per share.
On October 15, 1998, the Board granted 50,000 stock options to an officer
and 180,000 stock options to a non-affiliated shareholder of the Company,
respectively, at an exercise price of $1.20 per share as consideration for loans
made by them to the Company. The Company recorded no compensation cost for the
options granted to the officer, but recorded $356,346 as interest expense and an
increase to paid in capital for the options granted to the shareholder based on
an estimated fair value of $1.98 per share.
F-24
<PAGE>
On October 29, 1998, the Company entered into an agreement with an
investor relations firm whereby the Board granted them an option to purchase up
to 1,000,000 shares of common stock over a two year period. Amounts and exercise
prices are as follows:
Exercise
Number of Price
Vesting Period Options Per Share
-------------- --------- ---------
January 1, 1999 to March 31, 1999...... 45,000 $1.20
April 1, 1999 to June 30, 1999......... 70,000 $1.50
July 1, 1999 to September 30, 1999..... 95,000 $1.75
October 1, 1999 to December 31, 1999... 120,000 $2.00
January 1, 2000 to March 31, 2000...... 135,000 $2.25
April 1, 2000 to June 30, 2000......... 160,000 $2.50
July 1, 2000 to September 30, 2000..... 175,000 $2.75
October 1, 2000 to December 31, 2000... 200,000 $3.00
Options are eligible to vest on a quarterly basis, subject to the achievement of
certain market conditions surrounding the Company's stock. If the vesting
conditions are not met, the options eligible for vesting are forfeited.
Compensation cost will be recorded for the options when and if they become
vested. Only vested options are exercisable. At December 31, 1998, no options
were exercisable. All vested but unexercised options expire ten years from the
date of the agreement.
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
provides an alternative method of determining compensation cost for employee
stock options, which alternative method may be adopted at the option of the
Company. If compensation cost for the 50,000 options granted to an officer had
been determined consistent with SFAS 123, the Company's net loss and EPS would
have been reduced to the following pro forma amounts:
Net loss:
As reported ................ $(951,447)
Pro forma .................. $(1,012,818)
Basic and diluted EPS:
As reported ................ $(0.22)
Pro forma .................. $(0.24)
F-25
<PAGE>
A summary of the status of the Company's stock options at December 31,
1998, and changes during the period then ended is presented below:
Weighted
Average
Shares Exercise Price
---------- ---------------
Employees:
Outstanding, beginning of period ..... -- $ --
Granted .............................. 50,000 1.20
Exercised ............................ -- --
Canceled ............................. -- --
---------- ---------------
Outstanding, December 31, 1998 ....... 50,000 $ 1.20
---------- ---------------
Exercisable, December 31, 1998 ....... 50,000 $ 1.20
---------- ---------------
Weighted average grant-date fair value of options
granted during the period....................... $ 1.98
---------------
Non-Employees:
Outstanding, beginning of period ..... -- $ --
Granted .............................. 1,530,000 1.95
Exercised ............................ -- --
Canceled ............................. -- --
---------- ---------------
Outstanding, December 31, 1998 ....... 1,530,000 $ 1.95
---------- ---------------
Exercisable, December 31, 1998 ....... 530,000 $ 1.20
---------- ---------------
Weighted average grant-date fair value of options
granted during the period....................... $ 1.97
---------------
The following table summarizes information about fixed stock options
outstanding at December 31, 1998:
Options Outstanding Options Exercisable
------------------------------------ -----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/98 Life Price at 12/31/98 Price
--------------- ----------- ----------- -------- ----------- ---------
Employees
$1.20.......... 50,000 9.8 years $1.20 50,000 $1.20
----------- ----------- -------- ----------- ---------
Non-Employees
$1.20-$3.00.... 1,530,000 9.8 years $1.95 530,000 $1.20
----------- ----------- -------- ----------- ---------
The weighted average fair value for options granted during 1998 was
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: stock price of $2.00 per share, risk-free interest
rate of 6.0%, expected dividend yield of 0.0; expected life of ten years; and
estimated volatility of 151%. The options expire ten (10) years from the date of
grant. For the year ended December 31, 1998, the Company recorded $554,316 of
compensation cost as an expense and $494,925 as a prepaid expense.
F-26
<PAGE>
Note 9- Income Taxes
The components of deferred income tax are as follows:
From From
Inception Inception
(12/16/97) (12/16/97)
through Year Ended through
December 31, December 31, December 31,
1998 1998 1997
------------ ------------ ------------
Net operating loss $98,000 $98,000 $0
Stock-based compensation 188,000 188,000 0
Valuation allowance (286,000) (286,000) 0
------------ ------------ ------------
Net deferred tax asset $0 $0 $0
------------ ------------ ------------
At December 31, 1998, the Company had a net operating tax loss of
approximately $287,000, as reported on its Federal Income Tax Return, which
expires December 31, 2013, and temporary differences related to stock-based
compensation of $554,000. A valuation allowance fully offsets the benefit of the
net operating loss, since the Company does not meet the "more probable than not"
criteria of FASB 109.
Note 10-Earnings per Share
Basic and diluted EPS for the period ended December 31, 1998 and 1997
were computed as follows:
1998 1997
---------- ----------
Basic and Diluted EPS Computation:
Net loss applicable to common stockholders.. $(951,447) $ (1,719)
---------- ----------
Weighted average shares outstanding......... 4,253,702 0
---------- ----------
Basic and Diluted EPS....................... $ (0.22) $ (0.00)
---------- ----------
For 1998, all options were excluded from the EPS calculation as their
effect was anti-dilutive.
On March 4, 1999, the Board of Directors granted a total of 1,942,500
options at an exercise price of $1.5625 per share, which was the closing price
of the Company's common stock on the date of grant. Of the options granted,
1,692,500 were to employees and 250,000 were to Dr. Tabibzadeh. On April 21,
1999, 55,000 options at $1.5625 per share were exercised by an employee. On June
30, 1999, 70,000 options granted to an investor relations firm at an exercise
price of $1.50 per share became vested.
F-27
<PAGE>
Note 11- Adjustments to Previously Issued Financial Statements
The Company issued financial statements as of the same date and periods
included in these financial statements in its Form 10-SB filed as of August 3,
1999 and amended October 25, 1999. The accompanying financial statements have
been adjusted from those originally filed as follows:
December 31, December 31,
1998 1997
------------ ------------
Prepaid Consulting Expense reported in Form 10-SB
filed as of August 3, 1999 and amended
October 25, 1999.................................. $300,000 $0
Record additional 1998 compensation cost for stock
options granted to non-employees based on change
to stock price from $1.20 to $2.00 per share in
Black-Scholes calculation......................... 194,925 0
------------ ------------
Prepaid Consulting Expense reported in Form 10-SB
amended December 13, 1999......................... $494,925 $0
============ ============
Accounts Payable and Accrued Liabilities reported
in Form 10-SB filed as of August 3, 1999.......... $15,286 $0
Accrue additional G&A expense:
for 1997....................................... 240 240
for 1998....................................... 9,600 0
------------ ------------
Accounts Payable and Accrued Liabilities reported
in Form 10-SB amended October 25, 1999............ $25,127 $240
============ ============
Additional Paid in Capital reported in Form 10-SB
filed as of August 3, 1999........................ $740,093 $0
Accrue the value of services contributed by
officers and employees:
in 1997........................................ 1,479 1,479
in 1998........................................ 220,000 0
Accrue interest expense for stock options granted
to shareholder for loans to the Company in 1998... 216,000 0
------------ ------------
Additional Paid in Capital reported in Form 10-SB
amended October 25, 1999.......................... $1,177,571 $1,479
Accrue additional compensation cost (prepaid) for
stock options granted to non-employees based on
change to stock price from $1.20 to $2.00 per
share in Black-Scholes calculation................ 194,925 0
Accrue additional compensation cost (expense) for
stock options granted to non-employees based
on change to stock price from $1.20 to $2.00
per share in Black-Scholes calculation............ 77,970 0
Accrue additional interest expense for stock
options granted to shareholder for loans to
Company based on change to stock price from
$1.20 to $2.00 per share in Black-Scholes
calculation....................................... 140,346 0
------------ ------------
Additional Paid in Capital reported in Form 10-SB
amended December 13, 1999......................... $1,590,812 $1,479
============ ============
F-28
<PAGE>
From From
Inception Inception
(12/16/97) (12/16/97)
through Year Ended through
December 31, December 31, December 31,
1998 1998 1997
------------ ------------ ------------
Net loss reported in Form 10-SB
filed as of August 3, 1999.......... 287,531 287,531 0
Accrue the value of services
contributed by officers and
employees:
in 1997.......................... 1,479 0 1,479
in 1998 ......................... 220,000 220,000 0
Accrue additional G&A expenses:
for 1997......................... 240 0 240
for 1998......................... 9,600 9,600 0
Accrue interest expense for stock
options granted to shareholder
for loans to the Company in 1998.... 216,000 216,000 0
------------ ------------ ------------
Net loss reported in Form 10-SB
amended on October 25, 1999......... (734,850) (733,131) (1,719)
Accrue additional 1998 compensation
cost for stock options granted to
non-employees based on change to
stock price from $1.20 to $2.00
per share in Black-Scholes
calculation......................... 77,970 77,970 0
Accrue additional interest expense
for stock options granted to share-
holder for loans to Company in 1998
based on change to stock price from
$1.20 to $2.00 per share in
Black-Scholes calculation........... 140,346 140,346 0
------------ ------------ ------------
Net loss reported in Form 10-SB
amended on December 13, 1999........ (953,166) (951,447) (1,719)
============ ============ ============
Note 12- Subsequent Events
On August 4, 1999, the Company entered into an Agreement with UTEK
CORPORATION ("UTEK"), whereby UTEK will provide technology merchant consulting
services to the Company. Such services include identifying, evaluating and
recommending potential technology acquisitions that are synergistic with Lexon's
existing cancer diagnostic testing technologies. UTEK owns 1,000,000 shares (or
14.7% of the outstanding shares) of Lexon Common Stock.
The $132,000 consulting fee is payable in three equal installments of
$44,000 each, due on April 1, 2000, September 1, 2000 and December 1, 2000. If
Lexon is unable to pay this fee in cash, then Lexon may issue shares of its
restricted common stock to UTEK equal to 200% of the amount owed divided by the
price of the shares on the date the payment is due.
On August 5, 1999, the Company entered into an Agreement and Plan of
Merger ("Merger") with Cancer Diagnostics, Inc. ("CDI"), attached hereto as
Exhibit 2.1. The terms of the Merger are for Lexon to issue 500,000 shares of
its common stock in exchange for all of the issued and outstanding common stock
of CDI. UTEK, a shareholder of Lexon, Inc., is the sole shareholder of CDI.
F-29
<PAGE>
The Merger is subject to various conditions, some of which have not yet
occurred. Closing of the Merger is expected to occur in early January 2000.
There is no assurance that the Merger will close.
If the Merger closes, all the assets and liabilities of CDI will become
assets and liabilities of Lexon. The CDI assets consist of an exclusive
worldwide license to a patent-pending blood test for lung cancer, known as the
Telomerase AssayTM, which was developed at the University of Maryland,
Baltimore, and a two-year sponsored research agreement to fund the development
and commercialization of the Telomerase Assay for the ELISA format at the
University of Maryland, Baltimore. The liabilities consist of $124,537 payable
in cash, on or before January 1, 2001, to the University of Maryland, Baltimore,
under the terms of the sponsored research agreement.
If the Merger closes, the Company will be obligated to pay a royalty of
4% of Net Sales of products sold by Lexon under the terms of the exclusive
license agreement ("Agreement"). The Agreement provides for minimum annual
royalties for the life of the Agreement, which coincides with the life of the
last to expire patent covering the licensed technology. Such minimum annual
royalties range from $2,500 per year beginning in year 3 of the Agreement to a
maximum of $4,000 beginning in year 7 and continuing each year thereafter for
the life of the Agreement. In addition, the Agreement provides for royalties of
2% of Net Sales of products sold by sublicensees and 50% of all consideration
received by the Company for up-front, milestone or other payments from
sublicensees.
F-30
<PAGE>
PART III
Index to and Description of Exhibits
Exhibit
Number Description of Exhibit
------------- ----------------------------------------------------------
2.1 Certificate of Incorporation dated December 17, 1997
2.2 Bylaws of the Registrant Adopted December 16, 1997
3.1 Form of Common Stock Certificate
6.1 License Agreement between Gentest, Inc., the
University of South Florida and the University of South
Florida Research Foundation, Inc. dated April 9, 1998
6.2 Research and License Agreement between Gentest, Inc.
and North Shore University Hospital Research Corporation
dated June 22, 1998
6.3 Agreement between Registrant and North Shore Office of
Grants and Contracts dated March 8, 1999
6.4 Investor Relations Services Agreement and Option
Agreement between Registrant and Morgan-Phillips, Inc.
dated November 1, 1998
6.5 Consulting Agreement between Registrant and the Viking
Group dated November 1, 1998
6.6 Sponsorship Commitment Agreement between Registrant
and Celebrity Images, representatives for Eric Davis and
the Score Against Colon Cancer Event, dated March 15, 1999
6.7 Consulting Agreement between Registrant and SSP Management
Corporation dated March 31, 1999
6.8 Confidentiality Agreement between Registrant and Ortho-
Clinical Diagnostics, Inc. dated April 19, 1999
6.9 Confidentiality Agreement between Registrant and Chiron
Diagnostics Corporation,dated April 21, 1999
6.10 Confidentiality Agreement between Registrant and Abbott
Laboratories, dated June 29, 1999
6.11 Consulting Agreement between Registrant and Jonathan Dari-
yanani dated March 1, 1999
6.12 Consulting Agreement between Registrant and Dr. Tabibzadeh
6.13 Form of Indemnification Agreement
6.14 Lexon, Inc. 1998 Stock Option Plan dated August 15, 1998
and Form of Option Agreement
6.15 Agreement and Plan of Merger between Registrant and
Gentest, Inc. dated May 11, 1998
6.16 Certificate of Merger dated July 9, 1998
6.17 Agreement and Plan of Merger between Registrant and
Cancer Diagnostics, Inc. dated August 5, 1999
6.18 Consulting Agreement between Registrant and UTEK
CORPORATION effective August 4, 1999
12.1 Private Placement Memorandum dated April 1, 1998
12.2 Private Placement Memorandum dated May 18, 1998
12.3 Private Placement Memorandum dated November 6, 1998
12.4 Private Placement Memorandum dated January 18, 1999
27.0 Financial Data Schedule at June 30, 1999 (for electronic
filers only)
23
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
LEXON, INC.
December 13 , 1999 /s/ GIFFORD M. MABIE
PRESIDENT
24
CERTIFICATE OF INCORPORATION
OF
LEXON, INC.
ARTICLE I
NAME
The name of the Corporation is Lexon, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Oklahoma is
located at 4444 East 66th Street, Suite 200, Tulsa, OK 74136. The Corporation's
registered agent at that office is Frederick K. Slicker.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Oklahoma General
Corporation Act.
ARTICLE IV
CAPITALIZATION
The total number of shares which this Corporation is authorized to
issue is 50,000,000 shares, which shall consist of 45,000,000 shares of Common
stock, par value $0.001 per share, and 5,000,000 shares of Preferred Stock, par
value $0.001 per share.
The Preferred Stock may be issued in one or more series. The Board of
Directors is hereby expressly authorized to issue shares of Preferred Stock in
such series and to fix from time to time before issuance thereof the number of
shares to be included in any series and the designation, relative rights,
powers, preferences, restrictions and limitations of all shares of such series.
The authority of the Board of Directors with respect to each series shall
include, without limitation, the determination of any or all of the following,
and the shares of each series may vary from the shares of any other series in
the following respects:
(a) The number of shares constituting such series and the designation
thereof to distinguish the shares of such series from the shares
of all other series;
(b) The annual dividend rate on the shares of that series, if any, and
whether such dividends shall be cumulative and, if cumulative, the
date from which dividends shall accumulate;
1
<PAGE>
(c) The voting rights, if any, in addition to the voting rights
prescribed by law and the terms of exercise of such voting right;
(d) The right, if any, of shares of such series to be converted into
shares of any other series or class and the terms and conditions
of such conversion; and
(e) The redemption price for the shares in each particular series, if
redeemable, and the terms and conditions of such redemption;
(f) The preference, if any, of shares of such series in the event of
any liquidation, dissolution or winding up on the Corporation; and
(g) Any other relative rights, preferences, limitations and
restrictions applicable to that series.
The Board of Directors shall have the power and authority to issue
without shareholder approval debentures or other securities convertible into, or
warrants or options to subscribe for or purchase, authorized shares of Common
Stock of the Corporation upon such terms and conditions as shall be determined
by action of the Board of Directors.
ARTICLE V
NO CUMULATIVE VOTING
The holders of record of the Common Stock shall have one vote for each
share held of record. Cumulative voting for the election of directors or
otherwise is not permitted.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No holder of record of Common Stock shall have a preemptive right or be
entitled as a matter of right to subscribe for or purchase any: (i) shares of
capital stock of the Corporation of any class whatsoever; (ii) warrants, options
or rights of the Corporation; or (iii) securities convertible into, or carrying
warrants, options or rights to subscribe for or purchase, capital stock of the
Corporation of any class whatsoever, whether now or hereafter authorized.
ARTICLE VII
INCORPORATOR
The name and address of the incorporator is Frederick K. Slicker, 4444
E. 66th Street, Suite 200, Tulsa, Oklahoma 74136. The powers of the incorporator
shall terminate upon the election of initial directors effective immediately
after filing of this Certificate of Incorporation with the Secretary of State of
Oklahoma.
2
<PAGE>
ARTICLE VIII
BOARD OF DIRECTORS
The initial Board of Directors shall consist of one director who shall
be elected by the incorporator effective immediately after the filing of this
Certificate of Incorporation with the Secretary of State, State of Oklahoma, and
who shall serve as directors until the first annual meeting of shareholders or
until their respective successor is duly elected and qualified. The number of
directors may be changed from time to time in accordance with the bylaws of the
Corporation then in effect. Election of directors at a meeting of shareholders
need not be by written ballot.
ARTICLE IX
AMENDMENT OF BYLAWS
The Board of Directors of the Corporation is expressly authorized and
empowered to make, alter, amend or repeal the bylaws of the Corporation and to
adopt new bylaws.
ARTICLE X
POSSIBLE CONFLICTS OF INTEREST
No agreement or transaction involving the Corporation or any other
corporation, partnership, proprietorship, trust, association or other entity in
which the Corporation owns an interest or in which a director or officer of the
Corporation has a financial interest shall be void or voidable solely for this
reason or solely because any such director or officer is present at or
participates in the approval of such agreement or transaction.
ARTICLE XI
INDEMNIFICATION
To the full extent not prohibited by the law as in effect from time to
time, the Corporation shall indemnify any person (and the heirs, executors and
representatives of such person) who is or was a director, officer, employee or
agent of the Corporation, or who, at the request of this Corporation, is or was
a director, officer, employee, agent, partner, or trustee, as the case may be,
of any other corporation, partnership, proprietorship, trust, association or
other entity in which this Corporation owns an interest, against any and all
liabilities and reasonable expenses incurred by such person in connection with
or resulting from any claim, action, suit or proceeding, whether brought by or
in the right of the Corporation or otherwise and whether civil, criminal,
administrative or investigative in nature, and in connection with an appeal
relating thereto, in which such person is a party or is threatened to be made a
party by reason of serving or having served in any such capacity.
3
<PAGE>
ARTICLE XII
NO DIRECTOR LIABILITY IN CERTAIN CASES
To the maximum extent permitted by law as in effect from time to time,
no director of the Corporation shall be liable to the Corporation or its
shareholders for monetary damages for breach of any fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director for: (i) any breach of the director's duty of loyalty to
the Corporation or its shareholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
unlawful payment of dividends or stock redemptions; or (iv) any transaction from
which the director derived an improper personal benefit.
ARTICLE XIII
CERTAIN COMPROMISES
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 shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this Corporation or of any creditor or shareholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 1106 of Title 18 of the Oklahoma Statutes as in effect
from time to time or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 1100 of Title 18 of the Oklahoma Statutes as in effect from time to
time, may order a meeting of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
to be summoned in such manner as the court directs. If a majority in number
representing three-fourths (3/4ths) in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, and/or on all the shareholders or class of
shareholders, of this Corporation, as the case may be, and also on this
Corporation.
SIGNATURES
For the purpose of forming a corporation under the Oklahoma General
Corporation Act, the undersigned incorporator affirms, declares, certifies and
acknowledges that the foregoing Certificate of Incorporation is my free and
voluntary act and deed and that the facts stated therein are true and correct to
my best knowledge and belief as of this 16th day of December, 1997.
/s/ FREDERICK K. SLICKER
Frederick K. Slicker, Incorporator
4
BYLAWS
OF
LEXON, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office and Registered Agent. The registered office and
registered agent shall be designated in duly adopted actions of the Board of
Directors. Each registered office and registered agent may be changed from time
to time by a duly adopted action of the Board of Directors, and the Corporation
shall file an appropriate statement of change of registered office or registered
agent promptly after the taking of such action in accordance with applicable
law.
SECTION 1.02. Other Offices. The Corporation may also have offices at such other
places within or without the state of incorporation of the Corporation as the
Board of Directors may from time to time determine or the business of the
Corporation requires.
ARTICLE II
SHAREHOLDERS
SECTION 2.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at the principal executive office of the Corporation
unless otherwise determined by the Board of Directors and specified in the
notice of meeting, in which event the meeting shall be held at the place within
or without the state of incorporation as shall be designated in the notice of
such meeting.
SECTION 2.02. Annual Meeting. The Board of Directors may fix the date and time
of the annual meeting of the shareholders, but if no such date and time is fixed
by the Board, the annual meeting shall be held on a third Tuesday in May, if not
a legal holiday, and if a legal holiday, then on the next succeeding business
day, at 10:00 a.m. local time. Failure to hold an annual meeting shall not
invalidate, alter or otherwise affect the validity of subsequent actions. At the
annual meeting, the shareholders then entitled to vote shall elect Directors and
shall transact such other business as may properly be brought before the
meeting.
SECTION 2.03. Special Meetings. Special meetings of the shareholders of the
Corporation as a whole, and meetings of a particular class or series of
shareholders of the
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Corporation may be called for any purpose or purposes for which meetings may
lawfully be called at any time by the Chief Executive Officer of the Corporation
or by a majority of the Board of Directors, and shall be called after the
Corporation's receipt of the request in writing from shareholders owning of
record one-fourth of the amount of each class or series of stock of the
Corporation issued and outstanding and entitled to vote. Every request for a
special meeting shall state the specific purposes of the meeting. The date of
the meeting shall be held at such date and time as the Chief Executive Officer
of the Corporation shall fix, not less than 10 days nor more than 60 days after
the receipt of the request, and the Secretary shall give due notice thereof. If
the Chief Executive Officer of the Corporation shall neglect or refuse to fix
the time and date of such meeting or shall fail to cause the Secretary to give
notice thereof, the person or persons calling the meeting may do so.
SECTION 2.04. Notice of Meetings. Written notice of the place, date and hour of
every meeting of the shareholders, whether annual or special, shall be given to
each shareholder of record entitled to vote at the meeting not less than 10 nor
more than 60 days before the date of the meeting. Every notice of a special
meeting shall state the purposes thereof.
SECTION 2.05. Quorum and Adjourned Meetings. The record holders in the aggregate
of a majority of stock issued and outstanding (excluding treasury stock) and
entitled to vote at a shareholders meeting and who are present in person or
represented by proxy shall constitute a quorum for the transaction of business,
except as otherwise provided by law, by the Corporation's Certificate of
Incorporation or by these Bylaws. If the matter presented for action at any
meeting of shareholders is one which requires voting by class or series of
stock, then holders of a majority of each class or series effected who are
present in person or by proxy shall constitute a quorum for such class or
series. If a quorum of one or more classes or series of stock is present, in
person or by proxy, shareholders holding that class or series of stock may act
for that class or series, even if a quorum is not present for other classes or
series. If such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat who are present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting until a quorum
shall be present or represented. At any such adjourned meeting at which a quorum
shall be present in person or by proxy, any business may be transacted which
might have been transacted at the meeting as originally called. When a quorum is
present at any meeting, the vote of the record owners holding a majority of the
stock having voting power, present in person or represented by proxy, shall
decide all questions brought before such meeting, unless the question is one
upon which, by expressed provision of applicable law, the Corporation's
Certificate of Incorporation or these Bylaws, a different vote is required, in
which case such expressed provision shall govern and control the decision of
such question. The affirmative vote or consent of the holders of a majority of a
class or series of stock, voting as a class, shall constitute action by that
class or series, unless applicable law, the Corporation's Certificate of
Incorporation or these Bylaws expressly provides a different vote, in which case
such expressed provision shall control. Once a meeting is duly organized and a
quorum is present, the shareholders who are present in
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person or represented by proxy may continue to conduct business until
adjournment, even after withdrawal of enough shareholders to leave less than a
quorum present.
SECTION 2.06. Conduct of Meetings. All annual and special meetings of
shareholders shall be conducted in accordance with such rules and procedures as
the Board of Directors may determine, subject to the requirements of applicable
law, and as to matters not governed by such rules and procedures, the chairman
of the meeting shall determine in good faith the procedures to be followed. The
chairman of any annual or special meeting of shareholders shall be the Chief
Executive Officer of the Corporation, unless the Board of Directors or
shareholders entitled to vote thereat select a different person to be chairman
of the meeting. The Secretary or other person designated by the chairman of the
meeting, shall act as secretary of the meeting.
SECTION 2.07. Voting. Unless the Certificate of Incorporation provides
otherwise, each shareholder of record shall be entitled to one vote in person or
by proxy for each share of stock having voting power and held of record by such
shareholder. No cumulative voting for the election of Directors shall be
permitted unless expressly permitted by the Certificate of Incorporation. No
proxy shall be voted more than three years after its date, unless the proxy
specifically provides for a longer period and the law permits.
SECTION 2.08. Consent of Shareholders in Lieu of a Meeting. Any action required
or permitted to be taken at a meeting of shareholders of the Corporation may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing setting forth the action so taken shall be signed by the holders of
record of stock (by class or series of stock where voting by class or series of
stock is required) having not less than the minimum number of votes that would
be necessary to authorize the taking of such action. Prompt notice of the taking
of action by the shareholders without a meeting by less than unanimous written
consent shall be given to those shareholders entitled to vote on the action who
did not consent in writing to such action.
SECTION 2.09. Voting Lists. At least ten (10) days before every meeting of
shareholders, the Secretary shall cause the Corporation to prepare a complete
list of the shareholders of record entitled to vote at the meeting. The list
shall be arranged in alphabetical order showing the address of each shareholder,
the number of shares registered in the name of each shareholder and the class or
series of stock held. Such list shall be open to the examination of any
shareholder of record for any lawful purpose during ordinary business hours for
a period of at least ten (10) days prior to the meeting either at the principal
executive office of the Corporation or at the place where the meeting is to be
held. The list shall also be available and open for inspection during the whole
time of the meeting and may be inspected by any shareholder of record or
authorized representative who is present.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Powers. The Board of Directors shall have full power to manage the
business and affairs of the Corporation. All powers of the Corporation, except
those specifically reserved to the shareholders by law, the Certificate of
Incorporation or these Bylaws, are hereby granted to and vested in the Board of
Directors.
SECTION 3.02. Number, Qualifications and Term of Office. The Board of Directors
shall consist of such number of directors as may be determined from time to time
by resolution of the Board of Directors. No director need be an officer or
shareholder of the Corporation, but each Director shall be a natural person 21
years of age or older. Each Director shall serve until the next annual meeting
of the shareholders or until the Director's successor shall have been duly
elected and qualified, except in the event of the Director's death, resignation
or removal.
SECTION 3.03. Vacancies. Except as provided by law or the Certificate of
Incorporation of the Corporation, any Director may be removed, either for or
without cause, at any meeting of shareholders by the affirmative vote of a
majority in number of shares of the shareholders present in person or by proxy
at such meeting and entitled to vote for the election of such director; provided
notice of the intention to act upon such matter shall have been given in the
notice calling such meeting and further provided, if a Director is elected by a
class or series of shareholders, the Director may not be removed without the
action of a majority of the shareholders of that class or series, except as
provided by law, except as provided by law or the Certificate of Incorporation
of the corporation. Vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, though less than a quorum, or by a sole remaining
Director, and any Director so chosen shall hold office until the next annual
election or until his successor is duly elected and qualified. If there are no
Directors in office, then an election of Directors may be held in the manner
provided by law. If, at the time of filling any vacancy or any newly created
directorship, the Directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), a
court of competent jurisdiction may, upon application of shareholders holding of
record at least 10 percent of the total number of the shares at the time
outstanding having the right to vote for such Directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the Directors chosen by the Directors then in office.
SECTION 3.04. Resignations. Any Director of the Corporation may resign at any
time by giving written notice to the Board of Directors, the Chief Executive
Officer or the Secretary of the Corporation. Such resignation shall take effect
upon receipt by the Corporation of such notice or at any later time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 3.05. Organization. At every meeting of the Board of Directors, the
Chairman of the Board, if there be one, or, in the case of a vacancy or
incapacity in the office or absence of the Chairman of the Board, the Director
chosen by a majority of the Directors present, shall be the chairman of the
meeting and shall preside, and the person appointed by the chairman of the
meeting shall act as secretary of the meeting.
SECTION 3.06. Place of Meetings. The Board of Directors may hold its meetings,
both regular and special, at such place or places within or without the state of
incorporation as the Board of Directors may from time to time select, as
designated in the notice calling the meeting.
SECTION 3.07. Organizational Meeting. The first meeting of each newly elected
Board of Directors shall be held without notice immediately following the annual
meeting of Common shareholders, unless the shareholders shall determine
otherwise.
SECTION 3.08. Regular Meetings. Regular meetings of the Board of Directors may
be held without further notice after the regular schedule of meetings has been
determined and approved at such time and place as shall be designated from time
to time by a duly adopted action of the Board of Directors.
SECTION 3.09. Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board or by two or more of the
Directors. Notice of each special meeting shall be given to each director by
telephone, telegram, telecopy, in writing or in person at least 24 hours (in the
case of notice by telephone, in person or actual notice however received) or 48
hours (in the case of notice by telegram, or telecopy or similar wire
communication) or five (5) days (in the case of notice by mail or otherwise)
before the time at which the meeting is to be held. Each such notice shall state
the date, time and place of the meeting to be so held.
SECTION 3.10 Quorum and Adjourned Meetings. At all meetings of the Board, a
majority of the Directors shall constitute a quorum for the transaction of
business; and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the Certificate of
Incorporation. Proxies of Directors shall not be counted to determine a quorum
for meetings of the Board of Directors, or for any other purpose, and a Director
may not vote by proxy at a meeting of the Board of Directors. If a quorum is not
be present at any meeting of the Board of Directors, a majority of the Directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
SECTION 3.11. Unanimous Consent of Directors in Lieu of a Meeting. Unless
otherwise restricted by law, the Certificate of Incorporation or these Bylaws,
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, without
prior notice and without a vote if all members of the Board or such Committee,
as the case may be, consent thereto in writing either before or after the
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taking of action with respect thereto. The written consent shall be filed with
the minutes of proceedings of the Board or that Committee.
SECTION 3.12. Executive and Other Committees. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate an Executive
Committee and one or more other committees. Each Committee shall consist of one
or more Directors. Only to the extent expressly provided in the resolution
establishing any Committee and only to the extent such Committee is not
otherwise restricted or limited by applicable law or the Certificate of
Incorporation or these Bylaws, any Committee of the Board shall have and may
exercise all the power and authority of the Board of Directors in the management
of the business and affairs of the Corporation, including the power or authority
to declare a dividend, to authorize the issuance of stock, to adopt a
certificate of ownership and merger and to authorize the seal of the Corporation
to be affixed to all papers which may require it; but no such Committee shall
have the power or authority to (1) amend the Certificate of Incorporation
(except that a Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of the stock adopted by the
Board of Directors, as permitted by applicable law, fix any of the preferences
or rights of such shares relating to voting, dividends, redemption, dissolution,
any distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation not
issued and outstanding), (2) adopt an agreement of merger or consolidation, (3)
recommend to the shareholders the sale, lease or exchange, of all or
substantially all of the Corporation's property and assets, (4) recommend to the
shareholders the dissolution of the Corporation or a revocation of a
dissolution, or (5) amend the Bylaws of the Corporation. Each Committee shall
have such name as may be determined from time to time by resolution adopted by
the Board of Directors. Each Committee shall keep regular minutes of its
meetings and file the same with the minutes of the Board of Directors.
SECTION 3.13. Compensation of Directors. Unless otherwise restricted by law, the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of Directors. The Directors shall be
reimbursed their actual reasonable expenses, if any, of attendance at any
meeting of the Board of Directors and any Committee thereof and may be paid a
fixed sum for attendance at each such meeting or a fixed salary as determined by
the Board of Directors. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICE OF MEETINGS
SECTION 4.01. Notice. Whenever notice is required to be given to any Director or
shareholder, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such Director or shareholder, at
the person's address as it appears
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on the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to shareholders may also be given in accordance with
Section 2.04 of Article II hereof, and notice to Directors may also be given in
accordance with Section 3.09 of Article III hereof.
SECTION 4.02. Waiver of Notice. Whenever any notice is required to be given, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Presence in person at any meeting of
the shareholders, the Board of Directors or any Committee of the Board shall
constitute a waiver of notice of that meeting, unless the person in attendance
expressly states at the outset of the meeting that the person's presence is for
the purpose of objecting to notice. Except in the case of a special meeting of
shareholders and as otherwise required by law, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
shareholders, Directors, or Committee of Directors need be specified in any
written waiver of notice of such meeting.
SECTION 4.03. Teleconference Meetings. One or more shareholders, Directors or
members of a Committee of Directors may participate in a meeting of the
shareholders, the Board, or of a Committee of the Board, by means of conference
communications or similar communications equipment; provided that all persons
participating in the meeting can hear each other and participate in discussions
thereof. Participation by conference communication equipment at a meeting shall
have the same effect as being present in person at such meeting.
ARTICLE V
OFFICERS
SECTION 5.01 Number, Qualifications and Designation. The officers of the
Corporation shall be chosen by the Board of Directors and shall be a President,
one or more Vice Presidents, a Secretary, a Treasurer, and such other officers
as may be elected in accordance with the provisions of Section 5.02 of this
Article. Any person may hold more than one office. Officers may be, but need not
be, Directors or shareholders of the Corporation. The Board of Directors may
from time to time elect such other officers as it deems necessary or
appropriate, who shall exercise such powers and perform such duties as are
provided in these Bylaws and as the Board of Directors may from time to time
determine.
SECTION 5.02 Election, Term of Office and Resignation. The officers of the
Corporation shall be elected annually by the Board of Directors, and each such
officer shall hold office until a successor shall have been elected and
qualified, or until the officer's death, resignation, or removal. Any officer
may resign at any time upon written notice to the Corporation. Such resignation
shall take effect upon receipt by the Corporation of such notice, or such other
date as specified in such notice.
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SECTION 5.03 Removal of Officers. Any officer or agent elected or appointed by
the Board of Directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of the whole Board of Directors. If any office
becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
SECTION 5.04 Chairman of the Board. If the Board of Directors elects a Chairman
of the Board, the Chairman of the Board shall be the Chief Executive Officer of
the Corporation. The Chairman of the Board shall preside at all meetings of the
shareholders (unless the shareholders entitled to vote thereat select a
different person to so act) and the Board of Directors and shall assist the
Board of Directors in the formulation of policies to be pursued by the executive
management of the Corporation. It shall be the responsibility of the Chairman of
the Board to see that the policies established by the Board of Directors are
carried into effect. The Chairman of the Board may sign and deliver on behalf of
the Corporation any deeds, mortgages, bonds, contracts, powers of attorney, or
other instruments which the Board of Directors has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation; and the Chairman of the Board shall perform all duties
incident to the office of Chief Executive Officer of the Corporation and such
other duties as may be prescribed by the Board of Directors from time to time.
SECTION 5.05 President. The President shall be the Chief Operating Officer of
the Corporation, shall report to the Chairman of the Board, if one is elected,
and shall have general supervisory responsibility over all operations of the
Corporation, subject to the control of the Board of Directors. If a Chairman of
the Board is not elected and in the absence or incapacity of the Chairman of the
Board, the President shall perform all the duties of the Chairman of the Board,
including all duties as Chief Executive Officer of the Corporation. The
President shall execute and deliver, in the name of the Corporation, deeds,
mortgages, bonds, contracts or other instruments, authorized by the Board of
Directors, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation; and, in general, subject to supervision by
the Chairman of the Board, if one is elected, the President shall perform all
duties incident to the office of Chief Operating Officer of the Corporation, and
such other duties as from time to time may be assigned to him by the Chairman of
the Board or the Board of Directors.
SECTION 5.06 Vice Presidents. The Vice Presidents, in the order of the
designation by the Board of Directors, shall perform the duties of the President
in the President's absence or incapacity and such other duties as may from time
to time be assigned to them by the Board of Directors, the Chairman of the Board
or by the President.
SECTION 5.07 Secretary. Unless the chairman of the meeting provides otherwise,
the Secretary shall attend all meetings of the shareholders, the Board of
Directors and Committees thereof, shall record the minutes of the proceedings
thereat and shall keep a current and complete record thereof. The Secretary
shall publish, keep and maintain records and reports of the
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Corporation as required by law; shall be the custodian of the seal of the
Corporation and see that it is affixed to all documents to be executed on behalf
of the Corporation under its seal; and, in general, shall perform all duties
incident to the office of Secretary and such other duties as may from time to
time be assigned to the Secretary by the Board of Directors, the Chairman of the
Board or the President. Each Assistant Secretary shall have such powers and
perform such duties as the Board of Directors, the Chairman of the Board, or the
President may from time to time delegate to that Assistant Secretary.
SECTION 5.08 Treasurer. The Treasurer shall be the Chief Financial Officer of
the Corporation; shall have responsibility for the proper care and custody of
all corporate funds and securities; shall keep full, accurate and complete
records, receipts and disbursements of the Corporation; and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements; shall
render a report to the Board of Directors, whenever requested, of the financial
condition of the Corporation; and shall perform such other duties as the Board
of Directors may prescribe. In the absence or incapacity of a Corporate
Controller, the Treasurer shall also be responsible for the performance of all
the duties of the Controller. Each Assistant Treasurer shall have such powers
and perform such duties as the Board of Directors, the Chairman of the Board or
the President may from time to time delegate to that Assistant Treasurer.
SECTION 5.09 Controller. The Controller, if one is elected, shall be the Chief
Accounting Officer of the Corporation and shall cause to be kept full and
accurate books and accounts of all assets, liabilities and transactions of the
Corporation. The Controller shall establish and administer an adequate plan for
the control of operations, including systems and procedures required to properly
maintain internal controls on all financial transactions of the Corporation. The
Controller shall cause to be prepared statements of the financial condition of
the Corporation and proper profit and loss statements covering the operations of
the Corporation and such other and additional financial statements, if any, as
the Chairman of the Board, the President, the Treasurer or the Board of
Directors from time to time shall require. The Controller shall work under the
direct supervision of the Treasurer and also shall perform such other duties as
may be assigned to the Controller by the Board of Directors, the Chairman of the
Board or the President.
SECTION 5.10 Assistant Officers. The Board of Directors may appoint one or more
assistant officers. Each assistant officer shall, at the request of or in the
absence or incapacity of the officer to whom the person is an assistant, perform
the duties of such officer and shall have such other authority and perform such
other duties as the Board of Directors may prescribe.
SECTION 5.11 Bonds. If required by the Board of Directors, any officer shall
give the Corporation a bond in such form, in such sum, and with such surety or
sureties as shall be satisfactory to the Board, for the faithful performance of
the duties of the officer's office and for
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the restoration to the Corporation, in case of the officer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in their possession or under their control
belonging to the Corporation.
SECTION 5.12 Compensation of Officers. The compensation of the officers of the
Corporation shall be determined from time to time by the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 6.01 Issuance. Each shareholder shall be entitled to a certificate or
certificates representing shares of stock of the Corporation owned of record.
The stock certificates of the Corporation shall be numbered and registered in
the stock ledger and transfer books of the Corporation as issued. Certificates
shall be signed by the Chairman, President or a Vice President and by the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, and
shall bear the corporate seal. Any or all of the signatures and the corporate
seal upon such certificate may be a facsimile, engraved or printed. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer, transfer agent or registrar, the certificate shall be valid and of
the same force and effect as if the person continued to be such officer,
transfer agent or registrar.
SECTION 6.02 Transfer. Upon surrender to the Corporation or the transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, and subject
to compliance with applicable law, it shall be the duty of the Corporation to
issue a new certificate of like form to the person entitled thereto, cancel the
old certificate and record the transaction upon its books. No transfer shall be
made which would be inconsistent with applicable law.
SECTION 6.03 Stock Certificates. Stock certificates for each class and series of
stock of the Corporation shall be in such form as provided by statute and
approved by the Board of Directors. The stock transfer books for each class and
series of stock and the blank stock certificates shall be kept by the Secretary
or by any officer or agency designated by the Board of Directors for that
purpose.
SECTION 6.04 Lost, Stolen, Destroyed or Mutilated Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen, destroyed or mutilated upon the receipt by the
Corporation of an affidavit of that fact by the record owner claiming the
certificate of stock to be lost, stolen, destroyed or mutilated. When
authorizing issuance of a replacement certificate, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof, require
the record owner of such lost, stolen,
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destroyed or mutilated certificate, or the person's legal representative to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, destroyed or mutilated.
SECTION 6.05. Record Holder of Shares. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the record
and beneficial owner of shares to receive notices, to receive dividends, to
exercise voting rights and for all other purposes; and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, even if the Corporation shall have notice
thereof.
SECTION 6.06. Determination of Record Date. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or to receive payment of any dividend or
other distribution or allotment of any rights, or to exercise any rights in
respect of any change, conversion or exchange of stock or for any other lawful
action or purpose, the Board of Directors may fix a record date, which shall not
be more than 60 nor less than 10 days before the date of such meeting or any
other action.
If no record date is fixed:
(1) The record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and
(2) The record date for determining shareholders entitled to express consent to
actions in writing without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first written consent is
expressed; and
(3) The record date for determining shareholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
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ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
SECTION 7.01. Indemnification of Authorized Representatives in Third Party
Proceedings. To the maximum extent not prohibited by law, the Corporation shall
indemnify any person who was or is an authorized representative of the
Corporation (which shall mean for purposes of this Article a Director or officer
of the Corporation or another person serving at the request of the Corporation
as a director, officer, partner or trustee of another corporation, partnership,
joint venture, trust or other business enterprise) and who was or is a party
(which shall include for purposes of this Article the giving of testimony or
similar involvement) or is threatened to be made a party to any third party
proceeding (which shall mean for purposes of this Article, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitration, administrative or investigative other than an action by or in the
right of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (which shall
include for purposes of this Article attorneys' fees and expenses), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such third party proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding (which could or does lead to a criminal third
party proceeding) had no reasonable cause to believe such conduct was unlawful.
The termination of any third party proceeding by judgment, order, settlement,
indictment, conviction or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the authorized representative did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal third party proceeding, had reasonable cause to believe that such
conduct was unlawful.
SECTION 7.02. Indemnification of Authorized Representatives in Corporate
Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding (which shall mean for
purposes of this Article any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor or
investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action, if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation, unless and only to the extent that a
court of competent jurisdiction shall determine that, despite the adjudication
of liability but in view of all the circumstances of the case,
12
<PAGE>
such authorized representative is fairly and reasonably entitled to be
indemnified to the extent such court shall order.
SECTION 7.03. Mandatory Indemnification of Authorized Representatives. To the
extent that an authorized representative of the Corporation has been successful
on the merits or otherwise in defense of any third party proceeding or corporate
proceeding or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses actually and reasonably incurred by such
person in connection therewith.
SECTION 7.04. Determination of Entitlement to Indemnification. Any
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
is proper in the circumstances, because such person has either met the
applicable standards of conduct set forth in Section 7.01 or 7.02 or has been
successful on the merits or otherwise as set forth in Section 7.03 and that the
amount requested has been actually and reasonably incurred. Such determination
shall be made:
(1) By the Board of Directors by a majority of a quorum consisting of Directors
who were not parties to such third party or corporate proceeding; or
(2) If such a quorum of the Board of Directors is not obtainable, or, even if
obtainable, a majority vote of such a quorum so directs, by independent legal
counsel in a written opinion; or
(3) By the shareholders voting in the aggregate and not by class or series.
SECTION 7.05. Advancing Expenses. Expenses actually and reasonably incurred in
defending a third party or corporate proceeding shall be paid on behalf of an
authorized representative by the Corporation in advance of the final disposition
of such third party or corporate proceeding as authorized in the manner provided
in Section 7.04 of this Article upon receipt of an undertaking by or on behalf
of the authorized representative to repay such amount unless it shall ultimately
be determined that such person is entitled to be indemnified by the Corporation
as authorized in this Article. The financial ability of such authorized
representative to make such repayment shall not be a prerequisite to the making
of an advance.
SECTION 7.06. Employee Benefit Plans. For purposes of this Article, the
Corporation shall be deemed to have requested an authorized representative to
serve an employee benefit plan where the performance by such person of duties to
the Corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an authorized representative with respect to an employee benefit
plan pursuant to applicable law shall be deemed fines; and action taken or
omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed
13
<PAGE>
to be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Corporation.
SECTION 7.07. Scope. The indemnification of and advancement of expenses to
authorized representatives, as authorized by this Article, shall (1) not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in an
official capacity and as to action in another capacity, (2) continue as to a
person who has ceased to be an authorized representative, and (3) inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 7.08. Reliance. Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon rights of indemnification provided by this Article.
SECTION 7.09. Insurance. The Corporation may but shall not be obligated to
purchase and maintain insurance at its expense on behalf of any person who is or
was an authorized representative against any liability asserted against such
person in such capacity or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Dividends. Subject to the provisions of the Certificate of
Incorporation, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting only out of
funds or property lawfully available therefor under applicable law. Dividends
may be paid in cash, in property, or in shares of the capital stock or held by
the Corporation, subject to the provisions of the Certificate of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Directors from time
to time, in its absolute discretion, determines to be proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
Board of Directors shall determine to be in the interests of the Corporation,
and the Board of Directors may modify or abolish any such reserve in the manner
and at the time the Board of Directors thereof so determines.
SECTION 8.02. Annual Statements. The Board of Directors, through the officers of
the Corporation, shall present at each annual shareholders meeting, and at any
special meeting of the shareholders when called for by vote of the shareholders,
a full and clear statement of the business and condition of the Corporation.
SECTION 8.03. Contracts. Except as otherwise provided in these Bylaws, the Board
of Directors may authorize any officer or officers or any agent or agents to
enter into any contract or to execute and deliver any instrument on behalf of
the Corporation, and such authority may be general or confined to specific
instances.
SECTION 8.04. Checks. All checks, notes, bills of exchange or other orders in
writing shall be signed by such person or persons as the Board of Directors may
from time to time designate.
SECTION 8.05. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal", and the state of incorporation of the Corporation. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
SECTION 8.06. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors may approve or designate; and all
such funds may be withdrawn only upon checks or withdrawal requests signed by
such one or more officers or employees as the Board of Directors shall from time
to time determine.
SECTION 8.07. Amendment of Bylaws. These Bylaws may be altered, amended,
restated or repealed or new bylaws may be adopted by the shareholders or by the
Board of Directors at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal, restatement or
adoption of new bylaws is contained in the notice of such special meeting.
SECTION 8.08. Fiscal Year. The fiscal year of the Corporation shall begin on the
first day of January and end on the 31st day of December, unless otherwise
provided by resolution of the Board of Directors.
SECTION 8.09. Interested Directors. No contract or transaction between the
Corporation and one or more of its Directors or officers, or between the
Corporation and any other company, partnership, association or other
organization in which one or more of its Directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the Director or officer is present at or participates
in the meeting of the Board of Directors or Committee thereof which authorizes
the contract or transaction, or solely because the Director's or officer's vote
is counted for such purpose, if: (1) the material facts as to the relationship
or interest are disclosed to the Board or the Committee, and the Board or
Committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or (2) the material facts as to
the relationship or interest are disclosed to the shareholders or Directors
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders or Board of Directors; or (3)
the contract or
15
<PAGE>
transaction is determined to be fair as to the Corporation as of the time it is
authorized, approved, adopted or ratified by the Board of Directors or a
Committee thereof or by the shareholders. Interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a Committee
of the Board which authorizes the contract or transaction.
SECTION 8.10. Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account and
minute books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall convert any records so kept upon the
request of any person entitled to inspect the same.
16
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA
CUSIP NO. 52977E 10 9
Number Shares
xxxxxxxxxx xxxxxxxxxxx
LEXON, INC.
AUTHORIZED COMMON STOCK: 45,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of LEXON, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
Dated: xxxxxxxxxxxx
LEXON, INC.
CORPORATE
SEAL
DEC. 17, 1997
OKLAHOMA
- ------------------------------------ ------------------------------
Secretary President
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
Countersigned Registered:
NEVADA AGENCY AND TRUST COMPANY
50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA 89501
By:_________________________
Authorized Signature
LICENSE AGREEMENT
THIS AGREEMENT, effective the 9th day of April 1998, is between "GENTEST", INC.,
a Florida corporation, ("GENTEST"), located at 3214 Polo Place, Plant City,
Florida, and the University of South Florida Research Foundation, Inc.,
("USFRF') a not for profit corporation under Florida law and a university direct
support organization of the University of South Florida ("USF").
Introduction
WHEREAS, GENTEST will actively be involved in the merchandising and the
development of test kits for the screening of colon, ovarian and testicular
cancer.
WHEREAS, USF has developed a concept (defined hereinafter as USF Technology) for
the diagnosis of selected adenocarcinomas as set forth in US Patent Application
No. 08/919.421.
WHEREAS, GENTEST wants USF to conduct research on the development of laboratory
test kits, and desires a license to use the results of USF's research conducted
pursuant to this Agreement and USF technology.
WHEREAS, USFRF is the exclusive licensor of USF Technology and is willing to
grant GENTEST an exclusive license to use USF Technology and other USF research
results devised pursuant to this Agreement, on the terms and conditions therein;
and
WHEREAS, USFRF believes it is in the public interest to grant GENTEST the
license set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth
herein, and intending to be legally bound, the parties agree as follows:
I. Definitions
A. "USF Patent Rights" shall mean the USF Patent Applications
listed in Exhibit A and any successor application, domestic or
foreign resulting therefrom, any US or foreign patents issuing
therefrom, and any results of research supported by GENTEST
and which relates to cancer screening.
B. "USF Technology" shall mean the method for the diagnosis of
selected adenocarcinomas and the development of test kit(s)
for cancer screening and the uses thereof disclosed in USF
Patent Rights and USF know-how related directly thereto.
1
<PAGE>
C. "Licensed Product" shall mean any GENTEST product, system
and/or process in which USF Technology is used, and other uses
of cancer screening for which USF conducts research pursuant
to this Agreement.
D. To "Commercially Exploit" or "Commercial Exploitation" of a
Licensed Product shall mean to provide the Licensed Product to
a customer, in exchange for valuable consideration.
E. "Revenue" for a Licensed Product shall mean consideration
due or paid to GENTEST for GENTEST's providing of a Licensed
Product to a customer.
F. "Territory" shall mean Worldwide.
II. Grant
Subject to USFRF's retained rights and covenants set forth in Section VIII
below, GENTEST is granted the exclusive right and license to Commercially
Exploit Licensed Products in the Territory.
III. Best Efforts
GENTEST shall use its best efforts to develop and Commercially Exploit
Licensed Products in the Territory.
IV. Research Fees, License Fees and Running Royalties
GENTEST agrees to pay license fees, research fees, and running
royalties (all payable to USFRF) as follows:
A. Initial License fee of One Hundred Thousand Dollars ($100,000.00)
payable within ninety (90) days after execution of this License
Agreement.
B. To the extent consistent with USF rules and polices and Florida
Law, GENTEST will engage USFRF to conduct a cancer research
project as set forth in Exhibit B. The purpose of this research
project is to develop test kits for the screening of colon,
ovarian and testicular cancer. Siamak Tabibzadeh, M. D., of the
Moffit Cancer Center, will be the principal investigator of this
project. GENTEST will, within ninety (90) days of the execution
of this Agreement pay USFRF the sum of $311,250.00 for the
twenty-four (24) months sponsored research project to develop the
subject test kits; and of said sum of
2
<PAGE>
percent ($54,250.00) will be used to cover overhead associated
therewith. Any additional intellectual property relating to USF
Technology that results from said research and development will
be owned by USF and included in this exclusive license granted to
GENTEST.
C. Running Royalties equal to:
(i) five percent (5%) of Revenue from Commercial Exploitation
for Licensed Product, (e.g., test kits for cancer
screening); and
(ii) shall pay to USF as minimum royalty payments as follows:
zero (0) dollars for the first twenty-four (24) months;
seventy-five thousand ($75,000.00) dollars at the end of
year three (3); one hundred thousand ($100,000.00) dollars
at the end of year four (4); one hundred twenty-five
($125,000.00) dollars at the end of year five (5); one
hundred fifty ($150,000.00) dollars at the end of year six
(6); and said sum for each successive year thereafter during
the term of this Agreement.
V. Patent Prosecution
The filing, prosecution and maintenance of all USF Patent Rights shall
be at the sole discretion of USF, provided that at Licensee's request
and sole expense, USFRF will arrange for USF to seek, obtain and
maintain such patent and other protection, in the territory, to the
extent that USF is lawfully entitled to do so.
VI. Assignability
This Agreement may be assigned to any person or entity without USFRF's
advance notice, and thereafter may be assigned to any person or entity
only with advanced written approval from USFRF; provided that USFRF
will not reasonably withhold such approval in a timely manner, and
further provided that any such assignee agrees to comply with all of
the terms and conditions hereunder.
VII. Sublicensing
GENTEST'S rights and obligations under this Agreement may be
sublicensed without USFRF's advance written permission, provided
GENTEST is in compliance with all of its obligations under this
Agreement.
3
<PAGE>
USFRF will permit GENTEST to sublicense its rights to Commercially
Exploit Licensed Products, provided that GENTEST shall pay royalties to
USFRF as if GENTEST had Commercially Exploited Licensed Products sold
by its sublicenses which may have been granted by GENTEST. All
sub-licensees shall agree to comply with all of the terms and
conditions of this Agreement. GENTEST shall provide USFRF with a copy
of each executed sublicense within fifteen (15) days of its execution.
VIII. USFRF Retained Rights and Covenants
USFRF retains for itself and for USF the right to do all things granted
to GENTEST under Section II, and USFRF covenants that USFRF will not
license others to Commercially Exploit USF Technology licensed to
GENTEST under this Agreement, and will not itself so Commercially
Exploit, unless
(i) authorized by this Agreement, or
(ii) GENTEST becomes insolvent, or
(iii) anyone files a lien against this Agreement, or
(iv) GENTEST takes any action, or fails to take any action, the
result of which gives a third party the right to acquire a
security interest in this Agreement and/or USF Patent Rights,
or
(v) GENTEST files for bankruptcy or a receiver is appointed, or
(vi) GENTEST ceases to carry on its business, with the exception of
merger, reorganization, acquisition, or similar restructuring.
(vii) GENTEST materially breaches this Agreement in a manner which
causes the Agreement to terminate or gives USFRF the right to
terminate under SectionXII.
IX. Product Liability/Insurance
GENTEST shall, at all times during the term of this Agreement and
thereafter, be solely responsible for, and defend, hold harmless and
indemnify State of Florida, Board of Regions, USF, USFRF, their
trustees, officers, employees, agents and other representatives,
against any claims and expenses, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to
any person or property based upon products and/or services produced,
provided or developed for, or
4
<PAGE>
by GENTEST, or commercially exploited by GENTEST pursuant to its
rights under this Agreement. GENTEST shall obtain and carry in full
force and effect product liability insurance, in amounts customary in
the relevant industry in which GENTEST commercially exploits licensed
products which shall protect USF, USFRF, their trustees, the Board of
Regents, officers, employees, and agents and the State of Florida and
other representatives in regard to the foregoing events at such time
as GENTEST begins to supply licensed products to the marketplace.
X. Record Keeping
A. GENTEST shall keep full, true and accurate books of account
containing all particulars that may be necessary for the
purpose of showing the amounts payable to USFRF hereunder.
Said books of account shall be kept at GENTEST'S principal
place of business. Said books and the supporting data shall be
open at all reasonable times, with reasonable advanced notice,
for five (5) years following the end of the calendar year to
which they pertain, to the inspection of USFRF or its agents
for the purpose of verifying GENTEST'S royalty statement or
compliance in other respects with this Agreement.
B. GENTEST within ninety (90) days after each six (6) months,
shall deliver to USFRF true and accurate reports, giving such
particulars of the business conducted by GENTEST during the
six (6) months as shall be pertinent to royalty accounting
hereunder. These shall include at least the following:
(i) the number of Licensed Products provided by GENTEST to
its customers, if any,
(ii) the Revenue derived by GENTEST from its Commercial
Exploitation of Licensed Products, if any, and
(iii) the royalties due pursuant to Section IV.
With each such report submitted, GENTEST shall pay the
royalties and any other consideration due and payable under
this Agreement. If no royalties, fees or other consideration
shall be due, GENTEST shall so report.
C. On or before the ninetieth (90th) day following the close of
GENTEST'S fiscal year, GENTEST shall provide USFRF with GENTEST'S
financial statements for the preceding fiscal year including, at
a minimum, a Balance sheet and an Operating Statement.
D. The payments for royalties, fees or other consideration set forth
in this
5
<PAGE>
Agreement shall, if overdue, bear interest until payment at the
monthly rate of one percent (1%). The payment of such interest
shall not foreclose USFRF from exercising any other rights either
may have as a consequence of the lateness of any payment.
E. GENTEST hereby agrees that it shall not sell, transfer, export or
re-export any Licensed Products or related information in any
form, or any direct products of such information, except in
compliance with all applicable laws, including the export laws of
any U. S. government agency and any regulations thereunder, and
will not sell, transfer, export or re-export any such Licensed
Products or information to any persons or any entities with
regard to which there exist grounds to suspect or believe that
they are violating such laws. GENTEST shall be solely responsible
for obtaining all licenses, permits or authorizations required
from the U. S. and any other government for any such export or
re-export.
XI. Non Use of Names
GENTEST shall not use the names of the USF or USFRF, nor any adaptation
of either, in any advertising, promotional or sales literature without
prior written consent obtained from USF and/or USFRF in each case,
except that GENTEST may state that it is licensed under one or more of
the patents and/or applications comprising the USF Patent Rights.
XII. Term and Termination
A. Unless sooner terminated as provided herein, the royalty
obligations of this Agreement will expire with respect to a given
Licensed Product the longer of twenty (20) years from the date of
the execution of this Agreement or the expiration of the last to
expire patent which covers the licensed intellectual property in
the Territory. Notwithstanding the foregoing, the parties hereto
agree that the royalty provisions of Paragraph IV.C(i) are not
solely dependent upon Patent Rights, and GENTEST'S obligations to
pay royalties under paragraph IV.C.(i) hereinabove shall continue
unabated regardless of any of the foregoing expirations.
B. In the event either party files for bankruptcy or a receiver is
appointed, this Agreement may immediately thereafter be
terminated at the option of the other party.
C. Should GENTEST fail to pay the royalties, fees and/or other
consideration due
6
<PAGE>
and payable hereunder, USFRF shall have the right to terminate
this Agreement on forty-five (45) days written notice. Upon the
expiration of the forty-five (45) day period, if GENTEST shall
not have paid all such royalties and interest thereon, USFRF
shall have the right to terminate this Agreement.
D. Upon any material breach or default of this Agreement by GENTEST,
other than those occurrences set out hereinabove which shall
always take precedence in that order over any material breach or
default referred to in this Section, USFRF shall have the right
to terminate this Agreement and the rights, privileges and
license granted hereunder upon forty-five (45) days' written
notice to GENTEST. Such termination shall become effective unless
GENTEST shall have cured any such breach or default prior to the
expiration of forty-five (45) days from the date GENTEST receives
notice of the breach or default.
E. Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation
that matured prior to the effective date of such termination.
GENTEST may, however, after the effective date of such
termination, complete Commercial Exploitation of Licensed
Products for which GENTEST has received consideration at the time
of such termination and sell the same, provided that GENTEST
shall pay to USFRF the royalties or other consideration thereon
as required under the provisions of Section IV of this Agreement,
and shall submit the reports required under Section X regarding
the Commercial Exploitation of the Licensed Products.
F. Upon termination of this Agreement for any reason, all
intellectual property rights licensed hereunder, including
without limitation, all USF Patent Rights and all USF Technology
shall revert to USF and USFRF, and GENTEST shall have no further
right to or continuing interest. In addition, any sublicenses
hereunder shall terminate, unless accepted by USFRF.
G. GENTEST, its successors or assigns, shall have the option to
terminate this license agreement upon thirty (30) days written
notice and in that event, GENTEST shall cease using USF
Technology and return same to USF. In this event, it is
understood that all future monetary obligations under this
Agreement shall be void and any monies paid to date to USFRF
shall be non-refundable to GENTEST, or its assigns.
XIII. Payments Notices and Other Communications
Any payment, notice or other communication made to any party pursuant
to this
7
<PAGE>
Agreement shall be sufficiently made or given on the date of mailing
if sent to such party by certified first class mail or air courier,
postage prepaid, addressed to it at its address below, or at such
other address as it shall have designated by written notice given to
the other party.
In the case of USF: Copy to:
Director, Patents & Licensing General Counsel
4202 East Fowler Avenue FAO 126 4202 E. Fowler Ave. ADM 250
Tampa, Florida 33620-7900 Tampa, FL 33620
In the case of USFRF:
USF Research Foundation, Inc.
Post Office Box 30045
Tampa, Florida 33620-3044
In the case of GENTEST:
GENTEST, Inc.
3214 Polo Place
Plant City, Florida
XIV. Infringement
GENTEST understands that USFRF makes no representations and provides no
assurances that Commercial Exploitation of Licensed Products under this
Agreement does not, and will not in the future, infringe or otherwise
violate the rights of others.
XV. Miscellaneous Provisions
A. Each party represents and warrants that it has the authority to
enter into this Agreement and that the execution, delivery and
performance of this Agreement does not conflict with any
agreement, or understanding, either written or oral, to which it
is a party or to which it is otherwise bound.
B. This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the State of Florida,
U.S.A.
C. The parties hereto acknowledge that this Agreement sets forth the
entire agreement and understanding of the parties, hereto as to
the subject matter
8
<PAGE>
hereof, and shall not be subject to any change or modification
except by the execution of a written instrument subscribed to by
the parties hereto.
D. If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any
extent be held to be invalid or unenforceable,
(i) the remainder of this Agreement, or the application
of such term, covenant or condition to the parties or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected
thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the
fullest extent permitted by law; and
(ii) the parties hereto covenant and agree to renegotiate
any such term, covenant or application thereof in
good faith in order to provide a reasonably
acceptable alternative to the term, covenant or
condition of this Agreement or the application
thereof that is invalid or unenforceable, it being
the intent of the parties that the basic purpose of
this Agreement are to be effectuated.
E. In the event any provision of this Agreement is inconsistent with
USF Rules and Policy in effect as of March 1, 1998, USF Rules and
Policy shall control.
F. GENTEST agrees to use in connection with Licensed Products used
and/or provided in the United States all applicable United States
patent numbers and/or copyright notices requested by USFRF. All
Licensed Products used and/or provided in other countries shall
be marked in such a manner as to conform with the patent,
copyright and other laws and practice of the country.
G. The failure of any party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement
shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the
other party.
H. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, USF
AND USFRF MAKE NO REPRESENTATION AND EXTEND NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, 1NCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, AND VALIDITY OF USF PATENT RIGHTS.
9
<PAGE>
I. It is understood and agreed that USF is a third party beneficiary
of this Agreement.
J. This Agreement shall not be effective until such time that USFRF
has received the up front fee of One Hundred Thousand
($l00,000.00) Dollars and the sponsored research fee of Three
Hundred Eleven Thousand, Two Hundred Fifty Dollars ($311,250.00).
If the fees are not received within ninety days (90) from the
execution of this Agreement, then this Agreement shall become
null and void and the parties shall be released from its terms
and obligations.
K. This Agreement, together with any amendments hereto, shall inure
to the benefits of GENTEST, its successors and/or assigns.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals and duly
executed this Agreement the day and year set forth below.
UNIVERSITY OF SOUTH FLORIDA
RESEARCH FOUNDATION, INC.
By: /s/ KEN G. PRESTON /s/ NITA F. MILBOURN
Name Witness
Title: Exec Director
Date: 4/9/98
GENTEST, INC.
By: /s/ CLIFFORD M. GROSS /s/ NITA F. MILBOURN
Name Clifford M. Gross Witness
Title: CEO
Date: 4/9/98
10
RESEARCH AND LICENSE AGREEMENT
This Agreement, effective as of July 1, 1998 (the "Effective Date"), is
by and between: NORTH SHORE UNIVERSITY HOSPITAL RESEARCH CORPORATION
(hereinafter "NSUH"), a corporation organized and existing under the laws of the
State of New York and having a place of business at 350 Community Drive,
Manhasset, NY 11030
AND
Gentest, Inc. (hereinafter "CORPORATION"), a corporation organized and
existing under the laws of the State of Florida having its principal office at
3214 Polo Place, Plant City, Florida 33567, including any successor to
CORPORATION through merger or corporate reorganization.
RECITALS
WHEREAS, CORPORATION has already licensed technology developed by Dr.
Siamak Tabibzadeh at the University of South Florida for the screening of colon,
testicular and ovarian cancer;
WHEREAS, CORPORATION desires NSUH and Dr. Siamak Tabibzadeh
(hereinafter the "NSUH Scientist") to conduct research on the development of
laboratory assay kits for the screening of colon, ovarian and testicular cancer;
WHEREAS, NSUH and Dr. Tabibzadeh are willing to conduct such research
(hereinafter the "NSUH Research Project");
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WHEREAS, CORPORATION is prepared to sponsor the NSUH Research Project;
WHEREAS, subject to the terms and conditions hereinafter set forth,
NSUH is willing to grant to CORPORATION and CORPORATION is willing to accept
from NSUH the License (as hereinafter defined);
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
1. Definitions.
a. "Calendar Year" shall mean any consecutive period of twelve
months commencing on the first day of January of any year.
b. "Corporation Entity" shall mean any company or other legal entity
which controls, or is controlled by, or is under common control
with, CORPORATION; control means the holding of twenty five and
one tenth percent (25.1%) or more of (i) the capital and/or (ii)
the voting rights and/or (iii) the right to elect or appoint
directors.
c. "Date of First Commercial Sale" shall have the meaning set forth
in Section 7.b. hereof.
d. "Field" shall mean screening assays for colon, ovarian and
testicular cancer.
e. "License" shall mean the exclusive worldwide license to practice
the Research Technology (as hereinafter defined) for the
development, manufacture, use and sale of the Licensed Products
(as hereinafter defined).
f. "Licensed Products" shall mean assay kits for the screening of
colon, ovarian and testicular cancer, covered by a claim of any
unexpired NSUH Patent (as
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hereinafter defined) which has not been disclaimed or held
invalid by a court of competent jurisdiction from which no appeal
can be taken.
g. "Net Sales" shall mean the total amount invoiced in connection
with sales of the Licensed Products to an end user by CORPORATION
or a Corporation Entity or any sublicensee of CORPORATION or a
Corporation Entity under the License, after deduction of all the
following to the extent applicable to such sales:
i) all trade, case and quantity credits, discounts, refunds or
rebates;
ii) allowances or credits for returns;
iii) sales commissions; and
iv) sales taxes (including value-added tax).
h. "NSUH Know-How" shall mean any information and materials
including, but not limited to, pharmaceutical, chemical,
biological and biochemical products, technical and non-technical
data, materials, methods and processes and any drawings, plans,
diagrams, specifications and/or other documents containing such
information, discovered, developed or acquired by, or on behalf
of:
i) students or employees of NSUH or of North Shore University
Hospital during the term and in the course of the NSUH
Research Project;
ii) employees or consultants of CORPORATION and which is related
to the Licensed Products.
i. "NSUH Patents" shall mean all United States and foreign patents
and patent applications, and any divisions, continuations, in
whole or in part, reissues, renewals and extensions thereof, and
pending applications therefor: which claim inventions that are
made, in whole or in part, by
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i) students or employees of NSUH or of North Shore University
Hospital during the term and in the course of the NSUH
Research Project;
ii) employees or consultants of CORPORATION and which is related
to the Licensed Products.
j. "Research Period" shall mean the two-year period commencing on
the Effective Date hereof and any extension thereof as to which
NSUH and CORPORATION shall mutually agree in writing.
k. "NSUH Research Project" shall mean the investigations at NSUH
during the Research Period into the Field under the supervision
of the NSUH Scientist(s) in accordance with the research program,
described in annexed Appendix I, which forms an integral part
hereof.
l. "Research Technology" shall mean all NSUH Patents and NSUH
Know-How.
2. Effective Date.
This Agreement shall be effective as of the Effective Date and shall
remain in full force and effect until it expires or is terminated in
accordance with Section 16. hereof.
3. Performance of the NSUH Research Project.
a. In consideration of the sums to be paid to NSUH as set forth in
Section 4 below, NSUH undertakes to perform the NSUH Research
Project under the supervision of the NSUH Scientists during the
Research Period. If during the Research Period all of the NSUH
Scientists shall cease to supervise the NSUH Research Project,
then NSUH shall promptly so notify CORPORATION and
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CORPORATION shall have the option to terminate its funding of the
NSUH Research Project. CORPORATION shall promptly advise NSUH in
writing if CORPORATION so elects. Such termination of funding
pursuant to this Section 3.a. shall not terminate this Agreement
or the License granted herein. Nothing herein contained shall be
deemed to impose an obligation on NSUH to find a replacement for
the NSUH Scientists.
b. Nothing contained in this Agreement shall be construed as a
warranty on the part of NSUH that any results or inventions will
be achieved by the NSUH Research Project, or that the Research
Technology and/or any other results or inventions achieved by the
NSUH Research Project, if any, are or will be commercially
exploitable and furthermore, NSUH makes no warranties whatsoever
as to the commercial or scientific value of the Research
Technology and/or as to any results which may be achieved in the
NSUH Research Project.
c. Within sixty (60) days after the end of each year of the Research
Period, NSUH shall prepare a written report summarizing the
results of the work conducted on the NSUH Research Project during
the preceding year.
d. NSUH will have full authority and responsibility for the NSUH
Research Project. All students and employees of NSUH who work on
the NSUH Research Project will do so as employees or students of
NSUH, and not as employees of CORPORATION.
4. Funding of the NSUH Research Project
a. As compensation to NSUH for work to be performed on the NSUH
Research Project during the Research Period, subject to any
earlier termination of the
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Research Project pursuant to Section 3.a. hereof, CORPORATION
will pay NSUH the total sum of Three Hundred Eleven Thousand Two
Hundred Fifty Dollars ($311,250.00), within thirty (30) days of
the Effective Date.
b. Nothing in this Agreement shall be interpreted to prohibit NSUH
(or the NSUH Scientists) from obtaining additional financing or
research grants for the NSUH Research Project from government
agencies, which grants or financing may render all or part of the
NSUH Research Project and the results thereof subject to the
patent rights of the U.S. Government and its agencies, as set
forth in Title 35 U.S.C. ss.200 et seq.
5. Title.
a. Subject to the License granted to CORPORATION hereunder, it is
hereby agreed that all right, title and interest, in and to the
Research Technology, and in and to any drawings, plans, diagrams,
specifications, and other documents containing any of the
Research Technology shall vest solely in NSUH. At the request of
NSUH, CORPORATION shall take all steps as may be necessary to
give full effect to said right, title and interest of NSUH
including, but not limited to, the execution of any documents
that may be required to record such right, title and interest
with the appropriate agency or government office.
b. Subject to the License granted to CORPORATION hereunder, any and
all inventions made by the NSUH Scientist and relating to the
Field shall be owned solely by NSUH.
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6. Patents and Patent Applications.
a. NSUH will promptly disclose to CORPORATION in writing any
inventions which constitute potential NSUH Patents. CORPORATION
will promptly disclose to NSUH any inventions which constitute
potential NSUH Patents and which are conceived by employees or
consultants of CORPORATION.
b. At the initiative of CORPORATION or NSUH, the parties shall
consult with each other regarding the prosecution of all patent
applications with respect to the Research Technology. Such patent
applications shall be filed, prosecuted and maintained by the law
firm of Kenyon & Kenyon or by other patent counsel jointly
selected by NSUH and CORPORATION. Copies of all such patent
applications and patent office actions shall be forwarded to each
of NSUH and CORPORATION.
NSUH and CORPORATION shall each also have the right to have such
patent applications and patent office actions independently
reviewed by other patent counsel separately retained by NSUH or
CORPORATION, upon prior notice to and consent of the other party,
which consent shall not unreasonably be withheld.
c. Upon prior written approval by CORPORATION, all applications and
proceedings with respect to the NSUH Patents shall be filed,
prosecuted and maintained by NSUH at the expense of CORPORATION.
Against the submission of invoices, CORPORATION shall reimburse
NSUH for all costs and fees incurred by NSUH during the term of
this Agreement, in connection with the filing, maintenance,
prosecution, protection and the like of the NSUH Patents.
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d. NSUH and CORPORATION shall assist, and cause their respective
employees and consultants to assist each other, in assembling
inventorship information and data for the filing and prosecution
of patent applications on inventions pertaining to the Research
Technology.
e. If at any time during the term of this Agreement CORPORATION
decides that it is undesirable, as to one or more countries, to
prosecute or maintain any patents or patent applications within
the NSUH Patents, it shall give prompt written notice thereof to
NSUH, and upon receipt of such notice CORPORATION shall be
released from its obligations to bear all of the expenses to be
incurred thereafter as to such countries in conjunction with such
patent(s) or patent application(s) and such patent(s) or
application(s) shall be deleted from the Research Technology and
NSUH shall be free to grant rights in and to the Research
Technology in such countries to third parties, without further
notice or obligation to CORPORATION, and the CORPORATION shall
have no rights whatsoever to exploit the Research Technology in
such countries.
f. Nothing herein contained shall be deemed to be a warranty by NSUH
that
i) NSUH can or will be able to obtain any patent or
patents on any patent application or applications in
the NSUH Patents or any portion thereof, or that any
of the NSUH Patents will afford adequate or
commercially worthwhile protection, or
ii) that the manufacture, use, or sale of any element of
the Research Technology or any Licensed Product will
not infringe any patent(s) of a third party.
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7. Grant of License.
a. Subject to the terms and conditions hereinafter set forth, NSUH
hereby grants to CORPORATION and CORPORATION hereby accepts from
NSUH the License.
b. The License granted to CORPORATION in Section 7.a. hereof shall
commence upon the Effective Date and shall remain in force on a
country-by-country basis, if not previously terminated under the
terms of this Agreement, for fifteen (15) years from the date of
first commercial sale (hereinafter the "Date of First Commercial
Sale") of Licensed Products in such country or until the
expiration date of the last to expire of the NSUH Patents
whichever shall be later. CORPORATION shall inform NSUH in
writing of the Date of First Commercial Sale with respect to each
Licensed Product in each country as soon as practicable after the
making of each such first commercial sale.
c. CORPORATION shall be entitled to grant sublicenses under the
License on terms and conditions in compliance and not
inconsistent with the terms and conditions of this Agreement
(except that the rate of royalty may be at higher rates than
those set forth in this Agreement) (i) to a Corporation Entity or
(ii) to other third parties for consideration and in an
arms-length transaction. All sublicenses shall only be granted by
CORPORATION under a written agreement, a copy of which shall be
provided by CORPORATION to NSUH as soon as practicable after the
signing thereof. Each sublicense granted by CORPORATION hereunder
shall be subject and subordinate to the terms and conditions of
this License Agreement and shall contain (inter-alia) the
following provisions:
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(1) the sublicense shall expire automatically on the
termination of the License;
(2) the sublicense shall not be assignable, in whole or in
part;
(3) the sublicensee shall not grant further sublicenses;
and
(4) both during the term of the sublicense and thereafter
the sublicensee shall agree to a confidentiality
obligation similar to that imposed on CORPORATION in
Section 11 below, and that the sublicensee shall impose
on its employees, both during the terms of their
employment and thereafter, a similar undertaking of
confidentiality; and
(5) the sublicense agreement shall include the text of
Sections 14 and 15 of this Agreement and shall state
that each of NSUH and North Shore University Hospital
is an intended third party beneficiary of such
sublicense agreement for the purpose of enforcing such
indemnification and insurance provisions.
8. Payments for License.
a. In consideration for the grant and during the term of the License
with respect to each Licensed Product, CORPORATION shall pay to
NSUH:
(1) on the Effective Date, a non-refundable, non-creditable
license issue royalty of Five Thousand Dollars ($55,O0O.O0);
and
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(2) A royalty of one-half percent (0.5%) of the Net Sales of
CORPORATION or of Corporation Entity or of any sublicensee
of CORPORATION or Corporation Entity; and
(3) Ten percent (10%) of any consideration, monetary or
otherwise (not based on Net Sales), received by CORPORATION
from any sublicensee of CORPORATION or a Corporation Entity
under the terms of, or as a consideration for the grant of,
a sublicense of any rights or for grant of an option to
acquire such a sublicense.
b. For the purpose of computing the royalties due to NSUH hereunder,
the year shall be divided into two parts ending on June 30 and
December 31. Not later than sixty (60) days after each December
and June in each Calendar Year during the term of the License,
CORPORATION shall submit to NSUH a full and detailed report of
royalties or payments due NSUH under the terms of this Agreement
for the preceding half year (hereinafter "the Half-Year Report"),
setting forth the Net Sales and/or lump sum payments and all
other payments or consideration from sublicensees upon which such
royalties are computed and including at least
i) the quantity of Licensed Products used, sold,
transferred or otherwise disposed of;
ii) the selling price of each Licensed Product;
iii) the deductions permitted under subsection 1.g. hereof
to arrive at Net Sales; and
iv) the royalty computations and subject of payment.
If no royalties or other payments are due, a statement shall be
sent to NSUH stating such fact. Payment of the full amount of any
royalties or other payments
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due to NSUH for the preceding half year shall accompany each
Half-Year Report on royalties and payments. CORPORATION shall
keep for a period of at least six (6) years after the date of
entry, full, accurate and complete books and records consistent
with sound business and accounting practices and in such form and
in such detail as to enable the determination of the amounts due
to NSUH from CORPORATION pursuant to the terms of this Agreement.
c. Within sixty (60) days after the end of each Calendar Year,
commencing on the Date of First Commercial Sale CORPORATION shall
furnish NSUH with a report (hereinafter "the Annual Report"),
certified by an independent certified public accountant, relating
to the royalties and other payments due to NSUH pursuant to this
Agreement in respect of the Calendar Year covered by such Annual
Report and containing the same details as those specified in
Section 8.b. above in respect of the Half-Year Report.
d. On reasonable notice and during regular business hours, NSUH or
the authorized representative of NSUH shall each have the right
to inspect the books of accounts, records and other relevant
documentation of CORPORATION or of Corporation Entity and the
sublicensees of CORPORATION insofar as they relate to the
production, marketing and sale of the Licensed Products, in order
to ascertain or verify the amount of royalties and other payments
due to NSUH hereunder, and the accuracy of the information
provided to NSUH in the aforementioned reports.
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9. Method of Payment.
a. Royalties and other payments due to NSUH hereunder shall be paid
to NSUH in United States dollars. Any such royalties on or other
payments relating to transactions in a foreign currency shall be
converted into United States dollars based on the closing buying
rate of the Morgan Guaranty Trust Company of New York applicable
to transactions under exchange regulations for the particular
currency on the last business day of the accounting period for
which such royalty or other payment is due.
b. CORPORATION shall be responsible for payment to NSUH of all
royalties due on sale, transfer or disposition of Licensed
Products by Corporation Entity or by the sublicensees of
CORPORATION or of Corporation Entity.
10. Development and Commercialization.
a. CORPORATION undertakes to use its best efforts to carry out the
development and commercialization of the Licensed Products,
including but not limited to, the performance of all efficacy,
pharmaceutical, safety, toxicological and clinical tests, trials
and studies and all other activities necessary in order to obtain
the approval of the FDA for the production, use and sale of the
Licensed Products. CORPORATION further undertakes to exercise due
diligence and to employ its reasonable diligence to obtain or to
cause its sublicensees to obtain, the appropriate approvals of
the health authorities for the production, use and sale of the
Licensed Products, in each of the other countries of the world in
which
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CORPORATION or its sublicensees intend to produce, use, and/or
sell Licensed Products.
b. Provided that applicable laws, rules and regulations require that
the performance of the tests, trials, studies and other
activities specified in subsection a. above shall be carried out
in accordance with FDA Good Laboratory Practices and in a manner
acceptable to the relevant health authorities, CORPORATION shall
carry out such tests, trials, studies and other activities in
accordance with FDA Good Laboratory Practices and in a manner
acceptable to the relevant health authorities. Furthermore, the
Licensed Products shall be produced in accordance with FDA Good
Manufacturing Practice ("GMP") procedures in a facility which has
been certified by the FDA as complying with GMP, provided that
applicable laws, rules and regulations so require.
c. CORPORATION undertakes to begin the regular commercial
production, use, and sale of the Licensed Products in good faith
in accordance with the development plan to be provided to NSUH by
the end of the Research Period and to continue diligently
thereafter to commercialize the Licensed Products.
d. CORPORATION shall provide NSUH with written reports on all
activities and actions undertaken by CORPORATION to develop and
commercialize the Licensed Products; such reports shall be made
within sixty (60) days after each six (6) months of the duration
of this Agreement, commencing six months after the Effective
Date.
e. If CORPORATION shall not commercialize the Licensed Products
within a reasonable time frame, unless such delay is necessitated
by FDA or other regulatory agencies or unless NSUH and
CORPORATION have mutually agreed
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to amend the Development Plan because of unforeseen
circumstances, NSUH shall notify CORPORATION in writing of
CORPORATION's failure to commercialize and shall allow
CORPORATION sixty (60) days to cure its failure to commercialize.
CORPORATION's failure to cure such delay to NSUH's reasonable
satisfaction within such 60-day period shall be a material breach
of this Agreement.
11. CONFIDENTIAL INFORMATION.
a. Except as otherwise provided in Section 11.c. and Section 12
below, NSUH shall maintain any and all of the Research Technology
in confidence and shall not release or disclose any tangible or
intangible component thereof to any third party without first
receiving the prior written consent of CORPORATION to said
release or disclosure.
b. Except as otherwise provided in Section 11.c. and 11.d. below
CORPORATION shall maintain any and all of the Research Technology
in confidence and shall not release or disclose any tangible or
intangible component thereof to any third party without first
receiving the prior written consent of NSUH to said release or
disclosure.
c. The obligations of confidentiality on each party set forth in
Sections 11 .a. and b. shall not apply to any component of the
Research Technology which was part of the public domain prior to
the Effective Date of this Agreement or which becomes a part of
the public domain not due to some unauthorized act by or omission
of the receiving party after the effective date of this Agreement
or which is disclosed to the receiving party by a third party who
has the right to make such disclosure.
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d. The provisions of Section 11.b. notwithstanding, CORPORATION may
disclose the Research Technology to third parties who need to
know the same in order to secure regulatory approval for the sale
of Licensed Products.
12. Publication.
a. Prior to submission for publication of a manuscript describing
the results of any aspect of the NSUH Research Project, NSUH
shall send CORPORATION a copy of the manuscript to be submitted,
and shall allow CORPORATION thirty (30) days from the date of
such mailing to determine whether the manuscript contains such
subject matter for which patent protection should be sought prior
to publication of such manuscript, for the purpose of protecting
an invention made by the NSUH Scientists during the course and
within the term of the NSUH Research Project. Should CORPORATION
believe the subject matter of the manuscript contains a
patentable invention, then, prior to the expiration of such
30-day period from the mailing date of such manuscript to
CORPORATION by NSUH, CORPORATION shall give written notification
to NSUH of:
i) its determination that such manuscript contains
patentable subject matter for which patent protection
should be sought; and
ii) the countries in which such patent protection should be
sought.
b. After the expiration of such 30-day period from the date of
mailing such manuscript to CORPORATION, unless NSUH has received
the written notice specified above from CORPORATION, NSUH shall
be free to submit such manuscript for publication to publish the
disclosed research results in any manner consistent with academic
standards.
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c. Upon receipt of such written notice from CORPORATION, NSUH will
thereafter delay submission of the manuscript for an additional
period of up to thirty (30) days to permit the preparation and
filing in accordance with Section 6. hereof of a U.S. patent
application by NSUH on the subject matter to be disclosed in such
manuscript. After expiration of such 30-day period, or the filing
of a patent application on each such invention, whichever shall
occur first, NSUH shall be free to submit the manuscript and to
publish the disclosed results.
13. Infringement of NSUH Patent.
a. In the event a party to this Agreement acquires information that
a third party is infringing one or more of the NSUH Patents, the
party acquiring such information shall promptly notify the other
party to the Agreement in writing of such infringement.
b. In the event of an infringement of an NSUH Patent, CORPORATION
shall be privileged but not required to bring suit against the
infringer. Should CORPORATION elect to bring suit against an
infringer and NSUH is joined as a party plaintiff in any such
suit, NSUH shall have the right to approve the counsel selected
by CORPORATION to represent CORPORATION and NSUH. The expenses of
such suit or suits that CORPORATION elects to bring, including
any expenses of NSUH incurred in conjunction with the prosecution
of such suit or the settlement thereof, shall be paid for
entirely by CORPORATION and CORPORATION shall hold NSUH free,
clear and harmless from and against any and all costs of such
litigation, including attorneys' fees. CORPORATION shall
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not compromise or settle such litigation without the prior
written consent of NSUH which shall not be unreasonably withheld.
c. In the event CORPORATION exercises the right to sue herein
conferred, it shall have the right to first reimburse itself out
of any sums recovered in such suit or in settlement thereof for
all costs and expenses of every kind and character, including
reasonable attorneys' fees, necessarily involved in the
prosecution of any such suit, and if after such reimbursement,
any funds shall remain from said recovery, CORPORATION shall
promptly pay to NSUH an amount equal to fifty percent (50%) of
such remainder and CORPORATION shall be entitled to receive and
retain the balance of the remainder of such recovery.
d. If CORPORATION does not bring suit against said infringer
pursuant to Section 13.b. herein, or has not commenced
negotiations with said infringer for discontinuance of said
infringement, within ninety (90) days after receipt of such
notice, NSUH shall have the right, but shall not be obligated, to
bring suit for such infringement. Should NSUH elect to bring suit
against an infringer and CORPORATION is joined as a party
plaintiff in any such suit, CORPORATION shall have the right to
approve the counsel selected by NSUH to represent NSUH and
CORPORATION, and NSUH shall hold CORPORATION free, clear and
harmless from and against any and all costs and expenses of such
litigation including attorneys' fees. If CORPORATION has
commenced negotiations with an alleged infringer of the NSUH
Patent for discontinuance of such infringement within such 90-day
period, CORPORATION shall have an additional ninety (90) days
from the termination of such initial 90-day period to conclude
its negotiations before NSUH may bring suit for such
infringement. In the event
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NSUH brings suit for infringement of any NSUH Patent, NSUH shall
have the right to first reimburse itself out of any sums
recovered in such suit or settlement thereof for all costs and
expenses of every kind and character, including reasonable
attorneys' fees necessarily involved in the prosecution of such
suit, and if after such reimbursement, any funds shall remain
from said recovery, NSUH shall promptly pay to CORPORATION an
amount equal to fifty percent (50%) of such remainder and NSUH
shall be entitled to receive and retain the balance of the
remainder of such recovery.
e. Each party shall always have the right to be represented by
counsel of its own selection in any suit for infringement of the
NSUH Patents instituted by the other party to this Agreement
under the terms hereof. The expense of such counsel shall be
borne by the party initiating such infringement suit.
f. CORPORATION agrees to cooperate fully with NSUH at the request of
NSUH, including, by giving testimony and producing documents
lawfully requested in the prosecution of any suit by NSUH for
infringement of the NSUH patents; provided, NSUH shall pay all
reasonable expenses (including attorneys' fees) incurred by
CORPORATION in connection with such cooperation. NSUH shall
cooperate and shall endeavor to cause the NSUH Scientists to
cooperate with CORPORATION at the request of CORPORATION,
including by giving testimony and producing documents lawfully
requested, in the prosecution of any suit by CORPORATION for
infringement of the NSUH Patents; provided, that CORPORATION
shall pay all reasonable expenses (including attorneys' fees)
incurred by NSUH in connection with such cooperation.
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14. Liability and Indemnification.
a. CORPORATION shall indemnify, defend and hold harmless NSUH and
its trustees, directors, officers, medical and professional
staff, employees, students and agents and their respective
successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss or expense (including reasonable
attorneys' fees and expenses of litigation) incurred by or
imposed upon the Indemnitees or any one of them in connection
with any claims, suits, actions, demands or judgements (i)
arising out of the design, production, manufacture, sale, use in
commerce or in human clinical trials, lease, or promotion by
CORPORATION or by a sublicensee, Corporation Entity or agent of
CORPORATION of any Licensed Product, process or service relating
to, or developed pursuant to, this Agreement or (ii) arising out
of any other activities to be carried out pursuant to this
Agreement.
b. With respect to an Indemnitee, CORPORATION's indemnification
under subsection a.(i) of this Section 14 shall apply to any
liability, damage, loss or expense whether or not it is
attributable to the negligent activities of such Indemnitee.
CORPORATION's indemnification obligation under subsection a.(ii)
of this Section 14 shall not apply to any liability, damage, loss
or expense to the extent that it is attributable to the negligent
activities of any such Indemnitee.
c. CORPORATION agrees, at its own expense, to provide attorneys
reasonably acceptable to NSUH to defend against any actions
brought or filed against any Indemnitee with respect to the
subject of indemnity to which such Indemnitee is entitled
hereunder, whether or not such actions are rightfully brought.
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d. All references in this Section 14 and in Section 15 below to
"NSUH" shall be deemed to include North Shore University Hospital
Research Corporation and North Shore University Hospital.
15. Security of Indemnification.
a. At such time as any Licensed Product, process or service relating
to, or developed pursuant to, this Agreement is being
commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by CORPORATION or by a
sublicensee, Corporation Entity or agent of CORPORATION,
CORPORATION shall at its sole cost and expense, procure and
maintain policies of comprehensive general liability insurance in
amounts not less than $5,000,000 per incident and $10,000,000
annual aggregate and naming the Indemnitees as additional
insureds. Such comprehensive general liability insurance shall
provide (i) product liability coverage and (ii) broad form
contractual liability coverage for CORPORATION's indemnification
under Section 14 of this Agreement. If CORPORATION elects to
self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of $250,000 annual
aggregate) such self-insurance program must be acceptable to
NSUH.
The minimum amounts of insurance coverage required under this
Section 15 shall not be construed to create a limit of
CORPORATION's liability with respect to its indemnification under
Section 14 of this Agreement.
b. CORPORATION shall provide NSUH with written evidence of such
insurance upon request of NSUH. CORPORATION shall provide NSUH
with written notice at least sixty (60) days prior to the
cancellation, non-renewal or material
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change in such insurance; if CORPORATION does not obtain
replacement insurance providing comparable coverage within such
sixty (60) day period, NSUH shall have the right to terminate
this Agreement effective at the end of such sixty (60) day period
without notice or any additional waiting periods.
c. CORPORATION shall maintain such comprehensive general liability
insurance beyond the expiration or termination of this Agreement
during (i) the period that any product, process or service,
relating to, or developed pursuant to, this Agreement is being
commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by CORPORATION or by a
sublicensee, Corporation Entity or agent of CORPORATION and (ii)
a reasonable period after the period referred to in (c)(i) above
which in no event shall be less than fifteen (15) years.
16. Expiry and Termination.
a. Unless earlier terminated pursuant to this Section 16 or Section
8.e., hereof, this Agreement shall expire upon the expiration of
the period of the License in all countries as set forth in
Section 7.b. above.
b. At any time prior to expiration of this Agreement, either party
may terminate this Agreement forthwith for cause, as "cause" is
described below, by giving written notice to the other party.
Cause for termination by one party of this Agreement shall be
deemed to exist if the other party materially breaches or
defaults in the performance or observance of any of the
provisions of this Agreement and such breach or default is not
cured within sixty (60) days or, in the case of failure to pay
any amounts due hereunder, thirty (30) days (unless otherwise
specified herein) after the giving of notice by the other party
specifying such breach or default, or if either NSUH or
CORPORATION discontinues its business or becomes insolvent or
bankrupt.
c. Any amount payable hereunder by one of the parties to the other,
which has not been paid by the date on which such payment is due,
shall bear interest from such date until the date on which such
payment is made, at the rate of two percent (2%) per annum in
excess of the prime rate prevailing at the Citibank, N.A., in New
York, during the period of arrears and such amount and the
interest thereon may be set off against any amount due, whether
in terms of this Agreement or otherwise, to the party in default
by any non-defaulting party.
d. Upon termination of this Agreement for any reason and prior to
expiration as set forth in Section 16.a. hereof, all rights in
and to the Research Technology shall revert to NSUH, and
CORPORATION shall not be entitled to make any further use
whatsoever of the Research Technology.
e. Termination of this Agreement shall not relieve either party of
any obligation to the other party incurred prior to such
termination.
f. Sections 5, 11, 14, 15, 16 and 20 hereof shall survive and remain
in full force and effect after any termination, cancellation or
expiration of this Agreement.
17. Representations and Warranties of CORPORATION.
CORPORATION hereby represents and warrants to NSUH as follows:
(1) CORPORATION is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida.
CORPORATION has been granted all requisite power and authority to
carry on its business and to own and
24
<PAGE>
operate its properties and assets. The execution, delivery and
performance of this Agreement have been duly authorized by the
Board of Directors of CORPORATION if such authorization is
required for the execution, delivery and/or performance of this
Agreement. This Agreement has been duly executed and delivered by
CORPORATION.
(2) There is no pending or, to CORPORATION's knowledge, threatened
litigation involving CORPORATION which would have any effect on
this Agreement or on CORPORATION's ability to perform its
obligations hereunder; and
(3) There is no indenture, contract, or agreement to which
CORPORATION is a party or by which CORPORATION is bound which
prohibits or would prohibit the execution and delivery by
CORPORATION of this Agreement or the performance or observance by
CORPORATION of any term or condition of this Agreement.
18. Representations and Warranties of NSUH.
NSUH hereby represents and warrants to CORPORATION as follows:
(1) NSUH is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. NSUH has
been granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have been
duly authorized by the Board of Directors of NSUH if such
authorization is required for the execution, delivery and/or
performance of this Agreement. This Agreement has been duly
executed and delivered by NSUH.
(2) There is no pending or, to NSUH's knowledge, threatened
litigation involving NSUH which would have any effect on this
Agreement or on NSUH's ability to perform its obligations
hereunder; and
(3) There is no indenture, contract, or agreement to which NSUH is a
party or by which NSUH is bound which prohibits or would prohibit
the execution and delivery by NSUH of this Agreement or the
performance or observance by NSUH of any term or condition of
this Agreement.
19. No Assignment.
Neither CORPORATION nor NSUH shall have the right to assign, delegate
or transfer at any time to any party, in whole or in part, any or all
of the rights, duties and interest herein granted without first
obtaining the written consent of the other to such assignment, except
that NSUH shall have the right at any time to assign, delegate or
transfer, in whole or in part, its rights, duties or interest herein to
North Shore University Hospital. Nothing contained herein prohibits the
transfer of this Agreement to successors through merger or other
corporate restructurings involving the CORPORATION.
20. Use of Name.
Without the prior written consent of the other party, neither
CORPORATION nor NSUH shall use the name of the other party or any
adaptation thereof or of any staff member, employee or student of the
other party:
i) in any product labeling, advertising, promotional or sales
literature;
25
<PAGE>
ii) in connection with any public or private offering or in
conjunction with any application for regulatory approval, unless
disclosure is otherwise required by law, in which case either
party may make factual statements concerning the Agreement or
file copies of thc Agreement after providing the other party with
an opportunity to comment and reasonable time within which to do
so on such statement in draft.
Except as provided herein, neither NSUH nor CORPORATION will issue
public announcements about this Agreement or the status or existence of
the NSUH Research Project without prior written approval of the other
party. References in this Section 20 to "NSUH" shall be deemed to
include North Shore University Hospital Research Corporation and North
Shore University Hospital.
21. Miscellaneous.
a. In carrying out this Agreement the parties shall comply with all
local, state and federal laws and regulations including but not
limited to, the provisions of Title 35 United States Code ss.200
et seq. and 15 CFR ss.368 et seq.
b. If any provision of this Agreement is determined to be invalid or
void, the remaining provisions shall remain in effect.
c. This Agreement shall be deemed to have been made in the State of
New York and shall be governed and interpreted in all respects
under the laws of the Staze of New York.
26
<PAGE>
d. Any dispute arising under this Agreement shall be resolved in an
action in the courts of New York State or the federal courts
located in New York State, and the parties hereby consent to
personal jurisdiction of such courts in any action.
e. All payments or notices required or permitted to be given under
this Agreement shall be given in writing and shall be effective
when either personally delivered or deposited, postage prepaid,
in the United States registered or certified mail, addressed as
follows:
To NSUH: North Shore University Hospital Research Corporation
350 Community Drive
Manhasset, NY 11030
Attn: John S.T. Gallagher
President
And
Copy to: North Shore Health System
150 Community Drive
Great Neck, NY 11021
Attn: Harry E. Gindi
Vice President/Legal Affairs
To CORPORATION: Gentest, Inc.
3214 Polo Place
Plant City, Florida 33567
Attn: Cliff Gross, President
And
Copy to: UTEK Corporation
202 South Wheeler Street
Plant City, Florida 33566
27
<PAGE>
or such other address or addresses as either party may hereafter
specify by written notice to the other. Such notices and
communications shall be deemed effective on the date of delivery
or four (4) days after having been sent by registered or
certified mail, whichever is earlier.
f. This Agreement (and the annexed Appendices) constitute the entire
Agreement between the parties and no variation, modification or
waiver of any of the terms or conditions hereof shall be deemed
valid unless made in writing and signed by both parties hereto.
This Agreement supersedes any and all prior agreements or
understandings, whether oral or written, between CORPORATION and
NSUH with respect to the subject matter of this Agreement.
g. No waiver by either party of any non-performance or violation by
the other party of any of the covenants, obligations or
agreements of such other party hereunder shall be deemed to be a
waiver of any subsequent violation or non-performance of the same
or any other covenant, agreement or obligation, nor shall
forbearance by any party be deemed to be a waiver by such party
of its rights or remedies with respect to such violation or
non-performance.
h. The descriptive headings contained in this Agreement are included
for convenience and reference only and shall not be held to
expand, modify or aid in the interpretation, construction or
meaning of this Agreement.
i. It is not the intent of the parties to create a partnership or
joint venture or to assume partnership responsibility or
liability. The obligations of the parties shall be limited to
those set out herein and such obligations shall be several and
not joint.
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
NORTH SHORE UNIVERSITY HOSPITAL
RESEARCH CORPORATION
By: /s/ JOHN S.T. GALLAGHER
Title: President
Date: 6/23/98
GENTEST, INC.
By: /s/ CLIFFORD GROSS
Title: President
Date: 6/22/98
29
March 8, 1999
Jackie Altman, Director
Office of Grants and Contracts
North Shore-Long Island Jewish Health System
North Shore University Hospital
300 Community Drive
Manhasset, New York 11030
Re: Research/Development of Colon Cancer Test Kit-Dr. Tabibzadeh
Dear Ms. Altman,
Reference is made to that certain Sponsored Research Agreement into
which Lexon, Inc. funded $311,250 for additional research and development costs
to be incurred by Dr. Siamak Tabibzadeh in connection with a blood screening
test for the detection of colon, ovarian and testicular cancer.
Dr. Tabibzadeh has expressed a desire to hire two additional persons to
devote their time, energy and efforts in expediting the continuing research
being conducted by Dr. Tabibzadeh at an aggregate additional cost of $81,162, in
accordance with the Budget attached hereto.
1. Lexon requests that North Shore University-Long Island Jewish Health
System, North Shore University Hospital ("University") and the
University agrees to apply existing funds on hand and dedicated to this
Sponsored Research Agreement to pay $81,162 in order to expedite the
development of a prototype ELISA test kit in accordance with the
attached Budget.
2. Lexon agrees to pay the University into the Sponsored Research
Agreement Fund 6
<PAGE>
installments of $13,527 each, payable on or before October 1, 1999,
December 1, 1999, February 1, 2000, April 1, 2000, June 1, 2000 and
August 1, 2000.
3. The University agrees to provide Lexon with a general accounting of the
funds deposited by Lexon with the University in accordance with this
Sponsored Research Agreement on a quarterly basis, beginning with the
quarter ended March 31, 1999, in order for Lexon to
know what expenses have been spent, what funds are committed but not
yet spent, and what funds remain on account for future expenditure with
respect to Dr. Tabibzadeh with respect to this research.
We are delighted to be able to continue our relationship with the
University and with Dr. Tabibzadeh in this very exciting research. We appreciate
your cooperation and your support of Dr. Tabibzadeh. If you agree that this
letter sets forth our mutual understanding, please will sign this letter
evidencing the University's agreement. Thank you again for all your support.
Very truly yours,
Lexon, Inc.
By: /s/ THOMAS COUGHLIN, M.D.
Vice President
Agreed this 24th day of March, 1999
North Shore University Hospital
By: /s/ THOMAS J. DEGNAN, MD
Title: Chair, Dept. of Research
LEXON, INC.
INVESTOR RELATIONS SERVICES AGREEMENT WITH
MORGAN-PHILLIPS, INC.
This ("Agreement") is entered into and effective November 1, 1998 by
and between Lexon, Inc. ("Lexon") and Morgan-Phillips, Inc. ("MPI").
WHEREAS, Lexon is a development stage company which owns the exclusive
right to manufacture and market a cancer detection test kit in development whose
stock is traded on the Over the Counter Bulletin Board under the symbol "LXXN";
and
WHEREAS, MPI is in the business of providing companies with
shareholder, investor, and broker relations services; and
WHEREAS, Lexon has agreed to engage MPI and MPI has accepted an
engagement to provide shareholder, investor, and broker relations services in
accordance with the terms and conditions of this Agreement.
Now, therefore, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, parties agree as follows:
1. Acceptance of Engagement. Lexon hereby agrees to engage MPI to
provide, and MPI agrees to accept the engagement from Lexon to
provide traditional financial public relations and shareholder
relations information and other services in accordance with this
Agreement.
2. Scope of Services of MPI. MPI agrees to provide public relations,
education, information and the following related services:
A. Generate potential investor leads and inform, follow up,
update and create interest in Lexon and its common stock
through providing current information concerning Lexon,
including due diligence material;
B. Provide direct one-on-one telephonic contact with brokers,
investors, potential investors and others with respect to
Lexon;
C. Prepare and distribute periodically detailed "research
reports" regarding Lexon along with an abbreviated
"corporate profile" of Lexon;
D. Prepare and distribute news releases which are approved in
advance by Lexon;
E. Distribute initial and updated investor information packets
to brokers and potential investors information containing
current information concerning Lexon, including any
disclosure materials filed with the SEC, applicable state
securities commissions, financial rating services,
independent analysts' reports, product reports and similar
information;
F. Prepare and distribute audio and video presentations
concerning Lexon and its business and products;
G. Arrange and attend press conferences regarding Lexon;
H. Arrange and assist Lexon in attending television and radio
investment forums;
I. Write news articles approved by Lexon and distribute them to
investments clubs, investment newsletters, investor
magazines, and public print media;
1
<PAGE>
J. Develop and maintain an Internet Website for Lexon which
provides current information regarding Lexon;
K. Respond accurately and promptly to faxes, email and other
electronic inquiries concerning Lexon;
L. Write and distribute articles for investor club newsletters;
M. Arrange and participate in investor information meetings
with potential investors, the brokerage community and others
regarding Lexon;
N. Place articles at least quarterly regarding Lexon in
investor and news magazines;
O. Arrange, attend and assist Lexon in attending and making
presentations at investor trade shows at least 2 times a
year;
P. Use its good faith diligent efforts to know the current
facts concerning Lexon and ensure that its employees and
representatives remain current in their information
regarding Lexon;
Q. Establish and maintain a data bank with the names,
addresses, telephone numbers, fax numbers, email addresses
and other similar information regarding investors, potential
investors, brokers, and others in the investment community;
and
R. Generally, keep the public, the investor community and the
brokerage community well informed with concise, accurate and
timely information concerning Lexon and its business, its
progress and its potential.
3. Scope of Information to be Provided by MPI. MPI agrees to provide
only information that is received from and approved by Lexon. MPI
agrees not to provide any information that is false or materially
misleading or omit to provide any information regarding Lexon
which is necessary so that whatever information is provided by
MPI is not false or materially misleading. If MPI receives any
inquiry which calls for a response with information that has not
been approved by Lexon or as to which MPI does not know the
correct and current answer, MPI agrees to request the information
from Lexon and not provide a guess, a projection, or an
assumption.
4. Compensation. MPI agrees that as a founder of Lexon it shall
perform its services without additional compensation during the
term of this Agreement.
5. Nature of Relationship. MPI and Lexon are independent contractors
and are not partners, joint venturers, employees, agents, or
other representatives of the other. Neither MPI nor Lexon is
authorized or empowered to bind the other in contract or in any
other way or to act as a representative of the other in any
capacity without the express written consent of the other. Each
party is solely responsible for all costs and liabilities arising
from taxes of every kind or relating to its own employees and
other representatives, or relating to the conduct of its business
as an independent entity, and each party agrees to indemnify and
hold the other party harmless therefrom. MPI is in the business
of providing information to the investing public and the
investment community. MPI is not a registered broker or
investment advisor, and MPI agrees not to undertake any activity
which will require it to be so registered.
6. Costs of Investor Relations Function. MPI will bear the costs of
and be solely responsible for the investor relations activities
as described in paragraph 2, above MPI and Lexon understand that
MPI has the discretion and duty to spend its resources in the
manner, at the time and for the purposes for which MPI believes
in its best, reasonable good faith determination will be the most
effective in the furtherance of providing the investing public
current, accurate and timely information regarding
2
<PAGE>
Lexon. MPI will coordinate in writing with Lexon regarding any
material deviations from the investor relations activities.
Failure to perform the investor relations activities in a
material way shall constitute a breach of this Agreement.
7. No Conflicting Activities. MPI agrees not to engage in any
activities that violate its duties under this Agreement or
represent any other entity that is engaged in the manufacture or
sale of products or services that directly compete with the
business, products or services of Lexon.
8. Inside and Confidential Information. MPI agrees not to disclose,
use or disseminate any information of or relating to Lexon which
is proprietary, confidential and competitively sensitive without
the prior written approval of Lexon. MPI further agrees not to
act upon for its own account or for the account of another and
not to disclose or disseminate any non-public information that is
used to purchase or sell securities of Lexon.
9. Disclosure of Relationship with Lexon. MPI agrees to disclose in
a manner consistent with applicable laws, rules and regulations
that it is providing investor relations and public relations
services in exchange for common stock of Lexon and that it
maintains a financial and ownership interest in the success of
Lexon.
10. Ownership of Information. MPI will receive information concerning
Lexon and MPI will create advertising and other promotional
materials for the benefit of Lexon. MPI agrees that all such
material belong to and are the property of Lexon. Likewise, MPI
maintains certain information regarding potential investors that
it considers to be proprietary. Lexon agrees not to disclosure or
use any such information only in the furtherance of its business,
provided that Lexon investor information shall not be deemed for
any purpose to belong to MPI.
11. Term. This Agreement shall expire 2 years from the date set forth
above, unless sooner terminated by either party by it giving the
other not less than 30 days' prior written notice of termination.
12. Termination of Agreement. This Agreement shall terminate upon the
occurrence of any of the following events: (a) voluntary notice
of termination given in writing not less than 60 days by either
party; (b) a party becomes legally or practically unable to
perform its obligations hereunder; and (c) for cause. "Cause"
shall mean (i) material breach of this Agreement; (ii)
misrepresentation of a material fact; (iii) omission of a
material fact; (iv) willful misconduct; (v) material negligence;
and (vi) failure to comply with an applicable law, rule or
regulation. In the event of a proposed termination for cause,
notice of the facts and circumstances surrounding the alleged
cause shall be given to the other party and the party against
whom a termination for cause is asserted shall be provided with
an opportunity to present a response to the alleged reason for
cause and to cure the cause within 20 days. If not so cured, the
party against whom a cause is asserted shall be entitled to no
further benefits under this Agreement and shall immediately
return all client lists, client files, manuals, documents, files,
reports, property and equipment relating to or owned by the other
and all other Confidential Information (as described above).
13. Remedies. Each party shall be entitled to exercise all remedies
available to it under a law or in equity in the event the other
party breaches its obligations hereunder. The remedies set forth
herein are cumulative, may be exercised individually or together
with one or all other remedies and are not exclusive but instead
are in addition to all other rights and remedies available to the
parties at law or in equity in the event the other party breaches
its obligations hereunder.
14. Miscellaneous.
A. Notices. Any notice, request, demand or other communication
required to be made or which may be given to either party
hereto shall be delivered by certified U.S. mail, postage
prepaid, to that party's attention at the address set forth
below or at such other address as shall be
3
<PAGE>
changed from time to time by giving notice hereunder.
B. Entire Agreement. This document constitutes the complete and
entire employment agreement between the parties hereto with
reference to the subject matters hereof. No statement or
agreement, oral or written, made prior to or at the signing
hereof, and no prior course of dealing or practice by either
party shall vary or modify the written terms hereof.
C. Headings. The headings and captions contained in this
Agreement are for ease and convenience of reference only and
shall not be deemed for any purpose to affect the
substantive meaning of the rights and duties of the parties
hereto in any way.
D. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns.
E. Counterparts. This Agreement may be executed in multiple
counterparts, each of which has the same text and each of
which shall be deemed an original for all purposes, but
together they constitute one single and the same agreement.
F. Amendments. This Agreement may be amended only by a written
document signed by the parties and stating that the document
is intended to amend this Agreement.
G. Applicable Law. This Agreement shall be governed by and
construed in accordance with Oklahoma law.
H. Disputes. All disputes not resolved by mutual agreement
within 60 days, or such longer time as the parties mutually
agree, shall be submitted to binding arbitration pursuant to
the Commercial Rules of Arbitration of the American
Arbitration Association. All arbitration hearings shall be
held in Tulsa, Oklahoma. The parties agree to be finally
bound by all arbitration awards to the extent permitted by
law. In any dispute or proceeding to construe this Agreement
not resolved by final arbitration or to enforce an
arbitration award, the parties expressly consent to the
exclusive jurisdiction of state and federal courts in Tulsa
County, Oklahoma, the principal place of business of both
Morgan-Phillips and Lexon. The prevailing party in any suit
brought to interpret this Agreement shall be entitled to
recover reasonable attorney's fees and expenses in addition
to any other relief which it is entitled.
I. Additional Documents. The parties hereto shall enter into
and execute such additional agreements, understandings,
documents or instruments as may be necessary to implement
the intent of this Agreement.
J. Cumulative Remedies. The remedies of the parties as set
forth herein are cumulative and may be exercised
individually or together with one or all other remedies, and
are not exclusive but instead are in addition to all other
rights and remedies available to the parties at law or in
equity.
K. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be
held invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to
other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by
law.
L. Waiver. The failure of a party to enforce any provision of
this Agreement shall not constitute a waiver of such party's
right to thereafter enforce such provision or to enforce any
other provision at any time.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed effective this 1st day of November, 1998.
LEXON, INC. MORGAN-PHILLIPS, INC.
BY /s/ GIFFORD M. MABIE BY /s/ RAY LARSON
GIFFORD M. MABIE, PRESIDENT RAY LARSON, MANAGING DIRECTOR
5
OPTION AGREEMENT
This Option Agreement ("Agreement") is made and entered into October 29,
1998 by and Morgan-Phillips, Inc. ("Optionee") and Lexon, Inc. ("Lexon").
WHEREAS, Lexon desires to grant Optionee an option to purchase 1,000,000
shares of common stock of Lexon upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties agree:
1. Grant of Option. Subject to the terms and conditions of this Agreement,
Lexon hereby grants Optionee an option to purchase 1,000,000 shares of common
stock of Lexon at an exercise price of $1.20 per share or higher in accordance
with Exhibit A hereto. The Board of Directors has determined the fair market
value of the common stock of Lexon on the date hereof is $1.20 per share.
2. Term. The term of this Option shall begin on the effective date of this
Agreement and expire if not earlier exercised on October 27, 2008. Any Option
granted hereunder not exercised in accordance with the terms hereof on or before
October 27, 2008 shall terminate.
3. Vesting. The Options granted hereby shall become vested only after the
satisfaction of each element of the Performance Criteria ("Performance
Criteria") during a particular period as set forth in Exhibit A hereto. The
elements of Performance Criteria consist of (1) the average between the closing
bid and the asked price on the OTC bulletin board during a particular period;
and (2) the average number of shares traded on a daily basis during that
particular period. For example, if the average closing price quoted on the OTC
bulletin board for common stock of Lexon is equal to or greater than $2.75 for
the period beginning January 1, 1999 and ending March 31, 1999 and if at least
1.5% of the number of free-trading shares eligible to be traded ("Float") have
in fact been traded on a daily basis during that period, the Option covering
45,000 shares at an exercise price of $1.20 per share becomes vested. For
purposes of calculating the Float, see Exhibit B hereto. By reason of satisfying
those Performance Criteria, that Option becomes fully vested and exercisable at
any time up through October 27, 2008, in Optionee's sole discretion in whole or
in part, so long as that vested Option has not been canceled or terminated in
accordance herewith. On the other hand, if those Performance Criteria are not
met, that portion of the Options hereby granted shall terminate and forever be
rescinded, never to be eligible for exercise. Notwithstanding the cancellation
of a particular portion of the Options hereby granted because the Performance
Criteria have not been satisfied, no other portion of the Options hereby granted
shall be affected thereby, whether such other portions have become vested and
eligible for exercise prior thereto or may thereafter become vested and eligible
for exercise by the common stock achieving the applicable Performance Criteria
therefor.
<PAGE>
4. Procedure for Exercise. This Option may be exercised in whole or in part
by written notice to the Shareholders stating the number of shares to be
purchased and accompanied by a check for payment of the exercise price per share
times the number of shares to be purchased. Lexon shall promptly issue to
Optionee certificates representing the Option Shares so purchased.
5. Transferability. This Option is not transferable by Optionee and is
subject to compliance with the requirements of applicable securities and other
laws. No shares may be issued if to do so would violate any applicable
securities or other laws.
6. Rights as Shareholder. Optionee shall be deemed to own all rights,
titles and interests in the Option Shares immediately upon receipt of payment
for the exercise price of the Option Shares so exercised and the delivery of
required investment representations and other subscription agreement
requirements reasonable impose by Lexon in order for it to satisfy all
applicable requirements of applicable securities, together with a written notice
of exercise. Optionee shall have no rights as a Shareholder with respect to and
of the Option Shares until proper exercise and payment of the exercise price has
been received.
7. Fundamental Corporate Changes. If Lexon changes its capital structure or
mergers, consolidates, sells all or substantially all of its assets or dissolves
("Fundamental Change"), then Optionee shall be entitled to purchase that number
and class of securities to which Optionee would have been entitled to purchase
if immediately prior to the effective date of such Fundamental Change, Optionee
had exercised this Option in full. Lexon agrees to adjust the number of Option
Shares and the exercise price therefor accordingly.
8. No Restrictions. The existence of this Option or any unexercised
portions hereof shall not effect in any way the right or power of Lexon to (1)
make or authorize any or all adjustments, recapitalizations, reorganizations or
other Fundamental Changes in its capital structure or its business, or (2) issue
other common shares or subscriptions therefor, or (3) issue notes, debentures,
bonds or preferred stock with preferential rights to the rights of common stock,
or (4) dissolve or liquidate the issuer, or (5) sell or transfer all or any part
of its assets or business.
9. Corporate Changes. If the outstanding shares of Lexon shall at any time
be changed or exchanged by a stock dividend, stock split, combination of shares
or recapitalization, the number and kind of shares subject to any unexpired
portion of this Option and the exercise price therefor shall automatically,
proportionately and equitably be adjusted; and the Shareholders agree to make
such changes in the number and exercise price of the Option Shares to eliminate
any dilution caused thereby. No adjustment shall be made in this Option or in
the exercise price or number of shares covered by this Option if Lexon makes any
Fundamental Change as described in Paragraph 6 above.
-2-
<PAGE>
10. Merger, Business Combination, or Sale of Assets. In the event Lexon
consummates a merger, business combination, sale of all or substantially all of
its assets or any other similar transaction on or before December 31, 2000 in a
manner so that the Performance Criteria applicable to any period before that
time cannot be achieved, or in the event the common stock of Lexon ceases for
any reason to be eligible for trading in the OTC bulletin board, the NASDAQ
national market system or on any recognized regional or national stock exchange
in the US, all Options not theretofore vested shall automatically be canceled
and of no further force or effect. Options which have become vested hereunder
prior to the occurrence of such an event shall continue to remain vested and
eligible for exercise; provided that in accordance with the terms and conditions
of any such event, the vested Options which have theretofore not been exercised
shall be deemed exercised with the exercise price being deducted from the
consideration payable to Optionee thereunder. For example, if Optionee holds
unexercised vested Options granted hereunder for 20,000 shares at an exercise
price of $1.20 and the consideration payable to shareholders of Lexon common
stock equals $4.00 per share, Optionee shall be entitled to receive $2.80 per
share times 20,000 shares ($4.00 minus $1.20 equals $2.80 per share).
11. Conditions to the Exercise of this Option. Optionee agrees to enter
into such representations, warranties or agreements as the Lexon may reasonably
request in order to comply with applicable securities or other laws and with
this Agreement. Compliance with all such applicable laws is a condition to the
exercise of this Option, and Lexon shall not be obligated to reissue shares upon
the exercise of this Option if to do so would violate any applicable law, rule
or regulation.
12. Taxes. Optionee shall be responsible for all taxes payable by reason of
the exercise of this Option. Optionee shall have no liability for any taxes
imposed upon Lexon for any reason whatsoever.
13. Investment Representation. The Optionee agrees that it is acquiring
this Option and the Option Shares for its own account for investment purposes
and not with a view to the sale or other distribution thereof except as
permitted by law and in compliance with applicable securities and other laws.
Optionee agrees that it has such knowledge and experience in financial and
business matters and specific knowledge about Lexon as it deems necessary or
appropriate in order to exercise the Options. Optionee agrees that Optionee
shall be required to bear the full investment risks associated with ownership of
this Option and the Option Shares.
14. Free Trading Shares. Lexon represents and warrants that the Option
Shares that will be issued upon the exercise of the Options hereby granted will
be issued pursuant to Rule 504 and subject to the limitations imposed by Rule
504.
15. Binding Agreement. This Option Agreement is binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
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16. Governing Law. This Agreement and the Option shall be interpreted by
and construed in accordance with the laws of Oklahoma.
Lexon, Inc.
By: GIFFORD MABIE
Gifford Mabie, President
8908 S. Yale, Suite 409
Tulsa, OK 74137
Phone: (918) 492-4125
Fax: (918) 492-2560
Morgan-Phillips, Inc.
By /s/ RAY LARSON
Ray Larson, Managing Director
8030 S. Memorial Drive
Tulsa, OK 74133
Phone: (918) 250-8028
Fax: (918) 252-7656
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EXHIBIT A
Morgan-Phillips, Inc.
Option Agreement
PERFORMANCE CRITERIA
------------------------------
Daily Average
Bid & Asked Average Daily
Number of During The Volume as a %
Vesting Period Option Shares Exercise Price Vesting Period Of The Float
- -------------- ------------- -------------- -------------- -------------
January 1, 1999-
March 31, 1999 45,000 $1.20 $2.75 1.5%
April 1, 1999-
June 30, 1999 70,000 $1.50 $3.25 1.5%
July 1, 1999-
September 30, 1999 95,000 $1.75 $3.75 1.5%
October 1, 1999-
December 31, 1999 120,000 $2.00 $4.25 1.5%
January 1, 2000-
March 31, 2000 135,000 $2.25 $5.00 1.5%
April 1, 2000-
June 30, 2000 160,000 $2.50 $5.50 1.5%
July 1, 2000-
September 30, 2000 175,000 $2.75 $6.00 1.5%
October 1, 2000-
December 31, 2000 200,000 $3.00 $6.50 1.5%
TOTAL SHARES 1,000,000
<PAGE>
EXHIBIT B
Calculation of Float
Float means all the shares of Common Stock of Lexon which are not
restricted and are free trading at any particular time. At the date hereof, the
shares included in the Float are listed in the attachment hereto and not marked
with an "X". [See attachment]
LEXON, INC.
CONSULTING AGREEMENT WITH
THE VIKING GROUP, LLC
This Agreement ("Agreement") is entered into this 1st day of June and
effective as of October 29, 1998 by and among Lexon, Inc. ("Lexon") and The
Viking Group, LLC ("TVG").
WHEREAS, Lexon is a development stage company which owns the exclusive
right to manufacture and market a cancer detection blood test kit in development
whose stock is traded on the Over the Counter Bulletin Board under the symbol
"LXXN"; and
WHEREAS, TVG has extensive experience and expertise in matters of
corporate development, strategic and financial planning, corporate structuring
and investment banking; and
WHEREAS, TVG has extensive contacts and acquaintances in the investment
community and among individual investors and with broker-dealers who have
interests in investing in companies like Lexon and in providing bridge financing
to companies like Lexon; and
WHEREAS, Lexon has agreed to engage TVG and TVG has accepted an
engagement to provide consulting services to Lexon and make introductions to and
to assist Lexon in arranging funding from time to time in accordance with the
terms and conditions of this Agreement.
Now, therefore, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, parties agree as follows:
1. Acceptance of Engagement. Lexon hereby agrees to engage TVG to
provide, and TVG agrees to accept the engagement from Lexon, to
provide consulting services to Lexon and to make introductions to
and assist Lexon in the receipt of funding from time to time in
accordance with the terms of this Agreement.
2. Scope of Services Consulting Services. TVG agrees to provide the
following services to Lexon:
A. Generate potential investor and broker-dealer leads and
create interest in Lexon and its common stock in the
brokerage community and among potential investors;
B. Participate in investor information meetings with potential
investors, the brokerage community and others regarding
Lexon;
C. Make available to Lexon a data bank with the names,
addresses, telephone numbers, fax numbers, email addresses
and other similar information regarding investors, potential
investors, brokers, and others in the investment community;
and
D. Assist Lexon in arranging bridge financing upon mutually
accepted terms and conditions from time to time; and
E. Make itself reasonably available to consult with, advise,
assist and provide their respective expertise and experience
to Lexon.
3. Scope of Information to be Provided. TVG agrees to provide to
investors, brokers, dealers, and others in the investment and
brokerage community only information which is received from and
approved by Lexon. Morrisett and TGV agree not to provide any
information regarding Lexon or its securities which is false or
materially misleading or omit to provide any information
regarding Lexon which is necessary is not false or materially
misleading. If either Morrisett or TVG receives
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any inquiry which calls for a response with information that is
has not been approved by Lexon or as to which either of them does
not know the correct and current answer, Morrisett and TGV each
agrees to request the information from Lexon and not provide a
guess, a projection, or an assumption without Lexon's prior
written consent.
4. Compensation. Lexon agrees to grant to Morrisett or TVG or their
designees 300,000 options to purchase the shares of common stock
in Lexon at $1.20 per share, the fair market value as determined
by the Board of Directors on the date of grant.
5. Nature of Relationship. TGV, on the one hand, and Lexon, on the
other hand, are independent contractors and are not partners,
joint venturers, employees, agents, or other representatives of
the other. Neither TVG nor Lexon is authorized or empowered to
bind the other in any capacity without the express written
consent of the other. TGV, on the one hand, and Lexon, on the
other hand, are solely responsible for all costs and liabilities
incurred by them arising from taxes of every kind or relating to
its own employees and other representatives, or relating to the
conduct of its business as an independent entity, and each agrees
to indemnify and hold the other harmless therefrom. TGV is in the
business of providing investment banking, strategic financial and
business planning and other consulting services and to make
investments for its own account. TVG will not undertake for and
on behalf of Lexon any activity which will require either of them
to be a required to be a registered broker-dealer. Lexon
acknowledges and agrees that TVG intends to engage in various
businesses and advisory and consulting arrangements with other
companies in the conduct of business that will not directly or
indirectly compete with the business of Lexon. Neither TVG nor
any other of its affiliates shall be entitled to receive any
employee or other compensation or benefit from Lexon.
6. No Conflicting Activities. TVG agrees not to engage in any
activities that violate its duties under this Agreement or
represent any other entity that is engaged in the manufacture or
sale of products or services that directly compete with the
business, products or services of Lexon, without the prior
consent of Lexon.
7. Inside and Confidential Information. TVG agrees not to disclose,
use or disseminate any information of or relating to Lexon which
is proprietary, confidential and competitively sensitive
("Confidential Information") without the prior written approval
of Lexon; and each further agrees not to act for its own account
or for the account of another upon any non-public information in
connection with the purchase or sell securities of Lexon or in
violation of any SEC rule or regulation, including SEC Rule
10b-5.
8. Disclosure of Relationship with Lexon. TVG agrees to disclose in
a manner consistent with applicable laws, rules and regulations
that it is providing investor relations and public relations
services in exchange for common stock of Lexon and that it
maintains a financial and ownership interest in the success of
Lexon.
9. Ownership of Information. TGV will receive information concerning
Lexon. TVG agrees that all such material belongs to and is the
property of Lexon. Likewise, TVG agrees to maintain certain
information regarding potential investors that it considers to be
proprietary. Lexon agrees not to disclosure or use any such
information only in the furtherance of its business, provided
that Lexon investor information shall not be deemed for any
purpose to belong to Morrisett and TVG.
10. Term. This Agreement shall expire 1 year from the date set forth
above, unless sooner terminated by either party by it giving the
other not less than 30 days' prior written notice of termination.
11. Termination of Agreement. This Agreement shall terminate upon the
occurrence of any of the following events: (a) voluntary notice
of termination given in writing not less than 60 days' prior
notice by either party; (b) a party becomes legally or
practically unable to perform its obligations
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hereunder; and (c) for cause. "Cause" shall mean (i) material
breach of this Agreement; (ii) misrepresentation of a material
fact; (iii) omission of a material fact; (iv) willful misconduct;
(v) material negligence; and (vi) failure to comply with an
applicable law, rule or regulation. In the event of a proposed
termination for cause, notice of the facts and circumstances
surrounding the alleged cause shall be given to the other party
and the party against whom a termination for cause is asserted
shall be provided with an opportunity to present a response to
the alleged reason for cause and to cure the cause. If not so
cured, the party against whom a cause is asserted shall be
entitled to no further benefits under this Agreement and shall
immediately return all client lists, client files, manuals,
documents, files, reports, property and equipment relating to or
owned by the other and all other Confidential Information (as
described above).
12. Remedies. Each party shall be entitled to exercise all remedies
available to it under a law or in equity in the event the other
party breaches its obligations hereunder. The remedies set forth
herein are cumulative, may be exercised individually or together
with one or all other remedies and are not exclusive but instead
are in addition to all other rights and remedies available to the
parties at law or in equity in the event the other party breaches
its obligations hereunder. In addition, any shares of Lexon
securities issued to TVG for services rendered shall be canceled
for failure of consideration to the extent such services are not
performed in accordance with this agreement while such shares are
held by TVG. Any such securities while such shares are held by
TVG shall also be canceled to the extent TVG violates the terms
of this Agreement to the extent of the value of such shares at
the time of any breach of this Agreement by TVG or its respective
designees.
13. Miscellaneous.
A. Notices. Any notice, request, demand or other communication
required to be made or which may be given to either party
hereto shall be delivered by certified U.S. mail, postage
prepaid, to that party's attention at the address set forth
below or at such other address as shall be changed from time
to time by giving notice hereunder.
B. Entire Agreement. This document constitutes the complete and
entire employment agreement between the parties hereto with
reference to the subject matters hereof. No statement or
agreement, oral or written, made prior to or at the signing
hereof, and no prior course of dealing or practice by either
party shall vary or modify the written terms hereof.
C. Headings. The headings and captions contained in this
Agreement are for ease and convenience of reference only and
shall not be deemed for any purpose to affect the
substantive meaning of the rights and duties of the parties
hereto in any way.
D. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns.
E. Counterparts. This Agreement may be executed in multiple
counterparts, each of which has the same text and each of
which shall be deemed an original for all purposes, but
together they constitute one single and the same agreement.
F. Amendments. This Agreement may be amended only by a written
document signed by the parties and stating that the document
is intended to amend this Agreement.
G. Applicable Law. This Agreement shall be governed by and
construed in accordance with Oklahoma law.
H. Disputes. All disputes not resolved by mutual agreement
within 60 days, or such longer time as the parties mutually
agree, shall be submitted to binding arbitration pursuant to
the Commercial Rules of Arbitration of the American
Arbitration Association. All arbitration
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hearings shall be held in Tulsa, Oklahoma. The parties agree
to be finally bound by all arbitration awards to the extent
permitted by law. In any dispute or proceeding to construe
this Agreement not resolved by final arbitration or to
enforce an arbitration award, the parties expressly consent
to the exclusive jurisdiction of state and federal courts in
Tulsa County, Oklahoma, the principal place of business of
Lexon. The prevailing party in any suit brought to interpret
this Agreement shall be entitled to recover reasonable
attorney's fees and expenses in addition to any other relief
which it is entitled.
I. Additional Documents. The parties hereto shall enter into
and execute such additional agreements, understandings,
documents or instruments as may be necessary to implement
the intent of this Agreement.
J. Cumulative Remedies. The remedies of the parties as set
forth herein are cumulative and may be exercised
individually or together with one or all other remedies, and
are not exclusive but instead are in addition to all other
rights and remedies available to the parties at law or in
equity.
K. Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be
held invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to
other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by
law.
L. Costs and Expenses. Each party agrees to be responsible for
its own out of pocket expenses. No party shall incur costs
or expenses for or on behalf of the other, at the expense or
liability of the other, without that party's express prior
consent.
M. Waiver. The failure of a party to enforce any provision of
this Agreement shall not constitute a waiver of such party's
right to thereafter enforce such provision or to enforce any
other provision at any time.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the 1st day of June, 1999 and effective this 29th day of
October, 1998.
LEXON, INC. THE VIKING GROUP, LLC
BY: /s/ GIFFORD M. MABIE BY: /s/ MICHAEL MORRISETT
GIFFORD M. MABIE, PRESIDENT MICHAEL MORRISETT, PRESIDENT
4
Sponsorship Commitment Form
This letter will set forth the basic terms and conditions under which you have
agreed to participate in the Eric Davis Score Against Colon Cancer "Event"
campaign which is a public event to take place in 18 National League cities
beginning in April 1999.
You have agreed with Celebrity Images, representatives for Eric Davis, "ARTIST",
to participate in the Event as a sponsor. Your package includes the following:
Three Strike Sponsor - $100,000 Industry exclusivity Signage at each tour site
Company logo on all print material
Company logo on all giveaway promotional items (t-shirts, water bottles, etc.)
Link to campaign website Right to provide product coupons/information at tour
sites Company information and product information in press kits
You understand that Celebrity Images will be acting in reliance upon your
commitment as set forth herein. Further, Celebrity Images will be representing
to others that you have agreed to participate in the Event. Therefore, you agree
not to withdraw from the Event without good cause and without giving Celebrity
Images prior written notice.
In addition, you agree that your company name, and company history may be used
in connection with the advertisement and/or promotion of the Event without your
approval, provided that no such shall constitute or amount to an endorsement by
Artist.
As remuneration for the above-mentioned sponsor services, Lexon agrees to pay
the amount of US$100,000 to Celebrity Images on behalf of the Event. Celebrity
Images agrees to use the $100,000 solely in connection with the Score Against
Colon Cancer Event.
You understand that Celebrity Images is acting as your authorized representative
to facilitate the rendering of your services at the Events and is not making any
guaranty to you that the Events will be held. Celebrity Images will advise you
of any changes in connection with your services at the Event once Celebrity
Images receives notification, if any, from the Artist. Celebrity Images shall
have no right or authority to bind Lexon in contract or otherwise.
The term of this Agreement shall be as follows:
1. This Agreement may not be assigned by either party.
2. The parties agree that failure of Artist to comply with the terms hereof as
a result of injury, illness, war, riot, national police action, act of God
or any other cause beyond Artist's control shall not constitute a breach of
this Agreement. In the event the Score Against Colon Cancer tour is
cancelled, the funds not used in the promotion thereof shall be given to
the American Cancer Society for colon cancer research.
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3. Any controversy or claim arising out of or relating to the construction or
applications of any term, provision, or condition of this Agreement shall
comply with and be governed in accordance with the laws of the State of
Maryland as applicable to contracts made and performed entirely within the
State of Maryland and shall be settled by final and binding arbitration, in
Baltimore, MD, under the Commercial Arbitration Rules of the American
Arbitration Association.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
Lexon, Inc. Celebrity Images
On behalf of Eric Davis
By: /s/ GIFFORD MABIE By: /s/ ANGELA HUNT
Title: President Title: President
Date: March 15, 1999 Date: March 24, 1999
CONSULTING AGREEMENT
This agreement is entered into between SSP Management Corp., a Colorado
Corporation (hereafter known as SSP) and Lexon, Inc, an Oklahoma Corporation
(hereafter known as LXXN), with reference to the following facts.
LXXN has expressed a desire to enter into this exclusive agreement with
SSP to provide Internet Public Relations Services for LXXN. SSP is in the
business of providing such services and desires to enter into an agreement with
LXXN to provide these services. This Agreement is for the purpose of defining
the services to be provided and the rights and responsibilities of both parties.
I. SERVICES PROVIDED BY SSP
1. SSP agrees to prepare a detailed profile report on LXXN following
certain guidelines that have already been established by SSP.
2. SSP agrees to expose the profile report to either its
"Superstockpick" database or its "Stellarstocks" database of over 50,000
e-mail subscribers each during the month of April 1999.
3. SSP will post the profile report on its Stellarstocks.com or
Superstockpick.com Internet site no more than (14) days after it has been
released, via e-mail, to all subscribers.
4. SSP will continue to release to its subscribers on the selected
Newsletter all new company information (i.e. Press Releases, Annual
Reports, Analysts Reports, etc.), which the Company has formally and
officially released to the general public, for a period of one (1) year
from the date of the original profile.
II. Responsibilities of LXXN
1. LXXN agrees to assist SSP, as requested, in the preparation of the
corporate profile report on said Company.
2. LXXN will, if requested, provide or arrange to be provided to SSP
or its designee, such accounting records as may be necessary to complete
the corporate "due diligence" necessary to compile an accurate and
detailed profile report on the company.
3. LXXN agrees to provide SSP with certain business and other
material information about LXXN, its products, services, contracts,
pending litigation, patents, trademarks and
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other such business matters which SSP may request and which SSP considers
to be important for the completion of this contract.
4. LXXN agrees to notify SSP of any changes in the status or nature
of its business, any pending litigation, or any other developments that
may require further disclosure.
III. COMPENSATION
1. For services rendered, as described above, SSP will receive the
following compensation: $25,000 in cash, and $25,000 in free
trading common stock in LXXN (OTC BB: LXXN) payable upon the
execution of this Agreement, and based on the closing bid price
of the stock on the date of execution of this Agreement.
2. For services rendered, LXXN agrees to issue to SSP Management
$200,000 in restricted shares common stock, based on the closing
bid price of LXXN on the date of the execution of this Agreement,
due and payable upon execution of this Agreement.
IV. ADDITIONAL CONSIDERATION
N/A
V. REPRESENTATIONS BY SSP
SSP represents, warrants, and covenants the following:
1. SSP is a Corporation duly organized and existing under the laws of
the State of Colorado and is in good standing with the jurisdiction of its
incorporation.
2. SSP will disclose to LXXN any and all material facts and
circumstances which may affect its ability to perform its undertaking
herein.
3. SSP will cooperate in a prompt and professional manner with LXXN
or its agents in the performance of this Agreement.
VI. REPRESENTATIONS OF LXXN
LXXN represents, warrants and covenants the following:
1. LXXN will cooperate fully with SSP in executing the
responsibilities required under this Agreement so that SSP may fulfill its
responsibilities in a timely manner.
2. LXXN will not circumvent this Agreement either directly or
indirectly nor will it interfere with, impair, delay or cause SSP to
perform work not described in this Agreement.
3. LXXN and each of its subsidiaries is a corporation duly organized
and existing under the laws of its state of incorporation and is in good
standing with the jurisdiction of its incorporation in each state where it
is required to be qualified to do business.
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4. LXXN's articles of incorporation and by-law's delivered pursuant
to this Agreement are true, and complete copies of same have been duly
adopted.
5. LXXN will cooperate in a prompt and professional manner with SSP,
its attorneys, accountants and agents during the performance of the
obligations due under this Agreement.
6. LXXN represents that no person has acted as a finder or investment
advisor in connection with the transactions contemplated in this
Agreement. LXXN will indemnify SSP with respect to any claim for a
finder's fee in connection with this Agreement. LXXN represents that no
officer, director or stockholder of the company is a member of the NASD,
an employee or associated member of the NASD. LXXN represents that it has
disclosed or will disclose to SSP all potential conflicts of interests
involving its officers, directors, principals, stockholders and/or
employees.
7. All financial information from LXXN will be provided to SSP in a
timely and complete manner and all other information which LXXN has
previously provided to SSP concerning LXXN is accurate and complete in
every material respect. If it is later determined that such is not the
case, it shall be considered a basis for the termination of this
Agreement.
8. LXXN does hereby state that ALL information supplied to SSP during
the course of this Agreement shall be true and accurate to the best of
LXXN's knowledge. LXXN agrees to hold SSP harmless for the accuracy of any
information disclosed under this Agreement.
VII. CONFIDENTIALITY
SSP agrees that all information received from LXXN shall be treated
as confidential information and SSP shall not share such information with
any other person or entity, except as are required by SSP to fulfill this
Agreement, without the express written consent of LXXN, unless such
disclosure will not cause damages to LXXN.
LXXN agrees not to divulge any named source (i.e. lenders,
institutions, investors, personal contacts, Broker Dealers, etc.) which
may be introduced to LXXN by SSP, for a period of one (1) year from the
execution of this Agreement. Furthermore, LXXN agrees not to circumvent,
either directly or indirectly, the relationship that SSP has with said
sources.
VIII. NOTICES
Any notices from either party to the other shall be deemed received
on the date such notice is personally delivered. Any notice sent by fax
transmission shall be deemed received by the other party on the day it has
been transmitted. Any notice sent by mail by either party
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to the other shall be deemed received on the third business day after it
has been deposited at a United States Post Office. For purposes of
delivering or sending notice to the parties under this Agreement such
notices shall be delivered or sent as follows:
SSP Management Corp. Lexon, Inc.
1869 W. Littleton Blvd. 8908 South Yale Ave. Suite 409
Littleton, CO 80120 Tulsa, OK 74137
IX. ENTIRE AGREEMENT
Neither party has made representations to the other, which is not
specifically set forth in this Agreement. There are no oral or other
agreements between the parties that have been entered into prior or
contemporaneously with the formation of this Agreement. All oral promises,
agreements, representations, statements and warranties herein, after
asserted by one party against the other, shall be deemed to have been
waived by such party asserting that they were made and this Agreement
shall supersede all prior negotiations, statements, representations,
warranties and agreements made or entered into between the parties to this
Agreement.
X. NO ASSIGNMENT
Neither party may assign any benefit due or delegate performance
under this Agreement without the express written consent of the other
party.
XI. CONSTRUCTION
This Agreement shall be governed by the laws of the State of
Colorado. It shall also be construed as if the parties participated
equally in its negotiation and drafting. The Agreement shall not be
construed against one party over another party.
XII. ATTORNEYS FEES
In any action concerning the enforcement, breach, or interpretation
of this Agreement, the prevailing party shall be entitled to recover its
costs of suit and reasonable attorney's fees from the other party, in
addition to any other relief granted by the court.
XIV. WAIVER
The waiver of any provision of this Agreement by either party shall
not be deemed to be a continuing, waiver or a waiver of any other
provision of this Agreement by either party.
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XV. SEVERABILITY
If any provision of this Agreement or any subsequent modifications
hereof are found to be unenforceable by a court of competent jurisdiction,
the remaining provisions shall continue to remain in full force and
effect.
XVI. AUTHORITY TO ENTER INTO AGREEMENT
The individuals signing this Agreement below represent to each other
that they have the authority to bind their respective corporations to the
terms and conditions of this Agreement. The individuals shall not, however
have personal liability by executing this Agreement and sign this
Agreement only in their representative capacities as authorized officers
of the LXXN and SSP respectively.
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement on this 31st day of March, 1999.
Lexon, Inc. SSP Management Corp.
/s/ Gifford M. Mabie /s/James H. Watson, Jr.
President President
5
LEXON, INC.
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement ("Agreement") is entered into and
effective this 19th day of April, 1999 by and between Lexon, Inc. ("Lexon") and
Ortho-Clinical Diagnostics, Inc. ("OCD").
WHEREAS, Lexon and OCD are considering a business relationship in which
Lexon proposes to disclose and provide to OCD certain Confidential Information
as defined below concerning colon and other cancer detection and certain
business, financial and other information defined as Confidential Information.
NOW, THEREFORE, for good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. For purposes of this Agreement, the term "Confidential Information"
shall mean all Technical Information and all Miscellaneous Information
concerning the Ebaf Assay colon cancer blood screening discovery, technology,
process and use which is licensed to Lexon and which is confidential or
proprietary or competitively sensitive and which is disclosed in writing to OCD
or to its affiliates and their respective directors, officers, employees,
contractors, agents, and other representatives of Confidential Information
pursuant to this Agreement, whether before or after the date hereof, including
without limitation the following:
(i) Technical Information. All trade secrets, inventions,
discoveries, know-how, formulas, formulations, compositions,
specifications, patents, patent applications, copyrights,
software and applications, drawings, schematics, processes,
process technologies, manufacturing techniques, tests, test
results, research and development data and similar technical
information, together with all actual and proposed
modifications and alterations made, created, developed,
invented or discovered by or for and on behalf of Lexon,
including without limitation specifically the invention,
discovery and use of the Ebaf Assay and its detection,
measurement and use by way of the blood screening test kit
being developed by Dr. Siamak Tabibzadeh; and
(ii) Miscellaneous Information and Documentation. All records,
reports, analyses, memoranda, notes, analyses, compilations,
studies, and copies and extracts thereof, however and
whenever arising, containing any Confidential Information
with respect to any of the foregoing in every written form.
2. "Confidential Information" does not include (a) information which is
or becomes known to the general public through no fault of the receiving party,
(b) information which was rightfully in the possession of the receiving party
prior to its disclosure by or on behalf of Lexon hereto, (c) information which
comes into the possession of receiving party without violation of any
contractual or legal obligation, and (d) information which is independently
developed by or on behalf of OCD, without use of or reliance on the Confidential
Information received hereunder. If these exceptions to the confidential nature
of information provided apply to a specific item, that does not relieve the
receiving party of its obligations hereunder with respect to all other items.
The receiving
<PAGE>
party shall have the burden of proof relating to all exceptions to the
confidential treatment of Confidential Information hereunder.
3. The receiving party agrees to hold the Confidential Information in
strict confidence and not to communicate, disclose, divulge, disseminate,
publish or transfer the Confidential Information to any other person, except as
expressly permitted hereby, without the prior written consent of Lexon.
4. The receiving party agrees to use the Confidential Information
solely in connection with proposed business relationship with Lexon or an
affiliate thereof and for no other purpose whatsoever.
5. The receiving party may disclose the Confidential Information,
solely for the purposes permitted by this Agreement, to its directors, officers,
employees, agents, attorneys, accountants, and other representatives and
advisors strictly on a need-to-know basis for the purposes of evaluating the
Confidential Information and for any other purpose solely in accordance with the
uses permitted hereby; provided the receiving party notifies each person and
entity receiving the information which is Confidential Information covered by
this Agreement and requires that the receiving party maintains the confidential
nature of the Confidential Information in accordance with the terms and
conditions of this Agreement; and further provided OCD remains liable to Lexon
for any violation of these agreements and the actions or inactions on the part
of any other person who acquires access to the Confidential Information by, from
or through the receiving party.
6. Lexon shall furnish Confidential Information in written form marked
as "Confidential". However, if disclosure of Confidential Information is
initially in non-written form or if the disclosure is first made orally or by
visual inspection, Lexon shall have the obligation to confirm in writing the
confidential nature of the information within a 15 days after such disclosure,
and the confidentiality obligations under shall thereafter apply to such
information to the same extent as if the information had been marked as
"Confidential" when disclosed.
7. Nothing contained herein shall be construed as granting or implying
any right or license to use the Confidential Information disclosed hereunder,
except solely for the permitted purposes as set forth herein.
8. Lexon makes no representation or warranty as to the accuracy or
completeness of the Confidential Information disclosed hereunder. The receiving
party expressly agrees that neither Lexon nor its directors, officers,
employees, agents, advisors, attorneys, accountants, or representatives shall
have any liability to the receiving party or to anyone else for any inaccuracy
in, incompleteness of or unauthorized use of Confidential Information.
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<PAGE>
9. The receiving party agrees to return to Lexon all Confidential
Information not later than the earlier of 10 days after the termination of this
Agreement or within 10 days after receipt of a written request from the other,
whichever is sooner, except one copy which may be retained by OCD solely for
archival purposes and for no other use whatsoever.
10. No failure or delay by Lexon in exercising any right, remedy, power
or privilege shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude the exercise of any other right, remedy, power or
privilege hereunder or as permitted by law or in equity.
11. The term of this Agreement is 2 years from the date of execution of
this Agreement.
12. The rights, duties and obligations of the parties cannot be
assigned without the written consent of all interested parties.
13. This Agreement does not obligate any of the parties hereto to enter
into any transaction or agreement and does not obligate any party to purchase or
sell equipment or to provide services.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York , USA.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed effective as of the date first written above.
Lexon, Inc. Ortho-Clinical Diagnostics, Inc.
By /s/ FREDERICK K. SLICKER By /s/ ROY DAVIS
Frederick K. Slicker, Vice President Roy Davis, Vice President
-3-
LEXON, INC.
MUTUAL CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement ("Agreement") is entered into and
effective this 21st day of April, 1999 by and between Lexon, Inc. ("Lexon")
and Chiron Diagnostics Corporation ("CDC").
WHEREAS, Lexon and CDC are contemplating a business relationship in
which each proposes to disclose and provide to the other certain Confidential
Information as defined below concerning colon cancer detection and certain
business, financial and other information defined as Confidential Information.
NOW, THEREFORE, for good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. For purposes of this Agreement, the term "Confidential
Information" shall mean all Technical Information, all Business and Commercial
Information, and All Miscellaneous Information concerning colon cancer which is
confidential or proprietary or competitively sensitive and which is disclosed by
either party to the other party hereto or to their affiliates and their
respective directors, officers, employees, contractors, agents, and other
representatives of Confidential Information pursuant to this Agreement, whether
before or after the date hereof, including without limitation the following:
(i) Technical Information. All trade secrets, inventions,
discoveries, know-how, formulas, formulations, compositions,
specifications, patents, patent applications, copyrights,
software and applications, drawings, schematics, processes,
process technologies, manufacturing techniques, tests, test
results, research and development and similar technical
information, together with all actual and proposed
modifications and alterations made, created, developed,
invented or discovered by or for and on behalf of a party to
this Agreement; and
(ii) Business and Commercial Information. All information
concerning the financial condition, business and financial
results of operations, marketing strategies, financial
projections, contacts with customers and prospective
customers, prospective business acquisitions, lists of
customers and their expected requirements, customer
representatives, lists of prospective customers and their
expected requirements, costs, pricing, margins, sales,
quantities, product plans, market information, purchase
orders, sources of supply, projections, confidential
personnel information, all contracts or agreements
containing confidentiality provisions, the contents of all
agreements relating to any of the foregoing and all other
information relating to a party to this Agreement or its
customers or prospective customers which is either
confidential or proprietary or competitively sensitive; and
(iii)Miscellaneous Information and Documentation. All records,
reports, analyses, memoranda, notes, analyses, compilations,
studies, reports and copies and extracts thereof, however
and whenever arising,
<PAGE>
containing any Confidential Information with respect to any
of the foregoing in every recordable form.
"Confidential Information" also includes but is not limited to information
provided by or on behalf of a party to this Agreement before and after the date
hereof.
2. "Confidential Information" does not include (a) information
which is or becomes known to the general public through no fault of the
receiving party, (b) information which was rightfully in the possession
receiving party prior to its disclosure by or on behalf of the other party
hereto, and (c) information which comes into the possession of receiving party
without violation of any contractual or legal obligation. Even if these
exceptions to the confidential nature of information provided do not apply to a
specific item, that does not relieve the receiving party of its obligations
hereunder with respect to all other items. The receiving party shall have the
burden of proof relating to all exceptions to the confidential treatment of
Confidential Information hereunder.
3. The receiving party agrees to hold the Confidential
Information in strict confidence and not to communicate, disclose, divulge,
disseminate, publish or transfer the Confidential Information to any other
person, except as expressly permitted hereby, without the prior written consent
of the other party.
4. The receiving party agrees to use the Confidential
Information solely in connection with proposed business relationship with the
other party hereto or an affiliate thereof and for no other purpose whatsoever.
5. The receiving party agrees that the Confidential Information
constitutes proprietary information owned exclusively by the other party hereto
or by one of its affiliates or its customers or prospects.
6. The receiving party shall confine its dissemination of the
other party's Confidential Information only to those individuals within the
receiving party's organization or the receiving party's consultants who have a
need to evaluate the Confidential Information in connection with the proposed
business relationship with the other party and who are bound to obligations of
confidentiality and non-use at least as strict as those contained herein.
7. To the extent practical, the disclosing party shall furnish
Confidential Information in documentary or tangible form marked as
"Confidential". However, if disclosure of Confidential Information is in
non-documentary form or if the disclosure is first made orally or by visual
inspection, the disclosing party shall have the right or, if requested by
receiving party, the obligation to confirm in writing the fact and the general
nature of such disclosure within a reasonable time after such disclosure or
request is made. The failure to mark as "Confidential" information which is in
fact Confidential Information hereunder shall not reduce or otherwise alter the
obligations of confidentiality of that information hereunder.
2
<PAGE>
8. Nothing contained herein shall be construed as granting or
implying any right or license to use the Confidential Information disclosed
hereunder, except solely for the permitted purposes as set forth herein.
9. The parties make no representation or warranty as to the
accuracy or completeness of the Confidential Information provided to the other
hereunder. The receiving party expressly agrees that neither the disclosing
party nor its members, directors, officers, employees, agents, advisors,
attorneys, accountants, or representatives shall have any liability to receiving
party or to anyone else for any unauthorized use of Confidential Information.
10. The receiving party agrees to return to the disclosing party
all Confidential Information not later than the earlier of (1)15 days after the
termination of this Agreement and (2) immediately after receipt of a written
request from the other, whichever is sooner.
11. No failure or delay by the disclosing party in exercising
any right, remedy, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude the exercise of any other
right, remedy, power or privilege hereunder or as permitted by law or in equity.
12. The term of this Agreement is 2 years.
13. The rights, duties and obligations of the parties cannot be
assigned without the written consent of all interested parties.
14. This Agreement does not obligate any of the parties hereto
to enter into any transaction or agreement and does not obligate any party to
purchase or sell equipment or to provide services.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, USA.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed effective as of the date first written above.
Lexon, Inc. Chiron Diagnostics Corporation
By /s/ T.R. COUGHLIN, JR. By /s/ MARY ANDERSON
Dr. Thomas Coughlin, Jr., M.D. Mary Anderson
Vice President Manager, Business Development
Nucleic Acid Diagnostics &
New Marker R&D
Bayer
4
ABBOTT DIAGNOSTICS DIVISION
DISCLOSURE AGREEMENT-IN
In discussions between Abbott Laboratories and its affiliates (collectively
"Abbott") and the undersigned party ("Participant"), Participant wishes to
protect certain confidential information of Participant, including but not
limited to written, oral or visually presented information and such items as
electronic media products, equipment, compositions and the like (hereafter
collectively referred to as "Information"). Participant is willing to disclose
Information to Abbott, and Abbott is willing to receive it in confidence.
Therefore, Abbott and Participant, intending to be legally bound, agree that:
1. The parties' representatives for disclosing or receiving information are:
For Abbott: Jerry Henslee
For Participant: Thomas Coughlin, Jr. MD
2. Information provided hereunder is described as: Technical information on
Lexon's assay and reagents for detecting Ebaf as well as related clinical
data and patent information pertaining to Ebaf.
3. The existence of and the relationship created under this Agreement is
confidential and shall be treated as Information pursuant to the terms of
this Agreement.
4. The time period for Participant to provide Information to Abbott hereunder
shall begin June 21, 1999 and end June 20, 2000 ("Disclosure Period").
Abbott's obligations of non-disclosure under paragraphs 5 through 9 shall
terminate on June 21, 2005.
5. Abbott shall not disclose or use Information, or allow it to be used, for
its own benefit or the benefit of others, and shall protect Information by
using the same degree of care, but no less than a reasonable degree of
care, as Abbott uses to protect its own confidential information.
6. Abbott's duties under paragraphs 5 and 8 of this Agreement shall apply only
to Information that is: (a) disclosed by Participant in writing and marked
to indicate it is confidential at the time of disclosure; or (b) disclosed
by Participant in any other manner and indicated to be confidential at the
time of disclosure and thereafter is summarized in a written memorandum,
marked to indicate it is confidential and delivered to Abbott's
representative named in paragraph 1 within thirty (3)) days of disclosure;
of (c) disclosed in the form of tangible products or materials transmitted
to Abbott with an accompanying written memorandum.
7. This Agreement imposes no obligation upon Abbott with respect to
Information that: (a) was in Abbott's possession Before receipt from
Participant; or (b) is or becomes available to the public through no fault
of Abbott; or (c) is received in good faith by Abbott from a third party
and is not subject to an obligation of confidentiality owed to the third
party; of (d) is independently developed by Abbott without reference to
Information received hereunder.
8. In the event that Abbott is required by judicial or administrative process
to disclose Information, Abbott shall promptly notify participant and allow
Participant a reasonable time to oppose such process.
9. Abbott shall return all Information received from Participant at the
request of Participant except that Abbott may retain in its confidential
files one copy of written Information for record purposes only.
10. Participant warrants or represents that it has the right to make
disclosures under this Agreement.
11. Neither party shall acquire any license under intellectual property rights
of the other party pursuant to this Agreement.
12. Neither party has an obligation pursuant to this Agreement to purchase any
service or item from the other party.
13. The parties do not intend that any agency or partnership relationship be
created by this Agreement.
14. All additions or modifications to this Agreement, including any attachment
referred to in paragraph 16, must be made in writing and executed by both
parties.
15. This Agreement is to be executed in duplicate. Please return one fully
executed copy to: Technology Acquisitions, D-9RK AP6C, Abbott Laboratories,
100 Abbott Park Road, Abbott Park, IL 60064-6094.
16. Attachment X No ____Yes If Yes, number of pages ____.
Very truly yours, AGREED AND ACCEPTED:
ABBOTT LABORATORIES PARTICIPANT
By /s/ JAMES J. KOZIARZ Company Name Lexon, Inc.
James J. Koziarz, Ph.D. Address 8908 South Yale, Suite 409
Corporate Vice President City-State-Zip Tulsa, OK 74137-3545
Diagnostic Products
Research and Development Authorized
Signature /s/ FREDERICK K. SLICKER
Date 6/22/99 Printed Name Frederick K. Slicker
Title Vice President and General Counsel
Date 6/29/99
CONSULTING AGREEMENT WITH
JONATHAN DARIYANANI
This Agreement ("Agreement") is entered into and effective March 1,
1999 by and between Lexon, Inc. ("Lexon") and Jonathan Dariyanani
("Consultant").
WHEREAS, Lexon is a development stage company which owns the exclusive
right to manufacture and market a cancer detection blood test kit in development
whose stock is traded on the Over the Counter Bulletin Board under the symbol
"LXXN"; and
WHEREAS, Consultant has extensive experience and expertise in matters
of matters involving international commerce and has prior substantive
relationships with potential investors, investment bankers, companies and
individuals who from time to time purchase companies; and
WHEREAS, Lexon has agreed to engage Consultant and Consultant has
accepted an engagement to introduce Consultant's clients and contacts to Lexon
and to assist Lexon in arranging funding its activities and to arrange for the
sale of Lexon to a client of Consultant first introduced to Lexon by Consultant.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, parties agree as follows:
1. Acceptance of Engagement. Lexon hereby agrees to engage
Consultant, and Consultant agrees to accept the engagement from
Lexon, to (1) introduce to Lexon persons or entities that
consummate funding for Lexon, either through the sale of
authorized but unissued capital stock of Lexon or through the
consummation of loans to Lexon; and (2) introduce to Lexon
persons or entities to purchase all or substantially all the
assets or all or substantially all of the issued and outstanding
capital stock of Lexon or to arrange a merger, business
combination, reorganization or other major corporate transaction
in which Lexon is acquired (together, "Major Corporate
Transactions") or acquires on or more other persons or entities.
2. Scope of Information to be Provided. Consultant agrees to provide
to investors, companies and entities only information which is
received from and approved by Lexon. Consultant agrees not to
provide any information regarding Lexon or its securities which
is false or materially misleading or omits to provide information
regarding Lexon which is necessary to make the disclosures made
not false or materially misleading. If Consultant receives any
inquiry regarding Lexon which calls for a response with
information that is has not been approved by Lexon or as to which
Consultant does not know the correct answer, Consultant agrees to
request the information from Lexon and not provide a guess, a
projection, or an assumption without Lexon's prior written
consent.
<PAGE>
3. Compensation. Lexon agrees to pay Consultant in the aggregate the
following amounts:
(1) For the funding of purchases of capital stock of Lexon from
persons with whom Consultant has a prior substantive
relationship and which is first introduced to Lexon by
Consultant, 10% of the net proceeds actually received by and
funded to Lexon; and
(2) For the consummation of a Major Corporate Transaction, 5% of
the first $1 million actually received; 4% of the next $1
million actually received; 3% of the next $1 million
received; 2% of the next $1 million actually received; and
1% of all funds actually received in excess of $5 million;
and
(3) For the funding of loans made to Lexon by persons first
introduced to Lexon by Consultant, 3% of actual loans made
and funded.
For purposes of this paragraph, all compensation shall be paid in
the same form of consideration actually received; shall be
calculated in US dollars; and shall be based upon the net sale
price, after deducting all transportation, export, import,
customs agency, customs, insurance, taxes, and handling charges
and fees and after deducting all returns and rejections for
reasons other than for defective of damaged product.
4. Nature of Relationship. Consultant, on the one hand, and Lexon,
on the other hand, are independent contractors and are not
partners, joint venturers, employees, agents, or other
representatives of the other. Neither Consultant nor Lexon is
authorized or empowered to bind the other in any capacity without
the express written consent of the other. Consultant, on the one
hand, and Lexon, on the other hand, are solely responsible for
all costs and liabilities incurred by them arising from taxes of
every kind or relating to its own employees and other
representatives, or relating to the conduct of its business as an
independent entity, and each agrees to indemnify and hold the
other harmless therefrom. Consultant will not undertake for and
on behalf of Lexon any activity which will require either of them
to be a required to be a registered broker-dealer. Lexon
acknowledges and agrees that Consultant may engage in various
businesses and other consulting arrangements with other companies
in the conduct of business that will not directly or indirectly
compete with the business of Lexon. Consultants and any other his
affiliates shall not be entitled to receive any employee or other
compensation or benefit from Lexon.
5. No Conflicting Activities. Consultant agree not to engage in any
activities that violate his duties under this Agreement or
represent any other entity that is engaged in the manufacture or
sale of products or services that directly compete with the
business, products or services of Lexon, without the prior
consent of Lexon.
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<PAGE>
6. Inside and Confidential Information. Consultant agrees not to
disclose, use or disseminate any information of or relating to
Lexon which is proprietary, confidential and competitively
sensitive ("Confidential Information") without the prior written
approval of Lexon; and Consultant agrees not to act for his own
account or for the account of another upon any non-public
information in connection with the purchase or sell securities of
Lexon or in violation of any SEC rule or regulation, including
SEC Rule 10b-5.
7. Ownership of Information. Consultant will receive information
concerning Lexon that belongs to Lexon and does not belong to
Consultant. Consultant agrees that all such material belongs to
and is the property of Lexon. Likewise, Lexon agrees not to
disclosure or use any such information regarding any client of
Consultant for any purpose other than as contemplated by the
Agreement.
8. Term. This Agreement shall expire 1 year from the date set forth
above, unless sooner terminated by either party by it giving the
other not less than 30 days' prior written notice of termination.
9. Termination of Agreement. This Agreement shall terminate upon the
occurrence of any of the following events: (a) voluntary notice
of termination given in writing not less than 60 days' prior
notice by either party; (b) a party becomes legally or
practically unable to perform its obligations hereunder; and (c)
for cause. "Cause" shall mean (i) material breach of this
Agreement; (ii) misrepresentation of a material fact; (iii)
omission of a material fact; (iv) willful misconduct; (v)
material negligence; and (vi) failure to comply with an
applicable law, rule or regulation. In the event of a proposed
termination for cause, notice of the facts and circumstances
surrounding the alleged cause shall be given to the other party
and the party against whom a termination for cause is asserted
shall be provided with an opportunity to present a response to
the alleged reason for cause and to cure the cause. If not so
cured, the party against whom a cause is asserted shall be
entitled to no further benefits under this Agreement and shall
immediately return all client lists, client files, manuals,
documents, files, reports, property and equipment relating to or
owned by the other and all other Confidential Information (as
described above).
10. Remedies. Each party shall be entitled to exercise all remedies
available to it under a law or in equity in the event the other
party breaches its obligations hereunder. The remedies set forth
herein are cumulative, may be exercised individually or together
with one or all other remedies and are not exclusive but instead
are in addition to all other rights and remedies available to the
parties at law or in equity in the event the other party breaches
its obligations hereunder. In addition, any shares of Lexon
securities issued to either of the Consultant for services
rendered shall be canceled for failure of consideration to the
extent such services are not performed in accordance with this
Agreement. Any such securities shall also be canceled to the
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<PAGE>
extent Consultant violates the terms of this Agreement.
11. Miscellaneous.
(1) Notices. Any notice, request, demand or other communication
required to be made or which may be given to either party
hereto shall be delivered by certified U.S. mail, postage
prepaid, to that party's attention at the address set forth
below or at such other address as shall be changed from time
to time by giving notice hereunder.
(2) Entire Agreement. This document constitutes the complete and
entire employment agreement between the parties hereto with
reference to the subject matters hereof. No statement or
agreement, oral or written, made prior to or at the signing
hereof, and no prior course of dealing or practice by either
party shall vary or modify the written terms hereof.
(3) Headings. The headings and captions contained in this
Agreement are for ease and convenience of reference only and
shall not be deemed for any purpose to affect the
substantive meaning of the rights and duties of the parties
hereto in any way.
(4) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns.
(5) Counterparts. This Agreement may be executed in multiple
counterparts, each of which has the same text and each of
which shall be deemed an original for all purposes, but
together they constitute one single and the same agreement.
(6) Amendments. This Agreement may be amended only by a written
document signed by the parties and stating that the document
is intended to amend this Agreement.
(7) Applicable Law. This Agreement shall be governed by and
construed in accordance with Oklahoma law.
(8) Disputes. All disputes not resolved by mutual agreement
within 60 days, or such longer time as the parties mutually
agree, shall be submitted to binding arbitration pursuant to
the Commercial Rules of Arbitration of the American
Arbitration Association. All arbitration hearings shall be
held in Tulsa, Oklahoma. The parties agree to be finally
bound by all arbitration awards to the extent permitted by
law. In any dispute or proceeding to construe this Agreement
not resolved by final arbitration or to enforce an
arbitration
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<PAGE>
award, the parties expressly consent to the exclusive
jurisdiction of state and federal courts in Tulsa County,
Oklahoma, the principal place of business of Lexon. The
prevailing party in any suit brought to interpret this
Agreement shall be entitled to recover reasonable attorney's
fees and expenses in addition to any other relief which it
is entitled.
(9) Additional Documents. The parties hereto shall enter into
and execute such additional agreements, understandings,
documents or instruments as may be necessary to implement
the intent of this Agreement.
(10) Cumulative Remedies. The remedies of the parties as set
forth herein are cumulative and may be exercised
individually or together with one or all other remedies, and
are not exclusive but instead are in addition to all other
rights and remedies available to the parties at law or in
equity.
(11) Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be
held invalid or unenforceable to any extent, the remainder
of this Agreement and the application of such provisions to
other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by
law.
(12) Costs and Expenses. Each party agrees to be responsible for
its own out of pocket expenses. No party shall incur costs
or expenses for or on behalf of the other, at the expense or
liability of the other, without that party's express prior
consent.
(13) Waiver. The failure of a party to enforce any provision of
this Agreement shall not constitute a waiver of such party's
right to thereafter enforce such provision or to enforce any
other provision at any time.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed effective this 1st day of March, 1999.
LEXON, INC.
BY /s/ GIFFORD M. MABIE ____________________________________
GIFFORD M. MABIE, PRESIDENT JONATHAN DARIYANANI
-5-
Dr. Siamak Tabibzadeh
Chief of Experimental Pathology and
Professor of Pathology
North Shore University Hospital
Long Island, New York
Dear Dr. Tabibzadeh,
This letter confirms your agreement effective October 1, 1998 to provide
consulting services and technical assistance and advice to Lexon, Inc. in
connection with, and you will make yourself reasonably available at mutually
agreed times and places to promote the commercialization of your invention with
respect to the discovery and related test kit providing early detection of
ovarian, testicular and colon cancer through the presence of TGF-B4 (ebaf)
protein screening ("Invention"); provided that your assistance, availability and
advice does not interfere with your duties and responsibilities in teaching or
research at North Shore University Hospital or any other university, hospital or
research institution by which you are employed. Your advice and assistance are
an important element in the successful commercialization of your Invention. You
also agree to continue to use good faith and diligence to complete your research
on this Invention during the two year sponsored research program which will be
funded by Lexon.
For and in exchange for your assistance, advice, availability and
consulting services, Lexon, Inc. grants you options effective this October 1,
1998 to purchase 50,000 shares of common stock of Lexon at an exercise price of
$1.20 per share, the fair market value of such shares having the transfer
restrictions applicable thereto. The options expire September 30, 2008. We look
forward to a long and mutually beneficial personal and professional
relationship. If the letter sets forth our mutual understanding, please sign two
copies and return one to me in the enclosed self addressed envelope Thank you so
much.
Lexon, Inc.
By /s/ GIFFORD MABIE
Gifford Mabie, President
I accept your offer and I am delighted to assist you in any reasonable way
to make my Invention a commercial reality.
/s/ DR. SIAMAK TABIBZADEH
Dr. Siamak Tabibzadeh
OFFICER/DIRECTOR INDEMNIFICATION AGREEMENT
THIS AGREEMENT ("Agreement") is entered into and effective this ____
day of _______, 1998, by and between Lexon, Inc., an Oklahoma corporation
("Corporation"), and ________________, ("Indemnified Party").
WHEREAS, the Board of Directors has determined that it is in the best
interest of the Corporation and its shareholders to agree to indemnify
Indemnified Party (who is a Director and/or Officer of the Corporation) from and
against certain liabilities for actions taken by the Indemnified Party during
the performance of tasks for the Corporation.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification. The Corporation hereby agrees to indemnify and hold
harmless Indemnified Party to the maximum extent possible under all applicable
laws against any and all claims, demands, debts, duties, liabilities, judgments,
fines and amounts paid in settlement and expenses (including attorneys' fees and
expenses) actually and reasonably incurred by Indemnified Party in connection
with the investigation, defense, negotiation and settlement of any such claim or
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the Corporation) to which Indemnified Party is or becomes a party, or
is threatened to be made a party, by reason of the fact that Indemnified Party
is an officer or a director of the Corporation or any of its subsidiaries.
2. Limitations on Indemnity. No indemnity pursuant to this Agreement
shall be made by the Corporation:
(a) For the amount of such losses for which the Indemnified
Party is indemnified pursuant to any insurance purchased and
maintained by the Corporation; or
(b) In respect to remuneration paid to Indemnified Party if it
shall be determined by a final judgment or other final
adjudication that such remuneration was in violation of law;
or
(c) On account of any suit in which judgment is rendered against
Indemnified Party for an accounting of profits made (i) for
an improper personal profit without full and fair disclosure
to the Corporation of all material conflicts of interest and
not approved thereof by a majority of the disinterested
members of the Board of Directors of the Corporation; or
(ii) from the purchase or sale by Indemnified Party of
securities of the Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and
amendments thereto or similar provisions of any federal,
state or local law; or
<PAGE>
(d) On account of Indemnified Party's conduct which is finally
determined to have been knowingly fraudulent, deliberately
dishonest or willfully in violation of applicable law for
which the corporation suffered actual financial damages; or
(e) If a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not
lawful.
3. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Indemnified Party
is an officer or director of the Corporation or a subsidiary and thereafter so
long as Indemnified Party shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal or
investigative, by reason of the fact that Indemnified Party was an officer or a
director of the Corporation or any subsidiary.
4. Notification and Defense of Claim. Within 30 days after receipt by
Indemnified Party of notice of any claim or any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which Indemnified Party has a right to Indemnification
hereunder, Indemnified Party will notify the Corporation of the commencement
thereof. With respect to any such action, suit or proceeding as to which
Indemnified Party notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at
its own expense; and
(b) Except as otherwise provided below, to the extent that it
may wish, the Corporation jointly with any other
indemnifying party will be entitled to assume the defense
thereof, with counsel satisfactory to Indemnified Party.
After notice from the Corporation to Indemnified Party of
its election to assume the defense thereof, the Corporation
will not be liable to Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by
Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation or as otherwise
provided below. Indemnified Party shall have the right to
employ counsel in such action, suit or proceeding, but the
fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof
shall be at the expense of Indemnified Party, unless (i) the
employment of counsel by Indemnified Party has been
authorized by the Corporation, (ii) Indemnified Party shall
have reasonably concluded that there may be a conflict of
interest between the Corporation and Indemnified Party in
the conduct of the defense of such action, (iii) the
Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases
the fees and expenses of counsel shall be at the expense of
the Corporation, or (iv) unless the Indemnified Party
reasonably and in good faith asserts defenses and
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<PAGE>
theories of defense not asserted by the Corporation. The
Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of
the Corporation or as to which Indemnified Party shall have
made the conclusion provided for in (ii) or (iv) above.
(c) Either party may settle any matter, without the consent of
the other, but in such event, the indemnification provided
for herein shall be of no force or effect with respect to
such settlement. The Corporation shall not be liable to
indemnify Indemnified Party under this Agreement for any
amounts paid in settlement of any action or claim effected
without the Corporation's written consent. The Corporation
shall not settle any action or claim in any manner which
would impose any penalty or limitation on Indemnified Party
without Indemnified Party's written consent. Neither the
Corporation or Indemnified Party will unreasonably withhold
their consent to any proposed settlement.
5. Repayment of Expenses. Indemnified Party agrees that Indemnified
Party will reimburse the Corporation for all reasonable expenses paid by the
Corporation in defending any civil or criminal action, suit or proceeding
against Indemnified Party in the event and only to the extent that Indemnified
Party is finally determined that Indemnified Party is not entitled to be
indemnified by the Corporation for such expenses under the Corporation's charter
or bylaws, this Agreement or under applicable law.
6. Enforcement.
(a) The Corporation expressly confirms and agrees that it
has entered into this Agreement and assumed the
obligations imposed on the Corporation hereby in
order to induce Indemnified Party to serve as an
officer and/or director of the Corporation or any
subsidiary thereof, and acknowledges that Indemnified
Party is relying upon this Agreement as part of the
consideration for so acting.
(b) In the event Indemnified Party is required to bring
any action to enforce rights or to collect moneys due
under this Agreement and is successful in such
action, the Corporation shall reimburse Indemnified
Party for all of Indemnified Party's reasonable
attorneys' and other fees and expenses in bringing
and pursing such action.
7. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
3
<PAGE>
8. Governing Law; Binding Effect; Amendment and Termination.
(a) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Oklahoma.
(b) Party and upon the Corporation, its successors and
assigns, and shall inure to the benefit of
Indemnified Party, his heirs, personal
representatives and assigns and to the benefit of the
Corporation, its successors and assigns.
(c) No amendment, modification, termination or change of
this Agreement shall be effective unless it is signed
by both parties hereto.
9. Additional Rights. This Agreement is in addition to, and not in lieu
of, any other right to indemnification under the Corporation's corporate
charter, bylaws, insurance contracts or otherwise at law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
LEXON, INC.
By: ______________________________
Gifford M. Mabie, President and
Chief Executive Officer
Indemnified Party:
Name: _________________________
Title: ________________________
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LEXON, INC.
1998 INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan. The LEXON, INC. 1998 Incentive Stock Option
Plan (the "Plan") is intended to advance the interests of LEXON, INC. (
"Company") by providing its directors, officers, key employees and key advisors
who have substantial responsibility for the direction and management of the
Company with incentive for them to promote the success of the Company, to
establish and encourage them to increase their proprietary interest in the
Company, and to encourage them to remain in its service. These aims will be
achieved through the granting of incentive stock options to purchase shares of
the common stock of the Company, par value $.001 per share ("Common Stock"). It
is intended that options granted under the Plan and designated by the Committee
under Paragraph 2 will qualify as Incentive Stock Options ("Options") under
Section 422A of the Internal Revenue Code of 1954, as amended, (the "Code"), and
the terms of the Plan shall be interpreted in accordance with this intention.
Notwithstanding anything herein to the contrary, all actions taken shall be in
accordance with the Code and with this Plan.
2. Administration of the Plan. The Board of Directors shall appoint a
Committee or the Board of Directors may act as the Committee to administer this
Plan. The Board may from time to time appoint members to the Committee in
substitution for members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it shall deem
advisable. All action of the Committee shall be taken by majority vote of its
members. Any action may be taken by a written instrument signed by all the
members of the Committee, and action so taken shall be as effective as if that
action had been taken by a majority vote of the Committee members at a meeting
duly called and held. The Committee may appoint a secretary to keep minutes of
its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable. The Committee may take any action by
written consent of a majority of the members of the Committee, taken either
before or after such action.
3. Grant of Options. Subject to any applicable limitation in federal
tax laws from time to time, the Committee shall have complete and full authority
in its discretion: (i) to determine and designate persons entitled to
participate from the Company and its subsidiaries who are to receive Options,
(ii) to authorize the granting of Options, (iii) to establish the number of
shares to be covered by such Options including the terms thereof; and (iv) to
interpret the Plan and to prescribe, amend, and rescind rules and regulations
relating to it. All decisions of the Committee shall be final and binding.
4. Stock Subject to the Plan. The aggregate number of shares which may
be issued under Options granted under the Plan shall not exceed 3,000,000 shares
of Common Stock. Such shares may consist of authorized but unissued shares of
Common stock or previously issued shares of Common Stock reacquired by the
Company. Any shares subject to an Option under the Plan which remain unissued
upon the termination of the Option and which are not subject to outstanding
Options at the termination of the Plan, shall cease to be subject to the Plan,
but until termination of the Plan, the Company shall at all times make available
sufficient shares to meet the requirements
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<PAGE>
of the Plan. Should any Option hereunder expire or terminate prior to its
exercise in full, the shares theretofore subject to such Option may again be
subject to a new Option granted under the Plan. The aggregate number of shares
which may be issued under the Plan shall be subject to adjustments as provided
in Paragraph 6(j) hereof.
5. Eligibility. The persons eligible to participate in the Plan as
recipients of Options shall include only directors, officers, key employees and
key advisers of the Company and its subsidiaries. The term "key employee" shall
include directors, officers, executives, and supervisory personnel, as well as
other employees and principal advisors of the Company or a subsidiary
corporation of the Company. The term "subsidiary corporation" shall for the
purpose of this Plan be defined in the same manner as such term is defined in
Section 425(f) of the Code. A person who has been granted Options hereunder
shall remain eligible to receive an additional Option or Options, if the
Committee shall so determines. Options granted to different recipients and at
different times need not contain similar provisions.
6. Terms and Conditions. Each Option granted under the Plan shall be
evidenced by a written Incentive Stock Option Agreement ("Option Agreement"), in
a form approved by the Committee, which shall be subject to the following
express terms and conditions and to such other terms and conditions as the
Committee may deem appropriate.
(a) Option Period. Each Option Agreement shall specify the
period for which the Option thereunder is granted (which in no event
shall exceed ten years from the date of grant) and shall provide that
the Option shall expire at the end of such period. However, in the case
of an Option granted to an individual who, at the time of grant, owns
more than ten percent of the total combined voting power of all classes
of Common Stock of the Company ("Ten Percent Stockholder") on the date
the Option is granted to him, the Option period shall not exceed five
years from the date of grant.
(b) Option Price. The purchase price under each Option issued
shall be determined by the Committee at the time the Option is granted,
but in no event shall such purchase price be less than 100 percent of
the fair market value of the Company's Common Stock. In the case of an
Option granted to a Ten Percent Stockholder, the Option price shall not
be less than 110 percent of the fair market value of the Common Stock
subject to the Option, on the date the Option is granted.
(c) Exercise Period. Each Option Agreement shall provide that
the Option therein granted may be exercised in whole or in part at any
time after the Option grant or vested in such installments as the
Committee or Board of Directors may specify. However, no portion of any
Option may be exercisable prior to the approval of the Plan by the
shareholders of the Company.
(d) Procedure for Exercise. Options shall be exercised by the
delivery of written notice to the Company setting forth the number of
shares with respect to which the Option
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<PAGE>
is to be exercised. Such notice shall be accompanied by cash or
certified check, bank draft, and specifying the address to which the
certificates for such shares are to be mailed. As promptly as
practicable after receipt of such written notification and payment, the
Company shall deliver to the Optionee, certificates for the number of
shares with respect to which such Option has been so exercised, issued
in the Optionee's name; provided, however, that such delivery shall be
deemed effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United States
mail, addressed to the Optionee, at the address specified pursuant to
this paragraph 6(d).
(e) Termination of Employment. If a person to whom an Option
has been granted ceases to be employed by the Company or any one of its
subsidiaries for any reason other than death or disability or ceases to
be an advisor to the Company, the Options theretofore granted to such a
person under this Plan to the extent not theretofore exercised, shall
forthwith terminate. Any Options which are exercisable on the date of
such termination of employment may be exercised during a three month
period beginning on such date; provided, however, if an Optionee's
employment is terminated because of the Optionee's dishonesty, theft,
embezzlement from the Company, disclosing trade secrets of the Company,
or willful misconduct while in the employment of the Company, then any
Option or unexercised portion thereof granted to said Optionee shall
expire upon such termination of employment.
(f) Disability or Death of Optionee. In the event of the
disability or death of an Option holder under the Plan while, the
Options previously granted may be exercised (to the extent he would
have been entitled to do so at the date of his disability or death) at
any time and from time to time, within a period of one year after
Optionee's disability or death, by the executor or administrator of
Optionee's estate, by the person or persons to whom Optionee's rights
under the Option shall pass by will or the laws of descent and
distribution, but in no event may the Option be exercised after its
stated expiration. An Optionee shall be deemed to be disabled if, in
the opinion of a physician selected by the Committee, the Optionee is
incapable of performing services for the Company or any of its
subsidiaries by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long,
continued and indefinite duration.
(g) Transferability. Any Option granted hereunder may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and
distribution and shall be exercisable, during the Optionee's lifetime,
only by him.
(h) Rights as a Stockholder. An Optionee or a transferee of an
Option under the Plan has no rights as a stockholder with respect to
shares covered by an Option until the date he validly exercises the
Option in accordance herewith including full payment for the exercised
Option shares; except as provided in paragraph 6(j), no adjustment for
dividends, or otherwise shall be made if the record date therefor is
prior to the date on which he became or becomes the holder of record
thereof.
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<PAGE>
(i) Extraordinary Corporate Transactions. In the event of (i)
the dissolution or liquidation of the Company, or similar occurrence,
(ii) any merger, consolidation, acquisition, separation,
reorganization, or similar occurrence, where the Company will not be a
surviving entity or (iii) a transfer of substantially all of the assets
of the Company or more than 80% of the outstanding Common Stock, the
Option rights granted hereunder shall terminate and thereupon become
null and void; provided, however, that each Optionee shall have the
right immediately prior to or concurrently with such dissolution,
liquidation, merger, consolidation, acquisition, separation,
reorganization or similar occurrence, to exercise any Option rights
granted hereunder, without regard to an option period or of any
limitations thereunder.
(j) Changes in Company's Capital Structure. The existence of
the Plan and outstanding Options granted hereunder shall not affect in
any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business, or
any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock senior to or affecting
the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise; provided, however, if the
outstanding shares of Common Stock of the Company shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
combination of shares, or recapitalization, the number and kind of
shares subject to the Plan or subject to any Options theretofore
granted, and the Option prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of shares without
changing the aggregate Option price.
(k) Investment Representation. Shares of Common Stock shall
not be issued and delivered with respect to an Option granted under the
Plan unless issuance of such shares (i) complies with all relevant
provisions of law including, without limitation the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, or (ii) the Committee has
received evidence satisfactory to it to the effect that an exemption
from registration under the Securities Act and any applicable state
securities laws is available for the sale and issuance contemplated.
Each Option Agreement shall contain an agreement that upon demand by
the Committee for such a representation, the optionee (or any person
acting under paragraph 6(f)) shall deliver to the Committee at the time
of any exercise of an Option a written representation that the shares
to be acquired upon such exercise are to be acquired for investment and
not for resale or with a view to the distribution thereof. Upon such
demand, delivery of such representation prior to the delivery of any
shares issued upon exercise of an Option and prior to the expiration of
the Option period shall be a condition precedent to the right of the
optionee or such other person to purchase any shares.
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<PAGE>
(l) Option Agreement. Each Option Agreement which provides for
the grant of an Option to a key employee shall contain such terms and
provisions as the Committee may determine to be necessary or desirable
in order to qualify such Option under Section 422A of the Code.
7. Amendments or Termination. The Board of Directors may at any time
and from time to time amend, alter or terminate the Plan, but no amendment or
alteration shall be made which would impair the rights of any optionee under any
Option theretofore granted without his consent, or which, without the approval
of the holders of at least a majority of the shares of Common Stock at the time
outstanding, would: (i) except as is provided in paragraph 6(j) of the Plan,
increase the minimum number of shares reserved for the purposes of the Plan or
reduce the Option price provided for in paragraph 6(b) of the Plan, (ii) change
the class of persons eligible to participate in the Plan as provided in
paragraph 4 of the Plan, (iii) extend the Option period provided for in
paragraph 6(a) of the Plan, or (iv) extend the expiration date of this Plan set
forth in paragraph 9 of the Plan.
8. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Company to sell and
deliver shares under such Options shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any governmental or
regulatory agency or national securities exchange as may be required, and shall
be further subject to counsel for the Company with respect to such compliance.
The Company shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of such shares under any federal or state law or any ruling or
regulation of any government body or national securities exchange which the
Company shall, in its sole discretion, determine to be necessary or advisable
and the Company shall have no obligation to effect any such registration or
qualification.
9. Effectiveness and Expiration of Plan. The Plan shall be effective on
the date the Board of Directors of the Company adopts the Plan. If the holders
of at least a majority of the shares of Common Stock at the time outstanding
fail to approve the Plan within twelve months after the date the Board of
Directors approved the Plan, the Plan shall thereupon terminate and all Options
previously granted under the Plan shall immediately become null and void. The
Plan shall expire ten years after the effective date of the Plan and thereafter
no Option shall be granted pursuant to the Plan.
10. Liability of Company. The Company, its parent or any subsidiary
which is in existence or thereafter comes into existence shall not be liable to
an optionee or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or sale of
shares as to which the Company has been unable to obtain from any
regulatory body having jurisdiction the authority deemed by the
Company's counsel to be necessary to the lawful issuance and sale of
any shares hereunder; and
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<PAGE>
(b) Tax Consequences. Any tax consequence expected, but not
realized, by any Optionee or other person due to the exercise of any
Option granted hereunder.
11. Use of Proceeds. The proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the general funds and used for general corporate purposes.
12. Governing Law. This Plan shall be interpreted and construed in
accordance with the laws of the State of Oklahoma.
13. Incorporated by Reference. The Plan hereby granted includes all
technical corrections, modifications, alterations and amendments to the Internal
Revenue Code 1986 applicable to incentive stock option plans generally, and all
regulations, administrative pronouncements and interpretations thereof are
hereby incorporated herein automatically effective immediately upon the
effective date thereof. All options granted under the Plan and all Option
Agreements executed pursuant to the terms of the Plan hereby incorporate all
applicable provisions of all amendments, revisions, modifications and
alterations as hereby and as hereafter adopted to the extent permitted by law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing, LEXON, Inc. has caused these presents to be duly executed in its name
and behalf by its proper officers thereunto duly authorized, and its corporate
seal to be affixed hereto this ___ day of ______ 1998.
LEXON, INC.
By: _____________________________
Gifford Mabie, President
6
<PAGE>
FORM OF OPTION AGREEMENT
This Option Agreement ("Agreement") is made and entered into ___________
1998 by and _____________________________("Optionee") and Lexon, Inc. ("Lexon").
WHEREAS, Lexon desires to grant Optionee an option to purchase _______
shares of common stock of Lexon upon the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties agree:
1. Grant of Option. Subject to the terms and conditions of this Agreement,
Lexon hereby grants Optionee an option to purchase _______ shares of common
stock of Lexon at an exercise price of ______ per share, which the Board of
Directors has determined to be the fair market value of such shares under the
circumstances.
2. Term. The term of this Option shall begin on the effective date of this
Agreement and expire if not earlier exercised on ________________. The Option is
fully vested and exercisable at any time in Optionee's sole discretion in whole
or in part so long as this Option has not been canceled or terminated in
accordance herewith.
3. Procedure for Exercise. This Option may be exercised in whole or in part
by written notice to the Shareholders stating the number of shares to be
purchased and accompanied by a check for payment of the exercise price per share
times the number of shares to be purchased. Lexon shall promptly issue to
Optionee certificates representing the Option Shares so purchased.
4. Transferability. This Option is transferable by Optionee and is subject
to compliance with the requirements of applicable securities and other laws. No
shares may be issued if to do so would violate any applicable securities or
other laws.
5. Rights as Shareholder. Optionee shall be deemed to own all rights,
titles and interests in the Option Shares immediately upon receipt of payment
for the exercise of the Option Shares so exercised, together with a written
notice of exercise, but Optionee shall have no rights as a Shareholder with
respect to the Option Shares until proper exercise and payment of the exercise
price has been received.
6. Fundamental Corporate Changes. If Lexon changes its capital structure or
mergers, consolidates, sells all or substantially all of its assets or dissolves
("Fundamental Change"), then Optionee shall be entitled to purchase that number
and class of securities to which Optionee would have been entitled to purchase
if immediately prior to the effective date of such Fundamental Change, Optionee
had exercised this Option in full. The Shareholders agree to adjust the number
of Option Shares and the exercise price therefor
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<PAGE>
accordingly.
7. No Restrictions. The existence of this Option or any unexercised
portions hereof shall not effect in any way the right or power of Lexon to (1)
make or authorize any or all adjustments, recapitalizations, reorganizations or
other Fundamental Changes in its capital structure or its business, or (2) issue
other common shares or subscriptions therefor, or (3) issue notes, debentures,
bonds or preferred stock with preferential rights to the rights of common stock,
or (4) dissolve or liquidate the issuer, or (5) sell or transfer all or any part
of its assets or business.
8. Corporate Changes. If the outstanding shares of Lexon shall at any time
be changed or exchanged by a stock dividend, stock split, combination of shares
or recapitalization, the number and kind of shares subject to any unexpired
portion of this Option and the exercise price therefor shall automatically,
proportionately and equitably be adjusted; and the Shareholders agree to make
such changes in the number and exercise price of the Option Shares to eliminate
any dilution caused thereby. No adjustment shall be made in this Option or in
the exercise price or number of shares covered by this Option if Lexon makes any
Fundamental Change as described in Paragraph 6 above.
9. Conditions to the Exercise of this Option. Optionee agrees to enter into
such representations, warranties or agreements as the Lexon may reasonably
request in order to comply with applicable securities or other laws and with
this Agreement. Compliance with all such applicable laws is a condition to the
exercise of this Option, and Lexon shall not be obligated to reissue shares upon
the exercise of this Option if to do so would violate any applicable law, rule
or regulation.
10. Taxes. Optionee shall be responsible for all taxes payable by reason of
the exercise of this Option. Optionee shall have no liability for any taxes
imposed upon Lexon for any reason whatsoever.
11. Investment Representation. The Optionee agrees that it is acquiring
this Option and the Option Shares for its own account for investment purposes
and not with a view to the sale or other distribution thereof except as
permitted by law and in compliance with applicable securities and other laws.
Optionee agrees that it has such knowledge and experience in financial and
business matters and specific knowledge about Lexon as it deems necessary or
appropriate in order to exercise the Options. Optionee agrees that Optionee
shall be required to bear the full investment risks associated with ownership of
this Option and the Option Shares.
12. Free Trading Shares. Lexon represents and warrants that the Option
Shares that will be issued upon the exercise of the Options hereby granted will
be issued pursuant to Rule 504 and subject to the limitations imposed by Rule
504.
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<PAGE>
13. Binding Agreement. This Option Agreement is binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
14. Governing Law. This Agreement and the Option shall be interpreted by
and construed in accordance with the laws of Oklahoma.
Lexon, Inc.
By:________________________________
Gifford Mabie, President
8908 S. Yale, Suite 409
Tulsa, OK 74137
Phone: (918) 492-4125
Fax: (918) 492-2560
OPTIONEE
By__________________________________
-3-
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into by and
between Lexon, Inc., an Oklahoma corporation ("Lexon"), Gentest, Inc., a Florida
corporation ("Gentest"), and UTEK Corporation, a Florida corporation ("UTEK").
WHEREAS, UTEK is the sole shareholder of Gentest; and
WHEREAS, Gentest owns all right, title and interest in a license to
manufacture and market a proprietary protein screening process for colon,
ovarian and testicular cancer ("Invention") covered by a pending U.S. patent
application; and
WHEREAS, Lexon intends to establish a public market for its stock on
the NASDAQ Bulletin Board in order to attract new capital for the development,
testing and distribution of test kits using the Invention; and
WHEREAS, the parties desire to provide for the terms and conditions
upon which Gentest will merge into Lexon in a statutory merger ("Merger") in
accordance with 18 Oklahoma Statutes Section 1082 of the Oklahoma General
Business Corporation Act ("Oklahoma Act") and Section 607.1107 of the
Corporation Law of Florida ("Florida Act'), upon consummation of which the
assets and business of Gentest will be owned by Lexon, all liabilities and
obligations of Gentest will become the liabilities and obligations of Lexon, and
all issued and outstanding shares of capital stock of Gentest will be exchanged
for common stock of Lexon; and
WHEREAS, for federal income tax purposes, it is intended that the
merger qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("Code").
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
THE MERGER
1.01. The Merger
(a) Agreement to Merge. Subject to the terms and conditions of this
Agreement, at the Effective Time, as defined below, Gentest shall be merged with
and into Lexon in accordance with the provisions of this Agreement and the
Oklahoma Act; the separate corporate existence of Gentest shall cease; and Lexon
shall continue as the surviving corporation ("Surviving Corporation"). The
constituent corporations ("Constituent Corporations") to the Merger are Lexon
and Gentest. The name of the Surviving Corporation, Lexon, Inc., shall not be
changed by reason of the Merger
<PAGE>
(b) Effective Time. The Merger shall become effective ("Effective
Time") upon filing of a Certificate of Merger substantially in the form attached
as Exhibit A ("Certificate of Merger") with the Secretary of State of the State
of Oklahoma in accordance with applicable provisions of the Oklahoma Act.
(c) Appointment of Service Agent. Lexon hereby irrevocably appoints the
Secretary of State of the State of Florida as its agent to accept process in
Florida in any proceeding for the enforcement of any obligation of any
Constituent Corporation in Florida as well as for the enforcement of any
obligation of the Surviving Corporation arising from or by reason of the Merger,
including any suit or other proceeding to enforce appraisal rights of any
shareholder of Gentest. Lexon designates that all such process received shall be
sent to Lexon at 8908 South Yale, Suite 409, Tulsa, Oklahoma 74137-3545.
(d) Effect of the Merger. At the Effective Time, all rights, powers,
privileges, franchises, licenses and permits of the Constituent Corporations and
all property, real, personal and mixed, shall be vested in the Surviving
Corporation; and all debts, duties, liabilities and claims of every kind,
character and description of the Constituent Corporations shall be debts,
duties, liabilities and claims of the Surviving Corporation and may be enforced
against the Surviving corporation to the same extent as if such debts, duties,
liabilities and claims had been incurred by it originally. All rights of
creditors of the Constituent Corporations and all liens upon property of any
Constituent Corporation shall be preserved unimpaired and shall not be altered
in any way by reason of the Merger.
1.02. Conversion of Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the shareholders of the Constituent
Corporations:
(i) Each of the 1,000 shares of Gentest that are issued and outstanding
at the Effective Time shall be converted into 1,000,000 shares of common stock
of the Surviving Corporation issued in the name of UTEK on a ratio of 1 share of
Gentest common stock for 1,000 shares of Lexon at an agreed fair market value of
Lexon common stock of $.001 per share; and
(ii) All issued and outstanding options, warrants or other rights to
acquire common stock of Gentest at the Effective Time shall be reason of the
Merger and without action on the part of the holders thereof be automatically
canceled for all purposes; and
(iii) Each share of common stock of Lexon issued and outstanding at the
Effective Time shall remain issued and outstanding as one share of common stock
of the Surviving Corporation.
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1.03. Effect of Merger.
(a) Rights in Gentest Cease. At and after the Effective Time, the
holder of each certificate of common stock of Gentest shall cease to have any
rights as a shareholder of Gentest. All dividends or other distributions with
respect to Gentest common stock prior to the Effective Time shall be payable to
the shareholders of Gentest without interest upon surrender of certificates
representing Gentest common stock.
(b) Closure of Gentest Stock Records. From and after the Effective
Time, the stock transfer books of Gentest shall be closed, and there shall be no
further registration of stock transfers on the records of Gentest.
1.04. Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Surviving Corporation shall not be changed
by reason of the Merger.
1.05. Bylaws of the Surviving Corporation. The Bylaws of the Surviving
Corporation shall not be changed by reason of the Merger.
1.06. Directors of the Surviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall be the persons
named in Exhibit B until each of their respective successors is duly elected and
qualified.
1.07. Officers of the Surviving Corporation. The officers of the
Surviving Corporation immediately after the Effective Time shall be the persons
set forth in Exhibit B until each of their respective successors is duly elected
and qualified.
1.08. Closing. The Closing of the Merger shall take place at the
offices of Frederick K. Slicker, 8908 S. Yale, Suite 410, Tulsa, Oklahoma
74137-3545 at 5:00 p.m. local time on the date earlier than July 9,1998 on which
the last condition set forth herein is fulfilled or waived or at such time and
place as the parties mutually agree ("Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. General Representations and Warranties of UTEK.. UTEK represents
and warrants to Lexon that the facts set forth below are true and correct:
(a) Organization. Gentest is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida, is
qualified to do business as a foreign corporation in each other jurisdiction in
which the conduct of its business or the ownership of its properties require
such qualification, and has all requisite power and authority to conduct its
business and operate properties.
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(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and sole Shareholder of Gentest; no other
corporate action on its part is necessary in order to execute, deliver,
consummate and perform its obligations hereunder; and it has all requisite
corporate and other authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby.
(c) Capitalization. The authorized capital of Gentest consists of 1,000
shares of common stock, par value $1.00 per share; at the date hereof, 1,000
shares of its common stock were issued and outstanding and owned by UTEK; and no
shares were held in its treasury. All issued and outstanding shares of common
stock of Gentest have been duly and validly issued and are fully paid and
non-assessable shares and have not been issued in violation of any preemptive or
other rights of any other person or any applicable laws. There are no
outstanding options, warrants, commitments, calls or other rights or agreements
requiring it to issue any shares of Gentest common stock or securities
convertible into shares of its common stock to anyone for any reason whatsoever.
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which Gentest is a party and will not create a default
hereunder; and this Agreement constitutes a legal, valid and binding obligation
of Gentest, enforceable in accordance with its terms, except as the enforcement
may be limited by bankruptcy, insolvency, moratorium, or similar laws affecting
creditor's rights generally and by the availability of injunctive relief,
specific performance or other equitable remedies.
(e) Litigation Relating to this Agreement. There are no suits, actions
or proceedings pending or to its knowledge threatened which seek to enjoin the
Merger or the transactions contemplated by this Agreement or which, if adversely
decided, would have a materially adverse effect on the business, results of
operations, assets, prospects, the Patent Application, the License, or the
results of the operations of Gentest.
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by Gentest with the terms or
provisions thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in a violation of, its
corporate charter or bylaws, the Patent Application, the License, any agreement,
contract, instrument, order, judgment or decree to which it is a party or by
which it or any of the assets is bound, or violate any provision of any
applicable law, rule or regulation or any order, decree, writ or injunction of
any court or governmental entity which materially affects its assets or
business.
(g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with execution and
delivery of this Agreement
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by Gentest and performance of the obligations of Gentest hereunder or under any
other agreement to which Gentest is a party; and the consummation of the
transactions contemplated by this Agreement will not require the approval of any
entity or person in order to prevent the termination of the Patent Application,
the License, or any other material right, privilege, license or agreement
relating to Gentest or its assets or business.
(h) Title to Its Assets. Gentest has good and marketable title to its
assets (tangible and intangible), free and clear of all liens, claims, charges,
mortgages, options, restrictions, security agreements and other encumbrances of
every kind or nature whatsoever.
(i) The Patent and the License. To the knowledge of UTEK and Gentest
(with Lexon acknowledging that neither UTEK nor Gentest has conducted an
independent investigation to determine whether the Invention infringes the
rights of any other party or that the Invention itself is marketable):
(i) The Invention covering the use of TGF-B4 (Ebaf)
screening for early detection of colon, ovarian and
testicular cancer and products produced therefrom
will not infringe the intellectual or other rights of
another. This representation and warranty is not a
representation or warranty that there are no
infringing intellectual rights of any other, but is a
representation and warranty only that neither Gentest
nor UTEK has any knowledge thereof; and
(ii) The Invention is owned by the University of South
Florida ("USF") and USF has all right, power,
authority and ownership and entitlement to file the
U.S. Patent Application No. 081,919,421 ("Patent
Application"); and
(iii) Dr. Sioynak-Tabibzadeh and Dr. Ravi Kothapalli are
the only Inventors of the Invention and they have
assigned their rights in the Invention to USF; and
(iv) The license ("License") dated April 9, 1998 by and
between Gentest and the University of South Florida
Research Foundation, Inc., a Florida not for profit
corporation and a direct support organization of the
University of South Florida ("USFRF"), covering the
Invention, is legal, valid, binding and enforceable
in accordance with its terms;
(v) All of the tangible assets of Gentest have been
operated in accordance with customary operating
practices generally acceptable in its industry to
which and have been maintained and are in good
working order and repair in the ordinary course of
business, subject only to reasonable and ordinary
wear and tear.
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(j) Assets and Liabilities of Gentest. Gentest has no assets, no
liabilities of any kind, character or description except those created by the
License Agreement as follows:
(i) Initial License fee of $100,000.00 payable to the
USFRF on or before July 8, 1998 and the royalty
amount as set forth in its License Agreement with
Gentest as amended; and
(ii) Initial License Fee of $5,000 payable to North Shore
University Hospital Research Corporation on or before
July 8, 1998 and the royalty amount as set forth in
the License Agreement; and
(iii) Sponsored Research Fee of $311,250.00 payable to the
USFRF or North Shore University Hospital Research
Corporation on or before July 8, 1998; and
(iv) Consulting obligation to UTEK for $55,000 for
services rendered to date.
It is understood that if the fees are not received by USFRF or North
Shore University Hospital Research Corporation on or before the date due, then
the License shall become null and void, and the parties shall be released from
its terms and obligations.
(k) Taxes. All returns, reports, statements and other similar filings
required to be filed by it with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed; all such tax returns properly reflect all liabilities of
it for taxes for the periods, property or events covered thereby; and all taxes,
whether or not reflected on those tax returns, and all taxes claimed to be due
from it by any taxing authority, have been properly paid, except to the extent
reflected on Schedule 2.01(k) where Gentest has contested in good faith by
appropriate proceedings and reserves have been established on its financial
statements to the full extent if the contest is adversely decided against it.
Gentest has not received any notice of assessment or proposed assessment in
connection with any tax returns, Gentest has not extended or waived the
application of any statute of limitations of any jurisdiction regarding the
assessment or collection of any taxes. There are no tax liens (other than any
lien which arises by operation of law for current taxes not yet due and payable)
on any of its assets. There is no basis for any additional assessment of taxes,
interest or penalties. Gentest has made all deposits required by law to be made
with respect to employees' withholding and other employment taxes, including
without limitation the portion of such deposits relating to taxes imposed upon
it.
(l) Absence of Certain Changes or Events. Gentest has not, and without
the written consent of Lexon, and it will not have:
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(i) Sold, encumbered, assigned or transferred any of its
material assets or its interest in the Patent Application, the
License or any other material asset; or
(ii) Amended or terminated the License; or
(iii) Suffered any material damage, destruction or loss; or
(iv) Received notice or had knowledge of any material adverse
effect on the Patent or the License or any other material
asset or liability; or
(v) Made any commitments or agreements for capital
expenditures or otherwise; or
(vi) Entered into any transaction or made any commitment not
disclosed to Lexon; or
(vii) Agreed to take any of the actions set forth in this
paragraph.
(m) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to Lexon and such
agreements are in full force and effect without amendment:
(i) All promissory notes, mortgages, indentures, deeds of
trust, security agreements and other agreements and
instruments relating to the borrowing of money by or any
extension of credit to it; and
(ii) All operating agreements and lease agreements; and
(iii) The complete License and Patent Application with all
schedules, exhibits and amendments related thereto; and
(iv) All licenses to or from others of any intellectual
property and trade names; and
(v) All contracts or commitments to sell, lease or otherwise
dispose of any of its property.
(n) Compliance with Laws. Gentest is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
governmental body or agency relating to its business and operations. Gentest
owns all franchises, licenses, permits, easements, rights, applications,
filings, registration and other authorizations which
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are necessary for it to conduct business, all of which are valid and in full
force and effect, and it is in full compliance therewith.
(o) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against it affecting its assets
or business, and there is no factual basis therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(p) Employees. Gentest has no employees. Gentest is not a party to or
bound by any employment agreement or any collective bargaining agreement with
respect to any of the employees.
(q) Employee Benefit Plans. There are no employee benefit plans in
effect, and there are no outstanding or unfunded liabilities to employees of
Gentest.
(r) Books and Records. The books and records of Gentest are complete
and accurate in all material respects, fairly present its business and
operations, have been maintained in accordance with good business practices, and
accurately reflect in all material respects its business, financial condition
and liabilities.
(s) No Broker's Fees. Neither UTEK nor Gentest has incurred any
finder=s, broker=s, investment banking, financial, advisory or other similar
fees or obligations.
(t) Full Disclosure. All representations or warranties of UTEK are
true, correct and complete in all material respects on the date hereof and shall
be true, correct and complete in all material respects as of the Closing as if
they were made on such date. No statement made by either UTEK herein or in the
exhibits hereto or any document delivered by Gentest or on its behalf pursuant
to this Agreement contains an untrue statement of material fact or omits to
state all material facts necessary to make the statements therein not misleading
in any material respect.
(u) Offering Memorandum. The draft Lexon Private Offering Memorandum
dated May 7, 1998 is true and correct as it relates to the information relating
to UTEK , the Invention, the Patent Application and the Sponsored Research
Agreement.
2.02. General Representations and Warranties of Lexon. Lexon represents
and warrants to UTEK that the facts set forth are true and correct:
(a) Organization. Lexon is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma, is
qualified to do business as a foreign corporation in each other jurisdiction in
which the conduct of its business or the
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ownership of its properties require such qualification, and has all requisite
power and authority to conduct its business and operate properties.
(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and Shareholders of Lexon; no other
corporate action on its part is necessary in order to execute, deliver,
consummate and perform its obligations hereunder; and it has all requisite
corporate and other authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby.
(c) Capitalization. The authorized capital of Lexon consists of
45,000,000 shares of common stock, par value $.001 per share; and at the
Effective Date of the Merger, up to 5,000,000 shares of its common stock will be
issued and outstanding immediately after the Effective Date. All issued and
outstanding shares of common stock of Lexon have been duly and validly issued
and are fully paid and non-assessable shares and have not been issued in
violation of any preemptive or other rights of any other person or any
applicable laws. There will be no outstanding options, warrants, commitments,
calls or other rights or agreements requiring it to issue any shares of Lexon
common stock or securities convertible into shares of its common stock to anyone
for any reason whatsoever immediately after the Effective Date.
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which Lexon is a party and will not create a default
hereunder; and this Agreement constitutes a legal, valid and binding obligation
of Lexon, enforceable in accordance with its terms, except as the enforcement
may be limited by bankruptcy, insolvency, moratorium, or similar laws affecting
creditor's rights generally and by the availability of injunctive relief,
specific performance or other equitable remedies.
(e) Litigation Relating to this Agreement. There are no suits, actions
or proceedings pending or to its knowledge threatened which seek to enjoin the
Merger or the transactions contemplated by this Agreement or which, if adversely
decided, would have a materially adverse effect on its business, results of
operations, assets, prospects or the results of its operations of Lexon.
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by Lexon with the terms or
provisions thereof will result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in a violation of, its
corporate charter or bylaws, or any agreement, contract, instrument, order,
judgment or decree to which it is a party or by which it or any of the assets is
bound, or violate any provision of any applicable law, rule or regulation or any
order, decree, writ or injunction of any court or governmental entity which
materially affects its assets or business.
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(g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with its execution and
delivery of this Agreement and performance of the obligations of Lexon hereunder
or under any other agreement to which Lexon is a party; and the consummation of
the transactions contemplated by this Agreement will not require the approval of
any entity or person in order to prevent the termination of any material right,
privilege, license or agreement relating to Lexon or its assets or business.
(h) Title to Its Assets. Lexon has good and marketable title to its
assets (tangible and intangible), free and clear of all charges, claims, liens,
mortgages, options, restrictions, security agreements and other encumbrances of
every kind or nature whatsoever.
(i) Condition of Its Tangible Assets. All of its tangible assets have
been operated in accordance with customary operating practices generally
acceptable in its industry to which and have been maintained and are in good
working order and repair in the ordinary course of business, subject only to
reasonable and ordinary wear and tear.
(j) Financial Statements. The unaudited financial statements of Lexon
attached as Schedule 2.02 (j) present fairly its financial position and the
results of its operations on the dates and for the periods shown therein;
provided, however, that interim financial statements are subject to customary
year-end adjustments and accruals that, in the aggregate, will not have a
material adverse effect on the overall financial condition or results of its
operations. Lexon has not engaged in any business not reflected in its financial
statements. There have been no material adverse changes in the nature of its
business, prospects, the value of assets or the financial condition since the
date of its financial statements.
(k) Taxes. All returns, reports, statements and other similar filings
required to be filed by it with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed; all such tax returns properly reflect all liabilities of
it for taxes for the periods, property or events covered thereby; and all taxes,
whether or not reflected on those tax returns, and all taxes claimed to be due
from it by any taxing authority, have been properly paid, except to the extent
it has contested in good faith by appropriate proceedings and adequate reserves
have been established on its financial statements to the full extent if the
contest is adversely decided against it. Lexon has not received any notice of
assessment or proposed assessment in connection with any tax returns. Lexon has
not extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any taxes. There are no
tax liens (other than any lien which arises by operation of law for current
taxes not yet due and payable) on any of its assets. Lexon has no knowledge of
any basis for any additional assessment of taxes. Lexon has made all deposits
required by law to be made with respect to employees' withholding and
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other employment taxes, including without limitation the portion of such
deposits relating to taxes imposed upon it.
(l) Absence of Certain Changes or Events. Lexon has not and, without
the written consent of Gentest, it will not have:
(i) Sold, encumbered, assigned or transferred any of
its material assets for less than fair consideration; or
(ii) Amended or terminated any material agreement; or
(iii) Suffered any material damage, destruction or loss; or
(iv) Received notice or had knowledge of any material adverse
effect on its material assets; or
(v) Made any commitments or agreements for capital
expenditures; or
(vi) Entered into any transaction other than in the ordinary
course of business consistent with past practice; or
(vii) Agreed to take any of the actions set forth in this
paragraph.
(m) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to Gentest:
(i) All material promissory notes, mortgages, indentures,
deeds of trust, security agreements and other agreements and
instruments relating to the borrowing of money by or any
extension of credit to it; and
(ii) All material operating agreements and lease agreements;
and
(iii) All material licenses to or from others of any
intellectual property and trade names;
(n) Compliance with Laws. Lexon is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
governmental body or agency relating to its business and operations. Lexon owns
all franchises, licenses, permits, easements, rights, applications, filings,
registration and other authorizations which are necessary for it to conduct
business, all of which are valid and in full force and effect, and it is in full
compliance therewith.
11
(o) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against it affecting its assets
or business, and there is no factual basis therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(p) Employees. Lexon has 4 employees. Lexon has no written agreements
with its employees.
(q) Employee Benefit Plans and Arrangements. There are no employee
benefit plans in effect, and there are no unfunded liabilities to employees.
(r) Books and Records. The books and records of Lexon are complete and
accurate in all material respects, fairly present its business and operations,
have been maintained in accordance with good business practices, and accurately
reflect in all material respects its business and financial condition.
(s) No Broker's Fees. Lexon has incurred no finder=s, broker=s,
investment banking, financial, advisory or other similar fee.
(t) Full Disclosure. All representations or warranties of Lexon are
true, correct and complete in all material respects on the date hereof and shall
be true, correct and complete in all material respects as of the Closing as if
they were made on such date. No statement made by it herein or in the exhibits
hereto or any document delivered by it or on its behalf pursuant to this
Agreement contains an untrue statement of material fact or omits to state all
material facts necessary to make the statements therein not misleading in any
material respect.
(u) Offering Memorandum. The draft Lexon Private Offering Memorandum
dated May 7, 1998 is true and correct in all material respects. As to
information regarding UTEK, the Invention, the Patent Application and the
Sponsored Research Agreement, Lexon is relying upon the representations of UTEK.
2.03. Investment Representations of UTEK. UTEK represents and warrants
to Lexon that:
(a) It has such knowledge and experience in financial and business
matters as to be capable of evaluating the risks and merits of an investment in
the shares ("Shares") of common stock of Lexon pursuant to the Merger. It is
able to bear the economic risk of the investment in the Shares, including the
risk of a total loss of the investment in the Shares. The acquisition of the
Shares is for its own account and is for investment. Except as permitted by law,
it has a no present intention of selling, transferring or otherwise disposing
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in any way of all or any portion of the Shares. All information that it has
supplied to Lexon is true and correct. It acknowledges that an investment in the
Shares involves a very high degree of risk. It has conducted all investigations
and due diligence concerning Lexon which it deems appropriate, and he has found
all such information obtained fully acceptable. It is knowledgeable about the
prospects, business, financial condition, operations and possible acquisitions
of Lexon. It has had an opportunity to ask questions of the officers and
directors of Lexon concerning the Shares and the business and financial
condition of and prospects for Lexon, and the officers and directors of Lexon
have adequately answered all questions asked and made all relevant information
available to them. It understands that success of Lexon is dependent upon
Lexon's receipt of funds necessary to provide working capital, which may not
occur. It understands and agrees that the following restrictions and limitations
are applicable to the purchase, resale and distribution of the Shares pursuant
to applicable securities laws.
(b) (i) It is aware that it must bear the full economic risk of an
investment in Lexon for an indefinite period of time, because the transaction in
which the Shares are being issued has not been registered under the Securities
Act of 1933, as amended ("Securities Act"), or the securities laws of any state;
and, therefore, unless a valid SEC Regulation D Rule 504 exemption exists, the
Shares cannot be sold, pledged, transferred or otherwise disposed of unless
registered under applicable securities laws or an exemption from registration is
available. It further understands that only Lexon can take action to register
the Common Stock, and the cost of registration is prohibitive.
(ii) A legend will be placed on the certificates representing the
common stock of Lexon in substantially the following form:
NOTICE OF TRANSFER RESTRICTIONS
The shares evidenced by this Certificate have been acquired for
investment only and have not been registered under the Securities Act of 1933,
as amended, or the securities laws of any state. Without such registration, and
unless it is determined by counsel to Lexon that the shares were issued pursuant
to a valid Rule 504 of SEC Regulation D exemption, the shares may not be sold,
transferred, pledged or otherwise disposed of, except upon receipt by Lexon of
an opinion of counsel satisfactory to Lexon that registration is not required.
(iii) Stop transfer instructions have been placed in Lexon's transfer
records with respect to the Shares to insure that any transfer or disposition
thereof is in full compliance with applicable law. It agrees that Lexon may
refuse or delay transfer of the shares or impose other restrictions on the
transfer if Lexon is not satisfied that the transfer is lawful. However, Lexon
acknowledges and agrees that this determination must be made within a reasonable
time; and if Lexon finds the transfer is satisfactory and permitted by
applicable law, Lexon will not refuse or delay the transfer.
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ARTICLE III
TRANSACTIONS PRIOR TO CLOSING
3.01. Corporate Approvals. Prior to Closing, each of the parties shall
submit this Agreement to its Board of Directors and Shareholders and obtain
approval thereof. Copies of corporate actions taken shall be provided to each
party.
3.02. Access to Information. Each party agrees to permit upon
reasonable notice the attorneys, accountants, and other representatives of the
other parties reasonable access during normal business hours to its properties
and its books and records to make reasonable investigations with respect to its
affairs, and to make its officers and employees available to answer questions
and provide additional information as reasonably requested.
3.03. Expenses. Each party agrees to bear its own expenses in
connection with the negotiation and consummation of the Merger and the
transactions contemplated hereby.
3.04. Covenants. Except as permitted in writing, each party agrees that
it will:
(i) Use its good faith efforts to obtain all requisite licenses,
permits, consents, approvals and authorizations necessary in order to consummate
the Merger; and
(ii) Notify the other parties upon the occurrence of any event which
would have a materially adverse effect upon the Merger or the transactions
contemplated hereby or upon the business, assets or results of operations; and
(iii) Not modify its corporate structure, except as necessary or
advisable in order to consummate the Merger and the transactions contemplated
hereby.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the parties to consummate the Merger and the
transactions contemplated hereby are subject to the following conditions which
may be waived to the extent permitted by law:
(i) Each party must obtain the approval of its Board of Directors and
Shareholders in accordance with applicable law, and such approval shall not have
been rescinded or restricted; and
(ii) Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Merger and the
transactions contemplated hereby; and
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(iii) There shall be no effective injunction, writ or preliminary
restraining order or other order of a similar nature issued by any court or
governmental agency having jurisdiction directing that the Merger or the
transactions contemplated hereby shall not be consummated; and
(iv) The representations and warranties of the parties shall be true
and correct in all material respects at the Effective Time; and
(v) Lexon shall deposit into escrow $471,250 to insure for all parties
that these liabilities of Gentest, which become Lexon liabilities by reason of
the Merger, shall be paid on or before July 8, 1998, when due.
ARTICLE V
INDEMNIFICATION
(a) By UTEK UTEK agrees to indemnify, defend and hold harmless Lexon
and its shareholders, directors, officers, employees, agents and representatives
and their respective successors and assigns against and in respect of any cost,
damage, expense (including reasonable legal fees and actual expenses), liability
or loss incurred or suffered by any of them resulting from or arising out of the
(i) breach, inaccuracy, misrepresentation or untruth of any representation or
warranty, or the nonfulfillment of any agreement or covenant of UTEK contained
in this Agreement or in any document delivered by it to Lexon pursuant hereto;
and (ii) any action, assessment, claim, demand, proceeding or suit incident to
any of the foregoing. The liability of UTEK hereunder may be satisfied by the
return to Lexon of shares of Lexon common stock issued pursuant hereto valued at
the fair market value on the date the breach is discovered to the extent of the
breach.
(b) By Lexon. Lexon agrees to indemnify, defend and hold harmless UTEK
and its shareholders, officers, directors, employees, agents and representatives
and their respective successors and assigns against and in respect of any cost,
damage, expense (including reasonable legal fees and actual expenses), liability
or loss incurred or suffered by any of them resulting from or arising out of:
(i) the breach, inaccuracy, misrepresentation or untruth of any representation,
warranty, or the nonfulfillment of any agreement or covenant of Lexon contained
in this Agreement or in any document delivered by it to UTEK pursuant hereto;
and (ii) any action, assessment, claim, demand, proceeding or suit incident to
any of the foregoing.
(c) Costs. The indemnification rights and obligations of a party hereto
shall include the right to receive and the duty to pay and reimburse the
indemnified party all its reasonable costs and expenses incurred in the
enforcement of its rights hereunder.
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(d) Survival of Representations and Warranties.
(1) The representations and warranties made by UTEK shall
survive for a period of 3 years after Closing, and thereafter all such
representations and warranties shall be extinguished, except with respect to
claims then pending for which specific notice has been given during such 3-year
period. UTEK shall have liability and responsibility for the surviving
representations and warranties made by it herein, notwithstanding any due
diligence investigation or examination by Lexon.
(2) The representations and warranties made by Lexon shall
survive for a period of 3 years after Closing, and thereafter all such
representations and warranties shall be extinguished, except with respect to
claims then pending for which specific notice has been given during such 3-year
period. Lexon shall have liability and responsibility for the surviving
representations and warranties made to Lexon, notwithstanding any due diligence
investigation or examination by UTEK.
(e) Limitations on Liability. Notwithstanding any other provision
herein to the contrary, neither party hereto shall be liable to the other party
for any cost, damage, expense, liability or loss under this indemnification
provision until after the sum of all amounts individually when added to all
other such amounts in the aggregate exceeds $500, and then such liability shall
apply only to matters in excess of $500.
(f) Rights of Indemnitors. The indemnified party shall notify the
indemnifying party of the assertion of commencement of such action, claim or
proceeding within a reasonable period of time or, if citation or service of
process has been made, within 15 days thereafter. The indemnified party may, at
its option and at its sole expense, participate in the defense of and contest
any such action, claim or proceeding; provided, however, the indemnified party
shall at all times also have the right to participate fully therein. If the
indemnifying party, within a reasonable time after receiving such notice, fails
to participate, the indemnified party shall have the right, but shall not be
obligated, to undertake the defense of the action, claim or proceeding for the
account of and at the risk of the indemnifying party; provided, however, in the
event that the indemnified party shall determine to compromise or settle
(exercising its judgment in good faith) any such action, claim or proceeding,
the indemnified party shall be required to give the indemnifying party 15 days'
notice of such determination after its receipt of actual notice of the claim.
The indemnified party shall then be entitled to compromise or settle the action,
claim or proceeding for the account of and at the risk of the indemnifying
party; provided, however, the settlement shall be effective without the consent
of both the indemnifying and indemnified parties, which consent shall not be
reasonably withheld. The parties agree that any indemnified party may join any
indemnifying party in any action, claim or proceeding brought by a third party,
as to which any right of indemnity created by this Agreement would or might
apply, for the purpose of enforcing any right of the indemnity granted to such
indemnified party pursuant to this Agreement.
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(g) Additional Rights. Any right of indemnity of any party pursuant to
this Agreement shall be in addition to and shall not operate as a limitation on
any other right to indemnity of such party pursuant to this Agreement, any
document or instrument executed in connection with the consummation of the
transaction contemplated hereby or otherwise.
ARTICLE VI
ARBITRATION
In the event a dispute arises with respect to the interpretation or
effect of this Agreement or concerning the rights or obligations of the parties
hereto, the parties agree to negotiate in good faith with reasonable diligence
in an effort to resolve the dispute in a mutually acceptable manner. Failing to
reach a resolution thereof, either party shall have the right to submit the
dispute to be settled by arbitration under the Commercial Rules of Arbitration
of the American Arbitration Association. The parties agree that all arbitrations
shall be conducted in Tulsa, Oklahoma, unless the parties mutually agree to the
contrary. The cost of arbitration shall be borne by the party against whom the
award is rendered or, if in the interest of fairness, as allocated in accordance
with the judgment of the arbitrators. All awards in arbitration made in good
faith and not infected with fraud or other misconduct shall be final and
binding.
ARTICLE VII
MISCELLANEOUS
No party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties hereto. No
permitted assignment shall relieve a party of its obligations under this
Agreement without the separate written consent of the other parties. This
Agreement shall be binding upon and enure to the benefit of the parties and
their respective permitted successors and assigns. Each party agrees that it
will comply with all applicable laws, rules and regulations in the execution and
performance of its obligations under this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Oklahoma.
This document constitutes a complete and entire agreement among the parties with
reference to the subject matters set forth herein. No statement or agreement,
oral or written, made prior to or at the execution hereof and no prior course of
dealing or practice by either party shall vary or modify the terms set forth
herein without the prior consent of the other parties hereto. This Agreement may
be amended only by a written document signed by the parties. Notices or other
communications required to be made in connection with this Agreement shall be
delivered to the parties at the address set forth below or at such other address
as may be changed from time to time by giving written notice to the other
parties. This Agreement may be executed in multiple counterparts, each of which
shall constitute one and a single Agreement.
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ARTICLE VIII
PIGGYBACK REGISTRATION RIGHTS
Lexon covenants and agrees that if it files with the Securities and
Exchange Commission an underwritten registration statement on SEC Form S-1B or
Form S-l or its equivalent which includes the offer of shares owned by
shareholders of Lexon, Lexon will use its best efforts to include some or all of
the shares of Lexon common stock issued to and then held by UTEK pursuant to
this Agreement. If the underwriters include any selling shareholder shares, UTEK
shall be permitted to include some or all of its Lexon shares on a pro rata
basis to the extent and upon the same terms and conditions as other Lexon
shareholders are permitted to have their Lexon shares included in the proposed
offering. If the underwriters do not permit for any reason the inclusion of
selling shareholder shares in the offering, UTEK shares shall also not be
included. It is the expressed intent of this Article that UTEK be treated
exactly the same as any other selling Lexon shareholder in connection with any
underwritten offering of Lexon common stock, no better and no worse. If Lexon
proposes an underwritten offering, Lexon will give UTEK 15 days' prior written
notice thereof, and UTEK shall give Lexon notice within 10 days thereafter of
UTEK's desire as to the number of shares, if any, that UTEK desires to include
in the offering. Lexon will notify the lead underwriters of UTEK's desire, and
Lexon will include UTEK shares in accordance with this paragraph. As a condition
of including any UTEK shares in the offering, UTEK shall (1) sign all
underwriting agreements, representations, warranties, certificates and other
papers as the underwriters require of UTEK and other Lexon shareholders whose
shares are to be included in the offering; (2) pay pro rata all costs of the
offering to the same extent as other Lexon selling shareholders are required to
pay; and (3) take all other actions and do all other things as are required of
other selling shareholders. Failure of UTEK to respond within 10 days after
notice of Lexon's intention to file an underwritten offering shall constitute a
waiver of the rights set forth in this Article.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by a duly authorized officer this 11th day of May, 1998.
LEXON, INC. GENTEST, INC.
By: /s/ RHONDA VINCENT By: /s/ CLIFFORD M. GROSS
Rhonda Vincent, Vice President Clifford M. Gross, President
UTEK, INC.
By: /s/ CLIFFORD M. GROSS
Clifford M. Gross, President
18
CERTIFICATE OF MERGER
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA, 101 State Capitol Bldg.,
Oklahoma City, OK 73105.
This Certificate of Merger is being filed pursuant to Section 1082 of
the Oklahoma General Corporation Act. In lieu of filing an executed Agreement
and Plan of Merger, the Surviving Corporation hereby states and certifies as
follows:
1. The names and states of incorporation of each of the Constituent
Corporations are:
NAME OF CORPORATION STATE OF INCORPORATION
Lexon, Inc. Oklahoma
Gentest, Inc. Florida
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each Constituent Corporation, in accordance
with the provisions of Section 1082 of Title 18 of the Oklahoma Statutes
and Section 601.1107 of the Corporation Laws of Florida.
3. The name of the Surviving Corporation is Lexon, Inc.
4. The Certificate of Incorporation of the Surviving Corporation is not being
changed by reason of the Merger.
5. The executed Agreement and Plan of Merger is on file at the principal place
of business of the Surviving Corporation at 8908 S. Yale, Suite 409, Tulsa,
OK 74137-3545.
6. A copy of the Agreement and Plan of Merger will be furnished on request and
without cost to any shareholder of any Constituent Corporation.
7. The authorized capital of Gentest is 1,000 shares of common stock, par
value $1.00 per share, and 1,000 shares are issued, outstanding and voted
for the Merger.
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IN WITNESS WHEREOF, the Surviving Corporation has caused this
Certificate of Merger to be executed by its Vice President and attested by its
Secretary, this 8th of July, 1998.
LEXON, INC.
By: /s/ RHONDA VINCENT
Rhonda Vincent, Vice President
ATTEST:
By: /s/ RHONDA VINCENT
Rhonda Vincent, Secretary
2
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
LEXON, INC.
5,000,000 Shares at $0.001 per Share
Lexon, Inc. (the "Company") is offering 5,000,000 shares ("Shares") of its
Common Stock, par value $0.001 per share, to qualified investors acceptable to
Lexon in its sole discretion, for $0.001 per share, a price determined
arbitrarily by the Company. The Offering is made in reliance upon an exemption
from registration provided by Regulation D, Rule 504 of the Securities and
Exchange Commission. There is no established liquid trading market for the
Shares, and there is no assurance that one may develop or, if developed, that it
will be maintained. Consequently, a purchaser of the Shares may be unable to
sell the Shares when desired and may have to hold the Shares indefinitely.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION".
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES AGENCY, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES AGENCY PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Proceeds
Purchase Broker to the
Price Commissions Company
Per Share..................... $0.001 $0.00 $0.001
Total......................... $5,000 --- $5,000
(See footnotes on following page)
LEXON, INC.
8908 South Yale - Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The date of this Offering Memorandum is April 1, 1998
<PAGE>
THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS PROVIDED BY LEXON,
INC. SOLELY FOR THE PERSONS RECEIVING IT, AND REPRODUCTION OR DISTRIBUTION TO
OTHERS, IN WHOLE OR IN PART, IS PROHIBITED WITHOUT LEXON'S PRIOR WRITTEN
CONSENT.
THE SHARES ARE BEING OFFERED SUBJECT TO PRIOR SALE, WITHDRAWAL,
CANCELLATION OR MODIFICATION WITHOUT NOTICE AND FURTHER CONDITIONS SET FORTH
HEREIN.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION OF THOSE
MATTERS THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN
INVESTOR IN THIS OFFERING.
THERE IS NO PUBLIC OR OTHER MARKET FOR THE SHARES OFFERED HEREBY, NOR IS
THERE ANY ASSURANCE THAT SUCH A MARKET WILL EVER DEVELOP. FOR THIS REASON AND
BECAUSE THE SHARES HAVE NOT BEEN REGISTERED UNDER APPLICABLE SECURITIES LAWS, AN
INVESTOR WILL BE REQUIRED TO RETAIN OWNERSHIP OF THE SHARES ACQUIRED HEREUNDER
AND BEAR THE ECONOMIC RISK OF HIS INVESTMENT FOR AN INDEFINITE PERIOD.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY THE
COMPANY, ITS MANAGEMENT, AUTHORIZED REPRESENTATIVES OR ANY OTHER PERSON IN ANY
JURISDICTION IN WHICH AN OFFERING OR SOLICITATION IS UNLAWFUL OR UNAUTHORIZED.
THIS MEMORANDUM IS INTENDED TO FURNISH INFORMATION TO THE PROPOSED INVESTOR
WITH RESPECT TO THE INVESTMENT DESCRIBED. IN CONSIDERING THIS INVESTMENT, EACH
PROPOSED INVESTOR MUST EVALUATE FOR HIMSELF OR HERSELF ITS MERITS AND RISKS OR
RETAIN THE SERVICES OF ANOTHER PERSON WHO HAS SUFFICIENT KNOWLEDGE AND EXPERTISE
TO EVALUATE SUCH MERITS AND RISKS. THE COMPANY RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUBSCRIPTIONS TO PURCHASE SHARES OFFERED
HEREBY AND RESERVES THE RIGHT TO TERMINATE THIS OFFERING AT ANY TIME.
EXCEPT AS SET FORTH UNDER "ADDITIONAL INFORMATION", NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS OR FURNISH ANY INFORMATION CONCERNING
LEXON OR THE SHARES OFFERED HEREBY OTHER THAN THE REPRESENTATIONS AND
INFORMATION SET FORTH IN THIS MEMORANDUM, AND IF MADE OR FURNISHED, SUCH OTHER
REPRESENTATIONS OR INFORMATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY LEXON. LEXON SHALL MAKE AVAILABLE TO EACH PROSPECTIVE INVESTOR, OR THE
INVESTOR'S REPRESENTATIVE, DURING THIS OFFERING AND PRIOR TO THE SALE OF ANY
SHARES, ALL INFORMATION WHICH MAY BE DEEMED RELEVANT TO THIS OFFERING OR
NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN, AND THE
LEXON SHALL PROVIDE ALL PROSPECTIVE INVESTORS THE OPPORTUNITY TO ASK QUESTIONS
OF AND RECEIVE ANSWERS FROM LEXON CONCERNING ANY ASPECT OF THE OFFERING AND AN
INVESTMENT IN THE SHARES.
2
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TABLE OF CONTENTS
SUMMARY OF THE OFFERING......................................................4
USE OF PROCEEDS..............................................................5
THE COMPANY..................................................................5
MARKET AND INDUSTRY INFORMATION..............................................7
DILUTION.....................................................................9
DIRECTORS AND OFFICERS.......................................................9
DESCRIPTION OF SECURITIES...................................................10
PLAN OF DISTRIBUTION........................................................11
ADDITIONAL INFORMATION......................................................11
RISK FACTORS................................................................11
LEXON, INC. BALANCE SHEET INFORMATION.......................................14
SUBSCRIPTION AGREEMENT FOR INDIVIDUALS......................................15
3
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SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements appearing elsewhere in this
Offering Memorandum. Each prospective investor is urged to read this Offering
Memorandum in its entirety before making a decision to invest in the Shares
offered hereby.
The Company. Lexon, Inc., an Oklahoma corporation ("Company"), is a
development-stage corporation organized in December, 1997 to identify and
commercialize proprietary medical biotechnology opportunities. The Company
expects to acquire licenses from research institutions and other biotechnology
companies.
The Company has had preliminary discussions with Gentest, Inc., a Florida
corporation ("Gentest"), with the view to acquire Gentest. Gentest is
negotiating with the University of South Florida ("USF") for the exclusive
worldwide license to develop, manufacture, obtain FDA approval for, and market a
cancer screening test kit for detecting the protein TGF-B4 (ebaf), which allows
for early, non-invasive diagnosis of certain types of colon, ovarian and
testicular cancers. There is no assurance that Gentest will be successful in
obtaining the exclusive license. There is no assurance that the Company's
discussions with Gentest will lead to its acquisition by the Company.
The Offering. The offering is intended to comply with Rule 504 of SEC
Regulation D. The Company is offering 5,000,000 Shares of its Common Stock at a
price of $0.001 per share on a "best efforts basis" to selected investors. The
Offering shall be open until April 8, 1998, unless all 5,000,000 Shares are sold
earlier or the Offering is otherwise extended or terminated by the Company.
Use of Proceeds. The Company intends to use the net proceeds of this
Offering for general working capital purposes. (See "Use of Proceeds").
Risk Factors. Investment in the Shares offered hereby is speculative and
involves a high degree of risk and immediate dilution and should not be
purchased by any investor who cannot afford the loss of the entire investment.
Each prospective investor should carefully consider the significant risk factors
inherent in and affecting the business of the Company and this Offering. (See
"Risk Factors").
Summary Financial Information. The financial information set forth below is
from the unaudited balance sheet of the Company appearing elsewhere in this
Offering Memorandum. See "Financial Information". Such information should be
read in conjunction therewith.
March 31, 1998
As Adjusted for
Balance Sheet Data (Unaudited) this Offering
------------- ---------------
Total Assets.......................................$0 $5,000
Total Liabilities..................................$0 $0
Working Capital....................................$0 $5,000
Total Stockholders' Equity.........................$0 $5,000
4
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USE OF PROCEEDS
The Company estimates the proceeds of this Offering will be $5,000. The
Company expects to use the entire proceeds of this Offering for general working
capital purposes. All expenses of the formation of Lexon and of this Offering
are being paid for by the officers. The costs of preparing this Offering
memorandum has been contributed to the Company by its officers.
THE COMPANY
Lexon is a development-stage corporation organized in December, 1997 to
identify and commercialize proprietary medical biotechnology opportunities. The
Company hopes to license technology and product candidates from research
institutions and other biotechnology companies.
Discussions with Gentest. Lexon has had preliminary discussions with
Gentest, Inc., a Florida corporation ("Gentest"), in an effort to acquire
Gentest. There is no letter of intent or written agreement to date. Gentest is
negotiating with the University of South Florida to acquire the exclusive
license to develop, manufacture and market worldwide a test kit for detecting
the protein TGF- (beta)4 (ebaf), which allows for the early diagnosis of certain
types of colon, ovarian and testicular cancers. Gentest is also negotiating a
sponsored research agreement with USF, whereby Dr. Siamak Tabibzadeh, a
pathologist at USF and co-discover of the TGF-(beta)4 genetic market, will
supervise the development of the cancer screening test kit for laboratory use.
There is no assurance that Gentest will successfully negotiate sponsored
research agreement. There is no assurance of Dr. Tabibzadeh's continued
involvement in the development of the test kits nor of the Company's ability to
find a replacement. There is no assurance that the Company will be able to
acquire Gentest.
TGF-(beta)4 (ebaf) Protein Screening. Cancer is one of the leading causes
of death in the general population. A correlation exists between the early tumor
detection and the survival of the patient. The mortality from cancer can be
significantly reduced if tumors are found and treated at an early stage. Many
tumors do not produce any clinical signs or symptoms before they reach a
considerable size. Therefore, there is a need to discover markers that can
identify tumors at an early stage. In all types of cancer, the patient has the
best chance of survival if the tumor is detected and removed early.
Currently, very few markers exist that are useful in the diagnosis of
cancerous tumors. Carcinomembryonic antigen (CEA), prostatic specific antigen
(PSA), and carcinoma-125 (CA-125) are among the most widely used tumor markers.
However, the expression of CEA or CA-125 is not specific and these proteins are
expressed in a variety of conditions not related to cancer. For these reasons,
these markers can not be used for mass screening of the general population
because of the high number of false positives that would require additional
testing to rule out the presence of cancer. For mass screening, there is a need
for a specific and sensitive test.
Because of its specificity of expression, the TGF-(beta)4 (ebaf) protein
makes this marker uniquely suited for such mass screening. In addition, the
specific expression of the TGF-(beta)4 (ebaf) protein in cancers of colon, ovary
and testis would allow precise localization of the tumor.
The TGF-(beta)4 marker is the outgrowth of a discovery of a gene that is
the common thread linking a very diverse group of conditions. The gene is called
ebaf, for "endometrial bleeding associated factor" and its expression was
initially identified by USF researchers in both normal menstrual and abnormal
endometrial bleeding. Although the gene was initially called ebaf, a committee
on gene nomenclature has now approved the name TGF-(beta)4.
Key Personnel. The protein screening process was co-developed by Dr. Siamak
Tabibzadeh, M.D., a professor in the Department of Pathology at the University
of South Florida and an attending pathologist at the Moffitt Cancer Center at
USF. He serves as the editor-in chief of the "Frontiers in Bioscience", a
journal and virtual library, as a member of the editorial board of Endocrine,
and as a referee for several prestigious journals. He is the author of 80
published journal articles and has given numerous invited presentations in both
the United States and Europe. Dr. Tabibzadeh's current research is funded by the
National Institute of Health and
5
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primarily focuses on human endometrial cells and T-cells, as well as the
interaction of cancerous epithelial cells with T-cells. Dr. Tabibzadeh received
his M.D. from Tehran University School of Medicine, where he ranked first in the
graduating class. He served a residency in anatomic and clinical pathology at
Montefiore Medical Center in New York and held a fellowship in immunopathology
at Elmhurst Hospital, Elmhurst, New York and Mount Sinai School of Medicine, New
York, NY.
Licenses, Patents and Proprietary Information. The TGF-(beta)4 (ebaf)
protein screening process is owned by the University of South Florida ("USF").
If the Company acquires Gentest, the Company will have an exclusive worldwide
license to manufacture and market test kit products using the process owned by
the USF. Furthermore, any improvements to the process will not be owned the
Company and may not be covered by the existing license.
The filing, prosecution and maintenance of all patent rights are within the
sole discretion of the USF. The Company has the right to request that the USF
seek, obtain and maintain such patent and other protection to the extent that
USF is lawfully entitled to do so, at the Company's sole expense. There is no
assurance that USF will seek, obtain or maintain such patent and other
protection to which it is lawfully entitled. Further, there is no assurance that
the Company will have sufficient working capital to fund USF's efforts in those
activities.
The initial research and development related to the TGF-(beta)4 (ebaf)
protein screening process was funded by a grant from the National Institute of
Health. The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and infringement claims. There is
no assurance that the interests of the NIH will not materially adversely affect
the Company or its business.
The lack of U.S. and foreign patent protection for the test kit could
result in the manufacturing and sale of test kits copied by competitors who are
not be obligated to pay royalties. As a result, these competitors could achieve
superior operating margins, which could adversely affect the Company's ability
to compete.
Marketing. The Company has limited sales and marketing experience, and no
assurance is given that the Company will be able to successfully establish and
maintain a significant sales and marketing organization or that a direct sales
force, if developed by the Company, will succeed in promoting the Company's
products to third-party payors, clinical laboratories, healthcare providers and
government entities worldwide. The Company believes that the marketing effort
may be a lengthy process, requiring the Company to educate the worldwide medical
community regarding both the clinical utility and cost-effectiveness of the
Company's products.
Competition. The medical diagnostics and biotechnology industries are
subject to intense competition. The Company's competitors in the United States
and abroad may include Roche Diagnostic Systems, Abbott Laboratories, Chiron
Corporation and Gen-Probe Incorporated. Other companies, including large
pharmaceutical and biotechnology companies, may enter the market. The Company's
existing and potential competitors may be able to develop technologies that are
as effective as, or more effective or easier to interpret, than those offered by
the Company. Many of the Company's existing and potential competitors have
substantially greater financial, marketing, sales, manufacturing, distribution
and technological resources than the Company. There is no assurance that the
Company will be able to successfully compete.
Manufacturing. The Company has no commercial-scale manufacturing
experience and capabilities of medical products. It is anticipated that the
Company's products will initially be manufactured by FDA approved manufacturers.
There is no assurance that the Company will successfully manufacture any
products or obtain favorable manufacturing contracts with FDA approved
manufacturers.
Employees. As of April 1, 1998, Lexon had no employees.
Offices. To date, Lexon's principal offices at 8908 South Yale, Tulsa,
Oklahoma have been provided free of charge by the Company's officers. There is
no assurance that the Company's officers will continue to provide such office
space free of charge.
Litigation. Lexon is not involved in any litigation.
6
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MARKET AND INDUSTRY INFORMATION
Government Regulation. Regulation by governmental authorities in the United
States and other countries is a significant factor in ongoing research and
product development activities. The Company's diagnostic products will require
regulatory approval by governmental agencies prior to commercialization. Various
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, recordkeeping and marketing of such products. The lengthy
process of seeking these approvals, and the subsequent compliance with
applicable statutes and regulations, require the expenditure of substantial
resources. Any failure by the Company to obtain, or any delay in obtaining,
regulatory approvals could materially adversely affect the Company.
The levels of revenues and profitability of the Company may be affected by
the continuing efforts of government and third party payors to contain or reduce
the costs of healthcare through various means. There have been and the Company
expects that there will continue to be, a number of federal and state proposals
to implement to control pricing or profitability of therapeutic and other
products. While the Company cannot predict whether any such legislative or
regulatory proposals will be adopted, the adoption of such proposals could have
a material adverse effect on the Company.
FDA Approval Process. In the United States, medical devices and diagnostics
are classified into one of three classes (class I, II or III) on the basis of
the controls deemed necessary to the FDA to reasonably assure their safety and
effectiveness. Under FDA regulations, class I devices are subject to general
controls (for example; labeling, premarket notification and adherence to QSRegs)
and class II devices are subject to general and special controls (for example;
performance standards, postmarket surveillance, patient registries and FDA
guidelines). Generally, class III devices are those which must receive a PMA by
the FDA to ensure their safety and effectiveness (for example; life sustaining,
life supporting and implantable devices or new devices which have not been found
substantially equivalent to legally marketed devices).
Before a new device can be introduced into the market, the manufacturer
generally must obtain marketing clearance through the filing of either a 510 (k)
notification or a PMA application. A 510 (k) clearance will be granted if the
submitted information establishes that the proposed device is "substantially
equivalent" to a legally marketed class I or II medical device or to a class III
medical device for which the FDA has not called for a PMA. It generally takes
from four to twelve months from submission to obtain a 510 (k) clearance, but it
may take longer. The FDA may determine that a proposed device is not
substantially equivalent to a legally marketed device or that additional
information or data is needed before a substantial equivalence determination can
be made, either of which could delay market introduction of a new product. A
request for additional data may require that clinical studies of the device's
safety and efficacy be performed. Additionally, modifications or enhancements
that could significantly affect the safety of efficacy of the device, or that
constitute a major change to the intended use of the device, will require new
501 (k) submissions.
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed class I or class II device or if it is a class
III device for which the FDA has called for a PMA. A PMA application must be
supported by valid scientific evidence, including preclinical and clinical trial
data, to demonstrate the safety and effectiveness of the device. The PMA
application must also contain the results of all relevant bench tests,
laboratory and animal studies, a complete description of the device and its
components, a detailed description of the methods, facilities and controls used
to manufacture the device in addition to the device labeling and advertising
literature.
If a PMA application is accepted for filing, the FDA begins an in-depth
review of the submission. FDA review of a PMA application generally takes one to
two years from the date the PMA application is accepted for filing, but it may
take significantly longer. The PMA review process includes an inspection of the
manufacturer's facilities to ensure that the facilities are in compliance with
the applicable QSRegs requirements. In addition, an advisory committee made up
of clinicians and/or other appropriate experts is typically convened to evaluate
the application and make recommendations to the FDA as to whether the device
7
<PAGE>
should be approved. The PMA process can be expensive, uncertain and lengthy, and
a number of devices for which FDA approval has been sought by other companies
have never been approved for marketing.
Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of in vitro diagnostic ("IVD") are exempt from the IDE requirements, including
FDA approval of investigations, provided the testing meets certain exemption
criteria. IVD manufacturers must also establish distribution controls to assure
the IVDs distributed for the purpose of conducting clinical investigations are
used only for that purpose. Pursuant to current FDA policy, manufacturers of
IVDs labeled for investigational use only ("IUO") or research under which
investigational IVDs are distributed to or utilized only by individuals,
laboratories, or healthcare facilities that have provided the manufacturer with
a written certification of compliance indicating that the IUO or RUO product
will be restricted in use and will, among other things, meet institutional
review board and informed consent requirements.
Exports of products subject to 501 (k) notification requirements, but not
yet cleared to market, are permitted without FDA export approval, provided that
certain requirements are met. Unapproved products subject to PMA requirements
can be exported to any country without prior FDA approval, provided, among other
things, they are not contrary to the laws of the country to which they are
intended for import, they have been manufactured in substantial compliance with
the QSRegs and have been granted valid marketing authorization by the member
country of the European Union, Australia, Canada, Israel, Japan, New Zealand,
Switzerland or South Africa. The Company must also provide the FDA with simple
notification indicating the products to be exported and the countries to which
they will be exported.
FDA approval must be obtained for exports of products subject to the PMA
requirements if these export conditions are not met. To obtain export approval,
when required, certain requirements must be met and information must be provided
to the FDA, including, with some exceptions, documentation demonstrating that
the product is approved for import into the country to which it is to be
exported and, in some cases, safety data for the device.
Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and are
subject to periodic inspections by the FDA and certain state agencies. The FDC
Act requires devices to be manufactured in accordance with QSRegs, which impose
certain procedural and documentation requirements upon the Company with respect
to manufacturing and quality assurance activities.
International Sales. International sales are subject to foreign government
regulation, the requirements of which vary substantially from country to
country. The time required to obtain foreign approval may be longer or shorter
than that required for FDA approval and the requirements may substantially
differ. The Company must obtain the CE mark prior to engaging in sales within
the EU of certain medical devices. During this process the sponsor must also
demonstrate compliance with ISO manufacturing and quality requirements.
The introduction of the Company's developmental stage test products in
foreign markets will also subject the Company to foreign regulatory clearances,
which may impose additional costs and burdens. International sales of medical
devices are subject to the regulatory requirements of each country. The
regulatory review process varies from country to country and many countries also
impose product standards, packaging requirements, labeling requirements and
import restrictions on devices. In addition, each country has its own tariff
regulations, duties and tax requirements.
Reimbursement. In the United States and elsewhere, sales of diagnostic,
therapeutic and other pharmaceutical products are dependent, in part, on the
availability of reimbursement to the consumer from third-party payors, such as
government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. There is no
assurance that any of the Company's products will be considered cost effective
and that reimbursement to the consumer will be available, or will be sufficient
to allow the Company to sell its products on a competitive and profitable basis.
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DILUTION
Dilution is the difference between the purchase price paid by the investors
for their Shares and the net tangible book value of the securities after the
Offering. The net tangible book value of a security is equal to the Company's
tangible net worth (tangible assets minus total liabilities) divided by the
number of Shares of the security outstanding. Investors in this Offering will
suffer no dilution.
DIRECTORS AND OFFICERS
The following table identifies the directors and officers of the Company
and sets forth their respective ages and areas of expertise:
Name Age Expertise
Gifford M. Mabie............ 57 President, CEO and Director
Rhonda R.Vincent............ 34 Vice President, Secretary,
Treasurer and Director
Frederick K. Slicker........ 54 Vice President and General
Counsel
Set forth below is a description of the backgrounds of the directors and
management of the Company:
Gifford M. Mabie, age 57, is President, CEO and a Director of the Company.
Mr. Mabie is also President, CEO and a Director of Maxxon, Inc. (OTCBB: MXON), a
development-stage company co-founded by Mr. Mabie in 1996 to develop and
commercialize a patented disposable safety syringe. From 1982 to 1994, Mr. Mabie
was Senior Vice President of CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information company that was purchased by National Data Corporation
(NYSE: NDC) in 1996. As one of the founders of CIS, Mr. Mabie was instrumental
in raising over $40 million in capital that funded acquisitions and new product
development. As a result, that company's revenues grew from $105,000 in 1987 to
over $40 million in 1995. Prior to CIS, Mr. Mabie was with Honeywell Information
Systems, Inc., where he ranked as one of its top five salesmen worldwide. Prior
to joining Honeywell, he was corporate controller with W.B. Dunavant & Company,
one of the world's largest cotton brokers. He holds degrees in accounting and
economics from Memphis State University and served for eight years in the United
States Navy.
Rhonda R. Vincent, age 34, is Vice President, Secretary, Treasurer and
Director of the Company. Ms. Vincent is also Vice President, Secretary,
Treasurer and Director of Maxxon, Inc. (OTCBB: MXON), a development-stage
company co-founded by Ms. Vincent in 1996 to develop and commercialize a
patented disposable safety syringe. From 1994 to 1997, Ms. Vincent was Vice
President, Secretary, Treasurer and Director of Corporate Vision, Inc. (OTCBB:
CVIA), a multimedia software development company. For five years prior to
founding Corporate Vision, Ms. Vincent held various accounting, finance and
investor relations positions with CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information processing company that was purchased by National Data
Corporation (NYSE: NDC) in 1996. She began her career as an audit associate with
the public accounting firm of Coopers & Lybrand. Ms. Vincent is a Certified
Public Accountant and holds a Bachelor of Science degree in Accounting from Oral
Roberts University.
Frederick K. Slicker, age 54, is Vice President and General Counsel for the
Company. He has practiced law for 30 years, primarily in the areas of mergers
and acquisitions, securities law compliance and general business. He holds a
Juris Doctorate with the highest distinction from the University of Kansas and
an LLM from Harvard Law School. In addition to his employment by the Company, he
continues to practice law for third-party clients, including Maxxon, Inc.
Board of Directors. The authorized maximum number of directors is seven.
The Company's directors hold office until the next annual meeting of
stockholders or until their respective successors have been duly
9
<PAGE>
elected and qualified. The Company's officers are elected annually by the Board
of Directors and serve at the discretion of the Board.
Compensation of Directors. To date, no director's fees have been paid,
however, directors who are not employees of the Company may be paid reasonable
fees and may be granted stock options for serving as directors in the future.
Directors of the Company who are also employees of the Company will not receive
any additional compensation for their services as directors.
Compensation of Management. To date, members of management have received no
compensation for their services. There are no written employment agreements. The
officers and directors will receive no compensation unless the acquisition of
Gentest or the exclusive license to commercialize the investion is successfully
completed.
Conflicts of Interest. Members of the Company's management are associated
with other firms involved in a range of business activities. Consequently, there
are potential conflicts of interest inherent in their acting as officers and
directors of the Company. Insofar as the officers and directors are engaged in
other business activities, management anticipates it will devote no more than
50% of its time to the Company's affairs.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 45,000,000 shares of Common Stock, par
value $0.001 per share, of which no shares are presently outstanding. The
Company is authorized to issue 5,000,000 shares of Preferred Stock, par value
$0.001 per share, of which there are no shares presently outstanding. There is
no present intent to issue any Preferred Stock.
Upon completion of this Offering, up to 5,000,000 shares of Common Stock
will be outstanding. All Shares of Common Stock are, and all the Shares offered
by the Company hereby will be, when issued, fully paid and nonassessable.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
the Company has not paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors out of funds legally available therefor.
The Company intends to retain any earnings for the operation and expansion of
its business and does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of cash dividends will depend
upon future earnings, results of operations, capital requirements, the Company's
financial condition and such other factors as the Board of Directors may
consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to receive pro rata all
of the assets of the Company available for distribution to shareholders after
liabilities are paid and distributions are made to the holders of the Company's
Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of the Company.
10
<PAGE>
PLAN OF DISTRIBUTION
The subscription period will terminate on April 8, 1998, unless extended by
the Company. Funds from the sale of Shares will be made immediately available to
the Company. Subscriptions will be accepted until the expiration of the offering
period or until a maximum of 5,000,000 Shares are sold, whichever occurs first.
Additional subscriptions will not be accepted by the Company after the Offering
is fully subscribed.
Some offerees may utilize a purchaser representative in the evaluation of
the merits and risks of an investment in the Shares. Any such representative
must comply with the requirements of Regulation D under the Securities Act of
1933 and with applicable state securities laws. Neither the Company, nor any
officer or any director of Lexon, Inc. will pay any fees or commissions to, or
pay any charges for the services rendered by, any purchaser's representative
unless the purchaser's representative is a registered broker-dealer entitled to
receive the commissions.
Shares issued to non-affiliates of Lexon in a valid Rule 504 offering
purchase are shares that may be resold without federal registration or other
federal transfer restrictions. Applicable state laws may require registration
before any resles are made from certain states. If the Offering does not qualify
under Rule 504, resale of the Shares will be restricted indefinitely. There is
no asurance that this Offering will qualify under Rule 504.
ADDITIONAL INFORMATION
The Company intends to furnish its shareholders with annual reports
containing audited financial information, reported upon by independent public
accountants.
Each purchaser of Shares, prior to such purchase, is entitled to ask
questions of the Company and receive answers concerning the terms and conditions
of the Offering and to obtain any additional information which the Company
possesses that is necessary for the purchaser to verify the accuracy of the
information furnished in this Offering Memorandum.
The Company will make reasonable efforts to furnish to any qualified
prospective investor, or the prospective investor's authorized representative,
any additional information or opportunity for inquiry concerning the terms and
conditions of this Offering, including information requested to verify the
accuracy of the information contained in this Offering Memorandum or otherwise
furnish the prospective investor or the prospective investor's representative,
to the extent the Company possesses the information or can obtain it without
undue effort or expense. Prospective investors requiring additional information
may contact Gifford Mabie, President of the Company, at 8908 South Yale, Suite
409, Tulsa, Oklahoma 74137, telephone (918) 492-4125.
RISK FACTORS
The following factors make the Offering described herein speculative and
one of high risk. An investment in the Shares offered herein should not be made
by persons who cannot afford the loss of their entire investment.
1. No Operating History, Products or Assets. The Company was organized in 1997
has no operating or financial history. The Company has no products and no assets
at this time. If the Company acquires Gentest, the business of the Company will
depend upon the development of the cancer screening test kit to detect the
presence of the TGF-(beta)4 (ebaf) protein and upon the approval by the FDA of
the test kit. There is no assurance that the Company will acquire Gentest, that
Gentest will acquire a license from USF, or that the Company's activities will
be successful or profitable or that the FDA will approve the test kit. While
management has been advised that the detection of the TGF-(beta)4 (ebaf) protein
confirms a cancer diagnosis with a high degree of probability, management has
not independently verified the accuracy of this statement. No assurance is given
that the presence of TGF-(beta)4 (ebaf) is an accurate predictor of cancer.
11
<PAGE>
2. Gentest Acquisition is Uncertain. Lexon and Gentest have had preliminary
discussions concerning Lexon's acquisition of Gentest. There is no letter of
intent or definitive agreement to date. There is no assurance that the
acquisition will occur. The Company is dependent upon the successful completion
of the Gentest acquisition.
3. Patentability of Protein Screening Process is Uncertain. A patent
application related to the TGF-(beta)4 (ebaf) protein screening process was
filed by the USF with the U.S. Patent and Trademark Office ("USPTO") in 1997 but
a patent has not yet been issued. There is no assurance that the TGF-(beta)4
(ebaf) protein screening process is patentable. Even if a patent is issued, the
scope of the patent is unknown at this time. There is no assurance that a
patent, if issued, will not infringe on the rights of others.
4. Rights and Interests of the National Institute of Health are Unknown.
The initial research and development related to the TGF-(beta)4 (ebaf) protein
screening process was funded by a grant from the National Institute of Health
("NIH"). The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and infringement claims. There is
no assurance that the interests of the NIH will not materially adversely affect
the Company or its business.
5. Need for Additional Capital. The Company is dependent on additional
capital to finance its operating activities. There is no assurance that any
additional capital needed will be available to the Company on acceptable terms,
or at all. Any additional capital may involve substantial dilution to the
interests of the Company's then existing stockholders.
6. Government Regulation. The Company's proposed activities and products
may require regulatory approval in the United States, Canada and in a number of
foreign countries. The process of obtaining these approvals, if required, may be
time consuming and costly. Changes in the regulations for the Company's products
could adversely impact operations affecting profitability or competitive
advantages.
7. Acceptance by Medical Professionals. Inherent to the successful
marketing of the Company's proposed products is the acceptance of the product by
medical professionals. There is no assurance that such products will be
accepted.
8. Competition. The diagnostic segment of the medical industry is intensely
competitive and composed of large and well financed firms, including
pharmaceutical, biotechnology, and consumer goods companies, as well as
universities and other research institutions that are constantly developing or
acquiring rights to new products. Moreover, competing products have, in many
cases, been generally accepted by consumers who may be slow to change to the use
of alternative products. Some competitors have established distribution networks
and sufficient marketing resources to effectively resist attempts to dislodge
use of their products. In addition, there is no assurance that one or more
competitors will not develop or manufacture products that are more effective or
better accepted than those which the Company seeks to commercialize. There is no
assurance that the Company will be able to compete successfully or profitably.
9. Dependence Upon Key Personnel. The Company is dependent upon the
services of Dr. Tabibzedah, co-discoverer of the TGF-(beta)4 (ebaf) protein
screening process, to oversee the development of the cancer test kit. The loss
of the services of Dr. Tabibzedah and the inability to retain an acceptable
substitute could have a material adverse effect on the Company. The Company is
also dependent upon the services of its officers. The loss of the services of
these key personnel or the inability to retain such experienced personnel could
have a material adverse effect on the Company. There is no assurance that Dr. T
or the officers will continue to work on this project or that replacement of key
personnel will occur.
10. Broad Discretion in Application of Proceeds. The proceeds of this
Offering will be used for general working capital purposes and the Company will
have broad discretion as to the application of such proceeds.
11. Compliance with State and Federal Securities Laws. There is no
assurance that the Offering presently qualifies or will continue to qualify
under exemptions from registration provided by the Securities Act of 1933 (the
"Act") or applicable state securities laws due to, among other things, the
adequacy of disclosure, the manner of distribution of the Offering or the
retroactive change or interpretation of any applicable securities
12
<PAGE>
laws or regulations. If, and to the extent that, suits for rescission are
brought and successfully concluded for failure to register this Offering under
applicable securities laws, or for acts or omissions constituting certain
prohibited practices under state or federal securities laws, the capital and
assets of the Company could be adversely affected, thus jeopardizing the ability
of the Company to operate successfully.
12. No Trading Market for Common Stock. There is no established liquid
market for the Company's Common Stock. Although the Company intends to pursue
developing a liquid market as soon as practicable, there is no assurance that
such liquid market will develop, or if such a market develops, that it will be
maintained. Holders of the Shares of Common Stock may, therefore, have
difficulty in selling their stock should they desire to do so and should be able
to withstand the risk of holding their Shares of Common Stock indefinitely
13. No Dividends. The Company has not paid any cash or other dividends on
its Common Stock and does not expect to declare or pay any such cash dividends
in the foreseeable future.
13
<PAGE>
LEXON, INC. BALANCE SHEET INFORMATION
March 31, 1998
Balance Sheet (Unaudited)
Prior to the After the
Offering Offering
Assets
Current Assets
Cash..................................... $0 $5,000
Other Assets
License Agreement........................ 0 0
------------- ----------
Total Assets................................. $0 $5,000
------------- ----------
Liabilities
Current Liabilities.......................... $0 $0
Stockholders' Equity
Preferred stock, $0.001 par value,
5,000,000 Shares authorized............. 0 0
Common stock, $0.001 par value,
45,000,000 Shares authorized
5,000,000 Shares issues and outstanding
after the Offering..................... 0 5,000
Paid in Capital.............................. 0 0
Retained Earnings............................ 0 0
------------- ----------
Total Liabilities and Stockholders' Equity........... $0 $5,000
------------- ----------
14
<PAGE>
SUBSCRIPTION AGREEMENT
ISSUER:
Lexon, Inc.
8908 South Yale - Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The undersigned subscriber ("Subscriber") hereby subscribes to and
agrees to purchase __________ Shares ("Shares") of Lexon, Inc., at $0.001 per
Share.
1. General Information Concerning the Company and the Offering.
(A) Subscriber has received a copy of the Private Offering Memorandum dated
April 1, 1998.
(B) Subscriber understands that the business plans described in the Private
Offering Memorandum dated April 1, 1998 may not occur.
2. Status of Investor. (Check all that apply)
Accredited Investor
Subscriber is an "accredited investor" as defined by SEC Rule 501(a), by
reason of being (check one):
----- A natural person who has a net worth (together with my spouse)
of more than $1,000,000; or
----- A natural person who had income in excess of $200,000 ($300,000
jointly with my spouse) in each of the last two (2) years and a reasonable
expectation of earning the same income level this year; or
----- As otherwise specified in SEC Rule 501(a).
Non-Accredited Investor
----- Subscriber does not meet the requirements as an accredited
investor.
3. Subscriber's Investment Experience. Subscriber represents and warrants to the
Company that:
(A) Subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of an
investment in the Shares; and
(B) Subscriber is able to bear the economic risk of the investment in
the Shares, including the risk of a total loss of the investment in the
Shares.
4. Subscriber's Investment Representations. Subscriber represents and warrants
to the Company that:
(A) The acquisition of the Shares by Subscriber is for Subscriber's own
account and is for investment; and
(B) Subscriber has no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the Shares; and
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<PAGE>
(C) All information that Subscriber has supplied to the Company in
connection with Subscriber's subscription to purchase the Shares is
true and correct.
5. Subscriber's Understanding Concerning the Company. Subscriber represents
and warrants to the Company that:
(A) Subscriber understands that an investment in the Shares involves a
very high degree of risk; and
(B) Subscriber acknowledges that the Company is a development stage
company having been incorporated in December, 1997, and that the
Company has no prior business or financial experience; and
(C) Subscriber has conducted all investigations and due diligence
concerning the Company and the Shares which Subscriber deems
appropriate, and Subscriber has found all such information obtained
fully acceptable; and
(D) Subscriber is knowledgeable about the prospects, business,
financial condition and operations of the Company; and
(E) Subscriber has had an opportunity to ask questions of the officers
and directors of the Company concerning the Shares and the business and
financial condition of and prospects for the Company, and the officers
and directors of the Company have adequately answered all questions
asked and made all relevant information available to Subscriber,
including all relevant books and records of the Company; and
(F) Subscriber understands that no market exists for the Shares and
that there is no assurance that a market will exist in the future.
6. Compliance with Securities Laws. Subscriber understands and agrees that
federal and state securities laws may impose restrictions and limitations
applicable to the purchase, sale, resale and distribution of the Shares.
7. Indemnification. Subscriber agrees that the Company has relied on the
accuracy of the statements of Subscriber set forth herein and otherwise.
Subscriber agrees to defend and indemnify the Company and its officers,
directors, controlling persons, accountants, attorneys and agents representing
Lexon, and to hold all and each of them harmless from and against any and all
losses, damages, liabilities and expenses, including, without limitation,
reasonable attorneys' fees and expenses, which they or any of them incurs by
reason of any alleged misrepresentation made by or on behalf of Subscriber, any
alleged breach by Subscriber of the representations and warranties made by
Subscriber herein, any alleged failure by Subscriber to fulfill any of the
covenants and agreements of Subscriber set forth herein and any alleged
violation of applicable securities law by Subscriber.
8. Survival. All representations, warranties and covenants contained in this
Subscription Agreement, including without limitation, the indemnification
provisions hereof, shall survive the acceptance by the Company of this
Subscription Agreement and the delivery of the Common Stock to Subscriber.
Subscriber acknowledges and agrees that this Subscription Agreement shall
survive the death or disability of Subscriber.
9. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma.
16
<PAGE>
SUBSCRIBER
This Subscription Agreement has been executed by Subscriber effective
April ______, 1998. Please make check payable to: Lexon, Inc.
INDIVIDUAL OTHER
Signature Name of
Entity
----------------------- ---------------------------
By:
----------------------- ----------------------
Name: (name)
(title)
-----------------------
Address: Address:
----------------------- ---------------------------
----------------------- ---------------------------
Phone Phone
----------------------- ---------------------------
Fax: Fax:
----------------------- ---------------------------
SSN/ TIN: SSN/ TIN:
----------------------- ---------------------------
If Shares are jointly held, please designate the following (circle one):
Joint Tenants with Right of Survivorship OR Tenants in Common
LEXON, INC.
Agreed and accepted, effective April ____, 1998.
By: ____________________________________
Rhonda Vincent, Treasurer
17
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
LEXON, INC.
497,500 Shares at $2.00 per Share
Lexon, Inc. (the "Company") is offering 497,500 shares ("Shares") of its
Common Stock, par value $0.001 per share, to qualified investors acceptable to
Lexon in its sole discretion, for $2.00 per share, a price determined
arbitrarily by the Company. Lexon is a development stage company with an
opportunity to acquire an exclusive license to manufacture and market a
screening test kit that identifies colon, ovarian and testicular cancer. The
Offering is made in reliance upon an exemption from registration provided by
Regulation D, Rule 504 of the Securities and Exchange Commission. There is no
established liquid trading market for the Shares, and there is no assurance that
one may develop or, if developed, that it will be maintained. Consequently, a
purchaser of the Shares may be unable to sell the Shares when desired and may
have to hold the Shares indefinitely.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION".
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES AGENCY, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES AGENCY PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Estimated
Net Proceeds
Purchase Broker to the
Price Commissions(1) Company(2)
Per Share..................... $2.00 $0.40 $1.60
Total......................... $995,000 $199,000 $796,000
(See footnotes on following page)
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The date of this Offering Memorandum is May 18, 1998
<PAGE>
Footnotes from previous page
(1) No commissions will be paid in connection with sales made directly by the
officers and directors of the Company. However, Shares may be sold by
broker-dealers and members of the National Association of Securities Dealers,
Inc. With respect to these sales, a commission of 10% will be paid. Additional
compensation in the form of (a) a non-accountable expense allowance equal to 6%
of the gross proceeds from sales made by such persons and (b) a due diligence
fee of 4% of the gross proceeds may also be paid. The table assumes all Shares
will be sold through such persons.
(2) Before deducting expenses payable by the Company in connection with this
Offering estimated at $20,000. These expenses relate primarily to filing fees,
printing, legal and accounting expenses.
2
<PAGE>
THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS PROVIDED BY LEXON,
INC. SOLELY FOR THE PERSONS RECEIVING IT, AND REPRODUCTION OR DISTRIBUTION TO
OTHERS, IN WHOLE OR IN PART, IS PROHIBITED WITHOUT LEXON'S PRIOR WRITTEN
CONSENT.
THE SHARES ARE BEING OFFERED SUBJECT TO PRIOR SALE, WITHDRAWAL,
CANCELLATION OR MODIFICATION WITHOUT NOTICE AND FURTHER CONDITIONS SET FORTH
HEREIN.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION OF THOSE
MATTERS THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN
INVESTOR IN THIS OFFERING.
THERE IS NO PUBLIC OR OTHER MARKET FOR THE SHARES OFFERED HEREBY, NOR IS
THERE ANY ASSURANCE THAT SUCH A MARKET WILL EVER DEVELOP. FOR THIS REASON AND
BECAUSE THE SHARES HAVE NOT BEEN REGISTERED UNDER APPLICABLE SECURITIES LAWS, AN
INVESTOR WILL BE REQUIRED TO RETAIN OWNERSHIP OF THE SHARES ACQUIRED HEREUNDER
AND BEAR THE ECONOMIC RISK OF HIS INVESTMENT FOR AN INDEFINITE PERIOD.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY THE
COMPANY, ITS MANAGEMENT, AUTHORIZED REPRESENTATIVES OR ANY OTHER PERSON IN ANY
JURISDICTION IN WHICH AN OFFERING OR SOLICITATION IS UNLAWFUL OR UNAUTHORIZED.
THIS MEMORANDUM IS INTENDED TO FURNISH INFORMATION TO THE PROPOSED INVESTOR
WITH RESPECT TO THE INVESTMENT DESCRIBED. IN CONSIDERING THIS INVESTMENT, EACH
PROPOSED INVESTOR MUST EVALUATE FOR HIMSELF OR HERSELF ITS MERITS AND RISKS OR
RETAIN THE SERVICES OF ANOTHER PERSON WHO HAS SUFFICIENT KNOWLEDGE AND EXPERTISE
TO EVALUATE SUCH MERITS AND RISKS. THE COMPANY RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUBSCRIPTIONS TO PURCHASE SHARES OFFERED
HEREBY AND RESERVES THE RIGHT TO TERMINATE THIS OFFERING AT ANY TIME.
EXCEPT AS SET FORTH UNDER "ADDITIONAL INFORMATION", NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS OR FURNISH ANY INFORMATION CONCERNING
LEXON OR THE SHARES OFFERED HEREBY OTHER THAN THE REPRESENTATIONS AND
INFORMATION SET FORTH IN THIS MEMORANDUM, AND IF MADE OR FURNISHED, SUCH OTHER
REPRESENTATIONS OR INFORMATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY LEXON. LEXON SHALL MAKE AVAILABLE TO EACH PROSPECTIVE INVESTOR, OR THE
INVESTOR'S REPRESENTATIVE, DURING THIS OFFERING AND PRIOR TO THE SALE OF ANY
SHARES, ALL INFORMATION WHICH MAY BE DEEMED RELEVANT TO THIS OFFERING OR
NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN, AND THE
LEXON SHALL PROVIDE ALL PROSPECTIVE INVESTORS THE OPPORTUNITY TO ASK QUESTIONS
OF AND RECEIVE ANSWERS FROM LEXON CONCERNING ANY ASPECT OF THE OFFERING AND AN
INVESTMENT IN THE SHARES.
3
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TABLE OF CONTENTS
SUMMARY OF THE OFFERING.....................................................5
USE OF PROCEEDS.............................................................6
THE COMPANY.................................................................6
MARKET AND INDUSTRY INFORMATION.............................................9
DILUTION...................................................................11
DIRECTORS AND OFFICERS.....................................................12
PRINCIPAL SHAREHOLDERS.....................................................13
DESCRIPTION OF SECURITIES..................................................13
PLAN OF DISTRIBUTION.......................................................14
ADDITIONAL INFORMATION.....................................................14
FINANCIAL INFORMATION......................................................16
RISK FACTORS...............................................................18
SUBSCRIPTION AGREEMENT.....................................................22
EXHIBIT A. LICENSE AGREEMENT BY AND BETWEEN GENTEST, INC. AND THE UNIVERSITY
.. OF SOUTH FLORIDA RESEARCH FOUNDATION
EXHIBIT B. AGREEMENT AND PLAN OF MERGER
4
<PAGE>
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements appearing elsewhere in this
Offering Memorandum. Each prospective investor is urged to read this Offering
Memorandum in its entirety before making a decision to invest in the Shares
offered hereby.
The Company. Lexon, Inc., an Oklahoma corporation ("Company"), is a
development-stage corporation organized in December, 1997 to identify and
commercialize proprietary medical biotechnology opportunities. The Company seeks
to license technology and product candidates from research institutions and
other biotechnology companies.
Lexon has entered into a definitive Agreement and Plan of Merger with
Gentest, Inc., a Florida corporation ("Gentest"). Gentest has an exclusive
worldwide license to develop, manufacture, obtain FDA approval for, and market a
cancer screening test kit for detecting the protein TGF-(beta)4 (ebaf), which
allows for early, non-invasive diagnosis of certain types of colon, ovarian and
testicular cancers. There is no assurance that the merger will be completed or
that the cancer screening test kit, if successfully developed, will receive FDA
approval or will be accepted in the medical marketplace.
The Offering. The offering is intended to comply with Rule 504 of SEC
Regulation D. The Company is offering 497,500 Shares of its Common Stock at a
price of $2.00 per Share on a "best efforts basis". The Offering shall be open
for a period of thirty (30) days unless all 497,500 Shares are sold earlier or
the Offering is otherwise extended or terminated by the Company.
Use of Proceeds. The Company intends to use the net proceeds of this
Offering primarily to pay the liabilities of Gentest and for general working
capital purposes. (See "Use of Proceeds").
Risk Factors. Investment in the Shares offered hereby is speculative and
involves a high degree of risk and immediate dilution and should not be
purchased by any investor who cannot afford the loss of the entire investment.
Each prospective investor should carefully consider the significant risk factors
inherent in and affecting the business of the Company and this Offering. (See
"Risk Factors").
Summary Financial Information. The financial information set forth below is
from the unaudited balance sheet of the Company appearing elsewhere in this
Offering Memorandum. See "Financial Information". Such information should be
read in conjunction therewith.
April 30, 1998
As Adjusted
As Adjusted for for Gentest
Balance Sheet Data (Unaudited) this Offering(1) Merger(1)(2)
--------------------------------------------
Total Assets ................. $5,000 $781,000 $782,000
Total Liabilities.............. $0 $0 $0
Working Capital ............. $5,000 $781,000 $309,750
Total Stockholders' Equity..... $5,000 $781,000 $782,000
(1) Assumes maximum net proceeds from this Offering of $776,000.
(2) Assumes payment at Closing of $471,250 in liabilities of Gentest, which
relate to the licensing and development of the cancer screening test kit.
5
<PAGE>
USE OF PROCEEDS
The Company estimates the maximum net proceeds of this Offering to be
$776,000, after deducting the maximum estimated broker commissions,
non-accountable expenses and due diligence fees of $199,000 and the estimated
printing, legal and accounting expenses of $20,000. The Company expects to use
the net proceeds of this Offering in substantially the following manner:
Amount
------------------
GENTEST LIABILITIES
Initial License Fee........................... $100,000
Sponsored Research Contract................... 311,250
UTEK Consulting Fee........................... 60,000
------------------
Total Gentest Liabilities..................... $471,250
------------------
GENERAL WORKING CAPITAL
Salaries and Benefits.......................... 200,000
Office Expense................................. 45,000
Legal and Accounting .......................... 25,000
Miscellaneous ................................. 34,750
------------------
Total General Working Capital.................. $204,750
------------------
TOTAL USE OF MAXIMUM NET PROCEEDS................. $776,000
------------------
Since the maximum net proceeds of this Offering will be applied over time,
the actual expenditure of such proceeds for any purpose could vary significantly
from the anticipated expenditures described above. The Company reserves the
right, therefore, to reallocate proceeds among the uses described above,
depending upon factors such as the results of the Company's preliminary
engineering evaluation, the Company's success in developing new products, and
technological advances in the industry.
THE COMPANY
Lexon is a development-stage corporation organized in December, 1997 to
identify and commercialize proprietary medical biotechnology opportunities. The
Company seeks to license technology and product candidates from research
institutions and other biotechnology companies.
Gentest Merger. Lexon has entered into a definitive Agreement and Plan of
Merger with Gentest, Inc., a Florida corporation ("Gentest"), a copy of which is
attached as Exhibit B and incorporated herein by reference. Gentest has an
exclusive license agreement to develop, manufacture and market worldwide a test
kit for detecting the protein TGF-(beta)4 (ebaf), which allows the early
diagnosis of certain types of colon, ovarian and testicular cancers. This new
cancer screening test, which can be done using a drop of blood, avoids the need
for invasive diagnostic procedures.
The exclusive License Agreement, attached hereto as Exhibit A, has been
granted to Gentest by the University of South Florida Research Foundation
("USFRF"), which is the exclusive licensor for the University of South Florida
("USF"). The License Agreement provides for a 5% royalty to be paid to the USFRF
from gross receipts from sales of products developed using the protein screening
process.
Gentest also has a Sponsored Research Agreement with the USFRF whereby Dr.
Siamak Tabibzadeh, then a pathologist at USF and co-discoverer of the
TGF-(beta)4 genetic marker, will supervise the development of the cancer
screening test kit for laboratory use. Dr. Tabibzadeh has recently accepted a
position with North Shore University Hospital ("North Shore") in New York and
has expressed his desire to continue his life long work
6
<PAGE>
in the development of the cancer screening test kit and other related cancer
research at North Shore. There is no assurance of his continued involvement in
the development of the test kits or the Company's ability to find a replacement.
Gentest is presently working to amend the License Agreement and the Sponsored
Research Agreement with USFRF to transfer the Sponsored Research Agreement to
North Shore and to negotiate a license and royalty agreement with North Shore.
While early indications are that such agreements will be obtained, there is no
assurance that Gentest's efforts to amend the agreements with USFRF and to
negotiate agreements with North Shore will be successful. Any such agreements
with North Shore are likely to require a modest initial license and royalty as
well as continued research fees.
Under the terms of the Agreement and Plan of Merger, the Company will issue
to UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000 shares
of common stock of the Company. Gentest will cease to exist by reason of the
merger, and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, will become assets and liabilities of Lexon. The obligations
of Gentest are to pay a total of $471,250, of which $100,000 is for the
exclusive license, $311,250 is to develop the test kit and up to $60,000 for
services rendered by UTEK in connection with securing the agreements. There is
no assurance that the current obligations of Gentest will not materially
increase should Gentest be successful in negotiating agreements with North
Shore.
TGF-(beta)4 (ebaf) Protein Screening. Cancer is one of the leading causes
of death in the general population. A correlation exists between the early tumor
detection and the survival of the patient. The mortality from cancer can be
significantly reduced if tumors are found and treated at an early stage. Many
tumors do not produce any clinical signs or symptoms before they reach a
considerable size. Therefore, there is a need to discover markers that can
identify tumors at an early stage. In all types of cancer, the patient has the
best chance of survival if the tumor is detected and removed early.
Currently, very few markers exist that are useful in the diagnosis of
cancerous tumors. Carcinomembryonic antigen (CEA), prostatic specific antigen
(PSA), and carcinoma-125 (CA-125) are among the most widely used tumor markers.
However, the expression of CEA or CA-125 is not specific and these proteins are
expressed in a variety of conditions not related to cancer. For these reasons,
these markers can not be used for mass screening of the general population
because of the high number of false positives that would require additional
testing to rule out the presence of cancer. For mass screening, there is a need
for a specific and sensitive test.
Because of its specificity of expression, the TGF-(beta)4 (ebaf) protein
makes this marker uniquely suited for such mass screening. In addition, the
specific expression of the TGF-(beta)4 (ebaf) protein in cancers of colon, ovary
and testis would allow precise localization of the tumor.
The TGF-(beta)4 marker is the outgrowth of a discovery of a gene that is
the common thread linking a very diverse group of conditions. The gene is called
ebaf, for "endometrial bleeding associated factor" and its expression was
initially identified by USF researchers in both normal menstrual and abnormal
endometrial bleeding. Although the gene was initially called ebaf, a committee
on gene nomenclature has now approved the name TGF-(beta)4.
Key Personnel. The protein screening process was co-developed by Dr. Siamak
Tabibzadeh, M.D., currently a professor in the Department of Pathology at the
University of South Florida and an attending pathologist at the Moffitt Cancer
Center at USF. He serves as the editor-in chief of the "Frontiers in
Bioscience", a journal and virtual library, as a member of the editorial board
of Endocrine, and as a referee for several prestigious journals. He is the
author of 80 published journal articles and has given numerous invited
presentations in both the United States and Europe. Dr. Tabibzadeh's current
research is funded by the National Institute of Health and primarily focuses on
human endometrial cells and T-cells, as well as the interaction of cancerous
epithelial cells with T-cells. Dr. Tabibzadeh received his M.D. from Tehran
University School of Medicine, where he ranked first in the graduating class. He
served a residency in anatomic and clinical pathology at Montefiore Medical
Center in New York and held a fellowship in immunopathology at Elmhurst
Hospital, Elmhurst, New York and Mount Sinai School of Medicine, New
7
<PAGE>
York, NY. Dr. Tabibzadeh has recently accepted a position as Chief of
Experimental Pathology and Professor in Pathology at North Shore University
Hospital in Long Island, New York.
Licenses, Patents and Proprietary Information. The TGF-(beta)4 (ebaf)
protein screening process is owned by the University of South Florida ("USF").
Following the Merger, the Company will have an exclusive worldwide license to
manufacture and market test kit products using the process owned by the USF.
Furthermore, any improvements to the process will not be owned the Company and
may not be covered by the existing license.
The Licensing Agreement with the USF obligates the Company to pay royalties
of 5% of gross revenues from the sale of test kits, regardless of whether a
patent is issued. A preliminary patent application related to the TGF-(beta)4
(ebaf) protein screening process was filed by the USF with the U.S. Patent and
Trademark Office ("USPTO") in 1997, but was recently rejected for claims that
were considered too broad in scope. USF has six months to file an answer to the
rejection or the application will become stale. There is no assurance that USF
will file an answer within the prescribed time period, nor is there any
assurance that the patent application is free of other deficiencies.
Furthermore, there is no assurance that the TGF-(beta)4 (ebaf) protein screening
process is patentable. Even if a patent is issued, there is no assurance that a
patent will not infringe on the rights of others.
The preliminary patent application filed with the USPTO asserted claims
related only to the detection of colon cancer. Subsequent to filing the
preliminary patent application, a series of lectures and papers in which
additional claims related to the detection of ovarian and testicular cancer by
the protein screening process were made public by the USF. The existence of
these additional claims outside the scope of the preliminary patent application
renders the possibility of obtaining foreign patent protections for claims
related to the detection of ovarian and testicular cancers remote. There is no
assurance that the Company will obtain any U.S. or foreign patent protection for
any of the claims.
The filing, prosecution and maintenance of all patent rights are within the
sole discretion of the USF. The Company has the right to request that the USF
seek, obtain and maintain such patent and other protection to the extent that
USF is lawfully entitled to do so, at the Company's sole expense. There is no
assurance that USF will seek, obtain or maintain such patent and other
protection to which it is lawfully entitled. Further, there is no assurance that
the Company will have sufficient working capital to fund USF's efforts in those
activities.
The initial research and development related to the TGF-(beta)4 (ebaf)
protein screening process was funded by a grant from the National Institute of
Health. The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and infringement claims. There is
no assurance that the interests of the NIH will not materially adversely affect
the Company or its business.
The lack of U.S. and foreign patent protection for the test kit could
result in the manufacturing and sale of test kits copied by competitors who are
not be obligated to pay royalties. As a result, these competitors could achieve
superior operating margins, which could adversely affect the Company's ability
to compete.
Marketing. The Company has limited sales and marketing experience, and no
assurance is given that the Company will be able to successfully establish and
maintain a significant sales and marketing organization or that a direct sales
force, if developed by the Company, will succeed in promoting the Company's
products to third-party payors, clinical laboratories, healthcare providers and
government entities worldwide. The Company believes that the marketing effort
may be a lengthy process, requiring the Company to educate the worldwide medical
community regarding both the clinical utility and cost-effectiveness of the
Company's products.
Competition. The medical diagnostics and biotechnology industries are
subject to intense competition. The Company's competitors in the United States
and abroad may include Roche Diagnostic Systems, Abbott Laboratories, Chiron
Corporation and Gen-Probe Incorporated. Other companies, including large
pharmaceutical and biotechnology companies, may enter the market. The Company's
existing and potential
8
<PAGE>
competitors may be able to develop technologies that are as effective as, or
more effective or easier to interpret, than those offered by the Company. Many
of the Company's existing and potential competitors have substantially greater
financial, marketing, sales, manufacturing, distribution and technological
resources than the Company. There is no assurance that the Company will be able
to successfully compete.
Manufacturing. The Company has no commercial-scale manufacturing experience
and capabilities of medical products. It is anticipated that the Company's
products will initially be manufactured by FDA approved manufacturers.
Employees. As of April 30, 1998, Lexon employed 4 persons.
Offices. To date, Lexon's principal offices at 8908 South Yale, Tulsa,
Oklahoma have been provided free of charge by the Company's officers. Upon
completion of this Offering, Lexon will pay approximately $900 per month and
general operating expenses will be equitably allocated.
Litigation. Lexon is not involved in any litigation.
MARKET AND INDUSTRY INFORMATION
Government Regulation. Regulation by governmental authorities in the United
States and other countries is a significant factor in ongoing research and
product development activities. The Company's diagnostic products will require
regulatory approval by governmental agencies prior to commercialization. Various
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, recordkeeping and marketing of such products. The lengthy
process of seeking these approvals, and the subsequent compliance with
applicable statutes and regulations, require the expenditure of substantial
resources. Any failure by the Company to obtain, or any delay in obtaining,
regulatory approvals could materially adversely affect the Company.
The levels of revenues and profitability of the Company may be affected by
the continuing efforts of government and third party payors to contain or reduce
the costs of healthcare through various means. There have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement to control pricing or profitability of therapeutic and other
products. While the Company cannot predict whether any such legislative or
regulatory proposals will be adopted, the adoption of such proposals could have
a material adverse effect on the Company.
FDA Approval Process. In the United States, medical devices and diagnostics
are classified into one of three classes (class I, II or III) on the basis of
the controls deemed necessary to the FDA to reasonably assure their safety and
effectiveness. Under FDA regulations, class I devices are subject to general
controls (e.g. labeling, premarket notification and adherence to QSRegs) and
class II devices are subject to general and special controls (e.g. performance
standards, postmarket surveillance, patient registries and FDA guidelines).
Generally, class III devices are those which must receive a PMA by the FDA to
ensure their safety and effectiveness (e.g. life sustaining, life supporting and
implantable devices or new devices which have not been found substantially
equivalent to legally marketed devices).
Before a new device can be introduced into the market, the manufacturer
generally must obtain marketing clearance through the filing of either a 510 (k)
notification or a PMA application. A 510 (k) clearance will be granted if the
submitted information establishes that the proposed device is "substantially
equivalent" to a legally marketed class I or II medical device or to a class III
medical device for which the FDA has not called for a PMA. It generally takes
from four to twelve months from submission to obtain a 510 (k) clearance, but it
may take longer. The FDA may determine that a proposed device is not
substantially equivalent to a legally marketed device or that additional
information or data is needed before a substantial equivalence determination can
be made, either of which could delay market introduction of a new product. A
request for additional data may require that clinical studies of the device's
safety and efficacy be performed. Additionally, modifications or enhancements
that could significantly affect the safety of efficacy of the device, or that
constitute a major change to the intended use of the device, will require new
501 (k) submissions.
9
<PAGE>
A PMA application must be filed if a proposed device is not substantially
equivalent to a legally marketed class I or class II device or if it is a class
III device for which the FDA has called for a PMA. A PMA application must be
supported by valid scientific evidence, including preclinical and clinical trial
data, to demonstrate the safety and effectiveness of the device. The PMA
application must also contain the results of all relevant bench tests,
laboratory and animal studies, a complete description of the device and its
components, a detailed description of the methods, facilities and controls used
to manufacture the device in addition to the device labeling and advertising
literature.
If a PMA application is accepted for filing, the FDA begins an in-depth
review of the submission. FDA review of a PMA application generally takes one to
two years from the date the PMA application is accepted for filing, but it may
take significantly longer. The PMA review process includes an inspection of the
manufacturer's facilities to ensure that the facilities are in compliance with
the applicable QSRegs requirements. In addition, an advisory committee made up
of clinicians and/or other appropriate experts is typically convened to evaluate
the application and make recommendations to the FDA as to whether the device
should be approved. The PMA process can be expensive, uncertain and lengthy, and
a number of devices for which FDA approval has been sought by other companies
have never been approved for marketing.
Although clinical investigations of most devices are subject to the
investigational device exemption ("IDE") requirements, clinical investigations
of in vitro diagnostic ("IVD") are exempt from the IDE requirements, including
FDA approval of investigations, provided the testing meets certain exemption
criteria. IVD manufacturers must also establish distribution controls to assure
the IVDs distributed for the purpose of conducting clinical investigations are
used only for that purpose. Pursuant to current FDA policy, manufacturers of
IVDs labeled for investigational use only ("IUO") or research under which
investigational IVDs are distributed to or utilized only by individuals,
laboratories, or healthcare facilities that have provided the manufacturer with
a written certification of compliance indicating that the IUO or RUO product
will be restricted in use and will, among other things, meet institutional
review board and informed consent requirements.
Exports of products subject to 501 (k) notification requirements, but not
yet cleared to market, are permitted without FDA export approval, provided that
certain requirements are met. Unapproved products subject to PMA requirements
can be exported to any country without prior FDA approval, provided, among other
things, they are not contrary to the laws of the country to which they are
intended for import, they have been manufactured in substantial compliance with
the QSRegs and have been granted valid marketing authorization by the member
country of the European Union, Australia, Canada, Israel, Japan, New Zealand,
Switzerland or South Africa. The Company must also provide the FDA with simple
notification indicating the products to be exported and the countries to which
they will be exported.
FDA approval must be obtained for exports of products subject to the PMA
requirements if these export conditions are not met. To obtain export approval,
when required, certain requirements must be met and information must be provided
to the FDA, including, with some exceptions, documentation demonstrating that
the product is approved for import into the country to which it is to be
exported and, in some cases, safety data for the device.
Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA, including recordkeeping requirements and reporting of adverse
experiences with the use of the device. Device manufacturers are required to
register their establishments and list their devices with the FDA and are
subject to periodic inspections by the FDA and certain state agencies. The FDC
Act requires devices to be manufactured in accordance with QSRegs, which impose
certain procedural and documentation requirements upon the Company with respect
to manufacturing and quality assurance activities.
It is not clear which class the cancer screening test is in or what will be
the extent of applications required for the screening test kit. There is no
assurance that FDA and other approvals will be obtained or that the Company will
have the funds available to complete the field and other tests and successfully
file and prosecute the required applications.
10
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International Sales. International sales are subject to foreign government
regulation, the requirements of which vary substantially from country to
country. The time required to obtain foreign approval may be longer or shorter
than that required for FDA approval and the requirements may substantially
differ. The Company must obtain the CE mark prior to engaging in sales within
the EU of certain medical devices. During this process the sponsor must also
demonstrate compliance with ISO manufacturing and quality requirements.
The introduction of the Company's developmental stage test products in
foreign markets will also subject the Company to foreign regulatory clearances,
which may impose additional costs and burdens. International sales of medical
devices are subject to the regulatory requirements of each country. The
regulatory review process varies from country to country and many countries also
impose product standards, packaging requirements, labeling requirements and
import restrictions on devices. In addition, each country has its own tariff
regulations, duties and tax requirements.
Reimbursement. In the United States and elsewhere, sales of diagnostic,
therapeutic and other pharmaceutical products are dependent, in part, on the
availability of reimbursement to the consumer from third-party payors, such as
government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. There is no
assurance that any of the Company's products will be considered cost effective
and that reimbursement to the consumer will be available, or will be sufficient
to allow the Company to sell its products on a competitive and profitable basis.
DILUTION
Dilution is the difference between the purchase price paid by the investors
for their Shares and the net tangible book value of the shares after the
Offering. The net tangible book value of a security is equal to the Company's
tangible net worth (tangible assets minus total liabilities) divided by the
number of Shares of the security outstanding. The following table illustrates
the dilution on a per share basis of the Company's Common Stock:
Amount
---------------
<PAGE>
Sale price per Share.................................... $2.000
Net tangible book value before offering................. $0.001
Increase to present shareholders in net tangible book value
attributable to sale of Shares offered................ $1.999
Pro forma net tangible book value after offering........ $0.197
Dilution to new investors............................... $1.803
The following table shows the number of Shares acquired from the Company,
the aggregate consideration paid by the existing shareholders and new
Shareholders in this Offering:
Shares Percentage Aggregate Percentage of
Acquired from of Shares Consideration Consideration
Company Held by Group Paid for Paid by
Shares Group
----------------------------------------------------------
Existing Shareholders .....5,000,000 90.9% $5,000 0.5%
New Shareholders ............497,500 9.1% $995,000 99.5%
----------------------------------------------------------
Total ....................5,497,500 100.0% $1,000,000 100.0%
----------------------------------------------------------
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DIRECTORS AND OFFICERS
The following table identifies the directors and officers of the Company
and sets forth their respective ages and areas of expertise:
Name Age Expertise
Gifford M. Mabie............ 57 President, CEO and Director
Rhonda R.Vincent............ 34 Vice President, Secretary,
Treasurer and Director
Frederick K. Slicker........ 54 Vice President and General Counsel
Set forth below is a description of the backgrounds of the directors and
management of the Company:
Gifford M. Mabie, age 57, is President, CEO and a Director of the Company.
Mr. Mabie is also President, CEO and a Director of Maxxon, Inc. (OTCBB: MXON), a
development-stage company co-founded by Mr. Mabie in 1996 to develop and
commercialize a patented disposable safety syringe. From 1982 to 1994, Mr. Mabie
was Senior Vice President of CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information company that was purchased by National Data Corporation
(NYSE: NDC) in 1996. As one of the founders of CIS, Mr. Mabie was instrumental
in raising over $40 million in capital that funded acquisitions and new product
development. As a result, that company's revenues grew from $105,000 in 1987 to
over $40 million in 1995. Prior to CIS, Mr. Mabie was with Honeywell Information
Systems, Inc., where he ranked as one of its top five salesmen worldwide. Prior
to joining Honeywell, he was corporate controller with W.B. Dunavant & Company,
one of the world's largest cotton brokers. He holds degrees in accounting and
economics from Memphis State University and served for eight years in the United
States Navy.
Rhonda R. Vincent, age 34, is Vice President, Secretary, Treasurer and
Director of the Company. Ms. Vincent is also Vice President, Secretary,
Treasurer and Director of Maxxon, Inc. (OTCBB: MXON), a development-stage
company co-founded by Ms. Vincent in 1996 to develop and commercialize a
patented disposable safety syringe. From 1994 to 1997, Ms. Vincent was Vice
President, Secretary, Treasurer and Director of Corporate Vision, Inc. (OTCBB:
CVIA), a multimedia software development company. For five years prior to
founding Corporate Vision, Ms. Vincent held various accounting, finance and
investor relations positions with CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information processing company that was purchased by National Data
Corporation (NYSE: NDC) in 1996. She began her career as an audit associate with
the public accounting firm of Coopers & Lybrand. Ms. Vincent is a Certified
Public Accountant and holds a Bachelor of Science degree in Accounting from Oral
Roberts University.
Frederick K. Slicker, age 54, is Vice President and General Counsel for the
Company. He has practiced law for 30 years, primarily in the areas of mergers
and acquisitions, securities law compliance and general business. He holds a
Juris Doctorate with the highest distinction from the University of Kansas and
an LLM from Harvard Law School. In addition to his employment by the Company, he
continues to practice law for third-party clients, including Maxxon, Inc.
Board of Directors. The authorized maximum number of directors is seven.
The Company's directors hold office until the next annual meeting of
stockholders or until their respective successors have been duly elected and
qualified. The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board.
Compensation of Directors. To date, no director's fees have been paid,
however, directors who are not employees of the Company may be paid reasonable
fees and may be granted stock options for serving as directors in the future.
Directors of the Company who are also employees of the Company will not receive
any additional compensation for their services as directors.
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<PAGE>
Compensation of Management. To date, management has received no
compensation for their services. Upon completion of this Offering, it is
anticipated that Mr. Mabie, Ms. Vincent and Mr. Slicker will each receive an
annual salary of $60,000. There are no written employment agreements.
Conflicts of Interest. Members of the Company's management are associated
with other firms involved in a range of business activities. Consequently, there
are potential conflicts of interest inherent in their acting as officers and
directors of the Company. Insofar as the officers and directors are engaged in
other business activities, management anticipates it will devote no more than
50% of its time to the Company's affairs.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the ownership
of Common Stock as of the date of this Offering Memorandum:
Percentage of
Shares Owned Shares
------------------------------
Prior to the Offering
Officers and Directors as a group (3 persons)... 1,800,000 36.0%
Founding Shareholders........................... 3,200,000 64.0%
-------------------------------
Total Shares Outstanding prior to the Offering.. 5,000,000 100.0%
-------------------------------
After the Offering (Maximum Sold)
Officers and Directors as a group (3 persons)... 1,800,000 32.7%
Founding Shareholders........................... 3,200,000 58.2%
Offering Shareholders........................... 497,500 9.1%
-------------------------------
Total Shares Outstanding after the Offering..... 5,497,500 100.0%
-------------------------------
After the Gentest Merger
Officers and Directors as a group (3 persons)... 1,800,000 27.7%
Founding Shareholders........................... 3,200,000 49.2%
Offering Shareholders........................... 497,500 7.7%
Shareholders of Gentest, Inc.................... 1,000,000 15.4%
-------------------------------
Total Shares Outstanding after the Gentest Merger 6,497,500 100.0%
-------------------------------
DESCRIPTION OF SECURITIES
The Company is authorized to issue 45,000,000 shares of Common Stock, par
value $0.001 per share, of which 5,000,000 shares are presently outstanding. The
Company is authorized to issue 5,000,000 shares of Preferred Stock, par value
$0.001 per share, of which there are no shares presently outstanding. There is
no present intent to issue any Preferred Stock.
Upon completion of this Offering, up to 5,497,500 shares of Common Stock
will be outstanding. Upon completion of the Gentest merger, up to 6,497,500
shares of Common Stock will be outstanding. All Shares of Common Stock are, and
all the Shares offered by the Company hereby will be, when issued, fully paid
and nonassessable.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
the Company has not paid cash dividends on its Common Stock. Holders of Common
Stock are entitled to receive such dividends as may be declared and paid from
time to time by the Board of Directors out of funds legally available therefor.
The Company intends to retain
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<PAGE>
any earnings for the operation and expansion of its business and does not
anticipate paying cash dividends in the foreseeable future. Any future
determination as to the payment of cash dividends will depend upon future
earnings, results of operations, capital requirements, the Company's financial
condition and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to receive pro rata all
of the assets of the Company available for distribution to shareholders after
liabilities are paid and distributions are made to the holders of the Company's
Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of the Company.
PLAN OF DISTRIBUTION
The subscription period commences May 18, 1998, and will terminate on June
18, 1998, unless extended by the Company. Funds from the sale of Shares will be
made immediately available to the Company. Subscriptions will be accepted until
the expiration of the offering period or until a maximum of 497,500 Shares are
sold, whichever occurs first. Additional subscriptions will not be accepted by
the Company after the Offering is fully subscribed.
No commissions will be paid in connection with sales made directly by the
officers and directors of the Company. Brokers participating in the distribution
of the Shares will offer the Shares only to investors who represent to the
Company that they meet proper suitability requirements and that investment in
Common Stock is proper for them. The Company will pay a commission to brokers up
to 10% of the proceeds of the sale of the Shares. In addition, the Company will
pay brokers a due diligence fee and a non-accountable expense allowance of up to
4% of the gross proceeds and up to 6% of the gross proceeds, respectively.
Some offerees may utilize a purchaser representative in the evaluation of
the merits and risks of an investment in the Shares. Any such representative
must comply with the requirements of Regulation D under the Securities Act of
1933 and with applicable state securities laws. Neither the Company, nor any
officer or any director of Lexon, Inc. will pay any fees or commissions to, or
pay any charges for the services rendered by, any purchaser's representative
unless the purchaser's representative is a registered broker-dealer entitled to
receive the commissions.
Shares issued to non-affiliates of Lexon in a valid Rule 504 offering
purchase are shares that may be resold without federal registration or other
federal transfer restrictions. Applicable state laws may require registration
before any resles are made from certain states. If the Offering does not qualify
under Rule 504, resale of the Shares will be restricted indefinitely. There is
no asurance that this Offering will qualify under Rule 504.
ADDITIONAL INFORMATION
The Company intends to furnish its shareholders with annual reports
containing audited financial information, reported upon by independent public
accountants.
Each purchaser of Shares, prior to such purchase, is entitled to ask
questions of the Company and receive answers concerning the terms and conditions
of the Offering and to obtain any additional information which the Company
possesses that is necessary for the purchaser to verify the accuracy of the
information furnished in this Offering Memorandum.
The Company will make reasonable efforts to furnish to any qualified
prospective investor, or the prospective investor's authorized representative,
any additional information or opportunity for inquiry
14
<PAGE>
concerning the terms and conditions of this Offering, including information
requested to verify the accuracy of the information contained in this Offering
Memorandum or otherwise furnish the prospective investor or the prospective
investor's representative, to the extent the Company possesses the information
or can obtain it without undue effort or expense. Prospective investors
requiring additional information may contact Gifford Mabie, President of the
Company, at 8908 South Yale, Suite 409, Tulsa, Oklahoma 74137, telephone (918)
492-4125.
15
<PAGE>
LEXON, INC.
FINANCIAL INFORMATION
April 30, 1998
Balance Sheet Pro Forma Balance Sheets
(Unaudited) (Unaudited)
After the
Prior to the After the Gentest
Offering Offering (1) Merger(1)(2)
----------------- --------------- -------------
Assets
Current Assets
Cash $5,000 $781,000 $309,750
Other Assets
License Agreement 0 0 471,250
Gentest Merger 0 0 1,000
----------------- --------------- -------------
Total Assets $5,000 $781,000 $782,000
----------------- --------------- -------------
Liabilities
Current Liabilities $0 $0 $0
Stockholders' Equity
Preferred stock, $0.001 par value,
5,000,000 Shares authorized 0 0 0
Common stock, $0.001 par value,
45,000,000 Shares authorized 5,000 5,497 6,497
Paid in Capital 0 775,503 775,503
Retained Earnings 0 0 0
----------------- --------------- -------------
Total Liabilities and
Stockholders' Equity $5,000 $781,000 $782,000
----------------- --------------- -------------
Statement of Pro Forma Statements of
Operation Operations
(Unaudited) (Unaudited)
Prior to the After the After the
Offering Offering Gentest Merger
----------------- --------------- ---------------
Revenue $0 $0 $0
Expenses 0 0 0
----------------- --------------- --------------
Net Income $0 $0 $0
----------------- --------------- --------------
Earnings per Share $0.00 $0.00 $0.00
----------------- --------------- --------------
(1) Assumes receipt of maximum offering amount of $995,000 less estimated
broker comissions of $199,000 and estimated Offering expenses of $20,000.
(2) Assumes payment at Closing of $471,250 in liabilities of Gentest, which
relate to the licensing and development of the cancer screening test kit,
and issuance of 1,000,000 shares of Lexon Common Stock, $0.001 par value.
16
<PAGE>
LEXON, INC.
FINANCIAL INFORMATION
April 30, 1998
Statement of Pro Forma Statements of
Cash Flows Cash Flows
(Unaudited) (Unaudited)
After the
Prior to the After the Gentest
Offering Offering(1) Merger(1)(2)
----------------- --------------- ------------------
Operating Activities
Net Income $0 $0 $0
----------------- --------------- ------------------
Investing Activities
Initial License Fee 0 0 (100,000)
Sponsored Research Contract 0 0 (311,250)
Consulting Fee 0 0 (60,000)
----------------- --------------- ------------------
Total Investing Activities $0 $0 $(471,250)
----------------- --------------- ------------------
Financing Activities
Sale of Common Stock to Founders $5,000 $5,000 $5,000
Sale of Common Stock in this Offering 0 $995,000 $995,000
Less: Estimated Broker Commissions 0 (199,000) (199,000)
Less: Estimated Offering Expenses 0 (20,000) (20,000)
----------------- --------------- ------------------
Total Financing Activities $5,000 $781,000 $781,000
----------------- --------------- ------------------
Net Increase in Cash $5,000 $781,000 $309,750
Cash at Beginning of Period 0 0 0
----------------- --------------- ------------------
Cash at End of Period $5,000 $781,000 $309,750
----------------- --------------- ------------------
Schedule of Non-Cash Financing and
Investing Activities
Common Stock Issued in Gentest Merger $0 $0 $1,000
----------------- --------------- ------------------
(1) Assumes receipt of maximum offering amount of $995,000 less estimated
broker comissions of $199,000 and estimated Offering expenses of $20,000.
(2) Assumes payment at Closing of $471,250 in liabilities of Gentest, which
relate to the licensing and development of the cancer screening test kit,
and issuance of 1,000,000 shares of Lexon Common Stock, $0.001 par value.
17
<PAGE>
RISK FACTORS
This Offering is speculative and involves a high degree of risk. An
investment in the Shares offered herein should not be made by persons who cannot
afford the loss of their entire investment. Some risk factors are listed below:
1. No Operating History. The Company was organized in 1997 and has no operating
history. The Company has no products and minimal assets at this time. There is
no assurance that the Company will be able to develop, manufacture or market any
products successfully, generate net revenue from the sale of any products, or
achieve or maintain profitable operations.
2. Gentest Merger May Not Occur. The Company and Gentest have entered into an
Agreement and Plan of Merger, which is to certain conditions including payment
of $471,250 in Gentest liabilities at Closing. There is no assurance that the
Merger will occur.
3. Product Not Developed. The Company faces all the risks associated with the
development of a new, speculative business. The Company has no products and
limited assets at this time, and will be subject to numerous risks, expenses,
and difficulties typically encountered in the development of new medical
diagnostic tests. If the Company acquires Gentest, the business of the Company
will depend upon the development of the cancer screening test kit to detect the
presence of the TGF-(beta)4 (ebaf) protein and upon the approval by the FDA of
the test kit. There is no assurance that the Company's activities will be
successful or profitable or that the FDA will approve the test kit. While
management has been advised that the detection of the TGF-(beta)4 (ebaf) protein
confirms a cancer diagnosis with a high degree of probability, management has
not independently verified the accuracy of this statement. No assurance is given
that the presence of TGF-(beta)4 (ebaf) is an accurate predictor of cancer.
4. The Company Does Not Own the Protein Screening Process and Will Not Own Any
Improvements Thereto. Certain proprietary rights in the TGF-(beta)4 (ebaf)
protein screening process are owned by the University of South Florida ("USF")
and the License is owned by Gentest. Only if Lexon and Gentest merge will Lexon
have the exclusive worldwide license to manufacture and market test kit products
developed using the process. The Merger is subject to certain conditions which
may not occur. There is no assurance the Merger will occur, even if the
conditions are satisfied. Furthermore, any improvements to the process will
remain the property of the USF. There is no assurance that competing products
will not be developed or that improvements to the current screening process will
be available to the Company.
5. Patentability of Protein Screening Process is Uncertain. A non-provisional
patent application related to the TGF-(beta)4 (ebaf) protein screening process
was filed by the USF with the U.S. Patent and Trademark Office ("USPTO") in 1997
but was recently rejected for claims that were considered too broad in scope.
USF has six months to file an answer to the rejection or the application will
become stale. There is no assurance that USF will file an answer within the
prescribed time period, nor is there any assurance that the patent application
is free of other deficiencies. Furthermore, there is no assurance that the
TGF-(beta)4 (ebaf) protein screening process is patentable. Even if a patent is
issued, the scope of the patent is unknown at this time. There is no assurance
that a patent, if issued, will not infringe on the rights of others.
6. Foreign Patent Protections for Ovarian and Testicular Cancer Detection Claims
is Remote. A provisional patent application filed with the USPTO disclosed the
detection of colon cancer, but not detection of ovarian or testicular cancer.
Subsequent to filing the provisional patent application, a series of lectures
and papers in which additional disclosures related to the detection of ovarian
and testicular cancer by the protein screening process were made public by the
USF. The existence of these additional disclosures outside the scope of the
provisional patent application renders the possibility of obtaining foreign
patent protections for claims related to the detection of ovarian and testicular
cancers remote. There is no assurance that the Company will obtain any foreign
patent protection for any of the claims.
7. Filing, Prosecution and Maintenance of Patents Are Within the Sole Discretion
of the USF. The filing, prosecution and maintenance of all patent rights are
within the sole discretion of the USF. The Company has the right to request that
the USF seek, obtain and maintain such patent and other protection to
18
<PAGE>
the extent that USF is lawfully entitled to do so, at the Company's sole
expense. There is no assurance that USF will seek, obtain or maintain such
patent and other protection to which it is lawfully entitled. Further, there is
no assurance that the Company will have sufficient working capital to fund USF's
efforts in those activities, if requested.
8. Rights and Interests of the National Institute of Health are Unknown. The
initial research and development related to the TGF-(beta)4 (ebaf) protein
screening process was funded by a grant from the National Institute of Health
("NIH"). The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and infringement claims. There is
no assurance that the interests of the NIH will not materially adversely affect
the Company or its business.
9. Licensing Agreement Obligates Company to Pay Royalties Regardless of Patent
Issuance. The licensing agreement with the USF obligates the Company to pay
royalties of 5% of gross revenues from the sale of test kits, and also to make
minimum royalty payments of between $75,000 and $150,000 per year after two
years, regardless of whether a patent is issued.
10. Lack of US and Foreign Patent Protection Could Adversely Affect the
Company's Ability to Compete. At least some aspects of the process and detection
methods have been published by the USF or the inventors and are now available to
the public and to competitors. The lack of U.S. and foreign patent protection
for the test kit could result in the manufacture and sale of test kits copied by
competitors who are not obligated to pay royalties. As a result, these
competitors could achieve superior operating margins, which could adversely
affect the Company's ability to compete.
11. Inventor's Continued Involvement in Developing Test Kits is Uncertain. Dr.
Tabibzadeh, co-inventor of the TGF-(beta)4 (ebaf) protein screening process and
the principal investigator in developing the test kits, is leaving the USF for a
research hospital in New York. There is no assurance of his continued
involvement in the development of the test kits or the Company's ability to find
a replacement.
12. Cost to Develop Test Kits Could Exceed Agreed Upon Amount. The Sponsored
Research Agreement with the USF states that the cost to develop the test kits
shall not exceed $311,250. There is no assurance that the cost to develop the
test kits will not exceed this amount. Furthermore, there is no assurance that
the Company will have the capital necessary to fund any cost overruns.
13. Need for Additional Capital. The Company is dependent on the maximum
proceeds of the Offering described herein to acquire Gentest and to continue its
business plan. Additional capital will be required to field test the screening
kit, file and process applications for governmental approval, develop models,
identify manufacturers to mass produce the test kits, and to advertise, ship and
collect for products sold and any other costs. The Company intends to pursue
additional financing. However, there is no assurance that any additional capital
needed will be available to the Company on acceptable terms when needed, if at
all. Any additional capital may involve substantial dilution to the interests of
the Company's then existing stockholders.
14. Government Regulation. The Company's activities and products will require
regulatory approval in the United States, Canada and in a number of foreign
countries. The process of obtaining these approvals, if required, will be time
consuming and costly. Changes in the regulations for the Company's products
could adversely impact operations, affecting profitability or competitive
advantages. There is no assurance that governmental approvals will be obtained.
15. Acceptance by Medical Professionals. Inherent to the successful marketing of
the Company's cancer screening test kit is the acceptance of the product by
medical professionals. There is no assurance that the product will be accepted.
16. Competition. The diagnostic segment of the medical industry is intensely
competitive and composed of large and well financed firms, including
pharmaceutical, biotechnology, and consumer goods companies, as well as
universities and other research institutions that are constantly developing or
acquiring rights to new products. Moreover, competing products may be accepted
by consumers who may be slow to change to the
19
<PAGE>
use of alternative products. Some competitors have established distribution
networks and sufficient marketing resources to resist attempts to dislodge use
of their products. In addition, there is no assurance that one ormore
competitors will not develop or manufacture products that are more effective or
better accepted than those which the Company seeks to commercialize. There is no
assurance that the Company will be able to compete successfully or profitably.
17. Dependence Upon Key Personnel. The Company is dependent upon the services of
Dr. Tabibzedah, co-discoverer of the TGF-(beta)4 (ebaf) protein screening
process, to oversee the development of the cancer test kit. The loss of the
services of Dr. Tabibzedah and the inability to retain an acceptable substitute
could have a material adverse effect on the Company. The Company is also
dependent upon the services of its officers. The loss of the services of these
key personnel or the inability to retain such experienced personnel could have a
material adverse effect on the Company. There is no assurance that replacement
of key personnel will be possible.
18. Limited Experience of Management and Potential Conflicts of Interest. The
officers of the Company have had limited experience in the medical products
industry. In addition, members of the Company's management are associated with
other firms involved in a range of business activities. Consequently, there are
potential conflicts of interest in their acting as officers and directors of the
Company. Management estimates that not more than 50% of their time will be
devoted to the Company's activities (See "Conflicts of Interest").
19. Concentration of Ownership. As of the date of this Offering Memorandum, the
directors and executive officers of the Company, as a group, owned or controlled
36.0% of the outstanding Common Stock of the Company. After this Offering, if
the maximum is sold, the directors and executive officers, as a group, will own
or control 32.7% of the outstanding Common Stock of the Company. After the
acquisition of Gentest, Inc., the directors and executive officers of the
Company, as a group, will own or control 27.7% and the shareholders of Gentest
will own 15.4% of the outstanding Common Stock of the Company.
20. Broad Discretion in Application of Proceeds. Approximately $471,250 of the
net proceeds of this Offering will be used to pay the liabilities of Gentest.
Any remaining proceeds are intended for general working capital purposes. The
Company will have broad discretion as to the application of such proceeds. There
is no assurance that the required funds will be available when needed.
21. Arbitrary Offering Price. The offering price of the Shares has been
arbitrarily determined by the Company. There is no relationship between the
offering price and the Company's assets, book value, net worth, or any other
economic or recognized criterion of value. There is no assurance that this
offering will be successful or that the Company will raise sufficient funds to
complete the Gentest merger.
22. Dilution. Investors participating in this Offering will incur substantial
dilution as it relates to the resulting net tangible book value of the Company's
capital stock after the completion of the Offering.
23. Compliance with State and Federal Securities Laws. It is intended that this
offering will qualify for exemption from federal registration under Rule 504 of
SEC Regulation D. There is no assurance that the Offering presently qualifies or
will continue to qualify under exemptions from registration provided by the
Securities Act of 1933 (the "Act") or applicable state securities laws due to,
among other things, the adequacy of disclosure, the manner of distribution of
the Offering or the retroactive change or interpretation of any applicable
securities laws or regulations. Even if the Offering is exempt from registration
under federal law, registration may be required for sales and resales of the
Shares under applicable state laws. If, and to the extent that, suits for
rescission are brought and successfully concluded for failure to register this
Offering under applicable securities laws, or for acts or omissions constituting
certain prohibited practices under state or federal securities laws, the capital
and assets of the Company could be materially adversely affected, which could
jeopardize the ability of the Company to operate successfully thereafter.
24. No Trading Market for Common Stock. There is no established liquid market
for the Company's Common Stock. Although the Company intends to pursue
developing a liquid market as soon as practicable, there is no assurance that
such liquid market will develop, or if such a market develops, that it will be
20
<PAGE>
maintained. Holders of the Shares of Common Stock may, therefore, have
difficulty in selling their stock should they desire to do so. Investors must be
able to lose their entire investment in their Shares of Common Stock.
25. No Dividends. The Company has not paid any cash or other dividends on its
Common Stock and does not expect to declare or pay any such cash dividends in
the foreseeable future.
21
<PAGE>
SUBSCRIPTION AGREEMENT
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The undersigned subscriber ("Subscriber") hereby subscribes to and
agrees to purchase __________ Shares ("Shares") of Lexon, Inc. Common Stock,
$0.001 par value, for $2.00 per Share.
1. General Information Concerning the Company and the Offering.
(A) Subscriber has received a copy of the Private Offering Memorandum dated
May 18, 1998.
(B) Subscriber understands that the business plans described in the Private
Offering Memorandum dated May 18, 1998 assumes the successful completion of the
funding transactions described therein, none of which may occur.
2. Status of Investor. (Check all that apply)
Accredited Investor
Subscriber is an "accredited investor" as defined by SEC Rule 501(a),
by reason of being (check one):
----A natural person who has a net worth (together with my spouse) of more
than $1,000,000; or
----A natural person who had income in excess of $200,000 ($300,000 jointly
with my spouse) in each of the last two (2) years and a reasonable expectation
of earning the same income level this year; or
----As otherwise specified in SEC Rule 501(a).
Non-Accredited Investor
----Subscriber does not meet the requirements as an accredited investor.
3. Subscriber's Investment Experience. Subscriber represents and warrants to
the Company that:
(A) Subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of
an investment in the Shares; and
(B) Subscriber is able to bear the economic risk of the investment in
the Shares, including the risk of a total loss of the investment in the
Shares.
4. Subscriber's Investment Representations. Subscriber represents and warrants
to the Company that:
(A) The acquisition of the Shares by Subscriber is for Subscriber's own
account and is for investment; and
(B) Subscriber has no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the Shares; and
22
<PAGE>
(C) All information that Subscriber has supplied to the Company in
connection with Subscriber's subscription to purchase the Shares is
true and correct.
5. Subscriber's Understanding Concerning the Company. Subscriber represents
and warrants to the Company that:
(A) Subscriber understands that an investment in the Shares involves a
very high degree of risk; and
(B) Subscriber acknowledges that the Company is a development-stage
company having been incorporated in December, 1997, and that the
Company has no prior business or financial experience; and
(C) Subscriber has conducted all investigations and due diligence
concerning the Company and the Shares which Subscriber deems
appropriate, and Subscriber has found all such information obtained
fully acceptable; and
(D) Subscriber is knowledgeable about the prospects, business,
financial condition and operations of the Company; and
(E) Subscriber has had an opportunity to ask questions of the officers
and directors of the Company concerning the Shares and the business and
financial condition of and prospects for the Company, and the officers
and directors of the Company have adequately answered all questions
asked and made all relevant information available to Subscriber,
including all relevant books and records of the Company; and
(F) Subscriber understands that success of the Company is dependent
upon receipt of the maximum of $995,000 from the sale of the Shares;
and
(G) Subscriber understands that no market exists for the Shares and
that there is no assurance that a market will exist in the future.
6. Compliance with Securities Laws. Subscriber understands and agrees that
federal and state securities laws may impose restrictions and limitations
applicable to the purchase, sale, resale and distribution of the Shares.
7. Indemnification. Subscriber agrees that the Company has relied on the
accuracy of the statements of Subscriber set forth herein and otherwise.
Subscriber agrees to defend and indemnify the Company and its officers,
directors, controlling persons, accountants, attorneys and agents representing
Lexon, and to hold all and each of them harmless from and against any and all
losses, damages, liabilities and expenses, including, without limitation,
reasonable attorneys' fees and expenses, which they or any of them incurs by
reason of any alleged misrepresentation made by or on behalf of Subscriber, any
alleged breach by Subscriber of the representations and warranties made by
Subscriber herein, any alleged failure by Subscriber to fulfill any of the
covenants and agreements of Subscriber set forth herein and any alleged
violation of applicable securities law by Subscriber.
8. Survival. All representations, warranties and covenants contained in this
Subscription Agreement, including without limitation, the indemnification
provisions hereof, shall survive the acceptance by the Company of this
Subscription Agreement and the delivery of the Common Stock to Subscriber.
Subscriber acknowledges and agrees that this Subscription Agreement shall
survive the death or disability of Subscriber.
9. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma.
23
<PAGE>
SUBSCRIBER This Subscription Agreement has been executed by Subscriber this
_____ day of _________, 1998. Please make check payable to: Lexon, Inc.
FOR INDIVIDUALS FOR CORPORATE & OTHER
Signature(s): Signature
---------------------- -----------------------
By:
---------------------- ------------------------
(Second signature only if shares (Print name and title)
held jointly)
Please Register Shares as Follows: Please Register Shares as Follows:
Name: Name:
------------------------ -------------------------
Address: Address:
------------------------ -------------------------
City/State: City/State:
------------------------ -------------------------
Zipcode: Zipcode:
------------------------ -------------------------
Tax ID No.: Tax ID No.:
------------------------ -------------------------
Phone: Phone:
------------------------ -------------------------
Fax: Fax:
------------------------ -------------------------
Note: If Shares are jointly held, please designate the following (circle one):
Joint Tenants with Right of Survivorship OR Tenants in Common
LEXON, INC.
By: ____________________________________
Rhonda R. Vincent
Vice President, Secretary and Treasurer
Agreed and accepted, effective this _____ day of _____________, 1998.
24
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
LEXON, INC.
246,667 Shares at $3.00 per Share
Lexon, Inc. ("Lexon") is offering 246,667 shares ("Shares") of its Common
Stock, par value $0.001 per share, to qualified investors acceptable to Lexon in
its sole discretion, for $3.00 per share, a price determined arbitrarily by
Lexon. Lexon is a development stage company that owns an exclusive license to
manufacture and market a screening test kit that identifies colon, ovarian and
testicular cancer. The Offering is made in reliance upon an exemption from
registration provided by Regulation D, Rule 504 of the Securities and Exchange
Commission. The Shares are eligible for trading in the Over the Counter Market
under the symbol "LXXN". There is no assurance that a liquid market for the
shares will develop or, if developed, that it will be maintained. Consequently,
a purchaser of the Shares may be unable to sell the Shares when desired and may
have to hold the Shares indefinitely.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION".
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Estimated Net Proceeds
Purchase Broker to the
Price Commissions(1) Company(2)
Per Share..................... $3.00 $0.60 $2.40
Total........................$740,000 $148,000 $592,000
(See footnotes on following page)
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125
Fax (918) 492-2560
The date of this Offering Memorandum is November 6, 1998
<PAGE>
Footnotes from previous page
(1) No commissions will be paid in connection with sales made directly by the
officers and directors of Lexon. However, Shares may be sold by broker-dealers
and members of the National Association of Securities Dealers, Inc. With respect
to these sales, a commission of 10% will be paid. Additional compensation in the
form of (a) a non-accountable expense allowance equal to 6% of the gross
proceeds from sales made by such persons and (b) a due diligence fee of 4% of
the gross proceeds may also be paid. The table assumes all Shares will be sold
through such persons.
(2) Before deducting expenses payable by Lexon in connection with this Offering
estimated at $20,000. These expenses relate primarily to filing fees, printing,
legal and accounting expenses.
LEXON HIGHLIGHTS
In June, 1998, Lexon raised $250,410 through the sale of 125,205 shares of
Common Stock at $2.00 per Share, pursuant to an Offering dated May 18, 1998.
Since then, the following events have occurred:
1. Gentest, Inc. merged into Lexon, Inc. on July 8, 1998, and Lexon paid
$471,500 to complete the merger.
2. Lexon secured a License Agreement with North Shore University Hospital
covering the cancer screening test development by Dr. Tabibzadeh.
3. Lexon completed an audit of its financial statements as of July 31,
1998.
4. Lexon filed its application under Rule 15(c) 2-11 seeking authority to
allow its Common Stock to trade in the Over the counter market.
5. Lexon Common Stock was approved for trading on October 27, 1998.
Lexon's stock symbol is "LXXN".
6. Lexon has been advised by officials at USF that the U.S. Patent and
Trademark Office has verbally advised that its patent application
covering the cancer screening process will be issued by December 31,
1998.
7. Lexon has learned, but not confirmed, that it is likely that no FDA
approval will be required for the commercial sale of the test kit
developed by Dr. Tabibzadeh to be used by medical laboratories. If
true, the test kit could be available commercially by early 2000.
2
<PAGE>
THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS PROVIDED BY LEXON,
INC. SOLELY FOR THE PERSONS RECEIVING IT, AND REPRODUCTION OR DISTRIBUTION TO
OTHERS, IN WHOLE OR IN PART, IS PROHIBITED WITHOUT LEXON'S PRIOR WRITTEN
CONSENT.
THE SHARES ARE BEING OFFERED SUBJECT TO PRIOR SALE, WITHDRAWAL,
CANCELLATION OR MODIFICATION WITHOUT NOTICE AND FURTHER CONDITIONS SET FORTH
HEREIN.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION OF THOSE
MATTERS THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN
INVESTOR IN THIS OFFERING.
THERE IS NO PUBLIC OR OTHER MARKET FOR THE SHARES OFFERED HEREBY, NOR IS
THERE ANY ASSURANCE THAT SUCH A MARKET WILL EVER DEVELOP. FOR THIS REASON AND
BECAUSE THE SHARES HAVE NOT BEEN REGISTERED UNDER APPLICABLE SECURITIES LAWS, AN
INVESTOR WILL BE REQUIRED TO RETAIN OWNERSHIP OF THE SHARES ACQUIRED HEREUNDER
AND BEAR THE ECONOMIC RISK OF HIS INVESTMENT FOR AN INDEFINITE PERIOD.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY LEXON, ITS
MANAGEMENT, AUTHORIZED REPRESENTATIVES OR ANY OTHER PERSON IN ANY JURISDICTION
IN WHICH AN OFFERING OR SOLICITATION IS UNLAWFUL OR UNAUTHORIZED.
THIS MEMORANDUM IS INTENDED TO FURNISH INFORMATION TO THE PROPOSED INVESTOR
WITH RESPECT TO THE INVESTMENT DESCRIBED. IN CONSIDERING THIS INVESTMENT, EACH
PROPOSED INVESTOR MUST EVALUATE FOR HIMSELF OR HERSELF ITS MERITS AND RISKS OR
RETAIN THE SERVICES OF ANOTHER PERSON WHO HAS SUFFICIENT KNOWLEDGE AND EXPERTISE
TO EVALUATE SUCH MERITS AND RISKS. LEXON RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUBSCRIPTIONS TO PURCHASE SHARES OFFERED
HEREBY AND RESERVES THE RIGHT TO TERMINATE THIS OFFERING AT ANY TIME.
EXCEPT AS SET FORTH UNDER "ADDITIONAL INFORMATION", NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS OR FURNISH ANY INFORMATION CONCERNING
LEXON OR THE SHARES OFFERED HEREBY OTHER THAN THE REPRESENTATIONS AND
INFORMATION SET FORTH IN THIS MEMORANDUM, AND IF MADE OR FURNISHED, SUCH OTHER
REPRESENTATIONS OR INFORMATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY LEXON. LEXON SHALL MAKE AVAILABLE TO EACH PROSPECTIVE INVESTOR, OR THE
INVESTOR'S REPRESENTATIVE, DURING THIS OFFERING AND PRIOR TO THE SALE OF ANY
SHARES, ALL INFORMATION WHICH MAY BE DEEMED RELEVANT TO THIS OFFERING OR
NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN, AND LEXON
SHALL PROVIDE ALL PROSPECTIVE INVESTORS THE OPPORTUNITY TO ASK QUESTIONS OF AND
RECEIVE ANSWERS FROM LEXON CONCERNING ANY ASPECT OF THE OFFERING AND AN
INVESTMENT IN THE SHARES.
3
<PAGE>
TABLE OF CONTENTS
SUMMARY OF THE OFFERING...................................................5
USE OF PROCEEDS...........................................................6
LEXON.....................................................................6
MARKET AND INDUSTRY INFORMATION...........................................8
DILUTION..................................................................9
DIRECTORS AND OFFICERS...................................................10
PRINCIPAL SHAREHOLDERS...................................................11
DESCRIPTION OF SECURITIES................................................11
PLAN OF DISTRIBUTION.....................................................12
ADDITIONAL INFORMATION...................................................13
FINANCIAL INFORMATION....................................................14
RISK FACTORS.............................................................20
SUBSCRIPTION AGREEMENT...................................................23
4
<PAGE>
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements appearing elsewhere in this
Offering Memorandum. Each prospective investor is urged to read this Offering
Memorandum in its entirety before making a decision to invest in the Shares
offered hereby.
Lexon. Lexon, Inc., an Oklahoma corporation ("Company"), is a development
stage corporation organized in December, 1997 to identify and commercialize
proprietary medical biotechnology opportunities.
Lexon owns an exclusive worldwide license to develop, manufacture, obtain
FDA approval for, if required, and market a cancer screening test kit for
detecting the protein TGF-(beta)4 (ebaf), which allows for early, non-invasive
diagnosis of certain types of colon, ovarian and testicular cancers. There is no
assurance that the cancer screening test kit, if successfully developed, will
receive FDA approval, if required, or will be accepted in the medical
marketplace.
The Offering. The offering is intended to comply with Rule 504 of SEC
Regulation D. Lexon is offering 246,667 Shares of its Common Stock at a price of
$3.00 per Share on a "best efforts basis". The Offering shall be open for a
period of thirty (30) days unless all 246,667 Shares are sold earlier or the
Offering is otherwise extended or terminated by Lexon.
Use of Proceeds. Lexon intends to use the net proceeds of this Offering to
pay indebtedness of approximately $250,000 and for general working capital
purposes. (See "Use of Proceeds").
Risk Factors. Investment in the Shares offered hereby is speculative and
involves a high degree of risk and immediate dilution and should not be
purchased by any investor who cannot afford the loss of the entire investment.
Each prospective investor should carefully consider the significant risk factors
inherent in and affecting the business of Lexon and this Offering. (See "Risk
Factors").
Summary Financial Information. The financial information set forth below is
from the unaudited balance sheet of Lexon appearing elsewhere in this Offering
Memorandum. See "Financial Information". Such information should be read in
conjunction therewith.
As Adjusted
October 31, 1998 for this
Balance Sheet Data (Unaudited) Offering (1)
------------------------------------
Total Assets ......................... $472,549 $1,044,549
Total Liabilities...................... $253,736 $253,736
Working Capital ..................... $(253,438) $318,562
Total Stockholders' Equity............. $218,813 $790,813
(1) Assumes maximum net proceeds from this Offering of $572,000.
5
<PAGE>
USE OF PROCEEDS
Lexon estimates the maximum net proceeds of this Offering to be $572,000,
after deducting the maximum estimated broker commissions, non-accountable
expenses and due diligence fees of $148,000 and the estimated printing, legal
and accounting expenses of $20,000. Lexon expects to use the net proceeds of
this Offering in substantially the following manner:
Amount
------------------
Payment of Notes Payable plus Accrued Interest............ $240,000
Payment of Accounts Payable and Accrued Liabilities....... 14,536
Working Capital........................................... 317,464
------------------
TOTAL USE OF MAXIMUM NET PROCEEDS......................... $572,000
------------------
Since the maximum net proceeds of this Offering will be applied over time,
the actual expenditure of such proceeds for any purpose could vary significantly
from the anticipated expenditures described above. Lexon reserves the right,
therefore, to reallocate proceeds among the uses described above, depending upon
factors such as the results of Lexon's preliminary engineering evaluation,
Lexon's success in developing new products, and technological advances in the
industry.
LEXON
Lexon is a development stage corporation organized in December, 1997 to
identify and commercialize proprietary medical biotechnology opportunities.
Lexon owns the exclusive worldwide license to develop, manufacture and
market a test kit for detecting the protein TGF-(beta)4 (ebaf), which allows the
early diagnosis of certain types of colon, ovarian and testicular cancers. The
test kit, which is being developed for laboratory use, can detect elevated
levels of the TGF-(beta)4 (ebaf) protein in a patient's blood, thus avoiding the
need for invasive diagnostic procedures.
The discovery linking the TGF-(beta)4 (ebaf) protein to colon, ovarian and
testicular cancers was made by Dr. Siamak Tabibzadeh, M.D., while he was a
professor in the Department of Pathology at the University of South Florida
("USF") and an attending pathologist at the Moffitt Cancer Center at USF. Dr.
Tabibzadeh is now Chief of Experimental Pathology and Professor in Pathology at
North Shore University Hospital in Long Island, New York ("North Shore"), where
the test kit is being developed.
Lexon has exclusive license agreements with the University of South Florida
Research Foundation ("USFRF"), which is the exclusive licensor for USF, and with
North Shore. The agreements provide for a 5.0% royalty and 0.5% royalty to be
paid to the USFRF and North Shore, respectively, from gross receipts from sales
of products developed using the protein screening process. The license agreement
with USFRF requires minimum annual royalty payments of $75,000 in 2000, $100,000
in 2001, $125,000 in 2002, and $150,000 in 2003 and in each year thereafter for
the term of the agreement. The license agreement with North Shore does not
require a minimum annual royalty payment. The exclusive license agreements were
acquired by Lexon on July 8, 1998 by way of merger with Gentest, Inc.
TGF-(beta)4 (ebaf) Protein Screening. Cancer is one of the leading causes
of death in the general population. A correlation exists between early tumor
detection and the survival of the patient. The mortality from cancer can be
significantly reduced if tumors are found and treated at an early stage. Many
tumors do not produce any clinical signs or symptoms before they reach a
considerable size. Therefore, there is a need to discover markers that can
identify tumors at an early stage. In all types of cancer, the patient has the
best chance of survival if the tumor is detected and removed early.
6
<PAGE>
Currently, very few markers exist that are useful in the diagnosis of
cancerous tumors. Carcinomembryonic antigen (CEA), prostatic specific antigen
(PSA), and carcinoma-125 (CA-125) are among the most widely used tumor markers.
However, the expression of CEA or CA-125 is not specific and these proteins are
expressed in a variety of conditions not related to cancer. For these reasons,
these markers can not be used for mass screening of the general population
because of the high number of false positives that would require additional
testing to rule out the presence of cancer. For mass screening, there is a need
for a specific and sensitive test.
The TGF-(beta)4 marker is the outgrowth of a discovery of a gene that is
the common thread linking a very diverse group of conditions. The gene is called
ebaf, for "endometrial bleeding associated factor" and its expression was
initially identified by USF researchers in both normal menstrual and abnormal
endometrial bleeding. Although the gene was initially called ebaf, a committee
on gene nomenclature has now approved the name TGF-(beta)4.
Because of its specificity of expression, the TGF-(beta)4 (ebaf) protein
makes this marker uniquely suited for such mass screening. In addition, the
specific expression of the TGF-(beta)4 (ebaf) protein in cancers of colon, ovary
and testis could allow precise localization of the tumor.
Key Personnel. Dr. Siamak Tabibzadeh, M.D., Chief of Experimental Pathology
and Professor in Pathology at North Shore, is supervising the development of the
cancer screening test kit. He serves as the editor-in chief of the "Frontiers in
Bioscience", as a member of the editorial board of Endocrine, and as a referee
for several prestigious medical journals. He is the author of 80 published
journal articles and has given numerous invited presentations in both the United
States and Europe. Dr. Tabibzadeh received his M.D. from Tehran University
School of Medicine, where he ranked first in his graduating class. He served a
residency in anatomic and clinical pathology at Montefiore Medical Center in New
York and held a fellowship in immunopathology at Elmhurst Hospital, Elmhurst,
New York and Mount Sinai School of Medicine, New York, NY.
Licenses, Patents and Proprietary Information. The TGF-(beta)4 (ebaf)
protein screening process is owned by the University of South Florida ("USF")
and any improvements to the process will be owned by North Shore. Lexon owns
exclusive worldwide licenses to manufacture and market test kit products using
the process owned by the USF. Improvements to the process will not be owned by
Lexon and may not be covered by the existing licenses.
The Exclusive License Agreements with USF and with North Shore obligates
Lexon to pay royalties of 5.0% and 0.5% of gross revenues from the sale of test
kits, regardless of whether a patent is issued. A preliminary patent application
related to the TGF-(beta)4 (ebaf) protein screening process was filed by the USF
with the U.S. Patent and Trademark Office ("USPTO") in 1997, and USF officials
have informed Lexon that a U.S. Patent covering the screening process will be
issued soon. There is no assurance that a patent will be issued, and even if
issued, there is no assurance that a patent will not infringe the rights of
others.
The patent application filed with the USPTO asserted claims related only to
the detection of colon cancer. Subsequent to filing the patent application, a
series of lectures and papers in which additional claims related to the
detection of ovarian and testicular cancer by the protein screening process were
made public by the USF. The existence of these additional claims outside the
scope of the patent application renders the possibility of obtaining foreign
patent protections for claims related to the detection of ovarian and testicular
cancers remote. There is no assurance that Lexon will obtain any U.S. or foreign
patent protection for any of the claims.
The filing, prosecution and maintenance of all patent rights regarding the
cancer screening process are within the sole discretion of the USF. Lexon has
the right to request that USF seek, obtain and maintain such patent and other
protection to the extent that USF is lawfully entitled to do so, at Lexon's sole
expense. There is no assurance that USF will seek, obtain or maintain such
patent and other protection to which it is lawfully entitled. Further, there is
no assurance that Lexon will have sufficient working capital to fund USF's
efforts in those activities.
7
<PAGE>
The initial research and development related to the TGF-(beta)4 (ebaf)
protein screening process was funded by a grant from the National Institute of
Health. The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and infringement claims. There is
no assurance that the interests of the NIH will not materially adversely affect
Lexon or its business.
The lack of U.S. and foreign patent protection for the test kit could
result in the manufacturing and sale of test kits copied by competitors who are
not be obligated to pay royalties. As a result, these competitors could achieve
superior operating margins, which could adversely affect Lexon's ability to
compete.
Marketing. Lexon's management has limited sales and marketing experience,
and no assurance is given that Lexon will be able to establish and maintain a
significant sales and marketing organization or that a direct sales force, if
developed by Lexon, will succeed in promoting Lexon's products to third-party
payors, clinical laboratories, healthcare providers and government entities
worldwide. Lexon believes that the marketing effort may be a lengthy process,
requiring Lexon to educate the worldwide medical community regarding both the
clinical utility and cost-effectiveness of Lexon's products.
Competition. The medical diagnostics and biotechnology industries are
subject to intense competition. Lexon's competitors in the United States and
abroad may include Roche Diagnostic Systems, Abbott Laboratories, Chiron
Corporation and Gen-Probe Incorporated. Other companies, including large
pharmaceutical and biotechnology companies, may enter the market. Lexon's
existing and potential competitors may be able to develop technologies that are
as effective as, or more effective or easier to interpret, than those offered by
Lexon. Many of Lexon's existing and potential competitors have substantially
greater financial, marketing, sales, manufacturing, distribution and
technological resources than Lexon. There is no assurance that Lexon will be
able to successfully compete.
Manufacturing. Lexon has no commercial-scale manufacturing experience and
capabilities of medical products. It is anticipated that Lexon's products will
initially be manufactured by FDA approved manufacturers.
Employees. As of October 31, 1998, Lexon employed 4 persons. Lexon's
employees do not receive compensation for their services.
Offices. To date, Lexon's principal offices at 8908 South Yale, Suite 409,
Tulsa, Oklahoma have been provided free of charge by Lexon's officers. Upon
completion of this Offering, Lexon will pay approximately $900 per month and
general operating expenses will be equitably allocated.
Litigation. Lexon is not involved in any litigation.
MARKET AND INDUSTRY INFORMATION
Government Regulation and FDA Approval Process. Regulation by governmental
authorities in the United States and other countries could be a significant
factor in ongoing research and product development activities. Lexon's
diagnostic products may require regulatory approval by governmental agencies
prior to commercialization. However, it is now believed that the sale of the
cancer screening test kits to medical laboratories will not require FDA or other
governmental approvals. Various statutes and regulations also govern or
influence the manufacturing, safety, labeling, storage, recordkeeping and
marketing of such products. The lengthy process of seeking these approvals, and
the subsequent compliance with applicable statutes and regulations, require the
expenditure of substantial resources. Any failure by Lexon to obtain, or any
delay in obtaining, regulatory approvals could materially adversely affect
Lexon.
The levels of revenues and profitability of Lexon may be affected by the
continuing efforts of government and third party payors to contain or reduce the
costs of healthcare through various means. There have been, and Lexon expects
that there will continue to be, a number of federal and state proposals to
control pricing or profitability of therapeutic and other products. While Lexon
cannot predict whether any such legislative or
8
regulatory proposals will be adopted, the adoption of such proposals could have
a material adverse effect on Lexon.
Management believes that the cancer screening test kits used by medical
laboratories do not require FDA or other approvals. A test kit for home use, if
developed, it is believed, would require FDA approvals. It is not the intent of
Lexon to develop a home test kit.
International Sales. International sales are subject to foreign government
regulation, the requirements of which vary substantially from country to
country. The time required to obtain foreign approval may be longer or shorter
than that required for FDA approval and the requirements may substantially
differ. Lexon must obtain the "CE" mark prior to engaging in sales within the
Eurpoean Economic Union of certain medical devices. During this process, the
sponsor must also demonstrate compliance with ISO manufacturing and quality
requirements.
The introduction of Lexon's developmental stage test products in foreign
markets will also subject Lexon to foreign regulatory clearances, which may
impose additional costs and burdens. International sales of medical devices are
subject to the regulatory requirements of each country. The regulatory review
process varies from country to country and many countries also impose product
standards, packaging requirements, labeling requirements and import restrictions
on devices. In addition, each country has its own tariff regulations, duties and
tax requirements.
Reimbursement. In the United States and elsewhere, sales of diagnostic,
therapeutic and other pharmaceutical products are dependent, in part, on the
availability of reimbursement to the consumer from third-party payors, such as
government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. There is no
assurance that any of Lexon's products will be considered cost effective and
that reimbursement to the consumer will be available, or will be sufficient to
allow Lexon to sell its products on a competitive and profitable basis.
DILUTION
Dilution is the difference between the purchase price paid by the investors
for their Shares and the net tangible book value of the shares after the
Offering. The net tangible book value of a security is equal to Lexon's tangible
net worth (tangible assets minus total liabilities) divided by the number of
Shares of the security outstanding. The following table illustrates the dilution
on a per share basis of Lexon's Common Stock:
Amount
---------------------------
Sale price per Share................................ $3.00
Net tangible book value before offering............. $(0.04)
Increase to present shareholders in net tangible book value
attributable to sale of Shares offered....... $0.16
Pro forma net tangible book value after offering.... $0.13
Dilution to new investors...................... $2.87
9
<PAGE>
The following table shows the number of Shares acquired from Lexon, the
aggregate consideration paid by the existing shareholders and new Shareholders
in this Offering:
Shares Percentage Aggregate Percentage of
Acquired from of Shares Consideration Consideration
Company Held by Group Paid for Paid by
Shares Group
----------------------------------------------------------------
Existing Shareholders ...6,125,205 96.1% $255,410 25.7%
New Shareholders ..........246,667 3.9% $740,000 74.3%
----------------------------------------------------------------
Total ..................6,371,872 100.0% $995,410 100.0%
----------------------------------------------------------------
DIRECTORS AND OFFICERS
The following table identifies the directors and officers of Lexon and sets
forth their respective ages and areas of expertise:
Name Age Expertise
Gifford M. Mabie.....................57 President, CEO and Director
Rhonda R. Vincent....................34 Vice President, Secretary,
Treasurer and Director
Frederick K. Slicker.................55 Vice President and General Counsel
Set forth below is a description of the backgrounds of the directors and
management of Lexon:
Gifford M. Mabie, age 57, is President, CEO and a Director of Lexon. Mr.
Mabie is also President, CEO and a Director of Maxxon, Inc. (OTCBB: MXON), a
development stage company co-founded by Mr. Mabie in 1996 to develop and
commercialize a patented disposable safety syringe. From 1982 to 1994, Mr. Mabie
was Senior Vice President of CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information company that was purchased by National Data Corporation
(NYSE: NDC) in 1996. As one of the founders of CIS, Mr. Mabie was instrumental
in raising over $40 million in capital that funded acquisitions and new product
development. As a result, that company's revenues grew from $105,000 in 1987 to
over $40 million in 1995. Prior to CIS, Mr. Mabie was with Honeywell Information
Systems, Inc., where he ranked as one of its top five salesmen worldwide. Prior
to joining Honeywell, he was corporate controller with W.B. Dunavant & Company,
one of the world's largest cotton brokers. He holds degrees in accounting and
economics from Memphis State University and served for eight years in the United
States Navy.
Rhonda R. Vincent, age 34, is Vice President, Secretary, Treasurer and
Director of Lexon. Ms. Vincent is also Vice President, Secretary, Treasurer and
Director of Maxxon, Inc. (OTCBB: MXON), a development stage company co-founded
by Ms. Vincent in 1996 to develop and commercialize a patented disposable safety
syringe. From 1994 to 1997, Ms. Vincent was Vice President, Secretary, Treasurer
and Director of Corporate Vision, Inc. (OTCBB: CVIA), a multimedia software
development company. For five years prior to founding Corporate Vision, Ms.
Vincent held various accounting, finance and investor relations positions with
CIS Technologies, Inc. (NASD: CISI), a leading healthcare information processing
company that was purchased by National Data Corporation (NYSE: NDC) in 1996. She
began her career as an audit associate with the public accounting firm of
Coopers & Lybrand. Ms. Vincent is a Certified Public Accountant and holds a
Bachelor of Science degree in accounting from Oral Roberts University.
Frederick K. Slicker, age 55, is Vice President and General Counsel for
Lexon. He has practiced law for 30 years, primarily in the areas of mergers and
acquisitions, securities law compliance and general business. He holds a Juris
Doctorate with the highest distinction from the University of Kansas and an LLM
from Harvard Law School. In addition to his employment by Lexon, he continues to
practice law for third-party clients, including Maxxon, Inc.
10
<PAGE>
Board of Directors. There are two directors of Lexon. The authorized
maximum number of directors is seven. Lexon's directors hold office until the
next annual meeting of stockholders or until their respective successors have
been duly elected and qualified. Lexon's officers are elected annually by the
Board of Directors and serve at the discretion of the Board.
Compensation of Directors. To date, no director's fees have been paid,
however, directors who are not employees of Lexon may be paid reasonable fees
and may be granted stock options for serving as directors in the future.
Directors of Lexon who are also employees of Lexon will not receive any
additional compensation for their services as directors.
Compensation of Management. Members of Lexon's management receive no
compensation for their services. There are no written employment agreements.
Conflicts of Interest. Members of Lexon's management are associated with
other firms involved in a range of business activities. Consequently, there are
potential conflicts of interest inherent in their acting as officers and
directors of Lexon. Insofar as the officers and directors are engaged in other
business activities, management anticipates it will devote no more than 50% of
its time to Lexon's affairs.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the ownership
of Common Stock of the officers, directors and shareholders owning 10% or more
of the outstanding Common Stock of Lexon as of the date of this Offering
Memorandum:
Relationship to Percentage of
Company Shares Owned Shares
-----------------------------------------------------
Prior to the Offering
Gifford Mabie.......... Officer, Director 600,000 9.8%
Rhonda Vincent......... Officer, Director 600,000 9.8%
Frederick Slicker...... Officer 600,000 9.8%
-----------------------------------
Officers and Directors as a group (3
persons)................ 1,800,000 29.4%
UTEK Corporation........Beneficial Owner 1,000,000 16.3%
-----------------------------------
Officers, Directors and Beneficial Owners. 2,800,000 45.7%
-----------------------------------
Total Shares Outstanding prior to the
Offering.................................. 6,125,205
-----------------
After the Offering (Maximum Sold)
Gifford Mabie...........Officer, Director 600,000 9.4%
Rhonda Vincent..........Officer, Director 600,000 9.4%
Frederick Slicker ......Officer 600,000 9.4%
-----------------------------------
Officers and Directors as a group (3 1,800,000 28.2%
persons)..................................
UTEK Corporation........Beneficial Owner 1,000,000 15.7%
-----------------------------------
Officers, Directors and Beneficial Owners. 2,800,000 43.9%
-----------------------------------
Total Shares Outstanding after the
Offering.................................. 6,371,872
-----------------
At October 31, 1998, Lexon had outstanding options to purchase 580,000
Shares of its Common Stock at $1.20 per share to Dr. Tabibzadeh (50,000 Shares),
to certain officers (230,000 Shares) , and to certain consultants (300,000
Shares). The options expire ten years from the date of grant if not sooner
exercised. The exercise price was determined by the Board of Directors to be the
fair market value at the time the options were granted.
DESCRIPTION OF SECURITIES
Lexon is authorized to issue 45,000,000 shares of Common Stock, par value
$0.001 per share, of which 6,125,205 shares are presently outstanding. Lexon is
also authorized to issue 5,000,000 shares of Preferred Stock, par value $0.001
per share, of which there are no shares presently outstanding. There is no
present
11
<PAGE>
intent to issue any Preferred Stock. Upon completion of this Offering, up to
6,371,872 shares of Lexon Common Stock will be outstanding. All Shares of Common
Stock are, and all the Shares offered by Lexon hereby will be, duly authorized,
validly issued, fully paid and nonassessable.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
Lexon has not paid cash dividends on its Common Stock. Holders of Common Stock
are entitled to receive such dividends as may be declared and paid from time to
time by the Board of Directors out of funds legally available therefor. Lexon
intends to retain any earnings for the operation and expansion of its business
and does not anticipate paying cash dividends in the foreseeable future. Any
future determination as to the payment of cash dividends will depend upon future
earnings, results of operations, capital requirements, Lexon's financial
condition and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Lexon, holders of shares of Common Stock are entitled to receive pro rata all of
the assets of Lexon available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Lexon.
PLAN OF DISTRIBUTION
The subscription period commences November 6, 1998, and will terminate on
December 31, 1998, unless extended by Lexon. Funds from the sale of Shares will
be made immediately available to Lexon. Subscriptions will be accepted until the
expiration of the offering period or until a maximum of 246,667 Shares are sold,
whichever occurs first. Additional subscriptions will not be accepted by Lexon
after the Offering is fully subscribed.
No commissions will be paid in connection with sales made directly by the
officers and directors of Lexon. Brokers participating in the distribution of
the Shares will offer the Shares only to investors who represent to Lexon that
they meet proper suitability requirements and that investment in Common Stock is
proper for them. Lexon will pay a commission to brokers up to 10% of the
proceeds of the sale of the Shares. In addition, Lexon will pay brokers a due
diligence fee and a non-accountable expense allowance of up to 4% of the gross
proceeds and up to 6% of the gross proceeds, respectively.
Some offerees may utilize a purchaser representative in the evaluation of
the merits and risks of an investment in the Shares. Any such representative
must comply with the requirements of Regulation D under the Securities Act of
1933 and with applicable state securities laws. Neither Lexon, nor any officer
or any director of Lexon will pay any fees or commissions to, or pay any charges
for the services rendered by, any purchaser's representative unless the
purchaser's representative is a registered broker-dealer entitled to receive the
commissions.
Shares issued to non-affiliates of Lexon in a valid Rule 504 offering
purchase are shares that may be resold without federal registration or other
federal transfer restrictions. Applicable state laws may require registration
before any resales are made from certain states. If the Offering does not
qualify under Rule 504, resale of the Shares will be restricted indefinitely.
There is no assurance that this Offering will qualify under Rule 504.
12
<PAGE>
ADDITIONAL INFORMATION
Lexon intends to furnish its shareholders with annual reports containing
audited financial information, reported upon by independent public accountants.
Each purchaser of Shares, prior to such purchase, is entitled to ask
questions of Lexon and receive answers concerning the terms and conditions of
the Offering and to obtain any additional information which Lexon possesses that
is necessary for the purchaser to verify the accuracy of the information
furnished in this Offering Memorandum.
Lexon will make reasonable efforts to furnish to any qualified prospective
investor, or the prospective investor's authorized representative, any
additional information or opportunity for inquiry concerning the terms and
conditions of this Offering, including information requested to verify the
accuracy of the information contained in this Offering Memorandum or otherwise
furnish the prospective investor or the prospective investor's representative,
to the extent Lexon possesses the information or can obtain it without undue
effort or expense. Prospective investors requiring additional information may
contact Gifford Mabie, President of Lexon, at 8908 South Yale, Suite 409, Tulsa,
Oklahoma 74137, telephone (918) 492-4125.
13
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FINANCIAL INFORMATION
LEXON, INC.
(A Development Stage Company)
BALANCE SHEET
October 31, 1998
(Unaudited)
Prior to the After the
Offering Offering
Assets
Current Assets
Cash ................................................$ 299 $ 572,299
Other Assets
License Agreement ................................... 161,000 161,000
Gentest Merger ...................................... 311,250 311,250
---------- ------------
Total Other Assets .................................. 472,250 472,250
Total Assets ........................................$ 472,549 $ 1,044,549
---------- ------------
Liabilities
Current Liabilities
Accounts Payable and Accrued Liabilities ............$ 14,536 $ 14,536
Notes Payable to Related Parties (Principal Balance) 230,000 230,000
Accrued Interest on Notes Payable to Related Parties 9,200 9,200
---------- ------------
$253,736 $ 253,736
---------- ------------
Stockholders' Equity
Preferred stock, $0.001 par value,
5,000,000 Shares authorized ......................... 0 0
Common stock, $0.001 par value,
45,000,000 Shares authorized,
6,125,205 Shares issued and outstanding
prior to the Offering and 6,371,872
Shares issued and outstanding after
the Offering ....................................... 6,125 6,372
Paid in Capital .................................... 229,245 800,998
Retained Earnings .................................. (16,557) (16,557)
---------- ------------
218,813 790,813
---------- ------------
Total Liabilities and Stockholders' Equity ......... $ 472,549 $ 1,044,549
---------- ------------
The accompanying notes are an integral part of the financial statements
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LEXON, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
October 31, 1998
(Unaudited)
Before the After the
Offering Offering
---------- ----------
Revenue ............................................... $ 0 $ 0
Expenses
Interest Expense .................................. 9,200 9,200
Office ............................................ 1,062 1,062
Printing .......................................... 2,107 2,107
Transfer Agent .................................... 1,021 1,021
Travel ............................................ 3,167 3,167
-------- --------
16,557 16,557
-------- --------
Net Income ............................................ $(16,557) $(16,557)
-------- --------
Earnings per Share .................................... $ 0.00 $ 0.00
-------- --------
The accompanying notes are an integral part of the financial statements
15
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LEXON, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
October 31, 1998
(Unaudited)
Before the After the
Offering Offering
--------- ---------
Operating Activities
Net Loss ........................................... $ (16,557)
Change in Accounts Payable ......................... 2,139
Change in Interest Payable ......................... 9,200
Change in Other Payables ........................... 12,397
--------- ---------
Total Operating Activities ...................... $ 7,179
--------- ---------
Investing Activities
Initial License Fee ................................ (100,000)
Sponsored Research Contract ........................ (311,250)
Consulting Fee ..................................... (60,000)
--------- ---------
Total Investing Activities ..................... $(471,250)
--------- ---------
Financing Activities
Sale of Common Stock before this Offering .......... $ 255,410
Sale of Common Stock in this Offering .............. 0 $ 740,000
Less: Estimated Broker Commissions ............ 0 (148,000)
Less: Estimated Offering Expenses ............. (21,040) (20,000)
Loans from Officers ................................ $ 230,000 0
--------- ---------
Total Financing Activities ..................... $ 464,370 $ 572,000
--------- ---------
Net Increase in Cash .................................. $ 299 $ 572,000
Cash at Beginning of Period ........................... 0 299
--------- ---------
Cash at End of Period ................................. $ 299 $ 572,299
--------- ---------
Schedule of Non-Cash Financing and
Investing Activities
Common Stock Issued in Gentest Merger .............. $ 1,000
--------- ---------
The accompanying notes are an integral part of the financial statements
16
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LEXON, INC.
(A Development Stage Company)
Notes to Financial Statements
October 31, 1998
(Unaudited)
Note 1- Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
Lexon, Inc. ("Lexon" or "the Company") is a development stage corporation
that has the exclusive worldwide license to develop, manufacture, obtain FDA
approval for, if required, and market a cancer screening test kit for detecting
the protein TGF-B4 (ebaf), which allows for early, non-invasive diagnosis of
certain types of colon, ovarian and testicular cancers.
Development Stage Operations
The Company was incorporated on December 16, 1997 under the laws of the
state of Oklahoma. Since inception, the Company's primary focus has been raising
capital. The Company had no income or expenses during the period ended July 31,
1998.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three
months or less to be cash equivalents.
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Under the liability method, deferred taxes are determined based
on the differences between the financial statements and tax bases of assets and
liabilities at enacted tax rates in effect in the years in which the differences
are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
Note 2- Gentest Merger
On July 8, 1998, the Company completed its merger with Gentest, Inc., a
Florida corporation ("Gentest"). Gentest had the exclusive worldwide license to
develop, manufacture, obtain FDA approval for, and market the cancer screening
test kits for detecting certain types of colon, ovarian and testicular cancers.
Under the terms of the Agreement and Plan of Merger, the Company issued to
UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000 shares of
Common Stock of the Company. Gentest ceased to exist by reason of the merger,
and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, became assets and liabilities of Lexon. The obligations of
Gentest were to pay $105,000 for the exclusive license, $311,250 to develop the
test kit and $55,000 for services rendered in connection with securing the
agreements. The obligations were paid in full on July 8, 1998. The Gentest
merger was accounted for as a purchase. The purchase price of $1,000 was based
on the number of shares issued at par value of $0.001 per share.
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<PAGE>
Note 3- Exclusive License
On July 8, 1998, the Company paid $100,000 to the University of South
Florida Research Foundation ("USFRF") and $5,000 to North Shore University
Hospital Research Foundation ("North Shore") for the exclusive worldwide license
to develop and market the cancer screening test kits. In addition, the Company
paid $55,000 to UTEK for services rendered in connection with securing the
license agreements. The exclusive license is amortized over 17 years using the
straight-line method.
Note 4- Sponsored Research Contract
On July 8, 1998, the Company paid $311,250 to North Shore under the terms
of a Sponsored Research Contract to develop the cancer screening test kits. The
contract specifies a 24 month development period with costs not to exceed
$311,250. The Sponsored Research Agreement is amortized over 2 years using the
straight-line method.
Note 5- Notes Payable
On July 1, 1998, the Company borrowed a total of $230,000, of which
$170,000 was from two of its officers and $60,000 was from a shareholder. The
Company executed notes payable which are due December 31, 1998 and bear interest
of 12% per year. The notes are unsecured obligations of the Company.
Note 6- Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement, the Company agreed to
pay to the USFRF a royalty equal to the greater of (a) five percent (5%) of
revenue from the sale of products based on the concept for the diagnosis of
selected adenocarcinomas and any additions, extensions and improvements thereto
or (b) zero (0) dollars for the first twenty-four (24) months; $75,000 at the
end of year three (3); $100,000 at the end of year four (4); $125,000 at the end
of year five (5); $150,000 at the end of year six (6) and for each successive
year thereafter during the term of the exclusive license agreement. The royalty
obligation will expire after the longer of twenty (20) years or the expiration
of the last to expire patent that covers the licensed intellectual property. The
Company also agreed to pay to North Shore a royalty equal to one-half percent
(0.5%) of revenue from the sale of such products and ten percent (10%) of any
consideration received by the Company from granting sublicenses.
Note 7- Common Stock and Paid in Capital
Under the terms of an offering dated April 1, 1998, the Company offered up
to 5,000,000 shares of its common stock at par value, pursuant to an exemption
from registration under Rule 504 of Regulation D of the Securities Act of 1933,
as amended. Of the 5,000,000 shares sold, 1,800,000 shares were purchased by
officers and directors of the Company.
Under the terms of an offering dated May 18, 1998, the Company offered up
to 497,500 shares of its common stock at $2.00 per share, pursuant to an
exemption from registration under Rule 504 of Regulation D of the Securities Act
of 1933, as amended. On June 18, 1998, the Offering was extended until July 31,
1998. On July 31, 1998, the Offering was closed. In connection with the
Offering, the Company sold 125,205 shares at $2.00 per share ($250,410) for cash
and incurred Offering expenses of approximately $21,000.
On July 8, 1998, the Company issued 1,000,000 shares of its Common Stock to
UTEK Corporation in connection with the Gentest merger.
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<PAGE>
Note 8- Common Stock Options
At October 31, 1998, Lexon had outstanding options to purchase 580,000
Shares of its Common Stock at $1.20 per share to Dr. Tabibzadeh (50,000 Shares),
to certain officers (230,000 Shares), and to certain consultants (300,000
Shares). The options expire ten years from the date of grant if not sooner
exercised. The exercise price was determined by the Board of Directors to be the
fair market value at the time the options were granted.
19
<PAGE>
RISK FACTORS
This Offering is speculative and involves a high degree of risk. An
investment in the Shares offered herein should not be made by persons who cannot
afford the loss of their entire investment. Some risk factors are listed below:
1. No Operating History. Lexon was organized in December, 1997 and has no
operating history. Lexon has no marketable products and minimal assets at this
time. There is no assurance that Lexon will be able to develop, manufacture or
market any products successfully, generate net revenue from the sale of any
products, or achieve or maintain profitable operations.
2. Product Not Developed. Lexon faces all the risks associated with the
development of a new, speculative business. Lexon has no products and limited
assets at this time, and will be subject to numerous risks, expenses, and
difficulties typically encountered in the development of new medical diagnostic
tests. The business of Lexon will depend upon the development of the cancer
screening test kit to detect the presence of the TGF-(beta)4 (ebaf) protein and
upon the approval by the FDA, if required, of the test kit. There is no
assurance that Lexon's activities will be successful or profitable or that the
FDA will approve the test kit, if such approval is required. While management
has been advised that the detection of the TGF-(beta)4 (ebaf) protein confirms a
cancer diagnosis with a high degree of probability, management has not
independently verified the accuracy of this statement. No assurance is given
that the presence of TGF-(beta)4 (ebaf) is an accurate predictor of cancer.
3. Lexon Does Not Own the Protein Screening Process and Will Not Own Any
Improvements Thereto. Certain proprietary rights in the TGF-(beta)4 (ebaf)
protein screening process are owned by USF and some will be owned by North
Shore. By way of merger with Gentest, Inc., Lexon owns the exclusive worldwide
licenses to manufacture and market test kit products developed using the
process. Any improvements to the process will remain the property of the USF or
North Shore. There is no assurance that competing products will not be developed
or that improvements to the current screening process will be available to
Lexon.
4. Patentability of Protein Screening Process is Uncertain. A patent application
related to the TGF-(beta)4 (ebaf) protein screening process was filed by USF
with the U.S. Patent and Trademark Office ("USPTO") in 1997. Officials at USF
have advised Lexon that USF has been advised verbally that a U.S. Patent
covering the cancer screening process will be issued before December 31, 1998.
Even if a patent is issued, the scope of the patent is unknown at this time.
There is no assurance that a patent, if issued, will not infringe on the rights
of others.
5. Foreign Patent Protections for Ovarian and Testicular Cancer Detection Claims
is Remote. The patent application filed with the USPTO disclosed the detection
of colon cancer, but not detection of ovarian or testicular cancer. Subsequent
to filing the provisional patent application, a series of lectures and papers in
which additional disclosures related to the detection of ovarian and testicular
cancer by the protein screening process were made public by the USF. The
existence of these additional disclosures outside the scope of the provisional
patent application renders the possibility of obtaining foreign patent
protections for claims related to the detection of ovarian and testicular
cancers remote. There is no assurance that Lexon will obtain any foreign patent
protection for any of the claims.
6. Filing, Prosecution and Maintenance of Patents Are Within the Sole Discretion
of the USF. The filing, prosecution and maintenance of all patent rights are
within the sole discretion of the USF. Lexon has the right to request that the
USF seek, obtain and maintain such patent and other protection to the extent
that USF is lawfully entitled to do so, at Lexon's sole expense. There is no
assurance that USF will seek, obtain or maintain such patent and other
protection to which it is lawfully entitled. Further, there is no assurance that
Lexon will have sufficient working capital to fund USF's efforts in those
activities, if requested.
7. Rights and Interests of the National Institute of Health are Unknown. The
initial research and development related to the TGF-(beta)4 (ebaf) protein
screening process was funded by a grant from the National Institute of Health
("NIH"). The NIH retains certain statutory rights to use any invention that
results from its funding without having to pay license fees and royalties. In
addition, the NIH is protected from lawsuits and
20
<PAGE>
infringement claims. There is no assurance that the interests of the NIH will
not materially adversely affect Lexon or its business.
8. License Agreement Obligates Company to Pay Royalties Regardless of Patent
Issuance. The Licensing Agreement with the USF obligates Lexon to pay royalties
of 5% of gross revenues from the sale of test kits, with minimum royalty
payments of between $75,000 and $150,000 per year for each year beginning in
2000 and continuing for the term of the license agreement, regardless of whether
a patent is issued. There is no assurance that Lexon will have sufficient
working capital to make such payments.
9. Lack of US and Foreign Patent Protection Could Adversely Affect Lexon's
Ability to Compete. At least some aspects of the process and detection methods
have been published by the USF or the inventors and are now available to the
public and to competitors. The lack of U.S. and foreign patent protection for
the test kit could result in the manufacture and sale of test kits copied by
competitors who are not obligated to pay royalties. As a result, these
competitors could achieve superior operating margins, which could adversely
affect Lexon's ability to compete.
10. Cost to Develop Test Kits Could Exceed Agreed Upon Amount. The Sponsored
Research Agreement with North Shore states that the cost to develop the test
kits shall not exceed $311,250. There is no assurance that the cost to develop
the test kits will not exceed this amount. Furthermore, there is no assurance
that Lexon will have the capital necessary to fund any cost overruns.
11. Need for Additional Capital. Lexon is dependent on the maximum proceeds of
the Offering described herein to acquire Gentest and to continue its business
plan. Additional capital will be required to field test the screening kit, file
and process applications for governmental approval, develop models, identify
manufacturers to mass produce the test kits, and to advertise, ship and collect
for products sold and any other costs. Lexon intends to pursue additional
financing. However, there is no assurance that any additional capital needed
will be available to Lexon on acceptable terms when needed, if at all. Any
additional capital may involve substantial dilution to the interests of Lexon's
then existing stockholders.
12. Government Regulation. Lexon's activities and products may require
regulatory approval in the United States, Canada and in a number of foreign
countries. The process of obtaining these approvals, if required, will be time
consuming and costly. Changes in the regulations for Lexon's products could
adversely impact operations, affecting profitability or competitive advantages.
There is no assurance that governmental approvals will be obtained.
13. Acceptance by Medical Professionals. Inherent to the successful marketing of
Lexon's cancer screening test kit is the acceptance of the product by medical
professionals. There is no assurance that the product will be accepted.
14. Competition. The diagnostic segment of the medical industry is intensely
competitive and composed of large and well financed firms, including
pharmaceutical, biotechnology, and consumer goods companies, as well as
universities and other research institutions that are constantly developing or
acquiring rights to new products. Moreover, competing products may be accepted
by consumers who may be slow to change to the use of alternative products. Some
competitors have established distribution networks and sufficient marketing
resources to resist attempts to dislodge use of their products. In addition,
there is no assurance that one or more competitors will not develop or
manufacture products that are more effective or better accepted than those which
Lexon seeks to commercialize. There is no assurance that Lexon will be able to
compete successfully or profitably.
15. Dependence Upon Key Personnel. Lexon is dependent upon the services of Dr.
Tabibzedah, co-discoverer of the TGF-(beta)4 (ebaf) protein screening process,
to oversee the development of the cancer test kit. The loss of the services of
Dr. Tabibzedah and the inability to retain an acceptable substitute could have a
material adverse effect on Lexon. Lexon is also dependent upon the services of
its officers. The loss of the services of these key personnel or the inability
to retain such experienced personnel could have a material adverse effect on
Lexon. There is no assurance that replacement of key personnel will be possible.
21
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16. Limited Experience of Management and Potential Conflicts of Interest. The
officers of Lexon have had limited experience in the medical products industry.
In addition, members of Lexon's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
conflicts of interest in their acting as officers and directors of Lexon.
Management estimates that not more than 50% of their time will be devoted to
Lexon's activities (See "Conflicts of Interest").
17. Concentration of Ownership. As of the date of this Offering Memorandum, the
directors and executive officers of Lexon, as a group, owned or controlled 29.4%
of the outstanding Common Stock of Lexon. The officers, directors and beneficial
owners, as a group, owned or controlled 45.7% of the outstanding Common Stock of
Lexon. After this Offering, if the maximum is sold, the directors and executive
officers, as a group, will own or control 28.2% of the outstanding Common Stock
of Lexon. After this Offering, if the maximum is sold, the directors, executive
officers and beneficial owners, as a group, will own or control 43.9% of the
outstanding Common Stock of Lexon.
18. Broad Discretion in Application of Proceeds. Approximately $250,000 of the
net proceeds of this Offering will be used to repay loans, including interest
and to pay other liabilities of Lexon. Any remaining proceeds are intended for
general working capital purposes. Lexon will have broad discretion as to the
application of such proceeds. There is no assurance that the required funds will
be available when needed.
19. Arbitrary Offering Price. The offering price of the Shares has been
arbitrarily determined by Lexon. There is no relationship between the offering
price and Lexon's assets, book value, net worth, or any other economic or
recognized criterion of value. There is no assurance that this Offering will be
successful or that Lexon will raise sufficient funds to complete the Gentest
merger.
20. Dilution. Investors participating in this Offering will incur substantial
dilution as it relates to the resulting net tangible book value of Lexon's
capital stock after the completion of the Offering.
21. Compliance with State and Federal Securities Laws. It is intended that this
Offering will qualify for exemption from federal registration under Rule 504 of
SEC Regulation D. There is no assurance that the Offering presently qualifies or
will continue to qualify under exemptions from registration provided by the
Securities Act of 1933 (the "Act") or applicable state securities laws due to,
among other things, the adequacy of disclosure, the manner of distribution of
the Offering or the retroactive change or interpretation of any applicable
securities laws or regulations. Even if the Offering is exempt from registration
under federal law, registration may be required for sales and resales of the
Shares under applicable state laws. If, and to the extent that, suits for
rescission are brought and successfully concluded for failure to register this
Offering under applicable securities laws, or for acts or omissions constituting
certain prohibited practices under state or federal securities laws, the capital
and assets of Lexon could be materially adversely affected, which could
jeopardize the ability of Lexon to operate successfully thereafter.
22. No Trading Market for Common Stock. Lexon's Common Stock is eligible for
trading in the Over the Counter Market under the symbol "LXXN." Although Lexon
intends to pursue developing a liquid market as soon as practicable, there is no
assurance that such liquid market will develop, or if such a market develops,
that it will be maintained. Holders of the Shares of Common Stock may,
therefore, have difficulty in selling their stock should they desire to do so.
Investors must be able to lose their entire investment in their Shares of Common
Stock.
23. No Dividends. Lexon has not paid any cash or other dividends on its Common
Stock and does not expect to declare or pay any such cash dividends in the
foreseeable future.
22
<PAGE>
SUBSCRIPTION AGREEMENT
Lexon, Inc.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The undersigned subscriber ("Subscriber") hereby subscribes to and
agrees to purchase __________ Shares ("Shares") of Lexon, Inc. Common Stock,
$0.001 par value, for $3.00 per Share.
1. General Information Concerning Lexon and the Offering.
(A) Subscriber has received a copy of the Private Offering Memorandum dated
November 6, 1998.
(B) Subscriber understands that the business plans described in the Private
Offering Memorandum dated November 6, 1998 assumes the successful completion of
the funding transactions described therein, none of which may occur.
2. Status of Investor. (Check all that apply)
Accredited Investor
Subscriber is an "accredited investor" as defined by SEC Rule 501(a),
by reason of being (check one):
----A natural person who has a net worth (together with my spouse) of more
than $1,000,000; or
----A natural person who had income in excess of $200,000 ($300,000 jointly
with my spouse) in each of the last two (2) years and a reasonable expectation
of earning the same income level this year; or
----As otherwise specified in SEC Rule 501(a).
Non-Accredited Investor
----Subscriber does not meet the requirements as an accredited investor.
3. Subscriber's Investment Experience. Subscriber represents and warrants to
Lexon that:
(A) Subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of
an investment in the Shares; and
(B) Subscriber is able to bear the economic risk of the investment in
the Shares, including the risk of a total loss of the investment in the
Shares.
4. Subscriber's Investment Representations. Subscriber represents and warrants
to Lexon that:
(A) The acquisition of the Shares by Subscriber is for Subscriber's own
account and is for investment; and
(B) Subscriber has no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the Shares; and
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<PAGE>
(C) All information that Subscriber has supplied to Lexon in connection
with Subscriber's subscription to purchase the Shares is true and
correct.
5. Subscriber's Understanding Concerning Lexon. Subscriber represents and
warrants to Lexon that:
(A) Subscriber understands that an investment in the Shares involves a
very high degree of risk; and
(B) Subscriber acknowledges that Lexon is a development stage company
having been incorporated in December, 1997, and that Lexon has no prior
business or financial experience; and
(C) Subscriber has conducted all investigations and due diligence
concerning Lexon and the Shares which Subscriber deems appropriate, and
Subscriber has found all such information obtained fully acceptable;
and
(D) Subscriber is knowledgeable about the prospects, business,
financial condition and operations of Lexon; and
(E) Subscriber has had an opportunity to ask questions of the officers
and directors of Lexon concerning the Shares and the business and
financial condition of and prospects for Lexon, and the officers and
directors of Lexon have adequately answered all questions asked and
made all relevant information available to Subscriber, including all
relevant books and records of Lexon; and
(F) Subscriber understands that success of Lexon is dependent upon
receipt of the maximum of $740,000 from the sale of the Shares; and
(G) Subscriber understands that no market exists for the Shares and
that there is no assurance that a market will exist in the future.
6. Compliance with Securities Laws. Subscriber understands and agrees that
federal and state securities laws may impose restrictions and limitations
applicable to the purchase, sale, resale and distribution of the Shares.
7. Indemnification. Subscriber agrees that Lexon has relied on the accuracy of
the statements of Subscriber set forth herein and otherwise. Subscriber agrees
to defend and indemnify Lexon and its officers, directors, controlling persons,
accountants, attorneys and agents representing Lexon, and to hold all and each
of them harmless from and against any and all losses, damages, liabilities and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, which they or any of them incurs by reason of any alleged
misrepresentation made by or on behalf of Subscriber, any alleged breach by
Subscriber of the representations and warranties made by Subscriber herein, any
alleged failure by Subscriber to fulfill any of the covenants and agreements of
Subscriber set forth herein and any alleged violation of applicable securities
law by Subscriber.
8. Survival. All representations, warranties and covenants contained in this
Subscription Agreement, including without limitation, the indemnification
provisions hereof, shall survive the acceptance by Lexon of this Subscription
Agreement and the delivery of the Common Stock to Subscriber. Subscriber
acknowledges and agrees that this Subscription Agreement shall survive the death
or disability of Subscriber.
9. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma.
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<PAGE>
SUBSCRIBER
This Subscription Agreement has been executed for the purchase of
___________ Shares of Lexon, Inc. Common Stock, $0.001 par value, for $3.00 per
share by Subscriber this _____ day of _________, 1998.
Please make check payable to: Lexon, Inc.
FOR INDIVIDUALS FOR CORPORATE & OTHER
Signature(s): Signature
------------------ ------------------------
By:
------------------ ------------------------
(Second signature only if shares (Print name and title)
held jointly)
Please Register Shares as Follows: Please Register Shares as Follows:
Name: Name:
------------------ ------------------------
Address: Address:
------------------ ------------------------
City/State: City/State:
------------------ ------------------------
Zip Code: Zip Code:
------------------ ------------------------
Tax ID No.: Tax ID No.:
------------------ ------------------------
Phone: Phone
------------------ ------------------------
Fax: Fax:
------------------ ------------------------
Note: If Shares are jointly held, please designate the following (circle one):
Joint Tenants with Right of Survivorship OR Tenants in Common
Lexon, Inc.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125
Fax (918) 492-2560
By: ____________________________________
Rhonda R. Vincent
Vice President, Secretary and Treasurer
Agreed and accepted, effective this _____ day of _____________, 1998.
25
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
LEXON, INC.
384,000 Shares at $1.50 per Share
Lexon, Inc. ("Lexon") is offering 384,000 shares ("Shares") of its Common
Stock, par value $0.001 per share, to qualified investors acceptable to Lexon in
its sole discretion, for $1.50 per share. The Common Stock of Lexon is trading
in the Over the Counter Market under the symbol "LXXN". Lexon is a development
stage company that owns an exclusive license to manufacture and market the Ebaf
AssayTM, a blood test that screens for colon cancer and certain types of ovarian
and testicular cancer. The Offering is made in reliance upon an exemption from
registration provided by Regulation D, Rule 504 of the Securities and Exchange
Commission. There is no assurance that a liquid market for the shares will
develop or, if developed, that it will be maintained. Consequently, a purchaser
of the Shares may be unable to sell the Shares when desired and may have to hold
the Shares indefinitely.
INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. SEE "RISK
FACTORS" AND "DILUTION". -------------------------
THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Estimated Net Proceeds
Purchase Broker to the
Price Commissions(1(2) Company(3)
Per Share..................... $1.50 $0.30 $1.20
Total......................... $576,000 $115,200 $460,800
(See footnotes on following page)
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125
Fax (918) 492-2560
The date of this Offering Memorandum is January 18, 1999.
<PAGE>
Footnotes from previous page
(1) No commissions will be paid in connection with sales made directly by the
officers and directors of Lexon. However, Shares may be sold by broker-dealers
and members of the National Association of Securities Dealers, Inc. With respect
to these sales, a commission of 10% will be paid. Additional compensation in the
form of (a) a non-accountable expense allowance equal to 6% of the gross
proceeds from sales made by such persons and (b) a due diligence fee of 4% of
the gross proceeds may also be paid. The table assumes all Shares will be sold
through such persons.
(2) Lexon has entered into a non-exclusive investment banking agreement with
RichMark Capital Corporation ("RichMark") pursuant to which RichMark has agreed
to provide advice, consulting services and finder's services to Lexon in
exchange for a 10% commission, 6% due diligence fee and 4% unallocated expenses.
In addition, a shareholder of Lexon who is not an affiliate of Lexon has agreed
to sell to RichMark Capital Corporation 300,000 shares of Lexon Common Stock for
$0.001 per share if RichMark introduces and places investors of Lexon and Lexon
receives from those persons at least $500,000 gross from the sale of Lexon
Common Stock by March 31, 1999.
(3) Before deducting expenses payable by Lexon in connection with this Offering
estimated at $20,000. These expenses relate primarily to filing fees, printing,
legal and accounting expenses.
LEXON HIGHLIGHTS
In June, 1998, Lexon raised $250,410 through the sale of 125,205 shares of
Common Stock at $2.00 per Share, pursuant to an Offering dated May 18, 1998.
Since then, the following events have occurred:
1. Gentest, Inc. merged into Lexon, Inc. on July 8, 1998, and Lexon paid
$471,500 to complete the merger.
2. Lexon secured a License Agreement with North Shore University Hospital
covering the Ebaf Assay screening test development by Dr. Siamek
Tabibzadeh.
3. Lexon completed an audit of its financial statements as of July 31,
1998.
4. Lexon filed its application under Rule 15(c) 2-11 seeking authority to
allow its Common Stock to trade in the Over the counter market.
5. Lexon Common Stock was approved for trading on October 27, 1998.
Lexon's stock symbol is "LXXN".
6. Lexon has been advised by officials at USF that the U.S. Patent and
Trademark Office has verbally advised that its patent application
covering the cancer screening process will be issued by the first
quarter of 1999.
7. Lexon has learned, but not confirmed, that it is likely that no FDA
approval will be required for the commercial sale of the test kit
developed by Dr. Tabibzadeh to be used by medical laboratories. If
true, the test kit could be available commercially by early 2000.
8. In 1998, Lexon sold 125,205 shares of its Common Stock for $2.00 per
share and 39,416 shares of its Common Stock for $3.00 per share. All
numbers of shares have been adjusted to assume all such sales were at
$1.50 per share.
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<PAGE>
THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS PROVIDED BY LEXON,
INC. SOLELY FOR THE PERSONS RECEIVING IT, AND REPRODUCTION OR DISTRIBUTION TO
OTHERS, IN WHOLE OR IN PART, IS PROHIBITED WITHOUT LEXON'S PRIOR WRITTEN
CONSENT.
THE SHARES ARE BEING OFFERED SUBJECT TO PRIOR SALE, WITHDRAWAL,
CANCELLATION OR MODIFICATION WITHOUT NOTICE AND FURTHER CONDITIONS SET FORTH
HEREIN.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" FOR A DISCUSSION OF THOSE
MATTERS THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN
INVESTOR IN THIS OFFERING.
THERE IS NO PUBLIC OR OTHER MARKET FOR THE SHARES OFFERED HEREBY, NOR IS
THERE ANY ASSURANCE THAT SUCH A MARKET WILL EVER DEVELOP. FOR THIS REASON AND
BECAUSE THE SHARES HAVE NOT BEEN REGISTERED UNDER APPLICABLE SECURITIES LAWS, AN
INVESTOR WILL BE REQUIRED TO RETAIN OWNERSHIP OF THE SHARES ACQUIRED HEREUNDER
AND BEAR THE ECONOMIC RISK OF HIS INVESTMENT FOR AN INDEFINITE PERIOD.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY LEXON, ITS
MANAGEMENT, AUTHORIZED REPRESENTATIVES OR ANY OTHER PERSON IN ANY JURISDICTION
IN WHICH AN OFFERING OR SOLICITATION IS UNLAWFUL OR UNAUTHORIZED.
THIS MEMORANDUM IS INTENDED TO FURNISH INFORMATION TO THE PROPOSED INVESTOR
WITH RESPECT TO THE INVESTMENT DESCRIBED. IN CONSIDERING THIS INVESTMENT, EACH
PROPOSED INVESTOR MUST EVALUATE FOR HIMSELF OR HERSELF ITS MERITS AND RISKS OR
RETAIN THE SERVICES OF ANOTHER PERSON WHO HAS SUFFICIENT KNOWLEDGE AND EXPERTISE
TO EVALUATE SUCH MERITS AND RISKS. LEXON RESERVES THE RIGHT, IN ITS SOLE
DISCRETION, TO ACCEPT OR REJECT ANY SUBSCRIPTIONS TO PURCHASE SHARES OFFERED
HEREBY AND RESERVES THE RIGHT TO TERMINATE THIS OFFERING AT ANY TIME.
EXCEPT AS SET FORTH UNDER "ADDITIONAL INFORMATION", NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS OR FURNISH ANY INFORMATION CONCERNING
LEXON OR THE SHARES OFFERED HEREBY OTHER THAN THE REPRESENTATIONS AND
INFORMATION SET FORTH IN THIS MEMORANDUM, AND IF MADE OR FURNISHED, SUCH OTHER
REPRESENTATIONS OR INFORMATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY LEXON. LEXON SHALL MAKE AVAILABLE TO EACH PROSPECTIVE INVESTOR, OR THE
INVESTOR'S REPRESENTATIVE, DURING THIS OFFERING AND PRIOR TO THE SALE OF ANY
SHARES, ALL INFORMATION WHICH MAY BE DEEMED RELEVANT TO THIS OFFERING OR
NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED HEREIN, AND LEXON
SHALL PROVIDE ALL PROSPECTIVE INVESTORS THE OPPORTUNITY TO ASK QUESTIONS OF AND
RECEIVE ANSWERS FROM LEXON CONCERNING ANY ASPECT OF THE OFFERING AND AN
INVESTMENT IN THE SHARES.
3
<PAGE>
TABLE OF CONTENTS
SUMMARY OF THE OFFERING.....................................................5
USE OF PROCEEDS.............................................................6
LEXON.......................................................................6
MARKET AND INDUSTRY INFORMATION.............................................8
DILUTION................................................................... 9
DIRECTORS, OFFICERS AND KEY EMPLOYEES......................................10
PRINCIPAL SHAREHOLDERS.....................................................11
CERTAIN TRANSACTIONS.......................................................11
DESCRIPTION OF SECURITIES..................................................12
PLAN OF DISTRIBUTION.......................................................12
ADDITIONAL INFORMATION.....................................................13
FINANCIAL INFORMATION......................................................14
RISK FACTORS...............................................................20
SUBSCRIPTION AGREEMENT.....................................................23
EXHIBIT A: RESUME OF DR. TABIBZADEH
4
<PAGE>
SUMMARY OF THE OFFERING
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements appearing elsewhere in this
Offering Memorandum. Each prospective investor is urged to read this Offering
Memorandum in its entirety before making a decision to invest in the Shares
offered hereby.
Lexon. Lexon, Inc., an Oklahoma corporation ("Company"), is a development
stage corporation organized in December, 1997. Lexon owns an exclusive worldwide
license to develop, manufacture, obtain FDA approval for, if required, and
market the Ebaf AssayTM, a blood test which allows for early, non-invasive
detection of colon cancer and certain types of ovarian and testicular cancers.
The Ebaf Assay is the only known blood test to screen for colon cancer. There is
no assurance that the Ebaf Assay, if successfully developed, will receive FDA
approval, if required, or will be accepted in the medical marketplace.
The Offering. The offering is intended to comply with Rule 504 of SEC
Regulation D. Lexon is offering 384,000 Shares of its Common Stock at a price of
$1.50 per Share on a "best efforts basis". The Offering shall be open for a
period of thirty (30) days unless all 384,000 Shares are sold earlier or the
Offering is otherwise extended or terminated by Lexon.
Use of Proceeds. Lexon intends to use the net proceeds of this Offering to
pay indebtedness of approximately $260,000 and for general working capital
purposes. (See "Use of Proceeds").
Risk Factors. Investment in the Shares offered hereby is speculative and
involves a high degree of risk and immediate dilution and should not be
purchased by any investor who cannot afford the loss of the entire investment.
Each prospective investor should carefully consider the significant risk factors
inherent in and affecting the business of Lexon and this Offering. (See "Risk
Factors").
Summary Financial Information. The financial information set forth below is
from the unaudited balance sheet of Lexon appearing elsewhere in this Offering
Memorandum. See "Financial Information". Such information should be read in
conjunction therewith.
As Adjusted
for this
Balance Sheet Data Offering and
December 31, 1998 Application of
(Unaudited) Proceeds (1)
--------------------------------------
Total Assets ......................... $514,403 $694,746
Total Liabilities...................... $260,457 $0
Working Capital ..................... $(218,304) $222,496
Total Stockholders' Equity............. $253,946 $694,746
(1) Assumes maximum net proceeds from this Offering of $440,800 and payment of
$260,457 in liabilities of Lexon.
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<PAGE>
USE OF PROCEEDS
Lexon estimates the maximum net proceeds of this Offering to be $440,800,
after deducting the maximum estimated broker commissions, non-accountable
expenses and due diligence fees of $115,200 and the estimated printing, legal
and accounting expenses of $20,000. Lexon expects to use the net proceeds of
this Offering in substantially the following manner:
Amount
------------
Payment of Notes Payable plus Accrued Interest through 12/31/98..... $260,457
Working Capital..................................................... 180,343
------------
TOTAL USE OF MAXIMUM NET PROCEEDS................................... $440,800
------------
Since the maximum net proceeds of this Offering will be applied over time,
the actual expenditure of such proceeds for any purpose could vary significantly
from the anticipated expenditures described above. Lexon reserves the right,
therefore, to reallocate proceeds among the uses described above, depending upon
factors such as the results of Lexon's preliminary engineering evaluation,
Lexon's success in developing new products, and technological advances in the
industry.
LEXON
Lexon is a development stage corporation organized in December, 1997 to
identify and commercialize proprietary medical biotechnology opportunities.
Lexon owns the exclusive worldwide license to develop, manufacture and
market the Ebaf Assay, a blood test that allows for the early detection of colon
cancer and certain types of ovarian and testicular cancers. The Ebaf Assay test
kit, which is being developed for laboratory use, can detect elevated levels of
the ebaf protein in a patient's blood, thus avoiding the need for invasive
diagnostic procedures.
The discovery linking the ebaf protein to colon, ovarian and testicular
cancers was made by Dr. Siamak Tabibzadeh, M.D., while he was a professor in the
Department of Pathology at the University of South Florida ("USF") and an
attending pathologist at the Moffitt Cancer Center at USF. Dr. Tabibzadeh is now
Chief of Experimental Pathology and Professor in Pathology at North Shore
University Hospital in Long Island, New York ("North Shore"), where the blood
test kit is being developed.
The Ebaf Assay. Cancer is one of the leading causes of death in the general
population. A correlation exists between early tumor detection and the survival
of the patient. The mortality from cancer can be significantly reduced if tumors
are found and treated at an early stage. Many tumors do not produce any clinical
signs or symptoms before they reach a considerable size. Therefore, there is a
need to discover markers that can identify tumors at an early stage. In all
types of cancer, the patient has the best chance of survival if the tumor is
detected and removed early.
Currently, very few markers exist that are useful in the diagnosis of
cancerous tumors. Carcinomembryonic antigen (CEA), prostatic specific antigen
(PSA), and carcinoma-125 (CA-125) are among the most widely used tumor markers.
However, the expression of CEA or CA-125 is not specific and these proteins are
expressed in a variety of conditions not related to cancer. For these reasons,
these markers can not be used for mass screening of the general population
because of the high number of false positives that would require additional
testing to rule out the presence of cancer. For mass screening, there is a need
for a specific and sensitive test.
The ebaf marker is the outgrowth of a discovery of a gene that is the
common thread linking a very diverse group of conditions. The gene is called
ebaf, for "endometrial bleeding associated factor" and its
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<PAGE>
expression was initially identified by USF researchers in both normal menstrual
and abnormal endometrial bleeding.
Because of its specificity of expression, the ebaf marker is uniquely
suited for such mass screening. In addition, the specific expression of the ebaf
protein in cancers of colon, ovary and testis could allow precise localization
of the tumor.
Key Personnel. Dr. Siamak Tabibzadeh, M.D., Chief of Experimental Pathology
and Professor in Pathology at North Shore, is supervising the development of the
Ebaf Assay test kit. He serves as the editor-in chief of the "Frontiers in
Bioscience", as a member of the editorial board of Endocrine, and as a referee
for several prestigious medical journals. He is the author of 80 published
journal articles and has given numerous invited presentations in both the United
States and Europe. Dr. Tabibzadeh received his M.D. from Tehran University
School of Medicine, where he ranked first in his graduating class. He served a
residency in anatomic and clinical pathology at Montefiore Medical Center in New
York and held a fellowship in immunopathology at Elmhurst Hospital, Elmhurst,
New York and Mount Sinai School of Medicine, New York, NY. A copy of Dr.
Tabibzadeh's resume is attached as Exhibit A.
Licenses, Patents and Proprietary Information. The Ebaf Assay screening
process is owned by the University of South Florida ("USF"), and any
improvements to the process will be owned by North Shore.
Lexon has exclusive license agreements with the University of South Florida
Research Foundation ("USFRF"), which is the exclusive licensor for USF, and with
North Shore. The agreements provide for a 5.0% royalty and 0.5% royalty to be
paid to USFRF and North Shore, respectively, from gross receipts from sales of
products developed using the Ebaf Assay screening process. The license agreement
with USFRF requires minimum annual royalty payments of $75,000 in 2000, $100,000
in 2001, $125,000 in 2002, and $150,000 in 2003 and in each year thereafter for
the term of the agreement. The license agreement with North Shore does not
require a minimum annual royalty payment. The exclusive license agreements were
acquired by Lexon on July 8, 1998 by way of merger with Gentest, Inc.
A preliminary patent application was filed by USF with the U.S. Patent and
Trademark Office ("USPTO") in 1997, and USF officials have informed Lexon in
writing that the patent will be issued on or about June 30, 1999. There is no
assurance that a patent will be issued, and even if issued, there is no
assurance that the patent will not infringe on the rights of others.
The patent application filed with the USPTO asserted claims related only to
the detection of colon cancer. Subsequent to filing the patent application, a
series of lectures and papers in which additional claims related to the
detection of ovarian and testicular cancer by the protein screening process were
made public by the USF. The existence of these additional claims outside the
scope of the patent application renders the possibility of obtaining foreign
patent protections for claims related to the detection of ovarian and testicular
cancers remote. There is no assurance that Lexon will obtain any U.S. or foreign
patent protection for any of the claims.
The filing, prosecution and maintenance of all patent rights regarding the
ebaf screening process are within the sole discretion of the USF. Lexon has the
right to request that USF seek, obtain and maintain such patent and other
protection to the extent that USF is lawfully entitled to do so, at Lexon's sole
expense. There is no assurance that USF will seek, obtain or maintain such
patent and other protection to which it is lawfully entitled. Further, there is
no assurance that Lexon will have sufficient working capital to fund USF's
efforts in those activities.
The initial research and development related to the ebaf protein screening
process was funded by a grant from the National Institutes of Health ("NIH").
The NIH retains certain statutory rights to use any invention that results from
its funding without having to pay license fees and royalties. In addition, the
NIH is protected from lawsuits and infringement claims. There is no assurance
that the interests of the NIH will not materially adversely affect Lexon or its
business.
7
<PAGE>
The lack of U.S. and foreign patent protection for the test kit could
result in the manufacturing and sale of test kits copied by competitors who are
not be obligated to pay royalties. As a result, these competitors could achieve
superior operating margins, which could adversely affect Lexon's ability to
compete.
Marketing. Lexon's management has limited sales and marketing experience,
and no assurance is given that Lexon will be able to establish and maintain a
significant sales and marketing organization or that a direct sales force, if
developed by Lexon, will succeed in promoting Lexon's products to third-party
payors, clinical laboratories, healthcare providers and government entities
worldwide. Lexon believes that the marketing effort may be a lengthy process,
requiring Lexon to educate the worldwide medical community regarding both the
clinical utility and cost-effectiveness of Lexon's products.
Competition. The medical diagnostics and biotechnology industries are
subject to intense competition. Lexon's competitors in the United States and
abroad may include Roche Diagnostic Systems, Abbott Laboratories, Chiron
Corporation and Gen-Probe Incorporated. Other companies, including large
pharmaceutical and biotechnology companies, may enter the market. Although the
Ebaf Assay is the only known blood test to screen for colon cancer, Lexon's
existing and potential competitors may be able to develop technologies that are
as effective as, or more effective or easier to interpret, than those offered by
Lexon. Many of Lexon's existing and potential competitors have substantially
greater financial, marketing, sales, manufacturing, distribution and
technological resources than Lexon. There is no assurance that Lexon will be
able to successfully compete.
Manufacturing. Lexon has no commercial-scale manufacturing experience and
capabilities of medical products. It is anticipated that Lexon's products will
initially be manufactured by FDA approved manufacturers.
Employees. As of December 31, 1998, Lexon employed 1 person and 4 other
persons who were officers or key employees. Lexon's officers and key employees
do not receive compensation for their services. Mr. Slicker does not charge
Lexon for legal services rendered on its behalf.
Offices. To date, Lexon's principal offices at 8908 South Yale, Suite 409,
Tulsa, Oklahoma have been provided free of charge by Lexon's officers. Upon
completion of this Offering, Lexon will pay approximately $900 per month and
general operating expenses will be equitably allocated.
Litigation. Lexon is not involved in any litigation.
MARKET AND INDUSTRY INFORMATION
Government Regulation and FDA Approval Process. Regulation by governmental
authorities in the United States and other countries could be a significant
factor in ongoing research and product development activities. Lexon's
diagnostic products may require regulatory approval by governmental agencies
prior to commercialization. However, it is now believed that the sale of the
Ebaf Assay test kits to medical laboratories will not require FDA or other
governmental approvals. Various statutes and regulations also govern or
influence the manufacturing, safety, labeling, storage, recordkeeping and
marketing of such products. The lengthy process of seeking these approvals, and
the subsequent compliance with applicable statutes and regulations, require the
expenditure of substantial resources. Any failure by Lexon to obtain, or any
delay in obtaining, regulatory approvals could materially adversely affect
Lexon.
The levels of revenues and profitability of Lexon may be affected by the
continuing efforts of government and third party payors to contain or reduce the
costs of healthcare through various means. There have been, and Lexon expects
that there will continue to be, a number of federal and state proposals to
control pricing or profitability of therapeutic and other products. While Lexon
cannot predict whether any such legislative or regulatory proposals will be
adopted, the adoption of such proposals could have a material adverse effect on
Lexon.
8
<PAGE>
Management believes that the Ebaf Assay test kits used by medical
laboratories do not require FDA or other approvals.
International Sales. International sales are subject to foreign government
regulation, the requirements of which vary substantially from country to
country. The time required to obtain foreign approval may be longer or shorter
than that required for FDA approval and the requirements may substantially
differ. Lexon must obtain the "CE" mark prior to engaging in sales within the
European Economic Union of certain medical devices. During this process, the
sponsor must also demonstrate compliance with ISO manufacturing and quality
requirements.
The introduction of Lexon's developmental stage test products in foreign
markets will also subject Lexon to foreign regulatory clearances, which may
impose additional costs and burdens. International sales of medical devices are
subject to the regulatory requirements of each country. The regulatory review
process varies from country to country and many countries also impose product
standards, packaging requirements, labeling requirements and import restrictions
on devices. In addition, each country has its own tariff regulations, duties and
tax requirements.
Reimbursement. In the United States and elsewhere, sales of diagnostic,
therapeutic and other pharmaceutical products are dependent, in part, on the
availability of reimbursement to the consumer from third-party payors, such as
government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. There is no
assurance that any of Lexon's products will be considered cost effective and
that reimbursement to the consumer will be available, or will be sufficient to
allow Lexon to sell its products on a competitive and profitable basis.
DILUTION
Dilution is the difference between the purchase price paid by the investors
for their Shares and the net tangible book value of the shares after the
Offering. The net tangible book value of a security is equal to Lexon's tangible
net worth (tangible assets minus total liabilities) divided by the number of
Shares of the security outstanding. The following table illustrates the per
share dilution of Lexon's Common Stock:
Amount
-----------
<PAGE>
Sale price per Share......................................... $1.50
Net tangible book value before offering...................... $(0.03)
Increase to present shareholders in net tangible book value
attributable to sale of Shares offered..................... $0.06
Pro forma net tangible book value after offering............. $0.03
Dilution to new investors.................................... $1.47
The following table shows the number of Shares acquired from Lexon, the
aggregate consideration paid by the existing shareholders and new Shareholders
in this Offering:
Shares Percentage Aggregate Percentage of
Acquired from of Shares Consideration Consideration
Company Held by Group Paid for Paid by
Shares Group
----------------------------------------------------------
Existing Shareholders ... 6,269,313 94.2% $420,740 42.2%
New Shareholders ........ 384,000 5.8% $576,000 57.8%
----------------------------------------------------------
Total .................. 6,653,313 100.0% $996,740 100.0%
----------------------------------------------------------
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DIRECTORS, OFFICERS AND KEY EMPLOYEES
The following table identifies the directors, officers and key employees of
Lexon:
Name Age Capacity Title
Gifford M. Mabie.......... 57 Officer and Director President and Chief
Executive Officer
Rhonda R. Vincent......... 34 Officer and Director Vice President,
Secretary, Treasurer
Frederick K. Slicker...... 55 Officer Vice President and
General Counsel
Thomas R. Coughlin, M.D... 50 Key Employee Medical Director
Set forth below is a description of the backgrounds of the directors,
officers and key employees of Lexon:
Gifford M. Mabie, age 58, is President, CEO and a Director of Lexon. Mr.
Mabie is also President, CEO and a Director of Maxxon, Inc. (OTCBB: MXON), a
development stage company co-founded by Mr. Mabie in 1996 to develop and
commercialize a patented disposable safety syringe. From 1982 to 1994, Mr. Mabie
was Senior Vice President of CIS Technologies, Inc. (NASD: CISI), a leading
healthcare information company that was purchased by National Data Corporation
(NYSE: NDC) in 1996. As one of the founders of CIS, Mr. Mabie was instrumental
in raising over $40 million in capital that funded acquisitions and new product
development. As a result, that company's revenues grew from $105,000 in 1987 to
over $40 million in 1995. Prior to CIS, Mr. Mabie was with Honeywell Information
Systems, Inc., where he ranked as one of its top five salesmen worldwide. Prior
to joining Honeywell, he was corporate controller with W.B. Dunavant & Company,
one of the world's largest cotton brokers. He holds degrees in accounting and
economics from Memphis State University and served for eight years in the United
States Navy.
Rhonda R. Vincent, age 34, is Vice President, Secretary, Treasurer and
Director of Lexon. Ms. Vincent is also Vice President, Secretary, Treasurer and
Director of Maxxon, Inc. (OTCBB: MXON), a development stage company co-founded
by Ms. Vincent in 1996 to develop and commercialize a patented disposable safety
syringe. From 1994 to 1997, Ms. Vincent was Vice President, Secretary, Treasurer
and Director of Corporate Vision, Inc. (OTCBB: CVIA), a multimedia software
development company. For five years prior to founding Corporate Vision, Ms.
Vincent held various accounting, finance and investor relations positions with
CIS Technologies, Inc. (NASD: CISI), a leading healthcare information processing
company that was purchased by National Data Corporation (NYSE: NDC) in 1996. She
began her career as an audit associate with the public accounting firm of
Coopers & Lybrand. Ms. Vincent is a Certified Public Accountant and holds a
Bachelor of Science degree in accounting from Oral Roberts University.
Frederick K. Slicker, age 55, is Vice President and General Counsel for
Lexon. He has practiced law for 30 years, primarily in the areas of mergers and
acquisitions, securities law compliance and general business. He holds a Juris
Doctorate with the highest distinction from the University of Kansas and an LLM
from Harvard Law School. In addition to his employment by Lexon, he continues to
practice law for third-party clients, including Maxxon, Inc.
Thomas R. Coughlin, M.D., age 50, is Medical Director for Lexon. Prior to
joining Lexon, Dr. Coughlin was a cardiovascular surgeon. From 1992 to 1995, he
was Medical Director of Cardiovascular Surgical Services at Alexandria Hospital
in Alexandria Virginia and from 1991 to 1995, was Assistant Clinical Professor,
Thoracic and Cardiovascular Surgery at George Washington University Medical
Center in Washington, D.C. He has received numerous professional honors and has
published 25 research papers. He is a graduate of the University of Rochester
School of Medicine and Dentistry, Rochester, New York (M.D.) and of Seton Hall
University (B.S.).
Board of Directors. There are two directors of Lexon. The authorized
maximum number of directors is seven. Lexon's directors hold office until the
next annual meeting of stockholders or until their respective successors have
been duly elected and qualified. Lexon's officers are elected annually by the
Board of Directors and serve at the discretion of the Board.
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Compensation of Directors. To date, no director's fees have been paid,
however, directors who are not employees of Lexon may be paid reasonable fees
and may be granted stock options for serving as directors in the future.
Directors of Lexon who are also employees of Lexon will not receive any
additional compensation for their services as directors.
Compensation of Management. Members of Lexon's management receive no
compensation for their services. There are no written employment agreements.
Conflicts of Interest. Members of Lexon's management are associated with
other firms involved in a range of business activities. Consequently, there are
potential conflicts of interest inherent in their acting as officers and
directors of Lexon. Insofar as the officers and directors are engaged in other
business activities, management anticipates it will devote no more than 50% of
its time to Lexon's affairs.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the ownership
of Common Stock of the directors, officers and shareholders owning 10% or more
of the outstanding Common Stock of Lexon as of the date of this Offering
Memorandum:
Percent of Percent of
Outstanding Outstanding
Relationship Shares Owned Shares Prior to Shares After
to Company Offering the Offering
--------------------------------------------------------
Gifford Mabie.......Officer, Director 600,000 9.57% 9.02%
Rhonda Vincent......Officer, Director 600,000 9.57% 9.02%
Frederick Slicker...Officer 600,000 9.57% 9.02%
----------------------------------------
Officers and Directors as a group
(3 persons)........................... 1,800,000 28.71% 27.06%
UTEK Corporation....Beneficial Owner 1,000,000 15.95% 15.03%
----------------------------------------
Officers, Directors and Beneficial
Owners................................ 2,800,000 44.66% 42.08%
----------------------------------------
Common Stock Options. Lexon has reserved 2,500,000 shares of common stock
pursuant to its Stock Option Plans. At December 31, 1998, Lexon had outstanding
a total of 580,000 options to purchase shares of its Common Stock at $1.20 per
share to Dr. Tabibzadeh (50,000 Shares), to certain lenders (230,000 Shares),
and to certain consultants (300,000 Shares). The options expire ten years from
the date of grant if not sooner exercised. The exercise price was determined by
the Board of Directors to be the fair market value at the time the options were
granted.
CERTAIN TRANSACTIONS
On July 1, 1998, Mr. Mabie, Mr. Slicker and a non-affiliated shareholder
loaned Lexon $70,000, $50,000 and 60,000, respectively, in order for Lexon to
close the merger with Gentest and to thereby acquire the Ebaf Assay license. The
notes bear interest at 12% per annum through December 31, 1998 and 14% per annum
thereafter. The Notes are due March 31, 1999. In addition, Mr. Mabie, Mr.
Slicker and a non-affiliated shareholder received 70,000 options, 50,000
options, and 60,000 options, respectively, to purchase common stock of Lexon at
$1.20 per share.
11
<PAGE>
DESCRIPTION OF SECURITIES
Lexon is authorized to issue 45,000,000 Shares of Common Stock, par value
$0.001 per share, of which 6,269,313 shares were outstanding at January 17,
1999. Lexon is also authorized to issue 5,000,000 Shares of Preferred Stock, par
value $0.001 per share, of which there are no shares presently outstanding.
There is no present intent to issue any Preferred Stock. Upon completion of this
Offering, up to 6,653,313 Shares of Lexon Common Stock will be outstanding,
assuming none of the 580,000 options outstanding are exercised. All Shares of
Common Stock are, and all the Shares offered by Lexon hereby will be, duly
authorized, validly issued, fully paid and nonassessable.
Voting Rights. Holders of shares of Common Stock are entitled to one vote
per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the Board of Directors can elect all members of the Board of
Directors. Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.
Dividend Rights. Holders of record of shares of Common Stock are entitled
to receive dividends when and if declared by the Board of Directors. To date,
Lexon has not paid cash dividends on its Common Stock. Holders of Common Stock
are entitled to receive such dividends as may be declared and paid from time to
time by the Board of Directors out of funds legally available therefor. Lexon
intends to retain any earnings for the operation and expansion of its business
and does not anticipate paying cash dividends in the foreseeable future. Any
future determination as to the payment of cash dividends will depend upon future
earnings, results of operations, capital requirements, Lexon's financial
condition and such other factors as the Board of Directors may consider.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
Lexon, holders of shares of Common Stock are entitled to receive pro rata all of
the assets of Lexon available for distribution to shareholders after liabilities
are paid and distributions are made to the holders of Lexon's Preferred Stock.
Preemptive Rights. Holders of Common Stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of Lexon.
PLAN OF DISTRIBUTION
The subscription period commences January 18, 1999, and will terminate on
March 31, 1998, unless extended by Lexon. Funds from the sale of Shares will be
made immediately available to Lexon. Subscriptions will be accepted until the
expiration of the offering period or until a maximum of 384,000 Shares are sold,
whichever occurs first. Additional subscriptions will not be accepted by Lexon
after the Offering is fully subscribed.
No commissions will be paid in connection with sales made directly by the
officers and directors of Lexon. Brokers participating in the distribution of
the Shares will offer the Shares only to investors who represent to Lexon that
they meet proper suitability requirements and that investment in Common Stock is
proper for them. Lexon will pay a commission to brokers up to 10% of the
proceeds of the sale of the Shares. In addition, Lexon will pay brokers a due
diligence fee and a non-accountable expense allowance of up to 4% of the gross
proceeds and up to 6% of the gross proceeds, respectively.
Some offerees may utilize a purchaser representative in the evaluation of
the merits and risks of an investment in the Shares. Any such representative
must comply with the requirements of Regulation D under the Securities Act of
1933 and with applicable state securities laws. Neither Lexon, nor any officer
or any director of Lexon will pay any fees or commissions to, or pay any charges
for the services rendered by, any purchaser's representative unless the
purchaser's representative is a registered broker-dealer entitled to receive the
commissions.
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Shares issued to non-affiliates of Lexon in a valid Rule 504 offering
purchase are shares that may be resold without federal registration or other
federal transfer restrictions. Applicable state laws may require registration
before any resales are made from certain states. If the Offering does not
qualify under Rule 504, resale of the Shares will be restricted indefinitely.
There is no assurance that this Offering will qualify under Rule 504.
ADDITIONAL INFORMATION
Lexon intends to furnish its shareholders with annual reports containing
audited financial information, reported upon by independent public accountants.
Each purchaser of Shares, prior to such purchase, is entitled to ask
questions of Lexon and receive answers concerning the terms and conditions of
the Offering and to obtain any additional information which Lexon possesses that
is necessary for the purchaser to verify the accuracy of the information
furnished in this Offering Memorandum.
Lexon will make reasonable efforts to furnish to any qualified prospective
investor, or the prospective investor's authorized representative, any
additional information or opportunity for inquiry concerning the terms and
conditions of this Offering, including information requested to verify the
accuracy of the information contained in this Offering Memorandum or otherwise
furnish the prospective investor or the prospective investor's representative,
to the extent Lexon possesses the information or can obtain it without undue
effort or expense. Prospective investors requiring additional information may
contact Gifford Mabie, President of Lexon, at 8908 South Yale, Suite 409, Tulsa,
Oklahoma 74137, telephone (918) 492-4125.
13
<PAGE>
FINANCIAL INFORMATION
LEXON, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 1998
(Unaudited)
After the
Offering and
Prior to the Application of
Offering Proceeds(1)
------------- -------------
Assets
Current Assets
Cash $31,133 $211,476
Other Current Assets 11,020 11,020
------------- -------------
42,153 222,496
------------- -------------
Other Assets
License Agreement 161,000 161,000
Gentest Merger 311,250 311,250
------------- -------------
Total Other Assets 472,250 472,250
------------- -------------
Total Assets $514,403 $694,746
------------- -------------
Liabilities
Current Liabilities
Accounts Payable and Accrued Liabilities $16,657 $0
Notes Payable to Related Parties
(Principal Balance) 230,000 0
Accrued Interest on Notes Payable to
Related Parties 13,800 0
------------- --------------
$260,457 $0
------------- --------------
Stockholders' Equity
Preferred stock, $0.001 par value,
5,000,000 Shares authorized 0 0
Common stock, $0.001 par value,
45,000,000 Shares authorized;
6,269,313 Shares issued and outstanding
prior to the Offering and 6,653,313
Shares issued and outstanding after
the Offering 6,269 6,653
Paid in Capital 321,731 762,147
Retained Earnings (74,054) (74,054)
------------- -------------
253,946 694,746
------------- -------------
Total Liabilities and Stockholders' Equity $514,403 $694,746
------------- -------------
(1) Assumes maximum net proceeds from this Offering of $440,800 and payment
of $260,457 in liabilities of Lexon.
The accompanying notes are an integral part of the financial statements
14
<PAGE>
LEXON, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
December 31, 1998
(Unaudited)
Before and After
the Offering
------------------
Revenue $0
Expenses
Corporate Materials $26,442
Internet Website 23,895
Interest Expense 13,800
Office 5,069
Travel 4,848
------------------
74,054
------------------
Net Income $(74,054)
------------------
Earnings per Share $0.01
------------------
The accompanying notes are an integral part of the financial statements
15
<PAGE>
LEXON, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
December 31, 1998
(Unaudited)
After the
Offering and
Before the Application of
Offering Proceeds(1)
----------- --------------
Operating Activities
Net Loss $(74,054) $(74,054)
Change in Other Current Assets (11,020) (11,020)
Change in Accounts Payable and Accrued
Liabilities 16,657 0
Change in Interest Payable 13,800 0
----------- --------------
Total Operating Activities $(54,617) $(85,074)
----------- --------------
Investing Activities
Initial License Fee (105,000) (105,000)
Sponsored Research Contract (311,250) (311,250)
Consulting Fee (55,000) (55,000)
----------- --------------
Total Investing Activities $(471,250) $(471,250)
----------- --------------
Financing Activities
Sale of Common Stock before this Offering $373,658 $373,658
Less: Offering Expenses (46,658) (46,658)
Sale of Common Stock in this Offering 0 576,000
Less: Estimated Broker Commissions 0 (115,200)
Less: Estimated Offering Expenses 0 (20,000)
Loans from Officers 230,000 230,000
Repayment of Loans from Officers 0 (230,000)
----------- --------------
Total Financing Activities $557,000 $767,800
----------- --------------
Net Increase in Cash $31,133 $211,476
Cash at Beginning of Period 0 0
----------- --------------
Cash at End of Period $31,133 $211,476
----------- --------------
Schedule of Non-Cash Financing and
Investing Activities
Common Stock Issued in Gentest Merger $1,000 $1,000
Common Stock for Services Related to Offering $47,082 $47,082
----------- --------------
(1) Assumes maximum net proceeds from this Offering of $440,800 and payment of
$260,457 in liabilities of Lexon.
The accompanying notes are an integral part of the financial statements
16
<PAGE>
LEXON, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
(Unaudited)
Note 1- Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
Lexon, Inc. ("Lexon" or "the Company") is a development stage corporation
that has the exclusive worldwide license to develop, manufacture, obtain FDA
approval for, if required, and market the Ebaf Assay, blood test to screen for
the ebaf protein, which allows for early, non-invasive diagnosis of certain
types of colon, ovarian and testicular cancers.
Development Stage Operations
The Company was incorporated on December 16, 1997 under the laws of the
state of Oklahoma. Since inception, the Company's primary focus has been raising
capital. The Company had no income or expenses during the period ended July 31,
1998.
Cash and Cash Equivalents
The Company considers highly liquid investments with maturities of three
months or less to be cash equivalents.
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". Under the liability method, deferred taxes are determined based
on the differences between the financial statements and tax bases of assets and
liabilities at enacted tax rates in effect in the years in which the differences
are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year End
The Company's fiscal year ends on December 31.
Note 2- Gentest Merger
On July 8, 1998, the Company completed its merger with Gentest, Inc., a
Florida corporation ("Gentest"). Gentest had the exclusive worldwide license to
develop, manufacture, obtain FDA approval for, and market the Ebaf Assay, a
blood test for detecting certain types of colon, ovarian and testicular cancers.
Under the terms of the Agreement and Plan of Merger, the Company issued to
UTEK Corporation ("UTEK"), the sole shareholder of Gentest, 1,000,000 shares of
Common Stock of the Company. Gentest ceased to exist by reason of the merger,
and the assets and liabilities of Gentest, including those rights and
obligations associated with the exclusive License Agreement and the Sponsored
Research Agreement, became assets and liabilities of Lexon. The obligations of
Gentest were to pay $105,000 for the exclusive license, $311,250 to develop the
test kit and $55,000 for services rendered in connection with securing the
agreements. The obligations were paid in full on July 8, 1998. The Gentest
merger was accounted for as a purchase. The purchase price of $1,000 was based
on the number of shares issued at par value of $0.001 per share.
17
<PAGE>
Note 3- Exclusive License
On July 8, 1998, the Company paid $100,000 to the University of South
Florida Research Foundation ("USFRF") and $5,000 to North Shore University
Hospital Research Foundation ("North Shore") for the exclusive worldwide license
to develop and market the Ebaf Assay test kits. In addition, the Company paid
$55,000 to UTEK for services rendered in connection with securing the license
agreements. The exclusive license is amortized over 17 years using the
straight-line method.
Note 4- Sponsored Research Contract
On July 8, 1998, the Company paid $311,250 to North Shore under the terms
of a Sponsored Research Contract to develop the Ebaf Assay test kits. The
contract specifies a 24 month development period with costs not to exceed
$311,250. The Sponsored Research Agreement is amortized over 2 years using the
straight-line method.
Note 5- Notes Payable
On July 1, 1998, the Company borrowed a total of $230,000, of which
$170,000 was from two of its officers and $60,000 was from a shareholder. The
Company executed notes payable which are due December 31, 1998 and bear interest
of 12% per year. The notes are unsecured obligations of the Company.
Note 6- Commitments and Contingencies
Future Royalty Obligations Under Exclusive License Agreement
In connection with the exclusive license agreement, the Company agreed to
pay to the USFRF a royalty equal to the greater of (a) five percent (5%) of
revenue from the sale of products based on the concept for the diagnosis of
selected adenocarcinomas and any additions, extensions and improvements thereto
or (b) zero (0) dollars for the first twenty-four (24) months; $75,000 at the
end of year three (3); $100,000 at the end of year four (4); $125,000 at the end
of year five (5); $150,000 at the end of year six (6) and for each successive
year thereafter during the term of the exclusive license agreement. The royalty
obligation will expire after the longer of twenty (20) years or the expiration
of the last to expire patent that covers the licensed intellectual property. The
Company also agreed to pay to North Shore a royalty equal to one-half percent
(0.5%) of revenue from the sale of such products and ten percent (10%) of any
consideration received by the Company from granting sublicenses.
Note 7- Common Stock and Paid in Capital
Under the terms of an offering dated April 1, 1998, the Company offered up
to 5,000,000 shares of its common stock at par value, pursuant to an exemption
from registration under Rule 504 of Regulation D of the Securities Act of 1933,
as amended. Of the 5,000,000 shares sold, 1,800,000 shares were purchased by
officers and directors of the Company.
Under the terms of offerings dated May 18, 1998 and November 6, 1998,
pursuant to an exemption from registration under Rule 504 of Regulation D of the
Securities Act of 1933, as amended, the Company sold 125,205 shares at $2.00 per
share ($250,410) and 39,416 shares at $3.00 per share ($118,248) for cash,
respectively. The Company incurred total expenses of approximately $46,658 in
connection with those offerings. On December 31, 1998, the Board of Directors
agreed to adjust the offering price to $1.50 per share and to issue 81,151
additional shares to the purchasers in those offerings.
On July 8, 1998, the Company issued 1,000,000 shares of its Common Stock to
UTEK Corporation in connection with the Gentest merger.
18
<PAGE>
Note 8- Common Stock Options
Lexon has reserved 2,500,000 shares of common stock pursuant to its Stock
Option Plans. At December 31, 1998, Lexon had outstanding a total of 580,000
options to purchase shares of its Common Stock at $1.20 per share to Dr.
Tabibzadeh (50,000 Shares), to certain lenders (230,000 Shares), and to certain
consultants (300,000 Shares). The options expire ten years from the date of
grant if not sooner exercised. The exercise price was determined by the Board of
Directors to be the fair market value at the time the options were granted.
19
<PAGE>
RISK FACTORS
This Offering is speculative and involves a high degree of risk. An
investment in the Shares offered herein should not be made by persons who cannot
afford the loss of their entire investment. Some risk factors are listed below:
1. No Operating History. Lexon was organized in December, 1997 and has no
operating history. Lexon has no marketable products and minimal assets at this
time. There is no assurance that Lexon will be able to develop, manufacture or
market any products successfully, generate net revenue from the sale of any
products, or achieve or maintain profitable operations.
2. Product Not Developed. Lexon faces all the risks associated with the
development of a new, speculative business. Lexon has no products and limited
assets at this time, and will be subject to numerous risks, expenses, and
difficulties typically encountered in the development of new medical diagnostic
tests. The business of Lexon will depend upon the development of the Ebaf Assay
test kit to detect the presence of the ebaf protein and upon the approval by the
FDA, if required, of the test kit. There is no assurance that Lexon's activities
will be successful or profitable or that the FDA will approve the test kit, if
such approval is required. While management has been advised that the detection
of the ebaf protein confirms a cancer diagnosis with a high degree of
probability, management has not independently verified the accuracy of this
statement. No assurance is given that the presence of ebaf is an accurate
predictor of cancer.
3. Lexon Does Not Own the Protein Screening Process and Will Not Own Any
Improvements Thereto. Certain proprietary rights in the Ebaf Assay are owned by
USF and some will be owned by North Shore. By way of merger with Gentest, Inc.,
Lexon owns the exclusive worldwide licenses to manufacture and market test kit
products developed using the process. Any improvements to the process will
remain the property of the USF or North Shore. There is no assurance that
competing products will not be developed or that improvements to the current
screening process will be available to Lexon.
4. Patentability of Protein Screening Process is Uncertain. A patent application
related to the ebaf screening process was filed by USF with the U.S. Patent and
Trademark Office ("USPTO") in 1997. Officials at USF have advised Lexon that USF
has been advised verbally that a U.S. Patent covering the ebaf screening process
will be issued before December 31, 1998. Even if a patent is issued, the scope
of the patent is unknown at this time. There is no assurance that a patent, if
issued, will not infringe on the rights of others.
5. Foreign Patent Protections for Ovarian and Testicular Cancer Detection Claims
is Remote. The patent application filed with the USPTO disclosed the detection
of colon cancer, but not detection of ovarian or testicular cancer. Subsequent
to filing the provisional patent application, a series of lectures and papers in
which additional disclosures related to the detection of ovarian and testicular
cancer by the protein screening process were made public by the USF. The
existence of these additional disclosures outside the scope of the provisional
patent application renders the possibility of obtaining foreign patent
protections for claims related to the detection of ovarian and testicular
cancers remote. There is no assurance that Lexon will obtain any foreign patent
protection for any of the claims.
6. Filing, Prosecution and Maintenance of Patents Are Within the Sole Discretion
of the USF. The filing, prosecution and maintenance of all patent rights are
within the sole discretion of the USF. Lexon has the right to request that the
USF seek, obtain and maintain such patent and other protection to the extent
that USF is lawfully entitled to do so, at Lexon's sole expense. There is no
assurance that USF will seek, obtain or maintain such patent and other
protection to which it is lawfully entitled. Further, there is no assurance that
Lexon will have sufficient working capital to fund USF's efforts in those
activities, if requested.
7. Rights and Interests of the National Institutes of Health are Unknown. The
initial research and development related to the ebaf screening process was
funded by a grant from the National Institutes of Health ("NIH"). The NIH
retains certain statutory rights to use any invention that results from its
funding without having to pay license fees and royalties. In addition, the NIH
is protected from lawsuits and infringement claims. There is no assurance that
the interests of the NIH will not materially adversely affect Lexon or its
business.
20
<PAGE>
8. License Agreement Obligates Company to Pay Royalties Regardless of Patent
Issuance. The Licensing Agreement with the USF obligates Lexon to pay royalties
of 5% of gross revenues from the sale of test kits, with minimum royalty
payments of between $75,000 and $150,000 per year for each year beginning in
2000 and continuing for the term of the license agreement, regardless of whether
a patent is issued. There is no assurance that Lexon will have sufficient
working capital to make such payments.
9. Lack of US and Foreign Patent Protection Could Adversely Affect Lexon's
Ability to Compete. At least some aspects of the process and detection methods
have been published by the USF or the inventors and are now available to the
public and to competitors. The lack of U.S. and foreign patent protection for
the test kit could result in the manufacture and sale of test kits copied by
competitors who are not obligated to pay royalties. As a result, these
competitors could achieve superior operating margins, which could adversely
affect Lexon's ability to compete.
10. Cost to Develop Test Kits Could Exceed Agreed Upon Amount. The Sponsored
Research Agreement with North Shore states that the cost to develop the test
kits shall not exceed $311,250. There is no assurance that the cost to develop
the test kits will not exceed this amount. Furthermore, there is no assurance
that Lexon will have the capital necessary to fund any cost overruns.
11. Need for Additional Capital. Lexon is dependent on the maximum proceeds of
the Offering described herein to acquire Gentest and to continue its business
plan. Additional capital will be required to field test the screening kit, file
and process applications for governmental approval, develop models, identify
manufacturers to mass produce the test kits, and to advertise, ship and collect
for products sold and any other costs. Lexon intends to pursue additional
financing. However, there is no assurance that any additional capital needed
will be available to Lexon on acceptable terms when needed, if at all. Any
additional capital may involve substantial dilution to the interests of Lexon's
then existing stockholders.
12. Government Regulation. Lexon's activities and products may require
regulatory approval in the United States, Canada and in a number of foreign
countries. The process of obtaining these approvals, if required, will be time
consuming and costly. Changes in the regulations for Lexon's products could
adversely impact operations, affecting profitability or competitive advantages.
There is no assurance that governmental approvals will be obtained.
13. Acceptance by Medical Professionals. Inherent to the successful marketing of
Lexon's Ebaf Assay test kit is the acceptance of the product by medical
professionals. There is no assurance that the product will be accepted.
14. Competition. The diagnostic segment of the medical industry is intensely
competitive and composed of large and well financed firms, including
pharmaceutical, biotechnology, and consumer goods companies, as well as
universities and other research institutions that are constantly developing or
acquiring rights to new products. Moreover, competing products may be accepted
by consumers who may be slow to change to the use of alternative products. Some
competitors have established distribution networks and sufficient marketing
resources to resist attempts to dislodge use of their products. In addition,
there is no assurance that one or more competitors will not develop or
manufacture products that are more effective or better accepted than those which
Lexon seeks to commercialize. There is no assurance that Lexon will be able to
compete successfully or profitably.
15. Dependence Upon Key Personnel. Lexon is dependent upon the services of Dr.
Tabibzedah, co-discoverer of the ebaf screening process, to oversee the
development of the Ebaf Assay test kit. The loss of the services of Dr.
Tabibzedah and the inability to retain an acceptable substitute could have a
material adverse effect on Lexon. Lexon is also dependent upon the services of
its officers. The loss of the services of these key personnel or the inability
to retain such experienced personnel could have a material adverse effect on
Lexon. There is no assurance that replacement of key personnel will be possible.
16. Limited Experience of Management and Potential Conflicts of Interest. The
officers of Lexon have had limited experience in the medical products industry.
In addition, members of Lexon's management
21
<PAGE>
are associated with other firms involved in a range of business activities.
Consequently, there are potential conflicts of interest in their acting as
officers and directors of Lexon. Management estimates that not more than 50% of
their time will be devoted to Lexon's activities (See "Conflicts of Interest").
17. Concentration of Ownership. As of the date of this Offering Memorandum, the
directors and executive officers of Lexon, as a group, owned or controlled
28.71% of the outstanding Common Stock of Lexon. The officers, directors and
beneficial owners, as a group, owned or controlled 44.66% of the outstanding
Common Stock of Lexon. After this Offering, if the maximum is sold, the
directors and executive officers, as a group, will own or control 27.06% of the
outstanding Common Stock of Lexon. After this Offering, if the maximum is sold,
the directors, executive officers and beneficial owners, as a group, will own or
control 42.08% of the outstanding Common Stock of Lexon.
18. Broad Discretion in Application of Proceeds. Approximately $260,000 of the
net proceeds of this Offering will be used to repay loans, including interest
and to pay other liabilities of Lexon. Any remaining proceeds are intended for
general working capital purposes. Lexon will have broad discretion as to the
application of such proceeds. There is no assurance that the required funds will
be available when needed.
19. Arbitrary Offering Price. The offering price of the Shares has been
arbitrarily determined by Lexon. There is no relationship between the offering
price and Lexon's assets, book value, net worth, or any other economic or
recognized criterion of value. There is no assurance that this Offering will be
successful or that Lexon will raise sufficient funds to complete the Gentest
merger.
20. Dilution. Investors participating in this Offering will incur substantial
dilution as it relates to the resulting net tangible book value of Lexon's
capital stock after the completion of the Offering.
21. Compliance with State and Federal Securities Laws. It is intended that this
Offering will qualify for exemption from federal registration under Rule 504 of
SEC Regulation D. There is no assurance that the Offering presently qualifies or
will continue to qualify under exemptions from registration provided by the
Securities Act of 1933 (the "Act") or applicable state securities laws due to,
among other things, the adequacy of disclosure, the manner of distribution of
the Offering or the retroactive change or interpretation of any applicable
securities laws or regulations. Even if the Offering is exempt from registration
under federal law, registration may be required for sales and resales of the
Shares under applicable state laws. If, and to the extent that, suits for
rescission are brought and successfully concluded for failure to register this
Offering under applicable securities laws, or for acts or omissions constituting
certain prohibited practices under state or federal securities laws, the capital
and assets of Lexon could be materially adversely affected, which could
jeopardize the ability of Lexon to operate successfully thereafter.
22. No Trading Market for Common Stock. Lexon's Common Stock is eligible for
trading in the Over the Counter Market under the symbol "LXXN." Although Lexon
intends to pursue developing a liquid market as soon as practicable, there is no
assurance that such liquid market will develop, or if such a market develops,
that it will be maintained. Holders of the Shares of Common Stock may,
therefore, have difficulty in selling their stock should they desire to do so.
Investors must be able to lose their entire investment in their Shares of Common
Stock.
23. No Dividends. Lexon has not paid any cash or other dividends on its Common
Stock and does not expect to declare or pay any such cash dividends in the
foreseeable future.
22
<PAGE>
SUBSCRIPTION AGREEMENT
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125 Fax (918) 492-2560
The undersigned subscriber ("Subscriber") hereby subscribes to and
agrees to purchase ------- Shares ("Shares") of Lexon, Inc. Common Stock,
$0.001 par value, for $1.50 per Share.
1. General Information Concerning Lexon and the Offering.
(A) Subscriber has received a copy of the Private Offering Memorandum
dated January 18, 1999.
(B) Subscriber understands that the business plans described in the
Private Offering Memorandum dated January 18, 1999 assumes the
successful completion of the funding transactions described therein,
none of which may occur.
2. Status of Investor. (Check all that apply)
Accredited Investor
Subscriber is an "accredited investor" as defined by SEC Rule 501(a),
by reason of being (check one):
---- A natural person who has a net worth (together with my spouse) of
more than $1,000,000; or
---- A natural person who had income in excess of $200,000 ($300,000
jointly with my spouse) in each of the last two (2) years and a
reasonable expectation of earning the same income level this year; or
---- As otherwise specified in SEC Rule 501(a).
Non-Accredited Investor
---- Subscriber does not meet the requirements as an accredited
investor.
3. Subscriber's Investment Experience. Subscriber represents and warrants to
Lexon that:
(A) Subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of
an investment in the Shares; and
(B) Subscriber is able to bear the economic risk of the investment in
the Shares, including the risk of a total loss of the investment in the
Shares.
4. Subscriber's Investment Representations. Subscriber represents and warrants
to Lexon that:
(A) The acquisition of the Shares by Subscriber is for Subscriber's own
account and is for investment; and
(B) Subscriber has no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the Shares; and
(C) All information that Subscriber has supplied to Lexon in connection
with Subscriber's subscription to purchase the Shares is true and
correct.
23
<PAGE>
5. Subscriber's Understanding Concerning Lexon. Subscriber represents and
warrants to Lexon that:
(A) Subscriber understands that an investment in the Shares involves a
very high degree of risk; and
(B) Subscriber acknowledges that Lexon is a development stage company
having been incorporated in December, 1997, and that Lexon has no prior
business or financial experience; and
(C) Subscriber has conducted all investigations and due diligence
concerning Lexon and the Shares which Subscriber deems appropriate, and
Subscriber has found all such information obtained fully acceptable;
and
(D) Subscriber is knowledgeable about the prospects, business,
financial condition and operations of Lexon; and
(E) Subscriber has had an opportunity to ask questions of the officers
and directors of Lexon concerning the Shares and the business and
financial condition of and prospects for Lexon, and the officers and
directors of Lexon have adequately answered all questions asked and
made all relevant information available to Subscriber, including all
relevant books and records of Lexon; and
(F) Subscriber understands that success of Lexon is dependent upon
receipt of the maximum of $576,000 from the sale of the Shares; and
(G) Subscriber understands that no market exists for the Shares and
that there is no assurance that a market will exist in the future.
6. Compliance with Securities Laws. Subscriber understands and agrees that
federal and state securities laws may impose restrictions and limitations
applicable to the purchase, sale, resale and distribution of the Shares.
7. Indemnification. Subscriber agrees that Lexon has relied on the accuracy of
the statements of Subscriber set forth herein and otherwise. Subscriber agrees
to defend and indemnify Lexon and its officers, directors, controlling persons,
accountants, attorneys and agents representing Lexon, and to hold all and each
of them harmless from and against any and all losses, damages, liabilities and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, which they or any of them incurs by reason of any alleged
misrepresentation made by or on behalf of Subscriber, any alleged breach by
Subscriber of the representations and warranties made by Subscriber herein, any
alleged failure by Subscriber to fulfill any of the covenants and agreements of
Subscriber set forth herein and any alleged violation of applicable securities
law by Subscriber.
8. Survival. All representations, warranties and covenants contained in this
Subscription Agreement, including without limitation, the indemnification
provisions hereof, shall survive the acceptance by Lexon of this Subscription
Agreement and the delivery of the Common Stock to Subscriber. Subscriber
acknowledges and agrees that this Subscription Agreement shall survive the death
or disability of Subscriber.
9. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma.
24
<PAGE>
SUBSCRIBER
This Subscription Agreement has been executed for the purchase of
___________ Shares of Lexon, Inc. Common Stock, $0.001 par value, for $1.50 per
share by Subscriber this _____ day of _________, 1999.
Please make check payable to: Lexon, Inc.
FOR INDIVIDUALS FOR CORPORATE & OTHER
Signature(s): Signature
------------------- ------------------------
By:
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(Second signature only if shares (Print name and title)
held jointly)
Please Register Shares as Follows: Please Register Shares as Follows:
Name: Name:
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City/State: City/State:
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Note: If Shares are jointly held, please designate the following (circle one):
Joint Tenants with Right of Survivorship OR Tenants in Common
LEXON, INC.
8908 South Yale Avenue, Suite 409
Tulsa, Oklahoma 74137
Telephone (918) 492-4125
Fax (918) 492-2560
Agreed and accepted, effective this _____ day of _____________, 1999.
By: ____________________________________
Rhonda R. Vincent
Vice President, Secretary and Treasurer
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<PAGE>
EXHIBIT A: RESUME OF DR. SIAMAK TABIBZADEH
26
<PAGE>
CURRICULUM VITAE
NAME: Siamak Tabibzadeh, MD
ADDRESS: Department of Pathology
Moffitt Cancer Center
12902 Magnolia Drive
Tampa, Florida 33612
TELEPHONE: 813-979-7237
FAX: 813-979-3085
E-MAIL: [email protected]
[email protected]
PERSONAL: Date of birth: September 7, 1952
Citizen of United States
EDUCATION: MD degree (Summa Cum Laude): 1970-1977
Tehran University
School of Medicine
Tehran, Iran
Rotating Internship: 1976-1977
Tehran University Hospitals
Tehran, Iran
Residency in Anatomic and Clinical pathology 1978-1982
Montefiore Medical Center
Bronx, NY
Fellowship in Immunopathology 1982-1983
Elmhurst Hospital
Elmhurst, NY
HONORS AND
AWARDS: Full Tuition Scholarships: 1970-1977
Tehran University School of Medicine
First Place Medal for top standing in
graduating Class: 1977
Tehran University School of Medicine
Award in recognition of teaching, Pre-Med 1994
Students, Moffitt Cancer Center at the
University of South Florida
EXAMINIATIONS:
ECFMG 1976
VQE 1977
FLEX 1978
Board of Anatomic and Clinical Pathology 1982
(Diplomat of American Board of Pathology)
FLEX 1991
LICENSES:
New York State, 153139-1 1982
California, A39775 1982
1
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Connecticut, 20953 1979
Florida, ME0061785 1992
DEA AS20332857 1983
New York State, 153139-1 1982
PRESENT POSITION:
Attending in Pathology Moffitt Cancer Center 1991-Present
at the University of South Floida Tampa, FL
33612
PREVIOUS
POSITIONS:
Attending Pathologist, Elmhurst Hospital and 1983-1991
Mount Sinai School of Medicine, NY
FACULTY
POSITIONS:
Instructor, Dept. of Pathology, Mount Sinai 1983-1985
School of Medicine, NY, NY
Assistant Professor of Pathology, Dept. of 1985-1991
Pathology, Mount Sinai School of Medicine,
NY, NY
Associate Professor in Pathology; University of 1991-1996
South Florida School of Medicine, Tamp. FL
33612
Full Professor in Pathology, University of 1996-Present
South Florida School of Medicine, Tampa, FL
33612
GRANTS:
PI: R29, NIH (National Institute of Health; 1988-1993
Direct Cost; $350,000: Role(s) of cytokines
and HLA-DR in endometrial epithelium)
PI: Private funds: $165,000; Role of cytokines 1994-1999
In implantation
PI: RO1, NIH; Direct Cost; $474,115; Roles of 1994-1999
T cells in human endometrial epithelium
Co-PI: RO1, NIH; Direct Costs; $48,000; 1995-1998
Biology of endometrial carcinoma in the nude
Mouse model. $16,000
As a mentor: Aberrant G1 phase regulation in 1998-2001
thyroid cancer, Direct costs; $101,334
PENDING
PI: RO1, NIH (National Institute of Health 1998-2002
Direct Cost; $650,000; Identification of
endometrial receptivity markers
MEMBERSHIPS:
United States-Canadian Division of the 1984-Present
International Academy of Pathology
Histochemical Society 1985-Present
New York Academy of Sciences 1988-Present
Harvey Society 1990-Present
EDITORIAL BOARDS:
Editor-in-Chief; Frontiers in Bioscience 1995-Present
URLs:
US: http://bioscience.org
Israel: http://bioinfo.weizmann.ac.il/bioscience
France: http://vega.crbm.cnrs-mop.fr/bioscience
2
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Member of Editorial Board: Endocrine 1994-Present
PATENTS:
Expression of TGF(beta)4 in diagnosis of infertility, Pending
Endometrial bleeding and carcinoma of colon,
Ovary and testis
JOURNAL REFEREE:
Hepatology 1988-Present
Journal of Histochemistry and Cytochemistry 1989-Present
American Journal of Pathology 1990-Present
Endocrinology 1991-Present
Human Reproduction 1992-Present
Endocrine 1993-Present
Journal of Obstetrics and Gynecology 1993-Present
Biology of Reproduction 1994-Present
J of Clinical Endocrinology and Metabolism 1993-Present
Fertility and Sterility 1997-Present
GRANT REFEREE:
Ad hoc referee, NIH
GRADUATE
PROGRAM:
Associate member; University of South Florida 1993-Present
School of Medicine, Tampa, FL 33612
PROFESSIONAL
ACTIVITIES:
Autopsy Pathology
Surgical Pathology
Cytology
Electron Microscopy
Immunopathology
Molecular biology
DEVELOPMENT OF
LABORATORIES:
Electron microscopy Laboratory 1983
Immunopathology Laboratory 1984
Molecular Biology Laboratory 1990
COMMITTEES
Research committee: Responsibilities: reviews 1987-1991
of grants and research proposals Elmhurst
Hospital, NY, NY
Recruitment Committee Responsibiltiy: 1991
Position, Moffitt Cancer Center, Tampa, FL
Search committee for Chairperson, 1993
Responsibility: Evaluation of candidates for
chairmanship of the Dept. of Pathology at the
University of South Florida, Tampa, FL 33612
GI Program: Responsibility: Evaluation and 1993
presentation of surgical pathology cases for
patient care decisions, Moffitt Cancer center,
Tampa, FL
OB/GYN Program: Responsibility: Evaluation 1994-Present
and presentation of surgical pathology cases
for patient care decision, Moffitt Cancer
Center, Tampa, FL
DIRECTORSHIP:
Immunopathology Laboratory, Dept. of 1983-1991
Pathology, Elmhurst Hospital, Elmhurst, NY
Immunopathology and Electron Microscopy, 1984-1991
Dept. of Pathology, Elmhurst Hospital,
Elmhurst, NY
TEACHING:
Medical students, Subject: Immunopathology; 1983-1991
3
<PAGE>
small group discussions, Mount Sinai Medical
Center, NY, NY
Residents in Pahtology, Pathologists, MD's, 1993-Present
PhD's, technicians, postdoctoral fellow and
Postdoctoral fellows Subjects: Surgical
Pathology, Autopsy Pathology,
Immunopathology, Electron Microscopy, and
Molecular Biology, Elmhurst Hospital,
Elmhurst NY and Moffitt Cancer Center at
the University of South Florida, Tampa, FL
Medical students Subject: Course in 1983-1991
Immunopathology, University of South
Florida, Tampa, FL
Pre-Med students, Subject: Role of sytokines in 1991-1995
Endometrium, Role of T cells in invasion and
Metastasis, Moffitt Cancer center at the
University of South Florida
GRAND ROUNDS:
"Role of T cells and cytokines in the Oct 1993
pathobiology of neoplasia" University of South
Florida, Tamp, FL
INDEPENDENT AND
COLLABORATIVE
RESEARCH
Study of association of human papillomavirus infection 1978-1980
With dysplasia and neoplasia of cervix
Study of epithelial cells grown from human urine cultures
Ultrastructuralstudy of rhinoscleroma 1980-1986
Ultrastructural study of T cells, B cells and
dendritic cells in imprints
Developing a double staining method
Studying the distribution of lymphoid cells and HLA-DR
in human endometrium
Ultrastructural study of HLA-DR molecules in human
endometrium
Induction of HLA-DR molecules in human endometrial
epithelial cells in vitro by IFN-gamma
Study of applicability of monoclonal antibodies to
cytokeratins in the diagnosis of poorly differentiated
tumors
Study of applicability of monoclonal antibodies to
cytokeratins in the differential diagnosis of
Paget's disease
Isolation and characterization of endometrial T cells 1988-1989
Study of contribution of lymphoid cells to endometrial
proliferation
Study of interferon (beta)2 expression in human tumors
Study of induction of PGE2 in endometrial epithelial cells
by IL-1
Study of modulation of IL-1 receptor by steroid hormones
Study of IFN-gamma production by endometrial T cells
Study of activation markers of T cells in human
endometrium
Probing immunoreactivity of human endometrium for
dating
4
<PAGE>
Study of leukocyte adhesion molecules in human 1989-1990
endometrium
Study of proliferation of lymphoid cells in human
endometrium
Study of IL-1 induced HLA-Dr expresion in endometrial
epithelial cells
Study of immunoreactivity of endometrium throughout
menstrual cycle
Characterization of steroid-cytokine sensitive endometrial
cells lines
Study of HLA-DR expression in endometrial epithelial
cells induced by endometrial T cells
Development of nonradioisotpoic labeling technique of 1990-1991
probes used in the southern blotting and in situ
hybridization
Development of strategies to inhibit amplification of DNA
contaminants of RNA preparations
Development of In situ PCR
Study of IL-1 alpha, IL-1(beta), IRAP, IL-6, and TGF-alpha 1991-1992
gene and protein expression in human endometrium
throughout the menstrual cycle
Study of TNF-alpha gene expression in human endometrium
Study of integrin molecules in human endometrium
throughout the menstrual cycle
Study of the cell-cell and cytokine-cell interactions in
normal and meoplastic endometrial and epithelial cells
Study of T cell mediated mechanisms of tumor metastasis 1992-1994
Study of the cytokine regulation of endometrial function
Identification of genes implicated in human implantation 1995-1997
and infertility
Examination of the steroid regulation of TNF-alpha gene
expression
Identification of TGF(beta)4 (ebaf) a novel gene of the
TGFBeta superfamily of molecules. Application in the
diagnosis of endometrial bleeding, infertility, and
certain types of cancer
5
<PAGE>
INVITED PRESENTATIONS
1. Invited by: Dr. Pondichery G. Satyaswaroop, Dept of Obstetrics and
Gynecology, Milton S. Hershey Medical Center, The Pennsylvania State
University, Hershey, PA. Title of the talk: "Ia expression in human
endometrium". June 1985.
2. Invited by: Dr. Leopold G. Koss, Professor and Chairman, Dept of Pathology,
Montefiore Medical Center, Bronx, NY. Title of the talk: "Induction of
expression of HLA-DR molecules in glandular epithelial cells in vitro".
August 1986.
3. Invited by: Dr. Susan Heyner, Albert Einstein Medical Center, Philadelphia,
PA. Title of the talk: "Regulation of endometrial function by IFN-gamma.
September 1987.
4. Invited by: Dr. Patricia Kilian, Hoffmann La Roche, Nutley, NJ. Title of
the talk: "IL-1 induction of HLA-DR and IL-6 in human endometrium". October
1988.
5. Invited by: Dr. Shahla Masood, Dept of Pathology, University of Florida,
Jacksonville, FL. Title of the talk: "Role of cytokines in human
endometrium". November 1989.
6. Invited by: Dr. TM Fasy, Dept of Pathology, Mount Sinai Medical Center, NY,
NY. Title of the talk: "Endometrium and cytokines". January 1990.
7. Invited by: Dr. Jeff Pollard, Albert Einstein College of Medicine, Bronx,
NY. Title of the talk: "Regulation of endometrial function by IFN-gamma".
January 1990.
8. Invited by: Dr. Erlio Gurpide to the "First conference on the primate
endometrium". Title of the talk: "Potential roles of interferon-gamma in
human endometrium". May 28, 1990. NY, NY.
9. Invited by: Dr. Robert M. Bigsby, Department of Obstetrics and Gynecology,
Indiana University, Indiana: Title of the talk: "Evidence of T cell
activation and potential cytokine action in human endometrium". Oct 31,
1990.
10. Invited by: Dr. Michael L. Shelanski, Department of Pathology College of
Physicians and Surgeons of Columbia University. NY, NY. Title of the talk:
"Role of endometrial T cells and interferon gamma in human endometrium".
Jan. 31, 1991
11. Invited by: Dr. Santo Nicosia, Department of Pathology, University of South
Florida Health Sciences Center, Tampa, FL. Title of the talk: "Cytokine
interactions in human endometrium". April 12, 1991
12. Invited by: Dr. R. Mishell, USC School of Medicine, Women's Hospital to the
Symposium on hormone replacement therapy and endometrial hyperplasia. Title
of the talk: "Proliferation in human endometrium throughout the menstrual
cycle. Evidence for the presence of specific microenvironments in human
endometrium". Nov. 4, 1991, Baltimore, MD.
13. Invited by: Dr. K-D Shulz, University of Marburg to a conference entitled
"Normal and pathological human endometrium-regulation of function and
proliferation. Title of the talk: "Role of lymphoid cells and cytokines in
creation of microenvironments in human endometrium", April 23-24, 1992.
Marburg, Germany.
14. Invited by: Dr. Santo Nicosia, Dept. of Pathology, Moffitt Cancer Center at
the University of South Florida to the 12th Annual Cancer Conference and
Slide Seminar. Title of the talk: "Cytokines and Cancer", June 1992,
Longboat Key, Florida.
15. Invited by: Dr. Firyal S. Kahn, Dept. of Obstetrics and Gynecology, The
University of Texas Health Science Center at Houston, Houston, TX. Title of
the talk: "Microenvironments in human endometrium: Potential regulatory
roles of IFN-gamma." Oct. 13, 1992.
16. Invited by: Dr. David Lagunoff, Dept. of Pathology, St. Louis Univ., St.
Louis, MO. Title of the talk: "Cytokine interactions in human endometrium".
Nov 3, 1992.
17. Invited by: Dr. Hiroi to the VIII World Congress on In vitro Fertilization
and Assisted Reproduction". Title of the talk: "Cytokine mediated induction
of microenvironment in human endometrium". Also served as chairman for the
session entitled "endometrium" Sept. 12-15, 1993. Kyoto, Japan.
18. Invited by: Dr. Bulleti to the Second Conference on Endometrium. Title of
the talk: "Cytokine regulation of endometrial function. Sept. 20-22, 1993.
Bologna, Italy.
6
<PAGE>
19. Invited by Dr. HM Yamashiroya. Dept. of Pathology, University of Illinois,
Illinois. Title of the talk: Regulatory roles of TNF-alpha in human
endometrium. March 20, 1994.
20. Invited by Dr. Van Streirteghem to the 10th Annual Meeting of the European
Society of Human Reproduction and Embryology. Title of the talk:
"Regulatory roles of TNF-alpha in human endometrium". June 25-29, 1994.
Brussels, Belgium.
21. Invited by: Dr. M. Adachi to the 4th US-Japan Joint Congress on
Histochemistry and Cytochemistry. Title of the talk: "Implication of
ectocytosis in IL-2 receptor expression, proliferation and apoptosis of
human leukocytes" July 13-16, 1994, Maui, Hawaii.
22. Invited by: Dr. B. Hedon to the 15th World Congress on Fertility and
Sterility. Title of Talk: Contribution of cytokines to apoptosis in ovary
and endometrium. Sept. 17-22, 1995, Montepellier, France.
23. Invited by Dr. ME Weber to the symposium entitled "Endometrial markers in
Health and Disease" sponsored by Wyeth-Ayerst Laboratories. Title of the
Talk: Contribution of TNF-alpha and other genes to menstruation. May 31,
1996, Randor, Pennsylvania.
24. Invited by: The Organizer of the symposium" The Third International
Conference on the uterus: endometrium and myomterium". Title of the
talks"Implantation; from basics to clinical", "Scientific communication in
the 21st century". Chaired a session called "Angiogenesis and hemostasis".
Oct. 14-16, 1996, NYU, New York, New York.
25. Invited by: Dr. Howard Jones: Title of the talk "Molecular lesions in
infertility". Jones Institute. May 12, 1997, Norfolk, Virginia.
26. Invited by: Dr. Carlos Simon: International Symposium on Reproductive
Medicine. "State of the Art of Human Implantation. Basic and Clinical
Aspects". Title of the talks "Molecular lesions in infertility" and
"Scientific communication in the 21st century". May 19, 1997 - May 20,
1997. Madrid, Spain.
27. Dr. Gerhard Leyendecker: International Ferring Symposium on Function and
dysfunction of the Non-Pregnant Uterus. Title of the talk "Molecular
lesions in infertility". Jones Institute. June 19-21, 1997, Schloss
Reinhartshausen, Germany.
28. Invited by: Dr. D. Carson: International Symposium on Embryo Implantation:
Molecular, Cellular and Clinical aspects, Title of the talk: "Molecular
lesions in infertility".
7
<PAGE>
20. Tabibzadeh S: Contribution of cytokines to apoptosis in ovary and
endometrium. Sept. 1995, Montepellier, France.
21. Tabibzadeh S: Molecular lesions in infertility. Oct. 3-6, 1997, New Port
Beach, California.
22. Tabibzadeh S: Genetic aspects of implantation failure in: State of the art
of human implantation. Basic and clinical aspects. May 18-19, 1998, Madrid,
Spain.
9
<PAGE>
PAPERS PREVIEWED IN JOURNALS
Tabibzadeh SS, Santhanam U, Sehgal PB, May L: Cytokine-induced production of
interferon beta2/interleukin-6 by freshly explanted human endometrium.
Modulation by estradiol-17beta. J Immunol 142: 3134-3139, 1989 Previewed in the
Journal of NIH Research 2, 64-68, 1990: A Boldily confluence: Endometrial
cytokines and immune functions.
1997 Tabibzadeh S, Kong QF, Babknia A, May LT: Progressive rise in the
expression of IL-6 in human endometrium during menstrual cycle is initiated
during the implantation window. Mol Hum Reprod 10, 2793-2799, 1995. Journal of
NIH Research 9, 41-46, Previewed in: Mammalian Implantation: A molecular
conversation between mother and child.
BOOK REVIEW
Immunofluorescence antigen detection techniques in diagnostic microbiology.
Edited by E. Caul. Published by Eyre and Spottiswoods, Margate, London, England.
Review published in Arch Pathol Lab Med (1994).
BOOK EDITOR
Male reproductive medicine: from spermatogenesis to sperm function and
modulation of fertility. Edited by R.K. Naz and S. Tabibzadeh. Frontiers in
Bioscience. Volume 1, Oct 1996,
http://www.bioscince.org/current/special/mreprod.htm.
The endometrium: Editors; Stanley Glasser, S Tabibzadeh, John Aplin and Linda
Guidice (1998)
BOOK AUTHOR (CD-ROM)
S Tabibzadeh: Gross Tumor Pathology Atlas, 1997
AUTHOR OF NEWS
Science News: Frontiers in Bioscience:
http://www.bioscience.org/news/slist.htm
Computer News: Frontiers in Bioscience:
http://www.bioscience.org/ computer/list.htm.
AUTHOR OF DATABASES
S Tabibzadeh: Gene knockout database: Frontiers in Bioscience:
http://www.bioscience.org/knowckout/knochome.htm.
S Tabibzadeh, Nomula B Falcone: Tumor Atlas: Frontiers in Bioscience:
http://www.bioscience.org/atlases/tumpath/tumpath.htm
S Tabibzadeh: Amino Acid database: Frontiers in Bioscience:
http://www.bioscience.org/urllists/aminacid.htm
S Tabibzadeh: Heart Atlas: Frontiers in Bioscience:
http://www.bioscience.org/atlases/heart/heart.htm
S Tabizadeh: Journal name abbreviation
http://www.bioscience.org/atlases/jourabbr/list.htm
S Tabibzadeh: Elements database
http://www.bioscience.org/urllists/eltdbidx.htm
10
<PAGE>
PUBLICATIONS
1. Tabibzadeh SS, Koss LG, Molnar J. Romney S: Association of human
papillomavirus with neoplastic processes in the genital tract of four women
with impaired immunity. Gynecol oncol 12: 129-140, 1981
2. Tabibzadeh SS, Herz F, Koss LG: Fine structure of cultured epithelial cells
derived from voided urine of normal adults. Virchows arch Cell Pathol 39:
41-48, 1982
3. Tabibzadeh SS, :Human papillomaviruses, immonodeficiency and neoplasia of
the female genital tract. Cytopathol 2: 6, 1983
4. Thung SN, Gerber MA, Chen M-L, Tabibzadeh SS, Mead JR, Price PM, Sells MA:
Hepatitis B virus markers in transfected hepatic cells. Hepatology:
Festschrift for Hans Popper. Chapter 6: 129-132, 1983
5. Tabibzaden SS, Gerber MA: Applicability of imprints to
immunoultrastructural studies of lymphoid tissues. J Histochem Cytochem 33:
884-890, 1985
6. Tabibzadeh SS, Ryback BJ, Falcone R: Concurent and non-contiguous squamous
and transitional cell carcinoma of a bladder. St Sinai J Med 53: 129-133,
1986
7. Tabibzadeh SS, Gerber MA: Immunohistologic analysis of Lymphoid cells by a
rapid double immuneoenzymatic labeling. J Immunol Methods 91: 169-174, 1986
8. Tabibzadeh SS, Bettica A, Gerber MA: Variable expression of Ia antigens in
human endometrium and in chronic endometritis. Am J Clin Pathol 86:
153-160, 1986
9. Tabibzadeh SS, Gerber MA, Satyaswaroop PG: Induction of HLA-DR antigen
expression in human endometrial epithelial cells in vitro by recombinant
gamma- interferon. Am J Pathol 125: 90-96, 1986
10. Tabibzadeh, SS, Mortillo S, Gerber MA: Immunoultrastructural localization
of Ia antigens in human endometrium. Arch Pathol Lab Med 111: 32-37,, 1987
11. Shah KD, Tabibzadeh SS, Gerber MA: Comparison of cytokeratin expression
inprimary and metastatic carcinomas: Diagnostic application in surgical
pathology. Am J Clin Pathol 87: 708-715, 1987
12. Shah KD, Tabibzadeh SS, Gerber MA: Immunohistochemical distinction of
Paget's disease from Bowen's disease and superficial spreading melanoma
using monoclonal cytokeratin antibodies. Am J Clin Pathol 88: 689-695, 1987
13. Tabibzadeh SS, Satyaswaroop PG, Rao PN: Antiproliferative effect of
interferon gamma in human endometrial epithelial cells in vitro: Potential
local growth modulatory role in endometrium. J Clin Endocrinol Metab 67:
131-138, 1988
14. Gerber MA, Sells MA, Chen M-L, Thung SN, Tabibzadeh SS, Hood A, Acs GL:
Morphologic, immunohistochemical and ultrastructural stufdies of the
production of hepatitis B virus in vitro. Lab Invest 56: 1792-1799, 1988
15. Khavkin T, Tabibzadeh SS, : Infectious process in mouse lung after
intranasal challenge with Coxiella burnetti. Histologic, immunofluorescent
and electron microscopic study. Infection and Immunity 56: 1792-1799, 1988
16. Tabibzadeh SS, Santhanam U, Sehgal P, May L: Cytokine induced production of
interferon (beta)2/IL-6 by freshly explanted human endometrial stromal
cells: Modulation by estradiol-17(beta). Ann NY Acad Sci 557:543, 1988
17. Tabibzadeh SS, Shah KD: Application of a quick immuneoenzymatic labeling as
an adjunct to frozen diagnosis. Am J Clin Pathol 91: 63-66, 1989
18. Tabibzadeh SS, Satyaswaroop PG: Differential expression of HLA-DR, HLA-DP
and HLA-DQ antigenic determinants of the major histocompatibility complex
in human endometrium. Am J Reprod Immunol Microbiol 18: 124-130, 1989
19. Tabibzadeh SS, Santhanam U, Sehgal PB, Mah L: Cytokine-induced production
of interferon (beta)2/interleukin-6 by freshly explanted human endometrial
stromal cells. Modulation by estradiol-17(beta) J Immunol 142: 3134-3139,
1989
20. Tabibzadeh SS, satyaswaroop PG: Sex steroid receptors in lymphoid cells of
human endometrium. Am J Clin Pathol 91: 656-663, 1989
21. Tabibzadeh SS, Poubouridis D, May LT Sehgal PB: Interleukin-6
immunoreactivity in human tumors.
11
<PAGE>
Am J Pathol, Rapid Communication 135:427-433, 1989
22. Gross FJ, Waxman JS, Rosenblatt MA, Tabibzadeh SS, Solodnik: Eosinophilic
granuloma of the cavernous sinus. Ophtalmology 96: 462-467, 1989
23. Tabibzadeh SS, poubouridis D: Expression of leukocyte adhesion molecules in
human endometrium. Am J Clin Pathol 93: 183-189, 1990
24. Tabibzadeh SS: Proliferative activity of lymphoid cells in human
endometrium throughout the menstrual cycle. J Clin Endocrinol Metab 70:
437-443, 1990
25. Tabibzadeh SS, Sivarajah S, Carpenter D, Ohlsson- Wilhelm BM, Satyaswaroop
PG: Modulation of HLA-DR expression in epithelial cells by interleukin 1
and estradiol-17(beta). J Clin Endocrinol Metab 71: 740-747 1990
26. Tabibzadeh SS: Immunoreactivity of human endometrium:Correlation with
endometrial dating. Fertil Steril 54:624-631, 1990
27. Tabibzadeh SS: Evidence of T cell activation and potential cytokine action
in human endometrium. J Clin Endocrinol Metab 71: 645-649, 1990
28. Tabibzadeh SS, Kaffka KL, Satyaswaroop PG, Kilian PL: IL-1 regulation of
human endometrial function: Presence of IL-1 receptor correlates with IL-1
stimulated PGE2 produvtion. J Clin Endocrinol Metab 70: 1000-1006, 1990
29. Tabibzadeh SS, Kaffka KL, Kilian PL, Satyaswaroop PG: EnCa101AE and ECC1,
cell lines suitable models for studying cytokine actions in human
endometrium. In vitro Cell Dev Biol 26: 1173-1179, 1990
30. Tabibzadeh S: Induction of HLA-DR expression in endometrial epithelial
cells by endometrial T cells: Potential regulatory role of endometrial T
cells in vivo. J Clin Endocrinol Metab 73: 1352-1359, 1991
31. Tabibzadeh SS: Cytokine regulation of human endometrial functions. Ann NY
Acad Sci 622: 89-98, 1991
32. Tabibzadeh S: Human endometrium; an active site of cytokine production and
action. Endocr Rev 12: 272-290, 1991
33. Tabibzadeh SS, U Bhat, X Sun: Generation of nonradioactive
bromodeoxyuridine labeled DNA probes by polymerase chain reaction. Nucleic
Acids Res 19: 2783, 1991
34. Tabibzadeh S: Distinct subsets of stromal cells confined to unique
microenvironments in human endometrium throughout the menstrual cycle. Am J
Rep Immunol 26, 5-10, 1991
35. Tabibzadeh S: Ubiquitous expression of TNF-alpha/Cachetin in human
endometrium. Am J Re Immunol 26: 1-5, 1991
36. Satyaswaroop PG, Tabibzadeh S: Extracellular matrix and the patterns of
differentiation of human endometrial carcinomas in vitro and in vivo.
Cancer Res 51: 5661-5666, 1991
37. Pampfer S, Tabibzadeh S, Chuan F-C, Pollard JW: Molecular cloning of a
novel transcript for colony stimulating factor-1 from human endometrial
glands. Production of a transmembrane form of the protein. J Mol Endocrinol
5: 1931-1938, 1991
38. Tabibzadeh S: Pattersn of expression of integrin molecules in human
endometrium throughout the menstrual cycle. Human Reprod 7: 876-882, 1992
39. Hunt JS, Chen H-L, Hu X-L, Tabibzadeh S: Tumor necrosis factor-alpha mRNA
and protein in human endometrium. Biol of Reprod 47: 141-147, 1992
40. Tabibzadeh S, Sun XZ: Cytokine expression in human endometrium throughout
the menstrual cycle. Hum Reprod 7: 1214-1221, 1992
41. Satyaswaroop PG, Tabibzadeh S: Endometriosis; etiology, pathogenesis and
immune mechanisms. In: Immunology of Reproduction. Ed: R.K Naz immunology
of Reproduction. CRC Press, Ann Arbor, Michigan 81-97, 1993
42. Tabibzadeh S, Sun XZ, Kong QF, Kasnic G, Miller J, Satyaswaroop PG: In
vitro induction of a polarized microenvironment by T cells and IFN_gamma in
three dimensional spheroid cultures of endometrial epithelial cells. Hum
Reprod 8: 182-192, 1993
43. Tabibzadeh S: Role of cytokines and tumor-infiltrating leukocytes in the
pathogiology and treatment of neoplasia. Reviews on Endocrine Related
Cancer. 44:5-28, 1993
44. Tabibzadeh S, Kong QF, Sun XZ: Regulatory roles of TNF-alpha on
transepithelial migration of leukocytes and epithelial dyscohesion.
Endocrine 1: 417-425, 1993
12
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45. Tabibzadeh S: Microenvironments in human endometrium. Contribution of
lymphoid cells and cytokines to their development. J Ass Reprod Genetics,
Supp 10, 21, 1993
46. Hung YC, Tabibzadeh S, Satyaswaroop PG: The female reprodudtive system;
Cell lines from ovary and uterus. In: Atlas of human tumor cell lines. Eds:
RJ Hay, J-G Park, A Gazdar, Academic Press. Orlando, FL Chapter 14,
359-385, 1994
47. Tabibzadeh S: Cytokines and hypothalamicpituitary- ovarian-endometrial
axis. Hum Reprod Updates 9: 947-967, 1994
48. Tabibzadeh S: Role of cytokines in endometrium and at the fetomaternal
interface. Rep Med Rev 3: 11-28, 1994
49. Tabibzadeh S, Kong QF, Satyaswaroop PG, Zupi E, Marconi D, Romanini C,
Kapur S: Distinct regional and menstrual cycle dependent distribution of
apoptosis in human endometrium. Potential regulatory role of T cells and
TNF-alpha Endocrine 2: 87-95, 1994
50. Tabibzadeh S: Microenvironments in human endometrium: Contribution of
lymphoid cells and cytokines to their development. In: "Perspectives on
Assisted reproduction. Eds: T Mori, T Aono, T Tomminage, H Hiroi.
Ares-Serono Sumposia, Christengraf S.r.I. Rome, Italy" 219-225, 1994
51. Tabibzadeh S: Regulatory roles of IFN-gamma in human encometrium. Ann NY
Acad Sci 734: 1-6, 1994
52. Tabibzadeh S, Kong QF, Babaknia A: Expression of adhesion molecules in
human endometrial vasculature throughout the menstrual cycle. J Clin
Endocrinol Metab 79: 1024-1032, 1994
53. Tabibzadeh S, Kong QF: Passive acquisition of leukocyte proteins is
associated with changes in phosphorylation of cellular proteins and
cell-cell adhesion properties. Am J Pathol 145: 930-940, 1994
54. Tabibzadeh S, Kapur S, Kong QF, Hiraishi K, Adachi M: Implication of
ectocytosis in IL-2 receptor expression, proliferation, and apoptosis of
human leukocytes. Acta Histochem Cytochem 27: 581-589, 1994
55. Tabibzadeh S: Cytokines and endometrial microenvironments. Seminars in
Reprod Endocrinol 13: 133-141, 1995
56. Tabibzadeh S, Zupi E, Babaknia A, Liu R, Marconi D, Romanini C: Site and
menstrual cyle-dependent expression of proeteins of the TNF receptor
family, and BCL-2 oncoprotein and phase specific production of TNF-alpha in
human endometrium. Hum Reprod 10: 277-286, 1995
57. Tabibzadeh S, Babaknia A, Kong QF, Zupi E, Marconi D, Romanini C,
Satyaswaroop PG: Menstruation is associated with disordered expression of
Desmoplakin I/II, cadherin/catenins and conversion of F to G action in
endometrial epithelium. Hum Reprod 10: 776-784, 1995
58. Tabibzadeh S, Kong QF, Kapur S, satyaswaroop PG, Akotires K: TNf-alpha
mediated dyscohesion of epithelial cells is associated with disordered
expression of caherin/(beta)-catenin and disassembly of actin filaments.
Mol Hum Reprod 10: 994-1004, 1995
59. Giacomini G, Tabibzadeh S, Satyaswaroop PG, Bonsi L, Vitale L, Bagnara GP,
Strippoli P, Jansoni VM: Granulocyte macrophage colony-stimulating factor
synthesis by endometrial epithelial cells in human nonpregnant uterus. Hum
Reprod 12: 3259-3263, 1995
60. Tabibzadeh S, Kong QF, Kapur S, Leffers H, Ridley Am Aktories K, Celis JE:
TNF-alpha induces dyscohesion of epithelial cells. Association with
disassembly of actin filaments. Endocrine 3: 549-556, 1995
61. Tabibzadeh S, Babaknia A: The signals and molecular pathways involved in
implantation, a symbiotic interaction between blastocyst and endometrium
involving adhesion and tissue destruction. Mol Hum Reprod 10: 1579-1602,
1995
62. Tabibzadeh S: Signals and molecular pathways involved in apoptosis with
special emphasis on human endometrium. Hum Reprod Update 1: 303-323, 1995
63. Tabibzadeh S, Kong QF, Babaknia A, May LT: Progressive rise in the
expression of IL-6 in human endometrium during menstrual cycle is initiated
during the implantation window. Mol Hum Reprod 10: 2793-2799, 1995
64. Tabibzadeh S, Elzie J: A gene knockout database. Frontiers in Bioscience,
http://www.bioscience.org 1995
65. Tabibzadeh S, Kapur S, Kong QF, Liu RY, Moldawer L, Rabb H, Matsumoto I,
Gerke V: Expression of receptors of TNF-alpha, ICAM-1 and annexin family of
molecules in leukocyte vesicles; Implication of vesicles as biologically
active structural identities. Cell Vision 2: 301-309, 1995
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<PAGE>
66. Tabibzadeh S: Contribution of cytokines to apoptosis in the ovary and
endometrium. In: Fertility and Sterility. Eds: Hedon B, Bringer J, Mares P
237-247, 1995
67. Tabibzadeh S, Kapur S, Kong QF, Liu RY, Klein TW, Newton C, Torigoe T, Reed
JC: Leukocyte vesicles as distinct structural identities. Cell Vision 2:
398-406, 1995
68. S. Tabibzadeh, Suvarna Nomula, B Falcone: An evolving tumor atlas.
Frontiers in Bioscience, http://www.bioscience.org 1996
69. Khan-Dawood FS, Dawood MY, Tabibzadeh S: Immunohistochemical analysis of
ovarian microanatony. Biol Reprod 54: 734-742, 1996
70. Tabibzadeh S: The signals and molecular pathways involved in human
menstruation: a unique process of tissue destruction and remodeling. Mol
Hum Reprod 2: 77-92, 1996
71. Tabibzadeh S, Kong QF, Babaknia A: Expression of the heat shock proteins in
human endometrium during the menstrual cycle. Mol Hum Reprod 11: 633-640,
1996
72. Tabibzadeh S, Kothapalli R: From steroid signals to local regulatory
factors involved in endometrial bleeding. Obstet Bynecol 70: 25-27, 1996
73. Tabibzadeh: Implantation: from basics to the clinics. Ann NY Acad Sci 828:
131-136, 1997
74. Satyaswaroop PG, Tabibzadeh S: Endometrial carcinoma: Steroid hormones,
growth factors and cytokins. In: Biology of Female Cancers. Eds: SP
Langdon, WR Miller, A Berchuck CRC Press, NY, NY Chapter 12, 193-202, 1997
75. M. Gruidl, A Buyuksal, A Babaknia, A T Fazleabas, S Sivarajah, PG
Satyaswaroop, S Tabibzadeh: The progressive rise in the expression of
(alpha) crystallin B chain in human endometrium is initiated during the
implantation window; Modulation of gene expression by steroid hormones. Mol
Hum Reprod 3: 333-342, 1997
76. R. Kothapalli, I Buyuksal, S=Q Wu, N Chegini, S. Tabibzadeh: Detection of
ebaf, a novel human gene of the TGF-(beta) superfamily; association of gene
expression with endometrial bleeding. J Clin Invest 99: 2342-2350, 1997
77. Tabibzadeh S: Molecular lesions in infertility. Hum Reprod (In Press)
78. Tabibzadeh S, Kothapalli R, Buyuksal I: distinct tumor specific expression
of ebaf, a novel human gene of the TGF-(beta) superfamily. Front Biosci 2,
a18-25, 1997 http://www.bioscience.org/1997/v2/a/tabibzad/list.htm PubMed
No: 9230066
79. Tabibzadeh S, Parsons A, Maroulis G, Shcenken R, Babaknia A:
Two-dimensional gel electrophroesis reveals a consistent profile for
endometrial proteins throughout the menstrual cycle (Submitted)
80. Tabibzadeh S, Kong QF, Becker J: Endometriosis is associated with disturbed
secretion of proteins and IL-10 into the peritoneal fluid. (Submitted)
81. Tabibzadeh S, Satyaswaroop PG: Temporal and site specific expression of the
TGF-(beta)4 in human endometrium (Submitted)
14
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into by and
among LEXON, INC., an Oklahoma corporation ("LEXON"), CANCER DIAGNOSTICS, INC.,
a Florida corporation ("CDI"), and UTEK, LLC, a Florida limited liability
company ("UTEK").
WHEREAS, UTEK is the majority shareholder of CDI; and
WHEREAS, Dr. Jeffrey Strovel and Dr. Judith Stamberg are the inventors
of and Dr. Ed Highsmith, PhD, is the project leader of a team of researchers at
the University of Maryland that has discovered and is developing a new
proprietary blood screen test, technology and related processes for the
identification of Telomerase Assay as a marker for lung and perhaps other forms
of cancer ("Invention") covered by US Provisional Patent Application Nos.
60/074,793; 09/250,336 and 99/03302, each of which is dated February 16,1999
("Patent Applications"), the ownership thereof having been assigned to the
University of Maryland ("UM") as described more precisely in Schedule 2.01(i);
and
WHEREAS, CDI is negotiating to acquire and Exclusive License Agreement
("License") with the UM which will grant CDI the exclusive worldwide right to
manufacture, market and commercialize products covered by the Invention; and
WHEREAS, CDI is also negotiating to enter into a Sponsored Research
Agreement ("Research Agreement") with UM, which provides for the funding of
certain continued research, development and completion of an ELISA based blood
screening test which will detect and measure to presence of the Telomerase Assay
and related research; and
WHEREAS, the parties desire to provide for the terms and conditions
upon which CDI will merge into LEXON in a statutory merger ("Merger") in
accordance with 18 Oklahoma Statutes, Section 1082 of the Oklahoma General
Business Corporation Act ("Oklahoma Act") and Section 607.1107 of the
Corporation Law of Florida ("Florida Act"), upon consummation of which the
assets and business of CDI will be owned by LEXON, all liabilities and
obligations of CDI will become the liabilities and obligations of LEXON, and all
issued and outstanding shares of capital stock of CDI will be exchanged for
common stock of LEXON; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("Code").
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows:
<PAGE>
ARTICLE I
THE MERGER
1.01. The Merger
(a) Agreement to Merge. Subject to the terms and conditions of this
Agreement, at the Effective Time, as defined below, CDI shall be merged with and
into LEXON in accordance with the provisions of this Agreement and the Oklahoma
Act; the separate corporate existence of CDI shall cease; and LEXON shall
continue as the surviving corporation ("Surviving Corporation"). The constituent
corporations ("Constituent Corporations") to the Merger are LEXON and CDI. The
name of the Surviving Corporation, LEXON, INC., which shall not be changed by
reason of the Merger.
(b) Effective Time. The Merger shall become effective ("Effective
Time") upon filing of a Certificate of Merger substantially in the form attached
as Exhibit A ("Certificate of Merger") with the Secretary of State of the State
of Oklahoma in accordance with applicable provisions of the Oklahoma Act.
(c) Appointment of Service Agent. LEXON hereby irrevocably appoints the
Secretary of State of the State of Florida as its agent to accept process in
Florida in any proceeding for the enforcement of any obligation of any
Constituent Corporation in Florida as well as for the enforcement of any
obligation of the Surviving Corporation arising from or by reason of the Merger,
including any suit or other proceeding to enforce appraisal rights of any
shareholder of CDI. LEXON designates that all such process received by the
Secretary of State of Florida shall be sent to LEXON at 8908 South Yale, Suite
409, Tulsa, Oklahoma 74137-3545.
(d) Effect of the Merger. At the Effective Time, all rights, powers,
privileges, franchises, licenses and permits of the Constituent Corporations,
and all property, real, personal and mixed, shall be vested in the Surviving
Corporation; and all debts, duties, liabilities and claims of every kind,
character and description of the Constituent Corporations shall be debts,
duties, liabilities of and claims against of the Surviving Corporation and may
be enforced against the Surviving Corporation to the same extent as if such
debts, duties, liabilities of and claims against had been incurred by it
originally. All rights of creditors of the Constituent Corporations and all
liens upon property of any Constituent Corporation shall be preserved unimpaired
and shall not be altered in any way by reason of the Merger.
1.02. Conversion of Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the shareholders of the Constituent
Corporations:
(i) Each of the shares of CDI that are issued and outstanding at the
Effective Time shall be converted into 500 shares (or 500,000 shares in the
aggregate) of common stock of the Surviving Corporation; and
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<PAGE>
(ii) All issued and outstanding options, warrants or other rights to
acquire any capital stock of CDI at the Effective Time shall be reason of the
Merger and without action on the part of the holders of any such rights be
automatically canceled for all purposes; and
(iii) Each share of common stock of LEXON issued and outstanding at the
Effective Time and each right to receive a share of common stock of LEXON upon
the satisfaction of any conditions outstanding at the Effective Time shall
remain issued and outstanding and shall not be effected in any manner by reason
of the Merger.
1.03. Effect of Merger.
(a) Rights in CDI Cease. At and after the Effective Time, the holder of
each certificate of common stock of CDI shall cease to have any rights as a
shareholder of CDI. All dividends or other distributions with respect to CDI
common stock prior to the Effective Time shall be payable to the shareholders of
CDI without interest upon surrender of certificates representing CDI common
stock.
(b) Closure of CDI Stock Records. From and after the Effective Time,
the stock transfer books of CDI shall be closed, and there shall be no further
registration of stock transfers on the records of CDI.
1.04. Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Surviving Corporation shall not be changed
by reason of the Merger.
1.05. Bylaws of the Surviving Corporation. The Bylaws of the Surviving
Corporation shall not be changed by reason of the Merger.
1.06. Directors of the Surviving Corporation. The directors of the
Surviving Corporation immediately after the Effective Time shall be the persons
named in Exhibit B until each of their respective successors is duly elected and
qualified.
1.07. Officers of the Surviving Corporation. The officers of the
Surviving Corporation immediately after the Effective Time shall be the persons
set forth in Exhibit B until each of their respective successors is duly elected
and qualified.
1.08. Closing. The Closing of the Merger shall take place at the
offices of Frederick K. Slicker, 8908 S. Yale, Suite 410, Tulsa, Oklahoma
74137-3545 at 5:00 p.m. local time on a mutually agreed date on or before
January 31, 2000, or on an earlier date as the parties mutually agree ("Closing
Date"). The parties agree to use their good faith efforts to Close the Merger as
soon after but not before January 1, 2000 as is reasonably possible.
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<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01. General Representations and Warranties of CDI and UTEK. CDI and
UTEK represent and warrant to LEXON that the facts set forth below are true and
correct:
(a) Organization. CDI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida, is qualified to do
business as a foreign corporation in each other jurisdiction in which the
conduct of its business or the ownership of its properties require such
qualification, and has all requisite power and authority to conduct CDI's
business and operate properties.
(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and Shareholders of CDI; no other corporate
action on its part is necessary in order to execute, deliver, consummate and
perform its obligations hereunder; and CDI has all requisite corporate and other
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
(c) Capitalization. The authorized capital of CDI consists of 1,000
shares of common stock, no par value per share; at the date hereof and at the
Closing 1,000 shares of its common stock are and will be issued and outstanding
and owned by UTEK, and no shares were held in its treasury. All issued and
outstanding shares of common stock of CDI have been duly and validly issued and
are fully paid and non-assessable shares and have not been issued in violation
of any preemptive or other rights of any other person or any applicable laws.
There are no outstanding options, warrants, commitments, calls or other rights
or agreements requiring it to issue any shares of CDI common stock or securities
convertible into shares of the common stock of CDI to anyone for any reason
whatsoever.
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which CDI is a party and will not create a default
hereunder; and this Agreement constitutes a legal, valid and binding obligation
of CDI, enforceable in accordance with its terms, except as the enforcement may
be limited by bankruptcy, insolvency, moratorium, or similar laws affecting
creditor's rights generally and by the availability of injunctive relief,
specific performance or other equitable remedies.
(e) Litigation Relating to this Agreement. There are no suits, actions
or proceedings pending or to the knowledge of CDI or UTEK threatened which seek
to enjoin the Merger or the transactions contemplated by this Agreement or
which, if adversely decided, would have a materially adverse effect on the
business, results of operations, assets, prospects, the Patents, the Patent
Applications, the License, the Research Agreement or the results of the
operations of CDI.
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<PAGE>
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by CDI and UTEK with the
terms or provisions hereof will result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in a violation of, the
corporate charter or bylaws of CDI, the Patent Applications, the License, the
Research Agreement, or any agreement, contract, instrument, order, judgment or
decree to which either UTEK or CDI is a party or by which UTEK or CDI or any of
its assets is bound, or violate any provision of any applicable law, rule or
regulation or any order, decree, writ or injunction of any court or governmental
entity which materially affects its assets or business.
(g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with execution and
delivery of this Agreement by CDI or UTEK or performance of the obligations of
CDI or UTEK hereunder or under any other agreement to which CDI or UTEK is a
party; and the consummation of the transactions contemplated by this Agreement
will not require the approval of any entity or person or prevent the termination
of the Patent Applications, the License, the Research Agreement or any other
material right, privilege, license or agreement relating to CDI or its assets or
business.
(h) Title to Assets. CDI will at Closing have good and marketable title
to its assets (tangible and intangible), free and clear of all liens, claims,
charges, mortgages, options, restrictions, security agreements and other
encumbrances of every kind or nature whatsoever, including the duly executed and
delivered License and Research Agreement.
(i) The Patent Applications, the License and the Research Agreement.
(1) To the best knowledge of UTEK and CDI, the Patent
Applications listed in Schedule 2.01(i) are pending and are
being prosecuted in good faith with diligence; neither UTEK
nor CID has any reason to believe these Patent Applications
will not be granted; and
(2) To the best knowledge of UTEK and CDI, without having made
an independent inquiry, the Invention does not and will not
infringe the intellectual or other rights of another. This
representation and warranty is not a representation or
warranty that there are no infringing intellectual rights of
any other but is a representation and warranty only that
neither CDI nor UTEK has any knowledge thereof; and LEXON
acknowledges that neither UTEK nor CDI has conducted an
independent investigation to determine whether the Invention
infringes the rights of any other party or that the
Invention itself is marketable; and
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<PAGE>
(3) The Invention is owned by UM and UM has all right, power,
authority, ownership and entitlement to file, prosecute and
maintain in effect the Patents and Patent Applications with
respect to the Invention listed in Schedule 2.01(i) hereto;
and
(4) Dr. Jeffrey Strovel and Dr. Judith Stamburg are the only
Inventors of the Invention; and each has assigned all of his
and her rights, titles and interests in the Invention to UM;
and
(5) The License, when executed and delivered, will be in full
force and effect at the Closing and will be legal, valid,
binding and enforceable at Closing in accordance with its
terms; and
(6) The Research Agreement, when executed and delivered, will be
in full force and effect at Closing and will be legal,
valid, binding and enforceable at Closing in accordance with
its terms.
(j) Liabilities of CDI. CDI has no assets, no liabilities of any kind,
character or description except those created by the License or the Research
Agreement.
(k) Condition of Tangible Assets. All of the tangible assets of CDI
have been operated in accordance with customary operating practices generally
acceptable in its industry to which and have been maintained and are in good
working order and repair in the ordinary course of business, subject only to
reasonable and ordinary wear and tear.
(l) Financial Statements. The unaudited financial statements of CDI
attached as Schedule 2.01(l) as of the Closing will present fairly its financial
position and the results of its operations on the dates and for the periods
shown therein; provided, however, that interim financial statements are subject
to customary year-end adjustments and accruals that, in the aggregate, will not
have a material adverse effect on the overall financial condition or results of
its operations. CDI has not engaged in any business not reflected in its
financial statements. There have been no material adverse changes in the nature
of its business, prospects, the value of assets or the financial condition since
the date of its financial statements. There are no outstanding obligations or
liabilities of CDI except as specifically set forth in the CDI financial
statements, including the obligation to maintain the Patents from and after the
date of the License, or in a schedule attached hereto and specifically agreed to
by LEXON. In the event the Inventors cease to be employed by UM prior to the
Closing and become employed by another qualified institution eligible to accept
sponsored research funds, CDI shall use its best good faith efforts to cause the
new institution to agree to continue the Research Agreement relating to the
Invention in accordance with an agreement acceptable to LEXON.
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<PAGE>
(m) Taxes. All returns, reports, statements and other similar filings
required to be filed by CDI with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed; all such tax returns properly reflect all liabilities of
CDI for taxes for the periods, property or events covered thereby; and all
taxes, whether or not reflected on those tax returns, and all taxes claimed to
be due from CDI by any taxing authority, have been properly paid, except to the
extent contested in good faith by appropriate proceedings and reserves have been
established in its financial statements to the full extent if the contest is
adversely decided against it. CDI has not received any notice of assessment or
proposed assessment in connection with any tax returns, CDI has not extended or
waived the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any taxes. There are no tax liens
(other than any lien which arises by operation of law for current taxes not yet
due and payable) on any of its assets. There is no basis for any additional
assessment of taxes, interest or penalties. CDI has made all deposits required
by law to be made with respect to employees' withholding and other employment
taxes, including without limitation the portion of such deposits relating to
taxes imposed upon CDI.
(n) Absence of Certain Changes or Events. CDI has not, and without the
written consent of LEXON, it will not have:
(i) Sold, encumbered, assigned or transferred any of its
material assets or its interest in the Patents, the Patent
Applications, the Research Agreement, the License or any
other material asset; or
(ii) Amended or terminated the License or the Research Agreement;
or
(iii) Suffered any material damage, destruction or loss; or
(iv) Received notice or have knowledge of any material adverse
effect on the Patents, the Patent Applications, the Research
Agreement or the License or any other material asset or
liability of CDI; or
(v) Made any commitments or agreements for capital expenditures
or otherwise; or
(vi) Entered into any transaction or made any commitment not
disclosed to LEXON; or
(vii)Agreed to take any of the actions set forth in this
paragraph.
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<PAGE>
(o) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to LEXON and such
agreements are in full force and effect without amendment. In addition:
(i) There are no outstanding unpaid promissory notes, mortgages,
indentures, deeds of trust, security agreements and other
agreements and instruments relating to the borrowing of
money by or any extension of credit to CDI; and
(ii) There are no outstanding operating agreements, lease
agreements or similar agreements by which CDI is bound; and
(iii)The complete and executed License and the Research
Agreement and the Patents and the Patent Applications with
all schedules, exhibits and amendments related thereto and
all material correspondence with the patent authorities
relating thereto have been provided to LEXON; and
(iv) There are no outstanding licenses to or from others of any
intellectual property and trade names; and
(v) There are no outstanding contracts or commitments to sell,
lease or otherwise dispose of any of the property of CDI.
(p) Compliance with Laws. CDI is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
governmental body or agency relating to its business and operations. CDI owns
all franchises, licenses, permits, easements, rights, applications, filings,
registration and other authorizations which are necessary for it to conduct
business, all of which are valid and in full force and effect, and CDI is in
full compliance therewith.
(q) Litigation. There is no suit or action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against CDI or the Patents, the
Patent Applications, the License or the Research Agreement affecting its assets
or business, and there is no factual basis therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(r) Employees. CDI has no employees. CDI is not a party to or bound by
any employment agreement or any collective bargaining agreement with respect to
any of the employees.
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<PAGE>
(s) Employee Benefit Plans. There are no employee benefit plans in
effect, and there are no outstanding or unfunded liabilities to employees of
CDI.
(t) Books and Records. The books and records of CDI are complete and
accurate in all material respects, fairly present its business and operations,
have been maintained in accordance with good business practices, and accurately
reflect in all material respects its business, financial condition and
liabilities.
(u) No Broker's Fees. Neither UTEK nor CDI has incurred any finder=s,
broker=s, investment banking, financial, advisory or other similar fees or
obligations.
(v) Full Disclosure. All representations or warranties of UTEK and CDI
are true, correct and complete in all material respects on the date hereof and
shall be true, correct and complete in all material respects as of the Closing
as if they were made on such date. No statement made by CDI herein or in the
exhibits and schedules hereto or any document delivered by CDI or on its behalf
pursuant to this Agreement contains an untrue statement of material fact or
omits to state all material facts necessary to make the statements therein not
misleading in any material respect.
2.02. General Representations and Warranties of LEXON. LEXON represents
and warrants to UTEK and CDI that the facts set forth are true and correct:
(a) Organization. LEXON is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oklahoma, is
qualified to do business as a foreign corporation in each other jurisdiction in
which the conduct of its business or the ownership of its properties require
such qualification, and has all requisite power and authority to conduct its
business and operate properties.
(b) Authorization. The execution of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby have been duly
authorized by the Board of Directors and Shareholders of LEXON; no other
corporate action on its part is necessary in order to execute, deliver,
consummate and perform its obligations hereunder; and it has all requisite
corporate and other authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby.
(c) Capitalization. The authorized capital of LEXON consists of
45,000,000 shares of common stock, par value $.001 per share, of which up to
6,802,013 shares are issued and outstanding immediately, and 5,000,000 shares of
Preferred Stock, none of which is issued and outstanding. All issued and
outstanding shares of common stock of LEXON have been duly and validly issued
and are fully paid and non-assessable shares and have not been issued in
violation of any preemptive or other rights of any other person or any
applicable laws. There will be no outstanding options, warrants, commitments,
calls or
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other rights or agreements requiring it to issue any shares of LEXON common
stock or securities convertible into shares of its common stock to anyone for
any reason whatsoever immediately after the Effective Time, except that there
are issued and outstanding options to purchase 2,537,500 shares of common stock
of LEXON.
(d) Binding Effect. The execution, delivery, performance and
consummation of the Merger and the transactions contemplated hereby will not
violate any obligation to which LEXON is a party and will not create a default
hereunder; and this Agreement constitutes a legal, valid and binding obligation
of LEXON, enforceable in accordance with its terms, except as the enforcement
may be limited by bankruptcy, insolvency, moratorium, or similar laws affecting
creditor's rights generally and by the availability of injunctive relief,
specific performance or other equitable remedies.
(e) Litigation Relating to this Agreement. There are no suits, actions
or proceedings pending or to its knowledge threatened which seek to enjoin the
Merger or the transactions contemplated by this Agreement or which, if adversely
decided, would have a materially adverse effect on its business, results of
operations, assets, prospects or the results of its operations of LEXON.
(f) No Conflicting Agreements. Neither the execution and delivery of
this Agreement nor the fulfillment of or compliance by LEXON with the terms or
provisions hereof will result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in a violation of, its corporate
charter or bylaws, or any agreement, contract, instrument, order, judgment or
decree to which it is a party or by which it or any of the assets is bound, or
violate any provision of any applicable law, rule or regulation or any order,
decree, writ or injunction of any court or governmental entity which materially
affects its assets or business.
(g) Consents. No consent from or approval of any court, governmental
entity or any other person is necessary in connection with its execution and
delivery of this Agreement and performance of the obligations of LEXON hereunder
or under any other agreement to which LEXON is a party; and the consummation of
the transactions contemplated by this Agreement will not require the approval of
any entity or person in order to prevent the termination of any material right,
privilege, license or agreement relating to LEXON or its assets or business.
(h) Title to Its Assets. LEXON has good and marketable title to its
assets (tangible and intangible), free and clear of all charges, claims, liens,
mortgages, options, restrictions, security agreements and other encumbrances of
every kind or nature whatsoever.
(i) Condition of Tangible Assets. All of its tangible assets have been
operated in accordance with customary operating practices generally acceptable
in its industry to
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which and have been maintained and are in good working order and repair in the
ordinary course of business, subject only to reasonable and ordinary wear and
tear.
(j) Financial Statements. The unaudited financial statements of LEXON
attached as Schedule 2.02(j) present fairly its financial position and the
results of its operations on the dates and for the periods shown therein;
provided, however, that interim financial statements are subject to customary
year-end adjustments and accruals that, in the aggregate, will not have a
material adverse effect on the overall financial condition or results of its
operations. LEXON has not engaged in any business not reflected in its financial
statements. There have been no material adverse changes in the nature of its
business, prospects, the value of assets or the financial condition since the
date of its financial statements. There are no material outstanding obligations
or liabilities of LEXON except as specifically set forth in the LEXON financial
statements.
(k) Taxes. All returns, reports, statements and other similar filings
required to be filed by it with respect to any federal, state, local or foreign
taxes, assessments, interests, penalties, deficiencies, fees and other
governmental charges or impositions have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such tax returns are
required to be filed; all such tax returns properly reflect all liabilities of
it for taxes for the periods, property or events covered thereby; and all taxes,
whether or not reflected on those tax returns, and all taxes claimed to be due
from it by any taxing authority, have been properly paid, except to the extent
it has contested in good faith by appropriate proceedings and adequate reserves
have been established in its financial statements to the full extent if the
contest is adversely decided against it. LEXON has not received any notice of
assessment or proposed assessment in connection with any tax returns. LEXON has
not extended or waived the application of any statute of limitations of any
jurisdiction regarding the assessment or collection of any taxes. There are no
tax liens (other than any lien which arises by operation of law for current
taxes not yet due and payable) on any of its assets. LEXON has no knowledge of
any basis for any additional assessment of taxes. LEXON has made all deposits
required by law to be made with respect to employees' withholding and other
employment taxes, including without limitation the portion of such deposits
relating to taxes imposed upon it.
(l) Absence of Certain Changes or Events. LEXON has not and, without
the written consent of CDI, it will not have:
(i) Sold, encumbered, assigned or transferred any of its
material assets for less than fair consideration; or
(ii) Amended or terminated any material agreement; or
(iii) Suffered any material damage, destruction or loss; or
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(iv) Received notice or have knowledge of any material adverse
effect on its material assets; or
(v) Made any commitments or agreements for capital expenditures;
or
(vi) Entered into any transaction other than in the ordinary
course of business consistent with past practice; or
(vii)Agreed to take any of the actions set forth in this
paragraph.
(m) Material Contracts. A complete and accurate copy of all material
agreements, contracts and commitments of the following types, whether written or
oral to which it is a party or is bound, has been provided to CDI:
(i) All material promissory notes, mortgages, indentures, deeds
of trust, security agreements and other agreements and
instruments relating to the borrowing of money by or any
extension of credit to it; and
(ii) All material operating agreements and lease agreements; and
(iii)All material licenses to or from others of any intellectual
property and trade names.
(n) Compliance with Laws. LEXON is in compliance with all applicable
laws, rules, regulations and orders promulgated by any federal, state or local
governmental body or agency relating to its business and operations. LEXON owns
all franchises, licenses, permits, easements, rights, applications, filings,
registration and other authorizations which are necessary for it to conduct
business, all of which are valid and in full force and effect, and it is in full
compliance therewith.
(o) Litigation. There is no suit, action or any arbitration,
administrative, legal or other proceeding of any kind or character, or any
governmental investigation pending or threatened against it affecting its assets
or business, and there is no factual basis therefor. There are no pending or
threatened actions or proceedings before any court, arbitrator or administrative
agency which would, if adversely determined, individually or in the aggregate,
materially and adversely affect its assets or business.
(p) Employees. LEXON has 5 part-time employees, four of whom are
employed but do not receive cash compensation. LEXON has no written agreements
with its employees.
(q) Employee Benefit Plans and Arrangements. LEXON has no employee
benefit plans in effect, and LEXON has no unfunded liabilities to employees.
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(r) Books and Records. The books and records of LEXON are complete and
accurate in all material respects, fairly present its business and operations,
have been maintained in accordance with good business practices, and accurately
reflect in all material respects its business and financial condition.
(s) No Broker's Fees. LEXON has incurred no finder's, broker's,
investment banking, financial, advisory or other similar fee in connection with
this Agreement.
(t) Full Disclosure. All representations or warranties of LEXON are
true, correct and complete in all material respects on the date hereof and shall
be true, correct and complete in all material respects as of the Closing as if
they were made on such date. No statement made by it herein or in the exhibits
and schedules hereto or any document delivered by it or on its behalf pursuant
to this Agreement contains an untrue statement of material fact or omits to
state all material facts necessary to make the statements therein not misleading
in any material respect.
2.03. Investment Representations of UTEK Shareholder. UTEK represents
and warrants to LEXON that:
(a) General. It has such knowledge and experience in financial and
business matters as to be capable of evaluating the risks and merits of an
investment in the shares ("Shares") of common stock of LEXON issuable pursuant
to the Merger. It is able to bear the economic risk of the investment in the
Shares, including the risk of a total loss of the investment in the Shares. The
acquisition of the Shares is for its own account and is for investment. Except
as permitted by law, it has a no present intention of selling, transferring or
otherwise disposing in any way of all or any portion of the Shares. All
information that it has supplied to LEXON in connection with this Agreement is
true and correct. It acknowledges that an investment in the Shares involves a
very high degree of risk. It has conducted all investigations and due diligence
concerning LEXON which it deems appropriate, and it has found all such
information obtained fully acceptable. It is knowledgeable about the prospects,
business, financial condition, operations and possible acquisitions of LEXON. It
has had an opportunity to ask questions of the officers and directors of LEXON
concerning the Shares and the business and financial condition of and prospects
for LEXON, and the officers and directors of LEXON have adequately answered all
questions asked and made all relevant information requested available to it. It
understands that success of LEXON is dependent upon LEXON's receipt of funds
necessary to provide working capital, which may not occur. It understands and
agrees that the following restrictions and limitations are applicable to the
purchase, resale and distribution of the Shares pursuant to applicable
securities laws.
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(b) Stock Transfer Restrictions.
(i) It is aware that it must bear the full economic risk of an
investment in the Shares of LEXON for an indefinite period of
time, because the transaction in which the Shares are being
issued has not been registered under the Securities Act of 1933,
as amended ("Securities Act"), or the securities laws of any
state; and, therefore, the Shares cannot be sold, pledged,
transferred or otherwise disposed of unless registered under
applicable securities laws or an exemption from registration is
available. It further understands that only LEXON can take action
to register the Shares, and the cost of registration is
prohibitive.
(ii) A legend will be placed on the certificates representing the
common stock of LEXON in substantially the following form:
NOTICE OF TRANSFER RESTRICTIONS
The shares evidenced by this Certificate have been acquired for
investment only and have not been registered under the Securities Act
of 1933, as amended, or the securities laws of any state. The Shares
may not be sold, transferred, pledged or otherwise disposed of without
the receipt of an opinion of counsel acceptable to LEXON that no such
registration is required.
(iii)Stop transfer instructions have been placed in LEXON's transfer
records with respect to the Shares to insure that any transfer or
disposition thereof is in full compliance with applicable law. It
agrees that LEXON may refuse or delay transfer of the Shares or
impose other restrictions on the transfer of the Shares if LEXON
is not satisfied that the transfer is lawful. However, LEXON
acknowledges and agrees that this determination must be made
within a reasonable time; and if LEXON finds the transfer is
satisfactory and permitted by applicable law, LEXON will not
refuse or delay the transfer.
ARTICLE III
TRANSACTIONS PRIOR TO CLOSING
3.01. Corporate Approvals. Prior to Closing, each of the parties shall
submit this Agreement to its Board of Directors and Shareholders and obtain
approval thereof. Copies of corporate actions taken shall be provided to each
party.
3.02. Access to Information. Each party agrees to permit upon
reasonable notice the attorneys, accountants, and other representatives of the
other parties reasonable access during normal business hours to its properties
and its books and records to make reasonable
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investigations with respect to its affairs, and to make its officers and
employees available to answer questions and provide additional information as
reasonably requested.
3.03. Expenses. Each party agrees to bear its own expenses in
connection with the negotiation and consummation of the Merger and the
transactions contemplated hereby.
3.04. Covenants. Except as permitted in writing, each party agrees that
it will:
(i) Use its good faith efforts to obtain all requisite licenses,
permits, consents, approvals and authorizations necessary in
order to consummate the Merger; and
(ii) Notify the other parties upon the occurrence of any event
which would have a materially adverse effect upon the Merger
or the transactions contemplated hereby or upon the
business, assets or results of operations; and
(iii)Not modify its corporate structure, except as necessary or
advisable in order to consummate the Merger and the
transactions contemplated hereby.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the parties to consummate the Merger and the
transactions contemplated hereby are subject to the following conditions which
may be waived to the extent permitted by law:
(a) Each party must obtain the approval of its Board of Directors and
shareholders in accordance with applicable law, and such approval shall not have
been rescinded or restricted; and
(b) Each party shall obtain all requisite licenses, permits, consents,
authorizations and approvals required to complete the Merger and the
transactions contemplated hereby; and
(c) There shall be no effective injunction, writ or preliminary
restraining order or other order of a similar nature issued by any court or
governmental agency having jurisdiction directing that the Merger or the
transactions contemplated hereby shall not be consummated; and
(d) The representations and warranties of the parties shall be true and
correct in all material respects at the Effective Time; and
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(e) LEXON shall issued to UTEK 500,000 shares of LEXON common stock;
(f) LEXON shall enter into a Consulting Agreement with UTEK in mutually
acceptable form and substance;
(g) The Patent Applications have been prosecuted in good faith with
reasonable diligence; provided that the parties understand and agree that UTEK
is only making a representation and warranty that the patent application has
been prosecuted in good faith with reasonable diligence.
(h) The Research Agreement has been executed and delivered, is valid
and in full force and effect, is in form and substance acceptable to LEXON, and
there has been no default therein; and
(i) The License has been executed and delivered, is valid and in full
force and effect, is in form and substance acceptable to LEXON, and there has
been no default therein; and
(j) The Inventors and Dr. Highsmith have entered into Consulting
Agreements with LEXON in mutually agreed form and substance which provide that
they will be reasonably available to provide consulting services and technical
advice to LEXON from time to time about the Invention, so long as such advice
and consulting services do not unreasonably interfere with their duties and
responsibilities with UM and so long as the same are in accordance with
applicable policies of UM and applicable legal and regulatory requirements
applicable to them; and
(k) LEXON's common stock shall be eligible for trading on a public
market.
ARTICLE V
INDEMNIFICATION
(a) By UTEK. UTEK agrees to indemnify, defend and hold harmless LEXON
and its shareholders, directors, officers, employees, agents and representatives
and their respective successors and assigns against and in respect of any cost,
damage, expense (including reasonable legal fees and actual expenses), liability
or loss incurred or suffered by any of them resulting from or arising out of
the: (i) breach, inaccuracy, misrepresentation or untruth of any representation
or warranty, or the nonfulfillment of any agreement or covenant of UTEK
contained in this Agreement or in any document delivered by UTEK or CDI to LEXON
pursuant hereto; and (ii) any action, assessment, claim, demand, proceeding or
suit incident to any of the foregoing. The liability of UTEK hereunder may be
satisfied by the return to LEXON of shares of LEXON common stock issued pursuant
hereto valued at the fair market value on the date the breach is discovered to
the extent of the breach.
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(b) By LEXON. LEXON agrees to indemnify, defend and hold harmless UTEK
and its member, managers, officers, employees, agents and representatives and
their respective successors and assigns against and in respect of any cost,
damage, expense (including reasonable legal fees and actual expenses), liability
or loss incurred or suffered by any of them resulting from or arising out of:
(i) the breach, inaccuracy, misrepresentation or untruth of any representation,
warranty, or the nonfulfillment of any agreement or covenant of LEXON contained
in this Agreement or in any document delivered by it to UTEK pursuant hereto;
and (ii) any action, assessment, claim, demand, proceeding or suit incident to
any of the foregoing.
(c) Costs. The indemnification rights and obligations of a party hereto
shall include the right to receive and the duty to pay and reimburse the
indemnified party all its reasonable costs and expenses incurred in the
enforcement of its rights hereunder.
(d) Survival of Representations and Warranties.
(1) The representations and warranties made by UTEK shall survive
for a period of 3 years after Closing, and thereafter all such
representations and warranties shall be extinguished, except with
respect to claims then pending for which specific notice has been
given during such 3 year period. UTEK shall have liability and
responsibility for the surviving representations and warranties made
by it herein, notwithstanding any due diligence investigation or
examination by LEXON.
(2) The representations and warranties made by LEXON shall
survive for a period of 3 years after Closing, and thereafter all such
representations and warranties shall be extinguished, except with
respect to claims then pending for which specific notice has been
given during such 3 year period. LEXON shall have liability and
responsibility for the surviving representations and warranties made
to LEXON, notwithstanding any due diligence investigation or
examination by UTEK.
(e) Limitations on Liability. Notwithstanding any other provision
herein to the contrary, neither party hereto shall be liable to the other party
for any cost, damage, expense, liability or loss under this indemnification
provision until after the sum of all amounts individually when added to all
other such amounts in the aggregate exceeds $5,000, and then such liability
shall apply only to matters in excess of $5,000.
(f) Rights of Indemnitors. The indemnified party shall notify the
indemnifying party of the assertion or commencement of such action, claim or
proceeding within a reasonable period of time or, if citation or service of
process has been made, within 15 days thereafter. The indemnified party may, at
its option and at its sole expense, participate in the defense of and contest
any such action, claim or proceeding; provided, however, the indemnified party
shall at all times also have the right to participate fully therein. If the
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indemnifying party, within a reasonable time after receiving such notice, fails
to participate, the indemnified party shall have the right, but shall not be
obligated, to undertake the defense of the action, claim or proceeding for the
account of and at the risk of the indemnifying party; provided, however, in the
event that the indemnified party shall determine to compromise or settle
(exercising its judgment in good faith) any such action, claim or proceeding,
the indemnified party shall be required to give the indemnifying party 15 days'
notice of such determination after its receipt of actual notice of the claim.
The indemnified party shall then be entitled to compromise or settle the action,
claim or proceeding for the account of and at the risk of the indemnifying
party; provided, however, the settlement shall be effective without the consent
of both the indemnifying and indemnified parties, which consent shall not be
reasonably withheld. The parties agree that any indemnified party may join any
indemnifying party in any action, claim or proceeding brought by a third party,
as to which any right of indemnity created by this Agreement would or might
apply, for the purpose of enforcing any right of the indemnity granted to such
indemnified party pursuant to this Agreement.
(g) Additional Rights. Any right of indemnity of any party pursuant to
this Agreement shall be in addition to and shall not operate as a limitation on
any other right to indemnity of such party pursuant to this Agreement, any
document or instrument executed in connection with the consummation of the
transaction contemplated hereby or otherwise.
ARTICLE VI
ARBITRATION
In the event a dispute arises with respect to the interpretation or
effect of this Agreement or concerning the rights or obligations of the parties
hereto, the parties agree to negotiate in good faith with reasonable diligence
in an effort to resolve the dispute in a mutually acceptable manner. Failing to
reach a resolution thereof, either party shall have the right to submit the
dispute to be settled by arbitration under the Commercial Rules of Arbitration
of the American Arbitration Association. The parties agree that all arbitrations
shall be conducted in Tulsa, Oklahoma, unless the parties mutually agree to the
contrary. The cost of arbitration shall be borne by the party against whom the
award is rendered or, if in the interest of fairness, as allocated in accordance
with the judgment of the arbitrators. All awards in arbitration made in good
faith and not infected with fraud or other misconduct shall be final and
binding.
ARTICLE VII
MISCELLANEOUS
No party may assign this Agreement or any right or obligation of it
hereunder without the prior written consent of the other parties hereto. No
permitted assignment shall relieve a party of its obligations under this
Agreement without the separate written consent of the other parties. This
Agreement shall be binding upon and enure to the benefit of the parties
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and their respective permitted successors and assigns. Each party agrees that it
will comply with all applicable laws, rules and regulations in the execution and
performance of its obligations under this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Oklahoma.
This document constitutes a complete and entire agreement among the parties with
reference to the subject matters set forth herein. No statement or agreement,
oral or written, made prior to or at the execution hereof and no prior course of
dealing or practice by either party shall vary or modify the terms set forth
herein without the prior consent of the other parties hereto. This Agreement may
be amended only by a written document signed by the parties. Notices or other
communications required to be made in connection with this Agreement shall be
delivered to the parties at the address set forth below or at such other address
as may be changed from time to time by giving written notice to the other
parties. This Agreement may be executed in multiple counterparts, each of which
shall constitute one and a single Agreement.
ARTICLE VIII
PIGGYBACK REGISTRATION RIGHTS
LEXON covenants and agrees that if it files with the Securities and
Exchange Commission an underwritten registration statement on SEC Form S-SB1 or
Form S-l or its equivalent which includes the offer of shares owned by
shareholders of LEXON, LEXON will use its best efforts to include some or all of
the shares of LEXON common stock issued to and then held by UTEK pursuant to
this Agreement. If the underwriters include any selling shareholder shares, UTEK
shall be permitted to include some or all of its LEXON shares on a pro rata
basis to the extent and upon the same terms and conditions as other LEXON
shareholders are permitted to have their LEXON shares included in the proposed
offering. If the underwriters do not permit for any reason the inclusion of
selling shareholder shares in the offering, UTEK shares shall also not be
included. It is the expressed intent of this Article that UTEK be treated
exactly the same as any other selling LEXON shareholder in connection with any
underwritten offering of LEXON common stock, no better and no worse. If LEXON
proposes an underwritten offering, LEXON will give UTEK 15 days' prior written
notice thereof, and UTEK shall give LEXON notice within 10 days thereafter of
UTEK's desire as to the number of shares, if any, that UTEK desires to include
in the offering. LEXON will notify the lead underwriters of UTEK's desire, and
LEXON will include UTEK shares in accordance with this Article. As a condition
of including any UTEK shares in the offering, UTEK shall (1) sign all
underwriting agreements, representations, warranties, certificates and other
papers as the underwriters require of UTEK and other LEXON shareholders whose
shares are to be included in the offering; (2) pay pro rata all costs of the
offering to the same extent as other LEXON selling shareholders are required to
pay; and (3) take all other actions and do all other things as are required of
other selling shareholders. Failure of UTEK to respond within 10 days after
notice of LEXON's intention to file an underwritten offering shall constitute a
waiver of the rights set forth in this Article.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by a duly authorized officer this 5th day of August, 1999.
LEXON, INC. CANCER DIAGNOSTICS, INC.
By: /s/ GIFFORD M. MABIE By: /s/ CLIFFORD M. GROSS
- ---------------------------------- --------------------------------
Gifford M. Mabie, President Dr. Clifford M. Gross, President
UTEK, LLC
By: /s/ CLIFFORD M. GROSS
--------------------------------
Dr. Clifford M. Gross, Chief Executive
Officer
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Exhibit B
to
Agreement and Plan of Merger
Directors
Gifford M. Mabie
Officers and Key Consultants
Gifford M. Mabie President and CEO
Rhonda R. Vincent Director of Accounting
Frederick K. Slicker General Counsel
Thomas Coughlin, M. D. Medical Director
EXHIBIT A
CERTIFICATE OF MERGER
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA, 101 State Capitol Bldg.,
Oklahoma City, OK 73105.
This Certificate of Merger is being filed pursuant to Section 1082 of
the Oklahoma General Corporation Act. In lieu of filing an executed Agreement
and Plan of Merger, the Surviving Corporation hereby states and certifies as
follows:
1. The names and states of incorporation of each of the Constituent
Corporations are:
NAME OF CORPORATION STATE OF INCORPORATION
Lexon, Inc. Oklahoma
Cancer Diagnostics, Inc. Florida
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each Constituent Corporation, in accordance
with the provisions of Section 1082 of Title 18 of the Oklahoma Statutes
and Section 601.1107 of the Corporation Laws of Florida.
3. The name of the Surviving Corporation is Lexon, Inc.
4. The Certificate of Incorporation of the Surviving Corporation is not being
changed by reason of the Merger.
5. The executed Agreement and Plan of Merger is on file at the principal place
of business of the Surviving Corporation at 8908 S. Yale, Suite 409, Tulsa,
OK 74137-3545.
6. A copy of the Agreement and Plan of Merger will be furnished on request and
without cost to any shareholder of any Constituent Corporation.
7. The authorized capital of Cancer Diagnostic, Inc. is 1,000 shares of common
stock, no par value, and 1,000 shares are issued, outstanding and voted for
the Merger.
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IN WITNESS WHEREOF, the Surviving Corporation has caused these Articles
of Merger to be executed by its President and attested by its Assistant
Secretary, this ____of January, 2000.
LEXON, INC.
By: __________________________________
Gifford M. Mabie, President
ATTEST:
By:____________________________
Rhonda Vincent, Assistant Secretary
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EXHIBIT A
ARTICLES OF MERGER
TO THE SECRETARY OF STATE OF THE STATE OF FLORIDA, 409 EAST GAINES STREET,
TALLAHASSEE, FLORIDA 32299:
These Articles of Merger are being filed pursuant to Section 601.117 of
the Florida General Corporation Laws. In lieu of filing an executed Agreement
and Plan of Merger, the Surviving Corporation hereby states and certifies as
follows:
1. The names and states of incorporation of each of the Constituent
Corporations are:
NAME OF CORPORATION STATE OF INCORPORATION
Lexon, Inc. Oklahoma
Cancer Diagnostics, Inc. Florida
2. An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by each Constituent Corporation, in accordance
with the provisions of Section 1082 of Title 18 of the Oklahoma Statutes
and Section 601.1107 of the Corporation Laws of Florida. The Board of
Directors and Shareholders of the Surviving Corporation approved the Merger
August ___,1999 and August ___, 1999, respectively; and the Board of
Directors and Shareholders of Cancer Diagnostics, Inc. approved the Merger
on August __, 1999 and August ___, 1999, respectively.
3. The name of the Surviving Corporation is Lexon, Inc.
4. The Certificate of Incorporation of the Surviving Corporation is not being
changed by reason of the Merger.
5. The executed Agreement and Plan of Merger is on file at the principal place
of business of the Surviving Corporation at 8908 S. Yale, Suite 409, Tulsa,
OK 74137-3545.
6. A copy of the Agreement and Plan of Merger will be furnished on request and
without cost to any shareholder of any Constituent Corporation.
7. The authorized capital of Cancer Diagnostics, Inc. is 1,000 shares of
common stock, no par value, and 1,000 shares are issued, outstanding and
voted for the Merger.
1
<PAGE>
IN WITNESS WHEREOF, the Surviving Corporation has caused these Articles
of Merger to be executed by its President and attested by its Assistant
Secretary, this ____of January, 2000.
LEXON, INC.
By: __________________________________
Gifford M. Mabie, President
ATTEST:
By:____________________________
Rhonda Vincent, Assistant Secretary
2
<PAGE>
Schedule 2.01(l)
CDI Financial Statements
<PAGE>
Schedule 2.01(i)
PATENT APPLICATIONS
TECH DISCLOSURE PATENT
UMB ID# APPLICATION DATE TITLE
1489JS Provisional 2/16/98 Telomerase
Assay or Body
Fluids for
Cancer
Screening and
Assessment of
Disease Stage
and Prognosis
Patent App. 2/16/99
US
09/250,336
<PAGE>
Schedule 2.02(j)
LEXON Financial Statements
Consulting Agreement
--------------------
This consulting agreement ("Agreement") is entered into by and between LEXON,
INC., an Oklahoma corporation (LEXON) and UTEK CORPORATION, a Florida
corporation (UTEK) effective this 4th day of August 1999.
For good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Scope of Services. UTEK agrees to provide technology merchant
consulting services to LEXON to identify, evaluate and recommend
potential technology acquisitions that are synergistic with LEXON'S
existing cancer diagnostic testing technologies. This technology
search shall review technologies form US and foreign research
institutions and US government laboratories.
2. Compensation. LEXON agrees to pay UTEK a total of $132,000. Payable as
follows:
a. April 1, 2000 $44,000
b. September 1, 2000 $44,000
c. December 1, 2000 $44,000
To guarantee receipt of consideration by UTEK for performance of this
contract, if in the event that LEXON is unable to make any of the
above cash payments, it will deliver such payment to UTEK in the form
of LEXON unregistered shares of common stock. The number of shares to
be delivered will be equal to 200% of the amount owed divided by the
price of the shares on the date the payment is required to be made.
3. Term. The term for performance of the services of this Agreement shall
begin September 1, 1999 and end December 31, 1999.
4. The laws of the State of Florida govern this Agreement.
The parties have executed this Agreement effective August 4th, 1999.
LEXON, INC. UTEK CORPORATION
By: Gifford Mabie By: Clifford Gross
- --------------------------- ------------------------------
Gifford Mabie, President Clifford Gross, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule at June 30, 1999
</LEGEND>
<CIK> 0001062679
<NAME> Lexon, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 31,801
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 170,609
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 477,764
<CURRENT-LIABILITIES> 34,705
<BONDS> 0
0
0
<COMMON> 6,802
<OTHER-SE> 443,059
<TOTAL-LIABILITY-AND-EQUITY> 477,764
<SALES> 0
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<OTHER-EXPENSES> (1,524,250)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,418
<INCOME-PRETAX> (1,527,668)
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,527,668)
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.23
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