U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
PRAXIS PHARMACEUTICALS INC.
(Name of Small Business Issuer in its charter)
UTAH 87-0393257
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
595 HORNBY STREET, SUITE 600, VANCOUVER, BRITISH COLUMBIA V6C 1A4 CANADA
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (604) 646-5614
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
Exhibit index on page 14. Page 1 of ____ pages
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Praxis Pharmaceuticals Inc. ("Praxis" or the "Company") was formed in
response to an apparent market opportunity in the pharmaceutical industry for
small molecular agents capable of moderating inflammatory responses. The
founding individuals recognized several significant diseases, which are
inadequately served by current therapies, as providing this opportunity. Praxis
is a startup company, which commenced operations in July 1997. Its mission is to
develop a unique panel of therapeutics based on carbohydrate chemistry. To
achieve that mission, Praxis plans to acquire licenses for agents to apply in
new therapeutic categories and to develop new drugs internally. The drugs are
intended to be used in the control of inflammation in a range of indications,
such as skin conditions to autoimmune diseases. The technology also has
applicability in the cosmetic and nutraceutical markets and agents for wrinkles
and other conditions are being developed for these markets.
BACKGROUND AND CORPORATE STRUCTURE
Praxis Pharmaceuticals, Inc. was incorporated on June 20, 1997 under
the laws of the State of Nevada. In June 1998, Praxis-Nevada engaged in a
reverse acquisition transaction with Micronetics, Inc., a company incorporated
in Utah on December 31, 1981, where the shareholders of Praxis-Nevada gained
control over Micronetics. Micronetics then changed its name to Praxis
Pharmaceuticals Inc. A wholly owned Australian subsidiary, Praxis
Pharmaceuticals Australia Pty. Ltd. (ACN 082 811 630) ("Praxis-Australia"), was
formed in June 1998 as a private company.
In October 1999 an equity investment was made in Praxis Australia by
Rothschild Bioscience Managers Ltd., which reduced Praxis' equity ownership to
35%.
PATENTS AND LICENSE RIGHTS
The Company has obtained exclusive licenses to exploit and use
intellectual property possessed by the Australian National University in the
area of phosphosugars and their analogues as anti-inflammatory agents, covered
by the University's patents (including USA 5506210, European 89909685.3,
International WO90/01938 and Australia PO3098/96).
Anutech Pty Limited, the commercial subsidiary of Australian National
University, originally granted a license to the Company in October 1997. This
earlier agreement was superseded by an agreement dated October 14, 1999. The
Company's exclusive worldwide license pertains to the use of phosphosugars as
nutraceuticals (foods that provide medicinal or health benefits), complementary
medicines, or cosmetics. The license specifically excludes the use of
phosphosugars as prescription therapeutics and topical application for wound
care. As consideration for the license, Anutech is to receive a 4% royalty on
net sales of products, 50% of all royalty income on net sales of products
received from sublicensees, and 15% of all sublicense fees.
Anutech has granted Praxis-Australia the exclusive worldwide license to
the use of phosphosugars as prescription therapeutics and specifically excludes
the uses granted to the Company. Anutech is to receive 2% of all amounts
received by Praxis-Australia or any sublicensee in connection with the licensed
intellectual property or related products.
In addition to the licenses described above, Praxis owns two patents
that relate to agents for use in immunosuppression and transplant rejection
(US5691346 and US 5837709). Praxis believes that patent protection of its
technologies, processes and products is important to its future operations. The
success of Praxis's proposed products might depend, in part, upon the Company's
ability to obtain patent protection. Praxis intends to enforce its patent
position and intellectual property rights vigorously. The cost of enforcing
Praxis's patent rights in lawsuits, if necessary, may be significant and could
interfere with Praxis's operations. Although Praxis intends to file additional
patent applications, as management believes appropriate, with respect to any new
products or technological developments, no assurance can be given that any
additional patents will be issued or, if issued, will be of commercial benefit
to Praxis. In addition, it is impossible to anticipate the breadth or degree of
protection that any
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such patents may afford. To the extent that Praxis relies on unpatented
proprietary technology, no assurance can be given that others will not
independently develop or obtain substantially equivalent or superior technology
or otherwise gain access to Praxis' trade secrets, that any obligation of
confidentiality will be honored or that Praxis will be able to effectively
protect its rights to proprietary technology. Further, no assurance can be given
that any products developed by Praxis will not infringe patents held by third
parties or that, in such case, licenses from such third parties would be
available on commercially acceptable terms, if at all.
COMPANY DEVELOPMENT
It is envisioned that the Company will develop in stages:
o Research and Development
o Clinical Trials
o Commercialization
Praxis' business plan envisions the first two stages taking place over
the next three-year period. The Company has engaged in private placements of its
stock to fund research and development activities. Additional funding of
approximately $6,000,000 is being sought by the Company to enable it to develop
its intellectual property portfolio and to engage in early clinical trials of
its proposed products. Clinical trial activities will be necessary to generate
evidence of efficacy in order to attract alliance partners. An alliance in
pharmaceutical terms is the joint effort of a major pharmaceutical company and a
smaller "junior" drug developer who has the idea and the research, but not
sufficient capital to continue this to the next and most critical phase.
Management believes that the future viability of Praxis relies greatly on the
opportunity to gain the support, for mutual benefit, of one of the larger
worldwide drug houses. This may be particularly appropriate to the development
of formulations for topical or ocular delivery of Praxis drugs. Strategic
alliances with such companies will be investigated as a matter of priority by
Praxis.
The Company entered into a Research, Development and Licence Agreement
with Fairchild International Inc., an affiliate, dated as of May 11, 1999, which
closed September 30, 1999. Under that agreement, Fairchild obtained an
exclusive, worldwide license to make, use, and sell products and processes
developed by Praxis relating to arthritis and dermal wrinkles in consideration
for 2,600,000 shares of Fairchild common stock and $250,000. A first installment
of $62,500 was paid on October 1, 1999. Quarterly payments of $50,000 are to be
made beginning January 1, 2000, with a final payment of $37,500 due October 1,
2000. Praxis agreed to conduct certain research projects commencing October 1,
1999. Any new intellectual property developed as a result of that research is to
be included as part of the licensed technology and licensed to Fairchild.
Fairchild is authorized to grant sublicenses and/or assign the license to an
affiliate. Praxis is to be paid 35% of any consideration received by Fairchild
from the sale of a licensed product or the granting of a sublicense, less the
$250,000 and any other development costs, manufacturing and production costs,
and marketing and selling costs.
In October 1999, an equity investment of $1.4 million by Rothschild
Bioscience Managers Limited, of Melbourne, Victoria, was accepted by Praxis.
This investment was solely for the purpose of research and development into
phosphosugar-based anti-inflammatory agents for registered therapeutic use.
Praxis retains a 35% equity in Praxis Pharmaceuticals Australia Pty Ltd.
It is expected that the profitability and financial viability of the
Company will ultimately rest with the corporate alliances that will be entered
into at this stage of fund raising. As noted above, the benefits of a correctly
structured alliance can be enormous for both parties involved. The Company
expects to incur significant operating losses over at least the next three
years. There is every likelihood that these losses may increase in the future as
the research and development and clinical trials continue. The Company's
profitability will ultimately depend upon its ability to reach development and
obtain regulatory approval for its products, and to enter into alliances to
develop, manufacture and market the products. There is no guarantee that the
Company will ever be profitable.
Praxis' near-term goals are to raise the funds necessary for the next
five years of company research and development activities through share
offerings and cash flow derived from sales and or licensing agreements on
cosmetic products; invest in a dedicated research facility and personnel; and
generate pre-clinical and early clinical results for the lead compounds. Over
the long term, its goal is to develop strategic alliances with established
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pharmaceutical companies in order to conduct large scale, late stage clinical
trials and to market approved therapeutics.
RESEARCH AND DEVELOPMENT
During the fiscal years ended May 31, 1999 and 1998, the Company
incurred $92,456 and $50,016 in research costs, respectively. Through the three
months ended August 31, 1999, the Company spent $22,352 on research and
development.
In general terms the research and development process for the
pharmaceutical agents is as follows:
o Secure source of drug substance
o Development of validated analytical assays for purity and stability
o Development of validated analytical assays for detection of the
drug substance in plasma
o Formulation studies to provide a stable formulation for human use
o Full toxicology program in accord with current international
guidelines
o Preparation of clinical trial material
This process is expected to cost approximately $1,000,000 to complete
and allows commencement of clinical trials. The Company intends to focus its
efforts on the following conditions/diseases: psoriasis, surgical adhesions,
ocular inflammation, rheumatoid arthritis, and wrinkles. Specific strategic
commercial targets are as follows: Psoriasis - Develop optimal dermal
formulation and enter early stage clinical trials by second quarter 2001.
Following the early stage trials (early Phase II), the Company plans to form a
strategic alliance with large pharmaceutical company to advance clinical trials.
o Surgical adhesions - Develop a data package which will be used to
enter into an agreement with an appropriate large pharmaceutical
company to receive milestone and royalty payments for further
development. The goal is to have such a data package by first
quarter 2001.
o Ocular inflammation - Develop a data package which will be used to
enter into an agreement with an appropriate large ophthalmic
specialist pharmaceutical company to receive milestone and royalty
payments for further development. The goal is to have such a data
package by first quarter 2001.
o Rheumatoid arthritis - Develop optimal oral formulation and enter
early stage clinical trials by first quarter 2002. Following the
early stage trials (early Phase II), the Company plans to form a
strategic alliance with a large pharmaceutical company to advance
clinical trials.
o Wrinkles - A dermal product is to be finalized by second quarter
2000 and initial trials will begin in fourth quarter. An agreement
has been entered into with a cosmetic marketing company that will
be responsible for production and sales of the product in early
2001.
Although several drugs have been developed by various pharmaceutical
companies to treat the diseases targeted by Praxis, relatively limited research
has been conducted in the development of carbohydrate based on M6P receptor
targeted pharmaceutical products. Although Praxis has demonstrated in
pre-clinical studies that its carbohydrate compounds may have applicability in a
broad range of diseases, clinical studies are yet to be performed to confirm
these findings. The Company's proposed products are in the early development
stage, require significant further research, development, testing and regulatory
clearances, and are subject to the risks of failure inherent in the development
of products based on innovative technologies. These risks include the
possibilities that any or all of the proposed products may be found to be
ineffective or toxic, or otherwise may fail to receive necessary regulatory
clearances; that the proposed products, although effective, may be uneconomical
to market; or that third parties may market superior or equivalent products. Due
to the extended testing and regulatory review process required before marketing
clearance can be obtained, Praxis does not expect to be able to realize revenues
from the sale of any drugs in the near term.
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GOVERNMENT REGULATION
The production and marketing of Praxis's pharmaceutical products are
subject to regulation for safety, efficacy and quality. The Food and Drug
Administration approval procedure involves completion of certain pre-clinical
and manufacturing/stability studies and the submission of the results of these
studies to the FDA in an Investigational New Drug (IND) application in support
of performing clinical trials. IND allowance is then followed by performance of
human clinical trials and additional pre-clinical and manufacturing quality
control studies supporting safety, efficacy and manufacturing quality control.
The information developed under the IND is compiled into a New Drug Application
and submitted to FDA for approval to market. The sequence of events is as
follows:
o PRE-CLINICAL STUDIES involve laboratory evaluation of product
characteristics and animal studies to assess the efficacy and
safety of the product. These tests take on the average three and
one-half years.
o AN IND IS FILED with the FDA to begin testing the product on
people. The IND becomes effective if the FDA does not disapprove it
within 30 days. However, any FDA comments or questions must be
answered to the satisfaction of the FDA before initial clinical
testing can begin. In some instances, this process could result in
substantial delay and expense
o PHASEI trials consist of testing of the product in a small number
of normal volunteers, primarily for safety. These trials take on
the average one year.
o In PHASE II, in addition to safety, the efficacy of the product is
evaluated in a small patient population. This typically takes about
two years.
o PHASEIII trials typically involve multicenter testing for safety
and clinical efficacy in an expanded population of patients at
geographically dispersed test sites. A clinical plan, or
"protocol," accompanied by the approval of the institutions
participating in the trials, must be submitted to the FDA prior to
commencement of each clinical trial. The FDA may order the
temporary or permanent discontinuation of a clinical trial at any
time if adverse events that endanger patients in the trials are
observed. These trials take on the average three years.
o NEW DRUG APPLICATION (NDA) is prepared and filed with the FDA,
containing an analysis of the results of the pre-clinical and
clinical studies on the new drug. Following extensive review, the
FDA may grant marketing approval, require additional testing or
information or deny the application. The average NDA review time
for new drugs is roughly two and one-half years.
o PHASEIV clinical trials may be requested to be performed after
marketing approval to resolve any lingering questions.
Continued compliance with all FDA requirements and the conditions in an
approved application, including product specifications, manufacturing process
and labeling requirements, are necessary for all products. Failure to comply, or
the occurrence of unanticipated adverse events during commercial marketing,
could lead to the need for labeling changes, product recall, seizure,
injunctions against distribution or other FDA-initiated action, which could
delay further marketing until the products are brought into compliance.
The NDA itself is a complicated and detailed document and must include
the results of extensive animal, clinical and other testing, the cost of which
is substantial. Although the FDA is required to review applications within 180
days of filing, in the process of reviewing applications the FDA frequently
requests that additional information be submitted and starts the 180 day
regulatory review period anew when the requested additional information is
submitted. The effect of such requests and subsequent submissions can
significantly extend the time for the NDA review process. Until an NDA is
actually approved, no assurance can be given that the information requested and
submitted will be considered adequate by the FDA to justify approval.
Whether or not FDA approval has been obtained, approval of a product by
a comparable regulatory authority must be obtained in most foreign countries
prior to the commencement of marketing of the product in that country. The
approval procedure varies from country to country and may involve additional
testing, and the time required may differ from that required for FDA approval.
Although some procedures for unified filings exist for certain European
countries, in general each country has its own procedure and requirements, many
of which are time consuming and expensive. Thus, substantial delays in obtaining
required approvals from foreign regulatory
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authorities may be encountered after the relevant applications are filed. After
such approvals are obtained, further delays may be encountered before the
products become commercially available.
No assurance can be given that any required FDA or other governmental
approval will be granted or, if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of Praxis's proposed
products and cause Praxis to undertake costly procedures. This may furnish a
competitive advantage to the more substantially capitalized companies with which
Praxis plans to compete. In addition, the extent of potentially adverse
government regulations that may arise from future administrative action or
legislation cannot be predicted.
COMPETITION
Praxis faces significant competition in the area of pharmaceutical
research. Due to the Company's small size, it can be assumed that most if not
all of its competitors have significantly greater financial, technical, and
other resources. These competitors may be able to respond more quickly to new or
emerging technologies than Praxis can. Also, the Company's competitors and
potential competitors have greater name recognition and ability to enter into
strategic partnerships to engage in new research and development efforts. To
compete, Praxis may be forced to narrow its research and development focus,
reducing its likelihood for success.
EMPLOYEES
As of December 1, 1999, the Company had 6 full-time employees, 1 of
which was an officer of the Company, Dr. William Cowden.
The Company's opportunity for success depends largely upon the efforts,
abilities, and decision-making of its executive officers. The loss any of the
Company's key personnel could, to varying degrees, have an adverse effect on its
operations and research and development efforts. The loss of any one of them
would have a material adverse affect on the Company.
The Company does not currently maintain "key-man" life insurance on any
of its executive officers, and there is no contract in place assuring their
services for any length of time. Within a reasonable period of time after
sufficient funds are available, it is the Company's intention to develop a plan
to purchase key-man life insurance for one or more key persons, with the Company
designated as the beneficiary, and enter into employment contacts with its key
executives. There is no assurance that the services of any member of management
will remain available to the Company for any period of time, that the Company
will be able to enter into employment contracts with any of its management, or
that any of the Company's plans to reduce dependency upon key personnel will be
successfully implemented. The Company plans to have industry standard
non-compete and non-disclosure agreements with all of its employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of the financial condition and results of
operations for Praxis should be read in conjunction with the accompanying
financial statements and related footnotes.
GENERAL
The Company's business is the development and commercialization of
drugs and nutraceuticals designed to prevent inflammation and their sequelae,
and the development of cosmetics for skin conditions. To date, Praxis has not
generated any revenues from product sales, royalties or license fees. Effective
September 30, 1999, the Company entered into a sublicensing arrangement with
Fairchild International Corp. for the development of a nutraceutical and
cosmetic agent. In exchange for this sublicense, the Company is to receive
$250,000 as reimbursement for research and development costs it has incurred.
Praxis plans to develop novel drugs and cosmetics, and to commercialize these
products through the formation of partnerships, strategic alliances and license
agreements with pharmaceutical and cosmetic companies.
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It is expected that the profitability and financial viability of the
Company will ultimately rest with the corporate alliances it can obtain. The
Company expects to incur significant operating losses over at least the next
three years. It is likely that these losses may increase in the future as the
research and development and clinical trials continue. The Company's
profitability will ultimately depend upon its ability to reach development and
obtain regulatory approval for its products, and to enter into alliances to
develop, manufacture and market the products. There is no guarantee that the
Company will ever be profitable.
Praxis' near-term goals are to raise the funds necessary for the next
five years of company research and development activities through share
offerings and cash flow derived from sales and or licensing agreements on
cosmetic products; invest in a dedicated research facility and personnel; and
generate pre-clinical and early clinical results for the lead compounds. Over
the long term, its goal is to develop strategic alliances with established
pharmaceutical companies in order to conduct large scale, late stage clinical
trials and to market approved therapeutics.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO THREE MONTHS ENDED
AUGUST 31, 1998. The Company continues to incur losses from operations. The net
loss for the three months ended August 31, 1999 was $92,655 as compared to
$40,832 during the comparable three-month period in 1998. The most significant
increases in expenses occurred in promotion and travel (a 229% increase) and
related party administration charges (a 1946% increase). Related party
administration charges included consulting fees paid to an officer and director
of the Company ($25,472). Also included were amounts charged by Alexander Cox &
Co., a company controlled by David Stadnyk, for the Company's proportional share
of office rent and administrative services resulting from the sharing of office
facilities with other companies controlled or managed by Alexander Cox & Co.
YEAR ENDED MAY 31, 1999 COMPARED TO PERIOD ENDED MAY 31, 1998. For the
year ended May 31, 1999, the net loss was $530,574 as compared to a loss of
$68,296 for the period from inception at June 20, 1997 to May 31, 1998.
Administration expenses increased from $15,460 in 1998 to $393,118 in 1999. The
most significant component of these expenses in 1999 was consulting fees of
$253,358. Most of these consulting fees were paid through the issuance of the
Company's common stock for public relations and other services. Research and
development costs increased by $42,440 from $50,016 in 1998 to $ 92,456 in 1999,
an 84.9% increase. 1999 costs increased due to the hiring of a director of
research and development and to increased pre-clinical study costs and internal
research and development efforts. The Company expects that research and
development costs will continue to increase in 1999, reflecting increased
pre-clinical and clinical testing of its products.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the primary source of funding for Praxis' operations
has been the private sale of its securities. Through May 31, 1999, the Company
issued common stock for cash of $188,725 and services of $249,208, and sold
$50,000 of convertible debentures.
At May 31, 1999, the Company's working capital deficiency was $56,397,
as compared to the deficiency of $119,296 at May 31, 1998. Of the liabilities at
May 31, 1999, $153,082 was owed to Alexander Cox & Co., an affiliate, for sums
advanced for operations. At August 31, 1999, the working capital deficiency
increased to $149,052 due to the depletion of cash for operations during the
three months then ended and the increase in accounts payable.
Until such time as the Company obtains agreements with third-party
licensees or partners to provide funding for the Company's anticipated research
and development activities, the Company will be dependent upon proceeds from the
sale of securities. Further, substantial funds will be required before the
Company is able to generate revenues sufficient to support its operations. There
is no assurance that the Company will be able to obtain such additional funds on
favorable terms, if at all. The Company's inability to raise sufficient funds
could require it to delay, scale back or eliminate certain research and
development programs.
The report of the Company's independent auditors on the financial
statements for the year ended May 31, 1999, includes an explanatory paragraph
relating to the uncertainty of the Company's ability to continue as a going
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concern. Praxis has suffered losses from operations, requires additional
financing, and needs to continue the development of its products. Ultimately the
Company needs to generate revenues and successfully attain profitable
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. There can be no assurance that it will be able to
develop a commercially viable product. Even if the Company were able to develop
a commercially viable product, there is no assurance that it would be able to
attain profitable operations.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue refers to the inability of computer and other
information technology systems to properly process date and time information due
to the programming of a two digit year rather than a four digit year. The risk
is that a system will recognize the digits "00" as 1900 rather than the year
2000, or that the system may not recognize "00" as a year at all. As a result,
computers and embedded processing systems may be at risk of malfunctioning,
particularly during the transition from 1999 to 2000.
The Company has completed its assessment of the impact of Year 2000
issues on its business operations. The Year 2000 issue may affect the Company in
four principal areas including: (1) computer systems such as personal computers,
operating systems, business software, and application software including
accounting systems, technical support software and administration software; (2)
field assets (primarily embedded systems) such as programmable logic controllers
and equipment control panels; (3) other systems such as telephones, photocopiers
and facsimile machines; and (4) third-party suppliers and service providers such
as banks and insurance companies.
To date, the Company has implemented and tested its computer software
and hardware for Year 2000 compliance and has concluded that its hardware and
software is Year 2000 compliant.
The Company's Year 2000 program is designed to reduce the Company's
risk of material losses due to the Year 2000 issue. Management does not
anticipate any material adverse effect from the Year 2000 issue; however, the
Company cannot be certain that it will not suffer material adverse effects in
the event that third parties upon which the Company is dependent are unable to
resolve their Year 2000 issues.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company does not own real property. The Company shares office
facilities in Vancouver, British Columbia, for its executive offices, and is
charged for office and rent and administrative services on a proportional cost
basis by an affiliate. See Part I - Item 7. Certain Relationships and Related
Transactions.
Praxis accesses its research facilities through academic appointments
of the directors with the Australian National University and the payment of an
overhead fee to the university for the use of the facilities. These facilities
include laboratory and animal facilities, which are already in use for the
purpose of producing carbohydrate-based therapeutic compounds to be used in
pre-clinical and clinical trials and meet all the necessary regulatory
requirements. Praxis also has access to purpose built and equipped laboratory
facilities, which are dedicated to all aspects of carbohydrate chemistry
including synthesis, purification and analysis of compounds. The facilities also
allow the performance of most other aspects of chemistry that might be required.
Animal research facilities for all pre-clinical studies are in place and meet
all national standards for care and use of laboratory animals. Magnetic
resonance imaging and mass spectroscopy are freely accessible. A Silicon
Graphics workstation is operated and owned by Praxis. Full information
technology services are in place enabling high speed Internet connection and
computerized data handling. Other John Curtin School of Medical Research
laboratories and scientists are also accessible by Praxis in the event of
needing technology that is not directly available.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table provides certain information as to the officers and
directors individually and as a group, and the holders of more than 5% of the
Company's common stock, as of December 10, 1999. Except as
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otherwise indicated, the persons named in the table have sole voting and
investing power with respect to all shares of common stock owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS (1)<F1>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CEDE & Co. 8,149,220 (2)<F2> 68.93%
P.O. Box 222
Bowling Green Station
New York, NY 10274
Dr. Brett Charlton 1,666,110 (3)<F3> 13.45%
24/1-9 Totterdell Street
Belconnen, 2617 Australia
1,566,110 (4)<F4> 12.64%
Dr. William Cowden
56 Urambi Village
Darlington, NSW 2008
Australia
David Stadnyk 1,266,110 (4)<F4> 10.22%
430 - 744 Hastings Street
Vancouver, BC V6C 1A5 Canada
Officers and directors as a group (3 persons) 4,498,330 (5)<F5> 33.27%
- ------------
<FN>
<F1>
(1) Where persons listed on this table have the right to obtain additional
shares of common stock through the exercise of outstanding options or
warrants or the conversion of convertible securities within 60 days
from December 10, 1999, these additional shares are deemed to be
outstanding for the purpose of computing the percentage of common stock
owned by such persons, but are not deemed to be outstanding for the
purpose of computing the percentage owned by any other person.
Percentages are based on 11,822,209 shares outstanding.
<F2>
(2) CEDE & Co. holds the shares in nominee name on behalf of broker-dealer
firms.
<F3>
(3) Includes 800,000 shares held in the name of Neysa Investment Ltd.
<F4>
(4) Includes 566,110 shares issuable upon exercise of stock options. See
Item 6. Executive Compensation.
<F5>
(5) Includes 1,698,330 shares issuable upon exercise of stock options. See
Item 6. Executive Compensation.
</FN>
</TABLE>
CHANGES IN CONTROL
We are not aware of any arrangements that may result in a change in
control of Praxis.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Dr. Brett Charlton 43 President, Medical Director, and director
Dr. William B. Cowden 45 Vice President, Scientific Director, and director
David Stadnyk 35 Secretary and director
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The term of office of each director ends at the next annual meeting of
Praxis' stockholders or when such director's successor is elected and qualifies.
The term of office of each officer ends at the next annual meeting of the
Praxis' board of directors, expected to take place immediately after the next
annual meeting of stockholders, or when such officer's successor is elected and
qualifies.
The last annual meeting was held on August 30, 1999, in Vancouver,
British Columbia.
DR. BRETT CHARLTON, President and a director of the Company since June
19, 1998, is also responsible for the institution and management of all clinical
trials as the medical director of the Company. He has basic clinical training
and clinical involvement, particularly in diabetes. He has held academic
appointments at the Walter and Eliza Hall Institute and Stanford University, and
is now at the John Curtin School of Medical Research, Australian National
University. Dr. Charlton is also currently Medical Director of the Clinical
Studies Unit of the National Health Sciences Center. Dr. Charlton spent three
years with Baxter Healthcare, as research manager, where he was involved with
new technology assessment, strategic planning and clinical trial management. He
has been consulting for the biomedical and pharmaceutical industry since 1984.
Dr. Charlton has published more than 50 scientific papers in medical and
biomedical journals. He is a graduate of the University of New South Wales.
DR. WILLIAM B. COWDEN, Vice President and a director of the Company
since June 19, 1998, is also chief scientist and responsible for all drug
development programs and pre-clinical testing. He is currently Senior Research
Fellow at the John Curtin School of Medical Research, and Principal Scientific
Advisor to ANUTech Pty Ltd., Canberra, Australia. Dr. Cowden was previously
Senior Scientist at Peptide Technology Ltd., an Australia based company. As part
of his work within the commercial sector Dr. Cowden has been involved in drug
development studies from the earliest stages of identification of drug
candidates, including pre-clinical assessment, up to the early clinical trial
stage. Major pharmaceutical companies currently license some agents discovered
in his laboratory. He has published over 100 papers in peer-reviewed scientific
medical journals. He is the inventor and co-inventor on seven patents. He is a
graduate of the University of Queensland.
DAVID STADNYK, Secretary and a director of the Company from June 19,
1998, to September 21, 1999, and since December 21, 1999, has diverse experience
in corporate management and finance. He has served as the Chairman, President,
Secretary and a director of Goanna Resources, Inc., a publicly listed mining
company (now known as Fairchild International Inc.) from its inception in June
1997 to March 1999. He was the President and CEO of Alexander News
International, a publicly traded newspaper publishing chain in Canada, from July
1994 to February 1997. Mr. Stadnyk was also a licensed stockbroker with two
national investment houses in Canada. Mr. Stadnyk is currently executive
director of Alexander Cox & Co. based in Sydney, Australia and Vancouver,
British Columbia. He is a graduate of the University of British Columbia.
No other directorships are held by each director in any company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or any company registered as an investment company, under the
Investment Company Act of 1940.
Drs. Charlton and Cowden and Mr. Stadnyk may be deemed to be
"promoters" and "control persons" of the Company, as that term in defined in the
Securities Act of 1933.
ITEM 6. EXECUTIVE COMPENSATION.
The Company is not presently paying any executive compensation except
for consulting fees to Dr. Cowden. See Part I - Item 7. Certain Relationships
and Related Transactions. It has no long-term incentive plans. The Company does
not pay directors for their services as such nor does it pay any director's fees
for attendance at meetings. Directors are reimbursed for any expenses incurred
by them in their performance as directors.
There are no employment agreements with any of the Company's executive
officers.
10
<PAGE>
STOCK OPTION PLAN
On August 30, 1999, the Company's shareholders adopted a 1999 Stock
Option Plan under which a total of 1,698,330 shares were reserved initially for
grant to provide incentive compensation to officers and key employees. The
number of shares available for grant adjusts annually, commencing on the first
day of the next fiscal year to a number equal to 15% of the number of shares
outstanding on last day of the fiscal year just completed.
The board of directors administers the Stock Option Plan. Options may
be granted for up to 10 years at not less than the fair market value at the time
of grant, except that the term may not exceed five years and the price must be
110% of fair market value for any person who at the time of grant owns more than
10% of the total voting power of the Company. Unless otherwise specified in an
optionee's agreement, options granted under the plan to officers,
officer/directors, and employees will become vested with the optionee after six
months. The Plan will remain in effect until the board of directors terminates
it, except that no incentive stock option, as defined in Section 422 of the
Internal Revenue Code, may be granted after July 8, 2009.
Options may be exercised by payment of the option price (i) in cash,
(ii) by tender of shares of Company common stock which have a fair market value
equal to the option price, or (iii) by such other consideration as the board of
directors may approve at the time the option is granted.
As of December 10, 1,698,330 options had been granted under the plan as
follows:
<TABLE>
<CAPTION>
OPTIONEE Number of Options Exercise Price Expiration Date
<S> <C> <C> <C>
Dr. Brett Charlton 566,110 $0.41 12/09/2004
Dr. William Cowden 566,110 $0.41 12/09/2004
David Stadnyk 566,110 $0.41 12/09/2004
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Alexander Cox & Co., a company owned and controlled by David Stadnyk,
has advanced sums to the Company from time to time for working capital needs. At
May 31, 1999 and August 31, 1999, $153,082 was owed to Alexander Cox & Co.
Interest does not accrue and there is no date established for repayment. In
addition, the Company shares office facilities with Alexander Cox & Co. and is
charged for its proportional share of rent and administrative services. During
the year ended May 31, 1999, $14,874 was paid for rent and services.
The Company entered into a Research, Development and Licence Agreement
with Fairchild International Inc., an affiliate, dated as of May 11, 1999, which
closed September 30, 1999. Under that agreement, Fairchild obtained an
exclusive, worldwide license to make, use, and sell products and processes
developed by Praxis relating to arthritis and dermal wrinkles in consideration
for 2,600,000 shares of Fairchild common stock and $250,000. A first installment
of $62,500 was paid on October 1, 1999. Quarterly payments of $50,000 are to be
made beginning January 1, 2000, with a final payment of $37,500 due October 1,
2000. Praxis agreed to conduct certain research projects commencing October 1,
1999. Any new intellectual property developed as a result of that research is to
be included as part of the licensed technology and licensed to Fairchild.
Fairchild is authorized to grant sublicenses and/or assign the license to an
affiliate. Praxis is to be paid 35% of any consideration received by Fairchild
from the sale of a licensed product or the granting of a sublicense, less the
$250,000 and any other development costs, manufacturing and production costs,
and marketing and selling costs. David Stadnyk, an officer and director of the
Company, is the holder of more than 10% of the outstanding shares of Fairchild.
During the year ended May 31, 1999 and three months ended August 31,
1999, $4,643 and $25,472, respectively, were paid to Dr. William Cowden for
consulting fees.
11
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL
The Company is authorized to issue of up to 50,000,000 shares of common
stock, $.001 par value per share, and 10,000,000 shares of preferred stock,
$.001 par value per share. The following summary does not purport to be
complete. You may wish to refer to the Company's articles of incorporation and
bylaws, copies of which are available for inspection. None of the holders of any
class or series of the Company's capital stock has preemptive rights or a right
to cumulative voting. As of December 10, 1999, there were issued and outstanding
11,822,209 shares of common stock and no shares of preferred stock.
PREFERRED STOCK
The Company's board of directors may determine the designations,
rights, preferences or other variations of each class or series of the preferred
stock. No classes or series of preferred stock have been established as of the
date of this registration statement.
COMMON STOCK
As of December 10, 1999, there were 11,822,209 shares of common stock
issued and outstanding. The board of directors may issue additional shares of
common stock without the consent of the common stockholders.
VOTING RIGHTS. Each outstanding share of common stock is entitled to
one vote. The common stockholders do not have cumulative voting rights, which
means that the holders of more than 50% of such outstanding shares voting for
the election of directors can elect all of the directors to be elected, if they
so choose.
NO PREEMPTIVE RIGHTS. Holders of common stock are not entitled to any
preemptive rights.
DIVIDENDS AND DISTRIBUTIONS. Holders of common stock are entitled to
receive such dividends as may be declared by the directors out of funds legally
available for dividends and to share pro rata in any distributions to holders of
common stock upon liquidation or otherwise. However, the Company has never paid
cash dividends on its common stock, and does not expect to pay such dividends in
the foreseeable future.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
Praxis common stock has been traded over-the-counter since July 23,
1998 on the OTC Bulletin Board under the symbol "PRXX". The following table sets
forth the range of high and low bid quotations for each fiscal quarter since the
stock began trading. These quotations reflect inter-dealer prices without retail
mark-up, markdown, or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
BID PRICES
----------
1999 FISCAL YEAR HIGH LOW
- ---------------- ---- ---
<S> <C> <C>
Quarter ending 08/31/98 $3.25 $0.75
Quarter ending 11/30/98 $0.88 $0.06
Quarter ending 02/28/99 $0.54 $0.06
Quarter ending 05/31/99 $1.70 $0.19
2000 FISCAL YEAR
- ----------------
Quarter ending 08/31/99 $1.84 $0.39
Quarter ending 11/30/99 $1.10 $0.38
</TABLE>
12
<PAGE>
On December 10, 1999, the closing price for the common stock was $0.41.
The number of record holders of the common stock as of December 10, 1999, was
306 according to the Company's transfer agent. Holders of shares of common stock
are entitled to dividends when, and if, declared by the board of directors out
of funds legally available therefor.
ITEM 2. LEGAL PROCEEDINGS.
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has sold shares of its Common
Stock, which were not registered under the Securities Act of 1933, as amended,
as follows:
1. In July 1998, the Company acquired Praxis-Nevada by issuing
5,000,000 shares of common stock to the 13 shareholders of
Praxis-Nevada in reliance upon the exemption from registration
contained in Rule 504 of Regulation D. No underwriters were
used and no underwriting commissions were paid.
2. In July 1998, the Company issued 305,403 shares of Common
Stock to 3 persons for services valued at $30,540.30 in
reliance upon the exemption from registration contained in
Rule 504 under the Securities Act of 1933. No underwriters
were used and no underwriting commissions were paid.
3. In July 1998, the Company issued 215,450 shares of Common
Stock to 142 persons for cash of $107,725 in reliance upon the
exemption from registration contained in Rule 504 under the
Securities Act of 1933. No underwriters were used and no
underwriting commissions were paid.
4. In August 1998, the Company sold a convertible debenture to
Sholem Liebenthal in the principal amount of $100,000 due
August 26, 1999 in reliance upon the exemption from
registration contained in Section 4(2) of the Securities Act
of 1933. From September 1998 to February 1999, Mr. Liebenthal
converted $50,000 into 617,989 shares of Common Stock. The
remaining principal of $50,000 was redeemed for cash. The
Company relied upon Rule 504 for the issuance of the shares.
No underwriters were used and no underwriting commissions were
paid.
5. In September 1998, the Company issued 516,832 shares of Common
Stock to 6 persons for services valued at $129,208 in reliance
upon the exemption from registration contained in Rule 504
under the Securities Act of 1933. No underwriters were used
and no underwriting commissions were paid.
6. In December 1998, the Company sold 600,000 shares of Common
Stock to Grant Douglas Publishing, Inc. for $30,000 in
reliance upon the exemption from registration contained in
Rule
13
<PAGE>
504 under the Securities Act of 1933. No underwriters were
used and no underwriting commissions were paid. Through an
oversight the shares were not issued until June 1999.
7. In February 1999, the Company issued 2,583,000 shares of
Common Stock for services valued at $120,000 to 7 persons in
reliance upon the exemption from registration contained in
Rule 504 under the Securities Act of 1933. No underwriters
were used and no underwriting commissions were paid.
8. In February 1999, the Company issued 300,000 shares of Common
Stock to Anutech as consideration for the Company's license in
reliance upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933. No underwriters
were used and no underwriting commissions were paid.
9. In February 1999, the Company sold 250,000 shares of Common
Stock for cash of $50,000 to Jewett Finance Corp. in reliance
upon the exemption from registration contained in Rule 504
under the Securities Act of 1933. No underwriters were used
and no underwriting commissions were paid.
10. In March 1999, the Company sold 833,333 shares of Common Stock
for cash of $100,000 to Annette Gross-Blotekamp and Jewett
Finance Corp. in reliance upon the exemption from registration
contained in Rule 504 of the Securities Act of 1933. No
underwriters were used and no underwriting commissions were
paid.
11. In September 1999, the Company sold 500,000 shares of Common
Stock for cash of $150,000 to Jeffrey Stone in reliance upon
the exemption from registration contained in Rule 504 of the
Securities Act of 1933. No underwriters were used and no
underwriting commissions were paid.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 16-10a-901 ET SEQ. of the Utah Business Corporation Act and
Article VIII of the Company's Articles of Incorporation permit the Company to
indemnify its officers and directors and certain other persons against expenses
in defense of a suit to which they are parties by reason of such office, so long
as the persons conducted themselves in good faith and the persons reasonably
believed that their conduct was in the Company's best interests or not opposed
to the Company's best interests, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
Indemnification is not permitted in connection with a proceeding by or in the
right of the corporation in which the officer or director was adjudged liable to
the corporation or in connection with any other proceeding charging that the
officer or director derived an improper personal benefit, whether or not
involving action in an official capacity.
PART F/S
See pages beginning with page F-1.
14
<PAGE>
PART III
<TABLE>
<CAPTION>
REGULATION SEQUENTIAL
S-B NUMBER PAGE NUMBER
EXHIBIT
<S> <C> <C>
2.1 Stock Exchange Agreement with Micronetics, Inc. ___
3.1 Articles of Incorporation, as amended and restated ___
3.2 Bylaws ___
10.1 Research, Development and Licence Agreement dated May 11, 1999 between ___
Praxis Pharmaceuticals, Inc. and Fairchild International Inc.
10.2 Exclusive Licence Agreement dated October 14, 1999 between Anutech Pty ___
Ltd. and Praxis Pharmaceuticals Australia Pty Ltd.
10.3 Licence Agreement dated October 14, 1999 between Anutech Pty Ltd. and ___
Praxis Pharmaceuticals Inc.
10.4 Shareholders Agreement dated as of October 15, 1999, between Praxis ___
Pharmaceuticals Australia Pty Ltd., Praxis Pharmaceuticals Inc., Perpetual
Trustees Nominees Limited, and Rothschild Bioscience Managers Limited
10.5 1999 Stock Option Plan ___
21 Subsidiaries of the registrant ___
27 Financial Data Schedule ___
</TABLE>
15
<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.
PRAXIS PHARMACEUTICALS, INC.
Date: December 20, 1999 By: /S/ DR. BRETT CHARLTON
----------------------------
Dr. Brett Charlton, President
16
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 1999
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED - SEE NOTICE TO READER
<PAGE>
STEELE & CO.*
CHARTERED ACCOUNTANTS
*Representing incorporated professionals
SUITE 808 TELEPHONE: (604) 687-8808
808 WEST HASTINGS STREET TELEFAX: (604) 687-2702
VANCOUVER, B.C., CANADA V6C 1C8 EMAIL: [email protected]
NOTICE TO READER
WE HAVE COMPILED THE BALANCE SHEET OF PRAXIS PHARMACEUTICALS INC. (A DEVELOPMENT
STAGE COMPANY) AS AT AUGUST 31, 1999 AND THE STATEMENTS OF OPERATIONS AND
DEFICIT AND CASH FLOW FOR THE THREE MONTH PERIODS ENDED AUGUST 31, 1999 AND 1998
FROM INFORMATION PROVIDED BY MANAGEMENT. WE HAVE NOT AUDITED, REVIEWED OR
OTHERWISE ATTEMPTED TO VERIFY THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION
AND, ACCORDINGLY, WE DO NOT EXPRESS AN OPINION ON THEM. READERS ARE CAUTIONED
THAT THESE STATEMENTS MAY NOT BE APPROPRIATE FOR THEIR PURPOSES.
VANCOUVER, CANADA /s/STEELE & CO.
NOVEMBER 15, 1999 CHARTERED ACCOUNTANTS
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AUGUST 31, 1999
(EXPRESSED IN U.S. DOLLARS)
1999
----
ASSETS
CURRENT
CASH $ 36,945
==========
LIABILITIES
CURRENT
ACCOUNTS PAYABLE $ 32,915
OWING TO RELATED PARTIES 153,082
----------
185,997
----------
STOCKHOLDERS' EQUITY
SHARE CAPITAL
AUTHORIZED
50,000,000 COMMON SHARES WITH A PAR VALUE
OF $0.001 PER SHARE
10,000,000 PREFERRED SHARES WITHOUT PAR VALUE
ISSUED AND PAID IN CAPITAL (NOTE 2)
11,322,209 COMMON SHARES 667,473
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE (816,525)
----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (149,052)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 36,945
==========
APPROVED BY THE DIRECTORS
_________________________
_________________________
UNAUDITED - SEE NOTICE TO READER
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE MONTHS ENDED AUGUST 31, 1999 AND 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATING EXPENSES
BANK CHARGES AND EXCHANGE $ 1,967 $ 1,093
CONSULTING 10,414 -
RESEARCH AND DEVELOPMENT 22,352 16,559
RECOVERED COSTS (19,965) -
OFFICE AND SECRETARIAL 2,786 1,428
PROMOTION AND TRAVEL 28,643 8,716
PROFESSIONAL FEES 10,042 9,363
RELATED PARTY ADMINISTRATION CHARGES 33,316 1,628
RENT - 766
SHAREHOLDER INFORMATION 931 -
TRANSFER AGENT AND FILING FEES 2,169 1,279
------------- ------------
NET LOSS FOR THE PERIOD 92,655 40,832
DEFICIT BEGINNING OF THE PERIOD 723,870 193,296
------------- ------------
DEFICIT END OF THE PERIOD $ 816,525 $ 234,128
============= ============
BASIC LOSS PER SHARE $ 0.01 $ 0.02
============= ============
</TABLE>
UNAUDITED - SEE NOTICE TO READER
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED AUGUST 31, 1999 AND 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
NET LOSS FOR THE PERIOD $ (92,655) $ (40,832)
CHANGE IN NON-CASH OPERATING ITEM
ACCOUNTS PAYABLE 26,087 8,203
------------- ------------
(66,568) (32,629)
-------------- -------------
FINANCING ACTIVITIES
OWING TO RELATED PARTIES - (23,652)
SHARE CAPITAL ISSUED FOR CASH 30,000 112,725
SHARE SUBSCRIPTIONS (30,000) (70,000)
------------- ------------
- 19,073
------------- ------------
CHANGE IN CASH FOR THE PERIOD (66,568) (13,556)
CASH BEGINNING OF THE PERIOD 103,513 23,255
------------- ------------
CASH END OF THE PERIOD $ 36,945 $ 9,699
============= ============
</TABLE>
UNAUDITED - SEE NOTICE TO READER
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
1. ACCOUNTING POLICES AND NOTES
The accounting policies followed by the company are unchanged from those
outlined in the audited financial statements for the year ended May 31,
1999. The notes to the financial statements at May 31, 1999
substantially apply to the interim financial statements at August 31,
1999 and are not repeated here. All adjustments have been made which, in
the opinion of management, are necessary in order to make these
financial statements not misleading.
2. SHARE CAPITAL
<TABLE>
A. ISSUED AND PAID IN CAPITAL
<CAPTION>
SHARES CONSIDERATION
<S> <C> <C>
Common shares
Balance at May 31, 1999 10,722,209 $ 637,473
Issued during the period
For cash
@ $0.05 per share 600,000 30,000
------------- ---------------
Balance at August 31, 1999 11,322,209 $ 667,473
============= ===============
</TABLE>
B. SUBSEQUENT EVENTS
Stock options to acquire 250,000 common shares at $0.20 per share
and 250,000 common shares at $0.40 per shares for total proceeds
of $150,000 were exercised and the shares were issued subsequent
to the end of the period.
A share consolidation of one new share for five old common shares
was authorized by the shareholders and to be declared by the
directors on or before August 23, 2000.
3. PHARMACEUTICAL RESEARCH AND DEVELOPMENT AGREEMENTS
The Company has entered into a research and development agreement with
an Australian corporate third party subject to common management. In
exchange for the funding of research and development of pharmaceutical
products, the Company acquires the right of first refusal to obtain
exclusive licences to the products. The Company has entered into an
agreement, effective September 30, 1999, to grant a world-wide
sub-licence for certain products to a public company under common
management. In exchange for the sub-licence, the Company is to receive
common shares, representing a 24% ownership interest at the closing date
of the agreement. The third party will also pay the Company $250,000 to
reimburse the Company for research and development costs incurred.
UNAUDITED - SEE NOTICE TO READER
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1999
4. SEGMENTED INFORMATION
a. Cash
The Company maintains its cash balance in U.S., Canadian and
Australian currencies. At the period end, the U.S. dollar
equivalents were as follows.
U.S. dollars $ 6,336
Australian dollars 30,248
Canadian dollars 361
-------------
$ 36,945
=============
<TABLE>
b. Geographic Segments
<CAPTION>
DOMESTIC FOREIGN TOTAL
-------- ------- -----
<S> <C> <C> <C>
Net loss for the period $ 54,303 $ 38,352 $ 92,655
========== ========== ==========
Assets - current $ 6,336 $ 30,609 $ 36,945
========== ========== ==========
</TABLE>
The Company's activities are all in the one industry segment of
the research and development of pharmaceutical products.
UNAUDITED - SEE NOTICE TO READER
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
<PAGE>
STEELE & CO.*
CHARTERED ACCOUNTANTS
*Representing incorporated professionals
SUITE 808 TELEPHONE: (604) 687-8808
808 WEST HASTINGS STREET TELEFAX: (604) 687-2702
VANCOUVER, B.C., CANADA V6C 1C8 EMAIL: [email protected]
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
WE HAVE AUDITED THE ACCOMPANYING CONSOLIDATED BALANCE SHEETS OF PRAXIS
PHARMACEUTICALS INC. (FORMERLY MICRONETICS, INC.) (A DEVELOPMENT STAGE COMPANY)
AS OF MAY 31, 1999 AND 1998 AND THE RELATED CONSOLIDATED STATEMENTS OF
OPERATIONS AND DEFICIT, CHANGES IN STOCKHOLDERS' EQUITY AND CASH FLOW FOR THE
PERIODS THEN ENDED AND CUMULATIVE TO MAY 31, 1999. 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 CONSOLIDATED FINANCIAL STATEMENTS REFERRED TO ABOVE PRESENT
FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITION OF PRAXIS
PHARMACEUTICALS INC. (FORMERLY MICRONETICS, INC.) AS AT MAY 31, 1999 AND 1998
AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOW FOR THE PERIODS THEN ENDED
IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING
THAT THE COMPANY WILL CONTINUE AS A GOING CONCERN. AS DISCUSSED IN NOTE 3 TO THE
FINANCIAL STATEMENTS, THE COMPANY HAS SUFFERED LOSSES FROM OPERATIONS, HAS A NET
CAPITAL DEFICIENCY AND THERE IS NO REVENUE STREAM FROM OPERATIONS. AS A RESULT,
THERE IS UNCERTAINTY ABOUT ITS ABILITY TO CONTINUE AS A GOING CONCERN. THE
FINANCIAL STATEMENTS DO NOT INCLUDE ANY ADJUSTMENTS THAT MIGHT RESULT FROM THE
OUTCOME OF THIS UNCERTAINTY.
VANCOUVER, CANADASTEELE & CO. /s/STEELE & CO.
OCTOBER 8, 1999 CHARTERED ACCOUNTANTS
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
MAY 31, 1999 AND 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT
CASH (NOTE 8) $ 103,513 $ 23,255
================ ===============
LIABILITIES
CURRENT
ACCOUNTS PAYABLE $ 6,828 $ -
REORGANIZATION COSTS PAYABLE - 100,000
OWING TO RELATED PARTIES (NOTE 4) 153,082 42,551
---------------- ---------------
159,910 142,551
---------------- ---------------
COMMITMENTS (NOTE 7)
STOCKHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL (NOTE 5)
AUTHORIZED
50,000,000 COMMON SHARES WITH A PAR VALUE
OF $0.001 PER SHARE
ISSUED AND PAID IN CAPITAL 637,473 -
10,722,209 COMMON SHARES
SHARE SUBSCRIPTIONS (NOTE 5) 30,000 74,000
DEFICIT ACCUMULATED DURING (723,870) (193,296)
THE DEVELOPMENT STAGE ----------------- ----------------
TOTAL STOCKHOLDER'S EQUITY (DEFICIENCY) (56,397) (119,296)
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 103,513 $ 23,255
================ ===============
</TABLE>
APPROVED BY THE DIRECTORS
- ---------------------------------
- ---------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED MAY 31, 1999
AND THE PERIOD FROM JUNE 20, 1997 (DATE OF INCORPORATION)
TO MAY 31, 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
CUMULATIVE
TO PERIOD ENDED
MAY 31 MAY 31
1999 1999 1998
---- -----------------------------------------
<S> <C> <C> <C>
PROJECT COSTS
RESEARCH AGREEMENT AMENDMENT $ 45,000 $ 45,000 $ -
RESEARCH 142,472 92,456 50,016
PATENT COSTS 2,820 - 2,820
---------------- ---------------- ---------------
190,292 137,456 52,836
---------------- ---------------- ---------------
ADMINISTRATION EXPENSES
RELATED PARTY ADMINISTRATION 18,493 14,874 3,619
CHARGES
BANK CHARGES AND FOREIGN 2,450 2,450 -
EXCHANGE
CONSULTING 253,358 253,358 -
FILING FEES 1,484 1,484 -
FINDERS FEES 7,500 7,500 -
OFFICE, RENT AND SECRETARIAL 11,200 7,508 3,692
PROFESSIONAL FEES 32,486 24,337 8,149
TRANSFER AGENT FEES 2,013 2,013 -
TRAVEL AND ENTERTAINMENT 79,594 79,594 -
---------------- ---------------- ---------------
408,578 393,118 15,460
---------------- ---------------- ---------------
NET LOSS FOR THE PERIOD (NOTE 6) $ 598,870 530,574 68,296
================
DEFICIT BEGINNING OF THE PERIOD 193,296 -
REORGANIZATION COSTS (NOTE 2) - 125,000
---------------- ---------------- ---------------
DEFICIT END OF THE PERIOD $ 723,870 $ 193,296
================ ===============
BASIC LOSS PER SHARE $ 0.07
================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED MAY 31, 1999
AND THE PERIOD FROM JUNE 20, 1997 (DATE OF INCORPORATION)
TO MAY 31, 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
TOTAL
COMMON SHARES CAPITAL IN SHARE STOCK-
------------- EXCESS OF SUBSCRIP- HOLDERS'
SHARES AMOUNT PAR VALUE TIONS DEFICIT EQUITY
------ ------ --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Share subscriptions - $ - $ - $ 74,000 $ - $ 74,000
Net loss for the period - - - - (68,296) (68,296)
Re-organization costs - - - - (125,000) (125,000)
---------- ------------ ------------- -------------- -------------- --------------
Stockholders' equity
(deficiency) at May 31, 1998 - - - 74,000 (193,296) (119,296)
Common shares
Issued for cash
@ $0.001 per share 5,000,000 5,000 - (5,000) - -
@ $0.12 per share 833,333 833 99,167 - - 100,000
@ $0.20 per share 250,000 250 49,750 - - 50,000
@ $0.50 per share 215,450 215 107,510 (69,000) - 38,725
Issued for services
@ $0.03 per share 1,400,000 1,400 40,600 - - 42,000
@ $0.05 per share 800,000 800 39,200 - - 40,000
@ $0.10 per share 383,000 383 37,617 - - 38,000
@ $0.25 per share 516,832 517 128,691 - - 129,208
Issued for conversion of
debentures
@ $0.03 per share 325,926 326 10,674 - - 11,000
@ $0.11 per share 124,444 124 13,876 - - 14,000
@ $0.14 per share 106,667 107 14,893 - - 15,000
@ $0.16 per share 60,952 61 9,939 - - 10,000
Issued for reorganization
costs @ $0.10 per share 305,403 305 30,235 - - 30,540
Issued for research
agreement amendment 300,000 300 44,700 - - 45,000
Acquired on reorganization
acquisition 100,202 100 (100) - - -
Share subscriptions - - - 30,000 - 30,000
Net loss for the year - - - - (530,574) (530,574)
---------- ------------ ------------- -------------- --------------- --------------
Stockholders' equity
(deficiency) at May 31, 1999 10,722,209 $ 10,721 $ 626,752 $ 30,000 $ (723,870) $ (56,397)
========== ============ ============= ============== ============== ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEAR ENDED MAY 31, 1999
AND THE PERIOD FROM JUNE 20, 1997 (DATE OF INCORPORATION)
TO MAY 31, 1998
(EXPRESSED IN U.S. DOLLARS)
<CAPTION>
CUMULATIVE
TO PERIODS ENDED
MAY 31 MAY 31
1999 1999 1998
---- ----------------------------------------
<S> <C> <C> <C>
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
NET LOSS FOR THE PERIOD $ (598,870) $ (530,574) $ (68,296)
ITEMS NOT AFFECTING CASH FLOW
SHARE CAPITAL ISSUED
FOR CONSULTING 249,208 249,208 -
FOR RESEARCH AGREEMENT
AMENDMENTS 45,000 45,000 -
CHANGE IN NON-CASH OPERATING ITEMS
ACCOUNTS PAYABLE 6,828 6,828 -
------------------ ------------------ -----------------
(297,834) (229,538) (68,296)
------------------ ------------------ -----------------
FINANCING ACTIVITIES
OWING TO RELATED PARTIES 153,082 110,531 42,551
SHARE CAPITAL ISSUED
FOR CASH 262,725 262,725 -
FOR CONVERSION OF DEBENTURES 50,000 50,000 -
SHARE SUBSCRIPTIONS 30,000 (44,000) 74,000
REORGANIZATION COSTS (94,460) (69,460) (25,000)
------------------ ------------------ -----------------
401,347 309,796 91,551
------------------ ------------------ -----------------
CHANGE IN CASH FOR THE PERIOD 103,513 80,258 23,255
CASH BEGINNING OF THE PERIOD - 23,255 -
------------------ ------------------ -----------------
CASH END OF THE PERIOD $ 103,513 $ 103,513 $ 23,255
================== ================== =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
1. ACCOUNTING POLICIES
a. Basis of Presentation
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Praxis Pharmaceuticals Inc.
(a Nevada corporation) and Praxis Pharmaceuticals Australia Pty.
Limited. These financial statements have been prepared in accordance
with accounting principles and practices generally accepted in the
United States.
b. Pharmaceutical Research and Development
The Company is engaged in the research and development of pharmaceutical
products and expenses all costs incurred as period costs. The underlying
value of the pharmaceutical products is entirely dependent upon the
development of marketable products, the ability of the Company to obtain
the necessary financing to complete development and upon future
profitable production.
c. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying disclosures. Although these estimates are based on
management's best knowledge of current events and actions the Company
may undertake in the future, actual results may differ from the
estimates.
d. Foreign Currency
Transactions in foreign currencies are translated at rates prevailing on
the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies have been translated into U.S. dollars
at a rate of exchange prevailing at year end. Exchange gains and losses
from foreign currency translation adjustments are included in current
costs.
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
1. ACCOUNTING POLICIES (CONTINUED)
e. Income Taxes
The Company has incurred operating losses which are available for tax
credit carry forward. No certainty exists whether it is more likely than
not that some portion of these amounts will be realized by a reduction
of future taxes payable and no deferred tax asset has been recognized.
f. Uncertainty Due to Year 2000 Issue
The Year 2000 Issue arises because many computerized systems may
recognize the year 2000 as some other date, resulting in errors when
information using year 2000 dates is processed. The effects of the Year
2000 Issue may be experienced before, on or after January 1, 2000, and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 Issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
2. CORPORATE RE-ORGANIZATION, NAME CHANGE AND ACQUISITION OF
PRAXIS PHARMACEUTICALS INC. (A NEVADA CORPORATION)
The re-organization of the Company included the consolidation of the
Company's common shares to 100,202 outstanding on the basis of 118.45 old
shares for 1 new share, cancellation of 51,969 post-consolidation common
shares, and the change of the name from Micronetics, Inc. to Praxis
Pharmaceuticals Inc. (a Utah corporation).
By a share exchange agreement, the Company acquired a 100% interest in
Praxis Pharmaceuticals Inc. (a Nevada corporation), a private company.
5,000,000 common shares were issued in exchange for all of the issued shares
of the private company. In conjunction with the re-organization, the Company
completed a private placement of 215,450 common shares and issued 305,403
common shares in partial settlement of its commitment for re-organization
costs. The acquisition has been accounted for using the purchase method and
applying accounting principles applicable to a reverse takeover. As such,
the Company is a continuation of both the business and financial reporting
of the private company and the comparative figures presented in these
financial statements are for its year ended May 31, 1998.
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
3. GOING CONCERN CONSIDERATIONS
As at May 31, 1999, the Company had not reached a level of operations which
would finance day to day activities. These financial statements have been
prepared on the assumption that the Company is a going concern, meaning it
will continue in operation for the foreseeable future and will be able to
realize assets and discharge liabilities in the ordinary course of
operations. Different basis of measurement may be appropriate when a Company
is not expected to continue operations for the foreseeable future. The
Company's continuation as a going concern is dependent upon its ability to
attain profitable operations and generate funds therefrom and/or raise
equity capital or borrowings from third parties and related parties
sufficient to meet current and future obligations. The Company suffered
losses from operations of $530,574 and $68,296 for the periods ended May 31,
1999 and 1998 and had net capital deficiencies of $56,397 and $119,296 at
May 31, 1999 and 1998 respectively.
4. OWING TO RELATED PARTIES
The Company shares office facilities and has common management and
directorships with a number of public and private corporate related parties.
The Company is charged for office rentals and administrative services on a
proportional cost basis. Management believes that the methods of cost
allocations and resultant costs are reasonable. Accounts with companies with
common management and directorships, management and directors are unsecured
with no fixed terms of interest or repayment.
5. SHARE CAPITAL
a. Authorized
50,000,000 common shares with a par value of $0.001 per share
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
5. SHARE CAPITAL (CONTINUED)
<TABLE>
<CAPTION>
b. Common Shares Issued SHARES CONSIDERATION
------ -------------
<S> <C> <C>
Shares of Praxis Pharmaceuticals Inc. (a Nevada corporation) issued for cash 5,000,000 $ 5,000
and exchanged for shares of Micronetics, Inc.
Outstanding shares of Micronetics, Inc. at date of acquisition with a 100,202 1
nominal value
For reorganization costs 305,403 30,540
---------------- ---------------
Balance at completion of business re-organization 5,405,605 35,541
For cash 1,298,783 257,725
For services 3,099,832 249,207
For debenture conversion 617,989 50,000
For research agreement amendment 300,000 45,000
---------------- ---------------
Balance at May 31, 1999 10,722,209 $ 637,473
================ ===============
</TABLE>
c. Convertible Debentures
During the year, the Company issued $100,000 of 8% Series A senior
subordinated convertible redeemable debentures due August 26, 1999.
Interest was payable monthly by the issue of common shares, commencing
September 26, 1998. The debenture was convertible to common shares and
the Company had the option to redeem the debentures by paying 125% of
the principal balance.
The debenture holder converted $50,000 to 617,989 common shares and
principal of $50,000 was redeemed for cash. The debenture holder waived
the interest and redemption premium.
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
5. SHARE CAPITAL (CONTINUED)
d. Share Issue Commitments
The Company has granted stock options to a corporate third party as
follows:
250,000 shares at $0.20 per share (subsequently exercised)
250,000 shares at $0.40 per share (subsequently exercised)
The options have been granted to acquire shares of the Company at a
price greater than the quoted market price of the stock on the date of
the grant. The Company does not recognize an expense for services in
accounting for the granting or exercise of the option.
e. Share Subscriptions and Subsequent Events
Share subscriptions of $30,000 were received at May 31, 1999 to acquire
600,000 common shares (subsequently issued) at $0.05 per share.
The Company's shareholders have approved a share consolidation of one
new for five old common shares, effective September 16, 1999.
6. INCOME TAXES
The Company has incurred operating losses which are available to reduce
future years' taxable income. As at May 31, 1999, tax losses of
approximately $599,000 were incurred by different companies in different
jurisdictions. These losses are available for carry forward but may only be
available for offset in specific jurisdictions. No future benefits have been
recognized in the accounts.
7. PHARMACEUTICAL RESEARCH AND DEVELOPMENT AGREEMENTS
The Company has entered into a research and development agreement with an
Australian corporate third party subject to common management. In exchange
for the funding of research and development of pharmaceutical products, the
Company acquires the right of first refusal to obtain exclusive licences to
the products. The public company will receive a 4% royalty on net sales of
licenced products by the Company.
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(FORMERLY MICRONETICS, INC.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999
(EXPRESSED IN U.S. DOLLARS)
7. PHARMACEUTICAL RESEARCH AND DEVELOPMENT AGREEMENTS (CONTINUED)
The Company has entered into an agreement, effective September 30, 1999, to
grant a world-wide sub-licence for certain products to a public company
third party under common management. In exchange for the sub-licence, the
Company is to receive 260,000 shares, representing a 24% ownership interest
at the closing date of the agreement. The third party will also pay the
Company $250,000 ($112,500 paid) to reimburse the Company for research and
development costs incurred.
8. SEGMENTED INFORMATION
a. Cash
The Company maintains its cash balance in U.S., Canadian and Australian
currencies. At the year end, the U.S. dollar equivalents were as
follows.
1999 1998
---- ----
U.S. dollars $ 13,339 $ 19,965
Australian dollars 90,174 -
Canadian dollars - 3,290
--------------- ---------------
$ 103,513 $ 23,255
=============== ===============
<TABLE>
b. Geographic Segments
<CAPTION>
DOMESTIC FOREIGN TOTAL
<S> <C> <C> <C>
Net loss for the year $ 393,118 $ 137,456 $ 530,574
================ ================ ================
Assets - current $ 13,339 $ 90,174 $ 103,513
================ ================ ================
</TABLE>
The Company's activities are all in the ore industry segment of the
research and development of pharmaceutical products.
<PAGE>
EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT WITH MICRONETICS, INC.
<PAGE>
STOCK EXCHANGE AGREEMENT
THIS AGREEMENT is made this 20th day of June, 1998, by and between MICRONETICS
INC., a Utah corporation ("MKRO"), PRAXIS PHARMACEUTICALS INC., a Nevada
corporation ("PPI"), the shareholders of MKRO who are listed on Schedule A
attached hereto ("MKRO SHAREHOLDERS"), and the shareholders of PPI who are
listed on Schedule B attached hereto ("PPI SHAREHOLDERS").
WITNESSETH:
WHEREAS, the total authorized capital stock of PPI consists of 50,000,000 shares
of common stock, each with par value $0.001 par value, of which 5,000,000 shares
are issued and outstanding (the "PPI Shares"), and 1,000,000 shares of preferred
stock, each with $0.01 par value, of which none is issued and outstanding; and
WHEREAS, the total authorized capital stock of MKRO consists of 50,000,000
shares of $0.001 par value Common Stock of which 14,125,500 shares are issued
and outstanding; and
WHEREAS, MKRO desires to acquire all of the issued and outstanding capital stock
of PPI, or 5,000,000 shares of Common Stock ("PPI Shares") for 5,000,000
post-split shares of common stock of MKRO; and
WHEREAS, in reliance on and subject to the terms and conditions,
representations, warranties, covenants and agreements herein contained, PPI
desires to sell the PPI Shares to MKRO, and MKRO desires to purchase the PPI
Shares in a stock for stock exchange.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE
Section 1.1 AGREEMENT TO PURCHASE AND EXCHANGE. In reliance on and subject to
the terms, conditions, representations, warranties, covenants and agreements
herein contained, PPI shall assign, transfer and convey unto MKRO, and MKRO
shall purchase all of the PPI Shares for 5,000,000 post-split shares of MKRO in
a tax free reorganization.
Section 1.2 PURCHASE PRICE. The aggregate purchase price for the PPI Shares (the
"Purchase Price") shall be 5,000,000 post-split MKRO shares.
Section 1.3 CLOSING. The closing of the transaction contemplated in this
Agreement (the "Closing") shall take place at the offices of John Holt Smith of
Inman Steinberg Nye & Stone, 1925 Century Park East, Suite 1600, Los Angeles,
California 90067, on June 22, 1998, or at such other date, time or place as
shall be mutually acceptable to the parties (the "Closing Date").
Section 1.4 TRANSACTIONS AND DOCUMENTS AT AND AFTER CLOSING.
(a) At the Closing, PPI shall deliver to MKRO certificates representing
5,000,000 shares of PPI, duly endorsed for transfer.
1
<PAGE>
(b) At the Closing, MKRO shall deliver to PPI the shares of MKRO common stock
representing the Purchase Price for the PPI Shares, as set forth hereinabove,
and bearing an appropriate legend restricting transfer except as permitted under
Rule 144 of the Securities Act of 1933, as amended.
(c) From time to time and at any time, at MKRO's request, whether on or after
the Closing Date, and without further consideration, PPI shall, at its own
expense except as otherwise provided in this Agreement, execute and deliver such
further documents and instruments of conveyance and transfer and shall take such
further actions as may be necessary or convenient, in the reasonable opinion of
MKRO, to transfer and convey to MKRO, all of its right, title and interest in
and to the PPI Shares, free and clear of any lien or adverse claim.
(d) From time to time and at any time, at PPI's request, whether on or after the
Closing Date, and without further consideration, MKRO shall, at its own expense
except as otherwise provided in this Agreement, execute and deliver such further
documents and instruments of conveyance and transfer and shall take such further
actions as may be necessary or convenient, in the reasonable opinion of PPI, to
transfer and convey to PPI, all of its right, title and interest in and to the
MKRO Shares, free and clear of any lien or adverse claim.
2. ADDITIONAL AGREEMENTS.
Section 2.1 MKRO'S ACCESS AND INSPECTION. PPI has allowed and shall allow MKRO
and its authorized representatives full access during normal business hours from
and after the date hereof and prior to the Closing Date to all of PPI's
properties, books, contracts, commitments and records for the purpose of making
such investigation as MKRO may desire, and PPI shall furnish MKRO such
information concerning PPI's affairs as MKRO may request. PPI has caused and
shall cause PPI's personnel to assist MKRO in making such investigation and
shall cause the counsel, accountants, engineers and other non-employee
representatives of PPI to be reasonably available to MKRO for such purposes.
Section 2.2 PPI'S ACCESS AND INSPECTION. MKRO shall allow PPI and its authorized
representatives access during normal business hours from and after the date
hereof and prior to the Closing Date to such of MKRO's properties, books,
contracts, commitments and records as PPI may reasonably request for the purpose
of determinng the financial condition of MKRO, MKRO shall cause MKRO's personnel
to assist PPI in making such investigation and shall cause the counsel,
accountants, engineers and other non-employee representatives of MKRO to be
reasonably available to PPI for such purposes.
Section 2.3 COOPERATION. The parties shall cooperate fully with each other and
with their representatives, counsel and accountants in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, and will use their best efforts to consummate the transactions
contemplated hereby and fulfil their obligations hereunder.
Section 2.4 EXPENSES. All of the expenses incurred by MKRO in connection with
the authorization, preparation, execution and performance of this Agreement by
MKRO, including without limitation all fees and expenses of agents,
representatives, counsel and accountants for MKRO, shall be paid by MKRO and/or
its representatives. All expenses incurred by PPI in connection with the
authorization, preparation, execution and performance of this Agreement,
including without limitation all fees and expenses of agents, representatives,
counsel and accountants, shall be paid by PPI.
Section 2.5 BROKERS. Each party hereto jointly and severally represents and
warrants that no broker or finder has acted on its behalf in connection with
this Agreement or the transactions contemplated herein other than Type
Investments Holdings Ltd., Aspen Ridge Corporation and Satisfaction Trust, and
each party shall indemnify the other and save it harmless from any claim or
demand for commission or other
2
<PAGE>
compensation by any broker, finder or similar agent claiming to have been
employed by or on behalf of such party.
Section 2.6 MKRO SALE OF SUBSIDIARIES. Prior to the Closing, MKRO shall sell its
two subsidiaries, Information Management Systems Inc. and Telesolutions Inc., to
a private company owned or controlled by Juan Ledo in exchange for cancellation
of 4,445,000 shares of MKRO Common Stock in the name of Juan Ledo.
Section 2.7 REVERSE SPLIT. Prior to Closing, the Board of Directors of MKRO and
the requisite number of shareholders shall approve and effect a 1-to-118.45
reverse split of the Common Stock of MKRO.
3. REPRESENTATIONS AND WARRANTIES OF PPI.
PPI represents, covenants and warrants to MKRO as follows:
Section 3.1 CORPORATE EXISTENCE/STANDING/AUTHORITY. PPI is a corporation duly
organized, validly existing and in good standing under the laws of Nevada and
has the corporate power and authority to own, operate and lease its respective
properties, to carry on its business as now being conducted, and to enter into
this Agreement and to carry out the transactions contemplated hereby. PPI is
duly qualified to do business and is in good standing in each jurisdiction where
the failure to qualify would have a material adverse affect on it. PPI has
delivered to MKRO or its counsel true and correct copies of the articles of
incorporation and by-laws of PPI, together with any amendments thereto.
Section 3.2 SHARES OF STOCK. All issued and outstanding shares of capital stock
of PPI have been duly authorized and validly issued and are fully paid and
nonassessable. There is no subscription, option, warrant, call, right, contract,
commitment, understanding or arrangement relating to the issuance, sale or
transfer by PPI of any shares of its capital stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Section 3.3 AUTHORITY. PPI has the full right and authority to enter into and
fully perform this Agreement and all other agreements and documents to be
delivered to MKRO in connection herewith. All actions required to be taken by
PPI to authorize the execution, delivery and performance of this Agreement and
all other agreements and documents to be delivered in connection herewith have
been or will by the Closing Date be properly taken. This Agreement constitutes
the valid and binding obligation of PPI. Neither the execution and delivery of
this Agreement and all other agreements and documents executed in connection
herewith nor the consummation of the transactions contemplated hereby nor the
performance of this Agreement and all other agreements and documents executed in
connection herewith will (1) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws of PPI, (2) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance or the payment of
money required by, or result in the creation of any lien, security interest,
charge or encumbrance upon any of PPI's properties under any of the terms,
conditions or provisions of any loan agreement, note, bond, mortgage, indenture,
lease, agreement or other instrument or commitment to which PPI is a party, or
by which PPI or its properties may be bound or affected or (3) violate any
order, writ, injunction, decree, judgment, or ruling of any court or
governmental authority specifically applicable to PPI or any of its properties.
Section 3.4 NO VIOLATION. Except as set forth on Schedule 3.4, to the best
knowledge of PPI, PPI has complied with all rules, regulations, codes and laws
affecting its business and operations and is not in default under, or in
violation of, any provision of any federal, state or local rule, regulation,
code or law nor has PPI been given notice of any such default or violation.
3
<PAGE>
Section 3.5 LICENSES AND RIGHTS. PPI possesses all franchises, easements,
licenses, permits and other authorizations from governmental or regulatory
authorities and from all other persons or entities that are necessary to permit
it to engage in its business as presently conducted in and at all locations and
places where it is presently operating. Such franchises, licenses, permits and
other authorizations are set forth on Schedule 3.5.
Section 3.6 CONSENTS. Except as set forth on Schedule 3.6 hereto, no approval or
consent of any person, firm or other entity or body is required to be obtained
by PPI for the authorization of this Agreement or the consummation by PPI of the
transactions contemplated hereby.
Section 3.7 NO DEFAULTS. Except as set forth on Schedule 3.7, to the best
knowledge of PPI, no default (or event which with the passage of time or the
giving of notice or both would become a default) exists or is alleged to exist
with respect to the performance of any obligation of PPI under the terms of any
indenture, license, mortgage, deed of trust, lease, note, guaranty or other
contract or instrument, including, but not limited to, any contract set forth on
Schedule 3.17, to which PPI is a party or to which its assets are subject, or by
which it is otherwise bound, and no such default or event exists or is alleged
to exist with respect to the performance of any obligation of any other party
thereto.
Section 3.8 FINANCIAL STATEMENTS. MKRO has been or will be furnished with the
proforma financial statements (the "Financial Statements"). The Financial
Statements were prepared in accordance with generally accepted accounting
principles and present fairly and accurately the information set forth therein.
Section 3.9 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 3.9
hereto, since December 31, 1997, PPI has actively conducted its business in the
ordinary and regular course. Since that date, there has not been any material
adverse change in condition (financial or otherwise), results of operations,
assets, liabilities, properties, business or prospects of PPI nor is any event
threatened which would cause such an adverse change, nor has there occurred any
event or governmental regulation or order restricting the business of PPI.
Section 3.10 FACILITIES AND EQUIPMENT. The personal property owned or leased by
PPI at its facility for the operation of, or used in, its business is in its
possession or under its control and is adequate for the operation of such
business as presently conducted.
Section 3.11 TITLE TO ASSETS. Except as set forth on Schedule 3.11 or in the
Financial Statements, PPI has good, valid and marketable title to all of its
real property and leasehold estates and good and valid title to all of its other
assets (tangible and intangible), including, but not limited to, all leasehold
improvements and equipment and all other properties and assets reflected or
required to be reflected in the Financial Statements and all properties and
assets purchased or leased by it since the dates of such Financial Statements
(except for properties and assets so reflected or required to be reflected which
have been sold or otherwise disposed of in the ordinary course of business),
subject to no liens, pledges, encumbrances, mortgages, security interests,
charges or other similar restrictions of any nature whatsoever. Except as set
forth on Schedule 3.11, PPI enjoys peaceful and quiet possession of its
properties and assets pursuant to or by all of the deeds, bills of sale, leases,
licenses and other agreements under which it is operating its business.
Section 3.12 ABSENCE OF UNDISCLOSED LIABILITIES. PPI does not have any material
liabilities or obligations, either accrued or unaccrued, fixed or contingent,
which have not been reflected in the Financial Statements or set forth on
Schedule 3.12 hereof.
Section 3.13 LITIGATION. Schedule 3.13 hereof sets forth a list of all
administrative or judicial proceedings to which PPI is a party. Except as set
forth on Schedule 3.13, there is no action, suit, claim, demand, arbitration or
other proceeding, administrative or judicial, pending or, to the best knowledge
of PPI,
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threatened against or relating to PPI which, if adversely determined or
resolved, would materially and adversely affect the financial condition, results
of operations, business or prospects of PPI.
Section 3.14 PATENTS AND TRADEMARKS.
(a) Except as set forth on Schedule 3.14(a), PPI does not own, or operate under,
any patent, trademark or service mark or any applications therefor. All trade
names (including those whose use is limited to one or more states of the United
States) owned or used by PPI are listed on Schedule 3.14 hereof and, to the
extent indicated therein, have been duly registered with the states of the
United States or the corresponding offices of other countries. Except as set
forth on Schedule 3.14, PPI is the sole and exclusive owner of, or has the sole
and exclusive power with respect to, or has the sole and exclusive right to use,
the trade names specified on Schedule 3.14.
(b) Except as set forth on Schedule 3.14(b) hereof, PPI has not ever been
charged with infringement or violation of any adversely held trademark, trade
name or copyright.
(c) Except as set forth on Schedules 3.14(a) and 3.14(b), there are no claims or
demands of any other person, firm or corporation pertaining to the trade names,
copyright registrations or pending copyright registration applications, as the
case may be, listed on such schedules, and no proceedings have been instituted
which challenge the right of PPI in respect thereof.
Section 3.15 EMPLOYEE BENEFITS.
(a) Schedule 3.15 hereof contains a list of (i) each pension, profit sharing,
bonus, deferred compensation, or other retirement plan or arrangement for the
benefit of any employee or group of employees of PPI or any independent
contractors or group of independent contractor of PPI, (ii) each medical,
health, disability, insurance or other plan or arrangement of PPI, and (iii)
each employee stock option plan or other plan providing for the purchase of
shares of capital stock of PPI. All of such plans and arrangements of PPI are
referred to herein as the "employee benefit plans".
(b) The amounts reflected in the Financial Statements as liabilities or
contingent liabilities with respect to employee benefit plans have been
calculated in accordance and compliance with applicable law, including
accounting principles relating thereto.
(c) All of the employee benefit plans maintained by PPI (and each funding medium
which may be attendant thereto) are in compliance with applicable law and all
reporting and disclosure requirements under applicable laws and regulations, and
have been administered and operated in accordance with their respective
provisions and applicable law. There are no actions, suits or claims (other than
routine claims for benefits) pending with respect to the employee benefit plans.
(d) PPI has filed, published and disseminated all reports, documents, statements
and communications which are required to be filed, published or disseminated
under applicable law and the rules and regulations promulgated thereunder
relating to, and have timely made all modifications and amendments to, the
employee benefit plans.
Section 3.16 TAXES AND TAX RETURNS. PPI has duly filed all income, franchise and
other tax returns and reports required to be filed by it and has duly paid or
made provision for the payment of all taxes (including any interest or
penalties) which are due and payable pursuant to such returns. PPI has withheld
proper and accurate amounts from their employees' compensation in substantial
compliance with all withholding and similar provisions of applicable law. There
are and will hereafter be no tax deficiencies (including penalties and interest)
of any kind assessed against PPI with respect to any period ending on or before
the Closing Date.
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Section 3.17 CONTRACTS. PPI has heretofore furnished to MKRO or its counsel true
and complete copies of each document, and a written description of each oral
contact, set forth on Schedule 3.17 hereof. Schedule 3.17 is a true and complete
list of all contracts, understandings, commitments, arrangements and agreements
of the following types, including all amendments thereto which PPI is a party:
(a) Contracts relating to equipment purchases, or series of similar equipment
purchases from the same supplier, involving an expenditure of, or if in a
series, expenditures in the aggregate of, more than twenty-five thousand dollars
($25,000);
(b) Bonus, incentive, pension, profit-sharing, hospitalization, insurance,
deferred compensation, retirement, stock option or stock purchase plans or
similar plans providing employee benefits;
(c) Factoring, loan, note, financing or similar contracts with any lenders or
guarantees of undertakings to answer for the debts or defaults of another, or
any contracts encumbering title to any properties, involving in each case, or if
in a series involving the same lender, guarantor or property, as the case may
be, in the aggregate, at least twenty-five thousand dollars ($25,000);
(d) contracts for the acquisition or disposition of a business or substantially
all of the property, assets or capital stock or other securities of a business
or company under which there are continuing or unperformed obligations on the
part of any of the parties hereto, which contracts in each case involve at least
twenty-five thousand dollars($25,000);
(e) Conditional sales contracts, leases of personal property or contracts for
the purchase or sale of real or personal property, involving in each case at
least twenty-five thousand dollars ($25,000);
(f) Management or consulting contracts involving in each case, or with respect
to any individual in the aggregate, at least twenty-five thousand dollars
($25,000);
(g) contracts for the furnishing of services or products to or by PPI, involving
an expenditure in each case of at least twenty-five thousand dollars ($25,000);
(h) Royalty or licensing contracts or contracts requiring similar payments to
unrelated parties individually, or with respect to any unrelated party in the
aggregate, involving or which reasonably may in the future involve an amount in
excess of twenty-five thousand dollars ($25,000) annually;
(i) All employment agreements between PPI and any of its employees; and
(j) All agreements, contracts and commitments not listed on any other schedule
hereto which individually involve the payment of twenty-five thousand dollars
($25,000) or more.
Except as set forth on Schedule 3.17, all such contracts, understandings,
commitments, arrangements and agreements are in full force and effect.
Section 3.18 COLLECTIVE BARGAINING AGREEMENTS. Schedule 3.18 hereof is a list of
all collective bargaining agreements with any labor organization to which PPI is
a party. The relations of PPI with its employees are good and there are no
impending labor difficulties.
Section 3.19 INSURANCE. PPI is insured by insurers unaffiliated with PPI or PPI
with respect to its properties and the conduct of its business in such amounts
and against such risks as are generally and prudently maintained for comparable
businesses and consistent with its past practice.
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Section 3.20 REAL PROPERTY.
(a) Schedule 3.20 hereof sets forth a true and complete list of (i) all real
property owned by PPI and (ii) all real property leases to which PPI is a party.
PPI has heretofore furnished to MKRO or its counsel true and complete copies of
each written contract and a written description of each oral contract relating
to the list set forth on Schedule 3.20.
(b) With respect to the leases described on Schedule 3.20, except as set forth
on Schedule 3.20:
(i) All such leases are in writing and duly executed, and, where
required, witnessed, acknowledged and recorded to make them valid and binding
and in full force and effect for the full term thereof, and none have been
modified;
(ii) The rental set forth in each such lease is the actual rental being
paid, and there are no separate agreements or understandings with respect to the
same not set forth in Schedule 3.20;
(iii) The lessee under each such lease has the full right to exercise
any renewal option contained therein and upon due exercise will be entitled to
enjoy the use of the premises for the full term of such renewal option;
(iv) Upon performance by the lessee of the terms of each such lease,
the lessee has the full right to enjoy the use of the premises demised
thereunder for the full term thereof; and
(v) Except as set forth on Schedule 3.20, all security deposits
required by such leases have been made and no forfeiture with respect thereto
claimed, in whole or in part, by any of the lessors.
Section 3.21 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties made by PPI under this Agreement or in any certificate, schedule or
other document furnished or to be furnished to MKRO or its counsel pursuant
hereto, or in connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements of fact
contained therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF MKRO
MKRO represents, covenants and warrants to PPI as follows:
Section 4.1 CORPORATE EXISTENCE/STANDING/AUTHORITY. MKRO is a corporation duly
organized, validly existing and in good standing under the laws of Utah and has
the corporate power and authority to own, operate and lease its respective
properties, to carry on its business as now being conducted, and to enter into
this Agreement and to carry out the transactions contemplated hereby. MKRO is
duly qualified to do business and is in good standing in each jurisdiction where
the failure to qualify would have a material adverse affect on it. MKRO has
delivered to PPI or its counsel true and correct copies of the articles of
incorporation and by-laws of MKRO, together with any amendments thereto.
Section 4.2 SHARES OF STOCK. MKRO has authorized 50,000,000 shares of common
stock of which there are presently issued and outstanding 18,000,000 shares of
common stock. None of the shares of preferred stock are issued and outstanding.
All issued and outstanding shares of capital stock of MKRO have been duly
authorized and validly issued and are fully paid and nonassessable. There is no
subscription, option, warrant, call, right, contract, commitment, understanding
or arrangement relating to the issuance, sale or transfer by MKRO of any shares
of its capital stock, including any right of conversion or exchange under any
outstanding security or other instrument. There is on file with the NASD a
current, accurate and complete 15-c2(11) for MKRO and MKRO is currently trading
on the Bulletin Board under the Symbol "MKRO."
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Section 4.3 AUTHORITY. MKRO has the full right and authority to enter into and
fully perform this Agreement and all other agreements and documents to be
delivered to PPI in connection herewith. All actions required to be taken by
MKRO to authorize the execution, delivery and performance of this Agreement and
all other agreements and documents to be delivered in connection herewith have
been or will by the Closing Date be properly taken. This Agreement constitutes
the valid and binding obligation of MKRO. Neither the execution and delivery of
this Agreement and all other agreements and documents executed in connection
herewith nor the consummation of the transactions contemplated hereby nor the
performance of this Agreement and all other agreements and documents executed in
connection herewith will (1) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws of MKRO, (2) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance or the payment of
money required by, or result in the creation of any lien, security interest,
charge or encumbrance upon any of MKRO's properties under any of the terms,
conditions or provisions of any loan agreement, note, bond, mortgage, indenture,
lease, agreement or other instrument or commitment to which MKRO is a party, or
by which MKRO or its properties may be bound or affected or (3) violate any
order, writ, injunction, decree, judgment, or ruling of any court or
governmental authority specifically applicable to MKRO or any of its properties.
Section 4.4 NO VIOLATION. Except as set forth on Schedule 4.4, to the best
knowledge of MKRO, MKRO has complied with all rules, regulations, codes and laws
affecting its business and operations and is not in default under, or in
violation of, any provision of any federal, state or local rule, regulation,
code or law nor has MKRO been given notice of any such default or violation.
<PAGE>
Section 4.5 LICENSES AND RIGHTS. MKRO possesses all franchises, easements,
licenses, permits and other authorizations from governmental or regulatory
authorities and from all other persons or entities that are necessary to permit
it to engage in its business as presently conducted in and at all locations and
places where it is presently operating. Such franchises, licenses, permits and
other authorizations are set forth on Schedule 4.5.
Section 4.6 CONSENTS. Except as set forth on Schedule 4.6 hereto, no approval or
consent of any person, firm or other entity or body is required to be obtained
by MKRO for the authorization of this Agreement or the consummation by MKRO of
the transactions contemplated hereby.
Section 4.7 NO DEFAULTS. Except as set forth on Schedule 4.7, to the best
knowledge of MKRO, no default (or event which with the passage of time or the
giving of notice or both would become a default) exists or is alleged to exist
with respect to the performance of any obligation of MKRO under the terms of any
indenture, license, mortgage, deed of trust, lease, note, guaranty or other
contract or instrument, including, but not limited to, any contract set forth on
Schedule 4.17, to which MKRO is a party or to which its assets are subject, or
by which it is otherwise bound, and no such default or event exists or is
alleged to exist with respect to the performance of any obligation of any other
party thereto.
Section 4.8 FINANCIAL STATEMENTS. PPI has been or will be furnished with
statement of liabilities of MKRO for the period ended April 30, 1998, and its
statements of earnings for the fiscal year then ended (the "Financial
Statements") as set forth on Schedule 4.8 attached hereto. The Financial
Statements were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods and as of their date
of issuance were or will be true, correct and complete in all material respects
and present fairly and accurately the information set forth therein.
Section 4.9 ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule 4.9
hereto, since December 31, 1997, MKRO has actively conducted its business in the
ordinary and regular course. Since that date, there has not been any material
adverse change in the condition (financial or otherwise), results of
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operations, assets, liabilities, properties, business or prospects of MKRO nor
is any event threatened which would cause such an adverse change, nor has there
occurred any event or governmental regulation or order restricting the business
of MKRO.
Section 4.10 FACILITIES AND EQUIPMENT. The personal property owned or leased by
MKRO at its facility for the operation of, or used in, its business is in its
possession or under its control and is adequate for the operation of such
business as presently conducted.
Section 4.11 TITLE TO ASSETS. Except as set forth in Schedule 4.11 or in the
Financial Statements, MKRO has good, valid and marketable title to all of its
real property and leasehold estates and good and valid title to all of its other
assets (tangible and intangible), including, but not limited to, all leasehold
improvements and equipment and all other properties and assets reflected or
required to be reflected in the Financial Statements and all properties and
assets purchased or leased by it since the dates of such Financial Statements
(except for properties and assets so reflected or required to be reflected which
have been sold or otherwise disposed of in the ordinary course of business),
subject to no liens, pledges, encumbrances, mortgages, security interests,
charges or other similar restrictions of any nature whatsoever. Except as set
forth on Schedule 4.11, MKRO enjoys peaceful and quiet possession of its
properties and assets pursuant to or by all of the deeds, bills of sale, leases,
licenses and other agreements under which it is operating its business.
Section 4.12 ABSENCE OF UNDISCLOSED LIABILITIES. MKRO does not have any material
liabilities or obligations, either accrued or unaccrued, fixed or contingent,
which have not been reflected in the Financial Statements or set forth on
Schedule 4.12 hereof, or which exceed in the aggregate $25,000.
Section 4.13 LITIGATION. Schedule 4.13 hereof sets forth a list of all
administrative or judicial proceedings to which MKRO is a party. Except as set
forth on Schedule 4.13, there is no action, suit, claim, demand, arbitration or
other proceeding, administrative or judicial, pending or, to the best knowledge
of MKRO, threatened against or relating to MKRO which, if adversely determined
or resolved, would materially and adversely affect the financial condition,
results of operations, business or prospects of MKRO.
Section 4.14 PATENTS AND TRADEMARKS.
(a) Except as set forth on Schedule 4.14(a), MKRO does not own, or operate
under, any patent, trademark or service mark or any applications therefor. All
trade names (including those whose use is limited to one or more states of the
United States) owned or used by MKRO are listed on Schedule 4.14 hereof and, to
the extent indicated therein, have been duly registered with the states of the
United States or the corresponding offices of other countries. Except as set
forth on Schedule 4.14, MKRO is the sole and exclusive owner of, or has the sole
and exclusive power with respect to, or has the sole and exclusive right to use,
the trade names specified on Schedule 4.14.
(b) Except as set forth on Schedules 4.14(b) hereof, MKRO has not ever been
charged with infringement or violation of any adversely held trademark, trade
name or copyright.
(c) Except as set forth on Schedules 4.14(a) and 4.14(b), there are no claims or
demands of any other person, firm or corporation pertaining to the trade names,
copyright registrations or pending copyright registration applications, as the
case may be, listed on such schedules, and no proceedings have been instituted
which challenge the right of MKRO in respect thereof.
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<PAGE>
Section 4.15 EMPLOYEE BENEFITS.
(a) Schedule 4.15 hereof contains a list of (i) each pension, profit sharing,
bonus, deferred compensation, or other retirement plan or arrangement for the
benefit of any employee or group of employees of MKRO or any independent
contractors or group of independent contractor of MKRO, (ii) each medical,
health, disability, insurance or other plan or arrangement of MKRO, and (iii)
each employee stock option plan or other plan providing for the purchase of
shares of capital stock of MKRO. All of such plans and arrangements of MKRO are
referred to herein as the "employee benefit plans".
(b) The amounts reflected in the Financial Statements as liabilities or
contingent liabilities with respect to employee benefit plans have been
calculated in accordance and compliance with applicable law, including
accounting principles relating thereto.
(c) All of the employee benefit plans maintained by MKRO (and each funding
medium which may be attendant thereto) are in compliance with applicable law and
all reporting and disclosure requirements under applicable laws and regulations,
and have been administered and operated in accordance with their respective
provisions and applicable law. There are no actions, suits or claims (other than
routine claims for benefits) pending with respect to the employee benefit plans.
(d) MKRO has filed, published and disseminated all reports, documents,
statements and communications which are required to be filed, published or
disseminated under applicable law and the rules and regulations promulgated
thereunder relating to, and have timely made all modifications and amendments
to, the employee benefit plans.
Section 4.16 TAXES AND TAX RETURNS. MKRO has duly filed all income, franchise
and other tax returns and reports required to be filed by it and has duly paid
or made provision for the payment of all taxes (including any interest or
penalties) which are due and payable pursuant to such returns. MKRO has withheld
proper and accurate amounts from their employees' compensation in substantial
compliance with all withholding and similar provisions of applicable law. There
are and will hereafter be no tax deficiencies (including penalties and interest)
of any kind assessed against MKRO with respect to any period ending on or before
the Closing Date.
Section 4.17 CONTRACTS. MKRO has heretofore furnished to PPI or its counsel true
and complete copies of each document, and a written description of each oral
contact set forth on Schedule 4.17 hereof. Schedule 4.17 is a true and complete
list of all contracts, understandings, commitments, arrangements and agreements
of the following types, including all amendments thereto to which MKRO is a
party:
(a) Contracts relating to equipment purchases, or series of similar equipment
purchases from the same supplier, involving an expenditure of, or if in a
series, expenditures in the aggregate of, more than $25,000;
(b) Bonus, incentive, pension, profit-sharing, hospitalization, insurance,
deferred compensation, retirement, stock option or stock purchase plans or
similar plans providing employee benefits;
(c) Factoring, loan, note, financing or similar contracts with any lenders or
guarantees of undertakings to answer for the debts or defaults of another, or
any contracts encumbering title to any properties, involving in each case, or if
in a series involving the same lender, guarantor or property, as the case may
be, in the aggregate, at least $25,000;
(d) Contracts for the acquisition or disposition of a business or substantially
all of the property, assets or capital stock or other securities of a business
or company under which there are continuing or unperformed obligations on the
part of any of the parties hereto, which contracts in each case involve at least
$25,000;
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(e) Conditional sales contracts, leases of personal property or contracts for
the purchase or sale of real or personal property, involving in each case at
least twenty-five thousand dollars ($25,000);
(f) Management or consulting contracts, involving in each case, or with respect
to any individual in the aggregate, at least twenty-five thousand
dollars($25,000);
(g) Contracts for the furnishing of services or products to or by MKRO,
involving an expenditure in each case of at least twenty-five thousand dollars
($25,000);
(h) Royalty or licensing contracts or contracts requiring similar payments to
unrelated parties individually, or with respect to any unrelated party in the
aggregate, involving or which reasonably may in the future involve an amount in
excess of twenty-five thousand dollars ($25,000) annually;
(i) All employment agreements between MKRO and any of its employees; and
(j) All agreements, contracts and commitments not listed on any other schedule
hereto which individually involve the payment of twenty-five thousand dollars
($25,000) or more.
Except as set forth on Schedule 4.17, all such contracts, understandings,
commitments, arrangements and agreements are in full force and effect.
Section 4.18 COLLECTIVE BARGAINING AGREEMENTS. Schedule 4.18 hereof is a list of
all collective bargaining agreements with any labor organization to which MKRO
is a party. The relations of MKRO with its employees are good and there are no
impending labor difficulties.
Section 4.19 INSURANCE. MKRO is insured by insurers unaffiliated with MKRO or
MKRO with respect to its properties and the conduct of its business in such
amounts and against such risks as are generally and prudently maintained for
comparable businesses and consistent with its past practice.
Section 4.20 REAL PROPERTY.
(a) Schedule 4.20 hereof sets forth a true and complete list of (i) all real
property owned by MKRO and (ii) all real property leases to which MKRO is a
party. MKRO has heretofore furnished to PPI or its counsel true and complete
copies of each written contract and a written description of each oral contract
relating to the list set forth on Schedule 4.20.
(b) With respect to the leases described on Schedule 4.20, except as set forth
on Schedule 4.20:
(i) All such leases are in writing and duly executed, and, where
required, witnessed, acknowledged and recorded to make them valid and binding
and in full force and effect for the full term thereof, and none have been
modified;
(ii) The rental set forth in each such lease is the actual rental being
paid, and there are no separate agreements or understandings with respect to the
same not set forth in Schedule 4.20;
(iii) The lessee under each such lease has the full right to exercise
any renewal option contained therein and upon due exercise will be entitled to
enjoy the use of the premises for the full term of such renewal option;
(iv) Upon performance by the lessee of the terms of each such lease,
the lessee has the full right to enjoy the use of the premises demised
thereunder for the full term thereof; and
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(v) Except as set forth on Schedule 4.20, all security deposits
required by such leases have been made and no forfeiture with respect thereto
claimed, in whole or in part, by any of the lessors.
Section 4.20 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties made by MKRO under this Agreement or in any certificate, schedule or
other document furnished or to be furnished to PPI or its counsel pursuant
hereto, or in connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements of fact
contained therein not misleading.
5. COVENANTS AND TRANSACTIONS PRIOR TO CLOSING
Section 5.1 CONDUCT AND TRANSACTIONS OF PPI PRIOR TO THE CLOSING. Between the
date of this Agreement and the Closing, the executive officers and board of
directors of PPI shall retain full control of the management and business of
their respective businesses. In order to assure protection and preservation of
PPI's business as well as PPI's performance of its obligations under and related
to this Agreement, PPI agrees that from the date of this Agreement up to and
including the Closing:
(a) PPI shall give MKRO, its counsel, accountants, appraisers and other
representatives or experts retained by MKRO full access on reasonable notice to
all the premises and books, records and personnel of PPI during normal business
hours and cause PPI to furnish to MKRO such financial and operating data and
other information with respect to the business and properties of PPI as MKRO may
from time to time reasonably request. In the event of termination of this
Agreement for any reason, MKRO will return all documents, work papers and other
materials obtained from PPI or PPI and will not further disclose to third
parties any confidential information obtained by it pursuant hereto.
(b) PPI shall use all reasonable efforts to (i) preserve intact the present
business organization and personnel of PPI, (ii) preserve the present goodwill
and advantageous relationships of PPI with all persons having business dealings
with PPI, and (iii) preserve and maintain in force all licenses, certificates,
leases, contracts, permits, registrations, franchises, confidential information,
trade names and copyrights, and applications for any of same, bonds and other
similar rights of PPI. Except as otherwise provided in this Agreement, PPI shall
refrain from entering into any new employment or consulting agreements with any
of its present officers, management personnel or consultants, or any other
employment or consulting agreement with any other person, not terminable by PPI
on less than thirty (30) days' notice. PPI shall maintain in force all property,
casualty, crime, life, directors, officers and other forms of insurance and
bonds which it presently carries and, except with the written consent of MKRO,
no cancellation or assignment of existing insurance coverage will be effected by
PPI.
(c) MKRO shall operate its business only in the usual, regular and ordinary
course and manner, and, except with the written consent of MKRO, shall refrain
from (i) selling or agreeing to sell any capital stock, or (ii) except in the
ordinary course of business, encumbering or mortgaging any property or assets or
terminating or modifying any lease or incurring any obligation (contingent or
otherwise).
(d) PPI or PPI shall not discuss or negotiate with any third party a possible
sale of all or any part of the capital shares or assets of PPI, nor provide any
information to any third party with respect thereto, other than such information
which is provided in the ordinary course of the business operation of PPI to
third parties, provided PPI has no reason to believe that such information may
be utilized to evaluate a possible sale of the capital shares or assets of PPI.
(e) PPI will exert its best efforts to fulfill in a timely manner all objectives
and conditions to permit consummation of the transactions as contemplated by
this Agreement and execute and deliver to MKRO any and all documents necessary,
in the reasonable opinion of its counsel, to consummate the transactions
contemplated by this Agreement.
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(f) PPI acknowledges that at the Closing MKRO will transfer to Juan Ledo or
designee, all assets subject to liabilities and/or all stock of Information
Management Systems, Inc., its wholly owned subsidiary, in exchange for
cancellation of 4,445,000 shares of common stock of MKRO standing in his name.
Section 5.2 CONDUCT BY MKRO PRIOR TO CLOSING. Between the date of this Agreement
and the Closing Date, MKRO shall use its best efforts to fulfill in a timely
manner all objectives and conditions to permit consummation of the transactions
as contemplated by this Agreement and execute and deliver to PPI any and all
documents necessary, in the reasonable opinion of its counsel, to consummate the
transactions contemplated by this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF MKRO
The obligations of MKRO under this Agreement are, at its option, subject to
satisfaction of the following conditions at or prior to the Closing:
Section 6.1 REPRESENTATIONS OF PPI. The representations and warranties of PPI
set forth in this Agreement shal be true and complete in all material respects
on and as of the Closing to the same extent and with the same force and effect
as if made on such date, except as expressly provided to the contrary in this
Agreement.
Section 6.2 CONSENTS. All necessary approvals or consents shall have been
obtained from any and all federal departments and agencies and from all other
commissions, boards, agencies and from any other person, firm or entity whose
approval or consent is necessary to the consummation of the transactions
contemplated by this Agreement.
Section 6.3 PERFORMANCE BY PPI. PPI shall have duly performed all obligations,
covenants and agreements undertaken by them herein and complied with all terms
and conditions applicable to them hereunder to be performed and complied with
prior to the Closing.
Section 6.4 DOCUMENTS TO BE DELIVERED TO MKRO. MKRO shall have received:
(a) A certificate, dated as of the Closing and executed by PPI certifying as to
the fulfillment of the matters contained in Sections 6.1, 6.2 and 6.3;
(b) True and complete copy of the certificates of incorporation of PPI,
certified by the Secretary of State of Nevada, and of the by-laws of PPI,
together with all amendments thereto, certified by the Secretary of PPI;
(c) Good standing certificate for PPI, certified by the Secretary of State of
Nevada;
(d) Certificates representing 5,000,000 of the PPI Shares, duly endorsed for
transfer, and PPI shall have received the MKRO Shares, duly endorsed for
transfer. All such shares shall be subject to Rule 144 legend.
(e) The Employment Agreement duly executed by the employees listed on, in the
form of Schedule 2.6 hereof.
Section 6.5 SUITS. No suit, action or other proceeding shall be a threatened or
pending before any court or governmental agency in which it will be or it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement or which is likely to materially and adversely
affect the financial condition, results of operations, business or prospects of
PPI.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PPI
The obligations of PPI under this Agreement are, at its option, subject to
satisfaction of the following conditions at or prior to the initial Closing:
Section 7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of MKRO set forth in this Agreement shall be true and complete in all material
respects on and as of the Closing to the same extent and with the same force and
effect as if made on such date, except as affected by the transactions
contemplated by this Agreement.
Section 7.2 CONSENTS. All necessary approvals or consents shall have been
obtained from any and all federal departments and agencies and from all other
commissions, boards, agencies and from any other person, firm or entity whose
approval or consent is necessary to the consummation of the transactions
contemplated by this Agreement.
Section 7.3 PERFORMANCE BY MKRO. MKRO shall have duly performed all obligations,
covenants and agreements undertaken by it herein and complied with all the terms
and conditions applcable to them hereunder to be performed or complied with
prior to the Closing.
Section 7.4 DOCUMENTS TO BE DELIVERED TO PPI. PPI shall have received:
(a) A certificate, dated as of the Closing, and executed by an officer of MKRO,
certifying as to the fulfillment of the matters contained in Sections 7.1, 7.2
and 7.3;
(b) Certificates representing the MKRO Shares, duly endorsed for transfer, and
MKRO shall have received 5,000,000 of the PPI Shares, duly endorsed for
transfer.
(c) True and complete copies of the certificate of incorporation of MKRO,
certified by the Secretary of State of Utah, and of the by-laws of MKRO,
together with all amendments thereto, certified by the Secretary of MKRO;
(d) Good standing certificate for MKRO, certified by the Secretary of State of
the domicile of each entity; and
(e) True and correct copies of Minutes of the Board of Directors authorizing the
officers of MKRO to consummate the transaction.
Section 7.5 SUITS. No suit, action or other proceeding shall be threatened or
pending before any court or governmental agency in which it will be or it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement.
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<PAGE>
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
Section 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding the
closing of the transactions contemplated by this Agreement, or any investigation
made by or on behalf of PPI or MKRO, the representations and warranties of PPI
or MKRO contained in this Agreement or in any certificate, schedule, chart,
list, letter, compilation or other document delivered pursuant hereto, shall
survive the Closing for a period of one (1) year; provided, however, that as to
any breach of, or misstatement in, any such representation or warranty as to
which one party has given notice to the other on or prior to the expiration of
such one (1) year period, the same shall continue to survive beyond said period,
but only as to the matters contained in such notice.
Section 8.2 PPI'S INDEMNIFICATION. PPI covenants and agrees to indemnify and
save harmless MKRO and its directors, officers, employees and agents from any
and all costs, expenses, losses, damages and liabilities incurred or suffered
directly or directly by any of them (including reasonable legal fees and costs)
proximately resulting from or attributable to the breach of, or misstatement in,
any one or more of the representations or warranties of PPI made in or pursuant
to this Agreement.
Section 8.3 MKRO'S INDEMNIFICATION. MKRO covenants and agrees to indemnify and
save harmless PPI and its directors, officers, employees and agents from any and
all costs, expenses, losses, damages and liabilities incurred or suffered by any
of them (including reasonable legal fees and costs) proximately resulting from
or attributable to the breach of, or misstatement in, any one or more of the
representations or warranties of MKRO made in or pursuant to this Agreement.
Section 8.4 DEFENSE AGAINST ASSERTED CLAIMS. If any claim or assertion of
liability is made or asserted by a third party against a party indemnified
pursuant to this Section 8 ("Indemnified Party") based on any liability or
absence of right which, if established, would constitute a matter for which the
Indemnified Party would be entitled to indemnification by another party hereto
("the Indemnifying Party") the Indemnified Party shall with reasonable
promptness give to the Indemnifying Party written notice of the claim or
asserting of liability and request the Indemnifying Party to defend the same.
Failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of any liability which the Indemnifying Party might have to the
Indemnified Party unless such failure materially prejudices the Indemnifying
Party's position. The Indemnifying Party shall have the right to defend against
such liability or assertion, in which event the Indemnifying Party shall give
written notice to the Indemnified Party of the acceptance of defense of such
claim and the identity of counsel selected by the Indemnifying Party with
respect to such matters. The Indemnified Party shall be entitled to participate
with the Indemnifying Party in such defense and also shall be entitled at its
option to employ separate counsel for such defense at the expense of the
Indemnified Party. In the event the Indemnifying Party does not accept the
defense of the matter as provided above or in the event that the Indemnifying
Party or its counsel fails to use reasonable care in maintaining such defense,
the Indemnified Party shall have the full right at its option to defend against
the liability or assertion and to employ counsel for such defense at the expense
of the Indemnifying Party. All parties hereto will cooperate with each other in
the defense of any such action and the relevant records of each shall be
available to the others with respect to such defense.
9. ASSIGNMENT, THIRD PARTIES, BINDING EFFECT
The rights under this Agreement shall not be assignable nor the duties delegable
by any party without the written consent of all parties hereto having been
obtained thereto. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person or entity, other than the parties hereto, and
their successors in interest, any rights or remedies under or by reason of this
Agreement unless so stated expressly to the Contrary. All covenants, agreements,
representations, and warranties of the parties contained herein shall be binding
upon and inure to the benefit of MKRO and PPI and their respective successors
and permitted assigns.
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10. ABANDONMENT
In the event the transactions contemplated hereby are terminated or abandoned by
mutual agreement or the parties hereto, there shall be no liability on the part
of any of the parties by reason of such termination or abandonment.
11. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered or
deposited in the United States mail, certified or registered, return receipt
requested, postage prepaid, addressed to the parties at the following addresses
(or at such other address as shall be given in writing by any party to the
other) as follows:
To MKRO: Attn: SAM J BOYER
--------------------
Micronetics Inc.
14148 Magnolia Boulevard
Sherman Oaks, California 91423
Telephone: 818.784.6890 Facsimile: 818.784.6552
With a copy to: John Holt Smith, Esq.
Inman Steinberg Nye & Stone
1925 Century Park East #1600
Los Angeles, California 90067
Telephone: 310.274.7111 Facsimile: 310.274.8889
To PPI: Attn: ____________________
Praxis Pharmaceuticals Inc.
Northwestern Building
314-1008 Homer Boulevard
Vancouver, B.C. 6VB 2X1
Telephone: 604.718.6833 Facsimile: 604.718.6828
With a copy to: Lori Ann Fujioka, Esq.
Dill Dill Carr Stonbraker & Hutchings, P.C.
455 Sherman Street, Suite 300
Denver, Colorado 80203
Telephone: 303.777.3737 Facsimile: 303.777.3823
12. REMEDIES NOT EXCLUSIVE
No remedy conferred by any of the provisions of this Agreement is intended to be
exclusive of any other remedy, and each and every remedy shall be cumulative and
shall be in addition to every remedy given hereunder or now or hereafter
existing, at law or in equity by statute or otherwise. The election of any one
or more remedies by MKRO or PPI shall not constitute a waiver of the right to
pursue other available remedies.
13. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together shall constitute one and
the same instrument.
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14. CAPTIONS AND SECTION HEADINGS
Captions and section headings used herein are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
15. WAIVERS
Any failure by any of the parties hereto to comply with all of the obligations,
agreements or conditions set forth herein may be waived by the other party or
parties, provided, however that any such waiver shall not be deemed a waiver of
any other obligation, agreement or condition contained herein.
16. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties. There are
not and shall not be any verbal statements, representations, warranties,
undertakings or agreements between the parties, and this Agreement may not be
amended or modified in any respect except by a written instrument signed by the
parties hereto.
17. APPLICABLE LAW
This Agreement shall be governed and construed in accordance with the laws of
the State of California.
IN WITNESS WHEREOF, the parties have duly executed the Agreement as of the dated
first above written.
MICRONETICS INC.
By /S/JUAN G. LEDO
Name JUAN G. LEDO
Title PRESIDENT
PRAXIS PHARMACEUTICALS INC.
By
Name
Title
17
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION, AS AMENDED AND RESTATED
<PAGE>
State of Utah Co#096095
Department of Commerce
Division of Corporations and Commerical Code
I hereby certify that the foregoing has been filed
and approved on the 8th day of Nov 1999
in the office of this Division and hereby issue
this Certificate thereof
Examiner /s/Unknown Date 11/18/99
UTAH DIV OF
CORPORATIONS AND UCC
'99 NOV -8 AM : 51
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
PRAXIS PHARMACEUTICALS INC.
The undersigned, being the Secretary of Praxis Pharmaceuticals Inc. a
Utah corporation (hereinafter referred to as the "Corporation"), having been
authorized to execute these Articles of Amendment and Restatement, hereby
certifies to the Division of Corporations and Commercial Code of Utah that:
FIRST: The Corporation desires to amend and restate its Articles of
Incorporation as currently in effect as hereinafter provided.
SECOND: The provisions set forth in these Amended and Restated Articles
of Incorporation supersede the original Articles of Incorporation and all
amendments thereto. These Amended and Restated Articles of Incorporation
correctly set forth the provisions of the Articles of Incorporation, as amended
to the date hereof.
THIRD: The Board of Directors duly adopted and declared the
advisability of the Amended and Restated Articles of Incorporation.
FOURTH: Shareholders of the Corporation holding 6,211,503 of the
11,322,209 outstanding shares (54.86%) of the Corporation's common stock
approved and adopted the amendments contained in the Amended and Restated
Articles of Incorporation at a shareholders' meeting duly noticed and held on
August 30, 1999. The number of votes cast for the amendments were sufficient for
approval. There are no other classes of capital stock of the Corporation.
FIFTH: None of the amendments provides for an exchange,
reclassification, or cancellation of issued shares.
SIXTH: The Articles of Incorporation of the Corporation, as amended and
restated, are set forth on Exhibit A attached hereto.
/S/ DAVID STADNYK
David Stadnyk, Secretary
ACKNOWLEDGMENT
State/Province of British Columbia
County/City of Vancouver
On September 20, 1999, personally appeared before me, a Notary Public, David
Stadnyk, who acknowledged that he executed the above instrument.
(Notary Stamp or Seal) /S/ DAVID J. COWAN
Notary Public
David J. Cowan
Barrister & Solicitor
800 o 885 West Georgia Street
Vancouver, B.C. V6C 3H1
<PAGE>
Exhibit A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
PRAXIS PHARMACEUTICALS INC.
ARTICLE I
NAME
The name of the corporation is Praxis Pharmaceuticals Inc.
ARTICLE II
DURATION
The duration of this corporation is perpetual.
ARTICLE III
PURPOSES AND POWERS
The purpose or purposes for which this corporation is organized is to
engage in any lawful act or activity for which corporations may be organized
under the Utah Business Corporation Act.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
SHARES. The amount of total authorized capital stock which the
Corporation shall have authority to issue is 50,000,000 shares of common stock,
each with $0.001 par value, and 10,000,000 shares of preferred stock, each with
$0.001 par value.
COMMON STOCK. After the requirements with respect to preferential
dividends on the preferred stock, if any, shall have been met, and after the
Corporation shall have complied with all the requirements, if any, with respect
to the setting aside of sums as sinking funds or redemption or purchase
accounts, then, and not otherwise, the holders of the common stock shall be
entitled to receive such dividends as may be declared from time to time by the
Board of Directors of the Corporation.
After distribution in full of the preferential amount, if any, to be
distributed to the holders of the preferred stock in the event of voluntary or
involuntary liquidation, distribution, or sale of assets, dissolution, or
winding-up of the Corporation, the holders of the common stock shall be entitled
to receive all of the remaining assets of the Corporation, tangible and
intangible, of whatever kind available for distribution to shareholders, ratably
in proportion to the number of shares of the common stock held by them
respectively.
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Except as may otherwise be required by law, each holder of the common
stock shall have one vote in respect of each share of the common stock held by
such holder on all matters voted upon by the shareholders.
PREFERRED STOCK. To the fullest extent permitted by the laws of the
State of Utah (currently set forth in Section 16-10a-602 of the Utah Business
Corporation Act), as the same now exists or may hereafter be amended or
supplemented, the Board of Directors may fix and determine the designations,
rights, preferences or other variations of each class or series within each
class of capital stock of the Corporation.
ARTICLE V
DIRECTORS
The Directors are hereby granted the authority to do any act on behalf
of the Corporation as may be allowed by law. Any action taken in good faith
shall be deemed appropriate and in each instance where the Utah Business
Corporation Act provides that the Directors may act in certain instances where
the Articles of Incorporation so authorize, such action by the Directors, shall
be deemed to exist in these Articles and the authority granted by said law shall
be imputed hereto without the same specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9)
directors, as determined, from time to time, by the then existing Board of
Directors.
ARTICLE VI
CUMULATIVE VOTING
Cumulative voting shall not be permitted in the election of directors.
ARTICLE VII
LIMITATION ON DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the Corporation or to its shareholders for monetary
damages otherwise existing for (i) the amount of a financial benefit received by
a director to which he is not entitled; (ii) an intentional infliction of harm
on the Corporation or its shareholders; (iii) a violation of Section 16-10a-842
of the Utah Business Corporation Act; or (iv) an intentional violation of
criminal law. If the Utah Business Corporation Act is hereafter amended to
eliminate or limit further the liability of a director, then, in addition to the
elimination and limitation of liability provided by the preceding sentence, the
liability of each director shall be eliminated or limited to the fullest extent
permitted by the Utah Business Corporation Act as so amended. Any repeal or
modification of this Article shall not adversely affect any right or protection
of a director of the Corporation under this Article, as in effect immediately
A-2
<PAGE>
prior to such repeal or modification, with respect to any liability that would
have accrued, but for this Article, prior to such repeal or modification.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person, and the estate and
personal representative of any such person, against all liability and expense
(including attorneys' fees) incurred by reason of the fact that he is or was a
director or officer of the Corporation or, while serving as a director or
officer of the Corporation, he is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of, or in any similar managerial or fiduciary position of, another
domestic or foreign corporation or other individual or entity or of an employee
benefit plan. The Corporation shall also indemnify any person who is serving or
has served the Corporation as director, officer, employee, fiduciary, or agent,
and that person's estate and personal representative, to the extent and in the
manner provided in any bylaw, resolution of the shareholders or directors,
contract, or otherwise, so long as such provision is legally permissible.
ARTICLE IX
SHAREHOLDERS
PREEMPTIVE RIGHTS. Shareholders shall not have pre-emptive rights to
acquire unissued shares of the stock of this Corporation.
NONASSESSABLE STOCK. The capital stock, after the amount of the
subscription price has been paid in, shall not be subject to assessment to pay
the debts of said Corporation, whether issued for money, services, property or
otherwise. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
ACTION WITHOUT MEETING. Subject to the provisions of the Utah Business
Corporation Act, now contained in Section 16-10a-704, any action which may be
taken at any annual or special meeting of shareholders may be taken without a
meeting and without prior notice, if one or more consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take the action at a meeting at which all shares entitled to vote
thereon were present and voted.
ARTICLE X
REGISTERED AGENT AND OFFICE
The street address of the current registered office of the Corporation
is 50 West Broadway, Salt Lake City, Utah 84101, and the name of the initial
registered agent at that address is CT Corporation System.
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<PAGE>
EXHIBIT 3.2
BYLAWS
<PAGE>
EXHIBIT "A"
BY-LAWS
OF
WIZARD
ARTICLE I. OFFICES
The principal office of the corporation in the State of Utah
shall be located in Salt Lake City, Utah. The corporation may have such other
offices, either within or without the State of Utah, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
The registered office of the Corporation required by the Utah
Business Corporation Act to be maintained in the State of Utah may be, but need
not be, identical with the principal office in the State of Utah, and the
address of the registered office may be changed from time to time by the Board
of Directors.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
shareholders shall be held on such date and at such time as the Board of
Directors shall determine which is within 90 days after the end of its fiscal
year, beginning with the year next following the year of its incorporation, for
the purpose of electing Directors and for the transaction of such other business
as may come before the meeting. The day fixed for the annual meeting shall not
be a legal holiday in the State of Utah. If the election of Directors shall not
be held on the day designated herein or any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders as soon thereafter as
conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the President or by the Board of Directors, and shall
be called by the President at the request of the holders of not less than
one-tenth of all outstanding shares of the Corporation entitled to vote at the
meeting.
<PAGE>
SECTION 3. PLACE OF MEETING. The Board of Directors may
designate any place, either within or without the State of Utah, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Utah, as
the place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
office of the corporation in the State of Utah.
SECTION 4. NOTICE OF MEETING. Written notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall, unless otherwise
prescribed by statute, be delivered not less than ten nor more than fifty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, or the Secretary, or the persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, fifty days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than fifty days and, in case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock
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<PAGE>
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
SECTION 6. VOTING LISTS. The officer or agent having charge of
the stock transfer books for shares of the corporation shall make a complete
list of the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a
shareholder may vote in person or by proxy exectued in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the secretary of the corporation before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Subject to the provisions of the
Articles of Incorporation, each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted
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<PAGE>
to a vote at a meeting of shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares
outstanding in the name of another corporation may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Neither shares of its own stock held by the corporation, nor
those held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 11. INFORMAL ACTION BY SHAREHOLDERS. Any action
required to be taken at a meeting of the shareholders, or any action which may
be taken at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be not less than three (3) nor more than nine
(9) as determined, from time to time, by the Board of Directors. The number of
original directors shall be as set forth in the Articles of Incorporation. Each
Director shall
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<PAGE>
hold office until the next annual meeting of shareholders and until his
successor shall have been elected and qualified. Directors need not be residents
of the State of Utah or shareholders of the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this by-law immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Utah, for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
Directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Utah, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be
given at least two days previously thereto by written notice delivered
personally or mailed to each Director at his business address, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, so addressed, with postage thereon prepaid. If notice be
given by telegram such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. Any Director may waive notice of any
meeting. The attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 6. QUORUM. A majority of the number of Directors fixed
by Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action which may
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<PAGE>
be taken at a meeting of the directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
Directors though less than a quorum of the Board of Directors. A Director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of Directors may be filled by election by the Board of Directors for
a term of office continuing only until the next election of Directors by the
shareholders.
SECTION 9. COMPENSATION. By resolution of the Board of
Directors, each Director may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a stated salary as director
or a fixed sum for attendance at each meeting of the Board of Directors or both.
No such payment shall preclude any Director from serving the corporation in any
other capacity and receiving compensation therefor.
SECTION 10. PRESUMPTION OF ASSENT. A Director of the
corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
ARTICLE IV. OFFICERS.
SECTION 1. NUMBER. The officers of the corporation shall be a
President, one or more Vice-Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two or more offices may be held by the same person, except the offices of
President and Secretary.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held
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<PAGE>
at such meeting, such election shall be held as soon thereafter as conveniently
may be. Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent may be removed by the
Board of Directors whenever in its judgment, the best interests of the
corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpire portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal
executive officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the corporation thereunto authorized by the Board
of Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, 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, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties as may be prescribed by the Board of Directors from time to time.
SECTION 6. THE VICE-PRESIDENTS. In the absence of the
President or in the event of his death, inability or refusal to act, the
Vice-President (or in the event there be more than one Vice-President, the
Vice-Presidents in the order designated at the time of their election, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice-Presidnet
may sign, with the Secretary or an Assistant Secretary, certificates for shares
of the corporation; and shall perform such other duties as from time to time may
be assigned to him by the President or by the Board of Directors.
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<PAGE>
SECTION 7. THE SECRETARY. The Secretary shall: (a) keep the
minutes of the proceedings of the shareholders and of the Board of Directors in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these By-Laws or as required by law;
(c) be custodian of the corporate records and of the seal of the corporation and
see that the seal of the corporation is affixed to all documents the execution
of which on behalf of the corporation under its seal is duly authorized; (d)
keep a register of the post office address of each shareholder; (e) sign with
the President, or a Vice-President, certificates for shares of the corporation,
the issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
SECTION 8. THE TREASURER. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
corporation; (b) receive and give receipts for moneys due and payable to the
corporation from any source whatsoever, and deposit all such moneys in the name
of the corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Article V of these By-Laws; and
(c) in general perform all of the duties as from time to time may be assigned to
him by the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
SECTION 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice-President certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if required by the Board
of Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
SECTION 10. SALARIES. The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
Director of the corporation.
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<PAGE>
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of
the corporation and no evidence of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority may
be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time to time
be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as the Board of
Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing
shares of the corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President or a
Vice-President and by the Secretary or an Assistant Secretary and sealed with
the corporate seal or a facsimile thereof. The signatures of such officers upon
a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or one of its employees. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been; surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the
corporation shall be made only on the stock transfer books of the corporation by
the holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of
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<PAGE>
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation shall begin on the first
day of January and end on the thirty-first day of December in each year.
ARTICLE VIII. DIVIDENDS
The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in the manner, and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors shall provide a corporate seal.
ARTICLE X. WAIVER OF NOTICE
Whenever notice is required to be given to any shareholder or
director of the Corporation under the provisions of these By-Laws or under the
provisions of the Articles of Incorporation or under the provisions of the Utah
Business Corporation Act, 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.
ARTICLE XI. AMENDMENTS
These By-Laws may be altered, amended or repealed and new
ByLaws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors.
ARTICLE XII. PROCEDURE FOR CONDUCTING MEETINGS
All shareholder and director meetings shall be conducted in
accordance with the rules and procedures set forth in the most current edition
of ROBERTS' RULES OF ORDER.
ATTEST:
/S/ PAT M. BURKE
Secretary
<PAGE>
EXHIBIT 10.1
RESEARCH, DEVELOPMENT AND LICENCE AGREEMENT
DATED MAY 11, 1999 BETWEEN
PRAXIS PHARMACEUTICALS, INC. AND FAIRCHILD INTERNATIONAL INC.
<PAGE>
RESEARCH, DEVELOPMENT AND LICENCE AGREEMENT
DATED THE 11TH DAY OF MAY, 1999
BETWEEN:
PRAXIS PHARMACEUTICALS, INC.,
a body corporate incorporated pursuant
to the laws of the State of Utah,
one of the United States of America
and having an office at
ANUTECH Court, North Road, in the
City of Canberra, ACT, Australia
("Praxis")
- and -
FAIRCHILD INTERNATIONAL INC., a body corporate
incorporated pursuant to the laws of
the Province of British Columbia, Canada
and having an office at
Suite 600, 595 Hornby Street,
City of Vancouver, British Columbia, Canada
("FAIRCHILD")
WHEREAS:
A. The Australian National University is the owner of certain patents related to
the invention entitled "Phosphosugar-based anti-inflammatory and/or
immunosuppressive drugs" and certain patent applications related to an invention
entitled "Novel phosphosugars and phosphosugar-containing compounds having
anti-inflammatory activity" which are described in more detail herein;
B. ANUTECH PTY Ltd. ("Anutech"), the commercialization company of
the Australian National University, has entered into an
agreement as agent for and on behalf of the Australian
National University with Praxis pursuant to which Praxis has
been granted an exclusive licence for the use of the
inventions described above in specified areas of application;
C. Praxis has and intends to continue to conduct research and development
<PAGE>
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related to the above described inventions;
D. Praxis wishes to obtain funding from FAIRCHILD to conduct research in the
area of arthritis and dermal wrinkles and related to the above inventions;
E. FAIRCHILD wishes to obtain an exclusive, world-wide licence to make, use and
sell products and processes developed by Praxis relating to arthritis and dermal
wrinkles;
NOW THEREFORE, in consideration of the mutual terms and
conditions contained herein, the parties hereto agree as follows:
PART I - DEFINITIONS AND INTERPRETATION
SECTION 1 - DEFINITIONS
In this Agreement, including this Section, the following
defined terms have the meanings indicated:
(a) "Anutech Licence Agreements" means the agreement entered into
between Anutech and Praxis dated 27th October, 1997, a copy of
which is attached hereto as Schedule "D";
(b) "Closing Date" means September 30th, 1999
(c) "Confidential Information" means confidential or proprietary
information, trade secrets, know-how and technical information
related to the inventions claimed pursuant to the Patents and
any other information disclosed in confidence by Praxis to
FAIRCHILD or by FAIRCHILD to Praxis;
(d) "Field of Use" means arthritis and dermal wrinkles;
(e) "Intellectual Property" means any and all methods, devices,
techniques, discoveries, inventions (whether or not
patentable), know-how, ideas,
<PAGE>
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processes, trade secrets and other proprietary information,
including any patent right, copyright, trade secret or similar
right;
(f) "Licensed Patent Applications" means:
(i) the patent applications relating to the invention
entitled "Novel phosphosugars and
phosphosugar-containing compounds having
anti-inflammatory activity", including United State
Patent Application No. 08/953305, Australian
Application No. 41866/97 and any patent applications
filed now or in the future in any country which
disclose and claim the same inventions or the
priority of Australian Provisional Application PO
3098/96, filed October 18, 1996; and
(ii) all patent applications related to the New
Intellectual Property;
(g) "Licensed Patents" means:
(i) the patents described on Schedule "A" hereto;
(ii) all patents issued out of the Patent Applications;
(iii) any patents issued in any country disclosing and
claiming the same inventions as those claimed in the
patents referred to in clauses (i) and (ii) hereof;
and
(iv) all divisions, re-issues, re-examinations,
continuations, renewals and extensions of the
foregoing;
(h) "Licensed Product" means any product the manufacture or use of
which is covered by a Valid Claim;
(i) "Licensed Technology" means:
(i) the inventions disclosed and claimed in the Licensed
Patent Applications and Licensed Patents;
(ii) any additional Intellectual Property related to the
inventions referred to in clause (i), their
description, use, or application; and
(iii) all Confidential Information in any way related to
the inventions referred to in clause (i) hereof and
the Intellectual Property referred to in clause (ii)
hereof;
<PAGE>
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(j) "Net Revenue" means all consideration received by FAIRCHILD:
(i) for the sale or other disposition of Licensed
Products; and
(ii) pursuant to the terms of any sublicences granted by
FAIRCHILD in accordance with Section 11(3);
less the following:
(A) all costs incurred by FAIRCHILD in the
development of Licensed Products, including,
without limitation, payments made by
FAIRCHILD to Praxis pursuant to Section 8,
costs and expenses incurred by FAIRCHILD
pursuant to Section 13 and expenses incurred
by FAIRCHILD in connection with obtaining
Regulatory Approvals, including those
referred to in Section 17;
(B) all costs of direct materials, labour and
overhead expenses required in the
manufacture and production of Licensed
Products;
(C) costs incurred by FAIRCHILD in connection
with the marketing, selling and distribution
of Licensed Products;
(D) any tax or government charge (other than an
income tax) levied on the sale,
transportation or delivery of Licensed
Product;
(E) trade and quantity discounts or rebates
actually allowed and taken; and
(F) credits or allowances given or made for
rejection or return of previously sold
Licensed Products;
(k) "New Intellectual Property" means Intellectual Property that
is developed by Praxis during the conduct of the Research
Projects performed by Praxis in accordance with Section 8;
(l) "Regulatory Approval" means any approvals, licenses,
registrations or authorizations of any relevant authority
having jurisdiction necessary for the development, use,
importation, packaging, marketing, distribution, sale, storage
and transportation of the Licensed Products;
<PAGE>
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(m) "Research Projects" means the Research and Development
Projects relating to dermal wrinkles and arthritis conducted
in accordance with Section 8;
(n) "Shares" means shares in the capital stock of FAIRCHILD
described as Class A Common and having the rights set out on
Schedule "B" hereto;
(o) "Valid Claim" means a claim of any issued and unexpired
Licensed Patent which claim has not been held unenforceable,
unpatentable or invalid by a decision of a court or government
body of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, which has not been
rendered unenforceable through disclaimer or otherwise, and
which has not been lost through an interference proceeding or
by abandonment.
SECTION 2 - GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by and interpreted in
accordance with the laws in force in the Province of British Columbia. The
parties hereby submit to the jurisdiction of the Courts of British Columbia.
SECTION 3 - CURRENCY
All monetary units, except as expressly stated otherwise in
this Agreement, are in United States dollars.
SECTION 4 - AFFILIATES
For the purpose of this Agreement, a company is an Affiliate
of a party if:
(a) the party owns or controls, directly or indirectly, 50% or
more of the voting stock of that company;
(b) the party owns or controls, directly or indirectly, sufficient
voting stock in that company to elect a majority of the
directors of that company;
<PAGE>
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(c) that company owns or controls, directly or indirectly, 50% or
more of the voting stock of the party;
(d) that company owns or controls, directly or indirectly,
sufficient voting stock in the party to elect a majority of
the directors of the party;
(e) an organization owns or controls, directly or indirectly, 50%
or more of the voting stock of the party and that company; or
(f) an organizations owns or controls, directly or indirectly,
sufficient voting stock in the party and the company to elect
a majority of the directors of the party and that company.
SECTION 5 - SCHEDULES
The following Schedules are incorporated into and form part of
this Agreement:
Schedule "A" - Patents
Schedule "B" - Share Rights
Schedule "C" - Research Projects
Schedule "D" - Anutech Licence
PART II - PURCHASE AND SALE OF SHARES
SECTION 6 - SUBSCRIPTION AND PURCHASE
(1) In consideration for the licensing rights to the Praxis Intellectual
Property, FAIRCHILD hereby agrees to transfer, on or before the Closing Date,
260,000 pre-split shares or 2.6 million post-split shares of Fairchild
International Inc. to Praxis, and guarantees that the Shares will be issued as
fully paid up and non-accessible Shares; that the Shares be allotted and that a
certificate for the Shares be issued to Praxis.
<PAGE>
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(2) Praxis shall certify as at the Closing Date that the following
representations and warranties are correct:
(a) Praxis is engaged primarily in the business of developing a
unique panel of natural carbohydrate based compounds and
exploiting commercial applications of such;
(b) there are no material lawsuits against Praxis, or its
directors or officers that are related to the business of
Praxis, nor, to the best of the knowledge of Praxis and its
directors and officers are any being contemplated;
(c) Praxis is current in all taxes owed, including payroll taxes,
and on all debts, accounts payable and leases;
(d) Praxis has provided copies of its most recent financial
statements to FAIRCHILD and the information contained in such
financial statements is complete and accurately reflects
Praxis' situation, financial and otherwise;
(e) a copy of every material executed lease, licence, partnership
or collaboration agreement (whether technical, marketing,
manufacturing or other) stockholder agreement, loan agreement,
employment agreement, purchase and sale agreement has been
provided to FAIRCHILD;
(f) a comprehensive listing and description of all Intellectual
Property in the name of Praxis or obtained by Praxis through
licensing has been provided to FAIRCHILD as have copies of
file wrappers for all Licensed Patent Applications and there
are no existing or potential patent disputes of which Praxis
is aware or for which Praxis has not provided full and
complete disclosure to FAIRCHILD;
(g) a complete and current listing of Praxis' capital structure
and the terms and conditions associated therewith has been
provided to FAIRCHILD, including a list of all shareholders,
options, Warrants, puts and other instruments that may affect
FAIRCHILD's equity position after shareholdings are fully
diluted;
(h) there are no material written or oral agreements with any
other person or corporation pursuant to which Praxis or it
directors or officers have agreed to do anything beyond the
requirements of the formal written contracts referred to in
clause (e);
<PAGE>
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(i) the transfer of the Shares to Praxis contemplated by this
Agreement will not constitute a breach of any contract or
commitment to which FAIRCHILD is a party;
(j) Praxis has filed all necessary tax returns;
(k) this Agreement has been duly authorized, executed and
delivered by Praxis and is a legal, valid and binding
obligations of Praxis enforceable by FAIRCHILD in accordance
with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other laws affecting the rights of
creditors generally;
(l) the execution and delivery of this Agreement by Praxis and the
completion of the transactions herein will not result in a
breach or violation of any of the provisions of any obligation
of Praxis under any contract to which Praxis may be a party;
any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over
Praxis; or any applicable law, statute, ordinance, regulation
or rule;
(m) the issue of the Shares to Praxis is in compliance with the
constating documents of FAIRCHILD; and
(n) Praxis is not a non-resident of Canada within the meaning of
Section 116 of the Income Tax Act (Canada).
(3) If at any time prior to the Closing Date:
(a) Praxis shall have failed to comply with any term or condition
contained herein;
(b) any representations and warranties set out in Section 6(2) is
incorrect in any material respect;
(c) there is any material default under debts owed by Praxis which
default has not been cured within any applicable grace period;
or
(d) any material final judgments are rendered against Praxis;
FAIRCHILD may terminate this Agreement upon written notice to Praxis.
<PAGE>
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(4) All registration and recording fees payable to third parties in connection
with the closing of the transactions outlined in this Section 6 shall be borne
by Praxis.
SECTION 7 - PURCHASE OF ADDITIONAL SHARES
Praxis shall not purchase any Shares in addition to those to
which Praxis is entitled pursuant to Section 6 unless such purchase is made in
conjunction with or pursuant to an agreement between Praxis and FAIRCHILD for
the acquisition by Praxis of voting control of FAIRCHILD.
PART III - RESEARCH AND DEVELOPMENT
SECTION 8 - RESEARCH PROJECTS
(1) Praxis shall conduct the Research Projects and perform all work described in
Schedule "C".
(2) Praxis shall commence work on October 1st, 1999 and shall use reasonable
efforts to complete the Research Projects in accordance with the work schedule
included as part of Schedule "C".
(3) The Research Projects shall be performed by Praxis in a thorough and
diligent manner in accordance with Good Laboratory Practices and normal
professional standards.
(4) Praxis shall report to FAIRCHILD at the times and in the manner set forth in
Schedule "C".
(5) FAIRCHILD shall pay to Praxis the total sum of $250,000.00 USD, after
deduction for any loans to the company, payable as an initial payment of $62,500
USD
<PAGE>
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and then in three equal quarterly instalments of $50,000 USD payable on the
first day of each month commencing on January 1st, 2000 and a single, and final,
quarterly payment of $37,500 USD on October 1st, 2000, such payments to be
exclusive of any taxes, whether municipal, provincial, federal or Goods and
Services. The funds paid by FAIRCHILD to Praxis pursuant to this Section 8 shall
only be used by Praxis for the conduct of the Research Projects and shall only
be expended in accordance with the budget included as part of Schedule "C",
unless Praxis obtains prior written authorization from FAIRCHILD.
(6) FAIRCHILD and Praxis shall, not less than once every three (3) months,
review and evaluate progress on the Research Projects. Following such reviews
milestones as set out in Schedule C may be revised as and when needed by mutual
agreement between FAIRCHILD and Praxis.
(7) Praxis shall use reasonable efforts to ensure that the technology used in
the Research Projects does not infringe on any patents or proprietary rights of
other persons.
SECTION 9 - RECORDS AND CONFIDENTIALITY
(1) Praxis shall maintain complete and accurate records of the activities
conducted and results obtained pursuant to the Research Projects, all in
accordance with good scientific practice. Upon written request from FAIRCHILD,
Praxis shall provide copies of any such records to FAIRCHILD.
(2) Praxis shall keep full, accurate and complete records of books of account
relating to financial aspects of the Research Projects. FAIRCHILD, or a
designate of FAIRCHILD, may from time to time upon reasonable prior written
notice to Praxis examine, audit or have examined or audited the records and
books of account of Praxis.
<PAGE>
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(3) All data, reports, plans, records, logs and other information relating to
the Research Projects shall be treated by Praxis and FAIRCHILD as the
confidential property of both parties and both parties shall use all reasonable
efforts to ensure that such information is kept strictly confidential during the
term of this Agreement and for a period of ten (10) years thereafter. Nothing
herein shall prevent Praxis from using, disclosing or authorizing disclosure of
information:
(a) which is or becomes part of the public domain through no act
or failure on the part of Praxis;
(b) which was in Praxis' possession prior to its development
pursuant to the Research Projects or prior to receipt or
acquisition from FAIRCHILD;
(c) which is disclosed to Praxis by a third party without a
covenant of confidentiality, provided that such third party
is, to the knowledge of Praxis, under no obligation of
confidentiality with respect to the information; or
(d) with the prior written authorization of FAIRCHILD.
SECTION 10 - OWNERSHIP OF NEW INTELLECTUAL PROPERTY
(1) New Intellectual Property shall promptly be disclosed by Praxis to FAIRCHILD
and thereafter shall be included as part of the Licensed Technology and licensed
to FAIRCHILD pursuant to Section 11.
(2) All expenses connected with preparing, filing, prosecuting, obtaining,
maintaining and enforcing intellectual property rights related to the New
Intellectual Property shall be borne by FAIRCHILD.
<PAGE>
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PART IV - LICENCE
SECTION 11 - GRANT
(1) Praxis hereby grants to FAIRCHILD an exclusive, world-wide sublicence under
the Licensed Patent Applications and Licensed Patents, and an exclusive,
world-wide sublicence under the New Intellectual Property, to use the Licensed
Technology and to make, use and sell any products, compounds, compound uses,
processes, applications, methods or procedures within the Field of Use.
(2) FAIRCHILD shall be entitled to grant further sublicences of the rights
granted by Praxis to FAIRCHILD pursuant to Section 11(1) hereof. FAIRCHILD shall
advise Praxis in writing of any and all sublicences granted by FAIRCHILD in
accordance with this Section 11(3) and shall provide Praxis with the following
information:
(a) name of the sublicencee;
(b) the amount of any licence fee or royalties payable by the
sublicencee; and
(c) such further information as may be reasonably requested by
Praxis.
(3) FAIRCHILD may assign this Agreement to an Affiliate of FAIRCHILD or may
transfer or assign the rights and obligations of FAIRCHILD pursuant to Parts
III, IV or V, or any combination thereof, to an Affiliate of FAIRCHILD.
FAIRCHILD shall advise Praxis in writing of any such transfer or assignment.
Notwithstanding any such transfer or assignment, FAIRCHILD shall at all times
remain liable to Praxis for the performance of the obligations set out herein,
including the obligation to pay to Praxis a share of Net Revenue in accordance
with Section 12.
<PAGE>
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SECTION 12 - REVENUE
(1) Net Revenue shall be apportioned between the parties and FAIRCHILD shall pay
to Praxis an amount equal to thirty five percent (35%) of Net Revenue of Praxis
products for so long as there are Valid Claims.
(2) All payments required to be made pursuant to Section 12(1) shall be made
according to Section 8(5).
SECTION 13 - RECORDS AND REPORTS
(1) FAIRCHILD shall keep full, accurate and complete records and books of
account relating to Net Revenue and any amounts payable by FAIRCHILD to Praxis
pursuant to Section 12 hereof.
(2) All payments made by FAIRCHILD to Praxis pursuant to Section 12 shall be
accompanied by a report providing such information as is reasonably required by
Praxis to determine an accurate determination of the amounts payable by
FAIRCHILD to Praxis in accordance with Section 12.
(3) Praxis may from time to time, upon reasonable prior notice to FAIRCHILD have
the records and books of account maintained by FAIRCHILD in accordance with
Section 13(1) hereof audited or examined by a duly authorized independent
chartered accountant to ascertain the accuracy of the payments made. All costs
of any audit, examination or report shall be payable by Praxis, unless the
report discloses an underpayment of five (5%) percent or more, in which case the
cost of the audit, examination or report shall be payable by FAIRCHILD.
SECTION 14 - PROTECTION, ENFORCEMENT AND INFRINGEMENTS
<PAGE>
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(1) Praxis shall permit FAIRCHILD to control and direct (including the selection
of patent agents or patent attorneys) the preparation, filing and prosecution of
all patent applications the subject of this Agreement included within the Field
of Use of the Licensed Technology, including the New Intellectual Property.
Without limiting the generality of the foregoing, Praxis shall, upon FAIRCHILD's
request and at FAIRCHILD's cost and expense, file and prosecute patent
applications to protect the Licensed Technology in any country that a patent
application has not been filed. FAIRCHILD shall consult with Praxis on the
content of all patent applications and related filings. Praxis shall bear all
costs related to the preparation, filing, prosecution and maintenance with
respect to the Licensed Patents described on Schedule "A", the Licensed Patent
Applications described in Section 1(g)(i) and any other patents or Licensed
Patent Applications that disclose and claim the same inventions. FAIRCHILD shall
pay all costs of preparing, filing, prosecuting and maintaining all Licensed
Patent Applications and Licensed Patents related to the New Intellectual
Property.
(2) If either party believes that any Licensed Patents are being infringed by
another person, that party shall promptly notify the other party and shall
provide any evidence of infringement which is reasonably available. FAIRCHILD
shall have the first right and option, but not the obligation, to bring an
action for infringement, at FAIRCHILD's sole cost and expense, against the
alleged infringer. If FAIRCHILD elects to take such action, the conduct of the
action shall be entirely under the direction and control of FAIRCHILD. If
FAIRCHILD exercises the rights contained herein, FAIRCHILD may name Praxis as a
party plaintiff in such action, suit or proceeding, if reasonably necessary
under the circumstances, provided that FAIRCHILD shall indemnify and hold Praxis
and Anutech harmless from any costs or expenses incurred in connection with such
action, suit or proceeding. Any damages or sums recovered by FAIRCHILD in any
such action, suit or proceeding, or any settlement thereof, shall be retained by
FAIRCHILD, but, to the extent that the recovery reflects lost sales of Licensed
Products, the net amount after deducting expenses incurred by FAIRCHILD, shall
be included as part of Net Revenue.
<PAGE>
-15-
(3) If FAIRCHILD elects not to pursue an action for infringement, whether alone
or jointly with Praxis, Praxis shall have the right and option, but not the
obligation, at Praxis's sole cost and expense, to bring the action for
infringement against the alleged infringer. Any damages or sums recovered by
Praxis in such action, suit or proceeding, or any settlement thereof, shall be
retained by Praxis, but, to the extent that the recovery reflects lost sales of
Licensed Products, Praxis shall pay to FAIRCHILD one-half of the net amount
after deducting expenses incurred by Praxis.
(4) The parties shall cooperate in defending any impeachment, interference or
infringement action, suit or proceeding brought against either Praxis or
FAIRCHILD related to the Licensed Technology.
(5) The parties shall not take any actions that may be reasonably known to
compromise the position of the other party with respect to legal proceedings
commenced or to be commenced or being defended by the other party.
(6) The parties shall render all reasonable assistance, including providing all
documents in their possession and any witnesses as are or may be required in the
conduct of any proceedings referred to herein. If any party renders such
assistance at the request of another party, the requesting party shall reimburse
the assisting party for expenses incurred to render such assistance.
SECTION 15 - WARRANTIES, INDEMNITIES AND INSURANCE
(1) Praxis represents and Warrants to FAIRCHILD that, as of the Closing Date:
(a) Praxis owns or has valid and enforceable licenses of the
Licensed Technology free and clear of all liens, charges,
security interests
<PAGE>
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and encumbrances, licences and other restrictions;
(b) the Anutech Licence Agreement is in full force and effect,
unamended and that neither Praxis nor Anutech are in default
of any of the terms and conditions contained therein;
(c) to the best of Praxis's knowledge and belief, the practising
of the Licensed Technology will not infringe the rights of any
other person; and
(d) to the best of Praxis's knowledge and belief, it is not aware
of any activities or conduct of any other person that would
constitute infringement of the Licensed Technology.
(2) The parties shall assume and be liable for their own losses, damages and
expenses of any nature whatsoever which they may suffer, sustain, pay or incur
by reason of any matter or thing arising out of, or in any way related to this
Agreement, except for such losses, costs, damages and expenses as are the result
of the wilful breach of any term herein by the other party or the wilful or
negligent acts or omissions of the other party.
(3) Each party shall indemnify and hold harmless the other party, its employees
and agents, from and against any and all claims, demands and costs whatsoever
that may arise out of, directly or indirectly, the indemnifying party's
performance of this Agreement or that of the indemnifying party's employees or
agents. Such indemnifications shall survive this Agreement.
(4) Praxis shall, at its own expense and without limiting its liabilities
herein, maintain comprehensive or commercial general liability insurance with an
insurer in an amount not less than $1,000,000.00 per occurrence (annual general
aggregate, if any, not less than $2,000,000.00), insuring against bodily injury,
personal injury and property damage, including loss of use thereof. Such
insurance shall include blanket contractual liability.
<PAGE>
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(5) From the date that any Product arising out of the the Licenced Technology is
first applied for therapeutic human use (and for the term or foreseeable term of
the human use) FAIRCHILD undertakes to hold product liability insurance to the
value of at least $10,000,000.00. Such policies shall name Praxis as additional
insureds and shall be purchased from a reputable insurer. Certificates
evidencing the coverage shall be provided to Praxis.
SECTION 17 - REGULATORY APPROVALS
(1) FAIRCHILD shall use reasonable efforts to obtain Regulatory Approvals.
(2) Praxis shall assist FAIRCHILD in obtaining Regulatory Approvals in the
various countries by providing such information and data as may be in the
possession of Praxis necessary for or of assistance in obtaining any Regulatory
Approvals. FAIRCHILD shall be responsible for all regulatory, agency, filing,
inspection and other fees and expenses and charges incurred in connection with
obtaining any Regulatory Approvals pursuant to Section 17(1).
(3) Praxis shall ensure that all information and data generated by Praxis that
is related to the Clinical Trials or would be of any assistance to FAIRCHILD in
obtaining Regulatory Approvals shall be maintained in a form suitable for
submission to regulatory authorities and shall at all times be kept secure and
confidential.
PART VI - GENERAL
SECTION 18 - TERM AND TERMINATION
(1) The term of this Agreement shall expire on the expiration of the last
Licensed Patent. Upon the expiration of this Agreement, FAIRCHILD's licence
<PAGE>
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pursuant to Section 11 shall become a fully paid-up, perpetual licence.
(2) This Agreement may be terminated at any time upon the mutual agreement of
the parties.
(3) If:
(a) either party has breached any of its obligations pursuant to
this Agreement and fails to remedy such breach or to commence
and diligently pursue reasonable steps to remedy such breach
within sixty (60) days after notice in writing from the other
party;
(b) either party becomes bankrupt or insolvent or takes the
benefit of any statute for bankrupt or insolvent debtors or
makes any proposal, assignment or arrangement with its
creditors, or any steps are taken or proceedings commenced by
any person for the dissolution, winding up or termination of
either parties existence or the liquidation of its assets; or
(c) a trustee, receiver, receiver manager or like person is
appointed with respect to the business or assets of a party;
the party in default may terminate this Agreement by giving written notice to
the party in default.
(4) If Praxis is in default of any of its obligations related to the performance
of the Research Projects, and has failed to remedy such breach within sixty (60)
days after notice in writing from FAIRCHILD, FAIRCHILD may terminate the
Research Projects immediately upon written notice to Praxis. If FAIRCHILD
terminates the Research Projects in accordance with this Section 18(4):
(a) FAIRCHILD shall reimburse Praxis for costs and expenses
incurred in accordance with the budget included as part of
Schedule "C" to the date of termination;
(b) FAIRCHILD shall have no further obligation with respect to the
conduct of
<PAGE>
-19-
the Research Projects or any costs and expenses related
thereto;
(c) notwithstanding the termination of the Research Project, all
New Intellectual Property developed prior to the date of
termination shall be disclosed by Praxis to FAIRCHILD and
shall be included as part of the Licensed Technology and
licensed to FAIRCHILD pursuant to Section 11; and
(d) FAIRCHILD shall have the right to complete the Research
Project, or any part thereof at its own cost and expense and
any results; improvements to Intellectual Property sublicenced
from Praxis under the terms of this Agreement; new patents and
patent applications arising from this shall be deemed to be
New Intellectual Property.
(5) The following sections shall survive termination of this Agreement: 1, 2, 3,
4, 5, 9 and 15.
SECTION 19 - PUBLICITY
(1) A copy of all public announcements and press releases which either party
intends to release or make regarding products or technology covered by the
licence shall be provided to the other party prior to being released or made.
Any public announcement or news release that names, refers to or in any way
identifies both parties shall be approved by both parties prior to being
released or made. Each party shall respond to a request for approval within five
(5) working days of receipt of the copy and the approval of each party shall not
be unreasonably withheld.
(2) If either party is prevented from complying with Section 19(1) as a result
of the requirements of a Securities Commission or other regulatory body, the
party shall not be considered to be in breach of this Agreement, but shall use
reasonable efforts to consult with and keep the other party informed.
(3) The parties shall not use each other's name in any advertising material
without the prior written consent of the other party, which consent may be
arbitrarily
<PAGE>
-20-
withheld.
(4) Subject to subsection (3), FAIRCHILD shall be responsible for and have
control of labelling of Licensed Products.
SECTION 20 - COMPLIANCE WITH LAWS
The parties shall observe and comply with all applicable laws,
ordinances, codes and regulations of Government agencies, including Federal,
Provincial, Municipal and local governing bodies having jurisdiction.
SECTION 21 - RELATIONSHIP
Nothing in this Agreement shall be construed as:
(a) constituting either party as the agent, employee or
representative of the other party; or
(b) creating a partnership or as imposing upon either party any
partnership duty, obligation or liability to the other party.
SECTION 22 - NOTICES
All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be sent to the following
addresses or such other addresses as the relevant party may notify from time to
time:
TO: William B Cowden, CEO
Praxis Pharmaceuticals Inc.
GPO Box 1978
Canberra, ACT, Australia 2601
Facsimile: 61 2 6279 9758
<PAGE>
-21-
TO: Byron Cox
FAIRCHILD INTERNATIONAL Inc.
#600 - 595 Hornby Street
Vancouver, British Columbia V6C 1A4
Facsimile: (604) 646-5649
Notices sent by prepaid registered mail shall be deemed to be received by the
addressee on the 7th day (excluding Saturdays, Sundays, statutory holidays and
any period of postal disruption) following the mailing thereof. Notices
personally served or transmitted by facsimile shall be deemed received when
actually delivered or transmitted, provided such delivery shall be made during
normal business hours.
SECTION 23 - ASSIGNMENT
Except as expressly permitted pursuant to Section 11, the
parties shall not assign this Agreement or any part thereof, or any rights
hereunder without the prior written consent of the other party, such consent not
to be unreasonably withheld.
SECTION 24 - FURTHER ASSURANCES
The parties shall with reasonable diligence take all action,
do all things, attend or cause their representatives to attend all meetings and
execute all further documents, agreements and assurances as may be required from
time to time in order to carry out the terms and conditions of this Agreement in
accordance with their true intent.
SECTION 25 - SETTLEMENT OF DISPUTES
(1) If there is any dispute or disagreement related to or arising out of this
Agreement (the "Disagreement") the parties shall refer the Disagreement for
resolution
<PAGE>
-22-
to their respective Chief Executive Officers, or their nominees.
(2) If the Disagreement is not resolved pursuant to Section 25(1) within thirty
(30) days (or such longer period as agreed upon between the parties), a mediator
shall be appointed by the parties who shall assist the parties in resolving the
Disagreement.
(3) If the Disagreement is not resolved under Section 25(2) within thirty (30)
days (or such longer period as agreed upon between the parties) either party may
refer the Disagreement to be resolved by arbitration conducted as follows:
(a) either party may require arbitration by giving written notice
to arbitrate to the other party, which written notice shall
identify the nature of the Disagreement;
(b) if the parties are able to agree upon a single arbitrator, the
arbitration shall be conducted before the single arbitrator;
(c) if the parties have been unable to agree upon the selection of
a single arbitrator within two (2) weeks after receipt of the
notice requiring arbitration, each party shall within one (1)
further week, by notice in writing given to the other party,
nominate one neutral arbitrator. If either party fails to
nominate an arbitrator in accordance with this clause, the
arbitrator so nominated shall proceed to conduct the
arbitration alone. If both parties nominate neutral
arbitrators in accordance with this clause, the two
arbitrators so nominated shall nominate a third arbitrator
within one (1) week of their nomination;
(d) the arbitrator or arbitrators shall immediately proceed to
hear and determine the Disagreement. The parties agree that it
is important that all Disagreements be resolved promptly and
the parties therefore agree that the arbitration shall be
required to be conducted expeditiously and that the final
disposition shall be accomplished within two (2) weeks. The
parties shall ensure that the arbitrator or arbitrators upon
accepting the nomination shall agree that the arbitrator has
time available for the timely handling of the arbitration in
order to achieve final disposition within two (2) weeks;
(e) the decision of the arbitrator or arbitrators shall be
rendered in writing, without reasons and shall be promptly
served upon both parties. If the
<PAGE>
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arbitration is being conducted before a panel of three
arbitrators, the decision of any two of the three arbitrators
shall be decision of the arbitration panel. The decision of
the arbitrator or arbitrators shall be binding upon the
parties;
(f) in the event of the death, resignation, incapacity, neglect or
refusal to act of any arbitrator, and if the neglect or
refusal continues for a period of five (5) days after notice
in writing of such has been given by either party, another
arbitrator shall be nominated to replace the arbitrator by the
person who has originally nominated that arbitrator;
(g) the costs of the arbitration shall be in the discretion of the
arbitrators, and shall be borne by the parties in accordance
with the decision of the arbitrators;
SECTION 26 - ENUREMENT
This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
PRAXIS PHARMACEUTICALS, INC.
Per: /S/ BRETT CHARLTON (PRESIDENT)
Per:
FAIRCHILD INTERNATIONAL INC.
Per: /S/ BYRON COX
Per:
<PAGE>
DATE 1999
- --------------------------------------------------------------------------------
ANUTECH PTY LTD
AND
PRAXIS PHARMACEUTICALS AUSTRALIA PTY LTD
- --------------------------------------------------------------------------------
EXCLUSIVE LICENCE AGREEMENT
- --------------------------------------------------------------------------------
[] DUNHILL []
[] MADDDEN []
[] BUTLER []
SOLICITORS
AMP Tower
1 Hobart Place
CANBERRA CITY ACT 2600
Tel: (02) 6218 6500
Fax: (02) 6218 6525
Ref: G. Marques
BRISBANE o CANBERRA o MELBOURNE o SYDNEY
<PAGE>
THIS AGREEMENT is made on the 14th day of October 1999
BETWEEN
ANUTECH PTY LTD A.C.N. 008 548 650 of Anutech Court, Corner Barry Drive and
Daley Roads, Australian Capital Territory, Australia 2601
("ANUTECH")
AND
PRAXIS PHARMACEUTICALS AUSTRALIA PTY LTD A.C.N. 082 811 630 having its
registered office at Duesburys, 60 Marcus Clarke Street, Canberra City A.C.T.
2601
("PRAXIS")
WHEREAS
A. Anutech is the commercial subsidiary of the Australian National
University ("ANU") and regularly provides services to its clients by
engaging the services of the ANU and does so within the field of this
Agreement.
B. ANU is the proprietor of certain patents and is the owner of certain
other related intellectual property and has agreed to grant to Praxis a
licence of such patents and intellectual property on the terms and
conditions set out herein.
C. Praxis wishes to obtain an exclusive licence within the Licensed Field
of such patents and intellectual property, and to then undertake the
research, development and Exploitation of products based upon such
patents.
IT IS AGREED
1. INTERPRETATION
1.1 DEFINITIONS
In this agreement, unless the context otherwise requires, the following
words shall have the following meanings:-
"ANU INTELLECTUAL PROPERTY" means the Licensed Patents, any
Intellectual Property relating to the Licensed Patents or actual
or potential Products or Processes which is owned by ANU and
provided by ANU to Praxis during the Term, and includes any
Intellectual Property developed under the Research Funding
Agreement.
"BUSINESS DAY" means a day on which the trading banks are open for
general banking business in Canberra, Australia.
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ANUTECH/Praxis Page 1 of 1
<PAGE>
"COMMENCEMENT DATE" means the date of execution of this Agreement.
"CONFIDENTIAL INFORMATION" means any information whether written, oral,
electronic or in any other form which is disclosed by a party or
its representatives, is claimed as confidential to itself and
which relates to the ANU Intellectual Property, Improvements, this
agreement and business of the parties. It includes all copies and
notes generated from the disclosure and each party shall keep and
maintain confidential any further information which may come to
the other parties knowledge as a result of this Agreement.
"DOLLARS" or "$" means Australian dollars.
"EXPLOIT" means in respect of a:
(a) Product - to make, have made, hire, sell or otherwise dispose
of the Product, to offer to make, sell, hire or otherwise
dispose of the Product, to use or import it or keep it for the
purpose of doing any of those things;
(b) Process - use the method or process or do any act in respect
of a product resulting from such use which falls within
paragraph (a).
"FINAL JUDGMENT" means a judgment or decree which becomes not further
appealable or reviewable through the exhaustion of all permissible
applications for appeal, rehearing or review by any superior court
or tribunal or through the expiration of time permitted for such
applications.
"GST" means a tax on goods and services as defined by Commonwealth
legislation.
"IMPROVEMENTS" means any new Intellectual Property or any improvement,
innovation, invention or development relating to the function,
design, formulation, features, or process of manufacture of any
Product.
"INDEMNIFIED PARTIES" means ANU and Anutech and any of their directors,
officers, employees, staff, students and agents.
"INTELLECTUAL PROPERTY" means any copyright, design (whether registered
or unregistered), trademark (whether registered or unregistered),
circuit layout, knowhow, confidential information (whether such
information is in writing or recorded in any other form) and other
proprietary or personal rights arising from intellectual activity
in the industrial or scientific fields.
"LICENCE" means the right and licence granted by Anutech to Praxis
pursuant to this agreement.
"LICENSED FIELD" means the use of phosphosugars as ethical therapeutics
and expressly excludes:
(c) the use of phosphosugars as neutriceuticals, complementary
medicines or cosmetics for the treatment of any applicable
condition;
b) topical application for wound care; and
c) the use of fructose-1,6-diphosphate, administered
non-topically, for the treatment or prophylaxis of ischaemic
disorders in humans, which includes transplantation and
immunosuppression.
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ANUTECH/Praxis Page 2 of 2
<PAGE>
"LICENSED PATENTS" means the patents and patent applications listed in
SCHEDULE 1 and includes:
a) any continuations, continuations in part, divisions,
registrations, confirmations, reissues, renewals or extensions of
term of any of those patents;
b) any corresponding patent or patent application as defined in the
Patents Act 1990 (Cth) or any substantially similar form of
protection for inventions granted by any other country, the
essence of which is a right in the holder of such form of
protection to an exclusive right to work the relevant invention,
taken out or applied for in any country in the Territory which is
fairly based upon or derived from any of those patents;
c) any re-issue, renewal or extension of such a patent or patent
application (whether in whole or in part) and any patent of
addition thereto.
d) any patent or patent application which is dominated by or
dominates those patents.
"MARKETING" means the promotion, advertising, distribution and sale of
Products and includes a product launch campaign.
"NET REVENUE" means all amounts received by, at the direction of or on
behalf of Praxis or any Sub-Licensee (or any Related Corporation
of either of them) in connection with the ANU Intellectual
Property or Products or Process less:
a) transport and insurance related charges actually allowed and
taken;
b) trade, quantity or cash discounts or rebates actually allowed
and taken;
c) credits or allowances given or made on account of price
adjustments, recalls or destruction requested or made by an
appropriate government agency; and
d) any Tax, excise or other government charge upon or measured by
the sale, transportation, delivery or use of the Product which
is actually incurred by the seller;
but does not include any amount in respect of which a royalty has been
fully paid by Praxis to ANUTECH under clause 3 and which shall be
calculated without any deduction for amounts referable to any research
or development undertaken by Praxis or its Affiliates or ANU, including
for example pre-clinical research and clinical studies and where
applicable in accordance with clause 5 (GST).
"PARTY" means Anutech or Praxis and their respective successors and
permitted assigns and "PARTIES" means both of them.
"PRODUCTS" means any matter, article or thing which incorporates or
arises from the whole or partial use of ANU Intellectual
Property.
"PROCESS"means any process or method of manufacture in relation to the
operation, means of working or manufacture of a Product.
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ANUTECH/Praxis Page 3 of 3
<PAGE>
"QUARTER"means each period of three months commencing on the first of
each January, April, July and October during the Term.
"REGISTRATION" in respect of a country means the gaining of all
permissions from all Regulatory Authorities in that country
necessary to permit the commencement of Marketing in that
country and includes any approval in respect of packaging or
labelling.
"REGULATORY AUTHORITY" in respect of a country means any and all bodies
and organisations regulating the importation, distribution,
marketing or sale of the Product in any part of that country.
"RELATED CORPORATION" has the same meaning as is given to the
expression "RELATED BODY CORPORATE" in the Corporations Act
1989 of the Commonwealth of Australia.
"RESEARCHFUNDING AGREEMENT" means the agreement between Anutech and
Praxis, dated on or about the date of this Agreement which
provides for the funding by Praxis of certain research to be
undertaken by Anutech.
"ROYALTY PERIOD" means each Quarter Year during the Term provided that
where the Term commences or ends on a day other than first day
of a Quarter Year the first and last reports will be for only
so much of the Royalty Period as occurs during the Term.
"SUB-LICENSEE" means any person who:
a) becomes entitled to exercise any of the rights granted to Praxis
under this agreement, whether directly or indirectly or;
b) receives Product from Praxis or any Sub-Licensee for a purpose
which includes or could reasonably be regarded as including or
with the intention of re-sale.
"TAX" means any Tax (including any GST), withholding tax, charge, rate,
duty or impost imposed by any authority, but does not include any
income or capital gains tax.
"TERM"means the period during which this agreement is in force
pursuant to clause 14.
"TERRITORY" means the whole of the world.
"YEAR"means each period of twelve months commencing on the first day
of each January during the Term.
1.2 CONSTRUCTION
In this agreement unless the context otherwise requires:-
a) words importing the singular include the plural and vice versa
and words importing any gender include the other genders;
b) references to persons include corporations and bodies politic;
c) references to a person include the successors and permitted
assigns of that person;
d) a reference to a statute, ordinance, code or other law includes
regulations and other statutory instruments under it and
consolidations, amendments, re-
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ANUTECH/Praxis Page 4 of 4
<PAGE>
enactments or replacements of any of them (whether of the same or
any other legislative authority having jurisdiction);
e) references to this or any other document include the document as
varied or replaced, and notwithstanding any change in the
identity of the parties;
f) references to writing include any mode of representing or
reproducing words in tangible and permanently visible form, and
include telex and facsimile transmissions;
g) an obligation of two or more parties shall bind them jointly and
severally and an obligation incurred in favour of two or more
parties shall be enforceable by them jointly and severally;
h) if a word or phrase is defined, cognate words and phrases have
corresponding definitions;
i) references to a body which has ceased to exist or has been
reconstituted, amalgamated, reconstructed or merged, or the
functions of which have become exercisable by any other person or
body in its place, shall be taken to refer to the person or body
established or constituted in its place or the person or body by
which its functions have become exercisable;
j) reference to any thing (including, without limitation, any
amount) is a reference to the whole or any part of it and a
reference to a group of things or persons is a reference to any
one or more of them;
k) references to this agreement include its schedules;
l) headings shall be ignored in construing this agreement; and
m) if any day appointed or specified by this agreement for the
payment of any money or the doing of any act or thing falls on a
day that is not a Business Day, the day so appointed or specified
shall be deemed to be the next day which is a Business Day;
n) no provision of this Agreement will be construed adversely to a
party solely on the ground that the party was responsible for the
preparation of this Agreement or that provision; and
o) an expression importing a natural person includes any company,
partnership, joint venture, association, corporation or other
body corporate and any government, governmental, administrative,
judicial or semi-governmental agency or body.
1.3 PRECEDENCE
The documents comprising this agreement shall be read in the following
order of precedence:
a) the clauses in the body of this agreement; then
b) the paragraphs in the body of the schedules.
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ANUTECH/Praxis Page 5 of 5
<PAGE>
Where any conflict occurs between the provisions contained in two or
more of the documents forming this agreement, the documents lower in
the order of precedence shall where possible be read down to resolve
such conflict. If the conflict remains incapable of resolution by
reading down, the conflicting provisions shall be severed from the
document lower in the order of precedence without (to the extent
possible) otherwise diminishing the enforceability of the remaining
provisions of that document.
2. GRANT OF LICENCE
2.1 GRANT OF LICENCE
Anutech hereby grants to Praxis with effect on and from the
Commencement Date an exclusive licence, to:-
a) Exploit (within the Licensed Field) the Products and Processes in
the Territory utilising the ANU Intellectual Property; and
b) use the ANU Intellectual Property within the Licensed Field for
the purposes of further research and development and to Exploit
the results of such further research and development.
2.2 ANUTECH'S RIGHTS
Anutech and Praxis agree and acknowledge that during the Term, except
as set out in or permitted by this agreement Anutech shall not:-
a) Exploit the Products within the Licensed Field in the Territory
utilising the ANU Intellectual Property;
b) use the ANU Intellectual Property except for the purpose of its
own internal research.
3. ROYALTIES
a) In consideration for the grant of the Licence Praxis will pay to
Anutech a royalty of 2% of Net Revenue.
b) The obligation in clause 3(a) survives the termination of the
Licence and this Agreement.
4. REPORTS
4.1 REPORTING REQUIREMENTS
Praxis shall within 30 days of the end of each Royalty Period provide
to Anutech a written report setting out:
a) the total quantity of Products sold or provided by it and by its
Sub-Licensees;
b) the Net Revenue;
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ANUTECH/Praxis Page 6 of 6
<PAGE>
c) the calculation of the royalty payable, including details of the
currency conversion rates used, any taxes or other amounts
withheld and any adjustments on account of returns.
4.2 INTEREST
Praxis must pay Anutech interest on all amounts due under this
Agreement but unpaid, calculated at the rate applicable to overdrafts
charged by the Commonwealth Bank of Australia at the date of payment
from the due date until the date of payment, , calculated daily from
the due date. The payment of such interest shall not preclude Anutech
from exercising any other rights it may have because any payment is
overdue.
4.3 FOREIGN CURRENCIES
Praxis shall calculate royalties in local currencies and convert the
same to dollars at the ruling rate of exchange as on the last day of
the Royalty Period.
4.4 PAYMENT MECHANICS
The royalty payable to Anutech shall be paid to a bank account
nominated by Anutech in Canberra, Australia (or at such other location
in Australia as Anutech may stipulate from time to time) within sixty
days of the end of each Royalty Period.
4.5 PRAXIS TO KEEP ACCOUNTS AND RECORDS
Praxis shall keep for a period of 7 (seven) years after the end of the
Royalty Period to which they relate, true and particular accounts and
records of all sales of Products sufficient to verify Praxis'
calculation of Net Revenue and Products sold, the calculation of
royalty based thereon and conversion of such amounts into the relevant
currency.
4.6 INSPECTION OF ACCOUNTS
Anutech and its duly authorised representatives shall have the right to
inspect and audit from time to time the accounts and records referred
to in CLAUSE 4.6 and such other matters as are directly relevant to the
calculation of the amount of any payment due by Praxis to Anutech under
this agreement and shall be entitled to take copies of such records, on
the following conditions:-
a) inspection shall be limited to 2 times in any one Year;
b) inspections shall take place during normal business hours and
upon reasonable prior notice to Praxis;
c) employees of Anutech or its duly authorised representatives who
inspect such accounts and records must be suitably qualified
personnel reasonably acceptable to Praxis and shall:-
i) whilst inspecting such records and accounts, abide by all of
Praxis' standard rules and regulations;
ii) Anutech shall indemnify and hold Praxis harmless from all
liability resulting from any negligence or any other
activities on the part of Anutech's
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employees or duly authorised representatives inspecting such
records and accounts.
4.7 SETTLEMENT OF DISCREPANCIES
Anutech shall advise Praxis of the result of any audit conducted by it
pursuant to CLAUSE 4.6. If any discrepancy is found by Anutech then the
amount thereof shall by paid by the party that owes such amount within
7 days of demand therefor by the party due such amount.
4.8 COST OF AUDIT
Anutech shall bear the cost of any such examination unless an
underpayment of 5% or more in the amount of any royalty payment is
detected in which event Praxis will bear the expense of the
examination.
5. GST
The royalty does not include any amount on account of Tax. If any Tax
is payable by Anutech in relation to this Contract, ANUTECH WILL
INCREASE THE ROYALTY ON ACCOUNT OF THE TAX. Anutech will adjust the
royalty having regard to Part VB of the Trade Practices Act 1974(Cth).
6. EXPLOITATION OF LICENSED PATENTS
6.1 PRAXIS' OBJECTIVES
Praxis shall use reasonable endeavours at the expense of Praxis to:
a) Exploit Product, Process, and ANU Intellectual Property;
b) undertake either itself or through third parties further research
and development based on the ANU Intellectual Property; and
c) as and when required, undertake itself or through Related
Corporations, or enter into appropriate third party licensing or
marketing arrangements, to optimise the returns from sales of
Products, and to achieve Marketing of Products at the earliest
practicable and economically prudent date
and Praxis must:
d) at its cost obtain and maintain all Registrations necessary to
allow it to Exploit the ANU Intellectual Property and to
manufacture and sell Products;
e) ensure that each Product sold:
(i) is of merchantable quality;
(ii) is fit for the purpose for which it is acquired;
(iii) satisfies any conditions and warranties implied by
the law of that country in which it is sold; and
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(iv) complies with all laws and standards regulating
manufacture, assembly, labelling, packaging, storage
and sale in the country in which it is sold.
6.2 PRAXIS' SPECIFIC OBLIGATIONS
Further to its general obligations in CLAUSE 6.1 Praxis agrees to:-
a) on a 6 monthly basis provide to Anutech a written plan detailing
the steps proposed to be taken by Praxis in at least the next 12
months to achieve the objectives set out in CLAUSE 6.1, such plan
to include the budgeted expenditure for the next 12 months on
such activities in reasonable detail;
b) within 5 years of the Commencement Date, commence the sale of
Products either directly or through one or more Sub-Licensees ;
and
c) provide to Anutech a quarterly report as against prior plans and
budgets detailing all activities carried out by or on behalf of
Praxis pursuant to CLAUSE 6.1.
7. SUB-LICENSING
7.1 RIGHT TO SUB-LICENCE
Anutech grants to Praxis the right to sublicence ANU Intellectual
within the Licensed Field, subject to the prior written approval of
Anutech which shall not be unreasonably withheld.
7.2 SUB-LICENCE TERMS
Subject to CLAUSE 7.1, Praxis shall have the right to grant
sub-licences of the rights granted to it to third parties provided that
Praxis complies with the obligations set out in CLAUSE 7.2 and the
Sub-Licensee complies with the following:-
a) the third party being granted the sub-licence has the commercial
capacity to promote and Exploit the relevant Product with due
diligence and probity and has at least sufficient skills and
resources to comply with the obligations placed upon Praxis in
relation to that Product in the relevant country or countries;
b) the sub-licence is wholly consistent with the terms of this
Licence and in particular:
i) such sub-licence does not purport to extend or continue in
any circumstances where this Licence may be terminated; and
ii) the Sub-Licensee acknowledges that ANU owns the ANU
Intellectual Property;
c) the sub-licence prohibits the Sub-Licensee from taking any action
or allowing any action to be taken which detracts from the
ownership of the ANU Intellectual Property by ANU or conflicts
with the provisions contained in this Licence in relation to
prosecuting or defending the Licensed Patents or defending any
allegation of infringement of the ANU Intellectual Property other
than the Licensed Patents;
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d) the sub-licence is in the English language, executed by the
sub-licensee and giving its place of business;
e) the sub-licence requires the sub-licensee to maintain all books,
records and accounts necessary to enable verification of Net
Revenue and royalties and other amounts required to be paid by
Praxis to Anutech and to allow Anutech to inspect those books,
records and accounts on terms similar to those contained in
CLAUSE 4.5; and
f) the sub-licence limits the duration of the sub-licence in respect
of the ANU Intellectual Property for the term of this Agreement
and further provides for the sub-licence to terminate
automatically upon the termination of this Agreement.
7.3 RESEARCH LICENCES
Praxis shall be entitled to grant licences to third parties to the ANU
Intellectual Property for research purposes only on such terms and
conditions as it sees fit provided that Praxis protects its rights to
any commercially viable technology which may arise from such research.
8. CONFIDENTIAL INFORMATION
8.1 OBLIGATIONS OF THE PARTIES
Subject to CLAUSES 8.2(B) and 8.5, each party covenants with the other
as follows:
a) to keep all Confidential Information strictly secret and
confidential (including from all its employees, servants and
agents), exercising at least the same degree of care as it uses
to maintain its own confidential information;
b) to provide proper and secure storage for Confidential Information
within its possession or control;
c) to use Confidential Information only for the purposes of this
agreement and not for any other activity or purpose whatsoever
without the prior written approval of the other party; and
d) to not copy or reduce to writing or any other medium any part of
Confidential Information except as may be reasonably necessary
for the purposes of this agreement.
8.2 EXCEPTIONS TO OBLIGATIONS
a) The obligations of confidence set out in CLAUSE 8.1 shall not
extend to Confidential Information which:-
i) at the time of disclosure to a party is in the public
domain;
ii) after disclosure to a party becomes part of the public
domain otherwise than as a result of the wrongful act of
that party or one of that party's disclosees;
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iii) a party can show was in its possession at the time of
disclosure and was not acquired directly or indirectly from
the other party; or
iv) is received from a third party provided that it was not
acquired directly or indirectly by that third party from a
party to this agreement or under an obligation of
confidence; or
v) is required by compulsion of law to be disclosed,
provided that:
vi) the onus shall be on the party alleging the same to prove
that one of the above exceptions has application; and
vii) in any case of uncertainty as to whether the obligations in
CLAUSE 8.1 have application to any information, such
information shall be treated as subject to the obligations
until advised otherwise by the party to whom the obligations
are owed.
b) Prior to either party making any disclosure of information which
is prima facie Confidential Information in circumstances where
the party that intends to disclose the information is of the view
that one of the exceptions in CLAUSE 8.2(A) has application, it
shall notify the other party of the facts and circumstances by
virtue of which it believes that it is entitled to disclose the
information, and shall not disclose such information until either
14 days has elapsed or the other party has indicated its consent
to the disclosure of such information.
8.3 RIGHTS IN CONFIDENTIAL INFORMATION
Each party acknowledges and agrees that each other party has made a
substantial investment in that party's Confidential Information and has
a legitimate right to protect itself against wrongful disclosure or use
of such Confidential Information.
8.4 TERM OF OBLIGATION
The obligations in this CLAUSE 8 shall survive the expiry or
termination of this agreement for whatever reason and continue
indefinitely, subject always to the exceptions included in CLAUSE 8.2.
8.5 PERMITTED DISCLOSURES
Each party ("THE FIRST PARTY") shall be permitted to disclose
Confidential Information belonging to another party or supplied to it
by another party ("THE OTHER PARTY") to such of the first party's
employees as require access to such information for the purposes of
this agreement, provided that:
a) only such Confidential Information as needs to be disclosed to a
person for the purposes of this agreement will be disclosed to
that person; and
b) the first party shall:
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i) have obtained from each such person undertakings in favour
of the other party substantially in the form of the relevant
obligations and undertakings in this CLAUSE 8 (but not this
CLAUSE 8.5);
ii) be responsible for the performance of its employees'
undertakings referred to in CLAUSE 8.5(B)(I); and
iii) take whatever steps are reasonably necessary, including the
institution of legal proceedings, to ensure that each of its
employees is bound by and observes the terms of the
undertakings referred to in CLAUSE 8.5(B)(I).
8.6 FURTHER DISCLOSURE
Praxis shall be permitted to disclose Confidential Information to
actual and prospective Sub-Licensees to the extent that it deems
reasonably necessary for the purpose of carrying out of obligations
under this agreement, in particular the research, development,
Exploitation or Marketing of Products, Processes or the ANU
Intellectual Property, provided that:-
a) only such information as Praxis reasonably considers is necessary
for the relevant activity is disclosed; and
b) the recipient of such information agrees to treat such
information as confidential and an appropriate agreement to
protect the Confidential Information is executed.
9. USE OF NAME
Any proposed use of a party's name by the other in any published
material (including prospectus information) must be approved by the
other party in writing prior to release of that published material.
10. IMPROVEMENTS BY PRAXIS
Any Improvement invented, discovered or acquired by Praxis during the
Term shall be the property of Praxis and Praxis grants to ANU a royalty
free non-exclusive licence to use any such Improvement for the duration
of the Intellectual Property protection relating to such Improvement
but solely for the purpose of further internal research and not for any
commercial purpose.
11. ADDITIONS TO LICENSED PATENTS
Anutech agrees to advise Praxis promptly of the filing of any patent
application or of the issue of any patent which are legally or
beneficially owned by Anutech or ANU and which:-
a) are dominated by or dominate any patent or patent applications
otherwise included in Licensed Patents; or
b) relate to any Product or describe and claim any improvements in
or to any Product or methods or processes of making or using the
same,
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whereupon, Praxis shall have an option to have such patent included
within Licensed Patents, such option to be exercised by notice in
writing to Anutech within 3 months of notification to Praxis. If Praxis
does exercise its option then such patents or patent applications will
be included in Licensed Patents without increase in the earned royalty
rate specified in CLAUSE 3. If Praxis does not notify Anutech that it
wishes to exercise the option within the period of 3 months then Praxis
shall be deemed to have waived all rights and future rights to such
patents or patent applications. Anutech will then have a perpetual
unencumbered right to negotiate agreements relating to such patents or
patent applications with third parties.
12. LIABILITY
12.1 RESPONSIBILITY FOR PRODUCTS
Praxis shall ensure at all times during the Term that the Products are
manufactured, used and sold strictly in accordance with all relevant
applicable requirements and standards of relevant jurisdictions and
Praxis will be responsible for conducting its own independent
examination and verification of the accuracy and suitability of the ANU
Intellectual Property and for ensuring the Products are suitable for
the purposes for which they are provided.
12.2 ANUTECH AND ANU NOT LIABLE
Except as otherwise specifically provided in this agreement, the
Indemnified Parties shall not be liable (in contract or tort or
otherwise) to compensate Praxis for any loss howsoever arising suffered
by Praxis arising directly or indirectly from the use of the ANU
Intellectual Property or from the sale of Products.
13. INDEMNITIES AND INSURANCE
13.1 INDEMNITY BY PRAXIS
(a) Praxis agrees to indemnify the Indemnified Parties against and
hold the Indemnified Parties harmless from any and all loss,
liability, damage, claim, cost and expense (including without
limitation, reasonable attorney's fees) arising from or in
connection with:
(i) a breach by Praxis of any of its warranties or obligations under
this agreement;
(ii) the Exploitation of the Products by Praxis;
(iii) the storage, use, sale, shipping and Marketing of the Products by
Praxis;
(iv) any representations, express, implied or statutory made by Praxis
as to the efficacy or safety or use to be made by any purchaser
of the Products including, without limitation, representations
made by reference to the labelling or packaging or the Products;
provided that Praxis shall not be required to indemnify the Indemnified
Parties with respect to any loss, liability, damage, claim, cost or
expense to the extent it results from the Indemnified Parties'
negligence or breach of any of its warranties or obligations under this
agreement.
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(b) It shall be a term of any sub-licence granted by Praxis to any
sublease that the sublease agrees to the same extent and in the
same terms as the indemnities contained in CLAUSE 13.1 to
indemnify the Indemnified Parties and that the Sub-Licensee
specifically agrees that it will not challenge the standing of
the Indemnified Parties in the event of the Indemnified Parties
seeking to rely upon such indemnification.
13.2 INDEMNITY BY ANUTECH
Anutech agrees to indemnify Praxis against and hold Praxis harmless
from any and all loss, liability, damage, claim, cost and expense
(including without limitation, reasonable attorney's fees) arising from
or in connection with a breach by the Indemnifed parties of any of its
warranties or obligations under this agreement provided that Anutech
shall not be required to indemnify Praxis with respect to any loss,
liability, damage, claim, cost or expense to the extent it results from
Praxis' negligence or breach of any of Praxis' warranties or
obligations under this agreement.
13.3 NOTIFICATION REGARDING INDEMNITY
Any person seeking indemnity pursuant to CLAUSE 13.1 or 13.2 shall
promptly notify the relevant party of any claims or suits for which the
first person may assert indemnification from that party and shall
permit that party and its insurer at the person's expense to assume or
participate in the defence of any such claims or suits and the person
shall co-operate with the relevant party or its insurers in such
defence when reasonably requested to do so.
13.4 INSURANCE
a) Not less than 3 months prior to the commencement of Marketing of
any Product, Praxis shall at its own cost forthwith take out and
maintain during the balance of the Term one or more adequate
policies of insurance for the purposes of product liability
protection in respect of activities in respect of the Products in
the Territory for an amount not less $10,000,000.
b) Praxis shall provide Anutech with at least 30 days written notice
prior to any cancellation of a policy referred to CLAUSE 13.4(A)
and, upon request shall furnish Anutech with a certificate of its
insurer confirming the status of a policy taken out by Praxis.
c) Praxis shall procure that all of its Sub-Licensees shall maintain
adequate product liability and third party liability insurance in
respect of their activities pursuant to their respective
sub-licences.
14. TERM
Subject to CLAUSE 15, the term of this agreement the rights granted
hereunder shall continue for the life of the Licensed Patents, unless
otherwise earlier terminated pursuant to CLAUSE 6 (Exploitation of
Licensed Patents) or CLAUSE 15 (Termination) or extended by the written
agreement of the parties.
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15. TERMINATION
15.1 TERMINATION FOR BREACH
Subject to CLAUSE 15.5, if one party breaches any term, provision or
obligation of this agreement or the Research Funding Agreement (the
"DEFAULTING PARTY") and the Defaulting Party fails to:
a) remedy such breach within 90 days after receipt of notice from
the other party requiring remedy of the breach;
b) if the breach cannot be remedied within the said 90 day period,
commence action within the said 90 day period to remedy the
breach and undertake in writing to the other party to complete
remedy of the breach as soon as practicable thereafter; or
c) if the breach is incapable of remedy, offer to pay to the other
party reasonable pecuniary compensation to the other party in
respect of the loss suffered by it as a result of the breach,
the other party shall have the right to terminate this agreement
immediately upon the expiration of the said period of 90 days by
written notice to the Defaulting Party.
15.2 TERMINATION IN DEFAULT OF PAYMENT
Subject to CLAUSE 15.5 and notwithstanding anything contained in CLAUSE
20, this agreement may be forthwith terminated by a party by giving
notice to the other party if that other party defaults in the payment
of any money due by that other party to the first party under this
agreement and such default continues for a period of 30 days after
notice has been given to the other party demanding the payment of such
money.
15.3 TERMINATION FOR INSOLVENCY
Subject to CLAUSE 15.5 and notwithstanding anything contained in CLAUSE
15.1, this agreement may be terminated by a party giving notice to the
other party upon the happening of any of the following events in
respect of that other party:
a) the expiration of four weeks from the other party having a
receiver, manager, receiver and manager or agent in possession
validly appointed for the whole or any substantial part of its
assets or from a court order being validly made for the winding
up of the other party other than for the purpose of
reorganisation or reconstruction;
b) immediately a resolution of the other party's shareholders is
passed for the winding up of that party other than for the
purpose of reorganisation or reconstruction;
c) in the event that the other party files a petition in bankruptcy
or similar proceedings or is adjudicated bankrupt or if a
petition for bankruptcy or similar proceedings is filed against
the other party and is not stayed or discharged within 45 days of
such filing or if the party becomes insolvent or makes an
assignment for the benefit of creditors or enters into any
agreement, arrangement or composition pursuant to bankruptcy law
or otherwise acknowledges insolvency or is adjudged bankrupt or
if the other party discontinues business;
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d) any distress, execution, attachment or other process is made or
levied against any asset of the other party for an amount in
excess of $100,000.00 and remains outstanding or unsatisfied for
a period of 60 days; and
e) the other party is in breach of an undertaking given pursuant to CLAUSE
15.1(B).
15.4 RECONSTRUCTION EXCEPTION
A winding up or liquidation for the purposes of reconstruction or
amalgamation by the other party shall not be an event permitting or
giving rise to termination if after that reconstruction or amalgamation
the resulting corporation becomes bound by the terms of this Agreement
by way of assignment or novation.
15.5 TERMINATION TO BE WITHOUT PREJUDICE
Any termination of this agreement shall be without prejudice to the
rights which a party has against the other in respect of anything done
or omitted to be done hereunder prior to such termination or in respect
of any sums or other claims outstanding at the time of termination.
15.6 PRAXIS CHOOSES NOT TO EXPLOIT THE ANU INTELLECTUAL PROPERTY
The parties agree to the following:
a) if Praxis reports to Anutech, or Anutech reasonably considers,
that Praxis has not Exploited the ANU Intellectual Property in
accordance with this Agreement, either generally or in some
particular respect, Praxis and Anutech will meet and conduct
discussions in good faith with a view to agreeing a mechanism for
making the ANU Intellectual Property available to Anutech for
further development and Exploitation, either by Anutech on its
own or with or through other parties;
b) without limiting the ways that Praxis and Anutech might agree
that the ANU Intellectual Property are to be made available to
Anutech, examples include an assignment and a licence (whether
exclusive or non-exclusive);
c) where it is agreed between Praxis and Anutech that the ANU
Intellectual Property are to be made available to Anutech under
this arrangement, Praxis and Anutech will seek to agree a method
for compensating Praxis to the extent that Praxis' activities
pursuant to this agreement produced or funded the production of
the ANU Intellectual Property and are likely to contribute to any
anticipated Exploitation;
d) without limiting the ways that Praxis and Anutech might agree
that Praxis is to be compensated, the compensation ought to take
account of the parties' respective contributions, receipts and
risks which have been or are to be made or taken before, during
and after the date of proposed transition; and
e) non agreement in relation to the Exploitation of the ANU
Intellectual Property or the method of compensating the Licensee
shall not in any way affect the Licensee's right to the
Improvements.
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16. OBLIGATIONS AND RIGHTS ON TERMINATION
16.1 OBLIGATIONS OF PRAXIS
Immediately upon termination or expiration of this agreement, Praxis
shall:
a) pay all outstanding balances due under this agreement up to the
date of termination;
b) remove all signs, advertising displays, labels and the like
identifying Praxis as a licensee of the ANU Intellectual Property
; and
c) at Anutech's option and request to terminate or assign to Anutech
any sub-licence granted by Praxis hereunder.
16.2 OBLIGATIONS OF ANUTECH
Immediately upon termination or expiration of this agreement, Anutech
shall:
a) as soon as conveniently possible reconcile all accounts relating
to Praxis; and
b) accept all outstanding balances within existing terms of
settlement.
17. WARRANTIES
17.1 GENERAL WARRANTIES
Each party represents and warrants to the other that:
a) it has all necessary powers and authorisations necessary to enter
into this agreement and observe its obligations hereunder and
allow this agreement to be enforced against it;
b) this agreement does not contravene any law, regulation or
official directive or any obligations or undertakings by which it
or any of its assets are bound or cause a limitation on its
powers to be exceeded;
c) there does not presently exist any event which would either now
or with the effluxion of time entitle the other party to
terminate this agreement pursuant to CLAUSE 15.3;
d) it is not a party to any pending or threatened action or
proceeding affecting it or any of its assets before a court,
governmental agency, commission or arbitrator where an adverse
outcome could reasonably be expected to adversely impact upon the
performance of its obligations under this agreement; and
e) it has no immunity from the jurisdiction of a court or from legal
process (whether through service of notice, attachment prior to
judgment, attachment in aid of execution, execution or
otherwise).
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17.2 SPECIFIC WARRANTIES IN RESPECT OF ANU INTELLECTUAL PROPERTY
Anutech warrants and covenants that in respect of ANU Intellectual
Property either:
a) ANU is the sole legal and beneficial owner; or
b) ANU has such rights to the ANU Intellectual Property, as will
enable ANUTECH to perform its obligations under this Agreement.
Anutech makes no warranty as to whether the US Patent 5520926 (and
corresponding international patents or applications) in the name of
British Technology Group Limited infringes the ANU Intellectual
Property. Anutech makes no representations or warranties as to the
accuracy or completeness of ANU Intellectual Property.Due diligence
17.3 Praxis warrants that it has undertaken a due diligence examination of
the ANU Intellectual Property and warrants that it satisfied itself as
to ANU's rights to and the validity of the ANU Intellectual Property,
in particular the patents and patent applications set out in Schedule
1.
18. PROTECTION OF LICENSED PATENTS
18.1 MAINTENANCE OF THE LICENSED PATENTS
With respect to the existing ANU Intellectual Property and patent applications:
a) Anutech will prosecute and maintain the patents and patent
applications with the relevant patent offices and Praxis will
provide all reasonable assistance requested by Anutech at Praxisi
expense;
b) Praxis shall reimburse Anutech for one third of any costs
incurred in filing, maintaining and renewing the Licensed Patents
and patent applications whether incurred before and after the
date of this Agreement; and
c) Praxis may recommend the countries in which patent applications
are to be filed in the name of the ANU.
18.2 INFRINGEMENTS
(a) A party shall promptly report to the other in writing particulars
of any action or activity of which the first party becomes aware
which might reasonably amount to infringement of or challenge to
any of the ANU Intellectual Property.
(b) In the event of any patent, the subject of this Agreement, being
infringed Praxis may at its own cost and in its own name litigate
such infringement and may settle or compromise such litigation in
such a manner as Praxis shall determine provided that Praxis
shall consult with Anutech in good faith in relation to those
proceedings.
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18.3 ENFORCEMENT
(a) In the event that litigation is taken or threatened by a third
party against any rights associated with any patents the subject
of this Agreement, the parties shall consult in good faith and
use their best endeavours mutually to determine the manner in
which these proceedings are to be defended or resisted and to act
accordingly provided always that the parties shall first seek the
opinion of counsel experienced in such matters.
(b) In any litigation, Anutech shall cooperate with Praxis in making
available all relevant records, papers, information and the like
which may be relevant and in its possession.
18.4 LICENSEE'S PROCEEDINGS
Upon the commencement of proceedings by Praxis and during the pendency
thereof:
a) Praxis shall continue to make royalty reports to Anutech pursuant
to CLAUSE 4.1 but shall accrue and shall not be obliged to pay
royalties on sale of Products in any and all countries in which
the infringement or challenge is occurring (other than in respect
to sales made prior to the date of first infringement which
otherwise attracted a royalty obligation which has not previously
been satisfied) until the successful termination of such
proceedings or cessation of the infringement or challenge occurs
Praxis must pay any royalties retained under this clause into a
separate bank account on trust for Praxis and Anutech;
b) Anutech shall furnish to Praxis, upon the request of Praxis, all
evidence and information in its possession and control pertaining
to any such proceedings and Anutech shall join therein on a
non-controlling basis to the extent requested by Praxis. If the
furnishing of evidence and information as aforesaid is likely to
involve Anutech in any material expense Praxis will enter into
negotiations in good faith with a view to reaching a reasonable
agreement as to the extent to which Anutech should be reimbursed
therefor;
c) if Praxis receives a Final Judgment holding all applicable claims
of Licensed Patents being infringed invalid, or holding adversely
as to inventorship of such Licensed Patents or construing all
applicable claims of such Licensed Patents so as not to apply to
Products for which royalties have been accrued by Praxis, then
all moneys withheld under CLAUSE 18.5(A) may be paid to Praxis
for its own benefit absolutely otherwise Praxis shall pay the
same to Anutech forthwith upon receipt of Final Judgment (less
any amounts Praxis is entitled to deduct under CLAUSE 18.5(E);
d) upon any successful completion such proceedings, or upon
cessation of such infringement or challenge, the amounts of any
judgment or settlement of past infringement or challenge actually
paid to Praxis shall be firstly applied to reimburse Praxis for
its costs and expenses in prosecuting such proceedings and the
balance, if any, shall subject to amount which may be due to
Anutech be retained by Praxis; and
e) if the amount of any such judgment or settlement is insufficient
to cover Praxis' costs and expenses in prosecuting such
proceedings, then the costs and expenses of Praxis, or the
remainder thereof (as the case may be) will be reimbursed to
Praxis out of payments withheld pursuant to CLAUSE 18.5(A) and,
if necessary, out of any
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and all future royalty payments which would otherwise become
payable by Praxis to Anutech in respect to sales of Products in
any country referred to in CLAUSE 18.5(A).
19. INFRINGEMENT OF OTHERS RIGHTS
If a legal action is commenced against Praxis alleging that any Product
manufactured sold exercised or used by Praxis or any of its
Sub-Licensees or any method of manufacture of same or use thereof
infringes claims of an unexpired patent, patent application or other
intellectual property right owned by a third party, Praxis shall
promptly notify Anutech of the commencement of legal action. Anutech,
in its sole discretion, may choose to defend and/or assist in the
defence of such litigation but shall not be obligated to do so.
However, Anutech shall (at the expense of Praxis) assist Praxis'
efforts to settle and/or defend such claims. If Anutech does not choose
to defend such an action, Praxis shall bear all its own costs and
expenses and shall be responsible for awards against it only to the
extent that indemnification, warranties and other claims may not be
available against Anutech. If any amounts are recovered by or awarded
or paid to Praxis from or by a third party as a result of any such
action or litigation, Praxis shall from such amounts reimburse Anutech
for all costs and amounts paid by Anutech in connection with such
action or litigation and shall, after deducting the legal costs
incurred by it in taking such legal or other action, pay to Anutech
from any compensation recovered thereby, Anutech's part thereof
determined in accordance with the respective interests of the parties
in such compensation.
20. CONSTRUCTION OF PATENTS
If, in any proceedings in which the validity, infringement or priority
of any claim of any patent or patent application included in Licensed
Patents is in issue, a Final Judgment is obtained, the construction
placed upon any such claim by such a final judgment shall be thereafter
followed not only as to such claim but as to all claims to which such
construction applies with respect to acts occurring thereafter.
21. WITHHOLDING TAXES
If Praxis is legally obliged to deduct or withhold any tax from any
payment, in particular any royalty payment, to be made to Anutech
hereunder, Praxis shall on request provide Anutech with receipts and
any other evidence from relevant revenue authorities which may be
required by Anutech for its own tax affairs and Praxis shall not be
required to gross up any such amount.
22. ASSIGNMENT
A party shall not assign any rights hereunder to third parties,
provided that Anutech shall not withhold its consent to an assignment
by Praxis if:
a) the assignment is to:
i) a Related Corporation of Praxis; or
ii) a person who is reasonably acceptable to Anutech having
regard to the government policy to which it or ANU is
subject; and
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ANUTECH/Praxis Page 20 of 20
<PAGE>
b) the assignment binds assignee to perform, in favour of Anutech,
each and everyone of the obligations of Praxis.
23. NOTICES
23.1 FORM OF NOTICE
Any notice, approval, consent or other communication ("NOTICE") from
one party to another ("RECIPIENT") must be in writing and be signed by
a person duly authorised by the person giving the notice.
23.2 MANNER OF SERVICE
A notice must be served by:-
a) leaving it at the Recipient's address;
b) sending it by ordinary pre-paid post (airmail if being sent from
or to a place outside of Australia) to the Recipient's address;
or
c) sending it by facsimile to the facsimile number of the Recipient.
23.3 ADDRESS FOR SERVICE
Until other details are specified by a Party as its address or
facsimile number for service the following shall apply:-
ANUTECH
Address : Corner Barry Drive and Daley Roads,
Australian Capital Territory, Australia 2601
Postal Address : GPO Box 4
Canberra ACT 2601
Facsimile : 6257 1433
Attention : Dr Chris Scott
PRAXIS
Address :
Postal Address :
Facsimile :
Attention :
23.4 TIME OF SERVICE
A letter or facsimile shall be taken to be served:-
a) in the case of a delivered letter, on the day of delivery, unless
delivery is made on a non Business Day or after 4:30 p.m. on a
Business Day, in which case it shall be taken to be served on the
next Business Day;
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ANUTECH/Praxis Page 21 of 21
<PAGE>
b) in the case of a posted letter, on the third (or seventh in the
case of airmail) Business Day after posting; and
c) in the case of a facsimile, on receipt by the party giving the
notice of a transmission confirmation report, unless within one
Business Day of receipt the Recipient has informed the party
giving the notice that the transmission was incomplete or
garbled, provided that in any case if transmission is completed
after 4:30 p.m. (local time in the place of receipt) or is
received on a non Business Day, the notice shall be taken to be
served on the next Business Day.
24. FORCE MAJEURE
No party shall be responsible or liable to the any other party for, nor
shall this agreement be terminated as a result of any failure to
perform any of its obligations hereunder (with the exception of payment
of monies due and owing), if such failure results from circumstances
beyond the control of such party, including, without limitation,
requisition by any government authority or the effect of any statute,
ordinance or governmental order or regulations, wars, strikes,
lockouts, riots, epidemic disease, act of god, civil commotion, fire,
earthquake, storm, failure of public utilities, common carriers or
suppliers, or any other circumstances, whether or not similar to the
above causes. The parties shall use reasonable efforts to avoid or
remove any such causes and shall resume performance under this
agreement as soon as feasible whenever such cause is removed; provided
however that the foregoing shall not be construed to require a party to
settle any labour dispute or to commence, continue or settle any
litigation.
25. RESOLUTION OF DISPUTES
a) A party must not start arbitration or court proceedings (except
proceedings seeking interlocutory relief) about a dispute arising
out of this agreement ("DISPUTE") unless it has complied with
this clause.
b) A party claiming that a Dispute has arisen must notify the other
party to the Dispute giving details of the Dispute
("NOTIFICATION").
c) On receipt of a Notification each party must refer the Dispute
for resolution by its Chief Executive Officer or the CEO's
nominee.
d) If the parties are unable to resolve the Dispute in accordance
with CLAUSE 25 the parties must use their best efforts during the
following 7 days to agree on:
i) a process to resolve all or at least part of the Dispute
without arbitration or court proceedings (eg. mediation,
conciliation, executive appraisal or independent expert
determination);
ii) the selection and payment of any person ("MEDIATOR") to be
engaged by the parties for, and the involvement of any
dispute resolution organisation in, the process;
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ANUTECH/Praxis Page 22 of 22
<PAGE>
iii) any procedural rules;
iv) the timetable, including any exchange of relevant
information and documents; and
v) the place where any meetings will be held.
e) The role of any Mediator will be to assist in negotiating a
resolution of the Dispute. A decision of any Mediator is not
binding on a party unless that party has so agreed in writing.
f) Each party must bear its own costs of resolving a Dispute under
this clause and the parties to the Dispute must bear equally the
costs of any Mediator engaged and independent premises used for
the mediation.
g) If the Dispute is not resolved within 30 days after the
Notification, a party that has complied with CLAUSE 25 may
terminate the dispute resolution process by giving notice to the
other party to the Dispute.
h) If a party to a Dispute does not comply with any provision of
CLAUSE 25 the other party to the Dispute will not be bound by
that clause..
26. GENERAL
26.1 GOVERNING LAW
This agreement shall be construed in accordance with and governed by
the laws of the Australian Capital Territory, Australia and its form,
execution, validity, construction and effect shall be determined in
accordance with the laws of the Australian Capital Territory and the
parties hereby submit themselves to the jurisdiction of the courts in
and of that Territory.
26.2 ENTIRE AGREEMENT
Except as set out herein, this agreement constitutes the entire
agreement of the parties (and into which all prior negotiations,
commitments, representations and undertakings with respect to the
subject matter are merged) and there are no other oral undertakings,
warranties or agreements between the parties relating to the subject
matter of this agreement and this agreement is not based upon any
representations as to profit or worth nor has any representation been
made (whether by this agreement or otherwise) to induce Anutech or
Praxis to accept and execute this agreement.
26.3 VARIATIONS
Any modification, alteration, change or variation of any term or
condition of this agreement shall be only made in writing, executed by
all parties.
26.4 SEVERABILITY
This Agreement is severable and is deemed to apply separately as to
each country comprising the Territory. A material breach of this
Agreement in respect of one or more countries in the Territory shall
not affect the validity or enforceability of this Agreement as to the
other countries comprising the Territory. If any provision shall be
held invalid or unenforceable, in
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ANUTECH/Praxis Page 23 of 23
<PAGE>
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall only affect such provision or part thereof in
such jurisdiction, and shall not in any manner affect the provision in
this Agreement in any other jurisdiction. To the extent legally
permissible an arrangement which reflects the original intent of the
parties shall be substituted for such invalid or unenforceable
provision.
26.5 RELATIONSHIP OF PARTIES
Nothing contained in this agreement shall be construed so as to operate
or to place any party hereto in the relationship of principal employee,
agent, partner, joint venturer or legal representative of any other
party and it is hereby expressly agreed and acknowledged that each of
the parties hereto is an independent contracting party and does not
have the authority or power for or on behalf of any other party hereto
to enter into any contract, to incur debts, to accept money, to assume
any obligations or to make any warranties or representations
whatsoever.
26.6 STAMP DUTY AND COSTS
Each of the parties hereto shall bear its own legal costs of and
incidental to the preparation of this agreement or any agreement
entered or document executed pursuant to or to give effect to this
agreement. Praxis shall pay stamp duty (if any) payable on this
agreement and on any agreement entered into or document executed
pursuant to or to give effect to this agreement.
26.7 ADDITIONAL DOCUMENTS
Each party agrees that it will forthwith upon the request of the other
party execute and deliver all such instruments and agreements and will
take all such other actions as the other party may reasonably request
from time to time in order to give effect to the provisions and
purposes of this agreement.
26.8 WAIVER
The failure of any of the parties to insist upon a strict performance
of any of the terms and provisions herein shall not be deemed a waiver
of any subsequent breach or default of any of the terms or provisions
of this agreement.
26.9 REGISTRATION OF AGREEMENT
If this Agreement or any associated transaction is required by the law
of any country to be either approved or registered in any country or
with any governmental agency, Praxis shall be responsible for obtaining
such approval or registration including without limiting the generality
of the foregoing, causing the Agreement to be stamped, recorded and
registered at its cost in each country within the Territory. Anutech
agrees to co-operate in any such application or registration procedure.
Praxis shall furnish proof of compliance with the foregoing to Anutech
when and if Anutech so requires.
26.10 NOT OBLIGED TO ACT CONTRARY TO LAW
No party shall be obligated to carry out or perform any of the terms of
this agreement where such carrying out or performance would constitute
a violation of any treaty, law, code or regulation of any governmental
authority whether local, national or supranational. In any event the
other terms of this agreement shall nevertheless continue and the
parties shall use all
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ANUTECH/Praxis Page 24 of 24
<PAGE>
reasonable endeavours to re-negotiate and amend this agreement so that
the performance of this agreement as so amended will not involve any
such violation.
26.11 STATUS OF ANUTECH
Anutech warrants and covenants that it enters into this agreement as
agent for and on behalf of ANU having full power and authority so to
do, and with the express consent of ANU, to the intent that each and
every of the warranties, covenants, terms and conditions of this
agreement are given by Anutech in its own
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ANUTECH/Praxis Page 25 of 25
<PAGE>
IN WITNESS: this Agreement shall be duly executed and shall commence from
the Commencement Date:-
The COMMON SEAL of )
PRAXIS PHARMACEUTICALS AUSTRALIA PTY )
LIMITED was hereunto affixed in accordance )
with its constitution in the presence of: )
/S/ BRETT CHARLTON /S/ W. B. COWDEN
Director/Secretary Director
BRETT CHARLTON W.B. COWDEN
Name Name
The COMMON SEAL of )
ANUTECH PTY LIMITED )
was hereunto affixed in accordance )
with its constitution in the presence of: )
/S/ T. SARTESCHI /S/ JOHN D. BELL
Director/Secretary Director
T. SARTESCHI
COMPANY SECRETARY John D. Bell
ANUTECH PTY LTD MANAGING DIRECTOR
Name Name
<PAGE>
SCHEDULE 1 - LICENSED PATENTS
PHOSPHOSUGAR-BASED ANTI-INFLAMMATORY AND/OR IMMUNOSUPPRESSIVE DRUGS
i International Application No. PCT/AU89/00350
i Inventors - William Cowden, Christopher Parish, David Willenborg
i Priority date - 18 August 1988
i International filing date - 18 August 1989
i ANUTECH reference 140
COUNTRY APPLICATION NO. PATENT NO. STATUS
Australia 41875/89 627500 granted
Europe 89909685.3 0429522 granted
Japan 509079/89 examination requested
USA 988001 5506210* granted
USA-continuation discontinued
* date of grant = 9 April 1996
NOVEL PHOSPHOSUGARS AND PHOSPHOSUGAR-CONTAINING COMPOUNDS HAVING
ANTIINFLAMMATORY ACTIVITY
i Inventors - William Cowden, Christopher Parish, David Willenborg
i Priority date - 18 October 1996
i ANUTECH reference 278
COUNTRY APPLICATION NO. PATENT NO. STATUS
Australia PO3098/96 INT on 18 October 1997
Australia 41866/97 examination requested
USA 08/953305 examination requested
<PAGE>
<PAGE>
EXHIBIT 10.3
LICENCE AGREEMENT DATED OCTOBER 14, 1999 BETWEEN
ANUTECH PTY LTD. AND PRAXIS PHARMACEUTICALS INC.
<PAGE>
PRAXIS PHARMACEUTICALS INC.
and
ANUTECH PTY LIMITED
----------------------------------
LICENCE AGREEMENT
----------------------------------
PRAXIS Pharmaceuticals Inc.
GPO Box 1978
Canberra, ACT 2601
Australia
Tel: (02) 6249 2939
Fax: (02) 6279 9758
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS AND INTERPRETATION.......................................1
2. GRANT OF LICENCE.....................................................4
3. LICENCE CONSIDERATION................................................4
4. LICENCE TERM.........................................................4
5. PERFORMANCE OF PRAXIS................................................4
6. RIGHT TO SUBLICENSE..................................................5
7. GST..................................................................5
8. OWNERSHIP............................................................6
9. PROTECTION OF PATENTS................................................6
10. INFRINGEMENT AND ENFORCEMENT OF PATENTS..............................7
11. REPORTS, PAYMENTS AND ACCOUNTING.....................................7
12. CONFIDENTIALITY......................................................8
13. PUBLICATION..........................................................9
14. USE OF NAME..........................................................9
15. INDEMNITY AND INSURANCE..............................................9
16. WARRANTIES..........................................................10
17. ASSIGNMENT, TRANSFER................................................11
18. TERMINATION.........................................................11
19. MISCELLANEOUS PROVISIONS............................................12
20. TERMINATION OF LICENCE AND RESEARCH & DEVELOPMENT AGREEMENT.........15
21. SCHEDULE 1 - ANU Intellectual Property..............................17
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
THIS AGREEMENT IS MADE ON THE 14TH DAY OF OCTOBER 1999
BETWEEN:
ANUTECH PTY LIMITED, ACN 008 548 650 with its registered office at
ANUTECH Court, Cnr Barry Drive and Daley Road, Acton, Australian
Capital Territory, Australia 2601 ("ANUTECH").
AND:PRAXIS PHARMACEUTICALS INC., a company incorporated in Utah with its office
at Suite 600, 595 Hornby Street, Vancouver, BC, Canada ("Praxis").
RECITALS:
A. Praxis was incorporated on 20 June 1997 with the intention that it raise
capital, acquire intellectual property and research, develop and
commercialise pharmaceuticals.
B. ANU possesses intellectual property in the area of phosphosugars and
their analogues as anti-inflammatory agents.
C. Praxis wishes to license the ANU intellectual property in order to
undertake further research and development and commercialisation of the
intellectual property.
D. In accordance with the terms and conditions set forth in this agreement,
ANUTECH is willing to grant such a licence to Praxis with its term
dependant on Praxis achieving research and commercialisation milestones.
E. ANUTECH is the commercial subsidiary of the ANU and regularly provides
services to its clients by engaging the services of the ANU.
IT IS AGREED AS FOLLOWS:
DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless there is something inconsistent with the
context, the following terms and expressions shall have the following
meanings:
"AFFILIATE" means, in relation to a person, the person's related bodies
corporate (within the meaning of the Corporations Law), entities who are
partners or joint venturers of or trustees for the person or with whom
the person is acting in concert and the directors agents, officers and
employees of the person or any of those related bodies corporate or
entities.
"ANU INTELLECTUAL PROPERTY" means the following intellectual property
owned by the ANU:
(a) Intellectual Property in relation to phosphosugars and their
anti-inflammatory activity; and
(b) the patents and patent applications set out in Schedule 1, including
all divisions, continuations, continuations-in-part, renewals,
extensions and additions thereof.
"COMMENCEMENT DATE" means the day of 1999.
"CONFIDENTIAL INFORMATION" means any information whether written, oral,
electronic or in any other form which is disclosed by a party or its
representatives, is claimed as
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
confidential to itself and which relates to the ANU Intellectual
Property, Research, Results, Products, Agreement and business of the
parties. It includes all copies and notes generated from the disclosure
but does not include information which:
(a) is in the public domain at the time of disclosure;
(b) becomes a part of the public domain after disclosure, otherwise than
as a result of any unauthorised activity and/or omission on the part
of the recipient;
(c) the recipient can prove is already in its own possession at the time
of disclosure and which was not acquired from the other party
directly or indirectly;
(d) is rightfully acquired from a third party who did not obtain it
under an obligation of confidentiality; or
(e) is legally required to be disclosed - the party required to make
disclosure shall notify the other to allow that party to assert
whatever exclusions are available.
"DOLLAR", "DOLLAR" OR "$" means Australian dollars unless otherwise
indicated.
"FIELD" means the use of phosphosugars as neutriceuticals, complementary
medicines or cosmetics for the treatment of any applicable condition and
expressly excludes:
(a) the use of phosphosugars as ethical therapeutics; and
(b) topical application for wound care; and
(c) use of fructose-1,6-diphosphate, administered non-topically, for the
treatment or prophylaxis of ischaemic disorders in humans, which
includes transplantation and immunosuppression.
"GST" means a tax on goods and services as defined by Commonwealth
legislation.
"INTELLECTUAL PROPERTY" shall mean all intellectual property rights and
includes:
(a) Trade Marks: means any trade mark or trade name whether registered
or not under, or by reference to which, a product or service is
known;
(b) Patents: meaning any patents or patent applications including all
divisions, continuations, renewals, extensions and patents of
addition thereof which have been or are in the future filed and
granted as a patent;
(c) Copyright subsisting in any form or manner whether written or stored
in any form (whether visible or not) including without limitation
brochures, design logos, insignia, computer programs, software,
firmware and hardware;
(d) Designs (whether or not registered); and
(e) Know-How: meaning the unpatented, technical information, processes,
formulae, technical and technological documentation, reports,
computer programs, biological materials, procedures or methods, all
current and accumulated knowledge, skills and experience.
"NET SALES" means:
(a) for an arms length sale of any Product means the gross amount
invoiced by Praxis, or its Affiliates less the following:
(i) transport and insurance related charges actually allowed and
taken;
(ii) trade, quantity or cash discounts or rebates actually
allowed and taken;
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
(iii)credits or allowances given or made on account of price
adjustments, recalls or destruction requested or made by an
appropriate government agency; and
(iv) any tax (excluding income tax), excise or other government
charge upon or measured by the sale, transportation,
delivery or use of the Product which is actually incurred by
the seller.
(b) for a non-arms length sale, means the highest of the most recent
Net Sales at which Praxis, its Affiliates, its subsidiaries,
joint venturers licensees or agents has sold similar quantities
of Products in an arms length sale.
"PRODUCTS" means any matter, article or thing which incorporates or
arises from the whole or partial use of ANU Intellectual Property or
Results.
"RESULTS" means all Intellectual Property, materials (including
substances, compounds, biological material, products, samples and
devices) in whatever form and information however known or recorded
(including trade secrets, processes, techniques, designs, plans, data,
test results, findings, evaluations and reports) generated as a result
of any exploitation of or in any connection with any research and
development conducted at the ANU within the Field.
"SUBLICENSE FEES" means all payments to Praxis in consideration for
rights to the ANU Intellectual Property, Results and Products pursuant
to a sublicence, assignment, joint venture, strategic alliance or other
arrangement.
Sublicence Fees shall not include:
(a) fees for research and development undertaken by Praxis including for
example preclinical research and clinical studies; nor
(b) the royalty percentage above that is required to be paid by Praxis
pursuant to clause 3 (License Consideration).
1.2 In this Agreement unless the contrary intention appears:
(a) a reference to a clause, schedule, attachment, annexure or appendix
is a reference to a clause of or schedule, attachment, annexure or
appendix to this Agreement and references to this Agreement include
any recital, schedule annexure, attachment, or appendix;
(b) a reference to this Agreement or another instrument includes any
variation or replacement of either of them;
(c) a reference to a statute, ordinance, code or other law includes
regulations and other instruments under it and consolidations,
amendments, re-enactments or replacements of any of them;
(d) the singular includes the plural and vice versa;
(e) if a period of time is specified and dates from a given day or the
day of an act or event, it is to be calculated exclusive of that
day;
(f) if an event must occur on a stipulated day which is not a business
day, then the stipulated day will be taken to be the next business
day;
(g) headings are inserted for convenience and do not affect the
interpretation of this Agreement;
(h) words importing any one gender shall mean and include masculine,
feminine and/or neuter where appropriate;
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
(i) words importing natural persons shall (where appropriate) mean and
include corporations and unincorporated associations and vice versa;
(j) schedules and attachments form part of and are incorporated in this
Agreement.
(k) no provision of this Agreement will be construed adversely to a
party solely on the ground that the party was responsible for the
preparation of this agreement or that provision; and
(l) an expression importing a natural person includes any company,
partnership, joint venture, association, corporation or other body
corporate and any government, governmental, administrative, judicial
or semi-governmental agency or body.
1.3 For the avoidance of doubt the recitals to this Agreement shall form
part of this Agreement and in the event of any inconsistency between the
recitals and the other provisions of this Agreement the other provisions
of this Agreement shall prevail.
GRANT OF LICENCE
1.4 ANUTECH grants to Praxis an exclusive, worldwide licence to use and
exploit the ANU Intellectual Property and Results within the Field,
including the right to sublicense pursuant to clause 6 (Right to
Sublicense).
LICENCE CONSIDERATION
1.5 In consideration for the grant of the licence Praxis will pay to ANUTECH:
a) a 4% royalty on Net Sales of Products by Praxis;
b) 50% of all royalty income on Net Sales of Products received from
sublicensees;
c) 15% of all Sublicence Fees.
d) ANUTECH shall maintain the right to hold 300,000 shares issued to
ANUTECH 31 March 1999. These shares will be held in escrow for a
period of 12 months from the date of issue.
1.6 The obligation in clause 3.1 survives the termination of the licence in
clause 2.1 or this Agreement.
LICENCE TERM
1.7 The Licence in clause 2.1 commences upon the Commencement Date and ends
on the expiration of the last to expire of the patents covered by this
Agreement, unless otherwise earlier terminated pursuant to clause 5
(Performance of Praxis) or clause 18 (Termination).
PERFORMANCE OF PRAXIS
1.8 If Praxis fails to comply with the following performance milestones,
ANUTECH has at its election the right to terminate this Agreement in
accordance with clause 18(Termination).
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.9 Commercialisation milestones
a) Praxis shall use best efforts to commercialise the ANU Intellectual
Property and Results by undertaking an ongoing and active research,
developmental, manufacturing, marketing, licensing or capital
raising program, as appropriate, directed toward the exploitation of
the ANU Intellectual Property and Results within the Field.
b) Part of these best efforts includes Praxis providing to ANUTECH as
soon as practicable a business plan (and any updates thereafter)
which addresses Praxis's capacities, objectives and strategies for
such a commercialisation program.
c) Praxis shall also provide ANUTECH with an annual written report (on
the anniversary of the Commencement Date) on its progress towards
achieving these commercialisation milestones.
RIGHT TO SUBLICENSE
1.10 ANUTECH grants to Praxis the right to sublicence ANU Intellectual
Property and Results within the Field, subject to:
a) the prior written approval of ANUTECH which shall not be
unreasonably withheld;
b) the sublicensee being bound to similar terms as contained in this
Agreement; and
c) the royalty and Sublicence Fee stream provided for in clause 3
(Licence Consideration) are reserved.
GST
1.11 The parties acknowledge that this Agreement, including all pricing and
compensation terms, whether by way of reimbursement, indemnity or
otherwise has been drafted without taking into account the effect, if
any, of GST. The following principles apply when determining the amount
(including royalties) payable (the Payment) for any rights, services, or
any other thing granted or supplied pursuant to this Agreement.
1.12 If GST is payable in relation to the granting of rights, supply of
services or any other thing, the Payment will be the consideration
specified herein plus GST (if any).
1.13 If the Payment is determined by reference to any cost, expense or
liability incurred by a party (the Payee), the reference to cost,
expense or liability means the actual amount incurred by the Payee less
the amount of any GST input tax credit the Payee is entitled to claim in
respect of that cost, expense or liability. The Payee will be assumed to
be entitled to claim full input tax credits unless it demonstrates that
its entitlement is otherwise prior to the date on which the Payment must
be made.
1.14 If the Payment is a reimbursement or indemnification of a loss
determined (including a percentage of sales revenue) by reference to
revenue received and costs incurred, the revenue will be the revenue
earned net of GST and the costs will be determined in accordance with
clause 7.3.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.15 If a party sets off an amount otherwise payable under this Agreement,
the principles set out above shall be applied to calculate the amount to
be set off as if that amount had been paid.
1.16 Each party agrees to do all things, including providing invoices or
other documentation containing stipulated information, that may be
necessary or desirable to enable or assist the other party to claim any
credit, set off, rebate or refund in relation to any GST included in any
payment made under this Agreement.
OWNERSHIP
1.17 The following shall be owned by the ANU and licensed to Praxis pursuant
to the terms of this Agreement:
a) improvements to ANU Intellectual Property ; and
b) new patents and patent applications arising from the use of ANU
Intellectual Property.
PROTECTION OF PATENTS
1.18 With respect to the existing ANU Intellectual Property patents and
patent applications:
a) the parties shall cooperate in the prosecution and maintenance of
the patents and patent applications with the relevant patent
offices;
b) from the Commencement Date, one third of any past and future costs
and expenses incurred in their filing, maintenance and renewal shall
be borne by Praxis;
c) Praxis may select the countries in which patent applications are to
be filed in the name of the ANU; and
d) if Praxis decides not to request patent protection for an invention
in any country, ANU may file or maintain at its own cost patent
applications which Praxis has declined to file or maintain, and such
patent applications or granted patents shall lie outside the
provision of this Agreement.
1.19 With respect to any new patentable inventions arising from the Results
and use of ANU Intellectual Property:
a) Praxis may request ANUTECH to file and prosecute a patent
application, in ANU's name, for the invention or agree to treat the
invention as a trade secret;
b) the parties shall cooperate in the prosecution and maintenance of
the patents and patent applications with the relevant patent
offices;
c) all costs and expenses incurred in filing, maintaining and renewing
the patents and patent applications shall be borne by Praxis; d)
Praxis may select the countries in which patent applications are to
be filed in the name of the ANU; and
e) if Praxis decides not to request patent protection for an invention
in any country, ANU may file or maintain at its own cost patent
applications which Praxis has declined to file or maintain, and such
patent applications or granted patents shall lie outside the
provision of this Agreement.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
INFRINGEMENT AND ENFORCEMENT OF PATENTS
1.20 Infringement
In the event of any patent, the subject of this Agreement, being
infringed Praxis may at its own cost and in its own name litigate such
infringement and may settle or compromise such litigation in such a
manner as Praxis shall determine provided that Praxis shall consult with
ANUTECH in good faith in relation to those proceedings.
1.21 Enforcement
In the event that litigation is taken or threatened by a third party
against any rights associated with any patents the subject of this
Agreement, the parties shall consult in good faith and use their best
endeavours mutually to determine the manner in which these proceedings
are to be defended or resisted and to act accordingly provided always
that the parties shall first seek the opinion of counsel experienced in
such matters.
1.22 In any litigation, ANUTECH shall cooperate with Praxis in making
available all relevant records, papers, information and the like which
may be relevant and in its possession.
1.23 Nothing herein shall preclude ANUTECH from defending or pursuing any
such actions.
REPORTS, PAYMENTS AND ACCOUNTING
1.24 Within 30 days after the first day of January, April, July and October
of each year, Praxis shall provide to ANUTECH a true and accurate
royalty report. This royalty report will cover payments due under clause
3 (Licence Consideration) and specify:
a) the total quantity of Products sold or provided by it and by its
sublicensees;
b) the Net Sales price at which the Products were sold or provided;
c) the calculation of the royalty due;
d) the total royalties so calculated and due to ANUTECH; and
e) the amount of Sublicence Fees and the royalty due.
1.25 For the term of this Agreement and simultaneous with the delivery of
each such royalty report, Praxis shall pay to ANUTECH the royalty and
any other payments due under this Agreement for the period covered by
such report.
Praxis shall be responsible for all payments that are due to ANUTECH but
have not been paid by Praxis' sublicensees to Praxis.
1.26 All payments hereunder by Praxis shall be payable in Australian Dollars.
1.27 During the term of this Agreement, Praxis shall keep complete and
accurate records of its and its sublicensees sales of Products and
Sublicence Fees in sufficient detail to enable compliance with its
obligations under this Agreement to be verified.
1.28 Praxis shall permit ANUTECH or its representatives, at ANUTECH's
expense, to periodically examine its books, ledgers and records during
business hours and with 48 hours notice for the purpose of and to the
extent necessary to ensure that Praxis has complied, and is complying,
with its obligations under this Agreement.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.29 In the event that the difference between the amount of royalty due and
the amount of royalty actually paid exceeds 5% then Praxis shall pay the
amount of the underpayment plus the cost of such examination.
1.30 If Praxis fails to pay ANUTECH an amount due under this Agreement,
Praxis shall upon notification pay to ANUTECH the amount owing together
with interest, such interest to be at the rate applicable to overdrafts
charged by the Commonwealth Bank of Australia at the date of payment,
calculated daily from the due date or the date the shortfall in payment
was effective, as the case may be. The payment of such interest shall
not preclude ANUTECH from exercising any other rights it may have
because any payment is overdue.
CONFIDENTIALITY
1.31 The parties acknowledge that the Confidential Information is valuable to
the party in question and each party undertakes to keep the Confidential
Information secret and to protect and preserve the confidential nature
and secrecy of the Confidential Information.
1.32 The recipient of Confidential Information must:
1.33 keep it confidential;
1.34 use it only for the purposes of the Agreement; 1.35 not disclose it to
any person other than:
(a) to those of the recipient's employees or legal advisers who have a
need to know and who have first been directed and have undertaken
orally or in writing to keep it confidential; or
(b) to other people, such as contractors, visitors and agents who have a
need to know and who have agreed in writing to keep it confidential
in accordance with this Agreement
1.36 not copy it or any part of it other than as strictly necessary for the
purposes of this Agreement and must mark any such copy "Confidential";
1.37 promptly comply with any request by the discloser to return or destroy
any or all copies of Confidential Information; and
1.38 implement security practices against any unauthorised copying, use or
disclosure of the Confidential Information.
1.39 Each party shall take:
a) reasonable efforts to ensure that any person who has access to
Confidential Information does not make any unauthorised use,
reproduction or disclosure of that information; and
b) reasonable steps to enforce the confidentiality obligations imposed
or required to be imposed by this agreement, including diligently
prosecuting at its cost any breach or threatened breach of such
confidentiality obligations by a person to whom it has disclosed
Confidential Information and, where appropriate, making applications
for interim or interlocutory relief.
1.40 The provisions of this clause 12 shall continue to have effect for a
period of four (4) years after termination or expiry of this Agreement.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.41 Upon the termination or expiry of this agreement the recipient of
Confidential Information shall deliver (or with the discloser's prior
consent, destroy or erase) to the discloser all material forms of
Confidential Information in its or its representatives possession, power
or control. The return of Confidential Information under this clause
does not release either party or their representatives from their
confidentiality obligations under this clause.
PUBLICATION
1.42 If ANUTECH or its employees or agents wish to publish or otherwise
disclose any information contained in the ANU Intellectual Property or
Results, other than in accordance with clause 12 (Confidentiality),
including by way of written disclosure or any oral disclosure at any
seminar, lecture or other meeting ("Publication"), the following
procedures shall be observed:
(a) ANUTECH shall submit the Publication to Praxis 30 days prior to
disclosure;
(b) within the 30 day period Praxis will consider whether to agree to
the Publication and shall advise ANUTECH what part (if any) of the
information it does not wish published;
(c) if Praxis does not advise ANUTECH within the 30 day period that it
objects to the Publication it shall be deemed to have consented to
the Publication;
(d) if Praxis does advise ANUTECH of its objection then the information
in question will not be published:
(i) until the date upon which the complete Australian specification
in relation thereto becomes open to public inspection at the
Australian Patents Office; and
(ii) in the case of information which is not patentable or which it
is not proposed to patent, for so long as further confidential
research or development work or potential or actual commercial
exploitation is being actively pursued in relation thereto but in
any case not to exceed 2 years;
(e) where appropriate, ANUTECH will make proper acknowledgment of
Praxis.
USE OF NAME
1.43 Any proposed use of a party's name by the other in any published
material (including prospectus information) must be approved by the
other party in writing prior to release of that published material.
INDEMNITY AND INSURANCE
1.44 Praxis hereby agrees to defend, indemnify and hold harmless ANUTECH, ANU
and their employees from and against any and all demands, claims,
liabilities, damages, costs and expenses which may be brought against or
incurred by ANUTECH, ANU and their employees as a result of the use to
which Praxis or its sublicensees make of the ANU Intellectual Property,
Results and Products the subject of the licence granted in this
Agreement, other than to the extent (if any) that the same are caused
solely by the gross negligence of ANUTECH, ANU or of any of their
employees.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
The indemnity above shall also apply to actions that may arise out of
the capital raising that Praxis undertakes for the purposes of this
Agreement.
1.45 From the date that any Product arising out of the ANU Intellectual
Property is first applied for human use (and for the term or foreseeable
term of the human use) Praxis undertakes to hold product liability
insurance to the value of at least $5,000,000.00 .
1.46 Praxis shall at all times maintain in full force and effect general
liability insurance with limits of not less than $5,000,000.00.
1.47 Such policies shall name ANUTECH and the ANU as additional insureds and
shall be purchased from a reputable insurer. Certificates evidencing the
coverage shall be provided to ANUTECH.
WARRANTIES
1.48 Right to enter Agreement
Each Party hereby warrants to the other that it has the full right,
power, authority and liberty to enter into this Agreement and to perform
all of its respective duties and obligations hereunder. Each party
warrants to the other that it is not under any other duty or obligation
which is contrary to or inconsistent with any of its duties and
obligations hereunder.
1.49 No contrary agreements
Each party hereby warrants to the other that it will not enter into any
agreement, arrangement or understanding with any third party which is
contrary to or inconsistent with any of that party's rights, duties and
obligations under this Agreement.
1.50 Status of ANUTECH
ANUTECH warrants and covenants that it enters into this Agreement as
agent for and on behalf of ANU having full power and authority so to do,
and with the express consent of ANU, to the intent that each and every
of the warranties, covenants, terms and conditions of this Agreement are
given by and bind both ANUTECH in its own right and ANU.
1.51 Due diligence
Praxis warrants that it has undertaken a due diligence examination of
the ANU Intellectual Property licensed in this agreement and warrants
that it satisfied itself as to ANU's rights to and the validity of the
ANU Intellectual Property, in particular the patents and patent
applications set out in Schedule 1.
1.52 ANU Intellectual Property
To the best of its knowledge ANUTECH warrants and covenants that in
respect of ANU Intellectual Property either:
(a) ANU is the sole legal and beneficial owner; or
(b) ANU has such rights to the ANU Intellectual Property, as will enable
ANUTECH to perform its obligations under this Agreement.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
ANUTECH makes no warranty as to whether the US Patent 5520926 (and
corresponding international patents or applications) in the name of
British Technology Group Limited infringes the ANU Intellectual
Property.
1.53 Results achieving purpose
ANUTECH makes no representations or warranties as to the accuracy or
completeness of the Results generated by ANUTECH, or their capability to
achieve a particular purpose.
1.54 Fundamental Terms
Each party acknowledges that the warranties contained in this clause 16
(Warranties) are fundamental terms of this Agreement.
ASSIGNMENT, TRANSFER
1.55 This Agreement may not be assigned or otherwise transferred by Praxis
without the prior written consent of ANUTECH. An assignment is deemed to
include a change in greater than 50% beneficial ownership of shares in
Praxis with the exception of such a change in share holding in Praxis
through capital raising.
1.56 Any permitted assignee shall assume all obligations of its assignor
under this Agreement.
1.57 No assignment shall relieve Praxis of responsibility for the performance
of any accrued obligation(s) which Praxis then has hereunder.
TERMINATION
1.58 A party may terminate this Agreement upon 30 days written notice to the
other party on the occurrence of any of the following by the other
party:
a) upon or after the bankruptcy, insolvency, dissolution or winding up
of such party (other than dissolution or winding up for the purposes
of reconstruction or amalgamation); or
b) the failure of such party to comply with its obligations under this
agreement, if such default is not cured (if capable of being cured)
within 30 days of the party not in default giving notice of the
default; or
c) if the representations and warranties made under this Agreement
prove inaccurate or false in any material respect.
1.59 Without limiting clause 18.1 (b), ANUTECH may terminate this Agreement
upon 30 days written notice to Praxis in the event Praxis:
a) fails to make any payment which is due and payable pursuant to this
Agreement and such payment remains unpaid for more than 30 days; or
b) fails to achieve any of the performance milestones in accordance
with clause 5 and is demonstrated not to be making best efforts in
attempting to achieve these milestones and such default is not cured
(if capable of being cured) within 90 days of ANUTECH giving notice
of the default.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.60 The provisions of this clause 18 and clauses 3.1 (Licence Consideration)
12 (Confidentiality), 11 (Reports, Payments and Accounting), 15
(Indemnity and Insurance, 19.12 (Governing Law) and19.9 (Dispute
Resolution) shall continue in full force and effect notwithstanding the
termination, any alterations or additions to the other provisions of
this Agreement.
1.61 Upon termination of this Agreement and except as otherwise expressly
provided:
a) any rights or obligations of a party which may have arisen or
accrued prior to termination shall not be affected;
b) all licences granted to Praxis under the terms of this Agreement
shall terminate and Praxis shall cease its exploitation of the
relevant intellectual property other than provided for in clause
18.4 (d);
c) Praxis shall promptly pay to ANUTECH any amounts due under the terms
of this Agreement including royalties and Sublicence Fees which have
accrued as of the date of termination; d) Praxis may sell all
inventory of the Product that it may have on hand at the date of
termination provided that it pays royalties as provided in this
Agreement.
1.62 If any party terminates the Agreement and sublicensees are not then in
default under the terms of their sublicence agreements hereunder,
ANUTECH shall have the right (but not the obligation) to assume and
continue sublicence agreements with payments thereunder being made by
the sublicensees directly to ANUTECH without any further obligations on
the part of Praxis with respect thereto.
1.63 Waiver by either party of any breach (or a succession of breaches) of
any one or more of the provisions of this Agreement shall not deprive
such party of any right to terminate this Agreement pursuant to the
terms of this clause 18 upon the occasion of any subsequent breach.
MISCELLANEOUS PROVISIONS
1.64 Binding obligations
The duties and obligations imposed and the benefits conferred by this
Agreement are to be binding upon and to enure to the parties and to
their respective successors and permitted assigns.
1.65 Other instruments
Each party shall prepare and execute such other instruments and
documents and do such other acts and things as may be necessary or
desirable to ensure each party has such rights and interest as are
contemplated for it by this Agreement or as may be necessary or
desirable to give full effect to the provisions of this Agreement.
1.66 Whole Agreement
This Agreement combines the whole understanding of the Parties relating
to its subject matter and it supersedes and cancels any and all
agreements, understandings or commitments made by the same Parties with
respect to the same subject matter. Any purported representations,
warranties or other promises of the Parties not recorded in it are of no
effect.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.67 Amendment
The variation or waiver of a provision of this Agreement or a Party's
consent to a departure from a provision by another Party, will be
ineffective unless in writing executed by the Parties. The requirements
concerning variation or waiver apply to this clause itself.
1.68 No waiver
No waiver by either party of any breach (or a succession of breaches) of
any one or more of the provisions of this Agreement by the other party
shall be deemed to be a waiver of any subsequent breach of the same or
any other provision.
1.69 Illegality
If any provision of this Agreement shall be construed so as to be
illegal or invalid the legality or the validity of any other provision
shall not be affected thereby. Any legal or invalid provisions shall be
severable and all other provisions shall remain in full force and
effect.
1.70 Notices
A party notifying or giving notice under this Agreement must notify
(a) in writing;
(b) addressed to the address of the recipients specified below or as
altered by notice given in accordance with this clause; and
(c) delivered by hand, facsimile, registered mail or post.
A notice shall be deemed received:
(a) if hand delivered on the date of delivery
(b) if sent by facsimile on generation of an acknowledgment that the
transmission has been successfully completed,
(c) if sent by registered mail on acknowledgment of receipt by or on
behalf of the recipient
(d) if dispatched by post, after 5 days including day of posting.
If a notice is received on a day other than a business day or after 4.30
pm on a business day, then it is deemed received on the next business
day.
Notice addresses
ANUTECH Pty Ltd Praxis Pharmaceuticals Inc.
GPO Box 4 GPO Box 1978
CANBERRA ACT 2601 Canberra ACT 2601
or
ANUTECH Court
Cnr. Barry Drive and Daley Road and
ACTION ACT 2601
Suite 600, 595 Hornby Street, Vancouver,
Facsimile 02 6257 1433 BC, Canada
Facsimile: 1 (604)646 5649
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
1.1 Force Majeure
No party shall be responsible or liable to any other party for, nor
shall this Agreement be terminated as a result of any party's failure to
perform any of its obligations hereunder, with the exception of payment
of monies due and owing, if such failure results from circumstances
beyond the control of such party, including, without limitation,
requisition by any government authority or the effect of any statute,
ordinance or governmental order or regulations, wars, strikes, lockouts,
riots, epidemic disease, act of god, civil commotion, fire, earthquake,
storm, failure of public utilities, common carriers or suppliers, or any
other circumstances, whether or not similar to the above causes. The
parties shall use reasonable efforts to avoid or remove any such causes
and shall resume performance under this Agreement as soon as feasible
whenever such cause is removed; provided however that the foregoing
shall not be construed to require a party to settle any labour dispute
or to commence, continue or settle any litigation.
If after six months the force majeure continues, the Parties must meet
in good faith to discuss the situation and endeavour to achieve a
mutually satisfactory resolution of the problem.
1.2 Dispute resolution
If a dispute arises between the Parties out of or relating to this
Agreement (the "Dispute"), any Party seeking to resolve the Dispute must
do so strictly in accordance with the provisions of this clause.
Compliance with this clause is a condition precedent to seeking relief
in any court or tribunal in respect of the Dispute.
A Party seeking to resolve the Dispute must notify the existence and
nature of the Dispute to the other Party ("the Notification"). Upon
receipt of a Notification the Parties must refer resolution of the
Dispute to their respective chief executive officers or their nominees.
If the Dispute has not been resolved within thirty (30) days of receipt
of the Notification then any Party may refer the Dispute to the
Australian Commercial Dispute Centre Limited ("ACDC") for mediation. The
parties must negotiate in good faith, and in accordance with the
Conciliation Rules of ACDC, to resolve the Dispute.
If the Dispute has not been resolved within sixty (60) days of referral
to ACDC either Party is free to initiate proceedings in a court.
1.3 Stamp Duty
All stamp duty levied upon this agreement shall be paid by Praxis.
1.4 Costs
Each Party agrees to bear its own legal and other costs and expenses in
connection with the preparation and execution of this Agreement and of
other related documentation.
1.5 Governing law
This Agreement shall be construed in accordance with and governed by the
laws of the Australian Capital Territory, Australia, and the parties
hereby submit themselves to the jurisdiction of the courts in and of
that Territory.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
TERMINATION OF LICENCE AND RESEARCH & DEVELOPMENT AGREEMENT
1.6 The parties entered into a Licence and Research & Development Agreement
dated 27 October 1997 and an Addendum to the Licence and Research &
Development Agreement dated 8 October 1998 ("Licence and R&D
Agreement").
1.7 The parties have agreed to end the Licence and R&D Agreement by mutual
agreement with effect from the Commencement Date of this Agreement.
1.8 With effect from the Commencement Date of this Agreement:
(a) the parties agree that the Licence and R&D Agreement is terminated;
and
(b) each party permanently releases each other party from any actions,
suits, causes of action, arbitration, debts, dues, costs, claims,
demands, verdicts and judgments, either at law or in equity or
arising under statute ("Claims") which but for their entry into this
termination, they or any of them have or may have against each other
arising from or in connection with the early termination of the
Licence and R&D Agreement.
1.9 Each party must:
(a) use its best efforts to do all things necessary or desirable to give
full effect to this termination; and
(b) refrain from doing anything that might hinder performance of this
termination.
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
IN WITNESS: this Agreement shall be duly executed and shall commence from the
Commencement Date:-
The COMMON SEAL of )
PRAXIS PHARMACEUTICALS INC )
was hereunto affixed in accordance )
with its constitution in the presence of: )
/S/ BRETT CHARLTON /S W.B. COWDEN
Director/Secretary Director
BRETT CHARLTON W.B. COWDEN
Name Name
The COMMON SEAL of )
ANUTECH PTY LIMITED )
was hereunto affixed in accordance )
with its constitution in the presence of: )
/S/ T. SARTESCHI /S/ JOHN D. BELL
Director/Secretary Director
T. SARTESCHI
COMPANY SECRETARY John D. Bell
ANUTECH PTY LTD MANAGING DIRECTOR
Name Name
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ANUTECH Pty Ltd Praxis Pharmaceuticals Inc
<PAGE>
SCHEDULE 1 - ANU INTELLECTUAL PROPERTY
PHOSPHOSUGAR-BASED ANTI-INFLAMMATORY AND/OR IMMUNOSUPPRESSIVE DRUGS
o International Application No. PCT/AU89/00350
o Inventors - William Cowden, Christopher Parish, David Willenborg
o Priority date - 18 August 1988 o International filing date - 18 August 1989 o
ANUTECH reference 140
COUNTRY APPLICATION NO. PATENT NO. STATUS
Australia 41875/89 627500 granted
Europe 89909685.3 0429522 granted
Japan 509079/89 request examination
USA 988001 5506210* granted
USA-continuation discontinued
* date of grant = 9 April 1996
NOVEL PHOSPHOSUGARS AND PHOSPHOSUGAR-CONTAINING COMPOUNDS HAVING
ANTIINFLAMMATORY ACTIVITY
o Inventors - William Cowden, Christopher Parish, David Willenborg
o Priority date - 18 October 1996
o ANUTECH reference 278
COUNTRY APPLICATION NO. PATENT NO. STATUS
Australia PO3098/96
INT on 18 October 1997
EXHIBIT 10.4
SHAREHOLDER AGREEMENT DATED AS OF OCTOBER 15, 1999,
BETWEEN PRAXIS PHARMACEUTICALS AUSTRALIA PTY LTD.,
PRAXIS PHARMACEUTICALS INC., PERPETUAL TRUSTEES NOMINEES LIMITED,
AND ROTHSCHILD BIOSCIENCE MANAGERS LIMITED
<PAGE>
PRAXIS PHARMACEUTICALS AUSTRALIA PTY
LIMITED
(ACN 082 811 630)
- and -
PRAXIS PHARMACEUTICALS INC.
- and -
PERPETUAL TRUSTEES NOMINEES LIMITED
(ACN 000 341 533)
- and -
ROTHSCHILD BIOSCIENCE MANAGERS LIMITED
(ACN 072 515 247)
SHAREHOLDERS AGREEMENT
ARNOLD BLOCH LEIBLER
Solicitors and Consultants
333 Collins Street
MELBOURNE VIC 3000
Tel:(03) 9229 9999
Ref:JCS:EVK:1073464
(L:\SEC\EVK\1073464\PRAXSHAG.DOC)
<PAGE>
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made the 15th day of October December 21, 1999
BETWEEN:
PRAXIS PHARMACEUTICALS AUSTRALIA PTY LIMITED (ACN 082 811 630)
of 60 Marcus Clarke Street, Canberra, Australian Capital
Territory 2601 ("Company")
- and -
PRAXIS PHARMACEUTICALS INC. of 50 West Broadway, Salt Lake
City, Utah, United States of America 84101 ("Praxis USA")
- and -
PERPETUAL TRUSTEES NOMINEES LIMITED (ACN 000 341 533) of 39
Hunter Street, Sydney, New South Wales in its capacity as trustee for
The Australian Bioscience Trust constituted by a Trust Deed dated 20
August 1998 ("Trustee")
- and -
ROTHSCHILD BIOSCIENCE MANAGERS LIMITED
(ACN 072 515 247) of Level 15, 1 O'Connell Street, Sydney, New South
Wales ("RBML")
WHEREAS:
A The current Shareholder is Praxis USA who is the registered holder of
the entire 100 Class A Shares issued.
B It is intended that prior to the subscription by the Trustee, Praxis
USA will be the registered holder of 1,400,000 Ordinary Shares.
C RBML have agreed to procure the Trustee to subscribe, over two
tranches, for up to 2,000,000 Series A Preferred Shares, at a
subscription price of $1.00 per Share, on the terms and conditions set
out in this Agreement. The first tranche will be for 250,000 Series A
Preferred Shares for a total consideration of $250,000 and the second
tranche will be for 1,750,000 Series A Preferred Shares for a total
consideration of $1,750,000.
D The parties have agreed that their relationship shall be governed by
the terms and conditions set out in this Agreement.
<PAGE>
NOW IT IS AGREED:
1 DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement, unless the context otherwise requires:
"Anutech" means Anutech Pty Ltd (A.C.N. 008 548 650) of
Anutech Court, corner Barry Drive and Daley Road, Australian
Capital Territory 2601;
"Associate" has the meaning ascribed to that term in the
Corporations Law;
"Board" or "the Directors" means the Board of Directors of the
Company as constituted from time to time;
"Business" means the drug development operations of the
Company;
"Business Day" means a day on which banks are open for
domestic business in Melbourne excluding Saturdays, Sundays
and public holidays;
"Business Plan" means the business plan of the Company in
place from time to time;
"Confidentiality Deed" means a deed substantially in the form
of the confidentiality deed set out in Schedule 1;
"Commencement Date" means the third Business Day after the
date on which the condition precedent set out in Clause 2.1 is
satisfied or such other date as the parties may agree;
"Constitution" means the constitution of the Company;
"Corporations Law" means the Corporations Law of Victoria or,
where applicable, any other Corporations Law of any State or
Territory;
"Deed of Accession" means a deed substantially in the form of
the deed of accession set out in Schedule 2;
"Dispose" means, in relation to any relevant property, to
sell, transfer, assign, create an Encumbrance over, declare
oneself a trustee of or part with a benefit of or otherwise
dispose of the relevant property (or any interest therein) and
includes, without limitation, in relation to a share to enter
into a transaction in relation to the share (or any interest
therein), other than a transaction permitted by this Agreement
or the Constitution, which results in a person other than the
registered holder of the share:
<PAGE>
(a) acquiring any equitable interest in the share, including,
but not limited to, an equitable interest arising
pursuant to a declaration of trust, an agreement for sale
and purchase of or an option agreement or an agreement
creating a charge or other security interest in respect
of the share;
(b) acquiring any right to receive directly or indirectly any
dividends payable in respect of the share;
(c) acquiring any rights of pre-emption, first refusal or
like control over the disposal of the share;
(d) acquiring any rights of control over the exercise of any
voting rights or rights to appoint Directors attaching to
the share; or
(e) otherwise acquiring legal or equitable rights against the
registered holder of the share which have the effect of
placing the person in the same position as would exist if
the person had acquired a legal or equitable interest in
the share itself;
"Dividend" includes a bonus distribution in specie or in cash;
"Eligible Investee Company" has the meaning given to that term
in the IIF Program Guidelines No. 1 of 1998 established by the
Industry Research and Development Board acting under Part 2 of
the IIF Program, Policies and Practices Direction No. 1 of
1997 (as amended from time to time, whether generally or in
relation to any Licensed Fund);
"Employee Share Plan" means an employee share or option
incentive plan proposed to be introduced by the Company
pursuant to Clause 10;
"Encumbrance" means any mortgage, pledge, lien, hypothecation,
charge or other form of security interest or interest in the
nature of a security interest whatsoever;
"Group" means the Company and its subsidiaries (if any) for
the time being;
"IIF Management Licence" means an IIF Program management
licence executed between the Industry Research and Development
Board on behalf of the Commonwealth of Australia and a Party
to this Agreement;
"IIF Program" means the Innovation Investment Fund Program
established by the Commonwealth of Australia under the
Industry Research and Development Act 1986 (Clth.);
"Licence Agreements" means the licence agreements entered into
on or about the date of this Agreement between Anutech and
Praxis USA and between Anutech and the Company;
<PAGE>
"Licence and Research & Development Agreements" means the
Licence and Research & Development Agreement entered into
between Anutech and Praxis USA on 27 October 1997 and the
Addendum to the Licence and Research & Development Agreement
dated 8 October 1998;
"Licensed Fund" means a fund of whatever nature, and whether
incorporated or not:
(a) which, or the manager of which, is to be or has been
granted an IIF Management License; and
(b) the manager or trustee of which is a Shareholder;
"Ordinary Shares" means the ordinary Shares of the Company
having the rights ascribed to them by the Constitution;
"Party" means a party to this Agreement and includes a person
who executes a Deed of Accession;
"Preferred Shareholder" means a Party who holds a Series A
Preferred Share and includes a Party who holds the beneficial
interest in a Series A Preferred Share registered in the name
of another person as nominee for that Party;
"Proposing Transferor" means a Shareholder that proposes to
Dispose of any Shares held by it;
"Related Body Corporate" has the meaning ascribed to that term
in the Corporations Law;
"Relevant Event" means, in relation to a Shareholder:
(a) that Shareholder making any arrangement or composition
with its creditors generally or any or all of them (other
than for the purposes of a bona fide scheme of solvent
amalgamation or reconstruction to which the other
Shareholders have consented in writing);
(b) that Shareholder becoming insolvent within the meaning of
that expression in the Corporations Law;
(c) a receiver, manager, receiver and manager, administrator
or trustee or other like custodian being appointed by any
person over all or a substantial part of that
Shareholder's undertaking or assets and such receiver,
manager, receiver and manager, administrator, trustee or
other like custodian is not discharged within 60 days of
being appointed;
(d) that Shareholder having a petition or summons lodged or
an order made or a resolution passed for its liquidation
or winding up (other than a voluntary liquidation for the
purposes of a
<PAGE>
bona fide scheme of solvent amalgamation or
reconstruction to which the other Shareholders have
consented in writing) which is not discharged or revoked
within 30 days; or
(e) the power, whether held directly or indirectly and by
whatever means (whether or not enforceable at law or in
equity):
(i) to exercise or control the right to vote attached to
no less than 50% of the issued shares in that
Shareholder;
(ii) to Dispose of or exercise a right of disposal over
not less than 50% of the issued Shares of that
Shareholder;
(iii)to control the composition of the board of
directors of that Shareholder (which shall be
determined having regard to Section 47 of the
Corporations Law); or
(iv) to determine substantially the conduct of that
Shareholder's business activities,
shall reside in any persons other than those holding such
power on the date on which that Shareholder became a
Shareholder;
"Relevant Shares" means in relation to a transferee of Shares,
the Shares originally transferred to the Transferee and any
additional Shares issued or transferred to the Transferee by
virtue of the holding of those Shares or any of them;
"Second Tranche Date" means the date 10 Business Days after
the Investors have received a patent review satisfactory to
them from a patent attorney specified by the Investors
following the filing of a patent application in respect of new
compounds in accordance with the Business Plan;
"Senior Employee" means an employee whose rate of gross
contractual salary is $75,000 per annum or more;
"Series A Preferred Shares" means Series A Redeemable
Convertible Preferred Shares in the capital of the Company
having the rights ascribed to them by the Constitution;
"Share" means a share in the capital of the Company including,
without limitation, Ordinary Shares and Series A Preferred
Shares;
"Shareholder" means a Party who holds Shares and includes a
Party who holds the beneficial interest in Shares registered
in the name of another person as nominee for that Party;
"Specified Proportion" means, in relation to a Shareholder, a
fraction the numerator of which is the number of Shares held
by that Shareholder for the time being and the denominator of
which is
<PAGE>
the total number of Shares (including the Shares held by the
said Shareholder) in issue for the time being (assuming that
in so calculating the number of Shares held by a Shareholder
and the total number of Shares in issue, all Series A
Preferred Shares have been converted in to Ordinary Shares);
"Subsidiary" has the meaning ascribed to that term by the
Corporations Law;
"Transfer Notice" means a Transfer Notice delivered by a
Shareholder pursuant to Clause 8.3(b);
"Transfer Shares" means the Shares that a Proposing Transferor
proposes to Dispose of;
"Trust" means the Australian Bioscience Trust constituted by a
deed of trust dated 20 August 1998 between Perpetual and RBML;
"Trust Deed" means the deed of trust constituting the Trust;
and
"Trustee" means Perpetual and any substitute or additional
trustee appointed to the Trust.
1.2 INTERPRETATION
In this Agreement, including the Recitals, except to the
extent that the subject or the context otherwise requires:
(a) reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment of,
or any legislative provision substituted for, and all
legislation and statutory instruments issued under, such
legislation or such provision and shall include the
corresponding legislation in such other State or Territory of
the Commonwealth of Australia as may be relevant from time to
time;
(b) words (including words defined in this Agreement) denoting
the singular number shall include the plural and vice versa;
(c) words importing natural persons will include corporations,
firms, unincorporated associations, partnerships, trusts and
any other entities recognised by law and vice versa;
(d) words denoting any gender shall include all genders;
(e) the words "WRITTEN" and "IN WRITING" include any means of
visible reproduction of words in a tangible and permanently
visible form;
(f) reference to Clauses and Schedules are references to
clauses and schedules of this Agreement;
<PAGE>
(g) where a word or phrase is defined, other parts of speech
and grammatical forms of that word or phrase shall have
corresponding meanings;
(h) reference to any document or agreement shall be deemed to
include references to such document or agreement as novated,
supplemented, varied or replaced from time to time;
(i) no rule of construction applies to the disadvantage of a
party because that party was responsible for the preparation
of this Agreement or any part of it; and
(j) a reference to the ownership of Shares by a Shareholder or
the Shares held by a Shareholder shall include, in relation to
a Party who holds the beneficial interest in Shares registered
in the name of another person as nominee for that Party, a
reference to the beneficial ownership of such Shares by that
Party or the Shares the beneficial interest in which is held
by that Shareholder.
1.3 HEADINGS
The headings to Clauses or Schedules are for the purposes of
more convenient reference only and do not form part of this
Agreement or effect its interpretation.
1.4 ACKNOWLEDGEMENT
RBML acknowledges the provisions of this Agreement and agrees
and undertakes that to the extent of its powers as manager of
the Trust that it shall exercise all such powers as are
available to it under the Trust Deed, do all such acts,
matters and things and sign, execute and deliver all such
instructions and documents to require the Trustee to comply
with its obligations under this Agreement.
2 CONDITION PRECEDENT
2.1 This Agreement and the performance of all obligations under this
Agreement (other than obligations under this Clause 2) are subject to
and conditional upon the Constitution being amended as set out in
Schedule 3.
2.2 The Company must ensure that the condition precedent in Clause 2.1
is satisfied on or before 31 October 1999.
2.3 If the condition precedent in Clause 2.1 is not satisfied on or
before 31 October 1999 (or such other date as the parties may agree),
this Agreement (other than this Clause 2) is automatically terminated
without any of the parties being liable to any other party pursuant to
this Agreement except under this Clause 2.
<PAGE>
2.4 If the Second Tranche Date has not occurred on or before [ ], or
such other date as the Investors agree, the Investors' obligations
pursuant to Clause 3.2 are automatically terminated.
3 CAPITALISATION OF THE COMPANY AND OTHER MATTERS
3.1 On the Commencement Date RBML will procure that the Trustee
subscribe for a total of 250,000 fully paid Series A Preferred Shares at
a price of $1.00 per Share and shall accordingly complete, sign and
deliver to the Company an application form in respect of the Shares
being subscribed for by it accompanied by a cheque for the subscription
monies due.
3.2 On the Second Tranche Date, RMBL will procure that the Trustee
and/or such other persons as RBML determines subscribe for a total of
1,750,000 fully paid Series A Preferred Shares at a price of $1.00 per
share and shall accordingly complete sign and deliver to the Company an
application form in respect of the Shares being subscribed for by it
accompanied by a cheque for the subscription monies due. Any person
(other than the Trustee) who subscribes for Series A Preferred Shares
pursuant to this clause shall execute a Deed agreeing to become a Party
to this Agreement in a form acceptable to RBML.
3.3 The Company shall, upon each receipt from the applicant of its
respective applications, subscription monies or consideration in
accordance with Clauses 3.1 and 3.2, issue and allot Series A Preferred
Shares to the Trustee in accordance with each respective application and
issue the Trustee with share certificates for its respective Shares.
3.4 Unless otherwise agreed in writing between the Shareholders, the
subscription monies referred to in Clauses 3.1 and 3.2 shall be applied
by the Company solely for the purposes of the Business as detailed in
the Business Plan.
4 FURTHER FINANCING
4.1 Except as otherwise provided in this Agreement, none of the
Shareholders undertakes to provide any loan or Share capital to the
Company or to give any guarantee or indemnity in respect of any of the
Company's liabilities or obligations.
4.2 If, at any time prior to a public offering of any Shares, the
Company wishes to raise further funds, the Company must first offer the
right to provide to the Company all of the further funds to the
Preferred Shareholders in proportion to their respective holdings of
Series A Preferred Shares. If any Preferred Shareholder does not wish to
provide all or part of its proportion of the further funds, the other
<PAGE>
Preferred Shareholders shall have the right to provide those further
funds in proportion to their respective holdings of Series A Preferred
Shares.
5 PUBLIC OFFERING
5.1 Each party (other than the Trustee) shall use its best endeavours to
ensure that an initial public offering of the Shares on the terms set
out in Clause 5.2, or any other means by which the Shareholders can
realise the value of their investment in the Shares, occurs within 36
months from the Commencement Date.
5.2 It is intended that the initial public offering raise at least $10
million by the offer of Shares at an issue price of at least $3.00 per
share.
6 DIVIDEND POLICY FOR ORDINARY SHARES
6.1 The Parties agree that there is no existing intention to declare
Dividends on any Ordinary Shares, and that no declaration of Dividends
on any Ordinary Shares shall occur until such time as the Company has
generated sufficient profits from the Business as would enable all
Dividends that have accrued on Series A Preferred Shares, pursuant to
the Constitution, to be met in full were those Dividends payable on the
day the Dividend on the Ordinary Shares is to be declared.
6.2 Subject to Clause 6.1, the Directors shall determine whether the
Company shall pay a Dividend on the Ordinary Shares in any year.
7 DISPOSAL AND ENCUMBRANCE OF SHARES
7.1 Subject to Clause 7.2, a Shareholder shall not Dispose of any legal
or equitable interest in any of its Shares except:
(a) by a transfer of the entire legal and beneficial interest
therein; and
(b) to a transferee permitted by the Constitution and this
Agreement.
7.2 A Shareholder may create an Encumbrance in respect of any of its
Shares if:
(a) BONA FIDE SECURITY
(i) such Encumbrance is granted bona fide as security
for a financing arrangement; and
<PAGE>
(ii) in relation to the exercise or enforcement of any
power of sale or other right, power, authority,
remedy or discretion contained in or conferred under
or pursuant to the instrument creating the
Encumbrance or otherwise howsoever, it is a term or
condition that the person entitled to the benefit of
the Encumbrance ("the Chargee") and any person
(including any receiver or receiver and manager)
claiming through the Chargee ("an Administrator")
shall be required to:
(1) comply in all respects with the provisions of
this Agreement and the Constitution as if the
Chargee and the Administrator were each the
applicable Shareholder; and
(2) covenant with the Shareholders by a written
instrument in such form as the Shareholders may
require that if the Chargee and the
Administrator (or either of them) take
possession of the rights or benefits of the
applicable Shareholder under this Agreement,
which are subject to the Encumbrance, the
Chargee and the Administrator will each be
bound by the provisions of this Agreement and
the Chargee and the Administrator (or either of
them) will not exercise any power of sale
pursuant to the Encumbrance, except on terms
the same mutatis mutandis as those set forth in
this Agreement and the Constitution; or
(b) the prior written consent of all other Shareholders is
obtained.
8 TRANSFER OF SHARES
Notwithstanding anything to the contrary contained in this Agreement or
in the Constitution:
8.1 TRANSFER OF SHARES
(a) The Company shall refuse to register the transfer of any
Share unless the transferee has or the transferees have
entered into a Deed of Accession and:
(i) such transfer is permitted by, or is made pursuant
to and in accordance with, Clauses 8.3, 8.4, 8.5 or
8.6 or the provisions of any agreement in writing
between all the Shareholders; or
(ii) the proposed transferee is approved in writing by
all the Shareholders (other than the Transferor of
the Share) before any instrument is executed to give
effect to such
<PAGE>
transfer and, subject to such approval being given,
Clause 8.3 shall not apply to such transfer.
(b) Subject to Clause 8.1(c), the Company shall not be
entitled to decline to register the transfer of any Share
which otherwise qualifies under Clauses 8.1(a)(i) or
8.1(a)(ii).
(c) For the purpose of ensuring that a particular transfer of
Shares is permitted under this Agreement or under the
provisions of any agreement in writing between all the
Shareholders, the Company may require the transferor or
the person named as transferee in any transfer lodged for
registration to furnish the Company with such information
and evidence as the Company may think necessary or
relevant. Failing such information or evidence being
furnished to the satisfaction of the
Company within a period of 28 days after such request, the
Company shall be entitled to refuse to register the transfer
in question.
8.2 PERMITTED TRANSFERS
(a) A Shareholder may at any time transfer any of the Shares
held by it to the ultimate beneficial owner of those
Shares at the time of transfer.
(b) A transfer of any Shares pursuant to this Clause shall
only be treated as a permitted transfer if it is a
transfer of the entire legal interest in such Share free
from all Encumbrances.
(c) If a transfer pursuant to Clause 8.2(a) is to more than
one ultimate beneficial owner, those Shares transferred
and the rights and obligations under this Agreement shall
be held by and bind them jointly.
8.3 PRE-EMPTIVE RIGHTS
(a) Except as provided in Clauses 8.1, 8.2, 8.5 and 8.6 no
Share may be Disposed of unless the procedure provided
for in this Clause is followed.
(b) A Proposing Transferor shall be obliged to give notice in
writing to the Company that the Proposing Transferor
desires to Dispose of such Shares. The Transfer Notice
shall specify:
(i) the number and class of the Transfer Shares;
(ii) the price at which the Proposing Transferor wishes
to Dispose of the Transfer Shares (the "Transfer
Price"); and
(iii)the identity of a person who has indicated a bona
fide willingness to purchase the Transfer Shares at
such price (the "Transferee").
<PAGE>
(c) The Transfer Notice shall constitute the Company as the
agent of the Proposing Transferor empowered to sell the
Transfer Shares (together with all rights attaching
thereto at the date of the Transfer Notice or at any time
thereafter) at the Transfer Price on the terms of this
Clause 8.3.
(d) The Transfer Notice shall not be revocable except with
the prior written consent of all the Shareholders.
(e) Within 7 days after the receipt of any Transfer Notice
the Company shall serve a copy of that Transfer Notice on
all the Preferred Shareholders other than the Proposing
Transferor (if applicable). In the case of a deemed
Transfer Notice, the Company shall similarly serve notice
on all the Preferred Shareholders (including the
Proposing Transferor) notifying them that the same has
been deemed to have been given.
(f) Subject as provided otherwise in this Agreement, or in
any agreement in writing between all the Shareholders,
the Transfer Shares shall first be offered for purchase
at the Transfer Price by the Company to all the Preferred
Shareholders (other than the Proposing Transferor) in the
Specified Proportions of those Preferred Shareholders.
(g) Any offer made pursuant to Clause 8.3(f) shall be made by
notice in writing and shall specify:
(i) the number and class of the Transfer Shares;
(ii) the proportionate entitlement of the relevant
Preferred Shareholder;
(iii) the Transfer Price; and
(iv) a period of 14 days within which the offer must be
accepted or shall lapse.
(h) If the Company does not receive acceptances in respect of
all the Transfer Shares within the periods of the offers
referred to in Clause 8.3(g), the Company shall forthwith
give notice in writing of that fact to the Proposing
Transferor and the remaining Transfer Shares in respect
of which acceptances have not been received shall
thereafter be offered, pro-rata, to those Preferred
Shareholders who have accepted an offer within the
periods of the offers referred to in Clause 8.3(g). Any
offer made pursuant to this Clause 8.3(h) shall be made
in accordance with Clause 8.3(g), except that the period
within which all offers must be accepted before lapsing
shall be 14 days.
<PAGE>
(i) Subject to Clause 8.4, if the Company does not receive
acceptances in respect of all the Transfer Shares within
the periods of the offers referred to in Clauses 8.3(g)
or 8.3(h), the Company shall forthwith give notice in
writing of that fact to the Proposing Transferor, and the
Proposing Transferor may within a period of 3 months
after the date of such notice sell the Transfer Shares to
the Transferee named in the Transfer Notice at any price
which is not less than the Transfer Price (after
deducting, where appropriate, any Dividend declared, paid
or made after the date of the Transfer Notice in respect
of the Transfer Shares and which has been or is to be
retained by the Proposing Transferor).
(j) If any person or persons (including any other
Shareholder) (the "Purchasers") agree within the periods
referred to in Clauses 8.3(g), (h) or (i) (as the case
may be) to purchase all of the Transfer Shares, the
Company shall forthwith give notice in writing to the
Proposing Transferor and to the Purchasers and the
Proposing Transferor shall thereupon become bound upon
payment of the Transfer Price to the Proposing Transferor
(whose receipt shall be a good discharge to the Purchaser
and the Company therefor none of whom shall be bound to
see the application thereof) to transfer to each
Purchaser those Transfer Shares accepted by them. Every
such notice shall state the name and address of each
Purchaser, the number of Transfer Shares agreed to be
purchased by it and the place and time appointed by the
Company for the completion of the purchase (being not
less than 7 days nor more than 28 days after the date of
the said notice and not being at a place outside New
South Wales). Subject to the giving of such notice, the
purchase shall be completed at the time and place
appointed by the Company.
(k) If a Proposing Transferor, having become bound to
transfer any Transfer Shares pursuant to this Clause 8.3,
makes default in transferring the same the Company may
authorise some person (who shall be deemed to be the
attorney of the Proposing Transferor for the purpose) to
execute the necessary instrument of transfer of such
Transfer Shares and may deliver it on its behalf and the
Company may receive the purchase money and shall
thereupon (subject to such instrument being duly stamped)
cause the Transferee to be registered as the holder of
such Transfer Shares and shall hold such purchase money
on behalf of the Proposing Transferor. The Company shall
not be bound to earn or pay interest on any money so
held. The receipt of the Company for such purchase money
shall be a good discharge to the Transferee (who shall
not be bound to see to the application thereof) and after
the name of the Transferee has been entered in the
register of Shareholders in purported exercise of
<PAGE>
the power conferred pursuant to this Clause 8.3(k), the
validity of the proceedings shall not be questioned by
any person.
(l) Without limiting Clause 8.1(c), the Company may require
to be satisfied that any Shares being transferred by the
Proposing Transferor pursuant to Clause 8.3(i) are being
transferred in pursuance of a bona fide sale for the
consideration stated in the transfer and if not so
satisfied may refuse to register the instrument of
transfer.
8.4 TRANSFER ON A RELEVANT EVENT
(a) Upon the happening of a Relevant Event, the Shareholder
in question shall be deemed to have immediately given a
Transfer Notice in respect of all the Shares as shall
then be registered in the name of that Shareholder.
(b) In the case of a Transfer Notice being given pursuant to
Clause 8.4(a), the price per Transfer Share which is so
specified in the Transfer Notice shall be:
(i) such price as shall be agreed in writing between all
of the Shareholders; or
(ii) in the absence of such agreement within 14 days
after the date on which the Transfer Notice is
deemed to have been given, the price will be
determined by an independent Chartered Accountant
(the "Expert") nominated by agreement between all
the Shareholders or, failing such nomination within
14 days after the request of any Shareholder to the
others therefor, nominated at the request of any
Shareholder by the President or other head for the
time being of the Institute of Chartered Accountants
of Australia. The Expert shall act as an expert and
not as an arbitrator and his written determination
shall in the absence of manifest error be final and
binding on all the Shareholders. For the foregoing
purpose, the Expert shall have access to all books
of account and records and all vouchers, cheques,
papers and documents that in any way relate to the
Business or the Company.
(c) The Expert will certify in writing the sum that in his
opinion is the fair market value of the Transfer Shares.
The price per Share shall be the sum equal to the fair
market value of the Transfer Shares (of that class)
certified by that Expert divided by the number of
Transfer Shares (of that class). The Company will use its
best endeavours to procure that the Expert determines the
price per Share within 21 days of being requested to do
so.
<PAGE>
The costs and expenses of the Expert in determining the
price per Share shall be borne as to one half by the
Proposing Transferor and as to the other half by the
Purchasers (as defined in Clause 8.3(j)) pro rata
according to the number of Transfer Shares purchased by
them.
8.5 CO-SALE
(a) If a Proposing Transferor is permitted under this Clause
8 to sell all or any of its Shares to a third party
purchaser and the provisions of Clause 8.3 have been
complied with or waived by the Preferred Shareholders,
each of the Preferred Shareholders will have the right to
require by notice in accordance with Clause 8.5(b) the
Proposing Transferor to procure that the third party
acquire Shares from each of the Preferred Shareholders
who delivers such a notice, the number of Shares to be
calculated by multiplying the number of Transfer Shares
by the Specified Proportion of that Preferred
Shareholder, at the same price per Share and on the same
terms and conditions as the third party purchaser is to
acquire the Proposing Transferor's Shares and, if any of
the other Preferred Shareholders gives notice pursuant to
this Clause 8.5, the Proposing Transferor will only be
permitted to sell its Shares to the third party purchaser
if the third party purchaser also acquires the relevant
number of the other Preferred Shareholders' Shares at the
same price per Share and on the same terms and
conditions.
(b) A notice for the purposes of Clause 8.5(a) shall be in
writing addressed to the Proposing Transferor and given
to the Proposing Transferor within 14 days of receipt by
the other Preferred Shareholder of a notice from the
Proposing Transferor specifying the identity of the third
party purchaser, price per Share and terms and conditions
on which the Proposing Transferor's Shares are to be
sold.
(c) A Preferred Shareholder other than the Proposing
Transferor may sell its Shares to the third party
purchaser in accordance with Clause 8.5(a) without the
need to comply with the procedure set out in Clause 8.3.
8.6 TRANSFER OF ENTIRE INTEREST
An obligation to transfer a Share under the provisions of this
Clause 8 shall be deemed to be an obligation to transfer the
entire legal and beneficial interest in such Share free from
any Encumbrance.
<PAGE>
8.7 WAIVER OF PROVISIONS
The provisions of this Clause 8 may be waived in whole or in
part in any particular case with the prior written consent of
all the Shareholders.
8.8 SHAREHOLDER OBLIGATION
Each Shareholder shall do everything within its power and
shall not fail to do anything within its power to ensure that
Shares in itself are not Disposed of in order to overcome or
avoid the transfer provisions of Clause 8.
9 ALLOTMENT OF SHARES
9.1 If, at any time prior to a public offering of any Shares of
the Company, the Company issues any additional Shares or
securities convertible into Shares, the Company shall offer to
each Preferred Shareholder for subscription, at the same price
and on the same terms and conditions, sufficient of such
Shares or securities as will enable that Preferred Shareholder
to maintain its proportionate ownership of Ordinary Shares
after such issue, assuming that in so calculating the amount
of Shares or securities to be offered and each Shareholder's
proportionate ownership of Ordinary Shares, all issued Series
A Preferred Shares have been converted into Ordinary Shares.
9.2 Clause 9.1 shall not apply to Shares or securities issued to
employees, consultants or directors for incentive purposes.
10 EMPLOYEE SHARE OR OPTION INCENTIVE PLAN
The Parties acknowledge that it is intended that, after the completion
of certain milestones, the Company will create and maintain an employee
share or option incentive plan on the basis that if the shares were
issued or options were fully exercised, the shares so issued would
constitute up to 15% of the Ordinary Shares on issue determined as if
all shares, and securities convertible in to Ordinary Shares had been
converted, and on such other terms and conditions as are determined by
the Board.
11 WARRANTIES, UNDERTAKINGS AND OBLIGATIONS
11.1 The Company represents and warrants to each of the manager and
trustee of each Licensed Fund that it is an Eligible Investee
Company and there has been no material adverse change to the
financial position of the Company as at September 1999 as
described in the Business Plan; and
<PAGE>
11.2 The Company shall:
(a) proactively inform the manager of each Licensed Fund and
respond to any requests from a manager of a Licensed Fund
in a timely and expeditious manner, of any information
concerning the status of the Company as an Eligible
Investee Company or a change in the status of an
Associate or Related Body Corporate of the Company, and
any information that a manager of a Licensed Fund may
require to comply with its obligations under the relevant
IIF Management Licence;
(b) provide to the manager of each Licensed Fund on the date
of this Agreement and thereafter within 14 days of
receiving a request from a manager of a Licensed Fund so
to provide (on at least an annual basis) the following
information:
(i) the names of all officers and senior executives of
the Company and its Related Bodies Corporate;
(ii) the names of all the Company's Related Bodies
Corporate;
(iii)confirmation that no moneys invested by, or on
behalf of, a Licensed Fund will be used to discharge
a debt to, or acquire an asset from, the manager or
trustee of a Licensed Fund or any of their officers
or Related Bodies Corporate;
(iv) confirmation that the Company will not be acquiring
any goods or services from the manager or trustee of
the Licensed Fund or any of their officers or
Related Bodies Corporate;
(v) confirmation that the Company does not owe any money
on any account whatever to the manager or trustee of
a Licensed Fund or any of their officers or Related
Bodies Corporate; and
(vi) confirmation that in respect of any other holder of
a IIF Management Licence or another Licensed Fund
("Other Relevant Party"), the Company:
(1) cannot Control, or influence materially, the
Other Relevant Party's activities or internal
affairs;
(2) is not a member or beneficiary of or partner in
the Other Relevant Party;
(3) is not in a position to cast, or to Control the
casting of, a vote at a meeting of the equity
holders in the Other Relevant Party or to
Control or influence
<PAGE>
materially the Other Relevant Party's internal
affairs;
(4) has no power to dispose of, or to exercise
Control over the disposal of, a security in or
issued by the Other Relevant Party;
(5) is not owed a debt by and is not a creditor of
the Other Relevant Party; or
(6) does not act as agent for the Other Relevant
Party in any transaction or dealing,
(c) represent and warrant that the information provided by
the Company pursuant to clause 11.2(b) is true and
correct; and
(d) ensure that it does all matters and things as are
confirmed in the information provided by the Company
pursuant to clause 11.2(b).
(e) A reference in this Clause 11.2 to "Control" of a
corporation is a reference to the possession directly or
indirectly of the power whether or not having statutory,
legal or equitable force, and whether or not based on
statutory, legal or equitable rights, directly or
indirectly to:
(i) control more than 50% of the membership of the board
of directors of that corporation; or
(ii) control more than 50% of its voting shares; or
(iii)direct or cause the direction of the management and
policies of the manager,
whether by means of trusts, agreements, arrangements,
understandings, practices, the ownership of any interest in
shares or stock of that company or otherwise.
(f) A reference in this Clause 11.2 to "Control" of a
corporation or other person who is or proposes to act as
a trustee is a reference to the possession directly or
indirectly of the power to:
(i) control the trustee;
(ii) control any decisions of the trustee as trustee of
the relevant trust;
(iii) appoint, remove or replace the trustee;
(iv) appoint, remove or replace a majority of the
directors of the trustee; or
<PAGE>
(v) direct the allocation of any benefits under the
relevant trust.
(g) A reference in this Clause 11.2 to "Control" of an event,
outcome or result or the exercise of a right, power,
authority, discretion or remedy means the possession,
directly or indirectly, of the power to bring about or
direct that event outcome or result or direct the
exercise of that right, power, authority, discretion or
remedy.
12 MANAGEMENT OF THE COMPANY
12.1 The Board shall be responsible for the overall direction and
control of the management of the Company and the formulation
of the polices to be applied in the conduct of the Business.
12.2 The Board will consist of 5 directors, namely:
(a) an independent Chairman appointed by simple majority of
all Shareholders;
(b) a managing director appointed by simple majority of all
Shareholders;
(c) two directors appointed by simple majority of all
Preferred Shareholders, at least one of whom shall at all
times be an appointee of RBML; and
(d) one director appointed by Praxis USA.
12.3 The persons who have appointed a director referred to in
Clause 12.2 shall have the right from time to time to remove
any such director and appoint another director in his place.
12.4 The Company will pay to its non-executive directors:
(a) such fees as are determined by majority of the Board; and
(b) reasonable travel and related expenses incurred in
attending Board meetings or conducting business on the
Company's behalf and as authorised by the Board.
12.5 Unless otherwise agreed in writing between the Shareholders
and save as otherwise provided or contemplated in this
Agreement the Shareholders shall exercise their powers in
relation to the Company so as to ensure that:
(a) the Company carries on and conducts its business and
affairs in a proper and efficient manner and for its own
benefit;
<PAGE>
(b) the Company transacts all of its business on arm's length
terms;
(c) the Company shall maintain with a well-established and
reputable insurer adequate insurance coverage against all
risks usually insured against by companies carrying on
the same or a similar business and (without prejudice to
the generality of the foregoing) for the full replacement
or reinstatement value of all its assets of an insurable
nature;
(d) the Company allots and issues its Shares and other
securities at the best price reasonably obtainable in the
circumstances;
(e) the Company shall not acquire, dispose, hire, lease,
licence or receive licences of any assets, goods, rights
or services otherwise than at the best price reasonably
obtainable in the circumstances;
(f) the Company shall keep books of account and therein make
true and complete entries of all its dealings and
transactions of and in relation to its business;
(g) the Company fulfils its obligations under this Agreement;
(h) the Company shall prepare its accounts in accordance with
the Corporations Law and shall adopt such accounting
policies as may from time to time be generally accepted
in Australia;
(i) the Company shall prepare such accounts in respect of
each financial year as are required by statute and
procure that such accounts are audited as soon as
practicable and in any event not later than three months
after the end of the relevant financial year; and
(j) if the Company requires any approval, consent or licence
for the carrying on of its Business in the places and in
the manner in which it is for the time being carried on
or proposed to be carried on the Company will use its
best endeavours to obtain and maintain the same in full
force and effect.
The word "Company" where used in this paragraph shall be
deemed to include each of the other companies in the Group (if
any) from time to time to the intent and effect that the
provisions of this Clause 12.5 shall apply in relation to each
such company as they apply in relation to the Company.
12.6 The Company shall provide to each Preferred Shareholder:
(a) annual financial statements, certified by an accounting
firm of nationally recognised standing within 4 months of
the end of each financial year;
<PAGE>
(b) regular financial statements (including income
statements, balance sheets and cash-flow statements) in a
form acceptable to the Shareholders;
(c) an annual operating and financial plan agreed to by the
Board prior to the beginning of each fiscal year and any
revisions thereof promptly upon their adoption by the
Board;
(d) quarterly technical summary updates measured against
milestones in such form as the Shareholders may
reasonably require within 14 days of the end of each
calendar quarter; and
(e) such other information as to its financial and business
affairs as any Preferred Shareholder may reasonably
require.
12.7 The Preferred Shareholders have the right at all times to
appoint and instruct an independent chartered accountant to
the Company for the purposes of reviewing the financial
statements and other records and books of account of the
Company, and the Company shall permit the independent
accountant reasonable access to its records and books of
account. The costs of the independent accountant shall be
borne by the appointing Preferred Shareholder.
13 MEETINGS OF DIRECTORS
13.1 The Company shall convene meetings of the Directors at least 9
times per year or as otherwise agreed from time to time by the
Board.
13.2 After a meeting of the Directors to be held in June of each
year the Company shall present to each of the Directors for
consideration:
(a) comprehensive financial operating budgets, capital
budgets and cashflow budgets in a form acceptable to the
Directors; and
(b) business financial plans for the Company and its
Subsidiaries (if any) in respect of the period of 3 years
to commence on the 1st day of July in that year.
13.3 The quorum for a meeting of directors will be 3
directors, at least one of whom shall at all times be an
appointee of a Preferred Shareholder.
14 MATTERS REQUIRING DIRECTORS APPROVAL
Unless this Agreement otherwise provides, the Company will not, and
none of the other companies in the Group (if any) will do any of the
following, without the prior approval of a resolution of at least 4 of
the Directors (one of whom was appointed by RBML):
<PAGE>
14.1 enter into, vary or terminate any contract or arrangement
(whether legally binding or not) with any of its Directors or
any Shareholder or with any Related Body Corporate of a
Shareholder;
14.2 enter into any material contract or arrangement outside the
ordinary course of its Business or whereby any person would or
might receive remuneration calculated by reference to its
income or profits;
14.3 vary the terms of service (including compensation,
remuneration and emoluments) of a Director;
14.4 enter into any transaction or series of related transactions
(whether at one time or over a period of time) involving the
incurring of any capital expenditure or liability or the
disposal of any capital asset or assets and which involves a
total outlay or receipt, in any period of twelve consecutive
months, of more than $100,000 (or such larger sum as the
Shareholders may from time to time agree in writing) or a sum
equal to 10% of the net assets of the Company and its
Subsidiaries (if any) as shown in the latest audited
consolidated accounts of the Company and its Subsidiaries (if
any) or, if it has no Subsidiaries, in its latest audited
accounts, whichever amount shall be the higher, but excepting
transactions authorised expressly or impliedly in any current
capital expenditure budget; for these purposes expenditure
shall be deemed to be "Capital Expenditure" and an asset shall
be deemed to be a "Capital Asset" if, in either case, it would
be treated as such in accounts prepared in accordance with
accounting principles generally accepted in Australia;
14.5 borrow any money or obtain any advance, credit or financial
accommodation in any form (other than normal trade credit not
exceeding $50,000 or other than on normal banking terms for
unsecured overdraft facilities not exceeding $50,000) or vary
the terms and conditions of any borrowings or bank mandates;
14.6 create or allow to subsist any Encumbrance over all or a
substantial part of all of its assets;
14.7 lend any money to any person (other than by way of deposit
with a bank or other institution the normal business of which
includes the acceptance of deposits) or grant any credit to
any person (except to its customers in the normal course of
business) or give any guarantee, indemnity or security in
respect of the obligations of any other person;
14.8 enter into any death, retirement, profit sharing, bonus, share
option, employee incentive plan or other scheme for the
benefit of the officers or employees of the Company or any
material variation (including any increase in the percentage
amount of the contributions) of any such scheme;
<PAGE>
14.9 commence any legal or arbitration proceedings other than
routine debt collection;
14.10 make any claim, disclaimer, surrender, election or consent of
a material nature for tax purposes;
14.11 make any early repayments of any of its indebtedness; or
14.12 permit any power or authority of its Directors to be delegated
to an executive officer or committee of Directors or to any
other person whatsoever.
15 MATTERS REQUIRING PREFERRED SHAREHOLDERS APPROVAL
15.1 Unless this Agreement otherwise provides, the Company will
not, and none of the other companies in the Group (if any)
will do any of the following, without the prior approval of
two thirds of the Preferred Shareholders:
(a) issue, allot, redeem, purchase or grant options over any
of its Shares, debentures or other securities or
reorganise its share capital in any way except:
(i) where the number of Shares, debentures or other
securities to be issued, allotted, redeemed or
purchased does not exceed, within any 12 month
period, 10% of the total number of Shares,
debentures or other securities of the same class;
(ii) in relation to an Employee Share Plan; or
(iii)in relation to all options currently on issue at
the Commencement Date;
(b) pay or make any Dividend or other distribution including
without limiting the foregoing make any distribution out
of capital profits or capital reserves (including any
share premium account or capital redemption reserve fund)
except pursuant to the provisions of Clause 5.1;
(c) amend the provisions of its Constitution or pass any
resolution for winding up;
(d) acquire or make any investment in another company or
business;
(e) change the nature or scope of its business to a material
extent or commence any material new business not being
ancillary or incidental to such business as defined in
the Company's current Business Plan;
<PAGE>
(f) merge or amalgamate with any person;
(g) incur any material research and development expenditure
in excess of $250,000 in any 12 month period otherwise
than in accordance with the research and development
budget agreed to by the Shareholders for the year in
question; or
(h) modify or abrogate any rights for the time being attached
to any Shares.
15.2 If the Shareholders (or any of them) have been requested by
the Board or another Shareholder to provide their approval,
consent or determination in relation to any matter relating to
the Company, and the request:
(a) does not stipulate a time and date by which the approval,
consent or determination is to be given or made, the
Shareholder must give or withhold its approval or consent
or make the determination within 14 days after receiving
the request from the Board or other Shareholder; or
(b) stipulates a time and date by which the approval, consent
or determination is to be given or made, the Shareholder
must give or withhold its approval or consent or make the
determination within that timeframe.
If the Shareholder does not, it will be deemed to have given
its approval or consent, or made a favourable determination on
the expiry of the 14 day period or the stipulated timeframe.
16 MANAGEMENT AND PERSONNEL
16.1 Each Party, including the Company, shall keep all information
which it obtains concerning the Business, affairs or assets of
the Company strictly confidential and shall not, and shall
procure that their respective officers, employees, agents and
auditors do not, without the prior written consent of all the
other Parties, disclose any of the above information to any
third party except:
(a) if required to make such disclosure by any court of
competent jurisdiction or in order to enforce any rights
under this instrument in any proceedings;
(b) pursuant to any court order;
(c) pursuant to any law or regulation having the force of
law;
(d) pursuant to any requirements of the Australian Stock
Exchange Limited;
<PAGE>
(e) in circumstances where the information has come within
the public domain otherwise than by reason of a breach by
one of the Parties of the provisions of this Clause;
(f) to a bona fide intending purchaser of at least 5% of any
class of Shares or to a bona fide intending director
provided such purchaser or director agrees to observe the
confidentiality provisions of this Clause;
(g) in the normal and ordinary course of the Business of the
Company;
(h) pursuant to any other contract or legal obligation upon
the Company;
(i) nothing in this Clause shall prohibit a Director from
providing information to his appointor; or
(j) nothing in this Clause shall prohibit any Shareholder
from disclosing the information, on a confidential basis,
to employees or officers of any Related Body Corporate of
that Shareholder to the extent as is reasonably required
to satisfy any reporting obligations that Related Body
Corporate has to the ultimate beneficial owner of the
Shares.
16.2 The Company shall ensure that the contract of employment
entered into with all employees of the Company contains
confidentiality obligations in a form reasonably acceptable to
the Preferred Shareholders, or if there is not such written
contract, that the employee executes a Confidentiality Deed.
16.3 The Company shall ensure that the contract of employment
entered into with all Senior Employees contains a restrictive
covenant in relation to future employment in a form reasonably
acceptable to the Preferred Shareholders or, if there is no
such written contract that each Senior Employee executes a
restrictive covenant in relation to future employment in a
form reasonably acceptable to the Preferred Shareholders.
16.4 The personnel requirements of the Company will be determined
by the Board.
17 SUBSCRIPTION COSTS
17.1 Subject to Clause 17.2 being met, the Company will bear all
reasonable legal expenses of the Preferred Shareholders
associated with the preparation, negotiation and completion of
this Agreement and the amendment to the Constitution to
include the terms of issue of the Series A Preferred Shares.
<PAGE>
17.2 On or before the Commencement Date, each of the Company and
the Shareholders shall, where appropriate, duly and punctually
hold the meetings, give the notices and otherwise comply with
all the requirements of RBML regarding compliance with Section
260B of the Corporations Law so that to the extent required by
RBML any and all financial assistance, as referred to in
Clause 17.1 given by the Company is not prohibited by Section
260A of the Corporations Law.
17.3 If the Shareholders do not approve the giving of financial
assistance as referred to in Clause 17.1 pursuant to Section
260B of the Corporations Law, the Shareholders will bear, in
their Specified Proportions, all reasonable legal expenses of
RBML associated with the preparation, negotiation and
completion of this Agreement and the amendment to the
Constitution.
18 INDEMNITY FROM PRAXIS USA
Praxis USA indemnifies and agrees to keep indemnified each of the
Shareholders and the Company against all proceedings, claims, damages,
costs, expenses, losses and liabilities of whatever nature which may be
suffered, incurred, paid or sustained by any of the Shareholders or the
Company whether directly or indirectly as a result of any claim, action
or proceedings brought by any shareholder of Praxis USA against Praxis
USA or any of the Shareholders or the Company in relation to the
subscriptions and transactions contemplated by, or the conduct of the
Business in accordance with, this Agreement, including without
limitation, the Licence and Research & Development Agreements and the
Licence Agreements.
19 PUBLICITY
19.1 No public announcement of the holding of Shares as
contemplated in this Agreement shall be made by any of the
Parties otherwise than as a joint announcement in a form
approved by all the Parties.
19.2 Subject to Clause 19.1 and except to the extent required by
law or by the rules of any stock exchange, no Party shall make
any disclosure in relation to any other terms or conditions of
this Agreement.
20 NOTICES
Any notice required to be given under this Agreement by any Party to
another shall be:
20.1 in writing addressed to the address of the intended recipient
shown in this Agreement below or to such other address as has
been most recently notified by the intended recipient to the
Party giving the notice:
<PAGE>
IN THE CASE OF THE COMPANY:
Level 7, 60 Marcus Clarke Street
Canberra City, Australian Capital Territory 2601
Facsimile:
Attention:
IN THE CASE OF PRAXIS USA:
50 West Broadway, Salt Lake City, Utah,
United States of America 84101
Facsimile:
Attention:
IN THE CASE OF THE TRUSTEE:
39 Hunter Street, Sydney, New South Wales
Facsimile: 02 9221 1889
Attention: Senior Manager, Unit Trusts: Doug Browne
IN THE CASE OF RBML:
Level 10, 1 Collins Street, Melbourne, Victoria 3000
Facsimile: 03 9254 4940
Attention: Dr Geoff Brooke
20.2 signed by a person duly authorised by the sender; and
20.3 deemed to have been given and served:
(a) where despatched by hand, at the time delivery;
(b) where despatched by facsimile transmission, 24 hours
after the time recorded on the transmission report
unless:
(i) within those 24 hours the intended recipient has
informed the sender that the transmission was
received in an incomplete or garbled form; or
(ii) the transmission result report of the sender
indicates a faulty or incomplete transmission; and
<PAGE>
(c) where despatched by registered mail, on acknowledgment of
receipt by or on behalf of the recipient,
but if such delivery or receipt is on a day on which
commercial premises are not generally open for business in the
place of receipt or is later than 4.00 p.m. (local time) on
any day, the notice shall be deemed to have been given and
served on the next day on which commercial premises are
generally open for business in the place of receipt.
21 INCONSISTENCY WITH CONSTITUTION
In the event that there is any inconsistency between this Agreement and
the Constitution, this Agreement shall prevail.
22 FURTHER ASSURANCES
Each Party shall take all such steps, execute all such documents and do
all such acts and things as may be reasonably required by the other
Parties to give effect to any of the transactions contemplated by this
Agreement.
23 NON-WAIVER
Other than as otherwise specified in this Agreement, neither the
failure of any Party to enforce at any time any of the provisions of
this Agreement nor the granting of any time or other indulgence shall
be construed as a waiver of that provision or of the right of that
Party thereafter to enforce that or any other provision.
24 COSTS
Other than as otherwise specified in this Agreement, the Parties shall
bear their own costs arising out of the preparation of this Agreement
save that the Company shall bear any stamp duty chargeable on this
Agreement and on any instruments (other than a transfer of Shares)
required to be entered into pursuant to this Agreement and the Company
indemnifies the other Parties against the liability for all such stamp
duty.
25 AMENDMENT
This Agreement may not be amended except by the unanimous written
consent of all Parties.
26 TRUSTEES LIMITATION OF LIABILITY PROTECTION CLAUSE
26.1 The Trustee enters into this Agreement only in its capacity as
trustee of the Trust and in no other capacity. A liability
arising under
<PAGE>
or in connection with this Agreement is limited to and can be
enforced against the Trustee only to the extent to which it
can be satisfied out of property of the Trust out of which the
Trustee is actually indemnified for the liability. This
limitation of the Trustee's liability applies despite any
other provision of this Agreement and extends to all
liabilities and obligations of the Trustee in any way
connected with any representation, warranty, conduct,
omission, agreement or transaction related to this Agreement.
26.2 The parties other than the Trustee may not sue the Trustee in
any capacity other than as trustee of the Trust, including
seek the appointment of a receiver (except in relation to
property of the Trust), a liquidator, an administrator or any
similar person to the Trustee or prove in any liquidation,
administration or arrangement of or affecting the Trustee
(except in relation to property of the Trust).
26.3 The provisions of this Clause 26 shall not apply to any
obligation or liability of the Trustee to the extent that it
is not satisfied because under the Trust Deed establishing the
Trust or by operation of law there is a reduction in the
extent of the Trustee's indemnification out of the assets of
the Trust, as a result of the Trustee's fraud, negligence or
breach of trust.
26.4 It is acknowledged that RBML as the manager of the Trust is
responsible under the Trust Deed establishing the Trust for
performing a variety of obligations relating to the Trust,
including under this Agreement. No act or omission of the
Trustee (including any related failure to satisfy its
obligations or breach of representation or warranty under this
Agreement) will be considered fraud, negligence or breach of
trust of the Trustee for the purpose of this Clause 26.3 to
the extent to which the act or omission was caused or
contributed to by any failure by the manager or any other
person to fulfil its obligations relating to the Trust or by
any other act or omission of the manager or any other person.
27 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument.
28 GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws for the time being in force in the State of Victoria and each
party submits to the non-exclusive jurisdiction of the Courts of or
exercising jurisdiction in that State.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on the date written
above.
THE COMMON SEAL of PRAXIS )
PHARMACEUTICALS AUSTRALIA PTY )
LIMITED (ACN 082 811 630) was hereto )
affixed in accordance with its Constitution )
in the presence of: )
/s/ William B. Cowden Director
William B. Cowden Name of Director (Print)
/s/ Brett Charlton Director/Secretary
Brett Charlton Name of Director/Secretary (Print)
EXECUTED by PRAXIS )
PHARMACEUTICALS INC. by its )
authorised officer in the presence of: )
)
/s/ William B. Cowden Authorised Officer
William B. Cowden Name of Authorised Officer (Print)
CEO Title
EXECUTED BY PERPETUAL
TRUSTEES NOMINEES LIMITED
(ACN 000 341 533)
PERPETUAL TRUSTEES NOMINEES LIMITED (CAN
000 341 533) By its Attorneys who
declare that they have no notice of
revocation of the Power of Attorney
under which this document is signed.
THE COMMON SEAL of ROTHSCHILD )
BIOSCIENCE MANAGERS LIMITED )
(ACN 072 515 247) was hereto affixed in )
accordance with its Constitution in the )
presence of: )
/s/ G.C.D. Brooke Director
G.C.D. Brooke Name of Director (Print)
/s/ M.D. Pickering /Secretary
M.D. Pickering Name of /Secretary (Print)
<PAGE>
EXHIBIT 10.5
1999 STOCK OPTION PLAN
<PAGE>
PRAXIS PHARMACEUTICALS INC.
1999 STOCK OPTION PLAN
1. PURPOSE; EFFECTIVENESS OF THE PLAN.
(a) The purpose of this Plan is to advance the interests of the
Company and its stockholders by helping the Company obtain and
retain the services of employees, officers, consultants, and
directors, upon whose judgment, initiative and efforts the
Company is substantially dependent, and to provide those
persons with further incentives to advance the interests of
the Company.
(b) This Plan will become effective on the date of its adoption by
the Board, provided the Plan is approved by the stockholders
of the Company (excluding holders of shares of Stock issued by
the Company pursuant to the exercise of options granted under
this Plan) within twelve months before or after that date. If
the Plan is not so approved by the stockholders of the
Company, any options granted under this Plan will be rescinded
and will be void. This Plan will remain in effect until it is
terminated by the Board or the Committee (as defined
hereafter) under section 9 hereof, except that no ISO (as
defined herein) will be granted after the tenth anniversary of
the date of this Plan's adoption by the Board. This Plan will
be governed by, and construed in accordance with, the laws of
the State of Utah.
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan)
will govern the construction of this Plan, and of any stock option
agreements entered into pursuant to this Plan:
(a) "10% Stockholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions
set forth in Section 424(d) of the Code at the time he or she
is granted an Option, stock possessing more than ten percent
(10%) of the total combined voting power or value of all
classes of stock of the Company and/or of its subsidiaries;
(b) "1933 Act" means the federal Securities Act of 1933, as
amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Called for under an Option," or words to similar effect,
means issuable pursuant to the exercise of an Option;
(e) "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to
refer to Sections of the Code as enacted at the time of this
Plan's adoption by the Board and as subsequently amended, or
to any substantially similar successor provisions of the Code
resulting from recodification, renumbering or otherwise);
<PAGE>
(f) "Committee" means a committee of two or more Disinterested
Directors, appointed by the Board, to administer and interpret
this Plan; provided that the term "Committee" will refer to
the Board during such times as no Committee is appointed by
the Board;
(g) "Company" means Praxis Pharmaceuticals Inc., a Utah
corporation;
(h) "Disability" has the same meaning as "permanent and total
disability," as defined in Section 22(e)(3) of the Code;
(i) "Disinterested Director" means a member of the Board who is
not during the period of one year prior to his or her service
as an administrator of the Plan, or during the period of such
service, granted or awarded Stock, options to acquire Stock,
or similar equity securities of the Company under this Plan or
any similar plan of the Company, other than the grant of a
Formula Option pursuant to section 6(m) of this Plan;
(j) "Eligible Participants" means persons who, at a particular
time, are employees, officers, consultants, or directors of
the Company or its subsidiaries;
(k) "Fair Market Value" means, with respect to the Stock and as of
the date an ISO or a Formula Option is granted hereunder, the
market price per share of such Stock determined by the
Committee, consistent with the requirements of Section 422 of
the Code and to the extent consistent therewith, as follows:
(i) If the Stock was traded on a stock exchange on the
date in question, then the Fair Market Value will be
equal to the closing price reported by the applicable
composite-transactions report for such date;
(ii) If the Stock was traded over-the-counter on the date
in question and was classified as a national market
issue, then the Fair Market Value will be equal to
the last-transaction price quoted by the NASDAQ
system for such date;
(iii) If the Stock was traded over-the-counter on the date
in question but was not classified as a national
market issue, then the Fair Market Value will be
equal to the average of the last reported
representative bid and asked prices quoted by the
NASDAQ system for such date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value will be determined by the
Committee in good faith on such basis as it deems
appropriate.
(l) "Formula Option" means an NSO granted to members of the
Committee pursuant to section 6(m) hereof;
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 2
<PAGE>
(m) "ISO" has the same meaning as "incentive stock option," as
defined in Section 422 of the Code;
(n) "Just Cause Termination" means a termination by the Company of
an Optionee's employment by and/or service to the Company (or
if the Optionee is a director, removal of the Optionee from
the Board by action of the stockholders or, if permitted by
applicable law and the by-laws of the Company, the other
directors), in connection with the good faith determination of
the Company's board of directors (or of the Company's
stockholders if the Optionee is a director and the removal of
the Optionee from the Board is by action of the stockholders,
but in either case excluding the vote of the Optionee if he or
she is a director or a stockholder) that the Optionee has
engaged in any acts involving dishonesty or moral turpitude or
in any acts that materially and adversely affect the business,
affairs or reputation of the Company or its subsidiaries;
(o) "NSO" means any option granted under this Plan whether
designated by the Committee as a "non-qualified stock option,"
a "non-statutory stock option" or otherwise, other than an
option designated by the Committee as an ISO, or any option so
designated but which, for any reason, fails to qualify as an
ISO pursuant to Section 422 of the Code and the rules and
regulations thereunder;
(p) "Option" means an option granted pursuant to this Plan
entitling the option holder to acquire shares of Stock issued
by the Company pursuant to the valid exercise of the option;
(q) "Option Agreement" means an agreement between the Company and
an Optionee, in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Plan;
(r) "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of
the Option Stock called for under such Option;
(s) "Option Stock" means Stock issued or issuable by the Company
pursuant to the valid exercise of an Option;
(t) "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a
Transfer authorized under this Plan;
(u) "Plan" means this 1999 Stock Option Plan of the Company;
(v) "QDRO" has the same meaning as "qualified domestic relations
order" as defined in Section 414(p) of the Code;
(w) "Stock" means shares of the Company's Common Stock, $0.001 par
value;
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 3
<PAGE>
(x) "Subsidiary" has the same meaning as "Subsidiary Corporation"
as defined in Section 424(f) of the Code;
(y) "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment,
transfer, conveyance, pledge, hypothecation, encumbrance,
disposal, loan, gift, attachment or levy of such Option Stock,
including without limitation an assignment for the benefit of
creditors of the Optionee, a transfer by operation of law,
such as a transfer by will or under the laws of descent and
distribution, an execution of judgment against the Option
Stock or the acquisition of record or beneficial ownership
thereof by a lender or creditor, a transfer pursuant to a
QDRO, or to any decree of divorce, dissolution or separate
maintenance, any property settlement, any separation agreement
or any other agreement with a spouse (except for estate
planning purposes) under which a part or all of the shares of
Option Stock are transferred or awarded to the spouse of the
Optionee or are required to be sold; or a transfer resulting
from the filing by the Optionee of a petition for relief, or
the filing of an involuntary petition against such Optionee,
under the bankruptcy laws of the United States or of any other
nation.
3. ELIGIBILITY.
The Company may grant Options under this Plan only to persons who are
Eligible Participants as of the time of such grant. Subject to the
provisions of sections 4(d), 5 and 6 hereof, there is no limitation on
the number of Options that may be granted to an Eligible Participant.
4. ADMINISTRATION.
(a) COMMITTEE. The Committee, if appointed by the Board, will
administer this Plan. If the Board, in its discretion, does
not appoint such a Committee, the Board itself will administer
this Plan and take such other actions as the Committee is
authorized to take hereunder; provided that the Board may take
such actions hereunder in the same manner as the Board may
take other actions under the Company's Articles of
Incorporation and By-laws generally.
(b) AUTHORITY AND DISCRETION OF COMMITTEE. The Committee will have
full and final authority in its discretion, at any time and
from time to time, subject only to the express terms,
conditions and other provisions of the Company's Articles of
incorporation, by-laws and this Plan, and the specific
limitations on such discretion set forth herein:
(i) to select and approve the persons who will be granted
Options under this Plan from among the Eligible
Participants, and to grant to any person so selected
one or more Options to purchase such number of shares
of Option Stock as the Committee may determine;
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 4
<PAGE>
(ii) to determine the period or periods of time during
which Options may be exercised, the Option Price and
the duration of such Options, and other matters to be
determined by the Committee in connection with
specific Option grants and Options Agreements as
specified under this Plan;
(iii) to interpret this Plan, to prescribe, amend and
rescind rules and regulations relating to this Plan,
and to make all other determinations necessary or
advisable for the operation and administration of
this Plan; and
(iv) to delegate all or a portion of its authority under
subsections (i) and (ii) of this section 4(b) to one
or more directors of the Company who are executive
officers of the Company, but only in connection with
Options granted to Eligible Participants who are not
subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder,
and subject to such restrictions and limitations
(such as the aggregate number of shares of Option
Stock called for by such Options that may be granted)
as the Committee may decide to impose on such
delegate directors.
(c) LIMITATION ON AUTHORITY. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no
authority:
(i) to grant Options to any of its members, whether or
not approved by the Board; and
(ii) to determine any matters, or exercise any discretion,
in connection with the Formula Options under section
6(m) hereof, to the extent that the power to make
such determinations or to exercise such discretion
would cause one or more members of the Committee no
longer to be "Disinterested Directors" within the
meaning of section 2(i) above.
(d) DESIGNATION OF OPTIONS. Except as otherwise provided herein,
the Committee will designate any Option granted hereunder
either as an ISO or as an NSO. To the extent that the Fair
Market Value (determined at the time the Option is granted) of
Stock with respect to which all ISOs are exercisable for the
first time by any individual during any calendar year
(pursuant to this Plan and all other plans of the Company
and/or its subsidiaries) exceeds $100,000, such option will be
treated as an NSO. Notwithstanding the general eligibility
provisions of section 3 hereof, the Committee may grant ISOs
only to persons who are employees of the Company and/or its
subsidiaries.
(e) OPTION AGREEMENTS. Options will be deemed granted hereunder
only upon the execution and delivery of an Option Agreement by
the Optionee and a duly authorized officer of the Company.
Options will not be deemed granted hereunder merely upon the
authorization of such grant by the Committee.
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 5
<PAGE>
5. SHARES RESERVED FOR OPTIONS.
(a) OPTION POOL. The aggregate number of shares of Option Stock
that may be issued pursuant to the exercise of Options granted
under this Plan initially will not exceed One Million Six
Hundred Ninety-Eight Thousand Three Hundred Thirty (1,698,330)
(the "Option Pool"), provided that such number automatically
shall be adjusted annually on the beginning of the Company's
fiscal year to a number equal to 15% of the number of shares
of Stock of the Company outstanding at the end of the
Company's last completed fiscal year, or 1,698,330 shares,
whichever is greater, and provided further that such number
will be increased by the number of shares of Option Stock that
the Company subsequently may reacquire through repurchase or
otherwise. Shares of Option Stock that would have been
issuable pursuant to Options, but that are no longer issuable
because all or part of those Options have terminated or
expired, will be deemed not to have been issued for purposes
of computing the number of shares of Option Stock remaining in
the Option Pool and available for issuance.
(b) ADJUSTMENTS UPON CHANGES IN STOCK. In the event of any change
in the outstanding Stock of the Company as a result of a stock
split, reverse stock split, stock dividend, recapitalization,
combination or reclassification, appropriate proportionate
adjustments will be made in:
(i) the aggregate number of shares of Option Stock in the
Option Pool that may be issued pursuant to the
exercise of Options granted hereunder;
(ii) the Option Price and the number of shares of Option
Stock called for in each outstanding Option granted
hereunder; and
(iii) other rights and matters determined on a per share
basis under this Plan or any Option Agreement
hereunder. Any such adjustments will be made only by
the Board, and when so made will be effective,
conclusive and binding for all purposes with respect
to this Plan and all Options then outstanding. No
such adjustments will be required by reason of the
issuance or sale by the Company for cash or other
consideration of additional shares of its Stock or
securities convertible into or exchangeable for
shares of its Stock.
6. TERMS OF STOCK OPTION AGREEMENTS.
Each Option granted pursuant to this Plan will be evidenced by an
agreement (an "Option Agreement") between the Company and the person to
whom such Option is granted, in form and substance satisfactory to the
Committee in its sole discretion, consistent with
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 6
<PAGE>
this Plan. Without limiting the foregoing, each Option Agreement
(unless otherwise stated therein) will be deemed to include the
following terms and conditions:
(a) COVENANTS OF OPTIONEE. At the discretion of the Committee, the
person to whom an Option is granted hereunder, as a condition
to the granting of the Option, must execute and deliver to the
Company a confidential information agreement approved by the
Committee. Nothing contained in this Plan, any Option
Agreement or in any other agreement executed in connection
with the granting of an Option under this Plan will confer
upon any Optionee any right with respect to the continuation
of his or her status as an employee of, consultant or
independent contractor to, or director of, the Company or its
subsidiaries.
(b) VESTING PERIODS. Except as otherwise provided herein, each
Option Agreement may specify the period or periods of time
within which each Option or portion thereof will first become
exercisable (the "Vesting Period") with respect to the total
number of shares of Option Stock called for thereunder (the
"Total Award Option Stock"). Such Vesting Periods will be
fixed by the Committee in its discretion, and may be
accelerated or shortened by the Committee in its discretion.
Unless the Option Agreement executed by an Optionee expressly
otherwise provides and except as set forth herein, the right
to exercise an Option granted hereunder will be subject to the
following Vesting Periods, subject to the Optionee continuing
to be an Eligible Participant and the occurrence of any other
event (including the passage of time) that would result in the
cancellation or termination of the Option:
(i) no portion of the Option will be exercisable prior to
the expiration of six (6) months after the date of
grant set forth in the Option Agreement; and
(ii) such additional vesting periods as may be determined
by the Committee in its sole discretion.
(c) EXERCISE OF THE OPTION.
(i) MECHANICS AND NOTICE. An Option may be exercised to
the extent exercisable (1) by giving written notice
of exercise to the Company, specifying the number of
full shares of Option Stock to be purchased and
accompanied by full payment of the Option Price
thereof and the amount of withholding taxes pursuant
to subsection 6(c)(ii) below; and (2) by giving
assurances satisfactory to the Company that the
shares of Option Stock to be purchased upon such
exercise are being purchased for investment and not
with a view to resale in connection with any
distribution of such shares in violation of the 1933
Act; provided, however, that in the event the Option
Stock called for under the Option is registered under
the 1933 Act, or in the event resale of such Option
Stock
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 7
<PAGE>
without such registration would otherwise be
permissible, this second condition will be
inoperative if, in the opinion of counsel for the
Company, such condition is not required under the
1933 Act, or any other applicable law, regulation or
rule of any governmental agency.
(ii) WITHHOLDING TAXES. As a condition to the issuance of
the shares of Option Stock upon full or partial
exercise of an NSO granted under this Plan, the
Optionee will pay to the Company in cash, or in such
other form as the Committee may determine in its
discretion, the amount of the Company's tax
withholding liability required in connection with
such exercise. For purposes of this subsection
6(c)(ii), "tax withholding liability" will mean all
federal and state income taxes, social security tax,
and any other taxes applicable to the compensation
income arising from the transaction required by
applicable law to be withheld by the Company.
(d) PAYMENT OF OPTION PRICE. Each Option Agreement will specify
the Option Price with respect to the exercise of Option Stock
thereunder, to be fixed by the Committee in its discretion,
but in no event will the Option Price for an ISO granted
hereunder be less than the Fair Market Value (or, in case the
Optionee is a 10% Stockholder, one hundred ten percent (110%)
of such Fair Market Value) of the Option Stock at the time
such ISO is granted, and in no event will the Option Price for
an NSO granted hereunder be less than eighty-five percent
(85%) of Fair Market Value. The Option Price will be payable
to the Company in United States dollars in cash or by check
or, such other legal consideration as may be approved by the
Committee, in its discretion.
(i) For example, the Committee, in its discretion, may
permit a particular Optionee to pay all or a portion
of the Option Price, and/or the tax withholding
liability set forth in subsection 6(c)(ii) above,
with respect to the exercise of an Option either by
surrendering shares of Stock already owned by such
Optionee or by withholding shares of Option Stock,
provided that the Committee determines that the fair
market value of such surrendered Stock or withheld
Option Stock is equal to the corresponding portion of
such Option Price and/or tax withholding liability,
as the case may be, to be paid for therewith.
(ii) If the Committee permits an Optionee to pay any
portion of the Option Price and/or tax withholding
liability with shares of Stock with respect to the
exercise of an Option (the "Underlying Option") as
provided in subsection 6(d)(i) above, then the
Committee, in its discretion, may grant to such
Optionee (but only if Optionee remains an Eligible
Participant at that time) additional NSOs, the number
of shares of Option Stock called for thereunder to be
equal to all or a portion of the Stock so surrendered
or withheld (a "Replacement Option"). Each
Replacement Option will be evidenced by an Option
Agreement. Unless otherwise set forth therein,
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 8
<PAGE>
each Replacement Option will be immediately
exercisable upon such grant (without any Vesting
Period) and will be coterminous with the Underlying
Option. The Committee, in its sole discretion, may
establish such other terms and conditions for
Replacement Options as it deems appropriate.
(e) TERMINATION OF THE OPTION. Except as otherwise provided
herein, each Option Agreement will specify the period of time,
to be fixed by the Committee in its discretion, during which
the Option granted therein will be exercisable, not to exceed
ten years from the date of grant in the case of an ISO (the
"Option Period"); provided that the Option Period will not
exceed five years from the date of grant in the case of an ISO
granted to a 10% Stockholder. To the extent not previously
exercised, each Option will terminate upon the expiration of
the Option Period specified in the Option Agreement; provided,
however, that each such Option will terminate, if earlier:
(i) ninety days after the date that the Optionee ceases
to be an Eligible Participant for any reason, other
than by reason of death or disability or a Just Cause
Termination;
(ii) twelve months after the date that the Optionee ceases
to be an Eligible Participant by reason of such
person's death or disability; or
(iii) immediately as of the date that the Optionee ceases
to be an Eligible Participant by reason of a Just
Cause Termination.
In the event of a sale or all or substantially all of the
assets of the Company, or a merger or consolidation or other
reorganization in which the Company is not the surviving
corporation, or in which the Company becomes a subsidiary of
another corporation (any of the foregoing events, a "Corporate
Transaction"), then notwithstanding anything else herein, the
right to exercise all then outstanding Options will vest
immediately prior to such Corporate Transaction and will
terminate immediately after such Corporate Transaction;
provided, however, that if the Board, in its sole discretion,
determines that such immediate vesting of the right to
exercise outstanding Options is not in the best interests of
the Company, then the successor corporation must agree to
assume the outstanding Options or substitute therefor
comparable options of such successor corporation or a parent
or subsidiary of such successor corporation.
(f) OPTIONS NONTRANSFERABLE. No Option will be transferable by the
Optionee otherwise than by will or the laws of descent and
distribution, or in the case of an NSO, pursuant to a QDRO.
During the lifetime of the Optionee, the Option will be
exercisable only by him or her, or the transferee of an NSO if
it was transferred pursuant to a QDRO.
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 9
<PAGE>
(g) QUALIFICATION OF STOCK. The right to exercise an Option will
be further subject to the requirement that if at any time the
Board determines, in its discretion, that the listing,
registration or qualification of the shares of Option Stock
called for thereunder upon any securities exchange or under
any state or federal law, or the consent or approval of any
governmental regulatory authority, is necessary or desirable
as a condition of or in connection with the granting of such
Option or the purchase of shares of Option Stock thereunder,
the Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, consent
or approval is effected or obtained free of any conditions not
acceptable to the Board, in its discretion.
(h) ADDITIONAL RESTRICTIONS ON TRANSFER. By accepting Options
and/or Option Stock under this Plan, the Optionee will be
deemed to represent, warrant and agree as follows:
(i) SECURITIES ACT OF 1933. The Optionee understands that
the shares of Option Stock have not been registered
under the 1933 Act, and that such shares are not
freely tradeable and must be held indefinitely unless
such shares are either registered under the 1933 Act
or an exemption from such registration is available.
The Optionee understands that the Company is under no
obligation to register the shares of Option Stock.
(ii) OTHER APPLICABLE LAWS. The Optionee further
understands that Transfer of the Option Stock
requires full compliance with the provisions of all
applicable laws.
(iii) INVESTMENT INTENT. Unless a registration statement is
in effect with respect to the sale of Option Stock
obtained through exercise of Options granted
hereunder: (1) Upon exercise of any Option, the
Optionee will purchase the Option Stock for his or
her own account and not with a view to distribution
within the meaning of the 1933 Act, other than as may
be effected in compliance with the 1933 Act and the
rules and regulations promulgated thereunder; (2) no
one else will have any beneficial interest in the
Option Stock; and (3) he or she has no present
intention of disposing of the Option Stock at any
particular time.
(i) COMPLIANCE WITH LAW. Notwithstanding any other provision of
this Plan, Options may be granted pursuant to this Plan, and
Option Stock may be issued pursuant to the exercise thereof by
an Optionee, only after there has been compliance with all
applicable federal and state securities laws, and all of the
same will be subject to this overriding condition. The Company
will not be required to register or qualify Option Stock with
the Securities and Exchange Commission or any State agency,
except that the Company will register with, or as required by
local law, file for and secure an exemption from such
registration requirements from, the applicable
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 10
<PAGE>
securities administrator and other officials of each
jurisdiction in which an Eligible Participant would be granted
an Option hereunder prior to such grant.
(j) STOCK CERTIFICATES. Certificates representing the Option Stock
issued pursuant to the exercise of Options will bear all
legends required by law and necessary to effectuate this
Plan's provisions. The Company may place a "stop transfer"
order against shares of the Option Stock until all
restrictions and conditions set forth in this Plan and in the
legends referred to in this section 6(k) have been complied
with.
(k) NOTICES. Any notice to be given to the Company under the terms
of an Option Agreement will be addressed to the Company at its
principal executive office, Attention: Corporate Secretary, or
at such other address as the Company may designate in writing.
Any notice to be given to an Optionee will be addressed to the
Optionee at the address provided to the Company by the
Optionee. Any such notice will be deemed to have been duly
given if and when enclosed in a properly sealed envelope,
addressed as aforesaid, registered and deposited, postage and
registry fee prepaid, in a post office or branch post office
regularly maintained
(l) OTHER PROVISIONS. The Option Agreement may contain such other
terms, provisions and conditions, including such special
forfeiture conditions, rights of repurchase, rights of first
refusal and other restrictions on Transfer of Option Stock
issued upon exercise of any Options granted hereunder, not
inconsistent with this Plan, as may be determined by the
Committee in its sole discretion.
(m) FORMULA OPTIONS. [Reserved for future consideration]
7. PROCEEDS FROM SALE OF STOCK.
Cash proceeds from the sale of shares of Option Stock issued from time
to time upon the exercise of Options granted pursuant to this Plan will
be added to the general funds of the Company and as such will be used
from time to time for general corporate purposes.
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of this
Plan, and except with respect to Formula Options, the Committee may
modify, extend or renew outstanding Options granted under this Plan, or
accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, however, no modification of any Option
will, without the consent of the holder of the Option, alter or impair
any rights or obligations under any Option theretofore granted under
this Plan.
9. AMENDMENT AND DISCONTINUANCE.
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 11
<PAGE>
The Board may amend, suspend or discontinue this Plan at any time or
from time to time; provided that no action of the Board will cause ISOs
granted under this Plan not to comply with Section 422 of the Code
unless the Board specifically declares such action to be made for that
purpose and provided further that no such action may, without the
approval of the stockholders of the Company, materially increase (other
than by reason of an adjustment pursuant to section 5(b) hereof) the
maximum aggregate number of shares of Option Stock in the Option Pool
that may be issued under Options granted pursuant to this Plan or
materially increase the benefits accruing to Plan participants or
materially modify eligibility requirements for the participants.
Provided, further, that the provisions of section 6(m) hereof may not
be amended more often than once during any six (6) month period, other
than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules and regulations thereunder. Moreover,
no such action may alter or impair any Option previously granted under
this Plan without the consent of the holder of such Option.
10. PLAN COMPLIANCE WITH RULE 16B-3.
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, transactions under this plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors
under the 1934 Act. To the extent any provision of the plan or action
by the plan administrators fails so to comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
plan administrators.
11. COPIES OF PLAN.
A copy of this Plan will be delivered to each Optionee at or before the
time he or she executes an Option Agreement.
***
Date Plan Adopted by Board of Directors: July 8, 1999
Date Plan Approved by Stockholders: August 30, 1999
Praxis Pharmaceuticals Inc. 1999 Stock Option Plan - Page 12
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
Praxis Pharmaceuticals, Inc., a Nevada company.
Praxis Pharmaceuticals Australia Pty. Ltd., an Austalian company.
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED MAY 31, 1999 AND THE UNAUDITED FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED AUGUST 31, 1999, AND THE NOTES THERETO,
WHICH MAY BE FOUND ON PAGES F-1 THROUGH F-19 OF THE COMPANY'S FORM 10-SB, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> MAY-31-2000 MAY-31-1999
<PERIOD-START> JUN-01-1999 JUN-01-1998
<PERIOD-END> AUG-31-1999 MAY-31-1999
<EXCHANGE-RATE> 1 1
<CASH> 36,945 103,513
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 36,945 103,513
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 36,945 103,513
<CURRENT-LIABILITIES> 185,997 159,910
<BONDS> 0 0
0 0
0 0
<COMMON> 667,473 637,473
<OTHER-SE> (816,525) (693,870)
<TOTAL-LIABILITY-AND-EQUITY> 36,945 103,513
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 92,655 530,574
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (92,655) (530,574)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (92,655) (530,574)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (92,655) (530,574)
<EPS-BASIC> (0.01) (0.07)
<EPS-DILUTED> (0.01) (0.07)
</TABLE>
