U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A
AMENDMENT NO. 2
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 17. Page 1 of ____ pages
<PAGE>
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 products or
intellectual property from other organizations or companies when and if there is
sufficient evidence that this would facilitate the expansion of the range of
therapeutics that Praxis has in its product line. Praxis also plans 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.
Effective September 30, 1999, Praxis granted a worldwide, exclusive
license to Fairchild International Inc., an affiliate, for all products and
processes developed, and to be developed, relating to arthritis and dermal
wrinkles, in consideration for 2,600,000 shares of Fairchild common stock
(valued at $26,000) 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. The January 1,
2000 installment has been paid. The receipt of the remaining $137,500 from
Fairchild is not certain. Fairchild's financial condition is questionable. The
independent auditors' report on Fairchild's financial statements for the year
ended December 31, 1998 included an explanatory paragraph relating to the
uncertainty of Fairchild's ability to continue as a going concern.
Praxis is to be paid 35% of net revenue, which is any consideration
received by Fairchild from the sale of a licensed product or the granting of a
sublicense, after deduction of the following: $250,000 to be paid by Fairchild
plus any other development costs, manufacturing and production costs, marketing
and selling costs, and expenses incurred by Fairchild in connection with
obtaining regulatory approvals. Accordingly, it is not certain when, if, or to
what extent Praxis will receive any revenues from this licensing arrangement.
Upon the expiration of the last licensed patent, Fairchild's license shall
become a fully paid-up, perpetual license. This date would be no sooner than
2016. The settlement of any disputes regarding this agreement with Fairchild
will be by binding arbitration, with the arbitrators to be selected by the
Company and Fairchild.
David Stadnyk, an officer, director, and principal shareholder of the
Company, owns more than 10% of the outstanding stock of Fairchild. In addition,
in March 1999 Fairchild paid Mr. Stadnyk consulting compensation of $25,000,
500,000 shares of Fairchild common stock, and one-year options to purchase
1,000,000 shares of Fairchild common stock. The options expired without having
been exercised. See "Company Development" below and Part I Item 7. Certain
Relationships and Related Transactions.
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. Praxis-Nevada engaged in the reverse acquisition
transaction to achieve having its common stock quoted on the OTC Bulletin Board.
At the time of the transaction, the common stock of Micronetics was quoted on
the OTC Bulletin Board under the symbol "MKRO" and had a shareholder base of 262
holders. Praxis-Nevada had a shareholder base of 13. Immediately after the
reverse acquisition transaction, the shareholders of Praxis-Nevada held
approximately 98% of the outstanding shares of the Company.
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.
2
<PAGE>
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 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
3
<PAGE>
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. David Stadnyk, an officer, director, and principal
shareholder of the Company, owns more than 10% of the outstanding stock of
Fairchild. In addition, in March 1999 Fairchild paid Mr. Stadnyk consulting
compensation of $25,000, 500,000 shares of Fairchild common stock, and one-year
options to purchase 1,000,000 shares of Fairchild common stock. The options
expired without having been exercised. See Part I - Item 7. Certain
Relationships and Related Transactions.
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 (valued at $26,000) 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. The January 1, 2000 installment has been paid. The receipt of the
remaining $137,500 from Fairchild is not certain. Fairchild's financial
condition is questionable. The independent auditors' report on Fairchild's
financial statements for the year ended December 31, 1998 included an
explanatory paragraph relating to the uncertainty of Fairchild's ability to
continue as a going concern.
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 net revenue, which is any consideration
received by Fairchild from the sale of a licensed product or the granting of a
sublicense, less all of the following: the $250,000 paid by Fairchild and any
other development costs, manufacturing and production costs, marketing and
selling costs, and expenses incurred by Fairchild in connection with obtaining
regulatory approvals. While the net revenue definition used in the Fairchild
agreement is believed by management of the Company to be typical for this type
of licensing agreement, it is not certain when, if, or to what extent Praxis
will receive any revenues from this licensing arrangement. Upon the expiration
of the last licensed patent, Fairchild's license shall become a fully paid-up,
perpetual license. This date would be no sooner than 2016. The settlement of any
disputes regarding this agreement with Fairchild will be by binding arbitration,
with the arbitrators to be selected by the Company and Fairchild.
Praxis will use its best efforts to conduct the research and
development program outlined in the agreement with Fairchild. The agreement
provides for adjustment of milestones according to progress. If the research and
development project cannot be concluded satisfactorily by Praxis, the licensing
component of the agreement is still in force unless the two parties mutually
negotiate another research and development agreement or a new licensing
agreement. Royalties are still payable to Praxis even if Praxis does not perform
the research and development program to completion. Royalties from Fairchild to
Praxis in the event of an alliance between Fairchild and a larger firm would
still be 35% of net revenue, whether it is licensing fees or royalty payments
that Fairchild receives from the larger firm. An alliance with a larger
pharmaceutical firm would be on the basis of cash flowing from the larger firm
to Praxis and Fairchild, so it would not result in a requirement of any payments
from Praxis to another party.
In October 1999, an agreement was entered into whereby the equity
investment made in Praxis-Australia would be reduced to 35% through research and
development funding invested by Rothschild Bioscience Managers Limited, of
Melbourne, Victoria. The Rothschild investment is solely for the purpose of
research and development into phosphosugar-based anti-inflammatory agents for
registered therapeutic use.
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.
4
<PAGE>
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.
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 six
months ended November 30, 1999, the Company spent $200,889 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:
o 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.
o Acne - Clinical trials of a potential acne treatment developed
internally by Praxis commenced in March 2000. If the results
are favorable the filing of a new patent will be completed and
a suitable alliance partner will be sought for further
development and marketing.
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
5
<PAGE>
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 to consumers of any drugs within the next five
years.
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 PHASE I 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 PHASE III 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 PHASE IV clinical trials may be requested to be performed
after marketing approval to resolve any lingering questions.
Continuedcompliance 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
6
<PAGE>
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 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.
7
<PAGE>
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 shall incur.
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.
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
SIX MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO SIX MONTHS ENDED
NOVEMBER 30, 1998. The Company continues to incur losses from operations. The
net loss for the six months ended November 30, 1999 was $130,353 as compared to
$213,294 during the comparable six-month period in 1998. The decrease in the net
loss is due to the receipt of $158,193 in research and development funding,
which is recorded as a reduction of research and development expenses. Were it
not for the recovered costs, research and development expenses in 1999
($200,889) actually increased 864% over 1998 amounts ($20,840). Promotion and
travel expenses in 1999 ($44,574) also increased by 64% over 1998 amounts
($27,191). However, there were no consulting expenses in the 1999 period, as
compared to $130,708 in 1998.
YEAR ENDED MAY 31, 1999 COMPARED TO PERIOD ENDED MAY 31, 1998. For the
year ended May 31, 1999, the net loss was $490,574 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 $353,118 in 1999. The
most significant component of these expenses in 1999 was consulting fees of
$213,358. 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 $302,725 and services of $209,208, and sold
$50,000 of convertible debentures.
At May 31, 1999, the Company's working capital deficiency was $16,397,
as compared to the deficiency of $119,296 at May 31, 1998. Of the liabilities at
May 31, 1999, $113,082 was owed to Alexander Cox & Co., an affiliate, for sums
advanced for operations. At November 30, 1999, the working capital deficiency
increased to
8
<PAGE>
$23,750 due to the depletion of cash for operations during the six 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
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.
PLAN OF OPERATION
Assuming that Fairchild pays its remaining installments of $137,500,
the Company currently has cash and cash commitments to support the pre-clinical
research program into anti-inflammatory drugs and anti-wrinkle compounds for at
least the next 15 months. Additional funds will be needed to support any further
operations at that time. In order to increase the value of the intellectual
property to enhance the value of the Company, further funding will be required
in the next 12 months to increase the size of the research and development
operations and to conduct clinical trials. Pre-clinical research and development
can be accomplished without an injection of capital in the next 12 months
assuming receipt of the Fairchild funds. Unless extra capital is raised in the
next 12 months there will be no change in the number of employees or rate of
research and development. There are no anticipated purchases of plant or
equipment or sale of same.
The receipt of the Fairchild funds is not certain. As indicated in Part
I - Item 1. Description of Business above, Fairchild's financial condition is
questionable. The independent auditors' report on Fairchild's financial
statements for the year ended December 31, 1998 included an explanatory
paragraph relating to the uncertainty of Fairchild's ability to continue as a
going concern.
If Fairchild can obtain the capital necessary to fund the costs for
manufacturing, production, marketing, selling, and obtaining regulatory
approvals, it is possible that sales of products for arthritis and wrinkles
could commence in one to two years. This differs from prescription drugs, for
which Praxis does not expect to be able to realize revenues from the sale to
consumers within the next five years due to extended testing and regulatory
review. The regulatory requirements are much less stringent for cosmetic and
nutraceutical products than for prescription drugs. While there is nothing in
the agreement that would prevent Fairchild from unilaterally deciding to
continue to spend money on research and thereby, perhaps, use all monies that
would otherwise be paid to Praxis as royalties, doing so would not benefit
Fairchild. The agreement allows Fairchild to recoup only up to $250,000 of its
research expenditures in determining net revenues. If Fairchild were to spend
more than $250,000 on research, net revenues would not be affected.
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
9
<PAGE>
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 available and are
being used by Praxis as a result of Dr. Cowden's appointment at the Australian
National University. These facilities meet all national standards for care and
use of laboratory animals. Animals and associated services are provided by the
University at a per animal charge which includes a component for infrastructure
costs. 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 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.
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS (1)
Dr. Brett Charlton 1,666,110 (2)(3) 13.45%
24/1-9 Totterdell Street
Belconnen, 2617 Australia
Dr. William Cowden 1,566,110 (3) 12.64%
56 Urambi Village
Darlington, NSW 2008 Australia
10
<PAGE>
David Stadnyk 1,266,110 (3) 10.22%
430 - 744 Hastings Street
Vancouver, BC V6C 1A5 Canada
Neysa Investments Pty. Ltd. 800,000 6.77%
159 Victoria Road
Drummoyne, NSW 2047 Australia
Officers and directors as a group 4,498,330(4) 33.27%
(3 persons)
- ------------
(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.
(2) Includes 800,000 shares held in the name of Neysa Investment Ltd., a
company owned and controlled by Dr. Charlton.
(3) Includes 566,110 shares issuable upon exercise of stock options. See
Item 6. Executive Compensation.
(4) Includes 1,698,330 shares issuable upon exercise of stock options. See
Item 6. Executive Compensation.
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
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 (January 1986 to January 1988) and Stanford
University (February 1992 to January 1995), and has been at the John Curtin
School of Medical Research, Australian National University since January 1995.
Dr. Charlton has been the Medical Director of the Clinical Studies Unit of the
National Health Sciences Center since June 1997. The National Health Sciences
Center, located in Deakin, Australian Capital Territory, is a commercially
11
<PAGE>
funded non-profit organization that has government-based principal shareholders
of the Australian National University, the University of Canberra, and the
Australian Capital Territory. Funding is derived from fee for service conduct of
clinical trials and fee for service provision of graduate courses through the
University of Canberra. Revenues are used for funding of scientific research
activities in the government sector. Dr. Charlton spent three years with Baxter
Healthcare (January 1988 to January 1991), 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, Sydney, Australia, receiving his M.D. degree in 1979 and Ph.D. in
1985.
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 has been the Senior Research
Fellow at the John Curtin School of Medical Research, and Principal Scientific
Advisor to ANUTech Pty Ltd., Canberra, Australia, since April 1994. Dr. Cowden
was previously Senior Scientist at Peptide Technology Ltd., an Australia-based
company, from April 1994 to May 1998. 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, such as Johnson & Johnson Medical Corp., Cypros Pharmaceuticals Inc.,
and Progen Industries Inc., 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, Brisbane, Australia, and received his Ph.D.
degree in 1979.
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. Since July 1997, Mr. Stadnyk has been the
executive director of Alexander Cox & Co. based in Sydney, Australia and
Vancouver, British Columbia, which engages in financial consulting and venture
capital funding. 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. There are no other control persons.
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.
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.
12
<PAGE>
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 November 30, 1999, $113,082 and $111,426, respectively, were
owed to Alexander Cox & Co. The May 31, 1999 amount was owed for the following:
administration and office charges ($18,493) and expenses paid on behalf of the
Company, such as research and development ($34,234); reorganization costs
($57,500); and professional fees ($3,148). A repayment of $293 offsets these
amounts. 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 (valued at $26,000) 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. The January 1, 2000 installment has been paid.
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.
In addition, in March 1999 Fairchild paid Mr. Stadnyk consulting compensation of
$25,000, 500,000 shares of Fairchild common stock, and one-year options to
purchase 1,000,000 shares of Fairchild common stock. The options expired without
having been exercised. The 2,600,000 shares of Fairchild owned by the Company
represented approximately 24% of the outstanding shares on the issuance date.
During the year ended May 31, 1999 and six months ended November 30,
1999, $14,869 and $22,972, respectively, were paid to Dr. William Cowden for
consulting fees for services rendered in connection with the scientific conduct
of research and development.
13
<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. 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. The issuance of any shares of preferred
stock may operate to the detriment of the rights of holders of the common stock,
such as possibly preventing a takeover that could be advantageous to the
shareholders, making the common stock less marketable, and causing a decrease in
the price of the common stock.
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. The shareholders of
the Company approved a 1-for-5 reverse stock split to be effected by the Board
of Directors at any time on or before August 23, 2000.
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.
"PENNY STOCK REGULATION OF BROKER-DEALER SALES OF COMMON STOCK. The
Securities and Exchange Commission (SEC) has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks".
Generally, penny stocks are equity securities with a price of less than $5.00
(other than securities registered on certain national exchanges or quoted on the
NASDAQ system). If the Company's shares are traded for less than $5 per share,
as they currently are, the shares will be subject to the SEC's penny stock rules
unless (1) the Company's net tangible assets exceed $5,000,000 during the
Company's first three years of continuous operations or $2,000,000 after the
Company's first three years of continuous operations; or (2) the Company has had
average revenue of at least $6,000,000 for the last three years. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document prescribed by the SEC that provides information about penny stocks and
the nature and level of risks in the penny stock market. The broker-dealer also
must provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
those rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These requirements may have
the effect of reducing the level of trading activity in the secondary market for
a stock that becomes subject to the penny stock rules. As long as the Company's
Common Stock is subject to the penny stock rules, the holders of the Common
Stock may find it difficult to sell the Common Stock of the Company.
14
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Praxis common stock was traded over-the-counter from July 23, 1998 to
March 8, 2000 on the OTC Bulletin Board, and since March 9, 2000 on the "Pink
Sheets" 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.
BID PRICES
----------
1999 FISCAL YEAR HIGH LOW
- ---------------- ---- ---
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
Quarter ending 02/29/00 $1.00 $0.30
On March 29, 2000, the closing bid price for the common stock was
$0.70. 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.
15
<PAGE>
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 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. 800,000 of the shares had been sold in November
1998 for $40,000 cash to Jewett Finance Corp. and Alexander
Cox & Co. and the remaining 1,783,000 shares were issued for
services valued at $80,000 to 5 persons in reliance upon the
exemption from registration contained in Rule 504 under the
Securities Act of 1933. The services were rendered in October
1998 and November 1998. 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. Anutech
was deemed to be sophisticated with respect to this
transaction by virtue of its financial condition and
relationship to members of management of the Company.
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.
With respect to the Company's claim of exemption pursuant to Rule 504,
at the time of the transactions, the Company was not subject to the
reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, was not an investment company, and was not a
development stage company that had no specific business plan. The
aggregate consideration received for all the shares sold pursuant to
this exemption was less than $1,000,000.
16
<PAGE>
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.
PART III
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
REGULATION SEQUENTIAL
S-B NUMBER PAGE NUMBER
EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 Stock Exchange Agreement with Micronetics, Inc.* N/A
- ------------------------------------------------------------------------------------------------------------------
3.1 Articles of Incorporation, as amended and restated* N/A
- ------------------------------------------------------------------------------------------------------------------
3.2 Bylaws* N/A
- ------------------------------------------------------------------------------------------------------------------
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. N/A
and Praxis Pharmaceuticals Australia Pty Ltd. *
- ------------------------------------------------------------------------------------------------------------------
10.3 Licence Agreement dated October 14, 1999 between Anutech Pty Ltd. and Praxis N/A
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 * N/A
- ------------------------------------------------------------------------------------------------------------------
21 Subsidiaries of the registrant* N/A
- ------------------------------------------------------------------------------------------------------------------
27 Financial Data Schedule* N/A
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Filed previously
17
<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:April 3, 2000 By: /s/ Brett Charlton
---------------------------------
Dr. Brett Charlton, President
18
<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 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>
-2-
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>
-3-
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>
-4-
(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>
-5-
(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>
-6-
(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>
-7-
(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>
-8-
(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>
-9-
(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>
-10-
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>
-11-
(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>
-12-
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>
-13-
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>
-14-
(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>
-16-
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>
-17-
(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>
-18-
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>
-23-
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>
SCHEDULE "A" - PATENTS
----------------------
<PAGE>
<TABLE>
<CAPTION>
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,506,210
Parish et al. [45] DATE OF PATENT: Apr. 9, 1996
- --------------------------------------------------------------------------------
<S> <C>
[54] PHOSPHOSUGAR-BASED 4,935,406 6/1990 Coleman et al............... 514.54
ANTI-INFLAMMATORY AND/OR
IMMUNOSUPPRESSIVE DRUGS
FOREIGN PATENT DOCUMENTS
[75] inventors: Christopher R. Parish, Campbell;
William B. Cowden, Kambah; David 596800 1/1987 Australia
O. Willenborg, Sterling, all of Australia 614772 4/1989 Australia
158879 10/1985 European Pat. Off.
194710 9/1986 European Pat. Off.
[73] Assignee: The Australian National University, 2144332 3/1985 United Kingdom
Acton, Australia 2185398 7/1987 United Kingdom
[21] Appl. No.: 988,001
OTHER PUBLICATIONS
[22] Filed: Dec. 29, 1992
Patent Abstracts of Japan, vol. 7, No. 7,
Related U.S. Application Data issued 07 Oct. 1982, Murakami, "Production
of Mannose Monophosphate salt Derivative",
C144, p. 7, JP, A, 57-163491.
[63] Continuation of Ser. No. 656,082, filed as PCT/AU89/ Patent Abstracts of Japan, vol. 12, No.
00350, Aug. 18, 1989, abandoned. 482, issued 17 Aug. 1988, Murata,
"Preventive and Remedy for Hypertension",
C553, p. 48, JP.A, 63-198629.
[30] Foreign Application Priority Data Journal of Biological Chemistry, vol. 257,
No. 17, issued 10 Sep. 1982, Fischer et
al., "Binding of Phosphorylated Oli-
Aug. 19, 1988 [AU] Australia ............... P199942/88 gosaccharides to Immobilized
Phosphomannosyl Receptors", pp. 9938-9943.
Journal of Biological Chemistry, vol. 258,
[51] Int. Cl.6 .......................... A61K 31/70; C07H 11/04; No. 5, issued 10 Mar. 1982, Varki et al.,
C07H 13/00 "The Spectrum of Anionic Oligosaccharides
Released by Endo-B-N-acetylglucosainidase H
[52] U.S. Cl. .......................... 514/23; 514/825; 514/885; from Glycoproteins" pp. 2808-2814.
536/117
PRIMARY EXAMINER-Michael G. Wityshyn
ASSISTANT EXAMINER-Everett White
[58] Field of Search ..................... 514/23, 825, 885; ATTORNEY, AGENT, OR FIRM-Bacon & Thomas
536/117
[57] ABSTRACT
The invention relates to a method of anti-
inflammatory and/or immunosuppressive
treatment of an animal or human patient
[56] References Cited comprising administering to the patient an
effective amount of at least one
U.S. PATENT DOCUMENTS phosphosugar or derivative thereof, or a
phosphosugar-containing oligosaccharide or
4,096,250 6/1978 Hill ......................... 536/117 polysaccharide or derivative thereof.
4,122,179 10/1978 Vegezzi ....................... 514/23
4,247,540 1/1981 Holzmann ..................... 424/537 17 Claims, 1 Drawing Sheet
4,448,771 5/1984 Cattani et al. ............. 514/23
4,703,040 10/1987 Markov ....................... 536/117
4,739,046 4/1988 DiLuzio ..................... 536/117
4,745,185 5/1988 Maryanoff et al. ............ 536/117
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5,506,210
<S> <C> <C>
1 2
PHOSPHOSUGAR-BASED and/or immunosuppressive agents. In this
ANTI-INFLAMMATORY AND/OR aspect, there is provided a method of
IMMUNOSUPPRESSIVE DRUGS anti-inflammatory and/or immunosup-
pressive treatment of an animal or human
5 patient which comprises administration to
the patient of an effective amount of at
least one phosphosugar or a derivative
This application is a continuation thereof, or a phosphosugar-containing
of U.S. application Ser. No. 07/656.082, oligosaccharide or polysac-charide or a
filed Mar. 6, 1991, now abandoned, which 10 derivative thereof.
is the U.S. national phase of In another aspect, this invention
International application serial number relates to the use of at least one
PCT/AU89/00350, filed Aug. 18, 1989. phosphosugar or phosphosugar-containing
This invention relates to oli-gosaccharide or polysaccharide in the
phosphosugars and phospho- sugar preparation or manu-facture of a
containing compounds that possess anti- 20 pharmaceutical or veterinary composition
inflammatory and/or immunosuppressive for anti-inflammatory and/or
activity, and in particular it relates immunosuppressive treatment. In this
to the use of these compounds as anti- aspect, there is provided a
inflammatory and/or immunosuppressive pharmaceutical or veterinary composition
agents in animals and man. which comprises at least one phosphosugar
25 or a derivative thereof, or a
BRIEF DESCRIPTION OF THE DRAWINGS phosphosugar-containing oligosac-charide
or polysaccharide or a derivative
thereof, together with an acceptable
FIG. 1 is a graphical representation pharmaceutical or veterinary carrier or
of the analysis of phosphosugar diluent therefor.
specificity presented in Table III. 30 Phosphosugars and phosphosugar-
containing oligosac-charide or
DETAILED DESCRIPTION polysaccharide which may be used in
accordance with the present invention
comprise both naturally occurring and
The lysosomes of cells contain a wide synthetic compounds containing or
range of degrada- tive enzymes which 35 comprising phosphosugar residues, that
play a central role in the entry of is, sugar residues bearing at least one
leukocytes into inflammatory sites. phosphate moiety. Particularly useful
Lysosomal enzymes, produced in the rough phosphosug- ars include phosphomannoses,
endoplasmic reticulum, undergo phosphofructoses, phospho-galactoses and
glycosylation followed by a number of phosphoglucoses, while particularly
'trimming' and phosphorylation reactions 40 useful oligosaccharides or
resulting in oligosaccharides rich in polysaccharides include polysaccharides
mannose-6-phosphate residues (1-3). containing phosphomannose residues.
These mannose-6- phosphate residues are Presently preferred phosphosugars include
specific recognition markers of lyso- mannose-6-phosphate and fructose-1-
somal enzymes (3). It is this marker on phosphate. Preferred phosphosugar
the enzymes that is recognized by a 45 derivatives are the esters including
mannose phosphate receptor (MPR) which acetate esters, particularly the 1,2, 3,
mediates transport of lysomsomal enzymes 4-tetraacetate of mannose-6-phosphate.
to lysosomes. This receptor functions Whilst it is not intended that the
not only in internal transport of present invention should be restricted in
lysosomal enzymes but is also important 50 any way by a theoretical explanation of the
in their secretory pathway and their mode of action of the phosphosugars in accordance
expression on cell surfaces (1). Receptor- with the invention, it is presently believed that
lysosomal enzyme interactions have been these active compounds may exert their own anti-
extensively studied (4-6) and shown to be inflammatory effect, by acting as antagonists or
inhibited by exogenous mannose-6-phosphate. competitive inhibitors of the natural ligand of
Work leading to the present invention has 55 mannose phosphate receptors (MPR) on cells.
been based on the hypothesis that Accordingly, the active phosphosugars or
mannose-6-phosphate and related phosphosugar phosphosugar-containing oligosaccharides or
structures might act as anti-inflammatory polysaccharides may include any such compounds
agents in vivo, possibly by depleting which are effective antagonists or competitive
leukocytes of their lysosomal enzymes 60 inhibitors of the natural ligand of the MPR.
although this has not been shown previously. The active anti-inflammatory and/or immuno-
As a result of these investigations, it suppressive agents in accordance with the present
has now been discovered that certain phospho- invention may be used to treat inflammatory
sugars, notably mannose-6-phosphate and diseases or conditions such as multiple sclerosis
fructose-1-phosphate, are in fact effective 65 and rheumatoid arthritis, as well as in the
anti-inflammatory agents, continuous treatment of the inflammatory process associated
infusion of the sugars inhibiting experimental with the rejection of organ transplants (since
allergic encephalomyellits (EAE), an animal massive mononuclear cell infiltrates are usually
inflammatory disease of the central nervous associated with acute graft rejection). These
system resembling multiple sclerosis in humans. active agents may be used alone, in combination
Polysaccharides containing D-mannose with with one or more other phosphosugars, or in
phosphate residues have also been found to combination with other known anti-inflammatory or
inhibit EAE. immunosuppressive agents. In particular,
Phosphosugars, particularly mannose-6- compositions of phosphosugars and sulphated
phosphate, have also been found to exhibit polysaccharides with heparanase-inhibitory activity
an anti-inflammatory effect on passively may act synergistically and represent a formulation
induced adjuvant arthritis. Adjuvant-induced with potent anti-inflammatory activity. The anti-
arthritis in the rat shares a number of inflammatory activity of these sulphated poly-
features with arthritis in humans, viz. saccharides is disclosed in detail in International
the presence of a proliferative synovitis Patent Application No. PCT/AU88/00017.
and subcurtaneous nodules, swelling of The anti-inflammatory and/or immunosuppressive
extremities, and ultimately cartilage activity and use of the phosphosugars in accordance
and bone errosion. This animal model has with the present invention is demonstrated in the
been extensively used for detection of following Example.
anti-inflammatory and immunosuppressive drugs.
Finally, phosphosugars have been
found to be effective as an
immunosuppresant in preliminary
experiments, particularly in controlling
the delayed hypersensitivy reaction.
In a first aspect, therefore, the
present invention relates to the use of
phosphosugars and phosphosugar-
containing oligosaccharides and
polysaccharides as anti-inflammatory
<PAGE>
3 4
The first data column in the Tables
EXAMPLE 1 refers to the number of animals in each
group which showed any clinical signs of
Inhibition of EAE. EAE during the entire course of the
In this Example, a number of experiment. Thus, although 7/10 animals
phosphosugars and one phospho- 5 treated with mannose-6-phosphate
polysaccharide were tested for their developed some clinical signs of disease
ability to inhibit development of EAE in (Table III) the severity of these disease
rats. (All phosphosugars tested are symptoms was extremely mild compared with
commercially available and were obtained untreated animals, i.e. <10% disease
from Sigma Chemical Co., St. Louis, Mo., 10 severity of controls when clinical scores
U.S.A.). Experimental details are and duration of disease are examined. In
included in the footnotes to the Tables this sense, the mannose-6-phosphate data
setting out the test results. in Tables I and III are almost identical.
Table I presents data from an EAE Similarly, the estimation of disease
experiment in rats where mannose-6- severity can be used to rank the anti-
phosphate, administered to animals via 15 inflammatory activity of phosphosugars
osmotic pumps, totally inhibited which only partially inhibit disease,
development of disease. The data e.g., glucose-6-phosphate and fructose-
presented in Table II demonstrates that 1,6-diphosphate.
a four fold reduction in the mannose-6-
phosphate dose (40 mg/rat/week to 10 20 TABLE I
mg/rat/week) still resulted in a -----------------------------------------------------------
substantial reduction in disease
severity, i.e. the lowest dose of Effect of Mannose-6-Phosphate on Adoptively
phosphosugar reduced disease severity to Transferred EAE
37.7% that of control animals. -------------------------------------------
Analysis of phosphosugar specificity 25 Mean Mean Mean Length
revealed (Table III) that fructose-1- No. With Day Clinical Disease
phosphate was as effective as mannose-6- Treatment EAE/Total Onset Score (days)
phosphate at inhibiting disease. -----------------------------------------------------------
Fructose-6-phosphate was also a
compartively effective inhibitor of EAE, Control 8/8 5.2 3.0 3.5
whereas galactose-6-phosphate, glucose- Mannose-6- 0/8 0 0 0
6-phosphate and fructose-1-6-diphosphate 30 phosphate
were partially inhibitory. Glucose-1- -----------------------------------------------------------
phosphate and D-mannose apparently had
little or no effect on disease Legend to Table 1:
progression. These results are EAE induced in Lewis rats with 30 + 106 ConA activated
displayed graphically in FIG. 1. Such EAE effector cells. Miniosomotic pumps containing
phosphosugar specificity closely 35 phosphosugar were implanted subcultaneously on day 3
rsembles the monosaccharide specificity after cell transfer. Dose was 40 mg/rat delivered over
of the mannose-6-phosphate receptors on a 7 day period by 2.0 ml pumps. Clinical EAE was
cells (1). graded according to the following scheme: 0 asymptomanic;
In two separate experiments (Table 1, flaccid distal half of tail; 2, entire tail flaccid;
IV) administration of the D-mannose 3, ataxia, difficulty in righting; 4, hind limb weakness;
polysaccharide (mannan) from SACCHAROMY- 40 and 5, hind limb paralysis.
CES CEREVISIAE, which contains phosphate
moieties, totally inhibited EAE,
indicating that phosphomannans can
inhibit disease.
Histological examination of central
nervous system (CNS) tissue from
untreated animals with EAE and EAE
animals which had been treated with
either mannose-6-phosphate or mannan
containing phosphate moieties, (Table V)
revealed that both treatments
dramatically inhibited development of CNS
lesions. No lesions were detected in
mannose-6-phosphate treated animals and a
small number of lesions, compared with
controls, in mannan treated rats. Such data
are consistent with the view that the
sugars are inhibiting entry of leukocytes into
the CNS.
</TABLE>
<TABLE>
TABLE II
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Effect of Mannose-6-Phosphate Dose on Adoptively Transferred EAE
----------------------------------------------------------------
No. with Mean Mean Mean Length Disease Severity
Treatment Dose (mg) EAE/total Day Onset Clinical Score Disease ( %Control)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Control ---- 4/4 4.5 3.5 4.5 100%
Mannose-6-Phosphate 40 1/3 5.0 0.3 0.7 1.7%
Mannose-6-Phosphate 20 4/4 5.0 1.5 3.0 28.6%
Mannose-6-Phosphate 10 4/4 5.0 1.8 3.3 37.7%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Legend to Table II:
Experimental details as in Table I. Mannose-6-phosphate dose represents amount
of phosphosugar delivered to rats over a 7 day period via mino-osmotic pumps.
"Disease Severity" represents product of mean clinical score and mean length
disease.
<PAGE>
5,506,210
5 6
<TABLE>
<CAPTION>
TABLE III
- ---------------------------------------------------------------------------------------------------------------------------
Phosphosugar Specificity of EAE Inhibition
------------------------------------------
No. with Mean Mean Mean Length Disease Severity
Treatment EAE/Total Day Onset Clinical Score Disease(days) (% Control)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Control 9/9 5.0 3.6 4.2 100%
Mannose-6-phosphate 7/10 6.0 0.9 1.5 8.9%
Fructose-1-phosphate 3/5 5.5 1.2 1.6 12.6%
Fructose-6-phosphate 4/5 6.0 1.6 2.4 25.4%
Galactose-6-phosphate 5/5 5.2 2.0 3.0 40.5%
Glucose-6-phosphate 5/5 5.4 2.0 3.8 50.3%
Fructose-1,6-diphosphate 5/5 5.4 2.4 3.4 54.0%
Glucose-1-phosphate 5/5 5.2 3.0 3.8 75.5%
D-mannose 5/5 5.2 2.9 4.4 84.5%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Legend to Table III:
Experimental details as in Table I. "Disease Severity" represents product of
mean clinical score and mean length of disease.
<TABLE>
<S> <C> <C>
(HANSENULA HOLSTII) as described by
TABLE IV 20 Bretthauer et al. (7), that contains
- ---------------------------------------------------- mannose phosphate residues.
Inhibition of Adoptively Transferred EAE by Yeast The pentasaccharide is an isolated
Mannan monophosphomanno-pentaose fragment, 6-
- ---------------------------------------------------- phospho-mannose-a(1-3)-{mannose-a-(1-
Mean Mean Mean Length 3)}2-mannose-a-(1-2)-mannose, of the
No. with Day Clinical Disease 25 exocellular phosphomannan produced by
Treatment EAE/Total Onset Score (days) PICHIA HOLSTII (HANSENULA HOLSTII)
- ---------------------------------------------------- described by Bretthauer et al. (7).
Expt. 1 In these experiments, details of which
- ------- were as in Table I, the number of cells
Control 5/5 4.8 3.5 4.0 transferred was 25x106 /rat, while the
Yeast mannan 0/6 0 0 0 30 dose of compound administered was 10
Expt. 2 mg/rat delivered over a 7 day period by
- ------- mini-osmotic pumps, commencing on day 3
Control 4/4 5.0 3.1 3.7 after cell transfer. The results are set
Yeast mannan 0/4 0 0 0 out in Table VI.
- ----------------------------------------------------
Legend to Table IV: 35 TABLE VI
Yeast mannan from SACCHAROMYCES CEREVISIAE (Baker's --------------------------------------------------
yeast). Experimental details as in Table I. Control PPME Pentasaccharide
--------------------------------------------------
EAE/Total 5/5 3/5 1/5
--------------------------------------------------
40
EXAMPLE 3
Suppression of Passive Adjuvant Arthritis
(DA x Lew)F rats were immunized with
45 M.BUTYRICUM in light mineral oil given in
TABLE V each foot. Ten days later spleens were
- --------------------------------------------------- removed and incubated as single cell
Histological analysis of EAE Inhibition in Rats suspension tissue culture medium in +5
Receiving Mannose-6-Phosphate and Mannan ug/ml ConA for 75 hrs. Cells were
----------------------------------------------- harvested, washed and transferred i.v. at
No. Sections No. Lesions/ 50 65 x 10 6 cells/rat into (DA x Lew)F
Treatment scanned Lesions section recipients.
- --------------------------------------------------- Treated rats were implanted on the day
Expt. 1 they received cells with miniosmotic
- ------- pumps which delivered 6 mg/rat/day of
Control 1 10 110 11.0 mannose-6-phosphate for 14 days. Control
Control 2 8 206 25.7 55 rats were sham operated. The results are
Mannose-6-phosphate 1 18 0 0 shown in Table VII as % of pre-cell
Mannose-6-phosphate 2 15 0 0 injection foot size. {Average for group;
Expt. 2 n=4 (mannose-6-phosphate); n=6
- ------- (control)}.
Control 1 15 284 19.0 60
Control 2 12 303 25.0 TABLE VII
Yeast mannan 1 18 30 1.1 ------------------------------------------------------
Yeast mannan 2 15 92 6.7
- --------------------------------------------------- Day Mannose-6-Phosphate Control
65 ------------------------------------------------------
Legend to Table V: 4 97.3% 106.4%
Rats were killed 9 days after cell transfer and 6 105.8% 129.7%
sections of the lower thoracic-upper lumbar spinal 7 102.8% 149.7%
cord examined for inflammatory lesions. 9 108.4% 148.5%
Animals treated as in Table I. 11 107.6% 184.2%
14 117.4% 220.1%
------------------------------------------------------
EXAMPLE 2 EXAMPLE 4
Inhibition of EAE
In further experiments using the EAE model of Effect on Delayed-Type Hypersensitivity (DTH)
Example 1, other mannose phosphate-containing C57B1 mice were sensitised by i.v. injection 105
compounds were used, including PPME and a pentasac- of washed sheep red blood cells. 5 days later they
charide. were
PPME is the purified high molecular weight,
acid-resistant fragment, (polysaccharide core
fraction) of the isolated exocellular phosphomannan
produced by PICHIA HOLSTII
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5,506,210
7 8
<S> <C> <C>
challenged in the right hind footpad 3. A method according to claim 2,
with SRBC. Each mouse was given a 0.25 wherein said active agent is mannose-6-
ml injection i/p at the same time of phosphate.
either saline, mannose-6-phosphate or 4. A method according to claim 2,
the 1,2,3,4-tetraacetate of mannose-6- 5 wherein said active agent is fructose-1-
phosphate and all injections were phosphate.
repeated a further 6 times at approx. 5. A method according to claim 2,
31/2 hour intervals. The dose in each wherein said active agent is fructose-6-
injection of mannose-6-phosphate was phosphate.
0.15 mg and of 1,2,3,4-tetraacetate of 10 6. A method according to claim 1,
mannose-6-phosphate was also 0.15 mg. wherein said organic ester is an acetate.
At 24 hours after challenge the DTH 7. A method according to claim 6,
swelling was measured. Mannose-6- wherein said organic ester is the
phosphate reduced the swelling by 52.5%, 1,2,3,4-tetracetate of mannose-6-
and the 1,2,3,4-tetraacetate of mannose- 15 phosphate.
6-phosphate by 91.5%, as compared with 8. A method according to claim 1,
the saline controls. wherein said oligosac-charide or
polysaccharide is the D-mannose
polysaccharide (mannan) from
REFERENCES 20 SACCHAROMYCES CEREVISIAE.
9. A method according to claim 1,
1. vonFigura, K. and Hasilik, A. (1986), wherein said oligosac-charide or
ANN, REV. BIOCHEM. 55; 167. polysaccharide is the purified high
2. West, C.M. (1986). MOL. CELL,BIOCHEM. molecular weight, acid-resistant fragment
72; 3. 25 (polysaccharide core fraction) of the
3. Hickman, S. and Neufeld, E.F. (1972). exocellular phosphomannan produced by
BIOCHEM. BIOPHYS. RES. COMM. 49: PICHIA HOLSTII (HANSENULA HOLSTII), or an
992. oligosaccharide fragment derived
4. Varki, A. and Kornfeld, S. (1983). therefrom.
J.BIOL. CHEM. 258: 2808. 30 10. A method according to claim 9,
5. Fischer, H.D., Creek, K. E. and Sly, wherein said oligosac-charide fragment is
W. S. (1982). J. BIOL. CHEM. 257: the monophosphomannopentaose fragment, 6-
9938. phospho-mannose-a(1-3)-{mannose-a(1-3)}2.
6. Steiner, A. W. and Rome, L. H. mannose-a-(1-2)-mannose.
(1982). ARCH, BIOCHEM. BIOPHYS. 35 11. A method according to claim 1,
214: 681. wherein said treatment comprises
7. Brettbauer, R. K. Kaczorowski, G. J. treatment of inflammatory disease of the
and Weise, M. J., central nervous system.
(1973), BIOCHEMISTRY 12(7): 1251. 12. A method according to claim 1,
We claim: 40 wherein said treatment comprises
1. A method of treatment of treatment of arthritis.
arthritis, of inflammatory disease of 13. A method according to claim 1,
the central nervous system, to control wherein said treatment comprises
the delayed type hypersensitivity treatment to control the delayed-type
reaction, or of the inflammatory process 45 hypersensitivity reaction.
associated with rejection of organ 14. A method according to claim 1,
transplants in a warm-blooded animal, wherein said treatment comprises
which comprises administering to the treatment of rheumatoid arthritis.
warm-blooded animal in need thereof a 15. A method according to claim 1,
therapeutically effective amount of at wherein the treatment is of the
least one active agent selected from the inflammatory process associated with the
group consisting of phosphomannoses, rejection of organ transplants.
phosphofructoses and pharmaceutically 16. A method of treating arthritis in
acceptable salts and organic esters an animal subject, which comprises
thereof, oligosaccharides containing administering to the subject a
phosphomannose residues, polysaccharides therapeutically effective amount of
containing phosphomannose residues, and mannose-6-phosphate or a pharmaceutically
pharmaceutically acceptable salts and organic acceptable salt or organic ester thereof.
esters thereof, oligosaccharides containing 17. A method of treating inflammatory
phosphomannose residues, polysaccharides disease of the central nervous system in an
containing phosphomannose residues, and animal subject, which comprises administering
pharmaceutically acceptable salts and to the subject a therapeutically effective
organic esters thereof, said active agent amount of mannose-6-phosphate, fructose-1-
being an antagonist or competitive phosphate, or a pharmaceutically acceptable
inhibitor of the natural ligand of a salt or organic ester thereof.
mannose phosphate receptor.
2. A method according to claim 1,
wherein said active agent is selected from * * * * *
the group consisting of mannose-6-
phosphate, fructose-1-phosphate, fructose-
6-phosphate, and fructose-1,6-diphosphate.
</TABLE>
<PAGE>
SCHEDULE "C" - RESEARCH PROJECTS
--------------------------------
<PAGE>
APPENDIX C
DEVELOPMENT PROGRAM FOR NEUTRICEUTICAL AND COSMETIC AGENTS.
MAJOR ITEMS
- -----------
SCALE-UP
Bulk isolation and purification for "batch" preparations
Time 2 months (+ 2 weeks)
-
a) Along the way to full scale production pilot batches will be QA'd
and combined for immediate use in all tests
b) Target is for 250 g batch sizes
ARTHRITIS TRIALS
Time 6 months
This includes: 1) Ethics Committee approval (application in by 29/1/99)
2) Re-establishing model (active and passive)
3) Delivery and dose-finding studies including
i) Gavage
ii) Drinking water
iii) Food
iv) confirmation by mini-osmotic pump delivery
SKIN TRIALS
Time 6 - 8 months
This includes: 1) Formulation preparations (negotiations now going)
2) Evaluate dermal delivery formulations
3) Establishing a model for quick delivery assessment
4) Establish a wrinkle model and test materials
<PAGE>
MILESTONES SCHEDULE
-------------------
0-3 MONTHS
Preparation of batch material for all subsequent testing.
Produce formulations for skin testing
Commence trials in animal models of rheumatoid arthritis
3-6 MONTHS
Test skin formulations for penetration and effect
Complete rheumatoid arthritis animal studies
6-9 MONTHS
Begin skin toxicity studies
File skin cosmetic patent (material and formulation coverage)
9-12 MONTHS
Complete skin toxicity studies
Commence animal wrinkle model studies
12 MONTHS-
Complete wrinkle model studies
<PAGE>
BASIS OF PROCEDURES
-------------------
PREPARATION OF BULK MATERIAL
We will require bulk preparations of PM5 for all of our studies, including
formulation for skin delivery and dose-finding studies in both models. We
haven't done bulk preparations. We anticipate some minor teething problems but
nothing insurmountable in the immediate term. We will get some idea of batch to
batch variability as we scale up. Because of equipment limitations we plan to
standardise on 250 g preps. The biggest batch we have ever prepared is 5 g.
Meanwhile we are running several smaller scale preps per week. We will have this
sorted within 6 to 8 weeks.
ARTHRITIS
We have run the arthritis model previously, indeed this earlier work forms a
crucial part of the original patent. We can run both the active and passive
forms of the disease. The advantages of the passively-transferred arthritis
include consistency of disease between individual animals (and between groups)
and the ability to control the severity of the disease (through the number of
cells transferred). The disadvantages include the additional work load and time
involved and the increased numbers of animals required. So, obviously, the
advantages of the active form are the reverse and include reduced effort and
time, as well as fewer animal numbers required. The attendant disadvantages of
active arthritis are having very little control over the disease severity and
therefore variations both within and between groups. The other major advantage
from the therapeutic point is that the passive form of the disease is more like
the real clinical situation, ie the only time patients present is when they have
symptoms (in other words after the disease is established). So, the human
clinical situation is that only the efferent (clinical disease) is treated, not
the afferent or induction phase of arthritis. The bottom line is that we will
run both to start with and make an early decision regarding dose-finding studies
etc. We will know whether or not this is going to be a "goer" within 6 months.
SKIN TRIALS
In the first instance we need to have a delivery method. We have started
negotiations with Soltec Ltd. for preparing various formulations. We also have a
verbal agreement with Lipoderm in Canada to do formulations for us. We intend to
do some very preliminary studies with these formulations (such as dose it go in
and come out of the vehicle intact etc) and as quickly as possible put labelled
material into those showing promise in order to measure skin penetration.
Preliminary tolerance and dose-finding studies will be carried out as soon as we
have the material formulated. It will most likely take 6 months to get to this
stage.
Further testing will require animal models and (believe it or not) there is a
"wrinkly mouse" model available. This, of course, is a bit further down the road
but we will be planning to set this up while the other work is going. In the
mean time we will also try a few other simple approaches by looking at a simple
model of fibroblast migration in skin, probably by direct injection in the
immediate term but topical as soon as we have formulated material. This work
will be running in parallel with the kinetic topical formulation work.
<PAGE>
SCHEDULE "D" - ANUTECH LICENCE AND
----------------------------------
RESEARCH & DEVELOPMENT AGREEMENT
--------------------------------
<PAGE>
PRAXIS Pharmaceuticals Inc.
and
ANUTECH Pty. Ltd.
----------------------------------
LICENCE
and
RESEARCH & DEVELOPMENT
AGREEMENT
----------------------------------
Corporate Centre
ANUTECH Pty. Ltd.
ANUTECH Court
Cnr Barry Drive and Daley Road
Acton, ACT 2601
Australia
Tel: (02) 6249 2236
Fax: (02) 6257 1433
<PAGE>
THIS AGREEMENT is made on the 27th day of October 1997
BETWEEN:
ANUTECH PTY LTD, 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 Nevada with
its registered office at 1 East First Street, Reno, Nevada, USA
("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. ANUTECH is the commercial agent of the Australian National University
("ANU"), and enters into this Agreement as agent for and on behalf of
ANU.
C. ANU possesses intellectual property in the area of phosphosugars and
their analogues as anti-inflammatory agents.
D. Praxis wishes to license the ANU intellectual property in order to
undertake further research and development and commercialisation of the
intellectual property.
E. 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 certain capital raising,
research and commercialisation milestones. ANUTECH will also undertake
a program of research and development on behalf of Praxis.
IT IS AGREED AS FOLLOWS:
1. 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:
"Agreement" means this agreement.
"ANU Intellectual Property" means the following intellectual property
owned by the ANU:
(a) Know-how and expertise 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 27th day of October 1997.
"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, 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;
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
(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 available to it under such law.
"DOLLAR", "DOLLAR" or "$" means Australian dollars unless otherwise
indicated.
"FIELD" means the use of phosphosugars for treatment of:
(a) inflammatory skin conditions;
(b) inflammation resulting from abdominal/pelvic surgery; and
(c) ocular inflammation;
and expressly excludes:
(d) topical application for wound care; and
(e) use of fructose-1,6-diphosphate, administered non-topically, for
the treatment or prophylaxis of ischaemic disorders in humans,
which includes transplantation and immunosuppression.
"INTELLECTUAL PROPERTY" shall mean all or any of the following:
(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);
(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, its subsidiaries, joint venturers, licensees
or agents 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;
(iii)credits or allowances given or made on account of price
adjustments, recalls or destruction requested or made by an
appropriate government agency; and
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
(iv) any tax (excluding income tax), excise or other government
charge upon or measured by the sale, transportation, delivery
or use of the Product included in such amount which is
actually incurred.
(b) for a non-arms length sale, means the most recent Net Sales at
which Praxis, 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.
"QUARTER" means each consecutive 3 month period that ends on 31 March,
30 June, 30 September and 31 December each year.
"RESEARCH BUDGET" means the budget as set out in Schedule 2 and amended
by the Research Management Committee from time to time pursuant to
clause 9 (Research Management Committee).
"RESEARCH LEADER" means Dr. William B. Cowden or such other person or
persons as may be nominated by ANUTECH and agreed by Praxis .
"RESEARCH" means the objectives and program of research described in
Schedule 3 and undertaken on behalf Praxis by ANUTECH or ANU pursuant
to clause 7 (The Research).
"RESULTS" means all Intellectual Property, materials (including
substances, compounds, biological material, products, samples and
devices) and information (including trade secrets, processes,
techniques, designs, plans, data, test results, findings, evaluations
and reports) generated as a result of or in connection with the
Research
"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 ANU 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).
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
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;
(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.
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.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
2. GRANT OF LICENCE
- -------------------------
2.1 ANUTECH grants to Praxis an exclusive, worldwide licence to use and
exploit ANU Intellectual Property and Results within the Field,
including the right to sublicense pursuant to clause 6 (Right to
Sublicense).
3. LICENCE CONSIDERATION
- ------------------------------
3.1 In consideration for the grant of the licence Praxis will pay to
ANUTECH:
(i) a 10% royalty on Net Sales of Products by Praxis;
(ii) 50% of all royalty income on Net Sales of Products received from
sublicensees;
(iii) 15% of all Sublicence Fees.
4. LICENCE TERM
- ---------------------
4.1 The term of the Licence commences upon the Commencement Date until 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 20 (Termination) or extended by the
written agreement of the parties.
5. PERFORMANCE OF PRAXIS
- ------------------------------
5.1 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 20 (Termination).
5.2 Capital raising milestones:
(a) On or before 31 July 1998, Praxis shall raise capital of at least
$700,000 for use under this Agreement.
(b) On or before 31 July 1999, Praxis shall raise capital of at least
an additional $1,000,000 for use under this Agreement.
5.3 Research milestones
Pursuant to the Research Milestones as set out in Schedule 3 Praxis
shall:
(a) achieve the Aims within the Start and Finish dates; and
(b) ensure that sufficient research funds are made available to
undertake the Research.
5.4 Commercialisation milestones
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.
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.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
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.
6. RIGHT TO SUBLICENSE
- ----------------------------
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.
7. THE RESEARCH
- ---------------------
7.1 ANUTECH shall procure that researchers from the ANU or where else
required, shall carry out Research on behalf of Praxis in accordance
with the terms of this Agreement and pursuant to the general outline of
the Research Milestones.
7.2 Praxis and ANUTECH wish to retain flexibility in relation to the
Research. The scope, priority and emphasis of the Research may be
changed, altered or added to from time to time by written agreement of
the Research Management Committee.
7.3 Research shall commence on 1 November 1997 and continue until at least
December 2000, whereupon the parties will negotiate in good faith for
its continuation or completion.
7.4 Throughout the Research, the Research Leader, will be responsible for
the conduct, general management, and supervision of the Research.
Through the Research Leader, ANUTECH will ensure there is a high and
consistent level of communication and cooperation between and among all
personnel engaged in the Research, and that the Research is conducted
in a diligent professional manner commensurate with high scientific
standards and practices and in accordance with all applicable statutory
and other legal requirements as well as all relevant good laboratory
practices.
7.5 ANUTECH shall ensure that the Research Leader and any personnel engaged
in the Research enter into appropriate confidentiality agreements in a
form consistent with the confidentiality obligations under this
Agreement.
7.7 ANUTECH shall prepare and submit to the Research Management Committee
written reports at quarterly intervals throughout the Research, or at
such other intervals as may be agreed. The reports shall set out in
reasonable and informative detail, particulars of the research
undertaken during the period, accomplishments and inventions (if any),
difficulties encountered (if any) and possible future directions for
the Research. ANUTECH and the Research Project Leader may provide
informal reports of any progress, difficulties encountered or
inventions to Praxis as they occur during the term of the Agreement.
7.6 ANUTECH and the research team are independent contractors and are not
employees, agents, officers or partners of Praxis. The parties
acknowledge that Dr Bill Cowden and Dr Brett Charlton are part of the
research team as well as shareholders and officers of Praxis therefore
the parties will ensure that any conflicts of interest are managed
appropriately.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
8. PAYMENT OF RESEARCH FUNDS
- ----------------------------------
8.1 In consideration of ANUTECH's conduct of the Research, Praxis will pay
ANUTECH quarterly in advance and in accordance with the initial
Research Budget in Schedule 2.
8.2 Subsequent Research Budgets shall be determined on an annual basis by
the Research Management Committee. Such budgets shall include funds for
at least the following:
(a) salaries and salary related expenses for research team and
consultants;
(b) salary increments;
(c) consumables, equipment, sundry items and animals; and
(d) administrative and overhead costs for the ANU and ANUTECH.
8.3 ANUTECH shall ensure that funds paid by Praxis pursuant to this
Agreement are only used and applied in accordance with that which is
contemplated by this Agreement.
8.4 ANUTECH shall maintain accounts of all income and expenditure in
relation to the Research according to standard accounting principles.
ANUTECH shall provide to Praxis on a quarterly basis, financial
statements on income, commitments and expenditure.
9. RESEARCH MANAGEMENT COMMITTEE
- --------------------------------------
9.1 A Research Management Committee shall be established:
(a) it shall comprise one representative nominated by each party and
such other persons as may be nominated and agreed to by the
parties from time to time for the purpose of providing expertise
to the committee;
(b) be chaired by the person nominated by ANUTECH; and
(c) meet quarterly or at such other intervals as agreed by all members
of the committee, either in person at such location(s) as are
agreed and/or via telephone conference;
9.2 The functions of the Research Management Committee will be to:
(a) monitor and discuss the progress of the Research and if necessary,
to determine amendments to the Research direction;
(b) review and determine the annual Research Budgets;
(c) review any issues of disclosure of Confidential Information and
publications;
(d) discuss generally any patent applications, patents and new
inventions; and
(e) consider and manage any conflicts of interest.
9.3 The decisions of the Research Management Committee shall be binding on
the parties.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
10. OWNERSHIP
- ------------------
10.1 The following shall be owned by the ANU and licensed to Praxis pursuant
to the terms of this Agreement:
(a) Results;
(b) improvements to ANU Intellectual Property ; and
(c) new patents and patent applications arising from the Research,
Results and use of ANU Intellectual Property.
10.2 ANU shall have a non-determinable right to use the Results but only for
its own on-going internal research.
11. PROTECTION OF PATENTS
- ------------------------------
11.1 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.
11.2 With respect to any new patentable inventions arising from the Research
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.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
12. INFRINGEMENT AND ENFORCEMENT OF PATENTS
- ----------------------------------------------
12.1 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.
12.2 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.
12.3 Praxis shall be entitled to retain any recovery from the litigation or
settlement. Praxis shall pay to ANUTECH a royalty pursuant to clause
3.1 (iii) to the extent that such recovery by Praxis exceeds its
expenses.
12.4 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.
12.5 Nothing herein shall preclude ANUTECH from defending or pursuing any
such actions.
13. REPORTS, PAYMENTS AND ACCOUNTING
- -----------------------------------------
13.1 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.
13.2 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's sublicensees to Praxis.
13.3 All payments hereunder by Praxis shall be payable in Australian
Dollars.
13.4 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.
13.5 Praxis shall permit ANUTECH or its representatives, at ANUTECH's
expense, to periodically examine its books, ledgers and records during
business hours and with
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
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.
13.6 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.
13.7 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.
14. CONFIDENTIALITY
14.1 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.
14.2. The recipient of Confidential Information must:
(a) keep it confidential;
(b) use it only for the purposes of the Agreement;
(c) not disclose it to any person other than:
(i) 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
(ii) 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
(d) 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";
(e) promptly comply with any request by the discloser to return or
destroy any or all copies of Confidential Information; and
(f) implement security practices against any unauthorised copying, use
or disclosure of the Confidential Information.
14.3 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.
14.4 The provisions of this clause 14 shall continue to have effect for a
period of four (4) years after termination or expiry of this Agreement.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
14.5. 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.
15. PUBLICATION
- --------------------
15.1 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 14 (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)inthe 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.
16. USE OF NAME
- --------------------
16.1 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.
17. INDEMNITY AND INSURANCE
- --------------------------------
17.1 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.
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.
17.2 From the date that any Product arising out of the ANU Intellectual
Property is first applied for therapeutic human use (and for the term
or foreseeable term of the human
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
use) Praxis undertakes to hold product liability insurance to the value
of at least $100,000,000.00
17.3 Praxis shall at all times maintain in full force and effect general
liability insurance with limits of not less than $10,000,000.00.
17.4 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.
18. WARRANTIES
18.1 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.
18.2 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.
18.3 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.
18.4 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 Ptoperty, in particular the patents and patent
applications set out in Schedule 1.
18.5 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.
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 Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
18.5 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.
18.5 Fundamental Terms
Each party acknowledges that the warranties contained in this clause 18
(Warranties) are fundamental terms of this Agreement.
19. ASSIGNMENT, TRANSFER
19.1 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.
19.2 Any permitted assignee shall assume all obligations of its assignor
under this Agreement.
19.3 No assignment shall relieve Praxis of responsibility for the
performance of any accrued obligation(s) which Praxis then has
hereunder.
20. TERMINATION
20.1 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.
20.2 Without limiting clause 20.1 (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 such default is not cured (if capable of being
cured) within 30 days of ANUTECH giving notice of the default.
20.3 The provisions of this clause 20 and clauses 14 (Confidentiality), 17
(Indemnity and Insurance), 13 (Reports, Payments and Accounting) 21.12
(Governing Law), and 21.9 (Dispute Resolution) shall continue in full
force and effect notwithstanding the termination, any alterations or
additions to the other provisions of this Agreement.
20.4 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;
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
(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
20.4 (e);
(c) ANUTECH's Research on behalf of Praxis shall terminate;
(d) 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;
(e) 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.
20.5 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.
20.6 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 20 upon the occasion of any subsequent breach.
21. MISCELLANEOUS PROVISIONS
21.1 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.
21.2 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.
21.3 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.
21.4 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.
21.5 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.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
21.6 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.
21.7 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 56 Urambi Village
CANBERRA ACT 2601 Canberra ACT 2902
or and
ANUTECH Court c/o Corporate Trust Company of
Cnr. Barry Drive and Daley Road Nevada
ACTON nACT 2601 1 East First Street, Reno, Nevada
89501, USA
Facsimile: 02 6257 1433
21.8 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.
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
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.
21.9 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.
21.10 Stamp Duty
All stamp duty levied upon this agreement shall be paid by Praxis.
21.11 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.
21.12 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.
- --------------------------------------------------------------------------------
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 Articles of Association ) /s/ Brett Charlton
--------------------------
(Name) - (Position)
In the presence of :
/s/ W.B. Cowden
---------------------------------
Signature
W.B. Cowden
---------------------------------
Name
The COMMON SEAL of )
ANUTECH PTY LLD )
was hereunto affixed in accordance )
with its Articles of Association ) /s/ John Bell
----------------------------
John Bell - Managing Director
In the presence of :
/s/ L. J. Todd
---------------------------------
Signature
L.J. Todd, Secretary, Anutach Pty. Ltd.
---------------------------------------
Name
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
SCHEDULE 2
RESEARCH BUDGET
FIRST YEAR BUDGET: NOVEMBER 1997 - NOVEMBER 1998
------------------------------------------------
SALARIES SALARY TOTAL
--------
Chemist $43,000 $54,825
OVERHEADS/CONSUMABLES
---------------------
JCSMR overheads (26% on ANU staff) $14,255
ERM $15,000
APL fee (15%) $12,612
GRAND TOTAL $96,691
SECOND YEAR BUDGET: NOVEMBER 1998 - NOVEMBER 1999
-------------------------------------------------
SALARIES SALARY TOTAL
--------
Lab Technician $35,000 $44,625
Animal Technician $36,000 $45,900
Researcher $42,000 $53,550
Chemist $43,000 $54,825
TOTAL SALARIES $338,900
CONSULTANCY
-----------
Clinical Trial Coordinator $50,000
Research Leader Consultancy $90,000
TOTAL CONSULTANCY $140,000
OVERHEADS/CONSUMABLES
---------------------
JCSMR overheads (26% on ANU staff) $51,714
ERM (@$15K/person) $90,000
Equipment $50,000
Animals $20,000
Sundry (1) $5,000
APL Fee (15%) $83,342
TOTAL OVERHEADS $300,056
GRAND TOTAL $638,956
(1) Includes: printing, advertising, postage, courier, books/subscriptions,
contingency and other miscellaneous items etc
Payment details are provided below:
Electronic Transfer: Postal Address:
Bank: National Australia Bank ANUTECH Pty Ltd
Address: 39 London Circuit GPO Box 4
Canberra ACT 2600 Canberra ACT 2601
Australia Australia
Account Name: ANUTECH Pty Ltd
Account No.: 60584 3086
Branch No.: 082 962
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
SCHEDULE 3
RESEARCH AND RESEARCH MILESTONES
THE RESEARCH -
The research program encompasses both basic and clinical research
projects in the area of inflammation treatment. The overall aims of
the program are to develop compounds with greater efficacy than those
covered currently under the ANU Intellectual Property and to
demonstrate the efficacy, in animal models (ophthalmic and abdominal
inflammation), of the drug candidates, and to prove safety and
efficacy of these agents in human skin inflammatory conditions
(psoriasis).
THE RESEARCH MILESTONES:
In broad terms the Research Milestones can be summarised as follows:
1. BASIC RESEARCH
AIMS: To develop:
(i) 3 agents which are representative of 3 new classes of compounds
with improved binding constants to the M6P/IGF II receptor and to
assess these in vitro and in vivo.
(ii) to develop or identify formulations for optimal delivery in at
least one required application, eg for use in intra-abdominal or
intra-ocular applications
Start: November 1997
Produce agents: November 1998
In vitro analysis: March 1999
In vivo analysis: November 1999
Identify and test formulation: March 1999
Assess final formulation in vivo: November 1999
Finish: November 1999
2. PRE-CLINICAL
i) Post surgical/infection adhesions
- ------------------------------------
AIMS: To demonstrate efficacy of lead compounds in animal models of intra-
abdominal adhesions
Start: November 1997
Develop animal models: May 1998
Safety studies: September 1998
Efficacy studies: May 1999
Finish: June 1999
ii) Ocular inflammation
- -----------------------
AIMS: To demonstrate efficacy of lead compound in animal models of ocular
inflammatory conditions
Start: November 1998
Develop model: May 1999
Safety assessment: September 1999
Efficacy studies: September 2000
Finish: September 2000
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
<PAGE>
3. CLINICAL
i) Psoriasis
- ------------
AIMS: To demonstrate safety and efficacy of lead compounds in the treatment
of psoriasis
Phase I/IIa:
Start: January 1998
Protocol: March 1998
Ethics: June 1998
Recruitment : October 1998
Analysis: February 1999
Finish: February 1999
Phase IIb:
Start: May 1999
Ethics: June 1999
Recruitment : January 2000
Analysis: August 2000
Finish: September 2000
Phase III
Start: September 2000
Finish: September 2003
ii) Intra-abdominal adhesions
- -----------------------------
Phase I April 1999 - July 2000
Phase II October 2000 - March 2002
Phase III July 2002 - July 2005
iii) Ocular Inflammation
- ------------------------
Phase I September 2000 - September 2001
Phase II January 2002 - June 2003
Phase III December 2003 - December 2006
- --------------------------------------------------------------------------------
ANUTECH Pty Ltd Praxis Pharmaceuticals, Inc.
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>
SCHEDULE 1
----------
CONFIDENTIALITY DEED
<PAGE>
THIS CONFIDENTIALITY DEED is made the day of 1999
BETWEEN:
PRAXIS PHARMACEUTICALS AUSTRALIA PTY
LIMITED (ACN 082 811 630) of 60 Marcus Clarke
Street, Canberra, Australian Capital Territory 2601
("the Company")
- and -
[##] of [##] ("the Employee")
WHEREAS:
A The Company has agreed to engage the Employee as an employee to
assist in the ongoing drug discovery operations (the "Business") of
the Company.
B In the course of the Employee's employment as an employee,
information concerning the Business, accounts, finance, contractual
arrangements, dealings, transactions or affairs of the Company,
including, without limitation, any information relating to
biotechnology, processes, products, specifications, inventions,
patents, copyright and designs owned or used by the Company, however
generated, recorded, stored or disseminated ("Confidential
Information") may be disclosed to or acquired by the Employee.
C In consideration of his engagement as an employee of the Company, the
Employee undertakes to preserve and maintain the confidentiality of
the Confidential Information on the terms and conditions contained in
this Deed.
D Each of the parties acknowledge that in order to protect the Business
of the Company and to secure the services of the Employee, the
Employee has, at the request of the Company, agreed to enter into the
restrictive covenants contained in this Deed.
THE PARTIES COVENANT AND AGREE as follows:
1 The Employee shall at all times:
1.1 treat the Confidential Information in strict confidence and
maintain strict secrecy about the Confidential Information in
its possession;
1.2 not disclose or provide, whether voluntarily or otherwise, any
Confidential Information to any person without the prior
written consent of the Company; and
1.3 not directly or indirectly make use of any Confidential
Information for any purpose except in the course of employment
with the Company and for the benefit or advantage of the
Company.
<PAGE>
2
2 Nothing in Clause 1 prohibits the disclosure or use of any
Confidential Information which:
2.1 is or becomes publicly available through no fault of the
Employee;
2.2 was in the Employee's possession prior to his employment with
the Company and was not acquired by the Employee directly or
indirectly from the Company;
2.3 was rightfully received by the Employee from a third party
without a duty of confidentiality being owed by the Employee to
the third party and was not acquired by the Employee directly
or indirectly from the Company; or
2.4 the Employee is required to disclose by:
2.4.1 any law; or
2.4.2 an order of any Court of competent jurisdiction,
but only to the extent required by the law or order.
3 All Confidential Information shall be and remain the property of the
Company. The Employee acknowledges that all Confidential Information
developed in the course of the Employee's employment will vest in the
Company. The Employee agrees to execute any documents and supply any
information, data, models or programs required by the Company to
exploit, protect, register or assign ownership of such Confidential
Information.
4 The Employee acknowledges that the Company may suffer substantial
damage as a result of the disclosure of any of the Confidential
Information to any person other than a person authorised by the
Company to receive the Confidential Information. The Employee shall
at all times indemnify the Company against all and any loss, damages,
expenses or costs directly or indirectly sustained, suffered or
incurred (including special, consequential and economic damages) or
other claims howsoever arising (and legal and other professional
costs and disbursements necessarily incurred as a result thereof) in
consequence of the Employee failing for any reason to strictly
observe or perform any term or condition of this Deed.
5 The Employee releases the Company to the full extent permitted by law
from and against all claims, actions, damages, remedies and matters
arising from or which may arise from or in connection with the
provision, or any purported reliance upon the Confidential
Information.
6
6.1 The Employee agrees that it is reasonable and necessary for the
Company to have the benefit of the restrictive covenants set
out in this Clause 6 in order to protect the Business and the
confidentiality of information obtained by the Employee during
his employment with the Company.
<PAGE>
3
6.2 The Employee covenants with the Company that he/she will not
during the course of his/her employment or for the periods
specified in Clause 6.3 and within the areas specified in
Clause 6.4, directly or indirectly, as sole proprietor, member
of a partnership or joint venture, shareholder, investor,
participant, consultant, officer, manager or director of a
corporation, or as an employee, agent, associate or consultant
of any person, firm or corporation or in any other capacity:
6.2.1 undertake, carry on or be engaged in or concerned with
or interested in any business in Australia or elsewhere
which is directly or indirectly competitive with the
Business;
6.2.2 canvass, solicit, interfere with or endeavour to entice
away from the Company any employee, customer or client
of the Company; or
6.2.3 counsel, procure or otherwise assist any person to do
any of the acts referred to in sub-clauses 6.2.1 and
6.2.2.
6.3 The periods referred to in Clause 6.2 are:
6.3.1 24 months after the end of his/her employment;
6.3.2 12 months after the end of his/her employment;
6.3.3 6 months after the end of his/her employment.
6.4 The areas referred to in Clause 6.2 are:
6.4.1 the World;
6.4.2 North America, Europe and Australia;
6.4.3 Australia;
6.4.4 Australian Capital Territory.
6.5 The Employee warrants that he/she has received independent
legal advice with respect to the provisions of this Clause 6.
6.6 The Employee agrees that if there is a breach or threatened
breach of the provisions of this Clause 6, the Company shall be
entitled to an injunction restraining the Employee from such
breach. Nothing in this Deed shall be construed as prohibiting
the Company for pursuing any other remedies in respect of such
breach or threatened breach.
6.7 Each of the periods referred to in Clause 6.3 and each of the
areas referred to in Clause 6.4 shall each be severable and
have an
<PAGE>
4
independent operation from the other or others of them in the
order in which they appear in Clauses 6.3 and 6.4 respectively.
To the extent that if any one or more of such restrictions
constitutes an undue restraint of trade or is otherwise
contrary to public policy or public interest or is
unenforceable or illegal, such facts shall not affect the
subsequently mentioned period or area, as the case may be,
specified in the sub-Clause following the sub-Clause so severed
or the remainder of this Deed, which shall continue to operate
in full force and effect, provided always that unless and until
the provisions of this Clause 6.7 become operative the period
referred to in sub-Clause 6.3.1 and the area referred to in
sub-Clause 6.4.1 shall operate and be effective between the
parties. In this regard the Employee acknowledges that the
period specified in sub-Clause 6.3.1 and the area specified in
sub-Clause 6.4.1 are fair and reasonable.
7 The Employee shall continue to be bound by this Deed until the
Company gives the Employee an unconditional discharge in writing.
8 This Deed 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.
IN WITNESS WHEREOF the parties have executed this Deed 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: )
Director
Name of Director (Print)
Director/Secretary
Name of Director/Secretary (Print)
<PAGE>
5
SIGNED SEALED AND DELIVERED by )
[##] in the presence of: )
Witness
Name of Witness
(Print)
<PAGE>
SCHEDULE 2
----------
DEED OF ACCESSION
<PAGE>
THIS DEED is made the day of 2000
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")
- and -
NEW SHAREHOLDER
WHEREAS:
A Praxis USA and the Trustee are Shareholders in the Company pursuant to
a Share Subscription and Shareholders' Agreement dated [##] (the
"Shareholders' Agreement").
B The New Shareholder wishes to acquire all [a portion] of the Shares of
[##] (the "Outgoing Entity").
C It is a condition under the Shareholders' Agreement that each of the
parties hereto execute this Accession Deed.
<PAGE>
2
NOW THIS DEED WITNESSES AS FOLLOWS:
1 INTERPRETATION
1.1 For the purposes of this Deed:
1.1.1 terms which are defined in the Shareholders' Agreement
shall have the same meanings when used in this Deed;
and
1.1.2 the provisions of Clause 1.2 of the Shareholders'
Agreement shall apply in the interpretation of this
Deed, mutatis mutandis.
1.2 In this Deed (including the Recitals) unless inconsistent with
the subject matter or unless the context otherwise requires:
"Completion Date" means the date on which the sale of Shares
under the Shareholders' Agreement is completed between the
Outgoing Entity and the New Shareholder;
"Continuing Entities" means [##];
"Outgoing Entity" means [##];
2 The New Shareholder hereby:
2.1 ratifies and becomes a party to and agrees to be bound by the
Shareholders' Agreement and any other Agreement referred to in
Clause 2.2; and
2.2 takes and accepts the assignment and transfer to it of all
rights and benefits and assumes the obligations and agrees to be
bound by all of the terms, conditions, restrictions, covenants
and obligations of the Assignor under:
2.2.1 the Shareholders' Agreement; and
2.2.2 any other agreement between the Assignor and the other
parties or to which they are parties relative to the
Shareholders' Agreement,
which are subsisting at or incurred or arise on and from the
time of acquisition by the New Shareholder; and
2.3 indemnifies and keeps indemnified and saves harmless the
Outgoing Entity from and against all claims, demands, expenses,
losses and damages which may directly or indirectly arise in
respect of Clauses 2.1 and 2.2.
<PAGE>
3
3 Each of the Continuing Entities and the Company hereby consent to the
transfer of Shares from the Outgoing Entity to the New Shareholder
pursuant to Clause 8 of the Shareholders' Agreement and agree to
execute all such further documents and take such further action as may
be necessary to give full effect to the terms thereof.
4 For the purposes of the Shareholders' Agreement the address of the New
Shareholder to which all notices, consents, requests and other
documents required to be given or sent shall be as follows:
[here insert the address of the New Shareholder].
5 This Deed shall be governed by and interpreted in accordance with the
laws for the time being in force in the State of New South Wales and
each party, including the New Shareholder, submits to the non-exclusive
jurisdiction of the Courts of or exercising jurisdiction in that State.
6 This Deed may be executed in any number of counterparts, each of which
shall be deemed an original but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF the parties have executed this Deed 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: )
- -------------------------------------------- Director
- -------------------------------------------- Name of Director (Print)
- -------------------------------------------- Director/Secretary
- -------------------------------------------- Name of Director/Secretary (Print)
<PAGE>
4
EXECUTED by PRAXIS )
PHARMACEUTICALS INC. by its )
authorised officer in the presence of: )
- --------------------------------------- Authorised Officer
- --------------------------------------- Name of Authorised Officer (Print)
- --------------------------------------- Title
EXECUTED BY PERPETUAL TRUSTEES
NOMINEES LIMITED (ACN 000 341 533)
THE COMMON SEAL of ROTHSCHILD )
BIOSCIENCE MANAGERS LIMITED )
(ACN 072 515 247) was hereto affixed in )
accordance with its Constitution in the )
presence of: )
- ---------------------------------------- Director
- ---------------------------------------- Name of Director (Print)
- ---------------------------------------- Director/Secretary
- ---------------------------------------- Name of Director/Secretary (Print)
EXECUTED BY NEW SHAREHOLDER
(ACN ### ### ###)
<PAGE>
SCHEDULE 3
----------
AMENDMENT TO CONSTITUTION
<PAGE>
A"
CORPORATIONS LAW
----------------
A COMPANY LIMITED BY SHARES
---------------------------
CONSTITUTION
------------
-- of --
PRAXIS PHARMACEUTICALS AUSTRALIA
--------------------------------
PTY. LIMITED
------------
I N D E X
---------
CLAUSE SUBJECT MATTER PAGE
- ------ -------------- ----
1. DEFINITIONS..........................................................3
2. INTERPRETATION.......................................................8
3. PROPRIETARY COMPANY..................................................8
4. EXERCISE OF POWERS...................................................9
5. SHARE CAPITAL........................................................9
6. BROKERAGE AND COMMISSION............................................21
7. OWNERSHIP OF SHARES.................................................22
8. VARIATION OF RIGHTS.................................................22
9. CERTIFICATES........................................................22
10. CALLS ON SHARES.....................................................23
11. FORFEITURE OF SHARES................................................24
12. LIEN................................................................25
13. TAXATION LIEN.......................................................26
14. TRANSFER OF SHARES..................................................27
15. TRANSMISSION OF SHARES..............................................30
16. CONVERSION AND REDUCTION OF SHARE CAPITAL...........................31
17. GENERAL MEETINGS....................................................31
<PAGE>
2
18. PROCEEDINGS AT GENERAL MEETINGS.....................................33
19. VOTES OF MEMBERS....................................................34
20. PROXIES.............................................................35
21. BODY CORPORATE REPRESENTATIVE.......................................36
22. ATTORNEY OF MEMBERS.................................................37
23. MEETINGS OF CLASSES OF SHAREHOLDERS.................................38
24. DIRECTORS...........................................................38
25. DISQUALIFICATION OF DIRECTORS.......................................39
26. MANAGING DIRECTOR...................................................41
27. ALTERNATE OR SUBSTITUTE DIRECTORS...................................41
28. POWERS AND DUTIES OF DIRECTORS......................................42
29. PROCEEDINGS OF DIRECTORS............................................43
30. SECRETARY...........................................................45
31. MINUTES.............................................................45
32. SEAL AND EXECUTION OF DOCUMENTS.....................................46
33. DIVIDENDS...........................................................46
34. RESERVES AND PROVISIONS.............................................47
35. ACCOUNTS............................................................49
36. NOTICES.............................................................49
37. WINDING UP..........................................................50
38. INDEMNITY AND INSURANCE.............................................51
39. DEADLOCK............................................................52
<PAGE>
CONSTITUTION OF PRAXIS PHARMACEUTICALS AUSTRALIA PTY.
-----------------------------------------------------
LIMITED
-------
1. DEFINITIONS
-----------
1.1 In this Constitution the following expressions shall unless there
is something in the subject or context inconsistent therewith have
the meanings hereunder set out --
1.1.1 "ALLOTMENT DATE" means in relation to a Series A Preferred
Share the date upon which that Series A Preferred Share is
issued;
1.1.2 "BOARD" means the Board of Directors of the Company from
time to time or any committee thereof;
1.1.3 "BUSINESS DAY" means a day on which trading banks are open
for business in Sydney, New South Wales;
1.1.4 "CALL" includes an instalment of a call payable upon a
Share;
1.1.5 "CLOSING DATE" means the date fixed by the Directors as
the date on which Shares or securities of the Company
pursuant to the Public Offering are issued;
1.1.6 "COMMENCEMENT DATE" means the date on which a special
resolution is passed by the Members to adopt this
Constitution;
1.1.7 "CONSTITUTION" shall mean this Constitution as
supplemented substituted or amended from time to time;
1.1.8 "CONVERSION DATE" means in relation to a Series A
Preferred Share the first to occur of the following dates
-
1.1.8.1 the date expiring seven (7) Business Days after
receipt by the Company of a Conversion Notice;
or
1.1.8.2 the Specified Conversion Date;
1.1.9 "CONVERSION NOTICE" means a notice given by a Preferred
Holder to the Company in accordance with the provisions of
Clause 5.7;
1.1.10 "CONVERSION PERIOD" means in relation to a Series A
Preferred Share the period commencing on the Allotment
Date and terminating on the Redemption Date;
1.1.11 "CONVERSION RATE" means in relation to each Series A
Preferred Share required to be converted on the Conversion
Date applicable thereto, one Ordinary Share subject
however to such adjustment (if any) as may be required
pursuant to the provisions of Clauses 5.7.8 or 5.7.9;
1.1.12 "DIRECTORS" means the Directors for the time being or such
number of them as have authority to act for the Company
acting as a body
<PAGE>
4
and includes a person duly appointed and for the time
being acting as an attorney for a Director or as an
alternate Director;
1.1.13 "DIVIDEND" means -
1.1.13.1 in relation to each Ordinary Share, such
dividend as the Directors may from time to time
determine in accordance with the provisions of
Clause 33; and
1.1.13.2 in relation to each Series A Preferred Share,
the dividend calculated by reference to the
Dividend Rate and payable to each Preferred
Holder on the Dividend Payment Date;
and includes any bonus and interim Dividend;
1.1.14 "DIVIDEND PAYMENT DATE" in relation to each Series A
Preferred Share means the first to occur of the following
dates -
1.1.14.1 the date of the occurrence of a Liquidity Event;
or
1.1.14.2 the Redemption Date; or
1.1.14.3 the date of disposal of the whole of the
property, business and undertaking of the
Company; or
1.1.14.4 the date of voluntary merger or amalgamation of
the Company;
1.1.15 "DIVIDEND RATE" means in relation to a Series A Preferred
Share such rate as shall yield to the Preferred Holder
thereof a dividend equal to 10% per annum of the Issue
Price of that Share calculated from and including the
Allotment Date;
1.1.16 "FOUNDING SHAREHOLDER" means Praxis Pharmaceuticals, Inc.;
1.1.17 "FOUNDING SHARES" means Ordinary Shares in the capital of
the Company registered in the name of the Founding
Shareholder as at the Commencement Date;
1.1.18 "HOLDING COMPANY" has the same meaning as is ascribed to
that expression in Section 9 of the Law; ---------------
1.1.19 "ISSUE PRICE" means -
1.1.19.1 in respect of a Series A Preferred Share the sum
of $1.00; and
1.1.19.2 in respect of an Ordinary Share the sum of
$1.00;
1.1.20 "LAW" means the Corporations Law;
1.1.21 "LIQUIDITY EVENT" means -
<PAGE>
5
1.1.21.1 a disposal of the whole or substantially the
whole of the property, business and undertaking
of the Company; or
1.1.21.2 Winding Up of the Company;
1.1.22 "MEMBER" means any person who qualifies as a member of the
Company and includes any person who is the holder of a
Share in the capital of the Company;
1.1.23 "MONTH" means calendar month;
1.1.24 "OFFICE" or "OFFICE OF THE COMPANY" means the registered
office of the Company for the time being;
1.1.25 "ORDINARY HOLDER" means each person who is registered as
the holder of an Ordinary Share in the capital of the
Company;
1.1.26 "ORDINARY SHARE" means a fully paid Ordinary Share in the
capital of the Company issued in accordance with the
provisions of Clause 5;
1.1.27 "PAID UP" includes credited as paid up;
1.1.28 "PREFERRED HOLDER" means each person who is registered as
the holder of a Series A Preferred Share in the capital of
the Company;
1.1.29 "PRESENT" when used in relation to a Member at a meeting
means present in person, or by proxy, or by attorney, or
if a corporation, by a representative appointed pursuant
to this Constitution or the Law;
1.1.30 "PROPOSING TRANSFEROR" means an Ordinary Holder or
Preferred Holder which proposes to dispose of any Shares
in the capital of the Company;
1.1.31 "PUBLIC OFFERING" means an offer to the public of Shares
or securities of the Company raising gross proceeds
(before costs) of not less than $10 million, at a minimum
price being three times the Issue Price of the Series A
Preferred Shares;
1.1.32 "REDEMPTION AMOUNT" means the aggregate of the following
amounts calculated in respect of each Series A Preferred
Share as at the Redemption Date namely -
1.1.32.1 the Issue Price; and
1.1.32.2 the Dividend;
1.1.33 "REDEMPTION DATE" means in respect of a Series A Preferred
Share the date expiring 60 Business Days after the date of
receipt by the Company of a Redemption Notice;
<PAGE>
6
1.1.34 "REDEMPTION NOTICE" means a notice given by a Preferred
Holder to the Company in accordance with the provisions of
Clause 5.8;
1.1.35 "REGISTER" means the register of Members of the Company
maintained pursuant to the Law;
1.1.36 "RELEVANT EVENT" means, in relation to a Shareholder -
1.1.36.1 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);
1.1.36.2 that Shareholder becoming insolvent within the
meaning of that expression in the Law;
1.1.36.3 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;
1.1.36.4 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 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
1.1.36.5 the power, whether held directly or indirectly
and by whatever means (whether or not
enforceable at law or in equity) -
1.1.36.5.1 to exercise or control the right to
vote attached to no less than 50%
of the issued Shares in the
Shareholder;
1.1.36.5.2 to sell, transfer, assign or
otherwise dispose of or exercise
any such right over not less than
50% of the issued Shares of that
Shareholder;
1.1.36.5.3 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
<PAGE>
7
1.1.36.5.4 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;
1.1.37 "RESTRICTED PERIOD" means in relation to a Series A
Preferred Share the period commencing on the Allotment
Date and expiring on the fifth anniversary of the
Allotment Date;
1.1.38 "SHARES OR SECURITIES" has the same meaning ascribed
thereto in the Law;
1.1.39 "SHAREHOLDER" means any person who is the registered
holder of a Share in the capital of the Company;
1.1.40 "SERIES A PREFERRED SHARE" means a Series A Redeemable
Convertible Preferred Share issued pursuant to and in
accordance with the provisions of Clause 5;
1.1.41 "SPECIFIED CONVERSION DATE" means the date expiring seven
Business Days after the date of a notice having been given
by the Company in accordance with Clause 5.7.11;
1.1.42 "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 the total number of
Shares (including the Shares held by the relevant
Shareholder) on issue for the time being (assuming that in
so calculating the number of Shares held by a Shareholder
and the total number of Shares on issue, all Series A
Preferred Shares have been converted into Ordinary
Shares);
1.1.43 "TAX ACT" means the Income Tax Assessment Act 1936 and the
Income Tax Assessment Act 1997 of the Commonwealth of
Australia and all Acts encompassed thereby;
1.1.44 "TRANSFER NOTICE" means a notice given by a Preferred
Holder or Ordinary Holder to the Company in accordance
with the provisions of Clause 5.10.4 or Clause 14;
1.1.45 "TRANSFER SHARES" means Shares which a Proposing
Transferor proposes to sell, transfer, assign or otherwise
dispose of;
1.1.46 "WINDING UP" means -
1.1.46.1 an order being made for the winding up or
dissolution of the Company;
1.1.46.2 a liquidator or provisional liquidator being
appointed to the Company; or
<PAGE>
8
1.1.46.3 the Company being otherwise wound up,
deregistered, dissolved or liquidated; and
1.1.47 "WRITING" or "WRITTEN" includes printed lithographed or
represented or reproduced in a visible form by any other
means.
2. INTERPRETATION
2.1 In this Constitution --
2.1.1 references to any officer of the Company include any
person acting for the time being as such officer;
2.1.2 words importing the singular include the plural and vice
versa;
2.1.3 words importing any gender shall mean and include all
other genders;
2.1.4 words importing persons include companies corporations
partnerships associations bodies and entities (whether
incorporated or not) and vice versa;
2.1.5 words or expressions defined in the Law but not defined in
this Constitution shall, if not inconsistent with the
subject or context, bear the same meaning in this
Constitution; and
2.1.6 all references in this Constitution to any statutory
enactment or law shall mean and be construed as references
to that enactment or law as amended or modified or
re-enacted from time to time and to the corresponding
provisions of any similar enactment or law of any other
relevant jurisdiction and includes regulations and
statutory instruments thereunder.
2.2 The headings to Clauses or groups of Clauses shall not affect the
construction or interpretation of this Constitution.
2.3 The replaceable rules contained in the Law shall not apply to the
Company.
3. PROPRIETARY COMPANY
3.1 The Company is a proprietary company.
3.2 The number of Members of the Company is limited to no more than
fifty (counting joint holders of Shares as one person and not
counting any person in the employment of the Company or any of its
subsidiaries or any person who was an employee of the Company or
any of its subsidiaries when he became a Member).
<PAGE>
9
3.3 The Company shall not engage in any activity that would require
the lodgement of a prospectus under the Law save and except as
authorised by the Law.
4. EXERCISE OF POWERS
The Company may by resolution or special resolution as the Law requires
exercise from time to time any power which by the Law a company limited
by Shares may exercise if authorised by its constitution.
5. SHARE CAPITAL
5.1 Shares in the capital of the Company which are issued from time to
time shall be classified as either -
5.1.1 Ordinary Shares;
5.1.2 Series A Preferred Shares; or
5.1.3 such other classification as the Directors may, subject to
any agreement, arrangement or understanding existing
between the Company and all or any other Members of the
Company, determine at the time of issue.
5.2 Notwithstanding any other provisions of this Constitution but
subject always to any agreement, arrangement or understanding
existing between the Company and all or any other Members of the
Company, the Directors may issue Shares designated as Series A
Preferred Shares at such time and to such person or persons as the
Directors may, in their absolute discretion, think fit and, upon
issue, such Series A Preferred Shares shall confer on the
Preferred Holder thereof the rights contained in this Clause 5.
5.3 Series A Preferred Shares shall be issued at the Issue Price and
each Preferred Holder shall -
5.3.1 on the Dividend Payment Date (but not otherwise) - be
entitled in respect of each Series A Preferred Share until
the Conversion Date or Redemption Date (whichever shall
first occur but not otherwise) to a cumulative
preferential Dividend calculated by reference to the
Dividend Rate in respect of each Series A Preferred Share,
which Dividend shall be payable by the Company on the
Dividend Payment Date and all other Clauses of the
Constitution relating to the right of the Company in
general meeting or of the Directors to declare Dividends
shall be read subject to this provision;
5.3.2 in the event of an occurrence of a Liquidity Event or the
voluntary merger or amalgamation of the Company, be
entitled to receive an amount equal to the Redemption
Amount in respect of each Series
<PAGE>
10
A Preferred Share in priority to the holders of all other
Shares or classes of Shares issued in the capital of the
Company but shall not otherwise participate in any further
or other distributions of surplus assets or profits of the
Company;
5.3.3 be entitled to receive:
5.3.3.1 notices of general meetings;
5.3.3.2 annual financial report certified and audited
by a nationally recognised accounting firm;
5.3.3.3 financial statements (including income
statements, profit and loss statements, balance
sheets and cash flow statements) on a regular
basis at times coinciding with each board
meeting;
5.3.3.4 an annual operating and financial plan agreed to
by the board prior to the beginning of each
financial year and any revisions to the plan
promptly upon their adoption by the board; and
5.3.3.5 quarterly technical summary updates measured
against milestones, within 14 days of the each
of each quarter;
5.3.4 have the same rights as holders of Ordinary Shares to
attend (whether in person, by proxy or attorney or, if a
corporation, by representative) and (subject to the
provisions of Clause 5.5) to vote at all general meetings.
5.4 For the purposes of Clause 5.3.1, if the Dividend Payment Date is
not a Business Day, then payment of the Dividend is to be made on
the preceding Business Day.
5.5 For the purposes of Clause 5.3.4, the written consent of the
holders of two-thirds of the Series A Preferred Shares or the
sanction of a resolution passed by the holders of two-thirds of
the Series A Preferred Shares shall be required at any general
meeting convened for the purpose of -
5.5.1 increasing the number of Directors beyond five members;
5.5.2 the issue of any Share or securities in the Company (other
than Shares or securities issued under a board approved
employee share option plan for incentive purposes;
5.5.3 reducing the capital of the Company;
5.5.4 Winding Up the Company;
5.5.5 sanctioning a disposal of the main undertaking of the
Company;
5.5.6 sanctioning a voluntary merger or amalgamation of the
Company; or
<PAGE>
11
5.5.7 where the proposition or resolution before the meeting
directly or indirectly affects, varies or abrogates, in
any manner, any of the rights, privileges or conditions
attaching to the Series A Preferred Shares.
5.6 If, prior to the Conversion Date of a Series A Preferred Share,
there is made to any of the holders of Ordinary Shares an offer or
invitation by the Company to subscribe for Shares or other
securities in the Company (other than Shares or securities issued
under a board approved employee Share option plan for incentive
purposes) (whether by way of renounceable or non-renounceable
rights or otherwise), the Company shall procure that there is
extended to each Preferred Holder the same offer or invitation as
that Preferred Holder would have received if, immediately prior to
the relevant date for determining entitlements of the holders of
Ordinary Shares in respect of the offer or invitation, all of the
Preferred Holders had delivered to the Company a Conversion Notice
in accordance with the provisions of Clause 5.7.1.
5.7 The following provisions shall apply in respect of the conversion
of Series A Preferred Shares -
5.7.1 each Preferred Holder shall be entitled at any time during
the Conversion Period to require the Company to convert
all or any of the Series A Preferred Shares held by him in
the capital of the Company into Ordinary Shares by
delivering a Conversion Notice to the Company specifying
the number of Series A Preferred Shares required to be
converted;
5.7.2 on the Conversion Date each Series A Preferred Share
specified in a Conversion Notice shall be converted
(without any further action required by any Preferred
Holder) into such number of Ordinary Shares calculated in
accordance with the Conversion Rate and to the extent that
any fraction of a Series A Preferred Share would be
required to be converted, then the number of Ordinary
Shares shall be adjusted to the nearest whole Ordinary
Share and no cash adjustment will be made in respect of
any remaining fractional number of Series A Preferred
Shares and all such Series A Preferred Shares shall on the
Conversion Date cease to have any preference or priority;
5.7.3 each Ordinary Share issued on conversion of any Series A
Preferred Shares shall, as and from the Conversion Date,
rank in all respects pari passu with the Ordinary Shares
then on issue in the capital of the Company;
5.7.4 each Preferred Holder shall upon the Conversion Date be
bound to deliver to the Company the certificate for all of
the Series A Preferred Shares held by him and the Company
shall issue to each Preferred Holder a certificate for the
Ordinary Shares issued on conversion free of any charges
but the failure by any Preferred Holder to surrender a
certificate for any Series A Preferred Share
<PAGE>
12
shall not preclude, prejudice or affect the conversion of
such Series A Preferred Share;
5.7.5 if a takeover bid (as defined in the Law) is made for all
of the Ordinary Shares at any time after the Allotment
Date of any Series A Preferred Shares and prior to the
Conversion Date, the Company shall give to each Preferred
Holder written notice of the takeover bid within 5
Business Days of receiving notice of the takeover bid from
the offeror;
5.7.6 where notice has been given by the Company pursuant to the
provisions of Clause 5.7.5, a Preferred Holder may, within
fourteen (14) Business Days from the date of receipt of
such notice, deliver a Conversion Notice and the
certificate or certificates relating to all of the Series
A Preferred Shares to the Company stating that he requires
the Company to convert all of the Series A Preferred
Shares held by him into Ordinary Shares in accordance with
the provisions of Clause 5.7.5;
5.7.7 upon receipt by the Company of a Conversion Notice from a
Preferred Holder in accordance with the provisions of
Clause 5.7.6 the Company shall, pursuant to a resolution
passed at a meeting of the Directors of the Company,
convert all of the Series A Preferred Shares specified in
the Conversion Notice into Ordinary Shares in accordance
with the provisions of Clause 5.7.2;
5.7.8 in the event of a reconstruction (including consolidation,
subdivision, reduction or return) of the issued capital of
the Company at any time prior to the Conversion Date, the
Company shall reconstruct the basis for conversion of the
Series A Preferred Shares, in the same proportion as the
issued capital of the Company is reconstructed and in a
manner which will not result in any additional benefits
being conferred on any Preferred Holder which are not
otherwise thereby conferred on the members of the Company
(subject to the same provisions with respect to rounding
of entitlements as sanctioned by the meeting of members
approving the reconstruction of capital) but in all other
respects the terms of the conversion of Series A Preferred
Shares shall remain unchanged;
5.7.9 any adjustment to the rights attaching to Series A
Preferred Shares in accordance with the provisions of
Clause 5.7.8 shall not take effect until the Conversion
Date and shall not be taken to be a modification of the
right of conversion hereby granted;
5.7.10 if after the Allotment Date the Company issues any new
Shares, options, warrants for, or other securities (other
than Shares or securities issued under a board approved
Share option plan for incentive purposes) of the Company
convertible into Shares at a price per Share or security
less than the Issue Price, the Conversion Rate shall be
adjusted so that the number of Ordinary
<PAGE>
13
Shares issued on the conversion of the Series A Preferred
Shares will be calculated as follows -
IP
A = Cx --
B
where:
A = the number of Ordinary Shares to be issued on
the conversion of each Series A Preferred Share
C = the number of Ordinary Shares that would have
been issued on the conversion of each Series A
Preferred Share had it occurred immediately
prior to the issue of the new Shares or
securities
IP = the Issue Price
B = (SxIP) + (NxRP)
---------------
S + N
S = the number of Series A Preferred Shares on issue
N = the number of new Shares or securities to be
issued
RP = the price at which such new Shares or securities
are to be issued;
5.7.11 notwithstanding anything hereinbefore contained the
Company may, at any time after the Closing Date, by notice
in writing to each Preferred Holder require all of the
Series A Preferred Shares on issue to be converted into
Ordinary Shares; and
5.7.12 where notice has been given by the Company pursuant to the
provisions of Clause 5.7.11, the Company shall (without
any further action required of it) convert all of the
Series A Preferred Shares into Ordinary Shares in
accordance with the provisions of Clause 5.7.2.
5.8 The following provisions shall apply in respect of any redemption
of Series A Preferred Shares -
5.8.1 each Preferred Holder shall be entitled, on the occurrence
of a Liquidity Event or, at any time after the Restricted
Period, to require the Company to redeem all or any of the
Series A Preferred Shares held by him in the capital of
the Company by delivering a Redemption Notice to the
Company specifying the number of Series A Preferred Shares
required to be redeemed and a copy of such Redemption
Notice shall be delivered by such Preferred Holder to each
other Preferred Holder;
5.8.2 within 60 days after receipt of a copy of a Redemption
Notice pursuant to the provision of Clause 5.8.1 by each
other Preferred
<PAGE>
14
Holder, such other Preferred Holders shall be entitled to
require the Company to redeem all or any of the Series A
Preferred Shares held by them in the capital of the
Company by delivering a Redemption Notice to the Company
specifying the number of Series A Preferred Shares
required to be redeemed and such Redemption Notice shall
be deemed to have been served on the Company on the same
date as the Redemption Notice referred to in Clause 5.8.1;
5.8.3 on the Redemption Date each Preferred Holder shall be
bound to surrender to the Company the certificate for the
Series A Preferred Shares to be redeemed and where any
certificate includes any Series A Preferred Shares which
are not specified in the Redemption Notice then the
Company shall issue to the Preferred Holder thereof a new
certificate therefor;
5.8.4 the failure by any Preferred Holder to surrender a
certificate in respect of any Series A Preferred Share
shall not prejudice or affect the redemption of any Series
A Preferred Shares specified in the Redemption Notice but
the Redemption Amount payable to the Preferred Holder in
accordance with the provisions of Clauses 5.8.5 and 5.8.6
shall, after the Redemption Date thereof, be paid by the
Company into a bank account established for the purpose of
holding such moneys and be held by the Company in trust
for that Preferred Holder and shall be paid to that
Preferred Holder forthwith after the relevant certificate
(or if it has been lost or misplaced, satisfactory
evidence of that fact and any indemnity and release in
favour of the Company in respect thereof) is delivered to
the Company;
5.8.5 upon receipt by the Company of a Redemption Notice
pursuant to the provisions of Clauses 5.8.1 and 5.8.2, the
Company shall redeem (out of any profits or moneys of the
Company or the proceeds of a new issue of Shares of the
Company made for that purpose) the Series A Preferred
Shares specified in each such Redemption Notice at the
Redemption Amount in accordance with the provisions of
Clause 5.8.6;
5.8.6 the Redemption Amount payable to any Preferred Holder in
accordance with the provisions of Clause 5.8.5 shall
(subject to the provisions of Clauses 5.8.7 and 5.8.8) be
satisfied as follows -
5.8.6.1 in the case of a Liquidity Event - in full on
the Redemption Date; and
5.8.6.2 after the Restricted Period - by ten (10) equal
instalments, the first of which shall become
payable by the Company on the Redemption Date
and thereafter on the first Business Day after
the expiration of each ensuing six month period;
<PAGE>
15
5.8.7 notwithstanding the provisions of Clause 5.8.6, the
Company may at any time and from time to time pay to the
relevant Preferred Holder such sum or sums in reduction of
the Redemption Amount remaining unpaid;
5.8.8 if at the Redemption Date there are insufficient profits
or moneys available to the Company to pay the Redemption
Amount to any Preferred Holder in accordance with the
provisions of Clause 5.8.6, then the Company shall be
required to pay such amount as may be lawfully applied for
the purpose to each Preferred Holder pari passu and the
Company shall thereafter continue to apply funds of the
Company that may be lawfully applied for the purpose to
each Preferred Holder pari passu until the Redemption
Amount is paid in full;
5.8.9 upon payment of the Redemption Amount to the relevant
Preferred Holder, the Company shall cancel the Series A
Preferred Shares and shall cancel the certificate or
certificates relating to the Series A Preferred Shares so
redeemed.
5.9 For the purposes of this Constitution, any issue of further Series
A Preferred Shares ranking in priority, or any conversion of
existing Shares to Shares ranking equally or in priority to the
existing Series A Preferred Shares shall be deemed to be a
variation or abrogation of the rights attaching to the existing
Series A Preferred Shares.
5.10 Notwithstanding anything contained in the Constitution -
5.10.1 the Company shall refuse to register the transfer of any
Share unless the transferee has or the transferees have
entered into a deed, agreement, arrangement or
understanding with the Ordinary Holders, the Preferred
Holders and the Company, agreeing to be bound by such
agreement between the Ordinary Holders, Preferred Holders
and the Company (if any) as is then in force, and:
5.10.1.1 such transfer is permitted by, or is made
pursuant to and in accordance with, Clauses
5.10.4, 5.10.8 or 5.10.11 or the provisions of
any agreement in writing between all the
Ordinary Holders and all the Preferred Holders;
or
5.10.1.2 the proposed transferee is approved in writing
by all the Ordinary Holders and all the
Preferred Holders (other than the transferor of
the Share) before any instrument is executed to
give effect to such transfer and, subject to
such approval being given, Clause 5.10.2 shall
not apply to such transfer;
5.10.2 subject to Clause 5.10.3, the Company shall not be
entitled to decline to register the transfer of any Share
which otherwise qualifies under Clauses 5.10.1.1 or
5.10.1.2 or under the
<PAGE>
16
provisions of any agreement in writing between all the
Ordinary Holders and all the Preferred Holders;
5.10.3 for the purpose of ensuring that a particular transfer of
Shares is permitted under this Constitution or under the
provisions of any agreement in writing between all the
Ordinary Holders and all the Preferred Holders, 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 and 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;
5.10.4 except as provided in Clauses 5.10.1 and 5.10.5, no Share
may be sold, transferred, assigned or otherwise disposed
of unless the following procedure is followed -
5.10.4.1 a Proposing Transferor shall be obliged to give
a notice in writing to the Company that the
Proposing Transferor desires to dispose of the
Transfer Shares and such Transfer Notice shall
specify:
5.10.4.1.1 the number and class of the Transfer
Shares;
5.10.4.1.2 the price at which the Proposing
Transferor wishes to dispose of the
Transfer Shares (the "Transfer
Price"); and
5.10.4.1.3 the identity of a person who has
indicated a bona fide willingness to
purchase the Transfer Shares at the
Transfer Price (the "Transferee");
5.10.4.2 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 5.10.4;
5.10.4.3 the Transfer Notice shall not be revocable
except with the prior written consent of all the
Ordinary Holders and all the Preferred Holders;
5.10.4.4 within 7 days after the receipt of any Transfer
Notice, the Company shall serve a copy of that
Transfer Notice on all the Preferred Holders
other than the Proposing Transferor and in the
case of a deemed Transfer Notice, the Company
shall similarly serve notice on all
<PAGE>
17
the Preferred Holders (including the Proposing
Transferor) notifying them that the same has
been deemed to have been given;
5.10.4.5 subject as provided otherwise in any agreement
in writing between all the Ordinary Holders and
all the Preferred Holders, the Transfer Shares
shall first be offered for purchase at the
Transfer Price by the Company to all the
Preferred Holders (other than the Proposing
Transferor) in the Specified Proportions of
those Preferred Holders;
5.10.4.6 any offer made pursuant to Clause 5.10.4.5 shall
be made by notice in writing and shall specify:
5.10.4.6.1 the number and class of the Transfer
Shares;
5.10.4.6.2 the proportionate entitlement of the
relevant Preferred Holder;
5.10.4.6.3 the Transfer Price; and
5.10.4.6.4 a period of 14 days within which the
offer must be accepted or shall
lapse;
5.10.4.7 if the Company does not receive acceptances in
respect of all the Transfer Shares within the
periods of the offers referred to in Clause
5.10.4.6, 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 Holders who have accepted an
offer within the periods of the offers referred
to in Clause 5.10.4.6 and any offer made
pursuant to this Clause shall be made in
accordance with the provisions of Clause
5.10.4.6, except that the period within which
all offers must be accepted before lapsing shall
be 14 days;
5.10.4.8 if the Company does not receive acceptances in
respect of all the Transfer Shares within the
periods of the offers referred to in Clauses
5.10.4.6 or 5.10.4.7, 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
<PAGE>
18
respect of the Transfer Shares and which has
been or is to be retained by the Proposing
Transferor);
5.10.4.9 if any person or persons (including any other
Shareholder) (the "Purchasers") agree within the
periods referred to in Clauses 5.10.4.6,
5.10.4.7 or 5.10.4.8 (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 to
the application thereof) to transfer to each
Purchaser those Transfer Shares accepted by them
and 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) and subject to the
giving of such notice, the purchase shall be
completed at the time and place appointed by the
Company;
5.10.4.10 if a Proposing Transferor, having become bound
to transfer any Transfer Shares pursuant to this
Clause 5.10.4, 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 and the Company shall
not be bound to earn or pay interest on any
money so held and 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 members in purported exercise of the power
conferred pursuant to this Clause, the validity
of the proceedings shall not be questioned by
any person;
5.10.4.11 without limiting the provisions of Clause
5.10.3, the Company may require to be satisfied
that any Shares
<PAGE>
19
being transferred by the Proposing Transferor
pursuant to Clause 5.10.4.8 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;
5.10.5 upon the happening of a Relevant Event, the relevant
Shareholder shall be deemed to have immediately given a
Transfer Notice in respect of all the Shares registered in
the name of that Shareholder;
5.10.6 in the case of a Transfer Notice being given pursuant to
the provisions of Clause 5.10.5, the price per Transfer
Share which is so specified in the Transfer Notice shall
be -
5.10.6.1 such price as shall be agreed in writing between
all of the Shareholders; or
5.10.6.2 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 and for the foregoing purposes, the
Expert shall have access to all books of account
and records and all vouchers, cheques, papers
and documents which in any way relate to the
Company and the business of the Company;
5.10.7 the Expert will certify in writing the sum which in his
opinion is the fair market value of the Transfer Shares
and 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) and the Company will use its best
endeavours to procure that the Expert determines the price
per Transfer Share within 21 days of being requested to do
so and 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 under Clause 5.10.4.9) pro rata
according to the number of Transfer Shares purchased by
them;
5.10.8 if a Proposing Transferor is permitted under the
provisions of Clause 5.10 to sell all or any of its Shares
to a third party
<PAGE>
20
purchaser and the provisions of Clause 5.10.4 have been
complied with or waived, each of the Preferred Holders
will have the right to require by notice in accordance
with Clause 5.10.9 the Proposing Transferor to procure
that the third party acquire Shares from each of the
Preferred Holders who delivers such a notice, the number
of Shares to be no greater than the number calculated by
multiplying the number of Transfer Shares by the Specified
Proportion of that Preferred Holder, 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 Holders gives
notice pursuant to Clause 5.10.9, 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 Holders Shares
at the same price per Share and on the same terms and
conditions;
5.10.9 a notice for the purposes of Clause 5.10.8 shall be in
writing addressed to the Proposing Transferor and given to
the Proposing Transferor within 14 days of receipt by the
other Preferred Holders 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;
5.10.10 a Preferred Holder other than the Proposing Transferor may
sell its Shares to the third party purchaser in accordance
with Clause 5.10.8 without the need to comply with the
procedure set out in Clause 5.10.4;
5.10.11 an obligation to transfer a Share under the provisions of
this Clause shall be deemed to be an obligation to
transfer the entire legal and beneficial interest in such
Share free from any encumbrance; and
5.10.12 the provisions of this Clause 5.10 may be waived in whole
or in part in any particular case with the prior written
consent of all the Ordinary Holders and all the Preferred
Holders.
5.11 If there is any inconsistency between the provisions of this
Clauses 5.2 to 5.10 (inclusive) and any other Clauses, the
provisions of those Clauses shall prevail.
5.12 Subject to the provisions of Clauses 5.2 to 5.10 (inclusive) and
to the provisions of the Law with respect to the consent of the
Members affected and subject and without prejudice to any special
rights attached to any Shares for the time being issued, all
Shares shall be under the absolute control of the Directors who
may from time to time --
5.12.1 issue any Share;
5.12.2 create any class or new class of Ordinary Shares or
Preference Shares (including a class of Preference Shares
which are or at the
<PAGE>
21
option of the Company are to be redeemed the terms and
manner of redemption being (subject to the Law) determined
by the Directors upon the issue of the Shares);
5.12.3 reclassify any Share;
5.12.4 allot or grant options in respect of or otherwise dispose
of any Shares to such persons on such terms and conditions
and at such times and subject or not to the payment of any
part of the amount of the Shares in cash as the Directors
may determine; 5.12.5 allot any new Shares as fully or
partly paid Shares as part payment for any property bought
by the Company or for services rendered to the Company;
5.12.5 allot any new Shares as fully or partly paid Shares as
part payment for any property bought by the Company or for
services rendered to the Company;
5.12.6 make any such issue and create any such new class with
such preferred deferred or other special rights or subject
to such rights of compulsory sale or pre--emption or
subject to such restrictions whether in regard to
Dividends, voting, return of Share capital or other
matters as the Directors may determine.
5.13 The Company may, in accordance with the provisions of the Law, buy
back its own Shares.
6. BROKERAGE AND COMMISSION
6.1 The Company may pay brokerage or commission to any person for
subscribing or agreeing to subscribe (whether absolutely or
conditionally) for any Shares or debentures of the Company or
procuring or agreeing to procure subscriptions (whether absolute
or conditional) for any Shares or debentures of the Company and so
that --
6.1.1 the statutory conditions and requirements for the time
being in force (if any) shall be observed and complied
with;
6.1.2 the brokerage or commission shall not exceed 10% of the
price at which the Shares or debentures are issued unless
otherwise determined by the Directors;
6.1.3 the brokerage or commission may be paid either in cash or
in fully paid Shares or debentures of the Company of any
class in such other manner as the Directors may determine;
and
6.1.4 the Company may grant to any person so subscribing or
agreeing to subscribe or procuring or agreeing to procure
subscriptions an option to require the Company to issue to
himself or his nominee any further Shares of the Company.
6.2 The powers conferred by Clause 6.1 upon the Company may be
exercised on its behalf by the Directors.
<PAGE>
22
7. OWNERSHIP OF SHARES
Except as required by law no person shall (unless the Directors in any
case otherwise determine) be recognized by the Company as holding any
Share upon any trust and the Company shall not be bound by or be
compelled in any way to recognize (even when having notice thereof) any
equitable, contingent, future or partial interest in any Share or unit
of a Share or (except only as by this Constitution or by law otherwise
provided) any other rights in respect of any Share except an absolute
right to the entirety thereof in the registered holder.
8. VARIATION OF RIGHTS
8.1 Subject to the provisions of Clause 5, if at any time the issued
Share capital is divided into different classes of Shares the
rights attached to any class (unless otherwise provided by the
terms of issue of the Shares of that class) may be varied with
either -
8.1.1 the written consent of the holders of not less than 75%
of the issued Shares of that class; or
8.1.2 the sanction of a special resolution passed at a separate
general meeting of the holders of the Shares of that
class.
8.2 Without limiting the generality of Clause 5.9 the rights conferred
upon the holders of the Shares of any class issued with preferred
or other rights shall not, unless otherwise expressly provided by
the terms of issue of the Shares of that class, be deemed to be
varied by the creation or issue of further Shares ranking equally
therewith.
9. CERTIFICATES
9.1 Every person whose name is entered as a Member in the Register
shall without payment be entitled to a certificate (whether under
the common seal of the Company or not) in accordance with the Law.
9.2 In respect of a Share or Shares held jointly by several persons
the Company shall not be bound to issue more than one certificate
and delivery of a certificate for a Share to one of several joint
holders shall be sufficient delivery to all.
<PAGE>
23
10. CALLS ON SHARES
10.1 The Directors may from time to time make calls upon the Members in
respect of any money unpaid on their Shares and not by the
conditions of issue thereof made payable at fixed times but so
that -
10.1.1 no call shall be payable earlier than one month from the
date fixed for the payment of the last preceding call; and
10.1.2 each Member shall (subject to receiving at least 14 days'
notice specifying the time or times and place of payment)
pay to the Company, at the time or times and place so
specified, the amount called on his Shares.
10.2 A call may be revoked or postponed as the Directors may determine.
10.3 A call shall be deemed to have been made at the time when the
resolution of the Directors authorizing the call was passed and
may be required to be paid by instalments.
10.4 The joint holders of a Share shall be jointly and severally liable
to pay all calls in respect thereof.
10.5 If a sum called in respect of a Share is not paid before or on the
day appointed for payment thereof, the person from whom the sum is
due shall pay interest on the sum from the day appointed for
payment thereof to the time of actual payment at such rate not
exceeding 8% per annum, as the Directors may determine but the
Directors shall be at liberty to waive payment of that interest
wholly or in part.
10.6 Any sum which by the terms of issue of a Share becomes payable on
issue or at any fixed date shall, for the purposes of this
Constitution, be deemed to be a call duly made and payable on the
date on which by the terms of issue the same becomes payable and
in the event of non--payment of interest and expenses, forfeiture
or otherwise shall apply as if the sum had become payable by
virtue of a call duly made and notified.
10.7 The Directors may on the issue of Shares, differentiate between
the holders as to the amount of calls to be paid and the times of
payment.
10.8 The Directors may if they think fit, receive from any Member
willing to advance the same all or any part of the money uncalled
and unpaid upon any Shares held by him and upon all or any part of
the money so advanced may (until the same would but for the
advance become payable) pay interest at such rate not exceeding
(unless the Company in general meeting shall otherwise direct) 8%
per annum as may be agreed upon between the Directors and the
Member paying the sum in advance.
10.9 On the trial or hearing of any action for the recovery of any
money due for any call it shall be sufficient to prove that--
<PAGE>
24
10.9.1 the name of the Member sued is entered in the Register as
the holder or one of the holders of the Shares in respect
of which such debt accrued;
10.9.2 the resolution making the call is duly recorded in the
minute book; and
10.9.3 notice of such call was duly given to the Member sued in
pursuance of this Constitution
and it shall not be necessary to prove the appointment of the
Directors who made such call or that a quorum of Directors was
present at the meeting at which such call was made, nor any other
matters whatsoever and the proof of the matters aforesaid shall be
conclusive evidence of the debt.
11. FORFEITURE OF SHARES
11.1 If a Member fails to pay any call or instalment of a call on the
day appointed for payment thereof the Directors may, at any time
thereafter, during such time as any part of the call or instalment
remains unpaid, serve a notice on him requiring payment of so much
of the call or instalment as is unpaid, together with any interest
which may have accrued and all expenses which may have been
incurred by the Company by reason of non--payment.
11.2 The notice shall name a day (not earlier than 14 days from the
date of the notice) and a place or places on and at which the call
and interest and expenses are to be paid. The notice shall also
state that in the event of non--payment at or before the time and
at the place appointed the Shares in respect of which the call is
payable will be liable to be forfeited.
11.3 If the requirements of any such notice are not complied with, any
Shares in respect of which the notice has been given may at any
time thereafter, before the payment required by the notice has
been made, be forfeited by a resolution of the Directors to that
effect. Such forfeiture shall include all Dividends declared in
respect of the forfeited Shares and not actually paid before the
forfeiture.
11.4 When any Share has been so forfeited, notice of the resolution
shall be given to the Member in whose name it stood immediately
prior to the forfeiture and an entry of the forfeiture with the
date shall forthwith be made in the Register. The forfeiture of a
Share shall involve the extinction of all interest in and also of
all claims and demands against the Company in respect of the Share
and all other rights incident to the Share except only such of
those rights as by this Constitution are expressly waived.
11.5 A forfeited Share shall be deemed to be the property of the
Company and may be sold, re-issued or otherwise disposed of on
such terms and in such manner as the Directors think fit and at
any time before a sale, re--issue or disposition the forfeiture
may be cancelled on such terms as the Directors think fit.
<PAGE>
25
11.6 A person whose Shares have been forfeited shall cease to be a
Member in respect of the forfeited Shares but shall
notwithstanding remain liable to pay and shall forthwith pay to
the Company all money which at the date of forfeiture was payable
by him in respect of the Shares as set out in the notice
hereinbefore provided (together with interest at the rate of 8%
per annum from the date of forfeiture on the money for the time
being unpaid if the Directors think fit to enforce payment of such
interest) but his liability shall cease if and when the Company
receives payment in full of all such money in respect of the
Shares.
12. LIEN
12.1 The Company shall have a first and paramount lien on every Share
registered in the name of each Member (whether solely or jointly
with others) for all money (whether presently payable or not)
called or payable at a fixed time in respect of that Share or
presently payable by him or his estate to the Company and interest
and expenses thereon but the Directors may at any time declare any
Share to be wholly or in part exempt from the provisions of this
Clause 12.
12.2 The Company's lien on a Share shall extend to all Dividends
payable thereon.
12.3 Unless otherwise agreed the registration of a transfer of Shares
shall operate as a waiver of the Company's lien (if any) on those
Shares.
12.4 The Directors may sell in such manner as the Directors think fit
any Shares on which the Company has a lien but no sale shall be
made --
12.4.1 unless a sum in respect of which the lien exists is
presently payable; and
12.4.2 until the expiration of 14 days after written notice
stating and demanding payment of such part of the amount
in respect of which the lien exists as is presently
payable has been given to the registered holder for the
time being of the Share or the person entitled thereto by
reason of his death or bankruptcy.
12.5 To give effect to any sale pursuant to Clause 12.4 the Directors
may authorize some person to execute on behalf of the holders
thereof an instrument of transfer in order to transfer the Shares
sold to the purchaser thereof. The purchaser shall be registered
as the holder of the Shares comprised in any such transfer and
shall not be bound to see to the application of the purchase money
nor shall his title to the Shares be affected by any irregularity
or invalidity in the proceedings in reference to the sale.
12.6 The proceeds of the sale shall be received by the Company and
applied in payment of such part of the amount in respect of which
the lien exists as is presently payable and the residue if any
shall (subject to a like lien for sums
<PAGE>
26
not presently payable as existed upon the Shares before the
sale) be paid to the person entitled to the Shares at the date of
the sale.
13. TAXATION LIEN
13.1 Whenever in respect of, or in connection with, any Shares
registered in the name of a Member (whether solely or jointly with
others) or with any Dividends or bonus thereon and whether in
consequence of his death or for any reason any law for the time
being of the Commonwealth of Australia or of any Australian State
or Territory or of any other country or place imposes or purports
to impose any immediate or future or possible liability upon the
Company to make any payments to any Government or taxing authority
--
13.1.1 the Company shall, in respect of any such liability, be
fully indemnified by the Member and his executors or
administrators wheresoever constituted or situated;
13.1.2 any moneys paid by the Company in respect of any such
liability imposed or purported to be imposed on the
Company may be recovered by action from the Member or his
executors or administrators wheresoever constituted as a
debt due by him or his estate to the Company with interest
at 8% per annum from the date when the moneys were paid
until repayment;
13.1.3 any such moneys and interest may be deducted by the
Company from any Dividend or other moneys payable by it to
the Member or his executors or administrators;
13.1.4 the provisions of Clause 12 with respect to the Company's
lien for debts of a Member and the Company's power of sale
to enforce any such lien shall apply with respect to
moneys paid by the Company in respect of any liability to
which this Clause 13 relates;
13.1.5 nothing herein contained shall prejudice or affect any
right or remedy which in respect of any such payment by
the Company any law may confer or purport to confer upon
the Company; and
13.1.6 it is hereby expressly declared that as between the
Company and the Member or his estate and his executors or
administrators wheresoever constituted, any such right or
remedy shall be enforceable by the Company and every
Member of the Company as between himself and the Company
shall be deemed to agree and bind his executors
administrators and estate to submit to the legislative
power and jurisdiction of the State Territory country or
place imposing such liability upon the Company.
13.2 If under the Tax Act or any other enactment the Company becomes
liable to pay additional tax with respect to any undistributed
amount of its profits then notwithstanding any other provisions of
this Constitution the Company in making any subsequent
distribution of its profits (whether out of that undistributed
amount or out of other profits) may if the Directors think fit but
<PAGE>
27
not so as to affect any priority to which under this Constitution
the holders of any class of Shares are entitled determine to pay
Dividends at different rates with respect to the Shares of the
same class held by different Members so as to ensure, as nearly as
may be, that each Member bears his proper Share of the additional
tax which the Company has become liable to pay.
14. TRANSFER OF SHARES
14.1 An instrument of transfer of any Shares shall be in writing in any
usual or common form or in any other form which the Directors may
approve.
14.2 The instrument of transfer shall be -
14.2.1 executed by or on behalf of both the transferor and the
transferee; and
14.2.2 if required by law to be stamped, duly stamped
and the transferor shall remain the holder of the Shares
transferred until the transfer is registered and the name of the
transferee is entered in the Register in respect thereof.
14.3 Except as provided by this Constitution (in particular, Clause
##), there shall be no right of transfer of any Shares in the
Company whatsoever except with the approval of the Directors and
the Directors may, subject to the terms of issue of any Shares,
refuse to register any transfer of a Share without being bound to
give any reason for such refusal or without specifying any grounds
therefor.
14.4 Every instrument of transfer shall be left at the office for
registration accompanied by the certificate of the Shares to be
transferred and such other evidence as the Directors may require
to prove the title of the transferor or his right to transfer the
Shares.
14.5 All instruments of transfer which shall be registered shall be
retained by the Company but any instrument of transfer which the
Directors shall refuse to register shall, on demand, be returned
to the person depositing the same.
14.6 If the Directors refuse to register any transfer of Shares they
shall, within one month after the date on which the transfer was
lodged with the Company, send to the transferee notice of the
refusal but if within the said period of one month notice of
refusal shall not have been sent to the transferee then acceptance
of the transfer for registration shall be deemed to have occurred
at the expiration of the said period.
14.7 Any non--voting Share may be transferred by a Member to any child
or other issue, son--in--law, daughter--in--law, father, mother,
brother, sister, nephew, niece, widow or widower of the Member.
<PAGE>
28
14.8 Except as provided in Clauses 5, 14.7 and 15 no transfer of Shares
shall be registered unless all Members of the Company so agree or
unless the following procedures are complied with --
14.8.1 a person proposing to transfer any Shares ("the Proposing
Transferor") shall give written notice to the Company ("a
Transfer Notice") that he desires to transfer the Shares
specified in the Transfer Notice and he shall specify in
the Transfer Notice the price per Share which he fixes as
the fair value thereof;
14.8.2 a Transfer Notice shall not be revocable except with the
sanction of the Directors except where the fair value has
been fixed by arbitration as provided in Clause 14.8.6 at
a price lower than the price fixed by the Member in which
case, the Proposing Transferor may revoke the Transfer
Notice by written notice to the Company within 7 days
after he has received notice of the result of such
arbitration;
14.8.3 a Transfer Notice may include several parcels of Shares
and in such case shall operate as if it were a separate
Transfer Notice in respect of each parcel;
14.8.4 the service of a Transfer Notice shall be deemed to
constitute the Company the agent of the Proposing
Transferor for the sale of the Shares to a purchaser to be
nominated by the Company as hereinafter provided at a
price equal to the fair value thereof;
14.8.5 subject to the provisions of Clauses 14.8.2 and 14.8.10,
within 28 days after being served with a Transfer Notice,
the Company may by written notice to the Proposing
Transferor nominate one or more Members or other persons
whom in the opinion of the Directors it is desirable in
the interests of the Company to admit to membership as
purchaser of the parcel of Shares referred to in the
Transfer Notice ("the Purchaser") whereupon the Proposing
Transferor shall be bound upon payment of the fair value
of the Shares to transfer the Shares to the Purchaser;
14.8.6 the Company may, by the same notice as is referred to in
Clause 14.8.5, require the fair value of the Shares to be
fixed by arbitration pursuant to the Commercial
Arbitration Act (1984) in lieu of the fair value fixed in
the Transfer Notice but in the event of the fair value so
fixed by arbitration exceeding the fair value fixed in the
Transfer Notice the Purchaser may, by written notice to
the Proposing Transferor not later than 14 days after the
determination, elect not to continue with the purchase;
14.8.7 if the Proposing Transferor having become bound pursuant
to Clause 14.8.5 makes default in transferring the Shares,
the Directors may authorise some person to execute on
behalf of the holder thereof an instrument of transfer of
and to transfer such Shares to the Purchaser and to
receive the purchase price on behalf of the Proposing
Transferor and the Purchaser shall be
<PAGE>
29
registered as the holder of the Shares comprised in any
such transfer without production of the Share certificate
and shall not be bound to see to the application of the
purchase money;
14.8.8 after the Purchaser's name has been entered in the
Register in purported exercise of the power given by
Clause 14.8.7, the validity of the proceedings shall not
be questioned by any person;
14.8.9 if no purchaser is nominated by the Company pursuant to
Clause 14.8.5 in respect of the Shares specified in a
Transfer Notice within 28 days after the Company is served
with the Transfer Notice, or if the Purchaser elects not
to continue with the purchase pursuant to the provisions
of Clause 14.8.6, the Proposing Transferor shall be
entitled at any time within one month after the expiration
of the said period of 28 days or 14 days (as the case may
be) --
14.8.9.1 to sell and transfer the Shares to any person at
a price not less than the price fixed by him in
the Transfer Notice; or
14.8.9.2 to require the Company to be put into
liquidation in which case, notwithstanding
anything contained in this Constitution, he
shall in that event be entitled to require the
Directors to call and arrange to hold a general
meeting of the Company for the purpose of
considering a resolution that the Company be
wound up voluntarily and shall be entitled at
such meeting to exercise ten thousand votes for
every Share held by him in the Company;
14.8.10 any Shares specified in a Transfer Notice shall, forthwith
upon the giving thereof by a Proposing Transferor, be
offered to the other Members in proportion to the number
of Shares already held by them (and where any fraction of
a Share is involved the Shares offered shall be taken to
the next lowest whole number and any Shares left over
shall be offered to Members as determined by lot and the
Directors shall allot sufficient Shares to those who do
not draw the lots to enable the proportion to be exactly
maintained) and save as aforesaid the disposal of Shares
the subject of a Transfer Notice shall be at the
discretion of the Directors;
14.8.11 the Directors may exercise in the name of the Company all
the powers contained in this Clause 14.8 but if any
Director of the Company is the Proposing Transferor, or is
a director or member of or otherwise interested in any
Proposing Transferor, he shall not take part in any
deliberations of the Directors or exercise any vote on any
matter arising out of this Clause 14.8 and if there are
only two Directors of the Company, one Director shall be a
quorum in respect of any such matter;
<PAGE>
30
14.8.12 the expression "parcel of Shares" in this Clause 14.8
means all the Shares of any one class referred to in a
Transfer Notice; and
14.8.13 in the event of a Member or Director in any capacity and
whether as creditor or otherwise presenting to the Court
any petition to wind up the Company on any ground
whatsoever, or instituting any proceedings against the
Company for the recovery of any moneys allegedly due by
the Company, the Member and in the case of a Director any
Member of the Company being his wife or child or trustee
for the family of such Director or a company of which such
Director is a director, shall be deemed on the day prior
to the presentation of the petition to have served a
Transfer Notice pursuant to this Constitution in respect
of all Shares in the Company owned by the Member or such
other person or company as the case may be.
14.9 The Directors may subject to the Law suspend the registration of
transfers for any time or times not exceeding in the aggregate 30
days in any year.
15. TRANSMISSION OF SHARES
15.1 The legal personal representatives of a deceased sole holder of a
Share shall be the only persons recognized by the Company as
having any title to the Share.
15.2 In the case of a Share registered in the names of two or more
holders the survivors or survivor or the legal personal
representatives of the deceased survivor shall be the only persons
recognized by the Company as having any title to the Share but
nothing herein contained shall release the estate of a deceased
joint holder from any liability in respect of any Share which had
been held jointly by him with other persons.
15.3 Any of the following persons that is to say --
15.3.1 either of the parents or the guardian of any infant
Member;
15.3.2 any person becoming entitled to a Share in consequence of
the bankruptcy of a Member;
15.3.3 the legal personal representative of a deceased Member;
15.3.4 the beneficiaries of a deceased Member becoming entitled
thereto under the deceased Member's will or the next of
kin of the deceased Member entitled on an intestacy;
15.3.5 any person having authority in law to manage the affairs
of a Member who by reason of mental or physical infirmity
is unable to manage his affairs --
shall, upon such evidence being produced as to his or their status
or authority as is from time to time properly required by the
Directors, have the
<PAGE>
31
right either to be registered himself or themselves or to make
such transfer of the Share as the Member could have made and the
Directors shall have no right to decline or suspend registration
as they would have had in the case of a transfer of the Share by
the Member if the Member had been alive or capable of transferring
the Share.
15.4 The Shares standing in the name of the trustees of the will of any
deceased Member may be transferred upon any change of trustees to
the trustees for the time being of the will.
15.5 Where two or more persons are jointly entitled to be registered
pursuant to the provisions of this Clause 15 they shall, for the
purposes of this Constitution, be deemed to be joint holders of
the Share.
15.6 A person entitled to be registered as a Member in respect of a
Share pursuant to this Clause 15 shall be entitled to the same
Dividends and other advantages to which he would be entitled if he
were the registered holder of the Share except that he shall not,
before being registered as a Member in respect of the Share, be
entitled in respect of the Share to exercise any right conferred
by membership in relation to general meetings of the Company.
16. CONVERSION AND REDUCTION OF SHARE CAPITAL
16.1 The Company may (subject to the provisions of Clause 8 and the
Law) by resolution convert all or any of its Shares into a larger
or small number.
16.2 For the purposes of Clause 16.1, any amount unpaid on Shares to be
converted is to be apportioned equally among the replacement
Shares.
16.3 The Company may, subject to the provisions of the Law, reduce its
Share capital in any way which is not otherwise authorised by law.
17. GENERAL MEETINGS
17.1 All general meetings of the Company shall be held in accordance
with the provisions of the Law and this Constitution.
17.2 The Directors may whenever they think fit call a general meeting
and, in addition to any other general meetings the Directors may,
if they think necessary, call an annual general meeting in any
calendar year and all general meetings shall be called on such
requisition or, in default, may be called by such requisitionists
as provided by the Law.
17.3 If at any time there are not sufficient Directors capable of
acting to form a quorum for the purpose of calling a general
meeting, any Director or any Members of the Company with not less
than 5% of the votes that may be cast at general meetings may call
and arrange to hold a general meeting in the same manner, as
nearly as possible, in which general meetings may be called by the
Directors.
<PAGE>
32
17.4 Subject to the provisions of the Law relating to resolutions and
special resolutions and agreements for shorter notice not less
than 21 days written notice (exclusive of the day on which the
notice is served or deemed to be served but inclusive of the day
for which notice is given) must be given of all general meetings
specifying -
17.4.1 the place, date and time for the meeting (and, if the
general meeting is to be held in 2 or more places, the
technology that will be used to facilitate this);
17.4.2 the general nature of the business of the general meeting;
17.4.3 if a special resolution is to be proposed -
17.4.3.1 an intention to propose the special resolution;
and
17.4.3.2 the special resolution itself;
17.4.4 if a Member is entitled to appoint a proxy, that -
17.4.4.1 the Member has a right to appoint a proxy;
17.4.4.2 the proxy does not need to be a Member of the
Company; and
17.4.4.3 that a Member who is entitled to cast 2 or more
votes may appoint 2 proxies and may specify the
proportion or number of votes each proxy is
appointed to exercise.
17.5 All business shall be deemed special that is transacted at a
general meeting and all business that is transacted at an annual
general meeting (if any) shall also be deemed special with the
exception of sanctioning a Dividend, the consideration of the
financial reports, Directors' reports and auditor's reports (if
any) and the appointment of the auditor (if any) and the fixing of
his remuneration and the election of Directors.
17.6 Subject to the Law, any resolution of the Company determined on
without any general meeting and evidenced in writing under the
hand of each Member of the Company who for the time being is
entitled to vote, or of his proxy, or of his attorney appointed as
provided in this Constitution or, if the Member is a corporation,
of its representative appointed as provided in this Constitution
or the Law, shall be as valid and effectual as a resolution duly
passed at a general meeting of the Company.
17.7 Any resolution passed in accordance with the provisions of Clause
17.6 may consist of identical copies of the document recording the
resolution and accompanying information, each signed by one or
more Members or their respective proxies, attorneys or, if any
Members are corporations, by their respective representatives.
<PAGE>
33
18. PROCEEDINGS AT GENERAL MEETINGS
18.1 No business shall be transacted at any general meeting unless a
quorum is present at the time when the meeting proceeds to
business.
18.2 A quorum shall be constituted by --
18.2.1 where all of the issued voting Shares are held by a single
Member -- that Member;
18.2.2 where all of the issued Shares are held by a Holding
company - the person appointed to act as the
representative of the Holding company at general meetings
of the Company pursuant to Clause 21 and the Law; and
18.2.3 where all of the issued voting Shares are held by two or
more Members-- 2 Members.
18.3 If within 15 minutes from the time appointed for a general meeting
a quorum is not present--
18.3.1 the meeting if convened upon the requisition of Members
shall be dissolved; or
18.3.2 in any other case --
18.3.2.1 it shall stand adjourned to the same day, in the
next week, at the same time and place; and
18.3.2.2 if at the adjourned meeting a quorum is not
present within 15 minutes from the time
appointed for the meeting, the meeting shall be
dissolved.
18.4 The Chairperson (if any) elected by the Directors shall chair each
general meeting of the Company or if there is no such Chairperson,
or if at any meeting he is not present within 15 minutes after the
time appointed for holding the meeting or is unwilling to act, the
persons present and entitled to vote at a meeting shall choose
some one of their number to chair the meeting.
18.5 The Chairperson may, with the consent of any meeting at which a
quorum is present (and shall if so directed by the meeting),
adjourn the meeting from time to time and from place to place but
so that --
18.5.1 no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting
from which the adjournment took place;
18.5.2 when a meeting is adjourned for 10 days or more at any one
time, notice of the adjourned meeting shall be given as in
the case of an original meeting;
<PAGE>
34
18.5.3 save as aforesaid it shall not be necessary to give any
notice of an adjourned meeting or of the business to be
transacted at an adjourned meeting.
18.6 At any general meeting a resolution put to the vote of the meeting
shall be decided on a show of hands unless a poll is (before or on
the declaration of the results of the show of hands) demanded --
18.6.1 by the Chairperson; or
18.6.2 by at least three Members present having the right to vote
at the meeting; or
18.6.3 by any Member or Members present and representing not less
than 5% of the votes that may be cast on the resolution
on a poll
and unless a poll is so demanded, a declaration by the Chairperson
that a resolution has on a show of hands been carried or carried
unanimously or by a particular majority or lost and an entry to
that effect in the book containing the minutes of the proceedings
of the Company shall be conclusive evidence of the fact without
proof of the number or proportion of the votes recorded in favour
of or against the resolution.
18.7 The demand for a poll may be withdrawn.
18.8 If a poll is duly demanded it shall be taken in such manner and
either at once or after an interval or adjournment or otherwise as
the Chairperson directs and the result of the poll shall be the
resolution of the meeting at which the poll was demanded but a
poll demanded on the election of a Chairperson or on a question of
adjournment shall be taken forthwith.
18.9 In the case of an equality of votes whether on a show of hands or
on a poll the Chairperson of the meeting at which the show of
hands takes place or at which the poll is demanded shall not be
entitled to a second or casting vote.
19. VOTES OF MEMBERS
19.1 Subject to any special rights or restrictions imposed on or
attaching to any Shares or classes of Shares by the Directors on
the issue of those Shares or classes of Shares, each Member
present who holds one or more voting Shares shall be entitled to
vote at meetings of Members and on a show of hands every such
Member shall have one vote and on a poll every such Member shall
have one vote for each such Share he holds.
19.2 In the case of joint holders the vote of the Member whose name
appears first in the Register shall be accepted to the exclusion
of the votes of the other joint holders.
19.3 A Member who is of unsound mind or is a person whose person or
estate is liable to be dealt with in any way under any relevant
law relating to mental health may vote whether on a show of hands
or on a poll by his committee or
<PAGE>
35
by the trustee or by such other person as properly has the
management of his estate and any such committee trustee or other
person may vote by proxy or attorney.
19.4 A Member who is an infant may vote by either of his parents or by
his guardian upon such evidence being produced of the relationship
or of the appointment of the guardian as the Directors may from
time to time properly require.
19.5 No Member shall be entitled to vote at any general meeting unless
all calls and other sums presently payable by him to the Company
in respect of Shares in the Company have been paid.
19.6 No objection shall be raised to the qualification of any voter
except at the meeting or adjourned meeting at which the vote
objected to is given or tendered and every vote not disallowed at
such meeting shall be valid for all purposes. Any such objection
made in due time shall be referred to the Chairperson of the
meeting whose decision shall be final and conclusive.
20. PROXIES
20.1 Each Member of the Company entitled to attend and cast a vote at a
general meeting may appoint an individual as his proxy to attend
and vote for that Member at the general meeting.
20.2 The instrument appointing a proxy shall be in writing under the
hand of the appointor or of his attorney duly authorized in
writing or, if the appointor is a corporation, in accordance with
the constitution of that corporation.
20.3 A proxy need not be a Member of the Company.
20.4 The instrument appointing a proxy and the power of attorney or
other authority (if any) under which it is signed or a notarially
certified copy of that power or authority must be received by the
Company not less than 48 hours before the time for holding the
general meeting or adjourned general meeting at which the person
named in the instrument proposes to vote (unless a shorter period
is specified in the notice of general meeting to which the proxy
relates) and in default the instrument of proxy shall not be
treated as valid unless otherwise determined by the Chairperson.
20.5 For the purposes of Clause 20.4, an instrument appointing a proxy
must be received by the Company at any of the following -
20.5.1 the office of the Company; or
20.5.2 a fax number at the office of the Company; or
20.5.3 a place, fax number or electronic address specified for
that purpose in the notice of meeting.
<PAGE>
36
20.6 An instrument appointing a proxy may be in any usual form or in
any other form which the Directors may approve and if a Member is
entitled to cast two or more votes at the meeting, that Member may
appoint not more than two proxies.
20.7 Where a Member appoints two proxies, the appointment may specify
the proportion or number of votes that the proxy may exercise.
20.8 Any instrument appointing a proxy confers authority to demand or
join in demanding a poll.
21. BODY CORPORATE REPRESENTATIVE
21.1 Any body corporate which is a Member of the Company may by
resolution of its directors or other governing body appoint an
individual (whether a Member of the Company or not) whom it thinks
fit as its representative to exercise all or any of the powers
that the body corporate may exercise -
21.1.1 at general meetings of the Company or of any class of
Members of the Company; or
21.1.2 at meetings of creditors or debenture holders; or
21.1.3 in respect of resolutions to be passed without meetings.
21.2 The person so appointed shall be entitled to exercise the same
powers on behalf of the body corporate which he represents as that
body corporate could exercise (including the giving of any consent
and the signing of any resolution, appointment or other document)
if it were a natural person and also to exercise all the powers
mentioned in Clause 21.1 as are conferred by the instrument of
appointment.
21.3 A certificate executed in accordance with the constitution of the
body corporate, accompanied by such other evidence as the
Directors may properly require of any appointment of a
representative, must be received by the Company before the
commencement of the meeting or adjourned meeting at which the
person named in the certificate proposes to vote and, in the case
of a resolution to be determined on without any general meeting,
before the resolution or other document or statement in which the
resolution is set out is circulated for signing by the Members of
the Company entitled to vote on the resolution.
21.4 For the purposes of Clause 21.3, a certificate of appointment must
be received by the Company at any of the following -
21.4.1 the office of the Company; or
21.4.2 a fax number at the office of the Company; or
21.4.3 a place, fax number or electronic address specified for
that purpose in the notice of meeting.
<PAGE>
37
22. ATTORNEY OF MEMBERS
22.1 Any Member may appoint an attorney (whether a Member or not) to
act for him on his behalf at all general meetings of the Company
at which he is not present himself and to give any consent and
sign any appointment or resolution or other document which the
Member himself could give or sign.
22.2 Any appointment shall be made by power of attorney duly executed
by the Member and attested by one or more witness or witnesses or,
if the Member is a body corporate, then in accordance with its
constitution and the power of attorney must be received by the
Company not less than 48 hours before the attorney becomes
entitled to act thereunder (unless a shorter period is specified
in the notice of general meeting to which the power of attorney
relates) accompanied by such evidence of its due execution and
non--revocation as the Directors require.
22.3 For the purposes of Clause 22.2, the power of attorney must be
received by the Company at any of the following -
22.3.1 the office of the Company; or
22.3.2 a fax number at the office of the Company; or
22.3.3 a place, fax number or electronic address specified for
that purpose in the notice of meeting.
22.4 The power of attorney may be in any usual form or in any other
form which the Directors may approve.
22.5 The attorney so appointed may, during the absence of the Member
and while the power of attorney remains unrevoked, attend at and
take part in the proceedings and vote at all general meetings of
the Company and demand or join in the demand for a poll in the
same manner as the Member himself could do if personally present
and may give any consent and sign any appointment or resolution or
other document which the Member himself could give or sign.
22.6 A vote given or act done in accordance with the terms of an
instrument of proxy or attorney shall be valid notwithstanding the
previous death or mental incapacity of the principal or revocation
of the instrument or of the authority under which the instrument
was executed or the transfer of the Share in respect of which the
instrument is given if the Company has not received written notice
of such death, incapacity, revocation or transfer before the
commencement of the meeting or adjourned meeting at which the
instrument is used.
<PAGE>
38
23. MEETINGS OF CLASSES OF SHAREHOLDERS
At every separate meeting of holders of Shares of any class the
provisions of this Constitution relating to general meetings shall,
with such adaptations as are necessary, apply but so that (subject to
the provisions of Clause 8.1) --
23.1 the necessary quorum shall be two Members holding between them a
majority of the issued Shares of the class; or
23.2 where only one Member is the holder of Shares of the class - that
Member present shall for all purposes constitute a quorum; and
23.3 any holder of Shares of the class present at the meeting may
demand a poll.
24. DIRECTORS
24.1 The number of the Directors shall be not less than five comprising
-
24.1.1 an independent Chairperson;
24.1.2 the Managing Director appointed pursuant to Clause 26;
24.1.3 two persons appointed by Preferred Holders; and
24.1.4 one person appointed by the Founding Shareholder.
24.2 The Company may from time to time by resolution passed at a
general meeting, or by resolution passed without a meeting, fix
the number of Directors or increase or reduce the number of
Directors (but so that the number shall not be less than the
minimum number required by Clause 24.1 or the Law) and may also
determine in what rotation (if any) the increased or reduced
number is to go out of office.
24.3 Each Director shall hold office until he dies, or vacates office
in accordance with the provisions of Clause 25.1, or the term for
which he is appointed or elected expires as provided in this
Constitution.
24.4 The Company may, subject to Clause 24.1, by resolution --
24.4.1 appoint a person to be a Director;
24.4.2 remove a Director;
24.4.3 appoint another person as a Director in place of any
Director who dies, is removed or vacates office pursuant
to the provisions of Clause 25.1; and
24.4.4 may appoint additional Directors.
24.5 The Directors shall have power at any time and from time to time
to appoint any person to be a Director either to fill a casual
vacancy, or as an addition
<PAGE>
39
to the existing Directors, but so that the total number of
Directors shall not at any time exceed the number fixed in
accordance with this Constitution.
24.6 If a person who is the only Director and the only Member of the
Company -
24.6.1 dies; or
24.6.2 vacates office pursuant to the provisions of Clauses
25.1.2 or 25.1.4
and a personal representative or trustee is appointed to
administer the person's estate or property then (subject to the
provisions of the Law) the personal representative or trustee (as
the case may be) shall have the power to appoint a person as the
Director of the Company or to appoint themselves to that office.
24.7 No Share qualification shall be required of a Director.
24.8 A Director may hold any other office or place of profit in the
Company in conjunction with his directorship and may be appointed
thereto upon such terms as to remuneration, tenure of office and
otherwise as may be arranged by the Directors.
24.9 The Directors shall be paid out of the funds of the Company by way
of remuneration for their services such sum as the Directors may
from time to time determine. The Directors shall also be entitled
to be paid any outlay or expenses properly incurred by them on
behalf of the Company in attending meetings of the Directors or of
any committee of Directors or general meetings of the Company and
in connection with the business of the Company as the Directors
may from time to time determine.
24.10 If any Director being willing shall be called upon to perform
extra services or to make any special exertions in going from his
usual residence or otherwise for any of the purposes of the
Company, the Company may remunerate the Director for so doing
either by a fixed sum or by a percentage of profits or otherwise
as may be determined by the Directors and such remuneration may be
either in addition to or in substitution for his or their
remuneration as herein provided.
25. DISQUALIFICATION OF DIRECTORS
25.1 The office of Director shall be vacated if the Director --
25.1.1 ceases to be a Director pursuant to any provision of the
Law; or
25.1.2 becomes bankrupt or makes any arrangement or composition
with his creditors generally; or
25.1.3 becomes prohibited from being a Director by reason of any
order made under the Law; or
<PAGE>
40
25.1.4 becomes of unsound mind or a person whose person or estate
is liable to be dealt with in any way under any relevant
law relating to mental health; or
25.1.5 resigns his office by notice in writing to the Company; or
25.1.6 is removed from office pursuant to this Constitution.
25.2 Notwithstanding any rule of law or equity to the contrary but
subject to the provisions of the Law concerning disclosure of
interests by Directors --
25.2.1 a Director shall not be disqualified by his office from
contracting with the Company either as vendor, purchaser
or otherwise or from being employed or acting in any
capacity professionally or otherwise by or on behalf of
the Company;
25.2.2 if a Director has an interest in a contract or arrangement
or a proposed contract or arrangement with the Company
(other than as a Member of the Company) and the Director
discloses the nature and extent of the interest at a
meeting of Directors -
25.2.2.1 the Director may vote on whether the Company
enters into the contract or arrangement; and
25.2.2.2 the contract or arrangement may be entered into;
and
25.2.2.3 the Director may vote on matters involving the
contract or arrangement; and
25.2.2.4 if the disclosure is made before the contract or
arrangement is entered into -
25.2.2.4.1 the Director may retain benefits
under the contract or arrangement
even though the Director has an
interest in the contract or
arrangement; and
25.2.2.4.2 the Company cannot avoid the
contract merely because of the
existence of the interest;
25.2.3 it shall be the duty of the Secretary to record every
declaration under this Clause 25.2 in the minutes of the
meeting but failure to record such declaration shall not
in any way affect the validity of such contract or
arrangement; and
25.2.4 a Director may sign any contract or other document
relating to any contract or arrangement in which he is in
anyway interested (whether or not under common seal of the
Company).
25.3 The provisions of Clause 25.2.2 shall not apply to a Director -
25.3.1 if he is the only Director of the Company and is or
represents the only Member of the Company; or
<PAGE>
41
25.3.2 if the interest of that Director consists only of being a
Member or creditor of a corporation that has an interest
in a contract or arrangement with the Company if that
interest may be regarded as not being a material interest;
or
25.3.3 where the contract or arrangement relates to a loan to the
Company - that Director has guaranteed or joined in
guaranteeing the repayment of the loan or any part of the
loan; or
25.3.4 where the contract or arrangement has been or will be made
with or for the benefit of or on behalf of a related body
corporate - that Director is a director of that related
body corporate.
26. MANAGING DIRECTOR
26.1 The Directors may from time to time appoint one or more of their
body to the office of Managing Director for such period and on
such terms as they think fit and subject to the terms of agreement
entered into in any particular case may revoke any such
appointment.
26.2 A Director appointed as Managing Director shall not, while holding
that office, be subject to retirement by rotation or be taken into
account in determining the rotation of retirement of Directors but
a person ceases to be a Managing Director if he ceases to be a
Director.
26.3 A Managing Director shall subject to the terms of any agreement
entered into in any particular case receive such remuneration
(whether by way of salary commission or participation in profits
or partly in one way and partly in another) as the Directors may
determine.
26.4 The Directors may entrust to and confer upon a Managing Director
any of the powers exercisable by them upon such terms and
conditions and with such restrictions as they may think fit and
either collaterally with or to the exclusion of their own powers
and may from time to time revoke withdraw alter or vary all or any
of those powers.
27. ALTERNATE OR SUBSTITUTE DIRECTORS
27.1 Any Director may, with the approval of the other Directors,
appoint any person (whether a Member of the Company or not) to be
an alternate or substitute Director in his place during such
period as he thinks fit.
27.2 Any person while he so holds office as an alternate or substitute
Director shall be entitled to notice of meetings of the Directors
and to attend and vote thereat accordingly and to exercise all the
powers of the appointor in his place.
27.3 An alternate or substitute Director shall ipso facto vacate office
if his appointor vacates office as a Director or removes the
appointee from office.
<PAGE>
42
27.4 Any appointment or removal under this Clause 27 shall be effected
by notice in writing to the Company and to the person concerned
under the hand of the Director who makes the appointment or
removal.
28. POWERS AND DUTIES OF DIRECTORS
28.1 The business of the Company shall be managed by the Directors who
may exercise all the powers of the Company that are not by the Law
or by this Constitution required to be exercised by the Company in
general meeting subject nevertheless to any provision of this
Constitution and to the provisions of the Law.
28.2 No regulation made by the Company in general meeting shall
invalidate any prior act of the Directors which would have been
valid if that regulation had not been made.
28.3 Without limiting the generality of Clause 28.1 --
28.3.1 the Directors may in addition to all other general and
special powers possessed by them from time to time borrow
in the name and for all or any of the purposes of the
Company or in connection with its business any sum or sums
of money for such period and at such rate or rates of
interest and otherwise upon such terms and conditions as
the Directors may think fit and so that --
28.3.1.1 any sum or sums of money so borrowed may be
raised or secured by mortgage charge or pledge
of the whole or any part of the real or personal
estate revenues property undertaking choses in
action debts or effects of the Company including
unpaid calls and uncalled capital or by deposit
receipts debentures debenture stock bonds trusts
deeds personal covenant or otherwise as the
Directors may from time to time think fit
without such security;
28.3.1.2 every such mortgage charge or other security may
be in such form and contain such powers of sale
and other powers trusts and provisions and may
be accompanied by such collateral further and
other security as the Directors may think fit;
28.3.2 the Directors may pay out of the Company's funds all
expenses of the promotion, formation and registration of
the Company and the vesting in it of the assets acquired
by the Company; and
28.3.3 the Directors may from time to time by power of attorney
appoint any company firm or person or body of persons
whether nominated directly or indirectly by the Directors
to be the attorney or attorneys of the Company for such
purposes and with such powers authorities and discretions
(not exceeding those vested in or exercisable by the
Directors under this Constitution) and for
<PAGE>
43
such period and subject to such conditions as they may
think fit and any such powers of attorney may contain such
provisions for the protection and convenience of persons
dealing with any such attorney as the Directors may think
fit and may also authorise any such attorney to delegate
all or any of the powers authorities and discretions
vested in him.
29. PROCEEDINGS OF DIRECTORS
29.1 The Directors shall meet at least nine times in each year for the
dispatch of business and may adjourn and otherwise regulate their
meetings as they think fit using any technology consented to from
time to time by all the Directors.
29.2 Questions arising at any meeting shall be decided by a majority of
votes cast by Directors entitled to vote.
29.3 The Chairperson shall have a deliberative vote but not a second or
casting vote.
29.4 A Director may and the Secretary on the requisition of a Director
shall at any time summon a meeting of the Directors.
29.5 Subject to the provisions of Clause 29.15 the quorum necessary for
transaction of the business of the Directors may be fixed by the
Directors and unless so fixed shall be three, one of whom must be
an appointee of the Preferred Holders.
29.6 In the case of a meeting of the Directors held in a State in which
any Director or Directors are not usually resident, it shall not
be necessary to give notice of such meetings to such Director or
Directors and the failure to give such notice shall not invalidate
the acts or proceedings of the Board done or carried out in the
absence of such Director or Directors.
29.7 Unless the Directors in any case otherwise determine the
provisions contained in Clauses 29.17 or 36 (as the case may be)
shall apply to the giving of notice pursuant to the provisions of
Clause 29.6.
29.8 The continuing Directors or Director may act notwithstanding any
vacancy in their body but if and so long as their number is
reduced below the number fixed pursuant to this Constitution as
the minimum number of Directors, the continuing Directors or
Director may act in the event of an emergency or for the purpose
of summoning a general meeting of the Company but for no other
purpose.
29.9 The Directors may elect a Chairperson of their meetings and
determine the period for which he is to hold office but if no
Chairperson is elected or if at any meeting the Chairperson is not
present within 15 minutes after the time appointed for holding the
meeting or declines to act, the Directors present may choose one
of their number to be Chairperson of the meeting.
<PAGE>
44
29.10 The Directors may delegate any of their powers to a committee of
Directors. Any committee so formed must exercise the powers
delegated to it in accordance with any direction of the
Directors.
29.11 A committee may elect a Chairperson of its meetings but if no
Chairperson is elected or if at any meeting the Chairperson is
not present within 15 minutes after the time appointed for
holding the meeting or declines to act, the Members of that
committee present may choose one of their number to be
Chairperson of the meeting.
29.12 A committee may meet and adjourn as it thinks proper. Questions
arising at any meeting of a committee shall be determined by a
majority of votes of the Members of such committee present and
the Chairperson shall have a deliberative but not second or
casting vote.
29.13 The Directors may delegate any of their powers to one of their
number who shall, in the exercise of the powers so delegated,
conform to any regulations which may be imposed upon him by the
Directors and receive such remuneration as the Directors may
determine.
29.14 All acts done by any meeting of the Directors or of a committee
of Directors or by any person acting as a Director shall,
notwithstanding that it is afterwards discovered that there was
some defect in the appointment of any Director or person so
acting or that they or any of them were disqualified, be as
valid as if every Director or other person had been duly
appointed and was qualified to be a Director.
29.15 A resolution in writing signed --
29.15.1 where the Company has only one Director -- by that
Director; and
29.15.2 where the Company has two or more Directors -- by all
the Directors for the time being entitled to attend and
vote on the resolution
shall be as valid and effectual as if it had been passed at a
meeting of the Directors duly convened and held.
29.16 Any resolution passed in accordance with the provisions of
Clause 29.15 may consist of identical copies of the document
recording the resolution and accompanying information, each
signed by one or more Directors.
29.17 For the purpose of this Constitution the contemporaneous linking
together by telephone or by such other method of audio or audio
visual communication system of a number of the Directors not
less than the quorum specified in Clause 29.5 whether or not any
one or more of the Directors is out of Australia shall
constitute a meeting of the Directors and all the provisions in
this Constitution as to meetings of the Directors shall apply to
such meetings subject to the following conditions namely --
29.17.1 all the Directors for the time being entitled to
receive notice of a meeting of the Directors shall be
entitled to notice of a meeting by telephone or by such
other method of audio or audio visual
<PAGE>
45
communication system and to be linked by telephone or
such other audio or audio visual communication system
for the purposes of such meeting;
29.17.2 each of the Directors taking part in the meeting by
telephone or by such other method of audio or audio
visual communication system must be able to hear each
of the other Directors taking part at the commencement
of the meeting; and
29.17.3 at the commencement of the meeting each Director must
acknowledge his presence for the purpose of a meeting
of the Directors of the Company to all other Directors
taking part.
29.18 A notice of a meeting of Directors may be given by telephone or
by such other method of audio or audio visual communication
system as the Directors may from time to time determine or as
provided in Clause 36.
29.19 For the purposes of Clause 29.17 a Director may not leave the
meeting by disconnecting his telephone or such other audio or
audio visual communication system unless he has previously
obtained the express consent of the Chairperson of the meeting
and a Director shall be conclusively presumed to have been
present and to have formed part of the quorum at all times
during the meeting unless he has previously obtained the express
consent of the Chairperson to leave the meeting as aforesaid.
29.20 A minute of the proceedings at meetings convened by telephone or
by such other method of audio or audio visual communication
system shall be sufficient evidence of such proceedings and of
the observance of all necessary formalities if certified to be a
correct minute by the Chairperson of the meeting.
30. SECRETARY
One or more Secretaries shall in accordance with the Law be appointed
as Secretary or Secretaries of the Company by the Directors for such
term at such remuneration and upon such conditions as they may think
fit and any Secretary so appointed may be removed by them.
31. MINUTES
31.1 The Directors shall cause minutes to be made --
31.1.1 of all appointments of officers;
31.1.2 of the names of the Directors present at each meeting
of the Directors and of any committee of the
Directors;
<PAGE>
46
31.1.3 of all resolutions and proceedings at all meetings of
Members of the Company and of the Directors and of
committees of Directors and of all resolutions
determined on without meetings; and
31.1.4 of all other matters required by the Law.
31.2 Except in the case of documents deemed to constitute minutes in
accordance with the provisions of the Law and resolutions signed
in accordance with the provisions of Clauses 17.6 and 29.15, all
minutes shall be signed by the Chairperson of the meeting at
which the proceedings were held or by the Chairperson of any
succeeding meeting.
32. SEAL AND EXECUTION OF DOCUMENTS
32.1 The Company may have a common seal.
32.2 The Directors shall provide for the safe custody of the common
seal of the Company (and if they think fit of a Share seal which
is hereby authorized in accordance with the Law) which shall
only be used with the authority of the Directors and every
instrument to which the seal is affixed shall be signed by a
Director or by some other person or persons appointed by the
Directors to attest the affixing of the common seal.
32.3 All documents which of legal necessity need not be under common
seal and which the Company is capable in law of entering into
shall be legally binding on the Company if signed by one of the
Directors or by some other person or persons appointed by the
Directors in that behalf.
32.4 Promissory notes cheques or other negotiable instruments shall
be signed by or on behalf of the Company by one of the Directors
or in such other manner as the Directors may from time to time
determine.
33. DIVIDENDS
33.1 The profits of the Company, subject to any special rights
relating thereto created or authorized by this Constitution and
subject to the provisions of this Constitution as to reserves
and provisions, shall be divisible among the Members in such
proportion as the Directors may from time to time determine
(subject always to the terms on which the Shares in the Company
are issued) but so that all Dividends shall be paid according to
the amounts paid up on the Shares of the class in respect
whereof the Dividend is paid.
33.2 The Directors may (subject always to the terms on which the
Shares in the Company are issued) from time to time determine
that a Dividend is payable to the holders of one class of Shares
to the exclusion of any other class of Shares and may fix the
amount and the time for payment and the method of payment.
<PAGE>
47
33.3 In making a determination that a Dividend is payable to the
holders of any class of Shares, the Directors shall not be bound
to consider the proportion of the paid up capital or
Shareholding of any class of Shares in relation to the total
paid up capital or Shareholding in the Company.
33.4 No Dividend shall be paid otherwise than out of profits nor bear
interest against the Company.
33.5 No amount paid on a Share in advance of calls shall while
carrying interest be treated for the purposes of Dividend as
paid up on the Share.
33.6 If several persons are registered as joint holders of any Shares
any one of them may give effectual receipts for any Dividends or
other moneys payable on or in respect of the Share.
33.7 Subject to the provisions of Clause 33.2, any Dividend may be
paid by cheque, sent through the post to the registered address
of the Member or person entitled thereto or in the case of joint
holders to any one of such joint holders at his registered
address, or to such person and such address as the Member or
person entitled or such joint holders (as the case may be) may
direct.
33.8 For the purposes of Clause 33.7 every cheque shall be made
payable to the person to whom it is sent or bearer and crossed
"not negotiable" or to such other person as the Member or person
entitled or such joint holders (as the case may be) may direct.
34. RESERVES AND PROVISIONS
34.1 The Directors may set aside out of the profits of the Company
such sums as they think proper as reserves which shall at the
discretion of the Directors be applicable for any purpose to
which the profits of the Company may be properly applied and
pending any such application may at the like discretion either
be employed in the business of the Company or be invested in
such investments (other than Shares of the Company) as the
Directors may from time to time think fit.
34.2 The Directors may, without placing the same to reserve, carry
forward any profits which they may think prudent not to divide.
34.3 The Directors may, subject to the Law, from time to time pass a
resolution to the effect that any money investments or other
assets available for distribution as Dividends but not required
for the payment or provision of any fixed preferential Dividend
whether standing to the credit of any reserve or provision or
not and --
34.3.1 forming part of the undivided profits of the business
of the Company; or
34.3.2 representing profits arising from an ascertained
accretion to capital or from a revaluation of the
assets of the Company; or
<PAGE>
47
34.3.3 arising from the realisation of any capital assets of
the Company or any investments representing the same --
shall be capitalised and, subject to the terms on which the
Shares in the Company are issued, shall be distributed amongst
the holders of all of the Shares or any one or more classes of
Shares as the Directors think fit without making a distribution
among the holders of other classes of Shares or shall be
distributed in different proportions among the holders of
different classes of Shares.
34.4 For the purposes of Clause 34.3 --
34.4.1 a resolution may declare that all or any part of the
capitalised fund shall be applied in paying up in part
or in full any Shares or debentures of the Company and
that such application shall be accepted by the Members
entitled to Share in the distribution in part or full
satisfaction of their respective interests in the
capitalised sum;
34.4.2 when any such resolution has been passed, the Directors
may issue a sufficient number of Shares or may issue a
sufficient amount of debentures to the Members entitled
to Share in the distribution in satisfaction of their
respective interests in the capitalised sum and as
nearly as may be in proportion to the amounts paid up
on the Shares of the relevant class or classes held by
them; and
34.4.3 prior to such issue the Directors may authorize any
person on behalf of the holders of the Shares to whom a
distribution is to be made to enter into any agreement
with the Company for the issue to them of Shares to be
credited as fully paid up or partly paid up and in
satisfaction of the bonus or for the issue to them of
debentures in satisfaction of the bonus any agreement
made under such authority shall be effective.
34.5 For the purposes of giving effect to any resolution for
capitalisation and distribution of undivided profits or other
moneys or for satisfaction of a Dividend by distribution of
Shares or other assets of the Company, the Directors may --
34.5.1 settle as they think expedient any difficulty that may
arise in making the distribution and, in particular,
they may determine that fractions of less value than $1
may be disregarded in order to adjust the rights of all
parties;
34.5.2 fix the distribution value of any specific assets;
34.5.3 determine the amount of any cash payments to be made to
any Members upon the footing of the value so fixed;
34.5.4 vest any such cash or specific assets in trustees for
the persons entitled to the capitalised fund or
Dividend (as the case may be) upon such trusts as may
seem expedient to the Directors; and
<PAGE>
49
34.5.5 where necessary, file a proper contract in accordance
with any statutory requirements and appoint any person
to sign the contract on behalf of the persons entitled
to the capitalised fund or Dividend (as the case may
be).
35. ACCOUNTS
The Directors shall keep proper books of account and shall distribute
copies of financial reports as required by the Law and shall from time
to time determine whether and to what extent and at what times and
places and under what conditions or regulations the records, accounts
and books of the Company or any of them shall be open to the inspection
of Members (not being Directors) and no Member (not being a Director)
shall have any right of inspecting any record, account, book or paper
of the Company except as conferred by statute or authorized by the
Directors or by the Company in general meeting.
36. NOTICES
36.1 A notice may be given by the Company to any Member -
36.1.1 personally; or
36.1.2 by sending it by post to him at his registered address
or to the address (if any) supplied by him to the
Company for the giving of notices to him; or
36.1.3 by sending it to the fax number or electronic address
(if any) nominated by the Member; or
36.1.4 by any other means determined by the Directors in
accordance with the provisions of Clause 36.3.
36.2 Where a notice is sent by post, service of the notice shall be
deemed to be effected by properly addressing prepaying and
posting a letter containing the notice and to have been
effected, in the case of a notice of a meeting, on the day after
the date of its posting and in any other case, at the time at
which the letter would be delivered in the ordinary course of
post. A notice of meeting sent by fax or other electronic means
is taken to be given on the business day after it is sent.
36.3 Notwithstanding the provisions of Clause 36.1, if the Directors
shall so determine, a notice may be given by any other means as
shall ensure expeditious receipt of the notice and service of
the notice shall be deemed to be effected if the mode of service
of the notice is properly addressed and paid for and lodged for
delivery or transmission with a competent authority or body and
to have been effected at the time at which in the ordinary
course that mode of service of the notice would be delivered.
<PAGE>
50
36.4 A notice may be given by the Company to the joint holders of a
Share by giving the notice to the joint holder first named in
the Register in respect of the Share.
36.5 A notice may be given by the Company to the persons entitled to
a Share in consequence of the death or bankruptcy of a Member by
sending it through the post in a prepaid letter addressed to
them by name or by the title of representatives of the deceased
or assignee of the bankrupt or by any like description at the
address if any supplied for the purpose by the persons claiming
to be so entitled or (until such an address has been so
supplied) by giving the notice in any manner in which the same
might have been given if the death or bankruptcy had not
occurred.
36.6 Notice of every general meeting shall be given in any manner
hereinbefore authorized to --
36.6.1 every Member except those Members who have not supplied
to the Company an address for the giving of notices to
them;
36.6.2 every person entitled to a Share in consequence of the
death or bankruptcy of a Member who but for his death
or bankruptcy would be entitled to receive notice of
the meeting;
36.6.3 the auditor for the time being of the Company; and
36.6.4 such other persons as required by the Law.
36.7 No person other than as referred to in Clause 36.6 shall be
entitled to receive notices of general meetings.
37. WINDING UP
37.1 If the Company is wound up the liquidator may with the sanction
of a special resolution of the Company divide amongst the
Members in kind the whole or any part of the assets of the
Company (whether they consist of property of the same kind or
not) and may, for that purpose, set such value as he deems fair
upon any property to be so divided and may determine how the
division shall be carried out as between the Members or
different classes of Members.
37.2 The liquidator may with the sanction of a special resolution
vest the whole or any part of any such assets in trustees upon
such trusts for the benefit of the contributories as the
liquidator with the like sanction thinks fit but so that no
Member shall be compelled to accept any Shares or other
securities whereon there is any liability.
<PAGE>
51
38. INDEMNITY AND INSURANCE
38.1 Subject to the Law, the Company may indemnify a person who is or
has been an officer of the Company, to the full extent
permissible by law, out of the property of the Company against
all losses or liabilities to another person which any one of
them has or may sustain or incur as such an officer of the
Company or of a related body corporate in the proper performance
of their duties at law or pursuant to the Constitution
including, but not limited to, any liability for negligence or
for reasonable costs and expenses incurred --
38.1.1 in defending proceedings, whether civil or criminal, in
which either judgment is given in favour of the person
or in which the person is acquitted or there is a non
suit of the trial, or the proceeding is otherwise
discontinued, dismissed or stayed or withdrawn before
judgment; or
38.1.2 in connection with an application in relation to such
proceedings in which the Court grants relief to the
person under the Law; or
38.1.3 in connection with any administrative proceedings
relating to the person's position with the Company,
except proceedings which give rise to civil or criminal
prosecutions against that person in which judgment is
not given in that person's favour or in which that
person is not acquitted or which arise out of conduct
involving a lack of good faith.
38.2 The Company may indemnify a person who is or has been an officer
of the Company, to the full extent permissible by law, out of
the property of the Company against any liability to another
person (other than the Company or related body corporate) as
such an officer unless the liability arises out of conduct
involving a lack of good faith.
38.3 Subject to the Law, each officer is entitled to enforce against
the Company any indemnity conferred by Clauses 38.1 and 38.2 for
a period of seven years after the officer ceases for any reason
(including but not limited to death or disability but excluding
removal from office because of conduct involving lack of good
faith) to be an officer of the Company as if at all times during
that period the officer was an eligible officer of the Company
within the meaning of the Law (whether or not that is in fact
the case).
38.4 The Company may pay a premium for a contract insuring a person
who is or has been an officer of the Company and its related
bodies corporate against --
38.4.1 any liability incurred by that person as such an
officer which does not arise out of conduct involving a
willful breach of duty in relation to the Company or a
contravention of sections 232(5) or (6) of the Law; and
38.4.2 any liability for costs and expenses incurred by that
person in defending proceedings relating to that
person's position with the Company, whether civil or
criminal, and whatever their outcome.
<PAGE>
52
39. DEADLOCK
39.1 In the event of an equality of votes for and against
any resolution proposed or submitted at any meeting of
the Directors that resolution shall be put to a meeting
of the Company called and held for that purpose.
39.2 In the event of an equality of votes for and against
any resolution proposed or submitted at any meeting of
Members of the Company, then that that resolution or
the question to be determined thereby, whether it be or
concern an issue of law or fact or policy or management
of the Company or any other matter or question
concerning the affairs of the Company, shall be
submitted to the arbitration of two arbitrators (one of
whom shall be nominated by the Members voting for the
resolution and one by the Members voting against the
resolution) and their umpire, if the arbitrators shall
not be able to agree upon an award and any such
reference, shall be subject to the provisions of the
Commercial Arbitration Act (1984).
39.3 On the making of an award, each of the Members and
Directors of the Company shall (so far as he may
legally do so) call and hold or cause to be called and
held a meeting of the Company for the purpose of
passing any resolution or resolutions necessary to give
effect to the award of the arbitrators or their umpire
(as the case may be) and each of the Members and
Directors of the Company shall (so far as he may
legally do so) vote in favour of each and every such
resolution and shall do or concur in doing all acts and
things necessary to give effect to such award.
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
<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>
