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U.S SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
AXONYX INC.
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(Name of Small Business Issuer in Its Charter)
NEVADA 86-0883978
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
750 LEXINGTON AVE. SUITE 1400, NEW YORK, NEW YORK 10022
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(Address of Principal Executive Offices) (Zip Code)
(212) 688-4770 (PHONE) (212) 688-4843 (FAX)
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(Issuer's Telephone and Fax Number)
Securities to be registered under Section 12(b) of the Act.
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
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Securities to be registered under Section 12(g) of the Act:
COMMON STOCK $0.001 PAR VALUE
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(Title of Class)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
TABLE OF CONTENTS
A. THE COMPANY - INTRODUCTION AND EXECUTIVE SUMMARY
B. BUSINESS STRATEGY
C. AXONYX DRUG DISCOVERY PROGRAMS
D. THE INDUSTRY AND MARKET
E. FDA MATTERS
F. MARKETING AND SALES
G. PATENTS, TRADEMARKS, AND COPYRIGHTS
H. COMPETITION
I. EMPLOYEES
J. INDEPENDENT CONTRACTORS
K. CONSULTANTS
A. THE COMPANY - INTRODUCTION AND EXECUTIVE SUMMARY
(Axonyx Inc. undertook a two for one stock split with a record date of February
23, 1999 and a distribution date of March 5, 1999. All information on
outstanding securities of Axonyx gives effect to this stock split except where
specifically noted.)
GENERAL
Axonyx Inc. ("Axonyx" or the "Company") is engaged in the business of
identifying and acquiring novel post-discovery central nervous system (CNS) drug
candidates to advance through clinical development towards regulatory approval.
The Company is engaged in the business of acquiring patent rights and developing
CNS pharmaceutical compounds with significant potential market impact. The
Company has acquired worldwide exclusive patent rights to three main classes of
therapeutic compounds designed for the treatment of Alzheimer's Disease (AD),
Moderate Cognitive Impairment (MCI), and related diseases. The Company licensed
these patent rights from New York University (NYU) and, via a sublicense, from
the National Institutes of Health\National Institute on Aging (NIA) (the
"Licensors") and has an ongoing research and development relationship with both
Licensors.
Axonyx is developing its compounds under contract in laboratories at New
York University School of Medicine and, through a research and development
collaboration, with the NIA's laboratories and elsewhere. Axonyx intends to
develop corporate partnerships with established and well capitalized
pharmaceutical companies for the clinical development of some of its compounds
and for their production,
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commercialization and marketing. The Company itself does not currently maintain
any laboratory or research premises.
Axonyx has licensed a portfolio of CNS drugs that covers three distinct
therapeutic approaches that have all demonstrated activity in treating the
causes of AD in preclinical development. Each class of compounds has a different
target and represents a unique, innovative platform for the development of
pharmaceutical products for the diagnosis and treatment of AD.
The treatment of people with AD is a multi billion-dollar industry in the
United States alone and constitutes an extremely large potential market with an
unmet therapeutic need. Currently there are only two approved drugs that provide
at best marginal symptomatic relief for one aspect of AD. One of the Axonyx
compounds, Phenserine, an acetylcholinesterase inhibitor, has shown in
preclinical studies a potential therapeutic and safety profile superior to the
products currently on the market. Axonyx's two other lead product candidates,
Cymserine, a butyrylcholinesterase inhibitor, and the Amyloid Inhibiting
Peptides (AIPs), attack the disease in other inventive and effective ways,
representing potentially new platform technologies for the treatment of AD. The
Company expects to derive its revenues from patent sub-licensing fees, royalties
from pharmaceutical sales, appropriate milestone payments, and research and
development contracts.
The Company's executive offices are located at 750 Lexington Avenue, Suite
1400, New York, New York 10022, telephone number (212) 688-4770. It also
maintains offices at 1001 4th Avenue Plaza, Suite 3228, Seattle, Washington
98154, telephone number (206) 340-0211, and at 4041 State Highway 14, Stevenson,
Washington 98648, telephone number (509) 427-5132.
The Company's fiscal year end is December 31.
BACKGROUND
The predecessor of the Company, also named Axonyx Inc., was incorporated in
Delaware on September 16, 1996. Reference to Axonyx Inc. herein refers to the
historical Axonyx Inc., a Delaware company unless the context otherwise
requires. On December 28, 1998 Axonyx Inc. merged with Ionosphere, Inc., a
Nevada corporation incorporated on July 29, 1997. After the merger, Ionosphere,
Inc., the surviving Nevada corporation, changed its name to Axonyx Inc. On a
post merger basis, the business of Axonyx Inc. became the business of the
Company. The management and board of directors of Axonyx Inc. became the
management and directors of the consolidated company and shareholders of Axonyx
Inc. held 89.11% of the outstanding shares of Common Stock of the consolidated
company. See Item 6: Interests of Management and Others in Certain Transactions
for more details on the merger transaction.
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B. BUSINESS STRATEGY
Axonyx's plan is to: (1) identify, acquire and exploit rights to new
technologies and compounds relating to AD and other neurological disorders; (2)
enhance the value of those assets through further research and clinical testing;
(3) perform clinical studies towards regulatory approval and market its drugs
through profitable licensing agreements with major pharmaceutical companies; and
(4) work to develop other promising compounds in-house and in collaboration with
third parties such as its current Licensors at NYU and the NIA.
The Company's long term goal is to become a partially integrated
pharmaceutical company with capabilities in research, drug development, clinical
investigation, and regulatory affairs. Currently the Company does not maintain
any research or laboratory premises, utilizing instead such facilities on a
contractual or collaborative basis at academic and research institutions, as
well as Contract Research Organizations. Considering the commercialization
infrastructure necessary to effectively market its drug products, the Company
will seek joint ventures or collaborations with other pharmaceutical companies,
both domestically and outside the United States. The Company will seek corporate
partners who will be responsible for at least part of the clinical development,
regulatory approval, manufacturing and marketing of the drug product. Under such
an arrangement, the Company expects to receive certain up-front and
sub-licensing fees, ongoing research contracts, milestone payments, and
royalties on drug product sales.
C. AXONYX DRUG DISCOVERY PROGRAMS
Axonyx is pursuing three different types of products for the treatment of
AD and one for prion-related diseases. The AD targeted approaches include: (1)
Phenserine, an analog of physostigmine and a potent inhibitor of
acetylcholinesterase for which an Investigational New Drug application (IND) has
been filed, (2) a butyrylcholinesterase inhibitor which will be chosen from a
series of selectively acting compounds, the best studied of which is Cymserine,
and (3) compounds called Amyloid Inhibitory Peptides (AlPs) which may prevent
and reverse the formation of amyloid plaques in AD and in diseases of peripheral
amyloidosis. In addition to inhibiting key enzymes associated with neural
transmission, Phenserine and Cymserine appear to have the unique ability to
inhibit the formation of the beta-amyloid protein which is involved in plaque
formation. The Company is also conducting research on the diagnosis and
treatment of prion diseases such as Bovine Spongiform Encephalopathy using a
series of Prion Inhibitory Peptides (PIPs) which prevent and reverse the
formation of the toxic form of prions.
PROGRAM 1: INHIBITORS OF ACETYLCHOLINESTERASE AND BETA-AMYLOID PRECURSOR
PROTEIN (BETA-APP) FORMATION
Alzheimer's Disease is characterized by cognition impairments and partial
or total loss of memory. These impairments are caused by a loss of pre-synaptic
neurons of the
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cholinergic system of the brain and a loss of cortically-projecting neurons,
particularly to brain areas associated with memory and learning. The loss of
neurons results in a decreased synthesis and availability of acetylcholine, the
neurotransmitter involved in mediating these functions. The Company's most
advanced compound, Phenserine, is designed to selectively inhibit
acetylcholinesterase, the enzyme primarily responsible for degrading
acetylcholine at the neuronal synapse, thus increasing the availability of this
neurotransmitter. Phenserine has been shown to be a potent and selective
inhibitor of this enzyme in the rat brain and has the ability to increase memory
and learning over a wide therapeutic range in aged rats without causing toxic
side effects.
Phenserine also has the unusual ability to inhibit the formation of the
beta-amyloid precursor protein (beta APP), the source of the neurotoxic peptide
beta amyloid which is deposited in the brain and causes neuronal cell death.
These studies were conducted in neuroblastoma cell cultures and in one rat model
of amyloid formation in the brain. Additional animal studies will be conducted
to confirm and extend these findings since no other acetylcholinesterase
inhibitor tested to date appears to have this property. These results suggest
that Phenserine may have the ability to slow the progression of AD in addition
to providing symptomatic relief for the cognitive changes.
The Company is assessing the properties of other Phenserine analogs which
are potent inhibitors of acetylcholinesterase such as Tolserine, that may
ultimately prove to have certain advantages for use in AD, and Thiatolserine, a
compound whose characteristics are suitable for development as a transdermal
(skin patch) agent.
PROGRAM 2: INHIBITORS OF BUTYRYLCHOLINESTERASE AND BETA-AMYLOID PRECURSOR
PROTEIN (BETA-APP) FORMATION
One of the primary functions of butyrylcholinesterase is to metabolize
butyrylcholine and acetylcholine in the brain and peripheral tissues. This
enzyme was identified as a target for inhibition in AD since it terminated the
action of the neurotransmitter acetylcholine and is found in high concentration
in plaques taken from the brains of demented people. The Company is currently
characterizing a series of butyrylcholinesterase inhibitors to select a drug
candidate for development. The lead candidate, Cymserine, has been studied
extensively and has many of the characteristics desired for use in AD. Like
Phenserine, it has a dual mechanism of action in that it inhibits the
butyrylcholinesterase enzyme and the formation of beta-APP in cell culture and
in one rat model. Additional studies need to be conducted to confirm and extend
these important findings. Cymserine has also been shown to be highly active in
improving memory and learning in the aged rat. Axonyx appears to be the only
company with a patent position and lead compounds in this area of drug discovery
and development. Other compounds in the Cymserine series that may be pursued
include Thiacymserine, an agent that may be suitable for development in a
transdermal formulation.
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PROGRAM 3: AMYLOID INHIBITORY PEPTIDES (AIPS)
A key event in Alzheimer's Disease is the polymerization of beta amyloid
peptide into insoluble fibrous masses (fibrils) which are deposited as part of
the neurotoxic plaques that cause neuronal cell death. These changes play an
important role in the early pathogenesis of this disease. The Company's amyloid
inhibitory peptides (AIPs) have been designed to block polymerization in a
competitive manner by binding to the beta-sheet form of this protein.
Experiments IN VITRO with one of the AIPs inhibited the formation of fibrils,
caused disassembly of preformed fibrils and prevented neuronal cell death in
cell culture. In a rat model of amyloidosis an AIP reduced beta amyloid protein
deposition and completely blocked the formation of amyloid fibrils. In addition,
one of the AIPs has been shown to cause a significant reduction of established
amyloid deposits in the brains of rats. Current efforts are focused on
identifying a compound suitable for development for therapeutic use.
PROGRAM 4: PRION INHIBITORY PEPTIDES (PIPS)
There is increasing evidence to conclude that prions (proteinaceous
infectious particles) are the infectious agents that cause Bovine Spongiform
Encephalopathy (BSE), Creutzfeldt-Jakob Disease, new variant (CJDnv) and
possibly other transmissable spongiform encephalopathies. These diseases have
caused grave concern in Europe and the U.S. because of the potential for their
transmission to humans through the meat supply. These fatal neurodegenerative
disorders are characterized by deposits of protein into plaques in the brain.
Their infectivity is believed to be associated with an abnormal folding of the
prion protein which involves a conversion of the alpha-helical to the beta-sheet
form. The specific factors involved in this conversion are not presently known.
Prions of normal conformation are converted to the abnormal form by continuing
in contact with the abnormal prion.
The Company is developing a series of Prion Inhibitory Peptides (PIPs),
also referred to as beta-sheet breaker peptides, that interact IN VITRO with the
normal form of the prion to prevent its conversion to the abnormal form, and to
interact with the abnormal form to cause it to revert to a normal prion.
Incubation of the PIPs with toxic prions taken from BSE and CJDnv infected cows
caused a reversion of the toxic prions to the normal form. Experiments are in
progress to determine if the PIPs can eliminate toxic prions from infected
animals. These findings suggest a novel strategy for designing diagnostics and
therapeutic treatments for prion diseases.
PROGRAM 5: TREATMENT OF MILD COGNITIVE IMPAIRMENT
The biological and safety profile of Phenserine suggests that this drug
should be considered for treatment of individuals with mild to moderate
cognitive impairment and for age related loss of memory. The Company intends to
explore the opportunities for marketing Phenserine for these indications if the
human clinical results are consistent with the preclinical findings.
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D. THE INDUSTRY AND MARKET
A number of the major pharmaceutical companies have programs to develop
drugs for the treatment of Alzheimer's Disease and many of these drugs are
acetylcholinesterase inhibitors. Currently, Warner-Lambert (Tacrine) and
Eisai/Pfizer (Aricept) have marketed compounds of this type and they will soon
be joined by Sandoz (Exelon). Two biotechnology companies (Praecis and
Pharmaceutical Peptides, Inc.) appear to be pursuing the amyloid inhibitory
peptide approach similar in scope and direction as our Company but are not as
far advanced in their efforts. To our knowledge at this time, no other company
has a program to develop butyrylcholinesterase inhibitors. In the field of
prions, one company, Prionics, A.G., of Zurich, Switzerland, is focusing on the
development of diagnostic tests for animal use but does not have a program in
therapeutics for prion diseases.
Axonyx has proprietary patent rights that provide broad based protection
and cover superior pharmaceutical compounds based on unique mechanisms.
E. FDA MATTERS
The Company will seek to move its lead compounds through the FDA testing
and approval process. Phenserine is ready, upon approval of an Investigational
New Drug application (IND) by the FDA, to be clinically tested in humans. The
IND on Phenserine was filed by Axonyx in 1998. The IND for Phenserine has been
put on clinical hold by the FDA pending the correction of certain limited
deficiencies in the IND application. In response to the FDA's specifications
Axonyx has undertaken additional pharmacokinetic studies in animals, stability
studies on the drug formulation to be used in the Phase I clinical studies, and
is obtaining additional documentation describing the Good Manufacturing
Practices used in drug formulation. The Company expects to begin Phase I human
clinical trials for Phenserine in 1999. Cymserine is approximately one and a
half years behind Phenserine in preclinical development. The AIPs must undergo
approximately two more years of preclinical development before an IND can be
filed.
F. STRATEGIC ALLIANCES
The Company is providing funding for sponsored research at New York
University's School of Medicine for a four year period and has an exclusive
license to all inventions in the field arising from this research.
Research under the Company's licensing agreement has continued at the NIA,
furthering the preclinical development of Phenserine, Cymserine, and related
compounds. The Company is currently sponsoring one of the researchers at the NIA
facilities directed to this field of research.
In order to facilitate the recruitment and enrollment of patients into
clinical trials of the Company's pharmaceutical products, Axonyx has entered
into preliminary
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discussions with a number of institutions that operate centers
for the treatment of aged individuals. These institutions include the University
of Washington, Oregon Health Sciences, and the Aging and Dementia Center at New
York University, as well as a number of companies that operate senile dementia
centers providing long term residential care for elderly people suffering from
various forms of dementia including AD. It is contemplated that, subject to
appropriate ethical protection, through these institutions Axonyx will have
access to large groups of subjects for the Phase II and Phase III testing of its
drugs, that are prerequisites to FDA approval.
G. MARKETING AND SALES
The Company does not intend to manufacture or market any products it may
develop. The Company intends to license to, or enter into strategic alliances
with, larger pharmaceutical and veterinary companies that are equipped to
manufacture and/or market the Company's products through their well developed
distribution networks. The Company may license some or all of its worldwide
patent rights to more than one company to achieve the fullest development,
marketing and distribution of its products.
H. PATENTS, TRADEMARKS, AND COPYRIGHTS
The Company has obtained exclusive worldwide licenses to three patents
issued by the United States Patent and Trademark Office, and to two patent
applications pending in the United States. The Company is filing, in conjunction
with one of its Licensors, a patent application covering technology to be owned
jointly by both parties. The Company will continue to seek to obtain additional
licenses from universities and other research institutions.
On February 27, 1997, Axonyx Inc. obtained an exclusive worldwide license
from the NIA's parent agency, the Public Health Service to three patents from
the laboratory of Dr. Nigel Grieg and his collaborators via a sublicense with
CURE, LLC. Under the license agreement, Axonyx Inc. agreed to pay royalties to
CURE, LLC on future sales of products developed from the patented technologies,
as well as an up front fee, milestone payments and patent filing and prosecution
costs. The three patents cover Cymserine, the use of Phenserine, and related
acetylcholinesterase and butyrylcholinesterase compounds and have been issued in
the United States. Patent applications corresponding to these three patents have
been filed in Europe, Japan, Australia, and Canada. One pending patent
application directed to highly selective butyrylcholinesterase inhibitors
resulting from a collaboration between Dr. Hausman of Axonyx and Dr. Grieg of
the NIA concerning certain therapeutic uses for Cymserine has also been filed.
This patent application is jointly owned by the Company and the NIA. Additional
patent applications concerning new developments with Cymserine-related compounds
and Phenserine-related compounds are under preparation to be filed.
The Company obtained an exclusive worldwide license from NYU to two U.S.
patent applications and continuations thereof from the laboratory of Dr. Blas
Frangione at the New York University School of Medicine. Until January 31, 1999,
Dr. Claudio Soto
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was the lead scientist working on the projects covered by the patent
applications. Dr. Soto has recently contracted directly with the Company on a
temporary basis. See Item 1: Description of Business, subsection J: Independent
Contractors. Pursuant to the Research and License Agreement signed on April 1,
1997 with NYU, in addition to royalties on future sales of products developed
from the patented technologies, milestone payments and patent filing and
prosecution costs, Axonyx Inc. undertook to fund four years of research at the
NYU School of Medicine at Dr. Frangione's laboratory at a cost of $300,000 per
year. The Research and License Agreement also contains a provision by which
Axonyx Inc. undertakes to use its best efforts to raise an aggregate amount of
$5 million through private placements of equity securities prior to April 1,
1998 or, as an alternative, Axonyx Inc. can satisfy this requirement by entering
into a strategic alliance with a major pharmaceutical company with a market
valuation of $5 billion or more and by paying NYU $500,000 and agreeing to pay
milestone payments upon filing of an Investigational New Drug application and
approval of a New Drug Approval application equal to four times those
contemplated in the Research and License Agreement. On August 25, 1998, NYU and
Axonyx Inc. signed an amendment to the Research and License Agreement by which
the deadline for realization of the capitalization requirement or its
alternative was extended to April 1, 1999. In the event Axonyx Inc. is not
capitalized according to the capitalization requirement or does not meet the
requirements of the alternative, NYU may terminate the Research and License
Agreement upon written notice to Axonyx Inc. after which Axonyx Inc. would have
60 days to cure the default. As of the date of this Registration Statement,
Axonyx has raised an aggregate of $2,955,000 in private placements of equity
securities.
On April 3, 1997, Axonyx Inc. also signed Stock Option agreements with NYU
and Drs. Frangione and Soto under which Axonyx Inc. issued an aggregate of
600,000 shares of Common Stock (adjusted for stock splits) in October and
November 1997 in partial consideration for the worldwide exclusive patent
rights. See Item 6. Interests of Management and Others in Certain Transactions.
The NYU patent applications relate to the AIPs and PIPs. A patent
application covering the AIPs and PIPs has been filed in the United States,
Europe, Japan, Australia, and Canada. In addition, the Company has an exclusive
license to all inventions in the field arising from ongoing research.
The Company has not filed for any copyright or trademark protection to
date. The following is a breakdown of the issued and pending patents the Company
has acquired rights to.
ISSUED PATENTS
U.S. Patent #5,171,750 issued 12/15/92 for "Substituted Phenserines as Specific
Inhibitors of Acetylcholinesterase"
U.S. Patent #5,378,723 issued 1/3/95 for "Carbamate Analogs of Triophysovemine
and Method for Inhibiting Cholinesterases"
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U.S. Patent #5,409,948 issued 4/25/95 for "Method for Treating Cognitive
Disorders with Phenserine"
PATENTS PENDING
Note that there can be no assurance that corresponding patents will be
issued or that the scope of the coverage claimed in the following patent
applications will not be significantly reduced prior to any patent being issued.
NYU filed a patent application for "Anti-Amyloid Peptides in the Treatment
of Alzheimer's Disease and Other Amyloidosis Disorders" on June 6, 1995:
United States application entitled "PEPTIDES AND PHARMACEUTICAL
COMPOSITIONS THEREOF FOR TREATMENT OF DISORDERS OR DISEASES ASSOCIATED WITH
ABNORMAL PROTEIN FOLDING INTO AMYLOID OR AMYLOID-LIKE DEPOSITS." Applicants:
Claudio Soto, Marc Baumann, Blas Frangione.
The NIH/NIA filed U.S. Patent Application Serial No. 08/096,207, on July
26, 1993, entitled, "Phenylcarbamates of (-)-Eseroline, (-)-N1-Noreseroline and
(-)-N1-Benzylnoreseroline: Selective Inhibitors of Acetyl and/or
Butyrylcholinesterase." Inventors: Brossi et al (NIA and NIDDK). This patent
application is presently pending before the Board of Appeals of the U.S. Patent
Office and contains claims directed to three novel compounds:
(-)-2'-methylphenylcarbamoyl, N1-noreseroline, N1 bezylnoreseroline and their
pharmaceutically acceptable salts. Further claims are directed to pharmaceutical
compositions containing at least one of such compounds and methods of inhibiting
acetylcholinesterase or treating cholinergic diseases using such compounds.
The Company has filed in July of 1998 an additional application co-owned
with the NIA entitled "HIGHLY SELECTIVE BUTYRYLCHOLINESTERASE INHIBITORS FOR
ALZHEIMER'S DISEASE." This patent application seeks to protect certain
butyrylcholinesterase inhibitor compounds and important platform technology for
their use in the early diagnosis and treatment of AD, and related conditions.
I. COMPETITION
The Company competes with many large pharmaceutical companies that are
developing drug compounds similar to those being developed by the Company,
especially in the area of acetylcholinesterase inhibitors. Many large
pharmaceutical companies and smaller biotechnology companies have well funded
research departments concentrating on therapeutic approaches to AD. The Company
expects to encounter substantial competition for many of the principal
pharmaceutical products it is developing, especially in the area of
acetylcholinesterase inhibitors. However, the Company is not aware of any other
commercial research programs in the area of butyrylcholinesterase inhibitors,
and it
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believes that its patent protection covering the AIPs, if approved by the U.S.
Patent Office, will offer broad based protection and will provide the Company
with a significant competitive advantage to its competitors.
In the intense competitive environment that is the pharmaceutical industry,
those companies that complete clinical trials, obtain regulatory approval and
commercialize their drug products first will enjoy competitive advantages. The
Company believes that the compounds covered by its patent rights have unique
characteristics that may enable them, if fully developed, to have a substantial
market impact.
J. EMPLOYEES
The Company currently has four full time employees, all of whom are in
administration/management. In February 1999, the Company came to an oral
agreement with Linda Strascina under which Ms. Strascina will serve as
Director of Corporate Communications and Investor Relations for an annual
salary of $40,000, with a performance based bonus. See Item 5. Remuneration of
Directors and Officers: Employment Agreements for information on the Company's
employment arrangements with its officers and directors. The Company expects
to hire up to two more employees in 1999, in scientific management and support
staff.
K. INDEPENDENT CONTRACTORS
The Company has Professional Service Agreements with two scientists
involved in doing research related to the Company's patent rights on a temporary
basis. Dr. Claudio Soto, previously at the New York University Medical Center
doing research in collaboration with Dr. Blas Frangione on the AIPs and PIPs,
signed a Professional Services Agreement with the Company on February 1, 1999
for a period of three months. Dr. Soto is assisting the Company in developing
its research program for the AIPs.
Dr. Tadanobu Utsuki, a pharmaceutical chemist who is collaborating with Dr.
Nigel Greig at the NIA on research concerning Phenserine and related compounds,
signed a Professional Services Agreement with the Company on December 10, 1998
under which Dr. Utsuki was compensated in the amount of $9,250.00 for his
research for the period from October 1, 1998 to January 1, 1999. Dr. Utsuki
continues to do research for the Company on a month by month basis and is
compensated at the rate of $3,000 per month.
L. CONSULTANTS
The Company has and will continue to make use of outside consultants and
advisors in the development of its pharmaceutical products. The Company has
entered into arrangements with eight consultants or advisors, five of whom sit
on the Company's Scientific Advisory Board.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's operations are conducted from its offices in New York, New
York, Seattle, Washington and Stevenson, Washington. The Stevenson, Washington
facilities have been provided to the Company without charge on a temporary basis
by an officer of the Company. The Company has leased office space in Seattle on
a three
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month renewable basis. The Company is currently negotiating a lease on its
facilities in New York.
The Company does not currently own and the Company has not made any
investments in real estate, including real estate mortgages, and the Company
does not intend to make such investments in the near future.
ITEM 3. PLAN OF OPERATION.
The Company's predecessor Axonyx Inc. commenced operations in January 1997.
The Company is in the development stage, and its efforts have been principally
devoted to research and development activities and organizational efforts,
including the development of pharmaceutical compounds and product candidates for
the diagnosis and treatment of Alzheimer's Disease, other forms of dementia,
Bovine Spongiform Encephalopathy and Creutzfeldt Jakob Disease, new variant,
recruiting its scientific and management personnel and advisors and raising
capital.
The Company's plan of operation for the next 12 months will consist of
research and development and related activities aimed at:
(1) initiating Phase I clinical trials on its lead acetylcholinesterase
inhibitor, Phenserine. See Item 1. Description of Business - Axonyx Drug
Discovery Programs - Program 1: Inhibitors of Acetylcholinesterase and
Beta-Amyloid Precursor Protein (Beta-APP) Formation.
(2) further preclinical development at the NIA of the other
acetylcholinesterase inhibitors, Tolserine and Thiatolserine, and continued
study of the activity of the Phenserine analogues.
(3) further preclinical development at the NIA of the butyrylcholinesterase
inhibitor, Cymserine and active analogues. See Item 1. Description of
Business - Axonyx Drug Discovery Programs - Program 2: Inhibitors of
Butyrylcholinesterase and Beta-Amyloid Precursor Protein (Beta-APP)
Formation.
(4) further preclinical development of the Amyloid Inhibiting Peptides at NYU
and additional work at other facilities with IN VIVO studies and
development of a peptido-mimetic. See Item 1. Description of Business
-Axonyx Drug Discovery Programs - Program 3: Amyloid Inhibiting Peptides
(AIPs).
(5) further preclinical development of the Prion Inhibiting Peptides at NYU.
See Item 1. Description of Business - Axonyx Drug Discovery Programs -
Program 4: Prion Inhibiting Peptides (PIPs).
(6) hiring a scientific director and an administrative assistant.
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(7) seeking to establish strategic partnerships for the development, marketing,
sales and manufacturing of the Company's proposed products. See Item 1.
Description of Business - Business Strategy.
The actual research and development and related activities of the Company
may vary significantly from current plans depending on numerous factors,
including changes in the costs of such activities from current estimates, the
results of the Company's research and development programs, the results of
clinical studies, the timing of regulatory submissions, technological advances,
determinations as to commercial viability and the status of competitive
products. The focus and direction of the Company's operations will also be
dependent on the establishment of the Company's collaborative arrangement with
other companies, the availability of financing and other factors.
Pursuant to its present cost projections, the Company has determined that
it will require funding in the amount of approximately $2.2 million through the
year ending December 31, 1999, however thereafter the Company may need to raise
additional capital for the period from the year end to March 2000. In order to
satisfy this funding requirement, during the period between October 1998 and
December 1998, the Company received net proceeds of approximately $2.5 million
from the sale of Units consisting of 1,020,000 shares of Common Stock and Common
Stock Purchase Warrants to purchase 1,020,000 shares of Common Stock at an
exercise price of $3.75.
As a result of such financing, the Company believes that it has sufficient
capital to finance the Company's plan of operation for approximately 12 months.
The Company is considering further capital raising activities within the next 12
months, and is pursuing sub-licensing and other collaborative arrangements that
may generate revenues for the Company. However, there can be no assurance that
the Company will generate sufficient revenues, if any, to fund its operations
beyond this 12 month period or that any required financings will be available,
through bank borrowings, debt or equity offerings, or otherwise, on acceptable
terms or at all.
ITEM 4. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
The current executive officers, directors and significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Marvin S. Hausman, M.D. 57 President & Chief Executive
Officer, Director
Albert D. Angel 61 Chairman of the Board
of Directors
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Michael M. Strage 39 Vice President, Treasurer,
Director
Michael R. Espey 36 Vice President, Secretary,
Director
Christopher Wetherhill 50 Director
</TABLE>
Each director is elected to hold office for a one year term or until the
next annual meeting of stockholders and until his successor is elected and
qualified. The officers of the Company serve at the pleasure of the Company's
Board of Directors (the "Board").
The following sets forth certain biographical information with respect to
the directors and executive officers of the Company.
MARVIN S. HAUSMAN, M.D. Marvin Hausman has served as a Director and President &
CEO of the Company since January 1999, and as a Director and President & CEO of
the predecessor company, Axonyx Inc., from January 1997 to December 1998. Dr.
Hausman was a founder of Medco Research Inc. a pharmaceutical biotechnology
company specializing in adenosine products. He has thirty years experience in
drug development and clinical care. Dr. Hausman received his medical degree from
New York University School of Medicine in 1967 and has done residencies in
General Surgery at Mt. Sinai Hospital in New York, and in Urological Surgery at
U.C.L.A. Medical Center in Los Angeles. He also worked as a Research Associate
at the National Institutes of Health, Bethesda, Maryland. He has been a
Lecturer, Clinical Instructor and Attending Surgeon at the U.C.L.A. Medical
Center Division of Urology and Cedars-Sinai Medical Center, Los Angeles. He has
been a Consultant on Clinical/Pharmaceutical Research to various pharmaceutical
companies, including Bristol-Meyers International, Mead-Johnson Pharmaceutical
Company, Medco Research, Inc., and E.R. Squibb. Dr. Hausman is currently the
President of Northwest Medical Research Partners, Inc., a medical technology and
transfer company and is a member of the Board of Directors of Regent Assisted
Living, Inc.
ALBERT D. ANGEL, ESQ. Albert Angel has served as Chairman of the Board of
Directors of the Company since January 1999 and served as Chairman of the Board
of Directors of the predecessor company, Axonyx Inc., from April 1997 to
December 1998. Albert Angel is President of Angel Consulting and a partner in
Naimark & Associates, both of which provide management, marketing, planning and
public affairs advice to pharmaceutical and biotechnology companies. He is also
vice-chair of the National Board of Trustees of the National Jewish Medical and
Research Center (Denver, Colorado). He has more than 30 years of experience in
the pharmaceutical and biotechnology fields, primarily at Merck & Co., Inc. Mr.
Angel received his law degree from Yale Law School in 1960 and, after army
service, was with the firm of Hughes Hubbard Blair & Reed until 1967. Mr. Angel
joined Merck in 1967 as Latin American attorney and served successively as
European Counsel and International Counsel until 1977 when he relocated to
London as Vice-President of Merck Sharp & Dohme (Europe), Inc. During the next 8
years he
14
<PAGE>
served first as Regional Director responsible for Merck's Scandinavian
businesses and then as Chairman and Managing Director of Merck Sharp & Dohme
Limited responsible for business activities in the United Kingdom, Ireland and
Anglophone Africa. From 1985 to 1993 Mr. Angel served as Vice-President, Public
Affairs for Merck & Co., Inc.
CHRISTOPHER WETHERHILL Christopher Wetherhill has served as a Director of the
Company since January 1999 and served as a Director of the predecessor company,
Axonyx Inc., from August 1997 to December 1998. Mr. Wetherhill is the managing
director of Boundary Bay Investments Limited, a major shareholder of the
Company. Mr. Wetherhill is a chartered accountant and the President and Chief
Executive Officer of The Hemisphere Group Limited of Bermuda, a corporate
management company. From 1971 until 1977 he was the manager of the accounting
and management services department at Arthur Young & Co., now Ernst & Young,
Bermuda. From 1977 to 1981, he was a director and financial controller of
Offshore Contractors (Bermuda) Limited, a Bermuda company involved in offshore
oil platform construction and shipping. He is a Fellow of the Institute of
Chartered Accountants in England and Wales, a member of the Bermudian and
Canadian Institutes of Chartered Accountants, and a Fellow of the Institute of
Directors and Freeman of the City of London.
MICHAEL M. STRAGE, ESQ. Mr. Strage has been a Director, Vice President and
Treasurer of the Company since January 1999 and was a Director and Vice
President of the predecessor company, Axonyx Inc., from January 1997 to December
1998. He served as Axonyx Inc.'s Secretary from January 1997 until September
1998, and as Treasurer until the merger in December 1998. Michael Strage is an
attorney with experience in corporate transactions, commercial and securities
law, and litigation. His previous experience includes being an associate at the
Los Angeles law firm of Hancock, Rothert & Bunschoft and an assistant district
attorney at the Manhattan District Attorney's office.
MICHAEL R. ESPEY, ESQ. Mr. Espey has been a Director, Vice President and
Secretary of the Company since January 1999 and was a Director and Vice
President of the predecessor company, Axonyx Inc., since January 1997. He served
as Axonyx Inc.'s Treasurer from January 1997 until September 1998, and as
Secretary until the merger in December 1998. Michael Espey is an attorney based
in Seattle, Washington with extensive experience in securities law and
investment banking. He served as General Counsel for the securities firm of Lee,
Van Dyk, Zivarts, Pingree & Co. in Seattle and worked at Espey & Associates, a
New York firm where he was involved in structuring several transnational
securities placements.
Michael Strage is married to Michael Espey's sister. There are no other
family relationships between any of the officers and directors.
The Company has constituted Audit, Nominating and Compensation Committees.
The Audit Committee consists of Messrs. Christopher Wetherhill and Albert Angel.
The Nominating Committee consists of Messrs. Marvin Hausman and Albert Angel.
The Compensation Committee consists of Messrs. Albert Angel, Marvin Hausman and
Christopher Wetherhill.
15
<PAGE>
The Audit Committee oversees the Company's audit activities to protect
against improper and unsound practices and to furnish adequate protection to all
assets and records. The Nominating Committee makes proposals to the full Board
concerning the hiring or engagement of directors, officers and certain employee
positions. The Compensation Committee makes proposals to the full Board for
officer compensation programs, including salaries, option grants and other forms
of compensation. It is expected that these committees will meet periodically on
an informal basis
ITEM 5. REMUNERATION OF DIRECTORS AND OFFICERS.
CASH COMPENSATION
The Company, in its pre-merger period, did not pay any cash compensation to
its officers and directors.
Below is the aggregate annual remuneration of each of the highest paid
persons who were officers or directors of Axonyx Inc., the Company's pre-merger
predecessor, during Axonyx Inc.'s last two fiscal years ended December 31, 1997
and December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Securities
Other Underly-
Annual Restricted ing Op- All Other
Name and Principal Compen- Stock tions/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs Payouts sation
- ------------------ ---- ------ ----- ------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin S. Hausman, CEO 1998 $0 $0 $0 none none none none
1997 $0 $0 $0 none none none none
</TABLE>
EMPLOYMENT AGREEMENTS
Marvin S. Hausman, M.D., President & CEO. In January 1999, the Company came to
an oral agreement with Marvin Hausman whereby Dr. Hausman will serve as
President & CEO of the Company and as a Director of the Company for an annual
salary of $125,000.
Michael M. Strage, Vice President & Treasurer. In January 1999, the Company
came to an oral agreement with Michael Strage whereby Mr. Strage will serve as
Vice President & Treasurer of the Company and as a Director of the Company for
an annual salary of $100,000.
16
<PAGE>
Michael R. Espey, Vice President & Secretary. In January 1999, the Company
came to an oral agreement with Michael Espey whereby Mr. Espey will serve as
Vice President & Secretary of the Company and as a Director of the Company for a
monthly salary of $7,000.
DIRECTOR COMPENSATION
In June 1997, Axonyx Inc. entered into a letter agreement and a Vesting
Agreement with Mr. Angel pursuant to which Albert D. Angel, Chairman of the
Board of Directors, was issued 500,000 shares of restricted Common Stock subject
to a two year vesting schedule ending March 1, 1999. Mr. Angel's shares vest pro
rata on a monthly basis in compensation for his services as Chairman of the
Board of Directors.
Christopher Wetherhill served as a director of Axonyx Inc. from August 1997
to December 1998 without compensation. On January 13, 1999 Mr. Wetherhill was
granted 40,000 options exercisable at $2.88 vesting over a four year period.
Outside directors of the Company are compensated for the attendance of
Board Meetings at the following rates: $500.00 for each Board Meeting attended
in person, and $250.00 for each Board Meeting attended by telephone.
INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN
On December 1, 1998, the Board of Directors ratified a stock option plan
called the "1998 Stock Option Plan" (the "Plan") and on December 4, 1998, the
stockholders approved the Plan.
The Company believes that the Plan will work to increase the proprietary
interest in the Company of its directors, officers, employees and consultants,
and to align more closely their interests with that of the Company's
stockholders. The Plan will also maintain the Company's ability to attract and
retain the services of experienced and highly qualified employees, officers,
directors, and consultants.
Under the Plan, the Company reserved an aggregate of 2,000,000 shares of
Common Stock (as adjusted) for issuance pursuant to options granted under the
Plan (the "Plan Options"). On February 2, 1999, the Board of Directors of the
Company decided to adjust the number of shares reserved for issuance pursuant to
the Options in relation to the two for one forward stock split on February 23,
1999. The Compensation Committee of the Board of Directors of the Company
administers the Plan including, without limitation, the selection of persons who
will be granted Options under the Plan, the type
17
<PAGE>
of Plan options to be granted, the number of shares subject to each Plan Option
and the Plan Option price.
The Plan authorizes the issuance of incentive stock options ("ISOs") as
defined in Section 422A of the Internal Revenue Code of 1986 and non-statutory
stock options ("NSSOs").
Any ISO granted under the Plan must provide for an exercise price of not
less than 100% of the fair market value of the underlying shares on the date of
such grant, but the exercise price of any ISO granted to an eligible person
owning more than 10% of the Company's Common Stock must be at least 110% of such
fair market value as determined on the date of the grant. The aggregate fair
market value of the shares covered by the ISOs granted under the Plan that
become exercisable to a Plan participant for the first time in any calendar year
is subject to a $100,000 limitation. The exercise price of each NSSO is
determined by the Compensation Committee of the Board of Directors, in its
discretion. The Compensation Committee shall determine the term of the options,
provided, however, that in no event may an ISO be exercisable more than ten
years after the date of its grant and, in the case of an ISO granted to an
eligible employee owning more than 10% of the Company's Common Stock, no more
than five years after the date of the grant. Any option which is granted shall
be vested and exercisable at such time as determined by the Compensation
Committee.
As of December 31, 1999, there were non-statutory stock options outstanding
to purchase an aggregate of 150,000 shares granted by the Company's predecessor
company Axonyx Inc. in 1997 under the 1997 Axonyx Stock Option Plan and assumed
under the Plan upon the consummation of the merger.
18
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The Company did not grant any stock options in the last fiscal year. The
Company's predecessor company, Axonyx Inc., also did not grant any options to
purchase shares during Axonyx Inc.'s last fiscal year ended December 31, 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Percent of
Number of Total
Securities Options/
Underlying SARs
Options/ Granted To
SARs Employees Exercise or
Granted In Fiscal Base Price Expiration
Name (#) Year ($/Sh) Date
- ----------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C>
Marvin S. Hausman. M.D. 0 0 0 n/a
Albert D. Angel 0 0 0 n/a
Michael R. Espey 0 0 0 n/a
Michael M. Strage 0 0 0 n/a
Christopher Wetherhill 0 0 0 n/a
</TABLE>
OPTION EXERCISES AND HOLDINGS
No options to purchase shares of Common Stock of the Company or its
predecessors were exercised during the fiscal year ended December 31, 1998. The
number of unexercised options held as of the end of the 1998 fiscal year were
283,200. 150,000 non-statutory stock options were granted to Richard Salvador, a
consultant to the Company on September 2, 1997 under the 1997 Axonyx Stock
Option Plan. New York University is entitled to 66,600 non-statutory stock
options, Dr. Blas Frangione and Dr. Claudio Soto are each entitled to 33,300
non-statutory stock options based on a percentage of the current shares
outstanding, exercisable at certain capitalization milestones pursuant to Stock
Option Agreements signed on April 3, 1997. See Item 6. Interests of Management
and Others in Certain Transactions.
RECENT OPTION GRANTS
(These numbers have been adjusted to reflect the 2:1 forward stock split
effective February 23, 1999)
On January 4, 1999, the Company granted options to purchase 30,000 shares
of Common Stock exercisable at $1.25 per share to Intertrend Management Limited
under a Financial Consulting Agreement dated November 10, 1998 under which
Intertrend was
19
<PAGE>
retained to perform investment banking and other services concerning the merger
to the Company. These options were issued outside of the Stock Option Plan.
On January 13, 1999, the Company granted an aggregate of 340,600
Non-Statutory Stock Options and 240,000 Incentive Stock Options to officers,
directors and to a consultant of the Company pursuant to its 1998 Stock Option
Plan under various vesting schedules:
The Company granted 300,000 Non-Statutory Stock Options exercisable at
$2.88 per share to Albert D. Angel, Chairman of the Board, with 75,000 vesting
immediately, 75,000 vesting on January 1, 2000, 75,000 vesting on January 1,
2001, and 75,000 vesting on January 1, 2002.
The Company granted 40,000 Non-Statutory Stock Options exercisable at $2.88
per share to Christopher Wetherhill, a director of the Company, with 10,000
options vesting immediately, 10,000 vesting on January 1, 2000, 10,000 vesting
on January 1, 2001, and 10,000 vesting on January 1, 2002.
The Company granted 600 Non-Statutory Stock Options exercisable at $2.88
per share to Roberta Matta, a consultant to the Company, with all shares vesting
immediately.
The Company granted 200,000 Incentive Stock Options exercisable at $3.11
per share to Marvin S. Hausman, President & CEO of the Company, with 50,000
options vesting immediately, 50,000 vesting on January 1, 2000, 50,000 vesting
on January 1, 2001, and 50,000 vesting on January 1, 2002.
The Company granted 40,000 Incentive Stock Options exercisable at $2.88 per
share to Michael M. Strage, Vice President & Treasurer of the Company, with
10,000 options vesting immediately, 10,000 vesting on January 1, 2000, 10,000
vesting on January 1, 2001, and 10,000 vesting on January 1, 2002.
20
<PAGE>
ITEM 6. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock (the "Shares") as of March 1, 1999 (a)
by each person known to the Company to own beneficially 5% or more of any class
of the Company's securities, including those shares subject to outstanding
options and (b) by each of the Company's officers and directors and (c) by all
officers and directors of the Company as a group. As of March 1, 1999 there are
12,220,002 shares of Common Stock of the Company issued and outstanding.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENT OF CLASS
- ---------------- -------- ----------------
<S> <C> <C>
Marvin S. Hausman, M.D. (2) 2,038,500 16.61%
Christopher Wetherhill (3) 1,077,500 8.74%
Albert D. Angel (4) 575,000 4.68%
Michael M. Strage (5) 260,000 2.13%
Michael R. Espey (6) 250,000 2.05%
All directors and executive
officers (five persons) as a group 4,201,000 33.70%
--------- -----
Steven C. Espey (7) 2,050,000 16.77%
Boundary Bay Investments Ltd. (8) 960,000 7.79%
</TABLE>
- ----------
(1) Unless otherwise indicated, the address of each of the listed beneficial
owners identified above is 750 Lexington Avenue, Suite 1400, New York, NY
10022. Unless otherwise noted, the Company believes that all persons named
in the table have sole voting and investment power with respect to all the
Shares beneficially owned by them.
(2) Marvin S. Hausman, M.D. was a founder of the Company and currently serves
as the President and Chief Executive Officer. Includes (i) 1,988,500 shares
owned by Dr. Hausman; and (ii) 50,000 vested but unexercised options
exercisable at $3.11 per share granted on January 13, 1999.
(3) Christopher Wetherhill is a Director of the Company. Includes (i) 107,500
shares held in Mr. Wetherhill's name; (ii) 860,000 shares held by Boundary
Bay Investments Ltd. ("BBI"). Mr. Wetherhill holds a controlling position
as the Managing Director of BBI and is considered a beneficial owner; (iii)
100,000
21
<PAGE>
shares that BBI may acquire upon conversion of the principal of two
Convertible Notes in the aggregate amount of $200,000 with a conversion
price of $2.00 per share; and (iv) 10,000 vested but unexercised options
exercisable at $2.88 per share granted on January 13, 1999 held in Mr.
Wetherhill's name. Mr. Wetherhill's address is 9 Church Street, Hamilton HM
11, Bermuda.
(4) Albert D. Angel is the Chairman of the Board of Directors of the Company.
Includes (i) 500,000 shares owned by Mr. Angel, these shares vest over a
two year period beginning in March of 1997; and (ii) 75,000 vested but
unexercised options exercisable at $2.88 per share granted on January 13,
1999.
(5) Michael M. Strage was a co-founder of the Company and currently serves as
Vice President and Treasurer. Includes (i) 250,000 shares owned by Mr.
Strage; and (ii) 10,000 vested but unexercised options exercisable at $2.88
per share granted on January 13, 1999.
(6) Michael R. Espey was a co-founder of the Company and currently serves as
Vice President and Secretary. All shares listed are owned by Mr. Espey.
Michael Espey's address is 1001 4th Avenue Plaza, Suite 3228, Seattle, WA
98154.
(7) Steven C. Espey was a founder of the Company. Steven Espey is Michael
Espey's father. All shares are owned by Mr. S. Espey. Mr. Espey's address
is 358 East 69th Street, New York, NY 10021.
(8) Boundary Bay Investments Ltd. is a Cayman Islands corporation. Includes (i)
860,00 shares issued in the name of BBI; and (ii) 100,000 shares that BBI
may acquire upon conversion of the principal of two Convertible Notes in
the aggregate amount of $200,000 with a conversion price of $2.00 per
share. The address of BBI is 9 Church Street, Hamilton HM 11, Bermuda.
ITEM 7. INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
(Numbers for Ionosphere, Inc. shares issued prior to the merger are adjusted
retroactively to reflect the 1 for 2 reverse split on December 28, 1998 unless
otherwise indicated.)
During 1997 and up to March 1, 1999, Steven Espey has provided the Company
with the use of office space in New York. There has been no specific charge for
such use of office space, although issuance of Common Stock to Steven Espey at
the time of the Company's founding was designed, in part, to reflect this
anticipated contribution. The President of the predecessor company, Ionosphere,
Inc. provided Ionosphere with office space without charge from August 1997 to
December 1998.
Marvin S. Hausman, M.D. provided services as President & CEO to the Company
predecessor Axonyx Inc. from the time it began operations in January 1997
without cash remuneration from Axonyx Inc. Michael Strage and Michael Espey
provided services to
22
<PAGE>
the Company's predecessor Axonyx Inc. as officers since it began operations in
January 1997 until September 1998 without cash remuneration.
J.T. Jesky provided services as President to the Company predecessor
Ionosphere, Inc. from the time it began operations in July 1997 until December
1998 without compensation from Ionosphere, Inc. Skyelan Rose provided services
as Secretary and Ann Reihl provided services as Treasurer to the Company
predecessor Ionosphere, Inc. from the time it began operations in July 1997
until December 1998.
On March 5, 1997, Axonyx Inc. issued 4,300,000 shares of Common Stock to
Boundary Bay Investments Ltd. Of these shares, 3,300,000 shares of Common Stock
were issued upon assignment of option rights to certain exclusive patent rights,
and 1,000,000 shares of Common Stock were issued for the commitment of an
investment of $400,000 pursuant to an Investment Agreement dated February 18,
1997. The Company received $400,000 over a one year period between March 7, 1997
and February 4, 1998.
On April 3, 1997, Axonyx Inc. signed a Stock Option Agreement with NYU
under which NYU was granted non-statutory options to receive that number of
shares of Common Stock of the Company that would bring NYU's shareholdings in
the Company's Common Stock to 1.25% of the outstanding shares as of the date
that the paid in capital of the Company is $5,000,000, and was granted
non-statutory options to receive that number of shares of Common Stock of the
Company that would bring NYU's shareholdings in the Company's Common Stock to
1.75% of the outstanding shares as of the date that the paid in capital of the
Company is $10,000. On October 15, 1997 Axonyx Inc. issued 300,000 shares of
Common Stock to NYU pursuant to this agreement. These options were issued
outside of the 1997 Stock Option Plan.
On April 3, 1997, Axonyx Inc. signed a Stock Option Agreement with Dr. Blas
Frangione under which Dr. Frangione was granted non-statutory options to receive
that number of shares of Common Stock of the Company that would bring Dr.
Frangione's shareholdings in the Company's Common Stock to 0.625% of the
outstanding shares as of the date that the paid in capital of the Company is
$5,000,000, and was granted non-statutory options to receive that number of
shares of Common Stock of the Company that would bring Dr. Frangione's
shareholdings in the Company's Common Stock to 0.875% of the outstanding shares
as of the date that the paid in capital of the Company is $10,000,000. On
November 3, 1997, Axonyx Inc. issued 150,000 shares of Common Stock. These
options were issued outside of the 1997 Stock Option Plan.
On April 3, 1997, Axonyx Inc. signed a Stock Option Agreement with Dr.
Claudio Soto under which Dr. Soto was granted non-statutory options to receive
that number of shares of Common Stock of the Company that would bring Dr. Soto's
shareholdings in the Company's Common Stock to 0.625% of the outstanding shares
as of the date that the paid in capital of the Company is $5,000,000, and was
granted non-statutory options to receive that number of shares of Common Stock
of the Company that would bring Dr. Soto's shareholdings in the Company's Common
Stock to 0.875% of the outstanding shares as of the date that the paid in
capital of the Company is $10,000,000.
23
<PAGE>
On October 1, 1997, Axonyx Inc. issued 150,000 shares of Common Stock. These
options were issued outside of the 1997 Stock Option Plan.
On August 27, 1997, Axonyx granted a director of the Company 500,000 shares
of Common Stock subject to a two year vesting schedule in consideration of
services rendered and to be rendered to the Company under a Vesting Agreement
dated August 27, 1997.
On August 28, 1997, Ionosphere, Inc. issued 3,000,000 shares of Common
Stock, par value $0.001 to Ionosphere, LLC for cash of $4,200.00 and a note
receivable for $45,000.00 due August 28, 1999, with interest at 8% per annum.
T.J. Jesky, the President and CEO of Ionosphere, Inc. was the sole managing
member of Ionosphere, LLC. The note receivable was paid off on May 19, 1998.
On April 27, 1998, the Company issued a Nine Percent Convertible Note to
Boundary Bay Investments Ltd. (BBI) in the amount of $125,000, evidencing a loan
from BBI in that amount. This loan is convertible at $4.00 per share of Common
Stock (pre-split). The loan bears interest at 9% per annum, with interest
payments due annually. The Note matures May 1, 2000.
On May 19, 1998 Ionosphere, Inc. issued 215,000 shares of Common Stock to
its founding shareholder, T.J. Jesky in consideration for the following: (1)
forgiveness of loans to Ionosphere, Inc. in the amount of $4,645, (2) a Note
Receivable issued on August 28, 1997 for $45,000.00 was paid off, (3) accrued
interest on the Note Receivable in the amount of $2,604.00 was paid off, and (4)
a Deed of Trust for $260,000.00.
Pursuant to a private offering of certain of the Axonyx Inc.'s securities
between August 24, 1998 and December 28, 1998 (the August 1998 Offering), Axonyx
Inc. issued an aggregate of 102 units at $25,000 per unit to a limited number of
accredited and otherwise qualified investors based on their financial resources
and knowledge of investments. In addition, each of the investors was provided
with information and had access to relevant information about Axonyx Inc.
Accordingly, the issuance of the securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set forth in
Section 4(2) and Regulation D, Rule 506 of the Securities Act. Each unit
("Unit") consisted of 10,000 shares of Common Stock, par value $0.001 (the
"Shares"), and 10,000 Stock Purchase Warrants (the "Warrants") at a price of
$25,000 per Unit. Each Warrant entitled the holder to purchase one Share at a
price of $3.75 until their expiration on October 1, 2001. The minimum investment
was one Unit or $25,000, although Axonyx Inc., in its discretion, accepted
subscriptions for one half Units from some investors. Axonyx Inc. received gross
cash proceeds of $2,550,000 in the August 1998 Offering.
On September 1, 1998, the Company issued a Nine Percent Convertible Note to
Boundary Bay Investments Ltd. in the amount of $75,000.00, evidencing a loan
from BBI in that amount. This loan is convertible at $4.00 per share of Common
Stock (pre-
24
<PAGE>
split). The Note bears interest at 9% per annum, with interest payments due
annually. The Note matures September 1, 2000.
On December 28, 1998 an Agreement of Merger between Axonyx Inc., a Delaware
corporation, and Ionosphere, Inc., a Nevada corporation, became effective.
Ionosphere, Inc. was the surviving corporation and the merger was consummated
upon the issuance of 11,020,000 shares of Common Stock and 1,020,000 Common
Stock purchase warrants of Ionosphere, Inc. to Axonyx Inc. shareholders in
exchange for their shares and warrants outstanding on the date of the merger.
Prior to the merger, 4,100,000 shares of Common Stock of Ionosphere, Inc. were
issued and outstanding. Concurrent with the merger, Ionosphere, Inc. reverse
split its shares on a one for two basis resulting in a total of 2,050,001 shares
of Common Stock issued and outstanding on the date of the merger. On December
29, 1998, Ionosphere, Inc. exercised an option under which it had the right, for
an exercise price of $5,000, to repurchase 1,450,000 post split shares from the
majority shareholder of Ionosphere. The shares of Common Stock were returned to
Ionosphere's treasury. After the option exercise, the pre-merger shareholders of
Ionosphere held a total of 600,001 shares of Common Stock (1,200,002 shares with
application of the February 1999 2:1 forward stock split). As of January 1,
1999, the Company had 12,220,002 shares of Common Stock issued and outstanding
(11,020,000 shares held by Axonyx Inc. shareholders and 1,200,002 shares held by
Ionosphere shareholders), and 1,020,000 Common Stock purchase warrants. Pursuant
to the merger, the Company assumed the 150,000 options to purchase shares of
Common Stock issued under the 1997 Axonyx Stock Option Plan. On December 28,
1998 the officers and directors of Ionosphere, Inc. resigned after appointing
the directors of Axonyx Inc. to compose the Board of Directors of Ionosphere,
Inc. On December 30, 1998 Ionosphere, Inc. amended its Articles of Incorporation
to change its name to Axonyx Inc. The business of the Company is the same as
that of the pre-merger company, Axonyx Inc. The Articles of Merger were filed in
Nevada and Delaware on December 30, 1998.
ITEM 8. DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 25,000,000 shares of
Common Stock, $0.001 par value, of which 12,220,002 shares were outstanding as
of March 15, 1999. The Company is also authorized to issue up to 5,000,000
shares of Preferred Stock, $0.001 par value of which no shares are issued and
outstanding.
COMMON STOCK
The Company is authorized to issue 25,000,000 shares of Common Stock, of
which, as of the date of this Form 10-SB, 12,220,002 shares are outstanding and
held by 88 holders of record. All outstanding shares are validly authorized and
issued, fully paid and non-assessable.
The holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders. Holders
of Common Stock do not have cumulative voting rights. Holders of Common Stock
are entitled to receive
25
<PAGE>
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation, dissolution, or
winding up of the Company, holders of the shares are entitled to share ratably
in all assets remaining after payment of liabilities. Holders of the shares have
no preemptive rights and have no rights to convert their shares into any other
securities.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, $0.001 par value. The Company has not designated any classes of Preferred
Stock. As of the date of this Form 10-SB no shares of Preferred Stock are issued
and outstanding.
COMMON STOCK PURCHASE WARRANTS
In connection with the Company's private offering of certain of the
Company's securities over the period August 24, 1998 to December 28, 1998, the
Company issued warrants to purchase 1,020,000 shares of Common Stock (the
"Warrants"). These Warrants are exercisable at $3.75 per share on or prior to
October 1, 2001, the expiration date of the Warrants. The Company may call the
Warrants for exercise if the average closing bid price for the Company's Common
Stock is equal to or greater than $7.50 per share of Common Stock for any
consecutive period of thirty days.
Warrant holders do not have any voting or any other rights as stockholders
of the Company. The exercise price and the number of shares of Common Stock
issuable on exercise of the Warrants are subject to adjustment in certain
circumstances against dilution, including reorganization, consolidation, merger,
sale or conveyance of all or substantially all of its assets, or if the Company
shall by subdivision, combination or reclassification of securities, change the
Warrant Stock into the same or a different number of securities. The Warrants
may be exercised upon the surrender of the Warrant Certificate on or prior to
the expiration date (or earlier redemption date) of such Warrant at the offices
of the Company's transfer agent, with the form of a Notice of Exercise ,
completed and executed, accompanied by payment of the full exercise price (by
certified or bank check, payable to the order of the Company), for the number of
shares with respect to which the Warrant is being exercised. Pursuant to a
Registration Rights Agreement, certain piggy-back registration rights apply to
the Warrant Stock. The Company is not required to issue fractional shares upon
the exercise of the Warrants.
OPTIONS.
As of March 1, 1999, the Company had options outstanding to purchase an
aggregate of approximately 893,800 shares of Common Stock of the Company at
prices ranging from $0.001 to $3.11 per share and for exercise periods ranging
from 12/1/2000 to 1/1/2009, except for the 133,200 options granted to NYU, Dr.
Blas Frangione and Dr. Claudio Soto that have exercise periods pegged to the
dates on which the Company achieves certain equity capitalization milestones.
26
<PAGE>
CONVERTIBLE PROMISSORY NOTES.
On April 27, 1998, the Company issued a Nine Percent Convertible Note to
Boundary Bay Investments Ltd. in the amount of $125,000 and on September 1,
1998, the Company issued a Nine Percent Convertible Note to BBI in the amount of
$75,000.00 (collectively, the "Notes"), each respectively evidencing loans from
BBI in those amounts. These loans are convertible at $2.00 per share of Common
Stock (post split price). Each Note bears interest at 9% per annum, with
interest payments due annually. The Notes mature on May 1, 2000 and September 1,
2000, respectively, unless prepaid by the Company prior thereto or converted
into shares of Common Stock at $2.00 per share at the Holder's discretion.
Currently, there are $200,000 of Notes outstanding.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER Matters.
The Company's Common Stock is traded on the OTC Bulletin Board under the
symbol "AXYX" and commenced its trading under that symbol on January 4, 1999.
Prior to the merger the Common Stock was quoted under the symbol "IONO" with
trading commencing beginning July 23, 1998. The following table sets forth the
high and low bid quotations for the Common Stock for the periods indicated.
These quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs, and commissions and may not necessarily represent actual
transactions. These bid quotations have not been adjusted retroactively by any
stock split.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ ---- ---
<S> <C> <C>
Third Quarter ended 9/30/98 $3.00 $0.25
Fourth Quarter ended 12/31/98 $5.50 $0.25
January 1, 1999 to March 1, 1999 $13.00 $5.50
</TABLE>
The transfer agent of the Company is Nevada Agency and Trust Company, 50
West Liberty Street, Suite 880, Reno, Nevada 89501.
As of March 15, 1999 there were approximately 88 holders of record of the
Company's Common Stock, of which 12,220,002 were issued and outstanding.
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain future earnings, if any, to finance the expansion of
its business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on the Company's
earnings, capital requirements, expansion plans, financial condition and other
relevant factors.
27
<PAGE>
ITEM 2. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings, and there are no
material pending legal proceedings of which the Company is aware.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Pursuant to the merger between Ionosphere, Inc. and Axonyx Inc., the
management of the Company decided, on a post merger basis, to retain Richard A.
Eisner & Company, LLC ("RAE") as independent auditors of the Company. RAE had
audited the financial statements of Axonyx Inc. for the fiscal year ended
December 31, 1997. The Board of Directors of Axonyx Inc. appointed RAE as
accountants for the Company on December 1, 1998 to audit the financial
statements of the Company for the year ending December 31, 1998. This decision
was ratified at a Special Meeting of Shareholders of Axonyx Inc. on December 28,
1998 concurrent with the consummation of the merger.
Barry L. Friedman, CPA of 1582 Tulita Drive, Las Vegas, NV 89123 had
audited the financial statements of Ionosphere, Inc. for the periods from July
29, 1997 (inception) to August 31, 1997, from inception to December 31, 1997,
from inception to March 3, 1998, and from January 1, 1998 to May 21, 1998. James
E. Slayton, CPA of 3867 W. Market St., Suite 208, Akron, OH 44333 audited the
balance sheet of Ionosphere, Inc. as of November 30, 1998 and the statements of
operations, stockholder's equity and cash flows for the period January 1, 1998
to November 30, 1998. The change of independent auditors was made on the basis
of the relative fees charged by each individual and the time constraints imposed
by the merger. During the engagement of Mr. Friedman and Mr. Slayton as
independent auditors of Ionosphere, Inc., there were no disagreements between
the Company and either auditor on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. Both
accountants noted Ionosphere, Inc.'s lack of revenue and need for additional
capital. These factors raised substantial doubt about Ionosphere, Inc.'s ability
to continue as a going concern.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(Numbers for Ionosphere, Inc. shares issued prior to the merger are adjusted
retroactively to reflect the 1 for 2 reverse split on December 28, 1998.)
Between October 15, 1997 and March 3, 1998 Ionosphere, Inc. issued 750,000
shares of Common Stock par value $0.001 at a price of $0.05 per share to 29
investors in a private offering registered with the State of Nevada pursuant to
N.R.S. 90.490. Ionosphere, Inc. received gross cash proceeds of $37,500 in this
offering. The issuance of the shares was exempt from the registration
requirements of the Securities Act
28
<PAGE>
pursuant to the exemption set forth in Section 4(2) and Regulation D, Rule 504
of the Securities Act.
On November 16, 1998, Ionosphere, Inc. completed a private stock offering
that was registered with the State of Nevada pursuant to N.R.S. 90.490 and was
exempt from federal registration requirements pursuant to Regulation D, Rule 504
of the Securities Act. Ionosphere, Inc. issued 350,000 shares of Common Stock to
two accredited investors at a price of $0.10 per share for total cash proceeds
of $35,000.00.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 78.751 of the Nevada General Corporation Law provides as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation, partnership, joint venture,
trust of other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendre or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believe to be in or not opposed to the best interests
of the corporation, and that, in respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion or all appeals therefrom, to
be liable to the corporation for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit was
brought or other court of competent jurisdiction determines upon application
that in view of all the circumstances of the case, the person is
29
<PAGE>
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court
or advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper under the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered
by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his officer, except that
indemnification, unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may
30
<PAGE>
not be made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of heirs, executors and
administrators of such a person.
Article XI of the Articles of Incorporation of the Company provides as
follows:
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by the provisions of the Nevada
Revised Statutes of the State of Nevada, as the same may be amended and
supplemented. The corporation shall indemnify any person who incurs expenses by
reason of the fact that he or she is or was an officer, director, employee or
agent of the corporation. This indemnification shall be mandatory on all
circumstances in which indemnification is permitted by law.
Article VI of the By-Laws of the Company provides as follows:
The corporation shall, to the maximum extent and in the manner permitted by
the Nevada Revised Statutes, indemnify each of its directors and officers
against expenses (including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.1, a "director" or "officer" of
the corporation includes any person (i) who is or was a director or officer of
the corporation, (ii) who is or was serving at the request of the corporation as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or (iii) who was a director or officer of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
The corporation shall have the power, to the maximum extent and in the
manner permitted by the Nevada Revised Statutes, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was
31
<PAGE>
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the Nevada Revised Statutes.
PART F/S
The following financial statements of Axonyx Inc. are filed as part of this
registration statement on Form 10-SB:
Balance sheet as of December 31, 1998.
Statements of operations for the year ended December 31, 1998, and for the
periods from January 9, 1997 (commencement of operations) through December 31,
1997 and through December 31, 1998.
Statements of changes in stockholders' equity for the year ended December 31,
1998 and for the periods from January 9, 1997 through December 31, 1997 and
through December 31, 1998.
Statements of cash flows for the year ended December 31, 1998, and for the
periods from January 9, 1997 through December 31, 1997 and through December 31,
1998.
32
<PAGE>
AXONYX INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
AXONYX INC.
(a development stage company)
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
Independent auditors' report F-2
Balance sheet as of December 31, 1998 F-3
Statements of operations for the year ended December 31, 1998,
and for the periods from January 9, 1997 (commencement of
operations) through December 31, 1997 and through
December 31, 1998 F-4
Statements of changes in stockholders' equity for the year ended
December 31, 1998 and for the periods from January 9, 1997
(commencement of operations) through December 31, 1997 and
through December 31, 1998 F-5
Statements of cash flows for the year ended December 31, 1998,
and for the periods from January 9, 1997 (commencement of
operations) through December 31, 1997 and through
December 31, 1998 F-6
Notes to financial statements F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Axonyx Inc.
We have audited the accompanying balance sheet of Axonyx Inc. (a development
stage company) as of December 31, 1998 and the related statements of operations,
changes in stockholders' equity and cash flows for the year then ended, for the
periods from January 9, 1997 (commencement of operations) through December 31,
1997 and through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of Axonyx Inc. as of December 31,
1998, and the results of its operations and its cash flows for the year then
ended, and for the periods from January 9, 1997 through December 31, 1997 and
through December 31, 1998, in accordance with generally accepted accounting
principles.
New York, New York
February 15, 1999
With respect to Note G[5]
February 23, 1999
F-2
<PAGE>
AXONYX INC.
(a development stage company)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,558,000
Stock subscriptions receivable 750,000
Other assets 4,000
------------
Total current assets 2,312,000
Equipment, net 1,000
------------
$ 2,313,000
------------
------------
LIABILITIES
Current liabilities:
Accrued expenses $ 119,000
Convertible notes payable and accrued interest 210,000
------------
Total liabilities 329,000
------------
Commitments
STOCKHOLDERS' EQUITY (Note A)
Preferred stock - $.001 par value, 5,000,000 shares authorized; none issued
Common stock - $.001 par value, 25,000,000 shares authorized; 12,220,002 shares issued
and outstanding 12,000
Additional paid-in capital 3,363,000
Unearned compensation - stock/options (41,000)
Deficit accumulated during the development stage (1,350,000)
------------
Total stockholders' equity 1,984,000
------------
$ 2,313,000
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
AXONYX INC.
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
JANUARY 9, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Costs and expenses:
Research and development $ 353,000 $ 482,000 $ 835,000
General and administrative 289,000 216,000 505,000
------------ ------------ ------------
Loss from operations (642,000) (698,000) (1,340,000)
Interest expense (10,000) 0 (10,000)
------------ ------------ ------------
NET LOSS/COMPREHENSIVE LOSS $ (652,000) $ (698,000) $ (1,350,000)
------------ ------------ ------------
------------ ------------ ------------
NET LOSS PER COMMON SHARE-BASIC AND DILUTED $ (.07) $ (.08)
------------ ------------
------------ ------------
WEIGHTED AVERAGE SHARES-BASIC AND DILUTED 9,886,000 $ 9,230,000
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
AXONYX INC.
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Note A)
<TABLE>
<CAPTION>
COMMON STOCK DEFICIT
------------------------ UNEARNED ACCUMULATED
NUMBER ADDITIONAL COMPENSATION - DURING THE TOTAL
OF PAID-IN STOCK/ DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL OPTIONS STAGE EQUITY
------------ --------- ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of founders'
common stock at $.001
per share 7,900,000 $ 8,000 $ (6,000) $ 2,000
Issuance of common
stock - March 5, 1997
at $.40 per share 1,000,000 1,000 399,000 400,000
Issuance of common
stock to New York
University and scientists
at $.40 per share for
services - April 1, 1997 600,000 1,000 239,000 240,000
Common stock issued to
officer - August 27, 1997 500,000 190,000 $ (190,000) 0
Stock options granted 57,000 (57,000) 0
Amortization 88,000 88,000
Net loss $ (698,000) (698,000)
------------ --------- ------------ --------------- ------------- -------------
BALANCE - DECEMBER 31,
1997 10,000,000 10,000 879,000 (159,000) (698,000) 32,000
Issuance of common stock
and warrants (net of
expenses of $16,000)
October 9, 1998 to
December 31, 1998 at
$25,000 per unit 1,020,000 1,000 2,533,000 2,534,000
Shares deemed issued to
stockholders (net
of costs of $52,000) -
December 28, 1998 1,200,002 1,000 (49,000) (48,000)
Amortization 118,000 118,000
Net loss (652,000) (652,000)
------------ --------- ------------ --------------- ------------- -------------
BALANCE - DECEMBER 31,
1998 12,220,002 $ 12,000 $ 3,363,000 $ (41,000) $ (1,350,000) $ 1,984,000
------------ --------- ------------ --------------- ------------- -------------
------------ --------- ------------ --------------- ------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
AXONYX INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JANUARY 9, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------
1998 1997 1998
------------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (652,000) $ (698,000) $ (1,350,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization 118,000 88,000 206,000
Cost of services paid with common stock 240,000 240,000
Depreciation 1,000 1,000
Changes in:
Accrued expenses and interest 67,000 62,000 129,000
------------- ------------ ------------
Net cash used in operating activities (467,000) (307,000) (774,000)
------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (2,000) (2,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable 200,000 200,000
Net proceeds from issuance of common stock and warrants 1,854,000 332,000 2,186,000
Cost of merger (52,000) (52,000)
------------- ------------ ------------
Net cash provided by financing activities 2,002,000 332,000 2,334,000
------------- ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,535,000 23,000 1,558,000
Cash and cash equivalents at beginning of period 23,000 0 0
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,558,000 $ 23,000 $ 1,558,000
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE>
AXONYX INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - THE COMPANY
lonosphere, Inc. ("lonosphere"), an inactive corporation, was incorporated in
the State of Nevada on July 29, 1997. Effective December 28, 1998, Axonyx Inc.
("Axonyx" or the "Company"), a Delaware corporation (formed September 1996),
merged into Ionosphere, an inactive corporation. The merger was consummated
through an exchange of shares that resulted in the former Axonyx stockholders
receiving control of Ionosphere (see below for further discussion). The merger
has been treated as a capital transaction for accounting purposes. In connection
therewith, Axonyx's historic capital accounts were retroactively adjusted to
reflect the equivalent number of shares issued by Ionosphere in the transaction
while Axonyx's historical accumulated deficit was carried forward. The
operations reflect those of Axonyx from the commencement of its operations
(January 9, 1997). On December 28, 1998, Ionosphere changed its name to Axonyx
Inc. Through December 31, 1998, the Company has been in the development stage
and has conducted no revenue producing activities. The Company's efforts are
devoted to the discovery, development and acquisition of proprietary
pharmaceutical compounds and new technologies useful for the treatment of
cognitive disorders including Alzheimer's Disease. In September 1996, the
Company obtained an assignment of an option to negotiate a research and license
agreement with New York University. The agreement covers the exclusive worldwide
rights to a research project entitled "A New Therapeutic Approach for
Alzheimer's Disease: Design of Anti-Amyloid Inhibitors of Amyloidogenesis" (see
Note C). In addition, the assignment included the rights to acquire a license to
certain proprietary bio-medical technology, patents and related intellectual
property concerning an early stage compound known as "Phenserine" (see Note D).
3,300,000 shares of common stock were issued in exchange for these assignments
of option rights.
As discussed above, the merger between Axonyx and Ionosphere is accounted for as
a recapitalization. In accordance with the merger, Ionosphere issued 11,020,000
shares of its capital stock and 1,020,000 stock purchase warrants to the
stockholders of Axonyx in exchange for the outstanding common shares and
warrants of Axonyx.
The Company is subject to those risks associated with development stage
companies. The Company has sustained recurring losses since inception and
additional financing will be required by the Company to fund its research and
development activities and to support operations. However, there is no assurance
that the Food and Drug Administration will grant approval to the Company's
products or that profitable operations can be attained.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
[1] CASH EQUIVALENTS:
The Company considers all short-term investments with a maturity of three
months or less to be cash equivalents.
[2] EQUIPMENT:
Equipment is carried at cost less an allowance for depreciation.
Depreciation is recorded using the straight-line method over its
estimated useful life of five years.
[3] RESEARCH, DEVELOPMENT AND PATENT:
Research and development costs including certain costs related to patent
applications are charged to operations as incurred.
F-7
<PAGE>
AXONYX INC.
(a development stage company)
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[4] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
[5] STOCK-BASED COMPENSATION:
The Company accounts for its employee stock-based compensation plans
using the intrinsic value method prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees" and discloses the pro forma effects on net loss had the fair
value of options been expensed. Under the provisions of APB 25,
compensation cost for stock options is measured as the excess, if any, of
the fair value of the Company's common stock at the date of the grant
over the amount an employee must pay to acquire the stock.
[6] FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of cash and accrued expenses approximates their fair
value due to the short period to maturity of these instruments. The fair
value of the convertible notes payable are not readily determinable due
to the related party nature of those instruments.
[7] NET LOSS PER COMMON SHARE:
Statement of Financial Accounting Standards No.128, "Earnings Per Share"
("SFAS 128") requires the reporting of basic and diluted earnings/loss
per share. Basic loss per share is calculated by dividing net loss by the
weighted average number of outstanding common shares during the year. As
all potential common shares are anti-dilutive, the effects of options,
warrants and convertible securities are not included in the calculation
of diluted loss per share.
[8] RECENT PRONOUNCEMENTS:
The Financial Accounting Standards Board has recently issued Statements
of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure," No. 130, "Reporting Comprehensive Income" and
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company believes that the above pronouncements will not
have a significant effect on the information presented in the financial
statements.
NOTE C - AGREEMENT WITH NEW YORK UNIVERSITY ("NYU")
In April 1997, the Company entered into a research and license agreement with
NYU, as amended to provide funding and sponsor the research relating to the
diagnosis and treatment of Alzheimer's Disease and other amyloidosis disorders,
in exchange for a payment of $25,000 upon signing of the agreement, sixteen
consecutive quarterly payments of $75,000 beginning on April 1, 1997, and
600,000 shares of common stock with a fair value of $240,000 (issued to NYU and
its scientists, collectively "NYU stockholders"). The agreement also provides
for
F-8
<PAGE>
AXONYX INC.
(a development stage company)
NOTE C - AGREEMENT WITH NEW YORK UNIVERSITY ("NYU") (CONTINUED)
payments to NYU aggregating $175,000 upon achieving certain clinical and
regulatory milestones. In addition, the Company has agreed to pay NYU
royalties of up to 4% of net product sales under the agreement with minimum
royalty payments of $150,000 beginning January 1, 2003 through the expiration
or termination of the agreement, as defined. Further, the Company is required
to use its best efforts to raise an aggregate of $5,000,000 through one or
more private placements of equity securities prior to April 1999, (excluding
grace period) under the terms of its amended agreement with NYU. As of
December 31, 1998, the Company has raised approximately $2,950,000 in equity
financing.
Since entering into the agreement, the Company has paid $550,000 to NYU.
NOTE D - AGREEMENT WITH CURE, L.L.C. ("CURE")
On February 27, 1997, the Company entered into a sub-license agreement ("CURE
Agreement") with CURE where the Company would receive the rights covering the
patents that CURE obtained through the "PHS Patent License Agreement-Exclusive"
it entered into with the Public Health Service. The CURE Agreement provided for
a payment of $15,000 upon signing of the agreement and a payment of $10,000 six
months after the signing of the agreement. The CURE Agreement also provides for
payments to CURE aggregating $600,000 when certain clinical and regulatory
milestones are achieved. In addition, the Company has agreed to pay CURE
royalties of up to 3% of net product sales and sub-license royalties as defined
under the agreement, with minimum annual royalty payments of $10,000 beginning
on January 31, 2000 increasing to $25,000 per annum on commencement of sales of
the product until the expiration or termination of the agreement. Any royalty
payments made to CURE shall be credited against the minimum payments.
Since entering into the agreement, the Company has paid $25,000 to CURE.
NOTE E - INCOME TAXES
At December 31, 1998, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $427,000, expiring through
2012, that may be used to offset future taxable income. Approximately $46,000 of
such net operating loss carryforward is subject to an annual limitation as a
result of merger referred to in Note A.
The deferred tax consequences of temporary differences in reporting items for
tax and financial accounting purposes at December 31, 1998 result primarily
from certain expenses, aggregating $727,000 relating to research and
development which is not currently deductible. At December 31, 1998 and 1997,
the Company has deferred tax assets of approximately $466,000 and $222,000.
The Company has not recorded a benefit from its net operating loss
carryforward or expenses not currently deductible because realization of the
benefit is uncertain and, therefore, a valuation allowance of $466,000 has
been provided for the deferred tax asset.
NOTE F - RELATED PARTY TRANSACTIONS
During 1998 and 1997, a stockholder provided the Company the use of facilities.
There was no charge for such utilization of space. In addition, other
stockholders provided administrative support services to the Company without
remuneration. Such transactions were not material for the year ended December
31, 1998 and for the period from January 9, 1997 to December 31, 1997.
F-9
<PAGE>
AXONYX INC.
(a development stage company)
NOTE F - RELATED PARTY TRANSACTIONS (CONTINUED)
In April and September of 1998, the Company issued convertible notes for an
aggregate of $200,000 to a stockholder of the Company. The notes of $125,000 and
$75,000 are due May 1, 2000 and September 1, 2000, respectively and bear
interest at 9%. The Company may prepay the notes prior to maturity without
penalty provided written notice is given 30 days prior to prepayment. The notes
are convertible into common stock at $2 per share.
In September 1998, the Company entered into agreements with two executive
officers/stockholders for consulting services to be rendered to the Company.
Such arrangement provides for a base compensation of $7,000 per month through
December 31, 1998.
NOTE G - STOCKHOLDERS' EQUITY
[1] STOCKHOLDERS AGREEMENT:
Pursuant to a stockholders' agreement between NYU stockholders and
certain founding stockholders ("Founders"), such Founders may not
transfer any shares without written notice to NYU. In addition, Founders
shall not be granted registration rights unless NYU stockholders are
granted such rights on the same terms and conditions. Such agreement
terminates on an initial public offering.
[2] PRIVATE PLACEMENT:
During 1998, the Company sold 102 units in a private placement yielding
net proceeds of $2,534,000. Each unit consisted of 10,000 shares of
common stock and 10,000 warrants to purchase common stock (see Note
G[3]).
[3] WARRANTS:
At December 31, 1998 the Company has outstanding 1,020,000 warrants to
purchase common stock at $3.75 per share. Each warrant is exercisable
through October 1, 2001. The warrants are subject to call by the Company
if the average closing bid price of the Company's common stock is equal
to or greater than $7.50 per share for any consecutive thirty days.
[4] COMMON STOCK:
In August 1997, the Company granted an officer 500,000 shares of common
stock of which 250,000 shares vest through March 1, 1998 and thereafter
on a monthly basis through March 1, 1999. The Company valued these shares
at $190,000 which is being amortized over the vesting period. At December
31, 1998 437,446 shares were vested.
[5] STOCK SPLIT:
Effective February 23, 1999, the Company approved a 2 for 1 stock split
of its common stock. All share amounts in the accompanying financial
statements have been retroactively adjusted to reflect the stock split.
F-10
<PAGE>
AXONYX INC.
(a development stage company)
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[6] STOCK OPTIONS:
The Company applies APB 25 and related interpretations in accounting for
its employee stock options. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") requires
the Company to elect either fair-value expense recognition or the
disclosure-only alternative for stock-based employee compensation. The
expense recognition provision encouraged by SFAS 123 would require
fair-value based financial accounting to recognize compensation expense
for the employee stock compensation plans. The Company has elected the
disclosure-only alternative.
During 1998, the Board of Directors and the stockholders of the Company
approved a Stock Option Plan ("1998 Plan") which provides for the
granting of options to purchase up to 2,000,000 shares of common stock,
pursuant to which officers, directors, advisors and consultants are
eligible to receive incentive and/or nonstatutory stock options. Options
granted under the 1998 Plan are exercisable for a period of up to 10
years from date of grant at an exercise price which is not less than the
fair value on date of grant, except that the exercise period of options
granted to a stockholder owning more than 10% of the outstanding capital
stock may not exceed five years and their exercise price shall be granted
at an option price not less than 110% of the fair value of the common
stock at date of grant. Vesting of 1998 Plan options varies from fully
vested at the date of grant to multiple year apportionment of vesting as
determined by the Board of Directors.
During the period ended December 31, 1997, Axonyx issued 150,000 options
at an exercise price below the fair value of the stock to a consultant.
Axonyx valued each of these options at $.38 representing the difference
between the fair value of the common stock and the option exercise price,
which will be amortized over the life of the respective agreements. In
connection with the merger, these options were exchanged for options
under the 1998 Plan with the same terms.
Disclosures required under SFAS 123 for employee stock options granted as
of December 31, 1998 and 1997 using the Black-Scholes option pricing
model prescribed by SFAS 123 are provided below.
The assumptions used and the weighted average information for the period
ended December 31, 1997 is as follows:
<TABLE>
<S> <C>
Risk-free interest rate 5.76 - 5.81
Expected dividend yield 0%
Expected live 10 years
Expected volatility 30%
Weighted average grant-date fair value of options
granted during the period $.38
</TABLE>
Management has determined that accounting for stock-based compensation
under SFAS 123 would not have a significant effect on pro forma net loss
for the year ended December 31, 1998 and for the period ended December
31, 1997 as the actual charge based on the intrinsic value approximates
the fair value of the stock options.
F-11
<PAGE>
AXONYX INC.
(a development stage company)
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[6] STOCK OPTIONS: (CONTINUED)
Stock option activity under the 1998 Plan is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
--------- ----------
<S> <C> <C>
Options issued in exchange 150,000 $ .02
-------
-------
Options at end of year 150,000 .02
-------
-------
Options exercisable at end of year 105,000 .02
-------
-------
Weighted average remaining contractual life
(in years) at end of year 1.92
----
----
</TABLE>
As of December 31, 1998, 1,850,000 options are available for future grant
under the 1998 Plan.
On January 13, 1999, the Company granted 580,600 options to employees and
consultants at exercise prices ranging from $2.88 to $3.11 per share under
the 1998 Plan.
In connection with the merger transaction (see Note A) the Company granted
a consultant 30,000 stock options outside the 1998 Plan. The options are
exercisable at $1.25 per share through January 5, 2001. In addition, the
options have certain piggyback registration rights.
In connection with the agreements entered into with NYU and its scientists
the Company granted certain options to purchase additional shares up to a
maximum of 6% of the outstanding shares of the Company at a purchase price
of $.001 per share. The option agreements provide for the purchase of
additional shares based on a formula when the Company's paid-in capital
reaches $5,000,000 and $10,000,000. The Company may be required to record
a charge to operations representing the fair value of the options when the
paid-in capital milestones are reached. For the period ended December 31,
1998 the options were not exercisable.
NOTE H - COMMITMENTS
In January 1998, the Company entered into a consulting agreement which required
a $5,000 payment upon signing and $5,000 plus the issuance of up to 2,000 shares
of common stock upon the achievement of certain milestones relating to
Phenserine. During 1998, $10,000 was paid to this consultant.
In February 1998, the Company contracted with an institution to provide certain
pharmaceutical services at a cost of $13,500. During 1998 the Company paid
$7,000 to this institution.
NOTE I - SUBSEQUENT EVENT
In January and February 1999, the Company collected the balance due on the
common stock subscription receivable.
F-12
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
<S> <C>
2.1 Agreement of Merger between Axonyx Inc. and Ionosphere, Inc.
dated December 23, 1998
2.2 Articles of Merger (Delaware) dated December 28, 1998 and
Certificate of Correction dated March 10, 1999
2.3 Articles of Merger (Nevada) dated December 28, 1998
3.1 Restated Articles of Incorporation dated January 26, 1999.
3.2 By-Laws
4.1 Form of Common Stock Purchase Warrant
4.2 Form of Registration Rights Agreement
4.2 Nine Percent Convertible Note issued by Axonyx Inc. to
Boundary Bay Investments Ltd. dated April 27, 1998 in the
amount of $125,000.
4.4 Nine Percent Convertible Note issued by Axonyx Inc. to
Boundary Bay Investments Ltd. dated September 1, 1998 in the
amount of $75,000
10.1 1998 Stock Option Plan
10.2 License Agreement between the Company and CURE, LLC dated
February 27, 1997
10.3 Research and License Agreement between the Company and New
York University dated April 1, 1997
10.4 Amendment to Research and License Agreement between the
Company and New York University dated August 25, 1998
10.5 Lease Agreement between the Company and Business Service
Center of Seattle dated January 28, 1999
</TABLE>
<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 on this 15TH day of MARCH , 1999.
AXONYX INC.
(Registrant)
By: /s/ Marvin S. Hausman, M.D.
-----------------------------------
Marvin S. Hausman, M.D.
President, Chief Executive Officer,
and Director
<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER dated as of December 23, 1998 by and Ionosphere,
Inc., a Nevada corporation (hereinafter "Ionosphere"), and Axonyx Inc., a
Delaware corporation (hereinafter "Axonyx"), Ionosphere and Axonyx being
hereinafter collectively referred to as the "Constituent Corporations."
WHEREAS, the respective Board of Directors of each of the Constituent
Corporations deem it advisable and generally to the welfare and advantage of
each, and of their respective shareholders, to merge the Constituent
Corporations; and
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto hereby agree in
accordance with the Delaware General Corporation Law and the Nevada General
Corporation Act that Ionosphere and Axonyx shall be, at the effective date of
this Agreement, merged into a single corporation existing under the laws of the
State of Nevada, to wit, Ionosphere, one of the Constituent Corporations, which
shall be the surviving corporation (such corporation in this capacity being
hereinafter referred to as the "Surviving Corporation"), and the parties hereby
adopt and agree to the following terms and conditions relating to said merger
and the procedures for carrying the same into effect.
I. NAME, CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS
1.1 NAME OF SURVIVING CORPORATION. The name of the corporation which
shall survive the merger after the Effective Date (as defined in section 3.2
hereof) shall be Ionosphere, Inc., a Nevada corporation. The Surviving
Corporation will, as soon as practicable after the Effective Date, change its
name to Axonyx Inc., a Nevada corporation.
1.2 CERTIFICATE OF INCORPORATION. The Articles of Incorporation of
Ionosphere, as amended, shall from and after the Effective Date be the Articles
of Incorporation of the Surviving Corporation until changed or amended as
provided by law. Said Articles of Incorporation are hereby made a part of this
Agreement with the same force and effect as if herein set forth in full, and
said Articles of Incorporation may be separately certified as the Articles of
Incorporation of the Surviving Corporation.
1.3 BY-LAWS. The By-Laws of Ionosphere as in effect on the Effective Date
shall from and after the Effective Date be and continue to be the By-Laws of the
Surviving Corporation until changed as therein provided.
1.4 DIRECTORS. Concurrent with, and as a condition to, the consummation
of the merger, the Ionosphere directors shall resign after appointing the
current directors of Axonyx to the board of directors of Ionosphere. Pursuant
to this resignation and
<PAGE>
appointment, the names and addresses of the persons who shall be the initial
directors of the Surviving Corporation and who shall hold office until their
successors are elected in accordance with the By-Laws of the Surviving
Corporation, are as follows:
Albert D. Angel 4 Rocky Way, Llewellyn Park, West Orange,
(Chairman) New Jersey 07052
Marvin S. Hausman 4041 State Highway 14, House #1, Stevenson,
Washington 98648
Christopher Wetherhill
Michael R. Espey 318 18th Ave. E., Seattle, Washington 98112
Michael M. Strage 165 W. 88th St., New York, New York 10024
1.5 OFFICERS. The names and addresses of the persons who are to be the
initial officers of the Surviving Corporation who shall be elected at a Board
Meeting concurrent with the consummation of the merger and shall hold office
until their successors are elected or appointed in accordance with the By-Laws
of the Surviving Corporation, are as follows:
<TABLE>
<CAPTION>
NAME OFFICE ADDRESS
---- ------ -------
<S> <C> <C>
Marvin S. Hausman President & CEO same as above
Michael R. Espey Vice President & Secretary " "
Michael M. Strage Vice President & Treasurer " "
</TABLE>
II. STATUS AND CONVERSION OF SECURITIES
2.1 AXONYX CAPITAL STRUCTURE. As of December 23, 1998, Axonyx has the
following securities issued and outstanding: 5,250,000 shares of common stock,
250,000 stock purchase warrants, and 75,000 nonstatutory stock purchase options
exercisable at $0.10 per share. Given the pendency of a private placement
offering by Axonyx, knowledge of which Ionosphere acknowledges, these sums are
subject to change up to the Effective Date.
2.2 IONOSPHERE CAPITAL STRUCTURE, REVERSE STOCK SPLIT, EXERCISE OF OPTION.
Immediately prior to the Effective Date, Ionosphere has the following securities
issued and outstanding: 4,100,000 shares of common stock. As a condition
precedent to this Agreement and the merger pursuant thereto, Ionosphere shall,
concurrent with the consummation of the merger, reverse split their shares on a
2:1 basis, resulting in a total of
<PAGE>
2,050,000 shares being issued and outstanding. This reverse split has been duly
authorized by the Board of Directors of Ionosphere on December 1, 1998.
Ionosphere holds a Stock Option Agreement dated September 30, 1998 under
which it has the right, within 90 days of the date of the Stock Option
Agreement, to purchase 2,900,000 shares of Ionosphere common stock (1,450,000
post reverse split) from T.J. Jesky, a major shareholder, for $30,000 (the
"Option"). The Surviving Corporation shall have the same rights as Ionosphere
under this Stock Option Agreement from and after the Effective Date. The
Constituent Corporations agree that the Surviving Corporation shall exercise the
Option as soon as practicable after the Effective Date and both Ionosphere and
Axonyx agree that the successful exercise of the Option and the return of the
1,450,000 shares to the treasury of the Surviving Corporation is a critical
condition to the effective consummation of the merger.
2.3 AUTHORIZED CAPITALIZATION OF SURVIVING CORPORATION. The total number
of shares of all classes of stock which the Surviving Corporation shall have
authority to issue shall be twenty five million (25,000,000) shares of Common
Stock, par value $0.001 per share (hereinafter called "Common Stock of the
Surviving Corporation") including five million (5,000,000) shares of Preferred
Stock; par value $0.001 per share.
2.4 MANNER OF CONVERTING SECURITIES. The procedure for converting shares
of capital stock of each of the Constituent Corporations into shares of capital
stock of the Surviving Corporation shall be as follows:
(a) COMMON STOCK OF AXONYX. Each outstanding Share of Common Stock,
$0.001 par value, of Axonyx, and any additional shares of such stock issued
prior to the Effective Date, shall be converted into and exchanged for, and
from and after the Effective Date shall represent, one (1) share of the
common stock of the Surviving Corporation (the "Common Stock"); and the
holder thereof shall be entitled to precisely the same rights which it
would enjoy if it held certificates issued by the Surviving Corporation.
No fractional shares of Common Stock of the Surviving Corporation shall be
issued. Upon the surrender of any such certificate or certificates to the
Surviving Corporation, the transferee or other holder of the certificate or
certificates surrendered shall receive in exchange therefor a certificate
or certificates of the Surviving Corporation. The shares of Common Stock
to be issued to the Axonyx shareholders will not be registered under the
Securities Act of 1933 and will consequently be restricted stock that
cannot be transferred or resold unless registered or pursuant to an
applicable exemption from registration.
Each outstanding Axonyx stock purchase warrant shall be exchanged for
a stock purchase warrant of the Surviving Corporation, on the same terms
and conditions as the Axonyx stock purchase warrant. Upon the surrender of
any such stock purchase warrant to the Surviving Corporation, the
transferee shall receive in exchange therefor a warrant certificate of the
Surviving Corporation.
<PAGE>
The Axonxy outstanding nonstatutory stock purchase options shall, upon
consummation of the merger, become outstanding nonstatutory stock purchase
options (the "Options") of the Surviving Corporation, subject to the 1998
Ionosphere Stock Option Plan.
(b) COMMON STOCK OF IONOSPHERE. The shares of Common stock of
Ionosphere outstanding on the Effective Date, after giving effect to the
reverse split and the exercise of the Stock Option Agreement (i.e. 600,000
shares), and the certificates representing the same shall be converted into
and exchanged for, and from and after the Effective Date shall represent,
one (1) share of the Common Stock of the Surviving Corporation; and the
holder thereof shall be entitled to precisely the same rights which it
would enjoy if it held certificates issued by the Surviving Corporation.
No fractional shares of Common Stock of the Surviving Corporation shall be
issued. Upon the surrender of any such certificate or certificate to the
Surviving Corporation, the transferee or other holder of the certificate or
certificates surrendered shall receive in exchange therefor a certificate
or certificates of the Surviving Corporation.
III. SHAREHOLDER APPROVALS; EFFECTIVE DATE; FILING DATE
3.1 SHAREHOLDER APPROVALS.
(a) Axonyx has called a Special Meeting of Stockholders to be held on
December 28, 1998 in accordance with the Delaware General Corporation Law
to consider and vote upon the adoption of this Agreement. On or before
December 21, 1998, the shareholders of Ionosphere shall adopt, in lieu of
such a meeting, unanimous or legally sufficient written shareholder consent
to the adoption and execution of this Agreement in accordance with the
Nevada General Corporation Act.
(b) If this Agreement is approved and adopted at the Axonyx Special
Meeting and by written shareholder consent by Ionosphere and if the merger
is not thereafter abandoned pursuant to Article IX of this Agreement, that
fact shall be certified upon this Agreement or a conformed counterpart by
the Secretary of each of the Constituent Corporations, under their
respective corporate seals; this Agreement so adopted and certified shall
be signed, sealed and acknowledged by and on behalf of each of the
Constituent Corporations; and this Agreement so adopted, certified, signed,
sealed and acknowledged shall be submitted for filing and recording in
accordance with the Nevada General Corporation Act and the Delaware General
Corporation Law respectively.
3.2 EFFECTIVE DATE. This Agreement shall become effective for all
purposes of the laws of the states of Nevada and Delaware on December 28, 1998
following the Special Meeting of Stockholders of Axonyx scheduled for that date
and the adoption of
<PAGE>
the merger resolution presented to stockholders at that meeting for approval.
The date of such effectiveness is referred to herein as the "Effective Date".
3.3 FILING DATE. Counsel for the Constituent Corporations shall agree
upon the date on which this Agreement or related documentation shall be
submitted for filing in the states of Nevada and Delaware. The date of such
submission for filing is hereinafter referred to as the "Filing Date".
IV. AUDITED FINANCIAL STATEMENT. Axonyx and Ionosphere shall appoint a
qualified accounting firm to prepare audited financial statement of their
respective companies as of December 31, 1998. Such audited financial statements
will be furnished to the Surviving Corporation as soon as practicable after the
Effective Date.
V. LEGAL OPINION ON MERGER. Ionosphere shall retain a qualified attorney
who will provide a legal opinion indicating that the proposed merger meets the
requirements of applicable securities laws and has been properly approved by all
applicable regulatory agencies.
VI. LAWSUIT DISCLOSURE. Axonyx and Ionosphere each represent that they are
not a party to any legal actions as a defendant and further represent that they
are not aware of any threatened legal action by any third party.
VII. REGISTERED OFFICE; PURPOSES. The address of the Surviving Corporation's
registered office in the State of Nevada will be 50 West Liberty, Suite 880,
Reno, Nevada 89501, and its registered agent at such address shall be Nevada
Agency and Trust Company.
The purpose of the Surviving Corporation shall be to engage in any lawful
act or activity for which corporations may be organized under the Nevada General
Corporation Act.
VIII. CERTAIN EFFECTS OF MERGER
When the merger becomes effective, the separate existence of Axonyx shall
cease, Axonyx shall be merged into Ionosphere, and the Surviving Corporation,
without further action, shall succeed to and shall possess and enjoy all the
rights, privileges, powers and franchises both of a public and private nature,
and be subject to all restrictions, disabilities, and duties, of Axonyx, and all
property, real, personal and mixed, and all debts due to Axonyx any account, as
well as for stock subscriptions as all other things in action or belonging to
Axonyx, and every other interest shall be vested in the Surviving Corporation as
effectually as they were vested in Axonyx; and the title to any real estate and
to any other property vested by deed or otherwise, under the laws of the state
of Delaware or of any other jurisdiction in Axonyx shall not revert or be in any
way impaired by reason of the merger or the statutes providing therefor;
provided, however, that all rights of creditors and all liens upon any property
of Axonyx shall be preserved unimpaired, limited
<PAGE>
to the property affected by such liens at the time of the merger, and all debts,
liabilities and duties of Axonyx shall henceforth attach to the Surviving
Corporation and may be enforced against it to the same extent if they had been
incurred or contracted by it. Any time, or from time to time, after the
Effective Date, the last acting officers of Axonyx or the corresponding officers
of the Surviving Corporation may, in the name of Axonyx, execute and deliver all
such proper deeds, assignments and other instruments and take or cause to be
taken all such further or other action as the Surviving Corporation may deem
necessary or desirable in order to vest, perfect or confirm in the Surviving
Corporation title to and possession of all of Axonyx's property, rights,
privileges, powers, franchises, immunities and interests and otherwise to carry
out the purposes of this Agreement.
IX. TERMINATION AND ABANDONMENT
This Agreement and the merger contemplated hereby may be terminated and
abandoned by resolution of the Board of Directors of Axonyx at any time and for
any reason whatsoever prior to the Effective Date and the subsequent successful
exercise of the Option. In the event of the termination and abandonment of this
Agreement and the merger pursuant to the foregoing provisions of this Article
IX, this Agreement shall become void and have no effect, without any liability
on the part of either of the Constituent Corporations or their shareholders,
directors or officers in respect thereof.
X. GENERAL
10.1 EXECUTION IN COUNTERPARTS. For the convenience of the parties and to
facilitate filing, this Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of them together shall
constitute one and the same document.
10. 2 AMENDMENTS, SUPPLEMENTS, ETC.
At any time before or after approval and adoption by the respective
shareholders of the Constituent Corporations, this Agreement may be amended, or
supplemented by additional agreements as may be determined in the judgment of
the Boards of Directors of the Constituent Corporations to be necessary,
desirable or expedient to clarify the intention of the parties hereto or to
effect or facilitate the filing, recording or official approval of this
Agreement and the consummation of and the merger pursuant thereto, in accordance
with the purpose and intent of this Agreement.
<PAGE>
This Agreement of Merger is signed this 23rd day of December, 1998.
Axonyx Inc.
/s/ Marvin S. Hausman, M.D.
-----------------------------------------
Marvin Hausman, M.D., President & CEO
ATTEST:
/s/ Michael R. Espey
- ------------------------------
Michael R. Espey, Secretary
Ionosphere, Inc.
/s/ Ray Kuh
-----------------------------------------
Ray Kuh, President
ATTEST:
/s/ Cindy Swank
- ------------------------------
Cindy Swank, Secretary
<PAGE>
1
Exhibit 2.2
ARTICLES OF MERGER
These Articles of Merger entered into this December 28, 1998 by and
Ionosphere, Inc., a Nevada corporation (hereinafter called the "Nevada
Company"), and Axonyx Inc., a Delaware corporation (hereinafter called the
"Delaware Company"), the Nevada Company and the Delaware Company being
hereinafter collectively referred to as the "Constituent Corporations."
WHEREAS, the Delaware Company has an authorized capital stock consisting of
10,000,000 shares of Common Stock, par value $0.001 per share, of which
5,332,500 shares were duly issued and outstanding as of the date of this
Agreement, 332,500 Common Stock purchase warrants and 75,000 nonstatutory stock
purchase options are additionally duly issued and outstanding; and
WHEREAS, the Nevada Company has an authorized capital stock consisting of
25,000,000 shares of Common Stock, par value $0.001 per share, of which 600,000
shares were duly issued and outstanding as of the Effective Date, and 5,000,000
shares of Preferred Stock, of which no shares were duly issued and outstanding;
and
WHEREAS, the respective Board of Directors of each of the Constituent
Corporations deem it advisable and generally to the welfare and advantage of
each, and of their respective shareholders, to merge the Constituent
Corporations; and
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants herein contained, the parties hereto hereby agree in
accordance with the Delaware General Corporation Law and the Nevada General
Corporation Act that The Nevada Company and The Delaware Company shall be, at
the effective date of this Agreement, merged into a single corporation existing
under the laws of the State of Nevada, to wit, The Nevada Company, one of the
Constituent Corporations, which shall be the surviving corporation (such
corporation in this capacity being hereinafter referred to as the "Surviving
Corporation"), and the parties hereby agree as follows:
I. APPROVAL, CERTIFICATION, ACKNOWLEDGEMENT. On December 1, 1998, the directors
of the Delaware Company and the directors of the Nevada Company unanimously
adopted and approved these Articles of Merger by Written Consents to Action with
the caveat that the information concerning Axonyx shares and warrants
outstanding will be updated as of the date of this Agreement. These Articles of
Merger were unanimously approved in their entirety by the stockholders of the
Delaware Company on December 28, 1998 at a Special Meeting of Stockholders and
were approved by a majority vote of the shareholders of the Nevada Company by
Written Consent to Action dated December 4, 1998. The Secretary of each of the
Constituent Corporations certifies the approval of the stockholders of each
Constituent Corporation on the signature page of these Articles.
<PAGE>
2
II. NAME, CERTIFICATE OF INCORPORATION, BY-LAWS, DIRECTORS AND OFFICERS,
AUTHORIZED CAPITAL.
2.1 NAME OF SURVIVING CORPORATION. The name of the corporation which shall
survive the merger after the Effective Date (as defined in Article IV hereof)
shall Ionosphere, Inc., a Nevada corporation. The Surviving Corporation will, as
soon as practicable after the Effective Date, change its name to Axonyx Inc., a
Nevada corporation.
2.2 CERTIFICATE OF INCORPORATION. The Articles of Incorporation of the
Nevada Company, as amended, shall from and after the Effective Date be the
Articles of Incorporation of the Surviving Corporation until changed or amended
as provided by law. Said Articles of Incorporation are hereby made a part of
this Agreement with the same force and effect as if herein set forth in full,
and said Articles of Incorporation may be separately certified as the Articles
of Incorporation of the Surviving Corporation.
2.3 BY-LAWS. The By-Laws of The Nevada Company as in effect on the
Effective Date shall from and after the Effective Date be and continue to be the
By-Laws of the Surviving Corporation until changed as therein provided.
2.4 DIRECTORS. Concurrent with the consummation of the merger, the Nevada
Company directors resigned after having appointed the current directors of the
Delaware Company to the board of directors of the Nevada Company. Pursuant to
this resignation and appointment, the names and addresses of the persons who are
the initial directors of the Surviving Corporation and who shall hold office
until their successors are elected in accordance with the By-Laws of the
Surviving Corporation, are as follows:
<TABLE>
<S> <C>
Albert D. Angel 4 Rocky Way, Llewellyn Park, West Orange,
(Chairman) New Jersey 07052
Marvin S. Hausman 4041 State Highway 14, House #1, Stevenson,
Washington 98648
Christopher Wetherhill 9 Church St., Hamilton HM 11, Bermuda
Michael R. Espey 318 18th Ave. E., Seattle, Washington 98112
Michael M. Strage 165 W. 88th St., New York, New York 10024
</TABLE>
2.5 OFFICERS. The names and addresses of the persons who are the initial
officers of the Surviving Corporation elected at a Board Meeting concurrent with
the consummation of the merger and shall hold office until their successors are
elected or appointed in accordance with the By-Laws of the Surviving
Corporation, are as follows:
<PAGE>
3
<TABLE>
<CAPTION>
NAME OFFICE ADDRESS
<S> <C> <C>
Marvin S. Hausman President & CEO same as above
Michael R. Espey Vice President & Secretary " "
Michael M. Strage Vice President & Treasurer " "
</TABLE>
2.6 AUTHORIZED CAPITALIZATION OF SURVIVING CORPORATION. The total number of
shares of all classes of stock which the Surviving Corporation shall have
authority to issue shall be thirty million (30,000,000) shares, comprised of
twenty five million (25,000,000) shares of Common Stock, par value $0.001 per
share (hereinafter called "Common Stock of the Surviving Corporation") and five
million (5,000,000) shares of Preferred Stock; par value $0.001 per share.
III. CONVERSION OF OUTSTANDING SECURITIES
3.1 SECURITIES OF THE DELAWARE COMPANY. Each outstanding Share of Common
Stock, $0.001 par value, of the Delaware Company, and any additional shares of
such stock issued prior to the Effective Date, shall be converted into and
exchanged for, and from and after the Effective Date shall represent, one (1)
share of the common stock of the Surviving Corporation; and the holder thereof
shall be entitled to precisely the same rights which it would enjoy if it held
certificates issued by the Surviving Corporation. No fractional shares of Common
Stock of the Surviving Corporation shall be issued. Upon the surrender of any
such certificate or certificates to the Surviving Corporation, the transferee or
other holder of the certificate or certificates surrendered shall receive in
exchange therefor a certificate or certificates of the Surviving Corporation
Each outstanding stock purchase warrant of the Delaware Company shall be
exchanged for a stock purchase warrant of the Surviving Corporation, on the same
terms and conditions as the stock purchase warrant of the Delaware Company. Upon
the surrender of any such stock purchase warrant to the Surviving Corporation,
the transferee shall receive in exchange therefor a warrant certificate of the
Surviving Corporation.
The outstanding nonstatutory stock purchase options of the Delaware
Company shall, upon consummation of the merger, become outstanding nonstatutory
stock purchase options of the Surviving Corporation.
IV. EFFECTIVE DATE. These Articles of Merger shall become effective immediately
upon compliance with the laws of the states of Nevada and Delaware on December
30, 1998, the date of such effectiveness being hereinafter called the "Effective
Date".
V. REGISTERED OFFICE; PURPOSES. The address of the Surviving Corporation's
registered office in the State of Nevada will be 50 W. Liberty, Suite 880, Reno,
Nevada
<PAGE>
4
89501, and its registered agent at such address shall be the Nevada
Agency and Trust Company.
The purpose of the Surviving Corporation shall be to engage in any lawful
act or activity for which corporations may be organized under the Nevada General
Corporation Act.
VII. VACANCIES. If, upon the Effective Date, a vacancy shall exist in the Board
of Directors or in any of the offices of the Nevada Company as the same are
specified above, such vacancy shall thereafter be filled in the manner provided
by law and the Bylaws of the Nevada Company.
VIII. AGREEMENT AVAILABLE FOR PERUSAL, OR A COPY UPON STOCKHOLDER REQUEST. The
executed Merger Agreement between the Constituent Corporations signed on
December 23, 1998 and these executed Articles of Merger shall be on file at the
Surviving Corporation's offices at 358 East 69th Street, New York, NY 10021. A
copy of both the Merger Agreement and these Articles will be furnished on
request and without cost to any stockholder of either Constituent Corporation.
IX. SERVICE OF PROCESS IN DELAWARE. The Surviving Corporation agrees that it
may be served with process in Delaware in any proceeding for enforcement of any
obligation of any of the Constituent Corporations arising from the merger,
including any suit or other proceeding pursuant to enforce the right of any
stockholders as determined in appraisal proceedings pursuant to Section 262 of
the Delaware General Corporation Law, and shall irrevocably appoint the
Secretary of State of Delaware as its agent to accept service of process in any
such suit of other proceedings and a copy of such process may be mailed by the
Secretary of State of Delaware to the Surviving Corporation at 4041 State
Highway 14, P.O. Box 910, Stevenson, Washington 98648.
X. AMENDMENT. These Articles of Merger cannot be altered or amended, except
pursuant to an instrument in writing signed by all of the parties hereto.
<PAGE>
5
IN WITNESS HEREOF, the parties hereto have caused these Articles of Merger
to be executed by the President and Secretary of each of them pursuant to
authority given by their respective Board of Directors.
Axonyx Inc. Ionosphere, Inc.
Approved by the Board of Directors Approved by the Board of Directors
on December 1, 1998 and by the on December 1, 1998 and by the
stockholders at a meeting held on and by a majority of its shareholders
December 28, 1998. on December 4, 1998.
By /s/ Marvin S. Hausman, M.D. By: /s/ Raymond Kuh
---------------------------------- ----------------------------------
Marvin Hausman, President & CEO Ray Kuh, President
Attest: Attest:
By: /s/ Michael R. Espey By: /s/ Cindy Swank
--------------------------------- ----------------------------------
Michael Espey, Secretary Cindy Swank, Secretary
STATE OF WASHINGTON )
) SS.
COUNTY OF SPOKANE )
The undersigned, a Notary Public, does hereby certify that on this 28th day
of December, 1998, personally appeared before me, Raymond Kuh who being by me
first duly sworn, declared that he is the President of Ionosphere. Inc., a
Nevada corporation; and Cindy Swank, who being by me first duly sworn, declared
that she is the Secretary of Ionosphere, Inc., a Nevada corporation; that they
signed the foregoing document as President and Secretary of the corporation, and
that the statements therein contained are true.
IN WITNESS WHEREOF, I have set my hand and seal this 28th day of
December, 1998.
/s/ Brenda Lee Himelspock
-----------------------------------
Notary Public
Residing in: SPOKANE
-----------------------
My Commission Expires: 5-25-2000
--------------------
<PAGE>
CERTIFICATE OF CORRECTION
OF
ARTICLES OF MERGER
(Pursuant to Section 103(f) of the General
Corporation Law of the State of Delaware)
I, the undersigned, being a Vice President and the Secretary of
Ionosphere, Inc., do hereby certify that the Articles of Merger filed on
December 30, 1998 contained an inaccurate record.
The second paragraph in the preamble of the Articles provided as
follows:
WHEREAS, the Delaware Company has an authorized capital stock
consisting of 10,000,000 shares of Common Stock, par value $0.001 per share, of
which 5,332,500 shares were duly issued and outstanding as of the date of this
Agreement, 332,500 Common Stock purchase warrants and 75,000 nonstatutory stock
purchase options are additionally duly issued and outstanding; and
The second paragraph in the preamble of the Articles should read as
follows:
WHEREAS, the Delaware Company has an authorized capital stock
consisting of 10,000,000 shares of Common Stock, par value $0.001 per share, of
which 5,510,000 shares were duly issued and outstanding as of the date of these
Articles, 510,000 Common Stock purchase warrants and 75,000 nonstatutory stock
purchase options are additionally duly issued and outstanding under the 1997
Axonyx Stock Option Plan; and
I have duly executed this Certificate of Correction of Articles of
Merger this 10th day of March, 1999.
/S/ MICHAEL R. ESPEY
- --------------------------------------------
Michael R. Espey, Vice President & Secretary
Ionosphere, Inc., a Nevada corporation
<PAGE>
ARTICLES OF MERGER
These ARTICLES OF MERGER (the "Articles"), made and entered into this 28th
day of December, 1998, by and between AXONYX INC., a Delaware corporation
(hereinafter sometimes referred to as "the Merging Corporation") and IONOSPHERE,
INC., a Nevada corporation (hereinafter sometimes referred to as the "Surviving
Corporation"). These Articles are adopted pursuant to the requirements of the
Nevada Revised Statutes, the applicable laws of the State of Nevada, the
Delaware General Corporation Laws and the applicable laws of the State of
Delaware. All such laws permit the merger described hereinafter, subject to the
terms and conditions set forth as follows:
ARTICLE I
[INCORPORATION AND SURVIVING CORPORATION]
Axonyx Inc., was organized as a Delaware corporation on September 16, 1996.
Ionosphere, Inc., was organized as a Nevada corporation on July 29, 1997.
Ionosphere, Inc. is the Surviving Corporation.
ARTICLE II
[BOARD APPROVAL]
The Agreement of Merger was adopted unanimously by the Boards of Directors
of Axonyx Inc. and of Ionosphere, Inc on December 1, 1998.
ARTICLE III
[STOCKHOLDER APPROVAL]
The Agreement of Merger was adopted by the stockholders of the Axonyx Inc.
at a Special Meeting held on December 28, 1998. There were present in person or
by proxy 4,845,000 shares of the 5,277,500 shares outstanding. Axonyx Inc. has
one class of shares only, and each share is entitled to one (1) vote on all
matters submitted to the stockholders. There were 4,845,000 shares voting for
the resolution providing for the merger, which constitutes 91.81% of the
outstanding shares. There were no shares voted against the merger resolution.
The Agreement of Merger was adopted by the stockholders of Ionosphere, Inc.
by a Written Consent of Shareholders on December 4, 1998. The Written Consent
was adopted by 3,000,000 shares out of 4,100,000 shares outstanding, comprising
more than 73% of the outstanding shares of Ionosphere, Inc.
<PAGE>
The number of shares cast in favor of the merger by the stockholders of
both the Merging Corporation and the Surviving Corporation were sufficient for
approval of the merger by the stockholders of each corporation.
ARTICLE IV
[EXCHANGE OF SHARES]
The shares of the Merging Corporation will be converted into shares of the
Surviving Corporation, on the basis of one (1) share of the Merging Corporation
being converted into one (1) share of the Surviving Corporation. The stock
purchase warrants (the "Warrants") of the Merging Corporation will be converted
into Warrants of the Surviving Corporation, on the basis of one (1) Warrant of
the Merging Corporation being converted into one (1) Warrant of the Surviving
Corporation.
ARTICLE V
[REGISTERED OFFICE - THE NEVADA CORPORATION]
The complete executed Agreement of Merger is on file at the registered
office of the Surviving Corporation, at the Nevada Agency and Trust Company, 50
W. Liberty, Suite 880, Reno, Nevada 89501.
ARTICLE VI
[COPY OF PLAN OF MERGER]
A complete, executed Agreement of Merger is on file at the registered
office of the Surviving Corporation as set forth in Article V above. A copy of
the Agreement of Merger will be furnished by the Surviving Corporation on
request and without cost to any stockholder of any corporation which is a party
to the merger.
ARTICLE VII
[EFFECTIVE DATE]
The effective date of the merger shall be the date these Articles of Merger
are filed with the Secretary of State of Nevada. The Agreement of Merger will
be filed with the Secretary of the State of Nevada.
<PAGE>
IN WITNESS WHEREOF, these Articles of Merger, having been duly approved by
a resolution of the Boards of Directors and the stockholders of Axonyx Inc. and
Ionosphere, Inc., is executed by the President and Secretary of both
corporations.
DATED this 28th day of December, 1998.
ATTEST: Axonyx Inc.
A Delaware corporation
/s/ Michael R. Espey /s/ Marvin S. Hausman, M.D.
- ------------------------------ -----------------------------------
Michael Espey, Secretary Marvin Hausman, President & CEO
ATTEST Ionosphere, Inc.
A Nevada corporation
/s/ Cindy Swank /s/ Raymond Kuh
- ------------------------------ -----------------------------------
Cindy Swank, Secretary Raymond Kuh, President
STATE OF WASHINGTON )
) SS.
COUNTY OF KING )
The undersigned, a Notary Public, does hereby certify that on this 28th day
of December, 1998, personally appeared before me, Michael Espey who being by me
first duly sworn, declared that he is the Secretary of Axonyx Inc., a Delaware
corporation, that he signed the foregoing document as Secretary of the
corporation, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have set my hand and seal this 28th day of December,
1998.
/s/ Nancy C. Lubinick
-----------------------------------
Notary Public
Residing in: Seattle
-----------------------
My Commission Expires: 11-3-2000
------------------
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
AXONYX INC.
------------------------------------------------------
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, for the purpose of forming a corporation under and by
virtue of the State of Nevada, do hereby adopt the following Articles of
Incorporation.
ARTICLE I
The name of the corporation shall be AXONYX INC., a Nevada corporation.
ARTICLE II
The principal place of business of the corporation shall be in the County
of Clark and in the State of Nevada, but the Board of Directors shall designate
other places, either within or without the State of Nevada, where other offices
may be established and maintained and where corporate business may be
transacted.
ARTICLE III
The name and the mailing address of the incorporator are as follows:
T.J. Jesky
1801 E. Tropicana, Suite 9
Las Vegas, NV 89119
ARTICLE IV
The purpose for which this corporation is organized is the transaction of
any and all lawful business for which corporations may be incorporated under the
laws of the State of Nevada, as they may be amended from time to time.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
The corporation is authorized to issue Thirty Million (30,000,000) shares
of par value $0.001 stock, consisting of two classes of stock, designated
"Common Stock" and "Preferred Stock". The total number of shares of Common
Stock authorized to be issued is Twenty Five Million (25,000,000), par value
$0.001. The total number of shares of
<PAGE>
Preferred Stock authorized to be issued is Five Million (5,000,000), par value
$0.001. Any and all shares of stock may be issued, reissued, transferred or
granted by the Board of Directors, as the case may be, to persons, corporations,
and associations, and for such lawful consideration, and on such terms, as the
Board of Directors shall have the authority to issue pursuant to the Nevada
Revised Statutes and the By-Laws of the corporation. The Board of Directors
shall have the authority to set, by resolution, the particular designations,
preferences and the relative, participating, optional or other special rights
and qualifications, limitations or restrictions of any class of stock or any
series of stock within any class of stock issued by this corporation.
ARTICLE VII
Holders of Common Stock or Preferred Stock of the corporation shall not
have any preference, preemptive right or right of subscription to acquire shares
of the corporation authorized, issued, or sold, or to be authorized, issued or
sold, or to any obligations or shares authorized or issued or to be authorized
or issued, and convertible into shares of the corporation, nor to any right of
subscription thereto, other than to the extent, if any, the Board of Directors
in its sole discretion, may determine from time to time.
ARTICLE VIII
The corporation shall be managed by a Board of Directors whose duties and
responsibilities shall be set forth in the By-Laws to be adopted by the
corporation. The number of directors which shall constitute the Board of
Directors shall be fixed by or in the manner provided in the By-Laws. The Board
of Directors is empowered to adopt, amend or repeal the By-Laws of the
corporation from time to time as they may determine.
ARTICLE IX
The address, including street, number, city and county, of the registered
office of the corporation in the State of Nevada is 50 W. Liberty Street, Suite
880, Reno, NV 89501; and the name of the statutory agent of the corporation in
the State of Nevada at such address is Nevada Agency and Trust Company.
ARTICLE X
The Board of Directors of the corporation may from time to time
distribute on a pro-rata basis to its shareholders out of the capital surplus
of the corporation a portion of its assets in cash or property.
<PAGE>
ARTICLE XI
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by the provisions of the Nevada
Revised Statutes of the State of Nevada, as the same may be amended and
supplemented. The corporation shall indemnify any person who incurs expenses by
reason of the fact that he or she is or was an officer, director, employee or
agent of the corporation. This indemnification shall be mandatory on all
circumstances in which indemnification is permitted by law.
ARTICLE XII
From time to time any of the provisions of the Articles of Incorporation
may be amended, altered or repealed, and other provisions authorized by the laws
of the State of Nevada at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the shareholders of the corporation by these Articles of
Incorporation are granted subject to the provisions of this Article XII.
Dated this 26th day of January, 1999.
/s/ Marvin S. Hausman, M.D.
---------------------------------------------
Marvin S. Hausman, President & CEO
/s/ Michael R. Espey
---------------------------------------------
Michael R. Espey, Vice President & Secretary
<PAGE>
1
BYLAWS OF
AXONYX INC.
(A NEVADA CORPORATION)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - CORPORATE OFFICES 4
1.1 REGISTERED OFFICE 4
1.2 OTHER OFFICES 4
ARTICLE II - MEETINGS OF STOCKHOLDERS 4
2.1 PLACE OF MEETINGS 4
2.2 ANNUAL MEETING 4
2.3 SPECIAL MEETING 4
2.4 NOTICE OF STOCKHOLDERS' MEETINGS 5
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE 5
2.6 QUORUM 6
2.7 ADJOURNED MEETING; NOTICE 6
2.8 VOTING 6
2.9 WAIVER OF NOTICE 6
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING 7
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS 7
2.12 CONDUCT OF MEETING 8
2.13 PROXY REPRESENTATION 8
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE 8
2.15 INSPECTORS OF ELECTIONS 9
ARTICLE III - DIRECTORS 10
3.1 POWERS 10
3.2 NUMBER OF DIRECTORS 10
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS 10
3.4 RESIGNATION AND VACANCIES 10
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE 11
3.6 FIRST MEETINGS 11
3.7 REGULAR MEETINGS 11
3.8 SPECIAL MEETINGS; NOTICE 12
<PAGE>
2
3.9 QUORUM 12
3.10 WAIVER OF NOTICE 12
3.11 ADJOURNED MEETING; NOTICE 13
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING 13
3.13 FEES AND COMPENSATION OF DIRECTORS 13
3.14 APPROVAL OF LOANS TO OFFICERS 13
3.15 REMOVAL OF DIRECTORS 13
ARTICLE IV - COMMITTEES 14
4.1 COMMITTEES OF DIRECTORS 14
4.2 COMMITTEE MINUTES 14
4.3 MEETINGS AND ACTION OF COMMITTEES 14
ARTICLE V - OFFICERS 15
5.1 OFFICERS 15
5.2 ELECTION OF OFFICERS 15
5.3 SUBORDINATE OFFICERS 15
5.4 REMOVAL AND RESIGNATION OF OFFICERS 16
5.5 VACANCIES IN OFFICES 16
5.6 AUTHORITY AND DUTIES OF OFFICERS 16
ARTICLE VI - INDEMNITY 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS 16
6.2 INDEMNIFICATION OF OTHERS 17
6. 3 INSURANCE 17
ARTICLE VII - RECORDS AND REPORTS 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS 17
7.2 INSPECTION BY DIRECTORS. 18
ARTICLE VIII - GENERAL MATTERS 18
8.1 CHECKS 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS 18
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES 18
8.4 SPECIAL DESIGNATION ON CERTIFICATES 19
8.5 LOST CERTIFICATES 19
8.6 CONSTRUCTION; DEFINITIONS 20
8.7 DIVIDENDS 20
8.8 FISCAL YEAR 20
8.9 SEAL 20
<PAGE>
3
8.10 TRANSFER OF STOCK 20
8.11 STOCK TRANSFER AGREEMENTS 21
8.12 REGISTERED STOCKHOLDERS 21
ARTICLE IX AMENDMENTS 21
ARTICLE X DISSOLUTION 21
</TABLE>
<PAGE>
4
BYLAWS OF
AXONYX INC.
(a Nevada Corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be the Nevada Agency &
Trust Company, located at 50 West Liberty Street, Suite 880, City of Reno,
Nevada 89501. The name of the registered agent of the corporation at such
location is the Nevada Agency & Trust Company.
1.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Nevada, designated by the Board of Directors. In the absence of
any such designation, stockholders meetings shall be held at the registered
office of the corporation.
The annual meeting of stockholders shall be held each year within 180
days of the end of the prior fiscal year, on a date and at a time designated by
the Board of Directors or as otherwise determined by the Board of Directors.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
Board of Directors, or by the Chairman of the board, or by the President. The
Board of Directors shall determine the time and place of such special meeting.
Upon determination of the time and the place of the meeting, the officer
receiving the request shall cause notice to be
<PAGE>
5
given to the stockholders entitled to vote, in accordance with the provisions of
Section 2.4 and 2.5 of these bylaws.
2.4 NOTICE OF STOCKHOLDERS MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 2.5 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date, and hour of the meeting and (i) in the case of a special
meeting, the general nature of the business to be transacted (no business other
than that specified in the notice may be transacted) or (ii) in the case of the
annual meeting, those matters which the Board of Directors, at the time of
giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally, by first class mail, by facsimile or other written communication.
Notices not personally delivered shall be sent charges prepaid and shall be
addressed to the stockholder at the address of that stockholder appearing on the
books of the corporation or given by the shareholder to the corporation for the
purpose of notice. If no such address appears on the corporation's books or
records, notice shall be deemed to have been given if sent to that stockholder
by United States Mail or facsimile or other written communication to the
corporation's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by facsimile or other means of written
communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the Secretary, Assistant Secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
<PAGE>
6
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
Any stockholders meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. When a
meeting is adjourned to another time or place, unless these bylaws otherwise
require, notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of the Nevada Revised Statutes (relating to voting
rights of fiduciaries, pledges and joint owners of stock and to voting trusts
and other voting agreements). Each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder.
At a stockholders meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall not be entitled
to cumulate votes (i.e., cast for any candidate a number of votes greater than
the number of votes which such stockholder normally is entitled to cast).
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Nevada Revised Statutes or of the Articles of Incorporation or these bylaws, a
written waiver thereof,
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signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Articles of Incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of the corporation, or any action that may taken at any annual or
special of such stockholders, may be taken without a meeting, without prior
notice, and without a vote if a consent in writing, setting forth the action so
taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the Nevada
Revised Statutes if such action had been voted on by stockholders at a meeting
thereof, then the certificate filed under such section shall state, in lieu of
any statement required by such section concerning any vote of shareholders, that
written notice and written consent have been given as provided in the Nevada
Revised Statutes.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders of any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day of which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
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(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders entitled to notice
thereof or for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjournment meeting.
2.12 CONDUCT OF MEETING
Meetings of the stockholders shall be presided over by one of the
following officers in the order of seniority and if present and acting - the
Chairman of the Board, if any, the Vice-Chairman of the Board, if any, the
President, a Vice President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the chairman of the meeting shall appoint a secretary of
the meeting.
2.13 PROXY REPRESENTATION
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the Secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
facsimile, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney in fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of the Nevada Revised Statutes.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified,
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at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
2.15 INSPECTORS OF ELECTION
Before any meeting of stockholders, the Board of Directors may, but need
not, appoint an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the Chairman of
the meeting may, and on the request of any stockholder or a stockholder proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more stockholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the Chairman of the meeting may, and upon the request of
any stockholder or a stockholder's proxy, shall appoint a person to fill that
vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Nevada Revised Statutes and any
limitations in the Articles of Incorporation or these bylaws relating to action
required to be approved by the stockholders or by the outstanding shares, the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.
3.2 NUMBER OF DIRECTORS
A director need not be a stockholder, a citizen of the United States, or
a resident of the State of Nevada. The initial Board of Directors shall consist
of two persons. Thereafter the number of directors constituting the whole board
shall be at least one. Subject to the foregoing limitation and except for the
first Board of Directors, such number may be fixed from time to time by action
of the stockholders or of the directors, or, if the number is not fixed, the
number shall be one. The number of directors may be increased or decreased by
action of the stockholders or of the directors. No reduction of the authorized
number of directors shall have the effect of removing any director before that
director's term of office expires.
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal. Elections of directors need not be by written
ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office (even if
less than a quorum), including the resigning director(s) shall have power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section regarding the filling of other
vacancies.
Unless otherwise provided in the Articles of Incorporation or these
bylaws:
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(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Articles of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Articles of Incorporation or these bylaws.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Nevada. Unless
otherwise restricted by the Articles of Incorporation or these bylaws, members
of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
3.6 TIME
Meetings shall be held at such time as the Board shall fix, except that
the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
3.7 REGULAR MEETINGS
Regular meetings of the Board of Directors for which the time and place
have been fixed may be held without notice at such time and at such place as
shall from time to time be determined by the board.
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3.8 SPECIAL MEETINGS NOTICE
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the Chairman of the board, the President, any Vice
President, the Secretary or any director.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first class mail, charges
prepaid, electronic mail, or by facsimile addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States Mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally, by telephone, electronic mail, or facsimile, it shall be
delivered at least forty eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors. When a vacancy or
vacancies prevents such a majority, a majority of the directors in office shall
constitute a quorum, provided that such majority shall constitute at least
one-third of the whole Board. A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
Nevada Revised Statutes or of the Articles of Incorporation or these bylaws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice unless so required by the Articles of Incorporation or
these bylaws.
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3.11 ADJOURNED MEETING NOTICE
If a quorum is not present at any meeting of the Board of Directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WTTROUT A MEETING
Unless otherwise restricted by the Articles of Incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, by consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Articles of Incorporation or these
bylaws, the Board of Directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the Articles of Incorporation
or by these bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors; provided, however, that, if the
stockholders of the corporation are entitled to cumulative voting, and less than
the entire board is to be removed, no director may be removed without cause if
the votes cast against his or her removal would not be sufficient to elect him
or her if cumulatively voted at an election of the entire Board of Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the Articles of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in the Nevada Revised Statutes, fix any of
the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for shares of any other class or classes or
any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under of the
Nevada Revised Statutes, (iii) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissoluton, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
Articles of Incorporation expressly so provide, no such committee shall have the
power or authority to declare a dividend, to authorize the issuance of stock, or
to adopt a certificate of ownership and merger pursuant to the Nevada Revised
Statutes.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone) , Section 3.7 (regular
meetings), Section 3.8 (special
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meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice),
Section 3.11 (adjournment and notice of adjournment), and Section 3.12 (action
without a meeting), with such changes in the context of these bylaws as are
necessary to substitute the committee and its members for the Board of Directors
and its members; provided, however, that the time of regular meetings of
committees may also be called by resolution of the Board of Directors and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
Board of Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board
of Directors choosing him, no officer other than the Chairman or Vice-Chairman
of the Board, if any, need be a director. Any number of offices may be held by
the same person, as the directors may determine.
5.2 ELECTION OF OFFICERS, TERM
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of section 5.3 of these bylaws,
shall be chosen by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment. Unless otherwise provided in the
resolution choosing him, each officer shall be chosen for a term which shall
continue until the meeting of the Board of Directors following the next annual
meeting of stockholders and until his successor shall have been chosen and
qualified.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or empower the President to appoint, such
other officers and agents as the business of the corporation may require, each
of whom shall hold office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the Board of Directors may from
time to time determine.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, it any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, it any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 AUTHORITY AND DUTIES OF OFFICERS
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. In addition to the
foregoing authority and duties, all officers of the corporation shall
respectively have such authority and perform such duties in the management of
the business of the corporation as may be designated from time to time by the
Board of Directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the Nevada Revised Statutes, indemnify each of its directors and officers
against expenses (including attorneys' fees), judgments, fines, settlements,
and other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that
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such person is or was an agent of the corporation. For purposes of this Section
6.1, a "director" or "officer" of the corporation includes any person (i) who is
or was a director or officer of the corporation, (ii) who is or was serving at
the request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the Nevada Revised Statutes, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the Nevada Revised Statutes.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the Board of Directors, keep a record of
its shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Nevada or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The Board of Directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount. This does not
include contracts necessary to conduct day to day operations.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be non-certificated shares. Any such
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resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of non-certificated shares shall
be entitled to have a certificate signed by, or in the name of the corporation
by the Chairman or Vice Chairman of the Board of Directors, or the President or
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of noncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in the Nevada Revised Statutes, in lieu of the
foregoing requirements there may be set forth on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or non-certificated shares in the place of
any certificate theretofore issued by it,
<PAGE>
20
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or non-certificated shares. The Board of Directors, at its option,
may waive the bond.
8.6 CONSTRUCTION, DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Nevada Revised Statutes shall govern the
construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person. The term "he" as used herein is inclusive of he and she.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the Articles of Incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the Nevada Revised Statutes. Dividends may be
paid in cash, in property, or in shares of the corporation's capital stock.
The directors of the corporation may set out of any of the funds of the
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors. The fiscal
year for the first year will end on December 31, 1997.
8.9 SEAL
The Corporation shall have power to have a corporate seal, which shall
be adopted and which may be altered by the Board of Directors, and the
corporation may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
<PAGE>
21
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the Nevada Revised Statutes.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its Articles of Incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of
Directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the
<PAGE>
22
proposed dissolution, then a certificate stating that the dissolution has been
authorized in accordance with the provisions of the Nevada Revised Statutes and
setting forth the names and residences of the directors and officers shall be
executed, acknowledged, and filed and shall become effective in accordance with
the Nevada Revised Statutes. Upon such certificate's becoming effective in
accordance with the Nevada Revised Statutes, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent
in writing, either in person or by duly authorized attorney, to a dissolution,
no meeting of directors or stockholders shall be necessary. The consent shall
be filed and shall become effective in accordance with the Nevada Revised
Statutes. Upon such consent's becoming effective in accordance with the Nevada
Revised Statutes, the corporation shall be dissolved. If the consent is signed
by an attorney, then the original power of attorney or a photocopy thereof shall
be attached to and filed with the consent. The consent filed with the Secretary
of State shall have attached to it the affidavit of the Secretary or some other
officer of the corporation stating that the consent has been signed by or on
behalf of all the stockholders entitled to vote on a dissolution; in addition,
there shall be attached to the consent a certification by the Secretary or some
other officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
<PAGE>
Exhibit 4.1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION, OR SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE
EVIDENCED BY AN OPINION OF THE WARRANT HOLDER'S COUNSEL, IN FORM ACCEPTABLE TO
THE CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT
FROM ANY PROPOSED TRAINSFER OR ASSIGNMENT.
COMMON STOCK PURCHASE WARRANT
AXONYX INC.
THIS CERTIFIES that for good and valuable consideration received,
___________________________________ or registered assignee (the "Holder") is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
acquire from Axonyx Inc., a Delaware corporation (the "Corporation") up to
_____________ fully paid and nonassessable shares of common stock, $0.001 par
value, of the Corporation ("Warrant Stock") at a purchase price per share (the
"Exercise Price") of $7.50.
1. TERM OF WARRANT.
Subject to the terms and conditions set forth herein, this Warrant shall be
exercisable, in whole or in part, at any time on or after the date hereof and at
or prior to 11:59 p.m., Pacific Standard Time, on October 1, 2001 (the
"Expiration Time"). Notwithstanding the foregoing, the Corporation shall have
the right, except as may be limited by law, other agreements or herein, to call
this Warrant for exercise, in whole or in part, by mailing written notice by
United States mail to the registered Holder hereof if the average closing bid
price for the Corporation's common stock, as quoted by the Nasdaq National
Market or any other established over-the-counter quotation service, is equal to
or greater than $15.00 per share, as adjusted pursuant to Section 11 hereof, for
any consecutive period of thirty days. In such event, this Warrant shall expire
and cease to be exercisable at 11:59 p.m. Pacific Standard Time, of the
twenty-first day after the date of mailing of the notice. Notwithstanding the
foregoing, the Company may not call this Warrant unless there is a current
registration statement covering the Warrant or the Warrant Stock.
<PAGE>
2. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable by the
registered Holder hereof, in whole or in part, at any time and from time to time
at or prior to the Expiration Time by the surrender of this Warrant and the
Notice of Exercise form attached hereto duly executed to the office of the
Corporation at 358 East 69th Street, New York, N.Y. 10021 (or such other office
or agency of the Corporation as it may designate by notice in writing to the
registered Holder hereof at the address of such Holder appearing on the books of
the Corporation), and upon payment of the Exercise Price for the shares thereby
purchased (by cash or by check or bank draft payable to the order of the
Corporation or by cancellation of indebtedness of the Corporation to the Holder
hereof, if any, at the time of exercise in an amount equal to the purchase price
of the shares thereby purchased); whereupon the Holder of this Warrant shall be
entitled to receive from the Corporation a stock certificate in proper form
representing the number of shares of Warrant Stock so purchased.
3. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OF SCRIP.
Certificates for shares purchased hereunder shall be delivered to the
Holder hereof by the Corporation's transfer agent at the Corporation's expense
within a reasonable time after the date on which this Warrant shall have been
exercised in accordance with the terms hereof. Each certificate so delivered
shall be in such denominations as may be requested by the Holder hereof and
shall be registered in the name of such Holder or, subject to applicable laws,
other name as shall be requested by such Holder. If, upon exercise of this
Warrant, fewer than all of the shares of Warrant Stock evidenced by this Warrant
are purchased prior to the Expiration Time, one or more new warrants
substantially in the form of, and on the terms in, this Warrant will be issued
for the remaining number of shares of Warrant Stock not purchased upon exercise
of this Warrant. The Corporation hereby represents and warrants that all shares
of Warrant Stock which may be issued upon the exercise of this Warrant will,
upon such exercise, be duly and validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issuance thereof (other than liens or charges created by or imposed upon the
Holder of the Warrant Stock). The Corporation agrees that the shares so issued
shall be and will be deemed to be issued to such Holder as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered for exercise in accordance with the terms hereof. No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. With respect to any fraction of a share called for
upon the exercise of this Warrant, an amount equal to such fraction multiplied
by the then current price at which each share may be purchased hereunder shall
be paid in cash to the Holder of this Warrant.
4. LOCK UP, REGISTRATION RIGHTS.
Pursuant to the terms of the Registration Rights Agreement signed in
conjunction with this Common Stock Purchase Warrant, certain piggy-back
registration rights apply to
<PAGE>
the Warrant Stock with regard to any registration statement filed by the
Corporation. The Corporation may, at the request of a managing underwriter or
placement agent, if any, impose on each Holder a so-called "lock up" period in
connection with an initial public offering or a merger, which lock-up period
will not exceed 12 months from the effective date of the Registration Statement
for such public offering or merger.
5. CHARGES, TAXES AND EXPENSES.
Issuance of certificates for shares of Warrant Stock upon the exercise of
this Warrant shall be made without charge to the Holder hereof for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Corporation,
and such certificates shall be issued in the name of the Holder of this Warrant
or in such name or names as may be directed by the Holder of this Warrant;
provided, however, that in the event certificates for shares of Warrant Stock
are to be issued in a name other than the name of the Holder of this Warrant,
this Warrant when surrendered for exercise shall be accompanied by an Assignment
Form to be provided by the Company duly executed by the Holder hereof.
6. NO RIGHTS AS SHAREHOLDERS.
This Warrant does not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Corporation prior to the exercise hereof.
7. EXCHANGE AND REGISTRY OF WARRANT.
This Warrant is exchangeable, upon the surrender hereof by the registered
Holder at the above mentioned office or agency of the Corporation, for a new
Warrant of like tenor and dated as of such exchange. The Corporation shall
maintain at the above-mentioned office or agency a registry showing the name and
address of the registered Holder of this Warrant. This Warrant may be
surrendered for exchange, transfer or exercise, in accordance with its terms, at
such office or agency of the Corporation, and the Corporation shall be entitled
to rely in all respects, prior to written notice to the contrary, upon such
registry.
8. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT.
Upon receipt by the Corporation of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant and in case of
loss, theft or destruction of indemnity or security reasonably satisfactory to
it, and upon reimbursement to the Corporation of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Corporation will make and deliver a new Warrant of like tenor and
dated as of such cancellation, in lieu of this Warrant.
<PAGE>
9. SATURDAYS, SUNDAYS AND HOLIDAYS.
If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall be a Saturday or a Sunday or shall
be a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
10. MERGER, SALE OF ASSETS, ETC.
If at any time the Corporation proposes to merge or consolidate with or
into any other corporation, effect any reorganization, or sell or convey all or
substantially all of its assets to any other entity, then, as a condition of
such reorganization, consolidation, merger, sale or conveyance, the Corporation
or its successor, as the case may be, shall enter into a supplemental agreement
to make lawful and adequate provision whereby the Holder shall have the right to
receive, upon exercise of the Warrant, the kind and amount of equity securities
which would have been received upon such reorganization, consolidation, merger,
sale or conveyance by a Holder of a number of shares of common stock equal to
the number of shares issuable upon exercise of the Warrant immediately prior to
such reorganization, consolidation, merger, sale or conveyance. If the property
to be received upon such reorganization, consolidation, merger, sale or
conveyance is not equity securities, the Corporation shall give the Holder of
this Warrant ten (10) business days prior written notice of the proposed
effective date of such transaction, and if this Warrant has not been exercised
by or on the effective date of such transaction, it shall terminate.
11. SUBDIVISION, COMBINATION, RECLASSIFICATION, CONVERSION, ETC.
If the Corporation at any time shall by subdivision, combination,
reclassification of securities or otherwise, change the Warrant Stock into the
same or a different number of securities of any class or classes, this Warrant
shall thereafter entitle the Holder to acquire such number and kind of
securities as would have been issuable in respect of the Warrant Stock (or other
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change) as the result of such change if this Warrant had been exercised in full
for cash immediately prior to such change. The Exercise Price hereunder shall be
adjusted if and to the extent necessary to reflect such change. If the Warrant
Stock or other securities issuable upon exercise hereof are subdivided or
combined into a greater or smaller number of shares of such security, the number
of shares issuable hereunder shall be proportionately increased or decreased, as
the case may be, and the Exercise Price shall be proportionately reduced or
increased, as the case may be, in both cases according to the ratio which the
total number of shares of such security to be outstanding immediately after such
even bears to the total number of shares of such security outstanding
immediately prior to such event. The Corporation shall give the Holder prompt
written notice of any change in the type of securities issuable hereunder, any
adjustment of the Exercise Price for the securities
<PAGE>
issuable hereunder, and any increase or decrease in the number of shares
issuable hereunder.
12. TRANSFERABILITY; COMPLIANCE WITH SECURITIES LAWS.
(a) This Warrant may not be transferred or assigned in whole or in part
without compliance with all applicable federal and state securities laws by the
transferor and transferee (including the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Corporation, if
requested by the Corporation). Subject to such restrictions, prior to the
Expiration Time, this Warrant and all rights hereunder are transferable by the
Holder hereof, in whole or in part, at the office or agency of the Corporation
referred to in Section 1 hereof. Any such transfer shall be made in person or by
the Holder's duly authorized attorney, upon surrender of this Warrant together
with the Assignment Form attached hereto properly endorsed.
(b) The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant and the Warrant Stock issuable upon exercise hereof are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued upon
exercise hereof except under circumstances that will not result in a violation
of the Securities Act of 1933, as amended, or any state securities laws. Upon
exercise of this Warrant, the Holder shall, if requested by the Corporation,
confirm in writing, in a form satisfactory to the Corporation, that the shares
of Warrant Stock so purchased are being acquired solely for Holder's own account
and not as a nominee for any other party, for investment, and not with a view
toward distribution or resale.
(c) The Warrant Stock has not been and will not be registered under the
Securities Act of 1933, as amended, and this Warrant may not be exercised except
by (i) the original purchaser of this Warrant from the Corporation or (ii) an
"accredited investor" as defmed in Rule 501(a) under the Securities Act of 1933,
as amended. Each certificate representing the Warrant Stock or other securities
issued in respect of the Warrant Stock upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES
FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
<PAGE>
SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION
OF SUCH REGISRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR
ASSIGINMENT.
13. REPRESENTATIONS AND WARRANTIES.
The Corporation hereby represents and warrants to the Holder hereof that:
(a) during the period this Warrant is outstanding, the Corporation will
reserve from its authorized and unissued common stock a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise of this
Warrant;
(b) the issuance of this Warrant shall constitute full authority to the
Corporation's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares of
Warrant Stock issuable upon exercise of this Warrant;
(c) the Corporation has all requisite legal and corporate power to execute
and deliver this Warrant to sell and issue the Warrant Stock hereunder, to issue
the common stock issuable upon exercise of the Warrant Stock and to carry out
and perform its obligations under the terms of this Warrant; and
(d) all corporate action on the part of the Corporation, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Warrant by the Corporation, the authorization, sale,
issuance and delivery of the Warrant Stock, the grant of registration rights as
provided herein and the performance of the Corporation's obligations hereunder
has been taken;
(e) the Warrant Stock, when issued in compliance with the provisions of
this Warrant and the Corporation's Certificate of Incorporation (as they may be
amended from time to time, will be validly issued, fully paid and nonassessable,
and free of all taxes, liens or encumbrances with respect to the issue thereof,
and will be issued in compliance with all applicable federal and state
securities laws; and
(d) the issuance of the Warrant Stock will not be subject to any preemptive
rights, rights of first refusal or similar rights.
14. CORPORATION GOOD FAITH.
The Corporation will not, by amendment of its Certificate of Incorporation
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Corporation, but will at all times
in good faith assist in the carrying out of all the
<PAGE>
provisions of this Warrant and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of the
Warrant against impairment.
15. GOVERNING LAW.
This Warrant shall be governed by and construed in accordance with the laws of
the State of Washington.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officers.
Dated:
AXONYX INC.
By:
------------------------------
Marvin S. Hausman, President & CEO
<PAGE>
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, dated as of the ___ day of , 1998, between the person whose
name and address appears in the Purchaser Questionnaire (individually, a
"Holder" or, collectively with the holders of the Securities issued in the
Offering, each as defined below, the "Holders"), and AXONYX INC., with its
principal executive offices at 358 East 69th Street, New York, NY 10021 (the
"Company").
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Holders are purchasing from the Company (the "Offering") an aggregate of up
to ________ units (the "Units"), each Unit consisting of 5,000 shares (the
"Shares") of Common Stock, $.001 par value (the "Common Stock") of the Company
and 5,000 Warrants to purchase shares of Common Stock (the "Warrant Shares").
WHEREAS, the Company desires to grant to the Holder the registration rights
set forth herein with respect to the Warrant Shares issuable upon exercise of
the Warrants;
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. REGISTRABLE SECURITIES. As used herein the term "Registrable Security"
means each of the Warrant Shares; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Securities Act of 1933, as amended (the "Securities Act")
and disposed of pursuant thereto, or (ii) registration under the Securities Act
is no longer required for the immediate public distribution of such security.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 1.
For purposes hereof, Registrable Securities does not include the Shares.
2. PIGGYBACK REGISTRATION. If, during the term of the Warrants, the Company
proposes to prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement covering equity or debt securities of the
Company, or any such securities of the Company held by its shareholders or the
security holders of the Company (in any such case, other than in connection with
a merger, acquisition or pursuant to Form S-8 or successor form) (for purposes
of this Section 2, collectively, a "Registration Statement"), it will give
written notice of its intention to do so by registered mail ("Notice"), at least
thirty (30) days prior to the filing of each such Registration Statement, to all
holders of the Registrable Securities. Upon the written request of such a
<PAGE>
holder (a "Requesting Holder"), made within twenty (20) days after receipt of
the Notice, that the Company include any of the Requesting Holder's Registrable
Securities in the proposed Registration Statement, the Company shall, as to each
such Requesting Holder, use its best efforts to effect the registration under
the Securities Act of the Registrable Securities which it has been so requested
to register ("Piggyback Registration"), at the Company's sole cost and expense
and at no cost or expense to the Requesting Holders except as provided in
Section 4(b) hereof.
3. DEFERRAL OR LIMITATION OF REGISTRATION. Notwithstanding the provisions
of Section 2 above, (i) the Company shall have the right at any time after it
shall have given written notice pursuant to Section 2 (irrespective of whether
any written request for inclusion of such securities shall have already been
made) to elect not to file any such proposed Registration Statement, or to
withdraw the same after the filing but prior to the effective date thereof; or
(ii) if the Company's managing underwriter, if any, of an initial public
offering for which a Registration Statement has been filed so requests in
writing, the Registrable Securities can be limited or excluded from the
Registration Statement.
4. COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION.
The Company covenants and agrees as follows:
(a) In connection with any registration filed pursuant hereto, the
Company shall use its best efforts to cause the Registration Statement to become
effective as promptly as possible and, if any stop order shall be issued by the
Commission in connection therewith, to use its reasonable efforts to obtain the
removal of such order. Following the effective date of a Registration Statement,
the Company shall, upon the request of the Holder, forthwith supply such
reasonable number of copies of the Registration Statement, preliminary
prospectus and prospectus meeting the requirements of the Securities Act, and
other documents necessary or incidental to the public offering of the
Registrable Securities, as shall be reasonably requested by the Holder to permit
the Holder to make a public distribution of the Holder's Registrable Securities.
The obligations of the Company hereunder with respect to the Holder's
Registrable Securities are subject to the Holder's furnishing to the Company
such appropriate information concerning the Holder, the Holder's Registrable
Securities and the terms of the Holder's offering of such Registrable Securities
as the Company may reasonably request in writing.
(b) The Company shall pay all costs, fees and expenses in connection
with all Registration Statements filed pursuant to Section 2 hereof including,
without limitation, the Company's legal and accounting fees, printing expenses,
and blue sky fees and expenses; provided, however, that the Holder shall be
solely responsible for the fees of any counsel retained by the Holder in
connection with such registration and any transfer taxes or underwriting
discounts, commissions or fees applicable to the Registrable Securities sold by
the Holder pursuant thereto.
<PAGE>
(c) The Company will take all necessary action which may be required
in qualifying or registering the Registrable Securities included in a
Registration Statement for offering and sale under the securities or blue sky
laws of such states as are reasonably requested by the holders of such
securities, provided that the Company shall not be obligated to execute or file
any general consent to service of process or to qualify as a foreign corporation
to do business under the laws of any such jurisdiction.
(d) The Company will take all necessary action required to keep any
Registration Statement filed pursuant to Section 2 hereof current during the
term of the Warrants.
5. ADDITIONAL TERMS.
(a) The Company shall indemnify and hold harmless the Holder and each
underwriter, within the meaning of the Securities Act, who may purchase from or
sell for the Holder, any Registrable Securities, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in the Registration Statement, any other registration
statement filed by the Company under the Securities Act with respect to the
registration of the Registrable Securities, any post-effective amendment to such
registration statements, or any prospectus included therein or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission based upon information furnished or required to be furnished in
writing to the Company by the Holder or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls either the
Holder or underwriter within the meaning of the Securities Act and each officer,
director, employee and agent of the Holder and underwriter; provided, however,
that the indemnification in this Section 5(a) with respect to any prospectus
shall not inure to the benefit of the Holder or underwriter (or to the benefit
of any person controlling the Holder or underwriter) on account of any such
loss, claim, damage or liability arising from the sale of Registrable Securities
by the Holder or underwriter, if a copy of a subsequent prospectus correcting
the untrue statement or omission in such earlier prospectus was provided to the
Holder or underwriter by the Company prior to the subject sale and the
subsequent prospectus was not delivered or sent by the Holder or underwriter to
the purchaser prior to such sale and provided further, that the Company shall
not be obligated to so indemnify the Holder or any such underwriter or other
person referred to above unless the Holder or underwriter or other person, as
the case may be, shall at the same time indemnify the Company, its directors,
each officer signing the Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act, from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the Registration Statement, any
registration statement or any prospectus required to be filed or furnished by
reason of this Agreement or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue
<PAGE>
statement or omission based upon information furnished in writing to the Company
by the Holder or underwriter expressly for use therein.
(b) If for any reason the indemnification provided for in the
preceding section is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
(c) Neither the filing of a Registration Statement by the Company
pursuant to this Agreement nor the making of any request for prospectuses by the
Holder shall impose upon the Holder any obligation to sell the Holder's
Registrable Securities.
(d) The Holder, upon receipt of notice from the Company that an event
has occurred which requires a Post-Effective Amendment to the Registration
Statement or a supplement to the prospectus included therein, shall promptly
discontinue the sale of Registrable Securities until the Holder receives a copy
of a supplemented or amended prospectus from the Company, which the Company
shall provide as soon as practicable after such notice.
(e) If the Company fails to keep the Registration Statement referred
to above continuously effective during the requisite period, then the Company
shall, promptly upon the request of the Holders of at least a majority of the
unsold Registrable Securities, use its best efforts to update the Registration
Statement or file a new registration statement covering the Registrable
Securities remaining unsold, subject to the terms and provisions hereof.
(f) The Holder agrees to provide the Company with any information or
undertakings reasonably requested by the Company in order for the Company to
include any appropriate information concerning the Holder in the Registration
Statement or in order to promote compliance by the Company or the Holders with
the Securities Act.
6. GOVERNING LAW. The Registrable Securities will be, if and when issued,
delivered in Washington. This Agreement shall be deemed to have been made and
delivered in the State of Washington and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
substantive laws of the State of Washington, without giving effect to the choice
of law rules thereof.
7. AMENDMENT. This Agreement may only be amended by a written instrument
executed by the Company and the Holder.
<PAGE>
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
10. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows: If to the Holder, to his, her or its address set forth in
the Purchaser Questionnaire. If to the Company, to the address set forth on the
first page of this Agreement.
11. BINDING EFFECT BENEFITS. The Holder may assign his, her or its rights
hereunder. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective heirs, legal representatives and
successors. Nothing herein contained, express or implied, is intended to confer
upon any person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
12. HEADINGS. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
13. SEVERABILILY. Any provision of this Agreement which is held by a court
of competent jurisdiction to be prohibited or unenforceable in any jurisdictions
shall be, as to such jurisdictions, ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceabilityof such provision in
any other jurisdiction.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
AXONYX INC.
By:
----------------------------------------
Marvin Hausman, President, CEO
HOLDER
-------------------------------------------
Name:
--------------------------------------
<PAGE>
Exhibit 4.3
AXONYX INC.
CONVERTIBLE NOTE
CONTENTS
1. Interest
2. Payment
(a) Interest
(b) Principal
(c) Manner and Place of Payment
3. Prepayment
4. Conversion Rights
(a) Right to Convert
(b) Fractional Shares
(c) Capital Adjustments
(d) Conversion Prices
5. Default
6. Remedies upon Default
(a) Acceleration
(b) Remedies at Law and in Equity
7. Attorneys' Fee, Costs, and Other Expenses
8. Assignment; Obligations Binding on Successors
9. Notices
10. Governing Law
11. Headings
12. Entire Agreement
13. Waiver
THE SECURITIES REPRESENTED BY THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT"), AND IF ISSUED, THE SHARES WILL BE ISSUED PURSUANT
TO REGULATIONS D, RULE 505, UNDER THE ACT. THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UNDER SATISFACTION OF
CERTAIN CONDITIONS OR EXEMPTIONS FROM REGISTRATION.
<PAGE>
AXONYX INC.
NINE PERCENT CONVERTIBLE NOTE
$125,000.00 Due: May 1, 2000
Date of Note: April 27, 1998 New York, New York
Axonyx Inc., a Delaware corporation (the "Maker"), promises to pay to the
order of Boundary Bay Investments, Ltd. (the "Purchaser") the principal sum of
One Hundred Twenty Five Thousand ($125,000) dollars (the "Principal Sum")
together with interest, upon the terms and conditions provided in this
Convertible Note (the "Note").
1. INTEREST.
The unpaid balance of the Principal Sum shall bear simple interest at a
fixed rate equal to Nine Percent (9%) from the date of this note until such
balance is paid or the debt is converted to common stock of Axonyx Inc., as
outlined in the Subscription Agreement.
2. PAYMENT.
(a) INTEREST. Maker shall pay accrued interest to Purchaser on each
anniversary of the Date of Note (the "Interest Payment Date") beginning with the
first Interest Payment Date that is twelve months from the date of this Note;
except that all accrued interest shall be paid at the time the principal amount
is paid in full.
(b) PRINCIPAL. Maker shall pay Purchaser the outstanding Principal Sum on
or before May 1, 2000.
(c) MANNER AND PLACE OF PAYMENT. All payments shall be made by checks drawn
on Maker's corporate bank account and shall be in U.S. Dollars. All payments
shall be made to Purchaser at the address specified in Section 9 or at such
other place as Purchaser may specify in writing.
3. PREPAYMENT.
Maker may prepay any amount owing under this Note without premium or
penalty by giving written notice 30 days before the date of prepayment of intent
to prepay.
All notices of prepayment shall state: (1) the prepayment date; (2) the
principal amount of the Note to be redeemed, if less than the entire principal
amount of this Note; (3) that on the prepayment date, the prepayment price will
become due and payable upon this Note or any portion thereof, and that interest
thereof or any portion thereon shall cease to accrue on and after said payment
date; and (5) the current conversion price and
<PAGE>
the date on which the right to convert this Note or portion thereof into capital
stock will expire.
Any Note which is to be prepaid only in part shall be surrendered in
exchange for a new Note in an aggregate principal amount equal to the unprepaid
portion of the principal of the Note surrendered and paid for by the Maker.
4. CONVERSION RIGHTS.
(a) RIGHT TO CONVERT. At any time prior to expiration of the prepayment
notice period described in Paragraph 3 or, if no such notice is given, to
maturity of this Note, the Purchaser has the right, at its option, to convert
this Note into shares of Maker's $0.001 par value common stock (the "Common
Stock") by giving a written notice that it is exercising its rights hereunder
and surrendering the Note for that purpose to the Maker. The number of shares of
common stock of the Maker that Purchaser shall be entitled to receive upon such
conversion shall be determined by dividing the unpaid balance of the Principal
Sum by Four (U.S. $4.00) dollars (the "Conversion Factor"). All accrued and
unpaid interest at the time of the conversion shall be paid in cash and shall
not be treated as part of the unpaid balance of the Principal Sum.
(b) FRACTIONAL SHARES. The Maker shall not be required to issue fractional
shares upon conversion of the Note, but shall pay in cash, in lieu of such
fractional interest, an amount equal to the difference between the unpaid
balance of the Principal Sum and the product of the Conversion Factor times the
number of whole shares determined under Paragraph 4(a).
(c) CAPITAL ADJUSTMENTS. If this Note is converted, as provided in
Paragraph 4(a), subsequent to any share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of shares, separation,
reorganization, or liquidation ("Capital Adjustments") occurring after the date
hereof, as a result of which shares of any class shall be issued in respect of
outstanding Common Stock or Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes, the
Purchaser shall receive the aggregate number and class of shares which, if this
Note had been converted at the date hereof ("Deemed Conversion") and Common
Stock received upon the Deemed Conversion had not been disposed of, the
Purchaser would be holding, at the time of actual conversion, as a result of the
Deemed Conversion and such Capital Adjustments.
(d) CONVERSION PRICE. The Purchaser of this note may, at his, her or its
option, convert this Note into shares of $.001 par value common stock of the
Maker at the following rates: one share of common stock for each Four ($4.00)
dollars of principal (the "Conversion Price") any time prior to when the Maker
acquires, mergers or consolidates with a public Maker, undertakes an Initial
Public Offering or until the Note matures. This Note is an unsecured obligation
of the Maker and the payment of the principle and interest is not subordinated
to the prior or future obligations of the Maker,
<PAGE>
or any successor corporation. There is no legal limitation upon the incurring of
additional indebtedness that may be incurred by the Maker.
This Note is subject to prepayment at any time at the option of the Maker.
No sinking fund has been established for such prepayment. The right to convert
to common stock by the holder of this Note will be lost unless it is exercised
prior to prepayment.
5. DEFAULT.
The term "Default" as used in this Note means any of the following events:
(i) Maker at any time fails to pay any interest payment due on this Note
within 45 days of the time that it receives notice from Purchaser that such
payment is past due, or Maker fails to pay any payment of principal due on this
Note within 15 days of the time that it receives notice from Purchaser that such
payment is past due; or
(ii) Maker admits, in writing, its inability to pay its debts as they
become due.
6. REMEDIES UPON DEFAULT.
(a) ACCELERATION. Upon Default, Purchaser may, by written notice to Maker,
accelerate the due date of the Principal Sum owing under this Note. Such
accelerated amounts shall become immediately due and payable upon receipt of
such notice by Maker.
(b) REMEDIES AT LAW AND IN EQUITY. If Purchaser accelerates the amounts
owing under this Note, Purchaser shall have the right to pursue any or all
remedies available at law or in equity, including, but not limited to, the right
to bring suit on this Note.
7. ATTORNEYS' FEES, COSTS, AND OTHER EXPENSES.
Maker agrees to pay all costs and expenses which Purchaser may incur in
enforcing this Note upon Default, including, but not limited to, reasonable
attorneys' fees, expenses and costs incurred in any action undertaken with
respect to this Note, or any appeal of such an action.
8. ASSIGNMENT; OBLIGATIONS BINDING ON SUCCESSORS.
Maker may not assign any of its rights, duties, or obligations under this
Note without the prior written consent of Purchaser. This Note shall bind Maker
and its successors and assigns. All rights and powers established in this Note
shall benefit Purchaser and Purchaser's successors and assigns; provided,
however, that all transfers of this Note by Purchaser are subject to the
restrictions described in the legend at the end of this Note.
<PAGE>
9. NOTICES.
All notices, requests, consents, payments and other communications required
or provided for herein to any party shall be in writing, and shall be deemed to
be given when: (a) delivered in person; (b) sent by first class registered or
certified mail with postage prepaid; (c) delivered by overnight receipted
courier service; or (d) except with respect to payments, sent by confirmed
facsimile transmission. Notices shall be sent to the addresses set forth below,
or to such other addresses as may hereafter be designated in writing by the
party:
(i) If to the Maker:
Axonyx Inc.
4041 State Hwy 14
Box 910, Stevenson, WA 98648
(ii) If to Purchaser:
Boundary Bay Investments, Ltd.
9 Church Street
Hamilton HM DX Bermuda
10. GOVERNING LAW.
This Note will be construed, and the rights, duties and obligations of the
parties will be determined, in accordance with the laws of the State of New
York.
11. HEADINGS.
Headings used in this Note have been included for convenience and ease of
reference only, and will not in any manner influence the construction or
interpretation of any provision of this Note.
12. ENTIRE AGREEMENT.
This Note and the Convertible Note Subscription Agreement represent the
entire understanding of the parties with respect to the transaction giving rise
to the issuance of the Note. There are no other prior or contemporaneous
agreements, either written or oral, between the parties with respect to this
subject.
13. WAIVER.
No right or obligation under this Note will be deemed to have been waived
unless evidenced by a writing signed by the party against whom the waiver is
asserted, or by the party's duly authorized representative. Any waiver will be
effective only with respect to the specific instance involved, and will not
impair or limit the right of the waiving party
<PAGE>
to insist upon strict performance of the right or obligation in any other
instance, in any other respect, or at any other time.
MAKER: Axonyx Inc.
By: /s/ Marvin S. Hausman, M.D.
--------------------------------------
Marvin S. Hausman, President &CEO
<PAGE>
Exhibit 4.4
AXONYX INC.
CONVERTIBLE NOTE
CONTENTS
1. Interest
2. Payment
(a) Interest
(b) Principal
(c) Manner and Place of Payment
3. Prepayment
4. Conversion Rights
(a) Right to Convert
(b) Fractional Shares
(c) Capital Adjustments
(d) Conversion Prices
5. Default
6. Remedies upon Default
(a) Acceleration
(b) Remedies at Law and in Equity
7. Attorneys' Fee, Costs, and Other Expenses
8. Assignment; Obligations Binding on Successors
9. Notices
10. Governing Law
11. Headings
12. Entire Agreement
13. Waiver
THE SECURITIES REPRESENTED BY THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT"), AND IF ISSUED, THE SHARES WILL BE ISSUED PURSUANT
TO REGULATIONS D, RULE 505, UNDER THE ACT. THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UNDER SATISFACTION OF
CERTAIN CONDITIONS OR EXEMPTIONS FROM REGISTRATION.
<PAGE>
AXONYX INC.
NINE PERCENT CONVERTIBLE NOTE
$75,000.00 Due: September 1, 2000
Date of Note: September 1, 1998 New York, New York
Axonyx Inc., a Delaware corporation (the "Maker"), promises to pay to the
order of Boundary Bay Investments, Ltd. (the "Purchaser") the principal sum of
Seventy Five Thousand ($75,000) dollars (the "Principal Sum") together with
interest, upon the terms and conditions provided in this Convertible Note (the
"Note").
1. INTEREST.
The unpaid balance of the Principal Sum shall bear simple interest at a
fixed rate equal to Nine Percent (9%) from the date of this note until such
balance is paid or the debt is converted to common stock of Axonyx Inc., as
outlined in the Subscription Agreement.
2. PAYMENT.
(a) INTEREST. Maker shall pay accrued interest to Purchaser on each
anniversary of the Date of this Note (the "Interest Payment Date") beginning
with the first Interest Payment Date that is twelve months from the date of this
Note; except that all accrued interest shall be paid at the time the principal
amount is paid in full.
(b) PRINCIPAL. Maker shall pay Purchaser the outstanding Principal Sum on
or before September 1, 2000.
(c) MANNER AND PLACE OF PAYMENT. All payments shall be made by checks drawn
on Maker's corporate bank account and shall be in U.S. Dollars. All payments
shall be made to Purchaser at the address specified in Section 9 or at such
other place as Purchaser may specify in writing.
3. PREPAYMENT.
Maker may prepay any amount owing under this Note without premium or
penalty by giving written notice 30 days before the date of prepayment of intent
to prepay.
All notices of prepayment shall state: (1) the prepayment date; (2) the
principal amount of the Note to be redeemed, if less than the entire principal
amount of this Note; (3) that on the prepayment date, the prepayment price will
become due and payable upon this Note or any portion thereof, and that interest
thereof or any portion thereon shall cease to accrue on and after said payment
date; and (5) the current conversion price and
<PAGE>
the date on which the right to convert this Note or portion thereof into capital
stock will expire.
Any Note which is to be prepaid only in part shall be surrendered in
exchange for a new Note in an aggregate principal amount equal to the unprepaid
portion of the principal of the Note surrendered and paid for by the Maker.
4. CONVERSION RIGHTS.
(a) RIGHT TO CONVERT. At any time prior to expiration of the prepayment
notice period described in Paragraph 3 or, if no such notice is given, to
maturity of this Note, the Purchaser has the right, at its option, to convert
this Note into shares of Maker's $0.001 par value common stock (the "Common
Stock") by giving a written notice that it is exercising its rights hereunder
and surrendering the Note for that purpose to the Maker. The number of shares of
common stock of the Maker that Purchaser shall be entitled to receive upon such
conversion shall be determined by dividing the unpaid balance of the Principal
Sum by Four (U.S. $4.00) dollars (the "Conversion Factor"). All accrued and
unpaid interest at the time of the conversion shall be paid in cash and shall
not be treated as part of the unpaid balance of the Principal Sum.
(b) FRACTIONAL SHARES. The Maker shall not be required to issue fractional
shares upon conversion of the Note, but shall pay in cash, in lieu of such
fractional interest, an amount equal to the difference between the unpaid
balance of the Principal Sum and the product of the Conversion Factor times the
number of whole shares determined under Paragraph 4(a).
(c) CAPITAL ADJUSTMENTS. If this Note is converted, as provided in
Paragraph 4(a), subsequent to any share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of shares, separation,
reorganization, or liquidation ("Capital Adjustments") occurring after the date
hereof, as a result of which shares of any class shall be issued in respect of
outstanding Common Stock or Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes, the
Purchaser shall receive the aggregate number and class of shares which, if this
Note had been converted at the date hereof ("Deemed Conversion") and Common
Stock received upon the Deemed Conversion had not been disposed of, the
Purchaser would be holding, at the time of actual conversion, as a result of the
Deemed Conversion and such Capital Adjustments.
(d) CONVERSION PRICE. The Purchaser of this note may, at his, her or its
option, convert this Note into shares of $.001 par value common stock of the
Maker at the following rates: one share of common stock for each Four ($4.00)
dollars of principal (the "Conversion Price") any time prior to when the Maker
acquires, mergers or consolidates with a public Maker, undertakes an Initial
Public Offering or until the Note matures. This Note is an unsecured obligation
of the Maker and the payment of the principle and interest is not subordinated
to the prior or future obligations of the Maker,
<PAGE>
or any successor corporation. There is no legal limitation upon the incurring of
additional indebtedness that may be incurred by the Maker.
This Note is subject to prepayment at any time at the option of the Maker.
No sinking fund has been established for such prepayment. The right to convert
to common stock by the holder of this Note will be lost unless it is exercised
prior to prepayment.
5. DEFAULT.
The term "Default" as used in this Note means any of the following events:
(i) Maker at any time fails to pay any interest payment due on this Note
within 45 days of the time that it receives notice from Purchaser that such
payment is past due, or Maker fails to pay any payment of principal due on this
Note within 15 days of the time that it receives notice from Purchaser that such
payment is past due; or
(ii) Maker admits, in writing, its inability to pay its debts as they
become due.
6. REMEDIES UPON DEFAULT.
(a) ACCELERATION. Upon Default, Purchaser may, by written notice to Maker,
accelerate the due date of the Principal Sum owing under this Note. Such
accelerated amounts shall become immediately due and payable upon receipt of
such notice by Maker.
(b) REMEDIES AT LAW AND IN EQUITY. If Purchaser accelerates the amounts
owing under this Note, Purchaser shall have the right to pursue any or all
remedies available at law or in equity, including, but not limited to, the right
to bring suit on this Note.
7. ATTORNEYS' FEES, COSTS, AND OTHER EXPENSES.
Maker agrees to pay all costs and expenses which Purchaser may incur in
enforcing this Note upon Default, including, but not limited to, reasonable
attorneys' fees, expenses and costs incurred in any action undertaken with
respect to this Note, or any appeal of such an action.
8. ASSIGNMENT; OBLIGATIONS BINDING ON SUCCESSORS.
Maker may not assign any of its rights, duties, or obligations under this
Note without the prior written consent of Purchaser. This Note shall bind Maker
and its successors and assigns. All rights and powers established in this Note
shall benefit Purchaser and Purchaser's successors and assigns; provided,
however, that all transfers of this Note by Purchaser are subject to the
restrictions described in the legend at the end of this Note.
<PAGE>
9. NOTICES.
All notices, requests, consents, payments and other communications required
or provided for herein to any party shall be in writing, and shall be deemed to
be given when: (a) delivered in person; (b) sent by first class registered or
certified mail with postage prepaid; (c) delivered by overnight receipted
courier service; or (d) except with respect to payments, sent by confirmed
facsimile transmission. Notices shall be sent to the addresses set forth below,
or to such other addresses as may hereafter be designated in writing by the
party:
(i) If to the Maker:
Axonyx Inc.
4041 State Hwy 14
Box 910, Stevenson, WA 98648
(ii) If to Purchaser:
Boundary Bay Investments, Ltd.
9 Church Street
Hamilton HM DX Bermuda
10. GOVERNING LAW.
This Note will be construed, and the rights, duties and obligations of the
parties will be determined, in accordance with the laws of the State of New
York.
11. HEADINGS.
Headings used in this Note have been included for convenience and ease of
reference only, and will not in any manner influence the construction or
interpretation of any provision of this Note.
12. ENTIRE AGREEMENT.
This Note and the Convertible Note Subscription Agreement represent the
entire understanding of the parties with respect to the transaction giving rise
to the issuance of the Note. There are no other prior or contemporaneous
agreements, either written or oral, between the parties with respect to this
subject.
13. WAIVER.
No right or obligation under this Note will be deemed to have been waived
unless evidenced by a writing signed by the party against whom the waiver is
asserted, or by the party's duly authorized representative. Any waiver will be
effective only with respect to the specific instance involved, and will not
impair or limit the right of the waiving party
<PAGE>
to insist upon strict performance of the right or obligation in any other
instance, in any other respect, or at any other time.
MAKER: Axonyx Inc.
By: /s/ Marvin S. Hausman, M.D.
-------------------------------------------
Marvin S. Hausman, President &CEO
<PAGE>
Exhibit 10.1
AXONYX INC.
1998 STOCK OPTION PLAN
(ADOPTED BY THE BOARD OF DIRECTORS DECEMBER 1, 1998)
(APPROVED BY THE SHAREHOLDERS DECEMBER 4, 1998)
1. PURPOSE.
This 1998 Stock Option Plan is intended to encourage stock ownership in
Axonyx Inc. by the officers, directors, employees, consultants, and advisors of
the Company or its affiliates in order to promote their interest in the success
of the Company and to encourage their continued affiliation. All options granted
under this 1998 Stock Option Plan are intended to be either (a) Incentive Stock
Options or (b) Non-Statutory Stock Options.
2. DEFINITIONS.
As used herein the following definitions shall apply:
"Act" shall mean the Securities Exchange Act of 1934, as amended from time
to time.
"Affiliate" shall mean any corporation defined as a "parent corporation" or
a "subsidiary corporation" by Code Section 424(e) and (f), respectively.
"Agreement" shall mean either a 1998 Incentive Stock Option Agreement or a
1998 Non-Statutory Stock Option Agreement, embodying the terms of the agreement
between the Company and the Optionee with respect to Optionee's Option.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time. "Company" shall mean Axonyx Inc., a Nevada corporation.
"Consultant" shall mean any person who is placed on the Company's
Consultants List by the Board and who agrees in writing to be included thereon.
"Disability" or "Disabled" shall mean the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code or any successor provision.
"Director" shall mean an individual member of the Board.
1
<PAGE>
"Disinterested Person" means a Director: (i) who was either (A) not during
the one year prior to service as a member of the Committee administering the
Plan granted or awarded equity securities pursuant to the Plan or any other plan
of the Company or any of its affiliates entitling the participants therein to
acquire equity securities of the Company or any of its Affiliates except as
permitted by Rule 16b-3(c)(2)(i), or (B) who is otherwise considered to be a
"disinterested person" in accordance with Rule 16b-3(c)(2)(i), or any other
applicable rules, regulations or interpretations of the Securities Exchange
Commission; and (ii) who either (A) is not a current Employee, is not a former
Employee receiving compensation for prior services (other than benefits under a
tax qualified pension plan), was not an officer of the Company or an Affiliate
at any time, and is not currently receiving compensation for personal services
in any capacity other than as a Director, or (B) is otherwise considered an
outside director for purposes of Section 162(m) of the Code.
"Employee" shall mean any salaried employee of the Company or its
Affiliates, including those employees who are officers of the Company or its
Affiliates.
"ERISA" shall mean the Employee Retirement Income Security Act or the rules
thereunder, as amended from time to time.
"Fair Market Value" of Stock on a given date shall mean an amount per share
as determined by the Board or its delegates by applying any reasonable valuation
method determined without regard to any restriction other than a restriction
which, by its terms, will never lapse. Notwithstanding the preceding, if the
Stock is traded upon an established stock exchange, then the "Fair Market Value"
of Stock on a given date per share shall be deemed to be the average of the
highest and lowest selling price per share of the Stock on the principal stock
exchange on which the Stock is then trading or, if there was no trading of the
Stock on that day, on the next preceding day on which there was such trading; if
the Stock is not traded upon an established stock exchange but is quoted on a
quotation system, the "Fair Market Value" of Stock on a given date shall be
deemed to be the mean between the closing representative "bid" and "ask" prices
per share of the Stock on such date as reported by such quotation system or, if
there was no trading of the Stock on that day, on the next preceding day on
which there was such trading.
"Incentive Stock Option" shall mean an option granted pursuant to the Plan
which is designated by the Board or its delegates as an "Incentive Stock Option"
and which qualifies as an incentive stock option under Section 422 of the Code
or any successor provision.
"Non-Statutory Stock Option" shall mean a stock option granted pursuant to
the Plan which is not an Incentive Stock Option.
"Option" shall refer to either or both an Incentive Stock Option or
Non-Statutory Stock Option, as the context shall indicate.
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"Optionee" shall mean the recipient of an Incentive Stock Option or a
Non-Statutory Stock Option.
"Option Price" shall mean the price per share of Stock to be paid by the
Optionee upon exercise of the Option.
"Option Stock" shall mean the total number of shares of Stock the Optionee
shall be entitled to purchase pursuant to the Agreement.
"Plan" shall mean this Axonyx 1998 Stock Option Plan, as amended from time
to time.
"Reporting Person" shall mean an Optionee who is required to file
statements relating to his or her beneficial ownership of Stock with the SEC
pursuant to Section 16(a) of the Act.
"Rule 16b-3" shall mean Rule 16b-3 (as amended from time to time),
promulgated by the SEC under the Act, and any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Stock" shall mean the $0.001 par value Common Stock of the Company.
3. ADMINISTRATION.
The Plan shall be administered by the Board; provided, however, that the
Board may delegate all or any part of its authority to administer the Plan in
its entirety or, with respect to any group or groups of persons eligible to
receive Options hereunder, to such committee as the Board shall in its sole
discretion determine. Such committee shall be composed of not fewer than two
members (the "Committee"), all of the members of which Committee shall be
Disinterested Persons, if required. The requirement that any member of the
Committee be a Disinterested Person shall not apply if the Board or the
Committee expressly declares that such requirement shall not apply. Any
Disinterested Person shall comply with the requirements of Rule 16b-3. The Board
or its Committee may adopt, amend and rescind such rules and regulations for
carrying out the Plan and implementing agreements and take such actions as it
deems proper. The interpretation, construction and application by the Board or
its Committee of any of the provisions of the Plan or any Option granted
thereunder shall be final and binding on the Company, all Optionees, their legal
representatives, and any person who may acquire an Option directly from an
Optionee by permitted transfer, bequest or inheritance. Reference to
administrative acts by the Board in the Plan shall also refer to acts by its
Committee, unless the context otherwise indicates. Whether or not the Board has
delegated administrative authority, the
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Board has the final power to determine all questions of policy or expediency
that may arise in administration of the Plan.
4. ELIGIBILITY.
Only Employees are eligible to receive Incentive Stock Options under the
Plan Employees, Officers, Directors, Consultants and Advisors of the Company or
its Affiliates are eligible to receive Non-Statutory Stock Options under the
Plan.
No person shall be eligible to receive an Option for a larger number of
shares than is recommended for him or her by the Board. Any Optionee may hold
more than one Option (whether Incentive Stock Options, Non-Statutory Stock
Options, or both), but only on the terms and conditions and subject to the
restrictions set forth herein.
Incentive Stock Options granted to an Employee who owns stock at the time
the Incentive Stock Option is granted, representing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company and
its Affiliates, shall be granted at an Option Price at least one hundred ten
percent (110%) of the Fair Market Value of the Stock at the time the Incentive
Stock Option is granted. In determining ownership of Stock by an Employee, the
attribution standards set forth in Code Section 424(d) shall be applicable.
5. STOCK SUBJECT TO THE PLAN.
Options granted under the Plan shall be for shares of the Company's
authorized but unissued or re-acquired Stock. The aggregate number of shares of
Stock which may be subject to Options pursuant to the Plan shall not exceed one
million (1,000,000) shares, unless adjusted by the Board pursuant to Paragraph
6(l). Stock issued under other stock option plans of the Company shall not be
counted against the maximum number of shares that can be issued under the Plan.
In the event that any outstanding Option expires or is terminated for any
reason, the shares of Stock allocable to the unexercised portion of such Option
may again be subject to an Option under the Plan.
If an Optionee pays all or part of any Option Price with shares of Stock,
the number of shares deemed to be issued to the Optionee (and counted against
the maximum number of shares that can be issued under the Plan) shall be the
number of shares transferred to the Optionee by the Company, less the number of
shares transferred by the Optionee to the Company as payment. Stock issued on
the exercise of an Option which is forfeited in accordance with the conditions
contained in the grant by the Optionee after issuance shall be deemed to have
never been issued under the Plan and, accordingly, shall not be counted against
the maximum number of shares that can be issued under the Plan. Notwithstanding
the terms of the previous two sentences, the maximum number of shares
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for which Incentive Stock Options may be issued under the Plan shall be one
million (1,000,000) shares, subject to adjustment by the Board as provided under
Paragraph 6(l), regardless of the fact that under the terms of the preceding
sentences, a lesser number of shares is deemed to be issued pursuant to the
exercise of Incentive Stock Options.
6. TERMS AND CONDITIONS OF OPTIONS.
The Board or its delegates shall authorize the granting of all Options
under the Plan with such Options to be evidenced by Incentive Stock Option
Agreements or Non-Statutory Stock Option Agreements, as the case may be. Each
Agreement shall be in such form as the Board may approve from time to time. Each
Agreement shall comply with and be subject to the following terms and
conditions:
(a) TYPE OF OPTION; NUMBER OF SHARES. Each particular Option Agreement
shall state the type of Options to be granted (whether Incentive Stock
Options or Non-Statutory Stock Options) and the number of shares to
which the Option pertains. Under no circumstances shall the aggregate
Fair Market Value of the Stock (determined as of the time the Option is
granted) with respect to which Incentive Stock Options are exercisable
for the first time by any Employee during any calendar year (under all
incentive stock option plans of the Company and its Affiliates) exceed
$100,000.
(b) OPTION PRICE. Each particular Option Agreement shall state the
Option Price. The Option Price for an Incentive Stock Option shall not
be less than one hundred percent (100%) of the Fair Market Value per
share of Stock on the date the Incentive Stock Option is granted. The
Option Price for a Non-Statutory Stock Option shall be the price per
share of Stock set by the Board or its delegates.
(c) CERTIFICATE LEGENDS. Certificates for shares of Stock issued and
delivered to Reporting Persons may be legended, as the Board deems
appropriate, if required by the provisions of any applicable rule or
regulation.
(d) MEDIUM AND TIME OF PAYMENT. The aggregate Option Price shall be
payable upon the exercise of the Option and shall be paid in any
combination of:
(i) United States cash currency;
(ii) a cashier's or certified check to the order of the
Company;
(iii) a personal check acceptable to the Company;
(iv) to the extent permitted by the Board, shares of Stock
of the Company (including previously owned Stock or
Stock issuable in
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connection with the Option exercise), properly
endorsed to the Company, whose Fair Market Value on
the date of exercise equals the aggregate Option
Price of the Option being exercised; or
(v) to the extent permitted by the Board, the Optionee's
entering into an agreement with the Company, whereby
a portion of the Optionee's Options are terminated
and where the "built-in gain" on any Options which
are terminated as part of such agreement equals the
aggregate Option Price of the Option being exercised.
"Built-in gain" means the excess of the aggregate
Fair Market Value of any Stock otherwise issuable on
exercise of a terminated Option, over the aggregate
Option Price otherwise due the Company on such
exercise.
The Board may permit deemed or constructive transfer of shares
in lieu of actual transfer and physical delivery of certificates.
Except to the extent prohibited by applicable law, the Board may take
any necessary or appropriate steps in order to facilitate the payment
of any such Option Price. Without limiting the foregoing, the Board may
cause the Company to loan the Option Price to the Optionee or to
guarantee that any Stock to be issued will be delivered to a broker or
lender in order to allow the Optionee to borrow the Option Price. The
Board, in its sole and exclusive discretion, may require satisfaction
of any rules or conditions in connection with payment of the Option
Price at any particular time, in any particular form, or with the
Company's assistance. If Stock used to pay any Option Price is subject
to any prior restrictions imposed in connection with any plan of the
Company (including this Plan), an equal number of the shares of Stock
acquired on exercise shall be made subject to such prior restrictions
in addition to any further restrictions imposed on such Stock by the
terms of the Optionee's Agreement or by the Plan.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted
to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the
Option became vested but was not fully exercised. During the remainder
of the term of the Option (if its term extends beyond the end of the
installment periods), the option may be exercised from time to time
with respect to any shares then remaining subject to the Option.
(f) DURATION OF OPTIONS. Each particular Option Agreement shall state
the term of the Option; provided, however, that all Incentive Stock
Options granted under this Plan shall expire and not be exercisable
after the expiration of ten (10) years from the date granted; provided,
further, that any Incentive Stock Option
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granted to an Employee who owns stock at the time the Incentive Stock
Option is granted representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company and its
Affiliates shall expire and not be exercisable after the expiration of
five (5) years from the date granted. Non-Statutory Stock Options shall
expire and not be exercisable after the date set by the Board or its
delegates in the particular Option Agreement, or on any later date
subsequently approved by the Board or its delegates.
(g) EXERCISE OF OPTIONS.
(i) Each particular Option Agreement shall state when the
Optionee's right to purchase Stock pursuant to the terms of an
Option are exercisable in whole or in part. Subject to the
earlier termination of the right to exercise the Options as
provided under this Plan, Options shall be exercisable in
whole or in part as the Board, in its sole and exclusive
discretion, may provide in the particular Option Agreement, as
amended. The Board may at any time increase the percentage of
an Option that is otherwise exercisable under the terms of a
particular Option Agreement. The Board, in its sole and
exclusive discretion, may permit the issuance of Stock
underlying an Option prior to the date the Option is otherwise
exercisable, provided such Stock is subject to repurchase
rights which expire pro rata as the Option would otherwise
have become exercisable.
(ii) If the Optionee does not exercise in any one (1) year
period the full number of shares to which he or she is then
entitled to exercise, the Optionee may exercise those shares
in any subsequent year during the term of the Option.
(h) TRANSFER OF OPTIONS. An Option shall not be transferable except by
will or by the laws of decent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is
granted only by such person, except as specifically provided for by the
Board. An attempted non-permitted transfer of an Option shall be void.
(i) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of
the Optionee's Disability, the Optionee may exercise his or her Option,
but only within twelve (12) months from the date of such termination
(or such shorter period specified in the Option Agreement), and only to
the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). If, at the date
of termination, the Optionee is not entitled to exercise his of her
entire Option, the shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after termination, the Optionee
does not exercise his or her Option within the
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time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to the Plan.
(j) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within eighteen (18) months
following the date of death (or such other period specified in the
Option Agreement but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the Optionee was
entitled to exercise the Option at the date of death. If, at the time
of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after death, the Optionee's estate or a
person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan.
(k) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS AN OFFICER, DIRECTOR,
CONSULTANT OR ADVISOR In the event that an Optionee who is an Employee,
Officer, Director, Consultant or Advisor of the Company or its
Affiliates shall cease to be employed by or perform services for the
Company or its Affiliates prior to the Option's expiration date (other
than upon the Optionee's death or Disability), the exercise of Options
held by such Optionee shall be subject to such limitations on the
periods of time during which such Options may be exercised as may be
specified in the particular Option Agreement, as amended, between the
Optionee and the Company. Whether authorized leave of absence or
absence for military or governmental service shall constitute
termination of employment for purposes of the Plan shall be determined
by the Board in their sole and exclusive discretion. No provision of
the Plan shall be construed so as to grant any individual the right to
remain in the employ or service of the Company for any period of
specific duration.
(l) RECAPITALIZATION.
(i) The number of shares issuable under the Plan and the
number and amount of the Option Stock and the Option Price of
outstanding Options may be proportionately adjusted by the
Board, in its sole and exclusive discretion, for any increase
or decrease in the number of issued shares of Stock resulting
from a subdivision or consolidation of shares, or for the
payment of a stock dividend, or any other increase or decrease
in the number of such shares effected without receipt of
consideration by the Company in order to preclude the dilution
or enlargement of benefits under the Plan.
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(ii) The Board, in its sole and exclusive discretion, may make
such equitable adjustments to the Plan and outstanding Options
as it deems appropriate in order to preclude the dilution or
enlargement of benefits under the Plan, upon exchange of all
of the outstanding stock of the Company for a different class
or series of capital stock or the separation of assets of the
Company, including a spin-off or other distribution of stock
or property by the Company.
(iii) If the Company shall be the surviving corporation in any
merger or consolidation, each outstanding Option shall pertain
to and apply to the securities to which a holder of the number
of shares of Option Stock would have been entitled. A
dissolution or liquidation of the Company, a merger (other
than a merger the principal purpose of which is to change the
state of the Company's incorporation) or consolidation in
which the Company is not the surviving corporation, a reverse
merger in which the Company is the surviving corporation but
the Company's Common Stock outstanding immediately preceding
the merger is converted by virtue of the merger into other
property, or other capital reorganization in which more than
fifty percent (50%) of the Company's Common Stock is exchanged
(unless the dissolution or liquidation plan, merger or
consolidation agreement or capital reorganization corporate
documents expressly provide to the contrary) shall cause each
outstanding Option to terminate, provided, that each Optionee
shall, immediately prior to such event, have the right to
exercise his or her Option in whole or in part, unless the
Option in connection with such event is either to be assumed
by the successor corporation or parent thereof, or to be
replaced with a comparable option to purchase shares of the
capital stock of the successor corporation or parent thereof,
or the Option is to be replaced by a comparable cash incentive
program of the successor corporation based on the value of the
Option on the date of such event. Notwithstanding the
preceding, if, within one (1) year from the date of such
event, an Employee's employment is involuntarily terminated,
then the Employee's outstanding Options, if any, shall become
immediately exercisable.
(iv) All adjustments required by the preceding paragraphs
shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive, provided, that
adjustments shall not be made in a manner that causes an
Incentive Stock Option to fail to continue to qualify as an
"incentive stock option" within the meaning of Code Section
422.
(v) Except as expressly provided in this Paragraph 6(l), an
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, or the payment
of any stock dividend, or any other increase in the number of
shares of stock of any class by reason of any
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dissolution, liquidation, merger, consolidation,
reorganization, or separation of assets, and any issue by the
Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the number or amount of the Option Stock or the
Option Price of outstanding Options.
(vi) The grant or existence of an Option shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes in its capital
or business structure, or to merge, consolidate, dissolve,
liquidate or sell, or transfer all or any part of its business
or assets.
(m) RIGHTS AS A SHAREHOLDER. An Optionee shall not have rights as a
shareholder with respect to any shares until the date of the issuance
of a stock certificate to him or her for such shares. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights
for which the record date is prior to the date of issuance of such
stock certificate, except as provided in Paragraph 6(l) above.
(n) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions of the Plan, the Board may modify (including
lowering the Option Price or changing Incentive Stock Options into
Non-Statutory Stock Options), extend or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options
under this Plan and/or other stock option plans of the Company (to the
extent not previously exercised) and authorize the granting of new
Options in substitution therefor. Notwithstanding the foregoing, no
modification of an Option shall, without the consent of the Optionee,
alter or impair any rights or obligations under any Option previously
granted under the Plan.
(o) SECURITIES COMPLIANCE. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and
experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and
that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the
Option; and (2) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of
selling or otherwise distributing the stock. These requirements, and
any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the
Option has
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been registered under a then currently effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or
(ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
(p) TRANSFER AND EXERCISE OF OPTIONS. To the extent required by Code
Section 422, each Incentive Stock Option shall state that it is not
transferable or assignable by Optionee otherwise than by will or the
laws of descent and distribution, and that during an Optionee's
lifetime, such Incentive Stock Option shall be exercisable only by the
Optionee.
(q) OTHER PROVISIONS. Each Option Agreement may contain such other
provisions, including without limitation, restrictions upon the
exercise or transferability of the Option, as the Board may deem
advisable. Any Incentive Stock Option Agreement shall contain such
limitations and restrictions upon the exercise of the Incentive Stock
Option as shall be necessary in order that such Incentive Stock Option
shall be an "incentive stock option" as defined in Code Section 422, or
to conform to any change in the law.
(r) WITHHOLDING TAXES. When the Company becomes required to collect
federal and state income and employment taxes in connection with the
exercise of an Option ("withholding taxes"), the Optionee shall
promptly pay to the Company the amount of such taxes in cash, unless
the Board permits or requires payment in another form. Subject to such
conditions as it may require, the Board, in its sole discretion, may
allow an Optionee to reimburse the Company for payment of withholding
taxes with shares of Stock. If an Optionee is a Reporting Person at the
time of exercise and is given an election to pay any withholding taxes
with Stock, the Board shall have sole discretion to approve or
disapprove such election.
(s) LIMITATION ON GRANTS. The following limitation will apply to grants
of Options under the Plan: no Employee will be granted Options under
the Plan to receive more than two hundred thousand (200,000) shares of
Stock in any one fiscal year. The limitation set forth in this
Paragraph 6(s) is intended to satisfy the requirements applicable to
Options intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code. In the event that such
limitation is not required to qualify Options as performance-based
compensation, this limitation shall not apply under the Plan.
7. TERM OF PLAN.
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on January 15, 2003. No Incentive Stock
Options or Non-statutory Stock Options may be granted under the Plan while the
Plan is suspended
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or after it is terminated. Rights and obligations under any Option granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the
Option was granted.
8. AMENDMENT OF PLAN.
With respect to any shares at the time not subject to Options, the
Board may from time to time, insofar as permitted by law, suspend or discontinue
the Plan or revise or amend the Plan in any respect whatsoever, except that,
without approval of the shareholders, no such revision or amendment shall change
the number of shares for which Options may be granted under the Plan, except as
provided in Section 6(l), change the designation of the class of persons
eligible to receive Options under the Plan, materially increase the benefits
accruing to Optionees under the Plan, or decrease the price at which Incentive
Stock Options may be granted. Furthermore, without the approval of the
shareholders, the Plan may not be amended in any manner that will cause
Incentive Stock Options issued under it to fail to meet the requirements of
"incentive stock options" as defined in Code Section 422. The Board may amend
the Plan from time to time to the extent necessary to comply with any applicable
law, rule or other regulatory requirement.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Stock pursuant to
the exercise of an Option will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Optionee
to exercise such Option.
11. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as
Directors, Employees or agents of the Company, the Directors, or any individuals
who are delegated authority by the Board to administer the Plan, shall be
indemnified by the Company against: (i) their reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option granted
thereunder; and (ii) against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company), or paid by them in satisfaction of a judgment in any such action,.
suit or proceeding, except in actions to matters as to which it shall be
adjudged in such action, suit or proceeding that such Director or individual is
liable for negligence or misconduct in the performance of his duties; this
indemnification is expressly conditioned upon the indemnified party, within
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ninety (90) days after institution of any such action, suit or proceeding,
offering the Company in writing the opportunity, at its own expense, to handle
and defend the same.
12. APPROVAL OF SHAREHOLDERS.
The portions of the Plan dealing with Incentive Stock Options shall not
take effect unless approved by the shareholders of the Company's preferred (if
any) and Common Stock, which approval must occur within a period commencing
twelve (12) months before and ending twelve (12) months after the date the Plan
is adopted by the Board. Nothing in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
the right of the Company to grant Non-Statutory Options for proper corporate
purposes.
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LICENSE AGREEMENT
This Agreement, effective as of February 27, 1997 (the "Effective Date"), is by
and between CURE, LLC (hereinafter "CURE"), a corporation organized and existing
under the laws of the State of Maryland and having a place of business at 1300
Atwood Road, Silver Spring, Maryland 20906 and AXONYX Inc. (hereinafter
"LICENSEE"), a corporation organized and existing under the laws of the State of
Delaware having its principal office at: 358 East 69th Street, New York, N.Y.
10021.
RECITALS
WHEREAS, CURE has entered into a "PHS PATENT LICENSE
AGREEMENT-EXCLUSIVE"( the "PHS Agreement") dated January 31, 1997 with the
Public Health Service ("PHS") for the licensing of rights in intellectual
property contained in certain United States and foreign patents listed in
Appendix I Patents and Patent Applications, including all U.S. and foreign
rights derived from such patents (collectively the "Patents").
WHEREAS, pursuant to the PHS Agreement CURE has exclusive worldwide
licensing rights to the intellectual property contained in the Patents and is
empowered to enter into sub-licensing agreements covering all or part of the
Patents;
WHEREAS, LICENSEE desires to acquire commercialization rights to certain
of the inventions contained in the Patents in order to develop processes,
methods, and marketable products for public use and benefit;
WHEREAS, subject to the terms and conditions hereinafter set forth, CURE
is willing to grant to LICENSEE and LICENSEE is willing to accept from CURE a
sub-license (as hereinafter defined) covering the Patents;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS.
(a) "Calendar Year" shall mean a consecutive period of twelve
calendar months commencing on the first day of January of any
year.
(b) "Licensed Fields of Use" shall mean all fields of use covered
under the PHS Agreement.
(c) "License" shall mean the exclusive worldwide license to practice
the Licensed Patent Rights (as hereinafter defined) for the
development, manufacture, use and sale of Licensed Products or
Licensed Processes (as hereinafter defined), to the same extent
that CURE has such rights pursuant to the PHS Agreement.
<PAGE>
2
(d) "Net Sales" shall mean the total gross receipts for sales of
Licensed Products or practice of Licensed Processes by or on
behalf of LICENSEE or its sub-licensees, and from leasing,
renting or otherwise making Licensed Products available to others
without sale or disposition, whether invoiced or not, less
returns and allowances actually granted, packing costs, insurance
costs, freight out, taxes or excise duties imposed on the
transaction (if separately invoiced), and wholesale or cash
discounts in amounts customary in the trade. No deductions shall
be made for commissions paid to individuals, whether they be with
independent sales agencies or regularly employed by LICENSEE or
sub-licensees, and on its payroll, or for the cost of
collections.
(e) "Licensed Patent Rights" shall mean the rights granted to CURE
under the PHS Agreement.
(f) "Licensed Process(es)" means processes which, in the course of
being practiced would, in the absence of this Agreement, infringe
one or more claims of the Licensed Patent Rights that have not
been held invalid or unenforceable by an unappealed or
unappealable judgment of a court of competent jurisdiction.
(g) "Licensed Product(s)" means tangible materials which, in the
course of manufacture, use, or sale would, in the absence of this
Agreement, infringe one or more claims of the Licensed Patent
Rights that have not been held invalid or unenforceable by an
unappealed or unappealable judgment of a court of competent
jurisdiction.
(h) "Licensed Territory" shall mean worldwide.
(i) "Commercial Development Plan" means the written commercialization
plan, as amended, that is part of the PHS Agreement and that is
attached hereto as Appendix II, which forms an integral part of
this Agreement.
2. EFFECTIVE DATE:
(a) This Agreement shall become effective upon the signing of this
Agreement by both parties and the payment by LICENSEE to CURE of
$ 15,000, of which sum $ 5000 shall be used to reimburse CURE
forthe non-refundable license issue royalty, LICENSEE shall pay
to CURE an additional $ 10,000 six (6) months after the Effective
Date.
(b) Upon this Agreement becoming effective, this Agreement shall
remain in force and effect until it expires or is terminated in
accordance with Section 12 hereof.
<PAGE>
3
3. PASS THROUGH OBLIGATIONS FROM PHS AGREEMENT
LICENSEE agrees that the provisions of the PHS Agreement listed in
Paragraph 4.02, and appended hereto as Appendix III, shall be binding
upon LICENSEE as if it were a party to the PHS Agreement. These
specific provisions from the PHS Agreement cover the following:
Reserved Government Rights, Record Keeping, Performance of the
Commercial Development Plan, Indemnification of PHS, and certain
Termination and Modification of Rights provisions.
In addition to the forgoing, if the PHS Agreement shall terminate
pursuant to Section 13 thereof, then at LICENSEE's option, either: (a)
this Agreement also shall terminate; or (b) LICENSEE shall become a
direct licensee of PHS, subject to the approval of PHS and LICENSEE's
acceptance of the additional provisions of the PHS Agreement.
4. GRANT OF LICENSE.
(a) By this Agreement CURE grants to LICENSEE an exclusive license to
practice the Licensed Patent Rights in the Licensed Fields of Use
within the Licensed Territory. The License granted to LICENSEE
herein shall commence upon the Effective Date and shall remain in
force on a country-by-country basis, if not previously terminated
under the terms of this Agreement, for the life of the Patents or
the term of the PHS Agreement, whichever shall be shorter. At
the expiration of the term of this Agreement, the LICENSEE shall
be deemed to have a fully paid License, in perpetuity, in respect
of the Licensed Patent Rights, and no further royalties shall
accrue or be payable by the LICENSEE to CURE in respect thereof.
(b) LICENSEE shall be entitled to grant sub-licenses under the
License on terms and conditions not inconsistent with the terms
and conditions of this Agreement (except that the fees paid for
the sub-license may be different from those set forth in this
Agreement) to qualified third parties for fair consideration and
in an arms-length transaction. Such third parties shall be
deemed qualified if: (a) they have a capitalization of over
$100,000,000, and if they agree to be bound by all of the
applicable material provisions of this Agreement including
specifically the dictates of the Commercial Development Plan, or
(b) if CURE approves of them in writing.
5. PATENTS AND PATENT APPLICATIONS.
LICENSEE agrees that all of the provisions of the PHS Agreement relating
to patent filing, prosecution, and maintenance shall be binding upon
LICENSEE as if it were a party to the PHS Agreement. Subject to those
provisions:
<PAGE>
4
(a) At the initiative of LICENSEE or CURE, the parties shall consult
with each other regarding the prosecution of all patent
applications with respect to the Licensed Patent Rights
(c) LICENSEE shall, during the period beginning 36 months after the
Effective Date of this Agreement pay, or cause to be paid to CURE
such sums as CURE shall be required to pay to PHS in connection
with the applications and maintenance of the Patents. Any sums
that LICENSEE shall be obligated to pay to CURE hereunder shall
be paid on the same schedule and terms as the payments that CURE
must make to PHS.
(d) CURE and LICENSEE shall assist, and cause their respective
employees and consultants to assist each other, in assembling
inventorship information and data for the filing and prosecution
of patent applications on inventions pertaining to the Licensed
Patent Rights.
6. PAYMENTS FOR LICENSE.
In consideration for the grant and during the term of the License,
LICENSEE shall pay to CURE:
(a) MILESTONE PAYMENTS:
So that CURE may satisfy its obligations under the PHS Agreement,
LICENSEE will make, or cause to be made certain one time payments
to CURE as set forth below within thirty (30) days of the
achievement of the following technical milestones:
<TABLE>
<CAPTION>
Milestone Payments
--------- --------
<S> <C>
On LICENSEE's or its sub-licensee's submission
to the U.S. Food and Drug Administration (FDA)
of the first New Drug Application (NDA) to the
Licensed Products in the Licensed Fields of Use,
or of the corresponding filing in a foreign equivalent
of the FDA, whichever occurs first: $100,000
Upon the first FDA approval of any NDA submitted
to the FDA by LICENSEE or its sub-licensee: $300,000
On the first approval by a foreign counterpart of
the FDA of that country's equivalent of the NDA
submitted by the LICENSEE or its sub-licensee
for the licensed Products in the licensed Field of Use: $200,000
</TABLE>
In the event that NDA approval is obtained within six (6) years of the
effective date of the PHS Agreement, the milestone payments on the above
schedule will be
<PAGE>
5
reduced to $200,000 for the first NDA approval by the FDA and $150,000
for the first approval by a foreign counterpart of the FDA of that
country's equivalent of the NDA.
(b) ROYALTY PAYMENTS:
(i) SCHEDULE.
LICENSEE shall pay to CURE royalties according to the
following schedule:
With respect to the first $25 million in annual total Net
Sales CURE shall receive a royalty of 3%.
With respect to that portion of the total annual Net
Sales amount that shall exceed $25 million and be less
than or equal to $50 million CURE shall receive a royalty
of 2.5%.
With respect to that portion of the total annual Net
Sales amount that shall exceed $50 million and be less
than or equal to $100 million CURE shall receive a
royalty of 2%.
With respect to that portion of the total annual Net
Sales amount shall exceed $100 million CURE shall
receive a royalty of 1%.
(ii) SUB-LICENSING ROYALTY.
In the event that LICENSEE sub-licences the Licensed
Products and/or Licensed Processes, CURE shall receive as
royalties the larger of either the amount set forth on
the above schedule or 25% of the royalty income received
by LICENSEE pursuant to such sub-license for the first
two years after the first commercial sale in the United
States, Japan, the U.K., Germany, France, Belgium, or
Canada. Subsequent to that initial two-year period CURE
shall receive as royalties the smaller of either the
amount set forth on the above schedule or 25% of the
royalty income received by LICENSEE pursuant to such
sub-license, but not less than 1% of the total annual Net
Sales amount. Should LICENSEE receive any lump sum or
non-royalty based payments pursuant to any sub-license
agreement for the Licensed Products and/or Licensed
Processes other than the above pass-through milestone
payments and any training or research and development
fees earned by LICENSEE, LICENSEE shall pay, or cause to
be paid to CURE 33% of any such payment.
(c) MID-YEAR REPORT.
<PAGE>
6
For the purpose of computing the royalties due to CURE
hereunder, the year shall be divided into two parts
ending on June 30 and December 31. Not later than
forty-five (45) days after each December and June in each
Calendar Year or part thereof during the term of the
License, LICENSEE shall submit to CURE a full and
detailed report of royalties and payments due to CURE
under the terms of this Agreement for the preceding half
year (hereinafter "the Half-Year Report"), setting forth
the Net Sales of each of LICENSEE, and each sub-licensee
of LICENSEE and/or lump sum payments and all other
payments or consideration from sub-licensees upon which
such royalties are computed and including at least the
information in LICENSEE's possession that is necessary to
permit CURE to submit the reports required by the PHS
Agreement, including without limitation:
(i) the quantity of Licensed Products and Licensed
Processes used, sold, transferred or otherwise
disposed of on a country-by-country basis;
(ii) the selling price of each Licensed Product and
Licensed Process;
(iii) the deductions permitted under subsection 1 (d)
hereof used to compute Net Sales; and the royalty
computations and payment.
If no royalties or other payments are due a statement
shall be sent to CURE stating such fact. Payment of the
full amount of any royalties or other payments due to
CURE for the preceding half year shall accompany each
Mid-Year Report. LICENSEE shall maintain for a period of
at least five (5) years after the calendar year to which
the information pertains, full, accurate and compete
books and records consistent with sound business and
accounting practices and in such form and detail as to
enable the determination of the amounts due to CURE from
LICENSEE pursuant to the terms of this Agreement.
(d) ANNUAL REPORT.
Within forty-five (45) days after the end of each
Calendar Year or part thereof commencing on the date of
first commercial sale, LICENSEE shall furnish CURE with a
report (hereinafter the "Annual Report"), certified by an
independent certified public accountant, relating to the
royalties and other payments due to CURE pursuant to this
Agreement in respect of the Calendar Year covered by such
Annual Report and containing the same details as those
<PAGE>
7
specified in Section 6(c) above in respect of the
Half-Year Report including at least the information in
LICENSEE's possession that is necessary to permit CURE to
submit the reports required by the PHS Agreement.
(e) INSPECTION OF BOOKS.
On reasonable notice and during regular business hours,
CURE or its authorized representative shall each have the
right to inspect the books of accounts, records and other
relevant documentation of LICENSEE, or any of LICENSEE's
sub-licensees to the extant these are made available to
LICENSEE, insofar as they relate to the production,
marketing and sale of the Licensed Products, in order to
ascertain or verify the amount of royalties and other
payments due to CURE hereunder, and the accuracy of the
information provided to CURE in the aforementioned
reports.
(f) MINIMUM ANNUAL PAYMENTS.
So that CURE may satisfy its obligations under the PHS
Agreement, beginning three years after the effective date
of the PHS Agreement and continuing annually thereafter
until this Agreement shall terminate or expire, LICENSEE
agrees that LICENSEE shall pay to CURE a non-refundable
minimum annual payment of ten thousand dollars ($10,000)
for each Calendar Year, pro-rated for any fraction
thereof, until the First Commercial Sale (as defined in
the PHS Agreement) shall have occurred, and thereafter
LICENSEE shall pay to CURE a non-refundable minimum
annual payment of twenty-five thousand dollars ($25,000)
for each Calendar Year, pro-rated for any fraction
thereof. The amount of any royalties on Net Sales that
LICENSEE shall have paid to CURE during such Calendar
Year shall be credited against such minimum annual
payment amount due to CURE hereunder. If LICENSEE shall
fail to make such payment when due CURE shall have the
right solely at its election, upon written notice to
LICENSEE, to either terminate this .Agreement for cause
or to declare the License granted herein to LICENSEE to
be non-exclusive.
(g) Miscellaneous.
LICENSEE shall cause each of its sub-licensees to effect
sales of Licensed Products or Licensed Processes to third
parties on commercially reasonable, arm's length terms.
<PAGE>
8
7. METHOD OF PAYMENT.
All royalties and other payments due to CURE hereunder shall be paid to
CURE in United States dollars. Any royalties on transactions in a
foreign currency shall be converted into United States dollars based on
the New York foreign exchange rate quoted in the WALL STREET JOURNAL on
the day that the payment is due, unless LICENSEE's ability to convert
such funds into United States dollars is not lawful or possible, in
which case the CURE may elect to be paid in the local currency or in
United States dollars in an amount to be calculated upon conversion.
8. SCIENTIFIC ADVISORY BOARD.
LICENSEE shall form and maintain form a Scientific Advisory Board
("SAB") to supervise the progress of the Commercial Development Plan.
The SAB shall be composed of members appointed by the LICENSEE and shall
include Dr. Timothy Soncrant of CURE.
9. DEVELOPMENT AND COMMERCIALIZATION.
(a) LICENSEE undertakes to use reasonable diligence to carry out the
Commercial Development Plan including but not limited to, the
performance of all efficacy, pharmaceutical, safety,
toxicological and clinical tests, trials and studies and all
other activities necessary to obtain the approval of the FDA for
the production, use and sale of the Licensed Products, all as set
forth in the Commercial Development Plan and within all
timetables set forth therein. LICENSEE further undertakes to
exercise due diligence and to employ its reasonable diligence to
obtain or to cause its sub-licensees to obtain, the appropriate
approvals of the health authorities for the production, use and
sale of the Licensed Products, in each of the other countries of
the world in which LICENSEE or its sub-licensees intend to
produce, use, and/or sell Licensed Products.
(b) Provided that applicable laws, rules and regulations require that
the performance of the tests, trials, studies and other
activities specified in subsection (a) above shall be carried out
in accordance with U.S. FDA Good Laboratory Practices and in a
manner acceptable to the relevant health authorities, LICENSEE
shall carry out such tests, trials, studies and other activities
in accordance with U.S. FDA Good Laboratory Practices or in a
manner acceptable to the relevant foreign health authorities.
Furthermore, the Licensed Products shall be produced in
accordance with U.S. FDA Good Manufacturing Practice ("GMP")
procedures in a facility which has been certified by the FDA as
complying with GMP, provided that applicable laws, rules and
regulations so require.
(c) LICENSEE undertakes to begin the regular commercial production,
use, and sale of the Licensed Products in good faith in
accordance with the
<PAGE>
9
Commercial Development Plan and to continue diligently thereafter
to commercialize the Licensed Products and/or Licensed Processes.
(d) LICENSEE shall provide CURE with written reports on all
activities and actions undertaken by LICENSEE to develop and
commercialize the Licensed Products; such reports (the Half-Year
Commercialization Reports) shall be made within forty-five (45)
days after each six (6) months of the duration of this Agreement,
commencing six months after the Effective Date.
(e) If LICENSEE shall not commercialize the Licensed Products within
a reasonable time frame, unless such delay is necessitated by FDA
or other regulatory agencies or unless CURE and LICENSEE have
mutually agreed to amend the Commercial Development Plan, or
because of unforeseen circumstances, including manufacturing
delays out of LICENSEE's control, CURE shall notify LICENSEE in
writing of LICENSEE's failure to commercialize and shall allow
LICENSEE a reasonable period of time thereafter to cure its
failure to commercialize. LICENSEE's failure to cure such delay
to CURE's reasonable satisfaction within such reasonable period
of time shall be a material breach of this Agreement.
10. REVERSIONARY RIGHTS
In the event that LICENSEE fails either to: (a) commence Phase I
testing within three (3) months after the date of approval of an IND,
(b) Phase II testing within nine (9) months of the date of such
approval, (c) Phase III testing within twenty-seven (27) months of the
date of such approval, or (d) submit an NDA for approval in the United
States, Japan, the U.K., Germany, France, Belgium, or Canada within five
(5) years of the date of the IND approval, then CURE may make a written
demand that LICENSEE begin such phase of testing or submit such NDA for
approval, it being understood, however that if the delay in commencing
such phase of testing or obtaining such approval is a result of
difficulties in recruiting clinical research subjects for Phase III
clinical trials, or the result of other similar technical or logistical
difficulties with respect to factors outside of LICENSEE's or its
sub-licensee's control, then CURE shall refrain from making the
aforementioned written demand so long as, in CURE's reasonable judgment,
LICENSEE and/or its sub-licensee is acting in good faith and using its
best efforts to recruit such clinical research subjects, or to address
such other difficulties. If LICENSEE has not commenced such testing or
submitted such NDA application within sixty (60) days after receiving
such demand, and if CURE has not withdrawn its demand, then all rights
to the Patents transferred by this Agreement shall revert to CURE at
CURE's option, as provided below, unless either (i) such delay is
necessitated by the U.S. FDA or other regulatory agencies and LICENSEE
is working diligently to end such delay, or (ii) LICENSEE pays to CURE,
commencing on the sixty-first (61st) day following LICENSEE's receipt of
CURE's notice and continuing monthly thereafter as provided herein, the
sum of: (w) ten thousand dollars ($10,000) per month for up to a
maximum of three (3)
<PAGE>
10
months, and twenty-five thousand dollars ($25,000) per month for
up to three (3) months thereafter, for delays in commencing Phase I
testing, (x) fifteen thousand dollars ($15,000) per month for up
to a maximum of three (3) months, and thirty thousand dollars
($30,000) per month for up to three (3) months thereafter, for
delays in commencing Phase II testing, (y) twenty-five thousand dollars
($25,000) per month for up to a maximum of three (3) months, and fifty
thousand dollars ($50,000) per month for up to three (3) months
thereafter, for delays in commencing Phase III testing, or (z) fifty
thousand dollars ($50,000) per month for up to a maximum of three (3)
months, and one hundred thousand ($100,000) per month for each
additional month of delay until such NDA application has been submitted.
If LICENSEE shall fail to pay to CURE the sums set forth above when due,
or in any event if any of the above delays shall continue for more than
six months, then all rights to the Patents transferred by this Agreement
may, at CURE's election, revert to CURE, in which case this Agreement
shall terminate and LICENSEE shall immediately send to CURE exclusively
any and all scientific reports and research developed to that point
pursuant to this Agreement.
11. INFRINGEMENT OF PATENTS.
(a) In the event a party to this Agreement acquires information that
a third party is infringing one or more of the Licensed Patent
Rights the party acquiring such information shall promptly
notify the other party to the Agreement in writing of such
infringement.
(b) In the event of an infringement of the Licensed Patent Rights,
LICENSEE (1) may bring suit in its own name, at its own expense,
and on its own behalf for such infringement; (2) in any such
suit, enjoin infringement and collect for its use, damages,
profits, and awards of whatever nature recoverable for such
infringement; and (3) settle any claim or suit for infringement
of the Licensed Patent Rights, subject in each case to the rights
of CURE, PHS and appropriate Government authorities under
provisions of the PHS Agreement. Should LICENSEE elect to bring
suit against an infringer and CURE is joined as a party plaintiff
in any such suit, CURE shall have the right to approve the
counsel selected by LICENSEE to represent LICENSEE and CURE.
LICENSEE shall not compromise or settle such litigation without
the prior written consent of CURE, which consent shall not be
unreasonably withheld.
(c) Fifty percent of expenses incurred by LICENSEE under this Section
11 (c) including costs, fees, attorney fees, and disbursements,
may be credited against the royalties payable to CURE under this
Agreement in the country in which the suit was filed. In the
event that fifty percent (50%) of such expenses exceed the amount
of royalties payable by LICENSEE in any calendar year, the
expenses in excess may be carried over as a credit on the same
basis into succeeding calendar years. A credit against
litigation expenses, however, may not reduce the royalties due in
any calendar year to less than the minimum annual royalty. Any
recovery made by
<PAGE>
11
LICENSEE, through court judgment or settlement, first shall be
applied to reimburse CURE for royalties withheld as a credit
against litigation expenses and then to reimburse LICENSEE for
its litigation expense. Any remaining recoveries shall be shared
equally by LICENSEE and CURE.
(d) If LICENSEE does not bring suit against said infringer pursuant
to Section 11(c) herein, or has not commenced negotiations with
said infringer for discontinuance of said infringement, within
ninety (90) days after LICENSEE becomes aware of such
infringement, CURE or PHS shall have the right, but shall not be
obligated, to bring suit for such infringement. Should CURE
elect to bring suit against an infringer and LICENSEE is joined
as a party plaintiff in any such suit, LICENSEE shall have the
right to approve the counsel selected by CURE to represent CURE
and LICENSEE, and CURE shall hold LICENSEE free, clear and
harmless from and against any and all costs and expenses of such
litigation, including attorneys' fees. If LICENSEE has commenced
negotiations with an alleged infringer of the Licensed Patent
Rights for discontinuance of such infringement within such 90-day
period, LICENSEE shall have an additional ninety (90) days from
the termination of such initial 90-day period to conclude its
negotiations before CURE may bring suit for such infringement.
In the event CURE brings suit for infringement of the Licensed
Patent Rights, CURE shall have the right to first reimburse
itself out of any sums recovered in such suit or settlement
thereof for all costs and expenses of every kind and character,
including reasonable attorneys' fees necessarily involved in the
prosecution of such suit, and if after such reimbursement, any
funds shall remain from said recovery, CURE shall promptly pay to
LICENSEE an amount equal to fifty percent (50%) of such remainder
and CURE shall be entitled to receive and retain the balance of
the remainder of such recovery.
(e) Each party shall always have the right to be represented by
counsel of its own selection in any suit for infringement of the
Licensed Patent Rights instituted by the other party to this
Agreement under the terms hereof. The expense of such counsel
shall be borne by the party initiating such infringement suit.
(f) LICENSEE agrees to cooperate fully with CURE at the request of
CURE, including, by giving testimony and producing documents
lawfully requested in the prosecution of any suit by CURE for
infringement of the CURE Licensed Patent Rights; provided, CURE
shall pay all reasonable expenses (including attorneys' fees)
incurred by LICENSEE in connection with such cooperation. CURE
shall cooperate with LICENSEE at the request of LICENSEE,
including by giving testimony and producing documents lawfully
requested, in the prosecution of any suit by LICENSEE for
infringement of the Licensed Patent Rights; provided that
LICENSEE shall pay all reasonable expenses (including attorneys'
fees) incurred by CURE in connection with such cooperation.
<PAGE>
12
12. TERMINATION.
(a) Unless earlier terminated pursuant to Section 9-10 hereof, this
Agreement shall expire upon the expiration of the last to expire
of the Patents.
(b) LICENSEE shall have a unilateral right to terminate this
Agreement and/or any licenses in any country by giving CURE sixty
(60) days notice to that effect, and LICENSEE shall immediately
send to CURE exclusively any and all scientific reports and
research developed to that point pursuant to this Agreement.
Nothing in this paragraph shall limit CURE's right to any payment
owed to it by LICENSEE pursuant Section 10 hereof.
(c) At any time prior to expiration of this Agreement, either party
may terminate this Agreement forthwith for cause, as "cause" is
described below, by giving written notice to the other party.
Cause for termination of this Agreement shall be deemed to exist
if a party materially breaches or defaults in the performance or
observance of any of the provisions of this Agreement and such
breach or default is not cured within ninety (90) days after the
giving of notice specifying such breach or default, or if either
party discontinues its business or becomes insolvent or bankrupt.
(d) Any amount payable hereunder by one of the parties to the other,
which has not been paid by the date on which such payment is due,
shall bear interest from such date until the date on which such
payment is made, at the rate of two percent (2%) per annum in
excess of the prime rate prevailing at Citibank, N.A., in New
York, or the maximum rate then permitted by law if less, during
the period of arrears and such amount and the interest thereon
may be set off against any amount due, whether in terms of this
Agreement or otherwise, to the party in default by any
non-defaulting party.
(e) Upon termination of this Agreement for any reason and prior to
expiration of the Patents as set forth in Section 12 (a) hereof,
all rights in and to the Licensed Patent Rights transferred to
LICENSEE pursuant to this Agreement shall revert to CURE, and
LICENSEE shall not be entitled to make any further use whatsoever
of the Licensed Patent Rights.
(f) Termination of this Agreement shall not relieve either party of
any obligation to the other party incurred prior to such
termination.
(g) Section 16 hereof shall survive and remain in full force and
effect after any termination, cancellation or expiration of this
Agreement.
13. REPRESENTATIONS AND WARRANTIES BY LICENSEE.
LICENSEE hereby represents and warrants to CURE as follows:
<PAGE>
13
(1) LICENSEE is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. LICENSEE
has been granted all requisite power and authority to carry on
its business and to own and operate its properties and assets.
The execution, delivery and performance of this Agreement have
been duly authorized by the Board of Directors of LICENSEE.
(2) There is no pending or, to LICENSEE's knowledge, threatened
litigation involving LICENSEE which would have any effect on this
Agreement or on LICENSEE's ability to perform its obligations
hereunder; and
(3) There is no indenture, contract, or agreement to which LICENSEE
is a party or by which LICENSEE is bound which prohibits or would
prohibit the execution and delivery by LICENSEE of this Agreement
or the performance or observance by LICENSEE of any term or
condition of this Agreement.
14. REPRESENTATIONS AND WARRANTIES BY CURE.
CURE hereby represents and warrants to LICENSEE as follows:
(1) CURE is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland. CURE has
been granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have been
duly authorized by the Managing Director of CURE.
(2) There is no pending or, to CURE's knowledge, threatened
litigation involving CURE which would have any effect on this
Agreement or on CURE's ability to perform its obligations
hereunder; and
(3) There is no indenture, contract, or agreement to which CURE is a
party or by which CURE is bound which prohibits or would prohibit
the execution and delivery by CURE of this Agreement or the
performance or observance by CURE of any term or condition of
this Agreement.
15. NO ASSIGNMENT.
Neither LICENSEE nor CURE shall have the right to assign, delegate or
transfer at any time to any party, in whole or in part, any or all of
the rights, duties and interest herein granted without first obtaining
the written consent of the other to such assignment.
<PAGE>
14
16. INDEMNIFICATION.
(a) LICENSEE agrees that the Indemnification provision from the PHS
Agreement appended hereto in Appendix III shall be binding upon
LICENSEE as if LICENSEE were a party to that contract, and
LICENSEE hereby agrees to indemnify CURE to the fullest extent
that CURE shall be obligated to indemnify PHS thereunder for
liabilities other than those resulting from CURE's own acts or
omissions.
(b) Each party shall indemnify the other against any and all third
party claims, suits, actions or threats of action, liabilities,
settlement amounts, expenses or costs of any kind, including but
not limited to attorney's fees and costs which result from or
arise out of intentional or negligent actions or omissions,
misconduct or wrongdoing by the indemnifying party in its
performance under this Agreement.
(c) Upon receiving notice of any claim or suit, any indemnitee shall
immediately notify the indemnifying party and shall allow the
indemnifying party and/or its insurer the opportunity to assume
direction and control of the defense of such claim, including
without limitation the settlement thereof at the sole option of
the indemnifying party or its insurer, the conduct of any
negotiations, dispute resolution or litigation of any such claim
or suit; and the indemnifying party shall inform the indemnitee
of the progress of the claim or suit at such time and in such
manner as is reasonable under the circumstances. Notwithstanding
anything to the contrary herein, the LICENSEE, if it is the
indemnified party, shall at all times have the right to assume
the loss and expense of any litigation relating to the Licensed
Product and thereby control the contest and defense thereof.
17. MISCELLANEOUS.
(a) In carrying out this Agreement the parties shall comply with all
local, state and federal laws and regulations.
(b) If any provision of this Agreement is determined to be invalid or
void, the remaining provisions shall remain in effect.
(c) This Agreement shall be deemed to have been made in the State of
New York and shall be governed and interpreted in all respects by
federal law as applied in the Southern District of New York.
(d) Any dispute arising under this Agreement shall be resolved
through binding arbitration under the auspices of the American
Arbitration Association in New York State under federal law as
applied in the Southern District of New York.
<PAGE>
15
(e) All payments or notices required or permitted to be given under
this Agreement shall be given in writing and shall be effective
when either personally delivered or deposited, postage prepaid,
in the United States registered or certified mail, addressed as
follows:
To LICENSEE:
AXONYX Inc.
Attention: Dr. Marvin Hausman,
Chairman
110 Second St.
P.O. Box 910
Stevenson WA, 98648
with a copy to:
Michael M. Strage Esq.
358 East 69th Street
New York N.Y. 10021
To CURE:
CURE, LLC
1300 Atwood Road
Silver Spring, Maryland 20906
Attention: Dr. Timothy Soncrant
with a copy to:
Edwin M. Martin Jr., Esq.
Piper & Marbury L.L.P.
1200 19th Street, N.W.
Washington D.C. 20036
or such other address or addresses as either party may hereafter specify
by written notice to the other. Such notices and communications shall be deemed
effective on the date of delivery or fourteen (14) days after having been sent
by registered or certified mail, whichever is earlier.
(f) This Agreement (and the annexed Appendices) constitute the entire
Agreement between the parties and no variation, modification or waiver of any of
the terms or conditions hereof shall be deemed valid unless made in writing and
signed by both parties hereto. This Agreement supersedes any and all prior
agreements or understandings, whether oral or written, between LICENSEE and
CURE.
<PAGE>
16
(g) No waiver by either party of any non-performance or violation by
the other party of any of the covenants, obligations or agreements of such other
party hereunder shall be deemed to be a waiver of any subsequent violation or
non-performance of the same or any other covenant, agreement or obligation, nor
shall forbearance by any party be deemed to be a waiver by such party of its
rights or remedies with respect to such violation or non-performance.
(h) The descriptive headings contained in this Agreement are included
for convenience and reference only and shall not be heard to expand, modify or
aid in the interpretation, construction or meaning of this Agreement.
(i) It is not the intent of the parties to create a partnership or
joint venture or to assume partnership responsibility or liability. The
obligations of the parties shall be limited to those set out herein and such
obligations shall be several and not joint.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date and year first above written.
AXONYX Inc. CURE, LLC
By: Dr. Marvin Hausman By: Dr. Timothy Soncrant
/s/ Marvin S. Hausman, M.D. /s/ Timothy Soncrant
- --------------------------- ---------------------------
Title: Chairman Title: President
Date: 2-27-97 Date: 3/14/97
-------------------- --------------------
<PAGE>
RESEARCH AND LICENSE AGREEMENT
This Agreement, effective as of April 1, 1997 (the "Effective Date"), is by and
between NEW YORK UNIVERSITY (hereinafter "NYU"), a corporation organized and
existing under the laws of the State of New York and having a place of business
at 70 Washington Square South, New York, New York 10012 and AXONYX INC.
(hereinafter "CORPORATION"), a corporation organized and existing under the laws
of the State of Delaware having its principal office at: 110 Second Street
Stevenson WA 98648.
RECITALS
WHEREAS, Drs. Claudio Soto-Jara and Blas Frangione of NYU (hereinafter
the "NYU Scientists") have made certain inventions relating to the diagnosis and
treatment of Alzheimer's Disease and other amyloidosis disorders, all as more
particularly described in pending U.S. patent application and counterpart
foreign patent application owned by NYU, identified in annexed Appendix I and
forming an integral part hereof (hereinafter the "Pre-Existing Inventions");
WHEREAS, NYU is willing to perform the NYU Research Project (as
hereinafter defined);
WHEREAS, CORPORATION is prepared to sponsor the NYU Research Project;
WHEREAS, subject to the terms and conditions hereinafter set forth, NYU
is willing to grant to CORPORATION and CORPORATION is willing to accept from NYU
the License (as hereinafter defined);
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS.
(a) "Calendar Year" shall mean any consecutive period of twelve
months commencing on the first day of January of any year.
(b) "Corporation Entity" shall mean any company or other legal entity
which controls, or is controlled by, or is under common control
with, CORPORATION; control, means the holding of fifty and one
tenth percent (50. 1 %) or more of (i) the capital and/or (ii)
the voting rights and/or (iii) the right to elect or appoint
directors.
(c) "Date of First Commercial Sale" shall mean the date when a
"Licensed Product" is first sold in any country.
<PAGE>
(d) "Field" shall mean anti-amyloid peptide inhibitors of
amyloidogenesis in connection with the diagnosis, treatment and
prevention of animal or human diseases or conditions.
(e) "License" shall mean the exclusive worldwide license to practice
the Research Technology (as hereinafter defined) to develop, to
make and have made, to use and have used, and to sell and have
sold, the Licensed Products.
(f) "Licensed Products" shall mean products for the diagnosis,
treatment or prevention of animal or human diseases or conditions
(i) covered by a claim of any unexpired NYU Patent which has not
been disclaimed or held invalid by a court of competent
jurisdiction from which no appeal can be taken, or (ii) utilizing
or based upon NYU Know-How.
(g) "Net Sales" shall mean the total amount received by Corporation,
any Corporation Entity, or any sub-licensee of CORPORATION in
connection with sales of Licensed Products, in any arm's length
transaction, by CORPORATION, any Corporation Entity or any
sublicensee of CORPORATION, after deduction of all the following
to the extent applicable to such sales:
(i) all trade, case and quantity credits, discounts, refunds
or rebates-,
(ii) allowances or credits for returns or recalls;
(iii) sales commissions ;
(iv) all taxes (except income taxes), tariffs, duties and
other similar governmental charges paid by the
CORPORATION or its affiliates or sublicensees; and
(v) export packaging, outbound freight or transportation
charges;
provided that Net Sales shall not include amounts
invoiced by CORPORATION to any person or entity that is a
Corporation Entity or a sublicensee of CORPORATION under
the License.
(h) "NYU Know-How" shall mean the Pre-Existing Inventions and any
unpublished information and materials including, but not limited
to, pharmaceutical, chemical, biological and biochemical
products, technical and non-technical data, materials, methods
and processes and any drawings, plans, diagrams, specifications
and/or other documents containing such information, discovered,
developed or acquired by, or on behalf of students or employees
of NYU during the term and in the course of the NYU Research
Project.
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<PAGE>
(i) "NYU Patents" shall mean all United States and foreign patents
and patent applications, and any divisions, continuations, in
whole or in part, reissues, renewals and extensions thereof, and
pending applications therefor:
(i) which claim Pre-Existing Inventions and which are
identified on annexed Appendix 1; or
(ii) which claim inventions that are made, in whole or in
part, by students or employees of NYU during the term and
in the course of the NYU Research Project.
(j) "Research Period" shall mean the four-year period commencing on
the Effective Date hereof and any extension thereof as to which
NYU and CORPORATION shall mutually agree in writing.
(k) "NYU Research Project" shall mean the investigations at NYU
during the Research Period into the Field under the supervision
of the NYU Scientists in accordance with the research program,
described in annexed Appendix II, which forms an integral part
hereof.
(l) "Research Technology" shall mean all NYU Patents and NYU
Know-How.
(m) "Total Net Sales" shall mean the aggregate Net Sales of
CORPORATION, any Corporation Entity and any sublicensee of
CORPORATION.
2. EFFECTIVE DATE:
(a) This Agreement shall become effective with the signing of this
Agreement on April 1, 1997. Upon the Effective Date of this
Agreement CORPORATION will make its first quarterly installment
payment to NYU under Section 4 hereof.
(b) Upon this Agreement becoming effective, this Agreement shall
remain in force and effect until it expires or is terminated in
accordance with Section 16 or 18 hereof.
3. PERFORMANCE OF THE NYU RESEARCH PROJECT.
(a) In consideration of the sums to be paid to NYU as set forth in
Section 4 below, NYU undertakes to perform the NYU Research
Project under the supervision of the NYU Scientists during the
Research Period. If, during the Research Period all of the NYU
Scientists shall cease to supervise the NYU Research Project,
then NYU shall promptly so notify CORPORATION and shall endeavor
to' find among the scientists of NYU a scientist acceptable to
CORPORATION to continue the supervision of the NYU Research
Project in place of the NYU Scientists. If NYU is unable to find
such a scientist acceptable. to CORPORATION within three
3
<PAGE>
months after such notice to CORPORATION, CORPORATION shall have
the option to terminate its funding of the NYU Research Project.
CORPORATION shall promptly advise NYU in writing if CORPORATION
so elects. Such termination of funding pursuant to this Section
3(a) shall not terminate this Agreement or the License granted
herein. Nothing herein contained shall be deemed to impose an
obligation on NYU to find a replacement for the NYU Scientists.
(b) Nothing contained in this Agreement shall be construed as a
warranty on the part of NYU that any results or inventions will
be achieved by the NYU Research Project, or that the Research
Technology and/or any other results or inventions achieved by the
NYU Research Project, if any, are or will be commercially
exploitable and furthermore, NYU makes no warranties whatsoever
as to the commercial or scientific value of the Research
Technology and/or as to any results which may be achieved in the
NYU Research Project.
(c) NYU shall have full authority and responsibility for the
completion of the NYU Research Project within the parameters set
forth therein, subject to its obligations under Section 3(d)
hereof. All students and employees of NYU who work on the NYU
Research Project will do so as employees or students of NYU, and
not as employees of CORPORATION. Any student working on the NYU
Research Project shall enter into a written confidentiality
agreement with respect to CORPORATION Confidential Information
(as that term is hereinafter defined), a copy of which will be
provided to CORPORATION.
(d) A Scientific Advisory Board (hereinafter the "SAB") shall be
constituted by CORPORATION, and members of such Board appointed
by CORPORATION following consultation with NYU as to the
identities and qualifications of such members. The NYU Scientists
shall consult from time to time with the SAB to review the plan,
progress and direction of the NYU Research Project to evaluate
the tasks, goals, and timing of the NYU Research Project. The
NYU Research Project shall be amended only with the written
consent of NYU the NYU Scientists and CORPORATION.
(e) On or about June 1 and December 1 of each year of the Research
Period, NYU shall prepare a written report summarizing the
results of the work conducted on the NYU Research Project during
the preceding six (6) months and deliver such report to the SAB.
The CORPORATION may request, upon thirty days notice that NYU
prepare a written interim report for the SAB.
4
<PAGE>
4. FUNDING OF THE NYU RESEARCH PROJECT.
(a) As compensation to NYU for work to be performed on the NYU
Research Project during the Research Period, subject to any
earlier termination of the NYU Research Project pursuant to
Section 3(a) hereof, CORPORATION will pay NYU the total sum of
$1,200,000, payable in sixteen consecutive quarterly payments of
$ 75,000, beginning on the date of the signing of this Agreement
with subsequent payments on each three (3) month anniversary of
the Effective Date.
(b) Nothing in this Agreement shall be interpreted to prohibit NYU
(or the NYU Scientists) from obtaining additional financing or
research grants for the NYU Research Project from government
agencies, which grants or financing may render all or part of the
NYU Research Project and the results thereof subject to the
rights of the U.S. Government and its agencies, as set forth in
Title 35 U.S.C. Section 200 ET SEC. NYU shall provide
CORPORATION with reasonably timely notice of any such grant or
other financing. Such notice will include a copy of the complete
scientific research proposal for any such grant or additional
financing.
5. TITLE.
(a) Subject to the License granted to CORPORATION hereunder, it is
hereby agreed that all right, title and interest, in and to the
Research Technology, and in and to any drawings, plans, diagrams,
specifications, and other documents containing any of the
Research Technology shall vest solely in NYU. At the request of
NYU, CORPORATION shall take all steps as may be necessary to give
full effect to said right, title and interest of NYU including,
but not limited to, the execution of any documents that may be
required to record such right, title and interest with the
appropriate agency or government office.
(b) Subject to the License granted to CORPORATION hereunder, for so
long as the NYU Scientists are employed by NYU, any and all
inventions made by such NYU Scientists and relating to the Field
shall' be owned solely by NYU.
6. PATENTS AND PATENT APPLICATIONS.
(a) CORPORATION shall, simultaneously -with the signing of this
Agreement pay NYU the sum of U.S. $ 2,4,994.72, being the amount
of all costs and fees incurred by NYU up to the date hereof in
connection with the patent applications identified in Appendix I
hereto.
(b) NYU will promptly disclose to CORPORATION in writing any
inventions which constitute potential NYU Patents. CORPORATION
will promptly disclose to NYU any inventions which are in the
Field and which are conceived by employees
5
<PAGE>
or consultants of CORPORATION. All such inventions shall be
considered "CORPORATION Confidential Information" subject to
Section 11 of this Agreement.
(c) At the initiative of CORPORATION or NYU, the parties shall
consult with each other regarding the prosecution of all patent
applications with respect to the Research Technology. Such
patent applications shall be filed, prosecuted and maintained by
patent counsel selected by NYU, and acceptable to CORPORATION,
which acceptance shall be timely communicated and not be
unreasonably denied. Copies of all such patent applications and
patent office actions shall be forwarded to each of NYU and
CORPORATION. NYU and CORPORATION shall each also have the right
to have such patent applications and patent office actions
independently reviewed by other patent counsel separately
retained by NYU or CORPORATION, at their own respective expense,
upon prior notice to and consent of the other party, which
consent shall not unreasonably be withheld.
(d) All applications and proceedings with respect to the NYU Patents
shall be filed, prosecuted and maintained by NYU at the expense
of CORPORATION. Against the submission of invoices, CORPORATION
shall reimburse NYU for all reasonable costs and fees incurred by
NYU during the term of this Agreement in connection with the
filing, maintenance, prosecution, protection and the like of the
NYU Patents, subject to the prior written submission of cost
estimates and a budget for any legal work expected to cost more
than $2500.
(e) NYU and CORPORATION shall assist, and cause their respective
employees and consultants to assist each other, in assembling
inventorship information and data for the filing and prosecution
of patent applications on inventions pertaining to the Research
Technology.
(f) As long as CORPORATION diligently maintains and prosecutes any
patents or patent applications within the NYU Patents in each of
the following Major Countries: the United States, Japan, France,
Germany, the United Kingdom, Spain, Italy, Switzerland, Canada,
and Australia; CORPORATION shall retain a world wide exclusive
License as that term is defined above. If at any time during the
term of this Agreement CORPORATION decides that it is
undesirable, as to one or more of the Major Countries, to
prosecute or maintain any patents or patent applications within
the NYU Patents, it shall give prompt written notice thereof to
NYU, and upon receipt of such notice CORPORATION shall be
released from its obligations to bear all of the expenses to be
incurred thereafter as to such Major Countries in conjunction
with such patent(s) or patent application(s) and such patent(s)
or application(s) shall be deleted from the Research Technology
and NYU shall be free to grant rights in and to the Research
Technology in such Major
6
<PAGE>
Countries to third parties, and CORPORATION shall have no right
to exploit the Research Technology in such Major Countries
(g) Nothing herein contained shall be deemed to be a warranty by NYU
that
(i) NYU can or will be able to obtain any patent or patents
on any patent application or applications in the NYU
Patents or any portion thereof, or that any of the NYU
Patents will afford adequate or commercially worthwhile
protection, or
(ii) that the manufacture, use, or sale of any element of the
Research Technology or any Licensed Product will not
infringe any patent(s) of a third party.
7. GRANT OF LICENSE.
(a) Subject to the terms and conditions hereinafter set forth and
subject to the rights of the U.S. government and its agencies as
set forth in 35 U.S.C. 200 ET SEC, NYU hereby grants to
CORPORATION and CORPORATION hereby accepts from NYU the License.
(b) The License granted to CORPORATION in Section 7(a) hereto shall
commence upon the Effective Date and shall remain in force on a
country-by-country basis, if not previously terminated under the
terms of this Agreement, for eight (8) years from the Date of
First Commercial Sale in such country or until the expiration
date of the last to expire of the NYU Patents whichever shall be
later. At the expiration of the term of this Agreement, the
CORPORATION shall be deemed to have a fully paid License, in
respect of all rights being licensed hereunder, and no further
royalties shall accrue or be payable by CORPORATION to NYU in
respect thereof.
(c) CORPORATION shall be entitled to grant sublicenses under the
License on terms and conditions in compliance and not
inconsistent with the terms and conditions of this Agreement
(except that the rate of royalty may be different from those set
forth in this Agreement) (i) to a Corporation Entity or (ii) to
other third parties, in each case for consideration and in an
arms-length transaction. Sublicenses shall only be granted by
CORPORATION under a written agreement, a copy of which shall be
provided by CORPORATION to NYU as soon as practicable after the
signing thereof. Each sublicense granted by CORPORATION
hereunder shall be subject and subordinate to the terms and
conditions of this License Agreement and shall contain
(inter-alia) the following provisions:
(1) the sublicense shall expire automatically on the
termination of the License;
(2) the sublicense shall not be assignable, in whole or in
part;
7
<PAGE>
(3) the sublicensee shall not grant further sublicenses;
(4) both during the term of the sublicense and thereafter the
sublicensee shall agree to a confidentiality obligation
similar to that imposed on CORPORATION in Section 11
below, and that the sublicensee shall impose on its
employees, both during the terms of their employment and
thereafter, a similar undertaking of confidentiality; and
(5) the sublicense agreement shall include the text of
Sections 14 and 15 of this Agreement and shall state that
NYU is an intended third party beneficiary of such
sublicense agreement for :the purpose of enforcing such
indemnification and insurance provisions.
8. PAYMENTS FOR LICENSE.
(a) In consideration for the grant and during the term of the
License, CORPORATION shall pay to NYU:
(1) upon the achievement of the following technical
milestones with respect to:
(a) one neuroimaging product, (b) one Alzheimer's
treatment product and (c) one prion treatment product, in
each case which is a Licensed Product, the payments as
indicated below:
<TABLE>
<CAPTION>
Milestone Payments
--------- --------
<S> <C>
On (x) Thirty days (30) following the first filing of an $25,000
Investigational New Drug Application ("IND") or
(y) if the Federal Drug Administration requires
modification of such IND within such
thirty-day period, upon approval of such IND after
such modification
Upon the approval of a New Drug $150,000;
Application in the United States
</TABLE>
(2) With respect to sales of Licensed Products that
constitute therapeutic or preventative products for use
in humans, a royalty of (a) 4% of Total Net Sales during
each calendar year up to and including $50,000,000, (b)
3% of Total Net Sales during each calendar year in excess
of $50,000,000 and up to and including $100,000,000 and
(c) 2% of Total Net Sales during each calendar year in
excess of $ 1 00,000,000; and
8
<PAGE>
(3) With respect to sales of Licensed Products that
constitute diagnostic products for use in humans, or
diagnostic, therapeutic or preventative products for use
in animals, a royalty of (a) 3% of Total Net Sales during
each calendar year-up to and including $30,000,000 and
(b) 2% of Total Net Sales during each calendar year in
excess of $30,000,000.
(4) CORPORATION shall pay to NYU the royalty payments set
forth in Sections 8 (a)(2) and 8 (a)(3) hereof for a
period of eight (8) years from the Date of first
Commercial Sale in such country or until the expiration
date of the last to expire of the NYU Patents, whichever
shall be later; PROVIDED, however, that during any period
of time after the expiration date of the last to expire
of the NYU Patents, covering the product in question, but
within eight (8) years from the Date of First Commercial
Sale in a given country, NYU shall receive one half (1/2)
of the royalty payment as set forth on the schedule in
Sections 8 (a)(2) and 8(a)(3) hereof, on a country by
country and product by product basis. CORPORATION shall
inform NYU in writing of the Date of First Commercial
Sale with respect to each Licensed Product in each
country as soon as practicable after the making of each
such first commercial sale.
(b) For the purpose of computing the royalties due to NYU hereunder,
the year shall be divided into two parts ending on June 30 and
December 31. Not later than sixty (60) days after each December
and June in each Calendar Year during the term of the License,
CORPORATION shall submit to NYU a full and detailed report of
royalties or payments due NYU under the terms of this Agreement
for the preceding half year (hereinafter "the Half-Year Report"),
setting forth the Total Net Sales and Net Sales of each of
CORPORATION, each Corporation Entity and each sublicensee of
CORPORATION and/or lump sum payments and all other payments or
consideration from sublicensees upon which such royalties are
computed and including at least
(i) the quantity of Licensed Products used, sold, transferred
or otherwise disposed of on a country-by-country basis;
(ii) the selling price of each Licensed Product;
(iii) the deductions permitted under Section l(g) hereof to
arrive at Net Sales; and the royalty computations and
subject of payment.
If no royalties or other payments, are due, a statement shall be
sent to NYU stating such fact. Payment of the full amount of any
royalties or other payments due to NYU for the preceding half
year shall accompany each Half-Year Report on
9
<PAGE>
royalties and payments. CORPORATION shall keep for a period of
at least four (4) years after the date of entry, full, accurate
and compete books and records consistent with sound business and
accounting practices and in such form and in such detail as to
enable the determination of the amounts due to NYU from
CORPORATION pursuant to the terms of this Agreement.
(c) Within sixty (60) days after the end of each Calendar Year
commencing on the Date of First Commercial Sale, CORPORATION
shall furnish NYU with a report (hereinafter the "Annual
Report"), certified by CORPORATION's chief financial officer,
relating to the royalties and other payments due to NYU pursuant
to this Agreement in respect of the Calendar Year covered by such
Annual Report and containing the same details as those specified
in Section 8(b) above in respect of the Half-Year Report.
(d) On reasonable notice and during regular business hours, NYU or an
authorized representative of NYU shall each have the right to
inspect the books of accounts, records and other relevant
documentation of CORPORATION, or any Corporation Entity insofar
as they relate to the production, marketing and sale of Licensed
Products, in order to ascertain or verify the amount of royalties
and other payments due to NYU hereunder, and the accuracy of the
information provided to NYU in the aforementioned reports.
CORPORATION shall cause any sub-licensee of CORPORATION to permit
an inspection by CORPORATION, directly or through agents of
CORPORATION, of such sub-licensee's books of accounts, records
and other documentation to the extent that such documentation
relates to the production, marketing and sale of Licensed
Products, and shall, upon request of NYU, appoint NYU as an agent
of CORPORATION for purposes of conducting such an inspection.
(e) Beginning on the sixth Calendar Year and continuing thereafter
until this Agreement shall terminate or expire, CORPORATION
agrees that if the total royalties paid to NYU under Section
8(a)(2) and (3) do not amount to one hundred and fifty thousand
dollars ($150,000) in each Calendar Year, CORPORATION will pay to
NYU within sixty (60) days after the end of each such Calendar
Year, as additional royalty, the difference between the amount of
the total royalties paid to NYU by CORPORATION in such Calendar
Year and one hundred and fifty thousand dollars ($150,000),
failing which NYU shall have the right solely at its election,
upon written notice to CORPORATION, to either terminate this
Agreement for cause or to declare the License granted herein to
CORPORATION to be non-exclusive.
(f) CORPORATION shall, and shall cause each Corporation Entity and
sublicensee of CORPORATION, to effect sales of Licensed, Products
to third parties on commercially reasonable, arm's length terms.
10
<PAGE>
9. METHOD OF PAYMENT.
(a) Royalties and other payments due to NYU hereunder, shall be paid
to NYU in United States dollars. Any such royalties on or other
payments relating to transactions in a foreign currency shall be
converted into United States dollars based on the closing buying
rate published in the Wall Street Journal applicable to
transactions under exchange regulations for the particular
currency on the last business day of the accounting period for
which such royalty or other payment is due. If the transfer of
or the conversion into United States dollar equivalent of any
such royalties or payments due is not lawful or possible in any
country, such royalties or payments shall be made by the deposit
thereof in the currency of the country in question to the credit
and account of NYU or its nominee in a bank or trust company
located in that country, prompt notice of which shall given to
NYU, NYU shall be advised in writing in advance by CORPORATION
and provide CORPORATION a nominee if so desired.
(b) CORPORATION shall be responsible for payment to NYU of all
royalties due on sale, transfer or disposition of Licensed
Products by CORPORATION, any Corporation Entity and by the
sublicensees of CORPORATION.
10. DEVELOPMENT AND COMMERCIALIZATION.
(a) CORPORATION undertakes to use reasonable diligence to carry out
the Development Plan (annexed hereto as Appendix - and which is
an integral part of this Agreement), including but not limited
to, the performance of all efficacy, pharmaceutical, safety,
toxicological and clinical tests, trials and studies and all
other activities necessary in order to obtain the approval of the
FDA for the production, use and sale of the Licensed Products,
all as set forth in the Development Plan and within all
timetables set forth therein. CORPORATION further undertakes to
exercise due diligence and to employ its reasonable diligence to
obtain or to cause its sublicensees to obtain, the appropriate
approvals of the health authorities for the production, use and
sale of the Licensed Products, in each of the other countries of
the world in which CORPORATION or its sublicensees intend to
produce, use, and/or sell Licensed Products.
(b) Provided that applicable laws, rules and regulations require that
the performance of the tests, trials, studies and other
activities specified in subsection (a) above shall be carried out
in accordance with FDA Good Laboratory Practices and in a manner
acceptable to the relevant health authorities, CORPORATION shall
carry out such tests, trials, studies and other activities in
accordance with FDA Good Laboratory Practices and in a manner
acceptable to the relevant health authorities. Furthermore, the
Licensed Products shall be produced in accordance with FDA
11
<PAGE>
Good Manufacturing Practice ("GMP") procedures in a facility
which has been certified by the FDA as complying with GMP,
provided that applicable laws, rules and regulations so require.
(c) CORPORATION undertakes to begin the regular commercial
production, use, and sale of the Licensed Products in good faith
in accordance with the Development Plan and to continue
diligently thereafter to commercialize the Licensed Products.
(d) CORPORATION shall provide NYU with written reports on all
activities and actions undertaken by CORPORATION to develop and
commercialize the Licensed Products; such reports shall be made
within sixty (60) days after each six (6) months of the duration
of this Agreement, commencing six months after the Effective
Date.
(e) If CORPORATION shall not commercialize the Licensed Products
within a reasonable time frame, unless such delay is necessitated
by FDA or other regulatory agencies or unless NYU and CORPORATION
have mutually agreed to amend the Development Plan because of
unforeseen circumstances, NYU shall notify CORPORATION in writing
of CORPORATION's failure to commercialize and shall allow
CORPORATION ninety (90) days to cure its failure to
commercialize. CORPORATION's failure to cure such delay to NYU's
reasonable satisfaction within such ninety (90)-day period shall
be a material breach of this Agreement.
11. CONFIDENTIAL INFORMATION.
(a) Except as otherwise provided in Section 11 (c) and Section 12
below, NYU shall maintain any and all of the Research Technology
and any and all CORPORATION Confidential Inventions disclosed
under 6(b) hereof in confidence and shall not release or disclose
any tangible or intangible component thereof to any third party
without first receiving the prior written consent of CORPORATION
to said release or disclosure; provided, however that the
requirements of this section with respect to Research Technology
shall not apply to (i) government authorities and (ii) provision
of tangible components to academic or non-profit institutions for
research purposes, which shall be provided under a material
transfer agreement on conditions consistent with academic
standards. NYU shall provide timely notice to CORPORATION of any
disclosure made under this provision.
(b) Except as otherwise provided in Section 11 (c) and 11 (d) below,
CORPORATION shall maintain any and all of the Research Technology
in confidence and shall not release or disclose any tangible or
intangible component thereof to any third party without first
receiving the prior written consent of NYU to said release or
disclosure which consent shall not be withheld unreasonably.
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<PAGE>
(c) The obligations of confidentiality on each party set forth in
Sections 11 (a) and (b) shall not apply to any component of the
Research Technology or Corporation Inventions which: (i) was part
of the public domain prior to the Effective Date of this
Agreement, (ii) which becomes a part of the public domain not due
to some unauthorized act by or omission of the receiving party
after the effective date of this Agreement, (iii) which was
disclosed to the receiving party by a third party who has the
right to make such disclosure, (iv) was known to the receiving
party prior to disclosure by the disclosing party, or (v) was
independently developed by the receiving party without use of
confidential information of the disclosing party.
(d) The provisions of Section 11 (b) notwithstanding, CORPORATION may
disclose the Research Technology to: (i) third parties who need
to know the same in order to secure regulatory approval for the
sale of Licensed Products, (ii) in any private placement
memoranda, prospectus, business plan or other aspect of a
presentation to interested investors, or (iii), to prospective or
actual sublicensees of CORPORATION, provided that such third
parties undertake a written obligation of confidentiality with
respect to the Research Technology at least as restrictive as
CORPORATION's obligations under this Section 11, a copy of which
shall be provided to NYU.
12. PUBLICATION.
(a) Prior to submission for publication of a manuscript describing
the results of any aspect of the NYU Research Project, NYU shall
send CORPORATION a copy of the manuscript to be submitted, and
shall allow CORPORATION sixty (60) days from the date of such
mailing to determine whether- the manuscript contains such
subject matter for which patent protection should be sought prior
to publication of such manuscript, for the purpose of protecting
an invention made by the NYU Scientists during the course and
within the term of the NYU Research Project. Should CORPORATION
believe the subject matter of the manuscript contains a
patentable invention, then, prior to the expiration of such sixty
(60)-day period from the mailing date of such manuscript to
CORPORATION by NYU, CORPORATION shall give written notification
to NYU of:
(i) its determination that such manuscript contains
patentable subject matter for which patent protection
should be sought; and
(ii) the countries in which such patent protection should be
sought.
(b) After the expiration of such sixty (60)-day period from the date
of mailing such manuscript to CORPORATION, unless NYU has
received the written notice specified above from CORPORATION, NYU
shall be free to submit such manuscript for publication to
publish the disclosed research results in any manner consistent
with academic standards.
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(c) Upon receipt of such written notice from CORPORATION, NYU will
thereafter delay submission of the manuscript for an additional
period of up to sixty (60) days to permit the preparation and
filing in accordance with Section 6 hereof of a U.S. patent
application by NYU on the subject matter to be disclosed in such
manuscript. After expiration of such 60-day period, or the
filing of a patent application on each such invention, whichever
shall occur first, NYU shall be free to submit the manuscript and
to publish the disclosed results.
13. INFRINGEMENT OF NYU PATENT.
(a) In the event a party to this Agreement acquires information that
a third party is infringing one or more of the NYU Patents, the
party acquiring such information shall promptly notify the other
party to the Agreement in writing of such infringement.
(b) In the event of an infringement of an NYU Patent, CORPORATION
shall be privileged but not required to bring suit against the
infringer. Should CORPORATION elect to bring suit against an
infringer and NYU is joined as a party plaintiff in any such
suit, NYU shall have the right to approve the counsel selected by
CORPORATION to represent NYU. The expenses of such suit or suits
that CORPORATION elects to bring, including any expenses of NYU
incurred in conjunction with the prosecution of such suit or the
settlement thereof, shall be paid for entirely by CORPORATION and
CORPORATION shall hold NYU free, clear and harmless from and
against any and all costs of such litigation, including
attorneys' fees. CORPORATION shall not compromise or settle such
litigation without the prior written consent of NYU which shall
not be unreasonably withheld.
(c) In the event that CORPORATION exercises the right to sue provided
herein and obtains any amounts as a recovery in any such suit,
such amounts shall be divided into two categories of damages:
amounts attributable to lost revenues and amounts attributable to
all other claims. If the court or terms of any settlement
entered into by CORPORATION in accordance with the terms hereof
provides for an allocation, such allocation shall be used for
purposes of this Section 13 (c). CORPORATION shall (A) reimburse
itself for all costs and expenses of every kind and character,
including reasonable attorney's fees, necessarily involved in the
prosecution of such suit from amounts allocable to lost revenues,
(b) promptly pay to NYU an amount equal to the percentage called
for under the royalty provisions of this agreement of all amounts
allocated to claims for lost revenues, after reimbursement of
CORPORATION for expenses as provided in clause (a).
(d) If CORPORATION does not bring suit against said infringer
pursuant to Section 13(b) herein, or has not commenced
negotiations with said infringer for discontinuance of said
infringement, within ninety (90) days after receipt of such
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notice, NYU shall have the right, but shall not be obligated, to
bring suit for such infringement. Should NYU elect to bring suit
against an infringer and CORPORATION is joined as a party
plaintiff in any such suit, CORPORATION shall have the right to
approve the counsel selected by NYU to, represent CORPORATION and
NYU shall hold CORPORATION free, clear and harmless from and
against any and all costs and expenses of such litigation,
including attorneys' fees. If CORPORATION has commenced
negotiations with an alleged infringer of the NYU Patent for
discontinuance of such infringement within such 90-day period,
CORPORATION shall have an additional ninety (90) days from the
termination of such initial 90-day period to conclude its
negotiations before NYU may bring suit for such infringement. In
the event NYU brings suit for infringement of any NYU Patent, NYU
shall have the right to first reimburse itself out of any sums
recovered in such suit or settlement thereof for all costs and
expenses of every kind and character, including reasonable
attorneys' fees necessarily involved in the prosecution of such
suit, and if after such reimbursement, any funds shall remain
from said recovery, NYU shall promptly pay to CORPORATION an
amount equal to fifty percent (50%) of such remainder and NYU
shall be entitled to receive and retain the balance of the
remainder of such recovery.
(e) CORPORATION agrees to cooperate fully with NYU at the request of
NYU, including, by giving testimony and producing documents
lawfully requested in the prosecution of any suit by NYU for
infringement of the NYU patents; provided, NYU shall pay all
reasonable expenses (including attorneys' fees) incurred by
CORPORATION in connection with such cooperation. NYU shall
cooperate and shall endeavor to cause the NYU Scientists to
cooperate with CORPORATION at the request of CORPORATION,
including by giving testimony and producing documents lawfully
requested, in the prosecution of any suit by CORPORATION for
infringement of the NYU Patents; PROVIDED that CORPORATION shall
pay all reasonable expenses (including attorneys' fees) incurred
by NYU in connection with such cooperation.
14. LIABILITY AND INDEMNIFICATION.
(a) CORPORATION shall indemnify, defend and hold harmless NYU and its
trustees, officers, medical and professional staff, employees,
students and agents and their respective successors, heirs and
assigns (the "Indemnitees"), against any liability, damage, loss
or expense (including reasonable attorneys' fees and expenses of
litigation) incurred by or imposed upon the Indemnitees or any
one of them in connection with: any claims, suits, actions,
demands or judgments (i) arising out of the design, production,
manufacture, sale, use in commerce or in human clinical trials,
lease, or promotion by CORPORATION, Corporation Entity or any
agent or sublicensee of CORPORATION of any Licensed Product,
process or service relating to, or developed pursuant to, this
Agreement, or (ii) arising out of any
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other activities to be carried out pursuant to this Agreement;
except for claims arising out of the sole gross negligence of the
Indemnitee.
(b) With respect to an Indemnitee, CORPORATION's indemnification
under subsection (a)(i) of this Section 14 shall apply to any
liability, damage, loss or expense whether or not it is
attributable to the negligent activities of such Indemnitee.
CORPORATION's indemnification obligation under subsection (a)(ii)
of this Section 14 shall not apply to any liability, damage, loss
or expense to the extent that it is attributable to the negligent
activities of such Indemnitee.
(c) CORPORATION agrees, at its own expense, to provide attorneys
reasonably acceptable to NYU to defend against any actions
brought or filed against any Indemnitee with respect to the
subject of indemnity to which such Indemnitee is entitled
hereunder, whether or not such actions are rightfully brought.
(d) Whenever an event or situation arises which, it is reasonable to
believe, may lead to an indemnification obligation by
CORPORATION, the Indemnitee shall give prompt written notice to
CORPORATION of such event or situation and, if a claim is made or
a suit is brought, the Indemnified Party shall promptly forward a
copy of every demand, notice, summons, complaint or other process
received by it to CORPORATION. CORPORATION shall assume the
defense of such claim and all costs thereof. CORPORATION shall
have the right to negotiate and consent to settlement; PROVIDED
that the consent of NYU shall be obtained prior to any settlement
of a claim or litigation that involves affirmative action on the
part of NYU or any Indemnitee or the payment of money for which
CORPORATION has not made satisfactory arrangements for
reimbursement of NYU or such Indemnified Party. The
Indemnified Party shall cooperate reasonably with CORPORATION in
all respects in all phases of a claim and any proceeding arising
therefrom, including but not limited to, assisting in the conduct
of lawsuits, assisting in enforcing an agreement of contribution
or indemnity against a third party, providing witnesses, and
making records and information available to CORPORATION. The
Indemnified Party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless the employment of such counsel has
been specifically authorized in writing by CORPORATION.
CORPORATION shall not be responsible for any settlement of any
such claim effected without its consent.
15. SECURITY FOR INDEMNIFICATION.
(a) At such time as any Licensed Product, process or service relating
to, or developed pursuant to, this Agreement is being
-commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by CORPORATION, any Corporation
Entity or any agent or sublicensee of
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CORPORATION, CORPORATION shall at its sole cost and expense,
procure and maintain policies of comprehensive general liability
insurance in amounts not less than $2,000,000 per incident and
$5,000,000 annual aggregate and naming the Indemnitees as
additional insureds. Such comprehensive general liability
insurance shall provide (i) product liability coverage and (ii)
broad form contractual liability coverage for CORPORATION's
indemnification obligations under Section 14 of this Agreement.
If CORPORATION elects to self-insure all or part of the limits
described above (including deductibles or retentions which are in
excess of $250,000 annual aggregate), such self-insurance program
must be acceptable to NYU. The minimum amounts of insurance
coverage required under this Section 15 shall not be construed to
create a limit of CORPORATION's liability with respect to its
indemnification obligations under Section 14 of this Agreement.
(b) CORPORATION shall provide NYU with written evidence of such
insurance upon request of NYU. CORPORATION shall provide NYU
with written notice at least sixty (60) days prior to the
cancellation, non-renewal or material change in such insurance;
if CORPORATION does not obtain replacement insurance providing
comparable coverage within such sixty (60) day period, NYU shall
have the right to terminate this Agreement effective at the end
of such sixty (60) day period without notice or any additional
waiting periods.
(c) CORPORATION shall maintain such comprehensive general liability
insurance beyond the expiration or termination of this Agreement
during (i) the period that any product, process or service,
relating to, or developed pursuant to, this Agreement is being
commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by CORPORATION, any Corporation
Entity or any agent or sublicensee of CORPORATION and (ii) a
reasonable period after the period referred to in (c)(i) above
which in no event shall be less than fifteen (15) years.
16. EXPIRY AND TERMINATION.
(a) Unless earlier terminated pursuant to Section 16 or 18 hereof,
this Agreement shall expire upon the expiration of the period of
the License in all countries as set forth in Section 7(b) above.
(b) At any time prior to expiration of this Agreement, either party
may terminate this Agreement forthwith for cause, as "cause" is
described below, by giving written notice to the other party.
Cause for termination by one party of this Agreement shall be
deemed to exist if the other party materially breaches or
defaults in the performance or observance of any of the
provisions of this Agreement and such breach or default is not
cured within sixty (60) days or, in the case of failure to pay
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<PAGE>
any amounts due hereunder, thirty (30) days (unless otherwise
specified herein) after the giving of notice by the other party
specifying such breach or default, or automatically and without
further action if either NYU or CORPORATION discontinues its
business or becomes insolvent or bankrupt.
(c) Any amount payable hereunder by one of the parties to the other,
which has not been paid by the date on which such payment is due,
shall bear interest from such date until the date on which such
payment is made, at the rate of two percent (2%) per annum in
excess of the prime rate prevailing at Citibank, N.A., in New
York, during-the period of arrears and such amount and the
interest thereon may be set off against any amount due, whether
under terms of this Agreement or otherwise, to the party in
default by any non-defaulting party.
(d) Upon termination of this Agreement for any reason, prior to
expiration as set forth in Section 16(a) hereof, all rights in
and to the Research Technology shall revert to NYU, and
CORPORATION shall not be entitled to make any further use
whatsoever of the Research Technology.
(e) Termination of this Agreement shall not relieve either party of
any obligation to the other party incurred prior to such
termination.
(f) Sections 5, 14, 15, 16, and 21 hereof shall survive and remain in
full force and effect after any termination, cancellation or
expiration of this Agreement. Section 11 shall survive
terminaton, cancellation or expiration of this Agreement and
shall remain in full force and effect, EXCEPT that, upon
termination, Section 11(a) shall not apply to NYU with respect to
Research Technology.
(g) At the end of the term of the NYU Research Project, after
CORPORATION's payment of all funds due under Section 4 hereof,
CORPORATION shall have the right to terminate this Agreement
without cause, on sixty (60) days' written notice, whereupon all
rights in and to the Research Technology shall revert to NYU, and
CORPORATION shall not be entitled to make any further use
whatsoever of the Research Technology.
17. REPRESENTATIONS AND WARRANTIES BY CORPORATION.
CORPORATION hereby represents and warrants to NYU as follows:
(a) CORPORATION is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
CORPORATION has been granted all requisite power and authority to
carry on its business and to own and operate its properties and
assets. The execution, delivery and performance of this
Agreement have been duly authorized by the Board of Directors of
CORPORATION.
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(b) There is no pending or, to CORPORATION's knowledge, threatened
litigation involving CORPORATION which would have any effect on
this Agreement or on CORPORATION's ability to perform its
obligations hereunder; and
(c) There is no indenture, contract, or agreement to which
CORPORATION is a party or by which CORPORATION is bound which
prohibits or would prohibit the execution and delivery by
CORPORATION of this Agreement or the performance or observance by
CORPORATION of any term or condition of this Agreement.
18. CAPITALIZATION OF THE CORPORATION.
(a) To effectuate its funding obligations under Sections 4 and 8 of
this Agreement and its development and commercialization
obligations under Section 10 hereof, CORPORATION undertakes to
use its best efforts to sufficiently capitalize CORPORATION with
equity financing. CORPORATION undertakes to use its best efforts
to raise an aggregate amount of $5 million through one or more
private placements of equity securities prior to one (1) year
after the Effective Date of this Agreement, or such later date as
shall be mutually agreed upon by CORPORATION and NYU in writing,
provided, however, that neither party shall have any obligation
to agree to an extension beyond one (1) year after the Effective
Date of this Agreement. In the event CORPORATION is not
capitalized according to this agreement and CORPORATION has not
satisfied the requirements of Section 18 (b) below on or before
one (1) year after the Effective Date of this Agreement, and the
parties have not mutually agreed to an extension of such date,
this Agreement may be terminated by NYU on written notice to
CORPORATION.
(b) As an alternative to meeting the capitalization requirements of
Section 18(a) above CORPORATION may, at its option, upon written
notice to NYU, satisfy the requirements of this Section 18 by
entering into a strategic alliance including a sublicense
agreement under Section 7 (c) hereof with a major pharmaceutical
company, with a market valuation of $5 billion or more, that has
made a commitment to develop the Licensed Products in the United
States, Japan or Europe, and further provided that CORPORATION
shall have: (i) paid to NYU $500,000, and (ii) agrees to pay NYU
milestone payments upon filing of an IND and approval of an NDA
equal to four (4) times those contemplated in Section 8 (a)
above.
(c) The CORPORATION shall give NYU timely written notification of all
closings of private placements pursuant to Section 18(a), and any
strategic alliances contemplated in Section 18(b) above.
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19. REPRESENTATIONS AND WARRANTIES BY NYU.
NYU hereby represents and warrants to CORPORATION as follows:
(a) NYU is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. NYU has been
granted all requisite power and authority to carry on its
business and to own and operate its properties and assets. The
execution, delivery and performance of this Agreement have been
duly authorized by NYU.
(b) There is no pending or, to NYU's knowledge, threatened litigation
involving NYU which would have any effect on this Agreement or on
NYU's ability to perform its obligations hereunder; and
(c) There is no indenture, contract, or agreement to which NYU is a
party or by which NYU is bound which prohibits or would prohibit
the execution and delivery by NYU of this Agreement or the
performance or observance by NYU of any term or condition of this
Agreement.
20. NO ASSIGNMENT.
Neither CORPORATION nor NYU shall have the right to assign, delegate or
transfer at any time to any party, in whole or in part, any or all of
the rights, duties and interest herein granted without first obtaining
the written consent of the other to such assignment; PROVIDED that NYU
may assign its interest in this Agreement in whole or in part without
the consent of CORPORATION if such assignee (A) is a parent, subsidiary,
affiliate or related entity to NYU or (B) is an entity that acquires
substantially all of the ownership interests or assets of NYU or New
York University Medical Center (or any successor to the foregoing) or
(C) is an entity formed by NYU or New York University Medical Center (or
any successor to the foregoing) and other institutions, one of the
purposes, of which is to perform the activities for which NYU is
obligated pursuant to this Agreement.
21. USE OF NAME.
Without the prior written consent of the other party, neither
CORPORATION nor NYU shall use the name of the other party or any
adaptation thereof or of any staff member, employee or student of the
other party:
(i) in any product labeling, advertising, promotional or sales
literature;
(ii) in connection with any public or private offering or in
conjunction with any application for regulatory approval, unless
disclosure is otherwise required by law, in which case either
party may make factual statements concerning this Agreement
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<PAGE>
or file copies of this Agreement after providing the other party
with an opportunity to comment and reasonable time within which
to do so on such statement in draft.
Except as provided herein, neither NYU nor CORPORATION will issue public
announcements about this Agreement or the status or existence of the NYU
Research Project without prior written approval of the other party.
22. MISCELLANEOUS.
(a) In carrying out this Agreement the parties shall comply with all
local, state and federal laws and regulations including but not
limited to, the provisions of Title 35 United States Code Section
200 ET al. and 15 CFR Section 368 ET SEQ.
(b) If any provision of this Agreement is determined to be invalid or
void, the remaining provisions shall remain in effect.
(c) This Agreement shall be deemed to have been made in the State of
New York and shall be governed and interpreted in all respects
under the laws of the State of New York.
(d) Any dispute arising under this Agreement shall be resolved in an
action in the courts of New York State or the federal courts
located in New York State, and the parties hereby consent to
personal jurisdiction of such courts in any action.
(e) All payments or notices required or permitted to be given under
this Agreement shall be given in writing and shall be effective
when either personally delivered or deposited, postage prepaid,
in the United States registered or certified mail, addressed as
follows:
To NYU: New York University Medical Center
550 First Avenue
New York, NY 10016
Attention: Isaac T. Kohlberg
Vice President for
Industrial Liaison
and,
Office of Legal Counsel
New York University
Bobst Library
70 Washington Square South
New York, NY 10012
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Attention: Kathy L. Schulz Associate General Counsel
To CORPORATION:
AXONYX Inc.
110 Second Street
P.O. Box 910
Stevenson WA 98648
Attention: Dr. Marvin Hausman,
Chairman
or such other address or addresses as either party may hereafter
specify by written notice to the other. Such notices and
communications shall be deemed effective on the date of delivery
or fourteen (14) days after having been sent by registered or
certified mail, whichever is earlier.
(f) This Agreement (and the annexed Appendices) constitute the
entire Agreement between the parties and no variation,
modification or waiver of any of the terms or conditions
hereof shall be deemed valid unless made in writing and signed
by both parties hereto. This Agreement supersedes any and all
prior agreements or understandings, whether oral or written,
between CORPORATION and NYU.
(g) No waiver by either party of any non-performance or violation
by the other party of any of the covenants, obligations or
agreements of such other party hereunder shall be deemed to be
a waiver of any subsequent violation or non-performance of the
same or any other covenant, agreement or obligation, nor shall
forbearance by any party be deemed to be a waiver by such
party of its rights or remedies with respect to such violation
or non-performance.
(h) The descriptive headings contained in this Agreement are
included for convenience and reference only and shall not be
heard to expand, modify or aid in the interpretation,
construction or meaning of this Agreement.
(i) It is not the intent of the parties to create a partnership or
joint venture or to assume partnership responsibility or
liability. The obligations of the parties shall be limited to
those set out herein and such obligations shall be several and
not joint.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date and year first above written.
NEW YORK UNIVERSITY
By: /s/ Isaac T. Kohlberg
-----------------------------------
Isaac T. Kohlberg
Title: Vice President for Industrial Liaison
Date: 4/8/97
-----------------------------------
AXONYX Inc.
By: /s/ Marvin S. Hausman, M.D.
-----------------------------------
Dr. Marvin Hausman
Title: President
Date: 4/3/97
-----------------------------------
Read and Accepted by:
/s/ Blas Frangione /s/ Claudio Soto
- ------------------------------ ------------------------------
Dr. Blas Frangione Dr. Claudio Soto-Jara
Date: 4/8/97 Date: 4/8/97
------------------------- -------------------------
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<PAGE>
Exhibit 10.4
BUSINESS SERVICE CENTER
OF SEATTLE
LEASE AGREEMENT
PARTIES
This lease made this 28TH day of JANUARY, 1999, between Bee-Barr, Inc., dba
Business Service Center of Seattle, hereinafter referred to as Landlord, and
AXONYX, INC., hereinafter referred to as Tenant.
TERM
The term of this lease shall be 3 months, commencing on the 8th day of February,
1999, and terminating on the last day of the THIRD month, April, 1999. If Tenant
shall occupy the premises for permitted uses prior to the date set forth herein,
the commencement date for rent purposes shall be prorated and charged
accordingly as part of the first months rent. The termination date shall not be
affected by carry occupancy. If either Landlord or Tenant desires to termination
the lease at the end of the term, the party desiring to shall, 30 days prior to
the expiration date, give the other written notice of its intention to do so.
Should written notice of intention to terminate not be given by either party,
the lease shall be extended under the same terms and conditions for a like
period of time. The lease shall continue to renew itself under the same terms
and conditions until one party notifies the other, as set forth above, of its
intent to terminate.
PREMISES
Premises shall consist of Suite No. 3228 on the thirty-second floor of the 1001
Fourth Avenue Plaza Building, Seattle, Washington. In addition to suite No.
3228, Tenant shall have use of the common are of the thirty-second floor,
including the conference room on a reasonable and shared basis with other
thirty-second floor tenants. Tenant agrees to abide by the prevailing rules of
Business Service Center of Seattle as promulgated by Landlord from time to time,
provided said rules are reasonable and are communicated to Tenant. Tenant
further agrees that failure to adhere to said rules shall constitute a breach of
this Lease Agreement.
RENT
The rent amount for the term of this lease shall be $850.00 per month. Tenant
shall pay Landlord the monthly rent, in advance, on the first day of each
calendar month during said term. Rent shall be delivered to the Landlortd's
office in the 1001 Fourth Avenue Plaza Building. If the monthly rent not paid by
the tenth of the month in which due, a late charge of ten percent of the rent,
including proration, will be payable by the Tenant as a special handling charge.
Tenant agrees to pay Landlord a Twenty Dollar handling fee for any check
returned to Landlord. Acceptance of late rent and forebearance of collection
and/or eviction action on the part of the Landlord shall not constitute a waiver
of any of Landlord's right under the lease. Should Tenant's rent remain unpaid
after the 15th of any month, Landlord shall have the right to terminate services
to Tenant and deny Tenant access to both the exclusive and nonexclusive premises
by charging the locks. Any costs associated with changing the locks shall be at
Tenant's expense. Tenant shall reimburse Landlord for the cost of changing the
locks before any lease default will be considered cured. Should Tenant's rent
remain unpaid after the thirtieth day of any month, Landlord shall have the
right to terminate the lease, remove and store Tenant's property at Tenant's
expense and take whatever steps are necessary to rerent Tenant's premises.
Tenant shall not be relieved of his duty to pay rent under this Lease Agreement
until the premises are rerented or this Lease Agreement expires, whichever
occurs first. In any event, Landlord shall be entitled to recover any and all
reasonable costs incurred by Landlord in mitigating its damages by rerenting or
attempting to rerent
<PAGE>
2
Tenant's office. Should Tenant's rent become sixty days past due, Landlord shall
have the right to sell whatever of Tenant's property has been seized as an
offset against rent due Landlord. Landlord shall be entitled to deduct the cost
of said sale from the amount credit to Tenant's unpaid rent. *RENT INCLUDES 1
DESK, 1 DESK CHAIR, 2 SIDE CHAIRS AND 1 LATERAL FILE OR 1 CREDENZA.
DEPOSIT
Concurrently with the execution of this Agreement, Tenant shall deliver to
Landlord the sum of ONE THOUSAND, SEVEN HUNDRED Dollars and No/Cents which shall
constitute payment of the first and last month's rent on the Office Suite.
REPALRS AND ALTERATIONS
Tenant agrees by taking possession of premises that premises are then in a
tenantable and good condition; that Tenant will take good care of premises, and
the same will not be altered or changed without written consent of the Landlord.
Tenant shall not make changes to locks on doors or add or in any way change any
shelving, wall covering, or any fixtures without first obtaining written consent
of Landlord. Any wall hangings should be carefully hung with small nails, first
applying scotch tape to the wall so the paint will not chip when the nail is
removed.
Any repairs of the walls necessary because of damage caused by wall decorations
installed by Tenant shall be paid for by Tenant. All damage or injury done to
premises by Tenant or by any persons who may be in or upon premises with the
consent of Tenant, shall be paid for by Tenant and Tenant shall pay for all
damage to the building caused by Tenant's misuse of premises or the
appurtenances thereto. Tenant shall pay for the replacement of doors or windows
of premises which am cracked, broken or damaged by Tenant its employees, agent
or invitees and Tenant shall not put any curtains, draperies, or other hangings
on or beside the windows in premises without first obtaining Landlord's consent.
All floor plants shall sit on floor protectors approved by the building
management to prevent any damage to the carpet.
If damage to the carpet occurs for any reason, i.e., spotting, staining, odors,
discoloration, etc., Tenant will be responsible for all charges incurred for
shampooing, patching, or replacing said carpet. All alterations, additions, and
improvements, except fixtures installed by Tenant and which are removable
without damage to the building, shall become the property of Landlord. Tenant
shall at the termination of this lease by the expiration of time or otherwise,
surrender and deliver up premises to Landlord in as good a. condition as when
received by Tenant from Landlord, and if necessary to restore to that condition,
Landlord shall be entitled to add to Tenant's closing statement the amount
necessary to restore Tenant's office to the condition it was in upon
commencement of this lease.
FIRE RETARDANT/HAZARDOUS MATERIAL
Landlord has been advised by the building owner, JMB Property Management
Corporation, that asbestos has been used in the building as a fire retardant.
The building owner has further advised Landlord that a significant number of
buildings in Seattle use asbestos as fire retardant and that tests conducted by
the Landlord in the building indicate no danger to occupants of the building who
avoid direct contact with the material. The tests are available for inspection
by Tenant at owner's office in the building upon reasonable notice. Tenant
acknowledges Landlord's disclosure of asbestos in the building. Tenant accepts
the premises as is and as consideration in the negotiation of this lease,
releases Landlord from any and all liability for injury caused to Tenant its
employees or guests by the presence of asbestos in the building.
<PAGE>
3
SIGNS
No sign, picture, sticker, advertisement or notice shall be displayed,
inscribed, painted or affixed to any of the glass, walls, sign plaque, or
woodwork of the office or buildouts without the prior written consent of
Landlord. Tenant agrees that if he decides to have his name displayed on the
office directory, or outside his door, Tenant's name display shall be on a sign
approved, built and installed by Landlord. The total charge for the design,
construction, and installation of Tenant's directory sign and office sign shall
be home by Tenant in accordance with prevailing prices for signs at time of
execution of this lease. Should Tenant decide to order a directory sign or
office sign Tenant will indicate such affirmative decision and specify the exact
wording to appear on the sign at the time of check-in on the Sign Layout Form.
Tenant further agrees did Landlord shall be entitled to bill Tenant for said
sign(s) on Tenant's first monthly statement following the installation of the
sign(s), and that Tenant shall pay Landlord for said sign(s) on the same date
his rent is next paid.
ENTRY AND INSPECTION
Tenant will permit Landlord and its agents to enter into and upon premises at
all reasonable times for the purpose of inspecting the same or for the purpose
of cleaning, repairing, altering or improving premises or building. The Landlord
shall have the right to enter premises, at any reasonable time, for the purpose
of showing premises to prospective tenants for a period of 30 days prior to the
expiration of the Lease Agreement term.
ACCIDENTS, INDEMNITY AND WAIVER OF SUBROGATION
Tenant shall defend and indemnify Landlord and save it harmless from and against
any and all liability, damages, costs, or expenses, including attorneys' fees,
arising from any act, emission, or negligence of Tenant, or the officers,
contractors, licensees agents, servants, employees, guests, invitees, or
visitors of Tenant in or about the premises, or arising from any accident,
injury, or damage, howsoever and by whomsoever caused, to any person or
property, occurring in or about the promises. Whether the loss or damage is due
to the negligence of either Tenant or Landlord, their agents or employees, or
any other cause, Landlord and Tenant do each herewith and hereby release and
relieve the other from responsibility for, and waive their entire claim of
recovery from (i) any loss or damage to the real or personal property of either
located anywhere in the building and including the building itself, arising out
of or incident to the occurrence of any of the perils which may be covered by
fire and lightning insurance policy, with extended coverage endorsement in
common use in the Seattle locality, and policies covering any loss by theft or
water damage, and (ii) loss resulting from business interruption at premises
arising out of or incident to the occurrence of any of the perils which may be
covered by the business interruption insurance policy in common use in the
Seattle locality, to the extent that such risks under (i) and (ii) are in fact
covered by insurance, each party shall cause its insurance carriers to consent
to such waiver and to waive all rights or subrogation against the other party.
DEFAULT AND REENTRY
If Tenant fails to perform any covenant under this Lease Agreement within ten
days after written notice from Landlord stating the nature of default Landlord
may cancel this Lease Agreement and reenter and take possession of premises
using all legal means to do so; provided, however, that if the nature of such
default other than for nonpayment of rent is such that the same cannot
reasonably be cured within such ten-day period, Tenant shall not be deemed to be
in default if Tenant shall within such period commence such cure and thereafter
diligently prosecute the same to completion. Notwithstanding such retaking of
possession by Landlord, Tenant's liability for the rent provided herein shall
not be extinguished for the balance of the term of this Lease Agreement.
<PAGE>
4
UNLAWFUL USE
The Tenant will not disturb other occupants of said floor by making any undue or
unseemly noise or otherwise disturbing or permitting the disturbance of other
occupants of the floor or the visitors thereto, and will not do or permit to be
done in or about the premises anything which is illegal or unlawful or which
will be dangerous to life or limb, or will increase any insurance rates or
jeopardize the insurance coverage of said premises or any of the occupants
thereof, or in any way lessen the commercial or aesthetic value of the building
or surroundings. No food or other products will be stored on premises which emit
or tend to emit noxious or offensive odors and Tenant accepts the responsibility
for maintaining leased premises free from such odors.
SUPPORT SERVICES
Complete administrative support services am provided by Business Service Center
of Seattle at the rates indicated on the price list which will be provided by
Business Service Center of Seattle upon request. These rates arc subject to
change. Services include telephone answering, word processing, personal computer
data entry, secretarial, dictation transcription, telex, facsimiles, copying,
mail handling, and other administrative services.
Secretarial work will be processed by Business Service Center of Seattle as
quickly as possible on a first-come, first served basis. Office equipment is for
the exclusive use of die staff and is not to be used by Tenant, with the
exception of the Kodak copier.
Tenant may employ his/her own secretary, however, Tenant shall not offer for
sale/trade to any other tenants of Business Service Center of Seattle any of the
administrative Support Services offered by Business Service Center of Seattle,
including but not limited to word processing, dictation transcription, personal
computer data entry, etc. Tenant shall also not offer for sale/trade to any
other tenants of Business Service Center of Seattle photocopying or facsimile
transmission services.
KODAK COPIER
Tenant may purchase an access code to the Kodak copier and will thereby have
access to the machine 24 hours a day. Copies will be billed monthly at published
rates.
Tenant may have a photocopier in his office for his personal use; however,
Tenant shall not offer photo-copy service or use of Tenant's photocopier for
sale/trade to any other tenants of Business Service Center of Seattle.
TELEPHONE ANSWERING SERVICE
Telephone answering service is provided by Business Service Center of Seattle
from 6:30 am. to 6:30 p.m., Monday through Friday, at published rates (hours
subject to change at the discretion of Business Service Center of Seattle). The
telephone answering service is closed on those holidays normally observed by the
business community.
MAIL
Incoming mail is delivered to Tenant's mail box twice a day at no additional
charge to Tenant Outgoing mail service will be charged at the rates specified in
the price list. Outgoing mail should be deposited in the mail basket prior to
4:30 p.m. for posting that evening. Outgoing mail is posted and delivered to
Post Office once a day at 4:30 p.m.
<PAGE>
5
CONFERFENCE ROOM
The conference room on the thirty-second floor may be used by all tenants for up
to ten hours per month at no charge. This conference room will accommodate ten
or more people and may be used on a first-come, first-served basis. Reservations
may be made by Tenant recording his/her name in the Conference Room Schedule
Book located at the Reception Desk.
NON-SOLICITATION OF EMPLOYEES
During the term of this Lease Agreement and for one year thereafter, Tenant
agrees to refrain from soliciting or employing Landlord's support personnel or
staff. In the event of a violation or breach by Tenant of this non-solicitation
covenant, Tenant will pay to Landlord as liquidated damages of such breach a sum
equal to twenty-five percent (25%) of the annual gross compensation paid to such
employee by Business Service Center of Seattle. Tenant acknowledges the
importance of Business Service Center of Seattle's staff and support personnel
to the success of Landlord's business and their necessity to the continued
success of Business Service Center of Seattle that employee turnover be avoided.
ACCESS TO PREMISES
No additional locks shall be placed upon Tenants door beyond those already
provided without Landlord's written consent. Individual keys will be furnished
to each Tenant's office. Tenant agrees not to distribute any key to any person
other than Tenant's employees without landlord's written consent. Landlord shall
provide Tenant with one key to the lock of Tenant's suite at no additional
charge. Extra keys may be purchased at published rates. Said lock and key shall
be different from that of any other suite. Tenant agrees not to allow the use of
said key by anyone other than Tenant or his employees. Tenant acknowledges that
Landlord, the building janitorial service, security personnel and building
manager will have a key to Tenant's office.
Tenant may also purchase an access card to allow the Tenant and Tenant's
employees access to the building and Business Service Center of Seattle floor
after hours, weekends, and holidays. Tenant agrees not to allow the use of said
access card by anyone other than Tenant and his employees. Tenant agrees to
return his key(s) and access card(s) to Landlord upon vacating the premises, and
that should he/she fail to do so, Landlord shall have the right to have the
locks changed and access card(s) altered at Tenant's expense.
Tenant is encouraged to keep his door locked to his suite when he is not in said
suite, and should Tenant fail to do so, any resulting loss of property or
privacy shall be at Tenant's own peril.
SPECIAL IMPROVEMENTS
Any special improvements requested by the Tenant shall be made in writing to the
Landlord. Performance of said special improvements shall be at the discretion of
the Landlord. In the event Landlord makes special improvements on behalf on
Tenant, Tenant shall reimburse Landlord for Landlord's costs of making said
special improvements requested by Tenant within ten days of receipt of statement
from Landlord of special improvements.
NON-INTERFERENCE
Tenant agrees that it will not interfere with the business of Landlord in any
respect, including, without limitation, contracting as broker, consultant,
advisor or otherwise, any other of Landlord's tenants, directly or indirectly,
concerning alternative leased office space.
<PAGE>
6
COSTS AND ATTORNEY'S FEES
If Tenant or Landlord shall engage the services of an attorney to collect monies
due or to bring any action for any relief against the other, declaratory or
otherwise, arising out of this lease, including any suit by Landlord for
recovery of rent, additional rent or other payments hereunder or possession of
the promises, each party shall, and hereby does, to the extent permitted by law,
waive trial by jury and the losing party shall pay the prevailing Party a
reasonable sum for attorney's fees in such suit, at trial and on appeal and such
attorney's fees shall be deemed to have accrued on the commencement of such
action.
NOTICE
Any notice required to be given by either party to the other pursuant to the
provisions of this lease or any law, present or future, shall be in writing and
shall be deemed to have been duly given or sent if either delivered personally
or deposited in the United States mail, postage prepaid, registered or
certified, return receipt requested, and addressed to the Landlord or Tenant at
their respective office addresses in the 1001 Fourth Avenue Plaza Building,
Suite 3200, Seattle, Washington.
LEASE ASSIGNMENT
Tenant shall not assign or sublet this lease or any interest therein, nor let or
sublet the Premises or any part thereof or any right or privilege appurtenant
thereto, nor permit the occupancy or use of any part thereof by any other person
without the prior written consent of the Landlord. If Landlord gives written
consent to such assignment or subletting, the Tenant originally named herein
shall continue to be fully liable for all terms and conditions of this Lease
Agreement during its Lease term.
ENTIRE AGREEMENT
It is expressly understood and agreed by Landlord and Tenant that there are no
promises, agreements, conditions, understandings, induces, warranties or
representations, oral or written, express or implied, between them, other than
as herein set forth and that his lease shall not be modified in any manner
except by an instrument in writing executed by the parties. No consent given or
waiver made by Landlord of any breach of Tenant of any provision of this Lease
Agreement shall operate or be construed in any manner as a waiver of any
subsequent breach, or the same, or of any other provision.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement on the day
and year first above set forth.
LANDLORD: TENANT:
BEE-BARR, INC., dba AXONYX, INC.
Business Service Center of Seattle -------------------------------------
By: /s/ Kelley Gaffney By: /s/ Michael R. Espey
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Title: Sales Manager Title: V.P. & Secretary
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