<PAGE>
As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KERYX BIOPHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 8731 13-4087132
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
216 Jaffa Road
Sha'arei Ha'ir, Jerusalem, Israel 94383
+972-2-537-4997
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
Robert Trachtenberg, Esq.
216 Jaffa Road
Sha'arei Ha'ir, Jerusalem, Israel 94383
+972-2-537-4997
(Name and address, including zip code, and telephone
number, including area code, of agent for service)
---------------
Copies to:
Robert G. Robison, Esq. Steven S. Pretsfelder, Esq.
Nathaniel T. Weiner, Esq. Jonathan J. Russo, Esq.
Morgan, Lewis & Bockius LLP Baer Marks & Upham LLP
101 Park Avenue 805 Third Avenue
New York, New York 10178 New York, New York 10022
(212) 309-6000 (212) 702-5700
Fax: (212) 309-6273 Fax: (212) 702-5941
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Price Amount of
Securities to be Registered (1)(2) Registration Fee
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<S> <C> <C>
Common Stock, par value $.001 per share................. $75,000,000 $19,800
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</TABLE>
(1) Includes shares to be sold upon exercise of the underwriters' over-
allotment option. See "Underwriting."
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 of Regulation C under the Securities Act of 1933, as amended.
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities, and we are not +
+soliciting offers to buy these securities in any state where such offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, , 2000
PROSPECTUS
Shares
[LOGO OF KERYX]
Common Stock
-----------
We are selling shares of our common stock. This is our initial public
offering.
No public market currently exists for our common stock. We currently estimate
that the initial public offering price per share will be between $ and
$ .
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "KERX" and on the Alternative Investment Market of the London
Stock Exchange under the symbol "KRX."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 5.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Public offering price................................... $ $
Underwriting discounts and commissions.................. $ $
Proceeds, before expenses, to us........................ $ $
</TABLE>
We have granted the underwriters a 45-day option to purchase up to an
additional shares of common stock to cover over-allotments at the initial
public offering price less the underwriting discount.
-----------
The underwriters are offering the common stock as described under
"Underwriting." Delivery of the shares will be made on or about , 2000.
-----------
Global Coordinators
Roth Capital Partners, Inc. WestLB Panmure Limited
-----------
U.S. Lead Manager International Lead Manager
Roth Capital Partners, Inc. WestLB Panmure Limited
-----------
The date of this Prospectus is , 2000.
<PAGE>
Inside front cover:
[Flow Chart]
Flow chart representing the KinAce drug discovery
and development process, from disease target
identification through clinical trials.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................ 1
Risk Factors...................... 5
Use of Proceeds................... 14
Dividend Policy................... 14
Capitalization.................... 15
Dilution.......................... 16
Selected Financial Data........... 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 18
Business.......................... 23
Management........................ 36
Related Party Transactions........ 45
Principal Stockholders............ 47
Description of Our Corporate
Structure and Capital Stock...... 49
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of Our Certificate of
Incorporation and Bylaws.......... 52
Our Authorized and Issued Capital.. 54
Tax Considerations................. 55
Shares Eligible for Future Sale.... 63
Underwriting....................... 65
Legal Matters...................... 68
Experts............................ 68
Where You Can Find More
Information....................... 68
Additional Information for the
Alternative Investment Market..... 69
Index to Financial Statements...... F-1
Appendix: Independent Expert's
Report............................ A-1
</TABLE>
This prospectus contains trademarks and trade names of Keryx
Biopharmaceuticals, Inc., including our name and logo, and the KinAce mark. In
this prospectus, "we," "us" and "our" refer to Keryx Biopharmaceuticals, Inc.
and its subsidiaries unless the context requires otherwise.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it
is unlawful. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock. This preliminary prospectus is
subject to completion prior to this offering.
Unless otherwise stated, references to any legislation or regulations are to
US legislation or regulations.
FORWARD-LOOKING STATEMENTS
Some statements contained in this prospectus are forward-looking statements
concerning our operations, economic performance and financial condition.
Forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, are included, for example, in the
discussions about:
. our strategy;
. sufficiency of our capital resources;
. revenues from collaborations;
. product development;
. our research and development and other expenses; and
. our operational and legal risks.
These statements involve risks and uncertainties. Actual results may differ
materially from those expressed or implied in those statements. Factors that
could cause these differences include, but are not limited to, those discussed
under "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(i)
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may not
contain all of the information that is important to you. To understand this
offering fully, you should carefully read the entire prospectus including the
risk factors and the financial statements.
Our Business
We are a pioneer in the post-genomics era, applying data from the human
genome for the systematic discovery of new drugs. Our KinAce bioinformatics
drug discovery platform enables us to use this data to generate drug candidates
targeting protein kinases. Kinases are a major class of proteins that modulate
the critical pathways over which cells communicate, a form of communication
known as signal transduction. We believe that our approach to drug design
allows us to discover more drug candidates in less time and with lower levels
of toxicity than our competitors. We have discovered 13 lead compounds in less
than two years, eight of which have already exhibited in vivo activity. In
addition to developing drug candidates with our KinAce platform, we have in-
licensed KRX-101 and are developing it for the treatment of diabetic
nephropathy in Type II diabetes.
KinAce Drug Discovery Platform
Protein kinases are enzymes that play a key role in the way cells
communicate. When protein kinases give an inappropriate signal, the result is
often a disease or other medical condition. Our KinAce platform uses our
proprietary bioinformatic algorithm approach, which focuses on the sequence of
specific portions of a protein kinase, to identify small compounds that can
potentially inhibit or stimulate the activity of that kinase. To date, by
targeting such specific portions of protein kinases, our approach has enabled
us to discover 13 lead drug compounds. Of these compounds, 8 have already
exhibited in vivo activity, with an average time from concept to in vivo
testing of approximately 4 months.
We expect to file an application to enter human clinical trials in Israel
for our first KinAce compound, KRX-123 for hormone-resistant prostate cancer,
in 2000. We believe hormone-resistant prostate cancer, for which there is
currently no curative treatment, represents a potential market in excess of
$450 million. Our 12 other KinAce compounds are being developed through a
combination of in-house efforts and research and development agreements with
others. We recently entered into research and development agreements relating
to five of these compounds with the National Institutes of Health, or NIH, Novo
Nordisk A/S, Osteotech Inc., and a leading multi-national pharmaceutical and
healthcare products company.
KRX-101
In addition to our KinAce platform, we have in-licensed KRX-101 (sulodexide)
for the treatment of diabetic nephropathy and other conditions. KRX-101 has
been used for many years in Europe for vascular indications and has a well-
established safety profile. We intend to file an application with the FDA to
enter clinical trials in 2000 for the use of KRX-101 in the treatment of Type
II diabetic nephropathy. We will request FDA "fast track" review for KRX-101 on
the basis that there is currently no FDA-approved treatment for this
indication. We estimate the potential market for KRX-101 to be in excess of $1
billion and believe that KRX-101 has significant potential for indication
expansion.
1
<PAGE>
Our Strategy
We intend to:
. advance KRX-101 into clinical trials for diabetic nephropathy and pursue
additional indications for this drug candidate;
. complete pre-clinical development of KRX-123 for hormone-resistant
prostate cancer and file an application to enter clinical trials in
Israel for this drug candidate in 2000;
. continue to generate new drug candidates using our KinAce platform for a
variety of conditions, such as cancer and metabolic, cardiovascular,
immunological and neurological diseases;
. internally develop or out-license our drug candidates based on an
assessment of clinical and financial resources; and
. further develop and expand our relationships with corporate collaborators
for the development, marketing and distribution of our drug candidates.
Corporate Information
We are a Delaware corporation. Our registered office is at 1013 Centre Road,
Wilmington, Delaware 19805. Our executive offices are located at 216 Jaffa
Road, Sha'arei Ha'ir, Jerusalem, Israel 94383. Our telephone number is +972-2-
537-4997. Our e-mail address is [email protected].
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by us................... shares(1)
Common stock outstanding after the offering.. shares(1)(2)
Use of proceeds.............................. To fund clinical trials for
KRX-101 and KRX-123; to fund
the discovery and further
development of compounds using
our KinAce platform; and to use
as working capital and for
general corporate purposes.
Proposed Nasdaq National Market symbol....... KERX
Proposed Alternative Investment
Market symbol............................... KRX
</TABLE>
- --------
(1) Excludes a 45-day option granted to the underwriters to purchase up to
additional shares of common stock to cover over-allotments, if any.
(2) Excludes 2,820,000 shares of common stock that are reserved for issuance
under our stock option plan and 689,948 shares of common stock that are
reserved for issuance under various warrants and non-plan options
previously granted, pursuant to which at April 30, 2000 there was an
aggregate of 2,924,688 options and 529,948 warrants outstanding at a
weighted average exercise price of $0.21 per share.
3
<PAGE>
Summary Consolidated Financial Information
This table summarizes our statements of operations data and our balance
sheet data. The as-adjusted balance sheet data reflects the sale of shares
of our common stock in the offering at an assumed public offering price of $
per share, after deducting the estimated underwriting discount and offering
expenses, and the mandatory conversion of all of our outstanding shares of
convertible preferred stock.
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
Years Ended December 31, (unaudited)
--------------------------- ---------------
1997 1998 1999 1999 2000
-------- -------- -------- ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue from management fees..... $ 233 $ 66 $ -- $ -- $ --
Expenses:
Research and development ....... 569 1,407 6,923 414 1,253
General and administrative ..... 525 1,011 1,813 263 614
------- -------- -------- ------ -------
Total operating expenses....... 1,094 2,418 8,736 677 1,867
------- -------- -------- ------ -------
Operating loss................... (861) (2,352) (8,736) (677) (1,867)
Financing income/(expenses)...... (11) (157) (257) (10) 55
------- -------- -------- ------ -------
Net loss before taxes on income.. (872) (2,509) (8,993) (687) (1,812)
======= ======== ======== ====== =======
Net loss......................... $ (882) $ (2,539) $ (9,003) $ (687) $(1,839)
======= ======== ======== ====== =======
Basic and diluted net loss per
share........................... $ (0.16) $ (0.47) $ (1.67) $(0.13) $ (0.34)
======= ======== ======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
As of
March 31, 2000
(unaudited)
------------------
Actual As Adjusted
------ -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................................... $6,551 $
Working capital.............................................. 6,469
Total assets................................................. 7,607
Long-term obligations........................................ 129
Total stockholders' equity................................... 7,073
</TABLE>
See notes to our financial statements for explanations of the determination
of the number of shares used in computing per share data and the inclusion of
data with respect to our predecessor company for the periods indicated.
4
<PAGE>
RISK FACTORS
An investment in our common stock is risky. You should carefully consider
the following risks, as well as the other information contained in this
prospectus. If any of the following risks actually occur, our business could be
harmed. In that case, the trading price of our common stock could decline, and
you might lose all or part of your investment. The risks and uncertainties
described below are not the only ones facing us. Additional risks and
uncertainties not presently known to us, or that we currently see as
immaterial, may also harm our business. If any of these additional risks or
uncertainties occur, the trading price of our common stock could decline, and
you might lose all or part of your investment.
Risks Related to Our Business
We have a limited operating history and have incurred operating losses since
our inception. We expect to incur losses in the future, and we may never become
profitable.
We have a limited operating history. You should consider our prospects in
light of the risks and difficulties frequently encountered by early stage
companies. In addition, we have incurred operating losses since our inception
and expect to incur operating losses for the foreseeable future. As of March
31, 2000, we had an accumulated deficit of approximately $14 million. We expect
to expand our research and development efforts significantly, which will result
in increasing losses. We may continue to incur substantial operating losses
even if we begin to generate revenues from our drug candidates or technologies.
We have not yet commercialized any products or technologies, and we cannot
be sure that we will ever be able to do so. Even if we commercialize one or
more of our drug candidates or technologies, we may not become profitable. Our
ability to achieve profitability is dependent on a number of factors, including
our ability to complete our development efforts, to obtain regulatory approval
for our drug candidates and to successfully commercialize our drug candidates
and technologies.
Our drug discovery methods are novel and may not lead to commercially viable
drugs.
The drug discovery methods that we employ using our KinAce platform are
novel. We do not know if these methods will lead to the discovery of
commercially viable drugs. There is limited scientific understanding of protein
kinase modulation and its role in complex diseases. Furthermore, our drug
discovery efforts are focused on a number of protein kinases, the functions of
which have not yet been fully identified. As a result, the safety and efficacy
of drugs that modify these protein kinases have not yet been established, and
therefore our research and development activities may not result in any
commercially viable products. Moreover, the compounds developed using our
KinAce platform are made up of small peptides and may be difficult to formulate
as orally available drugs. If we are unable to formulate an effective way to
deliver our KinAce compounds, our ability to market these drug candidates will
be materially impaired. To date, we believe that only one product based on
protein kinase modulation has been commercialized.
Our drug candidates are in early stages of development.
Our drug candidates are in early stages of development, and none has been
approved for clinical trials. We will need to conduct significant additional
research and human testing before we can file applications for product approval
with the Food and Drug Administration, or FDA, or with regulatory authorities
of other countries. Pre-clinical testing and clinical development are long,
5
<PAGE>
expensive and uncertain processes. It may take us many years to complete the
testing of our drug candidates, and failure can occur at any stage of this
process. Interim results do not necessarily predict final results.
Clinical trials also have a high risk of failure. A number of companies in
the pharmaceutical industry, including biotechnology companies, have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. If we experience delays in the testing or approval process
or if we need to perform more or larger clinical trials than originally
planned, our financial results and the commercial prospects for our drug
candidates will be harmed, and our ability to become profitable will be
materially impaired. In addition, we have limited experience in conducting and
managing the clinical trials necessary to obtain regulatory approval in the
United States and abroad and, accordingly, may encounter unforeseen problems
and delays in the approval process.
We intend to submit an Investigational New Drug (IND) application for our
KRX-101 drug candidate for the treatment of Type II diabetic nephropathy.
However, we do not know whether the FDA or regulatory authorities of other
countries will allow us to commence clinicals trials for this drug candidate.
Our IND will propose a reduction in the albumin excretion rate as an endpoint.
In the past, the FDA has rejected this endpoint as a sufficient basis for
approval and we do not know whether the FDA will change its position. If the
FDA does not accept our proposed endpoint for KRX-101 trials, we will need to
resort to a combined clinical endpoint, which could significantly delay
commercialization and significantly increase our costs. Other factors that
could delay commercialization of KRX-101 include not receiving FDA "fast track"
review of our IND application or the FDA requiring us to expand the size and/or
scope of our clinical trials. In addition, we need to obtain additional pre-
clinical data on our KRX-123 drug candidate before we can submit an application
to conduct clinical trials in Israel for treatment of hormone-resistant
prostate cancer. If we do not receive approval to conduct clinical trials for
KRX-101 or KRX-123, or if approval is delayed, our ability to carry out our
present business strategy will be materially impaired.
We may be unable to obtain FDA or other regulatory approval of our drug
candidates.
The pharmaceutical industry is subject to stringent regulation by a wide
range of regulatory authorities. We cannot predict whether regulatory clearance
will be obtained for any of our drug candidates. Satisfaction of regulatory
requirements typically takes many years as it is dependent upon the nature,
complexity and novelty of the product and requires the expenditure of
substantial resources. Because we intend to initially commercialize our drug
candidates in the United States, we must satisfy stringent FDA requirements
covering the research, development, clinical testing, manufacture, quality
control, labeling, and promotion of drugs that will be marketed for human use.
In the event that we choose to commercialize our drug candidates outside the
United States, we will need to comply with applicable requirements of other
national or regional regulatory authorities.
Before receiving FDA approval to market a drug candidate in the United
States, we must demonstrate that the drug candidate is safe and effective for
the patient population that it is intended to treat. Data obtained from pre-
clinical and clinical tests can be interpreted in different ways, which could
delay, limit or prevent regulatory approval. Negative or inconclusive results
or adverse medical events during a clinical trial could cause delay or
terminate development. In addition, we may encounter delays or rejections as a
result of future legislation or regulatory changes during product development,
clinical trials and regulatory review. If we, our collaborators or our
manufacturers fail to comply with applicable FDA and other regulatory
requirements at any stage during the research, development, approval,
manufacturing, distribution or marketing processes, the FDA may impose
sanctions, including: delays; warning letters; fines; product recalls or
seizures; injunctions; refusal of the FDA to review pending applications or
supplements; total or partial suspension of production; civil penalties;
withdrawals of previously approved marketing applications; or criminal
prosecution. If we
6
<PAGE>
fail to demonstrate the safety and efficacy of our drug candidates, they will
not receive regulatory approval and we will be unable to commercialize them.
If our drug candidates do receive regulatory approval, we will continue to
be subject to extensive regulatory requirements that govern, among other
things: the reporting of adverse drug experiences; product promotion; product
manufacturing, including current good manufacturing practice, or cGMP,
requirements; and product changes or modifications. For additional information
concerning approval and regulation of our drug candidates, see "Business--
Government Regulation."
We do not own our primary proprietary technologies. Instead, we depend on
license agreements for the proprietary technologies underlying our lead drug
candidates and on a research agreement to develop our KinAce drug candidates.
We do not own the proprietary technologies underlying KRX-101 and our KinAce
platform. We have licensed these technologies from others. These license
agreements contain development and financing milestones. In addition, the
agreements obligate us to make royalty payments on sales of products resulting
from licensed technologies and to bear the related patent filing, prosecution
and maintenance costs. If we do not meet our obligations in a timely manner or
otherwise breach the terms of our agreements, our licensors could terminate the
agreements, and we would lose the rights to KRX-101 and our KinAce technology.
The termination of one or more of our license agreements would materially and
adversely affect our business.
We do not currently have laboratory facilities and depend on a third party
to conduct research in connection with our KinAce project. Under a research
agreement with Yissum Research Development Company of the Hebrew University of
Jerusalem, referred to in this prospectus as Yissum, we are required to make
quarterly research payments. This agreement expires in November 2001. Failure
to make these payments could result in the termination of the research
agreement. The early termination of this agreement or the failure to procure
adequate replacement services could delay our research, which would materially
and adversely affect our business.
If we are unable to adequately protect our intellectual property, third parties
may be able to use our technology, which could adversely affect our ability to
compete in the market.
Our commercial success will depend in part on obtaining and maintaining
patent protection on our drug products and technologies and successfully
defending these patents against third-party challenges. The patent positions of
pharmaceutical and biotechnology companies can be highly uncertain and involve
complex legal and factual questions. No consistent policy regarding the breadth
of claims allowed in biotechnology patents has emerged to date. Accordingly, we
cannot predict the breadth of claims allowed in these patents.
Protection of our proprietary rights is uncertain and we cannot assure you
that:
. any patents issued to us or our licensors will provide a basis for
commercially viable products or will provide us with any competitive
advantages or will not be challenged by third parties;
. our technologies do not infringe on the patent or other proprietary
rights of third parties;
. others will not independently develop similar or alternative
technologies or duplicate any of our technologies;
. any of our pending patent applications will result in issued patents;
. any technological advances that we make will be patentable;
. the patents of others will not adversely affect our ability to do
business;
7
<PAGE>
. either we or our licensors were the first to make the inventions covered
by each of our pending patent applications or issued patents; or
. either we or our licensors were the first to file patent applications for
these inventions.
We rely on trade secrets to protect technology where we believe patent
protection is not appropriate or obtainable. However, trade secrets are
difficult to protect. While we require our employees, collaborators and
consultants to enter into confidentiality agreements, this may not be
sufficient to adequately protect our trade secrets or other proprietary
information. In addition, we share ownership and publication rights to data
relating to some of our drug candidates with our research collaborators and
scientific advisors. If we cannot maintain the confidentiality of this
information, our ability to receive patent protection or protect our
proprietary information will be at risk.
Litigation or third-party claims of intellectual property infringement could
require us to spend substantial time and money and adversely affect our ability
to develop and commercialize products.
We could incur substantial costs in litigation if we are required to defend
against patent suits brought by third parties or if we sue to protect our
patent rights. Any legal action against our licensors or us seeking damages or
to enjoin our commercial activities relating to the affected technologies
could, in addition to subjecting us to monetary liability, require our
licensors or us to obtain a license to continue to use the affected
technologies. We cannot predict whether we or our licensors would prevail in
any of these actions or that any required license would be made available on
commercially acceptable terms, if at all.
We may be unable to manage the growth necessary to achieve our business plan.
We have nine employees and 27 persons working under sponsored research
agreements or consulting agreements. To achieve our business goals, we will
need to rapidly expand, and we have limited experience in managing such
expansion. If we are unable to manage our growth or successfully integrate new
employees into our business, we may be unable to carry out our business
strategy, and our business and financial condition will be materially harmed.
We may be unable to attract, retain and motivate the skilled personnel that we
require, which could delay our product development programs and our research
and development efforts.
Our success depends on our continued ability to attract, retain and motivate
highly qualified management and scientific personnel as well as our ability to
develop and maintain relationships with leading academic institutions and
scientists. Competition for personnel and academic collaborators is intense. In
particular, our product development programs depend on our ability to attract
and retain highly skilled scientists and clinical development personnel. If we
lose the services of any of these personnel, in particular, Dr. Morris Laster,
our Chief Executive Officer, or Professor Shmuel Ben-Sasson, the Chief
Scientist of our KinAce project, our ability to achieve our objectives will be
materially impaired. We will need to hire additional personnel and develop
additional relationships as we continue to expand our research and development
activities. If we are unable to attract, retain or motivate personnel or
maintain relationships, our business and operations could suffer.
All of the members of our scientific advisory board and some of our part-
time consultants are otherwise employed, and each of them may have commitments
that may limit their availability to us or other interests that may conflict
with our interests.
8
<PAGE>
The success of our business will depend on entering into collaborative
arrangements to develop and commercialize some of our compounds and
technologies.
A key part of our strategy is to form alliances with pharmaceutical
companies to assist us in developing, testing, obtaining regulatory approval
for and commercializing some of our compounds and technologies. We do not
currently possess the ability or resources necessary to reach these goals
alone. While we have a number of research and development agreements with third
parties, we do not have any commitments or collaboration agreements in effect
at the present time. If we are unable to obtain developmental assistance and
funds, we may have to delay, scale back or end one or more of our projects.
Accordingly, we face the following risks:
. we may be unable to enter into collaborative arrangements to develop and
commercialize our compounds and technologies;
. any future collaborative arrangements may not be successful; and
. we may be unable to meet milestones in any future agreements.
The success of our business will depend on contracting with third parties to
manufacture our drug candidates and products.
We currently have no manufacturing facilities for clinical or commercial
production of any compounds under consideration as products. For the
foreseeable future, we intend to rely on third parties to manufacture our drug
candidates. These third-party manufacturers must comply with applicable FDA or
international good manufacturing practice regulations, which include quality
control and assurance, as well as the maintenance of records and documentation.
Manufacturing facilities are subject to ongoing and periodic inspections,
including unannounced inspections by the FDA and other regulatory agencies, and
these facilities must be licensed before they can manufacture our products. If
our present or future suppliers are unable to comply with these requirements,
our business will be harmed.
In addition, other companies may compete with us for access to third-party
manufacturing facilities. Consequently, our products may be subject to
manufacturing delays if manufacturers give other products greater priority than
ours. As a result, we may be unable to manufacture our products in a cost-
effective or timely manner, which could impair our ability to commercialize
them. Furthermore, we may be unable to enter into or maintain third-party
manufacturing arrangements on acceptable terms, if at all.
We will depend on third parties to market our products.
We do not currently intend to establish an independent sales, marketing or
distribution capability for our drug candidates. We plan to contract with third
parties to perform these services on our behalf, and we may be unable to do so
on acceptable terms, if at all. If we are unable to contract with third parties
to market our products, our business will be harmed. In addition, any third-
party marketing relationships that we establish will increase our product
costs, resulting in decreased operating profits.
If our competitors develop and market products that are more effective than
ours, our commercial opportunity may be reduced or eliminated.
Our commercial opportunity will be reduced or eliminated if our competitors
develop and market products that are more effective, have fewer side effects
and are less expensive than our drug
9
<PAGE>
candidates. Other companies have products or drug candidates in various stages
of pre-clinical or clinical development to treat diseases for which we are
seeking to discover and develop drug candidates. Some of these potential
competing drugs are further advanced in development than our drug candidates
and may be commercialized earlier. Even if we are successful in developing
effective drugs, our products may not compete successfully with products
produced by our competitors.
Our competitors include pharmaceutical companies and biotechnology
companies, as well as universities and public and private research
institutions. In addition, companies active in different but related fields
represent substantial competition for us. Many of our competitors have
significantly greater capital resources, larger research and development staffs
and facilities and greater experience in drug development, regulation,
manufacturing and marketing than we do. These organizations also compete with
us to recruit qualified personnel, attract partners for joint ventures or other
collaborations, and license technologies that are competitive with ours. As a
result, our competitors may be able to more easily develop technologies and
products that would render our technologies or our drug candidates obsolete or
noncompetitive.
Our ability to generate product revenues will be diminished if we fail to
obtain adequate prices or reimbursement from third-party payors.
The continuing efforts of government and third-party payors to contain or
reduce healthcare costs may limit our commercial opportunities. Some of the
countries in which we plan to market our products impose price limits on
prescription pharmaceuticals, and it is possible that similar limits will be
adopted in the United States. In addition, an increasing emphasis on managed
care in the United States will continue to put pressure on decreasing the
prices of healthcare products, which could decrease the price that we would
receive for our products.
Because third-party payors are increasingly challenging the prices charged
for healthcare products and services, significant uncertainty exists as to the
reimbursement status of newly approved healthcare products, including any that
we may commercialize. Government and other third-party payors increasingly are
attempting to contain healthcare costs by limiting both coverage and the level
of reimbursement for new drugs and by refusing, in some cases, to provide
coverage for uses of approved products for disease indications for which
regulatory approval has not been granted. Third-party insurance coverage may
not be available to patients for any products we discover and develop. If
government and other third-party payors do not provide adequate coverage and
reimbursement levels for our products, market acceptance of these products will
suffer.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
The testing and marketing of pharmaceutical products entail an inherent risk
of product liability. If we cannot successfully defend ourselves against
product liability claims, we may incur substantial liabilities or be required
to limit commercialization of our products. Our inability to obtain sufficient
product liability insurance at an acceptable cost could prevent or inhibit the
commercialization of our products. Liability may also result from claims made
directly by consumers, pharmaceutical companies or others selling our products.
Although we intend to seek indemnification against such claims from the
pharmaceutical companies that will manufacture and market our products, any
indemnity undertakings that we secure may be insufficient. We do not currently
carry clinical trial insurance or product liability insurance. Although we
intend to obtain this insurance in the future, we may not be able to obtain
such insurance at a reasonable cost, if at all. If we do obtain clinical trial
or product liability insurance, it may not be adequate to protect us fully. If
we do not have adequate liability insurance coverage in the event of a
successful suit against us, we would be materially and adversely affected.
10
<PAGE>
We are doing business in Israel and may be subject to political, economic and
military risks.
Although we are incorporated in the State of Delaware, we maintain our
principal offices and our research and development activities in the State of
Israel. Currently, all of our personnel are located in Israel, and we may be
influenced by political, economic and military conditions affecting Israel,
which could materially and adversely affect our business. As a result, we may
be subject to risks related to doing business in Israel, including:
. political and economic instability;
. the difficulty of administering business abroad;
. the need to comply with export laws, tariff regulations and regulatory
requirements;
. currency fluctuations; and
. the obligation of male residents of Israel, including some of our
employees, to perform annual military reserve duty and possibly to be
called to active duty under emergency circumstances.
Risks Related to This Offering
We may be unable to obtain additional funds on terms favorable to us, or at
all, which would harm our business.
Based on our current plans, we believe our existing cash and cash
equivalents, together with the net proceeds of this offering, will be
sufficient to fund our operating expenses and capital requirements for at least
the next 18 months. However, the actual amount of funds that we will need
during or after the next 18 months will be determined by many factors, some of
which are beyond our control. We may need funds sooner than we currently
anticipate. These factors include:
. the progress of our research activities;
. the number and scope of our research programs;
. the progress of our pre-clinical and clinical development activities;
. the progress of the development efforts of parties with whom we have
entered into research and development agreements;
. our ability to establish and maintain current and new research and
development and licensing arrangements;
. our ability to achieve our milestones under licensing arrangements;
. the costs involved in enforcing patent claims and other intellectual
property rights; and
. the costs and timing of regulatory approvals.
If our capital resources are insufficient to meet future capital
requirements, we will have to raise additional funds. If we are unable to
obtain additional funds on terms favorable to us, we may be required to cease
or reduce our operating activities or sell or license to third parties some or
all of our technology. If we raise additional funds by selling additional
shares of our capital stock, the ownership interests of our stockholders will
be diluted. If we raise additional funds through the sale or license of our
technology, we may be unable to do so on terms favorable to us.
Concentration of ownership of our common stock among our existing executive
officers, directors and principal stockholders may prevent new investors from
influencing significant corporate decisions.
Upon completion of this offering, our executive officers, directors and
principal stockholders (including their affiliates) will, in the aggregate,
beneficially own approximately % of our
11
<PAGE>
outstanding common stock, or % if the underwriters' over-allotment option is
exercised in full. As a result, these persons, acting together, will have the
ability to effectively determine the outcome of all matters submitted to our
stockholders for approval, including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of our assets. In
addition, such persons, acting together, will have the ability to effectively
control our management and affairs. Accordingly, this concentration of
ownership may harm the market price of our common stock by discouraging a
potential acquiror from attempting to acquire our company.
There may not be an active, liquid trading market for our common stock.
An active trading market for our common stock may not develop following this
offering. As a result, you may not be able to sell your shares quickly or at
the market price. The initial public offering price will be determined by
negotiations between us and the Global Coordinators based upon a number of
factors. The initial public offering price may not be indicative of prices that
will prevail in the trading market. For additional information regarding our
arrangements with the underwriters and the factors considered in setting the
initial public offering price, see "Underwriting."
Our stock price could be volatile and your investment could suffer a decline in
value, which, in turn, could affect our ability to raise additional capital.
The trading price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in price in response to various factors,
many of which are beyond our control, including:
. developments concerning our drug candidates;
. announcements of technological innovations by us or our competitors;
. new products introduced or announced by us or our competitors;
. changes in financial estimates by securities analysts;
. actual or anticipated variations in quarterly operating results;
. expiration or termination of licenses, research contracts or other
collaboration agreements;
. conditions or trends in the regulatory climate and the biotechnology,
pharmaceutical and genomics industries;
. changes in the market valuations of similar companies;
. additions or departures of key personnel; and
. sales of our common stock.
In addition, equity markets in general, and the market for biotechnology and
life sciences companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of companies traded in those markets. These broad market
and industry factors may materially affect the market price of our common
stock, regardless of our development and operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class-action litigation has often been instituted against that
company. Such litigation, if instituted against us, could cause us to incur
substantial costs and divert management's attention and resources, which could
seriously harm our business, financial condition and results of operations.
12
<PAGE>
Future sales of our common stock could cause our stock price to decline.
Sales of substantial amounts of our common stock in the public market after
this offering could seriously harm prevailing market prices for our common
stock. These sales may make it difficult for us to sell additional securities
when we need to raise capital.
There will be shares of common stock outstanding immediately following
the offering, assuming the underwriters do not exercise their over-allotment
option. Of these shares, the following will be available for sale in the public
market:
. shares will be eligible for sale upon completion of this offering;
. shares will be eligible for sale upon the filing of a registration
statement relating to shares of common stock issuable upon the exercise
of options granted under our 1999 Share Option Plan (not otherwise
subject to lock-up agreements);
. shares will be eligible for sale upon the expiration of lock-up
agreements, beginning 180 days after the date of this prospectus; and
. shares will be eligible for sale upon the expiration of lock-up
agreements, beginning one year after the date of this prospectus.
Anti-takeover provisions in our charter documents and Delaware law could make a
third-party acquisition of us difficult. This could limit the price investors
might be willing to pay in the future for our common stock.
Provisions in our certificate of incorporation and bylaws could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, or control us. These
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock. Our certificate of incorporation
allows us to issue preferred stock with rights senior to those of the common
stock without any further vote or action by the stockholders and our bylaws
eliminate the right of stockholders to call a special meeting of stockholders,
which could make it more difficult for stockholders to effect certain corporate
actions. These provisions could also have the effect of delaying or preventing
a change in control. The issuance of preferred stock could decrease the amount
of earnings and assets available for distribution to the holders of our common
stock or could adversely affect the rights and powers, including voting rights,
of such holders. In certain circumstances, such issuance could have the effect
of decreasing the market price of our common stock.
13
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of shares of
common stock offered through this prospectus (after deducting underwriting
discounts and commissions and estimated offering expenses) of $ million (or
$ million if the underwriters exercise their over-allotment option in full).
We intend to use the net proceeds of this offering as follows:
. to fund clinical trials for KRX-101 for diabetic nephropathy;
. to fund clinical trials for KRX-123 for hormone-resistant prostate
cancer;
. to fund expansion of our KinAce platform and to further develop the
compounds we have generated with it; and
. to use as working capital and for general corporate purposes.
The timing and amounts of our actual expenditures will depend on several
factors, including the timing of our entry into collaboration agreements, the
progress of our clinical trials, the progress of our research and development
programs, the results of other pre-clinical and clinical studies and the timing
and costs of regulatory approvals.
Until we use the net proceeds, we intend to invest the funds in short-term,
investment-grade, interest-bearing instruments.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We do
not anticipate paying any dividends for the foreseeable future. The declaration
of dividends is subject to the discretion of our board of directors and will
take into account such matters as general business conditions, our financial
results, capital requirements, contractual, legal and regulatory restrictions
and such other factors as our board may deem relevant.
14
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
. on an actual basis; and
. on an adjusted basis to reflect the sale of shares of our common stock
in this offering at an assumed public offering price of $ per share,
after deducting the estimated underwriting discount and offering
expenses, and the mandatory conversion of all of our outstanding shares
of convertible preferred stock.
The information set forth below is unaudited and should be read in
conjunction with our consolidated financial statements and notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
(unaudited)
---------------------------
Actual As Adjusted(1)
----------- --------------
<S> <C> <C>
Long-term obligations.............................. $ 129,160 $ 129,160
----------- -----------
Stockholders' equity:
Preferred stock, $0.001 par value; 4,830,000
shares authorized, none issued and outstanding,
actual; none issued and
outstanding, as adjusted........................ -- --
Series A convertible preferred stock; $0.001 par
value, 170,000 shares authorized, 118,645 issued
and outstanding, actual; none issued and out-
standing, as adjusted........................... 118 --
Common stock, $0.001 par value; 20,000,000 shares
authorized, 5,405,537 issued and outstanding,
actual; issued and
outstanding, as adjusted........................ 806
Additional paid-in capital....................... 11,425,524
Deferred stock option compensation............... 6,728,875 6,728,875
Equity of predecessor company.................... 3,180,547 3,180,547
Accumulated deficit.............................. (14,262,863) (14,262,863)
----------- -----------
Total stockholders' equity......................... 7,073,007
----------- -----------
Total capitalization............................... $ 7,202,167 $
=========== ===========
</TABLE>
- --------
(1) The number of shares as adjusted for this offering assumes no exercise of
stock options and warrants outstanding as of March 31, 2000. As of March
31, 2000, there were 2,924,688 shares of common stock issuable upon
conversion of outstanding stock options at a weighted average exercise
price of $0.18 per share and 529,948 shares of common stock issuable upon
exercise of outstanding warrants at a weighted average exercise price of
$0.43 per share.
15
<PAGE>
DILUTION
The net tangible book value of our common stock as of March 31, 2000, was $
million, or $ per share. After giving effect to our sale of shares of
common stock in this public offering at an assumed public offering price of $
per share, assuming that the underwriters' over-allotment option is not
exercised, and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses, the adjusted net tangible book
value as of March 31, 2000, would have been $ million, or $ per share. Net
tangible book value per share before this offering has been determined by
dividing net tangible book value (total tangible assets less total liabilities)
by the number of shares of common stock outstanding as of March 31, 2000,
adjusted to give effect to 4,076,642 shares that will be issued immediately
prior to the offering upon conversion of our outstanding shares of Series A
convertible preferred stock. This offering will result in an immediate increase
in net tangible book value per share of $ to existing stockholders and an
immediate dilution per share of $ to new investors. Dilution is determined by
subtracting net tangible book value per share after this offering from the
assumed public offering price of $ per share. The following table illustrates
this dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price...................................... $
Net tangible book value per share at March 31, 2000............... $
Increase per share attributable to offering.......................
-----
Net tangible book value per share after this offering..............
-----
Dilution in net tangible book value per share to new investors..... $
=====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the net
tangible book value per share after the offering would be $ per share, the
increase in net tangible book value per share to existing stockholders would be
$ per share and the dilution in net tangible book value to new investors
would be $ per share.
The following table summarizes, as of March 31, 2000, the differences
between the total consideration paid to us and the average price per share paid
by the existing stockholders and the new investors purchasing common stock in
this offering, based on an assumed public offering price of $ per share:
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
----------------- --------------------- Per
Number Percent Amount Percent Share
------- -------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... % $ % $
New investors...................
------- -------- --------- ---------- -----
Total......................... % $ %
======= ======== ========= ========== =====
</TABLE>
These tables assume no exercise of stock options and warrants outstanding as
of March 31, 2000. As of March 31, 2000, there were 2,924,688 shares of common
stock issuable upon exercise of outstanding stock options at a weighted average
exercise price of $0.18 per share and 529,948 shares of common stock issuable
upon exercise of outstanding warrants at a weighted average exercise price of
$0.43 per share.
16
<PAGE>
SELECTED FINANCIAL DATA
The statements of operations data for the year ended December 31, 1997, 1998
and 1999, and the balance sheet data as of December 31, 1997, 1998 and 1999 ,
have been derived from our audited financial statements included elsewhere in
this prospectus, which have been audited by Somekh Chaikin, a member firm of
KPMG International, independent auditors. The statements of operations data for
the three months ended March 31, 1999 and 2000, and the balance sheet data as
of March 31, 2000, have been derived from our unaudited financial statements
included elsewhere in this prospectus. Historical results are not necessarily
indicative of future results. The data presented below have been extracted from
our financial statements that have been prepared in accordance with generally
accepted accounting principles and should be read with our financial
statements, including the notes, and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Three Months
Ended
Years Ended December March 31,
31, (unaudited)
------------------------ ---------------
1997 1998 1999 1999 2000
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Statements of Operations Data:
Revenue from management fees....... $ 233 $ 66 $ -- $ -- $ --
Expenses:
Research and development.......... 569 1,407 6,923 414 1,253
General and administrative........ 525 1,011 1,813 263 614
------ ------- ------- ------ -------
Total operating expenses......... 1,094 2,418 8,736 677 1,867
------ ------- ------- ------ -------
Operating loss..................... (861) (2,352) (8,736) (677) (1,867)
Financing income/(expenses)........ (11) (157) (257) (10) 55
------ ------- ------- ------ -------
Net loss before taxes on income.... (872) (2,509) (8,993) (687) (1,812)
====== ======= ======= ====== =======
Net loss........................... $ (882) $(2,539) $(9,003) $ (687) $(1,839)
====== ======= ======= ====== =======
Basic and diluted net loss per
share............................. $(0.16) $ (0.47) $ (1.67) $(0.13) $ (0.34)
====== ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
As
of March 31, 2000
As of December 31, (unaudited)
-------------------- ------------------
1997 1998 1999 Actual As Adjusted
----- ----- ------ ------ -----------
<S> <C> <C> <C> <C> <C>
(in thousands)
Balance Sheet Data:
Cash and cash equivalents....... $ 647 $ 128 $4,127 $6,551 $
Working capital................. 35 (157) 3,984 6,469
Total assets.................... 832 620 4,948 7,607
Long-term obligations........... 1,028 527 118 129
Total stockholders' equity...... (882) (241) 4,436 7,073
</TABLE>
See notes to our financial statements for explanations of the determination
of the number of shares used in computing per share data and the inclusion of
data with respect to our predecessor company for the periods indicated.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes to those statements included elsewhere in this prospectus. This
discussion includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, such as those set forth under "Risk
Factors" and elsewhere in this prospectus, our actual results may differ
materially from those anticipated in these forward-looking statements.
General
We are a pioneer in the post-genomics era, applying data from the human
genome to the systematic discovery of new drugs. Since commencing operations,
our activities have been primarily devoted to developing our technologies as
well as business development, raising capital, purchasing assets and recruiting
personnel. We are a development stage company and have no product sales to
date. Our major sources of working capital have been proceeds from various
private financings.
We were incorporated as a Delaware corporation in October 1998. We commenced
operations in November 1999, at which time we acquired substantially all of the
assets and certain liabilities of Partec Ltd., a company under common control.
Consequently, our financial statements for previous periods include the
activities of Partec, our predecessor company, by aggregating its financial
information with our financial statements, as if it had formed a discrete
operation under common management. Prior to November 1999, Partec had two
subsidiaries, SignalSite, Inc. (85% owned) and its wholly owned subsidiary,
SignalSite Israel Ltd., and Vectagen, Inc. (87.25% owned) and its wholly owned
subsidiary, Vectagen Israel Ltd.
Research and development expenses consist primarily of salaries and related
personnel costs, fees paid to consultants and outside service providers for
laboratory development, legal expenses resulting from intellectual property
prosecution and organizational affairs and other expenses relating to the
design, development, testing, and enhancement of our product candidates. We
expense our research and development costs as they are incurred.
General and administrative expenses consist primarily of salaries and
related expenses for executive, finance and other administrative personnel,
recruitment expenses, professional fees and other corporate expenses, including
business development and general legal activities.
Our results include non-cash compensation expense as a result of the
issuance of stock and stock option grants. Compensation expense for options
granted to employees represents the difference between the fair value of our
common stock and the exercise price of the options at the date of grant. We
account for stock-based employee compensation arrangements in accordance with
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and comply with the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation." Compensation for options granted to consultants has been
determined in accordance with SFAS No. 123 as the fair value of the equity
instruments issued. APB Opinion No. 25 has been applied in accounting for fixed
and milestone-based stock options to employees and directors as allowed by SFAS
No. 123. This amount is being recorded over the respective vesting periods of
the individual stock options. The expense is included in the respective
categories of expense in the statement of operations. We expect to record
additional non-cash compensation expense in the future, which may be
significant. However, because some of the options are milestone-based, the
total expense is uncertain.
18
<PAGE>
Results of Operations
Three Months Ended March 31, 2000 and 1999
Revenues. We are a development stage company and have not had revenues from
our planned principal operations.
Research and Development Expenses. Research and development expenses
increased by $839,000 to $1,253,000 for the quarter ended March 31, 2000 as
compared to $414,000 for the quarter ended March 31, 1999. This increase was
primarily attributable to non-cash compensation expense of $534,000 related to
stock options for the quarter ended March 31, 2000, as well as to the expansion
of our existing research and development activities during the period. We
expect our research and development costs to increase significantly over the
next several years as we expand our research and product development efforts
and implement our business strategy.
General and Administrative Expenses. General and administrative expenses
increased by $351,000 to $614,000 for the quarter ended March 31, 2000 as
compared to $263,000 for the quarter ended March 31, 1999. This increase was
primarily attributable to non-cash compensation expense of $181,000 related to
stock options for the quarter ended March 31, 2000, and professional advisor
fees aggregating $126,000. We expect general and administrative expenses to
continue to increase over the next several years as we implement our business
strategy and commercialize our products.
Income Taxes. Most of our operating losses are attributable to our
predecessor company and stock-based compensation, and accordingly, as of March
31, 2000, we had a minimal net operating loss carryforward for US federal
income tax purposes. This loss carryforward is available to offset against
future federal taxable income, if any, through 2004. Our net operating loss
carryforward could significantly increase as a result of the exercise of
options granted to employees, consultants and directors. However, utilization
of net operating losses and credits in the US may be substantially limited due
to the change in ownership provisions of the Internal Revenue Code of 1986 and
similar state provisions. In addition, an annual limitation may result in the
expiration of net operating losses and credits before utilization. Management
believes that there is sufficient uncertainty regarding the realization of
deferred tax assets such that a full valuation allowance is appropriate, and
accordingly, no asset was recorded. Income tax expense attributable to income
from the continuing operations of our subsidiary in Israel was $27,000 for the
quarter ended March 31, 2000.
Years Ended December 31, 1999 and 1998
Revenue. We did not have any revenues for the year ended December 31, 1999
and had insignificant revenues for the year ended December 31, 1998. The
revenues received in 1998 were in the form of management fees generated from
formerly affiliated companies. We no longer have management fee arrangements.
Research and Development Expenses. Research and development expenses
increased by $5,516,000 to $6,923,000 for the year ended December 31, 1999 as
compared to $1,407,000 in 1998. This increase was primarily attributable to
non-cash compensation expense of $5,426,000 related to stock option grants in
1999.
General and Administrative Expenses. General and administrative expenses
increased by $801,000 to $1,812,000 for the year ended December 31, 1999 as
compared to general and administrative expenses of $1,011,000 in 1998. This
increase was primarily attributable to non-cash compensation expense of
$588,000 related to stock option grants in 1999.
19
<PAGE>
Income Taxes. We incurred a net operating loss for the year ended December
31, 1999 for US federal income tax purposes. The income tax expense
attributable to income from continuing operations related to our subsidiary and
predecessor company in Israel, and totalled $10,000 in 1999 and $30,000 in
1998.
Years Ended December 31, 1998 and 1997
Revenues. Revenues from management fees generated from formerly affiliated
companies decreased by $167,000 from $233,000 for the year ended December 31,
1997 to $66,000 for the year ended December 31, 1998. This decrease was due to
the cessation of our management activities in 1998.
Research and Development Expenses. Research and development expenses
increased by $838,000 to $1,407,000 for the year ended December 31, 1998 as
compared to $569,000 in 1997. This increase was due primarily to 12 months of
research and development activities in 1998 as compared to nine months in the
prior period.
General and Administrative Expenses. General and administrative expenses
increased by $486,000 to $1,011,000 for the year ended December 31, 1998 as
compared to $525,000 in 1997. This increase was due primarily to the hiring of
additional employees and increased professional fees in 1998 and 12 months of
operations as compared to nine months in the prior period.
Income Taxes. The income tax expense for the years ended December 31, 1998
and 1997, totalled $30,000 and $10,000, respectively, and was attributable to
the predecessor company in Israel.
Liquidity and Capital Resources
We have financed our operations from inception primarily through various
private financings. As of March 31, 2000, we had received gross proceeds of
$11.6 million from issuances of common and preferred stock and $3.2 million
through the contribution of notes by holders in our predecessor company.
As of March 31, 2000, we had $6.6 million in cash and cash equivalents. Cash
used in operating activities for the quarter ended March 31, 2000 was $1.2
million as compared to $0.8 million for the quarter ended March 31, 1999. This
increase was due primarily to increased losses associated with the expansion of
our business. Net cash used in investing activities was $0.2 million for the
quarter ended March 31, 2000, consisting primarily of prosecution of patent
applications and related capital expenditures.
Current and Future Financing Needs. We have incurred negative cash flow from
operations since we started our business. We have spent, and expect to continue
to spend, substantial amounts in connection with implementing our business
strategy, including our planned product development efforts, our clinical
trials, and our research and development. Based on our current plans, we
believe that our cash and cash equivalents and net proceeds from this offering
will be sufficient to enable us to meet our planned operating needs for at
least the next 18 months. However, the actual amount of funds we will need to
operate is subject to many factors, some of which are beyond our control.
These factors include the following:
. the progress of our research activities;
. the number and scope of our research programs;
20
<PAGE>
. the progress of our pre-clinical and clinical development activities;
. the progress of the development efforts of parties with whom we have
entered into research and development agreements;
. our ability to maintain current research and development programs and to
establish new research and development and licensing arrangements;
. our ability to achieve our milestones under licensing arrangements;
. the costs involved in prosecuting and enforcing patent claims and other
intellectual property rights; and
. the costs and timing of regulatory approvals.
We have based our estimate on assumptions that may prove to be wrong. We may
need to obtain additional funds sooner or in greater amounts than we currently
anticipate. Potential sources of financing include strategic relationships,
public or private sales of our shares or debt and other sources. We may seek to
access the public or private equity markets when conditions are favorable due
to our long-term capital requirements. We do not have any committed sources of
financing at this time, and it is uncertain whether additional funding will be
available when we need it on terms that will be acceptable to us, or at all. If
we raise funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interest of our existing
stockholders will be diluted. If we are not able to obtain financing when
needed, we may be unable to carry out our business plan. As a result, we may
have to significantly limit our operations and our business, financial
condition and results of operations would be materially harmed.
Plan of Operation
Our plan of operation for the remainder of the year ending December 31, 2000
and for the first six months of 2001 is to begin to implement our business
strategy, including the clinical development of two of our compounds and to
further develop our KinAce platform. We expect our principal expenditures
during the next 18 months to include:
. operating expenses, including expanded research and development and
general and administrative expenses;
. product development expenses, including the costs incurred with respect
to applications to conduct clinical trials in Israel and the United
States for KRX-123, filing an IND application with the FDA for KRX-101
and the initiation of such clinical trials; and
. the cost of new laboratory and computer equipment and software.
As part of our planned expansion, we anticipate hiring additional scientific
and business development staff. In addition, we intend to use clinical research
organizations and third parties to perform our clinical studies and
manufacturing.
Financings
In February and April 1999, our predecessor company raised gross proceeds of
$2.7 million through the issuance of 12% convertible notes. These notes,
together with accrued interest of $253,000, were contributed to us in November
1999 in return for the issuance to the noteholders of 29,465 shares of Series A
convertible preferred stock and ten-year warrants to purchase 202,555 shares of
common stock at an exercise price of $0.01 per share. The Series A convertible
preferred stock will automatically convert into shares of common stock
immediately prior to the closing of this offering.
During December 1999 and January 2000, we raised gross proceeds of $8.9
million through the sale of 89,180 shares of Series A preferred stock.
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Impact of Inflation
The effects of inflation and changing prices on our operations were not
significant during the periods presented.
Recent Accounting Pronouncements
In April 1998, the Accounting Standards Executive Committee issued SOP 98-5
"Reporting on the Costs of Start-Up Activities." SOP 98-5 provides guidance on
the financial reporting of start-up costs and organization costs and requires
costs of start-up activities and organization costs to be expensed as they are
incurred.
The SOP broadly defines start-up activities as those one-time activities
related to opening a new facility, introducing a new product or service,
conducting business in a new territory, conducting business with a new class of
customers, initiating a new process in an existing facility, or commencing
certain new operations. Start-up activities include activities related to
organizing a new entity, known as organizational costs. We have adopted SOP 98-
5 and have determined that its impact on our financial position and results of
operations will not be material.
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. FAS No. 133, as
amended, establishes methods for valuing derivative financial instruments and
hedging activities related to those instruments, as well as other hedging
activities. We are required to adopt FAS No. 133 effective January 1, 2001.
Because we do not currently hold any derivative instruments and do not engage
in hedging activities, we do not currently believe that the adoption of FAS No.
133, as amended, will have a significant impact on our financial position,
results of operations or cash flow.
Disclosure About Market Risk
Interest Rate Risk. The primary objective of our investment activities is to
preserve principal while at the same time maximizing the income we receive from
our investments without significantly increasing risk. Some of the securities
that we invest in may have market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate
at the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. We currently maintain
an investment portfolio of primarily money market investments and certificates
of deposits with maturities of less than 90 days. After the offering, we intend
to maintain our portfolio in cash equivalents and short-term, interest bearing
securities, including commercial paper, money market funds and government debt
securities. The average duration of all of our investments in 1999 was less
than one year. Due to the short-term nature of these investments, we believe we
have no material exposure to interest rate risk arising from our investments.
Therefore, no quantitative tabular disclosure is required.
Foreign Currency Rate Fluctuations. While our Israeli subsidiary primarily
operates in New Israel Shekels or NIS, most operating expenses and commitments
are linked to the US dollar. As a result, there is currently minimal exposure
to foreign currency rate fluctuations. Any foreign currency revenues and
expenses are translated using the daily average exchange rates prevailing
during the year and any transaction gains and losses are included in net
income. In the future, our subsidiary may enter into NIS-based commitments that
may expose us to foreign currency rate fluctuations. We may use hedging
instruments, including forward contracts, to minimize any foreign currency rate
fluctuation exposure. Any hedging transactions that we enter into may not
adequately protect us against currency rate fluctuations and may result in
losses to us.
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BUSINESS
Overview
We are a pioneer in the post-genomics era, applying data from the human
genome for the systematic discovery of new drugs. Our KinAce bioinformatics
drug discovery platform enables us to use this data to generate drug candidates
targeting protein kinases. Kinases are a major class of proteins which modulate
the critical pathways over which cells communicate, a form of communication
known as signal transduction. We believe that our approach to drug design
allows us to discover more drug candidates in less time and with lower levels
of toxicity than our competitors. We have discovered 13 lead compounds in less
than two years, eight of which have already exhibited in vivo activity. In
addition to developing drug candidates with our KinAce platform, we have in-
licensed KRX-101 and are developing it for the treatment of diabetic
nephropathy in Type II diabetes.
Our Strategy
We intend to:
. advance KRX-101 into clinical trials for diabetic nephropathy and pursue
additional indications for this drug candidate;
. complete pre-clinical development of KRX-123 for hormone-resistant
prostate cancer and file an application to enter clinical trials in
Israel for this drug candidate in 2000;
. continue to generate new drug candidates using our KinAce platform for a
variety of conditions, such as cancer and metabolic, cardiovascular,
immunological and neurological diseases;
. internally develop or out-license our drug candidates based on an
assessment of clinical and financial resources; and
. further develop and expand our relationships with corporate collaborators
for the development, marketing and distribution of our drug candidates.
KRX-101
Overview
We have in-licensed KRX-101 (sulodexide) for the treatment of diabetic
nephropathy and other conditions. KRX-101 has been used for many years in
Europe for vascular indications unrelated to diabetes and has a well-
established safety profile. We intend to file an application with the FDA to
enter clinical trials in 2000 for the use of KRX-101 in the treatment of
nephropathy in Type II diabetics. We will request FDA "fast track" review for
KRX-101 on the basis that there is currently no FDA-approved treatment for this
indication.
Diabetes is a condition for which there currently is no cure. According to
the American Diabetes Association website, there are an estimated 10.3 million
diagnosed diabetics in the United States, of whom approximately 90% have been
diagnosed with Type II diabetes. Type II diabetes is a disorder resulting from
the body's inability to make or properly use insulin. It is also estimated that
between 10 and 20% of diagnosed Type II diabetics have nephropathy. Taken
together, these figures imply that there are between one and two million
diagnosed Type II diabetics with nephropathy in the United States. Based on
these figures, we believe the potential market for KRX-101 for the diabetic
nephropathy indication is in excess of $1 billion.
Scientific Background
Diabetes often damages the intricate system of delicate capillary loops
(glomeruli) in the human kidney. As these loops lose their structural
integrity, their ability to selectively filter the blood's contents diminishes
and protein, chiefly albumin, is lost into the urine, resulting in diabetic
23
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nephropathy. The presence of albumin in urine, known as albuminuria, causes
direct damage to crucial kidney structures. These pathological changes may
eventually result in end-stage renal disease, which can be treated only by
dialysis or kidney transplantation.
KRX-101 repairs and maintains glomerular membranes, thus reducing protein
leakage, and directly inhibits tubular and interstitial inflammation and
scarring. We believe these beneficial effects may delay or prevent end-stage
renal disease.
Development Status
There have been over 20 studies published in leading medical journals that
have assessed the safety of KRX-101 in humans. KRX-101 has been administered to
more than 3,000 patients in clinical trials for the treatment of vascular
conditions and, to our knowledge, has not demonstrated any significant side
effects for those uses.
ACE inhibitors, a broad class of commonly prescribed anti-hypertensive
drugs, are the current standard of care recommended by the American Diabetes
Association to treat diabetic nephropathy. However, ACE inhibitors are not as
effective for nephropathy of Type II diabetes. In addition, patients with Type
II diabetes experience more frequent side effects from ACE inhibitors than the
general population.
A 200-person clinical trial performed in Europe by the licensor of KRX-101
over a four-month period showed a clear relationship between dosage and
reduction in albuminuria. This trial also demonstrated reduction in albuminuria
in patients with Type II diabetes being treated with ACE inhibitors. On the
basis of this trial, we plan to file an IND application with the FDA for
permission to conduct a clinical trial for Type II diabetic nephropathy. We
will request "fast track" review for KRX-101 on the basis that there is
currently no FDA-approved treatment for nephropathy in Type II diabetes. Our
proposed clinical trial will involve approximately 200 Type II diabetic
patients with nephropathy on ACE inhibitors, and we will propose a reduction in
albuminuria as the endpoint of this trial.
The FDA has not yet accepted a reduction in albuminuria as a valid endpoint,
although the National Kidney Foundation has emphasized the role of albuminuria
as a cause of progressive kidney failure and recommended its maximal reduction.
(Source: Keane, W.F. and Eknoyan, G. Proteinuria, Albuminuria, Risk,
Assessment, Detection, Elimination : A Position Paper of the National Kidney
Foundation. American Journal of Kidney Diseases 33(5): 1004 (1999)). If the FDA
does not change its current position, we will be required to conduct clinical
trials with different endpoints that take longer than we currently anticipate,
which could significantly extend our development timeline for KRX-101 for
diabetic nephropathy.
Additional Indications
We believe KRX-101 has significant potential for indication expansion. Based
upon our understanding of the mechanism of action of KRX-101, we believe that
KRX-101 will be effective in the treatment of other conditions. These
indications include pre-eclampsia of pregnancy and diabetic retinopathy,
conditions for which there are currently no FDA-approved treatments, and
thrombosis.
KinAce Drug Discovery Platform
Overview
We believe our KinAce platform represents the first practical use of the
genomics database to systematically generate lead drug candidates that target
protein kinases.
Protein kinases are enzymes that play a key role in the way cells
communicate. When protein kinases give an inappropriate signal, the result is
often a disease or other medical condition. Our KinAce platform uses our
proprietary bioinformatic algorithm approach, which focuses on the sequence of
specific portions of a protein kinase, to identify small compounds that can
potentially inhibit or stimulate the activity of that kinase. To date, by
targeting such specific portions of protein kinases, our approach has enabled
us to discover 13 lead drug compounds. Of these compounds, 8 have already
exhibited in vivo activity, with an average time from concept to in vivo
testing of approximately 4 months.
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We expect to file an application to enter human clinical trials in Israel
for our first KinAce compound, KRX-123 for hormone-resistant prostate cancer,
in 2000. These trials will be conducted according to FDA good clinical
practice, or GCP, guidelines. We believe hormone-resistant prostate cancer, for
which there is currently no curative treatment, represents a potential market
in excess of $450 million. Our 12 other KinAce compounds are currently being
developed through a combination of in-house efforts and research and
development agreements with others. We recently entered into research and
development agreements relating to five of these compounds with the NIH, Novo
Nordisk, Osteotech, and a leading multi-national pharmaceutical and healthcare
products company.
Scientific Background
Cells within the human body, like those within all living organisms,
communicate with each other to co-ordinate their growth and differentiation.
Scientists have learned that the primary mechanism by which inter-cellular
communication occurs is a messenger system comprising the transmission of
biochemical signals. These "signals" are actually soluble molecules that are
secreted by cells. In general, signals from outside the cell come into contact
with a receptor on the cell surface and are then "transduced" across the
membrane. Once a signal enters the cell, it is relayed as a message inside the
cell. Protein kinases function as these cellular messengers.
Scientists have estimated that over 1,100 distinct protein kinases exist in
the human genome. (Source: T. Hunter. Signaling--2000 and Beyond, Cell, 100:
122-123, 2000). Protein kinases control a variety of functions carried out by
cells and may contribute to disease if they are "turned on" when they should be
"turned off," or "turned off" when they should be "turned on." For example, in
certain cancers, the excess activity of protein kinases allows uncontrolled
cell division. "Turning off" these protein kinases may provide one method of
halting the growth of malignancies. Conversely, if protein kinase activity
could be increased when it is not sufficient, other medical conditions may be
improved.
For any given protein kinase, our proprietary bioinformatic algorithm
approach enables us to identify small compounds that can potentially inhibit or
stimulate the activity of that kinase. Protein kinases generally have a common
set of structural characteristics that our algorithm approach can identify in
order to highlight the specific sequence portions or regions of a particular
kinase to be studied. These regions can then be systematically emulated to
identify drugs to potentially inhibit or stimulate protein kinase activity.
Advantages of the KinAce Approach
We believe that the bioinformatic algorithms employed by our KinAce platform
give us the following advantages over traditional drug design methods:
. Increased hit rate. Our KinAce platform targets regions that determine
specificity. This approach allows us to focus our efforts on only ten to
twenty compounds for testing per selected protein kinase. Our competitors
generally target regions common to all protein kinases. This approach
requires the testing of hundreds of thousands of molecular structures, a
process known as high throughput screening.
. Reduced time to discovery. Our proprietary bioinformatic algorithms and
systematic design enable us to generate compounds in an average time from
concept to in vivo testing of approximately four months. The industry
standard ranges from two to four years.
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. Reduced toxicity. Our compounds' increased specificity should result in
less toxicity. Toxicity is an undesired consequence of a drug or therapy
that occurs when the agent negatively impacts the functions of healthy
cells as well as the targeted site. This often leads to the halting of
development of compounds previously believed to be promising.
. Greater versatility. We believe that our ability to stimulate, as well as
inhibit, protein kinases gives our drug candidates a versatility in the
treatment of diseases and conditions that is not available to other
kinase-based drug discovery approaches. While the kinase-based compounds
of our competitors aim only to inhibit kinase activity, our compounds
target kinase stimulation as well.
Product Development Pipeline
The following table outlines the drug candidates generated to date using
our KinAce platform:
<TABLE>
<CAPTION>
Compound Indication Development Status
-------- ------------------------------------------------- -----------------------
<C> <C> <S>
KRX-123 Oncology: Hormone-Resistant Prostate Cancer in vivo-preparing for
clinical trials
KRX-131 Oncology: Chemotherapy-Induced Hair Loss in vivo-research and
development agreement
with leading multi-
national pharmaceutical
and healthcare products
company
KRX-211 Immunology: Septic Shock in vivo-development
agreement with NIH
KRX-167 Orthopedics: Bone Growth Stimulant in vivo-research and
development agreement
with Osteotech
KRX-291 Quality of Life: Sunless Tanning in vitro-research and
development agreement
with leading multi-
national pharmaceutical
and healthcare products
company
KRX-613 Metabolism: Diabetes in vitro-research and
development agreement
with Novo-Nordisk
KRX-168 Surgical Implants: Anti-Adhesion/Anti-Fibrotic in vivo-under
development
KRX-252 Immunology: Autoimmune Disease in vivo-under
development
KRX-341 Cardiovascular: Ischemic Heart Disease/Peripheral in vivo-under
Vascular Disease development
KRX-683 Metabolism: Type II Diabetes/Obesity in vivo-under
development
KRX-120 Oncology: Neuroblastoma in vitro-under
development
KRX-324 Oncology: Breast Cancer in vitro-under
development
KRX-411 Neurology: Neurodegenerative Disease in vitro-under
development
</TABLE>
Lead KinAce Drug Candidate
KRX-123--Hormone-Resistant Prostate Cancer
Our leading KinAce drug candidate is KRX-123 for the treatment of hormone-
resistant prostate cancer, referred to as HRPC, a currently incurable
condition with a potential market size in excess of $450 million. Members of
the Src protein kinase family are over-expressed in HRPC, and we believe that
by inhibiting Src protein kinases we can treat HRPC. We have generated in
vitro and in vivo data showing that HRPC can be treated through the modulation
of this protein kinase and have observed significant regression in hormone-
resistant prostate tumors during pre-clinical testing when compared to control
groups. We have conducted several in vivo tests on mice, using three sample
groups. The first group received chemotherapy treatment for HRPC, the second
group received no treatment, while the third group received four shots of KRX-
123. After four months, the KRX-123 groups had a survival rate of between 75
and 100%, compared to no survivors in either the group treated with
chemotherapy or the control groups.
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We plan to file an application in 2000 with the Israeli Ministry of Health
for a clinical trial for HRPC to be conducted in accordance with FDA GCP
guidelines. In addition, we intend to seek to file an IND application with the
FDA by the end of 2000. Due to the rapidly fatal nature of HRPC and the absence
of any curative treatment for this condition, we believe we can attain FDA
"fast track" review status for our IND application. If we obtain marketing
approval for KRX-123 at the conclusion of clinical trials, we intend to expand
its indications to include the treatment of hormone-sensitive, or earlier
stage, prostate cancers.
Other KinAce Drug Candidates
KRX-131--Chemotherapy-Induced Hair Loss
According to the American Cancer Society website, over 1.2 million cases of
cancer are diagnosed annually in the United States (excluding most skin
cancers). It has been estimated that more than 80% of cancer patients receive
chemotherapy, which results in hair loss for the duration of treatment in
nearly all recipients. (Source: Seminars in Oncology 25: 562, 1998). Hair loss
poses a significant quality of life problem for chemotherapy patients.
TGF-^ regulates hair growth. Chemotherapy causes over-expression of TGF-^ in
the skin, resulting in hair loss. Using our KinAce platform, we designed KRX-
131 to target and inhibit the activity of the TGF-^ receptor protein kinase. We
believe that KRX-131 can prevent chemotherapy-induced hair loss and address
this unmet healthcare need.
We have demonstrated the in vivo efficacy of KRX-131 by treating mice
undergoing chemotherapy with increasing doses of KRX-131. The test subjects
treated with KRX-131 experienced hair retention in a dose-dependent manner,
while members of the control group lost all of their hair.
We recently signed a research and development agreement with a leading
multi-national pharmaceutical and healthcare products company for the testing
of KRX-131. Following our evaluation of the results of these tests, we intend
either to license KRX-131 or to continue its development internally through
pre-clinical and Phase I clinical trials.
KRX-211--Septic Shock
There are an estimated 500,000 cases of septic shock in the United States
each year. (Source: New England Journal of Medicine 340: 207, 1999). Septic
shock is a life-threatening reaction to a severe infection, for which there is
currently no FDA-approved treatment. During septic shock, bacteria produce
toxins that cause a cascade of events resulting in extremely low blood pressure
and subsequent multi-system organ failure. The mortality rate for those with
septic shock is approximately 50%.
Employing our KinAce platform, we designed KRX-211 to inhibit JAK3, a
protein kinase that has been implicated in immunological pathways and the
septic shock cascade. We have demonstrated the efficacy of KRX-211 in an in
vivo model of septic shock. One hour after symptoms of septic shock arose, half
of the test group was injected with KRX-211, and a control group was injected
with a placebo solution. After 48 hours, 80% of the test group treated with
KRX-211 survived, while none in the control group remained alive.
The NIH has selected KRX-211 to undergo extensive in vivo testing in
preparation for clinical trials. Clinical testing for septic shock will involve
significant expenses. Therefore, following NIH testing, we intend to license
KRX-211 to a partner with the resources to clinically develop this compound.
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KRX-167--Bone Growth Stimulant
There is a growing need to accelerate bone healing following medical
procedures that affect bone structure. These procedures include joint
replacements, bone grafts, spinal fusion and dental implants. The number of
such procedures performed annually in the United States is estimated to exceed
500,000. (Source: Interpore Cross International, Annual Report, 1998). We
estimate that a similar number of procedures are performed outside the United
States each year.
Bone morphogenic proteins, referred to as BMP, are involved in the
regulation of the growth and differentiation of cartilage and bone. Using our
KinAce platform, we designed KRX-167 to stimulate BMP activity. We believe KRX-
167 is capable of promoting bone growth by stimulating BMP receptor protein
kinases. We have tested KRX-167 in an in vivo fracture model. In these trials,
bones treated with KRX-167 have consistently shown evidence of enhanced bone
formation and increased relative bone density when compared to the control
groups.
We have entered into a research and development agreement with Osteotech, a
leading company in the field of bone grafts for the testing of KRX-167.
Following our evaluation of the results of these tests, we intend either to
license KRX-167 or to continue its development internally through pre-clinical
and Phase I trials.
KRX-291--Sunless Tanning
The American Cancer Society website estimates that there will be
approximately 1.3 million cases of skin cancer diagnosed in the U.S. this year.
Skin cancer can result from overexposure to the sun. Exposure to the sun also
causes tanning by increasing the skin pigment, known as melanin. Using our
KinAce platform, we designed KRX-291 to stimulate synthesis of melanin in skin
cells without exposing them to the risks associated with overexposure to the
sun. In in vitro testing of KRX-291, we have been able to demonstrate dose-
dependent production of melanin. We believe that KRX-291 can be used to induce
tanning without the risk of skin cancer.
We recently signed a research and development agreement with a leading
multi-national pharmaceutical and healthcare products company for the testing
of KRX-291. Following our evaluation of the results of these tests, we intend
either to license KRX-291 or to continue its development internally through
pre-clinical and Phase I trials.
KRX-613--Diabetes
Diabetes is among the most prevalent chronic diseases in the world and
represents the fourth most common reason for patient contact with a physician.
It is a major cause of disability and mortality. Historically, the mainstay of
treatment of Type I disease and many Type II patients has been insulin. The
estimated market size for insulin worldwide is in excess of $2 billion. Insulin
is both expensive to synthesize, and its administration by injection is
cumbersome. As a result, many companies are searching for alternatives to
insulin therapy for the treatment of diabetes
In order for insulin to act, it must bind to its specific receptor. The
receptor harbors a protein kinase domain, known as IRK, which transduces the
signal intracellularly, leading to increased glucose uptake. We believe KRX-613
stimulates the intracellular activation of IRK without requiring insulin. In
vitro tests have shown that the incubation of the cells with KRX-613 leads to
glucose uptake comparable to the level achieved with physiological
concentrations of insulin.
We recently signed a research and development agreement with Novo Nordisk,
the second largest purveyor of insulin products in the world, for the testing
of KRX-613. Following our evaluation of the results of these tests, we intend
either to license KRX-613 or to continue its development internally through
pre-clinical and Phase I clinical trials.
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Competition
KRX-101
ACE inhibitors, a broad class of commonly prescribed anti-hypertensive
drugs, are the current standard of care recommended by the American Diabetes
Association to treat diabetic nephropathy. ACE inhibitors are marketed by a
number of companies. However, ACE inhibitors are not as effective for
nephropathy of Type II diabetes. Preliminary clinical evidence suggests that
KRX-101 may be synergistic with ACE inhibitors for nephropathy of both Type I
and Type II diabetes by reducing albuminuria further than ACE therapy alone.
Other companies are developing drugs designed to limit the development of
diabetic complications, including Exocell, Inc., which has one compound aimed
at nephropathy in a Phase III clinical trial. In the event that the FDA accepts
the reduction of albumin excretion as the pivotal endpoint for KRX-101 clinical
trials, other drug companies may be encouraged to submit drug candidates based
on this endpoint.
KinAce Platform
There are several biotechnology and pharmaceutical companies active in the
field of signal transduction, including Sugen, Inc. (recently acquired by
Pharmacia-Upjohn), Ariad Pharmaceuticals Inc., Tularik, Inc., Ligand
Pharmaceuticals Inc. and ICOS Corporation. In addition, Vertex Pharmaceuticals,
Inc. and Novartis Pharma AG recently announced a major alliance to discover
eight kinase inhibitors.
Generally, our competitors target common, non-specific regions within
protein kinases for identification of lead compounds. This necessitates the
testing of large numbers of compounds in high throughput screening to derive a
drug candidate. We believe that our targeted approach to drug discovery gives
us a significant advantage over our competitors, with more drug candidates
being generated in less time and with potentially lower toxicities.
There are a significant number of products in clinical development for HRPC,
adopting a variety of therapeutic approaches. These products may compete with
KRX-123 in the future.
Intellectual Property
General
Patents and other proprietary rights are very important to the development
of our business. We will be able to protect our proprietary rights from
unauthorized use by third parties only to the extent that our proprietary
rights are covered by valid and enforceable patents or are effectively
maintained as trade secrets. It is our intention to seek and maintain patent
protection for our drug candidates and our proprietary technologies.
KRX-101
Pursuant to our license for KRX-101, we have obtained rights to eleven
families of patents and applications filed in various countries. These include
at least 46 patents issued in various countries, of which nine are issued in
the United States. The licensed patent families cover the use of KRX-101 to
treat diabetic nephropathy and retinopathy, the use of related compounds to
treat diabetic nephropathy, neuropathy and retinopathy, and processes for
making diverse heparin derivatives. The licensed patent families also cover
multiple processes for making a wide variety of heparin derivatives. These
patents and applications are being maintained throughout the territories in
which they were filed. In addition, as part of our effort to expand the
indications for KRX-101, we have filed two new patent applications for novel
indications for KRX-101.
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KinAce Platform
We have an exclusive license to four families of patent applications
associated with our KinAce platform, which have been filed in various
countries, including the United States, countries of the European Union, Japan,
Canada, Australia and China. These applications identify and claim large
classes of peptides that modulate the activity of protein kinases and include
claims which encompass our lead drug candidates. In addition, the applications
describe a wide variety of therapeutic uses for these classes of peptides,
including the treatment of various cancers, diabetes, septic shock, multiple
sclerosis and inflammatory bowel disease. The applications also identify and
claim specific portions of these protein kinases upon which the selection of
peptide drug candidates are based when we apply our bioinformatic algorithm
approach. We intend to continue to file patent applications to cover additional
members of protein kinase families, specific drug candidates and additional
therapeutic indications as they are developed.
Other Intellectual Property Rights
We have applied to register the names "Keryx" and "KinAce" as trademarks
with the U.S. Patent and Trademark Office. In addition, we depend upon trade
secrets, know-how and continuing technological advances to develop and maintain
our competitive position. To maintain the confidentiality of trade secrets and
proprietary information, we require our employees, scientific advisors,
consultants and collaborators, upon commencement of a relationship with us, to
execute confidentiality agreements and, in the case of parties other than our
research and development collaborators, to agree to assign their inventions to
us. These agreements are designed to protect our proprietary information and to
grant us ownership of technologies that are developed in connection with their
relationship with us. These agreements may not, however, provide protection for
our trade secrets in the event of unauthorized disclosure of such information.
Agreements
KRX-101
License Agreement. Our license with Alfa Wassermann SpA grants us the
exclusive rights to KRX-101 for diabetic nephropathy, diabetic retinopathy and
diabetic neuropathy in the United States, Canada, Japan, Australia, New
Zealand, South Africa and Israel, and entitles Alfa Wassermann to ongoing
royalties and fixed milestone payments. The license includes rights to at least
46 patents that have been registered in these countries, and rights in
additional patent applications, and grants us exclusive, worldwide ownership of
any novel indication for KRX-101 that we develop. The license obligates us to
use our reasonable best efforts to commercialize and market KRX-101. The
license requires Alfa Wassermann to pay us a royalty to the extent that it or
its sub-licensees receive revenues from products that incorporate information
or know-how developed by us and commits Alfa Wassermann to participate in the
costs of data or intellectual property developed by us that it decides to
utilize. Unless terminated for reason of breach or other customary termination
provisions, the license terminates upon the later of the expiration of all
underlying patent rights or ten years from the first commercial sale of KRX-101
by us. The most recent patent application was filed in April 1999 and, if
granted, will expire in April 2019, subject to any extensions which may be
granted.
Manufacturing Agreements. We have two manufacturing agreements for the
production of KRX-101. Opocrin S.p.A., a manufacturer of bulk biological
products, has agreed to manufacture and supply our raw requirements for
sulodexide until 2009. Our agreement with Opocrin may be terminated by us or
them on 180 days' notice. Pharmaceutics International, Inc., a manufacturer of
medicinal gelcaps, has agreed to produce the KRX-101 gelcaps necessary for the
proposed clinical trial. Until the agreed-upon manufacturing is completed, this
agreement may be terminated only by us. Both Opocrin and Pharmaceutics
International maintain cGMP-certified manufacturing facilities that will be
used for the manufacture of KRX-101.
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<PAGE>
KinAce Platform
License Agreement. Pursuant to a license with Children's Medical Center
Corporation, referred to as CMCC, we have the exclusive right to commercialize
the KinAce platform and practice the claims contained in four patent
applications owned by them. The license gives us the right to develop, produce,
manufacture, market and sublicense products based on their patent applications,
any subsequently issued patents and future patent applications. Unless
terminated for breach or other customary termination provisions, the license
terminates upon the later of November 2014 or the expiration of the last patent
covered by the license. The most recent patent application was filed in
December 1999 and, if granted, will expire in December 2019, subject to the
granting of any extensions.
The license obligates us to use our reasonable best efforts to commercialize
and market one or more products based upon the signal transduction technology,
and contains certain development and financing milestones. To date, we have met
all of our milestones under this agreement. According to these development
milestones, we must file an IND application for a licensed product with the FDA
(or a foreign equivalent) by December 2001, and we must file a New Drug
Application, or NDA, with the FDA (or a foreign equivalent) within six years
from our first filing of an IND application. If we fail to meet any of the
development milestones that remain to be fulfilled, the license could be
terminated, which would materially and adversely affect our business.
Sponsored Research Agreement. Our KinAce research program is under the
direction of Professor Shmuel Ben-Sasson, pursuant to a research agreement with
Yissum Research Development Company of the Hebrew University of Jerusalem,
referred to as Yissum in this prospectus, and a consulting agreement with
Professor Ben-Sasson. The consulting agreement obligates Professor Ben-Sasson
to provide consulting services to us to develop the KinAce platform and may be
terminated by us or him on 180 days' notice. Professor Ben-Sasson received
268,512 shares of our common stock in connection with his consulting agreement.
The research agreement obligates us to make quarterly payments to Yissum and
expires in November 2001, although it may be extended by mutual agreement for
additional periods of 180 days. We may terminate the research agreement and
cease making payments to Yissum should Professor Ben-Sasson fail to meet any
milestones contained in that agreement. In general, the milestones are project-
specific and require Professor Ben-Sasson to meet enumerated product
development timetables. The loss of Professor Ben-Sasson's services as a result
of the termination of either the research agreement or the consulting agreement
would materially and adversely affect our business.
Research and Development Agreements. We recently entered into research and
development agreements for the advancement of five of our lead KinAce compounds
with the NIH, Novo Nordisk, Osteotech and a leading multi-national
pharmaceutical and healthcare products company. In general, these agreements
provide that the researcher will conduct pre-clinical testing for up to three
to six months. Upon completion of the testing, we will give the for-profit
researchers an exclusive two- to three-month right of first negotiation to
develop and license the compounds covered by the agreement.
Partec Acquisition
Contribution Agreement. In November 1999, in connection with our purchase of
assets from Partec Ltd., we entered into a contribution agreement with holders
of 12% convertible notes issued by Partec. In return for these notes, we issued
to these noteholders an aggregate of 29,465 shares of our Series A preferred
stock and ten-year warrants to purchase 202,555 shares of common stock at an
exercise price of $0.01 per share.
Asset Purchase Agreements. In November 1999, we entered into an asset
purchase agreement with Partec pursuant to which we acquired substantially all
of Partec's assets, which
31
<PAGE>
consisted primarily of intellectual property rights. In connection with this
agreement, we forgave $570,361 of Partec's 12% convertible notes, which we had
previously acquired from the holders thereof, and we entered into employment
agreements with Morris Laster, M.D., Benjamin Corn, M.D., Ira Weinstein and Bob
Trachtenberg. Also in November 1999, our subsidiary Keryx (Israel) Ltd.,
pursuant to a separate agreement with Partec, purchased in exchange for
$54,908, certain assets and assumed certain liabilities associated with
Partec's business, including Partec's fixed assets, leases and employment and
consultant agreements.
Government Regulation
The manufacturing and marketing of our drug candidates and our ongoing
research and development activities are subject to extensive regulation by
numerous governmental authorities in the United States, Israel and other
countries. None of our drug candidates has been approved for sale in any
market. Before marketing in the United States, any drug developed by us must
undergo rigorous pre-clinical testing and clinical trials and an extensive
regulatory approval process implemented by the FDA under the Federal Food,
Drug, and Cosmetic Act. The FDA regulates, among other things, the development,
testing, approval, manufacture, record keeping, labeling, storage, advertising,
promotion, sale and distribution of biopharmaceutical products.
The regulatory review and approval process is lengthy, expensive and
uncertain. Securing FDA approval requires the submission of extensive pre-
clinical and clinical data and supporting information to the FDA for each
indication or use to establish a drug candidate's safety and efficacy. The
approval process takes many years, requires the expenditure of substantial
resources, involves post-marketing surveillance, and may involve ongoing
requirements for post-marketing studies. Before commencing clinical trials in
humans, we must submit to, and receive approval from, the FDA of an IND
application. We expect to rely on some of our collaborative partners to file
IND applications and generally direct the regulatory approval process for some
of our drug candidates.
Expedited development, evaluation, and marketing of new therapies intended
to treat persons with serious or life-threatening conditions for which there is
an unmet medical need can be obtained in the FDA's Fast Track Drug Development
Program. A sponsor can apply for Fast Track Designation at the time of
submission of an IND application, or at any time prior to receiving marketing
approval of the NDA. A request for fast track designation must establish that
the criteria necessary for qualification are met, including:
. that the drug is intended to treat a serious or life-threatening
condition;
. that the drug is intended to treat a serious aspect of the condition; and
. that the drug has the potential to address unmet medical needs, and this
potential is being evaluated in the planned drug development program.
The FDA generally responds to a request for fast track designation within 60
calendar days of receipt of the request. Over the course of drug development, a
product in a fast track development program must continue to meet the criteria
for fast track designation. Sponsors of products in fast track drug development
programs should be in regular contact with the reviewing division of the FDA to
ensure that the evidence necessary to support marketing approval will be
developed and presented in a format conducive to an efficient review.
Sponsors of products in fast track drug development programs ordinarily are
eligible for priority review and may be permitted to submit portions of an NDA
to the FDA for review before the complete application is submitted. Sponsors of
drugs designated as "fast track" also may seek approval under the accelerated
approval regulations, which permit the FDA to grant accelerated approval based
on a determination that the effect on a surrogate endpoint is reasonably likely
to predict clinical benefit. A surrogate endpoint is defined as a laboratory or
physical sign that is used in
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<PAGE>
therapeutic trials as a substitute for a clinically meaningful endpoint and the
surrogate is expected to predict the effect of the therapy. Requirements for
submitting "substantial evidence" to demonstrate effectiveness, and for payment
of user fees, must still be met under accelerated approval regulations.
Further, where an accelerated approval is based on a surrogate endpoint,
postmarket studies ordinarily will be required to verify the drug's clinical
benefit and the relationship of the surrogate endpoint to clinical benefit.
Before receiving FDA approval to market a product, we must demonstrate that
the product is safe and effective on the patient population that will be
treated. If regulatory approval of a product is granted, this approval will be
limited to those disease states and conditions for which the product is
effective, as demonstrated through clinical studies. Marketing or promoting a
drug for an unapproved indication or use is prohibited. Clinical testing must
meet requirements for institutional review board oversight, informed consent
and good clinical practices, and must be conducted under FDA oversight. Upon
approval, a product may be marketed only in those dosage forms and for those
indications approved in the NDA. However, pursuant to recent US federal court
decisions, drug marketers are, in some limited circumstances, permitted to
distribute peer-reviewed materials concerning indications outside of the FDA
labeling for their approved drug products.
Clinical trials are conducted in sequential phases, with initial
administration of the drug to a small group of humans, either healthy
volunteers or patients, to test for safety, dosage tolerance, absorption,
metabolism, excretion, and clinical pharmacology in Phase I. Phase II involves
study in a slightly larger number of patients to assess the efficacy of the
product, to ascertain dose tolerance and the optimal dose range, and to gather
additional data relating to safety and potential adverse events. Phase III
studies establish safety and efficacy in an expanded patient population, and
the FDA can require further post-marketing studies in Phase IV.
The length of time necessary to complete clinical trials varies
significantly and may be difficult to predict. Clinical results are frequently
susceptible to varying interpretations that may delay, limit or prevent
regulatory approvals. Additional factors that can cause delay or termination of
our clinical trials, or the costs of these trials to increase, include:
. slow patient enrollment due to the nature of the protocol, the proximity
of patients to clinical sites, the eligibility criteria for the study or
other factors;
. inadequately trained or insufficient personnel at the study site to
assist in overseeing and monitoring clinical trials; delays in approvals
from a study site's review board;
. longer treatment time required to demonstrate effectiveness or determine
the appropriate product dose;
. lack of sufficient supplies of the drug candidate;
. adverse medical events or side effects in treated patients; and
. lack of effectiveness of the drug candidate.
Any drug is likely to produce some toxicity or undesirable side effects in
animals and in humans when administered at sufficiently high doses and/or for a
sufficiently long time. Unacceptable toxicity or side effects may occur at any
dose level at any time in the course of studies in animals designed to identify
unacceptable effects of a drug candidate, known as toxicological studies, or
clinical trials of our drug candidates. The appearance of any unacceptable
toxicity or side effect could cause us or regulatory authorities to interrupt,
limit, delay or abort the development of any of our drug candidates and could
ultimately prevent their approval by the FDA or foreign regulatory authorities
for any or all targeted indications.
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<PAGE>
Submission and approval of an NDA by the FDA and the payment of user fees
are required prior to commercial marketing of the drug. As part of the approval
process, the FDA must inspect and approve each manufacturing facility. Among
the conditions of approval is the requirement that a manufacturer's quality
control and manufacturing procedures conform to cGMP. Manufacturers must expend
time, money and effort to insure compliance with cGMP, and the FDA conducts
periodic inspections to certify compliance. Violations may result in
restrictions on the product or manufacturer, including costly recalls or
withdrawal of the product from the market. We or our contract manufacturers may
not be able to comply with the applicable cGMP and other FDA regulatory
requirements. If we or our contract manufacturers fail to comply, our business,
financial condition and results of operations may be materially and adversely
affected.
Outside the United States, our ability to market a product is contingent
upon receiving a marketing authorization from the appropriate regulatory
authorities. The requirements governing the conduct of clinical trials,
marketing authorization, pricing and reimbursement vary widely from country to
country. At present, foreign marketing authorizations are applied for at a
national level, although within the European Union, or EU, registration
procedures are available to companies wishing to market a product in more than
one EU member state. If the regulatory authority is satisfied that adequate
evidence of safety, quality and efficacy has been presented, a marketing
authorization will be granted. This foreign regulatory approval process
involves all of the risks associated with FDA approval discussed above.
Sales and Marketing
We do not intend to build our own sales force as we intend to market any
future products through corporate partnerships with leading biotechnology or
pharmaceutical companies. By contracting with corporate partners for the
manufacturing, marketing and distribution of products, we hope to limit our
exposure to capital-intensive activities beyond our expertise and concentrate
on developing new compounds and technologies.
Employees
We have nine employees, four of whom hold M.D. degrees and three of whom
hold other advanced degrees, and 27 persons working under sponsored research
agreements or consulting agreements. Of these 36 persons, 30 are working in
research and development, and six are working in administration and finance.
None of our employees is represented by a collective bargaining agreement, nor
have we ever experienced a work stoppage. We consider our relations with our
employees and consultants to be good.
Properties
Our current facilities consist of 1,485 square feet of leased space at 216
Jaffa Road, Sha'arei Ha'ir, Jerusalem, Israel, in which our administrative and
financial operations are headquartered. In addition, through our sponsored
research agreements, we maintain two research and development facilities at the
Hebrew University of Jerusalem, staffed by research personnel and equipped with
advanced scientific equipment. By the end of the second quarter of 2000, we
expect to move to a 3,600 square foot leased facility located in Jerusalem's
primary high technology park, Har Hotzvim. The lease for this new space extends
to the end of 2008, but may be terminated earlier by us at our discretion in
2004. This new facility will provide space for both our administrative and
financial functions and an on-site laboratory devoted to bioinformatics and
drug compound formulation. We will continue to maintain the laboratory space at
the Hebrew University. We believe that the new facility and the Hebrew
University space will be sufficient for our needs until the end of 2001. We are
confident that additional space will be available for future expansion.
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<PAGE>
We intend to open an office in the United States, which will coordinate both
our clinical trial programs and our financial, business development and
investor relations functions.
Legal Proceedings
There are no legal or arbitration proceedings, nor are we aware of any that
are pending or threatened, that may have or have had in the previous twelve
months a significant effect on our financial position.
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<PAGE>
MANAGEMENT
The directors consider that our senior management team will have the
relevant experience, market knowledge and management ability to successfully
develop our corporate strategy and to achieve rapid growth.
Executive Officers and Directors
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Morris Laster, M.D......... 36 Chairman and Chief Executive Officer, Director
Benjamin Corn, M.D......... 39 President
Ira Weinstein.............. 44 Chief Financial Officer and Treasurer
Bob Trachtenberg........... 43 General Counsel and Secretary
Peter M. Kash (1).......... 38 Director (Non-executive)
S. Leslie Misrock.......... 71 Director (Non-executive)
Mark H. Rachesky, M.D.
(1)(2).................... 40 Director (Non-executive)
Lindsay A. Rosenwald,
M.D....................... 44 Director (Non-executive)
Wayne Rothbaum (1)(2)...... 32 Director (Non-executive)
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Morris Laster, M.D., has served as our Chairman and Chief Executive Officer
since November 1999. From December 1996 to November 1999, Dr. Laster served as
the Chief Executive Officer and President of Partec Ltd., our predecessor
company. From 1990 to 1996, Dr. Laster was employed as Vice President of
Medical Venture Capital with Paramount Capital Investments LLC., a New York-
based biotechnology venture group. Dr. Laster received his M.D. from Downstate
Medical Center, performed post-doctoral training in surgery at Case Western
Reserve University Hospital and served as a physician and officer with the
paratroopers of the Israel Defense Forces.
Benjamin Corn, M.D., has served as our President since November 1999. From
October 1998 to November 1999, Professor Corn was the Chief Executive Officer
of SignalSite, Inc., a subsidiary of Partec Ltd., our predecessor company. From
1994 to 1998, he served as Professor and Vice-Chairman in the Department of
Radiation Oncology at Thomas Jefferson University Hospital in Philadelphia.
Professor Corn received his B.A. and M.D. degrees from Boston University and
completed residency training at the University of Pennsylvania, where he later
served as Assistant Professor of Radiation Oncology.
Ira Weinstein has served as our Chief Financial Officer and Treasurer since
November 1999. From January 1997 to November 1999, Dr. Weinstein was the Chief
Financial Officer of Partec Ltd. From 1989 to 1997, Dr. Weinstein was an
accountant with the Association of Americans and Canadians in Israel. He has
also served as a consultant to the New York State Department of Health and
taught business management at Baruch College, Touro College and St. John's
University. Dr. Weinstein holds a Doctorate of Business Administration from
Newport University and an M.B.A. in Management and a B.B.A. in Accountancy from
Baruch College.
Bob Trachtenberg has served as our General Counsel and Secretary since
November 1999. Prior to that date, from October 1998, he was the General
Counsel of Partec Ltd. From June 1994 to October 1998, Mr. Trachtenberg was
Senior Vice President for Administration and Legal Affairs at Accent Software
International, Ltd. (now known as LanguageWare.net, Ltd.), a publicly traded
software development company. Mr. Trachtenberg received his B.A. from the State
University of New York at Binghamton and his J.D. from New York University.
Peter M. Kash has served on our board since October 1998. Mr. Kash has been
a Senior Managing Director of Paramount Capital, Inc. and a Director of
Paramount Capital Asset
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<PAGE>
Management, Inc. since 1990. From 1989 to 1991, Mr. Kash served as an Associate
Professor at the Polytechnic University. In addition, since 1996, he has served
as a Lecturer in Entrepreneurship and International Venture Capital at the
Wharton School of the University of Pennsylvania and has accepted an
appointment as a visiting professor in entrepreneurship at Nihon University in
Tokyo, Japan from 1999 to 2001. He holds a B.S. in Management Science from the
State University of New York at Binghamton and an M.B.A. in Finance and Banking
from Pace University.
S. Leslie Misrock has served on our board since November 1999. Mr. Misrock
has been a partner of the law firm of Pennie & Edmonds LLP, a New York-based
intellectual property firm, since 1961 and a senior partner since 1970. He is a
member of the Visiting Committee of the Department of Biology and Chemistry at
MIT, the Association for the Cure of Prostate Cancer (CaP CURE), the Board of
Visitors of Fordham Law School, the Health Sciences Board of Columbia
University's College of Physicians and Surgeons, and the National Prostate
Cancer Coalition. Mr. Misrock is a Director of Cytogen Corporation, a publicly
held biopharmaceutical company, as well as a director of several privately held
biotechnology and medical informatics companies, including DirectGene Inc.,
Molecular Staging Inc., OANDA Corporation, Timbrel Systems Inc. and SerOptix
Inc. Mr. Misrock is a managing director of Quintessential Technologies LLC, a
technology investment company, and he is a general partner of Misrock Holdings
LP, a Delaware limited partnership. Mr. Misrock holds an S.B. in Chemistry from
the Massachusetts Institute of Technology, an A.M. in Chemistry from Columbia
University and an L.L.B. degree from Fordham University.
Mark H. Rachesky, M.D., has served on our board since February 2000. Dr.
Rachesky is the President of MHR Fund Management LLC, which he founded in 1996.
MHR is an investment manager of various private investment funds. Prior to
founding MHR, from 1990 to 1996, Dr. Rachesky was employed in various
capacities by Carl C. Icahn. He currently also serves as a director of the
Samsonite Corporation and Neose Technologies, Inc. Dr. Rachesky received his
B.S. from the University of Pennsylvania, and his M.D. and M.B.A. from Stanford
University.
Lindsay A. Rosenwald, M.D., has served on our board since March 2000. He is
an investment banker, as well as a venture capitalist and fund manager. Dr.
Rosenwald has served as Chairman of Paramount Capital, Inc., an NASD-member
broker-dealer since 1992, Chairman of Paramount Capital Investments LLC, a
merchant and investment bank, since 1995, and Chairman of Paramount Capital
Asset Management, Inc., which manages the investment of several funds
specializing in the technology and biotechnology sectors, since 1994. He is
also a director of Neose Technologies, Inc., Enzymed, Inc. and Nephros, Inc.
Dr. Rosenwald received his B.S. in Finance from Pennsylvania State University,
and his M.D. from Temple University School of Medicine.
Wayne Rothbaum has served on our board since February 2000. He is a Managing
Director at the Carson Group, a strategic consulting firm providing capital
markets intelligence to over 400 publicly traded companies. Mr. Rothbaum has
co-managed The Carson Group's life sciences team, which provides services
ranging from traditional investor relations to strategic consulting to
corporate finance for over 50 life sciences companies, since 1993. In addition,
he is a principal at Evolution Capital, an NASD registered investment fund,
which is a wholly owned subsidiary of The Carson Group. Mr. Rothbaum is also an
advisory director to Enzon, Inc. and Maxim Pharmaceuticals, Inc. He received an
M.A. from the Elliot School of International Relations at the George Washington
University and a B.A. in Cognitive Psychology and Political Science from the
State University of New York at Binghamton.
The business address of each of Morris Laster, Benjamin Corn, Ira Weinstein
and Bob Trachtenberg is 216 Jaffa Road, Sha'arei Ha'ir, Jerusalem, Israel
94383. The business address of Peter Kash and Lindsay Rosenwald is Paramount
Capital, Inc., 787 Seventh Avenue, New York, New York 10019. The business
address of S. Leslie Misrock is Pennie & Edmonds LLP, 1155 Avenue of the
Americas, New York, New York 10036. The address of Mark Rachesky is 985 Fifth
Avenue, New York, New York 10021. The business address of Wayne Rothbaum is 156
W. 56th Street, 10th Floor, New York, New York 10019.
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<PAGE>
Scientific Advisors
We rely on prominent scientists and physicians to advise us on our KinAce
platform and the clinical development of KRX-101.
Prof. Shmuel Ben-Sasson is the inventor of the KinAce platform and serves as
the Chief Scientific Officer. Dr. Ben-Sasson is the incumbent of the Joseph I.
Bluestone Chair in Experimental Medicine at Hebrew University Hadassah Medical
School in Jerusalem. He is the holder of multiple patents and the inventor of
the TUNEL Assay, the most commonly cited assay for apoptosis in the medical
literature. Dr. Ben-Sasson also maintains an appointment as a Visiting
Professor in the Department of Surgical Research at Harvard Medical School.
The KinAce Scientific Advisory Board
<TABLE>
<CAPTION>
Name Current Position
------------------------------------ ---------------------------------------
<C> <S>
James Broach, Ph.D. ................ Professor of Molecular Biology at
Princeton University
Moshe Oren, Ph.D. .................. Dean of Life Sciences at Weizmann
Institute (Rehovot, Israel)
William E. Paul, M.D. .............. Director of the Clinical Immunology
Laboratory at the National Institute of
Allergy and Infectious Diseases
Susan S. Taylor, Ph.D. ............. Professor of Biochemistry at the Howard
Hughes Medical Institute of the
University of California, San Diego
</TABLE>
We intend to enter into agreements with each of these advisors obligating
them to provide scientific advisory services to us for a three-year period.
Each agreement would be terminable by us upon agreement of a majority of our
board of directors, or by the advisor, upon 30 days' written notice. In
addition to a per diem fee, within 21 days of this offering, each advisor would
be granted an option to purchase 1,000 shares of our common stock, half of
which vest on the grant date and the balance of which vest on each of the first
and second anniversary of the grant date.
The KRX-101 Scientific Advisory Board
<TABLE>
<CAPTION>
Name Current Position
------------------------------------ -----------------------------------------
<C> <S>
Steven M. Haffner, Ph.D. ........... Professor of Internal Medicine in the
Department of Medicine/Clinical
Epidemiology at the University of Texas
Health Science Center
Job Harenberg, Ph.D. ............... Professor of Internal Medicine and Head
of the Department of Haemostaseology at
the University of Heidelberg (Heidelberg,
Germany)
Michael Mauer, Ph.D. ............... Professor of Pediatrics at the University
of Minnesota
Guisseppe Remuzzi, Ph.D. ........... Director of the Bergamo Laboratories of
the Mario Negri Institute for
Pharmacological Research (Bergamo, Italy)
Bernard Zinman, Ph.D. .............. Professor of Medicine and Director of the
Banting & Best Diabetes Center at the
University of Toronto
</TABLE>
We have entered into agreements with each of these advisors obligating them
to provide scientific advisory services to us for a three-year period. Each
agreement entitles the advisor to a per diem fee and is terminable by us upon
agreement of a majority of our board of directors, or by the advisor, upon 30
days' written notice.
38
<PAGE>
Committees of the Board
Audit Committee. We have an audit committee composed of non-employee
directors. The audit committee will recommend to our board the independent
auditors to be retained by us and will meet with our independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements. The audit committee will also receive and consider the
accountants' comments as to controls, adequacy of staff, management performance
and procedures in connection with audit and financial controls. Current members
of the audit committee are Dr. Rachesky and Mr. Rothbaum.
Compensation Committee. Our compensation committee reviews and recommends to
our board of directors the compensation and benefits of all our officers and
reviews general policies relating to compensation and benefits of our
employees. The compensation committee also administers the issuance of stock
options under our stock option plan and otherwise. Current members of the
compensation committee are Messrs. Kash, Rothbaum and Dr. Rachesky.
We have adopted the Model Code for AIM-listed companies with respect to the
dealings of our directors in our common stock.
Appointment of Directors
Our bylaws provide that our directors are elected by our stockholders and,
at each election, the persons receiving the greatest number of votes, up to the
number of persons being elected, shall be the persons then elected. Our board
consists of the number of directors determined by resolution of the board.
Currently the number of directors is six. Each director holds office until a
successor is elected and qualified or the director resigns or is removed. Any
director or the entire board may be removed, with or without cause, by the
holders of a majority of shares then entitled to vote at an election of
directors. Any vacancy in the board, whether because of death, resignation,
disqualification, an increase in the number of directors or any other cause,
may be filled by vote of the majority of the remaining directors, even if less
than a quorum, or by a sole remaining director.
Compensation of Directors
Non-executive directors do not receive any cash compensation from us for
their services as members of our board of directors or for attendance at
committee meetings. These directors may be reimbursed for expenses in
connection with attendance at board of directors and committee meetings. In
November 1999, each of our non-executive directors, including Messrs. Kash and
Misrock, were granted options to purchase 25,000 shares of our common stock at
an exercise price of $0.15 per share pursuant to our stock option plan. In
February 2000, Dr. Rachesky and Mr. Rothbaum were each granted options to
purchase 40,000 shares of our common stock. At the same time, Mr. Misrock was
granted additional options to purchase 15,000 shares of common stock and Mr.
Kash, in recognition of his extraordinary efforts on our behalf in our most
recent private placement, was granted options to purchase 50,000 shares of
common stock. All the February 2000 options carry an exercise price of $0.50
per share.
It is estimated that, under the arrangements in place at the date of
expected admission to listing of our shares on Nasdaq and the Alternative
Investment Market, the aggregate remuneration payable and benefits in kind to
be granted to our directors for the period of the current financial year, up to
December 31, 2000, will amount to approximately $279,000, all of which is
payable to Dr. Laster as salary and benefits for his services as Chief
Executive Officer. No loan or guarantee has been granted or provided by us to
any director or any person connected with them.
Limitation of Directors' and Officers' Liability
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to
the fullest extent permitted by Delaware law. We are also empowered under our
bylaws to enter into indemnification contracts with our directors and officers
and to purchase insurance on behalf of any person we are required or permitted
to indemnify.
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<PAGE>
We have obtained officers' and directors' liability insurance to cover the
liabilities that our officers and directors may incur in connection with their
services to us, including matters arising under the Securities Act. In
addition, our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary
damages for breach of the directors' fiduciary duty of care to us and our
stockholders. This provision in our certificate of incorporation does not
eliminate the duty of care and, in appropriate circumstances, equitable
remedies including an injunction or other forms of non-monetary relief would
remain available under Delaware law. Under current Delaware law, a director's
liability to us or our stockholders may not be limited:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or involving intentional
misconduct;
. for knowing violations of law;
. for any transaction from which the director derived an improper personal
benefit;
. for improper transactions between the director and us; and
. for improper distributions to stockholders and loans to directors and
officers.
This provision also does not affect a director's responsibilities under any
other laws, including the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving any of our directors
or officers as to which indemnification is being sought, nor are we aware of
any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
Executive Compensation
The table below summarizes for the year ended December 31, 1999 the
compensation earned for services rendered to us in all capacities by our chief
executive officer and our other most highly compensated executive officer whose
total compensation exceed $100,000 in such period. No individual who would
otherwise have been includable in such table on the basis of total compensation
earned during the year ended December 31, 1999 has resigned or otherwise
terminated his or her employment during such period.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation ------------
------------------------------ Securities
Name and Principal Other Annual Underlying All Other
Position Salary Bonus Compensation(1) Options Compensation(2)
------------------ -------- ----- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Morris Laster, M.D...... $225,000 -- $34,000 1,314,733 $7,645
Chief Executive
Officer,
Chairman and Director
Benjamin Corn, M.D...... $150,000 -- $22,000 182,684 --
President
</TABLE>
- --------
(1) Includes national insurance, pension, disability insurance premiums,
payments in lieu of statutory severance and continuing education plans.
(2) Includes reimbursement for automobile expenses.
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted to each of the named executive officers in the year ended
December 31, 1999, including the potential realizable
40
<PAGE>
value over the ten-year term of the options, based on assumed rates of stock
appreciation of 5% and 10% over the exercise price, compounded annually. These
assumed rates of appreciation comply with the rules of the SEC and do not
represent our estimates of our future stock price. Actual gains, if any, on
stock option exercises will depend on the future performance of our common
stock.
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed
Annual Rates
Individual Grants of Stock
----------------------------------------- Price
Number of Percentage Appreciation
Securities of Total Exercise for Option
Underlying Options Price Term
Options Granted in Per Expiration ------------
Name(1) Granted 1999(2) Share Date(3) 5%($) 10%($)
------- ---------- ---------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Morris Laster, M.D....... 1,014,733 37.11% $0.15 11/19/24
300,000 10.97% $0.15 11/19/09
Benjamin Corn, M.D....... 52,684 1.93% $0.15 11/19/24
130,000 4.75% $0.15 11/19/09
</TABLE>
- --------
(1) The securities reflected in this chart are held by Delaware corporate
entities controlled by irrevocable trusts of which the named executive
officers are beneficiaries but over which they have no control. See
"Principal Stockholders."
(2) Percentages shown under "Percentage of Total Options Granted in 1999"
are based on an aggregate of 2,734,688 options granted to certain of
our employees, consultants and directors under our share option plan
during 1999.
(3) The options with an expiration date of November 19, 2024, all vested
immediately upon grant. The options with an expiration date of November
19, 2009, vest, or have vested, as follows: one-third on December 6,
1999; one-sixth on May 19, 2000; one-sixth on November 19, 2000; one-
sixth on May 19, 2001; and one-sixth on November 19, 2001. The options
will fully vest upon a merger or acquisition of our company, as defined
in our option plan, unless the acquiring or merging entity assumes the
options or substitutes similar options.
Aggregate Option Exercises During the Last Fiscal Year and Fiscal Year-End
Option Values
The following table sets forth information with respect to exercisable and
unexercisable options held as of December 31, 1999, by the named executive
officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In- Shares
Options at the-Money Options at Acquired on Value
December 31, 1999 December 31, 1999 Exercise Realized
------------------------- ------------------------- ----------- --------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Morris Laster, M.D...... 1,114,733 200,000
Benjamin Corn, M.D...... 96,018 86,666
</TABLE>
Employment Agreements
Our Israeli operating subsidiary has entered into an employment agreement
with Morris Laster, M.D., and we, as the US parent, have entered into a
complementary employment agreement with Dr. Laster. Dr. Laster has been
retained to serve as our chief executive officer at a base salary of $225,000
per year for three years from November 18, 1999, with an annual discretionary
bonus of up to 100% of his base salary based upon specific development and
business milestones and achievements. The US agreement grants Dr. Laster a
ten-year option to purchase 300,000 shares of our common stock at an exercise
price of $0.15 per share. This option vests over a period of two years, with
one-third having already vested on December 6, 1999, and the remainder vesting
in equal portions each six months from November 19, 1999. Each agreement may
be terminated on three months' notice and each contains both non-competition
and non-solicitation provisions. The
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<PAGE>
agreements also provide that if Dr. Laster's employment is terminated without
cause or because of death or disability, he or his heirs will be paid his then-
current salary for nine months in monthly installments, in addition to the
three-month notice payment, and our board of directors will cause any
outstanding, unvested options to vest immediately and will extend the period in
which they may be exercised for two years from the date of the termination of
his employment.
Our Israeli operating subsidiary has entered into an employment agreement
with Benjamin Corn, M.D., and we, as the US parent, entered into a
complementary employment agreement with Dr. Corn. Dr. Corn has been retained to
serve as our president at a current base salary of $157,500 per year for three
years from November 18, 1999, with bonuses at the discretion of our chief
executive officer acting in consultation with our board of directors. The US
agreement grants Dr. Corn a ten-year option to purchase 130,000 shares of our
common stock at an exercise price of $0.15 per share. This option vests over a
period of two years, with one-third having already vested on December 6, 1999,
and the remainder vesting in equal portions, each six months from November 19,
1999. Each agreement may be terminated on three months' notice and each
contains both non-competition and non-solicitation provisions. The agreements
also provide that if Dr. Corn's employment is terminated without cause or
because of death or disability, he or his heirs will be paid his then-current
salary for three months in monthly installments, inclusive of the three-month
termination notice, and our board of directors will cause any outstanding,
unvested options to vest immediately and will extend the period in which they
may be exercised for two years from the date of the termination of his
employment.
All of our officers and employees are required, at the commencement of their
employment, to sign an employment agreement specifying basic terms and
conditions of employment. Each of these agreements includes, at a minimum,
obligations of confidentiality and assignment of inventions, which provide that
the employee will not disclose any confidential information received during the
course of employment and that the employee will assign to us any and all
inventions conceived or developed during the course of employment.
1999 Share Option Plan
In November 1999, we adopted the 1999 Share Option Plan, referred to as our
option plan. Our option plan will expire in November 2009, unless terminated
earlier by our board of directors at their discretion. Our option plan provides
for the grant of options to purchase shares of our common stock, including:
. incentive stock options, as defined by Section 422 of the Internal
Revenue Code, that may be granted solely to employees, including
officers; and
. non-statutory stock options, being stock options other than incentive
stock options, that may be granted to employees, including officers, non-
employee directors and consultants.
Share Reserve. We initially authorized the issuance of 3,620,000 shares of
our common stock pursuant to our option plan. In December 1999, our board of
directors amended our option plan to change the number of shares reserved to
2,820,000 shares of common stock.
Stock Options. Stock options are granted subject to stock option agreements.
The exercise price for stock options is set at the discretion of our board of
directors, but in the case of an incentive stock option, such price cannot be
less than 100% of the fair market value of the common stock on the date of
grant. Options granted under the option plan vest at the rate determined by our
board of directors in each stock option agreement.
In general, the term of stock options granted under our option plan is ten
years. Unless the terms of an option holder's stock option agreement provide
differently or our board of directors determines otherwise, in the event an
option holder's service relationship with us, or any affiliate of
42
<PAGE>
ours, ceases due to disability or death, the option holder or his beneficiary
may exercise any vested options up to 12 months after the date that the service
relationship ends. Unless the terms of an option holder's stock option
agreement provide otherwise or our board of directors determines otherwise, if
an option holder's relationship with us, or any affiliate of ours, ceases for
any reason other than disability or death, the option holder may exercise any
vested options up to 90 days from cessation of service.
Option holders may pay the exercise price of their options as determined by
our board of directors, and acceptable consideration may include cash, checks,
promissory notes and/or a direction to a broker to sell the common stock
underlying the options and deliver the exercise price from the sale of the
proceeds. Generally, an option holder may not transfer a stock option to any
entity other than a spouse or descendants or to a trust, or other entity owned
by such a trust, for the primary benefit of the option holder, his spouse
and/or his descendants.
Tax Limitations on Stock Option Grants. Under current tax laws, incentive
stock options may be granted only to our employees. The aggregate fair market
value, determined at the time of grant, of shares of our common stock with
respect to incentive stock options that are exercisable for the first time by
an option holder during any calendar year under all of our stock plans may not
exceed $100,000. No incentive stock option, and, prior to our stock being
publicly traded, no non-statutory stock option, may be granted to any person
who, at the time of the grant, owns or is deemed to own stock possessing more
than 10% of the total combined voting power of our company or any affiliate,
unless the following conditions are satisfied:
. the option exercise price must be at least 110% of the fair market value
of the stock subject to the option on the date of grant; and
. the term of any incentive stock option award must not exceed five years
from the date of grant.
Changes in Control. Upon specified changes in control as provided under our
option plan, all outstanding options under our option plan either will be
assumed or substituted for by any surviving entity or its parent or subsidiary
corporation, if any. If the surviving entity or its parent or subsidiary
corporation, if any, determines not to assume or substitute the options, our
board of directors shall provide for the options to be fully exercisable for a
period of 15 days from the date of notice. If our board of directors makes the
options fully exercisable for this 15-day period, the options will terminate at
the end of this period.
Authorized Shares. An aggregate of 3,620,000 shares of common stock were
authorized for issuance under our option plan. In December 1999, our board of
directors amended our option plan to reduce the number of shares reserved to
2,820,000. As of April 30, 2000, options to purchase a total of 2,764,688
shares of our common stock were held by all participants under our option plan,
and 55,312 shares of our common stock remained available for grant. Shares
subject to stock options that have expired or otherwise terminated without
having been exercised in full again become available for the grant of awards
under our option plan. Shares issued under our option plan may be previously
unissued shares or reacquired shares of common stock.
Plan Administration. Our board of directors administers our option plan. Our
board of directors may delegate authority to administer our option plan to a
committee of our board of directors. Subject to the terms of the option plan,
our board of directors or its designated committee determines recipients, the
numbers and types of stock awards to be granted, and the terms and conditions
of the stock awards, including the period of their exercisability and vesting.
Our board of directors or its designated committee also determines the exercise
price of options granted.
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<PAGE>
Our board of directors or its designated committee may, in its sole
discretion, include additional provisions in any option or award granted or
made under our option plan that are not inconsistent with our option plan or
applicable law. Our board of directors or its designated committee may also, in
its sole discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under our option plan may be exercised. In
the event of a decline in the value of our common stock, our board of directors
or its designated committee has the authority to offer option holders the
opportunity to replace outstanding higher-priced options with new lower-priced
options.
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<PAGE>
RELATED PARTY TRANSACTIONS
Investments in our Company. The following table summarizes the material
terms of transactions during the last three fiscal years, other than stock
option exercises, in which our directors, executive officers, major
stockholders and related persons purchased shares of our stock or the stock of
our majority-owned subsidiaries for more than $60,000 or in which our founders
purchased shares of our stock. In each transaction, the director, executive
officer, major stockholder or related person purchased stock at the same price
and on the same terms as independent third-party investors purchasing stock at
the same time.
<TABLE>
<CAPTION>
Aggregate
Directors and Number of Purchase
Executive Officers Purchase Date Class of Stock Shares Price
- ----------------------------- ------------- ------------------ --------- ---------
<S> <C> <C> <C> <C>
Lindsay A. Rosenwald, M.D.(1) 10/98 Common Stock 3,664,500 $3,665
11/99 Series A Preferred 6,224 $622,400
Peter M. Kash 10/98 Common Stock 578,500 $578
Mark Rachesky, M.D. 1/00 Series A Preferred 2,500 $250,000
<CAPTION>
Principal Stockholders
- -----------------------------
<S> <C> <C> <C> <C>
Children's Medical Center 11/99 Common Stock 537,025 (2)
Corporation
</TABLE>
- --------
(1) 4,860 shares of the Series A preferred stock listed under the name of Dr.
Rosenwald are held by Paramount Capital Investments LLC, an affiliate of
Dr. Rosenwald. See "Principal Stockholders" for more detail on these
shares.
(2) These shares were issued in connection with KinAce license agreement.
We have entered into the following agreements or arrangements with certain
of our stockholders and directors.
Private Placement. In connection with our private placement of Series A
preferred stock, Paramount Capital, Inc. received consideration of $375,400 and
three-year warrants to buy 77,393 shares of common stock at an exercise price
of $2.91 per share. Lindsay A. Rosenwald owns 100% of Paramount Capital.
Predecessor Company. Our predecessor company, Partec Ltd., was incorporated
in Israel in December 1996, to pursue opportunities in the biotechnology field.
Partec pursued individual biotechnology projects through the provision of
management services to Delaware corporations set up around those projects. In
October 1998, Dr. Rosenwald exchanged his interests in those companies for a
77% interest in Partec. In November 1999, we acquired substantially all of the
assets and liabilities of Partec. At the time of this acquisition, Dr.
Rosenwald and his affiliates owned approximately 77% of our outstanding common
stock.
In connection with this acquisition, we agreed to retain Partec's management
and staff and forgave approximately $570,000 of Partec's indebtedness arising
from a series of notes that it had issued in February and April 1999, which we
had subsequently acquired in exchange for Series A preferred stock and warrants
to purchase common stock. We also assumed various trade payables and financial
obligations owed by Partec to the employees that we retained. To facilitate the
transaction, we established an Israeli subsidiary named Keryx (Israel) Ltd. in
November 1999. This subsidiary acts as our legal representative in Israel to
conduct research and development and employ our Israel-based staff.
45
<PAGE>
KinAce License Agreement. On November 18, 1999, we acquired a license to the
KinAce platform from CMCC in exchange for certain royalty obligations and the
issuance of 537,025 shares of our common stock to CMCC. In addition, we granted
CMCC warrants to purchase 250,000 additional shares of common stock for $0.01
per share that expire ten years after they vest. Half of the warrants vest upon
first approval of an IND application by the FDA for a product arising from
patents we have licensed from CMCC, and the other half vest upon final
marketing approval for such a product.
Controlling Stockholder. In accordance with UK best practice, we have
entered into agreements with each of Dr. Rosenwald and Mr. Kash whereby they
have agreed with us that we will be capable at all times of acting
independently of them and that all transactions between us and them in the
future will be on an arm's length basis.
Intercompany Agreement. Pursuant to an intercompany agreement, our Israeli
subsidiary provides us with certain services for which we reimburse it for its
costs plus a profit margin of 10% and value added tax. Except for income tax
paid in Israel on the profits of the subsidiary, this arrangement has no effect
on our consolidated financial statements.
Patent Attorneys. We have retained Pennie & Edmonds LLP to act as our patent
counsel. S. Leslie Misrock, a director of our company, is a senior partner of
Pennie & Edmonds.
We believe that all of the transactions discussed above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of our board of directors, including a majority of the independent and
disinterested directors, and will be on terms no less favorable to us than
could be obtained from unaffiliated third parties. In addition to the
transactions discussed above, Dr. Laster and Dr. Weinstein are brothers-in-law.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us with respect
to the beneficial ownership of our common stock as of April 30, 2000, and as
adjusted to reflect the sale of our common stock offered by this prospectus,
by:
. all persons who are beneficial owners of three percent (3%) or more of
our common stock;
. each of our directors;
. each of our executive officers; and
. all current directors and executive officers as a group.
Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table below have sole voting and investment
power with respect to all shares of common stock held by them.
Applicable percentage ownership in the following table is based on
9,482,179 shares of common stock outstanding as of April 30, 2000, as adjusted
to reflect the automatic conversion of all shares of Series A preferred stock
outstanding immediately prior to this offering into 4,076,642 shares of common
stock.
Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to options
held by that person that are currently exercisable or exercisable within 60
days of April 30, 2000 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purpose of computing the percentage ownership of
any other person.
The business address of Children's Medical Center Corporation is 300
Longwood Avenue, Boston, Massachusetts 02115. The business addresses of the
other beneficial owners may be found in the "Management" section of this
prospectus.
<TABLE>
<CAPTION>
Percentage Beneficially
Owned
Number of Shares -----------------------------
Beneficially Owned Before After
Name of Beneficial Owner Prior to Offering Offering Offering(1)
------------------------ ------------------ ------------ -------------
<S> <C> <C> <C>
Morris Laster, M.D.(2)...... 1,164,733 10.94% --
Benjamin Corn, M.D.(3)...... 117,684 1.23% --
Ira Weinstein(4)............ 188,413 1.95% --
Bob Trachtenberg(5)......... 175,913 1.82% --
Lindsay A. Rosenwald,
M.D.(6).................... 3,998,532 41.64% --
Peter Kash(7)............... 653,500 6.84% --
Mark Rachesky, M.D.(8)...... 85,900 * *
S. Leslie Misrock(9)........ 40,000 * *
Wayne Rothbaum.............. -- -- --
Children's Medical Center
Corporation................ 537,025 5.65% --
All executive officers and
directors as a group
(9 persons)(10)............ 6,347,282 55.85% --
</TABLE>
- --------
* Represents beneficial ownership of less than one percent.
(1) Assumes no exercise of the underwriters' over-allotment option.
(2) Includes 1,164,733 shares of common stock issuable upon the exercise of
vested options. All 1,164,733 options are held in the name of Mogul LLC,
a Delaware limited liability company, the sole member of which is an
irrevocable trust of which Dr. Laster is a beneficiary, but over which
he has no control.
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<PAGE>
(3) Includes 117,684 shares of common stock issuable upon the exercise of
vested options. All 117,684 options are held in the name of Crown
Investment Holdings, Inc., a Delaware corporation, the sole stockholder
of which is an irrevocable trust of which Dr. Corn is a beneficiary, but
over which he has no control.
(4) Includes 188,413 shares of common stock issuable upon the exercise of
vested options. All 188,413 options are held in the name of Radio Eon,
LLC, a Delaware limited liability company, the sole member of which is an
irrevocable trust of which Dr. Weinstein is a beneficiary, but over which
he has no control.
(5) Includes 175,913 shares of common stock issuable upon the exercise of
vested options. All 175,913 options are held in the name of Manzello
Associates, LLC, a Delaware limited liability company, the sole member of
which is an irrevocable trust of which Mr. Trachtenberg is a beneficiary,
but over which he has no control.
(6) Includes 46,867 shares of common stock to be issued upon the conversion
of 1,364 shares of Series A preferred stock held by Dr. Rosenwald, and
166,989 shares of common stock to be issued upon the conversion of 4,860
shares of Series A preferred stock held by Paramount Capital Investments
LLC, an affiliate of Paramount Capital, Inc., of which Dr. Rosenwald is
Chairman. It also includes 9,376 shares of common stock issuable upon the
exercise of a vested warrant held by Dr. Rosenwald, 33,407 shares of
common stock issuable upon the exercise of a vested warrant held by
Paramount Capital Investments LLC, and 77,393 shares of common stock
issuable upon the exercise of a vested warrant held by Paramount Capital,
Inc.
(7) Includes 75,000 shares of common stock issuable upon the exercise of
vested options. 20,000 shares of common stock beneficially owned by Mr.
Kash are subject to a 10-year purchase option that Mr. Kash granted to an
irrevocable family trust, and 11,000 shares are subject to a 10-year
purchase option granted to a charitable foundation. In addition, Mr. Kash
has granted each of three family members 10-year options to purchase
20,000 shares.
(8) Includes 85,900 shares of common stock to be issued upon the conversion
of 2,500 shares of Series A preferred stock.
(9) Includes 40,000 shares of common stock issuable upon the exercise of
vested options.
(10) Includes 1,761,743 shares of common stock issuable upon the exercise of
vested options, 120,176 shares of common stock issuable upon the exercise
of vested warrants and 299,756 shares of common stock to be issued upon
the conversion of 8,724 shares of Series A preferred stock.
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<PAGE>
DESCRIPTION OF OUR CORPORATE STRUCTURE AND CAPITAL STOCK
Corporate Structure
We incorporated as a Delaware corporation under the Delaware General
Corporation Law on October 22, 1998, with the name Paramount Pharmaceuticals,
Inc. On November 22, 1999, we changed our name to Lakaro Biopharmaceuticals,
Inc. On January 6, 2000, we changed our name to Keryx Biopharmaceuticals, Inc.
We have one subsidiary, Keryx (Israel) Ltd., which is incorporated in
Israel. We hold 99 shares of NIS1.00 nominal value each in Keryx (Israel) Ltd.
An additional one share of nominal value NIS1.00 is held by Morris Laster in
trust for our benefit. No other shares in Keryx (Israel) have been issued, nor
have any options or other rights been granted to any person to acquire or
receive any Keryx (Israel) shares. Our subsidiary is our main operating company
and operates primarily in and from Israel. Its registered office is located at
216 Jaffa Road, Sha'arei Ha'ir, Jerusalem, Israel 94383.
We currently hold 211,500 shares of $0.001 each nominal value in MTR
Technologies, Inc., a company for which our predecessor company provided
management services. These shares are valued in our accounts at their nominal
value. Our interest represents less than 5% of the issued share capital of MTR
Technologies, Inc. We have not held any interests in any other undertakings
since the date of our incorporation.
General Description of Our Capital Stock
Our authorized capital stock consists of 20,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of preferred stock, $0.001 par value.
Immediately prior to the completion of this offering, there will be 9,482,179
shares of common stock outstanding (assuming conversion of all outstanding
Series A preferred stock, but no exercise of outstanding stock options or
warrants) and outstanding options and warrants to purchase 3,454,636 shares of
common stock. The liability of our stockholders is limited to the value of
their shares and any amount payable by them in respect of shares they have
agreed to purchase.
The following summary of the terms and provisions of our capital stock does
not purport to be complete. Reference should be made to our certificate of
incorporation and our bylaws, and to applicable law, for the complete
description of the terms and provisions of our capital stock.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred
stock, holders of common stock are entitled to receive ratably any dividends
that may be declared by our board of directors out of funds legally available
for dividend payments. Upon a liquidation, dissolution or winding up of our
company, holders of the common stock are entitled to share ratably in all
assets remaining after payment of liabilities and amounts due to the holders of
outstanding shares of preferred stock, if any. Holders of common stock have no
preemptive rights and no right to convert their common stock into any other
securities. There are no redemption or sinking fund provisions that apply to
our common stock. All outstanding shares of common stock are, and all shares of
common stock to be outstanding upon completion of this offering will be, fully
paid and non-assessable.
Preferred Stock
Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or
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<PAGE>
imposed upon the preferred stock, including dividend rights, conversion rights,
terms of redemption, liquidation preference, sinking fund terms and the number
of shares constituting any series or the designation of a series, without any
further vote or action by the stockholders. Our board of directors, without
stockholder approval, can issue preferred stock with voting and conversion
rights which could adversely affect the voting power of the holders of common
stock. The issuance of preferred stock could have the effect of delaying,
deferring or preventing a change in control. On December 6, 1999, our board of
directors designated 170,000 shares of preferred stock as Series A convertible
preferred stock.
As of April 30, 2000, there were 118,645 shares of Series A preferred stock
outstanding. All outstanding shares of Series A preferred stock will be
converted into shares of common stock immediately prior to this offering.
Following such conversion there will be no preferred stock outstanding, and we
have no current plans to issue any further shares of preferred stock.
Warrants
As of April 30, 2000, the following warrants were outstanding:
. Warrants issued to CMCC to purchase 250,000 shares of common stock at an
exercise price of $0.01 per share. Half of these warrants vest upon the
first approval of an IND application with the FDA for a product arising
from patents we have licensed from CMCC and the other half vest upon the
final marketing approval for such a product. These warrants expire ten
years after they vest.
. Ten-year warrants to purchase 202,555 shares of common stock at an
exercise price of $0.01 per share issued to holders of Series A
preferred stock. All of these warrants are fully vested.
. Three-year warrants issued to Paramount Capital, Inc. to purchase 77,393
shares of common stock at an exercise price of $2.91. All of these
warrants are fully vested.
Each of these warrants contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of
the warrant in the event of stock dividends, stock splits, reorganizations,
reclassifications or consolidations.
Registration Rights of Stockholders
In connection with the sale of our Series A preferred stock and warrants, we
have agreed to register the common shares issuable pursuant to those securities
under the Securities Act, in the event we propose to register any of our
securities in an offering under the Securities Act. The holders of these shares
will be entitled to include, at our expense, their shares of common stock in up
to two such registrations. In addition, we will be required to use our
reasonable best efforts to have the registration statement declared effective.
These rights become effective on the first anniversary of this offering, and
shall terminate on the earlier of five years after the execution of the
agreement providing for these rights, or when a holder is able to sell all its
shares pursuant to Rule 144 under the Securities Act in any 90-day period.
Attached to these registration rights are conditions and limitations, including
the right of the underwriters to limit the number of shares included in the
registration statement.
Anti-Takeover Provisions of Delaware Law and Charter Provisions
Delaware Anti-Takeover Law
We are subject to Section 203 of the Delaware General Corporation Law. In
general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date the person became an interested
stockholder, unless the "business combination" or the transaction in
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<PAGE>
which the person became an "interested stockholder" is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale or other transaction resulting in a financial benefit to the "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns 15% or more of a corporation's outstanding
voting stock at any time within the prior three years, other than "interested
stockholders" prior to the time its common stock is publicly traded. The
existence of this provision would be expected to have an anti-takeover effect
with respect to transactions not approved in advance by our board of directors,
including discouraging takeover attempts that might result in a premium over
the market price for the shares of our common stock held by stockholders.
Change of Control
Our certificate of incorporation and bylaws include provisions that may have
the effect of deterring hostile takeovers or delaying or preventing changes in
control or management. Our certificate of incorporation provides that our board
of directors can issue up to 5,000,000 shares of "blank check" preferred stock.
Our bylaws provide that special meetings of stockholders may be called only by
our board of directors, a committee thereof or an executive officer pursuant to
a resolution adopted by a majority of the total number of authorized directors.
Stock Transfer Agent and Registrar
American Stock Transfer and Trust Company will serve as transfer agent and
registrar for our common stock in the United States. IRG plc will serve as
transfer agent and registrar for our common stock in the United Kingdom.
Listing
We have applied to list our common stock on the Nasdaq National Market under
the symbol "KERX" and on the Alternative Investment Market of the London Stock
Exchange under the symbol "KRX." The Nasdaq shares may be exchanged for AIM
shares, and vice versa, through the applicable procedures of the relevant
clearing agency.
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SUMMARY OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Objects of the Company.
Our certificate of incorporation provides that we are permitted to engage
in any lawful act or activity for which corporations may be organized under
the Delaware General Corporation Law.
Variation of Capital.
No change in the aggregate number of authorized shares of a class, increase
or decrease in par value of shares of such class, nor any change in the
powers, preferences or special rights of such class so as to affect them
adversely, may be effected unless a majority of the outstanding shares of such
class have voted in favor.
Reduction of Capital.
Our certificate of incorporation and bylaws contain no provisions relating
to reduction of capital.
Issue of Shares.
Our bylaws permit our board to make such rules and regulations as it deems
expedient, not inconsistent with our bylaws, concerning the issuance of
certificates for shares of our stock. Under Delaware law, our board may issue
shares of our capital stock in exchange for such consideration as it deems
appropriate, provided that such consideration shall not be less than the par
value of the shares issued.
Transfer of Shares.
Shares of our common stock are transferable except to the extent such
transfer violates a restriction on transfer. No restriction on transfer of
shares that are owned by any person or group of persons may be binding on the
holders of shares issued prior to the adoption of the restriction unless the
holders of the shares are parties to an agreement providing for the
restriction or voted in favor of the restriction. Our board may make such
rules and regulations as it deems expedient concerning the issue, transfer and
registration of certificates for shares of our capital stock.
Dividends.
Such dividends as are declared and paid, in cash, in property or in shares
of capital stock, pursuant to a resolution of our board at any regular or
special meeting may be paid out of surplus or, if there is no surplus, out of
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. No dividends may be declared or paid out of such net
profits for so long as our capital is diminished to an amount less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets. The directors
have absolute discretion to set aside out of any funds available for dividends
such sums as they deem proper as a reserve to meet contingencies, or to
equalize dividends, or to repair or maintain any of our property, or for any
proper purpose. Our board may also abolish such reserve.
Unclaimed Dividends.
Delaware law provides that dividends declared with respect to shares of
stock of a Delaware corporation that remain unclaimed for a period of five
years or more devolve to the State of Delaware if at the end of such five-year
period the issuer does not know the location of the owner.
Stockholder Meetings.
Annual meetings of our stockholders may be held at such time, date and
place as our board of directors determines by resolution. Special meetings of
our stockholders may be called at any time by our board of directors. Notice
of every meeting of our stockholders will be given no more than 60 and no less
than 10 days before the meeting. Prior notice is not required for action by
written consent in lieu of a stockholders' meeting. Unless otherwise provided
by law, the holders of shares of our stock representing the majority of the
outstanding voting interests will constitute a quorum.
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Delivery of Stock Certificates.
Each owner of our stock is entitled to have a certificate or certificates in
the form prescribed by our board of directors certifying the number and class
of shares of our stock owned by him.
Borrowing.
Under Delaware law, we have the power to borrow money at such rates of
interest as we may determine and to issue debt instruments.
Interested Transactions.
No contract or transaction between us and one or more of our directors or
any other corporation, partnership, association or other organization in which
one or more of the directors are directors or officers or have a financial
interest shall be void or voidable solely because the director is present at or
participates in the meeting of the board of directors or committee which
authorizes the contract or transaction, or solely because his or their votes
are counted for such purpose if:
. the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the board of
directors, and the board of directors in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors are
less than a quorum;
. the material facts as to his or their relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the disinterested
stockholders; or
. the contract or transaction is fair as to our company as of the time it
is authorized, approved or ratified, by the board of directors.
Interested directors may be counted for the purpose of determining the
presence of a quorum at a meeting of the board of directors or of a
committee which authorizes the contract or transaction.
Amendments.
Our certificate of incorporation can be amended by a majority vote of our
stockholders, except for certain matters for which Delaware law requires
supermajority approval. Our bylaws can be amended by a majority vote of our
board of directors, except for amendments providing for a staggered board,
which require shareholder approval.
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OUR AUTHORIZED AND ISSUED CAPITAL
History of Authorized and Issued Capital
On October 26, 1998, we issued 4,600,000 shares of common stock at $.001 per
share.
On November 17, 1999, in connection with the KinAce license agreement, we
issued 537,025 shares of our common stock to CMCC. On November 19, 1999, in
connection with our entry into a consulting agreement with Professor Shmuel
Ben-Sasson, we issued 268,512 shares of our common stock to him.
On November 17, 1999, the directors designated 170,000 shares of our
preferred stock as Series A convertible preferred stock, par value $.001 each.
In November and December 1999, a total of 79,465 shares of our Series A
convertible preferred stock was issued for $100 per share.
In January 2000, a total of 39,180 shares of our Series A convertible
preferred stock was issued for $100 per share.
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TAX CONSIDERATIONS
United States
The following is a summary of the material US federal income tax
consequences relevant to the purchase, ownership and disposition of our common
stock. The following summary is not binding on the US Internal Revenue Service,
or IRS, and the IRS could take an opposing view with respect to the tax
consequences described below.
This summary is based on the current provisions of the Internal Revenue Code
of 1986, as amended, Treasury regulations and judicial and administrative
authority, all of which are subject to change, possibly on a retroactive basis.
This summary applies only to persons who hold common stock as capital assets,
within the meaning of section 1221 of the Internal Revenue Code. This summary
does not discuss the tax consequences to special classes of investors,
including:
. brokers or dealers in securities or currencies;
. financial institutions;
. tax-exempt entities;
. life insurance companies;
. persons holding common stock as a part of a hedging, short sale,
conversion or straddle transaction;
. persons who are US Holders (as defined below) whose functional currency
is not the US dollar;
. persons who hold common stock through partnerships or other pass-through
entities; or
. except as specifically noted, foreign holders and certain US
expatriates.
Other than UK tax consequences, which are discussed below, state, local and
foreign tax consequences of ownership of our common stock are not summarized.
We have not requested, and do not intend to request, any rulings from the
IRS concerning the federal income tax consequences of an investment in our
common stock. Prospective US Holders are advised to consult with their tax
advisors regarding the consequences of acquiring, holding or disposing of our
common stock in light of current tax laws, their particular investment
circumstances, and the application of state, local and foreign tax laws.
References in the summary to a "US Holder" mean a beneficial owner of our
common stock that is:
. a citizen or resident of the US for US federal income tax purposes;
. a corporation created or organized in the US or under the laws of the US
or of any political subdivision thereof;
. an estate whose income is includable in gross income for US federal
income tax purposes regardless of its source; or
. a trust if a court within the US is able to exercise primary supervision
of the administration of the trust and one or more US persons have the
authority to control all substantial decisions of the trust or a trust
that has a valid election in effect under applicable US Treasury
regulations to be treated as a US person.
References in the summary to a "Non-US Holder" mean a beneficial owner of
our common stock that is not a US Holder.
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US Holders
Taxation of Dividends
A cash distribution on our common stock will be treated as a dividend to the
extent of our current or accumulated earnings and profits allocable to the
distribution as determined under US federal income tax principles. The amount
of our earnings and profits at any time will depend upon our future actions and
financial performance. If the amount of the distribution exceeds current and
accumulated earnings and profits allocable to the distribution, the
distribution will be treated as a non-taxable return of capital and will be
applied against and reduce the US Holder's adjusted tax basis in our common
stock, but not below zero. The reduction in tax basis will increase the amount
of any gain, or reduce the amount of any loss, that the US Holder would
otherwise realize on the sale or other taxable disposition of our common stock.
If the distribution exceeds both our current and accumulated earnings and
profits allocable to the distribution and the US Holder's adjusted tax basis in
our common stock, the excess will be treated as capital gain and will be either
long-term or short-term capital gain, depending on the US Holder's holding
period for our common stock.
Corporate investors in our common stock generally should be eligible for the
70% dividends-received deduction with respect to the portion of any
distribution on our common stock taxable as a dividend. However, corporate
investors should consider certain provisions that may limit the availability of
the dividends-received deduction, including:
. the 46-day holding period required by section 246(c) of the Internal
Revenue Code,
. the rules in section 246A of the Internal Revenue Code that reduce the
dividends-received deduction for dividends on certain debt-financed
stock, and
. the rules in section 1059 of the Internal Revenue Code that reduce the
basis of stock in respect of certain extraordinary dividends.
Corporate investors should also consider the effect of the dividends-
received deduction on the determination of alternative minimum tax liability.
Taxation of Capital Gains
If a US Holder sells or disposes of our common stock in a taxable
transaction, the US Holder will recognize capital gain or loss equal to the
difference between the amount of cash and the fair market value of property
received and the US Holder's adjusted tax basis in the common stock disposed.
The gain or loss will be long-term capital gain or loss if the US Holder's
holding period for the common stock exceeds one year. For corporate taxpayers,
long-term capital gains are taxed at the same rate as ordinary income. For
individual taxpayers, net capital gains -- the excess of the taxpayer's net
long-term capital gains over his or her net short-term capital losses -- are
subject to a maximum tax rate of 20%.
Non-US Holders
Taxation of Dividends
Cash distributions received in respect of our common stock by a person that
is a Non-US Holder, to the extent considered dividends for US federal income
tax purposes, generally will be subject to withholding of US federal income tax
at a 30% rate or at a lower rate specified by an applicable income tax treaty,
unless the dividend is effectively connected with the Non-US Holder's conduct
of a trade or business within the US or, where a tax treaty applies, is
attributable to a US permanent establishment maintained by the Non-US Holder.
The US withholding tax rate on dividends paid by us to an individual who is a
tax resident of the UK will be 15%. The US withholding tax rate on dividends
paid by us to a UK corporation that owns 10% or more of our voting stock will
be 5%.
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If the dividend is effectively connected with the Non-US Holder's conduct of
a trade or business within the United States or, where a tax treaty applies, is
attributable to the Non-US Holder's US permanent establishment, the dividend
will be subject to US federal income tax on a net income basis at applicable
graduated individual or corporate rates and will be exempt from the withholding
tax. In addition, such dividends may, under some circumstances, be subject to
an additional "branch profits tax" at a 30% rate or at a lower rate specified
by an applicable income tax treaty.
For purposes of obtaining a reduced rate of withholding under an income tax
treaty, the Non-US Holder will be required to provide information concerning
the Non-US Holder's country of residence and entitlement to tax treaty benefits
on an appropriate form, currently IRS Form 1001 or Form W-8BEN. However, where
a Non-US Holder is required to file a form after December 31, 2000 to obtain a
reduced rate of withholding under an income tax treaty, whether by reason of
the expiration of a form filed earlier or otherwise, such Non-US Holder will be
required to file IRS Form W-8BEN and may be required to provide a taxpayer
identification number thereon. If the Non-US Holder claims exemption from
withholding with respect to dividends effectively connected with the Non-US
Holder's conduct of a business within the US, the Non-US Holder must provide
appropriate certification, currently IRS Form 4224 or Form W-8ECI, to us or our
paying agent. If the Non-US Holder is eligible for a reduced rate of US federal
withholding tax under an income tax treaty, the Non-US Holder may obtain a
refund of any excess amounts withheld by timely filing an appropriate claim for
refund.
If a distribution exceeds our current and accumulated earnings and profits
allocable to the distribution, it will be treated first as a return of the Non-
US Holder's tax basis in our common stock to the extent of the Non-US Holder's
adjusted tax basis in our common stock and then as gain from the sale of a
capital asset, which would be taxable as described below. Any withholding tax
on distributions in excess of our current and accumulated earnings and profits
will be refundable to the Non-US Holder upon the timely filing of an
appropriate claim for refund with the IRS.
Under currently applicable Treasury regulations, dividends paid to an
address outside the US are presumed to be paid to a resident of that country
unless the payor has knowledge to the contrary, for purposes of the withholding
discussed above, and, under the current interpretation of these Treasury
regulations, for purposes of determining the applicability of a tax treaty
rate. Under Treasury regulations currently scheduled to be effective with
respect to dividends paid after December 31, 2000, a Non-US Holder of our
common stock that wishes to claim the benefit of an applicable treaty rate, and
to avoid backup withholding as discussed below, will be required to satisfy
applicable certification and other requirements. However, under either set of
regulations, some payments to foreign partnerships and other fiscally
transparent entities may not be eligible for a reduced rate of withholding tax
under an applicable income tax treaty.
Taxation of Capital Gains
Generally, Non-US Holders will not be subject to US federal income tax on
any gain recognized upon the sale or other disposition of our common stock.
However, a Non-US Holder will be subject to federal income tax on the gain if:
(1) the gain is effectively connected with the Non-US Holder's US trade or
business or, if a tax treaty applies, attributable to the Non-US Holder's
US permanent establishment;
(2) the Non-US Holder is an individual who is a former citizen of the US
who lost US citizenship within the preceding ten-year period, or a former
long-term resident of the US who
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relinquished US residency on or after February 6, 1995, and the loss of
citizenship or permanent residency had as one of its principal purposes the
avoidance of US tax; or
(3) the Non-US Holder is a non-resident alien individual, the Non-US Holder
is present in the US for 183 or more days in the taxable year of
disposition and either (a) the Non-US Holder has a "tax home" in the US for
US federal income tax purposes or (b) the gain is attributable to an office
or other fixed place of business that the Non-US Holder maintains in the
US.
The Non-US Holder will also be subject to US federal income tax on any gain
from the sale of our common stock if we are or have been a "US real property
holding corporation" within the meaning of section 897(c)(2) of the Internal
Revenue Code at any time the Non-US Holder held the stock, or within the five-
year period preceding the sale of the stock if the Non-US Holder holds the
stock for more than five years. We believe that:
. we are not now a "US real property holding corporation";
. we have not been a "US real property holding corporation" at any time
since we were formed; and
. based on the assumption that the fair market value of the US real
property interests of each company in our group will continue to be less
than 50 percent of the sum of the fair market value of our real property
interests plus the fair market value of any other assets in the US that
are used in a business, we should not be a "US real property holding
corporation" in the future.
If we were a "US real property holding corporation" or were to become a "US
real property holding corporation," the Non-US Holder would be subject to US
federal income tax on any gain from sale of common stock if the Non-US Holder
beneficially owned, or had owned at any time during the specified five-year
period, more than 5% of the total fair market value of the class of stock the
Non-US Holder sold.
Estate Tax
If a Non-US Holder is an individual Non-US Holder, common stock the Non-US
Holder holds or is treated as owning at the time of death will be included in
the Non-US Holder's US gross estate for US federal estate tax purposes and may
be subject to US federal estate tax, unless an applicable estate tax treaty
provides otherwise. The Estate and Gift Tax Treaty between the UK and the US
generally exempts from the US federal estate tax common stock held by an
individual who at the time of his death is domiciled in the UK.
Information Reporting and Backup Withholding
We generally will be required to report to certain US and Non-US Holders and
to the IRS the amount of any dividends paid to the US and Non-US Holder in each
calendar year and the amounts of tax withheld, if any, with respect to the
dividend payments. Copies of the information returns reporting the dividends
and withholding may also be made available to the tax authorities in the
country in which a Non-US Holder resides under the provisions of an applicable
income tax treaty.
Each holder of common stock, other than an exempt holder such as:
. a corporation, tax-exempt organization, or qualified pension or profit
sharing trust,
. an individual retirement account, or
. a non-resident alien individual who provides certification as to his or
her status as a nonresident,
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will be required to provide, under penalties of perjury, a certification
setting forth:
. the holder's name, address and correct federal taxpayer identification
number, and
. a statement that the holder is not subject to backup withholding.
If a non-exempt US or Non-US Holder fails to provide the required
certification, we will be required to withhold 31% of the amount otherwise
payable to the US or Non-US Holder, and remit the withheld amount to the IRS as
a credit against the US or Non-US Holder's federal income tax liability.
However, no backup withholding will be required with respect to any payment
subject to the 30% US withholding tax (or lower treaty rate) discussed above.
US or Non-US Holders should consult their own tax advisors regarding
qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
The IRS has finalized Treasury regulations regarding the backup withholding
and information reporting rules which are effective for payments made after
December 31, 2000, subject to certain transition rules. In general, these
regulations unify certification procedures and forms and clarify and modify
reliance standards. Among other provisions, these regulations also include the
new provisions discussed below regarding sales of stock outside the US by or
for a broker. A Non-US Holder should consult its own tax advisor regarding the
application of the new regulations.
Payment of the proceeds of a sale of our common stock by or through a US
office of a broker will be subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that
it is a Non-US Holder or otherwise establishes exemption. In general, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of common stock by or through a foreign office of a broker.
If, however, the broker is, for US federal income tax purposes:
. a US person,
. a "controlled foreign corporation,"
. a foreign person, 50% or more of whose gross income is effectively
connected with a US trade or business for a specified three-year period,
or
. for taxable years beginning after December 31, 2000, a foreign
partnership in which one or more US persons, in the aggregate, own more
than 50% of the income or capital interests in the partnership or if the
partnership is engaged in a trade or business in the US,
payment of the proceeds will be subject to information reporting, but not
backup withholding, unless:
. the broker has documentary evidence in its records that the beneficial
owner is a Non-US Holder and certain other conditions are met, or
. the beneficial owner otherwise establishes an exemption.
For payments after December 31, 2000, certification will be required in the
case of the disposition of shares of common stock held in an offshore account
if the disposition is made through a foreign broker described in the
immediately preceding paragraph.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against the US or Non-US Holder's US federal income tax
liability, provided the required information is furnished to the IRS.
The foregoing discussion is for general information and is not tax advice.
Accordingly, each US or Non-US Holder of our common stock should consult its
tax advisor as to the particular tax
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consequences to it of our common stock, including the applicability and effect
of any state, local or foreign income tax laws, and any recent or prospective
changes in applicable tax laws.
United Kingdom
The comments below are of a general nature and are based on current UK law
and Inland Revenue practice at the date of this prospectus and the provisions
of the double taxation treaty between the UK and the US. The summary only
covers the principal UK tax consequences of holding common stock for holders of
common stock (1) who are resident or ordinarily resident in the UK for tax
purposes; (2) who are not resident in the US; and (3) who do not have a
permanent establishment or fixed base in the US with which the holding of
common stock is connected ("UK Holders"). In addition, the summary (1) only
addresses the tax consequences for UK Holders who hold our common stock as an
investment; (2) assumes that the UK Holder is not a company that either
directly or indirectly controls 10% or more of the voting power of our company;
and (3) assumes that the UK Holder does not hold the common stock in trust.
Taxation of Dividends
A dividend paid by us may, depending on the circumstances of the person
entitled to it, be subject to US tax. Under the current double tax treaty
between the UK and the US, the amount of any tax withheld at source on
dividends paid by us to a UK Holder will be limited to 15% in normal
circumstances where the UK Holder is subject to UK tax on the dividend
concerned.
Where a UK Holder is entitled to a dividend from us, the dividend may,
depending upon the UK Holder's particular circumstances, be subject to UK
income tax or corporation tax. A credit for US withholding tax should be given
against any UK tax liability in respect of the dividend.
Where a UK paying agent makes a payment in respect of a dividend payable in
respect of our common stock, that person will be required to withhold on
account of UK income tax at the lower rate (currently 10%), subject to any
setoff of foreign withholding tax. Assuming a 15% US withholding, no additional
UK withholding will therefore be due. The payment may not, in any case, be a
relevant payment, and therefore not subject to UK withholding tax, in a number
of circumstances including:
. the common stock is held in a "recognized clearing system" (Euroclear
and Cedel have each been designated as a "recognized clearing system" as
such) and payments are made by the UK paying agent directly into this
system or to its depository;
. the beneficial owner of the common stock and the related dividends is
not resident in the UK or is specified by regulations;
. the dividends are payable to trustees of certain qualifying
discretionary and accumulation trusts where the trustees are not
resident in the UK and none of the beneficiaries of the trust are
resident in the UK;
. the person beneficially entitled to the dividends is eligible under
specified provisions for relief from UK tax in respect of the dividends;
or
. the dividends fall to be treated as the income of, or of the government
of, a sovereign power or of certain international organizations.
In each case the exemption is subject to any requirements under the paying
agent scheme which have to be satisfied, such as a requirement that a
declaration in the form required by law be given, on the occasion of each
payment or otherwise, as the case may be, to the person by whom, through whom
or to whom the payment is made.
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Where a UK person acts as a collecting agent, i.e., in the course of his
trade or profession:
. acts as a custodian of the common stock and receives dividends, or
directs that dividends be paid to another person, or consents to such
payment;
. collects or secures payment of, or receives dividends on, the common
stock for another person (except by means of clearing a cheque or
arranging for the clearing of a cheque); or
. otherwise acts for another person in arranging to collect or secure
payment of dividends on the common stock;
that person will be required to withhold on account of UK income tax at the
lower rate (currently 10%) subject to any setoff of foreign withholding tax.
Assuming a 15% US withholding, no additional UK withholding will therefore be
due. The payment may not in any case be a relevant receipt (and therefore not
subject to UK withholding tax) if:
. the common stock is held in a "recognized clearing system" (Euroclear
and Cedel amongst others have been designated as such) and payments are
made by the UK collecting agent into this system or to its depository;
. the beneficial owner of the common stock and the related dividends is
not resident in the UK or is specified by regulations;
. the dividends are payable to trustees of certain qualifying
discretionary and accumulation trusts where the trustees are not
resident in the UK and none of the beneficiaries of the trust are
resident in the UK;
. the person beneficially entitled to the dividends is eligible under
specified provisions for relief from UK tax in respect of the dividends;
or
. the dividends fall to be treated as the income of, or of the government
of, a sovereign power or of certain international organizations.
In each case the exemption is subject to any requirements under the
collecting agent scheme which have to be satisfied such as a requirement that a
declaration in the form required by law be given, on the occasion of each
payment or otherwise, as the case may be, to the person by whom, through whom
or to whom the payment is made.
Finance Bill 2000
The Finance Bill published on April 7, 2000 includes draft provisions
whereby the obligations on paying and collecting agents to withhold tax as
described above would be abolished in respect of payments and receipts on or
after 1 April 2001 and instead the Inland Revenue would be given powers to
obtain information from such paying and collecting agents.
The Finance Bill also contains various provisions which are designed to
improve the arrangements whereby the Inland Revenue exchanges information with
other countries.
The Finance Bill is due to be enacted in July 2000 and the draft provisions
referred to above could change prior to that date.
Taxation of Capital Gains
A gain arising to a UK Holder will not normally be subject to tax in the US.
The disposal or deemed disposal of our common stock by a UK Holder will
generally give rise to a chargeable gain or an allowable loss for the purposes
of UK taxation of capital gains. In the case
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of a UK Holder which is a company, an indexation allowance can be used to
reduce or eliminate the gain but not to create or increase an allowable loss.
If the UK Holder is an individual, in certain circumstances a tapering relief
may be available to reduce a capital gain. A UK Holder who is an individual is
entitled to an annual exemption from tax on capital gains, currently up to
(Pounds)7,200.
A UK Holder subject to capital gains tax in the US on a disposal or deemed
disposal of common stock should be entitled to a credit for such US taxation
against his or her liability to UK tax.
Stamp Duty and Stamp Duty Reserve Tax
No SDRT will be payable on an agreement to transfer shares of common stock
unless they are registered in a register kept in the UK on behalf of our
company (a "UK Register"). No liability to UK stamp duty will arise on a
transfer of common stock provided that the instrument of transfer is executed
outside the UK, unless it relates to something done or to be done in the UK.
UK stamp duty is generally paid at the rate of 0.5% of the price paid with
the duty rounded up to the next (Pounds)5. SDRT is generally paid at the rate
of 0.5% of the price paid.
Any instrument effecting or evidencing the transfer of common stock and
executed in the UK will not be admissible as evidence in UK civil proceedings
unless duly stamped. Any instrument of transfer executed outside the UK will
also be inadmissible in UK civil proceedings unless duly stamped at the rate in
force at the date of the transfer instrument, if it relates to something done
or to be done in the UK.
Inheritance Tax
UK inheritance tax may be chargeable on the death of, or in certain
circumstances on a gift of common stock by, the owner of common stock where the
owner is an individual who is either (a) domiciled or is deemed to be domiciled
in the UK, or (b) not domiciled in the UK and the common stock is primarily
dealt with on a UK Register.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock. Sales of substantial amounts of common stock in the public market, or
the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair our future ability to raise capital
through the sale of equity securities.
Upon the closing of this offering, there will be an aggregate of
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
the outstanding shares, the shares being sold in this offering will be
freely tradable, except that any shares held by our affiliates may only be sold
in compliance with the limitations described below. Those shares of
common stock held by our affiliates will be deemed "restricted securities" that
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 under the Securities Act.
These rules are summarized below.
Subject to the lock-up agreements described elsewhere in this prospectus and
the provisions of Rules 144 and 701, shares in addition to those being offered
by this prospectus will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<C> <S>
Immediately after the date of this prospectus
Upon the filing of a registration statement
to register shares of common stock issuable
upon the exercise of options granted under
our 1999 Share Option Plan and not otherwise
subject to lock-up agreements
180 days after the date of this prospectus
(subject, in some cases, to limitations in
volume and manner of sale)
At various times 180 days after the date of
this prospectus
One year after the date of this prospectus
</TABLE>
In general, under Rule 144, as currently in effect, a person who owns shares
that were acquired from the issuer or an affiliate of the issuer at least one
year prior to the proposed sale is entitled to sell, within any three-month
period commencing 90 days after the date of the prospectus, a number of shares
that does not exceed the greater part of 1% of the then outstanding shares of
common stock (approximately shares immediately after this offering,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants) or the average weekly trading volume in the
common stock during the four calendar weeks preceding the date on which notice
of that sale is filed, subject to certain additional public information and
notification requirements. In addition, if the shares were acquired from the
issuer or an affiliate of the issuer at least two years prior to the proposed
sale, a person who has not been an affiliate of the issuer during the preceding
three months is entitled to sell those shares under Rule 144(k) without regard
to the requirements described above.
In addition, any of our employees, directors, consultants or officers who
purchased shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701 of the Securities Act,
which permits non-affiliates to sell their Rule 701 shares without
63
<PAGE>
having to comply with the public information, holding period, volume limitation
or notice provisions of Rule 144 and permits affiliates to sell their Rule 701
shares without having to comply with the holding period restrictions of Rule
144, in each case commencing 90 days after the date of this prospectus.
As of the date of this prospectus, options to purchase a total of 2,924,688
shares of common stock are outstanding, of which options to purchase 2,182,688
shares are currently exercisable and 529,948 warrants are outstanding.
Subsequent to the closing of this offering, we intend to file a registration
statement to register 2,820,000 shares of common stock reserved for issuance
under our option plan. That registration statement will automatically become
effective upon filing. Accordingly, shares issued upon the exercise of stock
options granted under our option plan will be eligible for resale in the public
market from time to time, subject to vesting restrictions and, in the case of
some of the options, to lock-up agreements. See "Underwriting." At the closing
of this offering, 279,948 shares of common stock will be issuable upon the
exercise of outstanding warrants.
Beginning 12 months after this offering, some holders of our common stock
will have rights to have their shares registered for resale under the
Securities Act. See "Description of Our Corporate Structure and Capital Stock--
Registration Rights of Stockholders."
64
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement, dated 2000, we have agreed to sell to the underwriters
named below, for whom Roth Capital Partners, Inc. and WestLB Panmure Limited
are acting as the Global Coordinators, the following respective numbers of
shares:
<TABLE>
<CAPTION>
U.S. Underwriters Number of Shares
----------------- ----------------
<S> <C>
Roth Capital Partners, Inc..................................
...............................................
Subtotal..................................................
<CAPTION>
International Manager
---------------------
<S> <C>
WestLB Panmure Limited......................................
------
Total...................................................
======
</TABLE>
Roth Capital Partners, Inc. is acting as the US lead manager for the US
underwriters and WestLB Panmure Limited is acting as international lead manager
for the international underwriters.
All sales in the US will be made through US registered broker-dealers. The
underwriting agreement provides that the underwriters are obligated to purchase
all of the common stock in this offering other than the common stock covered by
the over-allotment option described below. The underwriting agreement also
provides that, if an underwriter defaults, the purchase commitments of non-
defaulting underwriters may be increased or this offering of common stock may
be terminated.
The underwriters propose to offer the common stock initially at the public
offering price listed on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters and
selling group members may allow discounts of $ per share on sales to other
broker-dealers. After this offering, the public offering price and concessions
and discounts to dealers may be changed by the Global Coordinators.
The following table summarizes the compensation and estimated expenses we
will pay:
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
Pursuant to the agreement among the US and international underwriters, each
US underwriter has agreed that, as part of its distribution of the common stock
and subject to specified exceptions, it has not offered or sold, and will not
offer or sell, directly or indirectly, any common stock or distribute any
prospectus relating to the common stock to any person outside the United States
or Canada or to any other dealer who does not so agree. The international lead
manager has agreed that, as part of its distribution of our common stock and
subject to specified exceptions, it has not offered or sold, and will not offer
or sell, directly or indirectly, any common stock or distribute any prospectus
relating to the common stock in the United States or Canada or to any other
dealer who does not so agree. The foregoing limitations do not apply to
stabilization transactions or to transactions between the US and international
underwriters. As used herein, "United States" or "US" means the United States
of America, including each state and the District of Columbia, its territories,
possessions and other areas subject to its jurisdiction. "Canada" means Canada,
its provinces, territories, possessions and
65
<PAGE>
other areas subject to its jurisdiction, and an offer or sale shall be in the
United States or Canada if it is made to (1) any individual resident in the
United States or Canada or (2) any corporation, partnership, pension, profit-
sharing or other trust or entity, including any such entity acting as an
investment adviser with discretionary authority, whose office most directly
involved with the purchase is located in the United States or Canada.
We have agreed not to sell, issue, transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a period of 90 days
after the date of this prospectus without the prior written consent of the
Global Coordinators. This limitation does not apply to the issuance of shares
pursuant to:
. the conversion or exchange of convertible or exchangeable securities
existing on the date of this prospectus;
. the exercise of warrants, options or subscription rights existing on the
date of this prospectus; or
. grants of employee stock options under the terms of a plan in effect on
the date of this prospectus and the exercise of these options.
In connection with the AIM admission rules, it is anticipated that the
following persons will agree not to dispose of any interest in their common
stock for a period of one year from the date of our admission to AIM:
<TABLE>
<S> <C>
Lindsay A. Rosenwald Morris Laster
Paramount Capital, Inc. Ira Weinstein
Paramount Capital Investments LLC Bob Trachtenberg
Peter M. Kash Michael Spero
Mark C. Rogers Benjamin W. Corn
Shmuel Ben-Sasson Wayne Rothbaum
Mark A. Rachesky S. Leslie Misrock
</TABLE>
The restrictions on disposal do not apply in the event of an intervening
court order or a takeover offer for us becoming or being declared
unconditional.
In addition to those persons who have agreed to the one-year lock-up, it is
anticipated that our beneficial owners who hold in excess of shares and
who have not otherwise agreed to the one-year lock-up as described above, and
some of our employees will agree, subject to specified exceptions, not to offer
to sell, contract to sell, or otherwise dispose of, loan, pledge or grant any
rights with respect to any common stock or any options or warrants to purchase
any common stock, or any securities convertible into or exchangeable for common
stock owned as of the date of this prospectus, without the prior written
consent of the Global Coordinators. This restriction terminates after the close
of trading of our common stock on the 180th day following the day the common
stock commences trading on the Nasdaq National Market. However, the Global
Coordinators may, in their sole discretion and at any time or from time to time
before the termination of the 180-day period, without notice, release all or
any portion of the securities subject to lock-up agreements. There are no
existing agreements between the Global Coordinators and any of our stockholders
who have executed a lock-up agreement providing consent to the sale of shares
prior to the expiration of the lock-up period.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act as described in the underwriting agreement, or contribute to
payments which the underwriters may be required to make in respect thereof.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price for our common stock has been
determined by negotiation between us and the
66
<PAGE>
underwriters. Among the factors considered in determining the initial public
offering price were prevailing market and economic conditions, our financial
conditions and results of operations, market valuations of other companies
engaged in activities similar to ours, estimates of our business potential and
prospects, the present state of our business operations, our management and
other factors deemed relevant. We cannot assure you that a regular trading
market for our common stock can be sustained. The price at which our common
stock will sell in the public markets after this offering may be lower than the
price at which our common stock is sold by the underwriters in this offering.
Roth Capital Partners, Inc. may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act of 1934. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of shares to be higher than it would otherwise be in the absence of such
transactions. Under the stabilization rules in the UK, WestLB Panmure Limited
may engage in over-allotment and stabilizing transactions. These transactions
may be effected on the Nasdaq National Market, on the Alternative Investment
Market or otherwise and, if commenced, may be discontinued at any time. Roth
Capital Partners, Inc. and WestLB Panmure Limited do not intend to disclose the
extent of any stabilizing transactions or the amount of any long or short
positions.
67
<PAGE>
LEGAL MATTERS
The validity of common stock offered by this prospectus will be passed upon
for us by Morgan, Lewis & Bockius LLP, New York, New York and for the
underwriters by Baer Marks & Upham LLP, New York, New York.
EXPERTS
Our balance sheets as of December 31, 1997, 1998 and 1999, and the
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1999, have been included in
this registration statement in reliance on the report of Somekh Chaikin, a
member firm of KPMG International, independent accountants, given on the
authority of that firm as experts in accounting and auditing. An independent
expert's report has been prepared by PA Strategy Partners Ltd., independent
technology experts.
WHERE YOU CAN FIND MORE INFORMATION
Securities and Exchange Commission Requirements
We have filed with the SEC a registration statement, of which this
prospectus forms a part, on Form S-1 with respect to the common stock being
offered by this prospectus. This prospectus does not contain all of the
information included in the registration statement and its exhibits and
schedules. For further information with respect to our company and the shares
of common stock we are offering, reference is made to the registration
statement, including its exhibits and schedules. Statements contained in this
prospectus as to the contents of any contract or other document we refer to are
not necessarily complete and, where such contract is an exhibit to the
registration statement, each such statement is qualified in all respects by the
provisions of such exhibit, to which such reference is made. As a result of
this offering, we will become subject to the information and reporting
requirements of the Securities Exchange Act of 1934, and we will file periodic
reports, proxy statements and other information with the SEC. You may read and
copy any document we file with the SEC at the SEC's Public Reference Room
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
Information on the operation of the Public Reference Room is available by
calling 1-800-SEC-0330. You may also read and copy any document we file with
the SEC at the SEC's Regional Offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and 7 World Trade Center, 13th Floor, New York,
New York 10048. Upon approval of the common stock for quotation on the Nasdaq
National Market, such reports, proxy and information statements and other
information may also be inspected at the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The SEC maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's website is
http://www.sec.gov.
68
<PAGE>
ADDITIONAL INFORMATION FOR THE ALTERNATIVE INVESTMENT MARKET
Copies of the following documents will be available for inspection at the
offices of Morgan, Lewis & Bockius, 2 Gresham Street, London EC2V 7PE for 14
days from the day the SEC declares this registration statement effective during
usual business hours on any weekday (Saturdays and public holidays excepted):
(i) our certificate of incorporation and bylaws;
(ii) the report by P.A. Strategy Partners Ltd. set out on pages A-1 to
A-14 of this prospectus;
(iii) the report by Somekh Chaikin, a member firm of KPMG International,
set out on pages F-1 to F-21 of this prospectus;
(iv) the contracts referred to in "Management--Employment Agreements" on
page 41 of the prospectus;
(v) the rules of our 1999 Share Option Plan;
(vi) our consolidated audited accounts for each of the years ended
December 31, 1997, 1998 and 1999;
(vii) letters of consent from PA Strategy Partners Ltd. and Somekh Chaikin
referred to below; and
(viii) copies of each of the sources referred to in this prospectus.
1. We expect that dealings in the offered shares on the Alternative
Investment Market will commence at 2:30 p.m. (London time) on , 2000.
2. Each of Morgan, Lewis & Bockius LLP and Baer Marks & Upham LLP has given
and has not withdrawn its written consent to the inclusion of its name in the
form and context in which they appear.
3. PA Strategy Partners Ltd. has given and has not withdrawn its written
consent to the issue of this prospectus with its name included in it and the
references thereto in the form and context in which they appear and has
authorized the inclusion of their report set out on pages A-1 to A-14 of this
prospectus for the purposes of Regulation 13(1)(g) of the Public Offers of
Securities Regulations 1995.
4. Somekh Chaikin, a member firm of KPMG International, Certified Public
Accountants, has given and has not withdrawn its written consent to the
inclusion in this prospectus of their report set out on pages F-1 to F-21 of
this prospectus and has not become aware since the date of such report of any
matter affecting the validity of the report and accepts responsibility for such
report.
5. Somekh Chaikin, a member firm of KPMG International, audited our
consolidated balance sheets and the balance sheets of Partec Ltd., our
predecessor company, and its subsidiaries and our subsidiary as of December 31,
1997, 1998 and 1999 and the related consolidated statements of operations,
statements of changes in stockholders' equity and consolidated statements of
cash flows for each of the three financial years ended December 31, 1999.
6. Shares of our common stock will be issued in registered form. Subject to
our certificate of incorporation, our directors and executive officers may
determine that any class of shares may be held in uncertificated form and title
to such shares may be transferred by means of a relevant system, as defined in
the Uncertified Securities Regulations 1995, or that shares of any class should
cease to be held and transferred as aforesaid. No temporary documents of title
will be issued.
69
<PAGE>
7. In our opinion, taking into consideration the net proceeds of the
offering receivable by us, the working capital available to us is sufficient
for our present requirements, that is, for at least 12 months from the date of
our expected admission to listing on the Nasdaq National Market and the
Alternative Investment Market.
8. In the opinion of our directors and officers, the minimum amount which
must be raised pursuant to the offering in order to provide for working capital
and for expenses and commissions payable by the Company pursuant to the
offering is $ .
9. The following persons (excluding professional advisors otherwise
disclosed in this document and trade suppliers) have received, directly or
indirectly, from us in the past twelve months, or are entitled to receive
pursuant to contractual agreements not otherwise disclosed in this document,
fees totaling (Pounds)10,000 or more, or securities or any other benefit with a
value of (Pounds)10,000 or more:
<TABLE>
<CAPTION>
Amount
Name of person Nature of relationship received
--------------------------------- ------------------------------ -----------
<S> <C> <C>
Yigal Arnon & Co. ............... Legal advisor $40,170.78
Dr. Mark Friedman Ltd. .......... Patent attorney $23,773.82
Hadasit Medical Research Services
& Development Company, Ltd. .... KinAce research $25,087.17
Hoyle Consulting................. KRX-101 consulting $104,735.27
Kleinberg Kaplan Wolff & Cohen,
P.C. ........................... Legal advisor $54,320,96
Leumi & Co. Underwriters Ltd..... Private placement underwriters $88,275.00
Pennie & Edmonds LLP............. Patent attorney $83,414.04
Waymack, Inc..................... KRX-101 consulting $26,400.00
</TABLE>
10. The directors will apply for the common stock to be admitted to CREST to
take effect upon admission to the Alternative Investment Market. Accordingly,
it is expected that the common stock will be enabled for settlement in CREST by
means of the cross border link which exists between CREST for UK settlement and
the Depository Trust Company for US settlement, following admission to AIM.
Under the placing, placees who are system members (as defined in the POS
Regulations) may elect to have their common stock allocated to them in
uncertificated form through CREST.
11. Share certificates representing the shares of common stock to be issued
pursuant to the offering are expected to be despatched to applicants by mail at
their risk on admission. Temporary documents of title will not be issued in
connection with the offering.
12. Except as stated in this prospectus, we do not have any significant
investments in progress, nor are there any exceptional facts that have
influenced the our development.
13. Monies received from applicants pursuant to the offering will be held by
the Joint Global Coordinators until the offering becomes unconditional in all
respects. If the offering does not become unconditional in all respects by
, 2000, applications will be returned to applicants at their risk
without interest.
14. Payment for our common stock must be made to the Joint Global
Coordinators by 4:30 p.m. on , 2000. No applications for common stock
will be accepted after that time.
15. The directors do not believe that following this offering there will be
any persons who, directly or indirectly, jointly or severally, exercise or
could exercise control over us.
70
<PAGE>
Directors
At the date of this document no director has had any convictions relating to
criminal proceedings, has been bankrupt or has made or been the subject of any
individual voluntary arrangements.
None of our directors has been a director of any company at the time of, or
within twelve months preceding the date of, its receivership, compulsory
liquidation, creditors' voluntary liquidation administration, company voluntary
arrangements or any composition or arrangements with its creditors generally or
any class of its creditors. None of our directors has been a partner of any
assets of such partnership nor have any of their assets been the subject of
receivership.
Our directors are currently, or have been in the past five years, directors
or partners of the following companies or partnerships, as appropriate:
<TABLE>
<CAPTION>
Name Company or Partnership Whether Position Still Held
---- ---------------------- ---------------------------
<C> <S> <C>
Morris Laster, M.D. Progenitor Inc. No
Peter M. Kash Paramount Capital, Inc. Yes
Paramount Capital Asset
Management, Inc. Yes
S. Leslie Misrock Pennie & Edmonds LLP Yes
Cytogen Corporation Yes
DirectGene Inc. Yes
Molecular Staging, Inc. Yes
OANDA Corporation Yes
Timbrel Systems Inc. Yes
SerOptix Inc. Yes
Quintessential Technologies LLC Yes
Misrock Holdings LP Yes
NetStage Corporation No
Mark H. Rachesky, M.D. Samsonite Corporation Yes
Neose Technologies, Inc. Yes
Culligan Water Technologies, Inc. No
Cadus Pharmaceuticals No
Lindsay A. Rosenwald, M.D. Paramount Capital, Inc. Yes
Paramount Capital Investments LLC Yes
Paramount Capital Asset
Management, Inc. Yes
Neose Technologies, Inc. Yes
Enzymed, Inc. Yes
Nephros, Inc. Yes
Discovery Laboratories, Inc. No
Atlantic Pharmaceuticals, Inc. No
Avigen, Inc. No
Biocryst Pharmaceuticals, Inc. No
Titan Pharmaceuticals, Inc. No
VIMRx Pharmaceuticals, Inc. No
Zenometrix, Inc. No
Interneuron Pharmaceuticals, Inc. No
Sparta Pharmaceuticals, Inc. No
Wayne Rothbaum The Carson Group Yes
Enzon, Inc. Yes
Maxim Pharmaceuticals Yes
</TABLE>
71
<PAGE>
Substantial Stockholders
Our directors are aware of the following interests of persons other than
directors, direct or indirect, as of April 30, 2000, which will, following the
offering, represent three percent or more of the issued share capital of our
company.
<TABLE>
<CAPTION>
Number of Shares of Percentage of
Common Stock Issued Common Stock
Stockholder Following the Offering Following the Offering(1)
- ----------- ---------------------- -------------------------
<S> <C> <C>
Children's Medical Center
Corporation................. 537,025
</TABLE>
- --------
(1) These percentages assume no exercise of the over-allotment option.
As of the date of this prospectus and immediately following the offering,
the interests of each director and their related persons in the share capital
and options and warrants of Keryx are:
<TABLE>
<CAPTION>
Percentage of
Issued Number of
Number of Percentage of Common Stock Options
Shares of Issued Following or Exercise Exercise
Name Common Stock Common Stock this Offering Warrants Price Period
- ---- ------------ ------------- ------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Morris Laster, M.D. ......... -- -- -- 1,014,733 $0.15 25 years
300,000 $0.15 10 years
Peter Kash................... 578,500 6.10% 25,000 $0.15 10 years
50,000 $0.50 10 years
S. Leslie Misrock............ -- -- -- 25,000 $0.15 10 years
15,000 $0.50 10 years
Mark Rachesky, M.D. ......... 85,900(1) 0.90% 40,000 $0.50 10 years
Lindsay A. Rosenwald, M.D. .. 3,878,356(2) 40.90% 42,783(3) $0.01 10 years
77,393(4) $2.91 3 years
Wayne Rothbaum............... -- -- -- 40,000 $0.50 10 years
</TABLE>
- --------
(1) Represents common stock issued upon the conversion of 2,500 shares of
Series A preferred stock.
(2) Includes 213,856 shares of common stock issuable upon the conversion of
6,224 shares of Series A preferred stock.
(3) Includes 9,376 shares of common stock issuable upon the exercise of
warrants held directly and 33,407 shares of common stock issuable upon
the exercise of warrants held by Paramount Capital Investments LLC.
(4) Represents common stock issuable upon the exercise of warrants held by
Paramount Capital, Inc.
72
<PAGE>
INDEX TO FINANCIAL STATEMENTS
KERYX BIOPHARMACEUTICALS, INC.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1997, 1998 and 1999....... F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999..................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1997, 1998 and 1999.................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999..................................................... F-6
Notes to the Consolidated Financial Statements........................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Keryx Biopharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of Keryx
Biopharmaceuticals, Inc. (the "Company") and its subsidiary as of December 31,
1997, 1998 and 1999, and the related consolidated statements of operations,
statements of changes in stockholders' equity and consolidated statements of
cash flows for each of the years in the three-year period ended December 31,
1999, and for the development stage period. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
and its subsidiary at December 31, 1997, 1998 and 1999, and the results of
their operations, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1999, and for the
development stage period, in conformity with generally accepted accounting
principles in the United States.
Somekh Chaikin
Certified Public Accountants (Isr.)
A member firm of KPMG International
Jerusalem, Israel
May 19, 2000
F-2
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
--------- ----------- ------------
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 647,232 $ 127,872 $ 4,126,735
Other receivables...................... 51,038 46,579 85,685
Prepaid expenses....................... 21,876 2,103 166,137
--------- ----------- ------------
Total current assets................. 720,146 176,554 4,378,557
Long-term investments.................... 22,000 44,673 64,047
Fixed assets............................. 83,370 193,643 160,141
Other assets............................. 6,372 205,040 345,471
--------- ----------- ------------
Total assets......................... $ 831,888 $ 619,910 $ 4,948,216
========= =========== ============
<CAPTION>
Liabilities And Stockholders' Equity
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued
liabilities........................... $ 185,238 $ 333,137 $ 252,934
Related party.......................... 500,000 515 141,483
--------- ----------- ------------
Total current liabilities............ 685,238 333,652 394,417
Liability in respect of employee
severance benefits...................... 22,000 81,344 117,736
Long-term loans from related party....... 1,006,362 445,500 --
--------- ----------- ------------
Total liabilities.................... 1,713,600 860,496 512,153
--------- ----------- ------------
Stockholders' equity (deficit):
Series A convertible preferred stock,
$0.001 par value each (liquidation
preference--$100 per share plus all
declared but unpaid dividends)........ -- -- 79
Common stock, $0.001 par value each.... -- -- 806
Additional paid-in capital............. -- -- 7,664,818
Stock options.......................... -- -- 6,013,708
Equity of predecessor company.......... 6 3,180,547 3,180,547
Accumulated deficit.................... (881,718) (3,421,133) (12,423,895)
--------- ----------- ------------
Total stockholders' equity
(deficit)........................... (881,712) (240,586) 4,436,063
--------- ----------- ------------
Total liabilities and stockholders'
equity.............................. $ 831,888 $ 619,910 $ 4,948,216
========= =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Amounts
Accumulated
During the
Development
1997 1998 1999 Stage
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue from management
fees...................... $ 233,335 $ 66,662 $ -- $ 299,997
---------- ----------- ----------- ------------
Expenses:
Research and development
expenses (including
stock compensation
expense of $0, $0 and
$5,425,974 in 1997, 1998
and 1999,
respectively)........... 568,859 1,406,993 6,922,797 8,898,649
General and
administrative expenses
(including stock
compensation expense of
$0, $0 and $587,734 in
1997, 1998 and 1999,
respectively)........... 525,544 1,011,286 1,812,508 3,349,338
---------- ----------- ----------- ------------
Total operating
expenses................ 1,094,403 2,418,279 8,735,305 12,247,987
---------- ----------- ----------- ------------
Operating loss............. (861,068) (2,351,617) (8,735,305) (11,947,990)
Financing expenses......... 10,872 157,351 257,487 425,710
---------- ----------- ----------- ------------
Net loss before taxes on
income.................... (871,940) (2,508,968) (8,992,792) (12,373,700)
Taxes on income............ 9,778 30,447 9,970 50,195
---------- ----------- ----------- ------------
Net loss................... $ (881,718) $(2,539,415) $(9,002,762) $(12,423,895)
========== =========== =========== ============
Basic and diluted net loss
per common share.......... $ (0.16) $ (0.47) $ (1.67) $ (2.30)
Weighted average shares
used in computing basic
and diluted net loss per
common share.............. 5,405,537 5,405,537 5,405,537 5,405,537
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Series A Additional Equity of
Preferred Common Paid-In Stock Predecessor Accumulated
Stock Stock Capital Options Company Deficit Total
--------- ------ ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997.................... $ -- $-- $ -- $ -- $ -- $ -- $ --
Changes during the year:
Issuance of shares...... -- -- -- -- 6 -- 6
Net loss for the year... -- -- -- -- -- (881,718) (881,718)
----- ---- ---------- ---------- ---------- ------------ ------------
Balance at December 31,
1997.................... -- -- -- -- 6 (881,718) (881,712)
Changes during the year:
Issuance of capital
note.................... -- -- -- -- 3,180,541 -- 3,180,541
Net loss for the year... -- -- -- -- -- (2,539,415) (2,539,415)
----- ---- ---------- ---------- ---------- ------------ ------------
Balance at December 31,
1998.................... -- -- -- -- 3,180,547 (3,421,133) (240,586)
Changes during the year:
Conversion of
convertible note of
Partec into stock in
Keryx................... -- -- 2,973,376 -- -- -- 2,973,376
Issuance of shares (net
of issue expenses)...... 79 806 4,691,442 -- -- -- 4,692,327
Stock-based
compensation............ -- -- -- 6,013,708 -- -- 6,013,708
Net loss for the year... -- -- -- -- -- (9,002,762) (9,002,762)
----- ---- ---------- ---------- ---------- ------------ ------------
Balance at December 31,
1999.................... $ 79 $806 $7,664,818 $6,013,708 $3,180,547 $(12,423,895) $4,436,063
===== ==== ========== ========== ========== ============ ============
Amounts accumulated
during the development
stage
Issuance of shares (net
of issue expenses)...... 79 806 4,691,442 -- 6 -- 4,692,333
Equity of predecessor
company................. -- -- -- -- 3,180,541 -- 3,180,541
Conversion of
convertible note of
Partec into stock in
Keryx................... -- -- 2,973,376 -- -- -- 2,973,376
Stock-based
compensation............ -- -- -- 6,013,708 -- -- 6,013,708
Net loss................ -- -- -- -- -- (12,423,895) (12,423,895)
----- ---- ---------- ---------- ---------- ------------ ------------
Balance at December 31,
1999.................... $ 79 $806 $7,664,818 $6,013,708 $3,180,547 $(12,423,895) $ 4,436,063
===== ==== ========== ========== ========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Amounts
Accumulated
During the
Development
1997 1998 1999 Stage
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss................. $ (881,718) $(2,539,415) $(9,002,762) $(12,423,895)
Adjustments to reconcile
cash flows from
operating activities:
Revenues and expenses
not involving cash
flows:
Employees' stock
compensation expense.. -- -- 4,964,797 4,964,797
Consultants' stock
compensation expense.. -- -- 1,048,911 1,048,911
Interest on convertible
notes................. -- -- 252,966 252,966
Provision for employee
severance benefits.... 22,000 81,344 36,392 139,736
Depreciation........... 12,035 27,938 36,195 76,168
Changes in assets and
liabilities:
Decrease (increase) in
other receivables..... (47,938) 27,248 (38,641) (59,331)
Increase in prepaid
expenses.............. (21,876) (2,103) (164,034) (188,013)
Increase in amounts due
to related party...... -- 515 140,968 141,483
Increase (decrease) in
accounts payable and
accrued liabilities... 179,983 142,876 (80,833) 242,026
---------- ----------- ----------- ------------
Net cash used for
operating
activities.......... (737,514) (2,261,597) (2,806,041) (5,805,152)
---------- ----------- ----------- ------------
Cash flows from investing
activities:
Investment in fixed
assets, net of
disposals............... (95,370) (138,141) (2,058) (235,569)
Investment in other
assets.................. (6,372) (199,637) (140,431) (346,440)
Fundings in respect of
employee severance
benefits................ (22,000) (44,673) (19,374) (86,047)
---------- ----------- ----------- ------------
Net cash used for
investing
activities.......... (123,742) (382,451) (161,863) (668,056)
---------- ----------- ----------- ------------
Cash flows from financing
activities:
Receipt of short-term
loans................... 500,000 -- -- 500,000
Receipt of long-term
loans................... 1,006,362 2,119,679 124,861 3,250,902
Issuance of convertible
notes, net.............. -- -- 2,150,000 2,150,000
Issuance of shares,
net..................... 6 -- 4,692,327 4,692,333
---------- ----------- ----------- ------------
Net cash provided by
financing
activities.......... 1,506,368 2,119,679 6,967,188 10,593,235
---------- ----------- ----------- ------------
Effect of exchange rate on
cash..................... 2,120 5,009 (421) 6,708
---------- ----------- ----------- ------------
Net increase (decrease) in
cash and cash
equivalents.............. 647,232 (519,360) 3,998,863 4,126,735
Cash and cash equivalents
at beginning of year..... -- 647,232 127,872 --
---------- ----------- ----------- ------------
Cash and cash equivalents
at end of year........... $ 647,232 $ 127,872 $ 4,126,735 $ 4,126,735
========== =========== =========== ============
Non-cash transactions
Conversion of short-term
loans into equity of
predecessor company..... $ -- $ 500,000 $ -- $ 500,000
Conversion of long-term
loans into equity of
predecessor company..... -- 2,680,541 -- 2,680,541
Conversion of long-term
loans into convertible
notes of Partec......... -- -- 570,361 570,361
Conversion of
convertible notes of
Partec and accrued
interest into stock in
Keryx................... -- -- 2,973,376 2,973,376
Supplementary disclosures
of cash flow information
Cash paid during the
year for interest....... -- 120,336 13,719 134,055
Cash paid during the
year for income taxes... -- -- -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Note 1--Organization and Summary of Significant Accounting Policies:
Keryx Biopharmaceuticals, Inc. (the "Company") was incorporated in Delaware
in October 1998 (under the name Paramount Pharmaceuticals, Inc.) and commenced
activities in November 1999 as the successor company to Partec Limited (see
Consolidated Financial Statements below). At the same time, the Company's name
was changed to Lakaro Biopharmaceuticals, Inc. and was subsequently changed to
Keryx Biopharmaceuticals, Inc. in January 2000. The Company owns a 100%
interest in Keryx Israel Limited (the "subsidiary"), incorporated in Israel,
and together with its subsidiary is engaged in biopharmaceutical research and
development.
At present, substantially all of the Company's activities are in Israel and,
therefore, the Company has one geographical segment. The Company operates in
one segment of operations, namely the development and commercialization of
clinical compounds and core technologies for the life sciences. The Company
intends to expand its activities in the US beginning in the year 2000.
The Company is in the development stage and has not had revenues from its
planned principal operations. Revenues in 1998 and 1997 arise from provision of
management services to a related company. The Company is dependent upon
significant financing to fund the working capital necessary to execute its
business development plan. There can be no assurance that the Company will be
able to obtain additional financing.
These consolidated financial statements include the Company's activities for
the three years ended December 31, 1999 and amounts accumulated during the
development stage.
Consolidated Financial Statements
The accompanying consolidated financial statements for the three years ended
December 31, 1999 have been prepared in order to present the financial
position, results of operations and cash flows relating to the Company's
activities for all periods covered by the statements. Until November 1999, most
of the Company's activities were carried out by Partec Limited, an Israeli
corporation formed in December 1996, and its subsidiaries (hereinafter
collectively referred to as "Partec"). The subsidiaries of Partec during the
period prior to November 1999 were SignalSite Inc. (85% owned) and its wholly
owned subsidiary, SignalSite Israel Ltd., and Vectagen Inc. (87.25% owned) and
its wholly owned subsidiary, Vectagen Israel Ltd. In November 1999, the Company
and its subsidiary acquired substantially all of the assets and liabilities of
Partec and, as of that date, the activities formerly carried out by Partec are
now performed by the Company and its subsidiary. Consequently, these financial
statements include the activities performed in previous periods by Partec by
aggregating the relevant historical financial information with the financial
statements of the Company as if they had formed a discrete operation under
common management for the entire development stage. This has been effected by
means of an "as if" pooling and Partec is being presented as a predecessor
company.
Principles of Consolidation
The consolidated financial statements include the financial statements of
the Company, its subsidiary and the operations detailed above. Intercompany
transactions and balances have been eliminated.
Rate of Exchange
Transactions in foreign currency (primarily in New Israeli Shekels--"NIS")
are recorded in the accounting records according to the representative exchange
rate as of the transaction date. Assets
F-7
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
and liabilities in foreign currency are stated on the basis of the
representative rate of exchange of the NIS as of the balance sheet date. The
representative rate of exchange of the NIS at December 31, 1999 was $1 = NIS
4.153 (1998 $1 = NIS 4.160, 1997 $1 = NIS 3.536). Differences arising from
changes in rates of exchange have been included in the statements of income.
Cash and Cash Equivalents
For the purposes of these financial statements, all highly liquid
investments with original maturities of three months or less are considered to
be cash equivalents.
Long-Term Investment
Long-term investment in respect of employee severance benefits is recorded
at its current redemption value.
Fixed Assets
Fixed assets are stated at historical cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets at the
following annual rates:
<TABLE>
<CAPTION>
%
-----
<S> <C>
Office furniture and equipment....................................... 6-15
Computers, software and related equipment............................ 20-33
</TABLE>
Leasehold improvements are depreciated over the lesser of 10 years or the
total lease period inclusive of options.
Patents
In accordance with SFAS No. 2, "Accounting for Research and Development
Costs," acquired patents are recorded at cost and are amortized over their
estimated useful lives commencing when income results therefrom. Estimated
useful life is re-evaluated on an annual basis. The Company has not yet begun
amortization of the patents as no significant benefit has yet been derived
therefrom. The Company estimates that amortization will not commence before the
year 2002.
Revenue Recognition
Revenues from management fees are recognized ratably over the period for
which the services are provided.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using
F-8
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date. If the likelihood of
realizing the deferred tax assets or liability is less than "more likely than
not," a valuation allowance is then created.
Stock Option Plan
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
established accounting and disclosure requirements using a fair value-based
method of accounting for stock-based compensation plans. As allowed by SFAS
123, the Company applies the intrinsic value-based method of accounting
prescribed by the Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations, in
accounting for its fixed and milestone-based plan stock options to employees
and directors. As such, compensation expense would be recorded on the
measurement date only if the current market price of the underlying stock
exceeded the exercise price. SFAS 123 is applied to stock options granted to
consultants. The Company has adopted the disclosure requirements of SFAS 123.
Impairment of Long-Lived Assets
The Company follows the provisions of SFAS No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed of." This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity with
the SFAS No. 128, "Earnings Per Share" for all periods presented. Diluted net
loss per share is the same as basic net loss per share as the inclusion of
common stock equivalents would be anti-dilutive.
Comprehensive Income
The Company follows SFAS No. 130 "Reporting Comprehensive Income," which
states that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. It requires that an enterprise (a) classify items of other
comprehensive income by their nature in financial statements and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial position. Comprehensive loss is the same as net loss for all years
presented.
F-9
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentrations of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk," requires disclosure of any significant off-balance-sheet risk and credit
risk concentrations. The Company does not have significant off-balance-sheet
risk or credit risk concentrations. The Company maintains its cash and cash
equivalents with multiple financial institutions and invests in short-term,
investment-grade securities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
New Accounting Standards
In July 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
requires that all derivative financial instruments be recognized as either
assets or liabilities on the balance sheet. In June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of SFAS No. 133," which deferred the
implementation of SFAS No. 133. SFAS No. 133 will be effective for the
Company's first quarter in 2001. The Company holds no derivative financial
instruments and is not engaged in hedging activities. The Company therefore
believes that implementation of SFAS No. 133 is not expected to have any
significant impact on its financial position, results of operations or
liquidity.
In April 1998, the Accounting Standards Executive Committee ("AcSEC") issued
SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides
guidance on the financial reporting of start-up costs and organization costs,
and it requires costs of start-up activities and organization costs to be
expensed as incurred.
The SOP broadly defines start-up activities as those one-time activities
related to opening a new facility, introducing a new product or service,
conducting business in a new territory, conducting business with a new class of
customers, initiating a new process in an existing facility, or commencing
certain new operations.
Start-up activities include activities related to organizing a new entity
(organizational costs). The Company adopted SOP 98-5. The Company assessed the
effects of adopting SOP 98-5 and has determined that the impact on its
financial position and results of operations will not be material.
Fair Value of Financial Instruments
The Company's financial instruments include cash equivalents, accounts
receivable, long-term finance receivable/payable, accounts payable and long-
term debt.
The fair value of other financial instruments were not materially different
from their carrying or contract values at December 31, 1999.
F-10
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 2--Cash and Cash Equivalents:
<TABLE>
<CAPTION>
As of December 31,
-----------------------------
1997 1998 1999
-------- -------- ----------
<S> <C> <C> <C>
In or linked to US dollars.................... $672,100 $109,270 $4,041,513
In Israeli currency........................... (24,868) 18,602 85,222
-------- -------- ----------
$647,232 $127,872 $4,126,735
======== ======== ==========
</TABLE>
Note 3--Fixed Assets:
<TABLE>
<CAPTION>
As of December 31,
-------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Cost:
Office furniture and equipment.................. $48,615 $165,777 $153,119
Computers, software and related equipment....... 46,755 67,734 61,943
Leasehold improvements.......................... -- -- 2,275
------- -------- --------
95,370 233,511 217,337
------- -------- --------
Accumulated depreciation.......................... 12,000 39,868 57,196
------- -------- --------
Total fixed assets................................ $83,370 $193,643 $160,141
======= ======== ========
</TABLE>
Note 4--Other Assets:
<TABLE>
<CAPTION>
As of December 31,
-------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Patents............................................ $ 3,025 $200,981 $341,405
Other.............................................. 3,347 4,059 4,066
------- -------- --------
$ 6,372 $205,040 $345,471
======= ======== ========
</TABLE>
Note 5--Related Party:
The amount of $141,483 at December 31, 1999 is due to a related party in
connection with its activities relating to the Company's November 1999 private
placement as explained below. This amount bore no interest and was paid upon
the final closing of the private placement in January 2000.
The amount of $500,000 at December 31, 1997 represents a short-term loan
from a related party to Partec subsequently converted into a capital note in
1998.
Note 6--Liability in Respect of Employee Severance Benefits:
Under Israeli law, employers are required to make severance payments to
dismissed employees and employees leaving employment in certain other
circumstances, on the basis of the latest monthly salary for each year of
service.
This liability is provided for by payments of premiums to insurance
companies under approved plans and by a provision in these financial
statements.
For the year ended December 31, 1999, $36,392 (1998--$59,344; 1997--$22,000)
was recorded as salary expense in respect of future severance benefits and
$19,374 (December 31, 1998--$22,673; 1997--$22,000) was funded under the
severance payment plans and is included in these financial statements as long-
term investments.
F-11
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 7--Stockholders' Equity:
Composition
<TABLE>
<CAPTION>
As of December 31, 1998 As of December 31, 1999
------------------------------- -------------------------------
Issued and Issued and
Authorized Issued fully paid Authorized Issued fully paid
---------- --------- ---------- ---------- --------- ----------
Number Number Number Number Number Number
<S> <C> <C> <C> <C> <C> <C>
Common stock, $0.001 par
value ................. 20,000,000 4,600,000 -- 20,000,000 5,405,537 805,537
"Blank check" preferred
stock, $0.001 par value
(1).................... 5,000,000 -- -- 4,830,000 -- --
Series A convertible
preferred stock, $0.001
par value (2).......... -- -- -- 170,000 79,465 79,465
</TABLE>
- --------
(1) In November 1999, the board of directors designated 170,000 shares of
"blank check" preferred stock as Series A convertible preferred stock.
Subsequent to the designation, 4,830,000 shares of "blank check" preferred
stock remained authorized but unissued. Of the 79,465 shares of Series A
Convertible preferred stock which had already been issued, 29,465 were
issued (together with 202,555 warrants--see below) in consideration for the
contribution of $2.7 million worth of 12% notes and 50,000 shares were
issued to investors in a private placement.
(2) The shares of Series "A" convertible preferred stock have a stated value of
$100 each and are convertible into shares of common stock at a ratio of
100:2.91. The voting and dividend rights associated with the stock are
similar to those of the common stock, based on the number of shares which
would have been received if the preferred shares had been converted at the
record date. In January 2000, an additional 39,180 shares of Series A
convertible preferred stock were issued as part of the continuation of the
private placement. In total, the 79,465 shares, as referred to in (1)
above, together with the 39,180 shares in January 2000, were issued in
consideration for $8.9 million.
Stock Option Plan
In November 1999, the Company adopted a stock option plan (the "plan")
pursuant to which the Company's board of directors may grant stock options to
directors, consultants and employees. The plan authorizes option grants to
purchase up to 2,820,000 shares of authorized but unissued common stock at a
1:1 ratio. At December 31, 1999, a total of 2,734,688 stock options have been
granted as part of the plan with an exercise price of $0.15 per share and a
fair value of $2.91 per share. No options have yet been exercised. The vesting
and exercise terms are as follows:
To directors and employees:
<TABLE>
<CAPTION>
Number of
Expiration Date Vesting Terms Shares
--------------------------- -------------------------------- ---------
<C> <S> <C>
25 years from date of grant Immediately 1,397,723
10 years from date of grant At different dates from December 1,045,667
1999 through November 2001
10 years from date of grant Upon start of specific clinical 13,333
trial (a)
---------
2,456,723
=========
</TABLE>
- --------
(a) Subsequent to the balance sheet date, the vesting terms were amended so
that the options vest on the effective date of the Company's initial public
offering on NASDAQ.
F-12
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company applies APB Opinion No. 25 in accounting for its options granted
to directors and employees. The Company has recorded $4,964,797 of compensation
expense and $1,815,758 of compensation expense in regard to these options has
been deferred. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS 123, the Company's net
loss would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Amounts
Accumulated
For the Year Ended December 31, During the
----------------------------------- Development
1997 1998 1999 Stage
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net loss................ As reported $(881,718) $(2,539,415) $(9,002,762) $(12,423,895)
========= =========== =========== ============
Pro forma $(881,718) $(2,539,415) $(9,048,812) $(12,469,945)
========= =========== =========== ============
Basic and diluted losses
per common share....... As reported $ (0.16) $ (0.47) $ (1.67) $ (2.30)
========= =========== =========== ============
Pro forma $ (0.16) $ (0.47) $ (1.67) $ (2.30)
========= =========== =========== ============
</TABLE>
The value of these options has been estimated using the Black-Scholes model.
The assumptions used in the calculation of the fair value were a weighted
average expected life of each option of three years, an expected volatility
rate of 70% and a risk-free interest rate of 5%.
To consultants:
<TABLE>
<CAPTION>
Number of
Expiration Date Vesting Terms Shares
--------------------------- -------------------------------- ---------
<C> <S> <C>
25 years from date of grant Immediately 77,965
10 years from date of grant December 6, 1999 (already vested) 80,000
10 years from date of grant Upon commencement of various 120,000
clinical trials
-------
277,965
=======
</TABLE>
During 1999, the Company recorded $461,177 in compensation expense and
$313,122 of deferred compensation expense in regard to these options based on
the fair value at the grant date as determined using the Black-Scholes model
under the assumptions stated above. In accordance with EITF 96-18, these
options are revalued at every reporting period over the vesting period in order
to determine the actual amount of deferred compensation expense. At December
31, 1999, there were a total of 1,870,356 options exercisable and none of the
options had been exercised as of the balance sheet date.
Additional Stock Options
In February 2000, the board of directors granted 160,000 non-plan stock
options to directors of the Company. These options have an exercise price of
$0.50 per share, vest at varying dates in the year 2000 and expire ten years
from the date of issuance. Additionally, on March 16, 2000, the board of
directors granted 30,000 options to employees of the Company under the original
stock option plan at an exercise price of $0.75 per share vesting at varying
dates through the year 2003. From year-end through March 31, 2000, the Company
recorded $67,500 of compensation expense in respect of these options.
Warrants
In November 1999, the board of directors granted warrants to purchase
452,555 shares of common stock to investors and others (not directors or
employees). The Company recorded $587,734 in compensation expense and $725,400
of compensation expense in regard to these warrants has been deferred.
F-13
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The warrants are exercisable at $0.01 per share with a fair value of $2.91,
and have ten-year terms. There are 250,000 milestone-based warrants (vesting
upon receipt of various FDA approvals) and at December 31, 1999, the remaining
202,555 were exercisable. No warrants had been exercised as of balance sheet
date.
In January 2000, the board of directors granted warrants to a related party
to purchase 77,393 shares of common stock. The warrants have three-year terms,
have an exercise price of $2.91 per share, and vested immediately upon grant.
Compensation expense was recorded when the warrants were granted totaling
$113,621.
Note 8--Taxes on Income:
The Israeli subsidiary and Partec Ltd, the predecessor company, are subject
to the Israeli Income Tax Law (Inflationary Adjustments), 1985. Under this law,
operating results for tax purposes are measured in real terms, in accordance
with the changes in the Israeli Consumer Price Index ("Israeli CPI"), and
companies are entitled to deduct from their taxable income an "equity
preservation deduction" (which partially compensates for the decrease in the
value of stockholders' equity resulting from the annual rise in the Israeli
CPI).
The Company has accumulated losses for income tax purposes. The taxes
reported in the consolidated financial statements relate to Partec as well as
to the subsidiary in Israel. Income tax expense attributable to income from
continuing operations was $9,778, $30,447 and $9,970 for the years ended
December 31, 1997, 1998, and 1999, respectively, and differed from amounts
computed by applying the US federal income tax rate of 35% to pretax loss from
continuing operations as a result of the following:
<TABLE>
<CAPTION>
Amounts
Accumulated
For the Year Ended December 31, During the
----------------------------------- Development
1997 1998 1999 Stage
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Losses before taxes on
income, as reported in the
consolidated statements of
operations................ $(871,940) $(2,508,968) $(8,992,792) $(12,373,700)
--------- ----------- ----------- ------------
Computed "expected" tax
benefit................... (305,179) (878,139) (3,147,477) (4,330,795)
Increase in income taxes
resulting from:
Change in the balance of
the valuation allowance
for deferred tax assets
allocated to income tax
expense................. 302,647 871,733 3,970,686 5,145,066
Income not subject to
income tax.............. -- -- (1,025,210) (1,025,210)
Capital gains of Partec
recorded as changes in
net investment in
consolidated financial
statements.............. -- -- 259,656 259,656
Permanent differences
(mainly disallowed
expenses)............... 1,473 1,049 1,063 3,585
Difference in tax rate of
foreign subsidiary
income.................. 10,837 35,804 (48,748) (2,107)
--------- ----------- ----------- ------------
$ 9,778 $ 30,447 $ 9,970 $ 50,195
========= =========== =========== ============
</TABLE>
F-14
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The significant components of deferred income tax expense (income)
attributable to income from continuing operations are as follows:
<TABLE>
<CAPTION>
Amounts
Accumulated
For the Year Ended December 31, During the
--------------------------------- Development
1997 1998 1999 Stage
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Deferred tax expense
(income)..................... $(302,647) $(871,733) $(3,970,686) $(5,145,066)
Increase in the valuation
allowance for deferred tax
assets....................... 302,647 871,733 3,970,686 5,145,066
--------- --------- ----------- -----------
$ -- $ -- $ -- $ --
========= ========= =========== ===========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1998 and 1999, are presented below.
<TABLE>
<CAPTION>
December 31
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss................................. $ 1,072,570 $ 2,764,924
Timing differences in respect of vacation pay
accruals and employee severance benefits.......... 21,214 45,126
Timing differences in respect of stock
compensation...................................... -- 2,104,798
Timing differences in respect of research and
development costs................................. 80,596 230,218
----------- -----------
Total gross deferred assets.......................... 1,174,380 5,145,066
Less valuation allowance............................. (1,174,380) (5,145,066)
----------- -----------
Net deferred tax assets.............................. $ -- $ --
=========== ===========
</TABLE>
Note 9--Earnings Per Share (EPS):
<TABLE>
<CAPTION>
Weighted average number of
shares outstanding--basic and
diluted(1)
-----------------------------
December 31
-----------------------------
1997(2) 1998(2) 1999
--------- --------- ---------
<S> <C> <C> <C>
Common stock...................................... 5,405,537 5,405,537 5,405,537
</TABLE>
- --------
(1) Options and warrants have not been included as their inclusion is anti-
dilutive.
(2) Basic net loss per share has been computed using the number of shares
issued by the Company immediately following the commencement of
activities in November 1999 as if outstanding for the period of the
predecessor company.
Note 10--Commitments and Contingencies:
License Agreements
The Company is committed to pay its licensors royalties on its sales of
certain products currently in various stages of development (and none of which
is currently being sold) and on monies received from parties to whom rights to
such products are sub-licensed.
F-15
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition, the Company has undertaken to make milestone payments to its
licensors, contingent upon attaining certain goals, of up to approximately
$3.75 million. In certain cases, such payments will reduce any royalties to be
paid on sales of related products. In the event that the milestones are not
achieved, the Company remains obligated to pay one licensor $100,000 annually
for two years, commencing in 1999, and $50,000 annually thereafter until the
licenses expire.
Leases
The subsidiary leases its premises under an operating lease which expires in
December 2000. Annual lease payments under the lease amount to $40,900.
Additionally, the Company has signed (after December 31, 1999) a lease for
new premises through April 2004 with an option for a four-year renewal and has
informed its present lessor of its intention to vacate in June 2000. Future
minimum annual lease payments under the new lease, assuming all options are
exercised, are as follows:
<TABLE>
<S> <C>
2000............................................................. $47,810
2001............................................................. 63,750
2002............................................................. 63,750
2003............................................................. 63,750
2004............................................................. 15,940
</TABLE>
Sponsored Research
The Company has entered into sponsored research agreements for the
development of specific products under which the Company is committed to
finance up to $1.1 million of research costs through December 2001.
Other Research Agreements
The Company has entered into a number of research and development agreements
for advancement of certain compounds with pharmaceutical and consumer products
companies. In general, these agreements provide that the researcher will
conduct pre-clinical testing and upon completion the researcher will have a
right of first negotiation to develop and license the compounds covered by the
agreement.
Note 11--Subsequent Events:
Initial Public Offering
In May 2000, the Company's board of directors approved management's plans to
file a registration statement with the Securities and Exchange Commission for
its initial public offering in the US on the Nasdaq National Market and on the
Alternative Investment Market of the London Stock Exchange. There is no
assurance that the planned initial public offering will be completed.
Stock Options
See Note 7--Stockholders' Equity above.
F-16
<PAGE>
INDEX TO FINANCIAL STATEMENTS
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 2000, and
December 31, 1999..................................................... F-18
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 2000......................................... F-19
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 2000......................................... F-20
Note to the Condensed Consolidated Financial Statements................ F-21
</TABLE>
F-17
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000, AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 6,551,344 $ 4,126,735
Other receivables................................ 209,557 85,685
Prepaid expenses................................. 112,324 166,137
------------ ------------
Current assets................................. 6,873,225 4,378,557
Long-term investments............................ 84,629 64,047
Fixed assets..................................... 169,390 160,141
Other assets..................................... 479,613 345,471
------------ ------------
Total assets................................... $ 7,606,857 $ 4,948,216
============ ============
<CAPTION>
Liabilities And Stockholders' Equity:
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities......... $ 404,690 $ 252,934
Related party.................................... -- 141,483
------------ ------------
Total current liabilitites..................... 404,690 394,417
Liability in respect of employee severance
benefits.......................................... 129,160 117,736
------------ ------------
Total liabilities.............................. 533,850 512,153
------------ ------------
Stockholders' equity:
Series A convertible preferred stock, $0.001 par
value each
(liquidation preference--$100 per share plus all
declared but
unpaid dividends)............................... 118 79
Common stock, $0.001 par value each.............. 806 806
Additional paid-in capital....................... 11,425,524 7,664,818
Stock options.................................... 6,728,875 6,013,708
Equity of predecessor company.................... 3,180,547 3,180,547
Accumulated deficit.............................. (14,262,863) (12,423,895)
------------ ------------
Total stockholders' equity..................... 7,073,007 4,436,063
------------ ------------
Total liabilities and stockholders' equity..... $ 7,606,857 $ 4,948,216
============ ============
</TABLE>
The accompanying note is an integral part of the condensed consolidated
financial statements.
F-18
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
<TABLE>
<CAPTION>
Three Months Ended March
31,
-------------------------
1999 2000
----------- ------------
(Unaudited)
<S> <C> <C>
Expenses:
Research and development expenses (including stock
compensation expense of $0 and $534,046 in 1999
and 2000, respectively).......................... $ 414,421 $ 1,252,964
General and administrative expenses (including
stock compensation expense of $0 and $181,121 in
1999 and 2000, respectively)..................... 263,305 613,555
----------- ------------
Total operating expenses........................ 677,726 1,866,519
----------- ------------
Operating loss...................................... (677,726) (1,866,519)
Financing income/(expenses)......................... (9,599) 54,672
----------- ------------
Net loss before taxes on income..................... (687,325) (1,811,847)
Taxes on income..................................... -- 27,121
----------- ------------
Net loss for period................................. (687,325) (1,838,968)
Net loss at beginning of period..................... (3,421,133) (12,423,895)
----------- ------------
Net loss at end of period........................... $(4,108,458) $(14,262,863)
=========== ============
Basic and diluted net loss per common share......... $ (0.13) $ (0.34)
Weighted average shares used in computing basic and
diluted net loss per common share.................. 5,405,537 5,405,537
</TABLE>
The accompanying note is an integral part of the condensed consolidated
financial statements.
F-19
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1999 2000
--------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................. $(687,325) $(1,838,968)
Adjustments to reconcile cash flows from operating
activities:
Revenues and expenses not involving cash flows:
Employee stock compensation expense.............. -- 381,056
Consultants' stock compensation expense.......... -- 334,111
Provision for employee severance benefits........ 4,691 11,424
Depreciation..................................... 10,395 7,309
Changes in assets and liabilities:
Increase in other receivables.................... (24,823) (128,080)
Decrease in prepaid expenses..................... 2,103 53,813
Decrease in related party........................ -- (141,483)
Increase (decrease) in accounts payable and ac-
crued
liabilities..................................... (149,608) 141,892
--------- -----------
Net cash used for operating activities......... (844,567) (1,178,926)
--------- -----------
Cash flows from investing activities:
Investment in fixed assets, net...................... (7,350) (16,558)
Investment in other assets........................... -- (134,142)
Fundings in respect of employee severance benefits... -- (11,945)
--------- -----------
Net cash used for investing activities......... (7,350) (162,645)
--------- -----------
Cash flows from financing activities:
Receipt of long-term loans from related party........ 999,863 --
Issuance of shares, net.............................. -- 3,760,745
--------- -----------
Net cash provided by financing activities...... 999,863 3,760,745
--------- -----------
Effect of exchange rate on cash........................ 6,005 5,435
--------- -----------
Net increase in cash and cash equivalents.............. 153,951 2,424,609
Cash and cash equivalents at beginning of period....... 127,872 4,126,735
--------- -----------
Cash and cash equivalents at end of period............. $ 281,823 $ 6,551,344
========= ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............. $ 433 $ 100
Cash paid during the period for income taxes......... -- --
</TABLE>
The accompanying note is an integral part of the condensed consolidated
financial statements.
F-20
<PAGE>
KERYX BIOPHARMACEUTICALS, INC.
(DEVELOPMENT STAGE COMPANY)
NOTE TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1--General:
The Company, in its opinion, has included all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of the results
for the interim periods. The interim financial information is not necessarily
indicative of the results that will occur for the full year. The financial
statements and notes thereto should be read in conjunction with the financial
statements and notes for the year ended December 31, 1999.
The accompanying consolidated financial statements for the period ended
March 31, 2000, have been prepared in order to present the financial position,
results of operations and cash flows relating to the Company's activities for
all periods covered by the statements. Until November 1999, most of the
Company's activities were carried out by Partec Limited, an Israeli
corporation, and its subsidiaries (hereinafter collectively referred to as
"Partec"). The subsidiaries of Partec during the period prior to November 1999
were SignalSite Inc. (85% owned) and its wholly owned subsidiary, SignalSite
Israel Ltd., and Vectagen Inc. (87.25% owned) and its wholly owned subsidiary,
Vectagen Israel Ltd. In November 1999, the Company and its subsidiary acquired
substantially all of the assets and liabilities of Partec and, as of that date,
the activities formerly carried out by Partec are now performed by the Company
and its subsidiary. Consequently, these financial statements include the
activities performed in previous periods by Partec by aggregating the relevant
historical financial information with the financial statements of the Company
as if they had formed a discrete operation under common management for the
entire development stage. This has been effected by means of an "as if" pooling
and Partec is being presented as a predecessor company.
F-21
<PAGE>
APPENDIX: INDEPENDENT EXPERT'S REPORT
Our initial public offering is a global offering. In accordance with U.K.
best practice, we have retained an independent expert in the field of life
sciences to prepare a report which discusses our technology, drug candidates
and development strategy. A preliminary draft of this report appears as an
appendix to this prospectus. A final executed copy of this report will be
delivered to us and the underwriters subsequent to the date of this preliminary
prospectus.
<PAGE>
2000
The Directors
Keryx Biopharmaceuticals Inc
216 Jaffa Road
Sha'arei Ha'ir
Jerusalem
Israel 94383 [LETTERHEAD OF PA CONSULTING GROUP]
Roth Capital Partners, Inc
24 Corporate Plaza
Newport Beach
California 92660
USA
The Directors
WestLB Panmure Limited
35 New Broad Street
London EC2M 1SQ
UK
Dear Sirs
PA Strategy Partners Ltd ("PA") is a wholly-owned subsidiary of PA
Consulting Group (of which PA Holdings Ltd is the parent company), a leading
international business and technology consultancy head-quartered in the UK and
operating in Europe, North America, Scandinavia and Asia Pacific. PA has
conducted many reviews of pharmaceutical, medical device and related companies
which have involved assessing technology and advising companies on research
and development matters. PA has prepared Experts' Reports in connection with
the public offerings of Cantab Pharmaceuticals plc, Chiroscience Group plc,
Shire Pharmaceuticals Group plc, Phytopharm plc, Biocompatibles International
plc, Xenova Group plc, Powderject Pharmaceuticals plc, Gyrus Group plc, NMT
Group plc and Maelor plc. PA Consulting Group employs specialists with
knowledge of science, technology, product development, markets and business
issues in these industries.
PA has been retained by Keryx Biopharmaceuticals, Inc. ("Keryx" or the
"Company"), Roth Capital Partners, Inc., and WestLB Panmure Limited to review
certain aspects of the Company, specifically:
1. To provide commentary upon, and assessment of, the general validity of
Keryx's development strategy
2. To provide commentary upon, and assessment of, the KinAce(TM) technology
platform
3. To provide commentary upon the achievability of Keryx's research and
development programmes. Programmes included in the review are:
KRX-101: licensed from Alfa Wassermann and in clinical development for
diabetic nephropathy;
KRX-123: an application for clinical trials is in preparation for the
indication of hormone refractory prostatic cancer;
A-1
<PAGE>
KRX-131: the subject of research and development collaboration with a
major pharmaceutical company and is indicated in hair loss as a result
of chemotherapy;
KRX-168: for post-surgical adhesions and implants;
KRX-167: in early research and development under an agreement with
Osteotech for orthopaedic applications;
KRX-211: under investigation by NIH as a treatment for septic shock;
KRX-291: a product for sunless tanning under a research and development
agreement with a major pharmaceutical and healthcare products company;
and
KRX-613: a candidate therapy for diabetes mellitus.
4. For each of these research and development programmes to comment upon:
(a) the project merits;
(b) specific risk factors in successful project completion;
(c) the commercial potential of the project; and
(d) the project's development plans, including the appropriateness of
said plans.
In preparing this report, PA has conducted interviews with key Keryx staff,
officers and associates, made an extensive review of documentation prepared by
Keryx and assessed its activities by reference to our internal knowledge base.
This has been supplemented by PA's independent review.
This report has been prepared with due diligence based upon information
provided to PA by Keryx at the time of preparation. PA has no reason to doubt
the veracity of such information but PA has only verified it to the extent
indicated above. Changes in circumstances may render such information invalid
at any time hereafter.
1. BACKGROUND TO KERYX
Keryx Biopharmaceuticals, Inc. is a company involved in the discovery,
development and licensing of novel drugs identified through the application of
a proprietary approach to drug discovery.
To date, the Company has also acquired the license to one drug, KRX-101,
which is already marketed by the licensor in Europe for vascular indications
and which Keryx is developing for use in a new indication, diabetic
nephropathy. The remainder of its current portfolio has been developed through
the exploitation of bioinformatics and rational drug design, a process Keryx
has described as its KinAce(TM) technology.
Keryx seeks to exploit these discoveries by forming strategic collaborations
with established pharmaceutical companies, although in specific cases the
Company may choose to carry out the development itself. This is a strategy
followed by many emerging biotechnology companies, which has the merit of
seeking to share both the risk and the reward of the development of its
discoveries.
Keryx does not have, nor does it intend to establish, the extensive
facilities of an established pharmaceutical company, rather it will avail
itself to the broad range of contract research, development, manufacturing and
marketing capabilities of third parties. PA agrees with this strategy in that
it reduces the fixed investment in infrastructure and maintains maximum
financial flexibility.
2. PLATFORM TECHNOLOGY KinAce(TM)
Protein kinases are a class of enzymes which act to phosphorylate specific
amino acid residues. Amino acids are the building blocks and key components of
proteins and therefore play a key role in intracellular processes.
A-2
<PAGE>
Protein kinases are important agents in the mediation of signal transduction
(the complex cascade of molecular events that transduces a signal or stimulus)
in multicellular organisms. Protein kinases may be present as membrane
receptors or located inside the cell and act in biochemically important roles
such as signal transduction to the cell nucleus. During signal transduction,
protein kinases regulate intracellular events in response to external stimuli.
Agents which can modulate (increase or decrease) the activity of protein
kinases have the potential to induce a broad range of effects on a large number
of cellular biochemical mechanisms, for example cell hormone secretion, cell
growth and inflammation. In addition, there are disease states which involve
the up-regulation and down-regulation of the kinases themselves.
Protein kinase activity is based around the addition of phosphoryl groups
which serves to modulate the activity of the target protein. In addition to
this enzyme activity, kinases have a specific binding region which is used to
recognise and bind the protein substrate.
On the basis of their amino acid sequences and enzymatic activity, kinases
are classed in families. A large number of kinases have been identified and
sequenced.
Whilst research into kinase modulation has been carried out for many years
by a number of research groups, the focus of their investigation has been the
site of enzymatic phosphorylation. It has become evident that binding in other
regions on the kinase protein influences the enzymatic activity at this site.
The modulation of these additional regions appears to have an effect on kinase
activity.
Keryx's therapeutic approach is to construct short amino acid sequences of
between 5 and 12 residues (i.e., a peptide) to modulate the kinase activity by
serving as a decoy to those accessory regions. These regions are structurally
discrete from the phosphorlyation site but are functionally linked. Through the
use of a proprietary algorithm which analyses the kinase amino acid sequences,
Keryx believes that the correct site for binding can be identified and the
appropriate modulating peptide synthesised.
Through this approach, Keryx may be in a position to enhance or inhibit
biochemical pathways of choice through kinase sequence analysis and peptide
synthesis.
2.1 Merits of KinAce(TM)
The rational design and development of drugs targeting components of signal
transduction pathways is a relatively new development. Many signal transduction
pathways, their components, and effector molecules implicated in cancer
patheogenesis were not even elucidated until 1990. However, in the past ten
years, there have been significant advances in identifying, sequencing and
cloning proteins characterising signal transduction pathways and the associated
proteins.
Keryx's identification of regions of the kinase, which can modulate the
activity of the enzyme, together with the recognition of a number of conserved
amino acids in these regions, means that a relatively small number of molecules
need to be screened for activity. Furthermore, while the majority of kinase
modulators in development by other companies are inhibitors of the enzyme,
Keryx's ability to activate the enzyme of choice provides a broader range of
therapeutic approaches than its competitors.
PA believes that the KinAce(TM) approach to drug discovery is potentially an
immensely powerful tool. The approach bridges the information gap between the
output of bioinfomatics and the development of drugs. Keryx does not need to
conduct its own basic research into the biochemistry of a disease state,
relying instead on publically available information, and to date the approach
has proven prolific in so far as candidate identification is concerned.
A-3
<PAGE>
Conceptually the KinAce(TM) approach may be applied to the modulation of
other functional protein families. PA notes that it is possible that Keryx has
serendipitously selected a protein family (kinases) in which modulation by
small peptides is possible and that this may not be the case in any other
family. However, kinases have been implicated in a great many diseases
including many cancers and immunological diseases, as well as in inflammatory
conditions and in pain. Thus, even if Keryx's approach to drug discovery is
limited to kinase modulation, PA believes that there are significant
opportunities for the Company.
2.2 Risks Associated with KinAce(TM)
PA believes that, although many companies have explored approaches to the
modulation of kinases as a therapeutic approach, only one product based on this
pharmacology has yet reached the market. This is a protein kinase inhibitor
launched in Japan only for use as a therapy in haemorrhagic stroke. The risks
detailed below may appear extensive but merely reflect the relatively new area
of kinase modulation.
There is a number of risks associated with the development of peptides
identified through Keryx's approach. Each of these will need to be addressed on
a case-by-case basis. However, in PA's opinion these are no different to the
risks facing any company developing pharmaceuticals. What does differ in the
case of Keryx is the technical solution that Keryx or its partners may need to
develop. This solution may differ from those required in more traditional
pharmaceutical companies. The specific risks are:
Lack of specificity of the peptide
Peptides of such a short chain length may not be specific to the proposed
region of the kinase and may activate/deactivate several kinase molecules. This
could manifest itself as toxicity or as adverse events in clinical development.
PA believes, however, that the evidence to date supports Keryx's hypothesis
that its current candidates are specific to the kinase of interest.
Up-regulation
Many biochemical systems, when inhibited, respond by up-regulation or by
utilising alternative biochemical pathways to achieve the end effect. It is
possible that inhibition of a specific kinase may result in increased cellular
production of the kinase to compensate. This would result in a loss of efficacy
with increasing treatment time. To date, no chronic studies have been conducted
by Keryx with any of their candidates to investigate this aspect.
Drug delivery
All of the products of Keryx's approach to drug discovery are peptides
(small proteins). Oral delivery of peptides is technically complex: the
gastrointestinal tract contains enzymes which digest protein. Furthermore,
there are circulating peptidases in the blood which similarly digest peptides.
Thus, delivery by any route other than intravenous injection may be a technical
challenge.
To date, Keryx has not addressed formulation issues. However, given the
early stage of development of its candidates, this is not unsurprising. PA
believes that there is a number of formulation technologies available, which
may be appropriate to Keryx's products and that can be accessed at the
appropriate time by the Company.
Multiple pathways
PA accepts that Keryx has developed the technology and understanding to
modulate specific kinases, and that the kinases and their activity are
moderately well known. However, it is possible
A-4
<PAGE>
that in any specific indication there are multiple pathways, which result in
the disease state. Therefore, the inhibition of a kinase-mediated pathway may
result in a second pathway to the disease assuming greater importance.
Targeting of therapeutic action
The kinase targeted for modulation in the disease state may have a normal
and needed function in other areas of the body. Therefore, Keryx may need to
develop delivery technology or technologies that deliver active peptide only to
diseased regions of the body.
3. DEVELOPMENT PIPELINE
None of the Company's development candidates have entered clinical trials.
In each programme, the Company has generally only identified key clinical
development milestones in cases where a collaborator has been secured. This is
a pragmatic approach, which ensures that the timelines are prepared with input
from established pharmaceutical companies and as such (subject to appropriate
allocation of resources) are likely to be achievable.
3.1 KRX-101: Diabetic Nephropathy
KRX-101 (Sulodexide) is a hypolipaemic agent, developed by Alfa Wassermann
and licensed to Keryx for development as a treatment for diabetic nephropathy.
It is a glycosaminoglycan polysulfate, which has antiarteriosclerotic activity
mediated by release of lipoprotein lipase.
Diabetic nephropathy is one of the most common complications of diabetes. It
generally results in a chronic and progressive degradation of kidney function,
to the point where the patient must undergo regular dialysis or obtain a kidney
transplant to survive. About 40% of people with IDDM (Insulin Dependent
Diabetes Mellitus, or Type I diabetes) will eventually develop diabetic
nephropathy. At least 20% of people with NIDDM (Non Insulin Dependent Diabetes
Mellitus, or Type II diabetes) will develop diabetic nephropathy but the time
course of development of the disorder is variable.
The mechanism that causes diabetic nephropathy is unknown. The disease is
characterised by proteinuria and the key measure of protein in urine is the
assay of albumin. When the kidneys are normal, albumin is not measurable in the
urine.
The disorder is progressive. The risk of disease progression is related to
the control of the blood-glucose levels. The goals of treatment are to slow the
progression of kidney damage and control related complications. Diabetic
nephropathy is believed to be responsible for at least 25% of all renal
dialysis patients, resulting in increased morbidity, mortality and economic
cost. Diabetes is the fourth leading cause of death in the USA.
3.1.1 Project Merits
There are no current FDA approved therapies to prevent or reduce the onset
of Type II diabetic nephropathy. The current standard of care involves the
administration of angiotensin converting enzyme (ACE) inhibitors such as
captopril, to patients with chronic nephropathy as a result of diabetes.
However, ACE is not as effective in nephropathy of Type II diabetes.
KRX-101 has been in clinical use in Europe since the mid-1980s for other
indications, and there is, therefore, significant experience of drug use in
patients. Alfa Wassermann has conducted a clinical trial in Europe for diabetic
nephropathy in over 200 patients and has demonstrated a dose-related reduction
in albumin excretion in the urine (albuminuria), with no adverse events
reported. Albuminuria has been identified as a cause of progressive loss of
kidney function.
A-5
<PAGE>
The effectiveness of sulodexide has been shown by a significant decrease in
albuminuria in microalbuminuric and macroalbuminuric diabetic patients treated
with the drug. PA believes that experimental data on the effects of sulodoxide,
collected over the last seven years, indicate strongly that it may be an
effective therapeutic used for the treatment of diabetic nephropathy. However,
PA notes that additional studies may have to demonstrate improvements not only
in albuminuria, but also in additional clinical endpoints, for example, renal
function and morphologic abnormalities.
PA recognises that oral administration of KRX-101 compared to related
compounds (such as heparin) may make it more attractive to physicians and
patients alike.
3.1.2 Project Risks
Whilst albuminuria has been implicated in progressive kidney disease, there
is a range of opinion as to the true cause of diabetic nephropathy. For
example, one school of thought believes that glycated albumin is involved in
kidney pathogenesis and that early inhibition of glycosylation may be an
approach to prevention.
PA understands that the mechanism of kidney pathogenesis in diabetic
nephropathy is poorly understood and agrees with Keryx that reduction in
albuminuria, whilst not necessarily preventing disease progression, may improve
prognosis in this patient group. There is a risk, however, that this measure of
kidney disease may not be acceptable to regulatory authorities as a
demonstration of efficacy. Should this be the case, the timescale and cost of
the clinical development programme may be significantly increased.
Numerous studies have examined the effects of treatment on progression of
renal disease in diabetic nephropathy. Few of them, however, offer more than a
suggestion regarding the value of a given therapy, because methodological
issues such as small sample size, short duration of follow-up, poor patient
compliance, inappropriate endpoint or lack of a proper control group hinder
their interpretation.
3.1.3 Commercial Potential
In 1995, over 118 million people world-wide were suffering from some form of
diabetes, and this is forecast to grow to over 220 million by the year 2010.
Many cases of diabetes remain undiagnosed.
Keryx is seeking approval for therapy in Type II diabetes. PA estimates that
there are approximately 11 million such patients in the US, and a further 14
million in Europe and Japan. Of these patients, approximately 20% will develop
nephropathy in their lifetime.
The major areas of research addressing treatment are focused on two
therapeutic and pharmacological approaches: antihypertensives (ACE inhibitors,
angiotensin antagonists) and glycosylation antagonists (ARI's, AGE inhibitors).
Although AGE inhibitors have been associated with undesirable side effects,
the second- generation AGE inhibitors are expected to have much improved
efficacy and side-effect profiles. Since this class of agent addresses the
underlying cause of diabetic complications they have the potential to become a
mainstay in the treatment and prevention of diabetic nephropathy. However, PA
notes that the second-generation AGE inhibitors are unlikely to reach market
before 2004.
Diabetic nephropathy represents a significant unmet medical need. Despite
new technologies in development there are still no products available that
address the fundamental disease state.
A-6
<PAGE>
3.1.4 Development Plans
Keryx is currently preparing an IND (Investigational New Drug application)
for submission to the FDA. The Company anticipates submission in the second
quarter of 2000. Should KRX-101 prove effective in reducing albuminuria
significantly, or another endpoint agreed with the regulators, PA supports the
Company's contention that it may receive fast-track approval from the FDA.
3.2 KRX-123: Hormone Refractory Prostatic Cancer
PA estimates that there are approximately 1.2 million prostatic cancer
patients in the USA, Europe and Japan, with over 300,000 new cases diagnosed
each year. Prostate cancer is the second leading cause of death in American
men.
Radical prostatectomy and radiation therapy are treatments of choice for
cancers that have not spread beyond the prostate gland itself. For patients
whose cancers have spread beyond the prostate at the time of diagnosis, or
whose local cancers have recurred after initial treatment, hormone therapy is
the most common treatment. Hormone therapy does not cure the cancer, but it
slows the spread of the cancer by lowering the levels of male hormones (or
androgens).
Prostate cancers that do not respond to hormone therapy are described as
hormone-refractory or androgen-independent. Chemotherapy is a therapeutic
option for such patients. Like hormone therapy, chemotherapy is not expected to
cure the cancer, but it may be used to slow tumour growth and reduce pain. Some
of the chemotherapy drugs used in treating prostate cancer that has returned,
continued to grow or spread after treatment with hormonal therapy include
doxorubicin (Adriamycin), estramustine, etoposide, mitoxantrone, vinblastine,
carboplatin and paclitaxel. PA notes all of the current pharmaceutical
treatments for prostate cancer cause side effects.
3.2.1 Project Merits
KRX-123 is being developed to modulate Src kinase activity. Since Src kinase
activity has been reported to play an important role in the proliferation and
oncongenicity of several human cancers including human prostate carcinoma, PA
considers that Keryx's approach may have merit. However, PA notes that the
mechanism by which Src kinases contribute to oncogenesis remains to be fully
elucidated.
Keryx has carried out laboratory studies using xenografts of human hormone
refractory prostatic tumours in a model that PA believes is generally accepted
as an appropriate method for screening candidate molecules. In these tests, the
tumours in treated animals diminished, or totally disappeared. This, PA
believes, supports Keryx's decision to progress KRX-123 to clinical trial.
Moreover, Keryx has generated data, which demonstrates improved survival in
laboratory animals with xenographs.
3.2.2 Project Risks
Given the early stage of development of KRX-123, PA has identified no
project specific technology risks that are not described in Section 2.2-Risks
Associated with KinAce(TM).
Competition for patients in cancer trials is intense, with a significant
number of companies and products seeking limited numbers of patients. PA
believes that compelling evidence of efficacy is one method of attracting
clinicians to trials. Furthermore, a development partner with an established
franchise in the cancer area may further assist in recruiting investigators to
development programmes.
A-7
<PAGE>
3.2.3 Commercial Potential
PA estimates that the world market for prostatic cancer treatments is
approximately $2 billion. There is a significant number of products in clinical
development for hormone refractory prostatic cancer, adopting a variety of
therapeutic approaches.
3.2.4 Development Plans
Keryx is currently preparing an application for the Israeli Ministry of
Health to conduct Phase I/II clinical trials. Additionally, the Company is
seeking to file an IND for submission to the FDA by the end 2000. The Company
believes that on the basis of trials planned to begin in Israel by the end of
this year, it may have sufficient data to enable supply on a named patient-
basis in Europe which will have the effect of reducing time to market. There is
also the possibility of imminent legislation that may give Keryx-123 Orphan
Drug status in Europe. In PA's opinion this may be possible but is predicated
on the Company demonstrating compelling results from a small group of patients.
Israel has a Memorandum of Understanding with the FDA which ensures that
clinical trials conducted in that country are acceptable to the Agency.
3.3 KRX-131: Hairloss as a Result of Chemotherapy
Anagen effluvium is the sudden hair loss from exposure to chemicals or
radiation, such as certain types of chemotherapy or radiation treatment. Not
all chemotherapy drugs cause hair loss but the effect of those that do range
from a thinning of hair to complete loss. This is often the most distressing
side effect of cancer treatments. Hair loss occurs because chemotherapy
treatments attack rapidly dividing cells and the cells responsible for hair
growth are some of the fastest growing cells in the body. Hair loss normally
occurs one to three weeks after exposure to the toxic chemicals or radiation.
This is a temporary condition and hair growth will begin after treatment is
stopped.
3.3.1 Project Merits
KRX-131 is being developed to modulate activity of transforming the growth
factor-beta (TGF-^) receptor kinase. Since TGF-^ levels have been linked to
hair growth, PA believes that Keryx's selected receptor kinase may have promise
as a therapeutic target.
Hair loss from chemotherapy is often the most devastating side effect of
cancer treatment. Although hard to quantify, retaining hair would lead to an
improvement in the quality of life during a difficult time in one's life. In an
abstract from a recent meeting of the American Association for Cancer Research,
it was stated that "people are sometimes so worried about it (hair loss) that
they don't come forward for cancer screening."
Currently there are no approved therapies to treat the loss of hair from
cancer treatment.
3.3.2 Project Risks
Given the early stage of development of KRX-131, PA has identified no
project specific technology risks that are not described in Section 2.2-Risks
Associated with KinAce(TM).
3.3.3 Commercial Potential
Keryx estimates that 30% of the 1.2 million cancer sufferers in the United
States received chemotherapy in 1999 with a similar number in the rest of the
world. Of these patients Keryx believes that 80% will suffer from hair loss. At
this time, PA has not been able to confirm these estimates.
A-8
<PAGE>
3.3.4 Development Plans
Keryx has recently signed a research and development agreement with a major
pharmaceutical company for the testing of KRX-131. Following an evaluation of
these results, Keryx will decide to either license this compound or complete
internal development.
3.4 KRX-168: Anti-fibrotic for Post-Surgical Adhesions
Post-operative adhesions involve the formation of connections between two
traumatised mesothelial cell surfaces, or of one surface and the omentum. These
connections are usually made of fibrin. The adhesions arise as a result of
localised trauma which may be due to direct wounding of tissue arising during
surgery itself or even from handling of tissues or organs by the surgical staff
involved. Additionally, PA believes that there may be an emerging market in
implant-related fibrosis.
To date, most clinical research on post-operative adhesions has focused on
abdominal surgery. Adhesions occur more frequently with abdominal surgery,
especially gastrointestinal, rectal and gynaecological procedures, because the
peritoneum is extremely delicate and sensitive to trauma.
3.4.1 Project Merits
Substantial costs to healthcare services arise from post-operative
adhesions. PA believes that there is a significant unmet medical need in
managing post-operative adhesions, both for prophylactic treatment to prevent
de novo adhesion formation and in treating reformed adhesions.
PA notes that there is only a limited number of products available to reduce
the incidence of post-operative adhesions. All these products appear to have
limitations. Absorbable adhesion barriers may well reduce adhesions, but as
films they are surgically difficult to apply and require an intuitive decision
by the surgeon as to the likely location of the adhesion site.
PA believes that to date approved products for managing post-operative
adhesions have all used physical barrier technology. Consequently, there may be
significant market opportunity for effacious selective pharmaceuticals that
target the biochemical pathways leading to adhesion formation, either to
replace or to augment existing barrier methods.
Additionally, PA believes that there are currently no products approved for
the use of reducing fibrosis associated with surgical implants. This
application may represent a significant unmet medical need and a commercially
attractive market.
3.4.2 Project Risks
PA is aware of at least four companies that are looking to establish broad
anti-adhesion product portfolios. Three of these have already launched
products. Accordingly, Keryx may encounter barriers to market penetration
arising from late entry. Conversely, Keryx may find that this market situation
increases the potential for favourable out-licensing of KRX-168.
Given the early stage of development of KRX-168, PA has identified no
project specific technology risks that are not described in Section 2.2-Risks
Associated with KinAce(TM).
3.4.3 Commercial Potential
PA believes that there is a substantial market for efficacious anti-adhesion
products. For example, PA estimates that there are over 3 million abdominal and
gynaecological surgeries performed annually in the USA that may form the
initial target market for KRX-168.
A-9
<PAGE>
3.4.4 Development Plans
There are currently no clinical development plans for this candidate. In
line with its current strategy, the Company may develop this candidate under a
joint research and development programme with the eventual collaborator on this
project. Keryx will continue its internal in vivo development studies and
evaluate its options within the next 6 months.
3.5 KRX-167: Bone Growth Compound for Orthopaedic Applications
In 1965, Marshall Urist discovered extracts with the ability to induce bone
growth. Although Urist was unable to isolate substance responsible for bone
morphogenesis, he did give it the name bone morphogenic proteins (BMP). It is
now known that BMPs are a subfamily of TGF-b (transforming growth factor-beta)
supergene family of regulatory proteins and binds serine/threonine kinase
receptor that is related to the kinase domain in TGF-b receptors. To date, more
than 12 BMPs have been identified.
3.5.1 Project Merits
Bone formation involves the migration of undifferentiated mesenchymal cells,
differentiation into cartilage, and subsequent bone replacement by osteoblasts
and osteocytes. Studies have shown that BMP-4, when applied to cultured limb
bud mesoderm, stimulated cartilage formation, as measured by incorporation of
radioactive sulfate into sulfated proteoglycans. In mouse models, BMP-4 appears
for a specific period of 12 to 72 hours after a fracture has occurred. PA
agrees with the rational of researching a BMP-4 kinase stimulant. There is a
substantial amount of literature supporting BMP-4's role in regulating and
differentiating bone growth.
Bone fractures are a major source of costs to the healthcare community.
According to a recent study conducted by the National Osteoporosis Foundation,
the total economic cost of bone fractures caused by osteoporosis in the United
States was an estimated $13 billion. These cost calculations were based solely
on hip fractures and therefore under-represent the true cost of osteoporosis
bone fractures.
3.5.2 Project Risks
Products under development for the treatment of bone repair and fractures
include other bone stimulating substances such as other BMPs and human
osteogenic proteins linked to a bioresorbable barrier for non-union bone
fractures. These compounds induce the formation of cartilage and regenerates
new bone. Synthetic glycosaminoglycans for tissue modeling are also under
development.
3.5.3 Commercial Potential
There are about six million Americans who suffer from bone fractures
annually. Normally, the regenerative power of the bone will completely heal a
fracture within a few months. However, an estimated 5 to 10% of these people
will have delayed or impaired healing and may require surgical intervention to
aid the healing process.
One of the leading causes of bone fractures is osteoporosis. Osteoporosis is
suspected to cause approximately 1.5 million fractures and 250,000 hip
fractures each year in the United States. Hip fractures are the leading cause
of mortality associated with osteoporosis and are associated with the most
morbidity. An estimated 20% of people with hip fractures die within a year.
A-10
<PAGE>
3.5.4 Development Plans
Keryx has signed a research and development agreement with Osteotech. Keryx
intends to license KRX-167 to either Osteotech or a leading pharmaceutical
company following the successful completion of the agreement. It is the hope
that the licensee will be responsible for financing clinical trials,
manufacturing and marketing the compound. Keryx hopes to earn milestone
payments according to the progress of its drug in clinical trials and royalties
on sales following a successful conclusion of human clinical trials and FDA
marketing approval.
3.6 KRX-211: Septic Shock
Sepsis is the response by the body to infection, generally bacterial. Where
the infection becomes severe, organ dysfunction or failure may follow--this is
generally referred to as septic shock. Sepsis is considered to be the leading
cause of death in non-coronary intensive care units with mortality occurring in
40-50% of patients diagnosed with sepsis.
Many therapeutic approaches to sepsis and septic shock have been followed to
date, however none has proven effective in preventing death. Current therapies
focus on eradicating the bacterial infection and supporting failing organs.
3.6.1 Project Merits
Septic shock has proven difficult to treat; many therapeutics have been
administered, including antibiotics, antihypertensives, dopamine, diuretics and
corticosteroids. To date, no therapeutic regime has been proven wholly
effective. Therefore, PA believes there is a significant unmet medical need.
KRX-211 is being developed to modulate JaK3 kinase activity. Since this
family of kinases has been implicated in the signal transduction pathway
involved in immunological modulation, PA considers this kinase may be a
suitable target for developing new therapeutics against septic shock.
3.6.2 Project Risks
A variety of compounds are being researched for the treatment of septic
shock, these compounds include: TNF and IL antagonists, anti-ELAM antibodies,
anti-infectives and Nitric oxide inhibitors. In general, these compounds can be
categorized as acting upon inhibiting the cytokine cascade, anti-endotoxins,
anti-coagulation or anti-inflammatory compounds.
A general risk in the development of any compound in septic shock is that
the failure rate of previous discoveries has been high, as evidenced by the
current lack of therapies. PA believes that there are many reasons for these
failure rates, not least the difficulties of the design of the clinical
programmes. The laboratory data generated by Keryx are, however, compelling in
that significant benefits were achieved in a rigorously tested animal model.
3.6.3 Commercial Potential
PA estimates 800,000 to 1 million patients are diagnosed as suffering from
septic shock annually in Europe and the USA. In the United States, the
expenditure on treatment of resistant bacterial infections is estimated at $4
billion; in Europe, the total sepsis market is expected to reach $2.4 billion
by 2003.
A-11
<PAGE>
3.6.4 Development Plans
Keryx does not intend to carry out the development of KRX-211 itself. The
Company has signed an agreement with the National Institutes of Health (NIH)
under which NIH will carry out extensive pre-clinical testing. Thereafter,
Keryx intends to license KRX-211 to a development partner.
3.7 KRX-291: Sunless Tanning
Melanins are the pigments that impart colour to skin and hair. Exposure to
the sun can alter skin pigmentation by inducing melanin production. There is
considerable evidence that melanin helps protect skin from harmful ultraviolet
rays, which may induce skin cancers (basal and squamous cell carcinomas and
melanoma) and skin aging due to sunlight (photoaging).
The skin cells that produce the melanins are called melanocytes and comprise
5 to 10% of the total cellular population in the epidermis. Tanning is mediated
by melanocytes producing melanin, which is subsequently transferred to the
keratinocytes. Keratinocytes are the most abundant cells in the epidermis and
account for 80 to 90% of the total epidermal cellular population.
3.7.1 Project Merits
KRX-291 is being developed to modulate MSH receptor activity. Although the
exact intracellular signals that trigger melanin production are not well
understood, there is an abundant body of evidence implicating a role of MSH and
its receptor in melanin production. PA considers this kinase as a suitable
target for the development of sunless tanning.
People who tan poorly or sunburn easily are at the greatest risk for skin
cancer. According to PA estimates, in the USA, Europe and Japan, there are
approximately 57,000 new cases of skin cancer (melanoma) every year.
Additionally, approximately 1.2 million cases of squamous cell and basal cell
carcinomas, which are also related to sun exposure (though by no means as life-
threatening as melanomas) are diagnosed each year in the US. Increasing melanin
in the skin may provide protection against the effects of ultraviolet light on
the skin. This may become of increasing importance as the ozone layer is
depleted.
3.7.2 Project Risks
Research in sunless tanning is widespread. There are several products
already on the market but they do have some limitations.
There is scientific debate about the role of alpha-MSH and its exact role in
the pigmentation process. This debate stems from the fact there is conflicting
evidence about (1) the lack of effect of alpha-MSH to effect melanogenesis in
human cell cultures and (2) the amount of secreted alpha-MSH is very low in
humans, unlike that of most other animals. However, there is some new evidence
that is supporting the MSH's critical role in melanogenesis.
3.7.3 Commercial Potential
There are many products available for self tanning, working in a variety of
ways, although most act by dyeing the skin through the use of vegetable-based
pigments. PA estimates that global sales of self tanning products were in
excess of US$ 300 million in 1998.
A-12
<PAGE>
3.7.4 Development Plans
In line with its current strategy, the Company has signed a research and
development agreement with a major pharmaceutical and healthcare products
company. Consequently, Keryx will evaluate its options following its
examination of the collaberation results.
3.8 KRX-613: Diabetes
Diabetes is among the most prevalent chronic diseases in the world. It is
estimated that in the United States, there are 10 million cases diagnosed
annually and another 5 million cases that remain undiagnosed. There are
estimated to be around 143 million adult diabetics in the world, and this
number is expected to more than double by 2025.
Insulin is used in the treatment of both types of diabetes, but while
essential in Type I (around 10-15% of all diabetics), it is only used in the
later stages of Type II diabetes, when diet and oral therapies are no longer
sufficient. About 40% of Type II diabetics are thought to be on insulin, which
together with Type I, means that more than half of all diabetic patients use
insulin.
KRX-613 would be an alternative to insulin therapy. In order for insulin to
act, it must bind to its specific receptor. The receptor harbors a protein
kinase domain (IRK), which transduces the signal intracellularly, leading to
increased glucose uptake.
3.8.1 Project Merits
PA believes that a number of experiments have presented evidence that for
insulin, intracellular signal transduction is a significant factor in the
biological response. It has been shown that insulin binding results in rapid
activation of the IRK (a necessary step for the lowering of blood glucose
concentration) via a cascade of phosphorylation of intracellular signalling
proteins, and the comparably rapid internalisation of the IRK. Thus PA believes
that targeting IRK with KRX-613 is an appropriate therapeutic approach.
3.8.2 Project Risks
Given the early stage of development of KRX-613, PA has identified no
project specific technology risks that are not described in Section 2.2-Risks
Associated with KinAce(TM).
3.8.3 Comercial Potential
The total world wide market for insulin is estimated at $2.8 billion, the
main companies involved being Lilly, Novo Nordisk and Hoechst Marion Roussel
who, between them, have 98% of the global market. The diabetes market is
growing rapidly and the insulin segment of this market is growing with it, at a
rate of around 13% per year.
3.8.4 Development Plans
Keryx has entered into a research & development agreement with Novo Nordisk
for the evaluation of KRX-613. Following evaluation of the results of these
tests, Keryx intends either to license KRX-613 or to continue its development
internally through pre-clinical and Phase I clinical trials.
A-13
<PAGE>
4. CONCLUSION
The discovery of pharmaceutical candidates has historically been, and
remains, serendipitous. Despite the advances in science in recent years, drugs
are still discovered by screening of thousands of substances against receptors
using robotic systems. Despite all the publicity over the sequencing of the
human genome, few companies have thus far capitalised on the research by using
the data to derive drug development candidates.
PA believes that Keryx is one of the few companies that has been able to
utilise publicly available peptide sequence data to derive drug candidates. The
amino acid sequences for kinases are open to all; it is the understanding of
the specific region against which to target a short chain protein that has
enabled Keryx to discover a significant portfolio of candidate drugs in a very
short time. One other advantage of the Company's approach is that it is not
involved in the basic research to sequence these proteins, a costly and time
consuming affair. Further, evidence to date suggests that the KinAce(TM)
approach to discovery has been sufficiently predictive that the Company does
not need to screen thousands of molecules against its target on the kinase.
Protein kinases are a large family of enzymes, which are implicated in a
great many disease conditions. PA has found no basis to deny the hypothesis
that the discovery approach adopted by Keryx cannot be applied to the
modulation of other enzymes.
The Company's portfolio of product candidates is still at an early stage,
however PA believes that each product candidate is based on sound scientific
principles. Few therapeutic peptides have been launched and it remains to be
seen whether some of the technical challenges can be overcome. However, the
Company has demonstrated its ability to generate a significant portfolio of
product candidates in a limited time and PA believes that, should any one
product fail in development, as is inevitable, Keryx has the ability to rapidly
identify a successor.
Yours sincerely
Dr Keith Redpath
For and on behalf of PA Strategy
Partners Ltd
A-14
<PAGE>
Inside back cover:
[Picture]
Critical regulatory Drug candidates
region determines derived from
specificity this region act as
of signal functional decoys
transduction to treat diseases or
pathways other medical conditions.
Computer-generated model of a protein kinase,
highlighting the critical regulatory region.
Accompanying text briefly describes picture.
<PAGE>
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You should rely only on the information contained in this prospectus. No
dealer, salesperson or other person is authorized to give information that is
not contained in this prospectus. This prospectus is not an offer to sell nor
does it constitute an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted. The information contained in this
prospectus is correct only as of the date of this prospectus, regardless of the
time of the delivery of this prospectus or any sale of these securities.
SHARES
[LOGO OF KERYX BIOPHARMACEUTICALS]
Common Stock
PROSPECTUS
Dealer Prospectus Delivery Obligation
Until , 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to delivering a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
, 2000
- --------------------------------------------------------------------------------
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<PAGE>
[UK Cover Page]
THIS DOCUMENT IS IMPORTANT. If you are in any doubt regarding the contents
of this prospectus, you should consult a person authorized under the Financial
Services Act of 1986 who specializes in the acquisition of shares and other
securities. This document has been prepared to comply with the Public Offers of
Securities Regulations 1995 and forms part of a Registration Statement on Form
S-1 (the "S-1 Document") under the United States Securities Act of 1933, as
amended (this document, together with the S-1 Document, being collectively
referred to as the "Document") and relates to Keryx Biopharmaceuticals, Inc.
("Keryx" or the "Company"). A copy of this Document has been delivered to the
Registrar of Companies in England and Wales for registration in accordance with
Regulation 4(2) of the Public Offers of Securities Regulations 1995.
The directors of Keryx whose names appear on page of this Document accept
responsibility for the information contained in this Document. To the best of
the knowledge and belief of such directors (who have taken all reasonable care
to ensure that such is the case), the information contained in this Document is
in accordance with the facts and does not omit anything likely to affect the
import of such information.
Application has been made for the shares of par value $.001 each of the
Company (the "Shares") issued and to be issued in connection with the offer
described in this Document (the "Offer") to be admitted to the Alternative
Investment Market of the London Stock Exchange plc ("AIM"). It is expected that
admission of the Shares to the AIM will become effective and dealings will
commence on , 2000. Application has been made to have the Shares approved
for listing on the Nasdaq National Market.
AIM is a market designed primarily for emerging or smaller companies to
which a higher investment risk than that associated with established companies
tends to be attached. A prospective investor should be aware of the potential
risks of investing in such companies and should make the decision to invest
only after careful consideration and consultation with his or her own
independent financial advisor. The rules of AIM are less demanding than those
of the Official List of the UK Listing Authority. It is emphasized that no
application is being made for admission of the Shares to the Official List.
Furthermore, neither the UK Listing Authority nor the London Stock Exchange has
approved the contents of this Document.
Prospective investors should be aware that an investment in Keryx involves a
high degree of risk. In particular, prospective investors should consider the
section entitled "Risk Factors" on page 5 of this Document.
- --------------------------------------------------------------------------------
[LOGO of KERYX BIOPHARMACEUTICALS, INC.]
KERYX BIOPHARMACEUTICALS, INC.
(incorporated under the laws of the State of Delaware, USA)
Offer of up to shares of par value $.001 each
(at a price of each)
and admission to listing on the Alternative Investment Market
of the London Stock Exchange and the Nasdaq National Market
<TABLE>
<CAPTION>
Issued, and to be
Shares following closing issued,
Authorized of the Offer fully paid
- ------------------ ------------------------------ -------------------------
Number Amount Number Amount
- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares of par value $.001 each
</TABLE>
- --------------------------------------------------------------------------------
In connection with the Offer, WestLB Panmure Limited and/or Roth Capital
Partners, Inc. may over-allot or effect transactions which stabilize or
maintain the market price of the Shares at levels above those which might
otherwise prevail in the open market. Such transactions may be effected on the
AIM, the Nasdaq National Market or otherwise. Such stabilizing, if commenced,
may be discontinued at any time.
In connection with the Offer, Keryx has granted to the underwriters an
option, exercisable for 45 days from the date of the Document, to purchase up
to additional Shares at the public offering price less the underwriting
discount. The underwriters may exercise such option solely for the purpose of
covering over-allotments, if any, in connection with this offering.
WestLB Panmure Limited and Roth Capital Partners, Inc. are advising the
Company, and no one else, in relation to the Offer and will not be responsible
to anyone other than the Company for providing the protections afforded to
their customers nor for providing advice in relation to the Offer, the contents
of this Document or any transaction or arrangement referred to herein. WestLB
Panmure Limited is regulated by The Securities and Futures Authority Limited
and is acting as Nominated Advisor and Nominated Broker to the Company for the
purposes of the Rules of AIM. Roth Capital Partners, Inc. is a US registered
broker-dealer.
--------------
Joint Global Coordinators
WestLB Panmure Limited
Roth Capital Partners, Inc.
Nominated Advisor and Broker
WestLB Panmure Limited
Dated: , 2000
<PAGE>
DIRECTORS AND OFFICERS, REGISTERED OFFICE AND ADVISORS
Directors and Officers
Morris Laster, M.D. (Director, Chairman and Chief Executive Officer)
Benjamin W. Corn, M.D. (President)
Ira Weinstein (Chief Financial Officer and Treasurer)
Peter M. Kash (Non-Executive Director)
S. Leslie Misrock (Non-Executive Director)
Mark H. Rachesky, M.D. (Non-Executive Director)
Lindsay A. Rosenwald, M.D. (Non-Executive Director)
Wayne Rothbaum (Non-Executive Director)
General Counsel and Secretary
Robert Trachtenberg, Esq.
Registered Office
1013 Centre Road, Wilmington, Delaware 19805, USA
Advisors
Joint Global Coordinators
Roth Capital Partners, Inc. WestLB Panmure Limited
24 Corporate Plaza New Broad Street House
Newport Beach, California 35 New Broad Street
92660, USA London EC2M ISQ, UK
AIM Nominated Advisor and Broker
WestLB Panmure Limited
New Broad Street House
35 New Broad Street
London EC2M ISQ, UK
Legal Advisors to the Company Legal Advisors to the Joint Global
As to US law Coordinators
Morgan, Lewis & Bockius LLP As to US law
101 Park Avenue Baer Marks & Upham LLP
New York, New York 10178, USA 805 Third Avenue
New York, New York 10022,
USA
As to English law As to English law
Morgan, Lewis & Bockius Ashurst Morris Crisp
2 Gresham Street Broadwalk House
London EC2V 7PE, UK 5 Appold Street
London EC2A 2HA, UK
Registered Auditors and Reporting Accountants
Somekh Chaikin
a member firm of KPMG International
216 Jaffa Road
Sha'arei Ha'ir, Jerusalem, Israel 94383
Underwriters
WestLB Panmure Limited Roth Capital Partners, Inc.
Technology Expert Registrar
PA Strategy Partners Ltd. American Stock Transfer and Trust
Cambridge Technology Centre Company
Melbourn 40 Wall Street
Hertfordshire SG8 6DP, UK New York, New York 10005, USA
Overseas Distribution
This Document does not constitute an offer to sell, or the solicitation of
an offer to buy, shares in any jurisdiction in which such offer or solicitation
is unlawful and, in particular, is not for distribution in Canada, Australia or
Japan. The shares have not been and will not be registerable under the
applicable securities laws of Canada, Australia or Japan and, subject to
certain exceptions, may not be offered or sold within Canada, Australia or
Japan or to any national, resident or citizen of Canada, Australia or Japan.
The distribution of this Document in other jurisdictions may be restricted by
law and therefore persons into whose possession this Document comes should
inform themselves about and observe such restrictions. Any failure to comply
with these restrictions may constitute a violation of the securities laws of
any such jurisdiction.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
12. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with this offering. All of
such amounts (except the SEC registration fee and the NASD filing fee) are
estimated.
<TABLE>
<S> <C>
SEC registration fee................................................ $19,800
NASDAQ listing fee.................................................. *
NASD filing fee..................................................... 9,125
Blue Sky fees and expenses.......................................... *
Printing and engraving costs........................................ *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Transfer Agent and Registrar fees and expenses...................... *
Miscellaneous....................................................... *
Total............................................................. $ *
=======
</TABLE>
- --------
*To be completed by amendment.
13. Indemnification of Directors and Officers.
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to
the fullest extent permitted by Delaware law.
Our certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, our directors will not be liable for monetary
damages for breach of the directors' fiduciary duty of care to us and our
stockholders. This provision does not eliminate the duty of care and, in
appropriate circumstances, equitable remedies including an injunction or other
forms of non-monetary relief would remain available under Delaware law.
Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they 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 reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
II-1
<PAGE>
Our bylaws also allow us to enter into indemnification contracts with our
officers and directors and to purchase insurance on behalf of any person we
are required or permitted to indemnify. We have obtained officer and director
liability insurance to cover liabilities that our officers and directors may
incur in connection with their services to us, including matters arising under
the Securities Act.
The Underwriting Agreement, filed as Exhibit 1.1, provides that the
underwriters named therein will indemnify us and hold us harmless and each of
our directors, officers or controlling persons from and against certain
liabilities, including liabilities under the Securities Act. The Underwriting
Agreement also provides that such underwriters will contribute to certain
liabilities of such persons under the Securities Act.
14. Recent Sales of Unregistered Securities.
During the past three years, we have sold the securities set forth below which
were not registered under the Securities Act:
(1) On October 26, 1998, we issued 4,600,000 shares of common stock to
several accredited investors for an aggregate purchase price of $4,600.
(2) In connection with an exclusive license agreement, we issued to
Children's Medical Center Corporation 537,025 shares of common stock and
ten-year warrants to purchase an aggregate of 250,000 shares of common
stock at a price of $0.01 per share.
(3) In connection with a consulting agreement, in November 18, 1999, we
issued 268,512 shares of common stock to Professor Shmuel Ben-Sasson.
(4) On November 18, 1999, we issued 29,465 shares of our Series A
preferred stock to several accredited investors for $100 per share.
(5) On December 6, 1999, we issued 27,000 shares of our Series A
preferred stock to several accredited investors for $100 per share.
(6) On December 20, 1999, we issued 23,000 shares of our Series A
preferred stock to several accredited investors for $100 per share.
(7) On January 6, 2000, we issued 25,700 shares of our Series A
preferred stock to several accredited investors for $100 per share.
(8) On January 25, 2000, we issued 13,480 shares of our Series A
preferred stock to several accredited investors for $100 per share.
(9) In connection with compensation due under a finder's agreement, on
January 25, 2000, we issued to Paramount Capital, Inc. a three-year warrant
to purchase 77,393 shares of common stock at a purchase price of $2.91 per
share.
(10) On December 14, 1999, we issued ten-year warrants to certain
holders of Series A preferred stock to purchase an aggregate of 202,555
shares of common stock at an exercise price of $0.01 per share.
We believe that the sales of the above securities were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder. The recipients of
securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the instruments representing such securities issued in such transactions.
All recipients either received adequate information about us or had adequate
access, through their relationships with us, to such information.
II-2
<PAGE>
15. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* --Form of Underwriting Agreement.
2.1 --Asset Purchase Agreement between Partec Ltd. and B.R.T.
Biopharmaceuticals Ltd., dated as of November 11, 1999.
2.2 --Asset Purchase Agreement between Partec Ltd. and Lakaro
Biopharmaceuticals, Inc., dated as of November 18, 1999.
3.1 --Certificate of Incorporation of Keryx Biopharmaceuticals, Inc, as
amended.
3.2 --Bylaws of Paramount Capital Pharmaceuticals, Inc.
4.1* --Specimen Common Stock Certificate.
4.2 --Certificate of Designations of Series A Preferred Stock for Lakaro
Biopharmaceuticals, Ltd., dated as of December 6, 1999.
4.3 --Form of Stock Purchase Agreement for the purchase of shares of
Common Stock.
4.4 --Form of Contribution Agreement for the holders of 12% Convertible
Notes of Partec Ltd.
4.5 --Form of Subscription Agreement for the purchase of shares of Series
A Preferred Stock.
4.6 --Stockholder Agreement between Lindsay Rosenwald and Morris Laster,
dated as of November 19, 1999.
4.7 --Warrant No. 1 for the Purchase of Shares of Common Stock between
Children's Medical Center Corporation and Lakaro Biopharmaceuticals,
Inc., dated as of November 18, 1999.
4.8 --Warrant No. 2 for the Purchase of Shares of Common Stock between
Children's Medical Center Corporation and Lakaro Biopharmaceuticals,
Inc., dated as of November 18, 1999.
4.9 --Form of Warrant for the Purchase of Shares of Common Stock between
certain holders of Series A Preferred Stock and Lakaro
Biopharmaceuticals, Inc., dated as of December 14, 1999.
4.10 --Warrant for the Purchase of Shares of Common Stock between Paramount
Capital, Inc. and Lakaro Biopharmaceuticals, Inc., dated as of
January 25, 2000.
5.1* --Opinion of Morgan, Lewis & Bockius LLP.
10.1 --1999 Share Option Plan.
10.2 --Employment Agreement between Morris Laster, M.D. and Lakaro
Biopharmaceuticals, Inc., dated as of November 19, 1999.
10.3 --Employment Agreement between Morris Laster, M.D. and Keryx (Israel)
Biopharmaceuticals Ltd., dated as of May 1, 2000.
10.4 --Employment Agreement between Benjamin Corn and Lakaro
Biopharmaceuticals, Inc., dated as of November 19, 1999.
10.5 --Employment Agreement between Benjamin Corn and B.R.T.
Biopharmaceuticals Ltd., dated as of July 15, 1999.
10.6** --Exclusive License Agreement between the Children's Medical Center
Corporation and Lakaro Biopharmaceuticals, Inc., dated as of November
18, 1999.
10.7** --License Agreement between Alfa Wassermann S.p.A. and Partec Ltd.,
dated as of November 12, 1998.
10.8 --Consulting Agreement between Shmuel Ben-Sasson, Ph.D. and Lakaro
Biopharmaceuticals, Inc., dated as of November 19, 1999.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.9** --Research Agreement between Yissum Research and Development Company
of the Hebrew University of Jerusalem and Lakaro Biopharmaceuticals,
Inc., dated as of November 18, 1999.
10.10** --Manufacturing Agreement between Opocrin S.p.A. and Partec Ltd.,
dated as of April 16, 1999.
10.11** --Manufacturing Agreement between Pharmaceutics International, Inc.
and Keryx Biopharmaceuticals, Inc., dated as of March 17, 2000.
10.12** --Research and Development Agreement between National Institutes of
Health Laboratories and Keryx Biopharmaceuticals, Inc., dated as of
April 10, 2000.
10.13** --Research Material Transfer and Collaboration Agreement between
Osteotech, Inc. and Lakaro Biopharmaceuticals, Inc., dated as of
December 27, 1999.
10.14** --Research Material Transfer and Collaboration Agreement between Novo
Nordisk A/S and SignalSite, Inc., dated as of June 17, 1999.
10.15** --Research Material Transfer and Collaboration Agreement dated as of
December 14, 1999.
10.16 --Management Services Agreement between Lakaro Biopharmaceuticals,
Inc. and B.R.T. Biopharmaceuticals Ltd., dated as of November 30,
1999.
10.17 --Finder Agreement between Paramount Capital, Inc. and Lakaro
Biopharmaceuticals, Inc., dated as of November 19, 1999.
10.18 --Lease Agreement between Arbel Hafakot and Partec Ltd. dated as of
December 26, 1996.
10.19 --Management Agreement between Sha'arei Ha'ir Investments, Ltd. and
Partec Ltd. dated as of December 2, 1996.
10.20* --Form of KinAce Scientific Advisory Board Agreement.
10.21* --Form of KRX-101 Scientific Advisory Board Agreement.
10.22 --Tenancy Agreement between Har Hotzvim Properties Ltd. and BRT
Biopharmaceuticals Ltd., dated as of December 13, 1999.
10.23 --Management Agreement between Park Meir Management Company Ltd. and
BRT Biopharmaceuticals Ltd., dated December 13, 1999.
21.1 --List of subsidiaries of Keryx Biopharmaceuticals, Inc.
23.1 --Consent of KPMG.
23.2* --Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5).
23.3 --Consent of PA Strategy Partners Ltd.
24.1 --Powers of Attorney (included on signature page).
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Confidential treatment requested.
(b) Financial Statement Schedules
Financial Statement Schedules are omitted because the information is
included in our financial statements or notes to those financial
statements.
16. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) The undersigned will provide to the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.
(2) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance on Rule 430A
II-4
<PAGE>
and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it is declared
effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 19th day of May, 2000.
Keryx Biopharmaceuticals, Inc.
By: /s/ Morris Laster, M.D.
-----------------------------------
Name: Morris Laster, M.D.
Title: Chairman of the Board and
Chief Executive Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Morris Laster, M.D. and Bob Trachtenberg, and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, any and all amendments thereto
(including post-effective amendments), any subsequent Registration Statements
pursuant to Rule 462 of the Securities Act of 1933, as amended, and any
amendments thereto and to file the same, with exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Morris Laster, M.D. Chairman and Chief May 19, 2000
______________________________________ Executive Officer
Morris Laster, M.D. (Principal
Executive Officer)
/s/ Benjamin W. Corn, M.D. President (Executive May 19, 2000
______________________________________ Officer)
Benjamin W. Corn, M.D.
/s/ Ira Weinstein Chief Financial Officer May 19, 2000
______________________________________ and Treasurer (Principal
Ira Weinstein Financial and Accounting
Officer)
/s/ Peter M. Kash Director May 19, 2000
______________________________________
Peter M. Kash
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ S. Leslie Misrock Director May 19, 2000
______________________________________
S. Leslie Misrock
/s/ Mark H. Rachesky, M.D. Director May 19, 2000
______________________________________
Mark H. Rachesky, M.D.
/s/ Lindsay A. Rosenwald, M.D. Director May 19, 2000
______________________________________
Lindsay A. Rosenwald, M.D.
/s/ Wayne Rothbaum Director May 19, 2000
______________________________________
Wayne Rothbaum
</TABLE>
II-7
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered into
this 11th day of November, 1999, by and between Partec Ltd., an Israeli company
("Seller"), and B.R.T Biopharmaceuticals, Ltd., an Israeli company ("Buyer");
WITNESSETH:
WHEREAS, Seller is a biopharmaceutical company engaged in the development of
products and technologies for the biopharmaceutical market.
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from Seller,
certain assets of Seller (the "Assets"), and Seller desires to transfer, and
Buyer is willing to assume, certain liabilities of Seller (the "Liabilities"),
all upon the terms and conditions and subject to the limited exceptions set
forth herein;
WHEREAS, Seller expects to terminate its employment or engagement of certain of
its employees and consultants involved with the Projects, and Buyer desires to
hire or retain certain of such employees or consultants, all upon the terms and
conditions set forth herein;
WHEREAS, Buyer is a wholly owned subsidiary of LRK Biopharmaceuticals, Inc.
("LRK") to which Seller intends to sell certain other assets and transfer and
assign certain other liabilities and agreements to which Seller is a party, all
upon the terms and conditions set forth in a separate agreement between Seller
and LRK; and
WHEREAS, in furtherance of the parties' mutual desire for specificity with
respect to the assets and liabilities to be transferred by Seller to Buyer
pursuant to this Agreement, the parties desire to provide for the scheduling
and, where appropriate, segregation of such assets and liabilities on a date
certain to occur prior to Closing (as hereinafter defined) (the "Determination
Date");
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements of the parties hereinafter set forth, the parties
hereto, intending to be legally bound, do hereby agree as follows:
Section 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Upon the terms and subject to the
condition of this Agreement, Buyer agrees to purchase, accept, and acquire from
Seller, and Seller agrees to sell, transfer, assign, convey, and deliver to
Buyer, at the Closing, all right, title, and interest of Seller in and to all of
the rights and assets, real, personal, and mixed, tangible or intangible, in the
Assets or otherwise relating primarily to the. Assets, as owned or held by
Seller, subject to such express exclusion. Without in any way limiting the
generality of the foregoing, the Assets shall include all right and interest
owned or held by Seller in the following:
a. Fixed Assets. All those physical items owned by Seller as of the
Determination Date, as indicated in Schedule 1.1.a.
b. Contracts. All of Seller's rights under those contracts,
agreements, licenses, commitments, arrangements, permissions and all other
legally binding arrangements, whether oral or written (the "Contracts") listed
in Schedule 1.1.b.
c. Business Records. All business and marketing records, including
accounting and operating records, asset ledgers, inventory records, budgets,
personnel records, payroll records, customer lists, employment and consulting
agreements, supplier lists, files, correspondence and mailing lists, promotional
materials and brochures, and other business records used or developed in
connection with the Assets (the "Business Records").
d. Accounts Receivable. All accounts receivable, including all
license fees and maintenance fees and charges owing or to become owing to Seller
under any of the Contracts, in each case relating to or arising from
<PAGE>
the Assets (the "Accounts Receivable"). As of the Determination Date, the
Accounts Receivable consist of the items listed in Schedule 1.1.e.
e. Insurance Policies. All insurance and reinsurance, surety,
bonding, or indemnity policies, binders, or contracts, and the benefits of any
prior insurance coverage to the extent still available, as established or
obtained with respect to the Seller's business (the "Insurance Policies"). As of
the Determination Date, the Insurance Policies consist of the items listed in
Schedule 1.1.f.
f. Claims. All claims Seller may have against any person relating to
or arising from the Assets or the Projects, including rights to recoveries for
damages or defective goods, to refunds, and insurance claims ("Claims").
1.2 Intent of the Parties. Although the Schedules to this Agreement are
intended to be complete, to the extent any rights or assets of Seller primarily
relate to the Projects or are otherwise necessary for the ownership and use of
the Assets and the conduct of the Projects, but are not properly itemized or do
not appear on the applicable Schedules where required, then, unless this
Agreement expressly excludes such rights or assets or otherwise provides
directly for Buyer to provide for or obtain such rights or assets in a different
way, the general language of Section 1.1 shall govern and such rights and assets
shall nonetheless be deemed transferred to Buyer at Closing. It is mutually
acknowledged that the Schedules to Section 1.1 are to be prepared as of the
Determination Date, and consequently the Assets so identified may vary on the
Closing Date because of the ongoing operations of the Projects. Further, because
the Determination Date will occur following the execution of this Agreement, the
omission of such Schedules until such time on or shortly after the Determination
Date as they have been completed and the parties have agreed on their contents
shall not impair the effectiveness of this Agreement.
1.3 Excluded Assets. Seller shall not sell or assign to Buyer, and Buyer
shall not purchase or accept assignment from Seller of, the assets identified in
Schedule 1.3 (the "Excluded Assets").
Section 2
ASSUMPTION OF LIABILITIES
2.1 Enumeration of Assumed Liabilities. At and after the Closing, Buyer
shall assume and agree to pay or perform only the liabilities and obligations of
Seller that arise out of the Assets and/or are expressly identified in this
Section 2.1 (the "Assumed Liabilities") or are represented by any other
covenant, agreement, or indemnity of Buyer in this Agreement or the other
agreements and instruments to be executed and delivered by Buyer in connection
with this Agreement. Subject to the express exclusions set forth in Section 2.2,
the Assumed Liabilities shall consist of the following:
a. Trade Payables. All accrued trade payables of Seller arising out
of the Assets as set forth in Schedule 2.1.a.
b. Accrued Taxes. All of Seller's liability for Israeli tangible or
intangible property taxes.
c. Contracts. All payment and performance obligations arising out of
or relating to the Contracts.
d. Employee Liabilities. Any employee liabilities relating to
present and past employees of the Seller with respect to plans, programs,
policies, commitments, and other benefit entitlement established or existing on
or prior to Closing (whether or not such liabilities are accrued or payable at
Closing, and whether or not such liabilities are contingent in nature),
including, without limitation:
(i) Any liability or obligation for workers' compensation.
(ii) Any current or future liabilities to employees retiring
on, before, or after Closing, and their dependents.
<PAGE>
(iii) Any current or future liabilities for benefits that
may have been accrued or earned by any employees associated with the Seller's
business on or before Closing under any pension, provident or management
insurance, or continuing education fund plans relating to service prior to the
Closing Date.
(iv) Any current of future liabilities for claims incurred
prior to Closing and related expenses with respect to any employees associated
with the Seller's business under any welfare or disability plans established or
existing at or prior to Closing, regardless of when filed with Buyer, Seller, or
the claims administrator for any such plan.
(v) Any retrospective premium on pension, savings, thrift,
or profit-sharing plan contribution relating to any employees associated with
Seller's business incurred or accrued prior to the Closing Date, regardless of
when invoiced or recorded.
(vi) Any monetary liability for severance payments that may
arise at any time in favor of any of Seller's employees under any plan, program,
policy, commitment, or other benefit entitlement, or by reason of law.
(vii) Any liability for outstanding leave pay or any other
payments owing to any employee pursuant to any personal or collective agreement
or any extension order.
2.2 Liabilities Not Assumed. Without in any way expanding the specificity
and limitation of Section 2.1, Buyer shall not assume or be responsible for any
of the following liabilities or obligations expressly identified in this Section
2.2 (the "Excluded Liabilities"):
a. Violations of Law. Any liability or obligation resulting from
violations of any applicable laws or regulations by Seller prior to the Closing
Date.
b. Incidents to Excluded Assets. Any liability or obligation
associated with any of the Excluded Assets.
c. Litigation. Any claim or litigation pending against Seller at the
time of the execution of this Agreement.
d. Liabilities Assumed by Buyer's Parent. Any liability or
obligation of Seller assumed by LRK pursuant to the agreement between Seller and
LRK, dated November 10, 1999.
2.3 Intent of the Parties. Although the Schedules to this Agreement are
intended to be complete, to the extent any liabilities of Seller arise out of
the Assets or are otherwise related to the Assets, but are not properly itemized
or do not appear on the applicable Schedules where required, then, unless this
Agreement otherwise specifically provides otherwise, the general language of
Section 2.1 shall govern and such liabilities, known or unknown, contingent or
otherwise, shall nonetheless be deemed assumed by Buyer at Closing. It is
mutually acknowledged that the Schedules to Section 2.1 are to be prepared as of
the Determination Date, and consequently the Assumed Liabilities so identified
may vary on the Closing Date because of the effect of the ongoing operations of
the Projects. Further, because the Determination Date will occur following the
execution of this Agreement, the omission of such Schedules until such time on
or shortly after the Determination Date as they have been completed and the
parties have agreed on their contents shall not impair the effectiveness of this
Agreement.
Section 3
PRICE AND PAYMENT
3.1 Purchase Price. The aggregate purchase price for the Assets (the
"Purchase Price") shall be the value of the Assumed Liabilities, together with
$77,293 plus Value Added Tax ("VAT").
<PAGE>
3.2 Method of Payment.
a. On the Closing Date, Buyer shall deliver to Seller an agreement,
substantially in the form attached hereto as Exhibit A, pursuant to which Buyer
assumes the Assumed Liabilities (the "Assignment and Assumption Agreement"); and
b. Within fourteen (14) days of the Closing Date, Buyer shall
transfer to the Seller's bank account held at Bank Leumi Leyisrael Ltd. under
account number 11220036 the amount of $72,340 plus VAT.
Section 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization. Seller is a company validly existing under the laws of
the State of Israel with the corporate power and authority to conduct its
business (including the Projects) and to own and lease its properties and assets
(including the Assets) and, as to the use and ownership of the Assets
specifically, is duly qualified or licensed to do business in the State of
Israel.
4.2 Power and Authority. Seller has the power and authority to execute,
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, has taken all necessary corporate action to authorize the
execution and delivery of this Agreement and such other agreements and
instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and the other agreements and instruments to be
executed and delivered by Seller in connection with the transactions
contemplated hereby shall be, the legal, valid, and binding obligations of
Seller, enforceable in accordance with their terms.
4.3 No Conflict. Neither the execution and delivery of this Agreement and
the other agreements and instruments to be executed and delivered in connection
with the transactions contemplated hereby or thereby, nor the consummation of
the transactions contemplated hereby or thereby, will violate or conflict with
(1) any law, regulation, ordinance, zoning requirement, governmental
restriction, order, judgment, or decree applicable to Seller or the Assets, (2)
any provision of the Articles of Association or other governing or
organizational instrument of Seller, or (3) except insofar as Required Contract
Consents, as defined below, are to be procured prior to Closing, any mortgage,
indenture, license, instrument, trust, contract, agreement, or other commitment
or arrangement to which Seller is a party or by which Seller or any of the
Assets is bound.
4.4 Required Government Consents. No approval, authorization,
certification, consent, variance, permission, license, or permit to or from, or
notice, filing, or recording to or with, any governmental authorities is
necessary for the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by Seller or the consummation by
Seller of the transactions contemplated hereby or thereby, or the ownership and
use of the Assets (including by Buyer).
4.5 Contract Consents. No approval, authorization, consent, permission, or
waiver to or from, or notice, filing, or recording to or with, any person is
necessary for (1) the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by Seller or the consummation by
Seller of the transactions contemplated hereby; (2) the transfer and assignment
to Buyer at Closing of the Contracts, or the Insurance Policies, or (3) the
ownership and use of the Assets (including by Buyer).
4.6 Good and Marketable Title. Buyer at Closing shall obtain good and
marketable title to all of the tangible Assets free and clear of all title
defects, liens, restrictions, claims, charges, security interests, or other
encumbrances of any nature whatsoever, including any mortgages, leases, chattel
mortgages, conditional sales contracts, collateral security arrangements, or
other title or interest retention arrangements.
<PAGE>
4.7 Condition of Property. All of the tangible Assets are in good
operating order, condition, and repair, ordinary wear and tear excepted, and are
suitable for use in the ordinary course.
4.8 Contracts. The Contracts listed in Schedule 1.1.b are valid, binding,
and enforceable in accordance with their terms and are in full force and effect.
To the best of Seller's knowledge, there are no existing defaults by Seller
under any such contracts and no act, event, or omission has occurred that,
whether with or without notice, lapse of time, or both, would constitute a
default thereunder.
4.10 Accounts Receivable. All Accounts Receivable are fully collectible
within the customary collection cycle, subject only to bad debts. All Accounts
Receivable call for payment to be made within at least ninety (90) days to the
principal office of the Seller or otherwise in accordance with Israeli law.
4.11 Conduct of Business.
a. Ordinary Course of Business: No Removal or Disposal of Assets.
Seller has operated its business in the ordinary course consistent with past
practices, and has not removed or disposed of any Assets as of September 30,
1999 except in the ordinary course.
b. No Material Adverse Change. Since September 30, 1999, there has
been no material adverse change in the Assets.
c. Absence of Particular Events. Since September 30, 1999, Seller
has not (1) suffered any damage or destruction adversely affecting the Assets in
the amount of $1,000 in any one instance; (2) increased the compensation payable
or to become payable to employees of Seller having annual earnings in excess of
$100,000 per year or declared any bonus; (3) incurred any liability or
obligation relating to the Assets other than in the ordinary course consistent
with past practice; (4) made any change in any method, practice, or principle of
accounting involving the Assets; (5) paid, loaned, or advanced any material
monetary amount or other asset to, or sold, transferred, or leased any asset to,
any employee except for normal compensation involving salary and benefits; or
(6) agreed to take any action described in this Section 4.11.c.
4.12 Litigation. Except as set forth in Schedule 4.12, no claim, action,
suit, proceeding, inquiry, hearing, arbitration, administrative proceeding, or
investigation (collectively, "Litigation") is pending, or, to Seller's best
knowledge, threatened against Seller, its present or former directors, officers,
or employees, or any party to any Contract, affecting, involving, or relating to
any of the Assets. Except as set forth in Schedule 4.12, no Litigation has been
brought within the last three years against Seller affecting, involving, or
relating to any of the Assets. Seller knows of no facts that could reasonably be
expected to serve as the basis for Litigation against itself (or the Buyer upon
acquisition of the Assets),its present or former directors, officers, or
employees, or any party to the, affecting, involving, or relating to the Assets.
4.13 Compliance With Laws. There is no outstanding or, to Seller's best
knowledge, threatened order, writ, injunction, or decree of any court,
governmental agency, or arbitration tribunal against Seller affecting,
involving, or relating to the Assets. Seller is not in violation of any
applicable federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree affecting,
involving, or relating to the Assets except where noncompliance has no material
adverse effect upon the Assets, and Seller has received no notices of any
allegation of any such violation. The foregoing shall be deemed to include laws
and regulations relating to patent, copyright, trademark, trade secret and
unfair competition laws, and to all other applicable laws, including equal
opportunity, wage and hour, and other employment matters, and antitrust and
trade regulation laws.
4.14 Personnel and Compensation
a. List of Personnel. Seller shall have delivered to Buyer prior to
Closing a true and complete list of the names and current compensation levels of
(1) all salaried or annual employees and (2) all consultants involved in its
business, to be set forth in Schedule 4.14.a.
<PAGE>
b. Compensation, etc. Except as set forth in Schedules 4.14.a. and
4.14.c., Seller is not subject to, and has no obligation under, any employment,
consulting, or collective bargaining contracts, deferred compensation, pension,
profit-sharing, bonus, stock option, stock appreciation, stock purchase, or
other nonqualified benefit or compensation commitments, benefit plans,
arrangements, or plans, including any welfare plans, fringe benefit
arrangements, of or pertaining to the present or former employees involved in
the Seller's business. Except as set forth in Schedule 2.1.a, Seller has
complied with all of its obligations under the foregoing in all material
respects.
c. Employee Benefit Plans. Schedule 4.14.c identifies all of the
retirement, provident, pension, management insurance, savings and continuing
education fund plans, by plan name and plan year, that Seller has established
for the benefit of persons who are or were involved in the Seller's business
(the "Plans"). Subsequent to the Closing, the Plans and their administration
shall become the sole responsibility of Buyer.
d. Compliance with Laws. To the best of Seller's knowledge, Seller
is in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and
occupational safety and health pertaining to the employees involved in the
Seller's business. There is no labor strike, dispute, slowdown, or stoppage
pending or threatened against Seller. Apart from the litigation described in
Schedule 4.12.a, to the best of Seller's knowledge, there are no charges,
investigations, administrative proceedings, or formal complaints of
discrimination pending or, to the knowledge of Seller before any agency or court
against Seller, and, to the knowledge of the Seller, no basis for any such
charge, investigation, administrative proceeding, or complaint exists.
4.15 Insurance Policies. Schedule 1.1.f lists all Insurance Policies
relating to the Seller's business or the Assets in force as of the Determination
Date, naming Seller as an insured or beneficiary or as a loss-payable payee or
for which Seller has paid or is obligated to pay all or part of the premiums.
Seller has not received notice of any pending or threatened termination or
retroactive premium increase with respect thereto; and Seller is in compliance
with all conditions contained therein, the noncompliance with which could result
in termination of insurance coverage or increased premiums for prior or future
periods. There are no pending material claims against such insurance by Seller
as to which insurers have denied liability or are defending under any
reservation of rights, and, to the knowledge of Seller, there exists no material
claim under such insurance that has not been properly filed by Seller.
4.16 Broker's or Finder's Fees. Seller has not authorized any person to act
as broker or finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement in any manner that may or will
impose liability on Buyer.
4.17 Schedules Yet to Be Prepared. The Schedules to be prepared as of the
Determination Date shall be true and complete when submitted for inclusion in
this Agreement and shall set forth all information sought by this Agreement with
respect thereto.
4.18 Disclosure. No representation, warranty, or statement made by Seller
in this Agreement or in any document or certificate furnished or to be furnished
to Buyer pursuant to this Agreement contains or will contain any untrue
statement or omits or will omit to state any fact necessary to make the
statements contained herein or therein not misleading. Seller has disclosed to
Buyer all facts known or reasonably available to Seller that are material to the
Assets and the Assumed Liabilities.
4.19 Truth at Closing. All of the representations, warranties, and
agreements of Seller contained in this Article IV shall be true and correct and
in full force and effect on and as of the Closing Date.
4.20 Materiality Defined. For purposes of this Agreement, each reference to
any material adverse effect upon the Assets, or any other reference to a
material item or circumstance, shall be construed to include any act, omission,
event, or circumstances that would entail loss, liability, damage, or expense to
Buyer (with respect to the rights and benefits expected by Buyer to be obtained
under this Agreement) of $50,000 in any single instance, whether under one or
more representations, warranties, covenants, or agreements contained herein, or
$200,000 in the aggregate, taken as a whole under all representations,
warranties, covenants, and agreements contained herein.
<PAGE>
4.21 Disclaimer. Except as expressly set forth in this Agreement or in any
document, certificate, agreement, or other instrument furnished or to be
furnished to Buyer pursuant to this Agreement, SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation validly existing and in good
standing under the laws of the State of Delaware with the corporate power and
authority to conduct its business and to own and lease its properties and
assets. Buyer is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each state in which the failure to be so
qualified or licensed would have a material adverse effect on its financial
condition or operations.
5.2 Power and Authority. Buyer has the power and authority to execute,
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, and Buyer has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and such other agreements
and instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and, when such other agreements and instruments are
executed and delivered, the other agreements and instruments to be executed and
delivered by Buyer in connection with the transactions contemplated hereby and
thereby shall be, the legal, valid, and binding obligation of Buyer, enforceable
in accordance with their terms.
5.3 Broker's or Finder's Fees. Buyer has not authorized any person to act
as broker, finder, or in any other similar capacity in connection with the
transactions contemplated by this Agreement.
5.4 No Conflict. Neither the execution and delivery by Buyer of this
Agreement and of the other agreements and instruments to be executed and
delivered by Buyer in connection with the transactions contemplated hereby or
thereby, nor the consummation by Buyer of the transactions contemplated hereby
or thereby will violate or conflict with (1) any law, regulation, ordinance,
governmental restriction, order, judgement, or decree applicable to Buyer, or
(2) any provision of any charter, bylaw, or other governing or organizational
instrument of Buyer.
Section 6
CONDUCT OF THE PROJECTS PRIOR TO CLOSING
6.1 Course of Business. Seller shall conduct the Projects diligently and
substantially in the same manner as heretofore conducted, and Seller shall not
institute any new methods of accounting or operation or engage in any
transaction or activity, enter into any agreement, or make any commitment,
except in the ordinary course of such business and consistent with past
practice.
6.2 Organization. Seller shall use its best efforts to preserve the Assets
intact and to preserve for Buyer its relationship with licensors, consultants,
suppliers, and others having regular business relations with it.
6.3 Prohibited Actions. In no event, without the prior written consent of
Buyer, shall Seller:
a. Liens. Permit any of the Assets to be subjected to any mortgage,
pledge, lien, or encumbrance, except for Permitted Liens.
<PAGE>
b. Disposition of Assets. Waive any claims or rights of substantial
value respecting the Assets, or sell, transfer, or otherwise dispose of any of
the Assets, except in the ordinary course of business and consistent with past
practice.
c. Increases in Compensation. Increase the compensation of officers,
employees, or consultants, except in the ordinary course of business.
6.4 Insurance; Property. Seller shall maintain the Insurance Policies in
effect and shall at all times continue to insure all property constituting the
Assets against all ordinary and insurable casualty risks.
6.5 No Default. Seller shall not perform any act or omit to perform any
act, or permit any act or omission, that will cause a breach or default of any
covenant, agreement, warranty, or representation in this Agreement.
Section 7
COVENANTS OF SELLER AND BUYER PRIOR TO CLOSING
7.1 Access. From the date of this Agreement to the Closing Date, Seller
shall (1) provide Buyer with such information as Buyer may from time to time
reasonably request with respect to the transactions contemplated by its
Agreement; (2) provide Buyer and its officers, counsel, and other authorized
representatives access during regular business hours and upon reasonable notice
to the books, records, and offices of Seller, as Buyer may from time to time
reasonably request; and (3) permit Buyer to make such inspections thereof as
Buyer may reasonably request. Any investigation shall be conducted in such a
manner as not to interfere unreasonably with the operation of the business of
Seller.
7.2 Updating of Information. From the date of this Agreement to the
Closing Date, Seller shall deliver revised or supplementary schedules to this
Agreement, containing accurate information as of the Closing Date, in order to
enable Buyer to confirm the accuracy of Seller's representations and warranties
and otherwise to give full effect to the provisions of this Agreement. Such
revised or supplementary schedules shall not modify or be deemed part of this
Agreement unless agreed by Buyer in writing with reference to the specific
schedules to be so treated. Provided that the Schedules prepared as of the
Determination Date are true and correct when submitted for inclusion, the
foregoing obligation to furnish updated information shall apply to such
Schedules only insofar as material events or changes occur such as to make the
contents of such schedules unreliable or misleading.
7.3 Third-Party Certificates. Seller shall use its best efforts to procure
for the benefit of Buyer consent, assignment, and/or estoppel certificates in
such form, from such third parties, and with respect to such Assets to be
assigned to Buyer at Closing as Buyer may specify on or before Closing.
Section 8
CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of Seller to be performed hereunder shall be
subject to the satisfaction (or waiver by Seller) at or prior to the Closing
Date of each of the following conditions:
8.1 Representations and Warranties True at Closing Date. Buyer's
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date and Buyer shall have complied with the covenants and agreements set
forth herein to be performed by it on or before the Closing Date.
8.2 Litigation. No Litigation shall be threatened or pending against Buyer
or Seller before any court or governmental agency that, in the reasonable
opinion of counsel for Seller, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
<PAGE>
8.3 Documents Satisfactory in Form and Substance. All agreements,
certificates, and other documents delivered by Buyer to Seller hereunder shall
be in form and substance satisfactory to counsel for Seller, in the exercise of
such counsel's reasonable judgment.
<PAGE>
Section 9
CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of Buyer to be performed hereunder shall be subject
to the satisfaction (or the waiver by Buyer) at or prior to the Closing Date of
each of the following conditions:
9.1 Representations and Warranties True at Closing Date. Seller's
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date and Seller shall have complied with the covenants and agreements
set forth herein to be performed by it on or before the Closing Date.
9.2 Performance. Seller shall have performed and complied with all
agreements, obligations, and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
9.3 Investigations. Neither any investigation of Seller by Buyer, nor the
Schedules hereto, nor any other document delivered to Buyer as contemplated by
this Agreement, shall have revealed any facts or circumstances that, in the good
faith judgment of Buyer, reflect in a material adverse way on the Assets or the
Assumed Liabilities.
9.4 Consents. All Required Government Consents and Required Contract
Consents, to the extent required, shall have been obtained.
9.5 No Litigation. No Litigation shall be threatened or pending against
Buyer or Seller before any court or governmental agency that, in the reasonable
opinion of counsel for Seller, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.6 No Material Adverse Change. From the date of this Agreement until the
Closing Date, Seller shall not have suffered any material adverse change
(whether or not such change is referred to or described in any supplement to the
Schedules) to the Assets or the Assumed Liabilities.
Section 10
CLOSING
10.1 Closing. Unless this Agreement is first terminated as provided in
Article XV, the closing of the purchase and sale of the Assets and the transfer
and assumption of the Assumed Liabilities (the "Closing") shall take place at
the offices of Seller at 9.00 o'clock (1) on the first date on or after
November _____, 1999, that falls one (1) business day after all conditions to
Closing have been satisfied or duly waived, or (2) on such other time, date, and
place as the parties may agree in writing (the "Closing Date").
10.2 Actions at Closing. At Closing, Buyer and Seller shall take the
following actions, in addition to such other actions as may otherwise be
required under this Agreement:
a. Conveyance Instruments. Seller shall deliver to Buyer such
warranty deeds, bills of sale, assignments, and other instruments of conveyance
and transfer as Buyer may reasonably request to effect the assignment to Buyer
of the Assets.
b. Payment. Buyer shall transfer the amount of $185,772 to the
Seller's bank account as detailed in Section 3.2(b) and shall deliver to
Seller an assumption agreement pursuant to which Buyer assumes and agrees to pay
and perform the Assumed Liabilities.
c. Board and Shareholder Resolutions. Each party shall furnish to
the other certified copies of appropriate resolutions of the board of directors
and shareholders (if required) of each party required to implement the
transactions contemplated by this Agreement.
<PAGE>
d. Transfer of Plans. The Seller shall transfer the Plans maintained
by the Seller for the benefit of its employees to the Buyer and shall all such
things as may be necessary to procure such transfer.
10.3 Further Assurances. At and after the Closing, without further
consideration, Seller shall take all such other action and shall procure or
execute, acknowledge, and deliver all such further certificates, conveyance
instruments, consents, and other documents as Buyer or its counsel may
reasonably request (1) to vest in Buyer, and perfect and protect Buyer's right,
title, and interest in, and enjoyment of, the Assets or (2) to ensure more
effectively the compliance of Seller with its agreements, covenants, warranties,
and representatives under this Agreement.
Section 11
COVENANTS OF SELLER AND BUYER FOLLOWING CLOSING
11.1 Tax Matters.
a. Seller's Right and Responsibility for Preclosing Tax Matters.
Seller shall have the right and responsibility to direct the handling of all tax
matters affecting or relating to the conduct of the Projects prior to the
Closing Date, including the prosecution of all administrative and judicial
remedies, the settlement of all issues, and the execution of agreements,
consents, or waivers, extending the statute of limitations.
b. Buyer's Cooperation. Buyer shall provide Seller such assistance
as it may reasonably request in connection with matters relating to taxes,
including information with respect to Seller's preparation of any returns of
taxes, any audit or other examination by any taxing authority, any judicial or
administrative proceeding relating to Seller's liability for taxes, or any
claims arising hereunder respecting the Projects. Buyer shall retain and provide
Seller with records or information which may be relevant to any such return,
audit, examination, proceeding, or determination, and Buyer shall retain all
such books and records for so long as necessary in keeping with applicable
statutes of limitations.
11.2 Transfer Taxes. All sales, transfer, and similar taxes and fees
(including all recording fees, if any) incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Buyer and
Buyer shall file all necessary documentation with respect to such taxes.
11.3 No-Compete. For a period of five (5) years after the Closing Date,
Seller shall not engage in the business of acquiring, developing, marketing,
distributing, licensing, any project similar to, competitive with, or
substitutable for, the Projects, anywhere in the world, except as a customer or
authorized distributor of Buyer or otherwise with Buyer's consent (which may be
withheld in Buyer's sole discretion). Seller acknowledges and agrees that the
current market for the Projects extends throughout the entire world and it is
therefore reasonable to prohibit Seller from competing with Buyer anywhere in
such territory. Seller shall not engage in any such activity, directly or
indirectly, on its own behalf or in the service of or on behalf of others.
Section 12
CONFIDENTIALITY
12.1 Confidentiality Obligation of Buyer Prior to Closing. Until Closing
(and, if this Agreement is terminated for any reason, forever thereafter), Buyer
shall, and shall use its best efforts to cause its personnel and agents to, hold
in strict confidence, not disclose to any person without the prior written
consent of Seller, and not use in any manner except in connection with the
transactions contemplated hereby, any confidential business or technical
information obtained from Seller in connection with the transactions
contemplated hereby concerning the Projects or the Assets. This obligation shall
cease to apply to Buyer upon the occurrence of Closing. In the event that this
Agreement terminates for any reason, Buyer shall return to Seller or destroy all
materials in its possession containing any such confidential information,
including all copies, extracts, adaptations, and transcriptions thereof.
<PAGE>
12.2 Confidentiality Obligation of Seller Following Closing. Following the
occurrence of Closing, Seller shall, and shall use its best efforts to cause its
personnel and agents to, hold in strict confidence, not disclose to any person
without the prior written consent of Buyer, and not use in any manner
whatsoever, any confidential business or technical information remaining in its
possession concerning the Projects or the Assets. Promptly following Closing,
Seller shall surrender to Buyer or destroy all materials remaining in its
possession containing any such confidential information, including all copies,
extracts, adaptations, and transcriptions thereof.
12.3 Permitted Disclosures. Notwithstanding Sections 12.1 and 12.2, either
party may disclose confidential information (1) where necessary to any
regulatory authorities or governmental agencies pursuant to legal process or (2)
if required by court order or decree.
12.4 Scope of Confidential Information. For purposes of this Agreement,
information shall not be deemed confidential (1) if such information is
available in full from public sources; (2) if such information is received from
a third party not under an obligation to keep such information confidential; or
(3) if the recipient can conclusively demonstrate that such information was
independently developed by the recipient.
Section 13
TERMINATION PRIOR TO CLOSING
13.1 Termination of Agreement. This Agreement may be terminated at any time
prior to the Closing by:
a. Mutual Consent. By the mutual consent of Buyer and Seller;
b. Deadline. By Buyer or Seller, in writing, without liability, if
the Closing shall not have occurred on or before November 30, 1999; or
c. Material Breach. By Buyer or Seller in writing, without
liability, if the other party shall (1) fail to perform in any material respect
its agreements contained herein required to be performed by in on or prior to
the Closing Date or (2) materially breach any of its representations,
warranties, agreements, or covenants contained herein, provided that such
failure or breach is not cured within ten (10) days after such party has been
notified of the other party's intent to terminate this Agreement pursuant
hereto.
13.2 Termination of Obligations. Termination of this Agreement pursuant to
this Article XIII shall terminate all obligations of the parties hereunder,
except for the obligations set forth in Article XII.
Section 14
ARBITRATION
14.1 Appointment of Arbitrator. The parties shall endeavour in good faith
to resolve amicably any dispute concerning this Agreement. In the event that any
such dispute is not amicably resolved, it shall be resolved by binding
arbitration before a single arbitrator. In the absence of agreement by the
parties hereto to the appointment of the arbitrator, either party hereto may
apply to the Chairman of the Jerusalem Bar Association with a request to make
such appointment. The appointment made by the said Chairman shall be binding on
the parties hereto. The arbitrator shall be bound by substantive applicable law
and shall state in writing the reasons for his award/decision. In connection
with any arbitration hereunder, the attorneys (or attorneys in any law firms
with which those attorneys are associated) who have represented the parties in
connection with the negotiation and/or drafting of this Agreement shall be
precluded from serving as an arbitrator, even if designated by the parties; and
shall not be precluded from (a) submitting expert or other testimony; or (b)
representing any of those same parties in the arbitration or any related
proceedings.
14.2 Language and Location of Arbitration. Any arbitration hereunder shall
be conducted in English, and the arbitrator shall sit in Jerusalem unless
otherwise agreed by the parties. Nothing in the preceding sentence shall
preclude the taking of evidence in a place other than Jerusalem (or such other
place as
<PAGE>
is agreed) if the arbitration panel deems that appropriate.
14.3 Cooperation. In the event that any party to this Agreement is not a
formal participant in an arbitration proceeding hereunder, such party shall
cooperate with any reasonable request, from the arbitrator or from any
participant in such arbitration proceeding, for the producing of evidence. The
arbitrator will be entitled to request the submission of expert testimony.
14.4 Recourse to Court. Nothing in Article XIV shall preclude any party
from making an appropriate application to a court of competent jurisdiction for
injunctive or other equitable relief ancillary to the arbitration proceeding.
14.5 Confidentiality of Arbitration. Unless the participants in an
arbitration proceeding hereunder and the party producing evidence otherwise
agree in writing, the arbitrator and the participants in an arbitration
proceeding hereunder shall take all reasonable steps to ensure the
confidentiality of all evidence produced in connection with any such arbitration
proceeding. As used in this clause, "evidence" includes documents and testimony
(whether written or oral), and "producing evidence" includes giving, providing,
or otherwise furnishing evidence.
Section 15
MISCELLANEOUS
15.1 Entire Agreement. This Agreement (including the Schedules), and the
other certificates, agreements, and other instruments to be executed and
delivered by the parties in connection with the transactions contemplated
hereby; constitute the sole understanding of the parties with respect to the
subject matter hereof. No amendment, modification, or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
15.2 Parties Bound by Agreement; Successors and Assigns. The terms,
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Without the prior written consent of the other party, Buyer may assign
its rights, duties, or obligations hereunder or any part thereof to any other
person or entity, which shall thereupon become Buyer, provided that at the time
of such assignment Buyer unconditionally and irrevocably guarantees the payment
and performance of any duties or obligations so assigned.
15.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
15.4 Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
15.5 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party that is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar).
15.6 Expenses. Seller and Buyer shall each pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accounts, and counsel.
<PAGE>
15.7 Notices. Any notice, request, instruction, or other document to be
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, if to Seller to:
Partec, Ltd.
216 Jaffa Road
Jerusalem 94383 Israel
Attention: Morris Laster
if to Buyer to:
B. R. T. Biopharmaceuticals, Ltd.
216 Jaffa Road
Jerusalem 94383 Israel
Attention: General Counsel
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail.
15.8 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Israel without giving effect to the
principles of conflicts of law thereof.
15.9 Public Announcements. Seller and Buyer shall consult with each other
before issuing any press releases or otherwise making any public statements with
respect to this Agreement and the transactions contemplated hereby. Neither
Seller nor Buyer shall issue any such press release or make any public statement
without the agreement of the other party, except as such party's counsel advises
in writing may be required by law.
15.10 Third-Party Beneficiaries. With the exception of (1) the parties to
this Agreement and (2) the Buyer Group and the Seller Group with respect to the
matters inuring to their benefit under Article XIII, there shall exist no right
of any person to claim a beneficial interest in this Agreement or any rights
occurring by virtue of this Agreement.
15.11 "Including." Words of inclusion shall not be construed as terms of
limitation herein, so that references to "included" matters shall be regarded as
nonexclusive, noncharacterizing illustrations.
15.12 References. Whenever reference is made in this Agreement to any
Article, Section, or Schedule, such reference shall be deemed to apply to the
specified Article or Section of this Agreement or the specified Schedule to this
Agreement.
15.13 Survival of Agreements. All Covenants, agreements, representations,
and warranties made herein shall survive the execution and delivery of this
Agreement and the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed on its behalf on the date indicated.
B.R.T. Biopharmaceuticals, Ltd.
/s/ Bob Trachtenberg
- ---------------------------
By: Bob Trachtenberg
<PAGE>
Title: Director
Partec Ltd.
/s/ Morris Laster
- ----------------------------
By: Morris Laster
Title: CEO
<PAGE>
The schedules and exhibits to this agreement have not been included because they
have been otherwise disclosed or because they are not material to an investment
decision. Such schedules and exhibits will be furnished to the Commission
supplementally upon request.
<PAGE>
Exhibit 2.2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered into this
18th day of November, 1999, by and between Partec Ltd., an Israeli company
("Seller"), and Lakaro Biopharmaceuticals, Inc., a Delaware corporation
("Buyer");
WITNESSETH:
WHEREAS, Seller is a biopharmaceutical company engaged in the development of
products and technologies for the biopharmaceutical market.
WHEREAS, Seller has acquired and/or developed three projects known as
Sulodexide, the Oncological Gene Medicine project, and the Bone Marrow
Transplation Site project (the "Projects");
WHEREAS, The Projects constitute the entire active part of Seller's business;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to buy from Seller,
all the assets of Seller relating to the Projects and certain other assets
belonging to Seller (the "Acquired Assets"), and Seller desires to transfer, and
Buyer is willing to assume, certain liabilities of Seller (the "Liabilities"),
all upon the terms and conditions and subject to the limited exceptions set
forth herein;
WHEREAS, Seller expects to terminate its employment or engagement of certain of
its employees and consultants involved with the Projects, and Buyer desires to
hire or retain certain of such employees or consultants, all upon the terms and
conditions set forth herein;
WHEREAS, Buyer maintains a wholly owned subsidiary (the "subsidiary") to which
Seller intends to sell certain fixed assets and transfer and assign certain
liabilities and agreements to which Seller is a party, all upon the terms and
conditions set forth in a separate agreement between seller and the subsidiary;
and
WHEREAS, in furtherance of the parties' mutual desire for specificity with
respect to the assets and liabilities to be transferred by Seller to Buyer as
part of the Projects, the parties desire to provide for the scheduling and,
where appropriate, segregation of such assets and liabilities on a date certain
to occur prior to Closing (as hereinafter defined) (the "Determination Date");
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, and agreements of the parties hereinafter set forth, the parties
hereto, intending to be legally bound, do hereby agree as follows:
Section 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Acquired Assets. Upon the terms and subject to the
condition of this Agreement, Buyer agrees to purchase, accept, and acquire from
Seller, and Seller agrees to sell, transfer, assign, convey, and deliver to
Buyer, at the Closing, all right, title, and interest of Seller in and to all of
the rights and assets, real, personal, and mixed, tangible or intangible, in the
Acquired Assets or otherwise relating primarily to the Acquired Assets, as owned
or held by Seller, subject to such express exclusion. Without in any way
limiting the generality of the foregoing, the Acquired Assets shall include all
right and interest owned or held by Seller in the following:
a. Claims. All claims Seller may have against any person relating
to or arising from the Acquired Assets, including rights to recoveries for
damages or defective goods, to refunds, insurance claims, and chooses in action
("Claims").
b. Inventories. All inventories of, relating to, or arising out of
the Projects (the "Inventory"). As of the Determination Date, the Inventory
consists of the Inventory listed by category and volume level in Schedule 1.1.b.
<PAGE>
c. Contracts. All of Seller's rights under contracts, agreements,
licenses, commitments, arrangements, permissions and all other legally binding
arrangements, whether oral or written, respecting the Acquired Assets (the
"Contracts"). As of the Determination Date, the Contracts consist of the items
listed in Schedule 1.1.c.
d. Business Records. All business and marketing records, including
accounting and operating records, asset ledgers, inventory records, budgets,
personnel records, payroll records, customer lists, employment and consulting
agreements, supplier lists, files, correspondence and mailing lists, promotional
materials and brochures, and other business records used or developed in
connection with the Acquired Assets (the "Business Records").
e. Authorizations. All governmental approvals, authorizations,
certifications, consents, variances, permissions, licenses, and permits to or
from, or filings, notices, or recordings to or with, federal, state, and local
governmental authorities (the "Authorizations"), but subject, as to the
reassignability to Buyer, to the procurement of the Required Government Consents
(listed in Schedule 4.4). As of the Determination Date, the Authorizations
consist of the items listed in Schedule 1.1.e.
f. Intellectual Property. All patents, trademarks, service marks,
trade names, and copyrights (including registrations, licenses, and applications
pertaining thereto), and all other intellectual property rights, trade secrets,
and other proprietary information, processes, and formulae used in the Projects
or otherwise necessary for the ownership and use of the Acquired Assets and the
conduct of the Projects (the "Intellectual Property"). As of the Determination
Date, the Intellectual Property includes the filed patent applications and
issued patents listed in Schedule 1.1.f.
g. Business Interests, Participations, and Ownership Positions.
Those interests, participations, and ownership positions held by Seller in any
corporation, partnership, joint venture, co-marketing arrangement, or similar
enterprise or undertaking as set forth in Schedule 1.1.g.
1.2 Intent of the Parties. Although the Schedules to this Agreement are
intended to be complete, to the extent any rights or assets of Seller primarily
relate to the Projects or are otherwise necessary for the ownership and use of
the Acquired Assets and the conduct of the Projects, but are not properly
itemized or do not appear on the applicable Schedules where required, then,
unless this Agreement otherwise provides directly for Buyer to provide for or
obtain such rights or assets in a different way, the general language of Section
1.1 shall govern and such rights and assets shall nonetheless be deemed
transferred to Buyer at Closing. It is mutually acknowledged that the Schedules
to Section 1.1 are to be prepared as of the Determination Date, and consequently
the Acquired Assets so identified may vary on the Closing Date because of the
effect of the ongoing operations of the Projects. Further, because the
Determination Date will occur following the execution of this Agreement, the
omission of such Schedules until such time on or shortly after the Determination
Date as they have been completed and the parties have agreed on their contents
shall not impair the effectiveness of this Agreement.
1.3 Excluded Assets. Seller shall not sell or assign to Buyer, and Buyer
shall not purchase or accept assignment from Seller of, the assets identified in
Schedule 1.3 (the "Excluded Assets").
Section 2
ASSUMPTION OF LIABILITIES
2.1 Enumeration of Assumed Liabilities. At and after the Closing, Buyer
shall assume and agree to pay or perform only the liabilities and obligations of
Seller that arise out of the Projects or the Acquired Assets and/or are
expressly identified in this Section 2.1 (the "Assumed Liabilities") or are
represented by any other covenant, agreement, or indemnity of Buyer in this
Agreement or the other agreements and instruments to be executed and delivered
by Buyer in connection with this Agreement. Subject to the express exclusions
set forth in Section 2.2, the Assumed Liabilities shall consist of the
following:
<PAGE>
a. Trade Payables. All accrued trade payables of Seller arising out of
the Acquired Assets and the Projects as set forth in Schedule 2.1.a.
b. Contracts. All payment and performance obligations arising out of
or relating to the Contracts.
c. Other Accrued Liabilities. Any other liabilities set forth in
Schedule 2.1.c.
2.2 Liabilities Not Assumed. Without in any way expanding the specificity
and limitation of Section 2.1, Buyer shall not assume or be responsible for any
of the following liabilities or obligations expressly identified in this Section
2.2 (the "Excluded Liabilities"):
a. Violations of Law. Any liability or obligation resulting from
violations of any applicable laws or regulations by Seller prior to the Closing
Date or infringement of third-party rights or interests.
b. Incidents to Excluded Assets. Any liability or obligation
associated with any of the Excluded Assets.
c. Litigation. Any claim or litigation pending against Seller at the
time of the execution of this Agreement.
d. Liabilities Assumed by Buyer's Subsidiary. Any liability or
obligation of Seller assumed by Buyer's Israeli subsidiary pursuant to the
agreement between Seller and that subsidiary, dated November 10, 1999.
2.3 Intent of the Parties. Although the Schedules to this Agreement are
intended to be complete, to the extent any liabilities of Seller arise out of
the Projects or are otherwise related to the Acquired Assets and the conduct of
the Projects, but are not properly itemized or do not appear on the applicable
Schedules where required, then, unless this Agreement otherwise specifically
provides otherwise, the general language of Section 2.1 shall govern and such
liabilites, known or unknown, contingent or otherwise, shall nonetheless be
deemed assumed by Buyer at Closing. It is mutually acknowledged that the
Schedules to Section 2.1 are to be prepared as of the Determination Date, and
consequently the Assumed Liabilities so identified may vary on the Closing Date
because of the effect of the ongoing operations of the Projects. Further,
because the Determination Date will occur following the execution of this
Agreement, the omission of such Schedules until such time on or shortly after
the Determination Date as they have been completed and the parties have agreed
on their contents shall not impair the effectiveness of this Agreement.
Section 3
PRICE AND PAYMENT
3.1 Purchase Price. The aggregate purchase price for the Acquired Assets
(the "Purchase Price") shall be the the value of of the Assumed Liabilities
being assumed by Buyer and the forgiveness of $570,361 of long-term debt of
Seller held by Buyer.
3.2 Method of Payment. On the Closing Date, Buyer shall deliver to Seller
an agreement, substantially in the form attached hereto as Exhibit A, pursuant
to which Buyer assumes the Assumed Liabilities (the "Assignment and Assumption
Agreement").
<PAGE>
Section 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization. Seller is a private company validly existing under the
laws of the State of Israel with the corporate power and authority to conduct
its business (including the Projects) and to own and lease its properties and
assets (including the Acquired Assets).
4.2 Power and Authority. Seller has the power and authority to execute,
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, has taken all necessary corporate action to authorize the
execution and delivery of this Agreement and such other agreements and
instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and the other agreements and instruments to be
executed and delivered by Seller in connection with the transactions
contemplated hereby shall be, the legal, valid, and binding obligations of
Seller, enforceable in accordance with their terms.
4.3 No Conflict. Neither the execution and delivery of this Agreement and
the other agreements and instruments to be executed and delivered in connection
with the transactions contemplated hereby or thereby, nor the consummation of
the transactions contemplated hereby or thereby, will violate or conflict with
(1) any law, regulation, ordinance, zoning requirement, governmental
restriction, order, judgment, or decree applicable to Seller, the Projects, or
the Acquired Assets, (2) any provision of the Articles of Association or other
governing or organizational instrument of Seller, or (3) except insofar as
Required Contract Consents are to be procured prior to Closing, any mortgage,
indenture, license, instrument, trust, contract, agreement, or other commitment
or arrangement to which Seller is a party or by which Seller or any of the
Acquired Assets is bound.
4.4 Required Government Consents. No approval, authorization,
certification, consent, variance, permission, license, or permit to or from, or
notice, filing, or recording to or with, any governmental authorities is
necessary for the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by Seller or the consummation by
Seller of the transactions contemplated hereby or thereby, or the ownership and
use of the Acquired Assets and the conduct of the Projects (including by Buyer).
4.5 Contract Consents. No approval, authorization, consent, permission, or
waiver to or from, or notice, filing, or recording to or with, any person is
necessary for (1) the execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered in connection with the
transactions contemplated hereby or thereby by Seller or the consummation by
Seller of the transactions contemplated hereby; (2) the transfer and assignment
to Buyer at Closing of the Contracts, or (3) the ownership and use of the
Acquired Assets and the conduct of the Projects (including by Buyer).
4.6 Good and Marketable Title. Buyer at Closing shall obtain good and
marketable title to all of the tangible Acquired Assets (i.e., the Inventories
and Business Records), free and clear of all title defects, liens, restrictions,
claims, charges, security interests, or other encumbrances of any nature
whatsoever, including any mortgages, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements, or other title or interest
retention arrangements.
4.7 Condition of Property. All of the tangible Acquired Assets are in good
operating order, condition, and repair, ordinary wear and tear excepted, and are
suitable for use in connection with the Projects in the ordinary course.
4.8 Inventory. All Inventory is of usable quality and includes no material
amount of obsolete or discontinued items or items that cannot be used by Buyer
in the Projects in the ordinary course. All Inventory has been recorded using
the "First-In, First-Out" accounting method.
<PAGE>
4.9 Title to Intellectual Property.
a. Ownership. Except for the rights and licenses validly and
effectively established by the Contracts, Seller owns, Buyer shall receive at
Closing, and the Intellectual Property includes, all patents, trademarks,
service marks, trade names, and copyrights (including registrations, licenses,
and applications pertaining thereto) and all other intellectual property rights,
trade secrets, and other proprietary information, processes, and formulae used
in the Projects or otherwise necessary for the ownership and use of the Acquired
Assets and the conduct of the Projects. Schedule 1.1.g sets forth all filed
patent applications and issued patents used in the Projects or otherwise
necessary for the conduct of the Projects as heretofore conducted.
b. Personnel Agreements. All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated in the
conception and development of the Projects, or Intellectual Property on behalf
of Seller either (1) have been party to a "work-for-hire" arrangement or
agreement with Seller, in accordance with applicable law, that has accorded
Seller full, effective, exclusive, and original ownership of all tangible and
intangible property thereby arising, or (2) have executed appropriate
instruments of assignment in favor of Seller as assignee that have conveyed to
Seller full, effective, and exclusive ownership of all tangible and intangible
property thereby arising.
c. Absence of Claims. No claims have been assorted by any person or
entity to the use of the Intellectual Property, and Seller does not know of any
valid basis for any such claim. The use of the Intellectual Property, such as
patents and trademarks, by the Seller, to the best of its knowledge does not
infringe on the rights of any third party.
4.10 Contracts. The Contracts listed in Schedule 1.1.c constitute all
contracts, agreements, licenses, and other commitments and arrangements in
effect as of the Determination Date, that either (1) involve expenditure of more
than $10,000, or (2) require performance by any party thereto more than six (6)
months after the Closing Date. All such contracts are valid, binding, and
enforceable in accordance with their terms and are in full force and effect. To
the best of Seller's knowledge, there are no existing defaults by Seller under
any such contracts and no act, event, or omission has occurred that, whether
with or without notice, lapse of time, or both, would constitute a default
thereunder.
4.11 Accounts Receivable. All Accounts Receivable are fully collectible
within the customary collection cycle, subject only to bad debts that will not
exceed the amount of bad debt reserves set forth in the Closing Date Balance
Sheet. All Accounts Receivable call for payment to be made within at least
ninety (90) days to the principal office of the Seller.
4.12 Conduct of Business.
a. Ordinary Course of Business: No Removal or Disposal of Acquired
Assets. Seller has operated the Projects in the ordinary course consistent with
past practices, and has not removed or disposed of any assets that were assets
of the Projects as of September 30, 1999, except in the ordinary course.
b. No Material Adverse Changes. Since September 30, 1999, there has
been no material adverse change in the Projects or the Acquired Assets.
c. Absence of Particular Events. Since September 30, 1999, Seller has
not (1) suffered any damage or destruction adversely affecting the Projects or
involving the Acquired Assets in the amount of $1,000 in any one instance; (2)
increased the compensation payable or to become payable to employees of Seller
involved in the Projects having annual earnings in excess of $100,000 per year
or declared any bonus; (3) incurred any liability or obligation relating to the
Projects other than in the ordinary course consistent with past practice; (4)
made any change in any method, practice, or principle of accounting involving
the Projects or the Acquired Assets; (5) paid, loaned, or advanced any material
monetary amount or other asset to, or sold, transferred, or leased any asset to,
any employee involved in the Projects except for normal compensation involving
salary and benefits; or (6) agreed to take any action described in this Section
4.12.c.
d. Absence of Joint Ventures, etc. Seller is not a party to any joint
venture or other similar agreement or arrangement that involves any sharing of
profits of the Projects or the Acquired Assets or is similar to
<PAGE>
or competitive with the Projects, other than the Contracts identified as
"licenses from third parties (development and/or marketing)" in Schedule 1.1.c.
4.13 Litigation. Except as set forth in Schedule 4.13, no claim, action,
suit, proceeding, inquiry, hearing, arbitration, administrative proceeding, or
investigation (collectively, "Litigation") is pending, or, to Seller's best
knowledge, threatened against Seller, its present or former directors, officers,
or employees, or any party to any Contract, affecting, involving, or relating to
the Projects or any of the Acquired Assets. Except as set forth in Schedule
4.13, no Litigation has been brought within the last three years against Seller
affecting, involving, or relating to the Projects or any of the Acquired Assets.
Seller knows of no facts that could reasonably be expected to serve as the basis
for Litigation against itself (or the Buyer upon acquisition of the Projects),
its present or former directors, officers, or employees, or any party to the,
affecting, involving, or relating to the Projects or the Acquired Assets.
4.14 Compliance With Laws. There is no outstanding or, to Seller's best
knowledge, threatened order, writ, injunction, or decree of any court,
governmental agency, or arbitration tribunal against Seller affecting,
involving, or relating to the Projects or the Acquired Assets. Seller is not in
violation of any applicable federal, state, or local law, regulation, ordinance,
zoning requirement, governmental restriction, order, judgment, or decree
affecting, involving, or relating to the Projects or the Acquired Assets except
where noncompliance has no material adverse effect upon the Projects (including
under ownership by Buyer) or the Acquired Assets, and Seller has received no
notices of any allegation of any such violation. The foregoing shall be deemed
to include laws and regulations relating to patent, copyright, trademark, trade
secret and unfair competition laws, and to all other applicable laws, including
equal opportunity, wage and hour, and other employment matters, and antitrust
and trade regulation laws.
4.15 Sufficiency of Rights. Assuming the renewal or continuation of all
business arrangements currently in place (and, to the best of Seller's
knowledge, no reason exists why such renewal or continuation in favor of Buyer
could be obstructed), the Acquired Assets constitute all of the properties,
rights, and privileges necessary for the indefinite continuation of the conduct
of the Projects by Buyer in substantially the same manner as it has been
operated by Seller during the twelve (12) month period preceding the closing.
4.16 Broker's or Finder's Fees. Seller has not authorized any person to act
as broker or finder or in any other similar capacity in connection with the
transactions contemplated by this Agreement in any manner that may or will
impose liability on Buyer.
4.17 Related-Party Transactions. Except as disclosed in Schedule 4.17,
Seller is not a party to any contract, agreement, license, lease, or arrangement
with, or any other commitment to, directly or indirectly, (1) any officer or
salaried employee of the Projects in office within two (2) years of the date of
execution hereof; (2) any corporation, trust, or other entity in which any such
officer or salaried employee has a material equity or participating interest; or
(3) or any partnership in which any such officer or salaried employee has a
partnership or participating interest, in each case, relating to or involving
the Projects, the Acquired Assets, or the Assumed Liabilities, except, in each
instance, for existing compensation arrangements. Each such contract, agreement,
license, lease, arrangement, and commitment was entered into by Seller in the
ordinary course of business upon terms that are fair and reasonable to the
Projects without regard to the status and relationship of such other parties.
4.18 Schedules Yet to Be Prepared. The Schedules to be prepared as of the
Determination Date shall be true and complete when submitted for inclusion in
this Agreement and shall set forth all information sought by this Agreement with
respect thereto.
4.19 Disclosure. No representation, warranty, or statement made by Seller
in this Agreement or in any document or certificate furnished or to be furnished
to Buyer pursuant to this Agreement contains or will contain any untrue
statement or omits or will omit to state any fact necessary to make the
statements contained herein or therein not misleading. Seller has disclosed to
Buyer all facts known or reasonably available to Seller that are material to the
Acquired Assets, and the Assumed Liabilities.
4.20 Truth at Closing. All of the representations, warranties, and
agreements of Seller contained in this Article IV shall be true and correct and
in full force and effect on and as of the Closing Date.
<PAGE>
4.21 Materiality Defined. For purposes of this Agreement, each reference to
any material adverse effect upon the Projects (including under ownership by
Buyer) or the Acquired Assets, or any other reference to a material item or
circumstance, shall be construed to include any act, omission, event, or
circumstances that would entail loss, liability, damage, or expense to Buyer
(with respect to the rights and benefits expected by Buyer to be obtained under
this Agreement) of $.50,000 in any single instance, whether under one or more
representations, warranties, covenants, or agreements contained herein, or
$200,000 in the aggregate, taken as a whole under all representations,
warranties, covenants, and agreements contained herein.
4.22 Disclaimer. Except as expressly set forth in this Agreement or in any
document, certificate, agreement, or other instrument furnished or to be
furnished to Buyer pursuant to this Agreement, SELLER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE ASSETS OR THE PROJECTS,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
Section 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization. Buyer is a corporation validly existing and in good
standing under the laws of the State of Delaware with the corporate power and
authority to conduct its business and to own and lease its properties and
assets. Buyer is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each state in which the failure to be so
qualified or licensed would have a material adverse effect on its financial
condition or operations.
5.2 Power and Authority. Buyer has the power and authority to execute,
deliver, and perform this Agreement and the other agreements and instruments to
be executed and delivered by it in connection with the transactions contemplated
hereby and thereby, and Buyer has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and such other agreements
and instruments and the consummation of the transactions contemplated hereby and
thereby. This Agreement is, and, when such other agreements and instruments are
executed and delivered, the other agreements and instruments to be executed and
delivered by Buyer in connection with the transactions contemplated hereby and
thereby shall be, the legal, valid, and binding obligation of Buyer, enforceable
in accordance with their terms.
5.3 Broker's or Finder's Fees. Buyers has not authorized any person to act
as broker, finder, or in any other similar capacity in connection with the
transactions contemplated by this Agreement.
5.4 No Conflict. Neither the execution and delivery by Buyer of this
Agreement and of the other agreements and instruments to be executed and
delivered by Buyer in connection with the transactions contemplated hereby or
thereby, nor the consummation by Buyer of the transactions contemplated hereby
or thereby will violate or conflict with (1) any federal, state, or local law,
regulation, ordinance, governmental restriction, order, judgement, or decree
applicable to Buyer, or (2) any provision of any charter, bylaw, or other
governing or organizational instrument of Buyer.
Section 6
CONDUCT OF THE PROJECTS PRIOR TO CLOSING
6.1 Course of Business. Seller shall conduct the Projects diligently and
substantially in the same manner as heretofore conducted, and Seller shall not
institute any new methods of accounting or operation or engage in any
transaction or activity, enter into any agreement, or make any commitment,
except in the ordinary course of such business and consistent with past
practice.
6.2 Organization. Seller shall use its best efforts to preserve the
Projects intact and to preserve for Buyer its relationship with licensors,
consultants, suppliers, and others having regular business relations with it.
<PAGE>
6.3 Prohibited Actions. In no event, without the prior written consent of
Buyer, shall Seller:
a. Liens. Permit any of the Acquired Assets to be subjected to any
mortgage, pledge, lien, or encumbrance, except for Permitted Liens.
b. Disposition of Acquired Assets. Waive any claims or rights of
substantial value respecting the Acquired Assets, or sell, transfer, or
otherwise dispose of any of the Acquired Assets, except in the ordinary course
of business and consistent with past practice.
c. Licenses. Other than in the ordinary course of its licensing
activities and consistent with past practice, dispose of, license, or permit to
lapse any rights in any Intellectual Property.
6.4 No Default. Seller shall not perform any act or omit to perform any
act, or permit any act or omission, that will cause a breach or default of any
covenant, agreement, warranty, or representation in this Agreement.
Section 7
COVENANTS OF SELLER AND BUYER PRIOR TO CLOSING
7.1 Access. From the date of this Agreement to the Closing Date, Seller
shall (1) provide Buyer with such information as Buyer may from time to time
reasonably request with respect to the Acquired Assets, the Projects and the
transactions contemplated by its Agreement; (2) provide Buyer and its officers,
counsel, and other authorized representatives access during regular business
hours and upon reasonable notice to the books, records, and offices of Seller,
as Buyer may from time to time reasonably request; and (3) permit Buyer to make
such inspections thereof as Buyer may reasonably request. Any investigation
shall be conducted in such a manner as not to interfere unreasonably with the
operation of the business of Seller.
7.2 Updating of Information. From the date of this Agreement to the Closing
Date, Seller shall deliver revised or supplementary schedules to this Agreement,
containing accurate information as of the Closing Date, in order to enable Buyer
to confirm the accuracy of Seller's representations and warranties and otherwise
to give full effect to the provisions of this Agreement. Such revised or
supplementary schedules shall not modify or be deemed part of this Agreement
unless agreed by Buyer in writing with reference to the specific schedules to be
so treated. Provided that the Schedules prepared as of the Determination Date
are true and correct when submitted for inclusion, the foregoing obligation to
furnish updated information shall apply to such Schedules only insofar as
material events or changes occur such as to make the contents of such schedules
unreliable or misleading.
7.3 Third-Party Certificates. Seller shall use its best efforts to procure
for the benefit of Buyer consent, assignment, and/or estoppel certificates in
such form, from such third parties, and with respect to such Acquired Assets to
be assigned to Buyer at Closing as Buyer may specify on or before Closing.
Section 8
CONDITIONS TO SELLER'S OBLIGATIONS
Each of the obligations of Seller to be performed hereunder shall be
subject to the satisfaction (or waiver by Seller) at or prior to the Closing
Date of each of the following conditions:
8.1 Representations and Warranties True at Closing Date. Buyer's
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date and Buyer shall have complied with the covenants and agreements set
forth herein to be performed by it on or before the Closing Date.
8.2 Litigation. No Litigation shall be threatened or pending against Buyer
or Seller before any court or governmental agency that, in the reasonable
opinion of counsel for Seller, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
<PAGE>
8.3 Documents Satisfactory in Form and Substance. All agreements,
certificates, and other documents delivered by Buyer to seller hereunder shall
be in form and substance satisfactory to counsel for Seller, in the exercise of
such counsel's reasonable judgment.
Section 9
CONDITIONS TO BUYER'S OBLIGATIONS
Each of the obligations of Buyer to be performed hereunder shall be subject
to the satisfaction (or the waiver by Buyer) at or prior to the Closing Date of
each of the following conditions:
9.1 Representations and Warranties True at Closing Date. Seller's
representations and warranties contained in this Agreement shall be true on and
as of the Closing Date with the same force and effect as though made on and as
of such date, and Seller shall have complied with the covenants and agreements
set forth herein to be performed by it on or before the Closing Date.
9.2 Performance. Seller shall have performed and complied with all
agreements, obligations, and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
9.3 Investigations. Neither any investigation of Seller by Buyer, nor the
Schedules hereto, nor any other document delivered to Buyer as contemplated by
this Agreement, shall have revealed any facts or circumstances that, in the good
faith judgment of Buyer, reflect in a material adverse way on the Acquired
Assets or the Assumed Liabilities.
9.4 Consents. All Required Government Consents and Required Contract
Consents shall have been obtained.
9.5 No Litigation. No Litigation shall be threatened or pending against
Buyer or Seller before any court or governmental agency that, in the reasonable
opinion of counsel for Seller, could result in the restraint or prohibition of
any such party, or the obtaining of damages or other relief from such party, in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.6 No Material Adverse Change. From the date of this Agreement until the
Closing Date, Seller shall not have suffered any material adverse change
(whether or not such change is referred to or described in any supplement to the
Schedules), to the Acquired Assets or the Assumed Liabilities.
9.7 Employment and Consulting Agreements. At or prior to the Closing,
Morris Laster, Ira Weinstein and Bob Trachtenberg shall have entered into
contracts providing for their employment by Buyer, as the case may be, in the
forms attached hereto as Schedules 9.7.a, 9.7.b and 9.7.c, respectively, the
effectiveness of which shall be expressly contingent upon the occurrence of
Closing.
Section 10
CLOSING
10.1 Closing. Unless this Agreement is first terminated as provided in
Article XV, the closing of the purchase and sale of the Acquired Assets and the
transfer and assumption of the Assumed Liabilities (the "Closing") shall take
place at the offices of Seller at 9.00 o'clock (1) on the first date on or
after November 8, 1999, that falls one (1) business day after all conditions to
Closing have been satisfied or duly waived, or (2) on such other time, date, and
place as the parties may agree in writing (the "Closing Date").
10.2 Actions at Closing. At Closing, Buyer and Seller shall take the
following actions, in addition to such other actions as may otherwise be
required under this Agreement:
<PAGE>
a. Conveyance Instruments. Seller shall deliver to Buyer such warranty
deeds, bills of sale, assignments, and other instruments of conveyance and
transfer as Buyer may reasonably request to effect the assignment to Buyer of
the Acquired Assets.
b. Payment. Buyer shall deliver to Seller an assumption agreement
pursuant to which Buyer assumes and agrees to pay and perform the Assumed
Liabilities as required by Section 3.2.
c. Employment and Consulting Agreements. Each of Morris Laster, Ira
Weinstein and Bob Trachtenberg shall have entered into contracts providing for
their employment by Buyer, as the case may be, in the forms attached hereto as
Schedules 9.7.a, 9.7.b and 9.7.c, respectively.
d. Board and Shareholder Resolutions. Each party shall furnish to the
other certified copies of appropriate resolutions of the board of directors and
shareholders (if required) of each party required to implement the transactions
contmplated by this Agreeement.
10.3 Further Assurances. At and after the Closing, without further
consideration, Seller shall take all such other action and shall procure or
execute, acknowledge, and deliver all such further certificates, conveyance
instruments, consents, and other documents as Buyer or its counsel may
reasonably request (1) to vest in Buyer, and perfect and protect Buyer's right,
title, and interest in, and enjoyment of, the Acquired Assets and the Projects
or (2) to ensure more effectively the compliance of Seller with its agreements,
covenants, warranties, and representatives under this Agreement.
Section 11
COVENANTS OF SELLER AND BUYER FOLLOWING CLOSING
11.1 Tax Matters.
a. Seller's Right and Responsibility for Preclosing Tax Matters.
Sellers shall have the right and responsibility to direct the handling of all
tax matters affecting or relating to the conduct of the Projects prior to the
Closing Date, including the prosecution of all administrative and judicial
remedies, the settlement of all issues, and the execution of agreements,
consents, or waivers, extending the statute of limitations.
b. Buyer's Cooperation. Buyer shall use its reasonable efforts to
provide Seller such assistance as it may reasonably request in connection with
matters relating to taxes, including information with respect to Seller's
preparation of any returns of taxes, any audit or other examination by any
taxing authority, any judicial or administrative proceeding relating to Seller's
liability for taxes, or any claims arising hereunder respecting the Projects.
Buyer shall retain and provide Seller with records or information which may be
relevant to any such return, audit, examination, proceeding, or determination,
and Buyer shall retain all such books and records for so long as necessary in
keeping with applicable statutes of limitations.
11.2 Transfer Taxes. All sales, transfer, and similar taxes and fees
(including all recording fees, if any) incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Buyer and
Buyer shall file all necessary documentation with respect to such taxes.
11.3 No-Compete. For a period of five (5) years after the Closing Date,
Seller shall not engage in the business of acquiring, developing, marketing,
distributing, licensing, any project similar to, competitive with, or
substitutable for, the Projects, anywhere in the world, except as a customer or
authorized distributor of Buyer or otherwise with Buyer's consent (which may be
withheld in Buyer's sole discretion). Seller acknowledges and agrees that the
current market for the Projects extends throughout the entire world and it is
therefore reasonable to prohibit Seller from competing with Buyer anywhere in
such territory. Seller shall not engage in any such activity, directly or
indirectly, on its own behalf or in the service of or on behalf of others
<PAGE>
Section 12
CONFIDENTIALITY
12.1 Confidentiality Obligation of Buyer Prior to Closing. Until Closing
(and, if this Agreement is terminated for any reason, forever thereafter), Buyer
shall, and shall use its best efforts to cause its personnel and agents to, hold
in strict confidence, not disclose to any person without the prior written
consent of Seller, and not use in any manner except in connection with the
transactions contemplated hereby, any confidential business or technical
information obtained from Seller in connection with the transactions
contemplated hereby concerning the Projects or the Acquired Assets. This
obligation shall cease to apply to Buyer upon the occurrence of Closing. In the
event that this Agreement terminates for any reason, Buyer shall return to
Seller or destroy all materials in its possession containing any such
confidential information, including all copies, extracts, adaptations, and
transcriptions thereof.
12.2 Confidentiality Obligation of Seller Following Closing. Following the
occurrence of Closing, Seller shall, and shall use its best efforts to cause its
personnel and agents to, hold in strict confidence, not disclose to any person
without the prior written consent of Buyer, and not use in any manner
whatsoever, any confidential business or technical information remaining in its
possession concerning the Projects or the Acquired Assets. Promptly following
Closing, Seller shall surrender to Buyer or destroy all materials remaining in
its possession containing any such confidential information, including all
copies, extracts, adaptations, and transcriptions thereof.
12.3 Permitted Disclosures. Notwithstanding Sections 12.1 and 12.2, either
party may disclose confidential information (1) where necessary to any
regulatory authorities or governmental agencies pursuant to legal process or (2)
if required by court order or decree.
12.4 Scope of Confidential Information. For purposes of this Agreement,
information shall not be deemed confidential (1) if such information is
available in full from public sources; (2) if such information is received from
a third party not under an obligation to keep such information confidential; or
(3) if the recipient can conclusively demonstrate that such information was
independently developed by the recipient.
Section 13
TERMINATION PRIOR TO CLOSING
13.1 Termination of Agreement. This Agreement may be terminated at any time
prior to the Closing:
a. Mutual Consent. By the mutual consent of Buyer and Seller;
b. Deadline. By Buyer or Seller, in writing, without liability, if the
Closing shall not have occurred on or before November 30, 1999; or
c. Material Breach. By Buyer or Seller in writing, without liability,
if the other party shall (1) fail to perform in any material respect its
agreements contained herein required to be performed by in on or prior to the
Closing Date or (2) materially breach any of its representations, warranties,
agreements, or covenants contained herein, provided that such failure or breach
is not cured within ten (10) days after such party has been notified of the
other party's intent to terminate this Agreement pursuant hereto.
13.2 Termination of Obligations. Termination of this Agreement pursuant to
this Article XIII shall terminate all obligations of the parties hereunder,
except for the obligations set forth in Article XII.
Section 14
ARBITRATION
14.1 Appointment of Arbitrator. The parties shall endeavour in good faith
to resolve amicably any dispute concerning this Agreement. In the event that
any such dispute is not amicably resolved, it shall be
<PAGE>
resolved by binding arbitration before a single arbitrator. In the absence of
agreement by the parties hereto to the appointment of the arbitrator, either
party hereto may apply to the Chairman of the Jerusalem Bar Association with a
request to make such appointment. The appointment made by the said Chairman
shall be binding on the parties hereto. The arbitrator shall be bound by
substantive applicable law and shall state in writing the reasons for his
award/decision. In connection with any arbitration hereunder, the attorneys (or
attorneys in any law firms with which those attorneys are associated) who have
represented the parties in connection with the negotiation and/or drafting of
this Agreement shall be precluded from serving as an arbitrator, even if
designated by the parties ; and shall not be precluded from (a) submitting
expert or other testimony; or (b) representing any of those same parties in the
arbitration or any related proceedings.
14.2 Language and Location of Arbitration. Any arbitration hereunder shall
be conducted in English, and the arbitrator shall sit in Jerusalem unless
otherwise agreed by the parties. Nothing in the preceding sentence shall
preclude the taking of evidence in a place other than Jerusalem (or such other
place as is agreed) if the arbitration panel deems that appropriate.
14.3 Cooperation. In the event that any party to this Agreement is not a
formal participant in an arbitration proceeding hereunder, such party shall
cooperate with any reasonable request, from the arbitrator or from any
participant in such arbitration proceeding, for the producing of evidence. The
arbitrator will be entitled to request the submission of expert testimony.
14.4 Recourse to Court. Nothing in Article XIV shall preclude any party
from making an appropriate application to a court of competent jurisdiction for
injunctive or other equitable relief ancillary to the arbitration proceeding.
14.5 Confidentiality of Arbitration. Unless the participants in an
arbitration proceeding hereunder and the party producing evidence otherwise
agree in writing, the arbitrator and the participants in an arbitration
proceeding hereunder shall take all reasonable steps to ensure the
confidentiality of all evidence produced in connection with any such arbitration
proceeding. As used in this clause, "evidence" includes documents and testimony
(whether written or oral), and "producing evidence" includes giving, providing,
or otherwise furnishing evidence.
Section 15
MISCELLANEOUS
15.1 Entire Agreement. This Agreement (including the Schedules), and the
other certificates, agreements, and other instruments to be executed and
delivered by the parties in connection with the transactions contemplated
hereby; constitute the sole understanding of the parties with respect to the
subject matter hereof. No amendment, modification, or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
15.2 Parties Bound by Agreement; Successors and Assigns. The terms,
conditions, and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Without the prior written consent of the other party, Buyer may assign
its rights, duties, or obligations hereunder or any part thereof to any other
person or entity, which shall thereupon become Buyer, provided that at the time
of such assignment Buyer unconditionally and irrevocably guarantees the payment
and performance of any duties or obligations so assigned.
15.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
15.4 Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
15.5 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party that is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar).
<PAGE>
15.6 Expenses. Seller and Buyer shall each pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accounts, and counsel.
15.7 Notices. Any notice, request, instruction, or other document to be
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, if to Seller to:
Partec, Ltd.
216 Jaffa Road
Jerusalem, 94383 Israel
Attention: Morris Laster
if to Buyer to:
Lakaro Biopharmaceuticals, Inc.
216 Jaffa Road
Jerusalem, 94383 Israel
Attention: General Counsel
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice that is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fourth business day after
the day it is so placed in the mail.
15.8 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Israel without giving effect to the
principles of conflicts of law thereof.
15.9 Third-Party Beneficiaries. With the exception of (1) the parties to
this Agreement and (2) the Buyer Group and the Seller Group with respect to the
matters inuring to their benefit under Article XIII, there shall exist no right
of any person to claim a beneficial interest in this Agreement or any rights
occurring by virtue of this Agreement.
15.10 "Including." Words of inclusion shall not be construed as terms of
limitation herein, so that references to "included" matters shall be regarded as
nonexclusive, noncharacterizing illustrations.
15.11 References. Whenever reference is made in this Agreement to any
Article, Section, or Schedule, such reference shall be deemed to apply to the
specified Article or Section of this Agreement or the specified Schedule to this
Agreement.
15.12 Survival of Agreements. All Covenants, agreements, representations,
and warranties made herein shall survive the execution and delivery of this
Agreement and the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed on its behalf on the date indicated.
Partec Ltd. Lakaro Biopharamaceuticals, Inc.
By: /s/ Ira Weinstein By: /s/ Robert Trachtenberg
----------------------------- -----------------------------
Name: Ira Weinstein Name: Bob Trachtenberg
-------------------------- --------------------------
Title: COO Title: Secretary
-------------------------- --------------------------
<PAGE>
The schedules and exhibits to this agreement have not been included because they
have been otherwise disclosed or because they are not material to an investment
decision. Such schedules and exhibits will be furnished to the Commission
supplementally upon request.
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LAKARO BIOPHARMACEUTICALS, INC.
Following resolution of the Board of Directors of Lakaro Biopharmaceuticals,
Inc. (the "Corporation") and, in accordance with Section 222 of the General
Corporation Law of the State of Delaware, approval of a majority of the
stockholders entitled to vote on such matters, it is hereby certified that:
1. The name of the Corporation is
KERYX BIOPHARMACEUTICALS, INC.
2. The certificate of incorporation of the Corporation is hereby amended by
striking out Article FIRST thereof and substituting in lieu of said
Article the following new Article FIRST:
The name of the corporation (hereinafter called the
"corporation") is KERYX BIOPHARMACEUTICALS, INC.
3. The amendment of the certificate of incorporation of the Corporation
herein certified was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
Signed on January 6, 2000
/s/ Robert Trachtenberg
-----------------------
Bob Trachtenberg
Secretary
<PAGE>
Exhibit 3.1
CERTIFICATION OF INCORPORATION
OF
PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
----------
The undersigned, a natural person for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereon and supplemental thereto, and known, indemnified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington 19805, County of Now Castle; and the name of the
registered agent of the corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is twenty five million, which are
divided into five million shares of Preferred Stock of a par value of one mill
each and twenty five million shares of Common Stock of a par value of one mill
each.
The shares of Preferred Stock may be issued from time to time in one
or more series, in any manner permitted by law, an determined from time to time
by the Board of Directors, and stated in the resolution or resolutions providing
for the issuance of such shares adopted by the Board of Directors pursuant to
authority hereby vested in it. Without limiting the generality of the foregoing,
shares in such series shall have much voting powers, full or limited, or no
voting powers, and shall have such designations, preferences, and relative,
participating, optional, or other special rights, and qualifications,
limitations, or restrictions thereof, permitted by law, as shall be stated in
[STAMP]
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/22/1998
981408001-2958400
-1-
<PAGE>
the resolution or resolutions providing for the issuance of such shares adopted
by the Board of Directors pursuant to authority hereby voted in it. The number
of shares of any of such series so act forth in such resolution or resolutions
may be increased (but not above the total number of authorized shares of
Preferred Stock) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by the Board of
Directors pursuant to authority hereby vested in it.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
John S. Hoenigmann Two World Trade Center
Suite 8746
New York, New York 10048-____
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement, and to any reorganization of this corporation as consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class or creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
EIGHTH: For the management of the business and for the conduct of
the affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
-2-
<PAGE>
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed by,
or in the manner provided in, the Bylaws. The phrase "whole Board" and the
phrase "total number of directors" shall be deemed to have the same meaning, to
wit, the total number of directors which the corporation would have if there
were no vacancies. No election of directors need be by written ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payments for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the corporation may be
exercised by the Board of Directors of the corporation; provided, however, that
any provision for the classification of directors of the corporation for
staggered terms pursuant to the provisions of subsection (d) of section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote of the
corporation unless provisions for such classification shall be set forth in the
certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
corporation shall be authorized to issue more than one class of stock, no
outstanding shares of any class of stock which is denied voting power under the
provisions of the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of section 242 of the General Corporation Law of
the State of Delaware shall otherwise require; provided, that no share of any
such class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized shares
of said class.
NINTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by
the provisions of section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnity under
-3-
<PAGE>
said section from and against any and all of the expenses, liabilities, or other
realtors referred to in or covered by said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disintegrated directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered, or repaired, and other
provisions authorized by the laws of the State of Delaware 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 stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on October 21, 1998.
/s/ JOHN S. HOENIGMANN
--------------------------------
John S. Hoenigmann, Incorporator
-4-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
Following resolution of the board of directors of Paramount Capital
Pharmaceuticals, Inc. (the "Corporation") and, in accordance which Section 222
of the General Corporation Law of the State of Delaware, approval of a majority
of the stockholders entitled to vote on such matters it is hereby certified
that:
1. The name of the Corporation (hereinafter called the
"corporation") is
PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article FIRST thereof and substituting in lieu of said
Article the following new Article FIRST:
"The name of the corporation (hereinafter called the "corporation")
is LARAKO BIOPHARMACEUTICALS, INC."
3. The amendment of the certificate of incorporation of the
corporation herein certified was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Signed on November 17, 1999
/s/ DAVID M. TENEN
--------------------------------
David M. Tenen
Secretary
[STAMP]
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 11/17/1999
991493438-2956400
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LAKARO BIOPHARMACEUTICALS, INC.
Following resolution of the Board of Directors of Lakaro Biopharmaceuticals,
Inc. (the "Corporation") and, in accordance with Section 222 of the General
Corporation Law of the State of Delaware, approval of a majority of the
stockholders entitled to vote on such matters, it is hereby certified that:
1. The name of the Corporation is
KERYX BIOPHARMACEUTICALS, INC.
2. The certificate of incorporation of the Corporation is hereby amended by
striking out Article FIRST thereof and substituting in lieu of said
Article the following new Article FIRST:
The name of the corporation (hereinafter called the
"corporation") is KERYX BIOPHARMACEUTICALS, INC.
3. The amendment of the certificate of incorporation of the Corporation
herein certified was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
Signed on January 6, 2000
/s/ Robert Trachtenberg
-----------------------
Bob Trachtenberg
Secretary
<PAGE>
EXHIBIT 3.2
BYLAWS
of
PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I OFFICES.......................................................... 1
Section 1.01 REGISTERED OFFICE...................................... 1
Section 1.02 PRINCIPAL OFFICE....................................... 1
Section 1.03 OTHER OFFICES.......................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS........................................ 1
Section 2.01 ANNUAL MEETINGS........................................ 1
Section 2.02 SPECIAL MEETINGS....................................... 1
Section 2.03 PLACE OF MEETINGS...................................... 2
Section 2.04 NOTICE OF MEETINGS..................................... 2
Section 2.05 QUORUM................................................. 3
Section 2.06 VOTING................................................. 3
Section 2.07 LIST OF STOCKHOLDERS................................... 4
Section 2.08 STOCK LEDGER........................................... 4
Section 2.09 INSPECTOR OF ELECTION.................................. 5
Section 2.10 STOCKHOLDER ACTION WITHOUT MEETINGS.................... 5
Section 2.11 RECORD DATE............................................ 5
ARTICLE III BOARD OF DIRECTORS............................................. 6
Section 3.01 GENERAL POWERS......................................... 6
Section 3.02 NUMBER AND TERM........................................ 6
Section 3.03 ELECTION OF DIRECTORS.................................. 6
Section 3.04 RESIGNATION AND REMOVAL................................ 7
Section 3.05 VACANCIES.............................................. 7
Section 3.06 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING......... 7
Section 3.07 FIRST MEETING.......................................... 7
Section 3.08 REGULAR MEETINGS....................................... 7
Section 3.09 SPECIAL MEETINGS....................................... 8
Section 3.10 QUORUM AND ACTION...................................... 8
Section 3.11 ACTION BY CONSENT...................................... 8
Section 3.12 COMPENSATION........................................... 8
Section 3.13 COMMITTEES............................................. 9
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 3.14 OFFICERS OF THE BOARD.................................. 9
Section 3.15 INTERESTED DIRECTORS................................... 9
ARTICLE IV OFFICERS........................................................ 10
Section 4.01 OFFICERS............................................... 10
Section 4.02 ELECTION AND TERM...................................... 10
Section 4.03 SUBORDINATE OFFICERS................................... 10
Section 4.04 REMOVAL AND RESIGNATION................................ 10
Section 4.05 VACANCIES.............................................. 11
Section 4.06 PRESIDENT.............................................. 11
Section 4.07 CHAIRMAN OF THE BOARD.................................. 11
Section 4.08 CHIEF EXECUTIVE OFFICER/CHIEF OPERATING CHIEF EXECUTIVE
OFFICER/OFFICE OF THE CHIEF EXECUTIVE.................. 11
Section 4.09 VICE PRESIDENT......................................... 11
Section 4.10 SECRETARY.............................................. 11
Section 4.11 TREASURER.............................................. 12
Section 4.12 ASSISTANT SECRETARIES.................................. 12
Section 4.13 ASSISTANT TREASURERS................................... 13
Section 4.14 OTHER OFFICERS......................................... 13
Section 4.15 COMPENSATION........................................... 13
Section 4.16 VOTING SECURITIES OWNED BY THE CORPORATION............. 13
ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.................... 13
Section 5.01 EXECUTION OF CONTRACTS................................. 14
Section 5.02 CHECKS, DRAFTS, ETC.................................... 14
Section 5.03 DEPOSIT................................................ 14
Section 5.04 GENERAL AND SPECIAL BANK ACCOUNTS...................... 14
Section 5.05 AUDITS, ACCOUNTS AND REPORTS........................... 14
Section 5.06 ACCESS................................................. 15
Section 5.07 FISCAL YEAR............................................ 15
Section 5.08 ACCOUNTING POLICY...................................... 15
Section 5.09 DIVIDENDS.............................................. 15
ARTICLE VI SHARES AND THEIR TRANSFER....................................... 15
Section 6.01 CERTIFICATES FOR STOCK................................. 15
Section 6.02 TRANSFER OF STOCK...................................... 16
Section 6.03 REGULATIONS............................................ 16
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Section 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES...... 16
Section 6.05 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.......... 17
ARTICLE VII INDEMNIFICATION................................................. 17
Section 7.01 THE POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION.. 17
Section 7.02 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY
OR IN THE RIGHT OF THE CORPORATION...................... 17
Section 7.03 AUTHORIZATION OF INDEMNIFICATION........................ 18
Section 7.04 GOOD FAITH DEFINED...................................... 18
Section 7.05 INDEMNIFICATION BY A COURT.............................. 19
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Section 7.06 EXPENSES PAYABLE IN ADVANCE................................ 19
Section 7.07 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES................................................... 19
Section 7.08 INSURANCE.................................................. 20
Section 7.09 CERTAIN DEFINITIONS........................................ 20
Section 7.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.... 20
Section 7.11 LIMITATION ON INDEMNIFICATION.............................. 20
Section 7.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS.................... 21
ARTICLE VIII MISCELLANEOUS................................................... 21
Section 8.01 SEAL....................................................... 21
Section 8.02 WAIVER OF NOTICES.......................................... 21
Section 8.03 LOANS AND GUARANTIES....................................... 21
Section 8.04 GENDER..................................................... 21
Section 8.05 AMENDMENTS................................................. 22
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BYLAWS
of
PARAMOUNT CAPITAL PHARMACEUTICALS, INC.
a Delaware Corporation
ARTICLE I
OFFICES
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Section 1.01 REGISTERED OFFICE. The registered office of Paramount
Capital Pharmaceuticals, Inc. (hereinafter called the "Corporation") shall be at
such place in the State of Delaware as shall be designated by the Board of
Directors (hereinafter called the "Board").
Section 1.02 PRINCIPAL OFFICE. The principal office for the
transaction of the business of the Corporation shall be at such location, within
or without the State of Delaware, as shall be designated by the Board.
Section 1.03 OTHER OFFICES. The Corporation may also have an office
or offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of
the Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
Section 2.02 SPECIAL MEETINGS. Special meetings of the stockholders
of the Corporation for any purpose or purposes may be called at any time by the
Board, or by a committee of the Board which, or officer of the corporation who,
has been duly designated by the Board and whose powers and authority, as
provided in a resolution of the Board or in the Bylaws, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons; provided, however, that if and to the extent that any special
meeting of stockholders may be called by any other person
<PAGE>
or persons specified in any provisions of the Certificate of Incorporation or
any amendment thereto or any certificate filed under Section 151(g) of the
General Corporation Law of the State of Delaware (or its successor statute as in
effect from time to time hereafter), then such special meeting may also be
called by the person or persons, in the manner, at the time and for the purposes
so specified.
Section 2.03 PLACE OF MEETINGS. All meetings of the stockholders
shall be held at such places, within or without the State of Delaware, as may
from time to time be designated by the person or persons calling the respective
meetings and specified in the respective notices or waivers of notice thereof.
Section 2.04 NOTICE OF MEETINGS. Except as otherwise required by
law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail or overnight delivery
service, in a postage prepaid envelope, or by-hand delivery service, charges
prepaid, directed to him at his address furnished by him to the Secretary of the
Corporation for such purpose or, if he shall not have furnished to the Secretary
his address for such purpose, then at his address last known to the Secretary,
or by transmitting a notice thereof to him at such address by telegraph,
telecopy, cable or wireless. Except as otherwise expressly required by law, no
publication of any notice of a meeting of the stockholders shall be required.
Every notice of a meeting of the stockholders shall state the place, date and
hour of the meeting, and, in the case of a special meeting shall also state the
purpose or purposes for which the meeting is called. Except as otherwise
expressly required by law, notice of any adjourned meeting of the stockholders
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken.
Whenever notice is required to be given to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall have been taken or held without
notice to such person shall the same force and effect as if such notice had been
duly given. If any such person shall deliver to the Corporation a written
notice setting forth his then current address, the requirement that notice be
given to such person shall be reinstated.
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No notice need be given to any person with whom communication is
unlawful, nor shall there be any duty to apply for any permit or license to give
notice to any such person.
Section 2.05 QUORUM. Except as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. The stockholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. In the absence of a quorum at
any meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at or to act as secretary of such meeting may adjourn such meeting from time to
time. At any such adjourned meeting at which a quorum is present any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.06 VOTING.
(a) At each meeting of the stockholders, each stockholder shall be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation which has voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 2.07 of these Bylaws
as the record date for the determination of stockholders entitled to notice of
and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (A) at
the close of business on the day next preceding the day on which notice of the
meeting shall be given or (B) if notice of the meeting shall be waived, at the
close of business on the day next preceding the day on which the meeting shall
be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon.
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Stock having voting power standing of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or with respect to which two or
more persons have the same fiduciary relationship, shall be voted in accordance
with the provisions of the General Corporation Law of Delaware.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon. The stockholders present at a duly called or held meeting
at which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. The vote at any meeting of the stockholders on any question need not be
by ballot, unless so directed by the chairman of the meeting. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy
if there be such proxy, and it shall state the number of shares voted.
Section 2.07 LIST OF STOCKHOLDERS. The Secretary of the 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, 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 entire duration thereof, and may be inspected by any stockholder who
is present.
Section 2.08 STOCK LEDGER. The stock ledger of the Corporation shall
be the only evidence as to which the stockholders are entitled to examine the
stock ledger, the list required by Section 2.07 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
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Section 2.09 INSPECTOR OF ELECTION. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election to act at
the meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector so appointed shall first subscribe an oath faithfully to execute
the duties of an inspector at such meeting with strict impartiality and
according to the best of his ability. Such inspectors shall decide upon the
qualification of the voters and shall report the number of shares represented at
the meeting and entitled to vote on such question, shall conduct and accept the
votes, and, when the voting is completed, shall ascertain and report the number
of shares voted respectively for and against the question. Reports of the
inspectors shall be in writing and subscribed and delivered by them to the
Secretary of the Corporation. Inspectors need not be stockholders of the
Corporation, and any officer of the Corporation may be an inspector on any
question other than a vote for or against a proposal in which he shall have a
material interest. No director or candidate for the office of director shall
act as an inspector of an election of directors.
2.10 STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the
General Corporation Law of the State of Delaware to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the 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 shall be 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.
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Section 2.11 RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or 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 may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board and which record date: (i) in the case
of determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting; (ii) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board;
and (iii) in the case of any other action, shall not be more than sixty days
prior to such other action. If no record date is fixed: (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
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (ii) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting when no prior action of the Board is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
is required by law, shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action; and (iii) the record date
for determining stockholders 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 may fix a new record date for the
adjourned meeting.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 3.01 GENERAL POWERS. The property, business and affairs of
the Corporation shall be managed by or under the direction of the Board, which
may exercise all of the powers of the Corporation, except such as are by the
Certificate of Incorporation, by these Bylaws or by law conferred upon or
reserved to the stockholders.
Section 3.02 NUMBER AND TERM. The Board shall consist of one or more
members, the number of which shall be one until changed thereafter from time to
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time by resolution of the Board. Directors need not be stockholders of the
Corporation. Each director shall hold office until a successor is elected and
qualified or until the director resigns or is removed.
Section 3.03 ELECTION OF DIRECTORS. The directors shall be elected
by the stockholders of the Corporation, and at each election the persons
receiving the greatest number of votes, up to the number of directors then to be
elected, shall be the persons then elected. The election of directors is
subject to any provisions contained in the Certificate of Incorporation relating
thereto, including any provisions for a classified board, if any.
Section 3.04 RESIGNATION AND REMOVAL. Any director of the
Corporation may resign at any time by giving written notice to the Board or to
the Secretary of the Corporation. Any such resignation shall take effect at the
time specified therein, or, if the time is not specified, it shall take effect
immediately upon its receipt; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Except as otherwise provided by the Certificate of Incorporation or by
law, any director or the entire board of directors may be removed, with or
without cause, by the holders of a majority of shares then entitled to vote at
an election of directors.
Section 3.05 VACANCIES. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors, or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum, or by a sole remaining director. Each
director so chosen to fill a vacancy shall hold office until his successor shall
have been elected and shall qualify or until he shall resign or shall have been
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Upon the resignation of one or more directors from the Board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have the 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 hereinabove in the filling of other vacancies.
Section 3.06 PLACE OF MEETING; TELEPHONE CONFERENCE MEETING. The
Board may hold any of its meetings at such place or places within or without the
State of Delaware as the Board may from time to time by resolution designate or
as shall be designated by the person or persons calling the meeting or in the
notice or waiver of notice of any such meeting. Directors may participate in
any regular or special
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meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
Section 3.07 FIRST MEETING. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
Section 3.08 REGULAR MEETINGS. Regular meetings of the Board may be
held at such times as the Board shall from time to time by resolution determine.
If any day fixed for a meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day which is not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
Section 3.09 SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President, the Secretary or
by any two (2) directors, to be held at the principal office of the Corporation,
or at such other place or places, within or without the State of Delaware, as
the person or persons calling the meeting may designate.
Notice of the time and place of special meetings shall be given to
each director either (i) by depositing such notice in the United States mail or
overnight delivery service, in a postage prepaid envelope, or by-hand delivery
service, charges prepaid, addressed to him at his address as it is shown upon
the records of the Corporation, or if it is not so shown on such records or is
not readily ascertainable, at the place in which the meetings of the directors
are regularly held, or by transmitting a notice thereof to him at such address
by telegraph, telecopy, cable or wireless, at least forty-eight (48) hours prior
to the time of the holding of such meeting; or (ii) by orally communicating the
time and place of the special meeting to him at least forty-eight (48) hours
prior to the time of the holding of such meeting. Either of the notices as
above provided shall be due, legal and personal notice to such director.
Section 3.10 QUORUM AND ACTION. Except as otherwise provided in
these Bylaws or by law, the presence of a majority of the authorized number of
directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present, subject to Section 3.15. In the absence of a quorum, a
majority of directors present at any meeting may adjourn the same from time to
time until a quorum shall be present. Notice of any adjourned meeting need not
be given. The directors shall act only as a Board, and the individual directors
shall have no power as such.
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Section 3.11 ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or such committee. Such
action by written consent shall have the same force and effect as the unanimous
vote of such directors.
Section 3.12 COMPENSATION. No stated salary need be paid to
directors, as such, for their services but, as fixed from time to time by
resolution of the Board, the directors may receive directors' fees, compensation
and reimbursement for expenses for attendance at directors' meetings, for
serving on committees and for discharging their duties; provided that nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.13 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, 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 the 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 place of any such absent or
disqualified member. Any such committee, to the extent permitted by law and
provided in the resolution of the Board, shall have and may exercise all the
powers and authority of the Board 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 which may require it.
Unless the Board otherwise provides, each committee designated by the
Board may make, alter and repeal rules for conduct of its business. In the
absence of such rules each committee shall conduct its business in the same
manner as the Board conducts its business pursuant to these Bylaws. Any such
committee shall keep written minutes of its meetings and report the same to the
Board when required.
Section 3.14 OFFICERS OF THE BOARD. A Chairman of the Board or a
Vice Chairman may be appointed from time to time by the Board and shall have
such powers and duties as shall be designated by the Board.
Section 3.15 INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
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Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
disinterested stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
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Section 4.01 OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Treasurer. The Corporation may also have, at the
discretion of the Board, a Chairman of the Board, a Chief Executive Officer, one
or more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers and such other officers
as may be appointed in accordance with the provisions of Section 4.03 of these
Bylaws. One person may hold two or more offices, except that the Secretary may
not also hold the office of President.
Section 4.02 ELECTION AND TERM. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 4.03 or Section 4.05 of these Bylaws, shall be chosen annually by the
Board, and each shall hold his office until he shall resign or shall be removed
or otherwise disqualified to serve, or until his successor shall be elected and
qualified.
Section 4.03 SUBORDINATE OFFICERS. The Board may appoint, or may
authorize the Chief Executive Officer to appoint, such other officers as the
business of the Corporation may require, each of whom shall have such authority
and perform such duties as are provided in these Bylaws or as the Board or the
President from time to time
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may specify, and shall hold office until he shall resign or shall be removed or
otherwise disqualified to serve.
Section 4.04 REMOVAL AND RESIGNATION. Any officer may be removed,
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board, by the Chief Executive Officer upon whom such power of
removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the
Board, the Chairman of the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.05 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the Bylaws for the regular appointments to such office.
Section 4.06 PRESIDENT. The President of the Corporation shall,
subject to the control of the Board, have general supervision, direction and
control of the business and affairs of the Corporation. He shall preside at all
meetings of stockholders and the Board. He shall have the general powers and
duties of management usually vested in the chief executive officer of a
corporation, and shall have such other powers and duties with respect to the
administration of the business and affairs of the Corporation as may from time
to time be assigned to him by the Board or as prescribed by the Bylaws.
Section 4.07 CHAIRMAN OF THE BOARD. The Chairman of the Board, if
any, shall preside at all meetings of the stockholders and the Board and
exercise and perform such other powers and duties with respect to the
administration of the business and affairs of the Corporation as may from time
to time be assigned to him by the Board or as is prescribed by the Bylaws.
Section 4.08 CHIEF EXECUTIVE OFFICER/CHIEF OPERATING OFFICER/OFFICE
OF THE CHIEF EXECUTIVE. In the event the Board of Directors elects a Chief
Executive Officer and/or a Chief Operating Officer, or establishes an Office of
the Chief Executive, the person or persons so elected or the members of such
office shall individually or jointly, as the case may be, have general and
active management of the property, business and affairs of the Corporation,
subject to the supervision and control of the Board. The Chief Executive
Officer, the Chief Operating Officer, or members of the Office of the Chief
Executive, as the case may be, also shall have such powers and perform such
other duties as prescribed from time to time by the Board of Directors.
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Section 4.09 VICE PRESIDENT. The Vice President(s), if any, shall
exercise and perform such powers and duties with respect to the administration
of the business and affairs of the Corporation as from time to time may be
assigned to each of them by the President, by the Chairman of the Board, if any,
by the Board or as is prescribed by the Bylaws. In the absence or disability of
the President, the Vice Presidents, in order of their rank as fixed by the
Board, or if not ranked, the Vice President designated by the Board, shall
perform all of the duties of the President and when so acting shall have all of
the powers of and be subject to all the restrictions upon the President.
Section 4.10 SECRETARY. The Secretary shall keep, or cause to be
kept, a book of minutes at the principal office for the transaction of the
business of the Corporation, or such other place as the Board may order, of all
meetings of directors and stockholders, with the time and place of holding,
whether regular or special, and if special, how authorized and the notice
thereof given, the names of those present at directors' meetings, the number of
shares present or represented at stockholders' meetings and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal office
for the transaction of the business of the Corporation or at the office of the
Corporation's transfer agent, a share register, or a duplicate share register,
showing the names of the stockholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board required by these Bylaws or by law
to be given, and he shall keep the seal of the Corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board or these Bylaws. If for any reason the Secretary shall fail to
give notice of any special meeting of the Board called by one or more of the
persons identified in Section 3.09 of these Bylaws, or if he shall fail to give
notice of any special meeting of the stockholders called by one or more of the
persons identified in Section 2.02 of these Bylaws, then any such person or
persons may give notice of any such special meeting.
Section 4.11 TREASURER. The Treasurer shall keep and maintain or
cause to be kept and maintained, adequate and correct accounts of the properties
and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of capital, shall be
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classified according to source and shown in a separate account. The books of
account at all reasonable times shall be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
by the Board. He shall disburse the funds of the Corporation as may be ordered
by the Board, shall render to the President, to the Chief Executive Officer and
to the directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the Corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board or these Bylaws.
Section 4.12 ASSISTANT SECRETARIES. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 4.13 ASSISTANT TREASURERS. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
as signed to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 4.14 OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
Section 4.15 COMPENSATION. The compensation of the officers of the
Corporation, if any, shall be fixed from time to time by the Board.
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Section 4.16 VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
----------------------------------------------
Section 5.01 EXECUTION OF CONTRACTS. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, 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 in any amount.
Section 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for payment of money, notes or other evidence of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such person shall give such bond, if any, as
the Board may require.
Section 5.03 DEPOSIT. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, attorney or attorneys, of the Corporation to whom such power shall have
been delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the President, the Chief
Executive Officer, any Vice President or the Treasurer (or any other officer or
officers, assistant or assistants, agent or agents, or attorney or attorneys of
the Corporation who shall be determined by the Board from time to time) may
endorse, assign and deliver checks, drafts and other orders for the payment of
money which are payable to the order of the Corporation.
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Section 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board from time
to time may authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by an officer or officers, assistant or assistants,
agent or agents, or attorney or attorneys of the Corporation to whom such power
shall have been delegated by the Board. The Board may make such special rules
and regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
Section 5.05 AUDITS, ACCOUNTS AND REPORTS. The books of account of
the Company shall be audited at least once during each year by a firm of
independent certified accountants. The initial independent auditor of the
Company shall be Ernst & Young.
Section 5.06 ACCESS. All books and records of the Company shall be
kept at the principal place of business of the Company. Each shareholder may at
its own expense, after giving written notice to the Company, audit, investigate
and familiarize itself with the operations of the Company using its own
employees or such certified public accounting firm, qualified external auditor
or other advisers as it may select. The shareholders' rights under this
Section, which shall include the right to make copies of any relevant documents,
shall be exercised such that the actions of the shareholders or their respective
agents do not interfere unreasonably with the operation of the Company in its
ordinary course of business.
Section 5.07 FISCAL YEAR. The fiscal year of the Company shall end
on the last day of each calendar year.
Section 5.08 ACCOUNTING POLICY. The Company shall maintain
accounting records, accounts and related financial statements in accordance with
United States generally accepted accounting principles applied on a consistent
basis.
Section 5.09 DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
ARTICLE VI
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SHARES AND THEIR TRANSFER
-------------------------
Section 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, in such
form as the Board shall prescribe, certifying the number and class of shares of
the stock of the Corporation owned by him. The certificates representing shares
of such stock shall be numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any or all of the signatures on the
certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon any
such certificate shall thereafter have ceased to be such officer, transfer agent
or registrar before such certificate is issued, such certificate may
nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be canceled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so canceled, except in cases provided for in Section 6.04 of
these Bylaws.
Section 6.02 TRANSFER OF STOCK. Transfer of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03 of these Bylaws, and upon
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of stock
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security, and not absolutely, such fact shall be stated
expressly in the entry of transfer if, when the certificate or certificates
shall be presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 6.03 REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. The Board may appoint, or authorize any officer or
officers to appoint, one or more
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transfer clerks or one or more transfer agents and one or more registrars, and
may require all certificates for stock to bear the signature or signatures of
any of them.
Section 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In
any case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sums as the Board may direct; provided, however, that a
new certificate may be issued without requiring any bond when, in the judgment
of the Board, it is proper to do so.
Section 6.05 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or any Assistant Secretary of
this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to all shares of any other corporation or
corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
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ARTICLE VII
INDEMNIFICATION
---------------
Section 7.01 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 7.03 of
this Article VII, the Corporation shall 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 (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
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 contendere or its equivalent, shall not, of itself, create a
---- ----------
presumption that the person did not act 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
reasonable cause to believe that his conduct was unlawful.
Section 7.02 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR
IN THE RIGHT OF THE CORPORATION. Subject to Section 7.03 of this Article VII,
the Corporation shall 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 or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such
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person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
Section 7.03 AUTHORIZATION OF INDEMNIFICATION. Any indemnification
under this Article VII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 7.01
or Section 7.02 of this Article VII, as the case may be. Such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders who were not parties to such action, suit
or proceeding. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.
Section 7.04 GOOD FAITH DEFINED. For purposes of any determination
under Section 7.03 of this Article VII, a person shall be deemed to have acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their duties,
or on the advice of legal counsel for the Corporation or another enterprise or
on information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions
of this Section 7.04 shall not be deemed to be exclusive or to limit in any way
the circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 7.01 or 7.02 of this Article VII, as
the case may be.
Section 7.05 INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 7.03 of this Article VII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification
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to the extent otherwise permissible under Sections 7.01 and 7.02 of this Article
VII. The basis of such indemnification by a court shall be a determination by
such court that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standards of conduct set forth
in Sections 7.01 or 7.02 of this Article VII, as the case may be. Neither a
contrary determination in the specific case under Section 7.03 of this Article
VII nor the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 7.05 shall be given to
the Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 7.06 EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VII.
Section 7.07 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 7.01 and 7.02 of this Article VII shall be made to the
fullest extent permitted by law. The provisions of this Article VII shall not
be deemed to preclude the indemnification of any person who is not specified in
Sections 7.01 or 7.02 of this Article VII but whom the Corporation has the power
or obligation to indemnify under the provisions of the General Corporation Law
of the State of Delaware, or otherwise.
Section 7.08 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan 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,
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whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VII.
Section 7.09 CERTAIN DEFINITIONS. For purposes of this Article VII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes
of this Article VII, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VII.
Section 7.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7.11 LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VII to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 7.05 hereof), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 7.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VII to directors and officers of the Corporation.
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ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.01 SEAL. The Board shall provide a corporate seal, which
shall be in the form of a circle and shall bear the name of the Corporation and
words and figures showing that the Corporation was incorporated in the State of
Delaware and showing the year of incorporation.
Section 8.02 WAIVER OF NOTICES. Whenever notice is required to be
given under any provision of these bylaws, the Certificate of Incorporation or
by law, a written waiver, 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 a 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
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless required by the Certificate of
Incorporation.
Section 8.03 LOANS AND GUARANTIES. The Corporation may lend money
to, or guarantee any obligation of, and otherwise assist any officer or other
employee of the Corporation or of its subsidiaries, including any officer who is
a director, whenever, in the judgment of the Board, 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 shall approve, including,
without limitation, a pledge of shares of stock of the Corporation.
Section 8.04 GENDER. All personal pronouns used in these Bylaws
shall include the other genders, whether used in the masculine, feminine or
neuter gender, and the singular shall include the plural, and vice versa,
whenever and as often as may be appropriate.
Section 8.05 AMENDMENTS. These Bylaws, or any of them, may be
rescinded, altered, amended or repealed, and new Bylaws may be made (i) by the
Board, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the Board or (ii) by the stockholders, by
the vote of a majority of the outstanding shares of voting stock of the
Corporation, at an annual meeting of stockholders, without previous notice, or
at any special meeting of stockholders, provided that notice of such proposed
amendment, modification, repeal or adoption is given in the
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notice of special meeting; provided, however, that Section 2.02 of these Bylaws
can only be amended if that Section as amended would not conflict with the
Corporation's Certificate of Incorporation. Any Bylaw made or altered by the
stockholders may be altered or repealed by the Board or may be altered or
repealed by the stockholders.
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CERTIFICATE OF SECRETARY
The undersigned certifies:
(1) That the undersigned is duly elected and acting Secretary of
PARAMOUNT CAPITAL PHARMACEUTICALS, INC., a Delaware corporation; and
(2) That the foregoing Bylaws constitute the Bylaws of the
Corporation as duly adopted by unanimous written consent of the Directors dated
the 26th day of October, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Corporation this 26th day of October, 1998.
________________________________
David M. Tanen, Secretary
[SEAL]
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EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS
of
SERIES A PREFERRED STOCK
for
LAKARO BIOPHARMACEUTICALS, LTD.
LAKARO BIOPHARMACEUTICALS, LTD., a Delaware corporation (the
"COMPANY"), pursuant to the provisions of Section 151 of the General corporation
Law of the State of Delaware, does hereby make this Certificate of Designations
and does hereby state and certify that pursuant to the authority expressly
vested in the Board of Directors of the Company by the Certificate of
Incorporation of the Company, the Board of Directors duly adopted the following
resolutions, which resolutions remain in full force and effect as of the date
hereof:
RESOLVED, that, pursuant to Article IV of the Certificate of
Incorporation of the Company, the Board of Directors hereby authorizes the
issuance of, and fixes the designation and preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions, of a series of Preferred Stock consisting of
170,000 shares to be designated "Series A Preferred Stock" (the "SERIES A
PREFERRED STOCK").
RESOLVED, that up to 170,000 shares of Series A Preferred Stock may be
issued in one or more tranches.
RESOLVED, that each of the Series A Preferred Stock shall rank equally
in all respects and shall be subject to the following terms and provisions:
1. DIVIDENDS AND DISTRIBUTIONS. The holders of the Series A
Preferred Stock shall be entitled to receive dividends and distributions of
assets, securities, cash or other property, other than dividends of Common Stock
which are covered in Section 4(c) below (on the basis of the maximum amount of
Common Shares that such Series A Preferred Stock could be converted into
immediately prior to the close of business on the record date for such dividend
or distribution), at the same time and in the same manner as the holders of
Common Stock if, as and when a dividend or distribution is declared by the Board
of Directors of the Company with respect to shares of Common Stock.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, the
holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any assets of the Company to the holders of
any other class or series of equity securities, the amount of $100 per share of
Series A Preferred Stock, plus all declared but unpaid dividends (the
"LIQUIDATION PREFERENCE"). The applicable Liquidation Preference shall be paid
to all holders of Series A Preferred Stock within 3 days of the Company's
receipt of a written notice requiring such payment.
<PAGE>
3. CONVERSION.
(a) Optional Conversion. Each holder of the Series A Preferred
Stock shall have the right at any time after the date that is twelve (12) months
from the date of issuance of the Series A Preferred Stock, and from time to time
thereafter, at the option of such holder, to convert any or all of its Series A
Preferred Stock into fully paid, validly issued and nonassessable shares
("COMMON SHARES") of common stock, par value $0.001 of the Company ("COMMON
STOCK"), free and clear of any liens, claims or encumbrances. The initial
conversion price per share of Common Stock shall be equal to $2.91 (the
"CONVERSION PRICE") and shall be subject to adjustment as provided herein. The
rate at which each share Series A Preferred Stock is convertible at any time
into Common Stock (the "CONVERSION RATE") shall be determined by dividing the
then existing Conversion Price into $100.00.Except in the case where a holder is
converting all of its Series A Preferred Stock, any conversion of Series A
Preferred Stock shall be in an amount not less than 300 Series A Preferred
Stock.
(b) Mechanics of Optional Conversion. To convert Series A
Preferred Stock into Common Shares, the holder shall give written notice
("OPTIONAL CONVERSION NOTICE") to the Company in the form of Exhibit A hereto
(which Optional Conversion Notice may be given by facsimile transmission)
stating that such holder elects to convert the same and shall state therein the
number of Series A Preferred Stock to be converted and the name or names in
which such holder wishes the certificate or certificates for Common Shares to be
issued (the date of such Optional Conversion Notice shall be referred to herein
as the "CONVERSION DATE"). As soon as reasonably possible after delivery of the
Optional Conversion Notice, such holder shall surrender the certificate or
certificates representing the shares being converted, duly endorsed (or a lost
share affidavit), at the office of the Company or, if identified in writing to
all the holders by the Company, at the offices of any transfer agent for such
shares. The Company shall, immediately upon receipt of such Optional Conversion
Notice, issue and deliver to or upon the order of such holder, against delivery
of the certificates representing the shares which have been converted (or a lost
share affidavit with, if necessary, a reasonable indemnity), a certificate or
certificates for the number of Common Shares to which such holder shall be
entitled (with the number of and denomination of such certificates designated by
such holder), and the Company shall immediately issue and deliver to such holder
a certificate or certificates for the number of Series A Preferred Stock which
such holder has not yet elected to convert hereunder but which are evidenced in
part by the certificate(s) delivered to the Company in connection with such
Optional Conversion Notice. The Company shall effect such issuance of Common
Shares (and certificates for unconverted Preferred Stock) within three (3)
Trading Days of the Conversion Date and shall transmit the certificates by
messenger or overnight delivery service to reach the address designated by such
holder within three (3) Trading Days after the receipt of such Optional
Conversion Notice. In lieu of delivering physical certificates representing the
Common Shares issuable upon conversion of Series A Preferred Stock, provided the
Company's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the
holder, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the Common Shares issuable upon conversion or exercise
2
<PAGE>
to the holder, by crediting the account of holder's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The conversion pursuant to this Section 4(b) shall be deemed to
have been made immediately prior to the close of business on the Conversion
Date. The person or persons entitled to receive the Common Shares issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such Common Shares at the close of business on the Conversion Date.
The term "TRADING DAY" means a day on which there is trading on the
New York Stock Exchange or any other nationally recognized market or exchange.
(c) Adjustment to Conversion Rate for Stock Splits and Dividends
(i) If, at any time while the Series A Preferred Stock are
outstanding, the Company (A) shall pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including investments or
securities convertible into or exchangeable for such equity securities) in
shares of Common Stock, (B) subdivide outstanding Common Shares into a larger
number of shares, (C) combine outstanding Common Stock into a smaller number of
shares, then the number of Series A Preferred Stock issued and outstanding shall
be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding before such event and the denominator of
which shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 3(c)(i) shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination.
(ii) Whenever the number of Series A Preferred Stock is
adjusted pursuant to Section 3(c)(i), the Company shall promptly mail to each
holder of the Series A Preferred Stock a notice setting forth a brief statement
of the facts requiring such adjustment.
(d) Reorganization, Merger or Going Private. In case of any
reorganization or any reclassification of the capital stock of the Company or
any consolidation or merger of the Company with or into any other company or
companies or a sale or transfer of all or substantially all of the assets of the
Company to any other person, pursuant to which the Common Stock is converted
into other securities, cash or property (each, a "BUSINESS COMBINATION"),
holders of Series A Preferred Stock shall have the right thereafter, in addition
to any other rights they may have hereunder, to convert their Series A Preferred
Stock, in whole or in part, into the shares of stock and other securities, cash
and/or property receivable upon or deemed to be held by holders of Common Stock
following such Business Combination, and such holders shall be entitled upon
such event to receive such amount of securities, cash or property as the shares
of the Common Stock of the Company into which the Series A Preferred Stock could
have been converted immediately prior to such Business Combination would have
been entitled, subject to such further applicable adjustments as set forth in
this Section 4. In addition to the foregoing, if the
3
<PAGE>
holders of shares of Common Stock receive any non-publicly traded securities or
other property or cash as part or all of the consideration for such
reorganization, consolidation, merger or sale, then such distribution shall be
treated to the extent thereof as a distribution under Section 1 above and such
Section shall also apply to such distribution.
(d) Notice of Record Date. In the event of any taking by the
Company of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the Company
shall deliver to each holder of Series A Preferred Stock at least 20 days prior
to the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution, security
or right and the amount and character of such dividend, distribution, security
or right.
(e) Issue Taxes. The Company shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
Series A Preferred Stock pursuant hereto.
(f) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purposes of effecting the conversion of the Series
A Preferred Stock, 100% of the maximum number of shares of Common Stock into
which all issued and outstanding Series A Preferred Stock may be converted.
(g) Mandatory Conversion. Each share of Series A Preferred Stock
shall be automatically converted into shares of Common Stock at the then
applicable Conversion Rate immediately prior to the closing of the first
underwritten public offering of Common Stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT") for aggregate gross proceeds to the Company in excess of
$10,000,000 (the "QUALIFIED IPO"). Such mandatory conversion shall be subject to
and governed by all the provisions relating to permissive conversion of the
Series A Preferred Stock contained herein.
4
<PAGE>
5. VOTING RIGHTS. Each holder of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which its Series A Preferred Stock could be converted on the record date
for the vote or written consent of shareholders and shall have voting rights
equal to the voting rights of the holders of Common Stock. Each holder of Series
A Preferred Stock shall be entitled to notice of any shareholders' meeting in
accordance with the by-laws of the Company and shall vote with holders of the
Common Stock upon all matters submitted to a vote of shareholders, except those
matters required by law to be submitted to a class or series vote.
6. NOTICES. (a) The Company shall distribute to the holders of
Series A Preferred Stock copies of all notices, materials, annual and quarterly
reports, proxy statements, information statements and any other documents
distributed generally to the holders of shares of Common Stock of the Company,
at such times and by such method as such documents are distributed to such
holders of such Common Stock.
(b) Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, or delivered by hand against written receipt therefor,
addressed to: the Company at 216 Jaffa Road Sha'arei Ha'ir, Jerusalem, Israel
94383, Attn: General Counsel, and to the holder at such holder's address as
appearing on the books of the Company. Notices shall be deemed to have been
given or delivered on the date of mailing, except notices of change of address,
which shall be deemed to have been given or delivered when received.
7. REPLACEMENT CERTIFICATES. The certificate(s) representing the
Series A Preferred Stock held by any holder of Series A Preferred Stock may be
exchanged by such holder at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Series A
Preferred Stock, as reasonably requested by such holder, upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
8. NO FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series A
Preferred Stock. If more than on certificate evidencing shares of Series A
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any shares of Series A Preferred
Stock, the Company shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the Conversion Price as of
the close of business on the day of conversion.
5
<PAGE>
9. NO REISSUANCE. No Series A Preferred Stock acquired by the
Company by reason of redemption, purchase, conversion or otherwise shall be
reissued.
10. SEVERABILITY OF PROVISIONS. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.
Signed on December 6, 1999
By: /s/ BENJAMIN CORN
-------------------------
Name: Benjamin Corn
Title: President
6
<PAGE>
EXHIBIT A
(To be Executed by Holder
in order to Convert Preferred Stock)
OPTIONAL CONVERSION NOTICE
FOR
SERIES A CONVERTIBLE PREFERRED STOCK
The undersigned, as a holder ("Holder") of shares of Series A
Convertible Preferred Stock ("Preferred Stock") of LAKARO BIOPHARMACEUTICALS,
INC. (the "Company"), hereby irrevocably elects to convert _________ shares of
Preferred Stock for shares ("Common Shares") of common stock, par value $0.001
per share (the "Common Stock"), of the Company according to the terms and
conditions of the Certificate of Designations for the Preferred Stock as of the
date written below. The undersigned hereby requests that share certificates for
the Common Stock to be issued to the undersigned pursuant to this Optional
Conversion Notice be issued in the name of, and delivered to, the undersigned or
its designee as indicated below. No fee will be charged to the Holder of Series
A Preferred Stock for any conversion. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in the Certificate of
Designations.
Conversion Date: ______________________
Conversion Information: NAME OF HOLDER:
By: _____________________________
Print Name:
Print Title:
Print Address of Holder:
_________________________________
_________________________________
Issue Common Stock to: __________
at ______________________________
_________________________________
If Common Stock is to be issued to a person other than Holder, Holder's
signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
________________________________
<PAGE>
EXHIBIT 4.3
FORM OF
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into as of [DATE],
---------
by and between the undersigned (the "Purchaser") and PARAMOUNT CAPITAL
PHARMACEUTICALS, INC., a Delaware Corporation having a business address at 787
Seventh Avenue, New York, NY 10019 (the "Corporation").
R E C I T A L S
- - - - - - - -
A. WHEREAS, the Corporation desires to sell shares of common stock,
par value $.001 per share, of the Corporation (which class of shares is referred
to herein as "Common Stock") to Purchaser, and Purchaser desires to purchase
------------
these shares, upon the terms and conditions herein specified; and
B. WHEREAS, Purchaser is willing to subject the Stock (as defined
herein) to the restrictions contained herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual promises herein contained, the parties hereby agree as follows:
1. Issuance and Acquisition of Stock.
---------------------------------
(a) Immediately after the execution of this Agreement by the parties,
the Corporation shall transfer to the Purchaser, and the Purchaser shall acquire
from the Corporation, the number of shares of Common Stock listed beside the
Purchaser's name on the signature page hereto (the "Stock"), at the purchase
-----
price of $.001 per share, for the total purchase price listed below the
Purchaser's name on the signature page hereto (the "Purchase Price").
--------------
(b) As soon as reasonably practicable after the execution of this
Agreement, the Corporation shall deliver to the Purchaser a certificate or
certificates evidencing the Stock, registered in the name of the Purchaser and
concurrently therewith the Purchaser shall make payment for the Stock by
delivering to the Seller a check payable to the Corporation in the amount of the
Purchase price.
2. Violation Of Transfer Provisions. The Corporation shall not be
--------------------------------
required (i) to transfer on its books any shares of Stock which shall have been
sold, transferred, assigned or pledged in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such shares or to accord the right
to vote as
<PAGE>
such owner or to pay dividends to any transferee to whom such shares shall have
been so sold, transferred, assigned or pledged.
3. Rights as Shareholder. Except as otherwise provided herein, the
----------------------
Purchaser shall, during the term of this Agreement, exercise all rights and
privileges of a shareholder of the Corporation with respect to the Stock.
4. Representations and Warranties by the Corporation.
--------------------------------------------------
The Corporation represents, warrants and covenants with the Purchaser
as follows:
(a) The Corporation has all necessary power and capacity to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transaction contemplated hereby. This Agreement has been validly
executed and delivered by the Corporation and constitutes the legal, valid and
binding obligation of the Corporation, enforceable against the Corporation in
accordance with its terms. The execution and delivery of this Agreement by the
Corporation do not and the performance of its obligations under this Agreement
will not conflict with or result in any breach or constitute a default under any
contracts to which the Corporation is a party or by which the Corporation or any
property or asset of the Corporation is bound or affected.
(b) The Corporation has good title to the Stock and owns the Stock
free and clear of any security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges and
other encumbrances of any nature whatsoever (collectively, "Liens") other than
restrictions on transfer imposed under the Securities Act of 1933, as amended
(the "Securities Act"). Upon delivery thereof to the Purchaser, the Purchaser
shall acquire good title to the Stock, free and clear of any Liens other than
the restrictions set forth in this Agreement and under the Securities Act. The
Stock is validly issued, fully paid and nonassessable. The Corporation is
transferring the Stock to the Purchaser hereunder pursuant to a valid exemption
from registration under the Securities Act.
5. Representations and Warranties by the Purchaser.
-----------------------------------------------
The Purchaser represents, warrants and covenants with the Corporation
as follows:
(a) The Purchaser has all necessary power and capacity to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
2
<PAGE>
the transaction contemplated hereby. This Agreement has been validly executed
and delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms. The execution and delivery of this Agreement by the Purchaser
do not and the performance of its obligations under this Agreement will not
conflict with or result in any breach or constitute a default under any
contracts to which the Purchaser is a party or by which the Purchaser or any
property or asset of the Purchaser is bound or affected.
(b) The Stock will be acquired by the Purchaser for his own account
with the Purchaser's own funds for investment purposes and for the Purchaser's
own ac count, not as a nominee or agent for any other person, firm or
corporation, and not with a view to the sale or distribution of all or any part
thereof, and the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing, any or all of the Stock. The
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person, firm or corporation to sell, transfer or grant any participation to
any person, firm or corporation with respect to any or all of the Stock.
(c) The Purchaser understands that the Stock will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), and that
the Stock is being issued and sold to the Purchaser based upon an exemption from
registration predicated in part on the accuracy and completeness of the
Purchaser's representations and warranties appearing herein.
(d) The Purchaser agrees that in no event will the Purchaser sell,
transfer, assign or pledge all or any part of the Stock or any interest therein,
unless and until (i) the Purchaser shall have furnished the Corporation with an
opinion of counsel satisfactory in form and content to the Corporation to the
effect that (A) such disposition will not require registration of the Stock
under the Securities Act or compliance with applicable state securities laws, or
(B) appropriate action necessary for compliance with the Securities Act and
applicable state securities laws has been taken, (ii) the Corporation shall have
waived, expressly and in writing, its right under clause (i) of this subsection,
and (iii) the proposed transferee of the Stock shall have provided the
Corporation with a written agreement or undertaking by which such transferee
agrees to be bound by all terms, conditions and limitations of this Agreement
applicable to such transferee's transferor as if such transferee were a party
hereto. The requirement of sub paragraph (iii) shall not apply to any transfer
(A) pursuant to an offering registered under the Securities Act, (B) pursuant to
Rule 144 under the Securities Act or (c) effected in a market transaction
otherwise exempt from registration under the Securities Act.
3
<PAGE>
(e) The Purchaser is able to fend for itself in connection with the
transactions contemplated by this Agreement, has such knowledge and experience
in financial and business matters (including investments in development stage
biotechnology companies) as to be capable of evaluating the merits and risks of
its investment in the Corporation, has the ability to bear the economic risks of
its investment for an indefinite period of time and can afford a complete loss
of its investment and has had the opportunity prior to the Purchaser's purchase
of the Stock to ask questions of and receive answers from representatives of
the Corporation concerning the finances, operations and business of the
Corporation. The Purchaser acknowledges and agrees that (i) it is not relying
upon any statement, promise or assurance of the Corporation or any investor in
the Corporation (or any representative of the Corporation or any such investor)
in arriving at the Purchaser's decision to purchase the Stock, and has not
otherwise been induced to purchase the Stock by the Corporation or any such
investor (or any representative of the Corporation or any such investor), and
that (ii) it has decided to purchase the Stock based upon the Purchaser's own
analysis of the merits and risks of investing in the Corporation without the
intervention or assistance of any other person, firm or corporation.
(f) The Purchaser understands and acknowledges that the Purchaser will
not be permitted to sell, transfer, assign or pledge the Stock until it is
registered under the Securities Act or an exemption from the registration and
prospectus delivery requirements of the Securities Act is available to the
Purchaser, and that there is no assurance that such an exemption from
registration will ever be available or that the Purchaser will ever be able to
sell any of the Stock.
(g) All certificates representing the Stock and, until such time as
the Stock is sold in an offering which is registered under the Securities Act or
the Corpora tion shall have received an opinion of counsel satisfactory in form
and content to the Corporation that such registration is not required in
connection with a resale (or subsequent resale) of the Stock, all certificates
issued in transfer thereof or substitution therefor, shall, where applicable,
have endorsed thereon the following (or substantially equivalent) legends:
(i) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT
TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF
PARAMOUNT CAPITAL PHARMACEUTICALS, INC. (THE "COMPANY") AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY APPLICABLE STATE
4
<PAGE>
SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES OR "BLUE SKY" LAWS.
(ii) Any legend required to be placed thereon by any applicable
state securities law.
(h) The Corporation shall not be obligated to transfer any of the
Stock if counsel for the Corporation determines that any applicable registration
requirement under the Securities Act or any other applicable requirement of
federal or state law has not been met.
6. General Provisions.
------------------
(a) No Assignments. The Purchaser shall not transfer, assign or
--------------
encumber any of its rights, privileges, duties or obligations under this
Agreement without the prior written consent of the Corporation, and any attempt
to so transfer, assign or encumber shall be void.
(b) Notices. All notices and other communications which are required
-------
or permitted to be given pursuant to the terms of this Agreement shall be in
writing and shall be sufficiently given (i) if personally delivered, (ii) if
sent by telex or facsimile, provided that "answer-back" confirmation is received
by the sender or (iii) upon receipt, if sent by registered or certified mail,
postage paid return receipt requested in any case addressed as follows:
(i) If to the Corporation:
Paramount Capital Pharmaceuticals, Inc.
5
<PAGE>
787 Seventh Avenue
New York, NY 10019
Att.: David M. Tanen
Secretary
(ii) If to the Purchaser, to the address set forth on the
signature page of this Agreement.
The address of a party, for the purposes of this Section 6(b)(ii), may be
changed by giving written notice to the other party of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue in effect
for all purposes hereunder.
(c) Standoff Agreement. The Purchaser agrees that, in connection with
------------------
each underwritten public offering registered under the Securities Act of shares
of Common Stock or other equity securities of the Corporation by or on behalf of
the Corporation, the Purchaser shall not sell or transfer, or offer to sell or
transfer, any shares of Common Stock or other equity securities of the
Corporation for such period as the managing underwriter of such offering or the
Corporation determines is necessary to effect the underwritten public offering.
(d) Choice of Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
governed by and construed in accordance with the internal laws (without giving
effect to the conflicts of law principles) of the State of New York.
(e) Severability. The parties hereto agree that the terms and
------------
provisions in this Agreement are reasonable and shall be binding and enforceable
in accordance with the terms hereof and, in any event, that the terms and
provisions of this Agreement shall be enforced to the fullest extent permissible
under law. In the event that any term or provision of this Agreement shall for
any reason be adjudged to be unenforceable or invalid, then such unenforceable
or invalid term or provision shall not affect the enforceability or validity of
the remaining terms and provisions of this Agreement, and the parties hereto
hereby agree to replace such unenforceable or invalid term or provision with an
enforceable and valid arrangement which, in its economic effect, shall be as
close as possible to the unenforceable or invalid term or provision.
(f) Successors. All references in this Agreement to the Corporation
----------
shall include any and all successors in interest to the Corporation, whether by
merger, consolidation, sale of all or substantially all assets or otherwise, and
this Agreement shall inure to the benefit of the successors and assigns of the
6
<PAGE>
Corporation and, subject to the terms herein set forth, shall be binding upon
the Purchaser, its successors and permitted assigns.
(g) Counterparts. This Agreement may be executed in two counterparts,
------------
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
(h) Modification, Amendment and Waiver. No modification, amendment or
----------------------------------
waiver of any provision of this Agreement shall be effective against the
Corporation unless the same shall be in a written instrument signed by an
officer of the Corporation on its behalf and such instrument is approved by its
Board of Directors. The failure at any time to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of either party thereafter to enforce each and every
provision hereof in accordance with its terms.
(i) Further Assurances. The parties agree to execute such further
------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
(j) Integration. This Agreement constitutes the entire agreement of
-----------
the parties with respect to the subject matter hereof.
(k) Headings. The headings of the Sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
(l) Gender and Number. As used in this Agreement, the masculine,
-----------------
feminine or neuter gender, and the singular or plural, shall be deemed to
include the others whenever and wherever the context so requires. Additionally,
unless the context requires otherwise, "or" is not exclusive.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed by their respective
officers, partners or other representatives, thereunto duly authorized, all as
of the day and year first above written.
PARAMOUNT CAPITAL
PHARMACEUTICALS, INC.
By:
---------------------------
Name:
Title:
PURCHASER:
By:
---------------------------
Name:
Address: ---------------------
---------------------
---------------------
---------------------
---------------------
NUMBER OF SHARES OF
COMMON STOCK PURCHASABLE:
PURCHASE PRICE:
8
<PAGE>
EXHIBIT 4.4
FORM OF
CONTRIBUTION AGREEMENT
----------------------
CONTRIBUTION AGREEMENT (this "Agreement") made as of the date set forth on
the signature page hereof between Lakaro Biopharmaceuticals, Inc. (the
"Company"), and the undersigned (the "Noteholder").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Noteholder holds a 12% convertible note of Partec, Ltd. in
that face amount as is set forth on the signature page hereof (the "Note");
WHEREAS, the Noteholder desires to contribute the Note to the Company in
exchange for shares of the Company's Series A Preferred Stock (the "Preferred
Stock") and a warrant to purchase shares of the Company's common stock on the
terms and conditions hereinafter set forth; and
WHEREAS, the Company desires to issue shares of its Preferred Stock and a
warrant to the Noteholder in exchange for a contribution of such Note;
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. CONTRIBUTION OF NOTE AND REPRESENTATIONS BY NOTEHOLDER
------------------------------------------------------
I.1 Subject to the terms and conditions hereinafter set forth, the
Noteholder hereby contributes to the Company the Note free and clear of any
liens, claims, charges or encumbrances of any kind or nature, and the Company
agrees to accept the Note from the Noteholder, and issue to the Noteholder (i)
that number of shares of Preferred Stock as is calculated, subject to Article
IV.1, below, by dividing (A) the face amount of the Note plus all accrued and
unpaid interest thereon as of November 23, 1999 (the "Note Amount"), by (B) by
100; and (ii) a ten-year warrant to purchase that number of shares of the
Company's common stock, par value $0.001 (the "Common Stock") equal to that
number of shares of Common Stock as is calculated by (C) multiplying the Note
Amount by 0.2, and (D) dividing that amount by 2.91, at an exercise price of
$0.01 per share (the "Warrant"). The Preferred Stock and Warrant shall be
delivered to the Noteholder by the Company within ten (10) business days
following the contribution.
I.2 The Noteholder recognizes that an investment in the Preferred Stock
and Warrant involves a high degree of risk including, but not limited to, the
following: (a) the Company is a development stage business with no operating
history, and requires substantial additional funds; (b) an investment in the
Company is highly speculative, and only investors who can afford the loss of
their entire investment should consider investing in the Company and the
Preferred Stock; (c) the Noteholder may not be able to liquidate his investment;
(d) transferability of the Preferred Stock and Warrant is extremely limited; and
(e) in the event of a disposition, the Noteholder could sustain the loss of his
entire investment. Such risks are
<PAGE>
more fully set forth in the Confidential Private Placement Memorandum, dated
November 19, 1999, and the exhibits thereto, all of which constitute an integral
part thereof, furnished by the Company to the Noteholder (the "PPM"). The
Noteholder agrees and understands that the PPM was prepared in connection with a
soon to be commenced offering by the Company of Preferred Stock for cash and,
therefore, the portions of the PPM concerning such offering do not apply to the
transaction contemplated by this Agreement.
I.3 The Noteholder represents that he is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act").
I.4 The Noteholder hereby acknowledges and represents that (a) he has
significant prior investment experience, including investments in securities
that are non-listed, unregistered and/or neither traded on a national securities
exchange nor on the National Association of Securities Dealers' (the "NASD")
automated quotation system, or he has employed the services of an investment
advisor, attorney and/or accountant to read all of the documents furnished or
made available by the Company to him and to assist him in evaluating the merits
and risks of such an investment; (b) he recognizes the highly speculative nature
of this investment; and (c) he is able to bear the economic risk that he hereby
assumes.
I.5 The Noteholder hereby acknowledges receipt from the Company and
careful review by him of the PPM including without limitation, the section
entitled "Risk Factors", and hereby represents that he has been furnished by the
Company during the course of this transaction with all information regarding the
Company that he has requested or desired to know, has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the issuance of the Preferred Stock and the Warrant to him and has
received any additional information that he has requested.
I.6 (a) The Noteholder has relied solely upon the information provided by
the Company in the PPM and in this Agreement in making the decision to make a
contribution of his Note for shares of Preferred Stock and the Warrant. To the
extent he deems it to be necessary, he has retained, at his own expense, and
relied upon appropriate professional advice regarding the investment, tax and
legal merits and consequences of this Agreement and the transactions
contemplated hereby. The Noteholder acknowledges and agrees that (i) the Company
has prepared the PPM and that no other person, including without limitation,
Paramount Capital, Inc. (the "Finder"), has supplied any information for
inclusion in the PPM, (ii) the Finder has no responsibility for the accuracy or
completeness of the PPM and (iii) the Noteholder has not relied upon the
independent investigation or verification, if any, that may have been undertaken
by the Finder.
(b) The Noteholder represents that (i) he was contacted regarding the
contribution of his Note for shares of Preferred Stock and the Warrant by the
Finder or the Company (or an authorized agent or representative thereof) with
whom he had a prior substantial pre-existing relationship and (ii) no shares of
Preferred Stock or warrants were
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<PAGE>
offered or sold to him by means of any form of general solicitation or general
advertising, and in connection therewith he did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.
I.7 The Noteholder hereby represents that he, by reason of his business or
financial experience or the business or financial experience of his professional
advisors (who are unaffiliated with and who are not compensated by the Company
or any affiliate or selling agent of the Company, including the Finder, directly
or indirectly), has the capacity to protect his own interests in connection with
the transactions contemplated hereby.
I.8 The Noteholder hereby acknowledges that the terms of issuance of the
Preferred Stock and the Warrant contemplated by this Agreement have not been
reviewed by the United States Securities and Exchange Commission (the "SEC" or
"Commission") nor any state, local or foreign regulatory authority because such
issuance is intended to be exempt from the registration requirements of Section
5 of the Securities Act pursuant to Section 4(2) of the Securities Act, and/or
Regulation D promulgated under the Securities Act. The Noteholder agrees that
he will not sell or otherwise transfer the shares of Preferred Stock or the
Warrant unless they are registered under the Securities Act or unless an
exemption from such registration is available.
I.9 The Noteholder understands that neither the shares of Preferred Stock
nor the Warrant have been registered under the Securities Act or any other law
by reason of a claimed exemption under the provisions of the Securities Act and
other laws that depend, in part, upon the Noteholder's investment intention. In
this connection, the Noteholder hereby represents that he is obtaining the
shares of Preferred Stock and the Warrant for his own account for investment and
not with a view toward the resale or distribution to others. The Noteholder, if
an entity, further represents that it was not formed for the purpose of entering
into the transactions contemplated by this Agreement. THE SALE OF THESE
SECURITIES SHALL BE VOIDABLE BY ANY FLORIDA RESIDENT WITHIN 3 DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY SUCH FLORIDA RESIDENT TO THE COMPANY OR
WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH
FLORIDA RESIDENT, WHICHEVER OCCURS LATER, AS REQUIRED BY SECTION
517.061(11)(a)(5), FLORIDA STATUTES.
I.10 The Noteholder understands that there is no public market for the
Preferred Stock, the Warrant, or the Common Stock issuable upon the conversion
of the Preferred Stock or upon the exercise of the Warrant and that no market
may develop. The Noteholder understands that even if a public market develops
for such securities, Rule 144 ("Rule 144") promulgated under the Securities Act,
requires for non-affiliates, among other conditions, a one-year holding period
prior to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the
Securities Act.
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<PAGE>
The Noteholder understands and hereby acknowledges that the Company is under no
obligation to register any shares of Preferred Stock or the Warrant under the
Securities Act or any state securities or "blue sky" laws other than as set
forth in Article III. The Noteholder consents that, the Company, may but is not
obligated to do so, and accordingly, may permit transfer of the Preferred Stock
or the Warrant only when the request for transfer is accompanied by an opinion
of counsel satisfactory to the Company that neither the proposed sale nor the
proposed transfer results in the violation of the Securities Act or any other
applicable state, local or foreign securities or blue sky laws. The Noteholder
agrees to hold the Company and its directors, officers, employees, affiliates,
controlling persons and agents (including the Finder and its officers,
directors, employees, counsel, controlling persons and agents) and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any misrepresentation made by the Noteholder contained in this
Agreement, (b) any sale or distribution by the Noteholder in violation of the
Securities Act or any applicable state securities or "blue sky" laws, or (c) any
untrue statement of a material fact made by the Noteholder and contained herein.
I.11 The Noteholder consents to the placement of a legend on any
certificate or other document evidencing the Preferred Stock or the Warrant that
such securities have not been registered under the Securities Act or any local,
foreign or state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof contained in this
Agreement. The Noteholder is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the transferability of
such securities.
I.12 The Noteholder hereby represents that the Note contributed by him in
connection with this Agreement is owned by him and will be delivered to the
Company free and clear of any liens, claims charges or encumbrances of any kind
or nature.
I.13 The Noteholder hereby represents that his address furnished on the
signature page hereof is his principal residence if he is an individual or its
principal business address if it is a corporation or other entity.
I.14 The Noteholder represents that he has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement and
to enter into and perform the transactions contemplated hereby. This Agreement
constitutes the legal, valid and binding obligation of the Noteholder,
enforceable against him in accordance with its terms.
I.15 If the Noteholder is a corporation, partnership, limited liability
Company, trust, employee benefit plan, individual retirement account, Keogh
Plan, or other tax-exempt entity, it is authorized and qualified to become an
investor in the Company and the person signing this Agreement on behalf of such
entity has been duly authorized by such entity to do so. (If the Noteholder is
an employee benefit plan, individual retirement amount, Keogh Plan or other tax-
exempt entity, it may have special tax and ERISA considerations to take into
account.)
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<PAGE>
I.16 The Noteholder acknowledges that if he is a Registered Representative
of an NASD member firm, he must give such firm the notice required by the NASD's
Rules of Fair Practice.
I.17 The Noteholder acknowledges that the Finder will assist the Company
in identifying potential investors for which it will receive certain
compensation as described in the PPM.
II. REPRESENTATIONS BY THE COMPANY
------------------------------
The Company hereby represents and warrants to the Noteholder that:
II.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
described in the PPM.
II.2 Capitalization and Voting Rights. The shares of Preferred Stock and
--------------------------------
the Warrant, and the shares of Common Stock issued upon the conversion of the
Preferred Stock and the exercise of the Warrant, when issued and paid for in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable. Except as set forth in the PPM, in this Agreement and as
otherwise required by law, there are no restrictions upon the voting or transfer
of any of the shares of capital stock of the Company pursuant to the Company's
Certificate of Incorporation and/or By-Laws (collectively, the "Incorporation
Documents"), or other governing documents or any agreement or other instruments
to which the Company is a party or by which the Company is bound.
II.3 Authorization; Enforceability. The Company has all corporate right,
-----------------------------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the Preferred Stock
and the Warrant contemplated hereby and the performance of the Company's
obligations hereunder has been taken. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy. Upon the issuance and delivery of the shares of Preferred Stock, such
shares will be validly issued, fully paid and nonassessable. Upon the issuance
and delivery of Warrant, such Warrant will be validly, fully paid (subject to
the payment of the exercise price when exercised for the purchase of shares of
Common Stock) and nonassessable. The issuance of the Preferred Stock and the
Warrant contemplated hereby will not give rise to any preemptive rights or
rights of first refusal on behalf of any person.
-5-
<PAGE>
II.4 No Conflict; Governmental Consents.
----------------------------------
(a) The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Incorporation Documents of the
Company, and will not conflict with, or result in a breach or violation of, any
of the terms or provisions of, or constitute (with due notice or lapse of time
or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, nor result in the creation or imposition of any lien upon any of the
properties or assets of the Company.
II.5 No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or with the
authorization and issue of the Preferred Stock or the Warrant, except such
filings as may be required to be made with the SEC, the NASD and the NASDAQ and
with any state or foreign blue sky or securities regulatory authority.
III. REGISTRATION RIGHTS
-------------------
III.1 Any capitalized terms used herein that are not otherwise defined
herein shall have the meanings ascribed to such terms in the PPM, the
definitions from which are hereby incorporated as if set out in full herein. As
used in this Agreement, the following terms shall have the following meanings:
(a) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof.
(b) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in the United States in compliance with the Securities Act, and
the declaration or order of effectiveness of such registration statement or
document.
(c) The term "Registrable Securities" shall mean (i) the shares of
Common Stock issuable upon the conversion of the Preferred Stock, (ii) the
shares of Common Stock issuable upon the exercise of the Warrant, and (iii) any
shares of Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as) a dividend or other
distribution with respect to or in replacement of the Preferred Stock and/or the
Warrant; provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to a registration statement declared effective by the Commission, (B)
have not been issued or sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are
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<PAGE>
removed upon the consummation of such sale or (C) are held by a Holder or a
permitted transferee of a Holder pursuant to Section III.10.
III.2 Piggy-back Registration Rights. (a) The Company agrees that if, at
------------------------------
any time, and from time to time, commencing one (1) year after the closing date
of the first public offering of securities of the Company in the United States
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction) (the "IPO") and ending on the date
that is five (5) years from the date hereof, the Board of Directors of the
Company shall authorize the filing of a registration statement under the
Securities Act (other than the initial public offering of the Company's Common
Stock, or other than a registration statement on Form S-8, Form S-4 or any other
form that does not include substantially the same information as would be
required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders, the Company shall, (A) promptly notify the Holder that such
registration statement will be filed and that the Registrable Securities then
held by the Holder, which such Holder requests in writing within twenty (20)
days of notice by the Company be registered, will be included in such
registration statement at the Holder's request, (B) cause such registration
statement to cover all of such Registrable Securities issued to the Holder
requesting inclusion, (C) use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable, and (D) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Registrable Securities that have been
issued to the Holder to be sold or otherwise disposed of, and will maintain such
compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder to effect the
proposed sale or other disposition.
(b) Notwithstanding any other provision of this Article III, the
Company may at any time, abandon or delay any registration commenced by the
Company. In the event of such an abandonment by the Company, the Company shall
not be required to continue registration of shares requested by the Holder for
inclusion and the Holder shall retain the right to request inclusion of shares
as set forth above.
(c) The Holder shall have the right to request inclusion of any of
their Registrable Securities in a registration statement as described in this
Section III.2 up to two (2) times.
III.3 Obligations of the Company. Whenever required under this Article
--------------------------
III to include Registrable Securities in a Company registration statement, the
Company shall, as expeditiously as reasonably possible:
(a) Use its reasonable best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for the shorter of a period of up to one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed (the "Effective Period"); provided,
however, that such 120-day
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<PAGE>
period shall be extended for a period of time equal to the period that the
Holder refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company,
and provided further that if applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permits, in lieu of filing a
post-effective amendment that (i) includes any prospectus required by Section
10(a)(3) of the Securities Act or (ii) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the Company may incorporate by reference information required to be
included in (i) and (ii) above to the extent such information is contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other federal or
state securities laws of such jurisdictions as shall be reason-ably requested by
the Holders; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered hereunder to be
listed on each securities exchange or quotation service on which similar
securities issued by the Company are then listed or quoted.
-8-
<PAGE>
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
III.4 Furnish Information. It shall be a condition precedent to the
-------------------
obligation of the Company to take any action pursuant to this Article III with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
effect the registration of such Holder's Registrable Securities, including,
without limitation, as may be required by the applicable rules and regulations
of the SEC and applicable state or foreign securities laws concerning the
proposed method of sale or other disposition of the Securities and the identity
of, and compensation to be paid to, any proposed underwriter or brokers to be
employed by the Holder in connection therewith, and the Holder shall deliver to
the Company upon request any written undertakings reasonably requested by the
Company to assure full compliance with applicable laws.
III.5 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section III.2 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities; provided, however, that the
Company shall not bear the cost of any professional fees or costs of accounting,
financial or legal advisors to any of the Holders. Notwithstanding the
foregoing, each Holder shall pay all registration expenses which such Holder is
required to pay under applicable law.
III.6 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Article III.2 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included there-in owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder who is a holder of
Registrable Securities and is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and
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<PAGE>
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
III.7 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article III.
III.8 Indemnification. In the event that any Registrable Securities are
---------------
included in a registration statement under this Article III:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or the Exchange Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will reimburse each such Holder, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Article 3.8(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person; provided, that, in no event shall any
indemnity under this Article 5.3(b) exceed the gross proceeds from the offering
received by such Holder.
(b) To the extent permitted by law, each Holder registering its
Registrable Securities will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or
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<PAGE>
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration
or arises out of a Violation; and each such Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Article III.8(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Article III.8(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that, in no
event shall any indemnity under this Article III.8(b) exceed the gross proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Article
III.8 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Article III.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by the
indemnifying party and approved by the indemnified party (whose approval shall
not be unreasonably withheld); provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Article
III.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Article III.8.
(d) If the indemnification provided for in this Article III.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or pay-able by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged
-11-
<PAGE>
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Article
III.8 shall survive the completion of any offering of Registrable Securities in
a registration statement under this Article III, and otherwise.
III.9 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, and provided that the
Company's Common Stock is otherwise registered pursuant to the Securities Act,
the Company agrees to:
(a) make and keep public information avail-able, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the registration statement filed in connection with
an IPO by the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (ii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
III.10 Assignment of Registration Rights. The rights to cause the Company
---------------------------------
to register Registrable Securities granted to the Holders by the Company under
this Article III may be assigned in full by a Holder in connection with a
transfer by such Holder of its Registrable Securities if: (a) such Holder gives
prior written notice to the Company; and (b) such transferee agrees for the
benefit of the Company, to comply with the terms and provisions of this
Agreement, and such transfer is otherwise in compliance with this Agreement;
provided, however, that such transfer may otherwise be effected in accordance
with applicable securities laws. Except as specifically permitted by this
Section III.10, the rights of a Holder with respect to Registrable Securities as
set out herein shall not be transferable to any other Person, and any attempted
transfer shall cause all rights of such Holder therein to be forfeited.
-12-
<PAGE>
III.11 Termination of Registration Rights. In addition, notwithstanding
----------------------------------
Section 3.2(a), the right of any Holder to request inclusion in any registration
pursuant to Section 5.2 shall terminate if all shares of Registrable Securities
held by such Holder may be sold under Rule 144 during any 90-day period.
IV. MISCELLANEOUS
-------------
IV.1 No Fractional Shares. No fractional shares or scrip representing
--------------------
fractional shares of Preferred Stock shall be issued upon the contribution of
the Note. Instead of any fractional share of Preferred Stock which would
otherwise be issuable upon the contribution of the Note, the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to the
same fraction of Preferred Stock to be issued multiplied by $100.
IV.2 Notices. Any notice or other communication given hereunder shall
-------
be deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt therefor,
addressed to the Company at 216 Jaffa Road, Jerusalem 94383 Israel, Attn:
General Counsel, with a copy to c/o Paramount Capital, Inc. 787 Seventh Avenue,
48th Floor, New York, New York 10019, Attn: David M. Tanen, and to the
Noteholder at his address indicated on the signature page of this Agreement.
Notices shall be deemed to have been given or delivered on the date of mailing,
except notices of change of address, which shall be deemed to have been given or
delivered when received.
IV.3 Amendment. Except as otherwise provided herein, this Agreement
---------
shall not be changed, modified or amended except by a writing signed by the
parties to be charged, and this Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by the party to
be charged.
IV.4 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
IV.5 Binding Obligation. Upon the execution and delivery of this
------------------
Agreement by the Noteholder, this Agreement shall become a binding obligation of
the Noteholder, subject, however, to the right hereby reserved by the Company to
enter into the same agreements with other Noteholders and to add and/or delete
other persons as Noteholders.
IV.6 Governing Law; Jurisdiction. NOTWITHSTANDING THE PLACE WHERE THIS
---------------------------
AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY
AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS
NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO
-13-
<PAGE>
THIS AGREEMENT IS THE APPROPRIATE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
IV.7 Attorney Fees. In order to discourage frivolous claims the parties
-------------
agree that unless a claimant in any proceeding arising out of this Agreement
succeeds in establishing his claim and recovering a judgment against another
party (regardless of whether such claimant succeeds against one of the other
parties to the action), then the other party shall be entitled to recover from
such claimant all of its/their reasonable legal costs and expenses relating to
such proceeding and/or incurred in preparation therefor.
IV.8 Severability. The holding of any provision of this Agreement to be
------------
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid-id, illegal or incapable of being enforced
in whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provisions shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
IV.9 Waiver. It is agreed that a waiver by either party of a breach of
------
any provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
IV.10 Further Obligations. The parties agree to execute and deliver all
-------------------
such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
IV.11 Counterparts. This Agreement may be executed in two or more
------------
counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
IV.12 Publicity. The Noteholder agrees not to issue any public statement
---------
with respect to his investment or proposed investment in the Company or the
terms of any agreement or covenant between him and the Company without the
Company's prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation, in which
case the Noteholder shall give reasonable advance notice to the Company of such
required disclosure.
IV.13 No Brokers. The Noteholder represents and warrants that it has not
----------
engaged, consented to or authorized any broker, finder or intermediary to act on
its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Noteholder
agrees to indemnify and hold harmless the Company from
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<PAGE>
and against all fees, commissions or other payments owing to any such person or
firm acting on behalf of the Noteholder hereunder.
IV.14 No Rights. Nothing in this Agreement shall create or be deemed to
---------
create any rights in any person or entity not a party to this Agreement.
IV.15 Interpretation. The terms "it", "his" and "he" when used herein,
--------------
are intended to be gender neutral and, depending on the nature of the
Noteholder, shall be deemed to mean "his", "her," "their," or "its" or, as the
case may be, "he," "she," "they," or "it."
-15-
<PAGE>
[SIGNATURE PAGE]
PRINCIPAL AMOUNT OF NOTE BEING CONTRIBUTED: __________________________
AMOUNT OF ACCRUED INTERSET (AS OF 11/23/99): ________________________
TOTAL NOTE AMOUNT BEING CONTRIBUTED: _________________________________
Name in which the Preferred Stock, the Warrant and a check for any fractional
interest should be issued:
____________________________________________________
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on the date written below.
Dated as of November 18, 1999
PARTNERSHIP, CORPORATION, LIMITED
INDIVIDUAL NOTEHOLDER: LIABILITY COMPANY, OR TRUST NOTEHOLDER:
______________________________________ ______________________________________
(Signature) (Name of Entity)
______________________________________ By:___________________________________
(Print Name) (Signature of Authorized Person)
______________________________________
(Print Name and Title of Authorized
Person)
______________________________________ ______________________________________
______________________________________ ______________________________________
(Address) (Address of Entity)
______________________________________ ______________________________________
(Social Security Number) (Taxpayer I.D. Number)
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<PAGE>
ACCEPTANCE OF CONTRIBUTION
Name of Noteholder: ______________________________
The above is hereby agreed, and a contribution of $____________ face amount of
12% convertible note(s) of Partec, Ltd. is hereby accepted in exchange for (i)
_______ shares of Series A Preferred Stock, (ii) a Warrant to purchase
____________ shares of Common Stock, and (iii) $________ for the fractional
interest in Preferred Shares.
LAKARO BIOPHARMACEUTICALS, INC.
By: ___________________________________
Name: Morris Laster, M.D.
Title: Chief Executive Officer
-17-
<PAGE>
EXHIBIT 4.5
FORM OF
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth
on the signature page hereof between Lakaro Biopharmaceuticals, Inc. (the
"Company"), and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company desires to issue a minimum of four (4) Units (the
"Minimum Offering") and a maximum of twenty four (24) Units (the "Maximum
offering"), each "Unit" consisting of five thousand (5,000) shares of Series A
Preferred Shares (the "Preferred Stock" or the "Securities");
WHEREAS, the Subscriber desires to purchase that number of Units set
forth on the signature page hereof on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
--------------------------------------------------------
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of units, or fractions thereof, and the Company agrees to sell such Units
to the Subscriber as is set forth on the signature page hereof at a price equal
to $500,000 per Unit (the "Offering Price") payable in U.S. funds. The purchase
price is payable by personal or business check, wire transfer of immediately
available funds or money order made payable to "State Street Bank and Trust
Company, N.A., Escrow Agent, F/B/O Lakaro Biopharmaceuticals, Inc."
contemporaneously with the execution and delivery of this Agreement by the
Subscriber. (Specific wire instructions are annexed to this Agreement as Exhibit
A.) The Preferred Stock shall be delivered by the Company within ten (10)
business days following the consummation of the offering as set forth in Article
III-hereof. The Subscriber understands, however, that this purchase of Units is
contingent upon the company making sales of the minimum offering amount prior to
the Final Closing Date (as defined below) of the offering.
1.2 The Subscriber recognizes that the purchase of Units involves a
high degree of risk including, but not limited to, the following: (a) the
Company is a development stage business with no operating history, and requires
~ubstantial funds in addition to the proceeds of the Offering; (b) an investment
in the Company is highly speculative, and only investors who can afford the loss
of their entire investment should consider investing in the Company and the
Units; (c) the Subscriber may not be able to liquidate his investment; (d)
transferability of the Securities is extremely limited; (e) in the event of a
disposition, the Subscriber could sustain the loss of his entire investment.
Such risks are more fully set forth in the Confidential Private Placement
Memorandum, dated November 18, 1999, and the exhibits thereto ' all of which
constitute an integral part thereof furnished by the Company to the Subscriber
(the "PPM").
-1-
<PAGE>
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term in defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), as indicated by
the Subscriber's responses to the questions contained in Article VII hereof, and
that the Subscriber is able to bear the economic risk of an investment in the
Units.
1.4 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has significant prior investment experience, including investment in
securities that are non-listed, unregistered and/or neither traded on a national
securities exchange nor on the National Association of Securities Dealers' (the
"NASD") automated quotation system, or the Subscriber has employed the services
of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors in the Units and to assist the Subscriber in
evaluating the merits and risks of such an investment on the Subscriber's
behalf; (b) the Subscriber recognizes the highly speculative nature of this
investment; and (c) the Subscriber is able to bear the economic risk that the
Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt from the Company and
careful review by the Subscriber of (a) the PPM including without limitation,
the section entitled "Risk Factors", and (b) this Agreement, and hereby
represents that the Subscriber has been furnished by the Company during the
course of this transaction with all information regarding the Company that the
Subscriber has requested or desired to know, has been afforded the opportunity
to ask questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
offering and has received any additional information that the Subscriber has
requested.
1.6 (a) The Subscriber has relied solely upon the information provided
by the Company in the PPM, in this Agreement and in other material, if any,
provided by the Company in response to the Subscriber's request made pursuant to
Section 1.6, above, in making the decision to invest in the Units. To the extent
the Subscriber deems it to be necessary, the Subscriber has retained, at its own
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Units hereunder. The Subscriber acknowledges and agrees that (i)
the Company has prepared the PPM and that no other person, including without
limitation, Paramount Capital, Inc. (the "Finder"), has supplied any information
for inclusion in the PPM, (ii) the Finder has no responsibility for the accuracy
or completeness of the PPM and (iii) the Subscriber has not relied upon the
independent investigation or verification, if any, that may have been undertaken
by the Finder.
(b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Units by the Finder or the Company (or an authorized
agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship and (ii) no Units were offered or sold to
it by means of any form of general solicitation or general advertising, and in
connection therewith the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry
-2-
<PAGE>
investor conference whose attendees were invited by any general solicitation or
general advertising.
1.7 The Subscriber hereby represents that the Subscriber, by reason of
the Subscriber's business or financial experience or the business or financial
experience of the Subscriber's professional advisors (who are unaffiliated with
and who are not compensated by the Company or any affiliate or selling agent of
the Company, including the Finder, directly or indirectly), has the capacity to
protect the Subscriber's own interests in connection with the transaction
contemplated hereby.
1.8 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Conmission (the "SEC" or
"Commission") nor any state, local or foreign regulatory authority because the
offering is intended to be exempt from the registration requirements of Section
5 of the Securities Act pursuant to Section 4(2) of the Securities Act, and/or
Regulation D promulgated under the Securities Act. The Subscriber agrees that
the Subscriber will not sell or otherwise transfer the Securities unless they
are registered under the Securities Act or unless an exemption from such
registration is available.
1.9 The Subscriber understands that the Securities comprising the Units
have not been registered under the Securities Act or any other law by reason of
a claimed exemption under the provisions of the Securities Act and other laws
that depend, in part, upon the Subscriber's investment intention. In this
connection, the Subscriber hereby represents that the Subscriber is purchasing
the Securities comprising the Units for the Subscriber's own account for
investment and not with a view toward the resale or distribution to others. The
Subscriber if an entity further represents that it was not formed for the
purpose of purchasing the Securities. THE SALE OF THESE SECURITIES SHALL BE
VOIDABLE BY ANY FLORIDA RESIDENT WITHIN 3 DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH FLORIDA RESIDENT TO THE COMPANY OR WITHIN 3 DAYS
AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH FLORIDA
RESIDENT, WHICHEVER OCCURS LATER, AS REQUIRED BY SECTION 517.061(11)(a)(5),
FLORIDA STATUTES.
1.10 The Subscriber understands that there is no public market for the
Units nor the Securities comprising the Units and that no market may develop
for any of such Securities. The Subscriber understands that even if a public
market develops for such securities Rule 144 ("Rule 144") promulgated under the
Securities Act requires for non-affiliates, among other conditions, a one-year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration requirements
under the Securities Act. The Subscriber understands and hereby acknowledges
that the Company is under no obligation to register any of the Units or any of
the Securities comprising the Units under the Securities Act or any state
securities or "blue sky" laws other than as set forth in Article V. The
Subscriber consents that, the Company, may but is not obligated to do so, and
accordingly, may permit transfer of the Securities only when the request for
transfer is accompanied by an opinion of counsel satisfactory to the Company
that neither the proposed sale nor the proposed transfer results in the
violation of the Securities Act or any other applicable state, local or foreign
securities or blue sky laws.
-3-
<PAGE>
The Subscriber agrees to hold the Company and its directors, officers,
employees, affiliates, controlling persons and agents (including the Finder and
its officers, directors, employees, counsel, controlling persons and agents) and
their respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of, (a) any misrepresentation made by the Subscriber contained in this
Agreement (including the Confidential Investor Questionnaire contained in
Article VII herein), (b) any sale or distribution by the Subscriber in violation
of the Securities Act or any applicable state securities or "blue sky" laws or
(c) any untrue statement of a material fact made by the Subscriber and contained
herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Securities Act or any local, foreign or state
securities or "blue sky" laws and setting forth or referring to the restrictions
on transferability and sale thereof contained in this Agreement. The Subscriber
is aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of such Securities.
1.12 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional
Units and to close the Offering to the Subscriber at any time.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its principal
business address if it is a corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities underlying the Units.
This Agreement constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited
liability Company, trust, employee benefit plan, individual retirement account,
Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become
an investor in the Company and the person signing this Agreement on behalf of
such entity has been duly authorized by such entity to do so. (If a Subscriber
is an employee benefit plan, individual retirement amount, Keogh Plan or other
tax-exempt entity, it may have special tax and ERISA considerations to take into
account.)
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
-4-
<PAGE>
1.17 Subscriber acknowledges that the Finder will assist the Company
in identifying potential investors for which it will receive certain
compensation as described in the PPM.
1.18 In connection with any subsequent public offering of the
Company's securities, the Subscriber hereby agrees to be subject to a lock-up
for a period of sixty (60) days or such longer period following such public
offering as required by the underwriter or underwriters of such public offering.
During such "lock-up" periods, the Subscriber agrees not to directly or
indirectly sell, offer to sell, contract to sell, including, without limitation,
"short" or "short against the box" (as those terms are generally understood),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company or
derivative thereof held by it at any time during such period. This Section 1.18
shall be binding upon any transferee of the Securities. The Subscriber agrees
upon request to certify in writing to the Company its compliance with this
Section 1.18.
In order to enforce the foregoing covenant, the Company may impose
stock-transfer instructions with respect to the Securities of each Subscriber
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
II. REPRESENTATIONS BY THE COMPANY
------------------------------
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
described in the PPM.
2.2 Capitalization and Voting Rights. The authorized, issued and
--------------------------------
outstanding capital stock of the Company is as set forth in the PPM; all issued
and outstanding shares of the Company are validly issued, fully paid and
nonassessable. The Securities comprising the Units, when issued and paid for in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable. Except as set forth in the PPM, there are no outstanding
options, warrants, agreements, convertible securities, preemptive rights or
other rights to subscribe for or to purchase any shares of capital stock of the
Company. Except as set forth in the PPM, in this Agreement and as otherwise
required by law, there are no restrictions upon the voting or transfer of any of
the shares of capital stock of the Company pursuant to the Company's Certificate
of Incorporation and/or By-Laws (collectively, the "Incorporation Documents"),
or other governing documents or any agreement or other instruments to which the
Company is a party or by which the Company is bound.
2.3 Authorization; Enforceability. The Company has all corporate
-----------------------------
right, power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and
-5-
<PAGE>
delivery of the Securities contemplated hereby and the performance of the
Company's obligations hereunder has been or will be taken prior to the Closing.
This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. Upon the issuance and
delivery of the Securities (including the Common Stock issuable upon exercise of
the Finder Warrants (as defined in the PPM), and upon compliance by the
Subscriber with the terms hereof, the Securities will be validly issued, fully
paid and nonassessable. The issuance and sale of the Securities contemplated
hereby (including the Common Stock issuable upon exercise of the Finder
Warrants), will not give rise to any preemptive rights or rights of first
refusal on behalf of any person.
2.4 No Conflict; Governmental Consents.
----------------------------------
(a) The execution and delivery by the Company of this Agreement and
the consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Incorporation Documents of the
Company, and will not conflict with, or result in a breach or violation of, any
of the terms or provisions of, or constitute (with due notice or lapse of time
or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, nor result in the creation or imposition of any lien upon any of the
properties or assets of the Company.
(b) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Units or the Securities comprising the
Units, except such filings as may be required to be made with the SEC, the NASD
and the NASDAQ and with any state or foreign blue sky or securities regulatory
authority.
2.5 Litigation. Except as set forth in the PPM, the Company knows of
----------
no pending or threatened legal or governmental proceedings against the Company
that could materially adversely affect the business, property, financial
condition or operations of the Company.
III. TERMS OF SUBSCRIPTION
---------------------
3.1 The Company shall issue a minimum of four (4) Units (the "Minimum
Offering") and a maximum of twenty (24) Units (the "Maximum Offering"), each
"Unit" consisting of five thousand (5,000) shares of Series A Preferred Shares
(the "Preferred Stock"). Upon receipt of the Minimum Offering amount, the
Company may conduct a closing (the "Initial Closing Date") and may conduct
subsequent closings on an interim basis (each a "Closing") until the Maximum
Offering has been reached (the "Final Closing
-6-
<PAGE>
Date"). The Offering Period shall terminate at 11:59 p.m. New York City time on
December 31, 1999, subject to an extension, at the option of the Company, for
one additional sixty (60) day period. The Units will be offered on a "best
efforts" basis. The purchase price is payable by personal or business check,
wire transfer of immediately available funds or money order made payable to
"State Street Bank & Trust, N.A., Escrow Agent, F/B/O Lakaro Biopharmaceuticals,
Inc."
3.2 Pending the sale of the Units, all funds paid hereunder shall be
deposited by the Company in an interest-bearing escrow account with State Street
Bank & Trust, N.A, having a branch at 61 Broadway, New York, New York 10006. If
the Company shall not have obtained subscriptions (including this subscription)
for purchases of the Minimum Offering amount on or before the Final Closing
Date, then this subscription shall be void and all funds paid hereunder by the
Subscriber shall be promptly returned to the Subscriber, with interest, subject
to paragraph 3.4 hereof.
3.3 The Subscriber hereby authorizes and directs the Company to
deliver the Preferred Stock to be issued to the Subscriber pursuant to this
Agreement to the residential or business address indicated on the signature page
hereto.
3.4 The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
--------------------------------------------
4.1 The Subscriber's obligation to purchase the Units at the closings
(each, a "Closing") is subject to the fulfillment on or prior to each Closing of
the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) Representations and Warranties Correct. The representations
--------------------------------------
and warranties made by the Company in Article II hereof shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on each Closing with the same force and effect as if they had
been made on and as of said date.
(b) No Legal Order Pending. There shall not then be in effect
----------------------
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(c) No Law Prohibiting or Restricting Such Sale. There shall
-------------------------------------------
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person, which shall not have
been obtained, to issue the Securities (except as otherwise provided in this
Agreement).
(d) Minimum Subscriptions. The Company shall have received
---------------------
binding subscriptions for at least the Minimum Offering amount.
-7-
<PAGE>
V. REGISTRATION RIGHTS
-------------------
5.1 Any capitalized terms used herein that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Memorandum,
the definitions from which are hereby incorporated as if set out in full herein.
As used in this Agreement, the following terms shall have the following
meanings:
(a) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof.
(b) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in the United States in compliance with the
Securities Act, and the declaration or order of effectiveness of such
registration statement or document.
(c) The term "Registrable Securities" shall mean (i) the
shares of Common Stock issuable upon the conversion of the Preferred Stock being
sold in the Units, (ii) the shares of Common Stock underlying the Finder
Warrants and (iii) any shares of Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security that is issued
as) a dividend or other distribution with respect to or in replacement of the
Preferred Stock; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the
Commission, (B) have not been issued or sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale or (C) are held by a Holder or a
permitted transferee of a Holder pursuant to Section 5.10.
5.2 Piggy-back Registration Rights. (a) The Company agrees that if,
------------------------------
at any time, and from time to time, commencing one (1) year after the closing
date of the first public offering of securities of the Company in the United
States (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction)(the "IPO") and ending on
the date that is five (5) years from the date hereof, the Board of Directors of
the Company shall authorize the filing of a registration statement under the
Securities Act (other than the initial public offering of the Company's Common
Stock, or other than a registration statement on Form S-8, Form S-4 or any other
form that does not include substantially the same information as would be
required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders, the Company shall, (A) promptly notify the Holder that such
registration statement will be filed and that the Registrable Securities then
held by the Holder, which such Holder requests in writing within twenty (20)
days of notice by the Company be registered, will be included in such
registration statement at the Holder's request, (B) cause such registration
statement to cover all of such Registrable Securities issued to the Holder
requesting inclusion, (C) use its reasonable best efforts to cause such
registration statement to become effective as soon as practicable and (D) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Registrable Securities that have
-8-
<PAGE>
been issued to the Holder to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder to effect the
proposed sale or other disposition.
(b) Notwithstanding any other provision of this Article V, the
Company may at any time, abandon or delay any registration commenced by the
Company. In the event of such an abandonment by the Company, the Company shall
not be required to continue registration of shares requested by the Holder for
inclusion and the Holder shall retain the right to request inclusion of shares
as set forth above.
(c) The Holder shall have the right to request inclusion of
any of their Registrable Securities in a registration statement as described in
this Section 5.2 up to two (2) times.
5.3 Obligations of the Company. Whenever required under this
--------------------------
Article V to include Registrable Securities in a Company registration statement,
the Company shall, as expeditiously as reasonably possible:
(a) Use its reasonable best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for the shorter of a period of up to one
hundred twenty (120) days or until the distribution contemplated in the
Registration Statement has been completed (the "Effective Period"); provided,
however, that such 120-day period shall be extended for a period of time equal
to the period that the Holder refrains from selling any securities included in
such registration at the request of an underwriter of Common Stock (or other
securities) of the Company, and provided further that if applicable rules under
the Securities Act governing the obligation to file a post-effective amendment
permits, in lieu of filing a post-effective amendment that (i) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (ii) reflects
facts or events representing a material or fundamental change in the information
set forth in the registration statement, the Company may incorporate by
reference information required to be included in (i) and (ii) above to the
extent such information is contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement, and the prospectus used in
connection with such registration statement, as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other federal
or state securities laws of such jurisdictions as shall be reasonably requested
by the Holders; provided, however, that
-9-
<PAGE>
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered hereunder
to be listed on each securities exchange or quotation service on which similar
securities issued by the Company are then listed or quoted.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
5.4 Furnish Information. It shall be a condition precedent to the
-------------------
obligation of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
effect the registration of such Holder's Registrable Securities, including,
without limitation, as may be required by the applicable rules and regulations
of the SEC and applicable state or foreign securities laws concerning the
proposed method of sale or other disposition of the Securities and the identity
of, and compensation to be paid to, any proposed underwriter or brokers to be
employed by the Holder in connection therewith, and the Holder shall deliver to
the Company upon request any written undertakings reasonably requested by the
Company to assure full compliance with applicable laws.
5.5 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 5.2 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities; provided, however, that the
Company shall not bear the cost of any professional fees or costs of accounting,
financial or legal advisors to any of the Holders. Notwithstanding the
foregoing, each Holder shall pay all registration expenses which such Holder is
required to pay under applicable law.
-10-
<PAGE>
5.6 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Article 5.2 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder who is a holder of
Registrable Securities and is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
5.7 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article V.
5.8 Indemnification. In the event that any Registrable Securities are
---------------
included in a registration statement under this Article V:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or the Exchange Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will reimburse each such Holder, underwriter or controlling person for
any legal or other expenses reasonably incurred
-11-
<PAGE>
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Article 5.8(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person; provided,
that, in no event shall any indemnity under this Article 5.8(b) exceed the gross
proceeds from the offering received by such Holder.
(b) To the extent permitted by law, each Holder registering its
Registrable Securities will indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Securities Act, or
the Exchange Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration or arises out of a
Violation; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Article 5.8(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Article 5.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Article 5.8(b) exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Article 5.8 of notice of the commencement of any action (including any
governmental action), such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Article 5.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel selected by
the indemnifying party and approved by the indemnified party (whose approval
shall not be unreasonably withheld); provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Article
5.8, but
-12-
<PAGE>
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Article 5.8.
(d) If the indemnification provided for in this Article 5.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Article
5.8 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article V, and otherwise.
5.9 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, and provided that the
Company's Common Stock is otherwise registered pursuant to the Securities Act,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the registration statement filed in connection with
an IPO by the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (ii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
-13-
<PAGE>
5.10 Assignment of Registration Rights. The rights to cause the Company
---------------------------------
to register Registrable Securities granted to the Holders by the Company under
this Article V may be assigned in full by a Holder in connection with a transfer
by such Holder of its Registrable Securities if: (a) such Holder gives prior
written notice to the Company; and (b) such transferee agrees for the benefit of
the Company, to comply with the terms and provisions of this Agreement, and such
transfer is otherwise in compliance with this Agreement; provided, however, that
such transfer may otherwise be effected in accordance with applicable securities
laws. Except as specifically permitted by this Section 5.10, the rights of a
Holder with respect to Registrable Securities as set out herein shall not be
transferable to any other Person, and any attempted transfer shall cause all
rights of such Holder therein to be forfeited.
5.11 Termination of Registration Rights. In addition, notwithstanding
----------------------------------
Section 5.2(a), the right of any Holder to request inclusion in any registration
pursuant to Section 5.2 shall terminate if all shares of Registrable Securities
held by such Holder may be sold under Rule 144 during any 90-day period.
VI. MISCELLANEOUS
6.1 Notices. Any notice or other communication given hereunder
-------
shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, or delivered by hand against written receipt
therefor, addressed to the Company at 216 Jaffa Road, Jerusalem 94383 Israel,
Attn: General Counsel, with a copy to c/o Paramount Capital, Inc. 787 Seventh
Avenue, 48th Floor, New York, New York 10019, Attn: David M. Tanen, and to the
Subscriber at the Subscriber's address indicated on the signature page of this
Agreement. Notices shall be deemed to have been given or delivered on the date
of mailing, except notices of change of address, which shall be deemed to have
been given or delivered when received.
6.2 Amendment. Except as otherwise provided herein, this
---------
Agreement shall not be changed, modified or amended except by a writing signed
by the parties to be charged, and this Agreement may not be discharged except by
performance in accordance with its terms or by a writing signed by the party to
be charged.
6.3 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and to their respective heirs,
legal representatives, successors and assigns. This Agreement sets forth the
entire agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
6.4 Binding Obligation. Upon the execution and delivery of this
------------------
Agreement by the Subscriber, this Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Units as herein provided,
subject, however, to the right hereby reserved by the Company to enter into the
same agreements with other Subscribers and to add and/or delete other persons as
Subscribers.
-14-
<PAGE>
6.5 Governing Law; Jurisdiction. NOTWITHSTANDING THE PLACE WHERE
---------------------------
THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES
EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS
NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO
THIS AGREEMENT IS THE APPROPRIATE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
6.6 Attorney Fees. In order to discourage frivolous claims the
-------------
parties agree that unless a claimant in any proceeding arising out of this
Agreement succeeds in establishing his claim and recovering a judgment against
another party (regardless of whether such claimant succeeds against one of the
other parties to the action), then the other party shall be entitled to recover
from such claimant all of its/their reasonable legal costs and expenses relating
to such proceeding and/or incurred in preparation therefor.
6.7 Severability. The holding of any provision of this Agreement
------------
to be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provisions shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
6.8 Waiver. It is agreed that a waiver by either party of a
------
breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
6.9 Further Obligations. The parties agree to execute and deliver
-------------------
all such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
6.10 Counterparts. This Agreement may be executed in two or
------------
more counterparts each of which shall be deemed an original, but all of which
shall together constitute one and the same instrument.
6.11 Publicity. The Subscribers severally agree not to issue any
---------
public statement with respect to the Subscribers' investment or proposed
investment in the Company or the terms of any agreement or covenant between them
and the Company without the Company's prior written consent, except such
disclosures as may be required under
-15-
<PAGE>
applicable law or under any applicable order, rule or regulation, in which case
the Subscriber shall give reasonable advance notice to the Company of such
required disclosure.
6.12 No Brokers. Each Subscriber severally represents and warrants
----------
that it has not engaged, consented to or authorized any broker, Finder or
intermediary to act on its behalf, directly or indirectly, as a broker, finder
or intermediary in connection with the transactions contemplated by this
Agreement. Each Subscriber hereby severally agrees to indemnify and hold
harmless the Company from and against all fees, commissions or other payments
owing to any such person or firm acting on behalf of such Subscriber hereunder.
6.13 No Rights. Nothing in this Agreement shall create or be
---------
deemed to create any rights in any person or entity not a party to this
Agreement, except for the Finder pursuant to Sections 1.6(a) hereof.
-16-
<PAGE>
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
-----------------------------------
7.1 The Subscriber represents and warrants that he, she or it
comes within one category marked below, and that for any category marked, he,
she or it has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO
THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.
Category A ___ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate,
including your principal residence, cash, short-term
investments, stock and securities. Equity in personal
property and real estate should be based on the fair
market value of such property less debt secured by
such property.
Category B ___ The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in
excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in
excess of $300,000 in each of those years (in each
case including foreign income, tax exempt income and
full amount of capital gains and losses but excluding
any income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C ___ The undersigned is a director or executive officer of
the Company which is issuing and selling the Units.
Category D ___ The undersigned is a bank; a savings and loan
association; insurance company; registered investment
company; registered business development company;
licensed small business investment company ("SBIC");
or employee benefit plan within the meaning of Title
1 of ERISA and (a) the investment decision is made by
a plan fiduciary which is either a bank, savings and
loan association, insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that
are accredited investors.
Category E ___ The undersigned is a private business development
company as defined in section 202(a)(22) of the
Investment Advisors Act of 1940.
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<PAGE>
Category F ___ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit
organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed
for the specific purpose of acquiring the Units and
with total assets in excess of $5,000,000.
Category G ___ The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Units, where the purchase is
directed by a "sophisticated person" as defined in
Regulation 506(b)(2)(ii) under the Securities Act.
Category H ___ The undersigned is an entity (other than a trust) all
the equity owners of which are "accredited investors"
within one or more of the above categories. If
relying upon this Category alone, each equity owner
must complete a separate copy of this Agreement.
Category I ___ The undersigned is not within any of the categories
above and is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Final Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
-18-
<PAGE>
7.2 SUITABILITY (please answer each question)
-----------
(a) For an individual subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(b) For an individual subscriber, please describe any college or graduate
degrees held by you:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(c) For all subscribers, please list types of prior investments:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(d) For all subscribers, please state whether you have you participated in other
private placements before:
YES_______ NO_______
(e) If your answer to question (d) above was "YES", please indicate frequency of
such prior participation in private placements of:
Public Companies Private Companies Public or Private
---------------- -----------------
Biotechnology or
Medical Device
Companies
---------
Frequently ________________ _________________ _________________
Occasionally ________________ _________________ _________________
Never ________________ _________________ _________________
(f) For individual subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:
-19-
<PAGE>
YES_______ NO_______
(h) For all subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES_______ NO_______
(i) For all subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
-----------------------------------
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Corporation*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
-20-
<PAGE>
7.4 NASD AFFILIATION.
----------------
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Rule 3050 of the NASD Conduct Rules.
- ---------------------------------
Name of NASD Member Firm
By:______________________________
Authorized Officer
Date:____________________________
7.5 The undersigned is informed of the significance to the Company of
the foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Section VI and such answers have been provided
under the assumption that the Company will rely on them.
-21-
<PAGE>
[Signature Page]
NUMBER OF UNITS X $500,000 = (the "Purchase Price")
_______ ____________________
________________________________________________________________________________
Signature Signature (if purchasing jointly)
________________________________________________________________________________
Name Typed or Printed Name Typed or Printed
________________________________________________________________________________
Entity Name Entity Name
________________________________________________________________________________
Address Address
________________________________________________________________________________
City, State and Zip Code City, State and Zip Code
________________________________________________________________________________
Telephone-Business Telephone--Business
________________________________________________________________________________
Telephone-Residence Telephone--Residence
________________________________________________________________________________
Facsimile-Business Facsimile--Business
________________________________________________________________________________
Facsimile-Residence Facsimile--Residence
________________________________________________________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
________________________________________________________________________________
Name in which securities should be issued:
Check the box marked YES if you would like the securities
to be delivered to your account with Paramount Capital, Inc.
Yes ___ No ___
(If you check "No", securities will be delivered to you at the address provided
above.)
Dated: , 1999
This Subscription Agreement is agreed to and accepted as of ______________,
1999.
Lakaro Biopharmaceuticals, Inc.
By: ____________________________________
Name: Morris Laster, M.D.
Title: Chief Executive Officer
<PAGE>
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I,______________________________, am the_______________________________ of
_____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____day of _________________, 1999.
_______________________________________
(Signature)
<PAGE>
EXHIBIT 4.6
AGREEMENT
This AGREEMENT is entered into as of November 19, 1999 between Lindsay
Rosenwald, an individual with an address at 787 Seventh Avenue, New York, New
York 10019 United States of America ("Rosenwald"), and Morris Laster, an
individual with an address at 40 Segal Street, Jerusalem, Israel ("Laster").
WHEREAS, Laster is currently the Chief Executive Officer and a member of
the Board of Directors of Partec, Ltd., an Israeli company;
WHEREAS, Rosenwald is a principal shareholder of Lakaro Biopharmaceuticals,
Inc., a Delaware corporation (the "Company"), beneficially owning (as defined
below) 3,664,500shares of the Company's common stock (the "Common Stock") and
6,224 shares of the Company's Series A Preferred Stock (the "Preferred Stock");
WHEREAS, Laster and the persons listed on Schedule A hereto are becoming
option holders of the Company relying in part on the representations contained
herein; and
WHEREAS, Rosenwald desires that Laster accept a position as the Company's
Chief Executive Officer and serve as a member of the Company's Board of
Directors, as this would be of a substantial benefit to the Company, and
therefore, to Rosenwald personally;
NOW, THEREFORE, in consideration of the above and other good and valuable
consideration the sufficiency and receipt of which are hereby acknowledged by
the parties, the parties agree as follows:
Section 1. Voting Agreement.
----------------
Rosenwald hereby agrees to vote all of the shares of Common Stock and
Preferred Stock now or hereinafter beneficially owned by him (as defined in Rule
13d-3 promulgated under the Securities Act of 1933, as amended) in favor of, and
use his best efforts to elect Laster (or his designee as identified in writing
by Laster to Rosenwald prior to such meeting or consent) as a director of the
Company at any meeting of the Company's stockholders (whether annual or special)
or pursuant to any written consent of the Company's stockholders convened or
executed prior to the Expiration Date for the purpose of electing directors of
the Company. Rosenwald further agrees not to take any action prior to the
Expiration Date which has the effect, directly or indirectly, of removing Laster
as a director of the Company.
Section 2. Term. This Agreement shall take effect on the date hereof and
----
continue until the earlier of (i) the date on which Laster's employment with the
Company is terminated; and (ii) the closing of the first underwritten public
offering of Common Stock for aggregate gross proceeds to the Company in excess
of $10,000,000 (the "Expiration Date").
Section 3. Specific Enforcement. Each party expressly agrees and
--------------------
acknowledges that this Agreement shall be specifically enforceable in any court
of competent jurisdiction in
<PAGE>
accordance with its terms against either party hereto.
Section 4. Representations.
---------------
(a) Each party hereby represents to the other party that this
Agreement is its legal, valid and binding obligation, enforceable in accordance
with its terms, and that no consents or approvals from any third parties are
necessary for it to enter into this Agreement or consummate the actions
contemplated hereunder.
Section 5. Miscellaneous.
-------------
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs and administrators. The parties
agree that those persons listed on Schedule A hereto shall be entitled to the
benefits of this Agreement and are expressly intended as third party
beneficiaries hereof.
(b) This Agreement, and the rights of the parties hereto, shall be
governed by and construed in accordance with the internal laws of the State of
Delaware.
(c) This Agreement may only be amended or modified pursuant to a
written agreement between the parties hereto. The consent of any or all of the
persons listed on Schedule A hereto shall not be required for an amendment or
modification of this Agreement.
IN WITNESS WHEREOF, the parties have each duly executed this
Agreement as of the date first above written.
/s/ Lindsay Rosenwald
________________________________
Lindsay Rosenwald
/s/ Morris Laster
________________________________
Morris Laster
<PAGE>
SCHEDULE A
----------
Ira Weinstein
Bob Trachtenberg
Michael Spero
Ben Corn
Hadasit
Yoni Barnhard
Noa Shelach
Shira Rozenman
Sophie Green
Sara Singer
Seblewongel Tesfaye
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE WITHOUT THE
EXPRESS WRITTEN CONSENT OF LARAKO BIOPHARMACEUTICALS, INC. (THE "COMPANY") AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION
THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES
LAWS.
LAKARO BIOPHARMACEUTICALS, INC.
Warrant for the Purchase of Shares of
-------------------------------------
Common Stock
------------
No. 1 125,000 Shares
FOR VALUE RECEIVED, LAKARO BIOPHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), hereby certifies that CHILDREN'S MEDICAL CENTER CORPORATION or
its registered assigns (the "Holder") is entitled to purchase from the Company,
subject to the provisions of this Warrant, at any time commencing upon date (the
"Vesting Date") of approval of the first Investigational New Drug Application by
the United States Food and Drug Administration for the technologies granted to
the Company by the Holder pursuant to a license agreement entered into by and
among the Company and the Holder on November 18 1999, and prior to 5:00 P.M.,
New York City time, on the date that is ten (10) years after the Vesting Date
(the "Termination Date"), One Hundred Twenty-Five Thousand (125,000) fully paid
and non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock") at an initial per share exercise price equal to $.01, or an
initial aggregate exercise price of $1,250. The number of shares of Common
Stock to be received upon exercise of this Warrant and the price to be paid for
each share of Common Stock are subject to possible adjustment from time to time
as hereinafter set forth. The shares of Common Stock or other securities or
property deliverable upon such exercise as adjusted from time to time is
hereinafter sometimes referred to as the "Warrant Shares," the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Per Share Exercise Price" and the
aggregate purchase price payable for the Warrant Shares hereunder is hereinafter
sometimes referred to as the "Aggregate Exercise Price." The Aggregate Exercise
Price is not subject to adjustment. The Per Share Exercise Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares shall be adjusted by dividing the Aggregate Exercise
Price by the Per Share Exercise Price in effect immediately after such
adjustment. This Warrant is one of a duly authorized issue of Warrants
constituting components of units being sold by the Company on the date hereof
(collectively, the "Warrants").
<PAGE>
1. Exercise of Warrant.
-------------------
(a) This Warrant is not transferable and may not be assigned or
otherwise disposed of by the Holder until the Vesting Date.
(b) This Warrant may be exercised in whole or in part, at any time by
the Holder commencing upon the Vesting Date and prior to the Termination
Date:
(i) by presentation and surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set
forth in Subsection 8(a) hereof, together with payment, by certified
or official bank check payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if
exercised in part.
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at the
address set forth in Section 8(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the Aggregate Exercise Price, or the proportionate part thereof if
this Warrant is exercised in part. In the event of a Cashless
Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a
fraction, the numerator of which shall be the difference between (A)
the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common
Stock on such day, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed,
or if not listed or admitted to trading on any such exchange, the
representative closing sale price of the Common Stock as reported by
the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ
is no longer reporting such information, or, if the Common Stock is
not reported on NASDAQ, the high per share sale price for the Common
Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the
fair market value of the Common Stock as determined in good faith by
the Board of Directors (the "Current Market Price") and (B) the Per
Share Exercise Price, and the denominator of which shall be the then
Current Market Price. For purposes of any computation under this
Section 1(a), the then Current Market Price shall be based on the
trading day immediately prior to the Cashless Exercise.
(c) If this Warrant is exercised in part only, the Company shall,
upon presentation of this Warrant upon such exercise, execute and deliver
<PAGE>
(with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company
promptly shall deliver certificates for the Warrant Shares to the Holder
duly legended as authorized by the subscription form. No fractional shares
shall be issued upon exercise of this Warrant. With respect to any fraction
of a share called for upon exercise hereof, the Company shall pay to the
Holder an amount in cash equal to such fraction multiplied by the Current
Market Price of one (1) share of Common Stock.
2. Reservation of Warrant Shares; Fully Paid Shares; Taxes. The Company
-------------------------------------------------------
hereby undertakes until expiration of this Warrant to reserve for issuance or
delivery upon exercise of this Warrant, such number of shares of the Common
Stock as shall be required for issuance and/or delivery upon exercise of this
Warrant in full, and agrees that all Warrant Shares so issued and/or delivered
will be validly issued, fully paid and non-assessable, and further agrees to pay
all taxes and charges that may be imposed upon such issuance and/or delivery.
3. Protection Against Dilution.
---------------------------
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares or (iv) issue by reclassification of its Common Stock any shares
of capital stock of the Company, the Per Share Exercise Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Exercise Price and the denominator of which shall be the number
of shares of Common Stock or other capital stock of the Company which the
Holder would have owned immediately following such action had this Warrant
been exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(a) shall become effective immediately after the record
date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) In the event of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation,
or in case of any sale or conveyance to another entity of the property of
the Company as an entirety or substantially as an entirety, or in the case
of any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation
into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount
of securities, cash or other property which the Holder would have owned or
have been entitled to receive immediately after such reorganization,
reclassification,
<PAGE>
consolidation, merger, statutory exchange, sale or conveyance had this
Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions
set forth in this Section 3 with respect to the rights and interests
thereafter of the Holder of this Warrant to the end that the provisions set
forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the
exercise of this Warrant. The above provisions of this Subsection 3(b)
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances. The
issuer of any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant shall be responsible for all
of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior
to such event. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(c) No adjustment in the Per Share Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least
$0.05 per share of Common Stock; provided, however, that any adjustments
-------- -------
that by reason of this Subsection 3(c) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
-------- -------
accordance with the provisions of this Section 3 (other than this
Subsection 3(c)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holder of this
Warrant or Common Stock issuable upon the exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to
make such reductions in the Per Share Exercise Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders
shall not be taxable.
(d) Whenever the Per Share Exercise Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of
Warrants in accordance with this Section 3, the Company shall promptly
provide a certificate of its Chief Accounting Officer setting forth the Per
Share Exercise Price and the number of Warrant Shares after such adjustment
or the effect of such modification, a brief statement of the facts
<PAGE>
requiring such adjustment or modification and the manner of computing the
same and cause copies of such certificate to be mailed to the Holders of
the Warrants.
(e) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described
in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share
Exercise Price between or among shares or such classes of capital stock or
shares of Common Stock and other capital stock.
4. Limited Transferability. In addition to the limitation on
-----------------------
transferability set forth in Section 1(a) hereof, this Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or
his duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the holder thereof shall be identical to those of the Holder.
5. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
----------------------
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
6. Status of Holder. This Warrant does not confer upon the Holder any
----------------
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
7. Notices. No notice or other communication under this Warrant shall be
-------
effective unless, but any notice or other communication shall be effective and
shall be deemed to have been given, if the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
If to the Holder: 300 Longwood Avenue, Boston, MA 02115 Attn. Donald P.
Lombardi; or
<PAGE>
If to the Company: 216 Jaffa Road, Sha'arei Ha'ir, Jerusalem, Israel 94383
Attn: General Counsel
8. Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
9. Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Notwithstanding anything to the contrary contained herein,
in no event may the effective rate of interest collected or received by the
Holder exceed that which may be charged, collected or received by the Holder
under applicable law. The parties agree to settle any disputes through binding
arbitration in the city, county and State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its Chief Executive Officer and its corporate seal to be hereunto affixed and
attested by its Secretary this ___ day of November, 1999.
LRK BIOPHARMACEUTICALS, INC.
By: /s/ Morris Laster, M.D.
---------------------------
Name: Morris Laster, M.D.
Title: Chief Executive Officer
ATTEST:
____________________
Secretary
[Corporate Seal]
<PAGE>
(NOT PERMITTED UNTIL INITIAL VESTING DATE)
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exercise the within Warrant to the extent of
purchasing ____________________ shares of Common Stock thereunder and hereby
makes payment of $___________ by certified or official bank check in payment of
the exercise price therefor.
The undersigned hereby represents and warrants to the Company that the
undersigned is acquiring the shares of the Company's Common Stock pursuant to
exercise of the within Warrant for investment purposes only. The undersigned
hereby further acknowledges that the undersigned understands that such shares
(a) have not been registered under the Securities Act of 1933, as amended, and
are being issued to the undersigned by the Company in reliance upon the
foregoing representation and warranty and (b) may not be resold except in
accordance with the requirements of the Act, including Rule 144 thereunder, if
applicable. The undersigned further consents to the placing of a legend on the
certificates for the shares being purchased to the foregoing effect.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
____________________ the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint _____________________, attorney, to
transfer said Warrant on the books of SignalSite, Inc.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.001 per share, of SignalSite, Inc. pursuant
to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Common Stock,
no par value per share, of SignalSite, Inc. covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint ____________________, attorney, to
transfer that part of said Warrant on the books of SignalSite, Inc.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
EXHIBIT 4.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE WITHOUT THE
EXPRESS WRITTEN CONSENT OF SIGNALSITE, INC. (THE "COMPANY") AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH
TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
LAKARO BIOPHARMACEUTICALS, INC.
Warrant for the Purchase of Shares of
-------------------------------------
Common Stock
------------
No. 2 125,000 Shares
FOR VALUE RECEIVED, SIGNALSITE, INC., a Delaware corporation (the
"Company"), hereby certifies that CHILDREN'S MEDICAL CENTER CORPORATION or its
registered assigns (the "Holder") is entitled to purchase from the Company,
subject to the provisions of this Warrant, at any time commencing upon date (the
"Vesting Date") of approval of the first New Drug Application by the United
States Food and Drug Administration for the technologies granted to the Company
by the Holder pursuant to a license agreement entered into by and among the
Company and the Holder on August 18, 1997 and prior to 5:00 P.M., New York City
time, on the date that is ten (10) years after the Vesting Date (the
"Termination Date"), One Hundred Twenty-Five Thousand (125,000) fully paid and
non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock") at an initial per share exercise price equal to $.01, or an
initial aggregate exercise price of $1,250. The number of shares of Common
Stock to be received upon exercise of this Warrant and the price to be paid for
each share of Common Stock are subject to possible adjustment from time to time
as hereinafter set forth. The shares of Common Stock or other securities or
property deliverable upon such exercise as adjusted from time to time is
hereinafter sometimes referred to as the "Warrant Shares," the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Per Share Exercise Price" and the
aggregate purchase price payable for the Warrant Shares hereunder is hereinafter
sometimes referred to as the "Aggregate Exercise Price." The Aggregate Exercise
Price is not subject to adjustment. The Per Share Exercise Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares shall be adjusted by dividing the Aggregate Exercise
Price by the Per Share Exercise Price in effect immediately after such
adjustment. This Warrant is one of a duly authorized issue of Warrants
constituting components of units being sold by the Company on the date hereof
(collectively, the "Warrants").
<PAGE>
1. Exercise of Warrant.
-------------------
(a) This Warrant is not transferable and may not be assigned or
otherwise disposed of by the Holder until the Vesting Date.
(b) This Warrant may be exercised in whole or in part, at any time by
the Holder commencing upon the Vesting Date and prior to the Termination
Date:
(i) by presentation and surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set
forth in Subsection 8(a) hereof, together with payment, by certified
or official bank check payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if
exercised in part.
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at the
address set forth in Section 8(a) hereof. Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
the Aggregate Exercise Price, or the proportionate part thereof if
this Warrant is exercised in part. In the event of a Cashless
Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a
fraction, the numerator of which shall be the difference between (A)
the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common
Stock on such day, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or listed,
or if not listed or admitted to trading on any such exchange, the
representative closing sale price of the Common Stock as reported by
the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ
is no longer reporting such information, or, if the Common Stock is
not reported on NASDAQ, the high per share sale price for the Common
Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the
fair market value of the Common Stock as determined in good faith by
the Board of Directors (the "Current Market Price") and (B) the Per
Share Exercise Price, and the denominator of which shall be the then
Current Market Price. For purposes of any computation under this
Section 1(a), the then Current Market Price shall be based on the
trading day immediately prior to the Cashless Exercise.
(c) If this Warrant is exercised in part only, the Company shall,
upon presentation of this Warrant upon such exercise, execute and deliver
<PAGE>
(with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company
promptly shall deliver certificates for the Warrant Shares to the Holder
duly legended as authorized by the subscription form. No fractional shares
shall be issued upon exercise of this Warrant. With respect to any fraction
of a share called for upon exercise hereof, the Company shall pay to the
Holder an amount in cash equal to such fraction multiplied by the Current
Market Price of one (1) share of Common Stock.
2. Reservation of Warrant Shares; Fully Paid Shares; Taxes. The Company
-------------------------------------------------------
hereby undertakes until expiration of this Warrant to reserve for issuance or
delivery upon exercise of this Warrant, such number of shares of the Common
Stock as shall be required for issuance and/or delivery upon exercise of this
Warrant in full, and agrees that all Warrant Shares so issued and/or delivered
will be validly issued, fully paid and non-assessable, and further agrees to pay
all taxes and charges that may be imposed upon such issuance and/or delivery.
3. Protection Against Dilution.
---------------------------
(a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock into a greater number of shares,
(iii) combine its outstanding shares of Common Stock into a smaller number
of shares or (iv) issue by reclassification of its Common Stock any shares
of capital stock of the Company, the Per Share Exercise Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Exercise Price and the denominator of which shall be the number
of shares of Common Stock or other capital stock of the Company which the
Holder would have owned immediately following such action had this Warrant
been exercised immediately prior thereto. An adjustment made pursuant to
this Subsection 3(a) shall become effective immediately after the record
date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(b) In the event of any capital reorganization or reclassification,
or any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation,
or in case of any sale or conveyance to another entity of the property of
the Company as an entirety or substantially as an entirety, or in the case
of any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation
into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount
of securities, cash or other property which the Holder would have owned or
have been entitled to receive immediately after such reorganization,
reclassification,
<PAGE>
consolidation, merger, statutory exchange, sale or conveyance had this
Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions
set forth in this Section 3 with respect to the rights and interests
thereafter of the Holder of this Warrant to the end that the provisions set
forth in this Section 3 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the
exercise of this Warrant. The above provisions of this Subsection 3(b)
shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances. The
issuer of any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant shall be responsible for all
of the agreements and obligations of the Company hereunder. Notice of any
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale or conveyance and of said provisions so proposed to be made,
shall be mailed to the Holders of the Warrants not less than 30 days prior
to such event. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(c) No adjustment in the Per Share Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least
$0.05 per share of Common Stock; provided, however, that any adjustments
-------- -------
that by reason of this Subsection 3(c) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment;
provided, further, however, that adjustments shall be required and made in
-------- -------
accordance with the provisions of this Section 3 (other than this
Subsection 3(c)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holder of this
Warrant or Common Stock issuable upon the exercise hereof. All
calculations under this Section 3 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be entitled to
make such reductions in the Per Share Exercise Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders
shall not be taxable.
(d) Whenever the Per Share Exercise Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of
Warrants in accordance with this Section 3, the Company shall promptly
provide a certificate of its Chief Accounting Officer setting forth the Per
Share Exercise Price and the number of Warrant Shares after such adjustment
or the effect of such modification, a brief statement of the facts
<PAGE>
requiring such adjustment or modification and the manner of computing the
same and cause copies of such certificate to be mailed to the Holders of
the Warrants.
(e) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described
in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share
Exercise Price between or among shares or such classes of capital stock or
shares of Common Stock and other capital stock.
4. Limited Transferability. In addition to the limitation on
-----------------------
transferability set forth in Section 1(a) hereof, this Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or
his duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and all
rights of the holder thereof shall be identical to those of the Holder.
5. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the
----------------------
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
6. Status of Holder. This Warrant does not confer upon the Holder any
----------------
right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof.
7. Notices. No notice or other communication under this Warrant shall be
-------
effective unless, but any notice or other communication shall be effective and
shall be deemed to have been given, if the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
If to the Holder: 300 Longwood Avenue, Boston, MA 02115
Attn. Donald P. Lombardi; or
<PAGE>
If to the Company: c/o Partec, Ltd., 216 Jaffa Road, Sha'arei
Ha'ir, Jerusalem, Israel 94383 Attn: Dr.
Morris Laster
9. Headings. The headings of this Warrant have been inserted as a matter
--------
of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and construed in
--------------
accordance with the laws of the State of New York, without regard to principles
of conflicts of law. Notwithstanding anything to the contrary contained herein,
in no event may the effective rate of interest collected or received by the
Holder exceed that which may be charged, collected or received by the Holder
under applicable law. The parties agree to settle any disputes through binding
arbitration in the city, county and State of New York.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its Chief Executive Officer and its corporate seal to be hereunto affixed and
attested by its Secretary this 25th day of August, 1997.
LAKARO BIOPHARMACEUTICALS, INC.
By: /S/ Morris Laster, M.D.
___________________________
Name: Morris Laster, M.D.
Title: Chief Executive Officer
ATTEST:
/s/ Bob Trachtenberg
____________________
Secretary
[Corporate Seal]
<PAGE>
(NOT PERMITTED UNTIL INITIAL VESTING DATE)
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exercise the within Warrant to the extent of
purchasing ____________________ shares of Common Stock thereunder and hereby
makes payment of $___________ by certified or official bank check in payment of
the exercise price therefor.
The undersigned hereby represents and warrants to the Company that the
undersigned is acquiring the shares of the Company's Common Stock pursuant to
exercise of the within Warrant for investment purposes only. The undersigned
hereby further acknowledges that the undersigned understands that such shares
(a) have not been registered under the Securities Act of 1933, as amended, and
are being issued to the undersigned by the Company in reliance upon the
foregoing representation and warranty and (b) may not be resold except in
accordance with the requirements of the Act, including Rule 144 thereunder, if
applicable. The undersigned further consents to the placing of a legend on the
certificates for the shares being purchased to the foregoing effect.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
____________________ the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint _____________________, attorney, to
transfer said Warrant on the books of SignalSite, Inc.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.001 per share, of SignalSite, Inc. pursuant
to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Common Stock,
no par value per share, of SignalSite, Inc. covered by the foregoing Warrant,
and a proportionate part of said Warrant and the rights evidenced thereby, and
does irrevocably constitute and appoint ____________________, attorney, to
transfer that part of said Warrant on the books of SignalSite, Inc.
Dated:_______________ Signature:____________________
Address:______________________
<PAGE>
EXHIBIT 4.9
Void After 5:00 p.m., Warrant to Purchase ------
Eastern Standard Time Shares (Subject to Adjustment)
December 14, 2009
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE
UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES, AND (3) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.
LAKARO BIOPHARMACEUTICALS, INC.
Warrant to Purchase Common Stock
Lakaro Biopharmaceuticals, Inc. (the "Company"), a corporation organized
and operating under the laws of the State of Delaware, hereby certifies that,
for value received, ______ (the "Holder") is entitled to purchase from the
Company at any time before 5:00 p.m., Eastern Standard Time, on December 14,
2009, ______ shares of the Company's Common Stock, par value of $0.001
(the "Warrant Shares"), subject to the conditions of this Warrant and to
adjustment as hereinafter provided, at a price of $0.01 per share (the "Warrant
Price"). In the event the aforesaid expiration date of the Warrant falls on a
Saturday or Sunday, or on a legal holiday on which the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market Automated Quotation
System is closed, then the Warrant shall expire at 5:00 p.m. Eastern Standard
Time on the next succeeding U.S. business day.
Section 1. Vesting Schedule. This Warrant shall vest and be exercisable
----------------
immediately upon its issuance.
Section 2. Method of Exercise. The Warrant may be exercised by the Holder as to
------------------
the whole or any part of the Common Stock covered hereby by surrender of the
Warrant at the principal office of the Company, with the Cash Purchase Form
attached hereto duly executed, and upon payment to the Company of the Warrant
Price for the Common Stock to be purchased in cash or by certified check or bank
draft. Thereupon, this Warrant shall be deemed to have been exercised and the
person exercising the same to have become a holder of record of Common Stock
purchased hereunder for all purposes, and certificates for the appropriate
number of fully paid and non-assessable shares so purchased shall be delivered
to the Purchaser within a reasonable time thereafter. If the Warrant shall be
exercised in respect of a part only of the shares of Common Stock covered
hereby, the Holder shall be entitled to receive a similar Warrant of like
<PAGE>
tenor and date covering the number of shares of Common Stock in respect of which
this Warrant shall not have been exercised.
Section 3. Transfers and Exchanges. If permitted by the provisions of Section 9,
-----------------------
the Company shall transfer, from time to time, any outstanding Warrant upon the
books to be maintained for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by a written assignment of such Warrant
substantially in the form attached hereto duly executed by the Holder or his
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such a transfer. Upon any such transfer, a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.
Section 4. Registration Rights. This Warrant and the Warrant Shares issuable
-------------------
upon exercise hereof are not and, except as provided herein, will not be
registered under the Securities Act of 1933 (the "Act") or state securities
laws. The Holder, by acceptance hereof, and with reference to the Warrant and
the Warrant Shares issuable upon exercise of the Warrant, represents and
warrants that:
(a) The Holder is acquiring such securities for the Holder's own account
for investment and not with the view to or in connection with any offering or
distribution, and the Holder has no present intention of selling or otherwise
disposing of such securities.
(b) The Holder is not acquiring such securities for resale or other
disposition upon the occurrence or nonoccurrence of some predetermined event or
circumstance such as, for example, after holding them for any specific period to
realize long-term capital gains, or upon any price rise, or upon any price
decline or for a fixed or determined period in the future.
(c) Notwithstanding anything to the contrary herein, the Holder will not
sell, assign or transfer for value this Warrant or the Warrant Shares issuable
upon exercise hereof except pursuant to registration under the Act or receipt of
an opinion of counsel satisfactory to the Company that registration under the
Act is not required, and the Company will place a legend on this Warrant and on
any certificates for such Warrant Shares acknowledging the foregoing
restrictions.
(d) Subject to the provisions of this Warrant and, notwithstanding
anything herein to the contrary, the Company agrees to register the Warrant
Shares in the manner and upon the conditions set forth in Article III of the
Contribution Agreement, dated November 18, 1999 (the "Contribution Agreement"),
a copy of which Article III is annexed hereto as Exhibit A.
(e) Notwithstanding any other provision of this Section 4, the Company may
at any time, abandon or delay any registration commenced by the Company. In the
event of such an abandonment by the Company, the Company shall not be required
to continue registration of Warrant Shares requested by the Holder for inclusion
and the Holder shall retain the right to request inclusion of Warrant Shares as
set forth above.
(f) The Holder shall have the right to request inclusion of any of the
Warrant Shares in a registration statement as described in this Section 4 up to
two (2) times.
(g) The Holder hereby represents to the Company that he or she is an
accredited
<PAGE>
investor as defined in Rule 506 under the Securities Act of 1933, as amended.
Section 5. Adjustment of Warrant Price. The Warrant Price and the number of
---------------------------
shares of Common Stock subject to being purchased pursuant to this Warrant shall
be subject to adjustment from time to time as follows:
(a) In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall issue any Common Stock as a share dividend or subdivide
the number of outstanding Common Stock into a greater number of shares, then, in
either of such cases, the purchase price per share of the Common Stock
purchasable pursuant to this Warrant in effect at the time of such action shall
be proportionately reduced and the number of shares at the time purchasable
pursuant to this Warrant shall be proportionately increased; and conversely, in
the event the Company shall contract the number of outstanding Common Stock by
combining such shares into a smaller number of shares, then, in such case, the
purchase price per share purchasable pursuant to this Warrant in effect at the
time of such action shall be proportionately increased, and the number of shares
at that time purchasable pursuant to this Warrant shall be proportionately
decreased. If the Company, at any time during the life of this Warrant, shall
declare a dividend payable in cash on its Common Stock, and shall at
substantially the same time offer to its shareholders the right to purchase new
Common Stock from the proceeds of such dividend or for an amount substantially
equal to the dividend, all Common Stock so issued shall, for purposes of this
Warrant, be deemed to have been issued as a share dividend. Any dividends paid
or distributed upon Common Stock in shares of any other class or securities
convertible into Common Stock shall be treated as a dividend paid in Common
Stock to the extent that shares of Common Stock are issuable upon the conversion
thereof.
(b) In case, prior to the expiration of this Warrant by exercise or by its
terms, the Company shall be recapitalized by reclassifying its outstanding
Common Stock into shares of a different par value, or the Company shall merge
into or consolidate with another corporation or shall sell all or substantially
all of its or any of its successor corporation's property and assets to any
other corporation or corporations (any such corporation being included within
the meaning of the term "successor corporation"), the Holder shall thereafter
have the right to purchase, upon the basis and on the terms and conditions and
during the time specified in this Warrant in lieu of the Common Stock of the
Company theretofore purchasable upon the exercise of this Warrant, such shares,
securities, or assets as may be issued or payable with respect to, or in
exchange for, the Common Stock of the Company theretofore purchasable upon the
exercise of this Warrant had such recapitalization, consolidation, merger, or
conveyance not taken place; and in any such event, the rights of the Holder to
an adjustment in the number of Common Stock purchased upon the exercise of this
Warrant as herein provided shall continue and be preserved in respect of any
shares, securities, or assets which the Holder becomes entitled to purchase.
(c) If the Company shall set a record date with respect to its Common
Stock or shall propose to give notice to or take a vote of the holders of its
Common Stock for any of the purposes set forth in paragraphs (a) or (b) above,
the Company shall give notice to the Holder at least fifteen (15) days prior to
any such action to be taken. Such notice shall specify the date or expected
date, if any is to be fixed, as of which holders of Common Stock of record shall
be entitled to participate in any such action.
<PAGE>
(d) In case the Company at any time while this Warrant remains unexpired
and unexercised shall sell all or substantially all of its property or dissolve,
liquidate, or wind-up its affairs, the Holder may thereafter receive upon
exercise hereof in lieu of each share of Common Stock of the Company which it
would have been entitled to receive, the same kind and amount of any securities
or assets which may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding-up in respect of each share of Common Stock
of the Company.
Section 6. Payment of Taxes. The Company will pay any documentary stamp taxes
----------------
attributable to the initial issuance of Common Stock issuable upon the exercise
of this Warrant; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue or delivery of any share certificates in a name other than that of the
Holder in respect of which such shares are issued, and in such case the Company
shall not be required to issue or deliver any certificate for Common Stock or
any Warrant until the person requesting the same has paid to the Company the
amount of such tax or has established to the Company's satisfaction that such
tax has been paid or that such person has an exemption from the payment of such
tax.
Section 7. Reservation of Common Stock. There have been reserved, and the
---------------------------
Company shall at all times keep reserved out of the authorized and unissued
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by this Warrant. The Company
agrees that all Common Stock issued upon exercise of this Warrant shall be, at
the time of delivery of the certificates of such shares, validly issued and
outstanding, fully paid and non assessable and listed on any national securities
exchange upon which the other shares of Common Stock of the Company are then
listed. All warrants surrendered in the exercise of the rights thereby evidenced
shall be canceled by the Company, and such canceled warrants shall constitute
sufficient evidence of the exercise of such warrants. Promptly after the
expiration of this Warrant, the Company shall certify the total aggregate number
of warrants then outstanding, and thereafter no shares of Common Stock shall be
subject to reservation in respect of such Warrant which has expired.
Section 8. Fractional Interest. The Warrant may only be exercised to purchase
-------------------
full shares of Common Stock and the Company shall not be required to issue
fractions of shares of Common Stock on the exercise of the Warrant. However, if
the Holder exercised all warrants then owned or record by him and such exercise
would result in the issuance of a fractional share, the Company will pay to the
Holder, in lieu of the issuance of any fractional share otherwise issuable, an
amount of cash based on the market value of the Common Stock of the Company on
the last trading day prior to the exercise date or, if the Common Stock is not
then publicly traded, at its fair market value as determined by the Company's
Board of Directors.
Section 9. Restrictions on Transferability. This Warrant shall not be
-------------------------------
transferred, hypothecated or assigned before satisfaction of the conditions
specified in this Section 9, which conditions are intended to ensure compliance
with the provisions of the Securities Act with respect to the transfer of any
Warrant. This Warrant may be transferred in full only; no partial transfers will
be
<PAGE>
accepted or recognized by the Company under any circumstances. The Holder, by
acceptance of this Warrant, agrees to be bound by the provisions of this Section
9.
(a) Except as otherwise provided in this Section 9, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"This Warrant and the securities represented hereby have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state, and may not be transferred unless
registered pursuant thereto, or unless an exception therefrom is
available, and in accordance with the provisions of this Warrant."
(b) Notwithstanding the foregoing provision of this Section 9, the restrictions
imposed by this Section 9 upon the transferability of the Warrant and the legend
requirements of the subsection (a) hereof shall terminate as to any particular
Warrant (i) when and so long as such security shall have been effectively
registered under the Securities Act and disposed of pursuant thereto; or (ii)
when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such securities may be transferred without registration
thereof under the Securities Act. Whenever the restrictions on this Warrant
shall terminate, as hereinabove provided, the Holder shall be entitled to
receive from the Company a new unlegended Warrant.
All warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon.
Section 10. Notices. Any notice pursuant to this Warrant to be given by the
-------
Holder shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
Lakaro Biopharmaceuticals, Inc.
216 Jaffa Road
Jerusalem 94383 Israel
Attention: Robert Trachtenberg
General Counsel
Any notice pursuant to this Warrant to be given by the Company to the Holder
shall be sufficiently given if sent by registered mail, return receipt
requested, postage prepaid, addressed as follows:
Section 11. Supplements and Amendments. The Company may from time to time
--------------------------
supplement or amend this Warrant in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not be inconsistent with the provisions of the Warrant
and which shall not adversely affect the interest of the Holder.
<PAGE>
Section 12. Governing Law and Jurisdiction. This Warrant shall be deemed to be a
------------------------------
contract made under the laws of the State of New York and shall be construed in
accordance with the laws of New York applicable to agreements to be performed
wholly within State of New York. Any dispute arising from this Warrant shall be
resolved in the appropriate state or federal court in New York County and the
parties hereto consent to the personal jurisdiction of such court.
Section 13. Benefits of this Warrant. Nothing in this Warrant shall be construed
------------------------
to give to any person or corporation other than the Company and the Holder any
legal or equitable right, remedy or claim under this Warrant; but this Warrant
shall be for the sole and exclusive benefit of the Company and the Holder.
Notwithstanding the foregoing, this Warrant shall not entitle the Holder to any
rights as a shareholder of the Company.
Section 14. Successors. All the covenants and provisions of this Warrant by or
----------
for the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective heirs, administrators, successors and assigns hereunder.
IN WITNESS WHEREOF, the parties have entered into this Warrant on the date
written below.
Dated: December 14, 1999
LAKARO BIOPHARMACEUTICALS, INC.
By ___________________________________
Its ___________________________
Attest:
_______________________________________
Secretary
<PAGE>
EXHIBIT 4.10
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE. NEITHER SUCH WARRANTS NOR SUCH SECURITIES MAY
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
LAKARO BIOPHARMACEUTICALS, INC.
-------------------------------
Warrant for the Purchase
of Shares of Common Stock
FOR VALUE RECEIVED, LAKARO BIOPHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), hereby certifies that PARAMOUNT CAPITAL, INC. (the
"Holder"), its designee or its permitted assigns is entitled to purchase from
the Company, at any time or from time to time commencing on January 25, 2000,
and prior to 5:00 P.M., New York City time, on January 24, 2003 up to seventy
seven thousand three hundred ninety three (77,393) fully paid and non-assessable
shares of common stock (subject to adjustment), $.001 par value per share, of
the Company for $2.91 per share (subject to adjustment as provided herein) and
an aggregate purchase price of $225,213.63 (Hereinafter, (i) said common stock,
$0.001 par value per share, of the Company, is referred to as the "Common
Stock," (ii) the shares of the Common Stock purchasable hereunder or under any
other Warrant (as hereinafter defined) are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable for the Warrant Shares purchasable
hereunder is referred to as the "Aggregate Warrant Price," (iv) the price
payable for each of the Warrant Shares is referred to as the "Per Share Warrant
Price," (v) this Warrant and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrants," (vi) the holder
of this Warrant is referred to as the "Holder" and the holder of this Warrant
and all other Warrants and Warrant Shares are referred to as the "Holders" and
Holders of more than 50% of the outstanding Warrants and Warrant Shares are
referred to as the "Majority of the Holders"), and (vii) the "Current Market
Price" shall mean the last sale price of the Common Stock on the trading day
prior to such date or, in case no such reported sales take place on such day,
the average of the last reported bid and asked prices of the Common Stock on
such day, in either case on the principal national securities exchange on which
the Common Stock is admitted to trading or listed, or if not listed or admitted
to trading on any such exchange, the representative closing sale price of the
Common Stock as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ"), or other similar organization if NASDAQ
is no longer reporting such information, or, if the Common Stock is not reported
on NASDAQ, the average per share sale price for the Common
<PAGE>
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or if not so available, the fair market value of
the Common Stock as determined in good faith by the Board of Directors. The
Aggregate Warrant Price is not subject to adjustment.
By acceptance of this Warrant, the Holder agrees to comply with all
applicable provisions of the Subscription Agreement (the "Subscription
Agreement") entered into between the Company and the investors ("Investors") in
the Company's private placement offering of Series A Convertible Preferred Stock
to the same extent as if it were a party thereto.
1. Exercise of Warrant. (a) This Warrant may be exercised in
--------------------
whole at any time, or in part from time to time, commencing on January 25, 2000,
and prior to 5:00 P.M., Eastern Standard Time, on January 24, 2003 by the Holder
(i) by presentation and surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Section 9(a) hereof, together with payment, by certified or official bank check
payable to the order of the Company, of the Aggregate Warrant Price or the
proportionate part thereof if exercised in part.
(ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Section 9(a) hereof. Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between (A) the then Current Market
Price and (B) the Per Share Warrant Price, and the denominator of which shall be
the then Current Market Price. For purposes of any computation under this
Section 1(a), the then Current Market Price shall be based on the trading day
immediately prior to the Cashless Exercise.
(b) If this Warrant is exercised in part only, the Company shall,
upon presentation of this Warrant upon such exercise, execute and deliver (with
the certificate for the Warrant Shares purchased) a new Warrant evidencing the
rights of the Holder hereof to purchase the balance of the Warrant Shares
purchasable hereunder upon the same terms and conditions as herein set forth.
Upon proper exercise of this Warrant, the Company promptly shall deliver
certificates for the Warrant Shares to the Holder duly legended as authorized by
the subscription form annexed to this Warrant. No fractional shares shall be
issued upon exercise of this Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the Current Market Price of one (1)
share of Common Stock.
2. Reservation of Warrant Shares; Listing. The Company agrees that,
--------------------------------------
prior to the expiration of this Warrant, the Company shall at all times have
authorized and in reserve, and shall keep available, solely for issuance and
delivery upon the exercise of this Warrant, the shares of the Common Stock as
from time to time shall be receivable upon the exercise of this Warrant, free
and clear of all restrictions on sale or transfer, other than under
2
<PAGE>
Federal or state securities laws, and free and clear of all preemptive rights
and rights of first refusal.
3. Adjustments. (a) If, at any time or from time to time after the
-----------
date of this Warrant, the Company shall issue or distribute to any holder of
shares of Common Stock evidence of its indebtedness, any other securities of the
Company or any property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Section 3(b), and also excluding cash dividends or cash
distributions paid out of funds legally available therefor in the full amount
thereof) (any such non-excluded event being herein called a "Special Dividend"),
the Per Share Warrant Price shall be adjusted by multiplying the Per Share
Warrant Price then in effect by a fraction, the numerator of which shall be the
then Current Market Price in effect on the record date of such issuance or
distribution less the fair market value (as determined in good faith by the
Company's board of directors) of the evidence of indebtedness, cash, securities
or property, or other assets issued or distributed in such Special Dividend
applicable to one share of Common Stock and the denominator of which shall be
the then Current Market Price in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution to any holder of its capital stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of
shares, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares or (iv) issue by reclassification of its Common Stock any
shares of capital stock of the Company, the Per Share Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the number
of shares of Common Stock issuable pursuant this Warrant and the denominator of
which shall be the number of shares of Common Stock or other capital stock of
the Company that the Holder would have owned immediately following such action
had such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(b) shall become effective immediately after the
record date in the case of a dividend or distribution, and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c) No adjustment in the Per Share Warrant Price shall be required in
the case of the issuance by the Company of Common Stock (i) pursuant to the
exercise of any warrant; (ii) pursuant to the exercise of any stock options or
warrants currently outstanding or securities issued after the date hereof, which
may be approved by the Company's board of directors pursuant to any Company
benefit plan or exercised, under any employee benefit plan of the Company to
officers, directors, consultants or employees, but only with respect to such
warrants or stock options as are exercisable at prices no lower than fair market
value of the Common Stock as of the date of grant thereof.
(d) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in the case
of any statutory exchange of
3
<PAGE>
securities with another corporation (including any exchange effected in
connection with a merger of the Company into a third corporation), the Holder of
this Warrant shall have the right thereafter to receive on the exercise of this
Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Section 3(d) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The Company shall require the issuer of any
shares of stock or other securities or property thereafter deliverable on the
exercise of this Warrant to be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than ten (10) days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(e) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
-------- -------
reason of this Subsection 3(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 3 shall be made to the nearest cent or to the nearest 1/100th
of a share, as the case may be. Anything in this Section 3 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Per Share Warrant Price, in addition to those required by this Section 3, as it
in its discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(f) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly prepare a brief
statement of the facts requiring such adjustment or modification and the manner
of computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants.
(g) If the board of directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of capital surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than ten
4
<PAGE>
(10) days prior to the record date fixed for determining stockholders entitled
to participate in such dividend or other distribution.
(h) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the board of directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. Fully Paid Stock; Taxes. The shares of the Common Stock
-----------------------
represented by each and every certificate for Warrant Shares delivered upon the
exercise of this Warrant shall at the time of such delivery, be duly authorized,
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights or rights of first refusal. The Company shall pay all
documentary, stamp or similar taxes and other similar governmental charges that
may be imposed with respect to the issuance or delivery of any Common Shares
upon exercise of the Warrants (other than income taxes); provided, however, that
if the Common Shares are to be delivered in a name other than the name of the
Holder, no such delivery shall be made unless the person requesting the same has
paid to the Company the amount of transfer taxes or charges incident thereto, if
any.
5. Registration Under Securities Act of 1933. (a) The Holder shall
-----------------------------------------
have the right to participate in the registration rights granted to Investors
with respect to the Warrant Shares, as adjusted, pursuant to Section 5 of the
Subscription Agreement. By acceptance of this Warrant, the Holder agrees to
comply with the provisions of Section 5 of the Subscription Agreement to the
same extent as if it were a party thereto.
(b) After the Common Stock is publicly traded and until all of the
Warrant Shares have been sold under a registration statement declared effective
by the Securities and Exchange Commission or pursuant to Rule 144, the Company
shall use its reasonable best efforts to file with the Securities and Exchange
Commission all current reports and the information as may be necessary to enable
the Holder to effect sales of its shares in reliance upon Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act").
5
<PAGE>
6. Investment Intent; Limited Transferability. (a) The Holder
-------------------------------------------
represents, by accepting this Warrant, that it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered
for sale under Federal or state securities laws and are being offered and sold
to the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the first page hereof. The
Holder understands that it must bear the economic risk of its investment in this
Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless an exemption from such
registration is available.
(b) The Holder, by its acceptance of this Warrant, represents to the
Company that it and any designee or permitted assign is an "accredited investor"
as defined in Rule 501 under the Securities Act of 1933, as amended, and is
acquiring this Warrant and will acquire any securities obtainable upon exercise
of this Warrant for its own account for investment and not with a view to, or
for sale in connection with, any distribution thereof in violation of the Act.
The Holder, its designees and permitted assigns agree that this Warrant and any
such securities will not be sold or otherwise transferred unless (i) a
registration statement with respect to such transfer is effective under the Act
and any applicable state securities laws or (ii) such sale or transfer is made
pursuant to one or more exemptions from the Act and is accompanied by an opinion
of counsel acceptable to the Company to such effect.
7. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to
----------------------
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
8. Warrant Holder Not Stockholder. This Warrant does not confer
------------------------------
upon the Holder any right to vote on or consent to or receive notice as a
stockholder of the Company, as such, in respect of any matters whatsoever, nor
any other rights or liabilities as a stockholder, prior to the exercise hereof;
this Warrant does, however, require certain notices to Holders as set forth
herein.
9. Communication. No notice or other communication under this
-------------
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at Lakaro Biopharmaceuticals, Inc., 216 Jaffa Rd.,
Sha'arei Ha'ir, Jerusalem, Israel 94383, Attn: General Counsel; or other
such address as the Company has designated in writing to the Holder.
6
<PAGE>
(b) the Holder at 787 Seventh Avenue, New York, NY 10019 United
States of America, Attn: Chief Financial Officer, or other such address as
the Holder has designated in writing to the Company.
10. Headings. The headings of this Warrant have been inserted as a
--------
matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
12. Amendment, Waiver, etc. Except as expressly provided herein,
----------------------
neither this Warrant nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the Majority of the
Holders.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
this 25th day of January, 2000.
LAKARO BIOPHARMACEUTICALS, INC.
By: /s/ Morris Laster
____________________________
Name: Morris Laster
Title: CEO
ATTEST:
/s/ Bob Trachtenberg
__________________________
Secretary
7
<PAGE>
SUBSCRIPTION
------------
The undersigned, ___________________, pursuant to the provisions of
the foregoing Warrant, hereby elects to exercise the within Warrant to the
extent of purchasing ____________________ shares of Common Stock thereunder and
hereby makes payment of $___________ by certified or official bank check in
payment of the exercise price therefor.
The undersigned hereby represents and warrants to the Company that the
undersigned is acquiring the shares of the Company's Common Stock pursuant to
exercise of the within Warrant for investment purposes only. The undersigned
hereby further acknowledges that the undersigned understands that such shares
(a) have not been registered under the Securities Act of 1933, as amended, and
are being issued to the undersigned by the Company in reliance upon the
foregoing representation and warranty and (b) may not be resold except in
accordance with the requirements of the Act, including Rule 144 thereunder, if
applicable. The undersigned further consents to the placing of a legend on the
certificates for the shares being purchased to the foregoing effect.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
----------
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers
unto ____________________ the foregoing Warrant and all rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer said Warrant on the books of Lakaro Biopharmaceuticals,
Inc.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
-----------------
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Common Stock, par value $.001 per share, of Lakaro Biopharmaceuticals,
Inc. pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
8
<PAGE>
PARTIAL ASSIGNMENT
------------------
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Common Stock,
par value $.001 per share, of Lakaro Biopharmaceuticals, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of, Inc.
Dated:_______________ Signature:____________________
Address:______________________
9
<PAGE>
EXHIBIT 10.1
LAKARO BIOPHARMACEUTICALS, INC.
1999 SHARE OPTION PLAN
1. Purposes of the Plan. The purposes of this Share Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under this Plan may or may not contain such terms as will qualify the
Options as Incentive Share Options ("ISOs") within the meaning of Section 422(b)
of the United State Internal Revenue Code of 1986, as amended (the "Code").
Options granted under this Plan will be designated for tax purposes as
determined by the Administrator at the time of the grant in accordance with
Applicable Laws.
2. Definitions. As used herein, the following definitions and the
-----------
definitions set forth in Section 1 above shall apply.
(a) "Administrator" means the Board or any of its Committees as
-------------
shall be administering the Plan, in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of share option plans under U.S. state corporate laws, U.S.
federal and state securities laws, U.S. tax laws, the stock exchange or
quotation system on which the shares are listed or quoted and the applicable
laws of any country or jurisdiction where the shares are registered or options
are granted under the Plan.
(c) "Board" means the Board of Directors of the Company or of
-----
any Parent or Subsidiary of the Company.
(d) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 hereof.
(e) "Company" means Lakaro Biopharmaceuticals, Inc., a
-------
corporation under the laws of the State of Delaware.
(f) "Consultant" means any person who is engaged by the Company
----------
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(g) "Director" means a member of the Board.
--------
(h) "Employee" means any person, including officers of the
--------
Company (within the meaning of the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder), and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, any Parent, any Subsidiary, or any successor.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
<PAGE>
(i) "Fair Market Value" means, as of any date, the value of a Share
-----------------
determined as follows:
(i) If the Shares are listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, the
Fair Market Value shall be the closing sales price for such Shares (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
shall be the mean between the high bid and low asked prices for the Shares on
the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the
Shares, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(j) "Option" means a share option granted pursuant to the Plan.
------
(k) "Option Agreement" means a written or electronic agreement or
----------------
letter between the Company and an Optionee evidencing the terms and conditions
of an individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan. The Option Agreement shall specify whether, and to what
extent, the Options which are the subject of the Agreement are intended to be
ISOs or Options intended to be taxed under the Code but not intended to qualify
as ISO's ("NSOs").
(l) "Optioned Shares" means the Shares subject to an Option.
---------------
(m) "Optionee" means the holder of an outstanding Option granted
--------
under the Plan.
(n) "Parent" means any company other than the Company, whether now or
------
hereafter existing, in an unbroken chain of companies ending with the Company
if, at the time of the granting of the Option, each of the companies other than
the Company owns shares possessing 50 percent or more of the total combined
voting power of all classes of shares in one of the other companies in such
chain.
(o) "Plan" means this Lakaro Biopharmaceuticals, Inc. 1999 Share
----
Option Plan.
(p) "Repurchaser" means (i) the Company, if permitted by Applicable
-----------
Laws; (ii) if the Company is not permitted by Applicable Laws, then any
affiliate or subsidiary of the Company designated by the Board of Directors; or
(iii) if the majority of the Board of Directors of the Company so decide, any
other third party or parties designated by the Board of Directors, provided in
no case shall the Company provide financial assistance to any other party to
purchase the Shares if doing so is prohibited by Applicable Laws.
(q) "Service Provider" means an Employee, Director or Consultant.
----------------
<PAGE>
(r) "Share" means a share of the Company's common shares having a par
-----
value of $0.001, as adjusted in accordance with Section 11 below.
(s) "Subsidiary" means any company other than the Company, whether
----------
now or hereafter existing, in an unbroken chain of companies beginning with the
Company if, at the time of the granting of the Option, each of the companies
other than the last company in an unbroken chain owns shares possessing 50
percent or more of the total combined voting power of all classes of shares in
one of the other companies in such chain.
3. Shares Subject to the Plan. Subject to the provisions of Section 11 of
--------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is three million six hundred twenty thousand (3,620,000)
Shares. The Shares may be authorized, but unissued, or acquired by the
Repurchaser.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan, other than Shares which have been acquired
by the Repurchaser pursuant to the terms of the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board or a
---------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
---------------------------
the Plan, and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered
by each such award granted hereunder;
(iv) to approve forms of the Option Agreement for use
under the Plan;
(v) to determine the terms and conditions of any
Option granted hereunder, including, without limitation, the vesting schedule,
and whether and to what extent an Option shall be ISO's;
(vi) to determine whether and under what
circumstances an Option may be settled in cash as set forth under subsection
9(e) instead of Shares;
<PAGE>
(vii) to reduce the exercise price of any Option to
the then current Fair Market Value, if the Fair Market Value of the Shares
covered by such Option has declined since the date the Option was granted;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan;
(ix) subject to Applicable Laws, to allow Optionees
to satisfy withholding tax obligations by electing to have the Company, if
permitted under Applicable Laws, withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(x) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
(d) Grants to Committee Members. If the Administrator is a
---------------------------
Committee appointed by the Board, the grant of Options under the Plan to members
of such Committee, if any, shall be made by the Board and not by such Committee.
5. Eligibility.
-----------
(a) Options may be granted to Service Providers.
(b) The Plan shall not confer upon any Optionee any right with
respect to continuing the Optionee's relationship as a Service Provider with the
Company or a Parent or Subsidiary, nor shall it interfere in any way with his or
her right or the Company's right, or the right of the Company's Parent or
Subsidiary, subject to any employment agreements, to terminate such relationship
at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board. It shall continue in effect for a term of ten (10) years after the
earlier of its adoption by the Board or its approval by the Company's
Shareholders, unless sooner terminated under Section 13 of the Plan.
7. Term of Option. Unless stated otherwise in the Option Agreement, the
--------------
term of each Option shall be no more than ten (10) years from the date of grant
thereof.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Administrator in accordance with Applicable Laws and subject to guidelines as
shall be suggested by the Board from time to time, if any.
<PAGE>
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator and may consist entirely of (1) cash, (2) check, (3)
promissory note, (4) consideration received by the Company under a formal
cashless exercise program, if such program is adopted by the Company in
connection with the Plan, or (5) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
(c) The proceeds received by the Company from the issuance of
Shares subject to the Options will be added to the general funds of the Company
and used for its corporate purposes.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence other than leave pursuant to law. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by Applicable Laws, the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse, or
in the name of a valid trust established by the Optionee. Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. To avoid doubt, until the
Shares are issued, such Optionee shall not have the right to vote at any meeting
of the shareholders of the Company, nor shall the Optionees be deemed to be a
class of shareholders or creditors of the Company. Upon their issuance, unless
otherwise determined by the Board, the Shares shall carry equal voting rights as
the common stock of the company on all matters where such vote is permitted by
Applicable Law. The Company shall issue (or cause to be issued) such Shares
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 11 of the Plan.
If any law or regulation requires the Company to take any action with
respect to the Shares specified in such notice before the issuance thereof, then
the date of their issuance shall be delayed for the period necessary to take
such action.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
<PAGE>
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or disability (as defined below), the Optionee may exercise his or her Option
within such period of time (of at least thirty (30) days) as is specified in the
Option Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). Unless otherwise determined by the
Administrator and in the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for ninety (90) days following the
Optionee's termination, except that the Option shall remain exercisable for only
thirty (30) days following the Optionee's termination if such termination is
with cause (as determined by the Company). Unless otherwise determined by the
Administrator, if, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise within the time specified by the Option Agreement, the Plan or the
Administrator the portion of his or her Option that had vested, the vested
portion of the Option shall terminate, and the Shares covered by such portion
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
----------------------
Service Provider as a result of a physical or mental impairment, which has
lasted or is expected to last for a continuous period of not less than 12 months
and which causes the Optionee's total and permanent disability to engage in any
substantial gainful activity, the Optionee may exercise his or her Option within
such period of time as is specified in the Option Agreement (of at least six (6)
months) to the extent the Option is vested on the date of termination, but in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to the entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
-----------------
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (of at least six (6) months) to the extent that the
Option is vested on the date of death (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 acquires the right to exercise the Option
by bequest or inheritance. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's death, unless otherwise extended by the Administrator. If, at the
time of death, the Optionee is not vested as to the entire Option, the Shares
covered by the unvested portion of the Option shall revert to the Plan. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time, if
-----------------
permitted under Applicable Laws, offer to buy out for a payment in cash or
Shares, an Option previously granted, based on such terms and conditions as the
Administrator shall establish and
<PAGE>
communicate to the Optionee at the time that such offer is made. No such offer
shall obligate the Optionee to relinquish his or her Option.
10. Transferability of Options. Unless otherwise specifically provided in
--------------------------
an Option Agreement, Options may be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner,, only to an Optionee's spouse or
descendants, or to a trust (or other entity owned by such a trust) for the
primary benefit of the Optionee, his spouse and/or descendants ("Permitted
Transferees"), and may be exercised, during the lifetime of the Optionee, only
by the Optionee or a Permitted Transferee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the exercise price per Share of each such outstanding Option
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a share split, reverse share split, share dividend,
recapitalization, combination or reclassification of the Shares, rights issues
or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities (including the Series A Convertible
Preferred Stock) of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Shares, including Shares as to which
the Option would not otherwise be exercisable. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Acquisition. In the event of a merger of the
---------------------
Company with or into another company, or the sale of all or substantially all of
the assets or shares of the Company, each outstanding Option shall be assumed or
an equivalent option substituted by the successor company or a Parent or
Subsidiary of the successor company. In the event that the successor company
refuses to assume or substitute for the Option, the Optionee shall fully vest in
and have the right to exercise the Option as to all of the Optioned Shares,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or acquisition, the Administrator shall
notify the Optionee in writing or electronically that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. The Administrator
shall
<PAGE>
determine, in its discretion, the proper exchange ratio of the Options and the
fair value of such Options for purpose of such substitution, shall be authorized
to accelerate the vesting date of any or all Options and shall be authorized to
make all necessary adjustments in the terms of the Options and the substituted
options (including, without limitation, adjustments in the exercise price) which
are fair under the circumstances.
For the purposes of this paragraph, the Option shall be considered assumed
if, following the merger or acquisition, the option confers the right to
purchase or receive, for each Share of Optioned Shares immediately prior to the
merger or acquisition, the consideration (whether shares, options, cash, or
other securities or property) received in the merger or acquisition by holders
of shares for each share held on the effective date of the transaction (and if
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the merger or acquisition is not
solely common shares (or their equivalent) of the successor company or its
Parent, the Administrator may, with the consent of the successor company,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Shares, to be solely ordinary shares (or their
equivalent) of the successor company or its Parent equal in fair market value to
the per share consideration received by holders of a majority of the outstanding
shares in the merger or sale of assets, and provided further that the
Administrator may determine, in its discretion, that in lieu of such assumption
or substitution of Options for options of the acquiring corporation or its
parent or subsidiary, such Options will be substituted for any other type of
asset or property including cash which is fair under the circumstances.
12. Date of Grant. Subject to Applicable Laws, the date of grant of an
-------------
Option shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Board. Notice of the determination shall be given to each Service Provider to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
----------------------------------
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
14. Conditions Upon Issuance of Shares.
----------------------------------
<PAGE>
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option, the method of payment
and the issuance and delivery of such Shares shall comply with Applicable Laws
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) Investment Representations. As a condition to the exercise
--------------------------
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
15. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. Shareholder Approval of Plan. The Plan shall be subject to approval
----------------------------
by the shareholders of the Company. Such shareholder approval shall be obtained
in the manner and to the degree required under Applicable Laws.
18. Continuance of Status. Neither the Plan nor any Option Agreement
---------------------
shall impose any obligation on the Company, or a Parent or Subsidiary thereof,
to continue any Optionee as a Service Provider, and nothing in the Plan or in
any Option Agreement shall confer upon any Service Provider any right to
continue as a Service Provider.
19. Governing Law. This Plan shall be governed by and construed and
-------------
enforced in accordance with the laws of the state of Delaware applicable to
contracts made and to be performed therein, without giving effect to the
principles of conflict of laws.
20. Tax Consequences. Any tax consequences arising from the grant or
----------------
exercise of any Option, from the payment for Shares or from any other event or
act (of the Company or the Optionee) hereunder, shall be borne solely by the
Optionee. Furthermore, the Optionee shall agree to indemnify the Company and
hold it harmless against and from any and all liability for any such tax or
interest or penalty thereon, including without limitation, liabilities relating
to the necessity to withhold, or to have withheld, any such tax from any payment
made to the Optionee.
21. Multiple Agreements. The terms of each Option may differ from other
-------------------
Options granted under the Plan at the same time. The Administrator may also
grant more than one Option to a given Optionee during the term of the Plan,
either in addition to, or in substitution for, one or more Options previously
granted to that Optionee.
22. Provision for Foreign Participants. The Board of Directors may,
----------------------------------
without amending the Plan, modify awards or options granted to participants who
are foreign nationals or
<PAGE>
employed outside the United States to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.
Adopted by the Stockholders on
November 15, 1999
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement, dated November 19, 1999, by and between Lakaro
Biopharmaceuticals, Inc. ("Lakaro"), a Delaware corporation having an address at
216 Jaffa Rd., Sha'arei Ha'ir, Jerusalem, Israel 94383 and Morris Laster, M.D.,
an individual residing at 40 Segal, Jerusalem, Israel (the "CEO")
WITNESSETH:
WHEREAS, the Corporation desires to employ the CEO as Chief Executive
Officer of Lakaro and the CEO desires to be employed by the Lakaro as CEO of
Lakaro, all pursuant to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT DUTIES
-----------------
(a) Lakaro hereby engages and employs the CEO, and the CEO accepts
engagement and employment, as CEO of Lakaro, to direct, supervise and have
responsibilities for the daily operations of Lakaro, including, but not limited
to: (i) directing and supervising the business and research and development
efforts of Lakaro; (ii) managing the other executives and personnel of Lakaro
and (iii) evaluating, negotiating, structuring and implementing business
transactions with Lakaro's customers, partners and suppliers, and to perform
such other services and duties as the Board of Directors of Lakaro shall
determine. The CEO acknowledges and agrees that the performance by the CEO of
his duties hereunder may require significant domestic and international travel
by the CEO. In addition, the CEO realizes that he may be required to spend a
substantial amount of time in Jerusalem, Israel.
(b) The CEO shall devote substantially all of his gainful time to the
discharge of his duties and responsibilities under this Agreement.
2. TERM
----
The CEO's employment hereunder shall be for a term of three (3) years
commencing on the Effective Date and continuing through the third anniversary of
the Effective Date (the "Initial Term"), with successive one-year renewals
thereafter (the "Renewal Terms") unless sooner terminated as hereinafter
provided, or by notice of either party not less than 90 days prior to the
expiration of each term.
3. COMPENSATION
------------
(a) As compensation for the performance of his duties on behalf of Lakaro,
the CEO shall be compensated as follows:
(i) Upon the next meeting of the Corporation's Board of Directors, the
Corporation will grant (the "Initial Grant") the CEO options (the "Options") to
purchase 300,000 shares of the common stock of the Corporation at an exercise
price equal to $0.15 per share (the "Exercise Price"), which options shall be
exercisable for a period of 10 years from the date of issuance. Should any
change be made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the total
number and/or class of securities subject to such options and (ii) the
<PAGE>
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement under such options.
(ii) The stock options shall vest as follows: one-third on the
closing of the next equity investment in Lakaro; one-sixth six months from the
date of grant; one-sixth twelve months from the date of grant; one-sixth
eighteen months from the date of grant; and one-sixth twenty four months from
the date of grant; but immediate vesting shall occur upon a change of control of
the Corporation as described in paragraph 10(a)(iii)C below.
(iii) At the discretion of the Board of Directors, the CEO shall be
entitled to an annual grant of subsequent stock options each of which shall have
the same antidilution protection as described in Section 3 paragraph (a)(i)
above.
(b) Lakaro shall reimburse the CEO for all normal, usual and necessary
expenses incurred by the CEO in furtherance of the business and affairs of
Lakaro, including travel and entertainment, against receipt by Lakaro of
appropriate vouchers or other proof of the CEO's expenditures and otherwise in
accordance with such Expense Reimbursement Policy as may from time to time be
adopted by the Board of Directors of Lakaro.
(c) The CEO shall be, during the term of this Agreement, entitled to four
(4) weeks of vacation per year as well as all statutory holidays.
(d) Lakaro shall adopt as part of the Corporation's Bylaws a broad form
indemnity of all actions taken in good faith by the officers and directors of
the Corporation.
(e) Subject to Section 10(c) below, the CEO must be an employee of Lakaro
at the time any compensation is due in order to receive such compensation. In
addition, no options shall vest after the termination of this Agreement.
4. REPRESENTATIONS AND WARRANTIES
BY THE CEO AND Lakaro
---------------------
(a) The CEO hereby represents and warrants to Lakaro as follows:
(i) Neither the execution and delivery of this Agreement nor the
performance by the CEO of his duties and other obligations hereunder violate any
statute, law, determination or award, or conflict with or constitute a default
under (whether immediately, upon the giving of notice or lapse of time or both)
any prior employment agreement, contract, or other instrument to which the CEO
is a party or by which he is bound.
(ii) The CEO has the full right, power and legal capacity to enter
and deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
the CEO enforceable against him in accordance with its terms. No approvals or
consents of any persons or entities are required for the CEO to execute and
deliver this Agreement or perform his duties and other obligations hereunder.
(b) Lakaro hereby represents and warrants to the CEO as follows:
(i) Lakaro is duly organized, validly existing and in good standing
under the laws of the State of Delaware, with all requisite corporate power and
authority to own its properties and conduct its business in the manner presently
described.
(ii) Lakaro has the full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(iii) The execution, delivery and performance by Lakaro of this
Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether
<PAGE>
immediately, or upon the giving of notice or lapse of time or both) the
certificate of incorporation or by-laws of Lakaro, or any agreement or
instrument to which Lakaro is a party or by which Lakaro or any of its
properties may be bound or affected.
5. CONFIDENTIAL INFORMATION
------------------------
(a) The CEO agrees that during the course of his employment and at any time
thereafter, he will not disclose or make accessible to any other person,
Lakaro's products, services and technology, both current and under development,
promotion and marketing programs, lists, trade secrets and other confidential
and proprietary business information of Lakaro or any of its clients. The CEO
agrees: (i) not to use any such information for himself or others; and (ii) not
to take any such material or reproductions thereof from Lakaro's facilities at
any time during his employment by Lakaro, except as required in the CEO's duties
to Lakaro. The CEO agrees immediately to return all such material and
reproductions in his possession to Lakaro upon request and in any event upon
termination of employment. Nothing in the foregoing shall be construed to
prevent the CEO from disclosing or using any information which the CEO can show
by written documentation was in the public domain or enters into the public
domain through no improper act on the CEO's part or on the part of any of
Lakaro's employees or was in his possession prior to his joining Lakaro or
disclosed properly to the CEO after leaving Lakaro.
(b) Except with prior written authorization by Lakaro, the CEO agrees not
to disclose or publish any of the confidential, technical or business
information or material of Lakaro, its clients or any other party to whom Lakaro
owes an obligation of confidence, at any time during or for a period of two
years after his employment with Lakaro except in the event of involuntary no
cause termination by Lakaro or a termination by the CEO for cause.
6. NON-COMPETITION
---------------
(a) The CEO understands and recognizes that his services to Lakaro are
special and unique and agrees that, during the term of this Agreement, and for a
period of 12 months from the date of termination of his employment hereunder, he
shall not in any manner, directly or indirectly, on behalf of himself or any
person, firm, partnership, joint venture, corporation or other business entity
("Person"), enter into or engage in any business directly competitive with
Lakaro's business, either as an individual for his own account, or as a partner,
joint venturer, CEO, agent, consultant, salesperson, officer, director or
shareholder of a Person operating or intending to operate within the area that
Lakaro is, at the date of termination, conducting its business (the "Restricted
Businesses"); provided, however, that nothing herein will preclude the CEO from
holding one percent (1%) or less of the stock of any publicly traded company or
from holding a position with a Person who does not engage in a business directly
competitive with the Restrictive Businesses so long as the CEO works in a
division of such Person which carries on a bona fide business which is not
directly competitive with the Restricted Businesses.
(b) For a period of 12 months after the termination of this Agreement, the
CEO shall not interfere with or disrupt or attempt to disrupt Lakaro's business
relationship with any of its customers, or solicit any of the employees of
Lakaro.
(c) In the event that the CEO breaches any provisions of this Section 6 or
there is a threatened breach, then, in addition to any other rights which Lakaro
may have, Lakaro shall be entitled, without the posting of a bond or other
security, to injunctive relief to enforce the restrictions contained herein. In
the event that an actual proceeding is brought in equity to enforce the
provisions of this Section 6, the CEO shall not argue as a defense that there is
an adequate remedy at law nor shall Lakaro be prevented from seeking any other
remedies which may be available.
7. OWNERSHIP OF PROPRIETARY INFORMATION
------------------------------------
(a) The CEO agrees that all information that has been created, discovered
or developed by Lakaro, its subsidiaries, affiliates, successors or assigns
(collectively, the "Affiliates") (including, without limitation, information
relating to the development of Lakaro's business created, discovered,
<PAGE>
developed or made know to Lakaro or the Affiliates by CEO during the Term and
information relating to Lakaro's customers, suppliers, consultants, and
licensees) and/or in which property rights have been assigned or otherwise
conveyed to Lakaro or the Affiliates, shall be the sole property of Lakaro or
the Affiliates, as applicable, and Lakaro or the Affiliates, as the case may be,
shall be the sole owner of all patents, copyrights and other rights in
connection therewith, including but not limited to the right to make application
for statutory protection. All of the aforementioned information is hereinafter
called "Proprietary Information." By way of illustration, but not limitation,
Proprietary Information includes trade secrets, processes, discoveries,
structures, inventions, designs, ideas, works of authorship, copyrightable
works, trademarks, copyrights, formulas, data, know-how, show-how, improvements,
inventions, product concepts, techniques, information or statistics contained
in, or relating to, marketing plans, strategies, forecasts, blueprints,
sketches, records, notes, devices, drawings, customer lists, patent
applications, continuation applications, continuation-in-part applications, file
wrapper continuation applications and divisional applications and information
about Lakaro's or the Affiliates' employees and/or consultants (including,
without limitation, the compensation, job responsibility and job performance of
such employees and/or consultants).
(b) The CEO further agrees that at all times, both during the Term
and after the termination of this Agreement, he will keep in confidence and
trust all Proprietary Information, and he will not use or disclose any
Proprietary Information or anything directly relating to it without the written
consent of Lakaro or the Affiliates, as appropriate, except as may be necessary
in the ordinary course of performing his duties hereunder and except for
academic, non-commercial research purposes with the prior written approval of
the Board of Directors. The CEO acknowledges that the Proprietary Information
constitutes a unique and valuable asset of Lakaro and each Affiliate acquired at
great time and expense, which is secret and confidential and which will be
communicated to CEO, if at all, in confidence in the course of his performance
of his duties hereunder, and that any disclosure or other use of the Proprietary
Information other than for the sole benefit of Lakaro or the Affiliates would be
wrongful and could cause irreparable harm to Lakaro or the Affiliates, as the
case may be.
Notwithstanding the foregoing, the parties agree that, at all such
times, CEO is free to use (i) information in the public domain not as a result
of a breach of this Agreement, (ii) information lawfully received from a third
party and (iii) CEO's own skill, knowledge, know-how and experience to whatever
extent and in whatever way he wishes, in each case consistent with his
obligations as CEO and that, at all times, CEO is free to conduct any non-
commercial research not relating to Lakaro's business.
8. DISCLOSURE AND OWNERSHIP OF INVENTIONS
--------------------------------------
(a) During the Term, CEO agrees that he will promptly disclose to
Lakaro, or any persons designated by Lakaro, all improvements, inventions,
designs, ideas, works of authorship, copyrightable works, discoveries,
trademarks, copyrights, trade secrets, formulas, processes, structures, product
concepts, marketing plans, strategies, customer lists, information about
Lakaro's or the Affiliates' employees and/or consultants (including, without
limitation, job performance of such employees and/or consultants), techniques,
blueprints, sketches, records, notes, devices, drawings, know-how, data, whether
or not patentable, patent applications, continuation applications, continuation-
in-part applications, file wrapper continuation applications and divisional
applications, made or conceived or reduced to practice or learned by him, either
alone or jointly with others, during the Term (all said improvements,
inventions, designs, ideas, works of authorship, copyrightable works,
discoveries, trademarks, copyrights, trade secrets, formulas, processes,
structures, product concepts, marketing plans, strategies, customer lists,
information about Lakaro's or the Affiliates' employees and/or consultants,
techniques, blueprints, sketches, records, notes, devices, drawings, know-how,
data, patent applications, continuation applications, continuation-in-part
applications, file wrtapper continuation applications and divisional
applications shall be collectively hereinafter called "Inventions").
(b) The CEO agrees that all Inventions shall be the sole property of
Lakaro to the maximum extent permitted by applicable law and to the extent
permitted by law shall be "works made for hire" as that term is defined in the
United States Copyright Act (17 USCA, Section 101). Lakaro
<PAGE>
shall be the sole owner of all patents, copyrights, trade secret rights, and
other intellectual property or other rights in connection therewith. CEO hereby
assigns to Lakaro all right, title and interest he may have or acquire in all
Inventions. CEO further agrees to assist Lakaro in every proper way (but at
Lakaro's expense) to obtain and from time to time enforce patents, copyrights or
other rights on said Inventions in any and all countries, and to that end the
CEO will execute all documents necessary:
(i) to apply for, obtain and vest in the name of Lakaro alone (unless
Lakaro otherwise directs) letters patent, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous protection.
(c) The CEO's obligation to assist Lakaro in obtaining and enforcing
patents and copyrights for the Inventions in any and all countries shall
continue beyond the Term, but Lakaro agrees to compensate the CEO at his normal
and usual rate after the expiration of the Term for time actually spent by the
CEO at Lakaro's request on such assistance.
9. NON-SOLICITATION
----------------
During the Term, and for 12 months thereafter, CEO shall not, directly or
indirectly, without the prior written consent of Lakaro:
(a) solicit or induce any employee of Lakaro or any Affiliate to leave
the employ of Lakaro or any Affiliate or hire for any purpose any employee of
Lakaro or any Affiliate or any employee who has left the employment of Lakaro or
any Affiliate within six months of the termination of said employee's employment
with Lakaro; or
(b) solicit or accept employment or be retained by any party who, at
any time during the Term, was a customer or supplier of Lakaro or any Affiliate
where his position will be related to the business of Lakaro; or
(c) solicit or accept the business of any customer or supplier of
Lakaro or any Affiliate with respect to products similar to those supplied by
Lakaro.
10. TERMINATION
-----------
(a) This CEO's employment hereunder shall begin on the Effective Date and
shall continue for the period set forth in Section 2 hereof unless sooner
terminated upon the first to occur of the following events:
(i) (A) The death of the CEO; or
(B) the total disability of the CEO.
(ii) Termination by the Board of Directors of Lakaro for just cause.
Any of the following actions by the CEO shall constitute just cause:
(A) Material breach by the CEO of Sections 5, 6, 7, 8, or 9 of this Agreement;
or
(B) Material breach by the CEO of any provision of this Agreement other than
Sections 5, 6, 7, 8 or 9 which is not cured by the CEO within 30 days of notice
from Lakaro; or in the event the breach is not curable within 30 days; the
commencement of action(s) to cure within said 30 days and the
<PAGE>
diligent pursuit of the cure thereafter, provided such breach may be completely
cured; or
(C) Any action by the CEO constituting gross negligence, recklessness or
willful misconduct in respect of the CEO's obligation to Lakaro which has or is
likely to result in material, economic damage to Lakaro.
(iii) Termination by the CEO for just cause. Any of the following
actions or omissions by Lakaro shall constitute just cause.
(A) Material breach by Lakaro of any provision of this Agreement which is not
cured by Lakaro within 30 days of notice thereof from the CEO; or
(B) A failure to elect or reelect the CEO to the office of CEO of Lakaro or
other change by Lakaro of the CEO's function, duties or responsibilities such
that the CEO is no longer the highest ranking Officer of Lakaro; or
(C) A "change in control," which shall mean a merger or consolidation in which
either more than 50% of the voting power of Lakaro is transferred or Lakaro is
not the surviving entity, or sale or other disposition of all or substantially
all the assets of Lakaro; or
(D) Termination of the CEO's employment other than for serious, willful
misconduct in respect of the CEO's obligations to the Corporation, including,
but not limited to, final conviction for a felony or perpetration of a common-
law fraud which has or is likely to result in material economic damage to the
Corporation; or
(E) Relocation to a geographic area without the CEO's prior consent.
(iv) Termination by Lakaro without cause. Notwithstanding anything in
this Agreement, Lakaro may terminate the CEO's employment without cause upon 90
days prior notice.
(b) Upon termination by Lakaro for any reason other than the reasons set
forth in subparagraph (i) or (ii) of paragraph (a) above, or upon termination by
the CEO for any reason set forth in subparagraph (iii) of paragraph (a) above,
then the Options shall immediately vest and become exercisable at the option of
the CEO.
11. NOTICES
-------
Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given: when delivered personally against
receipt thereof; one (1) business day after being sent by Federal Express or
similar overnight delivery; or three (3) business days after being mailed
registered or certified mail, postage prepaid, return receipt requested, to
either party at the address set forth above, or to such other address as such
party shall give by notice hereunder to the other party.
12. SEVERABILITY OF PROVISIONS
--------------------------
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
<PAGE>
13. ENTIRE AGREEMENT MODIFICATION
-----------------------------
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
14. BINDING EFFECT
--------------
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, Lakaro, its successors and assigns, and upon the
CEO and his legal representatives. This Agreement constitutes a personal
service agreement, and the performance of the CEO's obligations hereunder may
not be transferred or assigned by the CEO.
15. NON-WAIVER
----------
The failure of either party to insist upon the strict performance of any of
the terms, conditions and provisions of this Agreement shall not be construed as
a waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
16. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law. Any litigation commenced pursuant to the terms of the
Agreement shall only be prosecuted and defended in the city, county and state of
New York. Additionally, the prevailing party in any litigation shall be
entitled to an additional award of the recoupment of its attorney fees, cost and
expenses.
17. REMEDIES FOR BREACH
-------------------
The CEO understands and agrees that any breach of Sections 5, 6, 7, 8 or 9
of this Agreement by the Executive could cause irreparable damage to Lakaro and
to the Affiliates, and that monetary damages alone would not be adequate and, in
the event of such breach, Lakaro shall have, in addition to any and all remedies
of law, the right to an injunction, specific performance or other equitable
relief to prevent or redress the violation of Lakaro's rights under such
Sections.
18. HEADINGS
--------
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EMPLOYEE:
By:/s/ Morris Laster, M.D.
-----------------------
Name: Morris Laster, M.D.
LAKARO BIOPHARMACEUTICALS, INC.
<PAGE>
By: /s/ Bob Trachtenberg
-------------------------
Name: Bob Trachtenberg
Title: Secretary
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
This employment agreement (the "Agreement") is effective as of May 1, 2000 (the
"Effective Date"), by and between Keryx Biopharmaceuticals (Israel) Ltd., an
Israeli company with it principal place of business at Sha'arei Ha'ir, 216 Jaffa
Road, Jerusalem (the "Company") and Morris Laster, I.D. No. 069455137, of 40
Segal Street, Jerusalem (the "Employee").
Whereas the Company desires to continue to employ the Employee in the position
of Chief Executive Officer (the "Position");
Whereas the Employee desires have his employment continued by the Company and
fulfill the responsibilities of the Position; and
Whereas the parties desire to set forth the conditions of employment pursuant to
which the Employee will be continued to be employed by the Company;
It is hereby agreed by and between the parties as follows:
1. Preamble
The preamble to this Agreement and any attachments thereto are an integral part
of this Agreement.
2. Job Description
The Employee shall have the title of Chief Executive Officer and shall be
responsible for the overall management, direction and leadership of the Company.
He shall report directly to the Board of Directors. The description of
responsibilities set forth herein shall serve as a general statement of the
duties, responsibilities and authority of the Employee. Additional duties,
responsibilities and authority may be assigned to the Employee by the Board of
Directors from time to time in its reasonable discretion.
3. Working Hours
The Employee shall be employed by the Company on a full-time basis, namely for
not less than forty-four (44) hours per week (inclusive of meal time). The
Employee agrees that his position is considered to be a management position as
defined in the Hours of Work and Rest Law - 1951, which requires a special
measure of personal trust. Accordingly, the provisions of the Hours of Work and
Rest Law - 1951 shall not apply and the Employee shall not be entitled to
receive any additional payment for his work other than those that are set forth
in this Agreement.
<PAGE>
4.Term of Agreement
Unless terminated earlier as hereinafter provided, this Agreement shall take
effect from the Effective Date and shall remain in effect through the third
anniversary of such date, at which time it shall be automatically renewed for an
additional three year term unless either party has provided written notice of
its intent not to renew prior to the second anniversary of the Effective Date.
5. Annual Salary
5.1. The Employee's annual salary shall be as follows:
5.1.1. The Employee shall receive an annual gross salary of two
hundred and twenty five thousand dollars ($225,000), payable in New
Israeli Shekels according the representative rate of exchange in
effect each month at the time Company salaries are calculated. The
Employees salary shall be paid in twelve equal installments, monthly
in arrears.
5.1.2. On each anniversary date of this Agreement, the Employee's
annual gross salary shall be increased by an amount to be determined
by the Board of Directors, but in no event shall such increase be less
than the increase in the Israeli Cost of Living Index for the year
each anniversary date.
5.1.3 The salary set forth in paragraph 5.1.1, above, shall be
referred to as the "Global Salary". The linkage of the Global Salary
to the United States dollar is in lieu of any generally-applicable
increases, whether the statutory cost of living increase ("Tosefet
Yoker") or any other industry-wide increase applicable as the result
of collective bargaining agreements or other order of the Ministry of
Labor and Welfare (such as Tzavei Harhava). By signing this Agreement
and accepting employment pursuant to its terms, the Employee
represents that s/he will not claim any such increase.
5.1.4. The Employee shall not be entitled to receive from the Company
any salary or payment of any kind other than the Global Salary and
other payments specifically set forth in this Agreement or properly
authorized by the Board of Directors and, should the Employee be a
director of the Company at the time such other payments not
specifically included in this Agreement are made, also by the
shareholders of the Company.
<PAGE>
5.2. Other Terms of Employment
5.2.1. Bonuses: The Employee shall be entitled to receive one or more
bonuses during any calendar year in accordance with the terms set
forth in Schedule 5.2.1, attached hereto.
5.2.2. Expenses: The Employee shall be entitled, in accordance with
the Company's standard policy in effect from time to time, to be
reimbursed for expenses (Hotza'ot Eshel) incurred in Israel and abroad
in connection with Company business against receipt by the Company of
appropriate vouchers, receipts or other proof of the Employee's
expenditures.
5.2.3. Continuing Education Fund: The Employee shall be entitled to
participate in the Company's continuing education fund (Keren
Hishtalmut). The Company shall contribute an amount equal to five
percent (5%) of the Employee's Global Salary and shall deduct two and
a half percent (2.5%) of the Employee's Global Salary and transfer it
as the Employee's contribution. The Employee consents to the deduction
of this amount as his contribution to the continuing education fund.
These contributions will be calculated up to the permissible tax-
exempt salary ceiling according to the income tax regulations in
effect from time to time. If the amount of the Company's contribution
is greater than permitted by those regulations, the Employee shall not
have the right to receive the excess amount.
5.2.4. Medical License Expense: The Company shall reimburse the
Employee for expenses incurred by him in connection with the
maintenance of his medical license in the United States, including,
but not limited to, the costs of any continuing medical education
("CME") required as a condition of such license.
5.2.5. Automobile Maintenance: The Employee shall be entitled to
receive reimbursement on a before-tax basis for the upkeep and
maintenance entailed in the use of his personal automobile for
business purposes up to an annual maximum of $12,000 per year.
5.2.6. Telephone: The Company shall pay or reimburse the Employee for
the costs of a cellular telephone, a car phone and a telephone line
installed at his home and for the telephone charges billed thereto
during the term of his employment after deducting the cost of the
Employee's itemized personal calls. The Company shall reimburse the
Employee for the itemized costs of telephone calls made for the
Company's business purposes billed to any of Employee's personal
telephones. If the Employee incurs any income tax liability under
Israeli law for such payment or reimbursement, the Company will also
pay the Employee an amount equal to such tax liability (including any
tax incurred because of the payment described in this sentence.)
5.2.7. Reserve Duty: The Employee shall be entitled to receive his
full Global Salary and other payments while performing reserve duty,
provided that any amount received by the Employee from the I.D.F. or
any other source (excluding Damei Calcala) is transferred to the
Company or, in the alternative,
<PAGE>
an amount equal to that received from the I.D.F. or any other source
is deducted from the Global Salary payable to the Employee.
5.2.8. Annual Leave and Recreation Pay (Damei Havra'a): The Employee
shall be entitled to thirty (30) working days of paid annual leave
each year. It is the intention of the Company that the Employee
utilize at least ten (10) working days of paid annual leave each year.
To the extent that such ten (10) working days of paid annual leave are
not utilized by the Employee, they shall be forfeited at the end of
each calendar year. In addition, the Employee shall not be allowed to
accrue more than thirty (30) working days of annual leave except in
unusual circumstances and with the permission of the Board of
Directors of the Company. Subject to the requirement that at least ten
(10) working days of paid annual leave be utilized by the Employee in
each calendar year or be forfeited, should the Employee's annual leave
balance exceed thirty (30) working days at the end of any calendar
year, the excess number of days shall be paid out in accordance with
the provisions of the Annual Leave Law - 1951. The Company shall also
pay the Employee for five (5) days of recreation (damei havra'a) each
year in accordance with the law and the normal practice of the Company
in effect from time to time.
5.2.9. Sickness and Disability Insurance: The Employee shall be
entitled to the number of days for sick leave permitted by law.
Compensation for sick days utilized shall be paid according to his
Global Salary only upon the presentation of medical documentation as
required by the Company. The Employee shall be covered by disability
insurance that provides monthly compensation. The cost of such
insurance shall be borne by the Company. Notwithstanding the
foregoing, the Employee shall not be entitled to receive compensation
for sick leave if such compensation is covered by the Employee's
disability insurance referred to above. However, should the amounts
received by the Employee pursuant to such disability insurance be less
than the amount that is properly payable as compensation for the
Employee's available sick leave, according to the Global Salary, the
Company shall pay the difference. It is understood and agreed that
unused sick leave cannot be redeemed by the Employee. For the
avoidance of doubt, it is understood and agreed that the payments made
by the Company in consideration of sick leave covers all obligations
of the Company pursuant to the Sick Leave Law - 1976.
5.3. Pension Benefits and Severance Payments
5.3.1. The Company will pay into a Provident Fund (Kupat Gemel) (in
the meaning of paragraph 47 of the Income Tax Ordinance) in the form
of Manager's Insurance or another form according to the Employee's
choice and the Company's agreement, an amount equal to thirteen and
one third percent (13 1/3 %) from the monthly Global Salary paid to
the Employee, and the Employee will pay, on his own account, an amount
equal to five percent (5%) from that Global Salary. The Employee
agrees that the Company shall be entitled to deduct the Employee's
contribution (5%) from the Global Salary. For the avoidance of doubt,
it is clarified that under no circumstance shall the
<PAGE>
Company's contribution exceed thirteen and one third percent (13 1/3
%) of the Global Salary in any one month.
5.3.2. Five percent (5%) of the thirteen and one third percent (13 1/3
%) that the Company contributes as set forth above and the five
percent (5%) the Employee contributes, together with linkage and
interest on the contributions, will be treated as pension benefits for
the Employee or his survivors. The remaining eight and one third
percent (8 1/3 %) of the Company's contribution, together with linkage
and interest on that portion, will be utilized to pay severance
benefits to the Employee or his descendants in the event of the
termination of his employment with the Company, except in those
circumstances discussed below.
5.3.3. In the event that the Employee chooses Manager's Insurance, the
policy shall belong to the Company as long as it employs the Employee
and it makes the required payments on the policy. The payments made
into the Kupat Gemel pursuant to paragraph 5.3.1, above, shall fulfill
the Company's obligation for severance payment pursuant to the
Severance Compensation Law - 1963. Upon the termination of the
Employee's employment, for whatever reason, and upon his final
departure from the Company, the Employee or his successors shall be
entitled to receive the ownership of all rights which have accrued on
his behalf in the Kupat Gemel or the ownership of the Manager's
Insurance policy, as appropriate and subject to the provisions of
section 6, below.
5.3.4. In the event that there is a difference in the Employee's favor
between the amount to which he is entitled to receive pursuant to the
Severance Compensation Law - 1963 and the severance payment amount
(including linkage and interest) that is in the Kupat Gemel or
Manager's Insurance policy, the Company shall pay that difference. The
Company shall be obligated to pay such difference whether the
termination of the Employee's employment is at the Employee's
initiative or the Company's, except in the case of termination
pursuant to paragraphs 6.4 and 6.5, below. For the avoidance of doubt,
it is understood that in the event that the severance payment amount
(including linkage and interest) that is in the Employee's Kupat Gemel
or Manager's Insurance policy exceeds the amount to which he is
entitled to receive as severance compensation pursuant to the
Severance Compensation Law - 1963, the difference shall not be
transferred to the Employee, including to his pension account, but
shall be the property of the Company.
6. Termination of Employment
6.1. Either party may terminate the Employee's employment with the Company
without cause, or the Employee may terminate his employment for "just
cause", at any time upon three (3) month's notice. The Company shall have
the right, in its sole discretion, to require the Employee to continue
working for the Company during the notice period. For the purposes of this
Agreement, "just cause" shall mean (
<PAGE>
6.2. The Employee's employment shall be terminated by his death or
disability. (For purposes of this section, "disability" shall be deemed to
have occurred if the Employee is unable, due to any physical or mental
disease or condition, to perform his normal duties of employment for 120
consecutive days or 180 days in any twelve month period.) Should the
Employee's employment be terminated as a result of his death, the benefits
granted in paragraph 6.3, below, shall be granted instead to his lawful
heir or heirs.
6.3. In the event the Employee's employment is terminated (a) by the
Company without cause, or because of his death or disability, or (b) by the
Employee for "just cause", he shall be entitled to continue to receive his
annual salary for fifteen (15) months following his last day of actual
employment by the Company. Such amount shall be in addition to any salary
he entitled to receive during or in consideration for the notice period set
forth in paragraph 6.1, above, and any severance payment he is entitled to
receive according the provisions of the Severance Compensation Law - 1963.
In addition, the Board of Directors shall take the necessary steps so that
(a) any outstanding, but unvested, options granted to the Employee shall
vest upon the effective date of his termination; and (b) the period during
which the Employee shall be permitted to exercise such options shall be
extended to two (2) years from the effective date of his termination as
defined in the Share Option Plan governing the options in question.
6.4. Notwithstanding the foregoing, the Company may terminate the Employee
immediately and without prior notice in the following circumstances: (a) a
material breach of the Employee's obligations pursuant to paragraphs 8.8,
8.9 and 8.9 (confidentiality and non-competition); (b) a material breach by
the Employee of any other provision of this Agreement, which is not cured
by the Employee within fifteen (15) days after receiving notice thereof
from the Company containing a description of the breach or breaches alleged
to have occurred; (c) the habitual neglect or gross failure by the Employee
to adequately perform the duties of his position; or (d) any criminal
action connected to his employment with the Company or his place of
employment.
6.5. In the event that Employee's employment has been terminated in
accordance with paragraph 6.4, above, the Employee shall not be entitled to
receive any of the severance payments set forth in paragraphs 5.3.4 and
6.3, above but shall be entitled to receive any salary or bonus accrued to
the date of termination.
6.6 In the event that Employee's employment is terminated by him for "just
cause"has been terminated in accordance with paragraph 6.4, above, the
Employee shall not be entitled to receive any of the severance payments set
forth in paragraphs 5.3.4 and 6.3, above but shall be entitled to receive
any salary or bonus accrued to the date of termination
<PAGE>
7. Taxes and Other Payments
7.1. Unless otherwise specifically provided for in this Agreement, the
Company shall not be liable for the payment of taxes or other payments for
which the Employee is responsible as result of this Agreement or any other
legal provision, and the Employee shall be personally liable for such taxes
and other payments.
7.2. The Employee hereby agrees that the Company shall deduct from his
Global Salary the Employee's national insurance fees, income tax and other
amounts required by law or the terms of this Agreement. The Company shall
provide the Employee with documentation of such deductions.
8. The Obligations of the Employee
8.1. The Employee agrees to devote his entire business time, energy,
abilities and experience to the performance of his duties, effectively and
in good faith.
8.2. During the period of his employment, the Employee shall not be
employed, whether or not during regular business hours, for pay by any
other party other than the Company. The Employee must receive the prior
written consent of the Company before assuming an unpaid position outside
the Company. Notwithstanding the foregoing, the Employee may, with the
written permission of the Chairman of the Board of Directors, become a
member of the Board of Directors of another company and may accept any
compensation in connection with such position.
8.3. The Employee agrees to immediately inform the Company of any Company
issue or transaction in which the Employee has a direct or indirect
personal interest and/or where such issue or transaction could cause a
conflict of interest for the Employee in the fulfillment of his
responsibilities as an employee of the Company.
8.4. The Employee hereby gives irrevocable instructions and permission to
the Company to deduct from any amounts owed to the Employee by the Company,
including amounts payable as severance compensation, (a) any debt he has or
will have to the Company; and/or (b) any amount that was wrongfully or
mistakenly paid to him by the Company. Any such amounts to be deducted
shall be calculated in real terms as of the date of the deduction,
including linkage to cost of living index.
8.5. The Company may at its discretion and at any time apply for and
procure as owner and for its own benefit and at its own expense, insurance
on the life of the Employee ("Key Man Life Insurance") in such amounts and
in such form or forms as the Company may choose. The Employee shall
cooperate with the Company in procuring such insurance and shall, at the
Company's request, submit to such medical examinations, supply such
information and execute such documents as may be required by the insurance
company or companies to whom the Company has applied for such insurance.
Neither the Employee nor any of his dependents shall have any interest
whatsoever in any such policy or policies or in the proceeds thereof.
<PAGE>
8.6. The Employee declares that the terms and conditions of his employment
are personal and confidential and will not be disclosed by him.
8.7. The Employee declares that he is free to enter into this Agreement and
that he has no obligations of any kind to any third party that would impair
this Agreement, either as an employee or an independent contractor. The
Employee further declares that as long as he remains an employee of the
Company, he will not incur any such obligations.
8.8. The Employee agrees to keep confidential (a) all professional,
scientific, commercial, and business information; and (b) any other
information or document that comes to the Employee's knowledge in
connection with the affairs of the Company (collectively, the "Confidential
Information"), and agrees not to use or exploit the Confidential
Information or to disclose it to any third party where such use,
exploitation or disclosure in not directly related to the affairs of the
Company, unless the Company gives prior written authorization of such
disclosure.
8.9. The Employees agrees that during his employment by the Company and
thereafter he (a) will not disseminate or otherwise make use of the
Confidential Information or of other non-public information of which he
learned while working for the Company, except where such dissemination or
use is directly related to the affairs of the Company; (b) will maintain
the confidentiality of the Confidential Information; and (c) will not in
any way act to injure the reputation of the Company or any of its
affiliated companies.
8.10 The Employee understands and recognizes that his services to the
Company are special and unique. Therefore, he agrees that during the term
of this Agreement and for one (1) year after the termination for any reason
of his employment, he shall not be employed in or give any services to any
business or third party that directly competes with the business of the
Company or whose activities directly conflict with the activities of the
Company, unless the Board of Directors of the Company's parent has given
his explicit written consent prior the commencement of such employment or
the giving of such services. For the purposes of this Section 8.10, the
business of the Company means the discovery, development and
commercialization of drug candidates as described on the Company's
Registration Statement on Form S-1 filed with the Securities Exchange
Commission on May __, 2000, provided that the business of the Company shall
include any additional business activity undertaken by the Company after
the date of this Agreement.
8.11. Upon termination of his employment, the Employee agrees to assist the
Company with an orderly transition of his responsibilities and to return to
the Company any documents, information and/or materials that were given to
him or which were created by him in connection with his employment.
<PAGE>
9. Intellectual Property Rights
9.1. The Employee declares that he is aware that anything that is done by
him in the Company or in connection with the Company, whether it be an
invention, a discovery, or the development of an idea or a thing, all
within the framework of the Company's business (the Development") shall
belong to and be controlled by the Company, unless the Board of Directors
shall, in writing, direct otherwise.
9.2. The Company shall have the right to fully utilize and exploit the
Development, as it sees fit, including changing it, registering part or all
of it as a patent, whether in Israel or abroad, selling it, transferring it
to a third party, all without being required to either receive the
Employee's consent or pay the Employee any additional payment for such
Development apart from any payment he receives pursuant to this Agreement.
9.3. The Development and any subsequent intellectual property arising
therefrom shall remain the sole property of the Employer even after the
Employee's employment terminates for any reason. The termination of this
Agreement, whether due to its breach or its own terms, shall not impair the
Company's exclusive rights in the Development. Notwithstanding the
termination of this Agreement, the Board of Directors shall have the
discretion to award the Employee a cash payment in accordance with the
terms of paragraph 5.2.1, above, as a result of any Development or
subsequent intellectual property arising therefrom developed primarily by
the Employee.
9.4. The Employee may not do anything with the Development or any related
materials without the knowledge and prior consent of the Company. The
Employee declares that he neither has nor will have any rights in the
Development or its fruits and that all rights to the Development and its
fruits shall fully reside in the Company.
9.5. Even in the event that at the time of the termination of the
Employee's employment for any reason the Development has not been
completed, the Employee shall be prohibited from any continued activity in
connection with the subject of the Development, alone or in concert with
others, that is not explicitly allowed in writing by the Company. The
Company alone will be the sole owner of the uncompleted Development and
shall have the sole right to complete the Development or to take any other
action in connection with the Development.
10. Indemnification
The Company shall take whatever steps are necessary to establish a policy of
indemnifying its officers, including, but not limited to the Employee, for all
actions taken in good faith in pursuit of their duties and obligations to the
Company. Such steps shall include, but shall not necessarily be limited to, the
obtaining of an appropriate level of Directors and Officers Liability coverage.
<PAGE>
11. General
11.1. It is agreed that the provisions of this Agreement represent the full
scope of the agreement between the parties and that neither side shall be
bound by any promises, declarations, exhibits, agreements or obligations,
oral or written, that are not included in this Agreement prior to its
execution, provided that this Agreement and any binding employment
agreement between Employee and the Company's parent shall be interpreted as
a single agreement. Any changes or amendments to this Agreement must be in
writing and signed by both parties.
11.2. This Agreement shall be governed by, and construed and interpreted
under, the laws of the State of Israel. The parties agree that any legal
claim lodged by one party against the other arising from the terms of this
Agreement shall be adjudicated only by the appropriate court in Jerusalem,
Israel.
11.3. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable, and no provision shall be deemed dependent upon any other
covenant or provision unless so expressed herein.
11.4. The rights, benefits, duties and obligations under this Agreement
shall inure to, and be binding upon, the Company, its successors and
assigns, and upon the Employee and his legal representatives. This
Agreement constitutes a personal service agreement, and the performance of
the Employee's obligations hereunder may not be transferred or assigned by
the Employee.
11.5 The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith or
with any other term, condition or provision hereof, and said terms,
conditions and provisions shall remain in full force and effect. No waiver
of any term or condition of this Agreement on the part of either party
shall be effective or any purpose whatsoever unless such waiver is in
writing and signed by such party.
11.6 The headings of Sections are inserted for convenience and shall not
affect any interpretation of this Agreement.
<PAGE>
12. Notices
12.1. A notice that is sent by registered mail to a party at its address as
set forth in paragraph 12.2, below, shall be deemed received three (3) days
after its posting, and the receipt stamped by the post office shall
represent definitive evidence of the date of mailing.
12.2. The addresses of the parties for the purposes of this Agreement are:
Company:
216 Jaffa Road
Jerusalem 94383
Employee:
40 Segal Street
Jerusalem 97289
IN WITNESS WHEREOF the parties have hereunto set their hands at the place and on
the date first above written.
COMPANY EMPLOYEE
/s/ Bob Trachtenberg /s/ Morris Laster
______________________________ ______________________
By: Bob Trachtenberg Morris Laster
Secretary
<PAGE>
SCHEDULE 5.2.1
--------------
Upon the completion of any the following milestones, the Company shall pay the
Employee a cash bonus in the amount of $75,000: upon (a) the approval of an IND
filed by the Company; and/or (b) a transaction with a strategic partner having a
value (as determined in good faith by the Board of Directors) in excess of
$10,000,000; and/or (c) the closing of an initial public offering of the shares
of the Company for net proceeds to the Company, aggregating not less than
$10,000,000. The bonuses paid to the Employee in any one calendar year shall not
exceed one hundred percent (100%) of his Global Salary in effect during the
beginning of such calendar year (the "Maximum Annual Bonus"). The Board of
Directors may, but is not required, to pay to the Employee such portion of the
Maximum Annual Bonus as it may decide if, in its opinion, the Company has made a
significant advances towards the completion of any milestone. For purposes of
this Schedule 5.2.1, the achievement by the Company's parent or one of its
subsidiaries of any of the aforementioned milestones shall constitute
achievement by the Company of such milestones.
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Agreement, dated November 19, 1999, by and between Lakaro
Biopharmaceuticals, Inc. ("Lakaro"), a Delaware corporation having an address at
216 Jaffa Rd., Sha'arei Ha'ir, Jerusalem, Israel 94383 and Benjamin Corn, an
individual residing at 1 Zelda Street, Jerusalem, Israel (the "President")
WITNESSETH:
WHEREAS, the Corporation desires to employ the President as President of
Lakaro and the President desires to be employed by the Lakaro as President of
Lakaro, all pursuant to the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT DUTIES
-----------------
(a) Lakaro hereby engages and employs the President, and the President
accepts engagement and employment, as President of Lakaro, to direct, supervise
and have responsibilities for the scientific and research affairs of Lakaro and
for any other appropriate areas and tasks which the Board of Directors and/or
the Chief Executive Officer may assign to him. The President acknowledges and
agrees that the performance by the President of his duties hereunder may require
significant domestic and international travel by the President. In addition,
the President realizes that he may be required to spend a substantial amount of
time in Jerusalem, Israel.
(b) The President shall devote substantially all of his gainful time to the
discharge of his duties and responsibilities under this Agreement.
2. TERM
----
The President's employment hereunder shall be for a term of three (3) years
commencing on the Effective Date and continuing through the third anniversary of
the Effective Date (the "Initial Term"), with successive one-year renewals
thereafter (the "Renewal Terms") unless sooner terminated as hereinafter
provided, or by notice of either party not less than 90 days prior to the
expiration of each term.
3. COMPENSATION
------------
(a) As compensation for the performance of his duties on behalf of Lakaro,
the President shall be compensated as follows:
(i) Upon the next meeting of the Corporation's Board of Directors, the
Corporation will grant (the "Initial Grant") the President options (the
"Options") to purchase 130,000 shares of the Common Stock of the Corporation at
an exercise price equal to $0.15 per share (the "Exercise Price"), which options
shall be exercisable for a period of 10 years from the date of issuance. Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the total number and/or class of securities subject to such options and (ii)
the Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement under such options.
(ii) The stock options shall vest as follows: one-third on the closing
of the next equity investment in Lakaro; one-sixth six months from the date of
grant; one-sixth twelve months from the date of grant; one-sixth eighteen months
from the date of grant; and one-sixth twenty four months from the date of grant;
but immediate vesting shall occur upon a change of control of the Corporation as
described in paragraph 10(a)(iii)C below.
(iii) At the discretion of the Board of Directors, the President
shall be entitled to an annual grant of subsequent stock options each of which
shall have the same antidilution protection as described in Section 3 paragraph
(a)(i) above.
(b) Lakaro shall reimburse the President for all normal, usual and
necessary expenses incurred by the President in furtherance of the business and
affairs of Lakaro, including travel and entertainment, against receipt by Lakaro
of appropriate vouchers or other proof of the President's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may from time
to time be adopted by the Board of Directors of Lakaro.
(c) The President shall be, during the term of this Agreement, entitled to
four (4) weeks of vacation per year as well as all statutory holidays.
(d) Lakaro shall adopt as part of the Corporation's Bylaws a broad form
indemnity of all actions taken in good faith by the officers and directors of
the Corporation.
(e) Subject to Section 10(c) below, the President must be an employee of
Lakaro at the time any compensation is due in order to receive such
compensation. In addition, no options shall vest after the termination of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES
BY THE PRESIDENT AND LAKARO
---------------------------
(a) The President hereby represents and warrants to Lakaro as follows:
(i) Neither the execution and delivery of this Agreement nor the
performance by the President of his duties and other obligations hereunder
violate any statute, law, determination or award, or conflict with or constitute
a default under (whether immediately, upon the giving of notice or lapse of time
or both) any prior employment agreement, contract, or other instrument to which
the President is a party or by which he is bound.
(i) The President has the full right, power and legal capacity to
enter and deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation
of the President enforceable against him in accordance with its terms. No
approvals or consents of any persons or entities are required for the President
to execute and deliver this Agreement or perform his duties and other
obligations hereunder.
(b) Lakaro hereby represents and warrants to the President as follows:
(i) Lakaro is duly organized, validly existing and in good standing
under the laws of the State of Delaware, with all requisite corporate power and
authority to own its properties and conduct its business in the manner presently
described.
(ii) Lakaro has the full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(iii) The execution, delivery and performance by Lakaro of this
Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether immediately, or upon the giving of notice or
lapse of time or both) the certificate of incorporation or by-laws of Lakaro, or
any agreement or instrument to which Lakaro is a party or by which Lakaro or any
of its properties may be bound or affected.
5. CONFIDENTIAL INFORMATION
------------------------
(a) The President agrees that during the course of his employment and at
any time thereafter, he will not disclose or make accessible to any other
person, Lakaro's products, services and technology, both current and under
development, promotion and marketing programs, lists, trade secrets and other
confidential and proprietary business information of Lakaro or any of its
clients. The President agrees: (i) not to use any such information for himself
or others; and (ii) not to take any such material or reproductions thereof from
Lakaro's facilities at any time during his employment by Lakaro, except as
required in the President's duties to Lakaro. The President agrees immediately
to return all such material and reproductions in his possession to Lakaro upon
request and in any event upon termination of employment. Nothing in the
foregoing shall be construed to prevent the President from disclosing or using
any information which the President can show by written documentation was in the
public domain or enters into the public domain through no improper act on the
President's part or on the part of any of Lakaro's employees or was in his
possession prior to his joining Lakaro or disclosed properly to the President
after leaving Lakaro.
(b) Except with prior written authorization by Lakaro, the President agrees
not to disclose or publish any of the confidential, technical or business
information or material of Lakaro, its clients or any other party to whom Lakaro
owes an obligation of confidence, at any time during or for a period of two
years after his employment with Lakaro except in the event of involuntary no
cause termination by Lakaro or a termination by the President for cause.
6. NON-COMPETITION
---------------
(a) The President understands and recognizes that his services to Lakaro
are special and unique and agrees that, during the term of this Agreement, and
for a period of 12 months from the date of termination of his employment
hereunder, he shall not in any manner, directly or indirectly, on behalf of
himself or any person, firm, partnership, joint venture, corporation or other
business entity ("Person"), enter into or engage in any business directly
competitive with Lakaro's business, either as an individual for his own account,
or as a partner, joint venturer, President, agent, consultant, salesperson,
officer, director or shareholder of a Person operating or intending to operate
within the area that Lakaro is, at the date of termination, conducting its
business (the "Restricted Businesses"); provided, however, that nothing herein
will preclude the President from holding one percent (1%) or less of the stock
of any publicly traded company or from holding a position with a Person who does
not engage in a business directly competitive with the Restrictive Businesses so
long as the President works in a division of such Person which carries on a bona
fide business which is not directly competitive with the Restricted Businesses.
(b) For a period of 12 months after the termination of this Agreement, the
President shall not interfere with or disrupt or attempt to disrupt Lakaro's
business relationship with any of its customers, or solicit any of the employees
of Lakaro.
(c) In the event that the President breaches any provisions of this Section
6 or there is a threatened breach, then, in addition to any other rights which
Lakaro may have, Lakaro shall be entitled, without the posting of a bond or
other security, to injunctive relief to enforce the restrictions contained
herein. In the event that an actual proceeding is brought in equity to enforce
the provisions of this Section 6, the President shall not argue as a defense
that there is an adequate remedy at law nor shall Lakaro be prevented from
seeking any other remedies which may be available.
7. OWNERSHIP OF PROPRIETARY INFORMATION
------------------------------------
(a) The President agrees that all information that has been created,
discovered or developed by Lakaro, its subsidiaries, affiliates, successors or
assigns (collectively, the "Affiliates") (including, without limitation,
information relating to the development of Lakaro's business created,
discovered, developed or made know to Lakaro or the Affiliates by President
during the Term and information relating to Lakaro's customers, suppliers,
consultants, and licensees) and/or in which property rights have been assigned
or otherwise conveyed to Lakaro or the Affiliates, shall be the sole property of
Lakaro or the Affiliates, as applicable, and Lakaro or the Affiliates, as the
case may be, shall be the sole owner of all patents, copyrights and other rights
in connection therewith, including but not limited to the right to make
application for statutory protection. All of the aforementioned information is
hereinafter called "Proprietary Information." By way of illustration, but not
limitation, Proprietary Information includes trade secrets, processes,
discoveries, structures, inventions, designs, ideas, works of authorship,
copyrightable works, trademarks, copyrights, formulas, data, know-how, show-how,
improvements, inventions, product concepts, techniques, information or
statistics contained in, or relating to, marketing plans, strategies, forecasts,
blueprints, sketches, records, notes, devices, drawings, customer lists, patent
applications, continuation applications, continuation-in-part appications, file
wrapper continuation applications and divisional applications and information
about Lakaro's or the Affiliates' employees and/or consultants (including,
without limitation, the compensation, job responsibility and job performance of
such employees and/or consultants).
(b) The President further agrees that at all times, both during the
Term and after the termination of this Agreement, he will keep in confidence and
trust all Proprietary Information, and he will not use or disclose any
Proprietary Information or anything directly relating to it without the written
consent of Lakaro or the Affiliates, as appropriate, except as may be necessary
in the ordinary course of performing his duties hereunder and except for
academic, non-commercial research purposes with the prior written approval of
the Board of Directors. The President acknowledges that the Proprietary
Information constitutes a unique and valuable asset of Lakaro and each Affiliate
acquired at great time and expense, which is secret and confidential and which
will be communicated to President, if at all, in confidence in the course of his
performance of his duties hereunder, and that any disclosure or other use of the
Proprietary Information other than for the sole benefit of Lakaro or the
Affiliates would be wrongful and could cause irreparable harm to Lakaro or the
Affiliates, as the case may be.
Notwithstanding the foregoing, the parties agree that, at all such
times, President is free to use (i) information in the public domain not as a
result of a breach of this Agreement, (ii) information lawfully received from a
third party and (iii) President's own skill, knowledge, know-how and experience
to whatever extent and in whatever way he wishes, in each case consistent with
his obligations as President and that, at all times, President is free to
conduct any non-commercial research not relating to Lakaro's business.
8. DISCLOSURE AND OWNERSHIP OF INVENTIONS
--------------------------------------
(a) During the Term, President agrees that he will promptly disclose
to Lakaro, or any persons designated by Lakaro, all improvements, inventions,
designs, ideas, works of authorship, copyrightable works, discoveries,
trademarks, copyrights, trade secrets, formulas, processes, structures, product
concepts, marketing plans, strategies, customer lists, information about
Lakaro's or the Affiliates' employees and/or consultants (including, without
limitation, job performance of such employees and/or consultants), techniques,
blueprints, sketches, records, notes, devices, drawings, know-how, data, whether
or not patentable, patent applications, continuation applications, continuation-
in-part applications, file wrapper continuation applications and divisional
applications, made or conceived or reduced to practice or learned by him, either
alone or jointly with others, during the Term (all said improvements,
inventions, designs, ideas, works of authorship, copyrightable works,
discoveries, trademarks, copyrights, trade secrets, formulas, processes,
structures, product concepts, marketing plans, strategies, customer lists,
information about Lakaro's or the Affiliates' employees and/or consultants,
techniques, blueprints, sketches, records, notes, devices, drawings, know-how,
data, patent applications, continuation applications, continuation-in-part
applications, file wrtapper continuation applications and divisional
applications shall be collectively hereinafter called "Inventions").
(b) The President agrees that all Inventions shall be the sole
property of Lakaro to the maximum extent permitted by applicable law and to the
extent permitted by law shall be "works made for hire" as that term is defined
in the United States Copyright Act (17 USCA, Section 101). Lakaro shall be the
sole owner of all patents, copyrights, trade secret rights, and other
intellectual property or other rights in connection therewith. President hereby
assigns to Lakaro all right, title and interest he may have or acquire in all
Inventions. President further agrees to assist Lakaro in every proper way (but
at Lakaro's expense) to obtain and from time to time enforce patents, copyrights
or other rights on said Inventions in any and all countries, and to that end the
President will execute all documents necessary:
(i) to apply for, obtain and vest in the name of Lakaro alone (unless
Lakaro otherwise directs) letters patent, copyrights or other analogous
protection in any country throughout the world and when so obtained or vested to
renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous protection.
(c) The President's obligation to assist Lakaro in obtaining and
enforcing patents and copyrights for the Inventions in any and all countries
shall continue beyond the Term, but Lakaro agrees to compensate the President at
his normal and usual rate after the expiration of the Term for time actually
spent by the President at Lakaro's request on such assistance.
9. NON-SOLICITATION
----------------
During the Term, and for 12 months thereafter, President shall not,
directly or indirectly, without the prior written consent of Lakaro:
(a) solicit or induce any employee of Lakaro or any Affiliate to leave
the employ of Lakaro or any Affiliate or hire for any purpose any employee of
Lakaro or any Affiliate or any employee who has left the employment of Lakaro or
any Affiliate within six months of the termination of said employee's employment
with Lakaro; or
(b) solicit or accept employment or be retained by any party who, at
any time during the Term, was a customer or supplier of Lakaro or any Affiliate
where his position will be related to the business of Lakaro; or
(c) solicit or accept the business of any customer or supplier of
Lakaro or any Affiliate with respect to products similar to those supplied by
Lakaro.
10. TERMINATION
-----------
(a) This President's employment hereunder shall begin on the Effective Date
and shall continue for the period set forth in Section 2 hereof unless sooner
terminated upon the first to occur of the following events:
(i) (A) The death of the President; or
(B) the total disability of the President.
(ii) Termination by the Board of Directors of Lakaro for just cause.
Any of the following actions by the President shall constitute just cause:
(A) Material breach by the President of Sections 5, 6, 7,
8, or 9 of this Agreement; or
(B) Material breach by the President of any provision of
this Agreement other than Sections 5, 6, 7, 8 or 9
which is not cured by the President within 30 days of
notice from Lakaro; or in the event the breach is not
curable within 30 days; the commencement of action(s)
to cure within said 30 days and the diligent pursuit of
the cure thereafter, provided such breach may be
completely cured; or
(C) Any action by the President constituting gross
negligence, recklessness or willful misconduct in
respect of the President's obligation to Lakaro which
has or is likely to result in material, economic damage
to Lakaro.
(iii) Termination by the President for just cause. Any of the
following actions or omissions by Lakaro shall constitute just cause.
(A) Material breach by Lakaro of any provision of this Agreement
which is not cured by Lakaro within 30 days of notice thereof from the
President; or
(B) A failure to elect or reelect the President to the office of
President of Lakaro or other change by Lakaro of the President's
function, duties or responsibilities such that the President is no
longer the highest ranking Officer of Lakaro; or
(C) A "change in control," which shall mean a merger or
consolidation in which either more than 50% of the
voting power of Lakaro is transferred or Lakaro is not
the surviving entity, or sale or other disposition of
all or substantially all the assets of Lakaro; or
(D) Termination of the President's employment other than for
serious, willful misconduct in respect of the President's obligations
to the Corporation, including, but not limited to, final conviction for
a felony or perpetration of a common-law fraud which has or is likely
to result in material economic damage to the Corporation; or
(E) Relocation to a geographic area without the President's
prior consent.
(iv) Termination by Lakaro without cause. Notwithstanding anything in
this Agreement, Lakaro may terminate the President's employment without cause
upon 90 days prior notice.
(b) Upon termination by Lakaro for any reason other than the reasons set
forth in subparagraph (i) or (ii) of paragraph (a) above, or upon termination by
the President for any reason set forth in subparagraph (iii) of paragraph (a)
above, then the Options shall immediately vest and become exercisable at the
option of the President.
11. NOTICES
-------
Any notice or other communication under this Agreement shall be in writing
and shall be deemed to have been given: when delivered personally against
receipt thereof; one (1) business day after being sent by Federal Express or
similar overnight delivery; or three (3) business days after being mailed
registered or certified mail, postage prepaid, return receipt requested, to
either party at the address set forth above, or to such other address as such
party shall give by notice hereunder to the other party.
12. SEVERABILITY OF PROVISIONS
--------------------------
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.
13. ENTIRE AGREEMENT MODIFICATION
-----------------------------
This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
14. BINDING EFFECT
--------------
The rights, benefits, duties and obligations under this Agreement shall
inure to, and be binding upon, Lakaro, its successors and assigns, and upon the
President and his legal representatives. This Agreement constitutes a personal
service agreement, and the performance of the President's obligations hereunder
may not be transferred or assigned by the President.
15. NON-WAIVER
----------
The failure of either party to insist upon the strict performance of any of
the terms, conditions and provisions of this Agreement shall not be construed as
a waiver or relinquishment of future compliance therewith, and said terms,
conditions and provisions shall remain in full force and effect. No waiver of
any term or condition of this Agreement on the part of either party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
16. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to principles
of conflicts of law. Any litigation commenced pursuant to the terms of the
Agreement shall only be prosecuted and defended in the city, county and state of
New York. Additionally, the prevailing party in any litigation shall be
entitled to an additional award of the recoupment of its attorney fees, cost and
expenses.
17. REMEDIES FOR BREACH
-------------------
The President understands and agrees that any breach of Sections 5, 6, 7, 8
or 9 of this Agreement by the Executive could cause irreparable damage to Lakaro
and to the Affiliates, and that monetary damages alone would not be adequate
and, in the event of such breach, Lakaro shall have, in addition to any and all
remedies of law, the right to an injunction, specific performance or other
equitable relief to prevent or redress the violation of Lakaro's rights under
such Sections.
18. HEADINGS
--------
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EMPLOYEE:
By:/s/ Benjamin Corn
-----------------
Name: Benjamin Corn
LAKARO BIOPHARMACEUTICALS, INC.
By:/s/ Robert Trachenberg
----------------------
Name: Robert Trachenberg Title: Secretary
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
This employment agreement (the "Agreement") is effective as of July 15, 1999
(the "Effective Date"), by and between B.R.T. Biopharmaceuticals, Ltd., an
Israeli company with it principal place of business at Sha'arei Ha'ir, 216 Jaffa
Road, Jerusalem (the "Company") and Benjamin Corn, of Rehov Zelda 1, Jerusalem
(the "Employee").
Whereas the Company desires to employ the Employee in the position of President
(the "Position");
Whereas the Employee desires to be employed by the Company and fulfill the
responsibilities of the Position; and
Whereas the parties desire to set forth the conditions of employment pursuant to
which the Employee will be employed by the Company;
It is hereby agreed by and between the parties as follows:
1. Preamble
The preamble to this Agreement and any attachments thereto are an integral part
of this Agreement.
2. Job Description
The Employee shall be responsible for working with the Chief Executive Officer
to promote the research and development and business development activities of
the Company. He shall report directly to the Chief Executive Officer. The
description of responsibilities set forth herein shall serve as a general
statement of the duties, responsibilities and authority of the Employee.
Additional duties, responsibilities and authority may be assigned to the
Employee by the Chief Executive Officer from time to time in his discretion.
3. Working Hours
The Employee shall be employed by the Company on a full-time basis, namely for
not less than forty-four (44) hours per week (inclusive of meal time). The
Employee agrees that his position is considered to be a management position as
defined in the Hours of Work and Rest Law - 1951, which requires a special
measure of personal trust. Accordingly, the provisions of the Hours of Work and
Rest Law - 1951 shall not apply and the Employee shall not be entitled to
receive any additional payment for his work other than those that are set forth
in this Agreement.
<PAGE>
4. Term of Agreement
This Agreement shall take effect from the Effective Date and shall remain in
effect through the third anniversary of such date, unless it is earlier
terminated as hereinafter provided.
5. Annual Salary
5.1. The Employee's annual salary shall be as follows:
5.1.1. The Employee shall receive an annual gross salary of one
hundred and fifty thousand dollars ($150,000), payable
in New Israeli Shekels according the representative rate
of exchange in effect each month at the time Company
salaries are calculated. The Employees salary shall be
paid in twelve equal installments, monthly in arrears.
5.1.2. On each anniversary date of this Agreement, the
Employee's annual gross salary shall be increased by an
amount to be determined by the Board of Directors and
the Chief Executive Officer.
5.1.3 The salary set forth in paragraph 5.1.1, above, shall be
referred to as the "Global Salary". The linkage of the
Global Salary to the United States dollar is in lieu of
any generally-applicable increases, whether the
statutory cost of living increase ("Tosefet Yoker") or
any other industry-wide increase applicable as the
result of collective bargaining agreements or other
order of the Ministry of Labor and Welfare (such as
Tzavei Harhava). By signing this Agreement and accepting
employment pursuant to its terms, the Employee
represents that s/he will not claim any such increase.
5.1.4. The Employee shall not be entitled to receive from the
Company any salary or payment of any kind other than the
Global Salary and other payments specifically set forth
in this Agreement or properly authorized by the Board of
Directors and, should the Employee be a director of the
Company at the time such other payments not specifically
included in this Agreement are made, by the shareholders
of the Company.
<PAGE>
5.2. Other Terms of Employment
5.2.1. Bonuses: The Employee shall be eligible to receive one
or more bonuses during any calendar year in the
discretion of the Chief Executive Officer, acting in
consultation with the Board of Directors.
5.2.2. Expenses: The Employee shall be entitled, in accordance
with the Company's standard policy in effect from time
to time, to be reimbursed for expenses (Hotza'ot Eshel)
incurred in Israel and abroad in connection with Company
business against receipt by the Company of appropriate
vouchers, receipts or other proof of the Employee's
expenditures.
5.2.3. Continuing Education Fund: The Employee shall be
entitled to participate in the Company's continuing
education fund (Keren Hishtalmut). The Company shall
contribute an amount equal to five percent (5%) of the
Employee's Global Salary and shall deduct two and a half
percent (2.5%) of the Employee's Global Salary and
transfer it as the Employee's contribution. The Employee
consents to the deduction of this amount as his
contribution to the continuing education fund. These
contributions will be calculated up to the permissible
tax-exempt salary ceiling according to the income tax
regulations in effect from time to time. If the amount
of the Company's contribution is greater than permitted
by those regulations, the Employee shall not have the
right to receive the excess amount.
5.2.4. Reserve Duty: The Employee shall be entitled to receive
his full Global Salary and other payments while
performing reserve duty, provided that any amount
received by the Employee from the I.D.F. or any other
source (excluding Damei Calcala) is transferred to the
Company or, in the alternative, an amount equal to that
received from the I.D.F. or any other source is deducted
from the Global Salary payable to the Employee.
5.2.5. Annual Leave and Recreation Pay (Damei Havra'a): The
Employee shall be entitled to fifteen (15) working days
of paid annual leave each year. The Employee shall not
be allowed to accrue more than thirty (30) working days
of annual leave except in unusual circumstances and with
the permission of the Company. Should the Employee's
annual leave balance exceed thirty (30) days at the end
of any calendar year, the excess number of days shall be
paid out in accordance with the provisions of the Annual
Leave Law - 1951. The Company shall also pay the
Employee for five (5) days of recreation (damei havra'a)
each year in accordance with the law and the normal
practice of the Company in effect from time to time.
5.2.6. Sickness and Disability Insurance: The Employee shall be
entitled to the number of days for sick leave permitted
by law. Compensation for sick days utilized shall be
paid according to his Global Salary only upon the
presentation of medical documentation as required by the
<PAGE>
Company. The Employee shall be covered by disability
insurance that provides monthly compensation. The cost
of such insurance shall be borne by the Company.
Notwithstanding the foregoing, the Employee shall not be
entitled to receive compensation for sick leave if such
compensation is covered by the Employee's disability
insurance referred to above. However, should the amounts
received by the Employee pursuant to such disability
insurance be less than the amount that is properly
payable as compensation for the Employee's available
sick leave, according to the Global Salary, the Company
shall pay the difference. It is understood and agreed
that unused sick leave cannot be redeemed by the
Employee. For the avoidance of doubt, it is understood
and agreed that the payments made by the Company in
consideration of sick leave covers all obligations of
the Company pursuant to the Sick Leave Law - 1976.
5.3. Pension Benefits and Severance Payments
5.3.1. The Company will pay into a Provident Fund (Kupat Gemel)
(in the meaning of paragraph 47 of the Income Tax
Ordinance) in the form of Manager's Insurance or another
form according to the Employee's choice and the
Company's agreement, an amount equal to thirteen and one
third percent (13 1/3%) from the monthly Global Salary
paid to the Employee, and the Employee will pay, on his
own account, an amount equal to five percent (5%) from
that Global Salary. The Employee agrees that the Company
shall be entitled to deduct the Employee's contribution
(5%) from the Employee's salary. For the avoidance of
doubt, it is clarified that under no circumstance shall
the Company's contribution exceed thirteen and one third
percent (13 1/3%) of the Global Salary in any one
month.
5.3.2. Five percent (5%) of the thirteen and one third percent
(13 1/3%) that the Company contributes as set
forth above and the five percent (5%) the Employee
contributes, together with linkage and interest on the
contributions, will be treated as pension benefits for
the Employee or his survivors. The remaining eight and
one third percent (8 1/3%) of the Company's
contribution, together with linkage and interest on that
portion, will be utilized to pay severance benefits to
the Employee or his descendants in the event of the
termination of his employment with the Company, except
in those circumstances discussed below.
5.3.3. In the event that the Employee chooses Manager's
Insurance, the policy shall belong to the Company as
long as it employs the Employee and it makes the
required payments on the policy. The payments made into
the Kupat Gemel pursuant to paragraph 5.3.1, above,
shall fulfill the Company's obligation for severance
payment pursuant to the Severance Compensation Law -
1963. Upon the termination of the Employee's employment,
for whatever reason, and upon his final departure from
the Company, the Employee or his descendants shall be
entitled to receive the ownership of all rights which
have accrued on his behalf in the Kupat Gemel or
the ownership of the Manager's
<PAGE>
Insurance policy, as appropriate and subject to the
provisions of section 6, below.
5.3.4. In the event that there is a difference in the
Employee's favor between the amount to which he is
entitled to receive pursuant to the Severance
Compensation Law - 1963 and the severance payment amount
(including linkage and interest) that is in the Kupat
Gemel or Manager's Insurance policy, the Company shall
pay that difference. The Company shall be obligated to
pay such difference whether the termination of the
Employee's employment is at the Employee's initiative or
the Company's, except in the case of termination
pursuant to paragraphs 6.3 and 6.4, below. For the
avoidance of doubt, it is understood that in the event
that the severance payment amount (including linkage and
interest) that is in the Employee's Kupat Gemel or
Manager's Insurance policy exceeds the amount to which
he is entitled to receive as severance compensation
pursuant to the Severance Compensation Law - 1963, the
difference shall not be transferred to the Employee,
including to his pension account, but shall be the
property of the Company.
6. Termination of Employment
6.1. Either party may terminate the Employee's employment with the
Company without cause at any time upon three (3) month's notice.
The Company shall have the right, in its sole discretion, to
require the Employee to continue working for the Company during
the notice period. If the Employer terminates the Employee
without cause pursuant to this section, the Board of Directors
shall take the necessary steps so that (a) any outstanding, but
unvested, options granted to the Employee shall vest upon the
effective date of his termination; and (b) the period during
which the Employee shall be permitted to exercise such options
shall be extended to two (2) years from the effective date of
his termination as defined in the Share Option Plan governing
the options in question.
6.2. The Employee's employment shall be terminated by his death or
disability. (For purposes of this section, "disability" shall be
deemed to have occurred if the Employee is unable, due to any
physical or mental disease or condition, to perform his normal
duties of employment for 120 consecutive days or 180 days in any
twelve month period.) In such an event, he shall be entitled to
continue to receive his annual salary for three (3) months
following his last day of actual employment by the Company. Such
amount shall be in addition to any severance payment he is
entitled to receive according the provisions of the Severance
Compensation Law - 1963. In addition, the Board of Directors
shall take the necessary steps so that (a) any outstanding, but
unvested, options granted to the Employee shall vest upon the
effective date of his termination; and (b) the period during
which the Employee shall be permitted to exercise such options
shall be extended to two (2) years from the effective date of
his termination as defined in the Share Option Plan governing
the options in question. Should the Employee's employment be
terminated as a
<PAGE>
result of his death, the benefits granted herein, shall be
granted instead to his lawful heir or heirs.
6.3. Notwithstanding the foregoing, the Company may terminate the
Employee immediately and without prior notice in the following
circumstances: (a) a material breach of the Employee's
obligations pursuant to paragraphs 8.8, 8.9 and 8.10
(confidentiality and non-competition); (b) a material breach by
[lie Employee of any other provision of this Agreement, which is
not cured by the Employee within fifteen (15) days after
receiving notice thereof from the Company containing a
description of the breach or breaches alleged to have occurred;
(c) the habitual neglect or gross failure by the Employee to
adequately perform the duties of his position; (d) any act of
moral turpitude or criminal action connected to his employment
with the Company or his place of employment; or (e) the
Employee's refusal to comply with or his violation of lawful
instructions of the Chief Executive Officer or the Board of
Directors.
6.4. In the event that Employee's employment has been terminated in
accordance with paragraph 6.3, above, the Employee shall not be
entitled to receive am of the severance payments set forth in
paragraphs 5.3.4 and 6.2, above.
7. Taxes and Other Payments
7.1. Unless otherwise specifically provided for in this Agreement,
the Company shall not be liable for the payment of taxes or
other payments for which the Employee is responsible as result
of this Agreement or any other legal provision, and the Employee
shall be personally liable for such taxes and other payments.
7.2. The Employee hereby agrees that the Company shall deduct from
his Global Salary the Employee's national insurance fees, income
tax and other amounts required by law or the terms of this
Agreement. The Company shall provide the Employee with
documentation of such deductions.
8. The Obligations of the Employee
8.1. The Employee agrees to devote his entire business time, energy,
abilities and experience to the performance of his duties,
effectively and in good faith.
8.2. During the period of his employment, the Employee shall not be
employed, whether or not during regular business hours, for pay
by any other party other than the Company, except for teaching
activities approved by the Chief Executive Officer. The Employee
must receive the prior written consent of the Company before
assuming an unpaid position outside the Company. Notwithstanding
the foregoing, the Employee may, with the written permission of
the Chairman of the Board of Directors, become a member of the
Board of Directors of another company and may accept any
compensation in connection with such position.
<PAGE>
8.3. The Employee agrees to immediately inform the Company of any
Company issue or transaction in which the Employee has a direct
or indirect personal interest and/or where such issue or
transaction could cause a conflict of interest for the Employee
in the fulfillment of his responsibilities as an employee of the
Company.
8.4. The Employee hereby gives irrevocable instructions and
permission to the Company to deduct from any amounts owed to the
Employee by the Company, including amounts payable as severance
compensation, (a) any debt he has or will have to the Company;
and/or (b) any amount that was wrongfully or mistakenly paid to
him by the Company. Any such amounts to be deducted shall be
calculated in real terms as of the date of the deduction,
including linkage to cost of living index.
8.5. The Company may at its discretion and at any time apply for and
procure as owner and for its own benefit and at its own expense,
insurance on the life of the Employee ("Key Man Life Insurance")
in such amounts and in such form or forms as the Company may
choose. The Employee shall cooperate with the Company in
procuring such insurance and shall, at the Company's request,
submit to such medical examinations, supply such information and
execute such documents as may be required by the insurance
company or companies to whom the Company has applied for such
insurance. Neither the Employee nor any of his dependents shall
have any interest whatsoever in any such policy or policies, or
in the proceeds thereof.
8.6. The Employee declares that the terms and conditions of his
employment are personal and confidential and will not be
disclosed by him.
8.7. The Employee declares that he is free to enter into this
Agreement and that he has no obligations of any kind to any
third party that would impair this Agreement, either as an
employee or an independent contractor. The Employee further
declares that as long as he remains an employee of the Company,
he will not incur any such obligations.
8.8. The Employee agrees to keep confidential (a) all professional,
scientific, commercial, and business information; and (b) any
other information or document that comes to the Employee's
knowledge in connection with the affairs of the Company
(collectively, the "Confidential Information"), and agrees not
to use or exploit the Confidential Information or to disclose it
to any third party where such use, exploitation or disclosure in
not directly related to the affairs of the Company, unless the
Company gives prior written authorization of such disclosure.
8.9. The Employees agrees that during his employment by the Company
and thereafter he (a) will not disseminate or otherwise make use
of the Confidential Information or of other non-public
information of which he learned while working for the Company,
except where such dissemination or use is directly related to
the affairs of the Company; (b) will maintain the
confidentiality of the Confidential Information; and (c) will
not in any way act to injure the reputation of the Company or
any of its affiliated companies.
<PAGE>
8.10 The Employee understands and recognizes that his services to the
Company are special and unique. Therefore, he agrees that during
the term of this Agreement and for one (1) year after the
termination for any reason of his employment, he shall not be
employed in or give any services to any business or third party
that competes with the Company or whose activities conflict with
the activities of the Company, unless the Chairman of the Board
of Directors has given his explicit written consent prior the
commencement of such employment or the giving of such services.
8.11. Upon termination of his employment, the Employee agrees to
assist the Company with an orderly transition of his
responsibilities and to return to the Company any documents,
information and/or materials that were given to him or which
were created by him in connection with his employment.
9. Intellectual Property Rights
9.1. The Employee declares that he is aware that anything that is
done by him in the Company or in connection with the Company,
whether it be an invention, a discovery, or the development of
an idea or a thing, all within the framework of the Company's
business (the "Development") shall belong to and be controlled
by the Company, unless the Board of Directors shall, in writing,
direct otherwise.
9.2. The Company shall have the right to fully utilize and exploit
the Development, as it sees fit, including changing it,
registering part or all of it as a patent, whether in Israel or
abroad, selling it, transferring it to a third party, all
without being required to either receive the Employee's consent
or pay the Employee any additional payment for such Development
apart from any payment he receives pursuant to this Agreement.
9.3. The Development and any subsequent intellectual property arising
therefrom shall remain the sole property of the Employer even
after the Employee's employment terminates for any reason. The
termination of this Agreement, whether due to its breach or its
own terms, shall not impair the Company's exclusive rights in
the Development. Notwithstanding the termination of this
Agreement, the Board of Directors shall have the discretion to
award the Employee a cash payment in accordance with the terms
of paragraph 5.2.1, above, as a result of any Development or
subsequent intellectual property arising therefrom developed
primarily by the Employee.
9.4. The Employee may not do anything with the Development or any
related materials without the knowledge and prior consent of the
Company. The Employee declares that he neither has nor will have
any rights in the Development or its fruits and that all rights
to the Development and its fruits shall fully reside in the
Company.
9.5. Even in the event that at the time of the termination of the
Employee's employment for any reason the Development has not
been completed, the Employee shall be prohibited from any
continued activity in connection with
<PAGE>
the subject of the Development, alone or in concert with others
that is not explicitly allowed in writing by the Company. The
Company alone will be the sole owner of the uncompleted
Development and shall have the sole right to complete the
Development or to take any other action in connection with the
Development.
10. Indemnification
The Company shall take whatever steps are necessary to establish a policy of
indemnifying its officers, including, but not limited to the Employee, for all
actions taken in good faith in pursuit of their duties and obligations to the
Company. Such steps shall include, but shall not necessarily be limited to, the
obtaining of an appropriate level of Directors and Officers Liability coverage.
11. General
11.1. It is agreed that the provisions of this Agreement represent the
full scope of the agreement between the parties and that neither
side shall be bound by any promises, declarations, exhibits,
agreements or obligations, oral or written, that are not
included in this Agreement prior to its execution. Any changes
or amendments to this Agreement must be in writing and signed by
both parties.
11.2. This Agreement shall be governed by, and construed and
interpreted under, the laws of the State of Israel. The parties
agree that any legal claim lodged by one party against the other
arising from the terms of this Agreement shall be adjudicated
only by the appropriate court in Jerusalem, Israel.
11.3. If any provision of this Agreement shall be declared by a court
of competent jurisdiction to be invalid, illegal or incapable of
being enforced in whole or in part, the remaining conditions and
provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable, and no provision shall be
deemed dependent upon any other covenant or provision unless so
expressed herein.
11.4. The rights, benefits, duties and obligations under this
Agreement shall inure to, and be binding upon, the Company, its
successors and assigns, and upon the Employee and his legal
representatives. This Agreement constitutes a personal service
agreement, and the performance of the Employee's obligations
hereunder may not be transferred or assigned by the Employee.
11.5 The failure of either party to insist upon the strict
performance of any of the terms, conditions and provisions of
this Agreement shall not be construed as a waiver or
relinquishment of future compliance therewith or with any other
term, condition or provision hereof, and said terms, conditions
and provisions shall remain in full force and effect. No waiver
of any term or condition of this Agreement on the part of either
party shall be effective or ally purpose whatsoever unless such
waiver is in writing and signed by such party.
11.6 The headings of Sections are inserted for convenience and shall
not affect any interpretation of this Agreement.
<PAGE>
12. Notices
12.1. A notice that is sent by registered mail to a party at its
address as set forth in paragraph 12.2, below, shall be deemed
received three (3) days after its posting, and the receipt
stamped by the post office shall represent definitive evidence
of the date of mailing.
12.2. The addresses of the parties for the purposes of this Agreement
are:
Partee Ltd.:
216 Jaffa Road
Jerusalem 94383
Employee:
Rehov Zelda I
Jerusalem
IN WITNESS WHEREOF the parties have hereunto set their hands at the place and on
the date first above written.
B.R.T. Biopharmaceuticals, Ltd.
By
/s/ Robert Trachtenberg /s/ Benjamin Corn
- ------------------------------- -------------------------------------
Secretary Employee
<PAGE>
EXHIBIT 10.6
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
CHILDREN'S MEDICAL CENTER CORPORATION
AND
LAKARO BIOPHARMACEUTICALS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Articles Page
<S> <C>
I. Definitions 2
II. Grant 4
III. Due Diligence 6
IV. Royalties and Other Payments 8
V. Reports and Records 10
VI. Patent Prosecution 12
VII. Infringement 12
VIII. Indemnification and Insurance Provisions 14
IX. Export Controls 15
X. Non-Use of Names 16
XI. Assignment 16
XII. Dispute Resolution and Arbitration 16
XIII. Term and Termination 17
XIV. Payments, Notices and Other Communications 18
XV. General Provisions 19
Appendix 1. Patent Rights
Appendix 2. Sponsored Research Agreement
</TABLE>
<PAGE>
EXHIBIT 10.6
EXCLUSIVE LICENSE AGREEMENT
This Agreement is made and entered into as of the date last written below
(the "Effective Date"), by and between CHILDREN'S MEDICAL CENTER CORPORATION, a
charitable corporation duly organized and existing under the laws of the
Commonwealth of Massachusetts and having its principal office at 300 Longwood
Avenue, Boston, Massachusetts, 02115, U.S.A. (hereinafter referred to as
"CMCC"), and Lakaro BIOPHARMACEUTICALS, INC., organized and existing under the
laws of Delaware and having its principal office at 216 Jaffa Road, Jerusalem
94383 Israel (hereinafter referred to as "Licensee").
WHEREAS, CMCC is the owner of CMCC 547 "Short peptides which selectively
modulate the activity of protein tyrosine kinases" by Dr. Shmuel Ben-Sasson
(the "547 Invention"), and CMCC and YISSUM RESEARCH DEVELOPMENT COMPANY OF THE
HEBREW UNIVERSITY OF JERUSALEM ("YISSUM") are the co-owners of CMCC 590 "Short
Peptides which selectively modulate the activity of serine/threonine kinases",
also by Dr. Shmuel Ben-Sasson (the "590 Invention"), and YISSUM has granted to
CMCC the right to grant licenses under YISSUM's interest in the 590 Invention.
The 547 Invention and the 590 Invention will be referred to hereinafter as the
"Background Patent Rights");
WHEREAS, YISSUM and Licensee have entered into an agreement of even date
herewith through which Licensee will fund YISSUM to conduct further research
related to the subject matter of the Background Patent Rights, to be performed
at Hebrew University under the supervision of Dr. Ben-Sasson, with a subcontract
for research to be performed at Children's Hospital (the "Sponsored Research
Agreement") attached hereto as Appendix 2 and incorporated herein by reference,
and YISSUM has agreed that any new inventions arising out of said research
("Research Patent Rights") shall be subject to the terms of this License
Agreement;
WHEREAS, CMCC has the right to grant exclusive licenses under certain
Patent Rights (as that term shall be defined hereafter), subject only to a
royalty-free, nonexclusive license heretofore granted to the United States
Government for those patents developed with U.S. Government funding;
WHEREAS, CMCC and YISSUM desire to have the Patent Rights utilized in the
public interest and CMCC is willing to grant a license to Licensee thereunder on
the terms and conditions described herein;
WHEREAS, Licensee has represented to CMCC that Licensee is ready, willing
and able to engage in the commercial development, production, manufacture,
marketing and sale of Licensed Products (as that term shall be defined
hereafter) and/or the use of Licensed Processes (as that term shall be defined
hereafter) and that it shall commit itself to a thorough, vigorous and diligent
program of exploiting the Patent Rights in accordance with the terms and
conditions described herein so that public utilization shall result therefrom;
and
<PAGE>
WHEREAS, Licensee desires to obtain an exclusive license under the Patent
Rights on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
For the purpose of this Agreement, the following words and phrases shall
have the meanings set forth below:
A. "Affiliate" shall mean any company or other legal entity controlling,
controlled by or under common control with Licensee. For purposes of the
definition of "Affiliate" the term "control" shall mean: (i) in the case of a
corporate entity, the direct or indirect ownership of at least a majority of the
stock or participating shares entitled to vote for the election of directors of
that entity; (ii) in the case of a partnership, the power customarily held by a
general partner to direct the management and policies of such partnership; or
(iii) in the case of a joint venture, whether in corporate, partnership or other
legal form, a more than nominal economic interest and managerial role.
B. "Combination Product(s) or Process(es)" shall mean a product or
process that includes a Licensed Product or Licensed Process sold in combination
with another component(s) whose manufacture, use or sale by an unlicensed party
would not constitute an infringement of the Patent Rights.
C. "Field of Use" shall mean the diagnosis, prevention or treatment of
any and all diseases or conditions in humans or animals.
D. "First Commercial Sale" shall mean with respect to each country: (i)
the first sales in excess of $100,000 of Licensed Products or Licensed Processes
by Licensee, following approval of such Licensed Product's or Licensed Process'
marketing by the appropriate governmental agency, if any such approval is
necessary, for the country in which the sale is to be made; or (ii) if in a
country where governmental approval is not required, the first sale in that
country of the Licensed Product or Licensed Process.
E. "Licensed Product" shall mean any product or part thereof:
1. The manufacture, use or sale of which would infringe any one of
the issued, valid, enforceable, unexpired claim(s) or any one of
the pending claim(s) contained in the Patent Rights in any
country.
2. The manufacture of which uses a "Licensed Process" as that term
shall be defined hereafter.
<PAGE>
F. "Licensed Process" shall mean any process that would infringe any one
of the issued, valid, enforceable, unexpired claim(s) or any one of the pending
claim(s) contained in the Patent Rights in any country.
G. "Licensee" shall mean Lakaro Biopharmaceuticals, Inc. and/or its
successor(s) or assignee(s) and/or its Affiliates.
H. "Net Sales" shall mean gross receipts received by Licensee or
Licensee's Affiliates for Licensed Products and Licensed Processes produced
hereunder, including any subsidies, co-payments, incentive compensation, or
other similar payments received by Licensee from any governmental agency (other
than for research and development) directly in consideration of Licensee's sales
to third parties, less the sum of the following:
1. Discounts allowed in amounts customary in the trade.
2. Sales taxes, tariff duties and/or use taxes directly imposed and
with reference to particular sales.
3. Packaging and freight charges, outbound transportation and
delivery charges (including insurance premiums related to
transportation and delivery) prepaid or allowed.
4. Amounts allowed or credited on returns.
5. Bad debt deductions actually written off during the accounting
period.
No deductions shall be made for commissions paid to individuals whether
they are with independent sales agencies or regularly employed by Licensee and
on its payroll or for the cost of collections. Licensed Products and Licensed
Processes shall be considered "sold" when billed out or invoiced.
Notwithstanding anything herein to the contrary, the following shall not be
considered a sale of a Licensed Product or Licensed Process under this
Agreement: (i) the transfer of a Licensed Product or Licensed Process to an
Affiliate for sale by the Affiliate in a transaction that will be royalty
bearing; (ii) the transfer of a Licensed Product or Licensed Process to a third
party without consideration to Licensee in connection with the development or
testing of a Licensed Product or Licensed Process; or (iii) the transfer of a
Licensed Product or Licensed Process to a third party without consideration in
connection with the marketing or promotion of the Licensed Product or Licensed
Process.
I. "Patent Rights" shall mean all of the following intellectual property
included in the Background Patent Rights and the Research Patent Rights which
CMCC owns or has the right to license during the term of this Agreement:
1. All patents and/or patent applications listed in Appendix 1
attached hereto and incorporated herein by reference, as this
Appendix 1
<PAGE>
may be amended from time to time to include Research Patent
Rights, and divisionals and continuations thereof.
2. The United States and foreign patents issued from the
applications listed in Appendix 1 and from divisionals and
continuations of those applications.
3. Claims of United States and foreign continuation-in-part
applications, and of the resulting patents, which relate to
subject matter specifically described in the United States and
foreign patent applications described in Appendix 1.
4. Claims of all later filed foreign patent applications, and of the
resulting patents, which relate to subject matter specifically
described in the United States patent and/or patent applications
described in subparagraphs 1, 2 or 3 of this Article I, Paragraph
I.
5. Any reissues, divisions, amendments or extensions of the United
States or foreign patents described in subparagraphs 1, 2, 3 or 4
of this Article I, Paragraph I.
J. "Sublicensee" shall mean a person or entity unaffiliated with Licensee
to whom Licensee has granted an arm's length sublicense under this Agreement.
ARTICLE II. GRANT
A. CMCC hereby grants to Licensee the worldwide right and exclusive
license to make, have made, use, lease and sell the Licensed Products and to
practice the Licensed Processes for the Field of Use to the end of the term for
which the Patent Rights are granted, unless sooner terminated as provided in
this Agreement.
B. Notwithstanding anything above to the contrary, CMCC shall retain a
royalty-free, nonexclusive, irrevocable license to practice, and to sublicense
other non-profit research organizations to practice, the Patent Rights for
noncommercial research purposes only.
C. Notwithstanding anything herein to the contrary, the license granted
hereunder shall be subject to the rights of the United States government, if
any, under Public Laws 96-517, 97-226, and 98-620, codified at 35 U.S.C. sec.
200-212 and any regulations promulgated thereunder.
D. (1) To the best knowledge and belief of the CMCC Technology Transfer
Office as of the date of this Agreement, CMCC has all right, title, and interest
in and to the 547 Invention, including exclusive, absolute, irrevocable right,
title and interest thereto, free and clear of all liens, charges, encumbrances
or other restrictions or limitations of any kind whatsoever and to the best
knowledge and belief of the CMCC Technology Transfer Office as of the date of
this Agreement, there are no licenses
<PAGE>
options, restrictions, liens, rights of third parties, disputes, royalty
obligations, proceedings or claims relating to, affecting or limiting its rights
or rights of Licensee under this Agreement with respect to any part or all of
the Patent Rights and their use as contemplated in the underlying patent
applications as presently drafted.
(2) To the best knowledge and belief of the CMCC Technology Transfer
Office as of the date of this Agreement, CMCC has all right, title, and interest
in and the CMCC's ownership interest in the 590 Invention, including exclusive,
absolute, irrevocable right, title and interest thereto, free and clear of all
liens, charges, encumbrances or other restrictions or limitations of any kind
whatsoever and to the best knowledge and belief of the CMCC Technology Transfer
Office as of the date of this Agreement, there are no licenses options,
restrictions, liens, rights of third parties, disputes, royalty obligations,
proceedings or claims relating to, affecting or limiting its rights or rights of
Licensee under this Agreement with respect to any part or all of CMCC's
ownership interest in the 590 Invention and their use as contemplated in the
underlying patent applications as presently drafted.
(3) YISSUM has represented to CMCC that to the best knowledge and belief
of YISSUM as of the date of this Agreement, YISSUM has all right, title, and
interest in and to YISSUM's ownership interest in the 590 Invention, including
exclusive, absolute, irrevocable right, title and interest thereto, free and
clear of all liens, charges, encumbrances or other restrictions or limitations
of any kind whatsoever and YISSUM has also represented to CMCC that to the best
knowledge and belief of YISSUM as of the date of this Agreement, there are no
licenses options, restrictions, liens, rights of third parties, disputes,
royalty obligations, proceedings or claims relating to, affecting or limiting
its rights or rights of Licensee under this Agreement with respect to any part
or all of YISSUM's ownership interest in the 590 Invention and their use as
contemplated in the underlying patent applications as presently drafted.
(4) The CMCC Technology Transfer Office is not aware of, and YISSUM has
represented to CMCC that YISSUM is not aware of, any ownership interest in the
590 Invention other than CMCC's and YISSUM's.
(5) YISSUM and CMCC have entered into an agreement through which YISSUM
has granted CMCC the exclusive right to grant a license to YISSUM's interest in
the 590 Invention.
(6). To the best knowledge and belief of the CMCC Technology Transfer
Office as of the date of this Agreement there is no claim, pending or
threatened, of infringement, interference or invalidity regarding, any part or
all of the Patent Rights and their use as presently drafted.
E. Licensee agrees that Licensed Products leased or sold *** shall be
manufactured substantially ***.
F. In order to establish exclusivity for Licensee, CMCC hereby agrees
that it shall not, without Licensee's prior written consent, grant to any other
commercial party a license to make, have made, use, lease and/or sell Licensed
Products or to use the
<PAGE>
Licensed Processes in the Field of Use during the period of time in which this
Agreement is in effect, except as otherwise specified in this Agreement or as
required by law to grant rights to the United States Government.
G. Licensee shall have the right to enter into sublicensing agreements
with respect to any of the rights, privileges, and licenses granted hereunder,
subject to the terms and conditions hereof. Except as provided in Section II K
below, such sublicenses will terminate upon the termination of Licensee's rights
granted herein unless events of default are cured by Licensee or Sublicensee
within thirty (30) days of notification by CMCC of such a default and/or as
provided by the terms of this Agreement.
H. Licensee agrees that any sublicense granted by it shall provide that
the obligations to CMCC of Articles II (Grant), V (Reports and Records), VII
(Infringement), VIII (Insurance and Indemnification), IX (Export Controls), X
(Non-Use of Names), XI (Assignment), XII (Dispute Resolution), XIII (Term and
Termination) and XV (Miscellaneous Provisions) of this Agreement shall be
binding upon the sublicensee as if it were a party to this Agreement. Licensee
further agrees to attach a copy of this Agreement to all sublicense agreements,
deleting economic terms when and as appropriate.
I. Licensee agrees to provide to CMCC notice of any sublicense granted
hereunder and to forward to CMCC a copy of any and all fully executed sublicense
agreements and other documents such as side letters that are pertinent to an
accounting of Licensee's payment obligations under this Agreement and/or to an
evaluation of Licensee's performance of its due diligence obligations under
Article III. Licensee further agrees to forward to CMCC annually a copy of such
reports received by Licensee from its sublicensees during the preceding twelve
(12) month period as shall be pertinent to a royalty accounting under the
applicable sublicense.
J. Licensee shall advise CMCC in writing of any consideration received
from sublicensees. Licensee shall not accept from any sublicensee anything of
value in lieu of cash payments to discharge sublicensee's payment obligations
under any sublicense granted under this Agreement, without the express written
permission of CMCC, which permission shall not be unreasonably withheld.
K. CMCC agrees that if Licensee has provided to CMCC notice that Licensee
has granted a sublicense to a sublicensee under this Agreement, then in the
event CMCC terminates this Agreement for any reason provided hereafter, CMCC
shall provide to such sublicensee no less than thirty (30) days prior to the
effective date of said termination, written notice of said termination at the
address specified by Licensee to CMCC in Licensee's notice to CMCC under
Paragraph H of this Article II. CMCC agrees that upon the sublicensee's notice
as described below and provided the sublicensee is not in breach of its
sublicense, CMCC shall grant to such sublicensee license rights and terms
equivalent to the sublicense rights and terms which the Licensee shall have
granted to said sublicensee; provided that the sublicensee shall remain a
sublicensee under this Agreement for a period of at least sixty (60) days
following receipt of notice from CMCC. Sublicensee shall during said sixty (60)
day
<PAGE>
period provide to CMCC notice wherein the sublicensee: (i) agrees to abide by
all of the terms and conditions of this Agreement applicable to sublicensees and
to discharge directly all pertinent obligations of Licensee which Licensee is
obligated hereunder to discharge; and (ii) acknowledges that CMCC shall have no
obligations to the sublicensee other than its obligations set forth in this
Agreement with regard to Licensee.
L. The license granted hereunder shall not be construed to confer any
rights upon Licensee by implication, estoppel or otherwise as to any technology
not described in the Patent Rights.
ARTICLE III. DUE DILIGENCE
A. Licensee shall use its good faith and reasonable best efforts to bring
one or more Licensed Products and/or Licensed Processes to market as soon as
reasonably practicable, consistent with sound and reasonable business practices
and judgment, through a thorough, vigorous and diligent program for exploitation
of the Patent Rights. Thereafter, Licensee agrees that until expiration or
termination of this Agreement, Licensee shall continue active and diligent
efforts to keep Licensed Products and/or Licensed Processes reasonably available
to the public. In the event Licensee decides not to exploit a licensed Patent
Right, it shall promptly inform CMCC in writing and shall surrender to CMCC its
license to that Patent Right.
B. Licensee shall accomplish development of Licensed Products and/or
Licensed Processes according to the following timetable:
1. file an Initial New Drug Application ("IND") for a Licensed
Product with United States Food and Drug Administration ("FDA")
or its foreign the equivalent in a country with reasonably
comparable requirements within *** from the identification of the
first lead compound; and
2. file a New Drug Application ("NDA") for a Licensed Product with
the United States FDA or its foreign equivalent in a country with
reasonably comparable requirements within *** from the first
filing of an IND with the United States FDA or its foreign
equivalent.
The above milestones and completion times shall be referred to hereinafter as
the "Development Plan".
C. Licensee shall use good faith and diligent efforts to accomplish the
milestones set forth in the Development Plan and to manufacture and distribute
Licensed Products and Licensed Processes.
D. Notwithstanding anything above to the contrary, CMCC shall not
unreasonably withhold its assent to any revision of the objective(s) set forth
in the
<PAGE>
Development Plan when requested in writing by Licensee and supported by evidence
reasonably acceptable to CMCC: (i) of technical difficulties or delays in the
clinical studies or regulatory process that Licensee could not have reasonably
avoided; or (ii) that Licensee, its Affiliates and/or sublicensees have expended
good faith and diligent efforts and adequate resources to meet said objective.
E. In the event CMCC reasonably believes that Licensee is not diligently
seeking to achieve the objectives set forth in the Development Plan in a timely
manner, CMCC shall so notify Licensee in writing. Licensee shall have the
option, exercisable by written notice to CMCC provided within ten (10) days
after receipt of any such notice, to either: (i) receive a *** grace period to
establish to CMCC's reasonable satisfaction that Licensee is expending its good
faith and diligent efforts and adequate resources to achieve said objectives; or
(ii) agree to CMCC's termination of this Agreement as provided hereafter. In the
event Licensee agrees to termination of this Agreement, CMCC shall immediately
terminate the license granted to Licensee under this Agreement. In the event
Licensee fails to establish its diligence to CMCC's reasonable satisfaction as
provided above prior to expiration of the *** grace period, CMCC shall have the
right to terminate the license granted to Licensee under this Agreement.
F. In the event that Licensee fails to meet the objective(s) set forth in
the Development Plan in a timely manner, CMCC shall notify Licensee thereof in
writing, and Licensee shall have thirty (30) days following such notification to
establish to the reasonable satisfaction of CMCC that (i) it has met such
objective(s); or (ii) a revision to the Development Plan is necessary and
appropriate as contemplated above. In the event that Licensee fails to establish
the same to CMCC's reasonable satisfaction, CMCC shall have the right in its
discretion to terminate the license granted to Licensee under this Agreement or
to convert the license granted to Licensee hereunder to a non-exclusive license
on financial terms and conditions mutually agreed to by CMCC and Licensee.
G. Licensee shall use its best efforts to secure an initial round of
financing of at least *** for Licensee through a private placement and/or public
offering of debt or equity securities of Licensee (the "Financing"). The total
pre-money valuation of any such Financing shall be not less than ***. If
Licensee has not raised at least *** of gross proceeds on the basis described in
the preceding sentence within *** months of the Effective Date, then this
License Agreement shall terminate and all right, title and interest in the
Patent Rights shall revert to CMCC (and/or YISSUM, as appropriate) and CMCC
shall return any and all shares or warrants beneficially owned by CMCC and
YISSUM.
ARTICLE IV. ROYALTIES AND OTHER PAYMENTS
A. For the rights, privileges and exclusive licenses granted hereunder,
Licensee shall pay to CMCC the following amounts in the manner hereinafter
provided until the end of the term of the last to expire Patent Right, unless
this Agreement shall be sooner terminated as hereinafter provided:
<PAGE>
1. Subject to the terms and conditions of the Sponsored Research
Agreement, Licensee shall sponsor research at YISSUM in an amount
an in accordance with the payment schedule set forth therein.
2. Upon the execution of this Agreement, Licensee shall issue to
CMCC 537,025 shares of its common stock, at par value ($0.001 per
share, which shall constitute 7.842% of the issued and
outstanding shares of common stock of the Company on the date
these shares are issued to CMCC. In any future registrations of
Licensee's common stock, Licensee shall treat the shares of
common stock being issued to CMCC pursuant to this Agreement and
the shares underlying the warrants described in Article IV.A.3,
below, no less favorably than any of its shares of common stock
issued and outstanding as of the date of this Agreement.
3. Licensee shall grant to CMCC ten (10) year net exercise warrants
to purchase 250,000 shares of common stock (the "Common Stock"),
at a price of $0.01 per share, vesting as follows:
(a) One-half of the warrants shall vest upon the
approval of the first IND for a Licensed Product or Licensed
Process by the United States FDA, or its foreign equivalent.
(b) One-half of the warrants shall vest upon the
approval of an NDA for a Licensed Product or Licensed Process by
the FDA, or foreign equivalent.
4. If so instructed by CMCC, Licensee shall issue to YISSUM, instead
of to CMCC, some or all of the shares due to CMCC as defined in
Section A.2 and some or all of the warrants due to CMCC as
defined in Section A.3.
5. In any calendar year, royalties in an amount equal to *** of Net
Sales of Licensed Products or Licensed Processes used, leased or
sold by and/or for Licensee and/or its Affiliates.
6. In the event that Licensee has granted sublicenses under this
Agreement, *** of any and all royalties received by Licensee on
sales from said sublicensees, and *** of any and all payments
received by Licensee from said sublicensees in consideration of
permitting the sublicensee to practice the Patent Rights,
including but not limited to sublicense issue fees, any lump sum
payments, milestone payments, technology transfer payments, or
other similar fees, but not including payments for research and
development, including pre-clinical and clinical trials;
provided, however, that overhead charges for such research and
development are
<PAGE>
reasonable and customary, and not including payment on account of
issuance of debt or equity securities of Licensee at fair value.
B. No multiple royalties shall be payable because the use, lease or sale
of any Licensed Product or Licensed Process is, or shall be, covered by more
than one valid and unexpired claim contained in the Patent Rights. In addition,
royalties shall be paid for a Licensed Product or Licensed Process based upon
only one of the paragraphs A.4 or A.5 above ( that is, royalties on direct sales
of a Licensed Product or Licensed Process by Licensee or its Affiliates shall be
based only on paragraph A.4, while royalties on sales of a Licensed Product or
Licensed Process by any sublicensee shall be based only on paragraph A.5 so as
to avoid double counting).
C. To the extent that Licensee obtains subsequent to the date of this
Agreement licenses to third party patents or other intellectual property that
are necessary to produce or sell Licensed Products or Licensed Processes,
Licensee may deduct from the royalty due to CMCC *** of the royalties due on
such third party patents or intellectual property up to an amount equal to ***
of royalties hereunder.
D. In the event that a Licensed Product is sold in the form of a
combination product containing one or more products or technologies which are
themselves not a Licensed Product, the Net Sales for such a combination product
shall be calculated by multiplying the sales price of such combination product
by the fraction A/ (A+B) where A is the invoice price of the Licensed Product,
or if sold to an Affiliate the Fair Market Value the Licensed Product would
command if sold to a third party, and B is the total invoice price of the other
products or technologies. In the case of a combination product which includes
one or more Licensed Products, the Net Sales for such combination product upon
which the royalty due to CMCC is based shall not be less than the sum of Net
Sales for each Licensed Product.
E. Royalty payments shall be paid in United States dollars in Boston,
Massachusetts, or at such other place as CMCC may reasonably designate
consistent with the laws and regulations controlling in any foreign country. If
the currency conversion shall be required in connection with the payments of
royalties or other amounts hereunder, the conversion shall be made by using the
exchange rate prevailing at the Bank of Boston on the last business day of the
calendar quarterly reporting period to which such royalty payments relate.
F. The royalty payments set forth in this Agreement shall, if overdue,
bear interest until payment at a per annum rate of *** above the prime rate in
effect at the Bank of Boston on the due date. The payment of such interest shall
not foreclose CMCC from exercising any other rights it may have as a consequence
of the lateness of any payment.
<PAGE>
ARTICLE V. REPORTS AND RECORDS
A. Licensee shall keep, and shall require its Affiliates and sublicensees
to keep, full, true and accurate books of account in accordance with generally
accepted accounting principles and containing sufficient detail to enable CMCC
to determine the royalty and other amounts payable to CMCC under this Agreement.
Said books of account shall be kept at Licensee's principal place of business or
the principal place of business of the appropriate division of Licensee to which
this Agreement relates. Said books and the supporting data shall be retained
for at least three (3) years following the end of the calendar year to which
they pertain.
B. CMCC shall have the right to audit the books of account described
above from time to time upon reasonable notice to Licensee and in no event more
than quarterly to the extent necessary to verify the reports provided for herein
or compliance in other respects with this Agreement. CMCC or its agents shall
perform these audits at CMCC's expense during Licensee's regular business hours.
C. Licensee shall deliver to CMCC true and accurate reports by March
31st, for the period July 1st through December 31st of the previous year, and on
September 30th, for the period January 1st through June 30th of the current
year, giving such particulars of the business conducted by Licensee, its
Affiliates and its sublicensees under this Agreement as shall be pertinent to a
royalty accounting hereunder and to verify Licensee's activities with respect to
achieving the objectives of the Development Plan described in Article III above.
These reports shall include at least the following:
1. Number of Licensed Products and Licensed Processes manufactured
and sold.
2. Aggregate billings for Licensed Products and Licensed Processes
sold.
3. Applicable deductions.
4. Total royalties due to CMCC.
5. Names and addresses of all sublicensees of Licensee.
6. Payments received by Licensee from Affiliates and sublicensees.
7. Licensed Products manufactured and sold to the U.S. Government.
No royalty obligations shall arise from sales or use by, for or
on behalf of the U.S. Government in view of a royalty-free,
nonexclusive license that may heretofore have been granted to the
U.S. Government.
8. Royalties and Fees received from sublicensees.
<PAGE>
D. Until the First Commercial Sale of a Licensed Product or Licensed
Process, Licensee shall provide to CMCC at least annually reasonable detail
regarding the activities of Licensee and/ or Licensee's Affiliates and
sublicensees relative to achieving the objectives set forth in the Development
Plan in a timely manner, including but not limited to, reports of financial
expenditures to achieve said objectives, research and development activities,
regulatory approvals, strategic alliances and manufacturing, sublicensing and
marketing efforts.
E. With each such report submitted, Licensee shall pay to CMCC the
royalties due and payable under this Agreement. Prior to first commercial sale,
if no royalties shall be due, Licensee shall not be required to make a report
pursuant to this Article V.
F. On or before the ninetieth (90th) day following the close of
Licensee's fiscal year, Licensee shall provide CMCC with Licensee's certified
financial statements for the preceding fiscal year, including at a minimum a
balance sheet and an operating statement or other public report containing
substantially the same information. CMCC agrees to hold in confidence each
report delivered by Licensee pursuant to this Article V until the termination of
this agreement, except that CMCC may disclose the reports to YISSUM under
agreement of confidentiality. Notwithstanding the foregoing, the CMCC may
disclose any such information required to be disclosed pursuant to any judicial,
administrative or governmental request, subpoena, requirement or order, provided
that the CMCC take reasonable steps to provide Licensee with the opportunity to
contest such request, subpoena, requirement or order.
ARTICLE VI. PATENT PROSECUTION
A. CMCC in cooperation with Licensee shall apply for, seek prompt
issuance of, and maintain during the term of this Agreement the Patent Rights
set forth in Appendix 1 through patent counsel mutually agreeable to both
partners. The parties agree that Hamilton, Brook, Smith & Reynold is a mutually
acceptable patent counsel as of the date hereof, and that, if Licensee so
requests within three (3) months hereof, Pennie and Edmonds would be mutually
acceptable. The prosecution, filing and maintenance of all Patent Rights
applications and patents shall be the primary responsibility of CMCC. Licensee
shall have reasonable opportunities to advise CMCC and shall cooperate with CMCC
in the prosecution, filing and maintenance of the Patent Rights.
B. Licensee shall reimburse to CMCC the amount of all fees and costs
relating to the filing, prosecution and maintenance of the Patent Rights whether
such fees and/or costs were incurred before or after the date of this Agreement.
CMCC shall provide to Licensee an itemized invoice of all such fees and Licensee
shall pay to CMCC all amounts due under said invoice within thirty (30) days of
the date of said invoice.
<PAGE>
C. In the event that CMCC elects not to pursue, maintain or retain a
particular Patent Right licensed to Licensee hereunder, CMCC shall so notify
Licensee within thirty (30) days of such decision so that Licensee may assume
the filing, prosecution and/or maintenance of such application or patent at
Licensee's expense. In such event, CMCC shall provide to Licensee any
authorization necessary to permit Licensee to pursue and/or maintain such Patent
Right. Licensee shall have no further royalty obligations under this Agreement
with respect to any such Patent Right.
ARTICLE VII. INFRINGEMENT
A. In the event that Licensee shall learn of the infringement of any
patent or right licensed under this Agreement, Licensee shall call CMCC's
attention thereto in writing. Both parties to this Agreement agree to consult
the other prior to notifying an infringing party, in a jurisdiction where
Licensee then has exclusive rights under this Agreement, of the infringement of
any of CMCC Patent Rights or such other intellectual property rights and shall
not notify such infringing party without first obtaining consent of the other
party, which consent shall not be reasonably withheld. Both parties shall use
their best efforts in cooperation with each other to terminate such infringement
without litigation. CMCC shall have the first option to undertake the
enforcement of the CMCC Patent Rights, provided, however, that Licensee may join
with CMCC and its counsel in prosecuting such legal action, provided, however,
that if the use of counsel chosen by CMCC would present such counsel with a
conflict of interest that would disqualify such counsel from joint
representation, then Licensee may obtain counsel of its choice at its sole
expense.
B. Licensee may request that CMCC take legal action against the
infringement of the Patent Rights licensed under this Agreement. Such a request
shall be made in writing and shall include reasonable evidence of such
infringement and damages to Licensee. If CMCC does not commence a diligent
legal challenge within sixty (60) business days after such request (or
immediately in the event Licensee requests that CMCC seek provisional relief and
reasonably demonstrates that such relief is required), and the infringing
activity has not been abated within such time, or if at any time thereafter CMCC
does not persist in such diligent legal challenge until the infringement has
been abated, Licensee may, if the infringement occurred in a jurisdiction where
Licensee had exclusive rights under this Agreement, may commence or assume
control, as the case may be, over the prosecution of legal actions relating
thereto. However, in the event Licensee elects to bring suit in accordance with
this paragraph B, CMCC may thereafter join with Licensee and its counsel in
prosecuting such legal action, provided, however that if the use of counsel
chosen by CMCC would present such counsel with a conflict of interest that would
disqualify such counsel from joint representation, then CMCC may obtain counsel
of its choice at its sole expense.
C. Recoveries or reimbursements from any such litigation or settlement
within the scope of paragraph B in a jurisdiction in which Licensee had
exclusive rights under this Agreement at the time of the infringement shall be
first applied to reimburse Licensee and/ or CMCC for out-of-pocket litigation
costs (with respect to Licensee, to the extent not theretofore credited against
royalties in accordance with paragraph E)
<PAGE>
and then to CMCC for any royalties past due or withheld pursuant to paragraph E.
Any remaining recoveries or reimbursements shall be divided between Licensee and
CMCC at a rate of 20% to CMCC and 80% to Licensee.
D. In the event that a claim or suit is asserted or brought against
Licensee alleging that the manufacture or sale of any Licensed Product by
Licensee or its sublicensees, or the use of such Licensed Product by any
customer of any of the foregoing, infringes proprietary rights of a third party,
Licensee shall give written notice thereof to CMCC. Licensee may, in its sole
discretion, modify such Licensed Product to avoid such infringement and/or may
settle on terms that it deems advisable in its sole discretion, subject to
paragraph F. Otherwise, Licensee shall have the right, but not the obligation,
to defend any such claim or suit. In the event Licensee elects not to defend
such suit, CMCC shall have the right, but not the obligation to do so at its own
sole expense.
E. Licensee may credit up to fifty (50) percent of any litigation costs
incurred by Licensee in any country pursuant to paragraph C or D and up to 50%
of all amounts paid in judgment or settlement of litigation within the scope of
paragraph D against royalties thereafter payable to CMCC hereunder for such
country and apply the same toward one-half of its actual, reasonable out-of-
pocket litigation costs. If one-half of such litigation costs in such country
exceed 50 % of royalties payable to CMCC in any year in which such costs are
incurred than the amount of such costs, expenses and amounts paid in judgment or
settlement, in excess of such 50% of the royalties payable shall be carried over
and credited against royalty payments in future years for such country (subject
to the same annual limits). The credit relating to paragraph D shall apply only
to the extent that litigation costs are incurred in defense or settlement of a
claim that the practice of the Patent Rights involved in the manufacture, use or
sale of Licensed Products infringes the patent rights of a third party.
F. Licensee shall not settle or compromise any suit in a manner that
imposes any obligations or restrictions on CMCC or grants any rights to the CMCC
Patent Rights without CMCC's written permission, which permission shall not be
unreasonably withheld. CMCC shall not settle or compromise any such suit in a
manner that imposes any obligations or restrictions on Licensee without
Licensee's written permission, which permission shall not be reasonably
withheld.
G. In any action to enforce any of the CMCC Patent Rights, either party,
at the request and expense of the other party, shall cooperate to the fullest
extent reasonably possible. This provision shall not be construed to require
either party to undertake any activities, including legal discovery, at the
request of any third party except as may be required by lawful process of a
court of competent jurisdiction.
H. Notwithstanding the foregoing, if a third party commences a legal
action in any country in which Licensee has exclusive rights under this
Agreement alleging that the practice of the Patent Rights infringes a third-
party's patent rights, Licensee may withhold, pending final resolution of the
litigation, 50% of the royalties thereafter payable to CMCC from sales made in
that country. In the event that Licensee recovers
<PAGE>
damages from any such litigation, it shall pay to CMCC the 50% previously
withheld together with interest at an annual rate of 10%.
ARTICLE VIII. INDEMNIFICATION
AND INSURANCE PROVISIONS
A. Licensee shall indemnify, defend and hold harmless CMCC and YISSUM,
their corporate affiliates, current or future directors, trustees, officers,
faculty, 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 attorney's 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
arising out of any theory of product liability (including, but not limited to,
actions in the form of tort, warranty, or strict liability) concerning any
product, process or service made, used or sold by Licensee pursuant to any right
or license granted under this Agreement.
B. Licensee's indemnification under Article VIII, Paragraph A above shall
not apply to any liability, damage, loss or expense to the extent that it is
directly attributable to the negligent activities, reckless misconduct or
intentional misconduct of the Indemnitees.
C. Licensee agrees, at its own expense, to provide attorneys reasonably
acceptable to CMCC to defend against any actions brought or filed against any
party indemnified hereunder with respect to the subject of indemnity contained
herein, whether or not such actions are rightfully brought.
D. Beginning at the time as any such product, process or service is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Licensee or by a sublicensee, Affiliate or agent of
Licensee, Licensee shall, at its sole cost and expense, procure and maintain
commercial general liability insurance in amounts not less than $2,000,000 per
incident and $2,000,000 annual aggregate and naming the Indemnitees as
additional insureds. Such commercial general liability insurance shall provide
(i) product liability coverage and (ii) contractual liability coverage for
Licensee's indemnification under Article VIII, Paragraphs A through C of this
Agreement. If Licensee 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
CMCC and the Risk Management Foundation of the Harvard Medical Institutions,
Inc. The minimum amount of insurance coverage required under this Article VIII,
Paragraph E. shall not be construed to create a limit of Licensee's liability
with respect to its indemnification under Article VIII, Paragraphs A through C
of this Agreement.
E. Licensee shall provide CMCC with written evidence of such insurance
upon request of CMCC. Licensee shall provide CMCC with written notice at least
fifteen (15) days prior to the cancellation, non-renewal or material change in
such insurance. If Licensee does not obtain replacement insurance providing
comparable coverage within such fifteen (15) day period, CMCC shall have the
right to terminate
<PAGE>
this Agreement effective at the end of such fifteen (15) day period without
notice of any additional waiting periods.
F. Licensee shall maintain such commercial general liability insurance
during (i) the period that any such product, process or service is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Licensee or by a sublicensee, Affiliate or agent of
Licensee and (ii) a reasonable period after the period referred to above, which
in no event shall be less than five (5) years.
G. Licensee shall continue to indemnify CMCC for any product liability
claims arising out of the use of Licensed Product(s) or Process(es) during the
period in which Licensee is developing, making, commercializing and selling any
Licensed Product(s) or Process(es) and for a period of five (5) years after the
date on which the Company ceases to do so (the "Cessation Date"), solely for
claims arising out of such activities prior to the Cessation Date.
H. Article VIII, Paragraphs F. and G. shall survive expiration or
termination of this Agreement.
I. OTHER THAN WARRANTIES SET FORTH HEREIN, CMCC MAKES NO WARRANTY,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO ANY PATENT, TRADEMARK, SOFTWARE, TRADE SECRET, TANGIBLE RESEARCH
PROPERTY, INFORMATION OR DATA LICENSED OR OTHERWISE PROVIDED TO LICENSEE
HEREUNDER AND HEREBY DISCLAIMS THE SAME.
ARTICLE IX. EXPORT CONTROLS
It is understood that CMCC is subject to United States laws and regulations
controlling the export of technical data, computer software, laboratory
prototypes and other commodities (including the Arms Export Control Act, as
amended and the Export Administration Act of 1979), and that its obligations
hereunder are contingent on compliance with applicable United States export laws
and regulations. The transfer of certain technical data and commodities may
require a license from the cognizant agency of the United States Government
and/or written assurances by Licensee that Licensee shall not export data or
commodities to certain foreign countries without prior approval of such agency.
CMCC neither represents that a license shall not be required, nor that if
required, it shall be issued.
ARTICLE X. NON-USE OF NAMES
Licensee shall not use the name of Children's Medical Center Corporation,
nor YISSUM, nor the name of any of their corporate affiliates or employees, nor
any adaptation thereof, in any advertising, promotional or sales literature
without prior
<PAGE>
written consent obtained from CMCC in each case which consent shall not be
reasonably withheld, except that Licensee may state that it is licensed by CMCC
under one or more of the patents and/or applications comprising the Patent
Rights, and Licensee may comply with disclosure requirements of all applicable
laws relating to its business, including United States and state securities
laws.
ARTICLE XI. ASSIGNMENT
A. Except as otherwise provided herein, this Agreement is not assignable
in whole or in part, and any attempt to do so shall be void and of no effect.
B. CMCC may assign this Agreement at any time to any corporate affiliate
of CMCC without the prior consent of Licensee.
C. Except as provided in Article XI, Paragraph D below, Licensee may
assign this Agreement to another entity only with the prior written consent of
CMCC, which consent shall not be unreasonably withheld or delayed.
D. Notwithstanding anything herein to the contrary, in the event Licensee
merges with another entity, is acquired by another entity, or sells all or
substantially all of its assets to another entity, Licensee may assign its
rights and obligations hereunder to, in the event of a merger or acquisition,
the surviving entity, and in the event of a sale, the acquiring entity, without
CMCC's consent, which shall not be unreasonably withheld or delayed, so long as:
(i) Licensee is not then in breach of this Agreement; (ii) the proposed assignee
has a net worth at least equivalent to the net worth Licensee had as of the date
of this Agreement; (iii) the proposed assignee has available resources and
sufficient scientific, business and other expertise comparable to Licensee in
order to satisfy its obligations hereunder; (iv) Licensee provides written
notice of the assignment to CMCC, together with documentation sufficient to
demonstrate the requirements set forth in subparagraphs (i) through (iii) above,
at least thirty (30) days prior to the effective date of the assignment; and (v)
CMCC receives from the assignee, in writing, at least thirty (30) days prior to
the effective date of the assignment: (a) an agreement to be bound by the terms
of this Agreement; and (b) an agreement to perform the obligations of Licensee
under this Agreement.
ARTICLE XII. DISPUTE RESOLUTION AND ARBITRATION
A. Except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order, a preliminary injunction, or
other equitable relief to preserve the status quo or prevent irreparable harm,
any and all claims, disputes or controversies arising under, out of, or in
connection with the Agreement, including any dispute relating to patent validity
or infringement, which the parties shall be unable to resolve within sixty (60)
days shall be mediated in good faith. The party raising such dispute shall
promptly advise the other of such claim, dispute or controversy in writing,
describing the dispute in reasonable detail. By no later than five (5) business
days after the recipient has received such notice of dispute, each party
<PAGE>
shall have selected a representative who shall have the authority to bind such
party and shall have advised the other party in writing of the name and title of
such representative.
B. In the event that a dispute arises between the parties hereto, then
the parties agree to use their best efforts to resolve the dispute amicably. In
the event that the parties have not resolved the dispute within sixty (60) days,
then the parties agree to submit to binding arbitration in accordance with this
Article XII.
C. Any and all claims, disputes or controversies arising under, out of,
or in connection with this Agreement, which have not been resolved by good faith
negotiations between the parties or by mediation shall be resolved by final and
binding arbitration in Boston, Massachusetts, in accordance with the rules of
the American Arbitration Association ("AAA") then obtaining and all expenses, in
connection therewith, will be shared equally, except for the expense of the
parties' respective legal counsels. A single arbitrator shall be mutually
agreed upon and if the parties are unable to agree on a mutually acceptable
arbitrator, an arbitrator shall be chosen in accordance with AAA rules. Any
award rendered in such arbitration shall be final and may be enforced by either
party.
D. Notwithstanding the foregoing, nothing in this Article shall be
construed to waive any rights or timely performance of any obligations existing
under this Agreement.
ARTICLE XIII. TERM AND TERMINATION
A. The term of this Agreement shall be not less than fifteen (15) years
or the life of the last expiring Patent Right, whichever period is the longer
term.
B. CMCC may terminate this Agreement immediately upon the bankruptcy,
insolvency, liquidation, dissolution or cessation of operations of Licensee; or
the filing of any voluntary petition for bankruptcy, dissolution, liquidation or
winding-up of the affairs of Licensee; or any assignment by Licensee for the
benefit of creditors; or the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of Licensee which is not
dismissed within ninety (90) days of the date on which it is filed or commenced.
C. CMCC may terminate this Agreement upon forty-five(45) days prior
written notice in the event of Licensee's failure to pay to CMCC royalties due
and payable hereunder in a timely manner, unless Licensee shall make all such
payments to CMCC within said forty-five (45) day period. Upon the expiration of
the thirty (30) day period, if Licensee shall not have made all such payments to
CMCC, the rights, privileges and licenses granted hereunder shall terminate.
D. Except as otherwise provided in Paragraph C above, CMCC may terminate
this Agreement upon sixty (60) days prior written notice in the event of
Licensee's breach or default of any material term or condition or warranty
contained in
<PAGE>
this Agreement, unless Licensee shall cure such breach to CMCC's reasonable
satisfaction within said sixty (60) day period. Upon the expiration of the sixty
(60) day period, if Licensee shall not have cured said breach to the reasonable
satisfaction of CMCC, the rights, privileges and license granted hereunder shall
terminate.
E. Licensee shall have the right to terminate this Agreement at any time
upon ninety (90) days prior written notice to CMCC, and upon payment by Licensee
of all amounts due CMCC through the effective date of termination.
F. Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. Licensee and any sublicensee
thereof may, however, after the effective date of such termination, sell all
Licensed Products and complete Licensed Products in the process of manufacture
at the time of such termination and sell the same, provided that Licensee shall
pay to CMCC the royalties thereon as required under this Agreement and shall
submit the reports required under this Agreement on the sales of Licensed
Products.
G. Upon termination of this Agreement for any reason, all rights and
licenses shall revert to CMCC and/or YISSUM, as appropriate. Licensee shall
return, and/or transfer, to CMCC and/or YISSUM, as appropriate, within 14 days
of termination, all the rights and/or material relating to Licensed Products or
Licensed Processes, and any and all data, inventions, know-how, and patent
rights developed under the Sponsored Research Agreement, and Licensee may not
make any further use thereof, nor shall Licensee be entitled to any
reimbursement of any amount paid to CMCC or YISSUM under this Agreement or the
Sponsored Research Agreement. Licensee shall also provide to CMCC exclusive
rights to any related tangible or intangible property and developed solely by
Licensee in the course of commercializing Licensed Products or Licensed Products
(including, but not limited to manufacturing know-how, test data, product
samples, patent filings, regulatory filings, and clinical data) under an
agreement through which CMCC would, from proceeds (if any) derived from
subsequent commercialization of the Patent Rights and/or Licensed Products
and/or Licensed Products, reimburse Licensee for its reasonable costs in
developing said tangible and intangible assets.
H. Upon termination of this Agreement by CMCC, CMCC shall, and shall
cause YISSUM to, refrain from selling any then unsold shares of common stock or
exercising any then unexercised warrants then owned or possessed by either
party, and shall return, and cause YISSUM to return, any such shares and/or
warrants to Licensee within fourteen (14) days of such termination.
ARTICLE XIV. PAYMENTS, NOTICES, AND OTHER COMMUNICATIONS
A. All payments, notices, reports and/or other communications made in
accordance with this Agreement, shall be sufficiently made or given on the date
of the mailing if delivered by hand, by facsimile or sent by first class mail
postage prepaid and addressed as follows:
<PAGE>
In the case of CMCC:
Director, Technology Transfer
Office of Research Administration
Children's Hospital
300 Longwood Avenue
Boston, MA 02115
Telefax 617 232-7485
In the case of Licensee:
General Counsel
Lakaro Biopharmaceuticals
216 Jaffa Road
Jerusalem 94383 Israel
Telefax: 972-2-537-5098
ARTICLE XV. GENERAL PROVISIONS
A. All rights and remedies hereunder will be cumulative and not
alternative, and this Agreement shall be construed and governed by the laws of
the Commonwealth of Massachusetts.
B. This Agreement may be amended only by written agreement signed by the
parties.
C. It is expressly agreed by the parties hereto that CMCC and Licensee
are independent contractors and nothing in this Agreement is intended to create
an employer relationship, joint venture, or partnership between the parties. No
party has the authority to bind the other.
D. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all proposals,
negotiations and other communications between the parties, whether written or
oral, with respect to the subject matter hereof.
E. If any provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be impaired thereby.
F. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original as against the party whose signature appears
thereon, but all of which taken together shall constitute but one and the same
instrument.
<PAGE>
G. The failure of either party to assert a right to which it is entitled
or to insist upon compliance with any term or condition of this Agreement shall
not constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
H. Licensee agrees to mark any Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to or sold in other countries shall be marked in such a manner as to
conform with the patent laws and practices of the country of manufacture or
sale.
I. Each party hereto agrees to execute, acknowledge and deliver such
further instruments and do all such further acts as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
J. The paragraph headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
K. Each party hereto shall be excused from any breach of this Agreement
which is proximately caused by governmental regulation, act of war, strike, act
of God or other similar circumstance normally deemed outside the control of the
parties.
L. This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event it shall be effective as of
the date recited on page one.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
last written below.
CHILDREN'S MEDICAL CENTER CORPORATION LRK BIOPHARMACEUTICALS, INC.
By: /s/ William New By: /s/ Benjamin Corn
____________________________ _____________________________
Name: William New Name: Benjamin Corn
__________________________ ___________________________
Vice President
Title: Research Administration Title: President
_________________________ __________________________
Date: Date: 11/18/99
__________________________ ___________________________
<PAGE>
Appendix 1
Patent Rights
CMCC 547 "Short peptides which selectively modulate the activity of protein
tyrosine kinases" by Dr. Shmuel Ben-Sasson
CMCC 590 "Short Peptides which selectively modulate the activity of
serine/threonine kinases", by Dr. Shmuel Ben-Sasson
<PAGE>
EXHIBIT 10.7
================================================================================
LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.A
and
PARTEC LTD
================================================================================
<PAGE>
Addendum No. 1 to License Agreement
-----------------------------------
This addendum (hereinafter referred to as this "Addendum"), effective as of
December 11, 1998, is entered into by and between ALFA WASSERMAN S.p.A., an
Italian company with registered offices in Contrada Sant'Emidio s/n, 65020
Alanno Scalo (PE) (the "Licensor") and PARTEC Ltd., a company duly organized and
existing under the laws of the State of Israel with registered offices in Jaffa
Road, Sha'arei Ha'ir, Jerusalem 94383 Israel (the "Company").
WHEREAS the Licensor and the Company executed a License Agreement (the
"Agreement") on November 12, 1998, pursuant to which the Company was given an
exclusive license as set forth in Article 2 of the Agreement, such exclusivity
being limited to the United States, Canada, Japan, Australia, New Zealand and
South Africa (the "Territory");
WHEREAS the parties desire to expand the definition of the Territory as set
forth in this Addendum; and
WHEREAS the Agreement also incorrectly described several of the patents being
licensed to the Company.
NOW, THEREFORE, it is agreed as follows:
1. Paragraph 1.8 of the Agreement shall be amended as follows:
"Territory" shall mean the United States, Canada, Japan, Australia, New
Zealand, South Africa and Israel.
2. The following changes shall be made in Schedule A to the Agreement:
a. In paragraph 7, change "-L-galacturonic acid" to
"(alpha)-L-galacturonic acid."
b. In paragraph 8, change "Hepatran" to "Heparan" and "(alpha)-
Liduronic-20-sulface acid" to "(alpha)-Liduronic-2-0-sulfate
acid."
c. In paragraph 10, change "Neuropathy" to "Nephropathy."
3. All other provisions of the Agreement shall remain as set forth in the
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum in triplicate
by proper persons thereunto duly authorized.
COMPANY LICENSOR
By: /s/ Andrea Golinelli By: /s/ Morris Laster
----------------------------- --------------------------
Name: Andrea Golinelli Name: Morris Laster
Title: General Manager Title: CEO
International Division
Alfa Wasserman SpA
<PAGE>
INDEX
of the LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.a
and
PARTEC LTD
LICENSE AGREEMENT ........................................................... 1
ARTICLE 1 - DEFINITIONS ..................................................... 1
ARTICLE 2 - GRANT ........................................................... 3
ARTICLE 3 - DUE DILIGENCE ................................................... 5
ARTICLE 4 - ROYALTIES AND OTHER CONSIDERATION ............................... 5
ARTICLE 5 - REPORTS AND RECORDS ............................................. 8
ARTICLE 6 - PATENT PROSECUTION AND MAINTENANCE .............................. 9
ARTICLE 7 - TERMINATION ..................................................... 10
ARTICLE 8 - ARBITRATION ..................................................... 11
ARTICLE 9 - INFRINGEMENT AND OTHER ACTIONS .................................. 12
ARTICLE 10 - LIMITATION OF LIABILITY, INDEMNITY ............................. 13
ARTICLE 11 - ASSIGNMENT ..................................................... 14
ARTICLE 12 - PAYMENT OF FEES AND EXPENSES ................................... 14
ARTICLE 13 - USE OF NAMES AND PUBLICATION ................................... 14
ARTICLE 14 - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS ..................... 15
ARTICLE 15 - CONFIDENTIALITY ................................................ 16
ARTICLE 16 - MISCELLANEOUS PROVISIONS ....................................... 17
SCHEDULE A .................................................................. a
SCHEDULE B .................................................................. i
SCHEDULE C .................................................................. i
SCHEDULE D .................................................................. i
<PAGE>
LICENSE AGREEMENT
-----------------
This License Agreement (hereinafter referred to as this "Agreement"), effective
as of November 12, 1998 (the "Effective Date"), is entered into by and between
ALFA WASSERMANN S.p.A, an Italian company with registered office in Contrada
Sant'Emidio s/n 65020 Alanno Scalo (PE), (the "Licensor") and PARTEC Ltd., a
corporation duly organized and existing under the laws of the State of Israel
with registered office in Jaffa Road, Shar'Arei Ha'ir, Jerusalem, 94383, (the
"Company").
WHEREAS, the Licensor is the owners of the Patents and Patent Applications set
forth in Schedule A attached hereto, which are based on inventions and
confidential information discovered by the Licensor (the "Invention"); and
WHEREAS, the Licensor may discover or develop additional intellectual property,
technical information or proprietary rights that may be subject to the terms of
this Agreement; and
WHEREAS, the Company now desires to obtain a license to the Invention and to any
further developments to the Invention, upon the terms and conditions hereinafter
set forth,
NOW, THEREFORE, it is agreed as follows:
ARTICLE 1 - DEFINITIONS
- -----------------------
For the purposes of this License Agreement, the following words and phrases
shall have the following meanings:
1.1 "Affiliate" shall mean, with respect to any Entity (as hereinafter
defined), any Entity that directly or indirectly controls, is controlled
by, or is under common control with such Entity.
1.1.1 "Control" shall mean, for this purpose, direct or indirect control of more
than fifty percent (50%) of the voting securities of an Entity or, if such
Entity does not have outstanding voting securities, more than 50% of the
directorships or similar positions with respect to such Entity.
1.1.2 "Entity" shall mean any corporation, association, joint venture,
partnership, trust, university, business, individual, government or
political subdivision thereof, including an agency, or any other
organization that can exercise independent legal standing.
1.2 "Patent Rights" shall mean all patents and patent applications set forth
in Schedule A;
1
<PAGE>
1.2.1 Any other patent applications and/or patents together with any and all
patents issuing thereon including continuation, divisionals and re-issue
applications and continuation-in-part applications and any patents granted
upon such applications, based upon inventions or improvements discovered
by Licensors any and all of which shall be deemed added to Schedule A;
1.2.2 Any later-filed patent applications based on the patent applications
and/or patents listed in Schedule A, or corresponding thereto, including
any continuations, continuations-in-part, divisionals, reissues,
reexaminations, or extensions thereof;
1.2.3 Any patents issuing from any of the foregoing; and
1.2.4 Any trademark applications filed by or on behalf of the Licensors related
to the Invention. The Licensor reserves the rights to decide whether to
allow the Company to use its trademarks/tradenames already filed/used
outside the Territory within one year from the execution of this
Agreement. It would be the Company's obligation to file and keep alive, at
its own costs and responsibility, any trademark of any Licensed Products
in the Territory.
1.3 "Know-how" shall mean all tangible information (other than that contained
in the Patent Rights) whether patentable or not (but which has not been
patented) and physical objects related to the Invention or to a Licensed
Product (as defined below), including but not limited to formulations,
materials, data, drawings and sketches, designs, testing and test results,
and regulatory information of a like nature, owned by the Licensor on or
after the Effective Date, which the Licensor has the right to disclose and
license to the Company.
1.4 "Licensed Product(s)" shall mean:
1.4.1 Any product which is covered in whole or in part by a valid and unexpired
claim contained in the Patent Rights in the country in which the product
is made, used, leased or sold;
1.4.2 Any product which is manufactured using a process which is covered in
whole or in part by a valid and unexpired claim contained in the Patent
Rights in the country in which the process is used;
1.4.3 Any product which is used according to a method which is covered in whole
or in part by a valid and unexpired claim contained in the Patent Rights
in the country in which the method is used.
1.5 "Licensed Process(es)" shall mean any process or method, which is covered,
in whole, or in part, by a valid and unexpired claim contained in the
Patent Rights in the country in which the process or method is used.
2
<PAGE>
1.6 "Net Sales" shall mean the sum of all sales prices invoiced or
otherwise charged on final sale of Licensed Products or practice of
Licensed Processes by or on behalf of the Company or any of its
Affiliates, less only the sum of the following:
1.6.1 Usual cash and trade discounts to customers;
1.6.2 Sales, tariff duties, use taxes, sales taxes, excise taxes, value-added
taxes and/or other taxes directly imposed and with reference to
particular sales;
1.6.3 Delivery charges;
1.6.4 Amounts allowed or credited on returns; and
1.6.5 Social insurance discounts.
1.7 "Field of Use" shall mean the use of the Invention for the treatment of
diabetic nephropathy, diabetic neuropathy and diabetic retinopathy.
1.7(a) The "Field of Not Novel Indications" shall mean: aterosclerosis,
peripheral arterial obstructive disease, venous leg ulcer, cerebral
vascular disease, myocardial infarction, lymphedema, idiopatic
urticaria and interstitial cystitis.
1.8 "Territory" shall mean the United States, Canada, Japan, Australia, New
Zealand and South Africa
ARTICLE 2 - GRANT
- -----------------
2.1 The Licensor hereby grants to the Company and the Company accepts,
subject to the terms and conditions of this Agreement, an exclusive
license in the Territory to practice under the Patent Rights and to
utilize the Know-how in the Field of Use, and to register, make, have
made, lease, use, market and/or sell Licensed Products and to practice
Licensed Processes, until expiration or termination of the Patent
Rights as hereinafter provided.
2.2 To the Licensor's knowledge and belief, the Licensor has all right,
title, and interest in and to the Patent Rights, including exclusive,
absolute, irrevocable right, title and interest thereto, free and clear
of all liens, charges, encumbrances or other restrictions or
limitations of any kind whatsoever and to the Licensor's knowledge and
belief there are no licenses, options, restrictions, liens, rights of
third parties, disputes, royalty obligations, proceedings or claims
relating to, affecting, or limiting its rights or the rights of the
Company under this Agreement with respect to, or which may lead to a
claim of infringement or invalidity regarding, any part or all of the
Patent Rights and their use as contemplated in the underlying patent
applications as presently drafted.
3
<PAGE>
2.3 To the Licensor's knowledge and belief there is no claim, pending or
threatened, of infringement, interference or invalidity regarding, any
part or all of the Patent Rights and their use as contemplated in the
underlying patent applications as presently drafted.
2.4 The Licensor has disclosed certain information to the Company subject
to the terms of the Confidentiality Agreement entered into prior to the
execution of this Agreement, some of which information may have been
made available to the public without restriction. Accordingly, attached
hereto as Schedule B is a list of all prior written publications, oral
presentations and any other public disclosure of the Patent Rights
and/or information covered by Know-how.
2.5 The Licensor hereby grants to the Company the right to grant
sublicenses to third-parties under the license granted hereunder.
2.5.1 Within 30 days after execution or receipt thereof, as applicable, the
Company shall provide the Licensor with a copy of each sublicense
issued hereunder and shall deliver copies of all royalty reports
received by the Company from such sublicensees.
2.5.2 Upon termination of this Agreement other than by expiration in
accordance with paragraph 7.6, any and all sublicenses shall survive
such termination provided that the Company's commitments to such
sublicensees shall not exceed the Company's rights from the Licensor
pursuant to this Agreement.
2.6 The Licensor shall, within 75 days of the development thereof, provide
the Company with any and all Know-how related to the Invention that the
Licensor develops at any time subsequent to the Effective Date
("Subsequent Indication"). The Licensor hereby grants to the Company
the right to use any such Subsequent Indication in the Territory
pursuant to the terms of this Agreement.
2.7 At the request of the Company, the Licensor agrees to use its good
relationship with Opocrin S.p.A., Via Pacinotti 3, 41040 Corlo di
Formigine (Modena), Italy, to aid the Company in securing the
production of sulodexide.
2.8 The Licensor acknowledges and agrees that any use of the Invention
outside the Field of Use for any indication other than intraperitoneal
dialysis and the Field of Not Novel Indications that is discovered by
the Company shall be and remain the property of the Company and the
Company shall enjoy exclusive, worldwide rights to such indication.
4
<PAGE>
2.9 The Company hereby grants to the Licensor right of first negotiation
for a period of 90 days to negotiate in good faith a license agreement
for use of the Invention for any new indication (other than
intraperitoneal dialysis) discovered by the Company during the Term of
this Agreement.
ARTICLE 3 - DUE DILIGENCE
- -------------------------
The Company shall use its reasonable best efforts to bring Licensed Products or
Licensed Processes to market through a thorough, vigorous and diligent
development program of commercial exploitation of the Patent Rights and
Know-how, including compliance with the milestones set forth in Schedule C. The
Company shall continue active, diligent marketing efforts for the Licensed
Products or Licensed Processes throughout the life of this Agreement.
ARTICLE 4 - ROYALTIES AND OTHER CONSIDERATION
- ---------------------------------------------
4.1 In consideration of the rights, privileges and license granted
hereunder, the Company shall pay to the Licensor as set forth in, and
in accordance with the provisions of, this Article 4 until termination
or expiration of this Agreement pursuant to Article 7 hereof.
4.2 The Company shall pay to the Licensor and/or its representatives a
non-refundable quarterly royalty in an amount equal to *** of Net
Sales by the Company, or any Affiliate of the Company, of Licensed
Products or Licensed Processes covered by at least one issued and
unexpired claim under the Patent Rights.
4.3 The Company shall pay to the Licensor a non-refundable quarterly
royalty in an amount equal to the lesser of (a) *** of the royalties
received by Licensee or its Affiliate from sales by any sublicensee of
Licensed Products or Licensed Processes and (b) *** of Net Sales by any
such sublicensee.
4.4 In addition, the Company shall pay to the Licensor *** of all lump-sum
payments received by the Company or an Affiliate from its sublicensees
for the use, lease or sale of Licensed Products and Licensed Processes,
excluding (a) payments used or reimbursed for research and development
and (b) payments received from the issuance of debt or equity
securities of the Company.
4.5 The Company agrees to pay to the Licensor the Milestone Payments set
forth on Schedule C attached hereto, which shall be deducted from or
credited against, as the case may be, payments made in accordance with
section 4.4 above.
5
<PAGE>
4.6 On each anniversary of the Effective Date, the Company shall pay to the
Licensor an annual fee in the following amounts which shall be fully
creditable against Milestones 2 through 5 as set forth on Schedule C
attached hereto: (a) Year 1 - *** (b) Year 2 - *** (c) Year 3 - *** (d)
Year 4 and thereafter - ***.
4.7 On sales of Licensed Products by the Company to Affiliates or related
parties that are end users of such Licensed Products, the value of Net
Sales attributed under this Article 4 shall be that which would have
been received in an arms-length transaction, based on sales of like
quantity and quality products at or about the time of such transaction.
4.8 No multiple royalties shall be payable because the use, lease or sale
of any Licensed Product or Licensed Process is, or shall be, covered by
more than one valid and unexpired claim contained in the Patent Rights.
In addition, royalties shall be paid for a Licensed Product or Licensed
Process based upon only one of paragraphs 4.2 or 4.3 above (that is,
royalties on direct sales of a Licensed Product or Licensed Process by
the Company or its Affiliates shall be based only on paragraph 4.2,
while royalties on sales of a Licensed Product or Licensed Process by
the Company's sublicensees shall be based only on paragraph 4.3, so as
to avoid double counting).
4.9 In the event that a Licensed Product is sold in the form of a
combination product containing one or more products or technologies
that are themselves not a Licensed Product, the Net Sales for such
combination product shall be calculated by multiplying ***. In the case
of a combination product which includes one or more Licensed Products,
the Net Sales for such combination product upon which the royalty due
to the Licensor is based shall not be less than the normal aggregate
Net Sales for such Licensed Product.
4.10 Royalty payments shall be paid in United States dollars in New York,
New York or at such other place as the Licensor may reasonably
designate consistent with the laws and regulations controlling in any
foreign country. Any withholding taxes that the Company, its Affiliate
or any sublicensee shall be required by law to withhold on remittance
of the royalty payments shall be deducted from such royalty payment to
the Licensor. The Company shall furnish the Licensor with the original
copies of all official receipts for such taxes. If any currency
conversion shall be required in connection with the payment of
royalties hereunder, such conversion shall be made by using the
exchange rate prevailing at Citibank, N.A. in New York, New York on the
last business day of the calendar quarterly reporting period to which
such royalty payments relate. The Company will reasonably cooperate
with the Licensor in the Licensor's effort to avoid a double taxation,
provided however that the Company shall not be required to pay any sums
to or on behalf of the Licensor pursuant to this section 4.10. Such
assistance shall not be interpreted to include the assistance or
cooperation by the Company in any illegal activity or tax evasion
6
<PAGE>
by the Licensor.
4.11 Royalties payable to the Licensor shall be paid quarterly on or before
forty-five (45) days from the end of each such calendar quarter. Each
quarterly payment shall be for unpaid royalties that accrued within or
prior to the Company's two most recently completed fiscal quarters.
4.12 Payment obligations shall be due with respect to any sale or sublicense
covering any Licensed Product in the Territory
4.13 To the extent that the Company or any Affiliate of the Company is
required, by order or judgement of any court to obtain in any
jurisdiction any license from a third party in order to make, use or
sell any Licensed Product or Licensed Process, then up to *** of the
royalties payable hereunder with respect to such Licensed Product or
Licensed Process in such jurisdiction may be deducted from royalties
otherwise payable to the Licensor hereunder, provided that in no event
shall the aggregate royalties payable to the Licensor in any quarterly
period in such jurisdiction be reduced by more than *** as a result of
such deduction, and provided further that any excess deduction
remaining as a result of such limitation may be carried forward to
subsequent periods.
4.14 In the event that the Licensor or any sublicensee registers, makes, has
made, uses, leases, markets and/or sells any product in Germany,
Switzerland, Greece, Sweden, Norway, Finland, Denmark, the United
Kingdom, Ireland, France and/or Benelux, which incorporates information
or know-how provided to the Licensor by the Company pursuant to
paragraph 5.1 hereof, then the Licensor shall pay to the Company
royalties in an amount equal to *** of Net Sales by the Licensor or any
such sublicensee and *** of any lump-sum payments received by the
Licensor from such sublicensee. Notwithstanding the foregoing, any
novel indication (which is defined as any indication different from
intraperitoneal dialysis and not included in the Field of Use and/or in
the Field of Not Novel Indications) discovered by the Company shall be
and remain the property of the Company for which it shall have
exclusive world-wide rights to such indication.
4.15(a) In the event that the Company develops proprietary information and data
including but not limited to pre-clinical studies and clinical studies
with applications outside the Field of Use and/or in the Field of Not
Novel Indications ("Company Proprietary Information"), the Licensor
shall be entitled to use the Company Proprietary Information within the
Field of Use and/or in the Field of Not Novel Indications and outside
the Territory but excluding those territories referred to in Section
4.14 above. In consideration for the use of the Company Proprietary
Information, the Licensor shall pay the Company a fee in U.S. dollars
equal to *** of the Company's expenses actually incurred for such
information and data development, payable upon delivery thereof by the
Company to the Licensor. The Licensor shall not be entitled to
sublicense, assign, transfer, market or commercially exploit the
Company Proprietary Information. The provisions of this section 4.15,
shall not limit the Company's right to receive royalties pursuant to
Section 4.14 above.
7
<PAGE>
(b) In the event that the Licensor discovers and develops novel indications
outside the Field of Use and/or in the Field of Not Novel Indications
but including the field of interperitoneal dialysis, the Licensor may
have the option to purchase any relevant Company Proprietary
Information relating thereto. In consideration for the use of the
Company Proprietary Information, the Licensor shall pay the Company a
fee in U.S. dollars equal to *** of the Company's expenses actually
incurred for such information and data development, payable upon
delivery thereof by the Company to the Licensor.
ARTICLE 5 - REPORTS AND RECORDS
- -------------------------------
5.1 The Company agrees to update the Licensor at least quarterly as to the
Company's activities related to the Invention including, without
limitation, the following: (a) the results of any research and
development of the Invention conducted by the Company and (b) the
Company's efforts to obtain approval from the FDA to market and sell
Licensed Products.
5.2 The Company shall keep full, true and accurate books of account
containing all particulars that may be necessary for the purpose of
showing the amounts payable to the Licensor by way of royalty as
aforesaid. Said books of account shall be kept at the Company's
principal place of business and the supporting data shall be available
to the Licensor up to twice per year upon reasonable notice to the
Company, for five years following the end of the calendar year to which
they pertain, for inspection by an auditor selected by the Licensor,
except one to whom the Company has reasonable objection, for the
purpose of verifying the Company's royalty statement or compliance in
other respects with this License Agreement. If an inspection shows an
under reporting or underpayment in excess of the greater of *** *** of
royalties payable for any 12 month period, then the Company shall
reimburse the Licensor for the cost of the inspection at the time the
Company pays the unreported royalties, including any late charges as
required by paragraph 5.5 of this Agreement. All payments required
under this Article 5 shall be due within 60 days of the date the
Licensor provides the Company notice of the payment due.
5.3 Within 45 days from the end of each quarter of each calendar year, the
Company shall deliver to the Licensor complete and accurate reports,
giving such particulars of the business conducted by the Company during
the preceding quarter under this License Agreement as shall be
pertinent to a royalty accounting hereunder. These shall include at
least the following:
5.3.1 All Licensed Products and Licensed Processes used, leased or sold, by
or for the Company, its Affiliates or any sublicensees.
5.3.2 Total amounts invoiced for Licensed Products and Licensed Processes
used, leased or sold, by or for the Company, its Affiliates or any
sublicensees.
5.3.3 Deductions applicable in computing "Net Sales" as defined in Paragraph
1.6.
8
<PAGE>
5.3.4 Total royalties due based on Net Sales by or for the Company, its
Affiliates or any sublicensee, any lump sum payment due to the
Licensor, pursuant to paragraphs 4.2 - 4.3.
5.3.5 Names and addresses of all sublicensees and Affiliates of the Company.
5.3.6 On an annual basis, the Company's year-end audited financial
statements.
5.4 With each such quarterly report submitted, the Company shall pay to the
Licensor the royalties due and payable under this Agreement. If no
royalties shall be due, the Company shall not be required to make a
report pursuant to this Article 5.
5.5 Amounts that are not paid when due and that are not the subject of a
bona fide dispute shall accrue interest from the due date until paid,
at a rate equal to the then prevailing prime rate of Citibank, N.A.,
plus two percent (2%).
5.6 The Company agrees to forward to the Licensor semi-annually a copy of
any report, which is in substance similar to the report required by
this Article 5, received from any sublicensee as well as any other
documents received from any sublicensee as the Licensor may reasonably
request, as may be pertinent to an accounting of royalties.
5.7 The Licensor agrees to hold in confidence each report delivered by the
Company pursuant to this Article 5 until the termination of this
Agreement. Notwithstanding the foregoing, the Licensor may disclose any
such information required to be disclosed pursuant to any judicial,
administrative or governmental request, subpoena, requirement or order,
provided that the Licensor takes reasonable steps to provide the
Company with the opportunity to contest such request, subpoena,
requirement or order.
ARTICLE 6 - PATENT PROSECUTION AND MAINTENANCE
- ----------------------------------------------
6.1 Within three months from the execution of this Agreement the parties
shall set forth a procedure by which the Licensor will monitor the
Patents and Patent Rights as set forth in Schedule A hereto (as the
same may be amended or supplemented from time to time after the date
hereof), for which the Company will be responsible to diligently
prosecute and maintain in the Territory the Patent Rights including,
but not limited to, the filing of patent applications for inventions
and improvements to the Invention, discovered by the Licensor or the
Company, utilizing such patent counsel as may be mutually agreed upon
by the parties hereto. The Company agrees to keep the Licensor
reasonably well informed with respect to the status and progress of any
such applications, prosecutions and maintenance activities and to
consult in good faith with the Licensor and take into account the
Licensor's comments and requests with respect thereto. Both parties
agree to provide reasonable cooperation to each other to facilitate the
application and prosecution of patents pursuant to this Agreement.
9
<PAGE>
6.2 The Company may, in its discretion, elect to abandon any patent
application or issued patent comprising the Patents Rights, in which
case the Company shall make no further use of such Patent Rights and
shall have no further royalty obligation to the Licensor in respect of
any Licensed Products and Licensed Processes the manufacture, use or
sale of which is covered by an issued claim of such abandoned Patent
Rights. Prior to any such abandonment, the Company shall give the
Licensor at least 60 days notice and a reasonable opportunity to assume
prosecution of such Patent Rights. In such event, the Licensor shall
have the right, but not the obligation, to commence or continue such
prosecution and to maintain any such Patent Rights under its own
control and at its expense and the Company shall then make no further
use of any such Patent Rights and shall have no royalty or other
obligation to the Licensor in respect of any Licensed Products and
Licensed Processes, the manufacture, use or sale of which is covered by
an issued claim of such Patent Rights. The Company agrees to cooperate
in such activities, including execution of any assignment or other
documents necessary to enable the Licensor to obtain and retain sole
ownership and control of such Patent Rights.
ARTICLE 7 - TERMINATION
- -----------------------
7.1 If the Company shall become bankrupt, or shall file a petition in
bankruptcy, or if the business of the Company shall be placed in the
hands of a receiver, assignee or trustee for the benefit of creditors,
whether by the act of the Company or otherwise, this License Agreement
shall automatically terminate.
7.2 In the event that the Company fails to make payment to the Licensor of
royalties due in accordance with the terms of this Agreement, provided
such failure to make payment is not as a result of a bona fide dispute
between the Licensor and the Company, the Licensor shall have the right
to terminate this License Agreement within 60 days after giving said
notice of termination unless the Company shall pay to the Licensor,
within the 60-day period, all such royalties due and payable. Subject
to Article 8, upon the expiration of the 60-day period, if the Company
shall not have paid all such royalties due and payable, the rights,
privileges and license granted hereunder shall, at the option of the
Licensor, immediately terminate.
7.3 Upon any material breach or default of this License Agreement by the
Company, other than as set forth in Paragraphs 7.1 and 7.2 hereinabove,
the Licensor shall have the right to terminate this Agreement and the
rights, privileges and license granted hereunder upon giving 60 days
notice to the Company. Such grounds for termination include, but shall
not be limited to, the Licensor's reasonable determination that the
Company is not using its reasonable best efforts to develop the
Invention and keep Licensed Products or Licensed Processes reasonably
available to the public after commercial use commences. Such
termination shall become effective immediately unless the Company shall
have cured any such breach or default prior to the expiration of the
60-day period referred to above. Notwithstanding the foregoing, in the
case of any sublicensee, assignee, transferee, or third party ("Third
Party"), the Company shall be entitled to cure the breach within the
aforementioned sixty (60) day period or terminate its agreement
10
<PAGE>
with the Third Party as a result of such a breach. In either of such
events, the Licensor shall not have the right to terminate this
Agreement, it being agreed that the Licensor shall only be entitled to
terminate this Agreement as a result of a breach by a Third Party in
circumstances where the Company allows the breach to continue without
curing same or terminating its agreement with the Third Party.
7.4 The Company shall have the right at any time to terminate this
Agreement in whole or as to any portion of the Patent Rights by giving
60 days notice thereof in writing to the Licensor. In the event of
termination pursuant to this Section 7.4, the Company shall transfer
the INDs/NDAs/registrations/marketing authorizations in its possession
or in possession of its sublicensees to the Licensor or to a Licensor's
designee. In consideration of the transfer of such information, the
Licensor shall pay to the Company a lump sum payment in U.S. dollars
equal to 25% of the expenses actually incurred by the Company from the
development of the Invention.
7.5 Upon termination of this Agreement for any reason, nothing herein shall
be construed to release either party from any obligation that matured
prior to the effective date of such termination or obligations under
Articles 5, 8, 9, 10, 15 and 16. The Company and/or any sublicensee
thereof may, however, at any time after the effective date of such
termination and continuing for a period not to exceed six months
thereafter, sell all completed Licensed Products, and any Licensed
Products in the process of manufacture at the time of such termination,
and sell the same, provided that the Company shall pay or cause to be
paid to the Licensor the royalties thereon as required by Article 4 of
this License Agreement and shall submit the reports required by Article
5 hereof on the sales of Licensed Products.
7.6 If not terminated sooner, this Agreement shall terminate upon the later
to occur of (a) the date of the last to expire claim contained in the
Patent Rights and (b) the date that is 10 years from the first
commercial sale of a Licensed Product.
7.7 Upon termination of this Agreement, except pursuant to 7.6 hereof, the
Company shall have no future rights to the Patent Rights and Know-how
granted hereunder, and shall make no further use thereof, including the
manufacture, use or sale of Licensed Products or Licensed Processes,
except as otherwise set forth herein.
7.8 If at any time on or before the fourth anniversary of the Effective
Date, the Board of Directors of the Company shall determine, in its
sole discretion not to proceed with the further development of the
Patent Rights and Know-how then the Company shall no longer have any
right, title and interest in the Patent Rights and Know-how
ARTICLE 8- ARBITRATION
- ----------------------
8.1 Any dispute arising from or relating to this Agreement shall be
determined by valid and binding arbitration in London, United Kingdom
and shall be conducted in the English language.
11
<PAGE>
8.2 Any claim, dispute, or controversy concerning the validity,
enforceability, or infringement of any patent contained in the Patent
Rights licensed hereunder shall be resolved in court having
jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall arise
concerning the validity, enforceability, or infringement of any patent
contained in the Patent Rights licensed hereunder, the arbitrators
shall, to the extent possible, resolve all issues other than validity,
enforceability, and infringement. In any event, the arbitrators shall
not delay the arbitration proceeding for the purpose of obtaining or
permitting either party to obtain judicial resolution of such issues,
unless an order staying the arbitration proceeding shall be entered by
a court of competent jurisdiction. Neither party shall raise any issue
concerning the validity, enforceability, or infringement of any patent
contained in the Patent Rights licensed hereunder, in any proceeding to
enforce any arbitration award hereunder, or in any proceeding otherwise
arising out of any such arbitration award.
8.4 The costs of such arbitration shall be borne proportionate to the
finding of fault as determined by the Arbitrator. Judgment on the
arbitration award may be entered by any court of competent
jurisdiction.
ARTICLE 9 - INFRINGEMENT AND OTHER ACTIONS
- ------------------------------------------
9.1 The Company and the Licensor shall promptly provide written notice, to
the other party, of any alleged infringement by a third party of the
Patent Rights and provide such other party with any available evidence
of such infringement.
9.2 During the term of this Agreement, the Company shall have the right,
but not the obligation, to prosecute and/or defend, at its own expense
and utilizing counsel of its choice, any infringement of, and/or
challenge to, the Patent Rights. In furtherance of such right, the
Licensor hereby agrees that the Company may join the Licensor as a
party in any such suit, without expense to the Licensor. No settlement,
consent judgment or other voluntary final disposition of any such suit
that would adversely affect the rights of the Licensor may be entered
into without the consent of the Licensor, which consent shall not be
unreasonably withheld. The Company shall indemnify and hold the
Licensor harmless against any costs, expenses or liability that may be
found or assessed against the Licensor in any such suit other than
resulting from the Licensor's gross negligence, recklessness or willful
misconduct.
9.3 In the event that a claim or suit is asserted or brought against the
Company alleging that the manufacture or sale of any Licensed Product
by the Company, an Affiliate of the Company, or any sublicensee, or the
use of such Licensed Product by any customer of any of the foregoing,
infringes proprietary rights of a third party, the Company shall give
written notice thereof to the Licensor. The Company may, in its sole
discretion, modify such Licensed Product to avoid such infringement
and/or may settle on terms that it deems advisable in its sole
discretion, subject to paragraph 9.2. Otherwise, the Company shall have
the right, but not the obligation, to defend any such claim or suit. In
the event the Company elects not to defend such suit, the Licensor
shall have the right, but not the obligation to do so at its
12
<PAGE>
sole expense.
9.4 Any recovery of damages by the Company, in any such suit, shall be
applied first in satisfaction of any unreimbursed expenses and legal
fees of the Company relating to the suit and then to the Licensor for
any royalties credited in accordance with paragraph 9.5. The balance
remaining from any such recovery shall be shared by the Licensor and
the Company seventy percent (70%) to the Company and thirty percent
(30%) to the Licensor.
9.5 The Company may credit up to fifty percent (50%) of any reasonable
litigation costs incurred by the Company in any country pursuant to
this Article 9 and up to 50% of all amounts paid in judgement or
settlement of litigation within the scope of this Article 9 against
royalties payable to the Licensor hereunder for such country and apply
the same toward one-half of its actual, reasonable out-of-pocket
litigation costs. If one-half of such litigation costs in such country
exceeds 50% of royalties payable to the Licensor in any year in which
such costs are incurred than the amount of such costs, expenses and
amounts paid in judgement or settlement, in excess of 50% of the
royalties payable to the Licensor shall be carried over and credited
against royalty payments in future years for such country.
9.6 If within 90 days from receipt of notice by the Company of any alleged
infringement, the Company shall have been unsuccessful in persuading
the alleged infringer to desist, or shall not have brought and shall
not be diligently prosecuting an infringement action, or if the Company
shall notify the Licensor, at any time prior thereto, of its intention
not to bring suit against the alleged infringer, then, and in those
events only, the Licensor shall have the right, but not the obligation,
to prosecute, at its own expense and utilizing counsel of its choice,
any infringement of the Patent Rights, and the Licensor may, for such
purposes, join the Company as a party plaintiff. The total cost of any
such infringement action commenced solely by the Licensor shall be
borne by the Licensor and the Licensor shall keep any recovery or
damages for infringement or otherwise derived therefrom and such shall
not be applicable to any royalty obligation of the Company.
9.7 In any suit to enforce and/or defend the Patent Rights pursuant to this
License Agreement, the party not in control of such suit shall, at the
request and expense of the controlling party, cooperate in all respects
and, to the extent possible, have its employees testify when requested
and make available relevant records, papers, information, samples,
specimens, and the like.
ARTICLE 10 - LIMITATION OF LIABILITY, INDEMNITY
- -----------------------------------------------
10.1 Other than as set forth in Article 2 hereof, the Licensor, by this
License Agreement, makes no representations or warranties as to the
validity and/or breadth of the inventions contained in the Patent
Rights and the Company so acknowledges. Other than as set forth in
Article 2, the Licensor, by this License Agreement makes no
representations or warranties as to patents now held or which will be
held by others in the field of the Licensed Products and/or Licensed
Processes for a particular purpose.
13
<PAGE>
10.2 Except as may be expressly provided herein, the licensor does not make,
and expressly disclaims any warranties, either express or implied, oral
or written, as to merchantability or fitness for a particular purpose.
10.3 The Company agrees to defend, indemnify and hold the Licensor harmless
from and against all liability, demands, damages, including without
limitation, expenses or losses including death, personal injury,
illness or property damage (each a "Claim") arising directly or
indirectly: (a) out of use by the Company or its transferees of
inventions licensed or information furnished under this License
Agreement or (b) out of any use, sale or other disposition by the
Company or its transferees of Patent Rights, Licensed Products or
Licensed Processes, except to the extent, in each such case, that such
Claim results from or arises out of the Licensor's gross negligence,
recklessness or willful misconduct. The Company agrees that any
sublicense agreement it enters relative to the Licensed Products and/or
Licensed Processes shall contain a covenant by such sublicensee
providing for the indemnification of the Licensor as provided in this
Article.
ARTICLE 11 - ASSIGNMENT
- -----------------------
This Agreement and the rights and duties appertaining hereto may not be assigned
by either party without first obtaining the written consent of the other, which
consent shall not be unreasonably withheld. Any such purported assignment,
without the written consent of the other party, shall be null and of no effect.
Notwithstanding the foregoing, either party may assign this Agreement (a) to a
purchaser, merging or consolidating corporation, or acquiror of substantially
all of the party's assets or business and/or pursuant to any reorganization
qualifying under section 368 of the Internal Revenue Code of 1986 as amended, as
may be in effect at such time, or (b) to an Affiliate of the party subject to
the consent of the other party which consent shall not be unreasonably withheld.
ARTICLE 12 - PAYMENT OF FEES AND EXPENSES
- -----------------------------------------
Each of the Company and the Licensor shall be responsible for their own expenses
relating to the preparation and consummation of this Agreement and the
agreements and transactions contemplated hereby.
ARTICLE 13 - USE OF NAMES AND PUBLICATION
- -----------------------------------------
13.1 Nothing contained in this Agreement shall be construed as granting any
right to the Company or its Affiliates to use in advertising,
publicity, or other promotional activities any name, trade name,
trademark, or other designation of the Licensor or any of its units
(including contraction, abbreviation or simulation of any of the
foregoing) without the prior, written consent of the Licensor;
provided, however, that the Licensor acknowledges and agrees that the
Company may use the name of the Licensor in various documents used by
the Company for capital raising and financing without such prior
written consent where the use of such names may be required by law. The
Company agrees to promptly provide the Licensor with a
14
<PAGE>
copy of any documents used by the Company, which contain the name of
the Licensor.
13.2 Nothing herein shall be deemed to establish a relationship of principal
and agent between the Licensor and the Company, nor any of their agents
or employees for any purpose whatsoever. This Agreement shall not be
construed as creating a partnership between the Licensor and the
Company, or as creating any other form of legal association or
arrangement which would impose liability upon one party for the act or
failure to act of the other party.
13.3 In the event that the Licensor desires to publish or disclose, by
written, oral or other presentation, Know-how, Patent Rights, or any
material information related thereto then the Licensor shall use its
best efforts to notify the Company in writing by facsimile where
confirmed by the receiving party, and/or by certified or registered
mail (return receipt requested) of its intention at least 60 days prior
to any speech, lecture or other oral presentation and at least 60 days
before any written or other publication or disclosure. The Licensor
shall include with such notice a description of any proposed oral
presentation or, in any proposed written or other disclosure, a current
draft of such proposed disclosure or abstract. The Company may request
that the Licensor, no later than 30 days following the receipt of such
notice, delay such presentation, publication or disclosure in order to
enable the Company to file, or have filed on their behalf, a patent
application, copyright or other appropriate form of intellectual
property protection related to the information to be disclosed or
request that the Licensor does so. Upon receipt of such request to
delay such presentation, publication or disclosure, the Licensor shall
arrange for a delay of presentation, publication or disclosure until
the earlier to occur of (a) to 90 days and (b) such time as the Company
or the Licensor has filed, or has had filed on its behalf, such patent
application, copyright or other appropriate form of intellectual
property protection in form and in substance reasonably satisfactory to
the Company and the Licensor. If the Licensor does not receive any such
request from the Company to delay such presentation, publication or
disclosure, the Licensor may submit such material for presentation,
publication or other form of disclosure.
ARTICLE 14 - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
- -------------------------------------------------------
Any notice or other communication required or permitted to be given pursuant to
this Agreement shall be in writing and sent by certified first class mail,
postage prepaid, by hand delivery or by facsimile if confirmed in writing, in
each case effective upon receipt, at the addresses below or as otherwise
designated by written notice given to the other party:
In the case of the Licensor:
Alfa Wassermann S.p.A.
Via Ragazzi del '99 no. 5
40133 Bologna - Italy
Tel: 051/6489511
Fax: 051/387914
Attn.: General Management
15
<PAGE>
In the case of the Company:
Partec Ltd.
216 Jaffa Rd.
Sha'arei Ha'ir
Jerusalem, Israel 94383
Tel: 011-972-2-537-4997
Fax: 011-972-2-537-5098
Attn: _________________
Any payment shall be made by SWIFT.
ARTICLE 15 - CONFIDENTIALITY
- ----------------------------
15.1 Any proprietary or confidential information relating to the Invention
(including but not limited to Know-how and patent prosecution documents
relating to Patent Rights) collectively constitute the "Confidential
Information." The Company and the Licensor agree that they will not use
the Confidential Information for any purpose unrelated to this
Agreement, and will hold it in confidence during the term of this
Agreement and for a period of five years after the termination or
expiration date of this Agreement. The Company and the Licensor shall
exercise with respect to such Confidential Information the same degree
of care as the Company and the Licensor exercise with respect to their
own confidential or proprietary information of a similar nature, and
shall not disclose it or permit its disclosure to any third party
(except to those of its employees, consultants, or agents who are bound
by the same obligation of confidentiality as the Company and Licensor
are bound by pursuant to this Agreement). However, such undertaking of
confidentiality by the Company or the Licensor shall not apply to any
information or data which:
15.1.1 The receiving party receives at any time from a third party lawfully in
possession of same and having the right to disclose same.
15.1.2 Is, as of the date of this Agreement, in the public domain, or
subsequently enters the public domain through no fault of the receiving
party.
15.1.3 Is independently developed by the receiving party as demonstrated by
written evidence without reference to information disclosed to the
receiving party.
15.1.4 Is disclosed pursuant to the prior written approval of the disclosing
party.
15.1.5 Is required to be disclosed pursuant to law or legal process
(including, without limitation, to a governmental authority) provided,
in the case of disclosure pursuant to legal process, reasonable notice
of the impending disclosure is provided to the disclosing party and
disclosing party has agreed to such disclosure in writing or has
exhausted its right to contest such disclosure.
16
<PAGE>
ARTICLE 16 - MISCELLANEOUS PROVISIONS
- -------------------------------------
16.1 This License Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the Courts of London, England,
without regard to principles of conflicts of laws.
16.2 Any and all proceedings, documents and other communications or
correspondences shall be in the English language.
16.3 If this Agreement or any associated transaction is required by the law
of any nation to be either approved or registered with any governmental
agency, the Company shall assume all legal obligations to do so and the
costs in connection therewith.
16.4 The Company shall observe all applicable United States and foreign laws
with respect to the use, sale, manufacture and transfer of Licensed
Products and related technical data to foreign countries, including,
without limitation, the regulations of the Food and Drug Administration
and its foreign equivalents, the International Traffic in Arms
Regulations (ITAR), the Export Administration Regulations.
16.5 The parties hereto acknowledge that this Agreement, including the
Appendices and documents incorporated by reference, sets forth the
entire agreement and understanding of the parties hereto as to the
subject matter hereof, and shall not be subject to any change of
modification except by the execution of a written instrument subscribed
to by the parties hereto.
16.6 The provisions of this License Agreement are severable, and in the
event that any provision of this License Agreement shall be determined
to be invalid or unenforceable under any controlling body of law, such
invalidity or unenforceability shall not in any way affect the validity
or enforceability of the remaining provisions hereof.
16.7 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this License Agreement
shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other
party.
16.8 The headings of the several articles are inserted for convenience of
reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement.
16.9 This Agreement will not be binding upon the parties until it has been
signed below on behalf of each party, in which event, it shall be
effective as of the date recited on page one.
16.10 This Agreement embodies the entire understanding of the parties and
shall supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to
the subject matter hereof.
17
<PAGE>
16.11 Each party hereto shall be excused from any breach of this Agreement
which is proximately caused by governmental regulation, act of war,
strike, act of God or other similar circumstance normally deemed
outside the control of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement, in
triplicate by proper persons thereunto duly authorized.
COMPANY LICENSOR
By: /s/ Morris Laster By: /s/ Andrea Golinelli
-------------------------------- -------------------------------------
Name: Morris Laster MD Name: Andrea Golinelli
Title: CEO Title: General Manager
Date: November 15, 1998 Date: November 12th, 1998
18
<PAGE>
SCHEDULE A
to the LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.a
and
PARTEC LTD
PATENTS
- -------
with reference to paragraphs 1.2; 1.2.1; 1.2.2
1. Licensor Reference #S 59 -
Title: "Heparin Derivatives and Process for Their Preparation"
Inventors: S. Piani, G.F. Tamagnone, R.R. Alpino, M.R. Milani, M. Fantuz
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 05/26/89 357.548 04/23/91 5010063 05/25/09
Canada 06/09/89 602.338 10/27/92 1309402 10/27/09
Australia 05/24/89 35128/89 09/29/91 611.028 05/24/09
Japan 06/09/89 148211/89 01/11/96 2008236 06/09/09
New Zealand 05/22/89 229212 06/21/91 229.212 05/22/05
South Africa 05/23/89 89/3882 02/28/90 89/3882 05/23/09
2. Licensor Reference #S 61 -
Title: "Heparinic Derivatives and Process for Their Preparation"
Inventors: S. Piani, G.F. Tamamgnone, R.R. Alpino, M.R. Milani, M. Fantuz
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 09/01/90 462462 04/14/92 5104860 01/09/10
Canada 01/11/90 2007616 05/14/96 2007616 01/11/10
Australia 01/29/90 4858/90 09/02/91 610034 01/29/10
Japan 01/29/90 20343/90 07/28/95 1956469 01/29/10
New Zealand 01/15/90 232115 09/26/91 232115 01/15/06
South Africa 01/15/90 90/0263 10/31/90 90/0263 01/15/10
a
<PAGE>
3. Licensor Reference #S 63 -
Title: "Salts of GAGs With Esters of Aminoacids, Preparations thereof and
Pharmaceuticals Formulations Containing Them"
Inventors: M. Cristofori, E. Marchi, L.G. Rotini
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP DATE
Japan 11/12/91 295/839 08/22/96 2550452 11/12/11
4. Licensor Reference #S 64 -
Title: "Pharmaceutical Compositions Containing Orally Absorbable
Glycosaminoglycans"
Inventors: M. Cristofori E. Marchi, L.G. Rotin,
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP DATE
U.S.A. 01/15/92 821455 10/12/93 5252339 01/15/12
Canada 01/22/92 2059865 01/22/12
Japan 01/29/92 13943/1992 02/26/96 2025632 01/29/12
5. Licensor Reference #S 68 -
Title: "Use of Glycosaminoglycans in the Treatment of Diabetic Nephropathy
and Diabetic Neuropathy"
Inventors: E. Marchi and G.F. Tamagnone
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP DATE
U S.A 04/20/92 871.048 08/17/93 5236910 04/20/12
Canada 04/20/92 2066785 04/22/12
b
<PAGE>
6. Licensor Reference #S 70 -
Title: "Semi-synthetic Glycosaminoglycans with Heparin or Heparan
Structure of (alpha)-L-iduronic-2-O-sulfate acid Modified in Position 2"
Inventors: S. Piani, E. Marchi and G.F. Tamagnone, F. Ungarelli
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 04/13/93 046.248 04/07/95 51430133 04/13/13
Canada 04/01/93 2093147 04/10/13
Australia 04/13/93 36895/93 08/01/95 658.498 04/13/13
Japan 04/16/93 89976/1993 04/16/13
New Zealand 03/18/93 247.196 06/20/95 247.196 03/18/13
South Africa 03/12/93 93-1798 01/26/94 93-1798 03/12/13
7. Licensor Reference #S 71 -
Title "Semi-synthetic Glycosaminoglycans containing -L-galacturonic acid
Substituted with Nucleophilic Groups in Position 3"
Inventors: S. Piani, E. Marchi and G.F. Tamagnone, F. Ungarelli
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 04/13/93 046.247 04/07/95 5430132 04/13/13
Canada 04/01/93 2093148 04/10/13
Australia 04/13/93 36896/93 08/01/95 658.499 04/13/13
Japan 04/16/93 89977/1993 04/16/13
New Zealand 03/18/93 247.197 06/20/95 247.197 03/18/13
South Africa 03/12/93 93-1799 02/23/94 93-1799 03/12/13
8. Licensor Reference #S 74 -
Title: "Process for Synthesis of Glycosaminoglycans with Heparin or
Hepatran Structure Modified in Position 2 of the
(alpha)-L-iduronic-20-sulfate acid"
Inventors: F. Ungarelli and S. Piani
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 03/07/94 206.980 04/11/95 5405949 03/07/14
Canada 02/03/94 2114862 02/03/14
Australia 02/10/94 55085/94 03/23/96 664.939 02/10/14
Japan 03/29/94 59447/1994 03/29/14
New Zealand 02/03/94 250.815 06/04/96 250.815 02/03/14
South Africa 02/11/94 94/0970 10/26/94 94/0970 02/11/14
c
<PAGE>
9. Licensor Reference #S 75 -
Title: "Process for Synthesis of Glycosaminoglycans Containing
(alpha)-L-galacturonic acid Substituted with Nucleophilic Groups in
Position 3"
Inventors: F. Ungarelli and S. Piani
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 03/07/94 207.140 04/25/95 5410039 03/07/14
Canada 02/03/94 2114863 02/03/14
Australia 02/10/94 55084/94 03/26/96 664.938 02/10/14
Japan 03/29/94 59448/1994 03/29/14
New Zealand 02/03/94 250.816 06/04/96 250.816 02/03/14
South Africa 02/09/94 94/0892 01/26/94 94/0892 02/09/14
10. Licensor Reference #S 78 -
Title: "Method of Treatment Diabetic Neuropathy By Means of Sulodexide and
of Medicines Containing it"
Inventors: E. Marchi and G.F. Tamagnone
Owner: Alfa Wassermann S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
U.S.A. 4/14/94 227502 03/05/96 5496807 04/14/14
Canada 03/23/94 2120062 03/28/14
Japan 04/28/94 1713/1994 04/28/14
11. Licensor Reference #8 90 -
Title: "Use of Sulodexide and of Medicines Containing it for the Treatment
of Diabetic Retinopathy"
Inventors: E. Palazzini and F. Rubbi
Owner: Alfa Wasserman S.p.A.
STATE FILING DATE FILING NO. GRANT DATE GRANT NO. EXP. DATE
Italy* 04/15/984 B098A 000239 04/15/18
* In case of abroad territorial extension of this patent application and to
claim the priority rights, it will be necessary to carry out the extension
procedure prior to April 15, 1999.
COMPANY LICENSOR
By: /s/ Morris Laster By: /s/ Andrea Golinelli
-------------------------------- ------------------------------
Name: Morris Laster, MD Name: Andrea Golinelli
Title: CEO Title: General Manager
Date: November 15, 1998 Date: November 12th, 1998
d
<PAGE>
SCHEDULE B
to the LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.a
and
PARTEC LTD
WITH REFERENCE TO ART. 2.4 HEREWITH ATTACHED THE LIST OF DOCUMENTATION.
COMPANY LICENSOR
By: /s/ Morris Laster By: /s/ Andrea Golinelli
-------------------------------- -------------------------------------
Name: Morris Laster MD Name: Andrea Golinelli
Title: CEO Title: General Manager
Date: November 15, 1998 Date: November 12th, 1998
i
<PAGE>
SCHEDULE C
to the LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.a
and
PARTEC LTD
PERFORMANCE MILESTONE PAYMENTS
- ------------------------------
The Company shall make the following payments (the "Milestone Payments") which
shall be creditable against or deductible from all payments due from the Company
to the Licensor earned pursuant to articles 4.2 and/or 4.3:
MILESTONE AMOUNT
- --------- ------
1. Effective Date $ ***
2. Approval of the first Company sponsored
Investigational New Drug Application ("IND")
for a Licensed Product by the FDA $ ***
3. Initiation of the first Company sponsored
Phase III clinical trial for a Licensed Product $ ***
4. The first filing of a New Drug Application
("NDA") by the Company or a Sublicensee of
the Company with the FDA (Schedule D) $ ***
5. The first final approval by the FDA of an
NDA for a Licensed Product (Schedule D) ***
COMPANY LICENSOR
By: /s/ Morris Laster By: /s/ Andrea Golinelli
-------------------------------- -------------------------------------
Name: Morris Laster MD Name: Andrea Golinelli
Title: CEO Title: General Manager
Date: November 15, 1998 Date: November 12th, 1998
i
<PAGE>
SCHEDULE D
to the LICENSE AGREEMENT
between
ALFA WASSERMANN S.p.a
and
PARTEC LTD
Payable in cash or equity at the discretion of the Company. The Company shall
only be entitled to make payments in equity if the Company is a publicly traded
company. Any equity payments payable hereunder shall be priced at the average
closing price of the common stock of the Company for the ten (10) consecutive
trading days immediately preceding the date of achievement of any such milestone
or the date upon which any such payment becomes due, whichever is earlier
COMPANY LICENSOR
By: /s/ Morris Laster By: /s/ Andrea Golinelli
-------------------------------- -------------------------------------
Name: Morris Laster, MD Name: Andrea Golinelli
Title: CEO Title: General Manager
Date: November 15, 1998 Date: November 12th, 1998
I
<PAGE>
EXHIBIT 10.8
CONSULTING AGREEMENT
--------------------
CONSULTING AGREEMENT (this "Agreement") dated as of November 19, 1999 (the
"Agreement") by and between Lakaro Biopharmaceuticals, Inc., (the "Company") and
Shmuel Ben-Sasson, Ph.D. ("Consultant").
WHEREAS the Company desires that it be able to call upon the experience and
knowledge of Consultant in the field of protein kinases modulation (the "Field")
for consultation services and advice in connection with its business;
WHEREAS Consultant is willing to render such services to the Company on the
terms and conditions hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Agreement. The term of this Agreement shall be for three (3)
-----------------
years unless terminated by either party by written notice to the other. This
Agreement shall be automatically extended or renewed for additional three- (3)
year periods unless terminated by either party in accordance with paragraph 5
hereof. The initial period and any extensions or renewals thereof shall
constitute the "Consulting Term."
2. Position and Responsibilities.
-----------------------------
(a) Consultant hereby agrees to serve as a consultant to the Company and to
render such advice and services to the Company as may be reasonably required by
the Company including, without limitation, advising the Company with respect to
the direction of the Company's research and product development and business
development activities. During the Consulting Term, Consultant shall report
directly to Dr. Morris Laster until such time as a Chief Executive Officer shall
be designated by and for the Company, and then to such Chief Executive Officer.
(b) Consultant shall undertake on a best-efforts basis such consultative
and advisory services as the Company may reasonable request in connection with
the Company's business including, without limitation, the Company's research and
development of its current technologies in the Field and evaluation and analysis
of any technologies in which the Company shall hereinafter develop a proprietary
or other interest.
<PAGE>
3. Compensation. The Company shall pay Consultant in his capacity as a
------------
consultant to the Company at a rate of two-thousand dollars ($2,000) per month
payable monthly in arrears; and
4. Stock Issuance. Upon the execution of this Agreement, the Company
--------------
shall issue to the Consultant 268,512 shares of common stock of the Company in
recognition of his contributions as the primary inventor of the signal
transduction technology being licensed by the Company from the Children's
Medical Center Corporation, and for the payment of $269.00 (the par value of
shares), receipt of which is hereby acknowledged.
5. Expenses. The Company shall reimburse the Consultant for all normal
--------
expenses incurred by Consultant in furtherance of the business and affairs of
the Company against receipt by the Company of appropriate vouchers or other
proof of the Consultant's expenditures and otherwise in accordance with such
expense-reimbursement policy as may from time to time be adopted by the Company.
6. Termination. This Agreement and Consultant's retention hereunder may
-----------
be terminated prior to the end of the Consulting Term for any reason upon one
hundred and eighty (180) days written notice by either party (the "Notice
Period"). In the event that the Consultant is the party giving notice, he shall
be required to continue his work for the Company during the entire notice
period, but if the Company is the party giving notice, it shall have the option
to require the Consultant to cease his work immediately upon receiving such
notice or at any time thereafter during the Notice Period, provided that it
shall continue to be liable to compensate the Consultant for the entire Notice
Period.
7. Confidentiality.
---------------
(a) Consultant recognizes and acknowledges that in the course of his
duties Consultant may receive confidential or proprietary information owned by
the Company, or other third parties with whom the Company has an obligation of
confidentiality. Therefore, during and after the Consulting Term, Consultant
agrees to keep confidential and not disclose or use (except in connection with
the fulfillment of his consulting duties to the Company under this Agreement)
all confidential or proprietary information owned by, or received by or on
behalf of, the Company unless required is required to be disclosed by legal,
administrative or judicial process.
(b) "Confidential Information" shall include, but shall not be limited
to, confidential or proprietary scientific or technical information or data,
business plans, trade secrets, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, manufacturing processes,
financing methods, plans or the business and affairs of the Company generally,
or of any subsidiary or affiliate of the Company.
<PAGE>
(c) "Confidential Information" shall not include, however, (i)
information in the public domain, (ii) information disclosed to Consultant by a
third party entitled to disclose it without any obligation of confidentiality,
(iii) information already known to Consultant prior to its receipt or which is
developed through Consultant's own skill, knowledge, know-how and experience;
provided that Consultant can evidence such prior knowledge by written
documentation, (iv) information which is authorized to be disclosed the Company.
(d) Upon termination of this Agreement and upon written request by the
Company, Consultant shall promptly redeliver to the Company, or, if requested by
the Company, promptly destroy all written Confidential Information and any other
written material containing Confidential Information, and will be permitted to
retain one (1) copy of any such written Confidential Information requested to be
returned or destroyed for Consultant's records.
(e) In the event that Consultant is requested or required (by oral
questions, deposition, interrogatories, requests for information, documentation,
subpoena, civil investigative demand or other process) to disclose all or any
part of any Confidential Information, Consultant shall provide the Company with
prompt notice of such request or requirement, as well as notice of the terms and
conditions of such request or requirement, so that the Company shall have an
opportunity to seek an appropriate protective order. In such case, the parties
will consult with each other on the advisability of pursuing such order or other
legal action or available steps to resist or narrow such request or requirement.
In any event, Consultant shall use his best efforts to obtain and will not
oppose action by the Company to obtain, an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the disclosure
of such information.
8. Ownership of Inventions. In consideration for the compensation paid
-----------------------
to the Consultant by the Company in paragraph 3 of this Agreement, Consultant
hereby assigns to the Company any and all right, title and interest in any
inventions that arise from his consulting activities for the Company hereunder,
and agrees to cooperate fully in the prosecution of any patent application
resulting from any such invention, at the expense of the Company, which
cooperation shall include executing any necessary documents in connection
therewith.
9. Specific Performance. Consultant acknowledges and agrees that the
--------------------
Company's remedies at law for a breach or threatened breach of any of the
provisions of paragraphs 6 through 8 would be inadequate and, in recognition of
this fact, Consultant agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain any form of equitable relief which may be
available to it.
10. Representation of Consultant; Use of Name. Consultant represents that
-----------------------------------------
there are no binding agreements to which he is a party or by which he is bound,
<PAGE>
forbidding or restricting his activities herein. In addition, Consultant
consents to the use of his name in various reports, brochures or other documents
produced by or on behalf of the Company, including any and all documents filed
with the Securities and Exchange Commission.
11. Non-Competition. Consultant understands and recognizes that his
----------------
services to the Company are special and unique and agrees that, during the
Consulting Term and for a period of two (2) years from the date of termination
of his retention hereunder, he shall not in any manner, directly or indirectly,
on behalf of himself or any person, firm, partnership, joint venture,
corporation or other business entity ("Person"), enter into or engage in any
business which manufactures or distributes any product arising out of the Field
directly or indirectly competitive with an existing or future technology of, or
product manufactured or distributed by, the Company in the Field ("Conflicting
Product"), either as an individual for his own account, or as a proprietor,
partner, member, joint venturer, employee, consultant, agent, salesperson,
officer, director or shareholder of a Person operating or intending to operate
within the Field, during the term hereof and as of the date of termination,
conducting or planning to conduct its business (the "Restricted Businesses");
provided, however, that nothing herein will preclude Consultant from holding one
percent or less of the stock of any publicly traded company; or from holding a
position with a Person which does not engage in a business in the Field directly
or indirectly competitive with a Conflicting Product or a Restricted Business so
long as Consultant works solely in a division of such Person which carries on a
bona fide business which is not in the Field or that is not directly or
indirectly competitive with a Conflicting Product or a Restricted Business.
12. Non-Solicitation. During the Consulting Term, and for two (2) years
-----------------
thereafter, Consultant shall not, directly or indirectly, without the prior
written consent of the Company:
(a) interfere with, disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
of its licensors, licensees, clients, customers, suppliers, employees or other
related parties, or solicit or induce for hire any of the employees, agents,
consultants or advisors of the Company or any such individual who in the past
was employed or retained by the Company, within six (6) months of the
termination of said individual's employment or retention by the Company;
(b) solicit or accept employment or be retained by any party who, at
any time during the Term, was a customer or supplier of the Company or any
Affiliate or any licensor or licensee thereof where his position will be related
to a Conflicting Product or to a Restricted Business (as such term is defined in
Section 10 above); or
<PAGE>
(c) solicit or accept the business of any customer or supplier of the
Company or any Affiliate with respect to products similar to those supplied by
the Company.
(d) During and after the Consulting Term, Consultant agrees not to
make any disparaging comment or statement about the Company, whether or not
true, including but not limited to comments which could adversely effect the
conduct of the Company's business, any of its plans or prospects, or the
business name or reputation of the Company.
13. Consultant Not an Employee. The Company and Consultant hereby
--------------------------
acknowledge and agree that Consultant shall perform the services hereunder as an
independent contractor and not as an employee of the Company. Consultant agrees
that he will file his own tax returns on the basis of his status as an
independent contractor for the reporting of all income, social security,
employment and other taxes due and owing on the consideration received by him
under this Agreement and that he is responsible for the payment of such taxes.
Similarly, other than as set forth in this Agreement, Consultant shall not be
entitled to benefits specifically associated with employment status, such as
medical, dental and life insurance of the Company and shall not be entitled to
participate in any other employer benefit programs, except as is set forth in a
separate Subscription Agreement between the parties hereto. As an independent
contractor, Consultant acknowledges, understands and agrees that he is not, and
shall not represent himself to third parties as being, the agent or
representative of the Company nor does he have, and shall not represent himself
to third parties as having, power or authority to do or take any action for or
on behalf of the Company, as its agent, representative or otherwise, except as
specifically set forth herein.
14. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Israel, without regard to principles
of conflicts of laws.
(b) Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding of the parties with respect to the retention of Consultant by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
---------
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term of any other term of this Agreement.
<PAGE>
(d) Severability. In the event that any one or more of the
------------
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
(e) Successors; Binding Agreement. This Agreement shall inure to the
-----------------------------
benefit of and be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns.
(f) Counterparts; Effectiveness. This Agreement may be signed in
---------------------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
Consultant:
By: __________________________________
Name: Shmuel Ben-Sasson, Ph.D.
Company:
LAKARO BIOPHARMACEUTICALS, INC.
By: __________________________________
Name:
Its:
<PAGE>
EXHIBIT 10.9
RESEARCH AGREEMENT
------------------
This Research Agreement (the "Agreement") is made as of this 18th day of
November, 1999 by and between YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW
UNIVERSITY OF JERUSALEM, 46 Jabotinsky Street, Jerusalem ("Yissum") of the one
part, and LAKARO BIOPHARMACEUTICALS, INC. (the "Company") of the other part.
WHEREAS, the Company, pursuant to the License Agreement of even date
herewith, between CMCC and the Company (the "License Agreement"), is the
exclusive licensee of certain rights to certain patents and patent applications
(the "Inventions") currently under development by Dr. Shmuel Ben-Sasson
(hereinafter, "Inventor") at Yissum;
WHEREAS, the Company wishes to finance research which is being carried out
and conducted in the Hebrew University of Jerusalem (hereinafter referred to as
the "University") under the supervision of the Inventor, subject to and as
detailed in the research program annexed hereto as an integral part hereof
(hereinafter referred to as the "Research"); and
WHEREAS, the Company has entered into a definitive license agreement (the
"License Agreement") with Children's Medical Center Corporation ("CMCC") of even
date herewith for the purpose of developing and commercializing the technology
being developed at the University by the Researcher.
WHEREAS, Yissum is the exclusive representative of the University and of
the Researcher in all aspects relating to the Research and/or this Agreement and
all rights whatsoever in the Research and/or the results thereof shall belong to
Yissum and/or CMCC; and
WHEREAS, the University has the facilities and the personnel with the
requisite skills, experience, and knowledge to undertake such Study (as
hereinafter defined); and
WHEREAS, Yissum agrees to procure the performance of the Research in
accordance with the terms and conditions of this Agreement below.
NOW, THEREFORE, the parties agree as follows:
1. Recitals and Definitions. The recitals hereto constitute an integral part
------------------------
hereof. In this Agreement the following expressions shall have the meanings
appearing alongside them.
(a) "University" shall mean the Hebrew University of Jerusalem and/or each
of its branches.
(b) "Research" shall mean the research which is being carried out and
conducted in the University subject to and as detailed in the Research program
annexed hereto as an integral part hereof and marked as Appendix "A".
(c) "Research Program" shall mean the subject matter of the Research as
set forth in Appendix "A".
1
<PAGE>
(d) "Research Results" shall mean the tangible and intangible information
arising out of the Research, including, without limitation, any patents, patent
applications, information, material, results, devices and any know-how arising
therefrom.
(e) "Research Period" shall mean the period set forth in the Research
Program for the performance of the Research.
(f) "Know-how" shall mean the Research Results and/or the patents and/or
the patent registration applications detailed in Appendix "B".
(g) "Agreement" shall mean this agreement together with all the appendices
and annexes hereto.
(h) "Consideration" shall mean the amounts set forth in Appendix C.
2. The Research and its Performance
--------------------------------
(a) Yissum hereby agrees to procure its performance in the University, all
as provided below in this Agreement.
(b) Yissum shall procure the conduct of the Research in accordance with
the Research Program during the Research Period and in accordance with the other
terms and conditions as provided in Appendix "A" hereto. The Company is entitled
to request that Yissum add to or introduce changes in the Research during the
course of the performance of the Research, provided that such additions or
changes as aforesaid are coordinated a reasonable time in advance and also
provided that the Consideration is adjusted to the reasonable satisfaction of
Yissum.
(c) Within sixty (60) days from the date hereof and from time to time
thereafter, the Company agrees to meet with the Researchers to establish
research milestones ("Milestones") which shall be set through good faith
negotiations for the dates which are twelve (12), eighteen (18), twenty-four
(24) and thirty (30) months from the date of this Agreement and to review the
progress towards the attainment of the Milestones. Such Milestones shall be
added to Appendix A and made a part of this Agreement.
(d) This Agreement may be extended for additional one-hundred-eighty (180)
day periods upon the mutual written agreement of the parties, provided the
parties shall have reached an agreement regarding the amount of financing the
Company shall pay to Yissum for the extended period or periods.
(e) On a semiannual basis and commencing six (6) months after the
commencement of the Research and upon the expiration of the Research Period or
of the extended period, Yissum shall give the Company a report detailing the
results and conclusions of the Research (hereinafter referred to as the
"Scientific Report"). For the avoidance of doubt, it is hereby expressed that
the Agreement in general and this clause in particular shall not constitute an
obligation and/or confirmation on the part of Yissum that any results and/or
conclusions will be achieved in consequence of the performance of the Research
and/or that a Product may be developed as a result thereof.
(f) The Company may at any time during the Research Period obtain any
information relating to the Research's performance from Yissum, including plans
and
2
<PAGE>
documents relating thereto. The Company's representative may attend the site
where the Research is being carried out, provided that the time of such visit is
coordinated in advance with Yissum and the Researchers.
3. Improvements and Patent Rights. It is recognized and understood that
------------------------------
certain existing Inventions and technologies are the separate property of the
Company or Yissum and are not affected by this Agreement, and neither Party
shall have any claims to or rights in such separate inventions and/or
technologies. Any improvements or inventions ("Improvements") to the Patent
Rights (as defined in Article I(I) of the License Agreement) resulting from the
Research (including, without limitations, intellectual property rights set forth
in Article I(I)(1)-(5)) shall be promptly disclosed in writing to the Company,
but in no event shall disclosure of such Improvements by Yissum, the Principal
Investigator or other researcher be made to any third party unless in accordance
with this paragraph 3; provided, however, that title to any new Improvements
resulting from the Study shall be in Yissum. Inventorship of such Improvements
shall be determined in accordance with patent law or by mutual agreement if the
Improvements are not patentable. To the extent that Yissum owns the rights of
sole or joint inventorship of such Improvements, the Company is hereby granted,
without further consideration, an exclusive right and license to any
Improvements upon the terms and conditions set forth in the License Agreement
and such Improvements shall be included as a part of the Patent Rights thereof.
In addition, if any such Invention is not patentable or otherwise protectable as
a trade secret, the Company shall have the right to use, develop, manufacture,
have manufactured, market and employ any such unpatentable Inventions without
the obligation to pay any royalties so long as the license is in effect or the
information is in the public domain.
4. Patent Prosecution. Any patents and/or patent applications arising out of
------------------
the Research or contained in the Research Results shall be diligently prosecuted
in accordance with Article VI of the License Agreement.
5. Finance of the Research
-----------------------
(a) In Consideration for the performance of the Research and in order to
finance it, the Company undertakes to pay, or procure its subsidiary, if any, to
pay to Yissum the amount detailed in the appendix annexed hereto as an integral
part hereof and marked as Appendix C.
(b) It is agreed between the parties that the provisions of this Agreement
shall not prevent Yissum, the University and/or the Researchers from obtaining
gifts, grants, donations or other charitable contribution from other entities
for the Research, provided that such entities shall not be granted rights
(commercial, financial or otherwise) in the Research, the Research Results or
the Know-how prejudicing the rights granted to the Company in accordance
herewith.
(c) Should the Research Period be extended as detailed in clause 2(c)
above or for any other reason as agreed to between the parties, the parties
shall determine by agreement the supplemental finance for the period of the
extension and such fee shall be added to the Consideration. The terms and
conditions of this Agreement shall apply, mutatis mutandis, to the supplemental
Consideration.
(d) Yissum shall submit to the Company every six (6) months commencing
from the date of commencement of the Research Period (hereinafter referred to as
the "Reporting
3
<PAGE>
Period") a report of expenses relating to the Research (hereinafter referred to
as the "Expense Report"). The Expense Report shall detail all the expenses
incurred relating to the Research and shall be submitted to the Company within
forty-five (45) days after the expiration of the Reporting Period. A summary
Expenses Report shall be submitted sixty (60) days after the expiration of the
Research Period, and should the Research Period be extended, 60 days after the
expiration of each extended period.
(f) If this Agreement is terminated prior to the end of the Research
Period, all funds paid up to the time of termination shall be considered non-
recoverable by the Company. Additionally, Yissum's sole damages and remedy
shall be to recover from the Company all amounts owed for work completed and
non-cancelable expenses committed through the date of termination based pro-rata
upon the figures in Appendix C, provided, however, that the Company shall
reimburse Yissum for non-cancelable employment obligations entered into by
Yissum as a result of this Agreement, except for the Principal Investigator, for
the remainder of any Agreement year which has begun and within such year the
termination has occurred. Paragraphs 3 (Inventions and Patent Rights), 7
(Confidential Information), 8 (Use of Name), 9 (Publication), and 10
(Indemnification) shall survive any termination of this Agreement.
6. Ownership
---------
Yissum and/or CMCC are the owners of the entire right, title and interest
in the Know-how and the Research Results, as more fully described in Appendix B
attached hereto, and the inventions described and/or claimed therein.
7. Confidentiality
---------------
(a) The Company and Yissum warrants and undertakes that during the term of
this Agreement and subsequent thereto, it shall maintain confidentiality and
also be liable for its employees and/or representative and/or persons acting on
its behalf maintaining absolute confidentiality of all information, details and
data which is in and/or comes to its knowledge and/or that of its employees,
representatives and/or any person acting on its behalf directly or indirectly
relating to the Research, the Know-how, the Product. The Company and Yissum
undertake not to convey or disclose anything in connection with the foregoing to
any entity.
(b) The obligation contained in this clause shall not apply to information
which is:
(i) received by the Company from a third party rightfully in
possession of the same and having the right to disclose the same; or
(ii) now or hereafter in the public domain through no fault of the
Company; or
(iii) disclosed without confidentiality restrictions by the Company
pursuant to prior specific written approval of Yissum; or
(iv) required to be disclosed by legal, administrative or judicial
process; or
4
<PAGE>
(v) approved for public release by written authorization by the
Disclosing Party.
(c) The Company may disclose details and information as aforesaid to its
employees, sub-licensees, potential sub-licensees and other third-parties, if
such sub-licensees, potential sub-licenses or other third-parties have executed
an undertaking for the maintenance of confidentiality as mentioned below.
(d) Without prejudice to the foregoing, the Company shall not mention the
University's name in any manner or for any purpose in connection with this
Agreement, the subject of the Research or any matter relating to the Research or
the Know-how, without obtaining Yissum's prior written consent, unless the
Company reasonably determines that such use of name may be required by law. The
Company shall further procure that any entity connected with and subordinate to
it shall not mention the University's name or the subject of the Research or any
matter relating to the Research as aforesaid unless such information is
otherwise publicly available.
(e) Yissum shall execute and procure that its Researchers, employees
and/or any other person connected with it with regard to the License executes an
undertaking for the maintenance of confidentiality in the form annexed hereto as
an integral part hereof and marked as Appendix E.
(f) The Company shall execute and procure that its employees and every
person connected with it or engaged by it executes an undertaking for the
maintenance of confidentiality in the form contained in Appendix E.
(g) The breach of this clause, including the sub-clauses hereof, by any
person or entity other than Yissum or the Company shall not be deemed a breach
of the Agreement, if Yissum or the Company prove that they took all reasonable
steps to avoid the breach.
(h) The termination of this Agreement shall not release the Company from
its obligations pursuant to this clause, including the sub-clauses hereof.
8. Use of a Party's Name. Neither Party will, without the prior written
---------------------
consent of the other Party, use in advertising, publicity, or otherwise, the
name, trademark, logo, symbol, or other image of the Party or that Party's
employee or agent; provided, however, that Yissum acknowledges and agrees that
the Company may Yissum's name and references to this Agreement and related
agreements and the names of the their employees (including, without limitation,
the Principal Investigator) as they may relate to such agreements in any private
placement memorandum, prospectus, registration statement or any similar
disclosure document used by the Company for capital raising and financing
purposes as may be required by and in accordance with applicable law without
such prior written consent. Yissum may list the existence of this Agreement in
its internal documents and annual reports and databases which are available to
the public and identify the Project by title, Principal Investigators, the
Company, and period and amount of funding.
9. Publications. In the event that Yissum desires to publish or disclose, by
------------
written, oral or other presentation, the Patent Rights or any material
information related thereto which may jeopardize the aforementioned rights then
Yissum shall notify the Company in writing in accordance with Article XIV of
their intention at least fifteen (15) days prior to any speech, lecture or other
oral presentation and at least sixty (60) days prior to any written or
5
<PAGE>
other publication or disclosure. Yissum shall include with such notice a
description of any such proposed oral presentation or, in any proposed written
or other disclosure, a current draft of such proposed disclosure or abstract.
The Company may request that the Inventors and Yissum, no later than thirty (30)
days following the receipt of such notice, delay such publication or disclosure
in order to enable the Company to request that Yissum file, or have filed on its
behalf, a patent application, copyright or other appropriate form of
intellectual property protection related to the information to be disclosed.
Upon receipt of such request, Yissum shall arrange for a delay in such
publication or disclosure until such time as Yissum has filed, or had filed on
its behalf, such patent application, copyright or other appropriate form of
intellectual property protection in form and in substance reasonably
satisfactory to the Company and Yissum. If Yissum receives no such request from
the Company to delay publication or disclosure, then Yissum may submit such
material for publication or presentation or make such other publication or
disclosure. If Yissum has not filed, or had filed on its behalf, such patent
application, copyright or other appropriate intellectual property protection
within thirty (30) days of a request by the Company to Yissum to do so, then the
Company shall have the right but not the obligation to file on behalf of Yissum
any appropriate intellectual property protection upon notice to Yissum within
fifteen (15) days of the expiration of said thirty (30) day period. Upon receipt
of such notice, Yissum shall arrange for a delay in publication or disclosure
until such time as the Company has filed such patent application, copyright or
other appropriate form of intellectual property protection which the Company
agrees to file as soon as is reasonably practicable provided, however that said
deferral shall not exceed ninety (90) days from the receipt of such notice.
10. Liability and Indemnity
-----------------------
(a) The Company agrees to indemnify, hold harmless and defend Yissum, its
trustees, officers, employees, and agents from and against any and all claims,
suits, losses, damages, costs, fees, expenses (including reasonable attorney's
fees), and other liabilities asserted by third parties, both government and non-
government, resulting from or arising out of the Study carried out pursuant to
this Agreement; provided, however, that the Company shall not be liable for (a)
the negligence, intentional wrongdoing, or failure of the Researcher to follow
the Research Program, Yissum, its trustees, officers, employees and agents and
(b) any and all claims for damages to Yissum property or for bodily injury,
death or property damage to employees of Yissum or to any third party acting on
behalf of or under the authorization of Yissum arising out of the performance of
this Agreement, except for the negligent or intentional acts solely of the
Company with respect to both (a) and (b) above. Without limiting the foregoing,
except for the negligence or willful misconduct of Yissum, the Company agrees to
indemnify and defend Yissum from all liabilities, demands, damages, expenses and
losses (including reasonable attorney fees and expenses of litigation) arising
out of the use by the Company, or any party acting on behalf of or under
authorization from the Company, of the Research Results or out of any use, sale
or other disposition by the Company, or by any party acting on behalf of or
under authorization from the Company, of products made or developed
incorporating the Research Results or made by a process incorporating the
Research Results.
(b) Yissum agrees to indemnify, hold harmless and defend the Company, its
directors, officers, employees, and agents from and against any and all claims,
suits, losses, damages, costs, fees, expenses (including reasonable attorney's
fees), and other liabilities asserted by third parties, both government and non-
government, resulting from or arising out of the Research carried out pursuant
to this Agreement as a result of the negligence, intentional wrongdoing of
Yissum, its trustees, officers, employees and agents and any and
6
<PAGE>
all claims for bodily injury, death or property damage to employees of Yissum or
to any third party acting on behalf of or under the authorization of Yissum
arising out of the performance of this Agreement, provided, however, that Yissum
shall not be liable for the negligent or intentional acts solely of the Company.
Yissum, its trustees, officers, employees and agents shall incur no liability
under this Section 10(b) with respect to any claims, suits, losses, damages,
costs, fees, expenses (including reasonable attorney's fees), and other
liabilities asserted by third parties, both government and non-government, as a
result of product liability and/or patent infringement.
11. Term and Termination
--------------------
(a) Subject to the terms and conditions as set forth in this Agreement,
the term of this Agreement shall be for a period of two (2) years.
(b) Without prejudice to Yissum's rights at law or pursuant to this
Agreement, Yissum may terminate this Agreement by notice given to the Company if
a receiver or liquidator is appointed for the Company and/or the Company passes
a resolution for voluntary winding up or a winding up application is made
against the Company and not set aside within sixty (60) days;
(c) Without prejudice to the Company's rights pursuant to this Agreement
or at law, the Company shall be entitled to terminate the Agreement on the
winding up or bankruptcy of Yissum or if Yissum should commit a breach of the
Agreement and not remedy the breach within thirty (30) days of receiving notice
thereof.
(d) Should the Inventor fail to attain any Milestone then the Company
shall be entitled to terminate this Agreement and shall not be obligated to
continue to finance the Research contemplated under this Agreement.
(e) Should the Inventor become unable to complete or continue the Research
for any reason, then Yissum and/or CMCC shall propose a substitute researcher
(the "Substitute Researcher") to the Company. In the event that the Substitute
Researcher is not reasonably acceptable to the Company, then the Company shall
be entitled to terminate this Agreement and shall not be obligated to continue
to finance the Research contemplated under this Agreement.
(f) Upon termination of this Agreement other than pursuant to the above
paragraphs (c) and (d), the Company shall return to Yissum, within fourteen (14)
days of such termination, all material relating to the Research, Know-How and/or
Research Results, and it may not make any further use thereof. Notwithstanding
the foregoing, the termination of this Agreement by the expiry of the term set
forth in subparagraph (a) above, provided that all payments due Yissum shall
have been paid according to the terms of this Agreement, shall not be considered
a termination pursuant to this subparagraph and shall not require the return by
the Company of any materials relating to the Research, Know-How and/or Research
Results or the cessation of the use thereof.
(g) Upon termination of this Agreement, Yissum shall refrain from selling
any shares of common stock of the Company and exercising any warrants owned or
possessed by Yissum and shall return any such shares or warrants to the Company
within fourteen (14) days of such termination.
7
<PAGE>
(h) Termination of this Agreement pursuant to this Article 11 shall not
constitute a breach of, nor result in the termination of, the License Agreement.
8
<PAGE>
12. Governing Law
-------------
The provisions of this Agreement and everything concerning the relationship
between the parties in accordance with this Agreement shall be governed by
Israeli law and jurisdiction shall be granted only to the appropriate court in
Jerusalem.
13. Arbitration
-----------
(a) Any differences or disputes arising between the parties in connection
with the Agreement and/or its interpretation, performance and/or breach shall be
referred for the decision of a tribunal of arbitrators. Each of Yissum and the
Company shall select one arbitrator. The third arbitrator shall be selected by
mutual agreement of the first two.
(b) Should the selected arbitrators be unable to reach agreement as to the
third arbitrator's identity, the arbitrator shall be appointed by the President
of the Israel Bar on the application of either of the parties.
(c) The arbitration shall be held in Israel. The arbitrator shall be
released from the civil procedure and laws of evidence but shall be bound by the
substantive law of Israel and be liable to give grounds for his decision.
(d) The arbitrators' decision shall be final and bind the parties.
(e) The parties execution of this Agreement shall constitute the execution
of an arbitration deed.
14. Miscellaneous
-------------
(a) This Agreement and the rights and duties appertaining thereto may not
be assigned by either party without first obtaining the written consent of the
other. Any such purported assignment, without the written consent of the other
party, shall be null and of no effect. Notwithstanding the foregoing, Yissum or
the Company may assign this Agreement to the following:
(ii) a purchaser, merging or consolidating corporation or acquiror of
substantially all of Yissum's or the Company's assets or business; or
(iii) an Affiliate of Yissum or the Company subject to the consent of
the other Party which consent shall not be unreasonably withheld.
(b) The failure or delay of a party to the Agreement to claim the
performance of an obligation of the other party shall not be deemed a waiver of
the performance of such obligation.
(c) Each party shall bear its own legal and other expenses involved in the
making of this Agreement.
(d) The headings to the clauses in this Agreement are for the sake of
convenience only and shall not serve in the Agreement's interpretation.
9
<PAGE>
(e) This Agreement constitutes a full and complete agreement between the
parties and may only be amended by a document signed by both parties.
(f) The appendixes annexed hereto constitute an integral part hereof and
shall be read jointly with its terms and provisions.
15. Notices
-------
All notices and communications pursuant to this Agreement shall be made in
writing and sent by registered mail to or served at the following addresses:
If to Yissum: Yissum Research Development Company
of the Hebrew University of Jerusalem
POB 4279, Jerusalem.
If to the Company: Lakaro Biopharmaceuticals, Inc.
216 Jaffa Road
Jerusalem 94383
Att: General Counsel
or such other address furnished in writing by one party to the other. Any notice
sent as aforesaid shall be deemed to have been received four days after being
posted by registered mail or one day after personal service, as the case may be.
AS WITNESS THE HANDS OF THE PARTIES:
YISSUM RESEARCH DEVELOPMENT
COMPANY OF THE HEBREW
By: /s/ Moti Perlmutter
----------------------------
Name: Moti Perlmutter
Title: Managing Director
LAKARO BIOPHARMACEUTICALS, INC.
By: /s/ Ira Weinstein
----------------------------
Name: Ira Weinstein
Title: Treasurer
10
<PAGE>
APPENDIX A
Scientific Agenda for KINASE Technology (2000)
***
(paragraph intentionally omitted)
11
<PAGE>
***
(paragraph intentionally omitted)
12
<PAGE>
APPENDIX B - THE KNOW-HOW
Patent Applications
1. Short Peptides Which Selectively Modulate the Activity of Serine/Threonine
Kinases - CMCC 590 - Filed in U.S. (08/861,338), PCT (US98/10319), EPO
(98922571.8), Japan, China, Canada, Australia.
2. Design of Short-Peptides That Selectively Modulate Intracellular
Signaling - CMCC 547 - Filed in U.S.(08/861,153), PCT (US98/10321), EPO
(98922451.4), Japan, China, Canada, Australia
3. Short Peptides Which Selectively Modulate the Activity of Protein Kinases -
CMCC - 679 - Filed in U.S. (09/161,094), PCT (US99/22106).
4. Short Peptides from the B4 and B5 Regions of Protein Kinases Which
Selectively Modulate Protein Kinase Activity - CMCC 775 - Filed in the U.S.
(09/458,491)
Know-How
13
<PAGE>
APPENDIX C - CONSIDERATION
The Company will pay to Yissum the total amount of *** per year for a
two (2) consecutive years as payable in equal quarterly installments commencing
December 15, 1999, and to be made every three (3) months thereafter, provided
that the Research has not otherwise been terminated.
14
<PAGE>
EXHIBIT 10.10
CONFIDENTIAL
MANUFACTURING AGREEMENT
Between
OPOCRIN S.P.A. - having its registered office at via Pacinotti, 3 - 41040 Corlo
di Formigine (Modena) Italy - Via Pacinotti 3 thereinafter referred to as
OPOCRIN)
and
PARTEC having its registered office at 216 Jaffa Road, Jerusalem 94383 Israel
(thereinafter referred to as PARTEC)
(together called PARTIES)
have agreed, on 16 April 1999, as follows:
WHEREAS
OPOCRIN is an Italian firm which has been producing for many years biological
products in bulk from animal glands and tissues. One of these products is
porcine Sulodexide (Glucuronylglucosaminglycansulphate) . ("DS") which OPOCRIN
has been supplying ALFA WASSERMANN (thereinafter referred to as ALFA) for its
specialty VESSEL, since the date of its commercialization.
PARTEC is an Israeli company specialized in the development and marketing of
biopharmaceutical products and is interested in buying DS from OPOCRIN pursuant
to the terms set forth in this Agreement for a product to be registered,
approved and marketed throughout the world (hereinafter referred to as the
TERRITORY).
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
PRODUCTION
1. OPOCRIN agrees to manufacture and PARTEC agrees to purchase amounts
of DS as PARTEC shall order from time to time for sale by PARTEC,
or its licensees, affiliates or partners, in the TERRITORY. OPOCRIN
may, subject to PARTEC's prior written agreement, procure the
supply of DS to PARTEC from a third party, provided that such
supply of DS shall conform in all respects to the requirements set
forth in this Agreement. Partec shall purchase, at a minimum,
amounts of DS from Opocrin sufficient to meet its needs for all
clinical trials of Sulodexide during the term of this Agreement.
Such amounts shall not be less than ten (10) kilograms for the
Phase II trials and one hundred (100) kilograms for the Phase III
trials, provided that the conduct of such trials is approved by the
United States Food and Drug Administration (the "FDA"). Provided
that OPOCRIN continues to comply with its obligations under this
Agreement, PARTEC agrees that it shall continue to purchase from
OPOCRIN all the DS it shall require for the sale and distribution
of Sulodexide subsequent to the approval of such sale by the FDA,
and shall recommend to its sublicensees, if any, that they should
purchase their DS needs from OPOCRIN as well.
2. OPOCRIN states that its production of DS is made according to its
own Drug Master File ("D.M.F.") (which was supplied by ALFA to
PARTEC under a separate agreement) which shall comply with
acceptable manufacturing procedures. OPOCRIN agrees to comply in
the future with the regulations and guidelines promulgated from
time to time by the FDA and other regulatory authorities and
current Good Manufacturing Practices ("cGMP"). The above mentioned
D.M.F. contains an International Validation to exclude the presence
of conventional viruses in the final product.
<PAGE>
CONFIDENTIAL
3. PARTEC's purchase of DS from OPOCRIN shall not confer on PARTEC or
its licensees, affiliates and/or partners, any licensee, express or
implied, of OPOCRIN's proprietary, confidential information and
know-how.
4. OPOCRIN requires a minimum lead time from the placement of an order
up to the date of delivery of forty five (45) Italian business
days. Provided that PARTEC has not been declared in breach of this
Agreement by OPOCRIN, OPOCRIN may not refuse a production order
from PARTEC made pursuant to this Agreement.
5. OPOCRIN shall give written notice of at least sixty (60) days to
PARTEC in the event that it takes any operational or strategic
decision that could affect, in any way, the timely and appropriate
fulfillment of OPOCRIN's obligations set forth in this Agreement
and shall take all necessary steps to prevent such decision having
such effect.
6. OPOCRIN agrees that in the event that (a) it becomes unable to meet
the needs of PARTEC for the production of DS; or (b) PARTEC has
sublicensed some or all of its rights to produce and sell
Sulodexide to a third party that, in spite of PARTEC's
recommendation to purchase its DS needs from OPOCRIN, chooses to
move the manufacture of DS from OPOCRIN to another manufacturer,
OPOCRIN shall transfer, without cost to PARTEC beyond the amounts
set forth in paragraph 10, below, all information produced by it in
connection with the fulfillment of its obligations under this
Agreement, but not proprietary to OPOCRIN, to PARTEC for
transmission to such other manufacturer. In the event that
information proprietary to OPOCRIN is required by the other
manufacturer to produce DS according to the specifications
required, OPOCRIN shall be entitled to a reasonable license fee for
such information upon reasonable terms and conditions to be
negotiated between OPOCRIN and the relevant parties. Absent the
successful conclusion of such a license agreement to OPOCRIN's
proprietary information, OPOCRIN shall have no obligation to
release such proprietary information to PARTEC or any third party.
7. OPOCRIN shall supply all the data in its possession required by
PARTEC in connection with its Initial New Drug application with the
FDA within twenty one (21) days of PARTEC's request for such data.
In addition, OPOCRIN, at the appropriate time, shall generate, in
return for the *** payment set forth in paragraph 10, below, all
reasonable data necessary to support an approvable D.M.F. and shall
provide PARTEC with a letter of authorization referencing the
"closed section" of the D.M.F. for the purposes of complying with
FDA requirements ("Letter of Authorization").
8. As soon as practicable after receiving FDA approval for an
appropriate IND, and in each September thereafter, the PARTIES
shall meet to discuss forecasts of PARTEC's anticipated future
needs. Should the parties agree that PARTEC's anticipated future
needs exceed OPOCRIN's manufacturing capacity, OPOCRIN shall submit
a plan within three (3) months of the data such under-capacity
becomes known to the parties whereby it shall increase such
capacity.
PRICE, SHIPPING AND TERMS OF DELIVERY
9. The per kilogram price for the DS being purchased in connection
with the Phase II and III clinical trials shall be calculated by
multiplying the per kilogram United States bulk price of sodium
heparin at the time each order is placed by PARTEC by a factor of
***. The price quoted by OPOCRIN on each order shall be the total
price invoiced to and paid by PARTEC and shall subsume any and all
costs incurred by OPOCRIN in the performance and production of such
order. The parties shall negotiate in good faith the yearly price
for DS once, and if, the FDA grants its approval for the commercial
marketing of DS.
10. Within ten (10) days of the date of the execution of this
Agreement, PARTEC shall pay to OPOCRIN the amount of ***. This
payment represents (a) a *** non-refundable payment in
consideration of the set-up work that OPOCRIN is required to do at
the proper time to comply with its obligations under this
<PAGE>
CONFIDENTIAL
Agreement, including, but not limited to, the preparation of the
D.M.F., the Letter of Authorization and all supporting materials;
and (b) a *** non-refundable advance against payment for the DS to
be purchased in connection with the Phase II clinical trials.
Within ten (10) days of the successful completion of the Phase II
trials, PARTEC shall pay to OPOCRIN the amount of *** as an advance
against payment for the DS to be purchased in connection with the
Phase III clinical trials. In the event that such Phase III trials
are not held, OPOCRIN shall refund PARTEC this *** prepayment.
11. OPOCRIN sells DS, C.L.F. arrival at a location of PARTEC's
choosing. All orders of DS shall be shipped by OPOCRIN in a manner
that accords with cGMP quality and accreditation requirements.
OPOCRIN shall provide all reasonable documentation necessary to
allow the release of the order from any reasonable customs
restrictions to either PARTEC or a third party designated by
PARTEC, but shall not be responsible for the final clearing of the
order from customs. PARTEC shall be responsible for paying all
appropriate customs duties and charges.
12. PARTEC shall pay for each order of DS as follows: Fifty percent
(50%) of the purchase price by Swift telex transfer to OPOCRIN not
later than 30 (thirty) days from the date of invoice; and fifty
percent (50%) of the purchase price by Swift telex transfer to
OPOCRIN not later than fifty (50) days from the date of the AWB
accompanying the order.
WARRANTY AND QUALITY CONTROL
13. OPOCRIN warrants:
a) That DS shall be of the kind and quality described in the
product specifications of the relative D.M.F.,
b) That the certificate of analysis which will accompany DS is
correct and has been produced using accepted procedures and
standards and by reputable workers, and
c) That it shall update the D.M.F. as required by relevant
governmental requirements of the FDA, with a copy to PARTEC.
14. OPOCRIN agrees that it shall perform a thorough quality control
check on each batch of DS manufactured pursuant to an order
submitted by PARTEC and that such check shall include, but not
necessarily be limited to, characterization and statistical
analysis of potency.
15. At least six (6) weeks Prior to the scheduled dispatch of each
batch of DS, OPOCRIN shall send a sample of the batch to PARTEC, or
to a third party designated in writing by PARTEC. PARTEC shall have
the sample analyzed according to the technique set out in the
D.M.F. and shall communicate the results of the analysis to OPOCRIN
within four (4) weeks of receipt of the sample. If, after
conducting the quality testing set forth in this paragraph, a
sample is determined to have failed such quality testing, OPOCRIN
shall replace, within twenty (20) Italian business days of receipt
of written notification by PARTEC, the defective sample at its own
expense and pay all freight with respect to such replacement.
PARTEC assumes sole responsibility for determining whether the DS
is suitable for the use contemplated by PARTEC.
16. PARTEC, or a third party chosen by it, shall analyze each batch of
DS upon receipt and shall inform OPOCRIN within fourteen (14) days
of PARTEC's receipt of the batch of any discrepancy between the
analysis of the sample provided and approved under paragraph 14,
above, and the analysis of the batch of DS. If, after conducting
the analysis set forth in this paragraph, a batch is determined to
be different than the sample approved under paragraph 14, above,
OPOCRIN shall replace, within 3 (three) weeks of receipt of written
notification by PARTEC, the defective batch at its own expense with
a sample of a new batch in the manner set forth in paragraph 15,
above, and pay all freight and duty with respect to such
replacement,
<PAGE>
CONFIDENTIAL
provided, however, PARTEC has stored the batch under proper
conditions from the date it received such batch. In the event of
any disagreement over the analysis conducted pursuant to this
paragraph, the PARTIES shall use all reasonable means to reach
agreement.
17. In the event that the sample or the batch of DS manufactured by
OPOCRIN to replace the defective batch should itself fail to pass
the agreed upon quality control standards set forth in the D.M.F.
and this Agreement, OPOCRIN shall pay any definitively
ascertainable consequential damages incurred by PARTEC as a result
of the delay in production of Sulodexide tablets engendered by a
delay caused by such failure, including, but not limited to, any
costs associated with the cancellation of tablet manufacturing
previously scheduled in reliance upon OPOCRIN's timely production
and delivery of conforming DS, provided that in no event shall such
damages, even if proven, exceed one-third (1/3) of the purchase
price of such batch.
18. Any dispute regarding the quality of a batch delivered pursuant to
this Agreement that cannot be settled amicably within thirty (30)
days after it arose shall be referred to an independent testing
organization that meets appropriate Good Laboratory Practices or to
a consultant of recognized repute within the European
Pharmaceutical Industry mutually agreed upon by the parties. If the
parties cannot agree on the appointment of such organization or
consultant within forty five (45) days after the dispute arose,
either party may request the chairman of the International Chamber
of Commerce to appoint an organization or consultant. The
determination of the organization or consultant so chosen or
appointed shall be final and binding on the parties. Any fees and
expenses of the organization or consultant shall be borne by the
party against which the determination is made.
RECORDS AND CONFIDENTIALITY
19. OPOCRIN shall maintain the appropriate records in connection with
the production of DS for PARTEC pursuant to this Agreement. At
least once in each six (6) month period (beginning with the
execution of this Agreement), OPOCRIN shall provide PARTEC with a
complete set of such records in electronic and typed form. All
records required to be maintained by this Agreement shall be
maintained in the English language.
20. The parties recognize that in the course of fulfilling their
respective obligations pursuant to this Agreement, they will have
occasion to disclose to each other confidential and proprietary
information. Accordingly, they agree to execute a non-disclosure
agreement substantially in the form as annexed to this Agreement as
Attachment A.
LIABILITY AND INDEMNIFICATION
21. Other than as set forth in paragraph 17 above, OPOCRIN shall only
be liable for any injury, monetary or otherwise, suffered by PARTEC
or any third party in connection with the Product or its use, if
and only to the extent such injury was caused by the Product at
issue not being manufactured in conformance with the requirements
of the D.M.F. and the other provisions of this Agreement.
22. PARTEC agrees to indemnify, hold harmless and defend OPOCRIN, its
trustees, officers, employees, and agents from and against any and
all claims, suits, losses, damages, costs; fees, expenses
(including reasonable attorney's fees), and other liabilities
asserted by third parties, both government and non-government,
resulting from or arising out of the manufacture and supply of the
Product carried out pursuant to this Agreement; provided, however,
that PARTEC shall not be liable for (a) negligence, international
wrongdoing, or failure to follow the provisions of this Agreement,
by OPOCRIN, its trustees, officers, employees and agents and (b)
any and all claims for damages to OPOCRIN property or for bodily
injury, death or property damage to employees of OPOCRIN arising
out of the performance of this Agreement, except for the negligent
or international acts solely of the PARTEC with respect to both (a)
and (b) above, Without limiting the foregoing, except for the
negligence or willful misconduct of OPOCRIN, PARTEC agrees to
indemnify and defend OPOCRIN from all
<PAGE>
CONFIDENTIAL
liabilities, demands, damages, expenses and losses (including
reasonable attorney fees and expenses of litigation) arising out of
the use by PARTEC, or any party acting on behalf of or under
authorization from PARTEC, of the Product; provided, however, that
the Product has been manufactured in accordance with the provisions
of this Agreement. This paragraph shall survive termination of this
Agreement.
23. OPOCRIN agrees to indemnify, hold harmless and defend the PARTEC,
its directors, officers, employees, and agents from and against any
and all claims, suits, losses, damage, costs, fees, expenses
(including reasonable attorney's fees), and other liabilities
asserted by third parties, both government and non-government,
resulting from or arising out of the manufacture and supply of the
Product carried out pursuant to this Agreement as a result of the
negligence, intentional wrongdoing or failure to follow the
provisions of this Agreement, of OPOCRIN, its trustees, officers,
employees and agents and any and all claims for bodily injury,
death or property damage to employees of OPOCRIN or to any third
party acting on behalf of or under the authorization of OPOCRIN
arising out of the performance of this Agreement; provided,
however, that OPOCRIN shall not be liable for the negligent or
intentional acts solely of PARTEC. Except as provided in paragraph
(a) above, OPOCRIN, its trustees, officers, employees and agents
shall incur no liability under this section with respect to any
claims, suits, losses, damages, costs, fees, expenses (including
reasonable attorney's fees), and other liabilities asserted by
third parties, both government and non-government, as a result of
product liability and/or patent infringements.
TERM AND TERMINATION
24. Unless otherwise terminated pursuant to this section, this
Agreement shall remain in force for a period for ten (10) years
from the date of its execution.
25. Notwithstanding the provisions of paragraph 24, above, this
Agreement may be terminated; (a) by either party upon one hundred
and eighty (180) days advance written notice, provided that should
such termination notice be given while OPOCRIN is filling a
previously placed order, such termination shall not take effect
until such order has been completed and supplied to and paid for by
PARTEC; or (b) immediately by either party; (i) if one of the
parties shall be declared insolvent or bankrupt; (ii) if a petition
is filed in any court and not resolved within sixty (60) days to
declare one of the parties bankrupt or for a reorganization
pursuant to the applicable bankruptcy or insolvency laws; or (iii)
if either party becomes involved in any voluntary bankruptcy or
other voluntary insolvency proceedings.
26. Upon the effective date of termination of this Agreement for any
reason, OPOCRIN shall cease accepting orders from PARTEC for the
production of DS and the parties shall return any and all
confidential information belonging to the other party in their
possession.
MISCELLANEOUS PROVISIONS
27. Independent Contractors: The relationship between OPOCRIN and
PARTEC is that of independent contractors and neither's agents,
representatives, or employees shall be considered employees of the
other. The parties shall each conduct their respective businesses
on their own initiative and responsibility and shall have no
authority to incur any obligations on behalf of the other. Except
as otherwise set forth in this Agreement, each party shall pay all
costs and expenses of whatever nature incurred by it in connection
with its activities under this Agreement, including but not
limited, to any commissions paid to agents, representatives, or
employees engaged or employed by it and expenses for travel,
entertainment, offices or any other items.
28. Notices: All notices under this Agreement shall be in writing and
shall be addressed as follows:
<PAGE>
CONFIDENTIAL
TO OPOCRIN
Via Pacinotti, 3
41040 Corlo di Formigne
Modena, Italy
Attention: Dr. G. Veronesi
TO PARTEC
216 Jaffa Road
Jerusalem 94383 Israel
Attention: Bob Trachtenberg
General Counsel
or at such other address as such party may specify in writing from
time to time. All notices shall be sent by certified or registered
mail, first-class postage prepaid, by courier delivery or by
personal delivery, and shall be deemed effective upon actual
receipt, if by personal or courier delivery, and seven (7) days
after its dispatch, if by certified or registered mail.
29. Force Majeure: Neither party shall be liable to the other for its
failure to perform any of its obligations hereunder during any
period in which such performance is delayed by circumstances beyond
its reasonable control, including, but not limited to fire, flood,
war, embargo, strike, riot, inability to secure materials and
transportation facilities or the intervention of any governmental
authority. If such delaying cause shall continue for more than
ninety (90) days, the party injured by the inability of the other
to perform shall have the right upon written notice to either (a)
terminate this Agreement or (b) treat this Agreement as suspended
during the delay and reduce any commitment in proportion to this
duration of this delay.
30. Successors: The terms and conditions of this Agreement shall be
binding on any successors of either party, where such successor has
acquired majority control of such party, provided that either party
or its successor shall be entitled to terminate this Agreement
pursuant to the provisions of paragraph 25(a), above.
31. Assignment: Either party shall be entitled to assign its rights
under this Agreement to a third party upon written notice to the
other party provided that such third party, (a) in the reasonable
opinion of the non-assigning party, is capable of fulfilling the
responsibilities of the assigning party; and (b) adopts the terms
and conditions of this Agreement in writing delivered to the
non-assigning party.
32. Resolution of Disputes: Any disputes arising out of this Agreement
shall be adjudicated before a single arbitrator pursuant to the
rules of the International Chamber of Commerce in Geneva,
Switzerland. Nothing in this paragraph shall prevent either party
from applying to the appropriate judicial authority in whatever
jurisdiction the other party may be sued for provisional relief as
necessary to protect its rights under this Agreement, including,
but not limited to, applications for injunctions and temporary
restraining orders, provided that any proceedings beyond the
proceeding for provisional relief shall be transferred, by consent
of the parties, to the International Chamber of Commerce for
adjudication as set forth above. All pleadings, correspondence,
documents, testimony or other material introduced in any proceeding
before the International Chamber of Commerce in respect to this
Agreement shall be in the English language as shall all
deliberations and proceedings had therein.
33. Entire Agreement: This Agreement, including the Attachments,
constitutes the entire agreement between the parties with respect
to this subject matter and supersedes all previous proposals, both
oral and written, negotiations, representations, commitments,
writings and all other communications between the parties. Each
party acknowledges that in entering into this Agreement, it has not
relied on any promises, inducements or representations of the other
<PAGE>
party that are not explicitly set forth in this written Agreement.
This Agreement may not be released, discharged or modified except
by an instrument in writing signed by the parties.
34. Severability: If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable,
such determination shall not affect the validity or enforceability
of any other part or provision of this Agreement.
35. Authoritative Language: This Agreement has been drafted and agreed
to in the English language, and is the authoritative version for
interpretation and construction by any adjudicative body.
36. Waiver: No waiver of any breach of any provisions of this Agreement
shall constitute a waiver unless made in writing and signed by an
authorized representative of the non-breaching party.
37. Headings: The headings provided in this Agreement are for
convenience and organization only and shall not be construed as
having any substantive effect.
IN WITNESS WHEREOF, each party to this Agreement has executed this Agreement by
a duly authorized representative as of the date set forth above.
OPOCRIN S.P.A. PARTEC LTD.
By: /s/ DR. GIORGIO GIUSTI By: /s/ MORRIS LASTER
------------------------------ -------------------------------
Dr. Giorgio Giusti
Title: President Title: CEO
<PAGE>
CONFIDENTIAL
ATTACHMENT A
PARTEC LTD
Bio-Medical Venture & Management
CONFIDENTIALITY AGREEMENT
This Agreement dated 16 April 1999 shall serve to set forth the terms and
conditions under which Partec Ltd. ("Partec") shall disclose to Opocrin, S.P.A.
("Opocrin") (or the "Receiving Party" or the "Disclosing Party", as appropriate)
proprietary and confidential information to each other, including, but not
limited to any and all information, know-how and data, technical or
non-technical, and product samples and specifications relating to the
manufacture of Sulodexide (the "Information").
1. The Receiving Party agrees not to divulge the Information which the
Disclosing Party discloses to it and which is marked as "Confidential" (the
"Confidential Information") to any third party or parties, or use said
Confidential Information for any purposes other than those purposes set forth in
the Manufacturing Agreement executed between the parties on 16 April 1999. The
Receiving Party further agrees to limit disclosure only to those of its
officers, employees, agents, affiliates and consultants as the Receiving Party
considers necessary. The Receiving Party shall take all reasonable steps to
prevent the disclosure of the Confidential Information as provided herein. This
obligation shall be binding upon the Receiving Party and shall continue for a
period of five (5) years from each date such Confidential Information is
disclosed to the Receiving Party.
2. Nothing in the foregoing shall be construed to prevent the Receiving Party
from disclosing or using any Information or from using Confidential Information
which:
(a) was in the Receiving Party's possession or control prior to the date of
disclosure;
(b) was in the public domain or enters into the public domain through no
improper act on the Receiving Party's part or on the part of any of the
Receiving Party's employees;
(c) is approved for public release by written authorization by the Disclosing
Party;
(d) is developed independent of the information derived from the Confidential
Information;
(e) is required to be disclosed by legal, administrative or judicial order; or
(f) is rightfully given to the Receiving Party from sources independent of the
Disclosing Party, its employees or agents.
3. Oral information which the Disclosing Party wishes to be kept confidential
must be reduced to writing and provided to the Receiving Party within thirty
(30) days of the initial disclosure to the Receiving Party by the Disclosing
Party and conspicuously marked "Confidential."
4. It is understood and agreed that any and all propriety rights, including,
but not limited to, patent rights, trademarks and proprietary rights in and to
the Confidential Information disclosed to the Receiving Party shall be and
remain in the possession of the Disclosing party and the Receiving party shall
have no right, title or interest in or to any of the Confidential Information.
In addition, nothing in this Agreement shall be construed as establishing any
joint venture or other business relationship, as granting to the Receiving Party
any license or right under any patent rights or as representing any commitment
by either party to enter into any license or other agreement by implication or
otherwise.
<PAGE>
5. This Agreement constitutes the entire agreement of the parties pertaining to
the subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between the parties with respect to such
subject matter are hereby superseded in their entirety. The parties have made no
agreements, representations or warranties relating to the subject matter of this
Agreement which are not set forth herein and no agreement, understanding or
promise subsequent to the date hereof relating to the subject matter of this
Agreement, the Confidential Information or otherwise between or by one of the
parties hereto shall be binding upon either party unless in writing and executed
by both The Disclosing Party and the Receiving Party and neither party shall be
reasonable in relying on oral statements made by the other which are not
contained in a written agreement.
6. This Agreement may not be modified, amended or waived in any manner except
by an instrument in writing signed by each of the parties hereto. The waiver by
either party of compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of such party of a provision
of this Agreement. Neither party may assign its rights or obligations hereunder.
7. This Agreement shall be governed by and construed in accordance with the
laws of the United Kingdom without regard to the conflicts of the law principles
thereof.
8. In addition, each party warrants to the other party that the person signing
this Agreement on behalf of the such party is fully authorized to bind the such
party to the obligations set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives as of the day and year
written above.
OPOCRIN S.P.A. PARTEC, LTD.
By: /s/ DR. GIORGIO GIUSTI By: /s/ MORRIS LASTER, MD
--------------------------------- ------------------------------
Name: Dr. Giorgio Giusti Name: Morris Laster, MD
Title: President Title: CEO
<PAGE>
EXHIBIT 10.11
[LOGO OF PII]
Manufacturing Agreement
An agreement made on the 17th of March, 2000, between Pharmaceutics
International, Inc., of 10819 Gilroy Road, Suite 100, Hunt Valley, MD 21031
("PII") and Keryx Biopharmaceuticals, Inc., of 216 Jaffa Road, Jerusalem 94383
Israel ("Keryx"),
Whereas Keryx intends to commence clinical trials of its drug KRX-101 (also
known as sulodexide) *** contingent on FDA approval of its IND; and
Whereas Keryx requires the manufacture of the clinical trial materials ("CTM")
consisting of a certain number of gelcaps containing KRX-101, as well as gelcaps
containing a placebo, to conduct such clinical trials; and
Whereas PII has the necessary expertise to manufacture the gelcaps required by
Keryx.
It is hereby agreed by and between the parties:
1. Keryx's Responsibilities
1.1. Keryx shall be responsible for supplying PII with the following
items:
1.1.1. API - Sulodexide
1.1.2. Technology transfer document including manufacturing
process
1.1.3. Cleaning Method
1.1.4. Material Safety Data Sheet
1.1.5. Packaging protocol
1.2. Keryx shall supply all special assays required for the drug
substance (Factor Xa) and shall source an appropriate outside
testing laboratory.
1.3. Keryx shall be responsible for all analytical method development
(for drug product and drug substance) transfer.
2. PII's Responsibilities
2.1. Feasibility Batch
2.1.1. PII shall review the manufacturing protocol supplied by
Keryx.
2.1.2. PII shall purchase all excipients.
2.1.3. PII shall verify the cleaning method supplied by Keryx.
2.1.4. PII shall then manufacture a feasibility batch of
Sulodexide 50 mg and 100 mg of approximately ***
gelcaps of each strength to assess the manufacturing
parameters. The manufacture of the feasibility batch
shall be completed within two (2) weeks of the date on
which PII receives the Sulodexide material and the
technology transfer document including manufacturing
process.
<PAGE>
[LOGO OF PII]
2.2. Manufacture of the CTM
2.2.1. PII shall manufacture up to *** gelcaps of each of
the following:
. Sulodexide - 50 mg
. Sulodexide - 100 mg
. Placebo - 50 mg
. Placebo - 100 mg
2.2.2. PII shall accept all the excipients, active
pharmaceutical ingredients and packaging components with
vendor Certificate of Analysis and perform full testing
(4 - 6 weeks).
2.2.3. PII shall prepare Master Batch Records for the clinical
supplies.
2.2.4. The CTM shall be manufactured, packaged and labeled by
PII under cGMP conditions as directed by Keryx in the
manufacturing protocol. Manufacturing staff of PII shall
wear respirators and Tyvex suits if appropriate.
2.2.5. Packing component shall be HDPE bottles and blister
packs and shall be packaged by PII in accordance with
the Keryx protocol.
2.2.6. The following in-process and finished-product tests
shall be performed under cGMP condition on the CTM of
each strength or as mutually agreed upon by the parties:
. Visual Inspection
. Shell Hardness
. Weight
. Fill weight
2.2.7. The following in-process and finished-product tests
shall be performed on the placebo CTM or as mutually
agreed upon by the parties:
. Visual Inspection
. Absence of active ingredients
. Hardness
. Weight
2.2.8. PII does anticipate using contract laboratories for some
of the activities (for Microbiology testing) in this
Agreement. PII shall be responsible for ensuring, in
writing, that any contract lab used complied with Good
Laboratory Practices and with all other relevant
requirements set forth in the Agreement between PII and
Keryx.
2.2.9. Manufacturing and packaging of the CTM shall be
completed and the CTM delivered with all appropriate FDA
and cGMP requirement documentation, to Keryx or its
designee(s) within 4 weeks after full testing is
complete.
3. Quality Assurance
3.1. At least five (5) U.S. working days prior to the scheduled
dispatch of each batch of finished gelcaps, PII shall send a
sample of the batch to Keryx, or to a third party designated in
writing by Keryx. Keryx shall have the sample tested by such
third party to ID and release tests.
<PAGE>
[LOGO OF PII]
3.2. If, after conducting such testing, a sample is determined to
have failed to demonstrate the required activity, PII shall redo
the entire batch of gelcaps, at its own expense, within seven
(7) U.S. working days of its receipt of written notification by
Keryx of the negative test.
4. Cost
4.1. The total cost of $ *** including packaging in HPDE bottles,
shall be apportioned as follows:
<TABLE>
<CAPTION>
Activity Cost
-------- ----
<S> <C> <C>
Section 2.1.3 Verification of Cleaning Method $ ***
Section 2.1.4 Feasibility Batches (50 mg/100 mg), Active and
Placebo (4 batches in total) $ ***
Section 2.2.1 Clinical Trial Material Manufacturing:
50 mg/100 mg 32,000 per batch $ ***
Matching Placebos (4 batches in total) $ ***
Section 2.2.5 Packaging in Bottles and Blister Packages TBC
Section 3 General Support $ ***
--------
Total $ ***
========
</TABLE>
4.2. Payments are due fifteen (15) days from the date of each
invoice, except for the first payment, which shall be due five
(5) days from the date of the invoice. Amounts due shall be
invoiced on the following schedule:
<TABLE>
<CAPTION>
Invoice Issue Date Amount Due
<S> <C> <C>
Day I Initiation $ ***
Section 2.1.4 Completion of feasibility batches $ ***
Section 2.2.3 Completion of CTM batch records $ ***
Section 2.2.9 Release of batches $ ***
--------
Total $ ***
========
</TABLE>
4.3. In addition to the above costs, Keryx shall pay to PII upon
receipt of PII's invoice by Keryx for all non-capital materials
(excipients, packaging components, HPLC columns, analytical
standards and tooling, if any) used in the study at ***. PII
shall obtain Keryx's prior written approval for any expenditures
greater than $5,000. For high priced items more than $5,000, PII
shall charge *** to Keryx, PII shall invoice Keryx for all
reasonable and normal out-of pocket travel related expenses,
including airfare, room & board, car rental and the like, of PII
during any technology transfer phase or project update meetings
requested in advance by Keryx. PII shall inform Keryx when non-
approvable invoices (under $5,000 items) reaches a total of
S5,000.
<PAGE>
[LOGO OF PII]
5. Indemnification
5.1. Keryx shall indemnify and hold PII and PII's affiliates and its
and their directors, officers, employees and agents, harmless
from and against any and all costs and expenses (including
attorney's fees) incurred as a result of claims asserted or
suits brought against PII and PII's affiliates, and its and
their directors, officers, employees and agents arising out of
(i) any negligence or willful misconduct of Keryx in performing
the services hereunder, (ii) any misrepresentation by Keryx or
breach by Keryx of any covenant or agreement hereunder, or (iii)
any claim asserted by a third party that Keryx in performing the
services hereunder has infringed or misappropriated any
proprietary or confidential information or intellectual property
rights of such third party arising out of materials provided by
Keryx to PII.
5.2. PII shall indemnify and hold Keryx and Keryx's affiliates, and
its and their directors, officers, employees and agents,
harmless from and against any and all costs and expenses
(including attorney's fees) incurred as a result of claims
asserted or suits brought against Keryx and Keryx's affiliates,
and its and their directors, officers, employees and agents
arising out of (i) any negligence or willful misconduct of PII
in performing the services hereunder, (ii) any misrepresentation
by PII or breach by PII of any covenant or agreement hereunder,
or (iii) any claim asserted by a third party that PII in
performing the services hereunder has infringed or
misappropriated any proprietary or confidential information or
intellectual property rights of such third party.
5.3. In no event shall either party be liable to the other for
consequential or indirect damages, including without limitation
lost profits or revenues.
6. Termination
6.1. Keryx, but not PII, shall have the right to terminate this
Agreement at anytime and for any reason at the sole discretion
of Keryx.
6.2. Upon such termination, Keryx shall pay all costs incurred by PII
for work performed to the date of termination, provided PII
provides written evidence that such costs have been incurred and
work performed.
6.3. Within 10 days of the termination of this Agreement, PII shall
deliver to Keryx all data, information, reports and any and all
related documentation which were, or required to be, developed,
generated or derived, directly or indirectly, by PII (or by any
subcontractor or agent of PII) for Keryx during the course of
the project.
7. Ownership of Materials and Information
7.1. All data, information, reports and any and all related
documentation, which are developed, generated or derived,
directly or indirectly, by PII (or by any subcontractor or agent
of PII) for Keryx during the course of the project (the "Data"),
and all inventions,
<PAGE>
[LOGO OF PII]
discoveries, formulae, procedures, processes, technology and any
other intellectual property, and any improvements thereto,
whether patentable or not, which result or evolve directly,
during the course of the project or as a result of the services
performed hereunder by PII (or by any subcontractor or agent or
PII) (the "Inventions"), shall be and remain the sole and
exclusive property of Keryx.
7.2. Neither PII nor its employees or agents shall have or acquire
any right, title or interest in such Data or Inventions, and PII
shall promptly disclose in writing to Keryx any Inventions,
shall assign any and all rights in any Data and Inventions to
Keryx and shall assist Keryx in performing its rights in such
Data and Inventions.
8. Nondisclosure
8.1. PII agrees that it will not use, provide to, disclose to, or
permit any third party to use any information, data, or
documents which were received from Keryx or which were
specifically developed or generated by PII or any third party in
this project for Keryx (the "Project Information").
8.2. PII acknowledges that the Project Information is highly
confidential, and PII agrees to return to Keryx all such Project
Information upon the termination of this Agreement or
completion of this project. PII's obligations with respect to
the Project Information shall survive this termination of this
Agreement and the completion of this project.
9. Miscellaneous
9.1. Independent Contractors: PII is providing the services set forth
in this Agreement as an independent contractor and, therefore,
neither it, its employees, its representatives nor its agents
shall have any authority to bind Keryx in any manner.
9.2. Governing Law: This Agreement and any disputes arising from it
shall be governed by the laws of the State of New York.
9.3. Entire Agreement: This Agreement constitutes the entire
agreement between the parties concerning the subject matter of
this Agreement and supersedes any prior understanding or write
or oral agreement. Its terms may be modified or amended only by
a writing signed by authorized signatories of each party.
<PAGE>
[LOGO OF PII]
AGREED AND ACCEPTED
PHARMACEUTICS INTERNATIONAL, INC.
/s/ Steve King
- ------------------------------
Steve King
Vice President Business Development
April 3rd 2000
- ------------------------------
Date
KERYX BIOPHARMACEUTICALS, INC.
/s/ Ira Weinstein
- ------------------------------
Authorized Agent or Representative
Title: Treasurer
March 30, 2000
- ------------------------------
Date
Keryx Biopharmaceuticals, Inc.
Billing Contact: Ira Weinstein
-------------
-------------
-------------
-------------
P/O Number:
-------------
<PAGE>
EXHIBIT 10.12
NATIONAL INSTITUTES OF HEALTH
MATERIALS COOPERATIVE RESEARCH
AND DEVELOPMENT AGREEMENT
This Materials Cooperative Research and Development Agreement ("Materials
CRADA") has been adopted for use of the National Institutes of Health ("NIH")
for transfers of essential research material ("Research Material") not otherwise
reasonably available for NIH research.
1. KERYX BIOPHARMACEUTICALS, INC., hereinafter referred to as "Collaborator,"
agrees to transfer the NIH's investigator, DR. PETER Q. EICHACKER, the following
"Research Material:" TYROSINE KINASE INHIBITOR, KERYX REF. KRX-211 IN ENOUGH
QUANTITY TO COMPLETE THE STUDY.
This Materials CRADA involves no other exchange of personnel or resources. All
changes to this model agreement are contained in Appendix B, which is
incorporated herein by reference. This Agreement is made under authority of the
Federal Technology Transfer Act, 15 U.S.C. Section 3710a, and is governed by its
terms.
2. This Research Material will be used solely in connection with the research
plan ("Research Plan"), attached as Appendix A, by NIH's investigator in his/her
laboratory under suitable containment conditions.
2(a). Are the Research Materials of human origin?
___ Yes
X No
2(b). If Yes in 2(a), were the Research Materials collected according to 45 CFR
Part 46, "Protection of Human Subjects?"
___ Yes (Please provide Assurance Number ___________)
___ No
Page 1 of 6
<PAGE>
3. In all oral presentations or written publications concerning the Research
Plan, NIH will acknowledge Collaborator's contribution of this Research Material
unless requested otherwise. To the extent permitted by law, each Party agrees to
treat in confidence, for a period of three (3) years from the date of the
disclosure, any of the disclosing Party's written information about this
Research Material that is stamped "CONFIDENTIAL" or any of the disclosing
Party's oral information about this Research Material that is identified in
writing as "CONFIDENTIAL" within ten (10) days of the oral disclosure, except
for information that was previously known to the receiving Party or that is or
becomes publicly available or which is disclosed to the receiving Party without
a confidentiality obligation. NIH may publish or otherwise publicly disclose the
results of the Research Plan, but if Collaborator has given CONFIDENTIAL
information to NIH such public disclosure may be made only after Collaborator
has had thirty (30) days to review the proposed disclosure to determine if it
contains any CONFIDENTIAL information, except when a shortened time period under
court order or the Freedom of Information Act pertains.
4. This Research Material represents a significant investment on the part of
Collaborator and is considered proprietary to Collaborator. NIH's investigator
therefore agrees to retain control over this Research Material, and further
agrees not to transfer the Research Material to other people not under her or
his direct supervision without advance written approval of Collaborator.
Collaborator reserves the right to distribute the Research Material to others
and to use it for its own purposes. When the Research Plan is completed or one
(1) year has elapsed, whichever occurs first, or the Materials CRADA is
terminated, the Research Material will be disposed of as directed by
Collaborator.
5. This Research Material is provided as a service to the research community. IT
IS BEING SUPPLIED TO NIH WITH NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Collaborator
makes no representations that the use of the Research Material will not infringe
any patent or proprietary rights of third parties. It is the intention of NIH
that Collaborator not be liable for any claims or damages arising from NIH's use
of the Research Material; however, no indemnification is provided or intended.
6. The NIH shall promptly report to Collaborator in writing each Subject
Invention and any patent applications filed thereon resulting from the research
conducted under this Materials CRADA that is reported to NIH by its employees.
Collaborator agrees to keep all information provided to Collaborator
confidential until the information is published or the patent issues. Subject
Invention means any invention, conceived or first actually reduced to practice
in the performance of the research plan during the term of this Materials CRADA,
that is or may be patentable under 35 U.S.C. Section 101 or Section 161,
protectable under 7 U.S.C. Section 2321, or otherwise protectable by other types
of U.S. or foreign intellectual property rights.
Page 2 of 6
<PAGE>
7. With respect to Government intellectual property rights to any Subject
Invention not made solely by the Collaborator's employees for which a patent or
other intellectual property application is filed, NIH hereby grants to be the
collaborator an exclusive option to elect an exclusive or nonexclusive
commercialization license, which is substantially in the form of the appropriate
model NIH license agreement. This option does not apply to Subject Inventions
conceived prior to the effective date of this CRADA that are reduced to practice
under this CRADA, if prior to that reduction to practice, NIH has filed a patent
application on the Subject Invention and has licensed it or offered to license
it to a third party. The terms of the license will fairly reflect the nature of
the invention, the relative contributions of the Parties to the Subject
Invention and the CRADA, the risks incurred by the Collaborator and the costs of
subsequent research and development needed to bring the Subject Invention to the
marketplace. The field of use of the license will be commensurate with the scope
of the research plan.
8. Within three (3) months after NIH provides notice to the Collaborator that
the patent or other intellectual property application is filed, the license
option must be exercised by written notice mailed to the designated NIH
official. Exercise of this option by the Collaborator initiates a license
negotiation period that expires nine (9) months after the patent or other
intellectual property application filing date. If the last proposal by the
Collaborator has not been responded to in writing by NIH within this nine (9)
month period, the negotiation period shall be extended to expire one (1) month
after NIH so responds, during which month the Collaborator may accept in writing
the final license proposal of NIH. In the absence of such acceptance or an
extension of the time limits by NIH, NIH will be free to license such
intellectual property rights to others. In the event that Collaborator elects
the option for an exclusive license, but no such license is executed during the
negotiation period, NIH agrees not to make an offer on more favorable terms to
third party for a period of six (6) months without first offering Collaborator
the same terms to be offered to the third party. These times may be extended at
the sole discretion of NIH upon good cause shown in writing by the Collaborator.
9. Pursuant to 15 U.S.C. Section 3710a(b)(1)(A), for Subject Inventions made
under this Materials CRADA by a NIH employee(s) or jointly by such employee(s)
and employees of the Collaborator under this Materials CRADA, and licensed to
Collaborator, the Collaborator grants to the Government a nonexclusive,
nontransferable, irrevocable, paid-up license to practice the invention or have
the invention practiced throughout the world by or on behalf of the Government.
In the exercise of such license, the Government shall not publicly disclose
trade secrets or commercial or financial information that is privileged or
confidential within the meaning of 5 U.S.C. 552(b)(4) or which would be
considered as such if it had been obtained from a non-Federal party.
10. Pursuant to 15 U.S.C. Section 3710a(b)(2), for Subject Inventions made
solely by Collaborator employees under this Materials CRADA, the Collaborator
grants to the Government, a nonexclusive, nontransferable, irrevocable, paid-up
license to practice the invention or have the
Page 3 of 6
<PAGE>
invention practiced throughout the world by or on behalf of the Government for
research or other Government purposes.
11. Pursuant to 15 U.S.C. Section 3710a(b)(1)(B), if NIH grants an exclusive
license to a Subject Invention made wholly by NIH employees or jointly with a
Collaborator under this Materials CRADA, the Government shall retain the right
to require the Collaborator to grant to a responsible applicant a nonexclusive,
partially exclusive, or exclusive sublicense to use the invention in
Collaborator's licensed field of use on terms that are reasonable under the
circumstances; or if the Collaborator fails to grant such a license, to grant
the license itself. The exercise of such rights by the Government shall only be
in exceptional circumstances and only if the Government determines (i) the
action is necessary to meet health or safety needs that are not reasonably
satisfied by Collaborator, (ii) the action is necessary to meet requirements for
public use specified by Federal regulations, and such requirements are not
reasonably satisfied by the Collaborator; or (iii) the Collaborator has failed
to comply with an agreement containing provisions described in 15 U.S.C.
3710a(c)(4)(B). The determination made by the Government under this paragraph is
subject to administrative appeal and judicial review under 35 U.S.C. 203(2).
12. Any dispute arising under this Materials CRADA that is not disposed of by
agreement of the Principal Investigators shall be submitted jointly to the
signatories of this Materials CRADA. If the signatories are unable to jointly
resolve the dispute within thirty (30) days after notification thereof, the
Assistant Secretary for Health (or his/her designee or successor) shall propose
a resolution. Nothing in this article shall prevent any Party from pursuing any
additional administrative remedies that may be available and, after exhaustion
of such administrative remedies, pursuing all available judicial remedies.
13. The illegality or invalidity of any provisions of this Materials CRADA shall
not impair, affect or invalidate the other provisions of this Materials CRADA.
14. Neither this Materials CRADA nor any rights or obligations of any Party
hereunder shall be assigned or otherwise transferred by either Party without the
prior written consent of the other Party.
15. All notices pertaining to or required by this Materials CRADA, shall be in
writing and shall be signed by an authorized representative and shall be
delivered by hand or sent by certified mail, return receipt requested, with
postage prepaid, to the addresses indicated on the signature page for each
Party. Notices regarding the exercise of license options shall be made pursuant
to Article 8. Any Party may change such address by notice given to the other
Party in the manner set forth above. The NIH component that is the Party for all
purposes of this Materials CRADA is the Bureau(s), Institute(s), Center(s) or
Divisions(s) listed on the Cover page herein.
Page 4 of 6
<PAGE>
16. By entering into this Materials CRADA, NIH does not directly or indirectly
endorse any product or service provided, or to be provided, whether directly or
indirectly related to either this Materials CRADA or to any patent or other
intellectual property license or agreement which implements this Materials CRADA
by its successors, assignees, or licensees. The Collaborator shall not in any
way state or imply that this Materials CRADA is an endorsement of any such
product or service by the U.S. Government or any of its organizational units or
employees.
17. Either the NIH or the Collaborator may unilaterally terminate this entire
Agreement at any time by giving written notice at least thirty (30) days prior
to the desired termination date.
18. This Materials CRADA constitutes the entire agreement between the Parties
concerning the subject matter of this Materials CRADA and supersedes any prior
understanding or written or oral agreement.
19. This Materials CRADA shall be construed in accordance with Federal law as
applied by the Federal courts in the District of Columbia.
20. The undersigned expressly certify and affirm that the contents of any
respective statements made or reflected in this Materials CRADA are truthful and
accurate.
21. This Materials CRADA shall be effective upon execution by the Parties. The
term of this Materials CRADA is twelve (12) months from execution.
22. The provisions of Articles 3, 5-10, 14 and 20 shall survive the termination
of this Materials CRADA.
SIGNATURES BEGIN ON THE NEXT PAGE
Page 5 of 6
<PAGE>
FOR NIHCC:
/s/ DAVID K. HENDERSON 4/10/00
- --------------------------------------------- ----------------
David K. Henderson, M.D. Date
Deputy Director, NIHCC
Mailing Address for Notice
National Institutes of Health Clinical Center
9000 Rockville Pike, Bldg 10, Rm. 2C407
Bethesda, MD 20892
For Keryx Biopharmaceuticals, Inc.
/s/ BENJAMIN CORN April 10, 2000
- --------------------------------------------- ----------------
Benjamin Corn, M.D. Date
President
Mailing Address for Notices:
Keryx Biopharmaceuticals, Inc.
216 Jaffa Road
Jerusalem 94383 Israel
Att: General Counsel
Page 6 of 6
<PAGE>
APPENDIX A
RESEARCH PLAN
I. BACKGROUND
Despite the use of effective antibiotics in combination with
cardiopulmonary support, the mortality rate from sepsis and septic shock for the
last three decades has remained high (35-50%). During this time, the incidence
of reported cases of sepsis in hospitals has more than doubled. New therapeutic
approaches are needed to lower the persistently high mortality rate of this
increasingly frequent syndrome.
Much data suggests that activation of the host inflammatory response
and the release of mediators, particular cytokines such as tumor necrosis factor
(TNF) and the interleukins, contribute to the pathogenesis of sepsis and septic
shock. However, therapies like TNF antibodies, soluble TNF receptor, and IL-1
receptor antagonist, designed to directly inhibit these mediators, while
beneficial in animal models of sepsis, have not been beneficial in clinical
trials with septic patients. Studies performed at the NIHCC show that risk of
death from infection may have had an important influence on the effects of these
previously studied agents (1). While very beneficial when the risk of death is
high, as in published animal studies, these agents were less beneficial or
harmful when the risk of death was lower, as in clinical trials. Data also
suggests that other factors, such as the site and type of bacterial infection,
may alter the effects of immunomodulators in sepsis.
Finding agents for the treatment of sepsis that remain beneficial over
a wide range of risk related to differing types of infection may be important to
improve this therapeutic approach. One such agent, KRX-211, is an inhibitor of
the Janus family of protein tyrosine kinases (Jaks). The Jaks are important in
inflammatory cytokine mediated signal transduction. Activation of these enzymes
results in the production of other inflammatory mediators like the cytokine IL-6
and nitric oxide (NO) and propagates the inflammatory cytokine. In vitro studies
have shown that KRX-211 reduces the production of IL-6 and nitric oxide by mouse
and rat macrophages. Furthermore, early in vivo studies have shown that this
agent increases survival with endotoxin challenges that produce either low or
high mortalities. In a limited number of studies, the agent has also been
effective in rats challenged with endotoxin. It is unclear, however, whether
KRX-211 will have similar beneficial effects during inflammation associated with
either gram-negative or gram-positive bacterial infections.
II. STUDY OBJECTIVE AND DESIGN
***
(paragraph intentionally omitted)
A-7
<PAGE>
***
(paragraph intentionally omitted)
III. COLLABORATOR CONTRIBUTION
The contribution of the Collaborator to the research plan is the
Research Material. All activities to be conducted by the NIH with the Research
Material pursuant to this Materials CRADA are set forth in this Appendix A. Any
other research activities conducted by the Collaborator with its Research
Material shall not be deemed to be governed by this Materials CRADA. This
Research Material, KRX-211, has been developed by the Collaborator and is not
commercially available nor obtainable from another source.
A-8
<PAGE>
VI. ABSTRACT OF THE RESEARCH PLAN FOR PUBLIC RELEASE
Although host inflammation contributes to the pathogenesis of sepsis
and septic shock, anti-inflammatory agents effective in highly lethal
gram-negative models of sepsis have not been beneficial in clinical trials where
mortality was lower. Emerging data suggests that variability in factors related
to infection capable of influencing the effects of these agents, such as the
severity, site and type of infection may explain these differences. Ideally
anti-inflammatory agents would work in sepsis regardless of such factors. The
tyrosine kinase inhibitor KRX-211 inhibits endotoxin stimulated IL-6 and nitric
oxide production in vitro and improves survival with endotoxin challenge in mice
and rats. In early studies, this protection was present with doses of endotoxin
producing both low and high mortalities. The purposes of the present study are
first to confirm these beneficial effects with KRX-211 during E. coli infection
and then to determine the influence of site (intravenous vs. intrabronchial),
type (E. coli vs. S. aureus) and severity (LD10 vs. LD50 vs. LD90) of infection
of its effects.
V. TITLE FOR PUBLIC RELEASE
The effects of Kinase Inhibitor, KRX-211, in rats challenged with intravascular
or intrabronchial S. aureus or E. coli infections.
A-9
<PAGE>
APPENDIX B
EXCEPTIONS OR MODIFICATIONS TO THIS CRADA
AMEND ARTICLE 3 AS FOLLOWS:
3. In all oral presentations or written publications concerning the Research
Plan, NIH will acknowledge Collaborator's contribution of this Research Material
unless requested otherwise. To the extent permitted by law, each Party agrees to
treat in confidence, for a period of three (3) years from the date of the
disclosure, any of the disclosing Party's written information about this
Research Material that is stamped "CONFIDENTIAL" or any of the disclosing
Party's oral information about this Research Material that is identified in
writing as "CONFIDENTIAL" within ten (10 ) days of the oral disclosure, except
for information that was previously known to the receiving Party without a
confidentiality obligation. NIH may publish or otherwise publicly disclose the
results of the Research Plan, such public disclosure may be made only
after Collaborator has had thirty (30) days to review the proposed disclosure to
determine if it contains any CONFIDENTIAL information, except when a shortened
time period under court order or the Freedom of Information Act pertains. The
disclosure shall be delayed for an additional thirty (30) days upon the request
of the Collaborator to preserve U.S. or foreign patent or other intellectual
property rights.
ADD NEW ARTICLE 22 TO READ AS FOLLOWS:
NIH agrees to provide all data resulting from the research conducted under the
Research Plan (Subject Data), including any raw data, to the Collaborator and
both parties will be free to utilize Subject Data for their own purposes
consistent with their obligations under this CRADA. To the extent permitted by
law, the Collaborator shall have the exclusive right to use any and all Subject
Data in and for regulatory filling made by, or on behalf of, the Collaborator,
except that NIH shall have the right to use Subject Data for that purpose, and
authorize others to do so for that purpose, if Collaborator abandons its
commercialization efforts, which abandonment shall be evidenced by
Collaborator's notification in writing to the NIHCC.
ORIGINAL ARTICLE 22 IS RENUMBERED TO BE ARTICLE 23.
A-10
<PAGE>
EXHIBIT 10.13
RESEARCH MATERIAL TRANSFER AND COLLABORATION AGREEMENT
------------------------------------------------------
Lakaro Biopharmaceuticals, Inc., a corporation organized under the laws of the
State of Delaware, USA, with offices at 787 Seventh Avenue, NY, NY 10019 and 216
Jaffa Road, Jerusalem 94383 Israel ("Lakaro"), will provide research material to
Osteotech, Inc., at 51 James Way, Eatontown, NJ 07724 United States of America
("Investigator") on the terms and conditions set forth in this Research Material
Transfer Agreement ("Agreement").
1. Lakaro will generate novel peptides to be used as research material by
the Investigator as described under Section 4 ("Research Materials"). The
Investigator shall also supply Lakaro with an indication of the amount of
specific peptides it anticipates requiring for testing to be performed pursuant
to this Agreement. It is anticipated that the area of focus will be bone
healing, but the scope of the collaboration need not be limited to bone healing.
2. Investigator agrees that any and all Research Materials will be used
under suitable containment conditions solely for in vitro and in vivo laboratory
studies or animal testing, and will not be used in humans. Investigator
acknowledges that the Research Materials are not intended for human use and,
pursuant to United States Food and Drug Administration regulations, animals
receiving Research Materials and by-products of such animals may not enter the
food chain. Investigator will comply with all federal, state and local laws and
regulations applicable to the Research Materials.
3. The Research Materials are being provided to Investigator pursuant to a
limited license, the sole purpose of which shall be for Investigator to test the
peptides to determine their efficacy in the treatment of diseases related to
bone healing or other diseases identified by the parties. Investigator agrees
that the Research Materials will be used solely to conduct research studies to
determine the feasibility of using the Research Materials concept as it relates
to bone healing and, should the parties so agree, other diseases, as set forth
in more detail in Section 20 ("Research Studies"), and will be used only for
research purposes. Investigator further agrees that it shall not use the
Research Materials to make peptide derivatives or peptidomimetics and that
Research Materials will not be transferred or provided to third parties outside
the Investigator's premises without Lakaro's prior written approval.
4. Lakaro shall generate the Research Materials within two (2) months
after receiving the signed Research Material Transfer Agreement. Investigator
shall have up to four (4) months from receipt of the Research Materials to test
them.
5. Investigator will provide Lakaro with access to all data generated from
the Research Studies and, upon completion of the Research Studies, a summary of
the results of the Research Studies with respect to the Research Materials. Upon
completion of the Research Studies, Investigator shall return to Lakaro all
Research Materials in Investigator's possession.
6. Investigator will not use the data or results that is produced from
work with the Research Materials for any purpose other than determining
Investigator's interest, if any, in entering into a business relationship with
Lakaro with respect to the Research Materials.
7. Investigator may not publish or otherwise disclose data or results
obtained using the Research Materials provided without Lakaro's prior written
approval.
8. Unless otherwise expressly provided in writing by Lakaro, no right or
license in or to patents, patent applications, trade secrets or other
intellectual property rights of Lakaro, is granted or implied hereunder, except
for the sole purpose of conducting the studies specifically described herein.
Should a patentable invention or inventions result or arise from the
Investigator's conduct of the Research Studies where proprietary materials of
Investigator are utilized, Investigator and Lakaro shall pursue applications for
jointly-held patents in connection with such invention or inventions.
9. Investigator acknowledges that the Research Materials are the
confidential property of Lakaro and that in the course of performing the
research studies, Investigator may receive confidential technical and business
information of Lakaro ("Information"). Investigator hereby agrees not to use
the Information except for the purpose of conducting the Research Studies, and
not to disclose the Information to third parties without the express written
permission of Lakaro, except that Investigator shall not be prevented from using
or disclosing Information:
(a) that is approved in writing by Lakaro for release by Investigator
without restrictions; or
(b) that Investigator can demonstrate by written records was previously
known to Investigator; or
<PAGE>
(c) which is now public knowledge, or becomes public knowledge, or becomes
public knowledge in the future, other than through acts of omissions of
Investigator in violation of this Section 9;
(d) which is lawfully obtained by Investigator from sources independent of
Lakaro who have a lawful right to disclose such Information; or
(e) which is independently developed or acquired by personnel of
Investigator who have not had access to, or knowledge of, the
Information supplied by Lakaro.
In case Information is provided in oral form, the above obligation shall apply
only to the extent such oral Information has been confirmed in writing to the
Investigator and marked Confidential within forty five (45) days after the date
of oral disclosure. The obligations of Investigator under the terms of this
Section 9 shall remain in effect for five (5) years after the effective date of
this Agreement. The Investigator shall be entitled to retain for its legal files
a copy of all Information received under this Agreement for the sole purpose of
determining the scope and effect of its confidentiality obligations hereunder.
10. Investigator shall pay Lakaro the amount of *** for one (1) gram in
the Research Materials, which amount shall include all applicable taxes and
shipping charges.
11. Upon the satisfactory conclusion of the Research Studies, Investigator
shall have a two month exclusive period in which to enter into a license and co-
development agreement with Lakaro for the subject indications.
12. Lakaro shall have the right to publicize the existence of the
relationship reflected in this Agreement following the prior written approval by
Investigator of the proposed publication in each case.
13. Investigator shall indemnify and hold harmless Lakaro, its employees
or agents from and against all loss or expense by reason of any liability
imposed by law upon Lakaro, provided that such loss or expense is due, or
claimed to be due, as a result of negligence or willful acts or omissions by
Investigator.
14. LAKARO PROVIDES NO WARRANTIES FOR THE RESEARCH MATERIALS, EXPRESS
OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, AND
SIGNALSITE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
15. This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Israel, without reference to conflict
of laws principles. Both parties will use their best efforts to settle all
disputes amicably. All disputes and differences of any kind related to this
Agreement which cannot be solved amicably by the parties shall be referred to
arbitration under the Rules of Arbitration of the International Chamber of
Commerce by one arbitrator appointed in accordance with those Rules. The
arbitration shall take place in London and shall be conducted in the English
language. The award of the arbitrator shall be final and binding on both
parties. The parties bind themselves to carry out the awards of the arbitrator.
16. No modification to this Agreement, nor any waiver of any rights,
shall be effective unless assented to in writing by the party to be charged and
the waiver of any breach or default shall not constitute a waiver of any other
right hereunder or any subsequent breach or default. This Agreement constitutes
the entire and exclusive Agreement between the parties hereto with respect to
the subject matter hereof and supersedes and cancels all previous registrations,
agreements, commitments and writings in respect thereof.
17. Either party may assign this Agreement to a parent, subsidiary,
affiliate or division of that party following written notification of such
assignment to the other party.
18. Each person signing below and each Party on whose behalf such person
executes this Agreement warrants that he or it, as the case may be, has the
authority to enter this Agreement and perform or cause the party on whose behalf
he has signed to perform the obligations hereunder.
<PAGE>
19. Description and amount of the Research Materials to be provided by
Lakaro ***
20. Description of the Research Studies to be conducted:
***
Lakaro Investigator
By: /s/ Benjamin Corn By: /s/ James Russell, Ph.D.
---------------------- ---------------------------
Print Name: Benjamin Corn Print Name: James Russell, Ph.D.
Title: President Title: Executive Vice President,
Chief Science Officer
Date: December 27, 1999 Date: December 17, 1999
<PAGE>
EXHIBIT 10.14
[LOGO OF KERYX BIOPHARMACEUTICALS]
Bob Trachtenberg
General Counsel
May 15, 2000
Pierre Honore
Novo Nordisk
Re: Transfer of SignalSite R&D Agreement
Dear Pierre,
I write to request the approval of Novo Nordisk to the assumption by Keryx
Biopharmaceuticals of the agreement executed by Novo Nordisk and SignalSite,
Inc. on June 15, 1999.
Please see the attached letter from Children's Medical Center Corporation, the
licensor, certifying that Keryx has the exclusive rights to the KinAce
technology. In addition, on behalf of Keryx, I certify that Keryx shall be bound
by the terms and conditions of the SignalSite agreement.
Please indicate Novo Nordisk's consent by signing this letter below and
returning it to me at 212-207-9760. We would appreciate receiving a hard copy of
the signed letter in the mail to our offices in Jerusalem.
Thank you for your prompt attention to this matter.
Best regards,
/s/ Bob Trachtenberg
Bob Trachtenberg
Agreed:
/s/ Pierre Honore
- ---------------------------
Name: PIERRE HONORE
Title: DIRECTOR, SCIENTIFIC LICENSING
Date: MAY 18, 2000
216 Jaffa Road, Sha'arei Ha'ir . Jerusalem . 94383
<PAGE>
RESEARCH MATERIAL TRANSFER AND COLLABORATION AGREEMENT
-------------------------------------------------------
SignalSite, Inc., a corporation organized under the laws of the State of
Delaware, USA, with offices at 787 Seventh Avenue, NY, NY 10019 and 216 Jaffa
Road, Jerusalem 94383 Israel ("SignalSite"), will provide research material to
Novo Nordisk, at 2880 Bagsvared, Copenhagen, Denmark ("Investigator") on the
terms and conditions set forth in this Research Material Transfer Agreement
("Agreement").
1. SignalSite will generate novel peptides based upon a list of kinases
supplied by Investigator to be used as research material as further described in
Section 19 ("Research Materials") and section 20("Research Studies"). The
Investigator shall also supply SignalSite with an indication of the amount of
specific peptides it anticipates requiring for testing to be performed pursuant
to this Agreement. It is anticipated that the area of focus will be diabetes,
but the scope of the collaboration need not be limited to diabetes.
2. Investigator agrees that any and all Research Materials will be used
under suitable containment conditions solely for in vitro and in vivo laboratory
studies or animal testing, and will not be used in humans. Investigator
acknowledges that the Research Materials are not intended for human use and,
pursuant to United States Food and Drug Administration regulations, animals
receiving Research Materials and by-products of such animals may not enter the
food chain. Investigator will comply with all federal, state and local laws and
regulations applicable to the Research Materials.
3. The Research Materials are being provided to Investigator pursuant to
a limited license, the sole purpose of which shall be for Investigator to test
the peptides to determine their efficacy in the treatment of diabetes or other
diseases identified by the parties. Investigator agrees that the Research
Materials will be used solely to conduct research studies to determine the
feasibility of SignalSite's concept as it relates to diabetes and, should the
parties so agree, other diseases, as set forth in more detail in Section 20
("Research Studies"), and will not be used for any commercial purposes.
Investigator further agrees that it shall not use the Research Materials to make
peptide derivatives or peptidomimetics and that Research Materials will not be
transferred or provided to third parties either within or outside the
Investigator's premises without SignalSite's prior written approval.
4. SignalSite shall generate the Research Materials within four (4)
months after receiving the list of kinases from Investigator. Investigator shall
have up to four (4) months from receipt of the Research Materials to test them
against its in vitro screen.
5. SignalSite will work with Investigator to develop the research test
plan. Investigator shall provide SignalSite with access to all data generated
from the research and testing, including a general outline of the assays used by
Investigator in the testing of the Research Materials. *** shall have the right
to approve the assays used in the testing of the Research Materials. Upon
completion of the Research Studies, Investigator shall return to *** all
Research Materials in Investigator's possession.
6. The parties will communicate at least bi-weekly during the conduct of
the Research Studies by conference call and written updates describing all
results and the accompanying data. Within thirty (30) days after completion of
the Research Studies, Investigator will provide to SignalSite a written summary
of data and results obtained using the Research Materials.
7. Investigator may not publish or otherwise disclose data or results
obtained using the Research Materials provided without SignalSite's prior
written approval.
8. SignalSite shall retain all right, title and interest relating to or
arising from the Research Materials, the Research Studies to be conducted and
existing uses thereof, including but not limited to all right, title and
interest in patents, patent applications, trade secrets and other intellectual
property rights arising from the Research Materials and/or the Research Studies.
Unless otherwise expressly provided in writing by SignalSite, no right or
license in or to patents, patent applications, trade secrets or other
intellectual property rights of SignalSite, is granted or implied hereunder,
except for the sole purpose of conducting the studies specifically described
herein.
9. Investigator acknowledges that the Research Materials are the
confidential property of SignalSite and that in the course of performing the
research studies, Investigator will receive confidential technical and business
information of SignalSite ("Information"). Investigator hereby agrees not to
use the Information except for the purpose of conducting the Research Studies,
and not to disclose the Information to third parties without the express written
permission of SignalSite, except that Investigator shall not be prevented from
using or disclosing Information:
(a) that is approved in writing by SignalSite for release by Investigator
without restrictions; or
<PAGE>
(b) that Investigator can demonstrate by written records was previously
known to Investigator; or
(c) which is now public knowledge, or becomes public knowledge, or becomes
public knowledge in the future, other than through acts of omissions
of Investigator in violation of this Section 9;
(d) which is lawfully obtained by Investigator from sources independent of
SignalSite who have a lawful right to disclose such Information; or
(e) which is independently developed or acquired by personnel of
Investigator who have not had access to, or knowledge of, the
Information supplied by SignalSite.
In case Information is provided in oral form, the above obligation shall apply
only to the extent such oral Information has been confirmed in writing to the
Investigator and marked Confidential within forty five (45) days after the date
of oral disclosure. The obligations of Investigator under the terms of this
Section 9 shall remain in effect for five (5) years after the effective date of
this Agreement. The Investigator shall be entitled to retain for its legal files
a copy of all Information received under this Agreement for the sole purpose of
determining the scope and effect of its confidentiality obligations hereunder.
10. Investigator shall pay SignalSite the amount of *** as applicable as
compensation for expenses and overhead incurred in the generation of the
Research Materials.
11. Upon the satisfactory conclusion of the Research Studies, Investigator
shall have a two month exclusive period in which to enter into a license and co-
development agreement with SignalSite.
12. SignalSite shall have the right to publicize the existence of the
relationship reflected in this Agreement following the prior written approval by
Investigator of the proposed publication in each case.
13. Investigator shall indemnify and hold harmless SignalSite, its
employees or agents from and against all loss or expense by reason of any
liability imposed by law upon SignalSite, provided that such loss or expense is
due, or claimed to be due, as a result of negligence or willful acts or
omissions by Investigator.
14. SIGNALSITE PROVIDES NO WARRANTIES FOR THE RESEARCH MATERIALS, EXPRESS
OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, AND
SIGNALSITE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
15. This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Israel, without reference to conflict
of laws principles. Both parties will use their best efforts to settle all
disputes amicably. All disputes and differences of any kind related to this
Agreement which cannot be solved amicably by the parties shall be referred to
arbitration under the Rules of Arbitration of the International Chamber of
Commerce by one arbitrator appointed in accordance with those Rules. The
arbitration shall take place in London and shall be conducted in the English
language. The award of the arbitrator shall be final and binding on both
parties. The parties bind themselves to carry out the awards of the arbitrator.
16. No modification to this Agreement, nor any waiver of any rights, shall
be effective unless assented to in writing by the party to be charged and the
waiver of any breach or default shall not constitute a waiver of any other right
hereunder or any subsequent breach or default. This Agreement constitutes the
entire and exclusive Agreement between the parties hereto with respect to the
subject matter hereof and supersedes and cancels all previous registrations,
agreements, commitments and writings in respect thereof.
17. Either party may assign this Agreement to a parent, subsidiary,
affiliate or division of that party following written notification of such
assignment to the other party.
18. Each person signing below and each Party on whose behalf such person
executes this Agreement warrants that he or it, as the case may be, has the
authority to enter this Agreement and perform or cause the party on whose behalf
he has signed to perform the obligations hereunder.
<PAGE>
19. Description and amount of the Research Materials to be provided by
Signal Site :
***
20. Description of the Research Studies to be conducted:
A) ***
B) ***
C) ***
SignalSite Investigator
,
By:/s/ Benjamin Corn, M.D. By:/s/ P. Honore
----------------------- --------------
,
Print Name: Benjamin Corn, M.D. Print Name: P. Honore
Title: Chief Executive Officer Title: Director, HC Business Development
Date: June 17, 1999 Date: June 17, 1999
<PAGE>
EXHIBIT 10.15
RESEARCH MATERIAL TRANSFER AND COLLABORATION AGREEMENT
-------------------------------------------------------
Lakaro Biopharmaceuticals, Inc., a corporation organized under the laws of the
State of Delaware, USA, with offices at 787 Seventh Avenue, NY, NY 10019 and
216 Jaffa Road, Jerusalem 94383 Israel ("Lakaro"), will provide research
material to *** ("Investigator") for testing on the terms and conditions set
forth in this Research Material Transfer Agreement ("Agreement").
1. Lakaro will generate at least two novel peptides based upon a list of
kinases supplied by Investigator to be used as research material as further
described in Section 19, which may be amended during the term of this Agreement
by the written consent of both parties ("Research Materials"). The Research
Materials will be tested in the Areas of Focus as set forth in Section 20
("Research Studies").
2. Investigator agrees that any and all Research Materials will be used
under suitable containment conditions solely for in vitro and in vivo laboratory
studies or animal testing, and will not be used in humans. Investigator
acknowledges that the Research Materials are not intended for human use and,
pursuant to United States Food and Drug Administration regulations, animals
receiving Research Materials and by-products of such animals may not enter the
food chain. Investigator will comply with all federal, state and local laws and
regulations applicable to the Research Materials.
3. The Research Materials are being provided to Investigator pursuant to a
limited license, the sole purpose of which shall be for Investigator to test the
Research Materials to determine their efficacy in the Research Studies, and will
not be used for any commercial purposes. Investigator further agrees that it
shall not use the Research Materials to analyze the chemical contents of the
Research Materials or make peptide derivatives or peptidomimetics and that
Research Materials will not be transferred or provided to third parties either
within or outside the Investigator's premises without Lakaro's prior written
approval. Investigator acknowledges that Lakaro has informed it that the
Research Materials being provided pursuant to this Agreement are able to
modulate skin biology, including, but not limited to, hair growth and skin
pigmentation.
4. Lakaro shall generate the Research Materials within two (2) months
after receiving signed Agreement from the Investigator. Investigator shall have
up to six (6) months from receipt of the Research Materials to test them
against its in vitro screen.
5. Upon reasonable request by Investigator, Lakaro will assist
Investigator in the Research Studies. Investigator shall provide Lakaro with
access to a summary of the results of its testing of the Research Materials in
the Research Studies within thirty (30) days after the completion of the
Research Studies. Upon completion of the Research Studies, Investigator shall
return to Lakaro or destroy all Research Materials in Investigator's possession.
6. The parties will periodically communicate during the conduct of the
Research Studies by conference call and written updates describing the status of
Research Studies.
7. Neither party may publish or otherwise disclose data or results
obtained using the data generated by Investigator from the Research Materials
provided (e.g., the results set forth in the summary of Section 5) without the
other party's prior written approval.
8. Unless otherwise expressly provided in writing by Lakaro, no right or
license in or to patents, patent applications, trade secrets or other
intellectual property rights of Lakaro, is granted or implied hereunder, except
for the sole purpose of conducting the studies specifically described herein.
9. Investigator acknowledges that the Research Materials are the
confidential property of Lakaro and that in the course of performing the
research studies, both parties recognize that Investigator will and Lakaro may
receive confidential technical and business information of the other party
("Information"). Each party hereby agrees not to use the Information it
receives except for the purpose of conducting the Research Studies and not to
disclose the Information to third parties without the express written permission
of the other party, except for Information:
(a) that is approved in writing for release by the disclosing party without
restrictions; or
(b) that the receiving party can demonstrate by written records was
previously known to the receiving party; or
<PAGE>
(c) which is now public knowledge, or becomes public knowledge, or becomes
public knowledge in the future, other than through acts of omissions
the receiving party in violation of this Section 9;
(d) which is lawfully obtained by the receiving party from sources
independent of the disclosing party who have a lawful right to
disclose such Information; or
(e) which is independently developed or acquired by personnel of
the receiving party who have not had access to, or knowledge of, the
Information.
In case Information is provided in oral form, the above obligation shall apply
only to the extent such oral Information has been confirmed in writing to the
other party and marked Confidential within forty five (45) days after the date
of oral disclosure. The obligations under the terms of this Section 9 shall
remain in effect for five (5) years after the effective date of this Agreement.
Each party shall be entitled to retain for its legal files a copy of all
Information received under this Agreement for the sole purpose of determining
the scope and effect of its confidentiality obligations hereunder.
10. Investigator shall pay Lakaro the amount of **** as applicable as
compensation for expenses incurred in the generation of the Research Materials.
Otherwise, each party will bear its own expense for conducting the Research
Studies under this Agreement.
11. During the term of this Agreement and for up to three(3) months
following the termination of this Agreement, unless mutually extended by the
parties in writing, Investigator shall have an exclusive period in which to
enter into a license and co-development agreement with Lakaro for Research
Materials ("Option Period"). Investigator and Lakaro shall pursue applications
for jointly-held patents where appropriate in connection with the Research
Materials and proprietary materials of Investigator.
12. Lakaro shall not have the right to publicize the existence of the
relationship reflected in this Agreement without the prior written approval by
Investigator of the proposed publication in each case.
13. Lakaro acknowledges that Investigator and its affiliates are in the
business of manufacturing and selling cosmetic and pharmaceutical products in
the Areas of Focus that may contain peptides and have an ongoing research and
development effort relating to such products. In addition, Investigator may
consult with, supply, and jointly develop with third parties such products.
Nothing contained herein shall be construed to prevent Investigator from
continuing such activities provided only that Investigator shall not reveal to
such third parties, or use for any purpose (other than as permitted by this
Agreement), any Confidential Information of Lakaro covered by this Agreement.
14. LAKARO PROVIDES NO WARRANTIES FOR THE RESEARCH MATERIALS, EXPRESS
OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, AND
LAKARO SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT.
15. This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Israel, without reference to conflict
of laws principles. Both parties will use their best efforts to settle all
disputes amicably.
16. No modification to this Agreement, nor any waiver of any rights,
shall be effective unless assented to in writing by the party to be charged and
the waiver of any breach or default shall not constitute a waiver of any other
right hereunder or any subsequent breach or default. This Agreement constitutes
the entire and exclusive Agreement between the parties hereto with respect to
the subject matter hereof and supersedes and cancels all previous registrations,
agreements, commitments and writings in respect thereof.
17. Either party may assign this Agreement to a parent, subsidiary,
affiliate or division of that party following written notification of such
assignment to the other party.
18. Each person signing below and each Party on whose behalf such person
executes this Agreement warrants that he or it, as the case may be, has the
authority to enter this Agreement and perform or cause the party on whose
behalf he has signed to perform the obligations hereunder.
19. Description and amount of the Research Materials to be provided by
Lakaro :
<PAGE>
***
20. Investigator will test one or more of the Research Materials in the
following Areas of Focus: (i) enhancement of melanogenesis and (ii) the growing
and/or retardation of hair.
21. This Agreement shall terminate upon the submission to Lakaro of the
summary set forth in Section 5. The obligations of the parties under Sections
7, 8, 9, 11, 12, 13, 14 and 15 shall survive the termination of this Agreement.
Lakaro Biopharmaceuticals, Inc. Investigator
By: /s/ Benjamin Corn By: /s/ ***
--------------------------- ----------------------------
Print Name: Benjamin Corn Print Name: ***
Title: President Title: ***
Date: December 12, 1999 Date: December 14, 1999
<PAGE>
EXHIBIT 10.16
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made as of the 30th day of November, 1999
by and between Lakaro Biopharmaceuticals, Inc., a Delaware corporation (the
"Sponsor") and B.R.T. Biopharmaceuticals Ltd. (the "Company") an Israeli company
having its registered offices at Sha'arei Ha'ir, 216 Jaffa Street, Jerusalem,
Israel.
WHEREAS the Sponsor is a biopharmaceutical company engaged in the research and
development of biopharmaceutical products for the world market (the "Business");
and
WHEREAS the Sponsor wishes to engage the services of its subsidiary, the
Company, to carry out the services more fully set forth below in connection with
the Business.
NOW, THEREFORE, the parties agree as follows:
1. Services
--------
The Company shall, in consultation with the Sponsor:
1.1 supervise and monitor the research and development conducted in Israel in
connection with the Business;
1.2 advise the Sponsor with respect to the direction of the Sponsor's research
and product development in connection with the Business; and
1.3 report to the Sponsor on the progress of the research and product
development being conducted in Israel in connection with the Business; and
1.4 assist in the performance of marketing services on behalf of the Sponsor in
connection with the Business and any products developed in the Business;
1.5 continue with research and development, which shall include without
limitation, the conducting of clinical trials; and
1.6 engage the services of advisory firms, consultants, and professionals, as
it deems necessary, in order to better perform the services enumerated
above (the "Services") or other services in connection therewith.
2. Payment
-------
In consideration for the Services, the Sponsor will pay the Company during
the term of this Agreement, a monthly fee equal to the amount of 110% of
expenses incurred (the "Fee"), to be adjusted annually between the Sponsor
and the Company, plus Value Added Tax ("VAT") thereon, if payable, at the
rate applicable at the time of issue by the Company to the Sponsor of a tax
invoice in respect of the Services. The Fee shall be paid quarterly in
advance on the first business day of January, April, July and October in
each year during the term hereof.
<PAGE>
3. Effective Period
----------------
This Agreement shall become effective upon its execution, and shall remain
in effect until either party terminates the Agreement by giving the other
party ninety (90) days prior written notice of termination.
4. Relationship of Parties
-----------------------
The Company is an independent contractor and is not an agent or employee
of, and has no authority to bind, the Sponsor by contract or otherwise,
unless and to the extent expressly authorized in writing by the Board of
Directors of the Sponsor, whether by grant of power of attorney or
otherwise.
5. Confidentiality
---------------
The Sponsor and the Company warrant and undertake that during the term of
this Agreement and subsequent thereto, it shall maintain confidentiality
and also be liable for its employees and/or representative and/or persons
acting on its behalf maintaining absolute confidentiality of all in
formation, details and data which is in and/or comes to its knowledge
and/or that of its employees and/or representatives and/or persons acting
on its behalf directly or indirectly relating to the Services, the Know How
or any products based on the Know How. The Sponsor and the Company
undertake not to convey or disclose (except in connection with the
fulfillment of its duties under this Agreement) anything in connection with
the foregoing. "Confidential Information" shall include, but shall not be
limited to, confidential or proprietary scientific or technical information
or data, business plans, trade secrets, or other confidential information
relating to customers, development programs, costs, marketing, trading,
investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans or the business and
affairs of the Sponsor or the Company generally, or of any subsidiary or
affiliate of the Sponsor or the Company. "Confidential Information" shall
not include, however, information in the public domain, information
disclosed to the Sponsor or the Company by a third party entitled to
disclose it without any obligation of confidentiality, or, information
already known to the Sponsor or the Company prior to its receipt.
6. Indemnification.
----------------
The Company agrees to indemnify and hold harmless the Sponsor and its
respective partners, affiliates, shareholders, directors, officers, agents,
advisors, representatives, employees, counsel and controlling persons
within the meaning of the Securities Act of 1933, as amended, (a "Sponsor
Indemnified Party") from and against any and all direct losses,
liabilities, claims, damages and expenses whatsoever (and all actions in
respect thereof) but excluding consequential loss and to reimburse the
Sponsor Indemnified Party for reasonable legal fees and related expenses as
incurred (including, but not limited to the costs of giving testimony or
furnishing documents in response to a subpoena or otherwise, the costs of
investigating, preparing, pursuing or defending any such action or claim
whether or not pending or threatened, whether or not resulting in any
liability, and whether or not the Sponsor or any Sponsor Indemnified Party
is a party thereto), insofar as such losses, liabilities, claims, damages
or expenses arise out of, relate to, whether or not resulting in any
liability, are incurred in connection with or are in any way a result of
(a) this Agreement, including any modifications or future additions to this
Agreement, (b)
<PAGE>
any act by the Company or any Sponsor Indemnified Party taken in connection
with the services to be provided under this Agreement, (c) the employment
by the Company of any device, scheme or artifice to defraud, or the
engaging by the Company in any act, practice or course of business which
operates or would operate as a fraud or deceit, or any conspiracy with
respect thereto, in connection with this Agreement; provided, however, that
the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage, liability or expense arises out of or is
based upon the negligence, recklessness or willful misconduct of the
Sponsor or any Sponsor Indemnified Party.
7. Amendments: Waivers
-------------------
This Agreement may be altered or amended, and any provisions hereof may be
waived, only upon the written approval of the Sponsor and the Company.
8. Notices
-------
Any notice or other communication given under this Agreement shall be
deemed to have been given in writing (including telex, telecopy or similar
teletransmission) addressed as provided below or to the addressee at such
other address as the addressee shall have specified by notice actually
received by the addressor), and if either (a) actually delivered in fully
legible form to such address (evidenced in the case of a telex by receipt
of the correct answerback) or (b) in the case of a letter, five days shall
have elapsed after the same shall have been deposited in the post, with
postage prepaid and registered or certified.
If to the Sponsor, to it at: c/o Paramount Capital, Inc.
787 Seventh Avenue, 48th floor
New York, New York 10019
Attn: Peter Kash
Tel: 212-554-4340
Fax: 212-554-4355
If to the Company, to it at: 216 Jaffa Road
Sha'arei Ha'ir
Jerusalem, Israel 94383
Attn: Bob Trachtenberg
Tel: 972-2-537-4997
Fax: 972-2-537-5098
9. Successors
----------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, successors and assigns provided,
however, that neither party may assign this Agreement except to an
Affiliate that agrees in writing to bound hereby and to assume all of the
obligations of the assigning party hereunder. For the purposes hereof, an
"Affiliate" shall mean any entity that, directly or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, either party hereto.
<PAGE>
10. Headings
--------
The headings in this Agreement are inserted for convenience of reference
only and shall not be a part of or control or affect the meaning hereof.
11. Entire Agreement
----------------
This Agreement supersedes any and all oral or written agreements heretofore
made relating to the subject matter hereof and constitutes the entire
agreement of the parties relating to the subject matter hereof.
12. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of Israel.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly
executed and delivered as an agreement under seal as of the date first above
written.
Lakaro Biopharmaceuticals, Inc. B.R.T. Biopharmaceuticals, Ltd.
By: /s/ Bob Trachtenberg By: /s/ Ira Weinstein
----------------------------- ----------------------------
Name: Bob Trachtenberg Name: Ira Weinstein
--------------------------- --------------------------
Title: Secretary Title: CFO
-------------------------- -------------------------
<PAGE>
EXHIBIT 10.17
FINDER AGREEMENT
----------------
Pursuant to this Finder Agreement (this "Agreement") entered into
November 19, 1999, (the "Effective Date"), between Lakaro BioPharmaceuticals,
Inc., a company organized under the laws of the State of Delaware, having a
place of business at 216 Jaffa Rd., Sha'arei Ha'ir Jerusalem, Israel 94383 (the
"Company") and Paramount Capital, Inc., having a place of business at 787
Seventh Avenue, 48th Floor, New York, New York 10019 (the "Finder"), the parties
hereto agree:
1. In connection with the offering (the "Offering") by the Company of
Units consisting of 1,000 shares of Series A Convertible Preferred Stock, stated
value $100.00 per share (the "Preferred Stock"), the Finder will introduce the
Company to third parties (the "Introduced Parties") with the hope and intent
that the Introduced Parties will purchase Units in the Offering (an
"Investment");
2. In the event that during the term of this Agreement, an Introduced
Party makes an Investment in the Company, then the Company shall pay to the
Finder, immediately following the closing of the Investment and the transfer of
the proceeds to the Company, a placement fee in cash equal to five percent (5%)
of such Investment. In addition, the Company, immediately following the closing
of the Investment, shall grant to the Finder and/or its designees, three (3)
year warrants to purchase a number of shares of Common Stock equal to three
percent (3%) of the aggregate number of shares of Common Stock issuable upon
conversion of the Preferred Stock purchased by purchasers of Units in the
Offering at an exercise price equal to $2.91 per share.
3. It is understood by the parties that the Finder may utilize the
services of one or more selected dealers that are members of the National
Association of Securities Dealers, Inc., or are located outside the U.S. (a
"Selected Dealer"), locate Introduced Parties. It is further understood by the
parties that any placement fee payable by the Company in connection with such
Introduced Parties shall be payable solely to the Finder. The Finder shall be
solely responsible for any financial arrangements it might make with such
Selected Dealer and the Company shall have no liability whatsoever therefore.
4. The Company agrees to indemnify and hold harmless the Finder and
its respective partners, affiliates, shareholders, directors, officers, agents,
advisors, representatives, employees, counsel and controlling persons within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") (a
"Finder Indemnified Party") from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (and all actions in respect thereof),
and to reimburse the Finder Indemnified Party for legal fees and related
expenses as incurred (including, but not limited to the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise, the
costs of investigating, preparing, pursuing or defending any such action or
claim whether or not pending or threatened, whether or not resulting in any
liability, and whether or not the Finder or any Finder Indemnified Party is a
party thereto), insofar as such losses, liabilities, claims, damages or expenses
arise out of, relate to, whether or not resulting in any liability, are in
incurred in connection with or are in any way a result of (i) the engagement of
the Finder pursuant to this Agreement and in connection with the transactions
contemplated by this Agreement and the Confidential Private Placement
Memorandum, the Subscription
<PAGE>
Agreement, the Units and the securities underlying such Units (collectively the
"Offering Documents") (the "Engagement"), including any modifications or future
additions to such Engagement and related activities prior to the date hereof,
(ii) any act by the Finder or any Finder Indemnified Party taken in connection
with the Engagement, (iii) a breach of any representation, warranty, covenant,
or agreement of the Company contained in this Agreement, (iv) the employment by
the Company of any device, scheme or artifice to defraud, or the engaging by the
Company in any act, practice or course of business which operates or would
operate as a fraud or deceit, or any conspiracy with respect thereto, in
connection with the sale of the Units, or (v) any untrue statement or alleged
untrue statement of a material fact contained in any of the Offering Documents
or the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing, the Company will
not be liable in any such case if and to the extent that any such loss, claim,
damage, liability or expense (A) arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made by
any Finder Indemnified Party unless the Finder Indemnified Party's statement or
omission is consistent with information found in the Offering Documents; or (B)
arises out of or is based on information furnished to the Company by the Finder
in writing specifically for use in the Offering Documents.
5. Unless sooner terminated by either party at their option at any
time upon ten (10) days written notice and without the payment of any penalty,
this Agreement shall remain in effect for a period of 90 days from the date of
inception, and may be renewed, upon mutual consent, for additional 90 day
periods thereafter. This Agreement shall automatically terminate in the event of
its assignment without the express approval of both parties.
6. This Agreement constitutes the entire agreement of the parties
pertaining to the subject matter hereof, and the parties have made no
agreements, representations or warranties relating to the subject matter of this
agreement that are not set forth herein or therein. This Agreement supersedes
and replaces any and all prior agreements or understandings between the parties
hereto, whether written, oral or otherwise.
7. The provisions set forth in this Agreement shall be severable. If
any provision contained in this Agreement is found to be invalid, illegal or
unenforceable, such provision shall be limited to the extent possible to render
it enforceable, and the validity of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
8. This Agreement may not be modified, amended or waived in any
manner except by an instrument in writing signed by each of the parties hereto.
The waiver by either party of compliance with any provision of this agreement by
the other party shall not operate or be construed as a waiver of such party of a
provision of this agreement.
9. All notices and other communications by either party shall be in
writing and deemed to have been duly given if delivered by hand or sent by
telecopier or facsimile transmission to the parties hereto at the addresses set
forth above, or to such other address as any party hereto specifies to the
other.
<PAGE>
9. Neither party may assign its rights or obligations hereunder.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflicts of the
law principles thereof. The parties agree to settle any disputes through binding
arbitration in the city, county and State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement of Introduction to be executed by their respective duly authorized
representatives as of the day and year written above.
PARAMOUNT CAPITAL, INC.,
By: /s/ Lindsay A. Rosenwald, M.D.
__________________________________
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
LAKARO BIOPHARMACEUTICALS, INC.
By: /s/ Ira Weinstein
__________________________________
Name: Ira Weinstein
Title: Treasurer
<PAGE>
EXHIBIT 10.18
UNPROTECTED TENANCY AGREEMENT
DRAWN AND SIGNED IN TEL AVIV, ON DECEMBER 26, 1996.
-----------------
Between:
Arbel Hafakot , Ltd.,
- -------------------------
POB 23829
Jerusalem 91236
(Hereafter: "the Lessor")
And:
Partec Ltd.
- -----------------------------------------
CHAPTER 1
DEFINITIONS
In this contract, the following terms shall be assigned the following
definitions:
"The lot" Lot 46 in bloc 30075 of Yaffo Street, on the corner of Sarei
Yisrael Street.
"The building" Structure(s) built on the lot, which is known as Sha'arei
Ha'ir.
"The rented
premises" Offices on the 7th floor of the building according to the
blueprint appended to this contract, and which constitutes an
inseparable part thereof.
"The
management
company" A management company that provides maintenance services for
the building or for parts thereof, or that shall provide such
services.
"The price
index" The Consumer Price Index (CPI), which includes the prices of
fresh produce, and which is published by the Central, Agency
of Statistics and General Research, even if this index is
published by some other agency or official institution as well
as any other official index it may be replaced with, whether
or not the new index is based on the same data.
"The baseline
index" The index for the month of October 1996 as it was published on
November 15, 1996, and which at that time was 141.1 points.
"The
determining
index" The last known index at the time determined in the contract
for any payment of rent, or at the time of actual payment,
whichever is the latest of the two.
<PAGE>
"The rental
period" The rental period as provided for in section 3(b) of this
contract.
"The bank" Bank Leumi of Israel, Ltd.
"Interest" The areas interest rate for any sum that is in arrears and for
the arrears period at the highest rate of interest charged by
banks for exceptional overdrafts in debt accounts. The banks
confirmation of the interest rate shall constitute proof
positive of said rate.
PREFACE
WHEREAS The company is the owner of the real property known as lot 46
in Bloc 30075 in Jerusalem (hereafter: "the lot"); and
WHEREAS The lessor hereby declares that it is the owner of the rented
premises and is entitled to lease it out; and
WHEREAS It is the stated desire of the lessee to lease the premises
from the lessor for the duration and under the conditions
provided for in this contract; and
WHEREAS The lessor has agreed to lease the premises to the lessee
under the conditions of this contract;
IT IS THEREFORE AGREED, STIPULATED AND DECLARED BY THE PARTIES AS FOLLOWS:
1)
a) The preface to this contract shall constitute an inseparable part of
the contract.
b) The appendices to this contract shall constitute an inseparable part
of the contract.
c) The titles of the sections of this contract are for purposes of
clarification and convenience only, and do not constitute a part of
the contract and shall not be used for purposes of interpreting the
contract.
THE RENTAL, DURATION AND PURPOSES
WAIVER OF CLAIMS OF DISCREPANCY AND OTHER CLAIMS
2) The lessee hereby declares that he has seen the rental, premises, has
measured its area, has examined the possible uses of the premises, and has
found it suitable for his purposes and requirements and that the premises
are in good condition and that all systems are functional. The lessee is
leasing the premises in their existing state at the time of the signing of
this contract and hereby expressly waives any claims of discrepancy or any
other claim whatsoever regarding the premises, the possible uses of the
premises, (and his entering into this contractual agreement).
<PAGE>
THE LEASE AND ITS DURATION
3)
a) The lessor hereby leases the premises to the lessee, and the lessee
leases the premises from the lessor, for the period and for the
appropriate consideration provided for in this contract.
b) The duration of the lease shall be for a period of two years,
beginning on January 1, 1997, and ending on December 31, 1998.
c) The lessee is hereby offered an option (hereafter: "first option") to
extend the lease period by an additional two years, from January 1,
1999 until December 31, 2000. The first option can be exercised by
giving notice no later than September 1, 1998. Should such notice not
be received by September 1, 1998, the option shall expire.
d) Should the first option be exercised, the lessee shall be offered an
option (hereafter: "second option"), to extend the lease period by yet
another two years, from January 1, 2001 until December 31, 2002. The
second option can be exercised by giving notice no later that
September 1, 2002. Should such notice not be received by September 1,
2000, the second option shall expire.
4)
a) The parties shall not be entitled to end this lease except for the
manner provided for in this contract. Any party who breaches its
contractual obligations, as aforementioned, shall not thus be released
from its obligations under this contract, in whole or in part.
b) All provisions of this contract shall be in force for the entire
extended rental period subsequent to the exercise of an option.
5)
a) The purpose of the lease is to conduct business activities relating to
the promotion and business and project management in the rental
premises by the lessee only, and the lessee hereby promises not to
use the premises for any other purposes during the rental period,
unless he should first receive written authorization from the lessor.
b) The lessee, or any party associated with him, are soon to register as
a limited corporation registered in Israel, which shall conduct the
business for which the premises are being leased. It is hereby agreed
by the parties that lessee shall be entitled to assign to this
corporation all his rights and obligations under this contract, on the
condition that the lessee shall be the guarantor of all the new
lessee's contractual obligations. The phrasing of the guaranty shall
be as provided for in the appendix to this contract.
c) The lessor hereby undertakes to install a kitchenette in the rental
premises, in the location designated in the appended blueprint.
<PAGE>
RENTAL PAYMENTS, AND METHOD OF PAYMENT
6)
a) The lessee hereby undertakes to pay the lessor monthly rental fees for
the entire duration of this contract, as follows:
For the period of January 1, 1997 until December 31, 1998, a sum of
10,995NIS for each month's rent, whereas this sum is the equivalent of
$3,350 according to the representative exchange rate of the US Dollar
on the date of the signing of this contract.
Should the first option be exercised: for the period of January 1,
1999 until December 31, 2000, a sum of 12,094NIS for each month's
rent, whereas this sum is the equivalent of $3,685 according to the
representative exchange rate of the US Dollar on the date of the
signing of this contract.
Should the second option be exercised: for the period of January 1,
2001 until December 31, 2002, a sum of 13,292NIS for each month's
rent, whereas this sum is the equivalent of $4,050 according to the
representative exchange rate of the US Dollar on the date of the
signing of this contract.
(The rental fees described in this section shall hereafter be referred
to as; the basic rental fees").
The basic rental fees shall be paid with the addition of index linking
differentials so that each payment of rental fees shall be increased
at a rate identical to the increase rate of the determining index in
comparison with the baseline index.
b) Rental fees shall be paid as follows:
i) On January 1, 1997, the lessee shall pay all rental fees for the
year 1997.
ii) On the 1st day of October for each year, beginning with 1997 (and
if this date is not a day on which business is conducted, then
the day before), the lessee shall pay the lessor all rental fees
for the following calendar year.
Payment of rental fees shall be by bank transfer to the lessor's
bank account, the details of which the lessor shall provide to
the lessee.
VAT
7) To every payment the lessee is obligated to pay under the terms of this
contract, the lessee shall pay the amount due plus value added tax (VAT) at
the rate in force at the time. For each such payment, the lessor shall
provide an invoice to the lessee.
<PAGE>
ADDITIONAL PAYMENTS TO BE MADE BY THE LESSEE
8)
a) In addition to the payment of rental fees the lessee hereby undertake
to pay the following payment to the lessor for the entire duration of
the lease period:
i) All municipal and government taxes, property taxes, fees, and
levies and any other mandatory taxes or payments that are in
force or shall be enforced on the holders of real properties for
the rental premises and for the use of said premises or upon any
operator or manager of any business on said premises.
ii) All the fees and payments for water and electricity for the
premises.
iii) Payments due to the management company according to the terms of
the management contract.
The aforementioned payments shall be paid directly to the
appropriate authorities unless the lessor expressly requests the
payments to be made through him, in which case the lessor will
provide the lessee an invoice for such payment.
b) In the event that any of the payments that the lessee is required to
make under the terms of this section are based on a bill that applies
to the entire building or to a section of the building, the lessee
shall pay the lessor according to a determined gauge applying to the
premises. If no such gauge exists, the lessee shall pay his relative
share as determined by the lessor or the lessor's representatives.
c) Any payment of the payments provided for in this section shall be paid
by the lessee on the legal due date, to the appropriate authority or
other proper recipient.
d) The lessee hereby undertakes to present to the lessor, from time to
time according to the lessor's request, upon the lessor's first
request, all receipts and/or certifications attesting to the fact that
the payments required to be made under the terms of this contract were
indeed made.
e) In the event that one party shall pay, for any reason whatsoever, some
payment that is due to be made by the other party, the obligated party
shall be required to repay the party that made the payment the full
amount paid on its behalf, immediately upon the paying party's
request, with added interest. For purposes of this provision, the
lessor's bills shall constitute prove positive of the matter.
<PAGE>
THE LESSEE'S OBLIGATIONS
9)
a) The lessee hereby undertakes to obtain, at his own expense, all the
licenses and permits, present and future, required by the controlling
authorities for conducting his business on the rental premises, and to
fulfill, at his own expense, any conditions imposed by said
controlling authorities in order to receive or renew such permits
and/or licenses.
The lessee's failure to obtain and/or renew said licenses and permits,
or any of them, shall not constitute a cause for breaching or
b) The lessee hereby undertakes to follow all rules, and regulations,
including Bylaws, that are in force or that shall be enforced,
relating to the rental premises, on the use of said premises, and on
the business operating on said premises, for the entire duration of
the lease. Should the lessee fail in any obligation placed upon him
under the terms of this section, he shall compensate the lessor for
the breach and/or for any direct or indirect damages caused by said
failure.
c) The lessee hereby promises that he will not use the rental premises or
any part thereof in a manner that causes unreasonable noise, odor,
tremor, pollution and/or smoke and/or that shall cause any disturbance
to his neighbors, according to the standards practices in the area in
which the rental premises are located.
The lessee shall bear the expense of any fines that are imposed by the
municipal authorities and/or any governmental institution, if such are
imposed, due to a breach of the terms of this section. Should such
fines be imposed upon the lessor due to any act or omission of the
lessee, the lessee shall reimburse the lessor upon the lessor's
request, for the full sum of the fines.
d) The lessee shall notify the local authorities and the electric company
in writing of his leasing of the premises, the duration of the lease,
and/or any other details required, and shall send copies of these
notices to the lessor. Such notice and copies shall be sent within a
reasonably short time after the signing of this agreement.
SIGNS
10) The lessee shall be entitled to place a sign or signs on the premises, but
only in the areas of the building designed for this purpose, and only after
the shape and type of sign is approved by the lessor.
LIMITATIONS OF USE
11) The lessee hereby promises not to store or keep any materials, tools,
equipment or any other chattel on the building premises or on the lot
outside the building, and the lessee shall not be entitled to use the lot
and/or any part of the building, except for the lease premises, for any
purpose whatsoever, except for the purpose of direct access to the rental
premises.
<PAGE>
MANAGEMENT OF THE BUILDING
12)
a) The lessee hereby promises to abide by all the building's regulations,
as set in the building charter, if such exists, and/or any rule or
regulations set from time to time by the management company.
b) In addition, and notwithstanding the other obligations incumbent upon
the lessee, the lessee undertakes to sign a management agreement with
the management company, at the signing of this rental agreement, which
shall be provided to him by the management company. The lessee
undertakes to pay the management company maintenance fees for the
entire duration of the lease, as well as other fees that are due under
the management agreement. Failure to pay any lawful payment to the
management company shall constitute a breach of this rental agreement
identical to a failure to pay rental fees, and the remedies shall be
identical.
c) At the sole discretion of the lessor or at the request of the
management company, the lessee shall sign the management agreement and
the lessee shall sign an obligation to the lessor to pay any sum due
under the management agreement and to abide by any obligation placed
upon the lessor according to said management agreement. The lessee
shall reimburse the lessor for any charge with which the lessor is
charged due to any act or omission of the lessee.
13)
a) The lessee hereby undertakes to make reasonable use of the rental
premises, to maintain the cleanliness of the rental premises and of
the building, and to prevent any damage and/or unreasonable
deterioration of the rental premises.
b) The lessee shall be required to repair, immediately and at his own
expense, to the satisfaction of the lessor, any damage and/or
deterioration caused to the rental premises by the lessee and/or by
the lessee's employees and/or by the lessee's clients, and/or due to
the lessee's use of the rental premises, except for deterioration
caused by wear and tear caused by reasonable use.
c) In the event that the lessee fails to perform any repair he is
obligated to perform under the provisions of subsection (b) herein,
the lessor or the lessor's representatives shall be entitled, but not
obligated, to perform said repair and the lessee shall be obligated to
reimburse the lessor for the cost of the repair with interest, upon
the lessor's request.
<PAGE>
d) The lessor shall be responsible for performing any repairs upon the
rental premises that are not within the lessee's areas of
responsibility, and which are necessary in order to make reasonable
use of the premises. Should such a repair not be performed within a
reasonable time of the lessor's receipt of written notice of the
required repair from the lessee, the lessee shall be entitled, after
providing reasonable notice to the lessor, to perform the repair and
be reimbursed for the cost of the repair with interest.
Notwithstanding the aforementioned provisions of this section, if the
repair is related to the warranty on the premises or their inspection
by the contractor who constructed the building or a representative of
the contractor, the lessor shall not be responsible for the repair on
the condition that the lessor gave notice to the contractor of the
required repair. However, in the event that the damage or fault
prevents the lessee's ongoing business activities, and the contractor
fails to perform the repair, the parties shall cooperate to the best
of their abilities in order to ensure the immediate repair of the
fault or damage.
14)
a) The lessee hereby promises that upon entering the leased premises, he
shall perform no changes and/or additions and/or construction of any
kind without first securing the approval of the lessor in advance and
in writing, and following all the conditions for such approval imposed
by the lessor.
b) Notwithstanding the aforementioned provisions of subsection (a), any
change and/or addition made to the rental premises and which abide by
the provisions of this section shall remain on the rental premises at
the end of the lease period and shall constitute and inseparable part
of said premises. The lessor shall not be required to pay the lessee
any consideration for such changes and/or additions, though the lessor
may require the lessee to return the premises to their original
condition, which the lessee shall be obligated to do at his own
expense and to the satisfaction of the lessor, by the end of the lease
period.
15) The lessee shall be responsible for any damage of any kind caused to the
rental premises and/or to the building (except for damage caused by normal
wear and tear from reasonable use of the premises) and/or to any third
party present on the rental premises and/or in the building and which are
the result of any action and/or omission of the lessee, the lessee's
employees, the lessee's representatives, the lessee's clients and/or due to
any business activity the lessee conducts on the rental premises and/or the
building premises. No provision of this section shall prohibit the lessee
from making a claim against any third party that the lessee believes to
have caused said damage and/or join such a third party in any suit against
the lessee by the damaged party or by the lessor.
The lessee hereby undertakes to compensate and/or indemnify the lessor,
upon the lessor's request, for any damages ordered against the lessor due
to any harm as provided for in this section and for any expense that the
lessor is liable to incur and/or that the lessor is required to pay in
connection with any of the aforementioned damages, including legal fees.
The aforementioned is conditioned upon the lessor's providing the lessee
with notice of any legal action or claims made upon the lessor by a third
party and the lessor's providing the lessee with an opportunity to defend
himself regarding such action or claim.
<PAGE>
INSURANCE
16)
a)
i) The lessee hereby undertakes to insure, at his own expense, his
activities on the rental premises with employee's insurance as
well as third party liability insurance. The premium of such
policies shall be of a reasonable sum, and the name of the lessor
shall be added as an insured on said policies, with no
indemnification by the lessor. The third party insurance shall be
subject to the "cross liability" clause according to which the
insurance shall be considered as if provided separately for each
unit of the insured.
ii) The lessee hereby undertakes to insure the content of the rental
premises. The premium of this policy shall be of a reasonable sum
and the lease shall be received from the insurer a release from
any right for indemnification regarding the rental premises.
iii) The lessee shall present to the lessor upon the lessor's request
any policy obtained by the lessee under the provisions of this
section, and the lease shall update the coverage amounts and/or
made any other changes in the policy as required.
b) In order to remove any doubt, it is hereby clarified that the lessor
shall not have any liability whatsoever to the lessee for any damage
that is caused to the lessee and/or the lessee's property and/or the
lessee's business, for any reason whatsoever.
c) The lessee hereby undertakes to avoid any action or activity on the
rental premises that are liable to increase the insurance rate for
insuring the premises, in a policy for the building or any part of it.
ACCESS AND REPAIRS
17)
a) The lessee hereby promises to allow the lessor and/or the lessor's
employees and/or the lessor's representatives, including the employees
of the building contractor who are performing warranty repairs or
inspections on the building premises, to enter the rental premises
during regular business hours and in coordination with the lessee in
order to inspect the rental premises and/or to perform repairs on the
premises and/or to show the premises to potential purchasers and/or
renters, under the condition that such access does not detract from
the lessee's reasonable use of the rental premises and/or that the
lessee's comfort be disrupted to the minimal extent.
Should the lessee be caused any loss of income due to repairs
performed as described in this section, he shall not be entitled to
any compensation from the lessor.
<PAGE>
b) The lessee is aware that the building contractor is likely to continue
to perform construction and development work on the building and/or on
the lot, as he sees fit, and the lessee shall not object to the
performance of such work so long as said work in no way affects the
lessee's reasonable use of the rental premises.
TRANSFER OF THE RENTAL PREMISES
18)
a) The lessor shall be entitled to sell mortgage and transfer his rights
in the building and/or in the rental premises, or any part of said
rights, at his sole discretion and with no requirement of securing the
lessee's agreement to such a transfer, provided that any transferee
undertakes all the lessor's obligations under this agreement.
b) Subject to the provisions of section 5(b) herein, the lessee promises
not to transfer any of his rights under this agreement to any person
and/or corporation, whether registered or unregistered, nor to
transfer or assign or sublet the rental premises or any part thereof,
not to allow any person and/or corporation, whether registered or
unregistered, to use the rental premises or any part thereof nor to
include any persons or corporation as aforementioned in his holding
rights regarding the rental premises or any part thereof, without the
lessor's advance written permission.
RETURN OF THE PREMISES TO THE LESSOR
19) The lessee hereby promises that at the end of the lease period or at such
time that this agreement should expire previous to the end of the lease
period for reasons provided for herein, the lessor shall vacate the
premises of any person or property and shall deliver said premises to the
lessor in good and usable condition, except for wear and tear caused by
reasonable use, and subject to the provisions of section 14(b) herein.
At this given time, the lessee shall provide the lessor copies of receipts
from the proper local authorities and from the electric company regarding
the full payment of any charges imposed according to section 8 herein.
<PAGE>
REPAIRS AFTER VACATING THE PREMISES
20) It is hereby stipulated and agreed by the parties that if at the time the
lessee vacates the premises and returns them to the lessor the premises are
not in the condition provided for in section 19 above, then without
releasing the lessee from his obligation to return the premises to the
conditions required by this agreement, the lessor shall be entitled, though
not required, to perform any and all work required at his sole discretion,
in order to bring the premises to the aforementioned good and usable
condition in which the lessee is required to return the premises to the
lessor. The lessee shall be obligated to reimburse the lessor, upon the
lessor's request, for the costs of performing such repairs with interest,
and to compensate the lessor for any damages, losses or prevention of
profit caused by the condition of the premises and/or from the need to
improve the condition of the premises.
NON-VACATION OF THE PREMISES
21)
a) Should the lessee not vacate the premises at the time specified in
section 19 herein, then without detracting from the lessor's right to
exercise his right to receive the rental premises through any legal
means he should desire, the lessee shall be obligated to pay the
lessor the predetermined compensation of 750NIS (Seven Hundred and
Fifty New Israeli Shekels) for every day the lessor occupies the
premises beyond the lease. This sum shall be linked to the baseline
index from the date of signing this agreement until payment is
actually made. It is hereby declared expressly by the parties that the
agreed compensation specified in this section has been determined
after a careful estimation and that the lessee is hereby enjoined from
claiming that this sum was determined with no relation to the damages
that could be foreseen at the time of agreement is entered into, and
as a reasonable consequence of the lessee's failure to vacate the
premises.
b) It is hereby stipulated and agreed by the parties expressly that
nothing stated in subsection (a) herein shall release the lessee from
his obligations as provided for in section 19 herein and/or to grant
the lessee any right to continue and hold the premises and/or to
constitute any relinquishment of rights by the lessor and/or to
detract in any way whatsoever from the rights of the lessor to pursue
redress including, but in no way limiting any other remedies or rights
provided from herein, evicting the lessee from the rental premises.
22)
a) In the event that the lessee materially breaches this agreement, then
the lessor shall be entitled to void this agreement, clear out the
premises at the lessee' s expense and with no need for an eviction
order, and reclaim possession of the premises, all this without in any
way detracting from any other available remedy, and on the condition
that the lessee has not remedied the material breach within 7 days of
the date on which he was requested to do so. For breaches that are not
material breaches the lessor shall be entitled to void this agreement
after giving 14 days notice to the lessee to remedy the breach, if the
breach is not then remedied to the lessor's satisfaction.
<PAGE>
b) Should the events described in subsection (a) come to pass, the lessor
shall be entitled to rent out the premises to another party, which is
no way shall detract from the obligations of the lessee to continue
and pay rental fees until such new rental actually takes place and/or
to pay any difference in rental fees should the new lease be made at a
lower rate. Nothing stated in this section shall be deemed to release
the lessor from his obligation to act reasonably and mitigate his
damages.
Nothing stated herein shall in any way detract from any rights the
lessor has to take legal action and obtain execution of the provisions
of this agreement and/or to make legal claims against the lessee for
compensation for any type of damage caused to the lessor as a result
of the lessee's breach of this agreement.
c) A breach of sections 6, 8, 9, 12, 14, 16, or 19 shall be considered a
material of this agreement.
NON-APPLICABILITY OF THE LANDLORD/TENANT LAW
23) The lessee hereby expressly states:
a) That he has not paid and will not pay the lessor any sum whatsoever
for his agreement to lease the premises to him, whether as key monies
or as participation in the lessor's investment in the building or in
any other manner, except for the rental fees provided for in this
agreement.
b) That he is aware that the construction of the rental premises was
completed after the day of August 20, 1968, and that the premises was
first rented out after this date.
c) That he is aware that there is no tenant, nor was there a tenant, who
is entitled to hold the rental premises and that the rental premises
are not leased with key monies.
d) That the lease provided for in this agreement is not a protected lease
and that the landlord/tenant law of 1972 (combined version) shall not
apply to the lease, nor any regulations based upon the law.
e) That at the time he vacates the rental premises, the lessor shall not
be entitled to any payment whatsoever from the lessor and/or from a
substitute tenant, not as key monies and not as payment for
improvements made upon the premises and not in any other manner.
24) In the event that the lessee becomes a corporation or partnership, the
lessor shall be entitled to void this agreement immediately upon the
initiation of proceeding to liquidate the lessee, including the event that
a temporary liquidator or a receiver or a receiver and manager is
appointed, or any other official appointment is made, whether temporary or
permanent, except for the event that the lessor goes through a voluntary
liquidation, that the lease shall revert to the original lessee beginning
on the day of petition for liquidation is filed.
<PAGE>
25) Should the lessee fall behind in any payment of any sum whatsoever that he
owes the lessor, any sum paid by the lessee to the lessor shall be applied
first to any interest due on said payment, then to index linking
differentials, and finally to the capital of the debt, and in the event
that collection of any such debt causes any expenses to be incurred by the
lessor, any sum then paid by the lessee to the lessor shall first be
applied to these expenses, and only then applied in the order stated above.
26) The stamping fee for this agreement shall be paid by the lessee.
27) Omission, delay or waiver by the lessor in the realization of any of his
rights under this agreement that are not done expressly and in writing,
shall not be considered as a waiver, impediment, agreement, or admission on
his part, and he shall be entitled to exercise any of his rights under this
agreement at any time, and shall in no way be restricted from doing so.
28) The lease hereby waives any right he might have by law to offset payment
against the lessor. Likewise, he also waives his right to offset any sums
that are due to him from the lessor against the management company.
29)
a) The provisions of this rental agreement reflect the full agreement of
both parties and cancel any contracts, promises or obligations that
were made, if such were made, between the parties before the signing
of this agreement.
b) Any alteration to this agreement and any addition to it shall be
invalid unless done in writing and signed by both parties.
30) In order to ensure the full compliance of the lessee with his obligations
to the lessor, the lessee shall provide the lessor a signed promissory note
for the sum of $42,000, with no date. The note shall be deposited in trust
with Attorney Zvi Nixon. Should the lessor have a claim against the lessee
for breach of this agreement, he shall be entitled to request Attorney
Nixon to fill out the necessary details of the note. Attorney Nixon shall
notify the lessee by registered mail of the lessor's claim, at the address
listed herein, and shall release the note to the lessor after 10 days from
the date of notice.
To ensure payment of rental fees for the year 1997, the lessee shall
deposit a sum equivalent to $10,000 in Attorney Nixon's trust account. This
sum shall be returned to the lessee after evidence of payment of the rent
for 1997 is presented.
31) Any notice sent by one party to another at the addresses listed in the
preface to this agreement shall be considered to have been received 72
hours from the time sent by registered mail, or 24 hours of being delivered
by a delivery service to the recipient.
IN EVIDENCE OF WHICH COME THE PARTIES SIGNED BELOW,
/s/ Morris Laster
__________________________ ________________________
The Holder The Company
<PAGE>
APPENDIX
Promissory Note
I,______________________________, signed below, hereby promise with full and
irrevocable Guarantee of payment to_________________________________(hereafter:
"the lessor") that I will fully abide by each and every obligation of
_____________________________________ (hereafter: "the lessee") under the rental
agreement signed between the lessor and the lessee for the rental premises
located at lot 46 of bloc 30075 on Yaffo Street, on the corner of Sarei Yisrael
Street-and any extension of said agreement.
I am aware that my guarantee of payment is a precondition of the contract
between the lessor and the lessee.
My guarantee is complete and irrevocable and cannot be voided or assigned to any
other party in any manner whatsoever. I hereby waive any prior claim upon the
lessee. I agree that sections 5, 6, 7, 15(a) of the Guarantor Law of 1967 shall
not apply to this promissory note.
______________________________
Guarantor
<PAGE>
EXHIBIT 10.19
MANAGEMENT AGREEMENT
Drawn and signed in __________ on December 2, 1996
Between:
Sha'arei Ha'ir Investments, Ltd.
Raul Wallenberg 4, Tel Aviv
(Hereafter: "the company")
And:
1. Partec Ltd., Identification Number _______________
(Hereafter: "the holder")
Whereas The company is the owner of the real property known as lot 46 in bloc
30075 in Jerusalem (hereafter: "the lot"); and
Whereas The company is constructing a development project on the lot, either by
itself or through others, as described herein; and
Whereas The project is designed to be a modern combination development, which
includes areas for business, trade, offices, a parking lot, etc; and
Whereas The holder purchased ownership/lease rights in the property from the
company, and is therefore the holder of the property or is the future
holder of the property; and
Whereas The management and performance of services in the project require
professional management and performance, in order to preserve the high
level of maintenance in the project; and
Whereas The company has contracted with a management company (hereafter: "the
management company") to provide such management services in the
project; and
Whereas The holder agrees that the management and performance of services in
the project are to be handled by the management company on an exclusive
basis, and he promises to act in accordance with the terms of this
agreement and to share in the management expenses as detailed herein;
and
Whereas For the sake of convenience this agreement is being signed between the
company and the holder, the holder nevertheless agrees that the
company's rights and obligations as provided for by this contract may
be assigned to the management company or to any other party that may
replace the management company; and
Whereas It is the desire of parties to formalize their legal relationship
within the bounds of this agreement;
<PAGE>
IT IS THEREFORE AGREED, STIPULATED AND DECLARED BY THE PARTIES AS FOLLOWS:
1. The introduction to this agreement, including the definitions and
declarations within it, constitutes an inseparable part of this agreement.
2. TERMS AND DEFINITIONS
"THE PROJECT": The "Sha'arei Ha'ir" building in Jerusalem, known as lot 46
in bloc 30075, which includes the building to be
constructed in the context of the project, including
commercial areas, office areas, public areas, a parking
garage and external areas.
"THE PROPERTY": An area that is sold or rented, including the gallery,
which is held by the holder as an owner and/or as a lessee
and/or as a renter and/or as having the right of possession
and/or any other right.
"THE SERVICES" Services include the following:
A Insurance on the structure and the equipment of the
public passages as well as third party insurance.
B Cleaning of the public passages, stairwells, elevators
and public bathrooms.
C Security, to the extent necessary.
D Maintenance, inspection and renovation as necessary in
the public passages and in the stairwells.
E Elevator service.
F Electricity for the public passages, stairwells and
elevators.
G Air conditioning for the public passages on the
commercial floor and ventilation on the office floors.
H Plumbing, water and sewage in the public bathrooms.
I Control systems and equipment for the public.
<PAGE>
"PUBLIC AREAS": A. Elevators, air conditioning installations, containers,
piping of any type, and all other apparatuses in the
project, and/or serving the project and which the
company has designated an/or shall designate for
common use by all holders in the project or by the
majority of them, even if they are within the
boundaries of the properties themselves or the
adjacent properties.
B. All other areas of the project that have not been sold
and/or have not been designated to be sold, including
yards, passageways, gardens, parking lots, parking
garages, apparatuses, pathways, sidewalks, etc.,
except for those parts of the project that the company
removes from the common area, at the company's
discretion.
C. In any event, any areas attached by the company to any
property will not be included in the common areas.
"INDEX": The Consumer Price Index (cost of living index), which
includes and fruits and vegetables, and which is published
by the Central Agency of Statistics and General Research,
even if this index is published by some other agency or
official institution as well as any other official index it
may be replaced with, whether or not the new index is based
on the same data. In the event that another index is
published by another agency or institution to replace the
Consumer Price Index as described herein, and the
publishing body does not determine the relation of the new
index to the prior index, the relation shall be determined
by the Central Agency of Statistics and General Research,
and in the case that this relationship is not so
determined, the company shall calculate the change in index
for purposes of this section, while taking the
aforementioned changes into consideration.
3. A. The company takes upon itself the sole management and performance of
services for the project (hereafter: "management and performance of
services") for the duration of this agreement.
B. The holder agrees to this, and hands over to the company the
management and performance of services exclusively. The holder hereby
promises not to carry out services or any part of them himself or
through others, but only through the company or the company's
assignee, and promises to act in accordance with this agreement and
share in the expenses as provided herein.
<PAGE>
4. Management and performance of services shall be carried out by the company
itself and/or by the company in part, and by others in part, at the
company's discretion. Notwithstanding the aforementioned, it is hereby
agreed that the management company shall be allowed to contract from time
to time with any other party for the purpose of obtaining maintenance
services for installed apparatuses and areas of the project, the company
shall employ a mechanism of technical staff, professional and
non-professional, administrative and others and shall also be permitted
allowed to manage and implement the services, in whole or in part, using
contractors, subcontractors, or in any other manner at its discretion,
including employment, full or partial, by special contract or according to
condition that it deems appropriate, of attorneys, accountants, advisors
and other people that the management company sees fit to employ.
5. A. The company shall be allowed, at its discretion, from time to time,
to determine the scope of the services, their type, nature, and which
part of them shall be provided to the project and the property and/or
to certain parts of them if at all and the time, duration and manner
of supplying them, subject to the services being provided in a
reasonable and regular manner.
B. The holder declares that he knows that the company shall provide the
various services to the project, including air conditioning etc.,
during accepted hours according to the company's decision.
6. A. The company shall be allowed to assign and transfer all its rights
and obligations under this agreement to another management company or
other legal entity (hereafter: "the transferee"). Concurrently with
such a transfer, the company shall receive from the transferee notice
that it is taking upon itself all the company's obligations under this
agreement.
B. Notice of transfer shall be given to holders as soon as possible after
such transfer takes place.
C. The results of such a transfer shall be that the company shall be
released ab initio from its obligations and rights under this
agreement, and these obligations and rights shall be considered ab
initio to belong to the transferee alone. The holder and transferee
only shall be party to this agreement, and anywhere in this agreement
where "the company" is referred to, shall be as if referring to the
transferee to begin with.
7. The holder hereby promises that:
A. He and his representatives shall be contractually bound to the
management company in all matters pertaining to management and
performance of services under this agreement, and shall take part in
the expenses involved in implementing the services and managing them
on the basis of a table to be determined by the company and approved
by the company's accountant.
<PAGE>
B. Thatin the event that he shall transfer, sell, rent or grant in any
manner proprietary rights and/or use of the property to any other
person and/or corporation (hereafter: "the receiver of rights") for
any time period whatsoever (whether limited or unlimited, including
full transfer of rights in the property), the holder must, before
signing such an agreement between him and the receiver of rights,
cause the receiver of rights to sign with the company, at a date that
shall be determined by the company for this purpose, a management
agreement that shall be acceptable to the company at the given time.
The signing of a management agreement by the receiver of rights with
the company shall not release the holder from his obligations to the
company, and he shall be jointly and severally liable with the
receiver of rights for carrying out in full obligations under this
agreement, except if the holder transfers the totality of his rights
in the property to the receiver of rights, and the receiver of rights
has signed a management agreement, as previously described.
C. The holder and his representatives shall cooperate with the company in
any event that cooperation is required in order to facilitate the
ongoing and effective management and performance of services.
D. To enable the company and its representatives to enter the property in
order to carry out activities connected with the management and
performance of services, including but not limited to opening walls,
floorings, ceilings and other areas, to exchange and repair plumbing
and pipes and to carry out any work necessary in the opinion of the
company in order to fulfill its obligations under this agreement,
whether the work is done for the benefit of the holder or for the
benefit of others, and the holder shall have no claim whatsoever
against the company due to any disruptions caused by such work. In any
case of activity as described herein the company shall make efforts to
minimize the disturbance caused to the purchaser and that the work
shall be finished as soon as possible.
E. To notify the company of any problem requiring the company to take
action.
F. To carry out any internal changes or other exceptional activity by an
through the company exclusively, unless the company agrees that the
activity be carried out by someone else, all subject to the receipt of
the proper licenses and the authorizations by the appropriate
authorities.
G. To provide the company with a key to the property premises in order to
enable access to the property whenever necessary, and in the event the
lock is changed, to provide the company with a new key.
8. The holder hereby agrees that this agreement shall be filed in the Land
Registry Office by its inclusion in the articles or its being appended to
the condominium articles and/or by registering a comment that the agreement
is existent and binding upon the holder, and/or in any other manner, at the
company's discretion.
<PAGE>
9. A. The holder promises to bear, together with all other holders in the
project, all expenses related to the management and performance of
services, including accompanying expenses for consulting and the
salary expenses of all those employed by the management company,
including financing expenses relating to the operations of the
company, which shall be linked to the Consumer Price Index, as defined
in section 2, herein (hereafter: "the expenses").
B. The basis for allocating the expenses shall be determined by the
company according to the relationship between the floor area of the
entire property (gross) and the floor area of each of the properties
in the project, according to the primary division and measurement of
the areas in the project. Nothing written in this section shall in any
way limit the company's right to change the table allocation the
expenses and the holder's share of the total expenses as provided in
section 8(A) above.
C. In order to ensure the possibility of replacing and renovating
apparatuses used by all the users in the building or to make basic
repairs, the company shall establish and maintain an amortization and
replacement fund, in which the money shall be accumulated from
payments made by holders in the project, and which shall be used for
additions, renovations and replacement of equipment, apparatuses, and
systems. The management company shall include in the expenses
payments, in amount to be determined by the company, which are
designated to cover the depreciation of apparatuses and common areas.
10. A. To the expenses aforementioned in section 9 will be added a sum
equal to 10% of said expenses (hereafter: "management fees"). The
management fees shall be an inseparable part of the expenses, shall be
paid by the holder and the rest of the holders in accordance with
section 9 herein, and shall constitute the wages of the company for
fulfillment of its obligations under this agreement.
B. In the event that it shall be determined by any judicial body that the
"cost plus" method of setting management fees, as provided for in this
agreement , is an unjust and/or void and/or unenforceable condition
for any reason whatsoever, the company shall charge management fees
that shall be added to the expenses as outlined above in the sum of
______________ NIS (_______________New Israeli Shekels), plus VAT, per
square meter of area of the property held by the holder. This sum
shall be linked to the Consumer Price Index. The baseline index shall
be the index published on _______________, which stands
at_______________ points, and the new index shall be the last know
index on the actual day each payment is made.
C. Anywhere in this agreement that the term "expenses" is used, the
meaning is expenses plus management fees (whether these are determined
on a "cost plus" basis or whether they are determined by the alternate
method described in subsection B of this section.
11. The holder promises to pay his share of the management fees for each
three-month period in advance. Payment shall be remitted up to 3 days
before the end of each period for the next three calendar months.
<PAGE>
12. A. The holder promises to pay the company his estimated share of the
expenses, including the allocations for the amortization fund and
management fees, in accordance with written bills that shall be
presented to him by the company. Payment shall be made within seven
days of receipt of such a bill. The aforementioned bills shall be
presented to the holder every month or per any time period to be
determined by the company, and shall be based upon an assessment of
the expenses at the given time.
B. The holder hereby promises to pay the company his share of the
expenses and other payments incumbent upon him under this agreement,
whether he is holding the property himself, or whether he has
transferred use of the property to another party, or whether no person
or legal entity is in fact using the property.
C. All payments that holder is obligated to pay the company shall be paid
by the holder in the offices of the company, or in any other
reasonable manner that the company shall instruct the holder to make
payment.
D. In addition, and notwithstanding the above content of this section
(12), the holder shall deposit with the company a prepayment of his
share in the expenses, in a sum equal to his estimated share of the
expenses for a period of three months, as it is determined at the time
of payment by the management company. This sum shall be held by the
company as a refundable prepayment, and payment of this sum shall not
detract from the holder's obligation to pay the ongoing bills that are
presented to him by the company. The holder hereby promises to remit
the said prepayment to the company within 14 days of receiving the
company's claim for payment of this sum.
13. A. The management company hereby promises to keep precise and orderly
books and records of all expenses and revenues in managing and
implementing the services.
B. The companies books and records shall be held in trust for the holder,
and shall constitute proof at any time of payments made by the holder
to the company.
C. The holder shall be entitled to an explanation regarding expenses and
to examine the accounting records that the company keeps for the
project. The procedures for the manner and time such explanation shall
be given are to be determined by the company.
14. A. Within a time period not to exceed 6 months from the end of each
calendar year, the company shall perform a final accounting of the
expenses related to the management and performance of services
(including depreciation and management fees) for the said year
(hereafter: "annual accounting), and shall produce a cop of the annual
accounting to all the holders in the building. The annual accounting,
when it is audited and approved by the company's accountants, shall
serve as prima facie evidence of the amount of the expenses for
management and performance of services.
<PAGE>
B. The holder hereby promises to pay the company any differences,
including index linking differentials should such occur, between the
estimated share of expenses paid by the holder and the actual expenses
as they are reflected in the annual accounting. This payment shall be
made within 7 days of the time the company produces the annual
accounting to the holder. Should any difference be to the benefit of
the holder, the holder's account shall be credited accordingly.
C. The holder shall pay the company value added tax on any and every
payment he is obligated to make under this agreement. The value added
tax shall be included in each such payment, at the rate in force at
the time the payment is made. For each payment, the holder shall
receive a receipt from the company, as required by law.
D. The company shall be allowed to invest any money balances left in it
possession, whether in funds or in deposit accounts or in any other
investment, in any manner the company sees fit.
15. A. In any event that the holder shall be later making a payment that
he is due or shall become due to pay the management company under this
agreement and/or if the holder shall breach any condition of this
agreement, the management company shall be entitled, without in any
way detracting from its rights to pursue other legal avenues of
relief, to pursue, at its discretion, one or more of the following
options:
(1) To cease management and performance services provided to the
holder, in whole or in part.
(2) To add Consumer Price Index linkage differentials as defined in
section 2 of this agreement to any payment or expense due to be
paid to the company by the holder and which was not paid in a
timely manner, plus interest at the rate current at the time of
payment in commercial banks, for exceptional overdrafts in debit
accounts, plus 2%.
(3) To use the security payment provided for in section 16 of this
agreement to cover the payment that is overdue.
(4) To demand and receive from the holder liquidated damages, paid in
NIS, in the amount equivalent to US $55,000 (Fifty five thousand
US dollars).
(5) To obtain an injunction.
(6) To cut off the supply of electricity and/or water and/or gas
until the Holder's debt is paid in full. The holder shall have no
claim against the company should it act according to the
provisions of this subsections.
(7) To act in any other legal manner.
B. The holder shall repay any and all expenses and payments paid by the
company due to the breach of this agreement by the holder and/or that
become necessary in order to pursue legal action or other remedies
against the holder, immediately upon the company's request for such
repayment.
<PAGE>
C. The holder's refusal or unwillingness to accept any service by the
company and/or the holder's desire to cease the management and
performance of services for the property in whole or in part and/or
the cessation of management and performance of services by the company
in accordance with section 15 (A)(1) herein, shall not release the
holder from his obligation to share in the expenses related to the
management and performance of services in accordance with this
agreement.
D. It is hereby agreed by the parties that the holder shall not be
allowed to set off and/or withhold payment due to the company, in
spite of any claim he may have against the company.
16. A. Notwithstanding the provisions of sections 12 and 14 of this
agreement, it is hereby agreed by the parties that in order to ensure
the performance of the holder's obligations under this agreement, the
holder shall deposit a security payment at the time of the signing of
this agreement a sum equal to the holder's estimated share of the
expenses for each 6 month period, as shall be determined by the
company at the time the signed (hereafter: "the security deposit"), in
addition to the payment provided for in section 12 herein.
B The security deposit shall be returned to the holder at the end of the
agreement period, at a sum linked to the Consumer Price Index (the
base index shall be the last known index at the time the security
deposit is made and the new index shall be the last known index at the
time the security deposit is returned to the holder), as provided for
in the instructions that follow.
C. In the event that the holder fails to make any payment in a timely
manner, as provided for in this agreement, the company shall be
entitled, at its own discretion and without detracting from any other
available remedies, to use the security deposit to cover said late
payment. In such an event, the amount used to cover said late payment
shall be deducted from the repayment of the security deposit to the
holder as provided for in subsection B above. Said sum shall be linked
to the Consumer Price Index beginning on the date the holder was due
to make a payment and failed to do so, as provided for herein, until
the day the security deposit is refunded.
17. In addition, the holder hereby promises to provide to the company, as
security, a bank check and/or a promissory note signed by him and two
guarantors for a sum equal to the estimated payment for management and
performance of services for a 6 month period, that shall be linked to the
Consumer Price Index. It is hereby agreed that the promissory note is
provided as security only, and shall not constitute any due payment until
and unless executed. The promissory note shall constitute a security not
only for payments due, but also for the liquidated damages agreed to
herein, interest, and legal expenses, caused by lack of payment of
management fees.
18. A. The company shall be entitled, at its own discretion and at any
time, to cease management and performance of services and/or any part
of them by giving written notice of such cessation to the holder at
least 6 months in advance.
<PAGE>
B. In the event that the holders and/or the owners should desire to
cancel and/or cease the management of services by the company in the
project, such cessation or cancellation shall occur only upon the
fulfillment of the following conditions, cumulatively:
(1) 80% of all the holders and/or the owners in the project arrive at
such a decision and express it in writing.
(2) All the holders and/or the owners in the project have paid off
all their debts to the company under the terms of this agreement
and have released the company from its obligations flowing from
its commitments as provided for in this agreement, pertaining to
the management and performance of services for any third party.
(3) The company is given 12 months advance notice.
(4) The company has been providing services for at least 10 years.
(5) All the holders and/or owners have entered a contractual
agreement with another corporation or any other entity that has
taken upon itself the management and performance of services
provided for in this agreement.
19. A breach of this agreement by the holder shall also be considered a breach
of obligations by purchaser/lessee against the seller in the sale/rental
contract, and the lack of timely payment of any payment due to the company
by the holder shall also be considered a lack of timely payment of
consideration/rent, without detracting from any other remedies the company
is due.
20. The holder hereby agrees to bear the expense of stamping this agreement.
21. The addresses of the parties to this agreement are as listed in the preface
of the agreement. Any notice that shall be sent by one party to the other
by registered mail at either of the aforementioned addresses shall be
considered to be received by the addressee within 3 business days of the
date such notice was posted. If notice is hand delivered, it is deemed
received at the time of delivery.
IN EVIDENCE OF WHICH THE PARTIES SIGN, AT THE TIME AND PLACEMENT AFOREMENTIONED,
<PAGE>
EXHIBIT 10.22
TENANCY AGREEMENT
[ref. heh het - shin kaf B-6]
Drafted and signed in Jerusalem on 13 December 1999
Between: HAR HOTZVIM PROPERTIES LTD. (51-168405-2)
27 Hamered St., Tel Aviv
(hereinafter "the lessor")
And: BRT BIOPHARMACEUTICALS LTD. (51-285095-9)
216 Jaffa Road, 94383 Jerusalem
(hereinafter "THE LESSEE")
Whereas The lessor is the owner of rights in land known as parcel 110 in
block 30241, on Qiryat Hamada Street, Har Hotzvim, Jerusalem;
And whereas An existing building is located on this land and other buildings
are in the process of planning or construction and development;
And whereas The lessee is interested in leasing from the lessor a unit located
in Building B on the land, all as stipulated in this agreement;
And whereas The lessor agrees to lease to the lessee a unit in Building B on
the property, as stipulated in this Agreement;
And whereas The parties have agreed on the principles for adapting the leased
property to the requirements of the lessee and have agreed on all
other conditions of the transaction;
NOW THEREFORE BE IT AGREED, STIPULATED, AND DECLARED AS FOLLOWS:
1. INTRODUCTION
1.1 The preamble to this agreement is an integral part thereof.
1.2 DEFINITIONS
In this agreement, the following terms shall be interpreted as
indicated:
1.2.1 "THE PROPERTY" - Parcel 110 in block 3241, on Qiryat
Hamada Street, Har Hotzvim, Jerusalem, including
everything built thereon and everything that may be
built and developed thereon. The boundaries of the
property are indicated on the sketch attached to this
agreement as an integral part thereof, and marked
"Appendix A-1."
<PAGE>
1.2.2 "THE PROJECT" - The Ramot Meir project, under
construction on the property, which includes and will
include multipurpose structures, car parks, and open
areas.
The Project is intended to comprise three main
buildings and a tower (Building A, Building B,
Building C, and Building D). The term "project"
includes of these buildings and all other structures,
facilities, areas, lawns, paths, and everything
located on the property.
The project will be erected in stages at the
discretion of the lessor.
1.2.3 "BUILDING A" - An exiting structure in the Project
whose boundaries are marked in the sketch in Appendix
A-1, which consists of several stories.
"BUILDING B" - A building currently being planned and
erected, whose boundaries are marked in the sketch in
Appendix A-1, and which will include a multistory
parking garage and multipurpose floors.
"BUILDING C" - A building currently being planned,
whose boundaries are marked in the sketch in Appendix
A-1, and which will include a multistory parking
garage and multipurpose floors.
"BUILDING D" - a building currently being planned,
intended as a tower to be erected, if approval is
forthcoming, above a portion of Building C.
1.2.4 "THE LEASED PREMISES" - An area on the third-floor
(level 722) of Building B. The boundaries of the
leased premises are marked in blue on the sketch
attached to this agreement as an integral part
thereof and designated APPENDIX A-2. For the purposes
of this agreement the leased premises are considered
to cover 400 square meters gross. The leased premises
are designated as Unit B/3/101 in the Project. It is
stipulated that the leased premises include an area
of approximately 283 square meters intended for the
offices of the lessee, marked on the sketch with the
word "offices," and an area of approximately 117
square meters intended for the laboratories of the
lessee, marked on the sketch with a work
"laboratories." The border between the office area
and the laboratory area is marked in red on the
sketch in APPENDIX A-2. For the purposes of this
agreement the total area of the leased premises is
approximately 400 square meters gross, as stated
above. It is stipulated that the office area will
include all the work, systems, and utility supplies
in accordance with Appendix B to this agreement
(Technical Specification) that are included in the
term "the leased premises," whereas the laboratory
area will be handed over to the lessee by the lessor
as a shell only and all interior, finishing, and
infrastructure work for the laboratory area for the
needs of the lessee will be done by the latter, at
the sole expense and responsibility of the lessee.
1.2.5 "MONTH" - A month according to the Gregorian
calendar, beginning on the first day of that month
and concluding on the least day of that month, in
<PAGE>
accordance with the number of days in that month in
that year according to the Gregorian calendar.
1.2.6 "MANAGEMENT COMPANY" - A firm designated by the
lessor to provide management and maintenance services
for the project, whether this company is that of the
lessor or any other company selected by the lessor.
1.3 The appendices to this agreement are an integral part thereof.
The appendices are as follows:
Appendix A-1: Sketch of the property
Appendix A-2: Sketch of the leased premises
Appendix B: Technical specification and work to be performed by
the lessor in the offices of the lessee
Appendix C: Interior work in the laboratory area of the leased
premises to be implemented by the lessee (to be
added at a later date)
Appendix D: Sample promissory note
Appendix E: Insurance appendix (with two subsidiary appendices)
Appendix F: Sample bank guarantee
1.4 The headings of the sections and provisions of this agreement
and its appendices have been inserted to facilitate the
reading of the agreement and its appendices. They are not part
of the agreement and the agreement shall not be interpreted
according to them.
2. UNDERTAKING TO LEASE
The lessee hereby undertakes to lease the leased premises from the
lessor and the lessor hereby undertakes to lease the leased premises to
the lessee, all in accordance with all conditions and provisions of
this agreement.
In addition, the lessee hereby undertakes to conclude a management
contract with the management company designated in this agreement and
to comply with all provisions and conditions of the management contract
as part of this obligations vis-a-vis the lessor according to this
agreement.
3. TERM OF THE LEASE
3.1 The term of the tenancy of the leased premises is hereby set
at 8 years, beginning on 1 March 2000 (hereinafter "the
starting day of the lease") and concluding on 29 February 2008
(this period shall be designated in this agreement "the term
of the lease").
<PAGE>
The lessee reserves the right to shorten the term of the lease
in accordance with and subject to the provisions and
conditions of section 24 below.
3.2 It is hereby agreed and stipulated that the starting day of
the lease may be postponed by the lessor, and this in the case
stipulated in section 23 below, as well as in the case that
the lessor finds that the work on the project and/or the
building in which the leased premises are located do not
permit the start of tenancy.
Should the lessor give notice of a postponement of the
starting day of the lease, then the term of the lease shall
begin on the new date stated by the lessor and shall last for
8 years, starting on the new date set by the lessor as the
"starting day of the lease." In such case, all dates
stipulated in this agreement shall be modified
correspondingly.
4. CONVEYANCE OF THE LEASED PREMISES
4.1 The lessee undertakes to take possession of the leased
premises on the starting day of the lease.
4.2 Until the date of the handover of possession of the leased
premises to the lessee, the lessor shall complete the work in
the office area of the leased premises, all in accordance with
the Technical Specification attached to this agreement as an
integral part thereof, and designated APPENDIX B.
By way of sound practice, it is hereby clarified that both the
lessor and other lessees in the building and the project are
entitled, even after the conveyance of possession of the
leased premises to the lessee, to continue to carry out
construction and finishing work in the project (and in every
part thereof), in the building in which the leased premises
are located as well as in other leased areas of this building.
The lessor shall make every effort to ensure that work as
stated in the preceding paragraph will be conducted with
minimal disturbance to the lessee.
4.3 The lessee confirms that it has seen and carefully examined
the plans for the leased premises and the technical
specification and that subject to their implementation the
leased premises are fully satisfactory to it.
4.4 In everything that has to do with the interior work in the
laboratory area of the leased premises that will be performed
by the lessee, there shall apply the provisions of section 14
below and the provisions of the document concerning "interior
work by the lessee," attached to this agreement as part
thereof and designated APPENDIX C.
4.5 The lessor undertakes to perform the interior work in the
office area of the leased premises, enumerated in the
technical specifications (Appendix B to the agreement) within
80 days after the lessee conveys to the lessor the lessee"
final plans for the internal division of the leased premises.
<PAGE>
The lessee undertakes to convey to the lessor, by20 December
1999, the lessee's plans in their final form and adapted to
the internal division of the office area in the leased
premises. Should the delivery of the lessee's plans to the
lessor be delayed until after the aforesaid date the transfer
of the leased premises will be postponed correspondingly and
similarly all the dated enumerated in this agreement will be
delayed correspondingly, but in any case the starting date of
the lease shall not fall after 1 April 2000.
4.6 Should the lessor delay the date of the transfer of possession
of the leased premises beyond the lapse of 80 days from the
date of delivery of the lessee's plans, in their final and
appropriate form, the lessor shall pay the lessee as agreed
and prepossessed damages a sum equal to the monthly rental for
the period during which the conveyance of possession of the
leased premises was delayed, prorated, and shall also
reimburse the lessee for the rent paid to it at the time of
the signing of this agreement for that same period, pro rata.
5. RENT
5.1 The monthly rent for each month during the term of the lease
between 1 March 2000 and 29 February 2004 is hereby set at the
amount of NIS 20,778 (twenty-thousand seven hundred
seventy-eight New Israeli Sheqels), plus indexation
differentials (hereinafter "the monthly rent").
The amount of the monthly rent for each month of the term of
the lease from 1 March 2004 until 29 February 2008 is hereby
set at the amount of NIS 22,855 (twenty-two thousand eight
hundred fifty-five New Israel Sheqels), plus indexation
differentials (hereinafter "the monthly rent").
5.2 In addition to the monthly rent the lessee shall add and pay
to the lessor Value Added Tax at the legal rate at the time of
payment. The rent shall not be reduced below the amounts
stipulated in section 5.1 above.
5.3 The monthly rent as stipulated above shall be linked to the
index and shall be paid with the addition of indexation
differentials, using the following indexation base:
5.3.1 It is agreed that the "determining index" according
to which the monthly rental payments will be
calculated is the index published on November 15,
1999 (106.8 points).
5.3.2 It is agreed that the "known index" is the last known
index on the day on which the monthly rent payment is
actually made.
5.3.3 "The index" means the index known as the "Consumer
Price Index" (including fruits and vegetables),
published by the Central Bureau of Statistics and
Economic Research. Should the publication of this
index be discontinued, it shall be replaced by
whatever index is stipulated by the Central Bureau of
Statistics as the index that replaces it; if none is
so designated, it shall be replaced by the index
accepted by the Bank of Israel as the index that
replaces
<PAGE>
it, whether or not said indices are based on the same
data as the aforementioned index.
6. PAYMENT OF RENT
6.1 The lessee undertakes to pay the lessor monthly rent as
follows:
6.1.1 Monthly rental payments for the entire term of the
lease, plus Value Added Tax, shall be paid by the
lessee to the lessor in quarterly payments (each in
the amount of the monthly rent for three months, plus
indexation differentials plus Value Added Tax), paid
for every three-month period in advance, no later
than the first day of the first month in each
quarter.
The rental payments in accordance with this
subsection shall be paid in every year that the lease
is in effect on the first day of each of the
following months: April, July, October, January.
6.1.2 It is agreed that, notwithstanding the provisions of
section 5.1 and section 6.1.1 above, the lessee shall
pay the lessor by check, on the day of the signing of
this agreement, the sum of NIS 139,253 (one hundred
thirty-nine thousand two hundred fifty-three New
Israel Sheqels), plus Value Added Tax, on account of
the monthly rent and on account of the monthly
parking fees for four parking spaces as stated in
section 26 below, for the period running from1 March
2000 through 30 September 2000.
It is agreed that all other monthly rental payments,
starting with the period that begins on 1 October
2000, shall be paid in the amounts and on the dates
stipulated in section 6.1.1 above. The last rental
payment shall relate to the period between the first
day of the month of January of the last year of the
lease and the 29th day of the month of February of
the last year of the lease.
6.1.3 The monthly rental payments shall be made with in
addition of indexation linkage differentials computed
according to the ratio between the base index and the
known index.
6.1.4 The lessee shall not be entitled to prepay the
monthly rent except with the prior written consent of
the lessor, if given.
6.2 At the time of the signing of this agreement the lessee
delivers to the lessor 14 index-linked promissory notes
phrased as stipulated in APPENDIX D to this agreement. The
amounts of the promissory notes and their dates of maturity
shall correspond to the sums and dates stipulated in sections
5.1 and 6.1.1 above (for the period beginning on 1 March 2000
and concluding on 29 February 2004). Except for the first
payment, which relates to the period from 1 March 2000 through
30 September 2000, which is paid by check as stated, and
except for the last promissory note, which relates to the
period from 1 January of the last year of the lease through 29
February of the last year of the lease, as stated, the amount
of each promissory note shall be the sum of the monthly rent
and the monthly parking fees for four parking spaces, as
stated, for three months, plus Value Added Tax (base index:
106.8 points).
The lessee undertakes to present to the lessor, on the dates
stipulated in section 24 below, 16 indexed promissory notes
phrased as stipulated in APPENDIX D to this
<PAGE>
agreement. The amounts of the promissory notes and their dates
of maturity shall correspond to the sums and dates stipulated
in sections 5.1 and 6.1.1 above (for the period beginning on 1
March 2004 and concluding on 29 February 2008). The amount of
each promissory note shall be the sum of the monthly rent for
three months, plus Value Added Tax (base index: 106.8 points).
6.3 The aforementioned promissory notes will be payable to the
order of the lessor, with the right of endorsement to the
lessor's bank for collection only. The promissory notes shall
be signed by the lessee.
The aforesaid promissory notes shall be given to guarantee
payment of the rent and to facilitate collection thereof.
Only the actual and timely redemption of each promissory note
shall be considered to constitute appropriate payment of the
rent covered by that note.
6.4 The lessee hereby conveys to the lessor a certified copy of an
irrevocable order given to Bank Leumi Le-Israel, Ltd., Mahane
Yehuda Branch (No. 913) to pay the aforesaid promissory notes
from the lessee's account with this bank (account number
121600/19) and undertakes to cause the promissory notes to be
honored by this bank in timely and complete fashion.
6.5 Each of the above subsidiary provisions of the present section
6 constitutes a principal condition of this agreement, the
violation of which constitutes a fundamental breach of the
agreement to which are applicable also the provisions of
section 18 below.
6.6 By way of sound practice it is hereby stated that each of the
promissory notes in accordance with section 6.2 above is
deemed to be a note with a face value in the amount written
(in words and in digits) on the note, plus an amount whose
rate is the same as the rate of the Value Added Tax stipulated
by law on the date set for payment of the note. The amount of
Value Added Tax shall be computed also with regard to
indexation differentials. The lessee undertakes to pay the
amount of the note (plus indexation differentials), including
Value Added Tax as stated, on the date set for payment.
Computation of the Value Added Tax shall be based on the rate
of Value Added Tax that applies to rental transactions (should
there be a distinction among different types of transactions).
The lessee undertakes not to claim that the note is
conditional or not for the face amount.
7. OBJECTIVE OF THE TENANCY
7.1 The lessee is leasing the leased premises and every part
thereof for the purpose of offices and laboratories for
research and development in the field of medicine and
para-medicine only, and undertakes to conduct on the leased
premises a use for this objective throughout the term of the
lease.
7.2 The lessee alone and at its expense is responsible for
obtaining business permits for the use of the leased premises.
<PAGE>
7.3 The lessee affirms that it is considering submitting a request
to receive the status of "approved enterprise" and/or to
conduct "an approved project" (in the sense of these terms in
the Encouragement of Capital Investment Laws), and this within
18 months of the starting date of the lease in accordance with
this agreement. The lessee affirms that to the best of its
knowledge it meets the criteria stipulated and required to
receive the status of approved enterprise and/or to conduct an
approved project as stated.
7.4 The provision of section 7.1 is a principal condition of this
agreement, the violation of which constitutes a fundamental
breach of the agreement to which are applicable also the
provisions of section 18 below.
8. IDENTITY OF THE USERS OF THE LEASED PREMISES
8.1 The leased premises are leased to the lessee alone; the lessee
may not transfer the leased premises or any part thereof to
another party, nor may the lessee grant any right whatsoever
in the leased premises or in any part thereof to other parties
without the prior written consent of the lessor, when the
alternative lessee is to the full satisfaction of the lessor.
Notwithstanding what is stated above, the lessor may reject a
subtenant or substitute lessee for reasonable cause only. It
is made clear that the purpose of the tenancy of the
substitute lessee shall not be limited to the objective of the
lease in accordance with section 7.1 above. It is made clear
that the rejection of a proposed substitute lessee by the
lessor because of the objective of the tenancy of the proposed
substitute lessee is inappropriate to the nature of the entire
project is reasonable. If the lessor has approved a subtenant
as stated, the lessee shall continue to bear responsibility
for all its undertakings in accordance with this agreement.
8.2 Given that the lessee is a limited liability corporation, it
is agreed that any change in the control of the company shall
be considered to be a transfer of rights that is not allowed
under section 8.1 of above (and accordingly requires the
consent of the lessor in the conditions stated above); the
lessor shall not reject a request by the lessee other than for
reasonable cause. Should the lessor reject a request by the
lessee for other than reasonable cause, the lessee shall be
entitled to shorten the term of the lease in accordance with
the provisions and conditions of this agreement, subject to
finding a substitute lessee to the full and exclusive
satisfaction of the lessor. The lessee declares that the
stockholders as of the date of the signing of this agreement
are Lakaro Biopharmaceuticals Inc. (99%) and Morris Last (1%),
and that the lessee company is controlled by these alone.
8.3 Each of the provisions of section 8 is a principal condition
of this agreement, the violation of which constitutes a
fundamental breach of the agreement to which are applicable
also the provisions of section 18 below.
<PAGE>
9. TAXES AND OTHER COMPULSORY PAYMENTS ON ACCOUNT OF THE LEASED PREMISES
The parties agree that all taxes, levies, fees, and other compulsory
payments that may be imposed with relation to the leased premises and
any part thereof and that are incumbent upon the party in possession of
the property shall all and with no exception devolve on the lessee.
Without detracting from the generality of the aforesaid and from other
sections of this agreement, it is hereby made plain that the lessee
shall pay the municipal rates due on account of the leased premises.
Property tax and other taxes imposed exclusively upon the owner of the
property and on the owner alone, including sewage, road construction,
drainage, and similar levies or fees, shall be paid by the lessor.
10. EXPENDITURES FOR USE AND MAINTENANCE OF THE LEASED PREMISES AND
RESPONSIBILITY FOR DAMAGES
10.1 The expenditures and payments required for use of the leased
premises and as a result of the use of the leased premises, of
any type whatsoever, including electricity, water, telephone,
telecommunications, heating, air-conditioning, and gas, shall
devolve exclusively on the lessee.
10.2 Should no water meter be installed in the leased premises, in
accordance with a decision of the lessor, payments for water
usage shall be made by the lessee to the lessor (plus Value
Added Tax) directly or through the management company. The
lessee's share of the outlay for water usage shall be computed
by the lessor according to the relative share of the leased
premises in the building in which the leased premises are
located. The payment for water shall be made within two weeks
of the day on which the lessor submits a bill for this to the
lessee.
Should the water usage of the building in which the leased
premise are located be marginal or negligible, the lessor
shall be entitled to determine that the total water usage of
the building will be included as part of the "actual
expenditures' of the management company on account of which
the lessee pays it "contributory share" in the "expenditures
of the company," as stipulated in the management agreement.
10.3 The lessee alone is responsible for maintaining the leased
premises and its systems in working order and for repairing
any damage or malfunction that may be caused or that may arise
in the leased premises during the term of the lease. The
lessee shall not bear responsibility for repairing any damage
or malfunction that occurs beyond the outside walls of the
leased premises or in the structure of the concrete ceiling of
the leased premises or in the building systems outside the
leased premises that are not systems of the leased premises,
except for damage or malfunction that results from an act of
commission or omission on the part of the lessee. The lessee
shall bear responsibility for all damage to windows of the
leased premises. The lessor shall bear responsibility for
repairing any damage or malfunction that results from faulty
construction and/or the use of defective building materials,
unless these damages
<PAGE>
result from an act of commission or omission on the part of
the lessee, in which case the lessee shall bear responsibility
for these damages.
10.4 The lessee alone and at its expense shall be responsible for
any damage that may be caused to the leased premises, to
property, and to any human being therein.
In addition to the aforesaid, it is agreed that the lessee
shall bear responsibility for damages of any type whatsoever
that may be caused to the lessor and/or to the management
company and/or to any third party whatsoever by a negligent
and malicious act of commission or omission on the part of the
lessee, including, and without detracting from the stated
generality, any damage to the body or property of any person
who may be found at any time whatsoever in the area of the
project. The lessee hereby releases the lessor and/or the
management company from any liability under law with relation
to any such damage and undertakes to compensate or indemnify
them in any amount of damage that may be caused to the lessor
and/or to the management company and on account any amount
that the lessor and/or the management company may be required
to pay in relation to any damage and outlay and/or loss and/or
fine that may be caused as stated. The compensation and
indemnification shall include any legal expenses that the
lessor and/or the management company may incur in connection
with the aforesaid and shall be paid to the lessor and/or to
the management company immediately upon the first request,
provided that the lessee has been given a reasonable
opportunity to defend itself against any claim that may be
submitted in this regard.
It is hereby stated and agreed that the lessee and all those
acting on its behalf explicitly waive any right of action
against the lessor and/or against the management company and
all those acting on their behalf as well as against other
tenants of the project whose tenancy and/or management
agreements include a parallel section concerning a waiver of
the right to lodge an action against the lessee on account of
damage for which it is entitled to indemnification under the
insurance policies that it undertook to take out in the
management contract, in the tenancy agreement, or in any
appendix that is a part thereof. The waiver of the right lodge
an action shall apply also to damage for which the tenant is
not entitled to indemnification because of a deductible clause
in the insurance policy. The waiver of the entitlement to
indemnification shall not apply vis-a-vis a party that has
caused damage with malicious intent.
11. INSURANCE
The lessee undertakes to carry insurance as specified in APPENDIX E to
the agreement and undertakes to fulfill each of the obligations imposed
on the lessee in APPENDIX E to the agreement.
Each of the lessee's obligations under the present section 11 and
Appendix E to the agreement (and its subsidiary appendices) is a
principal condition of this agreement, the violation of which
constitutes a fundamental breach of the agreement to which are
applicable also the provisions of section 18 below.
<PAGE>
12. NONAPPLICATION OF TENANT PROTECTION
The lessee declares that it is aware of and agrees to the following:
12.1 The lessee is not and shall not be a protected tenant under
the Tenant Protection Law (consolidated version) 5732-1972.
12.2 The tenancy is an unprotected tenancy. Neither it nor the
parties to the agreement are subject to the aforesaid Tenant
Protection Law or to any other law or judgment that relates to
the protection of tenants or control of rent and that may
replace or supplement the aforesaid law.
12.3 The lessee has not paid and it is agreed that it shall not
make any payment nor grant to the lessor any right whatsoever
that may be deemed to be key money. It is agreed that any
payment, consideration, right, or benefit that the lessor may
derive from the lease, the leased premises, and the lessee
shall also be deemed to be part of the rent in every respect,
and this in addition to the rent stipulated in this agreement.
12.4 The lessee declares that it is aware that the leased premises
are part of a structure erected after 1 April 1954 (in
practice after 20 August 1968) and leased for the first time
after 31 March 1955 (and in practice after 20 August 1968) and
that the leased premises are free of any tenant on the date of
the signing of this agreement.
12.5 The lessee declares that the leased premises are free of any
lessee and of any person with the rights to occupy it (except
for the lessor).
12.6 At the time of the vacation of the leased premises by the
lessor, the lessor shall not be entitled to any payment of
right of any kind whatsoever from the lessor and/or from any
substitute tenant or from any other party, including on
account of improvements or repairs to the leased premises.
13. PLANNING AND CONSTRUCTION OF THE PROJECT
13.1 The lessee confirms that it is aware that the programming,
planning, infrastructure development, and construction work on
the project (each and all of the above, hereinafter "the
construction of the project") have not yet been completed,
except for the existing building (Building A), to which
modifications and additions will also be made. The
construction of the project (and every part thereof) includes,
in part, the erection of buildings, development and finishing
work, as well as interior work in some of the completed
structures. The work will be performed in stages and in
accordance with schedules, with no time limit and on the basis
of existing plans or plans that may be drafted in the future
or plans that may be modified in the future, all at the
discretion of the lessor.
13.2 It is agreed that the lessee shall submit no claims or actions
against the lessor and against any third party whatsoever on
account of any disturbance or damage that may be caused to it,
if such is caused, on account of construction of the project
(and any portion thereof) or on account of the completion
thereof. It is further agreed that the
<PAGE>
lessee shall not take any action or institute any proceeding
that may constitute any infringement whatsoever of the
lessor's freedom to plan the project or hinder construction
works on the project by or on behalf of the lessor, or any
part thereof.
14. INTERIOR WORK IN THE LEASED PREMISES BY THE LESSEE
14.1 It is agreed that the lessee will obtain possession of the
leased premises in the engineering condition as is and in
which or in relation to which are included all of the
installations and components enumerated in Appendix B to the
agreement (Technical Specifications).
14.2 It is agreed that except for what is incumbent upon lessor in
accordance with Appendix B to the agreement with regard to the
office area of the leased premises and this area alone, all
work to adapt the leased premises, including the laboratory
area in the leased premises, to the purpose of the tenancy and
the use of the lessee, including any construction, insulation,
and assembly whatsoever in the leased premises, including
various systems and utility supplies (each of these
hereinafter "interior work"), shall be performed by the lessee
alone, at its responsibility and expense.
No work or utility supply in the leased premises or to the
leased premises, except for those enumerated in Appendix B to
the agreement (Technical Specifications) is or shall be
incumbent upon the lessor.
14.3 It is hereby agreed that the lessee may not perform any
interior work on the leased premises except in accordance with
and subject to the provisions of Appendix C to the agreement,
which is an integral part thereof. It is the responsibility of
the lessee to receive any permit or license required bylaw for
the performance of interior work.
The lessee shall begin the interior work in the laboratory
area of the leased premises no later than 1 March 2002, on
condition that the lessee's plans (including plans for
systems) have been approved in advance and in writing by the
lessor. The lessee undertakes to complete the interior work in
the laboratory area of the leased premises within three months
of the start of the aforesaid work.
The lessor shall not refrain from approving the lessee's plans
for interior work in the laboratory area of the leased
premises other than on engineering grounds and/or reasonable
cause.
14.4 After the completion of the interior work in the laboratory
area of the leased premises by the lessee, the lessee shall be
forbidden to make any modification to the entire leased
premises and its systems; nor shall it be allowed to make any
addition to the leased premises (including any fixed
installation or system) except with the prior written consent
of the lessor, which will be weighed by the lessor at its
exclusive discretion.
14.5 In order to avoid any misunderstandings it is hereby stated
that if water is supplied to the leased premises directly from
the local authority, the lessee shall sign a contract
<PAGE>
with the Jerusalem municipality for the supply of water to the
leased premises by 1 March 2000 and see to it that a water meter is
installed for the leased premises by this date, at its own expense.
It is further agreed that the lessee shall sign a contract with the
Electric Company for the supply of electricity by the starting day
of the lease and see to it that an electric meter is installed for
the leased premises by this date, at its own expense.
14.6 In no case whatsoever may the lessee carry out any work or
installation or use or modification that may require a quantity of
electricity or air-conditioning that exceeds the quantities and
scope stated in Appendix B (Technical Specifications).
14.7 Each of the provisions of the present section 14 is a principal
condition of this agreement, the violation of which constitutes a
fundamental breach of the agreement to which are applicable also the
provisions of section 18 below.
15. RETURN OF THE LEASED PREMISES TO THE LESSOR
15.1 At the conclusion of the term of the lease and at any date prior to
then, should be tenancy end or expire before the end of the term,
the lessee shall be obligated to return the leased premises to the
lessor free of every human being and object, with the leased
premises in the condition stipulated in section 15.2 below.
15.2 The lessee undertakes to return the leased premises to the lessor
with the leased premises in a sound and fit condition as received,
except for reasonable wear, in addition to all the interior work,
including all improvements, renovations, work, additions,
modifications, and systems that may be carried out or erected in the
leased premises, whether by the lessor or by the lessee.
If the lessor does not ask the lessee to remove all work, additions,
installations, or systems whatsoever (including in accordance with
Appendix C to the agreement), all of these shall belong to the
lessor, and the lessee shall not be entitled to any payment,
indemnification, or consideration for them from the lessor.
15.3 Shortly before the end of the lease the lessor shall draw up a list
of the work, defects, and repairs (each of these, hereinafter "the
repairs") that the lessee shall carry out before returning the
leased premises to the lessor.
15.4 The list according to section 15.3 shall also include the prices of
the cost of the repairs; in the event that the lessee does not carry
out the repairs by the end of the term of the lease lessor shall be
entitled to perform them in its stead and the lessee shall be
obligated to pay the lessor by the end of the lease the value of the
cost of the repairs even if they have not yet been carried out or
will not be carried out by the lessor. Nothing stated here is
intended to detract from the right of the lessor vis-a-vis the
lessee to receive compensation or any remedy on account of the
nonperformance of the repairs in timely fashion by the lessee in
accordance with provisions of this agreement (including compensation
for a delay in leasing the premises to other parties).
<PAGE>
Should the lessee disagree as to the need to carry out repairs
and/or about the prices set with regard to the cost of the repairs,
the disagreement shall be resolved, no later than two weeks before
the end of the term of the lease, by an engineer agreed upon by the
two parties. Should the parties fail to reach agreement concerning
the identity of the engineer, then the identity of this engineer
shall be determined by the secretary (or chair) of the Jerusalem
district of the AAAI association (after request of either party), on
condition that his or her appointment and decision be rendered
within two weeks from the day that the lessee announces its
disagreement with the prices.
15.5 No later than two weeks before the end of the term of the lease the
lessee shall deliver to the lessor certification by the
municipality, the electric company, and Bezeq that the lessee has
made all payments incumbent upon it for the period until the end of
the lease, including those for water, electricity, municipal rates,
and telecommunications.
15.6 Each of the provisions of the present section 15 is a principal
condition of this agreement, the violation of which constitutes a
fundamental breach of the agreement to which are applicable also the
provisions of section 18 below.
16. MAINTENANCE OF THE BUILDING AND OF SERVICES AND FACILITIES IN THE BUILDING
THAT SERVE THE LEASED PREMISES AND THOSE VISITING THE LESSEE
16.1 The lessor undertakes to install a management company whose function
will be to manage and operate the project and also to maintain the
project, its access routes (including paved surfaces, open space,
and plazas that are within the area of the project) and the
passageway and stairways within it, the project systems, and the
outside portions of each building in the project.
16.2 The lessor undertakes to install a management company whose function
will be to operate the systems and facilities that service the
project and to see to the cleanliness of the project.
16.3 The services of the management company shall relate only to those
portions of the project that have been completed.
16.4 The lessor makes known that it has designated Park Meir Management
Company, Ltd., as the management company; this shall be the
management company as long as the lessor has not stipulated
otherwise.
16.5 The lessee undertakes to sign a contract with the management company
at the time of the signing of this agreement. A breach of contract
with the management company shall be deemed to be a breach of this
agreement. In addition, the failure of the lessee to conclude the
stated contract with the management company shall be considered to
be a breach of a principal condition of this agreement.
16.6 The management company shall take out various insurance policies as
enumerated in the management contract. It shall also be entitled to
add or subtract various policies.
<PAGE>
However, nothing in the maintenance of these policies by the
management company shall detract from the liability of the lessee or
detract from the insurance obligations of the lessee.
16.7 The lessee undertakes to make payments to the management company
starting with the period that begins on 1 March 2000 and until the
end of the term of the lease and the return of possession of the
leased premises to the lessor in accordance with the provisions of
this agreement.
16.8 It is agreed that notwithstanding what is stated in the management
contract, with regard to the period that begins on 1 March 2000 and
concludes on 31 December 2000, the lessee's payments to the
management company for its monthly contributory share shall be in
the amount of NIS 12.70 for each square meter of the leased premises
(that is, the sum of NIS 5080 for the entire leased premises), plus
Value Added Tax, with this sum linked to the index (base index:
106.8 points, published on 15 November 1999). These payments by the
lessee to the management company shall be made every three months in
advance, starting on 1 July 1999 and concluding on 31 December 2000.
The first payment shall be made on 1 March 2000 for the period
between 1 March 2000 and 30 June 2000. As of 1 January 2001 the
monthly contributory share and terms of payment shall be as detailed
and stipulated in the contract with the management company.
17. DELINQUENCY IN PAYMENT
Without detracting from any right that the lessor may have in accordance
with this agreement and any legal provision on account of breach of the
agreement, it is agreed that any case in which the lessee is delinquent in
payment of any sum that it owes the lessor under this agreement, the
lessee shall pay to the lessor that amount, linked to the index, as
stipulated in this agreement (and if there is no base index with regard to
the sum, the "base index" for this amount shall be the known index on the
day when the lessee was supposed to have paid the amount), plus arrears
interest at a rate that is twice the interest rate (including fees and
expenses) charged by Bank Hapoalim, Ltd., (main Tel Aviv branch) on
authorized overdraft (hahad) accounts for nonpreferred customers, with
this arrears interest being computed by the method and manner whereby Bank
Hapoalim, Ltd., computes during the period of delinquency (including
compound interest).
18. DAMAGES, REFUNDS, AND REMEDIES
18.1 It is agreed that the payments and amounts owed by the lessee and
the dates for their payment, as well as the provision of full and
timely guarantees, are a principal condition of this agreement. This
provision is in addition to any other provision in this agreement
and its appendices in which various provisions are stated to be
principal conditions of the agreement.
18.2 Should the lessee violate any principal condition of this agreement
and fail to remedy this within fourteen days from the day when it
received written warning thereof, and in the case where the lessee
violates any other condition and does not
<PAGE>
remedy it within 30 days from the day when it receives written
warning thereof, this shall be deemed to be a fundamental breach of
the agreement and the lessor shall be entitled to nullify the
agreement. The nullification shall be executed in the form of a
written notice delivered to the lessee or sent to it by registered
mail.
18.3 Should the agreement be nullified by the lessor, as stated, the
lessee shall be required to vacate the leased premises within two
weeks of the day of nullification, and the provisions of section 15
above shall apply to the vacation of the premises.
18.4 In addition to any remedy to which the lessor is entitled, in
accordance with the agreement or any legal provision, on account of
a violation of this agreement by the lessee, the lessor shall be
entitled to compensation from the lessee for all damages, losses,
and diminution of revenues that it may be caused by a breach
committed by the lessee or by virtue of recourse to any remedy to
which the lessor is entitled.
Without detracting from any other right, compensation, or remedy to
which the lessor is entitled, it is agreed that the lessee shall be
liable to pay to the lessor daily usage fees for every day of
delinquency in restoring the leased premises to the lessor in
accordance with the provisions of section 15 above, in an amount
equal to one-fifteenth of the monthly rent. The lessor's entitlement
to the usage fees and the lessee's obligation to pay them shall not
in any way constitute a grant of any entitlement whatsoever to the
lessee.
It is agreed that the lessor shall be entitled to compensation
agreed upon in advance in the event of the breach of any principal
condition by the lessee, in an amount equal to the rent due to the
lessor for six months of tenancy. The amount of this compensation
has been set by the parties after being assessed by them as
appropriate, taking account of the length of the term of the lease
and the special rent conditions set by the lessor in this agreement
and in consideration of other special conditions agreed to by the
lessor. The lessor shall be entitled to the agreed upon compensation
in addition to any compensation, usage fee, entitlement, and remedy
that may be available to the lessor under this agreement and any
legal provision.
18.5 Any sum of any type whatsoever that a party to the agreement may
have paid instead of the second party shall be refunded by the
second party to the first party within seven days of a demand by the
first party, plus linkage differentials to be computed from the day
of payment until the end of that week; it is however hereby
explicitly agreed that the lessee shall not be entitled to offset
any debt that the lessor may owe it under this section and in
general from any payment that the lessee may owe the lessor.
18.6 The lessor is entitled to cash in the securities and guarantees
provided by the lessee under section 19 below, and this in addition
to any remedy or compensation to which the lessor is entitled under
this agreement and any provision of law, on the sole condition that
it has given the lessee written warning of its intention to do so at
least 14 days in advance.
<PAGE>
19. GUARANTEES
19.1 As additional security for the fulfillment of its obligations the
lessee hereby delivers to the lessor an independent bank guarantee
in the amount of NIS 122,000 (one hundred twenty-two thousand New
Israeli Sheqels) (index lined), worded on the model of the document
that is attached to his agreement as integral part thereof and
designated Appendix F. The amount of the bank guarantee as of the
date of the signing of the agreement is equal to the monthly rent
for five months, plus Value Added Tax.
The base index for the bank guarantee shall be 106.8 points.
The bank guarantee shall be payable to the benefit of the lessor and
shall be valid for one year and three months from the date of the
signing of this agreement. The lessee undertakes to extend its
validity as long as the lease remains in force, for an additional
year; such that the lessor shall always be the beneficiary of a bank
guarantee as stated and such that the bank guarantee will be in
force until three months after the expiration of the lease.
The validity of the bank guarantee shall be extended no later than
two weeks before its expiration. Should the lessee fail to extend
its validity the lessor shall be entitled to cash it in.
19.2 It is agreed that the lessor shall be entitled to cash in the bank
guarantee in the event that the lessee fails to take possession of
the leased premises on the date specified in this agreement, or if
by that date the lessee shall not have met every financial liability
or has not covered all obligations and debts owed by the lessee
(both to the lessor and to the management company), or has not
covered any damage caused it by the lessee, as well as in any case
of a violation of a principal condition of the agreement by the
lessee (and this in addition to any remedy to which the lessor is
entitled under any legal provision and under the agreement), on the
sole condition that the lessee has received written warning of the
intention to do so at least 14 days in advance.
The cashing in of the bank guarantee shall not of itself be
tantamount to cancellation of the agreement and the lessee shall be
obligated, immediately after the cashing of the guarantee, to
deliver to the lessor a new bank guarantee phrased in accordance
with Appendix F to the agreement, in the amount stated above, and
which will be in force, all in accordance with the provisions of
section 19.2 above.
19.3 The lessor shall return to the lessee the bank guarantee (or any
balance remaining after it has been cashed) no later than three
months after the end of the term of the lease, on the sole condition
that the lessee does not owe any debt or amount whatsoever to the
lessor as of that date.
19.4 In order to collect and recover any debt owed by the lessee and to
guarantee the fulfillment of every obligation incumbent upon the
lessee (including any debt or obligation of the lessee vis-a-vis the
management company), the lessor shall be
<PAGE>
entitled to cash in any security and any guarantee, individually or
all of them or any portion thereof, and the lessee and any guarantor
shall have no right to prevent the lessor from so doing. The bank
guarantees under this agreement are autonomous and not dependent on
this agreement and in general neither the lessee nor any party that
led to the taking out of the bank guarantee shall have any right to
hinder the cashing of the bank guarantee for any cause whatsoever.
19.5 Any delay in the delivery of the securities under section 19 shall
entitle the lessor to delay the transfer of possession of the leased
premises to the lessee, but the term of the lease shall be computed
from the starting date of the lease as stipulated by the lessor and
the lessee shall owe rent (and payment to the management company)
and any liability imposed under it under this agreement as of the
starting day of the lease or the date stipulated in the agreement,
even if it has not received possession of the leased premises as
stated.
19.6 Each provision of the present section 19 is a principal condition of
this agreement, the violation of which constitutes a fundamental
breach of the agreement to which are applicable also the provisions
of section 18 above.
20. MISCELLANEOUS
20.1 The lessee shall pay to the lessor, in connection with and along
with every payment made to the lessor, Value Added Tax at the rate
that may be stipulated by law at the time of payment. The lessor
shall provide the lessee with a tax invoice within the period
stipulated by law after the payment.
20.2 The lessee shall bear all expenses of tax stamps on the promissory
notes. The lessee shall convey to the lessor the amount of the stamp
tax so that the lessor can have the notes stamped for itself as
well.
20.3 The lessee shall be permitted to mount a nameplate in the building
where the leased premises are located. The size of the nameplate,
its basic design, and location must receive prior written approval
from the lessor, and this in addition to any permit that may be
required under law, all at the responsibility and expense of the
lessee.
20.4 The lessee undertakes to abide as appropriate, throughout the term
of the lease, the provisions of any law that may be in force during
the term of the lease, with regard to the leased premises, the use
thereof, the business conducted therein, and any activities there.
The lessee shall be liable for any damage or expense that the lessor
may incur as a result of the lessee's failure to meet these
obligations and the lessee shall be required to indemnify the
lessor, immediately upon demand, on account of any damage, fine,
loss, or expense incurred by the lessor.
20.5 It is agreed that only the actual payment of any amount that the
lessee may owe the lessor or the actual redemption of a promissory
note, including rent payments, shall be considered to be an
appropriate payment. The mere delivery of promissory notes
<PAGE>
to the lessor, under the provisions of this agreement, or their
endorsement shall not constitute any form of payment whatsoever.
20.6 The lessee affirms that it has examined with the planning and
construction authorities the plans for the project and the leased
premises and its ability to use the leased premises for the purpose
of the tenancy; and it has and will make no claims of any kind
whatsoever with regard to its ability or inability to receive a
business permit under the law.
A failure to receive a permit under the law or the voiding of the
permit shall not entitle the lessee to cancel the lease. It is
hereby agreed explicitly that the lessor makes no undertaking and
bears no responsibility vis-a-vis the lessee in anything associated
with the permit required by the lessee and related to the ability of
the lessee to make use of the leased premises.
All outlays, taxes, and mandatory payments required for obtaining
and extending the permit shall devolve upon the lessee alone. Should
the lessor incur any costs whatsoever on account of the need for a
permit, obtaining the permit, or extending he permit, the lessee
shall be required to refund them to the lessor within seven days of
the day upon which it is requested to do so by the lessor.
The lessee's use of the leased premises shall be exclusively for the
purpose of the tenancy and in accordance with all legal provisions.
20.7 It is agreed by the parties that only this agreement reflects what
has been stipulated, what is binding, and what is agreed to by the
parties. There is not and shall not be any validity to any
information, document, agreement, or notification that may have been
given to the lessee by the lessor or on its behalf, if given, before
the signing of this agreement.
There shall be no validity to any obligation, condition, waiver, or
amendment to the agreement unless made in advance and in writing.
The failure to have recourse to any remedy whatsoever or any
guarantee whatsoever shall not be considered to be a waiver.
20.8 The lessor shall be entitled to transfer or pledge its rights under
the present agreement to some other party or parties, on exclusive
condition that the rights of the lessee under this agreement not be
impaired. The lessor shall notify the lessee of this.
20.9 It is agreed that any payment that the lessee may be required to
make to the lessor shall be paid by the lessee in the offices of the
lessor, unless otherwise stipulated in this agreement.
20.10 It is agreed that the lessee shall be entitled to make use of the
leased premises in the evening and night as well as on Saturday
night after the conclusion of the Sabbath, and the lessor affirms
that it is not opposed to this; however, the hours of activity shall
be in accordance with all legal provisions. In everything related to
the operation of project systems at such times or on Saturday night
the lessee shall coordinate the
<PAGE>
matter with the management company and the operation of the systems
and services of the management company (including air-conditioning)
shall be in return for payment and in accordance with the conditions
that may be set by the management company. The lessee takes note of
the fact that for operation of the leased premises and operation of
the systems and provision of services by the management company at
times that are not regular working hours and on Saturday night it
will have to make special payments to the management company
according to conditions to be set by the management company.
20.11 By way of sound practice it is hereby emphasized that the project
will not be operated on Fridays, festival eves, Saturdays,
festivals, and legal holidays. The lessee takes note of the fact the
project will be closed at such times and emergency entry to it will
be possible only through an entry to be determined by the management
company.
20.12 Given that the lessee is a limited liability company, it is agreed
that the lessor shall be entitled to cancel this agreement in the
event that a receivership order (including a temporary order) or
liquidation order (including a temporary order) is issued against
the lessee, and this if the orders have not been annulled within 60
days of their issuance.
20.13 It is agreed that judicial jurisdiction in any legal proceedings
between the parties shall be held exclusively by a sitting in the
city of Jerusalem.
21. SPECIAL PROVISIONS
21.1 The lessee undertakes that the leased premises will always have a
neat and clean appearance, both in the interior of the leased
premises and its exterior. The lessee undertakes to keep the leased
premises clean on a continual basis.
21.2 The lessee shall not place any furniture, accessories, packages,
crates, materials, equipment, trash, or objects outside the leased
premises. The lessee shall make no use of any section of the
building and project other than for the purpose of access to and
from the leased premises.
21.3 The lessee undertakes not to receive deliveries to the leased
premises other than at the times and by the routes to be determined
by the management company as stated in the contract with the
management company.
21.4 The lessee undertakes not to discard trash, waste, or packages from
the leased premises other than at the times and by the routes to be
determined by the management company.
The lessee undertakes to store all waste, trash, and packages in a
concealed area inside the leased premises until such time as it is
entitled to remove them as stated above.
<PAGE>
21.5 The lessee undertakes not to take any action or make any use of the
leased premises that may create noise, odors, vibration, smoke,
contamination, or nuisance.
22. NOTIFICATIONS
Any notice from one party to the other delivered to the addresses listed
below or sent there be registered mail shall be considered to have reached
its address within 72 hours of its conveyance for delivery by registered
mail (and in the case of hand delivery, within twelve hours of
conveyance).
The lessee shall not convey or dispatch a notice such that the time
computed for its arrival or delivery falls on Friday or the eve of a
festival or Saturday or a festival day or the intermediate days of
Passover and Tabernacles.
THE ADDRESSES OF THE PARTIES FOR THE PURPOSE OF THIS AGREEMENT ARE AS
FOLLOWS:
Lessor: 27 Hamered St., Tel Aviv (c/o Isras), or any other address in Tel
Aviv of which the lessor may provide written notification to the
lessee.
Lessee: At the leased premises or 216 Jaffa Road, 94383 Jerusalem (at one of
these two addresses and each of them). The lessee's address at the
leased premises will not change.
23. POSTPONEMENTS
It is hereby agreed that should the lessor be delayed in completing the
work and utility supplies in accordance with section 4.2 above and in the
building beyond 1 March 2000, the date of the transfer of possession to
the lessee and the starting day of the lease will be postponed until a
date on which the lessor knows [thus in original; probably should be
"provides notice"] that it has completed the work and utility supplies.
Should there occur a delay in the date of the conveyance of possession as
stated, the lessee shall be liable to pay the rent under this agreement
only from the new date set by the lessor as the starting date of the
lease.
24. EARLY TERMINATION OF THE LEASE
24.1 It is agreed that on each of the dates listed below the lessee shall
be entitled to notify the lessor in writing of the early termination
of its tenancy, in such fashion that the tenancy will conclude on
the last day of the month of February immediately following the day
on which the lessor receives written notice from the lessee.
The following are the dates on which the lessee may submit such a
notice of early termination of the lease:
24.1.1 Until 31 August 2003 (for the period after 29 February
2004)
24.1.2 Until 31 August 2006 (for the period after 29 February
2007)
<PAGE>
24.2 Should the lessee submit notice in accordance with section 24.1
above (hereinafter "early termination notice"), the term of tenancy
under this agreement shall terminate on the date stipulated in
section 24.1 above (namely, on the last day of the month of February
following the early termination notice), all this on condition that
the early termination notice was submitted in due and timely
fashion. An early termination notice will be valid only if actually
delivered to the lessor by 31 of August (on one of the dates
specified in section 24.1 above).
Should no early termination notice be delivered by the date stated
above the term of the lease shall continue automatically.
Should an early termination notice be delivered to the lessor on a
date as stipulated above, the tenancy shall be seen as if it had
been originally arranged for the term ending on the last day of the
month of February immediately following the delivery of the early
termination notice, and all provisions of this agreement that apply
to the end of the term of tenancy shall apply.
24.3 Should the lessee not submit an early termination notice as stated
above the following provisions shall also apply:
24.3.1 The lessee undertakes that no later than 1 September
2003 it will convey to the lessor seven promissory notes
in accordance with the provisions of sections 6.2, 6.3,
and 6.4 above, relating to the period between 1 March
2004 and 28 February 2006, with the first promissory
note relating to the period from 1 March 2004 until 30
June 2004 and the last promissory note relating to the
period from 1 January 2006 until 28 February 2006.
24.3.2 The lessee undertakes that no later than 1 September
2006 it will convey to the lessor seven promissory notes
in accordance with the provisions of sections 6.2, 6.3,
and 6.4 above, relating to the period between 1 March
2006 and 29 February 2008, with the first promissory
note relating to the period from 1 March 2006 until 30
June 2006, and the last promissory note relating to the
period from 1 January 2008 until 29 February 2008.
24.4 Each of the provisions of section 24.3 above is a principal
condition of this agreement, the violation of which constitutes a
fundamental breach of the agreement to which are applicable also the
provisions of section 18 above.
24.5 In order to avoid any misunderstanding it is hereby agreed, in
addition to what is stated in section 24.4 above, that should the
lessee fail to convey to the lessor promissory notes in the amount
and on the date as stated in section 24.3 above, the lessor shall be
entitled (in addition to any other right and remedy under the
agreement and according to law) to inform the lessee in writing that
the term of the lease will conclude on 19 February immediately
following the latest date on which the lessee was to have conveyed
the promissory notes to the lessor.
<PAGE>
Should the lessor make such notification the term of the lease shall
be viewed as terminating on the aforesaid date and all provisions of
the agreement that apply to the end of the term of tenancy shall
apply to this date.
24.6 Should the lessee submit an early termination notice in accordance
with section 24.1, it shall also be entitled to inform the lessor,
as a separate section in the early termination notice, that the
tenancy will be terminated not necessarily on the last day of
February following the date of delivery of the early termination
notice stated but three months later, that is, on 30 June; on
condition that along with the early termination notice the lessee
convey a promissory note (in accordance with the provisions of
sections 6.2, 6.3, and 6.4, that includes the monthly rent for this
period, plus Value Added Tax; base index 106.1 points).
Should the lessee make such notification and convey a promissory
note as stated, the tenancy shall be considered as if it had
originally arranged for the period concluding on 30 June following
the delivery of the early termination notice, and all provisions of
this agreement that apply to the end of the term of tenancy shall
apply.
25. Whereas in order to construct the project and as part of the financing
thereof by Bank Hapoalim the lessor has pledged its rights in the project
and the leased premises, it is accordingly agreed that the lessor pledges
and assigns to Bank Hapoalim, in the form of a lien, all its rights
vis-a-vis the lessee and hereby gives the lessee an irrevocable order to
pay the rent and all other payments that are due and may be due it from
the lessee, under this tenancy agreement, into the lessor's account No.
696653 at the Kikar Rabin Tel Aviv branch (No. 609) of Bank Hapoalim. The
lessee's signature on this tenancy agreement constitutes an undertaking on
its part vis-a-vis the bank to act as stated. The promissory notes
conveyed by the lessee to the lessor will be deposited by the lessor in
the aforesaid bank account.
26. PARKING PRIVILEGES IN THE PARKING FACILITIES OF THE PROJECT
The lessor confirms that 4 parking spaces (whose numbers are _____ through
____, inclusive, two parking spaces in the parking facility in Building B
and _____ through _____, inclusive, and two parking spaces in the parking
garage in Building C) will be allocated to the lessee in the parking
facilities of the project, and this for the term of tenancy, on sole
condition that the lessee concludes a separate parking agreement with the
operator of the parking facility, pay the parking fees in accordance with
the parking agreement, and meet all other conditions of the parking
agreement.
It is agreed that the monthly parking fee for each parking space shall be
NIS 317 (three hundred seventeen New Israeli Sheqels) (plus Value Added
Tax), linked to the index (base index: 106.8 points), and that this is
included in the rent stipulated in section 5.1 above.
At the time of the signing of the present agreement the lessee and lessor
are also signing a Parking Agreement, but the lessee confirms that the
"parking facility operator" in accordance with the Parking Agreement will
be designated by the lessor after the signing
<PAGE>
of the Parking Agreement, and that any right or obligation of the "parking
facility operator" shall adhere to the stated "parking facility operator"
in place of the lessor.
When the "parking facility operator" replaces the lessor, the lessor shall
have no obligation with regard to parking and the parking facility, except
for its confirmation that the lessee is entitled (in the conditions
enumerated above) to the stated parking spaces and to the usage fees as
stated.
In everything related to parking, the provisions of the Parking Agreement
only shall apply; nevertheless, to the extent that the parking facility or
any part thereof may be operated commercially, the parking facility
operator shall bear a proportional share of the maintenance expenses for
the parking facility, including taxes and municipal rates, in accordance
with the number of parking spaces commercially available as a share of all
the parking spaces in the parking facility.
IN WITNESS WHEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES
Today, 13 December 1999, in Jerusalem
[company stamp: [company stamp:
Har Hotzvim Properties, Ltd.] BRT Biopharmaceuticals Ltd.]
[signatures: ?? & ??] [signatures: Moshe Laster & Ira Weinstein]
HAR HOTZVIM PROPERTIES, LTD. BRT BIOPHARMACEUTICALS LTD.
LESSOR LESSEE
[ref. heh het - shin kaf B-6]
<PAGE>
EXHIBIT 10.23
MANAGEMENT CONTRACT
Drafted and signed in Jerusalem on 13 December 1999
Between: PARK MEIR MANAGEMENT COMPANY LTD.
27 Hamered St., Tel Aviv (in the offices of Isras)
(hereinafter "THE COMPANY")
And: BRT BIOPHARMACEUTICALS LTD.
216 Jaffa Road, Jerusalem
(hereinafter "THE TENANT")
Whereas The Tenant has leased unit B/3/101 in Building B in the Ramot Meir
project, Har Hotzvim, Jerusalem, in accordance with a tenancy
agreement dated 13 December 1999 with "the Owner" (as this is defined
below);
And whereas The Company has been designated by the Owner as the management and
maintenance company of the Project (as this is defined below) and
accepts responsibility for providing the Project with management and
maintenance services as specified in this contract;
And whereas The Tenant agrees that the management and maintenance services for
the Project specified in this contract will be provided by the
Company;
And whereas This contract arranges the mutual obligations of the parties in
everything concerning the provision and receipt of management and
maintenance services in the Project and everything concerning the
Tenant's participation in the management and maintenance costs;
And whereas The parties have agreed on all conditions and undertakings with
regard to the management and maintenance of the Project;
NOW THEREFORE BE IT AGREED, STIPULATED, AND DECLARED AS FOLLOWS:
1. INTRODUCTION
1.1 The preamble to this agreement is an integral part thereof.
1.2 The headings and names given to the sections of this contract have
been inserted to facilitate reading the agreement and are not part of
the contract and will not be used to interpret the contract.
2. INTERPRETATION AND DEFINITIONS
In this contract, the following terms shall be given the meanings listed
alongside them, as follows:
<PAGE>
THE OWNER Har Hotzvim Properties Ltd.
TENANCY AGREEMENT The tenancy agreement dated 13 December 1999 between the
Tenant and the Owner
THE PROJECT The Ramot Meir project, being erected on the land known as
parcel 110 in block 3241, in the Har Hotzvim Industrial
Zone, Jerusalem, including everything built and existing
thereon, including all structures, buildings, wings, car
parks, and open areas, and every area, installation, and
system on the property whether existing on the day of the
signing of this contract or such as may exist in the
future. A sketch of the project is attached to this
contract as an integral part thereof and designated
Appendix A. Marked on the sketch are Building A (existing
building), Building B (currently under construction),
Building C (currently in an advanced stage of planning),
and Building D, planned to be erected in the future.
THE UNIT, THE UNITS Each one of the units in the project in each one of the
buildings A, B, C, and D, according to the division that
has been made or will be made by the Owner, and that are
intended to be leased or assigned by the Owner. The Units
shall not include: the covered parking facilities in the
Project, as well as "the Management Company areas" and
"Public Areas," even if restricted usage rights to them
have been conveyed (such as kiosks for the sale of various
items).
PUBLIC AREAS All of the areas (built up or otherwise) in the Project
and every building that is part of it (and every part
thereof) that are not "the Units" and are not "Management
Company areas" and are not the covered parking facilities
in the project. The definition of "public areas" Inter
will include, inter alia, the outside walls and roofs of
every building and structure in the project, all the
corridors, stairwells, elevators, open passageways and
corridors, open space, plazas and gardens, unroofed
parking spaces (if any); public services, shelters, paths,
and any system of the "project systems."
"MANAGEMENT COMPANY Surfaces, spaces, meeting halls, rooms structures, and
AREAS" parts of structures that are intended for the use of the
Company in the context of its provision of management and
maintenance services to the Project, including store
rooms, offices, cubicles, transformer, water, and
electricity rooms, and every other part of the project
used only by the Company.
"PROJECT SYSTEMS" All of the systems and installations in the project that
are not specifically attached exclusively to a particular
unit or particular
<PAGE>
units (in part of a building), including main
air-conditioning systems and installations, electrical
systems, telecommunications, water, electromechanical
systems, control/monitoring systems, elevators, lighting
systems, and sewage and drainage systems.
"TENANT'S UNIT" Unit No. _____ in Building B in the Project, which has
been leased to the Tenant by the Owner. It is agreed that
the area of the Tenant's Unit for the purposes of this
contract is 400 square meters.
"MANAGEMENT AND Each of the mandatory services, optional services, and
MAINTENANCE SERVICES" special services enumerated in section 3 of the contract
and the other sections of the contract and every part
thereof.
3. MANAGEMENT AND MAINTENANCE SERVICES
3.1 The Company shall be responsible for performing, on its own or by
means of outside contractors, each one of the following services
(hereinafter "mandatory services"):
3.1.1 Management and maintenance services, the operation, regular
upkeep, maintenance, management, restoration, and repair of
the public areas and project systems.
3.1.2 Cleaning public areas, removing trash from main facilities,
gardening and irrigation, lighting, services to improve the
appearance of the public areas, operation of public facilities
(lavatories).
3.1.3 Activation and deactivation of systems (Project systems) in
accordance with the seasons of the year or hours and days, as
set by the Company.
3.1.4 Insurance, as specified in section 10 below, and the payment
of deductibles on account thereof.
3.1.5 The maintenance of a central office (including a telephone
line to it) where all topics of management and maintenance
services for the project will be coordinated. The office hours
shall be the working hours designated by the Company.
3.1.6 The provision of each one of the above services and activities
in the Management Company areas.
3.2 The company is entitled to provide, on its own or through outside
contractors, each of the following services (hereinafter "optional
services"):
3.2.1 Security and monitoring services of the public areas, the
Management Company areas, and the project systems, including
surveillance of all traffic entering and leaving the Project.
<PAGE>
3.2.2 Services and actions that are generally provided by the house
committee of a condominium, including the maintenance of order
in the Project and the drafting of bylaws for the Project.
3.2.3 Central or distributed information services for the Project.
Surveillance of control/monitoring systems, public address and
alarm services, the locating of malfunctions, the locating of
fires and break-ins, etc.
3.2.4 The erection of directional signs and main signs providing
directions to the various buildings and parts of the project,
as well as directional signs and identifying signs on the
buildings of the project, and the hanging of other signs,
including determination of the design, size, and location of
signs belonging to the various tenants of the project, as well
as maintenance and restoration of the signs in the project.
3.2.5 Cleaning of the outside of the windows of the project.
3.2.6 Operation, regular upkeep, preventive maintenance,
restoration, repair, and insurance of systems and facilities
that are shared by several units in the project.
3.2.7 Provision of advertising services and erection of signs for
the Tenant in the project.
3.2.8 Services in a matter required by law (or at the demand of
legally constituted authorities) relating to the project and
relating to any part thereof (but not relating to the units
themselves).
3.2.9 Any other service in the project and any part thereof, in the
Management Company areas, in the public areas, and in the
project systems that the Company may, at its exclusive
discretion, decide to operate as a service that is required or
as a service that is related to the services that the Company
must or may provide.
3.3 The Company shall be entitled (but not required) to provide each of
the optional services enumerated in section 3.2 above, or any part
thereof, at its discretion and at times it may determine, and it is
agreed that the Tenant shall not interfere in any manner whatsoever
with the ability of the Company to decide and to provide each of the
optional services or any part thereof.
3.4 It is agreed that the Tenant shall not request and shall not receive
any service whatsoever of the type of services enumerated in section
3.1 and section 3.2 other than from the Company.
3.5 It is hereby emphasized that except for the services enumerated in
sections 3.1 and 3.2 above, the company will engage (as optional
services) in the management of the Ramot Meir project and the
promotion of its interests. It may also rely on the service of outside
service providers with regard to the management and
<PAGE>
maintenance of the project, including bookkeeping, accountants,
attorneys, planners, designers, engineering consultants, and insurance
consultants, and any other outside service. Each one of these services
provided to the Company shall be considered to be an "optional
service" of the Company that is provided to the project.
3.6 If water meters are not installed for the various units in the
building where the Tenant's unit is located, according to a decision
by the Owner, the Management Company shall collect on behalf of the
Owner usage fees for water, as set pro rata for each unit. The pro
rata water usage shall be determined on the basis of the overall water
usage as indicated by the water meter of the building (in which the
Tenant's unit is located), with this usage being divided among the
units in proportion to the area assigned to each unit in the building.
The aforesaid notwithstanding, should it become apparent to the Owner
that the water usage by the units of the building is negligible and
limited, the Owner shall be entitled to determine that the water
supply to the units in the building will be computed as part of the
mandatory services provided by the Company; and in this case the
payments required for water usage by each of the units shall be deemed
to be part of the "actual expenses," in accordance with section 6.1
below, and will be included in the contributory share of the
"expenditures of the Company" that the Tenant must pay under this
contract.
4. MANNER OF PROVISION OF THE SERVICES
In order to implement the services that the Company is required or may
provide, it shall operate as follows:
4.1 The Company undertakes to staff its main office in the Project during
working hours, which will be determined by it, in order to deal with
requests by tenants.
4.2 The Company undertakes to employ a person who will serve as service
manager for the Project.
4.3 The Company undertakes to set up, for the purpose of providing
services under this agreement, teams of employees and/or teams of
contractors and/or outside service providers who are professionals in
each of the domain in which it is required to provide services.
4.4 The Company shall organize an apparatus of employees and contractors
in order to organize its services, including bookkeepers, clerical
workers, supervisors, consultants, maintenance managers, and so on.
4.5 The Company shall establish contractual relations with providers of
repair services in everything connected with Project systems or some
part thereof in order to receive periodic maintenance services.
4.6 The Company, at its discretion, shall see to the maintenance of an
inventory of spare parts for the Project systems that can be replaced
with relative ease.
<PAGE>
4.7 The Company (with the approval of the Owner) is entitled to draw up
"project bylaws" that will set general rules for maintaining order and
sound management of the Project. The "project bylaws" shall apply to
all tenants in the project. The Company shall be entitled to amend and
modify the project bylaws from time to time. In the context of the
project bylaws the Company shall be entitled also to stipulate hours
and times for the removal of trash, instructions concerning the design
and location of signs, the appearance of building facades, modes of
assuring order and cleanliness, and so on.
4.8 The regular maintenance services, cleaning services, and other
services shall be provided by the Company during regular working
hours, with a frequency and rate set at the discretion of the Company
or the Owner, while scrupulously maintaining the clean and attractive
appearance of the public areas.
4.9 The Company or the Owner is entitled to specify hours and days for the
operation of the central air-conditioning systems in the public areas
and other central air-conditioning systems.
4.10 The lighting systems in the public areas inside the buildings and the
project will be operated such that these will be illuminated in
reasonable fashion during daytime and nighttime hours to an extent to
be determined by the Company. The outside lighting systems will be
operated during nighttime hours in a scope to be determined by the
Company.
4.11 Maintenance work, repairs, replacement of parts, and engineering work
shall be performed within a reasonable lapse of time and during
regular working hours, but in exceptional cases these will be
performed during hours when there is no activity in the Project that
might be disturbed as a result of the work.
4.12 The wages, conditions, and remuneration that the Company will extend
to its employees, contractors, and outside service providers shall be
reasonable and in accordance with the normal practice.
4.13 The Company shall be entitled to remove any sign, advertisement, or
installation of the Tenant's that was erected or designed without the
Company's agreement.
4.14 It is hereby made clear that even if the Company provides (itself or
by means of outside contractors) security and surveillance services,
it shall not be considered to be the "watchman" of the Tenant's unit
or the units in the project (and their content) or of the project for
the purposes of the Watchmen's Law 5727-1967, and the Company shall
not bear the responsibility under this law. The purpose of the
surveillance and supervision shall be in the domain of maintaining
order in the project. Any tenant or unit that requires security
services will have to see to them on its own.
4.15 It is hereby made clear that at the discretion of the Company and its
determination, various systems of the Project systems and various
services of the management and maintenance services will not be
provided and will not be performed in hours that
<PAGE>
are not regular working hours (8 A.M. to 6 P.M.) on weekdays and 8
A.M. to 1 P.M. on Fridays and festival eves). Should the Tenant
request the operation of some of these systems or to receive a Company
service during hours that are not the aforesaid hours, then, if the
Company is willing to comply with the Tenant's request, the Tenant
shall be required to make a special payment to the Company for such,
in accordance with a tariff that the Company may set from time to
time. Such service and the operation of systems as stated shall be
considered to be a special service to the Tenant.
4.16 The Tenant takes note of the fact that is possible that from time to
time, intentionally or unintentionally, as a result of the services of
the Management Company or as a result of some other factor, there may
be the suspensions, disruptions, delays, and malfunctions in anything
associated with the supply of electricity, water, generators,
elevators, air-conditioning, maintenance services, security, and
anything else associated with the Company's services. The Tenant
undertakes not to demand any compensation or indemnification from the
Company (and/or from the Owner) on account of such and shall not
demand any restitution or compensation on their account. The Company
affirms that it will act to the best of its ability to take all
reasonable steps that may be required, to the extent possible, to
prevent and limit malfunctions as stated.
5. OBLIGATIONS OF THE TENANT
The Tenant hereby commits itself vis-a-vis the Company, in addition to all
other obligations under the contract, as follows:
5.1 Not to commission services enumerated in this contract from any party
other than the Company and not to receive the services enumerated in
this contract from any party other than the Company; and this both in
everything associated with the area of the units as well as in
everything associated with the other areas of the project and
everything associated with any of the system in the Tenant's unit and
Project systems; all in accordance with the provisions of sections 3.4
and 3.5 above.
5.2 To refrain from any act of commission or omission that is likely to
interfere with the Company's ability to meet its obligations under
this contract or under management contracts signed with other parties,
and to refrain from any act of commission or omission that is likely
to interfere with the Company's ability to provide any service of the
services under this contract. The Tenant further undertakes to abide
by the provisions of the project bylaws that may be determined by the
Company (and as they may be amended from time to time); the Tenant
undertakes not to place installations, equipment, trash, crates, or
any other object outside the area of the Tenant's unit and not to put
up any signs whatsoever that have not been approved by the Company;
the Tenant further undertakes to cooperate with the Company and its
representatives in every matter associated with the services of the
Company and to comply with their requests.
<PAGE>
5.3 To permit the Company and anyone referred by it enter the Tenant's
unit during working hours (or at other times if so agreed by the
parties) in order to provide any of the services under this agreement
(and this both with regard to services that the management company
must provide to the Tenant or some other tenant in the project as well
as with regard to services that related to the Project and public
areas, including roofs and outside walls).
5.4 To pay to the Company its "contributory share" in the "expenditures of
the Company" on the dates and in the amounts stipulated in section 6
below and anywhere else in the contract. It is agreed that this
obligation of the Tenant's is absolute and unaffected if it does not
actually occupy the "tenant's unit" or does not use it or the public
areas or the Project systems or any part thereof or if it does not
benefit from the services of the Company or does not receive them for
any reason whatsoever.
5.5 To deposit with the Company a bank guarantee as security for payment
of the contributory share by the Tenant, in accordance with section
6.6 below.
5.6 The Tenant undertakes to pay to the Company the remuneration to which
it is entitled under this contract with regard to any service that the
Company may provide to the Tenant or with relation to its unit. The
remuneration shall be paid to the Company at a time to be determined
by the Company.
5.7 To pay to the Company Value Added Tax in addition to any payment that
it must make to the Company under the agreement.
5.8 The Tenant confirms and agrees that the Company (or someone designated
by it) shall constitute the "house committee" if the project or some
part thereof is registered as a condominium.
6. CONTRIBUTORY SHARE IN THE EXPENDITURES OF THE COMPANY
6.1 In the present section and in the present contract the following terms
shall have the meaning as indicated:
"EXISTING UNITS" - All of the units (including the Tenant's unit) that
already existed in the Project and in any part thereof at the time of
the provision of management and maintenance services by the Company
under the present contract, which are units in which all work has been
completed and they are fit for operation for their intended purpose,
even if they have not yet been occupied. This does not however include
the parking facilities in the project and does not include the
Management Company areas and public areas.
By way of sound practice it is hereby made plain and agreed that an
"existing unit" that has not yet been leased out by the Owner as well
as an "existing unit" that has been vacated by its lessee or tenant
(other than the Owner) shall not be considered to be an "existing
unit" or one of the "existing units," and no contributory share shall
be paid on account of such a unit and the "proportional share" as
stipulated below shall
<PAGE>
be computed without this unit. However, if as a result of the
nonleasing by the Owner or as the result of the vacating of the unit
or units by their tenants or occupiers (other than the Owner) the area
of "existing units" falls below 75% of the total area of the units
that were fit to be included as "existing units" were it not for the
nonleasing or vacating thereof, the Owner shall pay the contributory
share in the expenditures of the company (as stipulated below) on
account of areas to make up the 75% (seventy-five percent) stated
above. The Owner shall not be responsible for any contributory share
in the event that the area of the "existing units" (without units that
have not yet been leased or have been vacated as stated) exceeds 75%
of the area of the units that are fit to be included as existing
units.
"ACTUAL EXPENDITURES" - All expenditures without exception made by the
Company, including those associated with the provision of mandatory
services and optional services, whether fixed or variable, as well as
all expenditures made by the Company on account of the areas of the
covered parking facilities in the project (Buildings B and C) and on
account of their operation; without detracting from the stated
provisions, it is agreed that "actual expenditures" shall be also and
include the salaries of its employees who are associated with the
provision of the services (and including social benefits and ancillary
conditions), payments to contractors and subcontractors, outlays for
the purchase of materials, equipment, facilities, and media (including
the overhaul and/or replacement of equipment, facilities, and
accessories as needed), all as may be required in order to provide
management and maintenance services as well as outlays to lease and
maintain the Company's office and storerooms in the Project, financing
costs (including on account of the services, on account of the
equipment, and on account of fixed assets), depreciation and
[translated as written] on equipment and facilities, motor vehicle
maintenance, insurance, payments under deductible clauses, payment of
taxes, municipal rates, and other mandatory payments that relate to
the public areas, the covered parking facilities, the Management
Company areas, and Company services (excluding taxes and mandatory
payments on Company profits), as well as a closed reserve fund for the
overhaul and/or replacement of equipment, facilities, and accessories,
as well as the fees of the accountant and bookkeepers (who audit and
maintain the Company's books and the accounts that will be submitted
to the holders of the units), as well as general administrative
expenditures and the like, legal expense, and fees to attorneys and
other service providers. "Actual expenditures" shall also include
future obligations of the Company related to any matter enumerated
above.
"PROPORTIONAL SHARE" - A share to be computed on the basis of the
ratio between the area of the Tenant's unit and the overall area of
all the "existing units" at that time in the project and every part
thereof. The area of the Tenant's unit and the overall area of all the
existing units are computed according to the key determined by the
Owner and that will be displayed in the offices of the Management
Company.
"EXPENDITURES OF THE COMPANY"" - means the Actual Expenditures plus
15% of the Actual Expenditures.
<PAGE>
6.2 The Tenant undertakes to pay the Company its share of the
"expenditures of the Company"; this shall be the proportional share
(based on the "Tenant's unit") of the "expenditures of the Company"
(above and hereinafter "the contributory share"). The Tenant
undertakes to pay the Company its contributory share starting on 1
March 2000 and to continue paying it until the day on which it
actually restores possession of the Tenant's unit to the Owner, in the
manner and method stipulated in the tenancy agreement between the
Tenant and the Owner.
6.3 The Tenant shall pay its contributory share in the "expenditures of
the Company" in quarterly payments, every three months in advance. The
Company shall determine from time to time a realistic and cautious
estimate of the anticipated "expenditures of the Company" (hereinafter
"the estimate"), and the quarterly payments will be set provisionally
on the basis of this estimate.
It is agreed that these payments shall be made each year on the first
day of the months of January, April, July, and October.
6.4 From time to time (but at least once a year) the Company will examine
the actual expenditures really made vis-a-vis the estimate and draw up
an "updated expenditure report" for the period of the estimate. Should
it become clear that the estimate was lower than its real expenditures
(as presented in the updated expenditures report), it will send the
Tenant a bill to cover the difference; the Tenant undertakes to pay
this bill to the Company on the first date thereafter stipulated for
the payment of the quarterly contributory share.
Should it become apparent from the updated expenditures report that
the quarterly payments (under section 6.3) were greater than the
amount that the Tenant should have paid, the Tenant's account with the
Company will be credited as of the first day thereafter stipulated for
the payment of the quarterly contributory share.
6.5 To the differentials according to section 6.4 above will be added
linkage differentials to the Consumer Price Index, to be computed with
regard to each month in the period covered by the "updated
expenditures report."
6.6 To guarantee payment of the contributory share in the "expenditures of
the Company," the Tenant conveys to the Company an independent bank
guarantee in the amount of NIS 29,000 (twenty-nine thousand New
Israeli Sheqels) (including 17% Value Added Tax). The guarantee shall
be index-linked (base index 106.8 points, published on 15 November
1999). The guarantee shall be phrased as in the sample in Appendix E
to the Tenant's tenancy agreement with the Owner.
The Tenant undertakes not to take any step whatsoever to hinder the
ability of the Company to cash the bank guarantee.
The Tenant undertakes that the Company will always be in possession of
a bank guarantee of the stated type and in the event that the Company
cashes the guarantee in its possession, or any part thereof, the
Tenant undertakes to make up the amount of the guarantee or to provide
a new bank guarantee as stated.
<PAGE>
6.7 It is agreed that the Company alone shall be entitled to any income or
any revenue that the Company may have other than in relation to the
provision of mandatory services (section 3.1 above) and other than in
relation to the optional services (section 3.2 above). Any revenue or
income as stated shall not be offset against the Actual Expenditures.
6.8 It is agreed that the provisions of the present contract in general
and the provisions of the present section 6 in particular shall always
be interpreted in such fashion that there will not be imposed on the
Company any input or cost with relation to its services under the
present contract and that all its expenditures plus 15% as stated will
be covered by the tenants (including the Owner if it is in possession
of an existing unit on account of which it is obligated to bear a
"contributory share" as stated in section 6.1 (second paragraph of the
definition of "existing units").
6.9 In the event of any ambiguity or disagreement concerning the
assignment of any service or expenditure, the service and expenditure
shall be included as "actual expenditures."
7. BOOKKEEPING
7.1 The Company undertakes to maintain separate books of account relating
to "actual expenditures," its services, and its activities in the
project. The Company will also maintain a ledger card for each unit in
the project. The books of account will be audited and approved by an
accountant to be designated by the Company for this purpose.
7.2 In accordance with arrangements to be determined by the Company, the
Tenant will be entitled to receive from the Company and the accountant
explanations about everything related to the books of account and
documents that relate to the "actual expenditures."
8. DELINQUENCY AND LINKAGE
8.1 Without detracting from any right that the Company may have under this
contract and any legal provision on account of breach of the contract,
it is agreed that any case in which the Tenant is delinquent in
payment of any sum that it owes to the Company under the present
contract, the Tenant shall pay to the Company that amount linked to
the index, as stipulated in the present contract (and if with regard
to the sum there is no base index, the "base index" for this amount
shall be the known index on the day when the Tenant was supposed to
have paid the amount), plus arrears index at a rate that is twice the
interest rate (including fees and expenses) charged by Bank Hapoalim,
Ltd., (Main Tel Aviv branch) on authorized overdraft (hahad) accounts
for nonpreferred customers,, with this arrears interest being computed
by the method and manner whereby Bank Hapoalim, Ltd., computes during
the period of the arrears (including compound interest).
<PAGE>
8.2 The Company reserves the right to stipulate that the amount in arrears
will be paid plus linkage differentials and 12% annual interest (it
too index linked), instead of the interest stipulated in section 8.1
above.
8.3 In the present contract, "indexation" means linkage to the Consumer
Price Index published by the Central Bureau of Statistics and Economic
Research. The computation of linkage according to the present contract
shall be made according to the "known index."
8.4 Revenues from arrears interest or linkage (sections 8.1 and 8.2 above)
shall not be offset against the amount of the "actual expenditures."
9. MISCELLANEOUS
9.1 A Tenant who has rights of possession (lessee or sublessee) in a unit
in the "buildings" shall not be entitled to transfer its rights in the
unit unless it has paid all its debts on account of the contributory
share in the "expenditures of the Company" and on condition that the
party that receives its rights conclude a management contract with the
Company. The management contract, in this case, will be recorded in
the land registry office as a condition of the lease.
9.2 The Tenant affirms that in the event that it violates terms of the
present contract it will be considered to have violated its agreement
with the Owner and gives an irrevocable instruction to the Owner to
act according to the provisions of that agreement that deal with
breach of the agreement (including cashing of guarantees and
cancellation of the agreement).
9.3 With the signing of this management contract the Owner is seen to have
carried out all of its obligations vis-a-vis the Tenant in everything
associated with management and maintenance of the Project. It is
further agreed that in everything connected with management,
maintenance, and the provision of services under the tenancy agreement
only the provisions of the present contract shall apply and only with
regard to the Tenant and the Company.
9.4 The Company is entitled to transfer its liabilities and rights under
this management contract to another party to be determined by the
Owner and is entitled to meet its obligations (in a whole or in part)
by means of contractors and by means of outside service providers.
9.5 Deposits and funds belonging to the Tenant that may be held by the
Company, if any, shall not be included in the system of accounts under
section 7.1 above. Income and expenditures related to such deposits
and funds shall be at the responsibility or to the credit of the
company along.
9.6 It is agreed that the Company is entitled to require the Tenant to
make any repair in the Tenant's unit and any repair of a system or
installation associated with its unit or associated with particular
units including the Tenant's unit; the Company is further entitled to
determine that it will perform the required repairs as stated at its
own
<PAGE>
initiative and without the separate consent of the Tenant. Every
service of this sort by the Company shall be deemed vis-a-vis the
Tenant to be a service provided to it on a private basis and at its
commission, and the Tenant shall be obligated to pay the Company on
demand the rate (or price) of the repair.
9.7 With the approval of the Owner, the Company is entitled to determine
that the costs and expenditures related to the covered parking
facilities, in whole or in part, will not be included in the "actual
expenditures." The Tenant shall not, however, be entitled to impose
this upon the Company in any fashion whatsoever.
10. INSURANCE
The Company undertakes to take out insurance as stated in section 3.1.4 and
to take out each one of the policies listed below and in accordance with
the following provisions:
10.1 The Company will take out the "Company insurance" as detailed in
section 11 (and in Appendix E) to the tenancy agreement.
To avoid any doubt it is made plain that the Tenant will take out the
insurance required of it in section 11 of the tenancy agreement.
10.2 To take out additional insurance at the discretion of the Company and
to reduce such insurance or a portion thereof at the discretion of the
Company.
10.3 Insurance premiums and every other outlay that the Company and Owner
may have in connection with the "Company insurance" (under Appendix E
to the tenancy agreement) and in connection with other insurance taken
out by the Company and/or by the Owner shall be considered to be
"actual expenditures" for the purposes of section 6 above.
11. ADDRESSES AND NOTIFICATIONS
The Company's address for any matter related to this management contract is
the management office in the project.
The Tenant's address is the Tenant's unit.
Any notice from one party to the other sent by registered mail shall be
considered to have reached its address within 72 hours of its conveyance
for delivery by registered mail, and a written notice delivered by hand
shall be considered to have reached its destination 24 hours after its
delivery.
12. SPECIAL REMEDY IN THE EVENT OF A BREACH OF AGREEMENT BY THE TENANT
In addition to every right available to the Owner and the Company, it is
agreed that in the event of a breach of contract by the Tenant the Company
shall be entitled to suspend the provision of its services to the Tenant,
in a whole or in part, without thereby detracting from the obligation of
the Tenant to continue to pay its contributory share in the
<PAGE>
expenditures of the Company. In the context of this suspension of service
the Company will be entitled to deny the Tenant use of portions of the
public areas, including elevators, stairwells, air-conditioning, lighting,
and more.
13. TERM OF THE AGREEMENT
The present contract takes effect on the date of its signing by the parties
and shall remain in effect as long as the Tenant is a lessee or sublessee
of its unit. In the case that the Tenant is leasing the unit from the
Owner, the present contract shall remain in effect as long as the Tenant
retains possession of the Tenant's unit or as long as the lease remains in
effect (which ever is later).
The Company shall return to the Tenant the bank guarantees or any sum that
may remain in the hands of Company after it has been cashed only after the
Tenant has paid off all debts to the Company, including its debts until the
end of the contract term that may be discovered later with the
determination of its real actual expenditures (according to the first
paragraph of section 6.4 above).
14. Notwithstanding what may be stated anywhere in the contract or the tenancy
agreement, the Tenant shall not be entitled to offset any obligation that
it may have vis-a-vis the Company or vis-a-vis the Owner against any
obligation or debt that the Company or the Owner may have vis-a-vis the
Tenant under the contract and/or under any contract or other obligation in
general and under the tenancy agreement in particular. The Tenant's
obligation under this management contract is independent and absolute and
the Tenant shall be obligated to satisfy them unconditionally, and there
shall be no reduction thereof for any cause whatsoever even if the Tenant
has financial or other rights vis-a-vis the Owner or vis-a-vis the Company
or vis-a-vis other parties on account of any matter including on account of
the contract, on account of the tenancy agreement, on account of the
project, or anything related thereto.
15. The Company affirms that it has read the tenancy agreement and agrees with
its provisions.
IN WITNESS WHEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES, TODAY, 13 DECEMBER
1999, IN JERUSALEM.
[company stamp: [company stamp:
Park Meir Management Company Ltd.] BRT Biopharmaceuticals Ltd.]
[signatures: ?? & ??] [signatures: Moshe Laster & Ira Weinstein]
THE COMPANY THE TENANT
[Writ of guarantee crossed out and not translated]
<PAGE>
Name: BRT
Address:
[added by hand] copy
To:
Bank Leumi le-Israel Ltd.
Branch: Mahane Yehuda
Date: 15/12/99
[stamp: Bank Leumi Le-Israel Ltd.
Business Branch - Mahane Yehuda, Jerusalem
15-12-1999
913 RECEIVED 913]
Re: REQUEST TO ISSUE A GUARANTEE
Please issue a guarantee/obligation (hereinafter "the guarantee") in accordance
with the following form and details:
1. Name of beneficiary: Har Hotzvim Properties Ltd. (indicate the name of the
person or corporation that will be the beneficiary of the guarantee)
2. Address of the beneficiary
3. Amount of the guarantee: 29,000--
4. Name of maker: BRT Biopharmaceuticals Ltd. (indicate the name of the person
or corporation on whose behalf the guarantee will be issued)
5. With reference to: compliance with a management contract
6. Validity of the guarantee: 31/3/2001 (indicate the date to be inscribed on
the guarantee as the last date for reception of the demand by the bank)
7. Indexation terms: Consumer Price Index 10/99
8. Remarks:
The commission for the guarantee shall be at the rate of 2.6% per annum of the
amount of the guarantee (including interest, indexation differentials, or
exchange-rate differentials, if any) but in no case less than the sum of
NIS___*.
Please debit thereupon our account with your number 121600/19.
In addition, we are aware that we will be charged a commission for drafting
documents in the amount of NIS 100.
What is stated in the obligation we have signed for you with relation to the
issuance of the guarantee and/or indemnity by you shall also apply to the above
the guarantee (and to extensions of its validity if any).
*minimum commission as this appears in the list of commissions.
[company stamp: Park Meir Management Co. Ltd.] [signature] IRA WEINSTEIN
[company stamp: BRT
Biopharmaceuticals Ltd.}
Customer's Signature
- --------------------------------------------------------------------------------
For use by the branch
Guarantee No. File No. _____
Total obligo in guarantees _______ Approval by branch management ________
Securities offered ________ Approval by district management, dated _____
Remember that the customer must sign (on the copy of the guarantee that remains
in the branch) the guarantee document.
<PAGE>
[Protocol of a Meeting of the Board of Directors - in English, not translated]
<PAGE>
SPECIAL APPENDIX TO THE TENANCY AGREEMENT/REMEASUREMENT
LEASED PREMISES: UNIT NO. _____
LESSOR: HAR HOTZVIM PROPERTIES LTD.
LESSEE: BRT BIOPHARMACEUTICALS LTD.
1. In everything related to the area of the leased premises, as stated in
section 1.2.4 of the tenancy agreement signed by the parties, the parties
agree that after conveyance of possession of the leased premises the lessor
will perform a measurement of the net area of the leased premises.
2. The "net area of the leased premises" means: the area of the leased
premises including the entire area of the leased premises enclosed by the
outside walls of the eased premises, including the area of the
cross-section of the outside walls of the building and including the area
of the cross section of the outside wall of the leased premises located in
the interior of the building; but an outside wall shared with other leased
premises (and only other leased premises) shall be computed at one-half of
the area of its cross section. (The term "cross section" refers to a
horizontal cross section at the level of the floor.)
The "net area of the leased premises" shall be the basis for the
computation of the agreed area of the leased premises for the purpose of
the tenancy agreement and for the purpose of section 1.2.4 of the tenancy
agreement.
It is agreed that the "gross area of the leased premises"--namely, the area
that will be computed as the agreed area of the leased premises for the
purpose of the tenancy agreement, shall be that area such that subtracting
18% from it yields an area equal to the "net area of the leased premises."
For example: if the "net area of the leased premises" is 1,230 square
meters, then the "gross area of the leased premises" is 1,500 square
meters.
3. "The gross area of the leased premises" obtained through the computation in
this special appendix shall be the agreed-upon area that shall be
considered to be included in section 1.2.4 of the tenancy agreement; and
this in-place of the area currently stated in the tenancy agreement.
4. The amounts of the monthly rent as well as the amounts of the promissory
notes in the tenancy agreement shall be modified in accordance with the
change in the "gross area of the leased premises" and in proportional
fashion.
5. The lessee undertakes to convey to the lessor new promissory notes
according to the principles of the tenancy agreement, in their new value,
should it become apparent that there is a change in the "gross area of the
leased premises" as stated above. This provision is a principal condition
of the tenancy agreement.
<PAGE>
Until the lessee conveys to the lessor new promissory notes as stated, the
lessor shall present for payment the promissory notes in its possession at
that time and the lessee shall have no right to protest.
6. Following the measurement and modification of the "gross area of the leased
premises" as stated, if there is one, the lessor shall issue written
notification to the lessee concerning the amendment of the relevant
sections in the tenancy agreement, and this notice by the lessor shall bind
the parties and shall be an integral and binding part of the tenancy
agreement.
7. The lessee reserves the right to challenge, within one month, a
notification by the lessor under section 6 above, in the form of the
submission of a competing measurement of the "net area of the leased
premises" performed (at the lessee's expense) by a qualified surveyor. The
dispute shall be resolved by the surveyor on behalf of the lessor and the
surveyor on behalf of the lessee (each party shall bear the costs and fee
of its surveyor); and in accordance with the ruling on the disagreement a
new notification (according to section 6) shall be issued by the lessor. As
long as the dispute has not been resolved, the original notice by the
lessor under section 6 above shall continue to apply.
8. This special appendix is an integral part of the tenancy agreement.
IN WITNESS WHEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES
TODAY, 13 DECEMBER 1999, IN JERUSALEM
[company stamp: [signature:]
Har Hotzvim Properties, Ltd.]
[signatures: ?? & ??]
LESSOR LESSEE
<PAGE>
APPENDIX A-1
[captions]
Building A Building C Building D
Building B
Boundary Boundary
of the lot of the lot
<PAGE>
APPENDIX A-2 [ADDED BY HAND]
[captions]
Area 368 sq. m. Area 353 sq. m.
Area 400.2 sq. m. Area 406 sq. m.
<PAGE>
Our reference: 2050
Appendix B
TENANT AREAS
1. FLOOR:
o Finish: smooth concrete
o Height of industrial story about 4.60 meters (from concrete floor to
concrete ceiling). Not relevant for Emultek
o Height of office story about 3.60 meters (from concrete floor to
concrete ceiling)
o Maximum load capacity of floor - 630 kg/square meter
2. SHELL WALLS:
o Outside walls of concrete block and/or curtain walls, ready for
plastering by lessee
o Outside walls finished in dressed stone and/or aluminum, depending on
architect's plans
3. CENTRAL AIR-CONDITIONING UNIT:
o air-conditioning system for entire building based on chilled water
unit with air condenser
o Chilled water supplied to coilpipe bellows units and air treatment
units
o Boiler room--heating energy center will provide hot water to heat the
system
o Four-pipe air-conditioning system--two pipes for cold water and two
pipes for hot water
o All air-conditioning installations in the leased premises (planning
and implementation) will be handled by the Tenant and will include
connection to the cold and hot water lines located in the public
central shaft.
o The plans must be approved by the lessor before the start of work.
o The lessee will have the air-conditioning work done by Calorit Ltd.
o Clean air for the coilpipe bellows units will be provided to the
Tenant from the existing conduit in the floor shaft.
o Exhaust from lavatories--the Tenant will hook up to the existing
ventilation conduit in the central shaft.
<PAGE>
4. PLUMBING AND SPRINKLER SYSTEM:
o All sanitary systems will rely on gravity flow except for the floor of
the lower basement.
o Infrastructure for vertical wastewater pipes exists alongside some of
the pillars in the leased premises areas on each floor, as marked in
the blueprints.
o There are also sumps (at locations marked on the sketch) for
air-conditioning drainage.
o The water supply system is based on the municipal system.
o There are water lines on each floor in the public shafts. The lessee
will hook up to these lines.
o There are water reservoirs in the central shafts for the sprinklers
and hydrants only--hook-up by the lessee.
o The main water lines are alongside the central shafts with
infrastructure for water meters--hook-up by the lessee.
o The lessee will be responsible for having the plumbing and sprinkler
system work done by Calorit Ltd.
o Sprinklers--the main line for the sprinklers is in the central shaft;
the lessee will hook up to this line.
5. ELECTRICITY:
o The electrical system is based on the Electric Company's network of
distribution cables throughout the building. On each floor, in the
central core, there is a cabinet of the appropriate size for
installing electric meters for the tenants. Hook-up by the lessee.
o Every lessee will have its own hook-up to the Electric Company and
will sign a contract with the Electric Company and have a meter
installed.
o The capacity of the hook-up allocated to the lessee is 0.25 amperes
per square meter; if the lessee wishes to increase this it must bear
the added expense.
o The lessee will have the electrical work in the leased premises
performed by Sharon Ltd. The work for which the lessee is responsible
will include, inter alia, the connection as far as the meter that will
be installed in the central shaft.
6. MISCELLANEOUS:
a. All plans must be approved by the lessor before the start of work.
b. The facades of leased premises that face public areas must be approved
by the architect.
c. Plans for the internal division of space drawn up by the lessee must
meet the demands of standards, including safety standards.
<PAGE>
Appendix B (continued) [added by hand]
Work to be performed by the lessor in the office area of the lessee
[added by hand]
TECHNICAL SPECIFICATION FOR THE TENANT'S AREA
We shall make the following modifications to the leased premises.
a. Floor: fire-resistant carpeting at a base price of $12 per square meter
b. Rando Fisher 6 x 60 acoustic ceiling--base price, $4 per square meter
c. Plaster walls including 2" insulation
d. Decorel doors with honeycomb fill and Fournir veneer--up to 20 units
e. Walls--Superacril white paint
f. Lavatories--minimum standard
g. Kitchenette--three meters long, with marble countertop and sink
h. Installation of sprinkler system
i. Electricity - 2 x 36 W parabolic lighting fixtures
3 x 160A main electric panel
50 electric outlets and infrastructure for 25 computer/telephone outlets
j. air-conditioning--hook up to central system in accordance with plans as
provided by the air-conditioning consultant for the building
<PAGE>
Appendix B (continued) [added by hand]
TECHNICAL SPECIFICATION FOR BUILDING B - PUBLIC AREAS
1. STAIRWELLS:
o Marble flooring
o Stone and plaster walls
2. FOYER ON FLOOR:
o Marble flooring and wall paneling
o Metal and/or wood cabinets
o Mineral and/or metal acoustic ceilings, including recesses, and
fluorescent lighting
3. FLOOR DIMENSIONS:
o Terrazzo tile flooring
o Walls and ceiling--Tambourtex and/or Polycid paint
4. CENTRAL SHAFTS:
o Intended to carry systems (air-conditioning, sprinkler system,
plumbing, electricity, and telecommunications). The lessee will lay
the systems of the leased premises as far as the shaft. The work will
be planned and carried out in coordination with and after approval by
the lessor.
5. ROOFS AND BALCONIES:
o Waterproofing including thermal insulation
o Balconies with stone and/or marble paving
6. OUTSIDE SHELL:
o Combination of concrete walls including dressed stone facing and
thermal insulation with a total thickness of about 30 cm and glass and
aluminum curtain walls according to architect's plans
7. PARKING FACILITIES:
o Smooth concrete floor
o Full parking facility illumination
o Fire extinguisher and hydrant system in accordance with safety
requirements
<PAGE>
8. DEVELOPMENT:
o Asphalt pavement combined with another material such as tiled stones
o Central trash facility
o Outside lighting in accordance with specifications of electrical
consultant
o Loading and unloading bays on first and second stories (Building B
only)
9. CENTRAL ENERGY SYSTEMS:
o There is infrastructure in shafts for the lessee to hook up to the
public systems (hook up to main sprinkler system, air-conditioning and
heating lines)
o Central air-conditioning system (chillers) on roof of structure
o Emergency generator to backup public grid
o Central monitoring system to control public facilities
10. ELEVATORS:
o Two elevators in each core--passenger elevator and dual use
(passenger/freight) elevator
o Elevator cabin finished as determined by architect
<PAGE>
SPECIMEN [superimposed on document by hand]
Appendix D [added by hand]
Promissory note No. _______
INDEX-LINKED PROMISSORY NOTE
Executed on the _____day of the month of _____, 199__.
1. On the 01 day of the month of July, in the year 2000, we promise to pay to
the order of Har Hotzvim Properties Ltd. (hereinafter "Har Hotzvim
Properties"), corporation No. 51-168405-2, of 27 Hamered St. Tel Aviv, the
sum of 64,449 new sheqels (sixty-four thousand four hundred forty-nine
sheqels), linked (hereinafter together--"the amount"), as detailed below:
2. The amount shall be linked to the Consumer Price Index (including fruits
and vegetables) published from time to time by the Central Bureau of
Statistics and Economic Research. The "base index" for this note is 106.8
index for 10/99 and the "determining index" is the index that will be known
on the actual day of payment of the note.
3. If on the day of payment of this note the (new) determining index is higher
than the base index, we shall pay Har Hotzvim Properties the amount of the
note augmented proportionally to the rise in the "new" determining index as
against the base index (hereinafter "linkage differentials"). To avoid all
doubt it is hereby made clear that in any case the amount will not be
reduced in the event that the "new" determining index is lower than the
base index.
4. If on the day of payment of this note there exists an obligation to pay
Value Added Tax at its legal rate, the amount as defined in section I of
this note above shall be supplemented by an additional amount on account of
the Value Added Tax, plus linkage differentials on its account as well. In
order to avoid all doubt we agree and affirm that the amount of Value Added
Tax will be levied on the amount including the supplement on account of
linkage differentials.
5. We exempt the holder(s) of this note from any obligation of presentation
and/or dispatch of and warnings or notices whatsoever.
Place of payment:
Bank: 10 Leumi Branch: 913 Mahane Yehuda
account 121600/19
Signatures of Executors of the Note:
Name: BRT Biopharmaceuticals Ltd. Name:
ID number: 51-285095-9 ID number:
Address: 216 Jaffa Road, Jerusalem Address:
name and place address name and place address
Workplace: Workplace:
X Signature X Signature
We the undersigned guarantee, individually and collectively, the payment of this
note by the signatories. This guarantee shall not be affected adversely by the
grant of an extension or discounts to the signatories and/or to any guarantor
and/or to any endorser of this note. We individually and collectively hereby
waive any right to assert a claim of expiration or any other claim in connection
with this note, inter alia under the provisions of the Notes Ordinance and in
addition we hereby exempt the holder(s) of this note from any need to present
and/or send any warnings or notices whatsoever.
Signatures of Guarantors:
Name: Name:
ID number: ID number:
Address: Address:
name and place address name and place address
Workplace: Workplace:
X Signature X Signature
<PAGE>
Name: BRT
Address:
[stamp: Bank Leumi Le-Israel Ltd.
Business Branch - Mahane Yehuda, Jerusalem
15-12-1999
913 RECEIVED 913]
To:
Bank Leumi le-Israel Ltd.
Branch: Mahane Yehuda
Date 15/12/99
Re: REQUEST TO ISSUE A GUARANTEE
Please issue a guarantee/obligation (hereinafter "the guarantee") in accordance
with the following form and details:
1. Name of beneficiary: Har Hotzvim Properties Ltd. (indicate the name of the
person or corporation that will be the beneficiary of the guarantee)
2. Address of the beneficiary
3. Amount of the guarantee: 122,000--
4. Name of maker: BRT Biopharmaceuticals Ltd. (indicate the name of the person
or corporation on whose behalf the guarantee will be issued)
5. With reference to: compliance with a tenancy contract
6. Validity of the guarantee: 31/3/2001 (indicate the date to be inscribed on
the guarantee as the last date for reception of the demand by the bank)
7. Indexation terms: Consumer Price Index 10/99
8. Remarks:
The commission for the guarantee shall be at the rate of 2.6% per annum of the
amount of the guarantee (including interest, indexation differentials, or
exchange-rate differentials, if any) but in no case less than the sum of NIS
___*.
Please debit thereupon our account with you number 121600/19.
In addition, we are aware that we will be charged a commission for drafting
documents in the amount of NIS 350.
What is stated in the obligation we have signed for you with relation to the
issuance of the guarantee and/or indemnity by you shall also apply to the above
the guarantee (and to extensions of its validity if any).
*minimum commission as this appears in the list of commissions.
[company stamp: Har Hotzvim Properties, Ltd.] [signature} IRA WEINSTEIN
[company stamp: BRT
Biopharmaceuticals Ltd.]
Customer's Signature
- --------------------------------------------------------------------------------
For use by the branch
Guarantee No. File No. _____
Total obligo in guarantees _______ Approval by branch management ________
Securities offered ________ Approval by district management, dated _____
Remember that the customer must sign (on the copy of the guarantee that remains
in the branch) the guarantee document.
<PAGE>
BRT BIOPHARMACEUTICALS, LTD.
216 JAFFA ROAD, SHA'AREI HA'IR - JERUSALEM - 94383
Phone: 972-2-5374997 - Fax: 972-2-5375098
[stamp: Bank Leumi Le-Israel Ltd.
Business Branch - Mahane Yehuda, Jerusalem
15-12-1999
913 RECEIVED 913]
14 December 1999
To:
Bank Leumi
Mahane Yehuda Branch
Jerusalem
Dear Sirs and Mesdames,
Re: promissory notes to the order of Har Hotzvim Properties Ltd.
Enclosed please find a list of the promissory notes that we have conveyed to the
Har Hotzvim Co., Ltd., on account of a tenancy agreement. We hereby give you an
irrevocable instruction to honor these notes on the date fixed for their payment
and to pay them from our account number 121600/19 maintained at your branch.
Sincerely,
[signature] Ira Weinstein
[signature] Moshe Laster
<PAGE>
BRT BIOPHARMACEUTICALS, LTD.
216 JAFFA ROAD, SHA'AREI HA'IR - JERUSALEM - 94383
Phone: 972-2-5374997 - Fax: 972-2-5375098
Promissory notes to be honored:
NUMBER DATE AMOUNT (INDEX LINKED)
1 1 October 2000 NIS 66,141
2 1 January 2001 NIS 66,141
3 1 April 2001 NIS 66,141
4 1 July 2001 NIS 66,141
5 1 October 2001 NIS 66,141
6 1 January 2002 NIS 66,141
7 1 April 2002 NIS 66,141
8 1 July 2002 NIS 66,141
9 1 October 2002 NIS 66,141
10 1 January 2003 NIS 66,141
11 1 April 2003 NIS 66,141
12 1 July 2003 NIS 66,141
13 1 October 2003 NIS 66,141
14 1 January 2004 NIS 44,094
<PAGE>
APPENDIX E TO TENANCY AGREEMENT
Between: Har Hotzvim Properties Ltd. ("the lessor")
And: BRT Biopharmaceuticals Ltd. ("the lessee")
INSURANCE
1. This appendix constitutes an integral part of the tenancy agreement between
the lessor and the lessee that was signed with regard to the leased
premises that are unit No. B/3/101 in Building B in the Ramot Meir project,
Har Hotzvim, Jerusalem.
2. The lessee undertakes to take out and maintain the insurance detailed in
the provisions of this appendix and undertakes to abide by all of the
obligations imposed on it by the various provisions of this appendix, and
as follows:
2.1 Before the date of the handover of possession of the leased premises
and/or before the date of the granting of permission and as a
condition for receiving permission to carry out work in the leased
premises and/or before the starting date of any work whatsoever in the
leased premises by the lessee and/or on its behalf and/or for its
benefit--whichever of these three may be earliest--the lessee
undertakes to take out and maintain "construction work insurance" as
enumerated in Appendix E-1 (attached to the present Appendix E as part
thereof) at its own expense with a legally certified insurance company
that has a reputation in Israel, concerning all work to be performed
by it and/or on its behalf and/or for its benefit in the leased
premises, including equipment, systems, and machines that will be used
for the lessee's business as well as repairs, renovations,
improvements, modifications, and additions that may be made to the
leased premises.
2.2 Without a need for any request or application by the lessor and/or the
management company, the lessee undertakes to convey to the lessor no
later than the date of the handover of possession of the leased
premises or the date of the start of any work whatsoever in the leased
premises, whichever of these two may be earlier, confirmation that it
has taken out construction insurance, on the model of the
"construction insurance certification" attached to the present
appendix and labeled Appendix E-1, signed in due legal form by the
insurer. The lessee and the lessor and/or the management company shall
be entitled to prevent the lessee from carrying out work in the leased
premises and/or handling over possession of the leased premises in the
event that the said confirmation has not been presented before the
said date.
2.3 Without detracting from the liability and obligations of the lessee
under this tenancy agreement and the present Appendix E and under the
management contract and/or according to law, from the date of the
introduction of any property and/or belongings whatsoever to the
leased premises or from the date of the start of the term of the
<PAGE>
lease and/or from the date of the handover of possession of the leased
premises (whichever is earliest), the lessee undertakes to purchase at
its own expense and to maintain throughout the entire period of the
lease the insurance detailed in the "certification of tenant
insurance" attached to the present Appendix E as part thereof and
designated Appendix E-2 (hereinafter "tenant insurance").
2.4 The lessee undertakes to update the amount of the coverage on account
of the insurance stated in the "certification of tenant insurance"
from time to time so that it always reflects the full value, at
replacement value, of the property insured thereunder.
2.5 Without a need for any request or application by the lessor and/or the
management company, the lessee undertakes to convey to the lessor
and/or the management company, no later than the date of the start of
the lease or the date of the introduction of any property whatsoever
to the leased premises, whichever of these two may be earlier,
confirmation that it has taken out insurance on the leased premises on
the model of the "certification of tenant insurance" attached to the
present appendix and labeled Appendix E-2, signed in due legal form by
the insurer. The lessee states that it is aware that presentation of
the said "certification of tenant insurance" is a necessary and
prerequisite condition for the start of any activity by the lessee in
the leased premises and/or the introduction of any property whatsoever
to the leased premises as stated above, and the lessor and/or the
management company shall be entitled to prevent the lessee from
conducting any activity in the leased premises and/or introducing any
property as stated in the case that the said certification is not
submitted to it before the date stipulated above.
2.6 To avoid any misunderstanding it is made clear that the failure to
present the above certifications of insurance and insurance policies
on the date stated above shall not detract from the obligations of the
lessee under the tenancy agreement, including, and without detracting
from the generality of what is stated, the execution of any payment
that devolves on the lessee, and the lessee undertakes to meet all of
its obligations under the tenancy agreement and management contract
even if it is prevented from carrying out work and/or receiving
possession of the leased premises and/or introducing property to the
leased premises and/or opening its business in the leased premises,
because of the failure to present the certifications on time.
2.7 In this context it is made clear that nothing in the taking out of the
above insurance by the lessee can limit or detract in any fashion
whatsoever from the lessee's obligation under the tenancy agreement
and management contract and shall not release it from its obligation
to compensate the lessor and/or the management company or any person
whatsoever on account of any damage for which the lessee is liable
under the tenancy agreement and under the management contract and/or
by law.
2.8 The payment of any insurance benefits whatsoever shall have no force
other than reduce the amount of indemnification or compensation to
which the lessor and/or the management company may be entitled on
account of damage or loss.
<PAGE>
2.9 No later than 14 days before the expiration of the term of the tenant
insurance, the lessee undertakes to deposit with the lessor and/or the
management company certification of tenant insurance as stated in
section 2.5 above on account of the extension of its validity for
another year.
2.10 The lessor and/or the management company shall be entitled to examine
the insurance certificates presented by the lessee as stated above and
the lessee undertakes to make any change or modification that may be
required in order to make them compatible with its obligations. The
lessee declares and undertakes that the rights of the lessor and/or
the management company to conduct this examination and demand changes
as stated about do not impose upon the lessor and/or the management
company or anyone on their behalf any duty or any responsibility
whatsoever concerning the stated insurance certificates, their nature,
their scope, and their term of validity, or concerning their absence,
and nothing in them can detract from any obligation imposed on the
lessee under the tenancy agreement and the management contract, and
this whether or not they so requested and whether or not they so
examined.
2.11 The lessee undertakes to abide by all conditions of the policies
mentioned above in the present appendix, to pay the premiums in full
and on time, and to see to it and to verify that the leased premises
and tenant insurance policies are renewed from time to time, as
required, and remain in force throughout the term of the lease.
Should the lessee fail to meet its obligations under this entire
appendix, the lessor and/or the management company shall be entitled,
but not required, to take out the insurance or some portion thereof in
the place of the lessee and at its expense and/or to pay in its place
any sum whatsoever, and this without detracting from the right of the
lessor and/or the management company to any other remedy.
2.12 The lessee undertakes not to perform and/or allow anyone acting on its
behalf to commit any act of commission or omission that may tend to
increase the insurance outlays of the lessor and or the management
company and/or other lessees on account of insurance of the structure
or its leased premises.
The lessee undertakes that to the extent that the lessor and/or the
management company may be required to make other insurance payments
beyond the norm on account of activity by the lessee, the lessee shall
pay to the lessor and/or to the management company, as appropriate,
the stated supplement immediately upon receipt of the first request to
do so.
3. The lessor and/or the management company shall take out the following
insurance (hereinafter "Company insurance"):
3.1 Extended fire insurance for the structures of the project. For the
purposes of this section, the "structures of the project" do not
include the contents of the tenant's unit and/or any addition, repair,
modification, renovation, or expansion made to the tenant's unit by
the lessee or someone acting on its behalf. This insurance shall
<PAGE>
include a waiver of the right of subrogation vis-a-vis the lessee,
except in the case of damage caused by the lessee or by anyone acting
on its behalf with malicious intent ("the tenant's unit" means "the
leased premises").
3.2 Insurance against the loss of rent at its full value on account of
damage that may be caused to the leased premises and/or the project as
a result of risks that are covered by the property insurance
enumerated in section 3.1 above. This insurance shall include a waiver
of the right of subrogation vis-a-vis the lessee, except in the case
of damage caused by the lessee or by anyone acting on its behalf with
malicious intent.
3.3 Third-party liability insurance against bodily damage and/or property
damage that may be caused outside the area of the units and leased
premises and that is related to the operation, maintenance, and
management of the public areas of the project. The insurance shall be
extended to indemnify the lessee in the event that it is adjudged to
be responsible for the acts of commission and/or omission of the
lessor or management company and shall include a cross-liability
clause.
This insurance does not cover the separate and unique liability of the
lessee for damages associated with the leased premises themselves
and/or associated with the lessee and/or the content of the leased
premises.
3.4 Employers' liability insurance to cover liability of the lessor and/or
the management company vis-a-vis their employees under any law. This
insurance shall be extended to indemnify the lessee in the event that
it is adjudged to be the employer of any of the employees of the
management company and/or the lessor.
3.5 Additional insurance at the discretion of the lessor and/or at the
discretion of the management company.
Copies of the "company insurance" policies shall be on file in the offices of
the management company and available for examination by tenants during regular
working hours.
IN WITNESS WHEREOF THE PARTIES HAVE AFFIXED THEIR SIGNATURES
TODAY, 13 DECEMBER 1999, in JERUSALEM
[company stamp: [company stamp:
Har Hotzvim Properties, Ltd.] BRT Biopharmaceuticals Ltd.]
[signatures: ?? & ??] [signatures: Moshe Laster & Ira Weinstein]
LESSOR LESSEE
<PAGE>
APPENDIX E-1
(SUBSIDIARY APPENDIX TO APPENDIX E TO THE TENANCY AGREEMENT)
Between: Har Hotzvim Properties Ltd. ("the lessor")
And: BRT Biopharmaceuticals Ltd. ("the lessee")
Certification of Construction Insurance
To:
Har Hotzvim properties Ltd. (hereinafter "the lessor")
____________________(hereinafter "the management company")
____________________
Dear Sirs or Mesdames
Re: CERTIFICATION OF THE ISSUANCE OF CONSTRUCTION WORK INSURANCE
We hereby certify that starting on 1 January 2000 and continuing until 31 March
2000 we have drawn up on behalf of BRT Biopharmaceuticals Ltd. (hereinafter "the
lessee") and in its name the insurance listed below and in accordance with what
is stated in section 11 and Appendix E of the tenancy agreement between you
(unit ____ in Building ___ in the Ramot Meir project, Har Hotzvim, Jerusalem),
as follows:
1. CONSTRUCTION INSURANCE--policy to insure work by contractors--all risks
[added by hand:]
not including break-ins
CHAPTER 1 - PROPERTY INSURANCE
The policy covers the work, including materials, equipment, installations, and
everything else that may be brought to carry out the work of any type whatsoever
on the property leased under the aforesaid tenancy agreement.
This insurance includes the lessor and the management company and their
employees and or executives and all the contractors and subcontractors as
additional beneficiaries.
Total value of the work: $120,000
This policy includes the following extensions: Removal of rubble in the amount
of $12,000
Adjacent property and property
being worked on in the amount
of $250,000
<PAGE>
CHAPTER 2 - THIRD-PARTY LIABILITY INSURANCE
This policy will cover liability of the insured vis-a-vis any third party on
account of any injury whatsoever, loss, or damage to body and/or property as a
result of the work specified in chapter 1 above. This insurance shall include
the lessor and the management company and their executives and their employees
and all contractors and subcontractors as additional insured parties.
The liability limits of this policy are NIS 500,000 per incident and for the
entire term.
The policy includes the following extensions: Cross-liability clause
Property belonging to the
lessor and/or the management
company shall be considered to
be third party
Any person who is not included
in the wage lists of the
insured party shall be
considered to be a third party.
Damage to third-party property
as a result of the use of motor
vehicles, excluding liability
that is indemnifiable under the
Law for Compensation of Traffic
Accident Victims and liability
covered by a standard
motor-vehicle insurance policy.
The liability beyond the above
is within the limits of
liability specified above.
CHAPTER 3 - EMPLOYERS' LIABILITY INSURANCE
This policy will cover the liability under the law of each of those insured
vis-a-vis its employees, representatives, and any other person found in its
service and subject to its authority, including subcontractors, their employees,
their representatives, and any other person in their service and/or subject to
their authority, on account of bodily, mental, or emotional damage or death that
may be caused to each of those enumerated above in connection with his or her
work.
[added by hand:] $1,500,000 per employee and per incident.
The liability limits of this insurance are $5,000,000 (five million United
States dollars) per claimant and for the entire term.
This policy includes the lessor and the management company and all contractors
and subcontractors as additional insured parties.
In addition, this policy is not subject to any restriction with regard to
working hours, contractors, subcontractors, their employees, their
representatives, or any other person found in their service and/or subject to
their authority, work on heights or in depths, lures and poisons, as well as the
employment of youth.
<PAGE>
2. MISCELLANEOUS
2.1 We affirm that the aforesaid policy (or policies), chapters 1, 2, and
3, that are enumerated above, include an explicit clause with regard
to the waiver of the right of subrogation vis-a-vis the lessor, the
management company, their executives and/or employees, any person in
their service, and vis-a-vis other lessees in the aforesaid project
and/or their employees and executives of all of the above and all
those acting on their behalf.
2.2 We hereby undertake not to cancel and not to modify and not to reduce
the above insurance policies or any of them without providing previous
written notice by registered mail of at least 30 days to the lessor
and/or to the management company.
2.3 We affirm that the lessor and/or the management company shall not be
liable for payment of premiums for the policies mentioned above and
for fulfilling all of the obligations imposed upon the insured under
the terms of the policy.
2.4 The insurance under the above policy (or policies) (chapters 1, 2, and
3 above) is primary insurance and takes precedence over any other
insurance taken out by the lessor and/or by the management company.
[company stamp] Zion Insurance Company [signature]
seal of the insurer Signature of the insured
[signature] underwriter
Name of signatory position of the signatory
Ben Yehuda 1, Jerusalem
Address of the insurer
02 623 4341
telephone number of the insurer
SIGNATURES FOR THE PURPOSE OF THE TENANCY AGREEMENT
- --------------------------------------------------------------------------------
[company stamp: BRT Biopharmaceuticals Ltd.]
[Signatures: Moshe Laster & Ira Weinstein]
- --------------------------------------------------------------------------------
"The Lessor" "The Lessee"
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX E-2
(SUBSIDIARY APPENDIX TO APPENDIX E TO THE TENANCY AGREEMENT)
Between: HAR HOTZVIM PROPERTIES LTD. ("THE LESSOR")
And: BRT BIOPHARMACEUTICALS LTD. ("THE LESSEE")
CERTIFICATION OF TENANT INSURANCE
To:
Har Hotzvim properties Ltd. (hereinafter "the lessor")
____________________(hereinafter "the management company")
____________________
Dear Sirs or Mesdames
Re: CERTIFICATION OF THE ISSUANCE OF EMPLOYERS' LIABILITY INSURANCE, THIRD-
PARTY LIABILITY INSURANCE, PROPERTY INSURANCE, AND LOSS OF PROFIT
INSURANCE
We hereby certify that we have issued the policies enumerated below, as stated
in section 11 and Appendix E of the tenancy agreement between the lessor and BRT
Biopharmaceuticals Ltd. (hereinafter "the lessee") on account of the property
leased by the lessee in the Ramot Meir project, Building B, unit ____, Har
Hotzvim, Jerusalem, and this for the period beginning on 31 January 2000 and
concluding on 31 December 2000.
1. THE INSURANCE
Chapter 1. Coverage of the lessee's liability vis-a-vis its workers and/or all
those employed by it or on its behalf under the Torts Ordinance (new
version) and/or the Defective Products Liability Law 5740-1980, on
account of death and/or bodily damage to any worker as a result of
accident or illness during the course of or as a result account of
his or her employment, with a liability limit in the amount of
5,000,000 (five million United States dollars) and the total for the
entire period of the annual insurance. [added by hand:] per incident
and worker $1,500,000.
This policy has been extended to indemnify the lessor and/or the
management company to the extent that they may be adjudged to be the
employers of the workers of the lessee and its employees or any of
them.
Chapter 2. Third-party liability insurance--coverage of the lessee's liability
vis-a-vis the lessor and/or vis-a-vis the management company and/or
vis-a-vis any third party, under the laws of the State of Israel
with a limit of liability that is not less than a sum in sheqels
equal to NIS 500,000 for a single case and the total for the entire
period of the annual insurance.
The said policy is not subject to any limitation with regard to
liability that may stem from fire, panic, explosion, lifting
equipment, loading and unloading,
<PAGE>
poisoning, any harmful item in food and drink, defective sanitary
installations, strike and lockout, or claims on behalf of the
National Insurance Institute.
Chapter 3a. Property insurance--Coverage for the content of the leased premises
and any other property in the ownership and/or responsibility of the
lessee including any repair, modification, improvement, renovation,
or addition to the leased premises that has been performed and/or
may be performed by the lessee and/or those acting on its behalf at
the replacement value, against the risks of fire, smoke, lightning,
explosion, earthquake, storm, tempest, flood, damage by liquids,
impact by aircraft, sonic boom, collision, strikes, riots, malicious
damage, and break-in.
The name of the insured party includes also the lessor and the
management company.
Chapter 3b. Insurance against loss of profits by the lessee has result of damage
caused to the leased premises and/or to its contents as a result of
the risks insured as stated above, for a period of indemnification
that is not less than 12 months.
2. MISCELLANEOUS
2.1 We affirm that the aforesaid policy (or policies), chapters 1, 2, 3a,
and 3b, that are enumerated above, include an explicit clause with
regard to the waiver of the right of subrogation vis-a-vis the lessor,
the management company, their executives and/or employees, any person
in their service, and vis-a-vis other lessees in the aforesaid project
and/or their employees and executives of all of the above and all
those acting on their behalf.
2.2 We hereby undertake not to cancel and not to modify and not to reduce
the above insurance policies or any of them without providing previous
written notice by registered mail of at least 30 days to the lessor
and/or to the management company.
2.3 We affirm that the lessor and/or the management company shall not be
liable for payment or premiums for the policies mentioned above and
for fulfilling all of the obligations imposed upon the insured under
the terms of the policy.
2.4 The insurance under the above policy (or policies) (chapters 1, 2, and
3a and 3b above) is primary insurance and takes precedence over any
other insurance taken out by the lessor and/or by the management
company.
[company stamp] Zion Insurance Company [signature]
seal of the insurer Signature of the insured
[signature] underwriter
Name of signatory position of the signatory
Ben Yehuda 1, Jerusalem
Address of the insurer
02 623 4341
telephone number of the insurer
<PAGE>
Signatures for the Purpose of the Tenancy Agreement
- --------------------------------------------------------------------------------
[company stamp: BRT Biopharmaceuticals Ltd.]
[Signatures: Moshe Laster & Ira Weinstein]
- --------------------------------------------------------------------------------
"The Lessor" "The Lessee"
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 21.1
The subsidiaries of Keryx Biopharmaceuticals, Inc. are listed below:
. Keryx (Israel) Biopharmaceuticals Ltd.
<PAGE>
EXHIBIT 23.1
The Board of Directors
Keryx Biopharmaceuticals, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
Somekh Chaikin
Certified Public Accountants (Isr.)
A member firm of KPMG International
Jerusalem, Israel;
May 19, 2000
<PAGE>
Exhibit 23.3
[Logo of PA Consulting Group]
17 May 2000
The Directors
Keryx Biopharmaceuticals, Inc.
216 Jaffa Road
Sh'arei Ha'ir
Jerusalem
Israel 94383
Dear Sirs
Keryx Biopharmaceuticals
We hereby consent to the references to our experts report contained in the
Registration Statement on Form S-1 of Keryx Biopharmaceuticals, Inc. and to the
reference to us under the heading "Experts" in the prospectus, which is a part
of such Registration Statement.
We hereby consent for the purposes of section 13(1)(g) of the Public Offers of
Securities Regulations 1995 to the issue of the prospectus to be issued by you
in relation to your admission to trading on the Nasdaq National Market and the
Alternative Investment Market of the London Stock Exchange, a proof of which is
annexed hereto and initialled by us for the purposes of identification, with the
inclusion therein of a copy of our report and to the references to our name in
the form and context in which they appear.
Yours faithfully,
For and on behalf of
PA STRATEGY PARTNERS LIMITED
/s/ Keith Redpath
Keith Redpath
Management Group - PA
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated financial statements at December 31, 1999 and for the year then
ended and from the condensed consolidated financial statements at March 31, 2000
and for the three month period then ended, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> DEC-31-1999 MAR-31-2000
<CASH> 4,126,735 6,551,344
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,378,557 6,873,225
<PP&E> 217,337 233,895
<DEPRECIATION> 57,196 64,505
<TOTAL-ASSETS> 4,948,216 7,606,857
<CURRENT-LIABILITIES> 394,417 404,690
<BONDS> 0 0
0 0
79 118
<COMMON> 806 806
<OTHER-SE> 4,435,257 7,072,083
<TOTAL-LIABILITY-AND-EQUITY> 4,948,216 7,606,857
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> (8,992,792) (1,811,847)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (8,992,792) (1,811,847)
<INCOME-TAX> 9,970 27,121
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,002,762) (1,838,968)
<EPS-BASIC> (1.67) (0.34)
<EPS-DILUTED> (1.67) (0.34)
</TABLE>
