SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934. For the fiscal year ended: September 30, 2000
OR
[_] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the transition period from: to
Commission File Number: 000-030813
AlphaRx, Inc.
(Name of Small Business Issuer in its Charter)
Delaware 98-0177440
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10-75 East Beaver Creek
Ontario L4B 1B8, Canada
(Address of principal executive offices)
Registrant's telephone number, including area code: (905) 762-0745
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ ]
<PAGE>
Registrant's revenues for its fiscal year ended September 30, 2000 (its most
recent fiscal year) were $0.00.
The aggregate market value of registrant's Common Stock (the only class of stock
outstanding) held by non-affiliates of the registrant on October 30, 2000, based
upon the closing price of the Common Stock on the NASD OTC Bulletin Board on
such date, was approximately $59,265,996.
The number of outstanding shares of registrant's Common Stock on October 30,
2000 was 49,388,330.
<PAGE>
ALPHARx, INC.
2000 FORM 10-KSB REPORT
TABLE OF CONTENTS
PART I .................................................................... 1
ITEM 1. BUSINESS ....................................................... 1
ITEM 2. PROPERTIES ..................................................... 20
ITEM 3. LEGAL PROCEEDINGS .............................................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............ 20
PART II ................................................................... 21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS .................................................... 21
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................... 22
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .................... 24
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE .................................... 25
PART III .................................................................. 25
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ............. 25
ITEM 10. EXECUTIVE COMPENSATION ........................................ 27
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ......................................................... 28
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................ 29
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K ................................................ 29
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 which are not historical facts, and
involve risks and uncertainties that could cause actual results to differ
materially from those expected and projected. Such risks and uncertainties
include the following: constraints on our financial and personnel resources,
competitive factors, receipt of FDA approval and/or compliance with United
States or foreign governmental regulations and our exposure to potential product
liability risks, and those set forth under "Certain Factors that may Affect
Future Results" and elsewhere in this Annual Report on Form 10-KSB. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. We have no obligation to publicly release the
result of revisions to these forward-looking statements as a result of
occurrences after the date hereof or to reflect the occurrence of unanticipated
events.
<PAGE>
PART I
ITEM 1. BUSINESS
COMPANY OVERVIEW
In this Annual Report on Form 10-KSB, the "company," "AlphaRx," "we," "us,"
and "our," refer to AlphaRx, Inc.
We are a development stage drug delivery company incorporated in the State
of Delaware on August 8, 1997. We formulate and commercialize controlled-release
therapeutic products using our proprietary drug delivery technologies, which we
believe, can be combined with a broad range of therapeutic products. We have
applied our proprietary drug delivery technologies and formulation skills in
four applications:
Pain Management - developing generic versions of select brand name oral and
topical NSAID pharmaceuticals;
Oral Care Management - developing antimicrobial dental varnish, controlled
release mouth rinse and toothpaste;
Nutraceuticals - developing bioavailable specialized supplements with
therapeutic benefits; and
Immnomodulators - developing heterocyclic cyclopentene derivatives with
immunostimulating and anti-inflammatory activities.
We believe pharmaceutical companies are increasingly using
controlled-release drug delivery technologies to improve drug therapy.
Controlled-release drug delivery technologies generally provide more consistent
and appropriate drug levels in the bloodstream than immediate-release dosage
forms and thereby may improve drug efficacy and reduce side effects. These
technologies also allow for the development of "patient-friendly" dosage
formulations by reducing the number of times a drug must be taken, thereby
improving patient compliance. Controlled-release pharmaceuticals can be
especially beneficial for certain patient populations, such as the elderly, who
often require several medications with differing dosing regimens.
We believe the market for advanced drug delivery systems is large and
growing rapidly. Based on published data, the market for orally-administered
drugs that utilize sustained and controlled-release drug delivery systems is
expected to increase to approximately $50 billion in 2005 from approximately $10
billion in 1995. We also believe that pharmaceutical companies that do not
themselves have controlled-release drug delivery technology expertise will rely
upon third parties, such as AlphaRx, to apply such technologies to their product
candidates.
We intend to use our proprietary drug delivery technologies in
collaborative arrangements with pharmaceutical companies to formulate
controlled-release versions of
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their existing commercialized drugs as well as drugs under development by them.
By improving drug efficacy and reducing side effects, we believe our drug
delivery technologies will provide pharmaceutical companies with the opportunity
to enhance the commercial value of their existing products and new drug
candidates. We also intend to develop either independently or jointly certain
off-patent and over-the-counter ("OTC") products utilizing our proprietary drug
delivery technologies.
PRINCIPAL PRODUCT AND SERVICES AND PRINCIPAL MARKETS
We are engaged in developing novel formulations of existing drugs that are
insoluble or poorly soluble in water, utilizing our proprietary Bioadhesive
Colloidal Dispersion (BCD) drug delivery systems. Our strategy is to develop
patentable improved formulations of such drugs that are soluble in both human
and veterinary medicines. Our BCD drug delivery technology includes two
different approaches to improve the effectiveness of insoluble drugs and provide
new methods of delivery, namely, (i) CLD (Colloidal Lipid Dispersion System) and
(ii) SECRET (Self Emulsifying Controlled Release Tablet System).
Insoluble or poorly soluble drugs are a major problem for the
pharmaceutical industry, with over one-third of the drugs listed in the United
States' Pharmacopoeia being insoluble or poorly soluble in water. Further, most
approaches used to overcome insolubility result in clinical problems ranging
from poor and erratic bioavailability to serious side effects. The BCD drug
delivery technology is designed to develop drugs with major medical advantages,
such as lower dosing, fewer side effects and alternative dosage forms, as well
as commercial advantages, such as extended patent protection and broader use.
We have a number of drugs under development, certain of which have been
successfully reformulated, utilizing our BCD technology. Our central strategy is
to seek alliances with pharmaceutical companies which will assist us in
completing the reformulation and development of the drugs and which will
initiate clinical trials and commercialize the products.
PRODUCT PIPLELINE
The following is a list of some of our products in the development
pipeline:
<TABLE>
<CAPTION>
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BRAND NAME APPLICATION DELIVERY TECHNOLOGY STAGE MARKET SIZE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PAIN MANAGEMENT US$ 3 BILLION
------------------------------------------------------------------------------------------------------------------
Flexigan cream Arthritis Transdermal/CLD Pre-clinical
------------------------------------------------------------------------------------------------------------------
Indoflex cream Arthritis Transdermal/CLD Pre-clinical
------------------------------------------------------------------------------------------------------------------
Flexigan IR & ER tablet Arthritis Oral/SECRET R&D
------------------------------------------------------------------------------------------------------------------
Indoflex IR & ER tablet Arthritis Oral/SECRET R&D
------------------------------------------------------------------------------------------------------------------
ORAL HEALTH US$ 1 BILLION
------------------------------------------------------------------------------------------------------------------
ChlorSM Mouth Rinse Anti-gingivitis, Anti-plaque Oral/CLD Pre-clinical
------------------------------------------------------------------------------------------------------------------
ChlorSM Toothpaste Anti-gingivitis, Anti-plaque Oral/CLD Pre-clinical
------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTC Mouth Rinse Anti-plaque, Breath control Oral/CLD Pre-clinical
------------------------------------------------------------------------------------------------------------------
OraEase Lozenges Periodontal Disease Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
NUTRACEUTICALS US$ 9 BILLION
------------------------------------------------------------------------------------------------------------------
Q10 ER Hearth Health Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
Trivital C General Health Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
Reishi Biosomes Immune Health Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
TetraPherol General Health Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
ACE Biosomes Antioxidant Oral/SECRET R&D
------------------------------------------------------------------------------------------------------------------
LipoBloc Cholesterol Lowering Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
LipoLette Weight-loss Oral/SECRET Available
------------------------------------------------------------------------------------------------------------------
IMMNOMODULATORS US$ 2 BILLION
------------------------------------------------------------------------------------------------------------------
ARX-2001 AIDS Undetermined R&D
------------------------------------------------------------------------------------------------------------------
ARX-2002 Cancer Undetermined R&D
------------------------------------------------------------------------------------------------------------------
ARX-2003 Arthritis Undetermined R&D
------------------------------------------------------------------------------------------------------------------
</TABLE>
OVERVIEW OF THE DRUG DELIVERY INDUSTRY
Drug delivery companies apply proprietary technologies to create new
pharmaceutical products utilizing drugs developed by others. These products are
generally novel, cost-effective dosage forms that may provide any of several
benefits, including better control of drug concentration in the blood, improved
safety and efficacy, and ease of use and improved patient compliance. We believe
drug delivery technologies can provide pharmaceutical companies with a means of
developing new products as well as extending existing patents.
The increasing need to deliver medication to patients efficiently and with
fewer side effects has accelerated the development of new drug delivery systems.
Today, medication can be delivered to a patient through many different means of
delivery, including transdermal (through the skin), injection, implant and oral
methods. These delivery methods, however, continue to have certain limitations.
Transdermal patches are often inconvenient to apply, can be irritating to the
skin and the rate of release can be difficult to control. Injections are
uncomfortable for most patients. Implants generally are administered in a
hospital or physician's office and frequently are not suitable for home use.
Oral administration remains the preferred method of administering medication.
Conventional oral drug administration, however, also has limitations in that
capsules and tablets have limited effectiveness in providing controlled drug
delivery, resulting frequently in drug release that is too rapid (causing
incomplete absorption of the drug), irritation to the gastrointestinal (GI)
tract and other side effects. In addition capsules and tablets cannot provide
localized therapy.
In recent years, drug delivery companies have been able to develop
innovative and efficient solutions to some of the limitations of conventional
oral drug administration. For example, the improved oral delivery system
developed by ALZA in the 1980's reduced the side effects and dosing frequency of
the hypertension drug, Procardia(R). The improved product, Procardia XL(R),
resulted in substantially increased sales and the new formulation extended the
patent life on Procardia(R). We believe our BCD Systems have the potential to
offer similar opportunities of improved therapy and extended patent life to
pharmaceutical and biotechnology companies.
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BIOADHESIVE COLLODIAL DISPERSION (BCD) SYSTEMS
Our proprietary Bioadhesive Colloidal Dispersion (BCD) oral and transdermal
drug delivery technologies permit formulations of drug-containing polymeric
units that allow controlled delivery of an incorporated hydrophobic drug.
Although our formulations are proprietary, the polymers utilized in our BCD
Systems are commonly used in the food and drug industries. By using different
formulations of the polymers, we believe our BCD Systems are able to provide
continuous, controlled delivery of drugs of varying molecular complexity and
solubility.
The BCD Systems are designed to provide orally and transdermally
administered, conveniently dosed, cost-effective drug therapy in a continuous,
controlled delivery over a multihour period. We believe our BCD Systems may
provide one or more of the following therapeutic advantages over conventional
methods of drug administration:
1. Enhanced Safety and Efficacy. We believe our BCD Systems may improve the
ratio of therapeutic effect to toxicity by decreasing the initial peak
concentrations of a drug, associated with toxicity, while maintaining levels of
the drug at therapeutic, subtoxic concentrations for an extended period of time.
Many drugs demonstrate optimal efficacy when concentrations are maintained at
therapeutic levels over an extended period of time. When a drug is administered
intermittently, the therapeutic concentration is often exceeded for some period
of time, and then rapidly drops below effective levels. Excessively high
concentrations are a major cause of side effects, while subtherapeutic
concentrations are ineffective.
2. Greater Patient and Caregiver Convenience. We believe our BCD Systems
may permit once-daily dosing for certain drugs that are currently required to be
administered several times daily, thereby promoting compliance with dosing
regimens. Patient noncompliance with dosing regimens has been associated with
increased costs by prolonging treatment duration, increasing the likelihood of
secondary or tertiary disease manifestation and contributing to over-utilization
of medical personnel and facilities. By improving patient compliance, providers
and third-party payors may reduce unnecessary expenditures and improve
therapeutic outcomes.
3. Expanding the Types of Drugs Capable of Oral Delivery. Some drugs,
including certain proteins (complex organic compounds of high molecular weight
containing numerous amino acids) and peptides (low molecular weight compounds
consisting of two or more amino acids), because of their large molecular size
and susceptibility to degradation in the GI tract, must currently be
administered by injection or by continuous infusion, which is typically done in
a hospital or other clinical setting. We believe our BCD Systems may permit some
of these drugs to be delivered orally and/or transdermally.
4. Proprietary Reformulation of Generic Products. We believe our BCD
Systems offer the potential to produce improved proprietary formulations of
off-patent drugs,
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differentiated from the existing generic products by reduced dosing
requirements, improved efficacy, decreased toxicity or additional indications.
BACKGROUND
To be effective, drugs must reach an intended site in the body, at an
effective concentration, for an appropriate length of time. Traditional methods
of drug administration, such as oral ingestion, intramuscular and intravenous
injections and inhalation, are effective for a wide variety of drugs. Depending
upon the drug, however, each method may have disadvantages. For example, in oral
administration, a drug must pass through the gastrointestinal system to be
absorbed and may be metabolized or broken down in the stomach, intestines or
liver, resulting in the therapeutic availability of a lower amount of effective
drug. As a result, higher dosages of the drug must be used to produce the
desired effect, which may cause irritation of the gastrointestinal tract and
systemic toxicity.
Additionally, the rate at which an orally administered drug is absorbed may
vary depending on several factors, including the drug's chemical properties, the
length of time the drug remains in the gastrointestinal tract and the patient's
meal patterns. Although the pharmaceutical industry has investigated a variety
of alternative approaches for addressing drug adverse events and loss of
efficacy following oral dosing, by enteric coating of tablets, formulating with
various waxes and cellulosic materials, microencapsulation and compressing
tablets in various layers, the beneficial effects are not always reproducible
from patient to patient or effective in modifying metabolic effects produced in
the liver.
COLLOIDAL LIPID DISPERSION (CLD) SYSTEM
Our CLD system is a topical drug delivery technology which permit
pharmaceutical formulations (creams, gels, solutions, etc.) that enhance the
transdermal delivery of drugs into the skin or into the bloodstream. CLD
compounds, combined with polymers and adhesives, can also be used with patch
formats to achieve the transdermal delivery of selected drugs. We believe that
CLD compounds enhance the diffusion of drugs into and through the skin by making
the outer layer of the skin (stratum corneum) more permeable to the drug
molecule. Transdermal delivery provides an alternative to other methods of drug
administration (injection, oral dosage forms, inhalation, etc.), and may allow
selected drugs to be administered more effectively, at lower doses, with fewer
adverse events and improved patient compliance.
Our CLD system utilizes oil in water emulsions with a mean droplet size of
100-200 nm that are suitable for incorporation of lipophilic drugs. Drugs are
dissolved in the liquid oil core or incorporated into the oil/water interface,
according to the drug's hydrophobicity. We believe our CLD system is unique
compared with other drug delivery systems because our utility is dependent on
the physico-chemical properties of the drug (i.e. insolubility and surface
properties) rather than the chemical structure and reactivity.
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We develop specific CLD formulations for use with non-proprietary and
proprietary drugs, which we plan to commercialize through partnerships,
strategic alliances and license agreements with the pharmaceutical companies
manufacturing these products.
SELF EMULSIFYING CONTROLLED RELEASE TABLET (SECRET) SYSTEMS
Our SECRET system is a self-emulsifying, controlled release drug delivery
system for the systemic oral administration of hydrophobic (lipophilic) drugs.
Oral absorption improvement and bioavailability enhancement of hydrophobic drugs
are achieved using self-emulsifying oily preparations. In combination with a
biodegradable polymeric matrix, SECRET is capable of delivering these drugs to
the biological target in a sustained-release manner over prolonged periods of
time without the loss of bioavailability.
SECRET presents a novel way to increase the oral bioavailability of a
lipophilic substance over a desired target site in a prolonged and sustained
manner. More particularly, SECRET consists of a solid dispersion comprising the
lipophilic substance, a surfactant system having a melting point close to human
body temperature and an oil component in a biocompatible, biodegradable
polymeric matrix that does not interact with the entrapped compositions.
After the polymeric matrix erodes at the desired target site, it slowly
releases the entrapped compositions and, after mixing with body fluids, these
compositions undergo quick dissolution with resultant emulsification, thus an
oil-in-water emulsion is formed, the droplets of which have a diameter below
about 100 nm (0.1(mu)m). Emulsions having tiny droplets as those obtainable in
accordance with the SECRET formulations were hitherto obtainable only by
employing a complex homogenization procedure involving the use of intricate
equipment. Another feature of SECRET is the incorporation of a self-emulsifying
composition in a swellable polymeric matrix, which is suitable for tablet
formation, unlike conventional self emulsifying oily formulations that are
preferably encapsulated in a sealed soft or hard gelatin capsule.
SECRET is unique compared to other drug delivery systems because our
utility is dependent on the physico-chemical properties of the drug (i.e.
insolubility and surface properties) rather than the chemical structure and
reactivity.
Testing to date has demonstrated significant pharmaceutical and biological
advantages for our SECRET formulations as compared to standard Self Emulsifying
Drug Delivery System preparations.
The principal excipients used in SECRET formulations are highly
biocompatible and acceptable to the FDA. SECRET formulated water-insoluble drugs
offer the following benefour: (i) lower toxicity formulations; (ii) controlled
absorption with resultant reduction in peak to trough ratios; (iii) targeted
release of the drug to specific areas within the gastrointestinal tract; (iv)
absorption irrespective of the feeding state; (v) minimal potential for dose
dumping; (vi) improved oral bioavailability; (vii) enhanced
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stability; (viii) improved dissolution rate; (ix) less irritation; (x)
bioadhesive to mucous membranes for maximum penetration; (xi) high drug
payloads; and (xii) lower production cost.
DISTRIBUTION METHODS OF THE PRODUCTS AND SERVICES
We intend to have the BCD Systems used with as many pharmaceutical products
as possible. Our primary strategy is to establish collaborative relationships
with pharmaceutical and biotechnology companies to develop improved therapeutic
products utilizing our BCD Systems technology. The products will be jointly
developed, with the collaborative partner having primary responsibility to
clinically test, manufacture, market and sell the product, and we retaining
ownership of our technologies. We believe that our partnering strategy will
enable it to reduce our cash requirements while developing a larger potential
product portfolio. By providing new formulations of existing products using the
BCD Systems, We believes it will not only be able to offer our partners improved
products but also may provide them with the ability to extend the life of their
patents on such products, especially attractive to pharmaceutical companies
whose patents on existing products are close to expiration. Collaborations with
pharmaceutical and biotechnology companies are expected to provide near-term
revenues from sponsored development activities and future revenues from license
fees and royalties relating to the sale of products.
We have identified as potential partners six companies we believe have
drugs which can derive potential benefits utilizing the BCD Systems and have
initiated preliminary discussions with some of these companies. There can be no
assurance that any of these discussions will lead to our entering into a
development agreement with a collaborative partner or, if such agreement is
entered into, that such collaboration will lead to the successful development of
a product.
We also intend to develop over-the-counter (OTC) and/or off-patent drug
products utilizing our BCD Systems, either independently or jointly by entering
into collaborative partnerships with pharmaceutical, biotechnology or other
healthcare companies. To reduce costs and time-to-market, we intend to select
those products that treat indications with clear-cut clinical end-points and
that are reformulations of existing compounds already approved by the FDA. We
believe that products utilizing the BCD Systems will provide favorable product
differentiation in the highly competitive generic and OTC drug product markets
at costs below those of other drug delivery systems, thereby enabling We and our
collaborative partners to compete more effectively in marketing improved
off-patent and OTC drug products. We are also seeking to establish alliances
with overseas sales and marketing partners for the initial sale of our future
generic products. We believe that due to the more favorable regulatory
environments in some foreign countries, it may be able to generate revenues from
these markets while awaiting FDA approval in the United States.
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PAIN MANAGEMENT
Arthritis Overview
Arthritis is a condition in which one or more joints becomes inflamed. It
is the most common chronic condition in North America. Some forms of arthritis
(such as tendinitis and bursitis) can be cured completely but most forms are
chronic. Current treatment and therapy can only alleviate pain, relieve
stiffness and prevent the disease from progressing and deformities from
occurring. Each of these diseases has a different cause and may require
different medications and treatments.
Arthritis afflicts an estimated 10% of the world's population. With over 40
million people afflicted by the disease in North America, arthritis costs the
U.S. economy between $54.6 and $64.8 billion per year in medical, care and lost
wages .
Osteoarthritis (OA) is a degenerative joint disease in which the cartilage
that covers the ends of bones in the joint deteriorates, causing pain and loss
of movement as the bones begin to rub against each other. OA is the most common
form of arthritis. The motion of the joint becomes more limited as the disease
progresses. The joints most commonly hit by osteoarthritis are the fingers,
hips, and knees. Rheumatoid arthritis (RA) is a systemic autoimmune disorder,
characterized by inflammation of the synovial lining of the joints leading not
only to joint damage but also to systemic symptoms such as fever, anemia, lack
of energy, and loss of appetite.
NSAIDs are drugs employed for their anti-inflammatory properties. They are
heterogeneous in chemical structure and diverse in mechanisms of action, but
they share the important property of inhibiting prostaglandin (PG) biosynthesis.
Although these drugs effectively inhibit inflammation, there is no evidence that
they alter the course of an arthritic disorder.
Products under Development
We have two topical NSAID products under development:
---------------------------------------------------------------------
BRAND NAME ACTIVE INGREDIENT STATUS
---------------------------------------------------------------------
Flexigan 1.0% Diclofenac Pre-clinical
---------------------------------------------------------------------
Indoflex 2.0% Indomethacin Pre-clinical
---------------------------------------------------------------------
FLEXIGAN - Flexigan is a clear, non-smelling topical formulation of CLD,
which transports and delivers one of the most effective and widely prescribed
NSAIDs, diclofenac, through the skin eliminating the problems typically
associated with oral NSAIDs.
Flexigan does not irritate the skin when the cream is applied topically
causing Indomethaic to penetrate rapidly and deeply into the affected parts of
the body due to the CLD formulation. CLD are oil-in-water emulsions composed of
lipid phase, emulsified in
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aqueous medium with the aid of natural emulsifiers. CLD do not contain such
chemical enhancers propylene glycol, alcohol or Azone and are therefore highly
acceptable and of low irritancy.
INDOFLEX - Like Flexigan, Indoflex is a topical NSAID formulation of
indomethacin in CLD.
Controlled Release NSAIDs in Self Emulsifying Tablets
Oral NSAIDs, such as Indomethacin and Diclofenac have a pronounced
irritating action in the gastrointestinal (GI) level and stomach. Different
enteric-coated, extended-release, delayed-release, buffered capsules or tablets
or oral suspension formulations may reduce this side effect, however, they are
often in an undesirable range and costly to produce.
NSAIDs in emulsion are less irritating to the GI and also bioavailability
and absorption kinetic of active ingredient are also improved. Currently, we
have developed two oral NSAID products that utilize the SECRET drug delivery
system:
--------------------------------------------------------------------------
BRAND NAME ACTIVE INGREDIENT STATUS
--------------------------------------------------------------------------
Flexigan 25 & 50 mg Diclofenac Research & development
--------------------------------------------------------------------------
Indoflex 25 & 50 mg Indomethacin Pre-clinical
--------------------------------------------------------------------------
Flexigan ER 100 mg Diclofenac Research & development
--------------------------------------------------------------------------
Indoflex ER 50 mg Indomethacin Pre-clinical
--------------------------------------------------------------------------
ORAL CARE MANAGEMENT
Overview
The worldwide oral care market is estimated to exceed $7.0 billion in
annual retail sales. Annual oral care sales in North America are estimated to be
$2.8 billion in 1999 and are projected to reach $3.0 billion by the year 2000.
It is estimated that the oral care products will grow at an annual rate of 10%
internationally for the next 10 years with the highest growth rate in developing
countries such as China.
We intend to be a provider of proprietary oral care products to
international consumers using a scientific approach that will significantly
reduce the long-term costs of dental care. We are focused on developing and
marketing proprietary oral care products to treat the cause of tooth decay and
gum disease. We seek to establish distinctive brand identity emphasizing the
enhanced therapeutic benefits of our oral care products, which will be
communicated to both consumers and dental professionals.
Traditional dentistry is shifting away from treating symptoms (i.e.
drilling and filling cavities) and moving towards taking preventive action to
treat the cause of tooth decay and gum disease. This shift is caused by mounting
scientific evidence that tooth
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decay and gum disease are medical conditions caused by chronic low-grade
bacterial infections that can be prevented and treated with antimicrobial agents
such as Chlorhexidine and Fluoride.
Secondly, in response to rising costs and decreasing access to dental
treatments, consumers' interest in self-diagnosis and preventive treatment have
grown dramatically. Additionally, consumers are becoming increasingly aware of
the importance of oral hygiene. Consumers are looking for value and product
innovation that emphases therapeutic values.
We are focused on developing and marketing therapeutic oral care products
based on proprietary formulations and technologies. Our products treat the
bacterial infections that cause tooth decay and gingivitis. Through scientific
studies it has been shown that our formulations stop the demineralization of
tooth enamel.
We believe that the effectiveness of oral care products depend on how long
our active agents stay in the mouth. Most of the commercially available oral
care formulations have suffered from a number of drawbacks, including lack of
suitability of the carrier for our intended use. Most of these known
formulations suffer an inability to carry a large amount of the active agent and
to ensure a controlled and prolonged release thereof at the desired site. This
inability is particularly undesirable, since most biologically active agents
must remain at the desired site for a prolonged period in order to be effective.
Our oral care products are based on the active ingredients chlorhexidine
and sodium fluoride in proprietary formulations that effectively control the
release of chlorhexidine in the oral cavity over an extended period of time to
provide a sustained antimicrobial activity against tooth "demineralization"
(whereby sodium fluoride induces the uptake of minerals, such as calcium and
phosphate), which enhances tooth "remineralization".
Role of Bacteria in Dental Pathology
Although there are many origins for the conditions commonly treated by
dentists (ranging from tumors of the oral cavity to trauma induced tooth
injuries), a common feature of the two major dental diseases is the role played
by bacteria. In particular it is well established that tooth decay and most gum
diseases result from bacterial infections.
Tooth decay, or caries, refers to a hole or cavity in the surface of the
tooth. Depending on the length of time from our inception, the hole may
penetrate only the top surface of the tooth (the enamel) or may penetrate past
the dentin (the bone-like material which is the main constituent of the tooth)
into the pulp. The scientific literature has established quite clearly that one
species of bacteria, STREPTOCOCCUS MUTANS (S. MUTANS - actually a group of seven
closely related bacteria) is responsible for the onset of tooth decay. This
bacterium grows on the surface of the teeth in almost all individuals. In the
presence of sugars and starches in the diet, S. MUTANS metabolizes the
carbohydrate and
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produces acids. Acids demineralize the calcium phosphates that are the major
mineral constituent of tooth enamel and the decay process begins. Our
proprietary oral care products, kill S. MUTANS to prevent further cavities. The
evidence for the primary role of S. MUTANS in tooth decay is manifold, including
the following: significant correlation between S. MUTANS counts in saliva and
plaque and the incidence of caries.(i) the correlation of S. MUTANS counts and
the progression of tooth decay; (ii) S. MUTANS can be isolated from the tooth
surface before initiation of a cavity; (iii) infection of experimental animals
with S. MUTANS procedures high incidence of caries; (iv) immunization of
experimental animals with S. MUTANS significantly reduces the incidence of
caries; (v) S. MUTANS produces copious amounts of extracellular polysaccharide,
a key component of plaque;(vi) S. MUTANS metabolism of sucrose rapidly produces
an organic acid which demineralizes tooth enamel.
Due to the aging of the population, gum disease is becoming a more
prevalent disease than tooth decay. It is characterized by the pulling away of
the gums from the teeth due to the presence of plaque on the surface of the
teeth. Plaque is a mixture of bacteria, bacterial products and saliva which is
the medium in which bacteria grow. It is believed that bacterial metabolic
products in plaque are toxic to the cells of the gum tissue (gingiva) leading to
inflammation (gingivitis or the more severe periodontitis) and the receding of
the gum tissue from the teeth. If left untreated, the supporting tissue of the
gums becomes so loose that the teeth are lost.
Chlorhexidine in Dentistry and Oral Health
The bisbiguanide chlorhexidine (CHX) was first described more than 40 years
ago and is the most thoroughly studied antimicrobial substance used orally. CHX
is bactericidal against gram-positive and gram-negative bacteria and yeasts.
The antibacterial activity of CHX is associated with the absorption by the
bacteria. At neutral pH, the positively charged CHX molecule is absorbed on the
surface of the bacteria, where it reacts with negatively charged membrane
components. Under acid conditions the absorption decreases, resulting in a
reduced antibacterial effect. At low concentrations CHX causes disorganisation
of the cytoplasmic membrane, making the bacteria permeable to the drug which
inhibour essential metabolic events. At higher concentrations CHX coagulates
cytoplasmic constituents and prevents the bacterial cells from recovering.
Compared with other substances, CHX shows our special effectiveness in the
fact that plaque is considerably reduced, the development of caries and
gingivitis is interrupted, effects that certainly are related to our high
substantively. CHX is absorbed in sub-MIC concentrations for a few hours on the
outer surface of the teeth, as well as the oral mucous membrane and is slowly
released. Therefore the metabolism of the bacteria is effected. In vivo studies
show that acid production in the plaque is inhibited for extended periods of
time and the growth rate of bacteria reduced.
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In patients with high caries activity and high counts of mutans
streptococci, CHX is employed as an adjunct to other preventive measures.
Combinations of chlorhexidine with fluoride is also possible. The best clinical
effect, resulting in a considerable caries reduction, has been obtained when
persons highly colonized with mutans streptococci have been treated with gels
and when the results of the antimicrobial measures have been verified by
microbiological examination. Sustained release devices, like varnishes, reduce
the numbers of mutans streptococci in a patient's mouth to levels below
detection for long periods.
Older persons are at an increased risk of root caries since they may be
impaired, take multiple medications or have partials. Treatment strategies
should include antimicrobial agents for both the remineralization of early
lesions and prevention of further root caries. In periodontal treatment, CHX is
used for post-operative rinsings and as an adjunct to oral hygiene and
mechanical debridement. This means that CHX has a significant inhibitory effect
on gingivitis, but that it cannot dissolve already formed plaque.
People who have been treated with chemotherapy and radiotherapy for
neoplasms in the head and neck regions are more vulnerable to dental diseases.
In the long term, however, periodontal diseases and caries can be controlled
with appropriate use of CHX and fluoride.
Scientific and clinical studies have shown that children treated with CHX
had 50% less caries. In those children with high counts of S. MUTANS, the
incidence of caries was reduced by 80%. The treatment of first-time mothers with
CHX reduced the S. MUTANS level and incidence of caries in their children (It is
well established that young children pick up S. MUTANS from their parents).
Description of Products
We have the following products to treat the bacterial infections that cause
tooth decay and gingivitis:
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PRODUCT DESCRIPTION ACTIVE INGREDIENT(S)
--------------------------------------------------------------------
ChlorSM Mouth Rinse Chlohexidine w/NaF
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ChlorSM Toothpaste Chlorhexidine w/MFP
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ChlorSM colloidal mouth rinse
ChlorSM colloidal mouth rinse is a proprietary sustained release
formulation of chlorhexidine available by prescription in North America. ChlorSM
colloidal mouth rinse is an advanced mouth rinse formulation based on BCD, a
proprietary lipid based drug delivery technology which is highly mucoahesive and
capable of carrying a high load of active agents. BCD effectively controls the
release of Chlorhexidine in oral cavity over an extended period of time to
provide an effective and sustained protection.
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SME (Sub Micron Emulsion) colloidal toothpaste and mouth rinse
ChlorSM SME toothpaste is aproprietary controlled release therapeutic
toothpaste based on the BCD drug delivery system. The active agents in the SME
toothpaste are Chlorhexidine and Fluoride; it has been proven clinically that
the combination of the two active agents has a positive synergetic effect. The
SME toothpaste will inhibit demineralization of tooth enamel and provide cavity
prevention and pain relieving properties for individuals with exposed dentin
caused by receding gums. We, utilizing the BCD formulation, have successfully
retained the antimicrobial property of the active agent Chlorhexidine in
toothpaste form under a stable and controlled release environment. We believe
that there is no Chlorhexidine toothpaste commercially available in North
America.
NUTRACEUTICALS
The total United States retail market for nutritional supplements is highly
fragmented and historically has grown rapidly, generating $12 billion in 1998
sales, as compared to $5.0 billion in 1994. AlphaRx believes that this growth
was due to a number of factors, including: (i) increased interest in healthier
lifestyles; (ii) the publication of research findings supporting the positive
health effects of certain nutritional supplements; and (iii) the aging of the
"Baby Boomer" generation combined with the tendency of consumers to purchase
more nutritional supplements as they age.
Various publicly traded nutritional supplement companies have recently
announced, however, that there appears to be a slow-down in sales of nutritional
supplements. We believe that this slow-down may be the result of, among other
things, the lack of any recent industry-wide "hit" products such as St. John's
Wort. Our controlled-release drug delivery technologies can provide patent
protection for a nutritional product that has not been patented or for which the
patent is expiring or has expired. Patented methods of controlled drug delivery
may extend product life and provide a nutritional supplement manufacturer with a
competitive advantage over regular products delivered by conventional means. The
controlled delivery of certain nutritional products can also result in the
approval of new therapeutic indications, thereby expanding the utility of and
the market for those products.
Our enabling technology offers the following benefits:
1. Broad Application to Health Maintenance Regiments. We believe that our
enabling technology is applicable to a broad range of specialized health
maintenance products designed to address popular health issues such as elevated
LDL cholesterol, obesity, menopause and anti-aging.
2. Low Risk of Adverse Side Effects. Our nutraceutical products are
designed to be highly bioavailable, non-toxic and well tolerated.
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3. Convenient Oral Dosage Form. Our nutraceutical products are designed to
be potent at low dosage levels, thereby permitting oral administration either in
a convenient capsule or tablet form or transdermal administration in a lotion or
cream form.
Core Product Descriptions
LipoLette is a dual weight loss system, controlled release natural
supplement that promotes weight control through: (i) suppressing appetite; (ii)
blocking the fat absorption; and (iii) stimulating thermogenesis. LipoLette
contains certain hydrophobic active ingredients which are clinically proven to
be safe and non-toxic. We believe that our BCD drug delivery technologies may
enhance the bioavailability of these active ingredients significantly.
LipoBloc is a controlled release formulation of hydrophobic phytosterols.
Phytosterols have been clinically proven to inhibit cholesterol absorption in
the GI Tract and lower LDL in serum levels. The therapeutic usage of
phytosterols has been limited because of its poor solubility in water as well as
in oil. The suggested therapeutic dosages are 2.5-5.0 grams per day for a 15-20%
reduction in serum cholesterol levels. The latest clinical studies have
indicated that the same or even significantly better reduction could be achieved
with smaller dosages such as 100 - 300 mg per day using oil solubilized form of
phytosterols. In one clinical study 300 mg phytosterols formulation with 29%
maximum water solubility within 180 minutes demonstrated 38% reduction in serum
cholesterol levels. In vitro, LipoBloc with 100 mg phyosterols demonstrated 100%
solubility in water in 60 minutes using USP 24 (711) dissolution methodology. We
believe that LipoBloc is the most bioavailable phytosterol formulation in the
market, we also believe that LipoBloc may have a positive effect in
atherosclerotic plaque regression.
Q10 ER is a controlled release formulation of CoEnzyme Q10 and Vitamin E
which are clinically proven to promote cardiovascular health. We believe that
our Q10 ER has better bioavailability than other commercially available CoEnzyme
Q10 products because of its superior water solubility.
IMMUNOMODULATORS
Human immune systems are designed to protect the body from assault by
parasites. These pathogens include cellular virus and cellular parasites such as
bacteria, mycoplasms, fungi, unicellular protozoa and multicellular protozoa.
The immune system also defends the organism against cancerous cells.
Immunomodulators offer a powerful tool for the control of infectious
diseases. These chemicals modulate (stimulate or suppress) the immune system in
a non-specific manner. Stimulation of immunity is also important in the host's
defense against cancer. The latter occurs, for example, upon activation of
tumoricidal macrophages in response to immunomodulators. Immunomodulators may
also be used in the treatment of diseases
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caused by immune system disorders such as arthritis. They may also be used in
the treatment of individuals with a compromised immune system in order to
enhance their immune response. This group of patients includes surgery patients,
burn victims, patients undergoing radiotherapy or chemotherapy and patients with
immune disorders such as AIDS.
Unfortunately, most of the marketed immunomodulators show non-reproducible
and ambiguous results. Peptide and protein molecules (interferons, interleukins,
antibodies and vaccines) are very expensive and demonstrate many undesirable
side effects and uncertain activities. Accordingly, there is a need to develop
new immunomodulators which have significant immunomodulating activity, are
readily accessible, and possess less toxicity than the marketed agents.
Our newly discovered compounds possessed high stimulation properties for
immune system (either in normal or in depressed state). Preliminary
investigations showed low toxicity, fast onset of action and very high response
of immune system. Additionally, some of the investigated compounds demonstrated
prominent anti-inflammatory activity in different models.
COMPETITION
There are other companies that have oral drug delivery technologies that
compete with the BCD Systems. The competitors have oral tablet products designed
to release the incorporated drugs over time. Each of these companies has a
patented technology with attributes different from those of ours, and in some
cases with different sites of delivery to the GI tract. We believe that we are
the only drug delivery company that is currently using polymeric based colloidal
dispersion controlled release technologies to develop products for oral and
transdermal drug delivery systems for enhanced solubility and bioavailability of
poorly water soluble drugs. We believe that this combination of oral and
transdermal drug delivery technologies differentiates us from other oral drug
delivery companies and will enable us to attract pharmaceutical companies to
incorporate their proprietary drugs into the BCD Systems and also to
differentiate any OTC and/or off-patent drugs that utilize the BCD Systems from
those of other drug delivery companies.
Competition in the areas of pharmaceutical products and drug delivery
systems is intense and is expected to become more intense in the future.
Competing technologies may prove superior, either generally or in particular
market segments, in terms of factors such as cost, consumer satisfaction or drug
delivery profile. Our principal competitors in the business of developing and
applying drug delivery systems all have substantially greater financial,
technological, marketing, personnel and research and development resources than
us. In addition, we may face competition from pharmaceutical and biotechnology
companies that may develop or acquire drug delivery technologies. Many of our
potential collaborative partners have devoted and are continuing to devote
significant resources in the development of their own drug delivery systems and
technologies. Products incorporating our technologies will compete both with
products employing advanced drug delivery systems and with products in
conventional dosage
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forms. New drugs or future developments in alternate drug delivery technologies
may provide therapeutic or cost advantages over any potential products which
utilize the BCD Systems. There can be no assurance that developments by others
will not render any potential products utilizing the BCD Systems noncompetitive
or obsolete. In addition, our competitive success will depend heavily on
entering into collaborative relationships on reasonable commercial terms,
commercial development of products incorporating the BCD Systems, regulatory
approvals, protection of intellectual property and market acceptance of such
products.
PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS
It is our policy to file patent applications in the United States and
foreign jurisdictions. We currently have one issued United States patent and
three United States patent pending applications and have applied for patents in
two foreign countries which are still pending. No assurance can be given that
our patent applications will be approved or that any issued patents will provide
competitive advantages for the BCD Drug Delivery Systems or our technologies or
will not be challenged or circumvented by competitors. With respect to any
patents which may issue from our applications, there can be no assurance that
claims allowed will be sufficient to protect our technologies. Patent
applications in the United States are maintained in secrecy until a patent
issues, and we cannot be certain that others have not filed patent applications
for technology covered by our pending applications or that we were the first to
file patent applications for such technology. Competitors may have filed
applications for, or may have received patents and may obtain additional patents
and proprietary rights relating to, compounds or processes that may block our
patent rights or compete without infringing our patent rights. In addition,
there can be no assurance that any patents issued to us will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
proprietary protection or commercial advantage to us.
We also relies on trade secrets and proprietary know-how which it seeks to
protect, in part, through confidentiality agreements with employees,
consultants, collaborative partners and others. There can be no assurance that
these agreements will not be breached, that we will have adequate remedies for
any such breach or that our trade secrets will not otherwise become known or be
independently developed by competitors. Although potential collaborative
partners, research partners and consultants are not given access to our
proprietary trade secrets and know-how until they have executed confidentiality
agreements, these agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.
Trademarks
We have filed applications in the United States and China Patent and
Trademark Office to register the word mark "ChlorSM" and "Oralife" for oral care
products, such as medicated mouth rinse, professional dental gels and varnish.
We also registered the following trademarks, "Alpha-Source" and "AlphaRx" in
Canada and "AlphaRx",
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"LipoLette", "LipoBloc" and "PhytoScience" in the United States for
nutraceutical products. In connection with our Internet web site, we have
registered with Network Solutions, Inc., the internet domain name "AlphaRx.com."
and "LTII.com" for our corporate website.
Proprietary Information
Much of our technology is dependent upon the knowledge, experience and
skills of key scientific and technical personnel. To protect the rights to our
proprietary technology, our policy requires all employees and consultants to
execute confidentiality agreements that prohibit the disclosure of confidential
information to anyone outside AlphaRx. These agreements also require disclosure
and assignment to AlphaRx of discoveries and inventions made by such persons
while devoted to Company activities.
MANUFACTURING, MARKETING AND SALES
We do not have and do not intend to establish in the foreseeable future
internal manufacturing capabilities. Rather, we intend to use the facilities of
our collaborative partners or those of contract manufacturers to manufacture
products using the BCD Systems. Our dependence on third parties for the
manufacture of products using the BCD Systems may adversely affect our ability
to develop and deliver such products on a timely and competitive basis. There
may not be sufficient manufacturing capacity available to us when, if ever, it
is ready to seek commercial sales of products using the BCD Systems. In
addition, we expect to rely on our collaborative partners or to develop
distributor arrangements to market and sell products using the BCD Systems. We
may not be able to enter into manufacturing, marketing or sales agreements on
reasonable commercial terms, or at all, with third parties. Failure to do so
would have a material adverse effect on us.
Applicable cGMP requirements and other rules and regulations prescribed by
foreign regulatory authorities will apply to the manufacture of products using
the BCD Systems. We will depend on the manufacturers of products using the BCD
Systems to comply with cGMP and applicable foreign standards. Any failure by a
manufacturer of products using the BCD Systems to maintain cGMP or comply with
applicable foreign standards could delay or prevent their commercial sale. This
could have a material adverse effect on us.
GOVERNMENT REGULATION
We are subject to regulation under various federal laws regarding
pharmaceutical products and also various federal and state laws regarding, among
other things, occupational safety, environmental protection, hazardous substance
control and product advertising and promotion. In connection with our research
and development activities, AlphaRx is subject to federal, state and local laws,
rules, regulations and policies governing the use, generation, manufacture,
storage, air emission, effluent discharge, handling and disposal of certain
materials and wastes. We believe that we have complied
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with these laws and regulations in all material respects and we have not been
required to take any action to correct any material noncompliance.
FDA Approval Process. In the United States, pharmaceutical products,
including any drugs utilizing the BCD Drug Delivery Systems, are subject to
rigorous regulation by the FDA. If a company fails to comply with applicable
requirements, it may be subject to administrative or judicially imposed
sanctions such as civil penalties, criminal prosecution of We or our officers
and employees, injunctions, product seizure or detention, product recalls, total
or partial suspension of production, FDA withdrawal of approved applications or
FDA refusal to approve pending new drug applications, premarket approval
applications, or supplements to approved applications.
Prior to commencement of clinical studies involving human beings,
preclinical testing of new pharmaceutical products is generally conducted on
animals in the laboratory to evaluate the potential efficacy and the safety of
the product. The results of these studies are submitted to the FDA as a part of
an IND application, which must become effective before clinical testing in
humans can begin. Typically, clinical evaluation involves a time consuming and
costly three-phase process. In Phase I, clinical trials are conducted with a
small number of subjects to determine the early safety profile and the
pharmacokinetic pattern of a drug. In Phase II, clinical trials are conducted
with groups of patients afflicted with a specific disease in order to determine
preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase
III, large-scale, multi-center, comparative trials are conducted with patients
afflicted with a target disease in order to provide enough data to demonstrate
the efficacy and safety required by the FDA. The FDA closely monitors the
progress of each of the three phases of clinical testing and may, at our
discretion, re-evaluate, alter, suspend or terminate the testing based upon the
data which have been accumulated to that point and our assessment of the
risk/benefit ratio to the patient.
The results of the preclinical and clinical testing on drugs are submitted
to the FDA in the form of an NDA for approval prior to commencement of
commercial sales. In responding to an NDA, the FDA may grant marketing approval,
request additional information or deny the application if the FDA determines
that the application does not satisfy our regulatory approval criteria. There
can be no assurance that approvals will be granted on a timely basis, if at all.
Failure to receive approval for any products utilizing the BCD Drug Delivery
Systems could have a material adverse effect on us.
OTC products that comply with monographs issued by the FDA are subject to
various FDA regulations such as cGMP requirements, general and specific OTC
labeling requirements (including warning statements), the restriction against
advertising for conditions other than those stated in product labeling, and the
requirement that in addition to approved active ingredients OTC drugs contain
only safe and suitable inactive ingredients. OTC products and manufacturing
facilities are subject to FDA inspection, and failure to comply with applicable
regulatory requirements may lead to administrative or judicially imposed
penalties. If an OTC product differs from the terms of a
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monograph, it will, in most cases, require FDA approval of an NDA for the
product to be marketed.
Other Regulations. Even if required FDA approval has been obtained with
respect to a product, foreign regulatory approval of a product must also be
obtained prior to marketing the product internationally. Foreign approval
procedures vary from country to country and the time required for approval may
delay or prevent marketing. In certain instances we or our collaborative
partners may seek approval to market and sell certain of our products outside of
the U.S. before submitting an application for U.S. approval to the FDA. The
regulatory procedures for approval of new pharmaceutical products vary
significantly among foreign countries. The clinical testing requirements and the
time required to obtain foreign regulatory approvals may differ from that
required for FDA approval. Although there is now a centralized EU approval
mechanism in place, each EU country may nonetheless impose our own procedures
and requirements, many of which are time consuming and expensive, and some EU
countries require price approval as part of the regulatory process. Thus, there
can be substantial delays in obtaining required approval from both the FDA and
foreign regulatory authorities after the relevant applications are filed, and
approval in any single country may not be a meaningful indication that the
product will thereafter be approved in another country.
RESEARCH AND DEVELOPMENT
We conduct our research and development activities through collaborative
arrangements with universities, contract research organizations and independent
consultants. We are also dependent upon third parties to conduct clinical
studies, obtain FDA and other regulatory approvals and manufacture and market a
finished product.
We anticipate incurring significant development expenditures in the future
as we continue our efforts to develop our present technologies and new
formulations and as we begin to research other technologies and to expand
clinical studies of certain products. We plan to establish laboratory facilities
to conduct research and development and manufacture of batch forms for clinical
evaluations.
PRODUCT LIABILITY
Our business involves exposure to potential product liability risks that
are inherent in the production and manufacture of pharmaceutical products. Any
such claims could have a material adverse effect on us. We do not currently have
any product liability insurance. Although we will apply for product liability
insurance when it deems it appropriate, there can be no assurance that:
o we will be able to obtain or maintain product liability insurance on
acceptable terms;
o we will be able to secure increased coverage as the commercialization of
the BCD Systems proceeds; or
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o any insurance will provide adequate protection against potential
liabilities.
EMPLOYEES
As of September 30, 2000, we employed 4 people on a full-time basis and one
person on a part-time basis. None of our employees is represented by a
collective bargaining agreement, nor have we experienced any work stoppage. We
believe that our relations with our employees are excellent.
Item 2. Properties
At September 30, 2000, we leased approximately 1,100 square feet in
Richmond Hill, Ontario, under a lease which expires on November 30, 2001. We
believe that our existing properties are sufficient for our administrative,
research and development needs for the foreseeable future.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 2000, whether through
solicitation of proxies or otherwise.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Our Common Stock commenced trading on the OTC Pink Sheets under the symbol
"AHRX" on July 25, 2000. On October 12, 2000, our Common Stock ceased trading on
the OTC Pink Sheets and began trading on the OTC Bulletin Board under the same
symbol. The following table sets forth, for the periods indicated, the high and
low closing prices of our Common Stock as reported by the OTC Pink Sheets from
July 25, 2000 and by the OTC Bulletin Board from October 12, 2000.
YEAR ENDING SEPTEMBER 30, 2000 HIGH LOW
------------------------------ ----- ---
4th Quarter (From July 25, 2000) $1.25 $1.15
Records of our stock transfer agent indicate that as of September 30, 2000,
there were approximately 50 record holders of our common stock. We have not paid
any cash dividends to date and do not anticipate or contemplate paying cash
dividends in the foreseeable future. We plan to retain any earnings for use in
the operation of our business and to fund future growth.
RECENT SALES OF UNREGISTERED SECURITIES
In October 15, 1999, we issued an aggregate of 315,333 shares of Common
Stock to existing shareholders for a total purchase price of $31,533. The
proceeds were used for working capital.
In December 31, 1999, we issued an aggregate of 170,000 shares of Common
Stock for a total purchase price of $85,000. The proceeds were used for working
capital.
In June 30, 2000, we issued an aggregate of 196,000 shares of Common Stock
for a total purchase price of $196,000. The proceeds were used for working
capital.
No underwriting commissions or discounts were paid with respect to the
sales of the unregistered securities described above. The above sales were made
to accredited investors in reliance on Rule 506 of Regulation D and Section 4(2)
under the Securities Act and to persons outside the United States within the
meaning of Regulation S of the Securities Act.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes included in Item 8 of this report. Except for
the historical information contained herein the foregoing discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those projected in the forward-looking
statements discussed herein.
General
We are a development stage company engaged in the development of new and
proprietary drug delivery products. We have developed two types of drug delivery
systems, the Colloidal Lipid Dispersion System (the "CLD System") and the Self
Emulsifying Controlled Release Tablet System (the "SECRET System" and together,
the "BCD Systems"). The CLD System is designed to deliver drugs through the skin
in order to reduce the gastrointestinal irritation that is a side effect of many
orally administered drugs, and the SECRET System is designed to provide
continuous, controlled delivery of an incorporated drug. In addition, the BCD
Systems are designed to improve the bioavailability of poorly water-soluble
drugs.
Since our inception in August 1997, we have devoted substantially all our
efforts to research and development conducted on our own behalf with the BCD
Drug Delivery Systems. Our primary activities since inception (August 7, 1997)
have been, in addition to research and development, establishing our offices and
research facilities, recruiting personnel, filing patent applications,
developing a business strategy and raising capital.
We have experienced significant operating losses since our inception, and
expect to incur substantial and continuing losses for the foreseeable future. We
incurred a net loss of approximately $278,804 for the year ended September 30,
2000, resulting in an accumulated deficit of approximately $1,286,653. To date,
we have received only limited revenue, all of which has been from interest
earned from invested funds.
We intend to continue investing in the further development of our drug
delivery technologies and to actively seek collaborators and licensees to
accelerate the development and commercialization of products incorporating our
BCD Drug Delivery Systems. Depending upon a variety of factors, including
collaborative arrangements, available personnel and financial resources, we will
conduct or fund clinical trials on such products and will undertake the
associated regulatory activities. We will need to make additional capital
investments in laboratories and related facilities, including the purchase of
laboratory and pilot scale manufacturing equipment. As additional personnel are
hired in 2001 and beyond, expenses can be expected to increase from their 2000
levels.
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Results of Operations
Year ended September 30, 2000 compared to year ended September 30, 1999
Losses for 2000 were $278,804, which is $518,313 less than the losses for
the fiscal year ended September 30, 1999. This decrease is due to lower R&D
costs.
Research and development expenses have decreased by nearly 707% to $74,990.
Our expenses consist of legal and professional fees for preparation of patent
applications and laboratory service & supply expenses.
General and administrative expenses in 2000 were $205,182 compared to
$270,153 for the same period last year. The decrease was due to decreased
professional fees.
Liquidity and Capital Resources
Since inception, we have financed operations principally from the sale of
Common Stock and expect to continue this practice to fund our ongoing
activities.
We currently do not have sufficient resources to complete the
commercialization of any of our proposed products or to carry out our business
strategy. Therefore, we will likely need to raise substantial additional capital
to fund our operations sometime in the future. We cannot be certain that any
financing will be available when needed. Any additional equity financings may be
dilutive to our existing shareholders, and debt financing, if available, may
involve restrictive covenants on our business.
We expect to continue to spend capital on:
1. research and development programs;
2. preclinical studies and clinical trials;
3. regulatory processes; and
4. establishment of our own pilot scale manufacturing and marketing
capabilities or a search for third party manufacturers and marketing partners to
manufacture and market our products for us.
The amount of capital we may need will depend on many factors, including:
1. the progress, timing and scope of our research and development programs;
2. the progress, timing and scope of our preclinical studies and clinical
trials;
3. the time and cost necessary to obtain regulatory approvals;
4. the time and cost necessary to establish our own sales and marketing
capabilities or to seek marketing partners to market our products for us;
5. the time and cost necessary to respond to technological and market
developments; and
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6. new collaborative, licensing and other commercial relationships that we
may establish.
The inability to raise capital would have a material adverse effect on the
Company.
We currently have no capital commitments other than the payment of rent on
our facilities lease.
Impact of Year 2000
Year 2000 ("Y2K") exposure was the result of some computer programs using
two instead of four digits to represent the year. Computer programs may have
erroneously interpreted dates beyond the year 1999 causing system failures or
other computer errors, possibly leading to disruptions in operations.
In response to this potentiality, we developed and implemented a program to
eliminate Y2K exposures. Computer systems and applications were reviewed for Y2K
compliance, remedied as necessary and tested. Third-party relationships were
reviewed and monitored for Y2K compliance. We developed a contingency plan to
stockpile materials from any vendors that did not meet Y2K compliance by
year-end; however, we were sufficiently confident in our preparation, and in our
vendors', that we did not implement our contingency plan. We have not
experienced any system failures, errors or disruptions in our operations due to
Y2K and we do not expect any in the future.
Certain Factors that may Affect Future Results
AlphaRx is a development stage company. Certain of the information
contained in this document constitutes "forward-looking statements", including
but not limited to those with respect to the future revenues, our development
strategy, involve known and unknown risks, uncertainties, and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the risks and uncertainties associated with a drug delivery company which has
not commercialized our first product, including a history of net losses,
unproven technology, lack of manufacturing experience, current and potential
competitors with significant technical and marketing resources, need for future
capital and dependence on collaborative partners and on key personnel.
Additionally, we are subject to the risks and uncertainties associated with all
drug delivery companies, including compliance with government regulations and
the possibility of patent infringement litigation, as well as those factors
disclosed in our documents filed from time to time with the United States
Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Item 7 are set
forth below on pages F-1 through F-11.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of March 7, 2000, the name, age, and
position of each of our executive officers and directors:
NAME AGE POSITION
---- --- --------
Michael M. Lee 37 Chairman of the Board,
President & Director
Sai Ming Wong, MD 59 Executive Vice President & Director
Tin Pui Lo 56 Chief Financial Officer
Joseph Schwarz, Ph.D 46 Chief Scientist & Director
Michael Weisspapir, MD, Ph.D 43 Chief Medical Officer
Sandro Persia 31 Secretary/Treasurer and Director
Michael M. Lee, Mr. Lee is a founder of the Company. Mr. Lee has over 15
years of business experience in the areas of high tech development, marketing
and corporate finance. In 1984, he co-founded Logic Tech Corp. in Toronto,
Canada where he co-developed LogicDent Dental Practice Management Software and
served as Logic Tech Corp's Executive Vice President and Director until 1991.
From 1992 to 1995, Mr. Lee was a Vice President, Pacific Region of GeoFin
Partners LLC, a US merchant banking company engaged in project finance and funds
management. From 1995 to 1996, Mr. Lee served as banking consultant for 2
international commercial banks based in Asia. Mr. Lee holds a B.Sc. in Applied
Mathematics from the University of Western Ontario.
Sai Ming Wong, M.D., Dr. Wong practiced medical research in China from 1965
to 1980. Dr Wong was the chief surgeon of the medical unit that provided medical
and research services for the first China atomic testing. Dr. Wong served as the
Director of Product Development at the China Academy of Medical Sciences from
1970 to 1980, where he was the leader of a research team which specialized in
the development of drug formulations. From 1980 - 1992, Dr. Wong served as
General Manager of China National Light Industries Corp., a China state owned
company based in Hong Kong, where Dr. Wong was responsible for the daily
operation of the company. Dr. Wong earned his degree in Medicine from the
Beijing Capital University of Medical Sciences.
25
<PAGE>
Tin Pui Lo, Mr. Lo is the Chief Financial Officer of the Company. Mr. Lo
has extensive experience in financial resources management. He worked as an
executive officer in various departments in the Hong Kong Government from 1971
to 1994. His main tasks included preparation of departmental budgets and control
of expenditure of the department as well as of individual building projects. Mr.
Lo was a graduate of the Queen's College.
Joseph Schwarz, Ph.D. Dr. Schwarz is the chief scientist of the Company.
Dr. Schwarz has extensive experience in the research and development of
controlled release drug delivery systems, his areas of expertise cover
controlled delivery of drugs, targeted drug delivery, biodegradable
nanoparticles and nanocapsules, colloidal and microcorpusculate drug delivery
systems, submicron emulsions (SME), transdermal delivery (topical and systemic),
transdermal patches preformulation and technology development. Dr. Schwarz was
the recipient of the Young Scientist Award in 1977 and 1978 and the Institute
Award in 1979, both from the Academy of Science, Moscow and the Institute award
in 1986 from the Biotechnology Institute of Moscow. Dr. Schwarz has published
more than 40 articles in various scientific journals and has written over 20
patents and patent applications. Dr. Schwarz was the senior scientist at Pharmos
Corp., a publicly traded U.S. Pharmaceuticals, prior to joining the Company.
Michael Weisspapir, M.D., Ph.D. Dr. Weisspapir has 19 years of successful
experience in experimental medicine and extensive experience in
interdisciplinary research and development in experimental pharmacology,
immunopharmacology, toxicology and neuroscience. Dr. Weisspapir was a professor
at the Faculty of Medicine at Chelyabinsk State Medical Institute where he
taught courses in pharmacology, toxicology and clinical chemistry. Prior to
joining the Company, Dr. Weisspapir held a variety of research positions at the
University of Tel Aviv and Rabin Medical Center, Israel and the University
Health Network, University of Toronto, Canada. Dr. Weisspapir received a Ph.D.
in Pharmacology, Internship in Pediatrics and degree in Medicine from the
Chelyabinsk State Medical Institute in Russia.
Sandro Persia, Mr. Persia joined Logic Tech Corp. in 1989 as Marketing
Manager and promoted to Vice President in 1996. Mr. Persia has extensive
business experience in high tech marketing and sales. Mr. Persia holds a diploma
in business administration from the Seneca College.
All directors will hold office until the next annual stockholder's meeting
and until their successors have been elected or qualified or until their death,
resignation, retirement, removal, or disqualification. Vacancies on the board
will be filled by a majority vote of the remaining directors. Officers of the
Company serve at the discretion of the Board of Directors.
No director, officer, significant employee or consultant has been convicted
in a criminal proceeding, exclusive of traffic violations.
26
<PAGE>
No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise limited from
involvement in any type of business, securities or banking activities.
No director, officer, significant employee or consultant has been convicted
of violating a federal or state securities or commodities law.
ITEM 10. EXECUTIVE COMPENSATION
No compensation has been paid to any officer prior to September 30, 2000.
Employment Agreements
The Company has entered into an employment agreement with Michael M. Lee on
July 1, 2000, pursuant to which Mr. Lee is employed as President. The agreement
provides that Mr. Lee will devote all of his business time to the Company in
consideration of an annual salary of $24,000 for the period July 1, 2000 to
December 31, 2000, and $36,000 for the period ending June 30, 2003. In addition.
Pursuant to the employment agreement, Mr. Lee was granted a ten-year option to
purchase 2,000,000 shares of Common Stock at an exercise price equal to $1.00
per share, immediately exercisable from the date of the grant, and expiring ten
years thereafter.
The Company has entered into an employment agreement with Dr. Joseph
Schwarz, pursuant to which Dr. Schwarz is employed full-time as Chief Scientist
for a term of three years commencing on July 1, 2000. Pursuant to the employment
agreement, effective as of July 1, 2000, Dr. Schwarz will devote his full time
to the Company in consideration of an annual salary of $24,000 for the period
July 1, 2000 to December 31, 2000, and $96,000 for the period ending June 30,
2003. Dr. Schwarz was granted ten-year options to purchase an aggregate
1,250,000 shares of Common Stock at an exercise price equal to $1.00 per share.
The Company has entered into an employment agreement with Dr. Michael
Weisspapir, pursuant to which Dr. Weisspapir is employed full-time as Senior
Scientist for a term of three years ending in June 30, 2003. Pursuant to the
employment agreement, Dr. Weisspapir will devote his full time to the Company in
consideration of an annual salary of $12,000 for the period ending December 31,
2000, $72,000 for the period ended June 30, 2003. Dr. Weisspapir was granted
ten-year options to purchase an aggregate 1,000,000 shares of Common Stock at an
exercise price equal to $1.00 per share.
The Company has entered into an employment agreement with Dr. Sai Ming
Wong, pursuant to which Dr. Wong is employed full-time as Executive
Vice-President for a term of three years ending in June 30, 2003. Pursuant to
the employment agreement, Dr. Wong will devote his full time to the Company in
consideration of an annual salary of $12,000 for the period ending December 31,
2000, $36,000 for the period ended June 30, 2003. Dr. Wong was granted ten-year
options to purchase an aggregate 1,500,000 shares of Common Stock at an exercise
price equal to $1.00 per share.
27
<PAGE>
The following table sets forth the individual grants of stock options made
during the fiscal year ended September 30, 2000 to each of the named executive
officers.
------------------------------------------------------- ------------------------
Name Options % of Total Granted Excrise Expiratiopn
Granted # (1) to Employees in Price (3) Date
Fiscal Year (2)
------------------------------------------------------- ------------------------
Michael M. Lee 2,000,000 34.78% $1.00 June 30, 2010
------------------------------------------------------- ------------------------
Joseph Schwarz 1,250,000 21.74% $1.00 June 30, 2010
------------------------------------------------------- ------------------------
Michael Weisspapir 1,000,000 17.39% $1.00 June 30, 2010
------------------------------------------------------- ------------------------
Sai Ming Wong 1,500,000 26.09% $1.00 June 30, 2010
------------------------------------------------------- ------------------------
(1) The options reflected in this table were all granted under the Company's
2000 Stock Option Plan (the "Plan"). The date of grant is 10 years prior to the
expiration date listed.
(2) Based on an aggregate of 5,750,000 options granted to employees of the
Company in fiscal 1999.
(3) Exercise price is the fair market value on the date of grant as determined
in accordance with the Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding exercises of
stock options during the fiscal year ended September 30, 1999 by the named
executive officers. Value of unexercised options is considered to be the
difference between exercise price and market price of $1.20 per share on
September 30, 2000. No options were exercised by the named executive officers
during fiscal 1999.
------------------------------------------------------------ -------------------
Name Number of Exercisable Value of Unexercised
Options at Fiscal In-The-Money Options
Year-End (#) at Fiscal Year-End(#)
Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------------------------------------------------------------
Michael M. Lee 500,000/1,500,000 $100,000/$300,000
--------------------------------------------------------------------------------
Joseph Schwarz 312,500/937,500 $62,500/$187,500
--------------------------------------------------------------------------------
Michael Weisspapir 250,000/750,000 $50,000/$150,000
--------------------------------------------------------------------------------
Sai Ming Wong 375,000/1,125,000 $75,000/$225,000
--------------------------------------------------------------------------------
Item 11. Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth information with respect to ownership of the
Company's securities by its officers and directors and by any person (including
any "group") who is the beneficial owner of more than 5% of the Company's Common
Stock. The total number of shares authorized is 100,000,000 shares of Common
Stock, each of
28
<PAGE>
which has a par value of $0.001. 49,388,330 shares of Common Stock have been
issued and are outstanding.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF OWNER BENEFICIAL OWNER CLASS
------------------------------------------------------------------
Michael Lee(1) (2) (3) 33,760,000 shares 68%
Anna May Lee(1) (2) 4,000,000 shares 8%
Sai Ming Wong (3)(4) 1,000,000 shares 2%
Sandro Persia(3) 100,000 shares 0.2%
Tin Pui Lo(3) 2,000 shares 0.004%
(1) Related by blood or marriage
(2) The address of Michael Lee and Anna May Lee is c/o AlphaRx, Inc., 75 East
Beaver Creek, Unit 10, Richmond Hill, Ontario, Canada, L4B-1B8
(3) Directors and/or Officers
(4) The address of Sai Ming Wong is 7805 Bayview Avenue, Apartment 510,
Thornhill, Ontario, Canada L3T 7N1
Item 12. Certain Relationships And Related Transactions
In October 15, 1999, the Company issued an aggregate of 315,333 shares
of Common Stock to existing shareholders for a total purchase price of $31,533.
The proceeds were used for working capital.
In December 31, 1999, the Company issued an aggregate of 170,000 shares of
Common Stock for a total purchase price of $85,000. The proceeds were used for
working capital.
In June 30, 2000, the Company issued an aggregate of 196,000 shares of
Common Stock for a total purchase price of $196,000. The proceeds were used for
working capital.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) EXHIBITS
The exhibits to this Report are listed on the Exhibit Index on pages xx-xx
below. A copy of any of the exhibits listed or referred to below will be
furnished at a reasonable cost, upon receipt from any such person of a written
request for any such exhibit. Such request should be sent to AlphaRx, Inc.,
10-75 East Beaver Creek, Richmond Hill, Ontario, Canada L4B 1B8: Shareholder
Information.
The following is a list of each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Annual Report on Form
10-KSB pursuant to Item 13(a):
29
<PAGE>
A. 2000 Stock Option Plan.
(b) REPORTS ON FORM 8-K
We did not file any Current Reports on Form 8-K during the year ended
September 30, 2000.
INDEX TO EXHIBITS
Exhibit Item No. Item and Description
3.1 Copy of Registrant's Articles of Incorporation (1)
3.1(a) Copy of Registrant's Certificate of Amendment to Certificate
of Incorporation
3.2 Copy of Registrant's By-Laws (1)
10.1 Copy of Stock Option Plan
10.2 Copy of Employment Agreement between Registrant and Michael
Lee
10.3 Copy of Employment Agreement between Registrant and Dr.
Joseph Schwarz
10.4 Copy of Employment Agreement between Registrant and Dr.
Michael Weisspapir
10.5 Copy of Employment Agreement between registrant and Dr. Sai
Ming Wong
(1) Filed as an exhibit with the identical exhibit no. to the company's
Registration Statement on Form 10-SB, No. 000-30813 and incorporated herein
by reference.
30
<PAGE>
ALPHARX, INC.
FINANCIAL STATEMENTS AND ACCOUNTANT'S AUDIT REPORT
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
TABLE OF CONTENTS
FINANCIAL STATEMENTS PAGE
--------------------
INDEPENDENT AUDITOR'S REPORT F-1
BALANCE SHEET F-2
LIABILITY AND SHAREHOLDERS' EQUITY F-3
STATEMENT OF OPERATIONS F-4
STATEMENT OF SHAREHOLDERS' EQUITY F-5
STATEMENT OF RETAINED DEFICITS F-6
STATEMENT OF CASH FLOWS F-7
NOTES TO FINANCIAL STATEMENTS F-8-11
SUPPLEMENTARY INFORMATION
AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION F-12
SETLLING, GENERAL AND ADMINISTRATIVE EXPENSES F-13
<PAGE>
Independent Auditor's Report
Board of Directors
ALPHARX Inc.
Markham, Ontario, Canada
We have audited the accompanying balance sheet of AlphaRx, Inc. as of
September 30, 2000 and September 30, 1999, and the related income statements,
retained deficits, and cash flows for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ALPHARX Inc. at September
30, 2000 and September 30, 1999, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Philip K. Yeung, C.P.A.
November 27, 2000
F-1
<PAGE>
ALPHARX, INC.
BALANCE SHEET
FOR THE YEARS ENDED
SEPTEMBER 30, 2000 AND 1999
ASSETS
SEPTEMBER,
-------------------
2000 1999
-------- --------
CURRENT ASSETS $ 13,943 1,562
PROPERTY, PLANT & EQUIPMENT, at cost
Less accumulated depreciation of $11,060 (note 3) 63,431 3,235
OTHER ASSETS
Investment (note 4) 46,408 46,408
-------- --------
TOTAL ASSETS $123,782 51,205
======== ========
F-2
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY FOR THE
YEARS ENDED SEPTEMBER 30, 2000 AND 1999
CURRENT LIABILITIES SEPTEMBER 30,
---------------------------
2000 1999
----------- -----------
Accounts payable and accrued liabilities $ 28,840 19,026
Loan From Shareholders 2,365
-----------
SHAREHOLDERS' EQUITY
Common Stock,common, $0.0001par value
Authorized100,000,000 shares, issues and
Outstanding 49,388,330 shares (note 5) $ 4,939 4,228
Additional paid-in capital 1,374,291 1,035,800
Deficit (1,286,653) (1,007,849)
TOTAL SHAREHOLDERS'EQUITY 92,577 32,179
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
123,782 51,205
=========== ===========
See independent auditor's report
The accompanying notes are an integral part of this statement
F-3
<PAGE>
ALPHARX, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
SEPTEMBER 30,
------------------------
2000 1999
--------- ---------
SALES $ 0 0
SELLING, GENERAL & ADMINISTRATION EXPENSES 280,172 800,842
--------- ---------
LOSS FROMOPERATION (280,172) (800,842)
OTHER INCOME
Interest Income $ 456 $ 915
Miscellaneous Income 912
---------
Gain on sale of investment 2,810
---------
1,368 3,725
LOSS BEFORE INCOME TAXES (278,804) $ 797,117)
INCOME TAX 0 0
--------- ---------
NET LOSS $(278,804) $(797,117)
=========
See independent auditor's report
The accompanying notes are an integral part of this statement
F-4
<PAGE>
ALPHARX, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 2000
COMMON STOCK Total
Additional Retained Share-
Number of Paid-in Earnings holders'
Shares Amount Capital (Deficits) Equity
--------- ------- ----------- ---------- -------
Balance at 4,082,500 $ 4,083 $ 310,945 (213,732) $ 104,296
September30, 1998
Prior Period 3,000
Adjustment (note
6)
Issuance of Stock 145,000 145 724,855 725,000
Common (note5)
Net income for (797,117) (797,117)
The year Ending
September 30, 1999
Balance at 4,227,550 $ 4,228 $1,035,800 $(1,007,849) $ 32,179
September 30, 1999
Issuances of 711,333 711 338,491 339,202
stock - Common
(note 7)
Stock Split (note 44,449,497
5)
Net loss for The (278,804) (278,804)
year ending
September 30, 2000
49,388,330 4,939 1,374,291 (1,286,653) 92,557
========== ====== ========= ========== =========
See independent auditor's report
The accompanying notes are an integral part of this statement
F-5
<PAGE>
ALPHARX, INC.
STATEMENT OF RETAINED DEFICITS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
RETAINED DEFICITS SEPTEMBER 30,
-------------
2000 1999
---- ----
As previously reported $ (213,732)
Adjustment for overstatement of
Research & Development expense
(note 6) 3,000
-----
Beginning balance,October1,1999 $(1,007,849) Oct 1,1998 $ (210,732)
Netloss for theperiod (278,804) (797,117)
----------- --------
Ending balance,
September 30, 2000 $(1,286,653) Sept 30,1999 $(1,007,849)
===========
See independent auditor's report
The accompanying notes are an integral part of this statement
F-6
<PAGE>
ALPHARX, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2000
SEPTEMBER 30,
-----------------------
2000 1999
--------- ---------
CASH FLOWSFROMOPERATING ACTIVITIES
Net Loss $(278,804) $(797,117)
Depreciation Amount 4,533 4,006
Prior Period Adjustment (note 6) 3,000
Adjustment to reconsile net income to net cash
Cash provided by operating activities:
Changes in assets and liaibilies:
Increasein Accounts Payable
Increase in loan from shareholder 9,814 12,297
Decrease in Sales Tax Receivable 2,365 1,621
--------- ---------
NET CASH USED BY OPERATION ACTIVITIES $(262,092) $(776,133)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Equipment (64,729)
Purchase of investment (46,408)
CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from Issuance of Stock 711 145
Increase in Additional Paid-In Capital 338,491 724,855
---------
Repayment of shareholders'loan (29,407)
---------
NET CASH PROVIDED BY FINANCING $ 339,202 $ 695,593
--------- ---------
ACTIVITIES
NET INCREASE IN CASH 12,381
NET DECREASE IN CASH (126,948)
CASH AS OF SEPTEMBER 30, 1999 1,562 128,510
--------- ---------
CASH AS OF SEPTEMBER 30, 1999 $ 13,943 $ 1,562
========= =========
SUPPLEMENTARY DISCLOSURE
The statement of cash flows using indirect method as defined under Statement of
Financial Accounting Standard of No. 95.
See independent auditor's report
F-7
<PAGE>
ALPHARX, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 1. FORMATION AND ORGANIZATION OF BUSINESS
ALPHARX, INC. (the Company) was incorporated under the laws of the State of
Delaware on August 8, 1997. The company is still in its developing stage and had
no active business operation as of September 30, 2000. The company was formally
known as LOGIC TECH INTERNATIONAL, INC., and had its corporate name amended
during the fiscal year.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of ALPHARX, INC. is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Cash and Cash Equivalent
For purpose of these statements, cash equivalent included cash on hand, cash in
bank, and all short-term debt securities purchased with a maturity period of
three months or less.
Depreciation
The company's property, plant, and equipment are depreciated using the Modified
Accelerated Cost Recovery System Method, with recovery period of 3 years.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated by using
Modified Accelerated Cost Recovery System Method for financial reporting as well
as income tax reporting purposes at rates based on the following estimated
useful lives:
Funiture and Fixtures 7 years
Machinery and Equipment 3 years
Automobile 5 years
The company capitalizes expenditures that materially increase assets' lives and
expense ordinary repairs and maintenance to operating as incurred. When assets
are sold or disposed or otherwise fully depreciated, the cost and related
accumulated deprecation are removed from the accounts and any gain or loss is
included in the statement of income and related earnings.
See independent auditor's report
F-8
<PAGE>
ALPHARX, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
Income Taxes
The company is a C Corporation that subjects to accrual of federal tax according
to tax laws. There is no income tax for year ended since the company was under a
development stage and did not have active business operations. The State of
Delaware does not impose tax on corporation net income.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued.)
Research and Development (R&D)
All research and development cost were charged to expense for the period ended.
These costs included traveling to explore and evaluate new products and
negotiating marketing rights, products licensing, and various legal and
professional fees incurred for preparation of patent applications. A total of
$74,990 R&D expense had been spent during the twelve month ended September 30,
2000.
NOTE 3. PROPERTY, PLANT & EQUIPMENT
Life Year
Furniture & Fixtures $ 1,656 7
Machinery & Equipment 40,767 3
Automobile 22,067 5
--------
74,490
Less accumulated depreciation (11,060)
--------
$ 63,430
========
NOTE 4. INVESTMENTS
The Company had acquired common stocks of a foreign company located in Hong
Kong. The total amounted invested is $46,408. The securities invested are not
publicly traded.
NOTE 5. COMMON STOCK
The Company is authorized to issue 100,000,000 shares of common stock. As of
September 30, 2000, 49,388,330 shares of such common stock had been issued and
outstanding, each share bears a par value of $0.0001.
F-9
<PAGE>
On July 20, 2000 the Company's board of directors declared a ten-for-one stock
split, effected in the form of a stock dividend, on the shares of the Company's
common stock. Each shareholder of record on July 20, 2000, received 9 additional
share of common stock for each share of common stock then held. The stock was
issued on August 11, 2000. The Company amended the current par value of $.001
per share to $.0001for all shares of common stock. All references in the
financial statements to the number of shares outstanding, per share amounts, and
stock option data of the Company's common stock have been restated to reflect
the effect of the stock split for all periods presented.
See independent auditor's report
F-10
<PAGE>
ALPHARX, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
NOTE 6. STOCK OPTION PLAN
The Company has a Stock Option Plan (Plan) under which officers, key employees,
certain independent contractors, and non-employee directors may be granted
options to purchase shares of the Company's authorized but unissued common
stock. The maximum number of shares of the Company's common stock available for
issuance under the Plan is 8 million shares. As of September 30, 2000, the
maximum number of shares available for future grants under the Plan is 5,750,000
shares. Under the Plan, the option exercise price and its fair market value are
determined to be $US1.00. Options currently expire no later than 10 years from
the grant date and generally vest within five years. Proceeds received by the
Company from exercises of stock options are credited to common stock and
additional paid-in capital. Additional information with respect to the Plan's
stock option activity is as follows:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------
Outstanding at June 20, 200 (plan adoption) 5,750,000 $1.0
Granted 1,400,000 $1.0
Exercised 0 $1.0
Cancelled 0 $1.0
--------- -------
Outstanding at September30, 2000 5,750,000 $1.0
========= =======
Options exercisable at September30,2000 1,400,000 $1.0
========= =======
The Company has elected to follow APB Opinion No. 25 (Accounting for Stock
Issued to Employees) in accounting for its employee stock options. Accordingly,
no compensation expense is recognized in the Company's financial statements
because none of the vested options were exercised.
See independent auditor's report
F-11
<PAGE>
Independent Auditor's Report on Supplementary Information
Board of Directors
ALPHARX, Inc.
Markham, Ontario, Canada
We have audited the accompanying financial statements of AlphaRx, Inc. as
of and for the years ended September 30, 2000 and September 30, 1999, and have
issue our report thereon dated November 27, 2000. Our audit was conducted for
the purpose of forming an opinion on the basis financial statements taken as a
whole. The information contained in Schedule I is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as whole.
/s/ Philip K. Yeung, C.P.A.
November 27, 2000
F-12
<PAGE>
ALPHARX, INC.
SCHEDULE OF SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999
SEPTEMBER 30,
---------------------------
2000 1999
-------- --------
Automobile $ 7,344 4,988
Bank charge 501 499
Contract Labbor 7,675
Delivery & postage 3,093 1,030
Depreciation 4,533 4,066
Dues & subscriptions 630 27
Insurance 4,065 423
Interest expenses 693 169
License 1,998 483
Meals & entertainment 1,324 850
Miscellaneous 368
Office expense 8,944 7,898
Professional fees 126,470 215,121
Research & Development 74,990 530,688
Rent Expense 11,016
Security 394
Supplies 3,268
Telephone 5,573 15,001
Travel 15,664 14,248
Utility 1,629
Filing fees 5,000
Medical expenses 396
$280,271 $800,841
======== ========
See independent auditor's report
The accompanying notes are an integral part of this statement
F-13
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ALPHARX, INC.
The undersigned, the President of AlphaRx, Inc., a Delaware corporation
(the "Corporation"), does hereby execute the following Amended and Restated
Certificate of Incorporation pursuant to Sections 242(b) and 245 of the Delaware
General Corporation Law:
1. The name of the Corporation is AlphaRx, Inc.
2. The Corporation was originally incorporated under the name of "Logic
Tech International Inc." and the original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of Delaware on
August 8, 1997.
3. The Certificate of Incorporation of the Corporation is hereby amended
and restated to read in its entirety as follows:
"FIRST. The name of the corporation is AlphaRx, Inc.
SECOND. The registered office of the corporation in the State of
Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County
of New Castle, 19805, and its registered agent at such address is CORPORATE
AGENTS, INC.
THIRD. The purpose or purposes of the corporation shall be: To
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this
corporation is authorized to issue is one hundred million (100,000,000) shares
with a par value of one hundredth of one cent ($.0001) per share.
FIFTH. The name and mailing address of the incorporator is as
follows:
Kathleen Crowley
Corporate Agents, Inc.
1013 Centre Road
Wilmington, DE 19605
SIXTH. The Board of Directors shall have the power to adopt,
amend or repeal the by-laws."
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4. The four million nine hundred and eight thousand eight hundred and
thirty-three (4,908,833) shares of common stock, $.001 par value, of the
Corporation presently issued and outstanding are hereby converted and changed
into an aggregate of forty-nine million eighty- eight thousand three hundred and
thirty (49,088,330) issued and outstanding shares of the new class of common
stock, $.0001 par value, of the Corporation at the rate of 10 new shares of
$.0001 par value for each outstanding share of $.001 par value.
5. The foregoing amendment to the Certificate of Incorporation of the
Corporation was adopted by vote of the Board of Directors and the written
consent of the holders of a majority of the outstanding capital stock of the
Corporation in accordance with Sect ions 228, 242 and 245 of the Delaware
General Corporation Law. Prompt notice thereof has been given to those
stockholders who have not so consented in writing, in accordance with Section
228 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
July, 2000.
/s/ Michael M. Lee
------------------
Michael M. Lee
President
Attest: /s/ Sandro Persia
-----------------
Sandro Persia
Secretary
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ALPHARX, INC.
2000 STOCK OPTION PLAN
1. Purposes.
The ALPHARX, INC. 2000 STOCK OPTION PLAN (the "Plan") is intended to
provide the employees , directors, independent contractors and consultants of
AlphaRx, Inc. (the "Company") with an added incentive to continue their services
to the Company and to induce them to exert their maximum efforts toward the
Company's success. By thus encouraging employees, directors, independent
contractors and consultants and promoting their continued association with the
Company, the Plan may be expected to benefit the Company and its Shareholders.
The Plan allows the Company to grant Incentive Stock options ("ISOs") (as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended [the
"Code"]), Non-Qualified Stock Options ("NQSOs") not intended to qualify under
Section 422(b) of the Code, Stock Appreciation Rights ("SARs") and Stock
Depreciation Rights ("SDRs") (collectively the "Options").
2. Shares Subject to the Plan.
The total number of shares of Common Stock of the Company, $.001 par value
per share (the "Common Stock"), that may be subject to Options granted under the
Plan shall be 800,000 in the aggregate, subject to adjustment as provided in
Paragraph 8 of the Plan; however, the grant of any NQSO to an employee together
with a tandem SAR or SDR shall only require one share of Common Stock available
subject to the Plan to satisfy such joint Option. The Company shall at all times
while the Plan is in force reserve such number of shares of Common Stock as will
be sufficient to satisfy the requirement of outstanding Options granted under
the Plan. In the event any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall cease
for any reason to be exercisable in whole or in part, the unpurchased shares
subject thereto shall again be available for granting of Options under the Plan.
3. Eligibility.
ISO's may be granted from time to time under the Plan to one or more
employees of the Company or of a "subsidiary" or "parent" of the Company, as the
quoted terms are defined within Section 424 of the Code. An Officer is an
employee for the above purposes. Options, other than ISO's, may be granted from
time to time under the Plan to one or more employees of the Company, Officers,
members of the Board of Directors, independent contractors, consultants and
other individuals who are not employees of, but are involved in the continuing
development and success of the Company and/or of a subsidiary of the Company,
including persons who have previously been granted Options under the Plan.
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4. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the
Company as such Board of Directors may be composed from time to time or by a
Stock Option Committee (the "Committee") comprised of at least two disinterested
persons (the term "disinterested" having the meaning ascribed to it by Rule
16b-3 of the Securities Exchange Act of 1934 [the "1934 Act"]) appointed by such
Board of Directors of the Company. As and to the extent authorized by the Board
of Directors of the Company, the Committee may exercise the power and authority
vested in the Board of Directors under the Plan. Within the limits of the
express provisions of the Plan, the Board of Directors or Committee shall have
the authority, in its discretion, to determine the individuals to whom, and the
time or times at which, options shall be granted, the character of such Options
(whether ISO, NQSO and/or SAR or SDR in tandem with a NQSO) and the number of
shares of Common Stock to be subject to each option, and to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of Option agreements that may be entered into
in connection with Options (which need not be identical), subject to the
limitation that agreements granting ISOs must be consistent with requirements
for the ISOs being qualified as "incentive stock options" as provided in Section
422 of the Code, and to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan. In making such
determinations, the Board of Directors may take into account the nature of the
services rendered by such individuals, their present and potential contributions
to the Company's success, and such other factors as the Board of Directors, in
its discretion, shall deem relevant. The Board of Directors' determinations on
the matters referred to in this paragraph shall be conclusive.
(b) Notwithstanding anything contained herein to the contrary, the
Committee shall have the exclusive right to grant Options to persons subject to
Section 16 of the 1934 Act and set forth the terms and conditions thereof. With
respect to persons subject to Section 16 of the 1934 Act, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 for its
successors under the 1934 Act. To the extent any provision of the Plan or action
by the Board of Directors or Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the Board
of Directors.
5. Terms of Options.
Within the limits of the express provisions of the Plan, the Board or the
Committee may grant either ISOs or NQSOs or SARs and/or SDRs in tandem with
NQSOs. An ISO or an NQSO enables the optionee to purchase from the Company, at
any time during a specified exercise period, a specified number of shares of
Common Stock at a specified price (the "Option Price"). The optionee, if granted
a SAR in tandem with a NQSO, may receive from the Company, in lieu of exercising
his option to purchase shares pursuant to his NQSO, at one of the certain
specified times during the exercise period of the NQSO as set by the Board or
the Committee, the excess of the fair market value upon such exercise (as
determined in accordance with subparagraph (b) of this Paragraph 5) of one share
of Common Stock over the Option Price per share specified
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upon grant of the NQSO/SAR multiplied by the number of shares of Common Stock
covered by the SAR so exercised. The optionee, if qranted a SDR in tandem with a
NQSO, may receive from the Company at such date after the optionee's exercise of
the NQSO with which the SDR is in tandem and the SDR itself, which date shall be
determined by the Board or the Committee in its sole discretion, the excess of
the fair market value of one share of Common Stock upon the optionee's exercise
of the NQSO with which the SDR is in tandem over the greater of the (i) fair
market value on the date six months and one day after the exercise of such NQSO
and (ii) the option price paid on the exercise thereof, multiplied by the number
of shares of Common Stock covered by the NQSO/SDR so exercised. The character
and terms of each Option granted under the Plan shall be determined by the Board
of Directors consistent with the provisions of the Plan, including the
following:
(a) An Option granted under the Plan must be granted within 10 years from
the date the Plan is adopted, or the date the Plan is approved by the
Shareholders of the Company, whichever is earlier.
(b) The Option Price of the shares of Common Stock subject to each ISO
shall not be less than the fair market value of such shares of Common Stock at
the time such ISO is granted. Such fair market value shall be determined by the
Board of Directors and, if the shares of Common Stock are listed on a national
securities exchange or traded on the over-the-counter market, the fair market
value shall be the closing price on such exchange, or the mean of the closing
bid and asked prices of the shares of Common Stock on the over-the-counter
market, as reported by the National Association of Securities Dealers Automated
Quotation System (NASDAQ), the National Association of Securities Dealers OTC
Bulletin Board or the National Quotation Bureau, Inc., as the case may be, on
the day on which the Option is granted or, if there is no closing price or bid
or asked price on that day, the closing price or mean of the closing bid and
asked prices on the most recent day preceding the day on which the Option is
granted for which such prices are available. If an ISO is granted to any
individual who, immediately before the ISO is to be granted, owns (directly or
through attribution) more than 10% of the total combined voting power of all
classes of capital stock of the Company or a subsidiary or parent of the
Company, the Option Price of the shares of Common Stock subject to such ISO
shall not be less than 110% of the fair market value per share of the shares of
Common Stock at the time such ISO is granted.
(c) The Option Price of the shares of Common Stock subject to an NQSO or a
SAR or SDR in tandem with a NQSO granted pursuant to the Plan shall be
determined by the Board of Directors or the Committee, in its sole discretion.
(d) In no event shall any Option granted under the Plan have an expiration
date later than 10 years from the date of its grant, and all Options granted
under the Plan shall be subject to earlier termination as expressly provided in
Paragraph 6 hereof. If an ISO is granted to any individual who, immediately
before the ISO is granted, owns (directly or through attribution) more that 10%
of the total combined voting power of all classes of capital stock of the
Company or of a subsidiary or parent of the Company, such ISO shall
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by its terms expire and shall not be exercisable after the expiration of five
(5) years from the date of its grant.
(e) An SAR may be exercised at any time after six months of the date of
the grant thereof during the exercise period of the NQSO with which it is
granted in tandem and prior to the exercise of such NQSO, but only within the
specified 10 business day period referred to in subsection (e)(3) of Rule 16b-3
of the 1934 Act (generally, the 10 business days immediately following the
publication of the Company's quarterly financial information). The exercise of
an SAR granted in tandem with an NQSO shall be deemed to cancel such number of
shares subject to the unexercised Option as were subject to the exercised SAR.
An SDR may be exercised at any time prior to the expiration date of the NQSO
granted in tandem with the SDR and after 6 months from the exercise of the NQSO
granted in tandem with the SDR. The Board or the Committee has discretion to
determine and impose conditions on SDRs such as setting the time of payment at
the date six months and one day following the date of exercise, the date of the
sale of the Common Stock received upon the exercise of the NQSO which was
granted in tandem with the SDR, or some other date (but not later than the
expiration date of the option), and reducing the amount of the distribution to
take into account appreciation in the fair market value of the aforementioned
Common Stock prior to the payment of the distribution. The Board or the
Committee also has the discretion to alter the terms of the SDRs if necessary to
comply with Federal or state securities law. Amounts to be paid by the Company
in connection with an SAR or SDR may, in the Board's or the Committee's
discretion, be made in cash, Common Stock or a combination thereof. An NQSO
granted in tandem with an SAR or SDR may not be exercised within six months of
the grant thereof.
(f) Unless otherwise provided in any Option agreement under the Plan, an
Option granted under the Plan shall become exercisable, in whole at any time or
in part from time to time, but in no case may an Option (i) be exercised as to
less than one hundred (100) shares of Common Stock at any one time, or the
remaining shares of Common Stock covered by the Option if less than one hundred
(100), and (ii) become fully exercisable more than five years from the date of
its grant nor shall less than 20% of the Option become exercisable in any of the
first five years of the Option.
(g) An Option granted under the Plan shall be exercised by the delivery by
the holder thereof to the Company at its principal office (to the attention of
the Secretary) of written notice of the number of full shares of Common Stock
with respect to which the Option is being exercised, accompanied by payment in
full, in cash or by certified check payable to the order of the Company, of the
Option Price of such shares of Common Stock, or, at the discretion of the
Committee or the Board, by the delivery of shares of Common Stock having a fair
market value equal to the Option Price (provided, in order to qualify as an ISO,
more than one year shall have passed since the date of grant and one year from
the date of exercise), or at the option of the Committee or the Board, by a
combination of cash and such shares (subject to the restriction above) held by
the employee that have a fair market value together with such cash that shall
equal the Option Price, and, in the case of a NQSO, at the discretion of the
Committee or Board by having the Company withhold from the shares of Common
Stock to be issued upon
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exercise of the Option that number of shares having a fair market value equal to
the exercise price and/or the tax withholding amount due, otherwise provide for
withholding as set forth in Paragraph 9(c) hereof, or in the event an employee
is granted a NQSO in tandem with an SAR and/or SDR and desires to exercise such
SAR or SDR, such written notice shall so state such intention.
(h) The holder of an Option shall have none of the rights of a Shareholder
with respect to the shares of Common Stock covered by such holder's Option until
such shares of Common Stock shall be issued to such holder upon the exercise of
the Option.
(i) An ISO granted under the Plan and any NQSO granted under the Plan with
an exercise price below the fair market value at the date of grant or other NQSO
which the Board or Committee so designates at the time of grant shall not be
transferable otherwise than by will or the laws of descent and distribution, and
any ISO granted under the Plan may be exercised during the lifetime of the
holder thereof only by the holder. No Option granted under the Plan shall be
subject to execution, attachment or other process.
(j) The aggregate fair market value, determined as of the time any ISO is
granted and in the manner provided for by subparagraph (b) of this Paragraph 5,
of the shares of Common Stock with respect to which ISOs granted under the Plan
are exercisable for the first time during any calendar year and under incentive
stock options qualifying as such in accordance with Section 422 of the Code
granted under any other Incentive Stock Option plan maintained by the Company or
its parent or subsidiary corporations, shall not exceed $100,000. Any grant of
Options in excess of such amount shall be deemed a grant of a NQSO.
6. Death or Termination of Employment.
(a) If the employment of a holder of an ISO under the Plan shall be
terminated voluntarily by the employee or for cause, such holder's ISO shall
expire thirty (30) days after such termination. If such employment shall
terminate for any reason other than death, voluntary termination by the employee
or for cause, then such ISO may be exercised at any time within three (3) months
after such termination, subject to the provisions of subparagraph (f) of this
Paragraph 6. For the purposes of this subparagraph (a), the retirement of an
individual either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be a termination of such individual's employment
other than voluntarily by the employee or for cause.
(b) If the holder of an ISO under the Plan dies (i) while employed by the
Company or a subsidiary or parent corporation or (ii) within three (3) months
after the termination of such holder's employment other than voluntarily by the
employee or for cause, such ISO may, subject to the provisions of subparagraph
(f) of this Paragraph 6, be exercised by a legatee or legatees of such Option
under such individual's last will or by such individual's personal
representatives or distributees at any time within one year after the
individual's death.
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(c) If the holder of an ISO under the Plan becomes disabled within the
definition of section 22(e)(3) of the Code while employed by the Company or a
subsidiary or parent corporation, such ISO may, subject to the provisions of
subparagraph (f) of this Paragraph 6, be exercised at any time within one year
after such holder's termination of employment due to the disability.
(d) An ISO may not be exercised pursuant to this Paragraph 6 except to the
extent that the holder was entitled to exercise the ISO at the time of
termination of employment or death, and in any event may not be exercised after
the original expiration date of the ISO.
7. Leave of Absence.
For the purposes of the Plan, an individual who is on military or sick
leave or other bona fide leave of absence (such as temporary employment by the
Government) shall be considered as remaining in the employ of the Company or of
a subsidiary or parent corporation for ninety (90) days or such longer period as
such individual's right to reemployment is guaranteed either by statute or by
contract.
8. Adjustment Upon Changes in Capitalization.
(a) In the event that the outstanding shares of Common Stock are hereafter
changed by reason of recapitalization, reclassification, stock split-up,
combination or exchange of shares of Common Stock or the like, or by the
issuance of dividends payable in shares of Common Stock, an appropriate
adjustment shall be made by the Board of Directors, as determined by the Board
of Directors, in the aggregate number of shares of Common Stock available under
the Plan, in the number of shares of Common Stock issuable upon exercise of
outstanding Options, and the Option Price per share. In the event of any
consolidation or merger of the Company with or into another company, or the
conveyance of all or substantially all of the assets of the Company to another
company, each then outstanding Option shall upon exercise thereafter entitle the
holder thereof to such number of shares of Common Stock or other securities or
property to which a holder of shares of Common Stock of the Company would have
been entitled to upon such consolidation, merger or conveyance; and in any such
case appropriate adjustment, as determined by the Board of Directors of the
Company (or successor entity) shall be made as set forth above with respect to
any future changes in the capitalization of the Company or its successor entity.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding Options under the Plan will automatically terminate, unless
otherwise provided by the Board of Directors of the Company or any authorized
committee thereof. Notwithstanding anything contained herein to the contrary, no
adjustment in the aggregate number of shares of Common Stock available under the
Plan (irrespective of any adjustments required in the number of shares of Common
Stock issuable upon exercise of outstanding Options) or in the Option Price per
share, provided the Option Price in any option agreement issued under the Plan
is the initial public offering price of the Company's Common Stock, shall be
required, except as otherwise provided in any Option Agreement evidencing the
Options, in the event of a stock split or
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other re-capitalization of the Company, as described above, prior to the
consummation of an initial public offering by the Company.
(b) Any adjustment in the number of shares of Common Stock shall apply
proportionately to only the unexercised portion of the Options granted
hereunder. If fractions of shares of Common Stock would result from any such
adjustment, the adjustment shall be revised to the next lower whole number of
shares of Common Stock.
9. Further Conditions of Exercise.
(a) Unless the shares of Common Stock issuable upon the exercise of an
Option under the Plan have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, prior to the
exercise of the Option, the notice of exercise shall be accompanied by a
representation or agreement of the individual exercising the Option to the
Company to the effect that such shares of Common Stock are being acquired for
investment and not with a view to the resale or distribution thereof or such
other documentation as may be required by the Company, unless in the opinion of
counsel to the Company such representation, agreement or documentation is not
necessary to comply with said Act.
(b) The Company shall not be obligated to deliver any shares of Common
Stock until they have been listed on each securities exchange on which the
shares of Common Stock may then be listed or until there has been qualification
under or compliance with such state or federal laws, rules or regulations as the
Company may deem applicable. The Company shall use reasonable efforts to obtain
such listing, qualification and compliance.
(c) The Board or Committee may make such provisions and take such steps as
it may deem necessary or appropriate for the withholding of any taxes that the
Company is required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with the exercise of any Option, including, but not limited to, (i) the
withholding of payment of all or any portion of such Option and/or SAR and/or
SDR until the holder reimburses the Company for the amount the Company is
required to withhold with respect to such taxes, or (ii) the cancelling of any
number of shares of Common Stock issuable upon exercise of such Option and/or
SAR and/or SDR in an amount sufficient to reimburse the Company for the amount
it is required to so withhold, (iii) the selling of any property contingently
credited by the Company for the purpose of exercising such Option, in order to
withhold or reimburse the Company for the amount it is required to so withhold,
or (iv) withholding the amount due from such employee's wages if the employee is
employed by the Company or any subsidiary thereof.
10. Termination, Modification and Amendment.
The Plan (but not Options previously granted under the Plan) shall
terminate ten (10) years from the earliest of the date of its adoption by the
Board of Directors, or the date the Plan is approved by the Shareholders of the
Company, or such date of
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termination, as hereinafter provided, and no Option shall be granted after
termination of the Plan.
The Plan may from time to time be terminated, modified or amended by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon.
The Board of Directors of the Company may at any time, prior to ten (10)
years from the earlier of the date of the adoption of the Plan by such Board of
Directors or the date the Plan is approved by the Shareholders, terminate the
Plan or from time to time make such modifications or amendments of the Plan as
it may deem advisable; provided, however, that the Board of Directors shall not,
without approval by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote thereon,
increase (except as provided by Paragraph 8) the maximum number of shares of
Common Stock as to which Options may be granted under the Plan, materially
change the standards of eligibility under the Plan or materially increase the
benefits which may accrue to participants under the Plan. Any amendment to the
Plan which, in the opinion of counsel to the Company, will be deemed to result
in the adoption of a new Plan, will not be effective until approved by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon.
No termination, modification or amendment of the Plan may adversely affect
the rights under any outstanding Option without the consent of the individual to
whom such Option shall have been previously granted.
11. Effective Date of the Plan.
The Plan shall become effective upon adoption by the Board of Directors of
the Company. The Plan shall be subject to approval by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Company entitled to vote thereon within one year before or after adoption of the
Plan by the Board of Directors.
12. Not a Contract of Employment.
Nothing contained in the Plan or in any option agreement executed pursuant
hereto shall be deemed to confer upon any individual to whom an Option is or may
be granted hereunder any right to remain in the employ of the Company or of a
subsidiary or parent of the Company or in any way limit the right of the
Company, or of any parent or subsidiary thereof, to terminate the employment of
any employee.
13. Other Compensation Plans.
The adoption of the Plan shall not affect any other stock option plan,
incentive plan or any other compensation plan in effect for the employees of the
Company, nor shall the Plan preclude the Company from establishing any other
form of stock option plan, incentive plan or any other compensation plan for
employees of the Company.
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EMPLOYMENT AGREEMENT WITH MICHAEL M. LEE
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1st
day of July, 2000 by and between AlphaRx Inc., a Delaware corporation
("Company"), and Michael M. Lee ("Executive").
WHEREAS, Company desires to employ Executive as its President and
Executive desires to be employed by Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth and the mutual benefits to be derived herefrom, and intending to be
legally bound hereby, the Company and the Executive agree as follows:
1. Employment and Term. Company hereby employs Executive and Executive
hereby accepts employment for a term commencing on July 1st, 2000 and
continuing until June 30th, 2003, unless sooner terminated as provided
for in this Agreement. Company and Executive have the option to
renegotiate this Agreement beyond the three-year period. Executive hereby
warrants and represents to Company that he is free to enter into this
Agreement and is not a party to any agreement, written or otherwise, or
bound by any restrictions, which limit or restrict him from entering into
this Agreement or performing the services, duties and responsibilities
called for hereunder.
2. Duties.
2.1 Executive shall perform the duties of the President of the Company and
such additional executive duties of Company and its affiliates as may be,
from time to time, requested of him by the Company's Board of Directors
or the Chairman and/or Chief Executive Officer of the Company. As
President of the Company, the Executive shall report to the Chairman/CEO
of the Company.
2.1.1 The duties as President of the Company shall include but not be limited
to (i) having general and active management of the business of the
Company (ii) seeing that all orders and resolutions of the Board are
carried into effect, subject however, to the right of the directors to
delegate any specific powers, except such as may be by statute
exclusively conferred on the President, to any other officer or officers
of the Company (iii) executing bonds, mortgages and other contracts
requiring a seal, under the seal of the Company (iv) be Ex-Offico a
member of all committees (v) have the general powers and duties of
supervision and management usually vested in the office of President of a
Company (vi) assist the Board of Directors, Chairman/CEO in formulating
the business plan, goals and objectives for the Company's future growth.
2.2 Executive shall devote his full professional time and best efforts to the
performance of his duties and responsibilities hereunder to advance the
interests of the Company and shall not during the term of this Agreement
(as defined in
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Section 1 hereof) be employed, involved or otherwise engaged in, either
directly or indirectly, any other employment for gain, profit or other
pecuniary advantage, without prior written consent of Company. At no time
shall Executive engage in any activity that conflicts with the business
of the Company or its affiliates. Nothing set forth in this section 2.2
shall be construed to prevent Executive from (i) acting as a member of
Board of Trustees or a member of Board of Directors of any other
corporation, or as a member of the Board of Trustees of any organization
or entity which is not a competitor of the Company or (ii) devoting of
such of Executive's time and attention to philanthropic, charitable,
civic, community or other activities or endeavors as Executive shall
reasonably determine but only to the extent that Executive's pursuance of
any activities or endeavors does not materially and adversely effect the
Executive's ability to perform and discharge Executive's duties and
objectives to the Company hereunder.
2.3 Except for required travel on Company business or unless Company agrees
otherwise, Executive shall perform his duties and responsibilities at the
Company's principal executive offices located in the greater Toronto
area. The Company shall furnish Executive with office space, secretarial
assistance, a personal computer, a company car and such other facilities
and services as shall be suitable to Executive's position and adequate
for the performance of his duties hereunder.
3. Compensation. For all duties and responsibilities to be performed and/or
assumed by Executive hereunder, Executive shall be entitled to receive an
annual salary as set forth below ("Base Salary"). The Base Salary, less
any sums required to be withheld by law, shall be payable in equal
monthly installments or such other more frequent regular installments as
the Company may, from time to time, determine. For purposes hereof, Base
Salary shall be:
3.1 For the six-month period commencing with the date hereof, the Base Salary
shall be $24,000 per year which shall be increased to $36,000 per year
after the first six months of employment.
3.2 For each year thereafter, the Base Salary shall be increased by an amount
determined by the Board of Directors but in no event less than (i) five
percent (5%) after the first year, six percent (6%) after the second year
and each year thereafter upon mutual agreement to extend the term. Each
percentage increase for a particular year shall be based on the Base
Salary for the immediately preceding year.
4. Fringe Benefits. Company shall pay for or provide Executive with the
following benefits:
4.1 For the first year, Executive shall be entitled to three (3) weeks paid
vacation to be used at the Executive's discretion. Thereafter, Executive
shall be entitled to four (4) weeks paid vacation during each full year
of this Agreement to be used at
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the Executives discretion. Vacation time shall accrue on a pro-rata basis
during each year of this Agreement. Any unused vacation shall be
cumulative from year to year unless otherwise agreed upon by the parties.
***
4.2 Health and hospitalization insurance established and maintained by the
Company for its senior executives and key management personnel. Since the
Company presently does not have, in effect, a plan for health and
hospitalization insurance, Company shall reimburse Executive for all
COBRA payments made by Executive to his previous employer for health and
hospitalization coverage for Executive and his family. Thereafter,
Company shall either secure and maintain health and hospitalization
insurance for Executive and his dependents or reimburse Executive for
coverage comparable to Blue Shield/Blue Cross for Executive and his
dependents.
4.3 Such other employee benefits maintained by the Company for its senior
executives and key management employees, including, all pension, profit
sharing, retirement, stock bonus and stock option plans, to the extent
Executive is eligible to participate pursuant to the terms and conditions
of such plans.
4.4 Executive shall be reimbursed in a timely manner for all items of travel,
entertainment and miscellaneous expenses which Executive reasonably
incurs in connection with the performance of his duties hereunder,
provided that the Executive submits to the Company such statements and
other evidence supporting said expenses as the Company my reasonably
require. Executive, when traveling on Company business, shall be
permitted to fly first class on all domestic flights and business class
on all international flights.
4.5 Executive shall be reimbursed in a timely manner for all reasonable
moving expenses actually incurred by Executive in relocating the
Executive and his family to any locations required by the Company.
("Relocation Expenses"). The Relocation Expenses shall include the cost
of temporary residence, a moving company and related expenses. The total
Relocation Expenses for which Executive shall be reimbursed shall not
exceed $50,000 and shall be approved in writing, in advance, by the
Company.
5. Stock Options.
5.1 As part of Executive's compensation for services to be rendered
hereunder, Executive shall have the right and option to purchase from
Company voting common stock in Company ("Option"). The total number of
shares available to Executive under this Option is Two Hundred Thousand
Shares (200,000) at a purchase price of Ten Cents ($0.10) per share
(Option Shares"). The Option Shares are available for purchase in
installments as listed in Column A below and each installment shall
become vested on the corresponding date listed in Column B, as follows:
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Column A Column B
Number of Shares Date Option Shares Available for Purchase
Become Vested
50,000 Upon the commencement of Executive's employment
pursuant to the terms of this Agreement
50,000 First anniversary date of this Agreement
50,000 Second anniversary date of this Agreement
50,000 Third Anniversary date of this Agreement
In order for the Option Shares to become vested as provided for above, Executive
must be employed by the Company under the terms of this Agreement as of the
vesting date set forth in Column B above.
5.2 Except as otherwise provided for below, the term of the Option granted
shall remain in effect for ten (10) years from the date on which such
Option Shares become vested. If the Executive's employment with the
Company is terminated by the Company for Cause (as defined herein) or by
the act of Executive, the Executive's right to exercise vested Option
Shares shall cease and become null and void within thirty (30) days of
the date employment terminated, except as otherwise provided in Section
5.3 hereof. All unvested Option Shares will terminate immediately as of
the date of such termination of employment. In the event the Company
receives, accepts and consummates a tender offer for all of its
outstanding common stock prior to the vesting of the Option Shares, the
vesting rights shall be accelerated so as to allow Executive to exercise
the Option to purchase all of the Option Shares immediately prior to the
consummation of such tender offer.
5.3 Notwithstanding anything in this Section 5 to the contrary, if the
Executive's employment is terminated for Cause, as set forth in Section
6.3, the Company shall have the right to terminate and withdraw any
vested or unvested Options under this Agreement.
5.4 The purchase price of the Option Shares shall be paid in full upon the
exercise of the Option, and Company shall not be required to deliver
certificates for such Option Shares until payment has been made. In
addition to, and at the time of payment of the purchase price for such
Option Shares, Executive shall be responsible for all federal and state
withholding or other employment taxes applicable to the taxable income of
such Executive and any other fees resulting from the exercise of the
Executive.
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5.5 Each share of Option Stock purchased pursuant to the terms hereof shall
carry all appropriate registration and/or restrictions on sale and
notices as determined from time to time by Company's securities counsel.
Executive shall cooperate with Company and Company's counsel in complying
with all applicable securities laws.
6. Termination of Employment. The employment of Executive and Company's
liability and obligations hereunder shall terminate as follows:
6.1 This Agreement shall terminate immediately upon the death of Executive.
In such event, Company shall pay to such person as Executive may
designate in a written notice filed with the Company, or if no such
person shall be designated, to Executive's estate, a lump sum death
benefit in an amount equal to twelve (12) months of Executive's Base
Salary as in effect on the date of Executive's death and double indemnity
in event Executive's death occurs while traveling on Company business.
6.2 This Agreement shall terminate immediately upon the Disability of
Executive. Disability shall exist if due to a mental or physical
condition, Executive is determined to be unable to perform his duties and
responsibilities hereunder for a continuous period of two (2) months.
Disability shall be conclusively established by written certification by
two (2) licensed, disinterested physicians selected as mutually agreed
upon between Company and Executive. In the event the two (2) physicians
disagree, a third physician shall be selected by the two physicians to
break such impasse. The costs associated with the determination of
Disability shall be borne equally between Company and Executive. In the
event of Disability, Executive shall be entitled to receive his Base
Salary in accordance with Section 3 for a period of six (6) months
following the onset of Disability.
6.3 The Company may discharge the Executive for Cause and thereby immediately
terminate his employment under this Agreement. For purposes of this
Agreement, Company shall have "Cause" to terminate the Executive's
employment if the Executive, in the reasonable judgment of the Company:
6.3.1 Willfully fails to perform any reasonable directive of the Company's
Board of Directors, Chairman or Chief Executive Officer.
6.3.2 Materially breaches any of the agreements, duties, responsibilities or
obligations under this Agreement.
6.3.3 Embezzles or converts to his own use any funds or property of the Company
or any client or customer of the Company.
6.3.4 Is convicted of a felony or any crime involving larceny, embezzlement or
moral turpitude.
6.4 In the event that Executive's employment is terminated by the Company
without Cause, as defined in Section 6.3, above, for a reason other than
death or
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Disability, or Executive shall resign for "Good Reason", as defined
below, then, in such event:
6.4.1 Executive's Base Salary, as defined in Section 3 as then in effect, shall
continue to be paid for a period of twelve (12) months ("Payment Period")
or balance of Agreement whichever is longer.
6.4.2 Company shall maintain in effect during the Payment Period, for the
continued benefit of the Executive, all of the employee benefit plans and
programs in which the Executive was entitled to participate immediately
prior to the Executive's termination provided same is possible under the
general terms and provisions of such benefit plans and programs.
Moreover, during the Payment Period the Company shall provide the
Executive with such reasonable administrative and secretarial support
services as may be necessary or appropriate in order to assist Executive
in finding new employment or Executive may select an out-placement
service to be paid for by the Company at a cost not to exceed Five
Thousand Dollars ($5,000).
For purposes of this Section 6.4, "Good Reason" shall mean:
(i) An assignment to the Executive of any duties inconsistent with, or
a material change in the nature or scope of, Executive's
responsibilities, authority or duties hereunder.
(ii) Failure by the Company to comply with the provisions of this
Agreement.
(iii) Ill health of Executive or a member of his family, or any other
compelling personal circumstance which, in the mutual discretion
of the Executive and the Chairman of the Company, makes the
Executive's continued employment hereunder impossible, or
inappropriate.
6.5 Executive may voluntarily terminate his employment under this Agreement
without Good Reason, as defined in Section 6.4 above, by giving the
Company ninety (90) days prior written notice thereof, and upon the
expiration of such ninety (90) day period, Executive's employment under
this Agreement shall terminate, and Company shall have no further
obligation or liabilities under this Agreement except to pay the
Executive the portion, if any, that remains unpaid of the Base Salary and
unpaid accrued prorated vacation for the period up to the date of
termination. Resignation as defined herein must be in written form to the
Board, witnessed and signed by the Executive.
7. Surrender of Books and Records. Executive acknowledges that all lists,
books, records, literature, products and any other materials owned by
Company or its affiliates or used by them in connection with the conduct
of their business, shall at all times remain the property of Company and
its affiliates and that upon termination of employment hereunder,
irrespective of the time, manner or cause
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of said termination, Executive will surrender to Company and its
affiliates all such lists, books, records, literature, products and other
materials.
8. Miscellaneous.
8.1 This Agreement constitutes the entire understanding and agreement between
Company and Executive regarding its subject matter and supersedes all
prior negotiations and agreements, whether oral or written, between them
with respect to its subject matter. This Agreement may not be modified
except by a written agreement signed by the Executive and the Company.
8.2 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, successors and assigns,
except that this Agreement may not be assigned by the Executive.
8.3 No waiver by either party of any condition or of the breach by the other
of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or
covenant set forth in this Agreement. Moreover, the failure of either
party to exercise any right hereunder shall not bar the later exercise
thereof.
8.4 This Agreement shall be governed by the statutes and common laws of the
State of Delaware, excluding it's choice of law statutes or common law.
8.5 The headings of the various sections and paragraphs have been included
herein for convenience only and shall not be construed in interpreting
this Agreement.
8.6 If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless,
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall,
nevertheless, remain in full force and effect in all other
circumstances.
8.7 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized officer on the date first above
written.
ALPHARMX INC.
By: /s/ SANDRO PERSIAN By: /S/ MICHAEL M. LEE
--------------------------- ---------------------------
Sandro Persia Michael M.Lee
Secretary Chairman/CEO
EXECUTIVE
By: /s/ MICHAEL M.LEE
--------------------------
Michael M. Lee
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EMPLOYMENT AGREEMENT WITH JOSEPH SCHWARZ
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1st
day of July, 2000 by and between AlphaRx Inc., a Delaware corporation
("Company"), and Joseph Schwarz ("Executive").
WHEREAS, Company desires to employ Executive as its Chief Scientist and
Executive desires to be employed by Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth and the mutual benefits to be derived herefrom, and intending to be
legally bound hereby, the Company and the Executive agree as follows:
1. EMPLOYMENT AND TERM. Company hereby employs Executive and Executive
hereby accepts employment for a term commencing on July 1st, 2000 and
continuing until June 30th, 2003, unless sooner terminated as provided
for in this Agreement. Company and Executive have the option to
renegotiate this Agreement beyond the three-year period. Executive hereby
warrants and represents to Company that he is free to enter into this
Agreement and is not a party to any agreement, written or otherwise, or
bound by any restrictions, which limit or restrict him from entering into
this Agreement or performing the services, duties and responsibilities
called for hereunder.
2. DUTIES.
2.1 Executive shall perform the duties of the Chief Scientist of the Company
and such additional executive duties of Company and its affiliates as may
be, from time to time, requested of him by the Company's Board of
Directors or the Chairman, President and/or Chief Executive Officer of
the Company.
2.2 Executive shall devote his full professional time and best efforts to the
performance of his duties and responsibilities hereunder to advance the
interests of the Company and shall not during the term of this Agreement
(as defined in Section 1 hereof) be employed, involved or otherwise
engaged in, either directly or indirectly, any other employment for gain,
profit or other pecuniary advantage, without prior written consent of
Company. At no time shall Executive engage in any activity that conflicts
with the business of the Company or its affiliates. Nothing set forth in
this section 2.2 shall be construed to prevent Executive from (i) acting
as a member of Board of Trustees or a member of Board of Directors of any
other corporation, or as a member of the Board of Trustees of any
organization or entity which is not a competitor of the Company or (ii)
devoting of such of Executive's time and attention to philanthropic,
charitable, civic, community or other activities or endeavors as
Executive shall reasonably determine but only to the extent that
Executive's pursuance of any activities or endeavors does not materially
and adversely effect the Executive's ability to
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perform and discharge Executive's duties and objectives to the Company
hereunder.
2.3 Except for required travel on Company business, Executive shall perform
his duties and responsibilities at the Company's principal executive
offices located in the greater Toronto area. The Company shall furnish
Executive with office space, secretarial assistance, a personal computer,
and such other facilities and services as shall be suitable to
Executive's position and adequate for the performance of his duties
hereunder.
3. COMPENSATION. For all duties and responsibilities to be performed and/or
assumed by Executive hereunder, Executive shall be entitled to receive an
annual salary as set forth below ("Base Salary"). The Base Salary, less
any sums required to be withheld by law, shall be payable in equal
monthly installments or such other more frequent regular installments as
the Company may, from time to time, determine. For purposes hereof, Base
Salary shall be:
3.1 For the twelve-month period commencing with the date hereof, the Base
Salary shall be $24,000 per year which shall be increased to $96,000 per
year after the first six months of employment.
3.2 For each year thereafter, the Base Salary shall be increased by an amount
determined by the Board of Directors but in no event less than (i) five
percent (5%) after the first year, six percent (6%) after the second year
and each year thereafter upon mutual agreement to extend the term. Each
percentage increase for a particular year shall be based on the Base
Salary for the immediately preceding year.
4. FRINGE BENEFITS. Company shall pay for or provide Executive with the
following benefits:
4.1 For the first year, Executive shall be entitled to two (2) weeks paid
vacation to be used at the Executive's discretion. Thereafter, Executive
shall be entitled to three (3) weeks paid vacation during each full year
of this Agreement to be used at the Executives discretion. Vacation time
shall accrue on a pro-rata basis during each year of this Agreement. Any
unused vacation shall not be cumulative from year to year unless
otherwise agreed upon by the parties.
4.2 Such other employee benefits maintained by the Company for its senior
executives and key management employees, including, all pension, profit
sharing, retirement, stock bonus and stock option plans, to the extent
Executive is eligible to participate pursuant to the terms and conditions
of such plans.
4.3 Executive shall be reimbursed in a timely manner for all items of travel,
entertainment and miscellaneous expenses which Executive reasonably
incurs in connection with the performance of his duties hereunder,
provided that the Executive submits to the Company such statements and
other evidence supporting said expenses as the Company my reasonably
require. Executive, when traveling
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on Company business, shall be permitted to fly economy class on all
domestic and international flights.
5. STOCK OPTIONS.
5.1 As part of Executive's compensation for services to be rendered
hereunder, Executive shall have the right and option to purchase from
Company voting common stock in Company ("Option"). The total number of
shares available to Executive under this Option is One Hundred & Twenty
Five Thousand Shares (125,000) at a purchase price of Ten Cents ($0.10)
per share ("Option Shares"). The Option Shares are available for purchase
in installments as listed in Column A below and each installment shall
become vested on the corresponding date listed in Column B, as follows:
Column A Column B
Number of Shares Date Option Shares Available for Purchase
Become Vested
312,500 Upon the commencement of Executive's employment
pursuant to the terms of this Agreement
312,500 First anniversary date of this Agreement
312,500 Second anniversary date of this Agreement
312,500 Third Anniversary date of this Agreement
In order for the Option Shares to become vested as provided for above, Executive
must be employed by the Company under the terms of this Agreement as of the
vesting date set forth in Column B above.
5.2 Except as otherwise provided for below, the term of the Option granted
shall remain in effect for five (5) years from the date on which such
Option Shares become vested. If the Executive's employment with the
Company is terminated by the Company for Cause (as defined herein) or by
the act of Executive, the Executive's right to exercise vested Option
Shares shall cease and become null and void within thirty (30) days of
the date employment terminated, except as otherwise provided in Section
5.3 hereof. All unvested Option Shares will terminate immediately as of
the date of such termination of employment. In the event the Company
receives, accepts and consummates a tender offer for all of its
outstanding common stock prior to the vesting of the Option Shares, the
vesting rights shall be accelerated so as to allow Executive to exercise
the Option to purchase all of the Option Shares immediately prior to the
consummation of such tender offer.
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5.3 Notwithstanding anything in this Section 5 to the contrary, if the
Executive's employment is terminated for Cause, as set forth in Section
6.3, the Company shall have the right to terminate and withdraw any
vested or unvested Options under this Agreement.
5.4 The purchase price of the Option Shares shall be paid in full upon the
exercise of the Option, and Company shall not be required to deliver
certificates for such Option Shares until payment has been made. In
addition to, and at the time of payment of the purchase price for such
Option Shares, Executive shall be responsible for all federal and state
withholding or other employment taxes applicable to the taxable income of
such Executive and any other fees resulting from the exercise of the
Executive.
5.5 Each share of Option Stock purchased pursuant to the terms hereof shall
carry all appropriate registration and/or restrictions on sale and
notices as determined from time to time by Company's securities counsel.
Executive shall cooperate with Company and Company's counsel in complying
with all applicable securities laws.
6. TERMINATION OF EMPLOYMENT. The employment of Executive and Company's
liability and obligations hereunder shall terminate as follows:
6.1 This Agreement shall terminate immediately upon the death of Executive.
In such event, Company shall pay to such person as Executive may
designate in a written notice filed with the Company, or if no such
person shall be designated, to Executive's estate, a lump sum death
benefit in an amount equal to two (2) months of Executive's Base Salary
as in effect on the date of Executive's death and double indemnity in
event Executive's death occurs while traveling on Company business.
6.2 This Agreement shall terminate immediately upon the Disability of
Executive. Disability shall exist if due to a mental or physical
condition, Executive is determined to be unable to perform his duties and
responsibilities hereunder for a continuous period of two (2) months.
Disability shall be conclusively established by written certification by
two (2) licensed, disinterested physicians selected as mutually agreed
upon between Company and Executive. In the event the two (2) physicians
disagree, a third physician shall be selected by the two physicians to
break such impasse. The costs associated with the determination of
Disability shall be borne equally between Company and Executive. In the
event of Disability, Executive shall be entitled to receive his Base
Salary in accordance with Section 3 for a period of two (2) months
following the onset of Disability.
6.3 The Company may discharge the Executive for Cause and thereby immediately
terminate his employment under this Agreement. For purposes of this
Agreement, Company shall have "Cause" to terminate the Executive's
employment if the Executive, in the reasonable judgment of the Company:
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6.3.1 Willfully fails to perform any reasonable directive of the Company's
Board of Directors, Chairman or Chief Executive Officer.
6.3.2 Materially breaches any of the agreements, duties, responsibilities or
obligations under this Agreement.
6.3.3 Embezzles or converts to his own use any funds or property of the Company
or any client or customer of the Company.
6.3.4 Is convicted of a felony or any crime involving larceny, embezzlement or
moral turpitude.
6.4 In the event that Executive's employment is terminated by the Company
without Cause, as defined in Section 6.3, above, for a reason other than
death or Disability, or Executive shall resign for "Good Reason", as
defined below, then, in such event:
6.4.1 Executive's Base Salary, as defined in Section 3 as then in effect, shall
continue to be paid for a period of one (1) month ("Payment Period").
6.4.2 Company shall maintain in effect during the Payment Period, for the
continued benefit of the Executive, all of the employee benefit plans and
programs in which the Executive was entitled to participate immediately
prior to the Executive's termination provided same is possible under the
general terms and provisions of such benefit plans and programs.
Moreover, during the Payment Period the Company shall provide the
Executive with such reasonable administrative and secretarial support
services as may be necessary or appropriate in order to assist Executive
in finding new employment or Executive may select an out-placement
service to be paid for by the Company at a cost not to exceed One
Thousand Dollars ($1,000).
For purposes of this Section 6.4, "Good Reason" shall mean:
(i) An assignment to the Executive of any duties inconsistent with, or
a material change in the nature or scope of, Executive's
responsibilities, authority or duties hereunder.
(ii) Failure by the Company to comply with the provisions of this
Agreement.
(iii) Ill health of Executive or a member of his family, or any other
compelling personal circumstance which, in the mutual discretion
of the Executive, and the Chairman of the Company makes the
Executive's continued employment hereunder impossible, or
inappropriate.
6.5 Executive may voluntarily terminate his employment under this Agreement
without Good Reason, as defined in Section 6.4 above, by giving the
Company ninety (90) days prior written notice thereof, and upon the
expiration of such ninety (90) day period, Executive's employment under
this Agreement shall
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terminate, and Company shall have no further obligation or liabilities
under this Agreement except to pay the Executive the portion, if any,
that remains unpaid of the Base Salary and unpaid accrued prorated
vacation for the period up to the date of termination. Resignation as
defined herein must be in written form to the Board, witnessed and signed
by the Executive.
7. SURRENDER OF BOOKS AND RECORDS. Executive acknowledges that all lists,
books, records, literature, products and any other materials owned by
Company or its affiliates or used by them in connection with the conduct
of their business, shall at all times remain the property of Company and
its affiliates and that upon termination of employment hereunder,
irrespective of the time, manner or cause of said termination, Executive
will surrender to Company and its affiliates all such lists, books,
records, literature, products and other materials.
8. CONFIDENTIAL INFORMATION. Executive acknowledges that the confidential
and proprietary information and data (which shall mean information or
data not known or generally available to the public) obtained by him
during the course of his performance under this Agreement (or his work
prior to the date hereof for the Company) concerning the Company's
business, affairs, products, inventions, processes, techniques,
equipment, machinery, apparatus, business operations, technical
information, drawings, specifications, materials, know how, and the like,
and any knowledge or information developed by Executive as a result of
performing Services hereunder (collectively referred to as the
"CONFIDENTIAL INFORMATION"), are all the sole property of the Company.
Executive agrees to hold all Confidential Information in confidence and
not to disclose the same, without the prior written consent of the
Company, to anyone for any reason at any time (unless so required by law
or legal process, and then only after written notice to the Company and a
reasonable opportunity for the Company to challenge, at its cost, such
disclosure). Executive shall not, directly or indirectly, use or permit
the use of any Confidential Information for any purpose, other than
performing the Services hereunder, without the written consent of
Company. Executive shall use his best efforts to prevent publication,
disclosure or other use or transmission of any Confidential Information.
Upon the termination or expiration of this Agreement, or earlier if
requested by the Company, Executive agrees to return to the Company all
Confidential Information in the possession of Executive, regardless of
the form of such Confidential Information.
9. INTELLECTUAL PROPERTY RIGHTS.
(a) Without limiting the Company's rights arising by law or custom,
Executive acknowledges that the Company shall exclusively own, and
Executive hereby assigns, transfers, and conveys to the Company,
all discoveries, work product, trademarks, service marks, trade
names, brand names, software, copyrights, inventions,
improvements, patents and other intellectual property rights
produced, created, developed or conceived by Executive prior to or
during the Term of this Agreement,
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whether registered or unregistered, which relate to the Company's
business (collectively, the "INTELLECTUAL PROPERTY RIGHTS").
Executive shall disclose all such Intellectual Property Rights to
the Company, and Executive agrees to execute and deliver all
documents required by the Company to document or perfect the
Company's exclusive ownership of the Intellectual Property Rights.
(b) Executive further agrees that all copyrightable works developed by
the Executive, either alone or with others, prior to or during the
Term of this Agreement, which relate in any way to the Company's
business, shall be considered to be works made for hire and the
ownership of and the copyrights to such works shall be the
exclusive property of the Company. Executive shall disclose all
such works to the Company, and Executive agrees to execute and
deliver all documents required by the Company to document or
perfect the Company's exclusive ownership of such works.
(c) Upon the termination or expiration of this Agreement, or earlier
if requested by the Company, Executive agrees to return to the
Company all tangible (including electronic storage) elements of
the Intellectual Property Rights and works in the possession of
Executive, regardless of the form of such Intellectual Property
Rights and works.
(d) Notwithstanding the foregoing, the provisions of Section 9(a) does
not apply to any Intellectual Property Rights for which no
equipment, supplies, facility or trade secret information of
Company was used and which was developed entirely on Executive's
own time, and which does not relate to the business of the Company
or to the Company's actual or demonstrably anticipated business
activities.
10. NONCOMPETITION COVENANT. Executive hereby agrees that, during the Term
and for a period of two (2) years thereafter, Executive shall not,
directly or indirectly, own, manage, operate, control, be employed by,
act as an advisor or consultant to, or participate in, the ownership,
management, operation, or control of any business involving the design,
development, manufacture, distribution or sale (whether at wholesale or
retail) of drug delivery technology or otherwise in competition with the
businesses of the Company, as now or hereafter conducted, in any
geographic market served by the Company during the restriction period;
provided, however, that nothing contained in this Section shall prohibit
the Executive from owning stock in a publicly traded company which is in
competition with the Company provided Executive's aggregate holdings
therein do not exceed one percent (1%) of the capital of such company.
The provisions of this Section shall survive the expiration or
termination of this Agreement.
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11. MISCELLANEOUS.
11.1 Any notice, demand or communication required or permitted under this
Agreement shall be in writing and shall be sufficient when delivered
personally, or three (3) days after mailing by registered or certified
mail, return receipt requested, or the next day if sent by nationally
recognized overnight courier with proof of delivery, in each case postage
prepaid, addressed as follows:
If to the Company:
AlphaRx Inc.
75 East Beaver Creek, Unit 10
Richmond Hill, Ontario L4B 1B8
Attn.: Michael M. Lee, President
If to the Executive:
Joseph Schwarz
510-6020 Bathurst Street
Toronto, Ontario M2R 1Z8
The foregoing addressees may be changed at any time by notice given in the
manner herein provided.
11.2 This Agreement constitutes the entire understanding and agreement between
Company and Executive regarding its subject matter and supersedes all
prior negotiations and agreements, whether oral or written, between them
with respect to its subject matter. This Agreement may not be modified
except by a written agreement signed by the Executive and the Company.
11.3 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, successors and assigns,
except that this Agreement may not be assigned by the Executive.
11.4 No waiver by either party of any condition or of the breach by the other
of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or
covenant set forth in this Agreement. Moreover, the failure of either
party to exercise any right hereunder shall not bar the later exercise
thereof.
11.5 This Agreement shall be governed by the statutes and common laws of the
State of Delaware, excluding it's choice of law statutes or common law.
11.6 The headings of the various sections and paragraphs have been included
herein for convenience only and shall not be construed in interpreting
this Agreement.
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11.7 If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless,
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall,
nevertheless, remain in full force and effect in all other circumstances.
11.8 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized officer on the date first above
written.
ALPHARMX INC.
By: /s/ SANDRO PERSIAN By: /s/ MICHAEL M. LEE
--------------------------- ---------------------------
Sandro Persia Michael M. Lee
Secretary Chairman/CEO
EXECUTIVE
By: /s/ JOSEPH SCHWARTZ
---------------------------
Joseph Schwartz
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EMPLOYMENT AGREEMENT WITH MICHAEL WEISSPAPIR
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1st
day of July, 2000 by and between AlphaRx Inc., a Delaware corporation
("Company"), and Michael Weisspapir ("Executive").
WHEREAS, Company desires to employ Executive as its Senior Scientist and
Executive desires to be employed by Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth and the mutual benefits to be derived herefrom, and intending to be
legally bound hereby, the Company and the Executive agree as follows:
1. EMPLOYMENT AND TERM. Company hereby employs Executive and Executive
hereby accepts employment for a term commencing on July 1st, 2000 and
continuing until June 30th, 2003, unless sooner terminated as provided
for in this Agreement. Company and Executive have the option to
renegotiate this Agreement beyond the three-year period. Executive hereby
warrants and represents to Company that he is free to enter into this
Agreement and is not a party to any agreement, written or otherwise, or
bound by any restrictions, which limit or restrict him from entering into
this Agreement or performing the services, duties and responsibilities
called for hereunder.
2. DUTIES.
2.1 Executive shall perform the duties of the Senior Scientist of the Company
and such additional executive duties of Company and its affiliates as may
be, from time to time, requested of him by the Company's Board of
Directors or the Chairman, President or Chief Scientist of the Company.
2.2 Executive shall devote his full professional time and best efforts to the
performance of his duties and responsibilities hereunder to advance the
interests of the Company and shall not during the term of this Agreement
(as defined in Section 1 hereof) be employed, involved or otherwise
engaged in, either directly or indirectly, any other employment for gain,
profit or other pecuniary advantage, without prior written consent of
Company. At no time shall Executive engage in any activity that conflicts
with the business of the Company or its affiliates. Nothing set forth in
this section 2.2 shall be construed to prevent Executive from (i) acting
as a member of Board of Trustees or a member of Board of Directors of any
other corporation, or as a member of the Board of Trustees of any
organization or entity which is not a competitor of the Company or (ii)
devoting of such of Executive's time and attention to philanthropic,
charitable, civic, community or other activities or endeavors as
Executive shall reasonably determine but only to the extent that
Executive's pursuance of any activities or endeavors does not materially
and adversely effect the Executive's ability to
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perform and discharge Executive's duties and objectives to the Company
hereunder.
2.3 Except for required travel on Company business, Executive shall perform
his duties and responsibilities at the Company's principal executive
offices located in the greater Toronto area. The Company shall furnish
Executive with office space, secretarial assistance, a personal computer,
and such other facilities and services as shall be suitable to
Executive's position and adequate for the performance of his duties
hereunder.
3. COMPENSATION. For all duties and responsibilities to be performed and/or
assumed by Executive hereunder, Executive shall be entitled to receive an
annual salary as set forth below ("Base Salary"). The Base Salary, less
any sums required to be withheld by law, shall be payable in equal
monthly installments or such other more frequent regular installments as
the Company may, from time to time, determine. For purposes hereof, Base
Salary shall be:
3.1.1 For the twelve-month period commencing with the date hereof, the Base
Salary shall be US$12,000.00 per year which shall be increased to $72,000
per year after the first six months of employment.
3.1.2 For each year thereafter, the Base Salary shall be increased by an amount
determined by the Board of Directors but in no event less than (i) five
percent (5%) after the first year, six percent (6%) after the second year
and each year thereafter upon mutual agreement to extend the term. Each
percentage increase for a particular year shall be based on the Base
Salary for the immediately preceding year.
4. FRINGE BENEFITS. Company shall pay for or provide Executive with the
following benefits:
4.1 For the first year, Executive shall be entitled to one (1) week paid
vacation to be used at the Executive's discretion. Thereafter, Executive
shall be entitled to two (2) weeks paid vacation during each full year of
this Agreement to be used at the Executives discretion. Vacation time
shall accrue on a pro-rata basis during each year of this Agreement. Any
unused vacation shall not be cumulative from year to year unless
otherwise agreed upon by the parties.
4.2 Such other employee benefits maintained by the Company for its senior
executives and key management employees, including, all pension, profit
sharing, retirement, stock bonus and stock option plans, to the extent
Executive is eligible to participate pursuant to the terms and conditions
of such plans.
4.3 Executive shall be reimbursed in a timely manner for all items of travel,
entertainment and miscellaneous expenses which Executive reasonably
incurs in connection with the performance of his duties hereunder,
provided that the Executive submits to the Company such statements and
other evidence supporting said expenses as the Company my reasonably
require. Executive, when traveling
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on Company business, shall be permitted to fly economy class on all
domestic and international flights.
5. STOCK OPTIONS.
5.1 As part of Executive's compensation for services to be rendered
hereunder, Executive shall have the right and option to purchase from
Company voting common stock in Company ("Option"). The total number of
shares available to Executive under this Option is One Hundred Thousand
Shares (100,000) at a purchase price of Ten Cents ($0.10) per share
("Option Shares"). The Option Shares are available for purchase in
installments as listed in Column A below and each installment shall
become vested on the corresponding date listed in Column B, as follows:
Column A Column B
Number of Shares Date Option Shares Available for Purchase
Become Vested
25,000 Upon the commencement of Executive's employment
pursuant to the terms of this Agreement
25,000 First anniversary date of this Agreement
25,000 Second anniversary date of this Agreement
25,000 Third Anniversary date of this Agreement
In order for the Option Shares to become vested as provided for above, Executive
must be employed by the Company under the terms of this Agreement as of the
vesting date set forth in Column B above.
5.2 Except as otherwise provided for below, the term of the Option granted
shall remain in effect for five (5) years from the date on which such
Option Shares become vested. If the Executive's employment with the
Company is terminated by the Company for Cause (as defined herein) or by
the act of Executive, the Executive's right to exercise vested Option
Shares shall cease and become null and void within thirty (30) days of
the date employment terminated, except as otherwise provided in Section
5.3 hereof. All unvested Option Shares will terminate immediately as of
the date of such termination of employment. In the event the Company
receives, accepts and consummates a tender offer for all of its
outstanding common stock prior to the vesting of the Option Shares, the
vesting rights shall be accelerated so as to allow Executive to exercise
the Option to purchase all of the Option Shares immediately prior to the
consummation of such tender offer.
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5.3 Notwithstanding anything in this Section 5 to the contrary, if the
Executive's employment is terminated for Cause, as set forth in Section
6.3, the Company shall have the right to terminate and withdraw any
vested or unvested Options under this Agreement.
5.4 The purchase price of the Option Shares shall be paid in full upon the
exercise of the Option, and Company shall not be required to deliver
certificates for such Option Shares until payment has been made. In
addition to, and at the time of payment of the purchase price for such
Option Shares, Executive shall be responsible for all federal and state
withholding or other employment taxes applicable to the taxable income of
such Executive and any other fees resulting from the exercise of the
Executive.
5.5 Each share of Option Stock purchased pursuant to the terms hereof shall
carry all appropriate registration and/or restrictions on sale and
notices as determined from time to time by Company's securities counsel.
Executive shall cooperate with Company and Company's counsel in complying
with all applicable securities laws.
6. TERMINATION OF EMPLOYMENT. The employment of Executive and Company's
liability and obligations hereunder shall terminate as follows:
6.1 This Agreement shall terminate immediately upon the death of Executive.
In such event, Company shall pay to such person as Executive may
designate in a written notice filed with the Company, or if no such
person shall be designated, to Executive's estate, a lump sum death
benefit in an amount equal to two (2) months of Executive's Base Salary
as in effect on the date of Executive's death and double indemnity in
event Executive's death occurs while traveling on Company business.
6.2 This Agreement shall terminate immediately upon the Disability of
Executive. Disability shall exist if due to a mental or physical
condition, Executive is determined to be unable to perform his duties and
responsibilities hereunder for a continuous period of two (2) months.
Disability shall be conclusively established by written certification by
two (2) licensed, disinterested physicians selected as mutually agreed
upon between Company and Executive. In the event the two (2) physicians
disagree, a third physician shall be selected by the two physicians to
break such impasse. The costs associated with the determination of
Disability shall be borne equally between Company and Executive. In the
event of Disability, Executive shall be entitled to receive his Base
Salary in accordance with Section 3 for a period of two (2) months
following the onset of Disability.
6.3 The Company may discharge the Executive for Cause and thereby immediately
terminate his employment under this Agreement. For purposes of this
Agreement, Company shall have "Cause" to terminate the Executive's
employment if the Executive, in the reasonable judgment of the Company:
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6.3.1 Willfully fails to perform any reasonable directive of the Company's
Board of Directors, Chairman or Chief Executive Officer.
6.3.2 Materially breaches any of the agreements, duties, responsibilities or
obligations under this Agreement.
6.3.3 Embezzles or converts to his own use any funds or property of the Company
or any client or customer of the Company.
6.3.4 Is convicted of a felony or any crime involving larceny, embezzlement or
moral turpitude.
6.4 In the event that Executive's employment is terminated by the Company
without Cause, as defined in Section 6.3, above, for a reason other than
death or Disability, or Executive shall resign for "Good Reason", as
defined below, then, in such event:
6.4.1 Executive's Base Salary, as defined in Section 3 as then in effect, shall
continue to be paid for a period of one (1) month ("Payment Period").
6.4.2 Company shall maintain in effect during the Payment Period, for the
continued benefit of the Executive, all of the employee benefit plans and
programs in which the Executive was entitled to participate immediately
prior to the Executive's termination provided same is possible under the
general terms and provisions of such benefit plans and programs.
Moreover, during the Payment Period the Company shall provide the
Executive with such reasonable administrative and secretarial support
services as may be necessary or appropriate in order to assist Executive
in finding new employment or Executive may select an out-placement
service to be paid for by the Company at a cost not to exceed One
Thousand Dollars ($1,000).
For purposes of this Section 6.4, "Good Reason" shall mean:
(i) An assignment to the Executive of any duties inconsistent with, or
a material change in the nature or scope of, Executive's
responsibilities, authority or duties hereunder.
(ii) Failure by the Company to comply with the provisions of this
Agreement.
(iii) Ill health of Executive or a member of his family, or any other
compelling personal circumstance which, in the mutual discretion
of the Executive, and the Chairman of the Company makes the
Executive's continued employment hereunder impossible, or
inappropriate.
6.5 Executive may voluntarily terminate his employment under this Agreement
without Good Reason, as defined in Section 6.4 above, by giving the
Company ninety (90) days prior written notice thereof, and upon the
expiration of such ninety (90) day period, Executive's employment under
this Agreement shall
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terminate, and Company shall have no further obligation or liabilities
under this Agreement except to pay the Executive the portion, if any,
that remains unpaid of the Base Salary and unpaid accrued prorated
vacation for the period up to the date of termination. Resignation as
defined herein must be in written form to the Board, witnessed and signed
by the Executive.
7. SURRENDER OF BOOKS AND RECORDS. Executive acknowledges that all lists,
books, records, literature, products and any other materials owned by
Company or its affiliates or used by them in connection with the conduct
of their business, shall at all times remain the property of Company and
its affiliates and that upon termination of employment hereunder,
irrespective of the time, manner or cause of said termination, Executive
will surrender to Company and its affiliates all such lists, books,
records, literature, products and other materials.
8. CONFIDENTIAL INFORMATION. Executive acknowledges that the confidential
and proprietary information and data (which shall mean information or
data not known or generally available to the public) obtained by him
during the course of his performance under this Agreement (or his work
prior to the date hereof for the Company) concerning the Company's
business, affairs, products, inventions, processes, techniques,
equipment, machinery, apparatus, business operations, technical
information, drawings, specifications, materials, know how, and the like,
and any knowledge or information developed by Executive as a result of
performing Services hereunder (collectively referred to as the
"CONFIDENTIAL INFORMATION"), are all the sole property of the Company.
Executive agrees to hold all Confidential Information in confidence and
not to disclose the same, without the prior written consent of the
Company, to anyone for any reason at any time (unless so required by law
or legal process, and then only after written notice to the Company and a
reasonable opportunity for the Company to challenge, at its cost, such
disclosure). Executive shall not, directly or indirectly, use or permit
the use of any Confidential Information for any purpose, other than
performing the Services hereunder, without the written consent of
Company. Executive shall use his best efforts to prevent publication,
disclosure or other use or transmission of any Confidential Information.
Upon the termination or expiration of this Agreement, or earlier if
requested by the Company, Executive agrees to return to the Company all
Confidential Information in the possession of Executive, regardless of
the form of such Confidential Information.
9. INTELLECTUAL PROPERTY RIGHTS.
(a) Without limiting the Company's rights arising by law or custom,
Executive acknowledges that the Company shall exclusively own, and
Executive hereby assigns, transfers, and conveys to the Company,
all discoveries, work product, trademarks, service marks, trade
names, brand names, software, copyrights, inventions,
improvements, patents and other intellectual property rights
produced, created, developed or conceived by Executive prior to or
during the Term of this Agreement, whether
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registered or unregistered, which relate to the Company's business
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Executive
shall disclose all such Intellectual Property Rights to the
Company, and Executive agrees to execute and deliver all documents
required by the Company to document or perfect the Company's
exclusive ownership of the Intellectual Property Rights.
(b) Executive further agrees that all copyrightable works developed by
the Executive, either alone or with others, prior to or during the
Term of this Agreement, which relate in any way to the Company's
business, shall be considered to be works made for hire and the
ownership of and the copyrights to such works shall be the
exclusive property of the Company. Executive shall disclose all
such works to the Company, and Executive agrees to execute and
deliver all documents required by the Company to document or
perfect the Company's exclusive ownership of such works.
(c) Upon the termination or expiration of this Agreement, or earlier
if requested by the Company, Executive agrees to return to the
Company all tangible (including electronic storage) elements of
the Intellectual Property Rights and works in the possession of
Executive, regardless of the form of such Intellectual Property
Rights and works.
(d) Notwithstanding the foregoing, the provisions of Section 9(a) does
not apply to any Intellectual Property Rights for which no
equipment, supplies, facility or trade secret information of
Company was used and which was developed entirely on Executive's
own time, and which does not relate to the business of the Company
or to the Company's actual or demonstrably anticipated business
activities.
10. NONCOMPETITION COVENANT. Executive hereby agrees that, during the Term
and for a period of two (2) years thereafter, Executive shall not,
directly or indirectly, own, manage, operate, control, be employed by,
act as an advisor or consultant to, or participate in, the ownership,
management, operation, or control of any business involving the design,
development, manufacture, distribution or sale (whether at wholesale or
retail) of drug delivery technology or otherwise in competition with the
businesses of the Company, as now or hereafter conducted, in any
geographic market served by the Company during the restriction period;
provided, however, that nothing contained in this Section shall prohibit
the Executive from owning stock in a publicly traded company which is in
competition with the Company provided Executive's aggregate holdings
therein do not exceed one percent (1%) of the capital of such company.
The provisions of this Section shall survive the expiration or
termination of this Agreement.
11. MISCELLANEOUS.
11.1 Any notice, demand or communication required or permitted under this
Agreement shall be in writing and shall be sufficient when delivered
personally,
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or three (3) days after mailing by registered or certified mail, return
receipt requested, or the next day if sent by nationally recognized
overnight courier with proof of delivery, in each case postage prepaid,
addressed as follows:
If to the Company:
AlphaRx Inc.
75 East Beaver Creek, Unit 10
Richmond Hill, Ontario L4B 1B8
Attn.: Michael M. Lee, President
If to the Executive:
Michael Weisspapir
812-12 Goldfinch Court
Toronto, Ontario M2R 2C4
The foregoing addressees may be changed at any time by notice given in
the manner herein provided.
11.2 This Agreement constitutes the entire understanding and agreement between
Company and Executive regarding its subject matter and supersedes all
prior negotiations and agreements, whether oral or written, between them
with respect to its subject matter. This Agreement may not be modified
except by a written agreement signed by the Executive and the Company.
11.3 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, successors and assigns,
except that this Agreement may not be assigned by the Executive.
11.4 No waiver by either party of any condition or of the breach by the other
of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or
covenant set forth in this Agreement. Moreover, the failure of either
party to exercise any right hereunder shall not bar the later exercise
thereof.
11.5 This Agreement shall be governed by the statutes and common laws of the
State of Delaware, excluding it's choice of law statutes or common law.
11.6 The headings of the various sections and paragraphs have been included
herein for convenience only and shall not be construed in interpreting
this Agreement.
11.7 If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless,
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall,
nevertheless, remain in full force and effect in all other circumstances.
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11.8 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized officer on the date first above
written.
ALPHARMX INC.
By: /s/ SANDRO PERSIAN By: /s/ MICHAEL M. LEE
--------------------------- ---------------------------
Sandro Persia Michael M.Lee
Secretary Chairman/CEO
EXECUTIVE
By: /s/ MICHAEL WEISSPAPIR
---------------------------
Michael Weisspapir
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EMPLOYMENT AGREEMENT WITH SAI MING WONG
EMPLOYMENT AGREEMENT ("Agreement") made and entered into as of the 1st
day of July, 2000 by and between AlphaRx Inc., a Delaware corporation
("Company"), and Sai Ming Wong ("Executive").
WHEREAS, Company desires to employ Executive as its Executive Vice
President and Executive desires to be employed by Company, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth and the mutual benefits to be derived herefrom, and intending to be
legally bound hereby, the Company and the Executive agree as follows:
1. Employment and Term. Company hereby employs Executive and Executive
hereby accepts employment for a term commencing on July 1st, 2000 and
continuing until June 30th, 2003, unless sooner terminated as provided
for in this Agreement. Company and Executive have the option to
renegotiate this Agreement beyond the three-year period. Executive hereby
warrants and represents to Company that he is free to enter into this
Agreement and is not a party to any agreement, written or otherwise, or
bound by any restrictions, which limit or restrict him from entering into
this Agreement or performing the services, duties and responsibilities
called for hereunder.
2. Duties.
2.1 Executive shall perform the duties of the Executive Vice President of the
Company and such additional executive duties of Company and its
affiliates as may be, from time to time, requested of him by the
Company's Board of Directors or the Chairman, President and/or Chief
Executive Officer of the Company.
2.2 Executive shall devote his full professional time and best efforts to the
performance of his duties and responsibilities hereunder to advance the
interests of the Company and shall not during the term of this Agreement
(as defined in Section 1 hereof) be employed, involved or otherwise
engaged in, either directly or indirectly, any other employment for gain,
profit or other pecuniary advantage, without prior written consent of
Company. At no time shall Executive engage in any activity that conflicts
with the business of the Company or its affiliates. Nothing set forth in
this section 2.2 shall be construed to prevent Executive from (i) acting
as a member of Board of Trustees or a member of Board of Directors of any
other corporation, or as a member of the Board of Trustees of any
organization or entity which is not a competitor of the Company or (ii)
devoting of such of Executive's time and attention to philanthropic,
charitable, civic, community or other activities or endeavors as
Executive shall reasonably determine but only to the extent that
Executive's pursuance of any activities or endeavors does not materially
and adversely effect the Executive's ability to
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perform and discharge Executive's duties and objectives to the Company
hereunder.
2.3 Except for required travel on Company business, Executive shall perform
his duties and responsibilities at the Company's principal Asia offices
located in Hong Kong. The Company shall furnish Executive with office
space, secretarial assistance, a personal computer, and such other
facilities and services as shall be suitable to Executive's position and
adequate for the performance of his duties hereunder.
3. Compensation. For all duties and responsibilities to be performed and/or
assumed by Executive hereunder, Executive shall be entitled to receive an
annual salary as set forth below ("Base Salary"). The Base Salary, less
any sums required to be withheld by law, shall be payable in equal
monthly installments or such other more frequent regular installments as
the Company may, from time to time, determine. For purposes hereof, Base
Salary shall be:
3.1.1 For the six-month period commencing with the date hereof, the Base Salary
shall be $12,000 per year which shall be increased to $36,000 per year
after the first six months of employment
3.1.2 For each year thereafter, the Base Salary shall be increased by an amount
determined by the Board of Directors but in no event less than (i) five
percent (5%) after the first year, six percent (6%) after the second year
and seven percent (7%) after the third year and each year thereafter upon
mutual agreement to extend the term. Each percentage increase for a
particular year shall be based on the Base Salary for the immediately
preceding year.
4. Fringe Benefits. Company shall pay for or provide Executive with the
following benefits:
4.1 For the first year, Executive shall be entitled to three (3) weeks paid
vacation to be used at the Executive's discretion. Thereafter, Executive
shall be entitled to four (4) weeks paid vacation during each full year
of this Agreement to be used at the Executives discretion. Vacation time
shall accrue on a pro-rata basis during each year of this Agreement. Any
unused vacation shall be cumulative from year to year unless otherwise
agreed upon by the parties.
4.2 Health and hospitalization insurance established and maintained by the
Company for its senior executives and key management personnel. Since the
Company presently does not have, in effect, a plan for health and
hospitalization insurance, Company shall reimburse Executive for all
medical payments made by Executive to his previous employer for health
and hospitalization coverage for Executive and his family. Thereafter,
Company shall either secure and maintain health and hospitalization
insurance for Executive and his dependents or reimburse Executive for
coverage comparable to Blue Shield/Blue Cross for Executive and his
immediate family.
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4.3 Such other employee benefits maintained by the Company for its senior
executives and key management employees, including, all pension, profit
sharing, retirement, stock bonus and stock option plans, to the extent
Executive is eligible to participate pursuant to the terms and conditions
of such plans.
4.4 Executive shall be reimbursed in a timely manner for all items of travel,
entertainment and miscellaneous expenses which Executive reasonably
incurs in connection with the performance of his duties hereunder,
provided that the Executive submits to the Company such statements and
other evidence supporting said expenses as the Company my reasonably
require. Executive, when traveling on Company business, shall be
permitted to fly economy class on all domestic flights and business class
on all international flights with at least 4 hours of flight time.
5. Stock Options.
5.1 As part of Executive's compensation for services to be rendered
hereunder, Executive shall have the right and option to purchase from
Company voting common stock in Company ("Option"). The total number of
shares available to Executive under this Option is One Hundred & Fifty
Thousand Shares (150,000) at a purchase price of Ten Cents ($0.10) per
share ("Option Shares"). The Option Shares are available for purchase in
installments as listed in Column A below and each installment shall
become vested on the corresponding date listed in Column B, as follows:
Column A Column B
Number of Shares Date Option Shares Available for Purchase
Become Vested
37,500 Upon the commencement of Executive's employment
pursuant to the terms of this Agreement
37,000 First anniversary date of this Agreement
37,500 Second anniversary date of this Agreement
37,500 Third Anniversary date of this Agreement
In order for the Option Shares to become vested as provided for above, Executive
must be employed by the Company under the terms of this Agreement as of the
vesting date set forth in Column B above.
5.2 Except as otherwise provided for below, the term of the Option granted
shall remain in effect for ten (10) years from the date on which such
Option Shares become vested. If the Executive's employment with the
Company is terminated
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by the Company for Cause (as defined herein) or by the act of Executive,
the Executive's right to exercise vested Option Shares shall cease and
become null and void within thirty (30) days of the date employment
terminated, except as otherwise provided in Section 5.3 hereof. All
unvested Option Shares will terminate immediately as of the date of such
termination of employment. In the event the Company receives, accepts and
consummates a tender offer for all of its outstanding common stock prior
to the vesting of the Option Shares, the vesting rights shall be
accelerated so as to allow Executive to exercise the Option to purchase
all of the Option Shares immediately prior to the consummation of such
tender offer.
5.3 Notwithstanding anything in this Section 5 to the contrary, if the
Executive's employment is terminated for Cause, as set forth in Section
6.3, the Company shall have the right to terminate and withdraw any
vested or unvested Options under this Agreement.
5.4 The purchase price of the Option Shares shall be paid in full upon the
exercise of the Option, and Company shall not be required to deliver
certificates for such Option Shares until payment has been made. In
addition to, and at the time of payment of the purchase price for such
Option Shares, Executive shall be responsible for all federal and state
withholding or other employment taxes applicable to the taxable income of
such Executive and any other fees resulting from the exercise of the
Executive.
5.5 Each share of Option Stock purchased pursuant to the terms hereof shall
carry all appropriate registration and/or restrictions on sale and
notices as determined from time to time by Company's securities counsel.
Executive shall cooperate with Company and Company's counsel in complying
with all applicable securities laws.
6. Termination of Employment. The employment of Executive and Company's
liability and obligations hereunder shall terminate as follows:
6.1 This Agreement shall terminate immediately upon the death of Executive.
In such event, Company shall pay to such person as Executive may
designate in a written notice filed with the Company, or if no such
person shall be designated, to Executive's estate, a lump sum death
benefit in an amount equal to twelve (12) months of Executive's Base
Salary as in effect on the date of Executive's death and double indemnity
in event Executive's death occurs while traveling on Company business.
6.2 This Agreement shall terminate immediately upon the Disability of
Executive. Disability shall exist if due to a mental or physical
condition, Executive is determined to be unable to perform his duties and
responsibilities hereunder for a continuous period of two (2) months.
Disability shall be conclusively established by written certification by
two (2) licensed, disinterested physicians selected as mutually agreed
upon between Company and Executive. In the event the two (2)
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physicians disagree, a third physician shall be selected by the two
physicians to break such impasse. The costs associated with the
determination of Disability shall be borne equally between Company and
Executive. In the event of Disability, Executive shall be entitled to
receive his Base Salary in accordance with Section 3 for a period of six
(6) months following the onset of Disability.
6.3 The Company may discharge the Executive for Cause and thereby immediately
terminate his employment under this Agreement. For purposes of this
Agreement, Company shall have "Cause" to terminate the Executive's
employment if the Executive, in the reasonable judgment of the Company:
6.3.1 Willfully fails to perform any reasonable directive of the Company's
Board of Directors, Chairman or Chief Executive Officer.
6.3.2 Materially breaches any of the agreements, duties, responsibilities or
obligations under this Agreement.
6.3.3 Embezzles or converts to his own use any funds or property of the Company
or any client or customer of the Company.
6.3.4 Is convicted of a felony or any crime involving larceny, embezzlement or
moral turpitude.
6.4 In the event that Executive's employment is terminated by the Company
without Cause, as defined in Section 6.3, above, for a reason other than
death or Disability, or Executive shall resign for "Good Reason", as
defined below, then, in such event:
6.4.1 Executive's Base Salary, as defined in Section 3 as then in effect, shall
continue to be paid for a period of six (6) months ("Payment Period").
6.4.2 Company shall maintain in effect during the Payment Period, for the
continued benefit of the Executive, all of the employee benefit plans and
programs in which the Executive was entitled to participate immediately
prior to the Executive's termination provided same is possible under the
general terms and provisions of such benefit plans and programs.
Moreover, during the Payment Period the Company shall provide the
Executive with such reasonable administrative and secretarial support
services as may be necessary or appropriate in order to assist Executive
in finding new employment or Executive may select an out-placement
service to be paid for by the Company at a cost not to exceed Five
Thousand Dollars ($5,000).
For purposes of this Section 6.4, "Good Reason" shall mean:
(i) An assignment to the Executive of any duties inconsistent with, or
a material change in the nature or scope of, Executive's
responsibilities, authority or duties hereunder.
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(ii) Failure by the Company to comply with the provisions of this
Agreement.
(iii) Ill health of Executive or a member of his family, or any other
compelling personal circumstance which, in the mutual discretion
of the Executive, and the Chairman of the Company makes the
Executive's continued employment hereunder impossible, or
inappropriate.
6.5 Executive may voluntarily terminate his employment under this Agreement
without Good Reason, as defined in Section 6.4 above, by giving the
Company ninety (90) days prior written notice thereof, and upon the
expiration of such ninety (90) day period, Executive's employment under
this Agreement shall terminate, and Company shall have no further
obligation or liabilities under this Agreement except to pay the
Executive the portion, if any, that remains unpaid of the Base Salary and
unpaid accrued prorated vacation for the period up to the date of
termination. Resignation as defined herein must be in written form to the
Board, witnessed and signed by the Executive.
7. Surrender of Books and Records. Executive acknowledges that all lists,
books, records, literature, products and any other materials owned by
Company or its affiliates or used by them in connection with the conduct
of their business, shall at all times remain the property of Company and
its affiliates and that upon termination of employment hereunder,
irrespective of the time, manner or cause of said termination, Executive
will surrender to Company and its affiliates all such lists, books,
records, literature, products and other materials.
8. Miscellaneous.
8.1 Any notice, demand or communication required or permitted under this
Agreement shall be in writing and shall be sufficient when delivered
personally, or three (3) days after mailing by registered or certified
mail, return receipt requested, or the next day if sent by nationally
recognized overnight courier with proof of delivery, in each case postage
prepaid, addressed as follows:
If to the Company:
AlphaRx Inc.
75 East beaver Creek, Unit 10
Richmond Hill, Ontario L4B 1B8
Attn.: Michael M. Lee, President
If to the Executive:
Sai Ming Wong
Room 1802, Choi Yuk House, Choi Yuen Estate
Sheung Shui, Hong Kong
The foregoing addressees may be changed at any time by notice given in
the manner herein provided.
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8.2 This Agreement constitutes the entire understanding and agreement between
Company and Executive regarding its subject matter and supersedes all
prior negotiations and agreements, whether oral or written, between them
with respect to its subject matter. This Agreement may not be modified
except by a written agreement signed by the Executive and the Company.
8.3 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, executors, successors and assigns,
except that this Agreement may not be assigned by the Executive.
8.4 No waiver by either party of any condition or of the breach by the other
of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or
covenant set forth in this Agreement. Moreover, the failure of either
party to exercise any right hereunder shall not bar the later exercise
thereof.
8.5 This Agreement shall be governed by the statutes and common laws of the
State of Delaware, excluding it's choice of law statutes or common law.
8.6 The headings of the various sections and paragraphs have been included
herein for convenience only and shall not be construed in interpreting
this Agreement.
8.7 If any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall, nevertheless,
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall,
nevertheless, remain in full force and effect in all other circumstances.
8.8 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed by the Executive and
on behalf of the Company by its duly authorized officer on the date first above
written.
ALPHARMX INC.
By: /s/ SANDRO PERSIAN By: /s/ MICHAEL M. LEE
--------------------------- ---------------------------
Sandro Persia Michael M. Lee
Secretary Chairman/CEO
EXECUTIVE
By: /s/ SAI MING WONG
--------------------
Sai Ming Wong
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SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED: December 21, 2000
ALPHARx, INC.
By: /S/ MICHAEL M. LEE
-----------------------------
Michael M. Lee, President
Directors:
/S/ MICHAEL M. LEE
-------------------------
Michael M. Lee, Director
/S/ SAI MING WONG
-------------------------
Sai Ming Wong, Director
/S/ JOSEPH SCHWARTZ
-------------------------
Joseph Schwartz, Director
/S/ SANDRO PERSIA
-------------------------
Sandro Persia, Director
