As filed with the Securities and Exchange Commission on September 28, 1998
Registration Statement No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------
IMMTECH INTERNATIONAL, INC.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 8733 39-1523370
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
1890 Maple Avenue, Suite 110, Evanston, Illinois 60201 (847) 869-0033
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
T. Stephen Thompson
President
1890 Maple Avenue
Suite 110
Evanston, Illinois 60201
(847) 869-0033
(Name, address, including zip code, and telephone,
including area code, of agent for service)
with copies to:
John P. Goebel Vincent J. McGill
Gardner, Carton & Douglas Phillips, Nizer, Benjamin,
321 North Clark Street, Krim & Ballon LLP
Suite 3400 666 Fifth Avenue
Chicago, Illinois 60610-4795 New York, New York 10103-0084
(312) 245-8747 (212) 841-0566
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of this Registration
Statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
<PAGE>
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum
Title of Each Class of Amount Offering Aggregate Amount of
Securities to be Price Offering Registration
To be Registered Registered(1) Per Unit(2) Price(2) Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units 1,333,333 $6.00 $ 7,999,998 $2,360
Each Unit consisting of:
Two Shares of Common Stock,
$0.01 par value 2,666,666 N/A N/A (3)
One Class A Warrant to purchase
a share of Common Stock,
$0.01 par value 1,333,333 N/A N/A (3)(4)
Class B Contingent Warrants,
contingent upon exercise of the
Class A Warrant, to purchase
a share of Common Stock,
$0.01 par value 1,333,333 N/A N/A (3)(4)
Class C Contingent Warrants,
contingent upon exercise of the
Class A Warrant, to purchase
a share of Common Stock,
$0.01 par value 1,333,333 N/A N/A (3)(4)
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Common Stock, $0.01 par value, 3,999,999 $3.00 $11,999,997 $3,540
issuable on exercise of
Warrants (4)
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Common Stock, $0.01 par value 1,150,000 $3.00 $ 3,450,000 $1,018
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value 750,000 N/A N/A $ 664
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Total N/A N/A $23,449,995 $ 7,582(2)
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</TABLE>
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the antidilution provisions
of the Class A Warrants, the Class B Warrants and the Class C Warrants
(collectively, the "Warrants").
(2) Estimated solely for the purpose of computing the registration fee.
(3) As such securities are to be provided to purchasers of Units at no
additional cost, no registration fee is required with respect thereto.
<PAGE>
(4) Pursuant to Rule 457(g), the registration fee with respect to the Warrants
is being calculated based upon the price at which the Warrants may be
exercised and is reflected in this table opposite the shares of Common
Stock issuable on exercise of the Warrants.
-----------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1998
PROSPECTUS
[GRAPHIC OMITTED] IMMTECH INTERNATIONAL, INC.
1,333,333 Units Consisting of Two Shares of Common Stock and
One Class A Warrant
750,000 Shares of Common Stock
Immtech International, Inc. (the "Company" or "Immtech") is hereby
offering to the public 1,333,333 Units (the "Unit Offering"), each consisting of
two shares of Common Stock, $0.01 par value (the "Common Stock"), and one Class
A Common Stock Purchase Warrant (the "Class A Warrants"). Each Class A Warrant
entitles the holder to purchase at a price equal to the initial public offering
price per share at any time after the closing of this Offering and until
December 31, 1998 one share of Common Stock, one Class B Contingent Common Stock
Purchase Warrant (the "Class B Warrants") and one Class C Contingent Common
Stock Purchase Warrant (the "Class C Warrants" and collectively with the Class A
Warrants and the Class B Warrants, the "Warrants"). Each Class B Warrant
entitles the holder to purchase one share of Common Stock at a price equal to
the initial public offering price per share at any time from the date of
issuance until March 31, 1999. Each Class C Warrant entitles the holder to
purchase one share of Common Stock at a price equal to the initial public
offering price per share at any time from the date of issuance until June 30,
1999. The shares of Common Stock and Class A Warrant comprising a Unit will be
separately transferable immediately upon the closing of the Offering. It is
currently estimated that the initial public offering price will be between $3.00
and $6.00 per Unit. For information regarding the factors considered in
determining the initial public offering price of the Units and the exercise
price of the Warrants, see "Risk Factors" and "Underwriting". In addition, a
stockholder of the Company, Criticare Systems Inc. ("Criticare"), is
distributing shares of Common Stock (the "Spin-off Offering" and collectively
with the Unit Offering, the "Offerings") by means of a dividend to Criticare's
stockholders of record as of _________ ___, 1998 [immediately prior to
effectiveness] (the "Spin-off Shares"). The Company will not receive any
proceeds from the dividend by Criticare to Criticare stockholders of the
Spin-off Shares. See "Underwriting - Spin-off Offering" for a description of the
method whereby the Spin-off Shares will be distributed. Prior to this Offering
there has been no market for the Common Stock, the Warrants or the Units and
there can be no assurance that a trading market will develop after this Offering
with respect to the Common Stock or Warrants. Application has been made for the
Common Stock to be approved for quotation on the Nasdaq SmallCap Market under
the symbol "IMMT." The Company currently does not intend to make application to
any stock exchange or over-the-counter market with respect to any class of
Warrants. See "Risk Factors - Arbitrary Determination of Offering Price; No
Public Market for the Securities."
The Securities offered hereby involve a high degree of risk. See "Risk
Factors" beginning on page 10 for a discussion of certain matters that should be
considered by prospective purchasers of the securities offered hereby.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=======================================================================
Proceeds to
Price to Company
Public (1)(2)
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Per Unit ............................ $ $
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Total................................ $ $
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<PAGE>
(1) Before deducting cash expenses of the Unit Offering payable by the Company
estimated to be $400,000.
(2) The Unit Offering is being underwritten by The New China Hong Kong
Securities Ltd. (the "Underwriter"). Upon sale of the Units to the
Underwriter, the Company has agreed to pay to the Underwriter a placement
and due diligence fee of $100,000. In addition, the Company will pay to
the Underwriter additional sums, aggregating $150,000, contingent upon the
exercise of the Class A Warrants, the Class B Warrants and the Class C
Warrants. The Company has also agreed to issue warrants to the Underwriter
and/or its designees to purchase up to 500,000 shares of Common Stock at
an exercise price of $0.05 per share. The Company has also agreed to
indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933. See "Underwriting."
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Proceeds to
Price to Criticare
Public (1)
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Per Share of Common Stock ............... $0 $0
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Total.................................... $0 $0
================================================================================
(1) Any direct expenses related solely to the Spin-off Offering shall be paid
by Criticare.
----------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The Units offered by this Prospectus are being offered by the Underwriter on a
firm commitment basis. The shares of Common Stock being distributed by Criticare
to Criticare's stockholders of record as of _________ ___, 1998 [immediately
prior to effectiveness] (the "Dividend Recipients") will be distributed to the
Dividend Recipients by means of a dividend effected contemporaneous with
completion of the Unit Offering. The Underwriter reserves the right to reject
any order in whole or in part and to withdraw, cancel or modify the offer
without notice in accordance with applicable state law. It is expected that
certificates for the shares of Common Stock and Warrants will be available for
delivery on or about __________, 1998 at the offices of __________________.
The date of this Prospectus is _____________, 1998
----------------------
2
<PAGE>
AVAILABLE INFORMATION
The Company is not subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Once the
Company's securities are registered under the Exchange Act, it will file reports
and other information with the Securities and Exchange Commission (the
"Commission"). The Company intends to register its securities under Section
12(g) of the Exchange Act. Such reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at the Pacific
Regional Office located at 5670 Wilshire Boulevard, 11th Floor, Los Angeles,
California 90036-3648, the New York Regional Office located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and the Chicago Regional Office
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 ("SEC Regional Offices") and can be reviewed through the
Commission's Electronic Data Gathering Analysis and Retrieval System ("EDGAR")
which is publicly available through the Commission's web site
(http://www.sec.gov).
The Company intends to furnish to its stockholders annual reports
containing financial statements audited by its independent certified public
accountants and quarterly reports containing unaudited interim financial
statements for the first three quarters of each fiscal year.
The Company has filed with the Commission a Registration Statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the securities offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission thereunder. For further information with respect to the
Company, the Units and the Common Stock offered hereby, reference is made to
such Registration Statement, exhibits and schedules. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the Commission's public
reference facilities at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, at the SEC Regional Offices and copies of all or any
part thereof may be obtained at prescribed rates from the Public Reference
Section of the Commission. Such reports and other information can be reviewed
through EDGAR.
3
<PAGE>
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS
SHOULD CONSIDER CAREFULLY THE INFORMATION PROVIDED UNDER "RISK FACTORS."
THE COMPANY
Immtech is a biopharmaceutical company focused on the discovery and
commercialization of therapeutics for the treatment of patients afflicted with
opportunistic infectious diseases, cancer or compromised immune systems. The
Company has two independent programs for developing drugs. The first is based on
a technology for the design of a class of pharmaceutical compounds referred to
as dications. The Company believes that pharmaceutical dications can be designed
to inhibit the growth of a wide variety of infectious organisms which cause
parasitic, fungal, protozoan, bacterial and viral diseases. The second is based
on biological proteins that work in conjunction with the body's immune system.
These biological proteins are derivatives of C-Reactive Protein ("CRP"), which
occurs naturally in the body and which the Company believes can be used to
control the structural environment around cancerous tumors and to reprogram
cancerous cells to stop growing uncontrollably and revert to normal cell
behavior.
Pharmaceutical Products - Dications
The Company's pharmaceutical platform technology for developing dications
is the result of a research program focused on understanding Pentamidine (a drug
marketed by Fujisawa Healthcare, Inc.). Although the drug has reported toxicity,
Pentamidine is effective for the treatment of Pneumocystis carinii pneumonia
("PCP"), a form of pneumonia common in patients with compromised immune systems.
Researchers at the University of North Carolina at Chapel Hill ("UNC")
discovered that most of Pentamidine's toxicity was caused by certain metabolites
formed as the drug breaks down within the body. This discovery led the
researchers to design new compounds with more stable molecular structures which
do not break down into toxic substances that cause side effects. These newly
designed compounds proved to be significantly less toxic and more effective in
treating PCP than Pentamidine. The methodology used by these researchers to
develop these new compounds evolved into the Company's platform technology for
designing dicationic compounds. The Company intends to use this technology to
design pharmaceutical compounds to treat a wide variety of infectious diseases.
Dicationic compounds have two positively charged ends held together by a
neutrally charged chemical linker group. The unique structures of the compounds
with positive charges on the ends (shaped like molecular barbells) allow them to
bind to the negatively charged surface in the minor groove of an organism's DNA
(like a band-aid), preventing necessary life-sustaining enzymes from attaching
to the DNA's active sites. Once a site is occupied by one of the Company's
compounds, the necessary enzyme cannot bind to the DNA, preventing the organism
from dividing and stopping the spread of the related disease by inhibiting or
killing the growth of the organism. The objective of the Company's
pharmaceutical program is the development of effective, safe drugs against a
variety of micro-organisms, including fungal, protozoan, parasitic, bacterial,
and viral micro-organisms.
The Company has two dicationic compounds ready to begin human clinical
trials. The first compound, DAP-092, is for the treatment of Cryptosporidium
parvum, a parasite that causes severe diarrhea and wasting. The second compound,
DB-289, is for the treatment of PCP. These two orally administered drugs are
ideally suited to demonstrate the power of the dicationic technology platform.
DAP-092 was developed to treat a parasite that is found only in the
gastro-intestinal tract ("gut"). DAP-092, because of its positive charges,
cannot cross the digestive membranes, and stays in the digestive tract. As a
result, potential harmful side-effects are greatly reduced. On the other hand,
DB-289 which works in the circulatory system, was developed with a proprietary
(patented) method of temporarily neutralizing the positive charges allowing it
to readily pass through the digestive membranes into the circulatory system
where the dications become activated for treatment of diseases.
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4
<PAGE>
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DAP-092
DAP-092, administered orally, is designed to treat diarrhea and wasting
syndromes caused by Cryptosporidium parvum, a parasite which is only found in
the gut. Cryptosporidiosis is recognized around the world as one of the most
common infections of the intestinal tract. Currently, no drug is available in
the market to treat this disease. DAP-092 was designed to block a key enzyme
from binding in the minor groove of the Cryptosporidium's DNA, thus inhibiting
or killing the growth of the organism. DAP-092 is unique because it will work
directly in the gut and not be absorbed into the circulatory system,
substantially reducing the possibility of adverse side-effects. The Company has
specifically targeted a drug for the treatment of Cryptosporidiosis in an effort
to take advantage of the fast track Food and Drug Administration ("FDA")
approval process often afforded to drugs which cure diseases for which there is
no acceptable treatment. See "Risk Factors - No Assurance of FDA Approval;
Government Regulation." The Company estimates the worldwide market for DAP-092
to be approximately $100 million per annum.
DB-289
DB-289 was developed as an oral substitute for the drug Pentamidine,
currently used to treat PCP. Pentamidine is administered via slow I.V. infusion
or inhalation due to its inability to cross membranes and its toxicity; it is
generally administered in a hospital setting at substantial cost. DB-289 is an
analog of Pentamidine in that its positive charges have been neutralized to
enable DB-289 to cross the digestive membranes. Also, DB-289 was designed with a
more stable molecular structure which delivers more drug to the infected site
and reduces toxicity caused by breakdown products. Once DB-289 enters the
circulatory system, naturally occurring enzymes remove the patented masking or
neutralizing charges to expose the active drug. Since DB-289 can be given orally
and does not result in toxic metabolites as it breaks down, it is anticipated
that it will be self-administered at home, making it substantially less
expensive to use than Pentamidine. The Company believes DB-289 will receive a
fast-track approval from the FDA and capture the existing Pentamidine market
shortly after market introduction. The Company estimates that DB-289's market
potential is approximately $200 million annually.
Both DAP-092 and DB-289 will enter Phase I/IIa trials upon completion of
this Offering. The Company also has a series of dication compounds under
development which could be developed to treat a variety of fungal infections,
malaria and tuberculosis. The market for drugs currently used to treat these
diseases is greater than one billion dollars in annual sales.
The Company has an agreement with Pharm-Eco Laboratories, Inc.
("Pharm-Eco") and UNC, acting on behalf of a consortium of universities
including UNC, Duke University, Auburn University and Georgia State University
(the "Consortium"), regarding the continuing development and commercialization
of the technology underlying the Company's dicationic pharmaceutical product
candidates. Pursuant to this Agreement, the Company has obtained rights to the
technology platform for making dicationic pharmaceutical products, and the
exclusive right to treat microbial infections using an existing library of 800
compounds developed by the Consortium and future Compounds designed by the
Consortium. The Company considers its relationship with the Consortium, which
includes many of the world's leading experts in opportunistic infections and
rational drug design, a substantial asset. Members of the Consortium have
laboratory testing systems for screening compounds for activity to specific
micro-organisms (using both laboratory and animal models). Additionally, Georgia
State University has a proprietary computer modeling program which simulates the
binding of dicationic compounds to cellular DNA, which facilitates the work of
research chemists in designing dicationic compounds to treat specific
infections.
Biological Products - Modified CRP
The Company's biological program is focused on strengthening the innate or
natural immune system by (1) improving the structural environment around cells
and (2) reprogramming cancer cells to act normally. The immune system
coordinates the body's responses to injury and infection. It is the body's
primary defense against disease. The Company's scientists discovered that, as
part of the immune system's response to disease, the blood protein CRP is
modified by the body to form modified CRP or mCRP. Modified CRP strengthens
tissues and their interconnective structures which work to increase their
ability to resist disease and improve the effectiveness of the immune system.
Modified CRP is found naturally in healthy tissues surrounding blood vessels, in
the tissues in lymphatic organs, and in cells that have secretory functions. In
contrast, mCRP is absent (or present in greatly reduced amounts) in cancerous
tissues, such as those found in the lung, breast or prostate.
Cancers occur when normal cells grow uncontrollably. Rapidly dividing
cancer cells produce enzymes which attack and weaken surrounding tissues,
allowing cancer cells to grow unrestrained and become tumors. This unrestrained
growth
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5
<PAGE>
- --------------------------------------------------------------------------------
may destroy surrounding organs or impair physiological functions, often leading
to death. The Company's scientists discovered that when cancerous cells come in
contact with mCRP, cell behavior is markedly changed, abnormal rapid growth
ceases and the cell returns to normal activity. The Company's biological program
focuses on replacing mCRP in areas where mCRP is deficient, increasing barriers
between cells to reduce the entry and propagation of disease, and enhancing
immune reactions.
Many scientists believe that although therapies that directly kill
infected or cancerous cells - e.g. chemotherapy, radiation therapy - are the
cornerstone to curing cancer, it is also necessary to develop therapies which
will bolster the immune system during treatment and foster regeneration of a
normal immune system. By combining "killing" therapies with "strengthening"
therapies, the chances for recovery are greatly increased. The Company believes
that its mCRP based biotherapeutic product is such a strengthening therapy. The
Company has developed a synthetic or recombinant form of mCRP (rmCRP) which can
be produced economically. In 1996, the Company conducted a Phase I human
clinical trial of rmCRP in HIV-infected volunteers. The clinical results showed
that the drug was safe to administer and duplicated the positive results seen in
the animal pre-clinical tests. The Company recently entered into an agreement
with the Franklin Research Group, a venture capital partnership, to obtain
funding to accelerate the Company's biotherapeutic program for the treatment of
cancer and related diseases based on rmCRP.
Strategy
The Company's pharmaceutical strategy is to utilize the platform
technology developed by the Consortium's scientists for making pharmaceutical
products. The initial two objectives are to (1) commercialize dications in niche
markets by gaining fast-track FDA approvals and (2) demonstrate the power of the
dication platform technology upon which many new drugs can be developed. The
Company will continue to develop other dications which target diseases with
larger patient populations, and hence, larger markets. The Company's biological
strategy is to commercialize its rmCRP products as a primary therapy against
cancer and as an adjuvant for use with chemotherapy in treating cancer and in
the administration of vaccines.
The principal elements of the Company's short-term strategy are to (i)
focus its resources on current core technologies, (principally DAP-092 and
DB-289) and gain FDA acceptance of its dicationic technology; (ii) commence
human clinical trials of DAP-092 and DB-289; (iii) commence human clinical
trials of rmCRP as a primary treatment for cancer; and (iv) leverage its
resources through corporate joint ventures to minimize the cost to the Company
of extended clinical trials and the development of manufacturing procedures for
the production of the Company's products. The current status of the Company's
products planned for clinical trials is summarized below:
Clinical Development Plan
<TABLE>
<CAPTION>
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Clinical Trial Trial Design/Phase Expected Result
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<S> <C> <C>
Dication Therapy Against o Phase I/IIa o Shorter diarrhea duration
Opportunistic Diarrhea; o 20-30 HIV-infected o Prevent weight loss
Cryptosporidiosis patients o Safety and efficacy
DAP-092 o Oral dosing established
- ----------------------------------------------------------------------------------------------------------
Pro-drug Oral Administration for o Phase I/IIa o Equivalent/improved anti-
Pneumocystis and tropical diseases o 25-50 PCP-infected, HIV- microbial effect against
DB-289 infected patients PCP
o Oral dosing o Facilitated drug delivery
o Bioavailability o Reduced side effects
o Safety and efficacy
established
- ----------------------------------------------------------------------------------------------------------
rmCRP o Phase I/IIa o Tumor growth stopped
Anticancer Therapy; NextEra (JV) o 30-50 patients - all cancers o Reduced metastatic disease
o IV injections o Tumor cells killed
o Dose escalation
==========================================================================================================
</TABLE>
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6
<PAGE>
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History
A predecessor of the Company was incorporated under the laws of the State
of Wisconsin on October 15, 1984 and subsequently merged into the current
Delaware corporation on April 1, 1993. The Company's executive offices are
located at 1890 Maple Avenue, Suite 110, Evanston, Illinois 60201, telephone
number 847-869-0033.
Recapitalization and Private Placement.
As of July 24, 1998 (the "Effective Date"), the Company (with stockholder
approval) completed a recapitalization (the "Recapitalization") pursuant to
which: (i) the Company effected a 0.645260-for-1 reverse stock split of all of
the shares of Common Stock issued and outstanding immediately prior to the
Effective Date, resulting in the reduction in the number of issued and
outstanding shares of Common Stock from 2,305,166 to 1,487,431 (the "Reverse
Stock Split"); (ii) the Company converted approximately $2,780,000 million in
indebtedness (consisting of stockholder advances, notes payable and related
accrued interest) outstanding immediately prior to the Effective Date into
1,209,962 shares of Common Stock (after giving effect to the Reverse Stock
Split), (iii) 1,794,550 shares of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Date were converted into
1,157,951 shares of Common Stock (after giving effect to the Reverse Stock
Split), (iv) 1,600,000 shares of Series B Preferred Stock issued and outstanding
immediately prior to the Effective Date were converted into 1,232,138 shares of
Common Stock (after giving effect to the Reverse Stock Split), (v) as a result
of the Reverse Stock Split, options outstanding immediately prior to the
Effective Date and held by employees of or consultants to the Company to
purchase an aggregate of 1,716,815 shares of Common Stock were automatically
converted into options to purchase 1,107,792 shares of Common Stock and (vi) the
total number of authorized shares was increased to 35,000,000, consisting of
30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, $0.01
par value.
Contemporaneously with the completion of the Recapitalization, the Company
issued and sold 1,150,000 shares of Common Stock for $0.87 per share, or
aggregate consideration to the Company (without deducting expenses of the
Private Placement and payments to the Placement Agent thereof) of $1,000,000, to
one or more accredited investors in a transaction exempt from registration under
the Securities Act pursuant to Section 4(2) thereof and Regulation D thereunder
(the "Private Placement"). In connection with the Private Placement, the Company
paid a placement agency fee to the Underwriter consisting of $50,000 and
warrants to purchase an aggregate of 150,000 shares of Common Stock at an
exercise price of $0.05 per share. Also in connection with the Private
Placement, the Company paid a consulting fee to RADE Management Corporation
("RADE") consisting of warrants to purchase an aggregate of 450,000 shares of
Common Stock at an exercise price of $0.05 per share.
All share and per share amounts contained in this Prospectus have been
restated to give effect to the Reverse Stock Split.
The Spin-off Offering
Securities offered by Criticare in
the Spin-off Offering.................... 750,000 shares of Common Stock, to
be distributed to Criticare's
stockholders of record as of
_______ ___, 1998 [immediately
prior to effectiveness] ("Dividend
Recipients") by means of a dividend
effected contemporaneously with
completion of the Unit Offering.
Neither the Company nor Criticare
will receive any proceeds as a
result of the Spin-off Offering.
The Unit Offering
Securities offered by the Company
in the Unit Offering...................... 1,333,333 Units. Each Unit consists
of two shares of Common Stock and
one Class A Warrant.
Exercise Price of Warrants................. Each Class A Warrant entitles the
registered holder to purchase, at
any time prior to December 31,
1998, at a price equal to the
initial public offering price per
share,
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7
<PAGE>
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one share of Common Stock, one
Class B Warrant and one Class C
Warrant. Each Class B Warrant
entitles the registered holder
thereof to purchase, at any time
prior to March 31, 1999, one share
of Common Stock at a price equal to
the initial public offering price
per share. Each Class C Warrant
entitles the registered holder
thereof to purchase, at any time
prior to June 30, 1999, one share
of Common Stock at a price equal to
the initial public offering price
per share. See "Description of
Securities - Warrants."
Common Stock Outstanding Prior to
the Offerings(1).......................... 6,409,896 shares
Common Stock Outstanding After
the Offerings(1).......................... 9,076,562 shares
Estimated Net Proceeds to the Company from
the Unit Offering.......................... $3,600,000
Use of Proceeds by the Company............. For research and development,
clinical trials, royalty payments
and license fees, purchase of
equipment, working capital and
general corporate purposes. See
"Use of Proceeds."
Risk Factors............................... The securities being offered hereby
involve a high degree of risk and
immediate and substantial dilution
to the purchasers in the Unit
Offering. See "Risk Factors."
Nasdaq Symbol.............................. Common Stock "IMMT". Warrants will
not be quoted.
(1) Excludes (i) an aggregate of 1,222,500 shares of Common Stock subject to
issuance without further consideration to Pharm-Eco and members of the
Consortium upon completion of the Unit Offering; (ii) outstanding warrants
to acquire an aggregate of 1,700,000 shares of Common Stock with an
exercise price equal to the weighted average market price of the Company's
Common Stock during the first 20 days of trading on any stock exchange or
in any over-the-counter market, which warrants are exercisable upon
reaching certain scientific milestones and are held by Pharm-Eco and
members of the Consortium; (iii) an aggregate of 300,000 shares of Common
Stock subject to issuance without further consideration to Pharm-Eco and
members of the Consortium upon the filing by Immtech of an NDA or an ANDA
with the FDA with respect to any product; (iv) an aggregate of 182,800
shares of Common Stock subject to purchase and issuance pursuant to
exercise of outstanding warrants held by former holders of the Company's
Senior Subordinated Debentures, which warrants carry an exercise price of
1/2 of the per share price represented in the Unit Offering ($0.75 per
share assuming the initial public offering price of $1.50 per share) and
are exercisable upon completion of the Unit Offering until August 31,
1999; (v) an aggregate of 1,107,792 shares of Common Stock subject to
purchase and issuance pursuant to exercise of outstanding options held by
certain employees and consultants to the Company, which options carry a
weighted average exercise price of $0.45 per share; (vi) an aggregate of
2,600,000 shares of Common Stock subject to purchase and issuance at a
price of $.05 per share pursuant to exercise of outstanding warrants held
by RADE and NCHK; and (vii) shares of Common Stock to be issued upon
completion of the Unit Offering to satisfy the interest portion of
Immtech's outstanding note payable to the State of Illinois, which
interest portion equals $281,470 currently (and such amount will not
change prior to completion of the Unit Offering) (based upon the assumed
per share initial public offering price of $1.50, the number of shares
issued to the State of Illinois in satisfaction of Immtech's obligation
will be 187,647 shares of Common Stock).
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
Summary Financial Information
The following table sets forth summary financial data derived from the financial
statements of the Company. The data should be read in conjunction with the
financial statements, related notes and other financial information included
herein.
<TABLE>
<CAPTION>
Three Month
Periods Ended
Years Ended March 31, June 30,
-------------------------------------------------------- --------------------------
1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 260,503 $ 335,000 $ 15,000 $ 19,552 $ -- $ 136,909
Loss from operations (1,165,025) (621,648) (996,513) (827,798) (159,208) (291,211)
Net loss (1,432,212) (759,638) (1,350,563) (1,145,697) (243,305) (343,888)
Net loss attributable to
common stockholders (1,661,677) (1,005,962) (1,618,543) (1,477,132) (316,335) (452,390)
Net loss per common share (1.29) (0.76) (1.22) (1.09) (0.23) (0.30)
Weighted average number of
common shares, as adjusted
for the Reverse Stock Split 1,292,762 1,321,666 1,325,950 1,352,942 1,350,997 1,487,431
<CAPTION>
===========================================
June 30, 1998
-------------------------------------------
Pro Forma
As Adjusted
Actual As Adjusted(1) (1)(2)
----------- ------------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency) $(4,012,817) $ 16,622 $ 3,616,622
Total assets 194,780 724,556 4,324,556
Long-term debt due after one year -- -- --
Redeemaable Preferred Stock 5,548,397 -- --
Common Stockholders' investment (deficiency
in assets) (9,450,346) 127,490 3,727,490
</TABLE>
- ----------
(1) As adjusted to give effect to (i) the Recapitalization and (ii) closing of
the Private Placement.
(2) Reflects the sale of 1,333,333 Units offered by the Company at an offering
price of $3.00 per Unit (after deducting estimated cash offering
expenses). See "Use of Proceeds" and "Capitalization."
- --------------------------------------------------------------------------------
9
<PAGE>
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Units offered hereby. This Prospectus
contains forward-looking statements. Such forward-looking statements include,
but are not limited to, the Company's expectations regarding its future
financial condition and operating results, product development, business and
growth strategy, market conditions and competitive environment. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
in the following risk factors and elsewhere in this Prospectus.
Development Stage Company; No Assurance of Successful Product Development.
The Company is at an early stage of clinical development activities required for
drug approval and commercialization. Since formation in October 1984, the
Company has engaged in organizational and start-up activities, including
developing the research programs described in this Prospectus, recruiting
outside directors, scientific advisors and key scientists, making arrangements
for laboratory facilities and office space and negotiating and consummating
technology licensing agreements. The Company has generated no revenue from
product sales. The Company does not have any therapeutic products currently
available for sale, and none are expected to be commercially available for
several years, if at all. There can be no assurance that the Company's continued
research will lead to the development of commercially viable products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
History of Losses and Accumulated Deficits; Future Profitability
Uncertain. The Company has experienced significant operating losses since its
inception in 1984 and expects to incur operating losses for at least the next
several years as the Company expands its research and development and clinical
trial efforts. As of June 30, 1998, the Company had an accumulated deficit of
$13,714,836.
Need for Substantial Additional Funds. The Company's operations to date
have consumed substantial amounts of cash. The negative cash flow from
operations is expected to continue and to accelerate in the foreseeable future.
The Company will require substantial funds to conduct research and development,
preclinical and clinical testing and to manufacture (or have manufactured) and
market (or have marketed) its product candidates. The Company estimates that its
current cash resources and the net proceeds of the Unit Offering will be
sufficient to meet its operating and capital requirements for 18 months
following the closing of the Unit Offering. In addition, if all Warrants are
exercised, net proceeds therefrom, combined with proceeds from the Unit
Offering, will allow the Company to meet its operating and capital requirements
for 36 months following completion of the Unit Offering. However, the Company's
cash requirements may vary materially from those now planned because of results
of research and development, results of preclinical and clinical testing,
relationships with possible strategic partners, changes in the focus and
direction of the Company's research and development programs, competitive and
technological advances, the FDA regulatory process and other factors. The net
proceeds of the Unit Offering are not expected to be sufficient to fund the
Company's operations through the commercialization of one or more products
yielding sufficient revenues to support the Company's operations; therefore, the
Company is likely to need to raise additional funds. The Company may seek to
satisfy its future funding requirements through public or private offerings of
securities, by collaborative or other arrangements with major pharmaceutical
companies or from other sources. Additional financing may not be available when
needed or be available on terms acceptable to the Company. If adequate financing
is not available, the Company may not be able to continue as a going concern, or
may be required to delay, scale back or eliminate certain of its research and
development programs, to relinquish rights to certain of its technologies or
product candidates, to forego desired opportunities, or to license third parties
to commercialize products or technologies that the Company would otherwise seek
to develop itself. To the extent the Company raises additional capital by
issuing equity securities, ownership dilution to the investors in the Unit
Offering will result. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Early Stage of Experiments; Limited Human Data. The Company's tests of
rmCRP and its pharmaceutical products to date have been conducted primarily in
in vitro and in vivo preclinical animal models. Preclinical in vitro and in vivo
studies do not necessarily predict effectiveness in humans, and there can be no
assurance that the results achieved in the preclinical in vitro and in vivo
animal studies or in the limited human clinical studies conducted to date will
be achieved in more extensive testing of rmCRP in humans, nor can there be any
assurance that rmCRP will not result in adverse side effects when administered
for extended periods of time in humans. Substantial additional research and
development is
10
<PAGE>
necessary in order for the Company to develop and obtain regulatory approval for
its pharmaceutical and biological products, and there can be no assurance that
the Company's research and development will lead to development of products that
are commercially viable. In addition to further research and development, the
Company's products will require clinical testing, regulatory approval and
development of marketing and distribution channels, all of which are expected to
require substantial additional investment prior to commercialization. There can
be no assurance that the Company's products will be successfully developed,
prove to be safe and efficacious in clinical trials, meet applicable regulatory
standards, be capable of being produced in commercial quantities at acceptable
costs, be eligible for third party reimbursement from governmental or private
insurers, be successfully marketed or achieve market acceptance.
Uncertainties Related to Clinical Trials. To obtain required regulatory
approvals for commercial sale of its products, the Company must demonstrate
through clinical trials that such products are safe and efficacious for use in
each target indication. The Company has no experience in conducting clinical
trials in the United States. None of the products under development by the
Company has received regulatory approval for any stage of clinical trials in
humans in the United States. There can be no assurance that such regulatory
approval will be received or that necessary clinical trials will commence.
The Company may find, at any stage of its research and development, that
products which appeared promising in preclinical studies or Phase I and Phase II
clinical trials do not demonstrate efficacy in larger-scale clinical trials and
do not receive regulatory approvals. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in later
clinical trials and large-scale testing. Companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in various stages of
clinical trials, even after promising results had been obtained in earlier
trials. Completion of the Company's clinical trials may be delayed by many
factors, including slower than anticipated patient enrollment, difficulty in
securing sufficient supplies of clinical trial materials or adverse events
occurring during clinical trials. Completion of testing, studies and trials may
take several years, and the length of time varies substantially with the type,
complexity, novelty and intended use of the product. Delays or rejections may be
based upon many factors, including changes in regulatory policy during the
period of product development. No assurance can be given that any of the
Company's development programs will be successfully completed, that any
Investigational New Drug application ("IND") will become effective or that
additional clinical trials will be allowed by the FDA or other regulatory
authorities or that clinical trials will commence as planned. There have been
delays in the Company's testing and development schedules to date and there can
be no assurance that the Company's expected testing and development schedules
will be met. See "Business."
Conflicts of Interests. Criticare, the largest stockholder of the Company,
owns 29% of the outstanding shares of Common Stock of the Company. The President
of Criticare, Gerhard J. Von der Ruhr, serves as Chairman of the Company's Board
of Directors. The Company and Criticare have entered into various transactions
over the course of the Company's existence, most recently relating to an
agreement pursuant to which, in return for Criticare agreeing to (i) pay
$150,000 to the Company and (ii) effect the Spin-off, the Company (iii) issued
172,414 shares of Common Stock to Criticare, granted Criticare an option to
license the Company's patents and know-how relating to rmCRP for applications in
treating Sepsis, and (iv) assigned its rights to certain diagnostic products
relating to diabetes and alcoholism. The Company believes that the foregoing
transactions were in its best interests and were on terms no less favorable to
the Company than could be obtained from unaffiliated third parties and were in
connection with bona fide business purposes of the Company. See "Certain
Transactions."
In April 1998, Immtech granted to ImmvaRx, Inc. ("ImmvaRx") an option to
purchase a worldwide exclusive license to use mCRP/rmCRP technology and products
as adjuvants (therapeutic products used in conjunction with a vaccine to
heighten the immune response) for a series of upfront payments, a royalty fee,
issuance of stock of ImmvaRx and payment of certain patent expenses. As a
condition to exercising the option, ImmvaRx must raise $500,000 prior to October
9, 1998. Several of Immtech's executive officers, including Director and CEO T.
Stephen Thompson and Chief Financial Officer Gary C. Parks, are founding
stockholders of ImmvaRx. In addition, Mr. Thompson serves as CEO and Mr. Parks
as CFO of ImmvaRx. The Company believes that the foregoing transactions were in
its best interests and were on terms no less favorable to the Company than could
be obtained from unaffiliated third parties and were in connection with bona
fide business purposes of the Company. See "Certain Transactions."
Effect of Criticare's Spin-off to Dividend Recipients. Depending on the
amount of earnings and profits of Criticare, the Spin-off Offering may result in
a taxable dividend to the Dividend Recipients. See "Underwriting - Spin-off
Offering - Federal Income Tax Aspects of the Spin-off Offering."
11
<PAGE>
Effect of Criticare's Spin-off on Market for Common Stock. There can be no
assurance that the Dividend Recipients will not attempt to immediately sell the
shares of Common Stock received by them to pay the taxes, if any, payable as a
result of the distribution of shares by Criticare, thereby creating a
significant and adverse impact on the market price of the Common Stock. See "-
Effect of Secondary Offering and Criticare's Spin-off on Market for Common
Stock."
Limited Manufacturing Capability. The Company's ability to conduct
clinical trials and its ability to commercialize its products will depend in
part upon its ability to manufacture its products either directly or through
third parties at a competitive cost and in accordance with FDA and other
regulatory requirements. The Company currently lacks the facilities and
personnel to manufacture products in accordance with Good Manufacturing
Practices as prescribed by the FDA or to produce an adequate supply of compounds
to meet future requirements for additional clinical trials and
commercialization. There can be no assurance that the Company will be able to
acquire such resources at reasonable costs if it develops commercially viable
products. See "Business - Manufacturing."
Dependence on Third Party Relationships. The Company follows a business
strategy of utilizing the expertise and resources of third parties in a number
of areas, including the manufacture of vaccines and the conduct of preclinical
and clinical trials. This strategy creates risks to the Company by placing
critical aspects of the Company's business in the hands of third parties whom
the Company may not be able to control. If these third parties do not perform in
a timely and satisfactory manner, the Company may incur additional costs and
lose time in the conduct of its development and clinical programs as it seeks
alternate sources of such products and services, if available. Such costs and
delays may have a material adverse effect on the Company. One of the third
parties the Company has entered into an agreement with is Franklin Research
Group ("Franklin"), to form a corporation by the name of NextEra Therapeutics,
Inc. See "Business - Collaborative Arrangements - Formation of NextEra
Therapeutics, Inc." The agreement with Franklin contemplates that the Company
and Franklin will enter into an additional agreement further spelling out the
rights and responsibilities regarding the joint venture.
The Company may seek additional third party relationships in certain
areas, particularly in situations in which the Company believes that the
clinical testing, marketing, manufacturing and other resources of a
pharmaceutical company collaborator will enable the Company to develop
particular products or geographic markets which are otherwise beyond the
Company's resources and/or capabilities. There is no assurance that the Company
will be able to obtain any such collaboration, or any other research and
development, manufacturing, or clinical trial agreement. The inability of the
Company to obtain and maintain satisfactory relationships with third parties may
have a material adverse effect on the Company. See "Business - Collaborative
Arrangements."
Uncertain Ability to Protect Patents and Proprietary Information. The
pharmaceutical and biotechnology fields are characterized by a large number of
patent filings, and a substantial number of patents have already been issued to
other pharmaceutical and biotechnology companies. Third parties may have filed
applications for or have been issued patents and may obtain additional patents
and proprietary rights related to products or processes competitive with or
similar to those of the Company. The Company may not be aware of all of the
patents potentially adverse to the Company's interests that may have been issued
to others. No assurance can be given that patents do not exist, have not been
filed, or could not be filed or issued, which contain claims relating to the
Company's technology, products or processes. If patents have been or are issued
to others containing preclusive or conflicting claims, the Company may be
required to obtain licenses to one or more of such patents or to develop or
obtain alternate technology. There can be no assurance that the licenses that
might be required for the Company's processes or products would be available on
commercially acceptable terms, or at all.
Because of the substantial length of time and expense associated with
bringing new products to the marketplace through the development and regulatory
approval process, the biotechnology industry places considerable importance on
patent and trade secret protection for new technologies, products and processes.
Since patent applications in the United States are maintained in secrecy until
patents are issued and since publication of discoveries in the scientific or
patent literature often lag behind actual discoveries, the Company cannot be
certain that it (or any licensor) was the first to make the inventions covered
by pending patent applications or that it (or any licensor) was the first to
file patent applications for such inventions. The patent positions of vaccine
and biotechnology companies can be highly uncertain and involve complex legal
and factual questions, and therefore the breadth of claims allowed in vaccine
and biotechnology patents or their enforceability, cannot be predicted. There
can be no assurance that any patents under pending patent applications or any
further patent applications will be issued. Furthermore, there can be no
assurance that the scope of any patent protection will exclude competitors or
provide competitive advantages to the Company, that any of the Company's patents
12
<PAGE>
that have been issued or may be issued will be held valid if subsequently
challenged or that others, including competitors or current or former employers
of the Company's employees, advisors and consultants, will not claim rights in
or ownership to the patents and other proprietary rights held by the Company.
There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise obtain access to
the Company's proprietary information or that others may not be issued patents
that may require licensing and the payment of significant fees or royalties by
the Company.
The Company currently licenses several patents and patent applications and
other technologies that are integral to the Company's products and business. The
Company's breach of any existing license agreement or the failure to obtain a
license to technology required to commercialize its products candidates may have
a material adverse effect on the Company. See "Business - Patents and Licenses."
The biotechnology industry has experienced extensive litigation regarding
patent and other intellectual property rights. The Company could incur
substantial costs in defending itself in suits that may be brought against the
Company claiming infringement of the rights of others or in asserting the
Company's patent rights in a suit against another party. The Company may also be
required to participate in interference proceedings declared by the United
States Patent and Trademark Office for the purpose of determining the priority
of inventions in connection with the patent applications of the Company or other
parties. Adverse determinations in litigation or interference proceedings could
require the Company to seek licenses (which may not be available on commercially
reasonable terms) or subject the Company to significant liabilities to third
parties, and could therefore have a material adverse effect on the Company. Even
if the Company prevails in an interference proceeding or a lawsuit, substantial
resources of the Company, including the time and attention of its officers, will
be required.
The Company also relies on trade secrets, know-how and technological
advancement to maintain its competitive position. Although the Company uses
confidentiality agreements and employee proprietary information and invention
assignment agreements to protect its trade secrets and other unpatented
know-how, these agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.
Competition; Possible Obsolescence Due to Alternative Technologies. The
biopharmaceutical field is characterized by extensive research efforts and rapid
technological progress. Competition from other biotechnology companies,
pharmaceutical companies and research and academic institutions is intense.
Other companies are engaged in research and product development based on the
acute phase response of the immune system; adaptive immune response and
antimicrobial compounds. In addition, new developments in molecular cell
biology, molecular pharmacology, recombinant-DNA technology and other
pharmaceutical processes are expected to continue at a rapid pace in both
industry and academia. There can be no assurance that research and discoveries
by others will not render some or all of the Company's programs or products
noncompetitive or obsolete.
No Assurance of FDA Approval; Government Regulation. All new drugs and
biologics, including the Company's product candidates, are subject to extensive
and rigorous regulation by the federal government, principally the FDA under the
Federal Food, Drug and Cosmetic Act and other laws including, in the case of
biologics, the Public Health Services Act, and by state and local governments.
Such regulations govern, among other things, the development, testing,
manufacture, labeling, storage, premarket clearance or approval, advertising,
promotion, sale and distribution of such products. If drug products are marketed
abroad, they are subject to extensive regulation by foreign governments. Failure
to comply with applicable regulatory requirements may subject the Company to
administrative or judicially imposed sanctions such as civil penalties, criminal
prosecution, injunctions, product seizure or detention, product recalls, total
or partial suspension of production, and FDA refusal to approve pending
applications.
The Company has not received regulatory approval in the United States or
any foreign jurisdiction for the commercial sale of any of its products. The
process of obtaining FDA and other required regulatory approvals, including
foreign approvals, often takes many years and varies substantially based upon
the type, complexity and novelty of the products involved and the indications
being studied. Furthermore, such approval process is extremely expensive and
uncertain. There can be no assurance that the Company's product candidates will
be cleared for marketing by the FDA. The Company does not currently have
sufficient resources to complete the required regulatory review process. The
failure of the Company to receive FDA approval for its product candidates would
preclude the Company from marketing and selling its products in the United
States. Therefore, the failure to receive FDA approval would have a material
adverse effect on the Company. Even if regulatory approval of a product is
granted, there can be no assurance that the Company
13
<PAGE>
will be able to obtain the labeling claims necessary or desirable for the
promotion of such product. FDA regulations prohibit the marketing or promotion
of a drug for unapproved indications. Furthermore, regulatory marketing approval
may entail ongoing requirements for postmarketing studies. If regulatory
approval is obtained, the Company will be subject to ongoing FDA obligations and
continued regulatory review. In particular, the Company or its third party
manufacturers will be required to adhere to regulations setting forth GMPs,
which require that the Company or third party manufacturers manufacture products
and maintain records in a prescribed manner with respect to manufacturing,
testing and quality control activities. Further, the Company or its third party
manufacturer must pass a preapproval inspection of its manufacturing facilities
by the FDA before obtaining marketing approval. Failure to comply with
applicable regulatory requirements may result in penalties such as restrictions
on a product's marketing or withdrawal of the product from the market. In
addition, identification of certain side effects after a drug is on the market
or the occurrence of manufacturing problems could cause subsequent withdrawal of
approval, reformulation of the drug, additional preclinical testing or clinical
trials and changes in labeling of the product.
Prior to the submission of an application for FDA approval, drugs
developed by the Company must undergo rigorous preclinical and clinical testing
which may take several years and the expenditure of substantial resources.
Before commencing clinical trials in humans, the Company must submit to the FDA
and receive clearance of an IND. There can be no assurance that submission of an
IND for future clinical testing of any product under development or other future
products of the Company would result in FDA permission to commence clinical
trials or that the Company will be able to obtain the necessary approvals for
future clinical testing in any foreign jurisdiction. Further, there can be no
assurance that if such testing of products under development is completed, any
such drug compounds will be accepted for formal review by the FDA or any foreign
regulatory body, or approved by the FDA for marketing in the United States or by
any such foreign regulatory bodies for marketing in foreign jurisdictions.
Future federal, state, local or foreign legislation or administrative acts could
also prevent or delay regulatory approval of the Company's products. See
"Business - Government Regulation."
Dependence on Key Personnel. The Company's business depends to a
significant degree on the continuing contributions of its key management,
scientific and technical personnel. There can be no assurance that the loss of
certain members of management and scientists would not prevent the Company from
executing its business plan.
Uncertain Availability of Health Care Reimbursement; Health Care Reform.
The Company's ability to commercialize its product candidates will depend in
part on the extent to which reimbursement for the costs of such product will be
available from government health administration authorities, private health
insurers and others. Significant uncertainty exists as to the reimbursement
status of newly approved health care products. There can be no assurance of the
availability of third-party insurance reimbursement coverage enabling the
Company to establish and maintain price levels sufficient for realization of a
return on its investment in developing vaccines and biological products.
Government and other third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
new therapeutic products approved for marketing by the FDA and by refusing, in
some cases, to provide any coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third-party
payors for uses of the Company's products, the market acceptance of these
products would be adversely affected.
Health care reform proposals have been introduced in Congress and in
various state legislatures. It is currently uncertain whether any health care
reform legislation will be enacted at the federal level, or what actions
governmental and private payors may take in response to the suggested reforms.
The Company cannot predict when any proposed reforms will be implemented, if
ever, or the effect of any implemented reforms on the Company's business. There
can be no assurance that any implemented reforms will not have a material
adverse effect on the Company. Such reforms, if enacted, may affect the
availability of third-party reimbursement for products developed by the Company
as well as the price levels at which the Company is able to sell such products.
In addition, if the Company is able to commercialize products in overseas
markets, the Company's ability to achieve success in such markets may depend, in
part, on the health care financing and reimbursement policies of such countries.
Risk of Product Liability, Uncertainty of Availability of Product
Liability Insurance. The Company's business exposes it to substantial product
liability risks. The Company plans to obtain product liability insurance
covering the sale of its products prior to their commercial introduction;
however, there can be no assurance that the Company will be able to obtain or
maintain such insurance on acceptable terms or that any insurance obtained will
provide adequate
14
<PAGE>
coverage against potential liabilities. Claims or losses in excess of any
liability insurance coverage now carried or subsequently obtained by the Company
could have a material adverse effect on the Company.
Potential Adverse Effect of Shares Eligible for Future Sale. Sales of
Common Stock (including shares issued upon the exercise of outstanding options)
in the public market after this Offering could materially and adversely affect
the market price of the Securities. Such sales also might make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that the Company deems appropriate.
Upon the completion of these Offerings, and including the issuance of
1,222,500 shares of Common Stock to Pharm-Eco and Members of the Consortium and
the issuance of 187,647 shares of Common Stock to the State of Illinois
(assuming an initial public offering price of $1.50 per share), the Company will
have 10,486,709 shares of Common Stock outstanding (not including 9,890,591
shares of Common Stock subject to outstanding options or warrants ). Of the
shares to be outstanding upon completion of these Offerings, the 3,416,666
shares of Common Stock distributed by the Company and Criticare pursuant hereto
and the 1,150,000 shares being registered on behalf of the Selling Stockholders
will be freely tradeable without restriction. All of the remaining 5,920,043
shares will be restricted securities within the meaning of the Securities Act of
1933, as amended (the "Securities Act"). Pursuant to Rule 144, 2,875,829 of
these shares will be available for resale upon the effective date of the
Registration Statement of which this Prospectus forms a part and 1,634,067
shares will be available for resale approximately seven months thereafter. The
remaining 1,410,147 shares to be outstanding upon completion of these Offerings
will become available for resale one year after the date hereof. Of the shares
to be outstanding upon completion of these Offerings, the holders of 3,757,205
shares have agreed not to sell such shares for two years after the Closing and
the holders of 1,006,323 have agreed not to sell such shares for eighteen months
after the Closing, in each case, without the prior written consent of the
Underwriter. See "Description of Securities" and "Shares Eligible for Future
Sale."
Immediate Substantial Dilution. Purchasers of Units in this Offering will
experience immediate and substantial dilution of $1.09 (73%) per share, assuming
no value is given to the Class A Warrants which are part of the Units offered
hereby, between the pro forma net tangible book value of the shares and the
public offering price of $1.50 per share. See "Dilution."
Potential Adverse Effect of Underwriter's Warrants. At the consummation of
the Offering, the Company will sell to the Underwriter for nominal consideration
the Underwriter's Warrants to purchase up to 500,000 shares of Common Stock. The
Underwriter's Warrants will be exercisable for a period of four years commencing
one year after the effective date of this Offering, at an exercise price of
$0.05 per share, portions of which become exercisable upon exercise of the
Warrants. For the term of the Underwriter's Warrants, the holders thereof will
have, at nominal cost, the opportunity to profit from a rise in the market price
of the Securities without assuming the risk of ownership. As long as the
Underwriter's Warrants remain unexercised, the Company's ability to obtain
additional capital might be adversely affected. Moreover, the Underwriter may be
expected to exercise the Underwriter's Warrants at a time when the Company
would, in all likelihood, be able to obtain any needed capital through a new
offering of its securities on terms more favorable than those provided by the
Underwriter's Warrants. See "Underwriting."
Potential Adverse Effect of Substantial Shares of Common Stock Reserved.
Upon completion of these Offerings there will be reserved a total of 9,890,591
shares of Common Stock for issuance as follows: (i) 3,999,999 shares for
issuance upon exercise of the Warrants; (ii) 500,000 shares for issuance upon
exercise of the Underwriter's Warrants; (iii) 1,107,792 shares for issuance upon
exercise of stock options granted to employees of or consultants to the Company;
and (v) 4,282,800 shares for issuance upon the exercise of other outstanding
options and warrants. The exercise prices of the foregoing options and warrants
are substantially below the offering price of the Units offered hereby. The
existence of the Warrants, the Underwriter's Warrants and any other options or
warrants may adversely affect the Company's ability to consummate future equity
financings. Further, the holders of such warrants and options may exercise them
at a time when the Company would otherwise be able to obtain additional equity
capital on terms more favorable to the Company. To the extent any such options
and warrants are exercised, the interests of the Company's stockholders may be
diluted.
Absence of Dividends. The Company has never declared or paid dividends on
its Common Stock and does not intend to pay any dividends in the foreseeable
future. See "Dividend Policy."
Arbitrary Determination of Offering Price; No Public Market for the
Securities. The initial public offering price of the Units and the exercise
prices and terms of the Warrants have been determined arbitrarily by
negotiations
15
<PAGE>
between the Company and the Underwriter. Factors considered in such
negotiations, in addition to prevailing market conditions, included the history
and prospects for the industry in which the Company competes, an assessment of
the Company's management, the prospects of the Company, its capital structure
and certain other factors deemed relevant. Therefore, the public offering price
of the Units and the exercise prices and terms of the Warrants do not
necessarily bear any relationship to established valuation criteria and may not
be indicative of prices that may prevail at any time or from time to time in the
public market for the Common Stock and Warrants. Prior to these Offerings, there
has been no public market for the Common Stock, and there can be no assurance
that an active trading market will develop in any of the Securities after the
Offering, or, if developed, be sustained. See "Underwriting."
Price Volatility. The securities markets have from time to time
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies. In addition, the market
prices of the common stock of many publicly traded pharmaceutical or
biotechnology companies have in the past been, and can in the future be expected
to be, especially volatile. Announcements of technological innovations or new
products by the Company or its competitors, developments or disputes concerning
patents or proprietary rights, publicity regarding actual or potential clinical
trial results relating to products under development by the Company or its
competitors, regulatory developments in both the United States and foreign
countries, delays in the Company's testing and development schedules, public
concern as to the safety of vaccines or biological products and economic and
other external factors, as well period-to-period fluctuations in the Company's
financial results, may have a significant impact on the market price of the
Common Stock and Warrants. The realization of any of the risks described in
these "Risk Factors" could have a significant and adverse impact on such market
prices.
Underwriter's Lack of Influence on the Market. It is anticipated that all
of the Units will be sold to customers of NCHK. NCHK is not registered as a
broker-dealer in the United States and does not have the right to make a market
in the Common Stock or Warrants within the United States. The prices and the
liquidity of the Common Stock and Warrants may be adversely affected by the
inability of NCHK to make a market in these securities within the United States.
No assurances can be given that any market making activities which may be
commenced by other broker-dealers will not be stopped at any time.
Legal Restrictions on Sales of Shares Underlying the Warrants. The
Warrants are not exercisable unless, at the time of the exercise, the Company
has in effect a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company has agreed to keep a
registration statement covering the shares of Common Stock issuable upon
exercise of the Warrants effective for the term of the Warrants, if it fails to
do so for any reason, the Warrants may be deprived of value.
The Shares and Warrants are separately transferable immediately upon
issuance. Purchasers may buy Warrants in the aftermarket in, or may move to,
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants, and holders of Warrants would have no choice but to
attempt to sell the Warrants in a jurisdiction where such sale is permissible or
allow them to expire unexercised. See "Description of Securities."
Management's Broad Discretion in Use of Proceeds. Although the Company
intends to apply the net proceeds of the Unit Offering in the manner described
under "Use of Proceeds," it has broad discretion within such proposed uses as to
the precise allocation of the net proceeds, the timing of expenditures and other
aspects of the use thereof. The Company reserves the right to reallocate the net
proceeds of the Unit Offering among the various categories set forth under "Use
of Proceeds" as it, in its sole discretion, deems necessary or advisable. See
"Use of Proceeds."
Possible Applicability of Rules Relating to Low-Priced or "Penny" Stocks.
The Commission has adopted regulations which generally define a "penny stock" to
be any equity security that has a market price (as defined) of less than $5.00
per share, subject to certain exceptions. The price at which the shares of
Common Stock will be offered to the public pursuant to this Offering will be
less than $5.00, thus, the Common Stock and the Warrants offered hereby will
initially be "penny stocks" and become subject to rules that impose additional
sales practice requirements on broker/dealers who sell such securities to
persons other than established customers and accredited investors, unless the
Common Stock and the Warrants are listed on the Boston Stock Exchange. There can
be no assurance that the Company will be able to satisfy the listing criteria of
the Boston Stock Exchange or that the Common Stock or the Warrants will trade
for $5.00 or
16
<PAGE>
more per security after the Offering. Consequently, the "penny stock" rules may
restrict the ability of broker/dealers to sell the Company's securities and may
affect the ability of purchasers in this Offering to sell the Company's
securities in a secondary market.
Although the Company has applied for listing of the Common Stock and the
Warrants on the Boston Stock Exchange and the Nasdaq SmallCap Market, there can
be no assurance that such application will be approved or that a trading market
for the Common Stock and the Warrants will develop or, if developed, will be
sustained. Furthermore, there can be no assurance that the securities purchased
by the public hereunder may be resold at their original offering price or at any
other price.
In order to qualify for initial listing on the Boston Stock Exchange, a
company must, among other things, have at least $3.0 million in total assets,
$2.0 million in tangible assets, $1.5 million "public float," and a minimum bid
price for its securities of $2.00 per share. For continued listing on the Boston
Stock Exchange, a company must maintain a $500,000 market value of the public
float, $1 million in total assets and $500,000 in stockholders equity. The
failure to meet these maintenance criteria in the future may result in the
discontinuance of the listing of the Common Stock and Warrants on the Boston
Stock Exchange.
In order to qualify for initial listing on the Nasdaq SmallCap Market, a
company must, among other things, have at least $4.0 million in net tangible
assets, 1,000,000 shares in the "public float," $5.0 million "public float," and
a minimum bid price for its securities of $4.00 per share. For continued listing
on the Nasdaq SmallCap Market, a company must maintain a $200,000 market value
of the public float and $2.0 million in net tangible assets. In addition,
continued inclusion requires two marketmakers and a minimum bid of $1.00 per
share. The failure to meet these maintenance criteria in the future may result
in the discontinuance of the listing of the Common Stock and Warrants on the
Nasdaq SmallCap Market.
If the Company is or becomes unable to meet the listing criteria (either
initially or on a continued basis) of the Boston Stock Exchange or the Nasdaq
SmallCap Market and is never traded or becomes delisted therefrom, trading, if
any, in the Common Stock and the Warrants would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
"Electronic Bulletin Board" administered by the National Association of
Securities Dealers, Inc. (the "NASD"). In such an event, the market price of the
Common Stock and the Warrants may be adversely impacted. As a result, an
investor may find it difficult to dispose of or to obtain accurate quotations as
to the market value of the Common Stock and the Warrants.
Limitation of Liability and Indemnification. The Company's Certificate of
Incorporation limits, to the maximum extent permitted by the Delaware General
Corporations Law ("Delaware Law"), the personal liability of directors for
monetary damages for breach of their fiduciary duties as directors. The
Company's Bylaws provide that the Company shall indemnify its officers and
directors and may indemnify its employees and other agents to the fullest extent
permitted by law. The Company has entered into indemnification agreements with
its officers and directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in Delaware Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms. Section 145 of the Delaware Law provides that a
corporation may indemnify a director, officer, employee or agent made or
threatened to be made a party to an action by reason of the fact that he was a
director, officer, employee or agent of the corporation or was serving at the
request of the corporation against expenses actually and reasonably incurred in
connection with such action if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Delaware Law does
not permit a corporation to eliminate a director's duty of care, and the
provisions of the Company's Certificate of Incorporation have no effect on the
availability of equitable remedies, such as injunction or rescission, for a
director's breach of the duty of care. See "Management."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,333,333 Units offered hereby (after deducting estimated offering expenses
payable by the Company in connection with the Offering) are estimated to be
approximately $3.6 million based on an assumed initial public offering price of
$3.00 per Unit.
The Company intends to use $100,000 of such net proceeds to repay amounts
due the State of Illinois, which amount is due pursuant to an unsecured,
non-interest bearing obligation of the Company which matures upon completion of
an initial public offering. 187,647 shares of Common Stock will be issued to the
State of Illinois upon completion of the Unit Offering (assuming an initial
public offering price of $1.50 per share) as consideration for interest accrued
under the obligation. Substantially all of the remaining net proceeds of the
Unit Offering will be used to fund the Company's research and development
efforts, including clinical and preclinical studies. Any net proceeds not
applied to the Company's research and development effort will be used for
working capital and general corporate purposes. The amount and timing of
expenditures of the net proceeds of the Unit Offering cannot be precisely
determined, and will depend on numerous factors, including the status of the
Company's product development efforts, the results of clinical trials and the
regulatory approval process. The Company may also use a portion of the net
proceeds to acquire complementary businesses, products or technologies, although
the Company has no agreements and is not involved in any negotiations with
respect to any such transaction. See "Risk Factors - Management's Broad
Discretion in Use of Proceeds." Pending such uses, the Company plans to invest
the net proceeds from the Unit Offering in short-term, investment-grade,
interest-bearing securities.
The Company estimates that its current cash resources and the net proceeds
of this Offering will be sufficient to meet its operating and capital
requirements for 12 months following the closing of the Unit Offering. However,
there can be no assurance that the net proceeds of the Unit Offering will
satisfy the Company's requirements for any particular period of time. The
Company anticipates that additional funding will be required after the use of
the net proceeds of the Unit Offering. No assurance can be given that such
additional financing will be available when needed on terms acceptable to the
Company, if at all. See "Risk Factors - Need for Substantial Additional Funds."
Proceeds, if any, derived from the exercise of the Warrants will be added
to the Company's working capital.
DIVIDEND POLICY
The Company has never declared nor paid dividends on its Common Stock and
does not intend to pay any dividends in the foreseeable future.
18
<PAGE>
DILUTION
The pro forma net tangible book value (i.e., net tangible assets less
aggregate liabilities) of the Company as of June 30, 1998 was $66,979, or $0.01
per share of Common Stock, determined by dividing the pro forma net tangible
book value of the Company by the number of shares of Common Stock outstanding as
adjusted to give effect to the Recapitalization and closing of the Private
Placement as of June 30, 1998. After giving effect to the receipt of the net
proceeds of the sale of 1,333,333 Units offered hereby at an assumed initial
public offering price of $3.00 per Unit, the adjusted pro forma net tangible
book value of the Company on June 30, 1998 would have been $3,727,490, or $0.41
per share. This represents an immediate increase in pro forma net tangible book
value of $0.39 per share to existing stockholders and an immediate dilution of
$1.09 per share to new investors. The following table, which does not
contemplate the exercise of the Warrants, the Underwriter's Warrants or other
warrants or options to purchase shares of the Company's Common Stock (See "Risk
Factors - Potential Adverse Effect of Substantial Shares of Common Stock
Reserved"), illustrates the per share dilution:
Assumed initial public offering price per share $1.50
Pro forma net tangible book value per share $0.01
Increase per share attributable to new stockholders 0.40
Pro forma net tangible book value per share after the Offering 0.41
-----
Dilution per share to new stockholders $1.09
=====
The following table summarizes, on a pro forma basis, after giving effect
to the Recapitalization and the closing of the Private Placement, as of June 30,
1998, the difference between the number of shares of Common Stock purchased from
the Company, the total cash consideration paid and the average price per share
paid by existing stockholders of Common Stock and by the new investors
purchasing shares in this Offering, assuming the sale of the 1,333,333 Units
offered hereby at an assumed initial public offering price of $3.00 per Unit and
before any deduction of underwriting discounts and estimated offering expenses.
<TABLE>
<CAPTION>
NUMBER OF TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders 6,409,896 70.6% $ 6,802,542 63.0% $ 1.06
New investors 2,666,666 29.4% 3,999,999 37.0% $ 1.50
--------- ----------- ----- ------
Total 9,076,562 100.0% $10,802,541 100.0%
========= ===== =========== =====
</TABLE>
- ----------
19
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1998, (i) the actual
capitalization of the Company, (ii) the capitalization of the Company as
adjusted after giving effect to the Recapitalization and the Private Placement
and (iii) the pro forma capitalization of the Company giving effect to the
receipt of the estimated net proceeds from the sale of the 1,333,333 Units
offered hereby at an assumed initial public offering price of $3.00 per Unit.
This table should be read in conjunction with the financial statements of the
Company and the notes thereto included elsewhere in this Prospectus. See
"Description of Securities," "Use of Proceeds" and "Certain Transactions."
<TABLE>
<CAPTION>
As Adjusted for Pro forma
Recapitalization As Adjusted for
and Private the Offerings
Actual Placement Hereby
------ --------- ------
<S> <C> <C> <C>
Current portion of long-term debt,
including accrued interest $ 3,274,598 $ 281,470(1) $ 281,470(1)
------------ ------------ ------------
Preferred Stock
Series A Redeemable Preferred
Stock, par value, $0.01 per
share, 1,794,550 shares
authorized, issued and
outstanding as of June 30,
1998, with aggregate
liquidation preference of
$2,765,256; 0 shares
authorized, issued and
outstanding as of June 30,
1998 after giving pro forma
effect to the
Recapitalization and the
Private Placement and the
Offerings 2,765,256 -0- -0-
Series B Redeemable Preferred
Stock, par value $0.01 per
share, 1,600,000 shares
authorized, issued and
outstanding as of June 30,
1998, with aggregate
liquidation preference of
$2,783,141; 0 shares
authorized, issued and
outstanding as of June 30,
1998 after giving pro forma
effect to the
Recapitalization and the
Private Placement and the
Offerings 2,783,141 -0- -0-
Preferred Stock, par value $0.01
per share, 0 shares
authorized, issued and
outstanding as of June 30,
1998; 5,000,000 shares
authorized, 0 shares issued
and outstanding as of June
30, 1998 after giving pro
forma effect to the
Recapitalization and the
Private Placement and the
Offerings -0- -0- -0-
------------ ------------ ------------
Total preferred stock 5,548,397 -0- -0-
------------ ------------ ------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
As Adjusted for Pro forma
Recapitalization As Adjusted for
and Private the Offerings
Actual Placement Hereby
------ --------- ------
<S> <C> <C> <C>
Common Stockholders Investment
(deficiency in assets)
Common Stock, par value $0.01
per share, 10,000,000 shares
authorized, 2,305,166 shares
issued and outstanding as of
June 30, 1998 (2)(3)(4)(5);
30,000,000 shares authorized,
6,409,896 shares issued and
outstanding as of June 30,
1998 after giving pro forma
effect to the
Recapitalization and the
Private Placement
(3)(4)(5)(6)(7); 30,000,000
shares authorized, 10,486,710
shares issued and outstanding
as of June 30, 1998 after
giving pro forma effect to
the Recapitalization and the
Private Placement and the
Offerings 14,874 64,097 90,764
Additional paid-in capital 4,249,616 8,088,915 11,662,247
Deficit accumulated during the
development stage (13,714,836) (8,025,522) (8,025,522)
------------ ------------ ------------
Total common stockholders'
investment (deficiency in
assets) $ (9,450,346) $ 127,490 $ 3,727,490
============ ============ ============
</TABLE>
- ----------
(1) Includes an aggregate of $381,470 of indebtedness to the State of
Illinois, of which $100,000 will be paid in cash and the remainder will be
converted into Common Stock of the Company upon completion of the Unit
Offering at the per share price at which shares of Common Stock are sold
in the Unit Offering.
(2) Does not include an aggregate of 1,716,815 shares of Common Stock subject
to purchase and issuance pursuant to exercise of outstanding options held
by certain employees and consultants to the Company.
(3) Does not include (i) outstanding warrants to acquire an aggregate of
1,700,000 shares of Common Stock with an exercise price equal to the
weighted average market price of the Company's Common Stock during the
first 20 days of trading on any stock exchange or in any over-the-counter
market, which warrants are exercisable upon reaching certain scientific
milestones and are held by Pharm-Eco and members of the Consortium, and
(ii) an aggregate of 300,000 shares of Common Stock subject to issuance
without further consideration to Pharm-Eco and members of the Consortium
upon the filing by Immtech of an NDA or an ANDA with the FDA with respect
to any product.
(4) Does not include an aggregate of 1,222,500 shares of Common Stock subject
to issuance to UNC and Pharm-Eco upon completion of a financing by the
Company raising in excess of $4 million.
(5) Does not include an aggregate of 182,800 shares of Common Stock subject to
purchase and issuance pursuant to exercise of outstanding warrants held by
purchasers of the Company's Senior Subordinated Debentures.
(6) Does not include an aggregate of 1,107,792 shares of Common Stock (after
giving effect to the Reverse Stock Split) subject to purchase and issuance
pursuant to exercise of outstanding options held by certain employees and
consultants to the Company.
21
<PAGE>
(7) Does not include warrants that will be outstanding upon consummation of
the Offering to acquire an aggregate of 2,600,000 shares of Common Stock
with an exercise price of $0.05 per share, which warrants are exercisable
upon reaching certain financing milestones and are held by RADE and NCHK.
22
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below for the years ended March 31,
1996, 1997 and 1998 and the balance sheet data as of March 31, 1997 and 1998 are
derived from the financial statements audited by Deloitte & Touche LLP included
elsewhere in this Prospectus. The statement of operations data set forth below
for the year ended March 31, 1995 and the balance sheet data at March 31, 1995
and 1996 are derived from audited financial statements which are not included in
this Prospectus. The results of operations for the three month periods ended
June 30, 1997 and 1998 are not necessarily indicative of the results for either
fiscal year and include all normal recurring adjustments. Historical results are
not necessarily indicative of future results. The pro forma information as of
June 30, 1998 has been adjusted to give effect to the Recapitalization and the
closing of the Private Placement. The data set forth below should be read in
conjunction with the financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
========================================================================================
Three Month Periods Ended
June 30,
Years Ended March 31, (Unaudited)
----------------------------------------------------------------------------------------
1995 1996 1997 1998 1997 1998
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net revenues $ 260,503 $ 335,000 $ 15,000 $ 19,552 -- $ 136,909
----------- ----------- ----------- ----------- -----------
Operating expenses:
Research and development 996,486 737,805 478,871 312,366 89,305 310,499
General and administrative 429,042 218,843 532,642 534,984 69,903 117,621
Cancelled offering costs 188,144 65,837 73,984
Total operating expenses 1,613,672 956,648 1,077,350 921,334 159,208 428,120
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations (1,353,169) (621,648) (1,062,350) (901,782) (159,208) (291,211)
----------- ----------- ----------- ----------- ----------- -----------
Non operating expenses:
Interest expense (98,984) (135,468) (281,710) (241,767) (84,043) (53,800)
Other income (expense) 19,941 (2,522) (6,503) (2,148) (54) 1,123
----------- ----------- ----------- ----------- ----------- -----------
Total (non operating expenses) (79,043) (137,990) (288,213) (243,915) (84,097) 52,677
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) (1,432,212) (759,638) (1,350,563) (1,145,697) (243,305) (343,888)
Redeemable preferred stock
dividends net of premium
amortization (229,465) (246,324) (267,980) (331,435) (73,030) (108,502)
Net income (loss) attributable
to common stockholders $(1,661,677) $(1,005,962) $(1,618,543) $(1,477,132) $ (316,335) $ (452,390)
=========== =========== =========== =========== =========== ===========
Net income (loss) per common
share attributable to common
stockholders:
Net (loss) $ (1.11) $ (0.57) $ (1.02) $ (0.85) $ (0.18) $ (0.23)
Redeemable preferred stock
premium amortization and
dividends (0.18) (0.19) (0.20) (0.24) (0.05) (0.07)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per share
attributable to common
stockholders $ (1.29) $ (0.76) $ (1.22) $ (1.09) $ (0.23) $ (0.30)
=========== =========== =========== =========== =========== ===========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================
Three Month Periods Ended
June 30,
Years Ended March 31, (Unaudited)
---------------------------------------------------------------------------------------
1995 1996 1997 1998 1997 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average number of
shares of common stock as
adjusted for the Reverse
Stock Split 1,292,762 1,321,666 1,325,950 1,352,942 1,350,997 1,487,431
Balance Sheet Data:
Working capital (deficiency) (1,053,991) (1,763,833) (3,045,867) (3,638,865) (3,268,044) (4,012,817)
Total assets 154,558 117,532 189,394 70,771 89,756 194,780
Accrued interest 29,679 70,787 454,684 663,013 506,919 716,476
Stockholder advances -- 311,500 770,000 985,172 820,000 985,172
Notes payable 769,709 966,419 1,572,969 1,576,450 1,591,585 1,572,950
Long-term debt due after one
year 383,488 383,488 -- -- -- --
Redeemable preferred stock 4,344,156 4,590,480 5,108,460 5,439,895 5,181,890 5,548,397
Common stockholders'
investment (deficiency in
assets) (5,635,441) (6,633,903) (8,058,145) (9,021,623) (8,374,880) (9,450,346)
</TABLE>
=======================================
Pro Forma Pro Forma
Adjustments June 30,
(Unaudited) (Unaudited)
---------------------------------------
1998
---------------------------------------
Balance Sheet Data:
Working capital (deficiency) 4,029,439(1)(2)(3)(4) 16,622
Total assets 529,776(4) 724,556
Accrued interest (435,006)(2) 281,470
Stockholder advances (985,172)(2) --
Notes payable (1,455,450)(2) 117,500
Long-term debt due after one
year -- --
Redeemable preferred stock (5,548,397) --
Common stockholders'
investment (deficiency in
assets) 9,577,836(1)(2)(3)(4) 127,490
- ----------
(1) Includes the elimination of interest due of $53,800 on all notes payable
that were exchanged for Common Stock.
(2) Includes aggregate gain on extinguishment of debt of $1,954,306,
consisting of (i) $1,787,071 of gain related to indebtedness owed to
holders of promissory notes exchanged for Common Stock, (ii) $85,405 of
gain related to non-interest bearing stockholder advances exchanged for
Common Stock and (iii) $81,830 of gain related to the exchange of accounts
payable for Common Stock.
(3) Includes effect of the conversion of the Preferred A and B shares to Comon
Stock.
(4) Shares issued in connection with the Recapitalization are as follows:
Non-interest bearing stockholder advances 393,649
Preferred A conversion 1,157,951
Preferred B conversion 1,232,138
Promissory note/debenture conversion 795,405
Conversion of accounts payable 20,908
Private placement 1,150,000
Investment by Criticare (see "Certain Transactions") 172,414
---------
Total shares issued 4,922,465
=========
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. This
discussion contains forward-looking statements and such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Factors that could cause or contribute to such
differences include, but are not limited to, the factors discussed below and in
the "Business Section," as well as those discussed elsewhere in this document.
See "Risk Factors."
OVERVIEW
Immtech, a development stage enterprise, is a biopharmaceutical company
focused on the discovery and commercialization of therapeutics for the treatment
of patients afflicted with opportunistic infectious diseases, cancer or
compromised immune systems. The Company has two independent programs for
developing drugs. The first is based on a technology for the design of a new
class of pharmaceutical compounds commonly referred to as dications. The Company
believes that pharmaceutical dications can be designed to inhibit the growth of
a wide variety of infectious organisms which cause fungal, protozoan parasitic,
bacterial and viral diseases. The second is based on biological proteins that
work in conjunction with the body's immune system. These biological proteins are
derivatives of C-Reactive Protein ("CRP"), which occurs naturally in the body
and which the Company believes can be used to control the structural environment
around cancerous tumors and to reprogram cancerous cells to stop growing
uncontrollably and revert to normal cell behavior.
With the exception of research agreements and past development funding
from Centocor, Sigma-Aldrich and certain research grants, the Company has not
generated any revenue from operations. For the period from inception to June 30,
1998, the Company incurred a cumulative net loss of $13,714,836. The Company has
incurred additional losses since such date and expects to incur additional
operating losses for the foreseeable future. The Company expects that its
revenue sources for at least the next several years will be limited to research
grants from Small Business Technology Transfer Program Grants ("STTR") and
payments from other collaborators under arrangements that may be entered into in
the future. The timing and amounts of such revenues, if any, will likely
fluctuate sharply and depend upon the achievement of specified milestones, and
results of operations for any period may be unrelated to the results of
operations for any other period. See "Business."
RESULTS OF OPERATIONS
All amounts contained in this section have been rounded to the nearest
five hundred dollars.
Three Month Periods Ended June 30, 1998 and 1997.
Revenues under the Small Business Technology Transfer ("STTR") Program
from the National Institutes of Health accounted for $42,000 in the quarter
ending June 30, 1998. Additional revenue sources were a grant from Franklin
Research Group (co-founder of NextEra Therapeutics, Inc.) of $50,000 and
research payments of $45,000 from Sigma-Aldrich. There was no revenue in the
three month period ended June 30, 1997.
Research and development expenses were $310,500 and $89,500 in the three
month periods ended June 30, 1998 and June 30, 1997, respectively. The increase
is primarily due to contractual payments to UNC of $200,000.
General and Administrative expenses increased 67.9% from approximately
$70,000 in the three month period ended June 30, 1997 to $117,500 in the three
month period ended June 30, 1998, primarily as a result of patent expenses
incurred in 1998. Interest expense decreased 35.7% from $84,000 in the three
month period ended June 30, 1997 to $54,000 in the three month period ended June
30,1998. This is due to the Senior Subordinated Debt discount and issuance costs
becoming fully amortized in 1997.
Redeemable preferred stock dividends net of premium amortization increased
48.6% from $73,000 for the three months ended June 30, 1997 to $108,500 for the
three months ended June 30, 1998. This is due to the quarterly compounding of
the dividends and the cessation of the premium amortization as of December 1997.
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Years Ended March 31, 1998, 1997, and 1996.
Revenues under collaborative research and development agreements were
approximately $15,000 and $335,000 in the years ended March 31, 1997 and 1996,
respectively. In 1998, there were grant revenues of approximately $19,500 from
an STTR Program from the National Institutes of Health.
Research and development expenses decreased by 35.0% from approximately
$738,000 in 1996 to $479,000 in 1997 and decreased by 34.8% to approximately
$312,500 in 1998, due primarily to the completion of the biological platform
Phase I clinical trials in Germany in 1996, the internal shift from the
biological to the pharmaceutical focus and the corresponding shift from basic
research to clinical support.
General and administrative expenses increased by 0.5% in 1998 to
approximately $535,000 from $532,500 in 1997 and increased by 143.2% in 1997
from $219,000 in 1996. The 1997 increase resulted primarily from patent costs
related to the pharmaceutical platform technology. Interest expense increased
107.7% from $135,500 in 1996 to $282,500 in 1997, and decreased 14.0% to
$242,000 in 1998. The 1997 increase is due to the Company completing a Senior
Subordinated Debt issue in August 1996. Cancelled offering costs were
approximately $66,000 in 1997 and $74,000 in 1998. Both amounts relate to a
cancelled offering of the Company's preferred stock.
Redeemable preferred stock dividends net of premium amortization increased
8.8% from $246,500 in 1996 to $268,000 in 1997 and 23.7% to $331,500 in 1998.
The premium was fully amortized on the Series A Preferred as of December 1997.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1998, the Company financed its operations
from (i) the net proceeds of private placements of equity securities and cash
contributed from common stockholders which raised approximately $1,603,000, (ii)
the net proceeds of private placements of preferred stock, which raised
$3,330,000, (iii) payments from research agreements and Small Business
Innovation Research ("SBIR") grants and STTR Program grants of approximately
$1,858,000, and (iv) net proceeds from various debt instruments and advances
from stockholders of approximately $3,630,500.
In July 1998, the Company completed a private placement equity offering of
$1,000,000. As a condition to this investment, the Company completed the
Recapitalization effective July 24, 1998.
The Company intends to use $100,000 of the net proceeds of the Unit
Offering to repay amounts due to the State of Illinois. Substantially all of the
remaining net proceeds of the Unit Offering, $3,500,000, (assuming an initial
offering price of $3.00 per Unit), will be used to fund the Company's research
and development efforts, including clinical and preclinical studies. Any net
proceeds not applied to the Company's research and development efforts will be
used for working capital and general corporate purposes, including hiring up to
10 additional employees. The amount and timing of expenditures of the net
proceeds of the Unit Offering cannot be precisely determined, and will depend on
numerous factors, including the status of the Company's product development
efforts, the results of clinical trials and the regulatory approval process. The
Company may also use a portion of the net proceeds to acquire complementary
businesses, products or technologies, although the Company has no agreements and
is not involved in any negotiations with respect to any such transaction. See
"Risk Factors - Management's Broad Discretion in Use of Proceeds." Pending such
uses, the Company plans to invest the net proceeds from the Unit Offering in
short-term, investment-grade, interest-bearing securities. See "Use of
Proceeds."
The Company's cash resources have been used to finance research and
development, including sponsored research, capital expenditures, expenses
associated with the efforts of the Consortium and general and administrative
expenses. Over the next several years, the Company expects to incur substantial
additional research and development costs, including costs related to
early-stage research in preclinical and clinical trials, increased
administrative expenses to support its research and development operations and
increased capital expenditures for expanded research capacity, various equipment
needs and facility improvements or relocation.
At June 30, 1998, the Company was a party to sponsored research agreements
with UNC which, upon completion of this financing, require it to fund an
aggregate of approximately $100,000 per quarter through the third anniversary of
the completion of this offering.
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At June 30, 1998, the Company had federal net operating loss carryforwards
of approximately $8,573,000, which expire from 2003 through 2014. At June 30,
1998, the Company had available for federal income tax purposes approximately
$8,510,000 of alternative minimum tax credit carryforwards which expire from
2003 through 2014. The Company also has approximately $6,471,000 of state net
operating loss carryforwards available as of June 30, 1998, which expire from
2009 through 2014, available to offset certain future state taxable income for
Illinois state tax purposes. Because of "change of ownership" provisions of the
Tax Reform Act of 1986, approximately $2,352,000 and $250,000 of the Company's
net operating loss carryforwards for federal and State of Illinois purposes,
respectively, are subject to an annual limitation regarding utilization against
taxable income in future periods. The Company is considering various equity
financing alternatives. Such changes may result in a change of ownership and
significantly restrict the utilization of the Company's net operating loss
carryforwards and federal tax credit carryforwards.
The Company believes its existing resources, subject to the completion of
this Offering, to be sufficient to meet the Company's planned expenditures until
November 1999, although there can be no assurance the Company will not require
additional funds. The Company's working capital requirements will depend upon
numerous factors, including the progress of the Company's research and
development programs (which may vary as product candidates are added or
abandoned), preclinical testing and clinical trials, achievement of regulatory
milestones, the Company's corporate partners fulfilling their obligations to the
Company, the timing and cost of seeking regulatory approvals, the level of
resources that the Company devotes to the development of manufacturing, the
ability of the Company to maintain existing and establish new collaborative
arrangements with other companies to provide funding to the Company to support
these activities and other factors. In any event, the Company will require
substantial funds in addition to the present existing working capital to develop
its product candidates and otherwise to meet its business objectives.
YEAR 2000
Business interruptions resulting from technology problems arising out of
the Year 2000 may adversely affect companies in various industries. The Company
currently anticipates that it will still be in the process of conducting
clinical trials or otherwise developing its initial products at the onset of the
Year 2000. Consequently, it is not likely that the Company will be engaged in
time sensitive activities likely to be materially disrupted by the Year 2000
problems. Nevertheless, the Company recently assessed both its information
technology systems and other systems to determine the likelihood of a Year 2000
disruption. Based on such assessment the Company determined that its accounting
system will need to be modified, which can be accomplished by purchasing "off
the shelf" software that is Year 2000 compliant at a cost which is not material
to the Company's operations.
The Company intends to assess the Year 2000 vulnerability of its business
partners in mid 1999 to determine which, if any, relationships require
corrective action. Though the Company does not anticipate any material
disruptions to its operations from Year 2000 problems, there can be no assurance
such problems will not arise.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130 "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." These statements are required to be adopted
in fiscal 1999. In 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Post Retirement Benefits." This Statement is required
to be adopted in fiscal 1999. In 1998, the FASB also issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
is required to be adopted in fiscal 2000. The Company is currently in the
process of evaluating the impact of adopting these new statements.
BUSINESS
THE COMPANY
Immtech is a biopharmaceutical company focused on the discovery and
commercialization of therapeutics for the treatment of patients afflicted with
opportunistic diseases, cancer or compromised immune systems. Through its
independent efforts and in cooperation with a group of universities led by the
University of North Carolina at Chapel Hill ("UNC") and including Auburn, Duke
and Georgia State Universities (the "Consortium"), the Company has developed and
licensed a
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pipeline of biological and pharmaceutical compounds ready for Phase I and Phase
II human trials. To date, the Consortium has accumulated a library of over 800
compounds which are being tested in laboratories around the world. Additional
compounds are being screened in various laboratory and animal models for future
development to which the Company will have exclusive licensing rights for use as
antimicrobial agents. The Consortium is sponsored by a large National
Cooperative Drug Development Grant ("NCDDG") awarded by the National Institutes
of Health ("NIH") to develop platform technologies for new drugs; the focus is
on treating emerging diseases.
The Company has two independent programs for developing drugs. The first
is based on a technology for the design of a new class of pharmaceutical
compounds commonly referred to as dications. The Company believes that
pharmaceutical dications can be designed to inhibit the growth of a wide variety
of infectious organisms. The second is based on biological proteins that work in
conjunction with the body's immune system. These biological proteins are
derivatives of C-Reactive Protein ("CRP"), which occurs naturally in the body
and which the Company believes can be used to control the structural environment
around cancerous tumors and to reprogram cancerous cells to stop growing
uncontrollably and revert to normal cell behavior.
Pharmaceuticals - Dications
The discovery of the Company's pharmaceutical platform technology for
dications was the result of a research program focused on understanding
Pentamidine (a drug marketed by Fujisawa), an extremely toxic but effective drug
for the treatment of Pneumocystis carinii pneumonia ("PCP"), a form of pneumonia
common in patients with compromised immune systems. Researchers at UNC
discovered that most of Pentamidine's toxicity was caused by certain metabolites
formed as the drug breaks down within the body's circulatory system. This led to
the design of new compounds with more stable molecular structures which do not
break down into toxic substances. These newly designed compounds proved to be
significantly less toxic and more effective in treating PCP than Pentamidine.
The methodology used by these researchers to develop these new compounds evolved
into the Company's platform technology for designing dicationic compounds. The
Company intends to use this technology to design pharmaceutical compounds to
treat a wide variety of infectious diseases.
Dicationic compounds have two positively charged ends held together by a
neutrally charged chemical linker group. The unique structure of the compounds
with positive charges on the ends (shaped like molecular barbells) allows them
to bind to the negatively charged surface in the minor groove of the organism's
DNA (like a band-aid), preventing life-sustaining enzymes from attaching to the
DNA's active sites. Once a site is occupied by one of the Company's compounds,
the necessary enzyme cannot bind to the DNA, preventing the organism from
dividing, stopping the spread of the related disease by inhibiting or killing
the growth of the target organism. This will accelerate the body's return to
normal health.
UNC has developed a unique and rapid method for identifying drug
candidates for specific micro-organisms. The first step in this drug discovery
process is to map and analyze the genetic sequences of the DNA of infectious
microbes, specifically studying the structure of the minor grooves which run the
length of the double-stranded, helical DNA. The minor groove forms a deep pocket
with negative charges dispersed at regular intervals. Certain pockets define the
binding region for enzymes which control cell division and survival.
A second step in the discovery process identifies the location of sites
where the enzymes that control microbe cell division bind in the minor groove of
DNA. The Company's researchers then use rational computer modeling and empirical
drug design to develop compounds that can block the active enzyme sites. To
select target compounds, the researchers initially examine the current library
of 800 dicationic compounds that have already been made and analyzed, looking
for structures fitting the active site in the minor groove. Once the appropriate
compound is identified, a series of laboratory and animal tests are run on the
compound to assess its efficacy and safety.
The Company has two drugs that are ready to begin human clinical trials.
The first compound, DAP-092, is for the treatment of Cryptosporidium parvum, a
common enteric parasite that causes severe diarrhea and wasting. The second
compound, DB-289, is for the treatment of PCP. These two drugs are ideally
suited to demonstrate the power of the dication technology platform. DAP-092 was
developed to treat a parasite that is found only in the gut. Because of its
positive charges DAP-092 cannot cross the digestive membranes and stays in the
digestive tract where it is needed. On the other hand, DB-289 which works in the
circulatory system, was developed with a proprietary (patented) method of
temporarily neutralizing the positive charges which allows it to readily pass
through the digestive membranes into the circulatory system where the dications
become activated for treatment of diseases.
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DAP - 092 As A Therapy for Cryptosporidiosis
DAP-092 is derived from the pharmaceutical technology platform and was
designed to block key enzymes from binding to the minor groove of the
Cryptosporidium parvum parasite's DNA, thus inhibiting or killing the growth of
the organism. Dicationic compounds with strong positive charges generally cannot
pass through the membranes which separate the digestive tract from the
circulatory system. DAP-092 is unique because it will work directly in the
gastro-intestinal tract (gut) and not be absorbed into the circulatory system,
substantially reducing the possibility of adverse side effects. The Company has
specifically targeted Cryptosporidium in an effort to take advantage of the
fast-track FDA approval process often afforded to drugs which cure diseases for
which there is no acceptable treatment. The Company estimates the market for
DAP-092 to be approximately $100 million per annum.
The Company's DAP-092 pharmaceutical product has demonstrated efficacy in
animal tests against Cryptosporidium parvum, a parasite that causes a
debilitating diarrhea and wasting syndrome that affects cancer patients, AIDS
patients and a growing number of pediatric patents worldwide, which can lead to
death in severe cases. There is no drug currently approved for its treatment.
DAP-092 has been tested in several animal models infected with
Cryptosporidium parvum. In the data from the neonatal mouse model shown in the
table below, as higher doses of orally administered DAP-092 were given to the
mice, a significant reduction in the organisms were observed. At a dose of 4.7
mg/kg, there was approximately a 90% reduction in the number of organisms
measured in the stools of the mice. At doses five-time the effective dose no
toxicity or side effects were observed.
Activity of DAP-092 Against Cryptosporidium parvum
Neonatal Mouse Model of Infection
[GRAPHIC OMITTED]
The activity of DAP-092 was compared to saline control.
DB-289 As a Therapy for PCP and Other Diseases
DB-289 was specifically developed to be a substitute for Pentamidine.
However, unlike Pentamidine, which is administered in a cost intensive hospital
setting, DB-289 can be self-administered orally by the patient outside the
hospital, making it a much more cost effective treatment. In immuno-compromised
individuals infected with PCP, the lungs are often filled with mucus and other
fluids, resulting in compromised air passages causing potentially
life-threatening pulmonary disease. Since up to 40% of immuno-compromised
patients become intolerant of Trimethoprim-Sulfamethoxazole ("TMP/SMX"), the
current drug of choice for PCP, physicians then prescribe Pentamidine as the
second-line alternative. Because it is a dication and cannot pass through the
digestive tract to enter the bloodstream, Pentamidine can be administered only
intravenously or via inhalation therapy. In addition, because it is highly toxic
and has a narrow therapeutic window, Pentamidine is given only under constant
medical supervision. The Company's scientists believe that DB-289 will prove to
be a superior treatment than Pentamidine, and a substitute for TMP/SMX in
patients sensitive to sulphur-based drugs.
DB-289 has been studied extensively in animal model systems of
Pneumocystis carinii. UNC developed the standard laboratory animal model for
evaluating the efficacy of new drugs for the treatment of PCP. The laboratory
results
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from the immune suppressed rat model shows that DB-289 is a very effective oral
drug for the treatment of PCP. The data in the chart shows that as the dose
increases, the number of cysts observed in the lungs of the mice is reduced. In
the high dose groups (greater than 2.4 mg/kg), PCP was not found in the lung
tissues of the rats during histology examinations.
Activity of DB-289 Against
Pneumocystis carinii Pneumonia (PCP)
[GRAPHIC OMITTED]
DB-289 is an analog of Pentamidine, in which the charges have been
temporarily neutralized to enable DB-289 to cross the digestive membranes. Also,
DB-289 was designed with a more stable linker structure which results in
breakdown products that are far less toxic than those resulting from the
breakdown of Pentamidine. Once DB-289 enters the bloodstream, naturally
occurring enzymes remove the neutralizing groups that mask the positive charges,
thereby exposing the active drug. Because of this masking technology, DB-289 can
be taken orally. In addition, because of its reduced toxicity, DB-289 requires
less medical supervision than Pentamidine. Consequently, the Company believes
DB-289 will not only replace Pentamidine (and, in some cases, TMP/SMX) and
capture all of Pentamidine's portion of the existing $200 million annual PCP
treatment market, but will also lead to an expansion of this market.
The Company's Pipeline of Dication Pharmaceuticals
In addition to treating PCP, Company scientists have shown through animal
studies that dication compounds are active against Leishmania mexicana
amazonesis, an organism that causes ulcerating skin lesions, Leishmania denovni,
an organism that causes a potentially fatal visceral disease, and against
Trypanosoma brucei rhodesiense, a parasite that causes slow deterioration of
organs, tissues, and the central nervous system, which is fatal if untreated. In
May 1998, the Company received a Small Business Technology Transfer Grant
("STTR") to study dication compounds as a treatment for various tropical
diseases. The Company has been contacted by the Center for Disease Control
("CDC") about the availability of dication compounds to treat a recent epidemic
of Trypanosomiasis (sleeping sickness) in the Sudan. The Company's scientists
are also collaborating with experts from the Walter Reed Army Institute for
Medical Research, the Southern Research Institute and other universities to
expedite the development of compounds effective against Trypanosomiasis,
Leishmania, malaria and tuberculosis.
The Company has other dicationic compounds in the initial stages of
development directed at several large markets:
Fungal Infections. Fungi, especially the three most common forms - Candida
albicans, Cryptococcus neoformans and Aspergillosis fumigatus - cause major
health complications, particularly in patients with compromised immune systems.
A number of the Company's dicationic compounds have not only stopped the growth
of fungi in both in vitro and limited in vivo tests, but have actually killed
the fungi (fungicidal), thus being superior to Fluconazole, the most commonly
used anti-
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fungal drug, which only stops the growth of the organism (fungistatic). Initial
responses indicate that the Company's compounds are effective in treating a
broad spectrum of blood-based fungal infections.
Initial studies applying 30 of the Company's compounds against fungi have
been conducted by academicians and several large pharmaceutical companies. The
results have been encouraging and the pharmaceutical companies have committed to
conducting animal testing of certain of the Company's anti-fungal compounds. If
the initial animal studies are positive, the next step would be to conduct human
clinical trials.
Given that the fungicidal market is several billion dollars, the Company
may seek to develop its anti-fungal products independently if it raises
additional funding for a worldwide market. In the alternative, the Company will
look to a collaborative venture with a large pharmaceutical company for
additional funding.
Tuberculosis Mycobacterial Infections. Immuno-compromised patients are
increasingly developing infections from drug-resistant strains of tuberculosis.
Eighty percent of AIDS patients infected with drug-resistant Mycobacterial
tuberculosis die. Thus far, 19 of the Company's compounds have shown
effectiveness against these diseases in in vitro testing and have advanced into
animal tests to be performed under the auspices of the NIH at the Tuberculosis
Antimicrobial Acquisition and Coordinating Facility at the Southern Research
Institute.
A total of 70 of the Company's compounds were tested in vitro against
Mycobacterium avium organisms isolated from patients; 20 of these compounds were
up to 500 times more potent than Azithromycin, the drug currently used as the
standard for treating tuberculosis. Consequently, the Company will continue to
work with the NIH and collaborating laboratories, as well as several
pharmaceutical companies, to complete testing and advance these compounds into
clinical trials to treat the emerging, drug-resistant strains of tuberculosis.
HIV. The Company has designed a class of dicationic compounds to treat
HIV. Based upon the initial results of the in vitro and animal studies conducted
at Auburn University, the Company intends to develop further modifications of
these compounds and is in discussions with a potential licensee, which will
provide the funds for further testing. These compounds represent a new class of
antiviral drugs. These drugs inhibit the integrase enzyme which the HIV virus
needs to "integrate" into human DNA in order for the virus to divide and
multiply.
Other Infections. Some of the Company's pharmaceutical compounds are
effective against Giardia lambia, an enteric protozoa that is one of the most
widespread causes of common diarrhea. Other compounds are effective against
chloroquine- and mefloquine-resistant strains of Plasmodium falciparum, the
organism that causes malaria. Company scientists have shown that certain
compounds are active against Leishmania mexicana amazonesis, an organism that
causes ulcerating skin lesions, Leishmania donovni, an organism that causes a
potentially fatal visceral disease, and against Trypanosoma brucei rhodesiense,
a parasite that causes slow deterioration of organs, tissues and the central
nervous system.
The Company will pursue the clinical development of its pipeline compounds
for these clinical indications while conducting clinical trials to obtain FDA
approvals of DAP-092 for Cryptosporidiosis and DB-289 for PCP.
Biological Products - rmCRP
The Company's biological program is focused on strengthening the innate or
natural immune system by (i) improving the structural environment around cells
and vascular tissue and (ii) reprogramming cancer cells to act normally. The
Company's current biological products are derivatives of CRP, a naturally
occurring element of the human immune system and an important component of the
body's immediate immune response. When triggered, the immune system coordinates
physiological, biochemical, hormonal and immunological reactions to injury or
infection. It is the body's primary defense against disease. The Company's
scientists discovered that, as part of the immune system's response to disease,
the blood protein CRP is modified by the body to form modified CRP. Modified CRP
("mCRP") forms lattice-like meshworks that strengthen tissues and
interconnective structures which work to increase their ability to resist
disease and improve the effectiveness of the immune system. Using monoclonal
antibodies, the Company's scientists found that mCRP occurs naturally in healthy
tissues surrounding blood vessels, in the structural tissues inside lymphatic
organs, and in cells having important secretory functions (e.g. ductal
epithelial cells, insulin-secreting islet cells of the pancreas). In contrast,
mCRP is either absent or present in greatly reduced quantities in cancerous
tissues such as those found in the lung, breast, or prostate. mCRP functions not
only as a barrier to the spread of disease, but as a scaffold to order,
organize, and optimize biochemical
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and immunological reactions. When this "scaffold" is damaged or weakened, the
immune response is compromised and unable to resist diseases which it would
otherwise overcome.
The term "cancer" includes many different types of uncontrolled growth of
otherwise normal cells. Rapidly dividing cancer cells produce enzymes which
attack and weaken surrounding tissues, allowing cancer cells to grow
unrestrained and become tumors. As cancer cells grow they may also metastasize,
that is, spread from the primary site to secondary sites within the body.
Unrestrained growth of cancerous cells may destroy surrounding organs or impair
physiological functions, often leading to death. The Company's scientists have
discovered that when cancerous cells come in contact with mCRP, cell behavior is
markedly changed, abnormal rapid growth ceases and the cell returns to normal
activity. The Company's biological program focuses on replacing mCRP in areas
where deficient, increasing barriers between cells to reduce the entry and
propagation of disease, and enhancing the body's immune reactions.
The Company's scientists believe that rmCRP could be used to treat HIV and
cancer patients because, as these scientists recently discovered, when human
cancer cells or HIV-infected lymphocytes come in contact with rmCRP, their cell
morphology is markedly changed and their metabolic activity increases. The cells
shift away from phases of DNA duplication to phases of enhanced functional
activity. The effects of such shifts could be strongly positive in the fight to
stop the growth and spread of disease.
o In cancer, when cells divide uncontrollably, the Company's scientists
believe that therapeutic application of mCRP will stop DNA synthesis and
slow down the proliferation of cancer cells as it strengthens the immune
system to attack the defective cells.
o In viral infections such as HIV, viruses take over a cell and direct its
activities, merging the virus's genes with the DNA of the host cell. The
Company's scientists believe that therapeutic applications of mCRP will
inhibit the synthesis of DNA by the host cell, thus preventing viral genes
from reproducing themselves.
Preclinical studies have shown that mCRP has the following results when
used against a number of different diseases:
o stopped tumor growth and lead to tumor cell death or necrosis, and reduced
the spread of metastatic lesions in mouse models of several common
adenocarcinomas
o prevented the HIV virus from infecting CD4+lymphocytes in laboratory tests
o lowered both free virus and cell-associated virus
As an adjunct to standard chemotherapy regimens, injections of rmCRP also
enhanced the effectiveness and reduced the toxicity of a chemotherapeutic agent
in a mouse model of leukemia. In addition, rhesus monkeys infected with SIV (the
simian form of HIV), were able to safely tolerate injections of rmCRP, and rmCRP
treatments increased CD4+lymphocyte levels and platelet levels, and decreased
blood viral load.
A Phase I proof-of-principle human trial for mCRP was performed in 1994 in
Germany in three HIV-infected men. Each volunteer received seven intravenous
doses of mCRP over a two-week period. The injections were safely tolerated,
CD4+lymphocytes increased from 10 to 50 percent, platelet numbers and volume
increased notably, and blood viral load decreased within the four-week study
period. Thereafter, the Company developed a commercially scaleable recombinant
(synthetic) form of mCRP ("rmCRP") and, in 1996, began to conduct a larger scale
clinical program in Germany by using a dose-escalation, placebo-controlled
protocol. Five groups of four HIV-infected men were treated with 10 intravenous
injections of rmCRP each over a 12-day period. All patients safely completed
therapy with no adverse effects noted; the drug was shown to be nontoxic at high
doses. At a dose of 2 mg/kg, patients receiving rmCRP showed the same favorable
immune, hematopoietic, and antiviral effects observed in the Company's
preclinical and initial human clinical trials; there was an increase in CD4+
counts and platelets and a decrease in plasma HIV load.
TARGET MARKET
The market for the Company's products consists of those seeking to treat
cancer and HIV disease and the opportunistic infections associated with immune
suppressed patients. According to the Centers for Disease Control and Prevention
(CDC), cancer and infectious diseases rank second and third as causes of death
in the United States. In 1997,
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approximately 538,000 deaths (one of every four) resulted from cancer. Over 1.2
million people are diagnosed with cancer every year, and one of every four
Americans now living will eventually develop cancer. In 1997, the estimated cost
to society to treat cancer patients was over $100 billion, more than $5 billion
of it for drugs (both chemotherapeutic agents and treatments for opportunistic
infections).
The infectious disease market represents a major opportunity for Immtech.
Infectious diseases cause approximately 175,000 deaths in the United States
annually - 40 to 50 per cent from respiratory infections, and approximately 20
percent from opportunistic infections associated with HIV disease and AIDS. In
addition, 2 million people will contract infections this year during a hospital
stay, adding approximately 8 million days of extended hospital stay at an annual
cost of $4.5 billion.
In 1997, worldwide sales of drugs to combat infectious disease were
approximately $26 billion, including $7 billion in the United States. Three
individual drugs each had sales of more than $1 billion. Most prominent
anti-infectives have targeted bacterial and fungal infections. However, there is
an acute need to develop new drugs to treat not only primary infections but
secondary or opportunistic infections as well. The emergence around the world of
drug-resistant strains of micro-organisms has contributed to this need, as has
the growing immuno-suppressed population created by disease (e.g., HIV) and the
use of immunosuppressive drugs (e.g., chemotherapeutic agents).
Worldwide sales of drugs used to treat opportunistic infections are
estimated at more than $1 billion annually and are growing at more than 20
percent per year. Cancer patients account for the largest number of
opportunistic infections (an estimated 500,000 patients in the United States and
1 billion worldwide). Of the approximately 200,000 AIDS patients in the United
States, one-fourth will develop opportunistic infections which become
life-threatening. Before 1987, opportunistic infections generally occurred as
single infections; today, 50 to 75 percent of AIDS patients develop multiple
opportunistic infections. The use of protease inhibitors as antiviral therapy in
HIV positive patients has reduced the number of opportunistic infections
reported in the U.S. The protease drugs are often used in combination therapy
made up of several different protease drugs in a cocktail. This cocktail therapy
is very expensive (requires a rigid protocol for taking the drug) and is only
used in patients that can afford the high cost of the drugs. Further, in recent
meetings at the NIH, it has been reported that protease resistant strains of the
HIV virus are developing in a significant number of patients. This trend
suggests that over the next five years there will be an increase in
opportunistic infections in the HIV patient population.
The CDC recently issued a warning that drug-resistant forms of
Mycobacterium tuberculosis ("TB") are becoming prominent opportunistic
infections. The estimated annual cost to eradicate TB, reported to be $36
million in 1987 and $540 million in 1992, is estimated to have reached $825
million in 1996. In the state of New York, 23% of TB patients show signs of
having drug-resistant strains. It is estimated that 80% of patients with
multi-drug resistant TB die.
Another emerging opportunistic infection, Cryptosporidium parvum, occurs
not only in AIDS patients but in patients with cancers and heart disease, and
occasionally in the general population. The outbreak of Cryptosporidium parvum
in Milwaukee in 1993 afflicted approximately 400,000 people and was fatal to
100. This potentially life-threatening ailment affects 2-5% of AIDS patients,
with greater prevalence outside the United States, where protease inhibitors
have reduced the incidence. To date, there is no approved drug to treat
Cryptosporidium parvum-associated diarrhea. Immtech aims to have the first drug
in clinical trials and approved for treatment of this condition.
COMPETITION
Competition in the biotherapeutic, biotechnology and biopharmaceutical
industries is intense. Factors such as scientific and technological
developments, the availability of patents, timely governmental approval for
testing, manufacturing and marketing, and the ability to commercialize products
in a timely fashion play a significant role in determining a company's ability
to effectively compete. Furthermore, these industries are subject to rapidly
evolving technology that could result in the obsolescence of any products
developed by the Company. The Company competes with many specialized
biopharmaceutical firms, as well as a growing number of large pharmaceutical
companies that are applying biotechnology to their operations. Many of these
companies have concentrated their efforts in the development of human
therapeutics, and developed or acquired internal biotechnology capabilities.
These companies, as well as academic institutions, governmental agencies and
other public and private organizations conducting research, also compete with
the Company in recruiting and retaining highly qualified scientific personnel
and consultants and may establish collaborative arrangements with competitors of
the Company.
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The Company's competition will be determined in part by the potential
indications for which the Company's products are developed and ultimately
approved by regulatory authorities. The Company is relying on its collaborations
with the Consortium, Pharm-Eco, UNC and NextEra Therapeutics to enhance its
competitive edge by providing manufacturing, testing and commercialization
support.
The Company knows of other companies and institutions dedicated to the
development of therapeutics similar to those being developed by the Company,
including Eli-Lilly, Hoffman-LaRoche and Abbott Laboratories. Many of the
Company's competitors, existing or potential, have substantially greater
financial and technical resources and therefore may be in a better position to
develop, manufacture and market biopharmaceutical products. Many of these
competitors are also more experienced with regard to preclinical testing, human
clinical trials and obtaining regulatory approvals. The current or future
existence of competitive products may also adversely affect the marketability of
the Company's products.
COLLABORATIVE ARRANGEMENTS
The Company intends to continue to conduct independent research and to
rely upon business-sponsored research programs, joint ventures and other forms
of collaborative programs for product development, manufacturing and marketing.
The Company considers its current collaborative relationships significant to the
successful development of its business and believes that it will enter into
arrangements in the future to develop, manufacture and market not only the
products on which it is currently focusing, but also those which it will seek to
commercialize.
Pharmaceutical Products-Dications
The Company initially acquired its rights to the platform technology and
dicationic compounds developed by the Consortium pursuant to an Agreement, dated
January 15, 1997 (as amended, the "Consortium Agreement") among the Consortium,
Pharm-Eco and UNC on behalf of itself and the other academic institutions in the
Consortium. The Consortium Agreement commits each party to the agreement to
research, develop, finance the research and development of, manufacture and
market the technology and compounds owned by the Consortium and then licensed or
optioned to Pharm-Eco (the "Current Compounds") and licensed to the Company
pursuant to the Consortium Agreement, and all technology and compounds developed
by the Consortium after the date thereof through use of Immtech-sponsored
research funding or National Cooperative Drug Development grant funding made
available to the Consortium (the "Future Compounds" and, collectively with the
Current Compounds, the "Compounds"). The Consortium Agreement contemplates that
Immtech and Pharm-Eco, with respect to the Current Compounds, and Immtech and
UNC, with respect to Future Compounds, will enter into more comprehensive
license or assignments of the intellectual property rights held by Pharm-Eco and
the Consortium; and that Pharm-Eco and the Company will enter into an
arrangement relating to the manufacture of products derived from the Compounds.
Under the Consortium Agreement, Immtech has agreed to use its best efforts
to complete an initial public offering ("IPO") of shares of its Common Stock to
raise at least $10,000,000 or an alternative form of financing ("Alternative
Financing") to raise at least $4,000,0000 by September 30, 1998. Upon the
closing of the IPO or the Alternative Financing, Immtech will: (i) use the
greater of (x) 33% of the net proceeds from the IPO or an Alternative Financing
or (y) $5,000,000, to develop the Compounds, (ii) issue an aggregate of
1,222,500 shares of Common Stock to Pharm-Eco or persons designated by
Pharm-Eco, which number includes 275,000 shares to be issued to the Consortium,
(iii) issue warrants to purchase an aggregate of 1,700,000 shares of Common
Stock to Pharm-Eco or persons designated by Pharm-Eco with a ten-year term from
the date of issuance, at an exercise price equal to the weighted average market
price of the Company's Common Stock during the first 20 days of trading on any
stock exchange or in any over-the-counter market, which warrants are exercisable
upon the occurrence of certain events and subject to redemption by Immtech; and
(iv) issue an aggregate of 300,000 shares of Common Stock collectively to
Pharm-Eco or persons designated by Pharm-Eco, which number of shares includes
200,000 shares of Common Stock to be issued to the Consortium upon the filing by
Immtech of an NDA or ANDA with the FDA with respect to any product. In addition,
Immtech will pay UNC an aggregate royalty of 5% of net sales of Current Products
and Future Products, except that the Royalty Rate payable on any Compound
developed at Duke University will be determined by negotiation at the time such
Compound is developed. In the event that Immtech sublicenses its rights with
respect to the Compounds, Immtech will pay UNC, in addition to the royalty
described above, 2.5% of all signing, milestone and other non-royalty payments
made to Immtech pursuant to the sublicense agreement and will pay to Pharm-Eco
2.5% of all signing, milestone and other non-royalty payments made to Immtech
pursuant to the sublicense agreement.
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Upon closing of this Offering: (a) Pharm-Eco will be entitled to designate
for appointment one representative to Immtech's Board of Directors, (b) UNC will
be entitled to designate one person as a non-voting observer of all meetings and
other proceedings of Immtech's Board of Directors, (c) Immtech will make
quarterly $100,000 Research Grants to UNC commencing on the final day of the
month during which the closing of this Offering occurs, and continuing every
three months thereafter until, at a minimum, the third anniversary of this
Offering and (d) Immtech will pay all costs to prosecute, maintain and defend
all patents and patent applications relating to any Compounds or products.
Upon raising $4,000,000, Pharm-Eco will grant Immtech a license to use the
Current Compounds only as antimicrobial agents and UNC will grant Immtech a
license to use the Future Compounds only as antimicrobial agents. The initial
$5,000,000 in funds raised by Immtech (including the initial $4,000,000
referenced above) will be applied to the advancement of dications. Once Immtech
has raised more than $10,000,000 both Pharm-Eco and UNC will grant an exclusive
worldwide license to use, manufacture, have manufactured, promote, sell,
distribute, or otherwise dispose of any products based directly or indirectly on
all of the Current Compounds and Future Compounds.
In exchange for UNC's and Pharm-Eco's permission to extend the period of
time for Immtech to fulfill its obligations under the Agreement, Immtech has
agreed to (i) provide financial support to Dr. Richard Tidwell's laboratory and
research covered by the agreement, (ii) pay up to $50,000 in fees and expenses
charged UNC by UNC's patent counsel during the period of the extension, (iii)
pay arrearages in research support accrued prior to the date of the First
Amendment within 30 days of the closing of the IPO, (iv) replenish Dr. Tidwell's
UNC Department of Pathology & Laboratory Medicine trust fund of all monies spent
due to the delay in receipt of the Research Grants, currently estimated at
$150,000 and (v) provide each of UNC and Pharm-Eco with 50,000 shares of Common
Stock of Immtech.
Formation of NextEra Therapeutics, Inc.
The Company entered into a joint venture agreement with Franklin Research
Group ("Franklin"), pursuant to which the parties will form a corporation,
NextEra Therapeutics, Inc. ("NextEra") to develop therapeutic products for
treating cancer and related diseases. NextEra will focus initially on the
development of recombinant modified CRP ("rmCRP"). NextEra plans to fund the
development of rmCRP through Phase I, II and III clinical trials and early
commercialization.
The Letter Agreement, which will be supplemented by more detailed
agreements to be negotiated by the parties, commits Franklin to invest a minimum
of $1,350,000 to fund the Phase I human clinical trials using rmCRP in return
for 510,000 common shares of NextEra. Immtech will contribute its rmCRP
technology, including relevant patents and know-how, as well as the use of its
current laboratory facilities, for 330,000 common shares of NextEra. NextEra's
scientists are in the process of preparing drug substance and documents for a
safety study in 30-40 cancer patients to be carried out at Northwestern
University. The focus of the study is to evaluate the safety and early efficacy
of rmCRP in patients with different types of cancer.
At the conclusion of the Phase I trial, the data for safety and efficacy
will be evaluated and Franklin will have 90 days to decide to continue the
development of rmCRP in human Phase II and III clinical trials. If Franklin
decides to proceed, it will invest a minimum of an additional $6,500,000 for
which it will receive an additional 160,000 common shares of NextEra. If
Franklin decides not to proceed, Immtech can purchase majority control of
NextEra by buying stock at $1.00/share until enough shares are purchased for
majority control. In addition, if Franklin elects to proceed, at its option,
Immtech can invest $1,625,000 of the $6,500,000 required of Franklin after the
Phase I trial, in which event Franklin will receive only 40,000 of the 160,000
shares to which it otherwise would be entitled.
In addition to the shares of NextEra to be held by Immtech and Franklin
upon formation, 33,000 shares will be held by NextEra's lead scientist, 100,000
shares will be reserved for issuance to employees of the Company and consultants
and the lead scientist will be granted an option to purchase 30,000 shares.
NextEra will fund the operation of Immtech's primary facility, including
employees' salaries related to work on rmCRP and overhead associated with the
project. Currently, this includes all employees except the President and Chief
Financial Officer. In addition, NextEra will fund the maintenance and
prosecution of all patents that are part of the intellectual property
transferred to NextEra by Immtech.
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Manufacturing Joint Venture
The Company has formed a manufacturing joint venture with Pharm-Eco to
produce GMP-quality dicationic drugs and products for clinical testing and for
early commercialization. Pharm-Eco is a full-service drug synthesis and chemical
services company that has synthesized numerous compounds and advanced them into
clinical testing. Pharm-Eco is known internationally for providing high-quality
contract manufacturing services to NIH, the U.S. military, the federally-funded
AIDS programs, and numerous large pharmaceutical firms. Pharm-Eco has extensive
experience in developing and validating bulk pharmaceutical processes and in
preparing Drug Master Files.
The joint venture was formed to reduce the cost and risk associated with
manufacturing the initial pharmaceutical products (DAP-092 and DB-289). Once the
commercial sale of products begins, Immtech and Pharm-Eco will deduct their
costs associated with making and marketing (including selling, marketing, and
regulatory support) products. The remaining margin, after the costs have been
subtracted, will be divided equally between the joint venture partners. At such
time when Immtech's sales reach $20 million for DAP-092 and DB-289, Immtech can
elect not to use the joint venture or Pharm-Eco for manufacturing, whereupon
Immtech would be required to pay a royalty to Pharm-Eco of no more than 2% of
sales.
ImmvaRx, Inc. License Agreement
In April 1998, Immtech signed an Option Agreement with ImmvaRx for the use
of rmCRP as an adjuvant with vaccines. An adjuvant is a therapeutic product that
is used in conjunction with vaccines to heighten the immune response; increasing
the natural protection against diseases. In several research studies using
animal models, rmCRP has shown that it can enhance the immune response of
certain commonly used vaccines.
ImmvaRx is an early stage company that was founded to develop new peptide
cancer vaccines. ImmvaRx is currently conducting a private offering to raise $3
million. Pursuant to the Option Agreement, ImmvaRx has a three-month period to
raise a minimum of $500,000 to fund research and clinical development
activities. If ImmvaRx is successful in raising the money, ImmvaRx can purchase
a license for a $50,000 upfront fee, stock in ImmvaRx, and a royalty on sales of
adjuvant products sold. Several of Immtech's executives are founding
shareholders of ImmvaRx. See "Certain Transactions" and "Risk Factors--Conflicts
of Interest."
RESEARCH AND DEVELOPMENT
Pharmaceutical
The Company conducts independent research and development efforts and is
also a participant since 1997 in the Consortium organized by Dr. Richard R.
Tidwell of UNC. Many of the world's leading experts in opportunistic infections
are affiliated with the consortium, including:
o Dr. James E. Hall of UNC (for Pneumocystis diseases)
o Dr. John Perfect of Duke University (for fungal diseases)
o Dr. Byron Blagburn of Auburn University (for parasitic diseases)
o Dr. Christine Dykstra of Auburn (for the molecular and biochemical effects
of dicationic compounds on DNA and for viral disease)
o Drs. Dave Wilson and Dave Boykin of Georgia State University (for the
chemical design, synthesis, and molecular characterization of novel
anti-infective drugs).
The National Institutes of Health (NIH) has awarded two National
Cooperative Drug Development Grants to the Consortium, which has developed a
library of 800 compounds that have been tested in vitro and in animals against
infectious disease agents.
The Company is aggressively seeking to commence human clinical trials with
well-defined, short-term clinical end points. DAP-092, DB-289 and rmCRP are
being produced under GMP conditions, and study protocols and regulatory
information are being compiled in anticipation of starting clinical trials by
1999.
The Company plans to conduct multiple clinical trials using dication
drugs. Specifically:
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o DAP-092 will be given orally to patients afflicted with severe
diarrhea caused by the intestinal parasite Cryptosporidium parvum.
Final plans are in place for synthesis, final toxicology testing
prior to human use, adsorption, distribution, metabolism and
excretion analyses, formulation for administration, and regulatory
approvals. This study is intended to establish that DAP-092 reduces
the duration of Cryptosporidium parvum-caused diarrhea, the
associated weight loss, and the number of Cryptosporidium parvum
organisms excreted in the stool.
o DB-289 entered into a Phase I/IIa trial as an orally active prodrug
formulation to treat PCP. DB-289 is designed to cross the intestinal
membrane to get into the bloodstream, where it is activated by
natural enzymes found in human cells. Once activated, the drug kills
the microbes causing the pneumonia, resulting in a clearing of the
airways. The Company is pursuing an A-IND (an abbreviated IND for
rapid FDA approval) for this human trial because the Company's
application will focus primarily on enhancing the safety and
delivery mechanics of a currently approved drug. The Company will
test its prodrug in PCP-infected AIDS patients.
Biological
The Company has completed two human Phase I biological clinical trials of
its biological products. Biological trials conducted to date have had promising
results:
o In 1994, a proof-of-principle Phase I human clinical safety study of
mCRP, conducted in a limited number of HIV-positive patients in
Germany, established that mCRP can be safely injected intravenously
in multiple-injection protocols. During treatment, CD4+ and CD8+
cell counts increased, HIV viral titers decreased, platelet numbers
increased, and platelet mass increased significantly.
o In 1995-1996, the Company developed a recombinant form of mCRP
(rmCRP), which was tested in a follow-up human Phase I/IIa dose
escalation clinical trial, also in Germany. Consistent with the
initial trial in both safety and efficacy, rmCRP enhanced the immune
system (i.e., lymphocytes increased and viral load decreased) and
increased the number of circulating platelets.
The next step is to test rmCRP in a Phase I/IIa trial in cancer patients
with funds provided by Franklin. Initial studies will investigate the safety and
anti-cancer activity of rmCRP as a primary therapy. A cohort of 25 to 50 cancer
patients with various malignancies will be enrolled. The anti-cancer effects of
rmCRP will be monitored by changes in relative levels of blood markers of
cancer, non-invasive diagnostic imaging techniques, and biopsy evaluations.
MANUFACTURING
Pharmaceutical Products. The Company has formed a manufacturing joint
venture with Pharm-Eco to produce GMP-quality dicationic drugs and prodrugs for
the initial two compounds (DAP-092 and DP-289) for clinical testing and early
commercialization. See "Collaborative Arrangements."
Biological Products. The Company has developed a recombinant form of the
protein rmCRP. Recombinant manufacturing involves the use of cloned genetic
material (DNA) to produce proteins in large quantities. The Company's scientists
have successfully cloned and expressed the gene from mCRP in Escherichia coli
("E. coli"). The Company has developed methods to isolate rmCRP from E. coli and
remove other cell debris produced in the fermentation process. The Company's
scientists have determined that the recombinant protein has the same
characteristics as the naturally occurring protein, which showed promising
safety and efficacy characteristic in the Company's initial human trial. The
Company is continuously documenting the safety and efficacy of recombinant mCRP
to expeditiously file an IND to conduct Phase I&IIa trials with the products.
The Company recently signed a contract for making rmCRP on a commercial
scale with a third party manufacturer. The recombinant mCRP has been isolated
and purified to completion, and the Company has completed development of a
formulation method that is suitable for sterile and ongoing clinical trials. The
Company expects that the third party manufacturer will make sufficient
quantities of rmCRP to satisfy requirements for Phase I & IIa clinical trials.
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PATENTS AND LICENSES
The Company's success will depend in part on its ability to obtain patent
protection for its products, both in the United States and abroad. Although the
Company aggressively pursues patent protection, obtaining patents for
biopharmaceutical products involves complex legal and factual questions and
consequently involves a high degree of uncertainty. The Company has a policy of
developing new forms of and uses for its products and then applying for a patent
on each newly developed product.
There can be no assurance that any particular patent will be granted or
that patents issued to the Company will provide the protection contemplated.
Patents can be challenged, invalidated or circumvented. It is also possible that
competitors will develop similar products simultaneously.
The Company, by itself or jointly with others, has applied for 17 United
States patents, seven of which pertain to diagnostic or device products and ten
of which pertain to the lead biotherapeutic product, rmCRP. The ten patent
applications for rmCRP cover its clinical uses for (1) treating cancer, viral
infections, bacterial infections, thrombocytopenia, and immune complex disease,
(2) diagnostic imaging of tissue based disease, (3) monoclonal antibodies which
specifically bind rmCRP and (4) the production and isolation of rmCRP. To date,
the Company has been issued eight of the ten United States patents for the uses
of mCRP. In total, the Company has filed 55 patent applications in the U.S. and
in various global markets on its biological products.
The Company has also obtained worldwide exclusive licensing rights to 57
additional patents filed domestically and globally for its pharmaceutical
products. The pharmaceutical patent applications cover compound structure and
uses for the treatment of infections caused by Pneumocystis carinii pneumonia,
Cryptosporidium parvum, Giardia lamblia, Leishmania mexicana amazonesis,
Trypanosoma brucei rhodesienes, various fungi, Plasmodium falciparum and HIV.
Also, patent applications cover the process for making prodrugs and the uses of
the Company's unique compounds to detect and quantify nucleic acids and
cytoskeleton elements. To date, 19 U.S. patents and 32 total patents have been
issued on the Company's pharmaceutical products.
Four of the nine U.S. patents relating to mCRP and five of the U.S.
patents covering development of the Company's biological products were filed
jointly with Northwestern University or Rush Medical School, and the Company
retains exclusive worldwide rights to use the technology covered by these
patents pursuant to license agreements. All of the Company's patents on its
pharmaceutical products have been filed jointly with the University of North
Carolina at Chapel Hill and the other academic institutions of the Consortium.
It should be noted that as of June 8, 1995, certain legislative changes
implementing the General Agreement on Trade and Tariffs resulted in changes to
United States patent laws that affect the length of patent protection. Whereas
the term for patent applications used to be for a period of seventeen years from
the date of grant, the new term of a United States patent commences on the date
of issuance and terminates twenty years from the earliest effective filing date
of the application. The time from filing to issuance of biotechnology patent
application is often more than three years; consequently, a twenty-year term
from the effective date of filing may result in a negative impact on the
Company's patent position by offering a substantially shortened term of
protection.
The Company's potential products may conflict with patents which have been
or may be granted to competitors, universities or others. As the
biopharmaceutical industry expands and more patents are issued, the risk
increases that the Company's potential products may give rise to claims that
they infringe the patents of others. Such other persons could bring legal
actions against the Company claiming damages and seeking to enjoin clinical
testing, manufacturing and marketing of the affected products. If any such
actions are successful, in addition to any potential liability for damages, the
Company could be required to obtain a license in order to continue to
manufacture or market the affected products. There can be no assurance that the
Company would prevail in any such action or that any license required under any
such patent would be made available on acceptable terms, if at all. If the
Company becomes involved in litigation, it could consume a substantial portion
of the Company's time and resources.
The Company also relies on trade secret protection for its confidential
and proprietary information. However, trade secrets are difficult to protect and
there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets or technology, or that the Company
can meaningfully protect its rights to unpatented trade secrets.
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The Company requires its employees, consultants and advisors to execute a
confidentiality agreement upon the commencement of an employment or consulting
relationship with the Company. The agreements generally provide that trade
secrets and all inventions conceived by the individual and all confidential
information developed or made known to the individual during the term of the
relationship shall be the exclusive property of the Company and shall be kept
confidential and not disclosed to third parties except in specified
circumstances. There can be no assurance, however, that these agreements will
provide meaningful protection for the Company's proprietary information in the
event of unauthorized use or disclosure of such information.
GOVERNMENT REGULATION
The Company's development, manufacture and potential sale of therapeutics
is subject to extensive regulation by United States and foreign governmental
authorities.
Products being developed by the Company may be regulated by the FDA as
drugs or biologics. New drugs are subject to regulation under the Federal Food,
Drug, and Cosmetic Act, and biological products, in addition to being subject to
certain provisions of that Act, are regulated under the Public Health Service
Act. The Company believes that drug products developed by it or its
collaborators will be regulated either as biological products or as new drugs.
Both statutes and the regulations promulgated thereunder govern, among other
things, the testing, manufacturing, safety, efficacy, labeling, storage, record
keeping, advertising and other promotional practices involving biologics or new
drugs. FDA approval or other clearances must be obtained before clinical
testing, and before manufacturing and marketing, of biologics and drugs.
Obtaining FDA approval has historically been a costly and time consuming
process. Generally, in order to gain FDA pre-market approval, a developer first
must conduct pre-clinical studies in the laboratory and in animal model systems
to gain preliminary information on an agent's efficacy and to identify any
safety problems. The results of these studies are submitted as a part of an
investigational new drug ("IND") application, which the FDA must review before
human clinical trials of an investigational drug can start. The IND application
includes a detailed description of the clinical investigations to be undertaken.
In order to commercialize any product, the Company or its collaborator
must sponsor and file an IND and be responsible for initiating and overseeing
the clinical studies to demonstrate the safety, efficacy and potency that are
necessary to obtain FDA approval of any such products. For Company or
collaborator-sponsored INDs, the Company or its collaborator will be required to
select qualified investigators (usually physicians within medical institutions)
to supervise the administration of the products, and ensure that the
investigations are conducted and monitored in accordance with FDA regulations,
including the general investigational plan and protocols contained in the IND.
Clinical trials are normally done in three phases, although the phases may
overlap. Phase I trials are concerned primarily with the safety and preliminary
effectiveness of the drug, involve fewer than 100 subjects, and may take from
six months to over one year. Phase II trials normally involve a few hundred
patients and are designed primarily to demonstrate effectiveness in treating or
diagnosing the disease or condition for which the drug is intended, although
short-term side effects and risks in people whose health is impaired may also be
examined. Phase III trials are expanded clinical trials with larger numbers of
patients which are intended to evaluate the overall benefit-risk relationship of
the drug and to gather additional information for proper dosage and labeling of
the drug. Clinical trials generally take two to five years to complete, but may
take longer. The FDA receives reports on the progress of each phase of clinical
testing, and it may require the modification, suspension, or termination of
clinical trials if it concludes that an unwarranted risk is presented to
patients.
If clinical trials of a new product are completed successfully, the
sponsor of the product may seek FDA marketing approval. If the product is
regulated as a biologic, the FDA will require the submission and approval of
both a Product License Application ("PLA") and an Establishment License
Application before commercial marketing of the biologic. If the product is
classified as a new drug, the Company must file a New Drug Application ("NDA")
with the FDA and receive approval before commercial marketing of the drug. The
NDA or PLA must include detailed information about the drug and its manufacture
and the results of product development, preclinical studies and clinical trials.
The testing and approval processes require substantial time and effort and there
can be no assurance that any approval will be granted on a timely basis, if at
all. NDAs and PLAs submitted to the FDA can take, on average, two to five years
to receive approval. If questions arise during the FDA review process, approval
can take more than five years. Notwithstanding the submission of relevant data,
the FDA may ultimately decide that the NDA or PLA does not satisfy its
regulatory criteria for approval and
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deny approval or require additional clinical studies. In addition, the FDA may
condition marketing approval on the conduct of specific post-marketing studies
to further evaluate safety and effectiveness. Even if FDA regulatory clearances
are obtained, a marketed product is subject to continual review, and later
discovery of previously unknown problems or failure to comply with the
applicable regulatory requirements may result in restrictions on the marketing
of a product or withdrawal of the product from the market as well as possible
civil or criminal sanctions.
The Company also is subject to foreign regulatory requirements governing
human clinical trials and marketing approval for drugs with respect to marketing
outside the United States. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country.
EMPLOYEES
The Company currently has three employees, all of whom hold advanced
degrees. Through its collaborative agreement with the UNC Consortium,
approximately 25 researchers associated with institutions such as UNC, Auburn
University, Duke University and Georgia State University have worked to advance
the Company's products toward commercialization. The Company expects, upon
completion of this offering, to hire up to 10 employees primarily to focus on
clinical development activities and business opportunities. Among the employees
to be hired will be a physician to serve as the Company's Clinical Director to
coordinate and carry out human trials; several technical employees with
experience in preparing pharmaceutical products and recombinant proteins for
human trials; an expert in regulatory affairs to oversee clinical trials and
government filings; and a quality assurance coordinator to oversee and verify
compliance of good laboratory products (GLP) and data reporting. These employees
will be engaged directly in supporting the Company's clinical trial programs,
and in new product research and development activities.
None of the Company's employees is represented by a labor union or subject
to a collective bargaining agreement.
FACILITIES
The Company's administrative offices and research laboratories are located
in Evanston, Illinois. The Company occupies approximately 2,500 square feet of
space under a lease which expires on November 30, 1998. As part of the joint
venture with Franklin, the Company's current facilities will also be occupied by
NextEra. The Company expects that it will obtain new administrative space, as
well as space for research and development activities. Management believes it
will be able to secure such space locally and at commercially reasonable rates.
LITIGATION
The Company is not presently involved in any litigation, nor is it aware
of any impending litigation.
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MANAGEMENT AND KEY SCIENTIFIC PERSONNEL
Executive Officers, Key Scientists, Consultants and Directors
The executive officers, key scientists, consultants and directors of the
Company are as follows:
Name Age Position
---- --- --------
T. Stephen Thompson 51 Director, President and Chief Executive
Officer
Vice President-Research and Chief
Lawrence A. Potempa, Ph.D. 46 Scientific Officer
Treasurer, Secretary and Chief
Gary C. Parks 48 Financial Officer
Gerhard J. Von der Ruhr 57 Chairman of the Board of Directors
Byron E. Anderson, Ph.D. 56 Director
T. Stephen Thompson, President, Chief Executive Officer and Director. Mr.
Thompson has served as a Director since 1991. He joined Immtech in April 1991
from Amersham Corporation, where he was President and Chief Executive Officer.
He was responsible for Amersham Corporation's four North American divisions:
Life Sciences, Radiopharmaceuticals, Diagnostics, and Quality and Safety
Products. In addition, he had direct responsibility for the Clinical Reagent (in
vitro diagnostic) Division in the United Kingdom. He was employed by Amersham
Corporation from 1986 to 1991. Mr. Thompson has 20 years' experience in health
care with previous positions as President of a small diagnostic start-up,
General Manager of the Infectious Disease and Immunology Business Unit in the
Diagnostic Division of Abbott Laboratories from 1981 to 1986, and Group
Marketing Manager for the Hyland Division of Baxter International Inc. from 1978
to 1981. Mr. Thompson holds a B.S. from the University of Cincinnati and an
M.B.A. from Harvard University.
Lawrence A. Potempa, Ph.D., Vice President-Research and Chief Scientific
Officer. Dr. Potempa has over 10 years experience in the Biotechnology industry
and has successfully brought the Company's lead biological therapy into human
trials. Dr. Potempa has an appointment as an Adjunct Associate Professor of the
Department of Medicine at Northwestern University Medical School. Dr. Potempa
received his B.S. degree cum laude from Bradley University in 1973 and earned
his Ph.D. in biochemistry in 1977 at Northwestern University. He was an NIH
postdoctoral fellow in Immunology at Rush Medical College until 1981 and was an
Assistant Professor at Rush University in the Department of
Immunology/Microbiology until he joined Immtech in 1988. He has over 40
publications and is the lead inventor on 39 of the Company's patents. Dr.
Potempa is a member of the American Chemical Society and has received various
government grants and other awards for excellence.
Gary C. Parks, Treasurer, Secretary and Chief Financial Officer. Mr. Parks
joined Immtech in January 1994, having previously served at Smallbone, Inc. from
1989 until 1993, where he was Vice President, Finance. Mr. Parks was a Division
Controller with International Paper from 1986 to 1989. Prior to that, he was
Vice President, Finance of SerckBaker, Inc., a subsidiary of BTR plc, from 1982
to 1986 and a board member of SerckBaker de Venezuela. Mr. Parks holds a B.A.
from Principia College and an M.B.A. from the University of Michigan.
Gerhard J. Von der Ruhr, Chairman of the Board. Mr. Von der Ruhr was a
founder of Immtech and has served as Chairman of the Board since 1984. He is
President of Criticare, a developer and manufacturer of medical devices, which
he cofounded in October 1984. From 1976 to 1984, he served as President of
Biochem International, Inc., a manufacturer of blood gas sensors. From 1974 to
1976, he held the position of Vice President of Zimmer U.S.A., Inc., a wholly
owned subsidiary of Bristol-Myers Squibb Company, where he directed
international manufacturing and sales operations. Prior to that, he held various
management positions at General Electric and the Ford Motor Corporation. Mr. Von
der Ruhr holds an M.B.A. from the University of Cologne, Germany.
Byron E. Anderson, Ph.D., Director. Dr. Anderson was a founder of Immtech
and has served as a Director since 1984. He is presently a Professor at
Northwestern University Medical School in the Department of Cell, Molecular, and
Structural Biology. He is a member of the American Association of Immunologists,
the American Society of Molecular and Biological Chemists, the American
Association for Advancement of Science, and several other biological and medical
research societies. Dr. Anderson received his B.A. in Chemistry and Biology from
Kalamazoo College in 1963, and a
41
<PAGE>
Ph.D. from the University of Michigan. He was a postdoctoral fellow of the Helen
Hay Whitney Foundation, a Senior Investigator of the Arthritis Foundation, and a
NIH Research Career Development Awardee. His research areas include peptide,
protein and glycoprotein structure and function, as well as immunopathology of
autoimmune and cancer diseases.
All directors hold office until the next annual meeting of the
stockholders of the Company and until their successors are duly elected and
qualified. Officers are elected to serve, subject to the discretion of the Board
of Directors (the "Board"), until their successors are appointed. There are no
family relationships among any directors or executive officers of the Company.
Pursuant to the Consortium Agreement, upon completion of this Offering
Pharm-Eco will have the right to nominate one individual for election to the
Company's Board of Directors. Pursuant to its agreement with the Company, upon
completion of this Offering Rade will have the right to nominate two individuals
for election to the Company's Board of Directors. As of the date hereof, neither
Pharm-Eco nor Rade has indicated whether it will exercise its right to nominate
someone for election to the Company's Board of Directors.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, nor is the Company aware of any pending or threatened litigation
that may result in claims for indemnification by any such person.
Employment Agreements
The Company entered into an employment agreement with Mr. Thompson in 1992
pursuant to which the Company retained Mr. Thompson as its President and Chief
Executive Officer for an annual base salary of $150,000 (subject to annual
adjustment by the Board), plus reimbursement for related business expenses. The
agreement, which includes certain confidentiality and non-disclosure provisions,
also grants to Mr. Thompson the right to receive an annual bonus to be
established by the Board in an amount not to exceed 60% of Mr. Thompson's annual
base salary for the year and certain other fringe benefits. If the Company
breaches the agreement or Mr. Thompson is terminated by the Company without
cause, he is entitled to all payments which he would otherwise accrue over the
greater of nine months from the date of termination or the remaining term under
the agreement. Additionally, rights to all options granted to Mr. Thompson
pursuant to the agreement vest immediately upon his termination without cause or
a change of control of the Company. The term of Mr. Thompson's agreement expires
on May 11, 1999, subject to automatic renewal for successive one-year terms
unless terminated by either party upon 30 days notice. Except for $12,500 paid
to Mr. Thompson during the fiscal year ended March 31, 1998, Mr. Thompson has
waived any right to receive salary due under his employment agreement prior to
June 30, 1998. Beginning July 1, 1998 and continuing until the Company completes
the Unit Offering, Mr. Thompson has agreed to accept one-half of his annual
salary as full satisfaction of the Company's salary obligation under his
employment agreement. Upon completion of the Unit Offering, Mr. Thompson will be
paid the full amount of his salary under his employment agreement, but will not
be paid amounts previously waived.
NextEra plans to enter into a three year employment agreement with Dr.
Potempa, with an option on the part of NextEra to extend the agreement for an
additional two year period, whereby Dr. Potempa will be retained as the lead
scientist for an annual base salary of $120,000. It is expected that the
Agreement will provide that Dr. Potempa shall receive bonuses and salary
increases as determined by NextEra's CEO and/or Board of Directors. NextEra
issued 33,333 shares to Dr. Potempa upon the formation of NextEra. Additionally,
Dr. Potempa will receive options to purchase 30,000 shares of NextEra upon
submission of an NDA relating to rmCRP to a regulatory agency for product
approval. These options shall vest immediately if there is a change of control
of NextEra. The employment agreement will contain confidentiality and
non-disclosure provisions.
Summary Compensation Table. The following table sets forth certain
information for the year ended March 31, 1998 regarding the compensation of the
Company's Chief Executive Officer for the fiscal year ended March 31, 1998. None
of the Company's employees received a salary in excess of $100,000 during the
1996, 1997 and 1998 fiscal years.
42
<PAGE>
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
----------------- -----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) OPTIONS/SARS(#)
--------------------------- ---- ---------- ---------------
T. Stephen Thompson 1998 $12,500 0
President, Chief Executive
Officer and Director
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values.
There were no stock option exercises during the year ended March 31, 1998. The
following table sets forth for each of the Named Executive Officers the number
and value of securities underlying unexercised options held at March 31, 1998:
AGGREGATE OPTION EXERCISES IN YEAR ENDED MARCH 31, 1998 AND
OPTION VALUES AT MARCH 31, 1998
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT IN-THE MONEY OPTIONS AT
MARCH 31, 1998 (#) MARCH 31, 1998 ($) (1)
------------------------------ ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
T. Stephen Thompson 120,664 -0- $139,544 $0.00
- ----------
(1) Based on a value of $1.50 per share, the assumed initial public offering
price, minus the per share exercise price, multiplied by the number of
shares underlying the option.
Consulting Arrangements
The Company retained RADE Management Corporation ("RADE") as a financial
consultant in connection with the Private Placement, the Unit Offering by the
Company and the Spin-Off Offering by Criticare. In connection with such
consulting agreement, the Company has issued to RADE warrants to purchase up to
1,950,000 shares of Common Stock at an exercise price of $0.05 per share (the
"RADE Warrants"). The RADE Warrants are exercisable upon 60 days prior notice to
the Company at any time and from time to time over a period of five years from
the respective dates they become exercisable. Such Warrants are currently
exercisable as to 450,000 shares of Common Stock and become exercisable as to
the balance of the shares underlying such Warrants as follows: (1) as to up to
600,000 shares, on the Closing Date; (2) as to up to 300,000 shares of Common
Stock, on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class A Warrants,
aggregate gross proceeds of $1,500,000 from the exercise of all Class A Warrants
in accordance with their terms; (3) as to up to 300,000 shares of Common Stock,
on the date the Company receives, when taken together with the gross proceeds
received by the Company from all prior exercises of Class B Warrants, aggregate
gross proceeds of $1,500,000 from the exercise of all Class B Warrants in
accordance with their terms; and (4) as to up to 300,000 shares of Common Stock,
on the date the Company receives, when taken together with the gross proceeds
received by the Company from all prior exercises of Class C Warrants, aggregate
gross proceeds of $1,500,000 from the exercise of all Class C Warrants in
accordance with their terms. To the extent that any of the Class A, Class B or
Class C Warrants remain unexercised at the expiration date of any such Class of
Warrants, the number of RADE Warrants which would become exercisable in respect
of the exercise such Class A, Class B, Class C Warrants will be proportionately
reduced.
The consulting agreement with RADE will not require it to devote a
specific amount of time to the performance of its duties thereunder. The Company
has also agreed, for a period of one year from the date of the distribution of
the Spin-
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<PAGE>
Off Shares by Criticare, if so requested by RADE, to nominate and use its best
efforts to elect two designees of RADE as directors of the Company, or at RADE's
option, as non-voting advisers to the Company's Board of Directors. RADE has not
yet exercised its right to designate such persons.
The Company and Criticare have agreed to indemnify RADE against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments RADE may be required to make in respect thereof.
CERTAIN TRANSACTIONS
Criticare, the largest shareholder in Immtech, agreed to the Private
Placement of Stock by New China Hong Kong Securities Limited (NCHK) and the
spin-off of shares of Immtech owned by Criticare. In connection with the
Recapitalization and other related transactions, Criticare obtained an option to
license rmCRP as a therapy for treating sepsis. Sepsis is a bacterial infection
which quickly overwhelms the immune systems and can lead to sudden death.
On June 25, 1998 Criticare agreed to pay Immtech $150,0000 (which amount
Immtech chose to apply toward extinguishing outstanding indebtedness of Immtech
to a service vendor) in exchange for 172,414 shares of Common Stock (after
giving effect to the Reverse Stock Split) and the following additional
consideration: (i) all of Immtech's right, title and interest in the Patent
#5,484,735, which is used in the development of a hemoglobin A1c ("HbA1c") assay
to minor diabetics for long term diet and glucose control; (ii) all of Immtech's
right, title and interest in the Patent #5,702,904 which is used in the
development of a carbohydrate deficient transferrin ("CDT") blood to screen
individuals who abuse alcohol over a sustained period of time; (iii) all of
Immtech's rights under the Sigma Diagnostics, Inc. ("Sigma") Agreement dated as
of March 23, 1998, including up to $110,000 in license fees payable by Sigma
upon Sigma's exercise of options to license technology to conduct research and
evaluation; (iv) all of Immtech's rights with respect to the License agreements
between Immtech and Northwestern University dated as of March 10, 1998 and as of
October 27, 1994, the former license agreement involving certain patent rights
and know-how relating to Immunoassay Constructs to Quantitate
Glucosylated-Hemoglobin and other Glucosylated Serum Proteins (NU 8403) and the
latter license agreement involving certain inventions in the field of
Immunoassay for Identifying Alcoholics and Monitoring Alcohol Consumption (NU
9134); (v) an exclusive, royalty-free, world-wide license under Patent 5,405,832
to Potempa, granted as of April 11, 1995 to utilize rmCRP for the treatment of
sepsis, a life threatening disease caused by bacteria that overwhelm the body's
immune response; (vi) the right to sue for past infringement with respect to all
of the foregoing; and (vii) all other rights reasonably required to make, use,
sell and offer for sale products based on or related to the assigned assets.
Under the agreement, Criticare is not assuming any other liabilities or
obligations of any nature or kind, including any of Immtech's liabilities for
obligations to Northwestern University under the Northwestern NU 8403 License
and the Northwestern NU 9134 License occurring after the closing. Additionally
for a period of three years following closing, Immtech has agreed to make
available to Criticare the part-time services of Dr. Potempa to consult with and
advise Criticare regarding research, testing, FDA compliance and approval,
manufacture and commercialization of the products or applications covered by the
above referenced patents. In exchange for Dr. Potempa's services, Criticare will
reimburse Immtech for Immtech's out-of-pocket salary and employee benefit plan
expenses, pro rata, with respect to Dr. Potempa. For a period of five years from
the time of closing, Criticare shall have the option of purchasing supplies of
rmCRP from Immtech. Criticare also, may manufacture rmCRP. If Criticare does
decide to manufacture rmCRP, Immtech will provide all necessary know-how and
expertise to enable Criticare to manufacture the molecule in commercially viable
quantities. Criticare has until July of 1999 to raise a minimum of $500,000 to
fund the development of a sepsis product and begin clinical trials. If Criticare
is not successful in raising the funds, Immtech has a right to acquire the
technology at market value.
In April 1998, Immtech signed an option agreement with ImmvaRx, Inc., for
the use of mCRP as an adjuvant with vaccines, including, but not limited to, all
of the technical information known to and held by Immtech as of April 1998 and
all technical information developed during the term of the agreement which is
owned or controlled by Immtech with respect to the mCRP/rmCRP product. Under the
option agreement, Immtech will provide ImmvaRx with a worldwide exclusive
license to use mCRP/rmCRP technology and products as adjuvants with vaccines
under the following conditions: (i) Immtech will provide ImmvaRx with access to
technical documents and data on the performance of mCRP/rmCRP technology for all
of its various uses, including access to cell lines and other proprietary
information with respect to the manufacture of rmCRP, including giving ImmvaRx
access to any regulatory documents that describe the manufacturing process, as
well as the right to reference Immtech's DMF if ImmvaRx wishes to license the
right to manufacture rmCRP independent of Immtech's efforts; (ii) Immtech will
license to ImmvaRx the right to use any patented technology that the Company
owns which relate to the manufacture of rmCRP, or the use of mCRP/rmCRP as a
reagent that works as an adjuvant to potentiate the immune response; (iii)
Immtech will co-file with ImmvaRx and assign exclusive rights to
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<PAGE>
ImmvaRx any new patent applications involving mCRP/rmCRP as an adjuvant; (iv)
Immtech will license to ImmvaRx the use of mCRP/rmCRP technology as an adjuvant
in human and veterinary applications; and (v) Immtech will award ImmvaRx the
right to grant sublicenses consistent with the terms found in the option
agreement between Immtech and ImmvaRx.
For a description of the transaction between Immtech and NextEra regarding
rmCRP, please see "Business - Collaborative Arrangements - Formation of NextEra
Therapeutics, Inc."
In exchange for the license, ImmvaRx will (i) be given until October 9,
1998, to raise a minimum of $500,000 in funds (if the minimum is not raised
Immtech has the right to cancel the license agreement); (ii) pay Immtech an
upfront fee of $25,000 from the initial $500,000 raised; (iii) pay Immtech a
second payment of $25,000 from any funds raised by ImmvaRx greater than
$700,000; (iv) use its best efforts to scale-up and supply GMP quality product
for its clinical trials; (v) pay Immtech an annual royalty of 5% on net sales of
mCRP/rmCRP sold, in accordance with the terms of the agreement; (vi) issue to
Immtech 100,000 common shares in ImmvaRx and 50,000 common stock warrants in
ImmvaRx that would be purchased at $1.00 per share and exercisable within a five
year period; and (vii) pay for patent expenses of any new applications that
arise from the use of mCRP/rmCRP as an adjuvant. With respect to the payments
described in (ii) and (iii), Immtech will invest such amounts directly in the
development, refinement and scale-up of manufacturing clinical grade rmCRP
product. With respect to (iv), ImmvaRx will purchase rmCRP from Immtech for
clinical trials at a price of cost plus 25% and Immtech and ImmvaRx will share
any information garnered with respect to improving the production process,
including jointly developing a commercial manufacturing capacity if it is in the
interest of both parties. Several of Immtech's executives are founding
stockholders of ImmvaRx. See "Risk Factors - Conflicts of Interest."
In November 1997, Criticare advanced $120,000 on behalf of the Company in
order to fulfill a patent payment obligation of the Company to UNC. T. Stephen
Thompson, CEO of Immtech, reimbursed Criticare for the advancement of funds by
purchasing 20,425 shares of Criticare common stock (calculated using the average
of the high and low quotation price for Criticare's common stock on the NASDAQ
on the day of reimbursement). Criticare and Mr. Thompson have released Immtech
from any obligation to repay either of them with respect to the patent payment.
In January 1998, in connection with the acquisition of a "public shell"
corporation that the Company was considering merging into, certain stockholders
of the Company, including Gerhard J. Von der Ruhr, Chairman of the Company, and
T. Stephen Thompson, President and Chief Executive Officer of the Company, made
royalty payments to UNC on behalf of the Company in the amount of $56,000. The
payments were made on a voluntary basis in order to preserve the Company's
rights to the assets licensed from UNC pending completion of the proposed merger
between the Company and the "public shell" corporation. Thereafter, the Board of
Directors of the Company voted not to pursue the proposed merger and the $56,000
advanced on behalf of the Company was deemed to represent a contribution to the
Company's additional paid-in capital.
Criticare Systems, Inc. ("Criticare"), a shareholder, has advanced
$597,722 and $590,000 to the Company as of June 30, 1998 and 1997, respectively.
These advances plus accrued interest of $66,474 have been converted into an
aggregate of 291,686 shares of Common Stock (after giving effect to the Reverse
Stock Split). Other shareholders have converted interest free advances of
$387,450 as of June 30, 1998 into an aggregate of 393,649 shares of Common Stock
(after giving effect to the Reverse Stock Split).
On July 24, 1998, all shares of Series A Preferred Stock, with a
liquidation preference of $2,765,256, were converted into 1,157,951 shares of
Common Stock, and all shares of Series B Preferred Stock, with a liquidation
preference of $2,783,141, were converted into 1,232,138 shares of Common Stock.
On July 24, 1998, Senior Subordinated Debt holders exchanged a principal
balance of $914,000 and accrued interest of $250,776 for 306,000 shares of
Common Stock (after giving effect to the Reverse Stock Split).
The Company believes that the foregoing transactions were in its best
interests and were on terms no less favorable to the Company than could be
obtained from unaffiliated third parties and were in connection with bona fide
business purposes of the Company. As a matter of policy, all future transactions
between the Company and any of its officers, directors or principal stockholders
will be approved by a majority of the independent and disinterested members of
the Board, will continue to be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties and will continue to be in
connection with bona fide business purposes of the Company.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of the Company as of September 4, 1998
as adjusted to reflect the sale by the Company of the Shares offered hereby by
(i) each of the Company's directors and Named Executive Officers, (ii) all
directors and executive officers as a group and (iii) each person known to be
the beneficial owner of more than 5% of the Shares. See "Risk Factors -
Concentration of Ownership."
<TABLE>
<CAPTION>
Percentage of Outstanding Shares
Number of --------------------------------
Shares of of Common Stock
Common Stock ---------------
Beneficially
Name and Address Owned (1) Before Offering After Offering
---------------- --------- --------------- --------------
<S> <C> <C> <C>
T. Stephen Thompson 566,894 (2) 7.31% 5.34%
c/o Immtech International, Inc.
1890 Maple Avenue
Suite 110
Evanston, IL 60201
Byron Anderson, Ph.D 218,646 (3) 2.84% 2.07%
c/o Northwestern University
Medical School
303 East Chicago Avenue
Chicago, IL 60611
Gerhard J. Von der Ruhr 357,613 (4) 4.62% 4.61%
c/o Criticare Systems, Inc.
20900 Swenson Drive
Waukesha, WI 53186
Criticare Systems, Inc. 1,437,684 (5) 28.62% 20.84%
20925 Cross Road Circle
Waukesha, WI 53186
University of North Carolina 1,222,500 (6) 0% 11.66%
at Chapel Hill/Pharm-Eco
Laboratories
c/o Office of Technology
Development
308 Bynum Hall
Chapel Hill, NC 27599
All directors and officers 1,387,723 16.97% 12.58%
as a group (5 persons)
</TABLE>
- ----------
(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares beneficially owned
by them, subject to applicable community property laws.
(2) Includes 444,630 shares of Common Stock, 1,600 warrants to purchase Common
Stock, and 120,664 shares of Common Stock issuable upon the exercise of
options as follows: option to purchase 17,745 shares of Common Stock at
$0.23 per share by March 21, 2006; option to purchase 26,133 shares of
Common Stock at $0.17 per share by
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<PAGE>
November 27, 2001; option to purchase 48,394 shares of Common Stock at
$0.17 per share by December 31, 1998; and option to purchase 28,392 shares
of Common Stock at $0.87 per share by April 16, 2008.
(3) Includes 157,670 shares of Common Stock, and 60,977 shares of Common Stock
issuable upon the exercise of option as follows: option to purchase 43,555
shares of Common Stock at $0.29 per share by April 13, 2000; option
granted to Dr. Anderson's wife to purchase 17,422 shares at $0.17 per
share by May 1, 2001.
(4) Includes 231,527 shares of Common Stock, 9,800 warrants to purchase Common
Stock, and 116,287 shares of Common Stock issuable upon the exercise of
options as follows: option to purchase 23,433 shares of Common Stock at
$0.29 per share by April 13, 2000; option to purchase 48,782 shares of
Common Stock at $0.17 per share by May 1, 2001; option to purchase 15,680
shares of Common Stock at $0.17 per share by April 14, 2002; option to
purchase 28,392 shares of Common Stock at $0.87 per share by April 16,
2008.
(5) As adjusted to reflect completion of the Spin-off Offering, pursuant to
which Criticare is distributing 750,000 shares of Immtech Common Stock to
stockholders of Criticare. Before the Spin-off Offering, Criticare
Systems, Inc. owns 2,187,684 shares of Common Stock.
(6) University of North Carolina at Chapel Hill ("Consortium") and Pharm-Eco
jointly own 1,222,500 shares of Common Stock once $4,000,000 has been
raised in the Unit Offering. At the time of an ANDA or NDA filing, 300,000
additional shares of Common Stock shall be issued. Additionally, upon
reaching certain milestones of development, the Consortium and Pharm-Eco
are entitled to warrants to purchase 1,700,000 shares of Common Stock at
an exercise price equal to the weighted average market price of the
Company's Common Stock during the first 20 days of trading on any stock
exchange or in any over-the-counter market.
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<PAGE>
CERTAIN U.S. TAX CONSIDERATIONS APPLICABLE TO
NON-U.S. HOLDERS OF THE COMMON STOCK
The following is a general discussion of certain U.S. federal income tax
consequences of the ownership and disposition of Common Stock by a person that,
for U.S. federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership or a foreign estate or trust (a
"non-U.S. holder"). An individual may be deemed to be a resident alien (as
opposed to a non-resident alien) by virtue of being a lawful permanent resident
at anytime during the year, or being present in the United States on at least 31
days in the calendar year and for an aggregate of 183 days during a three-year
period ending in the current calendar year (counting for such purposes all of
the days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). Resident aliens are subject to U.S. federal tax as if they were
U.S. citizens and residents.
This discussion does not consider specific facts and circumstances that
may be relevant to a particular holder's tax position and does not deal with
U.S. state and local or non-U.S. tax consequences. Furthermore, the following
discussion is based on provisions of the U.S. Internal Revenue Code of 1986, as
amended (the "Code") and administrative and judicial interpretations as of the
date hereof, all of which are subject to change. Each prospective holder is
urged to consult a tax advisor with respect to the US. federal tax consequences
of holding and disposing of Common Stock as well as any tax consequences that
may arise under the laws of any U.S. state, municipality or other tax
jurisdiction.
Dividends. Dividends paid to a non-U.S. holder of Common Stock will be
subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are effectively connected with the conduct of a trade or business
within the United States. Dividends that are effectively connected with such
holder's conduct of a trade or business in the United States are subject to tax
at rates applicable to U.S. citizens, resident aliens and domestic U.S.
corporations, and are not generally subject to withholding. Any such effectively
connected dividends received by a non-U.S. corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.
Under current U.S. Treasury Regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such foreign
country for purposes of the withholding discussed above and under current
interpretation of U.S. Treasury Regulations, for purposes of determining the
applicability of a tax treaty rate. Under new U.S. Treasury Regulations,
effective January 1, 2000, however, a non-U.S. holder of Common Stock who wishes
to claim the benefit of an applicable treaty rate would be required to file Form
W-8 (Certificate of Foreign Status of Beneficial Owner for United States Tax
Withholding) with the Company or its agent. Such forms would be required to
contain the holder's name, address, and other pertinent information, to be
certified by the holder under penalties of perjury. A properly executed Form W-8
will be valid for the period running from the date the certificate is signed
until the last day of the third succeeding calendar year. Because the Common
Stock will be publicly traded, it will not be necessary to include a taxpayer
identification number ("TIN") for a non-U.S. holder on the Form W-8. However, if
a Form W-8 is furnished with a TIN, it will remain valid until a change in
circumstances makes any information on the certificate no longer correct (in
lieu of the three-year period described above).
The current regulations require a separate Form W-8 or other appropriate
documentation from each non-U.S. holder of Common Stock to establish the
holder's foreign status and treaty eligibility. Under the new regulations, a
foreign intermediary, such as a financial institution, that receives payments as
nominee on behalf of several non-U.S. holders, may enter into a withholding
agreement with the Internal Revenue Service to obtain "qualified intermediary"
status. Under this type of agreement, the qualified intermediary will be
permitted to furnish an intermediary withholding certificate certifying on
behalf of the non-U.S. holders for which it receives payments. The qualified
intermediary generally will be required to obtain Form W-8 withholding
certificates or other appropriate documentation from the non-U.S. holders, but
will not be required to attach such documentation to the intermediary
withholding certificate.
Under the new regulations, a payment made to a foreign partnership will
generally be treated as a payment made to the partners rather than to the
partnership, unless the partnership qualifies as a "withholding foreign
partnership" by entering into an agreement with the Internal Revenue Service
agreeing, among other things, to be responsible for all withholding and
reporting obligations. In the absence of such an agreement, withholding will be
required on dividends paid to the foreign partnerships that are not effectively
connected with the conduct by the partnership of a trade or business in the
United States. However, a reduced rate of withholding based on a treaty may be
obtained if the partnership provides
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<PAGE>
information on the distributive share of each partner and furnishes a Form W-8
certificate from each partner that claims reduced withholding for its
distributive share.
A non-U.S. holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
U.S. Internal Revenue Service.
Gain on Disposition of Common Stock. A non-U.S. holder generally will not
be subject to U.S. federal income tax in respect of gain recognized on a
disposition of Common Stock unless (i) the gain is effectively connected with a
trade or business of the non-U.S. holder in the United States, (ii) in the case
of a non-U.S. holder who is an individual and holds the Common Stock as capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale and either (a) such individual's "tax home" for U.S.
federal income tax purposes is in the United States, or (b) the gain is
attributable to an office or other fixed place of business maintained in the
United States by such individual, or (iii) the Company is or has been a "U.S.
real property holding corporation" for federal income tax purposes and the
non-U.S. holder held, directly or indirectly at any time during the five-year
period ending on the date of disposition, more than 5% of the Common Stock. The
Company is not and does not anticipate becoming a "U.S. real property holding
corporation" for U.S. federal income tax purposes.
Federal Estate Taxes. Common Stock held by a non-U.S. holder at the time
of death will be included in such holder's gross estate for U.S. federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding. U.S. information reporting
requirements (other than reporting of dividend payments for purposes of the
withholding tax discussed above) and backup withholding generally will not apply
to dividends on Common Stock paid to non-U.S. holders that are either subject to
the 30% withholding tax, or that are not so subject because an applicable income
tax treaty reduces or eliminates such withholding. Under current U.S. Treasury
Regulations, the payor of the dividends may generally rely on a payee's address
outside the United States in determining the exemption from information
reporting and backup withholding. Under the new Treasury Regulations that are
effective January 1, 2000, dividends will continue to be exempt from information
reporting and backup withholding, provided documentation exists establishing the
payee's status as a foreign person. Mere reliance upon a foreign address will no
longer be sufficient. For this purpose, documentation furnished to establish the
payee's eligibility for reduced withholding under an income tax treaty (Form
W-8) may also be used to support the exemption from information reporting and
backup withholding.
Under current Treasury Regulations, payment on the sale, exchange or other
disposition of Common Stock made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker is
a United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting (but not backup withholding) will be required
unless the broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or the
beneficial owner otherwise establishes an exemption. Under the new Treasury
Regulations, effective January 1, 2000, backup withholding may apply to any
reportable payment for which the broker has actual knowledge that the payee is a
United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the holder certifies, under penalties of perjury, that it is not a United States
person or otherwise establishes an exemption.
Holders should consult their tax advisors regarding their qualification
for an exemption from backup withholding and information reporting and the
procedures for obtaining such an exemption, if applicable. Any amounts withheld
under the backup withholding rules from a payment to a beneficial owner would be
allowed as a refund or a credit against such beneficial owner's United States
Federal income tax provided the required information is furnished to the
Internal Revenue Service.
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UNDERWRITING
Unit Offering
Subject to the terms and conditions contained in an international purchase
agreement (the "International Purchase Agreement") among the Company, Criticare
and New China Hong Kong Securities Limited (the "Underwriter"), the Company has
agreed to issue and sell to the Underwriter, and the Underwriter has agreed to
purchase from the Company, the 1,333,333 Units offered hereby. In the
International Purchase Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Units offered
hereby if any of such securities are purchased. The Units are being offered for
sale by the Underwriter outside the United States and Canada, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to approval of certain legal matters by counsel and to certain other conditions.
The Underwriter has advised the Company that it proposes to offer the Units to
the public at the public offering price set forth on the cover page of this
Prospectus.
The Company has agreed to pay the Underwriter a placement and due
diligence fee of up to $250,000, payable as follows: (1) $100,000 on the closing
date of the purchase of the Units by Underwriter (the "Closing Date"); (2)
$50,000 on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class A Warrants,
an aggregate of $2,000,000 from the exercise of all Class A Warrants in
accordance with their terms; (3) $50,000 on the date the Company receives, when
taken together with the gross proceeds received by the Company from all prior
exercises of Class B Warrants, an aggregate of $2,000,000 from the exercise of
all Class B Warrants in accordance with their terms; and (4) $50,000 on the date
the Company receives, when taken together with the gross proceeds received by
the Company from all prior exercises of Class C Warrants, an aggregate of
$2,000,000 from the exercise of all Class C Warrants in accordance with their
terms. The Company has agreed to issue warrants to the Underwriter and/or its
designees to purchase up to 500,000 shares of Common Stock at an exercise price
of $0.05 per share (the "Underwriter's Warrants"). The Underwriter's Warrants
become exercisable upon 60 days prior notice to the Company as follows: (1) as
to up to 200,000 shares of Common Stock, on the Closing Date; (2) as to up to
100,000 shares of Common Stock, on the date the Company receives, when taken
together with the gross proceeds received by the Company from all prior
exercises of Class A Warrants, an aggregate of $1,500,000 from the exercise of
all Class A Warrants in accordance with their terms; (3) as to up to 100,000
shares of Common Stock, on the date the Company receives, when taken together
with the gross proceeds received by the Company from all prior exercises of
Class B Warrants, an aggregate of $1,500,000 from the exercise of all Class B
Warrants in accordance with their terms; and (4) as to up to 100,000 shares of
Common Stock, on the date the Company receives, when taken together with the
gross proceeds received by the Company from all prior exercises of Class C
Warrants, an aggregate of $1,500,000 from the exercise of all Class C Warrants
in accordance with their terms.
In addition, the Underwriter's Warrants will expire proportionately based
upon the number of shares of Common Stock underlying any Class A, Class B or
Class C Warrants issued by the Company to the extent that any such Class A,
Class B or Class C Warrants are unexercised at the respective expiration dates
thereof. To the extent the Underwriter's Warrants become exercisable, each will
be exercisable at any time during a five-year term commencing on the date such
Warrant becomes exercisable. The Underwriter's Warrants may not be transferred
for a period of one year from their date of issuance, except to affiliates of
the Underwriter.
In addition to the foregoing, the Company has issued to the Underwriter in
connection with a private placement by the Company of 1,150,000 shares of Common
Stock (the "Private Placement"), warrants to purchase up to 150,000 shares of
Common Stock at an exercise price of $0.05 per share (the "Placement Warrants")
and paid a placement and due diligence fee of $50,000 to the Underwriter. The
Placement Warrants are exercisable and transferable on the same terms as the
Underwriter's Warrants and expire five years from their date of issuance.
During the respective exercise periods of the Underwriter's Warrants, the
Placement Warrants and the RADE Warrants, the holders of such Warrants are
given, at nominal cost, the opportunity to profit from a rise in the market
price of the Company's Common Stock. To the extent that any of such Warrants are
exercised, dilution to the interests of the Company's shareholders will occur.
Further, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of such Warrants can
be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the such Warrants.
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The Company, its executive officers and directors and Criticare have
agreed, subject to certain exceptions, not to directly or indirectly (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or thereafter acquired by the person executing the agreement
or with respect to which the person executing the agreement thereafter acquires
the power of disposition, or file a registration statement under the Securities
Act with respect to the foregoing or (ii) enter into any swap or other agreement
that transfers, in whole or in part, the economic consequence of ownership of
the Common Stock, whether any such swap or transaction is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, without the
prior written consent of the Underwriter, for a period of 24 months after the
date of the distribution by the Company of the Spin-Off Shares. See "Shares
Eligible for Future Sale."
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the Units and/or their
component securities or the possession, circulation or distribution of this
Prospectus or any other material relating to the Company, Criticare, or the
Units and/or their component securities in any jurisdiction where action for
that purpose is required. Accordingly, neither the Units nor their component
securities may be offered or sold, directly or indirectly, and neither this
Prospectus nor any other offering material or advertisements in connection with
the Units and/or their component securities may be distributed or published, in
or from any country or jurisdiction, except in compliance with any applicable
rules and regulations of any such country or jurisdiction.
Purchasers of the securities offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the country
of purchase, in addition to the offering price set forth on the cover page
hereof.
Spin-Off Offering
Criticare plans to distribute 750,000 shares of Common Stock as a special
dividend to its stockholders prior to _____________, 1998 [immediately prior to
effectiveness].
The Company expects that the Common Stock will be traded on the Nasdaq
Smallcap Market under the symbol "IMMT" following the completion of the Spin-Off
Offering. However, there has been no public market for the Company's Common
Stock and there can be no assurance that any such market will develop, or if
developed, that it will be sustained.
The Company has issued the RADE Warrants to RADE for financial advisory
services rendered in connection with the Spin-Off Offering, the Unit Offering
and the Private Placement. See " - Unit Offering."
Gardner, Carton & Douglas, counsel to the Company, has advised that in its
opinion the distribution of the Spin-off Shares to stockholders of Criticare may
result in the realization of taxable income pursuant to Section 301 of the
Internal Revenue Code of 1986, as amended (the "Code") to the extent set forth
below:
Federal Income Tax Aspects of the Spin-off Offering. The following is a
description of certain federal income tax consequences of the Spin-off Offering
(the distribution of shares of Common Stock of the Company owned by Criticare to
Criticare's stockholders). To the extent that the fair market value of the
shares of Common Stock distributed exceeds Criticare's adjusted basis in those
shares, gain will be recognized by Criticare. The distribution of the shares
will be a taxable dividend to Criticare's stockholders to the extent that the
fair market value of the shares distributed is less than or equal to the greater
of Criticare's (1) accumulated earnings and profits, or (2) earnings and profits
for the taxable year in which the shares are distributed (computed as of the
close of the taxable year without reduction for distributions made during the
taxable year). If the fair market value of the distributed shares exceeds the
foregoing amounts, the portion of the excess received by a Criticare stockholder
will first be considered as a return of the stockholder's basis in his or her
Criticare common stock to the extent of that basis, and any remaining excess
will be recognizable as gain by the stockholder.
Federal Income Tax Aspects of Investment in the Common Stock Purchase
Warrants. The following is a description of certain of the federal income tax
effects occasioned by an investment in the Class A, Class B or Class C Warrant.
If the Class A Warrant is exercised, the holder's basis in the Common Stock
thereby acquired will be the purchase price paid by the holder for the Class A
Warrant, plus any additional amount paid upon exercise. With respect to a
purchaser of a Unit, the portion of the purchase price of the Unit allocated to
the Class A Warrant will be determined by allocating to the Common Stock the
portion of the Unit purchase price which is equal to the fair market value of
the
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Common Stock on the date of purchase and allocating the remainder to the Class A
Warrant. No gain or loss will be recognized by the holder upon exercise of the
Class A Warrant. The basis of a Class B Warrant, a Class C Warrant and of a
share of Common Stock acquired by a holder through his exercise of a Class A
Warrant is determined by allocating the sum of (i) his basis in the Class A
Warrant and (ii) the $1.50 exercise price, between the share of Common Stock,
the Class B Warrant and the Class C Warrant in accordance with their relative
fair market values at the time of their acquisition. The basis of a share of
Common Stock acquired on the exercise of a Class B Warrant will be equal to the
total of the basis of the Class B Warrants and the exercise price thereunder.
The basis of a share of Common Stock acquired on the exercise of a Class C
Warrant will be equal to the total of the basis of the Class C Warrants and the
exercise price thereunder. However, gain or loss will be recognized upon the
sale or exchange of any of the Common Stock, Class A Warrants, Class B Warrants
or Class C Warrants. Generally, gain or loss will be long-term or short-term
capital gain or loss, depending upon whether the Common Stock, Class A, Class B
and Class C Warrant is held for more than a year. If the Class A, Class B or
Class C Warrant is exercised, the holding period for the underlying Common Stock
will not include the period for which the Warrant is held. If the Class A, Class
B or Class C Warrant expires without being exercised, the expired Warrant, will
be deemed to have been sold or exchanged upon the expiration date of the
Warrants. Generally, any loss to the holder will be considered long-term or
short-term capital loss, depending upon the length of time the Warrant is held.
DESCRIPTION OF SECURITIES
General
The authorized capital stock of the Company consists of 30,000,000 shares
of common stock, $0.01 par value per share, of which 10,486,709 shares will be
issued and outstanding upon completion of this Offering, and 5,000,000 shares of
preferred stock, $0.01 par value per share, of which no shares are issued and
outstanding.
The following summary of the respective rights of the holders of the
capital stock of the Company is qualified in its entirety by reference to the
Company's Certificate of Incorporation and By-Laws, as amended to date, where
such rights are set forth in full, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
Units
The securities being offered hereby are Units, each consisting of two
shares of Common Stock and one Class A Warrant. The Common Stock and the Class A
Warrant will be separately transferable immediately upon delivery of the Units.
Each Class A Warrant is exercisable upon the closing of this Offering through
December 31, 1998, at a price equal to the initial public offering price per
share to purchase one share of Common Stock, one Class B Warrant and one Class C
Warrant. Each Class B Warrant will be exercisable to purchase one share of
Common Stock at $1.50 per share during the period commencing on the date of
issuance through March 31, 1998. Each Class C Warrant will be exercisable to
purchase one share of Common Stock at $1.50 per share during the period
commencing on the date of issuance through June 30, 1998.
Common Stock
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock is entitled to receive such dividends
as may be declared by the Board of Directors out of funds legally available
therefor, and, in the event of liquidation, dissolution or winding up of the
Company, to share pro rata in any distribution of the Company's assets after
payment or providing for the payment of all liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record date
on all matters presented to a vote of stockholders, including the election of
directors. Holders of Common Stock have no cumulative voting rights or
pre-emptive rights to purchase or subscribe for any shares of Common Stock or
other securities of the Company in the event of any subsequent offering. The
shares of Common Stock have no conversion rights, are not subject to redemption
and are not subject to further calls or assessments. All outstanding shares of
Common Stock are, and the shares of Common Stock offered hereby on behalf of the
Company will be when issued, fully paid and nonassessable.
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Preferred Stock
The Board of Directors is authorized, without any action of the
stockholders, to provide for the issuance of one or more series of Preferred
Stock and to fix the designations, preferences, powers and relative,
participating, optional and other rights, qualifications, limitations and
restrictions thereof including, without limitation, the dividend rate, voting
rights, conversion rights, redemption price and liquidation preference per
series of Preferred Stock. Any series of Preferred Stock so issued may rank
senior to the Common Stock with respect to the payment of dividends or amounts
to be distributed upon liquidation, dissolution or winding up of the Company.
There are no agreements for the issuance of Preferred Stock and the Board of
Directors has no present intent to issue any Preferred Stock. The existence of
authorized but unissued Preferred Stock may enable the Directors to render more
difficult or to discourage an attempt to obtain control of the Company by means
of a merger, tender offer, proxy contest or otherwise. The issuance of Preferred
Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock and adversely affect the rights and
powers, including voting rights, of such holders and may have the effect of
delaying, deferring or preventing a change in control of the Company.
Warrants
The Warrants will be issued in registered form pursuant to a Warrant
Agreement among the Company, Harris Trust and Savings Bank, the Warrant Agent,
the Underwriter and Rade. Reference is made to said Warrant Agreement (the form
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part) for a complete description of the terms and
conditions of the Warrants (the description herein contained being qualified in
its entirety by reference to such Warrant Agreement).
Class A Warrants
The Company has authorized the issuance of registered Class A Warrants to
purchase an aggregate of 1,333,333 shares of Common Stock and has reserved an
equivalent number of shares for issuance upon exercise of such Class A Warrants,
subject to increase by reason of the antidilution provisions of the Class A
Warrants. Each Class A Warrant entitles the holder to purchase one share of
Common Stock, one Class B Warrant and one Class C Warrant for an aggregate
purchase price equal to the initial public offering price per share commencing
at any time upon the closing of this Offering and continuing through December
31, 1998.
Class B Warrants
The Company has authorized the issuance of registered Class B Warrants to
purchase an aggregate of 1,333,333 shares of Common Stock and has reserved an
equivalent number of shares for issuance upon exercise of such Class B Warrants,
subject to increase by reason of the antidilution provisions of the Class B
Warrants. Each Class B Warrant entitles the holder to purchase one share of
Common Stock at an exercise price equal to the initial public offering price per
share during the period commencing on the date of issuance of the Class B
Warrant through March 31, 1999.
Class C Warrants
The Company has authorized the issuance of registered Class C Warrants to
purchase an aggregate of 1,333,333 shares of Common Stock and has reserved an
equivalent number of shares for issuance upon exercise of such Class C Warrants,
subject to increase by reason of the antidilution provisions of the Class C
Warrants. Each Class C Warrant entitles the holder to purchase one share of
Common Stock at an exercise price equal to the initial public offering price per
share during the period commencing on the date of issuance of the Class C
Warrant through June 30, 1999.
General
Each class of Warrants is entitled to the benefit of adjustments in their
exercise prices and the number of shares of Common Stock and, in the case of the
Class A Warrants, the number of Class B Warrants and Class C Warrants
deliverable upon the exercise thereof in the event of a stock dividend, stock
split, recapitalization, reorganization, merger and consolidation. The Company
is not required to issue fractional shares. The holder of a Warrant will not
possess any rights as a stockholder of the Company unless he exercises his
Warrants. After the respective expiration dates of the Warrants, Warrant holders
will have no further rights. Warrants may be exercised by surrendering the
certificate representing the Warrant, with the form of election to purchase
properly completed and executed, together with the payment of the exercise price
and any
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transfer tax, to the Warrant Agent. If less than all the Warrants represented by
a certificate are exercised, a new certificate will be issued for the remaining
number of Warrants. Payment of the exercise price may be made by cash, bank
draft or official bank check or certified check equal to the purchase price.
The Warrant Agreement permits the Company and the Warrant Agent, without
the consent of the Warrant Holders, to supplement or amend the Warrant Agreement
to cure any ambiguity, manifest error or other mistake, or to address other
matters or questions arising that the Warrant Agent and the Company deem
necessary or desirable that are not inconsistent with the provisions of the
Warrants and that do not adversely affect the interest of any Warrant holder.
The Warrant exercise price and the exercise period of any Warrant cannot be
changed or revised by the Company without the consent of the Underwriter and
Rade, which consents shall not be unreasonably withheld or delayed.
Transfer Agent, Registrar and Warrant Agent
The transfer agent and registrar for the Common Stock of the Company and
the Warrant Agent for the Warrants is Harris Trust and Savings Bank.
Certain Provisions of the Delaware General Corporation Law
Generally, Section 203 of the Delaware General Corporation Law (the
"DGCL") prohibits a publicly held Delaware corporation from engaging in a broad
range of "business combinations with an "interested stockholder" (defined
generally as a person owing 15% or more of the corporation's outstanding voting
stock) for three years following the date such person became an interested
stockholder unless (i) before the person becomes an interested stockholder, the
transaction resulting in such person becoming an interested stockholder or the
business combination is approved by the board of directors of the corporation,
(ii) upon consummation of the transaction resulting in the stockholder becoming
an interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock of the corporation (excluding shares owned by directors
who are also officers of the corporation or shares held by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender offer or exchange
offer) or (iii) on or after such date on which such person became an interested
stockholder, the business combination is approved by the board of directors and
authorized at an annual or special meeting, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock excluding
shares owned by the interested stockholders. The restrictions of Section 203 do
not apply, among other reasons, if a corporation, by action of its stockholders,
adopts an amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by Section 203, provided that, in addition to any
other vote required by law, such amendment to the certificate of incorporation
or bylaws must be approved by the affirmative vote of a majority of the shares
entitled to vote. Moreover, an amendment so adopted is not effective until
twelve months after its adoption and does not apply to any business combination
between the corporation and any person who became an interested stockholder of
such corporation on or prior to such adoption. The Company's Certificate of
Incorporation and Bylaws do not currently contain any provisions electing not to
be governed by Section 203 of the DGCL.
Section 203 of the DGCL may discourage persons from making a tender offer
for or acquisitions of substantial amounts of the Common Stock. This could have
the effect of inhibiting changes in management and may also prevent temporary
fluctuations in the Common Stock that often result from takeover attempts.
Section 228 of the DGCL allows any action that is required to be or may be
taken at a special or annual meeting of the stockholders of a corporation to be
taken without a meeting with the written consent of holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, provided that the certificate of incorporation
of such corporation does not contain a provision to the contrary. The Company's
Certificate of Incorporation contains no such provision, and therefore
stockholders holding a majority of the voting power of the Common Stock will be
able to approve a broad range of corporate actions requiring stockholder
approval without the necessity of holding a meeting of stockholders.
Certain provisions of the Company's Bylaws may have the affect of
discouraging certain types of transactions that may involve an actual or
threatened change of control of the Company and encouraging any person who might
seek to acquire control of the Company to negotiate with the Company's Board of
Directors.
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REPORTS TO STOCKHOLDERS
Stockholders of the Company will be furnished with annual reports
containing audited financial statements of the Company and such other interim
reports as the Company may determine.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of these Offerings, the Company will have 10,468,709
shares of Common Stock outstanding, after giving effect to the issuance of
1,222,500 shares to Pharm-Eco and Members of the Consortium and 187,647 shares
to the State of Illinois (assuming an initial public offering price of $3.00 per
Unit and not including 9,076,563 shares of Common Stock subject to outstanding
options and warrants). Of the shares to be outstanding, the 3,416,666 shares of
Common Stock to be distributed by the Company and Criticare pursuant hereto and
the 1,150,000 shares being registered on behalf of the Selling Stockholders will
be freely tradeable without restriction. All of the remaining 5,920,044 shares
will be restricted securities within the meaning of the Securities Act. Pursuant
to Rule 144, 2,875,829 of these shares will be available for resale upon the
effective date of the Registration Statement of which this Prospectus forms a
part and 1,634,067 shares will be available for resale approximately seven
months thereafter. The remaining 1,410,147 shares to be outstanding upon
completion of these Offerings will become eligible for resale one year after the
date hereof.
Of the shares to be outstanding upon completion of these Offerings, the
holders of 3,757,205 shares, including Criticare and the officers and directors
of the Company and Criticare, have agreed not to offer, sell or otherwise
dispose ("Sell") of such shares for a period of two years from the closing of
these Offerings; and the holders of 1,006,323 shares have agreed not to Sell
their shares for a period of eighteen months after the Closing, in each case
without the written consent to the Underwriter.
In general, under Rule 144 as recently amended, a person (or persons whose
shares are aggregated), including an affiliate, who has beneficially owned
shares for at least one (1) year (including the contiguous holding period of any
prior owner except an affiliate) is entitled to sell in "broker's transactions"
or to market makers, within any three-month period, a number of shares that does
not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock (approximately 104,867 shares immediately after the Offering) or
(ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain requirements as to manner of
sale, the filing of a notice and the availability of public information
concerning the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the three (3) months preceding a
sale and who has beneficially owned the shares proposed to be sold for at least
two (2) years (including the contiguous holding period of any prior owner except
an affiliate) would be entitled to sell such shares under Rule 144(k) without
regard to the requirements described above.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701 under the Securities
Act, which permits nonaffiliates to sell their Rule 701 shares without having to
comply with the public information, holding period, volume limitation or notice
provisions of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions, in each
case commencing ninety (90) days after the date of this Prospectus.
Prior to the Offering, there has been no market for the Common Stock or
the Warrants of the Company, and no predictions can be made of the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock and the Warrants of the Company in the
public market could adversely affect prevailing market prices for the Common
Stock and the Warrants and the ability of the Company to raise equity capital in
the future.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Gardner, Carton & Douglas, Chicago, Illinois. Certain legal
matters will be passed upon for the Underwriter by Phillips, Nizer, Benjamin,
Krim & Ballon LLP, New York, New York.
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EXPERTS
The financial statements as of March 31, 1997 and 1998 and for each of the
three years in the period ended March 31, 1998 included in this Prospectus and
the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein (which report
expresses an unqualified opinion and includes an explanatory paragraph regarding
substantial doubt about the company's ability to continue as a going concern.)
Such financial statements have been included herein and elsewhere in the
Registration Statement based upon the report of such firm given upon their
authority as experts in accounting and auditing.
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GLOSSARY
As used in this Prospectus, the following terms have the meanings set
forth below.
Acute phase response The term used to describe a vast number of systemic and
metabolic changes occurring in the body immediately
after and within the first few days of any event which
threatens the integrity of healthy tissues.
Adaptive immunity The capacity of the immune system to "learn" and
acquire specific protection against disease.
Adjunct therapy An ancillary treatment which is secondary to the main
treatment.
Adjuvant A substance which aids another substance in its action.
Affinity The intrinsic attractiveness of one substance for
another.
AIDS Acquired immune deficiency syndrome.
ANDA Abbreviated new drug application.
Antibody An immunoglobulin molecule capable of specifically
combining with a known substance (antigen).
Antigen A substance recognized by (reacting with) an antibody.
B-cell One of two major classes of lymphocytes. B-cells
differentiate into antibody producing cells (i.e.
"plasma" cells).
Bone marrow Hematopoietic tissue. The area of the body where most
of the cellular elements of the blood are produced.
Candida albicans A common, yeast-like fungus, normally found in the
mouth, digestive tract. vagina, and on the skin of
healthy persons. Can cause infections of internal
organs.
Carcinoma A malignant tumor arising from epithelial tissues.
CD4+cell A subset of T-cells which function as helper cells in
the immune response to disease. HIV primarily infects
CD4+ cells which, as the infection proliferates, will
kill CD4+ cells.
CD8+cell A subset of T-cells which function as suppressor and
cytotoxic cells of the immune response.
CDT Carbohydrate Deficient Transferrin - An isomeric form
of the iron binding blood protein, Transferrin, that
occurs in greater amounts in people who chronically
consume excess alcohol.
Complement A set of proteins in the blood which are responsible
for many biological defense reactions of both innate
and adaptive immunity.
C-reactive protein
(CRP) A human protein composed of five identical globular
subunits arranged in cyclic symmetry (i.e. a cyclic
pentamer). The level of this protein in blood increases
up to 1000-fold within 24 to 72 hours of an acute phase
response. Because of these changes, CRP is known as the
prototypic acute phase reactant.
57
<PAGE>
CRO Clinical Research Organization
Cryptococcus neoformans A yeast-like fungus that spreads through the lungs to
the brain, skin, bones and urinary tract.
Cryptosporidium parvum A parasite that is commonly found in the intestinal
tract of mammals that, in immune suppressed
individuals, can cause chronic, profuse, watery
diarrhea accompanied by fever, marked weight loss, and
enlarged lymph nodes.
Cytokines Biologically active compounds produced by one cell and
which affect the activities of other cells.
Cytoskeleton An intracellular matrix of many different proteins
which form a scaffolding and a communication network
within a cell and functions to dynamically organize and
coordinate cellular actions and activities.
DAP 092 The designation given to the Company's lead drug
molecule. Its chemical structure contains two positive
charges (cationic groups) that are important in the
antibiotic activity of the molecule.
DB 289 The designation given to the Company's lead prodrug,
which can be administered orally.
Diabetes A chronic disease characterized by abnormal insulin
secretion from the pancreas. This causes problems in
the metabolism of glucose (sugar).
DMF Drug Master File; a reference document providing
detailed information about a drug in development.
DNA A type of molecule made up of polymerized
deoxyribonucleotides linked together by phosphate
bonds. The sequence of nucleotides in the polymer
contains the basic information of life.
Effector function The action which a cell or factor has been programmed
to complete.
Endotoxin A part of a bacteria which has potent immunological and
fever-producing effects.
Epitope A biochemical structure on the surface portion of a
biomolecule which is recognized by an antibody. The
term "determinant" is a synonym.
Extracellular matrix A combination of proteins, carbohydrates, cells and
factors which form a physical meshwork and which
defines tissue environment.
ex vivo Occurring outside the body.
FDA Food and Drug Administration.
Gene A distinctive hereditary unit defined by part of the
DNA sequence of nucleotides.
Germinal centers A collection of metabolically active lymphoblasts,
macrophages and plasma cells which appear within
lymphoid tissues following antigenic stimulation.
GLP Good Laboratory Practices.
GMP Good Manufacturing Practices.
58
<PAGE>
HbA1c Hemoglobin A1c - An adduct of the hemoglobin molecule
that is modified by a chemical reaction with glucose
(i.e. a "glycated"-hemoglobin) molecule. Because
diabetic patients generally have large fluctuations
in the number of glucose molecules in their blood, they
have a higher relative amount of HbA1c which correlates
with the extent of their disease.
Helper T-cells A class of specific T-lymphocytes which are
necessary to "help" B-cells produce antibody and
effector T-cells to carry out their functions.
HIV Human immunodeficiency virus (the virus that causes
AIDS).
Immunity An active process performed by white blood cells and
their products which repels a foreign organism or
substance.
IND Investigational new drug application; a document
required by the FDA prior to performance of clinical
investigations on human subjects in the United States.
Inflammation Redness, swelling and pain in a tissue resulting from
the infiltration of the tissue by foreign substances
and activated immune cells.
Innate immunity Natural (i.e. unlearned) immunity which provides
mechanical, chemical and biological barriers, and a
rapid and immediate protective response to any insult
to body tissues.
Interleukin A term applied to any of a group of peptide signals
that are produced by activated lymphocytes or
monocytes.
IRB Institutional (Internal) Review Board - a committee of
individuals deciding on the appropriateness of a
proposed experimental procedure or trial.
in vitro Occurring in a contained artificial test system (i.e.
in a test tube).
in vivo Occurring inside the body.
IV Intravenous.
Leismaniasis An infection caused by a protozoal parasite that
affects the skin and abdominal organisms, causing
ulcers or skin disorders that resemble leprosy.
Leukemia A form of cancer in which white blood cells proliferate
and distribute throughout the body abnormally.
Leukocytes Circulating white blood cells.
Lymphatics Vessels of the immune system that drain interstitial
fluids, debris and leukocytes.
Lymphocytes White blood cells of the lymph series, capable of
recognizing and responding to antigens in a specific
manner.
Lymphoma A form of cancer in which the cells in lymph tissues
(e.g. lymph nodes and spleen) proliferate
uncontrollably.
Lymph tissues Body structures within which lymphatic circulation
drains and immunity occurs.
Macrophage A phagocytic white blood cell found in tissues and in
blood. When found in blood, it is called a monocyte.
59
<PAGE>
Megakaryocyte A multinuclear giant cell of the bone marrow, portions
of which break off to form platelets.
Melanoma A form of cancer arising from skin cells.
Metastases Areas within the body where cancers spread and grow
distant from the site of the primary or original cancer
site.
modified-CRP (mCRP) A naturally occurring human protein with the same
genetic structure as CRP but which is structurally
changed so it is no longer a cyclic pentamer. mCRP has
biological, immunological and pharmacological
activities distinct from CRP.
Monoclonal antibody A homogenous population of antibodies which react with
one, specific epitope of an antigen.
Monocytes Phagocytic blood leukocytes, originating from the bone
marrow.
Mycobacterium avium A bacterial infection that can affect most internal
organs. It is associated with widely disseminated
disease which is manifest by non-specific symptoms such
as enlarged lymph nodes, weight loss and diarrhea.
Mycobacterium
tuberculosis A bacterial infection that is transmitted by breathing
in, or eating infected droplets, usually affecting the
lungs, although infection of other organ systems can
occur.
NCDDG National Cooperative Drug Development Grant
NDA New drug application. The application must be approved
by the FDA before a new drug can be marketed in the
United States.
Neoantigens Antigens arising as the result of a change in structure
of a molecule.
Neutrophil The most prominent white blood cell in the circulation
which functions to aggressively attack foreign
substances compromising the integrity of body tissues.
Pentamidine An antiprotozoal drug having two positive charges (i.e.
"dications"), used to treat Pneumocystis carinii
pneumonia, Leismaniasis, and African trypanosomiasis.
The drug is very difficult to deliver and is extremely
toxic if not administered properly.
Phase I Clinical testing time in which the safety and
pharmacological profile of a new drug is established in
humans.
Phase II Clinical testing time in which the effectiveness of a
new drug is established in humans. This includes
establishing the dose amount and frequency required to
achieve a therapeutic effect, the metabolic rate of the
administered drug, and the toxicity profile in specific
patient populations.
Phase III Clinical testing time involving extensive multicenter,
blinded testing in humans. This testing establishes the
significance of therapeutic effectiveness and is a
required step to gain FDA approval to begin product
marketing in the United States.
P-IND Physician-sponsored investigation new drug application.
Plasmodium falciparum A type of protozoa that causes the most severe form of
malaria.
60
<PAGE>
PLA Product License Application. Equivalent to an NDA, but
for products defined as `biological products' by the
FDA (e.g. vaccines, antitoxins, blood products, immune
modulators, etc.)
Platelet The smallest type of blood particle which plays a major
role in blood clotting.
Pneumocystis carinii
pneumonia (PCP) A type of lung infection found rarely in the general
population but presents in immune suppressed patients.
Approximately 80% of all AIDS patients get PCP at some
time during the course of the disease.
Prodrug A non-active precursor form of a drug. A chemical
modification of a prodrug is required to express the
active moiety.
recombinant mCRP A molecule identical to mCRP, produced by genetic
(rmCRP) engineering techniques.
RNA A group of molecules made up of polymerized
ribonucleotides linked together by phosphate bonds.
These molecules help translate the information stored
in DNA into physical effects.
Sepsis A severe bacterial infection involving the blood
stream.
Stem cell An undifferentiated cell from which various effector
cells are derived.
Systemic Affecting the whole body rather than a specific part.
Syncytium Multinucleated protoplasmic mass, an aggregation of
several cells without any apparent cell outlines.
T-cell One of two major classes of lymphocytes. T-cells are
subdivided into cells which "help" various aspects of
immune function, and cells which "suppress" various
aspects of immune function, and directly kill specific
targets (cells) which threaten health.
Thrombocyte Another name for a platelet.
Thrombocytopenia A reduction in the number of platelet cells in the
blood, causing a tendency to bleed.
Topoisomerase An enzyme that makes reversible cuts in a double
helical DNA molecule for the purpose of removing knots
or unwinding excessive twists.
Trypanosomiasis An infection caused by a protozoal parasite and
transmitted usually by insect bites.
61
<PAGE>
IMMTECH INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors.......................................... F-2
Balance Sheets at March 31, 1997 and March 31, 1998..................... F-3
Statements of Operations-Years ended March 31, 1996,
March 31, 1997 and March 31, 1998..................................... F-5
Statements of Common Stockholders' Investment (Deficiency
in Assets)-Years ended March 31, 1996, March 31, 1997 and
March 31, 1998........................................................ F-6
Statements of Cash Flows-Years ended March 31, 1996,
March 31, 1997 and March 31, 1998..................................... F-7
Notes to Financial Statements........................................... F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Immtech International, Inc.
(A Development Stage Enterprise):
We have audited the accompanying balance sheets of Immtech International, Inc.
(a development stage enterprise) (the "Company") as of March 31, 1997 and 1998,
and the related statements of operations, common stockholders' investment
(deficiency in assets), and cash flows for each of the three years in the period
ended March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of March 31, 1997 and 1998,
and the results of its operations and its cash flows for each of the three years
in the period ended March 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
enterprise engaged in the discovery and development of biopharmaceutical
products. As discussed in Note 1 to the financial statements, the deficiency in
working capital as of March 31, 1998 and the Company's operating losses since
inception raise substantial doubt about its ability to continue as a going
concern. In addition, management of the Company expects the Company to incur
significant losses during the next several years. Management's plans concerning
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
August 29, 1998
F-2
<PAGE>
IMMTECH INTERNATIONAL, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
--------------------- June 30,
ASSETS 1997 1998 1998
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 78,510 $ 67,782
Prepaid expenses and supplies 14,702 $ 13,634 16,130
--------- --------- ---------
Total current assets 93,212 13,634 83,912
--------- --------- ---------
PROPERTY AND EQUIPMENT (Note 1):
Furniture and equipment 296,042 296,042 296,042
Leasehold improvements 17,205 17,205 17,205
--------- --------- ---------
Total - at cost 313,247 313,247 313,247
Less accumulated depreciation and amortization 228,991 256,110 262,890
--------- --------- ---------
Property and equipment - net 84,256 57,137 50,357
OTHER ASSETS (Note 1):
Debt issuance costs - net 11,926
Deferred offering costs 60,511
--------- --------- ---------
TOTAL $ 189,394 $ 70,771 $ 194,780
========= ========= =========
</TABLE>
F-3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, June 30,
---------------------------- ------------
LIABILITIES AND COMMON STOCKHOLDERS' 1997 1998 1998
INVESTMENT (DEFICIENCY IN ASSETS) (unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 208,274 $ 395,736 $ 366,792
Accrued interest (Note 11) 454,684 663,013 716,476
Other accrued liabilities 133,152 32,128 455,339
Advances from stockholders (Notes 2 and 11) 770,000 985,172 985,172
Notes payable (Notes 3 and 11) 1,572,969 1,576,450 1,572,950
------------ ------------ ------------
Total current liabilities 3,139,079 3,652,499 4,096,729
------------ ------------ ------------
PREFERRED STOCK (Note 4 and 11):
Series A redeemable, par value $0.01 per share,
1,794,550 shares authorized, issued and outstanding,
aggregate liquidation preference of $2,505,791 and
$2,711,171 and $2,765,256 as of March 31, 1997 and
1998 and June 30, 1998, respectively 2,586,967 2,711,171 2,765,256
Series B redeemable, par value $0.01 per share,
1,600,000 shares authorized, issued and outstanding,
aggregate liquidation preference of $2,521,493,
$2,728,724 and $2,783,141 as of March 31, 1997 and
1998 and June 30, 1998, respectively 2,521,493 2,728,724 2,783,141
------------ ------------ ------------
Total preferred stock 5,108,460 5,439,895 5,548,397
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 3, 8, 10 and 11)
COMMON STOCKHOLDERS' INVESTMENT
(DEFICIENCY IN ASSETS) (Notes 2, 3, 4, 6, 10 and 11):
Common stock, par value $0.01 per share, 10,000,000
shares authorized, 1,350,997, 1,487,431 and 1,487,431
shares issued and outstanding as of March 31, 1997
and 1998 and June 30, 1998, respectively 13,510 14,874 14,874
Additional paid-in capital 3,713,659 4,225,949 4,249,616
Deficit accumulated during the developmental stage (11,785,314) (13,262,446) (13,714,836)
------------ ------------ ------------
Total common stockholders' investment
(deficiency in assets) (8,058,145) (9,021,623) (9,450,346)
------------ ------------ ------------
TOTAL $ 189,394 $ 70,771 $ 194,780
============ ============ ============
</TABLE>
F-4
<PAGE>
IMMTECH INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 15, October 15,
1984 Three Month Periods 1994
Years Ended March 31, (Inception) Ended June 30, (Inception)
--------------------------------------- to March 31, ---------------------- to June 30,
1996 1997 1998 1998 1997 1998 1998
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES (Notes 1 and 10) $ 335,000 $ 15,000 $ 19,552 $ 1,721,121 $ 136,909 $ 1,858,030
----------- ----------- ----------- ------------ ---------- ------------
EXPENSES:
Research and development (Note 1) 737,805 478,871 312,366 6,854,445 $ 89,305 310,499 7,164,944
General and administrative (Note 6) 218,843 532,642 534,984 5,347,696 69,903 117,621 5,465,317
Cancelled offering costs 65,837 73,984 584,707 584,707
----------- ----------- ----------- ------------ ---------- ---------- ------------
Total expenses 956,648 1,077,350 921,334 12,786,848 159,208 428,120 13,214,968
----------- ----------- ----------- ------------ ---------- ---------- ------------
LOSS FROM OPERATIONS (621,648) (1,062,350) (901,782) (11,065,727) (159,208) (291,211) (11,356,938)
----------- ----------- ----------- ------------ ---------- ---------- ------------
OTHER INCOME (EXPENSE):
Interest expense (135,468) (281,710) (241,767) (1,061,959) (84,043) (53,800) (1,115,759)
Miscellaneous (expense) income - net (2,522) (6,503) (2,148) 70,986 (54) 1,123 72,109
----------- ----------- ----------- ------------ ---------- ---------- ------------
Other expense - net (137,990) (288,213) (243,915) (990,973) (84,097) (52,677) (1,043,650)
----------- ----------- ----------- ------------ ---------- ---------- ------------
NET LOSS (759,638) (1,350,563) (1,145,697) (12,056,700) (243,305) (343,888) (12,400,588)
REDEEMABLE PREFERRED STOCK PREMIUM
AMORTIZATION (Note 4) 89,435 100,145 81,696 440,119 27,232 440,119
REDEEMABLE PREFERRED STOCK
DIVIDENDS (Note 4) (335,759) (368,125) (413,131) (1,645,865) (100,262) (108,502) (1,754,367)
----------- ----------- ----------- ------------ ---------- ---------- ------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS $(1,005,962) $(1,618,543) $(1,477,132) $(13,262,446) $ (316,335) $ (452,390) $(13,714,836)
=========== =========== =========== ============ ========== ========== ============
NET LOSS PER SHARE ATTRIBUTABLE TO
COMMON STOCKHOLDERS:
Net loss $ (0.57) $ (1.02) $ (0.85) $ (0.18) $ (0.23)
Redeemable preferred stock premium
amortization and dividends (0.19) (0.20) (0.24) (0.05) (0.07)
----------- ----------- ----------- ---------- ----------
NET LOSS PER SHARE ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ (0.76) $ (1.22) $ (1.09) $ (0.23) $ (0.30)
=========== =========== =========== ========== ==========
SHARES USED IN COMPUTING NET LOSS PER
SHARE ATTRIBUTABLE TO COMMON
STOCKHOLDERS 1,321,666 1,325,950 1,352,942 1,350,997 1,487,431
=========== =========== =========== ========== ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
IMMTECH INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF COMMON STOCKHOLDERS' INVESTMENT (DEFICIENCY IN ASSETS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Deficit Common
Common Accumulated Stockholders'
Shares Issued Common Additional During the Equity
and Stock Paid-in Development (Deficiency in
Outstanding Amount Capital Stage Assets)
<S> <C> <C> <C> <C> <C>
October 15, 1984 (inception)
Issuance of common stock to founders 226,486 $ 2,265 $ 23,735 $ 26,000
--------- --------- ---------- -----------
Balance, March 31, 1985 226,486 2,265 23,735 26,000
Issuance of common stock 170,736 1,707 268,633 270,340
Net loss $ (209,569) (209,569)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1986 397,222 3,972 292,368 (209,569) 86,771
Issuance of common stock 85,802 858 285,558 286,416
Net loss (47,486) (47,486)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1987 483,024 4,830 577,926 (257,055) 325,701
Issuance of common stock 8,420 84 28,917 29,001
Net loss (294,416) (294,416)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1988 491,444 4,914 606,843 (551,471) 60,286
Issuance of common stock 125,584 1,256 568,744 570,000
Provision for compensation 489,975 489,975
Net loss (986,746) (986,746)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1989 617,028 6,170 1,665,562 (1,538,217) 133,515
Issuance of common stock 32,957 330 170,894 171,224
Provision for compensation 320,980 320,980
Net loss (850,935) (850,935)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1990 649,985 6,500 2,157,436 (2,389,152) (225,216)
Issuance of common stock 436 4 1,181 1,185
Provision for compensation 6,400 6,400
Net loss (163,693) (163,693)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1991 650,421 6,504 2,165,017 (2,552,845) (381,324)
Issuance of common stock 36,238 362 85,593 85,955
Provision for compensation 864,496 864,496
Issuance of stock options in exchange
for cancellation of indebtedness 57,917 57,917
Net loss (1,479,782) (1,479,782)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1992 686,659 6,866 3,173,023 (4,032,627) (852,738)
Issuance of common stock 391,580 3,916 64,881 68,797
Provision for compensation 191,502 191,502
Net loss (1,220,079) (1,220,079)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1993 1,078,239 10,782 3,429,406 (5,252,706) (1,812,518)
Issuance of common stock 214,523 2,145 39,530 41,675
Provision for compensation 43,505 43,505
Net loss (2,246,426) (2,246,426)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1994 1,292,762 12,927 3,512,441 (7,499,132) (3,973,764)
Net loss (1,661,677) (1,661,677)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1995 1,292,762 12,927 3,512,441 (9,160,809) (5,635,441)
Issuance of common stock for compensation 32,263 323 7,177 7,500
Net loss (1,005,962) (1,005,962)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1996 1,325,025 13,250 3,519,618 (10,166,771) (6,633,903)
Issuance of common stock 25,972 260 5,778 6,038
Provision for compensation - employees 45,086 45,086
Provision for compensation - non-employees 62,343 62,343
Issuance of warrants to purchase common stock 80,834 80,834
Net loss (1,618,543) (1,618,543)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1997 1,350,997 13,510 3,713,659 (11,785,314) (8,058,145)
Issuance of common stock 136,434 1,364 28,180 29,544
Provision for compensation - employees 50,680 50,680
Provision for compensation - non-employees 201,696 201,696
Contributed capital - common stockholders (Note 10) 231,734 231,734
Net loss (1,477,132) (1,477,132)
--------- --------- ---------- ------------ -----------
Balance, March 31, 1998 1,487,431 14,874 4,225,949 (13,262,446) (9,021,623)
Provision for compensation - non-employees (unaudited) 23,667 23,667
Net loss (unaudited) (452,390) (452,390)
--------- --------- ---------- ------------ -----------
Balance, June 30, 1998 (unaudited) 1,487,431 $ 14,874 $4,249,616 $(13,714,836) $(9,450,346)
========= ========= ========== ============ ===========
</TABLE>
See notes to financial statements
F-6
<PAGE>
IMMTECH INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
October 15,
1984
Years Ended March 31, (Inception)
------------------------------------------ to March 31,
1996 1997 1998 1998
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (759,638) $ (1,350,563) $ (1,145,697) $(12,056,700)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization of property and equipment 42,296 36,814 27,119 287,790
Amortization of debt discount 62,218 18,616 80,834
Amortization of debt issuance costs 41,743 11,926 53,669
Compensation recorded related to issuance of common stock
or common stock options 7,500 107,429 252,376 2,462,963
Changes in operating assets and liabilities:
Prepaid expenses and supplies (5,270) (1,068) 1,068 (13,634)
Deferred revenue 15,000 (15,000)
Accounts payable 150,794 (205,487) 187,462 395,736
Other accrued liabilities 41,108 103,152 (101,024) 32,128
Accrued interest 124,360 169,726 208,329 663,013
------------ ------------ ------------ ------------
Net cash (used in) provided by operating activities (383,850) (1,051,036) (539,825) (8,094,201)
------------ ------------ ------------ ------------
INVESTING ACTIVITIES - Purchases of property and equipment (17,172) (318,403)
------------ ------------
Net cash used in investing activities (17,172) (318,403)
------------ ------------
FINANCING ACTIVITIES:
Advances from stockholders 311,500 458,500 215,172 985,172
Proceeds from the issuance of senior subordinated debt 525,000 525,000
Proceeds from the issuance of notes payable 72,350 2,120,194
Payments on notes payable (39,151) (3,500) (97,119)
Payments for debt issuance costs (53,669) (53,669)
Proceeds from the issuance of common stock 6,038 17,909 1,371,292
Additional capital contributed by stockholders 231,734 231,734
Proceeds from the issuance of Preferred Stock - Series A 1,330,000
Proceeds from the issuance of Preferred Stock - Series B 250,000 2,000,000
Deferred offering costs
Cash provided by (used in) financing activities 383,850 1,146,718 461,315 8,412,604
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH 0 78,510 (78,510) 0
CASH, BEGINNING OF PERIOD 0 0 78,510 0
------------ ------------ ------------ ------------
CASH, END OF PERIOD $ 0 $ 78,510 $ 0 $ 0
============ ============ ============ ============
<CAPTION>
October 15,
Three Month Periods 1994
Ended June 30, Inception
-------------------------- to June 30,
1997 1998 1998
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (243,305) $ (343,888) $(12,400,588)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization of property and equipment 9,202 6,780 294,570
Amortization of debt discount 18,616 80,834
Amortization of debt issuance costs 11,926 53,669
Compensation recorded related to issuance of common stock
or common stock options 23,667 2,486,630
Changes in operating assets and liabilities:
Prepaid expenses and supplies (2,496) (16,130)
Deferred revenue
Accounts payable 26,334 (28,944) 366,792
Other accrued liabilities (3,518) 423,211 455,339
Accrued interest 52,235 53,463 716,476
------------ ------------ ------------
Net cash (used in) provided by operating activities (128,510) 131,793 (7,962,408)
------------ ------------ ------------
INVESTING ACTIVITIES - Purchases of property and equipment (318,403)
------------
Net cash used in investing activities (318,403)
------------
FINANCING ACTIVITIES:
Advances from stockholders 50,000 985,172
Proceeds from the issuance of senior subordinated debt 525,000
Proceeds from the issuance of notes payable 2,120,194
Payments on notes payable (3,500) (100,619)
Payments for debt issuance costs (53,669)
Proceeds from the issuance of common stock 1,371,292
Additional capital contributed by stockholders 231,734
Proceeds from the issuance of Preferred Stock - Series A 1,330,000
Proceeds from the issuance of Preferred Stock - Series B 2,000,000
Deferred offering costs (60,511) (60,511)
------------ ------------ ------------
Cash provided by (used in) financing activities 50,000 (64,011) 8,348,593
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH (78,510) 67,782 67,782
CASH, BEGINNING OF PERIOD 78,510
------------ ------------ ------------
CASH, END OF PERIOD $ 0 $ 67,782 $ 67,782
============ ============ ============
</TABLE>
F-7
<PAGE>
IMMTECH INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF JUNE 30, 1998 AND FOR THE THREE MONTH PERIODS
ENDED JUNE 30, 1997 AND 1998 IS UNAUDITED
- --------------------------------------------------------------------------------
1. COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - Immtech International, Inc. (the "Company") is a
biopharmaceutical company focusing on the discovery and development of
therapeutic products for the treatment of opportunistic diseases and
cancer in patients with compromised immune responses. The Company has two
separate platform technologies for developing drugs, one based on
developing a new class of molecules as pharmaceuticals and a second for
developing a series of biological proteins that work in conjunction with
the immune system.
The Company was incorporated in 1984. The Company is in the development
stage and has directed its efforts toward research and development, hiring
scientific and management personnel, arranging for facilities and
conducting clinical trials. The Company has no products currently
available for sale, and none are expected to be commercially available for
several years.
Basis of Presentation - The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business.
Since inception, the Company has incurred accumulated losses of
approximately $13,715,000. Management expects the Company to continue to
incur significant losses during the next several years. In addition, as of
March 31, 1998 and June 30, 1998, the Company's current liabilities
exceeded its current assets by approximately $3,639,000 and $4,013,000,
respectively, and the Company had a common stockholders' deficiency of
approximately $9,022,000 and $9,450,000, respectively. In addition, as
discussed in Note 3, the Company was not in compliance with its notes
payable agreements. These factors, among others, indicate that the Company
may be unable to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient funds to meet its obligations as they
become due and ultimately, to obtain profitable operations. As discussed
in Note 11, subsequent to March 31, 1998, the Company completed a
recapitalization. Management's plans for the forthcoming year include
continuing their efforts to obtain additional equity financing.
Property and Equipment - Equipment and leasehold improvements are recorded
at cost and depreciation and amortization are provided using accelerated
methods. Assets are depreciated over five to seven years.
Debt Issuance Costs and Debt Discounts - Costs incurred in connection with
the issuance of the senior subordinated notes during the year ended March
31, 1997, were deferred and amortized over the original life of these
notes using the interest method. Amortization of approximately $42,000 and
$12,000 was charged to operations for the years ended March 31, 1997 and
1998, respectively, and
F-8
<PAGE>
$12,000 and $0 for the three month periods ended June 30, 1997 and 1998,
respectively, as additional interest expense. Discounts related to the
issuance of debt are amortized and charged to operations using the
interest method.
Deferred Offering Costs - Costs incurred with respect to a common stock
offering in process have been deferred pending the completion of the
offering.
Revenue Recognition - Revenue under grants and research and development
agreements is recognized based on the Company's estimates of the stage of
completion under the terms of the respective agreements. Amounts received
in advance under these agreements are recorded as deferred revenue until
the research has been performed.
Research and Development Costs - All research and development costs are
charged to operations as incurred.
Income Taxes - The Company accounts for income taxes using an asset and
liability approach. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable
income.
Net Loss Per Share - Net loss per share is calculated in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share." Diluted net loss per share was the same as the basic loss per
share as the stock options and warrants were antidilutive for the years
ended March 31, 1996, 1997 and 1998 and the three month periods ended June
30, 1997 and 1998.
Fair Value Information - Due to the uncertainties previously discussed in
Note 1, management has determined that it is not practicable to estimate
the fair value of the Company's financial instruments (notes payable and
preferred stock).
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Approved Accounting Standards Not Yet Adopted - In 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." These statements are required to be
adopted in fiscal 1999. In 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This
statement is required to be adopted in fiscal 1999. In 1998, the FASB also
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement is required to be adopted in fiscal 2000. The
Company is currently in the process of evaluating the impact of adopting
these new statements.
Reclassifications - Certain amounts previously reported have been
reclassified to conform with the current presentation.
F-9
<PAGE>
2. ADVANCES FROM STOCKHOLDERS
Criticare Systems, Inc. ("Criticare"), a stockholder who, as of March 31,
1998, owns 1,000,000 shares of Series A Preferred Stock, 1,200,000 shares
of Series B Preferred Stock and 112,501 shares of common stock, has
advanced $590,000 and $597,722 to the Company as of March 31, 1997 and
1998, respectively and $597,722 as of June 30, 1998. These advances bear
interest at 5% and are payable on demand.
Certain other stockholders have advanced funds to the Company aggregating
$180,000, $387,450 and $387,450 as of March 31, 1997 and 1998 and June 30,
1998, respectively. These advances do not bear interest and are payable on
demand.
On July 24, 1998, $985,172 of stockholder advances, together with related
accrued interest, were exchanged for common stock and cash (see Note 11).
3. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
March 31,
1997 1998 June 30,
------------------- 1998
<S> <C> <C> <C>
Senior subordinated notes, due May 31, 1997, 15% interest,
unsecured, net of unamortized discount of $18,616, $0 and $0 as of
March 31, 1997 and 1998 and June 30, 1998,
respectively $895,384 $914,000 $914,000
State of Illinois, payment due based upon closure of a private
placement offering and initial public offering, 0% interest as of
March 31, 1997 and 1998 and June 30, 1998, unsecured 100,000 100,000 100,000
Northwestern University, payable in monthly installments of $3,500
through October, 1997, 0% interest as of March 31, 1997 and 1998
and June 30, 1998, unsecured 24,500 21,000 17,500
Criticare Systems, Inc., due December 31, 1997, 8.5% interest,
unsecured 89,777 89,777 89,777
Walsh & Keating, S.C., due December 31, 1997, 8.5% interest,
unsecured 167,139 167,139 167,139
Partners of Walsh & Keating, S.C., due December 31, 1997, 8.5%
interest, unsecured 22,301 10,666 10,666
Winston & Strawn, due December 31, 1997, 8.5% interest, unsecured 153,744 153,744 153,744
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
March 31,
----------------------- June 30,
1997 1998 1998
<S> <C> <C> <C>
Brinks, Hofer, Gilson & Lione, due December 31, 1997,
8.5% interest, unsecured $ 120,124 $ 120,124 $ 120,124
---------- ---------- ----------
Total notes payable 1,572,969 1,576,450 1,572,950
Less current portion 1,572,969 1,576,450 1,572,950
---------- ---------- ----------
Long-term debt $ 0 $ 0 $ 0
========== ========== ==========
</TABLE>
The Company did not have sufficient funds to pay the aforementioned notes
on the maturity dates indicated and, accordingly, all such notes were in
default as of March 31, 1998 and June 30, 1998.
During the year ended March 31, 1997, approximately $389,000 of notes
payable were exchanged, in $1,000 increments, for an equal amount of
senior subordinated debt and a detachable warrant to purchase 200 shares
of the common stock of the Company. Also during fiscal 1997, the Company
sold for $525,000, senior subordinated notes in increments of $1,000, each
with a warrant to purchase 200 shares of common stock of the Company. The
holders of these warrants would be entitled to purchase a share of common
stock, in the event the Company participates in an initial public
offering, at a price equivalent to one-half the price in the initial
public offering. As of March 31, 1997 and 1998, 182,800 warrants were
outstanding. The warrants expire August 29, 1999.
The discount on the senior subordinated notes resulted from the allocation
of the proceeds from the issuance of the senior subordinated notes to the
debt and related stock warrants at their estimated fair value. The
estimated fair value of these warrants was $.45 per warrant at the date
the warrants were granted, resulting in a discount of $80,834. This
discount was amortized using the interest method over the original life of
the senior subordinated notes.
Interest on the State of Illinois loan stopped accruing during the year
ended March 31, 1996, when the maximum interest from this loan of $281,470
was reached. The interest rate on this loan was 25% prior to when it
stopped accruing interest. Interest on the Northwestern University loan
stopped accruing during the year ended March 31, 1997, when this loan was
restructured to provide Northwestern with higher monthly payments in
exchange for no further interest accrual. Before this loan was
restructured, its interest rate was 8.12%.
Two partners in the firm Walsh & Keating, S.C., legal counsel for the
Company, own 108,401 and 46,169 common shares of the Company's stock. A
partner in the firm Brinks, Hofer, Gilson & Lione, who is also legal
counsel for the Company, owns 1,355 common and 74,350 Series A preferred
shares of the Company's stock.
On July 24, 1998, the senior subordinated notes, the Criticare Systems,
Inc. note, the Walsh & Keating notes, the Winston & Strawn note and the
Brinks, Hofer, Gilson & Lione note, together with related accrued
interest, were exchanged for shares of common stock and cash (see Note
11).
4. PREFERRED STOCK
Preferred stock consists of Series A and Series B. The holders of the
Series A and Series B Preferred Stock have cumulative dividend preferences
at the rate of 8% per annum, compounded daily, of the liquidation value
thereof, plus accumulated and unpaid dividends thereon, in preference to
any dividend on common stock, payable when and if declared by the Board of
Directors. Dividends accrue whether
F-11
<PAGE>
or not they have been declared and whether or not there are profits,
surplus or other funds of the Company legally available for the payment of
dividends. In the event the Company declares a dividend or distribution on
the common stock, the holders of the preferred stock and the holders of
the common stock would share pro rata in such dividend or distribution. If
preferred shares are converted to common, such shares cease to accrue
dividends and the holders thereof forfeit their rights to receive any
accrued but unpaid dividends on such shares.
The holders of the Series A and Series B Preferred Stock have the right to
convert each share at any time, into one share of common stock. The
holders of the preferred stock have the right to vote with the holders of
the common stock. The holders have voting rights equivalent to the number
of shares of common stock issuable upon conversion.
The Company may require the conversion of its preferred stock upon the
issuing of a firm commitment for a public offering with net proceeds in
excess of $15,000,000 and a price of at least $7.50 per share.
In the event of any liquidation or dissolution of the Company, the holders
of the preferred stock would be entitled to receive, in preference to the
holders of common stock $1.00 per share of Series A Preferred Stock and
$1.25 per share of Series B Preferred Stock plus all accrued and unpaid
dividends.
The difference between the initial estimated fair value of the Series A
Preferred Stock and the aggregate redemption value was amortized by a
credit to retained earnings (deficit accumulated during the developmental
stage) and a debit to the carrying value of the preferred stock during the
period from issuance to December 21, 1997 using the interest method.
At any time on or after December 21, 1997, a holder of Series A and B
Preferred Stock may require the Company to redeem all or part of the
holder's shares at the liquidation value plus all accrued but unpaid
dividends thereon. The Company would redeem such shares in a series of
eight equal quarterly redemptions commencing on the last day of the
calendar quarter occurring at least 30 days following the Company's
receipt of the holder's redemption notice. The aggregate future annual
redemption requirements of the liquidation value plus accrued unpaid
dividends as of March 31, 1998 and June 30, 1998, was $5,439,895 and
$5,548,397, respectively.
On July 24, 1998, the Series A and B Preferred stockholders exchanged
their preferred shares for an aggregate 2,390,089 shares of common stock
(see Note 11).
5. INCOME TAXES
The Company accounts for income taxes using an asset and liability
approach which generally requires the recognition of deferred income tax
assets and liabilities based on the expected future income tax
consequences of events that have previously been recognized in the
Company's financial statements or tax returns. In addition, a valuation
allowance is recognized if it is more likely than not that some or all of
the deferred income tax asset will not be realized. A valuation allowance
is used to offset the related net deferred income tax assets due to
uncertainties of realizing the benefits of certain net operating losses
and tax credit carryforwards.
F-12
<PAGE>
The Company has no significant deferred income tax liabilities.
Significant components of the Company's deferred income tax assets are as
follows:
<TABLE>
<CAPTION>
March 31,
----------------------------------------- June 30,
1996 1997 1998 1998
<S> <C> <C> <C> <C>
Deferred income tax assets:
Federal net operating loss carryforwards $ 2,049,000 $ 2,467,000 $ 2,769,000 $ 2,915,000
State net operating loss carryforwards 188,400 247,300 290,000 310,600
Federal tax credit carryforwards 80,000 86,400 89,100 89,100
----------- ----------- ----------- -----------
Total deferred income tax assets 2,317,400 2,800,700 3,148,100 3,314,700
----------- ----------- ----------- -----------
Valuation allowance (2,317,400) (2,800,700) (3,148,100) (3,314,700)
----------- ----------- ----------- -----------
Net deferred income taxes recognized
in the balance sheets $ 0 $ 0 $ 0 $ 0
=========== =========== =========== ===========
</TABLE>
At March 31, 1998, the Company had federal net operating loss
carryforwards of approximately $8,144,000, which expire from 2001 through
2013. At March 31, 1998, the Company had available for federal income tax
purposes approximately $8,081,000 of alternative minimum tax credit
carryforwards which expire from 2001 through 2013. The Company also has
approximately $6,042,000 of state net operating loss carryforwards, which
expire from 2008 through 2013, available to offset certain future state
taxable income for Illinois State tax purposes. At June 30, 1998, the
Company had federal net operating loss carryforwards of approximately
$8,573,000, which expire from 2003 through 2014. At June 30, 1998, the
Company had available for federal income tax purposes approximately
$8,510,000 of alternative minimum tax credit carryforwards which expire
from 2003 through 2014. The Company also has approximately $6,471,000 of
state net operating loss carryforwards available as of June 30, 1998,
which expire from 2009 through 2014, available to offset certain future
state taxable income for Illinois state tax purposes. Because of "change
of ownership" provisions of the Tax Reform Act of 1986, approximately
$2,352,000 and $250,000 of the Company's net operating loss carryforwards
for federal and State of Illinois purposes, respectively, are subject to
an annual limitation regarding utilization against taxable income in
future periods. The Company is considering various equity financing
alternatives. Such changes may result in a change of ownership and
significantly restrict the utilization of the Company's net operating loss
carryforwards and federal tax credit carryforwards.
The income tax provision consists of the following:
Three
Month Periods
Years Ended Ended
March 31, June 30,
------------------ -----------
1996 1997 1998 1997 1998
Current:
Federal $ 0 $ 0 $ 0 $ 0 $ 0
State 0 0 0 0 0
---- ---- ---- ---- ----
Total income tax provision $ 0 $ 0 $ 0 $ 0 $ 0
==== ==== ==== ==== ====
F-13
<PAGE>
A reconciliation of the provision for income taxes (benefit) at the federal
statutory income tax rate to the effective income tax rate follows:
<TABLE>
<CAPTION>
Three Month
Years Ended Periods Ended
March 31, June 30,
---------------------------- -----------------
1996 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C>
Federal statutory income tax rate (34.0)% (34.0)% (34.0)% (34.0)% (34.0)%
State statutory income tax rate (4.8) (4.8) (4.8) (4.8) (4.8)
Benefit of federal and state net operating
loss carryforwards not recognized 38.8 38.8 38.8 38.8 38.8
------ ------ ------ ------ ------
Effective income tax rate 0 % 0 % 0 % 0 % 0 %
====== ====== ====== ====== ======
</TABLE>
6. STOCK OPTIONS AND COMMON STOCK
The Company has granted common stock options to individuals who have
contributed to the Company. The options contain various provisions
regarding vesting periods, expiration dates, stockholder approval
requirements and contingencies on the approval of an increase in the stock
option pool by the Board of Directors. The options vest in periods ranging
from 0 to 2 years and generally expire in ten years. As of March 31, 1998
and June 30, 1998, 960,060 and 1,107,792 granted options are outstanding,
respectively. As of March 31, 1998 and June 30, 1998, there were 5,162 and
5,162 employee stock options available for grant, respectively.
During the years ended March 31, 1997 and 1998 and the three month period
ended June 30, 1998, the Company issued stock options to nonemployees for
services rendered to the Company. For the year ended March 31, 1997,
58,073 options were issued and expense of $62,343 was recorded. For the
year ended March 31, 1998, 198,282 options were issued and expense of
$201,696 was recorded. For the three month period ended June 30, 1998,
174,220 options were issued and expense of $23,667 was recorded. The
expense was determined based on the estimated fair value of the options
issued.
F-14
<PAGE>
The activity during 1996, 1997 and 1998 for the Company's stock options is
summarized as follows:
Number of Stock Options Weighted Avg.
Shares Price Range Exercise Price
Outstanding at April 1, 1995 840,584 $0.15-3.44 $0.34
Granted 112,275 0.15-0.15 0.15
------------ ------------ -----
Outstanding at March 31, 1996 952,859 0.15-3.44 0.34
Granted 136,795 0.23-0.23 0.23
Exercised (25,972) 0.23-0.23 0.23
Expired (1,129) 0.23-0.23 0.23
------------ ------------ -----
Outstanding at March 31, 1997 1,062,553 0.15-3.44 0.42
Granted 289,909 0.29-0.87 0.51
Exercised (136,434) 0.17-0.29 0.22
Expired (255,968) 0.17-3.44 0.74
------------ ------------ -----
Outstanding at March 31, 1998 960,060 0.15-0.87 0.29
Granted 174,220 1.21-1.21 1.21
Expired (26,488) 0.15-0.17 0.15
------------ ------------ -----
Outstanding at June 30, 1998 1,107,792 $0.15-1.21 $0.45
============ ============ =====
Exercisable at March 31, 1998 957,371 $0.15-0.87 $0.29
============ ============ =====
Exercisable at June 30, 1998 971,750 $0.15-1.21 $0.34
============ ============ =====
The following table summarizes information about stock options outstanding
as of March 31, 1998:
Options Outstanding Options Exercisable
------------------------------------- ------------------------
Weighted
Average Weighted Shares Weighted
Shares Remaining Average Exercisable Average
Range of Outstanding at Contractual Exercise at Exercise
Exercise Prices March 31, 1998 Life-Years Price March 31, 1998 Price
$0.15 to 0.22 351,134 2.83 $ 0.17 351,134 $ 0.17
0.23 to 0.29 497,941 4.61 0.26 495,252 0.26
0.87 110,985 10.00 0.87 110,985 0.87
------- -------
960,060 4.58 $ 0.29 957,371 $ 0.29
======= =======
The following table summarizes information about stock options outstanding
as of June 30, 1998:
Options Outstanding Options Exercisable
------------------------------------- ------------------------
Weighted
Average Weighted Shares Weighted
Shares Remaining Average Exercisable Average
Range of Outstanding at Contractual Exercise at Exercise
Exercise Prices June 30, 1998 Life-Years Price June 30, 1998 Price
$0.15 to 0.22 324,646 2.28 $ 0.17 324,646 $ 0.17
0.23 to 0.29 497,941 4.36 0.26 497,941 0.26
0.87 to 1.21 285,205 9.80 1.07 149,163 0.96
--------- ---------
1,107,792 5.15 $ 0.45 971,750 $ 0.34
========= =========
F-15
<PAGE>
The following table summarizes information about stock warrants
outstanding (see Note 3) as of March 31, 1998 and June 30, 1998:
Warrants Expiration
Exercise Price Outstanding Date
50% of initial public offering price per share 182,800 August 29, 1999
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation," but applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its employee stock
option plans. For the year ended March 31, 1997, the Company issued 78,722
options to employees and recognized expense of $45,086 related to those
options. For the year ended March 31, 1998, the Company issued 91,627
options to employees and recognized expense of $50,680 related to those
options. The expense was calculated as the difference between the option
exercise price and the estimated fair value of the Company's stock as of
the date the option was granted. If the Company had recognized
compensation expense for the options granted during the fiscal years ended
March 31, 1997 and 1998, consistent with the method prescribed by SFAS No.
123, net loss and net loss per share would have been changed to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
Three Month Periods
Years Ended March 31, Ended June 30,
------------------------------ ------------------------------
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Net loss attributable to common stockholders -
as reported $ (1,618,543) $ (1,477,132) $ (316,335) $ (452,390)
Net loss attributable to common stockholders -
pro forma $ (1,623,641) $ (1,503,470) $ (316,335) $ (452,390)
Net loss per share attributable to common
stockholders - as reported $ (1.22) $ (1.09) $ (0.23) $ (0.30)
Net loss per share attributable to common
stockholders - pro forma $ (1.22) $ (1.11) $ (0.23) $ (0.30)
</TABLE>
The fair value of stock options used to compute pro forma net loss and net
loss per share is the estimated present value at the grant date using the
Black-Scholes option-pricing model. The assumptions used to estimate
compensation cost were expected volatility of 27.5%, risk-free interest
rate of 5.4% and expected option lives of 4.5 years. The pro forma effect
on net loss for 1997 and 1998 is not representative of the pro forma
effect in future years because it does not take into consideration pro
forma compensation cost related to grants made prior to 1997.
7. SUPPLEMENTAL CASH FLOW INFORMATION
The Company did not pay any income taxes during the years ended 1996, 1997
or 1998 or in the three month periods ended June 30, 1997 and 1998. The
Company paid $0, $8,023 and $0 in interest during 1996, 1997 and 1998,
respectively, and no interest during the three month periods ended June
30, 1997 and 1998, respectively.
Non-Cash Financing Activities:
In 1996, 1997 and 1998, the Company increased the carrying value of the
Series A and B Preferred Stock by amounts representing the value of
dividends not currently declared or paid, but which are payable under
mandatory redemption features. The Company has also recorded Series A
Preferred
F-16
<PAGE>
Stock premium amortization on the securities. Also, in 1996, 1997 and
1998, the Company issued common stock or options as compensation for
services. Finally, in 1998 the Company issued common stock for a note
payable payment. The amounts of these transactions were as follows:
<TABLE>
<CAPTION>
Three Month Periods
Years Ended March 31, Ended June 30,
----------------------------------- ----------------------
1996 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C>
Preferred stock dividends accrued $ 335,759 $ 368,125 $ 413,131 $ 100,262 $ 108,502
Preferred stock premium amortization (89,435) (100,145) (81,696) (27,232)
Issuance of common stock or stock options
as compensation for services 7,500 107,429 252,376 23,667
Common stock issued for note payable payment (11,635)
</TABLE>
During August 1996, the Company exchanged certain notes payable and
accrued interest on such notes for senior subordinated notes with a face
value of $389,000.
8. COMMITMENTS
The Company leases office space under an operating lease which expires in
November 1998. Total rental expense was approximately $58,000, $57,000 and
$50,000 for the years ended March 31, 1996, 1997 and 1998, respectively
and $14,000 and $4,000 for the three month periods ended June 30, 1997 and
1998, respectively. As discussed in Note 11, a third party has agreed to
fund the operating lease as of May 1998.
9. RELATED PARTY TRANSACTIONS
During the year ending March 31, 1998, the following payments for various
Company expenses were made on behalf of the Company by related parties:
approximately $146,000 from Criticare; approximately $56,000 from an
investment fund whose directors are also directors of the Company; and
approximately $30,000 from certain officers and directors of the Company.
These payments were recorded as expenses and additional paid-in capital in
the Company's financial statements for the year ended March 31, 1998.
There were no such payments for the years ended March 31, 1996 and 1997 or
for the three month periods ended June 30, 1997 and 1998.
10. COLLABORATIVE RESEARCH AND DEVELOPMENT ACTIVITIES
The Company has various collaborative research agreements with commercial
enterprises. Under the terms of these arrangements, the Company has agreed
to perform best efforts research and development and, in exchange, the
Company may receive advanced cash funding and may also earn additional
fees for the attainment of certain milestones. The Company may receive
royalties on the sales of such products. The other parties generally
receive exclusive marketing and distribution rights for certain products
for set time periods in specific geographic areas.
The Company initially acquired its rights to the platform technology and
dicationic compounds developed by a consortium of universities including
The University of North Carolina at Chapel Hill ("UNC"), Duke University,
Auburn University and Georgia State University (the "Consortium") pursuant
to an agreement, dated January 15, 1997 (as amended in May 1998, the
"Consortium Agreement") among the Consortium, Pharm-Eco Laboratories, Inc.
("Pharm-Eco"), and on behalf of itself and the other academic institutions
in the Consortium. The Consortium Agreement commits each party to the
agreement to research, develop, finance the research and development of,
manufacture and market the technology and compounds owned by the
Consortium and then licensed or optioned to Pharm-Eco (the "Current
Compounds") and licensed to the Company pursuant to the Consortium
F-17
<PAGE>
Agreement, and all technology and compounds developed by the Consortium
after the date thereof through use of Company-sponsored research funding
or National Cooperative Drug Development grant funding made available to
the Consortium (the "Future Compounds" and, collectively with the Current
Compounds, the "Compounds"). The Consortium Agreement contemplates that
the Company and Pharm-Eco, with respect to the Current Compounds, and the
Company and Pharm-Eco, with respect to the Current Compounds, and the
Company and UNC, with respect to Future Compounds, will enter into more
comprehensive license or assignments of the intellectual property rights
held by Pharm-Eco and the Consortium; and that Pharm-Eco and the Company
will enter into an arrangement relating to the manufacture of products
derived from the Compounds.
Under the Consortium Agreement, the Company has agreed to use its best
efforts to complete an initial public offering ("IPO") of shares of its
common stock to raise at least $10,000,000 or an alternative form of
financing ("Alternative Financing") to raise at least $4,000,000 by
September 30, 1998. Upon the closing of the IPO or the Alternative
Financing, the Company will: (i) use the greater of (x) 33% of the net
proceeds from the IPO or an Alternative Financing or (y) $5,000,000, to
develop the Compounds, (ii) issue an aggregate of 1,222,500 shares of
common stock to Pharm-Eco or persons designated by Pharm-Eco, which number
includes 275,000 shares to be issued to the Consortium, (iii) issue
warrants to purchase an aggregate of 1,700,000 shares of common stock to
Pharm-Eco or persons designated by Pharm-Eco with a ten-year term from the
date of issuance, at an exercise price equal to the weighted average
market price of the Company's common stock during the first 20 days of
trading on any stock exchange or in any over-the-counter market, which
warrants are exercisable upon the occurrence of certain events and subject
to redemption by the Company; and (iv) issue an aggregate of 300,000
shares of common stock collectively to Pharm-Eco or persons designated by
Pharm-Eco, which number of shares includes 200,000 shares of common stock
to be issued to the Consortium upon the filing by the Company of a new
drug application or an abbreviated new drug application with the Food and
Drug Administration with respect to any product. In addition, the Company
will pay UNC an aggregate royalty of 5% of net sales of Current Products
and Future Products, except that the royalty rate payable on any Compound
developed at Duke University will be determined by negotiation at the time
such Compound is developed. In the event that the Company sublicenses its
rights with respect to the Compounds, the Company will pay UNC, in
addition to the royalty described above, 2.5% of all signing, milestone
and other non-royalty payments made to the Company pursuant to the
sublicense agreement and will pay to Pharm-Eco 2.5% of all signing,
milestone and other nonroyalty payments made to the Company pursuant to
the sublicense agreement.
Upon closing of this Offering: (a) Pharm-Eco will be entitled to designate
for appointment one representative to the Company's Board of Directors,
(b) UNC will be entitled to designate one person as a non-voting observer
of all meetings and other proceedings of the Company's Board of Directors,
(c) the Company will make quarterly $100,000 Research Grants to UNC
commencing on the final day of the month during which the closing of the
offering occurs, and continuing every three months thereafter until, at a
minimum, the third anniversary of the offering and (d) the Company will
pay all costs to prosecute, maintain and defend all patents and patent
applications relating to any Compounds or products.
Upon raising $4,000,000, Pharm-Eco will grant the Company a license to use
the Current Compounds only as antimicrobial agents and UNC will grant the
Company a license to use the Future Compounds only as antimicrobial
agents. The initial $5,000,000 in funds raised by the Company (including
the initial $4,000,000 referenced above) will be applied to the
advancement of dications. Once the Company has raised more than
$10,000,000 both Pharm-Eco and UNC will grant an exclusive worldwide
license to use, manufacture, have manufactured, promote, sell, distribute,
or otherwise
F-18
<PAGE>
dispose of any products based directly or indirectly on all of the Current
Compounds and Future Compounds.
In exchange for UNC's and Pharm-Eco's permission to extend the period of
time for the Company to fulfill its obligations under the Agreement, the
Company has agreed to (i) provide financial support to Dr. Richard
Tidwell's laboratory and research covered by the agreement, (ii) pay up to
$50,000 in fees and expenses charged UNC by UNC's patent counsel during
the period of the extension, (iii) pay arrearages in research support
accrued prior to the date of the First Amendment within 30 days of the
closing of the IPO, (iv) replenish Dr. Tidwell's UNC Department of
Pathology & Laboratory Medicine trust fund of all monies spend due to the
delay in receipt of the Research Grants, currently estimated at $150,000
and (v) provide each of UNC and Pharm-Eco with 50,000 shares of Common
Stock of the Company.
The Company has formed a manufacturing joint venture with Pharm-Eco to
produce Good Manufacturing Practices-quality dicationic drugs and products
for clinical testing and for early commercialization. The joint venture
was formed to reduce the cost and risk associated with manufacturing the
initial pharmaceutical products (DAP-092 and DB-289). Once the commercial
sale of products begins, the Company and Pharm-Eco will deduct their costs
associated with making and marketing (including selling, marketing, and
regulatory support) products. The remaining margin, after the costs have
been subtracted, will be divided equally between the joint venture
partners. At such time when the Company's sales reach $20 million for
DAP-092 and DB-289, the Company can elect not to use the joint venture or
Pharm-Eco for manufacturing, whereupon the Company would be required to
pay a royalty to Pharm-Eco of no more than 2% of sales.
Costs incurred in the collaborative research and development activities
approximate such revenues earned and are included in research and
development expense in the accompanying financial statements.
In February 1998, the Company received a Small Business Technology
Transfer Research Grant for approximately $97,000 from the National
Institutes of Health ("NIH") to develop simple, immune-based assays to
measure drug presence and concentration in blood. The Company will receive
approximately $38,000 from this grant while the remaining $59,000 will go
to UNC for research performed on the Company's behalf. During the year
ending March 31, 1998, the Company recognized revenue of approximately
$20,000 from this grant. Another Small Business Technology Transfer
Research Grant for $100,000 was awarded to the Company in May 1998 from
the NIH to study the applicability and effectiveness of using prodrug
compounds as an oral treatment for tropical diseases such as
trypanosomiasis, leishmaniasis and malaria. Immtech will receive
approximately $51,000 for this grant while the remaining $49,000 will go
to UNC for research performed on Immtech's behalf.
In March 1998, Immtech entered into an option and worldwide exclusive
license agreement with Sigma Diagnostics, Inc. ("Sigma") for hemoglobin
Alc technology which the Company had the right to. The option part of the
agreement allows Sigma to evaluate the technology for potential
manufacturing and use on instrumentation developed by Sigma. The option
agreement includes a series of payments as specific research milestones
are met. The first two milestones were completed and payments by Sigma of
$20,000 and $25,000 were received by the Company in March 1998 and June
1998, respectively. The remaining milestone and license payments (which
have not been paid) are for $110,000 and will be paid to Criticare, which
acquired the Company's rights to future payments from Sigma, as further
described in Note 11. In addition, if a license is purchased by Sigma and
sales are made through commercial sales, Criticare will receive annual
royalty payments. The Company will receive no ongoing revenues nor will it
have any further obligations to Sigma.
F-19
<PAGE>
11. SUBSEQUENT EVENTS
Recapitalization and Private Placement
On July 24, 1998 (the "Effective Date"), the Company (with stockholder
approval) completed a recapitalization (the "Recapitalization") pursuant
to which: (i) the Company effected a 0.645260-for-1 reverse stock split of
all of the shares of common stock issued and outstanding immediately prior
to the Effective Date, resulting in the reduction in the number of issued
and outstanding shares of common stock from 2,305,166 to 1,487,431 (the
"Reverse Stock Split"); (ii) the Company's debtholders converted
approximately $2,780,000 in stockholder advances, notes payable and
related accrued interest outstanding immediately prior to the Effective
Date into 1,209,962 shares of common stock (after giving effect to the
Reverse Stock Split); (iii) the Company's Series A Preferred stockholders
converted 1,794,550 shares of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Date into 1,157,951 shares
of common stock (after giving effect to the Reverse Stock Split); (iv) the
Company's Series B Preferred stockholders converted 1,600,000 shares of
Series B Preferred Stock issued and outstanding immediately prior to the
Effective Date into 1,232,138 shares of common stock (after giving effect
to the Reverse Stock Split); (v) the Company converted options outstanding
immediately prior to the Effective Date and held by employees of or
consultants to the Company to purchase an aggregate of 1,716,815 shares of
common stock into options to purchase 1,107,792 shares of common stock
(after giving effect to the Reverse Stock Split) and (vi) the total number
of authorized shares was increased to 35,000,000, consisting of 30,000,000
shares of common stock and 5,000,000 shares of preferred stock, .01 par
value. All share and per share information included in the financial
statements has been restated to reflect the Reverse Stock Split.
Contemporaneously with the completion of the Recapitalization, the Company
issued and sold 1,150,000 shares of common stock for $0.87 per share, or
aggregate consideration to the Company of $1,000,000 to certain accredited
investors. For services and expenses involved with this Recapitalization,
the placement agent New China Hong Kong Securities Limited ("NCHK")
received $50,000 and 150,000 warrants to purchase the Company's common
stock at $.05 per share. For advisory services in this transaction, RADE
Management Corporation ("RADE") received 450,000 warrants to purchase the
Company's common stock at $.05 per share.
Formation of NextEra Therapeutics, Inc., a Joint Venture Company with
Franklin Research Group, Inc.
The Company entered into a joint venture agreement with Franklin Research
Group ("Franklin") pursuant to which the parties will form a corporation,
NextEra Therapeutics, Inc. ("NextEra"), to develop therapeutic products
for treating cancer and related diseases. NextEra will focus initially on
the manufacturing and clinical development of recombinant modified CRP
("rmCRP"). NextEra plans to fund rmCRP through the clinical Phases I, II,
and III and early commercialization.
On May 29, 1998, the Company signed a Binding Letter Agreement committing
Franklin to invest a minimum of $1,350,000 in NextEra to fund the scale-up
of manufacturing and Phase I clinical trials in return for 510,000 common
shares of NextEra. Immtech will contribute its rmCRP technology, including
relevant patents and know-how, as well as use of its current laboratory
facilities for 330,000 common shares of NextEra. NextEra's scientists are
in the process of preparing drug substance and documents for a Phase I
safety study in 30 to 40 cancer patients to be carried out at Northwestern
University. The focus of the study is to evaluate the safety and early
efficacy of rmCRP in patients with different types of cancer. If Franklin
fails to make their investment in NextEra, the Company can purchase the
shares owned by Franklin at 90% of their investment in exchange for
Immtech stock (if Immtech is publicly traded), or cash.
F-20
<PAGE>
The Company and Franklin estimate that it will take approximately 18
months to complete the initial Phase I clinical trial. At the conclusion
of the trial, the data for safety and efficacy will be evaluated and
Franklin will have 90 days to decide whether to continue the development
of rmCRP in human Phase II and III clinical trials. If Franklin decides to
proceed, it has to invest a minimum of an additional $6,500,000 for which
Franklin will receive an additional 160,000 common shares of NextEra. In
addition, if Franklin elects to proceed, at its option, the Company shall
have the right to provide $1,625,000 of the additional investment of
$6,500,000 in return for 40,000 of the 160,000 common shares Franklin
would receive. If Franklin decides not to proceed, the Company can
purchase majority control of NextEra by buying NextEra common stock at
$1.00 per share until enough shares are purchased for majority control.
The lead scientist will receive 33,333 shares of NextEra common stock at
the formation of NextEra and 30,000 options that will vest upon submission
of a new drug application for a product based on rmCRP. NextEra has also
reserved 100,000 shares of common stock for issuance as stock options for
employees and consultants.
The Board of Directors of NextEra will consist of two directors appointed
by the Company and five by Franklin. Unanimous approval of the Board will
be required for issuance of stock to employees, mergers, sales or
disposition of substantially all assets, or liquidation of NextEra.
The Company has, on the fifth anniversary of the formation of NextEra, a
"put" option on NextEra stock. The exercise of the put will cause NextEra
to purchase the stock owned by Immtech at an appraised value, or at $5.00
per share, whichever is lower.
NextEra will fund the operation of the Company's primary facility,
including employees' salaries related to work on rmCRP and overhead
associated with the project. Currently, this includes all of the Company's
employees except the President and Chief Financial Officer. In addition,
NextEra will fund the maintenance and prosecution of all patents that are
part of the intellectual property transferred to NextEra by the Company.
Transactions with Criticare Systems, Inc.
Criticare agreed to the private placement of stock by NCHK and the
spin-off of shares of the Company owned by Criticare. In exchange,
Criticare obtained an option to license rmCRP as a therapy for treating
sepsis. Sepsis is a bacterial infection which quickly overwhelms the
immune systems and can lead to sudden death.
Criticare's option includes patents and know-how developed by the Company.
NextEra has licensed the rights for producing rmCRP back to the Company
for use with sepsis applications. Criticare has twelve months from the
date of the closing on the private placement by NCHK to raise a minimum of
$500,000 to fund both the development of the sepsis technology and the
initiation of clinical trials. If Criticare or its assignee is unable to
raise the funds, the Company can acquire the sepsis technology from
Criticare at market price, determined by negotiations between the two
parties or an agreed third party if an agreement on price cannot be
reached. The Company is required to pay the cost of maintaining and
prosecuting the patents until the initial financing is completed by
Criticare or its assignee.
On July 2, 1998, the Company transferred to Criticare certain of its
intangible assets and 172,414 shares of the Company's common stock (after
giving effect to the Reverse Stock Split) for $150,000. These assets
include rights to the Company's diagnostic products for measuring
hemoglobin A1c. in diabetic patients and Carbohydrate Deficient
Transferrin ("CDT") as a marker in the blood for long-term alcohol
F-21
<PAGE>
abuse, as well as patents that have been issued for both technologies and
exclusive worldwide rights from Northwestern University to develop and
sell the products, which now inure to the benefit of Criticare. Criticare
will be responsible for the maintenance and prosecution of the patents for
both technologies.
Transactions with ImmvaRx, Inc.
In April 1998, the Company signed an option agreement with ImmvaRx, Inc.,
for the exclusive worldwide license use of mCRP as an adjuvant with
vaccines. In exchange for this license, ImmvaRx was given until October 9,
1998 to raise a minimum of $500,000. If this $500,000 is not obtained
within the stated time frame, the Company has the right to cancel this
license agreement. If this $500,000 is obtained, the Company will receive
an up-front fee of $25,000, and if more than $700,000 is obtained, the
Company will receive another $25,000. The Company's President and Chief
Financial Officer currently hold the same positions at ImmvaRx.
* * * * * *
F-22
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation in connection with this offering other
than those contained in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy any securities other than the
registered securities to which it relates. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that information contained herein is correct as of any
time subsequent to its date.
Until _________, 1998 ([___] days after the date of this Prospectus), all
dealers effecting transactions in the Registered Securities offered hereby,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
Page
----
Available Information.....................................................
Prospectus Summary........................................................
Summary Financial Information.............................................
Risk Factors..............................................................
Use of Proceeds...........................................................
Dividend Policy...........................................................
Dilution..................................................................
Capitalization............................................................
Selected Financial Data...................................................
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................
Business..................................................................
Management and Key Scientific Personnel...................................
Certain Transactions......................................................
Principal Stockholders....................................................
Certain U.S. Tax Considerations Applicable to Non-U.S. Holders of the
Common Stock............................................................
Underwriting..............................................................
Description of Securities.................................................
Reports to Stockholders...................................................
Shares Eligible for Future Sale...........................................
Legal Matters.............................................................
Experts...................................................................
Glossary..................................................................
Index to Financial Statements............................................. F-1
================================================================================
================================================================================
1,333,333 Units
[LOGO OMITTED] IMMTECH
INTERNATIONAL, INC.
Common Stock and Warrants
------------
PROSPECTUS
------------
__________, 1998
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1998
PROSPECTUS
[LOGO] IMMTECH INTERNATIONAL, INC.
1,150,000 Shares of Common Stock
All of the 1,150,000 shares of Common Stock, par value $0.01 (the "Common
Stock") of Immtech International, Inc. (the "Company" or "Immtech") offered
hereby are being sold by certain Selling Stockholders (the "Secondary
Offering"). See "Selling Stockholders and Plan of Distribution." The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholders. Prior to this Secondary Offering there has been no market for the
Common Stock and there can be no assurance that a trading market will develop
after the Secondary Offering. It is currently estimated that the initial public
offering price for the shares of Common Stock in the Secondary Offering will be
between $1.50 and $3.00 per share. In addition to this Secondary Offering, the
Company is simultaneously offering to sell up to 1,333,333 units (the "Units"),
with each Unit consisting of two shares of Common Stock and one Class A Common
Stock Purchase Warrant (the "Class A Warrants") (the "Unit Offering"). Each
Class A Warrant entitles the holder to purchase at a price equal to the initial
public offering price per share at any time after the closing of the Unit
Offering and until December 31, 1998 one share of Common Stock, one Class B
Contingent Common Stock Purchase Warrant (the "Class B Warrants") and one Class
C Contingent Common Stock Purchase Warrant (the "Class C Warrants" and
collectively with the Class A Warrants and the Class B Warrants, the
"Warrants"). Each Class B Warrant entitles the holder to purchase one share of
Common Stock at a price equal to the initial public offering price per share at
any time from the date of issuance until March 31, 1999. Each Class C Warrant
entitles the holder to purchase one share of Common Stock at a price equal to
the initial public offering price per share at any time from the date of
issuance until June 30, 1999. In addition, a stockholder of the Company,
Criticare Systems Inc. ("Criticare"), is distributing shares of Common Stock
(the "Spin-off Offering" and collectively with the Unit Offering and this
Secondary Offering, the "Offerings") by means of a dividend to Criticare's
stockholders of record as of _________ ___, 1998 [immediately prior to
effectiveness] (the "Dividend Recipients") (the "Spin-off Shares"). The Company
will not receive any proceeds from the dividend by Criticare to Criticare
stockholders of the Spin-off Shares. Application has been made for the Common
Stock to be approved for quotation on the Nasdaq SmallCap Market under the
symbol "IMMT."
The Securities offered hereby involve a high degree of risk. See "Risk
Factors" beginning on page 10 for a discussion of certain matters that should be
considered by prospective purchasers of the securities offered hereby.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
-----------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The Selling Stockholders' shares of Common Stock may be offered and sold from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices relating to the
then-current market price, or in negotiated transactions. The Selling
Stockholders' shares of Common Stock may be sold by one or more of the following
methods, without limitation: (a) a block trade in which a broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (d) face-to-face
transactions between sellers and purchasers without a broker/dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate. Such brokers or dealers may
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated. Such broker and dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act, in connection with such sales. See "Selling Stockholders and Plan of
Distribution."
The date of this Prospectus is _____________, 1998
-----------------------
AVAILABLE INFORMATION
[Please refer to text from Primary Prospectus]
PROSPECTUS SUMMARY
[Except as follows, please refer to text from Primary Prospectus]
The Offering
Common Stock offered by the
Selling Stockholders ...................... 1,150,000 shares of Common Stock.
Common Stock Outstanding
Prior to the Offering(1) .................. 6,409,896 shares
Common Stock Outstanding
After the Offering(1) ..................... 9,076,562 shares
Use of Proceeds............................ All of the Common Stock offered is
being sold by the Selling
Stockholders. The Company will not
receive any proceeds from the sale
of the shares being offered.
Risk Factors............................... The Common Stock being offered
hereby involves a high degree of
risk. See "Risk Factors."
Nasdaq Symbol.............................. "IMMT".
(1) Excludes (i) an aggregate of 1,222,500 shares of Common Stock subject to
issuance without further consideration to Pharm-Eco and members of the
Consortium upon completion of the Unit Offering; (ii) outstanding warrants
to
2
<PAGE>
acquire an aggregate of 1,700,000 shares of Common Stock with an exercise
price equal to the weighted average market price of the Company's Common
Stock during the first 20 days of trading on any stock exchange or in any
over-the-counter market, which warrants are exercisable upon reaching
certain scientific milestones and are held by Pharm-Eco and members of the
Consortium; (iii) an aggregate of 300,000 shares of Common Stock subject
to issuance without further consideration to Pharm-Eco and members of the
Consortium upon the filing by Immtech of an NDA or an ANDA with the FDA
with respect to any product; (iv) an aggregate of 182,800 shares of Common
Stock subject to purchase and issuance pursuant to exercise of outstanding
warrants held by former holders of the Company's Senior Subordinated
Debentures, which warrants carry an exercise price of 1/2 of the per share
price represented in the Unit Offering ($0.75 per share assuming the
initial public offering price of $1.50 per share) and are exercisable upon
completion of the Unit Offering until August 31, 1999; (v) an aggregate of
1,107,792 shares of Common Stock subject to purchase and issuance pursuant
to exercise of outstanding options held by certain employees and
consultants to the Company, which options carry a weighted average
exercise price of $0.45 per share; (vi) an aggregate of 2,600,000 shares
of Common Stock subject to purchase and issuance at a price of $.05 per
share pursuant to exercise of outstanding warrants held by RADE and NCHK;
and (vii) shares of Common Stock to be issued upon completion of the Unit
Offering to satisfy the interest portion of Immtech's outstanding note
payable to the State of Illinois, which interest portion equals $281,470
currently (and such amount will not change prior to completion of the Unit
Offering) (based upon the assumed per share initial public offering price
of $1.50, the number of shares issued to the State of Illinois in
satisfaction of Immtech's obligation will be 187,647 shares of Common
Stock).
SUMMARY FINANCIAL INFORMATION
[Please refer to text from Primary Prospectus]
RISK FACTORS
[Except as follows, please refer to text from Primary Prospectus]
Delete "Immediate Substantial Dilution." Risk Factor
Potential Adverse Effect of Underwriter's Warrants. At the consummation of
the Unit Offering, the Company will sell to the Underwriter for nominal
consideration the Underwriter's Warrants to purchase up to 500,000 shares of
Common Stock (the "Underwriter's Warrants"). The Underwriter's Warrants will be
exercisable for a period of four years commencing one year after the effective
date of this Offering, at an exercise price of $0.05 per share, portions of
which become exercisable upon exercise of the Warrants. For the term of the
Underwriter's Warrants, the holders thereof will have, at nominal cost, the
opportunity to profit from a rise in the market price of the Securities without
assuming the risk of ownership. As long as the Underwriter's Warrants remain
unexercised, the Company's ability to obtain additional capital might be
adversely affected. Moreover, the Underwriter may be expected to exercise the
Underwriter's Warrants at a time when the Company would, in all likelihood, be
able to obtain any needed capital through a new offering of its securities on
terms more favorable than those provided by the Underwriter's Warrants..
No Public Market for the Common Stock. Prior to the Unit Offering, there
has been no public market for the Common Stock, and there can be no assurance
that an active trading market will develop in the Common Stock after the
Offering, or, if developed, be sustained. See "Selling Stockholders and Plan of
Distribution."
Delete "Underwriter's Lack of Influence on the Market." Risk Factor
Delete "Legal Restrictions on Shares Underlying the Warrants."
3
<PAGE>
Delete "Management's Broad Discretion in Use of Proceeds. Risk Factor
USE OF PROCEEDS
All of the 1,150,000 shares of Common Stock of the Company being offered
hereby is being offered by the Selling Stockholders. The Company will not
receive any of the proceeds from the sale of the shares of Common Stock by the
Selling Stockholders.
DIVIDEND POLICY
[Please refer to text from Primary Prospectus]
CAPITALIZATION
[Please refer to text from Primary Prospectus]
SELECTED FINANCIAL DATA
[Please refer to text from Primary Prospectus]
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
[Please refer to text from Primary Prospectus]
BUSINESS
[Please refer to text from Primary Prospectus]
MANAGEMENT AND KEY SCIENTIFIC PERSONNEL
[Please refer to text from Primary Prospectus]
CERTAIN TRANSACTIONS
[Please refer to text from Primary Prospectus]
4
<PAGE>
PRINCIPAL STOCKHOLDERS
[Please refer to text from Primary Prospectus]
CERTAIN U.S. TAX CONSIDERATIONS APPLICABLE TO
NON-U.S. HOLDERS OF THE COMMON STOCK
[Please refer to text from Primary Prospectus]
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 1,150,000 shares of Common Stock (the "Selling
Stockholders' Shares") may be offered and sold pursuant to this Prospectus by
the Selling Stockholders. The Company has agreed to register the public offering
of the Selling Stockholders' Shares under the Securities Act and to pay all
expenses in connection therewith. The Selling Stockholders' Shares have been
included in the Registration Statement of which this Prospectus forms a part.
None of the Selling Stockholders nor their affiliates has ever held any position
or office with the Company or ever had any other material relationship with the
Company. The Company will not receive any of the proceeds from the sale of the
Selling Stockholders' Shares by the Selling Stockholders. The following table
sets forth certain information with respect to the Selling Stockholders:
<TABLE>
<CAPTION>
Beneficial Ownership of
Shares of Common Stock Beneficial Ownership of Shares of
Prior to Sale Common Stock After Offering
Name and Address of ------------- Number of Shares ---------------------------
Selling Stockholders Number Percent Being Offered Number Percent
-------------------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Creditview Ltd.................. 380,000 5.9% 380,000 - -
G/F., Shop 7
101 Third Street
Hong Kong
Wingpearl Investment Ltd........ 320,000 4.9% 320,000 - -
14C Dragonview Garden
16 Tin Hau Temple Road
Hong Kong
Happy Result Ltd................ 210,000 3.3% 210,000 - -
Room 1104
Allied Kajima Building
138 Gloucester Road
Wanchai, Hong Kong
Fukoku Asset Management Ltd..... 160,000 2.5% 160,000 - -
Room 2109
2112 Wing Shan Tower
173 Des Voeux Road
Central, Hong Kong
United Resources Investment Ltd. 80,000 1.2% 80,000 - -
Flat B
5th Floor Kailey Court
67-71 King's Road
Hong Kong
</TABLE>
5
<PAGE>
The Selling Stockholders' Shares may be offered and sold from time to time
as market conditions permit in the over-the-counter market, or otherwise, at
prices and terms then prevailing or at prices relating to the then-current
market price, or in negotiated transactions. The Selling Stockholders' Shares
may be sold by one or more of the following methods, without limitation: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchases; and (d) face-to-face transactions between sellers and
purchasers without a broker/dealer. In effecting sales, brokers or dealers
engaged by the Selling Stockholders may arrange for other brokers or dealers to
participate. Such brokers or dealers may receive commissions or discounts from
Selling Stockholders in amounts to be negotiated. Such broker and dealers and
any other participating brokers or dealers may be deemed to be "underwriters"
within the meaning of the Securities Act, in connection with such sales.
All expenses incurred in connection with the registration and sale of the
Selling Stockholders' Shares, other than discounts, brokerage commissions and
underwriting fees and commissions, if any, will be paid by the Company.
CONCURRENT REGISTRATION OF SHARES
OF COMMON STOCK UNDERLYING WARRANTS
Concurrently with this offering, the Company is registering the 1,333,333
Units consisting of 2,666,666 shares of Common Stock and 1,333,333 Class A
Warrants, the 1,333,333 shares of Common Stock and 1,333,333 Class B Warrants
and 1,333,333 Class C Warrants issuable upon exercise of the Class A Warrants
and the 2,666,666 shares of Common Stock issuable upon exercise of the Class B
Warrants and the Class C Warrants, under the Securities Act, pursuant to a Unit
Offering and Spin-Off Offering Prospectus included within the Registration
Statement of which this Prospectus forms a part. It is anticipated that the
shares to be distributed pursuant to the Spin-Off Offering will be offered and
sold from time to time in the over-the-counter market, or otherwise, at prices
and terms then prevailing or at prices related to the then-current market price
or in negotiated transactions.
If all of the Class A, Class B and Class C Warrants are exercised, of
which there can be no assurance, the Company could receive gross proceeds of up
to $6,000,000. Net proceeds received by the Company from such Warrant exercises
will be used for working capital and general corporate purposes.
DESCRIPTION OF SECURITIES
[Please refer to text from Primary Prospectus]
6
<PAGE>
REPORTS TO SHAREHOLDERS
[Please refer to text from Primary Prospectus]
SHARES ELIGIBLE FOR FUTURE SALE
[Please refer to text from Primary Prospectus]
LEGAL MATTERS
[Please refer to text from Primary Prospectus]
EXPERTS
[Please refer to text from Primary Prospectus]
GLOSSARY
[Please refer to text from Primary Prospectus]
IMMTECH INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
[Please refer to text from Primary Prospectus]
7
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation in connection with this offering other
than those contained in this Prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy any securities other than the
registered securities to which it relates. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that information contained herein is correct as of any
time subsequent to its date.
Until _________, 1998 ([___] days after the date of this Prospectus), all
dealers effecting transactions in the Registered Securities offered hereby,
whether or not participating in this distribution, may be required to deliver a
Prospectus. [This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.]
-----------------------
TABLE OF CONTENTS
Page
----
Available Information .....................................................
Prospectus Summary ........................................................
Summary Financial Information .............................................
Risk Factors ..............................................................
Use of Proceeds ...........................................................
Dividend Policy ...........................................................
Dilution ..................................................................
Capitalization ............................................................
Selected Financial Data ...................................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations ..................................................
Business ..................................................................
Provisions of the Delaware General Corporation Law ........................
Management ................................................................
Certain Transactions ......................................................
Principal Stockholders ....................................................
Certain U.S. Tax Considerations Applicable To Non-U.S.
Holders Of The Common Stock ............................................
Selling Stockholders and Plan of Distribution .............................
Concurrent Registration of Shares of Common Stock Underlying Warrants .....
Description of Securities .................................................
Reports to Shareholders ...................................................
[Transfer Agent and Registrar] ............................................
Shares Eligible for Future Sale ...........................................
Legal Matters .............................................................
Experts ...................................................................
Glossary ..................................................................
Index to Financial Statements ............................................. F-1
================================================================================
================================================================================
1,150,000 Shares
[LOGO] IMMTECH INTERNATIONAL, INC.
Common Stock
----------
PROSPECTUS
----------
_________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LIMITATION OF DIRECTOR'S LIABILITY
The By-laws of the Company (the "By-laws") eliminates the liability of
directors to the fullest extent permissible under Delaware law. Delaware law
permits a corporation to limit the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of certain
fiduciary duties as a director, provided, that the director's liability may not
be eliminated or limited for: (a) breaches of the director's duty of loyalty to
the corporation or its shareholders; (b) acts or omissions not in good faith or
involving intentional misconduct or knowing violations of law; (c) the payment
of unlawful dividends or unlawful stock repurchases or redemptions; or (d)
transactions in which the director received an improper personal benefit. A
director's liability may also not be limited for violation of, or otherwise
relieve the corporation or its directors from the necessity of complying with,
federal or state securities laws or affect the availability of non-monetary
remedies such as injunctive relief or rescission.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws relating to indemnification require that the Company
indemnify its directors and its executive officers to the fullest extent
permitted under Delaware law, provided, that the Company may modify the extent
of such indemnification by individual contracts with its directors and executive
officers, and provided, further, that the Company will not be required to
indemnify any director or executive officer in connection with a proceeding
initiated by such person, with certain exceptions. Delaware corporate law, the
Company's Bylaws, as well as any indemnity agreements, may also permit
indemnification for liabilities arising under the Securities Act or the
Securities Exchange Act of 1934, as amended.
The Board of Directors has been advised that, in the opinion of the
Securities and Exchange Commission, indemnification of liabilities arising under
the Securities Act is contrary to public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director or officer of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the Shares being registered hereby, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution of
the securities being registered hereby are itemized below.
Securities and Exchange Commission Registration fee.................... $ 7,582
Nasdaq application and listing fees.................................... $15,487
Accounting fees and expenses........................................... $ *
------
Legal fees and expenses................................................ $ *
------
Printing and engraving expenses........................................ $ *
------
Blue Sky fees and expenses (including legal fees)...................... $ *
------
Transfer Agent and Registrar fees and expenses......................... $ *
------
Miscellaneous.......................................................... $ *
------
TOTAL............................................................ $ *
------
- ----------
The Registrant will bear all expenses listed above.
* To be supplied by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
1
<PAGE>
ITEM 27. EXHIBITS.
Exhibit Description
- ------- -----------
1.1(2) Form of International Purchase Agreement
3.1(2) Certificate of Incorporation of the Company
3.2(2) By-laws of the Company
4.1(1) Form of Common Stock Certificate
4.2(2) Form of Warrant Agreement relating to the Class A Warrants, Class B
Contingent Warrants and Class C Contingent Warrants
4.3(2) Form of Warrant Agreement dated July ____, 1998 by and between the
Company and RADE Management Corporation
4.4(2) Form of Warrant Agreement dated July ____, 1998 by and between the
Company and New China Hong Kong Securities Limited
4.5(2) Form of Warrant Agreement dated November ____, 1998 by and between the
Company and New China Hong Kong Securities Limited
4.6(2) Registration Agreement dated November 25, 1992 by and among the
Company, Marquette Ventures Partners II, L.P. and certain investors
5.1(1) Opinion of Gardner, Carton & Douglas
8.1(1) Opinion regarding tax matter
10.1(2) Form of Consulting Agreement dated May 15, 1998 by and between the
Company and RADE Management Corporation
10.2(2) 1993 Stock Option and Award Plan
10.3(2) Letter Agreement dated January 15, 1997 between the Company, Pharm-Eco
Laboratories, Inc. and The University of North Carolina at Chapel
Hill, as amended
10.4(2) Letter Agreement dated May 29, 1998 between the Company and Franklin
Research Group, Inc.
10.5(2) Indemnification Agreement dated June 1, 1998 between the Company and
RADE Management Corporation
10.6(2) Letter Agreement dated June 24, 1998 between the Company and Criticare
Systems, Inc.
10.7(2) Letter Agreement dated June 25, 1998 between the Company and Criticare
Systems, Inc.
10.8(2) Option Agreement dated April 20, 1998 between the Company and ImmvaRx
10.9(2) Material Transfer and Option Agreement dated March 23, 1998 by and
between the Company and Sigma Diagnostics, Inc.
10.10(2) License Agreement dated March 10, 1998 by and between the Company and
Northwestern University
10.11(2) License Agreement dated October 27, 1994 by and between the Company
and Northwestern University
2
<PAGE>
10.12(2) Settlement Agreement and Release dated June 29, 1998 by and between
the Company and Brinks, Hofer, Gilson & Lione
10.13(2) Assignment of Intellectual Properties dated June 29, 1998 between the
Company and Criticare Systems, Inc.
10.14(2) Assignment Agreement dated June 26, 1998 by and between the Company
and Criticare Systems, Inc.
10.15(2) International Patent, Know-How and Technology License Agreement dated
June 29, 1998 by and between the Company and Criticare Systems, Inc.
10.16(2) Assignment Agreement dated June 29, 1998 by and between the Company
and Criticare Systems, Inc.
10.17(2) Employment Agreement dated ___________ ___, ____ by and between the
Company and T. Stephen Thompson
23.1(2) Consent of Deloitte & Touche LLP
23.2(1) Consent of Gardner, Carton & Douglas (included in Exhibit 5.1)
24.1(2) Powers of Attorney (included on signature page)
- ----------
(1) To be filed by amendment.
(2) Filed herewith.
ITEM 28. UNDERTAKINGS.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Evanston, State of Illinois, on this 25th day of
September, 1998.
IMMTECH INTERNATIONAL, INC.
By: /s/ T. Stephen Thompson
-----------------------------
T. Stephen Thompson
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each of the undersigned hereby
constitutes and appoints, jointly and severally, T. Stephen Thompson, Gary C.
Parker and Gerhard J. Von der Ruhr, or any of them (with full power to each of
them to act alone), as his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him and on his behalf to
sign, execute and file this Registration Statement, any subsequent Registration
Statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, and any or all amendments (including, without limitation,
post-effective amendments) to such Registration Statements, and to file the
same, with all exhibits thereto and any documents required to be filed with
respect therewith, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the
premises in order to effectuate the same as fully to all intents and purposes as
he might or could do if personally present, hereby ratifying and confirming all
that such attorneys-in-fact and agents, or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on this 25th day of September, 1998.
Signatures Title
- ---------- -----
/s/T. Stephen Thompson President, Chief Executive Officer and Director
- ------------------------------ (Principal Executive Officer)
T. Stephen Thompson
/s/Lawrence A. Potempa, Ph.D.
- ------------------------------ Vice President of Research and Chief Science
Lawrence A. Potempa, Ph.D. Officer
/s/Gary C. Parks
- ------------------------------ Chief Financial Officer, Treasurer and Secretary
Gary C. Parks (Principal Financial and Accounting Officer)
/s/Gerhard J. Von der Ruhr
- ------------------------------ Chairman of the Board of Directors
Gerhard J. Von der Ruhr
/s/Byron E. Anderson, Ph.D.
- ------------------------------ Director
Byron E. Anderson, Ph.D.
<PAGE>
INDEX TO EXHIBITS
Exhibit Description:
- ------- ------------
1.1(2) Form of International Purchase Agreement
3.1(2) Certificate of Incorporation of the Company
3.2(2) By-laws of the Company
4.1(1) Form of Common Stock Certificate
4.2(2) Form of Warrant Agreement relating to the Class A Warrants, Class B
Contingent Warrants and Class C Contingent Warrants
4.3(2) Form of Warrant Agreement dated July ____, 1998 by and between the
Company and RADE Management Corporation
4.4(2) Form of Warrant Agreement dated July ____, 1998 by and between the
Company and New China Hong Kong Securities Limited
4.5(2) Form of Warrant Agreement dated November ____, 1998 by and between the
Company and New China Hong Kong Securities Limited
4.6(2) Registration Agreement dated November 25, 1992 by and among the
Company, Marquette Ventures Partners II, L.P. and certain investors
5.1(1) Opinion of Gardner, Carton & Douglas
8.1(1) Opinion regarding tax matter
10.1(2) Form of Consulting Agreement dated May 15, 1998 by and between the
Company and RADE Management Corporation
10.2(2) 1993 Stock Option and Award Plan
10.3(2) Letter Agreement dated January 15, 1997 between the Company, Pharm-Eco
Laboratories, Inc. and The University of North Carolina at Chapel
Hill, as amended
10.4(2) Letter Agreement dated May 29, 1998 between the Company and Franklin
Research Group, Inc.
10.5(2) Indemnification Agreement dated June 1, 1998 between the Company and
RADE Management Corporation
10.6(2) Letter Agreement dated June 24, 1998 between the Company and Criticare
Systems, Inc.
10.7(2) Letter Agreement dated June 25, 1998 between the Company and Criticare
Systems, Inc.
10.8(2) Option Agreement dated April 20, 1998 between the Company and ImmvaRx
10.9(2) Material Transfer and Option Agreement dated March 23, 1998 by and
between the Company and Sigma Diagnostics, Inc.
10.10(2) License Agreement dated March 10, 1998 by and between the Company and
Northwestern University
10.11(2) License Agreement dated October 27, 1994 by and between the Company
and Northwestern University
<PAGE>
10.12(2) Settlement Agreement and Release dated June 29, 1998 by and between
the Company and Brinks, Hofer, Gilson & Lione
10.13(2) Assignment of Intellectual Properties dated June 29, 1998 between the
Company and Criticare Systems, Inc.
10.14(2) Assignment Agreement dated June 26, 1998 by and between the Company
and Criticare Systems, Inc.
10.15(2) International Patent, Know-How and Technology License Agreement dated
June 29, 1998 by and between the Company and Criticare Systems, Inc.
10.16(2) Assignment Agreement dated June 29, 1998 by and between the Company
and Criticare Systems, Inc.
10.17(2) Employment Agreement dated ___________ ___, ____ by and between the
Company and T. Stephen Thompson
23.1(2) Consent of Deloitte & Touche LLP
23.2(1) Consent of Gardner, Carton & Douglas (included in Exhibit 5.1)
24.1(2) Powers of Attorney (included on signature page)
- ----------
(1) To be filed by amendment.
(2) Filed herewith.
2
IMMTECH INTERNATIONAL, INC.
1,333,333 Units
Each Unit Consisting of Two
Shares of Common Stock
and
One Class A Warrant
INTERNATIONAL PURCHASE AGREEMENT
New China Hong Kong Capital Limited New York, New York
October , 1998
Hong Kong
Dear Sirs:
Immtech International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to New China Hong Kong Capital Limited (the
"Purchaser") an aggregate of 1,333,333 units (the "Units"), each Unit consisting
of two shares of common stock, par value $.01 per share ("Common Stock") and one
Class Common Stock Purchase Warrant (each, a "Class A Warrant" and collectively,
the "Class A Warrants"), at a price of U.S. $3.00 per Unit. Each Class A Warrant
entitles the holder thereof to purchase, at an exercise price of U.S. $1.50, at
any time after the closing of the sale of the Units pursuant to this Agreement
and until December 31, 1998, one share of Common Stock, one Class B Common Stock
Purchase Warrant (each, a "Class B Warrant" and collectively, the "Class B
Warrants") and one Class C Common Stock Purchase Warrant (each, a "Class C
Warrant" and collectively, the "Class C Warrants"). Each Class B Warrant
entitles the holder thereof to purchase at an exercise of U.S. $1.50, at any
time from the date of issuance thereof to March 31, 1999, one share of Common
Stock. Each Class C Warrant entitles the holder thereof to purchase at an
exercise price of U.S. $1.50, at any time from the date of issuance thereof
until June 30, 1999, one share of Common Stock. The Class A Warrants, the Class
B Warrants and the Class C Warrants (collectively, the "Warrants" and each, a
"Warrant") will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement") to be dated as of the Closing Date (as hereinafter defined) by and
among the Company, the Purchaser and __________________________, as warrant
agent (the "Warrant Agent").
<PAGE>
The Company also proposes to issue and sell to the Purchaser for its
own account and the accounts of its designees, warrants (the "Purchaser's
Warrants") to purchase an aggregate of 500,000 shares (collectively, the
"Purchaser Warrant Shares"), which sale will be consummated in accordance with
the terms and conditions of the form of Purchaser's Warrant Agreement filed as
an exhibit to the Registration Statement (the "Purchaser's Warrant Agreement").
The shares of Common Stock issuable upon exercise of the Warrants and the
Purchaser's Warrant Shares are hereinafter sometimes referred to as the "Warrant
Shares." The Units, the shares of Common Stock included in the Units
(hereinafter sometimes the "Unit Shares"), the Warrants, the Purchaser's
Warrants, and the Warrant Shares (collectively, the "Securities") are more fully
described in the Registration Statement and the Prospectus, as defined below.
The Company hereby confirms its agreement with the Purchaser as
follows:
1. Purchase and Sale of Offered Shares and Offered Warrants. On the
basis of the representations and warranties herein contained, but subject to the
terms and conditions herein set forth, the Company hereby agrees to sell the
Units to Purchaser and Purchaser agrees to purchase the Units from the Company
at a purchase price of U.S.$3.00 per Unit.
2. Payment and Delivery.
(a) Payment for the Units will be made to the Company by wire
transfer of immediately available funds to an account designated by the Company
against delivery of the Units to the Purchaser at the offices of Gardner, Carton
& Douglas, 321 North Clark Street, Suite 3300, Chicago, Illinois, counsel to the
Company. Such payment and delivery will be made at 10:00 A.M., Chicago time, on
the third business day following the Effective Date as defined below, the date
and time of such payment and delivery being herein called the "Closing Date."
The certificates representing the Unit Shares and Class A Warrants (comprising
the Units) to be delivered will be in such denominations and registered in such
names as the Purchaser may request not less than three full business days prior
to the Closing Date, and will be made available to the Purchaser for inspection,
checking and packaging at the office of the Company's transfer agent or
correspondent in _____________________________, not less than one full business
day prior to the Closing Date.
-2-
<PAGE>
(b) On the Closing Date, the Company will sell the Purchaser's
Warrants to the Purchaser and/or its designees (limited to affiliates of the
Purchaser and such other institutions as shall purchase Securities directly from
the Purchaser, "Designees"). The Purchaser's Warrants will be in the form of,
and in accordance with, the provisions of the Purchaser's Warrant Agreement
filed as an exhibit to the Registration Statement. The aggregate purchase price
for the Purchaser's Warrants shall be $100. The Purchaser's Warrants will be
restricted from sale, transfer, assignment or hypothecation for a period of one
year from the Closing Date, except to Designees. Delivery of the certificates
representing the Purchaser's Warrants will be made at the closing on the Closing
Date. The certificates representing the Purchaser's Warrants will be in such
denominations and such names as the Purchaser may request prior to the Closing
Date.
(c) The Company has agreed to pay the Purchaser a placement
and due diligence fee of up to U.S. $250,000 as follows: (i) U.S. $100,000 by
deduction of such amount from the purchase price for the Units; (ii) U.S.
$50,000 on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class A Warrants,
an aggregate of U.S. $2,000,000 from the exercise of Class A Warrants in
accordance with their terms; (iii) $50,000 on the date the Company receives,
when taken together with the gross proceeds received by the Company from all
prior exercises of Class B Warrants, an aggregate of $2,000,000 from the
exercise of Class B Warrants in accordance with their terms, and (iv) U.S.
$50,000 on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class C Warrants,
an aggregate of $2,000,000 from the exercise of Class B Warrants in accordance
with their terms. All payments on account of the placement and due diligence
fee, other than the initial amount, shall be made in U.S. dollars and in
immediately available funds to a deposit account with a commercial bank
designated by the Purchaser.
3. Optional Shares and/or Optional Warrants.
[INTENTIONALLY OMITTED]
4. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser that:
-3-
<PAGE>
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, with full
corporate power and authority to own or lease and operate its properties and to
conduct its business as described in the Registration Statement and to execute,
deliver and perform this Agreement, the Warrant Agreement and the Purchaser's
Warrant Agreement to issue the securities and to consummate the transactions
contemplated hereby and thereby. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and failure so to qualify could have a material
adverse effect on the financial condition, results of operations, business or
properties of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company, and
each of the Warrant Agreement and the Purchaser's Warrant Agreement, when
executed and delivered by the Company on the Closing Date, and each of the
Warrants and the Purchaser's Warrants, when issued, will be the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject, as to enforcement of remedies,
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and except that
enforceability of the indemnification provisions and the contribution provisions
set forth herein may be limited by the federal securities laws of the United
States or state securities laws or public policy underlying such laws. The
execution, delivery and performance of this Agreement, the Warrant Agreement and
the Purchaser's Warrant Agreement by the Company and the issuance of the
securities, the consummation by the Company of the transactions herein and
therein contemplated and the compliance by the Company with the terms of this
Agreement, the Warrant Agreement and the Purchaser's Warrant Agreement have been
duly authorized by all necessary corporate action and do not and will not, with
or without the giving of notice or the lapse of time, or both, (i) result in any
violation of the certificate of incorporation or by-laws of the Company, (ii)
result in a material breach of or materially conflict with any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any material lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Company pursuant to any indenture, mortgage, note, contract, commitment or
other agreement or instrument to which the Company is a party
-4-
<PAGE>
or by which the Company or any of its assets is or may be bound or, affected;
(iii) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business; or (iv) have
any material adverse effect on any permit, certification, registration,
approval, consent, license or franchise necessary for the Company to own or
lease and operate its properties and to conduct its business or the ability of
the Company to make use thereof.
(c) No authorization, approval, consent, order, registration,
license or permit of any court or governmental agency or body, other than such
as have been obtained and other than under the Securities Act of 1933, as
amended (the "Act"), the Regulations (as hereinafter defined), applicable state
securities or Blue Sky laws and clearance of such offering with the National
Association of Securities Dealers, Inc., is required for the valid
authorization, issuance, sale and delivery of the Units, Unit Shares, the Class
A Warrants and the Purchaser's Warrants to the Purchaser, and the consummation
by the Company of the transactions contemplated by this Agreement, the Warrant
Agreement or the Purchaser's Warrants.
(d) The Company has prepared in conformity with the
requirements of the Act and the regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") and filed with the
Commission a registration statement (File No. 333-) on Form SB-2 and amendments
thereto, covering the registration of the Units, the Unit Shares and the
Warrants under the Act, including the related preliminary prospectus (each
thereof being herein called a "Preliminary Prospectus") and a proposed final
prospectus. Each Preliminary Prospectus was endorsed with the legend required by
Item 501(c)(5) of Regulation S-B of the Regulations. Such registration statement
including any documents incorporated by reference therein and all financial
schedules and exhibits thereto, as amended at the time it becomes effective, and
the final prospectus included therein are herein, respectively, called the
"Registration Statement" and the "Prospectus," except that (i) if the prospectus
filed by the Company pursuant to Rule 424(b) of the Regulations differs from the
Prospectus, the term "Prospectus" will also include the prospectus filed
pursuant to Rule 424(b), and (ii) if the Registration Statement is amended or
such Prospectus is supplemented after the effective date of the Registration
Statement (the "Effective Date") and prior to ________________, the terms
"Registration Statement" and
-5-
<PAGE>
"Prospectus" shall include the Registration Statement as amended or
supplemented.
(e) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order preventing or
suspending the use of any Preliminary Prospectus or has instituted or, to the
best of the Company's knowledge, threatened to institute any proceedings with
respect to such an order.
(f) The Registration Statement when it becomes effective, the
Prospectus (and any amendment or supplement thereto) when it is filed with the
Commission pursuant to Rule 424(b), and both documents as of the Closing Date
will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations and will in all material respects
conform to the requirements of the Act and the Regulations, and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company in connection with the
Registration Statement or Prospectus or any amendment or supplement thereto by
the Purchaser expressly for use therein.
(g) The Company had at the date or dates indicated in the
Prospectus a duly authorized and outstanding capitalization as set forth in the
Registration Statement and Prospectus. Based on the assumptions stated in the
Registration Statement and Prospectus, the Company will have on the Closing Date
the adjusted stock capitalization set forth therein. Except as set forth in the
Registration Statement or in the Prospectus, on the Effective Date and on the
Closing Date, there will be no options to purchase, warrants or other rights to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell shares of the Company's capital stock
or any such warrants, convertible securities or obligations. Except as set forth
in the Prospectus, no holder of any of the Company's securities has any rights,
"demand," "piggyback" or otherwise, to have such securities registered under the
Act.
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(h) The descriptions in the Registration Statement and the
Prospectus of contracts and other documents are accurate and present fairly the
information required to be disclosed, and there are no contracts or other
documents required to be described in the Registration Statement or Prospectus
or to be filed as exhibits to the Registration Statement under the Act or the
Regulations which have not been so described or filed as required.
(i) Deloitte & Touche, the accountants who have certified
certain of the financial statements filed and to be filed with the Commission as
part of the Registration Statement and the Prospectus, are independent public
accountants within the meaning of the Act and Regulations. The financial
statements and schedules and the notes thereto filed as part of the Registration
Statement and included in the Prospectus present fairly the financial position
of the Company as of the dates thereof, and the results of operations and cash
flows of the Company for the periods indicated therein, all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods ("GAAP") involved, except as otherwise stated in the
Registration Statement and Prospectus. The selected financial data set forth in
the Registration Statement and Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the audited
and unaudited financial statements included in the Registration Statement and
Prospectus.
(j) The Company has filed with the appropriate federal, state
and local governmental agencies, and all foreign countries and political
subdivisions thereof, all tax returns, including franchise tax returns, which
are required to be filed under applicable laws or have duly obtained extensions
of time for the filing thereof and have paid all taxes shown on such returns and
all assessments received by it to the extent that the same have become due. The
provisions for income taxes payable, if any, shown on the financial statements
filed with or as part of the Registration Statement are sufficient for all
accrued and unpaid foreign and domestic taxes, whether or not disputed, and for
all periods to and including the dates of such financial statements. Except as
disclosed in writing to the Purchaser, neither the Company nor the Subsidiary
has executed or filed with any taxing authority, foreign or domestic, any
agreement extending the period for assessment or collection of any income taxes
and is not a party to any pending action or proceeding by any foreign or
domestic governmental agency for assessment or
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collection of taxes; and no claims for assessment or collection of taxes have
been asserted against the Company.
(k) The outstanding Common Stock and outstanding options and
warrants to purchase Common Stock have been duly authorized and validly issued.
The outstanding shares of Common Stock are fully paid and nonassessable. The
outstanding options and warrants to purchase Common Shares constitute the valid
and binding obligations of the Company, enforceable in accordance with their
terms. None of the outstanding Common Stock, options or warrants to purchase
Common Stock has been issued in violation of the preemptive rights of any
shareholder of the Company. The offers and sales of the outstanding Common Stock
and outstanding options and warrants to purchase Common Stock were at all
relevant times either registered under the Act and the applicable state
securities or Blue Sky laws or exempt from such registration requirements. The
authorized Common Stock conforms to the description thereof contained in the
Registration Statement and Prospectus. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and the Closing Date, there
will be no outstanding options or warrants for the purchase of, or other
outstanding rights to purchase, Common Stock or securities convertible into
Common Shares.
(l) No securities of the Company have been sold by the Company
or by or on behalf of, or for the benefit of, any person or persons controlling,
controlled by, or under common control with the Company within the three years
prior to the date hereof, except as disclosed in the Registration Statement.
(m) The issuance and sale of the Unit Shares and Warrant
Shares have been duly authorized and, when the Unit Shares and the Warrant
Shares have been issued and duly delivered against payment therefor, as
contemplated by this Agreement, by the Warrant Agreement or the Purchaser's
Warrant Agreement, as the case may be, the Unit Shares and the Warrant Shares
will be validly issued, fully paid and nonassessable. The offering and sale of
the Securities will not be subject to preemptive rights of any shareholder of
the Company, except those that have been waived in connection therewith.
(n) The issuance and sale of the Warrants and the Purchaser's
Warrants have been duly authorized and, when issued, paid for and delivered
pursuant to the terms of this Agreement, the Warrant Agreement or the
Purchaser's Warrant Agreement, as the case may be, the Warrants and the
Purchaser's Warrants will be validly issued, fully paid and nonassessable. The
Warrant
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Shares have been duly reserved for issuance upon exercise of the Warrants and
the Purchaser's Warrants in accordance with the provisions of the Warrants and
the Purchaser's Warrants. The Warrants and the Purchaser's Warrants will, as of
the Closing Date (the date of issuance) conform to the descriptions thereof
contained in the Registration Statement and Prospectus.
(o) The Company is not in violation of, or in default under,
(i) any term or provision of its Certificate of Incorporation, as amended, or
By-Laws; (ii) any material term or provision or any financial covenants of any
indenture, mortgage, contract, commitment or other agreement or instrument to
which it is a party or by which it or any of its property or business is or may
be bound or affected; or (iii) any existing applicable law, rule or regulation,
or, to the best of the Company's knowledge, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of the Company's or the Subsidiary's properties or business,
except any of the foregoing, the violation of which would not have a material
adverse effect on the Company. Except as otherwise disclosed in the Prospectus,
the Company owns, possesses or has obtained all material governmental licenses,
permits, certifications, registrations, approvals or consents and other
authorizations necessary to own or lease, as the case may be, and to operate its
properties, whether tangible or intangible, and to conduct its business and
operations as presently conducted. All such licenses, permits, certifications,
registrations, approvals, consents and other authorizations are in good
standing, and there are no proceedings pending or, to the best of the Company's
knowledge, threatened, or any basis therefor, seeking to cancel, terminate or
limit such licenses, permits, certifications, registrations, approvals or
consents or other authorizations, except for any such proceedings which, if
determined adversely to the Company, would not have a material adverse effect on
the Company.
(p) Except as set forth in the Prospectus, there are no
claims, actions, suits, proceedings, arbitrations, or to the best of the
Company's knowledge, any investigations or inquiries before any governmental
agency or court or tribunal, domestic or foreign, or before any private
arbitration tribunal, pending, or, to the best of the Company's knowledge,
threatened against the Company or involving the Company's properties or business
which, if determined adversely to the Company, would, individually or in the
aggregate, result in any material adverse effect in the financial condition,
results of operations, properties or business, or business prospects of the
Company or
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which threaten the validity of the capital stock of the Company or this
Agreement or of any action taken or to be taken by the Company pursuant to, or
in connection with, this Agreement; nor, to the best of the Company's knowledge,
is there any basis for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry. There are no outstanding orders, judgments or decrees
of any court, governmental agency or other tribunal naming the Company, or to
which the Company or the Company's properties or businesses is bound or subject
and enjoining the Company from taking, or requiring the Company to take, any
action the taking of which or the failure to so take, respectively, would have a
material adverse effect on the financial condition, results of operations,
properties or business of the Company.
(q) Neither the Company nor any of its affiliates has incurred
any liability for any finder's fees or similar payments in connection with the
transactions contemplated which are not fully disclosed in the Prospectus.
(r) Except as otherwise disclosed in the Prospectus, the
Company owns or possesses adequate and enforceable rights to use all material
patents, patent applications, trademarks, service marks, copyrights, trade
secrets, confidential information, processes and formulations used or proposed
to be used in the conduct of its business as described in the Prospectus
(collectively the "Intangibles"); to the best of the Company's knowledge, the
Company has not infringed or is not infringing the rights of others with respect
to Intangibles; and the Company has not received any notice of conflict with the
asserted rights of others with respect to Intangibles which could, singly or in
the aggregate, materially adversely affect its business as presently conducted
or prospects, financial condition or results of operations of the Company, and
the Company knows of no basis therefor; and, to the best of the Company's
knowledge, no others have infringed upon the Intangibles.
(s) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and the Company's latest
financial statements included therein, the Company has not incurred any material
liability or obligation, direct or contingent, or entered into any material
transaction not in the ordinary course of business, nor sustained any material
loss or interference with its business from fire, storm, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree; and since the respective dates
as of
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<PAGE>
which information is given in the Registration Statement and the Prospectus,
there have not been, and prior to the Closing Date referred to below, there will
not be, any changes in the capital stock or any material increases in the
long-term debt of the Company or any material adverse change in or affecting the
general affairs, management, financial condition, shareholders' equity, results
of operations or prospects of the Company, otherwise than as set forth or
contemplated in the Prospectus.
(t) The Company has good and marketable title in fee simple to
all real property and good title to all personal property (tangible and
intangible) owned by it, free and clear of all security interests, charges,
mortgages, liens, encumbrances and defects, except such as are described in the
Registration Statement and Prospectus or such as do not materially affect the
value of such property and do not interfere with the use of such property made,
or proposed to be made, by the Company. The material leases, licenses or other
contracts or instruments under which the Company leases, holds or is entitled to
use any property, real or personal, are valid and enforceable only with such
exceptions as are not material and do not interfere with the use of such
property made, or proposed to be made, by the Company, and all rentals,
royalties or other payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid, except where the failure to so pay
would not have a material adverse effect on the Company, and neither the Company
nor, to the best of the Company's knowledge, any other party is in material
default thereunder and, to the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a material default thereunder. The Company has not received notice of
any violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. The Company has reasonably insured
its properties against loss or damage by fire or other casualty and such other
insurance as is typically maintained by companies of its stage of development
engaged in the same or similar businesses located in its geographical area.
(u) Each material contract or other instrument (however
characterized or described) to which the Company is a party or by which its
property or business is or may be bound or affected is described in the
Prospectus and has been duly and validly executed by the Company, is in full
force and effect in all material respects and is enforceable against the Company
and the other parties thereto in accordance with its terms, and none of such
contracts or instruments has been assigned by the
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Company, and neither the Company, nor, to the best of the Company's knowledge,
any other party is in material default thereunder and, to the best of the
Company's knowledge, no event has occurred which, with the lapse of time or the
giving of notice, or both, would constitute a material default thereunder.
None of the material provisions of such contracts or
instruments violates any existing applicable law, rule, regulation, or, to the
best of the Company's knowledge, any judgment, order or decree of any
governmental authority or court having jurisdiction over the Company or the
subsidiary or any of their respective assets or businesses.
(v) The employment, consulting, confidentiality and
non-competition agreements between the Company and its officers, employees and
consultants, described in the Registration Statement, are binding and
enforceable obligations upon the respective parties thereto in accordance with
their respective terms.
(w) Except as set forth in the Prospectus, the Company has no
employee benefit plans (including, without limitation, profit sharing and
welfare benefit plans) or deferred compensation arrangements that are subject to
the provisions of the Employee Retirement Income Security Act of 1974.
(x) Except as set forth in the Prospectus, the Company does
not manufacture, fabricate or market any product or perform any service which is
subject to regulation by the Federal Food and Drug Administration (the "FDA"),
or to any provision of the Food, Drug and Cosmetic Act, as amended (the "FDA
Act"), or any rule or regulation promulgated thereunder.
With respect to the products manufactured, fabricated or
marketed by the Company and the services performed by the Company which are
subject to such regulation, the Company is in compliance in all material
respects with the provisions of the FDA Act and the rules and regulations
promulgated thereunder.
(y) There are no strikes, significant controversies or work
stoppages (other than those arising in the ordinary course of business) pending
or threatened against the Company or the Subsidiary in any manner which are, in
the aggregate, material to the financial condition, results of operations,
business or prospects of the Company.
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(z) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office and failed to
disclose fully any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient to cause the Company
to comply in all material respects with the Foreign Corrupt Practices Act of
1977, as amended.
(aa) The Unit Shares have been approved for listing on the
Nasdaq Small-Cap Market System ("Nasdaq").
Any certificate signed by an officer of the Company delivered
to the Purchaser or to counsel for the Purchaser shall be deemed to be a
representation and warranty by the Company to the Purchaser as to the matters
covered thereby.
5. Certain Covenants of the Company. The Company covenants with the
Purchaser as follows:
(a) The Company will not at any time, whether before the
Effective Date or thereafter during such period as the Prospectus is required by
law to be delivered in connection with the sales of the Units, the Unit Shares
and the Class A Warrants by the Purchaser or a dealer, file or publish any
amendment or supplement to the Registration Statement or Prospectus of which the
Purchaser or its counsel has not been previously advised and furnished a copy,
or to which the Purchaser shall reasonably object in writing.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective and will advise the Purchaser or its
counsel promptly, and, if requested by the Purchaser, confirm such advice in
writing, (i) when the Registration Statement, or any post-effective amendment to
the Registration Statement or any supplemented Prospectus is filed with the
Commission; (ii) of the receipt of any comments from the Commission; (iii) of
any request of the Commission for amendment or supplement of the Registration
Statement or Prospectus or for additional information; and (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus, or of the suspension of the qualification of the Units
or any of constituent securities
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of the Units for offering or sale in any jurisdiction, or of the initiation of
any proceedings for any of such purposes. The Company will use its best efforts
to prevent the issuance of any such stop order or of any order preventing or
suspending such use and to obtain as soon as possible the lifting thereof, if
any such order is issued.
(c) The Company will deliver to the Purchaser, without charge,
from time to time until the Effective Date, as many copies of each Preliminary
Prospectus as the Purchaser may reasonably request, and the Company hereby
consents to the use of such copies for purposes permitted by the Act. The
Company will deliver to the Purchaser, without charge, as soon as the
Registration Statement becomes effective, and thereafter from time to time as
requested, such number of copies of the Prospectus (as supplemented, if the
Company makes any supplements to the Prospectus) as the Purchaser may reasonably
request. The Company has furnished or will furnish to the Purchaser one signed
copy and one conformed copy of the Registration Statement as originally filed
and of all amendments thereto, whether filed before or after the Registration
Statement becomes effective, two copies of all exhibits filed therewith and one
signed copy and one conformed copy of all consents and certificates of experts.
(d) The Company will comply, as required, with the Act, the
Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations thereunder so as to permit the continuance
of sales of and dealings in the Units and the constituent securities of the
Units, in any of which may be issued and sold, and in the Warrant Shares
underlying such Warrants. If, at any time when a prospectus relating to such
securities is required to be delivered under the Act, any event occurs as a
result of which the Registration Statement and Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it shall be
necessary to amend or supplement the Registration Statement and Prospectus to
comply with the Act or the regulations thereunder, the Company will promptly
file with the Commission, subject to Section 5(a) hereof, an amendment or
supplement which will correct such statement or omission or which will effect
such compliance.
(e) If Purchaser determines to reoffer any Shares in the
United States, the Company will furnish such proper information as may be
required and otherwise cooperate in
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qualifying the Shares and Warrants for offering and sale under the securities or
Blue Sky laws relating to the offering or for sale in such jurisdictions as the
Purchaser may designate, provided that no such qualification will be required in
any jurisdiction where, solely as a result thereof, the Company would be subject
to service of general process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction.
(f) The Company will make generally available to its security
holders, in the manner specified in Rule 158(b) under the Act, and deliver to
the Purchaser as soon as practicable and in any event not later than 45 days
after the end of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earning statement
meeting the requirements of Rule 158(a) under the Act covering a period of at
least 12 consecutive months beginning after the effective date of the
Registration Statement.
(g) For a period of five years from the Effective Date, upon
request, the Company will deliver to the Purchaser on a timely basis (i) a copy
of each report or document, including, without limitation, reports on Forms 8-K,
10-C, 10-K (or 10-KSB, where applicable) and 10-Q (or 10-QSB, where applicable)
and exhibits thereto, filed with the Commission, any securities exchange or the
National Association of Securities Dealers, Inc. (the "NASD") as soon as
practicable after the date each such report or document is so filed; (ii) as
soon as practicable, copies of any reports or communications (financial or
other) of the Company mailed to its security holders; and (iii) as soon as
practicable, a copy of any Schedule 13D, 13G, 14D-1 or 13E-3 received or
prepared by the Company from time to time. The Company will furnish to its
shareholders annual reports containing audited financial statements and such
other periodic reports as it may determine to be appropriate or as may be
required by law.
(h) Neither the Company nor any person that controls, is
controlled by or is under common control with the Company will take any action
designed to or which might be reasonably expected to cause or result in the
stabilization or manipulation of the price of the Shares or Warrants.
(i) If the transactions contemplated by this Agreement are
consummated, the Company will pay or cause to be paid to the appropriate persons
the following: all costs and expenses incident to the performance of the
obligations of the
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Company under this Agreement, including, but not limited to, the fees and
expenses of accountants and counsel for the Company, the preparation, printing,
mailing and filing of the Registration Statement (including financial statements
and exhibits), Preliminary Prospectuses and the Prospectus, and any amendments
or supplements thereto, the issuance and delivery of the Units and the
constituent securities thereof Shares to the Purchaser; all taxes, if any, on
the issuance of the Units and the constituent securities thereof; if
qualification of Units and the constituent securities thereof for sale under
such laws is requested by Purchaser the reasonable fees, expenses and other
costs of qualifying the Units and the constituent securities thereof for sale
under the Blue Sky or securities laws of those states in which the Shares and
Warrants are to be offered or sold, the cost of mailing the "Blue Sky Survey"
and reasonable fees and disbursements of counsel in connection therewith,
including those of such local counsel as may have been retained for such
purpose; the filing fees incident to securing any required review by the NASD;
the cost of furnishing to the Purchaser copies of the Registration Statement,
Preliminary Prospectuses and the Prospectus as herein provided; and all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section.
In addition, at the Closing Date, the Purchaser will deduct
$100,000 from the purchase price for the Units as payment on account of the
Purchaser's placement and due diligence fee, which amount will include the fees
and expenses of counsel for the Purchaser.
(j) The Purchaser's placement and due diligence fee in the
amount of $250,000 will be payable by the Company as follows: (1) $100,000 on
the Closing Date; (2) $50,000 on the date the Company receives, when taken
together with the gross proceeds received by the Company from all prior
exercises of Class A Warrants, an aggregate of $2,000,000 from the exercise of
the Class A Warrants in accordance with their terms; (3) $50,000 on the date the
Company receives, when taken together with the gross proceeds received by the
Company from prior exercises of Class B Warrants, an aggregate of $2,000,000
from the exercise of Class B Warrants in accordance with their terms; and (4)
$50,000 on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class C Warrants,
an aggregate of $2,000,000 from the exercise of Class C Warrants in accordance
with their terms.
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(k) The Company intends to apply the net proceeds from the
sale of the Shares and Warrants for the purposes set forth in the Prospectus.
(l) During the period of two years from the date hereof, the
Company will not, and it will use its best efforts to ensure that Criticare and
none of the officers and directors of the Company and Criticare, and the
security holders listed on Schedule 5(l) (the "Lock-Up Shareholders") will offer
for sale or sell or otherwise dispose of, directly or indirectly, any securities
of the Company, in any manner whatsoever, whether pursuant to Rule 144 of the
Regulations or otherwise, without the prior written consent of the Purchaser.
The Company will deliver to the Purchaser the undertakings as of the date hereof
of Criticare and the officers and directors of the Company and Criticare, and
the Lock-Up Shareholders to this effect.
(m) The Company will not file any registration statement
relating to the offer or sale of any of the Company's securities, including any
registration statement on Form S-8, during the nine (9) months following the
date hereof without the Purchaser's prior written consent.
(n) The Company maintains and will continue to maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(o) The Company will use its best efforts to maintain the
listing of the Unit Shares and, when issued, the Warrant Share underlying the
Warrants on Nasdaq and, if so qualified, on the Nasdaq National Market System,
American Stock Exchange or the New York Stock Exchange for so long as the Shares
are qualified for such listing.
(p) The Company will, concurrently with the Effective Date,
register the class of equity securities of which the Shares are a part under
Section 12(g) of the Exchange Act and
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the Company will maintain the registration for a minimum of five years after the
Effective Date.
(q) The Company shall retain a transfer agent for the Unit
Shares and Warrants, and when issued, the Warrant Shares, reasonably acceptable
to the Purchaser, for a period of five years following the Effective Date. In
addition, for a period of thirteen months from the Effective Date, the Company,
at its own expense, shall cause such transfer agent to provide the Purchaser, if
so requested in writing to the Company, with copies of the Company's daily
transfer sheets and when requested by the Purchaser to the Company, a current
list of the Company's security holders, including a list of the beneficial
owners of securities held by a depository trust company and other nominees if
readily available to the Company.
(r) The Company hereby agrees, at its sole cost and expense,
to supply and deliver to the Purchaser, within a reasonable period from the date
hereof, four bound volumes, including the Prospectus and all other underwriting
documents.
(s) The Company shall, as of the date hereof, have applied for
listing in Standard & Poor's Corporation Records Service (including annual
report information) or Moody's Industrial Manual (Moody's OTC Industrial Manual
not being sufficient for these purposes) and shall use its best efforts to have
the Company listed in such manual as soon as practicable after the Effective
Date and shall use its best efforts to maintain such listing for a period of
five years from the Effective Date.
(t) For a period of five years from the Effective Date, the
Company shall continue to retain Deloitte & Touche LLP (or such other nationally
recognized accounting firm reasonably acceptable to the Purchaser) as the
Company's independent public accountants.
(u) For a period of five years from the Effective Date, the
Company, at its expense, shall cause its independent certified public
accountants, as described in Section 5(t) above, to read (but not review or
audit) the Company's financial statements for each of the first three fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's 10-Q quarterly report and the mailing of quarterly
financial information to stockholders, if applicable.
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(v) For a period of 13 months from the Effective Date, the
Company will not increase or authorize an increase in the cash compensation of
the Senior Executives (as defined in the Prospectus) over and above the amounts
provided in their employment agreements, without the prior written consent of
the Purchaser.
(w) For a period of 25 days from the Effective Date, the
Company will not issue press releases or engage in any other publicity without
the Purchaser's prior written consent, other than normal and customary releases
issued in the ordinary course of the Company's business or those releases
required by law.
6. Conditions of the Purchaser's Obligation to Purchase Securities
from the Company. The obligation of the Purchaser to purchase and pay for the
Units which it has agreed to purchase from the Company is subject (as of the
date hereof and the Closing Date) to the accuracy of and compliance in all
material respects with the representations and warranties of the Company herein,
to the accuracy of the statements of the Company or its officers made pursuant
hereto, to the performance in all material respects by the Company of its
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement will have become effective not
later than 9:00 A.M., New York City time, on the day following the date of this
Agreement, or at such later time or on such later date as the Purchaser may
agree to in writing; prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or will be pending or, to
the best of the Purchaser's or the Company's knowledge, will be contemplated by
the Commission; and any request on the part of the Commission for additional
information will have been complied with to the reasonable satisfaction of
_______________________, counsel for the Purchaser ("Purchaser's Counsel").
(b) At the Effective Date and at the Closing Date, there will
have been delivered to the Purchaser a signed opinion of Gardner, Carter &
Douglas, counsel for the Company ("Company Counsel"), dated as of the Effective
Date hereof or Closing Date, as the case may be (and any other opinions of
counsel referred to in such opinion of Company Counsel or relied upon by Company
Counsel in rendering their opinion), reasonably
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<PAGE>
satisfactory to Purchaser's Counsel, substantially to the effect as set forth in
Exhibit A attached hereto.
In rendering its opinion, Company Counsel may rely upon
(A) opinions of local counsel acceptable to Purchaser's Counsel with respect to
matters relating to the laws of any jurisdiction other than Illinois, the
general corporation laws of the State of Delaware or the United States of
America; and (B) the certificates of government officials and officers of the
Company as to matters of fact, provided that Company Counsel shall state that
they have no reason to believe, and do not believe, that they are not justified
in relying upon such opinions or such certificates of government officials and
officers of the Company as to matters of fact, as the case may be.
(c) At the Closing Date (i) the Registration Statement and the
Prospectus and any amendments or supplements thereto will contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and will conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus, there will not have been any material adverse
change in the financial condition, results of operations or business of the
Company from that set forth or contemplated in the Registration Statement and
the Prospectus, except changes which the Registration Statement and the
Prospectus indicates might occur after the Effective Date; (iii) since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall have been no material transaction, contract or
agreement entered into by the Company, other than in the ordinary course of
business, which would be required to be set forth in the Registration Statement
and the Prospectus, other than as set forth therein; and (iv) no action, suit or
proceeding at law or in equity will be pending or, to the best of the Company's
knowledge, threatened against the Company which is required to be set forth in
the Registration Statement and the Prospectus, other than as set forth therein,
and no proceedings will be pending or, to the best of the Company's knowledge,
threatened against the Company before or by any federal, state or other
commission, board or administrative agency wherein an
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<PAGE>
unfavorable decision, ruling or finding would materially adversely affect the
business, financial condition or results of operations of the Company, other
than as set forth in the Registration Statement and the Prospectus. At the
Closing Date, there will be delivered to the Purchaser a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company,
dated the Closing Date, evidencing compliance with the provisions of this
Section 6(d) and stating that the representations and warranties of the Company
set forth in Section 4 hereof were accurate and complete in all material
respects when made on the date hereof and are accurate and complete in all
material respects on the Closing Date as if then made; that the Company has
performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to or as of the
Closing Date; and that, as of the Closing Date, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or, to the best of his knowledge, are
contemplated or threatened. In addition, the Purchaser will have received such
other and further certificates of officers of the Company as the Purchaser or
Purchaser's Counsel may reasonably request.
(d) At the time that this Agreement is executed and at the
Closing Date, the Purchaser will have received a signed letter from Deloitte &
Touche LLP, dated the date such letter is to be received by the Purchaser and
addressed to it, confirming that it is a firm of independent public accountants
within the meaning of the Act and Regulations and stating that: (i) insofar as
reported on by them, in their opinion, the financial statements of the Company
included in the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act and the applicable Regulations;
(ii) on the basis of procedures and inquiries (not constituting an examination
in accordance with generally accepted auditing standards) consisting of a
reading of the unaudited interim financial statements of the Company, if any,
appearing in the Registration Statement and the Prospectus and the latest
available unaudited interim financial statements of the Company, if more recent
than that appearing in the Registration Statement and Prospectus, inquiries of
officers of the Company responsible for financial and accounting matters as to
the transactions and events subsequent to the date of the latest audited
financial statements of the Company, and a reading of the minutes of meetings of
the shareholders, the Board of Directors of the Company and any committees of
the Board of Directors, as set forth in the minute books of the Company, nothing
has come to
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their attention which, in their judgment, would indicate that (A) during the
period from the date of the latest financial statements of the Company appearing
in the Registration Statement and Prospectus to a specified date not more than
three business days prior to the date of such letter, there have been any
decreases in net current assets or net assets as compared with amounts shown in
such financial statements or decreases in net sales or increases in total or per
share net loss compared with the corresponding period in the preceding year or
any change in the capitalization or long-term debt of the Company, except in all
cases as set forth in or contemplated by the Registration Statement and the
Prospectus, and (B) the unaudited interim financial statements of the Company,
if any, appearing in the Registration Statement and the Prospectus, do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or are not fairly presented in
conformity with generally accepted accounting principles and practices on a
basis substantially consistent with the audited financial statements included in
the Registration Statement or the Prospectus; and (iii) they have compared
specific dollar amounts, numbers of shares, numerical data, percentages of
revenues and earnings, and other financial information pertaining to the Company
set forth in the Prospectus (with respect to all dollar amounts, numbers of
shares, percentages and other financial information contained in the Prospectus,
to the extent that such amounts, numbers, percentages and information may be
derived from the general accounting records of the Company, and excluding any
questions requiring an interpretation by legal counsel) with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the letter,
and found them to be in agreement.
(e) There shall have been duly tendered to the Purchaser
certificates representing the Unit Shares and Class A Warrants comprising the
Units to be sold on the Closing Date.
(f) The NASD shall have indicated that it has no objection to
the Underwriting arrangements pertaining to the sale of the Shares and Warrants
by the Purchaser following the Purchaser's use of its best efforts to obtain
such an indication.
(g) If the Purchaser determines to reoffer Units, Unit Shares
and/or Class A Warrants in the United States, no action shall have been taken by
the Commission or the NASD the effect of which would make it improper, at any
time prior to the
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<PAGE>
Closing Date, for any member firm of the NASD to execute transactions (as
principal or as agent) in the Units, the Unit Shares and/or the Class A
Warrants, and no proceedings for the purpose of taking such action shall have
been instituted or shall be pending, or, to the best of the Company's knowledge,
shall be contemplated by the Commission or the NASD. The Company represents at
the date hereof, and shall represent as of the Closing Date, that it has no
knowledge that any such action is in fact contemplated by the Commission or the
NASD.
(h) The Company meets the current and any existing proposed
criteria for listing of the Unit Shares on Nasdaq Small Cap Market.
(i) All proceedings taken at or prior to the Closing Date or
the Option Closing Date, as the case may be, in connection with the
authorization, issuance and sale of the Shares and Warrants shall be reasonably
satisfactory in form and substance to the Purchaser and to Purchaser's Counsel,
and such counsel shall have been furnished with all such documents, certificates
and opinions as they may reasonably request for the purpose of enabling them to
pass upon the matters referred to in Section 6(c) hereof and in order to
evidence the accuracy and completeness of any of the representations, warranties
or statements of the Company, the performance of any covenants of the Company,
or the compliance by the Company with any of the conditions herein contained.
(j) The Company shall have delivered to the Purchaser
agreements of Criticare, the officers and directors of the Company and
Criticare, and the individuals set forth on Schedule 5(L), not to sell or
otherwise dispose of, directly or indirectly, any of the Securities of the
Company for a period of two years from the date hereof without the prior written
consent of the Purchaser.
(k) Criticare shall have declared and paid out to its
shareholders a dividend in the form of 750,000 shares of the Common Stock of the
Company.
If any of the conditions specified in this Section 6 have not
been fulfilled in any material respect, this Agreement may be terminated by the
Purchaser on written notice to the Company.
7. Indemnification.
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<PAGE>
(a) Each of Criticare and the Company jointly and severally
agrees to indemnify and hold harmless the Purchaser, each officer, director,
partner, employee and agent of the Purchaser, including Purchaser's counsel, and
each person, if any, who controls the Purchaser within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions
in respect thereof), to which they or any of them may become subject under the
Act or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Purchaser and each such person, if any,
for any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions, whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in the Registration Statement, in any
Preliminary Prospectus or in the Prospectus (or the Registration Statement or
Prospectus as from time to time amended or supplemented) or (ii) in any
application or other document executed by the Company, or made in conformity
with written information furnished by or on behalf of the Company specifically
for use in such application, filed in any jurisdiction in order to qualify the
Units, the Unit Shares and the Class A Warrants under the Blue Sky or securities
laws thereof (hereinafter "application"), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, in light of the circumstances under which they were made, unless
such untrue statement or omission was made in such Registration Statement,
Preliminary Prospectus, Prospectus or application in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by the Purchaser or any such person through the Purchaser expressly
for use therein; provided, however, that the indemnity agreement contained in
this Section 7(a) with respect to any Preliminary Prospectus will not inure to
the benefit of the Purchaser (or to the benefit of any other person that may be
indemnified pursuant to this Section 7(a)) if (A) the person asserting any such
losses, claims, damages, or liabilities purchased the Shares and/Warrants which
are the subject thereof from the Purchaser or other indemnified person; (B) the
Purchaser or other indemnified person failed to send or give a copy of the
Prospectus to such person at or prior to the written confirmation of the sale of
such Shares and/or Warrants to such person; and (C) the Prospectus did not
contain any untrue statement or alleged untrue statement or omission or alleged
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<PAGE>
omission giving rise to such cause, claim, damage, expense or liability.
(b) The Purchaser agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers and each of its employees
and agents and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, and Rade
Management Company and Rade's counsel, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions in
respect thereof), to which they or any of them may become subject under the Act
or under any other statute or at common law or otherwise, and, except as
hereinafter provided, will reimburse the Company and each such director,
officer, employee, agent or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained (i) in the Registration Statement, in any Preliminary Prospectus
or in the Prospectus (or the Registration Statement or Prospectus as from time
to time amended or supplemented) or (ii) in any application (including any
application for registration of the Shares and Warrants under state securities
or Blue Sky laws), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, in light of
the circumstances under which they were made, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by the
Purchaser expressly for use therein.
(c) Promptly after receipt of notice of the commencement of
any action in respect of which indemnity may be sought against any indemnifying
party under this Section 7, the indemnified party will notify the indemnifying
party in writing of the commencement thereof, and the indemnifying party will,
subject to the provisions hereinafter stated, assume the defense of such action
(including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of expenses) insofar as such action relates to an alleged
liability in respect of which indemnity may be sought against the indemnifying
party. After notice from the indemnifying party of its election to assume the
defense of such claim or action, the indemnifying party shall no longer be
liable to the indemnified
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<PAGE>
party under this Section 7 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if, the defendants in
any such action and such parties include both the indemnifying party and the
indemnified party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or other indemnified parties
which are different from or additional to those available to the indemnifying
party, or the indemnified and indemnifying parties may have conflicting
interests which would make it inappropriate for the same counsel to represent
both of them, the indemnified party or parties shall have the right to employ a
single counsel to represent the indemnified parties who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the indemnified parties thereof against the indemnifying party, in which
event the fees and expenses of such separate counsel shall be borne by the
indemnifying party. Any party against whom indemnification may be sought under
this Section 7 shall not be liable to indemnify any person that might otherwise
be indemnified pursuant hereto for any settlement of any action effected without
such indemnifying party's consent, which consent shall not be unreasonably
withheld.
8. Contribution. To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to Section 7
hereof (subject to the limitations thereof) and it is finally determined, by a
judgment, order or decree not subject to further appeal, that such claim for
indemnification may not be enforced, even though this Agreement expressly
provides for indemnification in such case; or (ii) any indemnified or
indemnifying party seeks contribution under the Act, the Exchange Act, or
otherwise, then the Company (including, for this purpose, any contribution made
by or on behalf of any director of the Company, any officer of the Company who
signed the Registration Statement and any controlling person of the Company) as
one entity and the Purchaser (including, for this purpose, any contribution by
or on behalf of each person, if any, who controls the Purchaser within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and each
officer, director, partner, employee and agent of the Purchaser) as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, so that the Purchaser
is responsible for the proportion thereof equal to the percentage which the
underwriting discount per Share and per Warrant set forth on the cover page of
the Prospectus represents of the initial public offering price
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<PAGE>
per Share and per Warrant set forth on the cover page of the Prospectus and the
Company is responsible for the remaining portion; provided, however, that if
applicable law does not permit such allocation, then, if applicable law permits,
other relevant equitable considerations such as the relative fault of the
Company and the Purchaser in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses shall also be considered. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission or alleged omission relates
to information supplied by the Company or by the Purchaser, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, alleged statement, omission or alleged omission. The
Company and the Purchaser agree that it would be unjust and inequitable if the
respective obligations of the Company and the Purchaser for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
8. No person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) will be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. For purposes of this Section
8, each person, if any, who controls the Purchaser within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and each officer, director,
partner, employee and agent of the Purchaser will have the same rights to
contribution as the Purchaser and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who has signed the Registration Statement and
each director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 8. Anything in
this Section 8 to the contrary notwithstanding, no party will be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 8 is intended to supersede, to the
extent permitted by law, any right to contribution under the Act or the Exchange
Act or otherwise available.
9. Survival of Indemnities, Contribution, Warranties and
Representations. The respective indemnity and contribution agreements of the
Company and the Purchaser contained in Sections 7 and 8 hereof, and the
representations and warranties of the Company contained herein shall remain
operative and in full force
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<PAGE>
and effect, regardless of any termination or cancellation of this Agreement or
any investigation made by or on behalf of the Purchaser, the Company or any of
its directors and officers, or any controlling person referred to in said
Sections, and shall survive the delivery of, and payment for, the Shares and the
Warrants.
10. Termination of Agreement.
(a) The Company, by written or telegraphic notice to the
Purchaser, or the Purchaser, by written or telegraphic notice to the Company,
may terminate this Agreement prior to the earlier of (i) 11:00 A.M., New York
City time, on the first full business day after the Effective Date; or (ii) the
time when the Purchaser, after the Registration Statement becomes effective,
releases the Units, the Unit Shares and Class A Warrants for public offering.
The time when the Purchaser "releases the Units, the Unit Shares and Class A
Warrants for public offering" for the purposes of this Section 10 means the time
when the Purchaser releases for publication the first newspaper advertisement,
which is subsequently published, relating to the Offered Warrants, or the time
when the Company's trading symbols for its Common Stock on NASDAQ are released
and trading in the Company's Common Stock and Warrants on NASDAQ commences,
whichever will first occur.
(b) This Agreement, including without limitation, the
obligation to purchase the Units, are subject to termination in the absolute
discretion of the Purchaser, by notice given to the Company prior to delivery of
and payment for the Units if, prior to such time, any of the following shall
have occurred: (i) the Company withdraws the Registration Statement from the
Commission or the Company does not or cannot expeditiously proceed with the
public offering; (ii) the representations and warranties in Section 4 hereof are
not materially correct or cannot be complied with; (iii) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange will
have been suspended; (iv) limited or minimum prices will have been established
on either such Exchange; (v) a banking moratorium will have been declared either
by federal or New York State authorities; (vi) any other restrictions on
transactions in securities materially affecting the free market for securities
or the payment for such securities, including the Units, the Unit Shares and
Class A Warrants, will be established by either of such Exchanges, by the
Commission, by any other federal or state agency, by action of the Congress or
by Executive Order; (vii) trading in any securities of the Company shall have
been suspended or halted by any national securities exchange, the NASD
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or the Commission; (viii) there has been a material adverse change in the
financial condition, business prospects or obligations of the Company; (ix) the
Company will have sustained a material loss, whether or not insured, by reason
of fire, flood, accident or other calamity; (x) any action has been taken by the
government of the United States or any department or agency thereof which, in
the judgment of the Purchaser, has had a material adverse effect upon the market
or potential market for securities in general; or (xi) the market for securities
in general or political, financial or economic conditions will have so
materially adversely changed that, in the judgment of the Purchaser, it will be
impracticable to offer for sale, or to enforce contracts made by the Purchaser
for the resale of, the Units, the Unit Shares and Class A Warrants.
(c) If this Agreement is terminated pursuant to Section 6
hereof or this Section 10 or if the purchases provided for herein are not
consummated because any condition of the Purchaser's obligations hereunder is
not satisfied or because of any refusal, inability or failure on the part of the
Company to comply with any of the terms or to fulfill any of the conditions of
this Agreement, or if for any reason the Company shall be unable to or does not
perform all of its obligations under this Agreement, the Company will not be
liable to the Purchaser for damages on account of loss of anticipated profits
arising out of the transactions covered by this Agreement, but the Company will
remain liable to the extent provided in Sections 7, 8 and 9 of this Agreement.
11. Information Furnished by the Purchaser to the Company. It is
hereby acknowledged and agreed by the parties hereto that for the purposes of
this Agreement, including, without limitation, Sections 4(f), 7(a), 7(b) and 8
hereof, the only information given by the Purchaser to the Company for use in
the Prospectus are the statements set forth in the last sentence of the last
paragraph on the cover page, the statement, if any, appearing in the last
paragraph on page 2 with respect to stabilizing the market price of the Units,
the Unit Shares and Class A Warrants, the information in paragraph on page with
respect to the fees received by the Purchaser as placement agent in connection
with any bridge financing and the information in the last paragraph on page with
respect to the determination of the public offering prices, as such information
appears in any Preliminary Prospectus and in the Prospectus.
12. Notices and Governing Law. All communications hereunder will be
in writing and, except as otherwise provided,
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will be delivered at, or mailed by certified mail, return receipt requested, or
telegraphed to, the following addresses: if to the Purchaser, to New China Hong
Kong Capital Limited, __________________ Hong Kong, Attention:
__________________; with copies to __________________ and Phillips Nizer
Benjamin Krim & Ballon LLP, Attention: Vincent J. McGill, Esq., 666 Fifth
Avenue, New York, New York 10103-0084; if to the Company, addressed to it at
1890 Maple Avenue, Suite 110, Evanston, Illinois 60201, with a copy to Gardner,
Carton & Douglas, 321 North Clark Street, Suite 3300, Chicago, Illinois
60610-4795.
This Agreement shall be deemed to have been made and delivered
in New York City and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. The Company (1) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (2) waives any objection
which the Company may have now or hereafter to the venue of any such suit,
action or proceeding, and (3) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York, and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or proceeding in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York and agrees that service of
process upon the Company mailed by certified mail to the Company's address shall
be deemed in every respect effective service of process upon the Company, in any
such suit, action or proceeding.
13. Parties in Interest. This Agreement is made solely for the
benefit of the Purchaser, the Company and, to the extent expressed, any person
controlling the Company or the Purchaser, each officer, director, partner,
employee and agent of the Purchaser, the directors of the Company, its officers
who have signed the Registration Statement, and their respective executors,
administrators, successors and assigns, and, no other person will acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" will not include any purchaser of the Units, the Unit Shares or Class A
Warrants from the Purchaser, as such purchaser.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement between the Company and the
Purchaser in accordance with its terms.
Very truly yours,
IMMTECH INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
CRITICARE SYSTEMS, INC.
By:
-----------------------------------
Name:
Title:
Confirmed and accepted in
________________, N.Y., as of the
date first above written:
NEW CHINA HONG KONG LIMITED
By:
-----------------------------------
Name:
Title:
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CERTIFICATE OF INCORPORATION
OF
IMMTECH INTERNATIONAL, INC.
ARTICLE FIRST
The name of the corporation is Immtech International, Inc.
ARTICLE SECOND
The address of the corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, County of Kent, Dover, Delaware
19901. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
ARTICLE FOURTH
Section 1. Capital Stock.
The total number of shares of stock which the Corporation has
authority to issue is 10,394,550, consisting of:
(A) 1,794,550 shares of Series A Participating Preferred
Stock, $0.01 par value per share (the "Series A Preferred
Stock");
(B) 1,600,000 shares of Series B Participating Preferred
Stock, $0.01 par value per share (the "Series B Preferred
Stock"); and
(C) 7,000,000 shares of Common Stock, $0.01 par value per
share (the "Common Stock").
The Series A Preferred Stock and the Series B Preferred Stock are referred to
herein collectively as the "Preferred Stock."
<PAGE>
Section 2. Powers and Special Rights of the Preferred Stock.
Part 1. Dividends.
1A. General Obligation. When and as declared by the Corporation's
board of directors and to the extent permitted under the General Corporation Law
of the State of Delaware, the Corporation will pay preferential cumulative
dividends to the holders of the Preferred Stock as provided in this Part 1.
Except as otherwise provided herein, dividends on each share of Preferred Stock
will accrue on a daily basis at the rate of 8% per annum of the Liquidation
Value thereof plus accumulated and unpaid dividends thereon from and including
the date of issuance of such share of Preferred Stock to and including the
earlier of (i) the date on which the Liquidation Value of such share of
Preferred Stock plus any accrued and unpaid dividends thereon is paid upon any
1iquidation, dissolution or winding up of the Corporation, (ii) subject to
paragraph 5A(vii) below, the date on which such share of Preferred Stock is
converted into Common Stock or (iii) the date on which such share of Preferred
Stock is redeemed in accordance with Part 3 hereof. Such dividends will accrue
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues any share of
Preferred Stock will be deemed to be its "date of issuance" regardless of the
number of times transfer of such share of Preferred Stock is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share of Preferred Stock.
1B. Dividend Reference Dates. To the extent not paid on March 31,
June 30, September 30 and December 31 of each year, beginning December 31, 1992
(the "Dividend Reference Dates"), all dividends which have accrued on each share
of Preferred Stock outstanding during the three-month period (or other period in
the case of the initial Dividend Reference Date) shall be accumulated and shall
remain accumulated dividends with respect to each such share of Preferred Stock
until paid.
1C. Distribution of Partial Dividend Payments. If at any time the
Corporation pays less than the total amount of dividends then accrued with
respect to the Preferred Stock, such payment will be distributed ratably among
the holders of the Preferred Stock on the basis of the number of shares of
Preferred Stock owned by each such holder.
1D. Preference. The Corporation shall not, without the prior written
consent of the holders of a majority of the shares of Preferred Stock then
outstanding, pay or declare any dividend or distribution on any Junior
Securities at any time when accumulated dividends on the Preferred Stock have
not been paid in full.
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1E. Participation in Common Stock Dividends. In the event that the
Corporation declares a dividend or distribution on the Common Stock (subject to
the receipt of any required approvals under paragraph 1D), the holders of the
Preferred Stock and the holders of the Common Stock shall share pro rata (based,
in the case of holders of Preferred Stock, on the number of shares of Common
Stock which each holder of Preferred Stock would be entitled to receive upon
conversion of its Preferred Stock into Common Stock) in such dividend or
distribution.
Part 2. Liquidation.
Upon any liquidation, dissolution or winding up of the Corporation,
each holder of Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any Junior Securities, an amount in cash
equal to the aggregate Liquidation Value of all of such holder's shares of
Preferred Stock plus all accrued and unpaid dividends thereon. If upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's
assets available for distribution to its stockholders are insufficient to permit
payment to the holders of the Preferred Stock of the aggregate Liquidation Value
of the Preferred Stock plus all accrued but unpaid dividends thereon, then the
entire assets available for distribution will be distributed among the holders
of the Preferred Stock pro rata based upon the amount of each such holder's
aggregate investment in the Preferred Stock plus all accrued and unpaid
dividends thereon. If the Corporation's assets available for distribution to its
stockholders upon any such liquidation, dissolution or winding up exceed the
aggregate Liquidation Value of the Preferred Stock plus all accrued but unpaid
dividends thereon, then, after payment shall have been made to the holders of
the Preferred Stock of the aggregate Liquidation Value of the Preferred Stock
plus all accrued but unpaid dividends thereon, the holders of the Common Stock
and the holders of the Preferred Stock shall share pro rata (based, in the case
of holders of Preferred Stock on the number of shares of Common Stock which each
holder of Preferred Stock would be entitled to receive upon conversion of its
Preferred Stock into Common Stock) in all remaining assets of the Corporation
available for distribution. The Corporation will mail written notice of any
liquidation, dissolution or winding up to each record holder of Preferred Stock
not less than 30 days prior to the effective date thereof. Neither the
consolidation or merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all or any part of
its assets, nor the reduction of the capital stock of the Corporation, will be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this Part 2, but instead will be treated pursuant to Paragraph 3D
hereof.
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Part 3. Redemptions.
3A. Optional Redemption. Each holder of Preferred Stock may require
the Corporation to redeem all or part of its Preferred Stock at any time on or
after the fifth anniversary of the original date of issuance of the Series A
Preferred Stock in accordance with this Part 3 and at a price per share of
Preferred Stock equal to the Redemption Price (the "Redemption Right"). Any
holder of Preferred Stock may exercise the Redemption Right by delivering to the
Corporation a written notice (a "Redemption Notice") stating such holder's
intention to exercise the Redemption Right and the number of such holder's
shares of preferred Stock to be redeemed. The Corporation shall be obligated to
redeem the total number of shares of Preferred Stock specified in any Redemption
Notice in a series of eight equal quarterly redemptions, such redemptions to
occur on the last day of each calendar quarter commencing with the first
calendar quarter ending at least 30 days following the Corporation's receipt of
the Redemption Notice (each a "Redemption Date"). Within 5 days after receipt of
a Redemption Notice from any holder of Preferred Stock, the Corporation shall
notify all other holders of Preferred Stock that the Redemption Right has been
exercised, and each other holder shall have the right, exercisable by written
notice delivered to the Corporation within 10 days after receipt of such notice
from the Corporation, to request that any or all of such other holder's shares
of Preferred Stock be redeemed on the Redemption Dates together with the shares
of Preferred Stock of the holder who delivered the Redemption Notice.
3B. Redemption Price. For each share of Preferred Stock which is to
be redeemed on any Redemption Date, the Corporation will be obligated to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such share of Preferred Stock) an amount
in immediately available funds (the "Redemption Price") equal to the Liquidation
Value thereof plus all accrued but unpaid dividends thereon. If the funds of the
Corporation legally available for redemption of Preferred Stock on any
Redemption Date are insufficient to redeem the total number of shares of
Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of shares of
Preferred Stock ratably among the holders of such shares to be redeemed based
upon each stockholder's aggregate investment in the Preferred Stock plus all
accrued but unpaid dividends thereon. Thereafter, when additional funds of the
Corporation are legally available for the redemption of Preferred Stock, such
funds will be used to redeem the balance of the shares of Preferred Stock which
the Corporation became obligated to redeem on such Redemption Date but which it
has not redeemed (such redemptions to be made on a monthly basis).
3C. Reissuance of Certificates. In case fewer than the total number
of shares of Preferred Stock represented by any certi-
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ficate are redeemed in any installment, a new certificate representing the
number of unredeemed shares of such of Preferred Stock will be issued to the
holder thereof without cost to such holder promptly after surrender of the
certificate representing the redeemed shares of Preferred Stock.
3D. Special Redemptions.
(i) If a Fundamental Change is to occur, the Corporation will notify
each holder of Preferred Stock in writing of such pending Fundamental Change not
less than 35 days prior to the consummation thereof. Such notice will describe
the material terms and conditions of the Fundamental Change (including, but not
limited to, the amount and nature of the consideration to be paid in connection
therewith) and the provisions of this paragraph 3D and the Corporation will
thereafter give each holder prompt notice of any material changes in such terms
and conditions. The holder or holders of a majority of the Preferred Stock then
outstanding may (a) waive such notice, or (b) require the Corporation to redeem
all or any portion of the Preferred Stock owned by such holder or holders at a
price per share equal to that which such holder would be entitled to if the
Corporation were deemed to be liquidated (pursuant to Part 2 above) immediately
prior to the consummation of such Fundamental Change (the "Special Redemption
Price"), by giving written notice to the Corporation of such election within 20
days after receipt of notice from the Corporation. Such notice to the
Corporation will include an election by the holders of the Preferred Stock to
receive their respective Special Redemption Price in cash or in securities from
the acquiring Person, or in a combination thereof. Any securities to be
delivered to the holders of Preferred Stock will be valued at their Market
Price. The Corporation will give prompt written notice of such election to the
other holders of the Preferred Stock (but in any event within 10 days prior to
the consummation of the Fundamental Change), and each such holder will have
until 5 days after the receipt of such notice to request redemption (by written
notice given to the Corporation) of all or any portion of the class of Preferred
Stock owned by such holder. Upon receipt of such election(s), the Corporation
will be obligated to redeem the number of shares specified therein at the time
of the consummation of such Fundamental Change. If the Fundamental Change does
not occur, all requests for redemption will be rescinded.
(ii) The term "Fundamental Change" means (a) a sale or transfer of
more than 50% of the assets of the Corporation on a consolidated basis in any
transaction or series of related transactions (other than sales in the ordinary
course of business), (b) any merger, consolidation or reorganization to which
the Corporation is a party, except for a merger, consolidation or reorganization
in which the Corporation is the surviving corporation and, after giving effect
to such merger, consolidation or reorganization, the holders of the
Corporation's outstanding capital stock
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(on a fully-diluted basis) immediately prior to the merger, consolidation or
reorganization will own immediately following the merger, consolidation or
reorganization the Corporation's outstanding capital stock (on a fully-diluted
basis) having a majority of the ordinary voting power to elect the Corporation's
board of directors or (c) any sale or series of sales of shares of the
Corporation's capital stock by the holders thereof which results in any Person
or group of affiliated Persons (other than the owners of the Corporation's
capital stock as of the consumation of the merger contemplated by paragraph 3Q
of the Stock Purchase Agreement) owning capital stock of the Corporation
possessing the voting power (under ordinary circumstances) to elect a majority
of the Corporation's board of directors.
(iii) If and to the extent that applicable law or any other
restriction prohibits the payment to the holders of Preferred Stock of all or
any portion of the amounts required to be paid under subparagraph (i) above such
unpaid amounts will be paid to the holders of Preferred Stock by the Person
(other than the Corporation) who is a party to the Fundamental Change upon the
closing thereof by purchase of such shares of Preferred Stock under an agreement
which will provide that such purchased shares will be canceled effective upon
the closing of the Fundamental Change. In the event the full amount of any
payment hereunder is not paid to the holders of Preferred Stock upon or
immediately prior to the closing of the Fundamental Change in accordance
herewith, then the entire amount payable in respect of the Fundamental Change
will be distributed ratably among the holders of Preferred Stock in proportion
to the aggregate Special Redemption Price of the Preferred Stock held by each
holder.
(iv) In the event that the requirements of subparagraphs (i) and
(iii) above are not complied with, the Corporation will either:
(a) cause the closing of the Fundamental Change to be
postponed until such time as the requirements of subparagraphs (i) and
(iii) above have been complied with; or
(b) cancel such Fundamental Change, in which event the rights,
preferences and privileges of the holders of Preferred Stock shall revert
to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in
subparagraph (i) above.
3E. Redeemed or Otherwise Acquired Shares. Any shares of Preferred
Stock which are redeemed or otherwise acquired by the Corporation will be
canceled and will not be reissued, sold or otherwise transferred.
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Part 4. Voting Rights.
4A. Voting Rights. Except as otherwise required by law, the holders
of the Preferred Stock will be entitled to vote with the holders of the Common
Stock on each matter submitted to a vote of the Corporation's stockholders, with
each share of Preferred Stock having a number of votes equal to the number of
votes possessed by the number of shares of Common Stock into which such share of
Preferred Stock is convertible as of the record date for the determination of
stockholders entitled to vote on such matter. Notwithstanding the foregoing, the
provisions of this Paragraph 4A shall not apply to the election or removal of
directors at any time when the provisions of Paragraph 4B are in effect.
4B. Class Voting Rights.
(i) The Corporation's board of directors shall be elected as
follows:
(a) So long as at least the Requisite Number of shares of
Series A Preferred Stock are outstanding (as appropriately adjusted for
any stock dividends payable in shares of Preferred Stock and any
combinations, subdivisions and split-ups of the shares of Preferred
Stock), the holders of the Series A Preferred Stock will have the special
right, voting separately as a single class (with each share of Series A
Preferred Stock being entitled to the number of votes possessed by the
number of shares of Common Stock into which such share of Series A
Preferred Stock is convertible) and to the exclusion of all other classes
of the Corporation's stock, to elect two of the members of the board of
directors of the Corporation. The holders of Series A Preferred Stock
shall also have the special right, voting separately as a single class and
to the exclusion of all other classes of the Corporation's stock, to
remove any individuals elected to such directorships.
(b) At all times after at least 800,000 shares of Series B
Preferred Stock have been issued pursuant to the Series B Preferred Stock
Options and so long as at least the Requisite Number of shares of Series B
Preferred Stock are outstanding (as appropriately adjusted for any stock
dividends payable in shares of Preferred Stock and any combinations,
subdivisions and split-ups of the shares of Preferred Stock), the holders
of the Series B Preferred Stock will have the special right, voting
separately as a single class (with each share of Series B Preferred Stock
being entitled to the number of votes possessed by the number of shares of
Common Stock into which such share of Series B Preferred Stock is
convertible) and to the exclusion of all other classes of the
Corporation's stock, to elect one member of the board of directors of the
Corporation. The holders of Series B
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Preferred Stock shall also have the special right, voting separately as a
single class and to the exclusion of all other classes of the
Corporation's stock, to remove any individual elected to such
directorship.
(c) The holders of the Common Stock, voting separately as a
single class, shall have the right to elect three members of the board of
directors of the Corporation. The holders of the Common Stock shall also
have the right, voting separately as a single class, to remove any
individuals elected to such directorships.
(d) The holders of the Preferred Stock and the Common Stock,
voting together as a single class (with each share of Preferred Stock
having a number of votes equal to the number of votes possessed by the
number of shares of Common Stock into which such share of Preferred Stock
is convertible as of the record date for the determination of stockholders
entitled to vote on such matter), shall have the right to elect all other
members of the board of directors of the Corporation. The holders of the
Preferred Stock and the Common Stock shall also have the right, voting
together as a single class (with each share of Preferred Stock having the
number of votes set forth in the immediately preceding sentence), to
remove any individuals elected to such directorships.
(ii) The special right of the holders of Preferred Stock to elect
and remove directors contained in Paragraphs 4B(a) and 4B(b) may be exercised
either at a special meeting of the holders of the applicable series of Preferred
Stock called as provided below, at any annual or special meeting of the
stockholders of the Corporation, or by written consent of the holders of the
applicable series of Preferred Stock in lieu of a meeting. The directors to be
elected by the holders of the Preferred Stock pursuant to Paragraphs 4B(a) and
4B(b) shall serve for terms extending from the date of their election and
qualification until the time of the next succeeding annual meeting of
stockholders (unless sooner removed) and until their successors have been
elected and qualified.
At any time when the holders of Preferred Stock have the special
voting rights set forth in Paragraph 4B(a) and/or 4B(b), the secretary of the
Corporation shall, upon the written request of the holders of record of shares
of the applicable series of Preferred Stock having at least 10% of the votes
possessed by the then outstanding Preferred Stock of such series, call a special
meeting of the holders of such series of Preferred Stock for the purpose of
electing or removing directors. Such meeting shall be held at the earliest
practicable date at the Corporation's principal office or at such other place
designated by the holders of shares of the applicable series of Preferred Stock
having at least 10% of the votes possessed by the then outstanding Preferred
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Stock of such series. If such meeting shall not be called by a proper officer of
the Corporation within 10 days after personal service of said written request
upon the secretary of the Corporation or within 20 days after mailing the same
to the secretary of the Corporation at the Corporation's principal office, then
the holders of record of shares of the applicable series of Preferred Stock
having at least 10% of the votes possessed by the then outstanding Preferred
Stock of such series may designate in writing one of their number to call such
meeting at the expense of the Corporation, and such meeting may be called by
such persons so designated upon the shortest legally permissible notice. Any
holders of Preferred Stock so designated shall have access to the stock books of
the Corporation for the purpose of calling a meeting of the stockholders
pursuant to these provisions.
At any stockholders meeting at which the holders of Preferred Stock
shall have the special right, voting separately as a single class, to elect or
remove directors as provided in Paragraphs 4B(a) and 4B(b), the presence, in
person or by proxy, of the holders of record of shares of the applicable series
of Preferred Stock having a majority of the votes possessed by the then
outstanding Preferred Stock of such series shall be required to constitute a
quorum of such series of Preferred Stock for such election or removal. At any
such meeting or adjournment thereof, the absence of such a quorum of the
applicable series of Preferred Stock shall not prevent the election of directors
other than the directors to be elected by holders of such series of Preferred
Stock pursuant to Paragraph 4B(a) and/or 4B(b), and in the absence of either or
both such quorums, the holders of record of shares representing a majority of
the voting power present in person or by proxy of the class or classes of stock
which lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect from time to time without notice
other than announcement at the meeting.
A vacancy in the directorships to be elected by the holders of the
Preferred Stock pursuant to Paragraphs 4B(a) and 4B(b) may be filled only by
vote or written consent in lieu of a meeting of the holders of shares of the
applicable series of Preferred Stock having a majority of the votes possessed by
the then outstanding Preferred Stock of such series acting separately as a
single class and to the exclusion of all other classes of the Corporation's
stock.
Part 5. Conversion.
5A. Conversion Procedure.
(i) At any time and from time to time, any holder of shares of
Series A Preferred Stock may convert all or any portion of such shares
(including any fraction of a share) into the number of shares of the
Corporation's Common Stock computed by multiplying
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the number of shares of Series A Preferred Stock to be converted times $1.00 per
share and dividing the result by the Series A Conversion Price (as defined in
Paragraph 5B below). At any time and from time to time, any holder of shares of
Series B Preferred Stock may convert all or any portion of such shares
(including any fraction of a share) into the number of shares of the
Corporation's Common Stock computed by multiplying the number of shares of
Series B Preferred Stock to be converted times $1.25 per share and dividing the
result by the Series B Conversion Price (as defined in Paragraph 5B below).
(ii) Each conversion of preferred Stock will be deemed to have been
effected as of the close of business on the date on which the certificate or
certificates representing the Preferred Stock to be converted have been
surrendered at the principal office of the Corporation. At such time as such
conversion has been effected, the rights of the holder of such Preferred Stock
as such holder will cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or holders of record of
the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been effected and
in no event later than ten (10) business days thereafter, the Corporation will
deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such name
or names and such denomination or denominations as the converting holder
has specified;
(b) the amount payable under Subparagraph 5A(vi) below with
respect to such conversion; and
(c) a certificate representing any shares of Preferred Stock
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not
converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of Preferred Stock will be made without charge to the holders of such
Preferred Stock for any issuance tax in respect thereof or other cost incurred
by the Corporation in connection with such conversion and the related issuance
of shares of Common Stock. Upon conversion of any share of Preferred Stock, the
Corporation will take all such actions as are necessary in order to insure that
the Common Stock issued as a result of such conversion is validly issued, fully
paid and nonassessable.
(v) The Corporation will not close its books against the transfer of
Preferred Stock or of Common Stock issued or issuable
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upon conversion of Preferred Stock in any manner which interferes with the
timely conversion of preferred Stock.
(vi) If any fractional interest in a share of Common Stock would,
except for the provisions of this Subparagraph 5A(vi), be deliverable upon any
conversion of the Preferred Stock, the Corporation, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal to
the Market Price of such fractional interest as of the date of conversion.
(vii) Upon conversion of shares of Preferred Stock into Common Stock
pursuant to this paragraph 5A, the holder of such shares of Preferred Stock
shall forfeit its right to receive any accrued but unpaid dividends on such
shares.
5B. Conversion Price.
(i) The initial "Series A Conversion Price" will be $1.00. The
initial "Series B Conversion Price" will be $1.25. The Series A Conversion Price
and the Series B Conversion Price shall each be referred to herein as a
"Conversion Price". In order to prevent dilution of the conversion rights
granted under this subdivision, the Series A Conversion Price and the Series B
Conversion Price will be subject to adjustment from time to time pursuant to
this Paragraph 5B; provided, however, that, notwithstanding anything to the
contrary contained herein, there will be no adjustment of either Conversion
Price as a result of (a) the issuance of shares of Common Stock upon the
conversion of shares of the Series A Preferred Stock or Series B Preferred
Stock, or (b) issuances of Common Stock for incentive or compensatory purposes
to directors, officers, employees, consultants and scientific advisors of the
Corporation which are from time to time approved by the Corporation's board of
directors (including, without limitation, grants of stock options and the
issuance of Common Stock upon the exercise thereof).
(ii) If and whenever on or after the original date of issuance of
the Series A Preferred Stock, but prior to July 1, 1994, the Corporation issues
or sells, or in accordance with paragraph 5C is deemed to have issued or sold,
any share of Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to such time, then forthwith upon such issue
or sale the Conversion Price shall be reduced to the lowest net price per share
at which any such share of Common Stock has been issued or sold or is deemed to
have been issued or sold.
(iii) If and whenever on or after July 1, 1994, the Corporation
issues or sells, or in accordance with Paragraph 5C is deemed to have issued or
sold, any shares of its Common Stock for a consideration per share less than any
Conversion Price in effect immediately prior to the time of such issuance or
sale, then immediately upon such issuance or sale such Conversion Price will
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be reduced to the conversion price determined by dividing (a) the sum of (1) the
product derived by multiplying such Conversion Price in effect immediately prior
to such issuance or sale times the number of shares of Underlying Common Stock
outstanding immediately prior to such issuance or sale, plus (2) the
consideration, if any, received by the Corporation upon such issuance or sale,
by (b) the number of shares of Underlying Common Stock outstanding immediately
prior to such issuance or sale plus the number of shares of Common Stock deemed
to have been issued in such sale pursuant to this Part 5.
5C. Effect on Conversion Prices of Certain Events.
(i) For purposes of determining the adjusted Conversion Prices under
Subparagraph 5B(ii), the following will be applicable:
(a) Issuance of Rights or Options. If the Corporation in any
manner grants, issues or sells any right or option to subscribe for or to
purchase Common Stock (other than grants of stock options to directors,
officers, employees, consultants and scientific advisors of the
Corporation for incentive or compensatory purposes which are approved from
time to time by the Corporation's board of directors) or any stock or
other securities convertible into or exchangeable for Common Stock (such
rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") and the lowest price per share for which any one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Security is less than the
Conversion Price in effect immediately prior to the time of the granting,
issuance or sale of such Option, then such share of Common Stock shall be
deemed to have been issued and sold by the Corporation at the time of the
granting, issuance or sale of such Options for such price per share. For
purposes of this paragraph, the "lowest price per share for which any one
share of Common Stock is issuable" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Corporation with respect to any one share of Common Stock upon the
granting, issuance or sale of the Option, upon exercise of the Option and
upon conversion or exchange of the Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock or of such Convertible Security upon the exercise of
such Options or upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Security.
(b) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Security and the lowest price
per share for which any one share of Common Stock is issuable upon
conversion or exchange
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thereof is less than the Conversion Price in effect immediately prior to
the time of such issue or sale, then such share of Common Stock shall be
deemed to have been issued and sold by the Corporation at the time of the
issuance or sale of such Convertible Securities for such price per share.
For the purposes of this paragraph, the "lowest price per share for which
any one share of Common Stock is issuable" shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by the
Corporation with respect to any one share of Common Stock upon the
issuance or sale of the Convertible Security and upon the conversion or
exchange of such Convertible Security. No further adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock
upon conversion or exchange of any Convertible Security, and if any such
issue or sale of such Convertible Security is made upon exercise of any
Options for which adjustments of the Conversion Price had been or are to
be made pursuant to other provisions of this Part 5, no further adjustment
of the Conversion Price shall be made by reason of such issue or sale.
(c) Change in Option Price or Conversion Rate. If the purchase
price provided for in any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any Convertible
Security, or the rate at which any Convertible Security is convertible
into or exchangeable for Common Stock change at any time, the Conversion
Price in effect at the time of such change shall be readjusted to the
Conversion Price which would have been in effect at such time had such
Option or Convertible Security originally provided for such changed
purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold; provided
that if such adjustment of the Conversion Price would result in an
increase in the Conversion Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given to
all holders of the Preferred Stock.
(ii) For purposes of determining the adjusted Conversion Prices under
Subparagraph 5B(iii), the following will be applicable:
(a) Issuance of Rights or Options. If the Corporation in any
manner grants, issues or sells any Options or Convertible Securities and
the price per share for which Common Stock is issuable upon the exercise
of such Options or upon conversion or exchange of such Convertible
Securities is less than any Conversion Price in effect immediately prior
to the time of the granting, issuance or sale of such Options, then the
total maximum number of shares of Common Stock issuable upon the exercise
of such Options or upon conversion or exchange of the total maximum amount
of such Convertible
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Securities issuable upon the exercise of such Options will be deemed to
have been issued and sold by the Corporation for such price per share. For
purposes of this paragraph, the "price per share for which Common Stock is
issuable" will be determined by dividing (a) the total amount, if any,
received or receivable by the Corporation as consideration for the
granting, issuance or sale of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon
exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (b) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of such Conversion Price will be made
when Convertible Securities are actually issued upon the exercise of such
Options or when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Securities and the price per
share for which Common Stock is issuable upon such conversion or exchange
is less than any Conversion Price in effect immediately prior to the time
of such issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities will
be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share. For the purposes of this paragraph,
the "price per share for which Common Stock is issuable" will be
determined by dividing (a) the total amount received or receivable by the
Corporation as consideration for the issuance or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment of such Conversion Price will be made
when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issuance or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of such Conversion Price had been or are to be made pursuant
to other provisions of this Part 5, no further adjustment of such
Conversion Price will be made by reason of such issuance or sale.
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(c) Change in Option Price or Conversion Rate. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, any Conversion Price in
effect at the time of such change will be readjusted, if necessary, to the
Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of any
Conversion Price then in effect, such adjustment will not be effective
until 10 days after written notice thereof has been delivered by the
Corporation to all holders of the Preferred Stock.
(iii) For purposes of determining the adjusted Conversion Prices
under Subparagraph 5B(ii) and Subparagraph 5B(iii), the following will be
applicable:
(a) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, any Conversion Price then in effect hereunder
will be adjusted to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(b) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be
deemed to be the gross amount received by the Corporation therefor. In
case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation will be the fair value of such
consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Corporation will be
the Market Price thereof as of the date of receipt. If any Common Stock,
Option or Convertible Security is issued in connection with any merger in
which the Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration
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<PAGE>
other than cash and securities will be determined jointly by the
Corporation and the holders of a majority of the outstanding Preferred
Stock. If such parties are unable to reach agreement within 10 days after
the occurrence of an event requiring valuation (the "Valuation Event"),
the fair value of such consideration will be determined by an independent
appraiser jointly selected by the Corporation and the holders of a
majority of the outstanding Preferred Stock; provided, that, if such
parties are unable to reach agreement upon the selection of an independent
appraiser within 15 days after the Valuation Event, within 25 days after
the Valuation Event, the Corporation and the holders of a majority of the
Preferred Stock then outstanding will each choose a qualified independent
appraiser reasonably acceptable to the other party and each such appraiser
will deliver in writing its determination of the fair value of such
consideration. If the difference between the two appraisals is 10% or less
of the lower amount, the fair value will be the average of such two
appraisals. If the difference between the two appraisals is greater than
10% of the lower amount, the two appraisers will, within 35 days after the
Valuation Event, jointly choose a third qualified independent appraiser.
Within 45 days after the Valuation Event, the third appraiser will deliver
its determination of fair value and the final determination of the fair
value of such consideration will be equal to the average of the two
appraisals which are nearest to each other. The expenses of the appraisers
will be paid one-half by the Corporation and one-half by the holders of
the Preferred Stock (pro rata based on the number of shares of Preferred
Stock held).
(c) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option will be deemed to have been issued for a consideration of $.01.
(d) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition
of any shares so owned or held will be considered an issue or sale of
Common Stock.
(e) Record Date. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (I) to receive a
dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (II) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date will be deemed to
be the date of the issue or sale of the shares of Common Stock deemed
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<PAGE>
to have been issued or sold upon the declaration of such dividend or upon
the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
5D. Subdivision or Combination of Common Stock. If the Corporation
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, each Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced, and if the Corporation at any
time combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, each Conversion Price in effect immediately prior to such combination
will be proportionately increased.
5E. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any capital reorganization, reclassification, consolidation, merger or sale of
all or substantially all of the Corporation's assets to another Person which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as an
Organic Change. Prior to the consummation of any Organic Change, the Corporation
will make appropriate provisions (in form and substance reasonably satisfactory
to the holders of a majority of the Preferred Stock then outstanding) to insure
that each of the holders of Preferred Stock will thereafter have the right to
acquire and receive, in lieu of or (if additional consideration is received) in
addition to the shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Preferred Stock, such shares of
stock, securities or assets as such holder would have received in connection
with such Organic Change if such holder had converted its Preferred Stock
immediately prior to such Organic Change. In any such case, the Corporation will
make appropriate provisions (in form and substance satisfactory to the holders
of a majority of the Preferred Stock then outstanding) to insure that the
provisions of this Part 5 and Parts 6 and 7 will thereafter be applicable to the
Preferred Stock (including, without limitation, in the case of any such
consolidation, merger or sale in which the successor corporation or purchasing
corporation is other than the Corporation, an immediate adjustment of each
Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, if the value so reflected is less than such
Conversion Price in effect immediately prior to such consolidation, merger or
sale). The Corporation will not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor corporation (if other
than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets assumes by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of the
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<PAGE>
Preferred Stock then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
5F. Certain Events. If any event occurs of the type contemplated by
the provisions of this Part 5 but not expressly provided for by such provisions,
then the Corporation's board of directors will make an appropriate adjustment in
each Conversion Price so as to protect the rights of the holders of the
Preferred Stock; provided, however, that, no such adjustment will increase any
Conversion Price as otherwise determined pursuant to this Part 5 or decrease the
number of shares of Common Stock issuable upon conversion of each share of
Preferred Stock.
5G. Notices.
(i) Immediately upon any adjustment of the Conversion Price of any
class of Preferred Stock, the Corporation will give written notice thereof to
all holders of such class of Preferred Stock.
(ii) The Corporation will give written notice to all holders of
Preferred Stock at least twenty (20) days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or Liquidation.
(iii) The Corporation will also give written notice to the holders
of Preferred Stock at least twenty (20) days prior to the date on which any
Organic Change will take place.
5H. Mandatory Conversion. The Corporation may require the conversion
of all of the outstanding Preferred Stock upon the closing of a firm commitment
underwritten Public Offering of shares of the Corporation's Common Stock in
which (i) the net proceeds received by the Corporation will be at least
$15,000,000 and (ii) the price per share paid by the public for such shares will
be at least $7.50 (based on the Common Stock as constituted on the date of
issuance of Series A Preferred Stock and appropriately adjusted for any stock
dividend or stock split or in connection with any combination of shares,
recapitalization, merger, consolidation or other reorganization). Any such
mandatory conversion shall only be effected at the time of and subject to the
closing of the sale of such shares pursuant to such Public Offering and upon
written notice of such mandatory conversion delivered to all holders of
Preferred Stock at least 20 but not more than 40 days prior to such closing.
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<PAGE>
Part 6. Liquidating Dividends.
If the Corporation declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock or a stock split
(a "Liquidating Dividend"), then the Corporation shall pay to the holders of
Preferred Stock at the time of payment thereof the Liquidating Dividends which
would have been paid on the Common Stock had such Preferred Stock been converted
into Common Stock immediately prior to the date on which a record is taken for
such Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
Part 7. Purchase Rights.
If at any time the Corporation distributes, grants or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property to all record holders of any class of Common Stock
(the "Purchase Rights"), then each holder of Preferred Stock will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Preferred Stock immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the distribution, issue or sale of such Purchase Rights.
Part 8. Registration of Transfer.
The Corporation will keep at its principal office a register for the
registration of the Preferred Stock. Upon the surrender of any certificate
representing Preferred Stock at such place, the Corporation will, at the request
of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of Preferred Stock
represented by the surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of Preferred
Stock as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate; provided,
however, that any transfer shall be subject to any applicable restrictions on
the transfer of such shares and the payment of any applicable transfer taxes, if
any, by the holder thereof.
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<PAGE>
Part 9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder will be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation, upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares of Preferred Stock represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
Part 10. Definitions.
"Junior Securities" means any of the Corporation's equity
securities other than the Preferred Stock.
"Liquidation Value" means, with respect to the Series A Preferred
Stock, $1.00 per share, and with respect to the Series B Preferred Stock, $1.25
per share.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time, be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
ail such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Preferred Stock. If such parties are unable to reach agreement within a
reasonable period of time, such fair value will be determined by an independent
appraiser jointly selected by the Corporation and the holders of a majority of
the Preferred Stock.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint
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<PAGE>
venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its
equity securities to the public pursuant to an effective registration statement
under the Securities Act of 1933, as then in effect, or any comparable statement
under any similar federal statute then in force; provided that a Public Offering
will not include an offering made in connection with a business acquisition.
"Requisite Number" means (i) with respect to the Series A Preferred
Stock, 772,275 shares of Series A Preferred Stock and (ii) with respect to the
Series B preferred Stock, half the number of shares of Series B Preferred Stock
issued upon exercise of the Series B Preferred Stock Options pursuant to the
Stock Purchase Agreement.
"Series B Preferred Stock Options" has the meaning set forth in the
Stock Purchase Agreement.
"Stock Purchase Agreement" means that certain Stock Purchase
Agreement, dated as of December 18, 1992, by and among Immtech International,
Inc., a Wisconsin corporation, and certain investors.
"Subsidiary" means any corporation of which the shares of stock
having a majority of the general voting power in electing the board of directors
are, at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
"Underlying Common Stock" means (i) the Common Stock issued or
issuable upon conversion of the Preferred Stock and (ii) any Common Stock issued
or issuable with respect to the Common Stock referred to in clause (i) above by
way of stock dividend or stock split or in connection with a combination or
other reorganization.
Part 11. Amendment and Waiver.
No amendment, modification or waiver will be binding or effective
with respect to any provision of this Section 2 without the prior written
consent of the holders of a majority of the shares of Preferred Stock
outstanding at the time such action is taken. No change in the terms hereof may
be accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior affirmative vote or
written consent of the holders of a majority of the shares of Preferred Stock
then outstanding.
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<PAGE>
Part 12. Notices.
Except as otherwise expressly provided, all notices referred to
herein shall be in writing and shall be delivered by registered or certified
mail, return receipt requested, postage prepaid and shall be deemed to have been
delivered when so mailed (i) to the Corporation, at its principal executive
offices and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated in writing by
any such holder).
Section 3. Common Stock.
Part 1. Voting Rights. Except as otherwise required by law and the
other provisions of this Article Fourth, the holders of Common Stock will be
entitled to one vote per share on all matters to be voted on by the
corporation's stockholders.
Part 2. Dividends. Subject to the limitations contained in paragraph
1D of Section 2 of this Article Fourth, the holders of Common Stock will be
entitled to dividends if, when, and as declared by the Corporation's board of
directors, out of funds legally available therefor, whether payable in cash,
property or securities of the Corporation.
Part 3. Registration of Transfer. The Corporation will keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock. Upon the surrender of
any certificate representing shares of Common stock at such place, the
Corporation will, at the request of the registered holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares of Common Stock represented by the surrendered certificate, and the
Corporation forthwith will cancel such surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate.
Part 4. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (it being understood that an affidavit of the
registered holder will be deemed satisfactory to the Corporation) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of Common Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is an institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation, upon
surrender of such certificate, the Corporation will (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number
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<PAGE>
of shares represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate.
ARTICLE FIFTH
The board of directors of the Corporation shall consist of not more
than seven members.
ARTICLE SIXTH
The corporation is to have perpetual existence.
ARTICLE SEVENTH
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHTH
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINTH
To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended, a director
of this corporation shall not be liable to the corporation or its stockholders
for monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINTH shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TENTH
The corporation expressly elects not to be governed by Section 203
of the General Corporation Law of the State of Delaware.
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<PAGE>
ARTICLE ELEVENTH
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
* * * * *
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<PAGE>
State of Delaware PAGE 1
Office of the Secretary of State
-------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "IMMTECH INTERNATIONAL, INC.", FILED IN THIS OFFICE ON THE SIXTH DAY OF
AUGUST, A.D. 1996, AT 12 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[SEAL] ----------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
DATE:
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
IMMTECH INTERNATIONAL, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation").
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation has determined
that it is advisable and in the best interests of the Corporation that the
Certificate of Incorporation of the Corporation be amended by deleting the
current text of section 1 of Article Fourth thereof describing the authorized
shares and substituting in lieu thereof the following:
Section 1. Capital Stock.
The total number of shares of stock which the Corporation has
authority to issue is 13,394,550, consisting of:
(A) 1,794,550 shares of Series A Participating Preferred Stock,
$O.01 par value per share (the "Series A Preferred Stock");
(B) 1,600,000 shares of Series B Participating Preferred Stock,
$O.01 par value per share (the "Series B Preferred Stock"); and
(C) 10,000,000 shares of Common Stock, $O.Ol par value par value per
share (the "Common Stock").
The Series A Preferred Stock and the Series B Preferred Stock are referred
to herein collectively as the "Preferred Stock."
SECOND: That in accordance with section 228 of the General
Corporation Law of the State of Delaware the holders of a majority of the issued
and outstanding shares of capital stock of the Corporation and the holders of a
majority of the issued and outstanding shares of Common Stock of the Corporation
as a separate class have given written consent in favor of such amendment and
the
<PAGE>
Corporation has given written notice of such amendment to each stockholder of
the Corporation who has not given written consent in favor of such amendment.
THIRD: That the foregoing amendment was duly adopted in accordance
with the applicable provisions of section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to
be signed by T. Stephen Thompson, its President, and attested by Gary C. Parks,
its Secretary, this 26th day of July, 1996.
IMMTECH INTERNATIONAL, INC.
BY /s/ T. Stephen Thompson
-------------------------------------
President
Attest:
/s/ Gary C. Parks
----------------------------------------
Secretary
2
<PAGE>
CONSENT OF HOLDER OF PREFERRED STOCK
OF IMMTECH INTERNATIONAL, INC.
The undersigned, who is the sole owner and holder of a majority of the
issued and outstanding shares of Series A Preferred Stock, par value $0.01 per
share ("Series A Preferred"), and a majority of the issued and outstanding
shares of Series B Preferred Stock, par value $0.01 per share ("Series B
Preferred"), of Immtech International, Inc., a Delaware corporation (the
"Corporation"), hereby consents to the actions of the Corporation as provided
herein.
RECITALS
A. The Corporation entered into a Stock Purchase Agreement, dated as of
December 18, 1992, as amended (the "Agreement"), with Marquette Venture Partners
II, L.P., a Delaware limited partnership ("Marquette"), providing for the
purchase by Marquette or certain of Marquette's affiliates of certain shares of
Series A Preferred and options to purchase shares of Series B Preferred.
B. Section 4E of the Agreement prohibits under certain circumstances the
issuance by the Corporation of equity securities (including options, warrants
and securities convertible into or exchangeable for equity securities of the
Corporation) without the vote or written consent of the holders of a majority of
the issued and outstanding shares of Series A Preferred and Series B Preferred
as a single class.
C. Section 4J of the Agreement provides limited first refusal rights to
the holders of Series A Preferred and Series B Preferred upon certain issuances
by the Corporation of shares of common stock, par value $0.01 per share ("Common
Stock"), of the Corporation or securities containing options or rights to
acquire shares of Common Stock upon conversion or otherwise, subject to waiver
by the holders of a majority of the issued and outstanding shares of Series A
Preferred and Series B Preferred as a single class.
D. The Corporation has authorized the issuance of certain units ("Units")
consisting of Senior Convertible Notes due 1997 and warrants to purchase shares
of the Corporation's common stock, par value $0.01 per share, as described in
the Corporation's Private Placement Memorandum dated July 2, 1996 (the "PPM").
E. Criticare Biomedical, Inc. ("Stockholder") has purchased 1,000,000
shares of Series A Preferred and 1,200,000 shares of Series B Preferred
previously
<PAGE>
held by Marquette and/or certain of Marquette's affiliates, and as such
Stockholder has succeeded to the rights of Marquette under the Agreement.
CONSENT
1. Stockholder hereby consents to the issuance of the Units substantially
as described in the PPM.
2. Stockholder, for itself and for all owners and holders of Series A
Preferred and Series B Preferred, hereby waives, now and forever, but solely
with respect to the issuance of the Units substantially as described in the PPM,
all rights under section 4 of the Agreement, including, without limitation, with
respect to the restrictive covenants in section 4E of the Agreement and the
first refusal rights under section 4J of the Agreement.
Dated: 7/25/96 CRITICARE BIOMEDICAL, INC.
By /s/ Gerhard J. Von der Ruhr PRES
--------------------------------
2
<PAGE>
Certificate of Amendment to
Certificate of Incorporation
of
IMMTECH INTERNATIONAL. INC.
Pursuant to the provisions of Delaware General Corporation Law, Title 8, Chapter
1, Subchapter VIII, Section 242, the undersigned officer does hereby certify:
FIRST: The name of the Corporation is Immtech International, Inc.
SECOND: The Board of Directors of the Corporation duly adopted resolutions
on June 15, 1998 declaring the advisability of (i) effecting a reverse stock
split pursuant to which each issued and outstanding share of Common Stock, $0.01
par value per share ("Common Stock"), immediately prior to the effectiveness of
this amendment shall be converted into 0.645260 share of Common Stock, (ii)
reclassifying each issued and outstanding share of Series A Participating
Preferred Stock, $0.01 par value per share ("Series A Preferred") immediately
prior to the effectiveness of this amendment, into 0.645260 issued and
outstanding share of Common Stock (after giving effect to the above-referenced
reverse stock split), (iii) eliminating any authorized share of Series A
Preferred that is not outstanding immediately prior to the effectiveness of this
amendment, (iv) reclassifying each issued and outstanding share of Series B
Participating Preferred Stock, $0.01 par value per share ("Series B Preferred")
immediately prior to the effectiveness of this amendment, into 0.770086 issued
and outstanding share of Common Stock (after giving effect to the
above-referenced reverse stock split), (v) eliminating any authorized share of
Series B Preferred that is not outstanding immediately prior to the
effectiveness of this amendment, (vi) increasing the authorized capital stock of
the Corporation (after giving effect to the reverse stock split) and providing
for a class of Preferred Stock, $0.01 par value, with such designations,
preferences, qualifications and rights as may be determined by the Board of
Directors of the Corporation.
THIRD: The Stockholders of the Corporation duly adopted the following
resolution on or prior to June 30, 1998:
RESOLVED, that Article Fourth of the Certificate of Incorporation of the
Corporation be and it hereby is, amended in its entirety to read as
follows:
Section 1. AUTHORIZED CAPITAL STOCK. The total number of shares
which the Corporation shall have the authority to issue shall be
35,000,000 shares, of which 30,000,000 shares shall be Common Stock, $0.01
par value, and 5,000,000 shares shall be Preferred Stock, $0.01 par value.
Section 2. COMMON STOCK. The Board of Directors is hereby authorized
to cause shares of Common Stock to be issued from time to time for such
consideration as may be fixed from time to time by the Board of Directors,
or by way of stock split pro rata to the holders of the Common Stock. The
Board of Directors may also determine the proportion of the proceeds
received from the
<PAGE>
sale of such stock which shall be credited upon the books of the Company
to Capital or Capital Surplus.
Each share of the Common Stock shall be equal in all respects to
every other share of the Common Stock. Subject to any special voting
rights of the holders of Preferred Stock fixed by or pursuant to the
provisions of Section 3 of this Article Fourth, the shares of Common Stock
shall entitle the holders thereof to one vote for each share upon all
matters upon which stockholders have the right to vote.
No holder of shares of Common Stock shall be entitled as such as a
matter of right to subscribe for or purchase any part of any new or
additional issues of stock, or securities convertible into stock, of any
class whatsoever, whether now or hereafter authorized, and whether issued
for cash, property, services or otherwise.
After the requirements with respect to preferential dividends on
Preferred Stock (fixed by or pursuant to the provisions of Section 3 of
this Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements, if any, with
respect to the setting aside of sums as sinking funds or redemption or
purchase accounts (fixed by or pursuant to the provisions of Section 3 of
this Article Fourth) and subject further to any other conditions which may
be fixed by or pursuant to the provisions of Section 3 of this Article
Fourth, then, but not otherwise, the holders of Common Stock shall be
entitled to receive dividends, if any, as may be declared from time to
time by the Board of Directors.
After distribution in full of the preferential amount (fixed by or
pursuant to the provisions of Section 3 of this Article Fourth), if any,
to be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding up of the Company, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the Company,
tangible and intangible, of whatever kind available for distribution to
stockholders, ratably in proportion to the number of shares of Common
Stock held by each.
Section 3. PREFERRED STOCK. Shares of Preferred Stock may be divided
into and issued in such series, on such terms and for such consideration
as may from time to time be determined by the Board of Directors of the
Corporation. Each series shall be so designated as to distinguish the
shares thereof from the shares of all other series and classes. All shares
of Preferred Stock shall be identical, except as to variations between
different series in the relative rights and preferences as permitted or
contemplated by the next succeeding sentence. Authority is hereby vested
in the Board of Directors of the Company to establish out of shares of
Preferred Stock which are authorized and unissued from time to time one or
more series thereof and to fix and determine the following relative rights
and preferences of shares of each such series:
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<PAGE>
(1) the distinctive designation of, and the number of shares which
shall constitute, the series and the "stated value" or "nominal value," if
any, thereof;
(2) the rate of dividend applicable to shares of such series;
(3) the price at and the terms and conditions on which shares of
such series may be redeemed;
(4) the amount payable upon shares of such series in the event of
the involuntary liquidation of the Company;
(5) the amount payable upon shares of such series in the event of
the voluntary liquidation of the Company;
(6) sinking fund provisions for the redemption or purchase of shares
of such series;
(7) the terms and conditions on which shares of such series may be
converted, if such shares are issued with the privilege of conversion;
(8) the voting powers, if any, of the holders of shares of the
series, which may, without limiting the generality of the foregoing,
include (i) the right to one or less than one vote per share on any or all
matters voted upon by the stockholders and (ii) the right to vote, as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, upon such matters,
under such circumstances and upon such conditions as the Board of
Directors may fix, including, without limitation, the right, voting as a
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, to elect one or
more directors of the Corporation in the event there shall have been a
failure to pay dividends on any one or more series of Preferred Stock or
under such other circumstances and upon such conditions as the Board of
Directors may determine; provided, however, that in no event shall a share
of Preferred Stock have more than one vote; and
(9) any other such rights and preferences as are not inconsistent
with the Delaware General Corporation Law.
No holder of any share of any series of Preferred Stock shall be entitled
to vote for the election of directors or in respect of any other matter except
as may be required by the Delaware General Corporation Law, as amended, or as is
permitted by the resolution or resolutions adopted by the Board of Directors
authorizing the issue of such series of Preferred Stock.
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<PAGE>
Section 4. OTHER PROVISIONS.
(1) The relative powers, preferences, and rights of each series of
Preferred Stock shall, in each case, be as fixed from time to time by the
Board of Directors in the resolution or resolutions adopted pursuant to
authority granted in Section 3 of this Article Fourth, and the consent by
class or series vote or otherwise, of the holders of the Preferred Stock
or such of the series of the Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of
Directors of any other series of Preferred Stock whether the powers,
preferences and rights of such other series shall be fixed by the Board of
Directors as senior to, or on a parity with, powers, preferences and
rights of such outstanding series, or any of them; provided, however, that
the Board of Directors may provide in such resolution or resolutions
adopted with respect to any series of Preferred Stock that the consent of
the holders of a majority (or such greater proportion as shall be therein
fixed) of the outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of Preferred Stock.
(2) Subject to the provisions of Subsection 1 of this Section 4,
shares of any series of Preferred Stock may be issued from time to time as
the Board of Directors shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(3) Common Stock may be issued from time to time as the Board of
Directors shall determine and on such terms and for such consideration as
shall be fixed by the Board of Directors.
(4) No holder of any of the shares of any class or series of shares
or securities convertible into such shares of any class or series of
shares, or of options, warrants or other rights to purchase or acquire
shares of any class or series of shares or of other securities of the
Company shall have any preemptive right to purchase, acquire, subscribe
for any unissued shares of any class or series or any additional shares of
any class or series to be issued by reason of any increase of the
authorized capital stock of the Company of any class or series, or bonds,
certificate of indebtedness, debenture or other securities convertible
into or exchangeable for shares of any class or series, or carrying any
right to purchase or acquire shares of any class or series, but any such
unissued shares, additional authorized issue of shares of any class or
series of shares or securities convertible into or exchangeable for
shares, or carrying any right to purchase or acquire shares, may be issued
and disposed of pursuant to resolution of the Board of Directors to such
persons, firms, corporations or associations, and upon such terms, as may
be deemed advisable by the Board of Directors in the exercise of its sole
discretion.
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<PAGE>
(5) The Company reserves the right to increase or decrease its
authorized capital stock, or any class or series thereof or to reclassify
the same and to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation or in any amendment hereto, in the
manner now or hereafter prescribed by law, but subject to such conditions
and limitations as are hereinbefore prescribed, and all rights conferred
upon stockholders in this Certificate of Incorporation or any amendment
thereto, are granted subject to this reservation.
Each share of Common Stock which has heretofore been issued and
outstanding is, upon effectiveness of this amendment, converted into 0.645260
issued and outstanding share of Common Stock, and in lieu of any fractional
shares created by the above-provide-for reverse stock split, the Corporation
shall pay to the holders thereof the fair value of such fractional shares in
cash.
Each share of Series A Preferred which has heretofore been issued and
outstanding is, upon effectiveness of this amendment, reclassified into 0.645260
issued and outstanding share of Common Stock (after giving effect to the
above-provided-for-reverse stock split), and in lieu of any fractional shares
created by the above-provided-for reclassification, the Corporation shall pay to
the holders thereof the fair value of such fractional shares in cash.
Each share of Series A Preferred which has heretofore been authorized but
is not outstanding immediately prior to the effectiveness of this amendment, is,
upon effectiveness of this amendment, eliminated.
Each share of Series B Preferred which has heretofore been issued and
outstanding is, upon effectiveness of this amendment, reclassified into 0.770086
issued and outstanding share of Common Stock (after giving effect to the
above-provided-for reverse stock split), and in lieu of any fractional shares
created by the above-provided-for reclassification, the Corporation shall pay to
the holders thereof the fair value of such fractional shares in cash.
Each share of Series B Preferred which has heretofore been authorized but
is not outstanding immediately prior to the effectiveness of this amendment, is,
upon effectiveness of this amendment, eliminated.
FOURTH: The Corporation dispensed with the holding of a meeting of
stockholders, and this amendment was authorized and approved by a consent in
writing signed by the holders of outstanding shares of the Corporation having
the minimum voting power necessary to authorize and approve this amendment at a
meeting at which all shares entitled to vote hereon were present, all in
accordance with the provisions of Delaware General Corporate Law, Title 8,
Chapter 1, Subchapter VII, Section 228.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by T. Stephen Thompson, its President, and attested by Gary C. Parks, its
Secretary, this 30th day of June, 1998.
IMMTECH INTERNATIONAL, INC.
By: /s/ T. Stephen Thompson
------------------------------------
T. Stephen Thompson
President
Attest:
/s/ Gary C. Parks
------------------------------------
Gary C. Parks
Secretary
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BY-LAWS
OF
IMMTECH INTERNATIONAL, INC.
A Delaware corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at 32 Loockerman Square, Suite L-100,
Dover, Delaware, County of Kent. The name of the corporation's registered agent
at such address shall be The Prentice-Hall Corporation System, Inc. The
registered office and/or registered agent of the corporation may be changed from
time to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall be
determined by the president of the corporation; provided, that if the president
does not act, the board of directors shall determine the date, time and place of
such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no
<PAGE>
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting. All
such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for
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<PAGE>
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the stockholders,
and before any voting commences, all proxies filed at or before the meeting
shall be submitted to and examined by the secretary or a person designated by
the secretary, and no shares may be represented or voted under a proxy that has
been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing
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<PAGE>
the dates of signature of the stockholders who signed the consent or consents,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered to the corporation by delivery to its registered office
in the State of Delaware, or the corporation's principal place of business, or
an officer or agent of the corporation having custody of the book or books in
which proceedings of meetings of the stockholders are recorded. Delivery made to
the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested provided, however, that no consent or
consents delivered by certified or registered mail shall be deemed delivered
until such consent or consents are actually received at the registered office.
All consents properly delivered in accordance with this section shall be deemed
to be recorded when so delivered. No written consent shall be effective to take
the corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this section,
written consents signed by the holders of a sufficient number of shares to take
such corporate action are so recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any action
taken pursuant to such written consent or consents of the stockholders shall
have the same force and effect as if taken by the stockholders at a meeting
thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number. Election and Term of Office. The number of directors
which shall constitute the first board shall be one (1). Thereafter, the number
of directors shall be established from time to time by resolution of the board.
The directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote in the
election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then
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<PAGE>
entitled to vote at an election of directors. Whenever the holders of any class
or series are entitled to elect one or more directors by the provisions of the
corporation's certificate of incorporation, the provisions of this section shall
apply, in respect to the removal without cause of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole. Any director
may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president on at least twenty-four (24) hours notice to each
director, either personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these by-laws shall have and may exercise
the powers of the board of directors in the management and affairs of the
corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to
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<PAGE>
time by resolution adopted by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
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ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and shall consist of a president, one or more
vice-presidents, secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except that the offices of president and secretary shall be filled as
expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at the
first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are
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<PAGE>
carried into effect. The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors or by the president, shall, in the absence or disability of the
president, act with all of the powers and be subject to all the restrictions of
the president. The vice-presidents shall also perform such other duties and have
such other powers as the board of directors, the president or these by-laws
may, from time to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall have
the custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the corporation as may be ordered by the board of directors; shall
cause the funds of the corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall
render to the president and the board of directors, at its regular meeting or
when the board of directors so requires, an account of the corporation; shall
have such powers
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and perform such duties as the board of directors, the president or these
by-laws may, from time to time, prescribe. If required by the board of
directors, the treasurer shall give the corporation a bond (which shall be
rendered every six (6) years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the president or
treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 11. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemni-
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<PAGE>
fication rights than said law permitted the corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding) and such indemnification shall inure to the benefit of his heirs,
executors and administrators; provided, however, that, except as provided in
Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article V shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition. The corporation may, by action of its board
of directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its board of directors,
independent legal counsel, or its stockholders) that the claimant
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has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
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Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary,
or assistant secretary may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on, any
such certificate or certificates shall cease to be such officer or officers of
the corporation whether because of death, resignation or otherwise before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of stock
of the corporation shall only be transferred on the books of the corporation by
the holder of record thereof or by such holder's attorney duly authorized in
writing, upon surrender to the corporation of the certificate or certificates
for such shares endorsed by the appropriate person or persons, with such
evidence of the authenticity of such endorsement, transfer, authorization, and
other matters as the corporation may reasonably require, and accompanied by all
necessary stock transfer stamps. In that event,
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it shall be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate or certificates, and record the
transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the transfer
of any class or series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the next day preceding the day on which notice is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to
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consent to corporate action in writing without a meeting, when no prior action
by the board of directors is required by statute, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by statute, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or any other purpose and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the
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words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these bylaws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
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WARRANT AGREEMENT
Agreement made as of September __, 1998, between Immtech International,
Inc., aDelaware corporation with offices at 1890 Maple Avenue, Suite 110,
Evanston, Illinois 60201 (the "Company"), Harris Trust and Savings Bank, an
Illinois corporation with offices _____________ Chicago, Illinois _____ (herein
called the "Warrant Agent"), New China HongKong Securities Limited, a Hong Kong
corporation with offices at ______________ ("NCHKSL")and Rade Management
Corporation, a __________ corporation with offices at ____, New York, New York
zip ("Rade").
WHEREAS, the Company is engaged in a public offering of Units (the
"PublicOffering") and in connection therewith has determined to issue and
deliver up to (i) 3,999,999Common Stock Purchase Warrants consisting of
1,333,333 Class A Warrants, 1,333,333 ClassB Warrants and 1,333,333 Class C
Warrants (collectively, the "Public Warrants") to the publicinvestors and (ii)
500,000 Common Stock Purchase Warrants to NCHKSL (the "Representative")or its
designee (the "Representative's Warrants"); and the Company has previously
issued (y) to NCHKSL 150,000 Common Stock Purchase Warrants (the "PP Warrants")
and (z) to RADEManagement Corporation 1,950,000 Common Stock Purchase Warrants
(the "Consultant'sWarrants" and together with the Representative's Warrants and
the PP Warrants, the "PrivateWarrants"; the Public Warrants and Private Warrants
referred to collectively as the"Warrant(s)"); and
WHEREAS, the Company has filed with the Securities and Exchange Commission
aRegistration Statement, No. 33-_____ on Form SB-2 ("Registration Statement")
for theregistration, under the Securities Act of 1933, as amended, of, among
others, the PublicWarrants and the Common Stock issuable upon exercise of the
Public Warrants; andWHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, registration, transfer, exchange, redemption and exercise of
the Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the
PublicWarrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of rights, and immunities of the Company, the
Warrant Agent, the holders of theWarrants, NCHKSL and Rade; and
WHEREAS, all acts and things have been done and performed which are
necessary tomake the Public Warrants, when executed on behalf of the Company and
countersigned by oron behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations ofthe Company, and to authorize the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, theparties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company for the Warrants, and the Warrant Agent hereby
accepts such
<PAGE>
appointment and agrees to perform the same in accordance with the terms and
conditions set forth in this Agreement.
2. Warrants.
2.1. Form of Warrant. Each Public Warrant certificate shall be issued in
registered form only, shall be in substantially the form of Exhibits A, B and C
hereto the provisions of which are incorporated herein and shall be signed by,
or bear the facsimile signature of, the Chairman of the Board or President and
Secretary or Assistant Secretary of the Company and shall bear a facsimile of
the Company's seal. In the event the person whose facsimile signature has been
placed upon any Warrant certificate shall have ceased to be Chairman of the
Board or President and Secretary or Assistant Secretary of the Company before
such Warrant certificate is issued, it may be issued with the same effect as if
he had not ceased to be such at the date of issuance. The Public Warrant(s)
represented by a Warrant certificate may not be exercised until such certificate
has been countersigned by the Warrant Agent as provided in Section 2.3 hereof.
The Private Warrants shall not be issued in certificated form; annexed hereto as
Exhibits "D", "E" and "F" are the respective agreements representing the
Non-Redeemable Warrants (collectively, the "Warrant Agreements").
2.2. Effect of Countersignature. Unless and until countersigned by the
Warrant Agent pursuant to this Agreement, a Warrant certificate shall be invalid
and of no effect.
2.3. Events for Countersignature. The Warrant Agent shall countersign a
Warrant certificate only upon the occurrence of either of the following events:
(i) if the Warrant certificate is to be issued in exchange or
substitution for one or more previously countersigned Warrant certificates, as
hereinafter provided, or
(ii) if the Company instructs the Warrant Agent to do so.
2.4. Registration.
2.4.1. Warrant Register. The Warrant Agent shall maintain books (the
"Warrant Register"), for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Public Warrants, the Warrant Agent shall issue and register the Public Warrants
in the names of the respective holders thereof in such denominations and
otherwise in accordance with instructions delivered to the Warrant Agent by the
Company.
2.4.2. Registered Holder. Prior to due presentment for registration
of transfer of any Warrant certificate or any Warrants included among the
Private Warrants, the Company and the Warrant Agent may deem and treat the
person in whose name such Warrant certificate and such Private Warrant shall be
registered upon the Warrant Register (the "Registered Holder"), as the absolute
owner of such Warrant certificate, Private Warrant and of each Warrant
represented thereby (notwithstanding any notation of ownership or other writing
on the Warrant certificate or Warrant Agreement made by anyone other than the
Company or the
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Warrant Agent), for the purpose of any exercise thereof, and for all other
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
2.5. Detachability of Warrants. The Warrant Agent understands that the
Class A Warrants are being issued as part of Units together with shares of the
Company's Common Stock and that the shares of Common Stock and the Class A
Warrants are immediately detachable and may be traded separately.
3. Terms and Exercise of Warrants.
3.1. Warrant Price. Each Public Warrant certificate shall, when
countersigned by the Warrant Agent, entitle the Registered Holder thereof,
subject to the provisions of such Warrant certificate and of this Warrant
Agreement, to purchase from the Company the number of shares of Common Stock
stated therein, at the price of $1.50 per whole share (the "Purchase Price"),
except that upon exercise of a Class A Warrant the holder shall receive together
with one share of Common Stock, one Class B and one Class C Warrant; and each
Private Warrant shall entitle the holder to purchase the number of shares of
Common Stock stated therein at a purchase price of $0.05 per whole share (the
"Discount Price", and together with the Purchase Price referred to as the
Warrant Price), subject to the adjustments provided in Section 4 hereof. The
term "Warrant Price" as used in this Warrant Agreement refers to the price per
share at which securities may be purchased at the time a Warrant is exercised.
3.2. Duration of Warrants. Subject to Section ______ hereof, a Class A
Warrant may be exercised only during the period (the "Class A Exercise Period")
commencing at any time after the closing of the Public Offering and terminating
on December 31, 1998 (the "Class A Expiration Date"). A Class B Warrant may be
exercised only during the period (the "Class B Exercise Period") from the date
of issuance until March 31, 1999 (the"Class B Expiration Date"). A Class C
Warrant may be exercised only during the period (the "Class C Exercise Period")
from the date of issuance until June 30, 1999 (the"Class C Expiration Date").
Each Warrant not exercised on or before its expiration date shall become void,
and all rights thereunder and all rights in respect thereof under this Agreement
shall cease at the close of business on its applicable Expiration Date. The
Company with the consent of NCHKSL and RADE not to be unreasonably withheld or
delayed, may extend the duration of the Warrants by delaying the Expiration
Dates. The Private Warrants may be exercised during the respective periods
setforth in the Warrant Agreements.
3.3. Exercise of Warrants.
3.3.1. Payment. A Warrant, when countersigned by the Warrant Agent,
may be exercised by the Registered Holder thereof by surrendering the
certificate representing such Warrant or, in the case of the Private Warrants,
the Notice of Exercise annexed to the Warrant Agreement, at the office of the
Warrant Agent, in Chicago, Illinois, or at the office of its successor as
Warrant Agent, with the subscription form, as set forth on the Warrant
certificate, or the notice of exercise, as set forth in the Warrant Agreement,
duly executed, and by paying in full, in lawful money of the United States, in
cash, good certified check or bank draft payable
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to the order of the Company, the Warrant Price for the securities as to which
the Warrant is exercised and any and all applicable taxes due in connection with
the exercise of the Warrant, the exchange of the Warrant for the securities
purchased, and the issuance of the Common Stock.
3.3.2. Issuance of Certificates. As soon as practicable after the
exercise of any Warrant and the clearance of the funds in payment of the Warrant
Price, the Company shall issue to or upon the written order of the Registered
Holder of such Warrant a certificate or certificates for the number of full
shares of Common Stock to which he is entitled, registered in such name or names
as may be directed by him, and if such Warrant shall not have been exercised in
full, a new countersigned Warrant certificate for the number of shares and, in
the case of the Class A Warrants, the Class B and Class C Warrants, as to which
such Warrant shall not have been exercised. Notwithstanding the foregoing, the
Company shall not be obligated to deliver any securities pursuant to the
exercise of a Warrant unless a registration statement under the Securities Act
of 1933 with respect to the securities is effective. Warrants may not be
exercised by, or securities issued to, any registered holder in any state in
which such exercise would be unlawful. Notwithstanding the foregoing, the
Warrant Agent shall issue and deliver securities pursuant to the exercise of a
Private Warrant upon receipt of appropriate instructions from the Company
accompanied by an opinion of counsel to the Company as to compliance with
applicable federal and state securities laws.
3.3.3. Valid Issuance. All shares of Common Stock and Class B and
Class C Warrants issued upon the proper exercise of a Warrant in conformity with
this Agreement shall be validly issued.
3.3.4. Date of Issuance. Each person in whose name any such
certificate for shares of Common Stock, Class B and Class C Warrants is issued
shall for all purposes be deemed to have become the Registered Holder of such
securities on the date on which the Warrant certificate was surrendered and
payment of the Warrant Price was made, irrespective of the date of delivery of
such certificate, except that, if the date of such surrender and payment is a
date when the transfer books of the Company are closed, such person shall be
deemed to have become the Registered Holder of such shares at the close of
business on the next succeeding date on which the transfer books are open.
3.3.5. Private Warrants.
(a) The Consultant's Warrants are exercisable upon 60 days
prior notice to the Company at any time and from time to time over a period of
five years from the respective dates they become exercisable. Such Warrants are
currently exercisable as to 450,000 shares of Common Stock and become
exercisable as to the balance of the shares underlying such Warrants as follows:
(1) as to up to 600,000 shares, on the closing of the Public Offering; (2) as to
up to 300,000 shares of Common Stock, on the date the
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<PAGE>
Company receives, when taken together with the gross proceeds received by the
Company from all prior exercises of Class A Warrants, aggregate gross proceeds
of $1,500,000 from the exercise of all Class A Warrants in accordance with their
terms; (3) as to up to 300,000 shares of Common Stock, on the date the Company
receives, when taken together with the gross proceeds received by the Company
from all prior exercises of Class B Warrants, aggregate gross proceeds of
$1,500,000 from the exercise of all Class B Warrants in accordance with their
terms; and (4) as to up to 300,000 shares of Common Stock, on the date the
Company receives, when taken together with the gross proceeds received by the
Company from all prior exercises of Class C Warrants, aggregate gross proceeds
of $1,500,000 from the exercise of all Class C Warrants in accordance with their
terms. To the extent that any of the Public Warrants remain unexercised at the
expiration date of any such Class of Warrants, the number of Consultant's
Warrants which would become exercisable in respect of the exercise such
Redeemable Warrants will be proportionately reduced.
(b) The Representative's Warrants become exercisable upon 60
days prior notice to the Company as follows: (1) as to up to 200,000 shares of
Common Stock, on the closing of the Public Offering; (2) as to up to 100,000
shares of Common Stock, on the date the Company receives, when taken together
with the gross proceeds received by the Company from all prior exercises of
Class A Warrants, an aggregate of $1,500,000 from the exercise of all Class A
Warrants in accordance with their terms; (3) as to up to 100,000 shares of
Common Stock, on the date the Company receives, when taken together with the
gross proceeds received by the Company from all prior exercises of Class B
Warrants, an aggregate of $1,500,000 from the exercise of all Class B Warrants
in accordance with their terms; and (4) as to up to 100,000 shares of Common
Stock, on the date the Company receives, when taken together with the gross
proceeds received by the Company from all prior exercises of Class C Warrants,
an aggregate of $1,500,000 from the exercise of all Class C Warrants in
accordance with their terms. The Representative's Warrants will expire
proportionately based upon the number of shares of Common Stock underlying any
Public Warrants issued by the Company to the extent that any such Public
Warrants are unexercised at the respective expiration dates thereof. To the
extent the Representative's Warrants become exercisable, each will be
exercisable at any time during a five-year term commencing on the date such
Warrant becomes exercisable. The Representative's Warrants may not be
transferred for a period of one year from their date of issuance, except to
affiliates of the Representative.
(c) The PP Warrants become exercisable upon 60 days prior
notice to the Company and shall remain exercisable until ____________, 2003.
4. Adjustments. Subject and pursuant to the provisions of this Section, the
Purchase Price and number of securities subject to a Warrant shall be subject to
adjustment from time to time as hereinafter set forth:
4.1. Stock Dividends - Split-Ups, etc. If the Company shall at any time
subdivide its outstanding shares of Common Stock by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Common Stock to its shareholders, the number of
shares of Common Stock subject to each Warrant immediately prior to such
subdivision shall be proportionately increased, and, in the case of Class A
Warrants, the Anumber of Class B and Class C Warrants subject to each
outstanding Class A Warrant
5
<PAGE>
immediately prior to such subdivision shall be proportionately increased (with
the intent that each Class B and Class C Warrant shall at all times represent
the right to purchase neither more nor less than one share of Common Stock).
4.2 Aggregation of Shares. If the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of shares of Common Stock subject to each
Warrant immediately prior to such combination shall be proportionately decreased
and, in the case of Class A Warrants, the number of Class B and Class C Warrants
subject to each outstanding Class A Warrants immediately prior to such
subdivision shall be proportionately decreased. Any such adjustment, and related
adjustment to the Warrant Price pursuant to Section 4.3 shall be effective at
the close of business on the effective date of such subdivision or combination
or if any adjustment is the result of a stock dividend or distribution then the
effective date for such adjustment based thereon shall be the record date
therefore.
4.3. Adjustment Calculation. Whenever the number of shares of Common
Stock and/or Class B or Class C Warrants purchasable upon the exercise of a
Warrant is adjusted, as provided in this Section 4, the Warrant Price shall be
adjusted (to the nearest cent) by multiplying either the Purchase Price or the
Discount Price, as the case may be, immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the aggregate number of shares of
Common Stock purchasable upon the exercise of each Warrant, (including, in the
case of each Class A Warrant, the aggregate number of shares of Common Stock
purchasable upon the exercise of the Class B and Class C Warrants underlying
such Class A Warrant) immediately prior to such adjustment, and (y) the
denominator of which shall be the aggregate number of shares of Common Stock so
purchasable immediately thereafter.
4.4. Replacement of Securities Upon Reorganization, etc. In case of any
reclassification of the outstanding shares of Common Stock, other than a change
covered by Section 4.1 or 4.2 hereof or which solely affects the par value of
such shares of Common Stock, or in the case of any merger or consolidation of
the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification or capital reorganization of the outstanding
shares of Common Stock), or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety in connection with which the Company is dissolved, the Registered
Holder of each Warrant shall have the right thereafter (until the expiration of
the right of exercise of such Warrant) to receive upon the exercise thereof, for
the same aggregate Warrant Price payable hereunder immediately prior to such
event, the kind and amount of shares of stock or other securities or property
receivable upon such reclassification, capital reorganization, merger or
consolidation, or upon the dissolution following any sale or other transfer, by
a holder of the number of shares of Common Stock of the Company obtainable upon
exercise of such Warrant immediately prior to such event; in addition to the
foregoing, upon the exercise of a Class A Warrant, and the payment of the
Purchase Price payable hereunder immediately prior to such event, the holder of
a Class A Warrant shall receive, in addition to the securities receivable in
lieu of Common Stock due
6
<PAGE>
pursuant to the term of such Warrant, the right (until the applicable expiration
of the right of exercise of the Class B and Class C Warrants) to receive upon
the exercise thereof, for the aggregate Purchase Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, reorganization,
merger or consolidation, or upon the dissolution following any sale or other
transfer, by a Registered Holder of the number of shares of Common Stock
obtainable upon exercise of such Class B or Class C Warrants underlying the
Class A Warrants exercised, immediately prior to such event; and if any
reclassification or capital reorganizations also result in a change in shares of
Common Stock covered by Section 4.1 or 4.2, then such adjustment shall be made
pursuant to both Section 4.1 or 4.2,as the case may be, and this Section 4.4.
The provisions of this Section 4.4 shall similarly apply to successive
reclassifications, or capital reorganizations, mergers or consolidations, sales
or other transfers.
4.6. Form of Warrant Certificate. The form of Warrant Certificates need
not be changed because of any change pursuant to this Section 4, and Warrant
Certificates issued after such change may state the same Purchase Price and the
same number of shares as is stated in the Warrant Certificates initially issued
pursuant to this Agreement. However, the Company may at any time in its sole
discretion (which shall be conclusive) make any change in the form of Warrant
Certificate that the Company may deem appropriate and that does not affect the
substance thereof; and any Warrant Certificate thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, may be in the form as so changed.
4.7. Notices of Changes in Warrant. Upon every adjustment of the Warrant
Price or the number of shares issuable on exercise of a Warrant, the Company
shall give written notice thereof to the Warrant Agent, which notice shall state
the Warrant Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Upon the occurrence of any event
specified in Sections 4.1. 4.2., or 4.4., then, in any such event, the Company
shall give written notice in the manner set forth above of the record date for
such dividend, distribution, or subscription rights, or the effective date of
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Such notice shall also specify the date as
of which the holders of Common Stock of record shall participate in such
dividend, distribution, or subscription rights, or shall be entitled to exchange
their Common Stock for stock, securities, or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding up or issuance. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such event.
4.8. No Fractional Shares. Notwithstanding any provision contained in this
Warrant Agreement to the contrary, the Company shall not issue fractional shares
upon exercise of Warrants. If more than one Warrant certificate shall be
exercised at any one time by the same registered holder, the number of shares of
Common Stock which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of shares of Common Stock purchasable upon
such exercise. If the holder of any Warrant would be entitled, upon the
7
<PAGE>
exercise of such Warrant, to receive a fractional interest in a share, the
Company shall, upon such exercise, purchase such fractional interest at the
current value, determined as follows:
(i) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market or Nasdaq SmallCap Market, the current
value shall be the last reported sale price of the Common Stock on such exchange
on the date of exercise of a Warrant or if no such sale is made on such day, the
average of the closing bid and asked prices for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last reported bid
and asked prices reported by the National Quotation Bureau, Inc. on the date of
the exercise of a Warrant; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
4.9. Form of Warrant. The form of Warrant need not be changed because of
any adjustment pursuant to this Section 4, and Warrants issued after such
adjustment may state the same Warrant Price and the same number of shares as is
stated in the Warrants initially issued pursuant to this Agreement. However, the
Company may at any time in its sole discretion make any change in the form of
Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether
in exchange or substitution for an outstanding Warrant or otherwise, may be in
the form as so changed.
5. Transfer and Exchange of Warrants.
5.1. Registration of Transfer. The Warrant Agent shall register the
transfer, from time to time, of any outstanding Warrant upon the Warrant
Register, upon surrender of a Warrant certificate or, in the case of the Private
Warrants, the form of notice of transfer annexed to the Warrant Agreement, for
transfer, properly endorsed with signatures properly guaranteed and accompanied
by appropriate instructions for transfer. Upon any such transfer, a new Warrant
certificate or, in the case of the Private Warrants, Warrant Agreement,
representing an equal aggregate number of Warrants shall be issued and the old
Warrant certificate (Warrant Agreement) shall be canceled by the Warrant Agent.
The Warrant certificate (Warrant Agreement) so canceled shall be delivered by
the Warrant Agent to the Company from time to time upon request. Notwithstanding
the foregoing, the Warrant Agent shall not be required to issue a new Warrant
upon transfer of a Private Warrant prior to its receipt of an opinion of counsel
acceptable to the Company as to compliance of such transfer with applicable
state and federal securities laws.
5.2. Procedure for Surrender of Warrants. Warrant certificates may be
surrendered
8
<PAGE>
to the Warrant Agent, together with a written request for exchange, and
thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrant certificates as requested by the registered holder of the Warrant
certificates so surrendered, representing an equal aggregate number of Warrants;
provided, however, that in the event that a Warrant certificate surrendered for
transfer bears a restrictive legend, the Warrant Agent shall not cancel such
Warrant certificate and issue new Warrant certificates in exchange therefor
until the Warrant Agent has received an opinion of counsel for the Company
stating that such transfer may be made and indicating whether the new Warrant
certificates must also bear a restrictive legend.
5.3. Fractional Warrants. The Warrant Agent shall not be required to
effect any registration of transfer or exchange which will result in the
issuance of a warrant certificate for a fraction of a warrant.
5.4. Service Charges. No service charge shall be made for any exchange or
registration of transfer of Warrants.
5.5 Warrant Execution and Countersignature. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this
Agreement, the Warrants required to be issued pursuant to the provisions hereof,
and the Company, whenever required by the Warrant Agent, will supply the Warrant
Agent with Warrant certificates duly executed on behalf of the Company for such
purpose.
6. Other Provisions Relating to Rights of Holders of Warrants.
6.1. No Rights as Stockholder. A Warrant does not entitle the registered
holder thereof to any of the rights of a stockholder of the Company, including,
without limitation, the right to receive dividends, or other distributions,
exercise any preemptive rights to vote or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter.
6.2. Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant
certificate is lost, stolen, mutilated, or destroyed, the Company and the
Warrant Agent may on such terms as to indemnity or otherwise as they may in
their discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant certificate of like
denomination, tenor, and date as the Warrant certificate so lost, stolen,
mutilated, or destroyed. Any such new Warrant certificate shall constitute a
substitute contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated, or destroyed Warrant certificate shall be at any time
enforceable by anyone.
6.3. Reservation of Common Stock. The Company shall at all times reserve
and keep available a number of its authorized but unissued shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Warrants issued pursuant to this Agreement.
6.4. Registration of Common Stock. The Company agrees that prior to the
commencement of the Exercise Period it shall file with the Securities and
Exchange Commission
9
<PAGE>
a post-effective amendment to the Registration Statement, if possible, or a new
registration statement, for the registration, under the Securities Act of 1933,
of the Common Stock issuable upon exercise of the Public Warrants. In either
case, the Company agrees to use its best efforts to cause the same to become
effective promptly thereafter and to maintain the effectiveness of such
registration statement and keep current a prospectus thereunder until the
expiration of the Public Warrants in accordance with the provisions of this
Agreement.
7. Concerning the Warrant Agent and Other Matters.
7.1. Payment of Taxes. The Company will from time to time promptly pay all
taxes and charges that may be imposed upon the Company or the Warrant Agent in
respect of the issuance or delivery of shares of Common Stock upon the exercise
of Warrants, but the Company shall not be obligated to pay any transfer taxes in
respect of the Warrants or such shares.
7.2. Resignation, Consolidation, or Merger of Warrant Agent.
7.2.1. Appointment of Successor Warrant Agent. The Warrant Agent, or
any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities (other than those incurred prior to such
resignation or discharge) hereunder after giving sixty (60) days' notice in
writing to the Company. If the office of the Warrant Agent becomes vacant by
resignation or incapacity to act or otherwise, the Company shall appoint in
writing a successor Warrant Agent in place of the Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation or incapacity by the Warrant Agent or by
a holder of Warrants (who shall, with such notice, submit his Warrant for
inspection by the Company), then the holder of any Warrant may apply to the
Supreme Court of the State of Illinois for the county of _______ for the
appointment of a successor Warrant Agent. Any successor Warrant Agent, whether
appointed by the Company or by such court, shall be authorized under the laws of
the state in which it was organized to exercise corporate trust powers, shall
maintain an office in the City of Chicago and State of Illinois for the transfer
of Warrants, shall be subject to supervision or examination by federal or state
authority and shall be authorized to serve as Warrant Agent for the Warrants
under the Securities Exchange Act of 1934, as amended. If at any time the
Warrant Agent shall cease to be eligible in accordance with the provision of
this paragraph, it shall resign immediately. After appointment, any successor
Warrant Agent shall be vested with all the authority, powers, rights,
immunities, duties, and obligations of its predecessor Warrant Agent with like
effect as if originally named as Warrant Agent hereunder, without any further
act or deed; but if for any reason it becomes necessary or appropriate, the
predecessor Warrant Agent shall execute and deliver, at the expense of the
Company, an instrument transferring to such successor Warrant Agent all the
authority, powers, and rights of such predecessor Warrant Agent hereunder; and
upon request of any successor Warrant Agent the Company shall make, execute,
acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.
10
<PAGE>
7.2.2. Notice of Successor Warrant Agent. In the event a successor
Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the Common Stock not later
than the effective date of any such appointment.
7.2.3. Merger or Consolidation of Warrant Agent. Any corporation
into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the
Warrant Agent shall be a party, if it shall be eligible to serve as Warrant
Agent shall be the successor Warrant Agent under this Agreement without any
further act.
7.3. Fees and Expenses of Warrant Agent.
7.3.1. Remuneration. The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent hereunder and
will reimburse the Warrant Agent upon demand for all expenditures that the
Warrant Agent may reasonably incur in the execution of its duties hereunder.
7.3.2. Further Assurances. The Company agrees to perform, execute,
acknowledge, and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Agreement.
7.4. Liability of Warrant Agent.
7.4.1. Reliance on Company Statement. Whenever in the performance
of its duties under this Warrant Agreement, the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
shall be deemed to be conclusively proved and established by a statement signed
by the President of the Company and delivered to the Warrant Agent. The Warrant
Agent may rely upon such statement for any action taken or suffered in good
faith by it pursuant to the provisions of this Agreement.
7.4.2. Indemnity. The Warrant Agent shall be liable hereunder only
for its own negligence or willful misconduct. The Company agrees to indemnify
the Warrant Agent and save it harmless against any and all liabilities,
including judgments, costs and reasonable counsel fees, for anything done or
omitted by the Warrant Agent in the execution of this Agreement except as a
result of the Warrant Agent's negligence, willful misconduct, or bad faith.
7.4.3. Exclusions. The Warrant Agent shall have no responsibility
with respect to the validity of this Agreement or with respect to the validity
or execution of any Warrant (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Warrant; nor shall it be responsible to
make any adjustments required under the provisions of Section 4 hereof or
11
<PAGE>
responsible for the manner, method, or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment;
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Agreement or any Warrant or as to whether any shares
of Common Stock will when issued be valid and fully paid and nonassessable.
7.5. Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of the Company's Common Stock through the exercise of Warrants.
8. Miscellaneous Provisions.
8.1. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns.
8.2. Notices. Any notice, statement or demand authorized by this Warrant
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant to or by the Company shall be sufficiently given or made if sent by
certified mail, or private courier service, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent), as
follows:
Immtech International, Inc.
1890 Maple Avenue
Suite 110
Evanston, Illinois 60201
with a copy to:
John Goebel, Esq.
Gardner, Carton & Douglas
321 North Clark Street
Suite 3300
Chicago, Illinois 60610-4795
Any notice, statement or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be sufficiently given or made if sent by certified mail or private courier
service, postage prepaid, addressed (until another address is filed in writing
by the Warrant Agent with the Company), as follows:
Harris Trust and Savings Bank
12
<PAGE>
Chicago, Illinois
8.3. Applicable Law; Jurisdiction. The validity, interpretation, and
performance of this Agreement and of the Warrants shall be governed in all
respects by the law of the State of Delaware, without giving effect to
principles of conflicts of law. The Company hereby agrees that any action,
proceeding or claim against it arising out of or relating in any way to this
Agreement shall be brought and enforced in the courts of the State of Delaware
or of the United States of America for the _______ District of Delaware, and
irrevocably submits, to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenience forum. Any such
process or summons to be served upon the Company may be served by transmitting a
copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 9.2 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
Company in any action, proceeding or claim.
8.4. Persons Having Rights Under This Agreement. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto and the registered holders of the
Warrants and, for the purposes of Sections 3.3.5 and 6.1 through 6.4 hereof, the
Representative and Consultant, any right, remedy, or claim under or by reason of
this Warrant Agreement or of any covenant, condition, stipulation, promise, or
agreement hereof. The Representative and the Consultant shall be deemed to be a
third-party beneficiary of this Agreement with respect to such Sections. All
covenants, conditions, stipulations, promises, and agreements contained in this
Warrant Agreement shall be for the sole and exclusive benefit of the parties
hereto (and the Representative and Consultant to the extent set forth above) and
their successors and assigns and of the registered holders of the Warrants.
8.5. Examination of the Warrant Agreement. A copy of this Agreement shall
be available at all reasonable times at the office of the Warrant Agent in the
Chicago, Illinois, for inspection by the registered holder of any Warrant. The
Warrant Agent may require any such holder to submit his or her Warrant for
inspection by it.
8.6. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
8.7. Effect of Headings. The Section headings herein are for convenience
only and are not part of this Warrant Agreement and shall not affect the
interpretation thereof.
8.8 Amendment of Terms. The terms and provisions of the Warrants may not
be amended or modified, for example, by extension of the period of exercise or
decrease in the exercise price, without the consent of NCHKSL and Rade, which
consents shall not be unreasonably withheld or delayed. The terms of this
Section shall not apply to the Private Warrants.
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<PAGE>
8.9 Conflicts. Should any term or provision in this Agreement conflict
with any term or provision in the Rade Warrant Agreement or the NCHKSL private
placement Warrant Agreement, the terms and provisions of the Rade Warrant and
the NCHKSL private placement Warrant Agreement shall be deemed correct and shall
supercede any conflicting terms and provisions herein.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto under their respective corporate seals as of the day and year first above
written.
Attest:
- --------------------------------------
Name:
IMMTECH INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title: Officer
Attest:
- --------------------------------------
Name:
14
<PAGE>
HARRIS TRUST AND
SAVINGS BANK
By:
-----------------------------------
Name:
Title:
Attest:
- --------------------------------------
Name:
NEW CHINA HONG KONG
SECURITIES LIMITEDAttest:
By:
-----------------------------------
Name:
Title:
Attest:
- --------------------------------------
Name:
RADE MANAGEMENT CORPORATIONAttest:
By:
-----------------------------------
Name:
Title:
15
WARRANT AGREEMENT
Agreement made as of July __, 1998 between Immtech International, Inc., a
Delaware corporation with offices at 1890 Maple Avenue, Suite 110, Evanston,
Illinois 60201 (the "Company"), and Rade Management Corporation (hereinafter
referred to as the "Consultant").
WHEREAS, the Consultant has agreed to render certain consulting services
to the Company; and
WHEREAS, the Warrants issued pursuant to this Agreement are being issued
by the Company to the Consultant or officers and Affiliates of the Consultant in
consideration for, and as part of the Consultant's compensation for services to
the Company;
WHEREAS, the Company is contemplating a public offering (the "Public
Offering") of 1,333,333 units (the "Units"), each consisting of 25 Shares of
Common Stock (the "Public Shares") and one Warrant (the "Class A Warrant") and
up to 1,333,333 Class B Warrants and 1,333,333 Class C Warrants underlying the
Class A Warrants;
NOW, THEREFORE, in consideration of the premises and agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are herebyacknowledged, the parties hereto agree as follows:
1. Grant.
(a) The Consultant, and/or its designees who are officers or
Affiliates of the Consultant, are hereby granted the right to purchase,
pursuant to the contingencies and provisions set forth in Section 1(b)
hereof, up to 1,950,000 Shares.
(b) The Warrants represented hereby (the "Warrants") are currently
exercisable as to 450,000 shares and become exercisable as to the balance
as follows: (1) as to up to 600,000 Shares, on the closing of the Public
Offering; (2) as to up to 300,000 Shares, on the date the Company
receives, when taken together with the gross proceeds received by the
Company from all prior exercises of Class A Warrants, an aggregate of
$1,500,000 from the exercise of all Class A Warrants in accordance with
their terms; (3) as to up to 300,000 shares of Common Stock, on the date
the Company receives, when taken together with the gross proceeds received
by the Company from all prior exercises of Class B Warrants, an aggregate
of $1,500,000 from the exercise of all Class B Warrants in accordance with
their terms; and (4) as to up to 300,000 shares of Common Stock, on the
date the Company receives, when taken together with the gross proceeds
received by the Company from all prior exercises of Class C Warrants, an
aggregate of $1,500,000 from the exercise of all Class C Warrants in
accordance with their terms. The Warrants will expire proportionately
based upon the number of shares of Common Stock underlying any Class A,
Class B or Class C Warrants issued by the Company to the extent that any
such Class A, Class B or Class C Warrants are unexercised at the
respective expiration dates thereof. To the extent the Warrants become
exercisable, each
<PAGE>
will be exercisable at any time during a five-year term commencing on the
date such Warrant becomes exercisable. The Warrants may not be transferred
for a period of one year from their date of issuance, except to affiliates
of the Underwriter.
2. Exercise of Warrants.
2.1 Cash Exercise. The Warrants initially are exercisable at a price
of $0.05 per Share, payable in cash or by check to the order of the
Company, or any combination of cash or check, subject to adjustment as
provided in Article 8 hereof. Upon surrender of this Warrant Agreement
with the annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price (as hereinafter defined) for the Shares
purchased, at the Company's principal offices or, if a Warrant Agent has
been appointed for this Warrant, the offices of the Warrant Agent, the
registered holder of this Warrant ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each this Warrant are
exercisable at the option of the Holder hereof, in whole or in part (but
not as to fractional Shares). In the case of the purchase of less than all
the Shares purchasable under any this Warrant, the Company or the Transfer
Agent shall cancel the Warrant upon the surrender thereof and shall
execute and deliver a new Warrant Agreement of like tenor for the balance
of the Shares purchasable hereunder.
2.2 Cashless Exercise. At any time during the Warrant Exercise Term,
the Holder may, at its option, exchange this Warrant, in whole or in part
(a "Warrant Exchange"), into the number of Shares determined in accordance
with this Section, by surrendering this Warrant at the principal office of
the Company or at the office of its transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if
later, the date the Notice of Exchange is received by the Company (the
"Exchange Date") or the Warrant Agent. Certificates for the Shares
issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the Shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the
Holder within three business (3) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of Shares (rounded to the
next highest integer) equal to (A) the number of Shares specified by the
Holder in its Notice of Exchange (the "Total Share Number") less (B) the
number of Shares equal to the quotient obtained by dividing (i) the
product of the Total Share Number and the existing Exercise Price per
Share (as hereinafter defined) by (ii) the current market value of a
Public Share.
3. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made forthwith (and in any event within
three business days
<PAGE>
thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article
4 hereof) be issued in the name of, or in such names as may be directed
by, the Holder thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name
other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
The certificates representing the Shares shall be executed on behalf
of the Company by the manual or facsimile signature of the present or any
future Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. The Warrants
represented hereby shall not be issued in certificated form.
Upon exercise of the Warrants, in part or in whole, certificates
representing the Shares, shall bear a legend substantially similar to the
following:
"The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under such
Act relating to the disposition of securities), or (iii) upon the
delivery by the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the Company, stating that an
exemption from registration under such Act is available."
4. Restriction on Transfer of Warrants.
The Holder of Warrants represented hereby, by its acceptance hereof,
covenants and agrees that the Warrants are being acquired as an investment
and not with a view to the distribution thereof, and that the Warrants may
not be sold, transferred, assigned, hypothecated or otherwise disposed of,
in whole or in part, for a period of one (1) year from the date hereof,
except to officers or partners of the Underwriter or to any member of the
selling group participating in the distribution to the public of the
Public Shares and Public Warrants and/or their respective officers or
partners.
5. Price.
<PAGE>
5.1 Initial and Adjusted Exercise Price. The initial exercise price
of each Warrant shall be $0.05 per Share. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the
provisions of the Article.
5.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
5.3 Adjustments of Exercise Price and Number of Shares. The
following adjustments apply to the Exercise Price of the Warrants with
respect to the Shares and the number of Shares purchasable upon exercise
of the Warrants.
5.4 Computation of Adjusted Price. In case the Company shall at any
time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such
dividend or distribution shall forthwith be reduced to a price determined
by dividing:
(a) an amount equal to the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with
the provisions of this Section, the Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed
to have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
5.5 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
5.6 Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares
issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
5.7 Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock
(other than a
<PAGE>
change in par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is
the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock,
except a change as a result of a subdivision or combination of such shares
or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an
entirety, the Holders shall thereafter have the right to purchase the kind
and number of shares of stock and other securities and property receivable
upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owners of the Shares immediately
prior to any such events, at a price equal to the product of (x) the
number of shares issuable upon exercise of the Holders' Warrants and (y)
the Exercise Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if
such Holders had exercised the Warrants.
5.8 Determination of Outstanding Shares of Common Stock. The number
of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares issued or issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
5.9 Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to
its shareholders any monies, assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether
issued by the Company or by another person or entity, or any other thing
of value, the Holder or Holders of the unexercised Warrants shall
thereafter be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, to receive, upon the
exercise of such Warrants, the same monies, property, assets, rights,
evidences of indebtedness, securities or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance
of the provisions of this Subsection.
5.10 Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall
at any time after the date hereof and prior to the exercise of all the
Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the
shareholders of the Company, the Holders of the unexercised Warrants shall
be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Warrants, to receive such rights at
the time such rights are distributed to the other shareholders of the
Company.
6. Exchange and Replacement of Warrants.
<PAGE>
The Warrants represented hereby are exchangeable without expense,
upon the surrender hereof by the registered Holder at the principal
executive office of the Company or the office of the Warrant Agent,
together with the assignment form attached hereto, duly executed and
completed, and payment of all transfer taxes, if any, payable in
connection therewith.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant
Agreement, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company
of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Agreement, if mutilated, the Company will make and
deliver a new Agreement of like tenor, in lieu thereof.
7. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding
any fraction up to the nearest whole number of shares of Common Stock.
8. Reservation and Listing of Securities.
The Company shall at all times reserve and keep avail- able out of
its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants, such number of shares of Common Stock
as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Warrants and payment of the Exercise
Price therefor, all Shares issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. As long as the Warrants shall be
outstanding, the Company shall use its reasonable best efforts to cause
all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by NASDAQ or listed on such national securities
exchanges as the Company's securities might be quoted or listed on.
9. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior
to the expiration of the Warrants and their exercise, any of the following
events shall occur:
<PAGE>
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings,
as indicated by the accounting treatment of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or (c) a
dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company
shall give written notice of such event at least fifteen (15) days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the shareholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription
rights, options or warrants, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any
convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
10. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the following address or to such other
address as the Company may designate by notice to the Holders:
11. Supplements and Amendments.
The Company and the Consultant may from time to time supplement or
amend this Agreement to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Consultant may deem
necessary or desirable and which the Company and the Consultant deem not
to adversely affect the interests of the Holders of Warrants.
12. Successors.
<PAGE>
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
13. Termination.
This Agreement shall terminate at the close of business on _______
1, 200_. Notwithstanding the foregoing, this Agreement will terminate on
any earlier date when all Warrants have been exercised.
14. Governing Law.
This Agreement shall be deemed to be a contract made under the laws
of the State of New York and for all purposes shall be construed in
accordance with the laws of said State.
15. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company and the Under- writer and any other
registered holder or holders of this Warrant or the Shares any legal or
equitable right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company and the
Consultant and any other holder or holders of the Warrant or the Shares.
16. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
IMMTECH INTERNATIONAL, INC.
By:
-----------------------------------------
Name:
Title:
Attest:
- -------------------------------
<PAGE>
RADE MANAGEMENT CORPORATION
By:
-----------------------------------------
Name:
Title:
WARRANT AGREEMENT
Agreement made as of July __, 1998 between Immtech International, Inc., a
Delaware corporation with offices at 1890 Maple Avenue, Suite 110, Evanston,
Illinois 60201 (the "Company"), and New China Hong Kong Securities Limited
(hereinafter referred to as the "Agent").
WHEREAS, the Company proposes to issue to the Agent warrants ("Warrants")
to purchase up to 150,000 shares (the "Shares") of common stock of the Company,
$.01 par value (the "Common Stock"); and
WHEREAS, the Agent has agreed, pursuant to a certain Letter Agreement
dated June 5, 1998 by and between the Company and the Agent (the "Letter
Agreement"), to act as the placement agent in connection with the Company's
proposed private offering (the "Private Offering") of 1,150,000 shares of Common
Stock.
WHEREAS, the Warrants issued pursuant to this Agreement are being issued
by the Company to the Agent or officers and partners of the Agent in
consideration for, and as part of the Agent's compensation in connection with,
the Agent acting as the placement agent pursuant to the Letter Agreement;
WHEREAS, the Company is contemplating a public offering (the "Public
Offering") of 1,333,333 units, each consisting of two (2) shares of Common Stock
(the "Public Shares") and one Warrant (the "Class A Warrant"), and up to
1,333,333 Class B Warrants and 1,333,333 Class C Warrants underling the Class A
Warrants;
NOW, THEREFORE, in consideration of the premises and agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant.
The Agent, and/or its designees who are officers or partners of the Agent
in connection with the Private Offering, are hereby granted the right to
purchase, up to 150,000 Shares.
2. Exercise of Warrants.
2.1. Cash Exercise. The Warrants initially are exercisable at a
price of $0.05 per Share, payable in cash or by check to the order of the
Company, or any combination of cash or check, subject to adjustment as
provided in Article 8 hereof. Upon surrender of this Warrant Agreement
with the annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price (as hereinafter defined) for the Shares
purchased, at the Company's principal offices or, if a Warrant Agent has
been appointed for this Warrant, the offices of the Warrant Agent, the
registered holder of this Warrant
<PAGE>
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the Shares so purchased. The purchase rights represented
by each Warrant are exercisable at the option of the Holder hereof, in
whole or in part (but not as to fractional Shares). In the case of the
purchase of less than all the Shares purchasable under any Warrant, the
Company or the Transfer Agent shall cancel the Warrant upon the surrender
thereof and shall execute and deliver a new Warrant Agreement of like
tenor for the balance of the Shares purchasable hereunder.
2.2. Cashless Exercise. At any time during the Warrant Exercise
Term, the Holder may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange"), into the number of Shares determined in
accordance with this Section, by surrendering this Warrant at the
principal office of the Company or at the office of its transfer agent,
accompanied by a notice stating such Holder's intent to effect such
exchange, the number of Shares to be exchanged and the date on which the
Holder requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of Exchange is
received by the Company (the "Exchange Date") or the Warrant Agent.
Certificates for the Shares issuable upon such Warrant Exchange and, if
applicable, a new warrant of like tenor evidencing the balance of the
Shares remaining subject to this Warrant, shall be issued as of the
Exchange Date and delivered to the Holder within three business (3) days
following the Exchange Date. In connection with any Warrant Exchange, the
Warrant shall represent the right to subscribe for and acquire the number
of Shares (rounded to the next highest integer) equal to (A) the number of
Shares specified by the Holder in its Notice of Exchange (the "Total Share
Number") less (B) the number of Shares equal to the quotient obtained by
dividing (i) the product of the Total Share Number and the existing
Exercise Price per Share (as hereinafter defined) by (ii) the current
market value of a Public Share.
3. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for the
Shares purchased shall be made forthwith (and in any event within three business
days thereafter) without charge to the Holder thereof including, without
limitation, any tax which may be payable in respect of the issuance thereof, and
such certificates shall (subject to the provisions of Article 4 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The certificates representing the Shares shall be executed on behalf of
the Company by the manual or facsimile signature of the present or any future
Chairman or Vice Chairman of the Board of Directors or President or Vice
President of the Company under its corporate seal
2
<PAGE>
reproduced thereon, attested to by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. The
Warrants represented hereby shall not be issued in certificated form.
Upon exercise of the Warrants, in part or in whole, certificates
representing the Shares, shall bear a legend substantially similar to the
following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may not be
offered or sold except (i) pursuant to an effective registration statement
under the Act, (ii) to the extent applicable, pursuant to Rule 144 under
the Act (or any similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the Company of an
opinion of counsel, reasonably satisfactory to counsel to the Company,
stating that an exemption from registration under such Act is available."
4. Restriction on Transfer of Warrants.
The Holder of Warrants represented hereby, by its acceptance hereof,
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof, and that the Warrants may not be
sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part, for a period of one (1) year from the date hereof, except to officers
or partners of the Agent or to any member of the selling group participating in
the distribution of the Public Shares and Public Warrants and/or their
respective officers or partners.
5. Price.
5.1. Initial and Adjusted Exercise Price. The initial exercise price
of each Warrant shall be $0.05 per Share. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the
provisions of this Article.
5.2. Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
5.3. Adjustments of Exercise Price and Number of Shares. The
following adjustments apply to the Exercise Price of the Warrants with
respect to the Shares and the number of Shares purchasable upon exercise
of the Warrants.
5.4. Computation of Adjusted Price. In case the Company shall at any
time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such
dividend or distribution shall forthwith be reduced to a price determined
by dividing: (a) an amount equal to the total number of shares of
3
<PAGE>
Common Stock outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior
to such dividend or distribution, by (b) the total number of shares of
Common Stock outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with the
provisions of this Section, the Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the date following the date
fixed for the determination of stockholders entitled to receive such dividend or
other distribution.
5.5. Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
5.6. Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares
issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
5.7. Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock,
except a change as a result of a subdivision or combination of such shares
or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an
entirety, the Holders shall thereafter have the right to purchase the kind
and number of shares of stock and other securities and property receivable
upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owners of the Shares immediately
prior to any such events, at a price equal to the product of (x) the
number of shares issuable upon exercise of the Holders' Warrants and (y)
the Exercise Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if
such Holders had exercised the Warrants.
5.8. Determination of Outstanding Shares of Common Stock. The number
of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares issued or issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
4
<PAGE>
5.9. Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to
its shareholders any monies, assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether
issued by the Company or by another person or entity, or any other thing
of value, the Holder or Holders of the unexercised Warrants shall
thereafter be entitled, in addition to the shares of Common Stock or other
securities receivable upon the exercise thereof, to receive, upon the
exercise of such Warrants, the same monies, property, assets, rights,
evidences of indebtedness, securities or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance
of the provisions of this Subsection.
5.10. Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall
at any time after the date hereof and prior to the exercise of all the
Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the
shareholders of the Company, the Holders of the unexercised Warrants shall
be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Warrants, to receive such rights at
the time such rights are distributed to the other shareholders of the
Company.
6. Exchange and Replacement of Warrants.
The Warrants represented hereby are exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company or the office of the Warrant Agent, together with the assignment
form attached hereto, duly executed and completed, and payment of all transfer
taxes, if any, payable in connection therewith.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant Agreement, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Agreement, if
mutilated, the Company will make and deliver a new Agreement of like tenor, in
lieu thereof.
7. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
5
<PAGE>
8. Reservation and Listing of Securities.
The Company shall at all times reserve and keep avail able out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all Shares
issuable upon such exercise shall be duly and validly issued, fully paid,
non-assessable and not subject to the preemptive rights of any shareholder. As
long as the Warrants shall be outstanding, the Company shall use its reasonable
best efforts to cause all shares of Common Stock issuable upon the exercise of
the Warrants to be listed on or quoted by NASDAQ or listed on such national
securities exchanges as the Company's securities might be quoted or listed on.
9. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring upon
the Holder or Holders the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive
a dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale
of all or substantially all of its property, assets and business as
an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any
6
<PAGE>
convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
10. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly made when delivered, or
mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address
of such Holder as shown on the books of the Company; or
(b) If to the Company, to the following address or to such
other address as the Company may designate by notice to the Holders:
11. Supplements and Amendments.
The Company and the Agent may from time to time supplement or amend this
Agreement to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Agent may deem necessary or
desirable and which the Company and the Agent deem not to adversely affect the
interests of the Holders of Warrant.
12. Successors.
All the covenants and provisions of this Agreement by or for the benefit
of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
13. Termination.
This Agreement shall terminate at the close of business on _______ 1,
200_. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised.
14. Governing Law.
This Agreement shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of said State.
15. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Agent and any other registered Holder
or Holders of this Warrant or the Shares any legal or equitable right, remedy or
claim under this Agreement; and this
7
<PAGE>
Agreement shall be for the sole and exclusive benefit of the Company and the
Agent and any other Holder or Holders of the Warrant or the Shares.
16. Counterparts.
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
IMMTECH INTERNATIONAL, INC.
Attest: By:
--------------------------- ----------------------------------
Name: Name:
--------------------------- ----------------------------------
Title:
----------------------------------
NEW CHINA HONG KONG SECURITIES LIMITED
Attest: By:
--------------------------- ----------------------------------
Name: Name:
--------------------------- ----------------------------------
Title:
----------------------------------
8
WARRANT AGREEMENT
Agreement made as of November __, 1998 between Immtech International,
Inc., a Delaware corporation with offices at 1890 Maple Avenue, Suite 110,
Evanston, Illinois 60201 (the "Company"), and New China Hong Kong Securities
Limited (hereinafter referred to as the "Underwiter").
WHEREAS, the Company proposes to issue to the Underwriter warrants
("Warrants") to purchase up to 500,000 shares (the "Shares") of common stock of
the Company, $.01 par value (the "Common Stock"); and
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated November ___, 1998 between the
Underwriter and the Company, to act as the underwriter in connection with the
Company's proposed public offering (the "Public Offering") of 1,333,333 units
(the "Units"), each consisting of 2 shares of Common Stock (the "Public Shares")
and one warrant (the "Class A Warrant) at an initial public offering price of
$3.00 per Unit and up to 2,666,666 underlying warrants (the "Class B and Class C
Warrants").
WHEREAS, the Warrants issued pursuant to this Agreement are being issued
by the Company to the Underwriter or officers and partners of the Underwriter in
consideration for, and as part of the Underwriter's compensation in connection
with, the Underwriter acting as the underwriter pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises and agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant.
(a) The Underwriter, and/or its designees who are officers or
partners of the Underwriter in connection with the Public Offering, are
hereby granted the right to purchase, pursuant to the contingencies and
provisions set forth in Section 1(b) hereof, up to 500,000 Shares.
(b) The Warrants represented hereby (the "Underwriter's Warrants")
become exercisable as follows: (1) as to up to 200,000 Shares, on the
closing of the Public Offering; (2) as to up to 100,000 Shares, on the
date the Company receives, when taken together with the gross proceeds
received by the Company from all prior exercises of Class A Warrants, an
aggregate of $1,500,000 from the exercise of all Class A Warrants in
accordance with their terms; (3) as to up to 100,000 shares of Common
Stock, on the date the Company receives, when taken together with the
gross proceeds received by the Company from all prior exercises of Class B
Warrants, an aggregate of $1,500,000from the exercise of all Class B
Warrants in accordance with their terms; and (4) as to up to 100,000
shares of Common Stock, on the date the Company receives, when taken
<PAGE>
together with the gross proceeds received by the Company from all prior
exercises of Class C Warrants, an aggregate of $1,500,000 from the
exercise of all Class C Warrants in accordance with their terms. The
Underwriter's Warrants will expire proportionately based upon the number
of shares of Common Stock underlying any Class A, Class B or Class C
Warrants issued by the Company to the extent that any such Class A, Class
B or Class C Warrants are unexercised at the respective expiration dates
thereof. To the extent theUnderwriter's Warrants become exercisable, each
will be exercisable at any time during a five-year term commencing on the
date such Warrant becomes exercisable. The Underwriter's Warrants may not
be transferred for a period of one year from their date of issuance,
except to affiliates of the Underwriter.
2. Exercise of Warrants.
2.1 Cash Exercise. The Warrants initially are exercisable at a price
of $0.05 per Share, payable in cash or by check to the order of the
Company, or any combination of cash or check, subject to adjustment as
provided in Article 8 hereof. Upon surrender of this Warrant Agreement
with the annexed Form of Election to Purchase duly executed, together with
payment of the Exercise Price (as hereinafter defined) for the Shares
purchased, at the Company's principal offices or, if a Warrant Agent has
been appointed for this Warrant, the offices of the Warrant Agent, the
registered holder of this Warrant ("Holder" or "Holders") shall be
entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each this Warrant are
exercisable at the option of the Holder hereof, in whole or in part (but
not as to fractional Shares). In the case of the purchase of less than all
the Shares purchasable under any this Warrant, the Company or the Transfer
Agent shall cancel the Warrant upon the surrender thereof and shall
execute and deliver a new Warrant Agreement of like tenor for the balance
of the Shares purchasable hereunder.
2.2 Cashless Exercise. At any time during the Warrant Exercise Term,
the Holder may, at its option, exchange this Warrant, in whole or in part
(a "Warrant Exchange"), into the number of Shares determined in accordance
with this Section, by surrendering this Warrant at the principal office of
the Company or at the office of its transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Holder requests that such
Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if
later, the date the Notice of Exchange is received by the Company (the
"Exchange Date") or the Warrant Agent. Certificates for the Shares
issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the Shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the
Holder within three business (3) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the
right to subscribe for and acquire the number of Shares (rounded to the
next highest integer) equal to (A) the number of Shares specified by the
Holder in its Notice of Exchange (the "Total Share Number") less (B) the
number of Shares equal to the quotient obtained by dividing (i) the
product of the
2
<PAGE>
Total Share Number and the existing Exercise Price per Share (as
hereinafter defined) by (ii) the current market value of a Public Share.
3. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of certificates for
the Shares purchased shall be made forthwith (and in any event within
three business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of
the issuance thereof, and such certificates shall (subject to the
provisions of Article 4 hereof) be issued in the name of, or in such names
as may be directed by, the Holder thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such
certificates in a name other than that of the Holder and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The certificates representing the Shares shall be executed on behalf
of the Company by the manual or facsimile signature of the present or any
future Chairman or Vice Chairman of the Board of Directors or President or
Vice President of the Company under its corporate seal reproduced thereon,
attested to by the manual or facsimile signature of the present or any
future Secretary or Assistant Secretary of the Company. The Warrants
represented hereby shall not be issued in certificated form. Upon exercise
of the Warrants, in part or in whole, certificates representing the
Shares, shall bear a legend substantially similar to the following:
"The securities represented by thiscertificate have not been
registered underthe Securities Act of 1933, as amended (the "Act"),
and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act, (Act (or any similar rule
under such Act relating to the disposition of securities), or (iii)
upon the delivery by the holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel to the Company, stating
that an exemption from registration under such Act is available."
4. Restriction on Transfer of Warrants.
The Holder of Warrants represented hereby, by its acceptance hereof,
covenants and agrees that the Warrants are being acquired as an investment
and not with a view to the distribution thereof, and that the Warrants may
not be sold, transferred, assigned, hypothecated or otherwise disposed of,
in whole or in part, for a period of one (1) year from the date hereof,
except to officers or partners of the Underwriter or to any member
3
<PAGE>
of the selling group participating in the distribution to the public of
the Public Shares and Public Warrants and/or their respective officers or
partners.
5. Price.
5.1 Initial and Adjusted Exercise Price. The initial exercise price
of each Warrant shall be $0.05 per Share. The adjusted exercise price
shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the
provisions of this Article.
5.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
5.3 Adjustments of Exercise Price and Number of Shares. The
following adjustments apply to the Exercise Price of the Warrants with
respect to the Shares and the number of Shares purchasable upon exercise
of the Warrants.
5.4 Computation of Adjusted Price. In case the Company shall at any
time after the date hereof pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, then upon such dividend or
distribution the Exercise Price in effect immediately prior to such
dividend or distribution shall forthwith be reduced to a price determined
by dividing:
(a) an amount equal to the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend or
distribution, by
(b) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with
the provisions of this Section, the Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed
to have been issued immediately after the opening of business on the date
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
5.5 Subdivision and Combination. In case theCompany shall at any
time subdivide or proportionately decreased in the case of subdivision or
increased in the case of combination.
5.6 Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Article, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.
4
<PAGE>
5.7 Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Common Stock
(other than a change in par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in the case
of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation and which does not result in any
reclassification or change of the outstanding shares of Common Stock,
except a change as a result of a subdivision or combination of such shares
or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an
entirety, the Holders shall thereafter have the right to purchase the kind
and number of shares of stock and other securities and property receivable
upon such reclassification, change, consolidation, merger, sale or
conveyance as if the Holders were the owners of the Shares immediately
prior to any such events, at a price equal to the product of (x) the
number of shares issuable upon exercise of the Holders' Warrants and (y)
the Exercise Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if
such Holders had exercised the Warrants.
5.8 Determination of Outstanding Shares of Common Stock. The number
of shares of Common Stock at any one time outstanding shall include the
aggregate number of shares issued or issuable upon the exercise of
options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
5.9 Dividends and Other Distributions with Respect to Outstanding
Securities. In the event that the Company shall at any time prior to the
exercise of all Warrants declare a dividend (other than a dividend
consisting solely of shares of Common Stock) or otherwise distribute to
its shareholders any monies, assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether
issued by the Company or by another person or entity, or any other thing
of value, the Holder or Holders of the unexercised Warrants
shallthereafter be entitled, in addition to the shares of Common Stock or
other securities receivable upon the exercise thereof, to receive, upon
the exercise of such Warrants, the same monies, property, assets, rights,
evidences of indebtedness, securities or any other thing of value that
they would have been entitled to receive at the time of such dividend or
distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance
of the provisions of this Subsection.
5.10 Subscription Rights for Shares of Common Stock or Other
Securities. In the case the Company or an affiliate of the Company shall
at any time after the date hereof and prior to the exercise of all the
Warrants issue any rights to subscribe for shares of Common Stock or any
other securities of the Company or of such affiliate to all the
shareholders of the ompany, the Holders of the unexercised Warrants shall
be entitled, in addition to the shares of Common Stock or other securities
receivable upon the exercise of the Warrants, to receive such rights at
the time such rights are distributed to the other shareholders of the
Company.
5
<PAGE>
6. Exchange and Replacement of Warrants.
The Warrants represented hereby are exchangeable without expense,
upon the surrender hereof by the registered Holder at the principal
executive office of the Company or the office of the Warrant Agent,
together with the assignment form attached hereto, duly executed and
completed, and payment of all transfer taxes, if any, payable in
connection therewith. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant Agreement, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and reimbursement to
the Company of all reasonable expenses incidental thereto, and upon
surrender and cancellation of this Agreement, if mutilated, the Company
will make and deliver a new Agreement of like tenor, in lieu thereof.
7. Elimination of Fractional Interests.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding
any fraction up to the nearest whole number of shares of Common Stock.
8. Reservation and Listing of Securities.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon
the exercise of the Warrants, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of the Warrants and payment of the Exercise
Price therefor, all Shares issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. As long as the Warrants shall be
outstanding, the Company shall use its reasonable best efforts to cause
all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by NASDAQ or listed on such national securities
exchanges as the Company's securities might be quoted or listed on.
9. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive
notice as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior
to the expiration of the Warrants and their exercise, any of the following
events shall occur:
6
<PAGE>
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings,
as indicated by the accounting treatment of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed; then, in any one or more of said events, the Company
shall give written notice of such event at least fifteen (15) days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the shareholders entitled to such dividend,
distribution, convertible or exchangeable securities or subscription
rights, options or warrants, or entitled to vote on such proposed
dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any
convertible or exchangeable securities or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
10. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or (b) If to the
Company, to the following address or to such other address as the Company
may designate by notice to the Holders:
11. Supplements and Amendments.
The Company and the Underwriter may from time to time supplement or
amend this Agreement to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Underwriter may deem
necessary or desirable and which the Company and the Underwriter deem not
to adversely affect
7
<PAGE>
12. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
13. Termination.
This Agreement shall terminate at the close of business
on _______ 1, 200_. Notwithstanding the foregoing, this Agreement
will terminate on any earlier date when all Warrants have been
exercised.
14. Governing Law.
This Agreement shall be deemed to be a contract made under the laws
of the State of New York and for all purposes shall be construed in
accordance with the laws of said State.
15. Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company and the Underwriter and any other
registered holder this Agreement; and this Agreement shall be for the sole
and exclusive benefit of the Company and the Underwriter and any other
holder or holders of the Warrant or the Shares.
16. Counterparts.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
IMMTECH INTERNATIONAL, INC.
Attest: By:
--------------------------- ---------------------------------------
Name: Name:
--------------------------- Title:
8
<PAGE>
NEW CHINA HONG KONG SECURITIES
LIMITED
Attest: By:
--------------------------- ---------------------------------------
Name: Name:
--------------------------- Title:
9
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of December __, 1992, by and among Immtech
International, Inc., a Wisconsin corporation (the "Company"), Marquette Venture
Partners II, L.P., a Delaware limited partnership ("Marquette"), and each of the
other investors listed on the Schedule of Investors attached hereto and who
executes a signature page to this Agreement (collectively with Marquette, the
"Investors").
The Company and Marquette are parties to this Agreement are parties
to a Stock Purchase Agreement of even date herewith (the "Purchase Agreement").
In order to induce Marquette to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the Closing under the
Purchase Agreement. Unless otherwise provided in this Agreement, capitalized
terms used herein shall have the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after the date of this
Agreement, the holders of a majority of the Registrable Securities may request
registration under the Securities Act of all or part of their Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations"), and the holders of a majority of the Registrable Securities may
request registration under the Securities Act of all or part of their
Registrable Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten days after receipt of any such request, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 20 days after the receipt of the Company's notice. All
registrations requested pursuant to this paragraph 1(a) are referred to herein
as "Demand Registrations".
<PAGE>
(b) Long-Form Registrations. The holders of Registrable Securities
will be entitled to request two Long-Form Registrations hereunder; provided that
no registration initiated as a Long-Form Registration will count as a Long-Form
Registration unless it has become effective under the Securities Act and unless
and until the holders of Registrable Securities are able to register and sell at
least 90% of the Registrable Securities requested to be included in such
registration; provided that in any event the Company will pay all Registration
Expenses in connection with any registration initiated as a Long-Form
Registration whether or not it has become effective. All Long-Form Registrations
shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of Registrable
Securities will be entitled to request unlimited Short-Form Registrations.
Demand Registrations will be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. Once the Company has become subject
to the reporting requirements of the Securities Exchange Act, the Company will
use its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) Priority on Demand Registrations. The Company will not include
in any Demand Registration any securities which are not Registrable Securities
(other than securities with respect to which Criticare Systems, Inc. has
piggyback registration rights) without the prior written consent of the holders
of a majority of the Registrable Securities included in such registration. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder, other securities requested to be
included in such offering exceeds the number of Registrable Securities and other
securities, if any, which can be sold therein without adversely affecting the
marketability of the offering, the Company will include in such registration
prior to the inclusion of any securities which are not Registrable Securities
the number of Registrable Securities requested to be included which in the
opinion of such underwriters can be sold without adversely affecting the
marketability of the offering, pro rata among the respective holders thereof on
the basis of the amount of Registrable Securities owned by each such holder.
(e) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within 180 days after the effective
date of a previous Demand Registration.
-2-
<PAGE>
(f) Selection of Underwriters. The holders of a majority of the
Registrable Securities included in any Demand Registration will have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the Company, which approval will not be unreasonably
withheld.
(g) Other Registration Rights. Except as provided in this Agreement,
the Company will not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Registrable Securities; provided
that the Company may grant rights to other Persons to participate in Piggyback
Registrations so long as such rights are subordinate to the rights of the
holders of Registrable Securities with respect to such Piggyback Registrations.
(h) Demand Registration Expenses. The Registration Expenses of the
holders of Registrable Securities in all Demand Registrations will be paid by
the Company in accordance with paragraph 5 hereof.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register
any of its Common Stock under the Securities Act (other than pursuant to a
Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 20 days after the receipt of the
Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities in all Piggyback Registrations will be paid by the
Company in accordance with paragraph 5 hereof.
(c) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in
-3-
<PAGE>
such registration, pro rata among the holders of such Registrable Securities on
the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (other than a Demand Registration), and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the marketability of the
offering, the Company will include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration and the Registrable Securities requested to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of securities owned by each such holder, and (ii) second, other
securities requested or permitted to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by the holders of a majority of the Registrable
Securities included in such Piggyback Registration. Such approval will not be
unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities, until
a period of at least 90 days has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of equity
securities of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
90-day period beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which
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Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 90-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration (except as part
of such underwritten registration or pursuant to registrations on Form S-8 or
any successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) to cause each holder of its equity securities
(or any securities convertible into or exchangeable or exercisable for such
equity securities) purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144) of any
such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Series A
or Series B Preferred held by a holder of Registrable Securities requesting
registration as to which the Company has received reasonable assurances that
only Registrable Securities will be distributed to the public), and pursuant
thereto the Company will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed, which documents
will be subject to the review of such counsel);
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be
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necessary to keep such registration statement effective for a period of not less
than 90 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and
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<PAGE>
Exchange Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect to such
Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement, provided
that upon the reasonable request of the Company, any person to whom any
proprietary information is made available shall agree to maintain the
confidentiality of such proprietary information, except if disclosure is
required by judicial decree or applicable law or such proprietary information
otherwise becomes publicly available;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder might
be deemed to be an underwriter or a controlling person of the Company, (i) to
review and comment on the registration or comparable statement to be filed with
the Securities and Exchange Commission, and all preliminary versions thereof,
(ii) to require
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<PAGE>
the insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of such holder and its counsel should be included
therein in order to reduce the risk that such holder may be deemed to be an
underwriter or a controlling person of the Company, or to reduce the risk and
potential liability associated therewith in the event that such holder is deemed
to be an underwriter or controlling person of the Company (including, without
limitation, that the holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
such holder will assist in meeting any future financial requirements of the
Company); provided that such material does not contain a material misstatement
or omission; and (iii) in the event that reference to such holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force, the deletion of any reference to such holder (provided that such
holder shall furnish to the Company an opinion of counsel to such effect, which
opinion shall be reasonably satisfactory to the Company);
(1) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities;
(m) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement); and
(n) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and
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delivery expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company.
Registration Expenses shall also include the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
initially requesting such registration.
(c) Each holder of securities included in any registration hereunder
will pay any discounts and commissions incurred upon the sale of such
securities.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
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<PAGE>
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
will be individual to each holder and will be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
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<PAGE>
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder and
such holder's intended method of distribution.
8. Definitions.
(a) "Common Stock" means the Company's Common Stock, par value $.10
per share.
(b) "Registrable Securities" means (i) any Common Stock issued upon
the conversion of any Series A Preferred issued pursuant to the Purchase
Agreement (including any Series A Preferred issued in accordance with paragraph
2C of the Purchase Agreement), (ii) any Common Stock issued upon the conversion
of any Series B Preferred issued upon exercise of the options set forth in
paragraph 8A of the Purchase Agreement), and (iii) any Common Stock issued or
issuable with respect to the securities referred to in clauses (i) and (ii) by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public pursuant to
a offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force). For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable Securities whenever such
Person has the right to acquire directly or indirectly such Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected.
(c) "Series A Preferred" means the Company's Series A Participating
Preferred Stock, $0.01 par value per share.
(d) "Series B Preferred" means the Company's Series B Participating
Preferred Stock, $0.01 par value per share.
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<PAGE>
(e) Unless otherwise stated herein, all other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of a majority of the Registrable
Securities.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
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<PAGE>
(f) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. All questions concerning the relative rights of
the Company and its stockholders and the construction, validity and
interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by and construed in accordance with the domestic laws of the State of
Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
(j) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to each Investor (other than Marquette) at the
address listed on such Investor's signature page to this Agreement and to the
company and Marquette at the addresses indicated below:
to the Company: Immtech International, Inc.
1890 Maple Avenue, Suite 110
Evanston, Illinois 60201
Attn: President
with a copy to: Walsh & Keating
310 W. Wisconsin Avenue, Suite 1010
Milwaukee, Wisconsin 53203
Attn: Gerald Walsh
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<PAGE>
to Marquette: Marquette Venture Partners II, L.P.
Corporate 500 Centre, Suite 450
520 Lake Cook Road
Deerfield, Illinois 60015
Attn: John Patience
with a copy to: Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Keith S. Crow, Esq.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
* * * * *
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SIGNATURE PAGE TO REGISTRATION AGREEMENT
Name of Investor: ________________________________________
Notice Address: ________________________________________
________________________________________
________________________________________
Signature: ________________________________________
By:
Its:
<PAGE>
SCHEDULE OF INVESTORS
Richard Lione
Merlin N. Olson
First Trust, N.A. F/B/O R. Struyk
Anderson Limited Partnership
Jon Cyganiak
Raymond Reister
Walter Gustavson
Thomas Moe
First Bank, N.A. F/B/O Thomas Moe
John D. Levine
Mildred S. Hanson, M.D.
James & Marjorie Larson
Phillip H. Martin
Melvern & Marvin Janisch
Robert Struyk
T. Stephen Thompson
N.C. Joseph Lai
Gerhard Von Der Ruhr
MML Investment Partnership
FINANCIAL CONSULTING AGREEMENT
This Financial Consulting Agreement (the "Agreement") is made as of
May 15, 1998, by and between Immtech International, Inc. ("Immtech" or the
"Company") and RADE Management Corporation ("Rade").
R E C I T A L S :
A. Immtech is a privately held biotech company. The largest single
shareholder of Immtech is Criticare Systems, Inc. ("Criticare").
B. Immtech needs additional capital to further the development of
its products and believes that raising capital would be facilitated by becoming
a publicly traded company.
C. Rade employs individuals and engages consultants who are
knowledgeable with respect to the capital markets throughout the world. Rade is
willing to employ its expertise to advise Immtech with respect to steps it
should take to make itself more attractive to potential investors.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein the parties hereby agree as follows:
1. Engagement
1.1 The Company hereby engages Rade to serve as a financial advisor to the
Company. As such, Rade will advise the Company regarding its capital needs and
how they might be met. In particular, Rade will advise the Company as to how to
become publicly traded so that the Company might more easily access capital
markets throughout the world.
1.2 The initial specific steps to be undertaken by Rade will include:
(a) analyzing the objectives of Immtech with respect to it capital
raising activities;
(b) assisting the Company in determining the potential benefits
and drawbacks of various transaction structures; and
(c) assisting the Company in its initial discussions with its
lawyers and accountants, and with potential investors and
investment bankers.
Once the Company has determined a course of action, Rade's
responsibilities will include:
<PAGE>
(a) advising the Company with respect to the preparation of
offering memoranda, deal documents and other documents which
may be required, such as employment agreements, option
agreements, etc.
(b) assisting management in responding to and preparing for due
diligence inquiries;
(c) advising the Company with respect to particular points of
negotiation; and,
(d) advising the Company with respect to the preparation of final
deal documents.
2. Fees
2.1 Rade's compensation for the services that it may render hereunder
shall be 1,950,000 warrants to purchase common stock of the Company (after
giving effect to such reverse stock split as may be necessary for Immtech to
achieve the capital structure contemplated by the proposal for an equity
investment previously discussed by Immtech and Rade) (the "Warrants"); provided,
however, that the right to exercise such Warrants shall vest (i) as to 450,000
shares if, and only if, the Company receives a capital infusion of no less than
$1 million on or before August 1, 1998; (ii) as to an additional 600,000 shares
if, and only if, the Company receives an additional capital infusion of no less
than $4 million on or before October 15, 1998; (iii) as to an additional 300,000
shares if, and only if, the Company receives an additional capital infusion of
no less than $2 million on or before December 31, 1998; (iv) as to an additional
300,000 shares if, and only if, the Company receives an additional capital
infusion of no less than $2 million on or before March 31, 1999 and (v) as to
the remaining 300,000 shares if, and only if, the Company receives an additional
capital infusion of no less than $2 million on or before June 30, 1999.
2.2 In addition, upon the funding of the initial $1 million in equity
contemplated above, Rade will be reimbursed (or advanced) by the Company $50,000
against expenses (including, without limitation, legal and accounting fees)
incurred in connection with services rendered to the Company. On or before June
30, 1999, Rade will deliver documentation of the expenses incurred to the
Company or return to the Company the unused portion of the aforesaid advances
2.3 The fee provided for in Section 2.1 is premised upon Rade's current
understanding of the Company's financial needs and its willingness to fulfill
such needs through offerings structured substantially in the manner discussed by
Rade and the Company prior hereto. If the structure of the contemplated
transactions changes,
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<PAGE>
appropriate adjustment will be made to the Warrants issuable pursuant to Section
2.1.
2.4 The parties confirm that Rade is not responsible for or expected to
introduce the Company to any potential investors and the Warrants referred to in
Section 2.1 shall be exercisable and the amounts referred to in Section 2.2
shall be payable upon receipt of appropriate funding by the Company, regardless
of its source.
3. Indemnification
The Company agrees to the indemnification and contribution
provisions annexed hereto in Exhibit A and incorporated herein by reference.
4. Term
The term of the Agreement shall extend until September 30, 1999,
provided the Company may terminate this Agreement at any time upon sixty (60)
days prior notice to Rade.
Notwithstanding anything to the contrary contained herein, neither
expiration or termination of this Agreement shall effect Rade's right to receive
and, upon satisfaction of the appropriate conditions, exercise the Warrants, and
the provisions hereof regarding confidentiality, indemnification and
contribution, all of which shall survive.
5. Information
The Company recognizes and confirms that in performing its duties
pursuant to this Agreement, Rade will be using and relying on data, material,
and other information (the "Information") furnished by the Company and its
employees and representatives (including, without limitation, its legal counsel
and accountants) and on information available from generally recognized public
sources without any independent investigation or verification thereof. Rade
assumes no responsibility for the accuracy or completeness of the Information.
In rendering its services hereunder, Rade will not make an appraisal or
independent evaluation of any of the assets or liabilities of the Company. Rade
understands that the Information that the Company will furnish to it (other than
that portion of the Information that is publicly available) is confidential and
will take appropriate actions to maintain the confidentiality of the
Information.
6. Enforceability.
The failure of either party at any time to require performance by
the other party of any provision hereunder shall in no way affect the right of
that party thereafter to enforce the
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<PAGE>
same, nor shall it affect any other party's right to enforce the same, or to
enforce any of the other provisions in this Agreement; nor shall the waiver by
either party of the breach of any provision hereof be taken or held to be a
waiver of any subsequent breach of such provision or as a waiver of the
provision itself.
7. Assignment.
This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be sold, transferred, assigned, pledged or hypothecated by either
party hereto without the prior written consent of the other party.
8. Notice.
Any notice, request, instrument or other document to be given under
this Agreement by either party hereto to the other shall be in writing and shall
be deemed effective (a) upon personal delivery, if delivered by hand, (b) three
(3) days after the date of deposit in the mails, postage prepaid, if mailed by
certified or registered mail, or (c) on the next business day, if sent by a
prepaid overnight courier service, and in each case addressed as follows:
If to the Company:
Steve Thompson
Immtech International, Inc.
1890 Maple Avenue, Suite 110
Evanston, Illinois 60201
FAX: 847-869-0045
with a copy to:
John Goebel, Esq.
Gardner, Carton & Douglas
321 North Clark Street
Chicago, Illinois 60610-4795
FAX 312-644-3381
If to Rade:
RADE Management Corporation
1 North End Avenue
Suite 1111
New York, New York 10282
Attention: James Ng
FAX 212-791-2917
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<PAGE>
with a copy to:
Phillips Nizer Benjamin Krim & Ballon LLP
666 Fifth Avenue New York,
New York 10103-0084
Attention: Vincent J. McGill, Esq.
Fax: 212-262-5152
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
9. Miscellaneous.
9.1 The headings contained in this Agreement are for reference purposes
only, and shall not affect the meaning or interpretation of this Agreement.
9.2 This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflict of law
principles thereof.
9.3 This Agreement, represents the entire agreement between the Company
and the Consultant with respect to the subject matter hereof, and all prior
agreements relating to the engagement of the Consultant, written or oral, are
nullified and superseded hereby.
9.4 This Agreement may not be orally canceled, changed, modified or
amended, and no cancellation, change, modification or amendment shall be
effective or binding, unless in writing and signed by both parties to this
Agreement, and any provision hereof may be waived only by an instrument in
writing signed by the party or parties against whom or which enforcement of such
waiver is sought.
(THE BALANCE OF THIS PAGE IS INTENTIONALLY BLANK)
5
<PAGE>
9.5 As used in this Agreement, any gender includes a reference to all
other genders and the singular includes a reference to the plural and vice
versa.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
IMMTECH INTERNATIONAL, INC.
By:
---------------------------------
Name:
Title:
RADE MANAGEMENT CORPORATION
By:
---------------------------------
Name:
Title:
6
<PAGE>
Exhibit A
Indemnification Provisions
In connection with the engagement of RADE Management Corporation
("Rade") by Immtech International, Inc. (the "Company") pursuant to the
Financial Consulting Agreement dated June ___, 1998, between the Company and
Rade as it may be amended from time to time (the "Financial Consulting
Agreement"), the parties hereby agree as follows:
1. The Company agrees to reimburse Rade, its affiliates and their
respective principals, directors, officers, employees, agents and controlling
persons (each an "Indemnified Party") promptly upon demand for expenses
(including fees and expenses of legal counsel) as they are incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim, or any litigation, proceeding or other action in connection
with or arising out of or relating to the engagement of Rade under the Financial
Consulting Agreement, or any actions taken or omitted, services performed or
matters contemplated by or in connection with the Financial Consulting
Agreement, whether or not such litigation, proceeding or other action is
initiated or brought by the Company. The Company also agrees to indemnify and
hold harmless each Indemnified Party from and against any and all losses,
claims, damages and liabilities ("Loses"), joint or several, to which any
Indemnified Party may become subject, including, without limitation any amount
paid or payable in settlement of any litigation, proceeding or other action
(commenced or threatened), in connection with or arising out of or relating to
the engagement of Rade under the Financial Consulting Agreement, or any actions
taken or omitted, services performed or matters contemplated by or in connection
with the Financial Consulting Agreement, provided, however, that the Company
shall not be liable pursuant to this paragraph to the extent such Losses have
been finally determined by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily from the willful misconduct or gross
negligence of any Indemnified Party.
2. If indemnification is to be sought hereunder by an Indemnified
Party, then such Indemnified Party shall notify the Company of the commencement
or thereat of any litigation, proceeding or other action in respect thereof;
provided, however, that the failure to notify the Company shall not relieve the
Company from any liability or obligation that it may have hereunder or otherwise
to such Indemnified Party unless and only to the extent that such failure to
notify results in actual prejudice to the Company. Following such notification,
the Company may elect in writing to assume the defense of such litigation,
proceeding or other action (and the costs related thereto) and, upon such
election, the Company shall not be liable for any legal costs
<PAGE>
subsequently incurred by such Indemnified Party (other than costs of
investigation or the production of documents or witnesses) unless (i) the
Company has failed to provide legal counsel reasonably satisfactory to such
Indemnified Party in a timely manner or (ii) such Indemnified Party shall have
reasonably concluded on the advice of counsel that (a) the representation of
such Indemnified Party by legal counsel selected by the Company would be
inappropriate due to actual or potential conflicts of interest; or (b) there may
be legal defenses available to such Indemnified Party that are different from or
additional to those available to the Company such that separate representation
for such Indemnified Party would be advisable. Nothing set forth herein shall
preclude and Indemnified Party from retaining its own counsel at its own
expense.
The Company agrees that, without Rade's prior written consent (which
will not be unreasonably withheld), the Company will not settle, compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action or proceeding in respect of which indemnification could be sought
hereunder (whether or not Rade or any other Indemnified Party are an actual or
potential party to such claim, action or proceeding), unless such settlement,
compromise or consent includes an unconditional release of each of the foregoing
parties from all liability arising out of such claim, action or proceeding or
unless Rade reasonably agrees that such release is not necessary at such time
(it being understood that the Company's indemnification obligations will remain
in full force and effect). Rade agrees that the Company shall not be liable for
the settlement, compromise or consent of any claim, action or proceeding which
is effected without the Company's written consent (which will not be
unreasonably withheld).
3. In the event that the indemnity provided for in paragraphs 1 and
2 hereof is unavailable or insufficient to hold any Indemnified Party harmless
other than by operation of the proviso set forth in paragraph 1 above, then the
Company shall contribute to amounts paid or payable by an Indemnified Party in
respect of such Indemnified Party's Losses as to which the indemnity provided
for in paragraphs 1 and 2 hereof is unavailable or insufficient (i) in such
proportion as approximately reflects the relative benefits received by the
Company, on the one hand, and Rade, on the other hand, in connection with the
matters as to which such Losses relate or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
appropriately reflects not only the relative benefits referred to in clause (i)
but also the relative fault of the Company, on the one hand, and Rade, on the
other hand, as well as any other equitable considerations. The amounts paid or
payable by an Indemnified Party in respect of Losses referred to above shall be
deemed to include any legal or other fees and expenses incurred in defending any
litigation, proceeding or other action or claim.
2
<PAGE>
Notwithstanding the provisions hereof, to the extent permitted by applicable
law, Rade's share of the liability hereunder shall not be in excess of the
amount of fees actually received by Rade under the Financial Consulting
Agreement (excluding any amounts received as reimbursement of expenses incurred
by Rade).
4. These Indemnification Provisions shall remain in full force and
effect whether or not any of the transactions contemplated by the Financial
Consulting Agreement are consummated and shall survive the expiration or
termination of the Financial Consulting Agreement and all residual periods, and
shall be in addition to any liability that the Company might otherwise have to
any Indemnified Party under the Financial Consulting Agreement or otherwise. It
is further agreed that no Indemnified Party (including Rade) shall be liable to
the Company or any affiliate of the Company in connection with any matter
arising out of or relating to the engagement of Rade under the Financial
Consulting Agreement, or any actions taken or omitted, services performed or
matters contemplated by or in connection with the Financial Consulting
Agreement, except to the extent of any Losses that a court of competent
jurisdiction shall have finally determined (not subject to further appeal) to
have resulted primarily from the willful misfeasance or gross negligence of any
Indemnified Party.
RADE MANAGEMENT CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
IMMTECH INTERNATIONAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
3
IMMTECH INTERNATIONAL, INC.
1993 STOCK OPTION AND AWARD PLAN
<PAGE>
IMMTECH INTERNATIONAL, INC.
1993 STOCK OPTION AND AWARD PLAN
1. Purposes of the Plan
1.01 The purposes of the Immtech International Inc. 1993 Stock Option and
Award Plan are (a) to assist Immtech International Inc. in attracting and
retaining in the employ of the Company and any Subsidiaries individuals of
outstanding competence, and (b) to provide performance incentives for officers,
executives, key employees of and advisors and independent consultants to the
Company and any Subsidiaries.
2. Definitions
Unless otherwise required by the context, the terms used in this Plan
shall have the meanings indicated in this Section 2.
"Award" or "Stock Award": An award of shares of Common Stock granted
pursuant to paragraph 6.03.
"Beneficiary": As applied to a participant in the Plan, a person or entity
(including a trust or the estate of the participant) designated in writing by
the participant on such forms as the Committee may prescribe to whom an Option
or Award may pass in the event of the death of the participant. If, at the death
of a participant, there shall not be any living person or entity in existence so
designated, the term "Beneficiary" shall mean the legal representative of the
participant's estate.
"Board or Board of Directors": The Board of Directors of the Company.
"Committee": The Option Committee of the Board of Directors or such other
committee as may be designated by the Board of Directors pursuant to the
provisions of paragraph 4.01 to administer the Plan.
"Common Stock": The common stock of the Company, $0.10 par value, or such
other class of shares or other securities as may be applicable pursuant to the
provisions of Section 5.
"Consultant": An advisor or independent consultant to the Company who, in
the opinion of the Committee, is in a position to make significant contributions
to the Company or a Subsidiary. A non-employee director on the Company's Board
of Directors shall not be considered a Consultant eligible to receive Options or
Awards under the Plan.
<PAGE>
"Company": Immtech International Inc., a Delaware corporation, its
successors and assigns.
"Incentive Stock Option": A form of stock option which is, by specific
provision of the Internal Revenue Code of 1986, as amended, not subject to
federal income tax at the time of its exercise and issuable only to employees of
the corporation granting the option or a parent or subsidiary of such
corporation.
"Key Employee": An employee of the Company or of a Subsidiary regularly
employed on a full-time basis, including an officer or director if he is such an
employee, who, in the opinion of the Committee, is in a position to make
significant contributions to the Company or a Subsidiary.
"Market Value": As applied to a specific date and unless otherwise
specifically defined in the text of the Plan, (i) the mean between the highest
and lowest reported sale prices on the New York Stock Exchange - Composite
Transactions Table (or, if not so reported, on any domestic stock exchanges on
which the Common Stock is then listed); or (ii) if the Common Stock is not
listed on any domestic exchange, the mean between the closing high bid and low
asked prices as reported by the National Association of Securities Dealers
Automated Quotation System (or, if not so reported, by the system then regarded
as the most reliable source of such quotations); or (iii) if the Common Stock is
listed on a domestic exchange or quoted in the domestic over-the-counter
market, but there are no reported sales or quotations, as the case may be, on
the given date, the value determined pursuant to (i) and (ii) using the reported
sale prices or quotations on the last previous date on which so reported; or if
none of the foregoing clauses apply, (iv) the fair market value as determined
in good faith by the Committee.
"Optionee": A Key Employee or Consultant who has received an Option or
Options under the Plan.
"Option" or "Stock Option": An option to purchase shares of Common Stock
granted pursuant to paragraph 6.0l.
"Permanent Disability": The permanent incapacity of a participant to
perform the usual duties of his employment by reason of physical or mental
impairment. Permanent Disability shall be deemed to exist when so determined by
the Committee based upon a written opinion of a licensed physician who has been
approved by the Committee. For purposes of an Incentive Stock Option, "Permanent
Disability" shall be interpreted consistent with the requirements of Code
Section 22(e)(3).
"Plan": The Immtech International Inc. 1993 Stock Option and Award Plan as
from time to time amended.
-2-
<PAGE>
"Restricted Stock": Shares of Common Stock issued or transferred subject
to restrictions precluding a sale or other disposition for a period of time
(other than as specifically may be permitted) and requiring as a condition to
retention compliance with any other terms and conditions that may be imposed by
the Committee.
"Retirement": The termination of a participant's employment with the
Company and its Subsidiaries due to and consistent with the retirement policies
of the Company and its Subsidiaries.
"Rule 16b-3": As applied on a specific date, Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934 as then in
effect or any other provision that may have replaced such Rule and be then in
effect.
"Subsidiary": A corporation or other form of business association of which
Shares (or other ownership interests) having more than 50% of the voting power
are owned or controlled, directly or indirectly, by the Company.
"Supplement": Rules of general application consistent with the Plan
adopted by the Committee as a supplement thereto for the administration or
implementation of the Plan or a portion thereof.
3. Scope of the Plan
The Plan shall apply to the Company and to any Subsidiaries which have not
been specifically excluded by the Board of Directors.
4. Administration
4.01 The Plan shall be administered by a committee of two or more persons
selected by the Board of Directors from its own membership, which shall be the
Option Committee of the Board of Directors unless another committee of the
Board shall be designated by the Board. Should the Company, pursuant to Section
8 of the Plan, elect to register any of the shares of Common Stock covered by
the Plan upon a national securities exchange pursuant to the Securities Exchange
Act of 1934, no member of the Committee shall be eligible to participate in the
Plan and no person shall be appointed to or shall serve as a member of the
Committee unless at the time of such appointment and service such person shall
be a "disinterested person," as defined in Rule 16b-3. Until changed by the
Board of Directors, the Committee shall consist of the following directors:
____________________________.
-3-
<PAGE>
4.02 The Committee shall have full power to interpret and administer the
Plan and full authority to act in determining who shall be participants in the
Plan, the number of Options and/or Awards to be granted to each participant, and
the conditions, form, manner, time and terms of payment under such Options
and/or Awards. The interpretation by the Committee of the terms and provisions
of the Plan and the administration thereof, and all actions taken by the
Committee, shall be final, binding and conclusive on the Company, its
stockholders, Subsidiaries, all participants and employees, and upon their
respective Beneficiaries, successors and assigns, and upon all other persons
claiming under or through any of them.
4.03 The Committee may adopt such rules, regulations and Supplements, not
inconsistent with the provisions of the Plan, as it deems necessary (a) to
determine participation in the Plan, the amount to be granted to each
participant and the conditions, form, manner, time and terms of payment under
such Options and Awards and (b) to administer the Plan, and may amend or revoke
any such rule, regulation or Supplement.
4.04 No member or former member of the Committee or of the Company's Board
of Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any Option or Award granted hereunder. To the
maximum extent permitted by applicable law, each member or former member of the
Committee or of the Company's Board of Directors shall be indemnified and held
harmless by the Company against any cost or expense (including reasonable fees
and expenses of counsel) or liability (including any sum paid in settlement of a
claim with the approval of the Company), arising out of any act or omission to
act in connection with the Plan, unless arising out of such member's or former
member's own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the members or former members may have as
directors or under the by-laws of the Company.
5. Stock Subject to the Program: Adjustments Upon Changes in Capitalization
5.01 As of June ___,1993, and until further increased by the stockholders
of the Company, the aggregate number of shares of Common Stock which may be
issued or transferred under the Plan after such date shall not exceed __________
subject to the provisions of paragraph 5.02 and 6.02(k). Such shares may be
authorized but unissued shares of Common Stock, shares of treasury stock or
shares purchased for the Plan pursuant to the provisions of paragraph 7.05.
5.02 In the event of any change in the Common Stock of the Company by
reason of any stock dividend, recapitalization,
-4-
<PAGE>
reorganization, merger, consolidation, split-up, combination, or exchange of
shares, or rights offering to purchase Common Stock at a price substantially
below fair market value, or of any similar change affecting the Common Stock,
the number and kind of shares to be subject to Options and Awards thereafter
granted, the number and kind of shares subject to Options and Awards theretofore
granted, and the purchase price per share under outstanding option agreements
shall be appropriately adjusted consistent with such change in such manner as
the Committee may deem equitable to prevent substantial dilution or enlargement
of the rights granted to, or available for, Optionees and recipients of Awards
under the Plan; provided, however, that in the case of Incentive Stock Options,
such adjustments shall be consistent with Section 422 of the Internal Revenue
Code of 1986, as amended, and with the applicable regulations of the U.S.
Treasury Department.
6. Stock 0ptions and Awards
6.01 Grants of Options.
(a) The form or forms of Options and the number of shares of Common
Stock to be made subject to such Options shall be determined by the
Committee. Any or all Options granted to Key Employees under the
Plan may be in the form of Incentive Stock Options. Incentive Stock
Options may be granted by the Committee in substitution for any
Stock Option heretofore or hereafter granted to Key Employees under
the Plan or under any prior stock option plans of the Company and
such substitution shall not be deemed the grant of a new or
additional Option for any purpose under the Plan or otherwise, to
the extent permitted by applicable law.
(b) Subject to the adjustment provisions of paragraph 5.02, the maximum
number of shares of Common Stock which may be issued or transferred
to a participant subject to Stock Options shall not exceed such
number as shall be fixed by the Committee from time to time.
(c) Notwithstanding anything in the Plan to the contrary, the aggregate
Market Value (determined on the date the Option is granted) of the
Common Stock for which any Key Employee may be granted Incentive
Stock Options in the calendar year in which such Options are first
exercisable (under all plans of the Company or any Subsidiary which
provide for the granting of Incentive Stock Options) shall not
exceed $100,000. Consultants may not be granted Incentive Stock
Options.
6.02 Option Provisions. Options shall be subject to the following
provisions:
-5-
<PAGE>
(a) Options may be granted only to Key Employees and Consultants
selected by the Committee.
(b) The Option price per share of Common Stock shall be determined by
the Committee, but in the case of Incentive Stock options shall not
be less than 100% of the Market Value thereof on the date the Option
is granted.
(c) The expiration date of each Option shall be established by the
Committee at the time the Option is granted, but such date shall not
be later than ten years from the date the Option is granted. Except
as required with respect to Incentive Stock Options pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended, the
Committee may extend the term of an Option which has a term of less
than ten years for a period ending not later than ten years from the
date of the Option grant and such extension shall not be deemed the
grant of a new or additional Option for any purpose under the Plan
or otherwise. The extension of the term of an Option shall be
subject to the consent of the holder of the Option and may be made
at any time prior to the expiration of the Option. Incentive Stock
Options may not be granted more than ten years after the Plan is
adopted by the stockholders of the Company.
(d) Options may be exercised as to all or any portion of the shares of
Common Stock subject to the Option while the original Optionee has a
relationship with the Company which confers eligibility to be
granted Options, but not later than the expiration date specified
in such Option.
(e) Options granted to a Key Employee shall not be affected by any
change in the nature of the Key Employee's employment so long as he
continues to be employed by the Company or a Subsidiary. Approved
leaves of absence shall not be considered a termination or
interruption of full-time employment for any purpose of the Plan.
(f) Each Option shall terminate if and when the Optionee shall cease to
be an employee of or advisor or consultant, to the Company or its
Subsidiaries, except as follows (subject to the provisions of the
Internal Revenue Code and applicable regulations of the U.S.
Treasury Department concerning Incentive Stock Options):
-6-
<PAGE>
(i) If an Optionee dies while an employee of the Company or a
Subsidiary, his Option may be exercised to the extent that the
Optionee could have done so at the date of his death by his
Beneficiary, at any time, or from time to time, within one
year after the date of the Optionee's death but not later than
the expiration date specified in such Option.
(ii) If an Optionee's employment by the Company or a Subsidiary
shall terminate because of Permanent Disability, such employee
may exercise his Option, to the extent that he could have done
so at the date of his termination of employment, at any time,
or from time to time, within one year of such termination but
not later than the expiration date specified in such Option.
(iii) If an Optionee's employment by the Company or a Subsidiary
shall terminate due to Retirement, the Optionee may exercise
any Option to the extent that he could have done so at the
date of his termination of employment, at any time, or from
time to time, within one year of such Retirement but not later
than the expiration date specified in such Option.
(iv) Except as provided in the following provisions of this
paragraph 6.02(f), if the Optionee's employment by the Company
or a Subsidiary shall terminate for any reason other than
death, Permanent Disability or Retirement as aforesaid, he may
exercise his Option, to the extent that he could have done so
at the date of his termination of employment, at any time, or
from time to time, within three months of the date of
termination of his employment but not later than the
expiration date specified in such Option.
(v) Notwithstanding anything in the Plan to the contrary, if an
Optionee's employment is terminated for cause, his ability to
exercise such Option shall terminate on the date of his
termination of employment. For this purpose, termination for
"cause" shall mean termination for reason of habitual
intoxication, drug addiction, material theft, proven
dishonesty, gross misconduct, embezzlement, fraud, conviction
of a felony (whether connected with the employment
relationship or not), disclosure of material trade secrets or
business information of the Company or
-7-
<PAGE>
a Subsidiary or use of the facilities or premises of the
Company or a Subsidiary for the conduct of unlawful or
unauthorized activities or transactions, or termination of
employment voluntarily and entering into competition with the
Company or a Subsidiary.
(vi) Notwithstanding anything in the Plan to the contrary, the
Committee may at any time terminate an Option if it shall, in
the reasonable exercise of its judgment, find that the
Optionee has disclosed without the written consent of an
authorized officer of the Company, to any person not employed
by or engaged to render services to the Company or a
Subsidiary, any material confidential information of the
Company or a Subsidiary or has engaged in material competition
with the Company or any Subsidiary or in any activities
otherwise contrary to the best interests of the Company. The
right to exercise this Option has been granted, and the
compensation to be realized in the event of exercise has been
provided, upon the express understanding that the Optionee
shall refrain from engaging in any activities contrary to the
best interests of the Company.
(g) If any Optionee is not an employee of the Company or a Subsidiary,
but rather is a provider to the Company or a Subsidiary of other
services of the type contemplated by Sections 1 and 2 of the Plan,
the following provisions shall apply as if the Optionee were an
employee of the Company or a Subsidiary:
(i) Paragraph 6.02(f)(i) shall apply if the service
relationship terminates because of the Optionee's death.
(ii) Paragraph 6.02(f)(ii) shall apply if the service
relationship terminates because of the Optionee's
permanent disability.
(iii) Paragraph 6.02(f)(iii) shall apply if the service
relationship terminates because of the Optionee's
retirement.
(iv) Paragraph 6.02(f)(iv) shall apply if the service
relationship terminates for any other reason than the
Optionee's death, permanent disability or retirement.
-8-
<PAGE>
(v) Notwithstanding paragraphs 6.02(f)(i) through
6.02(f)(iv), above paragraph 6.02(f)(v) shall apply if
the service relationship is terminated by the Company or
a Subsidiary for cause.
(vi) Paragraph 6.02(f)(vi) shall apply as written.
(h) Subject to the provisions of paragraphs 6.02(c), (d), (e), (f) and
(g) and of the Option agreement pursuant to which an Option is
granted, Options may be exercised, in whole or in part, at any time
during the term of the Option, except that no Option shall be
exercisable prior to the date six months after date of grant of the
Option.
(i) An Option shall be considered exercised under the Plan on the date
written notice is mailed (postage prepaid) or delivered to the
Secretary of the Company advising of the exercise of a particular
Option and transmitting payment of the Option price for the shares
involved, but this provision shall not preclude exercise of an
Option by any other proper legal method.
(j) Options are not transferable other than by will or by the laws of
descent and distribution, and during a participant's lifetime are
exercisable only by him or by his guardian or legal representative.
(k) The committee may place such conditions and restrictions on the
exercise of Options and on the transferability of shares of Common
Stock received upon exercise of an Option, in addition to those
contained herein, as it shall deem appropriate and, without limiting
the generality of the foregoing may provide in the Option grant
that shares of Common Stock issued or transferred upon exercise of
the Option shall be shares of Restricted Stock subject to forfeiture
upon failure to comply with such conditions and restrictions, and/or
shall be subject to repurchase by the Company on the occurrence of
various events.
(l) Following the death of a participant, and upon the request of the
Beneficiary, the Company may at its election, (i) at any time while
the Option may be exercised, purchase the Option at a price equal to
the difference between the Market Value, on the date such request is
mailed (postage prepaid) or delivered to the Secretary of the
Company, of the shares of Common Stock subject to exercise and the
Option price of such
-9-
<PAGE>
shares of Common Stock, or (ii) within thirty days following the
exercise of an Option, purchase the shares of Common Stock so
acquired at their Market Value on the date of exercise. The number
of shares of Common Stock purchased by the Company shall be
considered issued and transferred for Purposes of paragraphs 5.01
and 6.01(c).
(m) No shares of Common Stock shall be issued or transferred upon
exercise of an Option until full payment therefor has been made.
Such payment shall be made in cash. A holder of an Option shall have
none of the rights of a stockholder until shares of Common Stock are
issued or transferred as the result of the exercise of such Option.
The proceeds received by the Company from the sale of Common Stock
pursuant to the Plan shall be available for general corporate
purposes.
6.03 Stock Awards. A Stock Award under this Plan shall confer on a Key
Employee or Consultant the right to receive specified number of shares of the
Company's Common Stock or cash, or a combination of both, having a value which
is related to or based upon a designated number of such shares. A Stock Award
may be in the form of, among others, a stock grant, share unit, or stock
appreciation right, and Stock Awards may (but need not) be subject to the
attainment of specified performance goals or targets, restrictions on transfer
or forfeitability provisions, as more fully set out in specific Stock Award
agreements. Stock Awards may be given to a Key Employee or Consultant subject to
such rules and conditions as the Committee, in its sole discretion, may
establish for such Stock Awards.
7. General Provisions
7.01 Neither the adoption of the Plan nor its operation, nor any booklet
or other document describing or referring to the Plan, or any part thereof,
(a) shall confer upon any employee any right to continue in the employ of the
Company or any Subsidiary or shall in any way affect the right and power of the
Company or any Subsidiary to dismiss or otherwise terminate the employment of
any employee at any time for any reason with or without cause, or (b) shall
confer upon any advisor or consultant to the Company or any Subsidiary any right
to continue in such capacity or shall in any way affect the right of the Company
to terminate the advisory or consulting relationship at any time for any reason
with or without cause. If the Company or any Subsidiary shall terminate the
employment or advisory or consulting relationship of a participant for any
reason, whether or not for cause, neither the Company nor such Subsidiary shall
incur any liability to the participant due to the inability of the participant
by reason of such termination
-10-
<PAGE>
to exercise thereafter any Option, to receive any grant under the Plan or to be
eligible thereafter for any grant under the Plan.
7.02 By accepting any benefits under the Plan, each participant and each
person claiming under or through him shall be conclusively deemed to have
indicated his acceptance and ratification of, and consent to, all provisions of
the Plan and any action or decision under the Plan by the Company, the Board of
Directors or the Committee.
7.03 Appropriate provision shall be made for all taxes which the Company
requires to be withheld in connection with the exercise of Options or the grant
of Awards, under the laws of any governmental authority, whether Federal, state
or local and whether domestic or foreign. The Committee may in its discretion
permit a participant to elect at any time, but in no event later than six months
prior to the exercise of any Option, to have a portion of the shares subject to
such exercise withheld by the Company for the purpose of satisfying any tax
withholding under Federal, state or local tax laws.
7.04 (a) No rights under the Plan shall be assignable, either voluntarily
(except as may specifically be permitted for gifts of Restricted Stock), or
involuntarily by way of encumbrance, pledge, attachment, levy or charge of any
nature (except as may be required by state or federal law). Notwithstanding
anything in the Plan to the contrary, a participant may designate a Beneficiary
to receive am Option and/or Award in the event of the participant's death.
(b) Nothing in the Plan shall require the Company or any Subsidiary to
segregate or set aside any funds or other property for the purpose of paying
Common Stock upon the exercise of Options or the granting of Awards. No
participant, Beneficiary or other person shall have any right, title or interest
in any amount awarded under the Plan prior to payment thereof, or in any
property of the Company or its Subsidiaries or affiliated corporations.
7.05 It is contemplated that the Company, although under no legal
obligation to do so, may from time to time purchase shares of Common Stock for
the purpose of paying an Option or granting an Award, or for the purpose of
replacing shares issued or transferred in payment of an Option or granting of an
Award. All shares so purchased shall, unless and until transferred in payment of
such Option or in granting such Award, be at all times the property of the
Company available for any corporate purpose; and no participant or employee or
Beneficiary, individually or as a group, shall have any right, title or interest
in any shares of Common Stock so purchased.
-11-
<PAGE>
7.06 Headings are given to the sections of the Plan solely as a
convenience to facilitate reference; neither such headings nor numbering or
paragraphing shall be deemed in any way material or relevant to the construction
of the Plan or any provision thereof.
7.07 The use of the masculine gender shall also include within its meaning
the feminine. The use of the singular shall include within its meaning the
plural and vice versa.
8. Compliance with Other Laws and Regulations. The Plan, the grant and
exercise of Options and Awards thereunder, and the obligation of the Company to
sell and deliver shares of Common Stock under such Options and Awards, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required. If at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the shares covered by the Plan upon any
national securities exchange or under any state or federal law, or the consent
or approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares under the
Plan, no shares will be delivered unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Committee.
If shares are not required to be registered, but are exempt from registration,
upon exercising all or any portion of an Option, the Company may require each
Optionee (or any person acting under paragraph 6.02(f)(i)), to represent that
the shares are being acquired for investment only and not with a view to their
sale or distribution, and to make such other representations deemed appropriate
by counsel to the Company. Stock certificates evidencing unregistered shares
acquired upon exercise of Options or granting of Awards shall bear any legend
required by applicable state securities laws and a restrictive legend
substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN THE
ABSENCE 0F SUCH REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER WILL NOT REQUIRE REGISTRATION UNDER
SUCH ACT OR UNDER THE SECURITIES LAWS OF ANY STATE.
9. Effective Date
The Plan shall become effective if and when, but not until, it is approved
by the stockholders of the Company.
-12-
<PAGE>
10. Amendment or Termination of Program
10.01 The Plan, or any part thereof, may be otherwise amended by the
Board of Directors at any time, provided that, without the approval of the
stockholders of the Company, no such amendment shall be effective which amends
the provisions of the Plan so as to (i) increase the maximum number of shares of
Common Stock which may be made subject to Options or Awards above the amount
authorized by paragraph 5.01, (ii) change materially the class of employees
eligible to participate in the Plan, (iii) amend the provisions of paragraph
4.01 relating to the administration of the Plan by the Committee and the
eligibility of a Board member to serve on the Committee, (iv) materially
increase the benefits accruing to participants under the Plan, within the
meaning of Rule 16b-3, if relevant, or (v) amend this Section 10.
10.02 The Board of Directors may, by resolution adopted by a majority of
the entire Board of Directors, at any time terminate the Plan or any portion
thereof.
10.03 No amendment or termination of the Plan or any portion thereof by
the Board of Directors or the stockholders shall, without the consent of a
participant adversely affect any award previously made or any Option or Award or
any other rights previously granted to him.
11. Applicable Law
This Plan and all rights hereunder shall be governed, construed and
administered in accordance with the laws of the State of Delaware.
-13-
IMMTECH INTERNATIONAL, INC.
1890 Maple Avenue, Suite 110, Evanston, IL 60201
Tel:847-869-0033
Fax:847-869-0045
The University of North Carolina
at Chapel Hill
Office of Technology Development
308 Bynum Hall
Chapel Hill, NC 27599-4105
Tel: 919-966-3929
Fax: 919-962-0646
Pharm-Eco Laboratories, Inc.
128 Spring Street
Lexington, MA 02173
Tel: 617-861-9303
Fax: 617-861-9386
Re: Formation of Research Collaboration
This Letter Agreement is a binding agreement setting forth the terms upon
which Immtech International, Inc. ("Immtech"), Pharm-Eco Laboratories, Inc.
("Pharm-Eco") and The University of North Carolina at Chapel Hill ("UNC") will
research, develop, finance the research and development of, manufacture and
market the technology and compounds owned by a consortium of universities
including UNC, Duke University, Auburn University and Georgia State University
(the "Consortium") and currently licensed or optioned to Pharm-Eco and described
on Exhibit A hereto (the "Current Compounds") and all technology and compounds
developed by the Consortium after the date hereof through use of Immtech
sponsored research funding or National Cooperative Drug Development grant
funding made available to the Consortium (the "Future Compounds" and,
collectively with the Current Compounds, the "Compounds"). Immtech and Pharm-Eco
contemplate entering into agreements regarding the license or assignment of
certain intellectual property rights licensed to or otherwise held by Pharin-Eco
relating to the Compounds and forming a joint venture or entering into other
contractual arrangements for the manufacture of products derived from the
Compounds. UNC contemplates entering into agreements with Immtech including the
licensing and assignment of rights in intellectual property relating to the
Compounds owned by UNC and the Consortium, and into sponsored research agreement
funded by Immtech. The structure of the transactions with respect to the
research collaboration will include an equity financing by Immtech, the license
of the Compounds to Immtech and the issuance of securities, payment of royalties
and grant of related rights by Immtech in consideration for the license,
pursuant to this Letter Agreement and one or more superceding definitive
agreements (the "Definitive Agreements"), on the following principal terms:
1. Financing.
(a) Immtech will use reasonable efforts to complete an initial
public offering of shares of its Common Stock, par value $0.01 per share
("Common Stock"), generating gross proceeds of at least $10,000,000 (the "IPO")
within nine months after the date of this Letter Agreement. At Immtech's option,
the IPO may also include, in addition to shares of Common Stock, any other
equity security of Immtech, or any security convertible into or exercisable for
any equity security of Immtech.
<PAGE>
(b) Immtech, at its option and in lieu of completing the IPO, may
use reasonable efforts to enter into agreements with one or more investors for
an aggregate equity investment of at least $10,000,000 within nine months after
the date of this Letter Agreement (an "Alternative Financing").
(c) Pharm-Eco and UNC (as licensor) will each use reasonable efforts
to cooperate with Immtech in completing the IPO or an Alternative Financing,
including, without limitation, by providing Immtech, its counsel, accountants
and other representatives and any underwriter or third party investor and its
counsel and other representatives with all documents, information and other
materials that any such party deems reasonably necessary to prepare a
prospectus, to otherwise comply with state or federal securities laws or to
conduct due diligence.
(d) Upon the closing of an IPO or an Alternative Financing, Immtech
will use the greater of (i) 33% of the net proceeds from the IPO or an
Alternative Financing and (ii) $5,000,000 to develop the Compounds.
2. License of the Compounds.
(a) From the date of this Letter Agreement until the completion of
the IPO or an Alternative Financing, Immtech may request UNC's written consent
for Immtech to use one or more of the Compounds to conduct clinical studies,
subject to the provisions of paragraph 9(a). Immtech will also have the right to
describe, and to provide information regarding, the Compounds to facilitate the
completion of the IPO or an Alternative Financing.
(b) Upon the completion of the IPO or an Alternative Financing,
Pharm-Eco will grant or assign to Immtech, and UNC will take any action
necessary to consent to the grant or assignment by Pharm-Eco to Immtech of, an
exclusive worldwide license to use, manufacture, have manufactured, promote,
sell, distribute or otherwise dispose of any and all products based directly or
indirectly on the Current Compounds (the "Current Products").
(c) Immtech will have the right to grant sublicenses to any third
party who agrees to be bound by the terms of this Letter Agreement in accordance
with the terms of its License Agreement with UNC.
(d) Upon completion of the IPO or an Alternative Financing, UNC will
grant to Immtech, and Pharm-Eco will take any action necessary to consent to the
grant by UNC to Immtech of, an exclusive worldwide license to use, manufacture,
have manufactured, promote, sell, distribute or otherwise dispose of any and all
products based directly or indirectly on the Future Compounds (the "Future
Products" and, collectively with the Current Products, the "Products").
3. Consideration for License.
(a) Upon the completion of the IPO or an Alternative Financing,
Immtech will issue an aggregate of 1,122,500 shares of Common Stock to Pharm-Eco
or persons designated by Pharm-Eco (the "Shares") to include 275,000 Shares
issued to UNC and the Consortium. Pharm-Eco will notify Immtech in writing of
the persons to whom the Shares should be issued not later than 10 business days
prior to the closing of the IPO or the Alternative Financing. The persons
receiving any Shares hereunder will agree to restrict the transfer of such
Shares for any reasonable period required by the managing underwriter of the IPO
(the "Lock-Up Period").
2
<PAGE>
(b) Upon the completion of the IPO or an Alternative Financing,
Immtech will issue warrants to purchase an aggregate of 1,700,000 shares of
Common Stock to Pharm-Eco or persons designated by Pharm-Eco (the "Warrants")
with a ten-year term from the date of issuance and an exercise price set at (i)
the average closing price per share of Common Stock on any public market on
which the Common Stock is traded for the 20 consecutive trading days commencing
on the first day of trading after the effectiveness of the IPO (the "Post-IPO
Market Price") if Immtech completes the IPO prior to an Alternative Financing or
(ii) the purchase price for shares of Common Stock in an Alternative Financing
if Immtech completes an Alternative Financing prior to the IPO. The Warrants
will become exercisable pursuant to the following schedule: (i) Warrants to
purchase 250,000 shares of Common Stock will be exercisable after Immtech files
an investigational new drug application with the FDA or the appropriate
governmental authority in Germany, France the United Kingdom or Japan (any such
country, an "Alternative Country") with respect to any Product and commences
Phase I human clinical trials in the United States or an Alternative Country
with respect to such Product, (ii) Warrants to purchase 250,000 shares of Common
Stock will be exercisable after Immtech commences Phase 111 human clinical
trials in the United States or any Alternative Country with respect to any
Product, (iii) Warrants to purchase 500,000 shares of Common Stock will be
exercisable upon receipt of final approval for the commercial sale of any
Product in the European Community and (iv) Warrants to purchase 700,000 shares
of Common Stock will be exercisable after Immtech files a new drug application
("NDA") with the FDA with respect to any Product (or Warrants to purchase
1,200,000 shares of Common Stock if Immtech files an NDA prior to the approval
in the European Community in lieu of the Warrants issuable pursuant to (iii)
above). Pharm-Eco will notify Immtech in writing of the persons to whom the
Warrants should be issued, and the Warrants received by each person hereunder
will vest pro rata pursuant to the schedule set forth above. At the option of
the holder of any Warrant, all or any part of such Warrant may be exercised by
surrendering to Immtech three shares of Common Stock underlying the Warrant for
each share of Common Stock received by the holder upon exercise of the Warrant
in lieu of payment to Immtech in cash of the exercise price. The Warrants will
also be redeemable at the option of Immtech at $.01 per share of Common Stock
underlying the Warrants on 60 days prior notice if the closing price of the
Common Stock on any public market on which the Common Stock is traded averages
in excess of 250% of the then current exercise price of the Warrant for a period
of 20 consecutive trading days ending within 15 days of the notice of
redemption. The Warrants will have customary terms regarding adjustments and
related matters.
(c) After the completion of the IPO or an Alternative Financing and
upon the filing by Immtech of an NDA or ANDA with the FDA with respect to any
Product, Immtech will issue an aggregate of 300,000 shares of Common Stock
collectively to Pharm-Eco or persons designated by Pharm-Eco to include 200,000
shares of Common Stock to be issued to the Consortium. Pharm-Eco will notify
Immtech in writing with respect to which persons will receive the shares of
Common Stock issued pursuant to this paragraph 3(c).
(d) Commencing on the day that is 30 days after the date on which
UNC has obtained Consents from each of the other members of the Consortium
pursuant to paragraph 9(a), Immtech will make the first of three monthly $33,333
research grants (each, a "Research Grant") to UNC, and will make two subsequent
monthly Research Grants on the same day of each of the next two succeeding
months until the closing of either the IPO or an Alternative Financing. After
the closing of the IPO or an Alternative Financing, Immtech will make quarterly
$100,000 Research Grants to UNC commencing on the final day of the month during
which the closing of either the IPO or an Alternative Financing occurs, and will
continue to make a Research Grant every three months thereafter until the third
anniversary of the first date of the payment of a Research Grant or the
expiration of the National Cooperative Drug Development Grant currently held by
the Consortium, whichever occurs later.
3
<PAGE>
(e) Immtech will pay UNC an aggregate royalty (the "Royalty") of 5%
of net worldwide sales of Current Products and Future Products, except as
provided below in this paragraph 3(e) for Future Products derived from Future
Compounds developed by Duke University (the "Future Duke Products"). With
respect to the Future Duke Products and solely to the extent required by
applicable federal tax law and regulations, Immtech and UNC, understanding that
certain tax ramifications exist in regard to royalty rates, agree to negotiate
all royalty rates for sales of each Future Duke Product in good faith at the
time such Future Duke Product becomes available for licensing under Immtech's
license for Future Products, but, in any event, such royalty rates will be
fairly representative of royalty rates in the same industry for comparable
technology negotiated at arm's length. In the event that Immtech and UNC fail to
reach mutually acceptable terms within 90 days after commencement of
negotiations with respect to the royalty rates to be paid to UNC for any such
Future Duke Product (the "Negotiation Period"), then UNC may offer an exclusive,
worldwide, royalty and fee bearing license with right to sublicense to such
Future Duke Product to any third party, provided, however, that for a period of
two years following the conclusion of such Negotiation Period, UNC may not offer
such license to any third party on financial terms that are more favorable to
the third party than those last offered by UNC to Immtech unless such more
favorable terms have first been offered in writing to Immtech and either (i)
Immtech has declined in writing to accept such terms or (ii) Immtech has not
responded in writing within a period of 30 days after receipt of such written
offer from UNC.
(f) In the event that Immtech sublicenses its rights with respect to
the Compounds or the Products pursuant to paragraph 2(c), Immtech will pay to
UNC, in addition to the amount of the Royalty due under paragraph 3(e), 12.5% of
all signing, milestone and other non-royalty payments made to Immtech pursuant
to the sublicense arrangement, and will pay to Pharm-Eco 12.5% of all signing,
milestone and other non-royalty payments made to Immtech pursuant to the
sublicense arrangement.
(g) To the extent that Immtech uses any other proprietary technology
other than the Current Compounds or Future Compounds (except as provided below
in this paragraph 3(g) for Future Compounds developed by Duke University) to
manufacture or sell a Product, the amount of the Royalty will be reduced to the
extent necessary so that the total royalties paid by Immtech with respect to
such Product will not exceed 10% of the net worldwide sales of such Product,
provided, however, that in no event will the amount of the Royalty be less than
3%. With respect to Future Compounds developed by Duke University and solely to
the extent required by applicable federal income tax law and regulations,
Immtech and UNC will negotiate in good faith for an appropriate reduction in the
royalty due UNC under Immtech's license for each such Future Compound consistent
with the negotiation process described in paragraph 3(e) above.
(h) Subject to the provisions of paragraph 3(t), all license fees,
milestone fees and other cash payments related to any of the Compounds that are
received by Immtech will be invested in the continued development of the
Compounds until more than 50% of the Warrants issued pursuant to paragraph 3(b)
have been exercised or redeemed.
(i) After the completion of the IPO or an Alternative Financing,
Immtech will pay all costs to prosecute, maintain and defend all patents and
patent applications relating to any Current Product or any Future Product.
4
<PAGE>
4. Manufacture of Products.
(a) Immtech and Pharm-Eco will each use reasonable efforts to
negotiate and enter into a Manufacturing Agreement providing for the manufacture
of the Current Products. The Manufacturing Agreement will set forth terms and
conditions with respect to a joint venture between Immtech and Pharm-Eco for the
manufacture of the Current Products either (i) by a partnership or other entity
formed by Immtech and Pharm-Eco or (ii) directly by Pharm-Eco or Immtech through
a profit-sharing arrangement. Immtech, at its sole discretion, may decide
whether any Future Products will be manufactured through a joint venture
arrangement between Immtech and Pharm-Eco.
(b) The Manufacturing Agreement will provide with respect to any
Products manufactured pursuant to the joint venture arrangement as provided by
paragraph 4(a) above, Immtech and Pharm-Eco each will receive 50% of the
profits derived from sales of the Products plus that respective party's costs in
manufacturing, marketing and selling the Products. For these purposes, Immtech's
costs will include all expenses incurred for marketing and selling Products to
customers, including, without limitation, the cost associated with returned
goods, the cost of FDA regulatory compliance and any royalties paid by Immtech
with respect to the Products, including the Royalty. In the event that the joint
venture arrangement is effected through a separate entity formed by Pharm-Eco
and Immtech, each of Pharm-Eco and Immtech will have a 50% ownership interest in
such entity and will recover their respective costs through contractual
arrangements with the entity.
(c) In the event that there is a disagreement or deadlock between
Immtech and Pharm-Eco relating to the manufacture of Current Products, the
Manufacturing Agreement will provide for terms permitting Immtech to, or
Pharm-Eco to require Immtech to, make one or more payments to Pharm-Eco in lieu
of the payments provided by paragraph 4(b) above with respect to one or more
Current Products that such party determines should not be manufactured through a
joint venture arrangement as provided by paragraph 4(a) above.
5. Rights to Appoint Representatives.
(a) Upon the closing of the IPO or an Alternative Financing,
Pharm-Eco will be entitled to designate for appointment one member of Immtech's
Board of Directors (the "Board Designee"). Immtech will be in compliance with
this paragraph 5(a) if it uses all reasonable efforts, consistent with the
fiduciary obligations of its Board of Directors, to cause the Board Designee to
be elected to the Board of Directors.
(b) Upon the closing of the IPO or an Alternative Financing, UNC
will be entitled to designate one person as a non-voting observer (the
"Observer") of all meetings and other proceedings of the Immtech's Board of
Directors, and Immtech will provide to the Observer notice of all meetings of
the Board of Directors and a copy of all materials circulated among Immtech's
directors.
6. Registration Rights. Immtech, Pharm-Eco and UNC will each use
reasonable efforts to negotiate and enter into a Registration Rights Agreement
providing the holders of the Shares issued pursuant to paragraph 3(a) above with
one demand and an unlimited number of piggyback registrations. Any such demand
registration must be requested in writing by the holders of a majority of the
outstanding Shares. Immtech will pay all expenses of any such registration,
except for underwriters' discounts or similar selling expenses. Any such
registration may be requested at any time after the end of any applicable
Lock-up Period. The Registration Rights Agreement will have all other customary
terms and conditions.
5
<PAGE>
7. Due Diligence. Each party hereto will afford to officers, employees,
counsel, accountants and other authorized representatives reasonable access to
all relevant books, records and information relating to the subject matter of
this Letter Agreement.
8. No Shop/Confidentiality: Upon the execution of this Letter Agreement
and subject to the provisions in paragraph 3, Pharm-Eco and UNC each agrees not
to solicit, make or accept any offers concerning any sale or license of the
Compounds. Subject to the requirements of law and except as otherwise provided
in this Letter Agreement, each party will keep confidential, and will cause its
representatives to keep confidential, all information and documents obtained
pursuant to paragraph 7. In the event that any party is required to disclose any
information or documents, such party will promptly give written notice of such
disclosure proposed to be made to the other parties so that the parties can work
together to limit the disclosure to the greatest extent possible and, in the
event that any party is legally compelled to disclose any information, to seek a
protective order or other appropriate remedy or both.
9. Cooperation:
(a) The parties hereto recognize that the rights with respect to the
Compounds and the Products are held jointly by the members of the Consortium,
and that UNC does not have the right to grant a license to the Compounds or the
Products without the consent of the other members of the Consortium. UNC will
use reasonable efforts to obtain the agreement of each of the other members of
the Consortium to be bound by the terms of this Letter Agreement (the
"Consents"). After Consents have been received from each of the other members of
the Consortium, all references to "UNC" in this Letter Agreement shall be deemed
to refer to the "Consortium." The rights and obligations of the parties hereto
pursuant to paragraphs 1,2,3,4,5 and 6 shall be subject to receipt of Consents
from each of the members of the Consortium.
(b) Immtech, Pharm-Eco and UNC each shall cooperate in good faith
and use reasonable efforts to obtain any necessary third party consents,
finalize and execute the Definitive Agreements and associated schedules and any
other documents or agreements necessary to effect transactions described in this
Letter Agreement, and each party hereto will take all reasonable actions
necessary to maintain their respective intellectual property rights that are the
subject of this Letter Agreement. UNC's acceptance of this Letter Agreement is
expressly conditioned upon the issuance or assignment to Immtech of a license
with terms substantially similar to those contained in the August 1993 license
from UNC to Pharm-Eco through a Definitive Agreement or as otherwise agreed,
except to the extent that such terms are contrary to any of the provisions of
this Letter Agreement. Any such Definitive Agreement will include provisions
whereby Immtech agrees to indemnify UNC from general liability and products
liability claims relating to Immtech's license granted it by UNC, and whereby
Immtech undertakes to acquire and maintain insurance coverage in an amount
reasonably adequate to provide such indemnification.
10. Termination. This Letter Agreement may be terminated (i) by any party
if neither an IPO generating gross proceeds of at least $5 million nor an
Alternative Financing generating gross proceeds of at least $5 million has been
closed within nine months of the date of this Letter Agreement, (ii) by the
agreement in writing of all of the parties hereto, including pursuant to a
Definitive Agreement or (iii) by Immtech if UNC has not obtained Consents from
each of the other members of the Consortium within 30 days after the date
hereof.
6
<PAGE>
11. Governing Law: This Letter Agreement shall be governed by the internal
laws of the State of North Carolina.
12. Assignment: This Letter Agreement may not be assigned without the
written consent of each of the other parties hereto.
13. Counterparts: This Letter Agreement may be executed in one or more
counterparts which shall be effective as original agreements of the parties
executing such counterpart. Original signatures transmitted by facsimile shall
be effective to create such counterparts.
IN WITNESS WHEREOF, this Letter Agreement shall be effective as a binding
agreement among the parties hereto upon being fully executed by the parties
indicated below and shall remain in effect as a Letter Agreement upon the terms
and conditions provided herein or until superseded by the execution and delivery
by the parties of a Definitive Agreement.
Execution Date: January 15, 1997
The University of North Carolina Immtech International, Inc.
at Chapel Hill
By: /s/ Francis J. Meyer 3/12/97 By: /s/ T. Stephen Thompson
-------------------- -----------------------
Name: Francis J. Meyer, Ph.D. Name: T. Stephen Thompson
Title: ASSOCIATE VICE PROVOST Title: President and Chief Executive
FOR TECHNOLOGY DEVELOPMENT Officer
Pharm-Eco Laboratories, Inc.
By: /s/ David J Wade
----------------
Name: David J Wade
Title: Core Coordinator
7
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
INVENTION FILED IN ISSUED-App. OR PATENT #
<S> <C> <C>
Dications - Treatment of Pneumocystis carinii US US - June 12, 1990 4,933,347
Pneumonia (0RS88-4)
Dications - Treatment of Leishmaniasis US US - April 13, 1993 5,202,320
(0RS88-4)
Dications - Treatment of Malaria US, EPO, Argentina, US - April 27, 1993 5,206,236
(0RS88-4) Brazil, Australia, Canada EPO - March 1, 1995 0,366,066
China, Denmark, Israel, Argentina - May 31, 1995 248,011
Japan, Mexico, Pakistan, Australia - Jan 25, 1993 626,033
Philippines, Korea, Mexico - August 30, 1995 179,371
Switzerland, Venezuela, Pakistan - Oct. 19, 1989 131,965
Finland, India, Norway, Switzerland - Apr 30, 1996
Taiwan Venezuela - Jan 5, 1996
Dications - Treatment of Fungal Infections US DIV-08/641,510
(0TD95-51) USSN-08/472,996
HIV - Inhibition of the Integrase Enzyme US, PCT, Australia, Brazil, US- 08,185,079 NZ-279619
(0RS94-34) Canada, Japan, New PCT- PCT/US95/01599
Zealand, EPO, Venezuela AU- 16798/95 VZ-503-96
EPO- 95908504.4
Dications - Detection of nucleic acids and US, PCT
cytoskeleton elements (0RS94-43)
Inhibition of Pneumocystis carinii Pneumonia US, PCT, Argentina, Israel, US - May 28, 1996 5,521,189
(0RS94-81) South Africa, Taiwan DIV-08/564,879
Inhibition of Giardia Lamblia US, PCT, Argentina, Israel,
(0RS94-81) South Africa, Taiwan
Inhibition of Cryptosporidium parvum US, PCT, Argentina, Israel,
(0RS94-81) South Africa, Taiwan
Inhibition of Pneumocystis carinii Pneumonia US, Canada, PCT, Japan, US - June 27, 1995 5,428,051
(0RS93-17) Brazil, Australia, New
Zealand, EPO, Venezuela
Prodrugs for PCP Infection US USSN-08/558,716
(0RS95-50)
Methods of Treating Microbial Infections US USSN-08/474,440
(0TD95-48) USSN-08/477,876
TIDWELL PCT/US96/08972
</TABLE>
<PAGE>
IMMTECH INTERNATIONAL, INC.
1890 Maple Avenue, Suite 110, Evanston, IL 60201
Tel:847-869-0033
Fax: 847-869-0045
February 17, 1997
Pharm-Eco Laboratories, Inc.
128 Spring Street
Lexington, MA 02173
Tel: 617-861-9303
Fax: 617-861-9386
Re: Side Letter to Research Collaboration Agreement
Immtech International, Inc. ("Immtech") and Pharm-Eco Laboratories, Inc.
("Pharm-Eco") are parties to a Letter Agreement with The University of North
Carolina at Chapel Hill dated January 15, 1997 regarding the Formation of
Research Collaboration (the "Research Collaboration Agreement"). Capitalized
terms used herein but not otherwise defined shall have the meanings set forth in
the Research Collaboration Agreement. In order to clarify the rights and
obligations between Immtech and Pharm-Eco as provided by the Research
Collaboration Agreement, and without modifying any of the terms of the Research
Collaboration Agreement, the parties hereto agree as follows:
1. Patent Expenses
(a) Immtech will fund the reasonable fees and expenses ("Patent
Costs") up to a maximum of $150,000 incurred by the patent firm of Bell,
Seltzer, Park, and Gibson (the "Patent Firm") from November 12, 1996 until the
completion by Immtech of an IPO or an Alternative Financing for the prosecution
of patents for Current Compounds. Immtech will have the right to review all
documents prepared by the Patent Firm relating to the Compounds. Immtech will
not be obligated to fund the Patent Costs with respect to any new patent filings
made after the date of this Agreement unless Immtech has given its written
approval for such patent filing prior to the filing. Immtech will pay the Patent
Costs as reflected in invoices from the Patent Firm promptly after Immtech has
received a copy of the invoice, provided, however, that Immtech will have the
right to question any unreasonable Patent Costs and may delay payment of the
Patent Costs until the satisfactory resolution of any such dispute.
(b) If, after the completion of an IPO or the Alternative Financing,
Immtech ceases to pay the costs to prosecute, maintain or defend the patents and
patent applications relating to any Compound (any such Compound, an "Abandoned
Compound"), Immtech will use reasonable efforts to provide that Pharm-Eco will
have the right to use the Abandoned Compound at Pharm-Eco's expense, provided,
however, that if Immtech ceases to pay patent costs with respect to an Abandoned
Compound at any time after Immtech has spent an aggregate of $500,000 or more
for patent costs for all Compounds, Pharm-Eco's use of the Abandoned Compound
will be subject to an annual royalty payment from Pharm-Eco to Immtech. The
annual royalty payments to Immtech will be 1.5% for the first $150 million in
sales for any year, 1% for sales between $150 million and $300 million for any
year, and 0.75% for sales greater than $300 million for any year.
<PAGE>
2. Warrants Pharm-Eco, by written notice to Immtech, may convert any
exercisable Warrants granted by Immtech pursuant to paragraph 3(b) of the
Research Collaboration Agreement into shares of Common Stock at a ratio of three
Warrants for each share of Common Stock.
3. Manufacturing Joint Venture
(a) Immtech and Pharm-Eco agree to use reasonable efforts to form a
joint venture (the "Joint Venture") for the manufacture and commercialization of
the initial compounds DAP-092 (for treatment of Cryptosporidium parvum
infections) and the prodrug for Pentamidine (for oral treatment of Pneumocystis
carinii pneumonia) (the "Initial Compounds") substantially on the terms set
forth on Exhibit A hereto, subject to the prior receipt of any consent required
from the Consortium.
(b) In order to accelerate the development of the Compounds for
clinical trials, Pharm-Eco and Immtech may agree to incur costs that would be
billed to the Joint Venture and repaid from an IPO or an Alternative Financing.
Pharm-Eco and Immtech will prepare a plan (including a milestone and a budget)
for work to be performed by each party prior to the commencement of any work.
4. License of Initial Compounds If Immtech is unable to complete an IPO or
an Alternative Financing as provided by the Research Collaboration Agreement,
Pharm-Eco will take all reasonable actions (including, without limitation,
obtaining any necessary consents from the Consortium) to provide Immtech with a
license to use the Initial Compounds on substantially the terms provided in
paragraph 2(b) of the Research Collaboration Agreement. If Immtech receives a
license to the Initial Compounds pursuant to this paragraph, Immtech will (a)
pay all costs for maintaining Pharm-Eco's rights to the Initial Compounds as
provided by the current written agreement between Pharm-Eco and the Consortium,
including, without limitation, by paying Patent Costs for the Initial Compounds,
and (b) immediately issue to the Joint Venture for the benefit of Pharm-Eco 25%
of the Shares and 25% of the Warrants, provided that Pharm-Eco will have the
right to convert such Warrants into shares of Common Stock as provided by
paragraph 2(a) of this Agreement.
5. Definition of Costs In paragraph 4(b) of the Research Collaboration
Agreement, the term "costs" in the case of manufactured products is agreed to
include a gross manufacturing margin of 60% determined as described in Exhibit A
hereto.
6. Governing Law: This Agreement shall be governed by the internal laws of
the State of Illinois.
7. Assignment: This Agreement may not be assigned without the written
consent of the other party hereto.
2
<PAGE>
8. Counterparts: This Agreement may be executed in one or more
counterparts which shall be effective as original agreements of the parties
executing such counterpart. Original signatures transmitted by facsimile shall
be effective to create such counterparts.
Immtech International, Inc.
By: /s/ T. Stephen Thompson
-----------------------
Name: T. Stephen Thompson
Title: President and Chief Executive Officer
Pharm-Eco Laboratories, Inc.
By: /s/ David J. Wade
-----------------
Name: David J. Wade
Title: Core Coordinator
By: /s/ Richard Gabriel
-------------------
Name: Richard Gabriel
Title: Core Coordinator
By: /s/ Salah A. Zahr
-----------------
Name: Salah A. Zahr
Title: Core Coordinator
By: /s/ Monica Tamborini
--------------------
Name: Monica Tamborini
Title: Core Coordinator
3
<PAGE>
Exhibit A
Outline of a Joint Venture Relationship between
Immtech International, Inc. and Pharm-Eco Laboratories, Inc.
This outline sets forth the principal terms for the formation of a joint
venture (the "Joint Venture") between Immtech International, Inc. ("Immtech")
and Pharm-Eco Laboratories, Inc. ("Pharm-Eco") pursuant to the Letter Agreement
dated January 15, 1997 among Immtech, Pharm-Eco and The University of North
Carolina at Chapel Hill regarding the Formation of Research Collaboration (the
"Research Collaboration Agreement"). Capitalized terms used herein but not
otherwise defined shall have the meanings set forth in the Research
Collaboration Agreement. The purpose of the Joint Venture is to facilitate the
movement of the Current Compounds from research into the marketplace and to
manufacture and sell these compounds and other drug products at the highest
possible profit. Immtech and Pharm-Eco believe that the most effective way to
move the Current Compounds into the marketplace is for Pharm-Eco to focus its
efforts on synthesizing and manufacturing the Current Compounds and for Immtech
to focus its efforts on the clinical development, licensing and marketing of the
Current Compounds.
1. Structure of the Joint Venture Immtech and Pharm-Eco will form the
Joint Venture as a partnership, corporation or other legal entity. Each of
Pharm-Eco and Immtech will have a 50% ownership interest in the Joint Venture
(after taking into account each party's contribution to the Joint Ventures
capital) and will recover their respective costs through contractual
arrangements with the Joint Venture. The agreement with respect to the formation
of the Joint Venture will set forth a reasonable valuation of each party's
contribution to the Joint Venture's capital. The organizational documents for
the Joint Venture will provide for satisfactory means to resolve potential
deadlocks between Immtech and Pharm-Eco in the management of the Joint Venture.
2. Contribution of Technology to the Joint Venture
(a) The first two Compounds to be developed through the Joint
Venture will be DAP-092 (for treatment of Cryptosporidium parvum infections) and
pentamidine analog prodrugs (for oral treatment of Pneumocystis carinii
pneumonia) (the "Initial Compounds"). All other Compounds will become candidates
for development by the Joint Venture only upon Immtech's prior written approval.
Products produced from the Initial Compounds or from any other Compounds
developed by the Joint Venture pursuant to this paragraph 2(a) are referred to
herein as "Joint Venture Products."
(b) Once any Compound is selected for development by the Joint
Venture, Immtech and Pharm-Eco will evaluate the steps necessary for the
development of that Compound and will jointly prepare a development plan (the
"Development Plan") setting forth the methodology and timetable for preclinical,
clinical and commercial production and marketing of that Compound.
(c) As provided herein, Pharm-Eco will provide services to the Joint
Venture for the manufacture of the Joint Venture Products and the preparation of
all documentation for regulatory filings for the Joint Venture Products, and
Immtech will provide services to the Joint Venture for the development and
management of the Joint Venture Products, including preclinical and clinical
testing and marketing and selling the Joint Venture Products.
<PAGE>
3. Manufacture of Joint Venture Products by Pharm-Eco
(a) Pharm-Eco will manufacture Joint Venture Products for the Joint
Venture subject to the terms of this paragraph 3. Pharm-Eco will manufacture the
Joint Venture Product for the Joint Venture in a timely manner based upon the
milestones set forth in the Development Plan. Pharm-Eco will use reasonable
efforts to build a new manufacturing facility with adequate capacity to
manufacture Joint Venture Products derived from the Initial Compounds at the
quantities and at the times set forth in the Development Plan for preclinical
trials, clinical trials and commercial sale. Pharm-Eco will give the Joint
Venture manufacturing priority so that Immtech can begin clinical trials and
commercialization as soon as is reasonably possible.
(b) Pharm-Eco will have the option to manufacture for the Joint
Venture the first $20 million annually of each Joint Venture Product. Once
annual purchases of a Joint Venture Product manufactured by Pharm-Eco exceed $20
million, the Joint Venture, at Immtech's option and upon such terms as Immtech
deems appropriate, may contract with Immtech or a third party to manufacture
such Joint Venture Product. Notwithstanding the foregoing, Pharm-Eco will
manufacture the clinical trial material and early GMP production of active
pharmaceutical ingredients for human trials for the Initial Compounds.
(c) In consideration for the manufacture of Joint Venture Products,
Pharm-Eco will bill the Joint Venture only for Pharm-Eco's Manufacturing Cost
and related non-manufacturing costs. As used herein, "Manufacturing Cost"
consists of (i) direct costs ("Direct Manufacturing Costs") incurred by
Pharm-Eco in the manufacture of Joint Venture Products, including material
costs, waste, packaging, shipping, labeling, labor, quality control, quality
assurance and manufacturing overhead, and (ii) a gross margin of 60%. If Direct
Manufacturing Costs exceed 25% of the Joint Venture's net sales for any Joint
Venture Product, then the amount by which the Direct Manufacturing Costs exceed
25% will be deducted from Pharm-Eco's share of the Joint Venture's profits.
Pharm-Eco will keep diligent records of its Direct Manufacturing Costs and will
allow representatives of Immtech to review such records upon request. Pharm-Eco
will bill the Joint Venture for its non-manufacturing costs without a gross
margin.
(d) If Immtech elects to have the Joint Venture use Immtech or a
third party for the manufacture of any Joint Venture Products as permitted by
paragraph 3(b) above, the Joint Venture will pay Pharm-Eco a royalty of 2% on
sales of the Joint Venture Product not manufactured by Pharm-Eco until such
sales reach $100 million and a royalty of 1% on sales greater than $100 million.
The foregoing royalty payment is in lieu of any royalty payments to which
Pharm-Eco may otherwise be entitled pursuant to paragraph 3(e) below.
(e) If Immtech and Pharm-Eco determine that Pharm-Eco will
manufacture any Joint Venture Product exclusively for sale in the United States
and Canada (the "Territory"), and that Immtech or a third party will receive a
license to manufacture such Joint Venture Product for sale outside of the
Territory, the Joint Venture will make an annual royalty payment to Pharm-Eco
with respect to such Joint Venture Product. The annual royalty payments to
Pharm-Eco will be 1.25% for the first $150 million in sales for any year, 1% for
sales between $150 million and $300 million for any year, and 0.75% for sales
greater than $300 million for any year. The foregoing royalty payment is in lieu
of any royalty payments to which Pharm-Eco may otherwise be entitled pursuant to
paragraph 3(d) above.
2
<PAGE>
4. Research. Development and Marketing by Immtech
(a) Immtech will provide services to the Joint Venture for the
research, development and marketing of Joint Venture Products, including
preclinical and clinical testing, regulatory approval, formulation and
marketing. Immtech will use reasonable efforts to diligently develop the Joint
Venture Products in accordance with the milestones set forth in the Development
Plan. Immtech may contract with outside firms to the extent it deems advisable
to efficiently develop the Joint Venture Products.
(b) In consideration for the development of Joint Venture Products,
Immtech will bill the Joint Venture only for Immtech's Direct Development Cost.
As used herein, "Direct Development Cost" consists of direct marketing, sales
and other non-manufacturing costs incurred by Immtech in the development,
marketing and sale of Joint Venture Products, including, without limitation,
sales and marketing expenses (but excluding costs associated with hiring,
equipping and training sales and marketing employees) and costs associated with
preclinical and clinical trials and regulatory filings. Immtech's Direct
Development Costs will be recovered without margin. Sales or marketing
expenditures for multiple Joint Venture Products will be allocated among the
Joint Venture Products. Immtech will keep diligent records of its Direct
Development Costs and will allow representatives of Pharm-Eco to review such
records upon request.
5. Licenses of Compounds Other than Joint Venture Compounds. Any Products
or Compounds (other than Joint Venture Products) that are licensed to any third
party by Immtech or that are manufactured directly by Immtech will be subject to
a royalty payment by Immtech to Pharm-Eco. The annual royalty payments to
Pharm-Eco will be 1.5% for the first $150 million in sales for any year, 1% for
sales between $150 million and $300 million for any year, and 0.75% for sales
greater than $300 million for any year. Pharm-Eco will also receive 12.5% of all
licensing fees and milestone payments as provided by paragraph 3(f) of the
Research Collaboration Agreement.
6. Termination of the Joint Venture If either Immtech or Pharm-Eco is in
material and continuing breach of its obligations to the Joint Venture, the
Joint Venture, at the option of the nonbreaching Joint Venture partner, may
terminate the breaching partner's contract with the Joint Venture and obtain
such services from a third party.
3
<PAGE>
AMENDMENT TO LETTER AGREEMENT
This Amendment to the Letter Agreement dated January 15, 1997 among Immtech
International, Inc., The University of North Carolina at Chapel Hill and
Pharm-Eco Laboratories, Inc. (the "Letter Agreement") is effective as of October
15, 1997.
RECITALS
A. Immtech has not completed an IPO or the Alternative Financing required by
Paragraph 1 of the Letter Agreement within the nine month period specified
in Paragraph 10 thereof, permitting any of the parties to terminate the
Letter Agreement as of the date of this Amendment.
B. Immtech has requested an extension of time to permit it to complete an IPO
or obtain the Alternative Financing.
C. UNC and Pharm-Eco are willing to grant an extension of time to Immtech on
the conditions specified below.
AGREEMENT
1. UNC and Pharm-Eco agree to extend the Letter Agreement until January 15,
1998, provided that (a) during such period Immtech pays the sum of $33,000
per month for support of Dr. Richard Tidwell's research covered by the
Letter Agreement. Payment for the first two months shall be made no later
than November 7, 1997 and for the third month by December 7, 1997, (b)
Immtech shall pay, as amounts become due, up to $50,000 in fees and
expenses charged UNC by UNC's patent counsel during the period of the
extension and (c) Immtech shall pay UNC any arrearages in research support
accrued prior to the date of this Amendment within thirty days of the
closing of an IPO or Alternative Financing.
2. Immtech agrees to provide UNC and Pharm-Eco with timely notice of and the
opportunity to participate in any substantive discussions and any meetings
with potential investors, including, but not limited to, Arch Venture
Partners and Bank America Ventures.
3. Paragraph 8 of the Letter Agreement, No Shop/Confidentiality, is deleted
from the Letter Agreement.
4. Capitalized terms used herein have the same meanings given them in the
Letter Agreement.
<PAGE>
5. Other than as amended herein, the Letter Agreement remains in full force
and effect.
The University of North Carolina Pharm-Eco Laboratories, Inc.
at Chapel Hill
By: _____________________________ By: _____________________________
Title: __________________________ Title: __________________________
Date: ___________________________ Date: ___________________________
Immtech International, Inc.
By: /s/ T. Stephen Thompson
-----------------------
Title: President and CEO
Date: Nov 20, 1997
-2-
<PAGE>
SECOND AMENDMENT TO LETTER AGREEMENT
This Amendment to the Letter Agreement dated January 15, 1997 among Immtech
International, Inc., The University of North Carolina at Chapel Hill and
Pharm-Eco Laboratories, Inc. (the "Letter Agreement") is effective as of January
15, 1998.
RECITALS
A. Immtech has not completed an IPO or the Alternative Financing required by
Paragraph 1 of the Letter Agreement within the nine month period specified in
Paragraph 10 thereof, as extended until January 15, 1998 by the Amendment to
Letter Agreement effective October 15, 1997, permitting any of the parties to
terminate the Letter Agreement as of the effective date of this Amendment.
B. Immtech has requested an extension of time to permit it to complete an IPO or
obtain the Alternative Financing.
C. UNC and Pharm-Eco are willing to grant an extension of time to Immtech on the
conditions specified below.
AGREEMENT
1. In return for Immtech providing a $200,000 Research Grant to Dr. Richard
Tidwell's laboratory at UNC on or before May 5, 1998, UNC and Pharm-Eco agree to
extend the Letter Agreement until May 5, 1998, to allow Immtech time to enter
into a commitment to complete the IPO or the Alternative Financing with a
third-party. Upon receipt of the $200,000 and entrance by Immtech into a
commitment as described above, the Letter Agreement will automatically be
extended until September 31, 1998. Within thirty days of closing of the IPO or
Alternative Financing, Immtech shall (a) replenish Dr. Tidwell's UNC Department
of Pathology & Laboratory Medicine trust fund of all monies spent due to the
delay in receipt of the Research Grants, currently about $150,000 and (b)
provide each of UNC and Pharm-Eco with 50,000 common (504-tradeable) shares of
Immtech stock. These shares shall be in addition to Immtech's obligation to
provide Common Stock and Warrants described in the Letter Agreement.
2. Paragraph 1(b) of the Letter Agreement, Financing, is modified with
"$10,000,000" being replaced with "$4,000,000".
3. Immtech agrees to provide UNC and Pharm-Eco with timely notice of and the
opportunity to participate in any substantive discussions and any meetings with
potential investors.
4. The last sentence of Paragraph 3(d) of the Letter Agreement, Consideration
for License, is modified to read "After the closing of the IPO or an Alternative
Financing, Immtech will make quarterly $100,000 Research Grants to UNC
commencing on the final day of the month during which the closing of either the
IPO or an Alternative Financing occurs, and will continue to make a $100,000
Research Grant every three months thereafter until, at a minimum, the third
anniversary of the completion of the IPO or Alternative Financing."
5. Paragraph 3(i) of the Letter Agreement, Consideration for License, is
modified to read "Prior to and after the completion of the IPO or an Alternative
Financing, Immtech will pay all costs to
<PAGE>
prosecute, maintain and defend all patents and patent applications relating to
any Compounds or Products. Immtech shall have forty-five days from the receipt
of invoice from UNC to pay all amounts owed under this Paragraph 3(i)."
6. Paragraph 10 of the Letter Agreement, Termination, is amended by adding the
following: "(iv) Prior to Immtech raising ten million dollars ($10,000,000)
pursuant to Paragraph 11 below, by UNC if Immtech does not pay all amounts owed
under this Letter Agreement within forty-five days of receipt of written notice
from UNC indicating the overdue status of such amounts. Immtech's right to pay
overdue amounts noticed hereunder shall be limited to two overdue events in any
calendar year. Any subsequent failure to pay amounts owed hereunder in the time
allotted shall entitle UNC to terminate this Letter Agreement, (v) After Immtech
raises ten million dollars ($10,000,000), by UNC if Immtech's cumulative
invoices from UNC are greater than one thousand dollars ($1,000), are more than
forty-five days overdue, and Immtech has received written notice from UNC giving
the company forty-five days notice to pay all overdue amounts. Immtech's right
to pay overdue amounts noticed hereunder shall be limited to two overdue events
in any calendar year. Any subsequent failure to pay amounts owed hereunder in
the time allotted shall entitle UNC to terminate this Letter Agreement.
7. Paragraph 3(f) of the Letter Agreement, Consideration for License, is amended
by adding the following: "To the extent that such signing, milestone and other
non-royalty payments are used by Immtech to fund research and clinical
development of the Compounds, then UNC and Pharm-Eco will each be paid 2.5% of
such amounts paid to Immtech.
8. Immtech shall pay UNC thirty-five thousand dollars ($35,000) by May 5th, 1998
as advance payment for patent expenses incurred in patenting the dication
compounds.
9. Limited License. Upon raising four million dollars ($4,000,000), Immtech will
be granted the license described in Paragraph 2 of the Letter Agreement, however
said license shall be limited to use of the dication compounds (as described in
Exhibit A of that Agreement) as antimicrobial agents. If additional uses for the
dication compounds are discovered by the Consortium, UNC may offer to include
them in the limited license described herein in return for Immtech's agreement
to pay the expenses associated with preparing, filing, and maintaining a US
patent on that new use. Alternatively, if UNC decides not to offer the
additional uses for the dication compounds to Immtech, it agrees not to offer
them to any third party until the sooner of Immtech filing for bankruptcy or
failing to raise ten million dollars within two years of the latest date of
signature below.
The initial five million dollars ($5,000,000) in funds raised by Immtech,
i.e., the four million dollars referenced above plus an additional one million
dollars, will be applied to the advancement of the dication compounds. Once
Immtech has raised more than ten million dollars ($10,000,000), the grant of
license will revert, in its entirety, to that described in the Letter Agreement.
10. Termination for Bankruptcy. In the event that Immtech files for bankruptcy
because of insolvency prior to raising ten million dollars ($10,000,000), the
limited license described in Paragraph 9 above shall terminate except for those
compounds for which INDs have been filed with the FDA, or for which human
clinical trials have been started by Immtech. After such bankruptcy filing, the
survival of Immtech's license to those compounds for which INDs have
<PAGE>
been filed or for which human clinical trials have been started will be for no
more than two years from the date of Immtech's bankruptcy filing. If, in UNC's
sole judgment, Immtech has after its bankruptcy filing proceeded with
significant development of the compounds, then UNC may choose not to terminate
Immtech's license.
11. Failure to Raise Funds. In the event that Immtech is not able to raise ten
million dollars ($10,000,000) in initial funds within two years of the latest
date of signature below, the limited license described in Paragraph 9 above may
be terminated at UNC and Pharm-Eco's discretion, except for those compounds for
which INDs have been filed with the FDA, or for which human clinical trials have
been started by Immtech. In order to maintain its license with respect to the
compounds for which INDs have been filed with the FDA, or for which human
clinical trials have been started, Immtech will have one additional year beyond
the two years described above to establish a program for financing the continued
development of these compounds. The financing program, which may include
collaboration or a sublicense with a third party, must be reasonably sufficient
in UNC's judgment to complete the clinical testing of these compounds. Failure
to establish a financing program satisfactory to UNC, will result in termination
of Immtech's license with respect to that compound.
12. Capitalized terms used herein have the same meaning given them in the Letter
Agreement.
13. Other than as amended herein and in the prior Amendment effective October
15, 1997, the Letter Agreement remains in full force and effect.
The University of North Carolina Pharm-Eco Laboratories, Inc.
at Chapel Hill
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
--------------- ---------------
Title: Director, Office of Title: Core Coordinator
Technology Development Date: 5/22/98
Date: May 14, 1998
Immtech International, Inc.
By: /s/ T. Stephen Thompson
-----------------------
Title: President and CEO
Date: May 12, 1998
May 29, 1998
Mr. T. Stephen Thompson
President
Immtech International, Inc.
1890 Maple Avenue
Suite 110
Evanston, Illinois 60201
Via Fax and Regular Mail
Re: Binding Letter Agreement Between Immtech International, Inc. and Franklin
Research Group, Inc.
Dear Steve:
The purpose of this letter is to set forth the principal terms of a proposed
transaction between Franklin Research Group, Inc. or its designee(s)
("Franklin") and Immtech International, Inc. ("Immtech"). Following the
execution of this letter by both parties, the parties shall proceed to enter
into one or more agreements consistent with the terms of this letter (such
agreement or agreements are hereinafter referred to as the ("Agreement"), and to
execute and deliver such other instruments, certificates, and documents as are
necessary to carry out the terms of this letter. The provisions of this letter
shall be binding on the parties hereto, and their respective successors and
assigns. The principal terms of the Agreement shall be as follows:
Purpose of Transaction. The purpose of the transaction will be to further
research and find commercial applications for the protein known as "modified
CRP" and hereinafter referred to as "mCRP."
Formation of Newco. A new C corporation shall be formed ("Newco"), the ownership
and capitalization of which shall be as follows:
1. In exchange for 330,000 shares of the capital stock of Newco, Immtech
shall contribute the following assets to Newco: (i) Immtech's domestic and
international patents relating to the manufacture, function and uses of
mCRP with the exception of uses in Sepsis and uses as an adjuvant in
vaccines as delineated in Schedule A attached hereto; (ii) Newco shall
grant to Immtech a non-exclusive license for the manufacture of mCRP
solely for the purpose of use in connection with Sepsis and as an adjuvant
in vaccines; (iii) In the event that Immtech's current licenses for use of
mCRP in the treatment of Sepsis and as an adjuvant for vaccines are
terminated for
1
<PAGE>
any reason, then Immtech shall offer Newco licenses for such uses upon,
the same terms as the existing licenses; (iv) all of Immtech's proprietary
and non-proprietary information on mCRP, including any records and printed
material relating thereto; (v) all licensed rights relating to mCRP,
including, without limitation, any rights licensed from Northwestern
University; (vi) Newco will have access to all instruments and other
equipment currently owned by Immtech that are used in the research and
manufacturing of mCRP, including, without limitation, all personal
property located at 1890 Maple Avenue in Evanston, Illinois. During the
time that these assets are owned by Immtech, Newco shall have the
obligation to pay a reasonable share of any maintenance costs associated
with these assets. The ownership of these assets shall transfer to Newco
upon commencing the additional $6.5 million investment as outlined in
Section 4 below; and (vii) all other assets, tangible and intangible, of
Immtech primarily used in connection with mCRP. In addition, Immtech shall
make available to Newco, at reasonable times and for reasonable
compensation, Immtech employees and consultants who have knowledge
concerning mCRP and its development.
2. In exchange for 510,000 shares of the capital stock of Newco, Franklin
will contribute or cause to be contributed to Newco $1,350,000 in
accordance with the schedule attached hereto as Schedule B. An additional
160,000 shares of the capital stock of Newco shall be reserved for
issuance to Franklin in accordance with paragraph 4 below.
3. Newco shall utilize the $1,350,000 provided by Franklin to prepare for and
conduct Phase I human clinical trials on the safety and effectiveness of
mCRP. Such Phase I trial will include at least 30 patients and will be
conducted primarily as safety tests, but it is anticipated that this Phase
I trial will also provide preliminary but statistically significant data
evidencing that mCRP is therapeutically efficacious in the treatment of
cancer in humans. It is anticipated that these clinical trials will take
approximately 18 months to complete.
4. If Newco completes the milestones outlined in paragraph 3 above, then
Franklin shall invest an additional $6,500,000 in Newco in exchange for an
additional 160,000 shares of the capital stock of Newco. These funds shall
be used to conduct Phase II and III human clinical trials. The
determination as to whether the Phase I results meet the requirements for
the additional $6,500,000 investment shall be made by a Medical Advisory
Board appointed by Newco's Board of Directors which shall include no fewer
than three members. The Medical Advisory Board shall render a written
opinion within thirty days of receipt of data from the Phase I clinical
trial. The additional $6,500,000 investment shall be required if in the
opinion of a majority of the Medical Advisory Board the Phase I results
indicate that mCRP is safe for use in
2
<PAGE>
humans and has a statistically significant therapeutically efficacious
effect on cancer in humans. If such an opinion is rendered, then within 90
days from the date of receipt of such opinion, Franklin shall provide not
less than $1,500,000 of the required additional investment of $6,500,000,
an additional $1,500,000 within 180 days of the date of receipt of such
opinion, and the remaining $3,500,000 within 270 days of the date of
receipt of such opinion. Notwithstanding the foregoing, Immtech shall have
the right to provide $1,625,000 of the additional investment of $6,500,000
by giving Newco notice of its intention to do so not later than ten days
after the receipt of the opinion of Newco's Medical Advisory Board. If
Immtech so notifies Newco, then Immtech shall receive 40,000 of the
additional 160,000 shares reserved for issuance to Franklin, and Immtech
shall pay such $1,650,000 ratably with the $4,875,000 Franklin is required
to provide ($375,000 within 90 days of receipt of the opinion, an
additional $375,000 within 180 days, and the balance or $900,000 within
270 days).
5. Upon formation of Newco, Lawrence A. Potempa shall receive 33,333 shares
of Newco and an option for an additional 30,000 shares. The option price
shall be nominal, and the option would vest upon the submission of a "new
drug application" in any major industrialized country by Newco for
regulatory approval of a product based upon mCRP, or the entering into of
a license by Newco with any entity that is required by the terms of the
license to file such an application. If there is a change in control of
Newco, the additional 30,000 options will automatically vest.
6. 100,000 shares of Newco shall be reserved for issuance pursuant to a stock
option plan for employees and consultants approved by Newco's Board of
Directors.
Additional Terms.
1. All shares of Newco shall be common shares and shall have identical terms
and rights except that the holders of the Franklin shares shall have the
right to elect five of seven members of the Board of Directors.
2. If Franklin fails to make any investment in Newco within thirty days of
the date that it is obligated to do so hereunder, and such failure occurs
while Franklin is obligated to make its initial $1,350,000 investment,
then Immtech shall have the option, exercisable during any time that such
failure continues, of (i) if Immtech is publicly traded (trading on the
electronic bulletin board shall not constitute "publicly traded") at the
time of Franklin's failure to invest, 90% of Franklin's investment will be
converted into Immtech stock at a price defined by the average of the
preceding 30 trading days; or (ii) to purchase for cash from Franklin all
of its shares for 90% of the amount actually contributed by Franklin to
Newco. If Immtech exercises its option to
3
<PAGE>
repurchase, then it must do so within 90 days of the date of its notice.
If such failure occurs while Franklin is obligated to contribute the
additional $6,500,000 and Immtech is not public, then Immtech shall have
an option to purchase an additional number of shares of Newco for $1 per
share such that Immtech would have a majority of the issued and
outstanding stock of Newco, and thereafter, there shall be no special
rights in the Franklin shares or Immtech shares with respect to the
election of the Board of Directors of Newco. The parties agree that if
this situation occurs, cumulative voting will apply. Immtech and Franklin
shall each have a right of first refusal to purchase the shares owned by
the other party upon the same terms and conditions as are contained in any
third party offer. This right of first refusal shall not apply to
transfers to trusts for the benefit of any shareholder or his family
members, or direct transfers to family members, provided that the
transferee agrees to subject the transferred shares to the right of first
refusal.
3. Until completion of the Phase I human trials, Franklin and Immtech agree
that the entering into of any agreement relating to mCRP (as defined in
the "Formation of Newco," Section 1 above), including any license or
sub-license, with any person or entity that is related in any way to
Franklin or any other director or shareholder of Newco shall require the
unanimous approval of Newco's Board of Directors. Until the Phase I
clinical trials are complete and Franklin has made its additional
$6,500,000 investment, the following actions shall require unanimous
approval of Newco's Board of Directors: (i) the issuance of any stock
options in excess of the 100,000 shares initially reserved for options,
and (ii) the agreement to a merger, sale, or disposition of substantially
all of the assets of Newco; (iii) the liquidation, dissolution or
consolidation of Newco with another entity or the effectuation of any
transaction or series of related transactions in which is more than 50% of
the voting power of Newco is disposed.
4. Upon the fifth anniversary of the formation of Newco, Immtech shall have a
"put" right to sell to Newco all of Immtech's Newco stock for a price
equal to the lesser of (i) the fair market value of such shares as
determined by a national investment banking firm selected by the parties
with experience in valuing biotechnology companies, or (ii) $5 per share.
Such right must be exercised by written notice to Newco within 30 days of
such fifth anniversary. The cost of any appraisal shall be paid by
Immtech. Closing of the sale of the shares shall occur within 60 days of
the date upon which the price is determined, and the purchase price shall
be paid in cash.
Employment of Dr. Potempa. Dr. Potempa shall enter into a three (3) year
employment agreement with Newco, with an option on the part of Newco to extend
the agreement for an additional two (2) year period. Dr. Potempa shall be paid
an initial salary of $120,000, plus benefits provided to other employees of
Newco. Dr. Potempa shall receive bonuses
4
<PAGE>
and salary increases as determined by Newco's CEO and/or Board of Directors. The
employment agreement shall contain non-competition provisions acceptable to
Newco and Dr. Potempa.
Payment of Patent Expenses. Newco shall pay for the maintenance and prosecution
of all patents transferred to Newco as set forth in Formation of Newco, Section
1 and as summarized in Schedule A. Newco shall not shall not bear any costs for
any Sepsis patents that have been issued.
Preparation of Agreement. Franklin shall produce the initial draft of the
Agreement. The parties agree to work diligently to execute the Agreement and any
other necessary documentation on or before June 22, 1998.
Board Approval. Each of Franklin and Immtech represents and warranties to the
other that all Board or other corporate approvals requisite to carrying out the
provisions of this letter have been obtained, and that no further corporate
approvals shall be necessary prior to the execution and delivery of the
Agreement and related documents.
Governing Law; Venue for Dispute Resolution. The Agreement shall be governed by
Delaware law and shall provide that any disputes are to be resolved in the
State and Federal courts located in Franklin County, Ohio.
Franklin Research Group, Inc. Immtech International, Inc.
By: /s/ Philipp D. Nick, President By: /s/ T. Stephen Thompson
-------------------------------- ---------------------------------
Philipp D. Nick, President T. Stephen Thompson, President
5
<PAGE>
---------------------------
Immtech International, Inc.
---------------------------
PATENT STATUS - MCRP BIOLOGICALS
As of MAY 22, 1998
Schedule A
<TABLE>
<CAPTION>
Patent US Australian Canadian EPO
Appl/Patent Number Appl/Patent Number Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued Date Filed/Issued Date Filed/Issued
========================================================================================================================
<S> <C> <C> <C> <C>
Cancer ISSUED ISSUED 2132001 93910710.8
(treatment with mCRP) P-5,283,238 No. 668168 4/22/93 (2545/80) 4/22/93 (2545/81)
2/1/94 (2545/31) 9/4/96 (2545/79)
- ------------------------------------------------------------------------------------------------------------------------
Imaging ISSUED
(mCRP diagnostics) P-5,474,904
12/12/95
(2545/55)
- ------------------------------------------------------------------------------------------------------------------------
Immune ISSUED ISSUED ISSUED ISSUED
Complex P-5,593,897 No. 633488 No. 1,339,290 No. 0411017
Binding 1/14/97 (2545/73) 6/11/93 (2545/24) 8/12/97 (2545/10) 3/6/96 (2545/93-97)
(mCRP) BE, FR, DE, IT, UK
- ------------------------------------------------------------------------------------------------------------------------
Monocional ISSUED ISSUED 2,057,058 90913619.4
Abs P-5,272,258 No. 642430 6/20/90 (2545/34) 6/20/90 (2545/35)
(mCRP specific) 12/21/93 (2545/16) 3/7/94 (2545/33)
- ------------------------------------------------------------------------------------------------------------------------
Recominant Notice of Allowance 94909837.0
mCRP (Substance) 7/97 8/26/94 (2545/87)
08/480.270
6/7/95 (2545/86)
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Patent Japan PCT
Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued
========================================================================
<S> <C> <C>
Cancer 5-519361 PCT/US93/03769
(treatment with mCRP) 4/22/93 (2545/82) 4/22/93 (2545/50)
- ------------------------------------------------------------------------
Imaging
(mCRP diagnostics)
- ------------------------------------------------------------------------
Immune 1-504716 PCT/US89/01247
Complex 3/31/89 (2545/28) 3/31/89 (2545/11)
Binding
(mCRP)
- ------------------------------------------------------------------------
Monocional 2-512688 PCT/US90/03487
Abs 6/20/90 (2545/36) 6/20/90 (2545/20)
(mCRP specific)
- ------------------------------------------------------------------------
Recominant 6-519333 PCT/US94/0218.1
mCRP (Substance) 2/24/94 (2546/88) 2/24/94 (2545/57)
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
---------------------------
Immtech International, Inc.
---------------------------
PATENT STATUS - MCRP BIOLOGICALS
As of MAY 22, 1998
Schedule A
<TABLE>
<CAPTION>
Patent US Australian Canadian EPO
Appl/Patent Number Appl/Patent Number Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued Date Filed/Issued Date Filed/Issued
=====================================================================================================================
<S> <C> <C> <C> <C>
Recombinant 08/480,270
mCRP (Divisional) 6/7/95 (2545/86)
- ---------------------------------------------------------------------------------------------------------------------
Sepsis ISSUED ISSUED 2123787 98900907 8
(mCRP therapy) [illegible] No. [illegible] 11/23/92 11/23/92 (2546/71)
1/23/96 (2545/70) (2545/69)
- ---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis (using ISSUED 95911884.5
mCRP) P-5,547,931 2/22/95 (2545/104)
8/20/98 (2545/58)
- ---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis (using Divisional
mCRP) 08/549,013
8/20/96 (2545/89)
- ---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis Divisional
(ex vivo kits) 08/648,974
8/27/95 (2545/90)
- ---------------------------------------------------------------------------------------------------------------------
HIV treatment ISSUED ISSUED 2123786 92925395.3
(mCRP/rmCRP) p-5,585,349 No. 662787 11/23/92 11/23/92 (2545/87)
12/17/96 1/23/96 (2545/66) (2545/65)
(2545/53)
- ---------------------------------------------------------------------------------------------------------------------
Viral treatment CIP
(mCRP/rmCRP) 08/767,795
12/16/96
(2545/105)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Patent Japan PCT
Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued
===============================================================================
<S> <C> <C>
Recombinant
mCRP (Divisional)
- -------------------------------------------------------------------------------
Sepsis 6-510212 [illegible]
(mCRP therapy) 11/23/92 11/23/92 (2545/47)
(2545/68)
- -------------------------------------------------------------------------------
Thrombopoiesis (using PCT/US95/02253
mCRP) 2/22/95 (2545/88)
- -------------------------------------------------------------------------------
Thrombopoiesis (using
mCRP)
- -------------------------------------------------------------------------------
Thrombopoiesis
(ex viva kits)
- -------------------------------------------------------------------------------
HIV treatment 5-510209 PCT/US92/10126
(mCRP/rmCRP) 11/23/92 11/23/92 (2545/46)
(2545/84)
- -------------------------------------------------------------------------------
Viral treatment
(mCRP/rmCRP)
- -------------------------------------------------------------------------------
</TABLE>
[illegible]
<PAGE>
SCHEDULE B
PAYMENT OF
$1,350,000
DATE AMOUNT
- ---- ------
April, 1998 $ 50,000
June 4, 1998 $ 100,000
July 15, 1998 $ 50,000
July 31, 1998 $ 350,000
September 30, 1998 $ 350,000
December 31, 1998 $ 250,000
February 28,1998 $ 200,000
- ---------------- ----------
Total $1,350,000
RADE MANAGEMENT CORPORATION
1 NORTH END AVENUE
SUITE 1111
NEW YORK, NEW YORK 10282
June 1, 1998
Immtech International Inc.
1890 Maple Avenue
Suite 110
Evanston, Illinois 60201
Gentlemen:
Rade Management Corporation ("Rade") is serving as a consultant to
Immtech International Inc. ("Immtech") in connection with, among other items, a
proposed private placement (the "Private Placement") of shares of common stock
of Immtech. As an accommodation to Immtech and the prospective investors in the
Private Placement (the "Prospective Investors"), Rade has agreed to receive
funds (the "Funds") from the Prospective Investors and hold the Funds until
disbursement to Immtech.
Subject to the conditions set forth below, Rade agrees to indemnify
and hold harmless Immtech, its officers, directors and employees, against any
and all loss, claims, damages, and expenses whatsoever (including, reasonable
attorneys' fees) arising out of or related to a claim by a Prospective Investor
for Funds delivered to Rade but not delivered to Immtech in connection with the
Private Placement.
Subject to the conditions set forth below, Immtech agrees to
indemnify and hold harmless Rade, its officers, directors and employees, against
any and all loss, claims, damages and expenses whatsoever (including reasonable
attorneys' fees) as and when incurred arising out of or based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
memorandum or document ("Offering Materials") delivered to the Prospective
Investors in connection with the Private Placement, or any omissions or alleged
omissions to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such untrue statement, alleged untrue
statement or omissions or alleged omissions were made in reliance upon and in
conformity with written information furnished to Immtech by Rade expressly for
inclusion in the Offering Materials, in which case Rade agrees to indemnify and
hold harmless Immtech, its officers, directors and employees against any and
all loss,
<PAGE>
Immtech International Inc.
June 1, 1998
Page 2
claims, damages and expenses whatsoever (including reasonable attorneys fees),
arising out of or based upon the use of such information provided by Rade and
(ii) any determination by Rade to deliver Funds to Immtech notwithstanding the
fact that a condition to the closing of the Private Placement had not been met;
provided Immtech shall not be obligated to indemnify Rade in respect of any
Funds which Rade receives but does not deliver to Immtech.
If an action or proceeding is brought against any party in respect
of which it may seek to be indemnified hereunder, such party shall promptly
notify all parties against whom indemnification may be sought in writing of the
institution of such action or proceeding, but the failure to so notify shall not
relieve the indemnifying parties from any liability they may have except to the
extent that such party has been prejudiced in any material respect by such
failure, and the indemnifying parties shall promptly assume the defense of such
action, including the employment of counsel reasonably satisfactory to such
indemnified party or parties and the payment of expenses. Such indemnified party
or parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying party or parties in
connection with the defense of such action, (ii) the indemnifying party or
parties shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be one or more legal defenses available to it or them which are
different from or additional to those available to one or more of the
indemnifying parties, in any of which events such reasonable fees and expenses
shall be borne by the indemnifying parties and the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties.
The terms of this Letter Agreement may not be modified, amended, or
terminated, except pursuant to a writing signed by the party to be charged
therewith.
This Letter Agreement (as the same may be amended from time to time)
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements.
This Letter Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but
<PAGE>
Immtech International Inc.
June 1, 1996
Page 3
all of which taken together shall constitute one and the same instrument.
Please confirm your agreement to the foregoing by executing this
letter in the space below and return an executed copy to the undersigned.
Yours truly,
Rade Management Corporation
By:
-------------------------
Name:
Title:
ACCEPTED AND AGREED:
Immtech International Inc.
By:
-------------------------
Name:
Title:
[LETTERHEAD OF CRITICARE SYSTEMS, INC.]
June 24, 1998
Mr. T. Stephen Thompson
President
Immtech International, Inc.
1890 Maple Avenue, Suite 110
Evanston, IL 60201
Dear Steve:
The purpose of this letter is to set forth the principal terms and
conditions which have been approved by Criticare Systems, Inc. Board of
Directors of a proposed transaction between Criticare Systems, Inc. or its
assignee ("CSI") and Immtech International, Inc. ("Immtech"). Following the
execution of this letter by both parties, the parties shall proceed in good
faith to prepare the documentation necessary to effectuate the transactions
contemplated hereby (such documents, including an exclusive license agreement
with an option to purchase the technology, and a supply agreement, are
hereinafter referred to as the ("Documents"). The principal terms of the
transaction shall be as follows:
Purpose of Transaction. The purpose of the transaction shall be to induce CSI to
engage in a reorganization of Immtech involving the conversion of its preferred
stock and certain indebtedness to Common Stock of Immtech as outlined in the
financing plans by RADE Management Corporation in the May 15, 1998 agreements,
"Agreement Between Investors and Immtech on the Investors' one Million dollars
Investment in Immtech" and "Exhibit I-Proposal for an Equity Investment in and
Public Listing of Immtech."
Form of Transaction. In conjunction with a private financing of $1 million, CSI
will (I) convert all the two outstanding Notes (November 10, 1994 and October
10, 1996) and interest (principle amount $679,776) into common stock of Immtech
at a price of $2.25 per share; (II) Will convert all its Immtech Preferred Stock
into Immtech Common stock at exchange rates of $1.00 for Series A and Series B
$1.05 (original price $1.25) and waive any additional antidilution rights; and
has the present intention to (III) distribute to its shareholders over a two
year period up to 85% of all its holdings in Immtech, with the initial
distribution to its shareholders being a minimum of 25% (750,000 shares) of its
total Immtech holdings, and CSI agrees to make its best efforts to assist
Immtech with the SEC registration (see Additional Terms-second paragraph) of the
Immtech stock hold by CSI. Items (I) through (III) above are conditioned upon
satisfaction of the following, all of which Immtech agrees to: CSI will receive
<PAGE>
Mr. T. Stephen Thompson
June 24, 1998
Page 2
an exclusive license to research, find commercial applications for, and exploit
the protein known as "recombinant modified CRP" ("mCRP") for treatment of
sepsis, including (I) exclusive rights under all patents relating to the
function and uses of mCRP with regard to sepsis; (II) all of Immtech's
proprietary information on mCRP, including any records and printed material
relating thereto; (III) all information developed by Immtech through its joint
venture with Franklin Research Group, Inc., but only to the extent relevant to
the manufacture or use of mCRP in treatment of sepsis; (IV) availability of
Immtech employees and consultants to conduct research and development of mCRP
pursuant to the plan set forth herein and as otherwise may be agreed to between
Immtech and CSI.
Additional Terms. Immtech agrees that CSI or its assignee shall be responsible
for any and all costs associated with the operations planned during each of
Phases I and II, including without limitation the costs of conducting necessary
research and clinical studies to permit the sale of mCRP for use in the
treatment of sepsis, including salaries, fees, benefits and expenses for its
employees, rent and other corporate costs, fees associated with any and all
regulatory filings, legal and accounting fees and applications. Immtech will be
responsible for all maintenance fees related to patent protection until a
financing is completed.
Immtech further agrees that it will promptly register the shares to be
distributed by CSI under either the Securities Act of 1933 or the Securities
Exchange Act of 1934, and under any state blue sky laws reasonably requested by
CSI, the Immtech shares held by CSI.
Employment of Dr. Potempa. Dr. Potempa shall enter into a three-year consulting
agreement with CSI, with an option on the part of CSI to extend the agreement
for an additional two-year period. Dr. Potempa shall receive bonuses based upon
completion of Phases I and II. The consulting agreement shall contain
non-competition and other provisions acceptable to CSI and Dr. Potempa.
Preparation of Documents. CSI shall produce the initial drafts of the Documents,
which shall include a provision for financing the sepsis project through Phase
I and II human clinical trials, including a best efforts commitment to raise the
initial twelve months of operation funds up to one million dollars within six
months after RADE funding. The parties agree to use their best efforts to
finalize the Documents within 30 days of the date hereof. Immtech and CSI will,
within 10 business days after the date of this letter, negotiate in good faith
appropriate benchmarks.
<PAGE>
Mr. T. Stephen Thompson
June 24, 1998
Page 3
Board Approval. Prior to execution of the Documents, Immtech and CSI shall have
obtained the approval of their respective Board of Directors.
Supply Agreement. CSI shall be entitled as its option to purchase mCRP from
Immtech (or if ceded by Immtech to another party from such party) at cost and/or
manufacture the molecule itself. In such a case, Immtech will provide all
necessary know-how and expertise to enable CSI to manufacture the molecule in
commercially viable quantities. Immtech shall reference this commitment in any
such license, manufacturing, supply or other agreement affecting this right.
Board of Directors. CSI will have one Board seat out of five. Should the Board
member elected by CSI be an outsider, RADE Management Corporation will be
consulted before such appointment is made.
CSI or its assignee will utilize its best efforts to raise not less than five
hundred thousand dollars to fund the development and commercialization of
products using mCRP for the treatment of sepsis. Additional funding
specifications are set forth in Section 11 of [ILLEGIBLE], Patent, Know-How and
Technology License Agreement" June, 1998; both documents shall be [ILLEGIBLE]
together.
If the foregoing terms and conditions are acceptable to you, please
execute a duplicate copy of this letter and return it to the undersigned.
Yours very truly,
CRITICARE SYSTEMS, INC.
By: /s/ Gerhard J. Von der Ruhr
-----------------------------------------
Gerhard J. Von der Ruhr, President
Accepted and agreed to
This 26th day of June, 1998.
IMMTECH INTERNATIONAL, INC.
By: /s/ T. Stephen Thompson
--------------------------------------
T. Stephen Thompson, President
CRITICARE SYSTEMS, INC.
20925 Crossroads Circle
Waukesha, WI 53186
June 25, 1998
T. Stephen Thompson, President
and CEO
Immtech International, Inc.
1890 Maple Avenue
Suite 110
Evanston, IL 60201
Dear Mr. Thompson:
This Agreement states the terms and conditions whereby Criticare Systems,
Inc. ("Criticare") agrees to acquire and Immtech International, Inc. ("Immtech")
agrees to sell to Criticare certain of its intangible assets. It is Criticare's
understanding that you have the full power and authority to enter into this
Agreement.
Subject to the terms and conditions set forth herein, Criticare will pay
you, at Closing (as hereinafter defined), the sum of $150,000 for such assets.
Immtech agrees, represents and warrants and Criticare agrees as follows:
1. Criticare will acquire from Immtech at the Closing (as hereinafter
defined) the following properties, assets and rights of Immtech (collectively,
the "Purchased Assets"):
(a) All right, title and interest in U.S. Patent No. 5,484,735 to
Davis et al. granted January 16, 1996 (the "735 Patent"), including any
continuations, continuations-in-part, divisionals, reissues, re-examinations,
extensions thereof, any U.S. patents or applications (including any
continuations, continuations-in-part, divisionals, reissues, re-examinations and
extensions) owned or licensed to or by Immtech which claim priority to or are
otherwise based on the 735 Patent or which otherwise establish rights which
cover, encompass or are ancillary to the "Materials," "Progeny," "Immtech
Biomaterials," "Immtech Technology" or "Immtech Improvements" thereto (as such
terms are defined in the Material Transfer and Option Agreement between Sigma
Diagnostics, Inc. and Immtech dated March 23, 1998 (a copy of which is attached
hereto as Exhibit A) (the "Sigma Agreement") and any corresponding or related
foreign applications owned or licensed by Immtech which claim priority to or are
otherwise based on the 735 Patent or which otherwise establish rights which
cover or encompass or
<PAGE>
T. Stephen Thompson, President
and CEO
June 25, 1998
Page 2
are ancillary to the Materials Progeny, Immtech Biomaterials, Immtech Technology
or Immtech Improvements thereto.
(b) All of Immtech's rights under the Sigma Agreement.
(c) All of Immtech's rights with respect to the License Agreement
dated March 10, 1998 between Immtech and Northwestern University (a copy of
which is attached hereto as Exhibit B (the "Northwestern NU 8403 License")).
(d) All right, title and interest in and to Patent No. 5,702,904 to
Makhlouf et at granted December 30, 1997 ("the 904 Patent"), any reissues,
re-examinations or extensions thereof, any U.S. patents or applications
(including any continuations, continuations-in-part, divisionals, reissues,
re-examinations and extensions) owned or licensed to Immtech which claim
priority to or are otherwise based on the 904 Patent and any corresponding or
related foreign applications owned or licensed by Immtech which claim priority
to or are otherwise based on the 904 Patent.
(e) All of Immtech's rights with respect to the License Agreement
dated October 27, 1994 between Immtech and Northwestern University, which is
attached hereto as Exhibit C (the "Northwestern NU 9134 License").
(f) An exclusive, royalty-free, worldwide license under Patent No.
5,405,832 to Potempa, granted on April 11, 1995 to utilize mCRP for the
treatment of septicema, as set forth in the License Agreement attached hereto as
Exhibit D (the "Sepsis License").
(g) The right, but not the obligation, to sue for past infringement
with respect to all of the foregoing.
(h) To Immtech's knowledge, all other rights reasonably required to
make, use, sell and offer for sale products based on or related to the Purchased
Assets.
2. Immtech agrees to provide Criticare and its successors, assigns or
other legal representatives, cooperation and assistance at Criticare's request
and expense (including the execution and delivery of any and all affidavits,
declarations, oaths, exhibits, assignments, powers of attorney or other
documentation as may be reasonably required): (1) in the preparation and
<PAGE>
T. Stephen Thompson, President
and CEO
June 25, 1998
Page 3
prosecution of any applications for patents or registration of the intellectual
property assigned, licensed or transferred pursuant to this Agreement; (2) in
the prosecution or defense of any interference, opposition, infringement or
other proceedings that may arise in connection with any of the intellectual
property assigned, licensed or transferred pursuant to this Agreement; and (3)
in the implementation or perfection of this Agreement.
3. Criticare will not assume any of Immtech's liabilities for obligations
to Northwestern University under the Northwestern NU 8403 License and the
Northwestern NU 9134 License occurring after the Closing. Criticare is not
assuming any other liabilities or obligations of Immtech of any nature or kind.
4. To induce Criticare to enter into this Agreement, Immtech represents
and warrants that all of the statements made herein are true and correct and
that:
(a) Immtech will own at the Closing all of the Purchased Assets, and
title to the Purchased Assets will be transferred to Criticare at Closing, free
and clear of all liens or encumbrances of any nature whatsoever, including sales
taxes, if any. Immtech has obtained all necessary consents to the transfers
contemplated hereby.
(b) Between the date hereof and Closing, Immtech will utilize its
best efforts to continue its customer relationships and to preserve the value of
the Purchased Assets and their attendant goodwill for the benefit of Criticare.
(c) All corporate procedures necessary to authorize or ratify this
Agreement by Immtech have been or will be taken prior to Closing and Immtech has
the necessary power and authority to deliver this Agreement and consummate the
transactions provided for herein.
(d) Immtech is not in default, and there exist no circumstances
which would allow the other party to such agreements to allege that Immtech is
in default under the Sigma Agreement, the NU 8403 License or the NU 9134
License.
(e) There exists no fact or condition, or to your knowledge, any
threatened development not otherwise disclosed to Criticare in writing which
could reasonably be considered as adversely affecting the prospects for or value
of the Purchased Assets.
<PAGE>
T. Stephen Thompson, President
and CEO
June 25, 1998
Page 4
5. The representations and warranties made by Immtech herein shall be true
at and survive the Closing for a period of two years, except that in any case
where Criticare can show that a matter was concealed intentionally or failure to
disclose was as a result of gross negligence, in which case the survival period
shall be three years from the date of discovery. In addition to the other
agreements herein contained, we agree with each other that neither of us has
employed a broker or finder in connection with this transaction and that each of
us will bear our respective expenses in connection with the transaction. We
agree that any publicity or communications to third parties concerning the
transaction prior to Closing will be released only if mutually approved.
From and after the Closing, Immtech will reimburse, indemnify and
hold harmless Criticare and its officers and directors, successors and assigns,
upon demand, with respect to any damages, losses, liabilities, costs and
expenses incurred or suffered by it that result from, relate to or arise out
of (i) any liabilities or obligations of Immtech not specifically assumed by
Criticare, (ii) any breach of representation or warranty or nonfulfillment of
any agreement or covenant contained in this Agreement, and (iii) any actions,
suits, claims or proceedings, including costs and expenses incident to the
foregoing. Criticare shall be entitled, along with any other remedies it may
possess, to withhold or apply any funds which you may be entitled to receive
from it under this or any other agreement as a reserve or set-off against
amounts for which you may be liable under this Agreement.
6. Immtech covenants and agrees that for a period of three years from and
after Closing, it will make available to Criticare or its assignee the services
of Dr. Potempa to consult with and advise Criticare or its assignee regarding
research, testing, FDA compliance and approval, manufacture and
commercialization of the products or applications covered by the patents being
purchased or licensed by Criticare pursuant to this letter agreement Criticare,
at its option, may extend such agreement for all or any part of one additional
two-year period. It is expected that Dr. Potempa's consultation will occur on a
part-time basis (no more than two days per week) for which Criticare will
reimburse Immtech for its out-of-pocket salary and employee benefit plan
expenses, pro rata, with respect to Dr. Potempa. Dr. Potempa shall also receive
bonuses based upon the completion of Phase I and II with respect to products for
which he is primarily responsible.
<PAGE>
T. Stephen Thompson, President
and CEO
June 25, 1998
Page 5
Immtech has discussed this engagement with Dr. Potempa and
understands that his availability is a significant inducement to Criticare to
enter into this letter agreement. Immtech and Dr. Potempa agree that they will
not enter into a consulting or advisory relationship with any person or entity
with respect to competitive products or applications during the consultancy
period and for 12 months after its conclusion.
7. Criticare or its assignee shall for a period of five years from and
after the Closing be entitled to purchase from Immtech, and Immtech or any
successor in interest to Immtech shall sell to Criticare or its assignee mCRP,
at Immtech's cost. Criticare may, at its option, manufacture mCRP, in which
event Immtech will provide all necessary know-how and expertise to enable
Criticare to manufacture the molecule in commercially viable quantities. Immtech
agrees that it will reference this commitment in any license, sublicense,
manufacturing, supply or other agreement affecting this right.
8. Criticare or, in the case of an assignment or sublicense by Criticare
to a third party, such third parry (without recourse to Criticare) shall be
responsible for any costs associated with operations during each of Phases I and
II, including without limitation the costs of conducting necessary research and
clinical studies to permit the sale of mCRP for use in the treatment of sepsis,
including salaries, fees, benefits and expenses for its employees, rent and
other corporate costs, fees associated with any and all regulatory filings,
legal and accounting fees and applications. Immtech will be responsible for all
maintenance fees related to patent protection until financing is completed.
9. Closing shall take place at Milwaukee, Wisconsin, at 2:00 p.m. on July
2, 1998 (the "Closing" or "Closing Date"). Title to the Purchased Assets shall
pass to Criticare at Closing.
10. Criticare has deposited in escrow with at its law firm, Reinhart,
Boerner, Van Deuren, Norris & Rieselbach, s.c. (the "Law Firm"), a certified
check in the amount of $l50,000, made payable to Immtech and endorsed to Brinks,
Hofer, Gilson & Lione. Immtech has, or within three days after the date of this
Agreement, will similarly deposit with such Law Firm the following: (i) the
Patent Assignment attached hereto as Exhibit E; (ii) the assignments in the
forms attached hereto as Exhibits F and G, assigning Immtech's rights under the
licenses referred to in paragraphs 3(c) and 3(e) and the Sigma Agreement; and
(iii) a copy of the agreement of Brinks, Hofer, Gilson & Lione ("Brinks"),
agreeing to accept
<PAGE>
T. Stephen Thompson, President
and CEO
June 25, 1998
Page 6
$150,000 in full settlement and accord of Immtech's indebtedness to such firm,
and releasing such firm from any further liability to Immtech. The Law Firm is
authorized and directed to release such check to Brinks on July 2, 1998.
11. This letter agreement shall be binding upon and inure to the benefit
of the parties' successors and assigns, but shall not be assignable by either
party without the prior written consent of the other; provided, however, that
nothing herein shall prevent Criticare from assigning its rights and obligations
hereunder to an affiliated corporation or subsidiary corporation controlled by
or under common control with Criticare. Each of the exhibits referred to in this
letter agreement is incorporated herein by reference and made a part hereof.
It is our intent that this letter agreement set forth our entire
understanding, merging all of our prior discussions herein. If you are in
agreement with all of the foregoing, would you please execute and return a copy
of this letter to us.
Yours very truly,
CRITICARE SYSTEMS, INC.
BY: [ILLEGIBLE]
--------------------------
PRES
MW2/46716REB
Enclosures
Acknowledged and agreed to
this 29th day of June, 1998.
IMMTECH INTERNATIONAL, INC.
BY: [ILLEGIBLE]
---------------------------
Its President & CEO
<PAGE>
Exhibits to Letter Agreement
Exhibit A Sigma Diagnostics, Inc. Agreement.
Exhibit B Northwestern NU 8403 License.
Exhibit C Northwestern NU 9134 License.
Exhibit D Sepsis License.
Exhibit E Patent Assignment.
Exhibit F Northwestern NU 8403 License Assignment.
Exhibit G Sigma Agreement Assignment.
<PAGE>
EXHIBIT A
MATERIAL TRANSFER AND OPTION AGREEMENT
This agreement is made and entered into as of the 23rd day of March,
1998, by and between Immtech International, Inc. ("IMMTECH"), a Delaware
Corporation, maintaining an office at 1890 Maple Avenue, Suite 110, Evanston, IL
60201, and Sigma Diagnostics, Inc. ("SIGMA"), a Missouri corporation maintaining
an office at 545 South Ewing Avenue, St. Louis, Missouri 63103.
WHEREAS, SIGMA desires to develop commercial diagnostic assays for
determining hemoglobin in type Alc ("Hb(Alc)") by detecting a reduced form of
Hb(Alc);
WHEREAS, SIGMA desires to obtain certain hybridoma cell lines that
produce monoclonal antibodies suitable for use in such assays from IMMTECH, and
to obtain related information known to IMMTECH in order to develop such
commercial assays;
WHEREAS, SIGMA desires to grow such cell lines and harvest
monoclonal antibodies from said cell lines for the purpose of evaluating the
suitability of the same for a commercial Hb(Alc) assay and for the purpose of
evaluating whether to exercise an option to license the exclusive, worldwide
rights associated with such cell lines, such monoclonal antibodies and such
related information known to IMMTECH, and
WHEREAS, IMMTECH is willing to provide such cell lines and such
information to SIGMA, to allow SIGMA to evaluate such cell lines and monoclonal
antibodies, and
WHEREAS, IMMTECH has, and/or will acquire as of the effective date
of this agreement, certain patent and nonpatent rights relating to such cell
lines, antibodies and information, and desires to grant SIGMA an option to
obtain such rights and a license thereto on the terms and conditions set forth
herein.
NOW THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained herein, and certain other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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1. DEFINITIONS
1.1 MATERIALS" means (1) the monoclonal antibody designated as
"MML03" having specificity to mannitol-valine-glycine-glycine (mannitol-VGG) or
a fragment, derivative, or conjugate thereof having such specificity, and (2)
hybridoma cell lines which will produce the MML03 monoclonal antibody.
1.2 "PROGENY" means all monoclonal antibodies and hybridoma cell
lines developed from the MATERIALS by IMMTECH, by SIGMA, or jointly by IMMTECH
and SIGMA.
1.3 "IMMTECH BIOMATERIALS" means all biomaterials useful in
connection with research related to the MATERIALS or in connection with PRODUCTS
involving the MATERIALS and developed or discovered by IMMTECH, independently of
SIGMA, including, without limitation, peptides, culture media, and other
biomaterials useful as calibrators, reference materials or controls.
1.4 "SIGMA BIOMATERIALS" means all biomaterials useful in connection
with research related to the MATERIALS or in connection with PRODUCTS involving
the MATERIALS or PROGENY and developed or discovered independently by SIGMA or
jointly by SIGMA and IMMTECH, including, without limitation, peptides, culture
media, and other biomaterials useful as calibrators, reference materials or
controls.
1.5 "IMMTECH TECHNOLOGY" means individually and collectively, all
designs, technical information, know-how, trade secrets, knowledge, data,
specifications, test results, manufacturing information, analytical information,
marketing information, inventions conceived and/or reduced to practice and/or
acquired, and other information relating to the MATERIALS and known to IMMTECH
on the date of this AGREEMENT or developed by IMMTECH thereafter, independently
of SIGMA, including, without limitation, all information which will allow and/or
assist SIGMA to establish commercially viable hybridoma cell lines which will
produce the MML03 monoclonal antibody in a quantity and with properties
reasonably required by SIGMA to develop a commercial Hb(Alc) assay.
1.6 "SIGMA TECHNOLOGY" means, individually and collectively, all
designs, technical information, know-how, trade secrets, knowledge, data,
specifications, test results, manufacturing information, analytical information,
marketing information, inventions conceived and/or reduced to practice and/or
acquired, and other information relating to the MATERIALS and developed
independently by SIGMA, or jointly by SIGMA and IMMTECH.
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1.7 "SIGMA PRODUCTS" means any products which comprise MATERIALS or
PROGENY and which are developed by SIGMA or jointly by SIGMA and IMMTECH,
including, without limitation, assay kits, assay methods and assay reagents.
1.8 "EFFECTIVE DATE" means the latter of (a) the date set forth
above in the recitals to this AGREEMENT, (b) the date on which IMMTECH has
executed this AGREEMENT, (c) the date on which SIGMA has executed this AGREEMENT
or (d) the date on which SIGMA receives from IMMTECH a copy of the duly executed
IMMTECH-NORTHWESTERN LICENSE AGREEMENT.
1.9 "EVALUATION PERIOD" of this AGREEMENT means the period which
begins upon the latter of (a) the EFFECTIVE DATE of this AGREEMENT or (b) the
date of first receipt of MATERIALS by SIGMA from IMMTECH, and which ends six
months after such date.
1.10 "RESEARCH AND DEVELOPMENT PERIOD" of this AGREEMENT means the
period which begins on the last day of the EVALUATION PERIOD and which ends two
years after the last day of the EVALUATION PERIOD.
1.11 "MONOCLONALITY" means that the hybridoma cells of the MATERIALS
produce monoclonal antibodies having an antibody combining site which binds with
SPECIFICITY to mannitol-VGG.
1.12 "CELL GROWTH" means the growth of the hybridoma cells of the
MATERIALS in SIGMA bioreactors in quantities reasonably required by SIGMA for
evaluation, research and product development purposes.
1.13 "SPECIFICITY" means that the monoclonal antibodies of the
MATERIALS have are specific for mannitol-VGG in a manner consistent with that
described in U.S. Patent No. 5,484,735 to Davis et al. and that such monoclonal
antibodies will not cross react with non-glucosylated hemoglobin (Hb(Ac)) or
with non-reduced glucosylated hemoglobin (Hb(Alc)).
1.14 "OPTION" means the option granted to SIGMA pursuant to P. 8.1
of this AGREEMENT.
1.15 "LICENSE" means the license to be executed in accordance with
P. 8.6 of this AGREEMENT.
1.16 "PATENT RIGHTS" means IMMTECH's patent rights associated with
the LICENSED PATENTS as set forth in Title 35 of the United States Code and in
corresponding foreign statutes and/or common law.
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1.17 "LICENSED PATENTS" shall include U.S. Patent No. 5,484,735 to
Davis et al. filed November 12, 1993 and entitled "Immunoassay of Glycosylated
Proteins Employing Antibody to Reductively Glycosylated N-Terminal Amino Acids"
(hereinafter referred to as "the `735 PATENT"), any reissues, reexaminations or
extensions thereof, any U.S. patents or applications (including divisionals and
continuation applications) owned or licensed to or by IMMTECH which claim
priority to or are otherwise based on the `735 PATENT or which otherwise
establish rights which cover, encompass or are ancillary to the MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS
thereto and any corresponding or related foreign applications owned or licensed
by IMMTECH which claim priority to or are otherwise based on the `735 PATENT or
which otherwise establish rights which cover, encompass or are ancillary to the
MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH
IMPROVEMENTS thereto.
1.18 "TECHNOLOGY RIGHTS" means IMMTECH's non-patent statutory and/or
common law rights associated with the LICENSED TECHNOLOGY, including, without
limitation, trade secret rights.
l.19 "LICENSED TECHNOLOGY" means any and all non-patented MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMPROVEMENTS thereto.
1.20 "LICENSED PRODUCT" means any PRODUCT covered by claims of the
LICENSED PATENTS or which involves LICENSED TECHNOLOGY.
1.21 "IMMTECH IMPROVEMENTS" means all modifications, variations,
revisions, new generations and new models of the MATERIALS, PROGENY, IMMTECH
BIOMATERIALS and/or IMMTECH TECHNOLOGY which relate or have consequence with
respect to the LICENSED PRODUCT in any of the following ways: (a) improves
performance of the LICENSED PRODUCT; (b) reduces the cost of materials or
components for the LICENSED PRODUCT; (c) reduces production, manufacturing or
associated costs of the LICENSED PRODUCTS; (d) increases the durability or
continuous performance characteristics of the LICENSED PRODUCTS; (e) expands the
applications to which the LICENSED PRODUCTS may be put; (f) increases or
enhances the marketability or commercial aspect of the LICENSED PRODUCT; or (g)
would, if implemented, replace or displace the LICENSED PRODUCT in one or more
materially commercial markets for LICENSED PRODUCTS. IMMTECH IMPROVEMENTS may be
patentable or unpatentable, and if patentable, need not be patented.
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1.22 "SIGMA IMPROVEMENTS" means all modifications, variations,
revisions, new generations and new models of the SIGMA BIOMATERIALS, sigma
technology and/or SIGMA PRODUCTS which relate or have consequence with respect
to the LICENSED PRODUCT in any of the following ways: (a) improves performance
of the LICENSED PRODUCT; (b) reduces the cost of materials or components for the
LICENSED PRODUCT; (c) reduces production, manufacturing or associated costs of
the LICENSED PRODUCTS; (d) increases the durability or continuous performance
characteristics of the LICENSED PRODUCTS; (e) expands the applications to which
the LICENSED PRODUCTS may be put; (f) increases or enhances the marketability or
commercial aspect of the LICENSED PRODUCT; or (g) would, if implemented,
replace or displace the LICENSED PRODUCT in one or more materially commercial
markets for LICENSED PRODUCTS. SIGMA IMPROVEMENTS may be patentable or
unpatentable, and if patentable, need not be patented.
1.23 "TERM OF THE LICENSE" means the period commencing with the date
on which the LICENSE is executed by all parties and ending (a) for LICENSED
PRODUCTS covered by the claims of one or more LICENSED PATENTS, on the date of
expiration of the last to expire of the LICENSED PATENTS which has a claim
covering the LICENSED PRODUCTS; or alternatively, (b) for LICENSED PRODUCTS not
covered by a claim of one or more LICENSED PATENTS, on the date seven years
after the LICENSE is executed.
1.24 "NET SALES" means the gross amount invoiced for the LICENSED
PRODUCTS, less all taxes, duties, trade, quantity and cash discounts actually
allowed, and credits or allowances actually granted on account of rejections,
returns, billing errors or retroactive price reductions.
1.25 "INITIAL NET SALES" means NET SALES until the time when the
cumulative total of NET SALES equals an amount of $3,167,000.
1.26 "REMAINING NET SALES" means the NET SALES after the time when
the cumulative total of NET SALES has surpassed an amount of $3,167,000.
1.27 "AFFILIATE" means any corporation or non-corporate business
entity, which controls, is controlled by, or is under common control with a
party to this AGREEMENT. A corporation or non-corporate business entity shall be
regarded as in control of another corporation if it owns, or directly or
indirectly controls, at least forty (40%) percent of the voting stock of the
other corporation or (i) in the absence of the ownership of at least forty (40%)
percent of the voting stock of a corporation or (ii) in the case of the
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<PAGE>
non-corporate business entity, or non-profit corporation, if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate business entity, as
applicable.
1.28 "IMMTECH-NORTHWESTERN LICENSE AGREEMENT" means a duly executed
agreement between IMMTECH and Northwestern University, Evanston, IL
(hereinafter, NORTHWESTERN) by which NORTHWESTERN grants IMMTECH exclusive
worldwide rights to the LICENSED PATENTS and to any LICENSED TECHNOLOGY owned by
NORTHWESTERN, with such granted rights being sufficient in scope to allow SIGMA
to develop commercial diagnostic assays for determining hemoglobin type Alc
("Hb(alc)") by detecting a reduced form of Hb (alc), and to make, have made, use
and sell such assays.
2. DELIVERY OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH
TECHNOLOGY
2.1 IMMTECH will deliver MATERIALS TO SIGMA within 10 days of the
EFFECTIVE DATE. The minimum quantity of delivered MATERIALS will include at
least two vials of viable hybridoma cells which will produce MMLO3 monoclonal
antibodies.
2.2 IMMTECH agrees to deliver additional quantities of MATERIALS to
SIGMA during the EVALUATION PERIOD and the RESEARCH AND DEVELOPMENT PERIOD of
this AGREEMENT upon request by SIGMA, which such additional MATERIALS are
reasonable necessary for technical evaluation, research or product development
as described in (P) 3.1, below.
2.3 IMMTECH agrees to deliver to SIGMA any and all PROGENY, IMMTECH
BIOMATERIALS, IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS throughtout the
EVALUATION PERIOD and the RESEARCH AND DEVELOPMENT PERIOD OF THIS AGREEMENT to
allow or assist SIGMA for technical evaluation, research, or product development
as described in (P) 3.1, below.
3. USE OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY
DURING EVALUATION PERIOD
3.1 SIGMA may use the MATERIOALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS during the EVALUATION PERIOD for the
purpose of technical evaluation, including without limitation, evaluation of
MONOCLONALITY, CELL GROWTH and SPECIFICITY, and for the purposes of research or
product development, including,
6
<PAGE>
without limitation, development of SIGMA BIOMATERIALS and SIGMA PRODUCTS.
3.2 None of the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH
TECHNOLOGY or IMMTECH IMPROVEMENTS may be transferred to others outside of
SIGMA'S research facilities during the EVALUATION PERIOD of this AGREEMENT
without the written consent of IMMTECH, but such consent shall not be
unreasonably withheld.
4. PAYMENT AND REPORTS DURING THE EVALUATION PERIOD
4.1 SIGMA will pay IMMTECH an amount of twenty thousand dollars
($20,000) within ten days after the latter of (a) the EFFECTIVE DATE of this
AGREEMENT or (b) SIGMA's initial receipt of MATERIALS from IMMTECH.
4.2 SIGMA will evaluate MONOCLONALITY and CELL GROWTH within two
months after SIGMA's initial receipt of MATERIALS from IMMTECH. If MONOCLONALITY
and CELL GROWTH is acceptable to SIGMA, and if SIGMA decides, in its sole
discretion, to continue with further evaluation and/or research and/or product
development efforts, SIGMA will pay IMMTECH an additional amount of twenty-five
thousand dollars ($25,000) within two months after the latter of (a) the
EFFECTIVE DATE of this AGREEMENT or (b) SIGMA'S INITIAL receipt of MATERIALS
from IMMTECH.
4.3 SIGMA will evaluate SPECIFICITY within six months after SIGMA'S
initial receipt of MATERIALS from IMMTECH. If SPECIFICTY is acceptable to SIGMA,
and if SIGMA decides, in its sole discretion, to enter the RESEARCH AND
DEVELOPMENT PERIOD to continue with further evaluation and/or research and/or
product development efforts, SIGMA will pay IMMTECH an additional amount of
fifty thousand dollars ($50,000) within six months after the latter of (a) the
EFFECTIVE DATE of this AGREEMENT or (b) SIGMA'S INITIAL receipt of MATERIALS
from IMMTECH.
4.4 SIGMA will provide a written report to IMMTECH after the end of
the EVALUAITON PERIOD detailing the results of SIGMA'S evaluation of
MONOCLONALITY, CELL GROWTH and SPECIFICITY.
5. USE OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY
DURING RESEARCH AND DEVELOPMENT PERIOD
5.1 Upon entering the RESEARCH AND DEVELOPMENT PERIOD in accordance
with (P) 4.3 above, SIGMA may use the
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MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, and IMMTECH
IMPROVEMENTS during the RESEARCH AND DEVELOPMENT PERIOD for the purpose of
technical evaluation, including without limitation, evaluation of MONOCLONALITY,
CELL GROWTH and SPECIFICITY, and for the purposes of research or product
development, including, without limitation, development of SIGMA BIOMATERIALS
and SIGMA PRODUCTS.
5.2 During the RESEARCH AND DEVELOPMENT PERIOD of this AGREEMENT,
SIGMA may use the MATERIALS and PROGENY in human clinical trials.
5.3 MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, or
IMMTECH IMPROVEMENTS may be transferred during the RESEARCH AND DEVELOPMENT
PERIOD to appropriate regulatory authorities where such transfer is reasonably
necessary for the purpose of obtaining U.S. Food and Drug Administration (FDA)
approval of a commercial Hb(A1c) assay or for the purpose of obtaining
equivalent approval in a foreign country.
6. RETURN OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS AND IMMTECH
TECHNOLOGY / PARTIAL REFUND OF PAYMENTS
6.1 If SIGMA determines, in its sole discretion, during the
EVALUATION PERIOD or the RESEARCH AND DEVELOPMENT PERIOD, that the MATERIALS or
PROGENY evaluated in accordance with (P.) 4.2 and (P.) 4.3 are not suitable for
further evaluation, research and/or product development, or that it is no longer
of commercial interest to develop a commercial Hb(A1c) assay involving the
MATERIALS or PROGENY, then SIGMA will return the MATERIALS and any PROGENY,
IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS to IMMTECH and
provide a report to IMMTECH which explains the basis upon which the MATERIALS or
PROGENY were determined to be unsuitable or the assays were determined to be not
of commercial interest.
6.2 IMMTECH will, upon receipt of the returned MATERIALS and any
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS and
upon receipt of a report from SIGMA in accordance with (P.) 6.1, refund an
amount of twenty-five thousand dollars ($25,000) to SIGMA.
7. OWNERSHIP
7.1 The MATERIALS, PROGENY, IMMTECH MATERIALS, IMMTECH TECHNOLOGY,
IMMTECH IMPROVEMENTS and any intellectual property rights associated therewith
shall be owned by IMMTECH.
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7.2 The SIGMA BIOMATERIALS, SIGMA TECHNOLOGY, SIGMA PRODUCTS, SIGMA
IMPROVEMENTS and any intellectual property rights associated therewith shall be
owned by SIGMA.
8. GRANT OF OPTION
8.1 IMMTECH hereby grants SIGMA an OPTION to license the PATENT
RIGHTS and the TECHNOLOGY RIGHTS under the terms set forth below.
8.2 SIGMA shall have the sole discretion as to whether or not to
exercise the OPTION.
8.3 The OPTION to license shall remain open and be exercisable by
SIGMA for an option period extending from the EFFECTIVE DATE of this AGREEMENT
until and including the date which is three months after the end of the
EVALUATION PERIOD of this AGREEMENT. If SIGMA informs IMMTECH in writing that
SIGMA does not desire to exercise its OPTION or if SIGMA fails to exercise its
OPTION with the aforementioned option period, IMMTECH shall have the right
thereafter to enter into an agreement with a third party or parties pertaining
to the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH
IMPROVEMENTS and SIGMA shall return all such MATERIALS, PROGENY, IMMTECH
BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS in SIGMA's possession
to IMMTECH.
8.4. If SIGMA decides to exercise its OPTION, no further fees beyond
those set forth under (P.) 4.1, (P.) 4.2 and (P.) 4.3 will be required at the
time of exercising the option. Additional fees and/royalties may, however, be
due, as applicable, under a LICENSE which includes the provisions of (P.) 8.7(c)
(P.) 8.7(d) and/or (P.) 8.7(g) of this AGREEMENT.
8.5 SIGMA can exercise the OPTION by (a) notifying IMMTECH that
SIGMA is exercising its option, and (b) unless previously paid by SIGMA, paying
IMMTECH the feel required under (P.) 4.3.
8.6 Upon exercise of the OPTION, the parties will negotiate in good
faith, and will, within a negotiation period of six months from the date on
which SIGMA exercised its OPTION, agree on and execute a LICENSE which includes
the terms set forth in (P.) 8.7, as well as any other terms, provisions and/or
conditions that the parties negotiate in good faith. If SIGMA and IMMTECH have
failed to execute a LICENSE having such terms within such negotiation period,
then SIGMA shall return all MATERIALS, PROGENY, IMMTECH MATERIALS, IMMTECH
TECHNOLOGY or IMMTECH IMPROVEMENTS in SIGMA's possession to IMMTECH, and IMMTECH
shall thereafter
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have the right to enter into an agreement with a third party or parties
pertaining to the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY
or IMMTECH IMPROVEMENTS, provided that such third-party agreement does not
contain any terms or provisions which are more favorable to the third party than
IMMTECH had offered in writing to SIGMA during such negotiation period.
8.7 The LICENSE shall include the following terms, provisions and/or
conditions:
(a) IMMTECH shall grant SIGMA exclusive, worldwide rights under the
LICENSED PATENTS and under the LICENSED TECHNOLOGY to possess, use, make, have
made, lease, sell and have sold all MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS thereto, and LICENSED PRODUCTS.
(b) SIGMA shall have the right to sublicense the LICENSED PATENTS
and LICENSED TECHNOLOGY to third parties.
(c) SIGMA shall pay IMMTECH an amount of $60,000 upon the earlier of
(i) the date of obtaining U.S. Federal Drug Administration (FDA) approval of a
LICENSED PRODUCT, or (ii) the date of the first sale of a LICENSED PRODUCT.
(d) SIGMA shall, during the TERM OF THE LICENSE, pay to IMMTECH
royalties as follows:
(i) at the rate of two percent (2%) of the INITIAL NET SALES
of LICENSED PRODUCTS; and then
(ii) at the rate of percent (5%) of the REMAINING NET SALES of
LICENSED PRODUCTS.
(e) SIGMA shall not be required to pay royalties to IMMTECH under
(P.) 8.7(d) for sales of LICENSED PRODUCTS made to AFFILIATES of SIGMA for
purposes of resale. Additionally, no multiple royalties shall be payable because
any LICENSED PRODUCT is covered by more than one patent or patent claim of the
LICENSED PATENTS. Moreover, in the event that any MATERIALS OR PROGENY become
available to third parties for commercial purposes through an act of or failure
to act by IMMTECH, the obligations of SIGMA set forth in (P.) 8.7(d) shall
terminate.
(f) For the first two year period following the date of the first
sale of a LICENSED PRODUCT, SIGMA shall meet a two-year target NET SALES amount
to be mutually agreed upon by the parties based on SIGMA's market projections,
failing which IMMTECH shall have the option, upon sixty (60) days written notice
to SIGMA, to license one other entity under the LICENSED PATENTS and LICENSED
TECHNOLOGY, with the
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LICENSE otherwise remaining in force. However, if during such sixty (60) day
period SIGMA pays the difference in royalties due based on the above-stated
target NET SALES versus the actual NET SALES for the two-year period, then the
LICENSE will continue in effect, without any changes as to the exclusivity
thereto. Moreover, should IMMTECH license one other entity under the LICENSED
PATENTS and/or LICENSED TECHNOLOGY: (i) such third-party agreement will not
contain any terms or provisions which are more favorable to the third-party than
those contained in the LICENSE between IMMTECH and SIGMA, and (ii) SIGMA shall
be able to recover an amount of one-half of the $60,000 fee paid pursuant to
(P.) 8.7 (c) by discounting the royalty payment required under (P.) 8.7 (d) (ii)
by 3% to obtain an effective royalty rate of 2% until such amount is recovered.
(g) SIGMA will make any maintenance payments or annuities required
for any LICENSED PATENTS for countries in which the claims such patents cover
the LICENSED PRODUCTS.
(h) Notwithstanding anything in the LICENSE to the contrary:
(i) SIGMA shall have the right to terminate the LICENSE at its
sole discretion by giving written notice to IMMTECH at least ninety
(90) days prior to the effective date of termination provided that
such effective date is on or before the last day of the RESEARCH
AND DEVELOPMENT PERIOD; and
(ii) either party shall, in the event of any material default
of the LICENSE by the other party, have the right to terminate the
LICENSE by giving written notice to the other party at Least ninety
(90) days prior to the effective date of termination, unless, after
receiving written notice of such default, the default is cured or
remedied by the defaulting party within ninety (90) days.
(i) Upon expiration or termination of the LICENSE for any reason,
SIGMA shall have the right, for a period of one (1) year from the effective date
thereof, to sell all LICENSE PRODUCTS on hand and to produce and sell all
MATERIALS or PROGENY on hand, subject to the obligations of SIGMA to pay
royalties, as provided for in (P.) 8.7(d), above.
9. CONFIDENTIALITY
9.1 Any information, including information existing as IMMTECH
TECHNOLOGY or SIGMA TECHNOLOGY, that is communicated between the parties and
that is designated by the parties as being confidential information by a written
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notice to the non-owning party within thirty (30) days after the first written
disclosure of that information by either party to the other, the non-owning
party shall, until five (5) years from the date of the expiration or termination
of this AGREEMENT: (a) take all reasonable steps to prevent disclosure of such
information to any third party and (b) not utilize any of such information for
any purpose other than the purposes provided in this AGREEMENT.
9.2 The obligations of confidentiality and non-use set forth in (P.)
9.1 shall not preclude disclosure of such information in a patent application or
in the prosecution of a patent application provided that the written consent of
the owning party is obtained prior to such disclosure.
9.3 The obligations of confidentiality and non-use set forth in (P.)
9.1 shall not extend to any of such information for which a non-owing party can
show:
(a) by the non-owning party's prior written records was already in
the non-owning party's possession prior to the date of such disclosure;
(b) such information became gennerally available to the public
through issuance or publication of a patent or application;
(c) such information is otherwise is or becomes generally available
to public through non fault of the non-owning party;
(d) such information is received by the non-owning party in good
faith from a third party on a non-confidential basis without violating any
obligation of secrecy to the owner party relating to the information disclosed;
or
(e) written consent to disclose such information was given by the
owning party.
10. PUBLICATION
10.1 If a non-patent publication results from SIGMA's work using the
MATERIALS, PROGENY, BIOMATERIALS, IMMTECH TECHNOLOGY, or IMMTECH IMPROVEMENTS,
SIGMA will acknowledge IMMTECH's provision of the same and will give credit to
IMMTECH scientists, as scientifically appropriate, based on any direct
contribution made.
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11. WARRANTIES, DISCLAIMERS and LIMITATIONS ON LIABILITIES
11.1 SIGMA hereby represents and warrants to IMMTECH, that SIGMA is
a corporation duly organized, validly existing and in good standing under the
Laws of the State of Missouri and has all requisite corporate power and
authority to enter into this Agreement and perform its obligations hereunder.
11.2 IMMTECH hereby represents and warrants to SIGMA that the
following are true and correct as of the EFFECTIVE DATE of this AGREEMENT:
(a) IMMTECH is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and
authority to enter into this Agreement and perform its obligations hereunder;
(b) IMMTECH owns the LICENSE PATENTS or is the worldwide exclusive
licensee of the LICENSE PATENTS and has the right to sublicense the same to
SIGMA;
(c) There are no claims relating to patent infringement or other
matters, actions, suits, proceedings, arbitrations or investigations pending or,
to the best of knowledge, threatened, against IMMTECH which if adversely
determined, would adversely affect the MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS, LICENSED PATENTS (or the patentability
thereof), LICENSED TECHNOLOGY and/or LICENSED PRODUCTS, or other related
technology practiced by IMMTECH, or IMMTECH's ability to enter into or carry out
this AGREEMENT; and
(d) As of the date hereof, IMMTECH warrants that (i) it has no
knowledge that the manufacture, use, importation or sale of any MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS,
LICENSED PATENTS, LICENSED TECHNOLOGY and/ or LICENSED PRODUCTS under this
AGREEMENT either alone or in combination, nor any method of using such the same
infringes any patent or other industrial property right of a third party; and
(ii) it has not received any notification from any third party alleging or
suggesting that the manufacture, use, importation or sale of any such MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS,
LICENSED PATENTS, LICENSED TECHNOLOGY and/ or LICENSED PRODUCTS does or would
infringe any patent or other industrial property. IMMTECH shall disclose to
SIGMA any information regarding adverse patent rights of which it is or becomes
aware and which relates to such MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
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IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS, LICENSED PATENTS, LICENSED TECHNOLOGY
and/or PRODUCTS.
11.3 Notwithstanding the representations and warranties of IMMTECH
provided under (P.) 11.2, IMMTECH makes no representations or warranties as to
the suitability of the MATERIALS or PROGENY for their intended use by SIGMA.
SIGMA acknowledges that THE MATERIALS ARE EXPERIMENTAL IN NATURE AND THEY ARE
PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND, except as set forth
above in (P.) 11.2.
12. MISCELLANEOUS AND GENERAL
12.1 SIGMA acknowledges that IMMTECH is subject to United States
laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities and that its obligations
hereunder are contingent on compliance with all applicable United States export
and other laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by SIGMA that SIGMA shall not export data
or commodities to certain foreign countries without prior approval of such
agency. IMMTECH neither represents that a license shall not be required or that,
if required, it shall be issued.
12.2 SIGMA shall obtain any and all licenses, permits, approvals or
authorizations ("REQUIRED CONSENTS") required by any governmental entity or
agency having jurisdiction over the transactions contemplated by this AGREEMENT.
IMMTECH shall cooperate with, and provide reasonable assistance to, SIGMA in
obtaining the REQUIRED CONSENTS; provided, however, that SIGMA shall reimburse
IMMTECH for all IMMTECH out-of-pocket expenses incurred in providing such
assistance.
12.3 All notices, statements and reports required or contemplated
herein by one party or the other shall be in writing and shall be deemed to have
been given upon delivery in person or upon the expiration of five (5) days after
deposit in a lawful mail depository in the country of residence of the party
giving the notice, registered or certified airmail postage prepaid, and
addressed as follows:
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If to Immtech: Attention: Mr. Steve Thompson
CEO & President
Immtech International Inc.
1890 Maple Avenue, Suite 110
Evanston, Illinois 60201
Facsimile: (847) 869-3045
With a copy to: Alice O. Martin, Esq. Ph.D.
Brinks, Hofer, Gilson & Lione
NBC Tower - Suite 3600
455 N. Cityfront Plaza Drive
Chicago, IL 60611-5599
Facsimile: (312) 321-4299
If to Sigma: Attention: Mr. Michael T. Hayo
Vice President
Sigma Diagnostics
545 South Ewing Avenue
St. Louis, Missouri 63103
Facsimile: (314) 286-78l9
Either party hereto may change the address to which notices to such party are to
be sent by giving notice to the other party at the address and in the manner
provided above. Any notice herein required or permitted to be given, in addition
to the manner set forth above, by telex, facsimile or cable, provided that the
party giving such notice obtains acknowledge by telex, facsimile or cable that
such notice has been received by the party to be notified. Notice made in this
manner shall be deemed to have been given when such acknowledgment has been
transmitted.
12.4 SIGMA shall not grant, transfer, convey, sublicense or
otherwise assign any of its rights or delegate any of its obligations under this
AGREEMENT other than to an affiliated company without the prior written consent
of IMMTECH, and any attempt to do so shall be of no effect; however, this
AGREEMENT shall be assignable by IMMTECH. This AGREEMENT shall be binding upon
and inure to the benefit of the successors and permitted assigns of the parties
hereto.
12.5 This AGREEMENT constitutes the entire agreement between IMMTECH
and SIGMA with respect to the subject matter hereof and shall not be modified,
amended or terminated except as herein provided or except by another agreement
in writing executed by the parties hereto.
12.6 The section and paragraph headings are for convenience only and
are not a part of this AGREEMENT.
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12.7 All rights and restrictions contained herein may be exercised
and shall be applicable and binding only to the extent that they do not violate
any applicable laws and are intended to be limited to the extent necessary so
that they will not render this AGREEMENT illegal, invalid or unenforceable. If
any provision or portion of any provision of this AGREEMENT not essential to the
commercial purpose of this AGREEMENT shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining provisions or portions thereof shall constitute their
agreement with respect to the subject matter hereof, and all such remaining
provisions or portions hereof shall remain in full force and effect. In the
event that any provision essential to the commercial purpose of this AGREEMENT
is held to be illegal, invalid or unenforceable and cannot be replaced by a
valid provision which will implement the commercial purpose of this AGREEMENT,
this AGREEMENT and the rights granted herein shall terminate.
12.8 The term of this AGREEMENT shall begin on the EFFECTIVE DATE
and shall continue in effect through the EVALUATION PERIOD and through the
RESEARCH AND DEVELOPMENT PERIOD, unless otherwise allowed to lapse by SIGMA
pursuant to its discretion under (Paragraphs) 4.2, 4.3 and 6.1.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be
executed by their duly authorized representatives as of day and year first above
written.
IMMTECH:
IMMTECH INTERNATIONAL INC.
By: /s/ T. Stephen Thompson
------------------------------------
SIGMA:
SIGMA DIAGNOSTICS
By: /s/ Michael T. Hayo
------------------------------------
Michael T. Hayo
Vice President
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LICENSE AGREEMENT
This Agreement made this tenth (10th) day of March, 1998, (the
"Effective Date"), by and between Northwestern University, an Illinois
corporation having a principal office at 633 Clark Street, Evanston, Illinois
60208 (hereinafter referred to as "Northwestern") and Immtech International
Inc., a Delaware corporation having a principal office at 1890 Maple Avenue,
Suite 110, Evanston, IL. 60201 (hereinafter referred to as "Licensee") (each a
"Party" and collectively the "Parties").
WITNESSETH
WHEREAS, Northwestern is the owner of certain patent rights and
know-how relating to Immunoassay Constructs to Quantitate
Glucosylated-Hemoglobin and other Glucosylated Serum Proteins (NU 8403) and has
the right to grant licenses hereunder, subject only to a royalty-free,
nonexclusive license heretofore granted to the United States Government;
WHEREAS, Northwestern desires to have the patent rights and know-how
developed and commercialized to benefit the public and is willing to grant a
license hereunder;
WHEREAS, Licensee has represented to Northwestern that Licensee will
commit itself to a thorough, vigorous and diligent program to develop and
subsequently manufacture, market and sell products utilizing the patent rights
and know-how;
WHEREAS, Licensee desires to obtain a license under the patent
rights and know-how upon the terms and conditions hereafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1 "Affiliate" shall mean any corporation, firm, partnership or other
entity which controls, is controlled by or is under common control with a Party.
For the purposes of this definition, "control" shall mean any right or
collection of rights that together allow direction on any vote with respect to
any action by an entity or the direction of management and operations of that
entity. Such right or collection of rights includes without limitation (a) the
authority to act as sole member or shareholder or partner with a majority
interest in an entity; (b) a majority interest in an entity; and (c) the
authority to appoint, elect, or approve at least a majority of the governing
board of that entity.
1.2 "Field" shall mean the use of immunoassays for diagnostic purposes to
quatitate hemoglobin type A.1c.
1.3 "Know-How" shall mean any and all technical information existing as of
the Effective Date or generated during the term of this Agreement which is owned
or controlled by Northwestern and directly relates to Licensed Products and
shall include, without limitation, all biological, chemical, pharmaceutical,
pharmacological, toxological, clinical, assay control and manufacturing data and
any other information relating to the Licensed Products and useful for the
development, Regulatory Approval, commercialization or safety and effectiveness
of the Licensed Products.
1.4 "Licensed Products" shall mean diagnostic assays for determining
hemoglobin type A.1c.
1.5 "Net Sales" shall mean the gross amount invoiced by Licensee, its
Affiliates or its sublicensees, to third parties for the sale of Licensed
Products, less amounts actually invoiced or allowed with respect to trade
credits, discounts, rebates and allowances actually granted on account of price
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adjustments, rebate programs, billing errors or the rejection or return of
goods, sales taxes, tariffs, and custom duties. If a Licensed Product is sold as
part of a combination, Net Sales for the purposes of determining royalties on
the Licensed Product(s) in the combination shall be calculated by multi plying
Net Sales by the fraction A/A+B, where A is the invoice price of the Licensed
Product(s) sold separately and B is the invoice price of the other active
ingredients in the combination.
1.6 "Patent Rights" shall mean the patents and patent applications listed
on Exhibit A attached hereto and incorporated herein by reference, and any
patents which issue from the patent applications listed on Exhibit A attached
hereto and incorporated herein by reference, and all substitutions, additions,
extensions, reissues, renewals, divisions, continuations and
continuations-in-part thereof and any foreign counterparts thereto.
1.7 "Regulatory Approval" shall mean the approval of either the Food Drug
Administration of the United States or a foreign counterpart thereto required to
commence commercial sale of a Licensed Product in such country in the Territory.
1.8 "Territory" shall mean the entire world.
ARTICLE II - GRANT
2.1 Northwestern hereby grants to Licensee and its Affiliates an exclusive
license under Patent Rights and Know-How to make, have made, use, import, offer
for sale and sell Licensed Products in the Territory in the Field.
2.2 The grant under Paragraph 2.1 shall be subject to the obligations of
Northwestern and of Licensee to the United States Government under any and all
applicable laws, regulations, and executive orders including those set forth in
35 U.S.C. ss.200, et seq.
2.3 Northwestern retains the right to utilize Patent Rights and Know-How
for noncommercial research purposes.
2.4 Northwestern hereby grants to Licensee the right to grant sublicenses
consistent with this Agreement provided that Licensee shall be responsible for
the performance of its sublicensees, including the payment of royalties.
ARTICLE III- CONFIDENTIAL INFORMATION
3.1 Northwestern and Licensee each agree that all information contained in
documents marked "Confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this Agreement and
not disclosed by the recipient (except as required by law or court agency or
administrative order), its agents or employees to any third party without the
prior written consent of an authorized officer of the disclosing Party, unless
such information (a) was in the public domain at the time of disclosure, (b)
later became part of the public domain through no act or omission of the
recipient, its employees, agents, successors or assigns, (c) was lawfully
disclosed to the recipient by a third party having the right to disclose it, (d)
was already known by the recipient at the time of disclosure, (e) was
independently developed, (f) is required by law or court or administrative
agency order, or (g) is required to be submitted to a government agency to
obtain and maintain the approvals and clearances of Licensed Products.
Disclosure may also be made to Affiliates, distributors, customers, and agents,
to nonclinical and clinical investigators, and to consultants, where necessary
or desirable with appropriate safeguards to protect the confidential underlying
disclosure. Northwestern and Licensee also agree that confidential information
may be orally disclosed by one Party to the other Party. Such information shall
be confirmed in writing and designated "Confidential" within thirty (30) days of
disclosure for the provisions of this Article III to apply.
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3.2 Each Party's obligation of confidence hereunder shall be fulfilled by
using at least the same degree of care with the other Party's confidential
information as it uses to protect its own confidential information. This
obligation shall exist while this Agreement is in force and for a period of two
(2) years thereafter except in the event of termination by Northwestern for
breach on the part of Licensee, in which event Licensee's obligation to maintain
the information confidential will exist for a period of ten (10) years after the
termination for breach.
3.3 This Agreement may be distributed solely (a) to those employees,
agents and independent contractors of Northwestern and Licensee who have a need
to know its contents, (b) to those persons whose knowledge of its contents will
facilitate performance of the obligations of the parties under this Agreement,
(c) to those persons, if any, whose knowledge of its contents is essential in
order to permit Licensee or Northwestern to maintain or secure the benefits
under policies of insurance, or (d) as may be required by law or regulation or
by court or administrative agency order.
ARTICLE IV - DUE DILIGENCE
4.1 Licensee shall, upon execution of this Agreement, submit to
Northwestern a preliminary development and business plan that sets forth an
outline of Licensee's intended efforts to develop and commercialize Licensed
Products. Such plan shall include a summary of personnel, expenditures and
estimated timing for the development of Licensed Products and estimates of the
market potential for Licensed Products.
4.2 Licensee agrees to devote that level of resources to the
commercialization of a Licensed Product as other companies in the industry
customarily devote to products of similar commercial potential.
ARTICLE V - PAYMENT
In consideration of the license granted by Northwestern to Licensee under
this Agreement, Licensee shall pay to Northwestern the following:
5.1 A non-creditable, non-refundable license issue fee of Twenty Thousand
Dollars ($20,000), of which the first ten thousand dollars ($10,000) shall be
paid within thirty (30) days of execution of this Agreement, and ten thousand
dollars ($10,000) shall be paid within three (3) months from the Effective Date,
but no later than August 1, 1998.
5.2 Beginning the first full calendar year after the Regulatory Approval
of a Licensed Product in a major market country, or the year 2003, whichever
comes first, Licensee shall pay to Northwestern minimum royalty payments of
$10,000 per year. Any such minimum royalty payments shall be fully creditable
against any payments required under Paragraph 5.4.
5.4 A running royalty of (a) six percent (6%) of Net Sales of Licensed
Products for the first Ten Million Dollars ($10,000,000) in sales anywhere in
the world, and (b) four percent (4%) of Net Sales of Licensed Products on sales
exceeding Ten Million Dollars anywhere in the world.
5.5 For all sublicenses granted by Licensee, a royalty at the rate of
thirty five percent (35%) of all royalties earned by Licensee under such
sublicenses.
5.5 In addition to the running royalties under Paragraph 5.4, ten percent
(10%) of any payments, including, but not limited to, sublicense issue fees or
milestones received from sublicensees as consideration for Patent Rights,
Know-How or Licensed Products.
5.6 In the event of a permitted assignment of this Agreement, five percent
(5%) of any payments received from such assignee as consideration for Patent
Rights, Know-How or Licensed Products, as defined herein.
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ARTICLE VI - PAYMENT, REPORTS AND RECORDS
6.1 Payment Dates and Reports
Within sixty (60) days after the end of each calendar quarter of
each year during the term of this Agreement (including the last day of any
calendar quarter following the expiration of this Agreement), Licensee shall pay
to Northwestern, all royalties accruing during such calendar quarter. Such
payments shall be accompanied by a statement showing the Net Sales of each
Licensed Product by Licensee and its sublicensees in each country, the
applicable royalty rate and the calculation of the amount of royalty due.
6.2 Accounting
a. Payments in U.S. Dollars
All dollar sums referred to in this Agreement are expressed in
U.S. dollars and the Net Sales used for calculating the royalties and other sums
payable to Northwestern by Licensee pursuant to Paragraph 6.1 shall be computed
in U.S. dollars. All payments of such sums and royalties shall be made in U.S.
dollars. For purposes of determining the amount of royalties due, the amount of
Net Sales in any foreign currency shall be computed by converting such amount
into U.S. dollars at the prevailing commercial rate of exchange for purchasing
U.S. dollars with such foreign currency in question as quoted by Citibank in New
York on the last business day of the calendar quarter for which the relevant
royalty payment is to be made by Licensee.
b. Blocked Royalties
Notwithstanding the foregoing, if by reason of any restrictive
exchange laws or regulations Licensee or any Affiliate or sublicensee hereunder
shall be unable to convert to U.S. dollars an amount equivalent to the royalty
payable by Licensee hereunder in respect of Licensed Product sold for funds
other than U.S. dollars, Licensee shall notify Northwestern promptly with an
explanation of the circumstances. In such event, all royalties due hereunder in
respect of the transaction so restricted (or the balance thereof due hereunder
and not paid in funds other than U.S. dollars as hereinafter provided) shall be
deferred and paid in U.S. dollars as soon as reasonably possible after, and to
the extent that such restrictive exchange laws or regulations are lifted so as
to permit such conversion to United States dollars, of which lifting Licensee
shall promptly notify Northwestern. At its option, Northwestern shall meanwhile
have the right to request the payment (to it or to a nominee), and upon such
request Licensee shall pay, or cause to be paid, all such amounts (or such
portions thereof as are specified by Northwestern) in funds, other than U.S.
dollars, designated by Northwestern and legally available to Licensee under such
then existing restrictive exchange laws or regulations.
6.3 Records
Licensee shall keep, and shall cause its Affiliates and sublicensees
to keep, for three (3) years from the date of payment of royalties, complete and
accurate records of sales of each Licensed Product by Licensee; its Affiliates
and its sublicensees in sufficient detail to enable the accruing royalties to be
determined accurately. Northwestern shall have the right during this period of
three (3) years after receiving any report with respect to royalties due and
payable to appoint, at its expense, an independent certified public accountant
to inspect the relevant records of Licensee, its Affiliates and its sublicensees
to verify such report. Northwestern shall submit the name of said accountant to
Licensee for approval; said approval shall not be unreasonably withheld.
Licensee shall make its records and those of its Affiliates and sublicensees
available for inspection by such independent certified public accountant during
regular business hours at such place or places where such records are
customarily kept, upon reasonable notice from Northwestern, to the extent
necessary to verify the accuracy of the reports and
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payments with not more than one (I) inspection per calendar year. Northwestern
agrees to hold in strict confidence all information concerning royalty payments
and reports, and all information learned in the course of any audit or
inspection, except to the extent necessary for Northwestern to reveal such
information in order to enforce its rights under this Agreement or as may be
required by law. If royalties are understated by ten percent (10%) or more in
LICENSEE's favor, the LICENSEE shall, within ten (10) days of receipt of the
audit report, pay the balance due Northwestern plus all reasonable costs of the
audit or inspection and interest at the prime rate as quoted by Citibank in New
York from the date at which such balance would have otherwise been due and
payable. If royalties are understated by less than ten percent (10%), Licensee
shall include such understated amount with the next scheduled payment pursuant
to Paragraph 6.1.
ARTICLE VII - PUBLICATION
Northwestern will be free to publish the results of any research related
to Patent Rights, Know-How or Licensed Products and use any information for
purposes of research, teaching, and other educationally-related matters.
ARTICLE VIII - PATENT PROSECUTION
8.1 Northwestern has granted Licensee the right to apply for, seek prompt
issuance of, and maintain during the term of this Agreement the Patent Rights in
the United States and in the foreign countries listed in Exhibit A hereto. The
prosecution, filing and maintenance of all Patent Rights shall be the primary
responsibility of Licensee; provided, however, Northwestern shall have
reasonable opportunities to advise Licensee and shall cooperate with Licensee in
such prosecution, filing and maintenance.
8.2 Payment of all fees and costs relating to the filing, prosecution, and
maintenance of Patent Rights shall be the responsibility of Licensee, whether
such fees and costs were incurred before or after the Effective Date.
ARTICLE IX - INFRINGEMENT
9.1 Licensee shall inform Northwestern promptly in writing of any alleged
infringement of the Patent Rights by a third party and of any available evidence
thereof
9.2 During the term of this Agreement, Northwestern shall have the right,
but shall not be obligated, to prosecute at its own expense all infringements of
the Patent Rights and, in furtherance of such right, Licensee hereby agrees that
Northwestern may include Licensee as a party plaintiff in such suit, without
expense to Licensee. The total cost of any such infringement action commenced or
defended solely by Northwestern shall be borne by Northwestern and Northwestern
shall keep any recovery or damages for past infringement derived therefrom.
9.3 If within six (6) months after having been notified of any alleged
infringement, Northwestern shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if Northwestern shall notify
Licensee at any time prior thereto of its intention not to bring suit against
any alleged infringer, then, and in those events only, Licensee shall have the
right, but shall not be obligated, to prosecute at its own expense any
infringement of the Patent Rights, and Licensee may, for such purposes, use the
name of Northwestern as party plaintiff; provided, however, that such right to
bring such infringement action shall remain in effect only for so long as the
license ranted herein remains exclusive. No settlement, consent judgment or
other voluntary final disposition of the suit may be entered into without the
consent
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of Northwestern, which consent shall not unreasonably be withheld. Licensee
shall indemnify Northwestern against any order for costs that may be made
against Northwestern in such proceedings. Licensee shall keep any recovery or
damages for past infringement derived therefrom; provided, however, that such
recovery, less expenses, including reasonable attorneys' fees, shall be treated
as Net Sales for the purpose of calculating running royalties under Paragraph
5.4
9.4 In the event that a declaratory judgment action alleging invalidity or
noninfringement of any of the Patent Rights shall be brought against Licensee,
Northwestern, at its option, shall have the right, within thirty (30) days after
it receives notice of the commencement of such action, to intervene and take
over the sole defense of the action at its own expense.
9.5 In any infringement suit that either Party may institute to enforce
the Patent Rights pursuant to this Agreement, the other party hereto shall, at
the request and expense of the Party initiating such suit, cooperate in all
respects and, to the extent possible, have its employees testify when requested
and make available relevant records, papers, information, samples, specimens,
and the like.
9.6 Licensee, during the term of this Agreement, shall have the sole right
in accordance with the terms and conditions herein to sublicense any alleged
infringer for future use of the Patent Rights. Any upfront fees as part of such
a sublicense shall be shared equally between Licensee and Northwestern; other
royalties shall be treated pursuant to Paragraph 5.4.
ARTICLE X - PRODUCT LIABILITY
10.1 Licensee shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Northwestern, its trustees, directors,
officers, employees and Affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to any person
or persons or out of any damage to property, or resulting from the production,
manufacture sale, use, lease, consumption or advertisement of the Licensed
Product(s) or arising from any obligation of Licensee hereunder.
10.2 Licensee and sublicensees involved in activities described in section
10.1 shall obtain and carry in full force and effect commercial, general
liability insurance which shall protect Licensee and Northwestern with respect
to events covered by paragraph 10.1 above. Such insurance shall be written by a
reputable insurance company authorized to do business in the State of Illinois,
shall list Northwestern as an additional named insured thereunder, shall be
endorsed to include product liability coverage and shall require thirty (30)
days written notice to be given to Northwestern prior to any cancellation or
material change thereof. The limits of such insurance shall not be less than
Five Million Dollars ($5,000,000) per occurrence with an aggregate of Fifteen
Million Dollars ($15,000,000) for personal injury or death, and One Million
Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for property damage. Licensee shall provide Northwestern with
Certificates of Insurance evidencing the same.
10.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NORTHWESTERN, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING AND
THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN
THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY
NORTHWESTERN THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER
SHALL NOT
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INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL NORTHWESTERN,
ITS TRUSTEES, DIRECTORS. OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR
INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER NORTHWESTERN SHALL BE
ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY.
ARTICLE XI - TERM AND TERMINATION
11.1 This Agreement shall become effective on the Effective Date. Unless
sooner terminated as provided for below, this Agreement shall continue in
effect, on a county-by-country basis, until (a) the expiration of the last to
expire of any Patent Rights, or (b) ten (10) years from the date of the first
commercial sale in countries where no Patent Rights exist
11.2 Licensee shall have the right to terminate this Agreement in whole or
in part anytime after three (3) years from the Effective Date by giving
Northwestern ninety (90) days written notice.
11.3 Northwestern shall have the right to terminate or render this license
non-exclusive at any time after three (3) years from the Effective Date if, in
Northwestern's reasonable judgement, Licensee a) has not put the Licensed
Product into commercial use in the Territory in the Field, directly or through a
sublicensee, thereby not making the Licensed Product available to the public, or
b) is not demonstrably engaged in research, development, manufacturing,
marketing as appropriate, directed towards this end.
11.4 The provisions of Article III (Confidentiality), Article VI
(Payments, Reports and Records), Article X (Product Liability) and Article XIII
(Dispute Resolution) shall survive termination or expiration of this Agreement
in accordance with their terms.
11.5 If(l) either Party breaches any material obligation imposed by this
Agreement; (2) either Party makes any general assignment for the benefit of its
creditors; (3) a petition is filed by or against either Party, or any proceeding
is initiated against either Party as a debtor, under any bankruptcy or
insolvency law, unless the laws then in effect void the effectiveness of this
provision; or (4) a receiver, trustee, or any similar officer is appointed to
take possession, custody, or control of all or any part of either Party's assets
or property, then the other Party may, at its option, send a written notice that
it intends to terminate the license granted by this Agreement
11.6 If the Party in breach does not cure the breach, negate the
assignment, obtain a dismissal of the proceeding, or have the appointment
vacated and regaining its assets within ninety (90) days from the notice date,
then the other Party shall have the right to terminate the license granted
immediately upon the date of mailing of a written notice of termination to the
Party in breach.
11.7 Upon termination of this Agreement for any cause, nothing herein
shall be construed to release either Party of any obligation that has matured
prior to the effective date of such termination. Licensee may, after the date of
such termination, sell all Licensed Products that it may have on hand at the
date of termination, provided that it pays the earned royalty thereon as
provided in this Agreement
11.8 In the event of termination for breach by Licensee, Licensee agrees
to no longer use any of the Patent Rights or Know-How under which it has been
granted a license and will turn over and assign to Northwestern its Regulatory
Approvals and data and material related to price and Regulatory Approvals at no
charge with the right to sub license.
11.9 Upon termination of this Agreement, any and all existing sublicense
agreements shall be immediately assigned to Northwestern and Northwestern agrees
to keep them in force to the extent that Northwestern is capable of performing
as a licensor in place of Licensee.
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ARTICLE XII - ASSIGNMENT
This Agreement shall not be assignable by either Party without the prior
written consent of the other, except that any Party may assign this Agreement to
any Affiliate, to a successor in interest (including the surviving company in
any consolidation or merger), or to an assignee of substantially all the
business and assets of such Party, or with respect to Licensee, to an assignee
of all or substantially all of the business to which this Agreement relates.
ARTICLE XIII - DISPUTE RESOLUTION
13.1 The Parties agree to effect all reasonable efforts to resolve any and
all disputes between them in connection with this Agreement in an amicable
manner.
13.2 The Parties agree that any dispute that arises in connection with
this Agreement and which cannot be amicably resolved by the parties shall be
resolved by binding Alternative Dispute Resolution (ADR) in the manner set forth
in Paragraph 13.3 through Paragraph 13.5.
13.3 If a Party intends to begin ADR to resolve a dispute, such Party
shall provide written notice to the other Party informing the other Party of
such intention and the issues to be resolved. Within ten (10) business days
after its receipt of such notice, the other Parry may, by written notice to the
Party initiating ADR, add additional issues to be resolved. If the Parties
cannot agree upon the selection of a neutral within twenty (20) business days
following receipt of the original ADR notice, a neutral shall be selected by the
then President of the Center for Public Resources (CPR), 680 Fifth Avenue, New
York, New York 10019. The neutral shall be a single individual having experience
in the biotechnology industry who shall preside in resolution of any disputes
between the Parties. The neutral selected shall not be an employee, director or
shareholder of either Party or an Affiliate or sublicensee.
13.4 Each Party shall have ten (10) business days from the date the
neutral is selected to object in good faith to the selection of that person. If
either Party makes such an objection, the then President of the CPR shall, as
soon as possible thereafter, select another neutral under the same conditions as
set forth above. This second selection shall be final.
13.5 The ADR shall be conducted in the following manner:
(a) No later than forty-five (45) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the
Parties.
(b) At least five (5) days prior to the hearing, each Party must
submit to the neutral and serve on the other Party a proposed ruling on each
issue to be resolved. Such proposed ruling shall contain no argument on or
analysis of the facts or issues, and shall be limited to not more than fifty
(50) pages.
(c) The neutral shall not require or permit any discovery by any
means, including depositions, interrogatories or production of documents.
(d) Each Party shall be entitled to no more than eight (8) hours of
hearing to present testimony or documentary evidence. The testimony of both
Parties shall be presented during consecutive calendar days. Such time
limitation shall apply to any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the Party conducting such direct, cross
or rebuttal testimony. It shall be the responsibility of the neutral to
determine whether the parties have had the eight (8) hours to which each is
entitled.
(e) Each Party shall have the right to be represented by counsel.
The neutral shall have the sole discretion with regard to the admissibility of
any evidence.
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(f) The neutral shall rule on each disputed issue within thirty (30)
days following the completion of the testimony of both Parties. Such ruling
shall adopt in its entirety the proposed ruling of one of the parties on each
disputed issue.
(g) ADR shall take place in Chicago, Illinois. All costs incurred
for a hearing room shall be shared equally between the Parties.
(h) The neutral shall be paid a reasonable fee plus expenses, which
fees and expenses shall be shared equally by the Parties.
(i) The ruling shall be binding on the Parties and may be entered as
an enforceable judgment by a state or federal court having jurisdiction of the
Parties.
13.6 This Section XIII shall survive any termination of this Agreement
ARTICLE XIV - NOTICES AND PAYMENTS
Any payment notice or other communication pursuant to this Agreement shall
be sufficiently made or given on the date of mailing if sent to such Party by
certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other Party:
In the case of Northwestern: Director
Technology Transfer Program
Northwestern University
1801 Maple Avenue
Evanston, Illinois 60201
In the case of Licensee: Mr. Stephen Thompson
President & CEO
Immtech International Inc.
1890 Maple Avenue
Evanston, Illinois 60201
ARTICLE XV - GENERAL
15.1 Force Majeure. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because rendered impracticable or impossible due to circumstances beyond its
reasonable control, including without limitation earthquakes, governmental
regulation, fire, flood, labor difficulties, interruption of supply of key raw
materials, civil disorder, and acts of God, provided that the Party experiencing
the delay promptly notifies the other Party of the delay.
15.2 Severability. In the event any provision of this Agreement is held to
be invalid or unenforceable, the valid or enforceable portion thereof and the
remaining provisions of this Agreement will remain in full force and effect.
15.3 Applicable Law. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of Illinois, excluding its
choice of law rules.
15.4 Entire Agreement. This Agreement and the exhibits attached hereto
constitute the entire, final, complete and exclusive agreement between the
Parties and supersede all previous agreements or representations, written or
oral, with respect to the subject matter of this Agreement. This Agreement may
not be modified or amended except in a writing signed by a duly authorized
representative of each Party.
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15.5 Headings. The headings for each article and section in this Agreement
have been inserted for convenience or reference only and are not intended to
limit or expand on the meaning of the language contained in the particular
article or section.
15.6 Independent Contractors. The Parties are not employees or legal
representatives of the other party for any purpose. Neither Party shall have the
authority to enter into any contracts in the name of or on behalf of the other
Party.
15.7 Advertising. Licensee shall not use the name of any inventor of
Northwestern University, of any institution with which the inventor has been or
is connected, nor the name of Northwestern in any advertising, promotional or
sales literature, without prior written consent obtained from Northwestern in
each case.
15.8 Waiver. Any waiver (express or implied) by either Party of any breach
of this Agreement shall not constitute a waiver of any other or subsequent
breach.
15.9 Counterparts. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
15.10 Patent Marking. Licensee agrees to mark the Licensed Products sold
in the United States with all applicable United States patent numbers. All
Licensed Products shipped to or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the country of
manufacture or sale.
In Witness Whereof, the Parties have executed this Agreement effective on
the date first set forth above.
LICENSEE NORTHWESTERN
By: /s/ T. Stephen Thompson By: /s/ Lydia Villa-Komaroff
------------------------- ---------------------------------
Name: T. Stephen Thompson Name: LYDIA VILLA-KOMAROFF
Title: President and CEO Title: VICE PRESIDENT FOR RESEARCH
AND GRADUATE STUDIES
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LICENSE AGREEMENT
This AGREEMENT made this 27th day of October, 1994 by and between
NORTHWESTERN UNIVERSITY ("NORTHWESTERN"), an Illinois corporation having a
principal office at 633 Clark Street, Evanston, Illinois 60203, and IMMTECH
INTERNATIONAL. INC. ("COMPANY"), a Delaware corporation having a principal
office at 1290 Maple Avenue, Suite 110, Evanston, Illinois 60201 (hereinafter
"IMMTECH").
WITNESSETH THAT:
WHEREAS, NORTHWESTERN represents that Samar Makhlouf, Mark Pankow,
and Byron Anderson (the Inventors) all being employees of NORTHWESTERN at the
time of the invention, have made certain inventions in the field of "Immunoassay
for Identifying Alcoholics and Monitoring Alcohol Consumption" (NIT 9134), and
that a patent has been applied for thereon, having United States Serial Number
07/765,169 in September 1991.
WHEREAS, NORTHWESTERN, subject to U.S. government obligations has
the right to make, use, sell, and grant licenses under the INVENTION and PATENT
RIGHTS as defined herein; and NORTHWESTERN wishes to have the INVENTION, as
defined by the PATENT RIGHTS, utilized for the public interest; and
WHEREAS IMMTECH desires to obtain a license to manufacture, sell,
and use the INVENTION and PATENT RIGHTS defined herein and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the faithful
Performance of the covenants contained herein, IT IS AGREED:
1.0 DEFINITIONS
For the purposes of this Agreement, and solely for that purpose, the
terms hereinafter set forth shall be defined as follows:
1.1 "INVENTION" shall mean the invention as described in EXHIBIT A,
and/or as covered in the PATENT RIGHTS and/or TECHNICAL INFORMATION
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1.2 "PATENT RIGHTS" shall mean any United States patent for the
INVENTION together with any divisional, continuation, or other
continuation-in-part applications based thereon, and any patents resulting from
any of said applications, and any reissues or extensions based on any such
patents, and any foreign counterparts pending or issued thereof -
1.3 "LICENSED PRODUCT" shall mean any products or processes
employing any INVENTION as described in EXHIBIT A, or as described by any valid
claim in an unexpired patent, which patent application or patent is included in
the PATENT RIGHTS.
1.4 "FIELD OF USE" shall mean the exclusive use of the INVENTION and
PATENT RIGHTS for QUANTITATIVE diagnostics.
15 "NET SALES PRICE" shall mean the gross sales price of any
LICENSED PRODUCT made and sold pursuant to this Agreement, less allowances to
customers for damaged or returned products and the amounts of discounts,
transportation charges, and all sales and excise taxes and duties paid,
absorbed, or allowed -
l6 "AFFILIATE" shall mean any corporation or other legal entity (a)
owning or controlling, directly or indirectly, more than fifty percent of the
voting capital shares of IMMTECH, (b) more than fifty percent of the voting
capital shares of which are owned or controlled, directly or indirectly, by
IMMTECH; or (c) more than fifty percent of the voting capital shares of which
are owned or controlled, directly or indirectly, by a legal entity which owns or
controls, directly or indirectly more than fifty percent of the voting capital
shares of IMMTECH.
1.7 "QUANTITATIVE DIAGNOSTICS" shall mean the use of immunoassays
that yield a quantitative answer and are generally performed via enzyme-linked
antibody methodology.
1.8 "TECHNICAL INFORMATION" shall mean NORTHWESTERN's technical
information and know-how relating to the INVENTION, including technical data,
plans, specifications, and drawings.
2.0 LICENSE
2.1 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the terms and
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conditions herein specified, a worldwide, exclusive, and non-assignable (except
as herein specified) License to use the INVENTION and PATENT RIGHTS to test,
evaluate, and develop the INVENTION and LICENSED PRODUCT coveted hereby and to
make, have made, use and sell the products in the FIELD OF USE thereof during
the term of this Agreement, and during the term of any extension thereof, unless
sooner terminated as hereinafter provided -
2.2 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the tents and conditions herein specified, the right to
extend the License granted hereunder to its sublicensee(s) IMMTECH shall
promptly notify NORTHWESTERN in writing that a sublicense has been wanted no
later than thirty (30) days after the effective date or the sublicense. IMMTECH
may negotiate such terms as it chooses for each sublicense, provided that
NORTHWESTERN shall receive a royalty for all sales made by sublicensee(s) at the
rate provided for in this Agreement.
2.3 If IMMTECH shall so notify NORTHWESTERN in writing as provided
in Section 2.2 of this Agreement, any sublicensee(s) to whom the License shall
have been extended pursuant to Section 2.2. hereof may make the reports and
royalty payments specified in Paragraph 3.0. hereof directly to Northwestern on
behalf of IMMTECH. For all other sublicensees, IMMTECH shall make said royalty
payments to Northwestern. For all sublicensees, Northwestern shall notify
IMMTECH and/or the sublicensee of the address to which payment should be sent.
2.4 NORTHWESTERN retains a non-exclusive, royalty-free, irrevocable
License to make, have made and use the INVENTION, PATENT RIGHTS and LICENSED
PRODUCT for its own noncommercial uses.
2.5 Outside the scope of the License between NORTHWESTERN and
IMMTECH no other, further, or different license or right, and no further power
to sublicense is hereby granted or implied.
3.0 ROYALTIES, RECORDS AND REPORTS
3.1 During the term of this Agreement, unless sooner terminated,
IMMTECH shall pay to NORTHWESTERN, in the manner hereinafter provided, earned
royalties at the rate of six percent (6%) of the NET SALES PRICE of all LICENSED
PRODUCT sold by IMMTECH, for the first Ten Million Dollars ($10,000,000) sales,
and at the rate of four percent (4%) for
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sales exceeding Ten Million Dollars, anywhere in the world.
3.2 IMMTECH shall pay to NORTHWESTERN with respect to all
sub-licenses granted by IMMTECH hereunder, a royalty at the rate of thirty
percent (30%) of all royalties earned by IMMTECH under such sub-licenses.
3.3 LICENSED PRODUCT shall be considered sold when sold or invoiced,
and if not sold or invoiced, when delivered to a third party.
3.4 IMMTECH shall be responsible for the performance hereunder of
all obligations including payment of royalties, keeping of records, and
reporting by IMMTECH and any sublicensee(s) to whom the License shall have been
extended pursuant to this Agreement.
3.5 So long as this Agreement remains in force, IMMTECH shall
deliver to NORTHWESTERN, within sixty (60) days after the first day of January,
April, July and October of each year, a true and accurate report, giving such
particulars of the business conducted by IMMTECH and its sublicensee(s) during
the preceding three (3) months under this Agreement as are necessary to
accurately account for sales subject to royalties under this Agreement.
3.6 Simultaneously with the delivery of each report required by the
preceding paragraph 3.4, IMMTECH shall pay to NORTHWESTERN the net royalties and
any other such payment due under this Agreement for the period covered by such
report. If no royalties are due, it shall be so reported.
3.7 All payments from IMMTECH to NORTHWESTERN shall be in U.S.
dollars. Royalties for sales made by IMMTECH in foreign currencies shall be paid
to Northwestern in U.S. Dollars at a conversion rate equal to the quarter
average of daily composite closing exchange rates for the quarter in which sales
were made as published by the Wall Street Journal.
3.8 In case of any delay in payment by IMMTECH to NORTHWESTERN not
occasioned by force majeure, interest at the rate of one percent (1%) per month,
assessed from the thirty-first day after the due date of said payment, shall be
due by IMMTECH without any special notice.
3.9 Royalties shall accrue in accordance with this Agreement, upon
the first sale of LICENSED PRODUCT.
3.10 IMMTECH shall keep full, true, and accurate
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books of account containing all particulars which may be necessary for the
purpose of showing the amount payable to NORTHWESTERN by way of royalty as
aforesaid or by way of any other provision hereunder. Said books of account
shall be sent at IMMTECH'S principal place of business. Said books and the
supporting data shall be available for inspection by Northwestern at reasonable
times upon reasonable notice to IMMTECH for three (3) years following the end of
the calendar year to which they pertain, to inspection by NORTHWESTERN for the
purpose or verifying IMMTECH'S royalty statements, or IMMTECH'S compliance in
other respects with this Agreement.
3.11 IMMTECH shall reimburse NORTHWESTERN for all out-of-pocket
costs of filing, prosecution and maintenance for all patent applications and all
patents issuing thereon filed and made at the request of IMMTECH. All such
patents and patent applications shall become part of the PATENT RIGHTS licensed
to IMMTECH hereunder. Such reimbursements shall be made to NORTHWESTERN within
sixty (60) days of receipt of invoice by IMMTECH. Any reimbursements made by
IMMTECH hereunder shall be creditable by IMMTECH in full against royalty payable
by it pursuant to Article 3.1 above.
4.0 AUDITING
4.1 NORTHWESTERN and its representatives will be entitled, upon the
provision of reasonable notice to IMMTECH, to cause a certified public
accountant ("CPA") reasonably acceptable to IMMTECH, to audit such records of
IMMTECH. Such audits shall occur during regular business hours, at the audited
party's place of business, and not more frequently than twice per year, nor more
than twice with respect to any fiscal year. Each such audit shall be designed
solely to determine correct amounts payable by one party to the other pursuant
to the terms of this Agreement, and to answer specific additional questions to
be mutually agreed upon by both parties. While such audit may disclose
information relating to the nature of goods sold and the sales price of said
goods, under no circumstances shall IMMTECH be required to disclose any
confidential information not directly relevant to the calculation of royalties.
The CPA will be under confidentiality obligations to the audited party to
disclose to the auditing party only the correct amounts payable or receivable by
the auditing party, and the answers to such specific agreed upon questions. In
the event that an audit reveals any underpayment or undercredit or royalties
and/or milestone payments by IMMTECH subject to the provisions herein, IMMTECH
will promptly pay or credit to NORTHWESTERN, as the case may be, the full
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amount of that underpayment or undercredit, together with interest thereon at a
rate of one percent (1%) per month, assessed from the thirty-first day after
said payment was due. In the event that the audit reveals an underpayment or
undercredit of in excess of five percent (5%), IMMTECH or sublicensee, as the
case may be, will promptly pay the entire cost of that audit.
5.0 PERFORMANCE
5.1 IMMTECH shall use its commercially reasonable efforts to
commence and maintain regular commercial production and sale of LICENSED
PRODUCT.
5.2 IMMTECH shall employ its commercially reasonable efforts to
develop Licensed Products, and, consistent with prudent and reasonable business
practices: to apply for and obtain approval from the FDA for the use and sale of
Licensed Products and to market Licensed Products after such approval is
obtained.
5.3 IMMTECH shall use commercially reasonable efforts consistent
with prudent business practice to pursue any necessary studies and to seek
approvals in countries other than the United States of America to market
Licensed Products.
5.4 IMMTECH shall use commercially reasonable efforts, and shall
cause its Affiliates to use their respective commercially reasonable efforts, to
market Licensed Products after appropriate regulatory approval is obtained.
5.5 NORTHWESTERN, at its discretion, and with the consent of
IMMTECH, may utilize IMMTECH'S patent expertise by requesting advice and
assistance from IMMTECH on the preparation, filing, prosecution and maintenance
of any patent application or patent related directly to the LICENSED PRODUCT.
IMMTECH agrees to provide such patent assistance and advice to NORTHWESTERN.
IMMTECH does not warrant the results of any legal and/or patent advice offered
to NORTHWESTERN pursuant to this Agreement. All final decisions regarding the
course of preparation, filing, prosecution and maintenance shall rest with
NORTHWESTERN in its sole discretion.
6.0 TERM AND EXTENSION
6.1 This License shall continue until the expiration of the last to
expire of any patents under PATENT RIGHTS, or
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for ten (10) years after date of execution of this Agreement in the event no
patent issues.
7.0 TERMINATION
7.1 If IMMTECH shall become bankrupt or insolvent and/or if the
business of IMMTECH shall be placed in the hands of a Receiver Assignee, or
Trustee, whether by the voluntary act of IMMTECH or otherwise, this License will
be deemed to have automatically terminated as of a date seven (7) days prior to
that event, provided, however, that such termination shall not terminate any
obligations which may have accrued prior thereto.
7.2 Notwithstanding the provisions of Article 5.1, upon any breach
or default under this Agreement by IMMTECH, NORTHWESTERN may terminate this
License by sixty (60) days written notice by registered mail to IMMTECH. Said
notice shall become effective at the end of said period, unless during said
period IMMTECH shall cure such breach or default and notify NORTHWESTERN
thereof.
7.3 IMMTECH may terminate this License at any time upon ninety (90)
days written notice by registered mail to NORTHWESTERN.
7.4 Upon termination of this License for any reason, all rights
granted hereunder shall revert to NORTHWESTERN for the sole benefit of
NORTHWESTERN.
7.5 IMMTECH's termination of this License shall not operate to
terminate any sublicenses made by IMMTECH hereunder. The rights of any and all
said sublicensee(s) shall be preserved on the condition that said sublicensee(s)
agrees to and performs all terms and conditions of IMMTECH pursuant to this
Agreement.
7.6 IMMTECH's responsibilities and obligations to report to
NORTHWESTERN and pay royalties to NORTHWESTERN as to any LICENSED PRODUCTS
produced or sold by IMMTECH or its sublicensees under this Agreement prior to
termination or expiration hereof shall survive such termination or expiration.
7.7 In the event that this Agreement is terminated by either party,
IMMTECH agrees to provide NORTHWESTERN with names and addresses of sublicensees
and copies of all Sublicense Agreements between IMMTECH and sublicensees.
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8.0 ASSIGNMENT
8.1 This Agreement may be assigned by NORTHWESTERN. This Agreement
may be assigned by IMMTECH to the successor of its entire business, or to an
entity acquiring significant ownership interest in IMMTECH, or to any partly or
wholly-owned subsidiary, but shall not be otherwise assignable by IMMTECH
without the prior written consent of NORTHWESTERN which consent shall not be
unreasonably withheld.
9.0 INFRINGEMENT
9.1 NORTHWESTERN agrees to protect its patents within the PATENT
RIGHTS from infringement and prosecute infringers when in its reasonable
judgement such action may be proper and justified. IMMTECH shall have the right
to sue infringers in its own name if NORTHWESTERN elects not to do so within one
hundred twenty (120) days following NORTHWESTERN's receipt of knowledge of such
infringement.
9.2 In the event either party hereto shall initiate or carry on
legal proceedings to enforce the PATENT RIGHTS against an alleged infringer, the
other party hereto shall fully cooperate with the party initiating or carrying
on such proceedings.
9.3 In the event NORTHWESTERN shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, it shall
have sole control of such suit and shall retain any recovery awarded as a result
of such suit.
9.4 In the event IMMTECH shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, NORTHWESTERN
shall have the option to join in such proceedings and shall be entitled to be
represented by counsel of its own choosing. From any recovery awarded as a
result of any suit or legal proceedings, IMMTECH (i) may deduct the full amount
of its expenses of prosecuting the same (including attorney's fees and court
costs); (ii) shall pay to NORTHWESTERN, to the extent possible after full
payment of (i) above, the full amount of NORTHWESTERN's costs of participating
in the same; (iii) shall pay to NORTHWESTERN, after full payment of (i) and (ii)
above, the applicable percentage determined under section 3.1 hereof, of any
remainder; and (iv) may retain the balance. IMMTECH shall not discontinue or
settle any such suit or legal proceedings brought by it without obtaining prior
concurrence of NORTHWESTERN, and giving NORTHWESTERN a timely opportunity to
continue such proceedings
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in its own name, under its sole control, at its sole expense, and at its sole
recovery.
10.0 SEVERABILITY
10.1 Should any part or provision of this Agreement be unenforceable
or otherwise in conflict with or in violation of the law of any jurisdiction,
the remainder of this Agreement shall remain binding upon the parties.
11.0 INDEMNITY AND NEGATION OF WARRANTIES
11.1 IMMTECH agrees to indemnify, hold harmless and defend
NORTHWESTERN its officers, employees, and agents against any and all claims,
suits, losses, damages, costs, fees, and expenses resulting from or arising out
of the production or use of the LICENSED PRODUCTS by IMMTECH, its sublicensees,
and others purchasing, using and/or receiving the LICENSED PRODUCTS.
11.2 IMMTECH shall maintain, prior to sale of any LICENSED PRODUCTS,
appropriate insurance, in good standing, at least in the amount of five million
dollars ($5,000,000) the amount subject to change from time to time as
designated by NORTHWESTERN in writing, naming. NORTHWESTERN as additional
insured. IMMTECH shall deliver to NORTHWESTERN, a certificate of such insurance
providing for not less than thirty (30) days notice to NORTHWESTERN of
cancellation or material change in the terms of such insurance.
11.3 Nothing in this Agreement shall be construed as:
11.31 a warranty or representation by NORTHWESTERN as to the
validity or scope of any Patent Rights; or
11.32 a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of patents
of third parties; or;
11.33 an obligation by NORTHWESTERN to bring or prosecute
actions or suits against third parties for infringement.
11.4 NORTHWESTERN makes no representation other than
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those specified in this Agreement. NORTHWESTERN MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF LICENSED
PRODUCT.
12.0 GENERAL
12.1 IMMTECH shall not use the name of any Inventor listed in PATENT
RIGHTS, of any institution with any Inventor has been or is connected, nor of
NORTHWESTERN, nor any adaptation of any of them, in any advertising, promotional
or sales literature, without prior written consent obtained from NORTHWESTERN in
each case. Similarly, NORTHWESTERN shall not use the name of IMMTECH or any
officer, employee or agent of IMMTECH, nor any adaptation of same, in any
advertising or promotional literature without prior consent obtained from
IMMTECH in each case.
12.2 Any notice required or permitted to be given by this Agreement
shall be given postpaid first class certified mail; unless otherwise stated:
TO LICENSEE: IMMTECH INTERNATIONAL INC.
1890 Maple Avenue
Evanston, Illinois 60201
Attn: Mr. T. Stephen Thompson
TO LICENSOR: NORTHWESTERN UNIVERSITY
Technology Transfer Program
1801 Maple Avenue
Evanston, Illinois 60208-1111
Attn: Administrator
Such addresses may be altered by written notice. If no time limit is specified
for a notice required or permitted to be given under this Agreement, the time
limit therefor shall be twenty (20) full business days, not including the day of
mailing
12.3 This Agreement and its effect is subject to and shall be
construed and enforced in accordance with the internal laws of the State of
Illinois, United States of America.
12.4 The parties to this Agreement recognize and agree that each is
operating as an independent contractor and not as an agent of the other.
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12.5 The captions herein are for convenience only and shall not be
deemed to limit or otherwise affect the construction thereof.
12.6 Any waiver by either party of the breach of any tent or
condition of this agreement will not be considered as a waiver of any subsequent
breach of the same or any other term or condition hereof.
13.0 ENTIRE AGREEMENT
13.1 This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter of this Agreement,
and merges all prior discussions between them. Neither of the parties shall be
bound by any conditions, definitions, warranties, or representations with
respect to the subject matter of this Agreement unless as duly set forth on or
subsequent to the date hereof in writing signed by a proper and duly authorized
representative of the party to be bound thereby
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and duly executed this Agreement as of the day and the year first above written.
NORTHWESTERN UNIVERSITY
ATTEST: /s/ [ILLEGIBLE] By: /s/ C. William Kern
------------------ ---------------------------
C. William Kern, Ph.D.
Vice President for
Research
Date: November 8, 1994 Date: November 8, 1994
IMMTECH INTERNATIONAL INC.
ATTEST: /s/ Mary Jane Ryan By: /s/ T. Stephen Thompson
------------------ ---------------------------
Date: November 17, 1994 Date: November 17, 1994
- ----------------------------------
OFFICIAL SEAL
MARY JANE RYAN
NOTARY PUBLIC. STATE OF ILLINOIS
MY COMMISSION EXPIRES 6-25-98
- ----------------------------------
12
<PAGE>
INTERNATIONAL PATENT, KNOW-HOW
AND TECHNOLOGY LICENSE AGREEMENT
THIS INTERNATIONAL PATENT, KNOW-HOW AND TECHNOLOGY LICENSE AGREEMENT
("Agreement") is made this 29th day of June, 1998 by and between IMMTECH
INTERNATIONAL, INC. ("Immtech"), a Delaware corporation, and CRITICARE SYSTEMS,
INC. ("Criticare"), a Delaware corporation.
RECITALS
Certain capitalized terms used in these recitals are defined below
in this Agreement.
A. Immtech owns the patent rights and certain Technology, including
Know-how and Technical Information necessary or useful in the design,
development, customization, manufacture, use, composition and processing of the
mCRP (modifiedC- Reactive Protein) and a recombinant form of mCRP for the
treatment of sepsis (collectively, the "mCRP Patent Rights"); and
B. Criticare desires to obtain, and Immtech is willing to grant, the
License with respect to the mCRP Patent Rights and Immtech Technology within the
Field upon the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the mutual covenants set forth herein, the
sufficiency of which is hereby acknowledged, the Parties agree to the terms and
conditions set forth below.
1. Definitions. For the purpose of this Agreement, the following
terms (when capitalized, except as otherwise noted) shall have the meanings set
forth hereinbelow.
(a) "Effective Date" means the date first stated above.
(b) "Field of the Agreement" means systems, methods,
processes, compositions, articles and apparatuses for the treatment of sepsis.
(c) "mCRP Patent Rights" means the patent rights and certain
Technology, including Know-how and Technical Information necessary or
<PAGE>
useful in the design, development, customization, manufacture, use, composition
and processing of the mCRP (modified C- Reactive Protein) and a recombinant form
of mCRP for the treatment of sepsis owned or licensed by Immtech, including,
without limitation, the patent rights listed in Schedule A and any
continuations, continuations-in-part, divisionals, reissues, reexaminations,
extensions or other patents or applications claiming priority or based upon the
listed patents.
(d) "mCRP Technology" means Technology that is owned or
licensable by Immtech.
(e) "Improvements" means any modification or enhancement,
patentable or not, which is conceived and/or reduced to practice by Criticare or
Immtech during the term of this Agreement, related to the Field of this
Agreement.
(f) "License" is defined in Article 3.1.
(g) "Licensed Territory" means the countries listed in
Schedule B attached hereto, as that schedule may be amended from time to time by
mutual written consent of the Parties or in accordance with Articles 3.6 or 3.7.
(h) "Product" shall mean any product in the Field of the
Agreement, which is covered by any claim in the Immtech Patent Rights and/or
which is produced utilizing Technology. "Product" may also include such
additional products and/or Improvements as may be agreed upon by mutual
agreement of the Parties from time to time.
(i) "Technology" means all Know-how and Technical Information
related to the Field of this Agreement which is owned or licensable by a Party,
now and during the term of this Agreement.
(i) "Know-how" means any information, including
technical data, now, or during the term of this Agreement or any renewals
hereof, possessed by Immtech, and which are, in Immetech's or Criticare's
judgment, reasonably necessary to enable Criticare to manufacture, customize,
use, market or sell Products, and includes dimensions, materials, processes and
procedures relating thereto, and which are the secret, confidential and
proprietary information of Immtech.
(ii) "Technical Information" means any information
possessed by a Party which, although not the secret Know-how of Immtech, is
2
<PAGE>
nevertheless in either party's reasonable judgment, useful in utilizing Know-how
or Immtech Patent Rights.
(j) The "term of this Agreement" (whether or not capitalized)
shall begin on the Effective Date hereof and unless terminated pursuant to
Article 10 shall continue for _________ years.
2. Disclosure and Support.
(a) Immtech agrees that, within thirty days after the
Effective Date of this Agreement, it will make Immtech Technology available to
Criticare for Criticare's use hereunder. As additional Immtech Technology is
developed by Immtech during the term of this Agreement, it shall promptly be
made available to Criticare hereunder at no additional cost.
(b) Immtech hereby agrees not to attempt in any manner to
license, sell or otherwise commercialize Products and/or any Improvements within
the Licensed Territory to any person or entity other than Criticare.
(c) Criticare agrees to provide to Immtech any technologically
significant data that is developed or obtained by Criticare during the term of
the Agreement. Each Party recognizes that some data may only be available in
summarized form to protect the confidentiality of customers, but Criticare shall
use reasonable efforts to secure permission, where needed, to provide such
pre-summarized information to Immtech. Representatives from Immtech are free to
contact Criticare project personnel for verbal reports, updates, or
clarification of written reports at any time during normal business hours.
3. Exclusive License Grant.
(a) Immtech hereby grants to Criticare the exclusive right and
license, with the right to sublicense others, throughout the Licensed Territory
under mCRP Technology and under the mCRP Patent Rights, to make, use, have made,
offer for sale and sell Products and to practice methods and processes utilizing
Immtech Techno1ogy in connection therewith. The foregoing right and license is
referred to herein as the "License."
(b) The right to sublicense granted Criticare in Article 3.1
specifically includes the right to sublicense others exclusively and/or
non-exclusively in the Licensed Territory under Immtech Technology and under the
Immtech Patent Rights any right granted Criticare under this Agreement,
including the right to grant exclusive and/or non-exclusive field-of-use
sublicenses.
3
<PAGE>
(c) Criticare will advise Immtech of all sublicenses and shall
at all times keep an account of all manufacture and assembly, sales, shipments
and uses of Products by Criticare and by all sublicensees.
(d) Criticare shall be responsible for finding sublicensees
and negotiating exclusive and/or non-exclusive (including exclusive and/or
nonexclusive restricted field-of-use) sublicense agreements with said
sublicensees.
4. Payments and Accounting.
(a) In consideration of the grant of the License Criticare
shall pay to Immtech during the term of this Agreement a royalty consisting of
$100 per year.
(b) The royalties payable under this Agreement are in
consideration of the grant of rights under the Immtech Technology as well as the
grant of rights under the Immtech Patent Rights, and no additional royalty or
fee is due Immtech for Criticare's rights granted hereunder to utilize Immtech
Technology to manufacture, assemble, use, have manufactured, have assembled,
offer for sale, sell or otherwise commercialize Products or otherwise exploit
the Technology.
5. Marking and Quality.
(a) Criticare will apply, and cause each of its sublicensees
to apply, appropriate notice of patent protection on or in connection with
Products or their packages, including the numbers of relevant issued patents,
and give notice of the pendency of patent applications on Products or their
packages, such as, for example, stating "Patent Pending," such notices being
sufficient under applicable law to provide reasonable protection to the rights
of Immtech.
(b) Immtech shall at all times have the right to require that
Products manufactured or assembled by Criticare pursuant to this Agreement
satisfy reasonable standards of quality fixed by Immtech, and Immtech shall have
the right to inspect such Products, and the manufacturing process, at reasonable
times and at Immtech's expense, to confirm that such Products do conform to such
standards.
6. Confidential Status of Techno1ogy.
(a) Each Party ac1~owIedges and agrees that, subject to the
provisions of this Article 6, all Technology disclosed to it by the other Party
4
<PAGE>
pursuant to this Agreement may constitute and comprise valuable confidential
information, and therefore the Parry agrees to hold any such Technoloy it
receives from the other Party in confidence and otherwise protect it as provided
in this Article 6.
(b) Each Party (the "receiving Party") agrees that, subject
to the provisions of this Article 6, it shall not, without the prior written
consent of the other Party (the "disclosing Party"), disclose, distribute or use
any portion of Technology disclosed to it by the disclosing Party, except to the
extent necessary for the receiving Party to exercise rights hereunder or
authorize or allow others to do so. Each receiving Parry further agrees to limit
access to such Technology to-
(i) those of its employees, or others, who have a "need
to know" of the same in order for the receiving Party to exercise said rights;
and
(ii) its sublicensees who have a "need to know" of the
same in order for sublicensees to exercise said rights; and
in either case who are under a duty to protect such Technology for the benefit
of the disclosing Party to the same extent as is the receiving Party itself.
(c) The obligations under this Article 6 shall not extend to
any information disclosed by a disclosing Party to a receiving Party which (i)
is within the public domain, or enters into the public domain through no fault
of the receiving Party, (ii) is within the possession of the receiving Party
prior to receipt from the disclosing Party as shown by appropriate records, or
(iii) is independently made available to the receiving Party by a third party
without breach by the third party of any duty owed to the disclosing Party with
respect thereto. It is understood that some Technology may, at least in part,
consist of a synthesis of information that is in the public domain; and it is,
therefore, understood that no exclusion contained in this Article 6.3 shall
operate to exclude from the obligations of this Article 6 such synthesis of
otherwise public domain information, unless it can be shown that such synthesis
is itself in the public domain.
(d) Each Party agrees that all obligations under this Article
6 with respect to any and all Technology shall survive any termination of any or
all other provisions of this Agreement and shall continue until such time as one
of the exceptions set forth in Article 6.3 becomes applicable to the Technology
in question or for a period not to exceed two years after any such termination.
(e) Neither Party shall be liable for the inadvertent or
accidental use or disclosure of Know how or Technical Information, provided such
5
<PAGE>
use or disclosure occurs despite the Party's exercise of the same degree of care
as the Party takes to safeguard arid preserve its own proprietary information.
7. Representations and Warranties.
(a) Immtech expressly warrants
(i) that Immtech has the right to grant the License
within the Field and throughout the Licensed Territory;
(ii) that no third party has any right, title or
interest in the Immtech Patent Rights or Immtech Technology in the Field and
throughout the Licensed Territory;
(iii) that Immtech has taken no actions which adversely
affect Criticare's rights under this Agreement; and
(iv) that Immtech has the right to execute and enter
into this Agreement, to perform its obligations hereunder, and to grant the
License.
(b) Immtech warrants that, to the best of its knowledge, there
are no circumstances that would (i) render the Immtech Patent Rights invalid or
unenforceable, or (ii) render Criticare liable for patent infringement or trade
secret misappropriation as a consequence of Criticare's performing the
activities permitted by this Agreement or practice of the Immtech Patent Rights
or Immtech Technology as provided to Criticare.
(c) Immtech represents that it will timely pay all necessary
maintenance fees, annuities, taxes or other fees in order to maintain the
enforceability of the Immtech Patent Rights.
(d) Criticare and Immtech each represents that it has the
corporate power to enter into this Agreement and perform the obligations assumed
hereunder. Criticare and Immtech each represents that the person executing this
Agreement on behalf of the corporation is authorized to execute this Agreement
and legally bind the corporation.
8. Improvements.
(a) Immtech agrees that all Improvements developed by Immtech
during the term of this Agreement shall be made available on the same basis and
under the same terms as set forth in this Agreement at no additional cost to
Criticare. Immtech shall promptly notify Criticare of all such Improvements as
6
<PAGE>
they can reasonably be made available in form sufficient to disclose such
Improvement to Criticare, and at Criticare's option such Improvements may be
included in this Agreement and/or Products.
(b) If Criticare requests Immtech, in writing, to file a
patent application in a given nation or nations within the Licensed Territory
based on the Immtech Patent Rights or a Immtech Improvement, Immtech shall
promptly initiate the filing of such application(s), using local counsel of
Criticare's choosing. Criticare shall be responsible for all out of pocket
costs, including attorney fees, of filing and prosecuting any such patent
application(s) together with all fees, taxes, assessments, and levies on said
patent application(s) and/or patent(s) obtained therefrom for so long as
Criticare desires to maintain its rights thereunder. Immtech shall cooperate
fully with the prosecution, maintenance and enforcement of said patent
application(s) and/or patent(s) obtained therefrom and shall execute all
documents reasonably necessary for these activities.
(c) Criticare agrees that all Improvements developed by
Criticare during the term of this Agreement shall be made available on a
nonexclusive basis to Immtech without cost or reduction in royalty payable to
Immtech. Criticare shall promptly notify Immtech of all such Improvements as
they can reasonably be made available in form sufficient to disclose such
Improvement to Immtech, and at Immtech's option may be included in Products
and/or may be licensed from Criticare on the same basis and under the same terms
as set forth in this Agreement.
(d) Upon termination of the term of this Agreement,
Criticare's fights to continue use of Immtech's Improvements shall be limited by
the scope of Immtech Patent Rights existing upon termination. Likewise, upon
termination of the term of this agreement Immtech's rights to continue use of
Criticare1s Improvements shall be limited by the scope of Criticare's patent
rights existing upon termination.
9. Infringement of Immtech Patent Rights.
(a) Immtech and Criticare agree to promptly notify each other
if they become aware of a probable infringement by a third party of the Immtech
Patent Rights. Immtech and Criticare further agree that, unless one Party
provides the other with written notice of the first Party's desire to not be
actively involved in a particular infringement action, actions against any third
party that may be infringing the Immtech Patent Rights in the Licensed Territory
shall be a joint effort of both Parties, and that both the costs and recovery
resulting from such actions shall be shared equally between the Parties. If
either Party notifies the other of its desire not to be actively involved in a
particular infringement action,
7
<PAGE>
and the other chooses to go forward with such an action, the Party going forward
shall be responsible for all costs relating to such action, and shall be the
sole beneficiary of any recovery resulting from such action; and in such case
the Party desiring not to be actively involved shall render reasonable
cooperation to the Party going forward, including, if necessary, being named as
a party to the action.
(b) In the event that Criticare, and/or Criticare's customers,
successors, and assigns are held liable as an infringer of a patent or trade
secret belonging to a third parry arising from the manufacture, use and sale of
any Product and/or component element thereof licensed under this Agreement,
Immtech agrees to reimburse Criticare, and its customers, successors and assigns
for any financial loss, including attorney fees, sustained thereby.
10. Term and Termination.
(a) The Parties agree that the term of this Agreement, except
for the obligations under Article 6 hereof, may be terminated early (i) by
Criticare at any time by providing Immtech written notice of such termination;
or (ii) by either Party if the other Party breaches or defaults on any material
obligation under this Agreement and fails to cure such breach within sixty days
after receipt of written notice from the terminating Party which sets forth the
basis of such breach and the terminating Party's intent to terminate the
Agreement due to such breach.
(b) Termination of the tern of this Agreement shall terminate
all of the Parties' respective rights and obligations under this Agreement,
except that such termination shall not affect:
(i) The right of Criticare to sell any Product on hand
on the date of such termination, to fill any orders for Product received on or
before the date of such termination, and to complete any Product in the process
of manufacture at the time of such termination and to sell the same;
(ii) The rights and obligations of the Parties under
Articles 4 and 6 of this Agreement; and
(iii) The right of either Party (including all
remedies), and the obligation of the other Party, to every performance accruing
prior to such termination.
11. Funding. Criticare or its assignee agrees that it will utilize
its best efforts to raise not less than $500,000 within 12 months after the date
of this Agreement to fund the development and commercialization of a product
utilizing
8
<PAGE>
mCRP for the treatment of sepsis. In the event that Criticare fails to complete
such financing, Immtech shall have 90 days within which to repurchase the mCRP
Patent Rights, mCRP Technology and any Improvements for their appraisal value.
Appraisal value shall be determined by a certified appraiser agreed upon by
Immtech and Criticare, or, if they cannot agree, an appraiser selected by
Criticare's then audit firm.
12. Maintenance of Immtech Patent Rights.
(a) The cost of filing, prosecuting to issuance and
maintaining the Immtech Patent Rights shall be borne by Immtech.
(b) Before permitting the Immtech Patent Rights to become
abandoned, lapsed or forfeited, Immtech shall give Criticare a reasonable notice
in writing, and Criticare may then at its option and expense, take over the
prosecution or maintenance of the Immtech Patent Rights, in which event Immtech
agrees to cooperate fully with Criticare. All costs, expenses and fees,
including attorney fees, incurred by Criticare in taking over the maintenance of
the Immtech Patent Rights shall be deducted from any royalties due Immtech
under this Agreement. Should any of the Immtech Patent Rights be abandoned,
lapsed, or forfeited due to the failure by Immtech to pay the appropriate
maintenance or other fee, then after the abandonment, Criticare shall be
permitted to sell Products covered by such abandoned patent without payment or
royalty for such sale and the obligations of Criticare under this Agreement with
respect to that abandoned Immtech Patent Right shall cease.
13. Miscellaneous.
(a) This Agreement, or any rights or obligations hereunder,
may not be assigned, in whole or in part, by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. However, nothing herein shall prevent Criticare from assigning its
rights and obligations hereunder to an affiliated corporation or subsidiary
corporation controlled by or under common control with Criticare. In the event
of such assignment, the assignee will automatically become substituted for
Criticare as to all obligations thereafter accruing hereunder and as to all
rights hereunder.
(b) The Parties agree that the sole relationship between
Immtech and Criticare hereunder will be that of licensor and licensee. Nothing
herein shall constitute or be interpreted to make either Party the agent of the
other Party, and neither Party shall in any way be authorized to obligate the
other Party in any transaction with a third party.
9
<PAGE>
(c) All notices and other communications under or with respect
to this Agreement shall be in writing (including by telecopier and other
available communication facilities providing written copy to the recipient
party) and shall be effective when actually delivered to the party to which they
are directed or when deposited in the United States mail, postage prepaid,
addressed to the party to which they are directed at the address provided below
for that parry or at such other address as that party may designate by notice.
The initial addresses are as follows:
If to Criticare:
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, WT 53186
Facsimile: 414-798-829O
Confirming telephone: 414-798-8282
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
Attn: Robert E. Bellin
1000 North Water Street, Suite 2100
P.O. Box 92900
Milwaukee, WI 53202-0900
Facsimile: 414-298-8097
Confirming telephone: 414-298-1000
If to Immtech:
Immtech International Inc.
Attn: Stephen Thompson
1890 Maple Avenue, Suite 110
Evanston, IL 60202
Facsimile: 847-869-0045
Confirming telephone: 847-869-0033
With a copy to:
-------------------------------------
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(d) The Parties acknowledge and agree that this Agreement
constitutes the entire agreement and understanding relating to the subject
matter of this Agreement and supersedes all previous communications, proposals,
representations and agreements, whether oral or written and whether relating to
the subject matter of this Agreement or otherwise.
(e) The Parties acknowledge and agree that this Agreement may
only be modified by the mutual written agreement of the Parties.
(f) (i) For purposes of this Article 13.6, a "Force Majeure
Event" shall be any event or condition that [a] is not known to the Excused
Party (as defined below), as of the date of this Agreement, to exist, [b] is not
reasonably foreseeable as of such date, and [c] is not reasonably within the
control of the Excused Party. Without limiting the foregoing, any of the
following shall constitute a Force Majeure Event if the same meets the
conditions expressed in the enumerated clauses of the preceding sentence:
natural disaster, fire, explosion, epidemic, war, riot, civil disturbance,
strike, lockout, labor slow-down, acts of governmental authority, and shortage
of energy or material.
(ii) Any period of time in which a Party (the Excused
Party") must perform any obligation under this Agreement shall be extended by
the period of time that a Force Majeure Event prevents such performance in whole
or in material part or renders such performance so difficult or costly that such
performance is commercially unreasonable, and the Excused Party shall not be
liable for loss or damage incurred by the other Party by reason of any delay in
such performance during such period of extension. If the Force Majeure Event is
of such a nature that the performance of the obligation will reasonably require
an additional period of time following cessation of the Force Majeure Event,
then the period of time in which the Excused Party must perform the obligation
shall be further extended by such additional period of time, and the Excused
Party shall not be liable for loss or damage incurred by the other Party by
reason of any delay in such performance during such additional period of time.
(iii) If the period of time in which a Party must
perform any material obligation hereunder is extended for a period of more than
six consecutive months pursuant to the preceding provisions of this Article,
either Party may terminate this Agreement, without liability to the other Party
for such termination, by giving notice of termination given to the other Party
prior to the end of the period of extension.
(iv) The foregoing provisions of this Article shall not
excuse any obligation to pay any amount which becomes due under this
11
<PAGE>
Agreement prior to termination of this Agreement, but payment for any
performance the time for which is extended pursuant to such provisions may be
suspended until such performance is rendered.
(g) The Parties agree that this Agreement will be governed and
construed in accordance with the internal laws of the State of Wisconsin.
(h) Each Party agrees that any delay or omission on the part
of the other Party to exercise any right under this Agreement will not
automatically operate as a waiver of such right or any other right, and a waiver
of any right on any one occasion will not be construed as a bar to or a waiver
of exercising the right on any other occasion.
(i) Each Party agrees that, should any provision of this
Agreement be determined by a court of competent jurisdiction to violate or
contravene any applicable law or policy, such provision may be severed and
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.
(j) The title, caption or heading of any provision of this
Agreement is used as a mater of convenience and is not to be used to interpret
or construe the meaning of any provision. The words "herein," "hereof," and
"hereunder," when used in this Agreement, refer to this Agreement in its
entirety. The word "include" and its derivatives mean by way of example and not
by way of exclusion or limitation. Words in the singular include the plural and
words in the plural include the singular, according to the requirements of the
context. Words importing a gender include all genders. Each Party agrees that
this Agreement is the result of extensive negotiations between the Parties and
represents the merged work product of both Parties, and so neither Party shall
be held to be the sole author of this Agreement for the purpose of contact
interpretation.
(k) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to constitute but one and the same instrument.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY BY
------------------------------- -----------------------------------------
Its Its
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12
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ASSIGNMENT OF INTELLECTUAL PROPERTIES
THIS ASSIGNMENT OF INTELLECTUAL PROPERTIES, effective the ___th day
of June, 1998, is between Immtech International, Inc., a Delaware corporation
("Assignor") and Criticare Systems, Inc., a Delaware corporation ("Assignee").
RECITALS
A. Assignor is the owner of all right, title and interest in and to
certain intellectual properties as specified below.
B. The Assignor desires to assign all its right, title and interest
in these properties to the Assignee and the Assignee desires to accept such
assignment.
AGREEMENTS
In consideration of the recitals and mutual agreements which follow
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Assignee and Assignor agree as follows:
1. Assignment of Patents and Inventions. The Assignor assigns,
transfers and contributes to the Assignee all right, title and interest in the
patents and patent applications listed on Schedule A (the "Assigned Patent
Rights"), including any continuations, continuations-in-part, divisionals,
reissues, reexaminations, extensions thereof any U.S. patents or applications
(including divisionals and continuation applications) owned or licensed to or by
Immtech which claim priority to or are otherwise based on the Assigned Patent
Rights or which otherwise establish rights which cover, encompass or are
ancillary to the "Materials," "Progeny," "Immtech Biomaterials," "Immtech
Technology" or "Immtech Improvements" thereto (as such terms are defined in the
Material Transfer and Option Agreement between Sigma Diagnostics, Inc. and
Immtech dated March 23, 1998 (a copy of which is attached hereto as Exhibit A)
(the "Sigma Agreement") and any corresponding or related foreign applications
owned or licensed by Immtech which claim priority to or are otherwise based on
the Assigned Patent Rights or which otherwise establish rights which cover or
encompass or are ancillary to the Materials Progeny, Immtech Biomaterials,
Immtech Technology or Immtech Improvements thereto.
<PAGE>
2. Assignment of Trade Secrets. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
all trade secrets, unified patent or invention disclosures, confidential
information and know-how related to the Assigned Patent Rights.
3. Assignment of Copyrights. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
any copyrightable works, copyright registrations and applications for copyright
registration related to the Assigned Patent Rights, including without limitation
all of the exclusive rights listed in 17 U.S.C. ss. 106 and any copyright
renewal and extension terms available for any such registrations in the United
States and all foreign counties, and in and to any copyright registrations that
may result from such applications.
4. Assignment of Accrued Enforcement Rights. The Assignor assigns
and contributes to the Assignee any causes of action for infringement or
unauthorized use of any of the intellectual properties specified in Paragraphs 1
through 3 above that may have accrued prior to the execution date of this
Agreement.
5. Further Assurances. The Assignor shall provide Assignee, its
successors, assigns or other legal representatives, cooperation and assistance
at Assignee's request and expense (including the execution and delivery of any
and all affidavits, declarations, oaths, exhibits, assignments, powers of
attorney or other documentation as may be reasonably required): (1) in the
preparation and prosecution of any applications for patents or registration of
the intellectual property assigned pursuant to this Assignment; (2) in the
prosecution or defense of any interference, opposition, infringement or other
proceedings that may arise in connection with any of the intellectual property
assigned pursuant to this Assignment; and (3) in the implementation or
perfection of this Assignment.
[Signatures and notarizations on following page.]
2
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seal
For ASSIGNOR, Immtech International, Inc.:
BY
--------------------------------------
Printed Name:
Title:
State of ___________)
: SS
______________County)
On this ______ day of______________, 1998, before me appeared
__________ to me personally known, who, being by me duly sworn, did say that he
is ______ of___________________, and that said instrument was signed on behalf
of said corporation by authority of the Board of Directors.
----------------------------------------
[Seal] Notary Public, State of_________________
My commission __________________________
For ASSIGNEE, Criticare Systems, Inc.:
BY
--------------------------------------
Printed Name:
Title:
State of ___________)
: SS
______________County)
On this ______ day of______________, 1998, before me appeared
_____________________ to me personally known, who, being by me duly sworn, did
say that he is __________________ of______________, and that said instrument was
signed on behalf of said corporation by authority of the Board of Directors.
----------------------------------------
[Seal] Notary Public, State of_________________
My commission __________________________
3
<PAGE>
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
United States Patent No. 5,484,735 Issued 1/16/96
United States Patent No. 5,702,904 Issued 12/30/97
Application Ser. No. 07/397,781-CIP Filed 8/23/89
Application Ser. No. 07/765,169 Filed 9/25/91
Application Ser. No. PCT/US9O/04666 Filed 8/17/90
Application Ser. No. 90913261.5 (EPO) Filed 8/17/90
Application Ser. No. 2-512516 (Japan) Filed 8/17/90
Application Ser. No. PCT/US92/O8136 Filed 9/25/92
Application Ser. No. 08/008,126 Filed 1/22/93
Application Ser. No. 08/068,525-CIP Filed 5/27/93
Application Ser. No. 08/151,073-CIP Filed 11/12/93
Application Ser. No. 27577/92 (Australia) Filed 9/25/92
Application Ser. No. 2119651 (Canada) Filed 9/25/92
Application Ser. No. 92921176.1 (EPO) Filed 9/25/92
Application Ser. No. 5-506376 (Japan) Filed 9/25/92
Application Ser. No. 08/272,852 Filed 7/6/94
<PAGE>
EXHIBIT F
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the ___ day
of _________, 1998, by and between CRITICAIRE SYSTEMS, INC., a Delaware
corporation ("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware
corporation ("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and obligations
of IMMTECH set forth in the Patent License Agreements between IMMTECH and
NORTHWESTERN UNIVERSITY (hereinafter referred to as "NU 9134 Licenses" and the
"NU 8403 License" (together the "LICENSES")), copies of which are attached
hereto as Exhibits A and B.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
LICENSES and be bound by all terms and conditions thereof continuing forward.
CRITICARE shall not be required to pay any past fees or royalties already paid
by or due from IMMTECH.
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the LICENSE and shall supersede all
previous communications, representations or undertakings, either verbal or
written between the parties relating to the subject matter of this ASSIGNMENT
AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY BY
-------------------------------- ----------------------------------------
Its Its
----------------------------- -------------------------------------
NORTHWESTERN UNIVERSITY hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the LICENSES
and acknowledges (i) that Immtech is current with respect to all of its
obligations and is not in default under such LICENSES, and (ii) that with
respect to sublicensee activities, Immtech's sole monetary responsibility under
the NU 9134 License Agreement is 30% of royalties earned, and under the NU 8403
License Agreement is 35% of all royalties earned plus 10% of any sublicense
issue fees or milestones received from sublicensees.
NORTHWESTERN UNIVERSITY
BY
----------------------------- -----------------
Its Date
--------------------------
2
<PAGE>
EXHIBIT G
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the ___ day
of________, 1998, by and between CRITICARE SYSTEMS, INC., a Delaware corporation
("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware corporation
("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and certain
obligations of IMMTECH set forth in a certain Material Transfer and Option
Agreement between IMMTECH and SIGMA DIAGNOSTICS, INC. (hereinafter referred to
as the "Sigma Agreement"), a copy of which is attached hereto as Exhibit A.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
Sigma Agreement and be bound by all terms and conditions thereof continuing
forward; provided, however, that Immtech shall retain and promptly fulfill any
obligations under such agreement to provide cultures, materials or any advice or
consultation related to the materials (as defined therein).
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the Sigma Agreement and shall
supersede all previous communications, representations or undertakings, either
verbal or written between the parties relating to the subject matter of this
ASSIGNMENT AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY BY
------------------------------- -------------------------------------
Its Its
---------------------------- ----------------------------------
SIGMA DIAGNOSTICS, INC. hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the Sigma
Agreement and acknowledges that Immtech is not in default of any of its
obligations thereunder.
SIGMA DIAGNOSTICS, INC.
BY
-------------------------- -----------------
Its Date
-----------------------
2
<PAGE>
<TABLE>
<CAPTION>
CRITICARE SYSTEMS, INC. WAUKESHA, WI 53186 065284
- ------------------------------------------------------------------------------------
OUR REFERENCE YOUR REFERENCE INVOICE INVOICE
NUMBER NUMBER DATE AMOUNT AMOUNT PAID DISCOUNT NET AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
000-1610 7/1/98 $150,000.00 **$150,000.00
PURCHASE OF CERTAIN PRODUCTS RIGHTS
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
[LOGO] CRITICARE SYSTEMS, INC. NORWEST BANK MONTANA, N.A. 93-527/929 065284
20925 CROSSROADS CIRCLE BILIINGS, MONTANA
WAUKESHA, WI 53186
<S> <C> <C> <C> <C>
DATE CONTROL NO. AMOUNT
7/1/98 065284 **$150,000.00
***$150,000 DOLLARS AND 00 CENTS***
PAY IMMTECH INTERNATIONAL, INC.
TO THE 1890 MAPLE AVE [STAMP ILLEGIBLE]
ORDER OF SUITE 110
EVANSTON, IL 60201 /s/ Phyllis Porath
-------------------------------
/s/ [ILLEGIBLE]
-------------------------------
- --------------------------------------------------------------------------------
||065284|| |:092905278|: 4990143393||
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CRITICARE SYSTEMS, INC. WAUKESHA, WI 53186 065284
- ------------------------------------------------------------------------------------
OUR REFERENCE YOUR REFERENCE INVOICE INVOICE
NUMBER NUMBER DATE AMOUNT AMOUNT PAID DISCOUNT NET AMOUNT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
000-1610 7/1/98 $150,000.00 **$150,000.00
PURCHASE OF CERTAIN PRODUCTS RIGHTS
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
[LOGO] CRITICARE SYSTEMS, INC. NORWEST BANK MONTANA, N.A. 93-527/929 065284
20925 CROSSROADS CIRCLE BILLINGS, MONTANA
WAUKESHA, WI 53186
<S> <C> <C> <C> <C>
DATE CONTROL NO. AMOUNT
7/1/98 065284 **$150,000.00
***$150,000 DOLLARS AND 00 CENTS***
PAY IMMTECH INTERNATIONAL, INC.
TO THE 1890 MAPLE AVE [STAMP ILLEGIBLE]
ORDER OF SUITE 110
EVANSTON, IL 60201 /s/ Phyllis Porath
-------------------------------
/s/ [ILLEGIBLE]
-------------------------------
- --------------------------------------------------------------------------------
||065284|| |:092905278|: 4990143393||
</TABLE>
<PAGE>
Pay to the order of
Brinks, Hofer, Gilson & Lione:
Immtech International Inc.
by /s/ Gary C. Parks
CFO
<PAGE>
[LETTERHEAD OF REINHART BOERNER VAN DEUREN NORRIS & RIESELBACH, S.C.]
July 1, 1998
DELIVERED BY COURIER
Michael E. Blount, Esq.
Seyfarth, Shaw, Fairweather & Geraldson
55 E. Monroe Street
Suite 4200
Chicago, IL 60603
Dear Mr. Blount:
I have enclosed with this letter a certified check in the amount of
$150,000, dated July 1, 1998, made payable to Brinks, Hofer, Gilson & Lione,
with regard to the Immtech matter. It is my understanding that in a conversation
with my secretary today, you orally confirmed you will hold these funds in your
possession pending notification by me to release same to Brinks, Hofer.
Yours very truly,
Robert E. Bellin
Enc.
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is between BRINKS, HOFER,
GILSON & LIONE ("Brinks") and IMMTECH INTERNATIONAL, INC. ("Immtech"). The
parties agree as follows:
1. Payment by Immtech. Upon execution of this Agreement, Immtech
shall cause to be deposited with Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. (the "Law Firm") a check dated July 1, 1998, drawn on the
account of Criticare Systems, Inc. and made payable to Immtech in the amount of
$150,000, endorsed by Immtech to the order of Brinks and to be certified on July
1, 1998, the same to be held and released pursuant to the terms of that certain
agreement dated June 29, 1998, between Immtech and Criticare Systems, Inc. and
the Escrow Agreement attached hereto as Exhibit A.
2. Return of Property. Brinks agrees to return all files of Immtech
within 30 days from the date of this Agreement, including a current docket
report as maintained by Brinks with respect to any filing deadlines for
intellectual property matters handled by Brinks for Immtech. Brinks does not
guaranty the accuracy of such report.
3. Release. The parties hereby mutually release each other, their
parent or subsidiaries, predecessors or successors in interest, present, former
or later insurers, assigns, agents, representatives, officers, administrators,
directors, shareholders and employees from any and all claims of whatever nature
either may have against the other which arise out of or are in any manner based
upon legal services provided by Brinks to Immtech prior to the date of this
Agreement.
Date: ___________________________ BRINKS, HOFER, GILSON
& LIONE
BY:
-------------------------------
Its
-------------------------
Date: 6-29-98 IMMTECH INTERNATIONAL, INC.
---------------------------
BY: /s/ [ILLEGIBLE]
-------------------------------
Its President & CEO
-------------------------
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is between BRINKS, HOFER,
GILSON & LIONE ("Brinks") and IMMTECH INTERNATIONAL, INC. ("Immtech"). The
parties agree as follows:
1. Payment by Immtech. Upon execution of this Agreement, Immtech
shall cause to be deposited with Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. (the "Law Firm") a check dated July 1, 1998, drawn on the
account of Criticare Systems, Inc. and made payable to Immtech in the amount of
$150,000, endorsed by Immtech to the order of Brinks and to be certified on July
1, 1998, the same to be held and released pursuant to the terms of that certain
agreement dated June 29, 1998, between Immtech and Criticare Systems, Inc. and
the Escrow Agreement attached hereto as Exhibit A.
2. Return of Property. Brinks agrees to return all files of Immtech
within 30 days from the date of this Agreement, including a current docket
report as maintained by Brinks with respect to any filing deadlines for
intellectual property matters handled by Brinks for Immtech. Brinks does not
guaranty the accuracy of such report.
3. Release. The parties hereby mutually release each other, their
parent or subsidiaries, predecessors or successors in interest, present, former
or later insurers, assigns, agents, representatives, officers, administrators,
directors, shareholders and employees from any and all claims of whatever nature
either may have against the other which arise out of or are in any manner based
upon legal services provided by Brinks to Immtech prior to the date of this
Agreement.
Date: 6-29-98 BRINKS, HOFER, GILSON
-------------------------- & LIONE
BY: /s/ [ILLEGIBLE]
-------------------------------
Its Chief Operating Officer
-------------------------
Date: IMMTECH INTERNATIONAL, INC.
------------------------
BY:
-------------------------------
Its
-------------------------
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
THIS AGREEMENT by and among REINHART, BOERNER, VAN DEUREN, NORRIS &
RIESELBACH, s.c. ("Law Firm"). CRITICARE SYSTEMS, INC. ("Criticare"), IMMTECH
INTERNATIONAL, INC. ("Immtech") and BRINKS, HOFER, GILSON & LIONE ("Brinks").
RECITAL
Immtech, Criticare and Brinks have deposited with Law Firm certain
documents to be released at the Closing of a certain transaction on July 2,
1998.
AGREEMENTS
The parties hereby agree as follows:
1. Law Firm shall hold such documents in escrow until July 2, 1998.
Law Firm's sole responsibility shall be to determine that all documents have
been executed and provided to it prior to the close of business on June 30,
1998, and to release to Immtech and Criticare respective copies of the documents
on July 2, 1998 (including, in the case of Brinks, the certified check in the
amount of $150,000) unless enjoined by legal process.
2. The parties herein acknowledge that Law Firm regularly acts as
Criticare's legal counsel and has represented Criticare in connection with the
refinancing and sale of certain assets by Immtech to Criticare, and all parties
waive any conflict of interest.
3. The parties hereby agree to indemnify and hold harmless Law Firm
with respect to its acting as escrow agent save only damages arising out of its
intentional misconduct, including any legal fees which it may incur with respect
to the resolution of any controversy regarding this escrow.
4. This Agreement shall be governed by, construed and enforced under
Wisconsin law.
Dated: CRITICARE SYSTEMS, INC.
--------------------------
By:
------------------------------
Its
------------------------
Dated: IMMTECH INTERNATIONAL, INC.
--------------------------
By:
------------------------------
Its
------------------------
<PAGE>
Dated: 6-29-98 BRINKS, HOFER, GILSON & LIONE
--------------------------
BY: [ILLEGIBLE]
------------------------------
Accepted ___ June, 1998:
REINHART, HOFER, VAN
DEUREN, NORRIS & RIESELBACH, s.c.
BY:
------------------------------
2
<PAGE>
ASSIGNMENT OF INTELLECTUAL PROPERTIES
THIS ASSIGNMENT OF INTELLECTUAL PROPERTIES, effective the 29th day
of June, 1998, is between Immtech International, Inc., a Delaware corporation
("Assignor") and Criticare Systems, Inc., a Delaware corporation ("Assignee").
RECITALS
A. Assignor is the owner of all right, title and interest in and to
certain intellectual properties as specified below.
B. The Assignor desires to assign all its right, title and interest
in these properties to the Assignee and the Assignee desires to accept such
assignment.
AGREEMENTS
In consideration of the recitals and mutual agreements which follow
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Assignee and Assignor agree as follows:
1. Assignment of Patents and Inventions. The Assignor assigns,
transfers and contributes to the Assignee all right, title and interest in the
patents and patent applications listed on Schedule A (the "Assigned Patent
Rights"), including any continuations, continuations-in-part, divisionals,
reissues, reexaminations, extensions thereof, any U.S. patents or applications
(including divisionals and continuation applications) owned or licensed to or by
Immtech which claim priority to or are otherwise based on the Assigned Patent
Rights or which otherwise establish rights which cover, encompass or are
ancillary to the "Materials," "Progeny," "Immtech Biomaterials," "Immtech
Technology" or "Immtech Improvements" thereto (as such terms are defined in the
Material Transfer and Option Agreement between Sigma Diagnostics, Inc. and
Immtech dated March 23, 1998 (a copy of which is attached hereto as Exhibit A)
(the "Sigma Agreement") and any corresponding or related foreign applications
owned or licensed by Immtech which claim priority to or are otherwise based on
the Assigned Patent Rights or which otherwise establish rights which cover or
encompass or are ancillary to the Materials Progeny, Immtech Biomaterials,
Immtech Technology or Immtech Improvements thereto.
2. Assignment of Trade Secrets. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
all
<PAGE>
trade secrets, unfiled patent or invention disclosures, confidential information
and know-how related to the Assigned Patent Rights.
3. Assignment of Copyrights. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
any copyrightable works, copyright registrations and applications for copyright
registration related to the Assigned Patent Rights, including without limitation
all of the exclusive rights listed in 17 U.S.C. ss. 106 and any copyright
renewal and extension terms available for any such registrations in the United
States and all foreign countries, and in and to any copyright registrations that
may result from such applications.
4. Assignment of Accrued Enforcement Rights. The Assignor assigns
and contributes to the Assignee any causes of action for infringement or
unauthorized use of any of the intellectual properties specified in Paragraphs 1
through 3 above that may have accrued prior to the execution date of this
Agreement.
5. Further Assurances. The Assignor shall provide Assignee, its
successors, assigns or other legal representatives, cooperation and assistance
at Assignee's request and expense (including the execution and delivery of any
and all affidavits, declarations, oaths, exhibits, assignments, powers of
attorney or other documentation as may be reasonably required): (1) in the
preparation and prosecution of any applications for patents or registration of
the intellectual property assigned pursuant to this Assignment; (2) in the
prosecution or defense of any interference, opposition, infringement or other
proceedings that may arise in connection with any of the intellectual property
assigned pursuant to this Assignment; and (3) in the implementation or
perfection of this Assignment.
[Signatures and notarizations on following page.]
2
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seal.
For ASSIGNOR, Immtech International, Inc.:
BY: /s/ T. Stephen Thompson
----------------------------------
Printed name: T. Stephen Thompson
Title: President & CEO
State of Wisconsin )
: SS
Milwaukee County )
On this 26th day of June, 1998, before me appeared T. Stephen
Thompson to me personally known, who, being by me duly sworn, did say that he is
Pres/CEO of Immtech International, Inc., and that said instrument was signed on
behalf of said corporation by authority of the Board of Directors.
/s/ Kathleen D. Mintner
--------------------------------------
[Seal] Notary Public, State of Wisconsin
--------------
My commission 9/30/2001
------------------------
For ASSIGNEE, Criticare Systems, Inc.:
BY: /s/ Gerhard vonder Ruhr
----------------------------------
Printed Name: Gerhard vonder Ruhr
Title: President
State of Wisconsin )
: SS
Milwaukee County )
On this 29th day of June, 1998, before me appeared Gerhard vonder
Ruhr to me personally known, who, being by me duly sworn, did say that he is
President of Criticare Systems, Inc., and that said instrument was signed on
behalf of said corporation by authority of the Board of Directors.
/s/ [ILLEGIBLE]
--------------------------------------
[Seal] Notary Public, State of Wisconsin
--------------
My commission is permanent
------------------------
3
<PAGE>
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
United States Patent No. 5,484,735 Issued 1/16/96
United States Patent No. 5,702,904 Issued 12/30/97
United States Application Ser. No. 07/397,781-CIP Filed 8/23/89
United States Application Ser. No. 07/765,169 Filed 9/25/91
Application Ser. No. PCT/US90/04666 Filed 8/17/90
Application Ser. No. 90913261.5 (EPO) Filed 8/17/90
Application Ser. No. 2-512516 (Japan) Filed 8/17/90
Application Ser. No. PCT/US92/08136 Filed 9/25/92
United States Application Ser. No. 08/008,126 Filed 1/22/93
United States Application Ser. No. 08/068,525-CIP Filed 5/27/93
United States Application Ser. No. 08/151,073-CIP Filed 11/12/93
Application Ser. No. 27577/92 (Australia) Filed 9/25/92
Application Ser. No. 2119651 (Canada) Filed 9/25/92
Application Ser. No. 92921176.1 (EPO) Filed 9/25/92
Application Ser. No. 5-506376 (Japan) Filed 9/25/92
United States Application Ser. No. 08/272,852 Filed 7/6/94
<PAGE>
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the 26th
day of June, 1998, by and between CRITICARE SYSTEMS, INC., a Delaware
corporation ("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware
corporation ("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and obligations
of IMMTECH set forth in the Patent License Agreements between IMMTECH and
NORTHWESTERN UNIVERSITY (hereinafter referred to as "NU 9134 Licenses" and the
"NU 8403 License" (together the "LICENSES")), copies of which are attached
hereto as Exhibits A and B.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
LICENSES and be bound by all terms and conditions thereof continuing forward.
CRITICARE shall not be required to pay any past fees or royalties already paid
by or due from IMMTECH.
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the LICENSE and shall supersede all
previous communications, representations or undertakings, either verbal or
written between the parties relating to the subject matter of this ASSIGNMENT
AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY /s/ Gerhard vonder Ruhr BY /s/ T. Stephen Thompson
------------------------------ --------------------------------
Its PRES. Its President & CEO
-------------------------- ----------------------------
NORTHWESTERN UNIVERSITY hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the LICENSES
and acknowledges (i) that Immtech is current with respect to all of its
obligations and is not in default under such LICENSES, and (ii) that with
respect to sublicensee activities, Immtech's sole monetary responsibility under
the NU 9134 License Agreement is 30% of royalties earned, and under the NU 8403
License Agreement is 35% of all royalties earned plus 10% of any sublicense
issue fees or milestones received from sublicensees.
NORTHWESTERN UNIVERSITY
BY
------------------------------ --------------------
Its Date
--------------------------
2
<PAGE>
LICENSE AGREEMENT
This AGREEMENT made this 27th day of October, 1994 by and between
NORTHWESTERN UNIVERSITY ("NORTHWESTERN"), an Illinois corporation having a
principal office at 633 Clark Street, Evanston, Illinois 60208, and IMMTECH
INTERNATIONAL INC. ("COMPANY"), a Delaware corporation having a principal office
at 1890 Maple Avenue, Suite 110, Evanston, Illinois 60201 (hereinafter
"IMMTECH").
WITNESSETH THAT:
WHEREAS, NORTHWESTERN represents that Samar Makhlouf, Mark Pankow,
and Byron Anderson (the Inventors) all being employees of NORTHWESTERN at the
time of the invention, have made certain inventions in the field of "Immunoassay
for Identifying Alcoholics and Monitoring Alcohol Consumption" (NU 9134), and
that a patent has been applied for thereon, having United States Serial Number
07/765,169 in September 1991.
WHEREAS, NORTHWESTERN, subject to U.S. government obligations has
the right to make, use, sell, and grant licenses under the INVENTION and PATENT
RIGHTS as defined herein; and NORTHWESTERN wishes to have the INVENTION, as
defined by the PATENT RIGHTS, utilized for the public interest; and
WHEREAS IMMTECH desires to obtain a license to manufacture, sell,
and use the INVENTION and PATENT RIGHTS defined herein and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the faithful
performance of the covenants contained herein, IT IS AGREED:
1.0 DEFINITIONS
For the purposes of this Agreement, and solely for that purpose, the
terms hereinafter set forth shall be defined as follows:
1.1 "INVENTION" shall mean the invention as described in EXHIBIT A,
and/or as covered in the PATENT RIGHTS and/or TECHNICAL INFORMATION
1
<PAGE>
1.2 "PATENT RIGHTS" shall mean any United States patent for the
INVENTION together with any divisional, continuation, or other
continuation-in-part applications based thereon, and any patents resulting from
any of said applications, and any reissues or extensions based on any such
patents, and any foreign counterparts pending or issued thereof.
1.3 "LICENSED PRODUCT" shall mean any products or processes
employing any INVENTION as described in EXHIBIT A, or as described by any valid
claim in an unexpired patent, which patent application or patent is included in
the PATENT RIGHTS.
1.4 "FIELD OF USE" shall mean the exclusive use of the INVENTION and
PATENT RIGHTS for QUANTITATIVE diagnostics.
1.5 "NET SALES PRICE" shall mean the gross sales price of any
LICENSED PRODUCT made and sold pursuant to this Agreement, less allowances to
customers for damaged or returned products and the amounts of discounts,
transportation charges, and all sales and excise taxes and duties paid,
absorbed, or allowed.
1.6 "AFFILIATE" shall mean any corporation or other legal entity (a)
owning or controlling, directly or indirectly, more than fifty percent of the
voting capital shares of IMMTECH, (b) more than fifty percent of the voting
capital shares of which are owned or controlled, directly or indirectly, by
IMMTECH; or (c) more than fifty percent of the voting capital shares of which
are owned or controlled, directly or indirectly, by a legal entity which owns or
controls, directly or indirectly more than fifty percent of the voting capital
shares of IMMTECH.
1.7 "QUANTITATIVE DIAGNOSTICS" shall mean the use of immunoassays
that yield a quantitative answer and are generally performed via enzyme-linked
antibody methodology.
1.8 "TECHNICAL INFORMATION" shall mean NORTHWESTERN's technical
information and know-how relating to the INVENTION, including technical data,
plans, specifications, and drawings.
2.0 LICENSE
2.1 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the terms and
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conditions herein specified, a worldwide, exclusive, and non-assignable (except
as herein specified) License to use the INVENTION and PATENT RIGHTS to test,
evaluate, and develop the INVENTION and LICENSED PRODUCT covered hereby and to
make, have made, use and sell the products in the FIELD OF USE thereof during
the term of this Agreement, and during the term of any extension thereof, unless
sooner terminated as hereinafter provided.
2.2 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the terms and conditions herein specified, the right to
extend the License granted hereunder to its sublicensee(s). IMMTECH shall
promptly notify NORTHWESTERN in writing that a sublicense has been granted no
later than thirty (30) days after the effective date of the sublicense. IMMTECH
may negotiate such terms as it chooses for each sublicense, provided that
NORTHWESTERN shall receive a royalty for all sales made by sublicensee(s) at the
rate provided for in this Agreement.
2.3 If IMMTECH shall so notify NORTHWESTERN in writing as provided
in Section 2.2 of this Agreement, any sublicensee(s) to whom the License shall
have been extended pursuant to Section 2.2. hereof may make the reports and
royalty payments specified in Paragraph 3.0. hereof directly to Northwestern on
behalf of IMMTECH. For all other sublicensees, IMMTECH shall make said royalty
payments to Northwestern. For all sublicensees, Northwestern shall notify
IMMTECH and/or the sublicensee of the address to which payment should be sent.
2.4 NORTHWESTERN retains a non-exclusive, royalty-free, irrevocable
License to make, have made and use the INVENTION, PATENT RIGHTS and LICENSED
PRODUCT for its own non-commercial uses.
2.5 Outside the scope of the License between NORTHWESTERN and
IMMTECH no other, further, or different license or right, and no further power
to sublicense is hereby granted or implied.
3.0 ROYALTIES, RECORDS AND REPORTS
3.1 During the term of this Agreement, unless sooner terminated,
IMMTECH shall pay to NORTHWESTERN, in the manner hereinafter provided, earned
royalties at the rate of six percent (6%) of the NET SALES PRICE of all LICENSED
PRODUCT sold by IMMTECH, for the first Ten Million Dollars ($10,000,000) sales,
and at the rate of four percent (4%) for
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sales exceeding Ten Million Dollars, anywhere in the world.
3.2 IMMTECH shall pay to NORTHWESTERN with respect to all
sub-licenses granted by IMMTECH hereunder, a royalty at the rate of thirty
percent (30%) of all royalties earned by IMMTECH under such sub-licenses.
3.3 LICENSED PRODUCT shall be considered sold when sold or invoiced,
and if not sold or invoiced, when delivered to a third party.
3.4 IMMTECH shall be responsible for the performance hereunder of
all obligations including payment of royalties, keeping of records, and
reporting by IMMTECH and any sublicensee(s) to whom the License shall have been
extended pursuant to this Agreement.
3.5 So long as this Agreement remains in force, IMMTECH shall
deliver to NORTHWESTERN, within sixty (60) days after the first day of January,
April, July and October of each year, a true and accurate report, giving such
particulars of the business conducted by IMMTECH and its sublicensee(s) during
the preceding three (3) months under this Agreement as are necessary to
accurately account for sales subject to royalties under this Agreement.
3.6 Simultaneously with the delivery of each report required by the
preceding paragraph 3.4, IMMTECH shall pay to NORTHWESTERN the net royalties and
any other such payment due under this Agreement for the period covered by such
report. If no royalties are due, it shall be so reported.
3.7 All payments from IMMTECH to NORTHWESTERN shall be in U.S.
dollars. Royalties for sales made by IMMTECH in foreign currencies shall be paid
to Northwestern in U.S. Dollars at a conversion rate equal to the quarter
average of daily composite closing exchange rates for the quarter in which sales
were made as published by the Wall Street Journal.
3.8 In case of any delay in payment by IMMTECH to NORTHWESTERN not
occasioned by force majeure, interest at the rate of one percent (1%) per month,
assessed from the thirty-first day after the due date of said payment, shall be
due by IMMTECH without any special notice.
3.9 Royalties shall accrue in accordance with this Agreement, upon
the first sale of LICENSED PRODUCT.
3.10 IMMTECH shall keep full, true, and accurate
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books of account containing all particulars which may be necessary for the
purpose of showing the amount payable to NORTHWESTERN by way of royalty as
aforesaid or by way of any other provision hereunder. Said books of account
shall be kept at IMMTECH'S principal place of business. Said books and the
supporting data shall be available for inspection by Northwestern at reasonable
times upon reasonable notice to IMMTECH for three (3) years following the end of
the calendar year to which they pertain, to inspection by NORTHWESTERN for the
purpose of verifying IMMTECH'S royalty statements, or IMMTECH'S compliance in
other respects with this Agreement.
3.11 IMMTECH shall reimburse NORTHWESTERN for all out-of-pocket
costs of filing, prosecution and maintenance for all patent applications and all
patents issuing thereon filed and made at the request of IMMTECH. All such
patents and patent applications shall become part of the PATENT RIGHTS licensed
to IMMTECH hereunder. Such reimbursements shall be made to NORTHWESTERN within
sixty (60) days of receipt of invoice by IMMTECH. Any reimbursements made by
IMMTECH hereunder shall be creditable by IMMTECH in full against royalty payable
by it pursuant to Article 3.1 above.
4.0 AUDITING
4.1 NORTHWESTERN and its representatives will be entitled, upon the
provision of reasonable notice to IMMTECH, to cause a certified public
accountant ("CPA") reasonably acceptable to IMMTECH, to audit such records of
IMMTECH. Such audits shall occur during regular business hours, at the audited
party's place of business, and not more frequently than twice per year, nor more
than twice with respect to any fiscal year. Each such audit shall be designed
solely to determine correct amounts payable by one party to the other pursuant
to the terms of this Agreement, and to answer specific additional questions to
be mutually agreed upon by both parties. While such audit may disclose
information relating to the nature of goods sold and the sales price of said
goods, under no circumstances shall IMMTECH be required to disclose any
confidential information not directly relevant to the calculation of royalties.
The CPA will be under confidentiality obligations to the audited party to
disclose to the auditing party only the correct amounts payable or receivable by
the auditing party, and the answers to such specific agreed upon questions. In
the event that an audit reveals any underpayment or undercredit or royalties
and/or milestone payments by IMMTECH subject to the provisions herein, IMMTECH
will promptly pay or credit to NORTHWESTERN, as the case may be, the full
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amount of that underpayment or undercredit, together with interest thereon at a
rate of one percent (1%) per month, assessed from the thirty-first day after
said payment was due. In the event that the audit reveals an underpayment or
undercredit of in excess of five percent (5%), IMMTECH or sublicensee, as the
case may be, will promptly pay the entire cost of that audit.
5.0 PERFORMANCE
5.1 IMMTECH shall use its commercially reasonable efforts to
commence and maintain regular commercial production and sale of LICENSED
PRODUCT.
5.2 IMMTECH shall employ its commercially reasonable efforts to
develop Licensed Products, and, consistent with prudent and reasonable business
practices, to apply for and obtain approval from the FDA for the use and sale of
Licensed Products and to market Licensed Products after such approval is
obtained.
5.3 IMMTECH shall use commercially reasonable efforts consistent
with prudent business practice to pursue any necessary studies and to seek
approvals in countries other than the United States of America to market
Licensed Products.
5.4 IMMTECH shall use commercially reasonable efforts, and shall
cause its Affiliates to use their respective commercially reasonable efforts, to
market Licensed Products after appropriate regulatory approval is obtained.
5.5 NORTHWESTERN, at its discretion, and with the consent of
IMMTECH, may utilize IMMTECH'S patent expertise by requesting advice and
assistance from IMMTECH on the preparation, filing, prosecution and maintenance
of any patent application or patent related directly to the LICENSED PRODUCT.
IMMTECH agrees to provide such patent assistance and advice to NORTHWESTERN.
IMMTECH does not warrant the results of any legal and/or patent advice offered
to NORTHWESTERN pursuant to this Agreement. All final decisions regarding the
course of preparation, filing, prosecution and maintenance shall rest with
NORTHWESTERN in its sole discretion.
6.0 TERM AND EXTENSION
6.1 This License shall continue until the expiration of the last to
expire of any patents under PATENT RIGHTS, or
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for ten (10) years after date of execution of this Agreement in the event no
patent issues.
7.0 TERMINATION
7.1 If IMMTECH shall become bankrupt or insolvent and/or if the
business of IMMTECH shall be placed in the hands of a Receiver, Assignee, or
Trustee, whether by the voluntary act of IMMTECH or otherwise, this License will
be deemed to have automatically terminated as of a date seven (7) days prior to
that event, provided, however, that such termination shall not terminate any
obligations which may have accrued prior thereto.
7.2 Notwithstanding the provisions of Article 5.1., upon any breach
or default under this Agreement by IMMTECH, NORTHWESTERN may terminate this
License by sixty (60) days written notice by registered mail to IMMTECH. Said
notice shall become effective at the end of said period, unless during said
period IMMTECH shall cure such breach or default and notify NORTHWESTERN
thereof.
7.3 IMMTECH may terminate this License at any time upon ninety (90)
days written notice by registered mail to NORTHWESTERN.
7.4 Upon termination of this License for any reason, all rights
granted hereunder shall revert to NORTHWESTERN for the sole benefit of
NORTHWESTERN.
7.5 IMMTECH's termination of this License shall not operate to
terminate any sublicenses made by IMMTECH hereunder. The rights of any and all
said sublicensee(s) shall be preserved on the condition that said sublicensee(s)
agrees to and performs all terms and conditions of IMMTECH pursuant to this
Agreement.
7.6 IMMTECH's responsibilities and obligations to report to
NORTHWESTERN and pay royalties to NORTHWESTERN as to any LICENSED PRODUCTS
produced or sold by IMMTECH or its sublicensees under this Agreement prior to
termination or expiration hereof shall survive such termination or expiration.
7.7 In the event that this Agreement is terminated by either party,
IMMTECH agrees to provide NORTHWESTERN with names and addresses of sublicensees
and copies of all Sublicense Agreements between IMMTECH and sublicensees.
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8.0 ASSIGNMENT
8.1 This Agreement may be assigned by NORTHWESTERN. This Agreement
may be assigned by IMMTECH to the successor of its entire business, or to an
entity acquiring significant ownership interest in IMMTECH, or to any partly or
wholly-owned subsidiary, but shall not be otherwise assignable by IMMTECH
without the prior written consent of NORTHWESTERN which consent shall not be
unreasonably withheld.
9.0 INFRINGEMENT
9.1 NORTHWESTERN agrees to protect its patents within the PATENT
RIGHTS from infringement and prosecute infringers when in its reasonable
judgement such action may be proper and justified. IMMTECH shall have the right
to sue infringers in its own name if NORTHWESTERN elects not to do so within one
hundred twenty (120) days following NORTHWESTERN's receipt of knowledge of such
infringement.
9.2 In the event either party hereto shall initiate or carry on
legal proceedings to enforce the PATENT RIGHTS against an alleged infringer, the
other party hereto shall fully cooperate with the party initiating or carrying
on such proceedings.
9.3 In the event NORTHWESTERN shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, it shall
have sole control of such suit and shall retain any recovery awarded as a result
of such suit.
9.4 In the event IMMTECH shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, NORTHWESTERN
shall have the option to join in such proceedings and shall be entitled to be
represented by counsel of its own choosing. From any recovery awarded as a
result of any suit or legal proceedings, IMMTECH (i) may deduct the full amount
of its expenses of prosecuting the same (including attorney's fees and court
costs); (ii) shall pay to NORTHWESTERN, to the extent possible after full
payment of (i) above, the full amount of NORTHWESTERN'S costs of participating
in the same; (iii) shall pay to NORTHWESTERN, after full payment of (i) and (ii)
above, the applicable percentage determined under section 3.1 hereof, of any
remainder; and (iv) may retain the balance. IMMTECH shall not discontinue or
settle any such suit or legal proceedings brought by it without obtaining prior
concurrence of NORTHWESTERN, and giving NORTHWESTERN a timely opportunity to
continue such proceedings
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in its own name, under its sole control, at its sole expense, and at its sole
recovery.
10.0 SEVERABILITY
10.1 Should any part or provision of its Agreement be unenforceable
or otherwise in conflict with or in violation of the law of any jurisdiction,
the remainder of this Agreement shall remain binding upon the parties.
11.0 INDEMNITY AND NEGATION OF WARRANTIES
11.1 IMMTECH agrees to indemnify, hold harmless and defend
NORTHWESTERN, its officers, employees, and agents against any and all claims,
suits, losses, damages, costs, fees, and expenses resulting from or arising out
of the production or use of the LICENSED PRODUCTS by IMMTECH, its sublicensees,
and others purchasing, using and/or receiving the LICENSED PRODUCTS.
11.2 IMMTECH shall maintain, prior to sale of any LICENSED PRODUCTS,
appropriate insurance, in good standing, at least in the amount of five million
dollars ($5,000,000) the amount subject to change from time to time as
designated by NORTHWESTERN in writing, naming NORTHWESTERN as additional
insured. IMMTECH shall deliver to NORTHWESTERN, a certificate of such insurance
providing for not less than thirty (30) days notice to NORTHWESTERN of
cancellation or material change in the terms of such insurance.
11.3 Nothing in this Agreement shall be construed as:
11.31 a warranty or representation by NORTHWESTERN as to the
validity or scope of any Patent Rights; or
11.32 a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of patents
of third parties; or;
11.33 an obligation by NORTHWESTERN to bring or prosecute
actions or suits against third parties for infringement.
11.4 NORTHWESTERN makes no representation other than
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those specified in this Agreement. NORTHWESTERN MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF LICENSED
PRODUCT.
12.0 GENERAL
12.1 IMMTECH shall not use the name of any Inventor listed in PATENT
RIGHTS, of any institution with any Inventor has been or is connected, nor of
NORTHWESTERN, nor any adaptation of any of them, in any advertising, promotional
or sales literature, without prior written consent obtained from NORTHWESTERN in
each case. Similarly, NORTHWESTERN shall not use the name of IMMTECH or any
officer, employee or agent of IMMTECH, nor any adaptation of same, in any
advertising or promotional literature without prior consent obtained from
IMMTECH in each case.
12.2 Any notice required or permitted to be given by this Agreement
shall be given postpaid first class certified mail; unless otherwise stated:
TO LICENSEE: IMMTECH INTERNATIONAL INC.
1890 Maple Avenue
Evanston, Illinois 60201
Attn: Mr. T. Stephen Thompson
TO LICENSOR: NORTHWESTERN UNIVERSITY
Technology Transfer Program
1801 Maple Avenue
Evanston, Illinois 60208-1111
Attn: Administrator
Such addresses may be altered by written notice. If no time limit is specified
for a notice required or permitted to be given under this Agreement, the time
limit therefor shall be twenty (20) full business days, not including the day of
mailing.
12.3 This Agreement and its effect is subject to and shall be
construed and enforced in accordance with the internal laws of the State of
Illinois, United States of America.
12.4 The parties to this Agreement recognize and agree that each is
operating as an independent contractor and not as an agent of the other.
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12.5 The captions herein are for convenience only and shall not be
deemed to limit or otherwise affect the construction thereof.
12.6 Any waiver by either party of the breach of any term or
condition of this agreement will not be considered as a waiver of any subsequent
breach of the same or any other term or condition hereof.
13.0 ENTIRE AGREEMENT
13.1 This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter of this Agreement,
and merges all prior discussions between them. Neither of the parties shall be
bound by any conditions, definitions, warranties, or representations with
respect to the subject matter of this Agreement unless as duly set forth on or
subsequent to the date hereof in writing signed by a proper and duly authorized
representative of the party to be bound thereby.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and duly executed this Agreement as of the day and the year first above written.
NORTHWESTERN UNIVERSITY
ATTEST: /s/ [ILLEGIBLE] By: /s/ CW Kern
-------------------------- ----------------------------
C. William Kern, Ph.D.
Vice President for
Research
Date: November 8, 1994 Date: November 8, 1994
---------------------------- --------------------------
IMMTECH INTERNATIONAL INC.
ATTEST: /s/ Mary Jane Ryan By: T. Stephen Thompson
-------------------------- ----------------------------
Date: November 17, 1994 Date: November 17, 1994
---------------------------- --------------------------
--------------------------------
OFFICIAL SEAL
MARY JANE RYAN
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 6-28-98
--------------------------------
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LICENSE AGREEMENT
This Agreement made this tenth (10th) day of March, 1998, (the
"Effective Date"), by and between Northwestern University, an Illinois
corporation having a principal office at 633 Clark Street, Evanston, Illinois
60208 (hereinafter referred to as "Northwestern") and Immtech International
Inc., a Delaware corporation having a principal office at 1890 Maple Avenue,
Suite 110, Evanston, IL. 60201 (hereinafter referred to as "Licensee") (each a
"Party" and collectively the "Parties").
WITNESSETH
WHEREAS, Northwestern is the owner of certain patent rights and
know-how relating to Immunoassay Constructs to Quantitate
Glucosylated-Hemoglobin and other Glucosylated Serum Proteins (NU 8403) and has
the right to grant licenses hereunder, subject only to a royalty-free,
nonexclusive license heretofore granted to the United States Government;
WHEREAS, Northwestern desires to have the patent rights and know-how
developed and commercialized to benefit the public and is willing to grant a
license hereunder;
WHEREAS, Licensee has represented to Northwestern that Licensee will
commit itself to a thorough, vigorous and diligent program to develop and
subsequently manufacture, market and sell products utilizing the patent rights
and know-how;
WHEREAS, Licensee desires to obtain a license under the patent
rights and know-how upon the terms and conditions hereafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Affiliate" shall mean any corporation, firm, partnership or other
entity which controls, is controlled by or is under common control with a Party.
For the purposes of this definition, "control" shall mean any right or
collection of rights that together allow direction on any vote with respect to
any action by an entity or the direction of management and operations of that
entity. Such right or collection of rights includes without limitation (a) the
authority to act as sole member or shareholder or partner with a majority
interest in an entity; (b) a majority interest in an entity; and (c) the
authority to appoint, elect, or approve at least a majority of the governing
board of that entity.
1.2 "Field" shall mean the use of immunoassays for diagnostic purposes to
quatitate hemoglobin type A1c..
1.3 "Know-How" shall mean any and all technical information existing as of
the Effective Date or generated during the term of this Agreement which is owned
or controlled by Northwestern and directly relates to Licensed Products and
shall include, without limitation, all biological, chemical, pharmaceutical,
pharmacological, toxological, clinical, assay control and manufacturing data and
any other information relating to the Licensed Products and useful for the
development, Regulatory Approval, commercialization or safety and effectiveness
of the Licensed Products.
1.4 "Licensed Products" shall mean diagnostic assays for determining
hemoglobin type A1c.
1.5 "Net Sales" shall mean the gross amount invoiced by Licensee, its
Affiliates or its sublicensees, to third parties for the sale of Licensed
Products, less amounts actually invoiced or allowed with respect to trade
credits, discounts, rebates and allowances actually granted on account of price
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adjustments, rebate programs, billing errors or the rejection or return of
goods, sales taxes, tariffs, and custom duties. If a Licensed Product is sold as
part of a combination, Net Sales for the purposes of determining royalties on
the Licensed Product(s) in the combination shall be calculated by multiplying
Net Sales by the fraction A/A+B, where A is the invoice price of the Licensed
Product(s) sold separately and B is the invoice price of the other active
ingredients in the combination.
1.6 "Patent Rights" shall mean the patents and patent applications listed
on Exhibit A attached hereto and incorporated herein by reference, and any
patents which issue from the patent applications listed on Exhibit A attached
hereto and incorporated herein by reference, and all substitutions, additions,
extensions, reissues, renewals, divisions, continuations and
continuations-in-part thereof and any foreign counterparts thereto.
1.7 "Regulatory Approval" shall mean the approval of either the Food Drug
Administration of the United States or a foreign counterpart thereto required to
commence commercial sale of a Licensed Product in such country in the Territory.
1.8 "Territory" shall mean the entire world.
ARTICLE II - GRANT
2.1 Northwestern hereby grants to Licensee and its Affiliates an exclusive
license under Patent Rights and Know-How to make, have made, use, import, offer
for sale and sell Licensed Products in the Territory in the Field.
2.2 The grant under Paragraph 2.1 shall be subject to the obligations of
Northwestern and of Licensee to the United States Government under any and all
applicable laws, regulations, and executive orders including those set forth in
35 U.S.C. ss.200, et seq.
2.3 Northwestern retains the right to utilize Patent Rights and Know-How
for noncommercial research purposes.
2.4 Northwestern hereby grants to Licensee the right to grant sublicenses
consistent with this Agreement provided that Licensee shall be responsible for
the performance of its sublicensees, including the payment of royalties.
ARTICLE III - CONFIDENTIAL INFORMATION
3.1 Northwestern and Licensee each agree that all information contained in
documents marked "Confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this Agreement, and
not disclosed by the recipient (except as required by law or court agency or
administrative order), its agents or employees to any third party without the
prior written consent of an authorized officer of the disclosing Party, unless
such information (a) was in the public domain at the time of disclosure, (b)
later became part of the public domain through no act or omission of the
recipient, its employees, agents, successors or assigns, (c) was lawfully
disclosed to the recipient by a third party having the right to disclose it, (d)
was already known by the recipient at the time of disclosure, (e) was
independently developed, (f) is required by law or court or administrative
agency order, or (g) is required to be submitted to a government agency to
obtain and maintain the approvals and clearances of Licensed Products.
Disclosure may also be made to Affiliates, distributors, customers, and agents,
to nonclinical and clinical investigators, and to consultants, where necessary
or desirable with appropriate safeguards to protect the confidential underlying
disclosure. Northwestern and Licensee also agree that confidential information
may be orally disclosed by one Party to the other Party. Such information shall
be confirmed in writing and designated "Confidential" within thirty (30) days of
disclosure for the provisions of this Article III to apply.
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3.2 Each Party's obligation of confidence hereunder shall be fulfilled by
using at least the same degree of care with the other Party's confidential
information as it uses to protect its own confidential information. This
obligation shall exist while this Agreement is in force and for a period of two
(2) years thereafter except in the event of termination by Northwestern for
breach on the part of Licensee, in which event Licensee's obligation to maintain
the information confidential will exist for a period of ten (10) years after the
termination for breach.
3.3 This Agreement may be distributed solely (a) to those employees,
agents and independent contractors of Northwestern and Licensee who have a need
to know its contents, (b) to those persons whose knowledge of its contents will
facilitate performance of the obligations of the parties under this Agreement,
(c) to those persons, if any, whose knowledge of its contents is essential in
order to permit Licensee or Northwestern to maintain or secure the benefits
under policies of insurance, or (d) as may be required by law or regulation or
by court or administrative agency order.
ARTICLE IV - DUE DILIGENCE
4.1 Licensee shall, upon execution of this Agreement, submit to
Northwestern a preliminary development and business plan that sets forth an
outline of Licensee's intended efforts to develop and commercialize Licensed
Products. Such plan shall include a summary of personnel, expenditures and
estimated timing for the development of Licensed Products and estimates of the
market potential for Licensed Products.
4.2 Licensee agrees to devote that level of resources to the
commercialization of a Licensed Product as other companies in the industry
customarily devote to products of similar commercial potential.
ARTICLE V - PAYMENT
In consideration of the license granted by Northwestern to Licensee under
this Agreement, Licensee shall pay to Northwestern the following:
5.1 A non-creditable, non-refundable license issue fee of Twenty Thousand
Dollars ($20,000), of which the first ten thousand dollars ($10,000) shall be
paid within thirty (30) days of execution of this Agreement, and ten thousand
dollars ($10,000) shall be paid within three (3) months from the Effective Date,
but no later than August 1, 1998.
5.2 Beginning the first full calendar year after the Regulatory Approval
of a Licensed Product in a major market country, or the year 2003, whichever
comes first, Licensee shall pay to Northwestern minimum royalty payments of
$10,000 per year. Any such minimum royalty payments shall be fully creditable
against any payments required under Paragraph 5.4.
5.4 A running royalty of (a) six percent (6%) of Net Sales of Licensed
Products for the first Ten Million Dollars ($10,000,000) in sales anywhere in
the world, and (b) four percent (4%) of Net Sales of Licensed Products on sales
exceeding Ten Million Dollars anywhere in the world.
5.5 For all sublicenses granted by Licensee, a royalty at the rate of
thirty five percent (35%) of all royalties earned by Licensee under such
sublicenses.
5.5 In addition to the running royalties under Paragraph 5.4, ten percent
(10%) of any payments, including, but not limited to, sublicense issue fees or
milestones received from sublicensees as consideration for Patent Rights,
Know-How or Licensed Products.
5.6 In the event of a permitted assignment of this Agreement, five percent
(5%) of any payments received from such assignee as consideration for Patent
Rights, Know-How or Licensed Products, as defined herein.
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ARTICLE VI - PAYMENT, REPORTS AND RECORDS
6.1 Payment Dates and Reports
Within sixty (60) days after the end of each calendar quarter of
each year during the term of this Agreement (including the last day of any
calendar quarter following the expiration of this Agreement), Licensee shall pay
to Northwestern, all royalties accruing during such calendar quarter. Such
payments shall be accompanied by a statement showing the Net Sales of each
Licensed Product by Licensee and its sublicensees in each country, the
applicable royalty rate and the calculation of the amount of royalty due.
6.2 Accounting
a. Payments in U.S. Dollars
All dollar sums referred to in this Agreement are expressed in
U.S. dollars and the Net Sales used for calculating the royalties and other sums
payable to Northwestern by Licensee pursuant to Paragraph 6.1 shall be computed
in U.S. dollars. All payments of such sums and royalties shall be made in U.S.
dollars. For purposes of determining the amount of royalties due, the amount of
Net Sales in any foreign currency shall be computed by converting such amount
into U.S. dollars at the prevailing commercial rate of exchange for purchasing
U.S. dollars with such foreign currency in question as quoted by Citibank in New
York on the last business day of the calendar quarter for which the relevant
royalty payment is to be made by Licensee.
b. Blocked Royalties
Notwithstanding the foregoing, if by reason of any restrictive
exchange laws or regulations Licensee or any Affiliate or sublicensee hereunder
shall be unable to convert to U.S. dollars an amount equivalent to the royalty
payable by Licensee hereunder in respect of Licensed Product sold for funds
other than U.S. dollars, Licensee shall notify Northwestern promptly with an
explanation of the circumstances. In such event, all royalties due hereunder in
respect of the transaction so restricted (or the balance thereof due hereunder
and not paid in funds other than U.S. dollars as hereinafter provided) shall be
deferred and paid in U.S. dollars as soon as reasonably possible after, and to
the extent that such restrictive exchange laws or regulations are lifted so as
to permit such conversion to United States dollars, of which lifting Licensee
shall promptly notify Northwestern. At its option, Northwestern shall meanwhile
have the right to request the payment (to it or to a nominee), and upon such
request Licensee shall pay, or cause to be paid, all such amounts (or such
portions thereof as are specified by Northwestern) in funds, other than U.S.
dollars, designated by Northwestern and legally available to Licensee under such
then existing restrictive exchange laws or regulations.
6.3 Records
Licensee shall keep, and shall cause its Affiliates and sublicensees
to keep, for three (3) years from the date of payment of royalties, complete and
accurate records of sales of each Licensed Product by Licensee; its Affiliates
and its sublicensees in sufficient detail to enable the accruing royalties to be
determined accurately. Northwestern shall have the right during this period of
three (3) years after receiving any report with respect to royalties due and
payable to appoint, at its expense, an independent certified public accountant
to inspect the relevant records of Licensee, its Affiliates and its sublicensees
to verify such report. Northwestern shall submit the name of said accountant to
Licensee for approval; said approval shall not be unreasonably withheld.
Licensee shall make its records and those of its Affiliates and sublicensees
available for inspection by such independent certified public accountant during
regular business hours at such place or places where such records are
customarily kept, upon reasonable notice from Northwestern, to the extent
necessary to verify the accuracy of the reports and
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payments with not more than one (1) inspection per calendar year. Northwestern
agrees to hold in strict confidence all information concerning royalty payments
and reports, and all information learned in the course of any audit or
inspection, except to the extent necessary for Northwestern to reveal such
information in order to enforce its rights under this Agreement or as may be
required by law. If royalties are understated by ten percent (10%) or more in
LICENSEE's favor, the LICENSEE shall, within ten (10) days of receipt of the
audit report, pay the balance due Northwestern plus all reasonable costs of the
audit or inspection and interest at the prime rate as quoted by Citibank in New
York from the date at which such balance would have otherwise been due and
payable. If royalties are understated by less than ten percent (10%), Licensee
shall include such understated amount with the next scheduled payment pursuant
to Paragraph 6.1.
ARTICLE VII - PUBLICATION
Northwestern will be free to publish the results of any research related
to Patent Rights, Know-How or Licensed Products and use any information for
purposes of research, teaching, and other educationally-related matters.
ARTICLE VIII - PATENT PROSECUTION
8.1 Northwestern has granted Licensee the right to apply for, seek prompt
issuance of, and maintain during the term of this Agreement the Patent Rights in
the United States and in the foreign countries listed in Exhibit A hereto. The
prosecution, filing and maintenance of all Patent Rights shall be the primary
responsibility of Licensee; provided, however, Northwestern shall have
reasonable opportunities to advise Licensee and shall cooperate with Licensee in
such prosecution, filing and maintenance.
8.2 Payment of all fees and costs relating to the filing, prosecution, and
maintenance of Patent Rights shall be the responsibility of Licensee, whether
such fees and costs were incurred before or after the Effective Date.
ARTICLE IX - INFRINGEMENT
9.1 Licensee shall inform Northwestern promptly in writing of any alleged
infringement of the Patent Rights by a third party and of any available evidence
thereof.
9.2 During the term of this Agreement, Northwestern shall have the right,
but shall not be obligated, to prosecute at its own expense all infringements of
the Patent Rights and, in furtherance of such right, Licensee hereby agrees that
Northwestern may include Licensee as a party plaintiff in such suit, without
expense to Licensee. The total cost of any such infringement action commenced or
defended solely by Northwestern shall be borne by Northwestern and Northwestern
shall keep any recovery or damages for past infringement derived therefrom.
9.3 If within six (6) months after having been notified of any alleged
infringement, Northwestern shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if Northwestern shall notify
Licensee at any time prior thereto of its intention not to bring suit against
any alleged infringer, then, and in those events only, Licensee shall have the
right, but shall not be obligated, to prosecute at its own expense any
infringement of the Patent Rights, and Licensee may, for such purposes, use the
name of Northwestern as party plaintiff; provided, however, that such right to
bring such infringement action shall remain in effect only for so long as the
license granted herein remains exclusive. No settlement, consent judgment or
other voluntary final disposition of the suit may be entered into without the
consent
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of Northwestern, which consent shall not unreasonably be withheld. Licensee
shall indemnify Northwestern against any order for costs that may be made
against Northwestern in such proceedings. Licensee shall keep any recovery or
damages for past infringement derived therefrom; provided, however, that such
recovery, less expenses, including reasonable attorneys' fees, shall be treated
as Net Sales for the purpose of calculating running royalties under Paragraph
5.4
9.4 In the event that a declaratory judgment action alleging invalidity or
noninfringement of any of the Patent Rights shall be brought against Licensee,
Northwestern, at its option, shall have the right, within thirty (30) days after
it receives notice of the commencement of such action, to intervene and take
over the sole defense of the action at its own expense.
9.5 In any infringement suit that either Party may institute to enforce
the Patent Rights pursuant to this Agreement, the other party hereto shall, at
the request and expense of the Party initiating such suit, cooperate in all
respects and, to the extent possible, have its employees testify when requested
and make available relevant records, papers, information, samples, specimens,
and the like.
9.6 Licensee, during the term of this Agreement, shall have the sole right
in accordance with the terms and conditions herein to sublicense any alleged
infringer for future use of the Patent Rights. Any upfront fees as part of such
a sublicense shall be shared equally between Licensee and Northwestern; other
royalties shall be treated pursuant to Paragraph 5.4.
ARTICLE X - PRODUCT LIABILITY
10.1 Licensee shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Northwestern, its trustees, directors,
officers, employees and Affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to any person
or persons or out of any damage to property, or resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of the Licensed
Product(s) or arising from any obligation of Licensee hereunder.
10.2 Licensee and sublicensees involved in activities described in section
10.1 shall obtain and carry in full force and effect commercial, general
liability insurance which shall protect Licensee and Northwestern with respect
to events covered by paragraph 10.1 above. Such insurance shall be written by a
reputable insurance company authorized to do business in the State of Illinois,
shall list Northwestern as an additional named insured thereunder, shall be
endorsed to include product liability coverage and shall require thirty (30)
days written notice to be given to Northwestern prior to any cancellation or
material change thereof. The limits of such insurance shall not be less than
Five Million Dollars ($5,000,000) per occurrence with an aggregate of Fifteen
Million Dollars ($15,000,000) for personal injury or death, and One Million
Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for property damage. Licensee shall provide Northwestern with
Certificates of Insurance evidencing the same.
10.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NORTHWESTERN, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING AND
THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN
THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY
NORTHWESTERN THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER
SHALL NOT
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INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL NORTHWESTERN,
ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR
INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER NORTHWESTERN SHALL BE
ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY.
ARTICLE XI - TERM AND TERMINATION
11.1 This Agreement shall become effective on the Effective Date. Unless
sooner terminated as provided for below, this Agreement shall continue in effect
on a country-by-country basis, until (a) the expiration of the last to expire of
any Patent Rights, or (b) ten (10) years from the date of the first commercial
sale in countries where no Patent Rights exist.
11.2 Licensee shall have the right to terminate this Agreement in whole or
in part anytime after three (3) years from the Effective Date by giving
Northwestern ninety (90) days written notice.
11.3 Northwestern shall have the right to terminate or render this license
non-exclusive at any time after three (3) years from the Effective Date if, in
Northwestern's reasonable judgement, Licensee a) has not put the Licensed
Product into commercial use in the Territory in the Field, directly or through a
sublicensee, thereby not making the Licensed Product available to the public, or
b) is not demonstrably engaged in research, development, manufacturing,
marketing, as appropriate, directed towards this end.
11.4 The provisions of Article III (Confidentiality), Article VI
(Payments, Reports and Records), Article X (Product Liability) and Article XIII
(Dispute Resolution) shall survive termination or expiration of this Agreement
in accordance with their terms.
11.5 If (1) either Party breaches any material obligation imposed by this
Agreement; (2) either Party makes any general assignment for the benefit of its
creditors; (3) a petition is filed by or against either Party, or any proceeding
is initiated against either Party as a debtor, under any bankruptcy or
insolvency law, unless the laws then in effect void the effectiveness of this
provision; or (4) a receiver, trustee, or any similar officer is appointed to
take possession, custody, or control of all or any part of either Party's assets
or property, then the other Party may, at its option, send a written notice that
it intends to terminate the license granted by this Agreement.
11.6 If the Party in breach does not cure the breach, negate the
assignment, obtain a dismissal of the proceeding, or have the appointment
vacated and regaining its assets within ninety (90) days from the notice date,
then the other Party shall have the right to terminate the license granted
immediately upon the date of mailing of a written notice of termination to the
Party in breach.
11.7 Upon termination of this Agreement for any cause, nothing herein
shall be construed to release either Party of any obligation that has matured
prior to the effective date of such termination. Licensee may, after the date of
such termination, sell all Licensed Products that it may have on hand at the
date of termination, provided that it pays the earned royalty thereon as
provided in this Agreement.
11.8 In the event of termination for breach by Licensee, Licensee agrees
to no longer use any of the Patent Rights or Know-How under which it has been
granted a license and will turn over and assign to Northwestern its Regulatory
Approvals and data and material related to price and Regulatory Approvals at no
charge with the right to sublicense.
11.9 Upon termination of this Agreement, any and all existing sublicense
agreements shall be immediately assigned to Northwestern and Northwestern agrees
to keep them in force to the extent that Northwestern is capable of performing
as a licensor in place of Licensee.
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ARTICLE XII - ASSIGNMENT
This Agreement shall not be assignable by either Party without the prior
written consent of the other, except that any Party may assign this Agreement to
any Affiliate, to a successor in interest (including the surviving company in
any consolidation or merger), or to an assignee of substantially all the
business and assets of such Party, or with respect to Licensee, to an assignee
of all or substantially all of the business to which this Agreement relates.
ARTICLE XIII - DISPUTE RESOLUTION
13.1 The Parties agree to effect all reasonable efforts to resolve any and
all disputes between them in connection with this Agreement in an amicable
manner.
13.2 The Parties agree that any dispute that arises in connection with
this Agreement and which cannot be amicably resolved by the parties shall be
resolved by binding Alternative Dispute Resolution (ADR) in the manner set forth
in Paragraph 13.3 through Paragraph 13.5.
13.3 If a Party intends to begin ADR to resolve a dispute, such Party
shall provide written notice to the other Party informing the other Party of
such intention and the issues to be resolved. Within ten (10) business days
after its receipt of such notice, the other Party may, by written notice to the
Party initiating ADR, add additional issues to be resolved. If the Parties
cannot agree upon the selection of a neutral within twenty (20) business days
following receipt of the original ADR notice, a neutral shall be selected by the
then President of the Center for Public Resources (CPR), 680 Fifth Avenue, New
York, New York 10019. The neutral shall be a single individual having experience
in the biotechnology industry who shall preside in resolution of any disputes
between the Parties. The neutral selected shall not be an employee, director or
shareholder of either Party or an Affiliate or sublicensee.
13.4 Each Party shall have ten (10) business days from the date the
neutral is selected to object in good faith to the selection of that person. If
either Party makes such an objection, the then President of the CPR shall, as
soon as possible thereafter, select another neutral under the same conditions as
set forth above. This second selection shall be final.
13.5 The ADR shall be conducted in the following manner:
(a) No later than forty-five (45) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the
Parties.
(b) At least five (5) days prior to the hearing, each Party must
submit to the neutral and serve on the other Party a proposed ruling on each
issue to be resolved. Such proposed ruling shall contain no argument on or
analysis of the facts or issues, and shall be limited to not more than fifty
(50) pages.
(c) The neutral shall not require or permit any discovery by any
means, including depositions, interrogatories or production of documents.
(d) Each Party shall be entitled to no more than eight (8) hours of
hearing to present testimony or documentary evidence. The testimony of both
Parties shall be presented during consecutive calendar days. Such time
limitation shall apply to any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the Party conducting such direct, cross
or rebuttal testimony. It shall be the responsibility of the neutral to
determine whether the parties have had the eight (8) hours to which each is
entitled.
(e) Each Party shall have the right to be represented by counsel.
The neutral shall have the sole discretion with regard to the admissibility of
any evidence.
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(f) The neutral shall rule on each disputed issue within thirty (30)
days following the completion of the testimony of both Parties. Such ruling
shall adopt in its entirety the proposed ruling of one of the parties on each
disputed issue.
(g) ADR shall take place in Chicago, Illinois. All costs incurred
for a hearing room shall be shared equally between the Parties.
(h) The neutral shall be paid a reasonable fee plus expenses, which
fees and expenses shall be shared equally by the Parties.
(i) The ruling shall be binding on the Parties and may be entered as
an enforceable judgment by a state or federal court having jurisdiction of the
Parties.
13.6 This Section XIII shall survive any termination of this Agreement
ARTICLE XIV - NOTICES AND PAYMENTS
Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such Party
by certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other Party:
In the case of Northwestern: Director
Technology Transfer Program
Northwestern University
1801 Maple Avenue
Evanston, Illinois 60201
In the case of Licensee: Mr. Stephen Thompson
President & CEO
Immtech International Inc.
1890 Maple Avenue
Evanston, Illinois 60201
ARTICLE XV - GENERAL
15.1 Force Majeure. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because rendered impracticable or impossible due to circumstances beyond its
reasonable control, including without limitation earthquakes, governmental
regulation, fire, flood, labor difficulties, interruption of supply of key raw
materials, civil disorder, and acts of God, provided that the Party experiencing
the delay promptly notifies the other Party of the delay.
15.2 Severability. In the event any provision of this Agreement is held to
be invalid or unenforceable, the valid or enforceable portion thereof and the
remaining provisions of this Agreement will remain in full force and effect.
15.3 Applicable Law. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of Illinois, excluding its
choice of law rules.
15.4 Entire Agreement. This Agreement and the exhibits attached hereto
constitute the entire, final, complete and exclusive agreement between the
Parties and supersede all previous agreements or representations, written or
oral, with respect to the subject matter of this Agreement. This Agreement may
not be modified or amended except in a writing signed by a duly authorized
representative of each Party.
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15.5 Headings. The headings for each article and section in this Agreement
have been inserted for convenience or reference only and are not intended to
limit or expand on the meaning of the language contained in the particular
article or section.
15.6 Independent Contractors. The Parties are not employees or legal
representatives of the other party for any purpose. Neither Party shall have the
authority to enter into any contracts in the name of or on behalf of the other
Party.
15.7 Advertising. Licensee shall not use the name of any inventor of
Northwestern University, of any institution with which the inventor has been or
is connected, nor the name of Northwestern in any advertising, promotional or
sales literature, without prior written consent obtained from Northwestern in
each case.
15.8 Waiver. Any waiver (express or implied) by either Party of any breach
of this Agreement shall not constitute a waiver of any other or subsequent
breach.
15.9 Counterparts. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
15.10 Patent Marking. Licensee agrees to mark the Licensed Products sold
in the United States with all applicable United States patent numbers. All
Licensed Products shipped to or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the country of
manufacture or sale.
In Witness Whereof, the Parties have executed this Agreement effective on
the date first set forth above.
LICENSEE NORTHWESTERN
By: /s/ T. Stephen Thompson By: /s/ Lydia Villa-Komaroff
----------------------- -------------------------------
Name: T. Stephen Thompson Name: LYDIA VILLA-KOMAROFF
Title: President and CEO Title: VICE PRESIDENT FOR RESEARCH
AND GRADUATE STUDIES
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EXHIBIT A
Immunoassay of Glycosylaed Proteins Employing Antibody
Directed to Reductively Glycosylated N-Terminal Amino Acids
Lyman E. Davis, Byron Anderson
U.S. Patent No. 5,484,735 - Issued: January 16, 1996
<PAGE>
INTERNATIONAL PATENT, KNOW-HOW
AND TECHNOLOGY LICENSE AGREEMENT
THIS INTERNATIONAL PATENT, KNOW-HOW AND TECHNOLOGY LICENSE AGREEMENT
("Agreement") is made this 29th day of June, 1998 by and between IMMTECH
INTERNATIONAL, INC. ("Immtech"), a Delaware corporation, and CRITICARE SYSTEMS,
INC. ("Criticare"), a Delaware corporation.
RECITALS
Certain capitalized terms used in these recitals are defined below
in this Agreement.
A. Immtech owns the patent rights and certain Technology, including
Know-how and Technical Information necessary or useful in the design,
development, customization, manufacture, use, composition and processing of the
mCRP (modifiedC- Reactive Protein) and a recombinant form of mCRP for the
treatment of sepsis (collectively, the "mCRP Patent Rights"); and
B. Criticare desires to obtain, and Immtech is willing to grant,
the License with respect to the mCRP Patent Rights and Immtech Technology within
the Field upon the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the mutual covenants set forth herein, the
sufficiency of which is hereby acknowledged, the Parties agree to the terms and
conditions set forth below.
1. Definitions. For the purpose of this Agreement, the following
terms (when capitalized, except as otherwise noted) shall have the meanings set
forth hereinbelow.
(a) "Effective Date" means the date first stated above.
(b) "Field of the Agreement" means systems, methods,
processes, compositions, articles and apparatuses for the treatment of sepsis.
(c) "mCRP Patent Rights" means the patent rights and certain
Technology, including Know-how and Technical Information necessary or
<PAGE>
useful in the design, development, customization, manufacture, use, composition
and processing of the mCRP (modified C- Reactive Protein) and a recombinant form
of mCRP for the treatment of sepsis owned or licensed by Immtech, including,
without limitation, the patent rights listed in Schedule A and any
continuations, continuations-in-part divisionals, reissues, reexaminations,
extensions or other patents or applications claiming priority or based upon the
listed patents.
(d) "mCRP Technology" means Technology that is owned or
licensable by Immtech.
(e) "Improvements" means any modification or enhancement,
patentable or not, which is conceived and/or reduced to practice by Criticare or
Immtech during the term of this Agreement, related to the Field of this
Agreement.
(f) "License" is defined in Article 3.1.
(g) "Licensed Territory" means the countries listed in
Schedule B attached hereto, as that schedule may be amended from time to time by
mutual written consent of the Parties or in accordance with Articles 3.6 or 3.7.
(h) "Product" shall mean any product in the Field of the
Agreement, which is covered by any claim in the Immtech Patent Rights and/or
which is produced utilizing Technology. "Product" may also include such
additional products and/or Improvements as may be agreed upon by mutual
agreement of the Parties from time to time.
(i) "Technology" means all Know-how and Technical Information
related to the Field of this Agreement which is owned or licensable by a Party,
now and during the term of this Agreement.
(i) "Know-how" means any information, including
technical data, now, or during the term of this Agreement or any renewals
hereof, possessed by Immtech, and which are, in Immetech's or Criticare's
judgment, reasonably necessary to enable Criticare to manufacture, customize,
use, market or sell Products, and includes dimensions, materials, processes and
procedures relating thereto, and which are the secret, confidential and
proprietary information of Immtech.
(ii) "Technical Information" means any information
possessed by a Party which, although not the secret Know-how of Immtech, is
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nevertheless in either party's reasonable judgment, useful in utilizing Know-how
or Immtech Patent Rights.
(j) The "term of this Agreement" (whether or not capitalized)
shall begin on the Effective Date hereof and unless terminated pursuant to
Article 10 shall continue for the term of the patent or any continuation or
extention thereof.
2. Disclosure and Support.
(a) Immtech agrees that, within thirty days after the
Effective Date of this Agreement, it will make Immtech Technology available to
Criticare for Criticare's use hereunder. As additional Immtech Technology is
developed by Immtech during the term of this Agreement, it shall promptly be
made available to Criticare hereunder at no additional cost.
(b) Immtech hereby agrees not to attempt in any manner to
license, sell or otherwise commercialize Products and/or any Improvements within
the Licensed Territory to any person or entity other than Criticare.
(c) Criticare agrees to provide to Immtech any technologically
significant data that is developed or obtained by Criticare during the term of
the Agreement. Each Party recognizes that some data may only be available in
summarized form to protect the confidentiality of customers, but Criticare shall
use reasonable efforts to secure permission, where needed, to provide such
pre-summarized information to Immtech. Representatives from Immtech are free to
contact Criticare project personnel for verbal reports, updates, or
clarification of written reports at any time during normal business hours.
3. Exclusive License Grant.
(a) Immtech hereby grants to Criticare the exclusive right and
license, with the right to sublicense others, throughout the Licensed Territory
under mCRP Technology and under the mCRP Patent Rights, to make, use, have made,
offer for sale and sell Products and to practice methods and processes utilizing
Immtech Technology in connection therewith. The foregoing right and license is
referred to herein as the "License."
(b) The right to sublicense granted Criticare in Article 3.1
specifically includes the right to sublicense others exclusively and/or
non-exclusively in the Licensed Territory under Immtech Technology and under the
Immtech Patent Rights any right granted Criticare under this Agreement,
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including the right to grant exclusive and/or non-exclusive field-of-use
sublicenses.
(c) Criticare will advise Immtech of all sublicenses and shall
at all times keep an account of all manufacture and assembly, sales, shipments
and uses of Products by Criticare and by all sublicensees.
(d) Criticare shall be responsible for finding sublicensees
and negotiating exclusive and/or non-exclusive (including exclusive and/or
nonexclusive restricted field-of-use) sub license agreements with said sub
licensees.
4. Payments and Accounting.
(a) In consideration of the grant of the License Criticare
shall pay to Immtech during the term of this Agreement a royalty consisting of
$100 per year.
(b) The royalties payable under this Agreement are in
consideration of the grant of rights under the Immtech Technology as well as the
grant of rights under the Immtech Patent Rights, and no additional royalty or
fee is due Immtech for Criticare's rights granted hereunder to utilize Immtech
Technology to manufacture, assemble, use, have manufactured, have assembled,
offer for sale, sell or otherwise commercialize Products or otherwise exploit
the Technology.
5. Marking and Quality.
(a) Criticare will apply, and cause each of its sublicensees
to apply, appropriate notice of patent protection on or in connection with
Products or their packages, including the numbers of relevant issued patents,
and give notice of the pendency of patent applications on Products or their
packages, such as, for example, stating "Patent Pending," such notices being
sufficient under applicable law to provide reasonable protection to the rights
of Immtech.
(b) Immtech shall at all times have the right to require that
Products manufactured or assembled by Criticare pursuant to this Agreement
satisfy reasonable standards of quality fixed by Immtech, and Immtech shall have
the right to inspect such Products, and the manufacturing process, at reasonable
times and at Immtech's expense, to confirm that such Products do conform to such
standards.
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6. Confidential Status of Technology.
(a) Each Party acknowledges and agrees that, subject to the
provisions of this Article 6, all Technology disclosed to it by the other Party
pursuant to this Agreement may constitute and comprise valuable confidential
information, and therefore the Party agrees to hold any such Technology it
receives from the other Party in confidence and otherwise protect it as provided
in this Article 6.
(b) Each Party (the "receiving Party") agrees that, subject to
the provisions of this Article 6, it shall not, without the prior written
consent of the other Party (the "disclosing Party"), disclose, distribute or use
any portion of Technology disclosed to it by the disclosing Party, except to the
extent necessary for the receiving Party to exercise rights hereunder or
authorize or allow others to do so. Each receiving Party further agrees to limit
access to such Technology to--
(i) those of its employees, or others, who have a "need
to know" of the same in order for the receiving Party to exercise said rights;
and
(ii) its sublicensees who have a "need to know" of the
same in order for sublicensees to exercise said rights; and
in either case who are under a duty to protect such Technology for the benefit
of the disclosing Party to the same extent as is the receiving Party itself.
(c) The obligations under this Article 6 shall not extend to any
information disclosed by a disclosing Party to a receiving Party which (i) is
within the public domain, or enters into the public domain through no fault of
the receiving Party, (ii) is within the possession of the receiving Party prior
to receipt from the disclosing Party as shown by appropriate records, or (iii)
is independently made available to the receiving Party by a third party without
breach by the third party of any duty owed to the disclosing Party with respect
thereto. It is understood that some Technology may, at least in part, consist of
a synthesis of information that is in the public domain; and it is, therefore,
understood that no exclusion contained in this Article 6.3 shall operate to
exclude from the obligations of this Article 6 such synthesis of otherwise
public domain information, unless it can be shown that such synthesis is itself
in the public domain.
(d) Each Party agrees that all obligations under this Article 6 with
respect to any and all Technology shall survive any termination of any or all
other provisions of this Agreement and shall continue until such time as one of
the
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exceptions set forth in Article 6.3 becomes applicable to the Technology in
question or for a period not to exceed two years after any such termination.
(e) Neither Party shall be liable for the inadvertent or
accidental use or disclosure of Know how or Technical Information, provided such
use or disclosure occurs despite the Party's exercise of the same degree of care
as the Party takes to safeguard and preserve its own proprietary information.
7. Representations and Warranties.
(a) Immtech expressly warrants
(i) that Immtech has the right to grant the License
within the Field and throughout the Licensed Territory;
(ii) that no third party has any right, title or
interest in the Immtech Patent Rights or Immtech Technology in the Field and
throughout the Licensed Territory;
(iii) that Immtech has taken no actions which adversely
affect Criticare's rights under this Agreement; and
(iv) that Immtech has the right to execute and enter
into this Agreement, to perform its obligations hereunder, and to grant the
License.
(b) Immtech warrants that, to the best of its knowledge, there
are no circumstances that would (i) render the Immtech Patent Rights invalid or
unenforceable, or (ii) render Criticare liable for patent infringement or trade
secret misappropriation as a consequence of Criticare's performing the
activities permitted by this Agreement or practice of the Immtech Patent Rights
or Immtech Technology as provided to Criticare.
(c) Until such time as Criticare completes the financing
referred to in paragraph 11, Immtech represents that it will timely pay all
necessary maintenance fees, annuities, taxes or other fees in order to maintain
the enforceability of the Immtech Patent Rights.
(d) Criticare and Immtech each represents that it has the
corporate power to enter into this Agreement and perform the obligations assumed
hereunder. Criticare and Immtech each represents that the person executing this
Agreement on behalf of the corporation is authorized to execute this Agreement
and legally bind the corporation.
6
<PAGE>
8. Improvements.
(a) Immtech agrees that all Improvements developed by Immtech
during the term of this Agreement shall be made available on the same basis and
under the same terms as set forth in this Agreement at no additional cost to
Criticare. Immtech shall promptly notify Criticare of all such Improvements as
they can reasonably be made available in form sufficient to disclose such
Improvement to Criticare, and at Criticare's option such Improvements may be
included in this Agreement and/or Products.
(b) If Criticare requests Immtech, in writing, to file a
patent application in a given nation or nations within the Licensed Territory
based on the Immtech Patent Rights or a Immtech Improvement, Immtech shall
promptly initiate the filing of such application(s), using local counsel of
Criticare's choosing. Criticare shall be responsible for all out of pocket
costs, including attorney fees, of filing and prosecuting any such patent
application(s) together with all fees, taxes, assessments, and levies on said
patent application(s) and/or patent(s) obtained therefrom for so long as
Criticare desires to maintain its rights thereunder. Immtech shall cooperate
fully with the prosecution, maintenance and enforcement of said patent
application(s) and/or patent(s) obtained therefrom and shall execute all
documents reasonably necessary for these activities.
(c) Criticare agrees that all Improvements developed by
Criticare during the term of this Agreement shall be made available on a
nonexclusive basis to Immtech without cost or reduction in royalty payable to
Immtech. Criticare shall promptly notify Immtech of all such Improvements as
they can reasonably be made available in form sufficient to disclose such
Improvement to Immtech, and at Immtech's option may be included in Products
and/or may be licensed from Criticare on the same basis and under the same terms
as set forth in this Agreement.
(d) Upon termination of the term of this Agreement,
Criticare's rights to continue use of Immtech's Improvements shall be limited by
the scope of Immtech Patent Rights existing upon termination. Likewise, upon
termination of the term of this agreement, Immtech's rights to continue use of
Criticare's Improvements shall be limited by the scope of Criticare's patent
rights existing upon termination.
9. Infringement of Immtech Patent Rights.
(a) Immtech and Criticare agree to promptly notify each other
if they become aware of a probable infringement by a third party of the Immtech
Patent Rights. Immtech and Criticare further agree that, unless one Party
7
<PAGE>
provides the other with written notice of the first Party's desire to not be
actively involved in a particular infringement action, actions against any third
party that may be infringing the Immtech Patent Rights in the Licensed Territory
shall be a joint effort of both Parties, and that both the costs and recovery
resulting from such actions shall be shared equally between the Parties. If
either Party notifies the other of its desire not to be actively involved in a
particular infringement action, and the other chooses to go forward with such an
action, the Party going forward shall be responsible for all costs relating to
such action, and shall be the sole beneficiary of any recovery resulting from
such action; and in such case the Party desiring not to be actively involved
shall render reasonable cooperation to the Party going forward, including, if
necessary, being named as a party to the action.
(b) In the event that Criticare, and/or Criticare's customers,
successors, and assigns are held liable as an infringer of a patent or trade
secret belonging to a third party arising from the manufacture, use and sale of
any Product and/or component element thereof licensed under this Agreement,
Immtech agrees to reimburse Criticare, and its customers, successors and assigns
for any financial loss, including attorney fees, sustained thereby.
10. Term and Termination.
(a) The Parties agree that the term of this Agreement, except
for the obligations under Article 6 hereof, may be terminated early (i) by
Criticare at any time by providing Immtech written notice of such termination;
or (ii) by either Party if the other Party breaches or defaults on any material
obligation under this Agreement and fails to cure such breach within sixty days
after receipt of written notice from the terminating Party which sets forth the
basis of such breach and the terminating Party's intent to terminate the
Agreement due to such breach.
(b) Termination of the term of this Agreement shall terminate
all of the Parties' respective rights and obligations under this Agreement,
except that such termination shall not affect:
(i) The right of Criticare to sell any Product on hand
on the date of such termination, to fill any orders for Product received on or
before the date of such termination, and to complete any Product in the process
of manufacture at the time of such termination and to sell the same;
(ii) The rights and obligations of the Parties under
Articles 4 and 6 of this Agreement; and
8
<PAGE>
(iii) The right of either Party (including all
remedies), and the obligation of the other Party, to every performance accruing
prior to such termination.
11. Funding. Criticare or its assignee agrees that it will utilize
its best efforts to raise not less than $500,000 within 12 months after the date
of this Agreement to fund the development and commercialization of a product
utilizing mCRP for the treatment of sepsis. In the event that Criticare fails to
complete such financing, Immtech shall have 90 days within which to repurchase
the mCRP Patent Rights, mCRP Technology and any Improvements for their appraisal
value. Appraisal value shall be determined by a certified appraiser agreed upon
by Immtech and Criticare, or, if they cannot agree, an appraiser selected by
Criticare's then audit firm.
12. Maintenance of Immtech Patent Rights.
(a) The cost of filing, prosecuting to issuance and
maintaining the Immtech Patent Rights related to a mutant protein and methods
and materials for making and using it shall be borne by Immtech.
(b) Before permitting the Immtech Patent Rights to become
abandoned, lapsed or forfeited, Immtech shall give Criticare a reasonable notice
in writing, and Criticare may then at its option and expense, take over the
prosecution or maintenance of the Immtech Patent Rights, in which event Immtech
agrees to cooperate fully with Criticare. All costs, expenses and fees,
including attorney fees, incurred by Criticare in taking over the maintenance of
the Immtech Patent Rights shall be deducted from any royalties due Immtech under
this Agreement. Should any of the Immtech Patent Rights be abandoned, lapsed, or
forfeited due to the failure by Immtech to pay the appropriate maintenance or
other fee, then after the abandonment, Criticare shall be permitted to sell
Products covered by such abandoned patent without payment or royalty for such
sale and the obligations of Criticare under this Agreement with respect to that
abandoned Immtech Patent Right shall cease.
13. Miscellaneous.
(a) This Agreement, or any rights or obligations hereunder,
may not be assigned, in whole or in part, by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. However, nothing herein shall prevent Criticare from assigning its
rights and obligations hereunder to an affiliated corporation or subsidiary
corporation controlled by or under common control with Criticare. In the event
of such
9
<PAGE>
assignment, the assignee will automatically become substituted for Criticare as
to all obligations thereafter accruing hereunder and as to all rights hereunder.
(b) The Parties agree that the sole relationship between
Immtech and Criticare hereunder will be that of licensor and licensee. Nothing
herein shall constitute or be interpreted to make either Party the agent of the
other Party, and neither Party shall in any way be authorized to obligate the
other Party in any transaction with a third party.
(c) All notices and other communications under or with respect
to this Agreement shall be in writing (including by telecopier and other
available communication facilities providing written copy to the recipient
party) and shall be effective when actually delivered to the party to which they
are directed or when deposited in the United States mail, postage prepaid,
addressed to the party to which they are directed at the address provided below
for that party or at such other address as that party may designate by notice.
The initial addresses are as follows:
If to Critic are:
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, WI 53186
Facsimile: 414-798-8290
Confirming telephone: 414-798-8282
With a copy to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
Attn: Robert E. Bellin
1000 North Water Street, Suite 2100
P.O. Box 92900
Milwaukee, WI 53202-0900
Facsimile: 414-298-8097
Confirming telephone: 414-298-1000
10
<PAGE>
If to Immtech:
Immtech International Inc.
Attn: Stephen Thompson
1890 Maple Avenue, Suite 110
Evanston, IL 60202
Facsimile: 847-869-0045
Confirming telephone: 847-869-0033
With a copy to:
John P. Goebel, Esq.
Gardner, Carton & Douglas
321 N. Clark Street
Chicago, IL 60610-4795
Facsimile: 312-644-3381
Confirming telephone: 312-644-3000
(d) The Parties acknowledge and agree that this Agreement
constitutes the entire agreement and understanding relating to the subject
matter of this Agreement and supersedes all previous communications, proposals,
representations and agreements, whether oral or written and whether relating to
the subject matter of this Agreement or otherwise.
(e) The Parties acknowledge and agree that this Agreement may
only be modified by the mutual written agreement of the Parties.
(f) (i) For purposes of this Article 13.6, a "Force Majeure
Event" shall be any event or condition that [a] is not known to the Excused
Party (as defined below), as of the date of this Agreement, to exist, [b] is not
reasonably foreseeable as of such date, and [c] is not reasonably within the
control of the Excused Party. Without limiting the foregoing, any of the
following shall constitute a Force Majeure Event if the same meets the
conditions expressed in the enumerated clauses of the preceding sentence:
natural disaster, fire, explosion, epidemic, war, riot, civil disturbance,
strike, lockout, labor slow-down, acts of governmental authority, and shortage
of energy or material.
(ii) Any period of time in which a Party (the "Excused
Party") must perform any obligation under this Agreement shall be extended by
the period of time that a Force Majeure Event prevents such performance in whole
or in material part or renders such performance so difficult or costly that such
performance is commercially unreasonable, and the Excused Party shall not be
liable for loss or damage incurred by the other Party by reason of
11
<PAGE>
any delay in such performance during such period of extension. If the Force
Majeure Event is of such a nature that the performance of the obligation will
reasonably require an additional period of time following cessation of the Force
Majeure Event, then the period of time in which the Excused Party must perform
the obligation shall be further extended by such additional period of time, and
the Excused Party shall not be liable for loss or damage incurred by the other
Party by reason of any delay in such performance during such additional period
of time.
(iii) If the period of time in which a Party must
perform any material obligation hereunder is extended for a period of more than
six consecutive months pursuant to the preceding provisions of this Article,
either Party may terminate this Agreement, without liability to the other Party
for such termination, by giving notice of termination given to the other Party
prior to the end of the period of extension.
(iv) The foregoing provisions of this Article shall not
excuse any obligation to pay any amount which becomes due under this Agreement
prior to termination of this Agreement, but payment for any performance the time
for which is extended pursuant to such provisions may be suspended until such
performance is rendered.
(g) The Parties agree that this Agreement will be governed and
construed in accordance with the internal laws of the State of Wisconsin.
(h) Each Party agrees that any delay or omission on the part
of the other Party to exercise any right under this Agreement will not
automatically operate as a waiver of such right or any other right, and a waiver
of any right on any one occasion will not be construed as a bar to or a waiver
of exercising the right on any other occasion.
(i) Each Party agrees that, should any provision of this
Agreement be determined by a court of competent jurisdiction to violate or
contravene any applicable law or policy, such provision may be severed and
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.
(j) The title, caption or heading of any provision of this
Agreement is used as a matter of convenience and is not to be used to interpret
or construe the meaning of any provision. The words "herein," "hereof," and
"hereunder," when used in this Agreement, refer to this Agreement in its
entirety. The word "include" and its derivatives mean by way of example and not
by way of exclusion or limitation. Words in the singular include the plural and
words in the
12
<PAGE>
plural include the singular, according to the requirements of the context. Words
importing a gender include all genders. Each Party agrees that this Agreement is
the result of extensive negotiations between the Parties and represents the
merged work product of both Parties, and so neither Party shall be held to be
the sole author of this Agreement for the purpose of contract interpretation
(k) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to constitute but one and the same instrument.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY /s/ Gerhard vonder Ruhr BY /s/ T. Stephen Thompson
-------------------------- -------------------------------
Its Pres Its President & CEO
---------------------- ---------------------------
13
<PAGE>
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the 29th
day of June, 1998, by and between CRITICARE SYSTEMS, INC., a Delaware
corporation ("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware
corporation ("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and certain
obligations of IMMTECH set forth in a certain Material Transfer and Option
Agreement between Immtech and SIGMA DIAGNOSTICS, INC. (hereinafter referred to
as the "Sigma Agreement"), a copy of which is attached hereto as Exhibit A.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
Sigma Agreement and be bound by all terms and conditions thereof continuing
forward; provided, however, that Immtech shall retain and promptly fulfill any
obligations under such agreement to provide cultures, materials or any advice or
consultation related to the materials (as defined therein).
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the Sigma Agreement and shall
supersede all previous communications, representations or undertakings, either
verbal or written between the parties relating to the subject matter of this
ASSIGNMENT AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY /s/ Gerhard vonder Ruhr BY
--------------------------- -------------------------------
Its Pres Its
--------------------- ---------------------------
SIGMA DIAGNOSTICS, INC. hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the Sigma
Agreement and acknowledges that Immtech is not in default of any of its
obligations thereunder.
SIGMA DIAGNOSTICS, INC.
BY
-------------------------- --------------
Its Date
--------------------
2
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY BY [ILLEGIBLE]
--------------------------- -------------------------------
Its Its CFO
--------------------- -------------------------
SIGMA DIAGNOSTICS, INC. hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the Sigma
Agreement and acknowledges that Immtech is not in default of any of its
obligations thereunder.
SIGMA DIAGNOSTICS, INC.
BY
---------------------------- --------------
Its Date
----------------------
2
Option Agreement Between Immtech International, Inc., and ImmvaRx, Inc.
For Licensing the Use of r(m)CRP a Vaccine Adjuvant
- --------------------------------------------------------------------------------
This Agreement made this 20th day of April, 1998, (the Effective Date), by
and between Immtech International, Inc. ("Immtech"), a Delaware Corporation
having a principal office at 1890 Maple Ave. Suite 110, Evanston, IL 60201 (The
"Company"), and ImmvaRx, Inc. ("ImmvaRx"), a California Corporation having a
principal office at 1890 Maple Ave. Suite 110, Evanston, IL 60201 ("Licensee").
Recitals:
1.1 WHEREAS Immtech is the owner of certain patent rights and know-how
relating to modified-C-reactive protein ("mCRP") and its use as a
biological reagent with immune stimulating activity;
1.2 WHEREAS ImmvaRx desires to license the use of mCRP, and its genetically
engineered recombinant analog recombinant modified C reactive protein
("r(m)CRP"), as an adjuvant to be used in vaccine preparations;
1.3 WHEREAS the term "Vaccine" shall mean a preparation that contains an
antigen and which is used to inoculate an animal as a means of inducing
specific immunity.
1.4 WHEREAS the term "Adjuvant" shall mean a material injected along with an
antigen to enhance its immunogenicity and potentiate the immune response.
1.5 WHEREAS "Know-How" shall mean any and all technical information existing
as of the Effective date or generated during the term of this Agreement
which is owned or controlled by Immtech and directly relates to the
mCRP/r(m)CRP product.
1.6 WHEREAS "Licensed Products" shall mean mCRP/r(m)CRP technology and
reagents for use as adjuvants.
1.7 WHEREAS "Net Sales" shall mean the gross amount invoiced by Licensee, its
Affiliates or its sublicensees, to third parties for the sale of Licensed
products, less amounts actually invoiced or allowed with respect to trade
credits, discounts, rebates and allowances actually granted on account of
price adjustments, rebate programs, billing errors or the return of goods,
sales taxes, tariffs, and custom duties.
1.8 WHEREAS "Territory" shall mean the entire world.
Grants:
2.1 Immtech will provide ImmvaRx with a worldwide exclusive license to use
mCRP/r(m)CRP technology and products as adjuvants under the following
terms.
2.1.1 Immtech will provide ImmvaRx with access to technical documents and
data on the performance of mCRP/r(m)CRP technology for all of its
various uses, including access to cell lines and other proprietary
information on the
<PAGE>
manufacture of r(m)CRP. Immtech would give ImmvaRx access to any
relevant regulatory documents (including Drug Master Files [DMFs])
that describe the manufacturing process, as well as the right to
reference Immtech's DMF if ImmvaRx wishes to license the right to
manufacture r(m)CRP independent of Immtech's efforts.
2.1.2 Immtech will License to ImmvaRx the right to use any patented
technology (including patents that are issued or pending) that the
Company owns which relate to the manufacture of r(m)CRP, or the use
of mCRP/r(m)CRP as a reagent that works as an adjuvant to potentiate
the immune response.
2.1.3 Immtech will co-file with ImmvaRx, and assign exclusive rights to
ImmvaRx, any new patent application(s) involving the use of
mCRP/r(m)CRP as an adjuvant.
2.1.4 Immtech will License to ImmvaRx, the use of mCRP/r(m)CRP technology
as an adjuvant for use in human and veterinary applications.
2.1.5 Immtech shall retain the right to utilize mCRP/r(m)CRP technology as
a therapy and as a cotherapy in all applications other than as a
vaccine adjuvant.
2.1.6 Immtech grants to Licensee the right to grant sublicenses consistent
with this Agreement provided that the Licensee shall be responsible
for the performance of its sublicensees, including the payment of
royalties.
Terms:
3.1 ImmvaRx will be given a six month period from the signing of this
agreement, to raise a minimum of $500,000 in funds, after which period, if
the minimum funding is not obtained, Immtech will have the right to cancel
this License Agreement with ImmvaRx.
3.2 ImmvaRx will pay Immtech an up-front fee of $25,000 from the initial
$500,000 raised. ImmvaRx will pay Immtech a second payment of $25,000 from
any funds raised by ImmvaRx (on a cumulative basis) greater than $700,000.
Immtech agrees that any funds received from ImmvaRx would be invested
directly in the development, refinement and scale-up of manufacturing
clinical grade r(m)CRP product.
3.3 ImmvaRx agrees to make its best effort to scale-up and supply Good
Manufacturing Practice (GMP) quality product to ImmvaRx for its clinical
trials. ImmvaRx agrees to purchase r(m)CRP from Immtech for clinical
trials at a price of cost (direct and indirect) plus 25%. Immtech and
ImmvaRx will share any information obtained on methods for improving the
production process. Immtech and ImmvaRx will, if it is in the interest of
both Parties, work together to develop a commercial manufacturing
capacity.
<PAGE>
3.4 Immtech would receive an annual royalty of 5% on Net Sales of mCRP/r(m)CRP
sold alone, or in combination with another active ingredient. If the
Licensed product is sold as part of a combination product (adjuvant and
vaccine), Net Sales for the purpose of determining royalties on the
Licensed Product(s) in the combination shall be calculated by multiplying
Net Sales by the fraction A/A+B, where A is the invoice price of licensed
Product(s) sold separately and B is the invoice price of the other active
ingredients in the combination. Immtech would have the right, at their
expense, to audit net sales. If cumulative royalties are greater than 8%,
Immtech will reduce their royalty rate on a prorata basis (including all
royalties) so the combined royalty is no more than 8%. However, Immtech
royalty will not be reduced below 2.5%.
3.5 ImmvaRx agrees to issue 100,000 common shares in ImmvaRx to Immtech for
signing this agreement. In addition, Immtech will be issued 50,000 common
stock warrants that would be purchased at $1.00/share and exercisable
within a five year period of time.
3.6. ImmvaRx agrees to pay for patent expenses of any new applications that
arise from the use of mCRP/r(m)CRP as an adjuvant. These expenses shall
include foreign filings of such patents.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective on the
date first set forth above.
IMMVARx INC. ("Licensee") IMMTECH INT'L, INC. ("Company")
By: By: /s/ Lawrence A. Potempa
------------------------ ---------------------------------
Name: Name: Lawrence A. Potempa, PhD
-----------------------
Title: Title: VP Research & CSO
----------------------
<PAGE>
3.4 Immtech would receive an annual royalty of 5% on Net Sales of mCRP/r(m)CRP
sold alone, or in combination with another active ingredient. If the
Licensed product is sold as part of a combination product (adjuvant and
vaccine), Net Sales for the purpose of determining royalties on the
Licensed Product(s) in the combination shall be calculated by multiplying
Net Sales by the fraction A/A+B, where A is the invoice price of licensed
Product(s) sold separately and B is the invoice price of the other active
Ingredients in the combination. Immtech would have the right, at their
expense, to audit net sales. If cumulative royalties are greater than 8%,
Immtech will reduce their royalty rate on a prorata basis (including all
royalties) so the combined royalty is no more than 8%. However, Immtech
royalty will not be reduced below 2.6%.
3.5 ImmvaRx agrees to issue 100,000 common shares ImmvaRx to Immtech for
signing this agreement. In addition, Immtech will be Issued 50,000 common
stock warrants that would be purchased at $1.00/share and exercisable
within a five year period of time.
3.6. ImmvaRx agrees to pay for patent expenses of any new applications that
arise from the use of mCRP/r(m)CRP as an adjuvant. These expenses shall
include foreign filings of such patents.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective on the
date first set forth above.
IMMVARx INC. ("Licensee") IMMTECH INT'L, INC. ("Company")
By: /s/ Edmund M. Monberg By: /s/ Lawrence A. Potempa
------------------------ ---------------------------------
Name: Edmund M. Monberg Name: Lawrence A. Potempa, PhD
Title: Director Title: VP Research & CSO
Sec., Treas.
EXHIBIT A
MATERIAL TRANSFER AND OPTION AGREEMENT
This agreement is made and entered into as of the 23rd day
of March, 1998, by and between Immtech International, Inc. ("IMMTECH"),
a Delaware Corporation, maintaining an office at 1890 Maple Avenue,
Suite 110, Evanston, IL 60201, and Sigma Diagnostics, Inc. ("SIGMA"), a
Missouri corporation maintaining an office at 545 South Ewing Avenue,
St. Louis, Missouri 63103.
WHEREAS, SIGMA desires to develop commercial diagnostic assays for
determining hemoglobin type A1c ("HB(A1c)") by detecting a reduced form of
HB(A1c);
WHEREAS, SIGMA desires to obtain certain hybridoma cell lines that
produce monoclonal antibodies suitable for use in such assays from IMMTECH, and
to obtain related information known to IMMTECH in order to develop such
commercial assays;
WHEREAS, SIGMA desires to grow such cell lines and harvest
monoclonal antibodies from said cell lines for the purpose of evaluating the
suitability of the same for a commercial HB(A1c) assay and for the purpose of
evaluating whether to exercise an option to license the exclusive, worldwide
rights associated with such cell lines, such monoclonal antibodies and such
related information known to IMMTECH, and
WHEREAS, IMMTECH is willing to provide such cell lines and such
information to SIGMA, to allow SIGMA to evaluate such cell lines and monoclonal
antibodies, and
WHEREAS, IMMTECH has, and/or will acquire as of the effective date
of this agreement, certain patent and non-patent rights relating to such cell
lines, antibodies and information, and desires to grant SIGMA an option to
obtain such rights and a license thereto on the terms and conditions set forth
herein.
NOW THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained herein, and certain other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1
<PAGE>
1. DEFINITIONS
1.1 "MATERIALS" means (1) the monoclonal antibody designated as
"MML03" having specificity to mannitol-valine-glycine-glycine (mannitol-VGG) or
a fragment, derivative, or conjugate thereof having such specificity, and (2)
hybridoma cell lines which will produce the MML03 monoclonal antibody.
1.2 "PROGENY" means all monoclonal antibodies and hybridoma cell
lines developed from the MATERIALS by IMMTECH, by SIGMA, or jointly by IMMTECH
and SIGMA.
1.3 "IMMTECH BIOMATERIALS" means all biomaterials useful in
connection with research related to the MATERIALS or in connection with PRODUCTS
involving the MATERIALS and developed or discovered by IMMTECH, independently of
SIGMA, including, without limitation, peptides, culture media, and other
biomaterials useful as calibrators, reference materials or controls.
1.4 "SIGMA BIOMATERIALS" means all biomaterials useful in connection
with research related to the MATERIALS or in connection with PRODUCTS involving
the MATERIALS or PROGENY and developed or discovered independently by SIGMA or
jointly by SIGMA and IMMTECH, including, without limitation, peptides, culture
media, and other biomaterials useful as calibrators, reference materials or
controls.
1.5 "IMMTECH TECHNOLOGY" means individually and collectively, all
designs, technical information, know-how, trade secrets, knowledge, data,
specifications, test results, manufacturing information, analytical information,
marketing information, inventions conceived and/or reduced to practice and/or
acquired, and other information relating to the MATERIALS and known to IMMTECH
on the date of this AGREEMENT or developed by IMMTECH thereafter, independently
of SIGMA, including, without limitation, all information which will allow and/or
assist SIGMA to establish commercially viable hybridoma cell lines which will
produce the MML03 monoclonal antibody in a quantity and with properties
reasonably required by SIGMA to develop a commercial HB(A1c) assay.
1.6 "SIGMA TECHNOLOGY" means, individually and collectively, all
designs, technical information, know-how, trade secrets, knowledge, data,
specifications, test results, manufacturing information, analytical information,
marketing information, inventions conceived and/or reduced to practice and/or
acquired, and other information relating to the MATERIALS and developed
independently by SIGMA, or jointly by SIGMA and IMMTECH.
2
<PAGE>
1.7 "SIGMA PRODUCTS" means any products which comprise MATERIALS or
PROGENY and which are developed by SIGMA or jointly by SIGMA and IMMTECH,
including, without limitation, assay kits, assay methods and assay reagents.
1.8 "EFFECTIVE DATE" means the latter of (a) the date set forth
above in the recitals to this AGREEMENT, (b) the date on which IMMTECH has
executed this AGREEMENT, (c) the date on which SIGMA has executed this AGREEMENT
or (d) the date on which SIGMA receives from IMMTECH a copy of the duly executed
IMMTECH-NORTHWESTERN LICENSE AGREEMENT.
1.9 "EVALUATION PERIOD" of this AGREEMENT means the period which
begins upon the latter of (a) the EFFECTIVE DATE of this AGREEMENT or (b) the
date of first receipt of MATERIALS by SIGMA from IMMTECH, and which ends six
months after such date.
1.10 "RESEARCH AND DEVELOPMENT PERIOD" of this AGREEMENT means the
period which begins in the last day of the EVALUATION PERIOD and which ends two
years after the last day of the EVALUATION PERIOD.
1.11 "MONCLONALITY" means that the hybridoma cells of the MATERIALS
produce monoclonal antibodies having an antibody combining site which binds with
SPECIFICITY to mannitol-VGG.
1.12 "CELL GROWTH" means the growth of the hybridoma cells of the
MATERIALS in SIGMA bioreactors in quantities reasonably required by SIGMA for
evaluation, research and product development purposes.
1.13 "SPECIFICITY" means that the monoclonal antibodies of the
MATERIALS have are specific for mannitol-VGG in a manner consistent with that
described in U.S. Patent No. 5,484,735 to Davis et al. and that such monoclonal
antibodies will not cross react with non-glucosylated hemoglobin (Hb(Ac)) or
with non-reduced glucosylated hemoglobin (Hb(A1c)).
1.14 "OPTION" means the option granted to SIGMA pursuant to
paragraph 8.1 of this AGREEMENT.
1.15 "LICENSE" means the license to be executed in accordance with
paragraph 8.6 of this AGREEMENT.
1.16 "PATENT RIGHTS" means IMMTECH's patent rights associated with
the LICENSED PATENTS as set forth in Title 35 of the United States Code and in
corresponding foreign statutes and/or common law.
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1.17 "LICENSED PATENTS" shall include U.S. Patent No. 5,484,735 to
Davis et al. filed November 12, 1993 and entitled "Immunoassay of Glycosylated
Proteins Employing Antibody to Reductively Glycosylated N-Terminal Amino Acids"
(hereinafter referred to as "the '735 PATENT"), any reissues, reexaminations or
extensions thereof, any U.S. patents or applications (including divisionals and
continuation applications) owned or licensed to or by IMMTECH which claim
priority to or are otherwise based on the '735 PATENT or which otherwise
establish rights which cover, encompass or are ancillary to the MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS
thereto and any corresponding or related foreign applications owned or licensed
by IMMTECH which claim priority to or are otherwise based on the '735 PATENT or
which otherwise establish rights which cover, encompass or are ancillary to the
MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH
IMPROVEMENTS thereto.
1.18 "TECHNOLOGY RIGHTS" means IMMTECH's non-patent statutory and/or
common law rights associated with the LICENSED TECHNOLOGY, including, without
limitation, trade secret rights.
1.19 "LICENSED TECHNOLOGY" means any and all non-patented MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMPROVEMENTS thereto.
1.20 "LICENSED PRODUCT" means any PRODUCT covered by claims of the
LICENSED PATENTS or which involves LICENSED TECHNOLOGY.
1.21 "IMMTECH IMPROVEMENTS" means all modifications, variations,
revisions, new generations and new models of the MATERIALS, PROGENY, IMMTECH
BIOMATERIALS and/or IMMTECH TECHNOLOGY which relate or have consequence with
respect to the LICENSED PRODUCT in any of the following ways: (a) improves
performance of the LICENSED PRODUCT; (b) reduces the cost of materials or
components for the LICENSED PRODUCT; (c) reduces production, manufacturing or
associated costs of the LICENSED PRODUCTS; (d) increases the durability or
continuous performance characteristics of the LICENSED PRODUCTS; (e) expands the
applications to which the LICENSED PRODUCTS may be put; (f) increases or
enhances the marketability or commercial aspect of the LICENSED PRODUCT; or (g)
would, if implemented, replace or displace the LICENSED PRODUCT in one or more
materially commercial markets for LICENSED PRODUCTS. IMMTECH IMPROVEMENTS may be
patentable or unpatentable, and if patentable, need not be patented.
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1.22 "SIGMA IMPROVEMENTS" means all modifications, variations,
revisions, new generations and new models of the SIGMA BIOMATERIALS, SIGMA
TECHNOLOGY and/or SIGMA PRODUCTS which relate or have consequence with respect
to the LICENSED PRODUCT in any of the following ways: (a) improves performance
of the LICENSED PRODUCT; (b) reduces the cost of materials or components for the
LICENSED PRODUCT; (c) reduces production, manufacturing or associated costs of
the LICENSED PRODUCTS; (d) increases the durability or continuous performance
characteristics of the LICENSED PRODUCTS; (e) expands the applications to which
the LICENSED PRODUCTS may be put; (f) increases or enhances the marketability or
commercial aspect of the LICENSED PRODUCT; or (g) would, if implemented, replace
or displace the LICENSED PRODUCT in one or more materially commercial markets
for LICENSED PRODUCTS. SIGMA IMPROVEMENTS may be patentable or unpatentable, and
if patentable, need not be patented.
1.23 "TERM OF THE LICENSE" means the period commencing with the date
on which the LICENSE is executed by all parties and ending (a) for LICENSED
PRODUCTS covered by the claims of one or more LICENSED PATENTS, on the date of
expiration of the last to expire of the LICENSED PATENTS which has a claim
covering the LICENSED PRODUCT, or alternatively, (b) for LICENSED PRODUCTS not
covered by a claim of one or more LICENSED PATENTS, on the date seven years
after the LICENSE is executed.
1.24 "NET SALES" means the gross amount invoiced for the LICENSED
PRODUCTS, less all taxes, duties, trade, quantity and cash discounts actually
allowed, and credits or allowances actually granted on account of rejections,
returns, billing errors or retroactive price reductions.
1.25 "INITIAL NET SALES" means NET SALES until the time when the
cumulative total of NET SALES equals an amount of $3,167,000.
1.26 "REMAINING NET SALES" means the NET SALES after the time when
the cumulative total of NET SALES has surpassed an amount of $3,167,000.
1.27 "AFFILIATE" means any corporation or non-corporate business
entity, which controls, is controlled by, or is under common control with a
party to this AGREEMENT. A corporation or non-corporate business entity shall be
regarded as in control of another corporation of it owns, or directly or
indirectly controls, at least forty (40%) percent of the voting stock of the
other corporation or (i) in the absence of the ownership of at least forty (40%)
percent of the voting stock of a corporation or (ii) in the case of the
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non-corporate business entity, or non-profit corporation, if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation or non-corporate business entity, as
applicable.
1.28 "IMMTECH-NORTHWESTERN LICENSE AGREEMENT" means a duly executed
agreement between IMMTECH and Northwestern University, Evanston, IL
(hereinafter, NORTHWESTERN) by which NORTHWESTERN grants IMMTECH exclusive
worldwide rights to the LICENSED PATENTS and to any LICENSED TECHNOLOGY owned by
NORTHWESTERN, with such granted rights being sufficient in scope to allow SIGMA
to develop commercial diagnostic assays for determining hemoglobin type A1c
("Hb(A1c)") by detecting a reduced form of Hb(A1c), and to make, have made, use
and sell such assays.
2. DELIVERY OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY
2.1 IMMTECH will deliver MATERIALS to SIGMA within 10 days of the
EFFECTIVE DATE. The minimum quantity of delivered MATERIALS will include at
least two vials of viable hybridoma cells which will produce MML03 monoclonal
antibodies.
2.2 IMMTECH agrees to deliver additional quantities of MATERIALS to
SIGMA during the EVALUATION PERIOD and the RESEARCH AND DEVELOPMENT PERIOD of
this AGREEMENT upon request by SIGMA, where such additional MATERIALS are
reasonably necessary for technical evaluation, research or product development
as described in paragraph 3.1, below.
2.3 IMMTECH agrees to deliver to SIGMA any and all PROGENY, IMMTECH
BIOMATERIALS, IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS throughout the
EVALUATION PERIOD and the RESEARCH AND DEVELOPMENT PERIOD of this AGREEMENT to
allow or assist SIGMA for technical evaluation, research, or product development
as described in paragraph 3.1, below.
3. USE OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY DURING
EVALUATION PERIOD
3.1 SIGMA may use the MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS during the EVALUATION PERIOD for the
purpose of technical evaluation, including without limitation, evaluation of
MONOCLONALITY, CELL GROWTH and SPECIFICITY, and for the purposes of research or
product development, including,
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without limitation, development of SIGMA BIOMATERIALS and SIGMA PRODUCTS.
3.2 None of the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH
TECHNOLOGY and IMMTECH IMPROVEMENTS may be transferred to others outside of
SIGMA's research facilities during the EVALUATION PERIOD of this AGREEMENT
without the written consent of IMMTECH, but such consent shall not be
unreasonably withheld.
4. PAYMENTS and REPORTS DURING THE EVALUATION PERIOD
4.1 SIGMA will pay IMMTECH an amount of twenty thousand dollars
($20,000) within ten days after the latter of (a) the EFFECTIVE DATE of this
AGREEMENT or (b) SIGMA's initial receipt of MATERIALS from IMMTECH.
4.2 SIGMA will evaluate MONOCLONALITY and CELL GROWTH within two
months after SIGMA's initial receipt of MATERIALS from IMMTECH. If MONOCLONALITY
and CELL GROWTH is acceptable to SIGMA, and if SIGMA decides, in its sole
discretion, to continue with further evaluation and/or research and/or product
development efforts, SIGMA will pay IMMTECH an additional amount of twenty-five
thousand dollars ($25,000) within two months after the latter of (a) the
EFFECTIVE DATE of this AGREEMENT or (b) receipt of MATERIALS from IMMTECH.
4.3 SIGMA will evaluate SPECIFICITY within six months after Sigma's
initial receipt of MATERIALS from IMMTECH. If SPECIFICITY is acceptable to
SIGMA, and if SIGMA decides, in its sole discretion, to enter the RESEARCH AND
DEVELOPMENT PERIOD to continue with further evaluation and/or research and/or
product development efforts, SIGMA will pay IMMTECH an additional amount of
fifty thousand dollars ($50,000) within six months after the latter of (a) the
EFFECTIVE DATE of this AGREEMENT or (b) SIGMA's initial receipt of MATERIALS
from IMMTECH.
4.4 SIGMA will provide a written report to IMMTECH after the end of
the EVALUATION PERIOD detailing the results of SIGMA's evaluation of
MONOCLONALITY, GROWTH and SPECIFICITY.
5. USE OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY DURING
RESEARCH AND DEVELOPMENT PERIOD
5.1 Upon entering the RESEARCH AND DEVELOPMENT PERIOD in accordance
with paragraph 4.3 above, SIGMA may use the
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MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY and IMMTECH
IMPROVEMENTS during the RESEARCH AND DEVELOPMENT PERIOD for the purpose of
technical evaluation, including without limitation, evaluation of MONOCLONALITY,
CELL GROWTH and SPECIFICITY, and for the purposes of research or product
development, including, without limitation, development of SIGMA BIOMATERIALS
and SIGMA PRODUCTS.
5.2 During the RESEARCH AND DEVELOPMENT PERIOD of this AGREEMENT,
SIGMA may use the MATERIALS and PROGENY in human clinical trials.
5.3 MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY and
IMMTECH IMPROVEMENTS may be transferred during the RESEARCH AND DEVELOPMENT
PERIOD to appropriate regulatory authorities where such transfer is reasonably
necessary for the purpose of obtaining U.S. Food and Drug Administration (FDA)
approval of a commercial Hb(A1c) assay or for the purpose of obtaining
equivalent approval in a foreign country.
6. RETURN OF MATERIALS, PROGENY, IMMTECH BIOMATERIALS and IMMTECH TECHNOLOGY /
PARTIAL REFUND OF PAYMENTS
6.1 If SIGMA determines, in its sole discretion, during the
EVALUATION PERIOD or the RESEARCH AND DEVELOPMENT PERIOD, that the MATERIALS or
PROGENY evaluated in accordance with paragraph 4.2 and paragraph 4.3 are not
suitable for further evaluation, research and/or product development, or that it
is no longer of commercial interest to develop a commercial Hb(A1c) assay
involving the MATERIALS or PROGENY, then SIGMA will return the MATERIALS and any
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS to
IMMTECH and provide a report to IMMTECH which explains the basis upon which the
MATERIALS or PROGENY were determined to be unsuitable or the assays were
determined to be not of commercial interest.
6.2 IMMTECH will, upon receipt of the returned MATERIALS and any
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY and IMMTECH IMPROVEMENTS and
upon receipt of a report from SIGMA in accordance with paragraph 6.1, refund an
amount of twenty-five thousand dollars ($25,000) to SIGMA.
7. OWNERSHIP
7.1 The MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY
and IMMTECH IMPROVEMENTS and any intellectual property rights associated
therewith shall be owned by IMMTECH.
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7.2 The SIGMA BIOMATERIALS, SIGMA TECHNOLOGY, SIGMA PRODUCTS, SIGMA
IMPROVEMENTS and any intellectual property rights associated therewith shall be
owned by SIGMA.
8. GRANT OF OPTION
8.1 IMMTECH hereby grants SIGMA an OPTION to license the PATENT
RIGHTS and the TECHNOLOGY RIGHTS under the terms set forth below.
8.2 SIGMA shall have the sole discretion as to whether or not to
exercise the OPTION.
8.3 The OPTION to license shall remain open and be exercisable by
SIGMA for an option period extending from the EFFECTIVE DATE of this AGREEMENT
until and including the date which is three months after the end of the
EVALUATION PERIOD of this AGREEMENT. If SIGMA informs IMMTECH in writing that
SIGMA does not desire to exercise its OPTION or if SIGMA fails to exercise its
OPTION with the aforementioned option period, IMMTECH shall have the right
thereafter to enter into an agreement with a third party or parties pertaining
to the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH
IMPROVEMENTS and SIGMA shall return all such MATERIALS, PROGENY, IMMTECH
BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS in SIGMA's possession
to IMMTECH.
8.4. If SIGMA decides to exercise its OPTION, no further fees beyond
those set forth under paragraph 4.1, paragraph 4.2 and paragraph 4.3 will be
required at the time of exercising the option. Additional fees and/royalties
may, however, be due, as applicable, under a LICENSE which includes the
provisions of paragraph 8.7(c) paragraph 8.7(d) and/or paragraph 8.7(g) of this
AGREEMENT.
8.5 SIGMA can exercise the OPTION by (a) notifying IMMTECH that
SIGMA is exercising its option, and (b) unless previously paid by SIGMA, paying
IMMTECH the fees required under paragraph 4.3.
8.6 Upon exercise of the OPTION, the parties will negotiate in good
faith, and will, within a negotiation period of six months from the date on
which SIGMA exercised its OPTION, agree on and execute a LICENSE which includes
the terms set forth in paragraph 8.7, as well as any other terms, provisions
and/or conditions that the parties negotiate in good faith. If SIGMA and IMMTECH
have failed to execute a LICENSE having such terms within such negotiation
period, then SIGMA shall return all MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY or IMMTECH IMPROVEMENTS in SIGMA's possession to IMMTECH, and
shall thereafter
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have the right to enter into an agreement with a third party or parties
pertaining to the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY
or IMMTECH IMPROVEMENTS, provided that such third-party agreement does not
contain any terms or provisions which are more favorable to the third party than
IMMTECH had offered in writing to SIGMA during such negotiation period.
8.7 The LICENSE shall include the following terms, provisions and/or
conditions:
(a) IMMTECH shall grant SIGMA exclusive, worldwide rights under the
LICENSED PATENTS and under the LICENSED TECHNOLOGY to possess, use, make, have
made, lease, sell and have sold all MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS thereto, and LICENSED PRODUCTS.
(b) SIGMA shall have the right to sublicense the LICENSED PATENTS
and LICENSED TECHNOLOGY to third parties.
(c) SIGMA shall pay IMMTECH an amount of $60,000 upon the earlier of
(i) the date of obtaining U.S. Federal Drug Administration (FDA) approval of a
LICENSED PRODUCT, or (ii) the date of the first sale of a LICENSED PRODUCT.
(d) SIGMA shall, during the TERM OF THE LICENSE, pay to IMMTECH
royalties as follows:
(i) at the rate of two percent (2%) of the INITIAL NET SALES
of LICENSED PRODUCTS; and then
(ii) at the rate of percent (5%) of the REMAINING NET SALES of
LICENSED PRODUCTS.
(e) SIGMA shall not be required to pay royalties to IMMTECH under
paragraph 8.7(d) for sales of LICENSED PRODUCTS made to AFFILIATES of SIGMA for
purposes of resale. Additionally, no multiple royalties shall be payable because
any LICENSED PRODUCT is covered by more than one patent or patent claim of the
LICENSED PATENTS. Moreover, in the event that any MATERIALS OR PROGENY become
available to third parties for commercial purposes through an act of or failure
to act by IMMTECH, the obligations of SIGMA set forth in paragraph 8.7(d) shall
terminate.
(f) For the first two year period following the date of the first
sale of a LICENSED PRODUCT, SIGMA shall meet a two-year target NET SALES amount
to be mutually agreed upon by the parties based on SIGMA's market projections,
failing which IMMTECH shall have the option, upon sixty (60) days written notice
to SIGMA, to license one other entity under the LICENSED PATENTS and LICENSED
TECHNOLOGY, with the
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LICENSE otherwise remaining in force. However, if during such sixty (60) day
period SIGMA pays the difference in royalties due based on the above-stated
target NET SALES versus the actual NET SALES for the two-year period, then the
LICENSE will continue in effect, without any changes as to the exclusivity
thereto. Moreover, should IMMTECH license one other entity under the LICENSED
PATENTS and/or LICENSED TECHNOLOGY: (i) such third-party agreement will not
contain any terms or provisions which are more favorable to the third party than
those contained in the LICENSE between IMMTECH and SIGMA, and (ii) SIGMA shall
be able to recover an amount of one-half of the $60,000 fee paid pursuant to
paragraph 8.7(c) by discounting the royalty payment required under paragraph
8.7(d)(ii) by 3% to obtain an effective royalty rate of 2% until such amount is
recovered.
(g) SIGMA will make any maintenance payments or annuities required
for any LICENSED PATENTS for countries in which the claims such patents cover
the LICENSED PRODUCTS.
(h) Notwithstanding anything in the LICENSE to the contrary:
(i) SIGMA shall have the right to terminate the LICENSE at its
sole discretion by giving written notice to IMMTECH at least ninety
(90) days prior to the effective date of termination provided that
such effective date is on or before the last day of the RESEARCH AND
DEVELOPMENT PERIOD; and
(ii) either party shall, in the event of any material default
of the LICENSE by the other party, have the right to terminate the
LICENSE by giving written notice to the other party at least ninety
(90) days prior to the effective date of termination, unless, after
receiving written notice of such default, the default is cured or
remedied by the defaulting party within ninety (90) days.
(i) Upon expiration or termination of the LICENSE for any reason,
SIGMA shall have the right, for a period of one (1) year from the effective
date thereof, to sell all LICENSED PRODUCTS on hand and to produce and sell any
MATERIALS or PROGENY on hand, subject to the obligations of SIGMA to pay
royalties, as provided for in paragraph 8.7(d), above.
9. CONFIDENTIALITY
9.1 Any information, including information existing as IMMTECH
TECHNOLOGY or SIGMA TECHNOLOGY, that is communicated between the parties and
that is designated by the parties as being confidential information by a written
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notice to the non-owning party within thirty (30) days after the first written
disclosure of that information by either party to the other, the non-owning
party shall, until five (5) years from the date of the expiration or termination
of this AGREEMENT: (a) take all reasonable steps to prevent disclosure of such
information to any third party and (b) not utilize any of such information for
any purpose other than the purposes provided in this AGREEMENT.
9.2 The obligations of confidentiality and non-use set forth in
paragraph 9.1 shall not preclude disclosure of such information in a patent
application or in the prosecution of a patent application provided that the
written consent of the owning party is obtained prior to such disclosure.
9.3 The obligations of confidentiality and non-use set forth in
paragraph 9.1 shall not extend to any of such information for which a non-owing
party can show:
(a) by the non-owning party's prior written records was already in
the non-owning party's possession prior to the date of such disclosure;
(b) such information became generally available to the public
through issuance or publication of a patent or application;
(c) such information otherwise is or becomes generally available to
public through non fault of the non-owning party;
(d) such information is received by the non-owning party in good
faith from a third party on a non-confidential basis without violating any
obligation of secrecy to the owner party relating to the information disclosed;
or
(e) written consent to disclose such information was given by the
owning party.
10. PUBLICATION
10.1 If a non-patent publication results from SIGMA's work using
the MATERIALS, PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY or IMMTECH
IMPROVEMENTS, SIGMA will acknowledge IMMTECH's provision of the same and will
give credit to IMMTECH scientists, as scientifically appropriate, based on any
direct contribution made.
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11. WARRANTIES, DISCLAIMERS and LIMITATIONS ON LIABILITIES
11.1 SIGMA hereby represents and warrants to IMMTECH, that SIGMA is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Missouri and has all requisite corporate power and
authority to enter into this Agreement and perform its obligations hereunder.
11.2 IMMTECH hereby represents and warrants to SIGMA that the
following are true and correct as of the EFFECTIVE DATE of this AGREEMENT:
(a) IMMTECH is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and
authority to enter into this Agreement and perform its obligations hereunder;
(b) IMMTECH owns the LICENSED PATENTS or is the worldwide exclusive
licensee of the LICENSED PATENTS and has the right to sublicense the same to
SIGMA;
(c) There are no claims relating to patent infringement or other
matters, actions, suits, proceedings, arbitrations or investigations pending or,
to the best of knowledge, threatened, against IMMTECH which if adversely
determined would adversely affect the MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS, LICENSED PATENTS (or the patentability
thereof), LICENSED TECHNOLOGY and/or LICENSED PRODUCTS, or other related
technology practiced by IMMTECH, or IMMTECH's ability to enter into or carry out
this AGREEMENT; and
(d) As of the date hereof, IMMTECH warrants that (i) it has no
knowledge that the manufacture, use, importation or sale of any MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS,
LICENSED PATENTS, LICENSED TECHNOLOGY and/or LICENSED PRODUCTS under this
AGREEMENT either alone or in combination, nor any method of using such the same
infringes any patent or other industrial property right of a third party and
(ii) it has not received any notification from any third party alleging or
suggesting that the manufacture, use, importation or sale of any such MATERIALS,
PROGENY, IMMTECH BIOMATERIALS, IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS,
LICENSED PATENTS, LICENSED TECHNOLOGY and/or LICENSED PRODUCTS does or would
infringe any patent or other industrial property, IMMTECH shall disclose to
SIGMA any information regarding adverse patent rights of which it is or becomes
aware and which relates to such MATERIALS, PROGENY, IMMTECH BIOMATERIALS,
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IMMTECH TECHNOLOGY, IMMTECH IMPROVEMENTS, LICENSED PATENTS, LICENSED TECHNOLOGY
and/or LICENSED PRODUCTS.
11.3 Notwithstanding the representations and warranties of IMMTECH
provided under paragraph 11.2, IMMTECH makes no representations or warranties as
to the suitability of the MATERIALS or PROGENY for their intended use by SIGMA.
SIGMA acknowledges that THE MATERIALS ARE EXPERIMENTAL IN NATURE AND THEY ARE
PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND, except as set forth
above in paragraph 11.2.
12. MISCELLANEOUS AND GENERAL
12.1. SIGMA acknowledges that IMMTECH is subject to United States
laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities and that its obligations
hereunder are contingent on compliance with all applicable United States export
and other laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by SIGMA that SIGMA shall not export data
or commodities to certain foreign countries without prior approval of such
agency. IMMTECH neither represents that a license shall not be required or that,
if required, it shall be issued.
12.2 SIGMA shall obtain any and all licenses, permits, approvals or
authorizations ("REQUIRED CONSENTS") required by any governmental entity or
agency having jurisdiction over the transactions contemplated by this AGREEMENT.
IMMTECH shall cooperate with, and provide reasonable assistance to, SIGMA in
obtaining the REQUIRED CONSENTS; provided, however, that SIGMA shall reimburse
IMMTECH for all IMMTECH out-of-pocket expenses incurred in providing such
assistance.
12.3 All notices, statements and reports required or contemplated
herein by one party or the other shall be in writing and shall be deemed to have
been given upon delivery in person or upon the expiration of five (5) days after
deposit in a lawful mail depository in the country of residence of the party
giving the notice, registered or certified airmail postage prepaid, and
addressed as follows:
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If to Immtech: Attention: Mr. Steve Thompson
CEO & President
Immtech International Inc.
1890 Maple Avenue, Suite 110
Evanston, Illinois 60201
Facsimile: (847) 869-0045
With a copy to: Alice O. Martin, Esq. Ph.D.
Brinks, Hofer, Gilson & Lione
NBC Tower - Suite 3600
455 N. Cityfront Plaza Drive
Chicago, IL 60611-5599
Facsimile: (312) 321-4299
If to Sigma: Attention: Mr. Michael T. Hayo
Vice President
Sigma Diagnostics
545 South Ewing Avenue
St. Louis, Missouri 63103
Facsimile: (314) 286-7819
Either party hereto may change the address to which notices to such party are to
be sent by giving notice to the other party at the address and in the manner
provided above. Any notice herein required or permitted to be given in addition
to the manner set forth above, by telex, facsimile or cable, provided that the
party giving such notice obtains acknowledge by telex, facsimile or cable that
such notice has been received by the party to be notified. Notice made in this
manner shall be deemed to have been given when such acknowledgment has been
transmitted.
12.4 SIGMA shall not grant, transfer, convey, sublicense or
otherwise assign any of its rights or delegate any of its obligations under this
AGREEMENT other than to an affiliated company without the prior written consent
of IMMTECH, and any attempt to do so shall be of no effect; however, this
AGREEMENT shall be assignable by IMMTECH. This AGREEMENT shall be binding upon
and inure to the benefit of the successors and permitted assigns of the parties
hereto.
12.5 This AGREEMENT constitutes the entire agreement between IMMTECH
and SIGMA with respect to the subject matter hereof and shall not be modified,
amended or terminated except as herein provided or except by another agreement
in writing executed by the parties hereto.
12.6 The section and paragraph headings are for convenience only and
are not a part of this AGREEMENT.
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12.7 All rights and restrictions contained herein may be exercised
and shall be applicable and binding only to the extent that they do not violate
any applicable laws and are intended to be limited to the extent necessary so
that they will not render this AGREEMENT illegal, invalid or unenforceable. If
any provision or portion of any provision of this AGREEMENT not essential to the
commercial purpose of this AGREEMENT shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining provisions or portions thereof shall constitute their
agreement with respect to the subject matter hereof, and all such remaining
provisions or portions hereof shall remain in full force and effect. In the
event that any provision essential to the commercial purpose of this AGREEMENT
is held to be illegal, invalid or unenforceable and cannot be replaced by a
valid provision which will implement the commercial purpose of this AGREEMENT,
this AGREEMENT and the rights granted herein shall terminate.
12.8 The term of this Agreement shall begin on the EFFECTIVE DATE
and shall continue in effect through the EVALUATION PERIOD and through the
RESEARCH AND DEVELOPMENT PERIOD, unless otherwise allowed to lapse by SIGMA
pursuant to its discretion under paragraphs 4.2, 4.3 and 6.1.
IN WITNESS WHEREOF, the parties have caused this AGREEMENT to be
executed by their duly authorized representatives as of day and year first above
written.
IMMTECH:
IMMTECH INTERNATIONAL INC.
By: /s/ T. Stephen Thompson
-----------------------------
SIGMA:
SIGMA DIAGNOSTICS
By: /s/ Michael T. Hayo
-----------------------------
Michael T. Hayo
Vice President
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LICENSE AGREEMENT
This Agreement made this tenth (10th) day of March, 1998, (the
"Effective Date"), by and between Northwestern University, an Illinois
corporation having a principal office at 633 Clark Street, Evanston, Illinois
60208 (hereinafter referred to as "Northwestern") and Immtech International
Inc., a Delaware corporation having a principal office at 1890 Maple Avenue,
Suite 110, Evanston, IL. 60201 (hereinafter referred to as "Licensee") (each a
"Party" and collectively the "Parties").
WITNESSETH
WHEREAS, Northwestern is the owner of certain patent rights and
know-how relating to Immunoassay Constructs to Quantitate
Glucosylated-Hemoglobin and other Glucosylated Serum Proteins (NU 8403) and has
the right to grant licenses hereunder, subject only to a royalty-free,
nonexclusive license heretofore granted to the United States Government;
WHEREAS, Northwestern desires to have the patent rights and know-how
developed and commercialized to benefit the public and is willing to grant a
license hereunder;
WHEREAS, Licensee has represented to Northwestern that Licensee will
commit itself to a thorough, vigorous and diligent program to develop and
subsequently manufacture, market and sell products utilizing the patent rights
and know-how;
WHEREAS, Licensee desires to obtain a license under the patent
rights and know-how upon the terms and conditions hereafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the Parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Affiliate" shall mean any corporation, firm, partnership or other
entity which controls, is controlled by or is under common control with a Party.
For the purposes of this definition, "control" shall mean any right or
collection of rights that together allow direction on any vote with respect to
any action by an entity or the direction of management and operations of that
entity. Such right or collection of rights includes without limitation (a) the
authority to act as sole member or shareholder or partner with a majority
interest in an entity; (b) a majority interest in an entity; and (c) the
authority to appoint, elect, or approve at least a majority of the governing
board of that entity.
1.2 "Field" shall mean the use of immunoassays for diagnostic purposes to
quatitate hemoglobin type A1c..
1.3 "Know-How" shall mean any and all technical information existing as of
the Effective Date or generated during the term of this Agreement which is owned
or controlled by Northwestern and directly relates to Licensed Products and
shall include, without limitation, all biological, chemical, pharmaceutical,
pharmacological, toxological, clinical, assay control and manufacturing data and
any other information relating to the Licensed Products and useful for the
development, Regulatory Approval, commercialization or safety and effectiveness
of the Licensed Products.
1.4 "Licensed Products" shall mean diagnostic assays for determining
hemoglobin type A1c.
1.5 "Net Sales" shall mean the gross amount invoiced by Licensee, its
Affiliates or its sublicensees, to third parties for the sale of Licensed
Products, less amounts actually invoiced or allowed with respect to trade
credits, discounts, rebates and allowances actually granted on account of price
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adjustments, rebate programs, billing errors or the rejection or return of
goods, sales taxes, tariffs, and custom duties. If a Licensed Product is sold as
part of a combination, Net Sales for the purposes of determining royalties on
the Licensed Product(s) in the combination shall be calculated by multiplying
Net Sales by the fraction A/A+B, where A is the invoice price of the Licensed
Product(s) sold separately and B is the invoice price of the other active
ingredients in the combination.
1.6 "Patent Rights" shall mean the patents and patent applications listed
on Exhibit A attached hereto and incorporated herein by reference, and any
patents which issue from the patent applications listed on Exhibit A attached
hereto and incorporated herein by reference, and all substitutions, additions,
extensions, reissues, renewals, divisions, continuations and
continuations-in-part thereof and any foreign counterparts thereto.
1.7 "Regulatory Approval" shall mean the approval of either the Food Drug
Administration of the United States or a foreign counterpart thereto required to
commence commercial sale of a Licensed Product in such country in the Territory.
1.8 "Territory" shall mean the entire world.
ARTICLE II - GRANT
2.1 Northwestern hereby grants to Licensee and its Affiliates an exclusive
license under Patent Rights and Know-How to make, have made, use, import, offer
for sale and sell Licensed Products in the Territory in the Field.
2.2 The grant under Paragraph 2.1 shall be subject to the obligations of
Northwestern and of Licensee to the United States Government under any and all
applicable laws, regulations, and executive orders including those set forth in
35 U.S.C. ss.200, et seq.
2.3 Northwestern retains the right to utilize Patent Rights and Know-How
for noncommercial research purposes.
2.4 Northwestern hereby grants to Licensee the right to grant sublicenses
consistent with this Agreement provided that Licensee shall be responsible for
the performance of its sublicensees, including the payment of royalties.
ARTICLE III - CONFIDENTIAL INFORMATION
3.1 Northwestern and Licensee each agree that all information contained in
documents marked "Confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this Agreement, and
not disclosed by the recipient (except as required by law or court agency or
administrative order), its agents or employees to any third party without the
prior written consent of an authorized officer of the disclosing Party, unless
such information (a) was in the public domain at the time of disclosure, (b)
later became part of the public domain through no act or omission of the
recipient, its employees, agents, successors or assigns, (c) was lawfully
disclosed to the recipient by a third party having the right to disclose it, (d)
was already known by the recipient at the time of disclosure, (e) was
independently developed, (f) is required by law or court or administrative
agency order, or (g) is required to be submitted to a government agency to
obtain and maintain the approvals and clearances of Licensed Products.
Disclosure may also be made to Affiliates, distributors, customers, and agents,
to nonclinical and clinical investigators, and to consultants, where necessary
or desirable with appropriate safeguards to protect the confidential underlying
disclosure. Northwestern and Licensee also agree that confidential information
may be orally disclosed by one Party to the other Party. Such information shall
be confirmed in writing and designated "Confidential" within thirty (30) days of
disclosure for the provisions of this Article III to apply.
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3.2 Each Party's obligation of confidence hereunder shall be fulfilled by
using at least the same degree of care with the other Party's confidential
information as it uses to protect its own confidential information. This
obligation shall exist while this Agreement is in force and for a period of two
(2) years thereafter except in the event of termination by Northwestern for
breach on the part of Licensee, in which event Licensee's obligation to maintain
the information confidential will exist for a period often (10) years after the
termination for breach.
3.3 This Agreement may be distributed solely (a) to those employees,
agents and independent contractors of Northwestern and Licensee who have a need
to know its contents, (b) to those persons whose knowledge of its contents will
facilitate performance of the obligations of the parties under this Agreement,
(c) to those persons, if any, whose knowledge of its contents is essential in
order to permit Licensee or Northwestern to maintain or secure the benefits
under policies of insurance, or (d) as may be required by law or regulation or
by court or administrative agency order.
ARTICLE IV - DUE DILIGENCE
4.1 Licensee shall, upon execution of this Agreement, submit to
Northwestern a preliminary development and business plan that sets forth an
outline of Licensee's intended efforts to develop and commercialize Licensed
Products. Such plan shall include a summary of personnel, expenditures and
estimated timing for the development of Licensed Products and estimates of the
market potential for Licensed Products.
4.2 Licensee agrees to devote that level of resources to the
commercialization of a Licensed Product as other companies in the industry
customarily devote to products of similar commercial potential.
ARTICLE V - PAYMENT
In consideration of the license granted by Northwestern to Licensee under
this Agreement, Licensee shall pay to Northwestern the following:
5.1 A non-creditable, non-refundable license issue fee of Twenty Thousand
Dollars ($20,000), of which the first ten thousand dollars ($10,000) shall be
paid within thirty (30) days of execution of this Agreement, and ten thousand
dollars ($10,000) shall be paid within three (3) months from the Effective Date,
but no later than August 1, 1998.
5.2 Beginning the first full calendar year after the Regulatory Approval
of a Licensed Product in a major market country, or the year 2003, whichever
comes first, Licensee shall pay to Northwestern minimum royalty payments of
$10,000 per year. Any such minimum royalty payments shall be fully creditable
against any payments required under Paragraph 5.4.
5.4 A running royalty of (a) six percent (6%) of Net Sales of Licensed
Products for the first Ten Million Dollars ($10,000,000) in sales anywhere in
the world, and (b) four percent (4%) of Net Sales of Licensed Products on sales
exceeding Ten Million Dollars anywhere in the world.
5.5 For all sublicenses granted by Licensee, a royalty at the rate of
thirty five percent (35%) of all royalties earned by Licensee under such
sublicenses.
5.5 In addition to the running royalties under Paragraph 5.4, ten percent
(10%) of any payments, including, but not limited to, sublicense issue fees or
milestones received from sublicensees as consideration for Patent Rights,
Know-How or Licensed Products.
5.6 In the event of a permitted assignment of this Agreement, five percent
(5%) of any payments received from such assignee as consideration for Patent
Rights, Know-How or Licensed Products, as defined herein.
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ARTICLE VI - PAYMENT, REPORTS AND RECORDS
6.1 Payment Dates and Reports
Within sixty (60) days after the end of each calendar quarter of
each year during the term of this Agreement (including the last day of any
calendar quarter following the expiration of this Agreement), Licensee shall pay
to Northwestern, all royalties accruing during such calendar quarter. Such
payments shall be accompanied by a statement showing the Net Sales of each
Licensed Product by Licensee and its sublicensees in each country, the
applicable royalty rate and the calculation of the amount of royalty due.
6.2 Accounting
a. Payments in U.S. Dollars
All dollar sums referred to in this Agreement are expressed in
U.S. dollars and the Net Sales used for calculating the royalties and other sums
payable to Northwestern by Licensee pursuant to Paragraph 6.1 shall be computed
in U.S. dollars. All payments of such sums and royalties shall be made in U.S.
dollars. For purposes of determining the amount of royalties due, the amount of
Net Sales in any foreign currency shall be computed by converting such amount
into U.S. dollars at the prevailing commercial rate of exchange for purchasing
U.S. dollars with such foreign currency in question as quoted by Citibank in New
York on the last business day of the calendar quarter for which the relevant
royalty payment is to be made by Licensee.
b. Blocked Royalties
Notwithstanding the foregoing, if by reason of any restrictive
exchange laws or regulations Licensee or any Affiliate or sublicensee hereunder
shall be unable to convert to U.S. dollars an amount equivalent to the royalty
payable by Licensee hereunder in respect of Licensed Product sold for funds
other than U.S. dollars, Licensee shall notify Northwestern promptly with an
explanation of the circumstances. In such event, all royalties due hereunder in
respect of the transaction so restricted (or the balance thereof due hereunder
and not paid in funds other than U.S. dollars as hereinafter provided) shall be
deferred and paid in U.S. dollars as soon as reasonably possible after, and to
the extent that such restrictive exchange laws or regulations are lifted so as
to permit such conversion to United States dollars, of which lifting Licensee
shall promptly notify Northwestern. At its option, Northwestern shall meanwhile
have the right to request the payment (to it or to a nominee), and upon such
request Licensee shall pay, or cause to be paid, all such amounts (or such
portions thereof as are specified by Northwestern) in funds, other than U.S.
dollars, designated by Northwestern and legally available to Licensee under such
then existing restrictive exchange laws or regulations.
6.3 Records
Licensee shall keep, and shall cause its Affiliates and sublicensees
to keep, for three (3) years from the date of payment of royalties, complete and
accurate records of sales of each Licensed Product by Licensee; its Affiliates
and its sublicensees in sufficient detail to enable the accruing royalties to be
determined accurately. Northwestern shall have the right during this period of
three (3) years after receiving any report with respect to royalties due and
payable to appoint, at its expense, an independent certified public accountant
to inspect the relevant records of Licensee, its Affiliates and its sublicensees
to verify such report. Northwestern shall submit the name of said accountant to
Licensee for approval; said approval shall not be unreasonably withheld.
Licensee shall make its records and those of its Affiliates and sublicensees
available for inspection by such independent certified public accountant during
regular business hours at such place or places where such records are
customarily kept, upon reasonable notice from Northwestern, to the extent
necessary to verify the accuracy of the reports and
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payments with not more than one (1) inspection per calendar year. Northwestern
agrees to hold in strict confidence all information concerning royalty payments
and reports, and all information learned in the course of any audit or
inspection, except to the extent necessary for Northwestern to reveal such
information in order to enforce its rights under this Agreement or as may be
required by law. If royalties are understated by ten percent (10%) or more in
LICENSEE's favor, the LICENSEE shall, within ten (10) days of receipt of the
audit report, pay the balance due Northwestern plus all reasonable costs of the
audit or inspection and interest at the prime rate as quoted by Citibank in New
York from the date at which such balance would have otherwise been due and
payable. If royalties are understated by less than ten percent (10%), Licensee
shall include such understated amount with the next scheduled payment pursuant
to Paragraph 6.1.
ARTICLE VII - PUBLICATION
Northwestern will be free to publish the results of any research related
to Patent Rights, Know-How or Licensed Products and use any information for
purposes of research, teaching, and other educationally-related matters.
ARTICLE VIII - PATENT PROSECUTION
8.1 Northwestern has granted Licensee the right to apply for, seek prompt
issuance of, and maintain during the term of this Agreement the Patent Rights in
the United States and in the foreign countries listed in Exhibit A hereto. The
prosecution, filing and maintenance of all Patent Rights shall be the primary
responsibility of Licensee; provided, however, Northwestern shall have
reasonable opportunities to advise Licensee and shall cooperate with Licensee in
such prosecution, filing and maintenance.
8.2 Payment of all fees and costs relating to the filing, prosecution, and
maintenance of Patent Rights shall be the responsibility of Licensee, whether
such fees and costs were incurred before or after the Effective Date.
ARTICLE IX - INFRINGEMENT
9.1 Licensee shall inform Northwestern promptly in writing of any alleged
infringement of the Patent Rights by a third party and of any available evidence
thereof.
9.2 During the term of this Agreement, Northwestern shall have the right,
but shall not be obligated, to prosecute at its own expense all infringements of
the Patent Rights and, in furtherance of such right, Licensee hereby agrees that
Northwestern may include Licensee as a party plaintiff in such suit, without
expense to Licensee. The total cost of any such infringement action commenced or
defended solely by Northwestern shall be borne by Northwestern and Northwestern
shall keep any recovery or damages for past infringement derived therefrom.
9.3 If within six (6) months after having been notified of any alleged
infringement, Northwestern shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if Northwestern shall notify
Licensee at any time prior thereto of its intention not to bring suit against
any alleged infringer, then, and in those events only, Licensee shall have the
right, but shall not be obligated, to prosecute at its own expense any
infringement of the Patent Rights, and Licensee may, for such purposes, use the
name of Northwestern as party plaintiff; provided, however, that such right to
bring such infringement action shall remain in effect only for so long as the
license granted herein remains exclusive. No settlement, consent judgment or
other voluntary final disposition of the suit may be entered into without the
consent
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of Northwestern, which consent shall not unreasonably be withheld. Licensee
shall indemnify Northwestern against any order for costs that may be made
against Northwestern in such proceedings. Licensee shall keep any recovery or
damages for past infringement derived therefrom; provided, however, that such
recovery, less expenses, including reasonable attorneys' fees, shall be treated
as Net Sales for the purpose of calculating running royalties under Paragraph
5.4
9.4 In the event that a declaratory judgment action alleging invalidity or
noninfringement of any of the Patent Rights shall be brought against Licensee,
Northwestern, at its option, shall have the right, within thirty (30) days after
it receives notice of the commencement of such action, to intervene and take
over the sole defense of the action at its own expense.
9.5 In any infringement suit that either Party may institute to enforce
the Patent Rights pursuant to this Agreement, the other party hereto shall, at
the request and expense of the Party initiating such suit, cooperate in all
respects and, to the extent possible, have its employees testify when requested
and make available relevant records, papers, information, samples, specimens,
and the like.
9.6 Licensee, during the term of this Agreement, shall have the sole right
in accordance with the terms and conditions herein to sublicense any alleged
infringer for future use of the Patent Rights. Any upfront fees as part of such
a sublicense shall be shared equally between Licensee and Northwestern; other
royalties shall be treated pursuant to Paragraph 5.4.
ARTICLE X - PRODUCT LIABILITY
10.1 Licensee shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold Northwestern, its trustees, directors,
officers, employees and Affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to any person
or persons or out of any damage to property, or resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of the Licensed
Product(s) or arising from any obligation of Licensee hereunder.
10.2 Licensee and sublicensees involved in activities described in section
10.1 shall obtain and carry in full force and effect commercial, general
liability insurance which shall protect Licensee and Northwestern with respect
to events covered by paragraph 10.1 above. Such insurance shall be written by a
reputable insurance company authorized to do business in the State of Illinois,
shall list Northwestern as an additional named insured thereunder, shall be
endorsed to include product liability coverage and shall require thirty (30)
days written notice to be given to Northwestern prior to any cancellation or
material change thereof. The limits of such insurance shall not be less than
Five Million Dollars ($5,000,000) per occurrence with an aggregate of Fifteen
Million Dollars ($15,000,000) for personal injury or death, and One Million
Dollars ($1,000,000) per occurrence with an aggregate of Three Million Dollars
($3,000,000) for property damage. Licensee shall provide Northwestern with
Certificates of Insurance evidencing the same.
10.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NORTHWESTERN, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES MAKE
NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR PENDING AND
THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN
THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY
NORTHWESTERN THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER
SHALL NOT
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INFRINGE THE PATENT RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL NORTHWESTERN,
ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR
INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER NORTHWESTERN SHALL BE
ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY.
ARTICLE XI- TERM AND TERMINATION
11.1 This Agreement shall become effective on the Effective Date. Unless
sooner terminated as provided for below, this Agreement shall continue in
effect, on a country-by-country basis, until (a) the expiration of the last to
expire of any Patent Rights, or (b) ten (10) years from the date of the first
commercial sale in countries where no Patent Rights exist.
11.2 Licensee shall have the right to terminate this Agreement in whole or
in part anytime after three (3) years from the Effective Date by giving
Northwestern ninety (90) days written notice.
11.3 Northwestern shall have the right to terminate or render this license
non-exclusive at any time after three (3) years from the Effective Date if, in
Northwestern's reasonable judgement, Licensee a) has not put the Licensed
Product into commercial use in the Territory in the Field, directly or through a
sublicensee, thereby not making the Licensed Product available to the public, or
b) is not demonstrably engaged in research, development, manufacturing,
marketing, as appropriate, directed towards this end.
11.4 The provisions of Article III (Confidentiality), Article VI
(Payments, Reports and Records), Article X (Product Liability) and Article XIII
(Dispute Resolution) shall survive termination or expiration of this Agreement
in accordance with their terms.
11.5 If (1) either Party breaches any material obligation imposed by this
Agreement; (2) either Party makes any general assignment for the benefit of its
creditors; (3) a petition is filed by or against either Party, or any proceeding
is initiated against either Party as a debtor, under any bankruptcy or
insolvency law, unless the laws then in effect void the effectiveness of this
provision; or (4) a receiver, trustee, or any similar officer is appointed to
take possession, custody, or control of all or any part of either Party's assets
or property, then the other Party may, at its option, send a written notice that
it intends to terminate the license granted by this Agreement.
11.6 If the Party in breach does not cure the breach, negate the
assignment, obtain a dismissal of the proceeding, or have the appointment
vacated and regaining its assets within ninety (90) days from the notice date,
then the other Party shall have the right to terminate the license granted
immediately upon the date of mailing of a written notice of termination to the
Party in breach.
11.7 Upon termination of this Agreement for any cause, nothing herein
shall be construed to release either Party of any obligation that has matured
prior to the effective date of such termination. Licensee may, after the date of
such termination, sell all Licensed Products that it may have on hand at the
date of termination, provided that it pays the earned royalty thereon as
provided in this Agreement.
11.8 In the event of termination for breach by Licensee, Licensee agrees
to no longer use any of the Patent Rights or Know-How under which it has been
granted a license and will turn over and assign to Northwestern its Regulatory
Approvals and data and material related to price and Regulatory Approvals at no
charge with the right to sublicense.
11.9 Upon termination of this Agreement, any and all existing sublicense
agreements shall be immediately assigned to Northwestern and Northwestern agrees
to keep them in force to the extent that Northwestern is capable of performing
as a licensor in place of Licensee.
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ARTICLE XII - ASSIGNMENT
This Agreement shall not be assignable by either Party without the prior
written consent of the other, except that any Party may assign this Agreement to
any Affiliate, to a successor in interest (including the surviving company in
any consolidation or merger), or to an assignee of substantially all the
business and assets of such Party, or with respect to Licensee, to an assignee
of all or substantially all of the business to which this Agreement relates.
ARTICLE XIII - DISPUTE RESOLUTION
13.1 The Parties agree to effect all reasonable efforts to resolve any and
all disputes between them in connection with this Agreement in an amicable
manner.
13.2 The Parties agree that any dispute that arises in connection with
this Agreement and which cannot be amicably resolved by the parties shall be
resolved by binding Alternative Dispute Resolution (ADR) in the manner set forth
in Paragraph 13.3 through Paragraph 13.5.
13.3 If a Party intends to begin ADR to resolve a dispute, such Party
shall provide written notice to the other Party informing the other Party of
such intention and the issues to be resolved. Within ten (10) business days
after its receipt of such notice, the other Party may, by written notice to the
Party initiating ADR, add additional issues to be resolved. If the Parties
cannot agree upon the selection of a neutral within twenty (20) business days
following receipt of the original ADR notice, a neutral shall be selected by the
then President of the Center for Public Resources (CPR), 680 Fifth Avenue, New
York, New York 10019. The neutral shall be a single individual having experience
in the biotechnology industry who shall preside in resolution of any disputes
between the Parties. The neutral selected shall not be an employee, director or
shareholder of either Party or an Affiliate or sublicensee.
13.4 Each Party shall have ten (10) business days from the date the
neutral is selected to object in good faith to the selection of that person. If
either Party makes such an objection, the then President of the CPR shall, as
soon as possible thereafter, select another neutral under the same conditions as
set forth above. This second selection shall be final.
13.5 The ADR shall be conducted in the following manner:
(a) No later than forty-five (45) business days after selection, the
neutral shall hold a hearing to resolve each of the issues identified by the
Parties.
(b) At least five (5) days prior to the hearing, each Party must
submit to the neutral and serve on the other Party a proposed ruling on each
issue to be resolved. Such proposed ruling shall contain no argument on or
analysis of the facts or issues, and shall be limited to not more than fifty
(50) pages.
(c) The neutral shall not require or permit any discovery by any
means, including depositions, interrogatories or production of documents.
(d) Each Party shall be entitled to no more than eight (8) hours of
hearing to present testimony or documentary evidence. The testimony of both
Parties shall be presented during consecutive calendar days. Such time
limitation shall apply to any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the Party conducting such direct, cross
or rebuttal testimony. It shall be the responsibility of the neutral to
determine whether the parties have had the eight (8) hours to which each is
entitled.
(e) Each Party shall have the right to be represented by counsel.
The neutral shall have the sole discretion with regard to the admissibility of
any evidence.
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(f) The neutral shall rule on each disputed issue within thirty (30)
days following the completion of the testimony of both Parties. Such ruling
shall adopt in its entirety the proposed ruling of one of the parties on each
disputed issue.
(g) ADR shall take place in Chicago, Illinois. All costs incurred
for a hearing room shall be shared equally between the Parties.
(h) The neutral shall be paid a reasonable fee plus expenses, which
fees and expenses shall be shared equally by the Parties.
(i) The ruling shall be binding on the Parties and may be entered as
an enforceable judgment by a state or federal court having jurisdiction of the
Parties.
13.6 This Section XIII shall survive any termination of this Agreement.
ARTICLE XIV - NOTICES AND PAYMENTS
Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such Party
by certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other Party:
In the case of Northwestern: Director
Technology Transfer Program
Northwestern University
1801 Maple Avenue
Evanston, Illinois 60201
In the case of Licensee: Mr. Stephen Thompson
President & CEO
Immtech International Inc.
1890 Maple Avenue
Evanston, Illinois 6~)201
ARTICLE XV - GENERAL
15.1 Force Majeure. Neither party shall be liable to the other for its
failure to perform any of its obligations under this Agreement, except for
payment obligations, during any period in which such performance is delayed
because rendered impracticable or impossible due to circumstances beyond its
reasonable control, including without limitation earthquakes, governmental
regulation, fire, flood, labor difficulties, interruption of supply of key raw
materials, civil disorder, and acts of God, provided that the Party experiencing
the delay promptly notifies the other Party of the delay.
15.2 Severability. In the event any provision of this Agreement is held to
be invalid or unenforceable, the valid or enforceable portion thereof and the
remaining provisions of this Agreement will remain in full force and effect.
15.3 Applicable Law. This Agreement is made in accordance with and shall
be governed and construed under the laws of the State of Illinois, excluding its
choice of law rules.
15.4 Entire Agreement. This Agreement and the exhibits attached hereto
constitute the entire, final, complete and exclusive agreement between the
Parties and supersede all previous agreements or representations, written or
oral, with respect to the subject matter of this Agreement. This Agreement may
not be modified or amended except in a writing signed by a duly authorized
representative of each Party.
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15.5 Headings. The headings for each article and section in this Agreement
have been inserted for convenience or reference only and are not intended to
limit or expand on the meaning of the language contained in the particular
article or section.
15.6 Independent Contractors. The Parties are not employees or legal
representatives of the other party for any purpose. Neither Party shall have the
authority to enter into any contracts in the name of or on behalf of the other
Party.
15.7 Advertising. Licensee shall not use the name of any inventor of
Northwestern University, of any institution with which the inventor has been or
is connected, nor the name of Northwestern in any advertising, promotional or
sales literature, without prior written consent obtained from Northwestern in
each case.
15.8 Waiver. Any waiver (express or implied) by either Party of any breach
of this Agreement shall not constitute a waiver of any other or subsequent
breach.
15.9 Counterparts. This Agreement may be executed in counterparts with the
same force and effect as if each of the signatories had executed the same
instrument.
15.10 Patent Marking. Licensee agrees to mark the Licensed Products sold
in the United States with all applicable United States patent numbers. All
Licensed Products shipped to or sold in other countries shall be marked in such
a manner as to conform with the patent laws and practice of the country of
manufacture or sale.
In Witness Whereof, the Parties have executed this Agreement effective on
the date first set forth above.
LICENSEE NORTHWESTERN
By: /s/ T. Stephen Thompson By: /s/ Lydia Villa-Komaroff
--------------------------- -------------------------------
Name: T. Stephen Thompson Name: LYDIA VILLA-KOMAROFF
-------------------------- ------------------------------
Title: President & CEO Title: VICE PRESIDENT FOR RESEARCH
------------------------- AND GRADUATE STUDIES
----------------------------
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EXHIBIT A
Immunoassay of Glycosylated Proteins Employing Antibody
Directed to Reductively Glycosylated N-Terminal Amino Acids
Lyman E. Davis, Byron Anderson
U. S. Patent No. 5,484,735 - Issued: January 16, 1996
LICENSE AGREEMENT
This AGREEMENT made this 27th day of October, 1994 by and between
NORTHWESTERN UNIVERSITY ("NORTHWESTERN"), an Illinois corporation having a
principal office at 633 Clark Street, Evanston, Illinois 60208, and IMMTECH
INTERNATIONAL INC. ("COMPANY"), a Delaware corporation having a principal office
at 1890 Maple Avenue, Suite 110, Evanston, Illinois 60201 (hereinafter
"IMMTECH").
WITNESSETH THAT:
WHEREAS, NORTHWESTERN represents that Samar Makhlouf, Mark Pankow,
and Byron Anderson (the Inventors) all being employees of NORTHWESTERN at the
time of the invention, have made certain inventions in the field of "Immunoassay
for Identifying Alcoholics and Monitoring Alcohol Consumption" (NU 9134), and
that a patent has been applied for thereon, having United States Serial Number
07/765,169 in September 1991.
WHEREAS, NORTHWESTERN, subject to U.S. government obligations has
the right to make, use, sell, and grant licenses under the INVENTION and PATENT
RIGHTS as defined herein; and NORTHWESTERN wishes to have the INVENTION, as
defined by the PATENT RIGHTS, utilized for the public interest; and
WHEREAS IMMTECH desires to obtain a license to manufacture, sell,
and use the INVENTION and PATENT RIGHTS defined herein and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the faithful
performance of the covenants contained herein, IT IS AGREED:
1.0 DEFINITIONS
For the purposes of this Agreement, and solely for that purpose, the
terms hereinafter set forth shall be defined as follows:
1.1 "INVENTION" shall mean the invention as described in EXHIBIT A,
and/or as covered in the PATENT RIGHTS and/or TECHICAL INFORMATION
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1.2 "PATENT RIGHTS" shall mean any United States patent for the
INVENTION together with any divisional, continuation, or other
continuation-in-part applications based thereon, and any patents resulting from
any of said applications, and any reissues or extensions based on any such
patents, and any foreign counterparts pending or issued thereof.
1.3 "LICENSED PRODUCT" shall mean any products or processes
employing any INVENTION as described in EXHIBIT A, or as described by any valid
claim in an unexpired patent, which patent application or patent is included in
the PATENT RIGHTS.
1.4 "FIELD OF USE" shall mean the exclusive use of the INVENTION and
PATENT RIGHTS for QUANTITATIVE diagnostics.
1.5 "NET SALES PRICE" shall mean the gross sales price of any
LICENSED PRODUCT made and sold pursuant to this Agreement, less allowances to
customers for damaged or returned products and the amounts of discounts,
transportation charges, and all sales and excise taxes and duties paid,
absorbed, or allowed.
1.6 "AFFILIATE" shall mean any corporation or other legal entity (a)
owning or controlling, directly or indirectly, more than fifty percent of the
voting capital shares of IMMTECH, (b) more than fifty percent of the voting
capital shares of which are owned or controlled, directly or indirectly, by
IMMTECH; or (c) more than fifty percent of the voting capital shares of which
are owned or controlled, directly or indirectly, by a legal entity which owns or
controls, directly or indirectly more than fifty percent of the voting capital
shares of IMMTECH.
1.7 "QUANTITATIVE DIAGNOSTICS" shall mean the use of immunoassays
that yield a quantitative answer and are generally performed via enzyme-linked
antibody methodology.
1.8 "TECHNICAL INFORMATION" shall mean NORTHWESTERN's technical
information and know-how relating to the INVENTION, including technical data,
plans, specifications, and drawings.
2.0 LICENSE
2.1 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the terms and
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conditions herein specified, a worldwide, exclusive, and non-assignable (except
as herein specified) License to use the INVENTION and PATENT RIGHTS to test,
evaluate, and develop the INVENTION and LICENSED PRODUCT covered hereby and to
make, have made, use and sell the products in the FIELD OF USE thereof during
the term of this Agreement, and during the term of any extension thereof, unless
sooner terminated as hereinafter provided.
2.2 NORTHWESTERN hereby grants to IMMTECH and IMMTECH hereby accepts
from NORTHWESTERN, upon the terms and conditions herein specified, the right to
extend the License granted hereunder to its sublicensee(s). IMMTECH shall
promptly notify NORTHWESTERN in writing that a sublicense has been granted no
later than thirty (30) days after the effective date of the sublicense. IMMTECH
may negotiate such terms as it chooses for each sublicense, provided that
NORTHWESTERN shall receive a royalty for all sales made by sublicensee(s) at the
rate provided for in this Agreement.
2.3 If IMMTECH shall so notify NORTHWESTERN in writing as provided
in Section 2.2 of this Agreement, any sublicensee(s) to whom the License shall
have been extended pursuant to Section 2.2. hereof may make the reports and
royalty payments specified in Paragraph 3.0. hereof directly to Northwestern on
behalf of IMMTECH. For all other sublicensees, IMMTECH shall make said royalty
payments to Northwestern. For all sublicensees, Northwestern shall notify
IMMTECH and/or the smblicensee of the address to which payment should be sent.
2.4 NORTHWESTERN retains a non-exclusive, royalty-free, irrevocable
License to make, have made and use the INVENTION, PATENT RIGHTS and LICENSED
PRODUCT for its own non-commercial uses.
2.5 Outside the scope of the License between NORTHWESTERN and
IMMTECH no other, further, or different license or right, and no further power
to sublicense is hereby granted or implied.
3.0 ROYALTIES, RECORDS AND REPORTS
3.1 During the term of this Agreement, unless sooner terminated,
IMMTECH shall pay to NORTHWESTERN, in the manner hereinafter provided, earned
royalties at the rate of six percent (6%) of the NET SALES PRICE of all LICENSED
PRODUCT sold by IMMTECH, for the first Ten Million Dollars ($10,000,000) sales,
and at the rate of four percent (4%) for
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sales exceeding Ten Million Dollars, anywhere in the world.
3.2 IMMTECH shall pay to NORTHWESTERN with respect to all
sub-licenses granted by IMMTECH hereunder, a royalty at the rate of thirty
percent (30%) of all royalties earned by IMMTECH under such sub-licenses.
3.3 LICENSED PRODUCT shall be considered sold when sold or invoiced,
and if not sold or invoiced, when delivered to a third party.
3.4 IMMTECH shall be responsible for the performance hereunder of
all obligations including payment of royalties, keeping of records, and
reporting by IMMTECH and any sublicensee(s) to whom the License shall have been
extended pursuant to this Agreement.
3.5 So long as this Agreement remains in force, IMMTECH shall
deliver to NORTHWESTERN, within sixty (60) days after the first day of January,
April, July and October of each year, a true and accurate report, giving such
particulars of the business conducted by IMMTECH and its sublicensee(S) during
the preceding three (3) months under this Agreement as are necessary to
accurately account for sales subject to royalties under this Agreement.
3.6 Simultaneously with the delivery of each report required by the
preceding paragraph 3.4, IMMTECH shall pay to NORTHWESTERN the net royalties and
any other such payment due under this Agreement for the period covered by such
report. If no royalties are due, it shall be so reported.
3.7 All payments from IMMTECH to NORTHWESTERN shall be in U.S.
dollars. Royalties for sales made by IMMTECH in foreign currencies shall be paid
to Northwestern in U.S. Dollars at a conversion rate equal to the quarter
average of daily composite closing exchange rates for the quarter in which sales
were made as published by the Wall Street Journal.
3.8 In case of any delay in payment by IMMTECH to NORTHWESTERN not
occasioned by force majeure, interest at the rate of one percent (1%) per month,
assessed from the thirty-first day after the due date of said payment, shall be
due by IMMTECH without any special notice.
3.9 Royalties shall accrue in accordance with this Agreement, upon
the first sale of LICENSED PRODUCT.
3.10 IMMTECH shall keep full, true, and accurate
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books of account containing all particulars which may be necessary for the
purpose of showing the amount payable to NORTHWESTERN by way of royalty as
aforesaid or by way of any other provision hereunder. Said books of account
shall be kept at IMMTECH'S principal place of business. Said books and the
supporting data shall be available for inspection by Northwestern at reasonable
times upon reasonable notice to IMMTECH for three (3) years following the end of
the calendar year to which they pertain, to inspection by NORTHWESTERN for the
purpose of verifying IMMTECH'S royalty statements, or IMMTECH'S compliance in
other respects with this Agreement.
3.11 IMMTECH shall reimburse NORTHWESTERN for all out-of-pocket
costs of filing, prosecution and maintenance for all patent applications and all
patents issuing thereon filed and made at the request of IMMTECH. All such
patents and patent applications shall become part of the PATENT RIGHTS licensed
to IMMTECH hereunder. Such reimbursements shall be made to NORTHWESTERN within
sixty (60) days of receipt of invoice by IMMTECH. Any reimbursements made by
IMMTECH hereunder shall be creditable by IMMTECH in full against royalty payable
by it pursuant to Article 3.1 above.
4.0 AUDITING
4.1 NORTHWESTERN and its representatives will be entitled, upon the
provision of reasonable notice to IMMTECH, to cause a certified public
accountant ("CPA") reasonably acceptable to IMMTECH, to audit such records of
IMMTECH. Such audits shall occur during regular business hours, at the audited
party's place of business, and not more frequently than twice per year, nor more
than twice with respect to any fiscal year. Each such audit shall be designed
solely to determine correct amounts payable by one party to the other pursuant
to the terms of this Agreement, and to answer specific additional questions to
be mutually agreed upon by both parties. While such audit may disclose
information relating to the nature of goods sold and the sales price of said
goods, under no circumstances shall IMMTECH be required to disclose any
confidential information not directly relevant to the calculation of royalties.
The CPA will be under confidentiality obligations to the audited party to
disclose to the auditing party only the correct amounts payable or receivable by
the auditing party, and the answers to such specific agreed upon questions. In
the event that an audit reveals any underpayment or undercredit or royalties
and/or milestone payments by IMMTECH subject to the provisions herein, IMMTECH
will promptly pay or credit to NORTHWESTERN, as the case may be, the full
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amount of that underpayment or undercredit, together with interest thereon at a
rate of one percent (1%) per month, assessed from the thirty-first day after
said payment was due. In the event that the audit reveals an underpayment or
undercredit of in excess of five percent (5%), IMMTECH or sublicensee, as the
case may be, will promptly pay the entire cost of that audit.
5.0 PERFORMANCE
5.1 IMMTECH shall use its commercially reasonable efforts to
commence and maintain regular commercial production and sale of LICENSED
PRODUCT.
5.2 IMMTECH shall employ its commercially reasonable efforts to
develop Licensed Products, and, consistent with prudent and reasonable business
practices, to apply for and obtain approval from the FDA for the use and sale of
Licensed Products and to market Licensed Products after such approval is
obtained.
5.3 IMMTECH shall use commercially reasonable efforts consistent
with prudent business practice to pursue any necessary studies and to seek
approvals in countries other than the United States of America to market
Licensed Products.
5.4 IMMTECH shall use commercially reasonable efforts, and shall
cause its Affiliates to use their respective commercially reasonable efforts, to
market Licensed Products after appropriate regulatory approval is obtained.
5.5 NORTHWESTERN, at its discretion, and with the consent of
IMMTECH, may utilize IMMTECH'S patent expertise by requesting advice and
assistance from IMMTECH on the preparation, filing, prosecution and maintenance
of any patent application or patent related directly to the LICENSED PRODUCT.
IMMTECH agrees to provide such patent assistance and advice to NORTHWESTERN.
IMMTECH does not warrant the results of any legal and/or patent advice offered
to NORTHWESTERN pursuant to this Agreement. All final decisions regarding the
course of preparation, filing, prosecution and maintenance shall rest with
NORTHWESTERN in its sole discretion.
6.0 TERM AND EXTENSION
6.1 This License shall continue until the expiration of the last to
expire of any patents under PATENT RIGHTS, or
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for ten (10) years after date of execution of this Agreement in the event no
patent issues.
7.0 TERMINATION
7.1 If IMMTECH shall become bankrupt or insolvent and/or if the
business of IMMTECH shall be placed in the hands of a Receiver, Assignee, or
Trustee, whether by the voluntary act of IMMTECH or otherwise, this License will
be deemed to have automatically terminated as of a date seven (7) days prior to
that event, provided, however, that such termination shall not terminate any
obligations which may have accrued prior thereto.
7.2 Notwithstanding the provisions of Article 5.1, upon any breach
or default under this Agreement by IMMTECH, NORTHWESTERN may terminate this
License by sixty (60) days written notice by registered mail to IMMTECH. Said
notice shall become effective at the end of said period, unless during said
period IMMTECH shall cure such breach or default and notify NORTHWESTERN
thereof.
7.3 IMMTECH may terminate this License at any time upon ninety (90)
days written notice by registered mail to NORTHWESTERN.
7.4 Upon termination of this License for any reason, all rights
granted hereunder shall revert to NORTHWESTERN for the sole benefit of
NORTHWESTERN.
7.5 IMMTECH's termination of this License shall not operate to
terminate any sublicenses made by IMMTECH hereunder. The rights of any and all
said sublicensee(s) shall be preserved on the condition that said sublicensee(s)
agrees to and performs all terms and conditions of IMMTECH pursuant to this
Agreement.
7.6 IMMTECH's responsibilities and obligations to report to
NORTHWESTERN and pay royalties to NORTHWESTERN as to any LICENSED PRODUCTS
produced or sold by IMMTECH or its sublicensees under this Agreement prior to
termination or expiration hereof shall survive such termination or expiration.
7.7 In the event that this Agreement is terminated by either party,
IMMTECH agrees to provide NORTHWESTERN with names and addresses of sublicensees
and copies of all Sublicense Agreements between IMMTECH and sublicensees.
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8.0 ASSIGNMENT
8.1 This Agreement may be assigned by NORTHWESTERN. This Agreement
may be assigned by IMMTECH to the successor of its entire business, or to an
entity acquiring significant ownership interest in IMMTECH, or to any partly or
wholly-owned subsidiary, but shall not be otherwise assignable by IMMTECH
without the prior written consent of NORTHWESTERN which consent shall not be
unreasonably withheld.
9.0 INFRINGEMENT
9.1 NORTHWESTERN agrees to protect its patents within the PATENT
RIGHTS from infringement and prosecute infringers when in its reasonable
judgement such action may be proper and justified. IMMTECH shall have the right
to sue infringers in its own name if NORTHWESTERN elects not to do so within one
hundred twenty (120) days following NORTHWESTERN'S receipt of knowledge of such
infringement.
9.2 In the event either party hereto shall initiate or carry on
legal proceedings to enforce the PATENT RIGHTS against an alleged infringer, the
other party hereto shall fully cooperate with the party initiating or carrying
on such proceedings.
9.3 In the event NORTHWESTERN shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, it shall
have sole control of such suit and shall retain any recovery awarded as a result
of such suit.
9.4 In the event IMMTECH shall institute suit or other legal
proceedings to protect or enforce PATENT RIGHTS as provided herein, NORTHWESTERN
shall have the option to join in such proceedings and shall be entitled to be
represented by counsel of its own choosing. From any recovery awarded as a
result of any suit or legal proceedings, IMMTECH (i) may deduct the full amount
of its expenses of prosecuting the same (including attorney's fees and court
costs); (ii) shall pay to NORTHWESTERN, to the extent possible after full
payment of (i) above, the full amount of NORTHWESTERN's costs of participating
in the same; (iii) shall pay to NORTHWESTERN, after full payment of (i) and (ii)
above, the applicable percentage determined under section 3.1 hereof, of any
remainder; and (iv) may retain the balance. IMMTECH shall not discontinue or
settle any such suit or legal proceedings brought by it without obtaining prior
concurrence of NORTHWESTERN, and giving NORTHWESTERN a timely opportunity to
continue such proceedings
8
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in its own name, under its sole control, at its sole expense, and at its sole
recovery.
10.0 SEVERABILITY
10.1 Should any part or provision of this Agreement be unenforceable
or otherwise in conflict with or in violation of the law of any jurisdiction,
the remainder of this Agreement shall remain binding upon the parties.
11.0 INDEMNITY AND NEGATION OF WARRANTIES
11.1 IMMTECH agrees to indemnify, hold harmless and defend
NORTHWESTERN, its officers, employees, and agents against any and all claims,
suits, losses, damages, costs, fees, and expenses resulting from or arising out
of the production or use of the LICENSED PRODUCTS by IMMTECH, its sublicensees,
and others purchasing, using and/or receiving the LICENSED PRODUCTS.
11.2 IMMTECH shall maintain, prior to sale of any LICENSED PRODUCTS,
appropriate insurance, in good standing, at least in the amount of five million
dollars ($5,000,000) the amount subject to change from time to time as
designated by NORTHWESTERN in writing, naming NORTHWESTERN as additional
insured. IMMTECH shall deliver to NORTHWESTERN, a certificate of such insurance
providing for not less than thirty (30) days notice to NORTHWESTERN of
cancellation or material change in the terms of such insurance.
11.3 Nothing in this Agreement shall be construed as:
11.31 a warranty or representation by NORTHWESTERN as to the
validity or scope of any Patent Rights; or
11.32 a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of patents
of third parties; or;
11.33 an obligation by NORTHWESTERN to bring or prosecute
actions or suits against third parties for infringement.
11.4 NORTHWESTERN makes no representation other than
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those specified in this Agreement. NORTHWESTERN MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF LICENSED
PRODUCT.
12.0 GENERAL
12.1 IMMTECH shall not use the name of any Inventor listed in PATENT
RIGHTS, of any institution with any Inventor has been or is connected, nor of
NORTHWESTERN, nor any adaptation of any of them, in any advertising, promotional
or sales literature, without prior written consent obtained from NORTHWESTERN in
each case. Similarly, NORTHWESTERN shall not use the name of IMMTECH or any
officer, employee or agent of IMMTECH, nor any adaptation of same, in any
advertising or promotional literature without prior consent obtained from
IMMTECH in each case.
12.2 Any notice required or permitted to be given by this Agreement
shall be given postpaid first class certified mail; unless otherwise stated:
TO LICENSEE: IMMTECH INTERNATIONAL INC.
1890 Maple Avenue
Evanston, Illinois 60201
Attn: Mr. T. Stephen Thompson
TO LICENSOR: NORTHWESTERN UNIVERSITY
Technology Transfer Program
1801 Maple Avenue
Evanston, Illinois 60208-1111
Attn : Administrator
Such addresses may be altered by written notice. If no time limit is specified
for a notice required or permitted to be given under this Agreement, the time
limit therefor shall be twenty (20) full business days, not including the day of
mailing.
12.3 This Agreement and its effect is subject to and shall be
construed and enforced in accordance with the internal laws of the State of
Illinois, United States of America.
12.4 The parties to this Agreement recognize and agree that each is
operating as an independent contractor and not as an agent of the other.
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12.5 The captions herein are for convenience only and shall not be
deemed to limit or otherwise affect the construction thereof.
12.6 Any waiver by either party of the breach of any term or
condition of this agreement will not be considered as a waiver of any subsequent
breach of the same or any other term or condition hereof.
13.0 ENTIRE AGREEMENT
13.1 This Agreement sets forth the entire agreement and
understanding between the parties as to the subject matter of this Agreement,
and merges all prior discussions between them. Neither of the parties shall be
bound by any conditions, definitions, warranties, or representations with
respect to the subject matter of this Agreement unless as duly set forth on or
subsequent to the date hereof in writing signed by a proper and duly authorized
representative of the party to be bound thereby.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and duly executed this Agreement as of the day and the year first above written.
NORTHWESTERN UNIVERSITY
ATTEST: [ILLEGIBLE] By: /s/ C. William Kern
----------------------- ----------------------------------
C. William Kern, Ph.D.
Vice President for Research
Date: November 8, 1994 Date: November 8, 1994
------------------------- -------------------------------
IMMTECH INTERNATIONAL INC.
ATTEST: Mary Jane Ryan By: [ILLEGIBLE]
----------------------- ---------------------------------
Date: November 17, 1994 Date: November 17, 1994
------------------------- -------------------------------
--------------------------------
OFFICIAL SEAL
MARY JANE RYAN
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 6-28-98
--------------------------------
12
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is between BRINKS, HOFER,
GILSON & LIONE ("Brinks") and IMMTECH INTERNATIONAL, INC. ("Immtech"). The
parties agree as follows:
1. Payment by Immtech. Upon execution of this Agreement, Immtech
shall cause to be deposited with Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, s.c. (the "Law Finn") a check dated July 1, 1998, drawn on the
account of Criticare Systems, Inc. and made payable to Immtech in the amount of
$150,000, endorsed by Immtech to the order of Brinks and to be certified on July
1, 1998, the same to be held and released pursuant to the terms of that certain
agreement dated June 29, 1998, between Immtech and Criticare Systems, Inc. and
the Escrow Agreement attached hereto as Exhibit A.
2. Return of Property. Brinks agrees to return all files of Immtech
within 30 days from the date of this Agreement, including a current docket
report as maintained by Brinks with respect to any filing deadlines for
intellectual property matters handled by Brinks for Immtech. Brinks does not
guaranty the accuracy of such report.
3. Release. The parties hereby mutually release each other, their
parent or subsidiaries, predecessors or successors in interest, present, former
or later insurers, assigns, agents, representatives, officers, administrators,
directors, shareholders and employees from any and all claims of whatever nature
either may have against the other which arise out of or are in any manner based
upon legal services provided by Brinks to Immtech prior to the date of this
Agreement.
Date: BRINKS, HOFER, GILSON & LIONE
-------------------------
BY:
------------------------------------
Its
-------------------------------
Date: 6-29-98 IMMTECH INTERNATIONAL,INC.
-------------------------
BY: /s/ T. Stephen Thompson
------------------------------------
Its President & CEO
-------------------------------
<PAGE>
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is between BRINKS, HOFER,
GILSON & LIONE ("Brinks") and IMMTECH INTERNATIONAL, INC. ("Immtech"). The
parties agree as follows:
1. Payment by Immtech. Upon execution of this Agreement, Immtech
shall cause to be deposited with Reinhart, Boerner, Van Deuren, Norris &
Riesslbach, s.c. (the "Law Firm") a check dated July 1, 1998, drawn on the
account of Criticare Systems, Inc. and made payable to Immtech in the amount of
$150,000, endorsed by Immtech to the order of Brinks and to be certified on July
1, 1998, the same to be held and released pursuant to the terms of that certain
agreement dated June 29, 1998, between Immtech and Criticare Systems, Inc. and
the Escrow Agreement attached hereto as Exhibit A.
2. Return of Property. Brinks agrees to return all files of Immtech
within 30 days from the date of this Agreement, including a current docket
report as maintained by Brinks with respect to any filing deadlines for
intellectual property matters handled by Brinks for Immtech. Brinks does not
guaranty the accuracy of such report.
3. Release. The parties hereby mutually release each other, their
parent or subsidiaries, predecessors or successors in interest, present, former
or later insurers, assigns, agents, representatives, officers, administrators,
directors, shareholders and employees from any and all claims of whatever nature
either may have against the other which arise out of or are in any manner based
upon legal services provided by Brinks to Immtech prior to the date of this
Agreement.
Date: 6-29-98 BRINKS, HOFER, GILSON & LIONE
-------------------------
BY: [ILLEGIBLE]
------------------------------------
Its Chief Operating Officer
--------------------------------
Date: IMMTECH INTERNATIONAL, INC.
-------------------------
BY:
------------------------------------
Its
--------------------------------
ASSIGNMENT OF INTELLECTUAL PROPERTIES
THIS ASSIGNMENT OF INTELLECTUAL PROPERTIES, effective the 29th day
of June, 1998, is between Immtech International, Inc., a Delaware corporation
("Assignor") and Criticare Systems, Inc., a Delaware corporation ("Assignee").
RECITALS
A. Assignor is the owner of all right, title and interest in and to
certain intellectual properties as specified below.
B. The Assignor desires to assign all its right, title and interest
in these properties to the Assignee and the Assignee desires to accept such
assignment.
AGREEMENTS
In consideration of the recitals and mutual agreements which follow
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Assignee and Assignor agree as follows:
1. Assignment of Patents and Inventions. The Assignor assigns,
transfers and contributes to the Assignee all right, title and interest in the
patents and patent applications listed on Schedule A (the "Assigned Patent
Rights"), including any continuations, continuations-in-part, divisionals,
reissues, reexaminations, extensions thereof, any U.S. patents or applications
(including divisionals and continuation applications) owned or licensed to or by
Immtech which claim priority to or are otherwise based on the Assigned Patent
Rights or which otherwise establish rights which cover, encompass or are
ancillary to the "Materials," "Progeny," "Immtech Biomaterials," "Immtech
Technology" or "Immtech Improvements" thereto (as such terms are defined in the
Material Transfer and Option Agreement between Sigma Diagnostics, Inc. and
Immtech dated March 23, 1998 (a copy of which is attached hereto as Exhibit A)
(the "Sigma Agreement") and any corresponding or related foreign applications
owned or licensed by Immtech which claim priority to or are otherwise based on
the Assigned Patent Rights or which otherwise establish rights which cover or
encompass or are ancillary to the Materials Progeny, Immtech Biomaterials,
Immtech Technology or Immtech Improvements thereto.
2. Assignment of Trade Secrets. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
all
<PAGE>
trade secrets, unfiled patent or invention disclosures, confidential information
and know-how related to the Assigned Patent Rights.
3. Assignment of Copyrights. The Assignor assigns, transfers and
contributes to the Assignee all right, title and interest worldwide in and to
any copyrightable works, copyright registrations and applications for copyright
registration related to the Assigned Patent Rights, including without limitation
all of the exclusive rights listed in 17 U.S.C. ss. 106 and any copyright
renewal and extension terms available for any such registrations in the United
States and all foreign countries, and in and to any copyright registrations that
may result from such applications.
4. Assignment of Accrued Enforcement Rights. The Assignor assigns
and contributes to the Assignee any causes of action for infringement or
unauthorized use of any of the intellectual properties specified in Paragraphs 1
through 3 above that may have accrued prior to the execution date of this
Agreement.
5. Further Assurances. The Assignor shall provide Assignee, its
successors, assigns or other legal representatives, cooperation and assistance
at Assignee's request and expense (including the execution and delivery of any
and all affidavits, declarations, oaths, exhibits, assignments, powers of
attorney or other documentation as may be reasonably required): (1) in the
preparation and prosecution of any applications for patents or registration of
the intellectual property assigned pursuant to this Assignment; (2) in the
prosecution or defense of any interference, opposition, infringement or other
proceedings that may arise in connection with any of the intellectual property
assigned pursuant to this Assignment; and (3) in the implementation or
perfection of this Assignment.
[Signatures and notarizations on following page.]
2
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seal.
For ASSIGNOR, Immtech International, Inc.:
BY: /s/ T. Stephen Thompson
------------------------------------
Printed name: T. Stephen Thompson
Title: President & CEO
State of Wisconsin )
: SS
Milwaukee County )
On this 26th day of June, 1998, before me appeared T. Stephen
Thompson to me personally known, who being by me duly sworn, did say that he is
Pres/CEO of Immtech International, Inc. and that said instrument was signed on
behalf of said corporation by authority of the Board of Directors.
Kathleen D. Mintner
----------------------------------------
[Seal] Notary Public, State of Wisconsin
My commission 9/30/2001
For ASSIGNEE, Criticare Systems, Inc.:
BY: /s/ Gerhard vondeer Ruhr
------------------------------------
Printed name: Gerhard von der Ruhr
Title: President
State of Wisconsin )
: SS
Milwaukee County )
On this 29th day of June, 1998, before me appeared Gerhard von der
Ruhr to me personally known, who being by me duly sworn, did say that he is
President of Criticare Systems, Inc, and that said instrument was signed on
behalf of said corporation by authority of the Board of Directors.
[ILLEGIBLE]
----------------------------------------
[Seal] Notary Public, State of Wisconsin
My commission is permanent
3
<PAGE>
SCHEDULE A
PATENTS AND PATENT APPLICATIONS
United States Patent No. 5,484,735 Issued 1/16/96
United States Patent No. 5,702,904 Issued 12/30/97
United States Application Ser. No. 07/397,781-CIP Filed 8/23/89
United States Application Ser. No. 07/765,169 Filed 9/25/91
Application Ser. No. PCT/US90/04666 Filed 8/17/90
Application Ser. No. 90913261.5 (EPO) Filed 8/17/90
Application Ser. No. 2-512516 (Japan) Filed 8/17/90
Application Ser. No. PCT/US92/08136 Filed 9/25/92
United States Application Ser. No. 08/008,126 Filed 1/22/93
United States Application Ser. No. 08/068,525-CIP Filed 5/27/93
United States Application Ser. No. 08/151,073-CIP Filed 11/12/93
Application Ser. No. 27577/92 (Australia) Filed 9/25/92
Application Ser. No. 2119651 (Canada) Filed 9/25/92
Application Ser. No. 92921176.1 (EPO) Filed 9/25/92
Application Ser. No. 5-506376 (Japan) Filed 9/25/92
United States Application Ser. No. 08/272,852 Filed 7/6/94
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the 26th
day of June, 1998, by and between CRITICARE SYSTEMS, INC., a Delaware
corporation ("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware
corporation ("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and obligations
of IMMTECH set forth in the Patent License Agreements between IMMTECH and
NORTHWESTERN UNIVERSITY (hereinafter referred to as "NU 9134 Licenses" and the
"NU 8403 License" (together the "LICENSES")), copies of which are attached
hereto as Exhibits A and B.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
LICENSES and be bound by all terms and conditions thereof continuing forward.
CRITICARE shall not be required to pay any past fees or royalties already paid
by or due from IMMTECH.
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the LICENSE and shall supersede all
previous communications, representations or undertakings, either verbal or
written between the parties relating to the subject matter of this ASSIGNMENT
AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY /s/ [ILLEGIBLE] BY /s/ T. Stephen Thompson
------------------------------ -------------------------------------
Its PRES. Its President & CEO
-------------------------- ----------------------------------
NORTHWESTERN UNIVERSITY hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the LICENSES
and acknowledges (i) that Immtech is current with respect to all of its
obligations and is not in default under such LICENSES, and (ii) that with
respect to sublicensee activities, Immtech's sole monetary responsibility under
the NU 9134 License Agreement is 30% of royalties earned, and under the NU 8403
License Agreement is 35% of all royalties earned plus 10% of any sublicense
issue fees or milestones received from sublicensees.
NORTHWESTERN UNIVERSITY
BY
------------------------------ -------------------
Its Date
---------------------------
2
INTERNATIONAL PATENT, KNOW-HOW
AND TECHNOLOGY LICENSE AGREEMENT
THIS INTERNATIONAL PATENT, KNOW-HOW AND TECHNOLOGY LICENSE AGREEMENT
("Agreement") is made this 29th day of June, 1998 by and between IMMTECH
INTERNATIONAL, INC. ("Immtech"), a Delaware corporation, and CRITICARE SYSTEMS,
INC. ("Criticare"), a Delaware corporation.
RECITALS
Certain capitalized terms used in these recitals are defined below
in this Agreement.
A. Immtech owns the patent rights and certain Technology, including
Know-how and Technical Information necessary or useful in the design,
development, customization, manufacture, use, composition and processing of the
mCRP (modifiedC- Reactive Protein) and a recombinant form of mCRP for the
treatment of sepsis (collectively, the "mCRP Patent Rights"); and
B. Criticare desires to obtain, and Immtech is willing to grant, the
License with respect to the mCRP Patent Rights and Immtech Technology within the
Field upon the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the mutual covenants set forth herein, the
sufficiency of which is hereby acknowledged, the Parties agree to the terms and
conditions set forth below.
1. Definitions. For the purpose of this Agreement, the following
terms (when capitalized, except as otherwise noted) shall have the meanings set
forth hereinbelow.
(a) "Effective Date" means the date first stated above.
(b) "Field of the Agreement" means systems, methods,
processes, compositions, articles and apparatuses for the treatment of sepsis.
(c) "mCRP Patent Rights" means the patent rights and certain
Technology, including Know-how and Technical Information necessary or
<PAGE>
useful in the design, development, customization, manufacture, use, composition
and processing of the mCRP (modified C- Reactive Protein) and a recombinant form
of mCRP for the treatment of sepsis owned or licensed by Immtech, including,
without limitation, the patent rights listed in Schedule A and any
continuations, continuations-in-part, divisionals, reissues, reexaminations,
extensions or other patents or applications claiming priority or based upon the
listed patents.
(d) "mCRP Technology" means Technology that is owned or
licensable by Immtech.
(e) "Improvements" means any modification or enhancement,
patentable or not, which is conceived and/or reduced to practice by Criticare or
Immtech during the term of this Agreement, related to the Field of this
Agreement.
(f) "License" is defined in Article 3.1.
(g) "Licensed Territory" means the countries listed in
Schedule B attached hereto, as that schedule may be amended from time to time by
mutual written consent of the Parties or in accordance with Articles 3.6 or 3.7.
(h) "Product" shall mean any product in the Field of the
Agreement, which is covered by any claim in the Immtech Patent Rights and/or
which is produced utilizing Technology. "Product" may also include such
additional products and/or Improvements as may be agreed upon by mutual
agreement of the Parties from time to time.
(i) "Technology" means all Know-how and Technical Information
related to the Field of this Agreement which is owned or licensable by a Party,
now and during the term of this Agreement.
(i) "Know-how" means any information, including
technical data, now, or during the term of this Agreement or any renewals
hereof, possessed by Immtech, and which are, in Immtech's or Criticare's
judgment, reasonably necessary to enable Criticare to manufacture, customize,
use, market or sell Products, and includes dimensions, materials, processes and
procedures relating thereto, and which are the secret, confidential and
proprietary information of Immtech.
(ii) "Technical Information" means any information
possessed by a Party which, although not the secret Know-how of Immtech, is
2
<PAGE>
nevertheless in either party's reasonable judgment, useful in utilizing Know-how
or Immtech Patent Rights.
(j) The "term of this Agreement" (whether or not capitalized)
shall begin on the Effective Date hereof and unless terminated pursuant to
Article 10 shall continue for the term of the patent or any continuation or
extension thereof.
2. Disclosure and Support.
(a) Immtech agrees that, within thirty days after the
Effective Date of this Agreement, it will make Immtech Technology available to
Criticare for Criticare's use hereunder. As additional Immtech Technology is
developed by Immtech during the term of this Agreement, it shall promptly be
made available to Criticare hereunder at no additional cost.
(b) Immtech hereby agrees not to attempt in any manner to
license, sell or otherwise commercialize Products and/or any Improvements within
the Licensed Territory to any person or entity other than Criticare.
(c) Criticare agrees to provide to Immtech any technologically
significant data that is developed or obtained by Criticare during the term of
the Agreement. Each Party recognizes that some data may only be available in
summarized form to protect the confidentiality of customers, but Criticare shall
use reasonable efforts to secure permission, where needed, to provide such
pre-summarized information to Immtech. Representatives from Immtech are free to
contact Criticare project personnel for verbal reports, updates, or
clarification of written reports at any time during normal business hours.
3. Exclusive License Grant.
(a) Immtech hereby grants to Criticare the exclusive right and
license, with the right to sublicense others, throughout the Licensed Territory
under mCRP Technology and under the mCRP Patent Rights, to make, use, have made,
offer for sale and sell Products and to practice methods and processes utilizing
Immtech Technology in connection therewith. The foregoing right and license is
referred to herein as the "License."
(b) The right to sublicense granted Criticare in Article 3.1
specifically includes the right to sublicense others exclusively and/or
non-exclusively in the Licensed Territory under Immtech Technology and under the
Immtech Patent Rights any right granted Criticare under this Agreement,
3
<PAGE>
including the right to grant exclusive and/or non-exclusive field-of-use
sublicenses.
(c) Criticare will advise Immtech of all sublicenses and shall
at all times keep an account of all manufacture and assembly, sales, shipments
and uses of Products by Criticare and by all sublicensees.
(d) Criticare shall be responsible for finding sublicensees
and negotiating exclusive and/or non-exclusive (including exclusive and/or
nonexclusive restricted field-of-use) sublicense agreements with said
sublicensees.
4. Payments and Accounting.
(a) In consideration of the grant of the License Criticare
shall pay to Immtech during the term of this Agreement a royalty consisting of
$100 per year.
(b) The royalties payable under this Agreement are in
consideration of the grant of rights under the Immtech Technology as well as the
grant of rights under the Immtech Patent Rights, and no additional royalty or
fee is due Immtech for Criticare's rights granted hereunder to utilize Immtech
Technology to manufacture, assemble, use, have manufactured, have assembled,
offer for sale, sell or otherwise commercialize Products or otherwise exploit
the Technology.
5. Marking and Quality.
(a) Criticare will apply, and cause each of its sublicensees
to apply, appropriate notice of patent protection on or in connection with
Products or their packages, including the numbers of relevant issued patents,
and give notice of the pendency of patent applications on Products or their
packages, such as, for example, stating "Patent Pending," such notices being
sufficient under applicable law to provide reasonable protection to the rights
of Immtech.
(b) Immtech shall at all times have the right to require that
Products manufactured or assembled by Criticare pursuant to this Agreement
satisfy reasonable standards of quality fixed by Immtech, and Immtech shall have
the right to inspect such Products, and the manufacturing process, at reasonable
times and at Immtech's expense, to confirm that such Products do conform to such
standards.
4
<PAGE>
6. Confidential Status of Technology.
(a) Each Party acknowledges and agrees that, subject to the
provisions of this Article 6, all Technology disclosed to it by the other Party
pursuant to this Agreement may constitute and comprise valuable confidential
information, and therefore the Party agrees to hold any such Technology it
receives from the other Party in confidence and otherwise protect it as provided
in this Article 6.
(b) Each Party (the "receiving Party") agrees that, subject to
the provisions of this Article 6, it shall not, without the prior written
consent of the other Party (the "disclosing Party"), disclose, distribute or use
any portion of Technology disclosed to it by the disclosing Party, except to the
extent necessary for the receiving Party to exercise rights hereunder or
authorize or allow others to do so. Each receiving Party further agrees to limit
access to such Technology to--
(i) those of its employees, or others, who have a "need
to know" of the same in order for the receiving Party to exercise said rights;
and
(ii) its sublicensees who have a "need to know" of the
same in order for sublicensees to exercise said rights; and
in either case who are under a duty to protect such Technology for the benefit
of the disclosing Party to the same extent as is the receiving Party itself.
(c) The obligations under this Article 6 shall not extend to
any information disclosed by a disclosing Party to a receiving Party which (i)
is within the public domain, or enters into the public domain through no fault
of the receiving Party, (ii) is within the possession of the receiving Party
prior to receipt from the disclosing Party as shown by appropriate records, or
(iii) is independently made available to the receiving Party by a third party
without breach by the third party of any duty owed to the disclosing Party with
respect thereto. It is understood that some Technology may, at least in part,
consist of a synthesis of information that is in the public domain; and it is,
therefore, understood that no exclusion contained in this Article 6.3 shall
operate to exclude from the obligations of this Article 6 such synthesis of
otherwise public domain information, unless it can be shown that such synthesis
is itself in the public domain.
(d) Each Party agrees that all obligations under this Article
6 with respect to any and all Technology shall survive any termination of any or
all other provisions of this Agreement and shall continue until such time as one
of the
5
<PAGE>
exceptions set forth in Article 6.3 becomes applicable to the Technology in
question or for a period not to exceed two years after any such termination.
(e) Neither Party shall be liable for the inadvertent or
accidental use or disclosure of Know how or Technical Information, provided such
use or disclosure occurs despite the Party's exercise of the same degree of care
as the Party takes to safeguard and preserve its own proprietary information.
7. Representations and Warranties.
(a) Immtech expressly warrants
(i) that Immtech has the right to grant the License
within the Field and throughout the Licensed Territory;
(ii) that no third party has any right, title or
interest in the Immtech Patent Rights or Immtech Technology in the Field and
throughout the Licensed Territory;
(iii) that Immtech has taken no actions which adversely
affect Criticare's rights under this Agreement; and
(iv) that Immtech has the right to execute and enter
into this Agreement, to perform its obligations hereunder, and to grant the
License.
(b) Immtech warrants that, to the best of its knowledge, there
are no circumstances that would (i) render the Immtech Patent Rights invalid or
unenforceable, or (ii) render Criticare liable for patent infringement or trade
secret misappropriation as a consequence of Criticare's performing the
activities permitted by this Agreement or practice of the Immtech Patent Rights
or Immtech Technology as provided to Criticare.
(c) Until such time as Criticare completes the financing
referred to in paragraph 11, Immtech represents that it will timely pay all
necessary maintenance fees, annuities, taxes or other fees in order to maintain
the enforceability of the Immtech Patent Rights.
(d) Criticare and Immtech each represents that it has the
corporate power to enter into this Agreement and perform the obligations assumed
hereunder. Criticare and Immtech each represents that the person executing this
Agreement on behalf of the corporation is authorized to execute this Agreement
and legally bind the corporation.
6
<PAGE>
8. Improvements.
(a) Immtech agrees that all Improvements developed by Immtech
during the term of this Agreement shall be made available on the same basis and
under the same terms as set forth in this Agreement at no additional cost to
Criticare. Immtech shall promptly notify Criticare of all such Improvements as
they can reasonably be made available in form sufficient to disclose such
Improvement to Criticare, and at Criticare's option such Improvements may be
included in this Agreement and/or Products.
(b) If Criticare requests Immtech, in writing, to file a
patent application in a given nation or nations within the Licensed Territory
based on the Immtech Patent Rights or a Immtech Improvement, Immtech shall
promptly initiate the filing of such application(s), using local counsel of
Criticare's choosing. Criticare shall be responsible for all out of pocket
costs, including attorney fees, of filing and prosecuting any such patent
application(s) together with all fees, taxes, assessments, and levies on said
patent application(s) and/or patent(s) obtained therefrom for so long as
Criticare desires to maintain its rights thereunder. Immtech shall cooperate
fully with the prosecution, maintenance and enforcement of said patent
application(s) and/or patent(s) obtained therefrom and shall execute all
documents reasonably necessary for these activities.
(c) Criticare agrees that all Improvements developed by
Criticare during the term of this Agreement shall be made available on a
nonexclusive basis to Immtech without cost or reduction in royalty payable to
Immtech. Criticare shall promptly notify Immtech of all such Improvements as
they can reasonably be made available in form sufficient to disclose such
Improvement to Immtech, and at Immtech's option may be included in Products
and/or may be licensed from Criticare on the same basis and under the same terms
as set forth in this Agreement.
(d) Upon termination of the term of this Agreement,
Criticare's rights to continue use of Immtech's Improvements shall be limited by
the scope of Immtech Patent Rights existing upon termination. Likewise, upon
termination of the term of this agreement, Immtech's rights to continue use of
Criticare's Improvements shall be limited by the scope of Criticare's patent
rights existing upon termination.
9. Infringement of Immtech Patent Rights.
(a) Immtech and Criticare agree to promptly notify each other
if they become aware of a probable infringement by a third party of the Immtech
Patent Rights. Immtech and Criticare further agree that, unless one Party
7
<PAGE>
provides the other with written notice of the first Party's desire to not be
actively involved in a particular infringement action, actions against any third
party that may be infringing the Immtech Patent Rights in the Licensed Territory
shall be a joint effort of both Parties, and that both the costs and recovery
resulting from such actions shall be shared equally between the Parties. If
either Party notifies the other of its desire not to be actively involved in a
particular infringement action, and the other chooses to go forward with such an
action, the Party going forward shall be responsible for all costs relating to
such action, and shall be the sole beneficiary of any recovery resulting from
such action; and in such case the Party desiring not to be actively involved
shall render reasonable cooperation to the Party going forward, including, if
necessary, being named as a party to the action.
(b) In the event that Criticare, and/or Criticare's customers,
successors, and assigns are held liable as an infringer of a patent or trade
secret belonging to a third party arising from the manufacture, use and sale of
any Product and/or component element thereof licensed under this Agreement,
Immtech agrees to reimburse Criticare, and its customers, successors and assigns
for any financial loss, including attorney fees, sustained thereby.
10. Term and Termination.
(a) The Parties agree that the term of this Agreement, except
for the obligations under Article 6 hereof, may be terminated early (i) by
Criticare at any time by providing Immtech written notice of such termination;
or (ii) by either Party if the other Party breaches or defaults on any material
obligation under this Agreement and fails to cure such breach within sixty days
after receipt of written notice from the terminating Party which sets forth the
basis of such breach and the terminating Party's intent to terminate the
Agreement due to such breach.
(b) Termination of the term of this Agreement shall terminate
all of the Parties' respective rights and obligations under this Agreement,
except that such termination shall not affect:
(i) The right of Criticare to sell any Product on hand
on the date of such termination, to fill any orders for Product received on or
before the date of such termination, and to complete any Product in the process
of manufacture at the time of such termination and to sell the same;
(ii) The rights and obligations of the Parties under
Articles 4 and 6 of this Agreement; and
8
<PAGE>
(iii) The right of either Party (including all
remedies), and the obligation of the other Party, to every performance accruing
prior to such termination.
11. Funding. Criticare or its assignee agrees that it will utilize
its best efforts to raise not less than $500,000 within 12 months after the date
of this Agreement to fund the development and commercialization of a product
utilizing mCRP for the treatment of sepsis. In the event that Criticare fails to
complete such financing, Immtech shall have 90 days within which to repurchase
the mCRP Patent Rights, mCRP Technology and any Improvements for their appraisal
value. Appraisal value shall be determined by a certified appraiser agreed upon
by Immtech and Criticare, or, if they cannot agree, an appraiser selected by
Criticare's then audit firm.
12. Maintenance of Immtech Patent Rights.
(a) The cost of filing, prosecuting to issuance and
maintaining the Immtech Patent Rights related to a mutant protein and methods
and materials for making and using it shall be borne by Immtech.
(b) Before permitting the Immtech Patent Rights to become
abandoned, lapsed or forfeited, Immtech shall give Criticare a reasonable notice
in writing, and Criticare may then at its option and expense, take over the
prosecution or maintenance of the Immtech Patent Rights, in which event Immtech
agrees to cooperate fully with Criticare. All costs, expenses and fees,
including attorney fees, incurred by Criticare in taking over the maintenance of
the Immtech Patent Rights shall be deducted from any royalties due Immtech under
this Agreement. Should any of the Immtech Patent Rights be abandoned, lapsed, or
forfeited due to the failure by Immtech to pay the appropriate maintenance or
other fee, then after the abandonment, Criticare shall be permitted to sell
Products covered by such abandoned patent without payment or royalty for such
sale and the obligations of Criticare under this Agreement with respect to that
abandoned Immtech Patent Right shall cease.
13. Miscellaneous.
(a) This Agreement, or any rights or obligations hereunder,
may not be assigned, in whole or in part, by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. However, nothing herein shall prevent Criticare from assigning its
rights and obligations hereunder to an affiliated corporation or subsidiary
corporation controlled by or under common control with Criticare. In the event
of such
9
<PAGE>
assignment, the assignee will automatically become substituted for Criticare as
to all obligations thereafter accruing hereunder and as to all rights hereunder.
(b) The Parties agree that the sole relationship between
Immtech and Criticare hereunder will be that of licensor and licensee. Nothing
herein shall constitute or be interpreted to make either Party the agent of the
other Party, and neither Party shall in any way be authorized to obligate the
other Party in any transaction with a third party.
(c) All notices and other communications under or with respect
to this Agreement shall be in writing (including by telecopier and other
available communication facilities providing written copy to the recipient
party) and shall be effective when actually delivered to the party to which they
are directed or when deposited in the United States mail, postage prepaid,
addressed to the party to which they are directed at the address provided below
for that party or at such other address as that party may designate by notice.
The initial addresses are as follows:
If to Criticare:
Criticare Systems, Inc.
20925 Crossroads Circle
Waukesha, WI 53186
Facsimile: 4l4-798-8290
Confirming telephone: 414-798-8282
With a copy to:
Reinhart, Boemer, Van Deuren,
Norris & Rieselbach, s.c.
Attn: Robert E. Bellin
1000 North Water Street, Suite 2100
P.O. Box 92900
Milwaukee, WI 53202-0900
Facsimile: 414-298-8097
Confirming telephone: 414-298-1000
10
<PAGE>
If to Immtech:
Immtech International Inc.
Attn: Stephen Thompson
1890 Maple Avenue, Suite 110
Evanston, IL 60202
Facsimile: 847-869-0045
Confirming telephone: 847-869-0033
With a copy to:
John P. Goebel, Esq.
Gardner, Carton & Douglas
321 N. Clark Street
Chicago, IL 60610-4795
Facsimile: 312-644-3381
Confirming telephone: 312-644-3000
(d) The Parties acknowledge and agree that this Agreement
constitutes the entire agreement and understanding relating to the subject
matter of this Agreement and supersedes all previous communications, proposals,
representations and agreements, whether oral or written and whether relating to
the subject matter of this Agreement or otherwise.
(e) The Parties acknowledge and agree that this Agreement may
only be modified by the mutual written agreement of the Parties.
(f) (i) For purposes of this Article 13.6, a "Force Majeure
Event" shall be any event or condition that [a] is not known to the Excused
Party (as defined below), as of the date of this Agreement, to exist, [b] is not
reasonably foreseeable as of such date, and [c] is not reasonably within the
control of the Excused Party. Without limiting the foregoing, any of the
following shall constitute a Force Majeure Event if the same meets the
conditions expressed in the enumerated clauses of the preceding sentence:
natural disaster, fire, explosion, epidemic, war, riot, civil disturbance,
strike, lockout, labor slow-down, acts of governmental authority, and shortage
of energy or material.
(ii) Any period of time in which a Party (the "Excused
Party") must perform any obligation under this Agreement shall be extended by
the period of time that a Force Majeure Event prevents such performance in whole
or in material part or renders such performance so difficult or costly that such
performance is commercially unreasonable, and the Excused Party shall not be
liable for loss or damage incurred by the other Party by reason of
11
<PAGE>
any delay in such performance during such period of extension. If the Force
Majeure Event is of such a nature that the performance of the obligation will
reasonably require an additional period of time following cessation of the Force
Majeure Event, then the period of time in which the Excused Party must perform
the obligation shall be further extended by such additional period of time, and
the Excused Party shall not be liable for loss or damage incurred by the other
Party by reason of any delay in such performance during such additional period
of time.
(iii) If the period of time in which a Party must
perform any material obligation hereunder is extended for a period of more than
six consecutive months pursuant to the preceding provisions of this Article,
either Party may terminate this Agreement, without liability to the other Party
for such termination, by giving notice of termination given to the other Party
prior to the end of the period of extension.
(iv) The foregoing provisions of this Article shall not
excuse any obligation to pay any amount which becomes due under this Agreement
prior to termination of this Agreement, but payment for any performance the time
for which is extended pursuant to such provisions may be suspended until such
performance is rendered.
(g) The Parties agree that this Agreement will be governed and
construed in accordance with the internal laws of the State of Wisconsin.
(h) Each Party agrees that any delay or omission on the part
of the other Party to exercise any right under this Agreement will not
automatically operate as a waiver of such right or any other right, and a waiver
of any right on any one occasion will not be construed as a bar to or a waiver
of exercising the right on any other occasion.
(i) Each Party agrees that, should any provision of this
Agreement be determined by a court of competent jurisdiction to violate or
contravene any applicable law or policy, such provision may be severed and
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.
(j) The title, caption or heading of any provision of this
Agreement is used as a matter of convenience and is not to be used to interpret
or construe the meaning of any provision. The words "herein," "hereof," and
"hereunder," when used in this Agreement, refer to this Agreement in its
entirety. The word "include" and its derivatives mean by way of example and not
by way of exclusion or limitation. Words in the singular include the plural and
words in the
12
<PAGE>
plural include the singular, according to the requirements of the context. Words
importing a gender include all genders. Each Party agrees that this Agreement is
the result of extensive negotiations between the Parties and represents the
merged work product of both Parties, and so neither Party shall be held to be
the sole author of this Agreement for the purpose of contract interpretation
(k) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to constitute but one and the same instrument.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY /s/ [ILLEGIBLE] BY /s/ T. Stephen Thompson
------------------------------ ------------------------------
Its PRES Its President & CEO
13
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of the 29th
day of June, 1998, by and between CRITICARE SYSTEMS, INC., a Delaware
corporation ("CRITICARE") and IMMTECH INTERNATIONAL, INC., a Delaware
corporation ("IMMTECH").
RECITAL
CRITICARE desires to prospectively assume all rights and certain
obligations of IMMTECH set forth in a certain Material Transfer and Option
Agreement between IMMTECH and SIGMA DIAGNOSTICS, INC. (hereinafter referred to
as the "Sigma Agreement"), a copy of which is attached hereto as Exhibit A.
AGREEMENTS
NOW, THEREFORE, CRITICARE and IMMTECH, in consideration of the
mutual promises and agreements set forth below, the receipt and sufficiency of
which consideration hereby is acknowledged, promise and agree as follows:
1. As of the day, month and year first above written, CRITICARE will
prospectively assume all rights and obligations of IMMTECH set forth in the
Sigma Agreement and be bound by all terms and conditions thereof continuing
forward; provided, however, that Immtech shall retain and promptly fulfill any
obligations under such agreement to provide cultures, materials or any advice or
consultation related to the materials (as defined therein).
2. This ASSIGNMENT AGREEMENT embodies the entire understanding
between CRITICARE and IMMTECH relating to the Sigma Agreement and shall
supersede all previous communications, representations or undertakings, either
verbal or written between the parties relating to the subject matter of this
ASSIGNMENT AGREEMENT.
3. This ASSIGNMENT AGREEMENT shall be governed and construed in
accordance with the internal laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, Inc. IMMTECH INTERNATIONAL, INC.
BY /s/ [ILLEGIBLE] BY
--------------------------- -------------------------
Its PRES Its
----------------------- ---------------------
SIGMA DIAGNOSTICS, INC. hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the Sigma
Agreement and acknowledges that Immtech is not in default of any of its
obligations thereunder.
SIGMA DIAGNOSTICS, INC.
BY
--------------------------- ------------------
Its Date
------------------------
2
<PAGE>
IN WITNESS WHEREOF, CRITICARE and IMMTECH have executed this
ASSIGNMENT AGREEMENT as of the day, month and year first above written.
CRITICARE SYSTEMS, INC. IMMTECH INTERNATIONAL, INC.
BY BY /s/ [ILLEGIBLE]
--------------------------- -----------------------------
Its Its CFO
----------------------- -------------------------
SIGMA DIAGNOSTICS, INC. hereby consents to CRITICARE'S assumption of
IMMTECH'S rights and obligations as described above in relation to the Sigma
Agreement and acknowledges that Immtech is not in default of any of its
obligations thereunder.
SIGMA DIAGNOSTICS, INC.
BY
--------------------------- ------------------
Its Date
------------------------
2
SCHEDULE I
EMPLOYMENT AGREEMENT
This Employment Agreement made this ____ day of ___, ____
(hereinafter sometimes referred to as this "Agreement"), between Immtech
International, Inc., a Wisconsin corporation (the "Company"), and Mr. T. Stephen
Thompson, an individual residing in Chicago, Illinois (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ Employee as President and
Chief Executive Officer of the Company upon the terms and conditions set forth
herein; and
WHEREAS, Employee is willing to accept such employment upon the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Duties. The Company agrees that Employee shall be employed by the
Company during the Term of this Agreement (as hereinafter defined) as President
and Chief Executive Officer of the Company or in such other executive capacity
as the Board of Directors shall from time to time determine. Employee shall
perform such duties and shall have such responsibilities consistent with the
By-Laws of the Company and customary for the duties and position of his office,
in each instance subject to the direction of the Board of Directors. Employee
agrees to be so employed and shall devote his best efforts and substantially all
his business time to advance the interests of the Company.
<PAGE>
2. Term. Subject to paragraphs 4, 5, 6 and 7 hereof, the term of the
Employee's employment hereunder shall be for a period of 12 months and
thereafter shall automatically renew for successive one year periods unless
notice of unrenewal shall be given by either party not less than 30 days prior
to each successive anniversary date of this Agreement while Employment is
employed, provided, however that should Employee be given less than nine (9)
months notice of nonrenewal, then the failure to renew shall be treated as a
Discharge Without Cause under Section 6 of this Agreement and Employee shall be
entitled to the salary, bonus, options and other benefits identified therein for
a period of nine (9) months.
3. Compensation.
(a) Base Salary. During the Term of this Agreement starting
after the completion of the successful financing of $5 million or more, Employee
shall be paid a salary at the per annum rate of $150,000. Employee shall receive
a salary increase for the following twelve months as determined by the Company's
Board of Directors. For purposes of this Agreement, "Base Salary" shall mean the
initial per annum rate of $150,000 and shall thereafter include increases
pursuant to the immediately preceding sentence. The Base Salary shall be payable
by the Company to Employee in accordance with the Company's regular payroll
practices.
(b) Bonus. Employee shall be eligible for an annual
performance bonus (the "Bonus") of up to 60% of the Base Salary as provided for
on Exhibit A attached hereto and made a part hereof ("Bonus Plan"). Any amounts
due Employee pursuant to the
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<PAGE>
Bonus Plan shall be payable by the Company to Employee within 120 days after the
anniversary date of such year, though Employee need not be employed on such date
to receive said Bonus.
(c) Vacation, Sick Leave and Holidays. During the Term of this
Agreement Employee shall be entitled to 30 days paid vacation on an annual
basis, and shall be entitled to sick leave and holidays at full pay in
accordance with the Company's policies established and in effect from time to
time.
(d) Fringe Benefits. During The Term of this Agreement the
Employee shall be entitled to participate in all insurance, retirement,
executive, employee benefits, pension and profit-sharing plans and other fringe
benefit programs established by the Company during the Term of this Agreement
including health insurance.
(e) Reimbursement of Expenses. During The Term of this
Agreement the Employee shall be reimbursed for all items of travel and
entertainment and miscellaneous expenses reasonably incurred by him on behalf of
the Company. Employee shall, as a condition of such reimbursement, provide
sufficient documentation in such detail as will allow Company to deduct such
expenses. Reimbursement of expenses not claimed within ninety (90) days after
incurred shall be deemed waived.
(f) Insurance. Subject to insurability of employee. The
Company shall provide Employee with disability insurance during the Term of this
Agreement in the amount equal to all of the Employee Base Salary and that would
have been payable pursuant to the terms of this Agreement and it had been
terminated prior to the expiration of its
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<PAGE>
term due to Employee's Total Disability (as hereinafter defined). In addition,
the Company shall provide Employee with term life insurance naming Employee's
spouse as named beneficiary providing the benefits set forth on Exhibit B
attached hereto and made a part hereof.
(g) Stock Option. On the date hereof the Company shall provide
Employee a stock option exercisable into shares of Common Stock of the Company,
as described in Exhibit C attached hereto and made a part hereof.
4. Death or Total Disability of Employee.
(a) Death. In the event of the death of the Employee during
the Term of this Agreement, this Agreement shall terminate effective as of the
date of the Employee's death and the Company shall have no further obligations
or liability hereunder, except (i) the Company shall pay to the Employee's
estate the remaining portion, if any, of the Employee's Base Salary and a
prorata share of bonus for the period up to the Employee's date of death; and
(ii) the Employee's estate shall be entitled to all amounts due pursuant to
fringe benefit programs and plans and insurance in which the Employee is a
participant or covered.
(b) Total Disability. In the event of the Total Disability (as
hereinafter defined) of the Employee for a period of 120 consecutive days during
the Ten of this Agreement, the Company shall have the right to terminate the
Employee's employment hereunder by giving the Employee ten (10) days' written
notice thereof, and upon expiration of such ten (10) day period, the Company
shall have no further obligations or liability under this
-4-
<PAGE>
Agreement, except (i) the Company shall pay to Employee the remaining portion,
if any, of the Employee's Base Salary and a prorata share of bonus for the
period to the date of termination and (ii) the Employee shall be entitled to all
amounts due pursuant to fringe benefit programs and plans and insurance in which
the Employee is a participant or covered.
The term "Total Disability", when used herein, shall mean a mental
or physical condition which, based upon competent medical evidence, renders the
Employee unable or incompetent to carry out substantially all of the material
job responsibilities he held or tasks to which he was assigned.
5. Discharge for Cause. The Company may discharge the Employee and
thereby terminate his employment hereunder for the following reasons (each of
which shall constitute "cause"); (a) habitual intoxication; (b) drug addiction;
(c) conviction of Employee of a felony or (d) a material breach by Employee of
any term or provision of this Agreement, which Employee fails to cure within 30
days after receipt of written notice from the Company advising Employee, in
reasonable detail, of the breach. In the event that the Company shall discharge
the Employee pursuant to this paragraph 5, the Company shall have no further
obligations or liability under this Agreement, except (i) the Company shall pay
to Employee the remaining portion, if any, of the Employee's Base Salary and a
prorata share of bonus for the period up to the date of termination; and (ii)
the Employee shall be entitled to all
-5-
<PAGE>
amounts due pursuant to fringe benefit programs and plans and insurance in which
the Employee is a participant or covered.
6. Discharge Without Cause. The Company may discharge the Employee
and thereby terminate his employment hereunder, for any or no reason, at any
time upon at least thirty (30) days prior written notice to the Employee. The
parties further agree that a willful breach by the Company of any of the
material terms and conditions of this Agreement shall constitute a discharge
without cause of this Agreement. In the event of a discharge by the Company
without cause pursuant to this Section 6, for the remaining period of the term
of this Agreement or for nine (9) months, whichever is greater, Employee shall
be entitled to receive: (1) all of the Employee Base Salary that would have been
payable pursuant to the terms of this agreement had it not been terminated; (2)
a bonus equivalent to the amount to which Employee would have been entitled had
he continued working for the period of the term of this agreement or for nine
(9) months from the termination, whichever yields a greater bonus; (3) all
options payable pursuant to the accelerated option schedule contained in Exhibit
C of this agreement; and (4) all, amounts due pursuant to fringe benefit
programs, plans and/or insurance in which the Employee is a participant or which
covered Employee on the date of termination, provided, however, that in the
event any fringe benefit program, plan and/or insurance refuses to treat
Employee as covered for the period specified in this section because of
Employee's status as a terminated employee or for any other reason, then the
Company shall pay to Employee an amount equivalent to that which the
-6-
<PAGE>
Employee must pay to obtain a comparable benefit, plan or insurance.
7. Change of Control. In the event of a Change of Control (as
defined below), Employee may terminate this Agreement at any time upon at least
five (5) days prior written notice to the Company. In the event that Employee
shall terminate this Agreement pursuant to this Section 7, such termination
shall be treated as a Discharge Without Cause pursuant to Section 6 of this
agreement and Employee shall be entitled to the salary, bonus, options and other
benefits identified therein for remaining period of the term of this agreement
or for nine (9) months, whichever is greater. A "Change of Control" shall mean
the sale or transfer of at least fifty percent (50%) of the shares of commons
stock of the Company to a third person or entity in a transaction or series of
transactions occurring within a twelve--month period, other than sale of stock
at a public offering.
8. Supersedes Other Agreements. This Agreement supersedes and is in
lieu of any and all other employment arrangements between Employee and the
Company.
9. Amendments. Any Amendment to this Agreement, excluding any
extension or renewal of the term of employment of Employee, shall be made in
writing and signed by the parties hereto.
10. Enforceability. If any provision of this Agreement shall be held
invalid or unenforceable, in whole or in part, then such provision shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and
-7-
<PAGE>
enforceable, or shall be deemed excised from this Agreement as the case may
require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision had been originally incorporated
herein as so modified or restricted, or as if such provision had not been
originally incorporated herein, as the case may be.
11. Governing Law. The validity and effect of this Agreement shall
be governed exclusively by the Laws of the State of Illinois, excluding the
"conflicts of laws" rules of that state.
12. Assignment.
(a) This Agreement and the obligations created hereunder may
not be assigned by the Company without the prior written consent of Employee.
For the purposes of this Agreement, a merger involving the Company shall
constitute an assignment of this Agreement, and said assignment shall require
the written consent of Employee.
(b) This Agreement and the obligations created hereunder may
not be assigned by the Employee.
13. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when personally
delivered or mailed, by certified or registered mail, return receipt requested,
addressed to the intended recipient as follows:
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<PAGE>
If to Employee:
T. Stephen Thompson
2608 North Lakeview Street
Chicago, Illinois 60614
If to the Company:
Immtech International, Inc.
906 University Place
Evanston, Illinois 60601
Attention: Gerhard J. Von der Ruhr
Any party may from time to time change its address for the purposes
of notices to that party by a similar notice specifying a new address, but no
such change shall be deemed to have been given until it is actually received by
the party sought to be charged with its contents.
14. Covenant Not to Compete. Employee agrees that he will not,
either directly or indirectly, at any time during his employment with the
Company, compete or interfere, or setup to compete or interfere, or aid others
to so compete or interfere or set up to compete or interfere with the Company in
the conduct or transaction of any business or enterprise in which the Company
(i) is presently engaged, or (ii) is planning to become engaged and has made
significant monetary investment in order to be engaged, or (iii) is engaged at
any time during Employee's employment by the Company.
Employee further agrees that, upon the termination of his
employment, with the Company, he will not, for a period of twelve (12) months
from the date of voluntary termination or termination for cause, as defined
herein, or for a period of nine (9) months from the date of involuntary
termination not for cause (collectively the "Restriction Period"), within any
geographic
-9-
<PAGE>
markets where the Company is then active, directly or indirectly compete with
the Company by engaging in a competitive business in the development,
manufacture, assembly, promotion, marketing or sale of biopharmaceutical
products made from CRP (C. reactive protein), modified CRP or other acute phase
proteins for the diagnosis or therapeutic treatment of AIDS, Cancer or Sepsis,
or other products developed or under development by the Company, or any
component or ingredient thereof, as an owner, partner, officer, director,
associate, employee, consultant, salesperson or stockholder or aid others,
directly or indirectly, in competing with the Company. For the purposes of this
Agreement, competition and/or engaging in a competitive business shall include,
but shall not be limited to, any disclosure of confidential, proprietary,
promotional or marketing information, trade secrets, names of the Company's
employees or research consultants, names of suppliers, names of customers or any
other information acquired prior to termination of employment which is not
already in the public domain.
Employee expressly agrees that, upon a breach or violation of the
provisions of this section, the Company shall be entitled, in addition to all
other remedies available to it, to appropriate injunctive relief in any court of
competent jurisdiction.
15. Confidentiality and Non-Disclosure. Employee covenants and
agrees:
(a) Not to use, publish or otherwise disclose, except in the course of
his duties as employee of the Company, any confidential,
proprietary, patentable or copyrightable
-10-
<PAGE>
information or materials generated by or disclosed to him in the
course of his duties as an employee of the Company, except for data
which:
(i) At the time of disclosure to Employee, was in the public
domain;
(ii) After the time of disclosure to Employee, is published or
becomes a part of the public domain through no fault of
Employee; or
(iii) Was in the possession of Employee prior to the time of
disclosure by the Company, which can be demonstrated by
Employee's written records or other competent evidence.
(b) Not to disclose or utilize, in connection with the performance of
his duties as an employee of the Company, any information that
Employee is under a duty not to disclose.
(c) Upon termination of his employment with the Company, to promptly
return to the Company all written and other information, data and
materials which are secret or confidential in nature of which relate
to patentable, copyrightable or proprietary information relating to
the business of the Company.
16. Waiver. No claim or right arising out of a breach or default
under this Agreement can be discharged in whole or in part by a waiver of that
claim or right unless the waiver is supported by consideration and is in writing
and executed by the aggrieved party hereto or its or his duly authorized agent.
A waiver by any party hereto of a breach of default by the other party hereto of
any provision of this Agreement shall not be deemed a waiver of any prior or
subsequent compliance herewith, and such provision shall remain in full force
and effect.
-11-
<PAGE>
IN WITNESS WHEREOF, this Employment Agreement has been executed by
the Company, by a duly authorized officer, and by the Employee on the date first
above written.
IMMTECH INTERNATIONAL, INC.
By: /s/ Gerhard J. Von der Ruhr
-------------------------------
Title: Chairman
----------------------------
/s/ T. Stephen Thomas
-----------------------------------
T. Stephen Thomas
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<PAGE>
EXHIBIT A
BONUS PLAN
Failure to meet the goals established herein shall not constitute a
material breach for purposes of Section 5 of this Agreement.
(To be Determined.)
<PAGE>
EXHIBIT B
INSURANCE COVERAGE
(To be Determined.)
<PAGE>
EXHIBIT C
T. Stephen Thompson
Stock Option
for shares of
Immtech International Inc.
Common Stock
Amount: 375,000 stock options to acquire Immtech stock.
Exercise Price: $.15 per share.
Vesting: Options will vest over a four-year period
starting with the date of this Agreement (one-
quarter at the end of each year).
Accelerated
Vesting: Notwithstanding the foregoing vesting schedule,
the options will vest as follows:
(1) 100% upon termination by Immtech without
cause or in the event Immtech allows this
Employment Agreement to lapse before all
such options have vested.
(2) 100% in the event that due to a merger or
consolidation in which Intech is a party,
all or substantially all of Immtech's
assets and outstanding voting stock is
sold or acquired by an unaffiliated third
party.
(3) In the event of death or disability at
least one-third of the options will be
vested or will vest and the balance of the
options that would normally vest during
this year will vest on a prorated basis.
Exercise
Period: Options can be exercised over five (5) years.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Immtech International,
Inc. on Form SB-2 of our report dated August 29, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to the
reference to us under the headings "Selected Financial Data" and "Experts" in
such Prospectus.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
September 25, 1998
