<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 0-20138
PHARMAGENICS, INC.
------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3072524
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Pearl Court, Allendale, New Jersey 07401-1623
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code - (201) 818-1000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $.01 par value,
455,108 Shares at November 1, 1996.
<PAGE>
PHARMAGENICS, INC.
INDEX TO FORM 10-Q
Page
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of September 30, 1996 and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . .3
Statements of Operations for the Three Month and Nine Month
periods ended September 30, 1996 and September 30, 1995 . . . . . . .4
Statements of Cash Flows for the Nine Month periods ended
September 30, 1996 and September 30, 1995 . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . . 9
PART II. ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . 12
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . 12
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<TABLE>
<CAPTION>
PHARMAGENICS, INC.
BALANCE SHEETS
September 30, 1996 December 31, 1995
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(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,607,554 $ 1,639,182
Prepaid expenses 27,297 22,970
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Total current assets 1,634,851 1,662,152
Property and equipment, net of $1,980,984 and
$1,705,980 of accumulated depreciation 874,908 996,048
Other assets 40,925 35,425
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Total assets $ 2,550,684 $ 2,693,625
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------------- -------------
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 1,106,763 $ 942,736
Deferred revenue 438,400 1,038,400
Capital lease obligations - current 155,127 321,650
------------- -------------
Total current liabilities 1,700,290 2,302,786
Capital lease obligations - long-term 28,826 39,280
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Total liabilities 1,729,116 2,342,066
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Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value;
10,000,000 shares authorized;
Series A convertible preferred stock
2,160,000 shares issued and outstanding,
liquidation preference $4,017,600 21,600 21,600
Series B convertible preferred stock
2,138,399 shares issued and outstanding,
liquidation preference $16,038,000 21,384 21,384
Series C convertible preferred stock
issued and outstanding 3,076,556 in 1996
and 1,356,592 shares in 1995,
liquidation preference $6,614,595 30,765 13,566
Common stock - $.01 par value,
15,000,000 shares authorized,
issued and outstanding 455,108 shares in 1996
and 451,608 shares in 1995 4,551 4,516
Additional paid-in capital 26,066,218 22,394,917
Accumulated deficit (25,244,781) (21,939,837)
Deferred compensation (78,169) (164,587)
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Total stockholders' equity 821,568 351,559
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Total liabilities and stockholders' equity $ 2,550,684 $ 2,693,625
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PHARMAGENICS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended September 30, Nine months ended September 30,
-------------------------------- --------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Research contracts $ 145,600 $ 775,000 $ 914,470 $ 2,170,633
License fees and royalties 0 0 0 766
Grants 0 372 90,249 36,372
-------------- --------------- -------------- ---------------
Total revenues 145,600 775,372 1,004,719 2,207,771
-------------- --------------- -------------- ---------------
COSTS AND EXPENSES:
Research and development 1,056,466 867,194 3,272,820 2,926,511
General and administrative 363,951 288,709 1,110,938 971,710
-------------- --------------- -------------- ---------------
Total costs and expenses 1,420,417 1,155,903 4,383,758 3,898,221
-------------- --------------- -------------- ---------------
LOSS FROM OPERATIONS (1,274,817) (380,531) (3,379,039) (1,690,450)
Interest expense (7,705) (73,530) (34,156) (331,087)
Interest income 25,185 15,079 108,251 33,337
-------------- --------------- -------------- ---------------
NET LOSS $ (1,257,337) $ (438,982) $(3,304,944) $ (1,988,200)
-------------- --------------- -------------- ---------------
-------------- --------------- -------------- ---------------
Net loss per common share $ (2.77) $ (0.97) $ (7.31) $ (4.41)
-------------- --------------- -------------- ---------------
-------------- --------------- -------------- ---------------
Weighted average common
shares outstanding 453,554 451,498 452,256 451,338
-------------- --------------- -------------- ---------------
-------------- --------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
PHARMAGENICS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended September 30,
-----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (3,304,944) $ (1,988,200)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 275,004 276,809
Amortization of deferred compensation expense 75,282 73,301
Expense incurred for warrants issued below fair market value -- 165,000
Interest on loans converted into Series C preferred stock -- 100,623
Changes in operating assets and liabilities:
(Increase) in prepaid expenses (4,327) (12,062)
(Increase) decrease in other assets (5,500) 15,840
Increase (decrease) in accounts payable and accrued expenses 164,027 (149,937)
(Decrease) in deferred revenue (600,000) (425,633)
---------------- ----------------
Net cash used in operating activities (3,400,458) (1,944,259)
---------------- ----------------
INVESTING ACTIVITIES:
Capital expenditures (153,864) (31,391)
---------------- ----------------
Net cash used in investing activities (153,864) (31,391)
---------------- ----------------
FINANCING ACTIVITIES:
Issuance of Series C convertible preferred stock 3,697,922 --
Payments on capital lease obligations (176,978) (176,361)
Proceeds from exercise of stock options 1,750 338
Proceeds from loans converted into equity -- 2,000,000
---------------- ----------------
Net cash provided by financing activities 3,522,694 1,823,977
---------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (31,628) (151,673)
Cash and cash equivalents at beginning of period 1,639,182 753,038
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,607,554 $ 601,365
---------------- ----------------
---------------- ----------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 34,156 $ 65,464
---------------- ----------------
---------------- ----------------
The accompanying notes are an integral part of these financial statements
</TABLE>
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<PAGE>
PHARMAGENICS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - THE COMPANY
PharmaGenics, Inc. (the "Company"), a Delaware corporation, was
incorporated on August 11, 1989 and is an integrated drug discovery company
principally engaged in the discovery and development of therapeutics for the
treatment of cancer based upon tumor suppressor genes and other cancer-related
genes. The Company utilizes proprietary SAGE (Serial Analysis of Gene
Expression) technology to evaluate and identify genes that are abnormally
expressed in cancer and other diseases, designs assays and implements
high-throughput screens for identification of therapeutic lead compounds, and
exploits its proprietary combinatorial chemistry technology to generate drug
candidates that target proteins relevant to cancer as well as other diseases.
The Company is subject to a number of risks similar to those of other
companies at this stage of development, including, but not limited to,
dependence on key individuals; uncertainty whether the Company's research and
development activities will result in the development of commercially usable
products and processes; competition from alternative products or processes; the
impact of research and product development activities of competitors of the
Company, many of whom have greater financial or other resources than those of
the Company; uncertainties related to clinical trials; uncertainties related to
technological improvements and advances; the need and ability to obtain adequate
additional financing necessary to fund continuing operations and product
development; uncertainties related to legal proceedings; uncertainties of
obtaining required regulatory approvals; and uncertainties of future
profitability. The Company expects to incur substantial additional costs before
it can begin to generate revenue from product sales sufficient to fund its
operations, including costs related to ongoing research and development
activities, preclinical studies and regulatory compliance, and for hiring
additional management, manufacturing, scientific, sales and administrative
personnel.
The Company was able to obtain additional financing in the first
quarter of 1996 and received a stand-by credit facility after the end of the
third quarter of 1996. The Company believes that its current cash resources and
other available funding sources, including the stand-by credit facility, are
sufficient to fund operations into early 1997. Since the Company will require
additional funds before it would be able to generate revenues sufficient to fund
its operations beyond such time, it is currently seeking additional financing
through a variety of strategies, including corporate collaborations and other
financing vehicles, and is contemplating various possible strategic options,
including mergers and corporate recapitalizations or reorganizations. No such
arrangements have yet been concluded and there can be no assurance that
continued funding will be available to the Company or that, if available, the
amounts will be sufficient to maintain the Company and its operations or the
terms will be acceptable to the Company.
NOTE 2 - BASIS OF PREPARATION
The information presented at September 30, 1996 and for the three
month and nine month periods then ended is unaudited, but includes all
adjustments (consisting only of normal recurring adjustments) that the Company's
management believes to be necessary for the fair presentation of results for the
periods presented. These financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not contain certain of the information and footnotes
required by generally accepted accounting principles for annual financial
statements. These financial statements should, therefore, be read in
conjunction with the Company's audited financial statements for the year ended
December 31, 1995, which were included as part of the Company's Annual
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<PAGE>
PHARMAGENICS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - BASIS OF PREPARATION (CONTINUED)
Report on Form 10-K. The December 31, 1995 balance sheet was derived from
audited financial statements.
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.
NOTE 3 - SERIES C CONVERTIBLE PREFERRED STOCK
In February 1996, the Company held a final closing on 1,719,964
additional shares of Series C convertible preferred stock for proceeds to the
Company of approximately $3,698,000 in a private placement offering that
commenced in December 1995. The offering was made directly by the Company to
the holders of the Company's other preferred stock and to new investors.
Including an initial closing in December 1995, total shares sold in this private
placement were 2,099,522 and proceeds to the Company were approximately
$4,514,000.
NOTE 4 - AGREEMENTS WITH PAINEWEBBER R&D PARTNERS III, L.P.
In May 1994, the Company entered into a series of agreements (the "R&D
Agreements ) with PaineWebber R&D Partners III, L.P. (the "Partnership"),
pursuant to which the Partnership paid a $250,000 license fee and agreed,
subject to certain conditions, to pay the Company up to $5,750,000 to conduct
research and development on behalf of the Partnership on targets previously
identified by the Company pursuant to a development plan originally projected to
extend through March 31, 1996. The Company has continued research activities
under such development plan beyond March 31, 1996. In March 1995 the R&D
Agreements were modified to, among other things, expand the area of research
under the development plan and to provide for acceleration of $750,000 of
research funding under the R&D Agreements into 1995. In addition, in September
1995 the Company converted a $1,000,000 loan from the Partnership into Series C
convertible preferred stock of the Company in lieu of repayment in cash, and
thereby reduced by $1,000,000 research funding available from the Partnership
under the R&D Agreements. As of December 31, 1995, the Company had received all
funding pursuant to the R&D Agreements. Furthermore, as of December 31, 1995
and September 30, 1996, $1,038,400 and $438,400, respectively, of the funding
received represents deferred revenue under the R&D Agreements, which relate to
research activities yet to be completed by the Company.
The R&D Agreements grant to the Company an option (the "Purchase
Option"), which in certain cases must be exercised, to purchase certain or all
of the rights owned by the Partnership as a result of activities under the R&D
Agreements ("Partnership Rights"). The Purchase Option terminates December 31,
1998 or earlier upon the occurrence of certain events. The Purchase Option
exercise price to acquire the Partnership Rights began at $9.4 million,
increased to $9.8 million on July 1, 1996, increases to $10.2 million on October
1, 1996 and then increases quarterly in increments up to $19.2 million. The
option price may be paid in whole or in part in shares of the Company's common
stock provided that such shares are registered under the Securities Act of 1933
and are tradable on a national securities exchange or The Nasdaq Stock Market
National Market System.
In consideration for the Purchase Option, the Company issued to the
Partnership a warrant to purchase up to 1,000,000 shares of the Company's common
stock (the "Core Warrant") and a
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<PAGE>
PARMAGENICS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - AGREEMENTS WITH PAINEWEBBER R&D PARTNERS III, L.P. (CONTINUED)
warrant to purchase up to an additional 666,667 shares of the Company's common
stock (the "Purchase Option Warrant"). With the modification of the R&D
Agreements in March 1995, the exercise price on both the Core Warrant and the
Purchase Option Warrant was fixed at $2.15 per share, subject to antidilution
provisions and other adjustments. The Core Warrant is exercisable for a period
of five years beginning July 1, 1996. The Purchase Option Warrant is
exercisable for a period of four years generally beginning ninety days following
the termination of the Purchase Option. If an initial public offering of the
Company's common stock has occurred and the Company exercises the Purchase
Option, the Purchase Option Warrant is subject to partial or full cancellation.
If the Company undergoes a change in control, as defined in the R&D Agreements,
the Partnership has an option to convert the amounts provided to the Company
under the R&D Agreements into equity of the Company. If such a conversion
occurs, the Purchase Option Warrant will be cancelled and the Company will
acquire sole rights to all technology under the R&D Agreements.
-8-
<PAGE>
PARMAGENICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included earlier in this report.
Discussions regarding the Company's expectations of research and
collaborative agreements, operating expenses, working capital financing, lease
financing, legal proceedings and access to capital constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes that its expectations are based on
reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurance that actual results will not vary
materially from its expectations. Meaningful factors that could cause actual
results to differ from expectations include, among others, uncertainties
relating to whether patents will issue and whether patents that issue will
provide the Company with adequate protection from other products or competitors;
dependence on key individuals for achievement of these expectations,
particularly the contributions of Michael I. Sherman, the Company's President
and Chief Executive Officer; continued collaboration between the Company and
Drs. Bert Vogelstein and Kenneth Kinzler of The Johns Hopkins University School
of Medicine; continued collaboration between the Company and its other
corporate, governmental and academic collaborators; establishment of additional
collaborations with academia or corporations; uncertainty whether the Company's
research and development activities will result in the development of
commercially usable products and processes; competition from alternative
products or processes; uncertainties related to technological improvements and
advances; the impact of research and product development activities of
competitors of the Company, many of whom have greater financial or other
resources than those of the Company; the ability to obtain adequate additional
financing necessary to fund operations and product development and the terms on
which such financing might be available; the ability to obtain lease financing
for capital equipment; uncertainties related to legal proceedings; uncertainties
related to clinical trials; uncertainties of obtaining required regulatory
approvals; advances in cancer research, in general; the ability of the Company
to arrange for the manufacture and marketing of any new products; and
uncertainties of future profitability. For additional information concerning
these and other important factors which may cause the Company's actual results
to differ materially from expectations, reference is also made to the Company's
Annual Report on Form 10-K and other reports filed by the Company with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
Revenues for the three months and nine months ended September 30, 1996 were
$145,600 and $1,004,719, respectively, decreases of $629,772 and $1,203,052
compared to the same periods last year. Research contracts were the primary
component of revenues for the periods and account for the decreases for the
comparable periods.
For the third quarter of 1996, the sole source of revenues earned under
research contracts was a series of agreements (the "R&D Agreements") with
PaineWebber R&D Partners III, L.P. (the "Partnership"). For the first nine
months of 1996, sixty-six percent of revenues from research contracts were
earned under the R&D Agreements, thirty-two percent were from a collaborative
agreement with Boehringer Mannheim GmbH (see "Financial Condition, Liquidity and
Capital Resources"), and the balance was from a research agreement with Genetic
Therapy, Inc. ("GTI"). Furthermore, as of September 30, 1996, the Company had
received $438,400 of deferred revenue under the R&D Agreements, which relate to
research activities yet to be completed by the Company. See Note 4 of Notes to
Financial Statements. Additionally, all funding pursuant to the research
agreement with GTI had been received and earned as of March 31, 1996. During
the third quarter and first nine months of 1995, ninety-seven percent and
ninety-two percent, respectively, of research contract revenues were earned
under the R&D Agreements with the Partnership. Grant revenues in 1996 were
earned under a five-year U.S. National Cancer Institute ("NCI") grant awarded as
a Cooperative Agreement in September
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<PAGE>
PHARMAGENICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS(CONTINUED)
of 1995. Grant revenues in 1995 were earned under a NCI Small Business
Innovative Research grant that was awarded in May 1994 and concluded in 1995.
Research and development expenses were $1,056,466 for the third quarter
of 1996 and $3,272,820 for the first nine months of 1996, increases of
$189,272 compared to the third quarter of 1995 and $346,309 compared to the
first nine months of 1995. Research expenses to support programs at
collaborators increased by approximately $112,500 in the third quarter and by
approximately $325,400 in the first nine months of 1996 compared to the same
periods last year. In addition, compensation expense increased by
approximately $25,500 or 5% in the third quarter of 1996 compared to the same
period last year, reflecting the impact of merit increases and promotions
awarded earlier in 1996, while for the first nine months compensation expense
increased by approximately $15,300 or 1% in 1996 compared to 1995. Although
research staffing totalled 33 at September 30, 1996 and at September 30,
1995, staffing was at lower levels during most of the first half of 1996 than
at September 30, 1996 and during the first half of 1995. As a result of
lower staffing, expenses for research supplies decreased by approximately
$23,600 for the first nine months of 1996 compared to the first nine months
of 1995. However, expenses for research supplies increased by approximately
$17,300 in the third quarter of 1996 compared to the third quarter of 1995,
primarily attributed to the Company's efforts in implementing its SAGE
genomics technology while staffing levels were comparable during these
quarters. The Company incurred an increase of approximately $21,000 for the
first nine months of 1996 compared to the same period last year in payments
for scientific advisors mainly due to increases in consulting fees and the
timing of meetings of the Company's Scientific Advisory Board.
General and administrative expenses were $363,951 for the third quarter of
1996 and $1,110,938 for the first nine months of 1996, increases of
approximately $75,200 compared to the third quarter of 1995 and $139,200
compared to the first nine months of 1995. Professional fees increased by
approximately $39,500 and $90,200 for the third quarter and first nine months of
1996, respectively, compared to the same periods last year, primarily attributed
to counsel in connection with the Company's efforts to obtain additional
financing through, among other strategies, corporate collaborations, to secure
and protect patents and to respond to litigation brought against the Company
earlier in the year. See "Legal Proceedings." Compensation expense increased
by approximately $24,500 and $59,100 for the third quarter and first nine months
of 1996, respectively, compared to the same periods last year, reflecting the
addition of a senior vice president and chief counsel as well as the impact of
merit increases awarded earlier in 1996.
The Company's interest expense decreased to $7,705 for the third quarter of
1996 and to $34,156 for the first nine months of 1996 from $73,530 for the third
quarter of 1995 and $331,087 for the first nine months of 1995, primarily
reflecting borrowings of $1,000,000 under loan agreements in February 1995 and
the related issuance of warrants and borrowing of $1,000,000 upon the issuance
to the Partnership of a convertible note in June 1995. The principal and
accrued interest under the loan agreements and the convertible note were
converted into Series C convertible preferred stock as of September 30, 1995.
Interest income increased in 1996 due to higher cash and cash equivalent
balances as a result of proceeds received from the private placement offering
completed in February 1996.
Net losses were $1,257,338 for the quarter ended September 30, 1996
compared to $438,982 for the same quarter last year. For the first nine months
of 1996 net losses were $3,304,944 compared to $1,988,200 for the first nine
months of 1995. Decreases in revenue earned under research contracts account
for most of the increase in net losses.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had cash and cash equivalents of
$1,607,554, a decrease of $31,628 compared to December 31, 1995. In February
1996, the Company held a final
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<PAGE>
PHARMAGENICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINACIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
closing on 1,719,964 additional shares of Series C convertible preferred
stock for proceeds to the Company of approximately $3,698,000 in a private
placement offering that commenced in December 1995. The offering was made
directly by the Company to the holders of the Company's other preferred stock
and to new investors. Including an initial closing in December 1995, total
Series C shares sold in the private placement were 2,099,522 and proceeds to
the Company were approximately $4,514,000.
Cash used in operations was $3,400,458 during the first nine months of 1996
compared to $1,944,259 used in operations during the same period of 1995,
primarily due to a reduction during 1996 in funding under research agreements.
As of December 31, 1995, all funding pursuant to the R&D Agreements had been
received by the Company. In addition, with the receipt of $25,000 in the first
quarter of 1996, all research funding pursuant to the research agreement with
GTI has been received by the Company. The Company had received approximately
$290,000 of contract research payments from Boehringer Mannheim GmbH
("Boehringer") in the first half of 1996. The Company might receive additional
amounts pursuant to the collaborative agreement with Boehringer; however, the
amount and timing of any such payments are uncertain. Funding required for
operating activities during the first nine months of 1996 was primarily provided
by the use of cash reserves and proceeds received from the private placement
offering. Funding required for operating activities during the same period of
1995 was provided by the use of cash reserves, research contract revenues and
funding received under loan agreements. These loans were converted into Series C
convertible preferred stock as of September 30, 1995.
The Company expects to continue to finance its anticipated operating losses
and its capital expenditures into early 1997 from existing cash reserves,
$100,000 of revenues from a genomics company in connection with their
contemplation of entering into a commercial relationship regarding SAGE
technology, approximately $100,000 of grant funding in the fourth quarter of
1996 from NCI as the Company's share under the Cooperative Agreement award
received in September 1995, and a stand-by credit facility made available to the
Company in the fourth quarter of 1996 from another biotechnology company with
more substantial resources than that of the Company, which biotechnology company
also has expressed interest in, among other things, acquiring access to SAGE
technology and in a possible broader relationship with the Company. In
addition, the Company has a commitment from a leasing company for up to $700,000
in equipment lease financing.
The Company believes that its current cash resources and the aforementioned
sources of funding are sufficient to fund operations into early 1997. The
Company will require additional financing to continue its operations beyond such
time and there can be no assurance that sources currently in place would
continue to be available beyond the first quarter of 1997. If additional
funding is not obtained, the Company may be required to take one or more of the
following actions: significantly curtail its research activities, cease
operations, or obtain funds through arrangements with collaboration partners or
others that may require the Company to relinquish rights to certain of its
technologies or product candidates.
The Company expects to incur substantial additional costs before it would
be able to begin to generate revenue from product sales, including costs related
to ongoing research and development activities, preclinical studies and
regulatory compliance, and for hiring additional management, manufacturing,
scientific, sales and administrative personnel. Since the Company will require
additional funds before it is able to generate revenues sufficient to fund
operations, it is currently seeking additional financing through a variety of
strategies, including corporate collaborations and other financing vehicles, and
is contemplating various possible strategic options, including mergers and
corporate recapitalizations or reorganizations. No such arrangements have yet
been concluded and there can be no assurance that continued funding will be
available to the Company or that, if available, the amounts will be sufficient
to maintain the Company and its operations or the terms will be acceptable to
the Company.
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<PAGE>
PHARMAGENICS, INC.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 19, 1996, LBC Capital Resources, Inc. ("LBC") brought an action
against the Company in the Superior Court of New Jersey in Bergen County,
alleging breach of contract and related causes of action arising out of an
agreement between the Company and LBC that obligated LBC to assist the Company
in finding new sources of capital. LBC asserts that the Company improperly
declined to pay LBC a commission in accordance with the agreement, and seeks
damages in excess of $150,000. The Company does not believe that the agreement
entitles LBC to a commission under these circumstances and will contest the
action vigorously. There have been no material new developments since the
Company's last report on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Numbers Description and Method of Filing
------- --------------------------------
3.1. Third Restated Certificate of Incorporation.(7)
3.1(a) Amendment to Third Restated Certificate of Incorporation.(9)
3.1(b) Certificate of Designation of Series C Convertible Preferred
Stock.(10)
3.2. By-laws, as amended.(1)
4.1. Warrant Agreement dated November 14, 1991 by and between the
Company and American Stock Transfer & Trust Company, as Warrant
Agent.(1)
4.2. Form of Warrant Certificate.(1)
4.3. Form of Common Stock Certificate and Series B Preferred Stock
Certificate.(1)
10.1. Lease dated November 20, 1990, as amended, between AETNA Life
Insurance Company and the Company.(1)
10.1(a) Third Amendment to Exhibit 10.1.(2)
10.1(b) Fourth Amendment to Exhibit 10.1.(9)
10.2. Letter Agreement dated June 8, 1990 between the Company and
Michael I. Sherman.(1)
10.3. Non-Transferable, Non-Qualified Stock Option Agreement dated
March 27, 1991 between the Company and Michael I. Sherman.(1)
10.4. Restricted Stock Purchase Agreement dated April 24, 1991 between
the Company and Michael I. Sherman.(1)
10.5. Incentive Stock Option Agreement dated September 27, 1991 between
the Company and Michael I. Sherman.(1)
10.9. Letter Agreement dated July 27, 1990 between the Company and Alan
F. Cook.(2)
10.9(a) Letter Agreement dated November 17, 1994 between the Company and
Alan F. Cook.(2)
10.10. Convertible Preferred Stock and Warrant Purchase Agreement dated
April 24, 1991 among the Company and HealthCare Ventures II, L.P.
and Everest Trust.(1)
10.11. Non-Transferable, Non-Qualified Stock Option Agreement dated
March 27, 1991 between the Company and Alan F. Cook.(2)
-12-
<PAGE>
PHARMAGENICS, INC.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(CONTINUED)
Exhibit
Numbers Description and Method of Filing
------- --------------------------------
10.11(a) Incentive Stock Option Agreement dated September 27, 1991 between
the Company and Alan F. Cook.(2)
10.12. Stockholders' Agreement dated April 24, 1991 among the Company
and HealthCare Ventures II, L.P. and Everest Trust (the
"Stockholders' Agreement").(1)
10.12(a) Amendment to Stockholders' Agreement.(5)
10.12(b) Amendment to Stockholders' Agreement.(7)
10.13. Warrant to Purchase Shares of Common Stock dated September 27,
1991 issued to HealthCare Ventures II, L.P.(1)
10.14. Warrant to Purchase Shares of Common Stock dated September 27,
1991 issued to Everest Trust.(1)
10.15. Consent and Agreement to Amend dated September 27, 1991.(1)
10.15(a) Amendment to Exhibit 10.15.(2)
10.16. Sales Agency Agreement dated as of October 7, 1991, as amended
November 13, 1991, between the Company and PaineWebber
Incorporated.(1)
10.17. Subscription Agreement dated November 14, 1991 among the Company
and HealthCare Ventures II, L.P., Everest Trust and Norma
Sarofin.(1)
10.18. Registration Agreement dated November 14, 1991.(1)
10.19. Registration Agreement dated November 14, 1991.(1)
10.20. Warrant to purchase Common Stock dated November 14, 1991 issued
to PaineWebber Incorporated.(1)
10.21. 1991 Stock Option Plan, as amended.(7)
10.22. Equipment Lease Agreement, including Warrant Agreement, as
amended, between the Company and Comdisco, Inc.(1)
10.23.+ Research Agreement dated March 1, 1989 among The Johns Hopkins
University, Hoffmann-La Roche Inc. and the Company.(8)
10.24.+ License Agreement dated February 5, 1992 among The Johns Hopkins
University, Hoffmann-La Roche Inc. and the Company.(8)
10.25.+ Agreement dated April 30, 1991 between Hoffmann-La Roche Inc. and
the Company.(8)
10.26.+ Agreement dated April 1, 1990 between Georgetown University and
the Company.(1)
10.26(a) Letter Agreement dated January 25, 1993 modifying Exhibit
10.26.(2)
10.27.+ Agreement dated November 1, 1990 between Georgetown University
and the Company.(1)
10.28. Consulting Agreement dated November 24, 1990 between the Company
and Richard Schlegel.(1)
10.29. Consulting Agreement dated April 3, 1991 between the Company and
Bert Vogelstein.(1)
10.30.+ License Agreement dated January 15, 1993 between the Company and
Genetic Therapy, Inc.(2)
-13-
<PAGE>
PHARMAGENICS, INC.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(CONTINUED)
Exhibit
Numbers Description and Method of Filing
------- --------------------------------
10.31. Incentive Stock Option Agreement dated February 17, 1993, between
the Company and Michael I. Sherman.(2)
10.33. Incentive Stock Option Agreement dated February 17, 1993, between
the Company and Alan F. Cook.(2)
10.33(a) Incentive Stock Option Agreement dated March 7, 1994, between the
Company and Alan F. Cook.(2)
10.34.+ Research Agreement effective April 1, 1993 between the Company
and Genetic Therapy, Inc.(2)
10.35 Form of Indemnification Agreement.(2)
10.36 1993 Stock Option Plan, as amended.(7)
10.37 Letter Agreement dated June 15, 1993, between the Company and
Michael I. Sherman.(4)
10.38 Master Equipment Lease Agreement, including Warrant Agreement,
dated September 10, 1993 between the Company and MMC/GATX
Partnership No. 1.(4)
10.39 1994 Independent Directors Stock Option Plan, as amended.(7)
10.40(c) Separation Agreement dated October 28, 1994 between the Company
and Paul P. Trotta.(8)
10.41(a) Letter Agreement dated May 10, 1991, between the Company and
Arthur H. Bertelsen.(5)
10.41(b) Incentive Stock Option Agreements dated September 27, 1991,
February 17, 1993, November 22, 1993 and March 7, 1994, between
the Company and Arthur H. Bertelsen.(5)
10.41(c) Non-transferable Non-Qualified Stock Option Agreement dated June
17, 1991 between the Company and Arthur H. Bertelsen.(5)
10.42 Amendment dated March 23, 1994, to Agreement of April 30, 1991
between Hoffmann-La Roche Inc. and the Company including Stock
Purchase Agreement and Warrants to purchase an aggregate of
150,000 shares of Common Stock.(5)
10.43+ Program Agreement dated as of April 1, 1994 between the Company
and PaineWebber R&D Partners III, L.P. (the "Partnership").(6)
10.43(a)+ First Amendment to Program Agreement, including Amended and
Restated Glossary.(8)
10.44+ Development Agreement dated as of April 1, 1994 between the
Company and the Partnership.(6)
10.44(a)+ Amended and Restated Development Agreement.(8)
10.45+ Purchase Option Agreement dated as of April 1, 1994 between the
Company and the Partnership.(6)
10.45(a)+ Amended and Restated Purchase Option Agreement.(8)
10.46 Technology Agreement dated as of April 1, 1994 between the
Company and the Partnership.(6)
-14-
<PAGE>
PHARMAGENICS, INC.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(CONTINUED)
Exhibit
Numbers Description and Method of Filing
------- --------------------------------
10.46(a) Amended and Restated Technology Agreement.(8)
10.47+ Core Warrant dated as of April 1, 1994 issued by the Company to
the Fund.(6)
10.47(a) Amended and Restated Core Warrant.(8)
10.48+ Purchase Option Warrant dated as of April 1, 1994 issued by the
Company to the Partnership.(6)
10.48(a)+ Amended and Restated Purchase Option Warrant.(8)
10.49+ Stock Purchase Agreement dated as of March 15, 1995 between the
Company and the Partnership.(8)
10.50+ Loan Agreement dated as of February 13, 1995 among the Company,
HealthCare Ventures III, L.P., HealthCare Ventures IV, L.P.,
Everest Trust and Larry Abrams.(8)
10.50(a) Amendment No. 1 to Exhibit 10.50.(9)
10.51+ Letter Agreement dated September 13, 1994, between the Company
and Boehringer Mannheim GmbH, as supplemented December 7,
1994.(8)
10.52+ License Agreement dated as of September 1, 1995, between the
Company and The Johns Hopkins University.(9)
10.53 Letter Agreement dated June 8, 1995, between the Company and A.
Steven Franchak.(9)
10.54 Non-Qualified Stock Option Agreement dated July 6, 1995, between
the Company and A. Steven Franchak.(9)
10.54(a) Incentive Stock Option Agreement dated September 1, 1995, between
the Company and A. Steven Franchak.(11)
10.55 Convertible Note dated June 8, 1995, between the Company and the
Partnership.(9)
10.56 Registration Rights Agreement dated February 13, 1996.(11)
10.57 Incentive Stock Option Agreements dated September 25, 1995 and
March 18, 1996, between the Company and A. Steven Franchak.(11)
10.58 Incentive Stock Option Agreements dated September 25, 1995 and
March 18, 1996, between the Company and Arthur H. Bertelsen.(11)
10.59 Incentive Stock Option Agreements dated September 25, 1995 and
March 18, 1996, between the Company and Alan F. Cook.(11)
10.60 Letter Agreement dated May 1, 1996, between the Company and
George M. Gould.(11)
10.61 Incentive Stock Option Agreements dated June 27, 1996, between
the Company and George M. Gould.(11)
10.62 Letter Agreement dated June 27, 1996, between the Company and
Michael I. Sherman.(11)
10.63 Incentive Stock Option Agreements dated September 25, 1995 and
June 27, 1996, between the Company and Michael I. Sherman.(11)
10.64 Letter Agreement and Indemnification Agreement, dated September
1, 1994, between the Company and PaineWebber Incorporated.(11)
-15-
<PAGE>
PHARMAGENICS, INC.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(CONTINUED)
10.65 Letter Agreement and Indemnification Agreement, dated August 15,
1996, between the Company and PaineWebber Incorporated.(11)
27 Financial Data Schedule.(11)
- ------------
+ Confidential treatment has been granted by the Commission. The copy filed
as an exhibit omits the information subject to the Grant of Confidential
Treatment.
(1) Incorporated by reference to the corresponding Exhibit number of
Registrant's Registration Statement on Form 10, No. 0-20138.
(2) Incorporated by reference to the corresponding Exhibit number of
Registrant's Annual Report on Form 10-K for the year ended December 31,
1992.
(3) Incorporated by reference to Exhibit A of the Registrant's definitive Proxy
Statement filed with the Securities and Exchange Commission on August 17,
1993.
(4) Incorporated by reference to the corresponding Exhibit number of
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1993.
(5) Incorporated by reference to the corresponding Exhibit number of
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.
(6) Incorporated by reference to the corresponding Exhibit number of
Registrant's Quarterly Report on Form 10-Q or 10-Q/A for the quarter ended
March 31, 1994.
(7) Incorporated by reference to the corresponding Exhibit number of
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1994.
(8) Incorporated by reference to the corresponding Exhibit number of
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
(9) Incorporated by reference to the corresponding Exhibit number of
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.
(10) Incorporated by reference to the corresponding Exhibit number of
Registrant's Annual Report on Form 10-K for the year ended December 31,
1995.
(11) Filed herewith.
REPORTS ON FORM 8-K:
The Registrant filed a Current Report on Form 8-K, dated October 10,
1996, to report, with respect to Item 5 thereof, the resignation of a
director who had determined that he did not wish to stand for re-election
at the Company's next Annual Meeting of Stockholders.
-16-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PHARMAGENICS, INC.
/s/ Michael I. Sherman
----------------------
Michael I. Sherman, President
and Chief Executive Officer
/s/ A. Steven Franchak
----------------------
A. Steven Franchak, Vice President,
Chief Financial Officer and Treasurer
Date: November 11, 1996
-17-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.54(a)
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: September 1,1995
OPTIONEE: A. Steven Franchak
NUMBER OF SHARES: 5,000
OPTION PRICE: $2.15
EXERCISE MEASUREMENT DATE: September 1,1995
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A(1) which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A(1) attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ A. Steven Franchak
----------------------- ----------------------
Michael I. Sherman Optionee
President
<PAGE>
SCHEDULE A(1)
TERMS AND CONDITIONS OF OPTION
SECTION 1. GRANT OF OPTION.
(a) The grant of this Option is subject to the terms and conditions of
this Agreement and the Plan. A copy of the Plan as in effect on the date hereof
has been delivered to the Optionee, and the Optionee hereby acknowledges receipt
thereof. This Option (an "ISO" as defined in the Plan) is intended to qualify
as an "incentive stock option" under the provisions of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Neither the grant of this Option nor any provision of the Plan or this
Agreement shall confer upon the Optionee any right with respect to the
continuation of his employment by the Company or interfere in any way with the
right of the Company to terminate such employment or to increase or decrease the
compensation of the Optionee at any time.
SECTION 2. EXERCISE.
(a) This Option may not be exercised after the expiration of ten years
from the date of this Agreement and, unless accelerated in accordance with the
provisions of the Plan or as provided herein, this Option shall be exercisable
in cumulative installments to the extent of twenty five percent (25%) of the
shares subject hereto at any time after the expiration of six months from the
Exercise Measurement Date and to the extent of not more than an additional
twenty five percent (25%) of such shares after the expiration of twelve,
eighteen and twenty-four months, respectively, after the Exercise Measurement
Date; provided, however, that in the event of the termination of the employment
by the Company of the Optionee, this Option may be exercised only to the extent
exercisable as of the effective date of such termination; and provided further,
that in the event of the consummation of a transaction involving the
consolidation or merger of the Company with or into any other corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any change in the Common Stock) or a
sale of all or substantially all of the assets or capital stock of the Company,
this Option shall become immediately exercisable with respect to all of the
Optioned Shares.
(b) This Option may not be exercised at a time when the exercise thereof
or the issuance or transfer of shares upon such exercise would, in the opinion
of the Committee (as defined in the Plan), constitute a violation of any law,
federal, state, local or foreign, or any regulations thereunder, or the
requirements of the New York Stock Exchange or any other national securities
exchange or market.
1
<PAGE>
(c) As a condition of exercise, the Committee, in its discretion, may
require the Optionee to (i) represent in writing that the shares of Common Stock
to be received upon exercise of this Option are being acquired for his own
account for investment and not with a view to distribution thereof, nor with any
present intention of distributing the same, and (ii) make such other
representations and warranties as are deemed necessary by counsel to the
Company. Stock certificates representing shares of Common Stock not registered
under the Securities Act of 1933, as amended (the "Securities Act"), acquired
upon the exercise of this Option shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SHARES UNDER SUCH ACT OR AN OPINION OF COUNSEL TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED."
(d) This Option may not be exercised for any fractional share.
SECTION 3. PROCEDURE FOR EXERCISE.
(a) This Option may be exercised, in whole or part, by the Optionee (or
other person, as provided in Section 6) by delivering a written notice (the
"Notice") to the Secretary of the Company. The Notice shall:
(i) state that the Optionee elects to exercise this Option and that
this Option is an ISO;
(ii) state the number of shares with respect to which this Option is
being exercised;
(iii) state the method of payment for such Optioned Shares (as
available pursuant to the provisions of paragraph (b) of this Section);
(iv) state the date upon which the Optionee desires to consummate the
purchase of such Optioned Shares (which date must be prior to the termination of
this Option), or state that cash, a check and stock certificates (as the case
may be) representing the aggregate Option Price of such Optioned Shares
accompanies the Notice;
(v) include any representation of the Optionee required pursuant to
Section 2(c);
2
<PAGE>
(vi) in the event this Option is being exercised pursuant to Section 6
by any person other than the Optionee, include appropriate evidence of the right
of such person to exercise this Option; and
(vii) include such further provisions consistent with the Plan as the
Committee may from time to time require.
(b) Payment of the aggregate Option Price for such Optioned Shares shall
be made (i) in cash or by personal or certified check payable to the Company in
an amount equal to the aggregate Option Price of the shares with respect to
which this Option is being exercised, (ii) by delivery of stock certificates (in
negotiable form) representing shares of Common Stock having a fair market value
(as determined by the Committee, which determination, if the Common Stock is
publicly traded, shall be based upon market prices) in an amount equal to the
aggregate Option Price of the shares with respect to which this Option is being
exercised, or (iii) a combination of both such methods. The exercise date of
this Option shall be the date on which the Company receives the Notice from the
Optionee unless another date is stated in the Notice pursuant to clause (iv) of
Section 3 (a).
(c) The Company shall issue a stock certificate in the name of the
Optionee (or such other person exercising this Option in accordance with the
provisions of Section 6) for such Optioned Shares as soon as practicable after
receipt of the Notice and payment of the aggregate Option Price for such shares,
which shall be held in escrow in accordance with the provisions of Section 7,
subject to the provisions of Section 8. Neither the Optionee nor any person
exercising this Option in accordance with the provisions of Section 6 shall have
any privileges as a stockholder of the Company with respect to any shares of
stock subject to this Option until such shares shall be registered on the books
of the Company in the name of such person.
SECTION 4. TERMINATION OF EMPLOYMENT, DISABILITY AND DEATH.
(a) Subject to the provisions of Section 2, the right to exercise the
unexercised portion of this Option shall forthwith terminate upon the first to
occur of the following:
(i) the expiration of 30 days from the Date of Termination of the
Optionee's employment by the Company (other than a termination described in
clause (ii) or (iii) below); provided, however, that if the Optionee shall die
or become permanently and totally disabled during such 30-day period, the time
during which the unexercised portion of this Option may be exercised shall be
determined in accordance with clause (ii) below; and, provided further, that, if
such employment shall be reinstated during such 30-day period, such termination
shall be deemed for purposes of this subparagraph never to have occurred;
3
<PAGE>
(ii) the expiration of six months from the Date of Termination of the
Optionee's employment if such termination is due to the Optionee's death or
permanent and total disability;
(iii) immediately upon the termination by the Company of the Optionee's
employment, if such termination is for Cause (as defined in Section 8(a)(i));
(iv) immediately upon the termination by the Optionee of the
Optionee's employment, unless such termination is with the consent of the
Company in which case the other clauses of this paragraph shall govern the
Optionee's right to exercise the unexercised portion of this Option; or
(v) the date specified in any notice of termination given to the
Optionee pursuant to the provisions of Section 12 of the Plan.
SECTION 5. ANTIDILUTION.
In the event the Common Stock is changed by reason of a stock split,
reverse stock split, stock dividend or recapitalization (exclusive of any public
or private sales of Common Stock), or is converted into or exchanged for other
securities as a result of a merger, consolidation or reorganization in which the
Company is the surviving corporation, appropriate adjustments shall be made in
the terms of this Option, or additional options shall be granted to the Optionee
as shall be equitable and appropriate, or an adjustment in the number and class
of shares allocated to, and the Option Price of, this Option shall likewise be
made, all in accordance with the provisions of Section 11 of the Plan.
SECTION 6. RESTRICTION ON TRANSFER OF OPTION.
This Option may not be transferred, pledged, assigned, hypothecated or
otherwise disposed of in any way by the Optionee, otherwise than by will or by
the laws of descent and distribution, and may be exercised during the lifetime
of the Optionee only by him. In the event of the death of the Optionee, this
Option may thereafter be exercised by the Optionee's representatives, executors
or administrators to the full extent to which this Option was exercisable by the
Optionee at the time of his death. This Option shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of this Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon this Option, shall result in the immediate termination of this Option.
SECTION 7. ESCROW ARRANGEMENT; DISTRIBUTIONS.
(a) All of the certificates representing the Optioned Shares, duly
endorsed in blank or with undated stock powers attached thereto, unless
repurchased by the Company as provided in Section 8, shall be held in escrow by
4
<PAGE>
the Company until the date the registration of the Common Stock shall have
become effective under the Securities Act.
(b) All dividends and other distributions paid or made with respect to the
Optioned Shares held in escrow shall be accumulated and held in escrow by the
Company for the benefit of the Optionee and will, upon termination of the
escrow, be paid over to the Optionee or members of the Group (as hereinafter
defined), as may be appropriate, together with interest thereon accrued from the
date of payment of the dividends or distributions through the date as of which
such dividends or distributions are paid over at the prime rate from time to
time published in the Wall Street Journal. If and to the extent any Optioned
Shares are repurchased by the Company, all undistributed dividends and other
distributions attributable to the Shares so repurchased, as well as the interest
accrued thereon, shall become the sole property of the Company, free and clear
of any claim by the Optionee or members of the Group.
SECTION 8. RESTRICTIONS ON SALE OF OPTIONED SHARES.
(a) DEFINITIONS. As used herein, the following terms shall have the
following respective meanings:
(i) "Cause" shall mean (A) the Optionee's willful misconduct with
respect to the business or affairs of the Company, its parent or any subsidiary
thereof, (B) the Optionee's neglect of duties or failure to act which can
reasonably be expected to materially and adversely affect the business or
affairs of the Company, its parent or any subsidiary thereof, (C) the Optionee's
breach of any of his obligations under any written or oral agreement pursuant to
which the Optionee is performing services for the Company (the "Employment
Agreement"), (D) the commission by the Optionee of an act involving moral
turpitude or fraud, or (E) the Optionee's conviction of a felony.
(ii) "Date of Termination" shall mean the date when any Termination
shall become effective.
(iii) "Fair Value Per Share" shall be determined as of the Date of
Termination and shall mean the fair market value of each Share (including, in
the case of any repurchase of Shares, any distributions with respect thereto
which would be repurchased with the Shares) determined in good faith by the
Committee not earlier than 60 days prior to the Date of Termination; provided,
however, that if within 10 days after the delivery of any notice pursuant to
paragraph (d) of this Section the Optionee shall object in writing to such fair
market value determination, the fair market value shall be determined by an
independent investment banking firm mutually selected by the Company and the
Optionee (or, if such selection cannot be made, by the American Arbitration
Association in accordance with its rules); and, provided further, that if the
fair market value as determined by such investment banking firm shall differ by
less than 10% from that determined by the Committee, the Optionee shall bear the
entire cost and expense of the investment banking firm, and if the fair market
value
5
<PAGE>
as determined by such investment banking firm shall differ by 10% or more from
that determined by the Committee, the Company shall bear the entire cost and
expense of the investment banking firm.
(iv) "Group" shall mean the Optionee and (A) the spouse and any parent,
sibling and lineal descendant of the Optionee, (B) a trust for the benefit of
any of the foregoing, and (C) any distributee, legatee or devisee of the
Optionee, in each case who has agreed in writing to be bound by and comply with
this Agreement to the same extent as the Optionee.
(v) "Sell," as to any Share, shall mean to sell, or in any other way
directly or indirectly transfer, assign, distribute, encumber or otherwise
dispose of, either voluntarily or involuntarily; provided, however, that the
Optionee shall not be deemed to Sell the Shares if such Shares are transferred
to a member of the Group.
(vi) "Selling Group" shall mean the Group proposing to Sell any of the
Shares, or which has delivered a notice of intention to Sell, pursuant to
paragraph (e) of this Section.
(vii) "Shares" shall mean the Optioned Shares and any other shares of
the Company's capital stock acquired by the Optionee as a stock dividend on or
in exchange for any of the Optioned Shares or otherwise in connection with the
Optioned Shares.
(viii) "Termination" shall mean any termination of the Employment
Agreement, whether such termination is by reason of death or permanent and total
disability, voluntary or involuntary, or for Cause or without Cause.
(b) RESTRICTIONS ON SALE. As long as the certificates representing any of
the Optioned Shares are held in escrow in accordance with the provisions of
Section 7, the Optionee shall not Sell any Shares except to a member of the
Group or except in accordance with the provisions of paragraphs (c), (d) or (e)
of this Section; provided, however, that the Optionee shall not sell any of the
Optioned Shares (other than pursuant to the provisions of paragraphs (c), (d) or
(e) of this Section) for such period of time after the effective date of a
registration statement under the Securities Act for the public offering of any
of the Company's securities as shall be requested by the managing underwriter
for such offering.
(c) REPURCHASE OF SHARES AT COST.
(i) In the event of any Termination for Cause, the Company (or its
designee) shall have the right to repurchase from the Optionee and any member of
the Group holding Shares, and the Optionee and any such member of the Group
shall sell to the Company (or its designee) upon the exercise of such right, at
a purchase price per share equal to the Option Price (adjusted for any stock
split, reverse stock split, stock dividend, recapitalization, etc.), all of the
Shares
6
<PAGE>
owned by the Optionee and any such member of the Group that are subject to
escrow in accordance with the provisions of Section 7.
(ii) In order to exercise its right to repurchase Shares under this
paragraph, the Company (or its designee) shall, within 60 days after any such
Termination, deliver a written notice to the Optionee and to any member of the
Group holding Shares it wishes to repurchase indicating its election to
repurchase such Shares and the purchase price therefor. The repurchase of the
Shares hereunder shall be made on a date within 30 days after the delivery of
the aforesaid notice or notices by delivery of one or more checks payable to the
order to the Optionee or such member of the Group, as may be appropriate,
against receipt of one or more certificates, properly endorsed, evidencing the
Shares to be so repurchased.
(iii) If the Company is legally prohibited from or unable to repurchase
the Shares during the period referred to above, such period shall be suspended
until such date on which the Company is legally permitted or able to repurchase
the Shares, whereupon the Company (or its designee) may exercise its repurchase
option within 60 days thereafter.
(d) REPURCHASE OF SHARES AT FAIR VALUE PER SHARE.
(i) In the event of any Termination other than for Cause, the Company
(or its designee) shall have the right to repurchase from the Optionee and any
member of the Group holding Shares, and the Optionee and any such member of the
Group shall sell to the Company (or its designee) upon the exercise of such
right, at a purchase price per share equal to the Fair Value Per Share, all of
the Shares owned by the Optionee and any such member of the Group that are
subject to escrow in accordance with the provisions of Section 7.
(ii) In order to exercise its right to repurchase Shares under this
paragraph, the Company (or its designee) shall, within 60 days after any such
Termination for Shares issued prior to Termination, or within 60 days after the
expiration of the right to exercise this Option in accordance with the
provisions of Section 4 for Shares issued after Termination, deliver a written
notice to the Optionee and to any member of the Group holding Shares it wishes
to repurchase indicating its election to repurchase such Shares and specifying
the number of Shares which it elects to repurchase and the purchase price
therefor. The repurchase of Shares hereunder shall be made on a date within 30
days after the delivery of the aforesaid notice or notices by delivery of one or
more checks payable to the order of the Optionee or such member of the Group, as
may be appropriate, against receipt of one or more certificates, properly
endorsed, evidencing the Shares to be so repurchased.
(iii) If the Company is legally prohibited from or unable to repurchase
the Shares during the period referred to above, such period shall be suspended
until such date on which the Company is legally permitted or able to
7
<PAGE>
repurchase the Shares, whereupon the Company (or its designee) may exercise its
repurchase right within 60 days thereafter.
(e) SALE OF STOCK TO THIRD PARTIES. Except as otherwise expressly
provided herein, the Optionee and each member of the Group shall not Sell any
Shares subject to escrow in accordance with the provisions of Section 7 except
as follows:
(i) The Selling Group shall first deliver to the Company a written
notice, which shall be irrevocable through the date of sale referred to in
clause (ii) below but in any event for not less than 90 days from the delivery
thereof, offering all or any part of the Shares owned by the Selling Group at
the purchase price and on the terms specified therein, whereupon the Company (or
its designee) shall have the right and option to repurchase all of the Shares so
offered at the purchase price and on the terms stated in such notice of
intention to Sell, such acceptance to be made by the delivery of a written
notice by the Company (or its designee) to the Selling Group within the 60-day
period after delivery of such notice of intention to Sell.
(ii) Any sale of Shares under the terms of clause (i) above shall be
made at the office of the Company on a mutually satisfactory business day within
30 days after the acceptance by the Company (or its designee) of the Selling
Group's offer to sell delivered pursuant to clause (i) above. Delivery of
certificates or other instruments evidencing such Shares, duly endorsed for
transfer to the Company (or its designee) shall be made on such date against
payment of the purchase price therefor by check or wire transfer of funds.
(iii) If acceptance shall not be received pursuant to clause (i) above
with respect to all the Shares offered for sale pursuant to the aforesaid
written notice, then the Selling Group may Sell all or any part of the remaining
Shares so offered for sale, at a price not less than the price and on terms not
more favorable to the purchaser thereof than the terms stated in the aforesaid
written notice of intention to Sell, at any time within 90 days after the
expiration of the offer made pursuant to clause (i) above. In the event the
remaining Shares are not sold by the Selling Group during such 90-day period,
the right of the Selling Group to Sell such remaining Shares shall expire and
the obligations under this paragraph shall be reinstated; provided, however,
that in the event the Selling Group determines, at any time during such 90-day
period, that the sale of all or any part of the remaining Shares on the terms
set forth in the written notice of intention to Sell is impractical, the Selling
Group may terminate the offer and reinstate the procedure provided in this
paragraph without waiting for the expiration of such 90-day period.
(iv) Any purchaser of Shares shall agree in writing in advance of any
purchase of Shares under this paragraph that it or he, as the case may be, shall
be bound by and comply with the terms and provisions of this Agreement,
including the provisions relating to the escrow of the Shares, the repurchase of
Shares by the Company, the sale of Shares to third parties, and the restrictive
8
<PAGE>
legend requirement, and the Shares so purchased shall continue to be subject to
all such terms and conditions.
(v) So long as the Optionee or members of the Group, or any purchaser
pursuant to the provisions of paragraph (e) of this Section shall hold any of
the Optioned Shares, and until termination of the escrow provided for in Section
7, all certificates representing the Shares shall bear a legend in substantially
the following form:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE PROVISIONS SPECIFIED IN THE INCENTIVE
STOCK OPTION AGREEMENT DATED [DATE OF OPTION AGREEMENT]
BETWEEN PHARMAGENICS, INC., A DELAWARE CORPORATION, AND
[NAME OF OPTIONEE], AND NO TRANSFER OF THESE SHARES SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF PHARMAGENICS, INC."
SECTION 9. TERM.
This Agreement shall terminate and be of no further force and effect upon
the earlier to occur of (a) the purchase of all of the Optioned Shares by the
Company (or its designees) pursuant to the provisions of Section 8, or (b) the
termination of the escrow provided for in Section 7; provided, however, that
notwithstanding the foregoing, this Agreement shall remain in full force and
effect so long as any part of this Option shall remain unexercised.
SECTION 10. NOTICES.
Any notice or other communication hereunder shall be in writing, shall be
given either manually or by mail, telegram, telefax, radiogram or cable,
addressed to the party to be notified, in the case of the Company at 4 Pearl
Court, Allendale, New Jersey 07401, and in the case of the Optionee at his
address on the records of the Company, and shall be deemed sufficiently given as
of the third day thereafter. Either party may, by notice to the other, change
its address for receiving such notices and communications.
SECTION 11. ASSIGNABILITY.
This Agreement, including the right to repurchase the Optioned Shares
pursuant to the provisions of Section 8, may be assigned by the Company and
shall enure to the benefit of any assignee of the Company, and the Optionee
shall execute any and all necessary documents in connection therewith.
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<PAGE>
SECTION 12. ALTERNATIVE DISPUTE RESOLUTION (ADR).
In the event of any dispute arising under this Agreement, the parties
shall, before litigation is commenced, explore in good faith the resolution of
such dispute through one or more ADR procedures (e.g., mediation, arbitration,
minitrial, neutral fact finding, etc.).
SECTION 13. NO WAIVER.
No waiver of any breach or condition of this Agreement shall be deemed to
be a waiver of any other or subsequent breach or condition, whether of like or
different nature.
SECTION 14. OPTIONEE UNDERTAKING.
The Optionee shall take whatever additional actions and execute whatever
additional documents the Company may in its judgment deem necessary or advisable
in order to carry out or effect one or more of the obligations or restrictions
imposed on the Optionee pursuant to the provisions of this Agreement.
SECTION 15. GOVERNING LAW.
This Agreement shall be construed in accordance with and governed by the
law of the State of New Jersey.
SECTION 16. COUNTERPARTS; CAPTIONS.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute but one and
the same instrument. The use of captions in this Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
hereof.
SECTION 17. NOUNS AND PRONOUNS.
Whenever the context may require, any pronoun used herein shall include the
corresponding masculine, feminine or neuter form, and the singular form of nouns
and pronouns shall include the plural and vice versa.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
PHARMAGENICS, INC.
------------------------------
Exhibit 10.56
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
PHARMAGENICS, INC.
REGISTRATION RIGHTS AGREEMENT
This Agreement dated as of February 13, 1996 is entered into by and among
PharmaGenics, Inc., a Delaware corporation (the "Company"), the Existing
Investors listed on Schedule I hereto (the "Existing Investors") and the
purchasers of the shares (the "Shares") of Series C Convertible Preferred Stock,
$.01 par value (the "Series C Preferred Stock") of the Company listed on
Schedule II attached hereto (the "New Investors", and together with the Existing
Investors, the "Investors").
WHEREAS, the Existing Investors are holders of Series C Preferred
Stock of the Company (as defined herein);
WHEREAS, the New Investors desire to purchase the Shares pursuant to a
Subscription Agreement dated as of the date hereof (the "Subscription
Agreement"); and
WHEREAS, the Company, the Existing Investors and the New Investors
desire to set forth certain arrangements for the registration of the Restricted
Shares (as hereinafter defined) under the Securities Act of 1933, as amended, on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
COMMISSION shall mean the U.S. Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
COMMON STOCK shall mean the common stock, $0.01 par value per
share, of the Company.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission issued under the Exchange Act, as they each may, from time to time,
be in effect.
PREFERRED SHARES shall mean the Series C Preferred Shares held of
record by the Investors as of the Closing (as defined in the Subscription
Agreement).
PREFERRED STOCK shall mean the Series C preferred Stock.
<PAGE>
PREFERRED STOCKHOLDERS shall mean, collectively, all holders of
Preferred Stock.
RESERVED SHARES shall mean the shares of Common Stock reserved by
the Company for issuance or actually issued upon conversion of the Preferred
Shares.
RESTRICTED SECURITIES shall mean the Preferred Shares or any of
the Reserved Shares issued upon conversion of the Preferred Shares which have
not been sold (a) in connection with an effective registration statement filed
pursuant to the Securities Act or (b) pursuant to Rule 144 promulgated by the
Commission under the Securities Act at any time after the Company shall have
satisfied or become in compliance with subparagraph (c) (i) of said Rule 144.
RESTRICTED SHARES shall mean the shares of Common Stock
constituting Restricted Securities.
SECURITIES ACT shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
SERIES C PREFERRED SHARES shall mean the 977,034 shares of Series
C Preferred Stock owned by the Existing Investors and the shares of Series C
Preferred Stock purchased by the New Investors pursuant to the Subscription
Agreement, as indicated next to each New Investor's name on Schedule II.
SERIES C PREFERRED STOCK shall mean the Series C Convertible
Preferred Stock, $0.01 par value, of the Company.
SUBSCRIPTION AGREEMENT shall have the meaning set forth in the
Introduction.
STOCKHOLDERS shall mean all holders of capital stock of the
Company.
2. REQUIRED REGISTRATION. If the Company shall be requested (i) by
holders of at least 50% of the outstanding Restricted Securities to effect the
registration under the Securities Act of Restricted Shares or (ii) after the
first registration pursuant to this Section 2, by one or more of the holders of
Restricted Securities to effect the registration under the Securities Act of
Restricted Shares having a proposed aggregate offering price equal to or greater
than $5,000,000, the Company shall promptly give written notice of such proposed
registration to all holders of Restricted Securities, and thereupon the Company
shall promptly use its best efforts to effect the registration under the
Securities Act of the Restricted Shares that the Company has been requested to
register
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<PAGE>
for disposition as described in the request of such holders of Restricted
Securities within 30 days after the giving of the written notice by the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to effect any
registration under the Securities Act except in accordance with the following
provisions and Section 4:
(a) Subject to Section 4, the Company shall not be obligated to file
and cause to become effective more than two (2) registration statements in which
Restricted Shares are registered under the Securities Act pursuant to this
Section 2, if all of the Restricted Shares offered under those two (2)
registration statements are sold hereunder upon the price and terms offered.
(b) Anything contained herein to the contrary notwithstanding, with
respect to each registration requested pursuant to this Section 2, the Company
may include in such registration any authorized but unissued shares of Common
Stock (or authorized treasury shares) for sale by the Company or any issued and
outstanding shares of Common Stock for sale by others; PROVIDED, HOWEVER, that
if the number of shares of Common Stock so included pursuant to this clause (b)
exceeds the number of Restricted Shares requested by the holders of Restricted
Shares requesting such registration, then such registration shall be deemed to
be a registration in accordance with and pursuant to Section 3; PROVIDED
FURTHER, HOWEVER, that the inclusion of such previously authorized but unissued
shares by the Company or issued and outstanding shares of Common Stock by others
in such registration shall not adversely affect, in the reasonable opinion of
the holders of Restricted Shares requesting such registration, their ability to
effectively market the entire number of Restricted Shares requested by them.
(c) Anything contained herein to the contrary notwithstanding, the
Company shall not be obligated to cause to become effective a registration
statement under the Securities Act pursuant to this Section 2 until a date no
later than 6 months from the effective date of a registration statement under
the Securities Act filed by the Company registering securities of the Company
in its initial public offering of securities.
3. PIGGYBACK REGISTRATION.
(a) Each time that the Company proposes for any reason to register
any of its securities under the Securities Act (other than pursuant to a
registration statement on Form S-4 or Form S-8 or similar or successor forms
(collectively, "Excluded Forms")), the Company shall promptly give written
notice of such proposed registration to all holders of Restricted Securities,
which shall offer such holders the right to request inclusion of any Restricted
Shares in the proposed registration.
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<PAGE>
(b) Each holder of Restricted Securities shall have 30 days from the
receipt of such notice to deliver to the Company a written request specifying
the number of Restricted Shares such holder intends to sell and the holder's
intended method of disposition.
(c) In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
and request under Section 3(b) may specify that the Restricted Shares be
included in the underwriting (i) on the same terms and conditions as the shares
of Common Stock, if any, otherwise being sold through underwriters under such
registration or (ii) on terms and conditions comparable to those normally
applicable to offerings of common stock in reasonably similar circumstances in
the event that no shares of Common Stock other than Restricted Shares are being
sold through underwriters under such registration.
(d) Upon receipt of a written request pursuant to Section 3(b), the
Company shall promptly use its best efforts to cause all such Restricted Shares
to be registered under the Securities Act, to the extent required to permit sale
or disposition as set forth in the written request.
(e) Notwithstanding the foregoing, if the managing underwriter
determines and advises in writing that the inclusion of all Restricted Shares
proposed to be included in the underwritten public offering, together with any
other issued and outstanding shares of Common Stock proposed to be included
therein by holders other than the holders of Restricted Securities (such other
shares, collectively, the "Other Shares"), would interfere with the successful
marketing of such securities, then the number of Restricted Shares and Other
Shares to be included in such underwritten public offering shall be reduced,
FIRST, (i) from the number of shares requested to be included in such
registration by the holders of Other Shares (on a PRO RATA basis based on the
number of shares requested to be included in such registration by each such
holder), and SECOND, if necessary, (ii)(A) one-half (1/2) of the remaining
number of shares to be reduced, from the shares proposed to be registered by the
Company, and (B) one-half (1/2) of the remaining number of shares to be reduced,
from the number of Restricted Shares then owned by such holder of such
Restricted Shares (on a PRO RATA basis based upon the number of Restricted
Shares requested to be registered, if any by such holder). In each case, those
shares of Common Stock which are excluded from the underwritten public offering
shall be withheld from the market by the holders thereof for a period, not to
exceed 180 days, which the managing underwriter reasonably determines as
necessary in order to effect the underwritten public offering.
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<PAGE>
(f) The rights granted under this Section 3 shall not apply to the
initial public offering of the Company's Common Stock at a price of at least
$7.50 per share (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares) resulting in gross proceeds to the Company of at least $10,000,000.
4. REGISTRATIONS ON FORM S-2 OR S-3. At such time as the Company
shall have qualified for the use of Form S-2 or S-3 (or any successor form
promulgated under the Securities Act), each holder of Restricted Securities
shall have the right to request in writing an unlimited number of registrations
on Form S-2 or S-3. Each such request by a holder shall: (a) specify the
number of Restricted Shares which the holder intends to sell or dispose of; (b)
state the intended method by which the holder intends to sell or dispose of such
Restricted Shares; and (c) request registration of Restricted Shares having a
proposed aggregate offering price of at least $500,000. Upon receipt of a
request pursuant to this Section 4, the Company shall use its best efforts to
effect such registration or registrations on Form S-2 or S-3; PROVIDED, HOWEVER,
that in no event shall the Company be obligated to file and cause to be
effective more than one (1) Form S-2 or S-3 registration statement in any six
(6) month period.
5. PREPARATION AND FILING. If and whenever the Company is under an
obligation pursuant to the provision of this Agreement to use its best efforts
to effect the registration of any Restricted Shares, the Company shall, as
expeditiously as practicable:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective in accordance with Section
5(b) hereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used as may be
necessary to keep such registration statement effective for at least nine months
and to comply with the provisions of the Securities Act with respect to the sale
or other disposition of all Restricted Shares covered by such registration
statement;
(c) furnish to each selling stockholder such number of copies of
any summary prospectus or other prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
documents as such seller may reasonably request in order to facilitate the
public sale or other disposition of such Restricted Shares;
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<PAGE>
(d) use its best efforts to register or qualify the Restricted
Shares covered by such registration statement under the securities or blue sky
laws of such jurisdictions as each such seller shall reasonably request and do
any and all acts or things which may be necessary or advisable to enable such
seller to consummate the public sale or other disposition in such jurisdictions
of such Restricted Shares; PROVIDED, HOWEVER, that the Company shall not be
required to consent to general service of process for all purposes in any
jurisdiction where it is not then subject to process, qualify to do business as
a foreign corporation where it would not be otherwise required to qualify or
submit to liability for state or local taxes where it is not liable for such
taxes;
(e) notify each seller of Restricted Shares covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statements is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 5(b) hereof, of the
happening of any event as a result of which the prospectus included in such
registration, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing and, at the request of such seller, prepare and furnish to such seller
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and
(f) furnish, at the request of any holder requesting
registration of Restricted Shares pursuant to this Agreement, on the date that
such Restricted Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the holder or holders
making such request, and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the holder or holders making such request.
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<PAGE>
6. EXPENSES. All expenses incurred by the Company in complying with
this Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), fees and expenses of complying with securities and
blue sky laws, printing expenses and fees and disbursements of counsel,
including with respect to each registration effected pursuant to Section 2, the
reasonable fees and disbursements of not more than one counsel for the Investors
as selling stockholder(s) thereunder will be paid by the Company; PROVIDED,
HOWEVER, that all underwriting discounts and selling commissions applicable to
the Restricted Shares covered by registrations effected pursuant to Section 2,3
or 4 hereof shall be borne by the seller or sellers thereof, in proportion to
the number of Restricted Shares sold by such seller or sellers.
7. INDEMNIFICATION.
(a) In the event of any registration of any Restricted
Shares under the Securities Act pursuant to this Agreement or registration or
qualification of any Restricted Shares pursuant to Section 5(d) hereof, the
Company shall indemnify and hold harmless the seller of such shares, each
underwriter of such shares, if any, each broker or any other person acting on
behalf of such seller and each other person, if any, who controls any of the
foregoing persons, within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any registration statement under which such
Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document incident to registration or qualification of any
Restricted Shares pursuant to Section 5(d) hereof, 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 to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Securities Act or state securities or blue sky
laws applicable to the Company and relating to action or inaction required of
the Company in connection with such registration or qualification under such
state securities or blue sky laws. The Company shall reimburse such seller,
such underwriter, broker or other person acting on behalf of such seller and
each such controlling person for any legal or any other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim,
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<PAGE>
damage, liability or action; PROVIDED, HOWEVER, the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said prospectus, or said amendment or supplement or any
document incident to registration or qualification of any Restricted Shares
pursuant to Section 5(d) hereof in reliance upon and in conformity with written
information furnished to the Company by such seller or such underwriter
specifically for use in the preparation thereof.
(b) Before Restricted Shares held by any prospective seller
shall be included in any registration pursuant to this Agreement, such
prospective seller and any underwriter acting on its behalf shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a)) the Company, each director of the Company, each officer
of the Company who shall sign such registration statement and any person who
controls the Company within the meaning of the Securities Act, with respect to
any untrue statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished to the Company through
an instrument duly executed by such seller or such underwriter specifically for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus or amendment or supplement; PROVIDED, HOWEVER, that the maximum
amount of liability in respect of such indemnification shall be limited, in the
case of each prospective seller, to an amount equal to the net proceeds actually
received by such prospective seller from the sale of Restricted Shares effected
pursuant to such registration.
(c) Promptly after receipt by an indemnified party of
notice of the commencement of any action involving a claim referred to in this
Section 7(a) or (b), such indemnified party will, if a claim in respect thereof
is made against an indemnifying party, give written notice to the latter of the
commencement of such action. In case any such action is brought against an
indemnified party, the indemnifying party will be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof;
PROVIDED, HOWEVER, that, if any indemnified party shall have reasonably
concluded that there may be one or more legal defenses available
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<PAGE>
to such indemnified party which are different from or additional to those
available to the indemnifying party, or that such claim or litigation involves
or could have an effect upon matters beyond the scope of the indemnity agreement
provided in this Section 7, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, and such
indemnifying party shall reimburse such indemnified party and any person
controlling such indemnified party for that portion of the fees and expenses of
any counsel retained by the indemnified party which are reasonably related to
the matters covered by the indemnity agreement provided in this Section 7. The
indemnifying party shall not make any settlement of any claims indemnified
against hereunder without the written consent of the indemnified party or
parties, which consent shall not be unreasonably withheld.
(d) Notwithstanding any of the foregoing, if, in connection
with an underwritten public offering of the Common Stock, the Company, the
selling stockholders and the underwriters enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification among the parties, the indemnification provisions of this
Section 7 shall be deemed inoperative for purposes of such offering.
8. INFORMATION BY HOLDER. Each Stockholder including Restricted
Shares in any registration shall furnish to the Company such information
regarding such Stockholder and the distribution proposed by such Stockholder as
the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
9. INVESTOR "STAND-OFF" AGREEMENT. Each Investor, if requested by
the Company and the managing underwriter of an offering by the Company of Common
Stock or other securities of the Company pursuant to a registration statement,
shall agree not to sell publicly or otherwise transfer or dispose of any
Restricted Shares or other securities of the Company held by such Stockholder
for a specified period of time not to exceed 30 days prior to, and 180 days
following, the effective date of such registration statement; PROVIDED, that:
(a) such agreement shall only apply to the first
registration statement covering Common Stock to be sold on its behalf to the
public in an underwritten offering; and
(b) all officers and directors of the Company enter into
similar agreements.
10. TRANSFERS OF RIGHTS. This Agreement, and the rights and
obligations of each Investor hereunder, may be assigned by such Investor to any
person or entity to which
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Restricted Securities are transferred by such Investor, and such transferee
shall be deem an "Investor" for purposes of this Agreement; provided that the
transferee provides written notice of such assignment to the Company.
11. GENERAL.
(a) NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
(i) two business days after being sent by registered or certified mail, return
receipt requested, postage prepaid or (ii) one business day after being sent via
a reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient as set forth below:
If to the Company, at 4 Pearl Court, Allendale, New Jersey O7401,
Attention: President;
If to an Investor, at his or its address set forth in the Company's
stock ledger.
Any party may give any notice, request, consent or other communication
under this Agreement using any other means including, without limitation,
personal delivery, messenger services, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section.
(b) ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof as it relates to the Restricted Securities and supersedes
all prior agreements and understandings relating to such subject matter as they
relate to the Restricted Securities.
(c) AMENDMENTS AND WAIVERS. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of at
least a majority of the Restricted Shares (including for this purpose Reserved
Shares issuable upon the conversion or exercise of Restricted Securities);
PROVIDED, that this Agreement may be amended with the consent of the holders of
less than all Restricted Shares only in a manner which affects all Restricted
Shares in the same fashion. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or
-10-
<PAGE>
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(d) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall be one and the same document.
(e) SEVERABILITY. The invalidity or unenforecability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New Jersey
(without reference to the conflicts of law provisions thereof).
-11-
<PAGE>
[COUNTERPART SIGNATURE PAGE]
Executed as of the date first written above.
COMPANY:
PHARMAGENICS, INC.
By: /S/ MICHAEL I. SHERMAN, Ph.D.
--------------------------------------
Michael I. Sherman, Ph.D., President
NEW INVESTORS:
FOR ENTITIES:
ON FILE
----------------------------------------
[Insert Name of Purchaser]
By: /S/ ON FILE
--------------------------------------
Name:
Title:
FOR INDIVIDUALS:
By: /S/ ON FILE
--------------------------------------
Name:
EXISTING INVESTORS:
HEALTHCARE VENTURES III, L.P.
By: /S/ ON FILE
--------------------------------------
-12-
<PAGE>
HEALTHCARE VENTURES IV, L.P.
By: /S/ ON FILE
--------------------------------------
EVEREST TRUST
By: /S/ ON FILE
--------------------------------------
PAINEWEBBER R&D PARTNERS III, L.P.
By: /S/ ON FILE
--------------------------------------
/S/ ON FILE
--------------------------------------
Larry Abrams
-13-
<PAGE>
SCHEDULE I
EXISTING INVESTORS
Number of Shares of
Name Series C Preferred Stock
---- ------------------------
Healthcare Ventures III, L.P 247,202
Healthcare Ventures IV, L.P 72,593
Everest Trust 152,151
PaineWebber R&D Partners III, L.P. 480,242
Larry Abrams 24,846
-14-
<PAGE>
SCHEDULE II
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
PaineWebber Inc., Custodian FBO Dr. M.B. Abaza IRA 10,000
Anthony M. & Allie J. Abbate 1,304
Carol A. Abdo 1,304
John E. Abdo Trust John E. Abdo TTEE 20,000
Larry Abrams 34,884
David H. Adamkin 10,000
Virgil J. Adams 652
Robert L. Aitchison 3,000
Robert Alati, George Laktzian, Gerald Jahn, Lawrence S. Stanko 1,304
Joseph B. Allegretti 5,200
PaineWebber Inc., FAO Alfonso Amato 652
Bruce B. Amshel 652
PaineWebber C/F Arthur Ancowitz IRA 1,304
C. John Anderson 1,300
Kurt Q. Anderson 5,000
Robert Anderson and Mary C. Anderson JT TEN 10,000
William C. Anderson 3,000
James C. Ruboyianes and Michael G. Anderson 652
I. Jackson Angell 652
Jack Argila and Joan Argila JT TEN 652
Stanley S. Arkin 2,608
B & G Tobacco & Candy Co., Inc. 15,000
Vincent Bacolini 1,304
Sharon Bahr 2,500
Betty Baker Trust 3,000
Phillip L. Baker Trust 3,000
Brad Baran and Barbara Baran JT TEN 1,304
Leonard Barrack & Lynne A. Barrack 1,304
John J. Genoa Jr. & Harry J. Barry 1,304
Ilene Barth 1,956
William L. Barton 2,500
Henry J. Basil 1,000
John R. Behrmann Revocable Trust 7,200
Doris Benson 1,000
Todd W. & Cinda R. Berman 2,000
Mildred C. Bianchi Living Trust DTD 11-14-84 652
H. Duane Billmeyer Jr. TTEE H. Duane Billmeyer Jr. TR UA DTD 3-13-81 2,000
Moye Lynwood Bishop, Jr. 652
William C. & Violette A. Blanks 2,800
Bertold Bodenheimer and Miriam Bodenheimer JT TEN 652
PaineWebber Inc. FAO Thomas H. Boehm & Renee R. Boehm 652
Warren F. Boos TTEE Warren F. Boos Revocable Trust DTD 2-27-91 1,956
-15-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Bernard S. & Elaine M. Brandchaft Trust 8,000
Fred Harry Brandt 1,304
Jeffrey Bronson 652
Joseph B. & Carolyn O'Neil Bronushas 1,000
Barry D. Brooks, MD & Susan M. Creagan, MD 10,000
Olive Young Brown 1,304
Kenneth A. Brown TTEE Kenneth A. Brown Trust UAD 5/25/88 652
Courtney P. Brown Jr. 652
John J. Burke & Mary K. Burke 1,800
Leo J. Burke & Cindi Burke 652
James Burkoff 652
Beth Burnam Trust of 1993 Beth Burnam Trustee 13,044
Bruce Burnam Trust of 1992 Bruce Burnam Trustee 13,044
John R. Byerly 5,000
J. Richard Caldwell, Jr. & Jo Ann Caldwell 1,304
Patricia C. Carnes 1,000
Francis S. Carnes Jr. 1,000
Thomas R. Carney MD APC Profit Sharing Trust Fund DTD 6/25/74 652
Theodore R. Carski 1,400
Kenneth Carter & Karen G. Carter 3,000
A. Bailey Chapin 4,000
Chester Chastek 3,912
Iftikhar A. Chatha 652
Manu Chatterjee 12,608
M. Robert Ching & Phyllis Ching 1,304
Phyllis Ching 29,020
Victor Ching & Beverly Ching 1,304
Philip T. & Beverly Ching Revocable Living Trust DTD 6/28/88 1,304
Philip Ching MD Inc. Profit Sharing 1,304
Virginia L. Christy Revocable Trust 5,869
Perry Chu & Celia Chu 652
Priscilla K. Chu 652
CIRCLE C, L.P. Alfred A. Caro Trustee Alfred A. Caro Living Trust 7,600
James R. Clifton 652
Marguerite Collier 1,304
Roger Colton PA Profit Sharing Plan & Trust DTD 1/1/81 1,000
Lee Comer 5,000
Donald Ray & Delia E. Cook 8,800
Larry N. Cook and Christine L. Cook JT TEN 10,000
C. Gary Cooper MD Inc. Pension and Profit Sharing 652
Anthony Coppola IRA 1,304
Charles Costa 652
-16-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Robert B. Costello & Marcia M. Costello 1,304
William A. Crosetto 4,000
Warren Cross 5,000
D. Jeanie Cushner & Charles Cushner 3,000
William Davidson 652
PaineWebber Inc. FAO Leslie A. Davis 652
Renee Crile Davis 1,000
Steven Dawes 652
Anthony Denisco 652
Alan S. Dernbach 1,304
PaineWebber CDN FBO Angela DiDomenico IRA 800
James R. Dobyns 652
Charles W.H. Dodge 652
Richard B. Donati & Donna J. Donati 2,804
PaineWebber C/F Gale Thomas Downey IRA 6,304
Joseph Dragoni 700
Thomas Dravis & Peggy Dravis 3,152
Grace R. Robbin or Vern Drehmel TTEES for the Drehmel-Robbin
Trust UA DTD 3/91 2,500
Paul Dresnick 652
Paul Dresnick Professional Corp Pension and Profit Sharing Plan 652
Scott F. Drill 8,000
Richard A. Dudek 1,200
Bennet Dworkis & Arlene Dworkis 800
Robert G. Easton 2,000
Nabil Ebraheim & Tracy Ebraheim 5,000
Charles C. Edwards 5,000
Electrolight Investments LTD 19,000
Palm Beach Ear, Nose, & Throat Assn. P.A. Profit Sharing Plan 2,608
William Epps RPT PA Employees Pension Plan 652
Thomas Nesgoda TTEE ER Doc Inc. Master Profit Sharing
Plan Trust DTD 1/89 17,500
Everest Trust 65,000
Frank E. Everett 20,200
William Farhet 1,304
R. Bruce Farmer 1,956
PaineWebber C/F R. Bruce Farmer IRA 5,652
James F. Fasi 2,500
Jerome J. Feder & Elayne J. Feder 2,500
Allen W. Feldman 2,500
Joseph & Carol C. Ferguson 15,000
Kenneth M. Fernandez 2,608
Donald J. Finnegan, Jr. 7,500
Sam N. Fisse 1,304
-17-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Mickie Flanigan 7,600
Walter A. Forbes 652
George N. Forker, MD 4,000
John H. Forte 2,608
A. Steven Franchak 6,000
T.J. Franken & Julie L. Franken 10,000
Marvin Fribush & Dora Fribush 4,000
James Gaffney & Kathleen Gaffney 800
Subhash Gajendragadkar 1,304
John K. Garvey 15,200
Peter W. Gault and B. Christine Gault JT TEN 652
Carlson Gerdau 1,000
Alan S. Gertler & Doris L. Gertler 1,304
Fred Ghavidel 5,000
Fred Ghavidel and Kurt Anderson 2,608
Ruth Gilbert 1,000
PaineWebber Trust Co TTEE FBO John H. Gilmer Keogh 800
PaineWebber C/F David W. Gjerde IRA 2,000
Leonard M. Goldstein 652
James Gosman 2,500
C. Herbert Grauling, Jr. 2,600
Constance I. Graves 1,304
Robert M. Gray 652
John M. & Mary A. Grewe 978
Tom Gumprecht and Bonnie J. Witrak 6,000
George E. Hackney II and Eden H. Hackney JT TEN 1,000
Mark D. Hafermann & Vija Hafermann 1,304
William O. Hagerman 1,000
Jack D. Hagewood Profit Sharing Plan 1,304
Raymond A. Haik 1,000
PaineWebber C/F Robert J. Hall IRA 5,000
Robert G. Hamilton 3,000
Philip M. Hampton and Elaina F. Hampton JT TEN 7,600
Peter & Taffy Handy 1,304
James W. Harrington and Carole N. Harrington JT TEN 652
Brian F. Harris and Carolyn K. Harris Trustees
Harris Family Trust 10/20/88 10,000
Kenneth A. & Irene Hartung 1,500
Joseph W. Hasler 1,956
Robert C. Hawkins 5,000
HealthCare Ventures II, L.P. 232,558
David & Joan Heinke 652
Mark T. Hellner and Mary Lee Hellner JT TEN 652
-18-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
PaineWebber CDN FBO Glen A. Hemstock IRA 800
Howard C. Hines 1,304
Carl Hirsch and Anne D. Hirsch JT TEN 1,300
Leif Holgersen and Marcia Holgersen JT TEN 1,304
Joel Hollingshead & Judith Hollingshead JTWROS 1,304
Donald Horst 5,000
Nancy F. Howar 2,000
Victor Hsia and Virginia Hsia JT TEN 2,000
Henry T. Hsia & Alice Hsia Revocable Living Trust 1,304
Laura Huberfeld & Naomi Bodner A Partnership 140,000
Jane Ann Hudson-Davis 2,000
Charles E. Huffman and Jonita S. Huffman JT TEN 1,304
I.O. Co., Ltd. - A California Limited Partnership 20,000
Demarest Ingraham and Marion Ingraham JT TEN 652
Moreland R. Irby, Jr. 652
John Jacobs III 652
George D. Jagels, Jr. 10,000
William A. Janssen TTEE William A. Janssen Rev Trust 652
Theodore Johnson 24,800
Norman W. Johnston 2,500
David Jones & Sue Ann Jones 1,304
John Z. Jones and Arlene M. Jones JT TEN 652
Korey S. Jorgensen 652
Lanny M. Kalik & Gail Kalik 1,304
Venkateswara Kanubaddi 652
Daniel Kaplan 652
Leonard Karp and Cheryl L. Karp JT TEN 3,152
Daniel P. Kearney 1,304
Dimitri & Lorraine Kececioglu COTTEES Kececioglu Family
Trust DTD 6/30/89 2,325
Tom L. Kemph and Barbara Kemph 652
Mary L. Kenzie 652
Ross B. Kenzie 652
Gregory S. Pineda TTEE Kern Co. Neurological Med Group
Pension Plan UA 10-1-74 1,000
Gyanchand J. Khicha & Manorama G. Khicha TTEES
Gyanchand J. Khicha Liv Trust 4,800
Edwin A. Kilburn 4,000
Hyoung D. Kim 652
Rachel K. King 652
Robert W. King 2,500
Claudine B. Kirkwood 2,608
Sheldon W. Kirsner TTEE Sheldon W. Kirsner Rev Trust 10/14/87 1,304
Philip W. Klaus, Jr. 1,200
Ronald Kolker and Ruth Kolker JT TEN 2,000
-19-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
William Stanley Konetzki 4,600
Yvonne Koo 1,304
William E. Krauter 3,912
Janet M. Kroll 652
Jerome I. Kroll 652
Carl A. & Jacqueline Kuhn 1,304
Joyce A. Lagnese 2,804
J. Joseph Lally and Sharon F. Lally TTEES of the
Lally Living Trust DTD 6-8-92 23,500
Richard Landrum 652
Harold & Julie Lane 652
John Lane 600
Eivind G. Lange and Betty Ivey Lange TTEES FBO
Eivind & Betty Lange Living Trust 652
Ellen Larsen 1,304
Karl Larsen 1,304
Richard E. Lautner & James R. Nunn 1,000
Morgan A. Lawrence 8,600
Joohn Shik & Adrienne Ok-Ja Lee 10,000
Tennyson G. Lee and Esther K. Lee JT TEN 1,304
Robert Levy 5,000
Doree Levy 2,500
Nancy S. Lewis 2,000
Robert C. Lewis, Jr. 2,700
PaineWebber C/F Paul A. Lillejord IRA 652
Rong-Chung Lin and Shiow Bih Lin JT TEN 652
Bruce G. Livergood 1,304
Bruce G. Livergood IRA 652
Gail Livergood IRA 652
David A. Lombardero 2,000
Gary Z. Lotner and David G. Tinkelman TEN IN COM 652
Fredia Loveland 652
George A. Loveland 4,000
Thomas V. Loveland 652
Jack R. Loving 1,304
Frank J. Low and Edith M. Low JT TEN 652
David A. Lowry 2,000
Herbert Lucks and Anita H. Lucks JT TEN 3,260
PaineWebber C/F Kristi Lund Lozier IRA 5,000
Doris Lund Revocable Trust - Doris Lund TTEE 5,000
Lake Lytal, Jr. 1,304
Morton J. Macks 5,000
Brenda R. Majdalani 2,000
Bernard Manekin 4,000
-20-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Harold Manekin 2,304
Wm. E. Manley 1,304
Rita N.A. Mansour 3,500
T. Joseph Mardelli, MD, PA Money Purchase & Pension
Trust DTD 11/1/86 FBO TJ Mardelli 1,304
PaineWebber Inc. FAO James A. Maritz III Trust 652
Cynthia Ann Maritz TTEE Cynthia Ann Maritz Trust 652
UMB Bank NA TTEE Toledo Radiological Assoc FBO Gerald Marsa 3,000
Dorothy Marshall 1,304
Patrick C. Massa and Patricia E. Massa JT TEN 1,304
Joseph & Carol McCormick 5,000
Michael F. McDermott 652
D.W. McDonald & Donna McDonald 1,304
Edwin P. McDuffie 652
Ralph L. McElroy 1,504
Harry McGowan 652
William B. McGuire 6,304
Rick & Deborah McKinney 21,304
James D. & Anne T. McLaughlin 2,800
John C. and Dorothy M. McNee Revocable Trust
John C. and Dorothy M. McNee TTEES 7,000
Edward T. McPhee, Jr. 5,000
J. Owen McPherson & Boatmen's First Nat'l Bank
TTEES of J. Owen McPherson Rev Trust 2,608
George F. Medill 5,000
Aristides Melissaratos 2,000
Robert G. Mennel, MD 1,000
W. Tom Meredith and Judith H. Meredith JT TEN 3,800
H. Kent Mergler 2,800
W.E. Michael Mikhail TTEE under Rev Trust of W.E.
Michael Mikhail DTD 7-19-95 20,000
Gary & Arlene Miller 652
Meredith Miller 1,652
Charles J. Miller III 800
Bonnie Minzer 652
Irwin Minzer 652
Richard E. Mistler Trustee Richard E. Mistler Trust 8,800
Kathleen Moody 5,652
Winship B. Moody, Sr. 652
Donald Morgan 652
Jon C. Moyle 652
Ferid & Carol A. Murad 3,913
PaineWebber C/F Kenneth Murdock IRA 2,500
Paul M. Murphy 3,800
Philippe G. Mutrux and Alice Marie Mutrux TTEES
Mutrux Rev Living Trust UTD 2-28-90 652
Edmund G. Nasief, Jr. and Nancy L. Nasief JT TEN 10,000
-21-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
James A. Nelson 5,000
James P. Newby 3,800
Samih F. Nimri 5,000
John S. Nolan 652
Walter J. Nott 4,652
The Oracle Fund Inc. 100,000
Steve A. Oravecz 3,000
Phyllis M. Oxtoby 2,400
Gwendolyn R. Paine 3,200
Ronald Pancner 652
Stelios Papadopoulos 50,000
Estate of Hilda B. Parker, Stephen L. Parker and
Marilou Parker Co-Executors 2,652
Donald R. & Margaret Mary Parks 10,200
Parkway Associates 652
Patheco Investment Partners, Ltd. Patrick Henry General Partner 1,304
Pathology Service Pension and Profit Sharing Trust FBO
Franklin H. Martin 7,500
Louis J. Patierno & Margaret S. Patierno 1,000
Charles H. Patterson & Sharon L. Patterson TTEES of
Patterson Family Trust DTD 2-2-84 1,304
Eugene Patton 3,000
Nan Pearlman 5,000
Nora R. Peek & Thomas R. Peek Co-TTEES U/A DTD 8/29/90
FBO Nora R. Peek Rev Trust 2,500
Xavier D. Pereira and Minda C. Pereira JT TEN 1,304
Clifford R. Perez & Janet R. Perez 652
Kenneth A. Perkins 2,608
Micheal C. Pistole, MD 1,304
Bernard E. Platt TTEE Bernard E. Platt Trust UAD 7-9-86 1,304
Donald Plochocki and Luanne Plochocki 1,304
Charles & Wendy Plotkin 7,600
John S. Poindexter III 652
Erich R. Pontasch, MD 4,100
Portico Investments Limited 6,522
John Potocki 1,000
William P. Potsic 1,304
J. Travis Prewitt 3,000
Donald H. Putnam, Jr. 6,000
David I. Rabo & Jean N. Rabo 652
Fred A. Rabo & Dorothy M. Rabo 652
Charles F. Radice and Alice Radice JT TEN 2,608
Robert C. Radice TTEE U/A DTD 8/7/91 for Robert C. Radice Trust 2,608
Noel P. Rahn 2,608
Ronald T. Ramge 1,200
Krishnamurti N. Rao TTEE Money Purchase Profit Sharing Plan DTD 8-1-86 1,304
-22-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Hugh A. Raphael and Jo A. Raphael JT TEN 652
Jose Raquel 2,652
Mark B. Ratterman TTEE Mark B. Ratterman Rev Living Trust DTD 12-12-87 1,304
Mary G. Ray 1,956
V. Chandra Sekhar Reddy 1,304
William H. Reeder Trust William G. Reeder Trustee 1,304
Michael Reese and Pamela Reese JT TEN 2,608
Frederick N. Reidenbach 1,304
Mary G. Reinbolt 3,000
Philip T. Resha 1,304
Richard Ressner & Margaret Ressner 2,500
Madaiah Revana 1,304
Gerald David Ritland 3,002
Louis Rizzo and Grace Rizzo JT TEN 1,304
Leon Robbin 5,000
Gary & Joanne Robertson 652
Arthur J. Rose III 3,600
Julius A. Rosenthal Residuary Marital Trust UA DTD 3-25-88
Barry H. Rosenthal TTEE 2,608
Dennis L. Ross & Ann M. Ross 3,800
Tom Rossi 652
Dermot F. Rowland 1,304
Jean C. Rubin 3,000
Kevin A. Rubin 3,000
Joel William Rudd Living Trust 1,304
Craig A. Rush IRA 2,500
Laurence P. Russe Trust U/I/T 5/30/85 1,304
Peter J. Russo 5,000
Stephen R. Saddemi 3,000
Herbert D. Sahar & Lorraine M. Sahar 2,608
Nasr N. Salaita and Miriam B. Salaita JT TEN 652
Joseph S. Sanfilippo and Patricia M. Sanfilippo JT TEN 24,000
Costas Sarantopoulos 3,600
Sarcar Associates 652
Phillip G. Saunders 1,304
John & Virginia Schilling 652
David Schmitz 20,000
Gerald E. Schneider 1,304
Roger Schnell 3,912
Kenneth, Russell & William Schomig SUCC Co-TTEES U/A/D 8/1/89
Rita R. Schomig Trust 1,000
Charles N. Schumann & Helen Schumann 1,304
Kathleen F. Schwieger 800
Jean Rockwell Scudder 652
-23-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Donald L. Sears 1,152
M.J. Seby & Ann Seby 652
Cabot Sedgwick 1,652
George A. Sedlock 652
Thomas J. Sedlock 2,800
Narendra N. Shah & Kamini N. Shah 652
Ratilal N. Shah & Bonny K. Shah 1,500
Gerald Joseph Shaughnessy IRA 2,000
Oliver Shaw TTEE Oliver Shaw Living Trust 9-12-91 2,608
Harvey L. Shephard & Dale Shephard TTEES for the Shephard Trust 2,608
Martin P. & Susan R. Sherman 3,488
Michael I. Sherman 12,000
Otto A. Silha 1,304
Dr. Jogendra & Kirpal Kaur Singh 2,304
Dean O. Smith 3,800
Robert G. & Linda V. Smith 7,000
Stewart W. Smith & Nancy W. Smith 2,652
Thomas J. Smith 3,000
Ronald E. Solomon 1,304
Sos & Co 6,522
Joe M. Sowder and Alice V. Sowder JT TEN 1,304
James R. Richman and Harold S. Spar JT TEN 1,304
Arnold Sperling & Lynn Sperling 15,000
Eileen Spigelmire 1,500
Robert H. Spitzer & Elizabeth A. Spitzer JT TEN 652
Arnold Stadheim 652
John Stafford 13,000
PaineWebber C/F Ernie Stautner Rollover IRA 1,300
Corey A. Steadman 2,600
John R. Stephens 10,000
Dominic Stevens & Mary Stevens 652
Daniel J. & Elvera Stock 2,977
Margaret E. Hancock, TTEE Stremark Trust U/A DTD 6-30-93 3,000
Michael D. Strum 652
Ellen Su 1,304
Marvin Sundquist 1,304
PaineWebber C/F Michael Swanson IRA 5,000
George Tallyn 2,652
Irene C. Tanury Trust DTD 1-19-85 1,000
S. James Tanury Trust 1,000
Swannie Zink Tarbel 1,500
John V. Thiemann Trust DTD 5-21-75 2,608
-24-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
Lawrence E. Thomas and Mary Ellen Thomas JT TEN 652
Lenerd G. Thomas Family Trust 2,600
John F. Thomas Trust 3,000
Elisa F. Thomases 1,800
PaineWebber C/F Pamela Morris Thomford IRA 2,500
Michael A. Thompson 2,000
Sioe Thung Thompson 4,000
Frank L. Thompson TTEE Thompson Living Trust 7,608
Severt W. Thurston, Jr. 1,304
James G. Tierney and Shirley A. Tierney TTEES FBO
The Tierney Family Trust 1,304
Gary D. Timm & Susan T. Timm 2,000
Gil Timm & Trili Timm 1,304
Michael L. Timm & Karen G. Timm 1,304
A. Thomas Traina 2,500
Tri - Lateral Trading Company 2,608
Gerald F. Tuohy & Darlene Tuohy 652
Louis Keimach & A. Raymond Tye 652
United Electric Co., Inc. 15,000
James E. Valentine 1,304
Fred C. Van Bebber 3,800
Claudio E. Vincenty and Kim M. Vincenty JT TEN 652
Richard L. Voorhees 3,000
Harvey Wallack MD Medical Corp Target Benefit Plan 5,304
Doris A. Walsh 3,000
John D. Warner 1,304
Jerry Watkins 652
Frank Weatherman & Glenna Weatherman JT TEN 652
PaineWebber C/F Marvin Weathers IRA 652
James A. Weaver 3,912
William J. Webber 3,000
Walter U. Weber & Marlene A. Weber 652
Martin L. Weich & Sharon G. Weich 5,652
Arnold Weiss 652
John E. Wenaas 3,652
Barbara Wertheimer 2,500
Frederick Wertheimer 5,000
Terry L. Whipple 652
Bruce Whitaker IRA 2,000
Charles S. White III, MD 10,000
Andrew Wiegand 3,000
Anders P. Wiklund 10,000
Michael M. Wild Trust U/A DTD 6-30-77 1,000
-25-
<PAGE>
NEW INVESTORS
Number of
Shares of
Series C
Preferred
Name Stock
- ---- ---------
PaineWebber C/F Alfred C. Wilder IRA 1,304
Estate of H.J. Wilkens Minel Wilkens Executor 652
Peter P. Williams 652
Keith Wilson 1,304
Adrian Woldring and Connie Woldring 652
Wolowitz Partners Pension Fund 5,200
Bernice M. Woock Revocable Trust DTD 6-5-90 652
Tom R. Wootten & Miriam Wootten 652
Martin & Phyllis Yocum 652
Mark Zaharski & Donna Zaharski 1,000
Peter Zes & Joan Zes 652
PaineWebber C/F Ronald W. Zesch IRA 2,500
PaineWebber CDN FBO Donald C. Zickus IRA 800
Tom S. Ziems 3,000
-26-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.57
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: September 25,1995
OPTIONEE: A. Steven Franchak
NUMBER OF SHARES: 2,000
OPTION PRICE: $2.15
EXERCISE MEASUREMENT DATE: September 25,1995
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ A. Steven Franchak
---------------------- ----------------------
Michael I. Sherman Optionee
President
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: March 18, 1996
OPTIONEE: A.Steven Franchak
NUMBER OF SHARES: 5,500
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: March 18, 1996
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ A. Steven Franchak
---------------------- ----------------------
Michael I. Sherman Optionee
President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.58
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: September 25,1995
OPTIONEE: Arthur H. Bertelsen
NUMBER OF SHARES: 10,000
OPTION PRICE: $2.15
EXERCISE MEASUREMENT DATE: September 25,1995
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ Arthur H. Bertelsen
----------------------- -----------------------
Michael I. Sherman Optionee
President
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: March 18, 1996
OPTIONEE: Arthur H. Bertelsen
NUMBER OF SHARES: 18,000
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: March 18, 1996
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ Arthur H. Bertelsen
------------------------ -----------------------
Michael I. Sherman Optionee
President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.59
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: September 25,1995
OPTIONEE: Alan F. Cook
NUMBER OF SHARES: 3,000
OPTION PRICE: $2.15
EXERCISE MEASUREMENT DATE: September 25,1995
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ Alan F. Cook
------------------------- -----------------------
Michael I. Sherman Optionee
President
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: March 18, 1996
OPTIONEE: Alan F. Cook
NUMBER OF SHARES: 11,000
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: March 18, 1996
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ Alan F. Cook
------------------------ --------------------
Michael I. Sherman Optionee
President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.60
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
CONFIDENTIAL
May 1, 1996
Mr. George M. Gould
287 Tillou Road
South Orange, New Jersey 07079
Dear George:
On behalf of PharmaGenics, Inc., I am very pleased to offer you the position of
Senior Vice President, Corporate Affairs and Chief Counsel at PharmaGenics,
reporting to me.
Term of Offer: This offer will expire on May 15, 1996.
Location: 4 Pearl Court, Allendale, New Jersey.
Start of Employment: On or before May 20, 1996 you will begin employment,
spending, on average, at least 24 hours per week at
PharmaGenics or elsewhere on assignment as requested by
PharmaGenics ("part-time employment"). You will
convert to full-time employment at PharmaGenics at a
time that is mutually agreeable to you and to
PharmaGenics.
Responsibilities: You will be responsible for intellectual property
issues, oversee the disposition of all legal issues and
interact with the CEO, CFO and Director, Business
Development in the establishment and elaboration of
business development strategies and activites.
You represent and warrant that you are not, to the best
of your knowledge and belief, under any legal restraint
or restriction that would prevent or make unlawful your
accepting this employment offer or performing the
responsibilities herein and that you have disclosed to
PharmaGenics any and all constraints, confidentiality
commitments or employment restrictions that you have
with any other employer or business.
<PAGE>
CONFIDENTIAL
Compensation: Base salary of $8,751 per month while you are engaged
in part-time employment at PharmaGenics: base salary of
$14,585 per month upon conversion to full-time
employment. Any annual or unscheduled bonuses are at
the discretion of the Company and based upon
performance and the Company's financial position.
Equity: Subject to approval by the Compensation Committee of
the Board of Directors, an option to purchase 50,000
shares of Common Stock, exercisable at fair market
value at the time of initiation of employment and
vesting at a rate of twenty-five percent (25%) every
twelve months. Sixty percent (60%) of the shares will
begin vesting on the date that you initiate part-time
employment at PharmaGenics; the remaining forty percent
of the shares will begin vesting on the date that you
begin full-time employment at PharmaGenics.
Upon termination for cause, the Company may purchase
all issued shares at cost and all remaining options
will expire. "Cause" means (i) your willful misconduct
or gross negligence, or (ii) your breach of your
confidentiality agreement with the Company. Issued
shares will be subject to a right of first refusal in
favor of the Company. Options will be issued pursuant
to the Company's stock option plan and option
agreement.
Severance: As an employee at will, you will be subject to
termination with or without cause. Severance benefit
equal to three months salary will be payable (at the
rate in effect at the time of termination) in the event
your employment is terminated by the Company without
cause at any time following the date on which you begin
full-time employment.
Benefits: Health (only if not covered by the Roche plan),
disability, life insurance, 401(k) savings plan
and vacation benefits as established by the Company
for comparable positions.
<PAGE>
CONFIDENTIAL
Medical Testing: This offer is contingent upon your satisfactorily
passing a urine test for drugs of abuse.
Contractual You will be required to complete confidentiality and
Requirements: patent assignment agreements upon commencement of
employment and to provide documentation confirming that
you are legally employable in the United States.
Please evidence your acceptance of the foregoing offer by signing and returning
one copy of this letter.
Yours truly,
/s/ Michael I. Sherman
Dr. Michael I. Sherman
President and Chief Executive Officer
Agreed and accepted this 2nd day of May, 1996.
/s/ George M. Gould
- ------------------------
George M. Gould
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.61
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: June 27, 1996
OPTIONEE: George M. Gould
NUMBER OF SHARES: 30,000
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: May 20, 1996
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ George M. Gould
------------------------ -------------------
Michael I. Sherman Optionee
President
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: June 27, 1996
OPTIONEE: George M. Gould
NUMBER OF SHARES: 20,000
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: Date optionee first begins
full-time employment
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman /s/ George M. Gould
------------------------ -------------------
Michael I. Sherman Optionee
President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.62
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
June 27, 1996
Michael I. Sherman, Ph.D.
314 Forest Avenue
Glen Ridge, New Jersey 07028
Dear Mike:
This letter agreement (this "Agreement") sets forth the terms and
conditions of your employment by PharmaGenics, Inc., a Delaware corporation
(which corporation, including its successors and assigns, will be referred to in
this letter agreement as the "Company").
1. TERM. The Company hereby employs you and you hereby
accept employment by the Company subject to the terms and conditions
in this Agreement. Your employment shall be for a three-year period
(the "Term") commencing July 1, 1996 and ending June 30, 1999, subject
to earlier termination as provided in this Agreement. The Term and
each extension thereafter shall be automatically extended for
successive one-year periods unless either party shall give written
notice to the other party at least sixty (60) days prior to the
expiration of the then present term that it elects not to extend such
term. The employment period as described in this paragraph shall be
referred to in this Agreement as the "Employment Period."
2. DUTIES. (a) The Company shall employ you as President
and Chief Executive Officer of the Company. You shall perform well
and faithfully such duties and services consistent with your positions
with the Company as may be assigned to you from time to time by the
Board of Directors of the Company or its designee.
(b) The Company shall use its best efforts to ensure your election as
a member of the Board of Directors and of the Executive Committee
thereof during the Employment Period.
(c) Except for reasonable vacations of a duration consistent with
Company policy and absences for temporary illness,
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 2
you shall devote your full time and energy to the business of the
Company during the Employment Period. You shall not engage in any
other business activity which in the Company's reasonable judgment
conflicts with your duties to the Company during the Employment
Period.
3. COMPENSATION; REIMBURSEMENT. (a) During the Employment
Period, commencing July 1, 1996, the Company shall pay you initially
an annual base salary (the "Base Salary") of $242,650, payable in such
installments as is consistent with Company policy for senior
executives. It is understood, however, that in the event that prior
to March 31, 1997 the Company undergoes a change in control and/or
receives additional financing in the cumulative amount of three
million dollars ($3,000,000), your annual base salary will be
increased to $260,000 retroactive to July 1, 1996. The Base Salary
shall be increased, as of each July 1 during the Employment Period by
(i) a percentage corresponding to the percentage increase (the "CPI
Increase"), if any, in the Revised Consumer Price Index (1967=100) --
All Urban Consumers [New Series] since the last adjustment date, or,
if no prior adjustment has been made, since July 1, 1996, and (ii)
such additional increases, if any, as determined by the Compensation
Committee of the Board of Directors in its sole discretion.
(b) On a calendar year basis within the Employment Period, the
Company shall pay you a cash bonus of at least $20,000, and may pay
you such additional bonuses as determined by the Compensation
Committee of the Board of Directors in its sole discretion. Such
bonus or bonuses shall be paid in such manner and at such times as is
consistent with Company policy for senior executives.
In addition, if, before the end of 1996, the Company (i) has an
Initial Public Offering with proceeds of at least twenty million
dollars ($20,000,000), or (ii) signs a definitive merger agreement in
which the Company's valuation is sixty million dollars ($60,000,000)
or greater, the Company shall pay you an additional one-time bonus of
$25,000 or a greater amount at the discretion of the Board of
Directors.
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 3
(c) During the Employment Period, the Company shall, at your option,
either (i) pay to you a car allowance of up to $650 per month payable
upon your submission of appropriate documentation evidencing purchase
and delivery of the car, (ii) reimburse you for car rental or lease
and related expenses not to exceed $650 per month, or (iii) rent or
lease a car for you in which case you agree to reimburse the Company
for all expenses paid by the Company related to such car rental to the
extent such expenses exceed $650 per month. Such payments to you
shall be grossed up on an annual basis in an amount equal to federal
and state income taxes on such payments.
(d) During the Employment Period, you shall be entitled to such health
and other benefits as are made available to senior executives of the
Company.
(e) If at any time during the Employment Period the principal offices
of the Company shall be moved to a site outside a fifty-mile radius of
Glen Ridge, New Jersey, the Company shall reimburse you for reasonable
relocation costs related thereto.
4. TERMINATION. (a) The Company may terminate your
employment at any time, with or without "cause."
(b) In the event of termination by the Company of your employment
without "cause," such termination shall be effective immediately upon
notice to you, and, in such event, the Company shall pay you that
portion of your Base Salary prorated to the date of termination which
has not yet been paid to you within thirty (30) days of such notice,
plus twelve months' Base Salary (at the rate and frequency in effect
at the time of termination but with no additional increases), but
neither you nor your assigns, beneficiaries or estate shall have any
further rights or claims against the Company, other than any rights or
claims to which you are entitled as a shareholder of the Company.
Without limiting the generality of the foregoing, (i) the Company's
election not to extend the Employment Period at
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 4
any time after the Term, unless for reasons set forth in Sections 4(c)
and 4(d), shall be deemed to be a termination without "cause" under
this Section 4(b), and (ii) in the event that, at any time prior to
the end of the six-month period following the date as of which the
Company shall demote you from the office of President and Chief
Executive Officer or appoint an officer of the Company to whom you
will be subordinate, you shall terminate your employment (other than
for "cause" or for a reason described in Section 4(d) below), such
termination shall be deemed to be a termination by the Company without
"cause" under this Section 4(b).
(c) In the event of termination of your employment for "cause," such
termination shall be effective immediately upon notice to you and, in
such event or in the event of your "voluntary termination" (as defined
in this Section 4(c) below), the Company shall pay you that portion of
your Base Salary prorated to the date of termination which has not yet
been paid to you, including any CPI increase due you but not paid, but
neither you nor your assigns, beneficiaries or estate shall have any
further rights or claims against the Company, other than any rights or
claims to which you are entitled as a shareholder of the Company.
As used in the letter agreement, "cause" means (i) your willful
misconduct or gross negligence with respect to the business and
affairs of the Company (or any subsidiary or affiliate thereof), (ii)
your breach of the provisions of Section 5 or 6 hereof, or (iii) your
commission of an act involving embezzlement or fraud or conviction for
any indictable crime.
The termination of your employment for any reason other than as set
forth in Section 4(a), 4(b), or 4(d) hereof, including any election by
you not to extend the Employment Period after the Term, shall be a
"voluntary termination."
(d) In the event of disability (under circumstances rendering you
incapable of performing the services hereunder for a period of 180
consecutive days or longer or
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 5
180 days during any twelve-month period), or such longer period of
time as necessary to qualify for disability benefits under the
Company's long-term disability benefits plan, the Company may
terminate your employment at any time thereafter, effective upon
notice to you. In the event of your death, your employment will be
deemed terminated on the date of your death. In each case, the
Company shall pay you (or your estate or beneficiaries as the case may
be) that portion of your Base Salary prorated to the date of
termination which has not been paid to you, plus six months' Base
Salary (at the rate and frequency in effect at the time of termination
but with no additional increases), but neither you nor your assigns,
beneficiaries or estate shall have any further rights or claims
against the Company, other than any rights or claims to which you are
entitled as a shareholder of the Company.
5. CONFIDENTIALITY. You agree that you will not, at any time
during the Employment Period, or for the five-year period immediately
following the Employment Period, disclose to any person, firm,
corporation or other business entity, except in furtherance of the
Company's business or as required by law, any non-public information
concerning the business, clients or affairs of the Company or any
subsidiary or affiliate thereof for any reason or purpose whatsoever
nor shall you make use of any of such non-public information for your
own purpose or for the benefit of any person, firm, corporation or
other business entity except the Company or any subsidiary or
affiliate thereof.
6. RESTRICTIVE COVENANT. (a) You hereby acknowledge and
recognize that during the Employment Period you will be privy to trade
secrets and confidential proprietary information critical to the
Company's business. You further acknowledge and recognize that the
Company would find it extremely difficult or impossible to replace you
and accordingly you agree that, in consideration of the premises
contained in this Agreement, the consideration to be received by you
hereunder and in consideration of certain stock and stock options to
be issued to you by the Company, you will not, (i) from or after the
date hereof through the
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 6
first anniversary of the termination of the Employment Period
(provided, however, that in the event that for any reason you do not
receive payment as specified in Section 4(b) or as a result of a
termination of your employment by the Company without "cause," the
period in this clause (i) shall terminate thirty (30) days after the
termination date of your employment), (A) be employed as an officer
or director by any business which is engaged primarily in research and
development activities which are fundamentally the same as those of
the Company at the time of your termination (or time of determination
if during the Employment Period) ("Competing R & D") and the marketing
and/or distribution of products from Competing R & D (including
products licensed from another entity and based on Competing R & D)
(any such business or activity described in clause (A) being referred
to in this Agreement as a "Competing Business"), excluding any
employment with a "Fortune 500" corporation or activities by reason of
your employment with a "Fortune 500" corporation (provided that you
shall in any event be subject to the restrictions of Section 5 hereof)
or (B) from and after the date hereof through the first anniversary
of the termination of the Employment Period induce other employees of
the Company or any subsidiary or affiliate thereof to terminate their
employment with the Company or any subsidiary or affiliate thereof, or
engage in any Competing Business, except with the prior written
approval of the Company.
Notwithstanding anything to the contrary, it is explicitly understood
that in the event the Company ceases R&D operations, all of your
employment restrictions in this Section 6(a) will be waived, although
all of your confidentiality obligations will remain in full effect.
(b) You understand that the foregoing restrictions may limit your
ability to earn a livelihood in a Competing Business, but you
nevertheless believe that you have received and will receive
sufficient consideration and other benefits in connection with the
Company's issuance of certain stock and stock options to you, as an
employee of the Company and as otherwise provided hereunder to clearly
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 7
justify such restrictions which, in any event (given your education,
skills and ability), you do not believe would prevent you from earning
a living.
7. COMPANY RIGHT TO INVENTIONS. You shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and
all inventions, improvements and technical information relating in any
way to the business of the Company, which you may develop or acquire
during the Employment Period (whether or not during usual working
hours), together with all patent applications, letters patent,
copyrights and reissues thereof that may at any time be granted for or
upon any such invention, improvement or technical information. In
connection therewith, during the Employment Period and the five-year
period immediately following the Employment Period:
(a) You shall without charge, but at the expense of the Company,
promptly at all times hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may be reasonably
necessary or proper in the reasonable opinion of the Company to vest
title to any such inventions, improvements, technical information,
patent applications, patents, copyrights or reissues thereof in the
Company and to enable it to obtain and maintain the entire right and
title thereto throughout the world;
(b) You shall render to the Company at its expense (including a
payment that is reasonable and customary in the industry for the time
involved in case you are not then in employ) all such assistance as it
may reasonably require in the prosecution of applications for said
patents, copyrights or reissues thereof, in the prosecution or defense
or interferences which may be declared involving any said
applications, patent or copyrights and in any litigation in which the
Company may be involved relating to any such patents, inventions,
improvements or technical information; and
(c) You represent and warrant that your employment with the Company
and your execution and delivery of this
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 8
Agreement and compliance with all the terms of this Agreement does not
and will not breach any written or oral agreement you have entered
into relating to intellectual property, noncompetition or otherwise,
and you shall not enter into any written or oral agreement in conflict
with this Agreement.
The restrictions set forth in Sections 7(a) and 7(b) shall cease to
apply five (5) years following termination of the Employment Period.
8. NOTICES. All notices and other communications which are
required or permitted hereunder shall be in writing and sufficient if
delivered personally or by telefax or sent by air courier or first
class certified or registered mail, return receipt requested and
postage prepaid, addressed using the applicable address set forth in
this letter agreement or to such other address as the party to whom
notice is given may have furnished to the other party in writing in
accordance herewith. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of delivery if
personally delivered or delivered by telefax; on the business day
after the date when sent if sent by air courier; and on the fifth
business day after the date when sent if sent by mail, in each case
addressed to such party as provided in this Section or in accordance
with the latest unrevoked direction from such party.
9. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New Jersey.
10. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings among the
parties with respect thereto.
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 9
11. REMEDIES; SURVIVAL (a) You acknowledge and understand
that the provisions of this Agreement are of a special and unique
nature, the loss of which cannot be accurately compensated for in
damages by an action at law; and that the breach or threatened breach
of the provisions of this Agreement would cause the Company
irreparable harm. In the event of breach or threatened breach by you
of the provisions of Section 5 or 6 hereof, the Company shall be
entitled to an injunction restraining you from such breach. Nothing
herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available for any breach or threatened
breach of this Agreement.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the provisions of Sections 5 and 6 and this Section 11 shall
survive the expiration or other termination of this Agreement until,
by their terms, such provisions are no longer operative.
(c) It is the intent of the Company and you that this Agreement shall
be enforced to the fullest extent permitted by law. Accordingly, any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
12. ASSIGNMENT. This Agreement is personal in its nature and
the parties hereto shall not, without the consent of the other, assign
or transfer this letter agreement or any rights or obligations
hereunder; provided, however, that the provisions hereof shall inure
to the benefit of, and be binding upon (i) each successor of the
Company, whether by merger, consolidation, transfer of all or
substantially all assets, or otherwise and (ii) your heirs and legal
representatives.
<PAGE>
Michael I. Sherman, Ph.D.
June 27, 1996
Page 10
Please acknowledge your agreement with the provisions set forth in
this Agreement by executing this Agreement in the space provided below for your
signature.
Very truly yours,
PharmaGenics, Inc.
By: /s/ A. Steven Franchak
-------------------------
A. Steven Franchak
Vice President
Agreed to as of June 27, 1996.
/s/ Michael I. Sherman
- ------------------------------
Michael I. Sherman
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
----------------------------------
Exhibit 10.63
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: September 25, 1995
OPTIONEE: Michael I. Sherman
NUMBER OF SHARES: 50,000
OPTION PRICE: $2.15
EXERCISE MEASUREMENT DATE: September 25,1995
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ A. Steven Franchak /s/ Michael I. Sherman
------------------------ --------------------
A. Steven Franchak Optionee
Chief Financial Officer
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
DATE OF GRANT: June 27, 1996
OPTIONEE: Michael I. Sherman
NUMBER OF SHARES: 108,445
OPTION PRICE: $2.30
EXERCISE MEASUREMENT DATE: June 27, 1996
Pursuant to the 1993 Stock Option Plan (the "Plan") of PharmaGenics, Inc.
(the "Company"), the Company has granted the individual named above (the
"Optionee"), as of the Date of Grant set forth above, an option (this "Option")
to purchase up to the aggregate number of shares of Common Stock, par value one
cent ($0.01) per share (the "Common Stock"), of the Company set forth above (the
"Optioned Shares") at the price per share (the "Option Price") set forth above,
all upon the terms and conditions hereof.
This Option is exercisable in installments, as provided herein, over a
period of time commencing with the Exercise Measurement Date set forth above.
This Option is subject to the provisions of the Terms and Conditions of
Option attached hereto as Schedule A which shall govern the exercise of this
Option and the transfer, sale, repurchase and escrow of the shares of Common
Stock underlying this Option.
This option agreement, including Schedule A attached hereto, (this
"Agreement") and the Plan constitute the entire agreement between the parties
with respect to the subject matter hereof, merging any and all prior agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Date of Grant set forth above.
PHARMAGENICS, INC.
By: /s/ A. Steven Franchak /s/ Michael I. Sherman
------------------------ -------------------
A. Steven Franchak Optionee
Chief Financial Officer
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
PHARMAGENICS, INC.
--------------------
Exhibit 10.64
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
Investment Banking
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212 713-2000
[LOGO]
CONFIDENTIAL
- ------------
September 1, 1994
PharamaGenics, Inc.
4 Pearl Court
Allendale, NJ 07401
Attention: Michael I. Sherman
Gentlemen:
PaineWebber Incorporated ("PaineWebber") is pleased to act as financial
advisor to PharmaGenics, Inc. (the "Company") in connection with merger and
acquisition transactions, strategic alliance transactions and other
investment banking services as PaineWebber and the Company may agree from
time to time. This Agreement confirms the terms of our engagement.
As used in this Agreement, the term "merger and acquisition
transaction" means, whether effected in one transaction or a series of
transactions: (a) any merger, consolidation, reorganization or other business
combination pursuant to which the business of the Company, or a subsidiary of
the Company, is combined with that of another entity (a "Counterparty"); (b)
the acquisition, directly or indirectly, by the Company of more than 20% of
the capital stock or assets of a Counterparty by way of tender or exchange
offer, negotiated purchase or otherwise; or (c) the acquisition, directly or
indirectly, by a Counterparty of more than 20% of the capital stock or assets
of the Company by way of tender or exchange offer, negotiated purchase or
otherwise. As used in this Agreement, the term "strategic alliance
transaction" means, whether effected in one transaction or a series of
transactions, any joint venture, product licensing or acquisition, technology
transfer, or research and development agreement, or other agreement relating
specifically to any of the Company's or a Counterparty's products, research
and development programs or technology, entered into between the Company and
a Counterparty.
On the terms and subject to the conditions of this Agreement,
PaineWebber will assist the Company in identifying Counterparties and in
analyzing, structuring, negotiating and effecting proposed merger and
acquisition transactions or strategic alliance transactions. If requested by
the Company, PaineWebber will render an opinion (the "Opinion") as to whether
or not the consideration to be paid in a proposed merger and acquisition
transaction or strategic alliance transaction is fair, from a financial point
of view, to the Company. If the transaction fee arising from the proposed
merger and acquisition transaction or strategic alliance transaction meets or
exceeds $500,000, the Opinion will be included in the services provided by
<PAGE>
PaineWebber.
If, during this engagement or within two years thereafter, the Company
enters into a definitive agreement which results in the consummation of a
merger and acquisition transaction, or any such transaction is consummated
with a Counterparty listed on Schedule II, the Company will pay PaineWebber a
transaction fee in an amount based on the purchase price and calculated
pursuant to the attached Schedule I. Such transaction fee will be payable in
cash upon the closing of such merger and acquisition transaction; however,
for transactions with a purchase price under $25 million, PaineWebber's
transaction fee of $500,000 may be paid in a combination of cash and common
stock of the Company with the cash component being no less than 2% of the
purchase price. The Company will pay to PaineWebber in cash an additional fee
on any date subsequent to such closing on which any additional consideration
is paid, such consideration to specifically exclude any royalty or related
payments and to specifically include any non-refundable milestone payments.
Such additional fee shall be in an amount based on the cumulative
consideration so received to such date, including any such additional
consideration, and calculated pursuant to the attached Schedule I.
If, during this engagement or within two years thereafter, the Company
enters into a strategic alliance transaction with a Counterparty listed on
Schedule II, the Company will pay PaineWebber a transaction fee of 2% based
on the purchase price, payable in cash upon the closing of such strategic
alliance transaction. The Company will pay to PaineWebber in cash an
additional fee on any date subsequent to such closing on which any additional
consideration is paid, such consideration to specifically exclude any royalty
or related payments and to specifically include any non-refundable milestone
payments. Such additional fee shall be 2% of any such additional
consideration.
The term "purchase price" means the sum of the aggregate fair market
value of any securities issued, and any cash consideration paid, to or by a
Counterparty or its security holders in connection with a merger and
acquisition transaction or the sum of the aggregate fair market value of any
securities issued, and any cash consideration paid, to or by a Counterparty
or its security holders in connection with its share of a strategic alliance
transaction. The fair market value of any such securities will be the value
determined by the Company and PaineWebber upon the closing of a merger and
acquisition transaction or strategic alliance transaction.
In addition to any fees payable to PaineWebber, the Company will
reimburse PaineWebber, upon request made from time to time, for its
reasonable out-of-pocket expenses incurred in connection with this
engagement, including the fees, disbursements and other charges of its legal
counsel, if any (limited to $20,000 without prior written consent of the
Company).
It if further understood that the Opinion, if rendered, will be
prepared solely for the confidential use of the Board of Directors of the
Company and will not be reproduced, summarized, described or referred to or
given to any other person or otherwise made public without PaineWebber's
prior written consent, which consent will not be unreasonably withheld. If
the Opinion is included in the proxy statement, the Opinion will be
reproduced in full, and any description of or reference to
<PAGE>
PaineWebber or summary of the Opinion will be in a form acceptable to
PaineWebber and its counsel and shall state that the Company has agreed that
PaineWebber, is rendering such Opinion, was not engaged to act as an agent or
fiduciary of, and that the Company has expressly waived, to the extent
permitted by law, any duties or liabilities PaineWebber may otherwise be
deemed to have had to, the Company's equity holders or any other third party.
The Company will furnish PaineWebber (and, if negotiations proceed
with a Counterparty, will request that such Counterparty furnish PaineWebber)
with such information as PaineWebber believes appropriate to its assignment
(all such information so furnished being the "Information"). The Company
recognizes and confirms that PaineWebber (a) will use and rely primarily on
the Information and on information available from generally recognized public
sources in performing the services contemplated by this Agreement and in
rendering the Opinion without having independently verified the same, (b)
does not assume responsibility for the accuracy or completeness of the
Information and such other information and (c) will not make an appraisal of
any assets of a Counterparty or the Company. To the best of the Company's
knowledge, the Information to be furnished by the Company, when delivered,
will be true and correct in all material respects and will not contain any
material misstatement of fact or omit to state any material fact necessary to
make the statements contained therein not misleading. The Company will
promptly notify PaineWebber if it learns of any material inaccuracy or
misstatement in, or material omission from, any Information therefore
delivered to PaineWebber.
PaineWebber agrees to keep strictly confidential all non-public
information provided to it by or on behalf of the Company, a Counterparty or
in connection with its engagement hereunder and agrees to not disclose
(except to the extent required by applicable law) the fact or terms of this
engagement or any such non-public information to any third party, other than
such of its employees whom PaineWebber determines to have a need to know and,
after written notice to the Company, to such of its advisors whom PaineWebber
determines to have a need to know. PaineWebber acknowledges the
confidentiality and sensitivity of the non-public information it will be
receiving and agrees to use its reasonable best efforts to protect such
confidentiality and agrees to return, within ten (10) days after a written
request by the Company or a Counterparty, all documents containing any such
non-public information.
The term "Non-Public Information" does not include information which:
(i) is already in our possession and not bound by a confidentiality agreement
or (ii) is or becomes generally available to the public other than as a
result of a disclosure by PaineWebber in violation of this Agreement or (iii)
becomes available to PaineWebber on a non-confidential basis from a source
other than the Company, provided that such source is not known by PaineWebber
to be bound by a confidentiality agreement with or other obligations of
secrecy to the Company, (iv) is disclosed pursuant to subpoena or other legal
process or otherwise pursuant to any law, regulation or rule or (v) is
developed by PaineWebber, its directors, officers, employees, agents or
advisors separate and apart from any disclosures by the Company.
It is understood that PaineWebber is being engaged hereunder solely to
provide
<PAGE>
the services described above to the Company, and that PaineWebber is not
acting as an agent or fiduciary of, and shall have no duties or liability to,
the equity holders of the Company or any other third party in connection with
its engagement hereunder, all of which are hereby expressly waived to the
extent permitted by law.
The Company agrees to the indemnification and other agreements set
forth in the Indemnification Agreement attached hereto, the provisions of
which are incorporated herein by reference and shall survive the termination,
expiration or supersession of this Agreement.
PaineWebber's engagement hereunder may be terminated by either the
Company or PaineWebber at any time upon written notice to that effect to the
other party, if being understood that the provisions relating to the payment
of fees and expenses, and indemnification and contribution will survive any
such termination.
This agreement will be governed by, and construed in accordance
with, the laws of the State of Delaware applicable to agreements made and to
be performed entirely in such state.
Each of the Company and PaineWebber agrees that any action or
proceeding based hereon, or arising out of PaineWebber's engagement
hereunder, shall be brought and maintained exclusively in the courts of the
State of Delaware or in the United States District Court for the District of
Delaware. The Company and PaineWebber each hereby irrevocably submits to the
jurisdiction of the courts of the State of Delaware and of the United States
District Court for the District of Delaware for the purpose of any such
action or proceeding as set forth above and irrevocably agree to be bound by
any judgment rendered thereby in connection with such action or proceeding.
Each of the Company and PaineWebber hereby irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may
have to the laying of venue of any such action or proceeding brought in any
such court referred to above and any claim that any such action or proceeding
has been brought in an inconvenient forum.
The Company (for itself, anyone claiming through it or in its name, and
on behalf of its equity holders) and PaineWebber each hereby irrevocably
waives any right they may have to a trial by jury in respect of any claim
based upon or arising out of this Agreement or the transactions contemplated
hereby. This Agreement may not be assigned by either party without the prior
written consent of the other party.
This Agreement (including the attached Indemnification Agreement)
embodies the entire agreement and understanding between the parties hereto
and supersedes all prior agreements and understandings relating to the
subject matter hereof. If any provision of this Agreement is determined to be
invalid or unenforceable in any respect, such determination will not affect
such provision in any other respect or any other provision of this Agreement,
which will remain in full force and effect. This Agreement may not be amended
or otherwise modified or waived except by an instrument in writing signed by
both PaineWebber and the Company.
Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to PaineWebber the enclosed original copy of this
Agreement and the
<PAGE>
Indemnification Agreement
Very truly yours
PAINEWEBBER INCORPORATED
By /s/ Stelios Papadopoulos
------------------------
Stelios Papadopoulos
Managing Director
Accepted as of the date
written above.
PHARMAGENICS, INC.
By: /s/ Michael I. Sherman
-----------------------
Michael I. Sherman
President and Chief Executive Officer
<PAGE>
PaineWebber
Schedule I
Fees to PaineWebber
Transaction Size Fee Percentage
- ----------------- ----- -----------
To $25,000,000 $ 500,000* NA
$50,000,000 $ 750,000 1.50%
$100,000,000 $1,250,000 1.25%
$250,000,000 $2,500,000 1.00%
$500,000,000 $3,750,000 0.75%
$1,000,000,000 $5,000,000 0.50%
The minimum merger and acquisition transaction fee is $500,000. Amounts
between those listed are to be interpolated. For purposes of interpolation,
assume a fee of 2% for a transaction size of up to $25,000,000. For example,
the fee for a $75,000,000 transaction is $1,031,250 or 1.375%.
<PAGE>
PaineWebber
Schedule II
Counterparties
Amgen
Argus
Canji
Chiron
Cortech
Genzyme (excludes current and related strategic alliance transactions with
Genzyme Transgenics)
IDEC
MGI Pharma
Onyx
Seragen
US Bioscience
Viagene
Xenova (excludes current and related strategic alliance transactions)
<PAGE>
---------------------
PaineWebber
Indemnification
Agreement
----------------------
<PAGE>
PaineWebber Indemnification Agreement
- -----------------------------------------------------------
Date September 1, 1994
------------------
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
Gentlemen:
In connection with the engagement of PaineWebber Incorporated
("PaineWebber") to advise and assist the undersigned (referred to herein as
"we", "our" or "us") with the matters set forth in the Agreement dated
September 1, 1994 between us and PaineWebber, we hereby agree to indemnify
and hold harmless PaineWebber, its affiliated companies, and each of
PaineWebber's and such affiliated companies' respective officers, directors,
agents, employees and controlling persons (within the meaning of each of
Section 20 of the Securities Exchange Act of 1934 and Section 15 of the
Securities Act of 1933) (each of the foregoing, including PaineWebber, being
hereinafter referred to as an "Indemnified Person") to the fullest extent
permitted by law from and against any and all losses, claims, damages,
expenses (including reasonable fees, disbursements and other charges of
counsel), actions (including actions brought by us or our equity holders or
derivative actions brought by any person claiming through us or in our name),
proceedings or investigations (whether formal or informal), or threats
thereof (all of the foregoing being hereinafter referred to as
"Liabilities"), based upon, relating to or arising out of such engagement or
any Indemnified Person's role therein; PROVIDED, HOWEVER, that we shall not
be liable under this paragraph: (a) for any amount paid in settlement of
claims without our consent, unless our consent is unreasonably withheld, or
(b) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct or gross
negligence of the Indemnified Person seeking indemnification. In connection
with our obligation to indemnify for expenses as set forth above, we further
agree to reimburse each Indemnified Person for all such expenses (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such Indemnified Person; PROVIDED, HOWEVER, that if an
Indemnified Person is reimbursed hereunder for any expenses, the amount so
paid shall be refunded if and to the extent it is finally judicially
determined that the Liabilities in question resulted primarily from the
misconduct or negligence of such Indemnified Person. We hereby also agree
that neither PaineWebber nor any other Indemnified Person shall have any
liability to us (or anyone claiming through us or in our name) in connection
with PaineWebber's engagement by us except to the extent that such
Indemnified Person has engaged in misconduct or grossly negligent.
2
<PAGE>
PaineWebber Indemnification Agreement
- -----------------------------------------------------------
Promptly after PaineWebber receives notice of the commencement of any
action or other proceeding in respect of which indemnification or
reimbursement may be sought hereunder, PaineWebber will notify us thereof;
but the omission so to notify us shall not relieve us from any obligation
hereunder unless, and only to the extent that, such omission results in our
forfeiture of substantive rights or defenses. If any such action or other
proceeding shall be brought against any Indemnified Person, we shall, upon
written notice given reasonably promptly following your notice to us of such
action or proceeding, be entitled to assume the defense thereof at our expense
with counsel chosen by us and reasonably satisfactory to such Indemnified
Person; PROVIDED, HOWEVER, that any Indemnified Person may at its own expense
retain separate counsel to participate in such defense. Notwithstanding the
foregoing, such Indemnified Person shall have the right to employ separate
counsel at our expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified
Person, (i) there are or may be legal defenses available to such Indemnified
Person or to other Indemnified Persons that are different from or additional
to those available to us, or (ii) a difference of position or potential
difference of position exists between us and such Indemnified Person that
would make such separate representation advisable; PROVIDED, HOWEVER, that in
no event shall we be required to pay fees and expenses under this indemnity
for more than one firm of attorneys (in addition to local counsel) in any
jurisdiction in any one legal action or group of related legal actions. We
agree that we will not, without the prior written consent of PaineWebber
which consent shall not be unreasonably withheld settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action or proceeding relating to the matters contemplated by PaineWebber's
engagement (whether or not any Indemnified Person is a party thereto) unless
such settlement, compromise or consent includes an unconditional release of
PaineWebber and each other Indemnified Person from all liability arising or
that may arise out of such claim, action or proceeding.
If the indemnification of an Indemnified Person provided for hereunder
is finally judicially determined by a court of competent jurisdiction to be
unenforceable, then we agree, in lieu of indemnifying such Indemnified
Person, to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is appropriate to
reflect the relative benefits received, or sought to be received, by us on
the one hand and by PaineWebber on the other from the transactions in
connection with which PaineWebber has been engaged. If the allocation
provided in the proceeding sentence is not permitted by applicable law, then
we agree to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is appropriate
to reflect not only the relative benefits referred to in such preceding
sentence but also the relative fault of us and of such Indemnified Person.
Notwithstanding the foregoing, in no event shall the aggregate amount
required to be contributed by all Indemnified Persons taking into account our
contributions as described above exceed the amount of fees actually received
by PaineWebber pursuant to such engagement. The relative benefits received or
sought to be received by us on the one hand and by PaineWebber on the other
shall be deemed to be in the same proportion as (a) the total value of the
transactions with respect to which PaineWebber has been engaged bears to (b)
the fees paid or payable to PaineWebber with respect to such engagement.
3
<PAGE>
PaineWebber Indemnification Agreement
- -----------------------------------------------------------
The rights accorded to Indemnified Persons hereunder shall be in
addition to any rights that any Indemnified Person may have at common law, by
separate agreement or otherwise.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. WE HEREBY CONSENT, SOLELY FOR THE
PURPOSE OF ALLOWING AN INDEMNIFIED PERSON TO ENFORCE ITS RIGHTS HEREUNDER, TO
PERSONAL JURISDICTION AND SERVICE AND VENUE IN ANY COURT IN WHICH ANY CLAIM
FOR WHICH INDEMNIFICATION MAY BE SOUGHT HEREUNDER IS BROUGHT AGAINST
PAINEWEBBER OR ANY OTHER INDEMNIFIED PERSON. We and PaineWebber also hereby
irrevocably waive any right we and PaineWebber may have to a trial by jury in
respect of any claim based upon or arising out of this agreement. This
agreement may not be amended or otherwise modified except by an instrument
signed by both PaineWebber and us. If any provision hereof shall be
determined to be invalid or unenforceable in any respect, such determination
shall not affect such provision in any other respect or any other provision
of this agreement, which shall remain in full force and effect. If there is
more than one indemnitor hereunder, each indemnifying person agrees that its
liabilities hereunder shall be joint and several. Each Indemnified Person is
an intended beneficiary hereunder.
The foregoing indemnification agreement shall remain in effect
indefinitely, notwithstanding any termination of PaineWebber's engagement.
Very truly yours,
PharmaGenics, Inc.
------------------------
Name of Client
By: /s/ Michael I. Sherman
----------------------
Name: Michael I. Sherman
Title: President and CEO
Acknowledged and Agreed to:
PAINEWEBBER INCORPORATED
By: /s/ Stelios Papadopoulos
------------------------
Name: Stelios Papadopoulos
Title: Managing Director
4
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
PHARMAGENICS, INC.
-------------------------
Exhibit 10.65
to
QUARTERLY REPORT ON FORM 10-Q
For Quarter Ended September 30, 1996
<PAGE>
Investment Banking Division
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212 713-2000
[Logo]
15 August, 1996
CONFIDENTIAL
- ------------
PharmaGenics, Inc.
4 Pearl Court
Allendale, NJ 07401
Attention: Michael I. Sherman, Ph.D.
Gentlemen:
PaineWebber Incorporated ("PaineWebber") is pleased to act as
exclusive financial advisor to PharmaGenics (the "Company") and its
affiliates in connection with any proposed sale transaction involving the
Company and another party (a "Purchaser"). This Agreement confirms the terms
of our engagement.
As used in this Agreement, the term "sale transaction" means, whether
effected in one transaction or a series of transactions: (a) any merger,
consolidation, reorganization or other business combination pursuant to which
the business of the Company is combined with that of a Purchaser or (b) the
acquisition, directly or indirectly, by a Purchaser of more than 35% of the
capital stock or assets of the Company by way of a negotiated purchase or
otherwise.
On the terms and subject to the conditions of this Agreement,
PaineWebber will assist the Company in identifying Purchasers and in
analyzing, structuring, negotiating and effecting proposed sale transactions.
If requested by the Company, PaineWebber will render an opinion (the
"Opinion") as to whether or not the consideration to be received in a
proposed sale transaction is fair, from a financial point of view, to the
Company. If an Opinion is requested, the Company will pay PaineWebber $50,000
in cash upon delivery of such Opinion.
If, (a) during this engagement, the Company enters into a definitive
agreement with a Purchaser, or (b) within two years after the termination of
this engagement the Company enters into a definitive agreement which
subsequently results in a sale transaction with a Purchaser (i) which
PaineWebber identified, or (ii) as to which PaineWebber advised the Company
regarding a sale transaction, in any such case during the term of this
engagement, the Company will pay PaineWebber a transaction fee in an amount
based on the purchase price and calculated pursuant to the attached Schedule
I, payable at the Purchaser's option (i) in cash, (ii) in shares of common
stock of the Purchaser ("Shares"), or (iii) in a combination of cash and
Shares, upon the closing of such sale transaction, but in an amount not less
than, in any circumstance, $500.000. If any portion of
1
<PAGE>
the transaction fee is paid in Shares, such Shares will be duly authorized
and validly issued by the Purchaser and will be fully paid-up, non
assessable, not subject to preemptive rights or similar rights, and
registered under the Securities Act of 1933, as amended, so as to be freely
tradable, and the Company or the Purchaser shall deliver an opinion of
counsel to such effect, satisfactory to PaineWebber.
The term "purchase price" means the sum of the aggregate fair market
value of any securities issued, and any cash consideration paid, to the
Company or its security holders in connection with a sale transaction, plus
the amount of any indebtedness of the Company that is assumed, directly or
indirectly, by the Purchaser. The fair market value of any such securities
will be the value determined by the Company and PaineWebber upon the closing
of the sale transaction.
The Company shall have the sole and absolute discretion to engage or
refuse to engage in discussions with potential Purchasers, to accept or reject
any proposed sale transaction, or to consummate or refuse to consummate any
sale transaction.
In addition to any fees payable to PaineWebber, the Company will
reimburse PaineWebber, in cash, upon request made from time to time, for all
of its out-of-pocket expenses incurred in connection with this engagement,
including the fees, disbursements and other charges of its legal counsel,
such legal fees not to exceed $30,000, without the prior approval of the
Company and such approval not to be unreasonably withheld.
It is further understood that the Opinion, if rendered, will be
prepared solely for the confidential use of the Board of Directors of the
Company and will not be reproduced, summarized, described or referred to or
given to any other person or otherwise made public without PaineWebber's
prior written consent that shall not be unreasonably withheld to the extent
the Company desires to include the Opinion in the proxy statement. If the
Opinion is included in the proxy statement, the Opinion will be reproduced in
full, and any description of or reference to PaineWebber or summary of the
Opinion will be in a form acceptable to PaineWebber and its counsel.
The Company will furnish PaineWebber (and will request that each
prospective Purchaser with which the Company enters into negotiations furnish
PaineWebber) with such information as PaineWebber believes appropriate to its
assignment (all such information so furnished being the "Information"). The
Company recognizes and confirms that PaineWebber (a) will use and rely
primarily on the Information and on information available from generally
recognized public sources in performing the services contemplated by this
Agreement and in rendering the Opinion without having independently verified
the same, (b) does not assume responsibility for the accuracy or completeness
of the Information and such other information and (c) will not make an
appraisal of any assets of the Company or any prospective Purchaser. To the
best of the Company's knowledge, the Information to be furnished by the
Company, when delivered, will be true and correct in all material respects
and will not contain any material misstatement of fact or omit to state any
material fact necessary to make the statements contained therein not
misleading. The Company will promptly notify PaineWebber if it learns of any
material inaccuracy or misstatement in, or material omission from, any
Information theretofore delivered to PaineWebber.
2
<PAGE>
PaineWebber agrees to keep strictly confidential all non-public
information provided to it by or on behalf of the Company, a Purchaser or in
connection with its engagement hereunder and agrees not to disclose (except
to the extent required by applicable law) the fact or terms of this
engagement or any such non-public information to any third party, other than
such of its employees whom PaineWebber determines to have a need to know.
PaineWebber acknowledges the confidentiality and sensitivity of the
non-public information it will be receiving and agrees to use its reasonable
best efforts to protect such confidentiality and agrees to return, within ten
(10) days after a written request by the Company or a Purchaser, all
documents containing any such non-public information.
The term "Non-Public Information" does not include information which:
(i) is already in our possession and not bound by a confidentiality agreement
or (ii) is or becomes generally available to the public other than as a
result of a disclosure by PaineWebber in violation of this Agreement or
(iii) becomes available to PaineWebber on a non-confidential basis from a
source other than the Company, provided that such source is not known by
PaineWebber to be bound by a confidentiality agreement with or other
obligations of secrecy to the Company, (iv) is disclosed pursuant to subpoena
or other legal process or otherwise pursuant to any law, regulation or rule
or (v) is developed by PaineWebber, it directors, officers, employees, agents
or advisors separate and apart from any disclosures by the Company.
It is understood that PaineWebber is being engaged hereunder solely to
provide the services described above to the Board of Directors of the
Company, and that PaineWebber is not acting as an agent or fiduciary of, and
shall have no duties or liability to, the equity holders of the Company or
any other third party in connection with its engagement hereunder, all of
which are hereby expressly waived, to the extent permitted by law.
The Company agrees to the indemnification and other agreements set
forth in the Indemnification Agreement attached hereto, the provisions of
which are incorporated herein by reference and shall survive the termination,
expiration or supersession of this Agreement.
PaineWebber's engagement hereunder may be terminated by either the
Company or PaineWebber at any time upon written notice to that effect to the
other party, it being understood that the provisions relating to the payment
of fees and expenses and indemnification and contribution will survive any
such termination.
THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY IN SUCH STATE.
EACH OF THE COMPANY AND PAINEWEBBER AGREE THAT ANY ACTION OR
PROCEEDING BASED HEREON, OR ARISING OUT OF PAINEWEBBER'S ENGAGEMENT
HEREUNDER, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT
3
<PAGE>
FOR THE SOUTHERN DISTRICT OF NEW YORK. THE COMPANY AND PAINEWEBBER EACH
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY
SUCH ACTION OR PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR
PROCEEDING. EACH OF THE COMPANY AND PAINEWEBBER HEREBY IRREVOCABLY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
The Company (for itself, anyone claiming through it or in its name, and
on behalf of its equity holders) and PaineWebber each hereby irrevocably
waive any right they may have to a trial by jury in respect of any claim
based upon or arising out of this Agreement or the transactions contemplated
hereby. This Agreement may not be assigned by either party without the prior
written consent of the other party.
This Agreement (including the attached Indemnification Agreement)
embodies the entire agreement and understanding between the parties hereto
and supersedes all prior agreements and understandings relating to the
subject matter hereof, except that the provisions relating to strategic
alliance transactions in the agreement between PaineWebber and the Company
dated September 1, 1994 shall remain in effect for such transactions. If any
provision of this Agreement is determined to be invalid or unenforceable in
any respect, such determination will not affect such provision in any other
respect or any other provision of this Agreement, which will remain in full
force or effect. This Agreement may not be amended or otherwise modified or
waived except by an instrument in writing signed by both PaineWebber and
the Company.
Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to PaineWebber the enclosed duplicate copy of this
Agreement.
Very truly yours,
PAINEWEBBER INCORPORATED
By /s/ Stelios Papadopoulos
------------------------
Accepted and Agreed to as of Stelios Papadopoulos
the date first written above: Managing Director
PHARMAGENICS, INC.
By /s/ Michael I. Sherman
-----------------------
Michael I. Sherman
4
<PAGE>
Schedule I
M&A Advisory Fees
Purchase Price Fee Percentage
-------------- --------------
On the first $50 million 1.5000%
On any amount above $50 million up to $250 million .7500%
On any amount above $250 million up to $1.0 billion .5000%
On any amount above $1.0 billion .1875%
5
<PAGE>
--------------------------
PaineWebber
Indemnification
Agreement
---------------------------
<PAGE>
PaineWebber Indemnification Agreement
- -------------------------------------------------------------------------------
Date August 15, 1996
---------------
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
Gentlemen:
In connection with the engagement of PaineWebber Incorporated
("PaineWebber") to advise and assist the undersigned (referred to herein as
"we", "our" or "us") with the matters set forth in the Agreement dated August
15, 1996 between us and PaineWebber, we hereby agree to indemnify and hold
harmless PaineWebber, its affiliated companies, and each of PaineWebber's and
such affiliated companies' respective officers, directors, agents, employees
and controlling persons (within the meaning of each of Section 20 of the
Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933)
(each of the foregoing, including PaineWebber, being hereinafter referred to
as an "Indemnified Person") to the fullest extent permitted by law from and
against any and all losses, claims, damages, expenses (including reasonable
fees, disbursements and other charges of counsel), actions (including actions
brought by us or our equity holders or derivative actions brought by any
person claiming through us or in our name), proceedings, arbitrations or
investigations (whether formal or informal), or threats thereof (all of the
foregoing being hereinafter referred to as "Liabilities"), based upon,
relating to or arising out of such engagement or any Indemnified Person's
role therein; PROVIDED, HOWEVER, that we shall not be liable under this
paragraph: (a) for any amount paid in settlement of claims without our
consent, unless our consent is unreasonably withheld, or (b) to the extent
that it is finally judicially determined, or expressly stated in an
arbitration award, that such Liabilities resulted primarily from the willful
misconduct or gross negligence of the Indemnified Person seeking
indemnification. If multiple claims are brought against any Indemnified
Person in an arbitration or other proceeding and at least one such claim is
based upon, relates to or arises out of the engagement of PaineWebber by us
or any Indemnified Person's role therein, we agree that any award, judgment
and other Liabilities resulting therefrom shall be deemed conclusively to be
based on, relate to or arise out of the engagement of PaineWebber by us or
any Indemnified Person's role therein, except to the extent that such award
or judgment expressly states that the award or judgment, or any portion
thereof, is based solely upon, relates to or arises out of other matters for
which indemnification is not available hereunder. In connection with our
obligation to indemnify for expenses as set forth above, we further agree to
reimburse each Indemnified Person for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by
such Indemnified Person; PROVIDED, HOWEVER, that if an Indemnified Person is
reimbursed hereunder for any expenses, the amount so paid shall be refunded
if and to the extent it is finally judicially determined, or expressly stated
in an arbitration award, that the Liabilities in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified Person.
We hereby also agree that neither PaineWebber nor any other Indemnified
Person shall have any liability to us (or anyone claiming through us or in
our name) in connection with PaineWebber's engagement by us except to the
extent that such Indemnified Person has engaged in willful misconduct or been
grossly negligent.
- -------------------------------------------------------------------------------
2
<PAGE>
PaineWebber Indemnification Agreement
- -------------------------------------------------------------------------------
Promptly after PaineWebber receives notice of the commencement of any
action or other proceeding in respect of which indemnification or
reimbursement may be sought hereunder, PaineWebber will notify us thereof;
but the omission so to notify us shall not relieve us from any obligation
hereunder unless, and only to the extent that, such omission results in our
forfeiture of substantive rights or defenses. If any such action or other
proceeding shall be brought against any Indemnified Person, we shall, upon
written notice given reasonably promptly following your notice to us of such
action or proceeding, be entitled to assume the defense thereof at our
expense with counsel chosen by us and reasonably satisfactory to such
Indemnified Person; PROVIDED, HOWEVER, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, such Indemnified Person shall have the right to
employ separate counsel at our expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (i) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to us, or (ii) a difference of position or
potential difference of position exists between us and such Indemnified
Person that would make such separate representation advisable; PROVIDED,
HOWEVER, that in no event shall we be required to pay fees and expenses under
this indemnity for more than one firm of attorneys (in addition to local
counsel) in any jurisdiction in any one legal action or group of related
legal actions. We agree that we will not, without the prior written consent
of PaineWebber, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding relating to the
matters contemplated by PaineWebber's engagement (whether or not any
Indemnified Person is a party thereto) unless such settlement, compromise or
consent includes an unconditional release of PaineWebber and each other
Indemnified Person from all liability arising or that may arise out of such
claim, action or proceeding.
If the indemnification of an Indemnified Person provided for hereunder
is finally judicially determined by a court of competent jurisdiction to be
unenforceable, then we agree, in lieu of indemnifying such Indemnified
Person, to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is appropriate
to reflect the relative benefits received, or sought to be received, by us on
the one hand and by PaineWebber on the other from the transactions in
connection with which PaineWebber has been engaged. If the allocation
provided in the preceding sentence is not permitted by applicable law, then
we agree to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is appropriate
to reflect not only the relative benefits referred to in such preceding
sentence but also the relative fault of us and of such Indemnified Person.
Notwithstanding the foregoing, in no event shall the aggregate amount
required to be contributed by all Indemnified Persons taking into account our
contributions as described above exceed the amount of fees actually received
by PaineWebber pursuant to such engagement. The relative benefits received or
sought to be received by us on the one hand and by PaineWebber on the other
shall be deemed to be in the same proportion as (a) the total value of the
transactions with respect to which PaineWebber has been engaged bears to (b)
the fees paid or payable to PaineWebber with respect to such engagement.
- -------------------------------------------------------------------------------
3
<PAGE>
PaineWebber Indemnification Agreement
- -------------------------------------------------------------------------------
The rights accorded to Indemnified Persons hereunder shall be in
addition to any rights that any Indemnified Person may have at common law, by
separate agreement or otherwise.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. WE HEREBY CONSENT, SOLELY FOR THE
PURPOSE OF ALLOWING AN INDEMNIFIED PERSON TO ENFORCE ITS RIGHTS HEREUNDER, TO
PERSONAL JURISDICTION AND SERVICE AND VENUE IN ANY COURT IN WHICH ANY CLAIM
FOR WHICH INDEMNIFICATION MAY BE SOUGHT HEREUNDER IS BROUGHT AGAINST
PAINEWEBBER OR ANY OTHER INDEMNIFIED PERSON. We and PaineWebber also hereby
irrevocably waive any right we and PaineWebber may have to a trial by jury in
respect of any claim based upon or arising out of this agreement. This
agreement may not be amended or otherwise modified except by an instrument
signed by both PaineWebber and us. If any provision hereof shall be
determined to be invalid or unenforceable in any respect, such determination
shall not affect such provision in any other respect or any other provision
of this agreement, which shall remain in full force and effect. If there is more
than one indemnitor hereunder, each indemnifying person agrees that its
liabilities hereunder shall be joint and several. Each Indemnified Person is
an intended beneficiary hereunder.
The foregoing indemnification agreement shall remain in effect
indefinitely, notwithstanding any termination of PaineWebber's engagement.
Very truly yours,
PHARMAGENICS, INC.
----------------------------------
Name of Client
By: /s/ Michael I. Sherman
-----------------------------
Name: Michael I. Sherman, Ph.D.
Title: President, Chief Executive
Officer and Director
Acknowledged and Agreed to:
PAINEWEBBER INCORPORATED
By: /s/ Stelios Papadopoulos
-------------------------------
Name: Stelios Papadopoulos
Title: Managing Director
- -------------------------------------------------------------------------------
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET AT SEPTEMBER 30, 1996 AND THE UNAUDITED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<CASH> 1,607,554
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,634,851
<PP&E> 2,855,892
<DEPRECIATION> 1,980,984
<TOTAL-ASSETS> 2,550,684
<CURRENT-LIABILITIES> 1,700,290
<BONDS> 28,826
0
73,749
<COMMON> 4,551
<OTHER-SE> 743,268
<TOTAL-LIABILITY-AND-EQUITY> 2,550,684
<SALES> 0
<TOTAL-REVENUES> 1,004,719
<CGS> 0
<TOTAL-COSTS> (4,383,758)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (34,156)
<INCOME-PRETAX> (3,304,944)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,304,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,304,944)
<EPS-PRIMARY> (7.31)
<EPS-DILUTED> 0
</TABLE>
