<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): February 14, 1997
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PANAX PHARMACEUTICAL COMPANY LTD.
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(Exact name of registrant as specified in its charter)
NEW YORK 0-24972 13-3754005
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
425 PARK AVENUE, NEW YORK, NEW YORK, 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code; (212) 319-8300
<PAGE> 2
ITEM 5. OTHER EVENTS.
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License: On February 14, 1997, Panax Pharmaceutical Company, Ltd.
("Panax") successfully concluded its previously announced negotiations to
secure a world-wide license to manufacture, use, sell and sublicense a
novel preparation tablet product for clearing the colon prior to colonoscopy
("Product"). On that date, it entered into an exclusive license agreement
("the Agreement")with the Aronchick, Lipshutz Wright Partnership
affiliated with Dr. Craig Aronchick ("ALW Partnership"). The license
covers certain proprietary technical information including patent
applications related to purgative and laxative compositions (the
"Technology") and provides for payment of a royalty at a rate based upon
net sales of Products which make use of the Technology. The rate will
range from 2% to 6% depending upon the amount of net sales in a given
year. The rate and payments will also be depend on the validity and
coverage of the patents licensed under the Agreement, with a minimum
royalty payment of $100,000 per year commencing with year six or year
seven, depending upon whether Panax has received an NDA approval for a
Product covered by the Technology.
Panax paid $100,000 to the licensor upon execution of the Agreement
and is to pay additional sums to the licensor upon obtaining equity or other
financing by November 14, 1997, and upon receiving regulatory (FDA)
approval allowing the commercializing of a Product which relates to the
Technology.
Clinical trials are currently being conducted on the Product. The
licensor has the right to terminate the Agreement upon occurrence of certain
events, including (i) an uncured material breach of the Agreement, (ii) the
failure of Panax to effect an equity or other financing of at least $2,000,000
by November 14,1997 provided that none of the stock options referred to below
are exercised prior to November 24, 1997.
At the same time, Panax entered into consulting agreements with
each of Drs. Aronchick, Lipshutz and Wright, the ALW Partnership partners,
providing for each to render consulting services in connection with the
Technology during the term of the License Agreement at a per diem
consideration of $2,000 for each eight hour day with Dr. Aronchick to be
engaged at least 20 days of consulting in the first year and at least 10
days of consulting in each of the second and third years. The
consultants are to perform services related to the development of chemical
protocols, establishment and monitoring of clinical trials, review of
clinical results, development of FDA filings and other services as may be
reasonably requested. Pursuant to the consulting agreements, Panax has
granted to Drs. Aronchick, Lipshutz and Wright, under its Consultant Option
Plan (the "Plan") options to purchase 450,000, 150,000 and 150,000 shares,
respectively, of its Common Stock at a price of $0.61 per share, the closing
sales price of the Common Stock on the NASDAQ Smallcap Market at the time
the letter of intent was negotiated. The options vest, subject to the
occurrence of certain conditions, in three equal amounts, but may not be
exercised until the earlier of November 14, 1997 or the date Panax obtains
the foregoing $2,000,000 financing. The grant of the options is subject to
the Plan being approved by the shareholders of the Company.
Item 7. Financial Statements and Exhibits.
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Exhibit Number Description
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a) Financial Statements - none.
b) Exhibits
10(l) Copy of License Agreement with ALW Partnership;
10(m) Consulting Agreement with Dr. Aronchick;
10(n) Form of Consulting Agreement with each of Drs.
Lipshutz and Wright;
10(o) Form of Option Agreement granted to Drs. Aronchick,
Lipshutz and Wright.
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SIGNATURES
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 hereunto duly authorized.
PANAX PHARMACEUTICAL COMPANY LTD.
(Registrant)
March 13, 1997 /s/ Taffy J. Williams, Ph.D.
-------------------------------
Taffy J. Williams, President
and Chief Executive Officer
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<TABLE>
EXHIBIT INDEX
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<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
<S> <C> <C>
10(l) Copy of License Agreement with
ALW Partnership
10(m) Consulting Agreement with Dr.
Aronchick;
10(n) Form of Consulting Agreement with
each of Drs. Lipshutz and Wright;
10(o) Form of Option Agreement granted
to Drs. Aronchick, Lipshutz and Wright.
</TABLE>
<PAGE> 1
LICENSE AGREEMENT
This License Agreement (this "Agreement") is made as of the 14th day
of February, 1997 by and between PANAX PHARMACEUTICAL COMPANY, LTD.
("PANAX"), a New York Corporation having an office at 425 Park Avenue, New
York, New York, 10022 and a partnership of Craig Aronchick, William H.
Lipshutz and Scott H. Wright, having an office at 8th and Spruce Streets,
Philadelphia, Pennsylvania, 19107 (jointly and severally, "ALW
PARTNERSHIP").
W I T N E S S E T H:
WHEREAS, PANAX is in the business of developing, licensing and
marketing pharmaceutical and biological products and related technology;
WHEREAS, ALW PARTNERSHIP represents that it is the owner of all
right, title and interest in and to inventions related to a solid dosage form of
sodium phosphate salts for use as a colonic purgative or laxative
composition and method ("the Inventions");
WHEREAS, ALW PARTNERSHIP represents that it has the right to enter
into this Agreement and to grant the licenses granted hereunder;
WHEREAS, ALW PARTNERSHIP has acquired and possesses a body of
proprietary technical information, including trade secret information and other
know-how relating to and including the Inventions ("TECHNOLOGY");
WHEREAS, PANAX wishes to license the TECHNOLOGY from ALW PARTNERSHIP
in order to pursue various business opportunities;
WHEREAS, ALW PARTNERSHIP desires to grant to PANAX, and PANAX desires
to obtain from ALW PARTNERSHIP, a license in the Field of Use to develop,
use, market and/or manufacture Products utilizing the TECHNOLOGY and also
to sub-license the TECHNOLOGY as set forth in Section 2B (collectively,
"the LICENSED RIGHTS").
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NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows.
1. DEFINITIONS
A. Affiliate. The term "Affiliate" shall mean any individual,
partnership, corporation, joint venture, trust, estate, unincorporated
organization, or other entity that, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common
control with, PANAX.
B. Patents. The term "PATENTS" shall mean those patents and patent
applications owned by ALW PARTNERSHIP in all jurisdictions related to the
TECHNOLOGY as set forth in Exhibit I and shall include any and all
continuations, continuations-in-part, extensions, reissues and divisions
of the foregoing, including any and all patent applications from which
such applications claim priority. The PATENTS include United States
patent application serial number 08/669,834, filed June 26, 1996 (allowed
with issue fee paid, but not yet issued) and PCT patent application number
PCT/US96/06563, filed May 8, 1996, which PCT application designates the
European Patent Office, Canada and Japan.
C. Confidential Information. The term "Confidential Information"
shall mean technical information, know-how, technology, chemical solutions,
ingredients, formulae, compositions, solvents, samples, prototypes,
information, ideas, inventions, improvements, data, files, supplier and
customer identities and lists, accounting records, business and marketing
plans and information and documentation to which a party has rights
relating to this Agreement, the TECHNOLOGY and the LICENSED RIGHTS and all
copies and tangible embodiments thereof (in whatever form or medium) which
are not generally known by the public (including such of the foregoing as
may be embodied in the TECHNOLOGY, the LICENSED RIGHTS, Products and
<PAGE> 3
Royalty Report); provided, however, that any of the foregoing shall not be
considered confidential information if it: (i) has become publicly known
through no wrongful act or breach of any obligation of confidentiality on
the receiving party's or any third party's part; (ii) was in the lawful
knowledge and possession of, or was independently developed by, the
receiving party prior to the time it was disclosed to, or learned by, the
receiving party as evidenced by written reports kept in the ordinary
course of business by the receiving party or by written and other
documentary proof of actual use by the receiving party; (iii) was
rightfully received from a third party not in violation of any
contractual, legal or fiduciary obligation by such third party; or (iv)
was approved for release by written authorization by the party owning the
Confidential Information.
D. Effective Date. The term "Effective Date" shall mean the date of
this Agreement set forth in the heading on page 1.
E. Field of Use. The term "Field of Use" shall mean the field of
colonic purgatives or laxatives.
F. Improvements. The term "Improvements" shall mean any and all
advancements, enhancements, discoveries, improvements, inventions and
modifications which embody or embrace the TECHNOLOGY or a modification of
the TECHNOLOGY in the Field of Use which are made or developed by PANAX
and/or ALW PARTNERSHIP. The term Improvement shall include all Products
not in existence at the time of the execution of this Agreement which are
derivative of the TECHNOLOGY.
G. Net Sales. The term "Net Sales" shall mean the gross revenues
received by PANAX, any Affiliate and any Sublicensee from any third party
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attributable to the sale of any Product or Improvement, less any standard
trade discounts, allowances for returns and refusals, and associated
transaction-related taxes including, but not limited to, VAT, sales and
duty taxes (collectively, "Qualifying Costs"). For Sublicensees and
Affiliates, PANAX shall be responsible for the payment to ALW PARTNERSHIP
of any Royalties.
H. Product. The term "Product" shall mean a solid dosage form or
forms of sodium phosphate or other products which use or relate to the
TECHNOLOGY. These products shall be referred to individually as "Product" and
collectively as the "Products." The term "Purgative Product" shall
specifically refer to the solid dosage form of sodium phosphate which is
used as a purgative agent.
I. New Product. The term "New Product" shall mean any product of a
chemical nature which relates to the Field of Use and which is not
derivative of, i.e., is not based directly or indirectly on, the TECHNOLOGY.
J. Royalty. The term "Royalty" and "Royalties" shall mean royalties
and other payments due ALW PARTNERSHIP from the sale of the Products and
Improvements.
K. Royalty Report. The term "Royalty Report" shall mean a written
report setting forth for each pertinent quarterly period:
(i) the type and quantity of each of the Products and Improvements
sold by PANAX and any Affiliate,
(ii) the type and quantity of each of the Products and Improvements
sold by any Sublicensee,
(iii) gross revenues, monies or other consideration invoiced, billed
or received for all Products and Improvements, and
(iv) Qualifying Costs by category of costs deducted from gross
revenues, monies or consideration as set forth in (iii), above, to derive Net
Sales.
<PAGE> 5
2. PATENT AND TECHNOLOGY LICENSE AND OPTION
A. License. Upon the execution of this Agreement, and subject to the
terms and conditions set forth herein, ALW PARTNERSHIP hereby grants to
PANAX, during the term of this Agreement, an exclusive, worldwide license
in the Field of Use to manufacture, have manufactured, use and sell the
Products and sub-license the LICENSED RIGHTS.
B. Sublicense. PANAX shall have the right to sublicense any or all
of the Licensed Rights to third parties (each, a "Sublicensee") pursuant to
the terms of this Agreement. If PANAX sublicenses to a Sublicensee under
this Agreement, PANAX shall remain primarily liable to ALW PARTNERSHIP for
all of the duties and obligations of PANAX contained in this Agreement and
any act or omission of a Sublicensee which would be a breach of this
Agreement if performed by PANAX shall be deemed to be a breach by PANAX of
this Agreement. PANAX shall deliver to ALW PARTNERSHIP a copy of any
sublicense agreement, promptly upon execution. Any sublicense agreement
shall provide that the Sublicensee is prohibited from further sublicensing
without the express written approval of ALW PARTNERSHIP and shall
acknowledge that the Sublicensee is subject to the terms and conditions of
the LICENSED RIGHTS granted to PANAX pursuant to this Agreement and
assumes all of PANAX's obligations under this Agreement with the exception
of clauses 3.A., 5, 7 and 20.K. hereof, and agrees to pay any royalties or
other fees or costs required to be paid under any sublicensing or other
agreement. In no event shall any independent dealer or distributor of
PANAX or an Affiliate be considered a Sublicensee.
In the event that PANAX shall receive a fixed payment, i.e., a
payment not calculated on Net Sales, from a Sublicensee for the Licensed Rights,
ALW PARTNERSHIP shall receive 50% of such amount and PANAX shall receive 50%
<PAGE> 6
of such amount. For all other Royalties paid by any Sublicensee for the
sale of Products and Improvements under this Agreement, including minimum
annual royalties paid by such Sublicensee, ALW PARTNERSHIP shall
participate in such royalty payments according to the schedule set forth
in Section 9.C.
3. COOPERATION AND ASSISTANCE
A. Furnishing TECHNOLOGY. Upon execution of this Agreement by both
parties, in a prompt and diligent manner after the Effective Date, ALW
PARTNERSHIP shall disclose and provide to PANAX the TECHNOLOGY, PATENTS
and all related CONFIDENTIAL INFORMATION in ALW PARTNERSHIP's possession
necessary for PANAX to use the LICENSED RIGHTS hereunder and to
manufacture the Products or have them manufactured.
B. No Offset. All amounts paid by PANAX under Section 9.G. of this
Agreement shall not be considered Royalties or applied as an offset
against the Royalty obligations of PANAX as set forth herein.
4. IMPROVEMENTS AND NEW PRODUCTS
A. Ownership of Improvements and New Products.
Subject to the terms and conditions of this Agreement, during the
term of this Agreement, PANAX shall have an exclusive worldwide license to
manufacture, have manufactured, use and sell any Improvements (pursuant to
section 1F) which are developed by PANAX or ALW PARTNERSHIP during the
term of this Agreement. Royalties pursuant to Section 9 shall be paid to
ALW PARTNERSHIP for Improvements which are the result of development
efforts by PANAX or ALW PARTNERSHIP, less any royalty payments made by
PANAX to a third party, if applicable, for a license of the Improvement
from the third party.
<PAGE> 7
Pursuant to this provision, PANAX shall have the right to apply at
its own expense for patent or other intellectual property protection in such
Improvements, and if necessary, ALW PARTNERSHIP agrees to cooperate in any
reasonable manner therein in conformity with this section.
B. Disclosure of Improvements. During the term of this Agreement,
ALW PARTNERSHIP shall disclose to PANAX any Improvement which ALW PARTNERSHIP
develops or has developed and shall provide to PANAX all copies and
tangible embodiments disclosing such Improvements and, subject to Section
4.C, hereof, New Products, within the Field of Use at no charge to PANAX.
C. Right of First Refusal On New Products. ALW PARTNERSHIP hereby
grants PANAX a right of first refusal on all New Products developed by ALW
PARTNERSHIP. PANAX shall have the right to exercise this right of first
refusal by (i) giving ALW PARTNERSHIP written notice of its acceptance
within ten (10) calendar days of receiving notice from ALW PARTNERSHIP of
the existence of a right of first refusal on a New Product and (ii)
entering into a definitive agreement with ALW PARTNERSHIP within 30
calendar days of sending ALW PARTNERSHIP its written acceptance.
5. PATENT PROSECUTION
A. Control of Patent Prosecution Process. PANAX shall supervise and
control all patent prosecution based on the TECHNOLOGY, Products,
Improvements and Inventions and shall diligently prosecute all patent
applications and maintain all patents relating to the TECHNOLOGY,
Products, Improvements and Inventions. PANAX shall consult with ALW
PARTNERSHIP as to the appropriate form of intellectual property protection
to be filed, and if so, the timing of such filing. ALW PARTNERSHIP shall
not file any patent application or take any other action relating to the
TECHNOLOGY or the LICENSED RIGHTS without the prior consent of PANAX, such
<PAGE> 8
consent not to be unreasonably withheld, or except as set forth in Section
5.A.(i).
(i) Payment of Patent Prosecution Costs. PANAX shall pay the fees
for preparing and prosecuting the PATENTS and other patent applications and
patents based on the TECHNOLOGY, Products, Improvements and Inventions.
PANAX shall be responsible to pay all costs for registering, filing and
maintaining in force the PATENTS and other patent applications and patents
based on the TECHNOLOGY, Products, Improvements and Inventions. All
patent applications filed after the Effective Date by PANAX shall be filed
in the name of PANAX as Applicant, where applicable. In the event that
PANAX declines to pay the fees for filing, prosecuting, issuing or
maintaining such a patent in a given jurisdiction and ALW PARTNERSHIP
decides to pay for such costs, in the event such a patent eventually
issues, PANAX will have non-exclusive rights to the patented subject
matter in that jurisdiction during the term of this Agreement and will pay
Royalties for any Products and Improvements developed therefrom as if
included in the provisions set forth in Section 9.
6. PATENT MARKINGS
PANAX agrees to observe reasonable requirements with respect to the
marking of the Products and Improvements covered by a valid claim of the
PATENTS. In the event that such marking of a Product or Improvement, as
the case may be, is not feasible, PANAX agrees to observe reasonable
requirements with respect to the marking of any packaging, advertising,
sales or technical literature pertaining thereto, with words and numbers
identifying the PATENTS applicable thereto. PANAX agrees to have the same
patent marking requirements apply to any Affiliate or Sublicensee.
<PAGE> 9
7. INTELLECTUAL PROPERTY LEGAL ACTION
A. Duty to Keep Watch. Each party agrees to keep diligent watch
during the term of this Agreement to detect any products or processes which
infringe or misappropriate, or potentially infringe or misappropriate, the
Products, Improvements or LICENSED RIGHTS. Upon discovery of any such
infringement or misappropriation, or suspected infringement or
misappropriation, such party shall promptly notify the other party
thereof.
B. Entitlement to Take Action. PANAX shall have the first right (but
not the obligation) to undertake any demand, suit or other action
(collectively, an "Action") on account of any infringement or
misappropriation of the Products, Improvements or LICENSED RIGHTS or
suspected infringement or misappropriation (collectively, an
"Infringement"). In the event that PANAX first undertakes an Action for
Infringement of the PATENTS, other patents, the LICENSED RIGHTS, Products
or Improvements, ALW PARTNERSHIP shall be notified by PANAX of the Action
and ALW PARTNERSHIP shall be given an opportunity to join in the Action
within 60 days of receiving notice. ALW PARTNERSHIP may undertake an
Action without the prior written consent of PANAX, if PANAX does not give
notice to ALW PARTNERSHIP that it has commenced an Action with respect to
an Infringement within 6 months of becoming aware or receiving notice of
such Infringement. ALW PARTNERSHIP shall give prompt notice to PANAX that
it intends to commence an Action with respect to such Infringement. PANAX
shall not settle or compromise any such suit in a manner that imposes any
obligations or restrictions on ALW PARTNERSHIP or grants any rights to the
PATENTS, patents or LICENSED RIGHTS without ALW PARTNERSHIP's written
permission, such permission not to be unreasonably withheld.
C. Entitlement to Proceeds. If either party prosecutes any demand,
suit or other action as provided herein without the participation of the
<PAGE> 10
other party (the mere joining of the other party as a necessary party in a
litigation shall not be deemed participation for purposes of this
provision), the prosecuting party shall bear all expenses, legal or
otherwise, and shall be exclusively entitled to all proceeds or recoveries
resulting therefrom, except that if PANAX prosecutes such a demand, suit
or other action without the participation of ALW PARTNERSHIP, the proceeds
or recoveries therefrom, if any, shall be distributed first to PANAX for
its disbursements for such expenses, legal or otherwise, and then to the
parties equally; provided however that the distribution to ALW PARTNERSHIP
to compensate for lost Royalties as a proportionate recovery of direct
damages shall not exceed the royalty payments to which it would otherwise
be entitled under this Agreement, assuming that PANAX or any Affiliate or
Sublicensee had made the sales which the infringer had actually made, and
the remainder of any proceeds shall be distributed to PANAX. In such
case, ALW PARTNERSHIP shall not share in any award over and above the
aforementioned proportionate recovery.
D. Entitlement to Proceeds for Joint Action. If each of the parties
pay expenses in prosecuting a demand, suit or other action of an infringement
or misappropriation, the proceeds thereof, if any, shall be distributed
first to the parties to compensate them for their disbursements for such
expenses, legal or otherwise, and then shall be divided between PANAX and
ALW PARTNERSHIP in proportion to the relative amounts expended by the
parties in instituting and prosecuting such demand, suit or other action.
E. Declaratory Judgement. In the event that any declaratory judgement
action alleging invalidity, unenforceability or non-infringement of any
PATENT shall be brought against PANAX, ALW PARTNERSHIP, at its option, may
intervene in the action within thirty (30) days and assume defense of the
action at its expense.
<PAGE> 11
F. Cooperation. Each party agrees to cooperate fully with the other
party, as the other party may reasonably request, in connection with any
demand, suit or other action taken hereunder. To that end, the parties
shall testify when they are available and make available relevant records,
papers, information, samples, specimens and the like.
8. CONFIDENTIALITY
Each party acknowledges that in the course of its performance under
this Agreement it will have access to the other party's Confidential
Information. All Confidential Information of a party disclosed under this
Agreement shall remain the exclusive property of that party, except as
otherwise specifically indicated in this Agreement. Each party agrees:
(i) to take all reasonable measures necessary to protect the confidential
nature of the Confidential Information using the same degree of care that
it uses to protects its own Confidential Information or proprietary
information; and (ii) except as provided in this Agreement or as required
by law or court order or as necessary to assert rights hereunder, not to
disclose to third parties any of the Confidential Information without
first obtaining an executed Confidentiality Agreement from such third
party. Without limiting the foregoing, PANAX agrees to ensure that all of
its employees that have access to ALW PARTNERSHIP'S Confidential
Information are on a need-to-know basis and are obligated in writing to
abide by PANAX'S obligations hereunder. PANAX agrees to use such
Confidential Information solely for furthering the objectives of this
Agreement and will not, either during the term of this Agreement or at any
time subsequent to the termination of this Agreement, use such information
for its own benefit or for the benefit of others. Notwithstanding the
provisions of this Section, during the term of this Agreement, nothing
shall prevent PANAX from selling a Product or Improvement or using the
LICENSED RIGHTS with respect to any Product or Improvement free of royalty
payments after all of the patents covering any such Product or Improvement
have expired.
<PAGE> 12
9. PAYMENTS.
Pursuant to this Agreement, PANAX shall pay to ALW PARTNERSHIP the
following amounts for the LICENSED RIGHTS during the term of this
Agreement.
A. Minimum Royalty Payments. After the sixth anniversary of this
Agreement, in order to maintain exclusivity of the LICENSED RIGHTS, PANAX
agrees to make yearly payments of $100,000 in equal quarterly
installments. However, in the event that PANAX has not received an NDA
approval for a Product or Improvement by the end of the sixth anniversary,
through no fault of its own, PANAX shall have the right to extend the
commencement of minimum royalty payments until the seventh anniversary of
this Agreement. Regardless of the number of Products or Improvements
marketed by PANAX, an Affiliate or Sublicensee, the minimum Royalty
payments, pursuant to this Section, will not exceed $100,000 per year.
In order for the LICENSED RIGHTS to remain exclusive with PANAX, minimum
payments shall be made for the period that there is at least one valid and
unexpired United States patent covering any of the Products and
Improvements or any proposed Product or Improvement. In the event of
expiration or a determination of invalidity of all of the United States
patents covering the Products and Improvements (Section 9.H. hereof) such
that there is no patent protection for any Product or Improvement in the
United States, PANAX shall maintain exclusivity of the LICENSED RIGHTS by
merely paying Royalties for the manufacture, sale or use of the Products
and Improvements in any jurisdiction covered by one or more valid and
unexpired non-United States patent or otherwise complying with the terms
of Section 9.H.
B. Pre-Paid Royalty Payments. To the extent that the $100,000 minimum
royalty payment referred to in Section 9.A. has not been earned by
<PAGE> 13
applying the schedule set forth in Section 9.C at the end of a given
calendar year, the difference between the minimum payment and the actual
Royalties due for sales in such year shall be treated as pre-paid
Royalties for the following year. Notwithstanding the foregoing, minimum
Royalties in the amount of $100,000 pursuant to Section 9.A shall still be
paid each such following year.
C. Percent Royalty for Sales. PANAX agrees to pay to ALW PARTNERSHIP a
royalty based upon total Net Sales of Products and Improvements used or
sold by PANAX, any Affiliate and any Sublicensee according to the
following schedule:
(i) 2% of Net Sales for the first $5,000,000 in a
calendar year;
(ii) 4% of Net Sales between $5,000,001 and $10,000,000
in a calendar year; and
(iii) 6% on Net Sales in excess of $10,000,000 in a
calendar year;
provided that if the first Net Sale is on a day other than January 1 or
the last Net Sale is on a day other than December 31 (each, a "Short
Year"), the dollar amounts set forth above shall be reduced
proportionately to reflect the actual number of calendar days in such
Short Year.
D. Total Net Sales. Total Net Sales in a given year according to the
above schedule shall be considered the total aggregate sales made by PANAX
and any Affiliate and Sub-licensee.
E. Royalty Payment Schedule. Royalty payments shall be paid within 45
days after the completion of each calendar quarter.
F. Right to Pay Minimum Payment. Subject to Sections 9.A. and 18,
hereof, PANAX, in its sole discretion, shall have the right to have the
<PAGE> 14
license granted hereunder continue after year six or seven, as applicable,
by continuing to make minimum yearly payments of $100,000 in equal
quarterly installments.
G. Non-Royalty Payments. The following non-royalty payments shall be
made to ALW PARTNERSHIP:
(i) Upon execution of this Agreement, PANAX agrees to pay ALW
PARTNERSHIP the sum of $100,000 less any payments which have
been made to Craig Aronchick pursuant to the paragraph
entitled Exclusivity on page 3 of the December 15, 1996
Letter of Understanding between PANAX Pharmaceutical
Company and Craig Aronchick, M.D. ("the Letter of
Understanding");
(ii) ALW PARTNERSHIP shall be further entitled to receive an
additional $150,000 payment from PANAX upon one or more
parties in one or more series, making an equity investment in
or a loan to PANAX aggregating at least $2,000,000; and
(iii) Upon receiving NDA approval of the first of any Product or
Improvement in the United States, ALW PARTNERSHIP will receive
$250,000 from PANAX.
H. Patent Invalidity/Enforceability. In the event that the patent or
patents covering a Product or Improvement is found by a forum of competent
jurisdiction in the United States to be invalid or unenforceable from
which no further appeal is or may be taken such that the Product or
Improvement is marketed without patent protection ("Unprotected Product"),
further payments to ALW PARTNERSHIP will be adjusted according to the
following schedule:
(i) the Net Sales attributable to the Unprotected Product shall be
decreased by 50% when calculating total Net Sales in accordance with
<PAGE> 15
Section 9C, provided that the total cumulative aggregate Net Sales of all
Products and Improvements have been at least $5,000,000;
(ii) there shall be no credit toward the Net Sales calculation in
Section 9C of the Net Sales attributable to the Unprotected Product if the
total cumulative aggregate Net Sales of all Products and Improvements have
been less than $5,000,000; and
(iii) Previously paid Royalties will not be refunded.
Notwithstanding the provisions of sections (i) and (ii), above, there
shall be no credit toward the Net Sales calculation in Section 9C of Net
Sales attributable to an Unprotected Product above $35,000,000.
I. Escrow Royalties. In the event that the patent or patents are found
by an initial forum of competent jurisdiction ("First Forum") to be
invalid and/or unenforceable so that the Product(s) or Improvement(s)
covered by such patent or patents is marketed without patent protection,
then Royalties otherwise due under Section 9.C. will be placed in escrow
with an independent third party escrow agent during the period in which an
appeal to overturn the First Forum is taken, if applicable. Minimum
Royalty payments under Section 9.A. will also be placed in escrow if there
are no other valid and unexpired United States patents covering any of the
Products or Improvements or any proposed Product or Improvement. In the
event of a successful appeal, PANAX shall immediately pay all Royalty
payments due out of such escrow amount, including any minimum Royalty
payments due. In the event of an unsuccessful appeal, Royalty payments
due under Section 9.H. shall immediately be paid out of such escrow
amount.
J. Non-patent Jurisdiction Competition. During the term of the patents,
in the event that patent protection is unavailable in a particular country
<PAGE> 16
for a reason other than as provided in Section 9.H., hereof, and
competition is impacting the ability of PANAX to make a profit on sales of
Purgative Product within that jurisdiction, the parties mutually agree to
negotiate to adjust royalties in that jurisdiction in order to allow PANAX
to make a reasonable profit in such jurisdiction.
10. RESERVED
11. ACCOUNTING
A. Date of Sale of Products. Sale by PANAX or any Affiliate or
Sublicensee of a Product or Improvement for which a Royalty is due shall
be deemed to have accrued for purposes herein on the date the Product or
Improvement is shipped or the date an invoice to which the Product or
Improvement relates is issued, whichever is earlier.
B. Royalty Due Date. Payments for Royalties based upon Net Sales which
accrue in any quarter period shall become due 45 days from the last day of
the respective calendar quarter period. All quarter periods shall end on
March 31, June 30, September 30 and December 31 of each year.
C. Medium of Exchange. All Royalty payments shall be in United States
Dollars by check, payable to ALW PARTNERSHIP. PANAX may deduct or
withhold from such payments and pay to the proper taxing authority any
taxes or fees required by law or regulation to be deducted or withheld
from such payments. If PANAX or any Affiliate or Sublicensee receives
revenues from Products or Improvements in currency other than United
States dollars, such revenues shall be converted into United States
dollars at the conversion rate for the foreign currency as published in
the eastern edition of The Wall Street Journal as of the last
<PAGE> 17
business day of the calendar quarter in which such revenues were received.
D. Royalty Remittance and Royalty Report Date. PANAX shall remit a
Royalty Report together with any Royalty payment accruing in any
particular quarter period within forty-five (45) calendar days of the end
of the quarter period in which such Royalty payment became due.
E. Late Royalty Payments. If any undisputed Royalty payment is not
remitted by PANAX to ALW PARTNERSHIP within the time period set forth in
Section 11D hereof, PANAX shall remit to ALW PARTNERSHIP payment of the
Royalty due plus simple interest, at one-half percent (0.5%) per month for
the period from the date such Royalty payment was due until the date such
Royalty payment is remitted. This provision shall not constitute a waiver
of any other remedy, including, but not limited to, termination of this
Agreement under the terms hereof.
F. Set-Off. PANAX shall have a right of set-off against amounts owed
ALW PARTNERSHIP hereunder for any claims PANAX may have against ALW
PARTNERSHIP consistent with all applicable law now or hereinafter in
effect.
12. RECORDS
A. Record Keeping. PANAX shall keep correct and complete records and
books of account covering all transactions relating to this Agreement and
containing all information required for the computation and verification
of the Royalties to be paid hereunder. PANAX agrees to permit, at ALW
PARTNERSHIP's expense and reasonable request upon not less than fifteen
(15) days' prior written notice, an independent certified public
accountant selected by ALW PARTNERSHIP (except one to whom PANAX has some
reasonable objection) to have access during ordinary business hours to
such records and books of account and all other documents and materials in
<PAGE> 18
the possession and under the control of PANAX relating to or pertaining to
the subject matter of this Agreement: (i) to determine in respect of any
quarter period ending not more than seven years prior to the date of such
request, the correctness of any Royalty Report payment made under this
Agreement; or (ii) to obtain information as to the Royalties payable for
any quarter period pursuant to the terms of this Agreement. Such
accountant shall agree in writing to keep confidential all information
disclosed to it by PANAX; provided, however, that such accountant may
disclose to ALW PARTNERSHIP only that information which relates solely to
the accuracy or preparation of, or which should properly have been
contained in the Royalty Report required hereunder. Such information
shall be deemed Confidential Information. PANAX shall use all reasonable
efforts to require third parties with which it has contractual
relationships relating to the Products or Licensed Rights that would
affect the calculation of Royalties to comply with this provision and
PANAX shall cause all Sublicensees and Affiliates to comply with this
provision.
B. Period of Record Retention. PANAX shall keep all such records and
books of account available for review pursuant to the terms and conditions of
Section 14A hereof for a period of at least seven years.
C. Deficiency of Royalty Due. If any audit or examination shall reveal a
deficiency of any undisputed Royalty payment due, PANAX shall make payment
to ALW PARTNERSHIP of such deficiency plus interest calculated as
prescribed in Section 11.E. hereof for the period of such deficiency.
Payment shall be made within fifteen (15) days following notification to
PANAX by ALW PARTNERSHIP of such deficiency.
D. Cost of Audit. In the event that such an audit or examination shall
reveal a deficiency of any undisputed Royalty payment due in an amount
equaling or exceeding five percent (5%) of the undisputed Royalties due,
<PAGE> 19
PANAX shall reimburse ALW PARTNERSHIP for the reasonable costs of such audit.
13. DISCLAIMER OF WARRANTIES
THE LICENSED RIGHTS ARE PROVIDED ON AN "AS IS" BASIS AND, EXCEPT AS
OTHERWISE SET FORTH HEREIN, ALW PARTNERSHIP MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PATENTS, INVENTIONS
AND LICENSED RIGHTS. BY WAY OF EXAMPLE, BUT NOT OF LIMITATION, ALW
PARTNERSHIP MAKES NO REPRESENTATIONS OR WARRANTIES OF (i) COMMERCIAL
UTILITY OR (ii) MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE. EXCEPT
AS OTHERWISE SPECIFICALLY SET FORTH HEREIN, ALW PARTNERSHIP SHALL NOT BE
LIABLE TO PANAX, ANY AFFILIATE OR SUBLICENSEE, PANAX'S SUCCESSORS OR
ASSIGNS OR ANY OTHER THIRD PARTY WITH RESPECT TO ANY CLAIM ON ACCOUNT, OR
ARISING FROM THE USE OF THE LICENSED RIGHTS OR THE MANUFACTURE, USE OR
SALE OF PRODUCTS OR ANY OTHER MATERIAL DERIVED THEREFROM.
14. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties by ALW PARTNERSHIP. ALW PARTNERSHIP
hereby represents, warrants and covenants to PANAX as follows.
(i) Title. ALW PARTNERSHIP is the sole and exclusive owner of the
entire right, title and interest in and to the TECHNOLOGY, and has the right
and authority to grant unrestricted rights and licenses, free and clear of all
liens, claims, and encumbrances, granted hereunder.
(ii) Right to Enter into Agreement. ALW PARTNERSHIP has the right to
enter into this Agreement and there are no outstanding assignments,
grants, licenses, encumbrances, obligations or agreements, either written
or oral, express or implied, which are inconsistent with this Agreement.
<PAGE> 20
(iii) Infringement and Misappropriation. To the best of ALW
PARTNERSHIP's knowledge, the TECHNOLOGY does not infringe the patent or
misappropriate the trade secret or other proprietary right of any third
party and the use thereof will not give rise to such a claim. ALW
PARTNERSHIP has not received any notice, claim or demand of infringement
or claimed infringement or of misappropriation or claimed misappropriation
with respect to the TECHNOLOGY or any of ALW PARTNERSHIP's Confidential
Information or the PATENTS and, to the best of ALW PARTNERSHIP's
knowledge, no condition exists which would give rise to such a claim. In
addition, ALW PARTNERSHIP has made PANAX aware of any information in its
possession including any third party claims or assertions that the PATENTS
are invalid or unenforceable or which relate to the infringement or
misappropriation of any third party.
(iv) Related Information. To the extent that ALW PARTNERSHIP has
provided technical information to PANAX which relates to the PATENTS,
INVENTIONS AND LICENSED RIGHTS, ALW PARTNERSHIP represents that, to the
best of its knowledge, such information is accurate and true.
B. Representations and Warranties by PANAX.
(i) Right to enter Agreement. PANAX hereby represents and warrants
that it has the right to enter into this Agreement and, to the best of PANAX's
knowledge, there are no outstanding assignments, grants, licenses,
encumbrances, obligations or agreements to which PANAX is a party, either
written or oral, express or implied, which are inconsistent with this
Agreement.
(ii) Due Incorporation. PANAX is a corporation duly incorporated and
subsisting under the laws of New York and has all requisite corporate
authority to own and lease its property, to carry on its business as now
being conducted and as proposed to be conducted, and to carry out the
transactions contemplated hereby.
<PAGE> 21
(iii) Authorization of Transaction. PANAX has full corporate
authority to perform its obligations hereunder. The execution, delivery
and performance of this Agreement have been duly authorized by all proper
and necessary corporate or other action and this Agreement shall
constitute valid and legally binding obligations of PANAX, enforceable
against PANAX in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and except to the extent that the remedy of specific enforcement
or injunctive relief subject to the discretion of the court before which
any proceedings may be brought.
(iv) Governmental Approvals. No authorization, consent, approval,
license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, was, is or will be necessary or
appropriate for the execution and delivery of this Agreement.
(v) Capitalization. The authorized capital stock of PANAX consists
of 10,000,000 shares of Common Stock, $0.0001 par value, of which
3,342,327 shares are issued and outstanding as of the date hereof. In
addition, PANAX has reserved for issuance shares of its Common Stock as
follows: (i) 1,235,710 shares upon exercise of outstanding Redeemable
Common Stock Purchase Warrants sold in the initial public offering; (ii)
107,500 shares issuable upon exercise of warrants issued to the
underwriter of PANAX's initial public offering; (iii) 320,000 shares
issuable upon exercise of Common Stock Purchase Warrants issued to D.H.
Blair & Co., Inc.; and (iv) shares issuable upon exercise of options
granted or to be granted under the Stock Option Plan, which Plan currently
relates to 500,000 shares. In addition, the Company intends to reserve
additional shares of Common Stock for issuance upon exercise of warrants
or options to be issued in connection with its proposed acquisition of
<PAGE> 22
Sangen Pharmaceutical, Inc. and the termination or modification of its
office lease.
(vi) Securities Law Disclosure. PANAX has filed all forms, reports,
statements or other documents required to be filed with the Securities and
Exchange Commission and NASDAQ, including, without limitation, its Annual
Report on Form 10-KSB for the year ended June 30, 1996, its Quarterly
Report on Form 10-KSB for the three months ended September 30, 1996, all
reports on Form 8-K and all amendments and supplements to all of the
foregoing reports (collectively, the "SEC Reports"). As of the respective
filing dates, the SEC Reports complied as to form in all material respects
with the requirements of the Securities Exchange Act of 1934 (the
"Exchange Act") or the Securities Act of 1933 (the "Securities Act") as
applicable. The SEC Reports did not, at the time they were filed, contain
any untrue statement of material fact, or omit to state a material fact
required to be stated therein that was necessary to make the statement
therein, in light of the circumstances under which they were made, not
misleading.
(vii) Financial Statements. Since the date of the audited balance
sheet included in PANAX's annual report on Form 10-KSB for the year ended June
30, 1996, there has been no event, development or condition of any type of
which PANAX has knowledge that has had or is reasonably likely to have a
material adverse effect on or that has materially and adversely affected
PANAX.
(viii) Litigation; Compliance with Laws. PANAX is not engaged in, or
a party to, or threatened with, any legal action, suit, investigation, or
other proceeding by or before any court, arbitrator or administrative
agency, and PANAX does not know of any basis for any such action,
investigation or proceeding. There are no outstanding orders, rulings,
decrees, judgments or stipulations or proceedings to which PANAX is a
party or by which PANAX is bound, by or with any court, arbitrator or
<PAGE> 23
administrative agency. PANAX is operating its business in compliance with
the requirements of federal, state and local laws, regulations, judgments,
injunctions, decrees, court orders and administrative orders regarding
such operations.
15. COVENANTS OF PANAX.
Within 90 days of obtaining $2,000,000 in aggregate equity financing or a
loan pursuant to Sections 9.G.(ii) and 18.F., PANAX will provide ALW
PARTNERSHIP with a detailed plan for the development of the Purgatory
Product and will send to ALW PARTNERSHIP semi-annual reports on the
progress made toward the commercialization of the Purgatory Product, and,
if applicable, of other Products and Improvements. PANAX shall use good
faith reasonable efforts to develop, use, manufacture or have
manufactured, market and sell or have sold the Products and Improvements.
16. INDEMNIFICATION
A. Indemnification by ALW PARTNERSHIP. Subject to Section 13, hereof,
and except as otherwise provided in this Agreement, ALW PARTNERSHIP shall
indemnify and hold PANAX and its Affiliates harmless from any and all
claims, demands, suits, actions, proceedings, costs, damages, expenses, or
other disputes which arise from the failure of ALW PARTNERSHIP to perform
any of its obligations hereunder or the breach of any representation and
warranty made by ALW PARTNERSHIP herein.
B. Indemnification by PANAX. Except as otherwise provided in this
Agreement, PANAX shall indemnify and hold ALW PARTNERSHIP harmless from
and against any and all claims, demands, suits, actions, proceedings,
costs, damages, expenses, or other disputes which relate directly, or
indirectly, to the license granted herein, the Products or Improvements,
<PAGE> 24
including, but not limited to, the failure of PANAX to perform any of its
obligations hereunder or the breach of any representation and warranty
made herein. Pursuant to this provision, PANAX shall name ALW PARTNERSHIP
as a co-insured on any products liability insurance policy(ies) it
obtains.
17. REGULATORY APPROVAL
The parties shall cooperate in complying with all necessary regulatory
requirements and in obtaining the necessary regulatory approvals in the
United States or outside the United States where required prior to
developing, manufacturing, marketing, selling, promoting or distributing a
Product in a particular country.
18. TERM AND TERMINATION
A. Term. This Agreement and PANAX's rights hereunder to sell Products
and Improvements and to use the TECHNOLOGY and the LICENSED RIGHTS shall
remain in full force and effect into perpetuity, unless sooner terminated
as hereinafter provided. After all of the patents in the United States
have expired or have been determined to be invalid or unenforceable from
which no further appeal is or may be taken for a particular Product or
Improvement, all royalty payments for the manufacture, use or sale of such
Product or Improvement in a given jurisdiction, if not previously
terminated, shall terminate upon the expiration of all of the patents
covering such Product or Improvement in that jurisdiction. No Royalty
payment with respect to a Product or Improvement shall be made to ALW
PARTNERSHIP after the expiration date of the last to expire of all of the
patents which cover such Product or Improvement.
<PAGE> 25
B. Termination for Breach. In the event that a party breaches its
material obligations under this Agreement, the non-breaching party may
terminate this Agreement by giving the breaching party not less than sixty
(60) days' written notice of its intention to terminate, provided,
however, that such breach remains uncured at the end of the sixty (60) day
notice period.
C. Termination By PANAX. PANAX may terminate this Agreement at any time
by providing 60 days written notification.
D. Termination for Failure to Sell Product.
(i) Failure by PANAX, an Affiliate or Sublicensee. After the eighth
anniversary of this Agreement, if PANAX or any Affiliate or Sublicensee
has failed to commence commercial sales of the Purgative Product, ALW
PARTNERSHIP shall have the right to terminate this Agreement upon ten (10)
days' written notice to PANAX.
(ii) Failure by Assignee of this Agreement. Pursuant to the provisions
of clause 20.D., hereof, in the event that this Agreement is assigned to a
third party, should such third party fail to make a good faith effort to
sell Product(s) which fall under the LICENSED RIGHTS, ALW PARTNERSHIP
shall have the right to terminate this Agreement. In the event of
termination by ALW PARTNERSHIP under this provision, such third party will
comply with the provisions of clause 19.A, as if such third party were
PANAX.
E. Failure to Pay Minimum Royalties. If PANAX fails to make minimum
Royalty payments pursuant to Sections 9.A. or 9.I., hereof, ALW
PARTNERSHIP may terminate this Agreement.
F. Termination for Insolvency. If PANAX files a petition in bankruptcy,
or if a petition in bankruptcy is filed against it, or if it becomes
insolvent, or makes an assignment for the benefit of creditors or an
<PAGE> 26
arrangement pursuant to any bankruptcy law, ALW PARTNERSHIP shall have the
right to terminate this Agreement upon thirty (30) days' written notice.
G. Termination for Failure to Obtain Equity Financing. Notwithstanding
the provisions of Section 9.G.(ii), hereof, if PANAX fails to obtain
equity financing in the aggregate of at least $2,000,000 within nine
months of the Effective Date, ALW PARTNERSHIP, in its sole discretion, may
terminate this Agreement within ten (10) calendar days after the nine
month date only if the principals of ALW PARTNERSHIP have not exercised
any rights under the options pursuant to their Option Agreements. In the
event that ALW PARTNERSHIP exercises its right to terminate this Agreement
under this section, all rights in PANAX options held by the principals of
ALW PARTNERSHIP, will immediately revert back to PANAX.
H. Effect of Termination on Royalties Due. The termination of this
Agreement for any reason shall not prejudice ALW PARTNERSHIP's rights to
Royalties due it hereunder and unpaid on the effective date of termination
or thereafter pursuant to Section 18.H., or to its rights to audit PANAX's
records pursuant to Section 12A hereof.
I. Effect of Termination on PANAX's Rights. Notwithstanding any
termination of this Agreement, PANAX may continue to use the LICENSED
RIGHTS to finish all works-in-process and to market, sell, promote and
distribute all existing inventory of Products for a period not to exceed
six (6) months after termination, provided that Royalty payments for such
activity are made.
J. Effect of Termination on Antecedent Breaches. The termination of this
Agreement for any reason shall not affect the rights of any party against
the other party in respect of antecedent breaches by that other party.
<PAGE> 27
K. Termination by ALW PARTNERSHIP for Failure to Commit Spending. It is
understood that the development of the Products shall be a priority of
PANAX and PANAX shall commit at least $1,000,000 for furthering the
development and/or the marketing of the Products over a period commencing
on the Effective Date and continuing until two years after completion of a
successful round of equity financing or a loan as described in Sections
9.G.(ii) and 18.F, hereof.
19. DUTIES OF THE PARTIES UPON TERMINATION
A. Duties of PANAX upon Termination of the Agreement. Upon termination
by either party, PANAX shall return or provide or cause to be returned or
provided promptly all writings submitted by ALW PARTNERSHIP to PANAX, any
Affiliate or Sublicensee or their representatives and copies of ALW
PARTNERSHIP's Confidential Information in whatever form or medium. In
addition, PANAX shall provide or cause to be provided to ALW PARTNERSHIP
all technical and regulatory information in its possession or its
Affiliates, Sublicensees and other representatives possession and which
pertains to the Products, the LICENSED RIGHTS and Improvements. Also, all
LICENSED RIGHTS, PATENTS and patents relating to Products and Improvements
shall revert or be assigned to ALW PARTNERSHIP.
B. Duties of ALW PARTNERSHIP upon Termination of the Agreement. If this
Agreement is terminated, ALW PARTNERSHIP shall have no further obligation
other than to abide by the provisions of this Agreement which survive
termination.
C. Survival of Confidentiality. If this Agreement is terminated, the
parties' obligations under the Confidentiality provisions hereof shall
survive the termination of this Agreement.
<PAGE> 28
D. Survival of Provisions After Termination. In addition to the
Confidentiality provisions of this Agreement surviving termination as set
forth in Section 19C and 8 hereof, the provisions of this Agreement set
forth in Sections 9, 11, 12, 13, 16 and 19 also shall survive termination.
20. MISCELLANEOUS
A. Entire Agreement. This Agreement, together with the attached Exhibits
which by this reference are hereby incorporated herein, contains the
entire agreement between the parties relating to the subject matter hereof
and all prior understandings, representations and warranties by and
between the parties, written and oral, which may be related to the subject
matter hereof in any way are superseded by this Agreement, including the
Letter of Understanding.
B. No Waiver or Amendment Unless in Writing. None of the terms of this
Agreement shall be deemed to be waived or amended by either party unless
such a waiver or amendment specifically references this Agreement and is
in writing signed by both parties.
C. Notices. All notices and demands required or permitted to be given or
made pursuant to this Agreement shall be in writing (which term shall
include telecopy) addressed to the person or persons named below and shall
be personally delivered or mailed by certified or registered mail or by
overnight courier, or sent by telecopy, provided such telecopy is promptly
confirmed by telephone conversation with the individuals named below,
addressed as follows:
<PAGE> 29
If to PANAX:
PANAX Pharmaceutical Company, Ltd.
425 Park Avenue, 27th Floor
New York, New York 10022
Telecopy: 212-751-4131
Attention: Taffy J. Williams, Ph.D., President and C.E.O.
If to ALW PARTNERSHIP:
ALW PARTNERSHIP
8th and Spruce Streets,
Philadelphia, Pennsylvania, 19107
Telecopy: 215-829-3020
Attention: Craig Aronchick, M.D.
or to such other address or person of which either party may notify the
other in writing. Notices delivered personally shall be deemed given on
the date of such delivery, notice delivered by confirmed telecopy shall be
deemed given on the next business day after the telephone conversation
confirming transmission, notice delivered by certified or registered mail
shall be deemed given ten (10) days after sending as provided above and
notice delivered by overnight courier shall by deemed given on the date
after sending.
D. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties, their successors and permitted assigns.
This Agreement shall not be assignable by either party without the prior
written consent of the other party, such consent not to be unreasonably
withheld or delayed; provided, however, that a party may assign this
Agreement, without the consent of the other party, to a purchaser or
assignee of all or substantially all the assets of its business to which
<PAGE> 30
this Agreement relates, provided that such purchaser or assignee agrees to
be bound by all of the terms hereof as if originally named herein. Any
attempted assignment which does not comply with the terms of this Section
shall be void and of no effect.
E. No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by both parties hereto to express their
mutual intent and no rule of strict construction against either party
shall apply to any term or condition of the Agreement.
F. Compliance with Laws. Each party shall comply with all applicable
laws, regulations and orders. The parties shall cooperate with each other
to comply with all such measures and shall promptly inform the other party
of any suspected noncompliance.
G. Severability. Should any provision of the Agreement be held illegal,
invalid or unenforceable by any court or regulatory agency of competent
jurisdiction, such provision shall be modified by such court or regulatory
agency in compliance with the law and, as modified, enforced. All other
terms and conditions of this Agreement shall remain in full force and
effect and shall be construed in accordance with the modified provision,
and as if such illegal, invalid or unenforceable provision had not been
contained herein.
I. Relationship of the Parties. Nothing herein shall be construed to
create any relationship of employer and employee, agent and principal,
partnership or joint venture between the parties. Each of PANAX and ALW
PARTNERSHIP is an independent contractor. Neither party shall assume,
either directly or indirectly, any liability of or for the other party.
Neither party shall have the authority to bind or obligate the other party
and neither party shall represent that it has such authority.
<PAGE> 31
J. Choice of Law. This Agreement and all disputes arising hereunder
shall be governed by, and interpreted in accordance with the internal laws
(not the laws of conflicts) of the State of New York.
K. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the performance or breach thereof, shall be resolved
exclusively through the alternative dispute resolution described in
Appendix A, attached hereto and made a part hereof.
L. Force Majeure. Neither party shall be liable for delay or
non-performance of its obligations hereunder because of any circumstances
beyond its reasonable control including, but not limited to, the
following: acts of God; acts of federal, state or local government, or
any agency thereof including the Environmental Protection Agency or
Occupation Safety and Health Administration; compliance with requests,
recommendations, ruling, regulations, or orders of any governmental
authority or any officer, department, agency, or instrumentality thereof;
fire, storm, inclement weather, or flood; inadequate or impassable roads
or bridges; earthquake, or explosion; accident, breakdown or failure of
production facilities; acts of public enemy, war, rebellion, terrorism,
insurrection or riot; strike, lockout, disputes or differences with
workmen; labor shortages, shortages of materials and supplies, shortages
of transportation facilities, transportation embargoes or failure or delay
in transportation. Nothing herein contained shall be construed as
requiring PANAX or ALW PARTNERSHIP to accede to the demands of labor
unions which it considers unreasonable. Notwithstanding the foregoing
provisions of this Section, should either party hereto be unable, for a
period of one hundred and eighty (180) consecutive days, to fulfill its
obligations hereunder due to force majeure, this Agreement shall
automatically terminate on such day.
<PAGE> 32
M. Confidentiality of Agreement. Neither party shall make reference to
any part of this Agreement or otherwise disclose its terms or conditions
to any third party other than a Sublicensee or assignee of PANAX either
during or after the term of this Agreement without the express prior
written consent of the other party, such consent not to be unreasonably
withheld.
N. Consent Not Unreasonably Withheld. Whenever provision is made in this
Agreement for either party to secure the consent or approval of the other
party, such consent or approval shall not unreasonably be withheld, and
whenever in this Agreement provisions are made for one party to object or
to disapprove a matter, such objection or disapproval shall not
unreasonably be exercised.
O. Further Assurances. The parties hereto shall each perform such acts,
execute and deliver such instruments and documents and do all such other
things as may be reasonably necessary to accomplish the transactions
contemplated in this Agreement.
P. No Waiver of Rights. No waiver of any term, provision, or condition of
this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing
waiver of any such term, provision, or condition of this Agreement.
Q. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original document,
but all such separate counterparts shall constitute only one and the same
instrument.
R. Headings of this Agreement. All headings in this Agreement are for
the convenience of the parties only and are not part of the substance of the
Agreement.
<PAGE> 33
The parties have executed this Agreement by their duly authorized
representatives as of the date first above written.
ALW PARTNERSHIP PANAX PHARMACEUTICAL COMPANY, LTD.
By: /s/ Craig Aronchick, M.D. By: /s/ Taffy J. Williams
---------------------- -------------------------
Craig Aronchick, M.D. Taffy J. Williams
President and C.E.O.
DATE: 02/25/97 DATE: 02/26/97
By: /s/ William H. Lipshutz, M.D.
------------------------------
William H. Lipshutz, M.D.
DATE: 02/25/97
By: /s/ Scott H. Wright, M.D.
--------------------------
Scott H. Wright, M.D.
DATE: 02/25/97
<PAGE> 34
APPENDIX A
The Parties recognize that during the term of this Agreement a bona fide
dispute as to certain matters which relate to either Party's rights and/or
obligations may arise from time to time. To have such a dispute resolved
by this Alternative Dispute Resolution ("ADR") provision, a Party first
must send written notice of the dispute to the other Party for attempted
resolution by good faith negotiations between their respective
representatives within twenty-eight (28) days after such notice is
received (all references to "days" in this ADR provision are to calendar
days).
If the matter has not been resolved within twenty-eight (28) days of the
notice of dispute, or if the Parties fail to meet within such twenty-eight
(28) days, either Party may initiate an ADR proceeding as provided herein.
The Parties shall have the right to be represented by counsel in such a
proceeding.
1. To begin an ADR proceeding, a Party shall provide written notice
to the other Party of the issues to be resolved by ADR. Within fourteen
(14) days after its receipt of such notice, the other Party may, by
written notice to the Party initiating the ADR proceeding, add additional
issues to be resolved within the same ADR proceeding.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the Parties shall select a mutually acceptable neutral person to
preside in the resolution of any disputes in this ADR proceeding. If the
Parties are unable to agree on a mutually acceptable neutral person within
such period, either Party may request the President of the CPR Institute
for Dispute Resolution ("CPR") or its successors or assigns, 36 Madison
Avenue, 14th Floor, New York, New York 10017, to select a neutral person
pursuant to the following procedures:
(a) The CPR shall submit to the Parties a list of not less than five
(5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. No candidate shall be
an employee, director, or shareholder of either Party or any of their
subsidiaries or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect its or her impartiality.
(c) Each Party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference) and shall
deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a Party believes a conflict of interest exists
regarding any of the candidates, that Party shall provide a written
explanation of the conflict to the CPR along with its list showing its
order of preference for the candidates. Any Party failing to return a
list of preferences on time shall be deemed to have no order of
preference.
<PAGE> 35
(d) If the Parties collectively have identified fewer than three (3)
candidates deemed to have conflicts, the CPR immediately shall designate
as the neutral person the candidate for whom the Parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the Parties
collectively have identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations regarding conflicts and, in
its sole discretion, may either (i) immediately designate as the neutral
person the candidate for whom the Parties collectively have indicated the
greatest preference, or (ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in subparagraphs 2(a) -
2(d) shall be repeated.
3. No earlier than twenty-eight (28) days or later than fifty-six
(56) days after selection, the neutral person shall hold a hearing to
resolve each of the issues identified by the Parties. The ADR proceeding
shall take place at a location agreed upon by the Parties. If the Parties
cannot agree, the neutral person shall designate a location other than the
principal place of business of either Party or any of their subsidiaries
or affiliates.
4. At least seven (7) days prior to the hearing, each Party shall
submit the following to the other Party and the neutral person:
(a) a copy of all exhibits on which such Party intends
to rely in any oral or written presentation to the neutral person;
(b) a list of any witnesses such Party intends to call
at the hearing, and a fair summary of the anticipated testimony of each
witness;
(c) a proposed ruling on each issue to be resolved,
together with a request for a specific damage award or other remedy for
each issue. The proposed rulings and remedies shall not contain any
recitation of the facts or any legal arguments and shall not exceed one
(1) page per issue.
(d) a brief in support of such Party's proposed rulings
and remedies, provided that the brief shall not exceed twenty (20) pages.
This page limitation shall apply regardless of the number of issues raised
in the ADR proceeding.
Except as expressly set forth in subparagraphs 4(a) - 4(d), no
discovery shall be required or permitted by any means, including
depositions, interrogatories, requests for admissions, or production of
documents.
<PAGE> 36
5. The hearing shall be conducted on two (2) consecutive
days and shall be governed by the following rules:
(a) Each Party shall be entitled to five (5) hours of hearing time
to present its case. The neutral person shall determine whether each
Party has had the five (5) hours to which it is entitled.
(b) Each Party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony, documents or
other evidence, to cross-examine witnesses, and to make a closing
argument. Cross-examination of witnesses shall occur immediately after
their direct testimony, and cross-examination time shall be charged
against the Party conducting the cross examination.
(c) The Party initiating the ADR shall begin the hearing and, if it
chooses to make an opening statement, shall address not only issues to be
raised but also any issues raised by the responding Party. The responding
Party, if it chooses to make an opening statement, also shall address all
issues raised in the ADR proceeding. Thereafter, the presentation of
regular and rebuttal testimony and documents, other evidence, and closing
arguments shall proceed in the same sequence.
(d) Except when testifying, witnesses shall be excluded
from the hearing until closing arguments.
(e) Settlement negotiations, including any statements made therein,
shall not be admissible under any circumstance. Affidavits prepared for
purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral person shall have sole discretion regarding the
admissibility of any evidence.
6. Within seven (7) days following completion of the hearing, each
Party may submit to the other Party and the neutral person a post-hearing
brief in support of its proposed rulings and remedies, provided that such
brief shall not contain or discuss any new evidence and shall not exceed
ten (10) pages. This page limitation shall apply regardless of the number
of issues raised in the ADR proceeding.
7. The neutral person shall rule on each disputed issue within
thirty (30) days following completion of the hearing. Subject to the
limitations imposed in the next sentence, the neutral person shall have
the power to grant any and all relief and remedies, whether at law or in
equity, that the courts in the State of New York may grant, other than
punitive damages. The Parties agree that the neutral person shall have no
power to alter or modify any express provision of this Agreement or to
render any award which, by its terms, effects such alteration or
modification.
<PAGE> 37
8. The laws of the State of New York, without regard to choice of
law doctrine, shall be applied by the neutral person to the resolution of
the dispute, provided that the neutral person shall base its or her
decision on the express terms, covenants and conditions of this Agreement.
The neutral person shall be bound to make specific findings of fact and
reach conclusions of law, based upon the submissions and evidence of the
Parties, and shall issue a written decision, which shall not exceed twenty
(20) pages, explaining the basis for the decision and award.
9. The neutral person shall be paid a reasonable fee plus expenses.
These fees and expenses, along with the reasonable legal fees and expenses
of the prevailing Party (including all expert witness fees and expenses),
the fees and expenses of a court reporter, and any expenses for a hearing
room, shall be paid as follows:
(a) If the neutral person rules in favor of one Party on all
disputed issues in the ADR, the losing Party shall pay 100% of such fees
and expenses.
(b) If the neutral person rules in favor of one Party on some
issues and the other Party on other issues, the neutral person shall issue
with the rulings a written determination as to how such fees and expenses
shall be allocated between the Parties. The neutral person shall allocate
fees and expenses in a way that bears a reasonable relationship to the
outcome of the ADR, with the Party prevailing on more issues, or on issues
of greater value or gravity, recovering a relatively larger share of its
legal fees and expenses.
10. The rulings of the neutral person and the allocation of fees and
expenses shall be binding, non-reviewable, and nonappealable, and may be
entered as a final judgment in any court having jurisdiction.
11. Except as provided in paragraph 10 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing,
any submissions (including exhibits, testimony, proposed rulings, and
briefs), and the rulings shall be deemed Confidential Information. The
neutral person shall have the authority to impose sanctions for
unauthorized disclosure of Confidential Information.
12. Notwithstanding the foregoing, the Parties specifically reserve
the right to seek a temporary judicial restraining order, preliminary
injunction, or other similar short term equitable relief, and grant the
neutral person the right to make a final determination of the Parties'
rights, including whether to make permanent or dissolve such court order.
No Party shall bring a civil action seeking enforcement or any other
remedy founded on this Agreement.
<PAGE> 1
CONSULTING AGREEMENT
AGREEMENT, made this 14th day of February, 1997, by and between
CRAIG ARONCHICK, M.D., residing at 903 Bryn Mawr Avenue, Penn Valley,
Pennsylvania 19072 ("Consultant") and PANAX PHARMACEUTICAL COMPANY LTD., a
New York corporation, (the "Company"), located at 425 Park Avenue, New
York, New York 10022.
WHEREAS, Consultant has been instrumental in the invention and
development of pharmaceutical products and has substantial experience in
the management and operation of medical practices; and
WHEREAS, the Company desires to engage, and Consultant desires
to be engaged, as a consultant on the terms and conditions as set forth
below;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed as follows:
1. The Company hereby retains Consultant as a consultant and
Consultant agrees to serve the Company as a consultant during the term of
a certain License Agreement (the "License Agreement") dated February 14,
1997 between the Company and ALW Partnership.
2. Consultant shall render consulting services to the
Company as required to develop clinical protocols, establish and monitor
clinical trials, review clinical results, assist in development of FDA
filings, present clinical and product information to peers and, if
requested, participate as a member of the Company's Scientific Advisory
Board. Consultant shall also perform such management consulting services
on behalf of the Company as may be reasonably assigned to Consultant from
time to time by the Board of Directors of the Company or its President.
In all instances, the rendering of such services by Consultant may be
effected, if he desires, after normal working hours or on Saturday, Sunday
or holidays and shall be subject to the reasonable availability of
Consultant.
<PAGE> 2
3. As compensation to Consultant the Company shall pay
Consultant the sum of $2,000.00 for each eight (8) hour day, including credit
for travel time outside of Philadelphia, or the pro rata portion thereof that
Consultant devotes to the Company. The Company shall pay Consultant for, and
Consultant shall render, a minimum of 20 days of consulting services in the
first year of this Agreement and ten days in each of the second and third year
of this Agreement. In calculating such compensation, time spent by Consultant
pursuant to Section 3.A. of the License Agreement shall not be considered
as time spent consulting hereunder. Consultant shall receive an Option
Agreement granting Consultant options ("Options") to acquire up to 450,000
shares of the Company's Common Stock on the terms and conditions contained in
the Option Agreement, a copy of which is attached hereto as Exhibit A.
4. Consultant shall be entitled to reimbursement from the
Company for reasonable and necessary expenses incurred by Consultant with the
prior approval of the Company in connection with the performance of
Consultant's duties hereunder upon the receipt of vouchers therefor in
accordance with such procedures as the Company may hereafter establish.
5. Subject to such consulting assignments as may be made
pursuant to Section 2 hereof, Consultant shall be free to exercise his
discretion and independent judgment as to the method and means of the
performance of his consulting services under this Agreement and shall in no
event be considered an employee of the Company or any of its subsidiaries nor
shall Consultant be entitled to be eligible to participate in any benefits or
privileges given or extended by the Company to its employees.
6. In order for Consultant to render such services, the Company
shall make available to Consultant such of its facilities as are reasonably
required by Consultant in the performance of services hereunder.
7. Consultant represents and warrants that he shall at no time
use for the Company's benefit or disclose to the Company any information he has
received from third parties and which he is still lawfully obligated to keep
confidential.
<PAGE> 3
8. Consultant may be given access to certain proprietary
information, including trade secrets, of the Company. In order to preserve in
strict confidence all such information during the term hereof and as long
thereafter as the information received is not in the public domain and except
as hereinbefore provided, Consultant shall not use or disclose this
information developed or obtained by Consultant in the performance of this
Agreement.
9. The Company agrees to prepare and file on the first
anniversary of this Agreement, a Registration Statement (the "Registration
Statement") on Form S-8 under the Securities Act of 1933, as amended (the
"1933 Act"), covering, inter alia, the registration of the shares of Common
Stock of the Company issuable upon exercise of the Options granted to
Consultant hereunder. Company shall keep the Registration Statement updated
so as to remain effective for resales of the Common Stock issuable upon
exercise of the Options granted to Consultant for so long as any Options
remain outstanding under this Agreement. In the event that the Registration
Statement shall be unavailable to Consultant to resell all of the shares of
the Common Stock acquired by Consultant pursuant to exercise of the Option
because Consultant may be deemed an "affiliate" of the Company as such term is
defined in the 1933 Act, or the Plan is not approved by the shareholders of
the Company, then the Company agrees to prepare and file a registration
statement on Form S-1 (or S-3 if available for use by the Company at that
time) to enable Consultant to sell the shares received upon exercise of the
Option. The Company shall cause such registration statement to become
effective and to remain effective for resales of the Common Stock issuable
upon exercise of the Options granted to Consultant.
Consultant and the Company agree to use their best efforts so as to
be in full compliance with the securities laws with respect to such
determination and resale provisions.
10. Representations and Warranties by the Company.
a. Right to enter Agreement. The Company hereby represents
and warrants that it has the right to enter into this Agreement and, to the
<PAGE> 4
best of the Company's knowledge, there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements to which the Company is a
party, either written or oral, express or implied, which are inconsistent with
this Agreement.
b. Due Incorporation. The Company is a corporation duly
incorporated and subsisting under the laws of New York and has all requisite
corporate authority to own and lease its property, to carry on its business as
now being conducted and as proposed to be conducted, and to carry out the
transactions contemplated hereby and by the Option Agreement.
c. Authorization of Transaction. The Company has full
corporate authority to offer, issue, sell and deliver the Options and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement and the Option Agreement have been duly authorized by all
proper and necessary corporate or other action and this Agreement and the
Option Agreement, when executed and delivered, shall constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
except to the extent that the remedy of specific enforcement or injunctive
relief subject to the discretion of the court before which any proceedings may
be brought. The issuance, sale and delivery of the Option and the issuance,
sale and delivery of the Common Stock into which the Option is exercisable
(the "Underlying Common") have been duly authorized by all necessary corporate
action on the part of the Company. When issued in accordance with the Option,
the Option and the Underlying Common will be duly and validly issued, fully
paid and non-assessable, free of any liens or restrictions, voting or
otherwise, the issuance of the Option and the Underlying Common will not be
subject to any preemptive or other preferential rights or similar statutory or
contractual rights.
d. Governmental Approvals. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
<PAGE> 5
foreign, was, is or will be necessary or appropriate for the execution and
delivery of this Agreement and the Option Agreement.
e. Capitalization. The authorized capital stock of the the
Company consists of 10,000,000 shares of Common Stock, $0.0001 par value, of
which 3,342,327 shares are issued and outstanding as of the date hereof. In
addition, the Company has reserved for issuance shares of its Common Stock as
follows: (i) 1,235,710 shares upon exercise of outstanding Redeemable Common
Stock Purchase Warrants sold in the initial public offering; (ii) 107,500
shares issuable upon exercise of warrants issued to the underwriter of the
Company's initial public offering; (iii) 320,000 shares issuable upon
exercise of Common Stock Purchase Warrants issued to D.H. Blair & Co., Inc.;
and (iv) shares issuable upon exercise of options granted or to be granted
under the Stock Option Plan, which Plan currently relates to 800,000 shares.
In addition, the Company intends to reserve additional shares of Common Stock
for issuance upon exercise of warrants or options to be issued in connection
with its proposed acquisition of Sangen Pharmaceutical, Inc. and the
termination or modification of its office lease.
f. Securities Law Disclosure. The Company has filed all forms,
reports, statements or other documents required to be filed with the
Securities and Exchange Commission and NASDAQ, including, without limitation,
its Annual Reports on Form 10-KSB for the year ended June 30, 1996, its
Quarterly Reports on Form 10-QSB for the three months ended September 30, 1996
and the three months ended December 31, 1996, all reports on Form 8-K and all
amendments and supplements to all of the foregoing reports (collectively, the
"SEC Reports"). As of the respective filing dates, the SEC Reports complied
as to form in all material respects with the requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") or the Securities Act of 1933 (the
"Securities Act") as applicable. The SEC Reports did not, at the time they
were filed, contain any untrue statement of material fact, or omit to state a
material fact required to be stated therein that was necessary to make the
statement therein, in light of the circumstances under which they were made,
not misleading.
<PAGE> 6
g. Financial Statements. Since the date of the audited balance
sheet included in the Company's annual report on Form 10-KSB for the year
ended June 30, 1996, there has been no event, development or condition of any
type of which the Company has knowledge that has had or is reasonably likely
to have a material adverse effect on or that has materially and adversely
affected the Company except as indicated or reflected on the Quarterly Reports
referred to in Section 10f.
h. Litigation; Compliance with Laws. The Company is not engaged
in, or a party to, or threatened with, any legal action, suit, investigation
or other proceeding by or before any court, arbitrator or administrative
agency, and after diligent inquiry, the Company does not know of any basis for
any such action, investigation or proceeding. There are no outstanding
orders, rulings, decrees, judgment or stipulation or proceedings to which the
Company is a party or by which the Company is bound, by or with any court,
arbitrator or administrative agency. The Company is operating its business in
compliance with the requirements of all federal, state and local laws,
regulations, judgments, injunctions, decrees, court orders and administrative
orders regarding such operations.
11. Should any one or more of the provisions of this Agreement
be adjudged unlawful by any court or arbiter or competent jurisdiction, the
remaining provisions of this Agreement shall remain in full force and effect.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any dispute between the
parties relating to the validity, interpretation, construction or performance
of this Agreement shall be submitted to binding arbitration conducted in
accordance with Exhibit B.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
PANAX PHARMACEUTICAL COMPANY LTD.
By /s/ Taffy J. Williams
------------------------------
Taffy J. Williams
/s/ Craig Aronchick
------------------------------
CRAIG ARONCHICK, M.D.
<PAGE> 1
CONSULTING AGREEMENT
AGREEMENT, made this 14th day of February, 1997, by and between
WILLIAM H. LIPSHUTZ, M.D., residing at 2101 Delancey Place, Philadelphia,
Pennsylvania 19103 ("Consultant") and PANAX PHARMACEUTICAL COMPANY LTD., a New
York corporation, (the "Company"), located at 425 Park Avenue, New York, New
York 10022.
WHEREAS, Consultant has been instrumental in the invention and
development of pharmaceutical products and has substantial experience in the
management and operation of medical practices; and
WHEREAS, the Company desires to engage, and Consultant desires to be
engaged, as a consultant on the terms and conditions as set forth below;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed as follows:
1. The Company hereby retains Consultant as a consultant and
Consultant agrees to serve the Company as a consultant during the term of a
certain License Agreement (the "License Agreement") dated February 14, 1997
between the Company and ALW Partnership.
2. Consultant shall render consulting services to the Company
as required to develop clinical protocols, establish and monitor clinical
trials, review clinical results, assist in development of FDA filings, present
clinical and product information to peers and, if requested, participate as a
member of the Company's Scientific Advisory Board. Consultant shall also
perform such management consulting services on behalf of the Company as
may be reasonably assigned to Consultant from time to time by the Board of
Directors of the Company or its President. In all instances, the rendering
of such services by Consultant may be effected, if he desires, after normal
working hours or on Saturday, Sunday or holidays and shall be subject to the
reasonable availability of Consultant.
<PAGE> 2
3. As compensation to Consultant the Company shall pay
Consultant the sum of $2,000.00 for each eight (8) hour day, including credit
for travel time outside of Philadelphia, or the pro rata portion thereof that
Consultant devotes to the Company. In calculating such compensation, time
spent by Consultant pursuant to Section 3.A. of the License Agreement shall
not be considered as time spent consulting hereunder. Consultant shall
receive an Option Agreement granting Consultant options ("Options") to acquire
up to 150,000 shares of the Company's Common Stock on the terms and conditions
contained in the Option Agreement, a copy of which is attached hereto as
Exhibit A.
4. Consultant shall be entitled to reimbursement from the
Company for reasonable and necessary expenses incurred by Consultant with the
prior approval of the Company in connection with the performance of
Consultant's duties hereunder upon the receipt of vouchers therefor in
accordance with such procedures as the Company may hereafter establish.
5. Subject to such consulting assignments as may be made
pursuant to Section 2 hereof, Consultant shall be free to exercise his
discretion and independent judgment as to the method and means of the
performance of his consulting services under this Agreement and shall in no
event be considered an employee of the Company or any of its subsidiaries nor
shall Consultant be entitled to be eligible to participate in any benefits or
privileges given or extended by the Company to its employees.
6. In order for Consultant to render such services, the Company
shall make available to Consultant such of its facilities as are reasonably
required by Consultant in the performance of services hereunder.
7. Consultant represents and warrants that he shall at no time
use for the Company's benefit or disclose to the Company any information he
has received from third parties and which he is still lawfully obligated to
keep confidential.
8. Consultant may be given access to certain proprietary
information, including trade secrets, of the Company. In order to preserve in
strict confidence all such information during the term hereof and as long
<PAGE> 3
thereafter as the information received is not in the public domain and except
as hereinbefore provided, Consultant shall not use or disclose this
information developed or obtained by Consultant in the performance of this
Agreement.
9. The Company agrees to prepare and file on the first
anniversary of this Agreement, a Registration Statement (the "Registration
Statement") on Form S-8 under the Securities Act of 1933, as amended (the
"1933 Act"), covering, inter alia, the registration of the shares of Common
Stock of the Company issuable upon exercise of the Options granted to
Consultant hereunder. Company shall keep the Registration Statement updated
so as to remain effective for resales of the Common Stock issuable upon
exercise of the Options granted to Consultant for so long as any Options
remain outstanding under this Agreement. In the event that the Registration
Statement shall be unavailable to Consultant to resell all of the shares of
the Common Stock acquired by Consultant pursuant to exercise of the Option
because Consultant may be deemed an "affiliate" of the Company as such term is
defined in the 1933 Act, then the Company agrees to prepare and file a
registration statement on Form S-1 (or S-3 if available for use by the Company
at that time) to enable Consultant to sell the shares received upon exercise
of the Option. In the event the Plan is not approved by shareholders of the
Company, the Consultant may also piggyback his shares in a registration
statement called for by Dr. Craig Aronchick pursuant to Dr. Aronchick's
Consulting Agreement with the Company of even date herewith. The Company
shall cause such registration statement to become effective and to remain
effective for resales of the Common Stock issuable upon exercise of the
Options granted to Consultant.
Consultant and the Company agree to use their best efforts so as to
be in full compliance with the securities laws with respect to such
determination and resale provisions.
10. Representations and Warranties by the Company.
a. Right to enter Agreement. The Company hereby represents
and warrants that it has the right to enter into this Agreement and, to the
<PAGE> 4
best of the Company's knowledge, there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements to which the Company is a
party, either written or oral, express or implied, which are inconsistent with
this Agreement.
b. Due Incorporation. The Company is a corporation duly
incorporated and subsisting under the laws of New York and has all requisite
corporate authority to own and lease its property, to carry on its business as
now being conducted and as proposed to be conducted, and to carry out the
transactions contemplated hereby and by the Option Agreement.
c. Authorization of Transaction. The Company has full
corporate authority to offer, issue, sell and deliver the Options and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement and the Option Agreement have been duly authorized by all
proper and necessary corporate or other action and this Agreement and the
Option Agreement, when executed and delivered, shall constitute valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
except to the extent that the remedy of specific enforcement or injunctive
relief subject to the discretion of the court before which any proceedings may
be brought. The issuance, sale and delivery of the Option and the issuance,
sale and delivery of the Common Stock into which the Option is exercisable
(the "Underlying Common") have been duly authorized by all necessary corporate
action on the part of the Company. When issued in accordance with the Option,
the Option and the Underlying Common will be duly and validly issued, fully
paid and non-assessable, free of any liens or restrictions, voting or
otherwise, the issuance of the Option and the Underlying Common will not be
subject to any preemptive or other preferential rights or similar statutory or
contractual rights.
d. Governmental Approvals. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
<PAGE> 5
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, was, is or will be necessary or appropriate for the execution and
delivery of this Agreement and the Option Agreement.
e. Capitalization. The authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, $0.0001 par value, of
which 3,342,327 shares are issued and outstanding as of the date hereof. In
addition, the Company has reserved for issuance shares of its Common Stock as
follows: (i) 1,235,710 shares upon exercise of outstanding Redeemable Common
Stock Purchase Warrants sold in the initial public offering; (ii) 107,500
shares issuable upon exercise of warrants issued to the underwriter of the
Company's initial public offering; (iii) 320,000 shares issuable upon
exercise of Common Stock Purchase Warrants issued to D.H. Blair & Co., Inc.;
and (iv) shares issuable upon exercise of options granted or to be granted
under the Stock Option Plan, which Plan currently relates to 800,000 shares.
In addition, the Company intends to reserve additional shares of Common Stock
for issuance upon exercise of warrants or options to be issued in connection
with its proposed acquisition of Sangen Pharmaceutical, Inc. and the
termination or modification of its office lease.
f. Securities Law Disclosure. The Company has filed all forms,
reports, statements or other documents required to be filed with the
Securities and Exchange Commission and NASDAQ, including, without limitation,
its Annual Report on Form 10-KSB for the year ended June 30, 1996, its
Quarterly Reports on Form 10-QSB for the three months ended September 30,
1996, and the three months ended December 31, 1996, all reports on Form 8-K
and all amendments and supplements to all of the foregoing reports
(collectively, the "SEC Reports"). As of the respective filing dates, the SEC
Reports complied as to form in all material respects with the requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") or the Securities Act
of 1933 (the "Securities Act") as applicable. The SEC Reports did not, at the
time they were filed, contain any untrue statement of material fact, or omit
to state a material fact required to be stated therein that was necessary to
make the statement therein, in light of the circumstances under which they
were made, not misleading.
<PAGE> 6
g. Financial Statements. Since the date of the audited balance
sheet included in the Company's annual report on Form 10-KSB for the year
ended June 30, 1996, there has been no event, development or condition of any
type of which the Company has knowledge that has had or is reasonably likely
to have a material adverse effect on or that has materially and adversely
affected the Company except as indicated or reflected on the Quarterly Reports
referred to in Section 10f.
h. Litigation; Compliance with Laws. The Company is not engaged
in, or a party to, or threatened with, any legal action, suit, investigation
or other proceeding by or before any court, arbitrator or administrative
agency, and after diligent inquiry, the Company does not know of any basis for
any such action, investigation or proceeding. There are no outstanding
orders, rulings, decrees, judgment or stipulation or proceedings to which the
Company is a party or by which the Company is bound, by or with any court,
arbitrator or administrative agency. The Company is operating its business in
compliance with the requirements of all federal, state and local laws,
regulations, judgments, injunctions, decrees, court orders and administrative
orders regarding such operations.
11. Should any one or more of the provisions of this Agreement
be adjudged unlawful by any court or arbiter or competent jurisdiction, the
remaining provisions of this Agreement shall remain in full force and effect.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any dispute between the
parties relating to the validity, interpretation, construction or performance
of this Agreement shall be submitted to binding arbitration conducted in
accordance with Exhibit B.
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
PANAX PHARMACEUTICAL COMPANY LTD.
By /s/ Taffy J. Williams
---------------------------------
/s/ William H. Lipshutz
---------------------------------
William H. Lipshutz
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THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER
SECURITIES STATUTE, INCLUDING, WITHOUT LIMITATION, THE SECURITIES LAWS OF ANY
STATE, AND IS SUBJECT TO RESTRICTIONS ON EXERCISE AND TRANSFER DESCRIBED IN
SECTION 11 HEREOF.
OPTION AGREEMENT
PANAX PHARMACEUTICAL COMPANY LTD., a New York corporation (the
"Company"), agrees as of this 14th day of February, 1997, pursuant to this
Option Agreement (this "Option"), issued under the Company's 1997 Consultant
Stock Option Plan (the "Plan") if available or otherwise and pursuant to the
terms of the Consulting Agreement dated February 14, 1997 (the "Consulting
Agreement") between the Company and Craig Aronchick, M.D. who resides at
903 Bryn Mawn Avenue, Penn Valley, Pennsylvania 19072 (Dr. Aronchick is
hereinafter referred to as the "Holder") that the Holder is entitled to
purchase from the Company, subject to the limitations and conditions
hereinafter set forth, up to 450000 shares of the Company's Common Stock,
$.000l par value per share (the "Shares"). The purchase price per Share (the
"Exercise Price") shall be equal to $0.61. The number of Shares and the
Exercise Price are subject to adjustment as provided herein. The Option is
designated as a Non-Qualified Option.
1. EXERCISE OF OPTION.
1.1 Exercise. This Option may be exercised during the term of
the Option and to the extent set forth in Section 1.3., as follows:
(a) Exercise may be effected by surrender of this Option, with the
form of subscription at the end hereof duly executed by Holder, to the Company
at 425 Park Avenue, New York, New York 10022, accompanied by payment in cash
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or by wire transfer to the Company, in the amount obtained by multiplying the
number of Shares to be exercised (giving effect to any adjustment herein) by
the Exercise Price, as adjusted. Such shares shall be issued as of the date
of surrender of the Option and payment of the exercise price. In case such
Shares have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), the Company may also require that such Holder furnish to the
Company a written statement that such Holder is purchasing such Shares for
such Holder's own account for investment and not with a view toward
distribution thereof, and that none of such Shares will be sold or otherwise
distributed in violation of the provisions of the 1933 Act; and
(b) Exercise may be effected by exchange of the Option in whole or in
part from time to time (an "Option Exchange"), into the number of Shares
determined in accordance with this Section (b), by surrendering this Option to
the Company, accompanied by a notice stating such Holder's intent to effect
such exchange, the number of Shares to be exchanged and the date on which the
Holder requests that such Option Exchange occur (the "Notice of Exchange").
The Option Exchange shall take place on the date specified in the Notice of
Exchange or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the shares issuable upon such
Option Exchange and, if applicable, a new Option of like tenor evidencing the
balance of the shares remaining subject to this Option after deducting the
number of Shares surrendered in such Option Exchange, shall be issued as of
the Exchange Date and delivered to the Holder within seven (7) business days
following the Exchange Date. In connection with any Option Exchange, this
Option shall represent the right to acquire the number of Shares (rounded to
the next highest integer) equal to (i) the number of Shares surrendered (the
"Total Number") specified by the Holder in its Notice of Exchange less (ii)
the number of Shares equal to the quotient obtained by dividing (A) the
product of the Total Number and the existing Exercise Price by (B) the current
market value of a share of Common Stock. Current market value shall have the
meaning set forth Section 3.1(a)(iv) below, except that for purposes hereof,
the date of exercise, as used in Section 3.1(a)(iv), shall mean the Exchange
Date. In case such Shares have not been registered under the 1933 Act, the
Company may also require that such Holder furnish to the Company a written
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statement that such Holder is purchasing such Shares for such Holder's own
account for investment and not with a view toward distribution thereof, and
that none of such Shares will be sold or otherwise distributed in violation of
the provisions of the 1933 Act.
1.2 Exercise in Part. This Option shall be exercised in part by
surrender of this Option in the manner and at the place provided in Section
1.1. On any such partial exercise, the Company, at its expense, will
forthwith issue and deliver to the Holder hereof a new Option or Options of
like tenor, in the name of such Holder, calling in the aggregate on the face
or faces thereof for the number of Shares equal (giving effect to any
adjustment therein) to the number of such Shares remaining subject to this
Option after exercise.
1.3 Term of Option and Extent Exercisable.
(a) With respect to 150000 Shares, this Option may be exercised in
full or in part at any time during the period beginning on the earlier to
occur of (i) nine months from the date hereof and (ii) the termination of
Holder's ability to terminate the License Agreement dated February 14, 1997
between the Company and ALW Partnership (the "License Agreement") under
paragraph 18G thereof and ending on February 14, 2007.
(b) With respect to an additional 150000 Shares, this Option may be
exercised in full or in part at any time during the period which commences
with the first day the Company effects the first sale in the United States of
any "Product" or "Improvement" as defined in the License Agreement and which
ends on the later of (i) February 14, 2007 or (ii) the earlier of the third
anniversary of such first sale or February 14, 2010.
(c) With respect to an additional 150000 Shares, this Option may be
exercised in full or in part at any time during the period which commences
with the first day following the first fiscal year of the Company during which
the total "Net Sales" by the Company as defined in the License Agreement of
all Products and Improvements exceeds $20,000,000 and ends on the later of (i)
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February 14, 2007 or (ii) the earlier of the third anniversary of such first
day or February 14, 2010.
2. DELIVERY OF STOCK AND OPTION CERTIFICATES, ETC. ON EXERCISE.
As soon as practicable after the exercise of this Option in full or
in part, and in any event within seven (7) business days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of, and delivered to, the Holder,
or otherwise as the Holder may direct (upon payment by the Holder of any
applicable transfer taxes), a certificate or certificates for the number of
fully paid and nonassessable Shares to which the Holder shall be entitled on
such exercise, rounded upward to the nearest whole share.
3. ADJUSTMENTS.
3.1 Adjustments to Exercise Price. The Exercise Price of the
Options shall be adjusted from time to time as follows:
(a) Except as hereinafter provided, in case the Company shall at any
time after the date hereof issue or sell any shares of Common Stock (including
shares held in the Company's treasury) for a consideration per share less than
the Exercise Price in effect immediately prior to the issuance or sale of such
shares, or without consideration, the Exercise Price shall forthwith be
reduced to a price determined by dividing:
(x) an amount equal to (i) the total number of shares of Common
Stock outstanding immediately prior to such issuance or sale multiplied by the
Exercise Price in effect immediately prior to such issuance or sale, plus (ii)
the consideration, if any, received by the Company upon such issuance or sale,
by
(y) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
For the purpose of any computation to be made in accordance with the
provisions of this paragraph 3.1(a), the following provisions shall be
applicable:
(i) In case of the issuance or sale of shares of Common Stock
for a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price), or, if shares of Common
Stock shall be sold to underwriters or dealers for public offering, the
initial public offering price before deducting therefrom any compensation paid
or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services or any expenses
incurred in connection therewith.
(ii) In case of the issuance or sale (other than as provided in
subparagraph 3.1(a)(iii) or (iv) or on conversion or exchange of other
securities of the Company) of shares of Common Stock for a consideration part
or all of which shall be other than cash, the amount of the consideration
therefor other than cash shall be deemed to be the value of such
consideration, as determined in good faith by the Board of Directors of the
Company as of the date of the adoption of the resolution authorizing such
issuance, irrespective of accounting treatment. The reclassification of
securities other than Common Stock into securities including Common Stock
shall be deemed to involve the issuance for a consideration other than cash of
such Common Stock immediately prior to the close of business on the date fixed
for the determination of security holders entitled to receive such Common
Stock.
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(iii) Shares of Common Stock issuable by way of dividend or
other distribution on any stock of the Company shall be deemed to have been
issued without consideration immediately after the opening of business on the
date following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution.
(iv) In the event of a merger in which the Company is the
surviving corporation, a merger or consolidation in which a subsidiary of the
Company is a constituent corporation, or the acquisition of assets by the
Company or a subsidiary, the consideration received by the Company or its
subsidiary for any Common Stock issued by the Company in connection therewith
shall be deemed to equal the "market value" of the securities issued by the
Company. "Market value" of securities issued by the Company shall be deemed
to be the average of the closing sales price of the Common Stock for the 30
day period immediately preceding the date the agreement of consolidation,
merger or acquisition is executed on the largest (by way of trading volume)
national securities exchange on which the Common Stock is listed or if the
Common Stock is not so listed, then the average of the low asked and high bid
prices quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if the Common Stock is not listed on a
national securities exchange or quoted on NASDAQ, then the average of the low
asked and high bid prices as quoted on the Bulletin Board of the NASD.
(v) The number of shares of Common Stock at any time outstanding
shall not include any shares then owned or held by or for the account of the
Company, but shall include the aggregate number of shares deliverable in
connection with those options, warrants and rights and convertible and
exchangeable securities referred to in paragraph 3.1(b) while such options,
warrants, rights or securities remain outstanding and unexercised, unconverted
or unexchanged, as the case may be, and thereafter to the extent such options,
warrants, rights or securities have been exercised, converted or exchanged.
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(b) In case the Company shall at any time after the date hereof issue
options, warrants or rights to subscribe for shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock
(including shares held in the Company's treasury), or issue any securities
convertible into or exchangeable for shares of Common Stock, for a
consideration per share less than the Exercise Price in effect immediately
prior to the issuance of such options, warrants or rights or convertible or
exchangeable securities, or without consideration, then the Exercise Price in
effect immediately prior to the issuance of such options, warrants or rights
or securities shall be reduced to a price determined by making a computation
in accordance with the provisions of paragraph 3.1(a); provided that:
(i) the aggregate maximum number of shares of Common Stock
deliverable under such options, warrants or rights shall be considered to have
been delivered at the earliest time such options warrants or rights may be
exercised and for a consideration equal to the minimum purchase price per
share of Common Stock provided for issuance of such shares in such options,
warrants or rights, plus the cash consideration (determined in the same manner
as consideration received on the issue or sale of Common Stock), if any,
received by the Company for such options, warrants or rights;
(ii) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such securities shall be
considered to have been delivered at the earliest time such securities may be
converted or exchanged and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or sale
of Common Stock) received by the Company for such securities, plus the minimum
consideration, if any, to be received by the Company upon the exchange or
conversion thereof; and
(iii) on the expiration of such options, warrants or rights or
the termination of such right to convert or exchange the convertible or
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exchangeable securities, the Exercise Price shall forthwith be readjusted to
such Exercise Price as would have obtained had the adjustments made upon the
issuance of such options, warrants, rights or convertible or exchangeable
securities been made upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon the exercise of such options,
warrants or rights or upon conversion or exchange of such securities.
(c) In case the Company shall at any time subdivide or combine the
outstanding shares of Common Stock, the number of Shares purchasable upon
exercise of this Option and the Exercise Price shall be appropriately and
equitably adjusted so as to maintain the proportionate number of Shares
without changing the aggregate Option price. Any such adjustment shall become
effective at the close of business on the date that such subdivision or
combination shall become effective.
(d) Within a reasonable time after the close of each month during
which the Exercise Price has been adjusted as herein provided, the Company
shall mail to the Holder a certificate signed by any of the Chairman of the
Board of Directors, the President, a Vice President, the Treasurer or the
Secretary of the Company, showing in detail the facts requiring all such
adjustments occurring during such period and the Exercise Price after each
such adjustment.
3.2 Non-Adjustment of Exercise Price. Notwithstanding anything
contained in Section 3.1 to the contrary, no adjustment of the Exercise Price,
other than pursuant to paragraph 3.1(c), shall be made:
(a) If the amount of such adjustment in the Exercise Price shall be
less than one cent ($.01), but in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to not less than
one cent ($.01).
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(b) In connection with the issuance or sale of Common Stock upon the
exercise of options, warrants or rights or upon the conversion or exchange of
convertible or exchangeable securities in any case where the adjustment
provided in this section was made upon the issuance of such options, warrants,
rights, or convertible or exchangeable securities by reason of the provisions
of paragraph 3.1(b).
(c) By reason of the issuance of (i) 1,235,710 shares of Common Stock
issuable upon exercise of the Company's outstanding Redeemable Common Stock
Purchase Warrants, 320,000 shares of Common Stock issuable upon the exercise
of outstanding warrants issued prior to the date hereof to D.H. Blair & Co.,
Inc. or its affiliates, and 107,500 shares issuable upon exercise of warrants
issued to the underwriter of the Company's initial public offering; (ii) the
issuance of options under the Company's stock option plans or upon exercise of
options granted thereunder, (iii) the shares of Common Stock and warrants to
purchase shares of Common Stock to be issued upon the acquisition of the
Sangen Pharmaceutical, Inc. and shares issued upon exercise of such warrants,
(iv) the warrants or options to purchase shares of Common Stock to be issued
in connection with the termination or assignment of the Company's lease with
respect to its offices at 425 Park Avenue, New York, New York and shares of
Common Stock issued upon exercise of such warrants or options, and (v) shares
reserved for issuance or issued pursuant to the anti-dilution provisions of
the foregoing securities or plans, including such provisions as shall take
effect as a result of the issuance and exercise of this Option.
3.3 Effect of Reorganization or Reclassification. In the case
of any reorganization of the Company or reclassification or recapitalization
of the outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision of combination) or in the case of any consolidation of
the Company with, or merger of the Company into another corporation, or in the
case of any sale, lease, transfer or conveyance of all, or substantially all,
of the assets, of the Company, then, as a part of such reorganization,
reclassification, recapitalization, consolidation, merger, sale, lease,
transfer or conveyance, provision shall be made so that the holder of this
<PAGE> 10
Option shall thereafter be entitled to receive upon exercise hereof the number
of shares of stock, warrants, or other securities, property or other assets of
the Company, or of the successor corporation resulting from such
reorganization, reclassification, recapitalization, consolidation, merger,
sale, lease, transfer or conveyance, to which a holder of that number of
Shares deliverable upon the exercise of this Option would have been entitled
on such reorganization, reclassification, recapitalization, consolidation,
merger, sale, lease, transfer or conveyance as if this Option had been
exercised in full immediately prior to the effectiveness of such
reorganization, reclassification, recapitalization, consolidation, merger,
sale, lease transfer or conveyance, subject to further adjustment as provided
for in this Section 3; provided, however, that any unexercised Options may be
exercised in full by the Holder at any time prior to the effective date of any
such reorganization, reclassification, recapitalization, consolidation, merger
sale, lease transfer or conveyance, without regard to Section 1.3, by giving
written notice to the Company.
3.4 Effect of Adjustment on Face of Option. Irrespective of any
adjustments in the Exercise Price or the number or kind of securities issuable
hereunder, this Option may continue to express the same price and number and
kind of shares and options as are herein stated.
3.5 Effect of Distribution of Assets. In case, prior to the
expiration of this Option by exercise or by its terms, the Company shall at
any time make any distribution of its assets to holders of its Common Stock as
a liquidating or partial liquidating dividend by way of return of capital or
otherwise (other than as either a cash dividend payable out of any surplus
legally available for the payment of dividends under the laws of the State of
New York or as a stock dividend as provided in paragraph 3.1(a) hereof), or
the Company is dissolved, then the holder, upon receipt of any Shares upon
exercise of this Option after the date of record for the determination of
holders of Common Stock entitled to such distribution of assets, shall also be
entitled to receive, in addition to the Shares, the amount of such assets or
dividend which the Holder would have received had it been the holder of record
on the record date for the determination of those entitled to such
distribution of such assets; provided that any unexercised Options may be
exercised in full by the Holder at any time prior to the effective date of any
<PAGE> 11
such liquidating dividend or dissolution, without regard to Section 1.3, by
giving written notice to the Company.
4. NO DILUTION OR IMPAIRMENT.
The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Option, but will at all times in good faith assist in carrying out all such
terms and in taking all such action as may be necessary or appropriate in
order to protect the rights of the Holder hereunder. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value
of Shares above the amount payable therefor on such exercise, and (ii) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Shares upon
exercise of this Option.
5. NOTICES OF RECORD DATE, ETC.
In the event of:
(a) any taking by the Company of a record of the holders of the
Common Stock or any class of other securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to
receive any other right; or
(b) any reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any sale, lease,
transfer or conveyance of all or substantially all of the assets of the
Company to, or consolidation or merger of the Company with or into, any other
person or entity; or
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(c) any voluntary or involuntary dissolution, liquidation, or winding
up of the Company;
then on or prior to the Record Date as hereinafter defined, the Company will
mail or cause to be mailed to the Holder a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, stating the amount and character of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, sale, lease, transfer, conveyance,
consolidation, merger, dissolution, liquidation or winding up is to take
place, and the time, if any, to be fixed as to which the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
sale, lease, transfer, conveyance, consolidation, merger, dissolution,
liquidation or winding up (the "Record Date"), and (iii) the amount and
character of any stock or other securities, or rights or warrants in respect
thereof, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed by certified mail,
return receipt requested, at least 15 days prior to the date therein
specified.
6. RESERVATION OF STOCK, ETC., ISSUABLE UPON EXERCISE OF THIS OPTION.
The Company will at all times authorize, reserve and keep available,
solely for issuance and delivery upon exercise of this Option as herein
provided, all shares of Common Stock from time to time issuable upon exercise
of this Option. All such shares, when issued upon exercise, shall be validly
issued, fully paid and non-assessable, free and clear or all liens, security
interests, charges and other encumbrances or, except as set forth herein,
restrictions on sale and free and clear of all preemptive rights.
<PAGE> 13
7. EXCHANGE OF OPTION.
Upon surrender for exchange of this Option properly endorsed to the
Company, the Company, at its expense, will issue and deliver to the Holder, a
new Option or Options of like tenor in the name of the Holder, calling in the
aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face of this Option.
8. REPLACEMENT OF OPTION.
Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Option and, in the case of
any such loss, theft or destruction, upon delivery of an agreement of
indemnity reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of this Option,
the Company, at its expense, will execute and deliver, in lieu thereof, a new
Option of like tenor.
9. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Option are not, and will not
be, adequate and that such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
10. NONNEGOTIABILITY, ETC.
This Option is issued upon the following terms, to all of which the
Holder by the taking hereof consents and agrees:
<PAGE> 14
(a) title to this Option is not transferrable except in accordance
with Section 11 hereof;
(b) until this Option is transferred on the books of the Company, the
Company may treat the Holder as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
11. RESTRICTIONS ON TRANSFER OF OPTION OR SHARES.
11.1 Restrictions in General.
(a) Notwithstanding any provisions contained herein to the contrary,
this Option and the Shares shall not be transferable except upon the
conditions specified in this Section 11, which conditions are intended, among
other things, to insure compliance with the provisions of the 1933 Act with
respect to transfer of this Option or of the Shares. The Holder agrees that
it will not transfer this Option except by will or the laws of descent or
distribution or transfer any of the Shares prior to delivery to the Company of
the opinion of counsel referred to, and to the effect described, in Section
11.2 hereof or until the effectiveness of the registration under the 1933
Act of the Shares to be transferred.
(b) The Company shall maintain its registration under Section 12 of
the Securities Exchange Act of 1934 (the "1934 Act") as long as this Option
remains outstanding and shall timely file the reports required to be filed as
a result of its registration under the 1934 Act (including those required to
make available the benefits of Rule 144 under the 1933 Act).
11.2 Statement of Intention to Transfer; Opinion of Counsel. If
the Shares have not been registered under the 1933 Act, the Holder, by its
acceptance of this Option, agrees that prior to any transfer of the Shares,
such Holder will deliver a statement to the Company setting forth the
intention of such Holder's prospective transfer with respect to its retention
<PAGE> 15
or disposition of the Shares together with a signed copy of the opinion of
such Holder's counsel as to the non-necessity for registration under the
1933 Act in connection with such transfer. If, in the opinion of such
Holder's counsel, which opinion must be reasonably satisfactory to the
Company's counsel, the proposed transfer of the Shares may be effected
without registration under the 1933 Act, then the Holder shall be entitled
to transfer the Shares in accordance with the intended method of disposition
specified in the statement delivered by such Holder to the Company, in which
event the Company will promptly instruct the transfer agent for the Common
Stock to effect the required transfer upon appropriate presentation and
execution of the certificate for the Shares being transferred and the
foregoing documents.
11.3 Acquisition for Investment. The Holder covenants and
agrees with the Company that the Company may instruct its transfer agent
not to transfer the Shares unless such agent has been advised by the
Company or has otherwise been satisfied that the transferor has complied
with the provisions described above.
11.4 Transfer Restriction Legend.
(a) Each certificate representing Shares initially issued upon
exercise of this Option, unless at the time of exercise such Shares are
registered under the 1933 Act, shall bear the following legend (and any
additional legend required by any securities exchange or organized trading
market on which the Shares may, at the time, be listed) on the face
thereof:
"The securities represented hereby have not been registered under the
Securities Act of 1933 and the transfer of such securities is subject to
the restrictions set forth in Section 11 of an Option Agreement issued by
Panax Pharmaceutical Company Ltd. (the "Company"), a copy of which is
available for inspection at the head office of the Company, and no
transfer of said securities shall be valid or effective unless and until
the terms and conditions of said Section 11 shall have been complied
with."
<PAGE> 16
(b) Any certificate issued at any time upon transfer of, or in
exchange for or replacement of, any certificate bearing such legend shall
also bear such legend unless, in the opinion of counsel for the Holder
thereof, which opinion is reasonably satisfactory to Company's counsel,
addressed and delivered to the Company and the Holder, the shares
represented thereby need no longer be subject to the restrictions
contained in this Article 11. The provisions of this Article 11 shall be
binding upon all subsequent Holders of certificates bearing the above legend.
12. NO CANCELLATION OR REDEMPTION RIGHTS AS TO THIS OPTION OR THE
SHARES.
The Company shall not have any right to redeem or cancel this
Option or redeem any or all of the Shares.
13. LISTING ON SECURITIES EXCHANGE.
The Company will, at its own expense, list on each national
securities exchange or over-the-counter market, including the Small Cap
and National Market Systems of Nasdaq, on which any Common Stock may at
any time be listed all Shares from time to time issuable upon exercise of
this Option, and will maintain such listing so long as any other shares of
its Common Stock are so listed.
14. NOTICES, ETC.
Except as otherwise provided herein and unless the Holder or the
Company, as the case may be, is notified in writing otherwise, all
notices and other communications hereunder shall be mailed by first class
registered or certified mail, postage prepaid, to such addresses as may be
furnished from time to time by the Company or the Holder to each other,
and prior thereto, as follows:
(a) To the Company, at:
<PAGE> 17
Panax Pharmaceutical Company Ltd.
425 Park Avenue
New York, New York 10022
Attention: Dr. Taffy Williams, President
and
(b) the Holder, at the address set forth in the opening
paragraph.
15. SURVIVAL OF AGREEMENTS.
All covenants and agreements contained herein, whether made by
the Company or by the Holder, shall survive the execution and delivery of
this Option and any investigation at any time made by the Holder or on the
Holder's behalf.
16. MISCELLANEOUS.
This Option and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Option is being delivered in the State of New
York and shall be construed and enforced in accordance with and governed
by the laws of such state and applicable federal law. The headings in
this Option are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof.
PANAX PHARMACEUTICAL COMPANY LTD.
By:/s/ Taffy J. Williams
- ------------------------------
Dr. Taffy Williams, President
AGREED:
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/s/ Craig Aronchick
- ------------------------------
Dr. Craig Arinchick, Holder
<PAGE> 19
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXERCISE THE OPTION
The undersigned hereby exercises the right to purchase the number of
shares of Common Stock set forth below covered by this Option according to
the conditions thereof and herewith makes payment of the Exercise Price of
such Shares in full.
Exercise as to _____ shares of Common Stock.
Signature:
Address:
Dated: ____________________
NOTICE
The signature to the foregoing Subscription Form must correspond to
the name as written upon the face of the within Option in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE> 20
NOTICE OF EXCHANGE FORM TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXCHANGE THE OPTION
The undersigned hereby exercises the right to exchange the number of
shares of Common Stock set forth below covered by this Option according to
the conditions thereof and herewith delivers Options sufficient to effect
such exchange.
Exchange as to _____ shares of Common Stock.
Signature:
Address:
Dated: ____________________
NOTICE
The signature to the foregoing Exchange Form must correspond to the
name as written upon the face of the within Option in every particular,
without
alteration or enlargement or any change whatsoever.
