AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 2004
REGISTRATION NO. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(AMENDMENT NO. ____ )
REGENERX BIOPHARMACEUTICALS, INC.
(Name of small business issuer in its charter)
DELAWARE 2834 52-1253406
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
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3 BETHESDA METRO CENTER, SUITE 700, BETHESDA, MARYLAND 20814 (301) 961-1992
(Address and telephone number of principal executive offices)
(Address of principal place of business or intended principal place of business)
J.J. FINKELSTEIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
REGENERX BIOPHARMACEUTICALS, INC.
3 BETHESDA METRO CENTER, SUITE 700
BETHESDA, MD 20814
(301) 961-1992
(Name, address and telephone number of agent for service)
Copies to:
JOSEPH G. PASSAIC, JR., ESQ.
PHILIP G. FEIGEN, ESQ.
CHERI CARPER BENNETT, ESQ.
PATTON BOGGS LLP
2550 M STREET, N.W.
WASHINGTON, DC 20037
(202) 457-6000
Approximate date of proposed sale to the public: From time to time after the effectiveness of this registration statement.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. []________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]______________________________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]______________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER PROPOSED MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED UNIT(1) OFFERING PRICE REGISTRATION FEE
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Common Stock, $.001 par value 2,393,580 $1.50 $3,590,370
per share
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Common Stock, $.001 par value 598,397 $1.50 $897,596
per share, underlying Warrants(2)
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TOTAL 2,991,977 $4,487,966 $568.63
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1. Estimated solely for the purposes of calculating the registration fee under
Rule 457. Based on the market value of the Registrant's common stock as
determined by the last reported price quoted on the OTC Bulletin Board on
March 2, 2004 of $1.50.
2. Issuable upon exercise of the warrants issued in conjunction with the
shares of common stock referred to above at an exercise price of $1.50 per
share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 9, 2004
REGENERX BIOPHARMACEUTICALS, INC.
Up to 2,991,977 shares of common stock
This prospectus relates to the sale of up to 2,991,977 shares of RegeneRx Biopharmaceuticals, Inc. common stock by the selling stockholders named on page 24. The selling stockholders will sell the shares from time to time on the Over-the-Counter Bulletin Board at prevailing market prices or privately negotiated prices. These prices will fluctuate based on the demand for the shares of common stock. On March 2, 2004, the closing sales price of RegeneRx's common stock was $1.50 per share. RegeneRx common stock is quoted on the OTC Bulletin Board under the symbol "RGRX."
RegeneRx will not receive any proceeds from any sales made by the selling stockholders but will pay the expenses of this offering.
INVESTING IN REGENERX COMMON STOCK INVOLVES CERTAIN RISKS. SEE THE "RISK FACTORS" SECTION BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is March 9, 2004
TABLE OF CONTENTS
SUMMARY........................................................................1 RISK FACTORS...................................................................4 FORWARD-LOOKING STATEMENTS.....................................................8 USE OF PROCEEDS................................................................8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS OR PLAN OF OPERATION......................................................................9 DESCRIPTION OF BUSINESS.......................................................10 DESCRIPTION OF PROPERTY.......................................................15 DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS............................15 EXECUTIVE COMPENSATION........................................................17 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................18 MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.......................21 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................22 SELLING STOCKHOLDERS..........................................................24 DESCRIPTION OF SECURITIES.....................................................26 PLAN OF DISTRIBUTION..........................................................28 LEGAL PROCEEDINGS.............................................................29 LEGAL MATTERS.................................................................29 EXPERTS.......................................................................30 WHERE YOU CAN FIND MORE INFORMATION...........................................30 DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES...................................................................30 INDEX TO FINANCIAL STATEMENTS.................................................31 |
SUMMARY
This summary highlights information contained elsewhere in this prospectus. RegeneRx urges you to read this entire prospectus carefully, including the "Risk Factors" section, before making an investment decision.
REGENERX BIOPHARMACEUTICALS, INC.
RegeneRx is a biopharmaceutical company developing Thymosin beta 4 as a platform technology for the treatment of acute and chronic wounds and for the treatment of a variety of human diseases involving tissue and organ repair under an exclusive world-wide license from the National Institute of Health. RegeneRx holds the rights to two patents related to the technology and has numerous world-wide patent applications pending for a variety of clinical indications. RegeneRx successfully completed Phase I human clinical trials with Thymosin beta 4 for the treatment of chronic dermal wounds and expects the next stage of trials to begin in the second quarter of 2004. There were no significant adverse events associated with the drug in Phase I and results demonstrated it was well tolerated by all subjects.
Thymosin beta 4 is a naturally occurring molecule present in virtually all human cells. Thymosin beta 4 represents a new class of wound healing drug and is different from other wound repair factors, such as growth factors, in that it promotes cell differentiation and movement, down-regulates a number of inflammatory molecules in the body, and has a very low molecular weight, allowing it to diffuse relatively long distances through tissues. A key mechanism of action is Thymosin beta 4's ability to regulate the cell-building protein, actin, a vital component of cell structure. It has been the subject of a significant amount of research at the National Institute of Health and other academic institutions, and has been reported to be effective in the repair of dermal and corneal wounds in animal models under a variety of conditions.
RegeneRx's business strategy is to use an outsourcing model, i.e., using outside independent contractors to perform research and development, product manufacturing and formulation, and clinical trials. This allows RegeneRx to spend capital in an efficient manner while maintaining flexibility. It also allows RegeneRx to take advantage of the capital markets by increasing expenditures as capital become more available and reducing such expenditures when the capital markets become tighter. RegeneRx's business is highly dependent on the availability of capital to fund its operations, therefore access to such capital is very important to the timely success of product development.
In January 2004, RegeneRx entered into a strategic out-licensing agreement with Defiante Farmaceutica L.d.a. Defiante is obligated to develop Thymosin beta 4 in Europe and certain contiguous countries and has certain milestone and performance obligations. Defiante will also be obligated to purchase all Thymosin beta 4 exclusively from RegeneRx. Defiante Farmaceutica, L.d.a. is a wholly-owned subsidiary of Sigma-Tau Finanziaria S.p.A., the Group holding company. Sigma-Tau is a research-based Italian pharmaceutical company with annual revenues of approximately $700 million and over 2,200 employees worldwide. Sigma-Tau has operating subsidiaries throughout Europe and the U.S. and maintains a presence in all of the world's major pharmaceutical markets.
(1) Includes approximately 19,652,797 shares held by affiliates.
(2) Includes the approximately 598,397 shares underlying warrants.
(3) Assumes the exercise of approximately 598,397 warrants held by the selling
stockholders.
SUMMARY FINANCIAL INFORMATION
Set forth below are summary statements of operations data for the two years ended December 31, 2003 and 2002 and summary balance sheet data as of December 31, 2003 and 2002. This information should be read in conjunction with the RegeneRx audited annual financial statements as of and for the years ended December 31, 2003 and 2002 and notes thereto and the "Management's Discussion and Analysis of Financial Condition or Plan of Operation," appearing elsewhere in this prospectus.
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
STATEMENT OF OPERATION DATA ------------------ ------------------
REVENUES $ 0 $ 0
EXPENSES
RESEARCH AND DEVELOPMENT 775,752 885,631
GENERAL AND ADMINISTRATIVE EXPENSES 848,743 559,641
TOTAL EXPENSES 1,624,495 1,445,272
OPERATING LOSS (1,624,495) (1,445,272)
OTHER INCOME 0 10,648
INTEREST INCOME 7,571 30,077
INTEREST EXPENSE (42,951) 0
NET LOSS $ (1,659,875) $ (1,404,547)
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.06) $ (0.05)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 28,522,042 25,560,301
OUTSTANDING
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AS OF AS OF
DECEMBER 31, 2003 DECEMBER 31, 2002
BALANCE SHEET DATA: ------------------ ------------------
CASH AND CASH EQUIVALENTS $ 1,019,889 $ 474,338
DUE FROM RELATED PARTIES 26,897 24,817
OTHER CURRENT ASSETS 36,428 18,929
TOTAL CURRENT ASSETS 1,083,214 518,084
FIXED ASSETS, NET 3,377 3,836
PROPRIETARY RIGHTS, NET 23,227 25,013
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TOTAL ASSETS $ 1,109,818 $ 546,933
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ACCOUNTS PAYABLE $ 81,268 $ 138,984
ACCRUED EXPENSES 91,734 78,116
LETTER AGREEMENTS WITH VENDORS 20,046 20,046
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TOTAL CURRENT LIABILITIES 193,048 237,146
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PREFERRED STOCK -- --
COMMON STOCK 30,099 26,966
ADDITIONAL PAID-IN CAPITAL 40,065,861 38,102,136
ACCUMULATED DEFICIT (39,179,190) (37,519,315)
STOCK SUBSCRIPTIONS -- (300,000)
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TOTAL STOCKHOLDERS' EQUITY 916,770 309,787
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,109,818 $ 546,933
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RISK FACTORS
An investment in RegeneRx common stock is risky. You should carefully consider the following risks, as well as the other information contained in this prospectus. If any of the following risks occur, the RegeneRx business could be harmed. In that case, the trading price of RegeneRx common stock could decline and you might lose all or part of your investment.
REGENERX HAS A LACK OF REVENUES AND A HISTORY OF LOSSES
RegeneRx has sustained operating losses since its inception in 1982. It believes these losses will continue for the foreseeable future. For the year ended December 31, 2003, RegeneRx had no revenues from operations and as of December 31, 2003, RegeneRx had an accumulated deficit of $39,179,190. RegeneRx does not expect to have revenues from operations in fiscal 2004 or in the foreseeable future. RegeneRx anticipates substantial and increasing operating losses over the next several years as it continues its research and development efforts and seeks to obtain regulatory approval of its products. Therefore, RegeneRx's ability to continue operations depends on its ability to cease operating losses by completing development of its products, obtaining requisite regulatory approvals and ultimately marketing such products.
THERE ARE UNCERTAINTIES RELATED TO THE LIMITED CAPITAL RESOURCES OF REGENERX
Although no assurance can be given, RegeneRx believes that its current cash and investment balances will be sufficient to meet RegeneRx's operating needs through at least the end of 2004. The cost of research and development and additional clinical trials will require additional capital after that time and could require additional capital before that time. The actual amount of funds that RegeneRx will need will be determined by many factors, some of which are beyond RegeneRx's control. These factors include the success of its research and development efforts, the status of its non-clinical and clinical testing, the costs relating to securing approvals of the U.S. Food and Drug Administration and other regulatory authorities, the costs and timing of obtaining new patent rights, regulatory changes, competition and technological developments in the market.
Potential sources of outside capital include entering strategic business relationships, public or private sales of shares of RegeneRx's capital stock or debt or other similar arrangements. RegeneRx does not have any committed sources of outside capital at this time. It is uncertain whether RegeneRx will be able to obtain outside capital when it needs it or on terms that would be acceptable. If RegeneRx raises funds by selling additional shares of its common stock or securities convertible into its common stock, the ownership interest of its existing stockholders will be diluted. If RegeneRx is unable to obtain outside capital when needed, in the amount needed, its business and future prospects would be adversely affected and it could be forced to suspend or discontinue operations.
REGENERX IS EXPOSED TO PRODUCT DEVELOPMENT RISK
Although RegeneRx was formed in 1982, it is still in the early stages of the development of its pharmaceutical products. Presently, RegeneRx does not have any products that have received regulatory approval, does not expect to have any such products for several years and may never successfully develop or commercialize any such products. RegeneRx's proposed products are subject to numerous risks associated with the development of medical products. These risks include the possibilities that any of RegeneRx's products could be found to be ineffective or toxic, or could fail to receive necessary
regulatory approvals. In addition, RegeneRx's products could face obsolescence if third parties develop superior or equivalent but less expensive products.
REGENERX IS SUBJECT TO GOVERNMENT REGULATION
Products that RegeneRx may develop will require regulatory approvals prior to sale. In particular, therapeutic agents and diagnostic products are subject to approval, prior to commercial marketing, by the FDA in the United States and by comparable agencies in most foreign countries. The process of obtaining FDA and corresponding foreign approvals is costly and time consuming and RegeneRx cannot assure that such approvals will be granted. Any failure to obtain or any delay in obtaining such approvals could decrease the ability of RegeneRx to successfully market any products developed. Also, RegeneRx cannot predict the extent of adverse government regulation that might arise from future legislative or administrative action.
REGENERX IS CURRENTLY DEVELOPING ONLY A SINGLE PRODUCT
As noted above, RegeneRx's current primary business focus is the development of Thymosin beta 4 for the treatment of non-healing wounds and similar conditions. While RegeneRx has in the past explored and may in the future explore the use of Thymosin beta 4 and other compounds for the treatment of other medical conditions, such as cystic fibrosis and septic shock, it presently has no immediate plans to develop products for such purposes. This lack of product diversification would have a material adverse affect on RegeneRx if it is unsuccessful in its efforts to commercialize Thymosin beta 4 as a wound-healing treatment, possibly resulting in the termination of its current line of business.
REGENERX IS DEPENDENT ON COLLABORATIVE RELATIONSHIPS
Prior to submitting a new drug application to the FDA, RegeneRx must conduct clinical trials. Because of its limited resources, RegeneRx will need to enter into collaborative relationships with larger partners to conduct certain such trials, whether involving Thymosin beta 4 or other substances, or raise additional funds to conduct these trials. RegeneRx also plans to contract with other companies to manufacture and market its products. RegeneRx may be unable to enter into such partnerships and that could impede its ability to bring products to market. RegeneRx cannot assure that any partnerships, if entered into, will be on favorable terms or will result in the successful development or marketing of RegeneRx's products. If RegeneRx is unsuccessful in establishing advantageous clinical testing, manufacturing and marketing relationships, RegeneRx would face serious delays in development of its products and would likely not generate revenues sufficient to sustain profitability.
REGENERX DEPENDS ON THIRD PARTIES FOR SUPPLY OF RAW MATERIALS
RegeneRx depends on outside vendors for the supply of Thymosin beta 4. While there are numerous vendors who can manufacture Thymosin beta 4 to RegeneRx's specifications, RegeneRx's ability to obtain Thymosin beta 4 at an affordable cost could be affected by various factors outside RegeneRx's control, including the availability of certain chemicals necessary for manufacturing Thymosin beta 4.
REGENERX RELIES UPON DR. GOLDSTEIN, MR. FINKELSTEIN, AND OTHER KEY PERSONNEL
RegeneRx's success will depend to a large extent on the abilities and continued service of Dr. Goldstein and Mr. Finkelstein. The loss of Dr. Goldstein or Mr. Finkelstein could prevent or significantly delay the achievement of RegeneRx's goals. RegeneRx has employment agreements with Dr. Goldstein and Mr. Finkelstein. RegeneRx does not maintain, however, a key man life insurance policy with respect
to Dr. Goldstein or Mr. Finkelstein. As RegeneRx grows, it will need to add additional management and other personnel. Competition for qualified personnel in RegeneRx's industry is intense, and RegeneRx's success will depend on its ability to attract and retain highly skilled personnel. RegeneRx cannot assure you that its efforts to obtain or retain such personnel will be successful.
REGENERX MAY BE UNABLE TO OBTAIN AND PROTECT ITS INTELLECTUAL PROPERTY RIGHTS
RegeneRx's success also will depend in substantial part on its ability to obtain, defend and enforce patents, maintain trade secrets and operate without infringing upon the proprietary rights of others, both in the United States and abroad. Pursuant to a research agreement with The George Washington University, RegeneRx has rights to two U.S. patents relating to the treatment of septic shock.
RegeneRx cannot assure you that any patent applications filed by RegeneRx, or by others under which RegeneRx has rights, will result in patents being issued in the United States or foreign countries. In addition, RegeneRx cannot guarantee that patents that have been or will be issued will afford meaningful protection for RegeneRx's products. Competitors may develop products similar to RegeneRx's that do not conflict with RegeneRx's patents. Others may challenge RegeneRx's patents and, as a result, RegeneRx's patents could be narrowed or invalidated. RegeneRx cannot assure that it will be able to afford the legal costs associated with defending or enforcing any of its patents.
Pursuant to an exclusive world-wide license from the National Institute of Health, RegeneRx now has exclusive rights under a patent application filed by the NIH for the use of Thymosin beta 4 in the treatment of non-healing wounds. RegeneRx cannot guarantee whether or when the patent will be issued or as to the scope of the patent issued. If no patent issues from the NIH's application, RegeneRx's ability to commercialize Thymosin beta 4 as a wound-healing treatment could be substantially limited.
REGENERX IS SUBJECT TO COMPETITION FROM COMPANIES WITH GREATER RESEARCH
RegeneRx is engaged in a business that is highly competitive. Research and development activities for the development of drugs to treat patients with cystic fibrosis, septic shock and non-healing wounds are being sponsored or conducted by private and public institutions and by major pharmaceutical companies located in the United States and a number of foreign countries. Most of these companies and institutions have financial and human resources that are substantially greater than those of RegeneRx, and that have extensive experience in conducting research and development activities and clinical testing and in obtaining the regulatory approvals necessary to market pharmaceutical products. With respect to wound healing, Johnson & Johnson is marketing Regranex(TM) for this purpose in patients with diabetic foot ulcers. Other companies, such as Novartis, are developing and marketing artificial skins which could compete with RegeneRx's products in certain wound healing areas. Moreover, wound healing is a large and highly fragmented marketplace attracting many companies, large and small, to develop products for treating acute and chronic wounds.
REGENERX MAY BE UNABLE TO OBTAIN ADEQUATE PRODUCT LIABILITY INSURANCE
RegeneRx's ability to proceed with human clinical trials for Thymosin beta 4 is dependent on its ability to obtain sufficient product liability insurance or to collaborate with corporate partners that have adequate insurance. In addition, the use of RegeneRx's products, when and if developed and sold, will expose RegeneRx to the risk of product liability claims. Although RegeneRx intends to obtain product liability insurance coverage, it cannot guarantee that product liability insurance will continue to be available to it on acceptable terms, or at all, or that its coverage will be sufficient to cover all claims against it. A product liability claim, even one without merit or for which RegeneRx has substantial coverage, could
result in significant legal defense costs, thereby exposing RegeneRx to expenses significantly in excess of its revenues.
REGENERX MAY BE UNABLE TO OBTAIN PRODUCT REIMBURSEMENT BY THIRD PARTIES
In addition to obtaining regulatory approval, the successful commercialization of certain of RegeneRx's products may depend on its ability to obtain reimbursement for the cost of the product and treatment. Government authorities, private health insurers and other organizations, such as health maintenance organizations, are increasingly challenging the prices charged for medical products and services. Also, the trend toward managed health care in the United States, the growth of healthcare organizations such as HMOs, and legislative proposals to reform healthcare and government insurance programs could significantly influence the purchase of healthcare services and products, resulting in lower prices and reducing demand for RegeneRx's products, if and when developed. The cost containment measures that healthcare providers are instituting and any healthcare reform could affect RegeneRx's ability to sell its products and may have a material adverse effect on its operations. RegeneRx cannot assure that reimbursement in the United States or foreign countries will be available for any of RegeneRx's products, that any reimbursement granted will be maintained, or that limits on reimbursement available from third-party payors will not reduce the demand for, or the price of, its products. The lack or inadequacy of third-party reimbursements for certain of RegeneRx's products decrease the potential profitability of its operations. RegeneRx cannot forecast what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect the legislation or regulation would have on its business.
REGENERX COMMON STOCK PRICE AND VOLUME IS VOLATILE
The price of RegeneRx's stock can be volatile, which makes it difficult for stockholders to predict the value of their shares or buy or sell shares at any given time. In the past year, RegeneRx's stock price has ranged from $0.27 to $1.70. A variety of factors may affect the market price of RegeneRx's common stock including, but not limited to, results of testing and clinical trials; corporate partnerships; technological innovations by RegeneRx or competitors; changes in laws and government regulations; developments concerning proprietary rights, including patents and litigation matters; public perception relating to the commercial value or safety of any of RegeneRx's products; and general stock market conditions.
RegeneRx's common stock is currently traded on the OTC Bulletin Board. Trading in RegeneRx's common stock is sporadic, and days or weeks may from time to time pass without any reported trades. If limited trading in RegeneRx's common stock continues, it may remain difficult for stockholders to sell their shares in the public market. This limited trading also could decrease or eliminate RegeneRx's ability to raise additional funds through issuances of its securities.
REGENERX HAS NEVER PAID DIVIDENDS ON ITS COMMON STOCK
Since its inception in 1982, RegeneRx has not paid cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future due to RegeneRx's limited funds for operations. Therefore, any return on your investment would come only from an increase in the value of the stock.
REGENERX CONTROLLED BY MANAGEMENT AND A SMALL NUMBER OF STOCKHOLDERS
As of March 2, 2004, RegeneRx's executive officers, directors and 5% or greater stockholders together controlled approximately 19,652,797 of the outstanding shares of RegeneRx's common stock, RegeneRx's sole class of outstanding voting securities. These stockholders, acting together, are in a position to influence and possibly control most matters submitted for approval by RegeneRx's stockholders, including the election of directors and the consideration of mergers or other proposed transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.
THERE IS A POTENTIAL FOR FUTURE DILUTION TO EXISTING STOCKHOLDERS
Currently, RegeneRx is authorized to issue up to 100,000,000 shares of its common stock, and as of March 2, 2004, there were issued and outstanding 32,492,548 shares of RegeneRx's common stock. The authorized but unissued shares may be issued by RegeneRx in such transactions and at such times as its Board of Directors considers appropriate, whether in public or private offerings, as stock splits or dividends or in connection with mergers and acquisitions or otherwise. Any such issuance that is not made solely to then-existing stockholders proportionate to their interests (as in a stock dividend or stock split) will result in dilution to each stockholder by reducing his or her percentage ownership of the total outstanding shares.
FORWARD-LOOKING STATEMENTS
When used in this Form SB-2 and in future filings by RegeneRx with the Securities and Exchange Commission, in RegeneRx's press releases or other public or shareholder communications, and in oral statements made with the approval of an authorized executive officer, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements concern RegeneRx's current expectations regarding future events, including the ongoing and prospective development of Thymosin beta 4 and possible future benefits to RegeneRx, its shareholders, and patients. Due to the nature of product development and the regulatory approval process, the forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results and those presently anticipated or projected. RegeneRx wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. RegeneRx wishes to advise readers that the factors described herein, in addition to other factors, could affect RegeneRx's financial performance and could cause RegeneRx's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
RegeneRx does not undertake and specifically declines any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events except as required under applicable law.
USE OF PROCEEDS
RegeneRx will not receive any proceeds from the sale of the common stock in this offering, but it will pay the expenses related to the registration of the shares of common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
OR PLAN OF OPERATION
This item should be read in conjunction with the audited financial statements and notes thereto of RegeneRx beginning on page F-1 of this registration statement.
PLAN OF OPERATION
Since its inception in 1982, RegeneRx's activities had consisted of conducting research and development, sponsoring clinical trials of its proprietary products, the construction and equipping of laboratory and production facilities, and the manufacture of products for research, testing and clinical trials. In 2000, RegeneRx adopted a modified business plan calling on the outsourcing of most of the activities necessary to its mission of developing its Thymosin beta 4, or T(beta)4, technology for the treatment of chronic wounds. This business model allows for the rapid and effective deployment of necessary resources without the burden of expensive and unwieldy infrastructure. It also allows RegeneRx to expand or contract its efforts depending on capital resources or other circumstances. RegeneRx has not generated revenues from operations and does not anticipate generating product revenues or other revenues from operations for the foreseeable future. During 2003 and 2002, Company earned no revenues. RegeneRx's accumulated deficit of $39,179,190 through December 31, 2003 has been funded primarily by the proceeds from the issuance of equity securities (and interest earned on such funds), the licensing of technology developed or acquired by RegeneRx, limited product sales and royalties, and the sale of royalty rights. RegeneRx will require substantial funding in order to complete research and development activities, manufacturing for clinical trials, and the eventual marketing of any products that RegeneRx intends to develop.
On June 11, 2003, RegeneRx completed the sale of 3,184,713 shares of restricted common stock pursuant to a private placement at a price of $.628 per share to Defiante Farmaceutica, L.d.a., a Portuguese company that is a wholly owned subsidiary of Sigma-Tau, S.p.A., a pharmaceutical company headquartered in Rome, Italy. RegeneRx received approximately $2.0 million in proceeds. In addition, RegeneRx granted Defiante warrants to purchase up to $1.5 million of additional restricted common stock of RegeneRx at prices ranging from $1.00 to $1.25 per share (or higher under certain circumstances) over a period of 18 months.
On January 23, 2004, RegeneRx completed the sale of 2,393,580 shares of common stock pursuant to a private placement at a price of $.95 per share to Defiante and several private investors. RegeneRx received approximately $2.3 million in proceeds. In addition, RegeneRx granted investors warrants to purchase 1 share of common stock for every 4 shares of common stock purchased in the offering at a price of $1.50 per share over a period of 30 months.
Although RegeneRx has no products that have received regulatory approval to date, RegeneRx's Investigational New Drug Application was accepted by the United States Food and Drug Administration in December 2002 allowing RegeneRx to commence the human testing of T(beta)4 for dermal wounds. RegeneRx initiated a Phase I human clinical trial in March 2003, which studies were designed to establish safety in human subjects, and successfully completed the trial in September 2003. There were no significant adverse events associated with the drug in Phase I and results demonstrated it was well tolerated by all subjects. RegeneRx has recently raised additional capital for Phase II trials that are expected to begin in the first half of 2004. RegeneRx believes each of the Phase II trials, which it hopes to conduct in a somewhat parallel fashion, will take approximately 12-15 months each and will cost just over $2 million. RegeneRx plans to independently develop T(beta)4 in the United States for chronic dermal wounds through completion of Phase III clinical trials.
On January 22, 2004, RegeneRx exclusively licensed certain European rights to T(beta)4 to Defiante. Defiante will develop T(beta)4 for internal and external wounds in Europe and certain other contiguous and geographically relevant countries. The Agreement expires on a country-by-country basis upon the later of the expiration of the last to expire of any granted patent in the territory having at least one valid claim covering the products then on the market, the expiration of any other exclusive or proprietary marketing rights or twelve years from the effective date.
Under the Agreement, Defiante will pay RegeneRx a royalty on commercial sales and will purchase all required T(beta)4 from RegeneRx. When RegeneRx completes positive Phase II clinical trials in the United States, Defiante must either pay RegeneRx $5 million or initiate pivotal Phase III clinical trials in Europe to maintain the license. Defiante also will be obligated to attain future clinical and regulatory milestones in the licensed territory. As those milestones are obtained, certain performance criteria regarding commercial registration and minimum annual royalties will be required in each licensed country. The agreement does not prevent RegeneRx from sublicensing the technology in countries outside the licensed territory, and has no impact on any U.S. rights.
At December 31, 2003, RegeneRx had cash and cash equivalents totaling $1,019,889 and working capital of $890,166 and total assets were $1,109,818. RegeneRx believes that its cash balances, and an additional $2,300,000 from the January 2004 private placement, will be sufficient to sustain current operations at least through December 31, 2004. RegeneRx is currently pursuing several potential financing alternatives for continuation of its research, development and clinical trials programs. There is no assurance that RegeneRx will be able to raise additional capital necessary to timely execute its current plan of operation or continue such plan of operation beyond December 2004 unless substantial additional capital is raised.
As RegeneRx utilizes a virtual company strategy it does not currently expect to purchase or sell any properties or significant equipment and does not expect to have significant changes in the number of its employees. For more information about RegeneRx's virtual company strategy, see "Description of Business."
DESCRIPTION OF BUSINESS
GENERAL
RegeneRx Biopharmaceuticals, Inc. was formed in 1982 and is a pharmaceutical research and development company focusing on the development of products to treat a variety of human diseases. RegeneRx's current primary business focus is the commercialization of Thymosin beta 4, a 43 amino acid peptide. RegeneRx is concentrating its efforts on the use of T(beta)4 for the treatment of injured tissue and non-healing wounds to enable more rapid repair and/or tissue regeneration.
RegeneRx utilizes a virtual company strategy in order to effectively control costs while focusing on the clinical development of T(beta)4. RegeneRx uses this model for certain research and development, clinical trials, and manufacturing operations, as well as other functions critical to its mission. RegeneRx believes this approach enhances its ability to allocate resources rapidly to different projects. The strategy consists of (i) identifying, evaluating and licensing pharmaceutical product opportunities that appear to have a significant commercial potential; (ii) designing pre-clinical and/or clinical protocols to test such products; (iii) utilizing third party contract manufacturers to supply clinical grade material and third party contract research organizations to perform pre-clinical and/or clinical studies in accordance with its designed protocols; and (iv) pursuing sublicense arrangements with established pharmaceutical companies to support late stage clinical testing and ultimately marketing if regulatory approval is obtained.
PRIMARY COMMERCIAL DEVELOPMENT FOCUS - THYMOSIN BETA 4
General. Originally isolated from the thymus, Thymosin beta 4 is a chemically synthesized copy of a natural human peptide that circulates in the blood and plays a vital role in the regeneration, remodeling and healing of tissues. Although it is recognized that wound healing is a complex process, most companies working to develop new drugs in this area have focused primarily on adding different growth factors to stimulate healing and have, to date, failed to demonstrate dramatic improvements in the healing process. T(beta)4 represents a new type of compound being developed to speed the healing of injured tissues, accelerate the growth of blood vessels and reduce inflammation. It represents a technology platform from which RegeneRx intends to investigate potential clinical uses beyond chronic dermal wounds. Unlike compounds such as Platelet-Derived Growth Factor, Keratinocyte Growth Factor, Epidermal Growth Factor, or basic Fibroblast Growth Factor, T(beta)4 is not a growth factor and, unlike Interleukin-1 or Tumor Necrosis Factor, Thymosin beta 4 is not a cytokine. (Cytokines are proteins and peptides, which act as immune regulators and modulate the functional activities of individual cells and tissues.) Rather, it regulates the actin molecule and reduces inflammation in most mammalian cells and as such plays a vital role in the healing of injured or damaged tissues. Actin comprises up to 10% of the protein of non-muscle cells and plays a central role in cell structure (formation of the cytoskeleton) and in the movement of cells throughout the body. Research studies from the National Institute of Health established that T(beta)4 stimulates the migration of human keratinocytes (skin cells) and the migration of human endothelial cells. Endothelial cells are the major cell types responsible for the formation of blood vessels and other tissues. These studies were the first to document the important role of Thymosin beta 4 in wound healing.
Product Development. RegeneRx first began evaluating Thymosin beta 4 in diseases associated with actin toxicity, such as cystic fibrosis. In March 1997, RegeneRx provided funding under a research contract with Vanderbilt University to determine the effect of Thymosin beta 4 in a sheep model of Adult Respiratory Distress Syndrome, a syndrome associated with septic shock. In animal models of septic shock, Thymosin beta 4 has been shown to reduce endotoxin-induced death, presumably by modulating pathologic mediators of inflammation and cell death, including the depolymerization of actin. RegeneRx is considering additional studies for this use of Thymosin beta 4 and holds two patents related to this application. See "--Proprietary Rights" below.
RegeneRx's main product development focus is the use of Thymosin beta 4 for the treatment of non-healing wounds and similar medical problems. RegeneRx entered into a Material Transfer - Cooperative Research and Development Agreement with the NIH during the second quarter of 1997. Under this agreement, RegeneRx received an option to elect an exclusive or non-exclusive commercialization license from the NIH for any patent rights that might result from the NIH research study that relate to the use of Thymosin beta 4 as a tissue growth and repair factor. A provisional patent application was filed by NIH in July 1998, with a Patent Cooperation Treaty application filed in July 1999, pertaining to the work performed on Thymosin beta 4. On February 6, 2001, RegeneRx executed an agreement with the NIH giving RegeneRx an exclusive worldwide license from the NIH for all claims to Thymosin beta 4 within the patent application. In exchange for the exclusive license, RegeneRx must make certain royalty and milestone payments to the NIH. No assurance can be given as to whether or when a patent will be issued, or as to any conditions that might be attached to the patent.
To date, the NIH has performed pre-clinical animal studies using Thymosin beta 4, supplied by RegeneRx, which have indicated that Thymosin beta 4 is effective in healing injured dermal and ocular tissue and improving wound healing and chemical burns in normal, elderly, diabetic, and steroid-suppressed rodents and other mammals. In December of 2002, RegeneRx initiated research under an Investigational New Drug Application, from the U.S. Food and Drug Administration allowing it to begin
Phase I human clinical trials. The Phase I study was successfully completed in September of 2003. For additional information regarding the regulatory approval process for RegeneRx's products, see "-- Government Regulation" below.
Other areas RegeneRx may explore with T(beta)4 are the healing of eye injuries, including chemical burns and inflammatory processes, post surgical healing, and wound healing in patients undergoing steroidal therapy, among other indications. RegeneRx also is reconsidering the possible applications of T(beta)4 for the treatment of septic shock and cystic fibrosis, as well as other internal wound healing applications.
All of RegeneRx's efforts to develop additional applications would likely require substantial additional capital or a strategic alliance or other partnership arrangement with a firm providing the capital and/or necessary expertise. RegeneRx has placed development of T(beta)4 for wound healing as its highest product development priority. For additional information regarding RegeneRx's efforts to commercialize Thymosin beta 4, see "--Proprietary Rights" below.
MANUFACTURING
RegeneRx, uses outside contract manufacturers to manufacture bulk T(beta)4 and formulate it into a final product, which product was used for its Phase I clinical trials and will be used for future clinical trials. Additional manufacturers have been identified for manufacturing of the bulk T(beta)4 as well as for the final T(beta)4 products. No agreements with these manufacturers have been entered into, however, and no assurance can be given that such agreements will be negotiated on terms favorable to RegeneRx, or at all. Contractors will be selected on the basis of their supply capability, ability to produce a drug substance in accordance with current Good Manufacturing Practice requirements of the FDA and to meet Company-established specifications. Although RegeneRx has enough bulk T(beta)4 for its currently scheduled clinical trials, there can be no assurance that RegeneRx will have sufficient funds to cover the costs of manufacturing additional materials for further development.
COMPETITION
RegeneRx is engaged in a business that is highly competitive. Research and development activities for the development of drugs to treat patients with cystic fibrosis, septic shock and non-healing wounds are being sponsored or conducted by private and public institutions and by major pharmaceutical companies located in the United States and a number of foreign countries. Most of these companies and institutions have financial and human resources that are substantially greater than those of RegeneRx, and that have extensive experience in conducting research and development activities and clinical testing and in obtaining the regulatory approvals necessary to market pharmaceutical products. With respect to wound healing, Johnson & Johnson has marketed Regranex(TM) for this purpose in patients with diabetes foot ulcers with some success. Other companies, such as Novartis, are developing and marketing artificial skins which could compete with RegeneRx's products in certain wound healing areas. Moreover, wound healing is a large and highly fragmented marketplace attracting many companies, large and small, to develop products for treating acute and chronic wounds.
GOVERNMENT REGULATION
In the United States, the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder, and other federal and state statutes and regulations govern, among other things, the testing, manufacture, labeling, storage, recordkeeping, approval, advertising, and promotion of RegeneRx's products on a product-by-product basis. Regulation by governmental authorities in the United States and foreign countries will be a significant factor in the manufacturing and marketing of RegeneRx's products and in its ongoing research and product development activities. Any product developed by RegeneRx will require regulatory approval by governmental agencies prior to commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approval procedures by the FDA and similar health authorities in foreign countries. The process of obtaining these approvals and the subsequent compliance with appropriate federal and state statutes and regulations require the expenditure of substantial resources. Any failure by RegeneRx to obtain regulatory approvals, or any delay in obtaining such approvals, could adversely affect the marketing of products being developed by RegeneRx, its ability to receive product or royalty revenues and its liquidity and capital resources.
Pre-clinical testing in the laboratory must ordinarily be conducted to evaluate the potential efficacy and the safety of an investigational drug. The results of these studies are submitted to the FDA as part of an Investigational New Drug Application, or IND, which must be reviewed and allowed to go into effect by the agency before clinical testing can begin. Typically, clinical evaluation involves a three-stage process. In Phase I, trials are conducted with a small number of subjects to determine the safety profile, the pattern of drug distribution and metabolism. In Phase II, trials are conducted with small groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase III, large scale, multi-center, comparative trials are generally conducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of efficacy and safety required by the FDA and other regulatory authorities.
The results of the pre-clinical and clinical testing with detailed information on manufacturing are submitted to the FDA in the form of a New Drug Application, or NDA, or Biologics License Application, or BLA, for approval to commence commercial sales. In responding to an NDA or BLA, the FDA may grant marketing approval, request additional information or deny the application if the FDA determines that the application does not satisfy its regulatory approval criteria. Therefore, even if RegeneRx completes Phase III clinical trials for certain of its products, and submits an NDA or BLA to the agency, there can be no assurance that the FDA will grant marketing approvals, or if granted, that they will be granted on a timely basis. If the FDA does approve a product, it may require, among other things, post-marketing testing, including potentially expensive Phase IV studies, and surveillance to monitor the safety and effectiveness of the drug. In addition, the FDA may in some circumstances impose restrictions on the use of the drug that may be difficult and expensive to administer. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market.
Among the conditions for an NDA or a BLA approval is the requirement that the applicable manufacturing, clinical, pharmacovigilance, quality control and manufacturing procedures conform on an ongoing basis with current Good Clinical Practices, current Good Manufacturing Practices, and computer information system validation standards. Before approval of a BLA, the FDA will perform a prelicensing inspection of clinical sites, manufacturing facilities and the related quality control records to determine its compliance with these requirements. To assure compliance, applicants must continue to expend time, money and effort in the area of training, production and quality control. After the applicant is licensed for the manufacture of any product, manufacturers are subject to periodic inspections by the FDA. If a
company fails to comply with FDA regulatory requirements, FDA may pursue a wide range of remedial actions.
In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress related to the regulation of drug products, and RegeneRx cannot predict the outcome or effect of such legislation on its business.
In December 2002, RegeneRx requested Thymosin beta 4 be designated an "Orphan Drug" under the Orphan Drug Act. Under the Act, the FDA may designate a product or products as having Orphan Drug status to treat "a rare disease or condition" which is a disease or condition that affects populations of less than 200,000 individuals in the United States, or, if victims of a disease number more than 200,000, the sponsor establishes that it does not realistically anticipate its product sales will be sufficient to recover its costs. If a product is designated as an Orphan Drug, then the sponsor is entitled to receive certain incentives to undertake the development and marketing of the product. One such incentive is marketing exclusivity. The sponsor that obtains the first marketing for a designated Orphan Drug for a given indication is eligible to receive marketing exclusivity for a period of seven years. There may be multiple designations of Orphan Drug status for a given drug and for different indications. The sponsor of the first approved NDA (or BLA) for a given drug for its use in treating a given rare disease may receive marketing exclusivity for that specific use. Even if a sponsor of a product for an indication for use with an Orphan Drug designation is the first to obtain FDA approval of an NDA (or BLA) for that designation and obtains marketing exclusivity, another sponsor's application for the same drug product may be approved by the FDA during the period of exclusivity if the FDA concludes that it is clinically superior. In early 2003, RegeneRx received a response indicating that at that time there was insufficient information in order to base a grant of the designation. The FDA, however, recommended that RegeneRx resubmit a new application when additional scientific and/or clinical evidence had been obtained. RegeneRx is in the process of preparing such application for resubmission.
PROPRIETARY RIGHTS
Under a research agreement with The George Washington University, RegeneRx funded Thymosin beta 4 research at GWU and was granted a sole and exclusive world-wide license to any patents that resulted from such research. While RegeneRx no longer funds research under this agreement, RegeneRx remains obligated under the research agreement to pay GWU a royalty of 4% of the net sales, if any, of specified products covered by patents issued in connection with the agreement. Pursuant to the research agreement, RegeneRx has exclusive rights to patent applications filed in the United States and in Europe disclosing the use of Thymosin beta 4 for the treatment of septic shock and associated syndromes, including Adult Respiratory Distress Syndrome. Two U.S. patents have been issued. The first patent, No. 5,578,570, entitled "Method of Treating Septic Shock Using Thymosin beta 4," issued on November 26, 1996 and the second patent, No. 5,593,964, entitled "Method of Treating Septic Shock By Preventing Actin Polymerization," issued on January 14, 1997. No sales have occurred and as a result, no royalty payments have yet been incurred or paid to GWU pursuant to the research agreement. RegeneRx has also filed numerous other patents related to Thymosin beta 4 and related compounds and indications for their use.
As discussed above under "--Primary Commercial Development Focus - Thymosin Beta 4 - Product Development," RegeneRx has obtained exclusive rights under a patent application filed by the NIH for the use of Thymosin beta 4 in the treatment of non-healing wounds. Subsequently, RegeneRx has filed numerous additional patent applications covering various compositions, uses and other aspects of Thymosin beta 4. There can be no assurance that these, or any other future patent applications under which RegeneRx has rights, will result in the issuance of a patent or that any patent issued will not be subject to challenge. In the case of a claim of patent infringement by or against RegeneRx, there can be
no assurance that RegeneRx will be able to afford the expense of any litigation that may be necessary to enforce its proprietary rights.
EMPLOYEES
RegeneRx utilizes a business strategy that involves contracting out research, development, manufacturing, and other functions to third parties partially in order to minimize the expense and overhead associated with the maintenance of a large infrastructure. Consistent with this strategy, RegeneRx currently utilizes several consultants, along with various other professional advisors, to advise its Chief Executive Officer and Board of Directors on all company matters. RegeneRx currently has three employees in addition to retaining several outside consultants and contractors.
CLINICAL TRIALS
Under its current business model, RegeneRx uses a Contract Research Organization, or CRO, to conduct all facets related to clinical trials. This includes any preclinical pharmacokinetics, toxicology, and formulation work required for human clinical trials. The CRO is also responsible for the conduct of clinical trials on behalf of RegeneRx. This will enable RegeneRx to efficiently perform high quality clinical trials without the need to build infrastructure to support such trials and without giving up any rights to its products. The FDA accepted RegeneRx's IND application in December 2002 and RegeneRx completed Phase I human clinical trials in September 2003. Phase I enrolled 15 subjects. RegeneRx has raised additional capital for certain Phase II clinical trials. Phase II trials are scheduled to begin in the second quarter of 2004.
DESCRIPTION OF PROPERTY
RegeneRx's corporate headquarters are located in Bethesda, Maryland where it leases office space in an executive office suite. RegeneRx entered into the lease agreement for this property in April 2002. The lease agreement provides for a twelve-month term, which automatically renews upon expiration for an additional twelve months unless either RegeneRx or the lessor provides notice of termination as described in the agreement. For additional information, see Note 8 of the Notes to Financial Statements on page F-16 of this registration statement.
DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
RegeneRx's Board of Directors consists of five directors. RegeneRx's bylaws allow for not less than three and not more than seven Directors. Directors are elected annually to serve one-year terms.
The following table sets forth, with respect to each director and executive officer, his name and age, the year in which he first became a director of RegeneRx, and his principal occupation and business experience during the past five years.
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NAME,
YEAR FIRST BECAME PRINCIPAL OCCUPATION AND
DIRECTOR OF COMPANY AGE BUSINESS EXPERIENCE
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J.J. Finkelstein, 2002 52 RegeneRx's President and CEO since 2002 and a member of the Board
of Directors since 2002. Mr. Finkelstein has been a chief executive
officer and consultant in the bioscience
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NAME,
YEAR FIRST BECAME PRINCIPAL OCCUPATION AND
DIRECTOR OF COMPANY AGE BUSINESS EXPERIENCE
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industry for the past twenty years, having served as Chief
Executive Officer of three biomedical companies since 1982,
including as CEO of RegeneRx from 1984 to 1989 and as Vice-Chairman
from 1989 to 1991.
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Allan L. Goldstein, 1982 66 Chairman of the Board of RegeneRx since 1982; Chief Executive
Officer of RegeneRx from 1982 to 1986, and 1999 to 2002; Chief
Scientific Advisor of RegeneRx from 1982 to present; Professor and
Chairman of Department of Biochemistry and Molecular Biology at The
George Washington University School of Medicine and Health Sciences
from 1978 to present.
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Albert Rosenfeld, 1982 83 Secretary - Treasurer of RegeneRx from 1999 to present; Consultant
on Future Programs for March of Dimes Birth Defect Foundation from
1973 to present; Adjunct Assistant Professor, Department of Human
Biological Chemistry and Genetics at University of Texas Medical
Branch, from 1974 to 1998; author and lecturer on scientific
matters.
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Richard J. Hindin, 2002 61 Director of Chicken Out Rotisserie Inc., founded in 1991, which
operates 28 restaurants in four states and the District of Columbia,
with annual sales in excess of $30 million. In 1967, he co-founded
Britches of Georgetown, Inc., (Britches) a clothing retailer
specializing in the sale of upscale men's and women's apparel and
accessories. Mr. Hindin also serves as Chairman of the Board of The
Institute of Advanced Studies in Immunology and Geriatric Medicine,
a non-profit 501(c)(3) corporation that specializes in disseminating
medical information to the public as well as providing the
pharmaceutical industry with an independent source for testing
vaccines and drugs for the elderly. Mr. Hindin is also President of
Hinsilblon Laboratories Ltd., a company based in Cape Coral, Florida
which sells odor neutralization products and delivery systems.
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Joseph C. McNay, 1987 69 Managing Principal, Chairman and Chief Investment Officer of Essex
Investment Management Company, LLC, a registered investment
advisor, from 1976 to present; Director of Softech, Inc. and MPSI
System, Inc.
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EXECUTIVE COMPENSATION
The following table summarizes for the years indicated the compensation paid by RegeneRx to RegeneRx's Chief Executive Officer during 2003 and all executive officers of RegeneRx that earned a salary and bonus for 2003 in excess of $100,000.
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (4)
------------------- -------------
Other Restricted
Annual Stock
Name and Principal Fiscal Compensation Award Options All Other
Position Year Salary Bonus ($)(3) ($) (#) Compensation
-------- ---- ------ ----- ------ --- --- ------------
J.J. Finkelstein, 2003 $175,000 $ 20,000(2) -- -- -- --
President and Chief 2002 $175,000 -- -- -- 500,000 --
Executive Officer(1) 2001 -- -- -- -- -- $107,670
Allan L. Goldstein, 2003 $110,000 $ 20,000(2) -- -- -- --
Chairman and Chief 2002 $110,000 -- -- -- 300,000 $ 37,674
Scientific Advisor 2001 $ 55,000 -- -- -- -- $ 5,000
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(1) On March 19, 2002, J.J. Finkelstein was appointed as RegeneRx's President
and Chief Executive Officer, replacing Dr. Goldstein who will remain as
Chairman and Chief Scientific Advisor of RegeneRx.
(2) Dr. Goldstein and J.J. Finkelstein were awarded a $20,000 bonus for work
performed in 2002. The amounts were accrued as of 12/31/02 and paid in
2003.
(3) Dr. Goldstein and Mr. Finkelstein did not receive any (a) personal benefits
or perquisites which exceeded the lesser of $50,000 or 10% of his salary
and bonus; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long term incentive
plans prior to settlement or maturation; (d) amounts reimbursed for payment
of taxes; or (e) preferential discounts on stock.
(4) RegeneRx had no long-term incentive plans in existence and made no payouts
or awards under such plans.
The following table provides information as to the value realized and unrealized by Dr. Goldstein and Mr. Finkelstein related to stock options during 2003. No stock options were exercised by Dr. Goldstein or Mr. Finkelstein during 2003.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
-------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END
(#) ($)
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SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)*
-------------------------------------------------------------------------------------------------------
Allan L. Goldstein -- -- 201,000 99,000 176,880 87,120
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J.J. Finkelstein -- -- 335,000 165,000 294,800 145,200
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* Based on a closing stock price on December 31, 2003 of $1.21 and an exercise price of $0.33.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
RegeneRx made advances to two officers prior to July 2002 which were non-interest bearing and due on demand. At December 31, 2003 and 2002, $26,897 and $24,817, respectively, are due from the officers.
In February 2003, the Board of Directors approved the modification of the subscription notes receivable agreements between RegeneRx and two officers totaling $150,000 for the purchase of common stock. Under the modified agreements, the two officers paid a total of $40,000 and returned 357,724 shares of common stock to the company.
In May 2003, RegeneRx entered into Bridge Loan Agreements with certain shareholders, including Richard J. Hindin, a director. The Bridge Loans totaling $400,000, accrued interest at 10% per annum and were scheduled to mature in November 2005. In addition, RegeneRx issued warrants to purchase 200,000 shares of its common stock at $.10 per share. The principal and accrued interest were repaid in June 2003. RegeneRx recorded interest expense of $40,648 related to the issuance of the warrants.
Employment Agreements
On January 1, 2002, Dr. Goldstein and J.J. Finkelstein entered into employment contracts with RegeneRx to serve as Chairman and Chief Scientific Advisor and President and Chief Executive Officer, respectively. In February 2004, the Compensation Committee voted to increase the salaries of Dr. Goldstein and Mr. Finkelstein to $125,000 and $200,000, respectively. The other terms of the agreements are as otherwise stated below.
Pursuant to the terms of his employment agreement, Dr. Goldstein is not obligated to devote 100% of his time to RegeneRx and continues to be employed by The George Washington University in Washington, D.C. The initial term of Dr. Goldstein's employment agreement is three years. The agreement will automatically be extended for successive one-year terms unless RegeneRx or Dr. Goldstein elects not to extend the agreement. The agreement provides for annual compensation of $110,000 and eligibility to receive an annual bonus in the discretion of the Board of Directors of RegeneRx. In consideration for his services, RegeneRx also granted Dr. Goldstein an option to purchase 300,000 shares of RegeneRx's common stock at a purchase price equal to fair market value pursuant to the Amended and Restated Option Plan. Dr. Goldstein's option vested as to 34% of the option shares on the first anniversary of the grant (January 1, 2003) and in twenty-four (24) equal monthly installments thereafter so long as he remains employed by RegeneRx. In the event of Dr. Goldstein's termination without cause or upon the occurrence of certain change in control events, Dr. Goldstein's stock shall immediately vest and be released from RegeneRx's repurchase option.
Pursuant to the agreement, Dr. Goldstein is entitled to participate in and receive all standard employee benefits under applicable Company welfare benefits plans and programs to the same extent as other senior executives of RegeneRx and to participate in all applicable incentive plans, including stock option, stock, bonus, savings and retirement plans provided by RegeneRx which are offered to senior executive officers in RegeneRx. The agreement also provides that Dr. Goldstein will receive such perquisites as RegeneRx may establish from time to time which are commensurate with his position and comparable to those received by other senior executives of RegeneRx (including vacation of at least four (4) weeks per annum and holidays, leaves of absence and leaves for illness and temporary disability in accordance with the policies of RegeneRx and federal, state and local law).
Dr. Goldstein is prohibited under the agreement participating in or taking any position, investment or interest known by him to be adverse or antagonistic to RegeneRx, its business or prospects, financial or otherwise. In addition, Dr. Goldstein is bound by a proprietary information, nonsolicitation, noncompetition and inventions assignment agreement as part of his employment agreement.
If Dr. Goldstein's employment is terminated without cause (as defined in the employment agreement) or he terminates his employment for any reason within 12 months after a change of control event, RegeneRx is obligated to pay him a lump sum payment in an amount equal to his then annual base salary (less federal and state tax withholding) as severance pay. Dr. Goldstein is required to sign a release in favor of RegeneRx as a condition to receiving the severance payment.
Pursuant to the employment agreement, RegeneRx may terminate Dr. Goldstein in the event of his death, or any illness, disability or other incapacity that renders him unable regularly to perform his duties generally for more than either one hundred twenty (120) consecutive days or more than a total of one hundred eighty (180) days in any consecutive twelve (12) month period. Dr. Goldstein may resign his employment for good reason by giving notice to RegeneRx. Good reason generally is defined by the employment agreement as a material change in his duties or responsibilities with RegeneRx, which causes his position to become one of lesser responsibility or importance, or a relocation of his place of employment by more than 60 miles or a material reduction in the benefits and perquisites provided to him or any material failure by RegeneRx to pay his the compensation and benefits under this Agreement. If Dr. Goldstein resigns with good reason, RegeneRx is obligated to pay him the severance described above.
Pursuant to the terms of his employment agreement, Mr. Finkelstein is expected to devote 100%
of his time and efforts to RegeneRx. The initial term of Mr. Finkelstein's employment agreement is three years. The agreement will automatically be extended for successive one-year terms unless RegeneRx or Mr. Finkelstein elects not to extend the agreement. The agreement provides for annual compensation of $175,000 and eligibility to receive an annual bonus in the discretion of the Board of Directors of RegeneRx. In consideration for his services, RegeneRx also granted Mr. Finkelstein an option to purchase 500,000 shares of RegeneRx's common stock at a purchase price equal to fair market value pursuant to the Amended and Restated Option Plan. Mr. Finkelstein's option vested as to 34% of the option shares on the first anniversary of the grant (January 1, 2003) and in twenty-four (24) equal monthly installments thereafter so long as he remains employed by RegeneRx. In the event of Mr. Finkelstein's termination without cause or upon the occurrence of certain change in control events, Mr. Finkelstein's stock shall immediately vest and be released from RegeneRx's repurchase option.
Pursuant to the agreement, Mr. Finkelstein is entitled to participate in and receive all standard employee benefits under applicable Company welfare benefits plans and programs to the same extent as other senior executives of RegeneRx and to participate in all applicable incentive plans, including stock option, stock, bonus, savings and retirement plans provided by RegeneRx which are offered to senior executive officers in RegeneRx. The agreement also provides that Mr. Finkelstein will receive such perquisites as RegeneRx may establish from time to time which are commensurate with his position and comparable to those received by other senior executives of RegeneRx (including vacation of at least four (4) weeks per annum and holidays, leaves of absence and leaves for illness and temporary disability in accordance with the policies of RegeneRx and federal, state and local law). Under the employment agreement, RegeneRx also is obligated to maintain a life insurance policy covering the life of Mr. Finkelstein with coverage in the amount of not less than $1,000,000 and a disability insurance policy with coverage in the maximum amount allowable or appropriate as determined by his base salary, provided that RegeneRx is not obligated to pay more than $600 per month in the aggregate, for life and disability coverage.
Mr. Finkelstein is prohibited under the agreement participating in or taking any position, investment or interest known by him to be adverse or antagonistic to RegeneRx, its business or prospects, financial or otherwise. In addition, Mr. Finkelstein is bound by a proprietary information, nonsolicitation, noncompetition and inventions assignment agreement as part of his employment agreement.
If Mr. Finkelstein's employment is terminated without cause (as defined in the employment agreement) or he terminates his employment for any reason within 12 months after a change of control event, RegeneRx is obligated to pay him a lump sum payment in an amount equal to his then annual base salary (less federal and state tax withholding) as severance pay. In addition, RegeneRx will reimburse him for premiums he pays for life and disability insurance for a 12 month period. Such reimbursement, in the aggregate, generally will be capped at the $600 per month. Mr. Finkelstein is required to sign a release in favor of RegeneRx as a condition to receiving any severance payment.
Pursuant to the employment agreement, RegeneRx may terminate Mr. Finkelstein in the event of his death, or any illness, disability or other incapacity that renders him unable regularly to perform his duties generally for more than either one hundred twenty (120) consecutive days or more than a total of one hundred eighty (180) days in any consecutive twelve (12) month period. Mr. Finkelstein may resign his employment for good reason by giving notice to RegeneRx. Good reason generally is defined by the employment agreement as a material change in his duties or responsibilities with RegeneRx, which causes his position to become one of lesser responsibility or importance, or a relocation of his place of employment by more than 60 miles or a material reduction in the benefits and perquisites provided to him or any material failure by RegeneRx to pay his the compensation and benefits under this Agreement. If Mr. Finkelstein resigns with good reason, RegeneRx is obligated to pay him the severance described above.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
In March 2001, RegeneRx's common stock began trading on the OTC Bulletin Board under the symbol RGRX. Prior to that date, and during 2000 and 1999, RegeneRx's common stock traded in the over-the-counter market in the "pink sheets." RegeneRx also has outstanding classes of warrants to purchase RegeneRx common stock for which there is no public market.
The following table sets forth the high and low bid prices for RegeneRx's common stock for the periods indicated as reported by myhdvest.com. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not represent actual transactions.
FOR THE YEAR ENDED HIGH LOW ------------------ ---- --- DECEMBER 31, 2003: First Quarter $ .55 $ .27 Second Quarter $ 1.70 $ .40 Third Quarter $ 1.30 $ .70 Fourth Quarter $ 1.25 $ 1.08 DECEMBER 31, 2002: First Quarter $ .68 $ .15 Second Quarter $ .72 $ .35 Third Quarter $ .53 $ .22 Fourth Quarter $ .60 $ .28 |
As of December 31, 2003, there were approximately 1,035 holders of record of RegeneRx's common stock.
RegeneRx has never paid a cash dividend on its common stock and does not anticipate that any cash dividends will be paid on the common stock in the foreseeable future due to RegeneRx's limited funds for operations.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about RegeneRx's common stock that may be issued upon the exercise of options, warrants and rights under all existing equity compensation plans as of December 31, 2003.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND (EXCLUDING SECURITIES
WARRANTS AND RIGHTS RIGHTS REFLECTED IN COLUMN (A))
-------------------------- ----------------------- ----------------------------
PLAN CATEGORY (A) (B) (C)
------------- --- --- ---
Equity compensation plans 1,225,000 0.32 1,275,000
approved by stockholders
Equity compensation plans not 0 0 0
approved by stockholders
Total 1,225,000 0.32 1,275,000
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of March 2, 2004, the beneficial ownership of RegeneRx's common stock by:
o any persons or entities known by management to beneficially
own more than five percent of the outstanding shares of
RegeneRx common stock as of the record date;
o each director of RegeneRx; and
o all of the executive officers and directors of RegeneRx as a
group.
The persons named in the following table have sole voting and dispositive powers for all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and except as indicated in the footnotes to the table.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Shares of common stock subject to outstanding options, warrants or other rights to acquire held by a person that are currently exercisable or exercisable within 60 days after March 2, 2004 are included in the number of shares beneficially owned by the person and deemed outstanding shares for purposes of calculating the person's percentage ownership. These shares are not, however, deemed outstanding for the purpose of computing the percentage ownership of any other person. As of March 2, 2004, there were 32,492,548 shares of RegeneRx common stock outstanding.
Percent of
Beneficial Common Stock
Name of Beneficial Owner Ownership Outstanding
-------------------------------------------------------------- ----------------------- ------------------
J. J. Finkelstein
Director, President and Chief Executive Officer 2,012,388(1) 6.12
Allan L. Goldstein,
Chairman and Chief Scientific Officer 2,333,786(2) 7.13
Albert Rosenfeld, Director, Secretary and Treasurer 86,766(3) 0.27
Richard J. Hindin, Director 1,803,258(4) 5.54
Joseph C. McNay, Director 1,410,777(5) 4.31
Sidney J. Silver 1,900,000(6) 5.85
Defiante Farmaceutica Unipessoal, L.d.a. 10,105,822(7) 29.63
All executive officers and directors as a group (5 persons) 7,646,975(8) 22.80
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(2) Consists of (i) 2,091,536 shares owned directly by Dr. Goldstein and his wife over which they share voting and dispositive powers. The address for Dr. Goldstein is c/o RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814. Does not include 57,750 options to purchase common stock to be issued to Dr. Goldstein under the Amended and Restated Option Plan that are currently unexercisable.
(3) Consists of (i) 10,100 shares owned directly by Mr. Rosenfeld over which he has sole voting and dispositive powers; and (ii) 76,666 shares which Mr. Rosenfeld has the right to acquire through the exercise of stock options that are currently exercisable. Does not include 33,334 options to purchase common stock to be issued to Mr. Rosenfeld under the Amended and Restated Option Plan that are currently unexercisable. The address for Mr. Rosenfeld is c/o RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814.
(4) Consists of (i) 1,750,188 shares owned directly by Mr. Hindin over which he has sole voting and dispositive powers; and (ii) 33,333 which Mr. Hindin has the right to acquire through the exercise of stock options that are currently exercisable. Does not include 66,667 options to purchase common stock to be issued to Mr. Hindin under the Amended and Restated Option Plan that are currently unexercisable. The address for Mr. Hindin is 407 Chain Bridge Road, McLean, Virginia 22101.
(5) Consists of (i) 1,142,795 shares owned directly by Mr. McNay over which he has sole voting and dispositive powers; (ii) 76,666 shares which Mr. McNay has the right to acquire through the exercise of stock options that are currently exercisable; and (iii) 191,316 shares which Mr. McNay has the
right to acquire pursuant to the exercise of warrants. Does not include 33,334 options to purchase common stock to be issued to Mr. McNay under the Amended and Restated Option Plan that are currently unexercisable. The address for Mr. McNay is c/o RegeneRx Biopharmaceuticals, Inc., 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland 20814.
(6) The address for Mr. Silver is c/o Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., Washington, D.C. 20005.
(7) Consists of (i) 8,492,664 shares owned directly by Defiante over which they have sole voting and dispositive powers and (ii) 1,613,158 shares which Defiante have the right to acquire pursuant to the exercise of warrants. The address for Defiante Farmaceutica Unipessoal, L.d.a. is Rua dos Ferreiros, 260, Funchal-Madeira (Portugal) 9000-082.
(8) Includes the shares noted in the footnotes above.
SELLING STOCKHOLDERS
The shares of RegeneRx common stock that are being registered for resale under this prospectus were issued pursuant to the private placement transaction with the selling stockholders in January 2004 that was exempt from the registration requirements of the Securities Act of 1933. Such shares are "restricted securities" under the Securities Act prior to effectiveness of this registration statement.
The selling stockholders may from time to time offer and sell pursuant to this prospectus the respective number of shares of RegeneRx common stock as are set forth opposite their names in the table below. The following table sets forth the name of each selling stockholder and the following information, based on information they have provided to RegeneRx, as of March 2, 2004:
o the number of shares of RegeneRx common stock beneficially owned by each selling stockholder;
o the maximum number of shares that may be offered for sale by such selling stockholder under this prospectus;
o the number of shares beneficially owned by each selling stockholder, assuming all such shares are sold; and
o the percentage of RegeneRx's outstanding common stock beneficially owned by such selling stockholder.
The selling stockholders may offer all, some or none of the common stock shown in the table or may acquire or dispose of other shares of common stock. For that reason, no reliable estimate can be made of the aggregate number of shares that will be sold pursuant to this offering. Therefore, RegeneRx has assumed for purposes of completing the last two columns that all shares of common stock offered hereby will have been sold by the selling stockholders upon completion of sales under this prospectus and that no other shares of common stock are acquired or disposed of by the selling shareholders prior to the termination of this offering. In addition, RegeneRx knows of no plans of any shareholder to dispose of any of their shares.
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PERCENTAGE OF
COMMON STOCK OUTSTANDING COMMON
COMMON STOCK BENEFICIALLY STOCK BENEFICIALLY
BENEFICIALLY COMMON STOCK OWNED AFTER OWNED AFTER
OWNED PRIOR TO OFFERED COMPLETION OF THE COMPLETION OF THE
NAME OF SELLING STOCKHOLDER THE OFFERING HEREBY(2) OFFERING OFFERING
----------------------------------------------------------------------------------------------------------------------
Defiante Farmaceutica L.d.a.(3) 8,790,032 1,315,790 8,790,032 27.95
----------------------------------------------------------------------------------------------------------------------
Richard J. Hindin (4) 1,704,574 98,684 1,704,574 5.66
----------------------------------------------------------------------------------------------------------------------
Joseph C. McNay (4) 1,279,198 131,579 1,279,198 4.22
----------------------------------------------------------------------------------------------------------------------
Alan Nordlinger 249,766 131,579 249,766 *
----------------------------------------------------------------------------------------------------------------------
Sheldon Kamins 212,766 65,790 212,766 --
----------------------------------------------------------------------------------------------------------------------
David C. Silver -- 92,105 -- --
----------------------------------------------------------------------------------------------------------------------
Barry P. Taff -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
Dave M. Muchnikoff -- 78,947 -- --
----------------------------------------------------------------------------------------------------------------------
Brian L. Alpert -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
Lynn Alpert -- 131,579 -- --
----------------------------------------------------------------------------------------------------------------------
Lawrence J. Eisenberg -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
Norman Freidken -- 135,000 -- --
----------------------------------------------------------------------------------------------------------------------
Dennis Ratner 302,128 67,500 302,128 *
----------------------------------------------------------------------------------------------------------------------
Michael L. Nash and Kristine M.Nash(1) -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
Ross H. Spicer and Donna Spicer(1) -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
G. Kent Humphries(5) -- 105,264 -- --
----------------------------------------------------------------------------------------------------------------------
William Bateman and Marc J. Loundas(1) -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
Regen Associates, LLC(6) -- 78,945 -- --
----------------------------------------------------------------------------------------------------------------------
Bernard R. Wolfe -- 32,895 -- --
----------------------------------------------------------------------------------------------------------------------
Lee Hindin and Karen Hindin(1) (7) --(7) 65,790 --(7) --
----------------------------------------------------------------------------------------------------------------------
Sam LeBauer and Joan LeBauer(1) -- 65,790 -- --
----------------------------------------------------------------------------------------------------------------------
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(1) Includes shares held jointly by the persons listed.
(2) Include shares underlying the warrants held by the selling shareholders in
connection with this offering.
(3) Defiante Farmaceutica L.d.a. has a license agreement with RegeneRx and is
the largest single shareholder.
(4) Messrs. Hindin and McNay are directors of RegeneRx.
(5) Includes shares held with Debbie Humphries and on behalf of Devon Ann
Humphries, Garrett Kent Humphries, and Taylor Kent Humphries.
(6) Includes shares held by Mark Nash, Norman Loeb, Judy Reines and Mark Rabin.
(7) Lee and Karen Hindin are the children of Richard Hindin, a director. Lee
Hindin individually owned 25,000 shares prior to the offering.
DESCRIPTION OF SECURITIES
RegeneRx's Certificate of Incorporation authorize the issuance of 100,000,000 shares of common stock, $0.001 par value per share. As of December 31, 2003, 30,098,968 shares of common stock were issued and outstanding. The following description is a summary of the capital stock of RegeneRx and contains the material terms of the capital stock. Additional information can be found in RegeneRx's Certificate of Incorporation and Bylaws.
Each holder of RegeneRx common stock is entitled to one vote per share of common stock standing in such holder's name on the records on each matter submitted to a vote of RegeneRx stockholders, except as otherwise required by law. Holders of RegeneRx common stock do not have cumulative voting rights. Holders of RegeneRx common stock are entitled to equal dividends and distributions, per share, when, as and if declared by its board of directors from funds legally available. Holders of RegeneRx common stock do not have preemptive rights to subscribe for any of its securities nor are any shares of RegeneRx common stock redeemable or convertible into any of its other securities. If RegeneRx liquidates, dissolves or winds up its business or affairs, its assets will be divided up pro-rata on a share-for-share basis among the holders of its common stock after creditors and preferred shareholders, if any, are paid.
RegeneRx's Certificate of Incorporation authorize the issuance of 1,000,000 shares of preferred stock, $0.001 par value per share, the designation and rights of which are to be determined by its Board of Directors. As of December 31, 2003, no shares of preferred stock were issued and outstanding.
The preferred stock may be issued from time to time in one or more series by resolution or resolutions of the Board of Directors. The resolution or resolutions of the Board of Directors may, to the full extent now or hereafter permitted by law and subject to the provisions of this Certificate of Incorporation, fix the voting powers, designations, preferences and relative, participating, option or other special rights, and qualifications, limitations or restrictions thereof, of the shares of such series. The authority of the Board of Directors with respect to each such series may include, but not be limited to, determinations of the following:
(a) the distinctive designation of such series, the number of shares that shall constitute such series, including any limitation on the authority to increase or decrease such number, and the stated value thereof, if any, if different from the par value thereof;
(b) the dividends, if any, payable either in cash, property or securities of RegeneRx, on such series, and the restrictions, limitations and conditions, if any, upon the payment of such dividends, whether any such dividends shall be cumulative or non-cumulative, the date or dates from which dividends, if declared, shall be payable, and the preference, if any, or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of this class;
(c) whether the shares of such series shall have voting power, in addition to any voting power provided by law and, if so, the terms of such voting power, which may be general or limited;
(d) the right, if any, of RegeneRx to redeem any or all shares of such series and, if so, the terms and conditions of such redemption;
(e) whether the shares of such series shall be subject to the operation of a retirement or sinking fund or funds and, if so, whether such retirement or sinking fund shall be cumulative or non-cumulative, the extent and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof;
(f) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of this class or any other securities or assets and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange;
(g) the amount, if any, which the holders of he shares of such series shall be entitled to receive in case of a liquidation, dissolution or winding up of the corporation and the preference, if any, or relation which such amounts shall bear to the amounts payable on any shares of stock of any other class or any other series of this class;
(h) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by RegeneRx of, the common stock or shares of stock of any other class or any other series of this class;
(i) the conditions or restriction, if any, upon the creation of indebtedness of RegeneRx or upon the issue of any additional stock, including additional shares of such series or of any other series of this class or of any other class; and
(j) any other voting powers, designations, preferences, and relative, participating optional or other special rights, or qualifications, limitations or restrictions thereof, of the shares of such series.
so far as not inconsistent with the provisions of the restated Certificate of Incorporation and to the full extent now or hereafter permitted by the laws of the State of Delaware.
The designations, voting powers, preferences and relative, participating, option or other special rights of each series of preferred stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. All shares of any one series of preferred stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative."
In April 1994, the Board of Directors adopted a Shareholders Rights Plan, pursuant to which it declared a dividend distribution of one Preferred Stock Purchase Right for each outstanding share of common stock. The dividend distribution was payable to stockholders of record at the close of business April 29, 1994.
The Rights can become exercisable only if a person or group acquires more than 25% of the common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of more than 25% of the common stock. Each Right would then entitle the holder to
purchase one-hundredth (1/100) of a share of a new series of preferred stock at an exercise price of $16.00.
If RegeneRx is acquired in a merger or other business combination transaction with, or a significant portion of RegeneRx's business is acquired by, a person or group that has acquired more than 25% of its outstanding common stock, each Right will entitle its holder (other than such person or group or any of their affiliates or associates) to purchase, at the then-current exercise price of the Right, a number of the acquiring company's common shares having a value that is twice such exercise price. In addition, if a person or group acquires more than 25% of RegeneRx's outstanding common stock, each Right will entitle its holder (other than such person or group or any of their affiliates or associates) to purchase, at the then-current exercise price of the Right, a number of shares of common stock having a market value that is twice such exercise price.
Prior to the time that the Rights become exercisable, they are redeemable at the option of the Board of Directors at a redemption price of $0.01 per Right. The Board of Directors is required to redeem the Rights in the event of an all-cash tender offer for all of the outstanding shares of the common stock that meets certain requirements. The Rights will expire on April 29, 2004. The Board of Directors intends to extend the Shareholder Rights Plan for another ten years.
As of December 31, 2003, RegeneRx had 2,206,797 warrants outstanding and 1,225,000 options outstanding.
The transfer agent for the common stock American Stock Transfer and Trust Company of Brooklyn, New York and its telephone number is (718) 921-8208.
PLAN OF DISTRIBUTION
The selling stockholders or their pledgees, donees, transferees, or other successors-in-interest may sell the shares of RegeneRx's common stock from time to time in the over-the-counter market, in regular brokerage transactions, in transactions directly with market makers, in privately negotiated transactions or otherwise. RegeneRx will not receive any proceeds from the sale of the shares by the selling stockholders, but it has agreed to pay the expenses incurred in connection with the registration of the shares. Sales may be made at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at negotiated prices.
The selling stockholders may effect such transactions by selling the shares to or through broker-dealers, and such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of the shares for whom such broker-dealers may act as agents or to whom they sell as principals, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). In connection with distributions of the shares, the selling stockholders may enter into hedging transactions with broker-dealers and the broker-dealers may engage in short sales of the shares in the course of hedging the positions they assume with the selling stockholder. The selling stockholders also may sell the shares short and deliver the shares to close out such short positions. The selling stockholders also may enter into options or other transactions with broker-dealers that involve the delivery of the shares to the broker-dealers, which may then resell or otherwise transfer such shares. The selling stockholders also may loan or pledge the shares to a broker-dealer and the broker-dealer may sell the shares so loaned or upon a default may sell or otherwise transfer the pledged shares.
Selling stockholders may sell any shares that qualify for sale pursuant to Rule 144 under the
Securities Act under Rule 144 rather than pursuant to this prospectus. In addition, shares held by Defiante Farmaceutica, Lda may also qualify for sale pursuant to Regulation S.
The selling stockholders will pay selling commissions or brokerage fees, if any, with respect to the sale of the shares in amounts customary for the type of transaction effected. The selling stockholders will also pay all applicable transfer taxes and all fees and disbursements of counsel for the selling stockholders incurred in connection with the sale of shares.
The selling stockholders have advised RegeneRx that during such time as the selling stockholders may be engaged in the attempt to sell shares registered under this prospectus, that they will:
o not engage in any stabilization activity in connection with any of RegeneRx's securities;
o cause to be furnished to each person to whom shares included in this prospectus may be offered, and to each broker-dealer, if any, through whom shares are offered, such copies of this prospectus, as supplemented or amended, as may be required by such person; and
o not bid for or purchase any of RegeneRx's securities or any rights to acquire RegeneRx's securities, or attempt to induce any person to purchase any of RegeneRx's securities or rights to acquire securities other than as permitted under the Exchange Act.
The selling stockholders and any broker-dealers, agents, underwriters or any other persons who participate with them in the distribution of the shares of RegeneRx's common stock, may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. Any commissions paid or any discounts or concessions allowed to any such persons, and any profits received on resale of the shares, may be deemed to be underwriting discounts and commissions under the Securities Act.
With regard to the shares, RegeneRx has agreed to maintain the effectiveness of this registration statement until two years after the effective date of this registration statement; provided however that if RegeneRx's counsel provides an opinion to the requesting holders, based on factual representations provided by the requesting holders or information filed with the SEC that such holders are not, at the time of such request, RegeneRx's "affiliates," within the meaning of Rule 144 of the Securities Act, then RegeneRx shall not be obligated to extend the effectiveness of the registration statement. No sales may be made pursuant to this registration statement and prospectus after such dates unless RegeneRx amends or supplements this registration statement and prospectus to indicate that RegeneRx has agreed to extend such period of effectiveness.
RegeneRx has agreed to indemnify the selling stockholders against certain liabilities, including liabilities under the Securities Act.
LEGAL PROCEEDINGS
RegeneRx is not currently involved in any material legal proceedings.
LEGAL MATTERS
The validity of the common stock offered hereby has been passed upon by Patton Boggs LLP, Washington, D.C., for RegeneRx and is included as Exhibit 5.1.
EXPERTS
The financial statements included in this prospectus have been audited by Reznick Fedder and Silverman, independent auditors, and have been included in reliance upon the report of such firm included herein.
WHERE YOU CAN FIND MORE INFORMATION
RegeneRx has filed with the Securities and Exchange Commission a registration statement on Form SB-2 under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which forms a part of the registration statement, does not contain all the information set forth in the registration statement, as permitted by the rules and regulations of the Commission. For further information with respect to RegeneRx and the securities offered by this prospectus, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document that RegeneRx has filed as an exhibit to the registration statement are qualified in their entirety by reference to the exhibits for a complete statement of their terms and conditions. The registration statement and other information may be read and copied at the Commission's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
In accordance with the General Corporation Law of the State of Delaware (being Chapter 1 of Title 8 of the Delaware Code), Section 2 of RegeneRx's Certificate of Incorporation provides "To the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, no director of the Corporation shall be liable to the Corporation or its stockholders for breach of his fiduciary duty as a director" and Article VII of the Registrant's Bylaws provides for indemnification of current and former directors, officers, employees or agents of RegeneRx.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or controlling persons of RegeneRx, pursuant to the foregoing provisions, or otherwise, RegeneRx has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable.
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
RegeneRx Biopharmaceuticals, Inc.
We have audited the accompanying balance sheets of RegeneRx Biopharmaceuticals, Inc. as of December 31, 2003 and 2002, and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RegeneRx Biopharmaceuticals, Inc. as of December 31, 2003 and 2002, the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 1, 2004
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RengeneRx Biopharmaceuticals, Inc.
BALANCE SHEETS
December 31, 2003 and 2002
2003 2002
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 1,019,889 $ 474,338
Due from related parties 26,897 24,817
Other current assets 36,428 18,929
------------ ------------
Total current assets 1,083,214 518,084
Fixed assets, net of accumlated depreciation of $7,613 and $5,300 3,377 3,836
Proprietary rights, net of accumulated amortization of
$2,973 and $1,187 23,227 25,013
------------ ------------
Total assets $ 1,109,818 $ 546,933
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 81,268 $ 138,984
Accrued expenses 91,734 78,116
Letter agreements with vendors 20,046 20,046
------------ ------------
Total current liabilities 193,048 237,146
------------ ------------
Commitments -- --
Stockholders' equity
Preferred stock, $.001 par value per share,
1,000,000 authorized; no shares issued -- --
Common stock, par value $.001 per share,
100,000,000 shares authorized; 30,098,968
and 26,965,479 issued and outstanding 30,099 26,966
Additional paid-in capital 40,065,861 38,102,136
Accumulated deficit (39,179,190) (37,519,315)
Stock subscriptions -- (300,000)
------------ ------------
Total stockholders' equity 916,770 309,787
------------ ------------
Total liabilities and stockholders' equity $ 1,109,818 $ 546,933
============ ============
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The accompanying notes are an integral part of these financial statements
RegeneRx Biopharmaceuticals, Inc.
STATEMENTS OF OPERATIONS
Years ended December 31, 2003 and 2002
2003 2002
------------ ------------
Revenue $ -- $ --
------------ ------------
Expenses
Research and development 775,752 885,631
General and administrative 848,743 559,641
------------ ------------
Total expenses 1,624,495 1,445,272
------------ ------------
Operating loss (1,624,495) (1,445,272)
------------ ------------
Other income (expense)
Other income -- 10,648
Interest income 7,57 1 30,077
Interest expense (42,951) --
------------ ------------
Total other income (expense) (35,380) 40,725
------------ ------------
Net loss $ (1,659,875) $ (1,404,547)
============ ============
Basic and diluted net loss per common share $ (0.06) $ (0.05)
------------ ------------
Weighted average number of common shares outstanding 28,522,042 25,560,301
============ ============
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The accompanying notes are an integral part of these financial statements
RegeneRx Biopharmaceuticals, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 2003 and 2002
Common Stock Total
------------------------ Additional Accumulated Stock stockholders'
Shares Amount paid-in capital deficit subscriptions equity
------ ------ --------------- ------- ------------- ------
Balance, December 31, 2001 19,477,429 $ 19,477 $ 36,415,289 $(36,114,768) $ (300,000) 19,998
Issuance of common stock 7,346,383 7,347 1,665,621 -- -- 1,672,968
Exercise of warrants 141,667 142 18,275 -- -- 18,417
Stock option compensation -- -- 2,951 -- -- 2,951
Net loss -- -- -- (1,404,547) -- (1,404,547)
---------- -------- ------------ ------------ ------------ ----------
Balance, December 31, 2002 26,965,479 26,966 38,102,136 (37,519,315) (300,000) 309,787
Issuance of common stock 3,184,713 3,185 1,986,815 -- -- 1,990,000
Issuance of warrants -- 40,648 -- -- 40,648
Exercise of options and warrants 306,500 306 30,345 -- -- 30,651
Repayment and modification of
subscription receivable (357,724) (358) (109,642) -- 300,000 190,000
Stock option compensation -- -- 15,559 -- -- 15,559
Net loss -- -- -- (1,659,875) -- (1,659,875)
---------- ------ ------------ ------------ ------------ ----------
Balance, December 31, 2003 30,098,968 $ 30,099 $ 40,065,861 $(39,179,190) $ -- $ 916,770
========== ======== ============ ============ ============ ==========
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The accompanying notes are an integral part of these financial statements
RegeneRx Biopharmaceuticals, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31, 2003 and 2002
2003 2002
----------- ---------
Cash flows from operating activities:
Net loss (1,659,875) $(1,404,547)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 4,099 3,289
Compensation expense - stock options 15,559 2,951
Interest expense related to issuance of warrants 40,648 --
Write-off of accounts payable -- (43,329)
Changes in operating assets and liabilities:
Increase in other current assets (3,336) (6,298)
Increase in due from related party (2,080) (15,619)
Increase (decrease) in accounts payable (57,716) 123,601
Increase (decrease) in accrued expenses 13,618 52,823
----------- ---------
Net cash used in operating activities (1,649,083) (1,287,129)
----------- ---------
Cash flows from investing activities:
Purchase of fixed assets (1,854) (4,208)
Purchase of license agreement -- (5,000)
----------- ---------
Net cash used in investing activities (1,854) (9,208)
----------- ---------
Cash flows from financing activities:
Proceeds from exercise of warrants 30,651 18,417
Proceeds from issuance of common stock 1,990,000 1,717,000
Repayment of subscription receivable 190,000 --
Deferred stock offering costs (14,163) (65,232)
----------- ---------
Net cash provided by financing activities 2,196,488 1,670,185
----------- ---------
Net increase in cash and cash equivalents 545,551 373,848
Cash and cash equivalents at beginning of period 474,338 100,490
----------- ---------
Cash and cash equivalents at end of period $ 1,019,889 $ 474,338
=========== ===========
Supplemental disclosure of significant noncash investing and
financing activities:
Modification of subscription receivable $ 110,000 $ --
=========== ===========
Issuance of common stock for license agreement $ -- $ 21,200
=========== ===========
|
The accompanying notes are an integral part of these financial statements
REGENERx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
1. ORGANIZATION AND BUSINESS
RegeneRx Biopharmaceuticals, Inc. (the "Company"), a Delaware corporation, was incorporated in 1982. The Company operates predominantly in a single industry segment, the biotechnology industry, which consists of researching and developing new pharmaceutical products for the treatment of diseases or conditions that arise as a result of immune system disorders, including chronic viral infections, cancer and autoimmune disease.
During 1997, the Company entered into a Material Transfer Agreement - Cooperative Research and Development Agreement ("MTA-CRADA") with the National Institutes of Health ("NIH"), pursuant to which an NIH investigator used Thymosin beta 4, provided by the Company, in several studies including clinical trials, for the treatment of non-healing wounds. In exchange for providing the product and other data, the Company received an option to elect to negotiate for an exclusive or non-exclusive commercialization license from NIH pursuant to a patent application filed by NIH in 1998. The Company's option expired on February 11, 1999. The Company's Chairman is a co-inventor on the patent application filed by the NIH. As a result, he had an equal, undivided interest in the intellectual property described in the patent which he subsequently assigned to the Company on May 1, 2000, resulting in full but non-exclusive rights to the Company. On February 6, 2001, the Company signed an exclusive licensing agreement with NIH whereby the Company obtained on exclusive worldwide license to Thymosin beta 4 as a wound-healing drug. In exchange for the exclusive license, the Company must make certain royalty and milestone payments to NIH.
The Company anticipates incurring additional losses in the future as it continues development of Thymosin Beta 4 and expands clinical trials for other indications of Thymosin Beta 4. To achieve profitability, the Company, alone or with others, must successfully develop and commercialize its technologies and proposed products, conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market such technologies and proposed products. The time required to reach profitability is highly uncertain, and there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all.
The Company has incurred negative cash flows from operations since its inception. The Company has expended and expects to continue to expend in the future, substantial funds to complete its planned product development efforts. The Company expects that its existing capital resources will be adequate to fund the Company's projected operations beyond the year ending December 31, 2004, based on current and projected expenditure levels. Management plans to continue to refine its operations, control expenses, evaluate alternative methods to conduct its business, and seek available and attractive sources of financing and sharing of development costs through strategic collaboration agreements or other resources. Should appropriate sources of financing not be available, management would delay certain clinical trials and research activities until such time as appropriate financing was available. There can be no assurance that the Company's financing efforts will be successful. If adequate funds are not available, our financial condition and results of operations will be materially and adversely affected.
Should the Company obtain substantial additional funding, other factors including competition, dependence on third parties, uncertainty regarding patents, protection of proprietary rights, manufacturing of peptides and technology obsolescence could have a significant impact on the Company and its operations.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
The Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents. The Company primarily invests excess cash in high-quality, liquid money market instruments (principally government and government agency notes and bills) maintained by financial institutions. Cash and cash equivalents are stated at cost which approximates fair value.
Fixed assets are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs which do not significantly prolong the useful lives of the assets are charged to expense. Depreciation is computed using the straight-line method over the estimated useful lives of two to ten years.
Proprietary rights are stated at cost and amortized using the straight-line method over the remaining life of approximately 15 years.
The Company will recognize revenue from royalties from sales when received. The Company will recognize consulting revenue as the consulting services are performed.
Research and development costs are expensed as incurred. Research and development performed by third parties is expensed based upon the third party's stage of product development.
The Company accounts for income taxes using the asset and liability approach, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying and tax bases of assets and liabilities. A valuation allowance is recorded if, based upon the evidence available, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has entered into letter agreements with two vendors which are due on demand. As of December 31, 2003 and 2002, respectively, $20,046, remains payable to these vendors.
The estimated fair values of the Company's cash and cash equivalents, due from related parties, accounts payable, letter agreements with vendors and accrued expenses approximate their carrying values, due to their short-term nature.
Loss Per Share
--------------
2003 2002
------------ ------------
Net loss available for common shareholders (A) $ (1,659,875) $ (1,404,547)
============ ============
Average outstanding:
Common stock (B) 28,522,042 25,560,301
Stock options and warrants -- --
------------ ------------
Common stock and stock equivalents (C) 28,522,042 25,560,301
============ ============
Loss per share:
Basic (A/B) $ (0.06) $ (0.05)
Diluted (A/C) $ (0.06) $ (0.05)
|
Unexercised employee stock options and warrants, which were previously granted, to purchase 3,431,797 and 2,528,297 shares of the Company's common stock as of December 31, 2003 and 2002, respectively, were not included in the computations of diluted earnings per share. The Company incurred a net loss for the years ended December 31, 2003 and 2002, therefore, all potential common shares are antidilutive and not included in the calculation of diluted net loss per share.
The Company uses the intrinsic-value method in accounting for its employee stock options rather than the alternative fair value accounting method. Companies that follow the intrinsic-value method must provide pro forma disclosure of the impact of applying the fair-value method.
Transactions with nonemployees in which consideration is received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Effective January 1, 2003, the Company adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123." SFAS No. 148 provides additional transition guidance for those entities that elect to voluntarily adopt the accounting provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 148 also mandates certain new disclosures that are incremental to those required by SFAS No. 123.
The following table summarizes relevant information as to reported results under the Company's intrinsic-value method of accounting for stock awards, with supplemental information as if the fair value recognition provisions had been applied:
For the Years Ended December 31,
2003 2002
----------- -----------
Net loss, as reported $(1,659,875) $(1,404,547)
Less: stock-based compensation (97,973) (98,034)
----------- -----------
Adjusted net loss $(1,757,848) $(1,502,581)
=========== ===========
Basic and diluted loss per share - as reported $ (0.06) $ (0.06)
Basic and diluted loss per share - as adjusted $ (0.06) $ (0.06)
|
The fair value for each option granted was estimated as the date of grant using the Black-Scholes option-pricing model, assuming no expected dividends and the following assumptions:
2003 2002
----------- -----------
Risk free rate of return 3.72% 3.98%
Expected life (in years) 10 10
Volatility 145.98% 191.37%
|
In November 2002, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. ("FIN") 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34." FIN 45 clarifies the requirements of SFAS No. 5, "Accounting for Contingencies," relating to the guarantor's accounting for, and disclosure of, the issuance of certain types of guarantees. The adoption of FIN 45 did not have a material impact on either the operating results or financial position of the Company. The Company has complied with the disclosure provisions of FIN 45.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
3. LICENSES
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures financial instruments. The standard is effective for new or modified contracts after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on either the operating results or financial position of the Company.
On April 23, 2002, the Company issued 40,000 shares of common stock pursuant to a license agreement with Morris A. Mann, M.D. through which the Company obtained an exclusive world-wide license to a certain patent related to Thymosin beta 4. In addition, the Company paid a license fee of $5,000 and will be required to pay royalties on future revenues related to the licensed patent. As of December 31, 2003, no such royalties have been incurred or paid by the Company.
The Company has a worldwide license to certain uses of Thymosin beta 4 under a research agreement with George Washington University ("GWU") under which the Company is obligated to pay GWU a royalty of 4% on commercial sales. No such royalties have been incurred or paid as of December 31, 2003.
4. RELATED PARTY TRANSACTIONS
The Company had entered into a note receivable agreement with the Chairman of the Company in the original amount of $115,617. The note bore interest at 11.5% and was repayable in equal monthly installments. Payments on the note receivable were recognized as income by the Company when received and a total of $22,000 in payments were received in 2002. In March 2002, the Board of Directors agreed to forgive the remaining balance of $42,000 on the loan.
In addition to his position with the Company, the Chairman of the Company is also Chairman of the Department of Biochemistry and Molecular Biology at GWU. The Company has not funded any research personally conducted by the Chairman, and anticipates that any future funding, if any, will also be limited to research projects performed by principal investigators at GWU other than Chairman. No funding was provided during 2003 or 2002.
The Company has made advances to two officers which are non-interest bearing and due on demand. At December 31, 2003 and 2002, $26,897 and $24,817, respectively, are due from the officers.
In February 2003, the Board of Directors approved the modification of the subscription notes receivable agreements between the Company and two officers totaling $150,000 for the purchase of Common Stock. Under the modified agreements, the two officers paid a total of $40,000 and returned 357,724 shares of Common Stock to the Company.
In September 2003, the Company entered into a consulting agreement for a term of one year with an affiliate of an outside director of the Company. As consideration for certain business consulting services, the Company agreed to pay $4,000 per month. During the year ended December 31, 2003, the Company paid $16,000 under the agreement.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
Fixed assets consist of the following:
December 31,
-----------------
2003 2002
------- -------
Furniture and equipment $10,990 $ 9,136
Less: accumulated depreciation 7,613 5,300
------- -------
$ 3,377 $ 3,836
======= =======
Accrued expenses consist of the following:
December 31,
-----------------
2003 2002
------- -------
Directors' bonus $ -- $43,060
Directors' fees -- 9,082
Professional fees 84,612 24,000
Other 7,122 1,974
------- -------
$91,734 $78,116
======= =======
6. NOTES PAYABLE AND STOCKHOLDERS' EQUITY
Common Stock and Warrants
-------------------------
|
During 1997, the Company completed a private placement of Units in which it sold a total of five Units at a price of $50,000 per Unit. Each Unit consisted of (i) 500,000 shares of Common Stock and (ii) 165,000 Class D Warrants, each of which is exercisable to purchase one share of Common Stock at an exercise price of $.10 per share and has a term of 10 years.
In June 1997, the Company entered into an agreement with an unrelated third party to provide financial advisory services. The agreement stipulated compensation for services to be performed at $10,000 and warrants to purchase 360,000 shares of the Company's Common Stock. The warrants became exercisable one year after the date of grant at a price equal to the 20-day average price per share for the period immediately prior to the grant date. The warrants expire five years subsequent to the grant date. During the year ended December 31, 2002, $7,424 of accrued expenses for services performed were written off.
During October 1997, the Company received a $60,000 unsecured loan bearing interest of 8% per annum. The note was paid in full during 1999, including accrued interest. Additionally, during July 1997, the Company received a $50,000 unsecured loan from an individual to provide additional operating capital. The terms of the loan agreement provided for repayment within six months with interest at the rate of 8% per annum.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
6. NOTES PAYABLE AND STOCKHOLDERS' EQUITY (Continued)
Additionally, the noteholder received a warrant to purchase 100,000 shares of the Company's Common Stock at $.13 per share. The warrant has a term of five years. In January 1998, the terms of the note were amended to provide for monthly repayment of the loan in equal amounts from January through June 1998. In consideration of the amended terms, the noteholder received an additional warrant to purchase 41,666 shares of the Company's Common Stock at $.13 per share with a term of five years. The note principal and accrued interest was repaid in full during 1998. During the year ended December 31, 2002, the warrants were exercised.
In April 1994, the Board of Directors adopted a Shareholders Rights Plan, pursuant to which it declared a dividend distribution of one Preferred Stock Purchase Right ("Right") for each outstanding share of Common Stock. The dividend distribution was payable to stockholders of record at the close of business April 29, 1994.
The Rights can become exercisable only if a person or group acquires more than 25% of the Common Stock or announces a tender offer, the consummation of which would result in ownership by a person or group of more than 25% of the Common Stock. Each Right would then entitle the holder to purchase one-hundredth (1/100) of a share of a new series of preferred stock at an exercise price of $16.00.
If the Company is acquired in a merger or other business combination transaction with, or a significant portion of the Company's business is acquired by, a person or group that has acquired more than 25% of its outstanding Common Stock, each Right will entitle its holder (other than such person or group or any of their affiliates or associates) to purchase, at the then-current exercise price of the Right, a number of the acquiring company's common shares having a value that is twice such exercise price. In addition, if a person or group acquires more than 25% of the Company's outstanding Common Stock, each Right will entitle its holder (other than such person or group or any of their affiliates or associates) to purchase, at the then-current exercise price of the Right, a number of shares of Common Stock having a market value that is twice such exercise price.
Prior to the time that the Rights become exercisable, they are redeemable at the option of the Board of Directors at a redemption price of $0.01 per Right. The Board of Directors is required to redeem the Rights in the event of an all-cash tender offer for all of the outstanding shares of the Common Stock that meets certain requirements. The Rights will expire on April 29, 2004.
In March 2002, the Company completed a private placement of its common stock. Under the terms of the private placement, the Company sold 7,346,383 restricted shares of its common stock at a price of $.235 per share. The total funds raised, net of offering costs, in the private placement amounted to $1,672,968.
In June 2003, the Company completed the sale of 3,184,713 shares of its common stock pursuant to a private placement at a price of $.628 per share to Defiante Farmaceutica, L.d.a. ("Defiante"), a Portuguese company that is a wholly owned subsidiary of Sigma-Tau, S.p.A., a pharmaceutical company headquartered in Rome, Italy. The Company received proceeds, net of offering costs, of $1,990,000. In addition, the Company granted Defiante warrants to purchase 750,000 shares of its common stock at a price of $1.00 per share, exercisable through December 2005 and 600,000 shares of its common stock at a price of $1.25, exercisable between December 11, 2003 and December 11, 2004.
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
6. NOTES PAYABLE AND STOCKHOLDERS' EQUITY (Continued)
In May 2003, the Company entered into Bridge Loan Agreements (the "Bridge Loans") with certain shareholders. The Bridge Loans totaling $400,000, accrued interest at 10% per annum and were scheduled to mature in November 2005. In addition, the Company issued warrants to purchase 200,000 shares of its common stock at $.10 per share. The principal and accrued interest were repaid in June 2003. The Company recorded interest expense of $40,648 related to the issuance of the warrants.
The Company accounts for stock based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Under APB No. 25, compensation cost is measured as the excess, if any, of the quoted market price on the Company's Common Stock at the date of the grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. Generally, the Company's policy is to grant options with an exercise price equal to the quoted market price of the Company's Common Stock on the grant date. Effective January 1, 2003, the Company adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS 123." The following table summarizes relevant information as to reported results under the Company's intrinsic-value method of accounting for stock awards, with supplemental information as if the fair value recognition provisions had been applied:
For the Years Ended December 31,
--------------------------
2003 2002
----------- -----------
Net loss, as reported $(1,659,875) $(1,404,547)
Less: stock-based compensation (97,973) (98,034)
----------- -----------
Adjusted net loss $(1,757,848) $(1,502,581)
=========== ===========
Basic and diluted loss per share - as reported $ (0.06) $ (0.06)
Basic and diluted loss per share - as adjusted $ (0.06) $ (0.06)
|
During 2002, the Company granted 900,000 options to members of the Board of Directors and 85,000 options to members of the Medical Advisory Board. During 2003, the Company granted 15,000 options to an employee and 15,000 options to a consultant. The grant price was equal or greater than the fair market price of the common stock at the date of the grant.
During 2000, a Stock Option and Incentive Plan was approved under which a Board of Directors committee may grant options to purchase shares of common stock of the Company up to 1,000,000 shares. The number of options that can be granted may increase based on shares repurchased by the Company or surrendered to the Company in payment of the exercise prices of options granted under the plan. Options may be granted only to
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
6. NOTES PAYABLE AND STOCKHOLDERS' EQUITY (Continued)
directors, officers or employees of or consultants or advisors to the Company and options granted to any participant cannot exceed 100,000 shares in any one year. The exercise price of the options are to be determined by the Plan committee but shall never be less than the fair market value of the Common Stock on the date of the grant.
During 2002, the Board of Directors of the Company approved the amended and restated 2000 Stock Option and Incentive Plan increasing the number of options that can be granted annually to an individual from 100,000 to 450,000 and increasing number of authorized shares reserved for issuance under the plan increased from 1,000,000 to 2,500,000.
The Directors Stock Option Plan was adopted by the Board of Directors and approved by the stockholders in 1987. Under the Plan, options to purchase 10,000 shares of Common Stock are granted automatically to each person who becomes a director after April 10, 1987, and who, at the time such person becomes a director, is not an employee of the Company. Options granted under the Plan have an exercise price per share equal to the fair market value of the Common Stock on the date of the grant. In 1992, the Plan was amended, with the approval of stockholders at the 1992 Annual Meeting (i) to add an automatic annual grant to each non-employee director of an option to purchase 5,000 shares of Common Stock if the individual is re-elected as a Director at the Annual Meeting, and (ii) to increase to 200,000 the number of shares of Common Stock issuable under the Plan. Options granted under the Plan have a ten-year term and become exercisable in 20% increments beginning on the date of the grant and on each anniversary date thereafter. The Plan expired in 1997. As of December 31, 2003, 10,000 options were outstanding under the Plan.
The following table summarizes the Company's stock options, warrants and rights activity for 2003 and 2002:
Weighted
Number Exercise average
of shares price range exercise price
--------- --------------- --------------
Outstanding, December 31, 2001 1,556,666 $0.04 to $10.50 $ 0.24
Granted 1,123,297 0.25 to 0.45 0.28
Exercised (141,666) 0.13 0.13
Terminated (10,000) 9.50 9.50
--------- --------------- ---------
Outstanding, December 31, 2002 2,528,297 $0.04 to $10.50 0.23
Granted 1,580,000 0.10 to 1.25 0.98
Exercised (306,500) 0.10 0.10
Terminated (370,000) 0.12 to 10.50 0.40
--------- --------------- ---------
Outstanding, December 31, 2003 3,431,797 $0.04 to $10.50 $ 0.57
========= =============== =========
|
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
6. NOTES PAYABLE AND STOCKHOLDERS' EQUITY (Continued)
The following table summarizes information about the options, warrants and rights outstanding at December 31, 2003:
Options, warrants and rights Options, warrants and
outstanding rights exercisable
--------------------------------------------------------------
Weighted
average
remaining
contractual Weighted Weighted
Number life average Number average
Range of exercise prices Outstanding (Years) exercise Outstanding exercise
------------------------ ----------- ------- -------- ----------- --------
$0.085 25,000 7.01 $ 0.085 25,000 $ 0.085
0.10 to 0.53 2,041,797 5.87 0.22 1,574,247 0.20
1.00 to 1.25 1,365,000 4.18 1.11 1,365,000 1.11
--------- ---------
3,431,797 2,964,247
========= ==========
|
In August 1999, the Company granted 7,500,000 options, at an exercise price of $0.04. All 7,500,000 of these options were exercised in 2000 with payment in the form of four subscription notes receivable agreements totaling $300,000 and consulting services valued at $7,500. The notes bore interest at the rate of 6.09% with interest paid quarterly. The Company earned interest income of $18,270 on these notes, and as of December 31, 2002, there was a stock subscription receivable of $300,000. The notes matured in February 2003, at which time, two of the subscription notes receivable totaling $150,000 were repaid and the Board of Directors approved the modification of the subscription notes receivable agreements between the Company and two officers totaling $150,000 for the purchase of common stock. Under the modified agreements, the two officers paid a total of $40,000 and returned 357,724 shares of common stock to the Company.
7. INCOME TAXES
Deferred tax assets are comprised of the following:
December 31,
----------------------------
2003 2002
------------ ------------
Net operating loss carryforwards $ 14,168,000 $ 13,873,000
Capital loss carryforward 200,000 231,000
Research and development tax credit 602,000 614,000
------------ ------------
14,970,000 14,718,000
Valuation allowance (14,970,000) (14,718,000)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
|
RegeneRx Biopharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Years ended December 31, 2003 and 2002
7. INCOME TAXES (Continued)
The Company has provided a full valuation allowance for deferred tax assets since realization of these future benefits cannot be reasonably assured as a result of recurring operating losses. If the Company achieves profitability, these deferred tax assets would be available to offset future income tax liabilities and expense, subject to certain limitations.
At December 31, 2003, the Company had net operating loss, capital loss and research and development tax credit carryforwards of approximately $37.8 million, $.6 million and $.6 million, respectively, for income tax purposes which expire in various years through 2023. Certain substantial changes in the Company's ownership would result in an annual limitation on the amount of the net operating loss carryforwards which can be utilized.
8. COMMITMENTS
In August 1999, the Company entered into an agreement to lease office space in Bethesda, Maryland. The lease was for a period of three months and expired on November 30, 1999. Under the terms of the lease agreement, the lease automatically renewed upon expiration for an additional three months, unless either the Company or the lessor provided notice of termination of the lease 60 days prior to expiration. In April 2002, the Company entered into an agreement to lease additional office space. The lease was for a period of twelve months. Under the terms of the lease agreement, the lease renewed automatically upon expiration for an additional twelve months, unless either the Company or the leaser provides notice of termination of the lease as described in the agreement. In December 2003, the Company entered into a new one-year lease agreement which included all existing office space plus additional office space required by the Company. The Company's rent expense for 2003 and 2002 was $38,892 and $32,961, respectively. The future minimum lease payments for the year ending December 31, 2004 are $27,192.
The Company has entered into employment contracts with two executives. The agreements are three years in length and provide for minimum salary levels, an option to purchase shares of the Company's stock and include incentive bonuses determined by the Board of Directors of the Company. The aggregate minimum commitment for future salaries, excluding bonuses, as of December 31, 2003 is approximately $285,000.
9. SUBSEQUENT EVENTS
On January 21, 2004, the Company entered into a Thymosin Beta 4 License and Supply Agreement (the Agreement) with Defiante, to grant to Defiante the exclusive right to use Thymosin Beta 4 to conduct research and development activities in Europe. Under the Agreement, the Company will receive fees and royalty payments based on a percentage of sales of Thymosin Beta 4 - related products by Defiante, as defined. The term of the Agreement is the later of the expiration of any patents developed under the Agreement, any marketing rights or 2016.
9. SUBSEQUENT EVENTS (Continued)
On January 23, 2004, the Company completed a private placement of its common stock. Under the terms of the private placement, the Company sold 2,393,580 shares of common stock at $.95 per share. In addition, the Company granted 598,397 warrants, each of which is exercisable immediately to purchase one share of common stock at an exercise price of $1.50 per share and has a term of 30 months. The total funds raised in the private placement totaled approximately $2.3 million.
PART II-- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2 of RegeneRx's Certificate of Incorporation provides that "To the fullest extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time, no director of the Corporation shall be liable to the Corporation or its stockholders for breach of his fiduciary duty as a director." In accordance with the General Corporation Law of the State of Delaware (being Chapter 1 of Title 8 of the Delaware Code), Article VII of the Registrant's Bylaws provides as follows (note the "Company" is referred to as the "Corporation" in Article VII):
ARTICLE VII: INDEMNIFICATION:
Section 7.1 Actions Other Than by or in the Right of the Corporation. Subject to Section 7.3 hereof, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to hereinafter as an "Indemnitee"), against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonable incurred by the person in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a pleas of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his conduct was unlawful.
Section 7.2 Actions by or in the Right of the Corporation. Subject to
Section 7.3 hereof, the Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact
that he is or was an Indemnitee (as defined above) against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
Section 7.3 Determination of Right of Indemnification. Any indemnification under this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Indemnitee is proper in the
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circumstances because he has met the applicable standard of conduct set forth in Section 7.1 or Section 7.2 hereof, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case.
Section 7.4 Good Faith Defined. For purposes of any determination under
Section 7.3 hereof, a person shall be deemed to have acted in good
faith and in a manner he reasonable believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of
account of the Corporation or another enterprise, or on information
supplied to him by the officers of the Corporation or another
enterprise in the court of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or
records given or reports made to the Corporation or another enterprise
by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this
Section 7.4 shall mean any other corporation or any partnership, joint
venture, trust or other enterprise of which such person is or was
serving at the request of the corporation as a director, officer,
employee or agent. The provisions of this Section 7.4 shall not be
deemed to be exclusive or to limit in any way the circumstances in
which a person may be deemed to have met the applicable standard of
conduct set forth in Section 7.1 or Section 7.2 hereof, as the case may
be.
Section 7.5 Advances of Expenses. Except as limited by Section 7.6 hereof, expenses (including attorneys' fees) incurred by an Indemnitee in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding if the Indemnitee shall undertake to repay such amount in the event that it is ultimately determined, as provided herein, that such person is not entitled to be indemnified by the Corporation. Notwithstanding the foregoing, no advance shall be made by the Corporation if a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum of disinterested directors, or if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that, based upon the facts known to the Board or counsel at the time such determination is made, such person did not meet the applicable standard of conduct set forth in Section 7.1 or Section 7.2 hereof, as the case may be.
Section 7.6 Right of Indemnitee to Indemnification Upon Application; Procedure Upon Application. Any indemnification or advancement of expenses under this Article VII shall be made promptly, and in any event within ninety (90) days, upon the written request of the Indemnitee, unless a determination is reasonably and promptly made pursuant to Section 7.3 or Section 7.5 hereof, as the case may be, that such Indemnitee has not met the applicable standard of conduct set forth in Section 7.1 or Section 7.2 hereof, as the case may be. The right to indemnification or advancement of expenses under this Article VII shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Board of Directors or independent legal counsel denies, in whole or in part, the Indemnitee's request for indemnification or advancement of expenses or if no disposition of such request is made within ninety (90) days. The basis of indemnification or advancement of expenses by a court shall be a determination by such court that indemnification or advancement of expenses of the Indemnitee is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 7.1 or Section 7.2 hereof, as the case may be. Notice of any application to a court by an Indemnitee under this Section 7.6 shall be given to the Corporation promptly upon the filing of such application. The Indemnitee's expenses actually and reasonably incurred in connection with successfully
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establishing his right to indemnification or advancement of expenses, in whole or in part, in any such action shall also be indemnified by the Corporation.
Section 7.7 Non-Exclusivity and Survival of Indemnification. The indemnification and advancement of expenses provided by this Article VII shall to be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), bylaw, agreement, contract, vote of stockholders or disinterested Directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office or while employed by the Corporation, it being the policy of the Corporation that indemnification of Indemnitees shall be made to the fullest extent permitted by law. The provisions of this Article VII shall not be deemed to preclude the indemnification of any person who is not an Indemnitee but whom the Corporation has the power or obligation to indemnify under the provisions of the Delaware General Corporation Law, or otherwise. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be an Indemnitee and shall inure to the benefit of the heirs, executors and administrators of such person. All rights to indemnification and advancement of expenses under this Article VII shall be deemed to be provided by a contract between the Corporation and each Indemnitee who serves or served in such capacity at any time while this Article VII and other relevant provisions of the General Corporation Law and other applicable law, if any, are in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
Section 7.8 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VII.
Section 7.9 Constituent Corporations. For purpose of this Article VII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
Section 7.10 Other Enterprises, Fines and Serving At Corporation's Request. For purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any services as a director, officer, employee, or trustee of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee
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benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of any employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VII.
Section 7.11 Savings Clause. If this Article VII or any portion thereof shall be invalidated on any ground by a court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal or administrative, and whether internal or external, including a grand jury proceeding and an action or suit brought by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VII that shall not have been invalidated, or by any other applicable law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be incurred in connection with the issuance and distribution of the securities being registered. All expenses will be paid by RegeneRx.
Securities and Exchange Commission Registration Fee $ 569
Printing Expenses $ 5,000
Accounting Fees and Expenses $ 20,000
Legal Fees and Expenses $ 50,000
Miscellaneous $ 5,000
----------
Total $ 80,569
=========
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ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following are the sales by the company of unregistered securities during the past three years:
In January 2004, RegeneRx issued 2,393,580 shares to a number of investors for $2,273,900 (and warrants to purchase an additional 598,397 shares). These shares are the subject of this Registration Statement for the resale of such shares filed on March 9, 2004.
In June 2003, RegeneRx issued 3,184,713 shares to one investor for $2,000,000 (and warrants to purchase up to an additional $1,500,000). For such offering, the company relied on Section 4(2) and Regulation S.
In May 2003, RegeneRx issued warrants to purchase 200,000 shares of common stock in connection with loan agreements with certain shareholders.
In March 2002, RegeneRx issued 7,346,383 shares to several investors for $1,700,000.
With respect to the sale of unregistered securities referenced above, all transactions were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, or Securities Act, and Regulation D promulgated under the Securities Act (unless otherwise noted). In each instance, the purchaser had access to sufficient information regarding RegeneRx so as to make an informed investment decision. More
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specifically, RegeneRx had a reasonable basis to believe that each purchaser was an "accredited investor" as defined in Regulation D of the Securities Act and otherwise had the requisite sophistication to make an investment in RegeneRx's common stock.
ITEM 27. EXHIBITS
Exhibit No. Description of Exhibit Reference*
----------- ---------------------- ----------
3.1 Restated Certificate of Incorporation of Company Exhibit 3.1 to Registration Statement
No. 33-9370, Amendment No. 1 (filed
November 26, 1986)
3.2 Amendment to Restated Certificate of Incorporation of Company Exhibit 3.2 to RegeneRx's
Transitional Report on Form 10-K,
File No. 0-15070 (filed March 18, 1991)
3.3 Amendment to Restated Certificate of Incorporation of Company Exhibit 3.3 to RegeneRx's Annual
Report on Form 10-KSB, File No.
0-15070 (filed April 2, 2001)
3.4 Bylaws of Company Exhibit 3.2 to Registration Statement
No. 33-9370 (filed October 8, 1986)
3.5 Amendment No. 1 to Bylaws of Company adopted August 11, 1989 Exhibit 4.7 to Registration Statement
No. 33-34551, Amendment No. 3(filed
June 21, 1990)
3.6 Amendment No. 2 to Bylaws of Company Exhibit 4.8 to Registration Statement
adopted June 18, 1990 No. 33-34551, Amendment No. 3 (filed
June 21, 1990)
3.7 Amendment No. 3 to Bylaws of Company Exhibit 3.6 to RegeneRx's
adopted November 30, 1990 Transitional Report on Form 10-K,
File No. 0-15070 (filed March 18,
1991)
4.1 Form of Stock Certificate Exhibit 4.1 to Registration Statement
No. 33-9370, Amendment No. 1 (filed
November 26, 1986)
4.2 Rights Agreement, dated as of April 29, 1994, Exhibit 1 to RegeneRx's Current
between RegeneRx and American Stock Report on Form 8-K, File No. 0-15070
Transfer & Trust Company, as Rights Agent (filed May 2, 1994)
4.3 Warrant Agreement, dated March 12, 1997 Exhibit 4.3 to RegeneRx's Annual
Report on Form 10-K, File No. 0-15070
(filed March 31, 1997)
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4.4 Warrant Agreement, dated January 23, 2004 Filed herewith
5.1 Opinion of Patton Boggs LLP, as to the legality of the common To be filed by amendment
stock registered hereby
10.1 Patent License Agreement - Exclusive, between the U.S. Public Exhibit 10.1 to RegeneRx's Annual
Health Service and RegeneRx Report on Form 10-KSB, File No.
0-15070 (filed April 2, 2001)**
10.3 Amended and Restated Directors Stock Option Exhibit 10.25 to RegeneRx's Annual
Plan Report on Form 10-K, File No. 0-15070
(filed March 26, 1993)
10.4 2000 Stock Option and Incentive Plan Filed as an Appendix to RegeneRx's
preliminary proxy materials, File No.
0-15070 (filed September 29, 2000)
10.5 Unit Purchase Agreement dated March 12, 1997 Exhibit 10.25 to RegeneRx's Annual
Report on Form 10-K, File No. 0-15070
(filed March 31, 1997)
10.6 Registration Rights Agreement, dated March 12, 1997 Exhibit 10.26 to RegeneRx's Annual
Report on Form 10-K, File No. 0-15070
(filed March 31, 1997)
10.7 Lease Agreement dated April 5, 2002 between RegeneRx and HQ Exhibit 10.7 to RegeneRx' Annual
Global Workplaces, Inc. Report on Form 10-KSB, File No.
0-15070 (filed March 31, 2003)
10.8 Employment Agreement Filed herewith
10.9 Employment Agreement Filed herewith
10.10 License Agreement Filed herewith***
10.11 Securities Purchase Agreement Filed herewith
23.1 Consent of Patton Boggs LLP (included in Exhibit 5) To be filed by amendment
23.2 Consent of Reznick Fedder & Silverman, P.C. Filed herewith
31.1 Certification dated March 8, 2004 Certification pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
(filed herewith)
32.1 Certification dated March 8, 2004 Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act
of 2002 (filed herewith)
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ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales of securities are being made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;
unless the information required by (i) and (ii) is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated by reference into this Registration Statement;
(2) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Bethesda, State of Maryland on March 8, 2004.
REGENERX BIOPHARMACEUTICALS, INC.
(Registrant)
March 8, 2004 By: /s/J.J. Finkelstein
--------------------------------------
J.J. Finkelstein
President and Chief Executive Officer
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In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated:
Signature Title Date
--------- ----- ----
/s/Allan L. Goldstein Chairman of the Board, Chief Scientific March 8, 2004
------------------------------------ Advisor, and Director
Allan L. Goldstein
/s/ J.J. Finkelstein President, Chief Executive Officer, and March 8, 2004
------------------------------------ Director
J.J. Finkelstein
/s/ Albert Rosenfeld Secretary, Treasurer, and Director March 8, 2004
------------------------------------
Albert Rosenfeld
/s/ Joseph C. McNay Director March 8, 2004
------------------------------------
Joseph C. McNay
/s/ Richard J. Hindin Director March 8, 2004
------------------------------------
Richard J. Hindin
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EXHIBIT 4.4
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 6 OF THIS WARRANT.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK
THIS CERTIFIES THAT, for value received, ______________ and his assignees are entitled to subscribe for and purchase _________ shares of the fully paid and nonassessable Common Stock, (as adjusted pursuant to Section 4 hereof, the "Shares") of RegeneRx Biopharmaceuticals, Inc., a Delaware corporation (the "Company"), at a price per share of $1.50 (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean the Company's Common Stock, and any stock into or for which such Common Stock may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean the Date of Grant listed on the signature page hereof, and (c) the term "Other Warrants" shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of this Warrant. The term "Warrant" as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise.
1. TERM. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through thirty (30) months after the Date of Grant.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified check, or by wire transfer to an account
designated by the Company (a "Wire Transfer") of an amount equal to the
applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A duly completed and executed) at the principal
office of the Company together with notice of arrangements
reasonably satisfactory to the Company for payment to the Company either by certified or bank check or by Wire Transfer from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the applicable Warrant Price per share multiplied by the number of Shares then being purchased. The person or persons in whose name(s) any certificate(s) representing shares of Common Stock shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty (30) days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period.
3. STOCK FULLY PAID; RESERVATION OF SHARES. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant.
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock, theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger by a holder of the number of shares of Common Stock, then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4 and, in the case of a new Warrant issuable after conversion of the authorized shares of the Common Stock shall provide for antidilution protection that shall be as nearly equivalent as may be practicable to the antidilution provisions applicable to the
Series Preferred on the Date of Grant. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination, effective at the close of business on the date the subdivision or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Common Stock payable in Common Stock, or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in Sections 4(a) and 4(b)), of Common Stock then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter.
5. FRACTIONAL SHARES. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors.
6. COMPLIANCE WITH ACT; DISPOSITION OF WARRANT OR SHARES OF COMMON STOCK.
(a) Compliance with Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act or any applicable state securities laws. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act and any applicable state securities laws or an exemption from such registration is available, the holder hereof shall confirm in writing that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale in violation of the Act and shall confirm such other matters related thereto as may be reasonably requested by the Company. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 6 OF THE WARRANT
UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR
INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder, at such time as the restrictions on the transfer of the applicable security shall have terminated. In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof in violation of the Act.
(2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder's investment intent as expressed herein.
(3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and qualified under any applicable state securities laws, or unless exemptions from registration and qualification are otherwise available. The holder is aware of the provisions of Rule 144, promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, or other evidence, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or such shares Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Promptly upon
receiving such written notice and reasonably satisfactory opinion or other evidence, if so requested, the Company, as promptly as practicable but no later than fifteen (15) days after receipt of the written notice, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 6(b) that the opinion of counsel for the holder or other evidence is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof after such determination has been made. Notwithstanding the foregoing, this Warrant or such shares of Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Common Stock thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 6(b) above shall apply to any transfer of, or grant of a security interest in, this Warrant (or the Common Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of the holder if the holder is a partnership, (ii) to a partnership of which the holder is a partner, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, if applicable, the transferee shall on the Company's request agree in writing to be bound by the terms of this Warrant as if an original signatory hereto.
7. RIGHTS AS STOCKHOLDERS; INFORMATION. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the stockholders.
8. ADDITIONAL RIGHTS.
8.1. Mergers. The Company shall provide the holder of this Warrant with at least twenty (20) days' notice of the terms and conditions of any of the following potential transactions: (i) the sale, lease, exchange, conveyance or other disposition of all or substantially all of the Company's property or business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly owned subsidiary of the Company), or any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of. The Company will reasonably cooperate with the holder in arranging the sale of this Warrant in connection with any such transaction.
9. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies;
(b) The shares of Common Stock have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable;
(c) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Certificate or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any material indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby; and
(d) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.
11. NOTICES. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the
Company's assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise or conversion of this Warrant, in whole or in part, upon request of the holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the holder hereof in respect of any rights (including, without limitation, any right to registration of the Shares) to which the holder hereof shall continue to be entitled after such exercise or conversion in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the holder hereof in respect of such rights.
13. LOST WARRANTS OR STOCK CERTIFICATES. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.
14. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.
15. GOVERNING LAW. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Delaware.
16. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative.
17. REMEDIES. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant.
18. NO IMPAIRMENT OF RIGHTS. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.
19. SEVERABILITY. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.
20. RECOVERY OF LITIGATION COSTS. If any legal action or other proceeding is brought for the enforcement of this Warrant, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Warrant, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.
21. ENTIRE AGREEMENT; MODIFICATION. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.
REGENERX BIOPHARMACEUTICALS, INC.
a Delaware corporation
By: /s/ J.J. Finkelstein
------------------------------------------------
Title: /s/ President and Chief Executive Officer
------------------------------------------------
Address: Bethesda Metro Center - Suite 700
-------------------------------------------
Bethesda, Maryland 20814
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|
Date of Grant: January 23, 2004
SCHEDULE OF WARRANT HOLDERS:
--------------------------------------------------------------------------------
DEFIANTE FARMACEUTICA L.D.A. DLJSC IRA FBO RICHARD J. HINDIN
a Portuguese corporation Name: Richard J. Hindin
Name: Mr. Pedro Moreira da Cruz Quintas Warrant:19,737 shares
Title: Director
Warrant: 263,158 shares
--------------------------------------------------------------------------------
Name: Joseph C. McNay Name: Alan Nordlinger
Warrant: 26,316 shares Warrant: 26,316 shares
--------------------------------------------------------------------------------
Name: Sheldon Kamins Name: David C. Silver
Warrant: 13,158 shares Warrant: 18,421 shares
--------------------------------------------------------------------------------
Name: Barry P. Taff Name: Dave M. Muchnikoff
Warrant: 13,158 shares Warrant: 15,790 shares
--------------------------------------------------------------------------------
Name: Brian L. Alpert Name: Lynn Alpert by Brian L. Alpert,
-------------------------------
attorney in fact
----------------
Warrant: 13,158 shares Warrant: 26,316 shares
--------------------------------------------------------------------------------
Name: Lawrence J. Eisenberg Name: Norman Freidkin
Warrant: 13,158 shares Warrant: 27,000 shares
--------------------------------------------------------------------------------
Name: Dennis F. Ratner Name: Michael L. Nash, Kristine M.
Nash
Warrant: 13,500 shares Warrant: 13,158 shares
--------------------------------------------------------------------------------
Name: Ross H. & Donna Tish Spicer Name: G. Kent Humphries & Debbie
Humphries JT TEN
Warrant: 13,158 shares Warrant: 13,158 shares
--------------------------------------------------------------------------------
Name: G. Kent Humphries Cust. for Name: G. Kent Humphries Cust. for
Devon Ann Humphries UTMA/MD Garrett Kent Humphries UTMA/MD
Warrant: 2,632 shares Warrant: 2,632 shares
|
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Name: G. Kent Humphries Cust. for Taylor Name: William Bateman
Kent Humphries UTMA/MD
Warrant: 2,632 shares
--------------------------------------------------------------------------------
Name: Marc J. Loundas Name: Bernard Wolfe
Warrant: 13,158 shares Warrant: 6,579 shares
--------------------------------------------------------------------------------
Name: Lee & Karen Hindin (JT) Name: Sam & Joan LeBauer (JT)
Warrant: 13,158 shares Warrant: 13,158 shares
--------------------------------------------------------------------------------
REGEN ASSOCIATES, LLC
Name: Mark Rabin
Warrant: 15,789 shares
|
EXHIBIT A
NOTICE OF EXERCISE
To: RegeneRx Biopharmaceuticals, Inc.
1. The undersigned hereby:
[ ] elects to purchase __________ shares of Common Stock of RegeneRx Biopharmaceuticals, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below:
3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares, all except as in compliance with applicable securities laws.
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January 1, 2002 (the "Effective Date") between REGENERX BIOPHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and DR. ALLAN L. GOLDSTEIN (the "Executive").
RECITALS
WHEREAS, the Executive possesses substantial knowledge and experience with respect to the Company's business; and
WHEREAS, the Company desires to employ the Executive to have the benefits of his expertise and knowledge. The Executive, in turn, desires employment with the Company. The parties, therefore, enter into this Agreement to establish the terms and conditions of the Executive's employment with the Company.
In consideration of the mutual covenants and representations contained in this Agreement, the Company and the Executive agree as follows:
1. EMPLOYMENT OF EXECUTIVE; POSITION. The Company agrees to employ the Executive and the Executive agrees to be employed by the Company as the Chairman and Chief Scientific Advisor subject to the terms and conditions of this Agreement. The Executive shall devote such time to the affairs of the Company as is necessary to perform his duties under this Agreement. The Company recognizes and agrees that, so long as the Executive shall be reasonably available to perform his duties hereunder, he may engage in other businesses and may render services to other persons. In particular, the Company agrees that the Executive may continue to be employed by the George Washington Universality in Washington, DC (the "University"), and it is understood that the Executive's activities on behalf of the Company will not conflict with faculty guidelines with the University. In addition, the Executive may engage in any activities in the scientific community that maintain or advance his professional status, such as serving as an officer in scientific societies, lecturing at academic institutions, authoring papers and books, and engaging in research collaborations with other professionals so long as such activities do not conflict with his responsibilities to the Company.
2. TERM OF EMPLOYMENT AND RENEWAL. The term of Executive's employment under this
Agreement will commence on the Effective Date. Subject to the provisions of
Section 13 of this Agreement, the term of Executive's employment hereunder shall
be for an initial term of three (3) years from the Effective Date (the "Initial
Term"). The Initial Term of this Agreement shall be automatically extended for
successive one (1) year periods (each a "Renewal Period") unless the Company or
the Executive gives written notice to the other at least thirty (30) days prior
to the expiration of the Initial Term, or a Renewal Period, of such party's
election not to extend this Agreement. References herein to the "Term" shall
mean the Initial Term as it may be so extended by one or more Renewal Periods.
The last day of the Term is the "Expiration Date."
3. DUTIES. During the Employment Period, the Executive shall serve as the Chairman of the Company's Board of Directors and shall perform such duties and responsibilities as are customarily associated with his position and such other duties not inconsistent with his title and
position and as may be assigned to him by the Company. Executive shall act in conformity with the written and oral policies of the Company and within the limits, budgets, business plans and instructions as set by its Board of Directors (the "Board"). Executive shall be subject to the authority of the Board and the Company's duly appointed officers.
4. PLACE OF EMPLOYMENT. Executive acknowledges that the Company's offices and headquarters are currently located in the County of Montgomery, State of Maryland and that shall be the initial site of Executive's employment.
5. OTHER EMPLOYMENT POLICIES. The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control.
6. COMPENSATION.
6.1 BASE SALARY. Executive shall receive an annual base salary of One Hundred and Ten Thousand U.S. Dollars (US$110,000) (the "base salary"), subject to standard federal and state payroll withholding requirements. The base salary shall be payable in equal periodic installments which are not less than on a monthly basis. The base salary shall not be adjusted downward without the written consent of the Executive, except in a circumstance which is part of a general reduction or other concessionary arrangement affecting all employees or affecting senior executive officers.
6.2 Bonus. The Executive shall be eligible to receive an annual bonus in such amount as shall be determined in the sole discretion of the Board of Directors of the Company.
7. STOCK.
7.1 Stock Options. As of the Effective Date, the Company shall grant the Executive, pursuant to the Company's 2000 Stock Option and Incentive Plan (the "Plan"), an option to purchase 300,000 shares of the Company's common stock at a purchase price equal to the fair market value as determined in accordance with the Plan and which shall have the terms and conditions set forth in the Plan and the Company's standard notice of grant which shall be provided to the Executive upon the date of the stock option grant provided for herein, vesting as long as the Executive is employed by the Company as to 34% of the option shares on the first anniversary of the grant, and in twenty-four (24) equal monthly installments thereafter.
7.2 ACCELERATION CLAUSE FOR STOCK VESTING. In the event of (a) Executive's termination without Cause as that term is defined in section 13.2 of this Agreement; or (b) a Change In Control event as is set forth under Section 12.1 of this Agreement, the Executive's Stock shall be immediately vested and released from the Company's repurchase option.
8. BENEFITS. Executive shall be entitled to (i) participate in and receive all standard employee benefits under applicable Company welfare benefits plans and programs (if and when such benefits are established by the Company) to the same extent as other senior executives of
the Company; (ii) participate in all applicable incentive plans, including stock option, stock, bonus, savings and retirement plans provided by the Company (if and when such plans are established by the Company), which are offered to senior executive officers in the company; (iii) receive such perquisites as the Company may establish from time to time which are commiserate with Executive's position and comparable to those received by other senior executives of the Company; (iv) paid vacation of at least four (4) weeks per annum; and (v) holidays, leaves of absence and leaves for illness and temporary disability in accordance with the policies of the Company and federal, state and local law.
9. OUTSIDE ACTIVITIES.
9.1 OTHER EMPLOYMENT/ENTERPRISE. Except with the prior written consent of the Board, Executive will not, while employed by the Company undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor or as permitted by Section 1 of this Agreement, so long as such activities do not materially interfere or conflict with the performance of his duties hereunder.
9.2 CONFLICTING INTERESTS. Except as permitted by Section 1, while employed by the Company, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
10. PROPRIETARY INFORMATION, NONSOLICITATION, NONCOMPETITION AND INVENTIONS ASSIGNMENT OBLIGATIONS. As a condition of employment, Executive agrees to execute and abide by the Proprietary Information, Nonsolicitation, Noncompetition and Inventions Assignment Agreement attached as Exhibit A to this Agreement.
11. FORMER EMPLOYMENT
11.1 NO CONFLICT WITH EXISTING OBLIGATIONS. Executive represents that his performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement or obligation of any kind made prior to his employment by the Company, including agreements or obligations he may have with prior employers or entities for which he has provided services or continues to provide services. Executive has not entered into, and agrees he will not enter into, any agreement or obligation either written or oral in conflict herewith.
11.2 NO DISCLOSURE OF CONFIDENTIAL INFORMATION. If, in spite of the second sentence of Section 11.1, Executive should find that confidential information belonging to any former employer might be usable in connection with the Company's business, Executive will not intentionally disclose to the Company or use on behalf of the Company any confidential information belonging to any of Executive's former employers (except in accordance with agreements between the Company and any such former employer); but during Executive's employment by the Company he will use in the performance of his duties all information which is generally known and used by persons with training and experience comparable to his own and all information which is common knowledge in the industry or otherwise legally in the public domain.
12. CHANGE OF CONTROL.
12.1 DEFINITION. "Change of Control" shall be deemed to occur upon any of the following events:
(A) the dissolution or liquidation of the Company;
(B) the sale of all or substantially all of the assets of the Company to an unrelated person or entity;
(C) a merger, reorganization or consolidation in which the holders of the Company's outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the surviving or resulting entity immediately upon completion of such transaction;
(D) the sale of all of the Stock of the Company to an unrelated person or entity; or
(E) if any "individual, firm, corporation, or other entity, or any group (as defined in ss. 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (1) a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company or (2) the Executive becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of (A) the outstanding shares of common stock of the Company, or (B) the combined voting power of the Company's then-outstanding securities entitled to vote generally in the election of directors, or
(F) any other transaction in which the owners of the Company's outstanding voting power prior to such transaction do not own at least a majority of the outstanding voting power of the relevant entity after the transaction, in each case, regardless of the form thereof.
12.2 SEVERANCE. In the event the Executive's employment is terminated without Cause, as defined in Section 13.1 of this Agreement, or the employee terminates this Agreement for any reason within 12 months after a change of control event, as defined in Section 12.1, the Company shall pay Executive not later than thirty (30) days following the date of termination, a lump sum payment in an amount equal to the Executive's then annual base salary less all federal and state withholdings, as severance pay ("Severance"). To receive such payment, the Executive will be required to execute a general release of liability with the Company substantially in the form attached hereto as Exhibit B (and as may be amended or modified prior to execution by the Company to comply with changing laws or legal norms) on or before the effective date of termination (the "General Release").
13. TERMINATION. The parties acknowledge that Executive's employment with the Company is at-will. The provisions of Sections 13.1 through 13.5 govern the amount of compensation, if any, to be provided to Executive upon termination of employment and do not alter this at-will status.
13.1 TERMINATION BY THE COMPANY WITHOUT CAUSE.
(A) The Company shall have the right to terminate Executive's employment with the Company at any time without Cause (as that term is defined in section 14.2) by giving notice as described in Section 13.6 of this Agreement.
(B) In the event Executive's employment is terminated without Cause, the Company shall pay Executive Severance, provided, that, the Executive shall not receive Severance unless and until the General Release becomes effective.
13.2 TERMINATION BY COMPANY FOR CAUSE.
(A) The Company, by action of its Board, may terminate the Executive's employment under this Agreement for Cause at any time by giving notice as described in Section 13.6 of this Agreement.
(B) "Cause" for termination means: (i) refusal, failure or neglect to perform the material duties of his employment under this Agreement (other than by reason of the Executive's physical or mental illness or impairment); (ii) committing willful dishonesty, fraud, embezzlement or misconduct with respect to the business or affairs of the Company; (iii) indictment or conviction of a felony or of any crime involving dishonesty or moral turpitude; or (iv) Executive's refusal to abide by or comply with the directives of the Board.
(C) In the event Executive's employment is terminated at any time with cause, he will not receive Severance or any further compensation.
13.3 VOLUNTARY TERMINATION BY EXECUTIVE.
(A) Executive may voluntarily terminate his employment with the Company at any time by giving notice as described in Section 13.6.
(B) In the event Executive voluntarily terminates his employment, he will not receive Severance or any further compensation.
13.4 TERMINATION FOR INABILITY TO REGULARLY PERFORM DUTIES.
(A) Company may terminate Executive in the event of Executive's death, or any illness, disability or other incapacity in such a manner that Executive is rendered unable regularly to perform his duties hereunder for more than either one hundred twenty (120) consecutive days or more than a total of one hundred eighty (180) days in any consecutive twelve (12) month period, unless otherwise prohibited by any applicable federal, state, or local law or ordinance.
(B) The determination regarding whether Executive is unable regularly to perform his duties under (a) above shall be made by a doctor mutually acceptable to the Executive and the Company. Executive's inability to be physically present on the Company's premises shall not constitute a presumption that Executive is unable to perform such duties.
(C) In the event Executive's employment is terminated due to his inability to regularly perform his duties under (a) above, then, the Company pay Executive Severance, provided, that the General Release becomes effective.
13.5 RESIGNATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may resign his employment for "GOOD REASON" by giving notice as described in Section 13.6 of this Agreement.
(A) "GOOD REASON" is defined as (i) a material change in Executive's
function, duties, or responsibilities with the Company, which change would cause
Executive's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof, unless consented to by the
Executive, (ii) a relocation of Executive's principal place of employment by
more than 60 miles from its location at the effective date of this Agreement,
unless consented to by the Executive, (iii) a material reduction in the benefits
and perquisites to the Executive from those being provided as of the effective
date of this Agreement, unless consented to by the Executive, or (iv) any
material failure by the Company to pay or provide the compensation and benefits
under this Agreement except any such circumstance which is part of a general
reduction or other concessionary arrangement affecting all employees or
affecting senior executive officers. In each such event listed in (i) through
(iv) above, the Executive shall give the Company notice thereof which shall
specify in reasonable detail the circumstances constituting Good Reason, and
there shall be no Good Reason with respect to any such circumstances cured by
the Company within thirty (30) days after such notice.
(B) In the event of Executive's resignation with Good Reason, the Company shall pay Executive Severance, provided that the General Release becomes effective.
(C) If the Executive terminates employment for any reason other than those listed in Section 13.5(a), the termination will not be for Good Reason and the Executive will not be entitled to Severance or any further compensation.
13.6 NOTICE; EFFECTIVE DATE OF TERMINATION. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:
(A) thirty (30) days after Executive, for any reason, gives written notice to the Company of his termination;
(B) thirty (30) days after the Company, for any reason, gives written notice to Executive of his termination;
(C) Executive will receive compensation through the 30-day notice period in the event of termination for any reason. However, the Company reserves the right to require that the Executive not perform any services or report to work during the 30-day notice period.
14. NOTICES. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by hand, telecopier, or telex) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his address as listed on the Company payroll.
15. VALIDITY; COMPLETE AGREEMENT. This Agreement and its Exhibit constitute the entire agreement between Executive and the Company. This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supercedes any prior oral discussions or written communications and agreements. This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in writing signed by an authorized officer of the Company.
16. WAIVER. If either party should waive any breach of any provisions of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
17. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.
18. AMENDMENT. This Agreement shall not be modified or amended except by written agreement of the parties hereto.
19. CHOICE OF LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the law of the State of Maryland regardless of the choice of law provisions of the State of Maryland or any other jurisdiction. The Parties consent to the exclusive jurisdiction of the federal and state courts in Maryland.
20. ARBITRATION OF DISPUTES. Any controversy or claim arising out of this Agreement or any aspect of the Executive's relationship with the Company including the cessation thereof shall be resolved by arbitration in accordance with the then existing Employment Dispute Resolution Rules of the American Arbitration Association, in Montgomery County, Maryland, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The parties shall split equally the costs of arbitration, except that each party shall pay its own attorneys' fees. The parties agree that the award of the arbitrator shall be final and binding.
21. INDEMNIFICATION. During the term of this Agreement, the Executive shall be entitled to coverage under any liability insurance procured by Company to the same extent as other senior executives at the Company.
22. COUNTERPART. This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement.
23. DELAY; PARTIAL EXERCISE. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
24. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.
25. ADVICE OF COUNSEL. The Executive and the Company hereby acknowledge that each party has had adequate opportunity to review this Agreement, to obtain the advice of counsel with respect to this Agreement, and to reflect upon and consider the terms and conditions of this Agreement. The parties further acknowledge that each party fully understands the terms of this Agreement and has voluntarily executed this Agreement. The Company shall pay the legal fees and costs incurred by the Executive in connection with the negotiation and preparation of this Agreement, upon the presentation of invoices in appropriate form.
26. HEADINGS. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.
"EXECUTIVE"
Dr. Allan L. Goldstein
/s/ Allan L. Goldstein ----------------------------------------- By: Dr. Allan L. Goldstein |
"THE COMPANY"
RegeneRx Biopharmaceuticals, Inc.
/s/ J.J. Finkelstein ----------------------------------------- By: Title: President & CEO |
EXHIBIT B
NON-COMPETITION, PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
As a condition of my employment, and in consideration of the compensation now and hereafter paid to me, by RegeneRx Biopharmaceuticals, Inc., a Delaware corporation (the "COMPANY"), I, Dr. Allan L. Goldstein, agree to the following:
1. MAINTAINING CONFIDENTIAL INFORMATION
(A) COMPANY INFORMATION. I agree at all times during the term of my employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation, without the written authorization of the Board of Directors of the Company, any trade secrets, confidential knowledge, data or other proprietary information of the Company. By way of illustration and not limitation, this shall include information relating to products, processes, know-how, designs, formulae, methods, samples, developmental or experimental work, improvements, discoveries, plans for research and new products, plans for marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers, and information regarding the skills and compensation of other employees of the Company.
(B) FORMER EMPLOYER INFORMATION. I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of my former or concurrent employers or companies, if any, and that I will not bring onto the premises of the Company any unpublished documents or any property belonging to my former or concurrent employers or companies unless previously and specifically consented to in writing by the particular employer or company.
(C) THIRD PARTY INFORMATION. I recognize that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. I agree that I owe the Company and such third parties, both during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to, except as is consistent with the Company's agreement with the third party, disclose it to any person, firm or corporation or use it for the benefit of anyone other than the Company or such third party, unless expressly authorized to act otherwise by an officer of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS
(A) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE COMPANY. I agree that I will make prompt written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company all my right, title and interest in and to any ideas, inventions, original works of authorship, developments, improvements or trade secrets (i) which I may solely or jointly conceive or reduce to practice, or cause to be conceived or reduced
to practice, during the period of my employment with the Company, or (ii) which I previously or jointly conceived or reduced to practice as a result of any work performed by me in any prior relationship with the Company, or which I previously developed at any time after I first entered into such relationship with the Company, using the Company's equipment, supplies, facilities, trade secrets or inventions.
Notwithstanding the foregoing, the Company recognizes and agrees that as of the date of this Agreement, I have certain right, title or interest in and to certain discoveries, inventions, improvements, patents (and applications therefore), copyrights, ideas, know-how, laboratory notebooks, creations or properties. The Company agrees that any right, title or interest in any discoveries, inventions, improvements, patents (and applications therefore), copyrights, ideas, know-how, laboratory notebooks, creations or properties to which I am entitled as of the date of this Agreement shall remain my exclusive property and the Company shall have no interest therein. The Company also recognizes that I am subject to certain agreements, specifically agreements with Hoffmann-La Roche, Inc., The George Washington University and the University of Texas, under which Hoffmann-La Roche, Inc., The George Washington University and the University of Texas may have certain right, title, and interest in and to discoveries, inventions, improvements, patents (and applications therefore), copyrights, ideas, know-how, laboratory notebooks, creations or properties discovered or developed by me. However, to the extent that I, during the term of employment with the Company, acquire any right, title or interest in and to any discoveries, inventions, improvements, patents (and applications therefore), copyrights, ideas, know-how, laboratory notebooks, creations or properties arising from or, in any way related to, my services for the Company, those proprietary rights shall become and remain the exclusive property of the Company, and I shall have no interests therein.
(B) OBTAINING LETTERS PATENT, COPYRIGHT REGISTRATIONS AND OTHER
PROTECTIONS.
(I) I will assist the Company in every proper way to obtain and enforce United States and foreign proprietary rights relating to any and all inventions, original works of authorship, developments, improvements or trade secrets of the Company in any and all countries. To that end I will execute, verify and deliver (A) such documents and perform such other acts (including appearing as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such proprietary rights and the assignment thereof and (B) assignments of such proprietary rights to the Company or its designee.
(II) My obligation to assist the Company with respect to proprietary rights in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company's request on such assistance.
(III) In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney-in-fact, to act for and on my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by
me. Such appointment is coupled with an interest. I hereby waive and quitclaim to the Company any and all claims of any nature whatsoever which I now or may hereafter have for infringement of any proprietary rights assigned to the Company.
(C) OBLIGATION TO KEEP THE COMPANY INFORMED. In addition to my obligations under paragraph 2(b) above, during the period of my employment and for one year after termination of my employment for any reason, I will promptly disclose to the Company fully and in writing all patent applications filed by me or on my behalf that relates to any known proprietary rights generally used by the Company as of such date.
3. NO CONFLICTS OR SOLICITATION
I agree that during the period of my employment by the Company I will not, without the Company's express written consent, engage in any other employment or business activity directly related to the business in which the Company is now involved or becomes involved, nor will I engage in any other activities which conflict with my obligations to the Company. For the period of my employment by the Company and for one year after the date of termination of my employment by the Company I will not (a) induce any employee of the Company to leave the employ of the Company or (b) solicit the business (as it relates to the business in which the Company is now involved or becomes involved) of any client or customer of the Company (other than on behalf of the Company). If any restriction set forth in this section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4. COVENANT NOT TO COMPETE
(A) Without the prior written consent of the Company, for the period of my employment by the Company and for one year following my termination, I will not directly or indirectly engage in (whether as an employee, consultant, proprietor, sales representative, partner, director or otherwise), or have any ownership interest in, or participation the financing, operation, management or control of, any person, firm, corporation or business that engages in a "Restricted Business" in a "Restricted Territory" (as defined below). It is agreed that ownership of no more than one percent of the outstanding voting stock of a publicly traded corporation shall not constitute a violation of this provision or require prior written consent of the Company.
(B) As used herein, the terms:
(I) "RESTRICTED BUSINESS" shall mean any business selling any products or services in competition with the business of the Company and its affiliates, as of the date hereof and/or as of the date of my termination of employment.
(II) "RESTRICTED TERRITORY" shall mean Montgomery County, Maryland.
(C) If any restriction set forth in this section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over
the maximum period of time, range of activities or geographic area as to which it may be enforceable.
5. NO CONFLICTING OBLIGATIONS
I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement or obligation of mine relating to any time prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement or my employment.
6. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, together with all copies thereof (in whatever medium recorded) belonging to the Company, its successors or assigns whether kept at the Company, home or elsewhere. I further agree that any property situated on the Company's premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with notice.
7. NOTIFICATION OF NEW EMPLOYER
In the event that I leave the employ of the Company, I hereby consent to the Company's notification of my new employer of my rights and obligations under this Agreement.
8. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access to and become acquainted with the proprietary information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. In the event any litigation or other proceedings brought by any party to enforce its rights hereunder, the prevailing party shall be entitled to recover and shall be awarded its reasonable attorneys fees.
9. GENERAL PROVISIONS
(A) NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in this Agreement shall confer any right with respect to continuation of my employment by the Company, nor shall it interfere in any way with my right or the Company's right to terminate my employment at any time, with or without cause.
(B) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will be governed by and construed according to the laws of the State of Maryland, excluding conflicts of laws principles. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Montgomery County, Maryland for any lawsuit filed there against me by the Company arising from or relating to this Agreement.
(C) ENTIRE AGREEMENT. This Agreement, and Exhibit A attached hereto and hereby incorporated herein, sets forth the final, complete and exclusive agreement and understanding between the Company and me relating to the subject matter hereof and supersedes all prior and contemporaneous understandings and agreements relating to its subject matter. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing with a specific reference to this Agreement and signed by both the Company and me. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
(D) SEVERABILITY. If one or more of the provisions in this Agreement are deemed unenforceable by law, then the remaining provisions will continue in full force and effect.
(E) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors and its assigns.
(F) SURVIVAL. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.
(G) WAIVER. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.
(H) NOTICE. All notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery or, if sent by certified or registered mail, postage prepaid, five days after the date of mailing.
[SIGNATURE PAGE FOLLOWS ON NEXT PAGE]
This Agreement shall be effective as of the first day of my employment with the Company, namely: January 1, 2002.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MADE IN MY PRIOR RELATIONSHIPS WITH THE COMPANY OR DURING MY EMPLOYMENT, RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT, AND RESTRICTS MY RIGHTS TO COMPETE WITH THE COMPANY.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Date: January 1, 2002 /s/ Allan L. Goldstein
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Dr. Allan L. Goldstein
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ACCEPTED AND AGREED TO:
REGENERX BIOPHARMEUCETICALS, INC.
By: /s/ J.J. Finkelstein
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J.J. Finkelstein
Chief Executive Officer
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January 1, 2002 (the "Effective Date") between REGENERX BIOPHARMACEUTICALS, INC., a Delaware corporation (the "Company"), and J.J. FINKELSTEIN (the "Executive").
RECITALS
WHEREAS, the Executive possesses substantial knowledge and experience with respect to the Company's business; and
WHEREAS, the Company desires to employ the Executive to have the benefits of his expertise and knowledge. The Executive, in turn, desires employment with the Company. The parties, therefore, enter into this Agreement to establish the terms and conditions of the Executive's employment with the Company.
In consideration of the mutual covenants and representations contained in this Agreement, the Company and the Executive agree as follows:
1. EMPLOYMENT OF EXECUTIVE; POSITION. The Company agrees to employ the Executive and the Executive agrees to be employed by the Company as the President and Chief Executive Officer subject to the terms and conditions of this Agreement. In connection therewith, Executive shall devote his best efforts, experience and judgement and all of his business time and attention (except for vacation periods as set forth herein and reasonable periods of illness or other incapacities permitted by the Company's general employment policies) to the business of the Company.
2. TERM OF EMPLOYMENT AND RENEWAL. The term of Executive's employment under this
Agreement will commence on the Effective Date. Subject to the provisions of
Section 13 of this Agreement, the term of Executive's employment hereunder shall
be for an initial term of three (3) years from the Effective Date (the "Initial
Term"). The Initial Term of this Agreement shall be automatically extended for
successive one (1) year periods (each a "Renewal Period") unless the Company or
the Executive gives written notice to the other at least thirty (30) days prior
to the expiration of the Initial Term, or a Renewal Period, of such party's
election not to extend this Agreement. References herein to the "Term" shall
mean the Initial Term as it may be so extended by one or more Renewal Periods.
The last day of the Term is the "Expiration Date."
3. DUTIES. During the Employment Period, the Executive shall serve in an Executive capacity and shall perform such duties and responsibilities as are customarily associated with his position and such other duties not inconsistent with his title and position and as may be assigned to him by the Company. Executive shall act in conformity with the written and oral policies of the Company and within the limits, budgets, business plans and instructions as set by its Board of Directors (the "Board"). Executive shall be subject to the authority of the Board and the Company's duly appointed officers.
4. PLACE OF EMPLOYMENT. Executive acknowledges that the Company's offices and headquarters are currently located in the County of Montgomery, State of Maryland and that shall be the initial site of Executive's employment.
5. OTHER EMPLOYMENT POLICIES. The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control.
6. COMPENSATION.
6.1 BASE SALARY. Executive shall receive an annual base salary of One Hundred and Seventy Five Thousand U.S. Dollars (US$175,000) (the "base salary"), subject to standard federal and state payroll withholding requirements. The base salary shall be payable in equal periodic installments which are not less than on a monthly basis. The base salary shall not be adjusted downward without the written consent of the Executive, except in a circumstance which is part of a general reduction or other concessionary arrangement affecting all employees or affecting senior executive officers.
6.2 Bonus. The Executive shall be eligible to receive an annual bonus in such amount as shall be determined in the sole discretion of the Board of Directors of the Company.
7. STOCK.
7.1 Stock Options. As of the Effective Date, the Company shall grant the Executive, pursuant to the Company's 2000 Stock Option and Incentive Plan (the "Plan"), an option to purchase 500,000 shares of the Company's common stock at a purchase price equal to the fair market value as determined in accordance with the Plan and which shall have the terms and conditions set forth in the Plan and the Company's standard notice of grant which shall be provided to the Executive upon the date of the stock option grant provided for herein, vesting as long as the Executive is employed by the Company as to 34% of the option shares on the first anniversary of the grant, and in twenty-four (24) equal monthly installments thereafter.
7.2 ACCELERATION CLAUSE FOR STOCK VESTING. In the event of (a) Executive's termination without Cause as that term is defined in section 13.2 of this Agreement; or (b) a Change In Control event as is set forth under Section 12.1 of this Agreement, the Executive's Stock shall be immediately vested and released from the Company's repurchase option.
8. BENEFITS. Executive shall be entitled to (i) participate in and receive all
standard employee benefits under applicable Company welfare benefits plans and
programs (if and when such benefits are established by the Company) to the same
extent as other senior executives of the Company; (ii) participate in all
applicable incentive plans, including stock option, stock, bonus, savings and
retirement plans provided by the Company (if and when such plans are established
by the Company), which are offered to senior executive officers in the company;
(iii) receive such perquisites as the Company may establish from time to time
which are commiserate with Executive's position and comparable to those received
by other senior executives of the
Company; (iv) paid vacation of at least four (4) weeks per annum; and (v) holidays, leaves of absence and leaves for illness and temporary disability in accordance with the policies of the Company and federal, state and local law. The Company shall procure and maintain in effect during the Term (a) life insurance policy covering the life of the Executive with coverage in the amount of not less than $1,000,000 and (ii) disability insurance policy with coverage in the maximum amount allowable or appropriate as determined by the Executive's base salary, provided, however, that the Company shall not be obligated to pay more than $600 per month (as may be adjusted by mutual agreement of the Executive and the Company), in the aggregate, for life and disability coverage. Any premium payments or other payments in excess of such amount shall be paid by the Executive.
9. OUTSIDE ACTIVITIES.
9.1 OTHER EMPLOYMENT/ENTERPRISE. Except with the prior written consent of the Company's Board of Directors, Executive will not, while employed by the Company undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for-profit activities or serve as a member of a not-for-profit or for-profit board of directors so long as such activities do not materially interfere or conflict with the performance of his duties hereunder.
9.2 CONFLICTING INTERESTS. Except as permitted by Section 9.3, while employed by the Company, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by him to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
9.3 COMPETING ENTERPRISES. While employed by the Company, except on behalf of the Company, Executive will not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which were known by him to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, he may own, as a passive investor, securities of any public competitor corporation, so long as his direct holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation.
10. PROPRIETARY INFORMATION, NONSOLICITATION, NONCOMPETITION AND INVENTIONS ASSIGNMENT OBLIGATIONS. As a condition of employment, Executive agrees to execute and abide by the Proprietary Information, Nonsolicitation, Noncompetition and Inventions Assignment Agreement attached as Exhibit A to this Agreement.
11. FORMER EMPLOYMENT
11.1 NO CONFLICT WITH EXISTING OBLIGATIONS. Executive represents that his performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement or obligation of any kind made prior to his employment by the
Company, including agreements or obligations he may have with prior employers or entities for which he has provided services. Executive has not entered into, and agrees he will not enter into, any agreement or obligation either written or oral in conflict herewith.
11.2 NO DISCLOSURE OF CONFIDENTIAL INFORMATION. If, in spite of the second sentence of Section 11.1, Executive should find that confidential information belonging to any former employer might be usable in connection with the Company's business, Executive will not intentionally disclose to the Company or use on behalf of the Company any confidential information belonging to any of Executive's former employers (except in accordance with agreements between the Company and any such former employer); but during Executive's employment by the Company he will use in the performance of his duties all information which is generally known and used by persons with training and experience comparable to his own and all information which is common knowledge in the industry or otherwise legally in the public domain.
12. CHANGE OF CONTROL.
12.1 DEFINITION. "Change of Control" shall be deemed to occur upon any of the following events:
(A) the dissolution or liquidation of the Company;
(B) the sale of all or substantially all of the assets of the Company to an unrelated person or entity;
(C) a merger, reorganization or consolidation in which the holders of the Company's outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the surviving or resulting entity immediately upon completion of such transaction;
(D) the sale of all of the Stock of the Company to an unrelated person or entity; or
(E) if any "individual, firm, corporation, or other entity, or any group (as defined in ss. 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (1) a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company or (2) the Executive becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of (A) the outstanding shares of common stock of the Company, or (B) the combined voting power of the Company's then-outstanding securities entitled to vote generally in the election of directors, or
(F) any other transaction in which the owners of the Company's outstanding voting power prior to such transaction do not own at least a majority of the outstanding voting power of the relevant entity after the transaction, in each case, regardless of the form thereof.
12.2 SEVERANCE. In the event the Executive's employment is terminated without Cause, as defined in Section 13.1 of this Agreement, or the employee terminates this Agreement
for any reason within 12 months after a change of control event, as defined in
Section 12.1, the Company shall pay Executive not later than thirty (30) days
following the date of termination, a lump sum payment in an amount equal to the
Executive's then annual base salary less all federal and state withholdings, as
severance pay ("Severance Payment"). To receive such payment, the Executive will
be required to execute a general release of liability with the Company
substantially in the form attached hereto as Exhibit B (and as may be amended or
modified prior to execution by the Company to comply with changing laws or legal
norms) on or before the effective date of termination (the "General Release").
In addition, the Company shall reimburse the Executive for premiums he pays for
life and disability insurance for a 12 month period if Executive executes the
General Release. Such reimbursement, in the aggregate, will be capped at the
$600 (or such other amount if the Company `s premium payment obligation is
adjusted in accordance with Section 8) per month. The Company's reimbursement
obligation is conditioned on the Executive providing written verification of his
premium payments to the Company, and the reimbursement obligation will end
immediately if the Executive obtains life and/or disability insurance from any
other source during the 12 month post-termination period ("Severance Benefits",
together with the Severance Payment, "Severance").
13. TERMINATION. The parties acknowledge that Executive's employment with the Company is at-will. The provisions of Sections 13.1 through 13.5 govern the amount of compensation, if any, to be provided to Executive upon termination of employment and do not alter this at-will status.
13.1 TERMINATION BY THE COMPANY WITHOUT CAUSE.
(A) The Company shall have the right to terminate Executive's employment with the Company at any time without Cause (as that term is defined in section 14.2) by giving notice as described in Section 13.6 of this Agreement.
(B) In the event Executive's employment is terminated without Cause, the Company shall pay Executive Severance, provided, that, the Executive shall not receive Severance unless and until the General Release becomes effective.
13.2 TERMINATION BY COMPANY FOR CAUSE.
(A) The Company, by action of its Board, may terminate the Executive's employment under this Agreement for Cause at any time by giving notice as described in Section 13.6 of this Agreement.
(B) "Cause" for termination means: (i) refusal, failure or neglect to perform the material duties of his employment under this Agreement (other than by reason of the Executive's physical or mental illness or impairment); (ii) committing willful dishonesty, fraud, embezzlement or misconduct with respect to the business or affairs of the Company; (iii) indictment or conviction of a felony or of any crime involving dishonesty or moral turpitude; or (iv) Executive's refusal to abide by or comply with the directives of the Board.
(C) In the event Executive's employment is terminated at any time with cause, he will not receive Severance pay or any further compensation.
13.3 VOLUNTARY TERMINATION BY EXECUTIVE.
(A) Executive may voluntarily terminate his employment with the Company at any time by giving notice as described in Section 13.6.
(B) In the event Executive voluntarily terminates his employment, he will not receive Severance or any further compensation.
13.4 TERMINATION FOR INABILITY TO REGULARLY PERFORM DUTIES.
(A) Company may terminate Executive in the event of Executive's death, or any illness, disability or other incapacity in such a manner that Executive is rendered unable regularly to perform his duties hereunder for more than either one hundred twenty (120) consecutive days or more than a total of one hundred eighty (180) days in any consecutive twelve (12) month period, unless otherwise prohibited by any applicable federal, state, or local law or ordinance.
(B) The determination regarding whether Executive is unable regularly to perform his duties under (a) above shall be made by a doctor mutually acceptable to the Executive and the Company. Executive's inability to be physically present on the Company's premises shall not constitute a presumption that Executive is unable to perform such duties.
(C) In the event Executive's employment is terminated due to his inability to regularly perform his duties under (a) above, then, the Company pay Executive Severance, provided, that the General Release becomes effective.
13.5 RESIGNATION BY THE EXECUTIVE FOR GOOD REASON. The Executive may resign his employment for "GOOD REASON" by giving notice as described in Section 13.6 of this Agreement.
(A) "GOOD REASON" is defined as (i) a material change in Executive's
function, duties, or responsibilities with the Company, which change would cause
Executive's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof, unless consented to by the
Executive, (ii) a relocation of Executive's principal place of employment by
more than 60 miles from its location at the effective date of this Agreement,
unless consented to by the Executive, (iii) a material reduction in the benefits
and perquisites to the Executive from those being provided as of the effective
date of this Agreement, unless consented to by the Executive, or (iv) any
material failure by the Company to pay or provide the compensation and benefits
under this Agreement except any such circumstance which is part of a general
reduction or other concessionary arrangement affecting all employees or
affecting senior executive officers. In each such event listed in (i) through
(iv) above, the Executive shall give the Company notice thereof which shall
specify in reasonable detail the circumstances constituting Good Reason, and
there shall be no Good Reason with respect to any such circumstances cured by
the Company within thirty (30) days after such notice.
(B) In the event of Executive's resignation with Good Reason, the Company shall pay Executive Severance, provided that the General Release becomes effective.
(C) If the Executive terminates employment for any reason other than those listed in Section 13.5(a), the termination will not be for Good Reason and the Executive will not be entitled to Severance or any further compensation.
13.6 NOTICE; EFFECTIVE DATE OF TERMINATION. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:
(A) thirty (30) days after Executive, for any reason, gives written notice to the Company of his termination;
(B) thirty (30) days after the Company, for any reason, gives written notice to Executive of his termination;
(C) Executive will receive compensation through the 30-day notice period in the event of termination for any reason. However, the Company reserves the right to require that the Executive not perform any services or report to work during the 30-day notice period.
14. NOTICES. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by hand, telecopier, or telex) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his address as listed on the Company payroll.
15. VALIDITY; COMPLETE AGREEMENT. This Agreement and its Exhibit constitute the entire agreement between Executive and the Company. This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supercedes any prior oral discussions or written communications and agreements. This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in writing signed by an authorized officer of the Company.
16. WAIVER. If either party should waive any breach of any provisions of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
17. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.
18. AMENDMENT. This Agreement shall not be modified or amended except by written agreement of the parties hereto.
19. CHOICE OF LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the law of the State of Maryland regardless of the choice of law provisions of
the State of Maryland or any other jurisdiction. The Parties consent to the exclusive jurisdiction of the federal and state courts in Maryland.
20. ARBITRATION OF DISPUTES. Any controversy or claim arising out of this Agreement or any aspect of the Executive's relationship with the Company including the cessation thereof shall be resolved by arbitration in accordance with the then existing Employment Dispute Resolution Rules of the American Arbitration Association, in Montgomery County, Maryland, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. The parties shall split equally the costs of arbitration, except that each party shall pay its own attorneys' fees. The parties agree that the award of the arbitrator shall be final and binding.
21. INDEMNIFICATION. During the term of this Agreement, the Executive shall be entitled to coverage under any liability insurance procured by Company to the same extent as other senior executives at the Company.
22. COUNTERPART. This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement.
23. DELAY; PARTIAL EXERCISE. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
24. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.
25. ADVICE OF COUNSEL. The Executive and the Company hereby acknowledge that each party has had adequate opportunity to review this Agreement, to obtain the advice of counsel with respect to this Agreement, and to reflect upon and consider the terms and conditions of this Agreement. The parties further acknowledge that each party fully understands the terms of this Agreement and has voluntarily executed this Agreement. The Company shall pay the legal fees and costs incurred by the Executive in connection with the negotiation and preparation of this Agreement, upon the presentation of invoices in appropriate form.
26. HEADINGS. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.
"EXECUTIVE"
J.J. Finkelstein
/s/ J.J. Finkelstein ----------------------------- By: J.J. Finkelstein |
"THE COMPANY"
RegeneRx Biopharmaceuticals, Inc.
/s/ Allan L. Goldstein ----------------------------- By: Allan L. Goldstein Title: Chairman |
EXHIBIT B
NON-COMPETITION, PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
As a condition of my employment, and in consideration of the compensation now and hereafter paid to me, by RegeneRx Biopharmaceuticals, Inc., a Delaware corporation (the "COMPANY"), I, J.J. Finkelstein, agree to the following:
1. MAINTAINING CONFIDENTIAL INFORMATION
(A) COMPANY INFORMATION. I agree at all times during the term of my employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, firm or corporation, without the written authorization of the Board of Directors of the Company, any trade secrets, confidential knowledge, data or other proprietary information of the Company. By way of illustration and not limitation, this shall include information relating to products, processes, know-how, designs, formulae, methods, samples, developmental or experimental work, improvements, discoveries, plans for research and new products, plans for marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers, and information regarding the skills and compensation of other employees of the Company.
(B) FORMER EMPLOYER INFORMATION. I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of my former or concurrent employers or companies, if any, and that I will not bring onto the premises of the Company any unpublished documents or any property belonging to my former or concurrent employers or companies unless previously and specifically consented to in writing by the particular employer or company.
(C) THIRD PARTY INFORMATION. I recognize that the Company has received and in the future will receive confidential or proprietary information from third parties subject to a duty on the Company's part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. I agree that I owe the Company and such third parties, both during the term of my employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to, except as is consistent with the Company's agreement with the third party, disclose it to any person, firm or corporation or use it for the benefit of anyone other than the Company or such third party, unless expressly authorized to act otherwise by an officer of the Company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS
(A) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE COMPANY. I agree that I will make prompt written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby assign to the Company all my right, title and interest in and to any ideas, inventions, original works of authorship, developments, improvements or trade secrets (i) which I may solely or jointly conceive or reduce to practice, or cause to be conceived or reduced
to practice, during the period of my employment with the Company, or (ii) which I previously or jointly conceived or reduced to practice as a result of any work performed by me in any prior relationship with the Company, or which I previously developed at any time after I first entered into such relationship with the Company, using the Company's equipment, supplies, facilities, trade secrets or inventions.
(B) OBTAINING LETTERS PATENT, COPYRIGHT REGISTRATIONS AND OTHER PROTECTIONS.
(I) I will assist the Company in every proper way to obtain and enforce United States and foreign proprietary rights relating to any and all inventions, original works of authorship, developments, improvements or trade secrets of the Company in any and all countries. To that end I will execute, verify and deliver (A) such documents and perform such other acts (including appearing as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such proprietary rights and the assignment thereof and (B) assignments of such proprietary rights to the Company or its designee.
(II) My obligation to assist the Company with respect to proprietary rights in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company's request on such assistance.
(III) In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney-in-fact, to act for and on my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. Such appointment is coupled with an interest. I hereby waive and quitclaim to the Company any and all claims of any nature whatsoever which I now or may hereafter have for infringement of any proprietary rights assigned to the Company.
(C) OBLIGATION TO KEEP THE COMPANY INFORMED. In addition to my obligations under paragraph 2(b) above, during the period of my employment and for one year after termination of my employment for any reason, I will promptly disclose to the Company fully and in writing all patent applications filed by me or on my behalf that relates to any known proprietary rights generally used by the Company as of such date.
3. NO CONFLICTS OR SOLICITATION
I agree that during the period of my employment by the Company I will not, without the Company's express written consent, engage in any other employment or business activity directly related to the business in which the Company is now involved or becomes involved, nor will I engage in any other activities which conflict with my obligations to the Company. For the period of my employment by the Company and for one year after the date of termination of my employment by the Company I will not (a) induce any employee of the Company to leave the employ of the Company or (b) solicit the business (as it relates to the business in which the
Company is now involved or becomes involved) of any client or customer of the Company (other than on behalf of the Company). If any restriction set forth in this section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
4. COVENANT NOT TO COMPETE
(A) Without the prior written consent of the Company, for the period of my employment by the Company and for one year following my termination, I will not directly or indirectly engage in (whether as an employee, consultant, proprietor, sales representative, partner, director or otherwise), or have any ownership interest in, or participation the financing, operation, management or control of, any person, firm, corporation or business that engages in a "Restricted Business" in a "Restricted Territory" (as defined below). It is agreed that ownership of no more than one percent of the outstanding voting stock of a publicly traded corporation shall not constitute a violation of this provision or require prior written consent of the Company.
(B) As used herein, the terms:
(I) "RESTRICTED BUSINESS" shall mean any business selling any products or services in competition with the business of the Company and its affiliates, as of the date hereof and/or as of the date of my termination of employment.
(II) "RESTRICTED TERRITORY" shall mean Montgomery County, Maryland.
(C) If any restriction set forth in this section is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
5. NO CONFLICTING OBLIGATIONS
I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement or obligation of mine relating to any time prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement or my employment.
6. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company (and will not keep in my possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, together with all copies thereof (in whatever medium recorded) belonging to the Company, its successors or assigns whether kept at the Company, home or elsewhere. I further agree that any property situated on the Company's
premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with notice.
7. NOTIFICATION OF NEW EMPLOYER
In the event that I leave the employ of the Company, I hereby consent to the Company's notification of my new employer of my rights and obligations under this Agreement.
8. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access to and become acquainted with the proprietary information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. In the event any litigation or other proceedings brought by any party to enforce its rights hereunder, the prevailing party shall be entitled to recover and shall be awarded its reasonable attorneys fees.
9. GENERAL PROVISIONS
(A) NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in this Agreement shall confer any right with respect to continuation of my employment by the Company, nor shall it interfere in any way with my right or the Company's right to terminate my employment at any time, with or without cause.
(B) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will be governed by and construed according to the laws of the State of Maryland, excluding conflicts of laws principles. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Montgomery County, Maryland for any lawsuit filed there against me by the Company arising from or relating to this Agreement.
(C) ENTIRE AGREEMENT. This Agreement, and Exhibit A attached hereto and hereby incorporated herein, sets forth the final, complete and exclusive agreement and understanding between the Company and me relating to the subject matter hereof and supersedes all prior and contemporaneous understandings and agreements relating to its subject matter. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing with a specific reference to this Agreement and signed by both the Company and me. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
(D) SEVERABILITY. If one or more of the provisions in this Agreement are deemed unenforceable by law, then the remaining provisions will continue in full force and effect.
(E) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors and its assigns.
(F) SURVIVAL. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.
(G) WAIVER. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.
(H) NOTICE. All notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery or, if sent by certified or registered mail, postage prepaid, five days after the date of mailing.
This Agreement shall be effective as of the first day of my employment with the Company, namely: January 1, 2002.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MADE IN MY PRIOR RELATIONSHIPS WITH THE COMPANY OR DURING MY EMPLOYMENT, RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT, AND RESTRICTS MY RIGHTS TO COMPETE WITH THE COMPANY.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Date: January 1, 2002 /s/ J.J. Finkelstein
---------------------------------------
J.J. Finkelstein
|
ACCEPTED AND AGREED TO:
REGENERX BIOPHARMEUCETICALS, INC.
By: /s/ Allan L. Goldstein
---------------------------
Dr. Allan L. Goldstein
Chairman of the Board
|
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Exhibit 10.10
THYMOSIN BETA 4 LICENSE AND SUPPLY AGREEMENT
("AGREEMENT")
This Agreement is made and entered into effective as of January 21, 2004 (the "Effective Date"), by and between
REGENERX BIOPHARMACEUTICALS, INC., a company organized and existing pursuant to the laws of the State of Delaware, USA, having its principal offices at 3 Bethesda Metro Center, Suite 700, Bethesda, Maryland, USA (hereinafter "RegeneRx");
and
DEFIANTE FARMACEUTICA LDA, a company organized and existing pursuant to the laws of Portugal recorded with the Register of Commerce of the Free Zone of Madeira n(degree) 04607/991124, V.A.T. Code n(degree) 511129840, having its registered offices at Rua Dos Ferreiros 260, 9000 082 Funchal, Madeira, Portugal (hereinafter "Defiante").
RegeneRx and Defiante may be alternately referred to as party, individually, or parties, collectively.
A. RegeneRx has expertise in developing and manufacturing certain biologically active peptides, including Thymosin Beta 4, for incorporation into commercial pharmaceutical products;
B. Defiante has, directly or indirectly, expertise in developing, distributing and selling a variety of pharmaceutical and dietary products; and
C. RegeneRx and Defiante desire to enter into an arrangement for the commercial development, marketing and distribution of Thymosin Beta 4-based products under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual representations, covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, RegeneRx and Defiante agree as follows:
The following terms, as used in this Agreement, shall have the meanings set forth in this Article:
1.1 "AFFILIATE" means any firm or corporation which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a party. "Control" means the legal or beneficial ownership of fifty percent (50%) or more of the voting or equity interests or the power or right to direct the management and affairs of the entity's business (including acting as the general partner of a limited partnership). For the sake of clarity, any
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Affiliates to which Defiante grants certain rights, as provided hereunder, under validly executed license agreements, shall have appropriate terms and conditions and be commensurate with those recited herein, which are related to the development, marketing and distribution of the Finished Products.
1.2 "BULK ACTIVE MATERIAL" means a sequence of amino acids primarily based on the 43 amino acid peptide commonly referred to as Thymosin Beta 4, in the form of an active ingredient to be utilized as a component in the Finished Products.
1.3 "COMMERCIAL MARKETING APPROVAL" means all authorizations, permissions, applications and/or registrations from the regulatory and/or governmental health authorities, including but not limited to the European Medicinal Evaluation Authority ("EMEA") and ICH Guidelines, for each of the countries in the Territory, which are necessary and required for the importation, marketing, use, distribution and Sale of the Finished Products in the Territory.
1.4 "CUSTOMER" means any wholesaler, hospital or other entity that obtains the Finished Products as a result of a Sale.
1.5 "DEFIANTE IMPROVEMENTS" mean any and all enhancements, changes, alterations or modifications, including but not limited to, new therapeutic indications, compositions, fragments, isoforms, analogues, synthetic derivatives and combinations thereof or with other biologically active ingredients, developed, created or generated, directly or indirectly, by Defiante, its Affiliates or Sub-Licensees during the Term of this Agreement, related to or based on the Finished Products, which are the subject of an independent, stand-alone proprietary interest and which do not incorporate or infringe the RegeneRx Improvements or Joint Improvements, nor any of RegeneRx's Patents.
1.6 "DISTRIBUTOR" means any entity authorized by Defiante, its Affiliates or Sub-Licensees, that under validly executed agreements, which are commensurate, as appropriate, with the terms and conditions recited herein, that shall be authorized only to distribute in the Territory the Finished Products as a result of a Sale to Customers. Defiante, on an annual basis on each anniversary of the Effective Date, shall provide RegeneRx a list of all Distributors
1.7 "DOCUMENTATION" means any and all proprietary and confidential reports, Specifications, registration material and dossiers resulting from clinical trials, including associated patient history (where permitted and in compliance with all local country disclosure laws), toxicological data, any and all technical data, notices, pre-clinical data, clinical data, CMC (chemistry, manufacturing, control data), pharmacokinetic and pharmacological test and analytical data and any orphan drug submissions, applications or designations, and any other embodiment of technical information, whether in electronic or tangible form, related to or associated with Defiante Improvements, Joint Improvements, RegeneRx Improvements, Bulk Active Material or Finished Products.
1.8 "FIELD OF USE" means the availability and use of the Finished Products formulated for the prevention and/or treatment of any indication for external wounds and internal wounds. For the sake of clarity, such indications shall include, but not be limited to, the gastrointestinal tract and burns; and shall not include ocular wounds. It is understood that any treatment or use of the Finished Products may not be incorporated into the form of any type of cosmetic product. It is
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understood by the parties that no expansion of this Field of Use may occur without the express authorization of RegeneRx.
1.9 "FINISHED PRODUCTS" mean any prescription or over-the-counter pharmaceutical product, or a medical device, in the Field of Use containing the Bulk Active Material.
1.10 "KNOW-HOW" means any and all proprietary and confidential Information, concepts, ideas, alterations, changes, apparatus, devices, inventions, methods, techniques, processes, formulations, compositions and technology arising from, associated with, based on or related to Bulk Active Material and/or RegeneRx Improvements, which are subject to Intellectual Property interests under Article 7, Section 7.2.
1.11 "JOINT IMPROVEMENTS" means any and all enhancements, changes, alterations or modifications, including but not limited to, new therapeutic indications, compositions, fragments, isoforms, analogues, synthetic derivatives and combinations thereof or with other biologically active ingredients, developed, created or generated jointly by RegeneRx and Defiante during the Term of this Agreement, resulting from or based on the Finished Products, RegeneRx Improvements and/or Defiante Improvements.
1.12 "MANUFACTURING APPROVAL" means all authorizations, permissions, applications and/or registrations from the relevant regulatory and/or local government health authorities in each of the countries in the Territory, which are necessary and required for the manufacture of the Bulk Active Material.
1.13 "MARKETING YEAR" means each calendar year (January 1 - December 31) during the Term hereof provided that the first Marketing Year shall begin on the first day of the month during which the Finished Product is first made commercially available in any country in the Territory and shall end on December 31 of the following calendar year.
1.14 "NET SALES" mean the gross receipt of monies from a Customer attributable to each Sale of the Finished Product minus:
(a) ***;
(b) ***;
(c) ***;
(d) ***;
(e) ***;
(f) ***;
(g) ***; and
(h) ***.
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1.15 "PATENTS" mean any and all inventions, processes or methods which are the subject of patent applications under U.S. Patent Laws (35 U.S. ss. 101 et seq.) or equivalent international patent laws, and the resulting granted U.S. or foreign patent, including associated Letters Patent, substitutions, re-examinations, extensions, reissues, continuations, continuations-in-part, divisionals, Supplemental Protection Certificates (SPC) or other recognized forms of patent protection, whether U.S. or foreign, issued therefrom owned or controlled by RegeneRx and relating to Bulk Active Material, Finished Products, Joint Improvements or RegeneRx Improvements. Patents related to Bulk Active Material at the Effective Date are recited in Attachment A, which is made a part hereof by reference. During the Term of this Agreement and in the event of the occurrence of RegeneRx Improvements or Joint Improvements, which may be the subject of Patents, such Patents shall be added to Attachment A from time to time throughout the Term herein.
1.16 "REGENERX IMPROVEMENTS" mean any and all enhancements, changes, alterations or modifications, including but not limited to, new therapeutic indications, compositions, fragments, isoforms, analogues, synthetic derivatives and combinations thereof or with other biologically active ingredients, developed, created or generated, directly or indirectly, by RegeneRx during the Term of this Agreement related to, resulting from, based on or arising from the Bulk Active Material and/or the Finished Products.
1.17 "SALE" means the commercial transfer, either directly or indirectly through a Distributor and/or a Sub-Licensee, as embodied in a commercial transaction document such as, but not limited to, a vendor agreement, purchase order, or the like, of one or more units of the Finished Products to a Customer for monetary consideration. All Sales must be for monetary consideration and may not be for in-kind consideration. In particular, a Sale is considered made on the date an invoice is issued by Defiante, Sub-Licensee or Distributor to Customer for one or more unit quantities of the Finished Products.
1.18 "SPECIFICATIONS" mean information that includes, but is not limited to, physical descriptions, testing methods and expected assay values, which recite the strict requirements for Bulk Active Material to be incorporated into the Finished Products as permitted under the Field of Use for the Territory, which are subject to Commercial Marketing Approval by the relevant authorities for each country in the Territory. The Specifications may be modified from time to time by RegeneRx upon reasonable prior notice to Defiante and subject to approval by the relevant regulatory authorities for Commercial Marketing Approval for each country in the Territory. It is understood that additions or modifications to the Specifications may be required by relevant regulatory authorities for Commercial Marketing Approval for each country in the Territory from time to time throughout the Term herein. The Specifications in effect as of the Effective Date are attached as Attachment B, which is made a part hereof by reference.
1.19 "SUB-LICENSEES" mean any third party entities, excluding Defiante's Affiliates, to which Defiante grants certain rights, as authorized hereunder, under validly executed license agreements, which are commensurate, as appropriate, with the terms and conditions recited herein, related to the development, marketing and distribution of the Finished Products. All Sub-Licensees, and any and all associated license agreements, shall be subject to the written approval of RegeneRx, which approval shall not be unreasonably withheld or delayed.
1.20 "TERRITORY" means the countries listed in Attachment C, which is made a part hereof by reference.
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1.21 "TRADEMARK FOR THE FINISHED PRODUCT" means one or more terms, designs, marks, names or other designations, which will be associated with the Finished Products, that will be chosen by Defiante in cooperation with RegeneRx and thereafter, filed and registered, at Defiante's expense, in each country of the Territory by Defiante in the name of Defiante or its designee. Trademark for the Finished Product, once determined and registered, will be identified in Attachment G, which is made a part hereof by reference.
1.22 "TRADEMARK FOR THE BULK ACTIVE MATERIAL" means one or more terms, designs, marks, names or other designations, which will be associated with the Bulk Active Material, that will be chosen by RegeneRx and, at RegeneRx's discretion, filed and registered, at RegeneRx's expenses, in each country of the Territory by RegeneRx in the name of RegeneRx or its designee. Trademark for the Bulk Active Material, once chosen, will be identified in Attachment F, which is made a part hereof by reference, and any use thereof will be subject to "The Trademark Style Guide and Requirements," which is attached hereto and made a part hereof.
1.23 "VALID CLAIM" means, on a country-by-country basis in the Territory, a granted claim within the issued Patents, which has not been held invalid and/or unenforceable in a decision of a patent office, court or other government agency of competent jurisdiction, unappealable or unappealed within the time frame allowed for appeal. However, if no challenge to the Patents occur, the claims in the issued Patents shall be presumed to be Valid Claims.
1.24 "WARRANTY AND UNDERTAKING" means the document which is executed between RegeneRx and Sigma-Tau Finanziaria SpA, an Affiliate of Defiante, that guarantees the performance of and assumes certain of the responsibilities of Defiante, or its Affiliates, should Defiante, or its Affiliates, breach or fail to perform under the Agreement. It is understood that such responsibilities shall not include the requirement by Sigma-Tau Finanziaria SpA to ***. In the event Sigma-Tau Finanziaria SpA does not *** then this Agreement shall terminate as provided hereunder, and Sigma-Tau Finanziaria SpA shall assume all termination obligations and liabilities to which Defiante, or its Affiliates, would be subject ***. The Warranty and Undertaking is described in Attachment D, which is made a part hereof by reference.
It is understood that the definitions shall have the same meaning regardless of whether a term is used in the singular or plural form.
2.1 Grant of License to Finished Products. In consideration of the fees and royalty payments payable hereunder as recited in Article 3, Defiante agrees to accept from RegeneRx and RegeneRx hereby grants, only in the Territory under the terms and conditions recited herein and for the Term as specified herein, to Defiante the sole and exclusive, royalty-bearing, transferable (subject to authorizations in Section 2.3 herein), sub-licensable (subject to authorizations in Section 2.4 herein) right in the Field of Use under the Know-How, the Documentation, the RegeneRx Improvements, Joint Improvements and the Patents : i) to use Bulk Active Material to produce or have produced Finished Products only for making Sales in the Field of Use, either directly, through its Affiliates or through Distributors or Sub-Licensees, in the Territory; and ii) to use Bulk Active Material to conduct internal research and development activities relative to and for the benefit of
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making Joint Improvements or Defiante Improvements to Finished Products (collectively "Finished Products Grant").
2.2 Grant of License to Trademark for the Bulk Active Material. In consideration of the fees and royalty payments payable hereunder as recited in Article 3, Defiante agrees to accept from RegeneRx and RegeneRx hereby grants, only in the Territory under the terms and conditions recited herein and for the Term as specified herein, to Defiante a non-exclusive, royalty-bearing, transferable (subject to authorizations herein), sub-licensable (subject to authorizations herein) right in the Field of Use to use, copy, publish, display, distribute and disseminate, on or in any tangible form or electronic media, the Trademark for the Bulk Active Material only in connection with the Sale of Finished Products in the Field of Use and associated marketing collaterals and packaging in accordance with the terms and conditions of the Trademark Style Guide and Requirements. This grant of license to Trademark for the Bulk Active Material shall run concurrent with the Finished Products Grant and shall not be exercised independent of the Finished Products Grant. Any and all uses of the Trademark for the Bulk Active Material shall be approved, in writing, by RegeneRx, which approval shall not be unreasonably withheld or delayed ("Trademark for the Bulk Active Material Grant").
2.3 Right to Transferability. The Finished Products Grant and the Trademark for the Bulk Active Material Grant are subject to the transfer and assignability authorizations recited in Article 11, Section 11.3.
2.4 Right to Sub-License. With respect to the Finished Products Grant and the Trademark for the Bulk Active Material Grant, RegeneRx authorizes Defiante to sub-license the rights recited therein to an Affiliate with no prior approval by RegeneRx and to a Sub-Licensee only in accordance with the following: Defiante shall be permitted to issue only one (1) sub-license to only one (1) Sub-Licensee in each country in the Territory, subject to RegeneRx's prior written approval of an identified Sub-Licensee and the terms and conditions of the associated sub-license agreement for that Sub-Licensee, which approval will not be unreasonably withheld or delayed. Defiante shall not grant any greater rights to any Sub-Licensee than provided under the Finished Products Grant and the Trademark for the Bulk Active Material Grant. ***. Further, the issuance of a sub-license shall not relieve Defiante of paying royalties as specified in Article 3, Section 3.5 for Sales made by any Defiante's Affiliates and Sub-Licensees, and Defiante shall be responsible for and liable for any royalty fees due, owing and payable to RegeneRx as a result of Sales made by any such Affiliates and Sub-Licensees. Defiante, and not any Defiante's Affiliates or Sub-Licensees shall be responsible for directly paying to RegeneRx the royalty payments under Article 3, which are due and payable to RegeneRx. Additionally, RegeneRx may elect, at its discretion and upon prior written notice to Defiante, to be subrogated to Defiante's rights and claims against such Defiante's Affiliates or Sub-Licensees in the event Defiante does not use reasonable efforts to pursue declared breaches by Defiante's Affiliates or Sub-Licensees of the applicable terms and conditions of this Agreement. Defiante shall supply RegeneRx with a list of its Affiliates, as each such Affiliate obtains rights hereunder.
2.5 No Right to Sub-License to Distributors. Defiante understands that Sub-Licensees may also be Distributors, however non-Sub-Licensee Distributors shall not obtain or be granted any rights under the Finished Products Grant or the Grant of License to Manufacture Bulk Active Material; but may be granted, commensurate with the rights and obligations hereunder and associated therewith, certain rights to use and display the Trademark for the Bulk Active Material.
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2.6 Grant of License to Manufacture Bulk Active Material. In the
event that RegeneRx cannot provide Bulk Active Material as recited in Article 4,
Section 4.9, only Defiante shall be granted the right only in the Territory,
under the terms and conditions recited herein and for the Term as specified
herein, a non-exclusive, royalty-bearing, non-transferable, non-sub-licensable
(except as subsequently specified herein) right under the Know-How, the
Documentation, the RegeneRx Improvements, the Joint Improvements and the Patents
to practice, use, manufacture or have manufactured the Bulk Active Material only
to produce Finished Products in order to continue the exercise the Finished
Products Grant in Section 2.1. In the event that Defiante exercises the Grant
of License to Manufacture Bulk Active Material, Defiante shall be obligated to
pay under Section 3.5 the royalty payments specified in Article 3,
Section 3.4(b) ("Bulk Active Material Manufacturing Grant"). If Defiante ceases
the exercise of the Bulk Active Material Manufacturing Grant, the royalty
payments due under Section 3.5 shall be readjusted to the percentage recited in
Article 3, Section 3.4(a). The Bulk Active Material Manufacturing Grant is
sub-licensable by Defiante to its Affiliates; further, the Bulk Active Material
Manufacturing Grant is sub-licensable by Defiante either to Sub-Licensees and/or
to third-party manufacturers only upon the express prior written authorization
of RegeneRx, which authorization shall not be unreasonably withheld or delayed.
RegeneRx expressly acknowledges that as of the Effective Date, Defiante has no
manufacturing facility of its own and hence Defiante cannot directly manufacture
the Bulk Active Material.
2.7 Grant of License to Documentation. In the event Documentation is generated by either party during the Term of this Agreement, the following license grants to the Documentation shall apply:
(a) RegeneRx hereby grants for the Term exclusively to Defiante only in the Territory for the Field of Use, the right to use, copy and make available, subject to the confidentiality and intellectual property rights and obligations recited in Article 7, the Documentation of RegeneRx to permit Defiante to exercise the Finished Products Grant and/or the Bulk Active Material Manufacturing Grant to meet the Specifications as recited in Article 6, Section 6.11 and to obtain Manufacturing Approvals and/or Commercial Marketing Approvals, as recited in Articles 4, 5 and 6, respectively ("RegeneRx Documentation Grant"). The RegeneRx Documentation Grant shall be sub-licensable only to Defiante's Affiliates; further the RegeneRx Documentation Grant shall be sub-licensable to RegeneRx approved Sub-Licensees or third-party manufacturers, which approval shall not be unreasonably withheld or delayed. The Documentation of RegeneRx shall be deliverable as provided under Article 6, Section 6.6. Defiante shall not retain any RegeneRx Documentation upon any termination, whether for convenience or cause, herein, except that Defiante may retain a copy of such RegeneRx Documentation upon the natural expiration of the Agreement consistent with the continued desire by Defiante to commercially exploit the Finished Product as recited in Section 9.4.2, and which will more particularly be described in a mutually agreeable new Bulk Active Material supply agreement.
(b) Defiante hereby grants to RegeneRx only for the countries outside the Territory an irrevocable, non-exclusive, transferable, sub-licensable, royalty-free, fully paid-up, perpetual right to use in any manner, copy, distribute, disseminate, edit and modify the Documentation of Defiante for any purpose, whatsoever. The Documentation of Defiante shall be deliverable as provided under Article 6, Section 6.6.
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2.8 NIH Reserved Rights. Defiante acknowledges that the U.S. Government, as a result of funding by the National Institutes of Health, has retained certain rights and interests in and to certain aspects of the Bulk Active Material and RegeneRx Improvements as embodied in Documentation, Patents and Know-How. Defiante acknowledges such U.S. Government's rights and interests and agrees to, as appropriate, reasonably give assistance to RegeneRx, at RegeneRx cost and expense, in complying with RegeneRx contractual obligations or directly comply with the obligations and requirements as set forth and recited in Attachment E, which is made a part hereof by reference, and understands that the U.S. Government may have additional rights and interests that shall prevail, whether or not such rights or interests are recited herein.
2.9 Grant of License to Defiante Improvements. During the Term of this Agreement and in the event Defiante, its Affiliates or Sub-Licensees create Defiante Improvements, Defiante hereby grants to RegeneRx only in the countries outside the Territory an irrevocable, non-exclusive, transferable, sub-licensable, perpetual right to practice, use, manufacture, have manufactured, distribute, disseminate and sell the Defiante Improvements, for any purposes whatsoever: ***.
2.10 No Further Licenses. Defiante acknowledges and agrees that no other rights or interests are granted hereunder to Defiante, or its Affiliates, other than as specified under this Article 2, and no additional licenses, express or implied, are granted to Defiante, or its Affiliates, hereunder.
2.11 Joint Improvements. In the event of the occurrence of Joint Improvements, RegeneRx shall assume the responsibility and obligation to obtain appropriate Intellectual Property protection for such Joint Improvement. In the event RegeneRx does not so assume, Defiante shall be permitted to obtain such Intellectual Property protection. The parties, regardless of which party obtains protection, shall split fifty/fifty (50/50) the reasonable prosecution costs therefor. In the event of any claims of infringement, both parties agree to defend the claim and split fifty/fifty (50/50) the costs incurred that are associated therewith. In the event of the occurrence of Joint Improvements: (i) during the Term of this Agreement, Defiante, its Affiliates and Sub-Licensees shall only be permitted, free of charge, to use, manufacture and, directly or indirectly, commercially distribute the Joint Improvements within the Field of Use within the Territory; (ii) during the Term of this Agreement, RegeneRx shall only be permitted, free of charge, to use, manufacture and, directly or indirectly, commercially distribute the Joint Improvements outside the Territory; and (iii) following the termination of this Agreement under Article 9, RegeneRx and Defiante shall be subject to the terms recited therein with respect to Joint Improvements. The aforementioned liability for costs shall survive termination of this Agreement unless otherwise agreed to by the parties.
3.1 Manufacturing and Marketing Costs and Expenses. Defiante, its Affiliates, its Distributors and/or Sub-Licensees shall bear the full costs, expenses and liabilities for the production, marketing and distribution of Finished Products for Sale, and the creation, if any, of associated marketing collaterals, inserts, advisory information or material or the like, including any translations thereof. Additionally, Defiante, its Affiliates, its Distributors and/or Sub-Licensees shall bear any and all costs, expenses and liabilities related to advertising, of whatever nature, for the Finished Products in each country in the Territory on or in any medium.
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3.2 Commercial Marketing Approval Costs and Expenses. Defiante shall bear the full costs, expenses and liabilities associated with obtaining and maintaining in its own name and/or in the name of its Affiliates or Sub-licensees (subject to local regulations) all relevant Commercial Marketing Approvals recited in Articles 5 and 6, respectively, and meeting and complying with the Specifications. RegeneRx shall reasonably cooperate, at its expense, and on an "as available basis," in aiding Defiante to obtain Commercial Marketing Approvals required for any Finished Products for the purpose of Sales in each country in the Territory.
3.3 No Customer Obligations. Defiante understands that RegeneRx shall have no obligations or liabilities to Customers with regard to the Finished Products, unless otherwise agreed to by the parties. Defiante, however, shall be fully responsible for providing Customers with Finished Products and assuming all liabilities, expenses, costs and obligations associated therewith.
3.4 Royalty Payments for the Exercise of the Grants in Article 2. All royalty payments or fees payable hereunder shall be payable in U.S. Dollars, and the royalty payment amounts shall be subject to deduction for withholding or similar taxes or fees associated therewith. Defiante shall give RegeneRx such assistance as may be reasonably necessary to enable or assist RegeneRx to claim exception therefore (under any applicable laws as well as any applicable treaties or conventions).
(a) In consideration of the exercise of the Finished Products Grant and the Trademark for the Bulk Active Material Grant and the Documentation Grant recited in Article 2, Sections 2.1, 2.2 and 2.7, respectively, Defiante shall be obligated to pay the following royalty: ***.
(b) In the event of the exercise of Bulk Active Material Manufacturing Grant as permitted under Article 2, Section 2.6, Defiante shall be obligated to pay ***.
(c) In the event sub-licenses are granted to Sub-Licensees as permitted under Article 2, Section 2.4, Defiante shall additionally pay ***.
3.5 Payment Obligations. RegeneRx shall be entitled to receive royalty fee payments from Defiante that are due and owing as specified in Sections 3.4(a), (b), and/or (c) above, on a calendar quarterly basis, which payments shall be due and payable within sixty (60) days after the end of each calendar quarter - i.e., February 28, May 31, August 31, November 30, respectively. Following the receipt of any royalty payment by RegeneRx, such payments shall be nonrefundable for any reason, subject to Section 8.4.
3.6 Euro Dollar or Other Currency Conversion to U.S. Dollar. Since all amounts payable hereunder shall be payable in U.S. Dollar, the parties acknowledge that the following monetary conversion process will occur with respect to any payment amounts payable hereunder. Defiante shall on each due date for a payment convert the different currencies into U.S. Dollars in accordance with the then current conversion rate recited in The Wall Street Journal on that due and payable date. The total of the foregoing amounts due, owing and payable shall be paid by Defiante to RegeneRx on the due date as specified herein.
3.7 Taxes/Withholding Taxes. RegeneRx shall not be liable to Defiante or Sub-Licensees for any costs, taxes or fees associated with the Sale of Finished Products or the payments received as a result of the issuance and execution of any sub-license. RegeneRx, however, shall be
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solely responsible for any costs, withholding, taxes or other fees associated with its receipt of royalty, supply prices or other fee payments hereunder. ***.
3.8 Finished Product Returns or Customer Refunds and Non-Payment. In the event Finished Products are returned, ***.
3.9 Fee and Royalty Reports. Defiante shall provide RegeneRx with Sales reports on a calendar quarterly basis commensurate with the date on which royalty payments are due and payable, such reports shall include: i) number of the units of Finished Products that were the subject of Sales; ii) the revenue received as a result of Sales; iii) any recordation of actual refunds or credits; iv) any actual received sub-license fees; and v) recalls, if any, and the reasons therefore. The foregoing shall be maintained for five (5) years or as required by applicable law, whichever is greater. Following the occurrence of a first commercial Sale of the Finished Product, Defiante shall provide RegeneRx with a status report on each report due date. Defiante shall assume the obligations to obtain the foregoing reports from Sub-Licensees to supplement Defiante's report to RegeneRx.
3.10 Sample Units of Finished Products. Defiante and its Affiliates and Sub-licensees shall be permitted to distribute, without any obligation to pay royalties, an adequate representative sample of units of the Finished Products to Distributors and Customers for the purposes of marketing and promoting the Finished Products. An estimate of such number of sample units will be recited in the Marketing Plan, as provided under Section 6.1(b).
3.11 Right to Receive Royalties. Should any other products containing the Thymosin Beta 4 be sold in any country of the Territory by any other third parties and should the Sales of the Finished Product be affected by such competing products, the parties shall meet to discuss in good faith how best to proceed, ***. Additionally, Defiante shall ensure that any obligations of Sub-Licensees to pay royalties shall be the responsibility and obligation of Defiante and that Defiante shall assume the entire liability therefore consistent with the requirements hereunder.
3.12 Audit Rights.
(a) RegeneRx, at its discretion, shall be permitted either:
to perform, at its expense, yearly audits of Defiante's records and books
related to the Bulk Active Material and Finished Products provided such audits
are reasonably conducted at Defiante's convenience and during Defiante's regular
business hours; or to request of Defiante an annual certified statement from
Defiante's auditors that all royalty payments and fees due and owing hereunder
have been accounted for under Generally Accepted Accounting Principles or the
equivalent Territory applicable accounting principles or methods. RegeneRx
acknowledges that any information acquired under the audit shall be considered
Information under Article 7, Section 7.1. In the event that a discrepancy arises
between the royalties and fees paid to RegeneRx and Defiante's records and
books, Defiante shall be given thirty (30) days from the receipt of the notice
to either explain such discrepancy and/or remedy such discrepancy, as
appropriate. Further, in the event of a discrepancy of more than five percent
(5%) between the amount owed and the actual amount received by RegeneRx,
Defiante shall reimburse all the actual expenses and costs incurred by RegeneRx
in performing such audit. Additionally, Defiante shall pay RegeneRx interest
charges equal to the prime United States Treasury rate as published in The Wall
Street Journal on the original royalty payment due dates on the delinquent
cumulative sum plus two percent (2%) per annum on all outstanding amounts due
and owing as determined by the foregoing audit.
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(b) RegeneRx shall consider Defiante in material breach of this Agreement if Defiante fails to pay RegeneRx the required royalty and fee payments specified hereunder or does not meet its audit obligations as defined herein provided that Defiante receives written notice of such breach and is permitted sixty (60) days from the date of the receipt of the notice to cure such breach, as permitted under Article 9, Section 9.3. The right to audit by RegeneRx and the obligations hereunder extend to Sub-Licensees.
4.1 Exclusive Supplier. During the Term of this Agreement, and subject to Section 4.9 below, RegeneRx, or its designees, shall be the sole and exclusive source from which Defiante, its Affiliates and/or Sub-Licensees shall purchase the Bulk Active Material, and Defiante, its Affiliates and/or Sub-Licensees shall be the sole and exclusive buyer to which RegeneRx, or its designees, shall sell the Bulk Active Material, except where otherwise permitted.
4.2 Issuance of Purchase Orders. During the Term of this Agreement, and subject to Section 4.9 below, Defiante, its Affiliates and/or its Sub-Licensees shall exclusively purchase and RegeneRx shall exclusively supply, all quantities of Bulk Active Material requested by Defiante, its Affiliates and/or its Sub-Licensees in accordance with the Specifications and as set forth on written purchase orders placed by Defiante, its Affiliates and/or Sub-Licensees under this Agreement. Defiante, its Affiliates and/or Sub-Licensee shall order Bulk Active Material and RegeneRx shall supply the Bulk Active Material according to the following procedure. ***.
(a) In anticipation of the need to fulfill the requirements for engaging in initial actual commercial distribution of the Finished Products for Sale under Articles 5 and 6, respectively, Defiante, its Affiliates and/or Sub-Licensee shall initially, namely for the *** from the dates specified by Defiante for engaging in initial commercial availability of the Finished Products for Sales, issue a purchase order for Defiante's, its Affiliates' and/or Sub-Licensee's requirements for an initial supply of Bulk Active Material needed for such initial commercial distribution of the Finished Product for Sale. RegeneRx shall deliver the amount specified in the purchase order within *** of the date of receipt of such purchase order by RegeneRx. Upon the date of issuance of such purchase order by Defiante, its Affiliates and/or Sub-Licensee, Defiante, its Affiliates and/or Sub-Licensee shall be obligated to pay the amount due and owing for the Bulk Active Material ordered in the purchase order, as specified under Section 4.7.
(b) Following the issuance of such initial purchase order as recited in Section 4.2(a) above, but no later than *** and *** during each calendar year thereafter, Defiante, its Affiliates and/or Sub-Licensee shall issue a purchase order for the amount of Bulk Active Material desired for the *** to ***. RegeneRx shall deliver the amount specified in each such purchase order within *** of the date of receipt of such purchase order by RegeneRx. Payment shall be as specified under Section 4.7.
(c) Throughout the Term of this Agreement, each subsequent
issued purchase orders following such initial purchase order as issued under
Section 4.2(a) above shall specify a quantity of Bulk Active Material that shall
not exceed by more than *** the quantity of the previous year's purchase order
quantity, unless otherwise mutually agreed to by the parties.
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4.3 Purchase Order Precedence. The terms and conditions of any purchase order shall be superceded by the terms recited in this Agreement, in the event of any conflicts.
4.4 Forecasts. Defiante, its Affiliates and/or Sub-Licensee shall be
required to forecast for a twelve (12) month period the quantities of Bulk
Active Material that Defiante, its Affiliates and/or Sub-Licensee desire from
RegeneRx. Once such twelve (12) month forecast is provided, the actual
quantities desired shall thereafter result in the issuance of a purchase order
from Defiante, its Affiliates and/or Sub-Licensee. Such purchase order
specifying the quantity of Bulk Active Material requested shall be issued twelve
(12) months in advance of the specified delivery date as provided under Section
4.2. Defiante, its Affiliates and/or Sub-Licensee will update such twelve (12)
month forecast on a quarter-by-quarter basis.
4.5 Supply Price. The supply price for the Bulk Active Material shall be equal to ***.
4.6 Delivery Terms. The delivery of quantities of Bulk Active Material to be sold to Defiante, its Affiliates and/or Sub-Licensees by RegeneRx shall be CIP Defiante designated location (Incoterms 2000) by a carrier of RegeneRx's choice, and RegeneRx shall be liable for any loss or damage to the Bulk Active Material prior to and up to the point of delivery to Defiante's, its Affiliates' and/or Sub-Licensee's dock, unless RegeneRx and Defiante otherwise agree in writing. The dates for delivery of Bulk Active Material in the quantity specified under issued purchase orders shall be twelve (12) months of the date of receipt of the purchase order by RegeneRx, subject to mutually agreed upon date adjustments. In the event Bulk Active Material is not delivered to Defiante, its Affiliates and/or Sub-Licensees by the carrier on the delivery date specified herein or damaged, prior to delivery, as a result of a shipping event, RegeneRx, at its expense, shall use all reasonable efforts to promptly replace and resend the lost or damaged, as a result of shipping, Bulk Active Material; or, in the event no other quantities of Bulk Active Material are deliverable by RegeneRx, then RegeneRx shall fully refund any monies paid by Defiante, its Affiliates and/or Sub-Licensee to RegeneRx for the lost or damaged, as a result of shipping, Bulk Active Material that was the subject of that purchase order associated with that shipment and delivery, and the foregoing shall serve as Defiante's, its Affiliates' and/or Sub-Licensee's entire remedy for damaged, as a result of shipping, late and/or non-delivered Bulk Active Material shipped by RegeneRx under a purchase order.
4.7 Payment Terms. All purchase orders provided by Defiante, its Affiliates and/or Sub-Licensees to RegeneRx pursuant to this Agreement shall be paid in U.S. Dollars (based on the conversion rate between the various currencies and U.S. Dollar as determined by the rate quoted in The Wall Street Journal on the date that the purchase order was issued by Defiante, its Affiliates and/or Sub-Licensee) as follows:
(a) ***:
(i) ***; and
(ii) ***
(b) ***, and
(c) ***.
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4.8 Acceptance of Delivery. RegeneRx warrants that the delivered
quantity, as specified in an associated invoice, of Bulk Active Material shall
meet the Specifications as set forth in the Commercial Marketing Approval, as
evidenced by a Certificate of Analysis (a verification of compliance with the
Specifications) that accompanies the delivered quantity of Bulk Active Material.
Defiante, its Affiliates and/or Sub-Licensees shall have thirty (30) days
following delivery of the Bulk Active Material in which to verify that the Bulk
Active Material meets the Specifications, which verification shall not be
unreasonably withheld or delayed. Following the lapse of thirty (30) days, the
delivered Bulk Active Material shall be considered to have been accepted and the
amounts associated with such accepted Bulk Active Material shall be due and
owing as specified in Section 4.7 above. If some or all of the delivered Bulk
Active Material, in Defiante's, its Affiliates' and/or Sub-Licensees' opinion do
not meet the Specifications, RegeneRx and Defiante, its Affiliates and/or
Sub-Licensees shall promptly engage a mutually acceptable third-party facility
that will conduct an independent analysis of the non-conforming Bulk Active
Material to determine compliance with the Specifications. Such independent
analysis is to be performed under "blinded" conditions so as to remove or
prevent any bias on the part of the facility. If the analysis verifies
compliance with the Specifications, then Defiante, its Affiliates and/or
Sub-Licensees shall be liable for the payments due, owing and payable under
Section 4.7 herein, as well as the total cost associated with the engagement of
such facility. If the analysis demonstrates non-compliance with the
Specifications, then Defiante, its Affiliates and/or Sub-Licensees shall return
the non-complying quantities of Bulk Active Material to RegeneRx, at RegeneRx's
expense, and RegeneRx shall, at its option: i) return the monies paid under the
purchase order for those returned lots of Bulk Active Material, or ii) as soon
as possible and no later than forty-five (45) days of the return F.O.B.
RegeneRx's company headquarters of such quantities of Bulk Active Material,
RegeneRx shall deliver new quantities of Bulk Active Material commensurate with
the quantity of units or lots requested under that purchase order which was
non-conforming to the Specifications. RegeneRx shall also assume the total costs
associated with the engagement of the facility. The acceptance process by
Defiante, its Affiliates and/or Sub-Licensees shall be repeated again for the
redelivered quantity as provided for in this Section 4.8. The foregoing and the
remedy recited in this Section 4.9, herein, will serve as the sole and exclusive
remedies for Defiante, its Affiliates and/or its Sub-Licensees for
non-conformance of delivered Bulk Active Material to Specifications
4.9 Bulk Active Material Manufacturing Grant Exercise Events. The occurrence of one or more of the following events during the Term shall permit only Defiante to exercise the Bulk Active Material Manufacturing Grant recited in Article 2, Section 2.6, such option to be exercised in writing effective immediately, if:
(a) RegeneRx, or its third-party manufacturer, ***; or
(b) RegeneRx, or its third-party manufacturer, ***; or
(c) RegeneRx, or its third-party manufacturer, ***; or
(d) RegeneRx, or its third-party manufacturer, is unable to supply Bulk Active Material ***; or
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(e) RegeneRx, or its third-party manufacturer, is unable to supply Bulk Active Material ***; or
(f) RegeneRx *** unable to supply the Bulk Active Material, ***.
RegeneRx shall *** if, at any time during the Term of this Agreement, RegeneRx, or its third-party manufacturer, is unable to supply the quantity of Bulk Active Material *** or if RegeneRx reasonably believes that RegeneRx is not or will not be reasonably capable of supplying *** of the Bulk Active Material. ***.
4.10 Applicability to Sub-Licensees and Affiliates. The obligations or rights, as appropriate and identified in this Article 4, shall also be applicable to Sub-Licensees and Affiliates.
4.11 Non-Termination of Agreement. It is acknowledged by the parties that non-compliance by RegeneRx with any obligation to supply Bulk Active Material in this entire Article 4 shall not be construed as a breach by RegeneRx of this Agreement and shall not entitle Defiante to terminate this Agreement for cause under Section 9.3 ***.
5.1 U.S. Phase II Clinical Trial Program. Subject to: (i) notification to Defiante by RegeneRx of the positive results, in terms of clinical efficacy and safety, of at least one completed phase II clinical trial of the Bulk Active Material as embodied in a commercially acceptable product formulation in the U.S., and (ii) the supply, at Defiante's expense, to Defiante of reasonably sufficient quantities of Bulk Active Material or U.S. finished product formulation from RegeneRx; Defiante, within *** of the fulfillment thereof shall initiate or have initiated at least one (1) pivotal phase III clinical trial in at least one (1) of the Tier 1 countries in the Territory, as identified in Attachment C. In particular, Defiante shall have initiated the activities toward the conduct of one (1) pivotal phase III clinical trial in at least one of the Tier 1 countries as designed, implemented and monitored consistent with Commercial Marketing Approval requirements associated with such Tier 1 country. Defiante shall, ***, complete the phase III clinical trial following the positive phase II clinical trial. In furtherance of the initiation and completion of such pivotal phase III clinical trials by Defiante, its Affiliates or its Sub-Licensee, RegeneRx will, at its discretion, and in view of the development plan under Section 6.1, supply at mutually agreeable reasonable costs: (i) the U.S. finished product formulation embodying the Bulk Active Material, as manufactured in the U.S. or the Bulk Active Material, and (ii) the relevant Documentation in RegeneRx's possession, which RegeneRx has, in its opinion, determined to be relevant based on the need to obtain Commercial Marketing Approval for such Tier 1 country. It is understood that such *** may be adjusted in the event that insufficient quantities of Bulk Active Material or the U.S. product formulation required for the pivotal phase III clinical trials are not available from RegeneRx. In the event sufficient quantities of Bulk Active Material are available for pivotal phase III trials, such trials must be initiated no later than *** from the completion of the positive phase II clinical trial(s) described herein. Once sufficient quantities of Bulk Active Material or U.S. finished product formulation are available from RegeneRx and delivery of such Bulk Active Material (as provided under Article 4) or U.S. finished product formulation occurs, Defiante shall promptly initiate the pivotal phase III clinical trial. If Defiante cannot obtain the sufficient quantities of Bulk Active Materials or U.S.
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finished product formulation for the pivotal phase III clinical trial from
RegeneRx as requested *** . If Defiante does not initiate the pivotal phase III
clinical trial, as provided above, Defiante shall alternatively, at its option:
i) pay to RegeneRx in U.S. Dollars via wire transfer on the date that such
pivotal phase III clinical trial should have been initiated, five million U.S.
Dollars (US$5,000,000) and this Agreement shall continue in full force and
effect; OR ii) Defiante may decide to terminate this Agreement as recited under
Article 9, Section 9.2, and meet the obligations recited under Section 9.4. ***.
5.2 Other Clinical Trials. Defiante may perform other pre-clinical and clinical trials in the Territory within the Field of Use with respect to the Finished Products.
5.3 Clinical Trials/Access to Documentation. RegeneRx shall keep Defiante or its designated Affiliates and/or Sub-Licensees timely informed of the progress of phase II clinical trials of the Bulk Active Material as embodied in a commercially acceptable product formulation in the U.S. Defiante shall keep RegeneRx timely informed of the progress of any and all clinical trials involving Finished Products and shall provide RegeneRx with quarterly summary reports of the results of those trials or, in the alternative, discuss the same in the Management Meetings, as provided in Section 6.9. Defiante shall give RegeneRx access to all Documentation, including the clinical reports and patient histories (as permitted by applicable local country law in the Territories) concerning all clinical trials, upon request by RegeneRx.
5.4 Support of Registration for New Indications. Defiante acknowledges that the Field of Use specifies the scope of authorized indications, as typically and customarily defined in the industry. Defiante may pursue new indications in the Field of Use from time to time, shall be obligated to inform RegeneRx of such new indications that Defiante pursues, and shall provide Documentation reflecting same. In the event such indications are being pursued, RegeneRx will use reasonable efforts to support Defiante's efforts and Defiante shall use reasonable efforts to pursue such indications as rapidly as practicable, including the filing of any additional registrations for Commercial Marketing Approval.
5.5 Commercial Marketing Applications. As soon as practicable following the successful conclusion of the positive pivotal phase III clinical trial contemplated in Section 5.1, Defiante shall prepare and file registration applications for Commercial Marketing Approval in accordance with the performance objectives recited in Article 6 for use and Sale of Finished Products within the Field of Use for the Territory. Defiante shall not be responsible for non-fulfillment of such obligation due to reasons beyond its control and/or due to reasons which are non-curable, as defined as a force majeure in Article 11, Section 11.11.
5.6 Information to RegeneRx. Defiante shall inform RegeneRx immediately of the approval of any registration applications and/or a ruling of any restrictions associated with registrations regarding Commercial Marketing Approval for Finished Products, including pricing recommendations or requirements of Finished Products and reimbursement criteria, if applicable. Any such marketing approvals, restrictions and reimbursement criteria shall be considered Documentation and shall be subject to use by RegeneRx as provided under Article 2, Section 2.7(b).
5.7 Registrations. Defiante, its Affiliates and/or Sub-Licensees agrees to register this Agreement and any related sub-license agreement with any foreign governmental agency within the Territory which requires such registration with any Commercial Marketing Approval authority
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and/or Manufacturing Approval authority; and Defiante, its Affiliates and/or Sub-Licensees shall pay all costs and fees in connection therewith.
5.8 Duty to Maintain Authorizations. Defiante, its Affiliates and/or Sub-Licensees shall use, during the Term, its commercially reasonable efforts to obtain and maintain Commercial Marketing Approvals and any other registrations obtained for each country in the Territory in the name of Defiante, its Affiliates and/or Sub-Licensees subject to local regulations.
5.9 Diligence. Defiante, its Affiliates and/or Sub-Licensees, as appropriate, and RegeneRx shall perform their respective obligations under this Article 5 using reasonable, good faith and diligent efforts.
6.1 (a) Research and Development Plan. As soon as practicable after the Effective Date but no later than June 30, 2004, Defiante shall deliver or have delivered to RegeneRx a written tentative outline of the activities that Defiante plans to undertake with respect to the research and development activities and clinical trials associated with the development of any Finished Products, and in anticipation of the Sales and eventual production of any Finished Products, whenever appropriate. The outline shall be updated annually on the Effective Date during the Term or at such other times, such as but not limited to the Management Meetings under Section 6.9, as the parties may mutually agree.
(b) Marketing Plan. Within three (3) months before any expected date of launch or commercial availability to Customers of the Finished Products in any country in the Territory, Defiante, its Affiliates and/or Sub-Licensee shall deliver to RegeneRx a written marketing plan ("Marketing Plan") for each country detailing Defiante's, its Affiliates' and/or Sub-Licensee's, as the case may be, plans for marketing, distributing and selling the Finished Products in that country in the Territory during the next twelve (12) month period following the actual date of commercial availability of the Finished Product. Thereafter, Defiante, its Affiliates and/or Sub-Licensee shall deliver to RegeneRx written updates to each of the initial Marketing Plans for each country at twelve (12) months after the first year of initial commercial availability of the Finished Products; and thereafter, an updated Marketing Plan shall be deliverable to RegeneRx on an annual basis. Each such Marketing Plan shall contain a detailed plan for the reasonable and diligent commercialization of the Finished Products in each country in the Territory that has secured Commercial Marketing Approval, including (i) a product pricing strategy; and (ii) a marketing and sales strategy including anticipated pre- and post-commercial availability sample needs, the number of units or samples. It is understood that the distribution of sample Finished Products, as specified in each Marketing Plan and for which Defiante receives no payment, shall not be subject to the payment of royalties. The parties shall meet and confer on each Marketing Plan during the Management Meetings, as provided under Section 6.9. Defiante, its Affiliates and/or Sub-Licensee shall supply, at no cost, to RegeneRx a reasonable quantity of pre- and post-launch sample units of Finished Products, as made available for each country in the Territory. Each such Marketing Plan shall also give a status report as to Defiante's, its Affiliates' and/or Sub-Licensee's success (or lack of success) in implementing the prior year's Marketing Plan for a particular country. Defiante, its Affiliates and/or Sub-Licensees
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shall actively market the Finished Products in the Territory in accordance with the terms of the Marketing Plan for that country and pursuant to the requirements under this Agreement.
6.2 Commercially Reasonable Efforts. Defiante, its Affiliates and/or Sub-Licensees shall use commercially reasonable efforts commensurate with the terms recited herein: (i) to, as promptly as is commercially feasible, obtain and maintain all necessary Commercial Marketing Approvals for the Sale of the Finished Products in the Territory; (ii) to make Sales of Finished Products in accordance with the performance criteria recited in Article 6, Section 6.4 of such Finished Products in the countries in the Territory; and (iii) to stimulate and increase interest in the Finished Products in the Territory.
6.3 No Competition. Subject to applicable laws, Defiante, its Affiliates, Distributors and Sub-Licensees shall not sell or distribute during the Term of this Agreement and for nine (9) months following the termination of this Agreement under Section 9.2, any product containing Thymosin Beta 4, which is the same or substantially equivalent in the treatment to or indications for the Finished Products without prior approval of RegeneRx. At all times, this provision will be subject to applicable local country and EU anti-trust and fair competition laws and regulations, and any and all applicable laws related to the commercial activities of pharmaceuticals or other commodity, mass-market prescription drugs.
6.4 Performance Obligations. To maintain this Agreement, in whole or in partial force, Defiante shall establish a date on which to file the first commercial marketing approval in the Territory according to the following provisions. ***
(a) "Tier 1" Countries of the Territory as Set Forth in Attachment C. ***.
(b) "Tier 2" Countries of the Territory as Set Forth in Attachment C. ***.
(c) "Tier 3" Countries of the Territory as Set Forth in Attachment C. ***.
(d) ***.
(e) In the event Defiante establishes no dates and/or that no
filings occur according to the dates established by Defiante or subsequently
reviewed by the parties, RegeneRx shall be entitled to terminate this Agreement
for breach under Article 9. In the event some of the foregoing filings in (a),
(b) or (c), respectively, do not occur, RegeneRx, at its discretion, may
eliminate the non-filed countries from the Territory that comprise Tier 1, Tier
2 and/or Tier 3, as applicable, and as such, the Tier 1, Tier 2 or Tier 3
countries that have no filings shall be eliminated from the Territory on the
date that such filings should have been completed, as reflected by amendment to
this Agreement. Additionally, if Commercial Marketing Approval is not
maintained, once obtained in a country in the Territory, for *** or are
withdrawn or suspended by regulatory authorities for *** then such country may,
at RegeneRx's discretion, be eliminated from the Territory. If no Tier 1
Commercial Marketing Approval occur as provided herein, then RegeneRx may, at
its option, terminate this Agreement without further liability or responsibility
hereunder, except for those obligations which survive hereunder.
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6.5 Minimum Sales.
(a) Defiante undertakes to achieve during the first *** after the launch of the Finished Products in the majority of the Tier 1 countries certain amounts of minimum Sales as follows, subject to: i) the occurrence of an event that is beyond the reasonable control of both parties that prevents the availability of Bulk Active Material or of the Finished Product for a significant period of time of at least *** and/or ii) ***. Following the occurrence of Tier 1 country conditions as recited in Sections 6.4(a) and (b), the royalty payment payable under Article 3 shall be based on the following on a per country basis:
(i) Marketing Year 1 - ***;
(ii) Marketing Year 2 - ***;
(iii) Marketing Year 3 and beyond - ***.
(b) Following the occurrence of Tier 2 country conditions as recited in Section 6.4(b) and (c), the royalty payment payable under Article 3 shall be based on the following on a per country basis:
(i) Marketing Year 1 - ***;
(ii) Marketing Year 2 - ***;
(iii) Marketing Year 3 and beyond - ***.
(c) Following the occurrence of Tier 3 country conditions as recited in Section 6.4(c), the royalty payment target payable under Article 3 shall be based on the following on a per country basis:
(i) Marketing Year 1 - ***;
(ii) Marketing Year 2 - ***;
(iii) Marketing Year 3 and beyond - ***.
(d) In all cases for the determination of minimum Sales ***
(i) ***;
(ii) ***;
(iii) ***;
(iv) ***;
(v) ***, and
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(vi) ***.
***.
6.6 Documentation Deliverables.
(a) In the event Defiante, its Affiliates and/or Sub-Licensees generates or obtains, during the Term, any Documentation relative to Finished Products or Bulk Active Material, Defiante, its Affiliates and/or Sub-Licensees shall promptly deliver copies of any and all Documentation to RegeneRx. In the event RegeneRx has in its possession, as of the Effective Date and during the Term, Documentation that RegeneRx determines that Defiante, its Affiliates and/or Sub-Licensees require or would aid Defiante, its Affiliates and/or Sub-Licensees, in obtaining and maintaining Commercial Marketing Approval or in conducting clinical studies as a result of access to and use of the Documentation, RegeneRx shall promptly provide such Documentation to Defiante, its Affiliates and/or Sub-Licensees. The Documentation of each party shall be considered Information, as subsequently defined. Additionally, certain Documentation may be subject to country laws and regulations, including patient privacy laws, relative to the release and use thereof, and, in such event, such Documentation may be withheld from a party unless appropriate approvals can be obtained for release.
(b) Within a reasonable period of time following the conclusion of the positive phase II clinical trial and in anticipation of the conduct of a pivotal phase III trial and subject to Section 5.1, RegeneRx shall deliver, at its fully allocated cost, and at the request of Defiante, sample quantities of Bulk Active Material for the purposes of conducting the pivotal phase III clinical testing. RegeneRx shall not be considered to be in breach of this Agreement if RegeneRx does not deliver the sample quantities requested or delivers less than the sample quantities requested.
(c) During the Term of this Agreement, RegeneRx shall promptly inform Defiante of any RegeneRx Improvements and/or Documentation that RegeneRx has developed. RegeneRx Improvements shall be embodied in or incorporated into the Finished Products only as provided under Article 6, Section 6.8. In the event the conditions recited in Section 6.8 do not occur regarding the embodiment or incorporation of RegeneRx Improvements into the Finished Products, then no RegeneRx Improvements shall be incorporated unless such RegeneRx Improvements are necessary for compliance with the Specifications or Commercial Marketing Approval. The use of the RegeneRx Improvements shall be governed by the Finished Products Grant and Bulk Active Material Manufacturing Grant recited in Article 2, Section 2.6.
(d) During the Term of this Agreement, Defiante shall promptly inform RegeneRx of any Defiante Improvements. Such Defiante Improvements shall be governed by the Defiante Improvement Grant in Article 2, Section 2.9. Defiante Improvements shall be embodied in or incorporated into the Finished Products as recited in Section 6.8. If no mutual agreement occurs, such Defiante Improvements shall not be incorporated into the Finished Products unless such Defiante Improvements are necessary for compliance with the Specifications or Commercial Marketing Approvals.
6.7 Sample Finished Products Testing. During the Term, Defiante shall supply, at no charge, to RegeneRx, within seven (7) days of RegeneRx's request, a small representative sample quantity of units of Finished Products for the purposes of internal use and evaluation by RegeneRx.
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Upon Defiante's request, RegeneRx shall inform Defiante of its use and evaluation findings. Such findings shall be considered Information to RegeneRx. The foregoing shall be applicable to Sub-Licensees.
6.8 RegeneRx Improvements/Defiante Improvements/Joint Improvements Incorporation Authorizations.
(a) In the event that Defiante desires to use or incorporate Joint Improvements, RegeneRx Improvements or Defiante Improvements in the Bulk Active Material and/or Finished Products, Defiante is free to do so except in the case where such Joint Improvements, RegeneRx Improvements or Defiante Improvements constitute substantive changes to the Bulk Active Material and/or Finished Products. Substantive changes shall be interpreted to include any and all changes that cause non-compliance with the Specifications, or cause non-compliance with the Commercial Marketing Approvals required for the Finished Products. In the case of substantive changes, both parties must review and mutually approve all such changes prior to such changes being incorporated into the Finished Products. In the event no mutual agreement is reached, the provisions of Section 6.8(c) shall govern. Defiante shall be considered in breach of this Agreement if Defiante incorporates into the Bulk Active Material and/or Finished Products any substantive changes relative to Joint Improvements, RegeneRx Improvements or Defiante Improvements without the mutual agreement of the parties hereto. If both parties mutually agree that such Bulk Active Material and/or Finished Products, incorporating Joint Improvements, RegeneRx Improvements or Defiante Improvements, comply with the Specifications and Commercial Marketing Approval, as the case may be, Defiante may begin production manufacturing of such Finished Products for Sales to Customers.
(b) Prior to engaging in Sales of Finished Products incorporating Joint Improvements, RegeneRx Improvements or Defiante Improvements, Defiante shall supply to RegeneRx, at no charge, at least a representative number of sample quantities of units of Finished Products using or incorporating such Joint Improvements, RegeneRx Improvements or Defiante Improvements for the purposes of internal evaluation and comment, which results will be shared with Defiante. Such results shall be considered RegeneRx Information.
(c) In the event the parties fail to reach mutual agreement on incorporating substantive changes relative to Joint Improvements, RegeneRx Improvements or Defiante Improvements into the Finished Products, such Defiante Improvements or RegeneRx Improvements shall not incorporated into the Finished Products by Defiante.
6.9 Management Meetings. During the first year of the Term of this Agreement, the parties shall meet at a time and place mutually agreeable to both parties within but no later than six (6) months following the Effective Date of this Agreement, and thereafter no less than and every twelve (12) months to review research and development, clinical trials, proposed and actual Joint Improvements, RegeneRx Improvements and Defiante Improvements and to exchange Information, data and Documentation that may be relevant to the commercialization of the Bulk Active Material and any advances on the Finished Products; including, but not limited to, a review of pending Commercial Marketing Approvals for Finished Products as well as marketing collaterals and projected Sales in a country in the Territory. Defiante shall also provide at each Management Meeting, as recited in Section 6.1, and when applicable, reports which review the commercialization activities pursued by Defiante hereunder; a review of Defiante's efforts to reduce to practice and to
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commercialize the Finished Products; pending Commercial Marketing Approvals, if any, for Finished Products; expected market price and reimbursement, where applicable; marketing collaterals; projected Sales for each country in the Territory; and the actual use of the Finished Products by Customers. The above is applicable to Sub-Licensees, as appropriate. The foregoing shall be considered Information.
6.10 Finished Products Marketing Collateral. RegeneRx shall be permitted to review and comment on Finished Products marketing collaterals and all associated forms, including electronic expressions, of Customer information, including but not limited to, Finished Products' inserts and directions. All such marketing collaterals shall conform to the requirements specified by the appropriate authorities in each country in the Territory responsible for Commercial Marketing Approval and be consistent with the Specifications required for each country in the Territory in the Field of Use, and shall be consistent with the requirements, expectations and quality associated with the standards that are typical and customary in the industry. Defiante shall promptly provide RegeneRx copies of the foregoing and Defiante shall ensure that the marketing collaterals are legally sufficient in each country in the Territory for the Field of Use.
6.11 Requirement for the Bulk Active Material to Conform to Specifications. During the Term, RegeneRx shall strictly comply with the requirements recited in the Specifications consistent with Commercial Marketing Approval for each country in the Territory. Additionally, Defiante, at its sole expense, shall be permitted, upon mutually agreeable times, to visit RegeneRx's facility, or such other facility, as is under control of RegeneRx for the purposes of Bulk Active Material manufacture, to observe the manufacture of Bulk Active Material. If RegeneRx fails to comply with the Specifications as set forth in the Commercial Marketing Approval, RegeneRx shall use all good faith and reasonable measures to promptly bring into compliance the Specifications with such Commercial Marketing Approval so that Defiante can comply with the Commercial Marketing Approval. RegeneRx, however, shall not alter, change, modify, revise, update or, in any way, vary the Specifications without previously notifying and obtaining the approval of Defiante, which approval shall not be unreasonably withheld or delayed. Thereafter, Defiante shall be responsible for securing necessary approvals to Commercial Marketing Approval by the relevant authorities. The foregoing, as applicable, shall apply to Sub-Licensees, as appropriate. It is understood that Defiante shall not alter, modify, change or, in any manner, revise the Specifications without the written approval of RegeneRx, which approval shall not be unreasonably withheld or delayed, at RegeneRx's discretion.
6.12 Requirement for the Finished Drug Product to Conform to Specifications. During the Term, Defiante shall strictly comply with the specifications for the Finished Drug Product consistent with Commercial Marketing Approval for each country in the Territory. Additionally, RegeneRx, at its sole expense, shall be permitted, upon mutually agreeable times, to visit Defiante's facility, or such other facility, as is under control of Defiante for the purposes of Finished Products manufacture, to observe the manufacture of Finished Products. If Defiante fails to comply with such specifications as determined by the appropriate authorities responsible for Commercial Marketing Approval, Defiante shall use all good faith and reasonable measures to promptly comply with the specifications for the Finished Drug Product consistent with Commercial Marketing Approval for each country in the Territory for the Field of Use. If despite such good faith and reasonable efforts, Defiante still fails to meet such specifications and Sales are affected, RegeneRx shall permit Defiante ninety (90) days to remedy such failure. Further, if, at any time during the Term of this Agreement, Defiante or any of its Sub-Licensees and/or Distributors directly cause one
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of the following events to occur: i) sanctions imposed on Defiante, Sub-Licensees or Distributors by appropriate authorities that cause the Finished Product to be removed from commercial availability or the market for more than two (2) times during a two (2) year period; or ii) any occurrence that causes Defiante, Sub-Licensees or Distributors to fail to make commercially available or to make Sales of the Finished Product for a period of twelve (12) consecutive months, then RegeneRx and Defiante shall discuss the foregoing events within ninety (90) days of the occurrence of one of the foregoing events. Defiante, however, shall not alter, change, modify, revise, update or, in any way, vary the specifications for the Finished Drug Product without the written authorization of RegeneRx, not to be unreasonably denied or delayed, unless such alteration, change, modification, revision, update or variance is required by the appropriate authorities responsible for Commercial Marketing Approval. The foregoing, as applicable, shall apply to Sub-Licensees, as appropriate.
6.13 Marketing Practices. Defiante shall, to the extent that it is typical and customary based upon industry standards:
(a) avoid deceptive, misleading, or unethical practices that may be detrimental to RegeneRx, RegeneRx Improvements, Joint Improvements, Bulk Active Material, Documentation or the Finished Products;
(b) not make any representations, warranties or guarantees to any third party or entity on behalf of RegeneRx or concerning RegeneRx Improvements, Joint Improvements, Bulk Active Material, Documentation or Finished Products, unless mutually agreed to otherwise by the parties hereto;
(c) comply with all applicable EU and local country laws and regulations with respect to the subject matter of this Agreement; and
(d) acknowledge that RegeneRx shall not participate in the marketing, promotion or selling of the Finished Products, but will provide information and material, at its discretion, that may be relevant and pertinent to Defiante's activities to commercialize Finished Products in the Territory for the Field of Use.
6.14 Reports on Adverse Reactions to Finished Products. During the Term herein, in the event an individual user obtains from a Customer the Finished Product and suffers an adverse reaction, Defiante shall immediately report to RegeneRx in detail according to applicable laws and regulations the adverse reaction indicating such items as, but not limited to, the unit or lot of Finished Products responsible for the adverse reaction, the date manufactured, type of adverse reaction, patient records and what aspect, if any, of non-compliance with the Specifications occurred that may have been a cause or contributing factor to such adverse reaction. Further, in case of a medical emergency involving any Finished Products, or if required by any appropriate regulatory authority to which Finished Products are subject, RegeneRx shall have immediate access, upon request, to all Documentation, including protocols, regulatory documentation, and promotional materials, prepared by or for Defiante, relating to the use or Sale of Finished Products. Defiante shall promptly inform RegeneRx of any such medical emergency or requirement of any appropriate regulatory authority as the foregoing requires. This Section shall apply to Sub-Licensees. Mutatis mutandis, RegeneRx shall notify Defiante according to this Section of any adverse reaction, side effects or the like connected with the Finished Products and/or Bulk Active Material. On an annual basis following commercial availability on the Effective Date, Defiante shall deliver a report to
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RegeneRx that summarizes the occurrence of any of the foregoing events related to adverse reactions. In the event no adverse reaction occurs during a year that is an annual period, no report shall be required to be delivered.
6.15 Trademark for Bulk Active Material and Trademark for Finished Products. During the Term, RegeneRx shall provide, if appropriate, Trademark for Bulk Active Material to Defiante for the purposes of engaging in the commercial availability and marketing, distribution and Sales of Finished Products. The right to use the Trademark for Bulk Active Material shall be subject to the Trademark for Bulk Active Material Grant recited in Article 2, Section 2.2, and the obligations under Attachment F.
(a) Defiante shall be entitled to select one or more Trademark(s) for the Finished Products. RegeneRx shall cooperate in good faith with Defiante for choosing such Trademark for the Finished Product. Defiante shall assume all appropriate steps to obtain, register, protect and maintain in Defiante's or its designee's name the Trademark for the Finished Products in the Territory. Trademark for the Finished Product shall be listed in Attachment G, which is made a part hereof, following prompt notification to RegeneRx when such Trademark for Finished Product is created and thereafter, made the subject of applications for registration under appropriate trademark law in each country in the Territory, at Defiante's expense.
(b) At RegeneRx's discretion and if permitted by law, RegeneRx shall require Defiante, its Affiliates and/or Sub-Licensees to co-brand Finished Products with Trademark for Bulk Active Material and Trademark for the Finished Product. The parties will cooperate in utilizing and displaying the Trademark for the Bulk Active Material in accordance with the requirements recited in the Trademark Style Guide and Requirements. Further, the parties will cooperate in reviewing the display and use of the Trademark for the Finished Product in combination with the Trademark for the Bulk Active Material.
6.16 Application to Sub-Licensees and Affiliates. All of the foregoing obligations in this Article 6, as appropriate, shall apply to Sub-Licensees and Affiliates.
ARTICLE 7
CONFIDENTIAL INFORMATION, INTELLECTUAL PROPERTY
7.1 Confidentiality, Proprietary Information And Publicity.
(a) Confidentiality. By nature of this Agreement, each party may have access to information of the other party which is considered confidential and/or proprietary ("Information"). Information shall include, but not be limited to, the following:
(i) RegeneRx Improvements, Defiante Improvements, Joint Improvements, Patents, Know-How, Bulk Active Material, Finished Products and Specifications;
(ii) Documentation;
(iii) product plans, technology, data, samples, documents, reports, marketing strategy, equipment, personnel information, customer lists, supplier information, business
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plans, chemical formulations, this Agreement and any other technical or business information related to the foregoing:
(iv) Information disclosed pursuant to the Nondisclosure Agreement (Attachment H), which is incorporated herein by reference, and effective as of April 18, 2003 and the terms therein shall apply only to the extent that such Nondisclosure Agreement is consistent with the terms and conditions of this Article 7 and in the event of conflict, the terms of this Agreement shall apply and supercede; and
(v) all other Information provided by either party to the other which is clearly marked with a confidential or similar legend by the disclosing party.
Notwithstanding the foregoing, Information shall not include information which:
(a) is or becomes a part of the public domain through no act or omission of the
receiving party; (b) was in the receiving party's lawful possession prior to the
disclosure and had not been subject to limitations on disclosure; (c) is
lawfully disclosed hereafter to the receiving party by a third party who did not
acquire the information directly or indirectly from the disclosing party; (d) is
released in writing by the disclosing party; (e) is subject to disclosure by
operation of law; or (f) is independently developed by the receiving party
without the access, use or benefit of the Information.
The receiving party shall not disclose, disseminate or distribute Information to any third parties. The receiving party may disclose Information only to its Affiliates, employees, subcontractors, consultants, Sub-Licensees and Distributors, who have a need to know such Information for carrying out the purposes of this Agreement. Further, the parties agree, both during the Term of this Agreement and/or after the termination or expiration of this Agreement, that all Information owned solely by one party and disclosed to the other party shall remain sole property of the disclosing party, and the confidentiality of the Information shall be maintained and protected by the other party with the same effort, but not less than a reasonable degree of effort, used to protect its own confidential and proprietary information of a like nature unless there is an occurrence of one or more of the above conditions. Defiante shall, prior to the disclosure of Information, obligate in writing any and all of its Affiliates, employees, consultants, subcontractors, Sub-Licensees and Distributors to the same degree of care and to similar obligations, as recited herein, regarding the confidentiality and proprietary nature of Information.
The Information shall only be used as specified under and only for the purposes of this Agreement, and for no other purpose.
No other information exchanged between the parties shall be deemed confidential unless agreed to in writing. The confidentiality obligations under this Agreement shall expire ten (10) years following the termination and/or expiration of this Agreement. Notwithstanding the foregoing, in the event certain Information is labeled as the distributing party's "Trade Secret" such Trade Secret Information shall remain confidential beyond the ten (10) year term unless one of the above events in (a) through (f) occur.
(b) Notices. Defiante shall ensure that the Finished Products include appropriate and proprietary markings. These markings shall include, but are not limited to, acknowledgments and valid proprietary notices. One such notice, for example, is the recitation of the U.S. Patent Nos. assigned/licensed to RegeneRx, which will be timely supplied hereunder by
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RegeneRx, and which is applicable to the Finished Products, as recited in Attachment A, and/or an appropriate Trademark for the Bulk Active Material designation, as recited in the Trademark Style Guide and Requirements.
(c) Publicity Regarding Agreement/Party References. The terms of this Agreement shall be treated by each party as Information. No press release or other publicity of any nature whatsoever regarding this Agreement (including advertising or promotional activity unless expressly permitted in this Agreement) shall be made without the other party's prior written approval. Such approval may be withheld by the approving party in its sole and absolute discretion; provided, however, that approval of such disclosure shall be deemed to be given to the extent such disclosure is required to comply with the Commercial Marketing Approval or the U.S. or local Government. When possible, the publishing party shall give the other party five (5) business days to review the text of such disclosure prior to publication or release. Once a publication or release is approved, use of the same publication or press release containing the same content shall not require additional approvals, provided that no substantive changes are made to the content or context of the publication.
(d) Publications. If Defiante desires to publish the discoveries and findings of Defiante arising out of its research and development activities related to Joint Improvements, RegeneRx Improvements, Defiante Improvements, Bulk Active Material or Finished Products wherein publications include reputable scientific journals, publications, conferences, symposiums, or meetings papers, abstracts, manuscripts, presentations or other writings (collectively, publications), then Defiante shall provide to RegeneRx a copy of such publication at least sixty (60) days prior to the date on which Defiante intends to submit such publication. RegeneRx may, in writing, on or before the expiration of such sixty (60) day period provide comments on the proposed publication. RegeneRx shall have the right to delay or stop the publication or presentation in order to obtain patent protection for the discoveries and findings contained therein, or to stop or postpone the publication to preserve the confidentiality of any Information of a technical or business nature, or Information related to commercialization efforts and activities. If RegeneRx timely informs Defiante, in writing, that publication or presentation of such publication must be stopped or delayed for the reasons above, Defiante agrees not to publish or present such publication.
7.2 Title to Intellectual Property.
(a) Intellectual Property is defined as, but not limited to, any ideas, information, concepts, improvements, know-how, techniques, methods, processes, research, results, developments, work products, designs, expressions, technology, chemical formulations, apparatus, product or function having either patent, copyright, trade secret, trademark or any other proprietary right associated therewith.
(b) All Intellectual Property rights, title and interests in
and to RegeneRx Improvements, Patents, Know-How, RegeneRx Documentation, Bulk
Active Material, Trademark for the Bulk Active Material and products embodying
the foregoing: i) which are in existence as of the Effective Date, are held by
and shall remain vested in RegeneRx to the extent provided by RegeneRx; and/or
ii) which are generated, created or developed by RegeneRx based on or derived
from the RegeneRx Improvements, Patents, Know-How, RegeneRx Documentation, Bulk
Active Material, Trademark for the Bulk Active Material and products embodying
the foregoing during the
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Term, shall be owned by and be vested in RegeneRx to the extent provided by RegeneRx, subject to the Grants recited in Article 2 ("RegeneRx Intellectual Property").
(c) All Intellectual Property rights, title and interests in any Defiante Documentation, Defiante Improvements, Finished Products, and the Trademark for the Finished Product, generated, created or developed by Defiante based on or derived from the Finished Product or Trademark for the Finished Product during the Term, shall be owned by and vested in by Defiante subject to the applicable Grants recited in Article 2 ("Defiante Intellectual Property").
(d) Subject to the relevant conditions herein, all Intellectual Property rights, title and interests in and to Joint Improvements generated, created or developed jointly by Defiante and RegeneRx during the Term, shall be jointly owned, as equal and undivided interests, by both parties, and jointly vested in RegeneRx and Defiante, with the right of each party upon termination, either only as a result of natural termination under Section 9.1 or as a result of termination for breach under Section 9.3, to exploit such Joint Improvements without an accounting to the other party. In the event of the procurement of Intellectual Property protection for the Joint Improvements, the procuring party shall execute, without additional consideration, all documents reasonably required to confirm both parties' ownership of such Intellectual Property and to permit the procuring party to secure protection thereon.
(e) In the event RegeneRx Intellectual Property results under
Section 7.2(b) above, Defiante shall execute, without additional consideration,
all documents reasonably required to confirm RegeneRx's ownership of such
Intellectual Property and to permit RegeneRx to secure protection thereon.
Additionally, in the event of termination and/or expiration, and as provided
hereunder, Defiante shall either transfer to or confirm to RegeneRx the rights
and interests in Defiante Intellectual Property consistent with the rights
reserved or granted hereunder, and, alternatively, as provided hereunder,
RegeneRx shall confirm to Defiante the rights and interests in RegeneRx
Intellectual Property consistent with the rights reserved or granted hereunder.
7.3 Prosecution and Maintenance of Intellectual Property. RegeneRx shall have full control over and responsibility for filing, prosecution and maintenance of (a) Patents and (b) Know-How and c) Trademark for Bulk Active Material during the Term of this Agreement. However, if RegeneRx does not desire to continue to assume responsibility for the filing, prosecution or maintenance of such Patents and Trademark for Bulk Active Material in the Territory, then Defiante shall be permitted to assume responsibility therefore only in the Territory. The assumption of such responsibility therefore shall, however, in no way diminish RegeneRx's rights, title or interests therein. Should Defiante assume such responsibility, the costs and expenses shall be deducted against any future royalties due and owing under the Agreement from the date such costs and expenses therefore are incurred by Defiante. Defiante shall maintain a record of such costs and expenses for review by RegeneRx. RegeneRx shall timely notify Defiante of its intent not to continue filing, prosecution and maintenance of the Patents and/or Trademark for Bulk Active Material so as to permit Defiante to have sufficient time in which to assume such responsibility therefore in the Territory.
7.4 Enforcement Against Third-Party Infringement. In the event Defiante, its Affiliates, Distributors or Sub-Licensees, or RegeneRx, itself, become aware of unauthorized, inappropriate or misappropriate use RegeneRx Documentation or Bulk Active Material; or become aware of infringement by a third party of any issued Patents or registered Trademark for the Bulk Active
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Material within the Territory, that party shall promptly notify the other parties, and Defiante and RegeneRx shall discuss the most appropriate action to take. All parties shall use their reasonable and best efforts in cooperating with each other to terminate such infringement or unauthorized, inappropriate or misuse without litigation; provided that, RegeneRx shall have sole control over the actions and activities in connection therewith and shall have sole discretion as to the non-litigation method of termination as follows:
(a) Within one hundred twenty (120) days after the date of notification of the foregoing, if attempts to abate such infringement or unauthorized, inappropriate or misuse are unsuccessful, then RegeneRx has the first right, but not the obligation, to bring such action, at its own expense, against such third party, in which event Defiante or any of the foregoing parties recited herein this Section 7.4 shall cooperate with RegeneRx, as reasonably requested.
(b) Defiante, subject to any required U.S. Government approvals, may, on its own initiative and cost, but only upon the approval of RegeneRx, join in any suit brought by RegeneRx under this Section 7.4; provided that, the control over the litigation and any offer of or acceptance of settlement associated therewith is in the sole and exclusive control and discretion of RegeneRx.
(c) All recoveries, damages and awards in a suit brought by RegeneRx, without the joinder of Defiante, and/or all settlement amounts by RegeneRx shall be due solely to RegeneRx. In the event that Defiante joins in any suit brought by RegeneRx under this Section 7.4, all recoveries, damages and awards in such joint action shall be shared equally by RegeneRx and Defiante after the recoupment of RegeneRx's fees, expenses and costs associated with the litigation and required payments to the U.S. Government.
(d) In the event that RegeneRx elects not to institute or prosecute any suit to enjoin or recover damages from any third-party infringer of the issued Patents or registered Trademark for the Bulk Active Material in the Territory or unauthorized, inappropriate or misuse of RegeneRx Improvements, RegeneRx Documentation or Bulk Active Material in the Territory, then Defiante alone, subject to U.S. Government approvals, but with the cooperation of RegeneRx, at Defiante's expense, may, in its sole discretion and expense, initiate and conduct an infringement, unauthorized, inappropriate or misuse action against such third party. In the event of any settlement as a result of such action , such settlement shall be subject to the approval of RegeneRx.
(e) In the case of award or settlement proceeds, which may be obtained from such action, the actual costs and expenses incurred by Defiante or RegeneRx and any required payment obligations to the U.S. Government shall be offset against the award or the settlement amounts; and thereafter, the remaining proceeds shall be equally divided between Defiante and RegeneRx, following a final and certified judgment. Defiante agrees that Defiante shall not offer or accept any settlement within the Territory on any issued Patents or registered Trademark for Bulk Active Material or any other claim under a proprietary interest without RegeneRx's prior written approval.
7.5 Challenge to Patents and Trademarks. To the extent a third-party challenge is lodged against RegeneRx, Defiante, its Affiliates, Distributors or Sub-Licensees based on any issued Patent or registered Trademark for Bulk Active Material, the following shall occur:
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(a) In the event Bulk Active Material, as incorporated into the Finished Products, becomes the subject of a claim of infringement from a third party based upon an issued Patent or registered Trademark for Bulk Active Material in the Territory applicable to that Finished Products, the party first receiving notice of such action shall promptly give notice to the other party and Defiante and RegeneRx shall meet to consider the claim and the appropriate course of action.
(b) RegeneRx shall have the sole right to conduct and control the defense of any such suit brought against RegeneRx., Defiante, its Affiliates, Distributors or Sub-Licensee. RegeneRx shall also have the sole right and authority to settle any such suit. Defiante, its Affiliates and/or Sub-Licensee shall cooperate with RegeneRx in connection with the defense of such claim, at RegeneRx costs and expenses.
(c) Any royalty payments derived from Sales that are due and payable by Defiante hereunder to RegeneRx during such action, shall continue to be payable regardless of such action, subject to the indemnity provision in Article 8, Section 8.4.
(d) If any counterclaims occur, which result in amounts awarded to RegeneRx then such amounts shall initially be used to offset RegeneRx's fees and expenses incurred as a result of the action, and to meet the obligation of any required payments to the U.S. Government, and the remaining amount, if any, shall be payable entirely to RegeneRx following a final and certified judgment.
(e) Neither Defiante, its Affiliates, Distributors nor Sub-Licensee shall be permitted to make an offer of or accept any settlement related to the foregoing challenge to issued Patents without the express written authorization of RegeneRx to do so.
8.1 RegeneRx. RegeneRx represents and warrants that:
(a) RegeneRx is a corporation validly formed and existing under the laws of the State of Delaware, USA;
(b) To the best of RegeneRx's knowledge as of the Effective Date, there are no prior or contemporaneous assignments, grants, licenses, encumbrances, obligations or agreements, either written, oral, express or implied, to which it is a party, that are inconsistent with this Agreement;
(c) To the best of RegeneRx's knowledge as of the Effective Date, RegeneRx has the right to grant under Article 2 to Defiante the rights recited in and pursuant to the terms of this Agreement under any issued Patent or registered Trademark for Bulk Active Material, Documentation, Know-How and RegeneRx Improvements in the Territory for the Field of Use. The parties acknowledge that such representation shall be at all times subject to and qualified by any applicable law, rule, regulation, ordinance, determination or requirement in connection with the rights reserved to the Government of the United States of America;
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(d) The execution, delivery and performance of this Agreement have been duly and effectively authorized by all necessary corporate or other actions, that those actions do not violate, conflict with, or result in the breach of any provision of its Articles of Incorporation, bylaws or any comparable documents, or of any agreement to which it is a party;
(e) This Agreement is binding on and enforceable against RegeneRx in accordance with its terms; and
(f) To the best of its knowledge as of the Effective Date, that the manufacturing of Bulk Active Material and the commercialization of the Bulk Active Material, whether or not incorporated into the Finished Products according to this Agreement, do not infringe any third parties' rights under any issued patents in the Territory.
8.2 Warranty Disclaimer. Nothing in this Agreement may be construed as:
(a) A warranty or representation by RegeneRx as to the validity, enforceability or scope of any issued Patents or registered Trademark for Bulk Active Material, RegeneRx Improvements or RegeneRx Documentation in the Territory;
(b) Except as provided under Section 8.1(e), a warranty or representation that anything made, used, sold or otherwise disposed of under any license or right granted in this Agreement is or will be free from infringement of any patents, copyrights, trademarks and other proprietary rights of third parties;
(c) An obligation to enforce or defend any actions or suits against or from third parties for infringement relative to Bulk Active Material, RegeneRx Improvements or RegeneRx Documentation, except to the extent and in the circumstances described in Sections 7.4 and 7.5; and
(d) A grant by implication, estoppel, or otherwise of any licenses under any other patent, trademark, copyright or other proprietary interest of RegeneRx, which is not a subject of this Agreement.
FURTHER, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, REGENERX DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND REGENERX MAKES NO REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES AS TO MERCHANTABILITY, USEFULNESS, OR FITNESS FOR A PARTICULAR PURPOSE TO ANY THIRD PARTY OR DEFIANTE RELATIVE TO REGENERX INTELLECTUAL PROPERTY, THE BULK ACTIVE MATERIAL, TRADEMARK FOR THE BULK ACTIVE MATERIAL, REGENERX IMPROVEMENTS, REGENERX DOCUMENTATION, PATENTS, KNOW-HOW OR INFORMATION, FINISHED PRODUCT, JOINT IMPROVEMENTS OR THIS AGREEMENT.
8.3 Defiante. Defiante represents and warrants that:
(a) It is a corporation validly formed and existing under the laws of Portugal;
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(b) To the best of Defiante's knowledge as of the Effective Date, there are no prior or contemporaneous assignments, grants, licenses, encumbrances, obligations or agreements, either written, oral, express or implied, to which it is a party, that are inconsistent with this Agreement;
(c) The execution, delivery and performance of this Agreement have been duly and effectively authorized by all necessary corporate or other actions, that those actions do not violate, conflict with, or result in the breach of any provision of its Articles of Incorporation, bylaws or any comparable documents, or of any agreement to which it is a party;
(d) To the best of Defiante's knowledge, before exploiting Finished Product, Defiante Improvements, or Defiante Documentation generated by Defiante according to this Agreement, Defiante shall ensure that such exploitation does not infringe any third parties' rights under any issued patents or registered trademarks in the Territory; and
(e) This Agreement is binding on and enforceable against Defiante, its Affiliates and Sub-Licensees, as provided hereunder, and Sigma-Tau Finanziaria SpA, under the Warranty and Undertaking, in accordance with the terms of this Agreement
FURTHER, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, DEFIANTE DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND DEFIANTE MAKES NO REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES AS TO MERCHANTABILITY, USEFULNESS, OR FITNESS FOR A PARTICULAR PURPOSE TO ANY THIRD PARTY OR REGENERX RELATIVE TO THE BULK ACTIVE MATERIAL, THE FINISHED PRODUCTS, DEFIANTE IMPROVEMENTS, JOINT IMPROVEMENTS, TRADEMARK FOR FINISHED PRODUCTS, OR THIS AGREEMENT
8.4 Infringement Indemnity. As provided for herein under Section 7.5, RegeneRx will defend, indemnify and hold harmless Defiante against any infringement claim by a third party relating to an issued Patent in the Territory for the Bulk Active Material as embodied in the Finished Products that is the subject of Sales in the Territory; provided that:
(a) Defiante notifies RegeneRx in writing within thirty (30) days of a date that a claim of infringement is received by Defiante;
(b) RegeneRx has sole control of the defense and all related settlement negotiations as provided under Article 7, Section 7.5; and
(c) at RegeneRx's request, Defiante provides RegeneRx with all necessary assistance, information and authority to perform the above.
RegeneRx shall have no liability for any claim of infringement based on: (a) use of altered, modified Bulk Active Material not supplied by RegeneRx, or Bulk Active Material not authorized by RegeneRx to be altered, modified or changed if such infringement would have been avoided by the use of an unaltered, unmodified or authorized Bulk Active Material directly supplied by RegeneRx; (b) the combination or use of the Bulk Active Material with materials or ingredients not furnished by RegeneRx if such infringement would have been avoided by use of the Bulk Active Material alone;
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or (c) the rights of a third party in technology which is similar to the Bulk Active Material previously developed by a third party cooperatively with Defiante prior to the Effective Date of this Agreement.
In the event Bulk Active Material is held or is believed by RegeneRx to infringe, RegeneRx shall have the option, at its expense, to:
(i) modify, at RegeneRx expenses, the Bulk Active Material to be noninfringing, subject to relevant regulatory approvals and regulatory changes to the Commercial Marketing Approval;
(ii) obtain for Defiante, at no additional expense to Defiante, a license to continue using and distributing the Bulk Active Material, as provided hereunder; or
(iii) terminate this Agreement and return to Defiante an amount equal to the royalties paid hereunder for Sales wherein such royalties shall be payable prorata to Defiante over a three (3) year period from the date of termination. The foregoing shall serve as RegeneRx's entire liability and responsibility for claims of infringement arising out of the Bulk Active Material. RegeneRx shall not be liable for any other sums or amounts arising therefrom, and that amount shall be the total amount payable to Defiante for claims of infringement against Defiante, as recited herein. RegeneRx shall not indemnify Defiante for any other claims of infringement except as expressly stated hereunder.
ADDITIONALLY, REGENERX SHALL NOT BE LIABLE TO DEFIANTE, ITS AFFILIATES, SUB-LICENSEES, DISTRIBUTORS OR SIGMA-TAU FINANZIARIA SPA FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES OR LOSSES WHICH MAY HAVE RESULTED FROM THE FOREGOING INFRINGEMENT INDEMNITY, EVEN IF REGENERX WAS INFORMED OF SUCH POTENTIAL FOR SUCH LOSSES OR DAMAGES.
8.5 Indemnification and Insurance.
(a) Indemnification by RegeneRx. RegeneRx shall be liable for any loss or damage to third parties due to personal injury, illness or death directly relating or attributable to the Bulk Active Material supplied by RegeneRx to the extent that such injury, illness or death directly results from a cause or causes occurring prior to the delivery of any Bulk Active Material to Defiante hereunder and is caused by the negligence or willful malfeasance of RegeneRx or its designees in the manufacturing, storage, transportation, use, handling or labeling of Bulk Active Material. RegeneRx shall defend, indemnify and hold Defiante, its Affiliates, Distributors and Sub-licensees and their agents, employees, officers and directors harmless from all suits, claims, liabilities, losses, expenses and damages (including court costs and reasonable attorneys' fees and expenses) of any kind or character arising from such claims of liability, loss or damage up to the amounts of coverage available under applicable insurance policies held by RegeneRx applicable to such claims but in no event less than the ***.
(b) Indemnification by Defiante. Defiante shall be liable for any loss or damage to third parties due to personal injury, illness or death directly relating or attributable to the Finished Product (and directly relating or attributable to the Bulk Active Material to the extent the Bulk
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Active Material is manufactured by Defiante) to the extent that it results from a cause or causes occurring subsequent to the delivery of any Bulk Active Material to Defiante hereunder and is caused by the negligence or willful malfeasance of Defiante or its designees in the manufacturing, storage, transportation, use, Sale, handling, business practices or activities, including but not limited to actions of contract or tort, or marketing of the Finished Product or the manufacture of Bulk Active Material by Defiante including but not limited to claims under product liabilities, including strict liabilities, associated with Finished Product use, performance, effect or non-effect. Defiante, its Distributors and Sub-Licensees shall defend, indemnify and hold RegeneRx, its Affiliates and their agents, employees, officers and directors harmless from all suits, claims, liabilities, losses, expenses and damages (including court costs and reasonable attorneys' fees and expenses) of any kind or character arising from such liability, loss or damage.
(c) Contributory Actions. In the event claims made by third parties occur with respect to the events recited in (a) and (b) above and the tribunal determining such claims issues a judgment that allocates responsibilities and liabilities between the parties, no indemnification of a party shall occur where there is contributory causation and each party shall be liable for the amounts of liability determined by the tribunal once the final judgment is rendered, and therefore, each party shall bear all expense, costs and liabilities in defending such claim from a third party.
(d) Product Liability Insurance. Not later than the date of first use of a Finished Product in humans in any country in the Territory, each party hereto shall obtain and maintain during the term of this Agreement proper product liability insurance issued by a reputable insurance company reasonably acceptable to the other party, insuring each such party's respective liability and indemnification obligations set forth above, respectively, wherein the minimum required amount of coverage shall be an amount equal to ***. Upon request, each party shall provide to the other party a certificate of insurance issued by the relevant insurance company verifying the issuance of an insurance policy complying with the provisions above.
8.6 Agreement to Cooperate. Except where otherwise stated, in all actions, claims and proceedings of the kind described in this Article 8, as applicable, each of the parties shall, at its own cost, render to the other party all assistance, furnish all documents and information, and cooperate to the fullest extent of its capacity, including but not limited to the assistance of, and the right to consult with, such party's technical and scientific personnel and attorneys.
8.7 Indemnification for Breach of Representations and Warranties.
RegeneRx shall defend, indemnify and hold harmless Defiante and its agents,
employees, officers, directors from and against any and all losses or damages
caused by a breach of any of the warranties and representations set forth in
Section 8.1 hereof, subject to Section 8.2, within the limits of liability
herein. Defiante shall defend, indemnify and hold harmless RegeneRx and its
agents, employees, officers, directors from and against any and all losses or
damages caused by a breach of any of the warranties and representations set
forth in Section 8.3 hereof, within the limits of liability herein.
8.8 Limitation of Liability. EXCEPT WHERE OTHERWISE STATED AND
EXCEPT WITH RESPECT TO CLAIMS ARISING OUT OF MISUSE, UNAUTHORIZED OR
MISAPPROPRIATE USE OF INFORMATION OR INTELLECTUAL PROPERTY BY A PARTY HERETO, IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING LOSS OF
PROFITS OR REVENUE, INCURRED BY THE
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OTHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, INCLUDING BUT NOT LIMITED TO THE USE, RESULTS, ACTUAL OR EXPECTED, BENEFITS, OR EFFECTS, WHETHER DIRECT, SIDE OR LATENT, OCCURRING NOW OR IN THE FUTURE FOR APPLICATIONS OUTSIDE THE FIELD OF USE; EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, RELATED TO THIS AGREEMENT, OR RELATED TO THE POSSESSION, USE, SALE OR DISTRIBUTION OF REGENERX IMPROVEMENTS, DEFIANTE IMPROVEMENTS, JOINT IMPROVEMENTS, KNOW-HOW, PATENTS, TRADEMARK FOR FINISHED PRODUCTS, TRADEMARK FOR BULK ACTIVE MATERIAL, BULK ACTIVE MATERIAL, FINISHED PRODUCTS, OR DOCUMENTATION, OR COMPLIANCE OF THE FINISHED PRODUCT AND/OR BULK ACTIVE MATERIAL WITH THE SPECIFICATION, COMMERCIAL MARKETING APPROVAL OR MANUFACTURING APPROVAL; OR QUALITY OR PERFORMANCE, EXPECTED OR ACTUAL, OF THE FINISHED PRODUCT AND/OR BULK ACTIVE MATERIAL. Each party, however, acknowledges that any breach of its obligations with respect to Information or Intellectual Property of each party will cause such nonbreaching party irreparable injury for which there are inadequate remedies at law and that such nonbreaching party shall further be entitled to equitable relief in addition to all other remedies available to it. Subject to the foregoing, each party's entire liability hereunder shall be limited to actual and provable damages up to the amounts paid or received hereunder, except as provided otherwise herein. Neither party shall be liable for any further or additional amounts of money.
9.1 Term. This Agreement shall become effective as of the Effective
Date, and unless earlier terminated under this Article 9 this Agreement shall
expire on a country by country basis on the date that is the later of: (i) the
expiration of the last to expire of any granted Patent in the Territory having
at least one Valid Claim covering the Finished Products then on the market, its
use or manufacture, to the extent such Valid Claim could be enforced against
Defiante's activities if not for the license granted hereunder; or (ii) twelve
(12) years from the Effective Date; or (iii) the expiration of any other
exclusive or proprietary marketing rights conferred on either party (such as,
but not limited to, Orphan designation or like designations) in any country in
the Territory ("Term").
9.2 Termination for Convenience. In the event Defiante desires to terminate the Agreement for convenience at any time during the Term, Defiante shall provide RegeneRx six (6) months notice to permit RegeneRx to locate another licensee in the Territory or develop new business plans. *** that termination, as provided hereunder in this Article 9.2, shall not entitle Defiante, its Affiliates, Sub-Licensees or Distributors to exercise any of the grants recited in Article 2, and Defiante, its Affiliates, Sub-Licensees or Distributors shall not be entitled to practice any Joint Improvements. Further, Defiante, its Affiliates, Sub-Licensees or Distributors shall not be permitted to practice any Defiante Improvements that infringe any of the Patents, having Valid Claims, of RegeneRx.
9.3 Termination for Default/Remedies. This Agreement may be terminated by a non-defaulting party, if the other party substantially fails to perform or otherwise materially breaches any of the material terms, covenants or provisions of this Agreement. The non-defaulting party shall
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give written notice of intent to terminate to the breaching party stating the grounds therefore. The party receiving the notice shall have sixty (60) days thereafter to correct such breach, except where otherwise stated in this Agreement. If such breach is not corrected to the non-breaching party's satisfaction within the sixty (60) day period, then this Agreement shall automatically terminate.
(a) Except as recited in Section 4.11, this Agreement shall not be subject to termination with respect to the events that occur under Article 4.
(b) A party that brings an action based on termination shall be entitled to seek the remedies provided under this Agreement subject to the limitation of liabilities recited herein, and the prevailing party shall be entitled to reasonable attorneys' fees and court and administrative costs as determined by the Arbitration Procedures recited in Article 10, Section 10.1(d). The remedies recited herein shall be the sole and entire remedies available to any party hereunder under any proceeding.
9.4 Effect of Termination.
9.4.1 Upon termination of this Agreement by Defiante under Section 9.2 and by RegeneRx under Section 9.3, the breach by Defiante and RegeneRx's right to termination under Section 9.3 to be confirmed by the arbitration under Article 10 hereof:
(a) Neither party shall thereby be discharged from any liability or obligation to the other party which became due or payable prior to the effective date of such termination; and
(b) Those Sections of this Agreement which by their nature extend beyond termination and which are explicitly set forth in Section 11.9, shall continue; and
(c) Defiante shall discontinue the use, marketing and sale of Finished Product and shall discontinue any use of Documentation, Patents, Know-How, Trademark for Finished Products and Trademark for Bulk Active Material and shall cease the exercise of the grants recited in Article 2; and
(d) All rights transferred to Defiante hereunder shall revert to RegeneRx, and Defiante agrees to execute all instruments necessary and desirable to revest said rights in RegeneRx. Defiante shall transfer all governmental filings or approvals regarding the Finished Product in the Territory, including Commercial Marketing Approval, clinical trial approvals, or other authorizations for the Finished Products to RegeneRx or its designee. Additionally, all rights granted to RegeneRx by Defiante shall survive the termination hereunder; and
(e) RegeneRx shall be entitled to receive any and all outstanding royalty payments that are due and owing under Articles 3, 4, 5 and 6 within ten (10) days of the date of termination. RegeneRx shall be entitled to retain all fees and royalty payments paid hereunder; and
(f) All manufacturing of the Finished Products shall immediately cease except that those Finished Products in progress or those Finished Products, which are the subject of an existing, as of the date of termination, unfulfilled Sales orders may be completed; and thereafter, the Finished Products shall be, at RegeneRx's discretion, promptly either turned over to RegeneRx at
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landed cost or, in the alternative, finally sold by Defiante. In the event of a final Sale, royalties shall be due and owing within thirty (30) days of the date of such final Sale; and
(g) All Information shall be returned to the disclosing party within ten (10) days of the date of termination; and
(h) Defiante shall promptly assign and transfer, without further consideration, all rights, title and interests in and to Trademark for the Finished Product to RegeneRx. Defiante shall promptly execute all documents reasonably required to effectuate such assignment and transfer; and
(i) Defiante shall promptly deliver all Defiante Documentation to RegeneRx and assign, without further consideration, all rights, title and interests therein to RegeneRx. Defiante shall not retain any Defiante Documentation upon any early termination hereunder ("Defiante Documentation Grant"); and
(j) Defiante's grant to Defiante Improvements under Section 2.9 shall become irrevocable and world-wide, provided that, upon the expiration of this Agreement as provided under this Section, RegeneRx shall be provided the rights to use, for any purpose, manufacture and commercially exploit throughout the world, the Defiante Improvements, free of charge and the grant shall be deemed fully paid-up; and
(k) Defiante shall have the rights to Joint Improvements as specified under Section 7.2(d), unless otherwise agreed to by the parties.
9.4.2 Upon termination of this Agreement by Defiante under Section 9.3, the breach by RegeneRx and Defiante's right to termination to be confirmed by the arbitration under Article 10 hereof.
(a) Neither party shall thereby be discharged from any liability or obligation to the other party which became due or payable prior to the effective date of such expiration or termination; and
(b) Those Sections of this Agreement which by their nature extend beyond termination and which are explicitly set forth in Section 11.9, shall continue; and
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9.4.3 Upon natural expiration of the Term of this Agreement under
Section 9.1 above, Defiante shall have ***. Defiante may elect to continue to
purchase the Bulk Active Material from RegeneRx or its designee under terms to
be mutually negotiated. This Section shall survive the natural expiration of
this Agreement.
9.5 Insolvency. It is acknowledged that with respect to any bankruptcy or insolvency proceedings by RegeneRx that does not wind up the business but permits RegeneRx to maintain business operations, it is acknowledged by Defiante that this Agreement shall remain in effect, provided that a trustee is appointed to represent the interests in the assets of RegeneRx, and that any and all royalty payments or fees shall be payable to that trustee when such payments and fees become due and payable, hereunder. Alternatively, if Defiante makes a filing for bankruptcy or
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insolvency under any proceeding, RegeneRx may at its discretion, promptly terminate this Agreement without further liability except for those obligations which survive under Article 11, Section 11.9.
10.1 Arbitration Procedure.
(a) In the event that a claim or controversy arises hereunder, the claim or controversy shall be reduced to writing by the aggrieved party and delivered to the nonaggrieved party. The nonaggrieved party shall be given thirty (30) days from the date of receipt of such writing to explain and/or remedy such claim or controversy to the aggrieved party's satisfaction. If the aggrieved party is not satisfied with such explanation and/or remedy, the claim or controversy shall be submitted to a Board of Arbitration for review.
(b) The Board of Arbitration which, except as hereinafter provided, shall consist of three arbitrators, each party shall appoint one arbitrator each, and the third arbitrator, who shall be the principal arbitrator, shall be elected by the two arbitrators appointed by the parties. The arbitration will be carried out according to the then-existing Rules of the American Arbitration Association. The place of arbitration shall be in Delaware. The Board of Arbitration shall determine matters in dispute in accordance with the laws, as appropriate, of the United States, and the State of Delaware.
(c) Should either party fail to appoint its respective arbitrator within thirty (30) days from the date requested by the other party, then the arbitrator chosen by the other party shall sit alone as the sole arbitrator. Should the two (2) arbitrators so appointed fail to appoint a third arbitrator within thirty (30) days from the date requested by the other party, the two (2) arbitrators shall jointly seek the intervention of the American Arbitration Association, to appoint the third arbitrator.
(d) The arbitration costs and expenses shall be borne by the parties as determined by the Board of Arbitration, except where otherwise stated herein.
(e) The parties agree that the award of the arbitrators shall be the sole and exclusive remedy between them regarding any claims, counterclaims, issues or accountings presented or pled to the arbitrators; that it shall be made and shall promptly be payable free of any tax, deduction or off-set; and that any cost, fees or taxes incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement. Any limits of liability contained in this Agreement shall also apply in any arbitration hereunder.
(f) The award shall include interest from the date of any damages incurred for breach or other violation of the contract, and from the date of the award until paid in full, at a rate to be fixed by the arbitrators.
(g) The decision of the Board of Arbitration shall be final, binding and incontestable and may be used as a basis for judgment in the United States, Portugal or elsewhere.
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(h) Neither party shall be entitled to maintain any action in court of law or equity upon any matter in dispute until such matter shall have been submitted and determined as hereinbefore provided and then only for the enforcement decision of the Board of Arbitration.
(i) Pending the submission to arbitration and thereafter until the Board of Arbitration publishes its awards, the parties shall, except in the event of termination, continue to perform all their obligations under this Agreement without prejudice to a final adjustment in accordance with the arbitrators' award.
11.1 Agreement Registration. RegeneRx agrees to cooperate in the preparation of any agreement and documentation which may be necessary to register the rights granted herein with any foreign governmental agencies, if such may be required by the laws of any such countries in which Defiante, its Affiliates and/or its Sub-Licensees or Distributors operate, provided that such registration does not diminish or destroy, in whole or in part, RegeneRx's proprietary rights in, RegeneRx Improvements, Joint Improvements, Know-How, Patents, Trademark for Bulk Active Material, Bulk Active Material or Finished Products.
11.2 Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be either transmitted by facsimile or delivered by personal service with return receipt requested and addressed to the party at the address stated above or such other address as the party shall, by written notice to the other, designate. Any such notice shall be deemed received on the day such notice is received.
11.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and their permitted assigns. This Agreement may be assigned, transferred, or hypothecated, in whole or in part, by either party to any entity which obtains a majority interest or controlling interest in a party or acquire substantially all of the a party's assets as a result of a sale, acquisition, merger, or results from a corporate reorganization. This Agreement may not be assigned, transferred or hypothecated, in whole or in part by either party, except as provided hereinbefore. Further, each party is permitted to assign and/or transfer this Agreement, in whole or in part, to any of its Affiliates, upon written notice to the other party.
11.4 Waiver; Delay. The express waiver by either party of any provision, condition or requirement of this Agreement shall not constitute a waiver of any future obligation to comply with such provision, condition or requirement nor shall a waiver of one provision, condition or requirement constitute a waiver of the remaining provisions, conditions or requirements. Any delay or omission by either party to exercise any right or remedy under this Agreement shall not be construed to be a waiver of any such right or remedy, or any other right or remedy hereunder. All rights of either party under this Agreement shall be cumulative and may be exercised separately or concurrently.
11.5 Attorneys' Fees. In addition to any other relief it may be awarded and except as otherwise stated herein, the prevailing party, as so determined by the arbitrators in Article 10, in any proceeding to resolve a dispute pertaining to matters covered by this Agreement shall be entitled to
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receive its reasonable attorneys' fees and administrative costs, as so determined by the arbitrators in Article 10, incurred in connection with such proceeding.
11.6 Entire Agreement. This Agreement, any Exhibits, Attachments and any agreement specifically incorporated by reference constitute the entire Agreement between the parties pertaining to the subject matter hereof, and supercede all proposals, or prior and contemporaneous agreements or understandings of the parties, which include the Deal Terms dated April 18, 2003, regarding such matter.
11.7 Export Control/U.N. Sales of Goods/Anti-Bribery/Internet. This Agreement and the respective performances of the parties hereunder shall be subject to all applicable laws and regulation as well as export control laws and regulations of the United States of America, and both parties agree that it will comply with such laws and regulations regarding the export or reexport of the Bulk Active Material and/or Finished Products to any country or person outside the United States. The parties specifically disclaim the application of the 1980 United Nations Convention on the International Sales of Goods to the subject matter of this Agreement. Additionally, both parties shall be subject to all applicable Anti-Bribery Ordinances and Kick-Back Regulations, as applicable, to each country in the Territory. Further, all Internet regulations and laws shall apply to commercial activity that is the subject matter of this Agreement.
11.8 Amendments and Modifications. No amendment or modification of this Agreement shall be valid unless made in writing and signed by duly authorized representatives of each party. Captions used in this Agreement are included for the convenience of the parties only and shall be disregarded in interpretations of this Agreement.
11.9 Survival. The obligations recited in Articles 2, 3, 4, 7, 8, 9, 10 and 11, as applicable, shall survive the expiration and/or termination of this Agreement.
11.10 Governing Law and Severability. The validity, interpretation and performance of this Agreement shall be governed by and construed under the laws of the State of Delaware, and of the United States, as applicable, in the competent courts of Delaware, notwithstanding the principles of any conflicts of law. If any provision of this Agreement is held invalid or unenforceable for any reason, the parties agree that such invalidity shall not affect the validity of the remaining provisions of the Agreement. If any provision of this Agreement is held invalid or unenforceable for any reason, the parties agree that such invalidity shall not affect the validity of the remaining provisions of the Agreement.
11.11 Force Majeure. Except where otherwise expressly provided in this Agreement, neither party shall be considered in default in the performance of its representations, warranties or obligations hereunder if the accuracy or performance is prevented, restricted or interfered with because of any event of force majeure. The party so affected shall give notice promptly to the other party in writing of the event of force majeure, and, thereupon, the affected party shall be excused from those of its obligations hereunder which it is unable to perform because of that event of force majeure for as long as that event of force majeure shall remain in force plus a period of thirty (30) days.
11.12 Counterparts. This Agreement may be signed in multiple counterparts. Signatures may be transmitted by facsimile telecopier.
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11.13 Independence of Parties. RegeneRx and Defiante are independent contractors and neither party is the legal representative, agent, joint venturer, partner, or employee of the other party for any purpose whatsoever. Neither party has any right or authority to assume or create any obligation of any kind or to make any representation or warranty on behalf of the other party, whether express or implied, or to bind the other party in any respect whatsoever, except as expressly agreed to herein.
11.14 Reasonable Interpretation of Clauses. The parties acknowledge that the restrictions and/or rights contained in this Agreement are the result of extended discussion between the parties relating to the development, marketing and distribution of products incorporating Thymosin Beta 4. The parties further acknowledge that the restrictions are reasonable in scope, time, territory or legal validity, and that if any court or Board of Arbitration having jurisdiction over the parties should determine that any part of this Agreement is illegal, invalid or unenforceable for any reason, it is the intent of the parties that any such illegal, invalid or unenforceable provision shall be replaced by a valid provision which will implement the commercial purpose of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed effective as of the date first written above.
REGENERX BIOPHARMACEUTICALS, INC. DEFIANTE FARMACEUTICA LDA By: --------------------------------- BY:--------------------------------- J.J. Finkelstein Name: |
President and CEO Title:
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ATTACHMENT A
PATENTS
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ATTACHMENT B
THYMOSIN (Beta) 4 TENTATIVE RELEASE SPECIFICATIONS
***
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ATTACHMENT C
TERRITORY
ATTACHMENT D
WARRANTY AND UNDERTAKING BETWEEN REGENERX AND SIGMA-TAU
Sigma-Tau Finanziaria SpA, Viale Sud Africa, 20 00144 Rome Italy ("Sigma-Tau") guarantees the performance of Defiante or its Affiliates as set forth in this Agreement. In the event Defiante or its Affiliates fail to perform its obligations, following an opportunity to cure as provided under this Agreement, Sigma-Tau shall assume all liability, including responsibility for damages, that result from Defiante's or its Affiliates' breach of this Agreement relative to performance by Defiante or its Affiliates unless Sigma-Tau, itself, assumes, at its discretion, all performance obligations under this Agreement. Sigma-Tau, however, shall have no liability to RegeneRx if Defiante or its Affiliates perform under this Agreement. This Warranty and Undertaking shall survive any termination under this Agreement.
REGENERX BIOPHARMACEUTICALS, INC. SIGMA-TAU Finanziaria SpA
By: By:
------------------------------ ----------------------------
J.J. Finkelstein Name:
President and CEO -----------------------
Title:----------------------
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ATTACHMENT E
NIH REQUIREMENTS
NATIONAL INSTITUTE OF HEALTH ("NIH"), THE CENTERS FOR DISEASE CONTROL AND PREVENTION ("CDC"), OR THE FOOD AND DRUG ADMINISTRATION ("FDA"), HEREINAFTER SINGULARLY OR COLLECTIVELY REFERRED TO AS "PHS", AGENCIES OF THE UNITED STATE PUBLIC HEALTH SERVICE AND HUMAN SERVICES ("DHHS") AGENCY REQUIREMENTS
RegeneRx declares that PHS have the following rights on the subject matter of this Agreement.
5.01(a) PHS reserves on behalf of the Government an irrevocable,
nonexclusive, nontransferable, royalty-free license for the
practice of all inventions licensed under the Licensed Patent
Rights throughout the world by or on behalf of the Government
and on behalf of any foreign government or international
organization pursuant to any existing or future treaty or
agreement to which the Government is a signatory. Prior to the
First Commercial Sale, Licensee agrees to provide PHS
reasonable quantities of Licensed Products or materials made
through the Licensed Processes for PHS research use.
5.01(b) In the event that Licensed Patent Rights are Subject
Inventions made under a Cooperative Research and Development
Agreement (CRADA), Licensee grants to the Government, pursuant
to 15 U.S.C. 3710a(b)(1)(A), a nonexclusive, nontransferable,
irrevocable, paid-up license to practice Licensed Patent
Rights or have Licensed Patent Rights practiced throughout the
world by or on behalf of the Government. In the exercise of
such license, the Government shall not publicly disclose trade
secrets or commercial or financial information that is
privileged or confidential within the meaning of 5 U.S.C.
552(b)(4) or which would be considered as such if it had been
obtained from a non-Federal party. Prior to the First
Commercial Sale, Licensee agrees to provide PHS reasonable
quantities of Licensed Products or materials made through the
Licensed Processes for PHS research use.
5.02 Licensee agrees that products used or sold in the United
States embodying Licensed Products or produced through use of
Licensed Processes shall be manufactured substantially in the
United States, unless a written waiver is obtained in advance
from PHS.
5.03 Licensee acknowledges that PHS may enter into future
Cooperative Research and Development Agreements (CRADAs) under
the Federal Technology Transfer Act of 1986 that relate to the
subject matter of this Agreement. Licensee agrees not to
unreasonably deny requests for a Research License from such
future collaborators with PHS when acquiring such rights is
necessary in order to make a Cooperative Research and
Development Agreement (CRADA) project feasible. Licensee may
request an opportunity to join as a party to the proposed
Cooperative Research and Development Agreement (CRADA).
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5.04(a) In addition to the reserved license of Paragraph 5.01 above,
PHS reserves the right to grant nonexclusive Research Licenses
directly or to require Licensee to grant nonexclusive Research
Licenses on reasonable terms. The purpose of this Research
License is to encourage basic research, whether conducted at
an academic or corporate facility. In order to safeguard the
Licensed Patent Rights, however, PHS shall consult with
Licensee before granting to commercial entities a Research
License or providing to them research samples of materials
made through the Licensed Processes.
5.04(b) In exceptional circumstances, and in the event that Licensed
Patent Rights are Subject Inventions made under a Cooperative
Research and Development Agreement (CRADA), the Government,
pursuant to 15 U.S.C. 3710a(1)(B), retains the right to
require the Licensee to grant to a responsible applicant a
nonexclusive, partial exclusive, or exclusive sublicense to
use Licensed Patent Rights in Licensee's field of use on terms
that are reasonable under the circumstances; or if Licensee
fails to grant such a license, the Government retains the
right to grant the license itself. The exercise of such rights
by the Government shall only be in exceptional circumstances
and only if the Government determines (i) the action is
necessary to meet health or safety needs that are not
reasonably satisfied by Licensee; (ii) the action is necessary
to meet requirements for public use specified by Federal
regulations, and such requirements are not reasonably
satisfied by Licensee; or (iii) the Licensee has failed to
comply with an agreement containing provisions described in 15
U.S.C. 3710c(4)(B). The determination made by the Government
under this Article is subject to administrative appeal and
judicial review under 35 U.S.C. 203(2).
RECORDKEEPING
-------------
8.01 Licensee agrees to keep accurate and correct records of
Licensed Products made, used, sold, or imported and Licensed
Processes practiced under this Agreement appropriate to
determine the amount of royalties due PHS. Such records shall
be retained for at least five (5) years following a given
reporting period and shall be available during normal business
hours for inspection at the expense of PHS by an accountant or
other designated auditor selected by PHS for the sole purpose
of verifying reports and payments hereunder. The accountant or
auditor shall only disclose to PHS information relating to the
accuracy of reports and payments made under this Agreement. If
an inspection shows an underreporting or underreporting or
underpaying in excess of five percent (5%) for any twelve (12)
month period, then Licensee shall reimburse PHS for the cost
of the inspection at the time Licensee pays the unreported
royalties, including any late charges as required by Paragraph
9.08 of this Agreement. All payments required under this
Paragraph shall be due within thirty (30) days of the date PHS
provides Licensee notice of the payment due.
PERFORMANCE
-----------
10.01 Licensee shall use its reasonable best efforts to bring the
Licensed Products and Licensed Processes to Practical
Application. "Reasonable best efforts" for the purposes of
this provision shall include adherence to the Commercial
Development
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Plan at Appendix F and performance of the Benchmarks at
Appendix E. The efforts of a sub-licensee shall be considered
the efforts of Licensee.
10.02 Upon the First Commercial Sale, until the expiration of this
Agreement, Licensee shall use its reasonable best efforts to
make Licensed Products and Licensed Processes reasonably
accessible to the United States public.
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12.05 Licensee shall indemnify and hold PHS, its employees,
students, fellows, agents, and consultants harmless from and
against all liability, demands, damages, expenses, and losses,
including but not limited to death, personal injury, illness,
or property damage in connection with or arising out of: a)
the use by or on behalf of Licensee, its sub-licensees,
directors, employees, or third parties of any Licensed Patent
Rights; or b) the design, manufacture, distribution, or use of
any Licensed Products, Licensed Processes or materials by
Licensee, or other products or processes developed in
connection with or arising out of the Licensed Patent Rights.
Licensee agrees to maintain a liability insurance program
consistent with sound business practice.
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13.07 PHS reserves the right according to 35 U.S.C.ss.209(f)(4) to
terminate or modify this Agreement if it is determined that
such action is necessary to meet requirements for public use
specified by federal regulations issued after the date of the
license and such requirements are not reasonably satisfied by
Licensee.
13.08 Within thirty (30) days of receipt of written notice of PHS's
unilateral decision to modify or terminate this Agreement,
Licensee may, consistent with the provisions of 37 U.S.C.
404.11, appeal the decision by written submission to the
designated PHS official. The decision of the designated PHS
official shall be the final agency decision. Licensee may
thereafter exercise any and all administrative or judicial
remedies that may be available.
13.09 Within ninety (90) days of expiration or termination of this
Agreement under this Article 13, a final report shall be
submitted by Licensee. Any royalty payments, including those
incurred but not yet paid (such as the full minimum annual
royalty), and those related to patent expense, due to PHS
shall become immediately due and payable upon termination or
expiration. If terminated under this Article 13, sub-licensees
may elect to convert their sublicenses to direct licenses with
PHS pursuant to Paragraph 4.03. Unless otherwise specifically
provided for under this Agreement, upon termination or
expiration of this Agreement, Licensee shall return all
Licensed Products or other materials included within the
Licensed Patent Rights to PHS or provide PHS with
certification of the destruction thereof.
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ATTACHMENT F
TRADEMARK STILE GUIDE AND REQUIREMENTS
1. "Trademarks" as used only in this Attachment F mean the TRADEMARK FOR BULK ACTIVE MATERIAL
2. Style Guide Adherence. Defiante will adhere to RegeneRx's style guide, which is attached hereto, which Defiante shall not be permitted to alter, modify or change, in any manner, the Trademarks or use the Trademarks in combination with other marks or designs, unless specifically authorized, in writing, by RegeneRx to do so.
3. Ownership. Defiante hereby acknowledges and recognized that RegeneRx owns all rights, title and interests in the Trademarks, and any use of the Trademarks by Defiante shall not diminish any rights, title or interest in such Trademarks. Defiante further agrees not to take any action inconsistent with such ownership including, without limitation, any action to challenge, dilute, diminish or harm RegeneRx's rights and interests in the Trademarks or its reputation or goodwill symbolized by the Trademarks. Defiante acknowledges that Defiante's use of the Trademarks pursuant to this Agreement and any goodwill established thereby shall inure to the sole benefit of RegeneRx. Defiante shall ensure that the integrity of the Trademarks is maintained in accordance with this Attachment.
4. Cooperation. Defiante shall use reasonable efforts to support RegeneRx in policing and protecting the Trademarks. Defiante shall make reasonable efforts to promptly notify RegeneRx of any activity or action by a third party known to Defiante and that Defiante reasonably considers may infringe or, in any way, harm the Trademarks. Such cooperation by Defiante shall be at the sole expense of RegeneRx.
5. Limit on Registration. Defiante will not attempt to register any of the Trademarks as a trademark with any official trademark office or with any other like regulatory office anywhere in the world. Further, Defiante will not display, use or register any marks, which are substantially similar to the Trademarks.
EXHIBIT 1
PROPER DISPLAY AND USE OF TRADEMARKS
[TBD IN THE FUTURE]
ATTACHMENT G
DEFIANTE TRADEMARKS
[TBD IN THE FUTURE]
ATTACHMENT H
NONDISCLOSURE BETWEEN DEFIANTE AND REGENERX
[TO BE ADDED]
EXHIBIT 10.11
SECURITIES PURCHASE AGREEMENT
BETWEEN
REGENERX BIOPHARMACEUTICALS, INC.
AND
SIGMA-TAU PHARMACEUTICAL GROUP AND OTHER PURCHASERS
DATED AS OF JANUARY 23, 2004
SECURITIES PURCHASE AGREEMENT
This PURCHASE AGREEMENT, dated as of January 23, 2004, (this "Agreement") is entered into by and among REGENERX BIOPHARMACEUTICALS, INC., a Delaware corporation (the "Company"), with its principal executive office at 3 Bethesda Metro Center, Bethesda, Maryland 20814, and THE PERSONS LISTED ON THE SCHEDULE OF PURCHASERS attached hereto as Schedule I (each a "Purchaser," and collectively, the "Purchasers") (all collectively, the "Parties").
A. The Company and the Purchasers desire that the Company and the Purchasers enter into a Securities Purchase Agreement, including a related Warrant which will represent the sole binding obligation between the parties.
B. On the terms and subject to the conditions set forth herein, each Purchaser is willing to purchase from the Company, and the Company is willing to sell to such Purchaser, shares of the Company's Common Stock (the "Shares"), no par value in the amount set forth opposite such Purchaser's name on Schedule I attached hereto, and the Company is willing to sell to such Purchaser warrant(s) to purchase the number shares of the Company's Common Stock set forth opposite such Purchaser's name on Schedule II attached hereto.
C. The Company desires to enter into this Agreement for the purposes, among others, of establishing certain rights and obligations attendant to such investment.
NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, and conditions set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
(a) Issuance and Purchase of Shares. At the Closing (as defined below), the Company agrees to issue and sell to each of the Purchasers, and, subject to all of the terms and conditions hereof, each of the Purchasers agrees to purchase Shares in the amount set forth opposite the respective Purchaser's name on Schedule I attached hereto. The obligations of the Purchasers to purchase Shares are several and not joint. The per share purchase price for the Shares shall be $0.95 (ninety-five cents).
(b) Issuance of Warrants. In consideration for the purchase by the Purchasers of the Shares and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company will issue to each of the Purchasers set forth on Schedule II attached hereto a warrant in the form attached hereto as Exhibit A (each a "Warrant," and collectively, the "Warrants") to purchase up to the number of shares of Common Stock (the "Warrant Shares") as set forth opposite the respective Purchaser's name on Schedule II attached hereto. The Warrant is exercisable, at a price of $1.50 (one dollar and fifty cents), in whole or in part, at any time and from time to time from the Date of Grant, as defined in the Warrant, through a period of 30 (thirty) months after the Date of Grant.
(c) Delivery. The sale and purchase of the Shares and the Warrants shall take place at a closing (the "Closing") to be held at the offices of Patton Boggs LLP, 2550 M Street, NW, Washington, DC 20037, on January 20, 2004 (the "Closing Date"), or at such other time or place as the parties shall mutually agree. The Parties agree that the Closing may occur by facsimile signature and delivery and that the Parties need not appear in person at the Closing. At the Closing, or as soon thereafter as practicable, the Company will deliver to each of the Purchasers a stock certificate representing the Shares registered in the name of the Purchaser and the respective Warrant to be purchased by such Purchaser, against receipt by the Company of the corresponding purchase price set forth opposite such Purchaser's name on Schedule I attached hereto (the "Purchase Price"). Each of the Warrants will be registered in such Purchaser's name in the Company's records.
(d) Payment of Purchase Price. The Purchase Price for the Shares shall be payable by each Purchaser of immediately available funds to an escrow account at Riggs Bank, NA, Washington, DC on or before the Closing as follows:
Riggs Bank N.A.
ABA #054000030
RNB Corporate Trust Clearing Account #09590094 Sovereign Trust Services FBO: RegeneRx/Riggs Bank Escrow Account #840130017 Attn: Earl Ziegler Voice: (202) 835-6746
(e) Use of Proceeds. The proceeds of the sale and issuance of the Shares and Warrants shall be used for the funding of Phase II clinical trials for chronic dermal wound healing and general corporate purposes.
(f) Registration of Shares. The Company undertakes to register the Shares with the Securities and Exchange Commission on a registration statement on Form SB-2, or whatever form the Company is eligible to use, as soon as practicable after the Closing, but no later than forty-five (45) days after the Closing.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents and warrants to each Purchaser that:
(a) Due Incorporation, Qualification, etc. The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction where the failure to be so qualified or licensed could reasonably be expected to have a Material Adverse Effect.
(b) Authority. The execution, delivery and performance by the Company of each Transaction Document to be executed by the Company and the consummation of the transactions
contemplated thereby (i) are within the power of the Company and (ii) have been duly authorized by all necessary actions on the part of the Company.
(c) Enforceability. Each Transaction Document executed, or to be executed, by the Company has been, or will be, duly executed and delivered by the Company and constitutes, or will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by the Company of the Transaction Documents executed by the Company and the performance and consummation of the transactions contemplated thereby do not and will not (i) violate the Certificate of Incorporation or Bylaws of the Company or any material judgment, order, writ, decree, statute, rule or regulation applicable to the Company; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage, indenture, agreement, instrument or contract to which the Company is a party or by which it is bound; or (iii) result in the creation or imposition of any Lien upon any property, asset or revenue of the Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its business or operations, or any of its assets or properties.
(e) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental authority or other Person (including, without limitation, the shareholders of any Person) is required in connection with the execution and delivery of the Transaction Documents executed by the Company and the performance and consummation of the transactions contemplated thereby.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, for that Purchaser alone, represents and warrants to the Company upon the acquisition of the Shares and/or Warrant as follows:
(a) Binding Obligation. Such Purchaser has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each of this Agreement and each Warrant issued to such Purchaser is a valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity.
(b) Securities Law Compliance. Such Purchaser has been advised that the Shares and Warrants have not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Such Purchaser is aware that the Company is under no obligation to effect any such registration with respect to the Shares and Warrants or to file for or comply with any exemption from registration, except as provided in Section 1(f). Such Purchaser has not been formed solely for the purpose of making this investment and is purchasing the Shares and Warrant(s) to be acquired by such Purchaser hereunder for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof. Such Purchaser has such knowledge and experience in financial and business matters that such
Purchaser is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time. Such Purchaser is an accredited investor as such term is defined in Rule 501 of Regulation D under the Securities Act.
(c) Access to Information. Such Purchaser acknowledges that the Company has given such Purchaser access to the corporate records and accounts of the Company and to all information in its possession relating to the Company, has made its officers and representatives available for interview by such Purchaser, and has furnished such Purchaser with all documents and other information required for such Purchaser to make an informed decision with respect to the purchase of the Shares and Warrant.
4. CONDITIONS TO CLOSING OF THE PURCHASERS. Each Purchaser's obligations at the Closing are subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any of which may be waived in whole or in part by all of the Purchasers:
(a) Representations and Warranties. The representations and warranties made by the Company in Section 2 hereof shall have been true and correct when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained all governmental approvals required in connection with the lawful sale and issuance of the Shares and Warrants.
(c) Legal Requirements. At the Closing, the sale and issuance by the Company, and the purchase by the Purchasers, of the Shares and Warrants shall be legally permitted by all laws and regulations to which the Purchasers or the Company are subject.
(d) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Purchasers.
(e) Transaction Documents. The Company shall have duly executed and delivered to the Purchasers the following documents:
(A) This Agreement;
(B) Each Warrant issued hereunder.
(f) License Agreement. Closing shall take place simultaneously with and only upon execution of a license agreement for certain development and marketing rights pursuant to thymosin beta 4, in Europe and surrounding countries, from the Company to Sigma-Tau Pharmaceutical Group (or its affiliate).
5. CONDITIONS TO OBLIGATIONS OF COMPANY. The Company's obligation to issue and sell the Shares and Warrants at the Closing is subject to the fulfillment, on or prior to the Closing Date, of the following conditions, any of which may be waived in whole or in part by the Company:
(a) Representations and Warranties. The representations and warranties made by the Purchasers in Section 3 hereof shall be true and correct when made, and shall be true and correct on the Closing Date.
(b) Governmental Approvals and Filings. Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained all governmental approvals required in connection with the lawful sale and issuance of the Shares and Warrants.
(c) Legal Requirements. At the Closing, the sale and issuance by the Company, and the purchase by the Purchasers, of the Shares and/or Warrants shall be legally permitted by all laws and regulations to which the Purchasers or the Company are subject.
(d) Purchase Price. Each Purchaser shall have delivered to the Company the Purchase Price in respect of the Share and/or Warrant(s) being purchased by such Purchaser referenced in Sections 1(a) and 1(b) hereof and Schedule I attached.
6. MISCELLANEOUS.
(a) Waivers and Amendments. Any provision of this Agreement may be amended, waived or modified only upon the written consent of the Company and a Majority in Interest of the Purchasers.
(b) Governing Law. This Agreement and all actions arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware or of any other state.
(c) Survival. The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Agreement.
(d) Successors and Assigns. Subject to the restrictions on transfer described in Section 6(e) below, the rights and obligations of the Company and the Purchasers of the Shares shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.
(e) Entire Agreement. This Agreement together with the Warrants and other Transaction Documents constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and this Agreement together with the Warrants and other Transaction Documents supercede and replace all other Agreements or Warrants or other obligations between the parties.
(f) Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or by recognized overnight courier or personal delivery, addressed (i) if to a Purchaser, at such Purchaser's address set forth in the Schedule of Purchasers attached hereto as Schedule I, or at such other address as such Purchaser shall have furnished the Company in writing, or (ii) if to the Company, at its address set forth at the beginning of this Agreement, or at such other address as the Company shall have furnished to the Purchasers in writing.
(g) Separability of Agreements; Severability of this Agreement. The Company's agreement with each of the Purchasers is a separate agreement and the sale of the Shares and Warrants to each of the Purchasers is a separate sale. Unless otherwise expressly provided herein, the rights of each Purchaser hereunder are several rights, not rights jointly held with any of the other Purchasers. Any invalidity, illegality or limitation on the enforceability of the Agreement or any part thereof, by any Purchaser whether arising by reason of the law of the respective Purchaser's domicile or otherwise, shall in no way affect or impair the validity, legality or enforceability of this Agreement with respect to other Purchasers. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall be deemed to constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date and year first written above.
COMPANY:
REGENERX BIOPHARMACEUTICALS, INC.
a Delaware corporation
By: /s/ J.J. Finkelstein
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Name: J.J. Finkelstein
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Title: President and Chief Executive Officer
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PURCHASERS:
DEFIANTE FARMACEUTICA L.D.A. DLJSC IRA FBO RICHARD J. HINDIN
a Portuguese corporation
/s/ Pedro Moreira da Cruz Quintas /s/ Richard J. Hindin
----------------------------------------------------------- ---------------------------------------------------------------
Name: Mr. Pedro Moreira da Cruz Quintas Name: Richard J. Hindin
Title: Director
/s/ Joseph C. McNay /s/ Alan Nordlinger
----------------------------------------------------------- ---------------------------------------------------------------
Name: Joseph C. McNay Name: Alan Nordlinger
/s/ Sheldon Kamins /s/ David C. Silver
----------------------------------------------------------- ---------------------------------------------------------------
Name: Sheldon Kamins Name: David C. Silver
/s/ Barry P. Taff /s/ Dave M. Muchnikoff
----------------------------------------------------------- ---------------------------------------------------------------
Name: Barry P. Taff Name: Dave M. Muchnikoff
/s/ Brian L. Alpert /s/ Lynn Alpert by Brian L. Alpert, attorney in fact
----------------------------------------------------------- ---------------------------------------------------------------
Name: Brian L. Alpert Name: Lynn Alpert by Brian L. Alpert, attorney in fact
---------------------------------------------------------
/s/ Lawrence J. Eisenberg /s/ Norman Freidkin
Name: Lawrence J. Eisenberg Name: Norman Freidkin
/s/ Dennis F. Ratner /s/ Michael L. Nash, Kristine M. Nash
----------------------------------------------------------- ---------------------------------------------------------------
Name: Dennis F. Ratner Name: Michael L. Nash, Kristine M. Nash
/s/ Ross H. & Donna Tish Spicer /s/ G. Kent Humphries & Debbie Humphries JT TEN
----------------------------------------------------------- ---------------------------------------------------------------
Name: Ross H. & Donna Tish Spicer Name: G. Kent Humphries & Debbie Humphries JT TEN
/s/ G. Kent Humphries Cust. for Devon Ann Humphries UTMA/MD /s/ G. Kent Humphries Cust. for Garrett Kent Humphries UTMA/MD
----------------------------------------------------------- ---------------------------------------------------------------
Name: G. Kent Humphries Cust. for Devon Ann Humphries UTMA/MD Name: G. Kent Humphries Cust. for Garrett Kent Humphries UTMA/MD
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/s/ G. Kent Humphries Cust. for Taylor Kent Humphries UTMA/MD /s/ William Bateman ------------------------------------------------------------- --------------------------------------------------------- Name: G. Kent Humphries Cust. for Taylor Kent Humphries UTMA/MD Name: William Bateman /s/ Marc J. Loundas /s/ Bernard Wolfe ------------------------------------------------------------- --------------------------------------------------------- Name: Marc J. Loundas Name: Bernard Wolfe LEE & KAREN HINDIN (JT) SAM & JOAN LEBAUER (JT) /s/ Lee Hindin /s/ Sam LeBauer ------------------------------------------------------------- --------------------------------------------------------- Name: Lee Hindin Name: Sam LeBauer /s/ Karen Hindin /s/ Joan LeBauer ------------------------------------------------------------- --------------------------------------------------------- Name: Karen Hindin Name: Joan LeBauer |
REGEN ASSOCIATES, LLC
/s/ Mark Rabin ------------------------------------------------------------- Name: Mark Rabin |
SCHEDULE I
SCHEDULE II
EXHIBIT A
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in this Registration Statement of RegeneRx Biopharmaceuticals, Inc. (the "Company") on Form SB-2 filed on or about March 5, 2004 of our report, dated February 1, 2004 as of and for the years ended December 31, 2003 and 2002, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the caption "Experts" in such Prospectus.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
March 5, 2004
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EXHIBIT 31.1
CERTIFICATION
I, J.J. Finkelstein, certify that:
1. I have reviewed this registration statement on Form SB-2 of RegeneRx Biopharmaceuticals, Inc.;
2. Based on my knowledge, this registration statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this registration statement;
3. Based on my knowledge, the financial statements, and other financial information included in this registration statement, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this registration statement;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) [*** Omitted pursuant to extended compliance period] for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) [***Omitted pursuant to extended compliance period]
(c) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: March 8, 2004
/s/J.J Finkelstein
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J.J. Finkelstein
Chief Executive Officer and
Principal Financial Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Registration Statement of RegeneRx (the
"Company") on Form SB-2 as filed with the Securities and Exchange Commission on
the date hereof (the "Registration Statement"), I, J.J. Finkelstein, Chief
Executive and Financial Officer of RegeneRx, certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Registration Statement fully complies with the requirements of the Securities Act of 1933; and
(2) The information contained in the Registration Statement fairly presents, in all material respects, the financial condition and result of operations of RegeneRx.
March 8, 2004 /s/J.J. Finkelstein
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Chief Executive and Financial Officer
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