FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended May 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-28385
Protalex, Inc.
(Name of small business issuer in its charter)
New Mexico 91-2003490
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
717 Encino Pl. N.E. Suite 17 Albuquerque, NM 87102
(Address of principal executive offices) (Zip Code)
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Issuer's telephone number (505) 243-8220
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent files in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ 0
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) $41,406,451 as of August 25, 2003.
Note: If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 12,244,379 as of August 25, 2003.
Transitional Small Business Disclosure Format (check one):
Yes No X
Documents Incorporated by Reference
Portions of the Definitive Proxy Statement for the 2003 Annual Meeting of Stockholders (which will be filed within 120 days after the close of the Company's fiscal year ended May 31, 2003) are incorporated by reference. With the exception of those portions which are specifically incorporated by referenced in this 10-KSB Annual Report, the Proxy Statement for the 2003 Annual Meeting of Stockholders is not deemed to be filed as a part of this Report.
ITEM I - DESCRIPTION OF BUSINESS
Overview
Protalex, Inc. ("Protalex" or the "Company") is a development stage company engaged in developing a class of human pharmaceuticals from organic molecules which in pre-clinical trials have demonstrated effectiveness in regulating the immune system with persisting effects. The autoimmune disease initially targeted by the Company is Rheumatoid Arthritis (RA). It currently has no product on the market. The Company was incorporated on April 23, 1958 and became Protalex pursuant to a reverse merger with Enerdyne in 1999.
Protalex's bioregulatory compounds are based upon the principal of influencing cellular activities at a more basic level than traditional pharmaceutical agents, which act upon the end products of complex metabolic pathways. In autoimmune disease models, the Company's target drug has induced reversal of the pathologic process and has resulted in a restoration of tissue integrity and function. The Company intends to bring this biotechnology to bear on a range of serious autoimmune conditions with millions of sufferers worldwide.
Pre-clinical trials demonstrating safety and efficacy in animals have been completed. The company is now preparing to file an Investigational New Drug (IND) application with the Food and Drug Administration (FDA) for human clinical trials expected to begin in 2004. In preparation for filing the IND, the Company is producing the drug at a contract laboratory, designing clinical trial protocols, and developing assays to measure drug concentrations and systemic effects in upcoming clinical trials.
About Bioregulation
The immune system exists to protect the body from foreign agents such as bacteria and viruses. In normal functioning, a complex set of interactions results in the destruction of these outside bodies. An important aspect of this process is the ability to recognize self (normal tissue) from non-self (foreign agents). Autoimmune diseases such as Rheumatoid Arthritis, Lupus, Crohn's, Insulin-Dependent Diabetes, and Multiple Sclerosis result when this self-recognition goes awry and the immune system mistakenly identifies normal tissue as foreign. In Rheumatoid Arthritis the dysregulation of the immune system causes the joint lining to form invasive tissue that degrades cartilage and bone. With the current treatments available, prevention of long-term damage in Rheumatoid Arthritis requires ongoing indefinite drug therapy. The vast majority of FDA approved drugs for the treatment of Rheumatoid Arthritis carry significant side effects. They generally target specific products of the immune response that are formed well after the system has lost its ability to self-regulate. Protalex's bioregulator on the other hand, addresses the fundamental pathogenic dysregulation that causes the initial abnormal response.
Protalex has discovered a method of "resetting" the immune system by deactivating the immune response via the use of a bioregulator, which has been shown to have no side effects at treatment dosages and works very early in the immune response to prevent the activation of lymphoid cells and the secretion of pathogenic cytokines. In the animal model specifically designed to evaluate the efficacy of anti-arthritic drugs, the Company's bioregulator has not only inhibited the acute inflammation but also repaired and/or reversed the tissue damage caused by inflammatory response.
Animal Studies
Protalex's Bioregulator has proven effective in two clinical standard mouse autoimmune models:
Collagen-Induced Arthritis - Mice received two injections of collagen in order to stimulate an inflammatory response, then one group was treated with Protalex's bioregulator, a second group received a leading commercially available treatment and the control group was injected with saline solution. The mice were scored daily on joint size and loss of function. The results showed that Protalex's bioregulator and the currently popular treatment performed similarly over the first 20 days of treatment, slowing disease progression as compared with the control group. After 20 days, the Protalex-treated mice improved and approached baseline "healthy" level, whereas the mice treated with the currently available RA treatment showed a resumption of joint inflammation and tissue damage until sacrifice at day 35.
BXSB Mice - These animals are genetically-predisposed to autoimmune diseases, and this model is used to evaluate drugs for RA,as well as Lupus, Crohn's disease and other autoimmune diseases. This genetic model more closely approximates the human condition in that it is complex, multi-factoral and usually treated by multiple drug regimens. In these studies mice were treated three times per week and sacrificed at regular intervals; their organs were weighed and sectioned for histological analysis and their spleens were used for immunological assays. Spleen enlargement (splenomegaly) was lower than the controls at almost every point, demonstrating the ability of Protalex's drug to delay the onset and severity of this disease indicator. Protalex's treatment also reduced non-specific immunoglobulin production and specific auto-antibody production and readjusted T and B cell number and function. All these effects represent a whole animal change in this complex disease syndrome.
Pre-clinical safety studies have shown no adverse events:
Toxicological studies in New Zealand rabbits - Protalex's drug was injected three times per week over fifteen weeks into a rabbit species selected for comparability to humans in preparation for the FDA Phase I trials. All animals survived to scheduled euthanasia. No significant clinical or injection site reactions were observed. No toxicologically meaningful differences were observed in body weight gain or food consumption, nor in hematology, clinical chemistry, urinalysis or organ weight data. These study results are a crucial component of Protalex's IND Application.
Markets
RA will be the first autoimmune disease targeted and is the primary and immediate focus of the Company. RA was chosen as a target disease because it represents a well-defined, rapidly growing market for which currently available treatments are expensive and only marginally effective.
RA is a serious autoimmune disorder that causes the body's immune system to mistakenly produce antibodies that attack the lining of the joints, resulting in inflammation and pain. RA can lead to joint deformity or destruction, organ damage, disability and premature death. More than 5 million people suffer from RA worldwide. Pharmaceuticals for RA represent an $8 billion market with a projected growth rate of 10% per year through the end of the decade.
Currently, no uniformly effective treatment for RA exists. Current treatments are costly, and in most cases must be continued for decades. In contrast, the Company believes that bioregulator therapy will be much more cost effective and administered by weekly injections over the course of a few months.
The Company anticipates that its products will initially be used to treat patients with severe cases of RA, and particularly those individuals for whom other treatments have failed. Additionally, the Company believes that its experience with this class of patients will prove the efficacy and safety of its products, and will encourage the use of its products in less severely affected individuals in earlier stages of the disease.
The second major goal is the development of synthetic analogs to the Company's first pharmaceutical product. The characterization of the active component of the Company's first product is underway and the synthetic chemistry project will follow. This synthetic focus for the Company will provide more comprehensive patent protection, as well as insight into future drugs.
The third goal of the Company is to pursue FDA approval to treat other autoimmune diseases, where its drug's ability to decrease the inflammatory response will abrogate the underlying disease processes. The BXSB animal model is a generalized autoimmune model, so efficacy in pre-clinical trials shows promise in treating other conditions. The Company is planning pre-clinical studies in Lupus and Crohn's Disease during 2004 and 2005, upon completion of significant milestones in the RA trials.
Competition
Because of the small treatment dosages and relatively simple production process, Protalex's compound has a potential competitive advantage. Current RA treatments are characterized by complex manufacturing methods, which have led to production problems and have resulted in an average annual retail cost of $13,000 to $30,000 per patient. A number of pharmaceutical agents are currently being used, with varying degrees of success, to control the symptoms of RA and slow its progress. Available treatment options include:
* Analgesic/anti-inflammatory preparations, ranging from simple aspirin to the recently introduced COX-2 inhibitors;
* Immunosuppressive/antineoplastic drugs, including azathioprine and methotrexate;
* TNF (Tumor Necrosis Factor) inhibitors, currently represented by Immunex Corporation's Enbrel-Registered Trademark;
* "Immunoadsorption Therapy", now in limited use in Europe and the United States, entailing weekly sessions during which a patient's blood is separated and passed through a molecular filter.
In all, at least a dozen large and small pharmaceutical companies are active in this market, with Immunex Corporation and Johnson & Johnson, Inc. dominating the market with their respective products, Enbrel-Registered Trademark and Remicade-Registered Trademark. Abbot's Humira-Registered Trademark is a recent entry into the RA market, with $150 million projected first year sales. Despite intense media attention and enormous sales, the long-term efficacy of these compounds remains to be evaluated.
Operations
The Company is currently executing a plan for FDA IND approval and inception of human trials in 2004, broadening its intellectual property and developing the corporate base for commercialization of its bioregulator products. The Company's business and laboratory operations are located in a leased space in Albuquerque, New Mexico. The Company contracts with Charles River Laboratories in the United States and Eurogentec in Belgium to conduct animal trials and to manufacture its drug for use in research and development (R&D) and clinical trials. The Company plans to contract with the site management organization Rheumatology Research International to run its clinical trials.
The Company's in-house research includes elucidating the mechanism of action, characterizing the active subcomponent of its drug molecule, and developing synthetic derivatives. Lab staff also is designing assays to screen derivative compounds for activity, measure drug concentrations in the blood and measure systemic effects to be used in evaluating clinical trial data.
Reverse Merger
In September 1999, Protalex acquired a majority of the issued and outstanding shares of common stock of Enerdyne from Don Hanosh, pursuant to a Stock Purchase Agreement between Protalex, Enerdyne and Mr. Hanosh. Under the Stock Purchase Agreement, in consideration for Mr. Hanosh's shares of common stock, Protalex executed a Promissory Note in the amount of $368,546.00 in favor of Mr. Hanosh, which has been paid in full.
In November 1999, Protalex merged with and into Enerdyne pursuant to a Merger Agreement and Plan of Reorganization (the "Merger Agreement"), and Enerdyne changed its name to Protalex, Inc., thereby creating the Company. Under the Merger Agreement, each share of Protalex common stock outstanding immediately prior to the effective date of the merger was converted into 822 shares of the Company's common stock. After the merger, Protalex's former shareholders held approximately 92% of the shares of common stock of the Company, and Enerdyne's former shareholders held approximately 8% of the shares of common stock of the Company.
Business and Marketing Strategy
The Company has concluded four prior private placements of its common stock, raising $3.4 million and carrying the Company through early research and Pre-Clinical Trials. The current private placement, targeted to raise a minimum of $8.5 million, is intended to carry the Company through Phase II clinical trials. The Company believes this financing will close in September 2003.
The Company expects that, if it is granted all regulatory approvals, its bioregulator products will be competitive throughout the global market. As its target drug moves closer to the marketing stage, the Company intends to enter into collaborative arrangements with larger strategic partners to market and sell the Company's products in the United States and in foreign markets. The Company expects that these partners will be responsible for funding or reimbursing all or a portion of the costs of pre-clinical and clinical trials required to obtain regulatory approval. In return for such payments, the Company will grant these partners exclusive or semi-exclusive rights to market certain of its products in particular geographical regions.
Government Regulation
The Company's ongoing research and development activities, and its future manufacturing and marketing activities, are subject to extensive regulation by numerous governmental authorities, both in the United States and in other countries. In the United States, the FDA regulates the approval of the Company's products under the authority of the Federal Food, Drug and Cosmetics Act.
In order to obtain FDA approval of the Company's drugs, extensive pre-clinical and clinical tests must be conducted and a rigorous clearance process must be completed. Final approval by the FDA for safety and efficacy may take several years and require the expenditure of substantial resources.
The FDA approval process entails several steps. The Company has completed a major preliminary step, pre-clinical trials, in which the Company demonstrated the safety and efficacy of its products through in vitro and in vivo laboratory animal testing.
Upon compilation of data from pre-clinical trials, and final formulation, packaging and stability testing of the Company's drug, the Company will submit an IND Application to the FDA before it can begin human clinical trials. The purpose of the IND is to confirm pre-clinical research data.
Clinical studies are typically conducted in three sequential phases, although these phases may overlap. In Phase I trials, a drug is tested for safety in one or more doses in a small number of patients or volunteers. In Phase II trials, efficacy and safety are tested in up to several hundred patients. Phase III trials involve additional safety, dosage and efficacy testing in an expanded patient population at multiple test sites.
The results of the pre-clinical and clinical trials are submitted to the FDA in the form of a New Drug Application (NDA). The approval of an NDA may take substantial time and effort. In addition, upon approval of an NDA, the FDA may require post marketing testing and surveillance of the approved product, or place other conditions on their approvals.
Sales of new drugs outside the United States are subject to foreign regulatory requirements that differ from country to country. Foreign regulatory approval of a product must generally be obtained before that product may be marketed in those countries.
The Company has discussed, with the FDA, the final requirements for its IND submission and initiation of human safety testing of the Company's RA bio-regulator. These requirements include a short "bridging study" to correlate the lots used in animal trials with the Company-manufactured product to be used in human clinical trials. Upon anticipated IND approval in 2004, the Company expects to begin human clinical trials of safety and efficacy in patients with advanced and intractable RA. This full-scale study will be supervised by Dr. Arthur Bankhurst, a renowned rheumatologist, and should be completed in approximately two years. Dr. Bankhurst is a director and shareholder of the Company. Once the trials are finished, an application for FDA authorization to produce and market the product will be filed, with final approval estimated to take an additional six months.
Patents, Trademarks, and Proprietary Technology
The Company's success will depend on its ability to maintain its trade secrets and proprietary technology in the United States and in other countries, and to obtain patents for its bioregulatory technology. The Company filed an initial usage patent in April 2002. Laboratory work has begun to characterize derivatives and develop synthetic analogs to its first drug, for which the Company will pursue additional patents as appropriate.
The Company has completed a trademark search for the name "Protalex," and is proceeding with filing on an "Intent To Use" basis with its patent and trademark counsel, Pillsbury Winthrop, LLP.
Risks Related To The Company's Business
This 10KSB Statement Contains Forward-Looking Statements Which May Differ From The Company's Actual Future Results. This 10KSB contains forward-looking statements that involve substantial risks and uncertainties. These statements are identified by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," and "continue" or similar words. Statements that contain these words should be read carefully because they discuss the Company's future expectations, contain projections of the Company's future results of operations or of the Company's financial condition, and state other "forward-looking" information. The Company believes it is important to communicate its expectations. However, there may be events in the future that the Company is not able to accurately predict which the Company has no control.
The risk factors listed in this section, as well as any other cautionary language appearing in this 10KSB, provide examples of risks, uncertainties and events that may cause the Company's actual results to differ materially from the expectations described in the Company's forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this 10KSB could have an adverse effect on the Company's business, results of operations and financial condition.
The Company May Not Be Able To Continue As A Going Concern If It Does Not Attract Investment Capital Or Generate Operating Revenue. The Company is a development stage enterprise and does not have operating revenue, nor does it anticipate generating operating revenue in the foreseeable future. The ability of the Company to continue as a going concern is dependent initially on its ability to raise sufficient investment capital to fund all necessary operations and product development activities. Thereafter, in order to generate operating revenue the Company must develop products that gain regulatory approval and market acceptance. There can be no assurance that the Company will be able to raise sufficient investment capital or successfully develop and market its products.
The Company Has A History Of Losses Since Its Merger With Enerdyne, And Will Continue To Incur Losses Until Its Sales Generate Sufficient Revenues. Since Enerdyne Corporation's acquisition of Protalex, Inc. (which is more fully described in "Corporate History"), the Company has incurred significant losses. The Company expects to continue to incur net losses until sales of its bioregulator products generate sufficient revenues to fund its continuing operations.
The Company Is Uncertain Whether Its Bioregulator Products Can Be Developed Successfully, And It May Have To Incur Additional Expenses If It Experiences Problems In Development. The Company does not know whether bioregulator products can be successfully developed for administration as human medications. The Company's failure to demonstrate the safety and/or efficacy of its bioregulator product, at the human trial stage, would necessitate potentially expensive and time-consuming additional research.
The Company's Bioregulator Product Is Limited To A Single Disease, Which Means The Company's Prospects May Be Limited If Its Product Does Not Successfully Treat The Disease. The Company is focused on the treatment of one disease, rheumatoid arthritis. If the results from the Company's animal studies and/or the human clinical trials related to that disease are inconclusive or show results no better than a substance with no medical effect, the Company would not have a commercially viable product. In this case, a great deal of additional research would be required, and it is unlikely that the Company would be able to attract further capital.
The Company's Bioregulator Products May Not Be Accepted By The Medical Community, Which Would Result In Poor Product Sales. The Company's bioregulator product may be safe and effective for its intended use, but may not show sufficient superiority to other treatments currently in use to gain a significant share of the market. Additionally, the novelty of this form of treatment or its mode of administration may make bioregulator therapy less appealing than existing treatments to prescribing physicians or to their patients. Inadequate medical acceptance would result in poor product sales and decreased profitability, and could impair the Company's ability to continue to operate.
The Company Is Uncertain Whether Its Existing Bioregulator Products Can Be Extended To Treat Diseases Other Than Rheumatoid Arthritis. While the Company will initially focus on the treatment of rheumatoid arthritis, its long-term plans call for the extension of bioregulator therapy to other types of human disease, such as cancer. The development of new bioregulator products (or expanding the indications for existing products to the treatment of new diseases) will be subject to many of the same hazards and risks discussed in this "Risk Factors" section.
The Company Is Exposed To Significant Costs And Risks Related To The Regulatory Approval Of Bioregulator Products, And Is At A Competitive Disadvantage Due To Its Need To Complete The Regulatory Process. Before the Company's products can be manufactured, marketed and sold to the public, the requirements of the FDA and similar governmental agencies in foreign countries must be met. The approval process typically entails considerable time and expense, and may delay marketing of the Company's products for a considerable period. The Company cannot predict when regulatory applications might be submitted, nor when final regulatory approval will be obtained. Also, the FDA could approve only certain uses of the Company's products or subject its products to additional testing or surveillance programs. Failure to obtain timely FDA approval will require the Company to spend more resources on additional applications, and would delay the generation of income from sales of the Company's products. In addition, the FDA approval process presents a competitive advantage to some of the Company's competitors who have already received FDA approval for their products.
The Company May Not Be Able To Manufacture Its Bioregulator Products In Commercial Quantities And May Have To Incur Significant Costs To Meet Its Manufacturing Requirements. Currently, the Company does not possess the facilities or equipment to manufacture its products. The Company intends to contract with a third party or parties to manufacture its products for commercial distribution. However, although production processes for the key compounds are thoroughly documented, such third party or parties could encounter problems manufacturing sufficient quantities of the Company's products for these purposes. Therefore, the Company may have to make significant investments to construct or lease facilities sufficient to meet its long-term manufacturing requirements. See "Operations."
The Company May Not Be Able To Protect Or Maintain The Security Of Its Patents Or Other Proprietary Information. The Company has filed for one patent, and intends file additional patents and to prosecute and maintain patents for this technology. Conceivably, the Company may be unsuccessful in obtaining additional patents and in avoiding infringements of patents granted to others. Even if patents are granted to the Company, the enforceability of patents issued to biotechnology and pharmaceutical firms is often highly uncertain, and existing law may not protect the Company's patents.
Without patent protection, it is unlikely that the Company could successfully market its bioregulator products. Lacking a proprietary advantage, the Company would be unable to prevent marketing of its bioregulator products by more well-established competitors who would be able to dominate the market. In addition, the Company could incur substantial costs in defending any patent litigation brought against it or in asserting its patent rights in a suit against another party. See "Patents, Trademarks and Proprietary Technology."
The Company relies on trade secrets, know-how and continuing technological advancement to develop and maintain its competitive position. The Company requires that each of its employees, consultants, and contract laboratories enter into a confidentiality agreement that contains provisions prohibiting the disclosure of confidential information to anyone outside the Company. However, these confidentiality agreements may not be honored and the Company may be unable to protect its rights to its unpatented trade secrets. Dissemination of this proprietary information might allow others to develop bioregulator products that would compete with those of the Company, diminishing the Company's sales and market share.
The Company's Business Could Be Harmed By New Research Efforts and Product Development By The Company's Competitors, Most of Whom Have Greater Resources Than The Company. The Company is engaged in a sector of the economy characterized by extensive research efforts and rapid technological development. New drug discoveries are to be expected, including those directed at the disease the Company has targeted. A number of the Company's competitors have substantially more capital, research and development, regulatory, manufacturing, marketing, human and other resources and experience than the Company. Such competitors may develop products that are more effective or less costly than any of the Company's current or future products and also may produce and market their products more successfully than the Company. Large-scale successful competition would reduce the Company's market share and profitability, and might jeopardize the Company's ability to stay in business. See "Competition."
The Company Is Exposed To Significant Liability Associated With Its Bioregulator Products, And May Not Be Able To Secure Insurance To Cover These Risks On Acceptable Terms, If At All. While the Company believes that its bioregulator product will be safe compared to other drugs, the Company still may incur significant product liability exposure. When the Company develops a product suitable for human administration, it intends to secure adequate product liability coverage. However, insurers may not offer the Company product liability insurance, may raise the price of such insurance or may limit the coverage of such insurance. In addition, the Company may not be able to maintain such insurance in the future on acceptable terms and such insurance may not provide the Company with adequate coverage against potential liabilities either for clinical trials or commercial sales. Successful product liability claims in excess of the Company's insurance would affect the Company's ability to continue to operate as a going concern.
The Company Is Dependent Upon Key Personnel For Its Growth.
The success of the Company's operations during the foreseeable future will
depend largely upon the continued services of the following individuals:
Mr. Steven Kane, the Company's President, and Dr. Dennis Vik, the Company's
Chief Scientist. The loss of the services of Mr. Kane or Dr. Vik could
have a material adverse impact on the Company. Dr. Vik has not entered into
employment agreements with the Company.
The Company's success will also depend in part on its ability to manage, attract
and retain qualified technical, management and sales personnel. Competition for
such personnel is intense. There can be no assurance that the Company will be
successful in attracting and retaining the personnel it required to conduct its
operations successfully. The Company's results of operations could be adversely
affected if the Company were unable to attract, manage and retain these
personnel or if its revenues fail to increase at a rate sufficient to absorb the
resulting increase in expenses.
See "Employees."
Recently Enacted And Proposed Changes In Securities Laws And Regulations Are Likely To Increase Company Costs.
The Sarbanes-Oxley Act of 2002 that became law in July 2002 requires changes in some of the Company's corporate governance, public disclosure and compliance practices. The Act also requires the SEC to promulgate new rules on a variety of subjects. The Company expect these developments to increase its legal and financial compliance costs. These developments may make it more difficult and more expensive to obtain director and officer liability insurance, and the Company may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These developments could make it more difficult to attract and retain qualified members of Protalex's board of directors, particularly to serve on the audit committee, and qualified executive officers. The Company is presently evaluating and monitoring regulatory developments and cannot estimate the timing or magnitude of additional costs.
The Company's Public Shares Are Illiquid And Their Price is Subject to Potential Volatility.
The market price of the shares of the Company's common stock is highly volatile, mainly due to the public market for the shares. Factors such as fluctuation the Company's operating results, the introduction of new products or services by the Company or its competitors, and general market conditions may also have a significant effect on the market price of the Company's common stock.
The Company Needs Additional Funding.
The Company is dependent upon equity financing to fund research and development and commercialization of the drug. The Company does not know if additional financing will be available when needed, or if it is available, if it will be available on acceptable terms. Insufficient funds may prevent the Company from implementing its business strategy or may require the Company to delay, scale back or eliminate certain components of its business plan.
Employees
The Company currently has six full-time employees. None of the Company's employees are represented by an organized labor union. The Company believes its relationship with its employees is very good and it has never experienced an employee-related work stoppage. The Company will need to hire and retain highly-qualified experienced technical, management and sales personnel in order to execute its business plan, carry out product development and secure advantages over its competitors. No assurances can be given that the Company will be able to pay the higher salaries necessary to retain such skilled employees.
ITEM 2 - DESCRIPTION OF PROPERTY
The Company's office and laboratory is located in a space at 717 Encino NE, Suite 17, Albuquerque, New Mexico 87102. The Company leases this property pursuant to a three-year lease agreement, which ends April 30, 2004, with an option to purchase, at any time, the property for $70,000.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings. The Company is not aware of threatened legal proceedings to which any person, officer, affiliate of Protalex or any owner of more than 5% of Protalex stock is an adverse party to or has a material interest adverse to Protalex.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in the fourth quarter of the fiscal year ended May 31, 2003.
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the Over-The-Counter Bulletin Board under the symbol "PRTX".
The following table sets forth, for the fiscal periods indicated, the high and low closing bid prices for the common stock of Protalex for the last two fiscal years. The Company's fiscal year-end is May 31. The quotations are taken from Internet quotation sources. The quotations may reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. Average daily volume was 1,043, and the annual average closing price was $1.85 for the year ended May 31, 2003.
High Low
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Fiscal Year 2002
First Quarter 2.88 1.69
Second Quarter 3.94 2.13
Third Quarter 3.30 2.19
Fourth Quarter 3.19 2.25
Fiscal Year 2003
First Quarter 2.85 1.17
Second Quarter 1.91 1.21
Third Quarter 3.05 1.35
Fourth Quarter 3.25 1.22
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At May 31, 2003 the Company had 12,247,450 shares of common stock outstanding, which were held by 383 holders of record. The transfer agent for the Company's common stock is Standard Registrar & Transfer Agency, PO Box 14411, Albuquerque, NM 87111.
Dividend Policy. No dividends have been declared or paid to date on any capital stock of the Company. The Company currently anticipates that it will retain all future earnings for use in the operation and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities.
In May 2000, the Company completed a private placement of 640,000 shares of its common stock, at an offering price of $1.00 a share to various investors. In this offering, the Company relied on Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), as an exemption to the registration requirements of the Securities Act. Subscription agreements executed by each investor attested to the fact they such investor was an accredited investor, as such term is defined in Regulation D, promulgated under the Securities Act.
In November 2001, the Company sold 881,600 shares of unregistered common stock, pursuant to Section 4(2) of the Securities Act, at $1.25 per share to various investors. Each investor executed a subscription agreement, attesting to such investor's accredited status.
On December 7, 2000, the Company issued 425,000 shares of its common stock to various investors, pursuant to a private placement exempt under Section 4(2) of the Securities Act. Each investor executed a subscription agreement confirming its accredited status.
On November 26, 2001, the Company issued options to purchase up to 100,000 shares of restricted common stock of the Company, at an exercise prices of $1.50 a share, to William Hitchcock, a director of the Company, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on November 26, 2011. The options were issued pursuant to the exemption set forth in Section 4(2) of the Securities Act.
On June 1, 2002, the Company issued options to purchase up to 125,000 shares of restricted common stock of the Company to Frederick Kuckuck, an employee of the Company, at an exercise prices of $1.50 a share, in exchange for his services as an employee of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on June 1, 2004. The options were issued pursuant to the exemption set forth in Section 4(2) of the Securities Act.
In July 2002, the Company offered 842,000 units, comprised of one share of common stock and one warrant to purchase common stock, for $1.50 a unit. The units were sold, in varying amounts, to various investors. Each investor certified its accredited status in executed subscription agreements, upon which the Company based its reliance on the exemption in Section 4(2) of the Securities Act.
On July 18, 2002, the Company issued options to purchase up to 100,000 shares of restricted common stock of the Company to Thomas Stagnaro, a director of the Company, at an exercise prices of $1.50 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire July 18, 2012. The options were issued pursuant to the exemption set forth in Section 4(2) of the Securities Act.
On October 24, 2002, the Company issued options to purchase up to 100,000 shares of restricted common stock of the Company to Thomas Stagnaro, a director of the Company, at an exercise prices of $1.45 a share, in exchange for his services as a consultant to the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on October 24, 2012. The options were issued pursuant to the exemption set forth in Section 4(2) of the Securities Act.
On December 16, 2002, the Company issued options to purchase up to 10,000 shares of restricted common stock of the Company to William Hitchcock, a director of the Company, at an exercise prices of $1.70 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on December 16, 2012.
On December 16, 2002, the Company issued options to purchase up to 10,000 shares of restricted common stock of the Company to Thomas Stagnaro, a director of the Company, at an exercise prices of $1.70 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on December 16, 2012.
On December 16, 2002, the Company issued options to purchase up to 10,000 shares of restricted common stock of the Company to Arthur Bankhurst, a director of the Company, at an exercise prices of $1.70 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on December 16, 2012.
On December 16, 2002, the Company issued options to purchase up to 10,000 shares of restricted common stock of the Company to Frank Dougherty, a director of the Company, at an exercise prices of $1.70 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on December 16, 2012.
On December 16, 2002, the Company issued options to purchase up to 10,000 shares of restricted common stock of the Company to John Doherty, a director of the Company, at an exercise prices of $1.70 a share, in exchange for his services as a director of the Company. The options were issued pursuant to a stand-alone Option Agreement and are fully vested. The options will expire on December 16, 2012.
On January 15 to May 15, 2003, the Company issued 41,670 shares of common stock to its President, Steven Kane, in lieu of compensation.
On May 14, 2003, the Company issued common stock to Joe Dervan, an employee, as compensation.
ITEM 6 - PROTALEX INC. - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
Pre-clinical safety studies for Protalex's target drug were completed in May, 2003 with no significant clinical reactions and no toxicologically meaningful differences between the test and control groups. These studies and the pre-clinical efficacy studies concluded in 2002 lay the foundation for the Investigational New Drug (IND) Application for treating Rheumatoid Arthritis (RA) to be submitted to the FDA in fourth quarter of calendar year 2003. IND-related activities include manufacturing Protalex's drug for Phase I and II clinical trials, arranging for packaging and testing, designing clinical trial protocols and designing an animal "bridging study" to compare the lots used in animal trials with the Company-manufactured product to be used in human clinical trials. These IND-related activites will occur during the next 12 months.
The Company is planning to raise at least $8.5 million through a private placement it intends to closing within the near future. This financing will satisfy the Company's cash needs for the next 24 months. The proceeds of this private placement will be used to fund FDA Phase I/II clinical trials, execute a broader patent strategy and continue research into other autoimmune disease indications.
After the July, 2002 Pre-IND meeting with the FDA, the Company had additional discussions with the FDA to further define the steps necessary for progression through Phase I and II clinical trials. Other ancillary projects arising out of discussions with the FDA include in-house laboratory work regarding drug formulation and stability and developing measures of immunogenicity. Protalex's contract laboratory in Europe, Eurogentec, is scheduled to produce an early lot of the Company's Drug for stability testing in third quarter of calendar year 2003, and a final lot to be released in first quarter of calendar year 2004, in time for Phase I clinical trials.
In the area of intellectual property and derivative drug development, Protalex's usage patent was filed in April, 2002, and the next generation of Protalex compounds are currently being made and tested in our R&D program.
Staffing plans for the coming fiscal year include hiring a Director of Clinical and Regulatory Affairs and a Laboratory Cell Technician in the first quarter of calendar year 2004. Continued growth in staffing is anticipated in the Company's business plan, and specialized staffing requirements in the areas of management, scientific and FDA regulatory affairs will call for competitive salaries to attract and retain qualified personnel.
The Company anticipates that it will need to purchase an auto-sampling tray for the existing HPLC machine, at a cost of $30,000, and a fume hood for the derivative protein project, at a cost of $15,000. These purchases will be made in the first quarter of calendar year 2004.
Research and Development (R&D) costs decreased slightly from the previous year from $918,022 to $909,246. Decreases in laboratory payroll costs were offset by increased expenses to outside contract labs for pre-clinical trials. Monthly R&D costs are anticipated to double in the coming fiscal year, driven by larger payments to vendors and labs performing drug manufacture, FDA consultation and clinical trial site management.
Administrative expenses increased over the prior year from $252,436 to $640,927 due to increased staffing and a shift in focus from conducting research to pursuing the regulatory process. Additional expenses include directors and officers insurance, costs associated with raising funds and additional administrative personnel, including an administrative assistant and a full-time Chief Financial Officer. The major factor in the increased administrative costs is the use of stock-based compensation to attract and reward qualified employees, consultants and board members.
ITEM 7 - FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
PROTALEX, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
May 31, 2003
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Protalex, Inc.
We have audited the accompanying balance sheet of Protalex, Inc. (a New Mexico Corporation in the development stage) as of May 31, 2003, and the related statement of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Protalex, Inc. as of May 31, 2002 and for the year then ended, including cumulative results of operations, statement of stockholders' equity and cash flows from inception (September 17, 1999) through May 31, 2002, were audited by other auditors whose report dated August 15, 2002, except for Note I for which the date is July 17, 2003, expressed an unqualified opinion with an explanatory paragraph addressing a substantial doubt about the Company's ability to continue as a going concern.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Protalex, Inc. as of May 31, 2003, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Grant Thornton LLP
Albuquerque, New Mexico
August 15, 2003
Protalex, Inc.
(A Company in the Development Stage)
BALANCE SHEET
May 31, 2003
ASSETS
CURRENT ASSETS
Cash .......................................... $ 280,052
Prepaid expense ............................... 6,872
-----------
Total current assets ............................ $ 286,924
EQUIPMENT
Lab equipment ................................. 248,706
Office and computer equipment ................. 134,387
Furniture & fixtures .......................... 21,268
Leasehold improvements ........................ 10,685
-----------
415,046
Less accumulated depreciation ................. (288,231) 126,815
-----------
|
OTHER ASSETS
Intellectual technology property, net of
accumulated amortization of $3,638.............. $16,662
-----------
Total Assets $ 430,401
===========
|
LIABILITIES
CURRENT LIABILITIES
Accounts payable .............................. $ 104,140
Credit card payable............................ 11,354
Payroll and related liabilities .............. 8,816
Interest payable .............................. 15
Current maturities of capital lease and
long-term liabilities ....................... 21,341
-----------
Total current liabilities .............. $ 145,666
Capital lease obligation ........................ 41,165
-----------
Total liabilities ...................... 186,831
STOCKHOLDERS' DEFICIT
Common stock, no par value,
authorized 40,000,000 shares,
12,247,950 shares issued and outstanding .... 3,758,315
Common stock, contra .......................... (368,547)
Additional paid in capital .................... 603,912
Deficit accumulated during
the development stage ....................... (3,750,110) 243,570
---------- -----------
$ 430,401
===========
|
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
For the years ended May 31, 2003 and 2002, and From Inception (September 17, 1999) through May 31, 2003
From Inception
Year Ended Year Ended Through
May 31, 2003 May 31, 2002 May 31,2003
------------ ------------ ------------
Revenues ........................ $ -- $ -- $ --
Operating Expenses
Research and development ...... (909,246) (918,022) (2,402,861)
Administrative ................ (640,927) (252,436) (963,399)
Professional fees ............. (71,548) (91,289) (277,216)
Depreciation and amortization . (41,167) (17,393) (76,364)
------------ ------------ ------------
Operating Loss ........ (1,662,888) (1,279,140) (3,719,840)
Other income (expense)
Interest income ............... 9,389 7,381 39,667
Interest expense .............. (2,572) (8,706) (60,918)
Loss on disposal .............. (9,019) -- (9,019)
------------ ------------ ------------
NET LOSS .............. $ (1,665,090) $ (1,280,465) $ (3,750,110)
============ ============ ============
Weighted average number of common
shares outstanding ............ 12,197,325 11,105,140 10,925,124
============ ============ ============
Loss per common share ........... $ (.14) $ (.12) $ (.34)
============ ============ ============
|
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
From Inception (September 17, 1999) through May 31, 2003
Deficit
Accumulated
Common Stock Additional Common In The
------------------------- Paid in Stock- Development
Shares Amount Capital Contra Stage Total
----------- ----------- ----------- ----------- ----------- -----------
September 17, 1999 -- initial issuance
of 10,000 shares for intellectual
technology license at $.03 per share . 10,000 $ 300 $ -- $ -- $ -- $ 300
September 30, 1999 -- cost of public
shell acquisition over net assets
acquired to be accounted for as a
recapitalization ..................... -- -- -- (250,000) -- (250,000)
October 27, 1999 -- issuance of 84
shares to individual for $25,000 ..... 84 25,000 -- -- -- 25,000
November 15, 1999 -- reverse merger
transaction with Enerdyne
Corporation, net transaction amounts . 8,972,463 118,547 -- (118,547) -- --
November 18, 1999 -- February 7, 2000
-- issuance of 459,444 shares to
various investors at $0.36 per share . 459,444 165,400 -- -- -- 165,400
January 1, 2000 -- issuance of 100,000
shares in exchange for legal services 100,000 15,000 -- -- -- 15,000
May 1 - 27, 2000 -- issuance of 640,000
shares to various investors at $1.00
per share ............................ 640,000 640,000 -- -- -- 640,000
May 27, 2000 -- issuance of 1,644 shares
to individual in exchange for interest
due .................................. 1,644 1,644 -- -- -- 1,644
Net loss for the year ended May 31, 2000 -- -- -- -- (250,689) (250,689)
----------- ----------- ----------- ----------- ----------- -----------
Balance, May 31, 2000 ........... 10,183,635 965,891 -- (368,547) (250,689) 346,655
December 7, 2000 -- issuance of 425,000
shares to various investors at $1.00
per share ............................ 425,000 425,000 -- -- -- 425,000
May 31, 2001 -- Forgiveness of debt owed
to shareholder ....................... -- -- 40,000 -- -- 40,000
Net loss for the year ended May 31, 2001 -- -- -- -- (553,866) (553,866)
----------- ----------- ----------- ----------- ----------- -----------
Balance, May 31, 2001 ......... 10,608,635 1,390,891 40,000 (368,547) (804,555)
257,789
August 13, 2001 -- Contribution by
shareholders ........................... -- -- 143,569 -- -- 143,569
November 7, 2001 -- issuance of 881,600
Shares at $1.25 per share ............ 881,600 1,102,000 -- -- -- 1,102,000
November 26, 2001 -- options issued to
board member ......................... -- -- -- -- -- 133,000
Net loss for the year ended May 31, 2002 -- -- -- -- (1,280,465) (1,280,465)
----------- ----------- ----------- ----------- ----------- -----------
Balance, May 31, 2002 ......... 11,490,235 2,492,891 316,569 (368,547) (2,085,020) 355,893
July 5, 2002 -- issuance of 842,000
at $1.50 per share ................... 842,000 1,263,000 -- -- -- 1,263,000
July 1, 2002 - May 1, 2003 -- purchase
of common stock from shareholder at
$.70 per share ....................... (130,955) (91,667) -- -- -- (91,667)
January 15, 2003 - May 15, 2003 --
common stock issued to Company
president ............................ 41,670 82,841 -- -- -- 82,841
May 14, 2003 -- common stock issued to
employee ............................. 5,000 11,250 -- -- -- 11,250
June 1, 2002 - May 31, 2003 -- options
issued to board members and employees -- -- 287,343 -- -- 287,343
Net loss for the year ended May 31, 2003 -- -- -- -- (1,665,090) (1,665,090)
----------- ----------- ----------- ----------- ----------- -----------
Balance, May 31, 2003 ........... 12,247,950 $ 3,758,315 $ 603,912 $ (368,547) $(3,750,110) $ 243,570
=========== =========== =========== =========== =========== ===========
|
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
For the years ended May 31, 2003 and 2002, and From Inception (September 17, 1999) through May 31, 2003
From Inception
Year Ended Year Ended Through
May 31, 2003 May 31, 2002 May 31, 2003
----------- ----------- -----------
Cash flows from operating activities
Net loss ........................................... $(1,665,090) $(1,280,465) $(3,750,110)
Adjustments to reconcile net loss to net
cash provided by operating activities
Loss on disposal of equipment ............... 9,019 -- 9,019
Depreciation and amortization .................. 108,641 111,102 305,266
Non cash compensation expense .................. 381,434 133,000 514,434
Non cash expenses ........................... -- -- 16,644
Decrease (increase) in prepaid expense ......... (5,270) 15,539 (6,872)
(Decrease) increase in payroll and
related liabilities ........................ 6,471 (20,229) 8,816
(Decrease) increase in interest payable ........ (538) (2,451) 15
Increase in accounts payable and credit
card payable .................................. 59,389 55,913 115,494
----------- ----------- -----------
Net cash used in operating activities ....... (1,105,944) (987,591) (2,787,294)
----------- ----------- -----------
Cash flows from investing activities
Acquisition of intellectual technology license
- fee portion .................................... -- -- (20,000)
Acquisition of equipment ........................... (15,236) (38,116) (290,881)
Excess of amounts paid for Public Shell
over assets acquired to be accounted for
as a recapitalization ............................ -- -- (250,000)
Proceeds from disposal of equipment ................ 6,000 -- 6,000
----------- ----------- -----------
Net cash used in investing activities ....... (9,236) (38,116) (554,881)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from stock issuance ....................... 1,263,000 1,102,000 3,620,401
Principal payment on installment purchase payable .. (37,968) (170,249) (232,905)
Contribution by shareholders ....................... -- 143,569 183,569
Principal payment on note payable individual ....... -- -- (225,717)
Issuance of note payable to individual ............. -- -- 368,546
Acquisition of common stock ........................ (91,667) -- (91,667)
----------- ----------- -----------
Net cash provided by financing activities ... 1,133,365 1,075,320 3,622,227
----------- ----------- -----------
NET INCREASE IN CASH ................................. 18,185 49,613 280,052
Cash, beginning of period ............................ 261,867 212,254 --
----------- ----------- -----------
Cash, end of period .................................. $ 280,052 $ 261,867 $ 280,052
=========== =========== ===========
|
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS -CONTINUED
For the years ended May 31, 2003 and 2002 and From Inception (September 17, 1999) through May 31, 2003
From Inception
Period Ended Period Ended Through
May 31, 2003 May 31, 2002 May 31, 2003
Interest paid ....................................... $ 2,558 $ 28,407 57,707
=============== =============== ==============
Taxes paid .......................................... $ -- $ 50 $ 50
=============== =============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
10,000 shares of company stock were
issued as part of the cost of acquisition
of the intellectual technology license
at inception - value at $.03 per share ............ $ -- $ -- $ 300
=============== =============== ==============
100,000 shares of company stock were
issued in exchange for legal services
performed ......................................... $ -- $ -- $ 15,000
=============== =============== ==============
1,644 shares of company stock were
issued in exchange for interest payable ........... $ -- $ -- $ 1,644
=============== =============== ==============
Lab equipment was acquired through
issuance of installment contract to seller ........ $ -- $ -- $ 91,430
=============== =============== ==============
Lab equipment was acquired
through lease agreement with seller ........ $ 61,151 $ -- $ 61,151
=============== =============== ==============
46,670 shares of company stock were
issued as compensation......................... $ 94,091 $ -- $ 94,091
=============== =============== ==============
|
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
From Inception (September 17, 1999) through May 31, 2003
NOTE A - DESCRIPTION OF OPERATIONS AND DEVELOPMENT STAGE STATUS
Protalex, Inc. (the Company or Protalex) is a development stage enterprise incorporated on September 17, 1999 and based in Albuquerque, New Mexico. The Company was formed to take all necessary steps to fully develop and bring to commercial realization certain bioregulator technology for the treatment of human diseases. The Company has no operating revenue.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company is a development stage enterprise and does anticipate generating operating revenue for the foreseeable future. The ability of the Company to continue as a going concern is dependent initially on its ability to raise sufficient investment capital to fund all necessary operations and product development activities. In August, 2003, documents were issued to initiate a Private Placement to raise $8,500,000. The placement is expected to close in mid-September, 2003. Secondly, the Company must develop products that are regulatory approved and market accepted to generate operating revenue. There is no assurance that these plans will be realized in whole or in part. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expense, and the disclosure of contingent assets and liabilities. Estimated amounts could differ from actual results.
2. Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing loss to common shareholders by the weighted average number of common shares outstanding for the period. All potentially dilutive securities have been excluded from the computations since they would be antidilutive. However, these dilutive securities could potentially dilute earnings per share in the future. As of May 31, 2003, the Company had a total of 2,568,922 potentially dilutive securities.
3. Stock Based Compensation
The Company accounts for the options granted to employees using the "intrinsic value" method, pursuant to Accounting Principles Board Opinion no. 25, which records as compensation cost the difference between exercise price of the options and the fair market value of Company stock on the measurement (grant) date. Options to non-employees are accounted for using the "fair value" method, which recognizes the value of the option as an expense over the related service period with a corresponding increase to paid-in capital.
Had the Company determined compensation expense based on the fair value at the measurement date for its stock options granted to employees under Statement of Financial Accounting Standards No. 123, the Company's net loss and loss per share would have increased to the proforma amounts indicated as follows:
From Inception
Year Ended Year Ended Through
May 31, May 31, May 31,
2003 2002 2003
---------- ---------- -----------
Net loss, as reported .......... $(1,665,090) $(1,280,465) $(3,750,110)
Add: stock-based employee
compensation expense
included in reported
net loss .................. 287,343 133,000 420,343
Deduct: Stock-based employee
compensation expense
determined under fair-
value method for all
awards ................. (817,233) (231,219) (1,048,452)
----------- ----------- -----------
Pro forma net loss ............. $(2,194,980) $(1,378,684) $(4,378,219)
=========== =========== ===========
Loss per share, as reported .... $ (.13) $ (.11) $ (.34)
Proforma loss per share ........ $ (.18) $ (.13) $ (.40)
|
The fair value of the options are estimated on the date of the grant using
the Black-Scholes option pricing model with the following assumptions:
dividends of $0 per year; expected volatility of 90-131 percent; risk-free
interest rate of 4.16-5.11 percent; and an expected life of three-five
years.
4. Equipment, Depreciation and Amortization
Equipment is carried at cost. Depreciation has been provided by the Company in order to amortize the cost of equipment over their estimated useful lives. The Company uses the straight-line method for all classes of assets for book purposes. The intellectual technology property is amortized over a 20-year life on a straight-line basis. Depreciation and amortization expense is $108,641, $111,102 and $305,266 for the year ended May 31, 2003, 2002 and from inception through May 31, 2003, respectively. Depreciation included in research and development expense totalled $67,474, $93,709 and $228,902 for the years ended May 31, 2003 and 2002 and from inception to May 31, 2003, respectively.
5. Income Taxes
Income taxes are recognized using enacted tax rates, and are composed of taxes on financial accounting income that is adjusted for the requirement of current tax law and deferred taxes. Deferred taxes are the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of existing assets and liabilities. The Company does not expect to have current income taxes payable or deferred tax balances for the foreseeable future.
6. Other Comprehensive Income
From September 17, 1999 (inception) through May 31, 2003, the Company had no changes in equity which constitute components of other comprehensive income.
7. Research and Development - Research and development costs are expensed as incurred.
8. Fair Value of Financial Instruments - The fair value of the Company's financial instruments, principally cash and debt, approximates their carrying value.
9. Recent Accounting Pronouncements
In June 2002, the FASB issued Statement 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. This statement requires entities to recognize costs associated with exit or disposal activities when liabilities are incurred rather than when the entity commits to an exit or disposal plan, as currently required. Examples of costs covered by this guidance include one-time employee termination benefits, costs to terminate contracts other than capital leases, costs to consolidate facilities or relocate employees, and certain other exit or disposal activities. This statement is effective for fiscal years beginning after December 31, 2002, but early adoption is encouraged. The Company has elected to early adopt this statement for the year ended May 31, 2003. The Company does not anticipate that adoption of this statement will have material effect on its financial or results of operations.
In December 2002, the FASB issued Statement 148 (SFAS 148), ACCOUNTING FOR STOCK-BASED COMPENSATION -- TRANSITION AND DISCLOSURE: AN AMENDMENT OF FASB STATEMENT 123 (SFAS 123), to provide alternative transition methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in annual financial statements about the method of accounting for stock-based employee compensation and the pro forma effect on reported results of applying the fair value based method for entities that use the intrinsic value method of accounting. The pro forma effect disclosures are also required to be prominently disclosed in interim period financial statements. This statement is effective for financial statements for fiscal years ending after December 15, 2002 and is effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002, with earlier application permitted. The Company does not plan a change to the fair value based method of accounting for stock-based employee compensation and has included the disclosure requirements of SFAS 148 in these notes to financial statements.
In November 2002, FASB Interpretation 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE
REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF
OTHERS (FIN 45), was issued. FIN 45 requires a guarantor entity, at the
inception of a guarantee covered by the measurement provisions of the
interpretation, to record a liability for the fair value of the obligation
undertaken in issuing the guarantee. A company previously did not record a
liability when guaranteeing obligations unless it became probable that the
Company would have to perform under the guarantee. FIN 45 applies prospectively
to guarantees the Company issues or modifies subsequent to December 31, 2002,
but has certain disclosure requirements effective for interim and annual periods
ending after December 15, 2002. The Company has historically not issued
guarantees and does not anticipate FIN 45 will have a material effect on its
financial statements.
In January 2003, the FASB issued FASB Interpretation 46 (FIN 46), CONSOLIDATION OF VARIABLE INTEREST ENTITIES. FIN 46 clarifies the application of Accounting Research Bulletin 51, CONSOLIDATED FINANCIAL STATEMENTS, for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest ("variable interest entities"). Variable interest entities within the scope of FIN 46 will be required to be consolidated by their primary beneficiary. The primary beneficiary of a variable interest entity is determined to be the party that absorbs a majority of the entity's expected losses, receives a majority of its expected returns, or both. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company is in the process of determining what impact, if any, the adoption of the provisions of FIN 46 will have upon its financial condition or results of operations.
NOTE C - REVERSE MERGER
On November 15, 1999, Enerdyne Corporation ( Enerdyne or Public Shell) acquired all of the outstanding common stock of Protalex, Inc. (Protalex) in exchange for the issuance of additional shares of Enerdyne stock. The ratio of exchange was 822 shares of Enerdyne stock issued for each share of Protalex stock received. For accounting purposes, the acquisition has been treated as an acquisition of Enerdyne by Protalex and as a recapitalization of Protalex (Reverse Merger). The historical financial statement of operations presented herein include only those of the accounting acquirer and that the retained earnings (deficit) of only the accounting acquirer carries over consistent with the requirements of reverse merger accounting. Concurrently with the share exchange, Enerdyne changed its name to Protalex, Inc.
The details of the reverse merger transaction are as follows:
Balance Sheet
Protalex, Enerdyne Transaction at November
Account Description Inc. Corporation Adjustments 16, 1999
--------------------------- ---------- ---------- ---------- ----------
Cash $ 23,531 $ - $ - $ 23,531
Note receivable shareholder - 118,547 - 118,547
License 20,300 - - 20,300
Investment in Enerdyne 368,547 - (368,547) -
Other current assets 8,212 - - 8,212
Other current liabilities (17,555) - - (17,555)
Accounts payable Alex (40,000) - - (40,000)
Note payable (368,546) - - (368,546)
Common stock (25,300) (833,459) 714,912 (143,847)
Additional paid in capital - (1,105,014) 1,105,014 -
Treasury stock - 430,424 (430,424) -
Accumulated deficit 30,811 1,389,502 (1,389,502) 30,811
Common stock - contra - - 368,547 368,547
---------- ---------- ---------- ----------
$ - $ - $ - $ -
========== ========== ========== ==========
|
Additional information in connection with stock amounts and number of shares issued is as follows:
Protalex, Inc. Enerdyne Corporation
----------------------- --------------------------------------
Shares
-----------------------
Account Description Shares Amount Outstanding Treasury Amount
------------------- ---------- ---------- ---------- ---------- ----------
Common stock ......... 10,084 $ 25,300 1,578,907 238,500 $ 833,459
822 to 1 stock
recapitalization ... (10,084) -- 8,289,048 -- --
Cancellation of shares
formerly held by
Protalex in Enerdyne -- -- (885,408) -- --
Increase to record net
assets of Enerdyne . -- 118,547 -- -- --
Cancellation of common
stock amounts for
Enerdyne ........... -- -- -- -- (833,459)
Name change to
Protalex, Inc. ..... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
-- $ 143,847 8,982,547 238,500 $ --
========== ========== ========== ========== ==========
|
NOTE D - INTELLECTUAL TECHNOLOGY PROPERTY
The Company's intellectual technology property was originally licensed from a former related party. This intellectual technology property was then assigned to the Company upon the dissolution of the related party. The cost of the intellectual technology property is being amortized over a 20-year period. The intellectual technology property is reported net of accumulated amortization of $3,638. The Company reviews the intellectual property for impairment on at least an annual basis in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets".
NOTE E - INCOME TAXES
No provision for federal or state income tax expense has been recorded due to the Company's losses. Total income tax benefit differs from the amounts computed by applying the statutory tax rate to loss before income taxes.
May 31, 2003 May 31, 2002
------------ -----------
Expected benefit at the US
statutory rate of 34% $ 566,130 $ 512,186
Valuation allowance (566,130) (512,186)
--------- ---------
Actual tax benefit $ - $ -
--------- ---------
|
For the year ended May 31, 2003, the components of income tax (benefit) expense consist of the following:
Current:
Federal $ - $ -
State - -
--------- ---------
- -
--------- ---------
Deferred:
Federal 618,000 748,000
State 109,000 132,000
Valuation allowance (727,000) (880,000)
--------- ---------
- -
--------- ---------
Income tax benefit $ - $ -
========= =========
|
Deferred taxes result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. The components of the net deferred tax asset as of May 31, 2003 are as follows:
Assets:
Net operating losses $1,459,000 $ 834,000
Vacation accrual 3,000 3,000
Warrants and options 169,000 54,000
---------- ----------
Deferred tax assets 1,631,000 891,000
---------- ----------
Liability:
Equipment (24,000) (11,000)
---------- ----------
Net deferred tax asset 1,607,000 880,000
Less valuation allowance (1,607,000) (880,000)
---------- ----------
Deferred tax asset,
net of valuation allowance $ - $ -
---------- ----------
|
The net deferred taxes have been fully offset by a valuation allowance since the Company cannot currently conclude that it is more likely than not that the benefits will be realized. The net operating loss carryforward for income tax purposes of approximately $1,500,000 expires beginning in 2014 through 2018. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally greater than a 50% change in ownership). As a result of these provisions, utilization of the NOL and tax credit carryforwards may be limited.
NOTE F - RELATED PARTIES
On August 13, 2001, a stockholder group contributed funds that allowed the Company to pay off its remaining balance due to an individual incurred in the Company's reverse merger transaction. No shares or notes payable to stockholder were issued in the transaction. The Company recorded additional paid-in-capital in the amount of $143,569 to reflect the funds contributed to retire the debt.
NOTE G - CAPITAL LEASE AND EQUIPMENT NOTE PAYABLE
Protalex leases certain equipment under a capital lease. As of May 31, 2003, the recorded amount of assets and related accumulated depreciation leased under capital leases totaled $61,151 and $0 respectively.
Future minimum lease payments and the related present value of the future obligation under the capital lease at May 31, 2003 are as follows:
2004 $ 22,620
2005 22,620
2006 20,735
--------
Total minimum obligations 65,975
Interest (6,455)
--------
Present value of minimum capital lease obligations 59,520
Current portion (18,355)
--------
Long-term capital lease obligations $ 41,165
========
|
In addition to the capital lease obligation as of May 31, 2003, the Company owes $2,986 in connection with a note payable on equipment. This note has been paid in full subsequent to May 31, 2003.
NOTE H - STOCK OPTIONS
All options issued are "stand alone" options. There is no currently Company stock option plan currently. The Company accounted for the options to employees using the "intrinsic" method which records as compensation cost the difference between exercise price of the options and the fair market value of Company stock on the measurement (grant) date. Options to non-employees are accounted for using the "fair value" method, which recognizes the value of the option as an expense over the vesting period of the option with a corresponding increase to paid-in capital in accordance with SFAS No. 123.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
From Inception (September 17, 1999) through May 31, 2003
A summary of the common stock option activity for employees, directors and officers is as follows:
Weighted
Average
Exercise
Options Prices Exercisable
--------- --------- ---------
Balance, September 17, 1999 ........... -- $ -- --
Granted, April 28, 2000 ............... 40,000 0.36 40,000
--------- ---------
Balance, May 31, 2001 ................. 40,000 0.36 40,000
Granted, November 26, 2001 ............ 100,000 1.25 100,000
Expired, April 28, 2002 ............... (40,000) .36 (40,000)
--------- ---------
Balance, May 31, 2002 ................. 100,000 $ 1.25 100,000
Granted, July 18, 2002 ................ 233,680 $ 1.50 233,680
Granted, June 1, 2002 ................. 125,000 $ 1.50 125,000
Granted, October 24, 2002 ............. 100,000 $ 1.45 100,000
Granted, December 16, 2002 ............ 913,242 $ 1.51 50,000
Granted, April 1, 2002................. 40,000 $ 1.50 --
Granted, March 15, 2003................ 130,000 $ 1.50 --
--------- ---------
1,641,922 608,680
--------- ---------
|
The following summarizes certain information regarding stock options at May 31, 2003:
Total Exercisable
-------------------------------------------------- -------------------------------------------------
Exercise Price Weighted Average Weighted Average Weighted Average Weighted Average
Range Number Exercise Price Remaining Life (yrs) Number Exercise Price Remaining Life
------------ --------- ---------------- -------------------- --------- ---------------- ----------------
$1.25 - 1.45 200,000 $1.35 8.95 200,000 $1.35 8.95
$1.50 - 1.70 1,441,922 $1.51 8.67 408,680 $1.52 6.70
--------- ---------
1,641,922 608,680
|
NOTE I - DESCRIPTION OF LEASING ARRANGEMENTS
The Company leases its laboratory and office space under a noncancellable operating lease. The lease term is for 36 months and 4 days, from April 27, 2001 through April 30, 2004. While the agreement provides for minimum lease payments, the lease is non-renewable. The lease contains an option to purchase at any time during the lease period for $70,000. Minimum lease payments under this lease total $15,532 for the year ending May 31, 2004.
NOTE J - SUBSEQUENT EVENTS
In July, 2003, the Board elected Kirk Raab to the Board and appointed him Chairman. Mr. Raab will be compensated at a rate of $150,000 per year, or may elect to take some or all of his compensation in the form of stock options at a first year strike price of $1.50. As an inducement for accepting the position as a director and Chairman, Mr. Raab will be issued stock options in the amount 3.5% of the issued and outstanding shares after the completion of the September 2003 Private Placement.
In August, 2003, the Board voted to issue 100,000 stock options to Steven Kane as a performance bonus for his work done to date. The options vest immediately, have a life of 10 years and have a strike price of $1.50.
On August 22, 2003, the Company entered into a stock redemption agreement with former Chief Scientist Paul Mann and three family members to redeem all of their outstanding 2,994,803 shares of stock for a total of $300,000.
In a separate agreement, Paul Mann agreed to execute patent assignments and other necessary applications for foreign patents related to the U.S. Patent filed in April, 2002.
In August 2003, an officer and a board member loaned the Company a total of $100,000. The two loans, each for $50,000, bear interest at 5% per annum, are unsecured and are payable on demand.
In August, 2003, documents were issued to initiate a Private Placement to raise $8,500,000. The placement is expected to close in mid-September, 2003.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On February 24, 2003, the Company's prior principal independent accountant, Atkinson & Co. resigned. Atkinson & Company completed the audit of the Company's May 31, 2001 and the May 31, 2002 year end financial statements. Their audit opinion on those final statements, dated August 11, 2001 and August 15, 2002, respectively, included an explaining paragraph regarding the Company's ability to continue as a going concern. Otherwise, the audit reports of Atkinson & Company on the Registrant's financial statements for the fiscal year ended May 31st, 2001 and 2002 did not contain any adverse opinion or disclaimer of opinion, nor were they modified as to audit scope or accounting principles. The Company had no disagreements with its prior accountants. The Company's audit committee has approved Atkinson & Co.'s decision to resign and the engagement of Grant Thornton LLP on February 24, 2003.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required as to this Item is incorporated herein by reference from the data under the caption "Information Concerning Nominees and Continuing Directors" and "Executive Officers" in the Proxy Statement to be used in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders.
ITEM 10 - EXECUTIVE COMPENSATION
The information required as to this Item is incorporated herein by reference from the data under the captions "Executive Compensation and Other Information," "Report on Executive Compensation and Employment Agreements" in the Proxy Statement to be used in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required as to this Item is incorporated herein by reference from the data under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement to be used in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required as to this Item is incorporated herein by reference from the data under the caption "Certain Relationships and Related Transactions" in the Proxy Statement to be used in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders.
ITEM 13 - INDEX TO EXHIBITS
2.1 Stock Purchase Agreement among Incorporated by reference, to
Protalex, Inc., Don Hanosh and the Company's 10-SB filing
Enerdyne Corporation December 3, 1999
2.2 Merger Agreement and Plan of Incorporated by reference, to
Re-organization between Protalex, the Company's 10-SB filing
Inc. and Enerdyne Corporation December 3, 1999
3.1 Articles of Incorporation Incorporated by reference, to
of the Company, as amended the Company's 10-SB filing
December 3, 1999
3.2 Bylaws of the Company Attached
10.1 Continuing and Unconditional Incorporated by reference, to
Guaranty executed by the Company's 10-SB filing
John E. Doherty December 3, 1999
10.2 Continuing and Unconditional Incorporated by reference, to
Guaranty executed by the Company's 10-SB filing
James K. Strattman December 3, 1999
10.3 Form of Confidential Disclosure Incorporated by reference, to
Agreement the Company's 10-SB filing
December 3, 1999
10.4 Executed offers of
employment and Board
appointment of Kirk Raab Attached
10.5 Contracts: Laboratory Lease
Agreement, Equipment Lease
Agreement, and Product
Formulation Contracts Attached
10.6 Option Agreement Form Attached
10.7 Promissory notes with
two Directors Attached
10.8 Intellectual property assignments Attached
10.9 Agreement with placement agent Attached
10.10 Stock Redemption Agreement Attached
10.11 Agreement Regarding International
Patent Applications Attached
16 Consent from prior
Certifying accountants Attached
99.1 Certifications Attached
|
Reports on Form 8-K.
A report on Form 8-K was filed on February 24, 2003 which detailed a change in
the Company's certifying accountants.
ITEM 14 - CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, Protalex carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the President and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic filings with the Securities and Exchange Commission. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the previously mentioned evaluation.
ITEM 15 - (RESERVED)
ITEM 16 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required as to this Item is incorporated herein by reference from the data under the captions "Audit Fees," "Audit-Related Fees," "Tax Fees" and "All Other Fees" in the Proxy Statement to be used in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 23, 2003 PROTALEX, INC.
By: Steven H. Kane
--------------------------
Steven H. Kane, President
SIGNATURE TITLE DATE
--------- ----- ----
Steven H. Kane President and Director September 23, 2003
---------------
Steven H. Kane
Frank Dougherty Director September 23, 2003
---------------
Frank Dougherty
William Hitchcock Director September 23, 2003
-----------------
William Hitchcock
Donald Dean Chief Financial Officer September 23, 2003
-----------
Donald Dean
Arthur D. Bankhurst Director September 23, 2003
------------------------
Arthur D. Bankhurst, M.D.
Thomas Stagnaro Director September 23, 2003
---------------
Thomas Stagnaro
John Doherty Director September 23, 2003
------------
John Doherty
Kirk Raab Chairman and Director September 23, 2003
---------
Kirk Raab
|
Exhibit 10.5
PROJECT ASSIGNMENT 2
PROTALEX, Inc.
717 Encino Pl. NE, Suite 17
Albuquerque NM 87102
USA
Date: July 31st, 2003
Dear Sirs,
Agreement between PROTALEX Inc. ("PROTALEX") and EUROGENTEC S.A ("EUROGENTEC")
dated April 24, 2003 (date of the signature of the R&D Projects Frame Contract).
This letter shall constitute a Project Assignment for the purposes of the above
Agreement ("the Agreement"). We agree that EUROGENTEC will perform a Project
under the Agreement on the following terms:
1. Description of the Project
Upon PROTALEX' s request, EUROGENTEC Project Assignment 1 has demonstrated the
feasibility to produce and purify Protein A from Staphylococcus aureus A-676
strain fermentation. In the course of the feasibility, fermentation and DSP
(Down Stream Process) has been partly studied. The goal of this Project
Assignment is to develop Fermentation, DSP, QC tests in order to set-up
procedures and parameters for future Protein A GMP Manufacturing. The
development programme will encompass the following steps:
- Analysis of batch 03G17 according to hereunder PROTALEX specifications:
Bioburden : no organisms detected.
Endotoxin : <0.5 EU/mg
Enterotoxin B : <1 mcg/mg
SDS-PAGE : > 98%
HPLC : >98% at 214 nm >95% at 280 nm
Hu IgG binding : >95%
UV absorbance : E (0.1%, 276 nm) = 0.14-2.0
Isoelectric Focusing: Single band between 4.6 and 5.2
- QC Development and Qualification (SDS-PAGE, Western Blot, HPLC, Bioanalyzer,
BCA, bioburden, enterotoxin B, Hu IgG Binding, IEF,etc.)
- 2 fermentations at 50-L scale to fine-tune the parameters defined during the
Feasibility.
- Kinetic analysis of fermentors
- Definition of the fermentation conditions for scale-up and Robustness Study
- Down Stream Process : 3 DSP runs at 10-L scale from Fermentor # 1
- Definition of the DSP steps and conditions
- DSP on fermentor # 2 at 50-L scale
- QC analysis (ELISA, Western Blot, SDS-PAGE, BCA, HPLC)
2. Time-Lines and Completion date of work Starting date has to be considered 2 weeks after reception of (i) signed Frame Contract , (ii) signed hereunder Project Assignment and/or (iii) the first PROTALEX payment as defined in the paragraph 6. Based on a starting date September 1st,2003 Development programme and QC/IPC development should not length more than 2.5 months until mid-November, 2003. The tentative Calendar (page 4) may not be considered as a firm commitment from EUROGENTEC.
3. Quantities and specifications of product to be supplied to PROTALEX The material produced and purified during this study will be delivered to PROTALEX. Quantity and Purity of Protein A will be related to the production of the protein during the Fermentation process and to the performances obtained during the DSP steps.
4. Eurogentec Staff The R&D Fermentation will be performed under the responsibility of Ir. Doriano Cingolani, Head of R&D Fermentation. Alain Poncin M.Sc. DSP Team Leader, will be in charge of the Down Stream Process for the Feasibility Phase of the Purification Process. Ingrid Dheur M.Sc. QC Manager, will supervise the QC first developments.
5. Project Management] Charles Schaus will make the overall project management.
6. Fees and Terms of payment
Expected duration Cost in euro
QC/In Process Controls
(Fermentation, DSP,
2.5 months euro 75,000 (fixed cost)
Development Programme 2.5 months euro 39,375/month
The overall Project management is charged euro 2.000 /month from the start
of the Project until the completion of the Project.
The total cost of the Development Programme is evaluated at euro 178,437.5:
euro 173,437.5 for the study and euro 5,000 for the project management.
50 % (euro 89,219) of the total cost will be invoiced at the signature of the
Frame
Contract/Project Assignment 1. PROTALEX shall pay EUROGENTEC at the receipt of
the invoice.
25 % (euro 44,609) of the total cost will be invoiced after one month. Invoice
shall be paid within thirty days of receipt.
the last invoice representing the remaining 25% ( euro 44,609) of the total
price will then be issued at the completion of the project ( November
2003). Invoice shall be paid within thirty days of receipt.
Normal laboratory reagent costs are included in the cost of the Development
Study. However specific costs, such as chromatographic media,
ultrafiltration membranes, DNA Sequence Analysis (outsourced) will be
charged separately with 5% overhead. Costs will need to be approved by
PROTALEX prior to commitment or purchase.
7. Documentation and Reports The Development Study will be recorded in specific laboratory notebooks with double signature. They will be kept at EUROGENTEC for 10 years. Copies can be made available to PROTALEX. Intermediary reports will be issued after main step completion. Laboratory books will be in French, reports in English. The final report will give full description of the process and the yields of product obtained. Details of any analytical methods used will also be included.
8. PROTALEX Deliverables No PROTALEX deliverables is expected to be provided to EUROGENTEC.
EUROGENTEC S.A.
____________________ ______________________ Name: Charles Schaus Name: Michel Thiry Title: Project Manager Title: Biologic Business Unit Manager Date: August 29, 2003 Date: August 29, 2003 |
EUROGENTEC S.A. o Parc scientifique du Sart Tilman o 4102 SERAING o BELGIUM o Tel.: +32 4 366 61 00 Fax: +32 4 365 16 04 o e-mail: info@eurogentec.com o R.C. Liege 152 016 o T.V.A. BE 427 348 346
PROTALEX Inc. ____________________ ______________________ Name: Dennis Vik, Ph.D. Name: Steven Kane Titlle: Chief Scientific Officer Title: CEO Date: August 28, 2003 Date: August 28, 2003 |
Exhibit 10.8
Protalex-ALEX\InventorassignALEX
ASSIGNMENT
ASSIGNMENT from ALEX, LLC, a New Mexico Limited Liability Company, (hereinafter referred to as "ALEX"), to Protalex, Inc., a New Mexico Public Corporation, whose address is c/o John E. Doherty, President, P. O. Box 30952, Albuquerque, New Mexico, 87190 (hereinafter sometimes referred to as "Protalex").
WHEREAS, ALEX, has sole rights to a technology application that applies to any application of bioregulation to any human disease process and/or treatment (hereinafter more specifically defined as "Invention").
WHEREAS, Protalex, desires in the future to file patent applications in the United States Patent and Trademark Office and in any other foreign patent office as Protalex, its assignees, successors and/or designees may choose in which to seek protection for the invention. Such filings shall be made at the expense of Protalex, or its assignees, successors and/or designees.
WHEREAS, ALEX and Protalex, for good and adequate consideration have agreed to a formal assignment from ALEX to Protalex of its entire right, title, and interest in and to the above Invention, as described below as well as to all patents, patent application, division, reissues, continuations, continuations-in-part, substitutions, renewals, extensions thereof, and all improvements owned by ALEX, including the right to bring lawsuits for past infringement of any patents that may be issued thereon, in the United States and all foreign countries.
WHEREAS, Protalex, desires in the future to file patent applications in the United States Patent and Trademark Office and in any other foreign patent office as Protalex, its assignees, successors and/or designees may choose in which to seek protection for the invention. Such filings shall be made at the expense of Protalex, or its assignees, successors and/or designees.
NOW, THEREFORE, ALEX does hereby sell, assign, and transfer unto Protalex an exclusive right to all its right, title, and interest in and to: (a) the above technology, (b) any technical information, know-how, trade secret, process, procedure, composition, device, method, formula, protocol, technique, software, design, drawing or data related to the above technology which is not covered by any subsequently filed patent application but which is necessary at any time for practicing the above invention (all of the foregoing, (a) and (b), being collectively referred to hereafter as "Invention"), (c) any and all patents, patent applications, divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions resulting from Invention, (d) all improvements hereafter owned by ALEX with respect to Invention, and (e) the right to bring lawsuits for past infringement of any patents, that may be issued on the Invention, in the United States and in any and all foreign countries.
FURTHER, ALEX agrees that it will communicate to Protalex any facts known to it respecting said Invention, will testify in any legal proceedings, will sign all lawful papers, will execute all divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions, and improvement made by ALEX, will execute all necessary assignment documents, will cause any and all of said patents to be issued to Protalex, and generally will do everything necessary or desirable to aid Protalex, its officers, agents, employees, directors, attorneys, successors, assigns, and those in active concert and/or participating with them to obtain and enforce property protection in regard to the above-described Invention, patents, patent applications, divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions and all improvements owned by ALEX thereof in the United States and in all foreign countries.
ALEX hereby authorizes and requests the Patent and Trademark Office officials to issue any of the aforesaid patent or patents, when granted, to Protalex for the use and enjoyment of Protalex, its officers, agents, employees, directors, attorneys, successors, assigns and those in active concert and/or participating with them.
ALEX represents and agrees that no assignment, sale agreement or encumbrance has been or will be made or entered into by him which would conflict with this Assignment.
ALEX hereby acknowledges by its signature hereto that it has read the foregoing and understands it content and has had the opportunity to consult legal counsel of its choosing concerning its rights and obligations hereunder prior to its signature hereto.
Effective July 5th, 2001.
Assignor, ALEX, LLC
Assignee: Protalex, Inc., a New Mexico Corporation
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
|
The foregoing instrument was subscribed and acknowledged before me, this 5th day of July, 2001, by Paul L. Mann, Ph.D and John E. Doherty, Managing Members of ALEX, LLC, a New Mexico LLC on behalf of said LLC.
My Commission Expires:
February 24, 2004
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
|
The foregoing instrument was subscribed and acknowledged before me, this 5th day of July, 2001 by John E. Doherty, President of Protalex, Inc., a New Mexico Corporation on behalf of said Corporation.
My Commission Expires:
February 24, 2004
Exhibit 10-8
ProtalexMANN\InventorassignPL
ASSIGNMENT
ASSIGNMENT from Paul L. Mann, Ph.D, whose address is set forth on the signature page hereof (hereinafter sometimes referred to as "Mann"), to Protalex, Inc., a New Mexico Public Corporation, whose address is c/o John E. Doherty, President, P. O. Box 30952, Albuquerque, New Mexico, 87190 (hereinafter sometimes referred to as "Protalex").
WHEREAS, Mann, who was at all pertinent times operating under a signed Agreement with ALEX, LLC a New Mexico Limited Liability Company (ALEX), has developed a technology application that applies to any application of bioregulation to any human disease process and/or treatment (hereinafter more specifically defined as "Invention") which ALEX has assigned to Protalex, and which Protalex may at its discretion in the future file a patent application in the United States Patent and Trademark Office and in any other foreign patent office as Protalex, its assignees, successors and/or designees may choose in which to seek protection for the invention. Such filings shall be made at the expense of Protalex, or its assignees, successors and/or designees.
WHEREAS, Protalex and ALEX, the entities under which the Invention was funded and created, desire to obtain a formal assignment from Mann to Protalex of his entire right, title, and interest in and to the above technology and Invention, as well as to all patents, patent application, division, reissues, continuations, continuations-in-part, substitutions, renewals, extensions thereof, and all improvements hereafter made or invented by Mann at any time during his association with Protalex and ALEX, including the right to bring lawsuits for past infringement of any patents that may be issued thereon, in the United States and all foreign countries.
NOW, THEREFORE, Mann does hereby sell, assign, and transfer unto Protalex an exclusive right to all his right, title, and interest in and to: (a) the above technology, (b) any technical information, know-how, trade secret, process, procedure, composition, device, method, formula, protocol, technique, software, design, drawing or data related to the above technology which is not covered by any subsequently filed patent application but which is necessary at any time for practicing the above invention (all of the foregoing, (a) and (b), being collectively referred to hereafter as "Invention"), (c) any and all patents, patent applications, divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions resulting from Invention, (d) all improvements hereafter made or invented by Inventor at any time during his contract with ALEX with respect to Invention, and (e) the right to bring lawsuits for past infringement of any patents, that may be issued on the Invention, in the United States and in any and all foreign countries.
FURTHER, Mann agrees that he will communicate to Protalex any facts known to him respecting said Invention, will testify in any legal proceedings, will sign all lawful papers, will execute all divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions, and improvement made during Mann's employment by ALEX, will execute all necessary assignment documents, will cause any and all of said patents to be issued to Protalex, and generally will do everything necessary or desirable to aid Protalex, its officers, agents, employees, directors, attorneys, successors, assigns, and those in active concert and/or participating with them to obtain and enforce property protection in regard to the above-described Invention, patents, patent applications, divisions, reissues, continuations, continuations-in-part, substitutions, renewals, extensions and all improvements hereafter made or invented by Mann at any time during his employment by ALEX thereof in the United States and in all foreign countries.
Mann hereby authorizes and requests the Patent and Trademark Office officials to issue any of the aforesaid patent or patents, when granted, to Protalex for the use and enjoyment of Protalex, its officers, agents, employees, directors, attorneys, successors, assigns and those in active concert and/or participating with them.
Mann represents and agrees that no assignment, sale agreement or encumbrance has been or will be made or entered into by him which would conflict with this Assignment.
Mann hereby acknowledges by his signature hereto that he has read the foregoing and understands it content and has had the opportunity to consult legal counsel of his choosing concerning his rights and obligations hereunder prior to his signature hereto.
Effective July 6, 2001 Assignor, Paul L. Mann, Ph.D
Paul L. Mann
------------
Paul L. Mann, Ph.D
Address: 3308 Loma Vista Pl. N.E.
Albuquerque, NM 87106
Assignee: Protalex, Inc., a New Mexico
Corporation
By: John E. Doherty
---------------
John E. Doherty, President
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
|
The foregoing instrument was subscribed and acknowledged before me, this 6th day of July, 2001, by Paul L. Mann, Ph.D.
February 24, 2004
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
|
The foregoing instrument was subscribed and acknowledged before me, this 6th day of July, 2001 by John E. Doherty, President of Protalex, Inc., a New Mexico Corporation on behalf of said Corporation.
My Commission Expires:
February 24, 2004
Exhibit 10.9
Pembroke Financial Partners, LLC 4550 Post Oak Place, Suite 119 Houston, TX 77027 Tel: 713/961-0534; Fax: 713/961-0574 Member NASD
July 9, 2001
Mr. John Doherty
President
Protalex, Inc.
P.O. Box 30952
Albuquerque, NM 87190
PERSONAL AND CONFIDENTIAL
RE: Letter Agreement
Dear John,
We are pleased to submit this Letter Agreement, which is based upon current market conditions, information provided about Protalex, Inc. (the Company) and other considerations, pursuant to which Pembroke Financial Partners, LLC (the "Placement Agent" or "Pembroke"), proposes to effect a "best efforts" private distribution of Common Stock of the Company ("the Offering") for a minimum of $675,000 to a maximum of $1,125,000. The Offering shall be made only to "Accredited Investors" as same is defined pursuant to Rule 501 of Regulation D of the SEC Act of 1933.
This letter is to set forth mutual understandings of the Placement Agent and the Company (the "parties") with regard to the proposed offering so that the parties may proceed in good faith with the completion of the necessary disclosure materials, such as private placement offering, business and financial plan and related documents.
1. Amount of Private Offering: Approximately $675,000 to $1,125,000.
2. Term of the Offering: Unless the Offering is extended pursuant to SEC Rule 10b-9 and the offering documents are stickered accordingly to reflect the new termination date of the Offering, the Offering shall terminate 90 days from the date it initially becomes effective. The Company further agrees to be in compliance with SEC Rule 10b-9 in the event the terms of the offering are changed or otherwise amended; further, the Company shall take all reasonable steps appropriate in order for the Placement Agent to reasonably insure the Company's compliance with SEC Rule 10b-9.
3. Pre-Offering Capitalization: The Offering is a "best efforts" private placement and is based on the understanding that no more than 10,846,935 shares of Common Stock of the Company are issued with 10,608,435 outstanding (calculated on a fully diluted basis) along with an additional 238,500 shares of Common Stock of the Company held in the treasury as of the effective date of this proposed Offering; subject to the changes that are approved in advance by the Placement Agent.
4. The Offering Price: Subject to market and other conditions at the time of the private offering, we estimate that the shares will be offered at a price per share of $1.15 to $1.50, or such other price as is agreed to by the parties.
5. Registration Rights: The Company agrees to file with the SEC and use reasonable best efforts to cause to become effective a registration statement registering for resale the shares included in this Offering within 90 days of the closing of this Offering.
6. Escrow Account: All investor funds received pursuant to the proposed Offering shall be made payable to the Escrow Account. All investor funds (checks or bank wire) received by the Company or Placement Agent pursuant to the proposed Offering shall immediately be delivered to an Escrow Account at Wells Fargo Bank New Mexico in Albuquerque, New Mexico established exclusively for this Offering. Any checks made payable to the Company shall be immediately endorsed by the Company direct to the appropriate Escrow Account and forward same to the appropriate Escrow Account for Deposit. In the case of a bank wire made payable to the company instead of to the appropriate Escrow Account, such transaction shall be returned to sender with correct wire transfer instructions. The Placement Agent on behalf of the Company shall notice any prospective investor, or customer of the error in payment on the check and direct the investor/customer to make all payments to the appropriate Escrow Account.
Pursuant to SEC Rule 15c2-4, all investor funds held in the Escrow Account received in accordance with the proposed Offering shall be released to the Company only after all contingencies specified in the proposed Offering have been met. Further, all investor funds will be promptly returned to the purchasers in the event the minimum offering is not reached by the termination date of the Offering. The Offering shall be terminated in accordance with the provisions of SEC Rule 10b-9, unless the Offering is otherwise extended, prior to the termination date, by express written consent of all purchasers as of the date of termination. Further, any requests for permission to extend which shall be given to purchasers, shall also include the ability for the investor to terminate his/her purchase of the Offering and to receive a refund of his/her investment.
7. Placement Agent's Compensation: Placement Agent discounts and commissions (the "spread") shall be zero percent (0%) of the aggregate Offering Price. Thus none of the proceeds of the Offering shall be payable to Placement Agent as a commission or fee. However, the Company shall pay the Placement Agent for all out of pocket expenses incurred in connect with this Offering. The Company's obligation to reimburse all reasonable out of pocket expenses is due on demand by the Placement Agent without regard to the success or failure of the closing of the Offering. In no case shall these expenses exceed $15,000 without prior approval of the Company; such approval will not be unreasonably withheld.
8. Placement Agent's Warrants: The Company shall deliver to the Placement Agent at both the initial and final closing of the Offering (the "Closings"), warrants ("Placement Agent Warrants") to purchase Common Stock of the Company in an amount equal to ten percent (10%) of the Shares in the Offering. The Placement Agent's Warrants shall be exercisable for a period of ten years commencing on the date of the final closing of the Offering (the "Effective Date") and shall be exercisable at a price equal to the offering price of the Shares. Such Placement Agent's Warrants shall contain customary anti-dilution provisions satisfactory to the Placement Agent, including capital structure and price protection anti-dilution for issuance of Common Stock or Common Stock equivalents at a price per share less than the offering price (excluding common stock and stock options currently outstanding or issued, and an agreed upon number of Employee Stock Option Plans shares). The Placement Agent's Warrants shall be transferable to the extent permitted by the NASD (National Association of Securities Dealers) and applicable State Law. Subject to SEC (Securities and Exchange Commission) and NASD approval, if required, the Placement Agent's Warrants shall include a net exercise provision (the "Net Exercise Provision") permitting the holder(s) to pay the exercise price by cancellation of a number of shares with a fair market value equal to the exercise price. At such time the Company shall file a new Registration Statement, it shall afford the holders of the Placement Agent's Warrants and the underlying Common Stock an opportunity to include the underlying Common Stock in any such registration statement or amendments, unless all of such underlying Common Stock held by the holder(s) can be sold under Rule 144 during a three-month period without registration through the use of the Net Exercise Provision. In addition, at any time after the Effective Date and within the following ten year period, the holders of a majority of the Placement Agent's Warrants shall have the right to require the Company at the Company's expense, including expenses in connection with blue sky qualifications, to prepare and file one registration statement so as to permit the public offering of the Common Stock underlying the Placement Agent's Warrants, unless all of such underlying Common Stock can be sold under Rule 144 during a three month period without Registration through the use of the Net Exercise Provision. The Company shall keep such registration statement current until at least the earlier of (a) the date that all Common stock underlying the Placement Agent's Warrants and included in the registration statement has been sold, or (b) expiration of one hundred and twenty (120) days from the effective date of the registration statement.
9. Expenses: The Company shall pay directly: (i) all expenses (including listing fees, if necessary, filing fees to the National Association of Securities Dealers, transfer taxes, if any, and fees of its counsel) in connection with the delivery to the Placement Agent of the offering documents in connection with the Offering; (ii) all expenses in connection with the preparation, printing, filing, delivering and shipping of the Offering and Disclosure Statement and any amendments or supplements thereto, (including all exhibits thereto), each preliminary and the final Offering and Disclosure Statement and any amendments or supplements thereto, and any Placement Agent related documents, if any; and (iii) filing fees and expenses including counsel fees, incurred by the Placement Agent in connection with the qualification of the Common Stock for offering and sale by the Placement Agent or by dealers under the securities of Blue Sky Laws of the states which the Placement Agent shall designate. Such expenses as incurred and set forth above shall be paid by the Company irrespective of the closing of the Offering.
10. Conditions Representations and Covenants: The Company represents, warrants and further covenants that:
a) The Company represents that it has filed an audited 10-KSB for the fiscal
year ended May 31, 2000 and the latest quarterly or other interim financial
statements as may be required pursuant to SEC rules. The Financial
statements fairly reflect the financial condition of the Company and the
results of its operations at a time and for the periods covered by such
financial statements in accordance with GAAP and SEC rules, and such
statements will be substantially as heretofore represented to the Placement
Agent.
b) The Company does not know of any facts adversely affecting its earnings or
prospects, which have not been fully disclosed to the Placement Agent as of
initial filing or delivery and up to the effective date of the Offering and
Disclosure Statement.
c) The Company shall prepare, execute and file where required a mutually
agreed upon Offering and Disclosure Statement for the private placement of
shares to accredited investors only.
d) The Company has prepared and delivered to the Placement Agent its most
recent financial statements and projections constituting its best estimate
of revenues, loss and cash flow and agrees to update those estimates on a
monthly basis to the date of the Offering and Disclosure Statement,
identifying uses of the proceeds to be received in the Offering reasonably
acceptable to the Placement Agent.
e) Prior to the effective date of the Offering and Disclosure Statement,
except as approved by the Placement Agent, the Company will not incur any
material obligations or transactions other than in the ordinary course of
business and that shall not be any material adverse changes in condition,
business, prospects or management of the Company.
f) The Company agrees to provide Pembroke with the right of first refusal on
any subsequent private and or public offering of securities for a period of
5 years subsequent to the Effective Date of the Offering. Any such Private
or Public Secondary Offerings will be pursuant to an underwriting agreement
consistent with those typically employed by major bracket underwriters, and
the transaction fee will, be consistent with the gross spreads charged by
major bracket underwriters for recent similar Public and Private Offerings.
g) The Company at the recommendation of the Placement Agent will hire the
appropriate legal and financial counsel that will assist the Company in the
normal preparation of the required documents for the underwriting, as
deemed necessary. Said counsel must have a track record of having done
numerous underwritings and have sufficient support staff to support the
underwriting.
h) In the event that the Company becomes party to another transaction arising
out of or in connection with the Placement Agent as financial advisor, the
Company agrees to pay the Placement Agent a fee consistent with the market
for such services as provided by nationally recognized investment banking
firms.
i) The Company will make best efforts to meet the agreed upon operational
goals as outlined in the Offering and Disclosure Statement.
11. Legally Binding: In addition to the provision of Paragraphs 4 and 6, the Company and the Placement Agent agree that the following provisions shall be legally binding on the Company.
a) The Company acknowledges its responsibility for the specified expense items
set for the in the enumerated paragraphs 7 and 9 above without regards to
the closing of the Offering.
b) In the event that the contemplated Offering is abandoned by the Company, or
if there is a material adverse change in the Company's business, financial
condition, results of operations or prospects, or if the Placement Agent
discovers, in the course of its due diligence, material facts or
circumstances which render the contemplated Offering impracticable, then in
any of such events, the Company shall reimburse the Placement Agent for all
its out-of-pocket expenses incurred in connection with this Offering,
including but not limited to, the fees of Placement Agent's Counsel.
c) In addition, if prior to the Effective Date of the Offering, the Company is
acquired, merges, sells all or substantially all of its assets or otherwise
effects a corporate reorganization with any other entity that as a result,
the Offering contemplated hereby is abandoned by the Company, the Placement
Agent shall be entitled to receive from the Company a cash fee upon
completion of such transaction of $50,000; such cash fee shall be in
addition to payment for expenses and fees as discussed in paragraphs 7 and
9 above. In addition, the Placement Agent shall also be entitled to all
Placement Agent Warrants that would have been delivered as discussed in
paragraph 8 above.
d) Following execution of this letter, the parties will cause their officers,
employees, counsel, agents, accounts, and other representatives working on
the Offering to cooperate with each other with respect to the Offering
until the Offering is consummated or negotiations with respect thereto are
terminated.
e) Following execution of this document, until the Offering is consummated or
negotiations with respect thereto are terminated, the Company will afford
to the offerees, employees, counsel, agents, and accounts of the Placement
Agent working on the Offering free and full access to its plants,
properties, books and records, will permit them to make extracts from and
make copies of such books and records, and will from time to time furnish
that with such additional financial operating data and other information as
to its financial condition, results of operations, business, properties,
assets, liabilities or future prospects as they from time to time may
request. The Company will cause its independent certified public accounts
to make available to the Placement Agent the work papers relating to any
audit of its financial statements in the last two years.
If the foregoing correctly sets forth our understanding, kindly sign at the place indicated below and return an executed copy of this Letter Agreement.
Sincerely,
BY: PEMBROKE FINANCIAL PARTNERS, LTD
William M. Hitchcock James Alan Townsend -------------------- ------------------- William M. Hitchcock James Alan Townsend Managing Partner Managing Partner |
ACCEPTED AND AGREED TO:
By: Protalex, Inc.
Exhibit 10.5
PROJECT ASSIGNMENT 1
PROTALEX, Inc.
717 Encino Pl. NE, Suite 17
Albuquerque NM 87102
USA
Date: April 24, 2003
Dear Sirs,
Agreement between PROTALEX Inc. ("PROTALEX") and EUROGENTEC S.A
("EUROGENTEC") dated April 24, 2003
This letter shall constitute a Project Assignment for the purposes of the above
Agreement ("the Agreement"). We agree that EUROGENTEC will perform a Project
under the Agreement on the following terms:
1. Description of the Project
PROTALEX requests EUROGENTEC to perform a Feasibility Study to produce and
purify natural extracellular Protein A from Staphylococcus aureus A-676. The
Feasibility Study will encompass the following steps:
o Staphylococcus aureus A-676 strain to be ordered from Goteborg University,
Sweden
o Pre-Master Seed Bank (50 vials) with Batch Record
o Staphylococcus aureus culture conditions analysis ( minimum3 fermentors 50 L
scale)
o Down Stream Process (DSP) first developments (minimum 3 DSP)
o QC and IPC tests first developments
2. Time-Lines and Completion date of work Starting date has to be considered 2
weeks after reception of (i) signed Frame Contract , (ii) signed hereunder
Project Assignment and/or (iii) the first PROTALEX payment as defined in the
paragraph 6.
Feasibility Study should be completed 8 weeks after the staring date. Weeks 31
to 33 are part of the summer holiday period and therefore some works could be
deferred. Based on a starting date Week 21, the final report for the Feasibility
Study could be issued Week 30.
The tentative Calendar (page 4) may not be considered as a firm commitment from
EUROGENTEC.
3. Quantities and specifications of product to be supplied to PROTALEX The
material produced and purified during this study will be delivered to PROTALEX.
Quantity and Purity of Protein A will be related to the production of the
protein during the Fermentation process and to the performances obtained during
the DSP steps.
4. Eurogentec Staff The R&D Fermentation will be performed under the
responsibility of Ir. Doriano Cingolani,. Head of R&D Fermentation. Alain Poncin
M.Sc. DSP Team Leader, will be in charge of the Down Stream Process for the
Feasibility Phase of the Purification Process. Ingrid Dheur M.Sc. QC Manager,
will supervise the QC first developments.
5. Project Management]
Charles Schaus will make the overall project management.
6. Fees and Terms of payment Expected duration Cost in euro Feasibility Study 2
months Euro 39,375/month The overall Project management is charged Euro 2.000
/month from the start of the Project until the completion of the Project. Normal
laboratory reagent costs are included in the cost of the Feasibility Study.
However specific costs, such as chromatographic media, ultrafiltration
membranes, will be charged separately with 5% overhead. Costs will need to be
approved by PROTALEX prior to commitment or purchase.
The total cost of the Feasibility Study is evaluated at Euro 82,750: Euro 78,750
for the study and Euro 4,000 for the project management.
o 50 % (Euro 41,375) of the total cost will be invoiced at the signature of the
Frame Contract/Project Assignment 1. PROTALEX shall pay EUROGENTEC at the
receipt of the invoice.
o 25 % (Euro 20,687.5) of the total cost will be invoiced after one month.
Invoice shall be paid within thirty days of receipt.
o The last invoice representing the remaining 25% ( Euro 20,687 .5) of the total
price will then be issued at the completion of the project ( after 2 months).
Invoice shall be paid within thirty days of receipt.
7. Documentation and Reports
The Feasibility Study will be recorded in specific laboratory notebooks with
double signature. They will be kept at EUROGENTEC for 10 years. Copies can be
made available to PROTALEX. Intermediary reports will be issued after main step
completion. Laboratory books will be in French, reports in English. The final
report will give full description of the process and the yields of product
obtained. Details of any analytical methods used will also be included.
8 PROTALEX Deliverables
No PROTALEX deliverables is expected to be provided to EUROGENTEC.
EUROGENTEC S.A.
____________________ ______________________ Name: Charles Schaus Name: Michel Thiry Title: Project Manager Title: Biologic Business Unit Manager Date: April 28, 2003 Date: April 28, 2003 |
EUROGENTEC S.A. o Parc scientifique du Sart Tilman o 4102 SERAING o BELGIUM o Tel.: +32 4 366 61 00 Fax: +32 4 365 16 04 o e-mail: info@eurogentec.com o R.C. Liege 152 016 o T.V.A. BE 427 348 346
PROTALEX Inc. ____________________ ______________________ Name: Dennis Vik, Ph.D. Name: Steven Kane Titlle: Chief Scientific Officer Title: CEO |
Date: April 24, 2003 Date: April 24, 2003 Frame contract - Eurogentec-Protalex - 24/04/03 10/10
Offer of Employment
Protalex, Inc., a Public Corporation ("Protalex" or "Company"), is please do offer you a position as a protein chemist to assist in the analysis and formulation of the Company's current drug and successor drug candidates.
You shall be paid a monthly salary of five thousand dollars ($5,000.00) which equates to an annual salary of sixty thousand dollars ($60,000.00). Your start date will be approximately one month from acceptance of this offer (sooner if possible).
Protalex also agrees to pay moving expenses of Dervan not to exceed five thousand dollars ($5,000.00) for relocation to Albuquerque, New Mexico.
You will be granted 40,000 options to purchase Protalex stock at a price of $1.50 per share. These options will vest over a four-year period at the rate of 1/48 monthly. Vesting will begin immediately, but you must be employed for a period of one year to become eligible.
Protalex agrees to pay for your moving expenses of up to five thousand dollars ($5,000) for relocation to Albuquerque, New Mexico. Additionally, Protalex will pay for all visa related expenses.
Joe, we are excited with the prospect of your joining the Protalex team, and feel that you can make a significant contribution to our future success. We look forward to your arrival in New Mexico.
This offer shall remain open until midnight, February 15th, 2003 and shall be accepted by your signature and return to Protalex at P. O. Box 30952, Albuquerque, New Mexico 87190 having been postmarked by that date.
Dated this 20th day of January, 2003.
Protalex, Inc.
Accepted this 4th day of February, 2003 by
Mr. Steven Kane
206 Lurgan Rd.
New Hope, PA 18938
RE: Offer Letter
Dear Steven,
I am pleased to make the following offer to you. I look forward to discussing this offer and having you join Protalex at the earliest opportunity.
Position: President and Chief Executive officer. You will also have a seat as a member of the board of directors.
Starting Date: The board would like you to begin no later than January 1, 2003.
If you can begin sooner, that would be excellent
Reporting: You will report to the Chairman of the board of Directors, William M.
Hitchcock.
Salary: A base salary will be $150,000 per year. You will be paid in stock at the rate of 8,334 shares per month, ([150,000 + 1.50] + 12 months). At the end of six months, the board will review your activities and determine whether you should become a permanent employee. After you have been made a permanent employee you will be paid in cash from that date forward.
Bonus: There will be two bonuses available to you in 2003. The first is a one-time payout of 1% of any dollars raised during 2003. This bonus will be paid upon closing of the financing round. The second bonus will consist of cash and additional options. This bonus will be paid to you in January of 2004, and be based upon the achievements of your corporate objectives to be determined by you and the Board of Directors. The intention of the compensation committee is to allow you to earn an additional $50,000 in cash and 25,000 in options that immediately vest.
Options: Protalex will provide you 863,242 options at a strike price of $1.50 per share. This represents 7% of the outstanding shares as of the date of this letter. Vesting will start on the first day of your employment. You must be an employee for 12 months in order to earn the first third of these options. The remaining options will vest monthly over three years starting December 16, 2003.
Relocation: At least initially, Protalex does not believe that it necessary for you to relocate to Albuquerque.
Expenses: Protalex will pay all expenses relating to the execution of your CEO Activities, plus an allowance for health care benefits.
Goals: Within six months of starting but no later than June, 2003, it is essential that you raise sufficient funds to allow Protalex to advance its development activities.
1. The board of directors would like you to complete the raising of $3 to $8
million dollars, in at least 2 placements. The actual amount will depend
upon the current stock price and other factors.
2. The Company would also like you to identify a corporate partner interested
in supporting the development activities of Protalex. Any funds associated
with this corporate collaboration will be counted as part of the fund
raising goal.
3. Initiate the phase 1/2 safety and dose ranging study by Q1 2003.
4. Initiate the phase 2/3 trial in RA by Q2 2004.
Issues: The board of directors recognizes that both you and Protalex are taking a chance with this offer. Although have been successful in your professional career, this will be the first time you will hold the position of CEO and all the responsibilities that the position entails, including the raising of substantial equity dollars. You are joining a public company that is underfunded. There are numerous funding vehicles open to a public company that are not available to a private biotech company. Most importantly both parties believe that the Protalex technology and products have tremendous potential.
Timing: This offer will remain open for two weeks.
Sincerely,
Thomas Stagnaro
Chairman, Protalex Compensation Committee
AGREED and ACCEPTED this ____ day of ___________ 2003
By:__________________________________
Steven H. Kane
CONSENT ACTION BY WRITING
OF THE DIRECTORS OF
PROTALEX, INC.
WHEREAS the Bylaws of Protalex, Inc. a New Mexico corporation (the "Corporation") provide for a maximum of seven Directors and currently the Board consists of six Directors, and
WHEREAS the Board has decided to fill the vacancy with G. Kirk Raab ("Raab") and Raab has agreed to serve on the Board under the terms and conditions set forth below,
THEREFORE, the undersigned, constituting the Directors of Protalex, Inc., being the current directors hereby consent in writing and elect and appoint G. Kirk Raab as director without a meeting, pursuant to N.M.S.A. 1978, Section 53-11-43 (1967) and pursuant to Article III of the Corporate Bylaws, without a meeting,
FURTHER, the undersigned, constituting the Directors of Protalex, Inc. elect and appoint G. Kirk Raab as Chairman of the Board of Directors,
FURTHER, Raab shall be compensated at a rate of one hundred fifty thousand dollars ($150,000) a year which compensation may be deferred by the Board until appropriate funds are available or Raab may elect to take some or all of his compensation in stock options which will vest immediately. The first year strike price shall be one dollar and 50/100 ($1.50). The strike price for subsequent years shall be the closing price of the previous trading day just prior to the grant. The options shall have a term of ten (10) years from the date of grant,
FURTHER, as a one time inducement for accepting the position as a director and chairman of the Board, Raab shall be issued a stock option granting him the right to purchase three and one-half percent (3.5%) of the issued and outstanding shares of Protalex, Inc. common stock existing upon completion of the current financing round expected to close in July or August, 2003 which option shall immediately vest one hundred thousand (100,000) options and the remaining options shall vest proportionately over forty eight (48) months from the date of the issue of the option. The option shall provide a strike price of one and 50/100 dollars ($1.50) per share and shall be exercisable for a period of ten (10) years from the date of grant.
This Consent may be executed in counterparts and shall be effective for all purposes as of the 8th day of July, 2003.
William M. Hitchcock John E. Doherty -------------------- --------------- William M. Hitchcock John E. Doherty Thomas P. Stagnaro Steven H. Kane ------------------ -------------- Thomas P. Stagnaro Steven H. Kane Arthur D. Bankhurst Frank M. Daugherty ------------------- ------------------ Arthur D. Bankhurst Frank M. Dougherty |
I accept the appointment of Director and Chairman of the Board:
Exhibit 10.10
STOCK REDEMPTION AGREEMENT
This agreement (hereinafter the "Agreement") is entered into by and between Protalex, Inc. (a New Mexico corporation, hereinafter referred to as "Protalex"), Paul L. Mann, Leslie A. McCament-Mann, Gail Skene and Elizabeth Sarah Anne Wiley (Mann, McCament-Mann, Skene, and Wiley are hereinafter collective referred to as "Sellers"). Protalex and Sellers agree as follows:
1. Sale and Redemption of Stock: If Protalex raises at least $1,000,000 by September 30, 2003, then Protalex shall purchase from Sellers, and Sellers shall convey to Protalex, all of the shares of common stock in Protalex owned by Sellers as of August 1, 2003. Sellers represent they own the following number of shares: Mann: 1,325,973; McCament-Mann: 1,468,830; Skene: 100,000; Wiley: 100,000. If Protalex has not raised $1,000,000 by September 30, then this Agreement will be null and void.
2. Purchase Price: The total purchase price to be paid by Protalex to Sellers for Seller's shares of stock in Protalex is $300,000.
3. Payment and Reconveyance of Stock: If Protalex has raised $1,000,000 by September 30, 2003, Protalex shall notify Sellers' attorney, George F. Koinis on or before October 5, 2003, and shall deliver to Mr. Koinis separate checks for each Seller in amounts to be specified in writing by all Sellers on or before August 15, 2003, at his office, or at any other location or date mutually agreed upon by the parties to this Agreement. At the time the checks are delivered, Sellers shall convey to Protalex, Inc., at the same location, all documents necessary to convey title and possession of the stock to Protalex. Delivery of the checks is contingent upon Protalex's receipt of all such documents. This Agreement shall terminate and be of no effect if not fully executed by all parties on or before August 15, 2003, or if Sellers have not specified disbursement amounts in accordance with this Agreement on or before August 15, 2003.
4. Release of Claims: Upon the exchange of the aforementioned checks and documents needed to convey the shares of stock, all claims and/or causes of action Protalex has against Sellers (including without limitation based on breach of fiduciary duty, fraud and misrepresentation, securities fraud, conversion, and misappropriation), and all claims and/or causes of action Sellers have against Protalex and/or its employees, agents, officers and or directors shall be deemed released and discharged, with the exception that none of the parties to this Agreement is releasing any claims or causes of action that are based primarily on facts unknown to the releasing party at the time this Agreement is signed.
5. Entire Agreement: This Agreement constitutes the entire agreement between the parties, and there are no agreements, understandings, warranties or representations between the parties except as set forth herein. This agreement cannot be amended except in writing executed by the parties.
6. Binding Effect: This Agreement will inure to the benefit of, and bind, the heirs, personal representatives, successors, and assigns of the parties hereto.
7. Warranty of Stock Ownership: Each Seller represents and warrants that the number of shares of stock indicated next to each Seller's name in Paragraph 1 of this agreement accurately represents the total shares owned by each Seller in Paragraph 1 of this Agreement accurately represents the total shares owned by each Seller as of the date this Agreement is signed.
8. Execution: This Agreement may be executed in counterparts, and all counterparts so executed shall constitute on Agreement binding on all parties.
IN WITNESS THEREOF, each of the undersigned has executed this Agreement,
PROTALEX, INC.
August 15, 2003 By: Steven H. Kane
Steven H. Kane
August 15, 2003 By: Paul L. Mann
Paul L. Mann
August 15, 2003 By: Leslie A. McCament-Mann
Leslie A. McCament-Mann
August 15, 2003 By: Elizabeth Sarah Anne Wiley
Elizabeth Sarah Anne Wiley
August 15, 2003 By: Gail Skene
Gail Skene
|
Exhibit 10.11
Protalex, Inc.
c/o Frank M. Dougherty, Esq. 2632 Mesilla NE
Albuquerque NM 87110-3660
August 21, 2003
I, Dr. Paul L. Mann, hereby reiterate and affirm my existing obligation to cooperate with and assist Protalex, Inc. in connection with any international patent applications or other filings that Protalex, Inc. may initiate in respect of the patent I developed and filed with the U.S. Patent and Trademark Office in April, 2002 and which I subsequently assigned to Protalex, Inc. I agree to execute and acknowledge such applications, assignments and other documents as may be necessary or desirable to obtain patent rights for said patent in other countries and to transfer ownership of said patent to Protalex, Inc. in accordance with the laws of other countries. All costs and expenses associated with obtaining such patent protection and ownership of the patent in other countries shall be the responsibility of Protalex, Inc.
Paul L. Mann
Dr. Paul L. Mann
Exhibit 10.5
PROMISSORY NOTE
$ 50,000.00
Date: August 15, 2003
Albuquerque, New Mexico
Payable as noted below, waiving notice, protest and suit, the undersigned (hereinafter referred to collectively as "maker"), for value received, promises to pay to the order of John E. Doherty, plus simple interest upon the unpaid balance at the rate of five percent (5.0%) per annum from the date hereof until paid in full, and if the same is not paid when due, maker promises to pay all costs of collection, including reasonable attorneys' fees, if suit be brought on this note, or if attorneys are employed to collect the same.
This note is payable on written demand delivered to maker. The maker shall have the right to prepay all or any part of the unpaid principal balance at any time without penalty. All payments shall be first applied to interest and the balance to principal.
If maker is in default of a demand payment after 3 days of written demand, the holder of the note shall give the maker notice by certified mail, return receipt requested, of such default and if the same is not paid within ten (10) days of mailing of such notice, the holder may accelerate the maturity of the entire unpaid principal balance and accrued interest.
If a payment is not made on or before 13 days of written demand (i. e., and within the demand period and the grace period of ten (10) days thereafter), then a late charge of ten percent (10%) of the demand payment shall be added thereto and shall be payable to the holder of this note.
Protalex, Inc.
PROMISSORY NOTE
$ 50,000.00
Date: August 15, 2003
Albuquerque, New Mexico
Payable as noted below, waiving notice, protest and suit, the undersigned (hereinafter referred to collectively as "maker"), for value received, promises to pay to the order of Steven H. Kane, plus simple interest upon the unpaid balance at the rate of five percent (5.0%) per annum from the date hereof until paid in full, and if the same is not paid when due, maker promises to pay all costs of collection, including reasonable attorneys' fees, if suit be brought on this note, or if attorneys are employed to collect the same.
This note is payable on written demand delivered to maker. The maker shall have the right to prepay all or any part of the unpaid principal balance at any time without penalty. All payments shall be first applied to interest and the balance to principal.
If maker is in default of a demand payment after 3 days of written demand, the holder of the note shall give the maker notice by certified mail, return receipt requested, of such default and if the same is not paid within ten (10) days of mailing of such notice, the holder may accelerate the maturity of the entire unpaid principal balance and accrued interest.
If a payment is not made on or before 13 days of written demand (i. e., and within the demand period and the grace period of ten (10) days thereafter), then a late charge of ten percent (10%) of the demand payment shall be added thereto and shall be payable to the holder of this note.
Protalex, Inc.
CERTIFICATION
I, Steven Kane, certify that :
1. I have reviewed this annual report on Form 10-KSB/A of Protalex, Inc.;
2. Based on my knowledge, this annual report 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, 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 annual report;
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-14 and 15d-14) for the registrant and have:
(a) Designated such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date") and
(c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions);
(a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers an I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
CERTIFICATION
I, Donald Dean, certify that :
1. I have reviewed this annual report on Form 10-KSB/A of Protalex, Inc.;
2. Based on my knowledge, this annual report 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 annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, 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 annual report;
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-14 and 15d-14) for the registrant and have:
(a) Designated such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date") and
(c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions);
(a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers an I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement ("Agreement") is effective as of the _____________ day of _____________ ("Effective Date") between Protalex, Inc., a New Mexico corporation, with its principal place of business in Albuquerque, New Mexico ("Company"), and _____________ ("Optionee"), and is made with reference to the following facts:
A. The Company desires to provide an incentive to and to encourage stock ownership by Optionee, so that Optionee may acquire a proprietary interest in the success of the Company, and to encourage (a) Optionee to remain a member of the Board of Directors of the Company (the "Board")/ (b) (Employee) to expand and improve the profits and prosperity of the Company.
B. Optionee is a (a) member of the Board (b)employee.
C. This Agreement shall be administered by the Board.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises contained herein, the Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right, privilege and option ("Option") to purchase ____________(#)_shares of the Company's common stock ("Shares") at ___________($)__per Share ("Exercise Price"), in the manner and subject to the conditions provided in this Agreement.
2. Vesting and Time of Exercise of Option. Subject to the provisions of Section 6, the Option shall vest in Optionee, and may be exercised by Optionee as to any or all of the Shares, as follows: (%) of the Shares shall vest immediately on the date hereof.
3. Method of Exercise.
3.1. Exercise Notice. The Option shall be exercised, in whole or in part by
written notice to the Company (in the form attached hereto as Exhibit A, the
"Exercise Notice") by Optionee or successor (except in the event of death),
stating the number of Shares with respect to which the Option is being exercised
and designating a time for the delivery thereof ("Exercise Date"), which time
shall be at least thirty (30) days after the giving of such notice, unless an
earlier date shall have been mutually agreed upon. In the event the Option shall
be exercisable by any person other than Optionee, the required notice under this
Section 3.1 shall be accompanied by appropriate proof of the right of such
person to exercise the Option.
3.2. Delivery of Shares. Subject to the terms of this Agreement, on the Exercise
Date and against delivery to the Company of the Exercise Price as set forth in
Section 3.3, the Company shall deliver to Optionee at the principal office of
the Company, or such other appropriate place as may be mutually agreed upon, a
certificate or certificates for such Shares (out of previously authorized but
unissued Shares or acquired or reacquired Shares, as the Company may elect).
Notwithstanding the foregoing, the Company may postpone delivery of any
certificate or certificates after notice of exercise for such reasonable period
as may be required to comply with any applicable listing requirements of any
securities exchange. In no event, however, shall the Company be required to
issue fractional Shares.
3.3. Medium and Time of Payment. The Exercise Price shall be payable in full upon any exercise of the Option by certified or bank cashier's check, or such other form of payment the Company agrees to accept.
4. Relationship with the Company and Investment Intent. The Optionee hereby makes the following representations and warranties with the understanding that the Company will rely upon them in order to grant the Option pursuant to certain exemptions provided under the New Mexico Statutes and the Securities Act of 1933, as amended (the "Act"):
4.1. he Optionee either:
(a) has a preexisting personal or business relationship with the Company or any of its officers, directors or controlling persons of a nature and duration as would allow the Optionee to be aware of the character, business acumen, general business and financial circumstances of the Company or of the person with whom such relationship exists; or
(b) by reason of the Optionee's business or financial experience, or the business or financial experience of the Optionee's professional advisor(s) who is (are) unaffiliated with and is (are) not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, has the capacity to protect the Optionee's interests in connection with the purchase of the Options of the Company and Shares issuable upon the exercise thereof.
(c) Under either of the above two cases (either a (a) or (b)), the Optionee has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment.
4.2. The Optionee acknowledges that the Optionee has had the opportunity to obtain and review all information from the Company necessary to make a reasonably informed investment decision and that the Optionee has had all questions asked of the Company answered to the reasonable satisfaction of the Optionee.
4.3. The Optionee acknowledges that an investment in the Company represents a speculative investment and a high degree of risk. The Optionee is able to bear the economic risk of his or her investment in the Options and the Shares issuable upon exercise thereof.
4.4. The Option and the Shares issuable upon exercise thereof will be acquired by the Optionee for investment only, for the Optionee's own account, and not with a view to or for sale in connection with any distribution of the Option or Shares issuable upon exercise thereof.
4.5. The Optionee understands and acknowledges that the Shares have not been,
and will not be, registered under the Act, or qualified under the New Mexico
Securities Act of 1986. The Optionee understands and acknowledges that the
Shares may not be sold without compliance with the registration and
qualification requirements of federal and applicable state securities laws
unless exemptions from such laws are available. The Optionee understands that
the certificate representing the Shares shall bear the legends set forth in
Section 9 of this Agreement.
4.6. The grant of Options for Shares and the exercise of the Options have not been accompanied by the publication of any advertisement or general solicitation.
4.7. The Optionee will not take, or cause to be taken, any action that would cause the Optionee, or any entity or person affiliated with the Optionee, to be deemed an underwriter with respect to the Option or the Shares.
4.8. The Optionee is a resident of the State of ______________.
4.9. The Optionee understands and agrees that, at the time of exercise of any part of the Option for Shares, the Optionee may be required to provide the Company with additional representations, warranties and/or covenants similar to those contained in this Agreement. The Optionee will notify the Company immediately of any change in the representations made in this Section 4 that occurs before the Option is exercised in full by the Optionee.
4.10. No person will be entitled to commission or other remuneration for the solicitation or sale of the Options.
5. Restrictions on Exercise and Delivery. Any exercise of the Option shall be subject to the condition that, if at any time the Company shall determine, in its discretion,
5.1. the satisfaction of any withholding tax or other withholding liabilities is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of Shares pursuant thereto,
5.2. the listing, registration, or qualification of any Shares deliverable upon such exercise is desirable or necessary, under any state or federal law, as a condition of, or in connection with, such exercise or the delivery or purchase of Shares pursuant thereto, or
5.3. the consent or approval of any regulatory body is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of Shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. Optionee shall make arrangements satisfactory to the Company to enable the Company to effect or obtain such withholding, listing, registration, qualification, consent or approval. Neither the Company nor any officer or director, or member of the Board, shall have any liability with respect to the non-issuance or failure to sell Shares as the result of any suspensions of exercisability imposed pursuant to this Section.
6. Termination of Option. Except as otherwise provided in this Agreement, the Option granted under this Agreement, to the extent not previously exercised, shall terminate forthwith upon the first to occur of any of the following events:
6.1. the dissolution or liquidation of the Company;
6.2.______(#) years from the Effective Date;
6.3.the breach by Optionee of any provision of this Agreement;
6.4. immediately upon the occurrence of any event giving rise to Optionee's cessation of providing services to the Company for "cause" ("cause" shall mean Optionee's personal dishonesty, misconduct, breach of fiduciary duty, incompetence, intentional failure to perform stated obligations, willful violation of any law, rule, regulation or final cease and desist order, or any material breach of any provision of this Agreement or any other agreement between Optionee and the Company); or
6.5. six (6) months after Optionee's death, in which event the person or persons to whom the rights of Optionee hereunder shall pass may exercise such Option to the extent that Optionee, had Optionee lived, would have been entitled to exercise such Option on the date of Optionee's death.
7. Nontransferability of Option. The Option shall not be sold, pledged, assigned or transferred in any manner other than by will or by the laws of descent and distribution, and may be exercised during the lifetime of Optionee only by Optionee. Any transfer by Optionee of any Option granted under this Agreement shall void such Option, and the Company shall have no further obligation with respect to such Option. No Option shall be pledged or hypothecated in any way, nor shall any Option be subject to execution, attachment or similar process.
8. Restrictions on Transfer of Shares. Optionee represents and warrants to the
Company that Optionee understands that, as of the date of this Agreement, the
Shares have not been registered under the Act or qualified under any applicable
state securities or "blue sky" laws, and the Shares must be held indefinitely
unless subsequently registered and qualified thereunder or exemptions from such
registration and qualification are available. Optionee further represents and
warrants to the Company that Optionee will not transfer any of the Shares
acquired hereunder in violation of the provisions of any applicable securities
statute or regulation or the provisions of this Agreement. Optionee acknowledges
that the Company has made no agreements, covenants or undertakings whatsoever
(i) to register or qualify any of the Shares under the Act or any applicable
state securities laws or (ii) about the availability of any exemption under the
Act (including the availability of Rule 144 promulgated thereunder) or
applicable state securities laws. Optionee also acknowledges that currently
there is no public market for the Shares and that such a market may never
develop.
9. Restrictive Legends. Certificates representing Shares shall bear the following legends giving notice of restrictions on transfer as follows:
9.1. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED OR TRANSFERRED IN A TRANSACTION WHICH WAS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION AFFORDED BY SUCH ACT. NO SALE OR TRANSFER OF THESE SHARES SHALL BE MADE, NO ATTEMPTED SALE OR TRANSFER SHALL BE VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT OR (B) THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH REGISTRATION IS NOT REQUIRED.
9.2. THE SALE, TRANSFER, HYPOTHECATION, OR ENCUMBRANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE PROVISIONS OF A NON-QUALIFIED STOCK OPTION AGREEMENT DATED THE ______________, A COPY OF WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE.
9.3. Any other legends required by applicable state securities laws, as determined by the Company and its counsel.
10. Rights as Shareholder. Neither Optionee nor Optionee's executor, administrator, heirs or legatees shall be, or have any rights or privileges of, a shareholder of the Company in respect of the Shares, unless and until certificates representing such Shares shall have been issued pursuant to the terms of this Agreement.
11. Repurchase Option. The Company shall have the right to purchase all Shares held by Optionee or any unexercised Option held by Optionee, which have been obtained pursuant to this Agreement, together with any rights, securities or additional stock that has been received pursuant to a stock dividend, stock split, reorganization or other similar transaction that has been received as a result of Optionee's Option or Shares acquired pursuant thereto in the event (i) Optionee terminates his or her membership on the Board, or (ii) the Company so elects, in the event of a Capital Transaction (as defined in Section 13). The price paid for any unexercised option or Shares shall be the value of such Option or Shares as determined under this Section 11. The value assigned to any Option shall be the fair market value (as determined under this Section 11) of the Shares as to which it is exercisable reduced by the exercise price. The parties shall first negotiate in good faith to reach an agreement as to the value of the Option or Shares. Absent an agreement within thirty (30) days, the parties shall select one appraiser to determine the value of the Option or Shares. In the event the parties cannot agree as to an appraiser, then each party shall appoint one appraiser and the two appraisers shall jointly determine a third appraiser. In the event the two appraisers cannot determine a third appraiser, such third appraiser shall be appointed by a Judge of the District Court of the County of Bernalillo, New Mexico. Such appraisers shall make their determination of the Fair Market Value of the Shares, and the average of the two appraisers whose valuations are closest to each other shall control. Any appraiser selected by any party shall be an appraiser experienced in the area of valuing similar stock. The Company and Optionee, or successor, shall each pay for one-half of the cost of any such appraisal. If the Company desires to purchase the Shares or Options held by Optionee as set forth in this Section, then the Company shall provide written notice to Optionee at Optionee's last known address within one hundred twenty (120) days after the termination of such Optionee's membership on the Board, or at least thirty (30) days prior to a Capital Transaction. The Board may assign the Company's repurchase option under this Section to any person selected by the Board including one or more of the shareholders of the Company.
11.1. The repurchase option set forth in this Section shall terminate upon the consummation of an underwritten public offering of the Company's Shares registered under the Act.
12.Right of First Refusal.
12.1. Shares issued pursuant to this Agreement together with any rights, securities or additional stock that have been received pursuant to a stock dividend, stock split, reorganization or other transaction that has been received as a result of the Option or stock acquired pursuant thereto shall be subject to a right of first refusal by the Company in the event the holder of such Shares proposes to sell, pledge or otherwise transfer said shares or any interest in said shares to any person or entity. Any holder of Shares (or other securities) acquired under this Agreement desiring to transfer such Shares (or other securities) or any interest therein shall give written notice to the Company describing the proposed transfer, including the price of Shares proposed to be transferred, the proposed transfer price and terms, and the name and address of the proposed transferee. Unless otherwise agreed by the Company and the holder of such Shares, repurchases by the Company under this Section shall be at the proposed price and terms specified in the notice to the Company. The Company's rights under this Section shall be freely assignable.
12.2. If the Company fails to exercise its right of first refusal within thirty
(30) days from the date upon which the Company received the Optionee's written
notice, Optionee may, within the next ninety (90) days, conclude a transfer of
the exact number of Shares covered by said notice on terms not more favorable to
the transferee than those described in the notice. Any subsequent proposed
transfer by such transferee shall again be subject to the Company's right of
first refusal. If the Company exercises its right of first refusal, the holder
shall endorse and deliver to the Company the stock certificates representing the
Shares being repurchased, and the Company shall promptly pay the shareholder the
total repurchase price as set forth in the terms of this Agreement. The holders
of Shares being repurchased pursuant to this Section shall cease to have any
rights with respect to such Shares immediately upon repurchase.
12.3. No written notice of a proposed transfer shall be required under this
Section and no right of first refusal shall exist with respect to transfers by
will or the laws of descent and distribution.
12.4. The right of first refusal set forth in this Section shall terminate upon the consummation of an underwritten public offering of the Company's Shares registered under the Act.
12.5. Any attempted transfer of any Shares or securities subject to this right of first refusal which is not made in compliance with this Section shall be null and void.
12.6. The Board may assign the Company's repurchase option under this Section to any person selected by the Board including one or more or the shareholders of the Company.
13. Adjustments Upon Changes In Capitalization.
13.1. Subdivision or Consolidation. Subject to any required action by shareholders of the Company, the number of Shares covered by each outstanding Option, and the exercise price thereof, shall be proportionately adjusted for any increase or decrease in the number of issued Shares of the Company resulting from a subdivision or consolidation of Shares, including, but not limited to, a stock split, reverse stock split, recapitalization, continuation or reclassification, or the payment of a stock dividend (but only on all outstanding Shares) or any other increase or decrease in the number of such Shares effected without receipt of consideration by the Company. Any fraction of a Share subject to Option that would otherwise result from an adjustment pursuant to this Section shall be rounded downward to the next full number of Shares without other compensation or consideration to the holder of such option.
13.2. Capital Transactions. Upon a sale or exchange of all or substantially all of the assets of the Company, a merger or consolidation in which the Company is not the surviving corporation, a merger, reorganization or consolidation in which the Company is the surviving corporation and shareholders of the Company exchange their stock for securities or property, a liquidation of the Company or similar transaction ("Capital Transaction"), this Agreement and the Option issued under this Agreement, whether vested or unvested, shall terminate, unless such Option is assumed by a successor corporation in a merger or consolidation, immediately prior to such Capital Transaction; provided, however, that unless the outstanding Option is assumed by a successor corporation in a merger or consolidation, subject to terms approved by the Board, or the Options are repurchased pursuant to Section 12, the Optionee will have the right, during the thirty (30) days prior to such Capital Transaction, to exercise his vested Option.
13.3. Adjustments.To the extent that the foregoing adjustments relate to Shares or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.
13.4. Ability to Adjust. The grant of an Option pursuant to the Agreement shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.
13.5. Notice of Adjustment. Whenever the Company shall take any action resulting in any adjustment provided for in this Section, the Company shall forthwith deliver notice of such action to Optionee, which notice shall set forth the number of Shares subject to the Option and the exercise price thereof resulting from such adjustment.
14. No Right to Membership on the Board of Directors of the Company. Neither the grant nor exercise of any portion of the Option shall impose upon the Company or any other corporation any obligation to maintain Optionee's status as a member of the Board or to grant Optionee a position in the Company in any other capacity; the right of the Company and any other corporation to retain or continue to retain Optionee in any capacity shall not be diminished or affected as a result of the Option.
15. Dispute Resolution Procedure.
15.1. Sole and Exclusive Method. The provisions of this Section 15 contain the sole and exclusive method, means and procedure to resolve any controversy or claim arising out of or relating to this Agreement or its making, performance or interpretation ("Dispute"), and the parties hereby irrevocably waive any and all rights to the contrary and shall at all times conduct themselves in strict, full, complete and timely accordance with the provisions of this Section 15. Any and all attempts to circumvent the provisions of this Section 15 shall be absolutely null and void and of no force or effect whatsoever.
15.2. Negotiated Settlement and Arbitration. Any Dispute shall be settled within twenty (20) days of receipt by all parties of a notice of the Dispute by negotiations between representatives of the parties with authority to settle such Dispute. In the absence of such a negotiated settlement, then the Dispute shall be resolved by arbitration before a single arbitrator (except as provided below) in Albuquerque, New Mexico, in accordance with the Rules of the American Arbitration Association then existing, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of the controversy. The arbitrator shall be a person experienced in the subject matter of the circumstance or circumstances to be arbitrated and shall be selected by mutual agreement of the parties. If the parties are unable to agree on the arbitrator within a period of fifteen (15) days after arbitration is demanded by either party, then each party shall select an arbitrator and the two arbitrators so selected shall select a third and the three so chosen shall constitute the board of arbitrators. The arbitrator(s) shall render a decision as soon as possible, but in any event within thirty (30) days of selection. The parties agree to abide by and perform any directions and awards made by the arbitrator(s) whose decision shall be final and binding for all purposes.
15.3. Arbitration Costs. The costs, including reasonable attorneys' fees, of an arbitration or any litigation, whether the same shall arise either in connection with or apart from the arbitration, shall be borne by the party against which the award is granted unless the award otherwise directs. The foregoing entitlement also shall include attorneys' fees (including in-house or outside counsel fees) and costs of the prevailing party on any appeal of a judgment and for any action to enforce a judgment. The arbitrator(s) may direct either party to pay any sum of money, or to do or subject itself to any act or execute any instrument, for the purpose of carrying the award of the arbitrator(s) into effect.
15.4. Discovery. Each party shall be entitled to pre-hearing discovery as provided in New Mexico Statutes 44-7A-18. If any question is submitted to a court of law for resolution, then the District Court of the County of Bernalillo, New Mexico, or the United States District Court having jurisdiction in the County of Bernalillo, shall be the exclusive court of competent jurisdiction for the resolution of such question.
16. Fair Market Value. The fair market value of Shares on any relevant date for valuation purposes under this Agreement (except for Section 12) shall be determined in accordance with the following provisions:
16.1. Over-the-Counter Shares. If the Shares are not at the time listed or admitted to trading on any stock exchange, but are traded in the over-the-counter market, the fair market value shall be the mean between the highest bid and lowest asked prices (or, if such information is available, the closing selling price) of one Share on the date in question in the over-the-counter market, as such prices are reported by the National Association of Securities Dealers through its NASDAQ system, or any successor system. If there are no reported bid and asked prices (or closing selling price) for the Shares on the date in question, then the mean between the highest bid price and lowest asked price (or the closing selling price) on the last preceding date for which such quotations exist shall be determinative of fair market value.
16.2. Stock Exchange Traded Shares. If the Shares are at the time listed or admitted to trading on any stock exchange, then the fair market value shall be the closing selling price of one Share on the date in question on the stock exchange determined by the Board to be the primary market for the Shares, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Shares on such exchange on the date in question, then the fair market value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists.
16.3. Non-Traded Shares. If the Shares at the time are neither listed nor admitted to trading on any stock exchange nor traded in the over-the-counter market, then the fair market value shall be determined by the Board after taking into account such factors as the Board shall deem appropriate, including one or more independent professional appraisals.
17. Withholding Taxes. Notwithstanding anything else to the contrary in this Agreement, the exercise of the Option shall be conditioned upon payment by Optionee in cash, or other provisions satisfactory to the Board, of all local, state, federal or other withholding taxes applicable, in the Board's judgment, to the exercise or to later disposition of Shares acquired upon exercise of the Option (including any repurchase of the Option or the Stock).
18. No Right of Employment. Neither the grant nor exercise of any portion of the Option shall impose upon the Company or any other corporation any obligation to employ or continue to employ Optionee; the right of the Company and any other corporation to terminate Optionee shall not be diminished or affected as a result of the Option.
19. Notices. Any notice to be given under the terms of this Agreement shall be addressed to the Company in care of its Secretary at the principal office of the Company, and any notice to be given to Optionee shall be addressed to Optionee at the address given below; the parties may substitute for the foregoing such other address(es) as either party may hereafter designate in writing to the other.
20. Governing Law. This Agreement shall be governed by the laws of the State of New Mexico as applied to contracts entered into among residents of New Mexico and to be performed wholly within New Mexico.
21. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Optionee, his heirs and successors, and of Company, its successors and assigns.
22. Descriptive Headings. Titles to sections and subsections are solely for information purposes and shall not be construed in interpreting this Agreement.
IN WITNESS WHEREOF, this Agreement is entered into and effective as of the date first above written.
THE COMPANY:
PROTALEX, INC., a New Mexico corporation
By:
Steven H. Kane, its President
OPTIONEE:
name
Address:
EXHIBIT "A"
(Optionee name)
Address: ____________________________
Date: ____________________________
Ladies and Gentlemen:
I (the "Undersigned") hereby exercise my right to purchase _____________
shares ("Shares") of Common Shares of Protalex, Inc., a New Mexico corporation
("Company"), pursuant to, and in accordance with, that Non-Qualified Stock
Option Agreement ("Agreement") between the Undersigned and the Company dated
effective the ______________. As provided in the Agreement, I deliver herewith
the following amount as the purchase price for the Shares:
______________________________. Please deliver to me at my address as set forth
above stock certificates representing the Shares registered in the following
name(s): ______________________________. I further request that the certificates
be registered in the following form of ownership (for example, as individual
property, community property, separate property, etc.):
______________________________.
The representations made by the Undersigned in the Agreement remain accurate in all respects as of the date of this notice, and the Undersigned is not aware of any breach of such representations or any breach of the covenants or other provisions of the Agreement.
Very truly yours,
10 Riverview Drive
Danbufy, CT06810
888.889.8033 Fax., 800.327.9724
Equipment Lease Agreement
Lease Number:
4192260-001
LESSEE (Legal) NAME: Protalex, Inc SUPPLIER
NAME: Waters Technologies Corporation
TRADE/DBA NAME: ADDRESS: 34 Maple Street
ADDRESS: 717 Encino NE, Suite 17 CITY, STATE, ZIP:Milford,
Massachusetts 01757
CITY, STATE, ZIP: Albuquerque, New Mexico 87102
COUNTY: Bernalillo
CONTACT & PHONE: Donald Dean
Equipment Schedule (Use Separate Schedule If Needed)
Description of Equipment
Waters Preparative LC System
Waters Fraction Collector III
Kit, UV Fraction Manager
Start Up Kit, UV Directed Autopurification
Fractionlynx v4.0
Quanlynx v4.0
Waters Temperature Control System
QTY 1
Equipment Cost:$57,464.13
Sales Tax:$3,340.39
Total Amount Financed: $60,804.52
Equipment Location
NAME: Protalex, Inc
CITY, STATE, ZIP: Albuquerque, New Mexico 87102
|
ADDRESS: 717 Encino NE, Suite 17 COUNTY: Bernalillo
Schedule of Rental Payments
Lease Term (In Months):36
Total Number of Rental Payments:36
Amount of Each Rental Payment: $1,885.16*
Lessee's Deposit*:$1,985.16 (Plus Applicable Taxes)
*Includes Freight
*Applied to: []First Payment [X]Advance Rent []Security Deposit []Other:
End of Lease Purchase Option: [] FMV [x] $1.00 [] Other
Indexing: Your Rental Payments are calculated using a lease rate factor (the "Lease Rate Factor"). The Lease Rate Factor is calculated, in part, using the interest rate for swaps (the "Original Swap Rate") that most closely approximates the initial term of this Lease as published in the Federal Reserve Statistical Release H.15 available at http://www.federalreserve.gov/releases/hl5/update/ on 4/18/2003 (the "Initial Rate Date"). The Lease Rate Factorwill be held until 5/18/2003 (the "Rate Expiration Date"). If you do not accept the Equipment on or before the Rate Expiration Date, the Lease Rate Factor and your periodic Rental Payments may be adjusted if the Swap Rate reported four (4) business days prior to your acceptance of the Equipment is different than the Swap Rate reported on the Initial Rate Date.
Important Notice: We have written this Lease in plain language because we want you to understand its terms. Please read this Lease carefully and feel free to ask us any questions you may have. The words "you" and "your" mean the Lessee named below. The words "we", "us", and "our" refer to the Lessor named below. BY SIGNING THIS LEASE, YOU AGREE TO THE TERMS ON THE FRONT AND REVERSE SIDES. SEE REVERSE SIDE FOR DISCLAIMER OF WARRANTIES. ORAL AGREEMENTS OR COMMITMENTS TO EXTEND CREDIT, LOAN MONEY OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU AND US FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS LEASE, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER MUTUALLY AGREE IN WRITING TO MODIFY IT.YOU CERTIFY THAT ALL THE INFORMATION GIVEN IN THIS LEASE AND YOUR APPLICATION, INCLUDING ANY FINANCIAL INFORMATION, WAS CORRECT AND COMPLETE WHEN THIS LEASE WAS SIGNED. YOU AGREE THAT THE EQUIPMENT WILL BE USED FOR BUSINESS PURPOSES ONLY AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. IF YOU SIGN THIS LEASE BEFORE WE HAVE GIVEN YOU OUR CREDIT APPROVAL, YOUR SIGNING DOES NOT OBLIGATE US TO ENTER INTO THIS LEASE. YOU RELEASE US FROM ANY OBLIGATION OR LIABILITY IN THE EVENT WE 00 NOT GIVE YOU CREDIT APPROVAL OR WE GIVE YOU SUCH APPROVAL BUT SUBSEQUENTLY REVOKE IT BEFORE WE HAVE SIGNED THIS LEASE.
Lessor: WATERS FINANCIAL SERVICES
By:
Title:
Date Accepted On:
Lease Number: 4192260-001
Lessee Name: PROTALEX, INC
Signature: /Donald Dean/
Title: Chief Financial Officer
Date Accepted On: 4-25-03
Federal Tax I.D. #:91-2003490
KLEINFELDCOMMERCIALBROKERAGE,LLC
3300 Columbia N. E., Suite A
Albuquerque, New Mexico 87107
(505) 875-1641
Lease
This Indenture, made this 27th day of April, 2001, by an between Charles M. and Joan M. Bovard Revocable Trust and W. W. Kridelbaugh, M. D. hereinafter,whether singular or plural, masculine, feminine, or neuter, designated as "Landlord," which expression shall include Landlord's heirs, executors, administrators, assigns, and successors in interest, and PROTALEX, INC. A New Mexico Corporation hereinafter, whether singular or plural, masculine, feminine, or neuter, designated as "Tenant," which expression shall include all Tenants, jointly and severally, and shall include Tenant's heirs, executors, administrators, assign, and successors in interest, WITNESSETH:
I. DEMISE OF PREMISES. Landlord, for and in consideration of the covenants and agreements herein contained to be kept and performed by Tenant, Tenant's heirs, executors, administrators, assigns, and successors in interest, and upon the terms and conditions herein contained, does hereby let, lease, and demise to Tenant the following-described premises situated in Albuquerque, in the County of Bernalillo, State of New Mexico, to-wit: Suite 17 Encino Medical Condominiums containing 1354 Square feet, 717 Encino N. E. Albuquerque, New Mexico 87102.
II. TERM OF LEASE. The term of this Lease shall be for a period of thirty-six months and four days, commencing on the 27th day of April .2001-, and ending on the 30th day of April, 2004.
III. RENT. Tenant, for and in consideration of this Lease and the demise of the said premises by Landlord to Tenant, hereby agrees and covenants with Landlord to pay as rent for the said premises, without notice or demand, the sum of Forty Six Thousand, Seven Hundred Twenty-nine dollars and twenty-three cents ($46.729.43) in the following manner, to-wit: Upon execution of this Lease, Tenant shall pay $2.820.84 as lease deposit to be held by Landlord during the term of this lease to guarantee performance of all covenants and conditions; said deposit will be refunded in whole or in part depending on the condition of the premises at the end of the term or any extension hereto and upon Tenant's full performance of all covenants and conditions contained herein; and the balance of $185.48 represents advance rent for the first four days of this lease term. Commencing August 1, 2001, and on the first day of each succeeding month up to and including April 1. 2004 .Tenant shall pay $1410.42* as advance monthly rent.
Protalex, Inc., is accepting this space in ''as is" condition. It is the intention of the tenant to install passage ways between the three offices in the northeast portion of the space. (see Exhibit "A"). It is also the intention of the tenant to replace the existing sinks with deeper sinks and to remove the handicapped toilet. It is agreed that the tenant will restore the space to its original configuration at the end of the lease term.
All of the rent shall be paid by Tenant to Landlord or Landlord's order in lawful money of the United States at * The rent shall be paid in the following manner: $729.15 to Joan and Charles Bovard. 2331 Cutler N. E., Albuquerque, New Mxico 87106. $681.27 to W. W. Kridelbaugh. M.D., 10015 Bridgepoint N.E., Albuquerque, New Mexico 87111, or at such other place as Landlord may designate from time to time for this purpose.
IV USE OF PREMISES. Tenant, for and in consideration of this lease and the demise of the said premises by Landlord to Tenant, hereby agrees and covenants with Landlord to use and occupy the said premises for the purpose of Medical Research Laboratory and for no other purpose without first obtaining the written consent of Landlord therefore; to confirm and comply with all applicable municipal, state, and federal ordinances, laws, rules, and regulations in using the said premises; and not to use or suffer to be used the said premises in any manner in contravention of any applicable municipal, state, or federal ordinances, laws, rule, or regulation, or so as to create any nuisance, or so as to tend to increase the existing rate of fire insurance for the said demised premises.
V. CONDITION OF PREMISES AND REPAIRS. Tenant, for and in consideration of the Lease and the demise of the said premises, hereby agrees and covenants with Landlord that Tenant has examined the said premises prior to the execution hereof, knows the condition thereof, and acknowledges that Tenant has received the said demised premises in good order and condition, and that no representation or warranty as to the condition or repair of the said premises has been made by Landlord, and, at the expiration of the term of this Lease, or any renewal or extension thereof, Tenant will yield up peaceably the said premises to Landlord in as good order and condition as when the same were entered upon by Tenant, loss by fire or inevitable accident, damage by the elements, and reasonable use and wear excepted; that Tenant will keep the said premises in good order and repair during the term of this Lease, or any extension or renewal thereof, at Tenant's own expense and will repair and replace promptly any and all damage, including damage to glass, that may occur from time to time; that Tenant hereby waives any and all right to have such repairs or replacements made by Landlord or at Landlord's expense; and that, if Tenant fails to make such repairs and replacements promptly, or, if such repairs and replacements have not been made within fifteen (15) days after the occurrence of damage, Landlord may, at Landlord's option, make such repairs and replacements, and Tenant hereby agrees and covenants to repay the cost thereof to Landlord on demand.
VI. LIABILITY OF LANDLORD. Tenant, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Landlord that Landlord shall not be liable for any damage to persons or property arising from any cause whatsoever, which shall occur in any manner in or about said premises, and Tenant hereby agrees to indemnify and save harmless Landlord from any and all claims and liability for damage to persons or property arising from any cause whatsoever, which shall occur in any manner in or about the said premises. Further, Tenant hereby agrees and covenants with Landlord that Landlord shall not be liable for any damage to the said demised premises, or to any part thereof, or to any property or effects therein or thereon, caused by leakage from the roof of said premises or by bursting, leakage, or overflowing of any waste pipes, water pipes, tanks, drains, or stationary washstands or by reason of any damage whatsoever caused by water from any source whatsoever, and Tenant hereby agrees and covenants to indemnify and save harmless Landlord from any and all claims and liability for any damage to the said demised premises, or to any part thereof, or to any property or effects therein or thereon.
VII. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Tenant, for and in consideration of the Lease and the demise of the said premises, hereby agrees and covenants with Landlord, that Tenant shall not make, or suffer or permit to be made, any alterations, additions, or improvements whatsoever in or about the said demised premises without first obtaining the written consent of Landlord therefor; provided, however, that such consent, if given, shall be subject to the express condition that any and all alterations, additions, and improvements shall be done at Tenant's own expense and in accordance and compliance with all applicable municipal;, state and federal ordinances, laws, rules, and regulations, and that Tenant hereby covenants and agrees with Landlord that in doing and performing such work Tenant shall do and perform the same at Tenant's own expense, in conformity and compliance with all applicable. municipal, state, and federal ordinances, laws, rules, and regulations and that no liens of mechanics, materialmen, labors, architects, artisans contractors, subcontractors, or any other lien of any kind whatsoever shall be created against or imposed upon the said demised premises, or any part thereof, and that Tenant shall indemnify and save harmless Landlord from any and all liability and claims for damages of every kind and nature which might be made or judgments rendered against Landlord or against said demised premises on account of or arising out of such alterations, additions, or improvements.
VIII. OWNERSHIP OF ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Tenant, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Landlord that any and all alterations, additions, and improvements, except shelving and moveable furniture, made at Tenant's own expense after having first obtained the written consent of Landlord therefore, in accordance with the provisions contained in Paragraph VII, hereof, whether attached to the walls, floors, premises, or not, shall immediately vest in Landlord and all such alterations, additions, and improvements shall remain on the said premises and shall not be removed by Tenant at the termination of this Lease. The shelving and/or moveable furniture, which Tenant is privileged to remove, must be removed by Tenant at Tenant's expense on or before the termination of the Lease.
IX. ASSIGNMENT AND SUBLETTING. Tenant, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Landlord that neither Tenant nor Tenant's heirs, executors, administrators, assigns, or successors in interest shall assign this Lease or sublet the said demised premises, in whole or in part, without first obtaining the written consent of Landlord therefor; that no assignment of this Lease or any subletting of the said demised premises, in whole or in part, shall be valid, except by and with the written consent of Landlord first obtained;' that the consent of Landlord to any such assignment or subletting shall not operate to discharge Tenant, or anyone of them, or Tenant's heirs, executors, administrators, assigns, or successors in interest from their liability upon the agreements and covenants of this Lease, and Tenant, Tenant's heirs, executors, administrators, assigns, or successors in interest shall remain liable for the full and complete performance of all of the terms, conditions, covenants, and agreements herein contained; that any consent of Landlord to any such assignment or subletting shall not operate as a consent to further assignment or subletting or as a waiver of this covenant and agreement against assignment and subletting; and that following any such assignment or subletting, the assignee and/or sublettee shall be bound by all of the terms, conditions, covenants, and agreements herein contained including the covenant against assignment and subletting
X. UTILITY AND OTHER CHARGES. Tenant, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with landlord to pay promptly charges for Janitorial, telephone and other services, which may be incurred in connection with Tenant's use of the said premises, and to save harmless Landlord therefrom. This is a full-service lease and common area maintenance charges and utilities and exterior maintenance are paid by the Landlord.
XI. LANDLORD'S RIGHT OF ENTRY AND TO MAKE ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Tenant, for and in consideration of the Lease and the demise of the said premises, hereby agrees and covenants with Landlord that Landlord, Landlord's heirs, executors, administrators, assigns, agents, attorneys, and successors in interest shall have the right at any time to enter upon the said premises to inspect the same and to make any and all improvements, alterations, and additions of any kind whatsoever upon the said premises, providing such improvements, alterations, and additions, are reasonably necessary or convenient to the use to which the said premises are being put at the time, but at no time shall Landlord be compelled or required to make any improvements alterations, or additions.
XII. TAXES, OTHER ASSESSMENTS, AND INSURANCE. Tenant and Landlord hereby covenant and agree that all taxes and other assessments of whatsoever kind that nature which have been or may be levied upon the said demised premises and upon any alteration, additions, and improvements thereon shall be paid by Landlord at the time when the same shall become due and payable, and that all taxes and other assessments of whatsoever kind and nature which have been or may be levied upon the personal property located upon the said demised premises shall be paid by Tenant at the time when the same shall become due and payable. Tenant, for and in consideration of this Lease and the demise of the said premises, hereby agrees and covenants with Landlord to carry and maintain in full force and effect during the term of this Lease and any extension or renewal thereof at Tenant's expense public liability insurance covering bodily injury and property damage liability, in a form and with an insurance company acceptable to Landlord, with single limit coverage of not less than $ 1.000.000.00 for the benefit of both Landlord and Tenant as protection against all liability claims arising from the premises, causing Landlord to be named as an additional-named insured on such policy of insurance, and delivering a copy thereof to Landlord. Fire and extended coverage insurance upon all buildings, residences, alterations, additions, and improvements upon the said premises shall be provided for by Landlord, and fire and extended coverage insurance upon all of the contents and other personal property situated upon the said premises shall be provided for by Tenant.
XIII. HOLDING OVER. Tenant, for and in consideration of this lease and the demise of the said premises, agrees and covenants with Landlord that no holding over by Tenant after the expiration of this Lease, or any renewal or extension thereof, whether with or without the consent of Landlord, shall operate to extend or renew this Lease, and that any such holding over shall be construed as a tenancy from month to month at the monthly rental which shall have been payable at the time immediately prior to when such holding over shall have commenced and such tenancy shall be subject to all the terms, conditions, covenants, and agreements of this Lease.
XIV. BANKRUPTCY AND CONDEMNATION. Tenant, for and in consideration of the Lease and the demise of the said premises, hereby agrees and covenants with Landlord that should Tenant, or anyone of them, make an assignment for the benefit of creditors or should be adjudged a bankrupt, either by voluntary or involuntary proceedings, or if otherwise a receiver should be appointed by any court of competent jurisdiction for Tenant because of any insolvency, the occurrence of any such event shall be deemed a breach of this Lease, and, in such event, Landlord shall have the option to forthwith terminate this Lease and then re-enter the said demised premises and take possession thereof, whereupon Tenant shall quit and surrender peaceably the said demised premises to Landlord. In no event shall this Lease be deemed an asset of Tenant, or anyone of them, after adjudication in bankruptcy, the apl1bintment of a receiver, or the assignment for the benefit of creditors. Further, Tenant hereby covenants and agrees with Landlord that in the event the said demised premises, or any part thereof, are taken, damaged consequentially or otherwise, or condemned by public authority, this Lease shall terminate, as to the part so taken, as of the date title shall vest in the said public authority, and the rental reserved shall be adjusted so that Tenant shall be required to pay for the remainder of the term that portion of the rent reserved in the proportion that the said demised premises remaining after the taking, damaging, or condemnation bears to the whole of the said demised premises before the taking, damaging, or condemnation. All damages and payments resulting from the said taking, damaging, or condemnation of the said demised premises shall accrue to and belong to Landlord, and Tenant shall have no right to any part thereof.
XV. DESTRUCTION. Tenant, for and in consideration of the Lease and the demise of the said premises, agrees and covenants with Landlord that if at any time during the term of this Lease, or any extension or renewal thereof, the said demised premises shall be totally or partially destroyed by fire, earthquake, or other calamity, then Landlord shall have the option to rebuild or repair the same, provided such rebuilding or repairing shall be commenced within the period of thirty days after notice in writing to landlord of such destruction or damage, and to rebuild or repair the same in as good condition as they were immediately prior to such calamity. In such case, a just and proportionate part of the rental herein specified shall be abated until such demised premises shall have been rebuilt and repaired. In case, however, Landlord shall within thirty days following notice in writing to him of such damage elect not to rebuild or repair said premises, Landlord shall so notify Tenant and, thereupon, this Lease shall terminate and become null and void.
XVI. SIGNS. Landlord and Tenant covenant and agree that Tenant may at Tenant's own expense erect and maintain a sign or signs to carry out the purpose for which Tenant is leasing the said demised premises provided, however, the location, type and design of all exterior signs shall be first approved in writing by Landlord. Upon the expiration of this Lease, or any renewal or extension thereof, Tenant shall remove such sign or signs, and shall repair any damage to the premises caused thereby at Tenant's sole expense. Further, at any time within thirty days prior to the termination of this Lease, or any renewal or extension thereof, Landlord shall have the right to place upon any part of said demised premised any "For Rent" or "For Lease" signs that Landlord may select.
XVII. TERMINATION. It is expressly understood and agreed between the parties aforesaid, that if the rent above reserved, or any part thereof, shall be behind or unpaid on the day of payment whereupon the same ought to be paid as aforesaid, or if default shall be made in any of the covenants or agreements herein contained to be kept by Tenant, Tenant's executors, administrators, assigns, and successors in interest, it shall and may be lawful for Landlord, Landlord's heirs, executors, administrators, agents, attorneys, assigns, or successors in interest, at Landlord's election to declare said term ended and to re-enter the said premises, or any part thereof, either with or without process of law, to expel, remove, and put out, the Tenant, or any other person or persons occupying the same, using such force as may be necessary in so doing, and to repossess and enjoy the same premises again as in its first and former state, and distrain for any rent that may be due thereon any property belonging to Tenant, whether the same be exempt from execution and distress by law or not, and Tenant in that case hereby waives any and all legal rights which Tenant now has or may have, to hold or retain any such property under any exemption laws now in force in the State, or in any other way; meaning and intending hereby to recognize in Landlord, Landlord's heirs, executors, administrators, assigns, or succesors in interest, a valid first lien as provided in the laws of New Mexico, upon any and all goods, chattels, and other property belonging to Tenant and located in said premises as security for the payment of said rent an fulfillment of the faithful performance of conditions in the manner aforesaid, anything hereinbefore mentioned to the contrary notwithstanding. And if at any time said term shall be ended at such election of Landlord, landlord's heirs, executors, administrators, assigns, or successors in interest, as aforesaid, or in any other way, Tenant, Tenant's heirs, executors administrators, assigns, or successors in interest, do hereby covenant and agree to surrender and deliver up the above-described premises and property peaceably to Landlord, Landlord's heirs, executors, administrators, assigns, or successors in interest, immediately upon the termination of said terms as aforesaid, and if Tenant shall remain in possession of the same ten (10) days after notice of such default, or after the termination of the Lease in any of the ways above named, Tenant shall be deemed guilty of a forcible detainer of said premises under the statute and shall be subject to all the conditions and provisions above named, and the eviction and removal forcible or otherwise, with or without process of law as above stated. And it is further covenanted and agreed by and between the parties hereto that the Tenant shall pay and discharge all costs, attorneys fees, and expenses that shall arise from enforcing the covenants of this indenture by Landlord, landlord's heirs, executors, administrators, assigns, or successors in interest.
XVIII. FAILURE TO TERMINATE. Tenant, for and in consideration of this Lease and the demise of the said premises, agrees and covenants, with Landlord that failure, neglect, or omission of Landlord to terminate this Lease for anyone or more breaches of any of the covenants hereof, shall not be deemed a consent by Landlord of such breach and shall not stop, bar, or prevent Landlord from thereafter terminating this Lease, either for such violation, or for prior or subsequent violation of any covenant hereof.
XIX. BINDING ON HEIRS, EXECUTORS, ADMINISTRATORS, ASSIGNS, AND SUCCESSORS IN INTEREST. It is covenanted and agreed by and between the parties hereto that the covenants and agreements herein contained shall extend to and be binding upon the heirs, executors, administrators, assigns, and successors in interest of the parties to this Lease.
XX. THIS LEASE EMBODIES ALL AGREEMENTS BETWEEN THE PARTIES. It is covenanted and agreed by and between the parties hereto that this lease incorporates all of the agreements, covenants, and understandings between the parties hereto concerning the subject matter hereof, and that all such covenants agreements, and understandings have been merged into this written Lease. No prior agreement or understanding, verbal or otherwise, of the parties or their agents shall be valid or enforceable unless embodied in the Lease.
XXI. CANCELLATION. It is covenanted and agreed by and between the parties hereto that in the event of a sale, a long term lease, or a major improvement of this property, the Landlord reserves the privilege of canceling this Lease by giving Tenant not applicable days notice in writing.
XXII. COMMISSION. Landlord for and in consideration of this Lease hereby agrees that Kleinfeld Commercial Brokerage, LLC is Broker of Record and as such are entitles to a 60;0 commission, plus applicable New Mexico Gross Receipts Tax, to be paid to said Kleinfeld Commercial Brokerage, LLC, upon execution of this Lease and upon the date of any renewals or extensions executed between the Landlord and Tenant.
XXIII. AMENDMENTS. It is covenanted and agreed by and between the parties hereto that this Lease shall not be altered, changed, or amended, except by instrument in writing executed by the parties hereto.
XXIV. OPTION TO RENEW. Landlord hereby grants Tenant the option to renew this lease for an additional N/A year period under the same terms and conditions contained herein except rent which shall be N/A. Tenant to notify Landlord in writing not less than sixty (60) days prior to the expiration of the initial lease term of Tenant's desire to exercise this option.
XXV. OPTION TO PURCHASE. Tenant has the right to purchase this property at any time during the time of this lease. The parties have agreed to a Purchase Price of $70,000.00. At the time of purchase, the purchaser will make a down payment of 20% or $14,000.00. The security deposit of $2,820.84 will be applied to the down payment with the balance due at closing of $11,179.16. The sellers will finance the balance with a Mortgage for $56,000.00, twenty (20) years amortization at the prime commercial rate charged by the Bank of America in effect on the day of Notice by Tenant to exercise the option to purchase per annum. At the end of five (5) years the balance will be due.
At the time of sale, sellers will pay to Kleinfeld Commercial Brokerage, LLC, a sales of commission of 60;0 plus New Mexico Gross Receipts tax, less any amount of unamortized commission paid on the lease.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day and year first above written.
FRAME CONTRACT
FOR RESEARCH AND DEVELOPMENT PROJECTS
This Agreement is effective as of the date of the last signature hereto
(hereinafter the "Effective Date")
BETWEEN
EUROGENTEC S.A., a company organised and existing under the laws of Belgium,
whose registered offices are at Parc Scientifique du Sart-Tilman, rue Bois
Saint-Jean, n(degree)14, B-4102,
SERAING, BELGIUM.
Hereinafter referred to as "EUROGENTEC".
AND
PROTALEX Inc., a company organised and existing under the laws of the United
States of America, whose registered offices are at 717 Encino Pl. Suite 17
Albuquerque NM 87102 USA
Hereinafter referred to as "PROTALEX".
The parties hereto agree as follows:
1. Subject Matter of the Agreement
1.1 The Agreement concerns the engagement of EUROGENTEC by PROTALEX to undertake and complete research and development projects ("Projects") for PROTALEX in the field of the production and purification of Protein A from and/or such other fields as may be agreed, as requested by PROTALEX from time to time.
1.2 EUROGENTEC shall undertake and complete each Project in accordance with the provisions of this Agreement and written project assignments entered into by PROTALEX and EUROGENTEC from time to time and signed on behalf of PROTALEX and EUROGENTEC ("Project Assignments").
1.3 Each Project Assignment shall be in the form of a letter agreement in similar form to the pro-forma letter contained in the Annex or in such other form as may be appropriate. The scope, time-lines and completion date of each Project may be amended by agreement between PROTALEX and EUROGENTEC or otherwise pursuant to the provisions of this Agreement. In any event, EUROGENTEC agrees to immediately inform PROTALEX in writing if it has reasons to believe that any of the time-lines and/or the completion date indicated in the Project Assignment may not be possible and shall indicate its best revised estimate to PROTALEX.
1.4 In the event of any conflict between the terms of this Agreement and the terms of any Project Assignment, the terms of this Agreement shall prevail unless such project Assignment expressly and specifically states that it supersedes this Agreement on a specific matter (but then this Agreement shall only be superseded in respect of such particular Project Assignment and in respect only of such specific matter).
1.5 In agreeing to perform a Project, EUROGENTEC will thereby represent and warrant that (a) it has the necessary expertise and experience to undertake and complete that Project in a timely and professional manner, being agreed however that due to the specificity of the Project, EUROGENTEC is not committed to any obligation of result; (b) it will use persons to perform that Project who have appropriate skills and experience; and (c) it will perform the Project in accordance with the relevant Project Assignment.
1.6 EUROGENTEC shall keep PROTALEX advised of the progress of each Project and provide PROTALEX with all information reasonably requested by PROTALEX relating to each Project and, upon termination or completion of each Project, EUROGENTEC shall furnish PROTALEX with a written report which fully sets forth the procedures used in and the results of that Project.
2. Fees and Expenses
2.1 PROTALEX shall pay to EUROGENTEC a net fee set out in the relevant Project Assignment. Payment conditions will be defined in such relevant Project Assignment and/or further Manufacturing Agreement. At any time, EUROGENTEC shall be entitled to require PROTALEX to provide with a guaranty of payment.
2.2 Raw materials including specific consumables, needed for the Project, other than usual chemical materials used by EUROGENTEC, are not included in the price mentioned in Paragraph 2.1 and will be invoiced separately by EUROGENTEC on a monthly basis with an additional charge of 5% to cover its administrative costs.
2.3 All the prices are in euro and are exclusive of V.A.T. Shall PROTALEX terminate or cancel this Agreement for any reason whatsoever, except for gross negligence of EUROGENTEC, all costs accrued by EUROGENTEC as of the date of termination will be invoiced.
2.4 If PROTALEX does not pay a sum of money when it falls due, EUROGENTEC shall be entitled to interest upon that sum from the time when payment is due, automatically and without the necessity of a reminder. The level of interest for late payment shall be the sum of the interest rate applied by the European Central Bank to its most recent main refinancing operation carried out before the first calendar day of the half-year in question, plus at least seven percentage points. (If PROTALEX is located in a Member State which is not participating in the third stage of economic and monetary union, the reference rate referred to above shall be the equivalent rate set by its national central bank). In both cases, the reference rate in force on the first calendar day of the half-year in question shall apply for the following six months.
2.5 Unless PROTALEX is not responsible for the delay, EUROGENTEC shall be entitled to claim reasonable compensation from PROTALEX for all relevant recovery costs incurred through the latter's late payment.
2.6 If any invoice is not paid at maturity, EUROGENTEC shall be entitled to suspend its services, 30 days after having given notice to PROTALEX by registered letter.
3. Inventions and other Materials
3.1 EUROGENTEC will promptly notify PROTALEX in writing of any invention made by it or its employees during this Agreement arising out of work performed under this Agreement. Any such invention shall be the exclusive property of PROTALEX, and EUROGENTEC' s remuneration for the transfer or assignment of any such inventions is included in the fees payable under Article 2. PROTALEX shall have the exclusive right, at its discretion, to file patent applications for any such invention anywhere in the world. EUROGENTEC agrees both during and after the term of this Agreement to sign and/or to cause its employees to sign, any assignment or other documents reasonably needed in connection with such patent application.
3.2 Where, in any Project Assignment, PROTALEX agrees to provide or arrange to be provided to EUROGENTEC material for use in the relevant Project, then PROTALEX shall ensure that sufficient quantities of the material referred to in such Project Assignment ("Material") are provided to EUROGENTEC as it may reasonably require for such Project. In connection with any Project, PROTALEX or a third party at PROTALEX' s request or direction may also provide EUROGENTEC with records, information, data and materials ("PROTALEX Information") relating to the Material and its properties and which may be utilised by EUROGENTEC in connection with that Project.
3.3 EUROGENTEC agrees that the Material, or materials and products which incorporate or contain the Material or which are produced or derived from such Material, materials or products ("Derived Material") and all PROTALEX Information are and shall be the exclusive property of PROTALEX. EUROGENTEC agrees to use the Material, Derived Material and the PROTALEX Information solely for the purposes of conducting the Project and agrees not to disclose or pass on the same to any third party.
3.4 EUROGENTEC agrees that all results, information, data, reports, know-how arising out of the Project ("Study Results") shall promptly be disclosed to PROTALEX and shall be the exclusive property of PROTALEX. The Study Results shall be kept confidential by EUROGENTEC on the same terms as those applicable under this Agreement to Confidential Information. Following termination of this Agreement, PROTALEX may fully disclose and use, by itself, and/or through third parties, any and all Study Results.
4. Secrecy
4.1 During this Agreement and for a period of 5 years after its termination, EUROGENTEC will retain in strict confidence, and not disclose to any third party or use for any purpose except for the performance of each Project Assignment, any confidential information (under any form including written, chart, oral, visual inspection, electronic or computer format or otherwise) belonging to or received from or on behalf of PROTALEX or PROTALEX' s affiliates which has been in the past or may be in the future made available to EUROGENTEC, whether in connection with this Agreement or otherwise ("Confidential Information"). However, EUROGENTEC shall have no obligation to PROTALEX with respect to any information which:
(A) Was in the public domain at the time of receipt by EUROGENTEC;
(B) Subsequently becomes part of the public domain through no fault on the part
of EUROGENTEC;
(C) It can prove by written evidence in its possession that it was known to EUROGENTEC at the time of receipt by it; or
(D) Is subsequently received from a third party who had no obligation of secrecy to PROTALEX with respect to such information.
(E) The Parties are required to disclose by law or by a government or other competent regulatory authority.
4.2 EUROGENTEC will immediately return to PROTALEX, at any time during and after termination or expiration of this Agreement, upon written request by PROTALEX, all Material, Derived Material, PROTALEX Information and any and all other written material incorporating Confidential Information provided by PROTALEX as well as other documents and files in any form prepared by it for the performance of this Agreement.
4.3 EUROGENTEC may disclose Confidential Information only to those of its employees who need to receive Confidential Information for the purpose of this Agreement and who are subject to confidentiality and non-use obligations which cover Confidential Information which are no less restrictive than those of EUROGENTEC under this Agreement.
5. Assignment Neither this Agreement nor any rights herein are assignable by EUROGENTEC without the prior written consent of PROTALEX.
6. Indemnities
6.1 PROTALEX undertakes and agrees that it will indemnify and hold EUROGENTEC harmless from and against any and all claims, demands, causes of action, actions or suits, whether at law or in equity, judgements, decrees, damages or any liability whatsoever asserted or entered against EUROGENTEC by or on behalf of any person, firm, corporation or governmental bodies for bodily injury or damage to property arising out of or relating to any use by PROTALEX or other parties of any of the products delivered by EUROGENTEC to PROTALEX pursuant to Article 1, provided however that EUROGENTEC undertakes to hold PROTALEX harmless from the foregoing in the event that the damage caused or allegedly causes is due to the negligence on the part of EUROGENTEC or of its employees, subject to the terms and conditions provided for in article 6.2 and following.
6.2 EUROGENTEC shall be deemed to comply with its obligations under this agreement in so far as it uses its best efforts to perform this agreement.
6.3 EUROGENTEC shall have no liability for any damages of any kind, however they are caused, with regard with the performance or the quality of the products developed and/or delivered under this agreement, provided that they were not due to gross negligence on its part or on the part of its employees.
6.4 PROTALEX shall examine the products as soon as possible after their arrival at destination and shall notify EUROGENTEC in writing of any lack of conformity of the goods within 15 days from the date when PROTALEX discovers or ought to have discovered the lack of conformity. In any case PROTALEX shall have no remedy for lack of conformity if he fails to notify EUROGENTEC thereof within 2 months from the date of arrival of the goods at the agreed destination.
6.5 The products will be deemed to conform to this Agreement despite minor discrepancies which are usual in the particular trade or through course of dealing between the parties.
6.6 Where the products are non-conforming (and provided PROTALEX, having given notice of the lack of conformity in compliance with article 6.4, does not elect in the notice to retain them), EUROGENTEC shall at his option:
(a) replace the products with conforming products, without any additional expense to PROTALEX, or
(b) reimburse to PROTALEX the price paid for the non-conforming products and thereby terminate the Project Assignment as regards those products.
6.7 The foregoing is the exclusive remedy of the PROTALEX for defects in the products developed and/or delivered to PROTALEX under this Agreement and is in lieu of any other warranty, express or implied, including but not limited to, implied warranty if merchantability or fitness for a particular purpose. No other remedy, including but not limited to, for incidental or consequential damages, lost profits, lost sales, injury to person, or any other damages, shall be available to PROTALEX.
7. Force Majeure
7.1 A party is not liable for a failure to perform any of his obligations in so far as he proves:
(a) that the failure was due to an impediment beyond his control, and
(b) that he could not reasonably be expected to have taken into account the impediment and its effects upon his ability to perform at the time of the conclusion of this Agreement, and
(c) that he could not reasonably have avoided or overcome it or its effects.
7.2 A party seeking relief shall, as soon as practicable after the impediment and its effects upon his ability to perform become known to him, give notice to the other party of such impediment and its effects on his ability to perform. Notice shall also be given when the ground of relief ceases.
7.3 A ground of relief under this clause relieves the party failing to perform from liability in damages, from penalties and other contractual sanctions, except from the duty to pay interest on money owing as long as and to the extent that the ground subsists.
7.4 If the grounds of relief subsist for more than six months, either party shall be entitled to terminate the Agreement with notice.
8. Hardship
If during the performance of this Agreement there should arise economic, political or technical circumstances which were unforeseen by the parties and are beyond their control, and which make performance of the Agreement so onerous (though not impossible) for one of the parties that the burden would exceed all the anticipatory provisions made by the parties at the time the Agreement is signed, such affected party shall be entitled to request an appropriate revision of the contractual terms. The parties will discuss the matter, and if an amicable solution cannot be reached, the affected party may request arbitration of the matter in accordance with the arbitration clause of this Agreement.
9. Notification
All notices which are required to be given under this Agreement shall be deemed to have been sufficiently given if in writing and sent by registered mail or express courier with the requisite postage affixed, or if by fax, confirmed by registered mail or expressed courier addressed to the Party notified, at the address set forth in the preamble above, or such other address as may hereinafter be given by such Party to the other for notice purpose. The date of such mailing or delivery shall be the date of service of such notice.
10. Independent Party
In performing its services hereunder, EUROGENTEC will be an independent
contractor of PROTALEX. Nothing in this Agreement shall be deemed to create a
partnership between PROTALEX and EUROGENTEC nor give EUROGENTEC or its employees
the authority to act as agent of PROTALEX. EUROGENTEC shall ensure that none of
its employees are or purport to be employees or agents of PROTALEX.
11. No Warranty
EUROGENTEC acknowledges that the Material is experimental in nature and agrees to use the Material with prudence and appropriate caution and in compliance with applicable laws and regulations.
12. General
12.1 Successors and Assigns
This Agreement shall ensure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.
12.2 Whole Agreement
This Agreement constitutes the entire agreement between the parties relating to the subject matter of this Agreement and no previous explanation or information made or given by either of the parties shall have effect or alter the meaning of interpretation of this Agreement. No amendment, change or addition to this Agreement shall be effective or binding on either of the parties unless it is in writing and executed by the respective authorised representatives of each of the parties.
12.3 Waiver
No time or other indulgence allowed by one party to the other shall constitute any waiver of any right or remedy and any choice of remedy shall not be exclusive of any other remedy.
12.4 Severability
If any of the provisions of this Agreement shall be determined unlawful or unenforceable to any extent such provision shall be severed from the remainder of this Agreement which shall continue to be valid to the full extent permitted by law.
12.5 Transfer of title
EUROGENTEC shall retain title to the products resulting from the Project Assignment until full payment by PROTALEX.
12.6 Transfer of risk
Any risk relating to total or partial damage or loss of the products resulting from the Project Assignment shall pass to PROTALEX from the moment the products are delivered by EUROGENTEC according to the Ex Work terms as set out in Incoterms 2000.
13. Term
13.1 This Agreement shall terminate on May 1st 2004, unless earlier terminated by mutual agreement between PROTALEX and EUROGENTEC, or in accordance with the provisions herein or its term is extended by mutual agreement in writing between EUROGENTEC and PROTALEX.
14. Termination
14.1 This Agreement and any and all Project Assignments hereunder may be terminated at any time by written notice effective on the date such notice is received by (i) either party after the occurrence of one of the events specified in Article 14.2 and by (ii) EUROGENTEC after the occurrence of the events specified in Article 14.3.
14.2 These events are as follows:
o The occurrence and continuation for an uninterrupted period of ninety (90)
days of a condition of force majeure, defined in Article 7 of this Agreement.
o To the extent permitted by law, the insolvency or bankruptcy of either Party,
the inability of either Party to pay its debts as they fall due, or the
appointment of a trustee or receiver or the equivalent for either Party, or the
institution of proceedings relating to dissolution, liquidation, winding up,
bankruptcy, insolvency, or the relief of the creditors, if such proceedings are
not terminated or discharged within thirty (30) days.
14.3 These events are as follows:
o The enactment of a law, decree, or regulation within the territory of Belgium
or any portion thereof which would impair or restrict (i) EUROGENTEC ` s right
to complete or terminate this Agreement as herein provided; or (ii) EUROGENTEC `
s right to collect the payments as set forth in this Agreement.
o Any change in the shareholder' structure of PROTALEX which results in an
acquisition of control by any third party outside of the group.
o The acquisition of the Business by any third party outside of the group.
14.4 Either Party may forthwith terminate this Agreement by giving a written notice to the other if the other Party commits any material breach of this Agreement and said breach is not remedied within thirty (30) calendar days of receipt of a written notice specifying such breach.
14.5 The provisions of article 6 shall continue in force and effect for a period of twelve (12) months from the Effective Date of this Agreement; the provisions of articles 3 and 4 shall continue in force and effect for a period of five (5) years from the date of signature, all in accordance with their terms, notwithstanding expiry or termination of this Agreement for any reason.
14.6 PROTALEX and EUROGENTEC may terminate this Agreement and/or any and all Project Assignments hereunder by mutual agreement.
15. Consequences of Termination Termination of this Agreement under Articles 13 or 14 shall not effect termination of any Project Assignments which have not by then been completed, unless such Project Assignments are also terminated in accordance with Article 14. EUROGENTEC shall continue to conduct the Projects subject to such Project Assignments on the terms of this Agreement.
16. Applicable Law and Jurisdiction
16.1 This Agreement and any disputes arising out of or in connection with this Agreement shall be governed by and construed in accordance with the laws of Belgium.
16.2 In the case a dispute arise in connection with this Agreement, including its signature, validity, interpretation, performance, changes, termination and/or post-termination obligations, the Parties shall attempt to amicably settle the dispute.
16.3 Should they not succeed in this attempt, the dispute shall be submitted to the CEPANI (Centre Belge d'Arbitrage et de Mediation - "Belgian Centre for the Study and Practice of National and International Arbitration"). The place of arbitration shall be Brussels and the language shall be English and/or French.
IN WITNESS WHEREOF the parties have through their duly authorised representatives executed this Agreement on the date first above written.
EUROGENTEC S.A.
____________________ ______________________ Name: Charles Schaus Name: Michel Thiry Title: Project Manager Title: Biologic Business Unit Manager Date: April 28, 2003 Date: April 28, 2003 |
EUROGENTEC S.A. o Parc scientifique du Sart Tilman o 4102 SERAING o BELGIUM o Tel.: +32 4 366 61 00 Fax: +32 4 365 16 04 o e-mail: info@eurogentec.com o R.C. Liege 152 016 o T.V.A. BE 427 348 346
PROTALEX Inc. ____________________ _______________________ Name: Dennis Vik, Ph.D. Name: Steven Kane |
Titlle: Chief Scientific Officer Title: CEO Date: April 24, 2003 Date: April 24, 2003 Frame contract - Eurogentec-Protalex - 24/04/03 10/10
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in Form 10-KSB of our reports, dated August 15, 2002 (except for Note I for which the date is July 17, 2003), relating to the financial statements of Protalex, Inc. We also consent to the reference to our Firm under the caption "Experts".
BYLAWS
OF
PROTALEX, INC.
A New Mexico Corporation
ARTICLE I.
CORPORATE OFFICE
The principal office of the corporation in the State of New Mexico shall be located in the City of Albuquerque, County of Bernalillo. The corporation may have such other offices, either within or without the State of New Mexico, as the Board of Directors may designate or as the business of the corporation may require from time to time.
The registered office of the corporation required by the New Mexico Business Corporation Act to be maintained in the State of New Mexico may be, but need not be, identical with the principal place of business in the State of New Mexico, and the address of the registered office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
SECTION 1. Annual Meeting. The annual meeting of the shareholders for the election of directors and the transaction of such other business as may properly come before it shall be held at the registered office of the corporation or at such other place within or without the State of New Mexico as shall be set forth in the notice of meeting. The meeting shall be held on the Fourth Tuesday in the month of October each year, or at such other time as shall be fixed by the Board of Directors. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors is not held on the day designated herein for any annual meeting, or any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient.
SECTION 2. Special Meetings. Special meetings of shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President, the Chairperson of the Board of Directors, if a Chairperson is elected, or by the Board of Directors, and shall be called by the President at the request of the holders of not less than one-tenth (l/l0th) of all the outstanding shares entitled to vote at such special meeting.
Special meetings shall be held at the registered office of the corporation or at such place within or without the State of New Mexico as shall be set forth in the notice of meeting.
SECTION 3. Notice of Meeting. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary or the officer or persons calling the meeting, to each shareholder of record entitled to vote at the meeting. If mailed, the notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. Attendance of a shareholder in person or by proxy at a meeting constitutes a waiver of notice of the meeting, except where a shareholder attends a meeting for the express purpose of objecting to the transaction of any business because a meeting is not lawfully called or convened. A waiver of notice signed by all shareholders entitled to vote at the meeting may designate any time or place, either within or without the State of New Mexico, as the time and place for the holding of such meeting.
SECTION 4. Meeting of all Shareholders. If all of the shareholders entitled to vote shall meet at a time and place, either within or without the State of New Mexico, and consent to the holding of a meeting, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors of the corporation may provide that the stock transfer books shall be closed for a stated period not to exceed fifty (50) days. If the stock transfer books are closed for the purpose of determining shareholders entitled to notice of, or to vote at a meeting of the shareholders, the books shall be closed for at least ten (10) days immediately preceding the meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, the date to be not more than fifty (50) days, and in case of a meeting of shareholders not less than ten (10) days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of, or to vote at, a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring the dividend is adopted, as the case may be, shall be the record date for the determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, the determination shall apply to any adjournment thereof, except where the determination has been made through the closing of the stock transfer books and the stated period of closing has expired.
SECTION 6. Voting List. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting or any adjournment thereof, arranged in alphabetical order, with the address of, and the number of shares held by, each, which list, for a period of ten (10) days prior to the meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder at any time during usual business hours. The list shall also be produced and kept open at the time and place of meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the shareholders entitled to examine the lists or transfer books or vote at any meeting of shareholders. Failure to comply with the requirements of this section does not affect the validity of any action taken at the meeting. An officer or agent having charge of the stock transfer books who fails to prepare the list of shareholders, or keep it on file for a period of ten (10) days, or produce and keep it open for inspection at the meeting, as provided in this section is liable to any shareholder suffering damage on account of the failure, to the extent of the damage.
SECTION 7. Quorum of Shareholders. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the shareholders. A quorum, once attained at a meeting, shall be deemed to continue until adjournment notwithstanding the voluntary withdrawal of enough shares to leave less than a quorum. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless a vote of a greater number is required by law or by the Articles of Incorporation. If less than a majority of the outstanding shares are represented at a meeting, and therefore a quorum is not present, a majority of the shares so represented shall have the power to adjourn the meeting from time to time, without further notice, until a quorum shall be present or represented. At such adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally called.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy, which proxy must be written, dated and executed by the shareholder or
by his duly authorized attorney-in-fact. No proxy shall be valid after eleven
(11) months from the date of its execution, unless otherwise specifically
provided in the proxy. Any shareholder giving a proxy has the power to revoke it
by giving notice to the corporation in writing or in open meeting before any
vote is taken.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of shareholders, except as otherwise provided in the Articles of Incorporation.
SECTION 10. Voting of Shares by Certain Holders.
A. Neither treasury shares, nor shares held by another corporation, domestic or foreign, if a majority of the shares entitled to vote for the election of directors of the other corporation is held by this corporation, shall be voted at any meeting or counted in determining the total number of outstanding shares at any given time.
B. Shares standing in the name of another corporation, domestic or foreign, may be voted by the officer, agent or proxy as the Bylaws of the other corporation may prescribe, or, in the absence of such provision, as the Board of Directors of the other corporation may determine.
C. Shares held by a personal representative, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of the shares into his name. Shares standing in the name of a trustee, or a custodian for a minor, may be voted by the trustee or custodian, either in person or by proxy, but only after a transfer of the shares into the name of the trustee or custodian.
D. Shares standing in the name of a receiver or bankruptcy trustee may be voted by the receiver or bankruptcy trustee, and shares held by or under the control of a receiver or bankruptcy trustee may be voted by him without the transfer thereof into his name if authority to do so is contained in an appropriate order of the Court by which the receiver or bankruptcy trustee was appointed.
E. A shareholder whose shares are pledged may vote the shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee may vote the shares so transferred.
F. Shares standing in the name of a partnership may be voted by any partner, and shares standing in the name of a limited partnership may be voted by any general partner.
G. Shares standing in the name of a person as life tenant may be voted by him, either in person or by proxy.
H. Shares standing in the name of joint tenants may be voted by any tenant, either in person or by proxy.
I. From the date on which written notice of redemption of redeemable shares has been mailed to the holders thereof and a sum sufficient to redeem the shares has been deposited with a bank or trust company with irrevocable instruction and authority to pay the redemption price to the holders thereof upon surrender of certificates therefore, the shares shall not be entitled to vote on any matter and shall not be deemed to be outstanding shares.
SECTION 11. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting, and a vote of the shareholders may be dispensed with, if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the corporate action being taken. Such consent shall have the same effect as a unanimous vote of the shareholders.
ARTICLE III.
DIRECTORS
SECTION 1. General Powers. The business and affairs of the corporation shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of directors of the corporation shall be no less than five (5) nor more than seven (7). The number of directors may be increased or decreased, but no decrease shall have the effect of shortening the term of any incumbent director. The term of office of each director shall be until the next annual meeting of shareholders, and each director shall hold office for the term for which he is elected and until his successor has been elected and qualified. Directors need not be residents of the State of New Mexico or shareholders of the corporation unless otherwise required by the Articles of Incorporation.
SECTION 3. Duties and Powers. The Board of Directors shall have control and management of the business and affairs of the corporation. The directors shall in all cases act as a Board, regularly convened, and in the transaction of business the act of a majority present at a meeting except as otherwise provided by law shall be the act of the Board provided a quorum is present. The directors may adopt such rules and regulations for the conduct of their meetings and the management of the corporation as they may deem proper, not inconsistent with law or these bylaws.
SECTION 4. Regular Meetings. A regular meeting of the Board of Directors, for the purpose of electing or appointing officers and for the transaction of any business which may come before the meeting, shall be held without other notice than that required by these Bylaws, immediately after, and at the same place as, the annual meeting of shareholders. The Board of Directors may provide, by resolution, the time and place, either within or without the State of New Mexico, for the holding of additional regular meetings without other notice than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President at any time. The President or the Secretary must, upon a written request of any director, call a special meeting to be held not more than seven (7) days after the receipt of such request. The President may fix any place, either within or without the State of New Mexico, as a place for holding any special meeting of the Board of Directors.
SECTION 6. Notice. Notice of any special meeting shall be given at least two (2) days previously thereto by written notice delivered personally or mailed to each director at his last known post office address, or sent by telegram. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail in a sealed envelope so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.
SECTION 7. Quorum. A majority of the number of directors duly elected shall constitute a quorum for the transaction of business at any regular or special meeting. A quorum, once attained at a meeting, shall be deemed to continue until adjournment notwithstanding a voluntary withdrawal of enough directors to leave less than a quorum. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the act of a greater number is required by the Articles of Incorporation. Interested directors shall be counted for quorum purposes. If less than a majority of the directors are present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without further notice, until a quorum shall be present.
SECTION 8. Presumption of Assent. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or a special meeting of Directors called for that purpose for a term of office continuing only until the next annual meeting of the Directors.
SECTION 10. Removal of Directors. At a shareholders' meeting called expressly for that purpose, one (1) or more directors, or the entire Board of Directors, may be removed, with or without cause, by a vote of the holders of a majority of the shares present or represented and entitled to vote at an election of directors.
SECTION 11. Compensation. Directors as such shall not receive any stated salaries for their services, but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at any regular or special meeting of the Board of Directors; provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore.
SECTION 12. Resignation. Any director may resign his office at any time. Such resignation shall be made in writing and shall take effect immediately without acceptance.
SECTION 13. Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors may designate from among its members an executive committee and one (1) or more other committees each of which, to the extent provided in the resolution, shall have and may exercise all the authority of the Board of Directors, but no such committee shall have the authority of the Board of Directors in reference to amending the Articles of Incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease, exchange or other disposition of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof, or amending the Bylaws of the corporation. The designation of any such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.
SECTION 14. Attendance. At any meeting of the Board of Directors, regular or special, or of any committee designated thereby, the attendance of a director at such a meeting constitutes a waiver of notice of the meeting, except where a director attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise restricted by the Articles of Incorporation, members of the Board of Directors or any committee designated thereby may participate in a meeting of the board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time, and participation by such means shall constitute attendance and presence as if the director was in person at the meeting.
SECTION 15. Consents. Any action required by the Business Corporation Act to be taken at a meeting of the directors of the corporation, or any action which may be taken at a meeting of the directors or a committee, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors, or all of the members of the committee, as the case may be. Consent may be provided by facsimile or e-mail. The consent shall have the same effect as a unanimous vote.
ARTICLE IV.
OFFICERS
SECTION 1. Officers and Qualifications. The officers of this corporation shall consist of a President, one (1) or more Vice Presidents (the number thereof to be determined by the Board of Directors from time to time), a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors at the time and in the manner prescribed by these Bylaws. Other officers and assistant officers and agents deemed necessary may be elected or appointed by the Board of Directors or chosen in the manner prescribed by these Bylaws. Any two (2) or more offices may be held by the same person. All officers and agents of the corporation, as between themselves and the corporation, shall have the authority and perform the duties in the management of the corporation as provided in these Bylaws or as determined by resolution of the Board of Directors not inconsistent with these Bylaws.
SECTION 2. Election and Term. All officers of the corporation shall be elected annually by the Board of Directors at its regular meeting held immediately after the annual meeting of shareholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor has been duly elected and qualified, or until a vacancy occurs as hereinafter set forth.
SECTION 3. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. Vacancies may be filled, or offices created and filled, at any meeting of the Board of Directors.
SECTION 4. Removal. Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person removed. Election or appointment of an officer or agent shall not of itself create any contract rights.
SECTION 5. Duties of Officers. The duties and powers of the officers of the corporation shall be as follows and shall hereafter be set by resolution of the Board of Directors:
Chairperson of the Board of Directors
The Board of Directors shall have the right and power to elect a chairperson from among the members of the Board of Directors. If a chairperson of the Board of Directors is elected, the chairperson shall preside at all meetings of the Board of Directors in place of the President of the corporation, and the chairperson may also cast a vote on all questions
President
A. The President shall be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall, in general, supervise and control all of the business and affairs of the corporation.
B. The President shall preside at all meetings of the shareholders and shall preside at all meetings of the directors unless a chairperson of the Board of Directors is elected, in which case the President shall preside only in the absence of the chairperson of the Board of Directors.
C. The President shall present at each annual meeting of the shareholders and directors a report of the condition of the business of the corporation.
D. The President shall cause to be called regular and special meetings of the shareholders and directors in accordance with the requirements of the statute and these Bylaws.
E. The President shall appoint, discharge and fix the compensation of all employees and agents of the corporation other than the duly elected officers, subject to the approval of the Board of Directors.
F. The President, with the Secretary or any other proper officer of the corporation as required and duly authorized by the Board of Directors, shall sign and execute all contracts in the name of the corporation, all certificates for shares of the corporation, and all deeds, mortgages, bonds, contracts, notes, drafts, or other orders for the payment of money, or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed.
G. The President shall cause all books, reports, statements, and certificates to be properly kept and filed as required by law.
H. The President shall enforce these Bylaws and perform all the duties incident to the office or which are required by law, and, generally, perform such other duties as may be prescribed by the Board of Directors from time to time.
Vice President
The Vice President shall perform such duties as from time to time may be assigned to him by the President or by the Board of Directors. In the absence of the President or in the event of the President's inability of refusal to act, the Vice President (or if there are more than one (1) Vice President, the Vice Presidents in order designated at the time of election, or in the absence of designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers and be subject to all the responsibilities of the office of President and shall perform such duties and functions as the Board of Directors may prescribe. Any Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the corporation.
Secretary
A. The Secretary shall keep the minutes of the meetings of the Board of Directors and of the shareholders in the appropriate books.
B. The Secretary shall see to it that all notices are duly given in accordance with the provisions of these Bylaws or as required by law.
C. The Secretary shall be the custodian of the records and seal of the corporation and shall affix the seal to the certificates representing shares and other corporate papers and documents when required and duly authorized.
D. The Secretary shall keep at the principal office of the corporation a book or record containing the names, alphabetically arranged, of all persons who are shareholders of the corporation, showing their mailing addresses as shall be furnished to the Secretary by such shareholders, the number of shares held by them respectively, and the dates when they respectively became the owners of record thereof. The Secretary shall keep such book or record and the minutes of the proceedings of its shareholders subject to inspection, within the limits prescribed by law, by any person duly authorized to inspect such records. At the request of the person entitled to an inspection thereof, the Secretary shall prepare and make available a current list of the officers and directors of the corporation and their mailing addresses.
E. The Secretary shall attest to the execution of the instruments on behalf of the corporation by a proper officer thereof, and the Secretary shall affix the corporate seal to such instruments on behalf of the corporation.
F. The Secretary shall sign all certificates representing shares and affix the corporate seal thereto when the issuance of such shares has been duly authorized by resolution of the Board of Directors.
G. The Secretary shall attend to all correspondence, and present to the Board of Directors at its meeting all official communications received by the Secretary.
H. The Secretary shall have general charge of the stock transfer books of the corporation.
I. The Secretary shall, in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the President or by the Board of Directors.
Treasurer
A. The Treasurer shall have the care and custody of and be responsible for all of the funds and securities of the corporation, and shall deposit such funds and securities in the name of the corporation in such banks, trust companies or other depositories as shall be designated by the Board of Directors.
B. Subject to banking resolutions adopted by the Board of Directors, the Treasurer shall make, sign, and endorse in the name of the corporation all checks, drafts, notes, and other orders for the payment of money and receive and give receipts for moneys due and payable to the corporation from any source whatsoever and deposit all such moneys in the name of the corporation.
C. The Treasurer shall keep at the principal office of the corporation accurate books of account of all of its business and transactions and shall at all reasonable hours exhibit books and accounts to any director upon application at the office of the corporation during business hours.
D. The Treasurer shall render a report of the condition of the finances of the corporation at each regular meeting of the Board of Directors and at such other times as shall be required of him, and he shall make a full financial report at the annual meeting of the shareholders.
E. The Treasurer shall further perform all duties incident to the office of the Treasurer of the corporation or that may be assigned to him by the President or by the Board of Directors.
F. If required by the Board of Directors, the Treasurer shall give such bond for the faithful discharge of the duties provided herein in such sum and with such surety or sureties as the Board of Directors shall determine.
Other Officers
Other officers shall perform such duties and have such powers as may be assigned to them by the Board of Directors or by the President. Assistant Secretaries, when authorized by the Board of Directors, may sign with the President or a Vice President certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors. Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the President or the Board of Directors. The Board may also provide for a Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Scientific Officer, Chief Clinical Officer and Chief Medical Officer and any other office that the Board may determine appropriate who shall perform such duties as shall be assigned to them by the President or the Board of Directors.
SECTION 6. Compensation of Officers. The officers shall receive such salary or compensation as say be fixed by the Board of Directors from time to time. No officer shall be prevented from receiving compensation by reason of the fact that he is also a director of the corporation.
SECTION 7. Duties of Officers May Be Delegated. If any officer of the corporation be absent or unable to act, or for any other reason that the Board may deem sufficient, the Board may delegate for the time being some or all of the functions, duties, powers and responsibilities of any officer to any other agent or employee of the corporation or other responsible person.
ARTICLE V.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidence of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents, of the corporation and in such manner as shall be determined from time to time by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select.
ARTICLE VI.
SHARES
SECTION 1. Certificates. The shares of the corporation shall be represented by Certificates in a form as shall be determined by the Board of Directors. These certificates shall be signed by the President or a Vice President and a Secretary or an Assistant Secretary, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a register, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon the certificate ceases to be an officer before the certificate is issued, it may be issued by the corporation with the same effect as if he were an officer at the date of its issue. All certificates shall be numbered consecutively in the order in which they are issued or shall be otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and the date of issue, shall be entered on the stock transfer books of the corporation. Each certificate representing shares of the corporation shall state upon its face: (1) That the corporation is organized under the laws of the State of New Mexico; (2) the name of the person to whom issued; (3) the number of shares represented by the certificate; and (4) the par value of each share represented by the certificate, or a statement that the shares are without par value. All certificates surrendered to the corporation for shall be cancelled and no new certificates shall be until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, destroyed, or mutilated certificate, a new one may be issued therefore upon such terms and indemnity to the corporation as the Board of Directors may prescribe.
SECTION 2. Subscriptions. Subscriptions to shares shall be paid at such times and in such installments as the Board of Directors shall determine. If default shall be made in the payment of any installment as required by such resolution, the Board of Directors may declare the shares and all previous payments therefore forfeited for the use of the corporation, in the manner prescribed by law.
SECTION 3. Transfer of Shares. The shares of the corporation shall be assignable and transferable only on the books and records of the corporation by the registered owner, or by his duly authorized attorney, upon surrender of the certificate duly and properly endorsed with proper evidence of authority to transfer. The corporation shall issue a new certificate for the shares surrendered to the persons or person entitled thereto. The person in whose name the shares stand on the books of the corporation shall be deemed the owner thereof for all corporate purposes.
SECTION 4. Returned Certificates. All certificates for shares delivered to the corporation for transfer or reissue shall be marked by the Secretary "Cancelled" with the date of cancellation, and the transaction shall be immediately recorded in the certificate book opposite the memorandum of their issue. The cancelled certificate may be inserted in the certificate book.
SECTION 5. Lost, Stolen or Destroyed Certificate. In case of the loss or destruction of any certificate for shares of stock of the corporation, upon due proof of the registered owner thereof or his or her representative, by affidavit of such loss or otherwise, the President and Secretary may issue a duplicate certificate (plainly marked "duplicate") in its place, upon the corporation being fully indemnified therefor.
ARTICLE VII.
DIVIDENDS
The Board of Directors at any regular or special meeting may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon such terms and conditions provided by law and its Articles of Incorporation. Dividends may be paid in cash, property, or shares of the corporation.
ARTICLE VIII.
SEAL
The Board of Directors may provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation, and the words "Corporate Seal" or "Seal". No instrument shall lack validity because of not having the corporate seal affixed.
ARTICLE IX.
INDEMNIFICATION
The corporation shall indemnify, to the fullest extent allowed by law, any and all persons who may serve or who have served at any time as directors or officers, or who, at the request of this corporation, may serve or at any time have served as director or officer of another corporation in which this corporation owns shares of the capital stock or of which this corporation is or may be a creditor, and their respective heirs and personal representatives against any and all reasonable costs and expenses which may be imposed upon or incurred in connection with or resulting from claim, action, suit or proceeding in which such person may be involved by reason of being or having been a director or officer of this corporation, or of such other corporation. This indemnification shall be effective whether or not such person continues to be a director or officer of this corporation, or of such other corporation, at the time such costs and expenses are imposed or incurred. As used herein, the term "costs and expenses" shall include, but shall not be limited to, counsel fees and amount of judgments against and amounts paid in settlement (before or after suit is commenced), actually and necessarily incurred by any such director or officer, other than amounts paid to the corporation itself; provided, however, that no such director or officer shall be indemnified in any action, suit or proceeding in which he or she shall be adjudged liable for his or her own negligence or misconduct in the performance of his or her duty to the corporation. The foregoing rights of indemnification shall not be deemed exclusive of any other rights to which such director or officer may otherwise be entitled. In addition, the corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer against any liability asserted against him or her and incurred in any such capacity, or arising out of the status as officer or director of the corporation.
ARTICLE X.
CONTRACTS WITH INSIDERS
A director or officer of the corporation shall not be disqualified by his office from dealing or contracting with the corporation either as a vendor, purchaser, or otherwise; nor shall any transaction or contract of the corporation be void or voidable by reason of the fact that any director or officer or any firm of which any director or officer is a member, or any corporation of which any director or officer is a shareholder, officer or director, is in any way interested in such transaction or contract, provided that such transaction or contract is entered into in good faith and is or shall be authorized, ratified, or approved either (1) by a vote of a majority of a quorum of the Board of Directors, or (2) by the written consent or by the vote at any shareholders' meeting of the holders of record of a majority of all of the outstanding shares of the corporation entitled to vote; nor shall any director or officer be liable to account to the corporation for any profits realized by or from or through any such transaction or contract authorized, ratified or approved as herein provided by reason of the fact that he, or any firm of which he is a member or any corporation of which he is a stockholder, officer or director, was interested in such transaction or contract. Nothing herein contained shall create liability in the event above described or prevent the authorization or approval of such contracts in any other manner permitted by law.
ARTICLE XI.
FISCAL YEAR
The Board of Directors shall have the power to fix and, from time to time, change the fiscal year of the corporation.
ARTICLE XII.
AMENDMENTS
These Bylaws may be altered, amended, repealed, or new Bylaws may be adopted, by a majority of the entire Board of Directors at a regular or special meeting of the board. However, any Bylaws adopted by the Board of Directors may be altered, amended, or repealed, or new Bylaws may be adopted, by a majority of the shareholders at a regular or special meeting of the shareholders.
I hereby certify that the above and foregoing Bylaws are the Bylaws of this corporation, adopted and approved on the 13th day of August, 2003.
SECRETARY