UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10

 

GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934

 

 

InB:Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

 

New Jersey

(State or Other Jurisdiction of
Incorporation or Organization)

 

23-1948942

(IRS Employer
Identification No.)

 

 

9 Innovation Way, Suite 100

Newark, Delaware 19711

(Address of Principal Executive Offices)

 

19711

(Zip Code)

 

Registrant’s telephone number, including area code: (201) 269-3400
 
Copies to:
 
Andrew H. Abramowitz, Esq.
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
212-801-9200 (telephone)
212-801-6400 (facsimile)

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

  None

Securities to be registered pursuant to Section 12(g) of the Act:

 

Title of Each Class
to be so Registered

 

Name of Each Exchange on Which
      Each Class is to be Registered      

Common Stock, par value $0.001 per share

 

OTC.BB

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer [ ]                    Accelerated filer [ ]

Non-accelerated filer [ ]                      Smaller reporting company [X]


 

InB:Biotechnologies, Inc.

 

Cross-Reference Sheet Between the Information Statement and Items of Form 10

 

Information Included in the Information Statement and Incorporated by Reference
into
the Registration Statement on Form 10

 

Item No.

 

 

Caption

 

  

Location in Information Statement

 

1.

 

Business

  

“Summary”; “Description of Our Business”; “Risks Related to Our Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

         

1A.

 

Risk Factors

 

“Risk Factors”

         

2.

 

Financial Information

  

“Summary Financial Information”; “Unaudited Pro Forma Financial Statements”; and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

         

3.

 

Properties

  

“Description of Our Business – Facilities”

         

4.

 

Security Ownership of Certain Beneficial Owners and Management

  

“Security Ownership of Management”

         

5.

 

Directors and Officers

  

“Our Management”

         

6.

 

Executive Compensation

  

“Executive Compensation”

         

7.

 

Certain Relationships and Related Transactions

  

“Summary”; “Distribution – Our Relationship with Integrated BioPharma after the Distribution”; “Risk Factors – Risks Relating to Ownership of Our Common Stock”; “Management”; “Description of Capital Stock – Anti-Takeover Provisions”; “Relationships Between Our Company and Integrated BioPharma, Inc.”

         

8.

 

Legal Proceedings

  

“Description of Our Business – Legal Proceedings”; “Management’s Discussion and Analysis of Financial Condition and Results of Operations – General Litigation”

         

9.

 

Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

  

  “Summary”; “Description of Distribution”; “Dividend Policy”; “Distribution – Our Relationship with BioPharma after the Distribution”; and “Description of Capital Stock”

         

10.

 

Recent Sales of Unregistered
Securities

  

“Description of Capital Stock - Recent Sales”

         

11.

 

Description of Registrant’s Securities to be Registered

  

“Description of Capital Stock”

         

 

 

  

         

 

  

         

 

  

 

 

  

 

 

2


 

 

12.

 

Indemnification of Directors and Officers

  

“Management - Indemnification of Directors and Officers

         

13.

 

Financial Statements and Supplementary Data

  

“Summary Financial Information”; “Unaudited Pro Forma Financial Statements”; and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

         

14.

 

Changes In and Disagreements with Accountants on Accounting and Financial Matters

  

 

None.

15.

 

Financial Statements and Exhibits

  


(a)    Financial Statements and Financial Statement Schedules

 

The following financial statements are included in the Information Statement and filed as a part of this Registration Statement on Form 10:

 

 

(1)

 

Unaudited Pro Forma Financial Statements of InB:Biotechnologies, Inc.;

 

(2)

 

Unaudited Pro Forma Financial Statements of Integrated BioPharma, Inc.; and

 

 

(3)

 

Financial Statements of InB:Biotechnologies, Inc.


 

(b)    Exhibits. The following documents are filed as exhibits hereto:

 

Exhibit Number

 

  

Exhibit Description

 

3.1

  

Form of Articles of Incorporation of iBioPharma, Inc.

3.2

  

Form of Bylaws of iBioPharma, Inc.

4.1

 

Form of Common Stock Certificate.

8.1

 

Tax Opinion of Greenberg Traurig, LLP, counsel to the Registrant.**

10.1

 

Separation and Distribution Agreement, dated as of November 14, 2007, between Integrated BioPharma, Inc. and the Registrant.**

10.2

  

Form of Indemnification and Insurance Matters Agreement between Integrated BioPharma, Inc. and the Registrant.

10.3

  

Form of Transitional Services Agreement between Integrated BioPharma, Inc. and the Registrant.

10.4

  

Form of Tax Allocation Agreement between Integrated BioPharma, Inc. and the Registrant.

10.5

 

Form of Securities Purchase Agreement between various purchasers and the Registrant.

10.6

 

Technology Transfer Agreement, dated as of January 1, 2004, between the Registrant and Fraunhofer USA Center for Molecular Biotechnology, Inc.

10.7

 

Non-Standard Navy Cooperative Research and Development Agreement, dated August 17, 2004, between the Registrant and Fraunhofer USA Center for Molecular Biotechnology, Inc. **

10.8

 

Supply License Agreement, dated as of March 22, 2006, between the Registrant and Mannatech, Inc. **

21.1

  

List of Subsidiaries - None.

99.1

  

Information Statement.

3

 





 

  *

 

To be filed by amendment.

**

 

Previously filed.

4




 

SIGNATURE

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.


 

INB:BIOTECHNOLOGIES, INC.

     

By:

 

/s/    Robert L. Erwin

 

 

Robert L. Erwin,
President

 

Dated:     July 11, 2008

 

 

 

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FORM OF
TAX RESPONSIBILITY ALLOCATION AGREEMENT

This Tax Responsibility Allocation Agreement (the “ Agreement ”) is dated as of this ___ day of July, 2008, between Integrated BioPharma, Inc., a Delaware corporation (“ BioPharma ”), and iBioPharma, Inc., a Delaware corporation (“ Biotechnologies ”), either or both of which may be a “party” or “parties”.

WHEREAS, as of _________, 2008, BioPharma owned 100% of the issued and outstanding common stock of Biotechnologies;

WHEREAS, the board of directors of BioPharma determined it would be in the best interests of BioPharma and its shareholders to distribute all of BioPharma’s shares in Biotechnologies to the BioPharma shareholders (the “ Distribution ”) on the terms and conditions set forth in the Separation and Distribution Agreement dated November 14, 2007 between BioPharma and Biotechnologies (the “ Distribution Agreement ”) (the date of such Distribution, the “ Distribution Date ”);

WHEREAS, the parties intend that the Distribution qualify as a tax-free spin-off pursuant to Section 355 of the Internal Revenue Code of 1986, as amended (the “ Code ”);

WHEREAS, as of the date hereof, BioPharma is the common parent of an affiliated group of domestic corporations, including Biotechnologies, which has elected to file consolidated U.S. federal income tax returns and, as a result of the Distribution, Biotechnologies will not be a member of such group for the portion of the taxable year following the Distribution or in future taxable years;

WHEREAS, the parties desire (i) to allocate the responsibilities for Income Tax (as hereinafter defined) of Biotechnologies, (ii) to allocate the responsibilities for Other Biotechnologies Tax (as hereinafter defined) and (iii) to provide for certain additional Tax (as hereinafter defined) matters;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties (each on behalf of itself, each of its subsidiaries as of the Distribution Date, and its future subsidiaries) hereby agree as follows:

1.     Definitions. The following terms shall have the following meanings (such meanings to apply equally to both the singular and the plural forms of the terms defined). All section references are to this Agreement unless otherwise stated.
 

Biotechnologies Business ” means any businesses carried out by the Biotechnologies Group, now or in the past.

Biotechnologies Combined Income Tax ” shall mean, with respect to any period for which the Biotechnologies Group is included in any of BioPharma’s combined or unitary groups, the liability for state or local Income Tax of the Biotechnologies Group computed as though the

 


Biotechnologies Group filed a Tax Return separate from BioPharma for such taxable period, which amount shall not be less than zero.

Biotechnologies Federal Income Tax ” shall mean, with respect to any period for which the Biotechnologies Group is included in BioPharma’s consolidated group, the liability for U.S. federal Income Tax (including “alternative minimum tax”, if any) of the Biotechnologies Group computed as though the Biotechnologies Group filed a U.S. federal Income Tax Return separate from BioPharma for such taxable period, which amount shall not be less than zero.

Biotechnologies Group ” shall mean, collectively or separately, Biotechnologies and any Subsidiary of Biotechnologies for which Biotechnologies has any direct or indirect Tax liability.

Biotechnologies State Income Tax ” shall mean any state or local Income Tax imposed on any member of the Biotechnologies Group (which is not a Biotechnologies Combined Income Tax).

BioPharma Group ” shall mean, collectively or separately, BioPharma and any Subsidiary of BioPharma for which BioPharma has any direct or indirect Tax liability, other than any member of the Biotechnologies Group.

Income Tax ” shall mean any tax imposed on net income.

Other Biotechnologies Tax ” means any Tax of the Biotechnologies Group or with respect to the Biotechnologies Business that is not an Income Tax (whether payable directly by Biotechnologies Group or payable by a combined or unitary group that includes the Biotechnologies Group to the extent of Biotechnologies Group’s portion of such Tax).

Post-Distribution Period ” means all taxable periods or portions of periods beginning on or after the Distribution Date.

Pre-Distribution Period ” means all taxable periods or portions of periods ending before the Distribution Date.

Subsidiary ” means any corporation, company, partnership or other business organization of which 50% or more of its equity interests are owned by another corporation, company, partnership or other business organization.

Tax ” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing imposed on any taxpayer or consolidated, combined or unitary group of taxpayers.

 

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Tax Authority ” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

Tax Benefit ” means the amount that any item of loss, deduction or credit (or any other item) decreases Taxes paid or payable including any interest with respect thereto or interest that would have been payable but for such item, net of any Tax imposed on such interest.

Tax Contest ” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of re-determining any Tax (including any administrative or judicial review of any claim for refund).

Tax Detriment ” means the amount that any item of income or gain (or any other item) increases Taxes paid or payable including any interest with respect thereto.

Tax Return ” means any report of Tax due, any claims for refund of Tax paid, any information return with respect to Tax, any election made with respect to Tax, or any other similar report, statement, declaration, or document required to be filed under the Code or other law in respect of Tax, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing for any taxpayer or consolidated, combined or unitary group of taxpayers.

2.     Responsibility for Tax
 

2.1      BioPharma’s Responsibility .

(a)     BioPharma shall be responsible for and indemnify and hold harmless the Biotechnologies Group from (i) any liability for Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax with respect to the Pre-Distribution Period (other than Income Taxes described in Section 2.2(b); (ii) any Income Tax of the BioPharma Group by reason of Biotechnologies Group being severally liable for such Income Tax pursuant to Treasury Regulations Section 1.1502-6 or any analogous provision of state or local law; and (iii) any item described in Section 3.1 to the extent not covered by Section 3.2.

(b)     Notwithstanding the provisions of clause (i) of Section 2.1(a), for all periods in which Biotechnologies is a member of BioPharma’s consolidated group, Biotechnologies shall be responsible for and shall pay to BioPharma, on or prior to the Distribution Date, an amount equal to the estimate of the Biotechnologies Federal Income Tax for such periods, as determined by BioPharma in good faith and in the ordinary course of business, subject to final determination of such amount as provided in Section 2.5(a).

(c)     Notwithstanding the provisions of clause (i) of Section 2.1(a), for all periods in which Biotechnologies or any other member of the Biotechnologies Group is a member of a state or local consolidated, combined or unitary group of which any member of the BioPharma Group is the parent, Biotechnologies shall be responsible for and shall pay to BioPharma, on or prior to the Distribution Date, an amount equal to the estimate of the Biotechnologies Combined

 

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Income Tax for such periods, as determined by BioPharma in good faith and in the ordinary course of business, subject to final determination of such amount as provided in Section 2.5(a).

2.2      Biotechnologies’ Responsibility .

(a)     Biotechnologies shall be responsible for, and indemnify and hold harmless the BioPharma Group from (i) all Income Tax of the Biotechnologies Group with respect to a Post-Distribution Period; (ii) Income Taxes described in Section 2.2(b); (iii) all Other Biotechnologies Tax (regardless of which period it relates to); and (iv) any act for which Biotechnologies is liable under Section 3.2.

(b)     In the event that any jurisdiction determines that the income of any member of the Biotechnologies Group is included or includible with the income of any member of the BioPharma Group for purposes of calculating the combined, consolidated, or unitary Tax liability of the BioPharma Group and, as of the date hereof, the income of such member of the Biotechnologies Group was not so included by any member of the BioPharma Group in a combined, consolidated, or unitary group of which such member of the BioPharma Group was the common parent, Biotechnologies shall be responsible for and shall pay to BioPharma any Income Tax liability incurred by any member of the BioPharma Group as a result of such determination.

2.3      General Responsibilities . For purposes of this Agreement, in the case of any taxable period that begins before and ends after the Distribution Date, the amount of Biotechnologies Federal Income Tax and/or Biotechnologies Combined Income Tax payable for such taxable period shall be allocated pro rata between the time period before the Distribution Date and the time period after the Distribution Date, as of each such time period.

2.4      Refunds and Tax Benefits .

(a)     Refunds and Carry backs.

(i) Except as provided in (ii) or (iii) below, BioPharma shall be entitled to any refunds of Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax (including refunds paid by means of a credit against other or future Tax liabilities) arising with respect to taxable periods ending on or before the Distribution Date; and Biotechnologies shall be entitled to any refunds of Income Tax of the Biotechnologies Group (including refunds paid by means of a credit against other or future Tax liabilities) arising with respect to taxable periods beginning after the Distribution Date. BioPharma and Biotechnologies agree to allocate such refunds (including refunds paid by means of a credit against other or future Tax liabilities) arising with respect to taxable periods that begin before and end after the Distribution Date to whichever of BioPharma or Biotechnologies initially accrued or recorded a liability for the Taxes to which such refund is attributable.

(ii)     Biotechnologies shall be entitled to any refunds or credits of Biotechnologies State Income Tax or Other Biotechnologies Tax (including refunds paid by means of a credit against other or future Tax liabilities).

 

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(iii)     Biotechnologies shall promptly forward to BioPharma or reimburse BioPharma for any refunds due BioPharma after receipt thereof, and BioPharma shall promptly forward to Biotechnologies or reimburse Biotechnologies for any refunds due Biotechnologies after receipt thereof. In the case of a refund received in the form of a credit against other or future Tax liabilities, reimbursement in respect of such refund shall be due in each case on the due date for payment of the Tax against which such refund has been credited. If BioPharma reasonably so requests, Biotechnologies, at BioPharma’s expense, shall file for and pursue any refund to which BioPharma is entitled under this Section 2.4(a). If Biotechnologies reasonably so requests, BioPharma, at Biotechnologies’s expense, shall file for and pursue any refund to which Biotechnologies is entitled to under this Section 2.4(a).

(iv)     BioPharma agrees that if the Biotechnologies Group carries back any item of loss, deduction or credit which arises in any taxable period the Income Tax for which Biotechnologies is responsible, into any taxable period the Income Tax for which BioPharma was responsible, then Biotechnologies shall be entitled to any Tax Benefit or refund of Tax realized as a result of the carry back.

(v)     Notwithstanding anything to the contrary in this Section 2.4, BioPharma shall not be entitled to, and Biotechnologies shall be entitled to, any refunds or credits with respect to Income Tax for which Biotechnologies was liable under Section 2.2(b).

(b)     Allocation of Benefits. If as a result of or in settlement of any Tax Contest, any adjustments shall be made to any Tax Returns relating to Income Tax of the Biotechnologies Group or the BioPharma Group for any period in which one of the parties was responsible for all or a portion of such Income Tax, and if such adjustment results in both Tax Detriment to one party or its subsidiaries and Tax Benefit to the other party or its subsidiaries, then the party receiving the Tax Benefit shall pay to the party subject to the Tax Detriment the amount of such Tax Benefit at such time or times as and to the extent that the party receiving the Tax Benefit realizes such benefit through a refund of Tax or reduction in the amount of Tax which would otherwise be paid if such adjustment had not been made.

2.5      Preparation of Tax Returns; Payment of Tax .

(a)     BioPharma shall cause the Biotechnologies Group to join, for any Pre-Distribution Period for which the Biotechnologies Group is required to do so (and may cause the Biotechnologies Group (or any member thereof) to join for any such period or Tax Return for which the Biotechnologies Group is eligible but not required to do so), in all federal, state or local consolidated, combined or unitary Income Tax Returns of BioPharma’s filing group. BioPharma shall prepare and timely file all such federal, state or local consolidated, combined or unitary Tax Returns and shall timely pay subject to 7.1(b) and (c) all Tax with respect to such Tax Returns. BioPharma shall provide to Biotechnologies a copy of the portion of each such Tax Return and any supporting schedules that relate to the Biotechnologies Group within 20 days after the filing thereof. No later than December 31 (or as close as reasonably practicable thereto) of the year in which BioPharma’s federal Income Tax Return with respect to such Tax is filed, BioPharma shall provide to Biotechnologies a statement of the Biotechnologies Federal Income

 

5


Tax and Biotechnologies Combined Income Tax for such period, as determined by BioPharma in good faith and in the ordinary course of business based upon such Tax Returns. If (x) the sum of the estimates of such Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax as paid by Biotechnologies pursuant to Section 2.1(b) and (c) above is less than (y) the sum of the Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax as determined under this Section 2.5(a), Biotechnologies shall pay to BioPharma the difference between (x) and (y). If (x) the sum of the estimates of such Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax as paid by Biotechnologies pursuant to Section 2.1(b) and (c) above is more than (y) the sum of the Biotechnologies Federal Income Tax and Biotechnologies Combined Income Tax as determined under this Section 2.5(a), BioPharma shall pay to Biotechnologies the difference between (x) and (y).

(b)     BioPharma shall prepare (or cause to be prepared), at Biotechnologies’s expense (or where appropriate through the utilization of Biotechnologies’s staff), and Biotechnologies shall timely file (or cause to be timely filed) any Tax Return relating to Biotechnologies State Income Tax for any period that begins before the Distribution Date (or any portion of such a Tax Return which relates to the Pre-Distribution Period) whether it is required to be filed before or after the Distribution Date. BioPharma shall provide a copy of each such Tax Return (or portion thereof) and any supporting schedules to Biotechnologies at least 30 days before the date such Return is to be filed (including any extensions) by Biotechnologies for Biotechnologies’s review and approval, which approval shall not be unreasonably withheld. Biotechnologies shall pay all Tax with respect to such Tax Return for which it is responsible pursuant to Section 2.1. BioPharma shall pay to Biotechnologies at least 5 days prior to the filing of such Tax Return any amount due on such Tax Return that is the responsibility of BioPharma pursuant to Section 2.1.

(c)     Biotechnologies shall be responsible for the preparation and filing of Tax Returns relating to Other Biotechnologies Tax. Biotechnologies shall pay all Tax with respect to any such Tax Returns.

(d)     Biotechnologies shall not file (or allow the Biotechnologies Group to file) any amended Tax Returns with respect to the Biotechnologies Group for any Pre-Distribution Period without BioPharma’s consent.

2.6      Cooperation and Exchange of Information . BioPharma on the one hand, and Biotechnologies, on the other, will timely and competently provide each other with such cooperation and information as either of them reasonably may request of the other in (i) filing any Tax Return, (ii) determining a liability for Tax or a right to a refund of Tax or (iii) participating in or conducting any Tax Contest. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules and related work papers and documents relating to rulings or other determinations by any Tax Authorities. Each party shall devote the personnel and resources necessary in order to carry out this Section 2.6 and shall make its employees available on a mutually convenient basis to provide explanations of any documents or information provided hereunder. Except as provided below, each party shall carry out their responsibilities under this Section 2.6 without charge to the other. Notwithstanding the foregoing, Biotechnologies shall reimburse BioPharma

 

6


for any out-of-pocket costs and expenses incurred with respect to matters concerning Biotechnologies State Income Tax for the Pre-Distribution Period. It is further understood that in order to reduce the cost to Biotechnologies in connection with Biotechnologies State Income Tax matters, to the extent appropriate, BioPharma shall utilize and Biotechnologies shall provide, members of Biotechnologies’s staff.

2.7      Tax Contests .

(a)      Notice . Each of the parties shall provide prompt notice to the other party of any pending or threatened Tax Contest of which it becomes aware related to Tax for which it is indemnified by the other party hereunder. Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters. If an indemnified party has knowledge of an asserted Tax liability with respect to a matter for which it is to be indemnified hereunder and such party fails to give the indemnifying party prompt notice of such asserted Tax liability, then if the indemnifying party is not precluded from contesting the asserted Tax liability in any forum, but such failure to give prompt notice results in a monetary detriment to the indemnifying party, then any amount which the indemnifying party is otherwise required to pay the indemnified party pursuant to this Agreement shall be reduced by the amount of such detriment.

(b)      Control of Tax Contests . Each party shall have full responsibility and discretion in handling, settling or contesting any Tax Contest involving a Tax for which it is liable pursuant to Section 2 of this Agreement and shall pay any costs associated with such Tax Contest; provided, however, BioPharma shall have full responsibility and discretion in handling, settling or contesting any Tax Contest with respect to a consolidated, combined or unitary federal or state Income Tax of which BioPharma or a BioPharma Subsidiary is the common parent. In the event that BioPharma controls (pursuant to the proviso in the previous sentence) any Tax Contest which gives rise to a Biotechnologies indemnification obligation hereunder, BioPharma shall consult with Biotechnologies with respect to such Tax Contest (to the extent such Tax Contest relates to issues for which Biotechnologies is liable) and shall consider in good faith Biotechnologies’s advice with respect thereto. Furthermore BioPharma may participate in any Tax Contest with respect to any Covered Transaction Tax (as hereinafter defined), and Biotechnologies shall consider in good faith BioPharma’s advice with respect thereto, regardless of whether BioPharma has liability or indemnification obligations with respect to such Tax under this Agreement.

3.     Transaction Tax
 

3.1      General . Except as otherwise provided in Section 3.2, BioPharma shall be responsible for and pay any and all Tax resulting from income or gain recognized by BioPharma as a result of the Distribution failing to qualify for or maintain tax-free treatment pursuant to Section 355 of the Code or other provisions of the Code or corresponding provisions of other applicable Tax laws, and any Tax resulting from any income or gain recognized by BioPharma or its Subsidiaries (including the Biotechnologies Group) under Treasury Regulations Sections 1.1502-

 

7


13 or 1.1502-19 (or any corresponding provisions of other applicable Tax laws) as a result of the Distribution (collectively “Covered Transaction Tax”).

3.2      Inconsistent Acts and Events . Biotechnologies shall be liable for, and shall indemnify and hold harmless the BioPharma Group from and against any liability for, any Covered Transactions Tax (including without limitation reasonable attorney fees and other costs incurred in connection therewith) to the extent arising from (i) any breach by the Biotechnologies Group of the representations or covenants under Section 4 and (ii) any Section 355(e) Event (defined herein) with respect to Biotechnologies. A “Section 355(e) Event” with respect to Biotechnologies means any fact, circumstance, event or occurrence relating to the stock of Biotechnologies or assets of the Biotechnologies Group, that causes the Distribution to be a taxable event to BioPharma as the result of the application of Section 355(e) of the Code and the Treasury Regulations (i.e., the Distribution becomes taxable to BioPharma under Section 355(e) of the Code and, but for such fact, circumstance, event or occurrence, the Distribution would not have been a taxable event to BioPharma under Section 355(e) of the Code).

4.     Representations and Covenants
 

4.1      Representations .

(a)     Each of Biotechnologies and BioPharma represent that, as of the date of this Agreement, it and its Subsidiaries knows of no fact or set of facts that would jeopardize the expected Tax treatment of the Distribution.

(b)     Each of Biotechnologies and BioPharma represent and warrant that neither it nor any of its Subsidiaries has any plan or intent to take any action which is inconsistent with the expected Tax treatment of the Distribution.

4.2      Covenants .

(a)     Biotechnologies covenants and agrees that it will not take any action, and it will cause its Subsidiaries to refrain from taking any action, that violates Section 355(e) of the Code and the Treasury Regulations promulgated thereunder or which is otherwise inconsistent with the Tax-free treatment of the Distribution.

(b)     Consistent Tax Returns. Each of BioPharma and Biotechnologies covenants and agrees that it will not take, and it will cause its Subsidiaries to refrain from taking, any position on a Tax Return that is inconsistent with the treatment of the Distribution as tax-free pursuant to Section 355 of the Code.

5.     Miscellaneous Provisions
 

5.1      Notice . Any payment, notice or communication required or permitted to be given under this Agreement shall be in writing (including facsimile) and mailed, faxed or delivered to the parties at the following addresses (or at such other address as one party may specify by notice to the other party):

 

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if to BioPharma:

Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attn: President
 
if to Biotechnologies:
 
iBioPharma, Inc.
9 Innovation Way, Suite 100
Newark, Delaware 19711
Attn: President

Notification of a change of address shall be given by either party to the other as provided in this Section 5.1. All such notices and communications shall be effective (i) when received, if mailed or delivered, or (ii) when confirmed by fax answerback, if faxed.

5.2      Governing Law . This Agreement shall be governed by the laws applicable to contracts entered into and to be performed within the Commonwealth of Delaware excluding its conflict laws.

 

5.3      Entire Agreement . This Agreement and the Distribution Agreement embodies the entire understanding between the parties relating to its subject matter and supersedes and terminates all prior agreements and understandings among the parties with respect to such matters. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement. This Agreement shall not be modified or terminated except by a writing duly signed by each of the parties hereto, and no waiver of any provisions of this Agreement shall be effective unless in a writing duly signed by the party sought to be bound. If, and to the extent, the provisions of this Agreement conflict with the Distribution Agreement, or any other agreement entered into in connection with the Distribution, the provisions of this Agreement shall control.

5.4      Assignment; Binding Effect . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other party; provided, however, that no such consent shall be required in the event of a merger, consolidation or sale of either BioPharma or Biotechnologies. Subject to the preceding sentence, this Agreement shall be binding on, and shall inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns.

5.5      Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same.

 

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5.6      Severability . If any provision of this Agreement or the application of any such provision to any person or circumstances shall be held invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision hereof.

5.7      Headings . Headings of sections in this Agreement are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

5.8      Survival . Notwithstanding anything in this Agreement to the contrary, the provisions of this Agreement shall survive for thirty days after the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof).

5.9      Payments . Unless a provision in this Agreement specifically provides a time period for payment, any payment owed under this Agreement shall be paid within 30 days after the date on which such payment becomes due.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, each of the parties has caused this Tax Responsibility Allocation Agreement to be executed by its respective duly authorized officer as of the date first set forth above.

INTEGRATED BIOPHARMA, INC.
 
By:               _____           

Name:

Title:

IBIOPHARMA, INC.
 
By:                 _____         

Name:

Title:

 

 

 

11

FORM OF
TRANSITIONAL SERVICES AGREEMENT

This Transitional Services Agreement (this “ Agreement ”) is entered into as of the ___ day of __________, 2008, by and between IBIOPHARMA, INC., a Delaware corporation (“ Biotech ”), and INTEGRATED BIOPHARMA, INC., a Delaware corporation, (“ BioPharma ”). BioPharma is sometimes referred to herein as “Service Company.”

WHEREAS, Biotech was formerly a subsidiary of BioPharma.

WHEREAS, concurrently with the execution of this Agreement, BioPharma has distributed the Biotech common stock owned by BioPharma to the BioPharma stockholders, as provided in the Separation and Distribution Agreement, dated November 14, 2007 (the “ Distribution ”).

WHEREAS, prior to the Distribution, Biotech obtained various services from BioPharma for corporate level functions, including without limitation legal, financial, tax, and corporate purchasing services.

WHEREAS, Biotech believes that it is in the interest of Biotech to continue to utilize such corporate services from BioPharma after the effective date of the Distribution and as provided in the Separation and Distribution Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.      Services . BioPharma shall offer to provide to Biotech, the services described in Exhibit A attached hereto and incorporated herein by reference (the “ Services ”) which consist of legal, financial, tax, corporate purchasing, and such other Services set forth in Exhibit A, for the term of this Agreement. Biotech may, but is not required to, use the Services for the conduct of Biotech’ business, from time to time or at any time. There is no limit on the number of occasions that Biotech may use the Services, nor is there any limit on the duration of the Services provided by BioPharma to Biotech. The parties may periodically review Biotech’s utilization history of the Services not more frequently than six (6) months, and based on the historical and projected future utilization of the Services by Biotech, the parties may, upon mutual agreement, equitably adjust the service fees set forth below.
 
2.      Service Boundaries . (i) BioPharma shall be required to provide the Services only to the extent and only at the locations such Services are being provided by BioPharma for Biotech immediately prior to the date of this Agreement; and (ii) the Services will be available only for purposes of conducting the business of Biotech substantially in the manner it was conducted prior to the date of this Agreement.
 
3.      Impracticability . BioPharma shall not be required to provide any Service to the extent the performance of such Service becomes impracticable as a result of a cause or causes outside the

 


 

reasonable control of BioPharma, including without limitation, unfeasible technological requirements, or to the extent the performance of such Services would require BioPharma to violate any applicable laws, rules or regulations or would result in the breach of any applicable agreement.
 
4.      Additional Resources . In providing the Services, BioPharma shall not be obligated to: (i) hire any additional employees; (ii) maintain the employment of any specific employee; or (iii) purchase, lease or license any additional facilities, equipment or software.
 
5.      Personnel . Subject to Section 4, above, BioPharma will provide Services by utilizing the Services of such executives, accountants, financial advisers, attorneys, and other persons as have the necessary qualifications to render the Services. If necessary, BioPharma, after consultation with Biotech, may also arrange for the Services of nonaffiliated experts, consultants and attorneys in connection with the performance of any of the Services supplied under this Agreement.
 
6.      Compensation and Allocation . BioPharma will provide the Services for an [annual] fee of $100,000, payable monthly in equal installments in advance on the first day of each month during the term of this Agreement, as it may be extended or renewed. The fee may be adjusted by the parties upon mutual agreement as set forth in Section 1, above.
 
7.      Term and Modification .

A.     Term. The term of this Agreement shall commence on the date of this Agreement and shall remain in effect for one year, and shall thereafter be automatically renewed for two additional one-year terms unless terminated by either party by written notice given not less than ninety (90) days prior to the expiration of the initial or any renewal term. Services shall be provided up to and including the expiration date of this Agreement, subject to earlier termination as provided herein.

B.     Modification of Services. Biotech may modify its selection of Services at any time during the calendar year by giving BioPharma written notice of the different or additional Services it wishes to receive, and/or the Services it no longer wishes to receive, from BioPharma. The requested modification in Services shall take effect on the first day of the first calendar month beginning at least thirty (30) days after Biotech sent written notice to BioPharma.

C.     Modification of Other Terms and Conditions. No other amendment, change or modification of this Agreement shall be valid, unless made in writing and signed by all parties hereto.

 

This Agreement is subject to termination or modification at any time to the extent its performance may conflict with the provisions of any applicable federal, state or local law, including the rules or regulations applicable to any licensed professionals employed by BioPharma and who may render any of the Services.

 

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8.      Notice . Where written notice is required by this Agreement, said notice shall be deemed given when mailed by United States registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

To Biotech:
 
9 Innovation Way, Suite 100
Newark, New Jersey 19711
Attn: President
 
To BioPharma:
 
Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Attn: President
 

9.      Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to their conflict of laws provisions.

10.      Entire Agreement . This Agreement, together with its exhibits, constitutes the entire understanding and agreement of the parties with respect to its subject matter, and effective upon the execution of this Agreement by the respective parties hereof and thereto, any and all prior agreements, understandings or representations with respect to this subject matter are hereby terminated and cancelled in their entirety and are of no further force and effect.

11.      Waiver . No waiver by any party hereto of a breach of any provision of this Agreement shall constitute a waiver of any preceding or succeeding breach of the same or any other provision hereof.

12.      Assignment . This Agreement shall inure to the benefit of and shall be binding upon the parties and their respective successors and assigns. No assignment of this Agreement or any party’s rights, interests or obligations hereunder may be made without the other party’s consent, which shall not be unreasonably withheld, delayed or conditioned; provided, however, that, subject to the requirements of applicable state and federal regulatory law, either party may assign its rights, interests or obligations under this Agreement to an affiliate, without the consent of the other party.

13.      Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall in no way be affected or impaired thereby.

14.      Effective Date . This Agreement is effective the date first written above.

[Signature page immediately follows]

 

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IN WITNESS WHEREOF, the parties have caused this Transitional Services Agreement to be duly executed as of the date first above mentioned.

IBIOPHARMA, INC.
 
 
By:                   _________  

Name:

Title:

INTEGRATED BIOPHARMA, INC.
 
 
By:                    _________  

Name:

Title:

 

 

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EXHIBIT A

DESCRIPTION OF SERVICES OFFERED BY INTEGRATED BIOPHARMA, INC.
UNDER THE TRANSITIONAL SERVICES AGREEMENT

1.      Accounting . Provide advice and assistance to Biotech in accounting matters, including the development of accounting practices, procedures and controls, the maintenance of the general ledger and related subsidiary systems, the preparation and analysis of financial reports, and the processing of certain accounts such as accounts payable, account receivable, and payroll.
 
2.      Auditing . Periodically audit the accounting records and other records maintained by Biotech and coordinate their examination, where applicable, with that of independent public accountants. The audit staff will report on their examination and submit recommendations, as appropriate, on improving methods of internal control and accounting procedures.
 
3.      Legal Regulatory . Provide advice and assistance with respect to legal and regulatory issues as well as regulatory compliance, including Exchange Act authorizations and compliance and regulatory matters under other Federal and State laws.
 
4.      Human Resources . Advise and assist Biotech in the formulation and administration of human resources policies and programs relating to the relevant Biotech labor relations, personnel administration, training, wage and salary administration and safety.
 
5.      Executive and Administrative . Advise and assist Biotech in the solution of major problems and in the formulation and execution of the general plans and policies of Biotech. Advise and assist Biotech as to operations, the issuance of securities, the preparation of filings arising out of or required by the various Federal and State securities, business, public utilities and corporation laws, the selection of executive and administrative personnel, the representation of Biotech before regulatory bodies, proposals for capital expenditures, budgets, financing, acquisition and disposition of properties, expansion of business, rate structures, public relationships and other related matters.
 
6.      Supply Chain . Advise and assist Biotech in the procurement of real and personal property, materials, supplies and services, conduct purchase negotiations, prepare procurement agreements and administer programs of material control.
 
7.      Tax . Advise and assist Biotech in the preparation of Federal and other tax returns, and generally advise Biotech as to any problems involving taxes including the provision of due diligence in connection with acquisitions.
 
8.      Corporate Secretary . Provide all necessary functions required of a publicly held corporation. Coordinate information and activities among stockholders, the transfer agent, and Board of Directors. Provide direct services to security holders. Prepare and file required annual and interim reports to stockholders and the Securities and Exchange Commission. Conduct the annual meeting of stockholders and ensure proper maintenance of corporate records.

 

 

5

FORM OF INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT

THIS INDEMNIFICATION AND INSURANCE MATTERS AGREEMENT (this “ Agreement ”) is entered into as of __________, 2008, by and between Integrated BioPharma, Inc., a Delaware corporation (“ BioPharma ”), and iBioPharma, Inc., a Delaware corporation (“ Biotechnologies ”). Certain capitalized terms used herein are defined in Article IV. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Distribution Agreement (defined below).

RECITALS

WHEREAS, the BioPharma Board of Directors has determined that it is appropriate and desirable for BioPharma to distribute its shares of the common stock of Biotechnologies on a pro rata basis to the holders of BioPharma common stock (the “ Distribution ”) as of ______ __, 2008; and

WHEREAS, BioPharma intends to make the Distribution as of 11:59 P.M. Eastern time, _________, 2008, or such other date as may be fixed by the BioPharma Board of Directors (the “ Distribution Date ”).

WHEREAS, as part of the foregoing, BioPharma and Biotechnologies have entered into the Separation and Distribution Agreement, dated as of November 14, 2007 (the “ Distribution Agreement ”), which provides, among other things, the pro-rata distribution by BioPharma of all of its shares of Biotechnologies common stock to the holders of BioPharma common stock, and the execution and delivery of certain other agreements in order to facilitate and provide for the foregoing; and

WHEREAS, in connection therewith, the parties desire to set forth certain agreements regarding indemnification and insurance.

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows:

1.      Indemnification
 

1.1      Indemnification by Biotechnologies .
 

(a)      Indemnification . Except as otherwise provided in this Agreement, Biotechnologies shall, for itself and for each of its subsidiaries, indemnify, defend and hold harmless the BioPharma Indemnitees from and against any and all Liabilities that any third party seeks to impose upon any of the BioPharma Indemnitees, or which are imposed upon any of the BioPharma Indemnitees, if and to the extent such Liabilities relate to, arise out of or result from any of the following items (without duplication):

(i)     any breach by Biotechnologies or any of its subsidiaries (“ Biotechnologies Group ”) of the Distribution Agreement or any of the Ancillary Agreements (including this Agreement); or

 


(ii)     any Biotechnologies Liability.

(b)      Reduction of Liability . In the event that any member of the Biotechnologies Group makes a payment to any BioPharma Indemnitee hereunder, and the amount of Liabilities paid or the direct out-of-pocket costs incurred by BioPharma for the Indemnitee are subsequently recovered by the BioPharma Indemnitee, either directly or through a third-party recovery (other than as a result of a recovery under an insurance policy owned by BioPharma and under which Biotechnologies is not an insured or an additional insured), BioPharma will promptly repay (or will procure the relevant BioPharma Indemnitee promptly to repay) such member of the Biotechnologies Group the amount by which the payment made by such member of the Biotechnologies Group exceeds the amount of the Liabilities actually paid by the BioPharma Indemnitee.

(c)      Joint and Several Liability; No Modification to Other Agreements . The liability of the members of the Biotechnologies Group under this Section 1.1 shall be joint and several. Nothing in this Section 1.1 shall modify or limit the rights and remedies of BioPharma under the Distribution Agreement or any of the Ancillary Agreements (other than this Agreement) relating to, arising out of or resulting from any breach by Biotechnologies or any member of the Biotechnologies Group of the Distribution Agreement or any of the Ancillary Agreements (other than this Agreement), including without limitation, any provisions relating to the measure of damages, consequential damages, liquidated damages, limitation of damages and/or specific performance.

1.2      Indemnification by BioPharma .

(a)      Indemnification . Except as otherwise provided in this Agreement, BioPharma shall, for itself and its subsidiaries excluding the Biotechnologies Group (the “ BioPharma Group ”), indemnify, defend and hold harmless the Biotechnologies Indemnitees from and against any and all Liabilities that any third party seeks to impose upon any of the Biotechnologies Indemnitees, or which are imposed upon any of the Biotechnologies Indemnitees, if and to the extent such Liabilities relate to, arise out of or result from (without duplication):

(i)     any breach by BioPharma or any member of the BioPharma Group of the Distribution Agreement or any of the Ancillary Agreements (including this Agreement); or

(ii)     any BioPharma Liability;

provided , however , that notwithstanding anything to the contrary herein, in no event shall BioPharma or any member of the BioPharma Group be obligated to indemnify, defend or hold harmless the Biotechnologies Indemnitees from, against or in respect of any Biotechnologies Liability.

 

(b)      Reduction of Liability . In the event that any member of the BioPharma Group makes a payment to any Biotechnologies Indemnitee hereunder, and the amount paid or the direct out-of-pocket costs incurred by the Biotechnologies Indemnitee for the Liabilities on account of

 

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which such payment was made are subsequently recovered by the Biotechnologies Indemnitee, either directly or through a third-party recovery, Biotechnologies will promptly repay (or will procure an Biotechnologies Indemnitee to promptly repay) such member of the BioPharma Group the amount by which the payment made by such member of the BioPharma Group exceeds the amount of the Liabilities actually paid by the Biotechnologies Indemnitee.

(c)      Joint and Several Liability; No Modification to Other Agreements . The liability of the members of the BioPharma Group under this Section 1.2 shall be joint and several. Nothing in this Section 1.2 shall modify or limit the rights and remedies of Biotechnologies under the Distribution Agreement or any of the Ancillary Agreements (other than this Agreement) relating to, arising out of or resulting from any breach by BioPharma or any member of the BioPharma Group of the Distribution Agreement or any of the Ancillary Agreements (other than this Agreement), including without limitation, any provisions relating to the measure of damages, consequential damages, liquidated damages, limitation of damages and/or specific performance.

1.3      Procedures for Defense, Settlement and Indemnification of Third Party Claims .

(a)      Notice of Claims . If an Indemnitee shall receive notice or otherwise learn of the assertion of any Third Party Claim with respect to which a party may be obligated to provide indemnification to such Indemnitee pursuant to Section 1.1 or 1.2, BioPharma or Biotechnologies (as applicable) shall ensure that such Indemnitee shall give the potential Indemnifying Party written notice thereof (including any pleadings relating thereto) within twenty (20) days after becoming aware of such Third Party Claim. Any such notice shall describe the Third Party Claim in reasonable detail. Notwithstanding the foregoing, any delay or failure of any Indemnitee to give notice as provided in this Section 1.3(a) shall not relieve the Indemnifying Party of its obligations under this Article 1, except to the extent that the Indemnifying Party is actually and substantially prejudiced by such delay or failure to give notice.

(b)      Defense by Indemnifying Party . For any Third Party Claim concerning which notice is required to be given under Section 1.3(a), the Indemnifying Party may elect to defend and, subject to Section 1.3(f), may settle or compromise the Third Party Claim using counsel appointed by the Indemnifying Party, which counsel shall be reasonably satisfactory to the Indemnitee. An Indemnifying Party electing to defend a Third Party Claim must notify the Indemnitee of its election to defend within twenty (20) days of receipt of notice of such claim pursuant to Section 1.3(a) or sooner if the nature of the Third Party Claim so requires.

(c)      Defense by BioPharma . Notwithstanding Section 1.3(b), BioPharma, in its sole discretion, upon written notice to Biotechnologies, may elect to defend (or may at any time assume the defense of) and, subject to Section 1.3(f), may settle or compromise, any Third Party Claim or series of related Third Party Claims, regardless of whether BioPharma is obligated to indemnify any member of the Biotechnologies Group in respect of such Third Party Claim or series of related Third Party Claims or whether BioPharma acknowledges any obligation to indemnify any Biotechnologies Indemnitee if:

 

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(i)     any member of the BioPharma Group is named as a party to any of such Third Party Claims; or

(ii)     both BioPharma and Biotechnologies may be Indemnifying Parties with respect to such Third Party Claim(s).

If BioPharma elects to defend against a Third Party Claim pursuant to this Section 1.3(c) all costs and expenses incurred by members of the BioPharma Group in connection with such defense shall be paid by BioPharma and Biotechnologies pro rata based on their respective proportionate liability for any Liabilities relating to, arising out of or resulting from such Third Party Claim (after taking into account the parties’ respective indemnification obligations under this Agreement, other than with respect to payment of defense costs). If the parties proportionate liability for any such liabilities cannot be determined at any point in time while a Third Party Claim is pending, then BioPharma and Biotechnologies shall each pay one-half of such costs and expenses, and the parties may subsequently reallocate all prior costs and expenses paid when the parties’ proportionate liability is finally determined.

(d)      Defense By Non-Electing Party . If the party having the right to elect to defend a Third Party Claim pursuant to Section 1.3(b) or 1.3(c) elects not to defend, or does not within any time frame required thereunder elect to defend, a particular claim, the other party shall defend such Third Party Claim. In such case, (i) the other party shall have the right, subject to Sections 1.3(c) and 1.3(f) to compromise, settle or consent to the entry of any judgment with respect to such Third Party Claim (but such compromise, settlement or judgment shall not necessarily be determinative of which party hereunder is entitled to indemnification) and (ii) the Indemnifying Party shall bear all costs and expenses of defending such Third Party Claim; provided, however, that if both parties may be Indemnifying Parties with respect to such Third Party Claim, the Non-Defending Party (defined below) shall reimburse the Defending Party for the Non-Defending Party’s pro rata share of all costs and expenses incurred by the Defending Party in connection with its defense of such Third Party Claim, based on the Non-Defending Party’s proportionate liability for any Liabilities relating to, arising out of or resulting from such Third Party Claim (after taking into account the parties’ indemnification obligations under this Agreement, other than with respect to payment of defense costs). If the parties proportionate liability for any such liabilities cannot be determined at any point in time while a Third Party Claim is pending, then BioPharma and Biotechnologies shall each pay one-half of such costs and expenses, and the parties may subsequently reallocate all prior costs and expenses paid when the parties’ proportionate liability is finally determined.

(e)      Participation by Non-Defending Party . In the event that a party (a “ Defending Party ”) elects or is required to defend a particular Third Party Claim pursuant to Section 1.3(b), 1.3(c) or 1.3(d), the other party (the “ Non-Defending Party ”) shall have the right to participate in the defense of such Third Party Claim; provided, however, that (i) the Defending Party shall control, manage and direct the defense of such Third Party Claim; and (ii) the costs and expenses of participating in such defense by the Non-Defending Party shall be the sole responsibility of the Non-Defending Party. Nothing in this Section 1.3(e) shall affect the rights of BioPharma under Section 1.3(c) at any time to assume the defense of any Third Party Claim and to be indemnified for costs and expenses of such defense in accordance with Section 1.3(c).

 

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(f)      No Settlement, Compromise or Consent to Judgments .

(i)     No Non-Defending Party may compromise or settle or consent to the entry of judgment or determination of liability with respect to any Third Party Claim without the consent of the Defending Party.

(ii)     Notwithstanding anything to the contrary herein, no Defending Party shall compromise, settle or consent to the entry of judgment or determination of liability concerning any Third Party Claim without providing at least 10 days’ prior written notice of such compromise, settlement or consent to the Indemnifying Party (if the Indemnifying Party is other than the Defending Party) and, if the terms of conditions of such compromise, settlement or consent would have a material adverse effect on the Non- Defending party without the consent of the Non-Defending Party (such approval not to be unreasonably withheld, delayed or conditioned).

1.4      Additional Matters .

(a)      Other Claims for Indemnification . Any claim in respect of a Liability which does not relate to, arise out of or result from a Third Party Claim shall be asserted by written notice from the Indemnitee to the Indemnifying Party stating the specific provisions of this Agreement or any Ancillary Agreement upon which such claim is based. Such Indemnifying Party shall have a period of twenty (20) days from actual receipt of the notice within which to respond thereto. If such Indemnifying Party does not respond within such 20-day period, then such Indemnifying Party shall be deemed to have denied responsibility for such claim.

(b)      Subrogation . In the event of payment by or on behalf of any Indemnifying Party to or on behalf of any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee, in whole or in part based upon whether the Indemnifying Party has paid all or only part of the Indemnitee’s Liability, as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(c)      Effect of Insurance on Indemnification/Contribution Obligations . No Indemnitee shall be required to pursue any claim under any Insurance Policies of which it is a beneficiary in connection with any Liability for which such Indemnitee is entitled to indemnification hereunder. The amount of indemnification or contribution to which such Indemnitee may be entitled hereunder shall not be reduced as a result of any claim such Indemnitee may pursue, or have the right to pursue, under any Insurance Policy in respect of the Liability to which such right to indemnification or contribution relates, unless the Indemnitee shall have actually recovered any portion of such Liability from its insurance carrier(s), in which case, whether or not the amount of indemnification or contribution to such Indemnitee shall be reduced shall be determined in accordance with Sections 1.1(b) and 1.2(b), as applicable.

 

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(d)      Not Applicable to Taxes . Notwithstanding anything to the contrary contained herein, this Agreement shall not apply to Taxes (which are covered by the Tax Sharing Agreement).

1.5      Survival of Indemnities . Subject to Section 3.4, the rights and obligations of the members of the BioPharma Group and the Biotechnologies Group under this Article I shall survive the sale or other transfer by any party of any assets or businesses or the assignment by it of any Liabilities or the sale by any member of the BioPharma Group or the Biotechnologies Group of the capital stock or other equity interests of any Subsidiary to any Person.

2.      Insurance Matters .
 

2.1      Biotechnologies Insurance Coverage .

(a) Biotechnologies, and Biotechnologies alone, shall be responsible for obtaining and maintaining insurance programs for its risk of loss beginning on the Distribution and for all time periods thereafter. Such insurance arrangements shall be separate and apart from BioPharma’s insurance programs. BioPharma shall not be required to maintain any insurance coverage for the benefit of the members of the Biotechnologies Group or the directors, officers or employees of any member of the Biotechnologies Group for any period after the Distribution.

2.2     (a) BioPharma Insurance Coverage . BioPharma shall be responsible for obtaining and maintaining insurance programs for its risks of loss (a) for all of BioPharma’s subsidiaries and businesses including Biotechnologies, for all time periods prior to the Distribution Date, and (b) for all of its subsidiaries and businesses excluding Biotechnologies from the Distribution Date and for all time periods thereafter.

2.3      Cooperation and Agreement Not to Release Carriers .

(a) Each of BioPharma and Biotechnologies will share such information as is reasonably necessary in order to permit the other to manage and conduct its insurance matters in an orderly fashion. Biotechnologies, at the request of BioPharma, shall cooperate with and use commercially reasonable efforts to assist BioPharma in recoveries for claims made under any BioPharma Insurance Policy for the benefit of members of the BioPharma Group. Neither Biotechnologies nor any of its Subsidiaries shall take any action which would intentionally jeopardize or otherwise interfere with the ability of any member of the BioPharma Group to collect any proceeds payable pursuant to any insurance policy. Nothing in this Agreement shall be interpreted to require BioPharma to maintain any insurance coverage for any Member of the Biotechnologies Group or any of their officers, directors or employees.

2.4      No Liability .

(a) Biotechnologies does hereby, for itself and as agent for each other member of the Biotechnologies Group, agree that no member of the BioPharma Group or any BioPharma Indemnitee shall have any Liability whatsoever as a result of the insurance policies and practices of BioPharma and its Subsidiaries as in effect at any time prior to the Distribution Date, including as a result of the level or scope of any such insurance, the creditworthiness of any

 

6

 


insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

2.5      No Restrictions .

(a) Nothing in this Agreement shall be deemed to restrict any member of the Biotechnologies Group from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period.

2.6      Further Agreements .

(a) Biotechnologies, the members of the Biotechnologies Group, and the directors, officers and employees of any member of the Biotechnologies Group, shall not make any claims under BioPharma Insurance Policies, including in respect of events that occurred when Biotechnologies and the members of the Biotechnologies Group were subsidiaries of BioPharma, without BioPharma’s approval, which may be granted or withheld in BioPharma’s sole discretion.

3.      Miscellaneous .
 

3.1      Entire Agreement . This Agreement, the Distribution Agreement, the Ancillary Agreements and any exhibits and schedules attached hereto and thereto, constitutes the entire agreement among the parties with respect to the subject matter hereof and thereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof and thereof.

3.2      Governing Law . This Agreement shall be construed in accordance with the laws of the State of Delaware as to all matters regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto.

3.3      Notices . All notices and other communications required or permitted to be given by any party pursuant to the terms of this Agreement shall be given as set forth in Section 5.5 of the Distribution Agreement.

3.4      Binding Effect; Assignment; Third-Party Beneficiaries . Biotechnologies may not, directly or indirectly, in whole or in part, whether by operation of law or otherwise, assign or transfer this Agreement or its rights or obligations hereunder, without BioPharma’s prior written consent and, except as otherwise permitted hereby, any attempted assignment, transfer or delegation without such prior written consent shall be voidable at the sole option of BioPharma. Nothing in this Agreement shall restrict any transfer of this Agreement by BioPharma, whether by operation of law or otherwise. Without limiting the foregoing, this Agreement shall be binding upon BioPharma and the other members of the BioPharma Group and Biotechnologies and the other members of the Biotechnologies Group and inure solely to the benefit of the Biotechnologies Indemnitees and the BioPharma Indemnitees and their respective legal representatives, successors and permitted assigns, and nothing in this Agreement, express or

 

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implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

3.5      Offset . In addition to, and not in limitation of, any other remedies any member of the BioPharma Group or any BioPharma Indemnitee may be entitled to under the Distribution Agreement, any Ancillary Agreement (including this Agreement), any member of the BioPharma Group or any BioPharma Indemnitee may satisfy any amounts owed to such member of the BioPharma Group or BioPharma Indemnitee by any member of the Biotechnologies Group by means of an offset against any amounts any member of the BioPharma Group may from time to time owe to any member of the Biotechnologies Group or an Biotechnologies Indemnitee, whether under the Distribution Agreement, any Ancillary Agreement (including this Agreement), any other agreement or arrangement existing between any member of the BioPharma Group and any member of the Biotechnologies Group, or otherwise.

3.6      Counterparts . This Agreement, including any schedules and exhibits hereto, and the other documents referred to herein, may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement.

3.7      Severability . If any term or other provision of this Agreement or any schedules or exhibits attached hereto is determined by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, this Agreement shall be modified by such court, agency or arbitrator so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible.

3.8      No Waiver . No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.

3.9      Amendment . No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the parties to this Agreement.

3.10      Interpretation . The headings contained in this Agreement, in any Annex, Exhibit or Schedule hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term used in any Annex, Schedule or Exhibit but not otherwise defined therein, shall have the meaning assigned to such term in this Agreement. When a reference is made in this Agreement to an Article or Section, or an Annex, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Annex, Exhibit or Schedule to, this Agreement unless otherwise indicated.

4.      Definitions .

 

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4.1      Action . “ Action ” means any claim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international governmental authority or any arbitration or mediation tribunal.

4.2      BioPharma Business . “ BioPharma Business ” means the business and operations of BioPharma as conducted on the date hereof, other than the Biotechnologies Business.

4.3      BioPharma Indemnitees . “ BioPharma Indemnitees ” means BioPharma, each member of the BioPharma Group and each of their respective directors, officers, employees, agents and representatives.

4.4      BioPharma Insurance Policy . “ BioPharma Insurance Policy ” shall mean each Insurance Policy owned or maintained by a member of the BioPharma Group.

4.5      BioPharma Liabilities . “ BioPharma Liabilities ” means

(a)     all Liabilities of any member of the BioPharma Group under, allocated to or to be retained or assumed by BioPharma or any of the other members of the BioPharma Group pursuant to the Distribution Agreement, this Agreement or any other Ancillary Agreement;

(b)     all Liabilities incurred by members of the BioPharma Group in connection with the management or conduct prior to, on or following the Distribution Date of the BioPharma Business.

4.6      Biotechnologies Business . “ Biotechnologies Business ” means the business and operations of Biotechnologies as conducted on the date hereof.

4.7      Biotechnologies Indemnitees . “ Biotechnologies Indemnitees ” means Biotechnologies, each member of the Biotechnologies Group and each of their respective directors, officers, employees, agents or representatives.

4.8      Biotechnologies Liabilities . “ Biotechnologies Liabilities ” means, collectively, all of the Liabilities of Biotechnologies and each of the other members of the Biotechnologies Group, including without limitation:

(a)     all of the Liabilities reflected on the financial statements of Biotechnologies;

(b)     all Liabilities which are incurred or arise, or which accrue or exist out of, or in connection with, or otherwise relate to or result from, the Biotechnologies Business including without limitation any liabilities relating to employment practices, employee benefits, products or professional liability, violation or nonconformity with the environmental laws, rule or regulations, or employee health and safety;

 

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(c)     all Liabilities of each member of the Biotechnologies Group under, allocated to or to be retained or assumed by Biotechnologies or any of the other members of the Biotechnologies Group pursuant to the Distribution Agreement, this Agreement or any Ancillary Agreements.

(d)     all of the Liabilities of any member of the BioPharma Group or Biotechnologies Group (whenever arising whether prior to, on or following the Distribution Date) arising out of or in connection with or otherwise relating to the management or conduct of the Biotechnologies Business prior to, on, or following the Distribution Date;

(e)     all Liabilities relating to, arising out of or resulting from (a) any Actions in which any member of the Biotechnologies Group has been named as a defendant by a plaintiff or by way of counter claim by a defendant in any Action as of the date of this Agreement or any amendments to such Actions (the “ Existing Actions ”), (b) any of the facts, circumstances and events giving rise to any Action relating to Biotechnologies, the Biotechnologies Business, or any liability of Biotechnologies or the Biotechnologies Business prior to, on or after the Distribution Date, and (c) any Actions involving similar claims or which are based upon similar facts, circumstances or events, whether involving the same parties or other parties, in each case whether relating to, arising out of or resulting from facts, circumstances or events prior to, on or after the Distribution Date;

(f)     all Liabilities relating to, arising out of or resulting from, any Third Party Claim relating to, arising out of or resulting from any infringement or alleged infringement by Biotechnologies on any intellectual property or other rights of any Person;

(g)     all Securities Liabilities relating to, arising out of or resulting from (A) the Distribution and any documents, information or data (financial or otherwise) furnished or provided, orally or in writing, to purchasers or transferees or potential purchasers and transferees (or any of their respective representatives), in connection therewith or filed or furnished in connection therewith with or to any Governmental Authority or any securities exchange or securities market, including, without limitation, the Registration Statements, (B) any other offer, issuance, sale, exchange or other transfer of securities of or by Biotechnologies or any member of the Biotechnologies Group prior to, on or after the Distribution Date, or any documents, information or data (financial or otherwise) furnished or provided, orally or in writing, to transferees or purchasers or potential transferees or purchasers (or any of their respective representatives) of such securities or filed or furnished in connection therewith with or to any Governmental Authority or securities exchange or securities market, including, without limitation, any registration statement, (C) any oral or written disclosure made, whether or not included in documents filed with or furnished to any Governmental Authority or securities exchange or securities market, by Biotechnologies or any member of the Biotechnologies Group, or on behalf of Biotechnologies or any Member of the Biotechnologies Group, prior to, on or after the Distribution Date or any disclosure made (other than by a member of the BioPharma Group), orally or in writing, of information or data (financial or otherwise) relating to or concerning Biotechnologies or any other member of the Biotechnologies Group, the business, operations and management of the Biotechnologies Business and/or Biotechnologies or any other member of the Biotechnologies Group, and (D) any oral or written disclosure made, whether or not included in documents filed with or furnished to any Governmental Authority or securities

 

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exchange or securities market, by BioPharma or any member of the BioPharma Group prior to, on or after the Distribution Date based on any information or data (financial or otherwise) provided by or on behalf of Biotechnologies or any member of the Biotechnologies Group; and

(h)     all other Liabilities arising out of, relating to or resulting from any Action or Third Party Claim by any Governmental Authority or any other Person that is based on (A) any violations or alleged violations by Biotechnologies, its Subsidiaries and/or any of their respective directors, officers, employees, agents or representatives of any of the provisions of the Securities Act, the Exchange Act, or the rules and regulations of the Commission promulgated thereunder, any other securities or similar law or any other law, rule or regulation, or (B) any breach or alleged breach of fiduciary duty by the Biotechnologies Board or any Committee of the Biotechnologies Board (or any member of the Biotechnologies Board or any Committee thereof) or the board of directors or similar body or any Committee of the board of directors or similar body (or any member of any such board or similar body or any Committee thereof) of any other member of the Biotechnologies Group, or by any officer or employee of any member of the Biotechnologies Group.

4.9      Dispute . “ Dispute ” means a dispute arising from or in connection with the Distribution Agreement, this Agreement or any other Ancillary Agreement, whether based on contract, tort, or otherwise.

4.10      Distribution Agreement . “ Distribution Agreement ” has the meaning set forth in the Recitals hereof.

4.11      Indemnifying Party . “ Indemnifying Party ” means any party who is required to indemnify any other Person pursuant to this Agreement.

4.12      Indemnitee . “ Indemnitee ” means a BioPharma Indemnitee or an Biotechnologies Indemnitee.

4.13      Insurance Policies . “ Insurance Policies ” means insurance policies pursuant to which a Person makes a true risk transfer to an insurer.

4.14      Liabilities . “ Liabilities ” means all debts, liabilities, guarantees, commitments and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising (including, without limitation, whether arising out of any contract or tort based on negligence or strict liability) and whether or not the same would be required by generally accepted accounting principles to be reflected in financial statements or disclosed in the notes thereto. For purposes of any indemnification hereunder, “ Liabilities ” shall be deemed also to include any and all damages, claims, suits, judgments, fines, penalties, costs and expenses of any kind or character, including attorney’s fees and expenses, out-of-pocket costs of investigation and preparation, expert witness costs and any other fees and expenses associated with the defense of any Action whether relating to Third Party Claims or Actions against the other party hereto.

 

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4.15      Material Adverse Effect . “ Material Adverse Effect ” means, with respect to either Group, a material adverse effect on the business, results of operations or financial conditions of the members of such Group, taken as a whole, provided that, without limiting the events, circumstances or conditions which may constitute or result in a Material Adverse Effect on the BioPharma Group, any compromise, settlement or consent affecting the BioPharma Group that, if applied to Biotechnologies or any member of the Biotechnologies Group, would result in a Material Adverse Effect on the Biotechnologies Group, shall be deemed to result in a Material Adverse Effect on the BioPharma Group.

4.16      Securities Liabilities . “ Securities Liabilities ” means any and all losses, liabilities, penalties, claims, damages, demands, costs or expenses or other Liabilities whatsoever that are assessed, imposed, awarded against, incurred or accrued by a Person arising out of or relating in whole or in part to any Action, any potential or threatened Action, any Third Party Claim or any potential or threatened Third Party Claim by any Governmental Authority or any other Person that is based on any violations or alleged violations of the Securities Act, the Exchange Act, and any of the rules or regulations of the Commission promulgated under the Securities Act or Exchange Act, or any other securities or other similar laws, rules or regulations, including, without limitation, state securities or “blue sky” laws, rules or regulations, foreign securities laws, rules or regulations and rules or regulations of any securities exchange or market.

4.17      Subsidiary . “ Subsidiary ” has the meaning set forth in the Distribution Agreement.

4.18      Taxes . “ Taxes ” has the meaning set forth in the Tax Sharing Agreement.

4.19      Third Party Claim . “ Third Party Claim ” means an Action brought, asserted, commenced or pursued by a Person (including any Governmental Authority) other than a member of the BioPharma Group or the Biotechnologies Group.

4.20      Other Definitions . Any capitalized terms used but not defined herein shall have the meanings assigned to them in the Distribution Agreement.

 

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IN WITNESS WHEREOF, each of the parties has caused this Indemnification and Insurance Matters Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written.

INTEGRATED BIOPHARMA, INC.

 
By: _________________________________
Name:
Title:

 
IBIOPHARMA, INC.

 
By: _________________________________
Name:
Title:

 

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SPECIMEN COMMON STOCK CERTIFICATE

NUMBER

SHARES

          

          

IBIOPHARMA, INC.
Incorporated under the Laws of the State of Delaware

 

COMMON STOCK

 

     

SEE REVERSE FOR
CERTAIN DEFINITIONS

This Certifies that
is the owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $0.001
EACH OF THE COMMON STOCK OF
IBIOPHARMA, INC.

transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this certificate properly endorsed.

Witness the seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated: ________________

IBIOPHARMA, INC.

2008

 
     

  ________________

CORPORATE SEAL

  ________________

PRESIDENT

DELAWARE

SECRETARY

     

     The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

 

TEN COM

as tenants in common

UNIF GIFT MIN ACT - ________ Custodian _________

TEN ENT

as tenants by the entireties

 

(Cust)

(Minor)

JT TEN

as joint tenants with right of survivorship and not as tenants in common

 

under Uniform Gifts to Minors Act

 

(State)

 

Additional Abbreviations may also be used though not in the above list.

 

iBioPharma, Inc.

 

The Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof of the Corporation and the qualifications, limitations, or restrictions of such preferences and/or rights. This certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Certificate of Incorporation and all amendments thereto and any resolutions of the Board of Directors providing for the issue of shares of Preferred Stock (copies of which may be obtained from the secretary of the Corporation), to all of which the holder of this certificate by acceptance hereof assents.

 

For value received, _________________________________________ hereby sell, assign and transfer unto

 

PLEASE INSERT SOCIAL
SECURITY OR OTHER
IDENTIFYING
NUMBER OF ASSIGNEE

 
   
     

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)

   
     
     
 
 
 

shares

 
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
 
 

Attorney

 

to transfer the said stock on the books of the within named Corporation will full power of substitution in the premises.

 
 

Dated__________________ By:______________________________

 

Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever.

 

Signature(s) Guaranteed:

 
   

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

 
   

CERTIFICATE OF INCORPORATION
OF
IBIOPHARMA, INC.

PURSUANT TO SECTION 102 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

The undersigned, in order to form a corporation pursuant to Section 102 of the General Corporation Law of the State of Delaware, hereby certifies:

1.     The name of the Corporation is iBioPharma, Inc. (the “Corporation”).

2.     The Certificate of Incorporation of the Corporation shall read as follows:

First :     The name of the corporation is IBIOPHARMA, INC.

Second :     The address of the Corporation’s registered office in the State of Delaware is 9 Innovation Way, Suite 100, Newark, Delaware 19711, New Castle County. The name of the registered agent of the corporation in the State of Delaware at such address is Jennifer Kmiec.

Third :     The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

Fourth :     The total number of shares which the Corporation shall have authority to issue is 51,000,000 shares of capital stock consisting of 50,000,000 shares of common stock, $0.001 par value per share (“ Common Stock ”) and 1,000,000 shares of preferred stock, $0.001 par value per share (“ Preferred Stock ”).

The Board of Directors of the Corporation (the “Board of Directors”) is hereby expressly authorized by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

Fifth :     The name and mailing address of the incorporator are as follows:

Name

Mailing Address

Kelly S. Diemand

c/o Greenberg Traurig, LLP
Met Life Building
200 Park Avenue
New York, New York 10166


 

Sixth :     The Corporation is to have perpetual existence.

Seventh :     The Corporation expressly elects not to be subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware.

Eighth :     The Board of Directors is expressly authorized to adopt, amend or repeal the by-laws of the Corporation.

Ninth :     Elections of directors need not be by written ballot unless the by-laws of the Corporation shall otherwise provide.

Tenth :     No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.

Eleventh :     Except as may otherwise be specifically provided in this Certificate of Incorporation, no provision of this Certificate of Incorporation is intended by the Corporation to be construed as limiting, prohibiting, denying or abrogating any of the general or specific powers or rights conferred under the General Corporation Law of the State of Delaware upon the Corporation, upon its stockholders, bondholders and security holders, and upon its directors, officers and other corporate personnel, including, in particular, the power of the Corporation to furnish indemnification to directors and officers in the capacities defined and prescribed by the General Corporation Law of the State of Delaware and the defined and prescribed rights of said persons to indemnification as the same are conferred under the General Corporation Law of the State of Delaware. The Corporation shall, to the fullest extent permitted by the laws of the State of Delaware, including but not limited to Section 145 of the Delaware General Corporation Law, as the same may be amended and supplemented, indemnify any and all directors and officers of the Corporation and may, in the discretion of the Board of Directors, indemnify any and all other persons whom it shall have power to indemnify under said Section or otherwise under Delaware law from and against any and all of the expenses, liabilities or other matters referred to or covered by said Section. The indemnification provisions contained in the Delaware General Corporation Law shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, resolution of stockholders or disinterested directors, or otherwise, and shall continue as to a person who has ceased to be a director, officer, employee or agent, both as to action in his official capacity and as to action in another capacity while holding such office, and shall inure to the benefit of the heirs, executors and administrators of such person.

           Twelfth : The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereinafter

 


 

prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of April, 2008, and I affirm that the foregoing certificate is my act and deed and that the facts stated herein are true.

/s/ Kelly S. Diemand               
Kelly S. Diemand, Incorporator

BYLAWS OF iBioPharma, Inc.

(A Delaware Corporation)

 

Article I

STOCKHOLDERS  


1.1      Place of Meetings . All meetings of stockholders shall be held at such place as may be designated from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer or, if not so designated, at the principal office of the corporation.

 

1.2      Annual Meeting . The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors, the Chairman of the Board or the Chief Executive Officer (which date shall not be a legal holiday in the place where the meeting is to be held). If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these Bylaws to the annual meeting of the stockholders shall be deemed to refer to such special meeting.

 

1.3      Special Meetings .

 

(a)      Special meetings of stockholders for any purpose or purposes for which meetings may be lawfully called, may be called at any time by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or by one or more stockholders holding shares in the aggregate entitled to cast not less than fifty percent (50%) of the votes at that meeting. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

 

(b)     If a special meeting is called by anyone other than the Board of Directors, the Chairman of the Board or the Chief Executive Officer, then the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by other written communication, including by electronic transmission, to the Chairman of the Board, the Chief Executive Officer, any Vice President or the Secretary of the corporation. Upon receipt of a written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary of the corporation to fix the date of the meeting to be held at such date and time as the Secretary may fix, not less than ten (10) nor more than sixty (60) days after the receipt of the request, and to give due notice thereof in accordance with the provisions of Section 1.4 of these Bylaws. If the notice is not given within twenty (20) days after receipt of the request, then the person or persons requesting the meeting may give the notice. Nothing contained in this Section 1.3(b) shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 


1.4      Notice of Meetings . Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with Delaware law) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the General Corporation Law of the State of Delaware.

 

1.5      Voting List . The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

 

1.6      Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum for the transaction of business. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.

 

1.7      Adjournments . Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these Bylaws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.

 

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1.8      Voting and Proxies . Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by Delaware law by the stockholder or such stockholder’s authorized agent and delivered (including by electronic transmission) to the Secretary of the corporation. No such proxy shall be voted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.

 

1.9      Action at Meeting . When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the affirmative vote of the holders of shares of stock having a majority of the votes cast by the holders of all of the shares of stock present or represented and voting on such matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on such matter), except when a different vote is required by law, the Certificate of Incorporation or these Bylaws. When a quorum is present at any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election.

 

1.10      Nomination of Directors.

 

(a)      Except for (i) any directors elected in accordance with Section 2.8 hereof by the Board of Directors to fill a vacancy or newly-created directorships, or (ii) as otherwise required by applicable law or stock market regulation, only persons who are nominated in accordance with the procedures in this Section 1.10 shall be eligible for election as directors. Nomination for election to the Board of Directors of the corporation at a meeting of stockholders may be made (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who (x) complies with the notice procedures set forth in Section 1.10(b) and (y) is a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such meeting.

 

(b)     To be timely, a stockholder’s notice must be received in writing by the Secretary at the principal executive offices of the corporation as follows: (x) in the case of an election of directors at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, a stockholder’s notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth

 

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day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs; or (y) in the case of an election of directors at a special meeting of stockholders, not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (A) the 90th day prior to such special meeting and (B) the tenth day following the day on which notice of the date of such special meeting was mailed or public disclosure of the date of such special meeting was made, whichever first occurs. The stockholder’s notice to the Secretary shall set forth: (x) as to each proposed nominee (i) such person’s name, age, business address and, if known, residence address, (ii) such person’s principal occupation or employment, (iii) the class and number of shares of stock of the corporation which are beneficially owned by such person, and (iv) any other information concerning such person that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (y) as to the stockholder giving the notice (i) such stockholder’s name and address, as they appear on the corporation’s books, (ii) the class and number of shares of stock of the corporation which are owned, beneficially and of record, by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice and (v) a representation whether the stockholder intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination; and (z) as to the beneficial owner, if any, on whose behalf the nomination is being made (i) such beneficial owner’s name and address, (ii) the class and number of shares of stock of the corporation which are beneficially owned by such beneficial owner, (iii) a description of all arrangements or understandings between such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made and (iv) a representation whether the beneficial owner intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock requirement to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination. In addition, to be effective, the stockholder’s notice must be accompanied by the written consent of the proposed nominee to serve as a director if elected. The corporation may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as a director of the corporation. A stockholder shall not have complied with this Section 1.10(b) if the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with the representations with respect thereto required by this Section 1.10.

(c)     The chairman of any meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the provisions of this Section 1.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with the representations with respect thereto required by this Section 1.10).

 

(d)     Except as otherwise required by law, nothing in this Section 1.10 shall obligate the corporation or the Board of Directors to include in any proxy statement or other

 

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stockholder communication distributed on behalf of the corporation or the Board of Directors information with respect to any nominee for director submitted by a stockholder.

(e)     Notwithstanding the foregoing provisions of this Section 1.10, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the corporation to present a nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the corporation.

 

(f)     For purposes of this Section 1.10, “public disclosure” shall include disclosure in a press release reported by the Dow Jones New Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.


1.11      Notice of Business at Annual Meetings.

 

(a)      At any annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (iii) properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, (x) if such business relates to the nomination of a person for election as a director of the corporation, the procedures in Section 1.10 must be complied with and (y) if such business relates to any other matter, the stockholder must (A) have given timely notice thereof in writing to the Secretary in accordance with the procedures set forth in Section 1.11(b) and (B) be a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such annual meeting.

 

(b)     To be timely, a stockholder’s notice must be received in writing by the Secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year’s annual meeting, a stockholder’s notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. The stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of shares of stock of the corporation which are owned, of record and beneficially, by the stockholder and beneficial owner, if any, (iv) a description of all arrangements or understandings between such stockholder or such beneficial owner, if any, and any other person or persons (including their names) in

 

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connection with the proposal of such business by such stockholder and any material interest of the stockholder or such beneficial owner, if any, in such business, (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting and (vi) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies from stockholders in support of such proposal. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting of stockholders except in accordance with the procedures set forth in this Section 1.11; provided, that any stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Exchange Act, and is to be included in the corporation’s proxy statement for an annual meeting of stockholders shall be deemed to comply with the requirements of this Section 1.11. A stockholder shall not have complied with this Section 1.11(b) if the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with the representations with respect thereto required by this Section 1.11.

(c)     The chairman of any meeting shall, if the facts warrant, determine that business was not properly brought before the meeting in accordance with the provisions of this Section 1.11 (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s proposal in compliance with the representation with respect thereto required by this Section 1.11), and if the chairman should so determine, the chairman shall so declare to the meeting and such business shall not be brought before the meeting.

 

(d)     Notwithstanding the foregoing provisions of this Section 1.11, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the corporation to present business, such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the corporation.

 

(e)     For purposes of this Section 1.11, “public disclosure” shall include disclosure in a press release reported by the Dow Jones New Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.


1.12      Conduct of Meetings.

 

(a)      Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman’s absence by the Vice Chairman of the Board, if any, or in the Vice Chairman’s absence by the Chief Executive Officer, or in the Chief Executive Officer’s absence by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen by vote of the stockholders at the meeting.

 

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The Secretary shall act as secretary of the meeting, but in the Secretary’s absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

(b)     The Board of Directors of the corporation may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

(c)     The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. If no announcement is made, the polls shall be deemed to have opened when the meeting is convened and closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted.

 

(d)     In advance of any meeting of stockholders, the Board of Directors, the Chairman of the Board or the Chief Executive Officer shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the corporation. Each inspector, before entering upon the discharge of such inspector’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law.


 

1.13      Action by Consent in Lieu of a Meeting . Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of statute or of the Certificate of Incorporation or of these Bylaws, the meeting and vote of stockholders may be dispensed with, and the action taken without such meeting and vote, if a consent in writing, setting forth the action so taken, shall be signed by the

 

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holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the corporation entitled to vote thereon were present and voted.

 

Article II

DIRECTORS


2.1      General Powers . The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation.

 

2.2      Number, Election and Qualification . The number of directors of the Corporation shall be established from time to time by the Board of Directors. Election of directors need not be by written ballot. Directors need not be stockholders of the corporation.

 

2.3      Classes of Directors . The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III.

 

2.4      Terms of Office . Each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, that each director initially appointed to Class I shall serve for a term expiring at the corporation’s annual meeting of stockholders held in 2009; each director initially appointed to Class II shall serve for a term expiring at the corporation’s annual meeting of stockholders held in 2010; and each director initially appointed to Class III shall serve for a term expiring at the corporation’s annual meeting of stockholders held in 2011; provided, further, that the term of each director shall continue until the election and qualification of a successor and be subject to such director’s earlier death, resignation or removal.

 

2.5      Quorum . A majority of the directors at any time in office shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.

 

2.6      Action at Meeting . Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by the Certificate of Incorporation.

 

2.7      Removal . Directors of the corporation may be removed only for cause and only by the affirmative vote of the holders of a majority of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors.

 

2.8      Vacancies . Any vacancy or newly-created directorships in the Board of Directors, however occurring shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy shall hold office until the next election of the

 

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class for which such director shall have been chosen, subject to the election and qualification of a successor and to such director’s earlier death, resignation or removal.

2.9      Resignation . Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.

 

2.10      Regular Meetings . Regular meetings of the Board of Directors may be held without notice at such time and place as shall be determined from time to time by the Board of Directors; provided, that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders.

 

2.11      Special Meetings . Special meetings of the Board of Directors may be held at any time and place designated in a call by the Chairman of the Board, the Chief Executive Officer, two or more directors, or by one director in the event that there is only a single director in office.

 

2.12      Notice of Special Meetings . Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) in person or by telephone or electronic mail at least 24 hours in advance of the meeting, (ii) by sending a telegram or telecopy or delivering written notice by hand, to such director’s last known business or home address at least 48 hours in advance of the meeting, or (iii) by sending written notice, via first-class mail or reputable overnight courier, to such director’s last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting.

 

2.13      Meetings by Conference Communications Equipment . Directors may participate in meetings of the Board of Directors or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.

 

2.14      Action by Consent . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents or electronic transmissions are filed with the minutes of proceedings of the Board of Directors or committee.

 

2.15      Committees . The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to

 

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act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these Bylaws for the Board of Directors.

2.16      Compensation of Directors . Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service.

 

Article III

OFFICERS

 

3.1      Titles . The officers of the corporation shall consist of a Chief Executive Officer, a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors may from time to time determine, including a Chairman of the Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate.

 

3.2      Election . The Chief Executive Officer, President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.

 

3.3      Qualification . No officer need be a stockholder. Any two or more offices may be held by the same person.

 

3.4      Tenure . Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each officer shall hold office until such officer’s successor is elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, resignation or removal.

 

3.5      Resignation and Removal . Any officer may resign by delivering a written resignation to the corporation at its principal office or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.

 

Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office.

 

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Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation.

3.6      Vacancies . The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of Chief Executive Officer, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is elected and qualified, or until such officer’s earlier death, resignation or removal.

 

3.7      Chairman of the Board . The Board of Directors may appoint from its members a Chairman of the Board, who need not be an employee or officer of the corporation. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the corporation’s Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.8 of these Bylaws. Unless otherwise provided by the Board of Directors, the Chairman of the Board shall preside at all meetings of the Board of Directors and stockholders.

 

3.8      Chief Executive Officer . The Chief Executive Officer shall have general charge and supervision of the business of the Corporation subject to the direction of the Board of Directors.

 

3.9      President . The President shall perform such other duties and shall have such other powers as the Board of Directors and the Chief Executive Officer (if the Chairman of the Board or another person is serving in such position) may from time to time prescribe.

 

3.10      Vice Presidents . Any Vice President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer or the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the Chief Executive Officer and when so performing shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors.

 

3.11      Secretary and Assistant Secretaries . The Secretary shall perform such duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be

 

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custodian of corporate records and the corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.

3.12      Treasurer and Assistant Treasurers . The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these Bylaws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation.

 

The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer.

3.13      Salaries . Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors.

 

Article IV

CAPITAL STOCK


4.1      Issuance of Stock . Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any shares of the authorized capital stock of the corporation held in the corporation’s treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such lawful consideration and on such terms as the Board of Directors may determine.

 

4.2      Shares of Stock . Shares of stock of the corporation may be certificated or uncertificated as provided under the law of the State of Delaware. Every holder of stock of the corporation shall be entitled, upon request, to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares

 

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owned by such holder in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile.

4.3      Transfers . Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by (i) in the case of certificated shares of stock, the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, or (ii) in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney lawfully constituted in writing and compliance with appropriate procedures for transferring shares in uncertificated form, and for each of (i) and (ii) above, with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require and upon payment of all necessary transfer taxes. Except as may be otherwise required by law, by the Certificate of Incorporation or by these Bylaws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these Bylaws.

 

4.4      Lost, Stolen or Destroyed Certificates . The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar.

 

4.5      Record Date . The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates.

 

If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.

 

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A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Article V

INDEMNIFICATION OF DIRECTORS AND OFFICERS


5.1      General . The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

 

5.2      Derivative Actions . The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the-fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

 

5.3      Indemnification in Certain Cases . To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 5.1 and 5.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

 

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5.4      Procedure . Any indemnification under Sections 5.1 and 5.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in such Sections 5.1 and 5.2. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders.

 

5.5      Advances for Expenses . Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the corporation as authorized in this Article V.

 

5.6      Rights Not Exclusive . The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

 

5.7      Insurance . The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article V.

 

5.8      Definition of Corporation . For the purposes of this Article VI, references to "the corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity.

 

5.9      Survival of Rights . The indemnification and advancement of expenses provided by, or granted pursuant to this Article V shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

 

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Article VI

GENERAL PROVISIONS

 

6.1      Fiscal Year . Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of July of each year and end on the last day of June in each year.

 

6.2      Corporate Seal . The corporate seal shall be in such form as shall be approved by the Board of Directors.

 

6.3      Waiver of Notice . Whenever notice is required to be given by law, by the Certificate of Incorporation or by these Bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time stated in such notice, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

6.4      Voting of Securities . Except as the Board of Directors may otherwise designate, the Chief Executive Officer or the Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation.

 

6.5      Evidence of Authority . A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.

 

6.6      Certificate of Incorporation . All references in these Bylaws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time.

 

6.7      Severability . Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.

 

6.8      Pronouns . All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

 

6.9      Checks, Notes, Drafts, Etc . All checks, notes, drafts or other orders for the payment of money of the corporation shall be signed, endorsed or accepted in the name of the corporation by such officer, officers, person or persons as from time to time may be designated by the Board of Directors or by an officer or officers authorized by the Board of Directors to make such designation.

 

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6.10      Execution of Contracts, Deeds, Etc . The Board of Directors may authorize any officer or officers, agent or agents, in the name and on behalf of the corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

 

Article VII

AMENDMENTS


These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation.

 

 

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FORM OF SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “ Agreement ”) is dated as of ________________, 2008 among iBioPharma, Inc., a Delaware corporation (the “ Company ”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “ Purchaser ” and collectively the “ Purchasers ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I
DEFINITIONS

1.1.      Definitions . In addition to the terms defined elsewhere in this Agreement the following terms have the meanings set forth in this Section 1.1:

 

Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

Board of Directors ” means the board of directors of the Company.

Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

Closing ” or “ Closings ” means the closing of the purchase and sale of the Securities pursuant to Section 2.2.

Closing Date ” means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the applicable Subscription Amount and (ii) the Company’s obligations to deliver the applicable Securities have been satisfied or waived.

Commission ” means the Securities and Exchange Commission.


Common Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

Common Stock Equivalents ” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

Company Counsel ” means Greenberg Traurig, LLP, with offices located at 200 Park Avenue, New York, New York 10166.

Disclosure Schedules ” shall have the meaning ascribed to such term in Section 3.1.

Effective Date ” means the date that the initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission.

Escrow Agent ” shall mean Greenberg Traurig, LLP, having an office at 200 Park Avenue, New York, New York 10166.

Escrow Agreement ” shall mean the escrow agreement entered into prior to or on the date hereof, by and among the Company and the Escrow Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions contemplated hereunder.

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Exempt Issuance ” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by the Board of Directors.

Information Statement ” shall mean the draft information statement on Schedule 14C in the form attached hereto as Exhibit A .

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Liens ” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other similar restriction.

Material Adverse Effect ” shall have the meaning assigned to such term in Section 3.1(b).

Parent ” shall mean Integrated BioPharma, Inc., a Delaware corporation.

Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Registration Rights Agreement ” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.

Registration Statement ” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Shares and the Warrant Shares by each Purchaser as provided for in the Registration Rights Agreement.

Required Approvals ” shall have the meaning ascribed to such term in Section 3.1(e).

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Securities ” means the Shares, the Warrants and the Warrant Shares.

Shares ” means the shares of Common Stock sold to each Purchaser pursuant to this Agreement.

Subscription Amount means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

Subsidiary ” means any direct or indirect subsidiary of the Company and shall, where applicable, include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

Third Party Purchaser ” shall have the meaning ascribed to such term in Section 2.5.

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Trading Day ” means a day on which the New York Stock Exchange is open for trading.

Trading Market ” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange or the OTC Bulletin Board.

Transaction Documents ” means this Agreement, the Warrants, the Registration Rights Agreement, the Escrow Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

Transfer Agent ” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company with a mailing address of 17 Battery Place, New York, New York 10004, and a facsimile number of (212) 509-5150, and any successor transfer agent of the Company.

Warrants ” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.3(a) hereof, which Warrants shall be exercisable immediately and have a term of exercise equal to five (5) years, in the form of Exhibit C attached hereto.

Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II
PURCHASE AND SALE


2.1.      Signing . On the date hereof, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $5,000,000 of Shares and Warrants. Each Purchaser shall deliver (1) to the Escrow Agent, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount and (2) to the Company, this Agreement duly executed by such Purchaser. The Company shall deliver to each Purchaser, this Agreement duly executed by the Company.

2.2.      Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company shall deliver to each Purchaser its respective Shares and a Warrant, as determined pursuant to Section 2.3(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.3 deliverable at the Closing. Upon satisfaction of the conditions set forth in Sections 2.3 and 2.4, the Closing shall occur at the offices of GT or such other location as the parties shall mutually agree. The parties hereto acknowledge that there may be more than one Closing in connection with transactions contemplated by this Agreement.

2.3.      Closing Deliveries (a) On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

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(i)     

a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of the number of shares purchased by such Purchaser, with an exercise price equal to 150% of the Closing Price subject to adjustment therein;


(ii)     

irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the per share purchase price of $3.01 (the “ Purchase Price ”), registered in the name of such Purchaser; provided , however , the parties hereto agree that the number of shares issued based on the Purchase Price shall be adjusted at the closing of the spin-off transaction (as described herein) consistent with the number of shares of Parent issued and outstanding on the record date for the spin-off transaction, such that a $500,000 investment pursuant to this Agreement shall represent less than 1% of the issued and outstanding shares of Common Stock of the Company on the closing date of the spin-off transaction;

(iii)     

a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of the number of shares purchased by such Purchaser, with an exercise price equal to 200% of the Closing Price subject to adjustment therein; and

(iv)     

the Registration Rights Agreement duly executed by the Company.

 

(b)      On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company (or, where indicated, to the Escrow Agent) the following:

 

(i)     

the Registration Rights Agreement duly executed by such Purchaser.


 

 

2.4.      Closing Conditions .

 

(a)      The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)     

  the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchasers contained herein;

(ii)     

all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

(iii)     

the delivery by each Purchaser of the items set forth in Section 2.3(b) of this Agreement.

(b)      The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

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(i)     

the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

(ii)     

all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii)     

the delivery by the Company of the items set forth in Section 2.3(a) of this Agreement;

(iv)     

the distribution of shares of common stock of the Company to the stockholders of Parent and the closing of the transactions contemplated by the Information Statement; and

(v)     

there shall have been no Material Adverse Effect with respect to the Company since the date hereof.

2.5.      Purchase Price Adjustment . Except with respect to Exempt Issuances, if at any time Shares are held by a Purchaser during the three-year period commencing on the date hereof, the Company shall offer, issue or agree to issue any Common Stock or Common Stock Equivalents (or modify any of the foregoing which may be outstanding) to any Person (each, a “ Third Party Purchaser ”) at a price per share of Common Stock or exercise price per share of Common Stock Equivalents which shall be less than the per share Purchase Price of the Shares of the Purchasers holding Shares, then the Company shall issue, for each such occasion, additional shares of Common Stock to each Purchaser so that the average per share purchase price of the shares of Common Stock issued to the Purchaser (of only the Shares still owned by the Purchaser) is equal to a price determined by multiplying the per share Purchase Price by a fraction (i) the numerator of which shall be (A) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (B) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of additional shares of Common Stock so issued would purchase at the per share Purchase Price, and (ii) the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue or sale plus the total number of additional shares of Common Stock so issued.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES



3.1.      Representations and Warranties of the Company . Except as set forth under the corresponding section of the disclosure schedules delivered to the Purchasers concurrently herewith (the “ Disclosure Schedules ”) which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to each Purchaser:

 

(a)     

  Subsidiaries . The Company has no Subsidiaries. Any references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded, unless such references are to Subsidiaries formed after the date hereof.

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(b)     

Organization and Qualification . The Company is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation or default of any of the provisions of its certificate of incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, properties or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c)     

Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents, to issue the Securities in accordance with the terms hereof and thereof and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including the issuance of the Securities, have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally.

(d)     

No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other transactions contemplated hereby and thereby (including, without limitation, the issuance of the Securities and the reservation for issuance of Warrant Shares) do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or

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asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations of any Trading Market on which the Common Stock is traded or quoted), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the cases of conflicts described in clauses (ii) or (iii) that would not have a Material Adverse Effect.

(e)     

Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to the Exchange Act, (ii) the filing with the Commission of the Registration Statement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Warrant Shares for trading thereon in the time and manner required thereby and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ”) and filings which if not made would not result in a Material Adverse Effect.

(f)     

Issuance of the Securities . The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all taxes and charges with respect thereof and free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all taxes and charges with respect thereof and free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock a sufficient number of shares of Common Stock for issuance of the Warrant Shares.

3.2.      Representations and Warranties of the Purchasers . Each Purchaser, for itself and for no other Purchaser hereby, represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

 

(a)     

Organization; Authority . Such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in

 

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accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.


(b)     

Own Account . Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

(c)     

Purchaser Status . At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises any Warrants it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

(d)     

Experience of Such Purchaser . Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

(e)     

General Solicitation . Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(f)     

Information . Each Purchaser represents that it has received and reviewed a copy of the Information Statement filed by the Parent with the Commission prior to the date of this Agreement.

(g)     

Spin-off . Each Purchaser represents that it is purchasing the Securities based on the expectation that the Company is likely to be the subject of a spin-off transaction in the near future, the result of which will be that the Company will be a stand-alone publicly-traded company.

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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES


4.1.      Transfer Restrictions .

 

(a)      The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement.

 

(b)      The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

 

NEITHER THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

4.2.      Use of Proceeds . The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes in connection with the Company’s development of its proprietary vaccine platform technology.

 

4.3.      Reservation and Listing of Securities . The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents.

 

4.4.      Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the

 

10


states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

Article V     

MISCELLANEOUS


5.1.      Termination .  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated with such Purchaser on or before sixty (60) days from the date hereof; provided, however, that such termination will not affect the right of any party to sue for any breach by the other party (or parties).

 

5.2.      Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.3.      Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2 nd ) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.4.      Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers of at least a majority in interest of the Securities still held by Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.5.      Counterparts . This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon

 

11


the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

 

5.6.      Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect the interpretation of any of the provisions hereof.

 

5.7.      Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8.      No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

5.9.      Governing Law; Jurisdiction; No Jury Trial . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in The City of New York, Borough of Manhattan. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. Each party hereby irrevocably waives any right it may have, and agrees not to request, a jury trial for the adjudication of any

 

12


 

dispute hereunder or in connection with or arising out of the transaction documents.

5.10.      Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

5.11.      Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.12.      Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.13.      Independent Nature of Purchasers’ Obligations and Rights . The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Purchasers.

 

13


 

5.14.      Saturdays, Sundays, Holidays, etc.   If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.15.      Construction . The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

(Signature Pages Follow)

14


IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

IBIOPHARMA, inc.

Address for Notice:

By:________________________________________
Name:     Robert B. Kay
Title:     Executive Chairman and
Chief Executive Officer
 

iBioPharma, Inc.

9 Innovation Way, Suite 100
Newark, DE 19711


Attention: Chief Executive Officer
Telephone: (302) 355-0650
Facsimile: (302) 356-1173
 

With a copy to (which shall not constitute notice):

Greenberg Traurig, LLP
MetLife Building
200 Park Avenue
New York, NY 10166
Attention: Andrew Abramowitz, Esq.
Telephone: (212) 801-9200
Facsimile: (212) 801-6400

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

15


[PURCHASER SIGNATURE PAGES TO IBIOPHARMA SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser:                                              

Signature of Purchaser or Authorized Signatory : ______________________________________

Name of Authorized Signatory (if applicable): ________________________________________

Title of Authorized Signatory: _____________________________________________________

E-mail Address of Purchaser:                                              

Facsimile Number of Purchaser:                                              

Address for Notice to Purchaser:     

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount:                               
Shares of Common Stock:           

Warrant Shares:           

EIN or Social Security Number: [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

 

16

Exhibit 10.6


FIFTH AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT

THIS FIFTH AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT is made in Newark, Delaware, on the _17 _ day of December, 2007, between FRAUNHOFER USA, INC., acting through its Center for Molecular Biotechnology a Rhode Island non-profit corporation, having a place of business at 9 Innovation Way, Suite 200, Newark, Delaware 19711 ("Fraunhofer ); and INB:BIOTECHNOLOGIES INC., having a place of business a t 9 Innovation Way, Suite 100, Newark, Delaware 19711 ("INB").

RECITALS:

WHEREAS, Fraunhofer and INB are parties to.certain agreements, including a Technology Transfer Agreement dated December 18, 2003 (the "Agreement"), a First Addendum to the Agreement dated March 15, 2005 (the "First Addendum"), a Research Agreement dated October 15, 2004 (the "Research Agreement # 1"), a First Amendment of Research Agreement # 1 dated March 18, 2005 (the "First Amendment"), and a Second Amendment of Research Agreement #1 dated March 1, 2006 (the "Second Amendment"), a Research Agreement # 2 dated June 1, 2006 ("Research Agreement #2), a Second Amendment of the Technology Transfer Agreement dated October 24, 2006 (the "Second Addendum"), a Third Amendment to the Technology Transfer Agreement dated November 2, 2006 (the "Third Addendum"), a Third Amendment of Research Agreement #1 dated November 22, 2006 ("Third Amendment") and a Fourth Amendment of the Technology Transfer Agreement dated June 25, 2007 (the "Fourth Amendment"), wherein INB is variously identified by its prior name "NuCycle Therapy, Inc." or by the defined terms "Company", "PLANT" or "INB", all of which agreements (collectively, the "Prior Agreements") concern the engagement of Fraunhofer by INB to develop certain exclusive rights to the proprietary technology and intellectual property related to plants in the areas of expression, engineering, testing, production and validation of vaccines, antibodies and therapeutic proteins, and the transfer of exclusive. commercial rights therein to INB . Pursuant to the Prior Agreements, Fraunhofer has developed, validated and filed patents covering a proprietary platform technology (referred to in the Prior Agreements as the "Technology") that uses plants (which have not been genetically modified) as a medium for the rapid, large-scale production of a broad range of vaccines, therapeutic proteins and antibodies. The parties wish to modify and supplement the Prior Agreements inter alia to broaden the Field for INB to include diagnostic applications for influenza, facilitate development of diagnostic reagents and assays using monoclonal antibodies, and to support INB efforts to commercialize the Technology.

 

WHEREBY, the parties agree as follows:

1. The first paragraph of RECITALS of the Agreement will be modified to read:

WHEREAS, Fraunhofer owns and will endeavor to develop certain exclusive rights to the proprietary technology and intellectual property specifically described in Appendix A (the "Technology") in the area of expression, engineering, testing, production and validation of human vaccines, human antibodies, human therapeutics, influenza vaccine antigens for veterinary use, and antibodies for influenza diagnostics produced in plants (the. "Field"); The Field does not include industrial biocatalysis veterinary applications, diagnostic applications, both human and other, agricultural and environmental applications except as otherwise specifically provided herein; and


2. Additional Payments. In consideration for this Amendment to the Agreement, INB shall make two (2) successive payments in 2008 for a total of One Hundred Thousand Dollars ($100,000) to support development of reagents and assays for influenza diagnostics as follows:

$50,000 - January 15, 2008 upon execution of this amendment .

$50,000 - December 15, 2008 upon delivery of first report

3. Interpretation. Unless otherwise expressly provided in this Amendment: (i) the defined terms shall have the meanings attributed to them in the Prior Agreements and particularly the Agreement and (ii) all other terms and conditions of the Agreement remain in effect.

IN WITNESS WHEREOF, the Parties have executed this - Agreement.

FRAUNHOFER USA CMB

 

INB:BIOTECHNOLOGIES INC.

By:

/s/ Vidadi Yusibov

 

By:

/s/ Robert B. Kay

 

Name: Vidadi Yusibov

   

Name: Robert B. Kay

 

Title: Executive Director

   

Title: Executive Chairman

FRAUNHOFER USA, INC

   

By:

/s/ William Hartman

     
 

Name: William Hartman

     
 

Title: Vice President

     


     

FOURTH AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT

THIS FOURTH AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT is made in Newark, Delaware, on the 20th day of August, 2007, between FRAUNIIOFER USA, INC., acting through its Center for Molecular Biotechnology a Rhode Island non-profit corporation, having a place of business at 9 Innovation Way, Suite 200, Newark, Delaware 19711 ("Fraunhofer"), and INB-BIOTECHNOLOGIES INC., having a place of business at 9 Innovation Way, Suite 100, Newark, Delaware 19711 ("INB").

RECITALS:

WHEREAS, Fraunhofer and INB are parties to certain agreements, including a Technology Transfer Agreement dated December 18, 2003 (the "Agreement"), a First Addendum to the Agreement dated March 15, 2005 (the "First Addendum"), a Research Agreement dated October 15, 2004 (the "Research Agreement #1"), a First Amendment of Research Agreement #1 dated March 18, 2005 (the "First Amendment"), and a Second Amendment of Research Agreement #1 dated March 1, 2006 (the "Second Amendment"), a Research Agreement # 2 dated June 1, 2006 ("Research Agreement #2), a Second Amendment of the Technology Transfer Agreement dated October 24, 2006 (the "Second Addendum"), a Third Amendment to the Technology Transfer Agreement dated November 2, 2006 (the "Third Addendum"), and a Third Amendment of Research Agreement #1 dated November 22, 2006 ("Third Amendment"), wherein INB is variously identified by its prior name "NuCycle Therapy, Inc." or by the defined terms "Company", "PLANT" or "INB", all of which agreements (collectively, the "Prior Agreements") concern the engagement of Fraunhofer by INB to develop certain exclusive rights to the proprietary technology and intellectual property related to plants in the areas of expression, engineering, testing, production and validation of vaccines, antibodies and therapeutic proteins, and the transfer of exclusive commercial rights therein to INB. Pursuant to the Prior Agreements, Fraunhofer has developed, validated and filed patents covering a proprietary platform technology (referred to in the Prior Agreements as the "Technology") that uses plants (which have not been genetically modified) as a medium for the rapid, large-scale production of a broad range of vaccines, therapeutic proteins and antibodies. The parties wish to modify and supplement the Prior Agreements inter alia to further enhance the commercial value of the Technology in the Field for INB, facilitate technology transfer to and implementation by INB, and provide access to Fraunhofer personnel and facilities, as appropriate, to support INB efforts to commercialize the Technology.

WHEREBY, the parties agree as follows:

1. Pursuant to the Prior Agreements: (i) INB is the exclusive licensee of the Technology and Improvements in the Field, (ii) following the payment of $250,000 on November 2, 2008 to Fraunhofer (the "Title Payment") Fraunhofer will convey to INB full title to the Technology and Improvements with exclusive rights in the Field, and (iii) will continue until December 31, 2009 to enhance the Technology and Intellectual Property related to the Technology and Improvements for INB and formally to transfer and convey rights thereto to 1NB as and when requested by INB.


2. During the five (5) year period commencing January 1, 2010 (immediately following completion of its performance under the Third Amendment) and ending December 31, 2014, Fraunhofer shall (i) further develop exclusively for and transfer to INB rights to proprietary technology and Intellectual Property Rights (the "Technology") in the area of expression, engineering, testing, production and validation of human vaccines, human antibodies and human therapeutic proteins in plants, veterinary applications of plant-based influenza vaccines, including commercial process and production techniques and methodologies related to those applications; (ii) facilitate technology transfer and implementation by or for INB; and (iii) provide access to Fraunhofer personnel and facilities, as appropriate, to support INB efforts to commercialize the Technology. Fraunhofer reserves the rights to the commercial process and production techniques and methodologies for all applications outside of the Field.

3. Guaranteed Annual Payments. In consideration for this Agreement, INB shall make ten (10) successive, non-refundable semi-annual payments for a total of Ten Million Dollars ($10,000,000) as follows:

   

$1,000,000 - November 2, 2009

$1,000,000 - April 2, 2010;

 

$1,000,000 - November 2, 2010

$1,000,000 - April 2, 2011;

 

$1,000,000 - November 2, 2011

$1,000,000 - April 2, 201 2 ;

 

$1,000,000 - November 2, 2012

$1,000,000 - April 2, 2013 ;

 

$1,000,000 - November 2, 2013

$1,000,000 - April 2, 2014 ;

   

4. Section 3.3 of the Agreement is amended to read as follows: Payment for Title. On November 2, 2008, the Company shall make a single payment of $250,000 to Fraunhofer (the "Title Payment") whereupon Fraunhofer shall convey to the Company full title to the Technology and Improvements. As additional consideration for the transfer of title to the Technology and Improvements, for a period of fifteen years after the effective date of such transfer, the Company shall make additional payments to Fraunhofer ("Additional Payments") equal to (a) 1% of all receipts derived by the Company, or any affiliates of the Company, or any affiliates of the Company (as defined in Section 9.13) from sales of products that incorporate or are produced utilizing the Technology and Improvements; and (b) 15% of all receipts derived by the Company from licensing the Technology and Improvements to third parties, whether characterized as license fees, royalties or any similar consideration; provided that in no event shall the same receipts require payments pursuant to both subparts (a) and (b). Any license agreement between the Company and its affiliate shall he on commercially reasonable terms. Additional Payments shall be made on the thirtieth day of each calendar quarter with regard to Receipts during the preceding quarter. Minimum Additional Payments shall be $200,000 per year. The first such payment will be due December 31, 2010. The Company may elect to forego the Title Payment and continue the license in effect, subject to the last sentence of Section 2.1(b).


5. Section 3.4 of the Agreement is amended to read as follows: License Fees. If the Company foregoes the Title Payment, as permitted in Section 3.3, in consideration of the continuation in effect of the license granted in Section 2.1, the Company shall pay Fraunhofer license fees equal to (a) 2% of all receipts derived by the Company and its


affiliates from sales of products that incorporate or are produced utilizing the Technology and Improvements; and (b) 20% of receipts derived by the Company from licensing the Technology and Improvements to third parties; provided that in no event shall the same receipts require payment pursuant to both subparts (a) and (b). Minimum annual aggregate license fee payments shall be $200,000. License fees shall be payable on the thirtieth day of each calendar quarter with regard to Product Receipts during the preceding quarter. The first license fee payment shall be due December 31, 2010.

6. Fraunhofer agrees to use commercially reasonable efforts, in consultation with INB, to conduct research designed to enhance, improve and expand the Technology in the Field through the period ending December 31, 2014 and will expend at a minimum, an additional amount at least equal to the Guaranteed Annual Payments for such research ($2.0 million per year). Fraunhofer's prospective performance will be accomplished using the same key senior personnel currently (as of July 2007) coordinating and directing the activities under this Agreement, only with such changes as may be mutually agreed upon by Fraunhofer and INB. Costing, shall he calculated on a basis consistent with the prior course of dealing between Fraunhofer and INB.

7. In addition, Fraunhofer agrees to use its best efforts, in coordination and cooperation with INB to obtain grants from governmental entities and non-governmental organizations to fund further development of the Technology in the Field

8. Intellectual Property Payment.

a) Fraunhofer shall pay INB an amount equal to nine percent (9%) of all receipts (excluding receipts from INB), if any, realized by Fraunhofer from sales, licensing or commercialization of Fraunhofer's Intellectual Property Rights ("Intellectual Property Net Income") during each of its fiscal years ending with or within the period beginning on the date of this Amendment and ending on the fifteenth anniversary of such date. Such payments shall be made annually together with the reports required by Section 9 below.

b) Survival. The provisions of this section shall survive termination of this Agreement.
 

9. Fraunhofer Reporting.

a) ANNUAL FINANCIAL REPORTS. Fraunhofer shall provide INB with Fraunhofer's audited financial statements within 15 business days after Fraunhofer receives each such statement from its auditors. Such financial statements shall reflect the financial condition of Fraunhofer as a whole, and shall also include divisional financial information for Fh CMB.

b) INTELLECTUAL PROPERTY REPORTING. Within ninety (90) days after the end of its fiscal years, Fraunhofer shall provide INB with a report describing all Intellectual Property Rights and all Intellectual Property Net Income.

10. Interpretation. Unless otherwise expressly provided in this Amendment: (1) the defined terms shall have the meanings attributed to them in the Prior Agreements and particularly the Agreement and (ii) all other terms and conditions of the Agreement remain in effect.


IN WITNESS WHEREOF, the Parties have executed this Agreement.

FRAUNHOFER USA CMB

 

INB:BIOTECHNOLOGIES INC.

By:

/s/ W. F. Hartman

 

By:

/s/ Robert Kay

 

Name: W. F. Hartman

   

Name: Robert Kay

 

Title: Vice President

   

Title: Chairman

FRAUNHOFER USA, INC

   

By:

/s/ Vidadi Yusibov

 

 

Name: Vidadi Yusibov

   

 

Title: Executive Director

   


SUPPLEMENTAL AGREEMENT

THIS SUPPLEMENTAL AGREEMENT is made in Newark, Delaware, as of the 1 st day of March, 2006, between FRAUNHOFER USA, INC. , acting through its Fraunhofer Center for Molecular Biotechnology, 9 Innovation Way, Suite 200, Newark, Delaware 19711 (" Fraunhofer ") and INB-BIOTECHNOLOGIES , INC. , having a place of business at 9 Innovation Way, Suite 100, Newark, Delaware 19711 (" INB ").
 

RECITALS

Fraunhofer and INB are parties to a Technology Transfer Agreement dated December 18, 2003 and a First Addendum to the Technology Transfer Agreement dated March 15, 2005 (collectively, the “Agreement” or “Prior Agreements”). The parties wish to modify the Agreement to increase the scope of the rights granted by Fraunhofer and acquired by INB .

1.      INB and Fraunhofer agree to amend the definition of "Field" in the Agreement to include "veterinary applications of influenza vaccines made using the Technology". In consideration for the expanded scope of the Agreement, INB shall make additional, guaranteed non-refundable payments for a total of $500,000 which shall be deemed to be Guaranteed Annual Payments pursuant to Section 3.2 of the Agreement. The parties acknowledge and agree that all other terms and conditions arising out of the work described in this agreement, fall within the scope of the Agreement and shall be implemented pursuant to the Agreement.

Accordingly, INB shall make five (5) successive, non-refundable payments as follows:

1)     

Payment 1:     Upon signing this amendment, $100,000.


2)     

Payment 2:     $100,000 February 2007.


3)     

Payment 3:     $100,000 July 2007.


4)     

Payment 4:     $100,000 February 2008.


5)     

Payment 5:     $100,000 July 2008.


2 .      All of the Technology and Improvements created pursuant to the Prior Agreements, as modified and supplemented by this agreement, shall be included in the transfer or licensing of Technology and Improvements described in Section 3.3 of the Agreement. All other terms and conditions of the Agreement remain in effect.

IN WITNESS WHEREOF , the parties have caused this Agreement to be executed by their duly authorized representatives as of March 1, 2006.

FRAUNHOFER USA CENTER FOR           INB-BIOTECHNOLOGIES, INC.

MOLECULAR BIOTECHNOLOGY

By:      /s/ Vidadi Yusibov __________          By:      /s/ Robert B. Kay ______
          Vidadi Yusibov, Ph.D.                                  Robert B. Kay
          Executive Director                                        Chairman


THIRD AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT

BETWEEN

IN:B:BIOTECHNOLOGIES (formerly NUCYCLE THERAPY, [NC.)

AND

Fraunhofer USA, Inc.

This THIRD AMENDMENT of the TECHNOLOGY TRANSFER AGREEMENT dated December 18, 2003, as amended (the "Agreement"), between FRAUNHOFER USA, INC., acting through its Fraunhofer Center for Molecular Biotechnology, having a place of business at 9 Innovation Way, Suite 200, Newark, Delaware 19711 ("Fraunhofer") and InB:Biotechnologies, fon - nerly NuCycle Therapy, Inc., having a place of business at 225 Long Ave., P.O. Box 278, Hillside, New Jersey 07205 ("INB") hereby amends the Agreement as follows.

1.       In order to facilitate the participation and support from the Bill & Melinda Gates Foundation in respect of a program (the "Program") to complete development of, and provide global access to vaccines against influenza and rabies virus (the "Diseases") for people most in need within the developing countries of the world affected by the Diseases, particularly throughout Africa and other "Low Income" and "Lower-middle-income" countries, as identified by World Bank ("Global Access"), INB hereby grants to Fraunhofer a royalty free license to apply the Technology (as defined in the Agreement) to provide Global Access to vaccines against the Diseases, provided, however, that if die Gates Foundation and Fraunhofer do not pursue the Program to completion, the license shall terminate and all rights shall revert to INB.

2.      All other terms and conditions of the Agreement remain in effect.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of November 2, 2006.

FRAUNHOFER USA CMB CENTER FOR

MOLECULAR BIOTECHNOLOGY

 

INB:BIOTECHNOLOGIES INC.

By:

/s/ Vidadi Yusibov

 

By:

/s/ Robert B. Kay

 

Vidadi Yusibov , Ph.D.

   

Robert B. Kay

 

Executive Director

   

Managing Director


SECOND AMENDMENT OF TECHNOLOGY TRANSFER AGREEMENT

BETWEEN

INB:BIOTECHNOLOGIES (formerly NUCYCLE THERAPY, INC.)

AND

Fraunhofer USA, Inc.

This SECOND AMENDMENT of the TECHNOLOGY TRANSFER AGREEMENT dated December 18, 2003, as amended (the "Agreement"), between FRAUNHOFER USA, INC., acting through its Fraunhofer Center for Molecular Biotechnology, having a place of business at 9 Innovation Way, Suite 200, Newark, Delaware 19711 ("Fraunhofer") and InB:Biotechnologies, formerly NuCycle Therapy, Inc., having a place of business at 225 Long Ave., P.O. Box 278, Hillside, New Jersey 07205 ("INB") hereby amends the Agreement as follows:
 

1.       In order to facilitate the participation and support from the Gates Foundation in respect of a program (the "Program") to complete development of, and provide global access to, vaccines against malaria and African trypanosomiasis (the "Diseases"), particularly throughout Africa and other regions affected by the Diseases, INB hereby relinquishes from the Field (as defined in the Agreement") and re-conveys to Fraunhofer rights to apply the Technology (as defined in the Agreement) to vaccines against the Diseases, provided, however, that if the Gates Foundation and Fraunhofer do not pursue the Program to completion, the subject rights shall revert to INB.
 

2.      All other terms and conditions of the Agreement remain in effect.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of October 24, 2006.

FRAUNHOFER USA CMB CENTER FOR
MOLECULAR BIOTECHNOLOGY

 

INB:BIOTECHNOLOGIES INC.

By:

/s/ Vidadi Yusibov

 

By:

/s/ Robert B. Kay

 

Vidadi Yusibov , Ph.D.

   

Robert B. Kay

 

Executive Director

   

Managing Director


FIRST ADDENDUM TO THE FRAUNHOFER USA CENTER FOR
MOLECULAR BIOTECHNOLOGY TECHNOLOGY TRANSFER AGREEMENT

ADDENDUM, made as of the 15 th day of March, 2005, between Fraunhofer USA, Inc., acting through its Center for Molecular Biotechnology ("Fraunhofer") and INB BioTechnologies, Inc. ("INB") (f/k/a NuCycle Therapy, Inc.)

RECITALS

On December 18 th , 2003, Fraunhofer and INB signed an agreement titled "Fraunhofer USA Center for Molecular Biotechnology Technology Transfer Agreement" (the "Agreement"). The Agreement has an effective date of January 1, 2004. The execution draft of the Agreement was prepared by counsel for INB, who had not been directly involved in negotiating the terms of the Agreement prior to reviewing the proposed execution draft of the Agreement. INB's legal counsel made a few minor revisions to the final draft of the Agreement and transmitted a signature-ready version of the Agreement to Fraunhofer and INB for final review and signature. Those changes included revising the language of Section 3.1 of the Agreement to state that the payment characterized in Section 3.1 of the Agreement as the Initial Research Support Grant was being paid in consideration of services to be provided by Fraunhofer to INB during the term of the Agreement. In prior drafts of the Agreement, Section 3.1 had provided that the initial research support grant was being paid in consideration of services provided by Fraunhofer to INB prior to the term of the Agreement. In changing the language of Section 3.1, counsel for INB did not realize that the parties had specifically negotiated the first sentence of Section 3.1 to read as presented in the previous drafts, for reasons that are material and important to Fraunhofer's financial accounting. Fraunhofer and INB signed the final draft of the Agreement without being aware that the first sentence of Section 3.1 had been changed by counsel for INB. The Science Director of the Fraunhofer Center for Molecular Biotechnology discovered the change to the first sentence of Section 3.1. of the Agreement sometime after signing the Agreement. The parties have agreed to sign this Addendum for the purpose of adopting the language that they intended to include in Section 3.1 of the Agreement.

NOW, THEREFORE, the parties agree as follows:

1.      Section 3.1. Section 3.1. of the Agreement is deleted in its entirety and is replaced by the following:

"Section 3.1. Initial Research and Support Grant. In consideration of services provided by Fraunhofer to the Company prior to the term of this Agreement, but not including services provided by Fraunhofer pursuant to the Fraunhofer USA, Inc. - NuCycle Therapy, Inc. Research Agreement, dated March 4, 2002, and subject to the provisions of Section 5.4 of this Agreement, Company shall pay to Fraunhofer an initiation fee of $500,000 ("Initial Research Support Grant") upon the effective date of this Agreement." In Year 1 (one) of this agreement Fraunhofer USA's research spending in the Field shall be no less then $750,000.


2.      Other Terms. Except as specifically provided in this Addendum, the other terms of the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the parties have signed this Addendum effective as of the day and year above written.


By:

/s/ William Hartman, Ph.D.

 

By:

/s/ Orn Adalsteinsson, Ph.D.

 

William Hartman, Ph.D.

   

Orn Adalsteinsson, Ph.D.

 

Vice President

   

President


FRAUNHOFER USA CENTER FOR MOLECULAR BIOTECHNOLOGY.
TECHNOLOGY TRANSFER AGREEMENT

AGREEMENT made as of the 18 day of December, 2003, and effective as of January 1, 2004 (the "Effective Date") between Fraunhofer USA, Inc, acting through its Center for Molecular Biotechnology ("Fraunhofer"), a Rhode Island non-profit corporation, and NuCycle Therapy Inc. ("Company"), a New Jersey corporation.

RECITALS:

WHEREAS, Fraunhofer owns and will endeavor to develop certain exclusive rights to the proprietary technology and intellectual property specifically described in Appendix A (the "Technology") in the area of expression, engineering, testing, production and validation of human vaccines, human antibodies and human therapeutic proteins in plants (the "Field"); The Field does not include industrial biocatalysis, veterinary applications, diagnostic applications, both human and other, agricultural and environmental applications; and

WHEREAS, Company desires to acquire the Technology, subject to the retention of certain rights in the Technology by Fraunhofer, in the Field in accordance with the terms and conditions of this Agreement.


NOW THEREFORE, in consideration of the amounts to be paid in accordance with Article 3, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE 1
INTERPRETATION

In this Agreement unless the contrary intention appears:

(a)      a reference to a clause, schedule, annexure or appendix is a reference to a clause or schedule, annexure or appendix to this Agreement and references to this Agreement include any recital, schedule, annexure or appendix;

(b)      a reference to this Agreement or another instrument includes any variation or replacement of either of them;
 
(c)      
a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;
 

(d)      the singular includes the plural and vice versa;

(e)      the word person includes a firm, a body corporate, an unincorporated association or an authority;

(f)      a reference to a person includes a reference to the person's executors, administrators, successors, substitutes (including, but not limited to, persons taking by novation) and assigns;

(g)      if a period of time is specified and dates from a given day or the day of an act or event, it is to be calculated exclusive of that day; and

(j) a reference to a day is to be interpreted as the period of time commencing at midnight and ending 24 hours later.


ARTICLE 2
TRANSFER TERMS

2.      Grant of License; Transfer of Title.

(a)      Subject to the terms and conditions of this Agreement, Fraunhofer grants to the Company an exclusive license to use and to develop products derived from or incorporating the Technology in the Field and to sub-license that right. Company shall require that all sublicensees agree in writing to be bound by terms and conditions no less restrictive than the terms of this Agreement. Notwithstanding the exclusive nature of this license grant, Fraunhofer specifically reserves its right to continue to use and develop the Technology and all Improvements (as defined below) for research purposes. Further, Fraunhofer may grant government organizations, non-exclusive, royalty-free licenses (without the right to sublicense or commercialize) to utilize Technology and Improvements within the Field. All royalty-bearing licenses to Technology and Improvements during the term of this Agreement shall be executed and approved by the Company and the licensee, even if such licenses are executed pursuant to a Research and Development Agreement between Fraunhofer and the licensee. The license granted in this Section shall not affect the licenses granted by Fraunhofer in certain work product described in separate agreements between Fraunhofer and The Dow Chemical Company and Final Design, Inc.

(b)       Upon receipt of the payment described in Section 3.3, Fraunhofer shall convey to the Company title to the Technology and Improvements. Immediately following such conveyance (and as a condition to that conveyance) the Company shall grant Fraunhofer a perpetual, world-wide, royalty-free license to do the following:

(i)     perform research utilizing the Technology or Improvements, in any field, on a non-exclusive basis; and

(ii) commercialize the Technology and Improvements for application outside of the Field on an exclusive basis. The parties shall execute a license agreement containing these terms and such additional terms as are mutually agreed. If the Company does not make the payment described in Section 3.3, then the license set forth in Section 2.1 (a) shall remain in effect, subject to the payment of royalties as provided in Section 3.4.
     

ARTICLE 3
PAYMENT AND GRANTS BY COMPANY

3.1 Initial Research and Support Grant. In consideration for services to be provided to the Company during the term of this Agreement, but not including services provided by Fraunhofer prior to the date of this Agreement pursuant to the Fraunhofer USA, Inc. - NuCycle Therapy, Inc. Research Agreement dated March 4, 2002, and subject to the provisions of Section 5.4 of this Agreement, Company shall pay to Fraunhofer an initiation fee of $500,000 ("Initial Research Support Grant") upon the effective date of this Agreement.
 

3.2 Guaranteed Annual Payments. In consideration of Fraunhofer's maintenance and support of the Technology during the first 5 years that this Agreement is in effect and Fraunhofer's commitment to perform research and development services on the Technology during that period, the Company shall make nine (9) successive, non-refundable semi-annual payments (for a total of $2,250,000) as follows:

$250,000

- May 2,

2004;

$250,000 - November 2,

2004

$250,000

- May 2,

2005;

$250,000 -November 2,

2005

$250,000

- May 2,

2006;

$250,000 -November 2,

2006

$250,000

- May 2,

2007;

$250,000 - November 2,

2007

$250,000

- May 2,

2008;

   


The parties shall characterize those payments as made in exchange for services rendered by Fraunhofer during the calendar year in which those payments are due.

3.3 Payment for Title. On November 2, 2008, the Company shall make a single payment of $250,000 to Fraunhofer (the "Title Payment") whereupon Fraunhofer shall convey to the Company full title to the Technology and Improvements. As additional consideration for the transfer of title to the Technology and Improvements, for a period of ten years after the effective date of such transfer, the Company shall make additional payments to Fraunhofer ("Additional Payments") equal to (a) 1% of all receipts derived by the Company, or any affiliates of the Company (as defined in Section 9.13) from sales of products that incorporate or are produced utilizing the Technology and Improvements; and (b) 15% of all receipts derived by the Company from licensing the Technology and Improvements to third parties, whether characterized as license fees, royalties or any similar consideration . Any license agreement between the Company and its affiliate shall be on commercially reasonable terms. Additional Payments shall be made on the thirtieth day of each calendar quarter with regard to Receipts during the preceding quarter. The first such payment will be due April 30, 2009. The Company may elect to forego the Title Payment and continue the license in effect, subject to the last sentence of Section 2.1(b)

3.4 License Fees If the Company foregoes the Title Payment, as permitted in Section 3.3, in consideration of the continuation in effect of the license granted in Section 2.1, the Company shall pay Fraunhofer license fees equal to (a) 2% of all receipts derived by the Company and its affiliates from sales of products that incorporate or are produced utilizing the Technology and Improvements; and (b) 20% of receipts derived by the Company from licensing the Technology and Improvements to third parties. Minimum annual aggregate license fee payments shall be $200,000. License fees shall be payable on the thirtieth day of each calendar quarter with regard to Product Receipts during the preceding quarter. The first license fee payment shall be due April 30, 2009.

3.5 Interest. The Initial Research and Support Grant and any and all Guaranteed Annual Payments, and the Title Payment, if not paid when due shall bear interest at a rate equal to the Prime Rate plus two percent (2%) per annum calculated, payable and compounded on a daily basis until paid in full. The term "Prime Rate" shall mean the prevailing prime rate of interest as published in the Wall Street Journal or, in the absence of such publication, the prime rate of interest charged by Fraunhofer's principal depositary institution.

3.6 Taxes. All payments to Fraunhofer by the Company to Fraunhofer hereunder are exclusive of all excise, sales, goods and services, use and other similar taxes imposed by any federal, provincial, state, municipal or other governmental authority (other than taxes on income of Fraunhofer), all of which taxes shall be paid by the Company to Fraunhofer or to the applicable governmental authority as may be required by applicable law.

3.7 Books, Records and Audits. The Company shall keep, and shall require that its sublicensees keep, regular and current books and records sufficient to accurately record and reflect the sales of products derived from or incorporating the Technology and Improvements and all license income received by the Company each month. Fraunhofer shall have the right to audit these books and records once each calendar year. Such an audit shall be conducted at Fraunhofer's expense, unless the audit reveals that (1) the Company's or Company's licensees' reports have understated Royalty Fees by 5% or more, or (2) that the Company or its licensees have sold products derived from or incorporating the Technology or Improvements outside the Field, in which case the cost of the audit will be borne by the Company. All audits will be conducted by an independent accountant not affiliated with or otherwise employed by either party.


ARTICLE 4
TERM

4.l Term. The term of this Agreement will begin upon execution of this Agreement and shall continue until otherwise terminated pursuant to the terms of this Agreement.

ARTICLE 5
TERMINATION

5.1 Termination. 5. 1. 1 Prior to the transfer of title to the Technology under Section 2.1(b), Either Party shall have the right to terminate this Agreement forthwith upon written notice to the other Party in the event that such other Party breaches or defaults in the performance or observance of any of its payments, obligations, representations, warranties or covenants under this Agreement. Such breach or default is not cured within sixty (60) days of such other Party receiving written notice of such default from the non-defaulting Party. Either Party shall have the right to use this sixty (60) day curative period only two (2) times per year in respect of any such breach or default, for which any additional breach or default will result in the immediate termination of this Agreement at the option of the non-breaching Party.

5.1.2 Fraunhofer shall have the right to terminate this Agreement upon the commencement of any proceeding or the taking of any step by or against the Company for the dissolution, liquidation or winding-up of the Company or for any relief under any applicable Laws of any jurisdiction relating to bankruptcy, insolvency, reorganization, arrangement, compromise or winding-up, or for the appointment of one or more of a trustee, receiver, receiver and manager, monitor, custodian, consultant, liquidator or any other Person with similar powers with respect to the Company or any part of any of its property or assets.

5.2 Obligations on Termination. Upon the termination of this Agreement under Section 5.1, the Company and its sublicensees shall immediately cease all use of the Technology and all Fraunhofer Improvements; Fraunhofer may enter upon any of the facilities or premises of the Company and its sublicensees where any of the Technology or Improvements may be located or utilized, without any obligation to pay any rent to any Person whatsoever, for purposes of requiring the Company to cease use of the Technology and Fraunhofer Improvements.

5.3 Abandonment of Technology. After the Company receives title to the Technology, if the Company abandons its efforts to commercialise the Technology, the Company and Fraunhofer shall negotiate in good faith, to sell the Technology back to Fraunhofer or license to Fraunhofer a non-exclusive, worldwide, royalty-free, perpetual license to the Technology and any Company Improvements for applications in any field. As used in this subsection, the phrase "abandons its efforts to commercialize the Technology" means the failure by the Company or any licensee or sublicensee of the Company to undertake any activity regarding the development, licensing or other commercial exploitation of the Technology for at least six consecutive months. Fraunhofer shall give the Company 60 days prior written notice of its intent to assert its license rights under this subsection. If, prior to the end of that 60 day period, the Company does not give Fraunhofer written evidence of any effort to develop, license or otherwise commercialise the Technology that occurred during the six month period preceding Fraunhofer's notice under this subsection, Fraunhofer and the Company shall -begin the negotiations discussed in the first sentence of this Section.

5.4 Survival. Notwithstanding any other provision of this Agreement, each of the provisions of 1, 5.1, 6, 7.5, 7.6, 8.1, and 9 and any other provision which by its context or plain meaning should have effect after the termination of this Agreement shall survive any termination of this Agreement.

5.5 Termination of March 4, 2002 Agreement. Upon execution of this Agreement;


5.5.1 the existing agreement, titled Fraunhofer USA, Inc. - NuCycle Therapy, Inc. Research Agreement, dated March 4, 2002, shall terminate;

5.5.2 NuCycle Therapy, Inc. shall make a single payment of $80,000 to Fraunhofer. Payments by NuCycle Therapy, Inc. under the March 4, 2002 agreement will be in addition to the payments due under this Agreement;

5.5.3 NuCycle Therapy, Inc. shall have no further obligations for payments specified in the March 4, 2002 agreement

ARTICLE 6
OWNERSHIP RIGHTS AND CONFIDENTIALITY

6.1 Title to Technology and Improvements. While the license granted under Section 2 is in effect, Fraunhofer shall retain worldwide title to, and ownership of, the Technology, and all modifications, revisions, additions, customizations and enhancements (collectively, the "Improvements") made by Fraunhofer. Any Improvements made by Company or its licensees shall be owned by Company or its respective licensee, and Fraunhofer shall have a non-exclusive, perpetual, royalty-fee license to such Improvements for research purposes only. Following

the termination of this Agreement under Section 5.1, Fraunhofer shall have a non-exclusive, world-wide, perpetual, royalty-free license to use Company owned Improvements for research and clinical development purposes only.

6.2 Protection of Intellectual Property Rights. Fraunhofer shall use commercially reasonable efforts in its best judgment to maintain in force and good standing its Intellectual Property Rights in the Technology and in Fraunhofer Improvements in the Field, including but not limited to trade secret maintenance and policing, trademark applications, trademark registrations, patents, patent applications, and copyright registrations, in the Field in connection with all of its Intellectual Property Rights related to the Technology and Improvements in the Field. Fraunhofer shall consult with Company on all matters relating to Intellectual Property Rights for the Technology and Improvements in the Field. Company agrees to give Fraunhofer and its designees or assignees all assistance reasonably required to perfect such rights, titles and interests and shall pay for all costs associated with the preparation, prosecution and maintenance of such patent applications trademark applications, copyright registrations or other legal protection, regardless of the fact that the Intellectual Property Rights to which such protection applies may have applications outside the Field. For purposes of this Agreement, the term "Intellectual Property Rights" means any and all proprietary rights provided under: (i) patent law; (ii) copyright law; (iii) trademark law; (iv) design patent or industrial design law; or (v) any other statutory provision or common law principle applicable to this Agreement, including trade secret law, which may provide a right in either ideas, formulae, algorithms, concepts, inventions or know-how generally, or the expression or use of such ideas, formulae, algorithms, concepts, inventions or know-how.

6.3 Further Development of Technology. Fraunhofer agrees to use commercially reasonable efforts to conduct research designed to enhance, improve and expand the Technology in the Field through the period ending December 31, 2008 and to expend, at a minimum, an amount equal to the Guaranteed Annual Payments for such research. Such efforts shall be supported by funding at least equal to the Guaranteed Annual Payments made pursuant to Section 3.2 of this Agreement. Fraunhofer shall have the exclusive right to conduct research utilizing the Technology or for the purpose of developing Improvements prior to January 1, 2009.

6.4 Confidentiality. 6.4.1 For purposes of Sections 6.4 and 6.5, the party providing Confidential Information shall be referred to as the "Disclosing Party" and the party receiving such Confidential Information from the Disclosing Party shall be referred to as the "Receiving Party." The Parties shall at all times, both during the term of this Agreement and after termination or expiration of this Agreement, keep and hold all Confidential Information of the Disclosing Party in the strictest confidence, and shall not use such Confidential Information for any purpose, other than as may be reasonably necessary for the performance of its duties pursuant to this Agreement, without the Disclosing Party's prior written consent.


The Receiving Party agrees:

(i) that it will not disclose to any Person or use any Confidential Information disclosed to it except as expressly permitted in this Agreement; and

(ii) that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the Disclosing Party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance;

(iii) that it will require its employees, sublicensees, consultants and all others who may have access to such Confidential Information, and prior to receiving and reviewing such Confidential Information, to separately execute a nondisclosure agreement containing terms and conditions no less restrictive than the terms and conditions of this Agreement.
 

6.4.2 The terms and conditions of this Agreement will be deemed to be the Confidential Information of the Disclosing Party and may not be disclosed without the prior written consent of the Disclosing Party.

(d)       The Receiving Party acknowledges that its failure to comply with the provisions of this Section will cause irreparable harm to the Disclosing Party which cannot be adequately compensated for in damages, and accordingly acknowledges that the Disclosing Party shall be entitled to obtain, in addition to any other remedies available to it, to interlocutory and permanent injunctive relief to restrain any anticipated, present or continuing breach of this Section.

(e)       As used in this Agreement, the term "Confidential Information" means all information in any form regarding the Disclosing Party's intellectual property, business plans, technology or product development plans, research results, finances, costs, customers, technical know-how and trade secrets, proprietary processes, biological materials and any other information that the Disclosing Party identifies in writing as confidential.
 

6.5 Return of Confidential Information. Upon the termination of this Agreement, the Receiving Party shall return to the Disclosing Party or destroy all Confidential Information of the Disclosing Party, including all copies of such Confidential Information, which is then in its possession or control.

6.6 Infringement of Intellectual Property.

6.6.1 Fraunhofer shall promptly notify the Company of any infringement or threatened infringement of the Technology or Improvements of which it becomes aware.

6.6.2 The Company shall in good faith evaluate all infringement claims and shall take such action as is reasonably necessary to enforce its rights in the Technology and Improvements in the Field. Any legal proceedings instituted by the Company in respect of such infringement or threatened infringement will be conducted at the Company's sole discretion and expense, provided that Fraunhofer shall, if requested to do so by the Company, join in and fully co-operate with the Company in the conduct of such proceedings, including making available to the Company all information and particulars relating to such infringement in the possession of Fraunhofer and other Persons under its direction or control. Any monetary or other award obtained by the Company in respect of such proceedings shall belong to the Company and shall be subject to royalty payments as provided in Section 3.4. If the Company declines to enforce its rights in the Technology and Improvements in the Field or does not pursue any such enforcement in good faith after reasonable advance notice from Fraunhofer, Fraunhofer may, at its cost, take action with respect to such infringement. The Company shall co-operate with Fraunhofer in taking such action, without cost to the Company, other than the expenditure of time. Any monetary or other award obtained by Fraunhofer as a result of such proceedings shall belong to Fraunhofer alone.

ARTICLE 7
REPRESENTATIONS, WARRANTIES AND INDEMNITIES

7.1 Party Representations, Warranties, and Covenants. Each Party represents, warrants and covenants to the other as follows and acknowledges that the other Party has relied upon the completeness and accuracy of such representations, warranties and covenants in entering into this Agreement:

7.1.1 it has the capacity to enter into this Agreement and to perform each of its obligations hereunder; and


7.1.2 it has duly authorized, executed and delivered this Agreement and this Agreement constitutes a legally valid and binding obligation of the Party enforceable against it in accordance with its terms except as such enforcement may be limited by applicable bankruptcy, insolvency and other Laws of general application affecting the enforcement of creditors' rights and subject to general equitable principles.

7.2 Fraunhofer Representations, Warranties, and Covenants. Fraunhofer further represents, warrants and covenants to the Company as follows and acknowledges that the Company has relied upon the completeness and accuracy of such representations, warranties and covenants in entering into this Agreement:

7.2.1 Fraunhofer is and shall at all times be the legal and beneficial owner or authorized licensor or sublicensor of the Technology; and

7.2.2 Fraunhofer has the full power and authority to grant the rights in the Technology herein contemplated without the consent of any other Person which has not already been obtained.

7.3 The Company , Representations and Warranties. The Company further represents, warrants and covenants to Fraunhofer as follows and acknowledges that Fraunhofer has relied upon the completeness and accuracy of such representations, warranties and covenants in entering into this Agreement:

7.3.1 The Company shall not knowingly use the Technology in a manner that infringes the intellectual property rights of any person;

7.3.2 All statements, information, reports and certificates made or given to Fraunhofer (either orally or written) are true, complete and accurate in all material respects.

7.4 Limitation of Implied Warranties. TO THE EXTENT PERMITTED BY LAW BUT SUBJECT TO THIS AGREEMENT, FRAUNHOFER MAKES NO REPRESENTATIONS, WARRANTIES OR COVENANTS TO THE COMPANY WHATSOEVER CONCERNING THE BUSINESS OF OR RELATING TO THE EXPLOITATION OF THE TECHNOLOGY IN THE FIELD AND THE COMPANY HEREBY ACKNOWLEDGES TO FRAUNHOFER THAT IT HAS PERFORMED AND RELIED ON ITS OWN INVESTIGATIONS AND DUE DILIGENCE AND HAS SOUGHT ITS OWN PROFESSIONAL ADVICE IN ENTERING INTO THIS AGREEMENT.

7.5 Fraunhofer Indemnity.

7.5.1 Indemnity Obligation. Notwithstanding any other provision hereof, Fraunhofer shall indemnify, defend and hold harmless the Company and its officers, directors, employees, consultants, authorized representatives and agents from any and all third party claims, losses, liabilities, damages, expenses and/or costs (including reasonable lawyers' fees) (collectively "Claims") as a result of or relating in any manner whatsoever to any breach of any warranty, representation or covenant by Fraunhofer in this Agreement.

7.5.2 The Company Obligation to Notify. The Company will promptly notify Fraunhofer of any third party claim within the scope of Section 7.5(a) (a "Third Party Claim") and will fully cooperate with Fraunhofer in connection with the defense and/or settlement thereof and the defense of any such Third Party Claim shall be conducted at Fraunhofer's sole discretion and expense, provided that the Company shall, if requested to do so by Fraunhofer, join in and fully co-operate with Fraunhofer in the conduct of such defense, including making available to Fraunhofer all information and particulars relating to such defense in the possession of the Company and other Persons under its direction or control, provided that the Company shall not be required to join in and fully co operate with Fraunhofer in this regard unless Fraunhofer first agrees to indemnify the Company for all reasonable costs incurred by the Company in doing so, including its reasonable attorneys' fees. The Company shall not charge Fraunhofer for time devoted to that defense by Company personnel.

7.6 Company Indemnity.

7.6.1 Indemnity Obligation. The Company shall indemnify, defend and hold harmless Fraunhofer, its Affiliates, and their respective officers, directors, employees, consultants, authorized representatives and agents from any and all third party claims, losses, liabilities, damages, expenses and/or costs (including reasonable professional fees) as a result of or relating in any manner whatsoever to:

(i)       any breach of any warranty, representation or covenant by the Company in this Agreement;

(ii)       any claim arising out of the utilization, installation, maintenance or operation of the Technology or Improvements at any location(s); and


(iii)       any claim that all or any part of the Technology or Improvements, as a result of the use of the Technology or Improvements by the Company which is not in accordance with the provisions of this Agreement, infringes or violates the Intellectual Property Rights of any other Person.

7.6.2 Fraunhofer Obligation to Notify. Fraunhofer will promptly notify the Company of any and third party claim within the scope of Section 7.6(a) and the defense of any such claims shall be conducted at the Company's sole discretion and expense, provided that Fraunhofer shall, if requested to do so by the Company, join in and fully co operate with the Company in the conduct of such defense, including making available to the Company all information and particulars relating to such defense in the possession of Fraunhofer and other Persons under its direction or control, provided that Fraunhofer shall not be required to join in and fully co-operate with the Company in this regard unless the Company has first agreed to indemnify Fraunhofer for all costs incurred by Fraunhofer in doing so, including reasonable attorneys' fees. Fraunhofer shall not charge the Company for time devoted to that defense by Fraunhofer personnel.

ARTICLE 8
LIMITATION OF LIABILITY

8.1 TO THE EXTENT PERMITTED BY LAW BUT SUBJECT TO THIS AGREEMENT, IN NO EVENT WILL FRAUNHOFER BE LIABLE TO THE COMPANY FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT OR OTHERWISE, WHETHER OR NOT FRAUNHOFER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND FRAUNHOFER'S LIABILITY SHALL AT ANY AND ALL TIMES BE LIMITED TO, AND WILL NOT EXCEED, THE LESSER OF (1) THE AMOUNT PAID TO FRAUNHOFER BY THE COMPANY UNDER THIS AGREEMENT; OR (2) $3 MILLION IN THE AGGREGATE..

ARTICLE 9 GENERAL

9.1 Public Announcements. The Company will not disclose the existence of and terms of this Agreement to a third party, unless agreed to in writing and in advance by Fraunhofer.

9.2 Notices. All notices, requests, demands and other communications required or permitted by this Agreement shall be in writing in the English language and (a) delivered by messenger; (b) transmitted by facsimile; or (c) delivered by a reputable international courier service, with courier charges paid or payable by the sender. All such notices and other communications shall be addressed as follows to the respective Parties set forth below or to such other address as any such Party may hereafter specify in writing:

Notices to Fraunhofer shall be addressed to:

Fraunhofer USA, Inc.

46025 Port St.

Plymouth MI 48170

Attn: William F. Hartman

Facsimile: 734-354-9711
 

with copies to:

Fraunhofer Center for Molecular Biotechnology

9 Innovation Way

Newark, DE 19711

Attention: Barry L. Marrs

Facsimile: 302-369-8955


     and:
 

Ellis, Eby, Conner, Smillie & Bourque, PLLC

320 N. Main St. Suite 300

Ann Arbor, MI 48104

Attn: Mark J. Eby

Facsimile: 734-769-2702
 
 

Notices to the Company shall be addressed to:

NuCycle Therapy Inc.
c/o Integrated BioPharma, Inc. P.O. Box 278

225 Long Avenue

Hillside, New Jersey 07205

Attention: Burt Ensley

Facsimile: (973) 926-1735

with a copy to:

St. John & Wayne, L.L.C.
Two Penn Plaza East, 10th Floor

Newark, New Jersey 07105

Attention: Wiliam P. Oberdorf, Esq.

Facsimile: (973)491-3489

A notice shall be deemed to have been given (i) on the day of delivery (evidenced by a signed receipt) if delivered by messenger; (ii) two Business Days after it has been delivered to a reputable international courier service with courier charges paid or payable by the sender; or (iii) on the day sent by facsimile, if the transmission is confirmed by the sender's facsimile.

9.3 Independent Contractors. The rights, duties, obligations and liabilities of the Parties under the relationship created hereby shall be limited to those rights, duties, obligations and liabilities set out in this Agreement. The Parties are creating an independent contractor relationship under this Agreement. Nothing herein contained shall be construed to create a partnership, employment, joint venture or other business relationship between the Parties. Except as expressly authorized by the terms and conditions hereof, nothing herein shall be construed to authorize a Party to act as the agent of the other Party, or to permit any Party to act on behalf of or bind the other Party.

9.4 Further Assurances and Power of Attorney. The Parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement. The Company hereby unconditionally and irrevocably constitutes and appoints Fraunhofer as its true and lawful attorney, with full power of substitution, to do such other acts and things in the name of the Company as Fraunhofer may deem necessary in its reasonable business judgement to establish, maintain and defend its right, title and interest in and to all or any part of the Technology and Improvements.


9.5 Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power or privilege under this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable Law: (a) no claim or right arising out of this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand to the extent provided in this Agreement..

9.6 Assignments, Successors and No Third Party Rights. Except as otherwise expressly contemplated hereby, neither Party may assign, except Fraunhofer to one of its Affiliates, any of its rights or delegate any of its obligations under this Agreement to any other Person without the prior written consent of the other Party; provided, however, this shall not prohibit the Company to sublicense the Technology and Improvements; and provided further, however, that, any such delegation of obligations by the Company shall not relieve the Company of its liability for the performance of such obligations. Subject to the preceding sentence, this Agreement shall apply to, be binding in all respects upon, and enure to the benefit of the successors and permitted assigns of the Parties. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the Parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and permitted assigns.


9.7 Counterparts. This Agreement may be executed in two or more counterparts by facsimile transmission, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same agreement.

9.8 Entire Agreement and Modification. This Agreement supersedes all prior agreements between the Parties with respect to the subject matter hereof and constitutes the entire agreement of the Parties with respect thereto. This Agreement may not be amended except by the written agreement of the Parties.

9.9 Headings and Construction. The headings of Articles and Sections in this Agreement are provided for convenience of reference only and shall not affect its construction or interpretation. All references to "Article(s)" or "Section(s)" refer to the corresponding Article(s) or Section(s) of this Agreement.

9.10 Severability. If any provision of this Agreement is held to be invalid or unenforceable by any Court of competent jurisdiction, such provision shall be severable from this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and the unenforceable provision shall be reformed or construed so as to as nearly as possible give effect to the intent of the parties entering into this Agreement.

9.11 Governing Law. This Agreement shall be governed by, construed, interpreted and enforced (without regard to principles relating to conflicts of laws) exclusively in accordance with the laws of the State of Delaware; and the state and federal courts in Delaware shall be the sole and exclusive forum for the resolution of all disputes arising under or relating to this Agreement and all performance under this Agreement.

9.12 Relationship to Other Entities. This Agreement is not intended to bind or to impose any obligations on the Fraunhofer Institute for Molecular Biology and Applied Ecology, Fraunhofer Gesellshaft, or any other entity which may be related by whole or partial common ownership with them.

9.13 Sublicense to Affiliates. The Company may sublicense the Technology and any Fraunhofer Improvements to affiliates of the Company only if such sublicenses require minimum royalty payments of 2% of gross receipts from sales of products incorporating or produced using the Technology or Improvements. The term "affiliate" means an organization which controls, is controlled by or is under common control with the Company or an organization that is controlled by an officer or director of the Company or any affiliate of the Company. The Company may sublicense the Technology and Improvements to unrelated third parties on any terms it deems appropriate.


IN WITNESS WHEREOF, the Parties have executed this Agreement.

 

FRAUNHOFER USA, INC.

 

NUCYCLE THERAPY, INC.

By:

/s/ W. F. Hartman

 

By:

/s/ Eric Friedman

 

Name: W. F. Hartman

   

Name: Eric Friedman

 

Title: Vice President

   

Title: Vice President

         


APPENDIX A


LICENSED TECHNOLOGY

The following patent applications filed by Fraunhofer prior to the effective date of this Agreement and license rights held by Fraunhofer on the date of this Agreement, to the extent the intellectual property described therein applies to the Field: Exhibit A:

CORE TECHNOLOGIES

1.

Transient expression of proteins in plants using two-component virus vector system : Filing date February 3, 2003; USSN 60/444,615. Inventors: Vidadi Yusibov, Shailaja Rabindran, Oleg Fedorkin.

   

2.

Virus induced gene silencing : Filing date: July 25, 2002; Docket No.: 02-40113-US (883192.20004); US Patent Application number: 10/205,562, PCTIUS30/23520 (international). Inventor: Vidadi Yusibov.

   

3.

Heterologous protein expression in plants : Filing date: April 25, 2002 (non-provisional is filed); Docket No.: 03-40064-US (883192.20003). Inventors: Vidadi Yusibov, Vadim Mett, Marina Skarjinskaia, Anna Hall.

   

4.

Expression of foreign sequences in plants using a trans-activation system: Filing date: November 6, 2002; Docket No.: 02-40112-1JS (883192.20003). Inventors: Vidadi Yusibov, Vadim Mett, Marina Skarjinskaia, Anna Hall.

   

5.

Carrier molecule for expression, delivery and purification of target polypeptides : Filing date: May 22, 2003; Docket No.: 03-40081-USPR (883192.20010); Application number 601472,495. Inventors: Vidadi Yusibov, Vadim Mett, Konstantin Musiychuk.

   

6.

World-wide exclusive rights to the commercial use and distribution of P12 technology that is key to producing peptides genetically fused to alfalfa mosaic virus coat protein .

All patent applications claiming inventions in the Field filed by Fraunhofer with regard to work product developed by the Fraunhofer USA Center for Molecular Biotechnology between the date of this Agreement and December 31, 2008, to the extent the intellectual property described therein applies to the Field

The Licensed Technology shall not include any intellectual property that is developed in whole or in part by the Fraunhofer Institute for Molecular BioloD and Applied Ecology, which is headquartered in Aachen, Germany.

     
608936-1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
——————————
SCHEDULE 14C
——————————
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. 3)

Check the appropriate box:
|X|     Preliminary Information Statement
[ ]     Confidential, For Use of the Commission Only (as permitted by Rule 14c-5(d) (2))
[ ]     Definitive Information Statement

Integrated BioPharma, Inc.
(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):
[ ]     No fee required
|X|     Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

(1)     Title of each class of securities to which transaction applies:
Common Stock

(2)     Aggregate number of securities to which transaction applies: 14,491,126

(3)     Per unit price or other underlying value of transaction computed

pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)     Proposed maximum aggregate value of transaction: $42,000,000

(5)     Total fee paid: $1,650

[X]     Fee paid previously with preliminary materials.
[ ]     Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)     Amount Previously Paid:
(2)     Form, Schedule or Registration Statement No.:
(3)     Filing Party: Integrated BioPharma, Inc.
(4)     Date Filed:


Preliminary and Subject to Completion, dated July___, 2008
INFORMATION STATEMENT
 

IBIOPHARMA, INC.

iBioPharma, Inc.
Common Stock
(Par value $0.001 per share)

This information statement is being furnished in connection with the distribution of 100% of the issued and outstanding shares of iBioPharma, Inc. (“iBioPharma”) common stock by Integrated BioPharma, Inc. (“Integrated BioPharma”) to its holders of common stock. References in this information statement to “we,” “us” or “our Company” refer to iBioPharma. Immediately following the distribution, we will complete a private offering of shares of our common stock to a limited number of investors for gross proceeds of approximately $5.0 million and will also issue additional shares of our common stock to Integrated BioPharma in lieu of intercompany debt.  As a result of these subsequent transactions, we expect that the current stockholders of Integrated BioPharma will own 84.6% of the issued and outstanding shares of iBioPharma common stock, the investors in the private offering will own an aggregate of 10% of such shares, and Integrated BioPharma will own 5.4% of such shares.

Shares of our common stock will be distributed to holders of Integrated BioPharma common stock of record as of the close of business on ________, 2008, which will be the record date. These stockholders will receive one share of our common stock for every one share of Integrated BioPharma common stock held as of the record date. The distribution of our shares will be made in book-entry form, and physical stock certificates will be issued only upon request. The distribution will be effective at 11:59 p.m. Eastern time on or about _________, 2008. As discussed more fully in the “Description of the Distribution” section of this information statement, if you sell shares of Integrated BioPharma common stock between the record date and _______, 2008, the distribution date, you will be selling your right to receive those shares of our common stock in the distribution.

No stockholder approval of the distribution is required or sought. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. Integrated BioPharma stockholders will not be required to pay for the shares of our common stock to be received by them in the distribution, or to surrender or to exchange shares of Integrated BioPharma common stock in order to receive our common stock or to take any other action in connection with the distribution. There is no current trading market for our common stock. However, we expect that a limited market, commonly known as a “when-issued” trading market, for our common stock will develop on or shortly before the record date for the spin-off, and we expect “regular way” trading of our common stock will begin the first trading day after the spin-off. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction. We expect that our common stock will be quoted on the OTC Bulletin Board following the distribution under the symbol “______.”

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 12.


Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is ____________, 2008,
and it is first being mailed to stockholders of Integrated BioPharma, Inc.
on or about ____________, 2008.


Integrated BioPharma, Inc.

Dear Integrated BioPharma Stockholder:

I am pleased to inform you that on November 9, 2007, the Board of Directors of Integrated BioPharma, Inc., approved a plan to distribute its equity interests in our subsidiary, iBioPharma, Inc. (formerly known as InB:Biotechnologies, Inc.), to our stockholders. This process is commonly referred to as a spin-off. iBioPharma, Inc., a Delaware corporation, will become the successor to InB:Biotechnologies, Inc., a New Jersey corporation, prior to effecting the spin-off.  iBioPharma was incorporated in Delaware on April 17, 2008 and is expected to become the successor corporation to InB:Biotechnologies, Inc. by reincorporation in July___, 2008. Accordingly, this Information Statement refers throughout to iBioPharma as if such reincorporation has occurred.  Integrated BioPharma stockholders will receive one share of iBioPharma common stock for each share of Integrated BioPharma common stock owned as of the record date, which is _________, 2008.

Following the spin-off, iBioPharma will be a public company with stock expected to be traded on the OTC Bulletin Board. If you are an owner of Integrated BioPharma stock on the record date, then on the effective date of the spin-off, __________, 2008, you will own shares in both Integrated BioPharma and iBioPharma. As discussed more fully in the “Description of the Distribution” section of this information statement, if you sell shares of Integrated BioPharma common stock between the record date and ________, 2008, the distribution date, you will be selling your right to receive shares of iBioPharma common stock in the distribution. Integrated BioPharma common stock will continue to trade under the symbol “INBP.” iBioPharma expects to have its common stock quoted on the OTC Bulletin Board under the symbol “______.”

Stockholder approval of the spin-off is not required, and you are not required to take any action to receive your iBioPharma common stock.

The enclosed information statement, which is being mailed to all Integrated BioPharma stockholders as of the record date, describes the distribution of shares of iBioPharma common stock in detail and contains important information, including financial statements, about iBioPharma. I suggest that you read it carefully.

If you have any questions regarding the spin-off of iBioPharma common stock, please contact the transfer agent of iBioPharma, Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004, (212) 509-4000.

Sincerely,
E. Gerald Kay,
Chief Executive Officer


iBioPharma, Inc.

Dear iBioPharma Stockholder:

It is my pleasure to welcome you as a stockholder of iBioPharma, Inc. We are a biopharmaceutical company focused on using, and promoting the use by others of, our proprietary plant-based technology platform, with an emphasis on applications for the prevention and treatment of serious infectious diseases.

As a separate company, iBioPharma will have the ability to focus exclusively on the growth and development of our plant-based biopharmaceutical businesses. Our goals are to:

•     Continue the development of product candidates based upon our proprietary plant-based technology platform.

•     Pursue opportunities for commercial partnerships and alliances and to begin clinical development of our potential products.

•     Expand our production capabilities and conduct preclinical and clinical studies of vaccines and antibodies for prevention and treatment of influenza, HPV, anthrax and plague infections.

We expect to have our common stock quoted on the OTC Bulletin Board under the symbol “____”.

As a separate and independent public company, iBioPharma will provide the opportunity to its initial stockholders and to those who subsequently become stockholders to be invested in a company devoted to the development of new-generation vaccines and antibodies in the growing infectious disease and biodefense markets. We invite you to learn more about iBioPharma and its opportunities as an independent public company in the attached information statement.

Sincerely,
Robert B. Kay
Executive Chairman


TABLE OF CONTENTS

SUMMARY

1

SUMMARY OF THE DISTRIBUTION

6

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

8

SUMMARY FINANCIAL INFORMATION

11

RISK FACTORS

12

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

25

DESCRIPTION OF THE DISTRIBUTION

25

General

25

Manner of Effecting the Distribution

25

Trading of Integrated BioPharma, Inc. Common Stock Between the Record Date and Distribution Date

26

Reasons for the Distribution

26

Results of the Distribution

28

Subsequent Share Issuances

28

Our Relationship with Integrated BioPharma after the Distribution

29

U.S. Federal Income Tax Consequences of Distribution

29

Listing and Trading of our Common Stock

31

Distribution Conditions and Terminations

31

Reason for Furnishing this Information Statement

32

DIVIDEND POLICY

32

CAPITALIZATION

32

IBIOPHARMA, INC. UNAUDITED PRO FORMA FINANCIAL STATEMENTS

34

INTEGRATED BIOPHARMA, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

39

MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

44

Overview

44

Effect of Spin-off from Integrated BioPharma

46

Critical Accounting Policies and Estimates

46

Results of Operations

49

Nine months ended March 31, 2008 Compared to the Nine months ended March 31, 2007

49

Year ended June 30, 2007 Compared to the Year ended June 30, 2006

52

Year ended June 30, 2006 Compared to the Year ended June 30, 2005

55

Recently Announced Accounting Pronouncements

60

Impact of Inflation

60

DESCRIPTION OF OUR BUSINESS

60

Overview

60

Our Business Structure

60

Our Product Candidates

63

Target Markets

65

Research and Development

66

Intellectual Property

68

Sales and Marketing

69

Competition

69

Government Regulation and Product Approval

70

Product Liability

74

Employees

74

Facilities

74

Legal Proceedings

75

i




 

    

 

OUR MANAGEMENT

75

Our Directors and Executive Officers

75

Scientific Advisors

77

Board Committees

78

Annual Meeting

78

Corporate Governance

78

Director Compensation

78

Executive Compensation

78

Summary Compensation Table

78

Outstanding Equity Awards at Fiscal Year-End

80

Director Compensation

80

Employment Agreements

80

401(k) Plan

81

Stock Option Plan

81

RELATIONSHIP BETWEEN OUR COMPANY AND INTEGRATED BIOPHARMA, INC.

81

Historical Relationship with Integrated BioPharma

81

Integrated BioPharma’s Distribution of Our Stock

81

Agreements Between Us and Integrated BioPharma

81

SECURITY OWNERSHIP OF MANAGEMENT

86

DESCRIPTION OF CAPITAL STOCK

89

Authorized Capital Stock

89

Market Price

90

Recent Sales

91

Transfer Agent and Registrar

91

OTC Bulletin Board Listing

91

INDEMNIFICATION OF DIRECTORS AND OFFICERS

91

AVAILABLE INFORMATION

92

ii




iBioPharma, Inc.

SUMMARY

The following is a summary of what we believe is the most important information contained in this information statement regarding our business and the distribution of shares of our common stock. For a complete understanding of our business and the distribution, we urge you to read this entire document carefully, including the risk factors, our historical and pro forma financial statements and the notes to those financial statements.

iBioPharma, Inc.

iBioPharma, Inc. (the “Company”) is a biopharmaceutical company focused on using and promoting the use of our proprietary plant-based technology platform (which we refer to herein as the platform, our platform, the “iBioLaunch™ technology” or the “iBioLaunch™ platform”) by which targeted proteins can be produced in plants for the development and manufacture of novel vaccines and therapeutics for use in humans and for certain veterinary applications. References in this information statement to “we,” “us” or “our company” refer to iBioPharma.

This platform was invented and developed by Fraunhofer USA Center for Molecular Biotechnology (“FhCMB”), a not-for-profit translational research institution. In January 2004, we acquired the platform from FhCMB together with FhCMB’s commitment for the maintenance and support necessary to further protect the intellectual property comprising the platform, including filing and prosecuting patent applications, providing scientific support for patent counsel’s activities on behalf of the Company and otherwise to maintain in force and good standing the Company’s intellectual property rights.

Our business model contemplates that, in addition to using our platform to create and advance our own product candidates, we will license the platform to, or enter into joint ventures or other arrangements with, other parties (we refer to these third parties collectively as licensees) who wish to use the platform for the development and/or production of their own product candidates. In order to attract appropriate licensees and increase the value of the Company’s share of such arrangements, the Company engaged FhCMB in October 2004 to perform research and development activities to apply the platform to create our first product candidate. The Company selected a plant-based flu vaccine for human use as the product candidate to exemplify the value of the platform particularly for products that require rapid, highly-scalable and economic production. Performance of this first research agreement, which requires us to make payments to FhCMB against the achievement of stated research milestones, has progressed through preclinical challenge studies in the ferret model. Clinical trials are expected to begin in the second quarter of 2009.

In addition, in 2006, the Company engaged FhCMB to create a prototype production module for products made through the use of the platform. The purpose for this engagement was to demonstrate the ease and economy with which platform-based products could be manufactured, again in order to attract potential licensees and increase the value of the Company’s share of commercial arrangements. The prototype design, which encompasses the entire production process from the seeding through pre-infiltration plant growth, infiltration with agrobacteria, harvesting of plant tissue and purification of target proteins, was completed in May 2008. Fabricated equipment for the prototype is scheduled to be delivered to FhCMB by November 2008. Equipment in the facility is scheduled to be commissioned, and the facility validated for current Good Manufacturing Practices (called cGMP) production in the first quarter of 2009. The facility will then be used for pilot scale production of protein targets for clinical trials of product candidates which use our platform technology.

1


In addition to our direct funding of FhCMB’s application of the platform technology to our human flu vaccine product candidate, we have established non-commercial arrangements among the Company, certain government entities, a non-governmental organization (which we refer to herein as a NGO) and FhCMB, pursuant to which the Company grants non-commercial rights to use its platform for the development and production by FhCMB of product candidates selected by the government entities and NGO, in consideration for grants by the government entities and NGO directly to FhCMB to fund such research and development.

 

Historically, we have also used plants as sources of high-quality nutritional supplements. The Company has a patented process for hydroponic growth of edible plants that causes them to accumulate high levels of important nutritional minerals such as chromium, selenium, iron and zinc. Following the spin-off, we will continue to engage the services of various wholly-owned subsidiaries of Integrated BioPharma for the production, marketing and sales of these phytomineral products.

Strategy

Through (i) the Company/FhCMB contracts and (ii) the non-commercial arrangements described above, the Company retains ownership of the intellectual property and exclusive commercial rights in the fields of human health and veterinary influenza applications of the intellectual property. The Company licenses or otherwise grants use rights (a) to government and NGO entities for not-for-profit applications of the intellectual property for the development or application of which they granted or were granted funding, and (b) to FhCMB for research purposes and applications in other fields. This business structure enables us to obtain commercial rights to various applications of our platform technology funded by government entities and NGOs. It also helps us demonstrate the validity and apparent value of the platform to parties to whom we will offer licenses or other business opportunities. Our use of FhCMB to perform research and development work allows us to develop our product candidates, and thereby promote the value of our platform for licensing and other collaboration purposes, without bearing the full risk and expense of establishing and maintaining our own research and development staff and facilities.

Using this business structure, we have applied our platform technology to create a pipeline of proprietary product candidates which we can offer to licensees, including vaccine and therapeutic candidates against seasonal and pandemic influenza, human papilloma virus (HPV), and other pathogens of public health significance. All of our product candidates are in the preclinical development stage, and to date, none of our product candidates has been approved by the U.S. Food and Drug Administration (“FDA”).


         We have exclusive control over and the rights to ownership of the intellectual property related to human health and veterinary influenza applications of the plant-based technology developed by FhCMB. Current development projects include expansion of production capabilities, conducting proof-of-principle preclinical studies and planning clinical studies of proprietary influenza and HPV vaccines and antibodies for potential treatment and diagnosis of influenza infections.

Technology

Our iBioLaunch technology is a platform that uses green plants for the accelerated development and manufacture of high value proteins of interest as product candidates. We believe that our platform technology is applicable to a broad range of disease agents, based on laboratory experiments conducted to date. We believe we can target rapidly evolving disease agents and develop product candidates that will demonstrate high safety, potency and efficacy. The table below summarizes the results of tests to date to assess the breadth of applicability of the iBioLaunch technology. Some, but not all, of the listed targets

2


are currently being pursued as product candidates by the Company to document the effectiveness of our platform technology.

Target

Produced via iBioLaunch

In vitro characterization complete

Immunogenicity demonstrated in animal model

Efficacy demonstrated in animal model

Influenza (vaccine)

X

X

X

X

Anthrax (vaccine)

X

X

X

X

Plague (vaccine)

X

X

X

X

RSV (vaccine)

X

X

X

X

Malaria (vaccine)

X

X

X

UT

Trypanosomes (vaccine)

X

X

X

X

HPV (vaccine)

X

X

X

X

Measles (vaccine)

X

X

X

UT

Influenza antibody
(therapeutic/diagnostic)

X

X

NA

UT

Anthrax antibody
(therapeutic)

X

X

NA

X

Tetanus toxin antibody
(therapeutic

X

X

NA

UT

hGH (therapeutic)

X

X

NA

UT

GM-CSF (therapeutic)

X

X

NA

UT

Diabetes autoantigen (diagnostic)

X

X

NA

UT

NA = not applicable UT = untested
 

Our iBioLaunch technology is based on using molecular “launch vectors,” which are DNA molecules that have the ability to turn on genes that we want to deliver into the cells and tissues of growing green plants. These launch vectors can be used to rapidly produce high levels of target protein in hydroponically-grown green plants. We believe that the use of green plants provides a safer supply of proteins than many natural or animal-based sources and contributes to a prospective cost advantage over traditional bioreactor technology, where cells are grown in expensive vessels. When combined with novel approaches to the design of subunit vaccines (vaccines composed of parts of disease-causing viruses or bacteria rather than the entire virus or bacterium), the iBioLaunch platform may eliminate the need for culturing dangerous human pathogens, and in the case of influenza vaccines, since eggs are not required for use of the iBioLaunch technology, our platform may eliminate the risk that a particular strain of influenza will prove lethal to chicken eggs, the most common source of flu vaccines.

Based upon the preclinical data developed for us by FhCMB to date, we expect that with iBioLaunch technology, the high yield of target protein per unit of biomass, the low fluid volumes required for biomass processing, and rapid production cycle times may enable the manufacture of pharmaceutical grade proteins with less total capital investment in manufacturing facilities than is required for microbial or mammalian cell bioreactor production processes. We estimate that the manufacturing facility capital requirements for deployment of our platform are less than half that required for conventional facilities. Our estimate is based on protein yields obtained in laboratory experiments and on preliminary engineering design for the pilot plant under construction in the facilities of FhCMB. In addition, we expect that once our technology is in commercial use, surge capacity for emergency response to disease outbreaks can be quickly established by simply increasing the number of green plants under

3




cultivation rather than by installing additional bioreactors, or maintaining bioreactor capacity in idle standby status.

The technical features and applications of our iBioLaunch technology have been described in peer-reviewed scientific publications including the journals “Vaccine,” “Transgenic Research,” and “Influenza.”

Product Candidates

 

In addition to seeking appropriate licensees of our platform, our near-term commercial focus is on advancing development of and establishing licenses for product candidates comprising vaccines for influenza, an avian influenza-specific antibody with potential use in both diagnostic and therapeutic applications and a therapeutic vaccine for HPV. In accordance with our business structure, we are also developing products for the biodefense market and for infectious diseases important in the developing world. None of our product candidates has yet entered the human clinical testing phase.

Diagnostic Product for Pandemic Avian Influenza . While predicting the timing of an avian influenza pandemic is not possible, reducing the potentially devastating impact of an outbreak requires an efficient method to distinguish avian influenza infections from other respiratory diseases, including seasonal influenza. There currently are no rapid diagnostic tests available for this purpose. We have discovered an antibody that distinguishes highly pathogenic avian influenza strains--a total of 19 strains from clades 1, 2a and 2b (“clade” is the designation for different categories of influenza virus; each clade is composed of several strains) from human seasonal influenza viruses. With the financial and technical support of a future commercial partner, we may be able to develop this proprietary antibody as a point of care diagnostic product.

Seasonal Influenza Vaccine . We are developing candidate target vaccines directed against seasonal influenza virus strains. Our vaccine candidates have shown significant promise in preclinical efficacy studies in ferrets (the preferred animal model for testing influenza products). Our near-term objective is to complete preclinical evaluation and transition selected vaccine candidates into Phase 1 human clinical trials.

Pandemic Influenza Vaccine . We are developing vaccine candidates targeting highly pathogenic avian influenza (H5N1) viruses. These candidates are in the preclinical development stage. They have been proven to generate an immune response (also referred to as immunogenicity) and have been successfully tested in mice and ferrets for protective efficacy. The Bill and Melinda Gates Foundation has committed significant funding to FhCMB for preclinical development of pandemic influenza vaccines using our platform technology. Our long term goal is the application of our platform to a combined vaccine effective for preventing both seasonal and pandemic influenza infections.

Therapeutic Antibody for Influenza . Our prototype product for treatment of patients hospitalized with avian influenza is an antibody that specifically inhibits neuraminidase (neuraminidase is an influenza virus protein that is essential to the continued function of the virus) activity of highly pathogenic avian influenza virus strains from clades 1 and 2. Antibodies are proteins that recognize other molecules based on unique shapes and bind to the recognized molecule. Sometimes when an antibody binds to its target it can inactivate the function of the target molecule. Other times antibody binding does not change the function of the target, but can serve to identify the specific target and distinguish it from other non-target molecules that are similar but not identical. When an antibody binds to viral neuraminidase tightly enough, it can shut down the function of the protein and stop the virus from spreading. The neuraminidases of different strains of influenza viruses are unique to each strain, and an antibody that binds to one particular type of neuraminidase can be used to distinguish that virus strain from other virus

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strains. We have preclinical evidence that the antibody FhCMB discovered for us is effective against drug-resistant influenza virus samples. This antibody has potential for prophylactic use and as a first line therapy in a flu pandemic. The antibody is in the preclinical development stage.

Therapeutic Vaccine for Human Papilloma Virus . We have commercial rights to vaccine candidates developed pursuant to our business structure based on fusing a protein component of HPV called the E7 antigen, to the LicKM protein of the bacterium Clostridium thermocellum . Several of these candidate vaccine formulations have demonstrated sufficient immune stimulation and protection from disease in mouse experiments to justify further investment in its development as a potential human therapeutic product.

Biodefense Products . We have commercial rights pursuant our business structure to an oral anthrax booster vaccine candidate developed by FhCMB in collaboration with the Naval Medical Research Center (“NMRC”). Animal tests have demonstrated safety and efficacy of this candidate product. Under Department of Defense sponsorship, FhCMB is also conducting rabbit and primate studies on a proprietary multi-agent anthrax and plague vaccine candidate.

Vaccines for Developing Markets . Funding for developing-world products comes primarily from FhCMB’s collaborators, especially the Gates Foundation, and supplements the research and development payments that we make to FhCMB to advance and expand the technology to which we have exclusive commercial rights. This supplemental funding provides significant benefits in technology optimization and is synergistic with our product development programs. Through these developing world programs, positive preclinical immunogenicity and efficacy results have been obtained for vaccines for HPV, trypanosomiasis and malaria.

Challenges and Risks

To achieve commercial success with any of our product candidates, we and/or our potential licensees must overcome a number of challenges and risks inherent in the new drug development process and also in developing our platform to be used at scale. Each of these risks could adversely affect our business, financial condition and operating results as well as adversely affect the value of our common stock. Please see “Risk Factors – Risks Related to Our Business,” “Risk Factors – Risks Relating to Our Relationship with and Spin-Off from Integrated BioPharma,” “Risk Factors – Risks Relating to the Distribution”, and “Risk Factors – Risks Relating to Ownership of our Common Stock” for more detailed descriptions of the matters described below.

Our product candidates are at an early stage of development, and if we are not able to successfully develop and commercialize them, we may not generate sufficient revenues to continue our business operations.

Even if we successfully complete clinical trials for our product candidates, there are no assurances that we will be able to submit, or obtain FDA approval of, a biologics license application.

We will not be able to commercialize our product candidates if our preclinical studies do not produce successful results or our clinical trials do not demonstrate safety and efficacy in humans.

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs.



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We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions, and such competition may adversely affect our ability to generate revenue from our products.

We will depend significantly on agreements with licencees to develop and commercialize our product candidates, and these agreements have not been entered into.

If third parties on whom we will rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates, and our business may suffer.

We face substantial uncertainty in our ability to protect our patents and proprietary technology.

Our business could suffer if our systems and infrastructure are inadequate or we cannot replace the other benefits previously provided by Integrated BioPharma.



SUMMARY OF THE DISTRIBUTION

The following is a brief summary of the terms of the distribution. Please see “Description of The Distribution” for a more detailed description of the matters described below.

Distributing company : Integrated BioPharma Inc., which is primarily engaged in manufacturing, distributing, marketing and sales of vitamins, nutritional supplements and herbal products; the manufacture and distribution of Paclitaxel, which is the primary chemotherapeutic agent in the treatment of breast cancer; and pharmaceutical technical services through its contract research organization.

Distributed company :iBioPharma, Inc., a specialty pharmaceutical company which licenses and uses its patented plant-based technology to produce vaccines and therapeutic antibodies.

Reasons for the distribution : The board of directors of Integrated BioPharma believes that the separation of iBioPharma from Integrated BioPharma will enhance the success of both Integrated BioPharma and iBioPharma, and thereby maximize stockholder value over the long-term for each company, by providing each company the ability to focus exclusively on maximizing opportunities for their distinct businesses. Integrated BioPharma’s board of directors believes that a tax-free distribution of shares in iBioPharma offers Integrated BioPharma and its stockholders the greatest long-term value and is the most tax efficient way to separate the companies. Please see “Description of the Distribution – Reasons for the Distribution” for more detailed information.

Securities to be distributed : Approximately ______ shares of our common stock, representing 100% of our issued and outstanding shares of common stock.

Distribution ratio : Each holder of Integrated BioPharma common stock as of the record date will receive one share of our common stock for every one share of Integrated BioPharma common stock held on the record date.

Method of distribution : For registered Integrated BioPharma stockholders, our transfer agent will credit their share of common stock to book-entry accounts established to hold their shares of our common stock. Book-entry refers to a method of recording stock ownership in the records of our stock registrar in which no physical certificates are issued. For stockholders who own Integrated BioPharma common stock

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through a broker or other nominee, their shares of our common stock will be credited to their accounts by the broker or other nominee. Following the distribution, stockholders whose shares are held in book-entry form may request the transfer of their shares of our common stock to a brokerage or other account at any time or the delivery of physical stock certificates for their shares, in each case without charge for such transfer or delivery. However, if you sell your Integrated BioPharma shares after the record date and before the end of trading on the distribution date of the iBioPharma common stock, NASDAQ Global Market “ex dividend” rules require that the right to receive the corresponding shares of iBioPharma common stock will automatically be conveyed with the sale of your Integrated BioPharma stock. See “Trading of Integrated BioPharma, Inc. Common Stock between the Record Date and Distribution Date.”

Record date : The record date is the close of business on __________ , 2008.

Distribution date : 11:59 p.m. on __________, 2008.

OTC Bulletin Board quotation : Currently there is no public market for our common stock. We expect our common stock to be quoted on the OTC Bulletin Board under the symbol “_____.” We anticipate that trading will commence on a “when-issued” basis shortly before the record date. When-issued trading refers to a transaction made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, when-issued trading in respect of our common stock will end and “regular way” trading will begin. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction. We cannot predict the trading prices for our common stock before or after the distribution date. In addition, Integrated BioPharma’s common stock will remain outstanding and will continue to trade on the NASDAQ Global Market. We cannot predict any change that may occur in the trading price of Integrated BioPharma’s common stock as a result of the distribution.

Transfer agent and registrar for the shares : Continental Stock Transfer & Trust Company, will be the transfer agent and registrar for the shares of our common stock.

Distribution agent for the shares : Continental Stock Transfer & Trust Company will be the distribution agent to distribute the shares of our common stock to all Integrated BioPharma stockholders.

Subsequent share issuances : Immediately following the distribution, we will issue additional shares of our common stock to Integrated BioPharma in lieu of intercompany debt.  We will also complete a private offering of shares of our common stock to a limited number of investors for gross proceeds of approximately $5.0 million. We expect to issue an aggregate of 10% of our common stock outstanding as of the record date to these investors. As a result of these subsequent transactions, we expect that the current stockholders of Integrated BioPharma will own 84.6% of the issued and outstanding shares of iBioPharma common stock, the investors in the private offering will own an aggregate of 10% of such shares, and Integrated BioPharma will own 5.4% of such shares.  The sale of shares of iBioPharma common stock in the private offering has not been registered under the Securities Act of 1933, as amended, and will be issued and sold in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act and Regulation D promulgated thereunder. These securities may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.

Dividend policy: Payment of future cash dividends, if any, will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and contractual restrictions with respect to the payment of dividends.

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Anti-takeover effects: We will indemnify Integrated BioPharma under a tax responsibility allocation agreement we have entered into in connection with the distribution for the tax resulting from the application of Section 355(e) of the U.S. Internal Revenue Code of 1986, as amended, (the “Internal Revenue Code”) as a result of any acquisition or issuance of our stock sale of a material portion of our business, or other action taken by us that would trigger such tax. The possibility of this potential tax liability could discourage, delay or prevent a change of control of iBioPharma. For instance, any cumulative 50% change of ownership in either Integrated BioPharma or iBioPharma within the four-year period beginning two years before the date of the spin-off will be presumed to be part a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in either Integrated BioPharma or iBioPharma. If this presumption applies, it would need to be rebutted to avoid a large taxable gain. In addition, a merger, recapitalization or acquisition, or issuance or redemption of common stock of iBioPharma after the spin-off could, in some circumstances, be counted toward the 50% change of ownership threshold. In this regard, we have agreed to refrain from taking future actions (as specified in the tax responsibility allocation agreement referred to above) and to provide further assurances that the distribution will qualify as tax-free. See “Relationships Between Our Company and Integrated BioPharma, Inc.—Agreements Between Us and Integrated BioPharma—Tax Responsibility Allocation Agreement.” In addition, some provisions of our certificate of incorporation, our by-laws and Delaware law may also have the effect of making more difficult an acquisition of control of us in a transaction not approved by our board of directors. See “Relationship Between Our Company and Integrated BioPharma, Inc.” and “Description of Capital Stock.”

Relationship with Integrated BioPharma: Immediately after the distribution, Integrated BioPharma will convert approximately $2.7 million of intercompany debt due from us by acquiring 6% of our common stock then outstanding and will cease to control iBioPharma. However, due to several relationships between the two companies that existed prior to the distribution, Integrated BioPharma and iBioPharma will enter into one or more agreements regarding the effects of the distribution, and the allocation of various obligations and liabilities between them. Please refer to Relationships between Our Company and Integrated BioPharma, Inc.” and “Risk Factors – Risks Relating to our Relationship with and Spin-off from Integrated BioPharma,” below, for more information.

U.S. Federal Income Tax Consequences: Integrated BioPharma has structured the distribution to conform to the requirements of Section 355 of the Internal Revenue Code with the intention of the distribution qualifying as a tax-free event. Please refer to “U.S. Federal Income Tax Consequences of Distribution,” for additional information. Because personal circumstances are unique to each individual stockholder, you are also urged to consult your own tax advisor to determine the tax consequences of the distribution to you.

Risk Factors: iBioPharma’s business is subject both to general and specific business risks relating to its operations. In addition, iBioPharma’s spin-off from Integrated BioPharma presents risks relating to it being a separately traded public company as well as risks relating to the nature of the spin-off transaction itself. Please refer to the section titled Risk Factors” on page 12 for a discussion of the various risks to our business and the value of your holdings of our common stock.

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

What do stockholders need to do to participate in the spin-off?

Nothing. You are not required to take any action to receive iBioPharma common stock in the distribution, although we urge you to read this entire document carefully. No stockholder approval of the distribution is required by applicable law, and we are not seeking such stockholder approval.

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Do I have to pay anything for the iBioPharma stock?

No. You do not have to pay anything for the iBioPharma stock you receive in the distribution. The distribution is in effect a dividend of certain property owned by Integrated BioPharma to its stockholders.

Do I have to send in my Integrated BioPharma stock certificate?

No. You do not have to do anything to receive the iBioPharma stock. If you are a Integrated BioPharma stockholder as of the record date of the distribution, you will be automatically credited with shares of iBioPharma common stock. However, see “Trading of Integrated BioPharma, Inc. Common Stock between the Record Date and Distribution Date” for consequences of a sale of Integrated BioPharma stock after the record date of the distribution.

How many shares of iBioPharma common stock will I receive?

You will receive one share of iBioPharma common stock for each share of Integrated BioPharma stock you own as of the distribution record date. The record date for the distribution is ______, 2008.

Will I get a stock certificate?

No. You will not automatically receive a paper certificate for your shares of iBioPharma common stock. Prior to the effective date of the distribution, our transfer agent will create an account for each Integrated BioPharma stockholder. On the effective date of the distribution, the transfer agent will credit the shares issued to each registered stockholder to their respective accounts with the transfer agent. The transfer agent will mail to each registered stockholder a statement of the shares of iBioPharma stock held in their account. This is called a “book-entry” system. For stockholders who own Integrated BioPharma stock through a broker or nominee, their shares of our common stock will be credited to their brokerage accounts by such broker or nominee. After the distribution, stockholders may request the delivery of a physical stock certificate for their shares.

Will my Integrated BioPharma stock continue to be publicly traded?

Yes. The Integrated BioPharma common stock will continue to be traded on the NASDAQ Global Market. After the effective date of the distribution, both the Integrated BioPharma common stock and the iBioPharma common stock will be publicly traded.

Where can Integrated BioPharma stockholders get more information? 

You should direct inquiries relating to the distribution to the transfer agent and registrar of our common stock at:

Continental Stock Transfer and Trust Company
17 Battery Place
New York, New York 10004-1123
(212) 509-4000
www.continentalstock.com

You should direct inquiries relating to your investment in Integrated BioPharma common stock to:

Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
(888) 319-6962
www.ibiopharma.com

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After the distribution, you should direct inquiries relating to our common stock to:

iBioPharma, Inc.
9 Innovation Way, Suite 100
Newark, Delaware 19711
(302) 355-0650
www.inb-biotechnologies.com

Information on these websites does not constitute part of this information statement .

 

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SUMMARY FINANCIAL INFORMATION

The following table presents a summary of selected financial information derived from our audited financial statements for the fiscal years ended June 30, 2005, 2006 and 2007, each of which are included elsewhere in this information statement, the unaudited financial statements for the fiscal years ended June 30, 2003 and 2004, the unaudited financial statements for the nine months ended March 31, 2008 and 2007, and the unaudited pro forma statement of operations for the fiscal year ended June 30, 2007, the nine months ended March 31, 2008 and the unaudited pro forma balance sheet as of March 31, 2008, which are also included elsewhere herein. The historical information presented in the following table may not be indicative of the results of operations or financial position that would have been obtained if we had been an independent company during the periods shown, or of our future performance as an independent company.

You should read the summary financial information in conjunction with our audited financial statements and the notes to the audited financial statements. You should also read the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The summary financial information is qualified by reference to these sections, the audited financial statements and the notes to the audited financial statements, each of which is included elsewhere in this information statement.

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RISK FACTORS

You should carefully consider the risks described below, in addition to the other information in this information statement, before purchasing shares of our common stock. Each of these risk factors could adversely affect our business, financial condition and operating results as well as adversely affect the value of an investment in our common stock.

Risks Related to Our Business

Our plant-based technology platform has not previously been used by others to successfully develop products, and if we are not able to establish licenses of the platform, we may not generate sufficient license revenues to fulfill our business plan.

If we are unable to convince others to adopt the use of the platform in addition to or instead of other methods to produce vaccines and therapeutic proteins, the Company will not generate the revenues presently contemplated by its business plan to support its continuing operations.

Our product candidates are in the preclinical stage of development, and if we or our licensees are not able to successfully develop and commercialize them, we may not generate sufficient revenues to continue our business operations.

We have five internal product candidates and two additional categories--biodefense and developing world--made through the application of our technology platform, none of which has entered human clinical trials and for none of which an investigational new drug application (IND) has been filed with the FDA. Our success in establishing licenses to our platform will substantially depend on our ability to successfully complete clinical trials, obtain required regulatory approvals for our product candidates alone or with other persons. If the studies described above or any further studies fail, if we do not obtain required regulatory approvals, or if we fail to commercialize any of our product candidates alone or with licensees, we may be unable to generate sufficient revenues to attain profitability or continue our business operations, and our reputation in the industry and in the investment community would likely be significantly damaged, each of which would cause our stock price to decline and your holdings of our stock to lose most, if not all, of their value.

We will not be able to commercialize our product candidates if our preclinical studies do not produce successful results or our clinical trials do not demonstrate safety and efficacy in humans.

Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and has an uncertain outcome. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to commercialize our product candidates, including the following:

·     

Our preclinical or clinical trials may produce negative or inconclusive results, which may require us to conduct additional preclinical testing or clinical trials or to abandon projects that we expect to be promising. For example, we may obtain promising animal data about the immunogenicity of a vaccine candidate and then our human tests may result in no or inadequate immune responses. In addition, we may encounter unexpected safety concerns that would require further testing even if the vaccine candidate produced a very significant immune response in human subjects.



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·     

Initial clinical results may not be supported by further or more extensive clinical trials. For example, we may obtain data that suggest a desirable immune response from one of our vaccine candidates in a small human study, but then when tests are conducted on larger numbers of people, we may not see the same extent of immune response. If the immune response generated by a vaccine is too low, or occurs in too few treated individuals, then the vaccine will have no commercial value.

·     

Enrollment in our clinical trials may be slower than we currently anticipate, resulting in significant delays. The cost of conducting a clinical trial increases as the time required to enroll adequate numbers of human subjects to obtain meaningful results increases. Enrollment in a clinical trial can be a slower-than-anticipated process because of competition from other clinical trials, because the study is not of interest to qualified subjects, or because the stringency of requirements for enrollment limits the number of people who are eligible to participate in the clinical trial.

·     

We might have to suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks. Animal tests do not always adequately predict potential safety risks to human subjects. We will not know the risk of any candidate product until it is tested in human subjects, and if subjects experience adverse events during the clinical trial, the trial may have to be suspended and modified or terminated entirely.

·     

Regulators or institutional review boards may suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements.

·     

Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the product not commercially viable.

·     

The effects of our product candidates may not be the desired effects or may include undesirable side effects.



If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, or if the results of these trials or tests are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for our product candidates, we may not be able to obtain marketing approval or we may obtain approval for indications that are not as broad as intended. Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether planned clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates. Poor clinical trial results or delays may make it impossible to license a product or so reduce its attractiveness to a licensing partner that we will be unable to successfully commercialize a product.

We will need substantial additional funding to shepherd our product candidates through the clinical testing process and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our research and development expenses to increase in connection with our ongoing activities, particularly as the scope of the clinical trials that we are conducting expands. In addition, subject to regulatory approval of any of our product candidates, we expect to incur significant

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commercialization expenses for product sales, marketing, manufacturing and distribution. We will need substantial additional funding and may be unable to raise capital when needed or may be unable to raise capital on attractive terms, which would force us to delay, reduce or eliminate our research and development programs or commercialization efforts.

 

We believe that our existing cash resources, along with our $5.0 million private placement of common stock that we anticipate will close after the distribution of our shares, as described herein, and committed funding from FhCMB collaborators will be sufficient to meet our projected operating requirements only through the third calendar quarter of 2009. Our future funding requirements will depend on many factors, including:

·     

the scope and results of our clinical trials;

·     

our ability to advance additional product candidates into development;

·     

the success of our anticipated commercial agreements with pharmaceutical companies;

·     

our ability to establish and maintain additional development agreements or other alternative arrangements;

·     

the timing of, and the costs involved in, obtaining regulatory approvals;

·     

the cost of manufacturing activities;

·     

the cost of commercialization activities, including product marketing, sales and distribution;

·     

the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including, if necessary, litigation costs and the results of such litigation; and

·     

potential acquisition or in-licensing of other products or technologies.



We estimate we would need to raise additional funds of approximately $35 million over the next three years to operate our business and independently fund a Phase 3 clinical trial of one of our product candidates. Our funding needs would likewise increase as we move additional product candidates through the clinical trial process.

If we are unsuccessful in raising additional capital or other alternative financing, we might have to abandon our efforts to commercialize the intellectual property obtained from FhCMB and cease operations as we might no longer have the financial support of Integrated BioPharma.

Our product development and commercialization involve a number of uncertainties, and we may never generate sufficient revenues from the sale of potential products to become profitable; therefore, we may raise funds which may be dilutive of our shareholders in the future.

We have generated no significant revenues to date. To generate revenue and to achieve profitability, we must successfully develop licenses for our platform and/or clinically test, market and sell our potential products. Even if we generate revenue and successfully achieve profitability, we cannot predict the level of that profitability or whether it will be sustainable. We expect that our operating results

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will fluctuate from period to period as a result of differences in when we incur expenses and receive revenues from sales of our potential products, business arrangements and other sources. Some of these fluctuations may be significant.

Until we can generate a sufficient amount of license and/or product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings and corporate product or technology development agreements and licensing arrangements. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve restrictive covenants. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholders. If we raise additional funds through development and licensing arrangements with third parties, it will be necessary to relinquish valuable rights to our technologies, research programs or product candidates or grant licenses on terms that may not be favorable to us.

Even if we or our potential licensees successfully complete clinical trials for our product candidates, there are no assurances that we will be able to submit, or obtain FDA approval of, a new drug application or biologics license application.

There can be no assurance that, if clinical trials for any of our product candidates are successfully completed, we will be able to submit a biologics license application (BLA), to the FDA or that any BLA we submit will be approved by the FDA in a timely manner, if at all. After completing clinical trials for a product candidate in humans, a dossier is prepared and submitted to the FDA as a BLA, and includes all preclinical and clinical trial data that clearly establish both short-term and long-term safety for a product candidate, and data that establishes the statistically significant efficacy of a product candidate, in order to allow the FDA to review such dossier and to consider a product candidate for approval for commercialization in the United States. If we are unable to submit a BLA with respect to any of our product candidates, or if any BLA we submit is not approved by the FDA, we will be unable to commercialize that product. The FDA can and does reject BLAs and requires additional clinical trials, even when product candidates perform well or achieve favorable results in large-scale Phase 3 clinical trials. If we fail to commercialize any of our product candidates, we may be unable to generate sufficient revenues to continue operations or attain profitability and our reputation in the industry and in the investment community would likely be damaged, each of which would cause our stock price to significantly decrease.

If commercialized, our product candidates may not be approved for sufficient governmental or third-party reimbursements, which would adversely affect our ability to market our product candidates.

In the United States and elsewhere, sales of pharmaceutical products depend in significant part on the availability of reimbursement to the consumer from third-party payers, such as government and private insurance plans. Since we currently have no commercial products, we have not had to face this issue yet; however, third-party payers are increasingly challenging the prices charged for medical products and services. It will be time consuming and expensive for us to go through the process of seeking reimbursement from Medicaid, Medicare and private payers for any of our product candidates. Our products may not be considered cost effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis. The passage of the Medicare Prescription Drug and Modernization Act of 2003 imposes new requirements for the distribution and pricing of prescription drugs which may negatively affect the marketing of our potential products.

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We face competition from many different sources, including pharmaceutical and biotechnology enterprises, academic institutions, government agencies and private and public research institutions, and such competition may adversely affect our ability to generate revenue from our products.

Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and marketing approved products than we do. For example, large pharmaceutical companies are in the influenza vaccine business. Five injectable influenza vaccines are approved for use in the U.S. These include Afluria made by CSL Limited, Fluzone made by Sanofi-Pasteur, Fluarix made by GlaxoSmithKline, Flulaval made by ID Biomedical and distributed by GlaxoSmithKline, and Fluvirin made by Novartis. In addition, a nasally-administered influenza vaccine called FluMist is made by MedImmune. If we are successful in obtaining regulatory approval for our influenza vaccine candidate, these large companies would be our competitors.

Smaller or early stage companies may also prove to be significant competitors, particularly through business arrangements with large and established companies that may reduce the potential demand for access to our platform. For example, Novavax is conducting human clinical trials of vaccines for influenza and other infectious diseases using cell culture processes for manufacturing, and Medicago has announced preclinical experiments to produce influenza vaccines in green plants.

There are currently approved therapies for the diseases and conditions addressed by our vaccine and antibody candidates that are undergoing clinical trials and for the diseases and conditions that are subjects of our preclinical development program. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer side effects or are less expensive than any products that we may develop. For example, the drugs oseltamivir, amantadine, and zanamivir are used to treat certain influenza infections, and Merck’s vaccine to prevent HPV infection has been approved by the FDA with a similar vaccine developed by GlaxoSmithKline in late-stage development. There are also a number of companies working to develop new drugs and other therapies for diseases of commercial interest to us that are undergoing various stages of testing including clinical trials. The key competitive factors affecting the success of all of our product candidates are likely to be their efficacy, safety profile, price and convenience.

Finally, these third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.

We will depend significantly on arrangements with third parties to develop and commercialize our product candidates.

A key element of our business strategy and our thinly-staffed employment structure is to establish arrangements with licensees, particularly leading pharmaceutical and biotechnology companies, to develop and commercialize product candidates. We and FhCMB currently are working within our business structure, which includes non-commercial arrangements as described above, to apply further our plant-based platform technology. Delays, withdrawals or other adverse changes to the current participants in our business structure might adversely affect our ability to develop and commercialize our product candidates.

We expect to rely upon our future business arrangements for support in advancing certain of our drug candidates and intend to rely on additional work under current and future arrangements during our

 

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efforts to commercialize our product candidates. Our contractors may be conducting multiple product development efforts within the same disease areas that are the subjects of their agreements with us. Our agreements might not preclude them from pursuing development efforts using a different approach from that which is the subject of our agreement with them. Any of our drug candidates, therefore, may be subject to competition with a drug candidate under development by a contractor.

 

The success of our business arrangements will depend heavily on the efforts and activities of the organizations which are party to these arrangements. Our future contractual arrangements may provide significant discretion in determining the efforts and resources available to these programs. The risks that we face in connection with these arrangements, and that we anticipate being subject to in future arrangements, include the following:

·     

Future agreements may be for fixed terms and subject to termination under various circumstances, including, in some cases, on short notice without cause.

·     

Our future licensees may develop and commercialize, either alone or with others, products and services that are similar to or competitive with the products that are the subject of the agreement with us.

·     

Our future licensees may underfund or not commit sufficient resources to the testing, marketing, distribution or other development of our products.

·     

Our future licensees may not properly maintain or defend our intellectual property rights, or they may utilize our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential liability.

·     

Our future licensees may change the focus of their development and commercialization efforts. Pharmaceutical and biotechnology companies historically have re-evaluated their priorities from time to time, including following mergers and consolidations, which have been common in recent years in these industries. The ability of our product candidates and products to reach their potential could be limited if our licensees or customers decrease or fail to increase spending relating to such products.



Business arrangements with pharmaceutical companies and other third parties often are terminated or allowed to expire by the other party. Such terminations or expirations would adversely affect us financially and could harm our business reputation.

We may not be successful in establishing additional arrangements with third parties, which could adversely affect our ability to discover, develop and commercialize products.

The Company engaged FhCMB to perform research and development activities to apply our platform technology to create product candidates. We currently do not have other similar agreements with third parties. If we are able to obtain such agreements, however, these arrangements may not be scientifically or commercially successful. If we are unable to reach new agreements with suitable third parties, we may fail to meet our business objectives for the affected product or program. We face significant competition in seeking appropriate companies with which to create additional similar business structures. Moreover, these arrangements are complex to negotiate and time-consuming to document. We may not be successful in our efforts to establish additional alternative arrangements. The terms of any

17


additional arrangements that we establish may not be favorable to us. Moreover, these arrangements may not be successful.

If third parties on whom we will rely for clinical trials do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates, and our business may suffer.

We do not have the ability to independently conduct the clinical trials required to obtain regulatory approval for our products. We have not yet contracted with any third parties to conduct our clinical trials. We will depend on independent clinical investigators, contract research organizations and other third party service providers to conduct the clinical trials of our product candidates and expect to continue to do so. We will rely heavily on these parties for successful execution of our clinical trials but will not control many aspects of their activities. For example, the investigators may not be our employees. However, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Third parties may not complete activities on schedule, or may not conduct our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates.

We face substantial uncertainty in our ability to protect our patents and proprietary technology.

Our ability to commercialize our products will depend, in part, on our or our licensors’ ability to obtain patents, to enforce those patents and preserve trade secrets, and to operate without infringing on the proprietary rights of others. The patent positions of biopharmaceutical companies like us are highly uncertain and involve complex legal and factual questions. To date, we have 22 U.S. applications pending and 34 applications pending in Europe, Canada, Australia, China, India, Brazil, Japan, Hong Kong and New Zealand for the intellectual property developed by FhCMB. There can be no assurance that:

·     

patent applications owned by or licensed to us will result in issued patents;

·     

patent protection will be secured for any particular technology;

·     

any patents that have been or may be issued to us will be valid or enforceable;

·     

any patents will provide meaningful protection to us;

·     

others will not be able to design around the patents; or

·     

our patents will provide a competitive advantage or have commercial application.



The failure to obtain and maintain adequate patent protection would have a material adverse effect on us and may adversely affect our ability to enter into, or affect the terms of, any arrangement for the marketing of any product. Please see “Description of Our Business – Intellectual Property” for more information.

We cannot assure you that our patents will not be challenged by others.

There can be no assurance that patents owned by or licensed to us will not be challenged by others. We currently hold one issued U.S. patent for methods of inducing gene silencing in plants and one U.S. patent application for which we have received a notice of allowance, describing systems for

18


expression of vaccine antigens in plants. Please see “Description of Our Business – Intellectual Property” for more information on our current patents and patent applications. We could incur substantial costs in proceedings, including interference proceedings before the United States Patent and Trademark Office and comparable proceedings before similar agencies in other countries in connection with any claims that may arise in the future. These proceedings could result in adverse decisions about the patentability of our or our licensors’ inventions and products, as well as about the enforceability, validity or scope of protection afforded by the patents. Any adverse decisions about the patentability of our product candidates could cause us to either lose rights to develop and commercialize our product candidates or to license such rights at substantial cost to us. In addition, even if we were successful in such proceedings, the cost and delay of such proceedings would most likely have a material adverse effect on our business.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information, may not adequately protect our intellectual property, and will not prevent third parties from independently discovering technology similar to or in competition with our intellectual property.

We rely on trade secrets and other unpatented proprietary information in our product development activities. To the extent we rely on trade secrets and unpatented know-how to maintain our competitive technological position, there can be no assurance that others may not independently develop the same or similar technologies. We seek to protect trade secrets and proprietary knowledge, in part, through confidentiality agreements with our employees, consultants, advisors, collaborators and contractors. Nevertheless, these agreements may not effectively prevent disclosure of our confidential information and may not provide us with an adequate remedy in the event of unauthorized disclosure of such information. If our employees, scientific consultants, advisors, collaborators or contractors develop inventions or processes independently that may be applicable to our technologies, product candidates or products, disputes may arise about ownership of proprietary rights to those inventions and processes. Such inventions and processes will not necessarily become our property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of our proprietary rights. If we fail to obtain or maintain trade secret protection for any reason, the competition we face could increase, reducing our potential revenues and adversely affecting our ability to attain or maintain profitability.

If we infringe or are alleged to infringe intellectual property rights of third parties, it will adversely affect our business.

Our research, development and commercialization activities, as well as any products candidates or products resulting from these activities, may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us or our customers, collaborators or licensees that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we or our customers, collaborators or licensees may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our customers, collaborators or licensees were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement

19


claims, we or our customers, collaborators or licensees are unable to enter into licenses on acceptable terms. This could harm our business significantly.

There have been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Risks Relating to Our Relationship with and Spin-Off from Integrated BioPharma

Our business could suffer if our systems and infrastructure are inadequate or we cannot replace the other benefits previously provided by Integrated BioPharma.

Since our inception, we have relied on Integrated BioPharma for various services which we have only recently developed for ourselves, including:

·     

legal;

·     

treasury;

·     

tax;

·     

employee benefits;

·     

insurance;

·     

investor relations; and

·     

executive oversight and other services.



Following the distribution, we will operate as a separate publicly traded company. We have developed and implemented systems and infrastructure to support our current and future business, and our responsibilities as a public company. These systems and infrastructure may be inadequate, however, and we may be required to develop or otherwise acquire other systems and infrastructure, or to obtain certain corporate services from Integrated BioPharma to support our current and future business such as legal, strategic financial planning, tax and SEC reporting services. For further detail, please see “Relationship Between Our Company and Integrated BioPharma, Inc. – Agreements Between Us and Integrated BioPharma.”

After the distribution, we will not be able to obtain financing from Integrated BioPharma.

Our plans to expand our business and to continue to improve our products may require funds in excess of our cash flow and may require us to seek financing from third parties. In the past, Integrated BioPharma has provided capital for our general corporate purposes, and we used cash provided by

20


Integrated BioPharma to fund our operations. After the distribution, however, Integrated BioPharma will not provide funds to finance our operations. Without the opportunity to obtain financing from Integrated BioPharma, we will in the future need to obtain additional financing from banks, or through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. We cannot give assurances at this time that we will be able to obtain such funding. In addition, the terms, interest rates, costs and fees of new credit facilities may not be as favorable as those historically enjoyed with Integrated BioPharma. For example, Integrated BioPharma did not charge us with any fees or costs for the intercompany borrowing, nor were there any covenants regarding financial ratios or prohibition on certain transactions in the loan arrangement with Integrated BioPharma. Our inability to obtain financing on favorable terms could restrict our operations and reduce our profitability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

There is a substantial risk of product liability claims in our business. If we are unable to obtain sufficient insurance, a product liability claim against us could adversely affect our business.

Our business involves exposure to potential product liability risks that are inherent in the production and manufacture of pharmaceutical products. Currently, we receive product liability coverage from the product liability insurance policy from Integrated BioPharma, and we have maintained this product liability insurance until now for sales of our phytomineral products. Clinical trial and product liability insurance, however, is volatile and may become increasingly expensive. As a result, we may be unable to obtain sufficient insurance or increase our existing coverage at a reasonable cost to protect us against losses that could have a material adverse effect on our business. An individual may bring a product liability claim against us if one of our products or product candidates causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in:

·     

liabilities that substantially exceed our product liability insurance, which we would then be required to pay from other sources, if available;

·     

an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;

·     

withdrawal of clinical trial volunteers or patients;

·     

damage to our reputation and the reputation of our products, resulting in lower sales of any future commercialized product which we may have;

·     

regulatory investigations that could require costly recalls or product modifications;

·     

litigation costs;

·     

the diversion of management’s attention from managing our business.



Our inability to obtain adequate insurance coverage at an acceptable cost could prevent or inhibit the commercialization of our products. If third parties were to bring a successful product liability claim or series of claims against us for uninsured liabilities or in excess of insured liability limits, our business, financial condition and results of operations could be materially harmed.

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The agreements we are entering into with Integrated BioPharma in connection with the distribution could restrict our operations.

In connection with the distribution, we and Integrated BioPharma are entering into a number of agreements that will govern our spin-off from Integrated BioPharma and our future relationship. Each of these agreements has been or will be entered into in the context of our relationship to Integrated BioPharma as a subsidiary and our spin-off from Integrated BioPharma and, accordingly, the terms and provisions of these agreements may be less favorable to us than terms and provisions we could have obtained in arm’s-length negotiations with unaffiliated third parties. These agreements commit us to take actions, observe commitments and accept terms and conditions that are or may be advantageous to Integrated BioPharma but are or may be disadvantageous to us. The terms of these agreements will include obligations and restrictive provisions, including, but not limited to:

·     

an agreement to indemnify Integrated BioPharma, its affiliates, and each of their respective directors, officers, employees, agents and representatives from certain liabilities arising out of any litigation we are involved in and all liabilities that arise from our breach of, or performance under, the agreements we are entering into with Integrated BioPharma in connection with the distribution and for any of our liabilities; and

·     

an agreement with regard to tax matters between ourselves and Integrated BioPharma which restricts our ability to engage in certain strategic or capital raising transactions.



For a further discussion of our agreements with Integrated BioPharma, see “Relationship Between Our Company and Integrated BioPharma, Inc. – Agreements Between Us and Integrated BioPharma.”

Risks Relating to the Distribution

If the spin-off is determined to be a taxable transaction, you and Integrated BioPharma could be subject to material amounts of taxes.

Integrated BioPharma and its Board of Directors have structured the distribution to qualify as a tax-free distribution to its stockholders under Section 355 of the Internal Revenue Code of 1986. If , however, the IRS determines that the distribution does not qualify as a tax-free transaction because of its structure, alleged lack of business purpose, or subsequent acquisitions or issuance of 50% or more of our common stock, you and Integrated BioPharma could be subject to material amounts of taxes. See “The Distribution – U.S. Federal Income Tax Consequences of the Distribution.”

Under some circumstances, we could be prevented from engaging in strategic or capital raising transactions, and we could be liable to Integrated BioPharma for any resulting adverse tax consequences.

It is possible that Integrated BioPharma could recognize a large taxable gain if the IRS were to assert that the distribution is part of a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in either Integrated BioPharma or iBioPharma. Any cumulative 50% change of ownership in either Integrated BioPharma or iBioPharma within the four-year period beginning two years before the date of the spin-off will be presumed under applicable law to be part of such a plan. If this presumption applies, it would need to be rebutted to avoid a large taxable gain. A merger, recapitalization or acquisition, or issuance or redemption of our common stock after the spin-off could, in some circumstances, be counted toward the 50% change

22


of ownership threshold. As a result, we may be unable to engage in strategic or capital raising transactions that stockholders might consider favorable, or to structure potential transactions in the manner most favorable to us. Further, our tax responsibility allocation agreement with Integrated BioPharma precludes us from engaging in some of these transactions and requires us to indemnify Integrated BioPharma for the adverse tax consequences resulting from these types of transactions.

Certain adverse tax consequences could arise by reason of the distribution.

It is possible that our stockholders could recognize a taxable gain if the IRS were to assert that the distribution was without sufficient business purpose to iBioPharma. This would have adverse consequences to Integrated BioPharma, which may then have to recognize a taxable capital gain on the difference between the fair market value of the 100% interest in iBioPharma it is distributing to its stockholders and Integrated BioPharma’s tax basis in its iBioPharma stock. Furthermore, if the IRS successfully challenges the tax-free status of the distribution, those Integrated BioPharma stockholders who receive iBioPharma stock in the distribution may suffer adverse tax consequences resulting from the characterization of the distribution as a taxable dividend to such stockholders. See “The Distribution – U.S. Federal Income Tax Consequences of the Distribution.”

Risks Relating to Ownership of Our Common Stock

Our common stock has no prior public market.

There has been no prior trading market for our common stock. While we expect our common stock will be quoted on the OTC Bulletin Board, there can be no assurance as to the price at which our common stock will trade or that a public trading market will develop.

We cannot predict the price range in which our common stock will trade or its volatility after the distribution which may harm our stockholders.

The securities of many biotechnology companies have experienced extreme price and volume fluctuations in recent years, often unrelated to the companies’ operating performance. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in its value. Price volatility might be worse if the trading volume of our common stock is low.

The market price of our common stock could fluctuate significantly as a result of many factors related to the economy in general or the biopharmaceutical industry in which we operate, including the following:

·     

economic and stock market conditions generally and specifically as they may affect the biopharmaceutical industry;

·     

earnings and other announcements by our competitors, and changes in the market’s perception of the biopharmaceutical industry in general; and

·     

changes in business or regulatory conditions affecting our industry



In addition, there are various factors related to our business in particular that could cause the market price of our common stock to fluctuate, including the following:

23


·     

announcement or implementation by us or our competitors of innovations or new products and services using similar plant-based technology that may make our platform less valuable;

·     

the introduction by competitors of new products that make our product candidates obsolete or less valuable;

·     

litigation judgments or settlements;

·     

our earnings and results of operations and other developments affecting our business;

·     

changes in financial estimates and recommendations by securities analysts that follow our stock; and

·     

trading volume of our common stock.



Our future results may vary significantly in the future which may adversely affect the price of our common stock.

It is possible that our quarterly revenues and operating results may vary significantly in the future and that period-to-period comparisons of our revenues and operating results are not necessarily meaningful indicators of the future. You should not rely on the results of one quarter as an indication of our future performance. It is also possible that in some future quarters, our revenues and operating results will fall below our expectations or the expectations of market analysts and investors. If we do not meet these expectations, the price of our common stock may decline significantly.

On the distribution date, our corporate governance structure, including provisions in our certificate of incorporation and by-laws, our stockholder rights plan and Delaware law, may prevent a change in control or management that stockholders may consider desirable.

Our certificate of incorporation and by-laws contain provisions that might enable our management to resist a takeover of our Company or discourage a third party from attempting to take over our Company. These provisions include:

·     

a classified board of directors;

·     

limitations on the removal of directors; and

·     

the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.



24


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this information statement that are not historical facts -- but rather reflect our current expectations concerning future results and events -- constitute forward-looking statements. The words “believes,” “expects,” “intends,” “plans,” “anticipates,” “intend,” “estimate,” “potential,” “continue,” “hopes,” “likely,” “will,” and similar expressions, or the negative of these terms, identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of iBioPharma, or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements.

Important factors that might cause our actual results to differ materially from the results contemplated by these forward-looking statements are contained in “Risk Factors” on page 12 and elsewhere in this report and our future filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s view only as of the date of this information statement. We undertake no obligation to update the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances.

DESCRIPTION OF THE DISTRIBUTION

General

Given the evolution of the distinct and highly competitive environments in which Integrated BioPharma and iBioPharma operate, Integrated BioPharma believes the best way to enhance the success and maximize stockholder value of both businesses over the long term is to enable each one to pursue its particular strategy. After the distribution, Integrated BioPharma will continue to focus on the manufacture, distribution, marketing and sales of vitamins, nutritional supplements and herbal products, and iBioPharma will continue to focus on the development and production of biopharmaceutical products.

The separation of iBioPharma from Integrated BioPharma will be accomplished through a pro rata distribution of 100% of the common stock of iBioPharma held by Integrated BioPharma to Integrated BioPharma stockholders, which we refer to as the distribution, or the spin-off, which is expected to occur on ________, 2008, the distribution date. As a result of the distribution, each Integrated BioPharma stockholder will:

·     

receive one share of our common stock for every one share of Integrated BioPharma common stock they own; and

·     

retain their shares of Integrated BioPharma.



Manner of Effecting the Distribution

The general terms and conditions relating to the distribution will be set forth in the separation and distribution agreement between Integrated BioPharma and us. Under that agreement, the distribution will be effective at 11:59 p.m. Eastern time on the distribution date, ________, 2008. The board of directors of Integrated BioPharma approved the distribution at a meeting of the board on November 9, 2007. As a result of the distribution, each Integrated BioPharma stockholder of record will receive one share of our common stock for every one share of Integrated BioPharma common stock owned by such stockholders

25


as of the record date of the distribution. In order to be entitled to receive shares of our common stock in the distribution, Integrated BioPharma stockholders must be stockholders at the close of business of the NASDAQ Global Market on the record date, __________, 2008 subject to the NASDAQ Global Market’s “ex dividend” rules discussed below. For registered Integrated BioPharma stockholders, our transfer agent will credit their shares of our common stock to book-entry accounts established to hold their shares of our common stock. Our distribution agent will send these stockholders a statement reflecting their ownership of our common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For stockholders who own Integrated BioPharma common stock through a broker or other nominee, their shares of our common stock will be credited to their accounts by the broker or other nominee. Each share of our common stock that is distributed will be validly issued, fully paid and non-assessable and free of preemptive rights. See “Description of Capital Stock.” Following the distribution, stockholders whose shares are held in book-entry form may request the transfer of their shares of our common stock to a brokerage or other account at any time as well as the delivery of physical stock certificates for their shares, in each case without charge for such transfer or delivery.

Integrated BioPharma stockholders will NOT be required to pay for shares of our common stock received in the distribution or to surrender or exchange shares of Integrated BioPharma common stock in order to receive our common stock or to take any other action in connection with the distribution. No vote of Integrated BioPharma stockholders is required or sought in connection with the distribution, and Integrated BioPharma stockholders have no appraisal rights in connection with the distribution.

Trading of Integrated BioPharma, Inc. Common Stock Between the Record Date and Distribution Date

In accordance with the trading rules of the NASDAQ Global Market, if you own shares of Integrated BioPharma, Inc. common stock at 5:00 p.m., New York City time, on the record date (__________, 2008) and sell those shares prior to the end of trading on the distribution date of the iBioPharma shares, you will also be selling the shares of iBioPharma common stock that would have been distributed to you pursuant to the distribution. The shares of iBioPharma common stock distributed with respect to such shares will be automatically routed and delivered by the clearing broker to the purchaser of such shares.

Reasons for the Distribution

Integrated BioPharma’s board of directors believes that separating iBioPharma from Integrated BioPharma’s other businesses in the form of a tax-free distribution to Integrated BioPharma stockholders of our new publicly traded common stock is appropriate and advisable for Integrated BioPharma and its stockholders. Integrated BioPharma’s board of directors believes that our separation from Integrated BioPharma will provide both companies with the opportunity to focus exclusively on their respective businesses and their opportunities for long-term growth and profitability. In addition, the separation will enable each company to enhance its strategic, financial and operational flexibility.

The key benefits of the separation include:

Sharper Strategic Focus; Allocation of Capital Resources

Both we and Integrated BioPharma anticipate that the separation will allow each company to focus exclusively on the unique opportunities facing its respective business. For many years, our business has operated within Integrated BioPharma’s broadly diversified nutraceutical and pharmaceutical

26


business. As part of Integrated BioPharma, our business was required to compete for product development funds, capital improvement funds, and other investment resources with Integrated BioPharma’s other major businesses. Furthermore, these competing businesses within Integrated BioPharma may have pursued different strategies from our own market strategies, or Integrated BioPharma may have elected to advance the interests of some of its other businesses in preference to or in conflict with the interests of our business. As separate entities, both we and Integrated BioPharma can use our respective resources to invest in opportunities targeted to each of our distinct strategies and markets. In addition, each company can devote more management time and attention toward meeting the unique needs of its respective customers. We believe this focused approach will allow each management team to make decisions more quickly and efficiently.

Flexibility to Pursue Independent Strategies

As a separate company, we will have greater flexibility to expand on our position in the biopharmaceutical industry by being more independent of Integrated BioPharma corporate constraints, i.e., having to solicit parent approval for major initiatives, especially those involving capital expenditure, and having to conform to a variety of Integrated BioPharma policies including benefits, accounting, information technology protocols, bonus criteria and salary administration. As a separate company, we will be better positioned to focus on our strategic growth initiatives.

Targeted Incentives for Employees

As an independent company, we will have the opportunity to reward employees using equity-based compensation plans that align the incentives of management and employees with the overall financial performance of our business. The results of our business will no longer be impacted by Integrated BioPharma’s other businesses, thus creating greater incentives for employees whose stock ownership will be more directly tied to our performance. The impact of this form of incentive system on our performance is expected to grow as management and employee ownership increases through the use of stock options and participation in other equity incentive programs.

Direct Access to Capital

Historically, our ability to access capital was constrained by Integrated BioPharma’s larger strategic priorities. Operating as a separate publicly traded company, we will have direct access to the capital markets. In addition, we will have the option to use our own equity as acquisition currency should appropriate strategic opportunities arise.

Greater Market Recognition of iBioPharma Value

Growth in the biopharmaceutical business may be obscured by the overall financial results of Integrated BioPharma. By becoming a public company, iBioPharma will have a greater visibility in the equity markets through a simpler business model and more visible financial reporting results. This greater visibility could lead to a greater valuation of iBioPharma than may be currently accorded to it as part of Integrated BioPharma.

Use of iBioPharma Stock for Acquisitions

While the growth of the iBioPharma business has been a result of new product development and innovation that has been accomplished almost exclusively through the internal resources of iBioPharma, in the future, there may be opportunities for iBioPharma to expand its strategic businesses through the acquisition of one or more complementary businesses. There can be no assurance that at the time of the

27




prospective acquisition that iBioPharma would have the access to capital or resources to finance such an acquisition exclusively through its own reserves through the issuance of equity securities or through debt financing. With a publicly traded equity stock, iBioPharma would also have the flexibility of acquiring other businesses with its own capital stock, through debt financing, or through a combination of the two financing alternatives.

As noted in “Description of Capital Stock – Anti-Takeover Provisions” and “Relationship Between Our Company and Integrated BioPharma, Inc. Agreements Between Us and Integrated BioPharma,” however, iBioPharma may be prohibited from engaging in any such acquisition if the structure of such a transaction would cause a “change in control” of iBioPharma, and violate the strictures contained in the continuing agreements with Integrated BioPharma regarding the acquisition or issuance of our common stock.

Integrated BioPharma’s board of directors considered a number of potentially negative factors in evaluating the distribution, including the following:

·     

the possibility that we may experience disruptions to our business as a result of the distribution;

·     

the reaction of Integrated BioPharma stockholders to the distribution;

·     

the one-time and ongoing costs of the distribution;

·     

the loss of funding from Integrated BioPharma; and

·     

the relative lack of liquidity associated with the trading of our common stock on the OTC Bulletin Board.



Integrated BioPharma’s board of directors concluded that the potential benefits of the separation outweigh these factors, and that separating our business from Integrated BioPharma’s other businesses in the form of a tax-free distribution to Integrated BioPharma stockholders is appropriate and advisable for Integrated BioPharma and its stockholders. Because Integrated BioPharma believes a tax-free distribution to Integrated BioPharma stockholders is the most economical means of separating our business for Integrated BioPharma and its stockholders, we did not pursue other means of separating the business.

Results of the Distribution

After the distribution, we will be a separate public company operating our current businesses. Immediately after the distribution , we expect to have approximately _____ record and beneficial stockholders of our common stock, and approximately _______ shares of our common stock issued and outstanding. This figure does not reflect any options that may be exercised by Integrated BioPharma officers prior to the record date of the distribution for the purchase of Integrated BioPharma common stock.

Subsequent Share Issuances

Immediately following the distribution, we will complete a private offering of shares of our common stock to a limited number of investors for gross proceeds of approximately $5.0 million. We expect to issue an aggregate of 10% of our common stock outstanding as of the record date to these investors. We will also issue additional shares of our common stock to Integrated BioPharma in lieu of intercompany debt.  As a result of these subsequent transactions, we expect that the current stockholders

28




of Integrated BioPharma will own 84.6% of the issued and outstanding shares of iBioPharma common stock, the investors in the private offering will own an aggregate of 10% of such shares, and Integrated BioPharma will own 5.4% of such shares.

The sale of shares of iBioPharma common stock in the private offering has not been registered under the Securities Act of 1933, as amended, and will be issued and sold in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act and Regulation D promulgated thereunder. These securities may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.

Our Relationship with Integrated BioPharma after the Distribution

Following the distribution and the subsequent private placement and conversion of intercompany debt, we will be an independent public company, and Integrated BioPharma will only have minority ownership interest in iBioPharma. Prior to the distribution, we will enter into one or more agreements with Integrated BioPharma for providing services by Integrated BioPharma for our benefit, which may include legal, finance, purchasing, and similar corporate services, and allocating liabilities relating to our business, including product liability, tax and other liabilities and obligations attributable to periods prior to, and in some cases, after the distribution. The agreement or agreements also include an agreement that we generally will indemnify Integrated BioPharma against liabilities arising out of our business.

U.S. Federal Income Tax Consequences of Distribution

In general, this discussion summarizes all the material U.S. federal income tax consequences of the distribution. This discussion does not, however, address the aspects of U.S. federal income taxation that may be relevant to Integrated BioPharma stockholders to which special provisions of U.S. federal income tax law may apply based on their particular circumstances or status . For example, the discussion does not address all aspects of U.S. federal income taxation that may be relevant to:

·     

Integrated BioPharma stockholders liable for alternative minimum tax;

·     

Integrated BioPharma stockholders whose “functional currency” is not the U.S. dollar;

·     

financial institutions;

·     

tax-exempt organizations;

·     

traders who acquired their shares of stock by exercising employee stock options or as some other form of compensation;

·     

qualified retirement plans;

·     

regulated investment companies; or

·     

real estate investment trusts.



Integrated BioPharma has received a legal opinion from Greenberg Traurig, LLP as to the federal income tax treatment of the distribution. In essence, the legal opinion letter states that the distribution should qualify as a transaction described in Section 355(a) of the Internal Revenue Code. The discussions of the material federal income tax consequences of the distribution set forth below under “Tax Consequences to Integrated BioPharma Stockholders” and under “Tax

29




Consequences to Integrated BioPharma and iBioPharma” are based on the U. S. Federal income tax law, as in effect on the date hereof, which law is subject to change potentially with retroactive effect.

The legal opinion is subject to the accuracy of factual representations and assumptions described in the opinion. If the factual representations or assumptions are incorrect in any material respect, the holdings of the opinion would be jeopardized. We and Integrated BioPharma are not aware of any facts or circumstances which would cause the representations and assumptions to be untrue. Additionally, events occurring after the distribution could potentially cause some of the representations and assumptions to be untrue and the distribution to be taxable. For instance, any cumulative 50% change of ownership in either Integrated BioPharma or iBioPharma within the four-year period beginning two years before the date of the spin-off will be presumed to be part a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in either Integrated BioPharma or iBioPharma. If this presumption applies, it would need to be rebutted to avoid a large taxable gain. In addition, a merger, recapitalization or acquisition, or issuance or redemption of common stock of iBioPharma after the spin-off could, in some circumstances, be counted toward the 50% change of ownership threshold. In this regard, we have agreed to refrain from taking future actions (as specified in a tax responsibility allocation agreement to be entered into by us and Integrated BioPharma) and to provide further assurances that the distribution will qualify as tax-free. In addition, we have agreed to indemnify Integrated BioPharma for taxes incurred by Integrated BioPharma from the distribution if the distribution becomes taxable to Integrated BioPharma as a result of future events involving our stock or assets, as set forth in the tax responsibility allocation agreement. See “Relationships Between Our Company and Integrated BioPharma, Inc.—Agreements Between Us and Integrated BioPharma—Tax Responsibility Allocation Agreement.”

If the distribution were not to qualify as tax-free to Integrated BioPharma stockholders, each Integrated BioPharma stockholder who receives our common stock in the distribution would be treated as if such stockholder received a taxable dividend equal to the value of our common stock received in the distribution. If the distribution were not to qualify as tax-free to Integrated BioPharma, a corporate level capital gains tax would be payable by Integrated BioPharma based upon the difference between the fair market value of the stock distributed and Integrated BioPharma’s adjusted basis in the stock.

Tax Consequences to Integrated BioPharma Stockholders. Assuming the distribution qualified as tax-free under Section 355 of the Internal Revenue Code:

·     

No income, gain or loss will be recognized by a Integrated BioPharma stockholder as a result of the distribution.

·     

The aggregate basis of a stockholder’s Integrated BioPharma common stock and our common stock immediately after the distribution will be the same as the basis of the stockholder’s Integrated BioPharma common stock immediately before the distribution, allocated between our common stock and the Integrated BioPharma common stock in proportion to their relative fair market values.

·     

The holding period of our common stock received by a Integrated BioPharma stockholder, will include the holding period of the Integrated BioPharma common stock with respect to which our common stock was distributed.



U.S. Treasury regulations require each Integrated BioPharma stockholder that receives our stock in the distribution to attach to the stockholder’s U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth information as may be appropriate to show the applicability of Section 355 of the Internal Revenue Code. Integrated BioPharma will provide Integrated

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BioPharma stockholders who receive our stock in the distribution with the information necessary to comply with this requirement.

Tax Consequences to Integrated BioPharma and iBioPharma. Assuming the distribution qualified as tax-free under Section 355 of the Internal Revenue Code:

·     

No material amount of gain or loss will be recognized by either Integrated BioPharma or iBioPharma as a result of the distribution.



THE SUMMARY OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION SET FORTH ABOVE DOES NOT ADDRESS THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO STOCKHOLDERS THAT ARE NOT U.S. HOLDERS AND DOES NOT ADDRESS ALL OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF U.S. HOLDERS THAT ARE SUBJECT TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE. ALL INTEGRATED BIOPHARMA STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO THEM, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS.

Listing and Trading of our Common Stock

There is currently no public market for our common stock. We expect our common stock to be quoted on the OTC Bulletin Board under the symbol “____.” We anticipate that trading of our common stock will commence on a when-issued basis shortly before the record date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. On the first trading day following the distribution date, when-issued trading with respect to our common stock will end and regular way trading will begin. Regular way trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full business day following the date of the transaction. We cannot predict what the trading prices for our common stock will be before or after the distribution date. In addition, we cannot predict any change that may occur in the trading price of Integrated BioPharma’s common stock as a result of the distribution.

The shares of our common stock distributed to Integrated BioPharma’s stockholders will be freely transferable except for shares received by persons that may have a special relationship or affiliation with us. Persons that may be considered our affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with us. This may include some or all of our officers and directors. Persons that are our affiliates will be permitted to sell their shares only pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Section 4(1) of the Securities Act or Rule 144 thereunder.

Distribution Conditions and Terminations

We expect that the distribution will be effective on the distribution date _______, 2008, provided that, among other things:

·     

the SEC has declared effective our registration statement on Form 10, of which this information statement is a part, under the Securities Exchange Act of 1934, and no stop order relating to the registration statement is in effect;



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·     

Integrated BioPharma has received an opinion from Greenberg Traurig that based on certain facts represented to Greenberg Traurig, the distribution should qualify as a tax free transaction under Section 355 of the Internal Revenue Code;

·     

we and Integrated BioPharma have received all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of foreign jurisdictions in connection with the distribution; and

·     

no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution or any of the transactions related thereto, including the transfers of assets and liabilities contemplated by the separation and distribution agreement, is in effect.



The fulfillment of the foregoing conditions will not create any obligation on Integrated BioPharma’s part to effect the distribution, and Integrated BioPharma’s board of directors has reserved the right to amend, modify or abandon the distribution and the related transactions at any time prior to the distribution date. Integrated BioPharma’s board of directors may also waive any of these conditions.

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to Integrated BioPharma stockholders who will receive shares of iBioPharma common stock in the distribution. It is not and is not to be construed as an inducement or encouragement to buy or sell any of our securities . We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither Integrated BioPharma nor we undertake any obligation to update the information except in the normal course of our respective public disclosure obligations.

DIVIDEND POLICY

Payment of future cash dividends, if any, will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, plans for expansion and contractual restrictions with respect to the payment of dividends.

CAPITALIZATION

The following table sets forth our capitalization on an actual basis as of March 31, 2008, and as adjusted to give effect to the following transactions as though they had been completed on March 31, 2008:

 

(1)     

Recapitalization of company’s stock authorizing 50,000,000 shares of common stock, par value $0.001 and 1,000,000 shares of preferred stock, no shares issued and outstanding;

(2)     

Contribution of intercompany debt of approximately 4.9 million to Additional Paid in Capital; and

(3)     

Issuance of 14,691,126 shares of common stock as a result of Integrated BioPharma’s spin-off of its 100% investment in iBioPharma to its shareholders;

(4)     

Conversion of approximately $2.7 million of iBioPharma’s payable to Integrated BioPharma to capital, resulting in the issuance of 937,731 shares of common stock, representing



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approximately 6% of the company’s 15,628,857 shares of common stock outstanding subsequent to the issuance of said shares, pursuant to its Separation Agreement; and

(5)     

An additional capital investment of $5.0 million, net of related costs of approximately $250,000, resulting in the issuance of 1,736,540 shares of common stock, representing 10% of the company’s 17,365,397 shares of common stock outstanding subsequent to the issuance of said shares.



This table should be read in conjunction with “Summary Financial Information” “Unaudited Pro Forma Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes to our financial statements included elsewhere in this information statement.

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IBIOPHARMA, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS


 

     The unaudited pro forma financial statements presented below consist of the unaudited pro forma statement of operations for the fiscal year ended June 30, 2007 and the nine months ended March 31, 2008 and the unaudited pro forma balance sheet as of March 31, 2008. The unaudited pro forma financial statements have been prepared to reflect certain adjustments to our historical financial information, which are described in the Notes to Unaudited Pro Forma Financial Statements, to give effect to the spin-off and other capital transactions, as if they had been completed on March 31, 2008 for balance sheet purposes and July 1, 2006 for the statements of operations. The unaudited pro forma financial statements are derived from our unaudited financial statements for the nine months ended March 31, 2008 and the audited financial statements for the fiscal year ended June 30, 2007, which are included elsewhere in the information statement but do not purport to represent our financial position and results of operations had the distribution occurred on July 1, 2006 or to project our financial performance for any future period. The unaudited pro forma financial statements should be read in conjunction with “ Management’s Discussion and Analysis, ” our historical audited financial statements, and the related notes included elsewhere in this information statement.

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35


36




IBIOPHARMA, INC.

(A WHOLLY OWNED SUBSIDIARY OF INTEGRATED BIOPHARMA, INC.)
NOTES TO
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
 
 

The accompanying Unaudited Pro Forma Financial Statements have been prepared to reflect the following adjustments to our historical financial statements to give effect to the spin-off as if it had occurred on March 31, 2008 for balance sheet purposes and July 1, 2006 for the statements of operations purposes. These Unaudited Pro Forma Financial Statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the pro forma results of our operations and financial position. This information should be read in conjunction with our historical financial statements and related notes which are included elsewhere in this information statement.

(1)     

Recapitalization of company’s stock authorizing 50,000,000 shares of common stock, par value $0.001 and 1,000,000 shares of preferred stock, no shares issued and outstanding;

(2)     

Contribution of intercompany debt of approximately $4.9 million to Additional Paid in Capital;

(3)     

Issuance of 14,691,126 shares of common stock as a result of Integrated BioPharma’s spin-off of its 100% investment in iBioPharma to its shareholders;

(4)     

Conversion of approximately $2.7 million of iBioPharma’s payable to Integrated BioPharma to capital, resulting in the issuance of 937,731 shares of common stock, representing approximately 6% of the company’s 15,628,857 shares of common stock outstanding subsequent to the issuance of said shares, pursuant to its Separation Agreement;

(5)     

An additional capital investment of $5.0 million, net of related costs of approximately $250,000, resulting in the issuance of 1,736,540 shares of common stock, representing 10% of the company’s 16,926,074 shares of common stock outstanding subsequent to the issuance of said shares;

(6)     

Increase in cost of goods sold from 50% to 90% effective subsequent to the spin-off, $366,896 in the pro forma nine month period ended March 31, 2008 and $354,240 in the pro forma fiscal year ended June 3, 2007.  The increase in cost of goods sold is the result of an increase in the cost to be charged to iBioPharma post spin-off for services performed by companies remaining in the consolidated group of Integrated BioPharma relating to the manufacturing supply agreement with Mannatech, a customer of iBioPharma.  iBioPharma intends to enter into a written agreement with the wholly owned subsidiary of Integrated BioPharma that will continue to manage this supply agreement for iBioPharma post spin-off which will specify the charge of 90% of the selling price in exchange for managing the supply agreement;

(7)     

The company expects that it will incur approximately $100,000 of additional operating expenses, on a per annum basis based on the pro forma statement of operations for the fiscal year ended June 30, 2007, ($133,089 for the nine months ended March 31, 2008), subsequent to the spin-off relating to expenses it expects to incur as a public company in excess of the amount the company is currently being charged by Integrated BioPharma as corporate overhead allocations which will not be charged subsequent to the spin-off.  Corporate overhead charges were approximately $430,000 and $264,400 in the fiscal year ended June 30, 2007 and the nine months ended March 31, 2008, respectively and will be replaced with the following estimated expenses which are based on estimated annual costs for legal and other professional fees to be incurred by us as a stand alone entity, the increased staffing requirements required for us to take over the accounting and other administrative functions currently performed by Integrated BioPharma and charged through the corporate support allocation charges and estimated listing fees for operating as a separate public company from our parent:



37


      and;

(8)     

The Company’s weighted average shares outstanding will increase from 100 shares to 17,365,397 in both pro forma periods presented and is calculated as follows:



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INTEGRATED BIOPHARMA, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated financial statements presented below consist of the unaudited pro forma consolidated statement of operations for the fiscal year ended June 30, 2007 and nine months ended March 31, 2008 and the unaudited pro forma consolidated balance sheet as of March 31, 2008. The unaudited pro forma consolidated financial statements have been prepared to reflect certain adjustments to our historical financial information, which are described in the Notes to Unaudited Pro Forma Consolidated Financial Statements, to give effect to the spin-off, as if it had been completed on March 31, 2008 for balance sheet purposes and July 1, 2006 for the consolidated statements of operations. The unaudited pro forma financial statements are derived from our unaudited consolidated financial statements for the nine months ended March 31, 2008 and the audited consolidated financial statements for the fiscal year ended June 30, 2007, which are incorporated by reference from Integrated BioPharma, Inc.’s Forms 10-Q and 10-K as filed with the Securities and Exchange Commission and do not purport to represent our consolidated financial position and consolidated results of operations had the distribution occurred on July 1, 2006 or to project our consolidated financial performance for any future period. The unaudited pro forma consolidated financial statements should be read in conjunction with “ Management’s Discussion and Analysis, ” our historical audited consolidated financial statements, and the related notes as filed with the Securities and Exchange Commission and are incorporated by reference in this information statement.

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40



See Notes to the Unaudited Pro Forma Consolidated Financial Statements following.

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42


INTEGRATED BIOPHARMA, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
 

(1)     

Reversal of the elimination of income and expense items for InB:Biotechnologies as a member of the consolidated group in the Historical Consolidated Financials of Integrated BioPharma for the periods presented;


(2)     

Add back intercompany sales and cost of goods sold eliminated in Historical Consolidated Financials of Integrated BioPharma;


(3)     

An increase in sales of $366,896 in the nine months ended March 31, 2008 and $354,240 in the fiscal year ended June 30, 2007 as a result of increasing the amount charged to iBioPharma for oversight of the Mannatech Supply Agreement from 50% to 90%;


(4)     

Add back Corporate Support Charges charged to iBioPharma included in other operating expenses in the amount of $264,400 in the nine months ended March 31, 2008 and $430,000 in the fiscal year ended June 30, 2007;


(5)     

Represents estimated transitional services revenue to be earned from iBioPharma in the periods presented, we expect the transitional services to be charged on a monthly basis for at least six months, however we do not expect the transition to exceed one year from the date of the spin-off;


(6)     

Impact on Basic and Diluted Earnings per Share of adjustments (1) through (4) above in the periods presented;


(7)     

Elimination of iBioPharma Assets, Liabilities and Capital Accounts;


(8)     

Add back intercompany receivable/payable from/to iBioPharma eliminated in Historical accounts receivable and accounts payable;


(9)     

Add back initial investment in iBioPharma eliminated in Historical Consolidated Financials of Integrated BioPharma;


(10)     

Increase in Investment in iBioPharma from additional capital contribution of intercompany account of approximately $4.6 million;


(11)     

Dividend of 100% of Investment in iBioPharma to the shareholders of Integrated BioPharma; and


(12)     

Purchase of 6% of iBioPharma common stock through the contribution of the remaining balance of Integrated BioPharma’s intercompany receivable account of approximately $2.7 million.


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MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the audited financial statements and corresponding notes, and the unaudited pro forma financial statements and corresponding notes, found elsewhere in this information statement. This section of the information statement contains forward-looking statements. Please see the section titled “Cautionary Note Regarding Forward-looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

iBioPharma, Inc. is a biopharmaceutical company focused on using and promoting the use of our proprietary plant-based technology platform by which targeted proteins can be produced in plants for the development and manufacture of novel vaccines and therapeutics for use in humans and for certain veterinary applications.

This platform was invented and developed by FhCMB, a not-for-profit translational research institution. In January 2004, we acquired the platform from FhCMB together with FhCMB’s commitment for the maintenance and support necessary to further protect the intellectual property comprising the platform, including filing and prosecuting patent applications, providing scientific support for patent counsel’s activities on behalf of the Company and otherwise to maintain in force and good standing the Company’s intellectual property rights.

Our business model contemplates that, in addition to using our platform to create and advance our own product candidates, we will license the platform to, or enter into joint ventures or other business arrangements with, other parties (collectively, we refer to these third parties as licensees) who wish to use the platform for the development and/or production of their own product candidates. In order to attract appropriate licensees and increase the value of the Company’s share of such business arrangements, the Company engaged FhCMB in October 2004 to perform research and development activities to apply the platform to create our first product candidate. The Company selected a plant-based flu vaccine for human use as the product candidate to exemplify the value of the platform particularly for products that require rapid, highly-scalable and economic production. Performance of this first research agreement, which requires us to make payments to FhCMB against the achievement of stated research milestones, has progressed through preclinical challenge studies in the ferret model. Clinical trials are expected to begin in the second quarter of 2009.

 

In addition, in 2006, the Company engaged FhCMB to create a prototype production module for products made through the use of the platform. The purpose for this engagement was to demonstrate the ease and economy with which platform-based products could be manufactured, again in order to attract potential licensees and increase the value of the Company’s share of contractual arrangements. The prototype design, which encompasses the entire production process from the seeding through pre-infiltration plant growth, infiltration with agrobacteria, harvesting of plant tissue and purification of target proteins, was completed in May 2008. Fabricated equipment for the prototype is scheduled to be delivered to FhCMB by November 2008. Equipment in the facility is scheduled to be commissioned and the facility validated for current Good Manufacturing Practices (called cGMP) production in the first quarter of 2009. The facility will then be used for pilot scale production of protein targets for clinical trials of product candidates which use our platform technology.

In addition to our direct funding of FhCMB’s application of the platform technology to our human flu vaccine product candidate, we have established non-commercial arrangements among the Company, certain government entities, a non-governmental organization (which we refer to herein as a

44


NGO) and FhCMB, pursuant to which the Company grants non-commercial rights to use its platform for the development and production by FhCMB of product candidates selected by the government entities and NGO, in consideration for grants by the government entities and NGO directly to FhCMB to fund such research and development.

Through (i) the Company/FhCMB contracts and (ii) the non-commercial arrangements described above, the Company retains ownership of the intellectual property and exclusive commercial rights in the fields of human health and veterinary influenza applications of the intellectual property. The Company licenses or otherwise grants use rights (a) to government and NGO entities for not-for-profit applications of the intellectual property for the development or application of which they granted or were granted funding, and (b) to FhCMB for research purposes and applications in other fields. This business structure enables us to obtain commercial rights to various applications of our platform technology funded by government entities and NGOs. It also helps us demonstrate the validity and apparent value of the platform to parties to whom we will offer licenses or other business opportunities. Our use of FhCMB to perform research and development work allows us to develop our product candidates, and thereby promote the value of our platform for licensing and product development purposes, without bearing the full risk and expense of establishing and maintaining our own research and development staff and facilities.

 

Using this business structure, we have applied our platform technology to create a pipeline of proprietary product candidates which we can offer to licensees, including vaccine and therapeutic candidates against seasonal and pandemic influenza, human papilloma virus (HPV), and other pathogens of public health significance. All of our product candidates are in the preclinical development stage, and to date, none of our product candidates has been approved by the FDA.

 

Historically, we have also used plants as sources of high-quality nutritional supplements. The Company has a patented process for hydroponic growth of edible plants that causes them to accumulate high levels of important nutritional minerals such as chromium, selenium, iron and zinc. Following the spin-off, we will continue to engage the services of various wholly-owned subsidiaries of Integrated BioPharma for the production, marketing and sales of these phytomineral products.

In the nine months ended March 31, 2008, our operating expenses increased to $1.4 million or approximately 54% from $932,500 for the nine months ended March 31, 2007. The significant increase was primarily due to increases in salary and benefits of approximately $143,300 as a result of the Company hiring its own staff, the number of employees increased from one in the nine months ended March 31, 2007 to four in the nine months ended March 31, 2008, including the addition of our president in October 2007. Another contributing factor to the Company’s increased expenses was a result of the loss on an investment of $253,500. In December 2006, the Company made an investment in a private biotech company that was in its initial stages of filing to become a public company. In the three month period ended December 31, 2007, the Company, based in part on information from public filings filed in February 2008 by this biotech company, which stated that if the company was unsuccessful in its efforts to raise additional capital, it only had enough cash on hand to cover operating expenses through May 2008, and, if it were successful in obtaining additional funding, such financings would have a dilutive effect to current stockholders. Furthermore, this biotech company is not a public company, the financial statements included in the public filing stated that there was substantial doubt about the company’s ability to continue as a going concern and there is no established market for the investment we hold, we therefore recorded a valuation reserve equal to our entire investment of $253,500, in this biotech company.

 

For the fiscal year ended June 30, 2007, our operating expenses increased to $2.1 million or approximately 45% from $1.5 million for the fiscal year ended June 30, 2006. The significant increases were in both our research and development costs, and amortization expense, approximately $244,000 and

45


$160,000, respectively as we continued to develop applications that use our intellectual property, expand our patent portfolio and achieve significant milestones under our research agreements with FhCMB.

Effect of Spin-off from Integrated BioPharma

After the distribution, the contribution of additional capital from Integrated BioPharma and the $5.0 million private placement, Integrated BioPharma will own approximately 5.4% of our common stock, and will cease to control iBioPharma. However, due to several relationships between the two companies that existed prior to the distribution, we have or will enter into one or more agreements regarding the effects of the distribution and ongoing business relationships under our supply agreement with Mannatech, Inc. (“Mannatech”), whereby, we engage the services of other wholly-owned subsidiaries of Integrated BioPharma. It is expected that our cost of goods sold under this agreement will increase from an average of 50% to 90%. As of January 1, 2008, an employee of ours was transferred to the payroll of one of the wholly owned subsidiaries of Integrated BioPharma, and this cost will be transferred from operating expenses to cost of goods sold as a result of this change in business arrangement.

Critical Accounting Policies and Estimates

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most significant estimates include:

 

·

sales returns and allowances;

 

·

allowance for doubtful accounts;

 

·

valuation and recoverability of intangible assets, including the values assigned to acquired intangible assets;

 

·

income taxes and valuation allowances on deferred income taxes; and

 

·

accruals for, and the probability of, the outcome of litigation, if any.



On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Allowances for Doubtful Accounts and Sales Returns
 

The Company makes judgments as to its ability to collect outstanding receivables and provides allowances for the portion of receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding amounts. We continuously monitor payments from

46


our customers and maintain allowances for doubtful accounts for estimated losses in the period they become known.

We performed a sensitivity analysis to determine the impact of fluctuations in our estimates for our allowance for doubtful accounts. As of March 31, 2008, we did not provide for an allowance for doubtful accounts as we believe that our customers will pay for their outstanding receivables as of March 31, 2008. If we were in error by one percent of the account receivable balance, the impact would be $2,500 of expense. In recording any additional allowances, a respective charge against income is reflected in the general and administrative expenses and would reduce the operating results in the period in which the increase is recorded.

 

The Company’s return policy is to only accept returns for defective products. If defective products are returned, it is the Company’s agreement with its customers that the Company cure the defect and reship the product. Our policy is that when the product is shipped we make an estimate of any potential returns or allowances. As of March 31, 2008, we had estimated that a reserve of approximately $15,000 was needed as an allowance for potential returns or allowances of our sales for the nine months ended March 31, 2008. If we were in error by plus or minus one percent of the sales for this period, the impact would be approximately $9,200 of additional income or expense. In recording any additional allowances, a respective charge against income is reflected in sales, net and would reduce the operating results in the period in which the increase is recorded.

Other Intangible Assets 

The Financial Accounting Standards Board (“FASB”) has issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized against earnings, but instead tested for impairment at least annually based on a fair-value approach as described in SFAS 142.

Intangible assets with finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. The carrying value of intangible assets with finite lives is evaluated whenever events or circumstances indicate that the carrying value may not be recoverable. The carrying value is not recoverable when the projected undiscounted future cash flows are less than the carrying value. Tests for impairment or recoverability require significant management judgment, and future events affecting cash flows and market conditions could result in impairment losses.

If our estimated useful lives on our intangible assets are off by 10%, either the estimated useful lives should be longer or shorter than their current estimated lives, our amortization expense would be approximately $125,600 more on a per annum basis if the estimate useful lives should be shorter by 10% than our current estimates and approximately $101,800, per annum, less if the estimated useful lives should be longer by 10% of our current estimates.

 

Deferred Taxes
 

The Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes” (SFAS 109”). SFAS 109 is an asset-and-liability approach that requires the recognition of deferred tax assets and liabilities for the expected tax consequences and events that have been recognized in the Company’s financial statements or tax returns. In the fiscal year ended June 30, 2007, the Company had net income tax expense of approximately $1,000 compared to a net income tax benefit of approximately $485,000 in the fiscal year ended June 30, 2006. Our ability to recognize an income tax

 

 

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benefit is dependent on the consolidated federal taxable income (loss) of Integrated BioPharma’s controlled group for federal income tax purposes. In the fiscal year ended June 30, 2007, the controlled group of Integrated BioPharma had a taxable loss and, therefore, did not utilize any of the losses generated by us and as stand alone taxable entity, we would have to reserve 100% of our resulting deferred tax asset generated from the net operating loss as it is more likely than not that, in the near term, we will generate sufficient taxable income to offset with our Fiscal 2007 taxable loss. In the fiscal year ended June 30, 2006, Integrated BioPharma’s controlled group for federal income tax purposes had taxable income and used $1.4 million of our net operating losses which resulted in a federal tax benefit of approximately $486,000. Our deferred tax asset relating to our federal and state net operating losses are fully reserved in a valuation allowance account since it is more likely than not that we will not have sufficient taxable income in the near future to offset any income taxes resulting from taxable income. Since we expect that we will continue to have future losses, we do not expect to have to pay any federal income taxes and pay only any minimum taxes in the states we operate in.

General Litigation

From time to time, the Company could be a defendant or plaintiff in various legal actions which arise in the normal course of business. As such, we would be required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, would be made after careful analysis of each matter. Any resulting provision may change in subsequent periods due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made.

 

General
 

The Company recognizes revenue in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin 104. The Company recognizes product sales revenue, the prices of which are fixed and determinable, when title and risk of loss have transferred to the customer, when estimated provisions for product returns, charge-backs and other sales allowances are reasonably determinable, and when collectibility is reasonably assured. Accruals for these items are presented in the financial statements as reductions to sales. The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns and other allowances. Cost of sales includes the cost of raw materials and overhead associated with the packaging of the products.

Recent Accounting Pronouncements
 

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in income tax positions. FIN 48 requires that we recognize in our financial statements, the impact of a tax position that is more likely than not to be sustained upon examination based on the technical merits of the position. This interpretation was effective as of July 1, 2007. The adoption of FIN 48, did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows for the nine months ended March 31, 2008.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 17, 2007 and interim periods within those fiscal years. We do not expect SFAS 157 to have a material impact on the Company’s financial position, results of operations and cash flows.

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In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits an entity to choose, at specified election dates, to measure eligible financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. At the effective date, an entity may elect the fair value option for eligible items that exist at that date. The entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. We do not expect SFAS No. 159 to have a material impact on the Company’s financial position, results of operations and cash flows.

 

In June 2007, the FASB’s Emerging Issues Task Force reached a consensus on EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities” that would require nonrefundable advance payments made by the Company for future R&D activities to be capitalized and recognized as an expense as the goods or services are received by the Company. EITF Issue No. 07-3 is effective for the Company with respect to new arrangements entered into beginning July 1, 2008. Currently we do not expect EITF Issue No. 07-3 to have a material impact on the Company’s financial position, results of operations and cash flows.

In December 2007, the Emerging Issues Task Force (“EITF”) issued EITF 07-1 entitled “Accounting for Collaborative Arrangements.” EITF 07-1 defines collaboration arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. EITF 07-1 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of EITF 07-1 to have a material effect on its financial position or results of operations.


 

Results of Operations  

Nine months ended March 31, 2008 Compared to the Nine months ended March 31, 2007

Net Sales. Net Sales for the nine months ended March 31, 2008 and 2007 were $893,900 and $664,300, respectively, an increase of $229,600 or 35%. Sales under our supply agreement with Mannatech represent substantially all our net sales in both periods.
 

For the nine months ended March 31, 2008, approximately 95% of net sales were derived from two customers. These two customers, JB Laboratories, Inc and Natural Alternatives International, became our customers under our supply agreement with Mannatech at the direction of Mannatech for the purpose of supplying certain raw materials in the manufacturing process of Mannatech’s nutraceutical product lines. For the nine months ended March 31, 2007, substantially all of our net sales (98.6%) were derived from three customers: Mannatech (60.3%), Natural Alternatives International (21.4%) and JB Laboratories, Inc. (16.9%), all in connection with our supply agreement with Mannatech. The loss of any of these customers would have an adverse affect on the Company’s operations.

 

Cost of sales. Cost of sales increased to $446,400 for the nine months ended March 31, 2008, as compared to $329,800 for the nine months ended March 31, 2007. Cost of sales, as a percentage of sales, were 49.9% and 49.6%, respectively for the nine months ended March 31, 2008 and 2007.

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Research and Development Costs. Our research and development costs were $250,000 in the nine months ended March 31, 2008 compared to $223,225 in the nine months ended March 31, 2007. Research and development costs consist primarily of payments made or owed to FhCMB in reaching milestones under our research agreements with them.

Selling and Administrative Expenses. Selling and administrative expenses were $1,433,350 for the nine months ended March 31, 2008, an increase of $500,900 or 54% as compared with $932,500 for the nine months ended March 31, 2007. A tabular presentation of the changes in selling and administrative expenses is as follows:


 


          

The salary allocation is an allocation of the Integrated BioPharma’s salaries and related employee costs for persons in the executive management team who devote a portion of their time to iBioPharma business and an allocation of salaries and related costs of the accounting and support staff of Integrated BioPharma who also devote a portion of their time to our record keeping and administrative matters. The overhead allocation is an allocation of Integrated BioPharma’s allocable overhead accounts, including office expenses, telephone, professional fees, consulting fees, finance charges and travel and entertainment expenses and are allocated to each of Integrated BioPharma’s subsidiaries’ based on the estimated percentage of time devoted to each company, including Integrated BioPharma, and actual expenses incurred by Integrated BioPharma.

 

 

Corporate support charges consisted of the following:


 

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The salary allocation is an allocation of the Integrated BioPharma’s salaries and related employee costs for persons in the executive management team that devote a portion of their time to iBioPharma business and an allocation of the accounting and support staff of Integrated BioPharma whom also devote a portion of their time to our record keeping and administrative matters. The overhead allocation is an allocation of Integrated BioPharma’s allocable overhead accounts including office expenses, telephone, professional fees, consulting fees, finance charges and travel and entertainment expenses.

 

In December 2006, the Company made in an investment in a private biotech company that was in its initial stages of filing to become a public company. In the three month period ended December 31, 2007, the Company, based in part on information from public filings filed in February 2008 by this biotech company, which stated that if the company was unsuccessful in its efforts to raise additional capital, it only had enough cash on hand to cover operating expenses through May 2008 and if it were successful in obtaining additional funding, such financings would have a dilutive effect to current stockholders. Furthermore, this biotech company is not a public company, the financial statements included in the public filing stated that there was substantial doubt about the company’s ability to continue as a going concern and there is no established market for the investment we hold, we, therefore, recorded a valuation reserve equal to our entire investment of $253,500, in this biotech company.                
 

          Salaries and employee benefits increased to $246,700 in the nine months ended March 31, 2008 from $102,900 in the nine months ended March 31, 2007, an increase of approximately $143,300. The increase is primarily attributable to the hiring of our President in October 2007 and two other employees in October and February, increasing our salary and employee benefit expense by approximately $127,400 in the nine months ended March 31, 2008 compared to no such expense in the comparable period a year ago.

 

          In the nine months ended March 31, 2008, lab expense increased by $58,100 to $76,500 from $18,400 in the comparable period a year ago, $28,100 of the increase relates to salaries of employees charged to lab expense. In the nine months ended March 31, 2008, an employee’s salary of approximately $38,000 was charged directly to lab expense as he exclusively works in the lab overseeing the production of the raw material under the Mannatech supply agreement. This employee was transferred from another wholly-owned subsidiary of Integrated BioPharma in January 2007 and was no longer charged through the corporate support allocation. In the six month period ended December 31, 2006, his salary was included in the corporate salary allocation from Integrated BioPharma and in the three months ended March 31, 2007, approximately $18,500 of salary expense was charged to lab expense, resulting in an increase of $19,500 in the nine months ended March 31, 2008. The remaining increase of approximately $9,600 was the result of new employee salaries charged to lab expense that worked on projects other than the Mannatech supply agreement. The remaining change of approximately $30,000 relates to increased supplies used by the new employees in their project work.


          Travel and entertainment expenses increased by 120.1% from $25,800 in the nine months ended March 31, 2007 to $56,900 in the nine months ended March 31, 2008, an increase of $31,100. This increase was the result of increased travel incurred in connection with our recruiting efforts for our newly hired president who began in October 2007, and additional travel incurred in the 2008 period in

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connection with our private placement efforts to raise additional capital. Additionally, our president who resides in California, and our Chief Scientific Officer, who resides in London, made several trips to our offices in Delaware and attended various meetings in New York and Florida in the nine months ended March 31, 2008 compared to the same period in 2007 resulting in increased travel and lodging costs of $24,000 and additional meal and entertainment costs of $7,100.

Consulting and other professional fees increased by about $94,000 or 61.4% in the nine months ended March 31, 2008 to approximately $248,000 compared to approximately $153,600 in the nine months ended March 31, 2007. Consulting and other professional fees consist of legal, outside accounting services, directors fees, scientific advisory board (“SAB”) expenses (both travel and consulting fees) and consulting fees paid to outside consultants and our own Chief Scientific Officer. The increase from the nine months ended March 31, 2007 to March 31, 2008 was the result of increased legal and accounting of $47,100, consulting fees of $10,700, and increased SAB costs of $36,000. Our SAB costs increased 100% as their were no meetings held in the nine months ended March 31, 2007 and one held in the nine month period ended March 31, 2008.

 

Pursuant to SFAS No. 123(R), adopted as of July 1, 2005, we recognized approximately $42,000 in compensation expense for employee stock options in nine months ended March 31, 2008 and $27,600 in the nine months ended March 31, 2007. This expense is a direct allocation from our Parent for our employees and directors who received compensation in the form of stock options providing for the purchase of our Parent’s stock upon vesting of their awards.

Year ended June 30, 2007 Compared to the Year ended June 30, 2006

Net Sales.
 

Net Sales for the fiscal years ended June 30, 2007 and 2006 were $896,000 and $18,700, respectively, an increase of $877,300. During the later part of our fiscal year ended June 30, 2006, we entered into an supply license agreement with a distributor whereby we agreed to supply mineral ingredients in a single formula which uses our patented intellectual property. Sales under this agreement were 99% of our net sales for the fiscal year ended June 30, 2007.

 

For the fiscal year ended June 30, 2007 approximately 99% of revenues were derived from three customers. Two of the these three customers, JB Laboratories, Inc and Natural Alternatives International, became our customers under our supply agreement with Mannatech at the direction of Mannatech for the purpose of supplying certain raw materials in the manufacturing process of Mannatech’s nutraceutical product lines, the third customer was Mannatech directly. The loss of any of these customers would have an adverse affect on the Company’s operations.

     For the fiscal year ended June 30, 2006 approximately 32% of net sales or approximately $6,100 were derived from Mannatech. Another customer, Edenspace Systems Corporation represented 62.4% or approximately $11,700 of our net sales in the fiscal year ended June 30, 2006, this customer represented approximately 1% of our fiscal year ended June 30, 2007 net sales.

Cost of sales. Cost of sales increased to $445,700 for the fiscal year ended June 30, 2007, as compared to $1,900 for the fiscal year ended June 30, 2006. Cost of sales increased as a percentage of sales to 50% for the fiscal year ended June 30, 2007 as compared to 10% for the fiscal year ended June 30, 2006. The increase is the result of the increased sales under the supply agreement with Mannatech.

 

Research and Development Costs. Our research and development costs increased by approximately $243,700 from the fiscal year ended June 30, 2006 compared to the fiscal year ended June 30, 2007

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primarily as a result of reaching several milestones in our flu vaccine studies, which triggered additional research and development payments of approximately $250,000 in the fiscal year ended June 30, 2007.

Selling and Administrative Expenses. Selling and administrative expenses were $1.4 million for the fiscal year ended June 30, 2007, an increase of $418,000 or 41% as compared with $1.0 million for the fiscal year ended June 30, 2006. A tabular presentation of the changes in selling and administrative expenses is as follows:


The salary allocation is an allocation of the Integrated BioPharma’s salaries and related employee costs for persons in the executive management team who devote a portion of their time to iBioPharma business and an allocation of salaries and related costs of the accounting and support staff of Integrated BioPharma who also devote a portion of their time to our record keeping and administrative matters. The overhead allocation is an allocation of Integrated BioPharma’s allocable overhead accounts, including office expenses, telephone, professional fees, consulting fees, finance charges and travel and entertainment expenses and are allocated to each of Integrated BioPharma’s subsidiaries’ based on the estimated percentage of time devoted to each company, including Integrated BioPharma, and actual expenses incurred by Integrated BioPharma.

 

Corporate support charges consisted of the following:

          The salary allocation is an allocation of the Integrated BioPharma’s salaries and related employee costs for persons in the executive management team that devote a portion of their time to iBioPharma business and an allocation of the accounting and support staff of Integrated BioPharma whom also devote a portion of their time to our record keeping and administrative matters. The overhead allocation is an allocation of Integrated BioPharma’s allocable overhead accounts including office expenses, telephone, professional fees, consulting fees, finance charges and travel and entertainment expenses.


 

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Consulting and other professional fees increased by about $96,000 or 36.1% in the fiscal year ended June 30, 2007 to approximately $363,000 compared to approximately $266,500 in the fiscal year ended June 30, 2006. Consulting and other professional fees consist of legal, outside accounting services, directors fees, scientific advisory board (“SAB”) expenses (both travel and consulting fees) and consulting fees paid to outside consultants and our own Chief Scientific Officer. The increase from the fiscal year ended June 30, 2006 to June 30, 2007 was the result of increased legal and accounting of $52,200, consulting fees of $20,000, director’s fees of $10,400 (as the director joined our Board in December 2005) and increased SAB costs of $14,000. Our SAB costs nearly doubled from $17,000 to $31,000 as a result of holding two meetings in the fiscal year ended June 30, 2007 compared to one meeting in the fiscal year ended June 30, 2006.

 

Amortization expense increased to approximately $322,000 in the fiscal year ended June 30, 2007 from approximately $162,000 in the fiscal year ended June 30, 2006, or approximately $160,000. T he primary increase is attributable to additional intangible assets of approximately $1.845 million period over period, $1.65 million relating to additional intellectual property acquired under our technology transfer agreement with FhCMB and additional capitalized patent costs of $195,100 as we continued to expand our patent and trademark portfolio.

 

In June 2007, we also had a change in our estimated useful life of the intellectual property acquired from FhCMB from 15 years to 20 years as a result of an amendment to our technology transfer agreement with FhCMB to extend our licensing rights from 10 years to 15 years.  

 

As of June 30, 2007, the Company has made payments of approximately $2.5 million and $1.9 million as of June 30, 2006 towards the purchase of $3.6 million, of which $1.15 million is accrued, $750,000 is to be paid in fiscal year 2008, with the remaining $400,000 to be paid in the fiscal year 2009. Under our technology transfer agreement, we have the right to cease paying the purchase price of the technology platform and pay a higher royalty payment to FhCMB. As of June 25, 2007, the amended date of the technology transfer agreement, FhCMB had delivered all the intellectual property under the technology transfer agreement, and payments were deferred because of the maintenance and support services necessary to further protect the platform. It was this determination that triggered the additional capitalization of the committed purchase price of the technology platform and as of June 30, 2007 increased our carry value by the unpaid balance of $1.15 million.

Based on the increased carry value of intellectual property, our amortization expense on our intellectual property relating to our iBioLaunch technology and our patent portfolio increased by $142,500 and $18,000, respectively, in our fiscal year ended June 30, 2007 from our fiscal year ended June 30, 2006.

 

Lab expenses of approximately $37,000 were incurred in the fiscal year ended June 30, 2007 compared to approximately $17,000 in the 2006 fiscal year ended June 30, 2006, an increase of approximately $20,000 or 115.3%. In the fiscal year ended June 30, 2007, an employee’s salary of approximately $37,000 was charged directly to lab expense as he exclusively works in the lab overseeing the production of the raw material under the Mannatech supply agreement. This employee was transferred from another wholly-owned subsidiary of Integrated BioPharma in January 2007 and was no longer charged through the corporate support allocation. In the fiscal year ended June 30, 2006, his salary was included in the corporate salary allocation from Integrated BioPharma. Lab expense in the fiscal year ended June 30, 2006 of approximately $17,000 related to research and development contracts that were completed or expired in the fiscal year ended June 30, 2006 and these expenses were not required in the fiscal year ended June 30, 2007.             

 

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Travel and entertainment expenses decreased by approximately $40,700 or 60% in the fiscal year ended June 30, 2007 to $27,500 compared to $68,200 in the prior fiscal year. This decrease of nearly $41,000 was due to decreased travel expenses of $23,200 and decreased entertainment costs of $16,500. In the fiscal year ended June 30, 2006, we held two scientific advisory board meetings paying for the travel and entertainment costs for the members of the board, while in the fiscal year ended June 30, 2007, we held only one meeting.

 

Pursuant to SFAS No. 123(R), adopted as of July 1, 2005, we recognized $34,000 in compensation expense for employee stock options in each of the fiscal year ended June 30, 2007, with no comparable expense in the fiscal year ended June 30, 2006. This expense is a direct allocation from our Parent for our employees who received compensation in the form of stock options providing for the purchase of our Parent’s stock upon vesting of their awards.

Income tax (benefit). In the fiscal year ended June 30, 2007, the Company had net income tax expense of approximately $1,000 compared to a net income tax benefit of approximately $485,000 in the fiscal year ended June 30, 2006. Our ability to recognize an income tax benefit is dependent on the consolidated federal taxable income (loss) of Integrated BioPharma’s controlled group for federal income tax purposes. In the fiscal year ended June 30, 2007, the controlled group of Integrated BioPharma had a taxable loss and therefore did not utilize any of the losses generated by us and as stand alone taxable entity, we would have to reserve 100% of our resulting deferred tax asset generated from the net operating loss as it is more likely than not that, in the near term, that we will not generate sufficient taxable income to offset our Fiscal 2007 taxable loss. In the fiscal year ended June 30, 2006, Integrated BioPharma’s controlled group for federal income tax purposes had taxable income and used $1.4 million of our net operating losses which resulted in a federal tax benefit of approximately $486,000. Our deferred tax asset relating to our federal and state net operating losses are fully reserved in a valuation allowance account since it is more likely than not that we will not have sufficient taxable income, in the near future, to offset any future taxable income.
 

Year ended June 30, 2006 Compared to the Year ended June 30, 2005

Net Sales and cost of sales were not material contributors to our net loss before income tax benefit of $1.4 million for the fiscal year ended June 30, 2006 compared to our net loss before income tax expense of $1.2 million in the fiscal year ended June 30, 2005. We had gross profit of $16,700 and $21,100 in the fiscal years ended June 30, 2006 and 2005, respectively.

Research and Development Costs. Our research and development costs increased by approximately $248,000 from the fiscal year ended June 30, 2005 compared to the fiscal year ended June 30, 2006 primarily as a result of reaching several milestones in our flu vaccine studies and other research agreements, which triggered additional research and development payments of approximately $250,000 in the fiscal year ended June 30, 2006.

Selling and Administrative Expenses. Selling and administrative expenses were $1.0 million for the fiscal year ended June 30, 2006, an increase of $37,300 or 4% as compared with $987,400 for the fiscal year ended June 30, 2005. A tabular presentation of the changes in selling and administrative expenses is as follows:

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Corporate support charges from Integrated BioPharma increased to approximately $305,000 in the fiscal year ended June 30, 2006 from approximately $194,000 in the fiscal year ended June 30, 2005, an increase of approximately $110,500 or 57% as a result of Integrated BioPharma’s increase in allocated payroll costs of approximately $117,400 in fiscal year ended June 30, 2006 with no corresponding allocation in the fiscal year ended June 30, 2005 as we had our own employees in the fiscal year ended June 30, 2005 independent of Integrated BioPharma. Our salaries and employee benefits decreased by $90,000 in the fiscal year ended June 30, 2006, as we decreased our staff and began sharing the staff of Integrated BioPharma offsetting all but $20,000 of the increase in corporate support costs. Corporate support charges consisted of the following:

Consulting and other professional fees decreased by nearly $76,200 or 22.2% in the fiscal year ended June 30, 2006 to approximately $266,500 compared to approximately $342,800 in the fiscal year ended June 30, 2005. Consulting and other professional fees consist of legal, outside accounting services, directors fees, scientific advisory board (“SAB”) expenses (both travel and consulting fees) and consulting fees paid to outside consultants and our own Chief Scientific Officer. The decrease from the fiscal year ended June 30, 2005 to June 30, 2006 was the result of decreased legal and accounting of $96,800, consulting fees of $30,200 and SAB costs of $24,300, offset by an increase in director’s fees of $10,600 (as the director joined our Board in December 2005). Our SAB costs decreased from $41,400 to $17,200 as a result of holding two meetings in the fiscal year ended June 30, 2005 compared to one meeting in the fiscal year ended June 30, 2006.

          Amortization expense increased to approximately $161,700 in the fiscal year ended June 30, 2006 from approximately $95,800 in the fiscal year ended June 30, 2005, or approximately $65,900. T he primary increase is attributable to additional intangible assets of approximately $838,000 period over period, $600,000 relating to payments made under our purchase commitment under the FhCMB technology agreement and additional capitalized patent costs of $238,000 as we establish our patent and trademark portfolio.

 

           Based on the increased carry value of intellectual property, our amortization expense on our intellectual property relating to our iBioLaunch technology and our patent portfolio increased by $50,800

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and $15,100, respectively, in our fiscal year ended June 30, 2006 from our fiscal year ended June 30, 2005.

           Travel and entertainment expenses increased by approximately $28,500 or 72% in the fiscal year ended June 30, 2006 to $68,200 compared to $39,700 in the prior fiscal year. This increase of approximately $28,500 was primarily due to increased travel expenses of $25,800. In the fiscal year ended June 30, 2005, our employees were traveling more frequently in an effort to obtain more business and to expand our business relationship with FhCMB.      
 

Lab expense decreased by $4,100 in the fiscal year ended June 30, 2006 to $17,200 from $21,400 in the fiscal year ended June 30, 2005 or 19.3% as a result of completing our analysis on capsules used in our research and development activities.

 

Income tax (benefit). In the fiscal year ended June 30, 2006, the Company had a net income tax benefit of approximately $485,000 compared to a net income tax expense of approximately $1,000 in the fiscal year ended June 30, 2005. Our ability to recognize an income tax benefit is dependent on the consolidated federal taxable income (loss) of Integrated BioPharma’s controlled group for federal income tax purposes. In the fiscal year ended June 30, 2006, Integrated BioPharma’s controlled group for federal income tax purposes had taxable income and used $1.4 million of our net operating losses which resulted in a federal tax benefit of approximately $486,000. In the fiscal year ended June 30, 2005, the controlled group of Integrated BioPharma had a taxable loss and therefore did not utilize any of the losses generated by us and as stand alone taxable entity, we would have to reserve 100% of our resulting deferred tax asset generated from our net operating loss as it is more likely than not that, that in the near term, we will not generate sufficient taxable income to offset our Fiscal 2005 taxable loss. Our deferred tax asset relating to our federal and state net operating losses are fully reserved in a valuation allowance account since it is more likely than not that we will not have sufficient taxable income, in the near future, to offset any future taxable income.

Seasonality

We do not believe that our operations are impacted by seasonality.

Liquidity and Capital Resources

The following table sets forth, for the periods indicated, the Company’s net cash flows used in operating, investing and financing activities:

At March 31, 2008, we had negative working capital of $1.3 million, an increase from our negative working capital of $1.2 million as of June 30, 2007.

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At June 30, 2007, we had negative working capital of $1.2 million, an increase from our negative working capital of $99,900, as of June 30, 2006. Our cash position is currently dependent on our Parent advancing funds to our operating account on an as needed basis and hence our cash balance as of March 31 and June 30, 2007 was approximately $57,000 and $19,000, respectively.

In the fiscal year ended June 30, 2007, we used $849,400 of cash from our operating activities compared to $958,800 of cash in operations in the fiscal year ended June 30, 2006, a decrease of $109,400. The decrease of $109,400 in cash used in operating activities is composed of increases in; our operating loss of $517,600 (excluding non-cash activities) and our accounts receivable of $137,400, offset by increases in our accounts payable of $302,400 and accrued expenses of $449,800 and a decrease in other assets of $13,100.

The increase in our accounts receivable balance is a direct result of our increase sales from the fiscal year ended June 30, 2006 to June 30, 2007 by approximately $877,000. Our average monthly sales in the fiscal year ended June 30, 2007 was approximately $81,500 and our customers paid on average between 45 and 60 days; the increase in accounts receivable of approximately $109,400 represents about 1.7 months of average sales.

The increases in account payable and accrued expenses of $302,400 and $449,800 are attributable to several factors, including (i) having liabilities for cost of goods sold in 2007 of $44,000 in the fiscal year ended June 30, 2007 compared to none in 2006, (ii) the increased costs of our accounting and legal expenses incurred in the fiscal year ended June 30, 2007 as compared to 2006, in 2007 we had accrued professional fees of $148,000 compared to $56,000 in 2006, an increase of $92,000, and (iii) accrued and unpaid research and development costs of $450,000 in 2007 with only $25,000 in 2006, an increase of $425,000.

The increase in cash used from investing activities of approximately $225,200 in our fiscal year ended June 30, 2007 from our fiscal year ended June 30, 2006 is primarily due to the purchase of other non-current assets of $253,500.                

The increase in cash provided from financing activities of approximately $133,300 from fiscal year ended June 30, 2006 to 2007, is a result of a net increase in advances from our Parent in order to support our operating expenses.

  The following table sets forth the Company’s future commitments as of March 31, 2008 (Contractual Commitments represents our expected payments to FhCMB under our amended technology transfer and research agreements):

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Our plans to expand our business and to continue to improve our product candidates to strengthen our ability to obtain licensees for our proprietary technology may require funds in excess of our cash flow and may require us to seek financing from third parties. In the past, Integrated BioPharma has provided capital for our general corporate purposes, and we used cash provided by Integrated BioPharma to fund our operations. After the distribution, Integrated BioPharma will not provide funds to finance our operations. Without the opportunity to obtain financing from Integrated BioPharma, we will in the future need to obtain additional financing from banks, or through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements. The terms, interest rates, costs and fees of new credit facilities may not be as favorable as those historically enjoyed with Integrated BioPharma. For example, Integrated BioPharma did not charge us with any fees or costs for the intercompany borrowing, nor were there any covenants regarding financial ratios or prohibition on certain transactions in the loan arrangement with Integrated BioPharma. Our inability to obtain financing on favorable terms could restrict our operations and increase our losses.

As of June 3, 2008, we have capital subscriptions of $5.0 million, which funds are held in escrow and are expected to be released at the time of the spin-off. This additional capital is expected to cover our anticipated costs through the third calendar quarter of 2009. If we are unsuccessful in raising additional capital or other alternative financing by then we might have to abandon our efforts to commercialize the intellectual property and cease operations as we will no longer have the financial support of Integrated BioPharma.

Capital Expenditures

The Company’s capital expenditures, other than intellectual property, during the fiscal year ended June 30, 2007, 2006 and 2005 were not material as well as the nine months ended March 31, 2008.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

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Recently Announced Accounting Pronouncements

Please refer to Note 2 in our financial statements which can be found at page F-6, herein.

Impact of Inflation

The Company does not believe that inflation has significantly affected its results of operations.

DESCRIPTION OF OUR BUSINESS

Overview

iBioPharma, Inc. is a biopharmaceutical company focused on using and promoting the use of our proprietary plant-based technology platform (which we refer to herein as the platform or our platform) by which targeted proteins can be produced in plants for the development and manufacture of novel vaccines and therapeutics for use in humans and for certain veterinary applications.

 

This platform was invented and developed by FhCMB, a not-for-profit translational research institution. In January 2004, we acquired the platform from FhCMB together with FhCMB’s commitment for the maintenance and support necessary to further protect the intellectual property comprising the platform, including filing and prosecuting patent applications, providing scientific support for patent counsel’s activities on behalf of the Company and otherwise to maintain in force and good standing the Company’s intellectual property rights.

Our business model contemplates that, in addition to using our platform to create and advance our own product candidates, we will license the platform to, or enter into joint ventures or other business arrangements with, other parties (collectively, we refer to these third parties as licensees) who wish to use the platform for the development and/or production of their own product candidates. In order to attract appropriate licensees and increase the value of the Company’s share of such contractual arrangements, the Company engaged FhCMB in October 2004 to perform research and development activities to apply the platform to create our first product candidate. The Company selected a plant-based flu vaccine for human use as the product candidate to exemplify the value of the platform particularly for products that require rapid, highly-scalable and economic production. Performance of this first research agreement, which requires us to make payments to FhCMB against the achievement of stated research milestones, has progressed through preclinical challenge studies in the ferret model. Clinical trials are expected to begin in the second quarter of 2009.

In addition, in 2006, the Company engaged FhCMB to create a prototype production module for products made through the use of the platform. The purpose for this engagement was to demonstrate the ease and economy with which platform-based products could be manufactured, again in order to attract potential licensees and increase the value of the Company’s share of business arrangements. The prototype design, which encompasses the entire production process from the seeding through pre-infiltration plant growth, infiltration with agrobacteria, harvesting of plant tissue and purification of target proteins, was completed in May 2008. Fabricated equipment for the prototype is scheduled to be delivered to FhCMB by November 2008. Equipment in the facility is scheduled to be commissioned and the facility validated for current Good Manufacturing Practices (called cGMP) production in the first quarter of 2009. The facility will then be used for pilot scale production of protein targets for clinical trials of product candidates which use our platform technology.

 

In addition to our direct funding of FhCMB’s application of the platform technology to our human flu vaccine product candidate, we have established non-commercial arrangements among the

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Company, certain government entities, a non-governmental organization (which we refer to herein as a NGO) and FhCMB, pursuant to which the Company grants non-commercial rights to use its platform for the development and production by FhCMB of product candidates selected by the government entities and NGO, in consideration for grants by the government entities and NGO directly to FhCMB to fund such research and development.

Through (i) the Company/FhCMB contracts and (ii) the non-commercial arrangements described above, the Company retains ownership of the intellectual property and exclusive commercial rights in the fields of human health and veterinary influenza applications of the intellectual property. The Company licenses or otherwise grants use rights (a) to government and NGO entities for not-for-profit applications of the intellectual property for the development or application of which they granted or were granted funding, and (b) to FhCMB for research purposes and applications in other fields. This business structure enables us to obtain commercial rights to various applications of our platform technology funded by government entities and NGOs. It also helps us demonstrate the validity and apparent value of the platform to parties to whom we will offer licenses or other business opportunities. Our use of FhCMB to perform research and development work allows us to develop our product candidates, and thereby promote the value of our platform for licensing and product development purposes, without bearing the full risk and expense of establishing and maintaining our own research and development staff and facilities.

Using this business structure, we have applied our platform technology to create a pipeline of proprietary product candidates which we can offer to licensees, including vaccine and therapeutic candidates against seasonal and pandemic influenza, human papilloma virus (HPV), and other pathogens of public health significance. All of our product candidates are in the preclinical development stage, and to date, none of our product candidates has been approved by the FDA.

We have exclusive control over and the rights to ownership of the intellectual property related to human health and veterinary influenza applications of the plant-based technology developed by FhCMB. Current development projects include expansion of production capabilities, conducting proof-of-principle preclinical studies and planning clinical studies of proprietary influenza and HPV vaccines and antibodies for potential treatment and diagnosis of influenza infections.

Biotech drugs are proteins such as antibodies, blood proteins and enzymes. Many biotech drugs have been on the market long enough for patents on them to expire. Emerging opportunities for biosimilars (also known as biogenerics or follow-on biologics) creates potential for our platform technology to be used by potential licensees to enter the market due to what we expect to be an economical production system. We currently have no commercial partners for this category of products and we are unlikely to develop products in this category without the financial and marketing support of a commercial partner.

Historically, we have also used plants as sources of high-quality nutritional supplements. The Company has a patented process for hydroponic growth of edible plants that causes them to accumulate high levels of important nutritional minerals such as chromium, selenium, iron and zinc. Following the spin-off, we will continue to engage the services of various wholly-owned subsidiaries of Integrated BioPharma for the production, marketing and sales of these phytomineral products.

Our Business Structure

A key element of our business strategy and our thinly-staffed employment structure is to establish business arrangements with licensees, particularly leading pharmaceutical and biotechnology companies, to use our platform technology for the development and commercialization of our product candidates. As

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