text:
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 1997
REGISTRATION STATEMENT NO. 333-23037
- -------------------------------------------------------------------------------
AMENDMENT NO. 1
TO FORM SB-2
REGISTRATION STATEMENT
THE SECURITIES ACT OF 1933
SIGA PHARMACEUTICALS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE                    2834                    13-3864870
(STATE OR OTHER     (PRIMARY STANDARD INDUSTRIAL     (I.R.S. EMPLOYER
JURISDICTION OF      CLASSIFICATION CODE NUMBER)     IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL
EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS)
DAVID H. DE WEESE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
ADAM EILENBERG, ESQ.                    KENNETH KOCH, ESQ.
EILENBERG & ZIVIAN                 SQUADRON, ELLENOFF, PLESENT
666 THIRD AVENUE                       & SHEINFELD, LLP
NEW YORK, NY 10017                      551 FIFTH AVENUE
(212) 986-2468                       NEW YORK, NY 10176
FACSIMILE (212) 986-2399                    (212) 476-8362
FACSIMILE (212) 697-6686
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective. If any of the
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
PROPOSED      MAXIMUM
TITLE OF EACH CLASS      AMOUNT      MAXIMUM      AGGREGATE
OF SECURITIES TO BE      TO BE    OFFERING PRICE  OFFERING      AMOUNT OF
REGISTERED        REGISTERED  PER SHARE(1)   PRICE(1)   REGISTRATION FEE
Common Stock, par value
$.0001................  4,000,000      $ 5.00     $20,000,000      $6,060
Underwriter's Warrants,
each to purchase one
share of Common
Stock(2)..............   400,000       $0.001        $400             -- (3)
$.0001(4)(6)..........   400,000       $5.50      $2,200,000         $667
$.0001(5)(6)..........   100,000       $5.00       $500,000          $152
Total: ................                                             $6,879(7)
(1) Estimated solely for the purpose of calculating the registration fee.
(2) To be issued to the Underwriter at the time of delivery and acceptance of
the securities to be sold to the public hereunder.
(3) No fee due pursuant to Rule 457(g) under the Securities Act of 1933.
(4) Issuable upon exercise of the Underwriter's Warrants.
(5) Issuable upon exercise of warrants (the "Bridge Warrants") issued to
certain persons in connection with a bridge financing completed on
(6) Also registered hereunder pursuant to Rule 416 are an indeterminate number
of shares of Common Stock which may be issued pursuant to the anti-
dilution provisions applicable to the Underwriter's Warrants and the
Bridge Warrants.
(7) $5,618 of this amount has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS REQUIRED BY PART 1 OF FORM SB-2
ITEM             TITLE OF ITEM                      CAPTION IN PROSPECTUS
----             -------------                      ---------------------
1.  Front of Registration Statement and
Outside Front Cover of Prospectus...   Front Cover Page
2.  Inside Front and Outside Back Cover
Pages of Prospectus.................   Inside Front Cover Page
3.  Summary Information and Risk            Prospectus Summary; Risk Factors
Factors.............................
4.  Use of Proceeds......................   Use of Proceeds
5.  Determination of Offering Price......   Underwriting
6.  Dilution.............................   Dilution
7.  Selling Security Holders.............   Not Applicable
8.  Plan of Distribution.................   Front Cover Page; Underwriting
9.  Legal Proceedings....................   Business
10.  Directors, Executive Officers,
Promoters and Control Persons.......   Management
11.  Security Ownership of Certain
Beneficial Owners and Management....   Principal Stockholders
12.  Description of Securities............   Description of Securities; Dividend
13.  Interest of Named Experts and           Legal Matters; Experts
Counsel.............................
14.  Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.........................   Description of Securities
15.  Organization Within Last Five Years..   Certain Transactions
16.  Description of Business..............   Business
17.  Management's Discussion and Analysis
or Plan of Operation................   Plan of Operation
18.  Description of Property..............   Business
19.  Certain Relationships and Related
Transactions........................   Certain Transactions
20.  Market for Common Equity and Related
Stockholder Matters.................   Description of Securities; Shares
Eligible for Future Sale
21.  Executive Compensation...............   Management
22.  Financial Statements.................   Financial Statements
23.  Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure................   Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+                                                                              +
+A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED HEREIN IS SUBJECT   +
+TO COMPLETION OR AMENDMENT PRIOR TO THE DATE SUCH REGISTRATION STATEMENT      +
+BECOMES EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE  +
+ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS +
+PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN    +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN  +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO             +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.    +
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED JULY 11, 1997
MINIMUM: 3,250,000 SHARES OF COMMON STOCK
MAXIMUM: 4,000,000 SHARES OF COMMON STOCK
This Prospectus relates to an offering (the "Offering") by SIGA
Pharmaceuticals, Inc. (the "Company") of a minimum of 3,250,000 shares of
common stock, par value $.0001 per share (the "Common Stock") (sometimes
hereinafter referred to as the "Securities") (the "Minimum Offering") and a
maximum of 4,000,000 shares of Common Stock (the "Maximum Offering"), to be
sold on a "best-efforts" basis through Sunrise Securities Corp. (the
"Underwriter"). Prior to the Offering, there has been no public market for the
Common Stock. It is currently anticipated that the initial offering price will
be $5.00 per share. See "Underwriting" for information relating to the factors
considered in determining the initial offering price.
The Company has applied for quotation of the Common Stock on The NASDAQ
SmallCap Market ("Nasdaq") under the trading symbol "SGPH".
The Company is a development stage, biopharmaceutical company which has
suffered operating losses since its inception and which has received a going
concern opinion from its independent accountants. As of March 31, 1997, the
Company had an accumulated deficit of $2,820,000. The Company expects to incur
substantial additional operating losses in the development and
commercialization of its technologies.
THE SECURITIES  OFFERED HEREBY  ARE SPECULATIVE  AND INVOLVE  A HIGH  DEGREE OF
RISK. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT
SHOULD INVEST. FOR A DESCRIPTION OF  CERTAIN RISKS REGARDING AN INVESTMENT IN
THE COMPANY AND  IMMEDIATE SUBSTANTIAL  DILUTION, SEE  "RISK FACTORS" (PAGE
10) AND "DILUTION" (PAGE 22).
THESE  SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES  AND
EXCHANGE   COMMISSION  OR  ANY  STATE  SECURITIES  COMMISSION  NOR  HAS   THE
COMMISSION  OR ANY STATE SECURITIES COMMISSION PASSED UPON THE  ACCURACY OR
ADEQUACY  OF THIS  PROSPECTUS. ANY  REPRESENTATION TO THE  CONTRARY IS  A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE TO   DISCOUNTS AND   PROCEEDS TO
PUBLIC    COMMISSIONS(1) COMPANY(2)(3)
Per Share.............................     $5.00         $.50          $4.50
Total Minimum.........................  $16,250,000   $1,625,000    $14,625,000
Total Maximum.........................  $20,000,000   $2,000,000    $18,000,000
(footnotes appear on page 3)
SUNRISE SECURITIES CORP.
The date of this Prospectus is      , 1997.
MECHANISMS TO PREVENT INFECTION
[Photo]
For a pathogen to infect a host, an interaction is required between its
surface proteins and the host's mucosal tissue. SIGA uses two different
methods to prevent serious infection. One is to develop mucosal vaccines,
inducing antibodies at mucosal surfaces, blocking the ability of the pathogen
to adhere. The second is to develop novel anti-infectives that will prevent
surface proteins from being expressed. SIGA has major mucosal vaccine
development programs targeting strep throat and periodontal diseases; gram
positive vectors for STD vaccines--HIV, HSV and HPV; and new targets for the
development of antibiotics.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING COVERING TRANSACTIONS, PENALTY BIDS AND SHORT SALES. FOR A
DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING."
- --------
(1) Does not include additional compensation to the Underwriter consisting of
(i) a non-accountable expense allowance equal to 3% of the gross proceeds
of the Offering, of which $45,000 has been paid by the Company to date and
(ii) warrants entitling the Underwriter to purchase the number of shares
of Common Stock equal to 10% of the number of shares of Common Stock sold
in this Offering (the "Underwriter's Warrants"). The Company has also
agreed to indemnify the Underwriter against certain civil liabilities,
including those arising under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."
(2) After deducting discounts and commissions payable to the Underwriter, but
before payment of the Underwriter's non-accountable expense allowance in
the amount of $487,500 in the Minimum Offering and $600,000 in the Maximum
Offering and the other expenses of the Offering payable by the Company
(estimated at $350,000). See "Underwriting."
(3) The shares of Common Stock are being offered on a "best-efforts" 3,250,000
share minimum, 4,000,000 share maximum basis. Pending sale of the
3,250,000 share minimum, all proceeds of this Offering will be held in a
non-interest bearing escrow account at United States Trust Company of New
York. Unless the 3,250,000 share minimum is sold by [September 1, 1997],
or by [October 1, 1997] if extended upon the mutual agreement of the
Company and the Underwriter (and after the expiration of an additional 10
business days to permit clearance of the funds in escrow), the Offering
will terminate and all funds collected will be promptly returned to the
subscribers without deduction or interest. During the escrow period,
subscribers will not be entitled to a return of their subscriptions. After
the sale of the initial 3,250,000 shares, the remaining 750,000 shares
will also be offered on a "best efforts" basis. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that any such market for the Common Stock will
develop after the closing of the Offering or that, if developed, it will be
sustained. Pursuant to Section 2720 of the National Association of Securities
Dealers, Inc. ("NASD") Rules of Conduct, the Common Stock is being offered at
a price no greater than the maximum price recommended by M.H. Meyerson & Co.,
a qualified independent underwriter. The offering price of the shares of
Common Stock was established by negotiation between the Company and the
Underwriter and does not necessarily bear any direct relationship to the
Company's assets, earnings, book value per share or other generally accepted
criteria of value. See "Underwriting."
Upon the consummation of the Offering, the Company's management and its
existing stockholders will, in the aggregate, own beneficially shares having
approximately 51% in the Minimum Offering and 46% in the Maximum Offering of
the total voting power of the Company's outstanding stock.
This Prospectus also covers the offer and proposed sale by the Company of an
estimated 100,000 shares of Common Stock issuable upon the exercise by the
holders thereof of warrants (the "Bridge Warrants") to purchase an estimated
100,000 shares (the actual number of shares will be determined by dividing
$500,000 by the actual initial offering price per share) at an exercise price
per share equal to the actual initial offering price per share issued to
certain investors in connection with a private placement transaction completed
on February 28, 1997 (the "Bridge Financing"). The Bridge Warrants are not
exercisable until February 28, 1998. See "Plan of Operation--Bridge
Financing."
The shares of Common Stock are being offered by the Underwriter on a "best
efforts" basis. Subject to the provisions of the underwriting agreement
between the Underwriter and the Company, the Underwriter reserves the right to
withdraw, cancel or modify the Offering and to reject any order in whole or in
part. Any modification to the Offering will be made by means of an amendment
to this Prospectus. It is expected that delivery of certificates will be made
against payment therefor at the office of the Underwriter, 135 East 57th St.,
New York, New York 10022, on or about      , 1997.
TO INVEST IN THESE SECURITIES, A CALIFORNIA RESIDENT MUST HAVE, AS A
MINIMUM, EITHER (i) A NET WORTH OF $100,000, EXCLUSIVE OF HOME, HOME
FURNISHINGS AND AUTOMOBILES, AND $65,000 OF GROSS INCOME DURING THE LAST TAX
YEAR AND ESTIMATED GROSS INCOME OF $65,000 FOR THE CURRENT TAX YEAR OR (ii) A
NET WORTH OF $250,000, EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES.
As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, will file reports, proxy and
information statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy and information statements
and other information can be inspected and copied at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following regional offices: New York
Regional Office, Suite 1300, 7 World Trade Center, New York, New York 10048,
and Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies of such material may also be obtained from the
Public Reference Section of the Commission at prescribed rates. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file such information electronically. The Company's Common Stock is
expected to be quoted on Nasdaq and such reports and other information can
also be inspected at the offices of Nasdaq Operations, 1735 K Street N.W.,
Washington, D.C., 20006. The Company intends to furnish its stockholders with
annual reports containing audited financial statements and such other reports
as the Company deems appropriate or as may be required by law.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated, the information in this
Prospectus assumes that the minimum number of shares of Common Stock will be
sold and does not give effect to the exercise of (a) the Underwriter's Warrants
and (b) other outstanding options and warrants to purchase an aggregate of
806,017 shares of Common Stock (includes 100,000 Bridge Warrants based on the
assumed initial public offering price). The initial public offering price per
share of Common Stock is assumed to be $5.00.
The Company is a development stage, biopharmaceutical company focused on the
discovery, development and commercialization of vaccines, antibiotics and novel
anti-infectives for serious infectious diseases. The Company's lead vaccine
candidate is for the prevention of "strep throat." The Company is developing a
technology for the mucosal delivery of its vaccines which may allow those
vaccines to activate the immune system at the mucus-lined surfaces of the
body--the mouth, the nose, the lungs and the gastrointestinal and urogenital
tracts--the sites of entry for most infectious agents. The Company's anti-
infectives programs, aimed at the increasingly serious problem of drug
resistance, are designed to block the ability of bacteria to attach to human
tissue, the first step in the infection process.
VACCINE CANDIDATES
The Company's lead vaccine candidate is for the prevention of group A
streptococcal pharyngitis or "strep throat," a recurrent infection affecting
between seven and 20 million children in the United States each year. Strep
throat remains the most common childhood disease for which there is no vaccine
available, and, if ineffectively treated, can progress to rheumatic fever. No
vaccine has been developed because more than 100 different serotypes of group A
streptococcus are known to cause the disease. In order to be effective, a
vaccine would have to be based upon an antigen (a molecule that triggers an
immune response) common to most of the important serotypes. The high incidence
of the disease, the potentially serious consequences of inadequate treatment
and the recent emergence of drug-tolerant types of group A streptococcus create
an important medical need for an effective vaccine.
The Company's proprietary antigen addresses the challenge of multiple
serotypes in that this antigen is common to most types of the bacteria that
cause strep throat, including types that have been associated with rheumatic
fever. When a vaccine incorporating this antigen was orally administered to
animals, it was shown to provide protection against multiple types of group A
streptococcal infection. The Company's vaccine candidate for strep throat
utilizes this antigen.
The Company is collaborating with the National Institutes of Health and the
University of Maryland Center for Vaccine Development on the clinical
development of this vaccine candidate and expects to file an Investigational
New Drug Application ("IND") with the United States Food and Drug
Administration (the "FDA") in the fall of 1997.
In addition to its strep throat vaccine, the Company is collaborating with
Chiron Corporation ("Chiron") on research toward the development of vaccines
against two sexually transmitted diseases and is testing a vaccine to prevent
periodontal disease in a collaboration with The Research Foundation of State
University of New York at Buffalo ("SUNY Buffalo").
MUCOSAL VACCINE DELIVERY SYSTEM
The Company is also developing a proprietary mucosal vaccine delivery system
which is a component of the Company's vaccine candidates and which the Company
intends to license to other vaccine developers. Mucosally-delivered vaccines
are considered attractive because such vaccines may mobilize an immune response
concentrated at the site of infection and because they may activate both a
mucosal IgA antibody response as well as a systemic (IgG and T cell) response.
The Company's mucosal vaccine delivery system utilizes commensal bacteria
(harmless bacteria that live in and on the body) that have been genetically
engineered to continually present disease-associated antigens that stimulate an
immune response at the body's mucosal surfaces. In this manner, the bacteria
may be able to prevent infection at the earliest possible stage. The Company
believes that mucosal vaccines developed using its proprietary commensal
delivery technology could provide a number of potential advantages over
conventional vaccines, including: more complete protection; fewer side effects;
the potential for single dose administration; non-injectable administration;
the potential for combination vaccine delivery; and lower cost production. The
Company's mucosal vaccine delivery technology is potentially applicable to any
infectious disease that begins at a mucosal surface.
ANTI-INFECTIVES AND ANTIBIOTICS THERAPY CANDIDATES
The Company's anti-infectives program is targeted principally toward drug-
resistant bacteria and hospital-acquired infections. According to estimates
from the Centers for Disease Control, approximately two million hospital-
acquired infections occur each year in the United States. According to the
Pharmaceutical Manufacturers Association, the United States and worldwide
antibiotic markets are $7 billion and $22 billion, respectively.
The Company's anti-infective approaches aim to block the ability of bacteria
to attach to and colonize human tissue, thereby blocking infection at the first
stage in the infection process. By comparison, antibiotics available today act
by interfering with either the structure or the metabolism of a bacterial cell,
affecting its ability to survive and to reproduce. No currently available
antibiotics target preventing the attachment of a bacterium to its target
tissue. By preventing attachment, the bacteria should be readily cleared by the
body's immune system.
The Company's lead anti-infectives program is based on a novel target for
antibiotic therapy. The Company's founding scientists have identified an
enzyme, a selective protease, utilized by most gram-positive bacteria to anchor
certain proteins to the bacterial cell wall. These surface proteins are the
means by which certain bacteria recognize, adhere to and colonize specific
tissue. The Company's strategy is to develop protease inhibitors. The Company
believes protease inhibitors will have wide applicability to gram-positive
bacteria in general, including antibiotic resistant staphylococcus and a broad
range of serious infectious diseases including meningitis and respiratory tract
infections.
The Company has entered into a collaborative research and license agreement
with the Wyeth-Ayerst Laboratories Division of American Home Products
Corporation ("Wyeth-Ayerst") to identify and develop protease inhibitors as
novel antibiotics. Pursuant to the agreement, Wyeth-Ayerst is providing funding
for a joint research and development program and is responsible for additional
milestone payments. Under the terms of the agreement, the Company could receive
up to $25 million in research and milestone payments for products developed
from the licensed technologies. Wyeth-Ayerst has exclusive license rights in
the field (as defined in the agreement) to any product resulting from this
research and is required to make royalty payments based on sales of any product
developed from the licensed technologies. See "Business--Collaborative Research
and Licenses."
The Company has entered into a letter of intent with MedImmune, Inc.
("MedImmune") regarding a technology transfer agreement pursuant to which the
Company will acquire all of MedImmune's rights in gram-negative antibiotic
targets, products, screens and services. The Company and MedImmune plan to
collaborate in
the development of antibiotics against gram-negative pathogens. These bacteria
utilize structures called pili to adhere to target tissue, and the Company
plans to exploit the assembly and export of these essential infective
structures as novel anti-infective targets. The Company and MedImmune
contemplate that upon the execution of the technology transfer agreement,
MedImmune will receive 335,530 shares of Common Stock (the "MedImmune Shares").
There can be no assurance that the Company will enter into a final agreement
with MedImmune on the terms described above or at all. See "Risk Factors--
Dependence on Others; Collaborations."
SURFACE PROTEIN EXPRESSION SYSTEM
The Company is developing proprietary protein production systems based on its
understanding of the mechanisms used by gram-positive bacteria to export and
anchor surface proteins. Methods have been developed to engineer gram-positive
bacteria to produce and secrete commercially useful proteins such as antigens
or enzymes into the culture medium in a form requiring minimal purification.
The Company believes that this technology provides a cost-effective alternative
to E. coli, yeast and mammalian cell culture systems.
The Company's technologies are licensed from The Rockefeller University
("Rockefeller"), Oregon State University ("Oregon State") and Emory University
("Emory"). The Company sponsors research and development activities in
laboratories at Rockefeller, Emory, Oregon State and SUNY Buffalo, and does not
maintain its own research and development facilities. See "Risk Factors--
Technologies Subject to Licenses" and "--Lack of Research and Development
Facilities."
The Company was incorporated in Delaware in December 1995. The Company's
executive offices are located at 666 Third Avenue, New York, NY, 10017, and its
telephone number is (212) 681-4970.
Securities offered................................. A minimum of 3,250,000
shares of Common Stock and
a maximum of 4,000,000
shares of Common Stock, on
a "best efforts" basis.
Offering price..................................... $5.00 per share of Common
Common Stock outstanding after the Offering(1)(2).. A minimum of 6,617,182
shares and a maximum of
7,367,182 shares.
Use of Proceeds.................................... The net proceeds to the
Company, aggregating
approximately $13,787,500
in the Minimum Offering
and $17,050,000 in the
Maximum Offering, will be
used to (i) repay short-
term indebtedness of
$1,000,000 (plus accrued
interest) incurred in the
Bridge Financing (and held
by non-affiliates of the
Company) and (ii) fund
activities, and the
balance used for working
capital and general
corporate purposes. See
"Use of Proceeds."
Risk Factors....................................... The securities offered
hereby involve a high
degree of risk and
substantial immediate
dilution to new investors.
Only investors who can
bear the risk of losing
their entire investment
should invest. See "Risk
Factors" and "Dilution."
Proposed Nasdaq symbol............................. "SGPH"
(1) Excludes (i) up to 400,000 shares of Common Stock reserved for issuance
upon exercise of the Underwriter's Warrants; (ii) 333,333 shares of Common
Stock reserved for issuance upon the exercise of stock options which may be
granted pursuant to the Company's 1996 Incentive and Non-Qualified Stock
Option Plan (the "Plan") (options to purchase 33,334 shares of Common Stock
at an exercise price of $1.50 per share, 16,667 shares of Common Stock at
an exercise price of $3.00 per share and 10,000 shares of Common Stock at
an exercise price per share equal to the initial public offering price (or
$5.00 if the Offering is not completed by November 1, 1997) have been
granted and are outstanding under the Plan); (iii) 461,016 shares of Common
Stock reserved for issuance upon the exercise of warrants granted to David
H. de Weese, the Chairman, President and Chief Executive Officer of the
Company, at an exercise price of $3.00 per share (the "de Weese Warrants");
(iv) 150,000 shares of Common Stock reserved for issuance upon the exercise
of warrants granted to Dr. Vincent Fischetti, the principal founding
scientist of the Company's technologies, at an exercise price of $1.50 per
share (the "Fischetti Warrants"); (v) an estimated 100,000 shares of Common
Stock reserved for issuance upon the exercise of the Bridge Warrants; and
(vi) 35,000 shares of Common Stock reserved for issuance upon the exercise
of warrants granted to two outside directors and three scientific advisors
at an exercise price per share equal to the initial public offering price
or $5.00 if the Offering is not completed by November 1, 1997 (the
"Directors/Advisors Warrants"). See "Plan of Operation--Bridge Financing,"
"Management--1996 Incentive and Non-Qualified Stock Option Plan" and "--
Employment and Consulting Agreements," "Certain Transactions" and
"Underwriting."
(2) Does not include the MedImmune Shares. There can be no assurance that the
Company will enter into a final agreement with MedImmune on the terms
described herein or at all. See "Risk Factors--Dependence on Others;
Collaborations."
SUMMARY FINANCIAL INFORMATION
The summary financial data set forth below is derived from and should be read
in conjunction with the audited financial statements, including the notes
thereto, appearing elsewhere in this prospectus.
DECEMBER 28,                DECEMBER 28,
1995                        1995         THREE       THREE     DECEMBER 28
(DATE OF        YEAR        (DATE OF      MONTHS      MONTHS         1995
INCEPTION) TO    ENDED      INCEPTION) TO    ENDED       ENDED    (INCEPTION) TO
DECEMBER 31,  DECEMBER 31,  DECEMBER 31,   MARCH 31,   MARCH 31,    MARCH 31,
1995          1996          1996         1996        1997          1997
------------- ------------  ------------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)  (UNAUDITED)
STATEMENT OF OPERATIONS
General and
administrative........     $ 1,000    $   787,817    $   788,817   $ 257,635   $ 300,962   $ 1,089,779
Research and
development...........         --         662,205        662,205      98,169     203,959       866,164
Patent preparation
fees..................         --         452,999        452,999     258,896      15,462       468,461
Stock option and
warrant compensation..         --         367,461        367,461         --          --        367,461
-------    -----------    -----------   ---------   ---------   -----------
Total operating
expenses..............       1,000      2,270,482      2,271,482     614,700     520,383     2,791,865
income/(expense).......         --           2,306          2,306         --      (30,390)      (28,084)
Net loss...............     $(1,000)   $(2,268,176)   $(2,269,176)  $(614,700)  $(550,773)  $(2,819,949)
=======    ===========    ===========   =========   =========   ===========
Net loss per common
share(1)..............         --     $     (0.66)                 $    (.21)  $    (.15)
=======    ===========                  =========   =========
AS ADJUSTED     AS ADJUSTED
FOR MINIMUM     FOR MAXIMUM
ACTUAL    OFFERING (2)(4) OFFERING (3)(4)
----------  --------------- ---------------
Working capital.................... $ (200,927)   $13,639,229     $16,901,729
Total assets.......................  1,118,753     13,897,920      17,160,420
Total liabilities..................  1,136,546        239,046         239,046
Stockholders' (deficit) equity.....    (17,793)    13,658,874      16,921,374
(1) For information concerning the computation of net loss per share, see Note
2 of Notes to Financial Statements.
(2) As adjusted to (i) give effect to the sale of 3,250,000 shares of Common
Stock offered hereby in the Minimum Offering, net of $2,462,500 of
underwriting discounts and commissions and Offering expenses ($163,489 of
such Offering expenses have been incurred by the Company as of March 31,
1997), at an assumed initial offering price of $5.00 per share of Common
Stock, (ii) repayment of the Bridge Notes in the principal amount of
$1,000,000 and accrued but unpaid interest thereon and (iii) the
recognition of the unamortized portion of the debt discount associated with
the Bridge Notes as an expense.
Stock offered hereby in the Maximum Offering, net of $2,950,000 of
The purchase of Common Stock is speculative and involves a high degree of
risk including, but not necessarily limited to, the Risk Factors described
below. Common Stock should not be purchased by investors who cannot afford the
loss of their entire investment. Prospective investors should carefully review
and consider the following risks as well as the other information contained in
this Prospectus.
Limited Operating History; Accumulated Deficit; Operating Losses; Potential
for Future Losses; Going Concern Explanatory Paragraph in Accountant's Report
The Company, a development stage, biopharmaceutical company, was
incorporated in December 1995 and accordingly has a limited operating history.
As of March 31, 1997, the Company had an accumulated deficit of $2,820,000.
The Company expects to incur substantial operating losses over the next
several years and expects cumulative losses to increase as the Company's
research and development and clinical efforts expand. In addition to increased
research and development expenses, the Company also expects general and
administrative expenses to increase due to increased staffing levels and
increased costs, including patent and regulatory costs, necessary to support
clinical trials, research and development and manufacturing. Revenues, if any,
that the Company may receive in the next few years will be limited to payments
under research or product development relationships that the Company may
establish and payments under license agreements that the Company may enter
into. There can be no assurance that the Company will be able to establish any
such relationships, enter into any such license agreements or generate
revenues. To achieve profitable operations, the Company, alone or with others,
must successfully identify and develop pharmaceutical products, conduct
clinical trials, obtain regulatory approvals and manufacture and market its
pharmaceutical products or enter into license agreements with third parties on
acceptable terms. The Company may never achieve significant revenues or
profitable operations.
The report of independent accountants on the Company's financial statements
included herein contains an explanatory paragraph stating that the Company's
financial statements have been prepared assuming that the Company will
continue as a going concern while expressing substantial doubt as to the
Company's ability to do so. The Company's ability to continue as a going
concern is dependent on its ability to generate sufficient cash flow to meet
its obligations as they become due. The Company has suffered operating losses
since inception and expects to incur substantial additional operating losses
in the development and commercialization of its technologies. These and other
factors discussed in Note 1 to the financial statements raise substantial
doubt about the Company's ability to continue as a going concern. See "Plan of
Operation" and Financial Statements and Notes thereto.
Early Stage of Development; Absence of Products; No Commercialization of
Products Expected in Near Future
The Company's product candidates are in an early stage of development. The
Company has not completed the development of any products and, accordingly,
has not received any regulatory approvals, commenced marketing activities or
generated revenues from the sale of products. The Company's product candidates
will require significant additional development, pre-clinical and clinical
trials, regulatory approval and additional investment prior to
commercialization. The Company does not expect to market any products for at
least four years. In addition, the Company's product candidates are subject to
the risks of failure inherent in the development of products based on
innovative technologies. Accordingly, there can be no assurance that the
Company's research and development efforts will be successful, that any of the
Company's product candidates will prove to be safe, effective and non-toxic in
clinical trials, that any commercially successful products will be developed,
that the proprietary or patent rights of others will not preclude the Company
from marketing its product candidates or that others will not develop
competitive or superior products. As a result of the early stage of
development of product candidates and the extensive testing and regulatory
review process that such product candidates must undergo, the Company cannot
predict with certainty when it will be able to market any of its products, if
at all. The failure to develop safe, commercially viable products would have a
material adverse effect on the Company's business, operating results and
financial condition.
Uncertainty Due to Unproven Technology
The Company's drug discovery approach faces technical issues which have not
been resolved and requires the development of multiple novel technologies to
create successful product candidates. While the Company has demonstrated that
it has several novel bacterial targets, the Company has not proven that drugs
which inhibit these targets will be safe and effective in human trials.
Furthermore, there can be no assurance that the drug inhibition activity
already demonstrated in primary screening will continue to be encouraging in
further screening or drug discovery studies. The Company has not tested any
product candidates in humans, and there can be no assurance that there will be
clinical benefits associated with any such product candidates. Furthermore,
there can be no assurance that the Company will successfully address these
technological challenges or others that may arise in the course of product
development. Any failure of the Company to anticipate or respond adequately to
technological developments will have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company's technology will lead to the discovery and
development of any viable product candidates in the future or that the Company
will be able to utilize its drug discovery approach successfully.
Future Capital Needs; Uncertainty Of Availability Of Additional Funding
The Company will require substantial additional funds to conduct and sponsor
research and development activities, to conduct pre-clinical and clinical
testing, and to market its products. The Company's future capital requirements
will depend on many factors, including continued scientific progress, progress
with pre-clinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing, prosecuting and
enforcing patent claims, competing technological and market developments, the
ability of the Company to establish collaborative arrangements, effective
commercialization activities and arrangements and the purchase or development
of additional equipment and facilities. The Company expects the net proceeds
of the Offering and the interest earned thereon will be sufficient to fund the
Company's activities for at least 24 months if the minimum number of shares is
sold and at least 30 months if the maximum number of shares is sold. There can
be no assurance, however, that changes in the Company's research and
development plans or other events affecting the Company's operating expenses
will not result in the utilization of such proceeds prior to that time.
The Company has no other current sources of funding, apart from research
payments and potential milestone payments from Wyeth-Ayerst. As a result, the
Company will need to raise substantial additional funds before any of the
Company's product candidates achieves regulatory approvals, if at all. The
Company intends to seek such additional funding through collaborative
arrangements and through public or private financings. There can be no
assurance that additional financing will be available, or, if available, that
such additional financing will be available on terms acceptable to the
In addition, for a period of 12 months (6 months in the case of any public
offering under the Securities Act) after the date of this Prospectus, the
Underwriter's prior written consent is required if the Company seeks to raise
additional funds through the issuance of equity. This may result in the
Company being required to raise needed funding through the issuance of debt.
If additional funds are raised by issuing debt, the Company will incur fixed
payment obligations, which could delay the time, if any, when the Company may
achieve positive cash flow. If adequate funds are not available, the Company
may be required to delay, scale back or eliminate one or more of its principal
product candidates or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to
certain of its technologies, product candidates or products that the Company
would not otherwise relinquish. See "Use of Proceeds" and "Underwriting."
Management's Broad Discretion in Application of Proceeds
The Company intends to use approximately $1,000,000 (excluding accrued
interest), or 7.3%, of the net proceeds of the Minimum Offering (5.9% of the
net proceeds of the Maximum Offering) to repay outstanding indebtedness and
the balance for the other purposes described under "Use of Proceeds." Although
the Company's current estimate as to the amount of such net proceeds that will
be used for each such other purpose is set forth under "Use of Proceeds," the
Company reserves the right to change the amount of such net proceeds
that will be used for any purpose to the extent that management determines
that such change is advisable. Accordingly, management of the Company will
have broad discretion as to the application of the net proceeds of the
Offering. See "Use of Proceeds" and "Plan of Operation."
Technologies Subject to Licenses
As a licensee of certain research technologies, the Company has a license
agreement with Rockefeller pursuant to which the Company has acquired
exclusive, worldwide rights to develop and commercialize such research
technologies. Certain scientists at Oregon State and Emory are co-inventors of
certain of such technologies and, therefore, Oregon State and Emory joined in
Rockefeller's license grant to the Company. The agreement with Rockefeller
generally requires the Company to pay royalties on sales of products developed
from the licensed technologies and fees on revenues from sublicensees, where
applicable, and the Company is responsible for certain milestone payments, of
up to $225,000 per product, for each product developed from the licensed
technologies. The Company is also responsible for certain costs incurred by
Rockefeller for filing and prosecuting patent applications. At March 31, 1997,
amounts payable to Rockefeller for patent application costs were $66,437.
Should the Company default on its obligations to Rockefeller under the license
agreement, its license would terminate, which would have a material adverse
effect on the Company's operations and prospects. See "Business--Collaborative
Research and Licenses."
No Assurance of Successful Development of Product Candidates
There can be no assurance that the Company's product candidates will be
successfully developed into drugs that can be administered to humans or that
any such drugs or therapies will prove to be safe and effective in clinical
trials or cost-effective to manufacture. Further, any product candidates
developed by the Company may prove to have adverse side effects.
Dependence on Others; Collaborations
The Company's strategy for the research, development and commercialization
of its product candidates will require the Company to enter into various
arrangements with corporate and academic collaborators, licensors, licensees
and others, and may therefore be dependent upon the subsequent success of
these outside parties in performing their responsibilities. The Company
currently has a license and research agreement with Rockefeller, Emory and
Oregon State; research support agreements with Emory, Oregon State and SUNY
Buffalo; a consulting agreement with Dr. Vincent Fischetti; a clinical trials
agreement with the National Institutes of Health, a collaborative research and
license agreement with Wyeth-Ayerst; and a collaborative research agreement
with Chiron. In addition, the Company has entered into a letter of intent with
MedImmune regarding a technology transfer agreement pursuant to which the
targets, products, screens and services. There can be no assurance, however,
that the Company will execute a final agreement with MedImmune on the terms
described herein or at all. In addition, there can be no assurance that the
Company will be able to establish other collaborative arrangements or license
agreements that the Company deems necessary or acceptable to develop and
commercialize its product candidates or that such collaborative arrangements
or license agreements will be successful. Moreover, certain of the
collaborative arrangements that the Company may enter into in the future may
place responsibility for pre-clinical testing and clinical trials and for
preparing and submitting applications for regulatory approval for product
candidates on the collaborative partner. Should a collaborative partner fail
to develop or commercialize successfully any product candidate to which the
Company has rights, the Company's business may be adversely affected. See
"Business--Collaborative Research and Licenses" and "Certain Transactions."
Lack of Manufacturing, Marketing or Sales Capabilities
The Company has not invested in the development of commercial manufacturing,
marketing, distribution or sales capabilities for any of its product
candidates. The Company currently lacks the facilities to manufacture its
product candidates in accordance with current Good Manufacturing Practices as
prescribed by the FDA or to produce an adequate supply of compounds to meet
future requirements for clinical trials. If the Company is unable to develop
or contract for manufacturing capabilities on acceptable terms, the Company's
ability to
conduct pre-clinical and human clinical testing will be adversely affected,
resulting in delays in the submission of products for regulatory approval and
in the initiation of new development programs, which in turn could materially
impair the Company's competitive position and the possibility of achieving
profitability.
The Company will need to hire additional personnel skilled in clinical
testing, regulatory compliance, marketing and sales as it develops products
with commercial potential. There can be no assurance that the Company will be
able to hire such personnel, or establish third-party relationships to provide
any or all of these resources.
Dependence on Qualified Personnel and Consultants; Need for Additional
David de Weese is the President and Chief Executive Officer of the Company.
Dr. Vincent Fischetti is the principal founding scientist and Chief Scientific
Advisor of the Company. Dr. Dennis Hruby is also a scientific founder and the
Company's Vice President of Research. Drs. Hruby and Fischetti, along with Mr.
de Weese, have primary responsibility for directing the Company's research
efforts. Mr. de Weese, along with, Dr. Joshua Schein and Judson Cooper,
Executive Vice Presidents of the Company, have primary responsibility for
directing the Company's strategic efforts. The Company's success is highly
dependent on these individuals. The loss of the services of either Dr. Hruby
or Dr. Fischetti or other personnel or consultants could have a material
adverse effect on the Company's operations.
Drs. Hruby and Fischetti, pursuant to each of their contracts with their
respective universities, may spend only 20% of their time on non-university
projects; however, all of the research being conducted by each of them is
research sponsored by the Company and the Company has exclusive license rights
to all inventions and discoveries resulting from this research. See
"Business--Collaborative Research and Licenses."
Mr. de Weese is the only full-time executive officer of the Company. Dr.
Schein and Mr. Cooper, are also officers of Virologix Corporation and Callisto
Pharmaceuticals, Inc., privately held, development stage, pharmaceutical
companies, and devote substantial amounts of their time to the three companies
on a substantially equal basis.
Although the Company has entered into employment agreements with each of its
key management and scientific employees and consulting agreements with its key
outside scientific advisors, any of such persons may terminate his or her
employment or consulting arrangement with the Company at any time on short
notice. Accordingly, there can be no assurance that these employees and
consultants will remain associated with the Company. The loss of the services
of any of the Company's key personnel or consultants may impede the Company's
ability to commercialize its product candidates. The Company maintains and is
the named insured under a $1,000,000 life insurance policy on Dr. Fischetti
and has an application pending for a $1,000,000 policy on Mr. de Weese. This
policy is conditionally in force pending final underwriting, which is expected
to be completed by the end of July 1997. There can be no assurance that such
insurance can be maintained or will be adequate to meet the Company's future
The Company's planned activities may require additional expertise in areas
such as pre-clinical testing, clinical trial management, regulatory affairs,
manufacturing and marketing. Such activities may require the addition of new
personnel and the development of additional expertise by existing management
personnel. The Company faces intense competition for such personnel from other
companies, academic institutions, government entities and other organizations,
and there can be no assurance that the Company will be successful in hiring or
retaining qualified personnel. The inability of the Company to develop
additional expertise or to hire and retain such qualified personnel could have
a material adverse effect on the Company's operations.
Lack of Research and Development Facilities
The Company does not maintain its own research and development facilities
and does not intend to construct such facilities in the future. The Company
sponsors research and development activities at Dr. Fischetti's laboratory at
Rockefeller and Dr. Hruby's laboratory at Oregon State, and at Emory and SUNY
Buffalo. The Company's research is conducted by its employees and employees of
the aforementioned universities. The Company's research and development
efforts, therefore, are dependent upon its continued
relationships with Dr. Fischetti, Dr. Hruby, Rockefeller, Oregon State, Emory
and SUNY Buffalo. In the absence of such relationships, the Company would need
to develop a new research and development arrangement with a third party, the
availability of which there can be no assurance. Any delay in finding suitable
research and development facilities would postpone commercialization of the
Company's products. See "Business--Human Resources and Facilities."
Control by Management and Existing Stockholders
Upon consummation of the Offering, the Company's management and existing
holders of the Company's stock will, in the aggregate, own beneficially shares
having approximately 51% in the Minimum Offering and 46% in the Maximum
Offering of the total voting power of the Company's outstanding stock (without
giving effect to the exercise of the Underwriter's Warrants, options granted
under the Plan, the de Weese Warrants, the Fischetti Warrants, the
Directors/Advisors Warrants or the Bridge Warrants). As a result, these
stockholders, acting together, would be able to effectively control most
matters requiring approval by the stockholders of the Company, including the
election of all of the directors. See "Principal Stockholders."
Potential Conflicts of Interest
Certain persons who are principal stockholders and executive officers of the
Company are involved in various relationships that could result in conflicts
between their interests and those of other stockholders of the Company. Dr.
Schein and Mr. Cooper have employment arrangements with two other operating
companies, which could force one or both of them to compromise or divert their
business attention from the concerns of the Company from time to time.
Additionally, Dr. Schein and Mr. Cooper are principals of CSO Ventures LLC
("CSO"), a privately held limited liability company which has a consulting
agreement with the Company. Under the terms of Dr. Schein and Mr. Cooper's
employment agreements with the Company, they are each entitled to the payment
of certain fees in connection with any sale of the Company. This provision,
together with lower prices paid by them for their shares of Common Stock
relative to the prices paid by investors in this Offering, could result in a
situation in which the purchase price paid in connection with any sale of the
Company represents a gain on their investment in the Company while
simultaneously representing a loss to investors in this Offering. See "Certain
Transactions" and "Management."
INDUSTRY RISKS
No Assurance of Regulatory Approval; Need for Extensive Clinical Trials
The production and marketing of the Company's principal product candidates,
as well as certain of its research and development activities, are subject to
regulation by governmental agencies in the United States and other countries.
Any drug developed by the Company will be subject to a rigorous approval
process pursuant to regulations administered by the FDA, comparable agencies
in other countries and, to a lesser extent, state regulatory authorities. The
approval process for any one of the Company's product candidates is likely to
take several years or more depending upon the type, complexity and novelty of
the pharmaceutical product and will involve significant expenditures by the
Company for which additional financing will be required.
The cost to the Company of conducting clinical trials for any potential
product can vary dramatically based on a number of factors, including the
order and timing of clinical indications pursued and the extent of development
and financial support, if any, from collaborators. Because of the intense
competition in the biopharmaceutical market and concern over the safety of
participating in clinical trials, the Company may have difficulty obtaining
sufficient patient populations or the support of clinicians to conduct its
clinical trials as planned and may have to expend substantial additional funds
to obtain access to such resources, or delay or modify its plans
significantly. There can be no assurance that the Company will be able to
obtain necessary clearances for clinical trials or approvals for the
manufacturing or marketing of any of its product candidates, that the Company
will have sufficient resources to complete the required regulatory review
process or that the Company can survive the inability to obtain, or delays in
obtaining, such approvals.
Even if regulatory approvals are obtained, they may provide for significant
limitations on the indicated uses for which a product may be marketed. As with
all investigational products, additional government regulations may be
promulgated requiring that additional research data be submitted that could
delay marketing approval of any of the Company's product candidates. The
subsequent discovery of previously unknown complications or the failure to
comply with applicable regulatory requirements may result in restrictions on
the marketing, or the withdrawal, of products or possible civil or criminal
liabilities. In addition, the Company cannot predict whether any adverse
government regulation might arise from future administrative actions. See
"Business--Government Regulation."
As part of the regulatory review process, the Company must sponsor and file,
or obtain through others, an IND for each of its product candidates before the
Company will be able to initiate the clinical trials necessary to generate
safety and efficacy data for inclusion in an application for FDA marketing
approval. The Company has not filed any INDs to date. Although the Company
anticipates filing its first IND in 1997, the Company cannot predict with
certainty when it might first submit any application for any product
candidates for FDA or other regulatory review. There can be no assurance that
clinical data from studies performed by the Company or others will be
acceptable to the FDA or other regulatory agencies in support of any
applications that may be submitted for regulatory approval and the FDA may,
among other things, require the Company to collect additional data and conduct
additional clinical studies prior to acceptance of any such applications.
Uncertainty Regarding Patents and Proprietary Information
The Company's ability to compete effectively will depend, in part, on its
success in protecting its proprietary technology in the United States and
abroad. The patent positions of biopharmaceutical firms generally are highly
uncertain and involve complex legal and factual questions. No consistent
policy has emerged regarding the breadth of claims covered in
biopharmaceutical patents. As its research projects develop, the Company
intends to file additional patent applications with the United States Patent
and Trademark Office (the "PTO") and with corresponding foreign patent
authorities. There can be no assurance that the PTO or any foreign
jurisdictions will grant the Company's patent applications or that the Company
will obtain any patents or other protection for which application for patent
protection has been made. No assurance can be given that patents issued to or
licensed by the Company will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide any competitive advantage.
The Company will also rely on trade secrets, know-how and continuing
technological advancement in seeking to achieve a competitive position. No
assurance can be given that the Company will be able to protect its rights to
its unpatented trade secrets or that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets.
In addition to protecting its proprietary technology and trade secrets, the
Company may be required to obtain additional licenses to patents or other
proprietary rights from third parties. No assurance can be given that any
additional licenses required under any patents or proprietary rights would be
made available on acceptable terms, if at all. If the Company does not obtain
required licenses, it could encounter delays in product development while it
attempts to design around blocking patents, or it could find that the
development, manufacture or sale of products requiring such licenses could be
foreclosed.
The Company could also incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those granted
by third parties. The PTO could institute interference proceedings against the
Company in connection with one or more of the Company's patents or patent
applications, and such proceedings could result in an adverse decision as to
priority of invention. The PTO or others could also institute reexamination
proceedings with the PTO against the Company in connection with one or more of
the Company's patents or patent applications and such proceedings could result
in an adverse decision as to the validity or scope of any patents that the
Company may obtain or have the right to use. See "Business--Patents and
Proprietary Rights."
Technological Change; Competition and Market Risk
The biopharmaceutical industry is characterized by rapid and significant
technological change. The Company's success will depend on its ability to
develop and apply its technologies in the design and development of its
product candidates and to establish and maintain a market for its product
candidates. There also are many companies, both public and private, including
major pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions engaged in developing
pharmaceutical and biotechnology products. Many of these companies have
substantially greater financial, technical, research and development, and
human resources than the Company. Competitors may develop products or other
technologies that are more effective than any that are being developed by the
Company or may obtain FDA approval for products more rapidly than the Company.
If the Company commences commercial sales of products, it still must compete
in the manufacturing and marketing of such products, areas in which the
Company has no experience. Many of these companies also have manufacturing
facilities and established marketing capabilities that would enable such
companies to market competing products through existing channels of
distribution. See "Business--Competition."
Uncertainty of Pharmaceutical Pricing; Healthcare and Related Matters
The levels of revenues and profitability of pharmaceutical companies may be
affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of healthcare through various means. For example,
in certain foreign markets, pricing of prescription pharmaceuticals is subject
to governmental control. In the United States, there have been, and the
Company expects that there will continue to be, a number of federal and state
proposals to implement similar government control. It is uncertain what
legislative proposals will be adopted or what actions federal, state or
private payors for healthcare goods and services may take in response to any
healthcare reform or legislation.
The Company cannot predict the effect that healthcare reforms may have on
its business, and there can be no assurance that any such reforms will not
have a material adverse effect on the Company. Further, to the extent that
such proposals or reforms have a material adverse effect on the business,
financial condition and profitability of other pharmaceutical companies that
are prospective collaborators for certain of the Company's potential products,
the Company's ability to commercialize its product candidates may be adversely
affected. In addition, in both the United States and elsewhere, sales of
prescription medical products are dependent in part on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. Third party payors can indirectly affect the pricing
or the relative attractiveness of the Company's product candidates by
regulating the maximum amount of reimbursement that they will provide for the
Company's product candidates or by denying reimbursement. There can be no
assurance that, if and when marketed, the Company's product candidates will be
considered cost-effective by third party payors, that reimbursement will be
available or, if available, that such third party payors' reimbursement
policies will not adversely affect the Company's ability to sell its product
candidates on a profitable basis. Limitations on, or failure to obtain,
reimbursement for use of the Company's product candidates and changes in
government and private third party payors' policies toward reimbursement could
have a material adverse effect on the Company's ability to market its product
Potential Product Liability and Availability of Insurance
The Company's business exposes it to potential liability risks that are
inherent in the testing, manufacturing and marketing of pharmaceutical
products. The use of the Company's product candidates in clinical trials may
expose the Company to product liability claims and possible adverse publicity.
These risks will expand with respect to the Company's product candidates, if
any, that receive regulatory approval for commercial sale. Product liability
insurance for the biotechnology industry is generally expensive, if available
at all. The Company does not have product liability insurance but intends to
obtain such coverage if and when its product candidates are tested in clinical
trials. There can be no assurance, however, that the Company will be able to
insurance coverage at acceptable costs or in a sufficient amount, if at all,
or that a product liability claim would not adversely affect the Company's
business, operating results or financial condition.
OFFERING/INVESTMENT RISKS
No Prior Public Market; Possible Volatility of Stock Price
Prior to this Offering, there has been no public market for the Company's
Common Stock. Accordingly, there can be no assurance that an active trading
market will develop or be sustained subsequent to this Offering. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the Underwriter and may not be indicative of the
prices that may prevail in the public market. The Company has applied to have
the Common Stock quoted on Nasdaq, but there is no assurance that the
Company's future operating results will enable it to remain eligible for
quotation on Nasdaq. If the Company is unable to satisfy such listing criteria
in the future, the Common Stock may be delisted from trading on Nasdaq and
consequently an investor could find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Common Stock. The stock
market generally, and the biotechnology sector in particular, have experienced
and are likely in the future to experience significant price and volume
fluctuations which could adversely affect the market price of the Common Stock
without regard to the significant fluctuations in response to variations in
quarterly operating results, shortfalls in sales or earnings below analyst
estimates, stock market conditions and other factors. There can be no
assurance that the market price of the Common Stock will not experience
significant fluctuations or decline below the initial public offering price.
Underwriter's First Initial Public Offering
The Underwriter has not previously acted as an underwriter in connection
with an initial public offering, though it has acted as a syndicate member,
sole placement agent, co-placement agent, selected dealer or sole
participating broker in more than 18 public and private offerings. As part of
its due diligence function, the Underwriter makes such inquiries of management
as it deems appropriate, reviews the accuracy of the Prospectus and
establishes, with the qualified independent underwriter, the initial public
offering price for the Common Stock. The Underwriter's limited experience may
adversely affect the price and liquidity of the Common Stock. Prospective
purchasers of shares of Common Stock offered hereby should consider the
Underwriter's limited experience in evaluating an investment in the Common
Stock. See "Underwriting."
No Market Making Activity by Underwriter
The Underwriter has indicated that it does not intend to act as a market
maker in the Common Stock, which may adversely affect the price and liquidity
of the Common Stock.
Shares Eligible for Future Sale
Upon completion of this Offering, the Company will have outstanding a
minimum of 6,617,182 shares of Common Stock and a maximum of 7,367,182 shares
of Common Stock, without giving effect to (a) shares of Common Stock issuable
upon exercise of (i) the Underwriter's Warrants, (ii) options granted under
the Plan, (iii) the de Weese Warrants, (iv) the Fischetti Warrants, (v) the
Directors/Advisors Warrants or (vi) the Bridge Warrants or (b) the MedImmune
Shares. (There can be no assurance that the Company will enter into a final
agreement with MedImmune on the terms described herein or at all. See "Risk
Factors--Dependence on Others; Collaborations.") Of such outstanding shares of
Common Stock, all the shares to be sold by the Company in this Offering will
be freely tradeable without restriction or further registration under the Act,
except for any shares held by "affiliates" of the Company within the meaning
of the Act which shares will be subject to the resale limitations of Rule 144
promulgated under the Act.
The remaining 3,367,182 shares (the "Restricted Shares") were issued by the
Company in private transactions in reliance upon one or more exemptions
contained in the Act. 1,288,012 of the Restricted Shares were issued in
connection with two private placement transactions completed in March and
September 1996,
respectively (the "Private Shares") and 2,079,170 of the Restricted Shares
were issued to the founders of the Company in December 1995 (the "Founders'
Shares"). The Restricted Shares are deemed to be "restricted securities"
within the meaning of Rule 144 promulgated pursuant to the Act and may be
publicly sold only if registered under the Act or sold pursuant to exemptions
therefrom.
Because the Founders' Shares and 1,038,008 of the Private Shares acquired in
the March 1996 private placement will have been held for more than one year as
of the date of this Prospectus, such shares will be eligible for public sale
in accordance with the requirements of Rule 144, as amended. In addition, the
remaining 250,004 of the Private Shares will be eligible for public sale in
September 1997. However, certain holders of the Private Shares and the holders
of the Founders' Shares have agreed with the Underwriter not to sell or
otherwise dispose of such shares for a period of six months and 24 months,
respectively, after the date of the consummation of the Offering. See "Shares
Eligible for Future Sale" and "Underwriting."
Dilution; Equity Securities Sold Previously at Below Offering Price
This Offering involves immediate dilution of $2.94 per share if the minimum
number of shares is sold and $2.70 if the maximum number of shares is sold
between the adjusted net tangible book value per share after the Offering and
the per share public offering price of $5.00 attributable to the Common Stock.
Investors in the Offering will contribute 88% if the minimum number of shares
is sold and 90% if the maximum number of shares is sold, of the aggregate
consideration received for the aggregate number of shares of Common Stock
outstanding after the Offering, but will only own 49% if the minimum number of
shares is sold and 54% if the maximum number of shares is sold, of the
aggregate number of shares of Common Stock outstanding after the Offering. See
"Dilution."
Lack of Dividends
The Company has not paid any dividends and does not contemplate paying
dividends in the foreseeable future. It is currently anticipated that
earnings, if any, will be retained by the Company to finance the development
and expansion of the Company's business. See "Dividend Policy."
Antitakeover Effect of Certificate of Incorporation
The Company's Certificate of Incorporation authorizes the Board of Directors
to determine the rights, preferences, privileges and restrictions of unissued
series of preferred stock, $.0001 par value per share (the "Preferred Stock"),
and to fix the number of shares of any series of Preferred Stock and the
designation of any such series, without any vote or action by the Company's
stockholders. Thus, the Board of Directors can authorize and issue up to
10,000,000 shares of Preferred Stock with voting or conversion rights that
could adversely affect the voting or other rights of holders of the Company's
Common Stock. In addition, the issuance of Preferred Stock may have the effect
of delaying, deferring or preventing a change of control of the Company, since
the terms of the Preferred Stock that might be issued could potentially
prohibit the Company's consummation of any merger, reorganization, sale of
substantially all of its assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of
the Common Stock. The Company, however, has no intention of adopting a
stockholder rights plan ("poison pill") in the foreseeable future. See
"Description of Securities--Preferred Stock."
Best-Efforts Offering; Escrow of Investors' Funds
This Offering is being made on a "best-efforts" basis. There can be no
assurance that any or all of the shares of Common Stock will be sold. The
Underwriter is offering the shares of Common Stock for a period of 30 days
expiring on [September 1, 1997], which may be extended up to an additional 30
days to [October 1, 1997] by mutual agreement between the Company and the
Underwriter. Pending the sale of a minimum of 3,250,000 shares and a maximum
of 4,000,000 shares offered hereby, all proceeds will be held in an escrow
account at United States Trust Company of New York. No commitment exists by
anyone to purchase all or any
of the shares of Common Stock offered hereby. Consequently, subscribers' funds
may be held in escrow for as long as 60 days and returned without interest or
deduction in the event a minimum of 3,250,000 shares is not sold within the
offering period. Investors, therefore, will not have the use of any
subscription funds during the subscription period. See "Underwriting."
Possible Delisting of Securities from Nasdaq
Following the Offering, the Company's Common Stock will meet the current
Nasdaq listing requirements and is expected to be initially included on
Nasdaq. There can be no assurance, however, that the Company will meet the
criteria for continued listing. Continued inclusion on Nasdaq generally
requires that (i) the Company maintain at least $2,000,000 in total assets and
$1,000,000 in capital and surplus, (ii) the minimum bid price of the Common
Stock be $1.00 per share, (iii) there be at least 100,000 shares in the public
float valued at $200,000 or more, (iv) the Common Stock have at least two
active market makers and (v) the Common Stock be held by at least 300 holders.
The Nasdaq Stock Market has recently announced proposals which would increase
the listing standards for inclusion on Nasdaq. If the listing standards are
increased, the Company may be unable to satisfy the listing requirements for
inclusion on Nasdaq.
If the Company is unable to satisfy Nasdaq's listing standards, its
securities may be delisted from Nasdaq. In such event, trading, if any, in the
Common Stock would thereafter be conducted in the over-the-counter market on
the so-called "pink sheets" or the NASD's "Electronic Bulletin Board."
Consequently, the liquidity of the Company's securities could be impaired, not
only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, reduction in security analysts'
and the news media's coverage of the Company and lower prices for the
Company's securities than might otherwise be attained.
Risks of Low-Priced Stock; "Penny Stock" Restrictions
If the Company's securities were delisted from Nasdaq (See "--Possible
Delisting of Securities from Nasdaq"), they could become subject to Rule 15g-9
under the Exchange Act, which imposes additional sales practice requirements
on broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worths
in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000
together with their spouses). For transactions covered by this rule, a broker-
dealer must make a special suitability determination for the purchaser and
have received the purchaser's written consent to the transaction prior to
sale. Consequently, such rule may adversely affect the ability of broker-
dealers to sell the Company's securities and may adversely affect the ability
of purchasers in the Offering to sell in the secondary market any of the
securities acquired hereby.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require delivery, prior to any transaction in a penny stock,
of a disclosure schedule prepared by the Commission relating to the penny
stock market. Disclosure is also required to be made about commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's securities if such securities are listed on Nasdaq and have certain
price and volume information provided on a current and continuing basis or
meet certain minimum net tangible assets or average revenue criteria. There
can be no assurance that the Company's securities will qualify for exemption
from these restrictions. In any event, even if the Company's securities were
exempt from such restrictions, it would remain subject to Section 15(b)(6) of
the Exchange Act, which gives the Commission the authority to prohibit any
person that is engaged in unlawful conduct while participating in a
distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's
securities were subject to the rules on penny stocks, the market liquidity for
the Company's securities could be severely adversely affected.
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $13,787,500 in the Minimum Offering and
$17,050,000 in the Maximum Offering after deducting the underwriting discount
and estimated offering expenses payable by the Company and assuming an initial
public offering price of $5.00 per share.
The Company expects to use the net proceeds as follows:
MINIMUM OFFERING              MAXIMUM OFFERING
----------------------------- -----------------------------
APPROXIMATE                   APPROXIMATE
APPROXIMATE    PERCENTAGE     APPROXIMATE    PERCENTAGE
APPLICATION OF PROCEEDS  DOLLAR AMOUNT OF NET PROCEEDS DOLLAR AMOUNT OF NET PROCEEDS
- -----------------------  ------------- --------------- ------------- ---------------
development............  $ 4,500,000        32.6%      $ 4,500,000        26.4%
administrative.........    4,350,000        31.6         4,350,000        25.5
Repayment of Bridge
Notes and accrued
interest thereon(1)....    1,008,333         7.3         1,008,333         5.9
Working capital.........    3,929,167        28.5         7,191,667        42.2
-----------       -----       -----------       -----
TOTAL.................  $13,787,500       100.0%      $17,050,000       100.0%
===========       =====       ===========       =====
(1) Represents the repayment of the outstanding principal amount of $1,000,000
plus estimated accrued interest thereon at the rate of 10% per annum as of
March 31, 1997, on indebtedness incurred in the Bridge Financing. The
proceeds of the Bridge Financing, in the amount of $1,000,000, were used
for research and development, working capital and other general corporate
purposes.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations, that the proceeds of this Offering will be
sufficient to satisfy the Company's contemplated cash requirements for at
least 24 months if the minimum number of shares is sold and 30 months if the
maximum number of shares is sold, following the consummation of the Offering.
In the event the Company's plans change or its assumptions change or prove to
be inaccurate or the proceeds of the Offering prove to be insufficient to fund
operations (due to unanticipated expenses, delays, problems or otherwise), the
Company could be required to seek additional financing sooner than currently
anticipated. The Company has no current arrangements with respect to, or
sources of, additional financing, apart from research payments and potential
milestone payments from Wyeth-Ayerst and there can be no assurance that
additional financing will be available to the Company when needed on
commercially reasonable terms or at all. Any inability to obtain additional
financing when needed would have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail or cease its
Until required for operations, the Company's policy is to invest its cash
reserves in bank deposits, certificates of deposit, commercial paper,
corporate notes, U.S. government instruments and other investment-grade
quality instruments.
The following table sets forth as of March 31, 1997 (i) the actual
capitalization of the Company; and (ii) the pro forma capitalization of the
Company as adjusted to give effect to the receipt and anticipated use of the
estimated net proceeds of this Offering. This table should be read in
conjunction with the Company's Financial Statements and Notes thereto,
"Selected Financial Data" and "Plan of Operation" included elsewhere in this
Prospectus.
AS ADJUSTED
FOR MINIMUM  AS ADJUSTED
OFFERING(1)  FOR MAXIMUM
HISTORICAL                OFFERING(2)
-----------  -----------  -----------
Bridge Notes(3)......................... $   889,167          --           --
Preferred Stock ($0.0001 par value,
10,000,000 shares authorized, none
issued and outstanding...............         --           --           --
Common Stock ($0.0001 par value,
25,000,000 shares authorized,
3,367,182 shares issued and
outstanding; 6,617,182 and 7,367,182
shares issued and outstanding as
adjusted, respectively(4)(5)......... $       337  $       662  $       737
Additional paid-in capital............   2,801,819   16,588,994   19,851,419
Accumulated deficit(6)................  (2,819,949)  (2,930,782)  (2,930,782)
Total stockholders' equity (deficit)..     (17,793)  13,658,874   16,921,374
Total capitalization.................... $   871,374  $13,658,874  $16,921,374
===========  ===========  ===========
(1) As adjusted to reflect the sale of 3,250,000 shares of Common Stock
offered hereby in the Minimum Offering. See "Use of Proceeds."
offered hereby in the Maximum Offering. See "Use of Proceeds."
(3) Represents principal amount of $1,000,000, net of unamortized debt
discount of $110,833 as of March 31, 1997.
(4) Assumes (i) no exercise of the Underwriter's Warrants; (ii) no exercise of
options granted under the Plan; (iii) no exercise of the de Weese
Warrants; (iv) no exercise of the Fischetti Warrants; (v) no exercise of
the Directors/Advisors Warrants; and (vi) no exercise of the Bridge
Warrants. See "Plan of Operation--Bridge Financing," "Management--1996
Incentive and Non-Qualified Stock Option Plan" and "--Employment
Agreements," "Description of Securities," "Underwriting" and "Certain
Transactions."
(6) As adjusted to give effect to the recognition of the unamortized portion
of debt discount associated with the Bridge Financing as an expense.
As of March 31, 1997, the Company had a negative net tangible book value
equal to ($181,282). See "Selected Financial Data." After giving effect to the
sale of 3,250,000 shares of Common Stock offered in the Minimum Offering
(4,000,000 shares of Common Stock offered in the Maximum Offering) by the
Company pursuant to this Prospectus at an assumed initial offering price per
share of $5.00 per share, net of underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company, and application of
a portion of the estimated net proceeds to repay the Bridge Notes as set forth
under "Use of Proceeds," the pro forma net tangible book value at such date
would have been $13,658,874 ($16,921,374 in the Maximum Offering) or $2.06 per
share ($2.30 per share in the Maximum Offering) to the existing stockholders
and an immediate dilution of $2.94 per share ($2.70 per share in the Maximum
Offering) or 59% (54% in the Maximum Offering) to purchasers of Common Stock
offered hereby ("New Investors"). If the initial public offering price is
higher or lower, the dilution to New Investors will be, respectively, greater
or less. The following tables illustrate the dilution per share:
MINIMUM  MAXIMUM
OFFERING OFFERING
-------- --------
Assumed public offering price(1)..........................   $5.00    $5.00
Net tangible book value per share at March 31, 1997(2)..   $(.05)   $(.05)
Increase per share attributable to New Investors........    2.11     2.35
-----    -----
Pro forma net tangible book value per share after the
Offering(3)..............................................   $2.06    $2.30
Dilution per share to New Investors.......................   $2.94    $2.70
=====    =====
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(2) Net tangible book value per share represents the Company's total tangible
assets less its total liabilities divided by the number of shares of
Common Stock outstanding.
The following tables set forth, with respect to existing stockholders and
New Investors, a comparison of the number of shares of Common Stock acquired
from the Company, the percentage ownership of such shares, the total
consideration paid and the average price per share.
MINIMUM OFFERING
SHARES PURCHASED      TOTAL CONSIDERATION PAID
----------------- ---------------------------------
NUMBER   PERCENT   AMOUNT    PERCENT   PER SHARE
--------- ------- ----------- ------- -------------
Officers, Directors,
Promoters and
Affiliates............... 2,212,504  33.4%  $   201,248   1.1%      $0.09
Unaffiliated Existing
Stockholders............. 1,154,678  17.4%    2,107,000  11.4%       1.82
New Investors............. 3,250,000  49.2%   16,250,000  87.5%       5.00
--------- ------  ----------- ------
Total................... 6,617,182 100.0%  $18,558,248 100.0%      $2.80
========= ======  =========== ======      =====
MAXIMUM OFFERING
Stockholders............. 1,154,678  15.7%    2,107,000   9.4%       1.82
The information contained in the above table does not give effect to the
exercise of (i) the Underwriter's Warrants, (ii) options granted and
outstanding under the Plan to purchase 60,001 shares of Common Stock at
exercise prices ranging from $1.50 to $5.00 per share, (iii) the de Weese
Warrants, (iv) the Fischetti Warrants, (v) the Directors/Advisors Warrants or
(vi) the Bridge Warrants. Exercise of such options and/or warrants would
result in further dilution to New Investors. If all warrants and options
eligible for exercise at March 31, 1997 (50,001 options and 265,254 warrants)
were exercised, per share dilution to the New Investors would be $2.93 ($2.71
in the Maximum Offering). The information in the above table also does not
include the MedImmune Shares. There can be no assurance that the Company will
enter into a final agreement with MedImmune on the terms described herein or
at all. See "Risk Factors--Dependence on Others; Collaboration."
The Company currently anticipates that it will retain any future earnings
for use in its business and does not anticipate paying any cash dividends in
the foreseeable future. The payment of any future dividends will be at the
discretion of the Board of Directors and will depend, among other things, upon
the Company's future earnings, operations, capital requirements and financial
condition, general business conditions and contractual restrictions on payment
of dividends, if any.
The following selected financial data as of December 31, 1996 and 1995 and
for each of the periods then ended shown below have been derived from the
Company's audited financial statements. The balance sheet data as of March 31,
1997 and the statement of operations data for the three month periods ended
March 31, 1997 and 1996 have been derived from unaudited financial statements.
In the opinion of management, the unaudited financial statements include all
material adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations for the periods presented. This data should be read in conjunction
with the "Plan of Operation" and with the Company's Financial Statements and
the Notes thereto included elsewhere in this Prospectus.
DECEMBER 28,               DECEMBER 28,
1995 (DATE                 1995 (DATE                           DECEMBER 28,
OF                         OF                                1995 (DATE
INCEPTION)                 INCEPTION)      THREE       THREE         OF
TO       YEAR ENDED        TO         MONTHS      MONTHS     INCEPTION)
DECEMBER 31, DECEMBER 31,  DECEMBER 31,  ENDED MARCH ENDED MARCH TO MARCH 31,
1995         1996          1996       31, 1996    31, 1997       1997
------------ ------------  ------------  ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
administrative.......   $ 1,000    $   787,817   $   788,817    $ 257,635   $ 300,962  $ 1,089,779
development..........       --         662,205       662,205       98,169     203,959      866,164
fees.................       --         452,999       452,999      258,896      15,462      468,461
compensation.........       --         367,461       367,461          --          --       367,461
-------    -----------   -----------    ---------   ---------  -----------
expenses...........     1,000      2,270,482     2,271,482      614,700     520,383    2,791,865
income/(expense).......       --           2,306         2,306          --      (30,390)     (28,084)
Net loss .............   $(1,000)   $(2,268,176)  $(2,269,176)   $(614,700)  $(550,773) $(2,819,949)
=======    ===========   ===========    =========   =========  ===========
share(1).............       --     $     (0.66)                 $   (0.21)  $   (0.15)
DECEMBER 31, DECEMBER 31,  MARCH 31,
1995         1996        1997
------------ ------------ -----------
BALANCE SHEET DATA:                                                 (UNAUDITED)
Working capital(deficit).................   $(7,937)     $232,050   $ (200,927)
Total assets.............................     6,937       580,918     1,118,753
Total liabilities........................     7,937       180,938     1,136,546
Stockholders' equity.....................    (1,000)      399,980       (17,793)
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Prospectus.
The Company is a development stage, biopharmaceutical company. Since its
inception in December 1995, the Company's efforts have been principally
devoted to research and development, securing patent protection and raising
capital. From inception through March 31, 1997, the Company has sustained
cumulative losses of $2,819,949, including non-cash charges in the amount of
$367,461 for stock option and warrant compensation expense. These losses have
resulted primarily from expenditures incurred in connection with research and
development, patent preparation and prosecution and general and administrative
activities. From inception through March 31, 1997, research and development
expenses amounted to $866,164, patent preparation and prosecution expenses
amounted to $468,461 and general and administrative expenses amounted to
The Company expects to continue to incur substantial research and
development costs in the future resulting from ongoing research and
development programs, manufacturing of products for use in clinical trials and
pre-clinical and clinical testing of the Company's products. The Company also
expects that general and administrative costs, including patent and regulatory
costs, necessary to support clinical trials, research and development,
manufacturing and the creation of a marketing and sales organization, if
warranted, will increase in the future. Accordingly, the Company expects to
incur increasing operating losses for the foreseeable future. There can be no
assurance that the Company will ever achieve profitable operations.
To date, the Company has not marketed, or generated revenues from the
commercialization of, any products. The Company's current product candidates
are not expected to be commercially available for several years.
General and administrative expenses from inception through March 31, 1997,
were $1,089,779, primarily due to personnel costs and associated operating
costs. The Company anticipates that general and administrative expenses will
increase substantially during the next 12 months as the Company increases its
staffing levels.
Research and development expenditures consist primarily of payments for
sponsored research, payments to its scientific consultants and the salaries of
its research staff. Research and development expenses from inception through
March 31, 1997 were $866,164. As of March 31, 1997, the Company had made
advance payments of $302,083 for research support to Rockefeller for the
period ending January 31, 1998. The Company has research support agreements
with both Emory and Oregon State pursuant to which the Company is obligated to
fund research through January 31, 1998 in the aggregate annual amount of
$183,320. The Company anticipates that its research and development expenses
will increase during the next 12 months as the Company continues to fund
research programs and pre-clinical and clinical testing for its product
candidates and technologies under development. See "--Product Research and
Development Plan."
During the year ended December 31, 1996, the Company recorded non-cash
compensation expense in the amount of $367,461 related to the issuance of
compensatory stock options and warrants to the President of the Company and
the consultant who serves as the Company's Chief Scientific Advisor. The
warrants issued to the consultant were to compensate him for his efforts in
introducing the Company to potential collaborative partners.
1996 Private Placement Transactions
In March 1996, the Company completed a private placement transaction in
which it sold 1,038,008 shares of Common Stock for an aggregate gross
consideration of $1,557,000. In September 1996, the Company completed a
private placement transaction in which it sold 250,004 shares of Common Stock
for an aggregate gross consideration of $750,000.
On February 28, 1997, the Company completed the Bridge Financing pursuant to
which the Company issued Bridge Notes in the aggregate principal amount of
$1,000,000 and Bridge Warrants to purchase an estimated 100,000 shares in
aggregate of the Company's Common Stock (the actual number of shares will be
determined by dividing one-half the principal of the Bridge Notes ($500,000)
by the actual initial offering price per share) at an exercise price equal to
the actual initial offering price per share. In the event an initial public
offering of the Common Stock is not completed prior to the maturity date of
the Bridge Notes, the holders of the Bridge Notes will receive Bridge Warrants
to purchase an aggregate of 100,000 shares of Common Stock at an exercise
price of $5.00 per share. The Bridge Notes bear interest at the rate of 10%
per annum and are due on the earlier of six months subsequent to the date of
issuance or the closing of the Offering. As of July 8, 1997 the maturity date
of Bridge Notes in the principal amount of $250,000, which had maturity dates
of July 1997 had been extended to the earlier of October 1, 1997 or completion
of the Offering. The Company is currently seeking extensions of the remaining
Bridge Notes to the earlier of October 1, 1997 or completion of the Offering.
The Bridge Warrants, which are exercisable from February 28, 1998 until
February 28, 2002, were issued to the Bridge Investors because the interest
rate on the Bridge Notes did not provide the Bridge Investors with a
sufficient rate of return given the risks associated with their investment in
the Bridge Notes. None of the Bridge Investors are affiliates of the Company.
The Company intends to use a portion of the proceeds of the Offering to repay
the Bridge Notes and the interest accrued thereon and will recognize an
expense upon completion of the Offering relating to the unamortized portion of
the debt discount associated with the Bridge Financing which amounted to
$110,833 at March 31, 1997.
Collaborative Research and License Agreement
In July 1997 the Company entered into a collaborative research and license
agreement with Wyeth-Ayerst. Under the terms of the agreement, the Company has
granted Wyeth-Ayerst an exclusive worldwide license to develop, make, use and
sell products derived from specified technologies. The agreement requires
Wyeth-Ayerst to sponsor further research by the Company for the development of
the licensed technologies for a period of two years from the effective date of
the agreement, in return for payments to the Company totaling $1,200,000. An
initial sponsored research payment in the amount of $300,000 is due to the
Company within 30 days of the execution of the agreement. The remaining
sponsored research payments are payable in equal quarterly installments over
the two years. In consideration of the license grant, the Company is entitled
to receive royalties equal to specified percentages of net sales of products
incorporating the licensed technologies. The royalty percentages increase as
certain cumulative and annual net sales amounts are attained. The Company
could receive milestone payments, up to $13,750,000 for the initial product
and up to $3,250,000 for the second product developed from a single compound
derived from the licensed technologies. The Company could also receive, under
certain circumstances, additional milestone payments, for an additional
compound, as defined in the agreement, developed from the licensed
The Company anticipates that its current resources, together with the net
proceeds of the Offering, will be sufficient to finance the Company's
currently anticipated needs for operating and capital expenditures for at
least 24 months, if the minimum number of shares is sold in the Offering and
at least 30 months if the maximum number of shares is sold, from the
consummation of this Offering. (If this Offering is not consummated until
[October 1, 1997], the Company's current resources are sufficient to fund its
operations through such date.) In addition, the Company will attempt to
generate additional working capital through a combination of collaborative
agreements, strategic alliances and equity and debt financings. However, no
assurance can be provided that additional capital will be obtained through
these sources. In addition, for a period of 12 months (6 months in the case of
any public offering under the Securities Act) after the date of this
Prospectus, the Underwriter's prior written consent is required if the Company
seeks to raise additional funds through the issuance of equity. If the Company
is not able to obtain continued financing the Company may cease operation and
purchasers of the Common Stock will, in all likelihood, lose their entire
investment. See "Underwriting."
The Company's working capital and capital requirements will depend upon
numerous factors, including progress of the Company's research and development
programs; pre-clinical and clinical testing; timing and cost of obtaining
regulatory approvals; levels of resources that the Company devotes to the
development of manufacturing and marketing capabilities; technological
advances; status of competitors; and ability of the Company to establish
collaborative arrangements with other organizations.
At March 31, 1997, the Company had $587,741 in cash and cash equivalents,
and a working capital deficit of $200,927. In accordance with the terms of the
Bridge Notes, the Company will utilize proceeds of approximately $1,000,000
upon completion of the Offering to repay the principal of, and accrued
interest through consummation of the Offering on, the Bridge Notes. See "Use
of Proceeds" and Note 9 of Notes to Financial Statements.
PRODUCT RESEARCH AND DEVELOPMENT PLAN
The Company's plan of operation for the 12 months following completion of
this Offering will consist primarily of research and development and related
activities including:
.  formulation and further pre-clinical development of the Company's
vaccine candidate for strep throat, and if successful, the initiation of
clinical trials. See "Business--The Company's Product Candidates and
Research and Discovery Programs--Mucosal Vaccines."
.  further development of the Company's anti-infectives programs aimed at
blocking the function or expression of certain bacterial surface
proteins. See "Business--The Company's Product Candidates and Research
and Discovery Programs--Anti-Infectives."
.  continuing the funding of the research on mucosal vaccine delivery
systems, mucosal vaccine candidates and novel anti-infectives currently
being conducted at Rockefeller, Oregon State, Emory and SUNY Buffalo.
See "Business--Collaborative Research and Licenses."
.  continuing the prosecution and filing of patent applications. See
"Business--Patents and Proprietary Rights."
.  hiring additional employees, including filling senior positions in the
areas of finance, product development and regulatory and clinical
affairs.
.establishing a research facility.
The actual research and development and related activities of the Company
may vary significantly from current plans depending on numerous factors,
including changes in the costs of such activities from current estimates, the
results of the Company's research and development programs, the results of
clinical studies, the timing of regulatory submissions, technological
advances, determinations as to commercial potential and the status of
competitive products. The focus and direction of the Company's operations will
also be dependent upon the establishment of collaborative arrangements with
other companies, and other factors.
discovery, development and commercialization of vaccines, antibiotics and
novel anti-infectives for serious infectious diseases. The Company's lead
vaccine candidate is for the prevention of "strep throat." The Company is
developing a technology for the mucosal delivery of its vaccines which may
allow those vaccines to activate the immune system at the mucus-lined surfaces
of the body--the mouth, the nose, the lungs and the gastrointestinal and
urogenital tracts--the sites of entry for most infectious agents. The
Company's anti-infectives programs, aimed at the increasingly serious problem
of drug resistance, are designed to block the ability of bacteria to attach to
human tissue, the first step in the infection process.
vaccine has been developed because more than 100 different serotypes of group
A streptococcus are known to causes the disease. In order to be effective, a
and the recent emergence of drug-tolerant types of group A streptococcus
create an important medical need for an effective vaccine.
development of this vaccine candidate and expects to file an IND with the FDA
in the fall of 1997.
In addition to its strep throat vaccine, the Company is also collaborating
with Chiron on research toward the development of vaccines against two
sexually transmitted diseases and is testing a vaccine to prevent periodontal
disease in a collaboration with SUNY Buffalo.
are considered attractive because such vaccines may mobilize an immune
response concentrated at the site of infection and because they may activate
both a mucosal IgA antibody response as well as a systemic (IgG and T cell)
response. The Company's mucosal vaccine delivery system utilizes commensal
bacteria (harmless bacteria that live in and on the body) that have been
genetically engineered to continually present disease-associated antigens
which stimulate an immune response at the body's mucosal surfaces thereby
preventing infection at the earliest possible stage. The Company believes that
mucosal vaccines developed using its proprietary commensal delivery technology
could provide a number of potential advantages over conventional vaccines,
including: more complete protection; fewer side effects; the potential for
single dose administration; non-injectable administration; the potential for
combination vaccine delivery; and lower cost production. The Company's mucosal
vaccine delivery technology is potentially applicable to any infectious
disease that begins at a mucosal surface.
Pharmaceutical Manufacturer's Association, the United States and worldwide
The Company's anti-infectives approaches aim to block the ability of
bacteria to attach to and colonize human tissue, thereby blocking infection at
the first stage in the infection process. By comparison, antibiotics available
today act by interfering with either the structure or the metabolism of a
bacterial cell, affecting its ability to survive and to reproduce. No
currently available antibiotics target the attachment of a bacterium to its
target tissue. By preventing attachment, the bacteria would be readily cleared
by the body's immune system.
enzyme, a selective protease, utilized by most gram-positive bacteria to
anchor certain proteins to the bacterial cell wall. These surface proteins are
the means by which certain bacteria recognize, adhere to and colonize specific
bacteria in general, including antibiotic resistant staphlyococcus and a broad
range of serious infectious diseases including meningitis and respiratory
tract infections. The Company has entered into a collaborative research and
license agreement with Wyeth-Ayerst to identify and develop protease
inhibitors as novel antibiotics.
The Company has entered into a letter of intent with MedImmune regarding a
technology transfer agreement pursuant to which the Company will acquire all
of MedImmune's rights in gram-negative antibiotic targets, products, screens
and services. The Company and MedImmune plan to collaborate in the development
of antibiotics against gram-negative pathogens. These bacteria utilize
structures called pili to adhere to target tissue, and the Company plans to
exploit the assembly and export of these essential infective structures as
novel anti-infective targets. There can be no assurance that the Company will
at all. See "Risk Factors--Dependence on Others; Collaborations."
The Company is developing proprietary protein production systems based on
its understanding of the mechanisms used by gram-positive bacteria to export
and anchor surface proteins. Methods have been developed to engineer gram-
positive bacteria to produce and secrete commercially useful proteins such as
antigens or enzymes into the culture medium in a form requiring minimal
purification. The Company believes that this technology provides a cost-
effective alternative to E. coli, yeast and mammalian cell culture systems.
Infectious diseases are the leading cause of death in the world. For most of
the twentieth century, the incidence of infectious disease has decreased
dramatically due to the use of antibiotics and the development of effective
vaccines to prevent many common diseases. In recent years, however, this trend
has reversed with the emergence of many new infectious diseases or the re-
emergence or increased incidence of known infectious diseases worldwide, a
public health issue which has become "a threat to global health and security."
There are many reasons for this emergence, including: (i) the intrusion of
humans into formerly unpopulated or isolated populations has provided exposure
to organisms previously unknown (e.g. Lyme disease, hantavirus, Ebola virus);
(ii) the spread of disease-causing organisms has increased due to the ease of
worldwide transportation; (iii) changes in human behavior, such as increased
sexual activity and intravenous drug abuse, have contributed to the spread of
diseases like human immunodeficiency virus ("HIV"), hepatitis, and chlamydia;
(iv) the
widespread use of day care facilities has exposed a larger number of children
to infectious diseases and, as a result, their families; (v) the use of
immunosuppressive drugs, particularly for cancer treatment, has rendered
susceptible an ever growing number of people subject to infectious diseases
which in otherwise healthy individuals would be benign; (vi) past complacency
of public health officials has resulted in lowered surveillance of and reduced
prevention programs for infectious diseases leading to an inability to react
quickly to newly arising infectious threats; and (vii) increased antibiotic
resistance has resulted in a major threat from organisms which were
effectively and easily treated in the past.
As a result of these and other factors, the Centers for Disease Control and
Prevention has estimated that between 1980 and 1992, in the United States, the
mortality rate due to infectious diseases rose by 58%. Alarmingly, the age
group most affected, ages 25 to 44 years, has experienced over a six-fold
increase in infectious disease-related deaths during this period. Due to this
increase, infectious diseases are now the third leading cause of death in the
United States, following only cardiovascular and cancer-related deaths. The
financial burden to the public to treat or prevent infectious diseases has
been conservatively estimated to exceed $120 billion annually. The problem of
emergent infections, combined with the need to provide quality healthcare at a
reasonable cost, have led to a reexamination of the approaches used to combat
infectious diseases.
The human immune system is a complex system of checks and balances, coupled
with an intricate network of cells and effector molecules, which has evolved
to stave off the intrusion of foreign elements into the body. To accomplish
this the body has developed a means to determine the difference between self
and non-self ("foreign"). Foreign substances include elements such as dust
particles, pollen grains, infectious agents and antigens (the surface of these
other structures generally are covered with antigens, or secrete them). Once
the determination has been made that a foreign intruder exists, the body's
defenses are triggered, beginning a cascade of events known collectively as
the immune response. The end result, in a healthy person, is the successful
clearance or elimination of the offending material. The immune response has
been divided into two arms based principally on the ultimate effector
mechanism which will fight the initial insult; these arms are known as the
humoral and cellular immune responses. The humoral immune system employs a
family of molecules circulating in the blood stream known as immunoglobulins,
or antibodies, which are secreted by immune cells called lymphocytes. In terms
of infectious diseases, these antibodies are very effective at combating
invasions by bacteria, protozoan parasites, and some viruses, as well as
specific proteins produced by these infectious agents. In contrast, a cellular
immune response, as the name implies, uses effector cells of the immune system
to generally target certain viruses and cancer cells.
A different delineation also exists within the immune system in terms of the
site of the induction and the response of the immune system. The systemic
immune system is generally regarded as that which is internal to the body,
including the antibodies in the blood stream and lymphatic system and the
cellular immune response in the tissues where foreign agents have encroached.
The other active site, and the focus of the Company's vaccine efforts, is the
mucosal immune system. This portion of the immune system is spread over the
tissues lining the cavities of the body and those involved in the secretions
which ultimately find their way to these cavities. Included in this vast
network are the linings of the oral and nasopharyngeal cavity, the respiratory
tract, the gastrointestinal tract, and the urogenital tract. There are a
number of physical barriers present which can prevent the invasion of
infectious agents into the mucosal lining. Among these physical factors are:
(i) the mucus which covers the lining of mucosal tissues; (ii) the production
of protein degrading enzymes which digest proteins either free in the mucosal
environment or attached to infectious organisms, thereby decreasing their
ability to invade the mucosal tissues; (iii) the peristaltic motion of the
walls beneath the mucosa which function in moving digested food and,
consequently, infectious agents which are present, through the digestive tract
and out of the body; (iv) the motion of the cilia lining the mucosal cavities
which carry infectious organisms through the body; and (v) the specialized
cells which line the mucosa coupled with the tight junctions between them also
provide a strong barrier to the penetration of infectious organisms into the
deeper tissues.
The specific response which occurs in the mucosal immune system begins with
the uptake of the infectious agent or antigen generally by a specialized cell
lining the mucosa called an M cell. This cell facilitates the movement of the
antigen to cells underlying the epithelial layer which can efficiently prepare
the antigen and present it to cells of the immune system. Once stimulated,
these cells can migrate to various parts of the mucosal system where they can
either produce antibodies or induce effector cells specific for the offending
(or, in the case of vaccines, immunizing) agent. Due to this migratory nature
of the immune cells of the mucosal immune system, the entire system has been
termed the common mucosal immune system. As a result of this trafficking of
immune cells, induction of a mucosal immune response at one site results in
the expression of that specific response at multiple sites within the mucosal
system; i.e. induction of an immune response in the oral cavity would lead to
an immune response there, but also in the gut. The weakness of this common
mucosal system is that generally the immune response is greater at the site of
stimulation than at distant sites within the system, a problem which the
Company hopes to circumvent using the site-specific aspects of its commensal
vaccine delivery system.
The primary effector molecule of the mucosal immune response is an antibody
known as secretory immunoglobulin A (sIgA), which is found in saliva, tears,
and other secretions of the respiratory, gastrointestinal ("GI"), and
urogenital tracts. Given that the mucosal surface covers such a large area, it
is not surprising that the sIgA produced there accounts for greater than 75%
of all the antibodies produced in the body. sIgA performs a variety of
important functions, including: (i) neutralization of viruses, toxins, and
enzymes; (ii) inhibition of adherence of microorganisms to mucosal surfaces;
(iii) immune exclusion of macromolecules and bacterial toxins; (iv)
suppression of antibody-mediated inflammatory responses at mucosal surfaces;
(v) synergism with nonspecific antibacterial factors, such as lactoferrin,
peroxidase, and lysozyme; (vi) clearance of adsorbed antigen from the
circulation; and (vii) interference with other infectious determinants. These
factors, coupled with the non-specific barriers described above, form a
formidable obstacle to invading infectious organisms.
Vaccines prevent disease by stimulating the body to produce a protective
immune response to particular disease-causing organisms, or pathogens.
Conventional vaccines consist of killed microorganisms (e.g. pertussis
vaccine), live attenuated microorganisms (e.g. polio or smallpox vaccines) or
components of microorganisms, called subunit vaccines (e.g. hepatitis B
vaccine). These types of vaccines have been successful in many cases, as
evidenced by the global eradication of smallpox through immunization. However,
conventional vaccines can have significant limitations. For example, killed
vaccines and component vaccines can have variable efficacy and may require
boosters to maintain immunity. Attenuated vaccines, while generally more
effective, can be associated with certain medical complications, such as
neurological damage, allergic reaction, bleeding and infection. There are also
a number of diseases for which conventional approaches have not been able to
evoke a protective immune response. Aside from the oral polio vaccine, all of
these vaccines are administered via the systemic route, i.e. through a needle.
The World Health Organization has recently reported that in Eastern Europe 50%
of the vaccine centers gave unsafe vaccines or used vaccines of doubtful
potency. While clearly there are many factors contributing to this problem,
one of the solutions is to alter the manner in which vaccines are delivered.
Most infectious agents enter the host's body through and initiate infection
at one of the mucosal surfaces--the mouth, the nose, the lungs or the GI or
urogenital tracts. For example, the influenza virus usually enters the body
through the mouth or nose, salmonella through the GI tract and chlamydia
through the urogenital tract. The body's mucosal surfaces present a physical
barrier to pathogens and also possess a specific local immune system, which
provides a primary line of defense against invading organisms. While
conventional vaccines are designed to produce an effective systemic (internal)
immune response, they are relatively ineffective at stimulating the mucosal
immune system. It is now well recognized in the scientific and medical
communities that the mucosal immune system represents an important target for
immunization and that vaccines designed to activate the mucosal immune system
may prevent a variety of diseases for which conventional vaccines provide only
limited protection or do not exist.
Anti-infectives and Drug Resistance
Since their introduction in the 1940s, antibiotics have been the first line
of defense against bacterial infections. Over the past few decades, however,
bacterial resistance to existing antibiotics has been increasing, rendering
some previously innocuous infections virtually untreatable. All current
classes of antibiotics function by interfering with either the structure or
the metabolism of a bacterial cell, affecting its ability to survive and to
reproduce. For example, penicillin prevents production of new bacterial cell
walls, tetracycline inhibits the synthesis of new bacterial proteins,
fluoroquinolones inhibit nucleic acid synthesis, and polymyxin B disrupts the
integrity of bacterial membranes. Within any given population of infectious
organisms, there are generally some cells which are not susceptible to the
antibiotic selected for treatment. Because this population is so small, the
host can usually remove the remainder of the resistant cells by its normal
clearance mechanisms. If, however, a population of pathogens is given the
opportunity to increase the percentage of resistant organisms within its
number, then eventually the resistant organisms will predominate. There are
several reasons for the recent emergence of antibiotic resistance in
microorganisms: (i) indiscriminate prescribing of antibiotics by physicians to
patients who do not require antibiotic treatment; (ii) non-compliance of
dosing regimens by patients leading to incomplete clearance of the infectious
agent; (iii) transfer of resistance genes from one organism to another; and
(iv) the widespread use of antibiotics in cattle, which ultimately enters the
human food chain.
Antibiotic resistance has become a problem with many medically important
bacteria, but has become particularly dangerous with respect to Mycobacterium
tuberculosis (which causes TB), Neisseria gonorrheae (gonorrhea), Pseudomonas
aeruginosa (infections in immunocompromised patients), S. aureus (hospital-
acquired and other infections), Streptococcus pneumoniae (pneumonia, otitis
media, meningitis), and Enterococcus spp. (bacteremia and GI tract
infections). While new generations of antibiotics have been developed with
broad spectrum activity, only one new class of antibiotics has been developed
in the last two decades. The need for new classes of antibiotics and new
targets for their action has become crucial to the health of the nation and
the world.
THE COMPANY'S TECHNOLOGIES
Vaccine Technologies: Mucosal Immunity and Vaccine Delivery
Using proprietary technology licensed from Rockefeller, the Company is
developing certain commensal bacteria ("commensals") as a means to deliver
mucosal vaccines. Commensals are harmless bacteria that naturally inhabit the
body's surfaces--with different commensals inhabiting different surfaces,
particularly the mucosal surfaces. The Company's vaccine candidates utilize
genetically engineered commensals to deliver antigens from a variety of
pathogens to the mucosal immune system. When administered, the genetically
engineered ("recombinant") commensals colonize the mucosal surface and
replicate. By activating a local mucosal immune response, the Company's
vaccine candidates are designed to prevent infection and disease at the
earliest possible stage. By comparison, most conventional vaccines are
designed to act after infection has already occurred.
The Company's commensal vaccine candidates utilize gram-positive bacteria,
one of two major classes of bacteria. Rockefeller scientists have identified a
protein region that is used by gram-positive bacteria to anchor proteins to
their surfaces. The Company is using the proprietary technology licensed from
Rockefeller to fuse antigens from a wide range of infectious organisms, both
viral and bacterial, to the surface protein anchor region of a variety of
commensal organisms. By combining a specific antigen with a specific
commensal, vaccines can be tailored to both the target pathogen and its
mucosal point of entry.
To target an immune response to a particular mucosal surface, a vaccine
would employ a commensal organism that naturally inhabits that surface. For
example, vaccines targeting sexually transmitted diseases could employ
Lactobacillus acidophilus, a commensal colonizing the female urogenital tract.
Vaccines targeting GI diseases could employ Lactobacillus casei, a commensal
colonizing the GI tract. The Company has conducted initial experiments using
Streptococcus gordonii ("S. gordonii"), a commensal that colonizes the oral
cavity and that can potentially be used in vaccines targeting pathogens that
enter through the upper respiratory tract, such as the influenza virus.
By using an antigen unique to a given pathogen, the technology can
potentially be applied to any infectious agent that enters the body through a
mucosal surface. The Company's founding scientists have expressed and anchored
a variety of viral and bacterial antigens on the outside of S. gordonii,
including the M6 protein from group A streptococcus, a group of organisms that
cause a range of diseases, including strep throat, necrotizing fasciitis,
impetigo and scarlet fever. In addition, proteins from other infectious
agents, such as HIV and human papilloma virus have also been expressed using
this system. The Company believes this technology will enable the expression
of essentially any antigen regardless of size or shape. In animal studies, the
Company has shown that the administration of a recombinant S. gordonii vaccine
prototype induces both a local mucosal immune response and a systemic immune
The Company believes that mucosal vaccines developed using its proprietary
commensal delivery technology could provide a number of advantages, including:
More complete protection than conventional vaccines: Mucosal vaccines in
general may be more effective than conventional parenteral (injectable)
vaccines, due to their ability to produce both a systemic and local
(mucosal) immune response. By stopping infectious organisms at the earliest
stage, the immune response has no need to eliminate pathogens which have
already become established in the host.
Potential single dose administration: The commensal delivery has the
potential to allow for long term colonization of the host, eliminating the
need for boosters, while providing an extended exposure to the selected
vaccine candidate(s).
Safety advantage over other live vectors: A number of bacterial pathogens
have been genetically rendered less infectious, or attenuated, for use as
live vaccine vectors. Commensals, by virtue of their harmless nature, offer
a safer delivery vehicle without fear of genetic reversion to the
infectious state inherent in attenuated pathogens.
Non-injection administration: Oral, nasal, rectal or vaginal
administration of the vaccine eliminates the need for painful injections
with their potential adverse reactions.
Potential for combined vaccine delivery: The Children's Vaccine
Initiative has called for the development of combined vaccines,
specifically to reduce the number of needle sticks per child by combining
several vaccines into one injection, thereby increasing compliance and
decreasing disease. The Company believes its commensal delivery technology
can be an effective method of delivery of multi-component vaccines within a
single commensal organism that address multiple diseases or diseases caused
by multiple strains of an infectious agent.
Eliminating need for refrigeration: One of the problems confronting the
effective delivery of parenteral vaccines is the need for refrigeration at
all stages prior to injection. The stability of the commensal organisms in
a freeze-dried state would, for the most part, eliminate the need for
special climate conditions, a critical consideration, especially for the
delivery of vaccines in developing countries.
Low cost production: By using a live bacterial vector, extensive
downstream processing is eliminated, leading to considerable cost savings
in the production of the vaccine. The potential for eliminating the need
for refrigeration would add considerably to these savings by reducing the
costs inherent in refrigeration for vaccine delivery.
Anti-Infectives Technology: Prevention of Attachment and Infectivity
The bacterial infectious process generally includes three steps:
colonization, invasion and disease. The adherence of bacteria to a host's
surface is crucial to establishing colonization. Bacteria cells adhere through
a number of mechanisms, but generally by using highly specialized surface
structures which, in turn, bind to specific structures or molecules on the
host's cells or, as discussed below, to inanimate objects residing in the
host. Once adhered, many bacteria will invade the host's cells and either
establish residence or continue invasion into deeper tissues. During any of
these stages, the invading bacteria can produce the molecules (toxins) which
result in the outward manifestations of the disease. The severity of disease,
while dependent on a large combination of factors, is often the result of the
ability of the bacteria to persist in the host. These bacteria accomplish this
persistence by using surface molecules which can alter the host's non-specific
mechanisms or its highly specific immune responses to clear or destroy the
organisms.
Unlike conventional antibiotics, as discussed above, the Company's anti-
infectives approaches aim to block the ability of pathogenic bacteria to
attach to and colonize human tissue, thereby preventing infection at its
earliest stage. The Company is pursuing two anti-infective strategies: (i)
inhibiting the expression of bacterial surface proteins required for bacterial
infectivity and (ii) blocking the tissue binding sites on bacterial surface
proteins. The Company believes that these approaches have promise in the areas
of hospital-acquired drug-resistant infections and a broad range of other
diseases caused by bacteria.
Many special surface proteins used by bacteria to infect the host are
anchored in the bacterial cell wall. Scientists at Rockefeller have identified
an amino acid sequence and related enzyme, a selective protease, that are
essential for anchoring proteins to the surface of most gram-positive
bacteria. Published information indicates that this amino acid sequence is
shared by more than 50 different surface proteins found on a variety of gram-
positive bacteria. This commonality suggests that this protease represents a
promising target for the development of a new class of antibiotic products for
the treatment of a wide range of infectious diseases. Experiments by the
Company's founding scientists at Rockefeller have shown that without this
sequence, proteins cannot become anchored to the bacterial surface and thus
the bacteria are no longer capable of attachment, colonization or infection.
Such "disarmed" bacteria should be readily cleared by the body's immune
system. The Company is using a combination of structure-based drug design and
high throughput screening procedures to identify compounds that inhibit the
protease, thereby blocking the anchoring process. If successful, this strategy
should provide relief from many gram-positive bacterial infections, but may
prove particularly important in combating diseases caused by the emerging
antibiotic resistance of the gram-positive organisms S. aureus, Streptococcus
pneumoniae, and the enterococci.
Surface Protein Expression System ("SPEX")
The ability to overproduce many bacterial and human proteins has been made
possible through the use of recombinant DNA technology. The introduction of
DNA molecules into E. coli has been the method of choice to express a variety
of gene products, because of this bacteria's rapid reproduction and well-
understood genetics. Yet despite the development of many efficient E. coli-
based gene expression systems, the most important concern continues to be
associated with subsequent purification of the product. Recombinant proteins
produced in this manner do not readily cross E. coli's outer membrane, and as
a result, proteins must be purified from the bacterial cytoplasm or
periplasmic space. Purification of proteins from these cellular compartments
can be very difficult. Frequently encountered problems include low product
yields, contamination with potentially toxic cellular material (i.e.,
endotoxin) and the formation of large amounts of partially folded polypeptide
chains in non-active aggregates termed inclusion bodies.
To overcome these problems, the Company has taken advantage of its knowledge
of gram-positive bacterial protein expression and anchoring pathways. This
pathway has evolved to handle the transport of surface proteins that vary
widely in size, structure and function. Modifying the approach used to create
commensal mucosal vaccines, the Company has developed methods which, instead
of anchoring the foreign protein to the surface of the recombinant gram-
positive bacteria, result in it being secreted into the surrounding medium in
a manner which is readily amenable to simple batch purification. The Company
believes the advantages of this approach include the ease and lower cost of
gram-positive bacterial growth, the likelihood that secreted recombinant
proteins will be folded properly, and the ability to purify recombinant
proteins from the culture medium without having to disrupt the bacterial cells
and liberating cellular contaminants. Gram-positive bacteria may be grown
simply in scales from those required for laboratory research up to commercial
mass production.
THE COMPANY'S PRODUCT CANDIDATES AND RESEARCH AND DISCOVERY PROGRAMS
The following table lists the potential indications and current status of
the Company's product candidates and research and discovery programs. A more
detailed description of these product candidates and research and discovery
programs follows this table. The Company's product candidates are subject to
innovative technologies. See "Risk Factors--Early Stage of Development;
Absence of Products; No Commercialization of Products Expected in Near
Future."
STAGE OF
PRODUCT CANDIDATES/PROGRAM                 INDICATION             DEVELOPMENT*
--------------------------                 ----------             ------------
MUCOSAL VACCINES
Streptococcal vaccine           Strep throat                       Pre-clinical
STD vaccines                    Herpes, HIV, HPV                   Research
Periodontal vaccine             Periodontal disease                Pre-clinical
DELIVERY SYSTEM
Mucosal vaccine delivery system Infectious diseases                Pre-clinical
Protease inhibitor              Gram-positive bacterial infections Research
PROTEIN EXPRESSION SYSTEM
SPEX                            Protein production                 Research
* "Research" activities include initial research and development related to
specific vaccine or antibiotic compounds or formulations and their delivery.
"Pre-clinical" indicates that the Company is conducting pharmacology
testing, toxicity testing, formulation process development and/or
development of the manufacturing process prior to possible submission of an
IND. "Discovery" indicates that the Company is conducting studies to
validate proof of concept and identify potential lead compounds.
Development of the Company's mucosal vaccine candidates involves: (i)
identifying a suitable immunizing antigen from a pathogen; (ii) selecting a
commensal that naturally colonizes the mucosal point of entry for that
pathogen; and (iii) genetically engineering the commensal to express the
antigen on its surface for subsequent delivery to the target population.
Strep Throat Vaccine Candidate. Until the age of 15, many children suffer
recurrent strep throat infections. Up to five percent of ineffectively treated
strep throat cases progress to rheumatic fever, a debilitating heart disease
which worsens with each succeeding streptococcal infection. Since the advent
of penicillin therapy, rheumatic fever in the United States has experienced a
dramatic decline. However, in the last decade, rheumatic fever has experienced
a resurgence in the United States. Part of the reason for this is the latent
presence of this organism in children who do not display symptoms of a sore
throat, and, therefore, remain untreated and at risk for development of
rheumatic fever. Based on data from the Centers for Disease Control and
Prevention, there are seven to 20 million cases of pharyngitis due to group A
streptococcus in the United States each year. There are over 32 million
children in the principal age group targeted by the Company for vaccination.
Worldwide, it is estimated that one percent of all school age children in the
developing world have rheumatic heart disease. Despite the relative ease of
treating strep throat with antibiotics, the specter of antibiotic resistance
is always present. In fact, resistance to erythromycin, the second line
antibiotic in patients allergic to penicillin, has appeared in a large number
of cases.
No vaccine for strep throat has been developed because of the problems
associated with identifying an antigen that is common to the more than 100
different serotypes of group A streptococcus, the bacterium that causes the
disease. The Company has licensed from Rockefeller a proprietary antigen which
is common to most types of group A streptococcus, including types that have
been associated with rheumatic fever. When this antigen was orally
administered to animals, it was shown to provide protection against multiple
types of group A streptococcal infection. Utilizing this antigen, the Company
is developing a mucosal vaccine for strep throat.
The Company's technology expresses the strep throat antigen on the surface
of the commensal, S. gordonii, which lives on the surface of the teeth and
gums. The Company believes that a single oral dose of the vaccine may be
adequate to provide protection. Indeed, investigators at other institutions
have shown that organisms of this type can safely colonize in the human oral
cavity for up to two years. The Company is currently completing pre-clinical
development of its strep throat vaccine candidate. Pre-clinical research in
mice and rabbits has
established the ability of this vaccine candidate to colonize and induce both a
local and systemic immune response. The Company is collaborating with the
National Institutes of Health and the University of Maryland Center for Vaccine
Development on the clinical development of this vaccine candidate and expects
to file an IND with the FDA in the fall of 1997.
STD Vaccine Candidates. One of the great challenges in vaccine research
remains the development of effective vaccines to prevent sexually transmitted
viral diseases. The three principal viral pathogens which are transmitted via
this route are Herpes simplex, type 2 ("HSV-2") which causes recurrent genital
ulcers, HIV, the causative agent of AIDS, and human papilloma virus (HPV) which
is linked to both genital warts and cervical carcinoma. To date, a great deal
of effort has been expended, without appreciable success, to develop effective
injectable prophylactic vaccines versus these pathogens. Given that each of
these viruses enters the host through the mucosa, the Company believes that
induction of a vigorous mucosal response to viral antigens may protect against
acquisition of the initial infection. To test this hypothesis, the Company is
expressing known immunodominant antigens from each of these viral pathogens in
its proprietary mucosal vaccine delivery system. These live recombinant
vaccines will be delivered to animals and tested for local and systemic immune
response induction, and whether these responses can block subsequent viral
infections. The Company is collaborating with Chiron on research toward the
development of vaccines against two sexually transmitted diseases.
Periodontal Vaccine Candidate. Periodontal disease is characterized by acute
soft tissue inflammation and subsequent alveolar bone loss. It is estimated
that this condition afflicts up to 50% of the adult population by the time they
reach age 65. Current treatments include mechanical debridement, tissue
resection and/or antibiotic therapy. It is believed that periodontal disease is
the result of an interaction between the immune system or the host and a number
of oral bacterial pathogens, principally Porphyromonas gingivalis ("P.
gingivalis"). The Company has entered into a research agreement with SUNY
Buffalo to develop a mucosal vaccine to prevent periodontal disease. The
vaccine, as currently constructed, features a surface antigen, fimbrillin, from
P. gingivalis delivered to the oral cavity via the Company's proprietary
mucosal vaccine delivery system. In pre-clinical trials, mucosal immunization
with, or direct delivery of, fimbrillin-derived peptides to the oral cavity of
germ-free rats blocked the ability of P. gingivalis to colonize in the rats
upon subsequent challenge and dramatically reduced associated periodontal
disease and bone loss. Two vaccine candidates are currently being studied in
pre-clinical animal colonization and challenge experiments.
The Company's commensal vaccine candidates utilize gram-positive bacteria as
vectors for the presentation of antigens. Scientists at Rockefeller have
identified a protein region used by gram-positive bacteria to anchor proteins
to their surfaces. The Company is using proprietary technology licensed from
commensal organisms. By combining a specific antigen with a specific commensal,
the Company believes that vaccines can be tailored to both the target pathogen
and its mucosal point of entry.
The Company has developed several genetic methods for recombining foreign
sequences into the genome of gram-positive bacteria at a number of non-
essential sites. Various parameters have been tested and optimized to improve
the level of foreign protein expression and its immunogenicity. In pre-clinical
studies, recombinant commensals have been implanted into the oral cavities of
several animal species with no deleterious effects. The introduced vaccine
strains have taken up residence for prolonged periods of time and induce both a
local mucosal (IgA) as well as a systemic immune response (IgG and T-cell).
More than two million nosocomial infections occur each year. Of these, a
large number are due to the pathogenic gram-positive bacteria. Many of these
bacteria have acquired antibiotic resistance and have become an increasing
problem. The gram-positive bacteria principally involved in these nosocomial
infections include: S. aureus, coagulase-negative staphylococci and
enterococci. S. aureus has been described above. The coagulase-
negative staphylococci have become the leading cause of nosocomial bacteremia
and, alarmingly, have shown a higher percentage of methicillin resistant
strains (up to 78%) than S. aureus (up to 22%). The enterococci have shown a
disturbing propensity toward resistance to the antibiotic of last resort,
vancomycin. Even more alarming is the fact that in certain cases where the
last antibiotic of choice to treat a S. aureus or coagulase-negative infection
is vancomycin, some strains of enterococci have evolved that may actually
thrive on vancomycin, rendering the treatment potentially life threatening.
Another important gram-positive organism with an increasing presence of
antibiotic resistance is Streptococcus pneumoniae, an organism responsible for
pneumonia and meningitis, and which is the leading cause of middle ear
infections in children.
Scientists at Rockefeller have determined that many different surface
proteins from a variety of gram-positive bacteria are attached to the
bacterial surface via a common anchoring mechanism. These surface proteins are
responsible for a wide variety of functions essential to the successful
establishment of infection by the organism, including adherence, binding to
serum proteins, resistance to phagocytosis (ingestion and destruction by the
host's cells), cross-signaling between the bacterium and the host's cells, and
various enzymatic processes. The Company has identified an enzyme, a selective
protease, utilized by most gram-positive bacteria to anchor certain proteins
to the bacterial cell wall. The Company will attempt to identify compounds
that will inhibit this protease, thereby blocking the anchoring process and
the ability of the bacteria to initiate or prolong infection. In this process,
the Company is using molecular modeling to identify possible structures of the
anchor region. Once these structures are identified, natural and synthetic
molecules that may inhibit the anchoring process will be screened using an
existing high throughput assay developed by Rockefeller and licensed to the
Company. The Company believes that this approach represents a departure from
conventional antibiotics and therefore may afford a method to circumvent the
resistance mechanisms already established in many gram-positive organisms. The
Company has entered into an agreement with Wyeth-Ayerst to identify and
develop protease inhibitors as novel antibiotics.
The Company's proprietary SPEX protein expression uses the protein export
and anchoring pathway of gram-positive bacteria as a means to facilitate the
production and purification of biopharmaceutical proteins. The Company has
developed vectors which allow foreign genes to be inserted into the chromosome
of gram-positive bacteria in a manner such that the encoded protein is
synthesized, transported to the cell surface and secreted into the medium.
This system has been used to produce milligram quantities of soluble
antigenically-authentic protein that can be easily purified from the culture
medium by affinity chromatography. The Company believes this technology can be
extended to a variety of different antigens and enzymes.
MedImmune Technology
and services. Such rights include MedImmune's rights to technology developed
by scientists at Washington University. Research carried out by these
scientists has demonstrated that assembly of type P pili on gram-negative
bacteria requires the participation of both a periplasmic molecular chaperone
and an outer membrane usher. Since the gram-negative pili are the primary
mechanism by which these organisms adhere to and colonize host tissue,
inhibition of their assembly should effectively inhibit disease caused by this
class of organisms. Detailed structural data is available on the molecular
chaperone and scientists at Washington University are developing the same for
the usher protein. This information will be used in concert with molecular
modeling techniques to identify potential structures that will bind to the
conserved residues of the chaperone and usher proteins. Once these structures
are identified, natural and synthetic molecules that inhibit chaperone/usher
function will be screened using high throughput assays developed by scientists
at Washington University. The Company believes that this approach is a
departure from conventional antibiotics and therefore may afford a method to
circumvent the resistance mechanisms already established in many gram-negative
bacteria. There can be no assurance that the Company will enter into a final
agreement with MedImmune, and, therefore, there can be no assurance that the
Company will acquire the rights to the technology described above. See "Risk
Factors--Dependence on Others; Collaborations."
COLLABORATIVE RESEARCH AND LICENSES
The Company sponsors research and development activities in laboratories at
Rockefeller, Emory, Oregon State, and SUNY Buffalo and does not maintain its
own research and development facilities. The Company's research is conducted
by its employees and employees of the aforementioned universities. The
Company's two principal research scientists, Dr. Vincent Fischetti, whose
laboratory is at Rockefeller, and Dr. Dennis Hruby, whose laboratory is at
Oregon State, work together to coordinate the Company's research projects. The
majority of the Company's molecular biology and genetic research is conducted
at Oregon State and the bulk of its bacteriology and immunology research is
conducted at Rockefeller. The Company has entered into the following license
agreements and collaborative research arrangements:
Rockefeller University. The Company and Rockefeller have entered into an
exclusive worldwide license and research agreement whereby the Company has
obtained the right and license to make, use and sell mucosal vaccines based on
gram-positive organisms and products for the therapy, prevention and diagnosis
of diseases caused by streptococcus, staphylococcus and other organisms. The
license covers two issued United States patents and one issued European patent
as well as 11 pending United States patent applications and corresponding
foreign patent applications. The issued United States patents expire in 2005
and 2014, respectively. The agreement generally requires the Company to pay
royalties on sales of products developed from the licensed technologies and
fees on revenues from sublicensees, where applicable, and the Company is
responsible for certain milestone payments and for the costs of filing and
prosecuting patent applications. Pursuant to the agreement, the Company has
provided funding to Rockefeller for sponsored research through January 31,
1998, with exclusive license rights to all inventions and discoveries
resulting from this research.
Emory. Emory is a party to the Company's license agreement with Rockefeller
whereby the Company has obtained the right and license to make, use and sell
products for the therapy, prevention and diagnosis of diseases caused by
streptococcus. Because the license relates to the same United States patent
covered by the Rockefeller license, the Company has agreed to reimburse
Rockefeller for Emory's patent expenses and Rockefeller will remit such
amounts to Emory. Pursuant to a separate research support agreement with
Emory, the Company is providing funding for sponsored research through January
31, 1998, with a right of first refusal to acquire exclusive license rights to
all inventions and discoveries resulting from this research.
Oregon State. Oregon State is also a party to the Company's license
agreement with Rockefeller whereby the Company has obtained the right and
license to make, use and sell products for the therapy, prevention and
diagnosis of diseases caused by streptococcus. Because the license relates to
the same United States patent covered by the Rockefeller license, the Company
has agreed to reimburse Rockefeller for Oregon State's patent expenses and
Rockefeller will remit such amounts to Oregon State. Pursuant to a separate
research support agreement with Oregon State, the Company is providing funding
for sponsored research through January 31, 1998, with exclusive license rights
to all inventions and discoveries resulting from this research.
National Institutes of Health. The Company has entered into a clinical
trials agreement with the National Institute of Allergy and Infectious
Diseases, National Institutes of Health ("NIH") pursuant to which NIH, with
the cooperation of the Company, will submit an IND for the Company's strep
throat vaccine and conduct a clinical trial of the Company's strep throat
vaccine.
SUNY Buffalo. The Company has entered into a research agreement with SUNY
Buffalo to develop a mucosal vaccine to prevent periodontal disease. Pursuant
to the agreement, the Company is providing funding for sponsored research
through June 30, 1998 and has an exclusive option to license all inventions
and discoveries resulting from this research.
Wyeth-Ayerst. The Company has entered into a collaborative research and
license agreement with Wyeth-Ayerst in connection with the discovery and
development of anti-infectives for the prevention and treatment of gram-
positive bacterial infections. Pursuant to the agreement, Wyeth-Ayerst is
providing funding for a joint research and development program through June
30, 1999 and is responsible for additional milestone payments. Under the terms
of the agreement, the Company could receive up to $18.2 million in research
and milestone
payments for products developed from a single compound, or up to $25.5 million
if products are developed from an additional compound. Wyeth-Ayerst has
exclusive license rights in the field (as defined in the agreement) to any
product resulting from this research and is required to make royalty payments
based on sales of any product developed from the licensed technologies.
Chiron. The Company has entered into a collaborative research agreement with
Chiron regarding research toward the development of vaccines against two
sexually transmitted diseases. The agreement was entered into as of July 1,
1997 and expires on July 1, 1998. Pursuant to the agreement, each company
retains sole rights to any technology invented solely by such company and the
companies will jointly own any technology jointly developed by the companies.
In addition, the Company has entered into a letter of intent with MedImmune
regarding a technology transfer agreement pursuant to which the Company will
acquire all of MedImmune's rights in gram-negative antibiotic targets,
products, screens and services. The Company and MedImmune plan to collaborate
in the development of antibiotics against gram-negative pathogens. The Company
and MedImmune contemplate that upon the execution of the technology transfer
agreement, MedImmune will receive 335,530 shares of Common Stock. There can be
no assurance that the Company will enter into a final agreement with MedImmune
on the terms described above or at all. See "Risk Factors--Dependence on
Others; Collaborations."
The Company does not intend to invest in large scale manufacturing
facilities unless and until its product candidates pass significant
developmental hurdles. The Company believes that all of its existing products
under development can be made using well understood manufacturing methods.
Nevertheless, the Company has no manufacturing experience and it may not be
able to develop reproducible and effective manufacturing processes at a
reasonable cost. In such event, the Company will have to rely on third party
manufacturers whose availability and cost are presently unknown. The Company
plans to contract with third party manufacturers to produce pre-clinical and
clinical lots of its biological products. No assurances can be given that the
Company will establish such relationships or manufacture its product
candidates successfully. See "Risk Factors--Lack of Manufacturing, Marketing
or Sales Capabilities."
The Company currently has no internal marketing and sales resources and
personnel. The Company recognizes the challenges associated with marketing and
sales in the pharmaceutical industry and anticipates undertaking these
activities only for products that address large but focused therapeutic
markets in which a small marketing organization can compete effectively. It
is, however, the Company's present intention to seek marketing partners to
assist it in later stages of regulatory and clinical development, process
scale up, production and marketing. No assurances can be given that the
Company will establish such relationships or market its product candidates
successfully. See "Risk Factors--Lack of Manufacturing, Marketing or Sales
Capabilities."
PATENTS AND PROPRIETARY RIGHTS
Protection of the Company's proprietary compounds and technology is
essential to the Company's business. The Company's policy is to seek, when
appropriate, protection for its lead compounds and certain other proprietary
technology by filing patent applications in the United States and other
countries. The Company has licensed the rights to two issued United States
patents and one issued European patent. The Company has also licensed the
rights to 11 pending United States patent applications as well as
corresponding foreign patent applications. The two issued United States
patents expire in 2005 and 2014, respectively.
The patents and patent applications licensed by the Company relate to all of
the core technology used in the development of the Company's leading product
candidates, including the mucosal vaccine delivery system, the SPEX protein
expression system for producing biopharmaceutical products, the protective
streptococcal antigens and the antibiotic development target, as well as a
variety of early stage research projects. Each of the Company's products
represented by each of the patents is in a very early stage in its development
The Company also relies upon trade secret protection for its confidential
and proprietary information. No assurance can be given that other companies
will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Company's trade
secrets or that the Company can meaningfully protect its trade secrets.
The Company requires its employees, consultants, outside scientific
collaborators and sponsored researchers and certain other advisors to enter
into confidentiality agreements with the Company. These agreements will
provide that all confidential information developed or made known to the
individual during the course of the individual's relationship with the Company
will be kept confidential and will not be disclosed to third parties except in
specific circumstances. In the case of employees, such agreements will provide
that all inventions conceived by the employee are the exclusive property of
the Company. There can be no assurance, however, that these agreements will
provide meaningful protection or adequate remedies for the Company's trade
secrets in the event of unauthorized use or disclosure of such information.
Regulation by governmental authorities in the United States and other
countries will be a significant factor in the production and marketing of any
products that may be developed by the Company. The nature and the extent to
which such regulation may apply to the Company will vary depending on the
nature of any such products. Virtually all of the Company's potential products
will require regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products are subject to
rigorous pre-clinical and clinical testing and other approval procedures by
the FDA and similar health authorities in foreign countries. Various federal
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, record keeping and marketing of such products. The process
of obtaining these approvals and the subsequent compliance with appropriate
federal and foreign statutes and regulations requires the expenditure of
substantial resources.
In order to test clinically, produce and market products for diagnostic or
therapeutic use, a company must comply with mandatory procedures and safety
standards established by the FDA and comparable agencies in foreign countries.
Before beginning human clinical testing of a potential new drug, a company
must file an IND and receive clearance from the FDA. This application is a
summary of the pre-clinical studies that were conducted to characterize the
drug, including toxicity and safety studies, as well as an in-depth discussion
of the human clinical studies that are being proposed.
The pre-marketing program required for approval of a new drug typically
involves a time-consuming and costly three-phase process. In Phase I, trials
are conducted with a small number of patients to determine the early safety
profile, the pattern of drug distribution and metabolism. In Phase II, trials
are conducted with small groups of patients afflicted with a target disease in
order to determine preliminary efficacy, optimal dosages and expanded evidence
of safety. In Phase III, large scale, multi-center comparative trials are
conducted with patients afflicted with a target disease in order to provide
enough data for statistical proof of efficacy and safety required by the FDA
The FDA closely monitors the progress of each of the three phases of
clinical testing and may, in its discretion, reevaluate, alter, suspend or
terminate the testing based on the data that have been accumulated to that
point and its assessment of the risk/benefit ratio to the patient. Estimates
of the total time required for carrying out such clinical testing vary between
two and ten years. Upon completion of such clinical testing, a company
typically submits a New Drug Application ("NDA") or Product License
Application ("PLA") to the FDA that summarizes the results and observations of
the drug during the clinical testing. Based on its review of the NDA or PLA,
the FDA will decide whether or not to approve the drug. This review process
can be quite lengthy, and approval for the production and marketing of a new
pharmaceutical product can require a number of years and substantial funding,
and there can be no assurance that any approvals will be granted on a timely
basis, if at all.
Once the product is approved for sale, FDA regulations govern the production
process and marketing activities, and a post-marketing testing and surveillance
program may be required to monitor continuously a product's usage and its
effects. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained. Other countries in which any products developed by
the Company may be marketed impose a similar regulatory process.
The biotechnology and pharmaceutical industries are characterized by rapidly
evolving technology and intense competition. The Company's competitors include
most of the major pharmaceutical companies, which have financial, technical and
marketing resources significantly greater than those of the Company.
Biotechnology and other pharmaceutical competitors include Cubist
Pharmaceuticals, Inc., Microcide Pharmaceuticals, Inc., Oravax, Inc., Maxim
Pharmaceuticals, Inc., and Vaxcel, Inc. Academic institutions, governmental
agencies and other public and private research organizations are also
conducting research activities and seeking patent protection and may
commercialize products on their own or through joint venture. There can be no
assurance that the Company's competitors will not succeed in developing
products that are more effective or less costly than any which are being
developed by the Company or which would render the Company's technology and
future products obsolete and noncompetitive.
HUMAN RESOURCES AND FACILITIES
The Company currently has seven employees. In addition, the Company has a
consulting agreement with Dr. Vincent Fischetti, the principal founding
scientist and Chief Scientific Advisor of the Company and a Professor and Co-
Chairman of the Laboratory of Bacterial Pathogenesis and Immunology and Co-
Director of the Protein Sequence/Biopolymer Facility at Rockefeller. In
addition, the Company and CSO have entered into a consulting agreement under
which CSO has agreed to provide certain business services to the Company,
including business development, licensing, strategic alliances and
administrative support. See "Certain Transactions."
The Company's President and Chief Executive Officer is David de Weese. Dr.
Dennis Hruby is the Company's Vice President of Research. Drs. Fischetti and
Hruby, along with Mr. de Weese, have primary responsibility for directing the
Company's research efforts. Mr. de Weese, along with, Dr. Joshua Schein and
Judson Cooper, Executive Vice Presidents of the Company, have primary
responsibility for directing the Company's strategic efforts.
Rockefeller, Emory, Oregon State and SUNY Buffalo and does not maintain its own
research and development facilities. The Company leases office space at 666
Third Avenue, New York, New York, 10017. See "Risk Factors--Lack of Research
and Development Facilities."
products. The Company does not have product liability insurance but intends to
obtain insurance coverage at acceptable costs or in a sufficient amount, if at
all, or that a product liability claim would not adversely affect the Company's
business, operating results or financial condition. See "Risk Factors--
Potential Product Liability and Availability of Insurance."
The Company is not a party to any legal proceedings.
DIRECTORS, EXECUTIVE OFFICERS, KEY PERSONNEL AND CONSULTANTS
The following table sets forth information concerning each of the directors,
executive officers, key personnel and consultants of the Company.
NAME                      AGE POSITION
- ----                      --- --------
David H. de Weese.......   54 Chairman, President and Chief Executive Officer
Joshua D. Schein,          36 Executive Vice President, Chief Financial Officer,
Ph.D. .................      Secretary and Director
Judson A. Cooper........   37 Executive Vice President, Director
Donald S. Howard*.......   68 Director
Terence E. Downer.......   58 Director
Dennis E. Hruby,           45 Vice President of Research
Ph.D. .................
Kevin F. Jones, Ph.D. ..   44 Director of Bacterial Research
Vincent A. Fischetti....   56 Consultant
* Subject to the consummation of the Offering
All Directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board,
subject to the provisions of certain employment agreements. See "--Employment
and Consulting Agreements."
David H. de Weese has served as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since November 1996.
Prior to joining the Company, Mr. de Weese served as a director and a
consultant to Biovector Therapeutics, S.A., a developer of drug delivery
technology based in France, and as an advisor to Paul Capital Partners, L.P.,
a private equity investment manager with whom he maintains a consulting
relationship. From 1993 to 1995, Mr. de Weese was President, Chief Executive
Officer and a Director of M6 Pharmaceuticals, Inc, a biopharmaceutical
company. From 1986 to 1992, Mr. de Weese was the President, Chief Executive
Officer, a Director and a founder of Cygnus Therapeutic Systems (now Cygnus,
Inc.), a developer and manufacturer of transdermal drug delivery systems.
Prior to that, Mr. de Weese co-founded Medical Innovations Corporation, a
medical device business currently a division of Ballard Medical Products,
Inc., and was Chairman of the Board, President and Chief Executive Officer of
Machine Intelligence Corporation, a developer of computer software and
hardware. Mr. de Weese is a director of Bioject Medical Technologies, Inc., a
publicly traded biotechnology company. Mr. de Weese received his M.B.A. from
the Harvard University Graduate School of Business.
Joshua D. Schein, Ph.D. has served as an Executive Vice President of the
Company since December 1996 and Chief Financial Officer, Secretary and a
Director of the Company since December 1995. Dr. Schein also serves as
President and Director of Virologix Corporation, a private biotechnology
company ("Virologix"). Additionally, Dr. Schein serves as Chief Financial
Officer and a Director of Callisto Pharmaceuticals, Inc., a privately held,
development stage, pharmaceutical company ("Callisto"). Dr. Schein devotes
substantial amounts of his time to the Company, Virologix and Callisto on a
substantially equal basis. Dr. Schein has served as a Director of DepoMed,
Inc., a private biotechnology company, since January 1996. From October 1994
to December 1995, Dr. Schein served as a Vice President of Investment Banking
at Josephthal, Lyon and Ross, Incorporated, an investment banking firm. From
June 1991 to September 1994, Dr. Schein was a Vice President at D. Blech &
Company, Incorporated, a merchant bank that invested in the biopharmaceutical
industry. Dr. Schein received a Ph.D. in neuroscience from the Albert Einstein
College of Medicine and an MBA from the Columbia Graduate School of Business.
Dr. Schein is a principal of CSO Ventures LLC ("CSO"), a privately held
limited liability company. See "Certain Transactions."
Judson A. Cooper has served as Executive Vice President of the Company since
November 1996 and a Director of the Company since December 1995 and served as
President from December 1995 until November
1996. Mr. Cooper also serves as Chief Financial Officer and Director of
Virologix. Additionally, Mr. Cooper serves as President and a Director of
Callisto. Mr. Cooper devotes substantial amounts of his time to the Company,
Virologix and Callisto on a substantially equal basis. Mr. Cooper has also
served as a Director of DepoMed, Inc. since November 1995. Mr. Cooper had been
a private investor from September 1993 to December 1995. From 1991 to 1993,
Mr. Cooper served as a Vice President of D. Blech & Company, Incorporated. Mr.
Cooper is a graduate of the Kellogg School of Management. Mr. Cooper is a
principal of CSO. See "Certain Transactions."
Donald S. Howard has agreed to serve as a Director of the Company beginning
on the date of the consummation of the Offering. Mr. Howard has served as a
consultant to a number of financial institutions since 1993. Mr. Howard served
as Executive Vice President and Chief Financial Officer and a Managing
Director of Salomon Brothers from 1988 to 1993. From 1980 to 1988, Mr. Howard
served as Executive Vice President and Chief Financial Officer of Citicorp,
Inc. Prior to that time, Mr. Howard held numerous positions at Citicorp, Inc.
Mr. Howard is currently a director of Green Garden Inc., Consolidated
Purchasing Services and Bank Leumi New York Trust Co.
Terence E. Downer has served as a Director of the Company since July 1,
1997. Mr. Downer served as Vice President, Corporate Development of Janssen
Pharmaceutica, Inc., an affiliate of Johnson & Johnson, from 1991 to June
1997. Mr. Downer has worked in the pharmaceutical industry for Johnson &
Johnson and its affiliates for over 30 years and has held senior positions in
sales, marketing, research and business development. In addition to Janssen
Pharmaceutica, Inc., Mr. Downer was also involved in starting up two other
companies for Johnson & Johnson, Cyclex, Inc. and Critikon, Inc. Mr. Downer is
on the Board of the National Organization of Orthopaedic Nurses and is the New
Jersey Program Chair for the Licensing Executive Society.
Dennis E. Hruby, Ph.D. has served as Vice-President of Research of the
Company since April 1, 1997. From January 1996 through March 1997, Dr. Hruby
served as a senior scientific advisor to the Company. Dr. Hruby is a Professor
of Microbiology at Oregon State University, and from 1990 to 1993 was Director
of the Molecular and Cellular Biology Program and Associate Director of the
Center for Gene Research and Biotechnology. From 1993 to 1995, Dr. Hruby
served as Vice-President of Research for M6 Pharmaceuticals, Inc. Dr. Hruby
specializes in virology and cell biology research, and the use of viral and
bacterial vectors to produce recombinant vaccines. Dr. Hruby has published
more than 100 research, review articles and book chapters. He is a member of
the American Society of Virology, the American Society for Microbiology and a
fellow of the American Academy of Microbiology. Dr. Hruby received a Ph.D. in
microbiology from the University of Colorado Medical Center and a B.S. in
microbiology from Oregon State University.
Kevin F. Jones, Ph.D. has been the Company's Director of Bacterial Research
since January 1996. From 1992 to 1995, Dr. Jones served as Director of
Bacterial Research for M6 Pharmaceuticals, Inc. From 1990 until joining the
Company, Dr. Jones was a Senior Research Scientist at Lederle-Praxis
Biologicals, Inc., a vaccine company and division of American Cyanamid. Dr.
Jones has written numerous articles on the pathogenesis of group A
streptococcal infection. Dr. Jones is currently Adjunct Professor at
Rockefeller. Dr. Jones received a Ph.D. and an M.S. in immunology from Cornell
University.
Vincent A. Fischetti, Ph.D. has served as a consultant to the Company since
January 1996. Dr. Fischetti is a Professor and Co-Chairman of the Laboratory
of Bacterial Pathogenesis and Immunology and Co-Director of the Protein
Sequence/Biopolymer Facility at Rockefeller. Dr. Fischetti specializes in the
research of group A streptococcus and streptococcal diseases. Dr. Fischetti is
the chairman of the Microbial Pathogenesis Division of the American Society of
Microbiology and was recently elected a fellow of the American Academy of
Microbiology. Dr. Fischetti is the editor-in-chief of Infection and Immunity,
is an editor of the Journal of Immunology and serves on the editorial board of
the Journal of Experimental Medicine. Dr. Fischetti has published
approximately 100 research articles and is a contributing author to 60
textbooks. Dr. Fischetti received a Ph.D. in microbiology from New York
The number of directors on the Board of Directors is determined from time to
time by the Board of Directors and is currently fixed at four. Directors are
elected at each annual meeting of stockholders by the holders of the Common
Stock and hold office until their successors have been duly elected and
qualified or until their resignation, removal from office or death. Officers
of the Company are appointed by and may be removed by the Board of Directors.
Upon the consummation of the Offering, Mr. Howard will become a director and
the Company plans to appoint an additional person not otherwise affiliated
with the Company as a director.
Upon the consummation of the Offering, the Company will form an Audit
Committee and a Compensation Committee. The Audit Committee will be
responsible for reviewing audit functions, including accounting and financial
reporting practices of the Company, the adequacy of the Company's system of
internal accounting control, the quality and integrity of the Company's
financial statements and relations with its independent accountants. It is
anticipated that the Audit Committee will consist of two non-employee
directors. The Compensation Committee will be responsible for establishing the
compensation of the Company's directors, officers and employees, including
salaries, bonuses, commission, and benefit plans, administering the Plan, and
other forms of or matters relating to compensation. It is anticipated that the
Compensation Committee will consist of two non-employee directors.
The Company's Scientific Advisory Board currently consists of advisors to
the Company with experience in microbiology, immunology, protein chemistry and
infectious disease. At the Company's request, the scientific advisors review
and evaluate the Company's research programs and advise the Company with
respect to technical matters in fields in which the Company is involved.
The table below sets forth the name and current position of each member of
the Scientific Advisory Board:
NAME                                   POSITION
----                                   --------
Vincent A. Fischetti,       Chief Scientific Advisor; Professor and Co-Chairman
Ph.D.....................   of the Laboratory of Bacterial Pathogenesis and
Immunology and Co-Director of the Protein
Sequence/Biopolymer Facility at Rockefeller
Richard M. Krause, Ph.D...  Advisor; Senior Scientific Advisor, Fogarty
Robert J. Genco, Ph.D.....  Advisor; Distinguished Professor and Chair of Oral
Biology, State University of New York at Buffalo
Scott Hultgren, Ph.D......  Advisor; Associate Professor of Molecular
Microbiology, Washington University
Each of the scientific advisors are employed by other entities and may have
consulting agreements with entities other than the Company. The Company has
entered into written agreements with each of its scientific advisors.
Vincent A. Fischetti, Ph.D. has served as Chief Scientific Advisor and a
consultant to the Company since January 1996 and is Chairman of the Scientific
Advisory Board. Dr. Fischetti receives an annual consulting fee of $75,000.
See "--Directors, Executive Officers, Key Personnel and Consultants" and "--
Employment and Consulting Agreements."
Richard M. Krause, Ph.D. has served as an advisor to the Company since June
1997. Dr. Krause spent over twenty years on the faculty of Rockefeller
University working on the immune response to streptococcal infections. From
1975 to 1984, Dr. Krause served as the Director of the National Institute of
Allergy and Infectious Disease at the National Institutes of Health where he
directed efforts to combat emerging pathogens.
From 1984 to 1989, Dr. Krause was the Dean of the School of Medicine at Emory
University. From 1989 to the present, Dr. Krause has served as a Senior
Scientific Advisor at the Fogarty International Center. During his career, Dr.
Krause has published numerous research papers and several books. In
recognition of his pioneering work, Dr. Krause was elected to the National
Academy of Sciences in 1977. In 1980 he received from President Sadat the
Republic of Egypt Order of Gumhuria Award, in 1985 he received the Robert Koch
Medal in Gold and in 1997 he received the Order of Merit from the President of
the Federal Republic of Germany. Dr. Krause receives an annual advisory fee of
$10,000 and received warrants to purchase 5,000 shares of Common Stock at the
initial offering price per share (or $5.00 per share if the Offering is not
completed by November 1, 1997).
Robert J. Genco, Ph.D. has served as an advisor to the Company since May
1997. Dr. Genco has worked for over two decades on laboratory and clinical
studies which have helped in understanding the causes, prevention and
treatment of oral diseases including caries and periodontal disease. Dr. Genco
is active in many professional organizations including the American Society of
Microbiology, the American Society of Immunology, the International and
American Association for Dental Research, the American Dental Association and
the American Academy of Periodontology. Dr. Genco is a member of the Institute
of Medicine and was awarded the Gold Medal for Excellence in Research by the
American Dental Association, as well as the Gold Medal Award from the American
Academy of Periodontology. Dr. Genco has published over 260 articles
describing his research and edited several books including Contemporary
Periodontics. Dr. Genco is currently Editor of the Journal of Periodontology
and serves on the editorial board of several other journals. Dr. Genco
receives an annual advisory fee of $10,000 and received warrants to purchase
5,000 shares of Common Stock at the initial offering price per share (or $5.00
per share if the Offering is not completed by November 1, 1997).
Scott Hultgren, Ph.D. has served as an advisor to the Company since July
1997. For the past decade Dr. Hultgren has conducted pioneering research aimed
at elucidating the mechanisms by which type P pili are exported and assembled
on the surface of gram-negative bacteria. As a result of his efforts the
genetics and biochemistry of this process are now well-defined. Dr. Hultgren
has published more than 50 research publications and numerous book chapters on
these topics. Dr. Hultgren is a member of the American Society for
Microbiology, the American Association for the Advancement of Science, The
Protein Society, the Erlanger Society, and is a past recipient of a Markey
Young Investigator Faculty Award. Dr. Hultgren receives an annual consulting
fee of $30,000 and received warrants to purchase 5,000 shares of Common Stock
at the initial offering price per share (or $5.00 per share if the Offering is
not completed by November 1, 1997). See "--Employment and Consulting
Agreements."
The following table sets forth certain information with respect to annual
and long-term compensation paid by the Company to the Chief Executive Officer
and the other executive officers of the Company (the "Named Executive
Officers") whose 1996 compensation exceeded $100,000:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION THROUGH 12/31/96              LONG TERM COMPENSATION
------------------------------------------------   -------------------------
NAME AND PRINCIPAL                                        OTHER ANNUAL     OPTIONS/     ALL OTHER
POSITION          YEAR      SALARY         BONUSES   COMPENSATION     WARRANTS    COMPENSATION
------------------     -------- ------------    --------  -------------   ----------   ------------
David H. de Weese.......      1996 $     21,635(1)       --          -- (5)   477,683(2)      --
Chairman, President and
Joshua D. Schein,             1996 $    153,116(3)       --          -- (5)    16,667         --
Executive Vice
President, Chief
Financial Officer and
Judson A. Cooper........      1996 $    153,116(4)       --          -- (5)    16,667         --
(1) Mr. de Weese became Chairman, President and Chief Executive Officer of the
Company in November 1996. Mr. de Weese's annual salary is $225,000. See
"--Employment and Consulting Agreements."
(2) Includes the 461,016 de Weese Warrants and options to purchase 16,667
shares of Common Stock held by Mr. de Weese. See "--Employment and
Consulting Agreements."
(3) Dr. Schein currently receives an annual salary of $    150,000. This amount
does not include Dr. Schein's share ($40,000) of payments made to CSO. See
"Certain Transactions."
(4) Mr. Cooper currently receives an annual salary of $150,000. This amount
does not include Mr. Cooper's share ($40,000) of payments made to CSO. See
(5) Aggregate amount does not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for the named officer.
The following table sets forth certain information concerning all stock
option grants to the Named Executive Officers during the year ended December
OPTION GRANTS
COMMON STOCK      % OF TOTAL
UNDERLYING     OPTIONS GRANTED    EXERCISE        FAIR VALUE    EXPIRATION
NAME                OPTIONS GRANTED(1)  TO EMPLOYEES   PRICE PER SHARE AT DATE OF GRANT    DATE
----                ------------------ --------------- --------------- ---------------- ----------
David H. de Weese (2)...       16,667            33.3%           $3.00           $3.50        11/18/06
Joshua D. Schein (3)....       16,667            33.3%           $1.50           $1.50          1/1/01
Judson A. Cooper (3)....       16,667            33.3%           $1.50           $1.50          1/1/01
(1) All options were granted pursuant to the Plan.
(2) The options were granted on November 18, 1996.
(3) The options were granted on January 1, 1996.
The following table sets forth certain information concerning option
exercises and option holdings under the Plan as of December 31, 1996 with
respect to each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES AND VALUES AS OF 12/31/96
OF STOCK UNDERLYING      VALUE OF UNEXERCISED
SHARES                UNEXERCISED OPTIONS     IN-THE-MONEY OPTIONS(1)
ACQUIRED    VALUE   ------------------------- -------------------------
NAME               ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----               ----------- -------- ----------- ------------- ----------- -------------
David H. deWeese(2).....      --        --       16,667         --         $33,334        --
Joshua D. Schein, Ph.D..      --        --       16,667         --         $58,335        --
Judson A. Cooper........      --        --       16,667         --         $58,335        --
(1) Based upon the assumed initial public offering price of $5.00 per share.
(2) Excludes the 461,016 de Weese Warrants exercisable at $3.00 per share.
EMPLOYMENT AND CONSULTING AGREEMENTS
David H. de Weese, President and Chief Executive Officer of the Company, has
an employment agreement with the Company which expires in November 1999 and is
cancelable by the Company only for cause, as defined in the agreement. Mr. de
Weese currently receives an annual base salary of $225,000 and 16,667 stock
options per year, exercisable at the fair market value on the date of grant,
and is eligible to receive additional stock options and bonuses at the
discretion of the Board of Directors. In addition, Mr. de Weese will receive a
cash payment equal to 1.5% of the total consideration received by the Company
in a transaction resulting in a change of ownership of at least 50% of the
outstanding Common Stock of the Company. The consummation of the Offering will
not result in a change of ownership under the terms of the agreement. In
connection with Mr. de Weese's employment agreement, Mr. de Weese received
warrants to purchase 461,016 shares of Common Stock at $3.00 per share.
Warrants to purchase 25% of such shares are currently exercisable and the
remaining warrants become exercisable on a pro rata basis on the first, second
and third anniversaries of the agreement.
Dr. Joshua Schein, an Executive Vice President and Chief Financial Officer
of the Company, has an employment agreement with the Company which expires in
December 1998 and is cancelable by the Company only for cause, as defined in
the agreement. Dr. Schein currently receives an annual base salary of $150,000
and 16,667 stock options per year, exercisable at the fair market value on the
date of grant, and is eligible to receive additional stock options and bonuses
at the discretion of the Board of Directors. In addition, Dr. Schein will
receive a cash payment equal to 1.5% of the total consideration received by
the Company in a transaction resulting in a change of ownership of at least
50% of the outstanding Common Stock of the Company. The consummation of the
Offering will not result in a change of ownership under the terms of the
Judson Cooper, an Executive Vice President of the Company, has an employment
agreement with the Company which expires in December 1998 and is cancelable by
the Company only for cause, as defined in the agreement. Mr. Cooper currently
receives an annual base salary of $150,000 and 16,667 stock options per year,
exercisable at the fair market value on the date of grant, and is eligible to
receive additional stock options and bonuses at the discretion of the Board of
Directors. In addition, Mr. Cooper will receive a cash payment equal to 1.5%
of the total consideration received by the Company in a transaction resulting
in a change of ownership of at least 50% of the outstanding Common Stock of
the Company. The consummation of the Offering will not result in a change of
ownership under the terms of the agreement.
Dr. Dennis Hruby, Vice President of Research of the Company, has an
employment agreement with the Company which expires April 1, 1998, but is
automatically renewed each year unless either party notifies the other of its
intention not to renew. Dr. Hruby currently receives an annual base salary of
$85,000, and in April 1997 received options to purchase 10,000 shares of
Common Stock at the initial offering price (or $5.00 if the Offering is not
completed by November 1, 1997). Dr. Hruby is eligible to receive additional
stock options and bonuses at the discretion of the Board of Directors.
Dr. Kevin F. Jones, Director of Bacterial Research of the Company, has an
employment agreement with the Company which expires in December 1997 and is
cancelable by the Company only for cause, as defined in the agreement. Dr.
Jones currently receives an annual base salary of $90,000 and is eligible to
Directors.
Dr. Vincent A. Fischetti, the Chief Scientific Advisor of the Company, has
entered into a consulting agreement with the Company under which Dr. Fischetti
has agreed to provide certain research and development services to the
Company. Pursuant to the terms of the agreement, Dr. Fischetti will receive an
annual fee of $75,000. The agreement expires December 31, 1998 and is
cancelable by the Company only for cause as defined in the agreement.
Dr. Scott Hultgren, a Scientific Advisor of the Company since July 1997, has
entered into a consulting agreement with the Company under which Dr. Hultgren
Company. Pursuant to the terms of the agreement, Dr. Hultgren receives an
annual fee of $30,000. The agreement expires in July 1998, but may be extended
for up to four additional one year terms by mutual agreement. Dr. Hultgren
also received warrants to purchase 5,000 shares of Common Stock at the initial
offering price per share (or $5.00 per share if the Offering is not completed
by November 1, 1997).
1996 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
As of January 1, 1996, the Company adopted its 1996 Incentive and Non-
Qualified Stock Option Plan (the "Plan"), pursuant to which stock options may
be granted to key employees, consultants and outside directors.
Following the completion of the Offering, the Plan will be administered by a
committee (the "Committee") comprised of disinterested directors. The
Committee will determine persons to be granted stock options, the amount of
stock options to be granted to each such person, and the terms and conditions
of any stock options as permitted under the Plan. The members of the Committee
have not yet been appointed.
Both Incentive Options and Nonqualified Options may be granted under the
Plan. An Incentive Option is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Any Incentive Option granted under the Plan will have an
exercise price of not less than 100% of the fair market value of the shares on
the date on which such option is granted. With respect to an Incentive Option
granted to an employee who owns more than 10% of the total combined voting
stock of the Company or of any parent or Subsidiary of the Company, the
exercise price for such option must be at least 110% of the fair market value
of the shares subject to the option on the date the option is granted. A
Nonqualified Option (i.e., an option to purchase Common Stock that does not
meet the Code's requirements for Incentive Options) must have an exercise
price of at least the fair market value of the stock at the date of grant.
The Plan provides for the granting of options to purchase 333,333 shares of
Common Stock, of which 33,334 options are outstanding at an exercise price of
$1.50 per share, 16,667 options are outstanding at an exercise price of $3.00
per share and 10,000 options are outstanding at an exercise price per share
equal to the initial offering price (or $5.00 if the Offering is not completed
PRINCIPAL STOCKHOLDERS
The table below sets forth information as of the date of this Prospectus
and, as adjusted, assumes the sale of the Common Stock offered pursuant to
this Prospectus. The table also assumes, with respect to each individual
stockholder, the exercise of all warrants, options or conversion of all
convertible securities held by such stockholder. It does not assume the
exercise or conversion of securities held by any other holder of securities.
The table is based on information obtained from the persons named below with
respect to the beneficial ownership of shares of Common Stock by (i) each
person known by the Company to be the owner of more than 5% of the aggregate
outstanding shares of Common Stock, (ii) each Named Executive Officer and
director and (iii) all officers and directors as a group.
PERCENTAGE OF OUTSTANDING SHARES
AMOUNT AND -----------------------------------
NATURE OF              AFTER
NAMES AND ADDRESSES OF           BENEFICIAL PRIOR TO   MINIMUM   AFTER MAXIMUM
BENEFICIAL OWNER(1)             OWNERSHIP  OFFERING OFFERING(2) OFFERING(2)(3)
----------------------           ---------- -------- ----------- --------------
David H. de Weese(4)...........    477,683   12.4%       6.7%         6.1%
Judson Cooper(5)...............    477,683   14.1%       7.2%         6.5%
Joshua D. Schein, Ph.D.(6).....    477,683   14.1%       7.2%         6.5%
Steven M. Oliveira(7)..........    461,016   13.7%       7.0%         6.3%
Richard B. Stone(8)............    414,915   12.3%       6.3%         5.6%
135 East 57th St., 11th FL
Vincent Fischetti, Ph.D.(9)....    305,938    8.7%       4.5%         4.1%
Nathan Low(10).................    179,436    5.3%       2.7%         2.4%
Terence E. Downer(11)..........     10,000     *          *            *
All Officers and Directors as a
Group (five persons)...........  1,503,049   38.6%      21.0%        19.0%
*  Less than 1% of the outstanding shares of Common Stock.
(1) Unless otherwise indicated the address of each beneficial owner identified
is 666 Third Avenue, New York, NY 10017. Unless otherwise noted, the
Company believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially
owned by them.
(2) Excludes (i) 325,000 shares of Common Stock reserved for issuance upon
exercise of the Underwriter's Warrants; (ii) 333,333 shares of Common
Stock reserved for issuance under the Plan, pursuant to which options to
purchase 60,001 of such reserved shares have been granted; and (iii)
746,016 shares of Common Stock issuable upon the exercise of the de Weese,
Fischetti, Directors/Advisors Warrants and Bridge Warrants.
(4) Includes shares underlying the 461,016 de Weese Warrants and 16,667
options held by Mr. de Weese.
(5) Includes shares underlying 16,667 options held by Mr. Cooper.
(6) Includes shares underlying 16,667 options held by Dr. Schein.
(7) Mr. Oliveira is a member of CSO. See "Certain Transactions."
(8) Mr. Stone is a managing director of the Underwriter. See "Underwriting."
(9) Includes shares underlying the 150,000 Fischetti Warrants.
(10) Mr. Low is a principal of the Underwriter. See "Underwriting."
(11) Consists of shares underlying warrants held by Mr. Downer.
CERTAIN TRANSACTIONS
The Company and CSO have entered into a consulting agreement under which CSO
has agreed to provide certain business services to the Company, including
business development, licensing, strategic alliances and administrative
support. Pursuant to the terms of the agreement, CSO receives an annual fee of
$120,000 and will be reimbursed for certain expenses. The agreement expires on
January 15, 1998 and is cancelable by the Company only for cause as defined in
the agreement. Mr. Cooper, Dr. Schein and Steven Oliveira are the members of
CSO.
In March 1996, Dr. Fischetti and the Company entered into an agreement
pursuant to which Dr. Fischetti was to receive options to purchase up to
150,000 shares of Common Stock upon the completion of collaborative agreements
with certain pharmaceutical companies. On September 15, 1996, such agreement
was cancelled and Dr. Fischetti received warrants to purchase 150,000 shares
of Common Stock at $1.50 per share as compensation for introducing the Company
to certain potential collaborative pharmaceutical companies.
The Company believes that the terms of the transactions described above were
no less favorable than the Company could have obtained from unaffiliated third
parties. The Company has adopted a policy, effective following the
consummation of this Offering, that all future transactions between the
Company and its officers, directors and affiliates must (i) be approved by a
majority of those members of the Company's Board of Directors that are not
parties, directly or indirectly through affiliates, to such transactions and
(ii) be on terms no less favorable to the Company than could be obtained from
unrelated third parties.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $.0001 per share, and 10,000,000 shares of Preferred Stock, par value
$.0001 per share. As of the date of this Prospectus, there are 3,367,182
shares of Common Stock outstanding and no shares of Preferred Stock
The following summary description of the Company's Common Stock and
Preferred Stock is qualified in its entirety by reference to the Articles and
Bylaws, copies of which are included as exhibits to the Registration Statement
of which this Prospectus is a part.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of any outstanding Preferred Stock. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company available after the payment of all debts
and other liabilities and subject to the prior rights of any outstanding
Preferred Stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are,
and the shares offered by the Company in this Offering will be, when issued
and paid for, fully paid and nonassessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.
The Board of Directors has the authority, without further action of the
stockholders of the Company, to issue up to an aggregate of 10,000,000 shares
of Preferred Stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or the
designation of such series.
The Board of Directors, without stockholder approval, can issue Preferred
Stock with voting and conversion rights that could adversely affect the voting
power of holders of Common Stock. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Preferred
The Company's transfer agent and registrar for the Common Stock is American
Stock Transfer & Trust Company.
The Certificate of Incorporation (the "Certificate") of the Company provides
that, to the fullest extent permitted by applicable law, as amended from time
to time, the Company will indemnify any person who was or is a party or is
threatened to be made a party to an action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was director, officer, employee or agent of the Company or serves
or served any other enterprise at the request of the Company.
In addition, the Certificate provides that a director of the Company shall
not be personally liable to the Company or its stockholders for monetary
damages for breach of the director's fiduciary duty. However, the Certificate
does not eliminate or limit the liability of a director for any of the
following reasons: (i) a breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or knowing violation of law; or (iii) a
transaction from which the director derived an improper personal benefit.
The Company will purchase and maintain Directors' and Officers' Insurance as
soon as the Board of Directors determines practicable, in amounts which they
consider appropriate, insuring the directors against any liability arising out
of the director's status as a director of the Company regardless of whether
the Company has the power to indemnify the director against such liability
under applicable law.
The Company has been advised that it is the position of the Commission that
insofar as the foregoing provisions may be invoked to disclaim liability for
damages arising under the Securities Act, such provisions are against public
policy as expressed in the Securities Act and are, therefore, unenforceable.
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
In addition, certain provisions of the Company's Certificate and Bylaws
summarized in the following paragraphs may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders.
Special Meeting of Stockholders
The Company's Bylaws provide that special meetings of stockholders of the
Company may be called only by the President of the Company, the Board of
Directors or holders of not less than 10% of the votes entitled to be cast at
the special meeting.
Authorized But Unissued Shares
The authorized but unissued shares of Common Stock and Preferred Stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions, poison
pills and employee benefit plans. The existence of authorized but unissued and
unreserved Common Stock and Preferred Stock may enable the Board of Directors
to issue shares to persons friendly to current management which could render
more difficult or discourage an attempt to obtain control of the Company by
means of a proxy contest, tender, offer, merger or otherwise, and thereby
protect the continuity of the Company's management.
Shares. There can be no assurance that the Company will enter into a final
Factors--Dependence on Others; Collaborations." Of such outstanding shares of
The remaining 3,367,182 Restricted Shares were issued by the Company in
private transactions in reliance upon one or more exemptions contained in the
Act. The 1,288,012 Private Shares were issued in connection with two private
placement transactions completed in March and September 1996 and the 2,079,170
Founders' Shares were issued to the founders of the Company in December 1995.
The Restricted Shares are deemed to be "restricted securities" within the
meaning of Rule 144 promulgated pursuant to the Act and may be publicly sold
only if registered under the Act or sold pursuant to exemptions therefrom.
in accordance with the requirements of Rule 144, as described below. In
addition, the remaining 250,004 of the Private Shares will be eligible for
public sale in September 1997. However, certain holders of the Private Shares
and the holders of the Founders' Shares have agreed with the Underwriter not
to sell or otherwise dispose of such shares for a period of six months and 24
months, respectively, after the date of the consummation of the Offering.
In general, under Rule 144, as amended, subject to the satisfaction of
certain other conditions, a person, including an affiliate of the Company (or
persons whose shares are aggregated with an affiliate), who has owned
restricted shares of Common Stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of one per cent of the total number of outstanding
shares of the same class or, if the common stock is quoted on Nasdaq, the
average weekly trading volume during the four calendar weeks preceding the
sale. A person who has not been an affiliate of the Company for at least three
months immediately preceding the sale and who has beneficially owned shares of
the Company for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above.
The Company intends to file a registration statement under the Securities
Act to register shares of Common Stock reserved for issuance under the Plan,
thereby permitting the resale of such shares by non-affiliates in the public
market without restriction under the Securities Act. The Company has reserved
up to 333,333 shares of Common Stock for issuance under the Plan. As of the
date of this Prospectus, options to purchase 60,001 of such reserved shares of
Common Stock were outstanding under the Plan. See "Management--1996 Incentive
and Non-Qualified Stock Option Plan."
Prior to this Offering, there has been no public market for the Common
Stock, and no predictions can be made as to the effect, if any, that sales of
the Common Stock will have on the market price of such securities
from time to time. Sales of substantial amounts of the Company's securities in
the public market could have a significant adverse effect on prevailing market
prices and could impair the Company's future ability to raise capital through
the sale of its equity securities. See "Risk Factors--Shares Eligible for
Future Sale."
Subject to the terms and conditions set forth in the underwriting agreement
between the Company and the Underwriter (the "Underwriting Agreement"), the
Underwriter has agreed to use its best efforts to offer a minimum of 3,250,000
shares of Common Stock and a maximum of 4,000,000 shares of Common Stock to
the public at a purchase price of $5.00 per share. The shares of Common Stock
are offered on a "best-efforts" basis. The Underwriter has made no commitment
to purchase or take down all or any part of the shares of Common Stock offered
hereby. The Underwriter is offering the shares of Common Stock for a period of
30 days expiring on [September 1, 1997], which may be extended by mutual
agreement between the Company and the Underwriter for an additional 30 days
ending [October 1, 1997] (and an additional period of 10 business days
thereafter to permit clearance of the funds in escrow). The Underwriter will
promptly send to each subscriber confirmation of the subscriber's subscription
with instructions to forward funds to the order of United States Trust Company
of New York. All proceeds will be held in an escrow account at United States
Trust Company of New York. If a minimum of 3,250,000 shares of Common Stock is
not sold by [September 1, 1997] (or [October 1, 1997], if extended) and the
offering is canceled, all funds held in the escrow account will be promptly
returned to the subscribers without interest or deduction. During the escrow
period, subscribers will not be entitled to a refund of their subscription.
Upon completion of the sale of at least 3,250,000 shares of Common Stock
offered hereby, all funds in the escrow account will be released to the
Company. No affiliate of the Company will purchase any shares of Common Stock
in this Offering.
The Underwriter proposes to offer the shares of Common Stock at the offering
price set forth on the cover page. The Underwriter has advised the Company
that the Underwriter does not intend to confirm sales to any accounts over
which it exercises discretionary authority.
The Underwriting Agreement provides further that the Underwriter will
receive from the Company a non-accountable expense allowance of three per cent
of the gross proceeds of the Offering, of which $45,000 has been paid by the
Company to date. The Company has also agreed to pay all expenses in connection
with qualifying the shares of Common Stock offered hereby for sale under the
laws of such states as the Underwriter may designate, including expenses of
counsel retained for such purpose by the Underwriter.
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase up to 400,000 shares of
Common Stock. The Underwriter's Warrants will be nonexercisable for one year
after the date of this Prospectus. Thereafter, for a period of four years, the
Underwriter's Warrants will be exercisable at an amount equal to 110% of the
offering price of the Common Stock sold in this Offering. The Underwriter's
Warrants are not transferable for a period of one year after the date of this
Prospectus, except to officers and directors of the Underwriter, members of
the selling group and their officers and partners. The Company has also
granted certain demand and "piggyback" registration rights to the holders of
the Underwriter's Warrants.
For the life of the Underwriter's Warrants, the holders thereof are given,
at a nominal cost, the opportunity to profit from a rise in the market price
of the Common Stock with a resulting dilution in the interest of other
stockholders. Further, such holders may be expected to exercise the
Underwriter's Warrants at a time the Company would in all likelihood be able
to obtain equity capital on terms more favorable than those provided in the
Underwriter's Warrants.
Nathan Low, President of the Underwriter, beneficially owns an aggregate of
179,436 shares of Common Stock (representing 5.3% of the outstanding Common
Stock) of the Company. In addition, Richard Stone, a managing director of the
Underwriter, beneficially owns an aggregate of 414,915 shares of Common Stock
(representing 12.3% of the outstanding Common Stock) of the Company. As a
result, this Offering is being
conducted in accordance with the applicable provisions of Section 2720 of the
NASD Rules of Conduct. Accordingly, the initial public offering price can be
no higher than that recommended by a "qualified independent underwriter"
meeting certain standards. M.H. Meyerson & Co. served as qualified independent
underwriter in connection with this Offering. M.H. Meyerson & Co. has assumed
the responsibilities of acting as qualified independent underwriter in pricing
the Offering, has performed due diligence with respect to the information
contained herein and has participated in preparing the Registration Statement.
In its role as qualified independent underwriter, M.H. Meyerson & Co. will
receive an aggregate fee from the Underwriter of      ,       of which has
been paid and       of which is to be paid upon consummation of the Offering.
In addition, M.H. Meyerson & Co. will be reimbursed by the Underwriter for up
to       for certain expenses incurred in connection with its services,
including its independent counsel.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against liabilities in connection with the
Offering, including liabilities under the Securities Act.
The initial public offering price of the shares of Common Stock offered
hereby has been determined by negotiation between the Company and the
Underwriter, and within the parameters set forth above, and does not
necessarily bear any direct relationship to the Company's assets, earnings,
book value per share or other generally accepted criteria of value. Factors
considered in determining the offering price of the shares of Common Stock
included the business in which the Company is engaged, the Company's financial
condition, an assessment of the Company's management, the general condition of
the securities markets and the demand for similar securities of comparable
During and after the Offering, the Underwriter may purchase and sell Common
Stock in the open market. These transactions may include stabilizing
transactions and purchases to cover short positions created in connection with
the Offering. The Underwriter also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the Common Stock sold in
the Offering for their account may be reclaimed if such shares are repurchased
by the Underwriter in stabilizing or covering transactions. These activities
may stabilize, maintain or otherwise affect the market price of the Common
Stock which may be higher than the price that might otherwise prevail in the
open market. Neither the Company nor the Underwriter makes any representation
or prediction as to the discretion or magnitude of any effect that the
transactions described above may have on the price of the Common Stock.
The foregoing includes a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the copy
of the Underwriting Agreement filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The validity of the securities offered by this Prospectus will be passed
upon for the Company by Eilenberg & Zivian, New York, New York. Eilenberg &
Zivian owns 4,668 shares of Common Stock and has from time to time represented
CSO and its members. Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New York,
New York, has acted as counsel to the Underwriter with respect to certain
legal matters related to this Offering.
The financial statements of the Company as of December 31, 1995 and 1996,
for the period from inception (December 28, 1995) through December 31, 1995,
for the year ended December 31, 1996, and for the period from inception
through December 31, 1996 included in this Prospectus have been so included in
reliance on the report (which contains an explanatory paragraph relating to
the Company's ability to continue as a going concern as described in Note 1 to
such financial statements) of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The Company has filed a Registration Statement on Form SB-2 under the Act
with the Securities and Exchange Commission with respect to the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto: certain portions
have been omitted pursuant to rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, however all material terms of
such contract or document are reflected in this Prospectus. In each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge, at the Public
Reference Facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, 1400 Citicorp Center, 500 West Madison, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048 and copies
of all or any part thereof may be obtained upon payment of the fees prescribed
by the Commission. Electronic registration statements made through the
Electronic Data Gathering, Analysis and Retrieval System are publicly
available through the Commissions's World Wide Web site at http://www.sec.gov.
ANTIBIOTIC. A substance, such as penicillin or streptomycin, produced by or
derived from certain fungi, bacteria, and other organisms, that can destroy or
inhibit the growth of other microorganisms. Antibiotics are widely used in the
prevention and treatment of infectious diseases.
ANTIGEN. A substance that when introduced into the body stimulates the
production of an antibody. Antigens include toxins, bacteria, foreign blood
cells, and the cells of transplanted organs.
COMMENSAL. An organism participating in a symbiotic relationship in which
one species derives some benefit while the other is unaffected.
EFFECTOR. A small molecule that when bound to the allosteric site of an
enzyme causes either a decrease or an increase in the activity of the enzyme.
ENTEROCOCCUS. A usually nonpathogenic streptococcus that inhabits the
intestine.
ENZYME. Any of numerous proteins or conjugated proteins produced by living
organisms and functioning as biochemical catalysts.
FLUOROQUINOLONE. Chemical analogs of nalidixic acid, fluoroquinolones exert
their anti-microbial activity by inhibition of bacterial DNA gyrase (involved
in DNA coiling) and, generally, have a wide spectrum of antibiotic activity.
HUMORAL IMMUNITY. The component of the immune response involving the
transformation of B-lymphocytes into plasma cells that produce and secrete
antibodies to a specific antigen.
IMMUNE RESPONSE. An integrated bodily response to an antigen, especially one
mediated by lymphocytes and involving recognition of antigens by specific
antibodies or previously sensitized lymphocytes.
IMMUNE SYSTEM. The integrated body system of organs, tissues, cells, and
cell products such as antibodies that differentiates self from nonself and
neutralizes potentially pathogenic organisms or substances.
IMMUNOGLOBULIN. Any of a group of large glycoproteins secreted by plasma
cells in vertebrates that function as antibodies in the immune response by
binding the specific antigens. Immunoglobulins are found along the respiratory
and intestinal tracts, on mucosal surfaces, and in milk, saliva, tears, and
blood serum.
IMMUNOSUPPRESSION. Suppression of the immune response, as by drugs or
radiation, in order to prevent the rejection of grafts or transplants or
control autoimmune diseases. Also called immunodepression.
LACTOFERRIN. An iron-binding glycoprotein found in mucosal secretions and
blood neutrophils, which has antimicrobial activity.
LYMPHOCYTE. Any of the nearly colorless cells formed in lymphoid tissue, as
in the lymph nodes, spleen, thymus, and tonsils, constituting between 22 and
28 percent of all white blood cells in the blood of a normal adult human
being. Lymphocytes function in the development of immunity and include two
specific types, B cells and T cells.
LYSOZYME. An enzyme occurring naturally in egg white, human tears, saliva,
and other body fluids, capable of destroying the cell walls of certain
bacteria and thereby acting as a mild antiseptic.
METHICILLIN. A synthetic antibiotic, C\\17\\H\\19\\N\\2\\O\\6\\NaS, related to
penicillin and most commonly used in treatment of infections caused by
penicillinase-producing staphylococci.
MUCOUS MEMBRANE. A membrane lining all body passages that communicate with
the air, such as the respiratory and alimentary tracts, and having cells and
associated glands that secrete mucus.
PATHOGEN. An agent that causes disease, especially a living microorganism
such as a bacterium or fungus.
PENICILLIN. Any of a group of broad-spectrum antibiotic drugs obtained from
penicillium molds or produced synthetically, most active against gram-positive
bacteria and used in the treatment of various infections and diseases.
PEROXIDASE. Any of a group of enzymes that occur especially in plant cells
and catalyze the oxidation of a substance by a peroxide.
PHARYNGITIS. Inflammation of the pharynx, the section of the alimentary
canal that extends from the mouth and nasal cavities to the larynx, where it
becomes continuous with the esophagus.
RHEUMATIC FEVER. A severe infectious disease occurring chiefly in children,
characterized by fever and painful inflammation of the joints and frequently
resulting in permanent damage to the valves of the heart.
SEROTYPE. A group of closely related microorganisms distinguished by a
characteristic set of antigens.
STREPTOCOCCUS. A round to ovoid, gram-positive, often pathogenic bacterium
of the genus Streptococcus that occurs in pairs or chains, many species of
which destroy red blood cells and cause various diseases in human beings,
including erysipelas, scarlet fever, and septic sore throat.
SUBUNIT VACCINE. A vaccine consisting of purified or semi-purified
components of an infectious organism for which protection is desired.
SYSTEMIC. Of, relating to, or affecting the entire body or an entire
organism.
TETRACYCLINE. A yellow crystalline compound, C\\22\\H\\24\\N\\2\\O\\8\\,
synthesized or derived from certain microorganisms of the genus Streptomyces
and used as a broad-spectrum antibiotic.
TOXIN. A poisonous substance, especially a protein, that is produced by
living cells or organisms and is capable of causing disease when introduced
into the body tissues but is often also capable of inducing neutralizing
antibodies or antitoxins.
VACCINE. A preparation of a weakened or killed pathogen, such as a bacterium
or virus, or of a portion of the pathogen's structure that upon administration
stimulates antibody production against the pathogen but is incapable of
causing severe infection.
VANCOMYCIN. An antibiotic, C\\66\\H\\75\\Cl\\2\\N\\9\\O\\24\\, produced by the
actinomycete Streptomyces orientalis, found in Indonesian and Indian soil, and
effective against staphylococci and spirochetes.
VIRUS. Any of various simple submicroscopic parasites of plants, animals,
and bacteria that often cause disease and that consist essentially of a core
of RNA or DNA surrounded by a protein coat. Unable to replicate without a host
cell, viruses are typically not considered living organisms.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants.......................................... F-2
Balance Sheet as of December 31, 1995 and 1996 and March 31, 1997
(unaudited)............................................................... F-3
Statement of Operations for the period from December 28, 1995 (inception)
through December 31, 1995, for the year ended December 31, 1996, for the
period from inception through December 31, 1996, for the three months
ended March 31, 1996 and 1997 (unaudited) and for the period from December
28, 1995 (inception) through March 31, 1997 (unaudited)................... F-4
Statement of Changes in Stockholders' Equity for the period from inception
through December 31, 1996 and for the three months ended March 31, 1997
Statement of Cash Flows for the period from inception through December 31,
1995, for the year ended December 31, 1996, for the period from inception
through December 31, 1996, for the three months ended March 31, 1996 and
1997 (unaudited) and for the period from December 28, 1995 (inception)
through March 31, 1997 (unaudited)........................................ F-6
Notes to Financial Statements.............................................. F-7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of SIGA Pharmaceuticals, Inc.
In our opinion, the accompanying balance sheet and related statements of
operations, of cash flows and of changes in stockholders' equity present
fairly, in all material respects, the financial position of SIGA
Pharmaceuticals, Inc. (a development stage company) at December 31, 1995 and
1996, and the results of its operations for the period from inception
(December 28, 1995) through December 31, 1995, for the year ended December 31,
1996 and for the period from inception through December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a development stage company and has
suffered operating losses since inception. These and other factors, as
discussed in Note 1, raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Price Waterhouse LLP
DECEMBER 31, DECEMBER 31,   MARCH 31,
1995         1996         1997
------------ ------------  -----------
Cash and cash equivalents.............       --     $    42,190   $   587,741
Prepaid sponsored research (Note 7)...       --         370,798       329,128
Prepaid expenses......................       --             --         18,750
Deferred offering costs (Note 2)......       --         115,688       163,489
-------    -----------   -----------
Total current assets................       --         528,676     1,099,108
Prepaid sponsored research (Note 7)...       --          30,208           --
Equipment, net (Note 3)...............       --          21,425        19,036
Other assets..........................   $ 6,937            609           609
Total assets........................   $ 6,937    $   580,918   $ 1,118,753
=======    ===========   ===========
Accounts payable......................   $ 7,937    $    92,241   $   107,205
Accrued expenses......................       --          22,260        73,737
Patent preparation fees payable (Note
7)...................................       --          66,437        66,437
Bridge notes (Note 9).................       --             --        889,167
Total liabilities...................     7,937        180,938     1,136,546
Commitments and contingencies (Notes 6,
7, 8 and 9)                                   --             --            --
Preferred stock ($.0001 par value,
issued and outstanding)..............       --             --            --
Common stock ($.0001 par value,
2,079,170, 3,367,182 and 3,367,182
shares issued and outstanding at
December 31, 1995, December 31, 1996,
and March 31, 1997, respectively)
(Notes 4 and 9)......................       208            337           337
Additional paid-in capital............     1,040      2,668,819     2,801,819
Stock subscriptions outstanding.......    (1,248)           --            --
Deficit accumulated during the
development stage....................    (1,000)    (2,269,176)   (2,819,949)
(deficit)..........................    (1,000)       399,980       (17,793)
Total liabilities and stockholders'
equity.............................   $ 6,937    $   580,918   $ 1,118,753
The accompanying notes are an integral part of these financial statements.
DECEMBER 28,      YEAR        DECEMBER 28,                               DECEMBER 28,
1995 (INCEPTION)    ENDED     1995 (INCEPTION) THREE MONTHS THREE MONTHS 1995 (INCEPTION)
TO DECEMBER     DECEMBER      TO DECEMBER    ENDED MARCH  ENDED MARCH      TO MARCH
31, 1995      31, 1996        31, 1996       31, 1996     31, 1997       31, 1997
---------------- -----------  ---------------- ------------ ------------ ----------------
(Unaudited)  (Unaudited)    (Unaudited)
(including amounts to
related parties of
$444,000 for the year
ended December 31,
1996 and $116,423 and
$113,605 for the three
months ended March 31,
1996 and 1997,
respectively).........       $ 1,000     $   787,817    $   788,817     $ 257,635    $ 300,962     $ 1,089,779
development (including
amounts to related
parties of $75,000 for
the year ended
and $18,750 for each
of the three months
ended March 31, 1996
and 1997).............           --          662,205        662,205        98,169      203,959         866,164
fees..................           --          452,999        452,999       258,896       15,462         468,461
warrant compensation..           --          367,461        367,461           --           --          367,461
---------     -----------    -----------     ---------    ---------     -----------
expenses.............         1,000       2,270,482      2,271,482       614,700      520,383       2,791,865
income/(expense).......           --            2,306          2,306           --       (30,390)        (28,084)
Net loss...............       $(1,000)    $(2,268,176)   $(2,269,176)    $(614,700)   $(550,773)    $(2,819,949)
=========     ===========    ===========     =========    =========     ===========
share.................           --      $     (0.66)                   $   (0.21)   $   (0.15)
=========     ===========                    =========    =========
Weighted average number
of shares
outstanding...........     2,498,581       3,413,531                    2,886,408    3,686,589
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON STOCK     ADDITIONAL     STOCK     DURING THE        TOTAL
-------------------  PAID-IN   SUBSCRIPTIONS DEVELOPMENT   STOCKHOLDERS'
SHARES   PAR VALUE  CAPITAL    OUTSTANDING     STAGE     EQUITY (DEFICIT)
--------- --------- ---------- ------------- -----------  ----------------
Issuance of common
stock at inception.... 2,079,170   $208    $    1,040    $(1,248)           --             --
Net loss...............       --     --            --         --     $    (1,000)   $     1,000)
---------   ----    ----------    -------    -----------    -----------
Balance at December 31,
1995................... 2,079,170    208         1,040     (1,248)        (1,000)        (1,000)
Net proceeds from
issuance and sale of
common stock.......... 1,038,008    104     1,551,333        --             --       1,551,437
common stock..........   250,004     25       748,985        --             --         749,010
Receipt of stock
outstanding...........       --     --            --       1,248            --           1,248
Issuance of
compensatory options
and warrants..........       --     --        367,461        --             --         367,461
Net loss...............       --     --            --         --      (2,268,176)    (2,268,176)
1996................... 3,367,182    337     2,668,819        --      (2,269,176)       399,980
Issuance of warrants
with bridge notes
(Note 9) (unaudited)..       --     --        133,000        --             --         133,000
Net loss (unaudited)...       --     --            --         --        (550,773)      (550,773)
Balance at March 31,
1997 (unaudited)....... 3,367,182   $337    $2,801,819        --     $ 2,819,949    $   (17,793)
=========   ====    ==========    =======    ===========    ===========    ===
DECEMBER 28,                 DECEMBER 28,     THREE        THREE
1995                         1995        MONTHS       MONTHS      DECEMBER 28,
(INCEPTION) TO  YEAR ENDED   (INCEPTION) TO    ENDED        ENDED          1995
DECEMBER 31,  DECEMBER 31,   DECEMBER 31,   MARCH 31,    MARCH 31,   (INCEPTION) TO
1995          1996           1996         1996         1997      MARCH 31, 1997
-------------- ------------  -------------- -----------  -----------  --------------
(Unaudited)  (Unaudited)   (Unaudited)
Net loss...............     $(1,000)    $(2,268,176)   $(2,269,176)  $  (614,700) $ (550,773)   $(2,819,949)
Adjustments to
reconcile net loss to
Depreciation..........         --            7,249          7,249         1,016       2,389          9,638
compensation.........         --          367,461        367,461           --          --         367,461
Amortization of debt
discount.............         --              --             --            --       22,167         22,167
Changes in assets and
liabilities:
Prepaid sponsored
research............         --         (401,006)      (401,006)     (684,130)     71,878       (329,128)
Prepaid expenses.....         --              --             --            --      (18,750)       (18,750)
Other assets.........      (6,937)          6,328           (609)          --          --            (609)
accrued expenses....       7,937         173,001        180,938        (8,412)     66,441        247,379
-------     -----------    -----------   -----------  ----------    -----------
activities..........         --       (2,115,143)    (2,115,143)   (1,306,226)   (406,648)    (2,521,791)
investing activities:
Capital expenditures...         --          (28,674)       (28,674)      (24,377)        --         (28,674)
activities...........         --          (28,674)       (28,674)      (24,377)        --         (28,674)
financing activities:
stock.................         --        2,300,447      2,300,447     1,556,999         --       2,300,447
outstanding...........         --            1,248          1,248           --          --           1,248
Deferred offering
costs.................         --         (115,688)      (115,688)          --      (47,801)      (163,489)
Proceeds from bridge
notes.................         --              --             --            --    1,000,000      1,000,000
Net cash provided from
activities...........         --        2,186,007      2,186,007     1,556,999     952,199      3,138,206
Net increase in cash and
cash equivalents.......         --           42,190         42,190       226,396     545,551        587,741
Cash and cash
equivalents, beginning
of period..............         --              --             --            --       42,190            --
equivalents, end of
period.................         --      $    42,190    $    42,190   $   226,396  $  587,741    $   587,741
=======     ===========    ===========   ===========  ==========    ===========
There were no cash payments for interest or income taxes for the periods
ended December 31, 1995 and 1996 and the period ended March 31, 1997.
(Unaudited with respect to March 31, 1996 and 1997 and for each three month
period then ended)
1. ORGANIZATION AND BASIS OF PRESENTATION
SIGA Pharmaceuticals, Inc. (the "Company") was incorporated in the State of
Delaware on December 28, 1995. The Company is engaged in the discovery,
development and commercialization of vaccines, antibiotics, and novel anti-
infectives for the prevention and treatment of infectious diseases. The
Company's technologies are licensed from third parties and the Company depends
on third parties to conduct research on its behalf pursuant to research and
consulting agreements.
The Company's activities since inception have consisted primarily of
sponsoring research and development, performing business and financial
planning, preparing and filing patent applications, and raising capital.
Accordingly, the Company is considered to be a development stage company and
will require additional financing to achieve commercialization of its
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Since inception, the Company has
incurred cumulative net operating losses and expects to incur substantial
additional losses to complete the commercialization of its technologies. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. The Company's ability to continue as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations as they come due. Management is actively pursuing various options
which include securing additional equity financing through an initial public
offering and believes that sufficient funding will be available to meet its
planned business objectives. The Company has entered into a non-binding letter
of intent with an underwriter to sell shares of the Company's common stock in
an initial public offering (the "IPO") pursuant to the Securities Act of 1933.
The financial statements do not include any adjustments relating to the
recoverability of the carrying amount of recorded assets or the amount of
liabilities that might result from the outcome of these uncertainties.
Cash equivalents consist of short term, highly liquid investments, with
original maturities of less than three months when purchased and are stated at
cost. Interest is accrued as earned.
Equipment is stated at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of the respective assets, none of which
exceeds three years.
Deferred offering costs
In connection with the Company's proposed IPO, the Company has incurred
certain costs which have been deferred. In the event the proposed IPO is not
consummated the deferred offering costs will be expensed.
Research and development costs are expensed as incurred and include costs of
third parties who conduct research and development, pursuant to development
and consulting agreements, on behalf of the Company. Costs related to the
acquisition of technology rights, for which development work is still in
process, and that have no alternative future uses, are expensed as incurred
and considered a component of research and development costs.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income taxes are accounted for under the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Deferred income taxes are recorded for temporary
differences between financial statement carrying amounts and the tax basis of
assets and liabilities. Deferred tax assets and liabilities reflect the tax
rates expected to be in effect for the years in which the differences are
expected to reverse. A valuation allowance is provided if it is more likely
than not that some or all of the deferred tax asset will not be realized.
Net loss per common share
Net loss per common share is computed using the weighted average number of
common shares and common share equivalents assumed to be outstanding during
the period. Common share equivalents consist of the Company's common shares
issuable upon exercise of stock options and outstanding warrants. Pursuant to
the requirements of the Securities and Exchange Commission, stock options,
warrants and shares issued by the Company within one year of the date of the
initial public offering at prices below the proposed offering price have been
included in the calculation of weighted average shares outstanding as if they
were outstanding for all periods presented using the treasury stock method.
Accounting 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.
The carrying value of cash and cash equivalents, and accounts payable and
accrued expenses approximates fair value due to the relatively short maturity
of these instruments.
3. EQUIPMENT
Equipment consisted of the following at December 31, 1996 and March 31,
DECEMBER 31, MARCH 31,
1996       1997
------------ ---------
Computer equipment..................................   $28,674     $28,674
Less--Accumulated depreciation....................    (7,249)     (9,638)
-------     -------
Equipment, net....................................   $21,425     $19,036
=======     =======
4. STOCKHOLDERS' EQUITY
In March 1996, the Company completed a private offering of 1,038,008 shares
of its common stock at the price of $1.50 per share, providing gross proceeds
of $1,557,000, and net proceeds, after deducting expenses, of $1,551,437. In
September 1996, the Company completed a second private offering of 250,004
shares of common stock at a price of $3.00 per share providing gross proceeds
of $750,000 and net proceeds, after deducting expenses, of $749,010.
Reverse stock split
Effective December 1996, the Company implemented a one for six reverse stock
split (without changing the par value thereof) applicable to all issued and
outstanding shares of the Company's common stock. All fractional shares
resulting from such stock split were rounded up to the next whole share. All
common shares, stock options, warrants and related per share data, reflected
in the accompanying financial statements and notes thereto, have been
presented as if such change had occurred at December 28, 1995.
Stock option plan and warrants
In January 1996, the Company implemented its 1996 Incentive and Non-
Qualified Stock Option Plan (the "Plan") whereby options to purchase up to
333,333 shares of the Company's common stock may be granted to employees,
consultants and outside directors of the Company. The exercise period for
options granted under the Plan, except those granted to outside directors, is
determined by a committee of the Board of Directors. Stock options granted to
outside directors pursuant to the Plan must have an exercise price equal to or
in excess of the fair market value of the Company's common stock at the date
of grant and become exercisable over a period of three years with a third of
the grant being exercisable at the completion of each year of service
subsequent to the grant. The fair market value of the Company's common stock
is determined by a committee of the Board of Directors. The committee is
comprised entirely of employees who receive stock options under the Plan.
During the year ended December 31, 1996, the Company granted options under the
Plan to employees to purchase 33,334 shares of its common stock at an exercise
price of $1.50 per share and options to purchase 16,667 shares at an exercise
price of $3.00 per share. These options expire on January 1, 2001 and November
18, 2006, respectively. All such grants were outstanding at December 31, 1996
and were eligible for exercise. There were no grants to outside directors
during the year ended December 31, 1996.
In November 1996, the Company entered into an employment agreement with its
President and Chief Executive Officer. Under the terms of the agreement, the
employee received warrants to purchase 461,016 shares of common stock at $3.00
per share. Warrants to purchase 25% of such shares were exercisable upon
issuance and the remaining warrants are exercisable on a pro rata basis on the
first, second and third anniversaries of the agreement (see Note 8). These
warrants expire on November 18, 2006.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
warrants issued to employees and stock options granted under the Plan. During
the year ended December 31, 1996, compensation expense of $57,627 has been
recognized for warrants issued to employees and $8,334 for options issued
pursuant to its stock-based compensation plan calculated based upon the
difference between the exercise price of the warrant or option and the fair
market value of the Company's common stock on the date of grant. Had
compensation cost for warrants issued and stock options granted been
determined based upon the fair value at the grant date for awards consistent
with the methodology prescribed under Statement of Financial Accounting
Standards No. 123 ("FAS 123"), "Accounting for Stock-Based Compensation," the
Company's net loss and loss per share would have been increased by
approximately $73,000, or approximately $.02 per share.
In March 1996, the Company entered into an agreement with a consultant, who
is a stockholder, whereby the consultant would be granted options to purchase
150,000 shares of the Company's common stock, at an exercise price of $1.50
per share, contingent upon completion of collaborative agreements with
specified pharmaceutical companies. In September 1996, such agreement was
terminated and the consultant was issued
warrants to purchase 150,000 shares of its common stock, at an exercise price
of $1.50 per share. The warrants were exercisable upon issuance and expire on
the twentieth anniversary of the date of issuance. The Company has recognized
non-cash compensation expense of $301,500 for the year ended December 31,
1996, based upon the fair value of such warrants on the date of grant (see
Note 6).
The fair value of the options and warrants granted to employees and the
warrants issued to the consultant during 1996 ranged from $.22 to $2.01 on the
date of the respective grant using the Black-Scholes option-pricing model
assuming (a) no dividend yield, (b) a risk-free interest rate ranging from
5.26% to 6.26% based on the date of the respective grant, (c) no forfeitures,
and (d) an expected life of three years. As permitted under the provisions of
FAS 123, and based on the historical lack of a public market for the Company's
common stock, no factor for volatility has been reflected in the option and
warrant pricing calculation.
The Company has incurred losses since inception which have generated net
operating loss carryforwards of approximately $1,901,000 and $2,451,000,
respectively, at December 31, 1996 and March 31, 1997 for federal and state
income tax purposes. These carryforwards are available to offset future
taxable income and expire in 2011 and 2012 for federal income tax purposes.
These losses are subject to limitation on future years' utilization should
certain ownership changes occur.
The net operating loss carryforwards and temporary differences, arising
primarily from noncash compensation expense, result in a noncurrent deferred
tax benefit at December 31, 1996 and March 31, 1997 of approximately $877,000
and $1,097,000, respectively. In consideration of the Company's accumulated
losses and the uncertainty of its ability to utilize this deferred tax benefit
in the future, the Company has recorded a valuation allowance of an equal
amount on such dates to fully offset the deferred tax benefit amount.
For the year ended December 31, 1996 and the three months ended March 31,
1997, the Company's effective tax rate differs from the federal statutory rate
principally due to net operating losses and other temporary differences for
which no benefit was recorded, state taxes and other permanent differences.
6. RELATED PARTIES
Consulting agreements
The Company has entered into a consulting agreement, expiring January 15,
1998, with CSO Ventures LLC ("CSO") under which CSO provides the Company with
business development, operations and other advisory services. Pursuant to the
agreement CSO is paid an annual consulting fee of $120,000. Two Executive Vice
Presidents of the Company are principals of CSO. The agreement is only
cancelable by the Company for cause, as defined in the agreement. During the
year ended December 31, 1996 and the three months ended March 31, 1997, the
Company incurred expense of $120,000 and $30,000, respectively, pursuant to
the agreement.
In connection with the development of its licensed technologies the Company
has entered into a consulting agreement with the scientist who developed such
technologies, under which the consultant serves as the Company's Chief
Scientific Advisor. The scientist, who is a stockholder, shall be paid an
annual consulting fee of $75,000. The agreement, which commenced in January
1996 and is only cancelable by the Company for cause, as defined in the
agreement, has an initial term of two years and provides for automatic
renewals of three additional one year periods unless either party notifies the
other of its intention not to renew. Research and
development expense incurred under the agreement amounted to $75,000 and
$18,750 for the year ended December 31, 1996 and the three month period ended
March 31, 1997, respectively. During the year ended December 31, 1996, the
scientist was issued warrants to purchase 150,000 shares of the Company's
common stock at an exercise price of $1.50 per share (see Note 4).
The Company has employment agreements, expiring in December 1998, with its
two Executive Vice Presidents ("EVPs"), who are principal shareholders of the
Company and CSO, under which the EVPs are each to be paid minimum annual
compensation of $150,000. In addition, the Company granted each of the EVPs
options to purchase 16,667 shares of the Company's common stock, at an
exercise price of $1.50 per share, upon execution of the respective
agreements. During the term of the agreements the EVPs are each to receive
annual stock option grants to purchase 16,667 common shares exercisable at the
fair market value at the date of grant. Under the provisions of the agreements
the EVPs will each receive a cash payment equal to 1.5% of the total
consideration received by the Company in a transaction resulting in a greater
than 50% change in ownership of the outstanding common stock of the Company.
The Company incurred $324,000 and $83,605 of expense for the year ended
December 31, 1996 and the three months ended March 31, 1997, respectively,
pursuant to these agreements.
Underwriting agreement
As discussed in Note 1, the Company has secured a nonbinding letter of
intent with an underwriter to sell shares of the Company's common stock in an
IPO. At December 31, 1996 and March 31, 1997, employees of the underwriter
hold 594,351 shares or approximately 18% of the Company's outstanding common
7. LICENSE AND RESEARCH SUPPORT AGREEMENT
In January 1996, the Company entered into a license and research support
agreement with third parties. Under the terms of the agreement, the Company
has been granted an exclusive world-wide license to make, use and sell
products derived from the licensed technologies. In consideration of the
license grant the Company is obligated to pay royalties equal to a specified
percentage of net sales of products incorporating the licensed technologies.
In the event the Company sublicenses any technologies covered by the agreement
the third parties would be entitled to a significant percentage of the
sublicense revenue received by the Company. In addition, the Company is
required to make milestone payments, up to $225,000 per product, for each
product developed from the licensed technologies.
The Company has agreed to sponsor further research by the third parties for
the development of the licensed technologies for a period of two years from
the date of the agreement, in return for a payment of $725,000 to such third
parties. The period of sponsored research will automatically be renewed for
additional one-year periods unless terminated by the Company. Amortization of
prepaid sponsored research under this agreement was $332,292 and $71,878 for
the year ended December 31, 1996 and the three months ended March 31, 1997,
respectively. The Company also agreed to reimburse the third parties for costs
associated with the preparation, filing and prosecution of patent rights for
the licensed technologies incurred prior to the execution of the license and
research support agreement. The agreement is only cancelable by the Company
for cause, as defined in the agreement. The Company has expensed $310,986 of
reimbursable patent preparation costs pursuant to the agreement during the
year ended December 31, 1996, of which $66,437 remains accrued at December 31,
1996 and March 31, 1997.
In January 1996, the Company entered into research agreements with third
parties. Under the terms of the agreements, the Company has agreed to fund two
years of research in return for annual payments of $183,320. Research and
development expense under these agreements amounted to $175,024 and $45,830
1997, respectively.
8. COMMITMENTS AND CONTINGENCIES
The Company has an employment agreement with its Director of Bacterial
Research which expires in December 1997. Under the terms of the agreement, the
employee is to receive minimum annual compensation of $90,000. The agreement
is only cancelable by the Company for cause, as defined in the agreement.
During the year ended December 31, 1996 and the three months ended March 31,
1997, the Company incurred $90,000 and $24,231, respectively, of expense
pursuant to the agreement.
In November 1996, the Company entered into an employment agreement, expiring
in November 1999, with its President and Chief Executive Officer. Under the
terms of the agreement, the employee is to receive annual base compensation of
$225,000 and options to purchase 16,667 shares of the Company's common stock,
exercisable at the fair market value on the date of grant. Upon execution of
the agreement, the Company granted the employee options to purchase 16,667
shares of its common stock at an exercise price of $3.00 per share. In
addition, the employee was issued warrants to purchase 461,016 shares of
common stock at $3.00 per share (see Note 4). Under the provisions of the
agreement, the President will receive a cash payment equal to 1.5% of the
total consideration received by the Company in a transaction resulting in a
greater than 50% change in ownership of the outstanding common stock of the
Company. During the year ended December 31, 1996 and the three months ended
March 31, 1997, the Company incurred $28,435 and $60,577, respectively, of
expense pursuant to the agreement.
9. SUBSEQUENT EVENTS (UNAUDITED)
In January and February 1997, in contemplation of its proposed IPO, the
Company issued bridge notes (the "Bridge Notes") in the principal amount of
$1,000,000. The Bridge Notes bear interest at 10% per annum and are due and
payable together with accrued but unpaid interest, on the earlier of (a) the
closing of an initial public offering of the Company's common stock, or (b)
six months after the date of execution of the Bridge Notes. In conjunction
with the issuance of the Bridge Notes, the Company entered into warrant
agreements whereby to the purchasers of the Bridge Notes will be issued
warrants to purchase a number of shares of common stock determined by dividing
(i) one-half of the gross proceeds of the Bridge Notes ($500,000) by (ii) the
IPO price per share. The warrants will provide for an exercise price per share
equal to the IPO price per share and will not be exercisable for a period of
one year subsequent to issuance. In the event that prior to the maturity date
of the Bridge Notes (i) the Company's proposed IPO is not consummated, or (ii)
the Company is acquired by another corporation, the holders of the Bridge
Notes will receive warrants to purchase an aggregate of 100,000 shares of
common stock at an exercise price of $5.00 per share. As of July 8, 1997 the
maturity date of Bridge Notes in the principal amount of $250,000, which had
original maturity dates of July 1997, had been extended to the earlier of
October 1, 1997 or completion of the IPO. The Company is currently seeking
extensions of the maturity date of the remaining Bridge Notes to the earlier
of October 1, 1997 or completion of the IPO.
The fair value of the warrants, in the amount of $133,000, issued by the
Company in connection with the bridge financing, has been recorded as debt
discount and is being amortized over the six month term of the Bridge Notes.
During the period ended March 31, 1997 the Company recognized $22,167 of debt
discount amortization as interest expense. Upon completion of the Company's
planned IPO and repayment of the Bridge Notes from the net proceeds of the
offering, the unamortized portion of the debt discount will be immediately
expensed.
agreement with a large pharmaceutical company. Under the terms of the
agreement, the Company has granted the pharmaceutical company an exclusive
worldwide license to develop, make, use and sell products derived from
technologies. The agreement requires the pharmaceutical company to sponsor
further research by the Company for the development of the licensed
technologies for a period of two years from the effective date of the
agreement, in return for payments to the Company totaling $1,200,000. In
consideration of the license grant the Company is entitled to receive
royalties equal to specified percentages of net sales of products
could receive milestone payments, under the terms of the agreement of up to
$13,750,000 for the initial product and up to $3,250,000 for the second
product developed from a single compound derived from licensed technologies.
The Company could also receive, under certain circumstances additional
milestone payments for an additional compound, as defined in the agreement,
developed from the licensed technologies.
In July 1997 the Company entered into a non-binding letter of intent with a
third party pursuant to which the Company will acquire the third party's
rights to certain technology, intellectual property and related rights in the
field of gram negative antibiotics in exchange for 335,530 shares of the
Company's common stock. There can be no assurance that the Company will enter
into a final agreement with the third party on the terms described above or at
SIGA'S FOCUS
APPLYING CUTTING-EDGE SCIENCE
TO FIGHT INFECTIOUS DISEASE
SIGA is engaged in the discovery, development and commercialization of novel
products for the prevention and treatment of infectious diseases. The company
has four lead programs in development, including gram positive commensal
vectors for the delivery of mucosal vaccines; mucosal vaccines against strep
throat and periodontal diseases; novel targets for new antibiotics; and
Surface Protein Expression System (SPEX) for cost-effective mass production of
proteins.
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
Prospectus Summary ........................................................   5
Risk Factors ..............................................................  10
Use of Proceeds............................................................  20
Capitalization ............................................................  21
Dilution ..................................................................  22
Dividend Policy............................................................  23
Selected Financial Data....................................................  24
Plan of Operation..........................................................  25
Business ..................................................................  28
Management ................................................................  42
Principal Stockholders ....................................................  49
Certain Transactions ......................................................  50
Description of Securities..................................................  50
Shares Eligible for Future Sale............................................  52
Underwriting ..............................................................  53
Legal Matters..............................................................  54
Experts....................................................................  54
Available Information......................................................  54
Glossary ..................................................................  56
Index to Financial Statements.............................................. F-1
UNTIL      , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR SOLICITATIONS TO PURCHASE THE SECURITIES OFFERED HEREBY.
MINIMUM OFFERING OF 3,250,000 SHARES OF COMMON STOCK AND MAXIMUM OFFERING OF
4,000,000 SHARES OF COMMON STOCK
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee............................................ $  6,879
Nasdaq-SCM Listing Fee.......................................... $  8,675
NASD Filing Fee................................................. $  2,354
Accounting Fees and Expenses*................................... $100,000
Printing and Engraving*......................................... $ 75,000
Legal Fees and Expenses*........................................ $100,000
Blue Sky Fees and Expenses...................................... $ 46,000
Transfer Agent and Registrar Fees*.............................. $  2,000
Miscellaneous Expenses*......................................... $  9,092
Total....................................................... $350,000
*Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following discussion gives retroactive effect to the one for 6 reverse
stock split effected on December 6, 1996. Since its organization in December
1995, the Company has sold and issued the following unregistered securities:
In December 1995, the Company issued 2,079,170 shares of Common Stock to
Judson A. Cooper, Steven M. Oliveira, Joshua D. Schein, Vincent A. Fischetti,
Kevin F. Jones, Dennis Hruby and Richard Stone for nominal consideration in
connection with the formation of the Company.
In March 1996, the Company sold 1,038,008 shares of Common Stock to eighteen
accredited investors for gross proceeds of $1,557,000 in cash.
In September 1996, the Company issued 250,004 shares of Common Stock to
twelve accredited investors and two non-accredited investors for $750,000 in
II-1
In February 1997, the Company entered into warrant agreements to issue
warrants to purchase an estimated 100,000 shares of common stock to eight
accredited investors in connection with a $1,000,000 bridge financing
completed on February 28, 1997.
ITEM 27. EXHIBITS.
NUMBER    DESCRIPTION OF EXHIBITS
-------   -----------------------
1         Underwriting Agreement
**1(a)    Form of Underwriting Agreement
*1(b)     Form of Underwriter's Warrant
*1(c)     Escrow Agreement by and among the Company, Sunrise Securities Corp. and
United States Trust Company of New York, dated as of              , 1997
*1(d)     Form of Subscription Agreement to purchase shares of Common Stock of the
3         Certificate of Incorporation and By-Laws
*3(a)     Certificate of Incorporation of the Company, in effect as of the date
hereof
*3(b)     Bylaws of the Company, in effect as of the date hereof
4         Instruments defining the rights of holders
*4(a)     Form of Common Stock Certificate
*4(b)     1996 Incentive and Non-Qualified Stock Option Plan(1)
*4(c)     Warrant Agreement dated as of September 15, 1996 between the Company and
Vincent A. Fischetti(1)
*4(d)     Warrant Agreement dated as of November 18, 1996 between the Company and
David de Weese(1)
*4(e)     Form of Bridge Loan Letter Agreement for Bridge Investors
*4(f)     Form of Promissory Note for Bridge Investors
*4(g)     Form of Warrant Agreement for Bridge Investors
*4(h)     Form of Registration Rights Agreement for Bridge Investors
5         Opinion re: legality
*5(a)     Opinion of Eilenberg & Zivian
10        Material Contracts
*10(a)    License and Research Support Agreement between the Company and The
Rockefeller University, dated as of January 31, 1996; and Amendment to
License and Research Support Agreement between the Company and The
Rockefeller University, dated as of October 1, 1996(2)
*10(b)    Research Agreement between the Company and Emory University, dated as of
January 31, 1996(2)
*10(c)    Research Support Agreement between the Company and Oregon State
University, dated as of January 31, 1996(2)
*10(d)    Employment Agreement between the Company and Dr. Joshua D. Schein, dated
as of January 1, 1996(1)
*10(e)    Employment Agreement between the Company and Judson A. Cooper, dated as of
January 1, 1996; and Amendment No. 1 to Employment Agreement between the
Company and Judson A. Cooper, dated as of November 18, 1996(1)
*10(f)    Employment Agreement between the Company and Dr. Kevin F. Jones, dated as
of January 1, 1996
*10(g)    Employment Agreement between the Company and David de Weese, dated as of
November 18, 1996(1)
*10(h)    Consulting Agreement between the Company and CSO Ventures LLC, dated as of
*10(i)    Consulting Agreement between the Company and Dr. Vincent A. Fischetti,
dated as of January 1, 1996
*10(j)    Consulting Agreement between the Company and Dr. Dennis Hruby, dated as of
*10(k)    Letter Agreement between the Company and Dr. Vincent A. Fischetti, dated
as of March 1, 1996
**10(l)   Employment Agreement between the Company and Dr. Dennis Hruby, dated as of
**10(m)   Clinical Trials Agreement between the Company and National Institute of
Allergy and Infectious Diseases, dated as of July 1, 1997
**10(n)   Research Agreement between the Company and The Research Foundation of
State University of New York, dated as of July 1, 1997(2)
**10(o)   Collaborative Research and License Agreement between the Company and
American Home Products Corporation, dated as of July 1, 1997(2)
**10(p)   Collaborative Evaluation Agreement between the Company and Chiron
Corporation, dated as of July 1, 1997
**10(q)   Consulting Agreement between the Company and Dr. Scott Hultgren, dated as
of July 9, 1997
**10(r)   Letter of Intent between the Company and MedImmune, Inc., dated as of July
11       Statement re: Computation of per share earnings
**11(a)  Statement re: Computation of per share earnings
24       Consents of experts and counsel
*24(a)   Consent of Eilenberg & Zivian
**24(b)  Consent of Price Waterhouse LLP
(1) These agreements were entered into prior to the reverse split of the
Company's Common Stock and, therefore, do not reflect such reverse split.
(2) Confidential information is omitted and identified by "*****" and filed
separately with the SEC pursuant to a request for Confidential Treatment.
* Filed with original SB-2 Registration Statement filed on March 10, 1997.
** Filed herewith.
ITEM 28. UNDERTAKINGS.
--The undersigned Registrant in all instances will provide to the
Underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
--Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the undersigned Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the undersigned Registrant of expenses incurred or paid by a
director, officer or controlling person of the undersigned Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the undersigned Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
--The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the undersigned Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of the registration statement as of the time it was declared
effective; and
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
--The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
UNDERSIGNED REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE
THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND AUTHORIZED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, ON THE 11TH DAY OF JULY,
/s/ David H. de Weese
By: _________________________________
David H. de Weese
Chairman, President, Chief Executive
Officer and Director (Principal
Executive Officer)
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE                           TITLE                    DATE
---------                           -----                    ----
/s/ Joshua D. Schein           Principal Financial Officer,    July 11, 1997
____________________________________  Executive Vice President,
Dr. Joshua D. Schein          Secretary and Director
/s/ Judson A. Cooper           Executive Vice President and    July 11, 1997
____________________________________  Director
Judson A. Cooper
/s/ Terence E. Downer           Director                        July 11, 1997
Terence E. Downer
INDEX TO EXHIBITS
NUMBER                                                                     PAGE
-------                                                                    ----
10(l)   Employment Agreement between the Company and Dr. Dennis Hruby,     E-1
dated as of April 1, 1997.......................................
10(m)   Clinical Trials Agreement between the Company and National         E-10
Institute of Allergy and Infectious Diseases, dated as of July
1, 1997.........................................................
10(n)   Research Agreement between the Company and The Research            E-17
Foundation of State University of New York, dated as of July 1,
1997(1).........................................................
10(o)   Collaborative Research and License Agreement between the Company   E-24
and American Home Products Corporation, dated as of July 1,
10(p)   Collaborative Evaluation Agreement between the Company and         E-
Chiron Corporation, dated as of July 1, 1997....................
10(q)   Consulting Agreement between the Company and Dr. Scott Hultgren,   E-
dated as of July 9, 1997........................................
10(r)   Letter of Intent between the Company and MedImmune, Inc., dated    E-
as of July 10, 1997.............................................
11(a)   Statement re: Computation of per share earnings.................   E-48
24(b)   Consent of Price Waterhouse LLP.................................   E-50
1  Confidential information is omitted and identified by "*****" and filed
EXHIBIT 1(a)
FORM OF UNDERWRITING AGREEMENT
____________, 1997
New York, New York  10022
Attention:  Nathan Low, President
The undersigned, SIGA Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement with you (the "Underwriter") as
1.  INTRODUCTION.
(a) Subject to the terms and conditions contained herein, the Company
proposes to issue and sell in the United States a minimum of 3,250,000 and a
maximum of 4,000,000 shares (the "Shares") of common stock, without par value of
the Company (the "Common Stock"), with an offering price per share of Common
Stock of $5.00.
(b) The Company is retaining the Underwriter as its exclusive agent in the
offering contemplated hereby (the "Offering") and understands that the
Underwriter is acting on a "best efforts" basis in connection with the Offering
and that the Shares will be sold on an "all or none" basis, such that no Shares
will be sold unless all of the Shares are sold.
(c) The Company hereby agrees to pay to the Underwriter a commission equal
to 10.0% of the gross proceeds of the sale of the Shares in the Offering.
(d) The Company hereby agrees to issue and sell to the Underwriter warrants
(the "Underwriter's Warrants") to purchase a number of shares of Common Stock
equal to 10% of the number of Shares sold to purchasers in the Offering (the
"Warrant Stock") for a purchase price of $.001 per warrant.  The Underwriter's
Warrants will be exercisable for the Warrant Stock for a period of four years,
commencing one year after the effective date of the Registration Statement (as
hereinafter defined) at an initial exercise price per share equal to 110% of the
price per Share in the Offering.  The Warrant Stock shall be identical to the
Shares.  The Underwriter's Warrants shall be substantially in the form filed as
Exhibit 1(b) to the Registration Statement.  The Underwriter's Warrants and the
Warrant Stock are sometimes hereinafter referred to collectively as the
"Underwriter's Securities."  The Shares and the Underwriter's Securities are
sometimes hereinafter referred to collectively as the "Securities."
2.  REPRESENTATIONS AND WARRANTIES.  The Company represents and warrants
to, and agrees with, the Underwriter that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement, and may have filed one or more
amendments thereto, on Form SB-2 (Registration No. 333-23037), including
in such registration statement and each such amendment a related
preliminary prospectus, for the registration of the Securities under the
Securities Act of 1933, as amended (the "Act").  As used in this Agreement,
the term "Registration Statement" shall refer to such registration
statement, as amended, on file with the Commission at the time such
registration statement becomes effective under the Act (including the
prospectus, financial statements, exhibits, and all other documents filed
as a part thereof, or incorporated by reference directly or indirectly
therein (such incorporated documents being herein referred to as the
"Incorporated Documents")); provided, however, that such Registration
Statement, at the time it becomes effective, may omit such information as
is permitted to be omitted from such Registration Statement when it becomes
effective under the Act pursuant to Rule 430A of the General Rules and
Regulations under the Act (the "Regulations"), which information (the "Rule
430A Information") shall be deemed to be included in such Registration
Statement when a final prospectus is filed with the Commission in
accordance with Rules 430A and 424(b)(1) or (4) of the Regulations; the
term "Preliminary Prospectus" shall refer to each prospectus included in
the Registration Statement, or any amendments thereto, before the
Registration Statement becomes effective under the Act, the form of
prospectus omitting Rule 430A Information included in the Registration
Statement when the Registration Statement becomes effective under the Act,
if applicable (the "Rule 430A Prospectus"), and any prospectus filed by the
Company with your consent pursuant to Rule 424(a) of the Regulations; and
the term "Prospectus" shall refer to the final prospectus in the form first
filed pursuant to Rule 424(b)(1) or (4) of the Regulations or, if no such
filing is required, the form of final prospectus included in the
Registration Statement.  Any reference in this Agreement to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after the effective
date under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations of the Commission thereunder that are
deemed to be incorporated by reference therein.
(b)   When the Registration Statement becomes effective under the Act,
and at all times subsequent thereto up to and including the First Closing
Date (as defined in Section 3), and each Additional Closing Date (as
defined in Section 3) and during such longer period as the Prospectus may
be required to be delivered in connection with sales by you, and during
such longer period until any post-effective amendment thereto shall become
effective under the Act, the Registration Statement (and any post-effective
amendment thereto) and the Prospectus (as amended or as supplemented, if
the Company shall have filed with the Commission any amendment or
supplement to the Registration Statement or the Prospectus), respectively,
will contain all statements which are required to be stated therein in
accordance with the Act and the Regulations, will comply with the Act and
the Regulations, and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no event will
have occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has not
then been set forth in such an amendment or supplement; if a Rule 430A
Prospectus is included in the Registration Statement at the time it becomes
effective under the Act, the Prospectus filed pursuant to Rules 430A and
424(b)(1) or (4) of the Regulations will contain all Rule 430A Information
and all statements which are required to be stated therein in accordance
with the Act or the Regulations, will comply with the Act and the
Regulations, and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and each
Preliminary Prospectus, as of the date filed with the Commission, did not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; except that no representation or
warranty is made in this Section 2(b) with respect to statements or
omissions made in reliance upon and in conformity with written information
furnished to the Company as stated in Section 8(b) with respect to the
Underwriter by or on behalf of the Underwriter expressly for inclusion in
the Registration Statement, any Preliminary Prospectus, or the Prospectus,
or any amendment or supplement thereto.  Each of the Incorporated Documents
complies in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder.
(c) Neither the Commission nor the "blue sky" or securities authority
of any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, preventing or suspending the
use of the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, refusing to permit the
effectiveness of the Registration Statement, or suspending the registration
or qualification of the Securities, nor has any of such authorities
instituted or, to the knowledge of the Company, threatened to institute any
proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, or license required to
be described in the Registration Statement or the Prospectus has been
properly and accurately described therein.  Any contract, agreement,
instrument, lease, or license required to be filed as an exhibit to the
Registration Statement has been filed with the Commission as an exhibit to,
or has been incorporated as an exhibit by reference into, the Registration
(e) The Company has no subsidiary or subsidiaries (as defined in the
Regulations).   The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of
and from, and declarations and filings with, all federal, state, local, and
other governmental authorities and all courts and other tribunals, to own,
lease, license, and use its properties and assets and to conduct its
business in the manner described in the Prospectus.  The Company is duly
qualified to do business as a foreign corporation and is in good standing
as such in every jurisdiction in which its ownership, leasing, licensing,
or use of property and assets or the conduct of its business makes such
qualification necessary, except where the failure to be so qualified does
not amount to a  material liability or disability to the Company.
(f) The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, of which 3,367,182 shares are outstanding without
giving effect to the issuance of the Shares and 10,000,000 shares of
Preferred Stock, par value $.0001 per share, of which there are no
outstanding shares.  Except as disclosed in the Prospectus, each
outstanding share of Common Stock is validly authorized and issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, has not been issued and is not owned or held in
violation of any preemptive rights of stockholders.   Except as may be
Properly described in the Prospectus, or as is not required to be described
in the Prospectus, there is no commitment, plan, or arrangement to issue,
and no outstanding option, warrant, or other right calling for the issuance
of, any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company.  There is outstanding no
security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company, except as
may be properly described in the Prospectus.  The certificates evidencing
the Common Stock are in proper form.
(g) The financial statements of the Company included in the
Registration Statement and the Prospectus fairly present, with respect to
the Company, the balance sheets, the statements of stockholders' equity,
the statements of operations, the statements of cash flows, and the other
information purported to be shown therein at the respective dates and for
the respective periods to which they apply.  Such financial statements have
been prepared in accordance with generally accepted accounting principles
(except to the extent that certain footnote disclosures regarding any stub
period may have been omitted in accordance with the applicable rules of the
Commission under the Exchange Act) consistently applied throughout the
periods involved, are correct and complete in all material respects, and
are in accordance with the books and records of the Company.  Price
Waterhouse LLP, the accountants whose report on the audited financial
statements is filed with the Commission as a part of the Registration
Statement, are, and during the periods covered by their report(s) included
in the Registration Statement and the Prospectus were, independent
certified public accountants with respect to the Company within the meaning
of the Act and the Regulations.  No other financial statements are required
by Form SB-2 or otherwise to be included in the Registration Statement or
the Prospectus.  Since the date of the latest information set forth in the
Registration Statement or the Prospectus, except as may be properly
described in the Prospectus, there has at no time been a material adverse
change in the financial condition, results of operations, business,
properties, assets, liabilities or, to the best of its knowledge, future
prospects of the Company.
(h) There is no claim or litigation, arbitration, governmental or
other proceeding (formal or informal), or investigation pending,
threatened, or, to the best knowledge of the Company, in prospect (or any
basis therefor) with respect to the Company or any of its operations,
businesses, properties, or assets, except (i) as may be properly described
in the Prospectus or (ii) such as individually or in the aggregate do not
now have, and will not in the future have, a material adverse effect upon
the operations, business, properties, or assets of the Company.  The
Company is not in violation of, or in default with respect to, any law,
rule, regulation, order, judgment, or decree, except:  (A) as may be
properly described in the Prospectus or (B) such as in the aggregate do not
the operations, business, properties, assets or net worth of the Company.
The Company is not currently required to take any action in order to avoid
any such violation or default.
(i) The Company has good title to all properties and assets which the
Prospectus indicates are owned by it, free and clear of all liens, security
interests, pledges, charges, encumbrances and mortgages, except such as do
not materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by the
Company (or except as may be properly described in the Prospectus).  No
real property leased, licensed, or used by the Company lies in an area
which is, or to the knowledge of the Company will be, subject to zoning,
use, or building code restrictions which would prohibit, and no state of
facts relating to the actions or inactions of another person or entity or
his or its ownership, leasing, licensing, or use of any real or personal
property exists or will exist which would prevent, the continued effective
leasing, licensing, or use of such real property in the business of the
Company as presently conducted or as the Prospectus indicates the Company
contemplates conducting, with such exceptions as are not material and do
not interfere with the use made or proposed to be made of such property and
buildings by the Company (or except as may be properly described in the
Prospectus).
(j) Neither the Company nor, to the knowledge of the Company, any
other party, is now, or is expected by the Company to be, in violation or
breach of, or in default with respect to, any material provision of any
contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company, and each such contract,
agreement, instrument, lease, license, arrangement, and understanding is in
full force and effect and is the legal, valid, and binding obligation of
the parties thereto and is enforceable as to them in accordance with its
terms, subject to applicable bankruptcy and insolvency laws.  The Company
enjoys peaceful and undisturbed possession under all leases and licenses
under which it is operating.  Except as described in the Prospectus, the
Company is not a party to, or bound by, any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to
any charter or other restriction, which has had, or may reasonably be
expected to have, a material adverse effect on the financial condition,
results of operations, business, properties, assets, liabilities or future
prospects of the Company.  The Company is not in violation or breach of, or
in default with respect to, any term of its certificate of incorporation
(or other charter document) or by-laws.
(k) All United States and foreign patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
franchises, and other intangible properties and assets (all of the
foregoing being herein called "Intangibles") that the Company owns or has
pending, or under which it is licensed, are in good standing and
uncontested, except as may be properly described in the Prospectus.  There
is no right under any Intangible necessary to the business of the Company
as presently conducted or as the Prospectus indicates it contemplates
conducting, except as may be so designated in the Prospectus.  The Company
has not infringed, is not infringing, or has not received notice of (or
knows of any basis for) a third party claim of infringement with respect to
asserted Intangibles of others, except as may be properly described in the
Prospectus.  To the knowledge of the Company, there is no infringement by
others of Intangibles of the Company.  To the knowledge of the Company,
there is no Intangible of others which has had, or may in the future have a
material adverse effect on the financial condition, results of operations,
business, properties, assets, liabilities or future prospects of the
Company, except as may be properly described in the Prospectus.
(l) Neither the Company, nor any director, officer, agent, employee,
or other person associated with the Company, in such capacity, or acting on
behalf of, the Company has, directly or indirectly: used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment.  The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply in all respects with the Foreign
Corrupt Practices Act of 1977, as amended.
(m) The Company has all requisite power and authority to execute,
deliver, and perform this Agreement, the Escrow Agreement (as hereinafter
defined), the Subscription Agreements (as hereinafter defined) and the
Underwriter's Warrants.  All necessary corporate proceedings of the Company
have been duly taken effective the date hereof to authorize the execution,
delivery and performance by the Company of this Agreement, the Escrow
Agreement, the Subscription Agreements and the Underwriter's Warrants.
Assuming due execution and delivery by the Underwriter, this Agreement has
been duly authorized, executed, and delivered by the Company, is the legal,
valid and binding obligation of the Company, and is enforceable against the
Company in accordance with its terms.  Assuming due execution and delivery
by any other parties thereto, the Underwriter's Warrants, the Escrow
Agreement, and the Subscription Agreements have been duly authorized by the
Company and, when executed and delivered by the Company, will be the legal,
valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.  No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration
or filing with, any federal, state, local, or other governmental authority
or any court or other tribunal is required by the Company or the Subsidiary
for the execution, delivery, or performance by the Company of this
Agreement, the Escrow Agreement, the Subscription Agreements, or the
Underwriter's Warrants (except such as have been obtained or filings under
the Act which have been or will be made before the First Closing Date or
Additional Closing Date, as the case may be, and consents, authorizations,
approvals, orders, licenses, certificates, permits, declarations, or
filings required under "blue sky" or securities
laws which have been obtained at or prior to the date of this Agreement).
No consent of any party to any contract, agreement, instrument, lease,
license, arrangement, or understanding to which the Company is a party, or
to which any of their respective properties or assets are subject, is
required for the execution, delivery, or performance of this Agreement, the
Escrow Agreement, the Subscription Agreements, and the Underwriter's
Warrants, except such consents as in the aggregate will not have a material
adverse effect upon the operations, business, properties, assets or net
worth of the Company.  The execution, delivery, and performance of this
Agreement, the Escrow Agreement, the Subscription Agreements, and the
Underwriter's Warrants will not violate, result in a material breach of,
conflict with, result in the creation or imposition of any lien, charge, or
encumbrance upon any properties or assets of the Company pursuant to the
terms of, or (with or without the giving of notice or the passage of time
or both) entitle any party to terminate or call a default under, any such
understanding, or violate, result in a breach of, or conflict with any term
of the certificate of incorporation (or other charter document) or by-laws
of the Company, or violate, result in a material breach of, or conflict
with any law, rule, regulation, order, judgment or decree binding on the
Company or to which any of its operations, businesses, properties or assets
are subject.
(n) Each Share to be delivered on the First Closing Date or any
Additional Closing Date is validly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully
ownership thereof, and will not be issued in violation of any preemptive or
similar rights of stockholders, and each purchaser will, upon payment
therefor, receive good title to the Shares purchased by it from the
Company, free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements, and voting trusts. The Warrant
Stock is validly authorized and reserved for issuance and, when issued and
delivered upon the exercise of the Underwriter's Warrants and payment
therefor in accordance with the respective terms thereof, will be validly
issued, fully-paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of
any preemptive or similar rights of stockholders. When issued, the
Underwriter's Warrants will constitute legal, valid, and binding
obligations of the Company to issue and sell, upon exercise thereof and
payment therefor in accordance with the respective terms thereof, the
number and type of securities of the Company called for thereby and the
Underwriter's Warrants will be enforceable against the Company in
accordance with their respective terms. The Underwriter will receive good
title to the Underwriter's Warrants purchased by it, free and clear of all
liens, security interests, pledges, charges, encumbrances, restrictions
(other than restrictions under federal and any applicable state securities
laws), stockholders' agreements, and voting trusts.
(o) The Securities conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
(p) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in the Prospectus, the Company has not (i)
issued any securities or incurred any liability or obligation, primary or
contingent, for borrowed money, (ii) entered into any transaction not in
the ordinary course of business, (iii) declared or paid any dividend on its
capital stock or (iv) experienced any adverse changes or any development
which may materially adversely effect the condition (financial or
otherwise), net assets or stockholders' equity, results of operations,
business, key personnel, assets, or properties of the Company.
(q) Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take,
directly or indirectly, any action designed to stabilize or manipulate the
price of any security of the Company, or which has caused or resulted in,
or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company,
to facilitate the sale or resale of any of the Shares.
(r) The Company has obtained from each of the Company's stockholders
owning in excess of one percent of the outstanding securities of any class
of the Company as of the effectiveness of the Registration Statement under
the Act (the "Beneficial Owners"), and each officer, director and founder
of the Company, his or its enforceable written agreement, in form and
substance satisfactory to counsel for the Underwriter, that for a period of
(i) six months from the date on which the Registration Statement becomes
effective under the Act, with respect to the Beneficial Owners, and (ii) 24
months from such date with respect to the directors, officers and founders
of the Company, he or it will not, without the prior written consent of the
Underwriter, issue, offer, sell, contract to sell, grant any option for the
sale of, or otherwise dispose ("Dispose") of, directly or indirectly, any
shares of Common Stock or other securities of the Company or any security
or other instrument which by its terms is convertible into, exercisable
for, or exchangeable for shares of Common Stock or any other securities of
the Company, including, without limitation, any shares of Common Stock
issuable under any employee stock options.  Each such agreement is a legal,
valid, and binding obligation of the director, officer, or securityholder
executing the same, and is enforceable as to such director, officer, or
securityholder in accordance with the terms thereof.
(s) The Company is not, and does not intend to conduct its business in
a manner in which it would become, an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended.
(t) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the
filing or effectiveness of the Registration Statement, except as properly
and accurately described in the Prospectus.
(u) Except as may be set forth in the Prospectus, the Company has not
incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(v) Neither the Company nor any of its affiliates is presently doing
business with the government of Cuba or with any person or affiliate
located in Cuba.  If, at any time after the date on which the Registration
Statement is declared effective under the Act or with the Florida
Department of Banking and Finance (the "Florida Department"), whichever is
later, and prior to the end of the period referred to in the first clause
of Section 2(b), the Company commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba, the
Company will so inform the Florida Department within 90 days after such
commencement of business in Cuba, and, during the period referred to in
Section 2(b), will inform the Florida Department within 90 days after any
change occurs with respect to previously reported information.
(w) Except as disclosed in the Prospectus, no officer or director of
the Company has any affiliation or association with the National
Association of Securities Dealers, Inc. (the "NASD") or any member thereof
and upon inquiry of its stockholders beneficially owning five percent or
more of the outstanding shares of Common Stock, the Company has been
advised that no such stockholder has any such affiliation of association,
except as disclosed in writing to the Underwriter.
(x) Except as disclosed in the Prospectus, the Company has filed all
necessary federal, state, local, and foreign income and franchise tax
returns and other reports required to be filed and has paid all taxes shown
as due thereon; and there is no tax deficiency which has been, or, to the
knowledge of the Company, might be, asserted against the Company.
(y) All requirements for the use by the Company of a registration
statement on Form SB-2 with respect to the Offering have been satisfied.
(z)  The Common Stock is authorized for quotation on the Nasdaq
SmallCap Market ("Nasdaq") and upon the Closing Date, all appropriate
action will have been taken to include the Shares on Nasdaq.
3.   PURCHASE, SALE, AND DELIVERY OF THE SHARES.
(a) On the basis of representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the Company
hereby appoints you its sales agent and grants you the exclusive right to
offer and sell the Shares during the Offering Period (as hereinafter
defined) for the account and risk of the Company.  You accept such
appointment and agree to use your best efforts as sales agent, following
written or telegraphic receipt of notice of the effective date of the
Registration Statement, to offer and sell such number of Shares as
contemplated by this Agreement at the price stated in the Prospectus.
(b) Each prospective purchaser of Shares will be required to complete,
execute, and deliver to the Company a subscription agreement in the form
filed as an exhibit to the Registration Statement (the "Subscription
Agreement").  Prior to or concurrently with the delivery to the Company of
any Subscription Agreement by any purchaser, funds sufficient to purchase
the Shares subscribed for shall be wired to an escrow account to be
maintained pursuant to an escrow agreement among the Escrow Agent (as
hereinafter defined), the Company, and the Underwriter in the form filed as
an exhibit to the Registration Statement (the "Escrow Agreement"). You
shall transmit any funds received from any purchaser directly to the Escrow
Agent by noon of the next business day after your receipt of such checks.
Except as provided in the first sentence of subparagraph (c) below, the
Company shall not be entitled to reject, without the Underwriter's consent,
any Subscription Agreement tendered to it prior to the Termination Date (as
hereinafter defined) unless (i) the Subscription Agreement is not properly
completed after the Underwriter and the Company have given the subscriber
an opportunity to cure the defect or payment in full for the Shares
subscribed for is not made in accordance with such Subscription Agreement
or (ii) the subscriber submitting such Subscription Agreement is a resident
of a jurisdiction in which the offering is not registered, qualified, or
exempt from such registration or qualification. The Company will forward to
you copies of each Subscription Agreement accepted by it within three
business days of receipt by the Company of such Subscription
(c) All subscriptions for Shares will be conditioned upon the
acceptance by the Company of Subscription Agreements at least 3,250,000
Shares (the "Minimum Subscriptions") on or prior to 30 days after the
effectiveness of the Registration Statement, which is the last date on
which the offering of Shares may be made, except that such last offering
date may be extended by the Underwriter, in its sole discretion, to a date
not later than 60 days after the effective date of the Registration
Statement (the last date on which the offering of Shares may be made is
herein referred to as the "Termination Date" and the period during which
the offering of Shares may be made is herein referred to as the "Offering
Period"). If Minimum Subscriptions are not tendered to and accepted by the
Company by the Termination Date, this Agreement shall, subject to the
provisions of Section 10 hereof, terminate. If at least the Minimum
Subscriptions are tendered to and accepted by the Company on or before the
Termination Date, a closing will be held at the offices of the Underwriter
at a mutually agreed date (not later than five business days after the
Termination Date) and time as soon as practicable after the delivery of the
last of such subscriptions (the "First Closing Date") and shall be subject
to each of the conditions precedent to closing provided for in this
Agreement. The parties hereto may mutually agree to continue the Offering
after the First Closing Date and prior to the Termination Date until up to
4,000,000 Shares are subscribed for. If additional subscriptions are
tendered and accepted after the First Closing Date and prior to the
Termination Date, one or more additional closings with respect to such
subscriptions shall be held in accordance with the terms of the Prospectus
(each an "Additional Closing Date"). Each such additional closing will be
held at the offices of the Underwriter at a mutually agreed date (not later
than five business days after the Termination Date) and time and shall be
subject to each of the conditions precedent to closing provided for in this
Agreement. Each closing date provided for under this Agreement (including
the First Closing Date) shall constitute a "Closing Date."
(d) On or prior to the applicable Closing Date, all cash payments of
purchasers received (unless and until returned to the purchasers pursuant
hereto) will be placed in a segregated escrow account with United States
Trust Company of New York (the "Escrow Agent") for the purchasers' benefit.
(e) The purchase price paid by any prospective purchaser whose
subscription is rejected, or is returned because the conditions to closing
were not satisfied, shall be returned to such prospective purchaser,
without any deduction therefrom or interest thereon.
(f) If, prior to the Termination Date, subscriptions for more than
4,000,000 Shares are received, the Underwriter, in its sole and absolute
discretion, may allocate the Shares among the subscribers as to whom a
closing has not already been held in such manner as it shall see fit.
(g)  As soon as practicable after each Closing Date, the Company shall
deliver or cause to be delivered by mail to each purchaser of Shares on
such Closing Date (i) a copy of an executed Subscription Agreement which
indicates thereon the number of Shares such purchaser has purchased and
(ii) a stock certificate representing such Shares, registered in such
purchaser's name.
4.   OFFERING OF THE SHARES ON BEHALF OF THE COMPANY.
(a) In offering the Shares for sale, you shall offer Shares as agent
for the Company, and the Offering shall be made upon the terms and subject
to the conditions set forth in the Registration Statement and Prospectus.
The Underwriter shall commence offering the Shares for sale as agent for
the Company as soon after the effective date of the Registration Statement
as the Underwriter may deem advisable.
5.   COVENANTS.  The Company covenants that it will:
(a) Use its best efforts to cause the Registration Statement to become
effective under the Act as promptly as possible and notify you immediately,
and confirm such notice in writing, (i) when the Registration Statement and
any post-effective amendment thereto become effective under the Act, (ii)
of the receipt of any comments from the Commission or the "blue sky" or
securities authority of any jurisdiction regarding the Registration
Statement, any post-effective amendment thereto, the Prospectus, or any
amendment or supplement thereto, (iii) of the filing with the Commission of
any supplement to the Prospectus and (iv) of the receipt of, or its
otherwise becoming aware of, any notification with respect to a Stop Order
or the initiation or threatening of any proceeding with respect to a Stop
Order.  The Company will use its best efforts to prevent the issuance of
any Stop Order and, if any Stop Order is issued, to obtain the lifting
thereof as promptly as possible.  If the Registration Statement has become
or becomes effective under the Act with a form of prospectus omitting Rule
430A Information, or filing of the Prospectus with the Commission is
otherwise required under Rule 424(b) of the Regulations, the Company will
file with the Commission the Prospectus, properly completed, pursuant to
Rule 424(b) of the Regulations within the time period prescribed and will
provide evidence satisfactory to you of such timely filing.
(b) During the time when a prospectus relating to the Shares is
required to be delivered hereunder or under the Act or the Regulations,
comply with all requirements imposed upon it by the Act, as now existing
and as hereafter amended, and by the Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of, or
dealings in, the Shares and in accordance with the provisions hereof and of
the Prospectus.  If, at any time when a prospectus relating to the Shares
is required to be delivered hereunder or under the Act or the Regulations,
any event shall have occurred as a result of which, in the reasonable
opinion of counsel for the Company or counsel for the Underwriter, the
Registration Statement or the Prospectus as then amended or supplemented
contains any untrue statement of a material fact or omits to state any
statements therein not misleading, or if, in the opinion of either of such
counsel, it is necessary at any time to amend or supplement the
Registration Statement or the Prospectus to comply with the Act or the
Regulations, the Company will as promptly as practicable, and, in any event
within one business day, notify you and promptly prepare and file with the
Commission an appropriate amendment or supplement (in form and substance
satisfactory to you) which will correct such statement or omission or which
will effect such compliance and will use its best efforts to have any such
amendment declared effective under the Act as soon as possible.
(c) Deliver without charge to you such number of copies of each
Preliminary Prospectus as you may reasonably request and, as soon as the
Registration Statement, or any amendment thereto, becomes effective under
the Act or a supplement is filed with the Commission, deliver without
charge to you or your counsel not less than two signed copies of the
Registration Statement, including exhibits and Incorporated Documents, or
such amendment thereto, as the case may be, and two copies of any
supplement thereto, and deliver without charge to you such number of copies
of the Prospectus, the Registration Statement, and amendments and
supplements thereto, if any, without exhibits or Incorporated Documents, as
you may request for the purposes contemplated by the Act.
(d) Endeavor in good faith, in cooperation with you and your counsel,
at or prior to the time the Registration Statement becomes effective under
the Act, to qualify the Shares for offering and sale under the "blue sky"
or securities laws of such jurisdictions as you may designate; provided,
however, that no such qualification shall be required in any jurisdiction
where, as a result thereof, the Company would be subject to service of
general process or to taxation as a foreign corporation doing business in
such jurisdiction to which it is not then subject.  In each jurisdiction
where such qualification shall be effected, the Company will, unless you
agree in writing that such action is not at the time necessary or
advisable, file and make such statements or reports at such times as are or
may be required by the laws of such jurisdiction.
(e) Make generally available (within the meaning of Section 11(a) of
the Act and the Regulations) to its securityholders as soon as practicable,
but not later than 45 days after the end of its fiscal quarter in which the
first anniversary date of the Registration Statement occurs an earnings
statement (which need not be certified by independent certified public
accountants unless required by the Act or the Regulations, but which shall
satisfy the provisions of Section 11(a) of the Act and the Regulations)
covering a period of at least 12 months beginning after the effective date
of the Registration Statement.
(f) For a period of 12 months (or six months, in the case of any
public offering under the Act) after the date hereof, not, without the
prior written consent of the Underwriter, which shall not be unreasonably
withheld or delayed, Dispose of any shares of Common Stock or other
securities of the Company (or any security or other instrument which by its
terms is convertible into, or exercisable or exchangeable for, shares of
Common Stock or any other securities of the Company), except for (i) the
Underwriter's Warrants and the Warrant Stock; (ii) the shares of Common
Stock issuable upon the exercise of options or warrants outstanding on the
date hereof, which may not be sold until the lock-ups referred to in
Section 2(r) expire; (iii) the grant or exercise of options under the plans
existing on the date hereof or pursuant to a plan adopted by the Company
with the consent of the Board of Directors and the stockholders, in the
case of grants to officers and directors, shall provide that the underlying
shares are not saleable until the lock-ups referred to in Section 2(r)
expire; (iv) securities Disposed of in connection with any strategic
alliance with a pharmaceutical company or in connection with the hiring or
retention of key employees, consultants or directors; and (v) securities
Disposed of in connection with commitments existing as of the date hereof;
provided further that the Company may extend the exercisibility of
outstanding options and warrants or replace them upon their termination or
expiration with a like number of options or warrants.
(g) During the Offering Period, without the prior written consent of
the Underwriter, which shall not be unreasonably withheld or delayed, not
consummate any stock dividend, stock split, recapitalization,
reorganization, reclassification, combination or any other similar event
affecting the capital stock of the Company.
(h) For a period of three years after the effective date of the
Registration Statement, furnish you without charge the following:
(i) within 90 days after the end of each fiscal year, three
copies of financial statements certified by independent certified
public accountants, including a balance sheet, statement of
operations, and statement of cash flows of the Company and its then
existing subsidiary or subsidiaries, with supporting schedules,
prepared in accordance with generally accepted accounting principles,
as at the end of such fiscal year and for the 12 months then ended,
which may be on a consolidated basis;
(ii) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the
Commission or the NASD, three copies of each annual and interim
financial and other report or communication sent by the Company to its
stockholders or filed with, or furnished to, the Commission or the
NASD;
(iii)  as soon as practicable, two copies of every press release
and every material news item and article in respect of the Company or
its affairs which was released by the Company; and
(iv) such additional documents and information with respect to
the affairs of the Company and its then existing subsidiary or
subsidiaries as you may from time to time reasonably request;
provided, however, that such additional documents and information
shall be received by you on a confidential basis, unless otherwise
disclosed to the public, and shall not be used in violation of the
Federal securities laws and the regulations promulgated thereunder.
(i) Apply the net proceeds received by the Company from the Offering
contemplated by this Agreement in the manner set forth under the heading
"Use of Proceeds" in the Prospectus.
(j) Furnish to you as early as practicable prior to the First Closing
Date, and any Additional Closing Date, as the case may be, but no less than
two full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company which have been read
by the Company's independent certified public accountants, as stated in
their letters to be furnished pursuant to Section 7(e).
(k) File no amendment or supplement to the Registration Statement or
Prospectus at any time, whether before or after the date on which the
Registration Statement becomes effective under the Act, unless such filing
shall comply with the Act and the Regulations and unless you shall
previously have been advised of such filing and furnished with a copy
thereof, and you and counsel for the Underwriter shall have approved such
filing.  Until the later of (i) the completion by you of the distribution
of the Shares (but in no event more than nine months after the date on
which the Registration Statement shall have become effective under the Act)
and (ii) 25 days after the date on which the Registration Statement becomes
effective under the Act, the Company will prepare and file with the
Commission, promptly upon the Underwriter's request, any amendments or
supplements to the Registration Statement or the Prospectus which, in the
Underwriter's sole opinion, may be necessary or advisable in connection
with the distribution of the Shares.
(l) File timely with the Commission and the NASD a report on Form 10-C
in accordance with the rules and regulations of the Commission under the
Exchange Act.
(m) Comply with all provisions of all undertakings contained in the
Registration Statement.
(n) Prior to the First Closing Date or any Additional Closing Date, as
the case may be, issue no press release or other communication, directly or
indirectly, and hold no press conference with respect to the Company or the
financial condition, results of operations, business, properties, assets,
liabilities of the Company, or the Offering, without the prior written
consent of the Underwriter, (other than trade releases issued in the
ordinary course of the Company's business or otherwise required by law, in
which case deliver such release to the Underwriter for review prior to
issuance).
(o) Make all filings required, and otherwise use its reasonable best
efforts, to maintain the inclusion of the Common Stock on Nasdaq for at
least five years from the date of this Agreement.
(p) On each Closing Date, sell to the Underwriter (or its designee),
the Underwriter's Warrants at the price of $.001 per option, entitling the
holder thereof to purchase a number of shares of Common Stock equal to 10%
of the number of Shares sold on such Closing Date for an exercise price
equal to 110% of the price per Share in the Offering.
(q) Until expiration of the Underwriter's Warrants, keep reserved
sufficient shares of Common Stock for issuance upon exercise of the
(r) Deliver to the Underwriter, without charge, within a reasonable
period after the last Closing Date, three sets of bound volumes of the
Registration Statement and all related materials to the individuals
designated by you or counsel for the Underwriter.
(s) For a period of three years after the effective date of the
Registration Statement, provide, at its sole expense, to the Underwriter
copies of the Company's daily transfer sheets, if so requested.
(t) For a period of five years after the First Closing Date, supply to
the appropriate parties such information as may be necessary or desirable,
and otherwise use its best efforts, so that during such five-year period
the Company will be listed in one or more of the securities manuals
published by Standard & Poor's Corporation and Moody's Investors Service,
Inc. and that, at all times during such period, such listing will, at a
minimum, contain the names of the Company's officers and directors, a
balance sheet as of a date not more than 18 months prior to such time and a
statement of operations for either the fiscal year preceding such date or
the most recent fiscal year of operations.
(u) Comply with all registration, filing and reporting requirements of
the Exchange Act, which may from time to time be applicable to the Company.
6.   PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay, whether or not the Offering is
consummated, all expenses (other than fees of counsel to the Underwriter, except
as provided in Sections 6(a)(iii) and 6(b)) in connection with (i) the
preparation, printing, filing, distribution, and mailing of the Registration
Statement and the Prospectus and the printing, filing, distribution, and mailing
of this Agreement, and related documents, including the cost of all copies
thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments or supplements thereto supplied to the Underwriter in quantities as
hereinabove stated, (ii) the issuance, sale, transfer, and delivery of the
Securities, including any transfer or other taxes payable thereon, (iii) the
registration or qualification of the Securities under state or foreign "blue
sky" or securities laws, including the costs of printing and mailing any "Blue
Sky Surveys" and the fees of counsel (in the amount of $35,000) for the
and the disbursements in connection therewith, (iv) the filing fees payable to
the Commission, the NASD, and the jurisdictions in which such qualification is
sought, (v) any fees relating to the listing of the Securities on Nasdaq, (vi)
the cost of printing certificates representing the Securities and (vii) the fees
of the transfer agent for the Securities.
(b) In addition, if the Offering is consummated, the Company hereby
agrees to pay to the Underwriter on each Closing Date (i) a non-accountable
expense allowance equal to 3.0% of the gross proceeds from the sale of the
Shares on such Closing Date, $45,000 of which has already been paid by the
Company; and (ii) a commission equal to 10.0% of the gross proceeds from the
sale of Shares on such Closing Date.
(c) In the event that (i) this Agreement is terminated by the
Underwriter pursuant to Section 10 hereof, or (ii) the Minimum Subscriptions are
not received prior to the Termination Date, the Company hereby confirms that it
will pay within 10 days following the date of termination of this Agreement (in
the case of clause (i) above) and within 10 days following the Termination Date
(in the case of clause (ii) above), the amount of all of your actual accountable
out-of-pocket expenses, including, without limitation, the reasonable legal fees
and expenses, marketing and due diligence expenses, and travel expenses incurred
by you, but in no event to exceed the sum of $100,000, less amounts previously
paid to you in reimbursement for such expenses (including, without limitation,
the sum of $45,000 paid on or about July 23, 1996); and the Company will be
responsible for the payment of all other expenses relating to this Agreement and
the Offering, whether or not set forth in clauses (i) through (vii) of Section
6(a) hereof.
7.   CONDITIONS OF UNDERWRITER'S OBLIGATIONS.   Your obligations hereunder,
and the right of the Company to obtain on any Closing Date the purchase price
for Shares to be purchased on such Closing Date, shall be subject to the
continued accuracy in all material respects, on the date hereof and on such
Closing Date, of the representations, warranties and agreements of the Company
and to the performance by the Company of its obligations hereunder to the
following terms and conditions:
(a) The Registration Statement shall have become effective under the
Act not later than 6:00 p.m., New York City time, on the date of this Agreement
or such later date and time as shall be consented to in writing by you; on or
prior to the First Closing Date, or any Additional Closing Date, as the case may
be, no Stop Order shall have been issued, and no proceeding shall have been
initiated or threatened with respect to a Stop Order; and any request by the
Commission for additional information shall have been complied with by the
Company to the reasonable satisfaction of your counsel. If required, the
Prospectus shall have been filed with the Commission in the manner and within
the time period required by Rule 424(b) under the Regulations.
(b)  On the First Closing Date and any Additional Closing Date, as the
case may be, the Underwriter shall have received the opinions of Eilenberg &
Zivian, counsel for the Company, dated the date of delivery, addressed to the
Underwriter, and [ ], patent counsel for the Company, in form and substance
satisfactory to counsel for the Underwriter.
(c)  On or prior to the First Closing Date and any Additional Closing
Date, as the case may be, the Underwriter shall have been furnished such
information, documents, certificates, and opinions as they may reasonably
require in order to evidence the accuracy, completeness, or satisfaction of any
of the representations, warranties, covenants, agreements, or conditions herein
contained, or as the Underwriter may reasonably request.
(d)  At the First Closing Date, and any Additional Closing Date, as
the case may be, you shall have received a certificate of the chief executive
officer and the chief financial officer of the Company, dated the First Closing
Date or such Additional Closing Date, as the case may be, to the effect that,
(i) the conditions set forth in Section 7(a) have been satisfied, (ii) as of the
date of this Agreement and as of the First Closing Date or such Additional
Closing Date, as the case may be, the representations and warranties of the
Company contained herein were and are accurate and correct in all material
respects, and (iii) as of the First Closing Date or such Additional Closing
Date, as the case may be, the obligations to be performed by the Company
hereunder on or prior thereto have been fully performed in all material
(e) At the First Closing Date and any Additional Closing Date, as the
case may be, you shall have received a letter, dated the date of delivery,
addressed to the Underwriter, from Price Waterhouse LLP, independent certified
public accountants for the Company:
(i) confirming that they are, and during the period covered by their
report included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Act and the published Regulations;
(ii) stating that, in their opinion, the consolidated financial
statements of the Company included in the Registration Statement examined by
them comply in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations;
(iii) stating that, on the basis of procedures (but not an examination
made in accordance with generally accepted auditing standards) consisting of a
reading of the latest available unaudited interim consolidated financial
statements of the Company (with an indication of the date of the latest
available unaudited consolidated interim financial statements), a reading of the
latest available minutes of the stockholders and Board of Directors of the
Company and committees of such Board of Directors, inquiries to certain officers
and other employees of the Company responsible for financial and accounting
matters, and other specified procedures and inquiries, nothing has come to their
attention that caused them to believe that: (A) any unaudited financial
statements of the Company included in the Registration Statement and Prospectus
do not comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published rules and
regulations under the Act or the Exchange Act or are not fairly presented in
conformity with generally accepted accounting principles (except to the extent
that certain footnote disclosures regarding any stub period may have been
omitted in accordance with the applicable rules of the Commission under the
Exchange Act) applied on a basis consistent with that of the audited financial
statements appearing therein; (B) there was any change in the capital stock or
long-term debt of the Company or any decrease in the net current assets or
stockholders' equity of the Company as of the date of the latest available
monthly financial statements of the Company as of a specified date not more than
five business days prior to the date of such letter, each as compared with the
amounts shown in the latest balance sheet included in the Registration Statement
and Prospectus, other than as properly described in the Registration Statement
and Prospectus; or (C) there was any decrease in current assets or stockholders'
equity or increase in net loss during the period from the date of such balance
sheet to the date of the latest available monthly financial statements of the
Company or to a specified date not more than five business days prior to the
date of such letter, each as compared with the corresponding period in the
preceding fiscal year, other than as properly described in the Registration
Statement and Prospectus; and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the Registration
Statement, which have been specified by you, to the extent that such data and
information may be derived from the general accounting records of the Company,
with the results obtained from the application of specified readings, inquiries,
and other appropriate procedures (which procedures do not constitute an
examination in accordance with generally accepted auditing standards) set forth
in the letter, and found them to be in agreement.
(f) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be satisfactory in form and
substance to you and to your counsel.
(g) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to the Underwriter's participation in such
offering upon the terms and conditions provided for herein.
(h) Prior to or on each Closing Date, the Company shall have issued,
in accordance with this Agreement, the Underwriter's Warrants to the Underwriter
in the name or names and in such authorized denominations as the Underwriter may
(i) At least the Minimum Subscriptions shall have been tendered to the
Company in accordance with the terms hereof.
Any certificate or other document signed by any officer of the Company and
delivered to the Underwriter or to counsel for the Underwriter shall be deemed a
representation and warranty by the Company hereunder to the Underwriter as to
the statements made therein. If any condition to the Underwriter's obligations
hereunder to be fulfilled prior to or at the First Closing Date, or any
Additional Closing Date, as the case may be, is not so fulfilled, the
Underwriter may terminate this Agreement or, if the Underwriter so elects, in
writing waive any such conditions which have not been fulfilled or extend the
time for their fulfillment.
If any of the conditions specified in this Section 7 shall not have been
fulfilled or waived, this Agreement and all your obligations hereunder may be
cancelled, prospectively, by you at, or at any time prior to, any Closing Date.
Any such cancellation shall be without liability to you, and the obligations of
the Company pursuant to Sections 6 and 8 hereof shall nevertheless survive and
continue thereafter.  Notice of such cancellation shall be given to the Company
at the addresses specified in Section 11 hereof, in writing, or by telegraph or
telephone confirmed in writing.
8.   INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Underwriter, its officers, directors,
stockholders, employees, agents, and counsel, and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage,
and expense whatsoever (which shall include, for all purposes of this Section 8,
but not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with, (i) any untrue statement of a material fact
or alleged untrue statement of a material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto or (B) any
application or other document or communication (for purposes of this Section 8,
collectively referred to as an "application") executed by, or on behalf of, the
Company or based upon written information furnished by, or on behalf of, the
Company filed in any jurisdiction in order to qualify the Securities under the
"blue sky" or securities laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company by or on behalf
of the Underwriter as stated in Section 8(b) with respect to the Underwriter,
expressly for inclusion in the Registration Statement, any Preliminary
Prospectus, or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any representation,
warranty, covenant, or agreement of the Company contained in this Agreement.
The foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Agreement.
If any action is brought against the Underwriter or any of its officers,
directors, stockholders, employees, agents, or counsel, or any person who
20(a) of the Exchange Act (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall within three business days notify the Company
in writing of the institution of such action (but the failure so to notify,
including within such three-day period, shall not relieve the Company from any
liability it may have other than pursuant to this Section 8(a) and shall relieve
the Company from liability pursuant to this Section 8(a) only to the extent the
Company is materially prejudiced thereby), and the Company shall promptly assume
the defense of such action, including the employment of counsel (satisfactory to
such indemnified party or parties) and payment of expenses.  Such indemnified
party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense of
such action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company, and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties.  Anything
in this paragraph to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent, which shall not be unreasonably withheld.  The Company shall
not, without the prior written consent of each indemnified party that is not
released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may be
sought hereunder (whether or not any indemnified party is a party thereto),
unless such settlement, compromise, consent, or termination includes an
unconditional release of each indemnified party from all liability in respect of
such action.  The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of the Shares, the
Registration Statement, any Preliminary Prospectus, any Rule 430A Prospectus, or
the Prospectus, or any amendment or supplement thereto, or any application.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
the Registration Statement, counsel of the Company and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the Underwriter in Section 8(a), but only with respect to
statements or omissions, if any, made in the Registration Statement, any
Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application in
reliance upon, and in conformity with, written information furnished to the
Company as stated in this Section 8(b) with respect to the Underwriter by or on
behalf of the Underwriter expressly for inclusion in the Registration Statement,
any Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be; provided, however, that the
obligation of the Underwriter to provide indemnity under the provisions of this
Section 8(b) shall be limited to the gross amount of the commission received by
the Underwriter of the Offering.  For all purposes of this Agreement, the
information relating to when the Underwriter registered and became a member of
the NASD and the Underwriter's participation in prior offerings constitute the
only information furnished in writing by the Underwriter expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus (as
from time to time amended or supplemented), or any amendment or supplement
thereto, or in any application, as the case may be.  If any action shall be
brought against the Company, or any other person so indemnified based on the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment or supplement thereto, or on any application, and in respect of which
indemnity may be sought against the Underwriter pursuant to this Section 8(b),
the Underwriter shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Sections 8(a) or
8(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case or (ii) any indemnified or indemnifying party seeks
contribution under the Act, the Exchange Act, or otherwise, then the Company
(including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed the Registration
Statement, any controlling person of the Company and counsel of the Company), as
one entity and the Underwriter (including for this purpose any contribution by
or on behalf of an indemnified party) as a second entity, shall contribute to
the losses, liabilities, claims, damages, and expenses whatsoever to which any
of them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company and the Underwriter; provided,
however, that if applicable law does not permit such allocation, then other
relevant equitable considerations such as the relative fault of the Company and
the Underwriter  in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered.  The
relative benefits received by the Company and the Underwriter shall be deemed to
be in the same proportion as (x) the total proceeds from the Offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and (y) the underwriting discounts and commissions received by
the Underwriter, in each case as set forth in the table on the cover page of the
Prospectus and in the footnotes thereto.  The relative fault, in the case of an
untrue statement, alleged untrue statement, omission, or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission, or alleged omission relates to information supplied by the Company or
by the Underwriter, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission.  The Company and the Underwriter agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Underwriter for contribution were determined by pro rata or per
capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Underwriter and the other indemnified parties were treated
as one entity for such purpose) or by any other method of allocation that does
not reflect the equitable considerations referred to in this Section 8(c).  No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.  For purposes of this Section 8(c),
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and each officer, director,
stockholder, employee, agent, and counsel of the Underwriter shall have the same
rights to contribution as the Underwriter and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement, each director of the Company and counsel of the Company shall have
the same rights to contribution as the Company, subject in each case to the
provisions of this Section 8(c).  Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent.  This
Section 8(c) is intended to supersede any right to contribution under the Act,
the Exchange Act, or otherwise.
9.   REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY.  All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the First Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Company, and the
Underwriter, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by, or on behalf of, the Underwriter or any indemnified
person, or by, or on behalf of, the Company, or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Shares to the purchasers and the
Underwriter's Option to the Underwriter. In addition, the provisions of Sections
5(a), 6, 8, 9, 10 and 12 shall survive termination of this Agreement, whether
such termination occurs before or after the First Closing Date or any Additional
Closing Date, as the case may be.
10.  EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective upon its execution except
that you, at your option, may delay the effectiveness of this Agreement until
the earlier of (i) 11:00 A.M. New York time on the first full business day
following the day on which the Registration Statement becomes effective under
the Act and (ii) the commencement of the public offering by you of the Stock.
In addition to the right to terminate this Agreement pursuant to Section 7
hereof, you shall have the right to terminate this Agreement at any time prior
to the First Closing Date or any Additional Closing Date, as the case may be, by
giving notice to the Company, (i) if any domestic or international event, act,
or occurrence has materially disrupted, or, in your opinion, will in the
immediate future materially disrupt, the securities markets; or (ii) if there
shall have been a general suspension of, or a general limitation on prices for,
trading in securities on the New York Stock Exchange, the American Stock
Exchange or in the over-the-counter market; or (iii) if there shall have been an
outbreak or increase in the level of major hostilities or other national or
international calamity; or (iv) if a banking moratorium has been declared by a
state or federal authority; or (v) if a moratorium in foreign exchange trading
by major international banks or persons has been declared; or (vi) if there
shall have been a material interruption in the mail service or other means of
communication within the United States; or (vii) if the Company or the
Subsidiary shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage, or other calamity or malicious
act, whether or not such loss shall have been insured, or from any labor dispute
or court or government action, order, or decree, which will, in your opinion,
make it inadvisable to proceed with the offering, sale, or delivery of the
Shares; or (viii) if any material governmental restrictions shall have been
imposed on trading in securities in general, which restrictions are not in
effect on the date hereof; or (ix) if there shall be passed by the Congress of
the United States or any state legislature any act or measure, or adopted by any
governmental body, authoritative accounting institute or board, or governmental
executive any orders, rules, or regulations, which you believe likely to have a
material adverse effect on the business, financial condition, or financial
statements of the Company and the Subsidiary or the market for any of the
Company's securities; or (x) if there shall have been a material adverse change
in the market for the Company's securities or securities in general or in
political, financial, or economic conditions as in your judgment makes it
inadvisable to proceed with the offering, sale, and delivery of the Shares on
the terms contemplated by the Prospectus.
(b) If you elect to prevent this Agreement from becoming effective, as
provided in this Section 10, or to terminate this Agreement, you shall notify
the Company promptly by telephone or telecopy, confirmed by letter.
(c) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 5(a), 6, 8, 9, 10 and 12 shall not be in any way affected
by such termination or failure to carry out the terms of this Agreement or any
part hereof.
11.  NOTICES.  All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and shall be delivered
personally, transmitted by facsimile transmission confirmed in writing within
three business days thereafter, or sent by prepaid overnight air courier or
registered or certified mail, postage prepaid, return receipt requested, if sent
to you at 135 E. 57th Street, New York, New York 10022, Attention: Mr. Preston
Tsao, Facsimile: (212) 421-5944, with a copy to Squadron, Ellenoff, Plesent &
Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176, Attention: Kenneth
R. Koch, Esq., Facsimile: (212) 697-6686; or if sent to the Company, at 666
Third Avenue, New York, New York  10017, Attention: Joshua D. Schein, Chief
Financial Officer, Facsimile: (212) 986-2399, with a copy to Eilenberg & Zivian,
666 Third Avenue, New York, New York  10017, Attention: Adam Eilenberg, Esq.,
Facsimile: (212) 986-2399.  All notices hereunder shall be deemed to have been
given (a) when delivered, if delivered personally, or sent by facsimile
transmission and, in the case of facsimile transmission, confirmed in writing
within three business days thereafter, or sent by prepaid overnight air courier
or (b) three business days following the mailing thereof, if mailed by
registered or certified mail, postage prepaid, return receipt requested, in any
such case at the address set forth in this Section 11, or such other address or
addresses as a party may have advised the other party in the manner provided in
this Section 11.
12.  PARTIES.  This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriter, the Company, and the persons and
entities referred to in Section 8 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any buyer, as such, of the Shares), and no
other person shall have or be construed to have any legal or equitable right,
remedy, or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
13.  CONSTRUCTION.  THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS.
TIME IS OF THE ESSENCE IN THIS AGREEMENT.
14.  CONSENT TO JURISDICTION.  THE COMPANY IRREVOCABLY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF ANY FEDERAL COURT
LOCATED IN SUCH STATE IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT
OF, OR RELATING TO, THIS AGREEMENT, ANY DOCUMENT OR INSTRUMENT DELIVERED
PURSUANT TO, IN CONNECTION WITH, OR SIMULTANEOUSLY WITH THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, THE ESCROW AGREEMENT OR ANY SUBSCRIPTION
AGREEMENT, OR A BREACH OF
THIS AGREEMENT OR ANY SUCH DOCUMENT OR INSTRUMENT.  IN ANY SUCH ACTION OR
PROCEEDING, THE COMPANY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR
OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE IN ACCORDANCE WITH
SECTION 11.  WITHIN 30 DAYS AFTER SUCH SERVICE, OR SUCH OTHER TIME AS MAY BE
MUTUALLY AGREED UPON IN WRITING BY THE ATTORNEYS FOR THE PARTIES TO SUCH ACTION
OR PROCEEDING, THE COMPANY SHALL APPEAR OR ANSWER SUCH SUMMONS, COMPLAINT, OR
OTHER PROCESS.  SHOULD THE COMPANY FAIL TO APPEAR OR ANSWER WITHIN SUCH 30-DAY
PERIOD OR SUCH EXTENDED PERIOD, AS THE CASE MAY BE, THE COMPANY SHALL BE DEEMED
IN DEFAULT AND JUDGMENT MAY BE ENTERED AGAINST THE COMPANY FOR THE AMOUNT AS
DEMANDED IN ANY SUMMONS, COMPLAINT, OR OTHER PROCESS SO SERVED.
If the foregoing correctly sets forth the understanding between you and the
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between us.
ACCEPTED AS OF THE DATE FIRST ABOVE
WRITTEN IN NEW YORK, NEW YORK
EXHIBIT 10(l)
[EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND DR. DENNIS HRUBY]
Employment Agreement effective as of April 1, 1997 between SIGA
PHARMACEUTICALS, INC., a Delaware corporation (with its successors and assigns,
referred to as the "Corporation"), and Dr. Dennis Hruby (referred to as
"Hruby").
PRELIMINARY STATEMENT
The Corporation desires to employ Hruby, and Hruby wishes to be employed by
the Corporation, upon the terms and subject to the conditions set forth in this
Agreement.  The Corporation and Hruby also wish to enter into the other
agreements set forth in this Agreement, all of which are related to Hruby's
employment under this Agreement.
Hruby and the Corporation therefore agree as follows:
1.  EMPLOYMENT FOR TERM.  The Corporation hereby employs Hruby and Hruby
hereby accepts employment with the Corporation for the period beginning on the
date of this Agreement and ending on April 1, 1998 (the "Initial Term), or upon
the earlier termination of the Term pursuant to Section 6.  This Agreement
shall be automatically renewed for additional one-year periods (the "Renewal
Terms;" together with the Initial Term, the "Term") unless either party notifies
the other in writing of its intention not to so renew this Agreement no less
than 60 days prior to the expiration of the Initial Term or a Renewal Term.  The
termination of Hruby's employment under this Agreement shall end the Term but
shall not terminate Hruby's or the Corporation's other agreements in this
2.  POSITION AND DUTIES.  During the Term, Hruby shall serve as the Vice
President of Research of the Corporation.  During the Term, Hruby shall also
hold such additional positions and titles as the Board of Directors of the
Corporation (the "Board") may determine from time to time.  During the Term,
Hruby shall devote his best efforts to his duties as an employee of the
Corporation.
3.  COMPENSATION.
(a)  BASE SALARY AND STOCK.  The Corporation shall pay Hruby a base
salary, beginning on the first day of the Term and ending on the last day of the
Term, of not less than $85,000 per annum, payable at least monthly on the
Corporation's regular pay cycle for professional employees.
(b)  STOCK OPTIONS.  Pursuant to the Corporation's stock option plan,
the Corporation shall grant to Hruby 10,000 options to purchase 10,000 shares of
the Corporation's Common Stock at an exercise price equal to the initial public
offering price ("IPO Price") of the Common Stock of the Corporation.  The
options shall vest on a pro rata basis on the first, second, third and fourth
anniversaries of this Agreement.
(c)  OTHER AND ADDITIONAL COMPENSATION.   Section 3 and (b)
establishes the minimum compensation during the Term and shall not preclude the
Board from awarding Hruby a higher salary or any bonuses or stock options in the
discretion of the Board during the Term at any time.
4.  EMPLOYEE BENEFITS.  During the Term, Hruby shall be entitled to the
employee benefits, including vacation, health and other insurance benefits made
available by the Corporation to any other employee of the Corporation.
5.  EXPENSES.  The Corporation shall reimburse Hruby for actual out-of-
pocket expenses incurred by him in the performance of his services for the
Corporation upon the receipt of appropriate documentation of such expenses.
6.  TERMINATION.
(a)  GENERAL.  The Term shall end immediately upon Hruby's death.  The
Term may also end for Cause or Disability, as defined in Section 7.
(b)  NOTICE OF TERMINATION.  Promptly after it ends the Term, the
Corporation shall give Hruby notice of the termination, including a statement of
whether the termination was for Cause or Disability (as defined in Section 7
and 7(b) below).  The Corporation's failure to give notice under this Section 6
shall not, however, affect the validity of the Corporation's termination of the
Term.
7.  SEVERANCE BENEFITS.
(a)  "CAUSE" DEFINED.  "Cause" means 1. willful malfeasance or willful
misconduct by Hruby in connection with his employment; 2. Hruby's gross
negligence in performing any of his duties under this Agreement; 3. Hruby's
conviction of, or entry of a plea of guilty to, or entry of a plea of nolo
contendere with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; 4. Hruby's material breach of any written
policy applicable to all employees adopted by the Corporation; or 5. material
breach by Hruby of any of his agreements in this Agreement.
(b) DISABILITY DEFINED. "Disability" shall mean Hruby's incapacity due
to physical or mental illness that results in his being unable to substantially
perform his duties hereunder for six consecutive months (or for six months out
of any nine month period).  During a period of Disability, Hruby shall continue
to receive his base salary hereunder, provided that if the Corporation provides
Hruby with disability insurance coverage, payments of Hruby's base salary shall
be reduced by the amount of any disability insurance payments received by Hruby
due to such coverage.  The Corporation shall give Hruby written notice of
termination which shall take effect thirty (30) days after the date it is sent
to Hruby unless Hruby shall have returned to the performance of his duties
hereunder during such thirty (30) day period (whereupon such notice shall become
void).
(c)  TERMINATION.  If the Corporation ends the Term for Cause or
Disability, or if Hruby resigns as an employee of the Corporation, or if Hruby
dies, then the Corporation shall have no obligation to pay Hruby any amount,
whether for salary, benefits, bonuses, or other compensation or expense
reimbursements of any kind, accruing after the end of the Term, and such rights
shall, except as otherwise required by law, be forfeited immediately upon the
end of the Term.
8.  CONFIDENTIALITY, OWNERSHIP, AND COVENANTS.
(a)  "CORPORATION INFORMATION" AND "INVENTIONS" DEFINED.  "CORPORATION
INFORMATION" means all information, knowledge or data of or pertaining to (i)
the Corporation, its employees and all work undertaken on behalf of the
Corporation, and (ii) any other person, firm, corporation or business
organization with which the Corporation may do business during the Term, that is
not in the public domain (and whether relating to methods, processes,
techniques, discoveries, pricing, marketing or any other matters).  "INVENTIONS"
collectively refers to any and all inventions, trade secrets, ideas, processes,
formulas, source and object codes, data, programs, other works of authorship,
know-how, improvements, research, discoveries, developments, designs, and
techniques regarding any of the foregoing.
(b)   CONFIDENTIALITY.  (i)  Hruby hereby recognizes that the value of
all trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the
Corporation in the course of his employment with the Corporation is attributable
substantially to the fact that such confidential information is maintained by
the Corporation in strict confidentiality and secrecy and would be unavailable
to others without the expenditure of substantial time, effort or money.  Hruby
therefore, except as provided in the next two sentences, covenants and agrees
that all Corporation Information shall be kept secret and confidential at all
times during and after the end of the Term and shall not be used or divulged by
him outside the scope of his employment as contemplated by this Agreement,
except as the Corporation may otherwise expressly authorize by action of the
Board.  In the event that Hruby is requested in a judicial, administrative or
governmental proceeding to disclose any of the Corporation Information, Hruby
will promptly so notify the Corporation so that the Corporation may seek a
protective order or other appropriate remedy and/or waive compliance with this
Agreement.  If disclosure of any of the Corporation Information is required,
Hruby may furnish the material so required to be furnished, but Hruby will
furnish only that portion of the Corporation Information that legally is
(ii)  Hruby also hereby agrees to keep the terms of this Agreement
confidential.
(c)  OWNERSHIP OF INVENTIONS, PATENTS AND TECHNOLOGY.
(i)  IN GENERAL.  Subject to Section 8(c)(ii) below, Hruby hereby
assigns to the Corporation all of Hruby's right (including patent rights,
copyrights, trade secret rights, and all other rights throughout the
world), title and interest in and to Inventions, whether or not patentable
or registrable under copyright or similar statutes, made or conceived or
reduced to practice or learned by Hruby, either alone or jointly with
others, during the course of the performance of services for the
Corporation.  Hruby shall also assign to, or as directed by, the
Corporation, all of Hruby's right, title and interest in and to any and all
Inventions, the full title to which is required to be in the United States
government by a contract between the Corporation and the United States
government or any of its agencies.  The Corporation shall have all right,
title and interest in all research and work product produced by Hruby as an
employee of the Corporation, including, but not limited to, all research
materials and lab books.
(ii) STATE OF OREGON UNIVERSITY.  Specifically, Hruby shall
promptly and fully disclose to the Corporation any and all inventions,
methods, improvements, discoveries, original works of authorship, trade
secrets, or other intellectual property conceived, developed or reduced to
practice by Hruby or any of his employees, consultants or research
assistants, during the performance of the Term hereunder or derived from
Confidential Information, including without limitation, as relates to the
Core Technology, as defined in a research agreement (the "Research
Agreement"), dated as of January 31, 1996, by and between the Corporation
and The State Board of Higher Education on behalf of State of Oregon
University ("Oregon") (collectively, "Work Product").  Hruby shall treat
all Work Product as the Confidential Information of the Corporation.  Hruby
agrees and does hereby assign to the Corporation and its successors and
assigns, without further consideration, his entire right, title and
interest in and to all Work Product developed during the performance of the
Term hereunder or derived from any Confidential Information, whether or not
patentable or copyrightable, subject only to the provisions of the Research
Agreement and Oregon's rights thereunder and any other existing written
agreement Hruby may have with Oregon.  Hruby further agrees to execute all
applications for patents and/or copyrights, domestic or foreign,
assignments and other papers necessary to secure and enforce rights
relating to the Work Product.  The parties acknowledge that all original
works of authorship that are made by Hruby within the scope of the Term and
that may be protected by copyrighted are "works made for hire," as that
time is defined in the United States Copyright Act (17 USC Section 101).
(d)  NON-COMPETITION PERIOD DEFINED.  "Non-Competition Period" means
the period beginning at the end of the Term and ending one (1) year after the
(e)  COVENANTS REGARDING THE TERM AND NON-COMPETITION PERIOD.  Hruby
acknowledges and agrees that his services pursuant to this Agreement are unique
and  extraordinary; that the Corporation will be dependent upon Hruby for the
research and development of antibiotics, vaccines and anti-infectives;  and that
he will have access to and control of confidential information of the
Corporation.  Hruby further acknowledges that the business of the Corporation is
national in scope and cannot be confined to any particular geographic area of
the United States.  For the foregoing reasons and to induce the Corporation to
enter this Agreement, Hruby covenants and agrees that during the Term and the
Non-Competition Period Hruby shall not unless with written consent of the
(i) engage in the business of research and development of the Core
Technology, as defined in the Research Agreement, or any other products or
processes in which the Corporation is engaged in during the Term or in any
other business conducted by the Corporation during the Term (collectively
the "Prohibited Activity") in the United States or elsewhere for his own
account;
(ii)  become interested in any individual, corporation, partnership or
other business entity (a "Person") engaged in any Prohibited Activity in
the United States, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, employee, trustee,
consultant or in any other relationship or capacity; provided, however,
that Hruby may own directly or indirectly, solely as an investment,
securities of any Person which are traded on any national securities
exchange if Hruby (x) is not a controlling person of, or a member of a
group which controls, such person or (y) does not, directly or indirectly,
own 5% or more of any class of securities of such person;
(iii)  directly or indirectly hire, engage or retain any person which at
any time during the Term or Non-Competition Period was a supplier, client
or customer of the Corporation, or directly or indirectly solicit, entice
or induce any such person to become, a supplier, client or customer of any
other person engaged in any Prohibited Activity; or
(iv)  directly or indirectly hire, employ or retain any person who at any
time was an employee of the Corporation or directly or indirectly solicit,
entice, induce or encourage any such person to become employed by any other
(f)  REMEDIES.  Hruby hereby acknowledges that the covenants and
agreements contained in Section 8  are reasonable and valid in all respects and
that the Corporation is entering into this Agreement, inter alia, on such
acknowledgment.  If Hruby breaches, or threatens to commit a breach, of any of
the Restrictive Covenants, the Corporation shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Corporation under law or in equity: (i) the right and remedy to have the
Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such  breach or
threatened breach will cause irreparable injury to the Corporation and that
money damages will not provide an adequate remedy to the Corporation; (ii) the
right and remedy to require Hruby to account for and pay over to the Corporation
all compensation, profits, monies, accruals, increments or other benefits
(collectively, "Benefits") derived or received by Hruby as the result of any
transactions constituting a breach of any of the Restrictive Covenants, and
Hruby shall account for and pay over such Benefits to the Corporation; (iii) if
any court determines that any of the Restrictive Covenants, or any part thereof,
is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions; and (iv) if any court construes any of the
Restrictive Covenants, or any part thereof, to be unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
(g)  JURISDICTION.  The parties intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Covenants.  If the courts of
any one or more such jurisdictions hold the Restrictive Covenants wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties that such determination not bar or in any way affect
the Corporation's right to the relief provided above in the courts of any other
jurisdiction, within the geographical scope of such Covenants, as to breaches of
such Covenants in such other respective jurisdictions such Covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
9.  SUCCESSORS AND ASSIGNS.
(a)   HRUBY.  This Agreement is a personal contract, and the rights
and interests that the Agreement accords to Hruby may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of Hruby shall be for the sole personal benefit of Hruby, and no other person
shall acquire any right, title or interest under this Agreement by reason of any
sale, assignment, transfer, claim or judgment or bankruptcy proceedings against
Hruby. Except as so provided, this Agreement shall inure to the benefit of and
be binding upon Hruby and his personal representatives, distributees and
legatees.
(b)   THE CORPORATION.  This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns, including (but not limited to) any corporation that may acquire all
or substantially all of the Corporation's assets or business or into or with
which the Corporation may be consolidated or merged.  This Agreement shall
continue in full force and effect in the event that the Corporation sells all or
substantially all of its assets, merges or consolidates, otherwise combines or
affiliates with another business, dissolves and liquidates, or otherwise sells
or disposes of substantially all of its assets.  The Corporation's obligations
under this Agreement shall cease, however, if the successor to, the purchaser or
acquiror either of the Corporation or of all or substantially all of its assets,
or the entity with which the Corporation has affiliated, shall assume in writing
the Corporation's obligations under this Agreement (and deliver an executed copy
of such assumption to Hruby), in which case such successor or purchaser, but not
the Corporation, shall thereafter be the only party obligated to perform the
obligations that remain to be performed on the part of the Corporation under
this Agreement.
10.  ENTIRE AGREEMENT.  This Agreement represents the entire agreement
between the parties concerning Hruby's employment with the Corporation and
supersedes all prior negotiations, discussions, understandings and agreements,
whether written or oral, between Hruby and the Corporation relating to the
subject matter of this Agreement.
11. AMENDMENT OR MODIFICATION, WAIVER.  No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by Hruby and by a duly authorized officer of the Corporation.  No waiver
by any party to this Agreement of any breach by another party of any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time.
12.  NOTICES.  Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
If to Hruby:             Dr. Dennis Hruby
4017 NW Christine
If to the Corporation:   SIGA PHARMACEUTICALS, INC.
Attention:  David H. de Weese
with a copy to:          Eilenberg & Zivian
Attention:  Jeffrey D. Abbey, Esq.
Any notice delivered personally or by overnight courier shall be deemed given on
the date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date mailed.
13.  SEVERABILITY.  If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law.  If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
Hruby that, to the extent that the provision is or would be valid or enforceable
under applicable law, any court of competent jurisdiction shall construe and
interpret or reform this Agreement to provide for a restriction having the
maximum enforceable area, time period and such other constraints or conditions
(although not greater than those contained currently contained in this
Agreement) as shall be valid and enforceable under the applicable law.
14.  SURVIVORSHIP.  The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
15.  HEADINGS.  All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
16.  WITHHOLDING TAXES.  All salary, benefits, reimbursements and any other
payments to Hruby under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of and federal, state or local authority.
17.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
18.  APPLICABLE LAW:  JURISDICTION.  The laws of the State of New York
shall govern the interpretation, validity and performance of the terms of this
Agreement, without reference to rules relating to conflicts of law.  Any suit,
action or proceeding against Hruby with respect to this Agreement, or any
judgment entered by any court in respect thereof, may be brought in any court of
competent jurisdiction in the State of New York, as the Corporation may elect in
its sole discretion, and Hruby hereby submits to the nonexclusive jurisdiction
of such courts for the purpose of any such suit, action, proceeding or judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
By:  /s/ David H. de Weese
David H. de Weese, President
/s/ Dennis Hruby
Dr. Dennis Hruby
EXHIBIT 10(m)
[CLINICAL TRIALS AGREEMENT BETWEEN THE COMPANY AND
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES]
Clinical Trials Agreement                                   Protocal DMID 96-091
SIGA Pharmaceuticals, Inc.-NIAID                                          6/2/97
NATIONAL INSTITUTE OF ALLERGY AND INFECTIOUS DISEASES
CLINICAL TRIALS AGREEMENT
FOR STUDIES DONE WITH THE DIVISION OF
PROTOCOL DMID 96-091
SAFETY, TRANSMISSIBILITY AND DOSE-RESPONSE IN HUMANS OF A
GROUP A STREPTOCOCCAL VACCINE GP 1223 COMPRISING THE HUMAN COMMENSAL BACTERIUM
STREPTOCOCCUS GORDONII ENGINEERED TO EXPRESS THE CONSERVED REGION OF THE M
PROTEIN OF
Clinical Trials Agreement                                   Protocol DMID 96-091
The Division of Microbiology and Infectious Diseases (DMID), National Institute
of Allergy and Infectious Diseases (NIAID), and SIGA Pharmaceuticals, Inc.,
located at 666 Third Avenue, New York, New York 10017, have agreed to cooperate
on the conduct of a clinical trial whose designation of Protocol DMID 96-091 for
Streptococcus gordonii GP 1223 vaccine, entitled "Safety, Immunogenicity,
Transmissibility and Dose-Response in Humans of a Group A Streptococcal Vaccine
GP 1223 Comprising the Human Commensal Bacterium Streptococcus gordonii
Engineered to Express the Conserved Region of the M Protein of Streptococcus
pyogenes."
The DMID, NIAID believes that this clinical trial can be efficiently conducted
by taking advantage of the established clinical trial site network, Vaccine and
Treatment Evaluation Units which is uniquely positioned to coordinate the
efforts of a staff of program and data managers, scientists, physicians,
statisticians and regulatory experts.  Thus, the agreement whose terms and
conditions under which the protocol will be conducted and which are outlined
below reflects this belief.
The understanding by both parties to the agreement is as follows:
1.   INVESTIGATIONAL NEW DRUG APPLICATION (IND) SPONSORSHIP
The NIAID shall be responsible for the submission of an IND covering
Protocol DMID 96-091.  The IND shall satisfy all of the requirements of the
United States Food and Drug Administration (U.S. FDA).  A letter granting
cross reference to SIGA Pharmaceuticals, Inc.'s FDA files which pertain to
S. gordonii GP 1223 vaccine shall be supplied by SIGA Pharmaceuticals,
Inc., and, in return, the NIAID will also supply a letter, if requested,
granting cross reference to the NIAID'S IND to SIGA Pharmaceuticals, Inc.
A.   Monitoring
The IND Holder shall be responsible for clinical site monitoring and
the quality assurance of all data.  Monitoring shall be done in
compliance with U.S. FDA Good Clinical Practices Guidelines.
Representatives of SIGA Pharmaceuticals, Inc. shall have the right
with the coordination of the IND Holder to visit the clinical site
with the IND Holder.
B.   Adverse Experience Reporting
Adverse experience reports shall be collected by the IND Holder according
to the procedures outlined in the protocol.
The IND holder shall assume total responsibility for the reporting of
such adverse events to the FDA with a copy to SIGA Pharmaceuticals,
The IND holder shall report all serious and life threatening adverse
events observed in this clinical trial to FDA and SIGA
Pharmaceuticals, Inc., on a timely basis consistent with Federal
Regulations 21 CFR 312.32.  All other adverse experiences shall be
reported by IND holder to FDA and SIGA Pharmaceuticals, Inc. on a
timely basis consistent with Federal Regulations 21 CFR 312.33 for the
Annual Report.  Specific provisions for reporting adverse experiences
to agencies outside the U.S. shall be provided for as required.
SIGA Pharmaceuticals, Inc. shall, in a timely manner and during the
term of this trial, provide the DMID, NIAID with any information it
now has or may obtain in the future regarding the safety and/or the
toxicity of S. gordonii GP 1223 vaccine.
2.  PROTOCOL TEAM
Development and management of the protocol, evaluation of data, proposal of
amendments, recommendations for early termination, etc. shall be the
responsibility of the Protocol Team.  The membership shall include the
study PI, co-investigators, representatives from the DMID, NIAID, SIGA
Pharmaceuticals, Inc. and the persons involved with statistical and data
analysis from the study.
While the DMID, NIAID will endeavor to control the distribution of the
protocol document itself,  SIGA Pharmaceuticals, Inc. acknowledges that a
list of all protocols which are open to patient enrollment are available
(with abstracts) to the public under the Freedom of Information Act.
3.   STUDY SITES
The DMID, NIAID will utilize trial sites under Government Contract for the
studies described in the protocol.
The NIAID will ensure that the protocol will be conducted at Clinical Trial
Sites according to the U.S. FDA Good Clinical Practices Guidelines.
4.   CASE REPORT FORM (CRF) DEVELOPMENT
The Protocol team shall assume responsibility for the development and
subsequent revisions, if any, of CRFs with appropriate review and approval
by the DMID, NIAID.
5.   DATA COLLECTION, MANAGEMENT, ANALYSIS AND REPORTING
The DMID, NIAID shall assume responsibility for the collection, management,
analysis, and initial reporting of all data obtained from the trial.  SIGA
Pharmaceuticals, Inc. may utilize data and reports from this study for any
legitimate business or regulatory purpose.
Information which may be released to the public or which may have
significant impact on SIGA Pharmaceuticals, Inc.'s approval of S. gordonii
GP 1223 vaccine for commercial sale shall not be released without prior
discussion of the information with SIGA Pharmaceuticals, Inc. except to the
extent required by Federal Law.
SIGA Pharmaceuticals, Inc., after appropriate consultation with the DMID,
NIAID, may provide information regarding the trial to governmental
organizations (e.g., FDA, SEC, etc.).
6.   VACCINE SUPPLY AND DISTRIBUTION
The DMID, NIAID shall provide SIGA Pharmaceuticals, Inc. with an estimate
of the quantity of S. gordonii GP 1223 vaccine that will be required to
complete the protocol.  SIGA Pharmaceuticals, Inc. shall provide this
quantity of vaccine to the DMID, NIAID without charge.  The NIAID shall be
responsible for distributing S. gordonii GP 1223 vaccine as well as any
other vaccine used in the trial to the trial sites.  The timing of the
delivery and the quantities of the vaccine shipped to repository or study
sites shall be mutually agreed upon.  The DMID, NIAID shall not provide any
of the vaccine to a third party (other than the specific trial sites)
without the prior written consent of SIGA Pharmaceuticals, Inc.
SIGA Pharmaceuticals, Inc., shall provide the DMID, NIAID with necessary
Material Safety Data Sheet (MSDS) for S. gordonii GP1223 vaccine together
with any specific storage or shipping instructions.
7.   CONFIDENTIALITY/PROPRIETARY INFORMATION
The DMID, NIAID shall treat as confidential/proprietary any preclinical,
clinical, or formulation data that SIGA Pharmaceuticals, Inc. marks
"Confidential" including but not limited to the Investigator's Brochure and
the protocol.  Such information is the sole and exclusive property of SIGA
Pharmaceuticals, Inc. during the period of this Agreement and subsequent
thereto.  Likewise, all information which is disclosed visually or orally
and subsequently confirmed as Confidential Information in writing within
ten (10) working days after first disclosure will be held as Confidential
Confidential/Proprietary Information means confidential scientific,
business, or financial information provided that such information:
is not publicly known or available from other sources who are not
under a confidentiality obligation to the source of the information;
has not been made available by its owners without a confidentiality
obligation;
is not already known by or available to the receiving Party without a
confidentiality obligation; or does not relate to potential hazards or
cautionary warnings associated with the production, handling, or use
of the subject matter of this Agreement
8.   TRIAL DATA
All raw data obtained from the trial shall be the property of the Clinical
Trial Site that produces the data.  These data shall not be released to the
public except to the extent required by law.  No persons or party other
than SIGA Pharmaceuticals, Inc., its contractor, and/or its designate shall
have any rights to review and/or use the raw data obtained from the trial
for purposes of filing an NDA without the permission of SIGA
Pharmaceuticals, Inc.
Where applicable, the grouped data shall be controlled by the NIAID and
shall not be released to the public without appropriate consultation with
SIGA Pharmaceuticals, Inc.  However, SIGA Pharmaceuticals, Inc. retains the
right to access and utilize the data for all legitimate business or
regulatory purposes.
Upon completion of the study, SIGA Pharmaceuticals, Inc. will be provided
with a copy of the complete analysis data set and other raw data as
required in a machine-readable format to be determined jointly.
9.   FDA MEETING
With respect to any discussions with FDA involving data obtained from this
trial, IND holder shall take the initiative in arranging meetings with the
FDA.  Formal meetings with the FDA concerning the trial data shall be
discussed and agreed upon by SIGA Pharmaceuticals, Inc. and the DMID, NIAID
in advance.  SIGA Pharmaceuticals, Inc. shall have the right to attend all
formal meetings with the FDA.  The IND holder shall provide SIGA
Pharmaceuticals, Inc. with written summaries of all substantive telephone
discussions with the FDA.
10.  PUBLICATIONS POLICY
Any publications based on the results of the trial shall conform to the
conditions in the "Advance Understanding" in the contract with the
University of Maryland, Contract N01 AI45251: "The content of any abstract
or manuscript containing data generated under this contract
shall be submitted for review by the NIAID Project Officer before
submission for public presentation or publication including presentations
at a scientific meeting which includes abstracts.  Preprints and reprints
of these shall be sent to the Project Officer."
Additional clauses within the contract state that all publications shall
acknowledge NIAID support and be submitted to the Project Officer for
review prior to publication.  The Project Officer shall have access to all
data generated with the support of this contract.  SIGA Pharmaceuticals,
Inc. shall receive copies of any abstract or manuscript prior to their
submission for publication with sufficient time for review and comment.
11.  INDEMNIFICATIONS AND DISPUTES
No indemnification for damages is provided for under this agreement.  Each
party shall be liable for damages it incurs as a result of its own
activities under this agreement.
Any dispute arising under this Agreement which is not disposed of by
agreement of the parties shall be submitted jointly to the signatories of
this Agreement.  If the signatories are unable to jointly resolve the
dispute within thirty (30) days after notification thereof, the Assistant
Secretary of Health (or his/her designee) shall propose a resolution.
Nothing in this section shall prevent any Party from pursuing any and all
administrative and/or judicial remedies which may be available.
12.  ENDORSEMENT
SIGA Pharmaceuticals, Inc. acknowledges that the involvement of the DMID,
NIAID in the trial shall not be construed as an endorsement by the DMID,
NIAID or the National Institutes of Health (NIH) for S. gordonii GP1223
vaccine. However, this does not prohibit SIGA Pharmaceuticals, Inc. to
reference or use publications and reports based on the trial for legitimate
business and regulatory purposes.
13.  PROVISION OF FINANCIAL SUPPORT TO NIAID CLINICAL TRIALS
SIGA Pharmaceuticals, Inc. shall not provide separate funding to any sites
participating in the trial for any aspect of the study without the prior
written approval of the DMID, NIAID.
14.  UNILATERAL TERMINATION
Either DMID, NIAID or the Collaborator may unilaterally terminate this
entire Agreement at any time by giving written notice at least sixty (60)
days prior to the desired termination date.
The Parties agree that should this Agreement be terminated, the Protocol
will nonetheless be completed if medically appropriate.
Neither party may transfer or assign this Agreement or any rights or
obligations under this Agreement.
If this Agreement is terminated, SIGA Pharmaceuticals, Inc. shall receive
copies of all data, reports and other information related to this clinical
trial and any unused vaccine.  The obligations under Paragraphs # 1B
(Adverse Experience Reporting), #2 (Protocol Team, as it relates to the
distribution of the Protocol); #5 (Data Collection, Management, Analysis
and Reporting, as it relates to the release of information); #8 (Trial
Data), #10 (Publications Policy) and #11 (Indemnification and Disputes)
shall survive the termination of this Agreement. In addition, the
Confidentiality provisions of Paragraph #7 will expire three years from the
date this agreement is terminated.
If you agree with the terms of this Clinical Trials Agreement for Protocol DMID
96-091 entitled "Safety, Immunogenicity, Transmissibility and Dose-Response in
Humans of a Group A Streptococcal Vaccine GP1223 Comprising the Human Commensal
Bacterium Streptococcus gordonii Engineered to Express the Conserved Region of
the M Protein of  Streptococcus pyogenes," please have your authorized
representative sign below. An additional signed original is enclosed for your
records.
/s/ John R. La Montagne                           6/26/97
- ------------------------                           ---------
John R. La Montagne                           (Date)
/s/ Claire T. Driscoll                             6/27/97
- ------------------------                            ---------
Office of Technology Development              (Date)
/s/ David de Weese                                6/27/97
- --------------------                               ---------
David de Weese                                (Date)
EXHIBIT 10(n)
[RESEARCH AGREEMENT BETWEEN THE COMPANY AND
THE RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK]
RESEARCH AGREEMENT
THE RESEARCH FOUNDATION OF STATE UNIVERSITY
THIS AGREEMENT entered into this 1st day of July, 1997 is by and between
SIGA PHARMACEUTICALS, INC., a for-profit corporation existing under the laws of
the State of Delaware, with its principal offices located at 666 Third Avenue,
30th Floor, New York, NY 10017, hereinafter referred to as "Sponsor" and THE
RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK, a nonprofit, educational
corporation existing under the laws of the State of New York, with its principal
offices located at State University Plaza, Broadway and State Street, Albany,
New York 12246 (Mailing Address:  The UB Commons, Suite 211, 520 Lee Entrance,
Amherst, New York 14228), hereinafter referred to as "Foundation".
WITNESSETH:
WHEREAS, Sponsor desires to have Foundation undertake a research program in
"P. gingivalis Fimbrillin Expression in S. gordonii"; and
WHEREAS, Foundation has available personnel and facilities needed to
conduct such studies; and
WHEREAS, the Foundation desires to enter into an agreement with Sponsor for
the conduct of the aforementioned research program,
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:
1.     SCOPE OF WORK
The Foundation agrees to conduct and carry out in a professional and
competent manner all the work and services set forth in Exhibit A, which is
attached to and made a part of this Agreement.
2.   KEY PERSONNEL
The research will be conducted at the State University of New York at
Buffalo under the direction of Dr. Robert J. Genco and Dr. Todd Evans.  Dr.
Dennis E. Hruby shall act as technical representative of Sponsor.
3.   COMPENSATION
Sponsor shall pay the Foundation ***** for the work performed in accordance
with the terms of this Agreement.  The cost of the research is mutually agreed
upon and will not be exceeded by Foundation without prior specific written
authorization from Sponsor.  This sum shall be paid in ***** equal quarterly
installments of ***** commencing on July 1, 1997.
4.     TERM
This Agreement shall commence on July 1, 1997 and shall terminate on (i)
the later of June 30, 1998, or 90 days following the completion of the research
and presentation of a written report to the Sponsor, or (ii) thirty (30) days
after notice of termination has been given by either one of the parties hereto,
unless extended by mutual agreement of the parties hereto expressed in writing
in the manner provided in Article 10 of this Agreement.  In the event of
termination, Sponsor shall reimburse Foundation for the costs of all obligations
which Foundation entered into prior to cancellation that cannot be cancelled.
5.   PROPRIETARY INFORMATION
It is understood that in the course of carrying out the purposes of this
Agreement Sponsor may wish to provide the Foundation with information
proprietary to Sponsor.  The Foundation agrees not to disclose such information
which is clearly marked as proprietary to other than its employees and shall use
its best efforts to prevent unauthorized disclosure of such proprietary
6.   USE OF NAME
Sponsor agrees not use the name of The Research Foundation of State
University of New York of the State University of New York or the State of New
York or the name of any member of the respective organization in sales promotion
or advertising or in any other form of publicity without the express written
permission of the respective organization and, if appropriate, the individual
whose name is to be used.
7.   PUBLICATION
The Foundation will be free to publish papers consistent with protection of
any patentable rights and proprietary information dealing with results of
research under this Agreement after giving a copy of material intended for
publication to Sponsor.  Title to and the right to determine the disposition of
any copyrightable material, first produced or composed in performance of this
research, shall remain with the Foundation, provided that the Foundation shall
grant to Sponsor an irrevocable, royalty-free, nonexclusive right to reproduce,
translate, and use all such copyrighted material for its own purposes.
8.   PATENTS
The parties to this Agreement recognize that inventions may result from the
investigations which are pursued by the Foundation during the performance of
this Agreement.  Title to any invention or discovery made or conceived in the
performance of this research shall be determined in the following manner:
(a) In the event that a patentable invention is, or inventions are
conceived or reduced to practice under this Agreement utilizing University
or Foundation owned or controlled facilities at any of the State-operated
institutions of the State University of New York, the Foundation may, at
its option, file or cause to have filed and prosecute domestic and foreign
patent applications covering such invention or inventions, and the
Foundation shall have title to any such inventions, and the patent
applications or patents maturing therefrom.
(b) In the event that a patentable invention or inventions are conceived or
reduced to practice under this Agreement by one or more employees of the
project team employed by Sponsor not utilizing University or Foundation
owned or controlled facilities at any of the State-operated institutions of
the State University of New York, Sponsor may, at its option, file or cause
to have filed and prosecute domestic and foreign patent covering such
invention or inventions, and Sponsor shall have title to any inventions,
patent applications or patents
maturing therefrom.  Sponsor shall provide a  nonexclusive, royalty-free
license to Foundation for research purposes.
(c) In the event one or more employees of the project team of the
State University of New York and one or more employees of Sponsor conceive
or reduce to practice under this Agreement an invention or inventions
utilizing University or Foundation owned or controlled facilities at any of
the State-operated institutions of the State University of New York, the
Foundation shall have title to any inventions, patent applications or
patents maturing therefrom.
9.   OPTION FOR LICENSE
Sponsor shall have an exclusive option to negotiate an exclusive license to
commercialize any invention or discovery made or conceived in the performance of
this research.  Such option shall include an exclusive option to an exclusive
license to technology described in U.S. Patent Number 5,536,497 (Fimbrial
polypeptids useful in the prevention of periodontitis, Evans et. al., July 16,
1996) and any foreign counterparts.  The royalty rate shall be negotiated at the
time the option is exercised by Sponsor.   Sponsor must exercise its option
within three (3) months of the termination of the Research Agreement.
10.  NOTICES
All notices, demands and other communications hereunder, except exchanges
of technical information, shall be delivered personally to the party hereto to
which it is addressed or mailed to such party by registered or certified mail,
return receipt requested, with postage hereon fully prepaid at the following
addresses, unless otherwise subsequently modified by change of address in
If to the SPONSOR:
666 Third Avenue, 30/th/ Floor
Attn:  David H. de Weese, President and CEO
If to the FOUNDATION:
Maureen B. McMahon
Office of Sponsored Programs Administration
The UB Commons - Suite 211
520 Lee Entrance
Any notices, demands and other communications delivered personally shall be
deemed to have been received by addressee at the time and date of its delivery.
Any notices, demands and other communications so mailed shall be deemed to have
been received by the addressee seven (7) days after the time and date of its
being so mailed.
11.  WAIVERS
No waiver of any term, provision or condition of this Agreement whether by
conduct or otherwise in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such term, provision or
condition or of any other term, provision or condition of the Agreement.
12.  INTEGRATION
This Agreement represents and embodies all the agreements and negotiations
between the parties hereto and no oral agreements of correspondence prior to the
date of execution of this Agreement shall be held to vary the provision hereof.
13.  MODIFICATIONS AND CHANGES
This Agreement may be changed, amended, modified, extended or terminated by
mutual consent provided that such consent shall be in writing and executed by
the parties hereto prior to the time such change shall take effect.
14.  SITUS
Regardless of the place of physical execution, this Agreement shall be
construed according to the laws of the State of New York.
15.  ORDER OF PRECEDENCE
In the event of any inconsistency between Clauses 1 through 12 of this
Agreement, and the attached Exhibit A, the inconsistency should be resolved by
giving precedence to Clauses 1 through 13.
IN WITNESS WHEREOF, this Agreement has been duly executed by and the
parties hereto as of the date hereinabove first written.
THE RESEARCH FOUNDATION OF STATE  UNIVERSITY OF NEW YORK
By   /s/ Charles Kaars                        July 1, 1997
------------------                       ------------
Charles Kaars                            Date
By   /s/ David de Weese                       June 25, 1997
-------------------                      -------------
David de Weese                           Date
P. GINGIVALIS FIMBRILLIN EXPRESSION IN S. GORDONII
SIGA PROJECT- GNOTOBIOTIC RAT
Purpose:       This project will measure the effect of using S. gordonii
recombinants expressing Fim A from P. gingivalis in preventing or
modifying P. gingivalis-induced alveolar bone destruction in the
rat model of periodontal disease.
Recombinant:        Two strains of S. gordonii provided by Siga Pharmaceutical
Inc. will be  constructed to express the carboxy portion of
P. gingivalis strain 381 fimbriae.  Modified strain I will
express the peptide anchored to the cell  at the carboxyl
terminal end.  Modified strain II will secrete the peptide.
Animal Model:  A rat model based on the Evans et al. finding that gnotobiotic
rats can be infected with P. gingivalis resulting in alveloar
bone loss.  It is known that  as a result of the P. gingivalis
strain 381 infection in rats that hose-derived MMP are found in
gingival  tissue presumably derived from macrophages.  It may be
postulated that FimA expression could induce protective
antibodies or low levels of expression could block receptors on
machrophages preventing induction of MMP.
Experimental:  Preliminary study.  Nine animals infected by the intranasal route
with S. gordonii WT will be examined for bone loss as a result of
infection with WT only.  It is anticipated that no bone loss will
be evident.  Colonization by S. gordonii will be monitored by
Challenge study.  Four groups of 12 animals each (total 48
animals) of Sprague-Dawley gnotobiotic rats obtained from Taconic
Farms will be maintained in barriers.  No pre-treatment with
antibiotics prior to infection with P. gingivalis is required.
The following groups will be used: (1) negative controls which
receive a sham infection; (2) an untreated positive control which
is infected with P. gingivalis only (3)an experimental group
which receives the S. gordonii with the anchored peptide
(modified Sg strain I); and (4) an experimental group which
receives the S. gordonii secreting Fim A (modified Sg strain II).
Animal numbers used in each group are based on previously
performed studies which determined the optimal group size to
obtain the desired sensitivity.
Outcomes:    Periodontal disease will be estimated by alveolar bone loss
measurements using the horizontal bone loss method.  Infection
will be monitored for S. gordonii and P. gingivalis infection by
culture.  Antibody production in serum and saliva by PCFIA.
EXHIBIT 10(o)
[COLLABORATIVE RESEARCH AND LICENSE AGREEMENT BETWEEN THE COMPANY
AND AMERICAN HOME PRODUCTS CORPORATION]
This COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is entered
into as of July 1, 1997 by and between AMERICAN HOME PRODUCTS CORPORATION, a
Delaware corporation, represented by its Wyeth-Ayerst Laboratories Division
having its principal place of business at 555 East Lancaster Avenue, St. Davids,
Pennsylvania 19087 ("WYETH-AYERST"), and SIGA Pharmaceuticals Inc.("SIGA"), a
Delaware corporation, having its principal place of business at 666 Third
Avenue, 30th Floor, New York, New York 10017.
WHEREAS, *****
WHEREAS, WYETH-AYERST has expertise in discovering, developing, testing,
obtaining regulatory approvals, manufacturing and marketing products for
bacterial diseases; and
WHEREAS, WYETH-AYERST and SIGA wish to enter into this Agreement in order to
collaborate in the performance of research to discover and develop products for
bacterial diseases *****
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the parties hereby agree as follows:
Whenever used in this Agreement with an initial capital letter, the terms
defined in this Section 1 shall have the meanings specified.
1.0  "ACTIVITY PROFILE" *****
1.1  "AFFILIATE" means any corporation, firm, limited liability company,
partnership or other entity which directly or indirectly controls or is
controlled by or is under common control with a party to this Agreement.
"Control" means ownership, directly or through one or more Affiliates, of fifty
percent (50%) or more of the shares of stock entitled to vote for the election
of directors, in the case of a corporation, or fifty percent (50%) or more of
the equity interests in the case of any other type of legal entity, status as a
general partner in any partnership, or any other arrangement whereby a party
controls or has the right to control the Board of Directors or equivalent
governing body of a corporation or other entity.
1.2  "BACTERIAL DISEASE" means a disease in humans or other animals caused by
infection or colonization with bacterial organisms.
1.3  "COMPOUND" means a chemical compound or mixture of compounds that is
discovered or developed in the R & D Program, which is identified as having the
Activity Profile by use of a biochemical screen, genetically engineered cell-
based screen, affinity screen or other methodology, together with analogs,
derivatives or modifications thereof.  Without limiting the generality of the
foregoing, a Compound will be deemed "discovered" in the R & D Program if the
potential utility or mode of action of such Compound in the Field is identified
or investigated in the R & D Program.
1.4  "CONFIDENTIAL INFORMATION" means all Technology and all financial,
marketing, competitive, or other business information, including but not
limited to information about any element of Technology or a party's business,
which is disclosed by one party to the other hereunder and indicated as
confidential by the disclosing party except to the extent that such information
(i) as of the date of disclosure is demonstrably known to the party receiving
such disclosure or its Affiliates, as shown by written documentation, other than
by virtue of a prior confidential disclosure to such party or its Affiliates;
(ii) as of the date of disclosure is in, or subsequently enters, the public
domain, through no fault or omission of the party receiving such disclosure; or
(iii) as of the date of disclosure or thereafter is obtained from a third party
free from any obligation of confidentiality to the disclosing party.
1.5  "CPMP" means the Committee on Proprietary Medical Products of the European
Union.
1.6  *****
1.7  "EFFECTIVE DATE" means the date of full execution of this Agreement by the
parties.
1.8  "FIELD" means all human and veterinary antibacterial uses, including
without limitation, vaccines of any kind, and other systemic and topical uses,
related to the Activity Profile.
1.9  "FIRST COMMERCIAL SALE" means the date of the first sale of a Licensed
Product in the ordinary course of business in any country by WYETH-AYERST or an
Affiliate, or a distributor, licensee or sublicensee of either.
1.11 "JOINT TECHNOLOGY" means Technology jointly owned by the parties as
determined in accordance with the provisions of Section 5.2 and 5.4 hereof.
1.12 "LICENSED PRODUCT" means any product in the Field which is discovered or
identified as a result of the R & D Program conducted pursuant to this
Agreement, or the making, using, importing, offer for sale or sale of which
would infringe a Valid Claim of a SIGA Patent but for the licenses granted
herein.
1.13 "NDA" means a New Drug Application, as defined by the U.S. FDA, or the
equivalent in any other country in the Territory.
1.14 "NET SALES" means with respect to a Licensed Product, the gross amount
invoiced by WYETH-AYERST, its Affiliates and/or its licensees and sublicensees,
on sales or other dispositions of the Licensed Product to unrelated third
parties, less the following items, provided that such items are actually
included in the price charged and do not exceed reasonable and customary amounts
in the country in which such sale occurred:
(a) Trade, cash and quantity discounts actually allowed and taken directly
with respect to such sales;
(b) Excise, sales taxes or other taxes imposed upon and paid directly with
respect to such sales (excluding national, state or local taxes based on
income);
(c) Amounts repaid or credited by reason of rejections, defects, recalls or
returns or because of rebates or retroactive price reduction; and
(d) One Percent (1%) of gross sales invoiced less (a), (b) and (c) above as
an allowance to cover all other items, such as freight, transportation and
insurance.
If a Licensed Product is sold, or otherwise commercially disposed of for
value (including, without limitation, disposition in connection with the
delivery of other products or services), in a transaction that is not a sale for
cash to an independent third party, then the gross amount invoiced in such
transaction shall be deemed to be the gross amount that would have been paid had
there been such a sale at the average sale price determined on a country-by-
country basis of such Licensed Product during the applicable royalty reporting
Net Sales shall not include any consideration received by WYETH-AYERST, its
Affiliates, its licensees or sublicensees in respect of the sale, use or other
disposition of a Licensed Product in a country as part of a clinical trial prior
to the receipt of all regulatory approvals required to commence commercial sales
of such Licensed Product in such country, except sales under "treatment INDs,"
"named patient sales," "compassionate use sales," or their equivalents pursuant
to which WYETH-AYERST, its Affiliates, licensees or sublicensees is/are
entitled, under applicable regulatory policies, to recover costs incurred in
providing such Licensed Products to the patients.
1.15 "PATENT RIGHTS" means the rights and interests in and to issued patents and
pending patent applications in any country which are necessary or commercially
desirable to develop, make, have made, use, import, offer for sale, sell or have
sold Licensed Products, including, but not limited to, all provisional
applications, substitutions, continuations, continuations-in-part, divisions,
and renewals, all letters patent granted thereon, and all reissues,
reexaminations and extensions thereof, whether owned solely or jointly by a
party or otherwise controlled by a party with the right to transfer rights
therein.  "SIGA Patent Rights" shall mean those Patent Rights owned or otherwise
controlled by SIGA.  "WYETH-AYERST Patent Rights" shall mean those Patent Rights
owned or otherwise controlled by WYETH-AYERST.  "Joint Patent Rights" shall mean
those Patent Rights owned or otherwise controlled jointly by the parties.
Patent Rights are listed on Schedule I attached hereto and made a part hereof,
which Schedule shall be updated by the parties from time to time during the term
of this Agreement, as appropriate.
1.16 "PRE-PROJECT STATUS" means a WYETH-AYERST research designation for a
Compound that is a candidate for further development in anticipation of filing
an Investigational New Drug Application with the United States Food and Drug
Administration or its equivalent (IND track), which designation is given to a
Compound by WYETH-AYERST in accordance with its customary drug development
practices for its own proprietary compounds, and when, at a minimum, it has been
demonstrated to WYETH-AYERST's satisfaction, consistent with its customary
criteria, that such Compound has in vitro and in vivo activity, and wherein in
WYETH-AYERST's determination, an acceptable margin of safety will be attainable
for such Compound, as indicated by a preliminary toxicity assessment.  Pre-
Project Team means a scientific task force assembled by WYETH-AYERST to further
develop such Compound receiving this designation.
1.17 "PROGRAM COMMENCEMENT DATE" means July 1, 1997.
1.18 "PROTEASE" shall mean *****
1.19      "R & D PROGRAM" means the research and development program, to be
conducted by SIGA and WYETH-AYERST pursuant to Section 2 of this Agreement and
reflected in the Work Plans, which shall be amended from time to time, as
appropriate, in accordance with Section 2.1.3 hereof.
1.20      "RESEARCH PHASE" means research relating to Compounds that have not
yet received Pre-Project Status designation.
1.21      "RESEARCH TERM" means the term during which the R & D Program should
be conducted which shall commence on the Program Commencement Date and expire on
April 30, 1999, unless extended in accordance with Section 2.3.2 hereof.
1.22      "TECHNOLOGY" means and includes any and all scientific or other
technical data, know-how, trade secrets, information, materials, compounds,
compositions, biological material, such as plasmids, vectors, DNA, RNA, or
peptide sequences, peptide structure, peptide conjugates, vaccine adjuvants,
organisms, cell lines, and antibodies, samples and other information owned or
controlled by either party which (i) is used in the Research Program; (ii) which
relate to the Licensed Products including, without limitation, chemical,
biological, pharmacological, toxicological, non-clinical and clinical data,
product formulations, specifications and usage, or (iii) which relate to
processes, techniques and specifications for the manufacture of the Licensed
Products, including, without limitation, preparation, synthesis, culture,
recovery and purification and qualify control processes, techniques and
specifications; whether or not patentable, and including any negative results.
1.23      "TERRITORY" means all the countries of the world.
1.24      "VALID CLAIM" means any claim of an unexpired patent which has not
been held unenforceable, unpatentable or invalid by a decision of a court or
other governmental agency of competent jurisdiction, unappealed or unappealable
within the time allowed for appeal, and which has not been admitted to be
invalid or unenforceable through reissue, reexamination, disclaimer or
1.25      "WORK PLAN" means the written plan describing the activities to be
carried out during each year of the R & D Program pursuant to this Agreement.
Each Work Plan will be set forth in a written document prepared by SIGA and
WYETH-AYERST, and approved by the Joint Steering Committee.
2. R & D PROGRAM
2.1  IMPLEMENTATION OF R & D PROGRAM.
2.1.1     Basic Provisions of Program
The objective of the Research Phase of the ***** The objective of the
development phase of the R & D Program shall be the development of Compounds
which have received Pre-Project Status designation and the testing and
regulatory approval of Licensed Products having the Activity Profile. In
carrying out the R & D Program, SIGA shall devote an average of at least *****
full-time equivalent employees per year to the Research Phase of the R & D
Program over its ***** year duration, and shall ensure that such employees are
devoted solely to the R & D Program. SIGA and WYETH-AYERST shall each use
reasonable efforts to perform such tasks as are set forth to be performed by it
in the Work Plans, including the provision of such facilities, materials,
equipment and consultants as each deems necessary to the achievement of such
Work Plans.
2.1.2     Collaborative Efforts and Reports.
The parties agree that the successful execution of the R & D Program will
require the collaborative use of both parties' areas of expertise.  The
parties shall keep each other fully informed about the status of the portions of
the R & D Program they respectively perform.
Designated representatives of SIGA and WYETH-AYERST shall cooperate in the
performance of the R & D Program and, subject to any confidentiality obligations
to third parties, shall exchange information and materials as necessary to carry
out the R & D Program, but subject to the provisions of Sections 4 and 5 hereof.
Each party will attempt to accommodate any reasonable request of the other party
to send or receive personnel for purposes of collaborating or exchanging
information under the R & D Program.  Such visits and/or access will have
defined purposes and be scheduled in advance.  Each party will bear its relevant
travel and lodging costs.
2.1.3 Work Plans.
The Work Plan for the first year of the R & D Program shall be prepared by
the JSC (as defined herein) as promptly as practical after the Effective Date.
The Work Plan for the second year of the R & D Program shall be prepared by the
JSC no later than thirty (30) days before the end of the first year of the R & D
Program.  The Work Plan shall set forth specific research and development
objectives, milestones and resource allocation requirements.
Each Work Plan shall be in writing and shall set forth with reasonable
specificity tasks for the period covered by the Work Plan.  The JSC may make
adjustments to the Work Plan at its quarterly meetings or otherwise as it may
determine.
In planning and monitoring the R & D Program, each party may be assigned
tasks and responsibilities taking into account each party's respective specific
capabilities and expertise in order to avoid duplication and enhance efficiency
and synergies.
As of the Execution Date, it is contemplated that the following duties will
be undertaken by each party, to be set forth in the Work Plan for the first year
of the R & D Program.
2.2  JOINT STEERING COMMITTEE.
(i) The R&D Program, until IND nomination by Wyeth-Ayerst, will be
administered by a Joint Steering Committee ("JSC") which will be comprised of an
equal number of representatives of each of SIGA and Wyeth-Ayerst and which will
be chaired by a representative of Wyeth-Ayerst.  The JSC will act on behalf of
the two companies, and will be responsible for planning and monitoring the R&D
Program and for drawing up a research and development plan for each one year
period during the Research Term, setting forth specific research and development
objectives, milestones and resource allocation requirements for that period.
The JSC will meet quarterly, or as frequently as mutually agreed, to review
progress and recommend necessary adjustments to the plan as the research
progresses.  Such meetings will be alternatively held in New York City and Pearl
River, or at a mutually agreed upon site elsewhere.  Each party will pay its own
expenses related to such meetings.  In addition, each party will report not less
than quarterly to the JSC and the other party on its activities in the R&D
(ii) Upon IND nomination by WYETH-AYERST and until NDA approval of each
Licensed Product, the JSC shall continue to meet quarterly or as often as
mutually agreed, to monitor and comment on the progress of the Wyeth Drug
Development Program (as defined in 2.4.2 hereof).  The Parties shall appoint
members to the JSC having such expertise in regulatory and clinical affairs as
is relevant and appropriate to each stage of the Drug Development Program
respecting each such Licensed Product.
(iii) All matters will be decided in the JSC by consensus.  Matters which
the JSC cannot resolve will be referred to senior management of the respective
parties for resolution in accordance with Paragraph 10.1 hereof.
2.3  RESEARCH AND DEVELOPMENT TERM.
2.3.1     Term of the R & D Program.
The R & D Program shall be conducted during the Research Term unless the R
& D Program is earlier terminated by either party pursuant to the termination
provisions below.
2.3.2     Extension of the Research Term.
The Research Term may be extended upon three (3) months written notice
prior to its expiration, by mutual written agreement of the parties on terms to
be agreed upon between the parties.
2.4  PRODUCT DEVELOPMENT
2.4.1     Identification of Compounds for Pre-Project Status.
WYETH-AYERST shall, in good faith and consistent with its customary
criteria for such decisions regarding its own proprietary products, determine
whether or not a Compound should be given Discovery Team Status and Pre-Project
Status.  In rendering its decision, WYETH-AYERST shall consider factors such as
the relative ease of synthesis, availability of starting materials, Compound
stability, proprietary status of the Compound and its synthesis and the
existence of third party products and patents.  Once a Compound is given Pre-
Project Status, its development will be the sole
responsibility of WYETH-AYERST, and WYETH-AYERST will appoint Discovery Teams
and/or Pre-Project Teams to manage the development thereof.
2.4.2     Development Obligations.
WYETH-AYERST or its Affiliates shall conduct a drug development program to
develop Licensed Products in the field of human medicine, and in its sole
discretion and through an Affiliate, in veterinary medicine, and henceforth
market Licensed Products in the Field incorporated or derived from any Compounds
discovered or identified as a result of the R & D Program, which reach Pre-
Project Status and which are selected by WYETH-AYERST or its Affiliates for
development (a "Drug Development Program").
Within (90) days following the selection of a Compound for Pre-Project
Status, WYETH-AYERST, with input from the JSC shall prepare a development plan
("Global Development Plan") for such Compound.  The Global Development Plan
shall describe the activities to be carried out by Wyeth during each year of the
Drug Development Program.  The Global Development Plan may be amended by WYETH-
AYERST from time to time, based on a variety of conditions that may occur, such
as, but not limited to, performance of the Compound as to efficacy or
toxicology, the regulatory requirements of an agency, the availability of animal
models for preclinical investigations or of investigators or patients for
clinical trials, the availability of drug supplies, and other like factors.
WYETH-AYERST shall use commercially reasonable efforts to develop and
market Licensed Products hereunder, which shall mean that WYETH-AYERST shall
exert efforts comparable to that which it or its Affiliates extend in their own
proprietary discovery and development programs and to products that are
marketed, giving due consideration to scientific profile, safety, efficacy,
patient accrual in clinical trials, the competitive environment, market
dynamics, and product life cycle, among other considerations.  Though not an
obligation to be met, the parties agree that as a goal, and within the initial
***** years of the Research Term, the parties will attempt to identify a
Compound which is suitable for designation of Pre-Project Status.  It is
expressly understood by the Parties that WYETH-AYERST's nomination of a Compound
for Pre-Project Status may occur after the Research Term, and that this shall in
no way affect WYETH-AYERST's rights and obligations hereunder, provided that
WYETH-AYERST is actively pursuing the designation of a Compound for Pre-Project
Notwithstanding the foregoing, and if WYETH-AYERST has not designated a
Compound Pre-Project Status for veterinary medicine within ***** years of the
initial approval of an NDA for the first Licensed Product, then, in its sole
discretion, SIGA may elect to redefine the Field to exclude all or a portion of
veterinary uses, and all rights hereunder relating to same shall revert to SIGA.
2.4.3     Reports.
WYETH-AYERST will keep SIGA fully informed concerning the status of the
Drug Development Program for each Licensed Product, it being understood that all
such information is Confidential Information subject to all the terms and
conditions of this Agreement, and particularly Article 4 hereof.  WYETH-AYERST
shall (a) report to SIGA in reasonable detail no less frequently than semi-
annually concerning all aspects of such development and commercialization
activities; (b) provide SIGA with access to Technology and Confidential
Information employed in or arising out of such development and commercialization
activities; and (c) provide SIGA with summaries of all regulatory filings filed
in connection with such Licensed Products, together with all clinical protocols
and material correspondence with regulatory authorities in the United States and
other countries.
2.5  COMMERCIALIZATION RIGHTS.
WYETH-AYERST shall have the exclusive right to develop and commercialize
Licensed Products hereunder, including without limitation, any manufacture
thereof.
3. FUNDING
3.1  RESEARCH FUNDING.
In partial consideration of the research to be performed by SIGA in the R &
D Program, WYETH-AYERST will pay SIGA $***** within thirty (30) days of the
Effective Date.  WYETH-AYERST will continue to fund SIGA's research hereunder
during the Research Term by making research payments of US$***** per year during
the initial two-year period of the Research Term, payable quarterly.  Such
payments will be made in advance, on or before the first day of each calendar
quarter, with the first and last payments prorated in the event that the
Effective Date is not the first day of a calendar quarter.
3.2  ADDITIONAL R & D PAYMENTS.
WYETH-AYERST will make additional research payments to
SIGA in furtherance of the performance of additional research.  Such additional
research payments shall be payable within thirty (30) days of the determination
(as set forth in Section 3.5) of the achievement of this research as follows:
Achievement                                   Payment
-----------                                   -------
*****                                              $*****
**If there are multiple Licensed Products from a single Compound, research
payments for the second such Licensed Product from a single Compound will be
***** of these amounts.  No payment will be required for any subsequent Licensed
Products beyond the second such Licensed Product.
3.3  RESEARCH AND DEVELOPMENT TAX CREDITS.
Each party shall be entitled to seek the benefit of any research and
development tax credits arising out of any research paid for by such party or
its Affiliates.  SIGA acknowledges that research payments made under Sections
3.1 and 3.2 are made in furtherance of research, and accordingly, WYETH-AYERST
is entitled to seek research tax credits.
3.4  RECORD KEEPING AND AUDIT OF RESEARCH FUNDS.
SIGA warrants and represents that it will apply the research funding it
receives from WYETH-AYERST pursuant to Section 3.1 toward achieving the
objectives of the R & D Program for which SIGA is responsible under the Work
Plan.  SIGA shall keep for three (3) years from the date of each payment of
research funding pursuant to Section 3.1 hereof, complete and accurate records
of the use of such funding, in sufficient detail to allow such use to be
determined accurately, and shall submit reports detailing such use in its
written reports due in accordance with Section 2.2 hereof.  WYETH-AYERST shall
have the right for a period of three (3) years after receiving any report or
statement with respect to same to appoint an independent certified public
accountant reasonably acceptable to SIGA to inspect the relevant records of SIGA
to verify such reports or statements.  SIGA shall make such records available
for inspection by such independent certified public accountant during regular
business hours at such place or places where such records are customarily kept,
upon reasonable notice from WYETH-AYERST, solely to verify the accuracy of the
reports and use of the research payments.  Such inspection right shall not be
exercised more than once in any year, nor more than once with respect to any
particular research payment.  WYETH-AYERST agrees, and will require that any
such certified public accountant shall agree, to hold in strict confidence all
information concerning such payments and reports, and all information learned in
the course of any audit or inspection, except to the extent necessary for WYETH-
AYERST to reveal such information in order to enforce its rights under this
Agreement or if disclosure is required by law.  The results of each inspection,
if any, shall be binding on both parties.
4. TREATMENT OF CONFIDENTIAL INFORMATION
4.1  CONFIDENTIALITY.
4.1.1     General.
During the term of this Agreement and for three (3) years thereafter, each
party will keep confidential, and will cause its employees, consultants,
Affiliates, licensees and sublicensees to keep confidential, all Confidential
Information of the other party that is disclosed to it, or to any of its
employees, consultants, Affiliates, licensees and sublicensees, pursuant to or
in connection with this Agreement, and all Confidential Information relating to
the R & D Program and the development of Licensed Products hereunder.  Neither
SIGA nor WYETH-AYERST nor any of their respective employees, consultants,
Affiliates, licensees and sublicensees shall use Confidential Information of the
other party for any purpose whatsoever except as expressly permitted in this
Agreement.  Notwithstanding the foregoing,
the following exchange of information shall not constitute a violation of this
Section 4.1, as long as each such exchange is covered by like obligations of
confidentiality and limited use:
(i)  an exchange of information between SIGA and The Rockefeller University
("Rockefeller") pursuant to SIGA's License and Research Support Agreement with
Rockefeller; and
(ii) an exchange of information by either party with the prior consent of
the non-disclosing party, with any other research collaborator or consultant
engaged relevant to the R & D Program.
4.1.2     Restricted Access.
SIGA and WYETH-AYERST each agree that any disclosure of the other party's
Confidential Information to any of its officers, employees, consultants or
agents or those of any of its Affiliates, licensees and sublicensees shall be
made only if and to the extent necessary to carry out its rights and
responsibilities under this Agreement, and shall only be made to persons who are
bound by like obligations of confidentiality and limited use.  Accordingly, SIGA
and WYETH-AYERST, for themselves and their Affiliates, each agree not to
disclose Confidential Information to any third parties without prior written
approval from the other party except as required in any patent application or
patent prosecution, in any application for regulatory approval for testing,
manufacture or sale of a Licensed Product subject to this Agreement, or as
otherwise required by law, and except as otherwise reasonably required to
exercise such party's rights under this Agreement.  However, before disclosing
the other party's Confidential Information in connection with a patent
application, patent prosecution or regulatory application or as otherwise
required by law, the disclosing party shall provide a copy of such intended
disclosure to the other party.  If the other party so requests and where
permitted by law or regulation, the disclosing party shall redact such portion
of the intended disclosure as reasonably requested.  Each party shall take such
action, and shall cause its Affiliates, licensees and sublicensees to take such
action, to preserve the confidentiality of each other's Confidential Information
as it would customarily take to preserve the confidentiality of its own
Confidential Information, and in no event, less than reasonable care.  Each
party, upon the other's request, will return all the Confidential Information
disclosed to it by the other party pursuant to this Agreement, including all
copies and extracts of documents, within sixty (60) days of the request
following the termination of this Agreement; provided that a party may retain
Confidential Information of the other party relating to any license or right
which survives such termination and one copy of all other Confidential
Information may be retained in confidential and inactive archives solely for the
purpose of establishing the contents thereof.
4.1.3     Employee Confidentiality Agreements.
SIGA and WYETH-AYERST each represent that all of its employees and all of
the employees of its Affiliates, and any consultants to such party or its
Affiliates, participating in the R & D Program who shall have access to
Confidential Information of the other party are bound by written agreements to
maintain such information in confidence and not to use such information except
as expressly permitted herein.
4.2  Publicity.
Neither party may disclose the existence or terms of this Agreement without
the prior written consent of the other party; provided, however, that either
party may make such a disclosure to the extent required by law or by the
Securities Exchange Commission in connection with any offering of SIGA's
securities, subject to the same provisions of redaction set forth in 4.1.2
hereof.  All news releases relating to the existence and any term of this
Agreement, for publication in general circulation periodicals and newswires,
shall be prepared by the parties in mutually agreeable format and substance
following the Effective Date of this Agreement.
4.3  PUBLICATION.
It is expected that each party may wish to publish the results of its
research under this Agreement.  In order to safeguard intellectual property
rights, the party wishing to publish or otherwise publicly disclose the results
of its research hereunder shall first submit a draft of the proposed scientific
manuscripts, abstracts or other proposed public presentations, to the JSC for
review, comment and consideration of appropriate patent action at least eight
(8) weeks prior to any submission for publication or other public disclosure.
Within thirty (30) days of receipt of the pre-publication materials, the JSC
will advise the party seeking publication as to whether a patent application
will be prepared and filed or whether trade secret
protection should be pursued and, if so, the JSC will, in cooperation with both
parties, determine the appropriate timing and content of any such desired
publications.
5.1  DISCLOSURE OF INVENTIONS.
Each party shall promptly inform the other and the JSC about all inventions
in the Field that are conceived, made or developed in the course of carrying out
the R & D Program by employees or consultants of either of them, alone or
jointly with employees or consultants of the other party.  The following
provisions shall apply to rights in the intellectual property developed by SIGA
or WYETH-AYERST, developed by either party alone or jointly by the parties
during the course of carrying out the R & D Program.
5.2  OWNERSHIP.
5.2.1     Intellectual Property Rights.
SIGA shall have sole and exclusive ownership of all right, title and
interest on a worldwide basis in and to any Technology developed solely by SIGA,
with full rights to license or sublicense, subject to WYETH-AYERST's rights
hereunder.  WYETH-AYERST shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any Technology developed
solely by WYETH-AYERST with full rights to license or sublicense, subject to
SIGA's rights hereunder.  WYETH-AYERST and SIGA shall jointly own all Technology
jointly invented by both SIGA and WYETH-AYERST in the R & D Program and shall
jointly own all Joint Patent Rights thereon.  Except as specifically set forth
herein, each party shall retain the sole and exclusive right under Patent Rights
and Technology solely owned or otherwise controlled by such party (including
rights under its own interests in any Joint Technology and any Patent Rights
thereon), and shall have the right to grant sublicenses thereunder, in either
case to use such Technology and Patent Rights in any way outside the Field, and
to develop, have developed, make, have made, use, distribute for sale, sell,
offer for sale and import any products which are derived therefrom outside the
Field.
5.3  PATENT COORDINATORS.
SIGA and WYETH-AYERST shall each appoint a Patent Coordinator who shall
serve as such party's primary liaison with the other party on matters relating
to patent filing, prosecution, maintenance and enforcement.  Each party may
replace its Patent Coordinator at any time by notice in writing to the
5.4  INVENTORSHIP.
Inventorship determination shall be made in accordance with the relevant
patent laws.  In case of dispute between SIGA and WYETH-AYERST over
inventorship, the Patent Coordinators and mutually acceptable outside patent
counsel, shall make the determination of the inventor(s) by application of the
standards contained in United States patent law.  The Patent Coordinators and
mutually acceptable outside patent counsel, shall also, in the case of dispute,
make the determination as to whether an invention is Joint Technology.
5.5  TRADEMARKS.
WYETH-AYERST, its Affiliates, distributors, assignees, licensees and
sublicensees, shall have the absolute right to use, and in their sole
discretion, register any trademarks, tradenames and/or tradedress they may
choose, in connection with the Licensed Products licensed hereunder, provided
that the label for any such Licensed Product shall be consistent with applicable
regulatory and labeling requirements in the relevant country
therefor.  SIGA shall have no right, title, or interest in or to any trademark,
tradename or tradedress which WYETH-AYERST, its Affiliates, distributors,
assignees, licensees or sublicensees may use on or in connection with Licensed
Products, or the packaging, advertising, promotion, labeling, marketing or
selling thereof.  Further, and for so long as WYETH-AYERST, its Affiliates,
distributors, assignees, licensees or sublicensees shall have any interest in or
to any such trademarks, tradenames, or tradedress whether as proprietor, owner,
licensee, or licensor, in any part of the Territory, SIGA shall not adopt, use,
apply for registration, register, own or acquire such trademark, tradename or
tradedress, or any mark, name or tradedress confusingly similar thereto.  No
rights to any trademarks, tradenames, tradedress, or copyrights owned by SIGA
are granted to WYETH-AYERST under this Agreement.
6. PROVISIONS CONCERNING THE FILING, PROSECUTION
AND MAINTENANCE OF PATENT RIGHTS
The following provisions relate to the filing, prosecution and maintenance
of Patent Rights during the term of this Agreement:
6.1  FILING OF PATENTS.
In consultation with the Patent Coordinators, the JSC will coordinate the
determination of what patents will be filed on Technology developed under the R
& D Program and make a recommendation to WYETH-AYERST.  WYETH-AYERST will then
determine the countries in which such patent applications will be filed and
shall be responsible for the filing, prosecution, and maintenance (including the
defense of interferences and similar proceedings) of such patent applications,
provided that SIGA shall have the opportunity to provide substantive review and
comment on any such prosecution.  If WYETH-AYERST decides not to file a patent
application on any such Technology in any country, it shall promptly notify SIGA
of such decision at least 90 days prior to the applicable bar date for such
patent application.  In such event SIGA shall have the right to file a patent
application, and WYETH-AYERST shall not have any rights in or to such patent
application or any resulting patent in any such country.  Responsibility for
filing, prosecution, and maintenance of patents (including the defense of
interferences and similar proceedings) on Joint Technology will be agreed upon
by the parties on a case-by-case basis and handled by mutually acceptable
outside patent counsel charged with the duty to act in the best interests of
both parties.  WYETH-AYERST will bear the costs of the filing, prosecution and
maintenance of all patents filed pursuant to this Agreement, unless such patent
application is filed by SIGA, in which case the prosecution and maintenance will
be at SIGA's expense.  The parties shall cooperate with each other in gaining
patent term restoration or similar extensions or continuations of rights under
Patent Rights.  Each party shall also promptly give notice to the other of the
grant, lapse, revocation, surrender, invalidation or abandonment of any Patent
Rights for which it has responsibility.  If at any time, either party wishes to
discontinue the prosecution or maintenance of any Patent Rights for which it has
responsibility, such party shall promptly give notice of such intention to the
other party.  The party receiving such notice shall have the right, but not the
obligation, to assume responsibility for the prosecution or continued
maintenance of any such Patent Right by giving return notice to the party
wishing to discontinue same within thirty (30) days.
7. LICENSE RIGHTS
7.1  LICENSE GRANTS.
(a) Research Use:  SIGA hereby grants to WYETH-AYERST an exclusive license
under SIGA Technology, SIGA Confidential Information, and SIGA Patent Rights and
SIGA's interests in Joint Technology and Joint Patent Rights, to research,
discover, develop, and make Compounds and to discover and develop Licensed
Products for use in the Field; with the proviso that said license
shall be exclusive in the Field except as to SIGA's internal, nontransferable,
non-commercial research use only.
(b) Commercial License:  SIGA hereby grants to WYETH-AYERST an exclusive
license in the Territory, including the right to grant sublicenses, to develop,
have developed, make, have made, use, distribute for sale, offer for sale, sell
and import Licensed Products for use in the Field under any and all Patent
Rights and Technology owned by or otherwise controlled by SIGA (including SIGA's
interests in Joint Technology and Joint Patent Rights).  SIGA grants WYETH-
AYERST the right to use Confidential Information owned by or otherwise
controlled by SIGA in connection with the development, making, using,
distribution for sale, offer for sale, sale and import of Licensed Products.
7.2  TERM OF LICENSES.
(a) The license term of the exclusive research use license granted pursuant
to 7.1(a) hereof shall be commensurate with the Research Term of this Agreement.
During the Research Term and for the six month period following the end of the
Research Term, SIGA will not collaborate with, or grant license rights to, any
other party in the Field, provided, however, that SIGA may collaborate or grant
license rights to academic institutions for non-commercial research use only.
(b) The commercial license term for each Licensed Product shall continue on
a country-by-country and product-by-product basis until the last to expire of
the SIGA Patent Rights, WYETH-AYERST Patent Rights or Joint Patent Rights in any
country in the Territory to which the license pertains, having at least one
Valid Claim that but for the licenses granted herein would be infringed, or
until the expiration of ten (10) years from the First Commercial Sale in such
country by WYETH-AYERST or its Affiliates, licensees or sublicensees of each
such Licensed Product, whichever is later. At the end of the commercial license
term for each Licensed Product, the license granted pursuant to 7.1(b) shall be
fully-paid and irrevocable.  The license for each such Licensed Product shall be
deemed a license separate and severable from licenses to other Licensed
7.3  PAYMENT OF ROYALTIES, ROYALTY RATES, ACCOUNTING FOR
ROYALTIES AND RECORDS.
7.3.1     Payment of Royalties to SIGA
WYETH-AYERST shall pay SIGA a royalty of ***** on the first $***** of cumulative
Net Sales of Licensed Products.  For all sales of Licensed Products after such
cumulative amount is reached, WYETH-AYERST shall pay SIGA a royalty based on the
Net Sales of Licensed Products in each country as follows:
FOR ANNUAL NET SALES BETWEEN:  MARGINAL ANNUAL ROYALTY (%)
$*****                         *****
Such royalty shall be determined based on total annual Net Sales of WYETH-AYERST
and its Affiliates, licensees and sublicensees of each Licensed Product in each
calendar year and shall be payable on an incremental basis, i.e., *****% annual
royalty is payable on the first $***** Net Sales for a particular calendar year,
with *****% accruing on the incremental Net Sales over that amount up to and
including $***** in Net Sales for that calendar year.  Unless otherwise provided
by the parties, the obligation to pay royalties shall be imposed on WYETH-AYERST
regardless of the entity making Net
Sales.  The obligation to pay royalties is imposed only once with respect to the
same unit of Licensed Product(s).
7.3.2     Combination Products and Bulk Sales.
Royalties due on sales of Licensed Products that are formulated in
combination with one or more additional active ingredients shall be calculated
by multiplying actual Net Sales of such combination Licensed Products by the
fraction A/(A+B) where A is the invoice price of the combination Licensed
Product if sold separately, and B is the total invoice price of any other active
component or components in the combination, if sold separately.
If on a country-by-country basis the other active component or components
in the combination are not sold separately in said country, Net Sales, for the
purpose of determining royalties on the combination Licensed Products shall be
calculated by multiplying actual Net Sales of such combination Licensed Products
by the fraction A/C where A is the invoice price of the Licensed Product if sold
separately and C is the invoice price of the combination Licensed Product.
If on a country-by-country basis, neither the Licensed Product nor the
combination Licensed Product is sold separately in said country, Net Sales for
purposes of determining royalties on the combination Licensed Products shall be
calculated as above except that WYETH-AYERST shall allocate values to the
components A and B based upon a good-faith determination (which must be set
forth in writing and provided to SIGA) of the respective contributions of such
components to the market value of the combination Licensed Product.
If on a country-by-country basis a Licensed Product is sold in bulk (as
distinguished from packaged pharmaceutical form) for resale in packaged or
finished form, Net Sales shall be calculated by determining the quantity of
Licensed Product in packaged pharmaceutical form that would reasonably be
produced from the bulk quantity of Licensed Product so sold, and by multiplying
such quantity by the average wholesale market price for such licensed product in
packaged pharmaceutical form during the applicable royalty reporting period.
7.3.3     Reduced Royalty.
Notwithstanding the foregoing, royalty payments due to SIGA as specified
above shall be reduced by *****% in any country where WYETH-AYERST decided to
file a patent application pursuant to Section 6.1 and the Patent Rights related
to such patent application do not exist and there is a competitive product
against which WYETH-AYERST could have asserted an issued valid patent, had such
a valid patent existed.
7.3.4     Outside Technology.
If, after application of the credits and reductions set forth in 7.3.2
above, the commercialization of any Licensed Product hereunder becomes
infeasible because of the overall level of royalties payable thereon, the
parties will in good faith discuss the modification of the economic terms hereof
in order to attempt to mitigate such circumstances.
7.3.5     Payment Dates and Reports.
Royalties shall be paid by WYETH-AYERST on Net Sales within thirty (30)
days after the end of each calendar quarter in the year in which such Net Sales
are made.  Such payments shall be accompanied by a report showing the quantity
and Net Sales of each Licensed Product sold by WYETH-AYERST or any Affiliate,
licensee or sublicensee in each country, the applicable royalty rate for such
Licensed Product, any credits or offsets to be applied, and a calculation of the
amount of royalty due.  Payments that are late by fifteen (15) days (after the
30 day due date) will incur a penalty of 1 1/2% per month.
7.3.6  Accounting.
The Net Sales used for computing the royalties payable to SIGA hereunder
shall be computed, and royalties shall be paid, in U.S. dollars.  For purposes
of determining the amount of royalties due, the amount of Net Sales in any
foreign currency shall be computed by converting such amount into U.S. dollars
at the prevailing commercial rate of exchange for purchasing dollars with such
foreign currency as reported in The Wall Street Journal on the last business day
of the period to which a royalty payment relates.
If SIGA has operations outside the U.S. generating expenses in a country,
and if any portion of royalties due hereunder cannot be remitted from such
country or converted from local currency to United States dollars because of
government control, and it is legally permissible to remit royalties in local
currency within the country, then WYETH-AYERST, its Affiliates, licensees or
sublicensees shall have the right to deposit in a bank of SIGA's choice in such
country and in trust for SIGA that portion of royalties that could not be
remitted from the country.  If SIGA has operations outside the U.S. generating
taxable revenues in a country, SIGA agrees that any tax burden levied by any
such country covered by this Agreement on receipt by SIGA of royalties from
WYETH-AYERST under this Agreement shall be borne by SIGA.  In the event that
such tax is required to be withheld by WYETH-AYERST, its Affiliates, licensees
or sublicensees, it shall deliver to SIGA a statement including the amount of
tax withheld and justification therefor, and such other information as may be
necessary for United States foreign tax credit purposes.
7.3.7     Records.
WYETH-AYERST, its Affiliates, licensees and sublicensees shall keep for
three (3) years from the date of each payment of royalties complete and accurate
records of sales by WYETH-AYERST and its Affiliates, licensees and sublicensees
of each Licensed Product in sufficient detail to allow the accruing royalties to
be determined accurately.  SIGA shall have the right for a period of three (3)
years after receiving any report or statement with respect to royalties due and
payable to appoint an independent certified public accountant reasonably
acceptable to WYETH-AYERST to inspect the relevant records of WYETH-AYERST and
its Affiliates, licensees and sublicensees to verify such report or statement.
WYETH-AYERST and its Affiliates, licensees and sublicensees shall make its
records available for inspection by such independent certified public accountant
during regular business hours at such place or places where such records are
customarily kept, upon reasonable notice from SIGA, solely to verify the
accuracy of the reports and payments.  Such inspection right shall not be
exercised more than once in any year, nor more than once with respect to sales
of any Licensed Product in any given payment period.  If any inspection by SIGA
under this Section 7.3.7 results in a discrepancy of more than 5% of the amounts
paid to SIGA under this Agreement, WYETH-AYERST shall promptly reimburse SIGA
for the reasonable costs of such inspection.  SIGA agrees, and will require that
any such certified public accountant shall agree, to hold in strict confidence
all information concerning royalty payments and reports, and all information
learned in the course of any audit or inspection, except to the extent necessary
for SIGA to reveal such information in order to enforce its rights under this
if any, shall be binding on both parties.  SIGA shall pay for such inspections,
except that in the event there is any upward adjustment in aggregate royalties
payable for any calendar year of more than five percent (5%) of the amount paid,
WYETH-AYERST shall pay for such inspection.
7.4  LEGAL ACTION.
7.4.1 Actual or Threatened Infringement.
In the event either party becomes aware of any possible infringement or
unauthorized possession, knowledge or use in the Field, or outside the Field
with a detrimental effect to the R & D Program or otherwise in the Field itself,
of any Patent, Confidential Information, or Technology (collectively, an
"Infringement"), that party shall promptly notify the other party and provide it
with full details.  WYETH-AYERST shall be responsible for the prosecution,
prevention or termination of any Infringement at WYETH-AYERST's expense and with
the sharing of recoveries as specified below.  If WYETH-AYERST does not commence
an action to prosecute, or otherwise take steps to prevent or terminate an
Infringement within one hundred and twenty (120) days from such notice, then
with respect to Technology and Patent Rights owned solely by SIGA and Joint
Technology and Joint Patent Rights, SIGA shall have the right and option to take
such reasonable action as SIGA considers appropriate to prosecute, prevent or
terminate such Infringement.  If either party determines that it is necessary or
desirable for the other to join any such suit, action or proceeding, the second
party shall execute all papers and perform such other acts as may be reasonably
required in the circumstances.
Each party shall, unless otherwise mutually agreed, bear the cost of any
proceeding or suit under this Section 7.4.1 brought by it.  In each case, the
party bringing suit shall have the right first to reimburse itself out of any
sums recovered in such suit or in its settlement for all reasonable costs and
expenses, including reasonable attorney's fees, related to such suit or
settlement.  The remainder is next to be used to reimburse the other party for
its reasonable costs and expenses so incurred. Any remaining amounts shall be
shared on a 50/50 basis.  Each party shall always have the right to be
represented by counsel of its own selection and at its own expense in any suit
instituted under this Section by the other party for Infringement.  If WYETH-
AYERST lacks standing and SIGA has standing to bring any such suit, action or
proceeding, then SIGA shall do so at the request of WYETH-AYERST and at WYETH-
AYERST's expense.  In any action under this Section 7.4.1, the parties shall
fully cooperate with and assist each other.
7.4.2 Defense of Claims by WYETH-AYERST.
Notwithstanding anything to the contrary in this Agreement, in the event
that any action, suit or proceeding is brought against WYETH-AYERST or any
Affiliate, licensee or sublicensee of WYETH-AYERST alleging the infringement of
the intellectual property rights of a third party by reason of the discovery,
development, manufacture, use, sale, importation or offer for sale of a Licensed
Product by WYETH-AYERST or its Affiliates, licensees or sublicensees, WYETH-
AYERST shall be relieved of its research and development obligations of Article
2 hereof and may otherwise discontinue any and all development, making, using,
offering for sale, importing, and selling of any such affected Licensed Product,
until such time as the action, suit, or proceeding is finally adjudicated or
settled by the parties with the result that WYETH-AYERST, its Affiliates,
licensees, or sublicensees would be free to resume the activities and
obligations hereunder.  The parties will cooperate with each other in the
defense of any such suit, action or proceeding.  The parties will give each
other prompt written notice of the commencement of any such suit, action or
proceeding or claim of infringement and will furnish each other a copy of each
communication relating to the alleged infringement.
7.5  TERMINATION AND DISENGAGEMENT.
7.5.1     This Agreement shall expire automatically upon the earlier of ten
(10) years or the last to expire issued patent within Patents in the relevant
country of manufacture, use, importation, offer for sale, or sale of each
Licensed Product.  Upon such expiration, and subject to the provisions of 7.2
hereof, all licenses as granted hereunder to WYETH-AYERST shall be fully paid-up
and irrevocable.
7.5.2     This Agreement may be earlier terminated by WYETH-AYERST in its
independent discretion at any time upon ninety (90) days prior written notice,
subject to the payment of research funds for the initial ***** years of the
Research Term and subject to the additional research payments of Article 3
hereof that have accrued as of the date of notice of such termination.  Upon
such early termination, all WYETH-AYERST rights granted pursuant to 7.1(a)
hereof to SIGA Technology and Patents, and SIGA'S interests in Joint Patents and
Joint Technology, shall revert to SIGA.  All rights granted WYETH-AYERST
pursuant to 7.1(b) hereof shall also revert to SIGA, except with respect to any
Compound that has been identified in the R & D Program as of the date of notice
of such termination, but subject to the continued research funding obligations
of Section 3.2 hereof as respects each such identified Compound and subject to
the royalty obligations of Section 6.4 hereof as respects each such Compound.
7.5.3     WYETH-AYERST may terminate the R & D Program at its sole
discretion (i) in the event of the "Acquisition" of SIGA by a third party, (ii)
if SIGA is no longer generally engaged in Protease research as a primary
business activity or is generally unable to perform the types of obligations set
forth herein due to a change in its business objectives, (iii) if SIGA fails to
deliver sufficient quantities of Protease pursuant to Section 2.1.3, or (iv) if
there has been an action or other proceeding brought in accordance with Section
7.4.2 hereof.  For purposes hereof, an "Acquisition" shall be deemed to have
occurred if SIGA shall consolidate or merge with another entity, or convey, sell
or lease to another entity all or substantially all of the stock, assets or
business of SIGA and its subsidiaries, taken as a whole, or suffer a Change in
Control in which another entity shall come to control SIGA.  "Change of Control"
as used herein shall mean any transaction or event as a result of which any
other entity acquires or for the first time controls and is able to vote without
restriction (directly or through nominees or beneficial ownership) more than
fifty percent (50%) or more of the capital stock of SIGA outstanding at the time
having the power ordinarily to vote for directors of SIGA.
Any termination of the R & D Program under this Section by WYETH-AYERST
shall be without prejudice to the rights of either party against the other, then
accruing or otherwise accrued under this Agreement.  The license granted to
WYETH-AYERST pursuant to Section 7.1(b) hereof shall survive early termination
of the R & D Program by WYETH-AYERST under this Section as to Compounds already
identified as a result of the R & D Program and designated for IND Track Status
or under active evaluation for such status at the time of termination.  Further,
as of the effective date of such early termination by WYETH-AYERST of the R & D
Program, WYETH-AYERST shall be released from its future obligations of research
funding, except for any obligations which have accrued but have not been
satisfied as of such termination date.
7.5.4     SIGA may terminate this Agreement in its sole discretion if
WYETH-AYERST has not identified a Compound for Pre-Project Status following the
completion of the Research Term and is not actively pursuing such
identification, as set forth in Section 2.4.2.
7.5.5     Either party shall have the right to terminate this Agreement by
giving notice to the other party of its election to that effect in accordance
with the notice provisions hereof, in any of the following events:
(i)  If a party assigns or makes any composition or sequestration of its
assets for the benefit of its creditors; or
(ii)  If a party becomes insolvent, goes into liquidation, files a petition
in bankruptcy, is adjudicated bankrupt, is placed in judicial
receivership or provisional administration, or dissolves, or its
financial condition is such that it is unable to pay its bills and
obligations as and when due and payable to its creditors.
7.5.6     Notwithstanding any other provisions of this Agreement, either
party, at its option, may terminate this Agreement on ninety (90) days' prior
written notice served by a party should the other party fail to comply with or
perform its obligations hereunder (including without limitation, WYETH-AYERST's
obligation to adhere to the Global Development Plan), unless such failure or
non-performance is corrected within the ninety (90) day period following
notification, or such extended period as shall be agreed between the parties;
and further provided, that if the nature of the breaching party's obligation is
such that more than ninety (90) days is required for cure, then such party shall
not be in default if it shall have commenced performance to cure within the
ninety (90) day period and thereafter diligently attempts to complete
performance of cure; and further provided that as to any alleged breach
expressly set forth with reasonable detail to be the subject of a good faith
dispute, the remainder of said ninety (90) day period shall be tolled until the
dispute is resolved.  Termination of this Agreement with respect to a particular
Licensed Product, shall not give rise to grounds for termination of the
Agreement in its entirety or as to any other Licensed Product.  Termination of
this Agreement with respect to the R & D Program shall not give rise to grounds
for termination of the Agreement as to a Licensed Product already under
development and not the subject of the incurred material breach.
7.5.7     Effect of Termination for Cause.
Upon termination by WYETH-AYERST pursuant to Section 7.5.5 or 7.5.6, the
licenses granted to WYETH-AYERST pursuant to 7.1(a) and 7.1(b) shall survive,
subject to the earned royalty and related provisions of Sections 7.3.1 through
7.4.2 hereof, respecting WYETH-AYERST's sale of Licensed Product.
Subject to all other terms and conditions herein, and upon termination by
SIGA under Sections 7.5.4, 7.5.5 or 7.5.6 hereof, the licenses granted pursuant
to 7.1(a) and 7.1(b) shall revert to SIGA.
7.5.8  Upon termination by SIGA for any reason and upon the reasonable
request of WYETH-AYERST, SIGA shall grant a direct commercial license, pursuant
to 7.1(b) hereof, to any licensee or sublicensee of WYETH-AYERST with respect to
any Compound already identified in the R & D Program prior to said termination
and which would be affected by such termination.  The terms and conditions of
this Article 7 shall apply to such license unless otherwise agreed by the
parties and such licensee or sublicensee.
7.5.9 Upon termination of this Agreement, except termination by WYETH-
AYERST under Sections 7.5.3, 7.5.5 and 7.5.6 hereof, and upon SIGA's express
written request, WYETH-AYERST will provide to SIGA all copies of data, test
results, and any other information, reports, or written materials related to the
R & D Program, if same has not already been provided to SIGA pursuant to
Paragraph 2.4.3 hereof or otherwise; and further, WYETH-AYERST shall make
available for inspection and review by SIGA, under appropriate terms of
confidentiality and limited use, all copies of regulatory filings and related
materials, data and test results, including clinical studies, related to
Licensed Products.
7.5.10    Surviving Provisions.
Termination of this Agreement for any reason shall be without prejudice to
the rights and obligations of the parties provided in Article 4, Sections 5.2,
5.5, 7.7, Article 9, Section 10.1, and Article 11, all of which shall survive
such termination.
7.6  WARRANTY DISCLAIMER.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, INFORMATION, PATENTS, GOODS,
SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-
INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
7.7  LIMITED LIABILITY.
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER SIGA
NOR WYETH-AYERST WILL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER
OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER
OR EQUITABLE THEORY FOR (I) ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.
8. REPRESENTATIONS AND WARRANTIES
8.1  MUTUAL REPRESENTATIONS.
SIGA and WYETH-AYERST each represents and warrants as follows:
8.1.1     Organization.
It is a corporation duly organized, validly existing and is in good
standing under the laws of the State of Delaware and the State of Delaware
respectively, and it and/or its Affiliates are qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
performance of its obligations hereunder requires such qualification and has all
requisite power and authority, corporate or otherwise, to conduct its business
as now being conducted, to own, lease and operate its properties and to execute,
deliver and perform this Agreement.
8.1.2     Authorization.
The execution, delivery and performance by it of this Agreement have been
duly authorized by all necessary corporate action and do not and will not (a)
require any consent or approval of its stockholders or (b) violate any provision
of any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to it or any
provision of its charter documents.
8.1.3     Binding Agreement.
This Agreement is a legal, valid and binding obligation of it enforceable
against it in accordance with its terms and conditions.
8.1.4     No Inconsistent Obligation.
It is not under any obligation to any person, or entity, contractual or
otherwise, that is conflicting or inconsistent in any respect with the terms of
this Agreement or that would impede the diligent and complete fulfillment of its
obligations.
8.1.5     Governmental Consents.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of either party in
connection with the valid execution, delivery and performance of this Agreement,
except for any filings under any applicable securities laws and except for any
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.  The filings under securities laws, if any, will be effected by SIGA at
its cost within the applicable stipulated statutory period.  Any filings under
the Hart-Scott-Rodino Antitrust Improvements Act, if any, will be effected by
the parties hereto within thirty (30) days after the Effective Date.  If a Hart-
Scott-Rodino filing is effected by the parties, the costs attendant thereto
shall be borne equally by the parties.  If this Agreement is enjoined under
Hart-Scott- Rodino, then this Agreement shall be null and void and any and all
research funding made to SIGA under Article 3 shall be returned to WYETH-AYERST.
8.1.6     Intellectual Property.
It (a) owns or is the licensee in good standing of all Patent Rights,
technology, trade secrets and other intellectual property to be used by it in
connection with this Agreement; (b) has received no notice of infringement or
misappropriation of any alleged rights asserted by any third party in relation
to any technology to be used by it in connection herewith; (c) is not in default
with respect to any license agreement related hereto; and (d) is not aware of
any patent, trade secret or other right of any third party which could
materially adversely affect its ability to carry out its responsibilities
hereunder, or the other party's ability to exercise or exploit any license
granted to it under this Agreement.  Such party agrees to immediately notify the
other party in writing in the event such party hereafter receives a notice of
the type referred to in (b) above, becomes in default under any license
agreement referred to in (c) above, or becomes aware of any patent, trade secret
or other right of the nature referred to in (d) above.
8.1.7.    Litigation.
There is no action, suit, proceeding or investigation pending or currently
threatened against it which questions the validity of this Agreement or the
right to enter into such instrument or to consummate the transactions
contemplated hereby.
Each party shall indemnify, defend and hold harmless the other party, its
Affiliates and their respective directors, officers, employees, and agents and
their respective successors, heirs and assigns, against any liability, damage,
loss or expense (including reasonable attorneys' fees and expenses of
litigation) incurred by or imposed upon such indemnified party, or any of them,
in connection with any claims, suits, actions, demands or judgments of third
parties, including without limitation personal injury and product liability
matters (except in cases where such claims, suits, actions, demands or judgments
result from a willful material breach of this Agreement, gross negligence or
willful misconduct on the part of the indemnifying party arising directly out of
any actions of the indemnifying party in the performance of the R & D Program or
arising out of the development, testing, production, manufacture, promotion,
import, sale or use by any person of any Licensed Product manufactured or sold
by WYETH-AYERST or by an Affiliate, licensee, sublicensee, distributor or agent
of WYETH-AYERST.
10.1 SENIOR OFFICIALS.
The parties recognize that a bona fide dispute as to certain matters may
from time to time arise during the term of this Agreement which relates to
either party's rights and/or
obligations hereunder.  In the event of the occurrence of such a dispute, either
party may, by notice to the other party, have such dispute referred to their
respective senior officials designated below or their successors, for attempted
resolution by good faith negotiations within thirty (30) days after such notice
is received.  Said senior officials shall be designated by the parties upon
execution of this Agreement.
11.1 PAYMENT METHOD.
Each payment to SIGA under this Agreement shall be paid by WYETH-AYERST in
U.S. currency by wire transfer of funds to an account of SIGA in accordance with
instructions provided by SIGA.
11.2 NOTICES.
All notices shall be in writing mailed via certified mail, return receipt
requested, courier providing evidence of delivery, or facsimile transmission
with confirmation of receipt requested, addressed as follows, or to such other
address as may be designated by notice so given from time to time:
If to WYETH-AYERST:
WYETH-AYERST LABORATORIES
St. Davids, Pennsylvania 19087
Attention: Senior Vice President
AMERICAN HOME PRODUCTS CORPORATION
One Campus Drive
Parsippany, New Jersey 07054
If to SIGA:
666 Third Avenue, 30th Floor
New York, NY  10017
Attn:  President
Eilenberg & Zivian
Attn:  Jeffrey D. Abbey, Esq.
Notices shall be deemed given as of the date received as evidenced by
confirmation of receipt.
11.3 GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in accordance with the
laws of the state of New Jersey, U.S.A., without regard to the application of
principles of conflicts of law, except with regard to issues of patent law,
which shall be determined with reference to the substantive laws of the country
in question.
11.4 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors and permitted
assigns.
11.5 HEADINGS.
Section and subsection headings are inserted for convenience of reference
only and do not form a part of this Agreement.
11.6 COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
11.7 AMENDMENT: WAIVER.
This Agreement may be amended, modified, superseded or canceled, and any of
the terms may be waived, only by a written instrument executed by each party or,
in the case of waiver, by the party or parties waiving compliance.  The delay or
failure of any party at any time or times to require performance of any
provisions shall in no manner affect the rights at a later time to enforce the
same.  No waiver by any party of any condition or of the breach of any term
contained in this Agreement, whether by conduct, or otherwise, in any
one or more instances, shall be deemed to be, or considered as, a further or
continuing waiver of any such condition or of the breach of such term or any
other term of this Agreement.
11.8 NO THIRD PARTY BENEFICIARIES.
Except as set forth in Section 10, no third party, including any employee
of any party to this Agreement, shall have or acquire any rights by reason of
11.9 NO AGENCY OR PARTNERSHIP.
Nothing contained in this Agreement shall give either party the right to
bind the other, or be deemed to constitute the parties as agents for the other
or as partners with each other or any third party.
11.10     ASSIGNMENT AND SUCCESSORS.
This Agreement may not be assigned by either party without the consent of
the other, which consent shall not be unreasonably withheld, except that each
party may, without such consent, assign this Agreement and the rights,
obligations and interests of such party, in whole or in part, to any of its
Affiliates, to any purchaser of all or substantially all of its assets to which
the subject matter of the Agreement relates, or to any successor corporation
resulting from any merger or consolidation of such party with or into such
11.11     AFFILIATE AGREEMENTS.
WYETH-AYERST may, from time to time after Pre-Project Status has been
granted to an Licensed Product, request and SIGA agrees to execute separate
license agreements for such Licensed Product under Section 8.1(b) hereof in
mutually satisfactory form ("Affiliate Agreements") separately granting to
American Home Products Corporation, or separately granting directly to any
Affiliate, equivalent rights as granted to WYETH-AYERST in Section 8.1(b)
hereof, in any country or countries within the Territory.  Any such Affiliate
Agreement entering into force under this Section shall be prepared by WYETH-
AYERST, subject to review and approval by SIGA, and shall contain terms and
conditions consistent with those of this Agreement, subject only to such
modifications as may be required by the laws or regulations of the country or
countries having jurisdiction over any such Affiliate Agreement, including, but
not limited to, governmentally required changes in the rate of payment,
restrictions against the remittance thereof and limitations upon the term or
duration of any such Affiliate Agreement.  In those countries in which any such
Affiliate Agreement requires prior government approval or registration, such
Affiliate Agreement shall not be binding or have any force or effect until the
required government approval or registration has been granted. All Affiliate
Agreements shall be deemed to be severable and independent with respect to this
Agreement and to each other.
11.12 FORCE MAJEURE.
For a period of one (1) year from each occurrence thereof, neither WYETH-
AYERST nor SIGA shall be liable for failure of or delay in performing
obligations set forth in this Agreement, and neither shall be deemed in breach
of its obligations, if such failure or delay is due to natural disasters or any
causes beyond the reasonable control of WYETH-AYERST or SIGA.  In event of such
force majeure, the party affected thereby shall use reasonable efforts to cure
or overcome the same and resume performance of its obligations hereunder.
11.13     INTERPRETATION.
The parties hereto acknowledge and agree that: (i) each party and its
counsel reviewed and negotiated the terms and provisions of this Agreement and
have contributed to its
revision; (ii) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement; and (iii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in a favor of or against any
party, regardless of which party was generally responsible for the preparation
of this Agreement.
11.14     INTEGRATION: SEVERABILITY.
This Agreement is the sole agreement with respect to the subject matter
hereof and merges and supersedes all other agreements and understandings between
the parties with respect to same, including but not limited to the
Confidentiality Agreement between SIGA and WYETH-AYERST dated February 29, 1996.
If any provision of this Agreement is or becomes invalid or is ruled invalid by
any court of competent jurisdiction or is deemed unenforceable, it is the
intention of the parties that the remainder of this Agreement shall not be
affected.
11.15     EXPORT CONTROLS.
This Agreement is made subject to any restrictions concerning the export of
Licensed Products, Confidential Information, or Technology from the United
States which may be imposed upon or related to either party to this Agreement
from time to time by the Government of the United States.  Neither party will
export, directly or indirectly, any Confidential Information, Technology or any
Licensed Products utilizing such Confidential Information or Technology to any
countries for which the United States Government or any agency thereof at the
time of export requires an export license or other governmental approval,
without first obtaining the written consent to do so from the Department of
Commerce or other agency of the United States Government when required by
applicable statute or regulation.
Without limitation of the foregoing, and in support of maintaining a
general license for the export of technical data under this Agreement, a party
receiving an export agrees to not knowingly export or reexport any technical
data or materials furnished to such party under this Agreement, any part thereof
or any direct product thereof, directly or indirectly, without first obtaining
permission to do so from the United States Department of Commerce, the United
States Food and Drug Administration and/or other appropriate United States
governmental agencies, into Afghanistan, the People's Republic of China, South
Africa, Namibia, Iran, Iraq, Syria, or any other country subject to applicable
terrorist or foreign policy controls, or any of those countries listed from time
to time in supplements to Part 770 to Title 15 of the Code of Federal
Regulations in Country Groups Q, S, W, Y or Z.
11.16     SECTION 365(n) OF THE BANKRUPTCY CODE.
All rights and licenses granted under or pursuant to any section of this
Agreement are, and shall otherwise be, deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(35A) of the Bankruptcy Code.  The parties shall retain
and may fully exercise all of their respective rights and elections under the
Bankruptcy Code.  Upon the bankruptcy of either party, the non-bankrupt party
shall further be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property, and such, if not already in its
possession, shall be promptly delivered to the non-bankrupt party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
REPRESENTED BY ITS WYETH-AYERST
LABORATORIES DIVISION
By:  /s/ Robert I. Levy
Title:    President Wyeth Ayerst Research
Date:  July 8, 1997
By:  /s/ Judson A. Cooper
Title:    Executive Vice President
EXHIBIT 10(p)
[Collaborative Evaluation Agreement between the Company and Chiron Corporation]
COLLABORATIVE EVALUATION AGREEMENT
This Agreement is made by and between Chiron Corporation, 4560 Horton Street,
Emeryville, California 94608 ("Chiron"), and SIGA Pharmaceuticals, Inc., 666
Third Avenue, 30/th/ Floor, New York, New York 10017 ("SIGA"), effective July 1,
1997, as follows:
1.   Evaluation.  Chiron and SIGA desire to collaborate on evaluating the
utility of gram-positive commensal bacteria as vectors for inducing mucosal
immunity as set forth in the SIGA/Chiron Research Project proposal attached
hereto as Exhibit A and incorporated herein (the "Evaluation").
2.   Materials:
2.1  Chiron Materials:  Chiron shall provide its proprietary HSV gD2
and HIV gp120 and gp120 V3 loop plasmids  (the "Chiron Materials") to SIGA
solely for SIGA's use in conducting the Evaluation.  Chiron retains sole
ownership of the Chiron Materials.  SIGA may not use the Chiron Materials for
any other purpose, nor may SIGA take, send or otherwise provide the Chiron
Materials to any third party except as expressly permitted herein, without
Chiron's prior written approval.
2.1.1  Chiron acknowledges that SIGA plans to perform part or all of
the Evaluation at laboratory facilities located at Rockefeller University,
Oregon State University and/or Emory University under the direction of one or
more SIGA employees as described in Exhibit A, and Chiron hereby consents to
such performance.
2.1.2  SIGA represents and warrants that all personnel, including
employees of SIGA, Rockefeller University, Oregon State University and/or Emory
University, who will be involved in the performance of the Evaluation are and
shall be bound by: (a) confidentiality obligations at least as strict as those
set forth herein; and (b) an obligation to assign all Inventions (as defined in
Section 3 herein) to SIGA and to cooperate with SIGA in connection with
patenting such Inventions. SIGA agrees that it will not permit persons not bound
by such obligations to work on the Evaluation.
2.2  SIGA Materials:  SIGA owns and/or has licensed certain gram-
positive commensal bacteria and related technology, including without limitation
the gram-positive commensal bacteria and related technology licensed from
Rockefeller University, Oregon State University and/or Emory University (the
"SIGA Materials").  SIGA retains sole ownership of the SIGA Materials.
2.3  Joint Materials:  Using the SIGA Materials, SIGA shall make
recombinant constructs expressing heterologous genes contained within the Chiron
Materials (the "Joint Materials") and shall provide the Joint Materials to
Chiron solely for its performance of the Evaluation.  Subject to the terms of
this Agreement, Chiron and SIGA shall jointly own the Joint Materials.  Neither
Chiron nor SIGA may take, send or otherwise provide the Joint Materials to any
third party without the prior written approval of both Chiron and SIGA.
3.   Results, Inventions and Invention Disclosures.
3.1  Chiron and SIGA shall jointly evaluate the results of the
Evaluation and the Joint Materials and shall consult with each other as needed
regarding the proposed course of the Evaluation.  For the purposes of this
Agreement, the results of the Evaluation shall be considered Confidential
Information of Chiron and SIGA as defined in Section 4 herein.
3.2  Invention; Invention Disclosure.  Each party shall promptly
provide a full written disclosure to the other (an "Invention Disclosure")
describing any invention, improvement, or discovery arising out of its conduct
of the Evaluation (an "Invention").
4.   Confidentiality and Non-Use Obligations.  During the course of the
Evaluation Chiron and SIGA may each provide confidential information, including
but not limited to each party's proprietary materials, research and development
data and plans, proprietary technologies, business or research strategies, trade
secrets and material embodiments thereof (each party's "Confidential
Information"), to the other solely for the recipient's conduct of the
Evaluation.
4.1  Confidential Information shall be provided in writing, marked
"confidential", or if disclosed orally, reduced to writing, marked
"confidential", and provided to the recipient within thirty (30) days of such
oral disclosure.
4.2  The recipient shall maintain the disclosing party's Confidential
Information in confidence.  The recipient shall use the disclosing party's
Confidential Information solely for its conduct of the Evaluation, unless the
recipient has received the prior written approval of the disclosing party.
4.3  The recipient's obligations hereunder shall not apply to any
information which: (i) can be shown by contemporaneous documentation of the
recipient to have been in its possession prior to receipt from the disclosing
party; (ii) is or becomes, through no fault of the recipient, publicly known;
(iii) is furnished to the recipient by a third party without breach of a duty to
the disclosing party; (iv) is independently developed by the recipient without
access to the disclosing party's Confidential Information; or (v) is required to
be disclosed by operation of law, provided that the disclosing party has
received advance notice of the proposed disclosure by the recipient.
4.4  Upon request by the disclosing party, the recipient shall return
or provide satisfactory evidence of the destruction of all Confidential
Information furnished hereunder and any notes, copies, summaries or extracts
thereof, provided that the recipient may retain one (1) copy of the disclosing
party's Confidential Information in its legal archives in order to monitor its
obligations hereunder.
5.   Intellectual Property Rights.  Chiron and SIGA acknowledge that the
conduct of the Evaluation may result in Inventions or know-how of commercial
value, and they agree to collaborate so as to protect the proprietary nature of
such Inventions or know-how.  Inventorship of any Inventions arising from the
conduct of the Evaluation shall be determined by the patent laws of the
United States and, subject to the terms of this Agreement, ownership shall
follow therefrom. SIGA represents and warrants that its conduct of the
Evaluation will not result in the creation of any rights to any third parties.
Except as expressly set forth in this Agreement, no party shall obtain rights in
or a license to any patent, copyright, trademark or other property right of the
5.1  Definitions:  As used in this Agreement:
5.1.1  "Chiron Inventions" shall mean Inventions invented solely by
Chiron employees or persons obligated to assign their Inventions to Chiron.
Chiron retains all right, title, and interest in and to all Chiron Inventions.
5.1.2  "SIGA Inventions" shall mean Inventions invented solely by
employees of SIGA or persons obligated to assign their Inventions to SIGA.
Subject to the provisions of Section 6 herein, SIGA retains all right, title,
and interest in and to all SIGA Inventions.
5.1.3  "Joint Inventions" shall mean Inventions invented jointly by
employees of Chiron or persons obligated to assign Inventions to Chiron, and
employees of SIGA or persons obligated to assign Inventions to SIGA. Subject to
the provisions of Section 6 herein, Chiron and SIGA shall jointly own all Joint
5.2  Right to File Patents:
5.2.1  Each party shall have the sole right to file, prosecute and
maintain patent applications and patents with respect to its solely owned
materials and Inventions, at its sole expense.
5.2.2  With respect to Joint Inventions, the parties shall mutually
determine which party shall file, prosecute and maintain patent applications and
patents on behalf of the parties jointly. Unless otherwise agreed, the parties
shall share equally all out-of-pocket patent costs with respect to such Joint
6.   License and Option Rights.
6.1  Subject to each party's obligations hereunder regarding the Joint
Materials and each party's Confidential Information, Chiron and SIGA shall each
have a co-exclusive license, without the right to sublicense, to use the results
of the Evaluation solely for its internal research purposes.
6.2  Chiron shall also have a right of first negotiation with regard
to a license in any patents or patent applications relating to any SIGA
Invention or Joint Invention, and in any patents or patent applications owned or
licensed by SIGA necessary to practice SIGA Inventions and Joint Inventions.
Chiron must notify SIGA in writing of its intent to negotiate such license
within ninety (90) days after its receipt of SIGA's Invention Disclosure and
completion of the Evaluation or termination of this Agreement, whichever is
later.  If Chiron does not so notify SIGA or if the parties are unable to enter
into a license agreement on mutually satisfactory terms, then SIGA shall have
right to license any such patents or patent applications to any third party.
7.   Publications.  Chiron and SIGA are free to present or publish the
findings of the Evaluation in a thesis, scientific publication, or public,
noncommercial conference provided that: (a) no Chiron Confidential Information
is revealed by SIGA, and no SIGA Confidential Information is revealed by Chiron
thereby; and (b) at least thirty (30) days prior to submission thereof to a
publisher or any third party, the publishing party shall have delivered copies
of the proposed presentation or publication to the other party for review.  Said
other party may, within forty five (45) days of such delivery, object to the
publication or presentation because there would be a disclosure of Chiron or
SIGA Confidential Information, or because there is patentable subject matter in
which said other party has an interest which needs protection. Upon written
objection, Chiron or SIGA shall refrain from disclosing the other's Confidential
Information.  Upon written objection regarding disclosure of patentable subject
matter, Chiron and SIGA shall, for up to ninety (90) days from initial delivery,
delay disclosing such patentable subject matter in order to permit the filing of
patent applications thereon.  The parties shall, in any publication, acknowledge
the contributions and publications of the other as scientifically appropriate.
8.   Compliance with Law.   Each party shall conduct the Evaluation in
compliance with all applicable laws and regulations including, where applicable,
those relating to the treatment of laboratory animals and current NIH
guidelines.  Each party shall use any materials received from the other only in
laboratory animals or in in vitro experiments, and not in human beings.
9.   Indemnification.  Except to the extent caused by the negligence or
willful misconduct of the indemnified party, its employees, agents or
representatives, each party shall indemnify and hold the other harmless from and
against any loss, cost, expense, damages or liability, including reasonable
attorney's fees, arising at any time in connection with the indemnified party's
conduct of the Evaluation.
10.  Notices.  Routine notices of conditions or situations affecting the
Evaluation shall be given in writing between Drs. Hruby, Fischetti and Jones of
SIGA and Dr. Gail Barchfeld of Chiron. All other notices will be given in
writing and delivered by mail or facsimile to the parties as follows:
In the case of SIGA:
SIGA Pharmaceuticals
Attention:  Joshua D. Schein, Ph.D., Chief Financial Officer
In the case of Chiron:
Chiron Corporation
4560 Horton Street
Emeryville, California 94608
Attention:  Contracts Administrator, Legal Department
11.  Independent Contractor. Neither party, nor their respective employees,
consultants or representatives, shall be considered employees, partners, or
agents of the other party.  Neither party may make any representations or
commitments on the other party's behalf nor may one party use the other party's
name or trademarks in any public disclosure, without the named party's prior
written consent.
12.  Term, Termination, Amendment and Survival.
12.1 This Agreement shall terminate on the first anniversary of the
effective date of this Agreement.
12.2 This Agreement may be terminated by either party upon thirty (30)
days prior written notice to the other party.
12.3 This Agreement may be amended or renewed only with the written
agreement of both parties.
12.4 The obligations of Sections 2, 3, 4, 5, 6, 7 and 9 shall survive
termination or expiration of this Agreement.
13.  Assignment.  Neither party not assigned or transfer this Agreement
without the written consent of the other party, which consent shall be not be
unreasonably withheld.
15.  Entire Agreement.  This Agreement is the entire agreement of the
parties relating to the Evaluation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CHIRON CORPORATION                                 SIGA PHARMACEUTICALS
By:  /s/ Leander Lauffer                      By:    /s/ David H. de Weese
--------------------                        -------------------------
Leander Lauffer, Ph.D.                      Authorized Representative
Vice President, Business Development
Chiron Vaccines                          Name:  David H. de Weese
Title: President and CEO
EXHIBIT 10(q)
[Consulting Agreement between the Company and Dr. Scott Hultgren]
This Agreement made this 9th day of July, 1997 ("Effective Date"), by and
between SIGA PHARMACEUTICALS, INC. a Delaware corporation having a place of
business at 666 Third Avenue, 30th Floor, New York, NY 10017 (hereinafter
"SIGA"), and Dr. SCOTT HULTGREN, an individual residing at 1637 Country Hill
Lane, Ballwin, MO 63021 (hereinafter "Individual").
WHEREAS, SIGA is in the business of researching and developing antibiotic
products (hereinafter "SIGA Business"); and
WHEREAS, SIGA has and will have certain materials, compounds, compositions,
chemicals, biologics owned or controlled by SIGA and/or which SIGA has received
from third parties under an obligation of confidentiality (individually and
collectively "SIGA Materials") and certain technical and business information
which pertains to SIGA Business and/or SIGA Materials which information is owned
or controlled by SIGA and/or which is received individually and collectively as
"SIGA Information"; and
WHEREAS, Individual is desirous of becoming a consultant to SIGA with
respect to SIGA Business; and
WHEREAS, SIGA is desirous of retaining Individual as a consultant with
WHEREAS, Individual will have access to SIGA Material and SIGA Information;
NOW, THEREFORE, in consideration of the mutual promises and other good and
valuable consideration, the parties hereto agree as follows:
1.(a)  Individual shall provide consulting services, as requested by SIGA
with respect to SIGA Business for a period of one (1) year from the Effective
Date of this Agreement.  This Agreement may be extended for up to four (4)
additional one year terms by mutual agreement.
(b) Individual's consulting services will include:
I)  providing scientific scrutiny of programs funded by SIGA with respect
to the appropriateness of its research and development programs and potential
impact of alternative technologies;
II)  advising SIGA concerning developments in research and the potential of
such developments as a basis for developing new products;
III)  recommending persons who might be appropriate as consultants or
scientific staff for SIGA;
IV)  membership on the Scientific Advisory Board ("SAB") of SIGA, at
meetings to be held not more frequently than quarterly.
(c) Individual will also be available for consultation with SIGA by
correspondence or telephone, the latter at SIGA's expense, and when necessary
for meetings at mutually agreed times and locations, such activities not to
exceed twenty (20) days per year.
(d) Individual will consult exclusively for SIGA in the area of SIGA
Business while retained as a consultant by SIGA.
2.  As compensation for consulting services, pursuant to this agreement,
Individual will receive:
(a) Thirty thousand dollars ($30,000) per year, payable in four equal
installments on the first day of each quarter.  Payments for partial quarters
will be pro rata based on the number of days this Agreement is in effect during
such quarters.  The first payment will be made within thirty (30) days of the
Effective Date.
(b) Individual will also receive reimbursement made in accordance with
policy and practice of SIGA for reasonable, authorized, out-of-pocket expenses
for each visit to SIGA or such other place as authorized by SIGA, upon
presentation of appropriate expense vouchers.
(c) Five thousand (5,000) six (6) year warrants to purchase five thousand
(5,000) shares of SIGA common stock at the initial public offering price (the
"IPO Price") of the SIGA's Common Stock, par value $.0001 (the "Warrants"). The
Warrants shall vest in 50% increments on the first and second anniversaries of
the Effective Date of this Agreement and shall expire on the sixth anniversary
of the Effective Date of this Agreement.
(d) The Compensation, reimbursement and Warrants described in this
paragraph shall be the only amounts due or payable to the Individual for
consulting services provided under this Agreement.
3.  Individual hereby agrees to disclose to SIGA promptly in writing any
invention, development, information or idea whether patentable or not made
and/or conceived by Individual alone or with others in the course of performing
consulting services as defined in Paragraph 1 and/or which is based on SIGA
Materials or SIGA Information (hereinafter "Developed Technology").  Individual
hereby waives whatever rights he may now or hereafter
have in and to any Developed Technology and agrees to execute whatever
additional documents may be necessary to perfect such waiver.
4.  Individual agrees to assign and hereby does assign to SIGA or its
nominee or successor all right, title and interest in and to Developed
Technology, and further agrees to execute such further papers, and perform all
such acts as may be necessary to perfect such assignment.
5.  In the event that SIGA makes or proposes to make any United States or
foreign patent applications relating to Developed Technology owned by SIGA
pursuant to Paragraph 4, Individual shall cooperate fully with SIGA and its
patent counsel in preparing and prosecuting any such application.
6.  Individual further agrees tary to enable SIGA to publish or protect
Developed Technology owned by SIGA by patent or otherwise in any and all
countries and vest title to said patents, inventions, improvements, ideas and
applications in SIGA or its nominees, successors or assigns and to render all
such assistance as SIGA may require in any patent office proceeding or
litigation involving the Developed Technology owned by SIGA.
7.  Unless excluded pursuant to Paragraph 8 below, Developed Technology
owned by SIGA will be considered to be confidential and will be maintained in
confidence by Individual and will not be transferred or disclosed to any person
or entity or used by Individual for any purpose other than for the benefit of
SIGA.
8.  Specifically excluded from the obligations of confidentiality of this
Agreement are SIGA Information, SIGA Materials, and Developed Technology:
(a) which at the time of disclosure are already in the public domain;
(b) which Individual can demonstrate by written evidence were in the
possession of Individual prior to disclosure by SIGA;
(c) which subsequently become part of the public domain through no fault of
(d) which become known to Individual subsequent to the disclosure by SIGA
through a third party who is not under any obligation of confidentiality to
9.  The fact that general information may be in or become part of the
public domain, in and of itself, does not exclude any specific information or
specific material from the obligations of this Agreement.
10.  No rights or licenses in or to SIGA Information, SIGA Materials or
Developed Technology are granted to Individual by virtue of this Agreement.
11.  At the request of SIGA, Individual shall return to SIGA any and all
materials and physical documents, whether prepared by SIGA or by Individual,
when such materials or documents are, include or incorporate SIGA Materials,
SIGA Information or Developed Technology.  The term document is used in its
broadest sense and include electronic information in the form of discs, tapes,
12.  Individual represents and warrants that to the best of his knowledge
he is permitted to enter into this Agreement and perform the obligations
contemplated thereby and that this Agreement and the terms and obligations
thereof are not inconsistent with or in violation of his present employment or
with any other obligation he may have.
13.  This Agreement constitutes the entire and exclusive Agreement between
Individual and SIGA with respect to the subject matter thereof and supersedes
any prior or contemporaneous agreements, representations and understandings of
the parties with respect thereto.  No supplement, modification or amendment of
this Agreement shall be binding upon SIGA or Individual unless set forth in a
written agreement executed by SIGA and Individual.
14.  Except for his present employment with Washington University School of
Medicine, Individual agrees that while employed as a consultant for SIGA and for
one year after termination of such consulting services he will not directly or
indirectly be engaged or be connected with or assist any business, activity or
person competing or intending to compete with SIGA Business, whether his
involvement shall be as an officer, director, owner, employee, partner,
affiliate, consultant, or otherwise.
15.  It is the desire and intent of the parties hereto that the provisions
of this Agreement shall be enforced to the fs sought.  Accordingly, to the
extent that a restriction contained in this Agreement is more restrictive than
permitted by the laws of any jurisdiction where this Agreement may be subject to
review and interpretation, the terms of such restriction, for the purpose only
of the operation of such restriction in such jurisdiction, shall be the maximum
restriction allowed by the laws of such jurisdiction and such restriction shall
be deemed to have been revised accordingly herein.
Individual further consents to personal jurisdiction in the State of New
York for the purposes of enforcing this Agreement and further agrees that the
State of New York is and shall be a convenient forum and the law of the State of
New York shall govern this Agreement without regard to choice of law principles.
16.  Individual represents, warrants and agrees that he can and will
perform the services required by this Agreement without disclosing or using any
and/or proprietary information of a third party.
17.  If Individual breaches any of his obligations hereunder, in addition
to any other remedies it may have, SIGA shall have the right to terminate this
Agreement and SIGA's subsequent obligations hereunder and the consulting
services of Individual by written notice to Individual.
18.  The obligations of Paragraphs 4-12, 14-16, 18 and 19 of this Agreement
shall survive any termination of this Agreement.
19.  Individual and/or SIGA shall have the right to terminate the
consulting services of Individual and SIGA's obligation to compensate Individual
by sixty (60) days prior written notice.  In the event that the consulting
services of Individual are terminated by SIGA under this Paragraph 19 prior to
the first anniversary of this Agreement, the obligations of Paragraph 14 shall
not be applicable.
20.  This Agreement is also terminated (i) if a Technology Transfer
Agreement between SIGA and MedImmune, Inc. and related agreements, including an
agreement which provides for the funding of the Individual's research program at
Washington University, are not executed prior to December 31, 1997; or (ii) if
Washington University's conflict of interest review group determines that this
Agreement does not meet Washington University's conflict of interest standards.
21. This Agreement is also terminated if it is not subsequently approved by
Michael Richman at MedImmune, Inc. and Susan Cullen at Washington University.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
indicated above.
By: /s/ David H. de Weese
DR. SCOTT HULTGREN
/s/ Scott Hultgren
EXHIBIT 10(r)
[Letter of Intent between the Company and MedImmune, Inc.]
MedImmune, Inc.
35 W. Watkins Mill Road
Gaithersburg, MD  20878
This letter sets forth the intention of MedImmune, Inc. ("MedImmune") to
enter into an agreement or related series of agreements with SIGA
Pharmaceuticals, Inc. ("Siga") pursuant to which Siga will purchase certain
technology, intellectual property and related rights in the field of gram
negative antibiotics from MedImmune as described below.  If acceptable to you,
this will evidence our mutual intention to proceed promptly and in good faith to
negotiate a definitive agreement substantially on the following terms:
1.   Purchase Price.  In consideration of the sale of the "Assets" (as
defined below) to Siga, and the other agreements of MedImmune set forth below,
Siga shall issue and transfer to MedImmune 335,530 shares of Siga's common stock
(representing 7.5% of the number of shares of common stock outstanding on a
fully diluted basis on May 19, 1997), $.0001 par value per share, pursuant to a
separate Stock Purchase Agreement, which shall include provisions related to the
registration and resale of the shares acquired by MedImmune. Such shares will be
subject only to those restrictions on transferability applicable to the shares
held by other 5% stockholders of Siga in connection with the initial public
offering of Siga's common stock or applicable securities laws.
2.   Sale of Assets.  MedImmune shall sell to Siga all of its right, title
and interest in and to all discoveries and inventions, and related patents and
patent filings, if any, related to the field of gram negative antibiotic
targets, products, processes and services for all human and animal uses, and all
related intellectual property owned by MedImmune as of the effective date (the
"Assets").  The Assets do not include certain intellectual property and related
rights which the parties intend will be acquired or licensed by Siga directly
from certain universities, faculty members of such Universities, and prior
research sponsors of such universities (collectively, the "Collaborators"), as
previously discussed by the parties.  MedImmune shall in good faith take all
reasonable actions necessary to transfer and assign the Assets to Siga,
including the execution of documents, instruments and further agreements as Siga
may request, and will allow Siga personnel to visit and work with MedImmune
personnel directly to effect such transfer and assignment.
3.   Further Assignments.  MedImmune and Siga will assist each other in
good faith to execute appropriate agreements with each of the Collaborators in
order to enable Siga
to acquire, or otherwise receive an appropriate grant of rights to, the
intellectual property of each of the Collaborators in the field of gram negative
antibiotics previously identified by
Siga and MedImmune, including without limitation (i) appropriate amendments to
and assignments of existing agreements between MedImmune and the Collaborators,
respectively, (ii) continuing research agreements with certain of the
Collaborators on terms and conditions substantially similar to those currently
or previously in effect between MedImmune and such Collaborators, and (iii)
license agreements as appropriate on terms and conditions substantially similar
to those currently in effect or offered to MedImmune by any of the
Collaborators.
4.   Further Covenants.  MedImmune and Siga will define certain services
which at its discretion MedImmune will provide to Siga in the field of gram
negative antibiotics, including guidance and support in the development by Siga
of compounds based on the Assets, development of patent protection strategies,
and the conduct of animal testing on Siga compounds and products.  MedImmune
shall also have the right to perform certain clinical, clinical trial and
regulatory compliance and development services as requested by Siga from time to
time.  MedImmune will also provide Siga with appropriate representations and
warranties concerning MedImmune's ownership or other interests in the Assets as
of the effective date, and the parties will provide each other with customary
indemnifications concerning the sale of the Assets to Siga and the use of the
Assets by Siga.  (The foregoing does not include a representation by MedImmune
as to the validity of any patents, however.) Further, for a period of five years
from the execution of definitive agreements, Siga will agree to refrain from
attempting to develop or develop any vaccine technology using the Assets, and
MedImmune will agree to refrain from attempting to develop or develop any
product or technology within the field of gram negative antibiotics; provided,
however, that this restriction shall not apply to MedImmune if there is a change
in the ownership of MedImmune due to sale, merger or similar transaction.
Siga and MedImmune agree to use their good faith efforts to expeditiously
negotiate and finalize the agreements necessary to implement the foregoing
transactions at the earliest reasonable date, but acknowledge and agree that
this letter is not binding and neither party shall be obligated to proceed with
the transaction described above prior to the execution of definitive agreements
and instruments acceptable to each party.  The definitive agreements shall
contain such additional matters as are customary in transactions of the nature
described above and which are mutually acceptable to the parties.  Such
termination shall not affect, limit or otherwise terminate any agreements of
confidentiality entered into between the parties prior or subsequent to the date
of this Letter of Intent.  Each party shall bear its own legal and other
expenses in connection with this letter of intent, the purchase and sale of the
Assets, the issuance of the Shares, and the negotiation and execution of
definitive agreements.
We look forward to your acceptance by returning to us a fully-executed copy
of this Letter of Intent where indicated below.
By: /s/ Joshua D. Schein
Its Executive Vice President
Accepted and agreed as of the date
written above, by:
By: /s/ David Mott
Its President & C.O.O.
Computation of Per Share Earnings
December 31, 1996                    December 31, 1995
-------------------------------       ------------------------------
Days           Weighted Avg.          Days             Weighted Avg.
Shares     Outstanding     shares outstanding    Outstanding       shares outstanding
------     -----------     ------------------    -----------       ------------------
Shares to founders                          2,079,170       365             2,079,170                4           2,079,170
Shares issued in March 1996 private
placement                              1,038,008       308               875,908                -                   -
Shares issued in September 1996
private placement                        250,004        95                65,070                -                   -
Cheap stock consideration for shares
issued in September 1996 private
placement                                100,004(1)    270                73,976                4             100,004
Cheap stock consideration for stock options
and warrants issued during 1996          319,407(2)    365               319,407                4             319,407
Weighted average shares
outstanding                                                    3,413,531                            2,498,581
Net loss for period                                             $  (2,268,176)                          $   (1,000)
---------------                         ------------
Net loss per common share                                       $       (0.66)                                   -
===============                         ============
March 31, 1997                          March 31, 1996
Shares to founders                          2,079,170        90             2,079,170               91           2,079,170
placement                              1,038,008        90             1,038,008               34             387,827
private placement                        250,004        90               250,004                -                   -
placement                                100,004         -                     -               91             100,004
and warrants issued during 1996          319,407        90               319,407               91             319,407
Net loss for period                                             $    (550,773)                          $ (614,700)
Net loss per common share                                       $       (0.15)                          $    (0.21)
==============                          ===========
- ----------
(1)  Gross proceeds from private placement                             $750,000
Divided by assumed initial offering price per share               $   5.00
Calculated shares at offering price                                150,000
Actual shares issued                                               250,004
Cheap stock consideration                                          100,004
(2)  Gross proceeds upon exercise of stock options and warrants      $1,708,050
Divided by assumed initial offering price per share             $     5.00
Actual shares issuable upon exercise of stock options and
warrants                                                         661,017
EXHIBIT 24(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated March 3, 1997 relating
to the financial statements of SIGA Pharmaceuticals, Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.