|
As
filed with the Securities and Exchange Commission on October
14,
2005
|
Registration
No. 333-_________
|
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_________________________________
FORM
SB-2
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________________
ZIOPHARM
Oncology, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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2834
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84-1475642
|
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer
|
|
Incorporation
or organization)
|
Classification
Code Number)
|
Identification
No.)
|
1180
Avenue of the Americas, 19th
Floor
New
York,
NY 10036
(646)
214-0700
(Address
and telephone number off principal executive offices and principal place
of
business)
|
Dr.
Jonathan Lewis
Chief
Executive Officer
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Americas, 19th Floor
New
York, NY 10036
Telephone:
(646) 214-0700
Facsimile:
(646) 214-0711
(Name
and address of agent for service)
|
Copies
to:
William
M. Mower, Esq.
Alan
M. Gilbert, Esq.
Maslon
Edelman Borman & Brand, LLP
90
South 7th Street, Suite 3300
Minneapolis,
Minnesota 55402
Telephone:
(612) 672-8200
Facsimile:
(612) 642-8381
|
__________________________________
Approximate
date of proposed sale to the public: From
time
to time after the effective date of this registration statement, as shall
be
determined by the selling stockholders identified herein.
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, please check the following box and list
the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
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. o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o
CALCULATION
OF REGISTRATION FEE
|
Title
of each class of
securities
to be registered
|
Number
of shares to be registered (1)
|
Proposed
maximum
offering price per unit (2) |
Proposed
maximum
aggregate
offering
price (2)
|
Amount
of
registration
fee
|
|||||||||
|
Common
stock, par value $.001 per share
|
4,870,281
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$
|
16.00
|
$
|
77,924,496
|
$
|
9,171.71
|
||||||
| (1) |
There
is also being registered hereunder an indeterminate number of additional
shares of common stock as shall be issuable pursuant to Rule 416
to
prevent dilution resulting from stock splits, stock dividends or
similar
transactions.
|
| (2) |
Estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457 of the Securities Act based upon the last trade of
the
registrant’s common stock on the OTC Bulletin Board, which occurred on
August 23, 2005 at a price per share equal to $16.00 (adjusted
to reflect
a 1-for-40 share combination that was effective August 24,
2005).
|
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.
The
information in this prospectus is preliminary and incomplete and may be changed.
Securities included in the registration statement of which this prospectus
is a
part may not be sold until the registration statement filed with the securities
and exchange commission becomes effective. This prospectus is not an offer
to
sell these securities and is not soliciting an offer to buy these securities
in
any state where the offer or sale is not permitted.
OFFERING
PROSPECTUS
ZIOPHARM
Oncology, Inc.
4,870,281
shares of common stock
The
selling stockholders identified on pages 41-49 of this prospectus are offering
on a resale basis a total of 4,870,281 shares of our common stock, including
482,407 shares issuable upon the exercise of outstanding warrants. We will
not
receive any proceeds from the sale of these shares by the selling
stockholders.
Our
common stock is quoted on the Over-the-Counter Bulletin Board under the symbol
“ZIOP.” The last sale of our common stock as reported on the OTC Bulletin Board
occurred on August 23, 2005 at a price per share equal to $16.00 (adjusted
to
reflect a 1-for-40 share combination that was effective August 24,
2005).
________________
The
securities offered by this prospectus involve a high degree of
risk.
See
“Risk Factors” beginning on page 5.
________________
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved these securities or determined that this prospectus
is
truthful or complete. A representation to the contrary is a criminal
offense.
The
date
of this prospectus is __________, 2005
TABLE
OF CONTENTS
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Page
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||||
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PROSPECTUS
SUMMARY
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1
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|||
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RISK
FACTORS
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5
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|||
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NOTE
REGARDING FORWARD-LOOKING STATEMENTS
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15
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|||
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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16
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|||
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DESCRIPTION
OF BUSINESS
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18
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|||
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MANAGEMENT
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27
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|||
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EXECUTIVE
COMPENSATION
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30
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|||
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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35
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|||
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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37
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|||
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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40
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|||
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USE
OF PROCEEDS
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40
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|||
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SELLING
STOCKHOLDERS
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41
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|||
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PLAN
OF DISTRIBUTION
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50
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|||
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DESCRIPTION
OF CAPITAL STOCK
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52
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|||
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
53
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|||
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ABOUT
THIS PROSPECTUS
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53
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|||
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WHERE
YOU CAN FIND MORE INFORMATION
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53
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|||
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VALIDITY
OF COMMON STOCK
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54
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|||
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EXPERTS
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54
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|||
PROSPECTUS
SUMMARY
This
summary highlights certain information found in greater detail elsewhere in
this
prospectus. This summary may not contain all of the information that may be
important to you. We urge you to read this entire prospectus carefully,
including the risks of investing in our common stock discussed under “Risk
Factors” and the financial statements and other information that is incorporated
by reference into this prospectus, before making an investment decision. In
addition, this prospectus summarizes other documents which we urge you to read.
All references in this prospectus to the “Company,” “we,” “us” and
“our” refer to ZIOPHARM Oncology, Inc.
Our
Company
We
are a
development-stage company that is seeking to develop and commercialize a
diverse, risk-sensitive portfolio of in-licensed cancer drugs that address
unmet
medical needs. Our management and advisors are focused on licensing proprietary
drug candidate families that are related to cancer therapeutics on the market
where the application of new biological understanding and our drug development
expertise will lead to a lower risk for clinical development failure while
expediting clinical registration. We expect to commercialize our products on
our
own in North America but recognize that promising clinical trial results in
cancers with a high incidence and prevalence might also be addressed in a
commercial partnership with another company with the requisite financial
resources. Currently, we are in U.S. Phase I studies for two product candidates
known as ZIO-101 and ZIO-201. We currently intend to continue with clinical
development of ZIO-101 for advanced myeloma and ZIO-201 for advanced sarcoma.
None of our product candidates have been approved by the United States Food
and
Drug Administration (the “FDA”) or any other regulatory body. Further, we have
not received any commercial revenues to date, and until we receive the necessary
approvals from the FDA or a similar foreign regulatory authority, we will not
have any commercial revenues.
| · |
ZIO-101
is
an organic arsenic compound covered by an issued U.S. patent and
applications internationally. A form of commercially available inorganic
arsenic (arsenic trioxide (Trisenox®)
or ATO) has been approved for the treatment of acute promyelocytic
leukemia (APL), a precancerous condition, and is on the compendia
listing
for the therapy of multiple myeloma as well as having been studied
for the
treatment of various other cancers. Nevertheless, ATO has been shown
to be
toxic to the heart and liver, limiting its use as an anti-cancer
agent.
Inorganic arsenic has also been shown to cause cancer of the skin
and lung
in humans. The toxicity of arsenic generally is correlated to its
accumulation in organs and tissues. The Company’s preclinical studies
demonstrated that ZIO-101 (and organic arsenic in general) is considerably
less toxic than inorganic arsenic, particularly with regard to heart
toxicity. In
vitro
testing of ZIO-101 using the National Cancer Institute’s human cancer cell
panel detected activity against lung, colon, brain, melanoma, ovarian
and
kidney cancer. Moderate activity was detected against breast and
prostate
cancer. In addition to solid tumors, in
vitro
testing in both the National Cancer Institute’s cancer cell panel and
in
vivo
testing in a leukemia animal model demonstrated substantial activity
against hematological cancers (cancers of the blood and blood-forming
tissues) such as leukemia, lymphoma, myelodysplastic syndromes and
multiple myeloma. Leukemia is a cancer that begins in blood-forming
tissue
such as the bone marrow and causes large numbers of blood cells to
be
produced and enter the bloodstream. Lymphomas are cancers that begin
in
cells of the immune system. Myelodysplastic syndromes, also called
preleukemia or smoldering leukemia, are diseases in which the bone
marrow
does not function normally.
|
|
·
|
ZIO-201,
or isophosphoramide mustard (IPM), is a proprietary stabilized metabolite
of ifosfamide that is also related to cyclophosphamide. A patent
application for pharmaceutical composition has been filed.
Cyclophosphamide and ifosfamide are alkylating agents. Cyclophosphamide
is
the most widely used alkylating agent in cancer therapy and is used
to
treat breast cancer and non-Hodgkin’s lymphoma. Ifosfamide has been shown
to be effective in high dose by itself, or in combination in treating
sarcoma and lymphoma. Although ifosfamide-based treatment generally
represents the standard of care for sarcoma, it is not licensed for
this
indication by the FDA. Our preclinical studies have shown that, in
animal
and laboratory models, IPM evidences activity against leukemia and
solid
tumors. These studies also indicate that ZIO-201 has a better
pharmacokinetic and safety profile than ifosfamide or cyclophosphamide,
offering the possibility of safer and more efficacious therapy with
ZIO-201. Ifosfamide is metabolized to IPM. In addition to IPM, another
metabolite of ifosfamide is acrolein, which is toxic to the kidneys
and
bladder. The presence of acrolein can mandate extensive in-hospital
hydration and the administration of a protective agent called
Mesna®,
which is inconvenient and expensive. Chloroacetaldehyde is another
metabolite of ifosfamide and is toxic to the central nervous system,
causing “fuzzy brain” syndrome for which there is currently no protective
measure. Similar toxicity concerns pertain to high-dose cyclophosphamide,
which is widely used in bone marrow and blood cell transplantation.
Because ZIO-201 is independently active—without acrolein or
chloroacetaldehyde metabolites—the Company believes that the
administration of ZIO-201 may avoid the toxicities of ifosfamide
and
cyclophosphamide without compromising efficacy. In addition to anticipated
lower toxicity, ZIO-201 may have other advantages over ifosfamide
and
cyclophosphamide. ZIO-201 likely cross-links DNA differently than
ifosfamide or cyclophosphamide metabolites, resulting in a different
activity profile. Moreover, in some instances ZIO-201 appears to
show
activity in ifosfamide- and/or cyclophosphamide-resistant cancer
cells.
|
We
were
originally incorporated in Colorado in September 1998 (under the name Net
Escapes, Inc.) and later changed our name to “EasyWeb, Inc.” in February 1999.
We were re-incorporated in Delaware on May 16, 2005 under the same name. On
September 13, 2005, we completed a “reverse” acquisition of privately held
ZIOPHARM, Inc., a Delaware corporation. To effect this transaction, we caused
ZIO Acquisition Corp., our wholly-owned subsidiary, to merge with and into
ZIOPHARM, Inc., with ZIOPHARM, Inc. surviving as our wholly owned subsidiary.
In
accordance with the terms of the merger, the outstanding common stock of
ZIOPHARM, Inc. automatically converted into the right to receive an aggregate
of
approximately 97.3% of our outstanding common stock (after giving effect to
the
transaction).Following the merger, we caused ZIOPHARM, Inc. to merge with and
into us and we changed our name to “ZIOPHARM Oncology, Inc.”
Our
executive offices are located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036, and our telephone number is (646) 214-0700. Our internet site
is
www.ziopharm.com.
None of
the information on our internet site is part of the prospectus.
2
Recent
Developments
Reverse
Stock Split
On
August
24, 2005, we effected a 1-for-40 share combination (i.e., reverse stock split)
of our capital stock. The share combination was approved by our stockholders
at
a special stockholder meeting held on February 28, 2005. As a result of the
share combination, we had 189,922 shares of common stock outstanding immediately
prior to the Merger.
Acquisition
of ZIOPHARM, Inc.
Pursuant
to an Agreement and Plan of Merger dated August 3, 2005 (the “Merger Agreement”)
by and among us, ZIO Acquisition Corp., a Delaware corporation and our wholly
owned subsidiary, and ZIOPHARM, Inc., a Delaware corporation (“ZIOPHARM”), ZIO
Acquisition Corp. merged with and into ZIOPHARM, with ZIOPHARM remaining as
the
surviving corporation and our wholly-owned subsidiary. This transaction is
referred to throughout this report as the “Merger.” The Merger was effective as
of September 13, 2005, upon the filing of a certificate of merger with the
Delaware Secretary of State. In consideration for their shares of ZIOPHARM
capital stock and in accordance with the Agreement, the stockholders of ZIOPHARM
received an aggregate of 6,967,941 shares or approximately 97.3% of our common
stock. In addition, all securities convertible into and exercisable for shares
of ZIOPHARM capital stock outstanding immediately prior to the Merger were
cancelled, and the holders thereof received similar securities convertible
into
an aggregate of 1,366,846 shares of our common stock.
All
share
and per share data in this prospectus (other than in our financial statements
and in Item 26) have been adjusted to give effect to the conversions effected
as
part of the merger.
The
Merger Agreement was filed as Exhibit 10.1 to our current report on Form 8-K
filed with the Securities and Exchange Commission on August 9, 2005, and is
incorporated herein by reference. The foregoing description of the Merger
Agreement and the Merger do not purport to be complete and is qualified in
its
entirety by reference to the Merger Agreement.
On
September 13, 2005, our board of directors approved a transaction pursuant
to
which ZIOPHARM merged with and into us, leaving us as the surviving corporation.
In connection with this parent-subsidiary merger, we relinquished our prior
corporate name, EasyWeb, Inc., and assumed in its place the name “ZIOPHARM
Oncology, Inc.” The parent-subsidiary merger and name change became effective on
September 14, 2005.
Changes
in Board of Directors
At
the
effective time of the Merger, our board of directors was reconstituted by the
appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James Cannon,
Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and Michael Weiser
as directors (all of whom were directors of ZIOPHARM immediately prior to the
Merger), and the resignations of David C. Olson and David Floor from their
roles
as our directors.
Risk
Factors
For
a
discussion of the risks you should consider before purchasing shares of our
common stock, you are urged to carefully review and consider the section
entitled “Risk Factors” beginning on page 5 of this prospectus.
3
The
Offering
The
selling stockholders identified on pages 41-49 of this prospectus are offering
on a resale basis a total of 4,870,281 shares of our common stock, of which
482,407 shares are issuable upon exercise of outstanding warrants and
options.
|
Common
stock offered
|
4,870,281
shares
|
|||
|
Common
stock outstanding before the offering (1)
|
7,241,211
shares
|
|||
|
Common
stock outstanding after the offering (2)
|
7,723,618
shares
|
|||
|
Common
stock OTC Bulletin Board trading symbol
|
ZIOP
|
|
(1)
|
Based
on the number of shares outstanding as of October 12, 2005, not including
1,449,674 shares issuable upon exercise of various warrants and options
to
purchase our common stock.
|
|
(2)
|
Assumes
the issuance of all shares offered hereby that are issuable upon
exercise
of warrants.
|
4
RISK
FACTORS
An
investment in our common stock is very risky. You may lose the entire amount
of
your investment. Prior to making an investment decision, you should carefully
review this entire prospectus and consider the following risk
factors:
We
currently have no product revenues and will need to raise additional capital
to
operate our business.
To
date,
we have generated no product revenues. Until and unless we receive approval
from
the U.S. Food and Drug Administration (the “FDA”) and/or other regulatory
authorities for our product candidates, we cannot sell our drugs and will not
have product revenues. Currently, our only product candidates are
ZIO-101(organic arsenic) and ZIO-201 (isophosphoramide mustard), and they are
not approved by the FDA for sale.
We
will need to seek additional sources of financing which may not be available
on
favorable terms, if at all.
Currently,
we expect that we will have sufficient cash to fund our operations into the
second quarter of 2006. However, changes may occur that would consume our
existing capital prior to that time, including the progress of our research
and
development efforts, changes in governmental regulation and acquisitions of
additional product candidates. If we do not succeed in raising additional funds
on acceptable terms, we may be unable to complete planned preclinical and
clinical trials or obtain approval of any product candidates from the FDA and
other regulatory authorities. In addition, we could be forced to discontinue
product development, reduce or forego sales and marketing efforts or forego
attractive business opportunities. Any additional sources of financing will
likely involve the issuance of our equity securities, which will have a dilutive
effect on our existing stockholders.
We
are not currently profitable and may never become profitable.
We
have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we succeed in developing and commercializing one or
more
product candidates, we expect to incur substantial losses for the foreseeable
future and may never become profitable. We expect also to continue to incur
significant operating and capital expenditures and anticipate that our expenses
will increase substantially in the foreseeable future as we:
| · |
continue
to undertake preclinical development and clinical trials for product
candidates;
|
| · |
scale
up the formulation and manufacturing of our product candidates;
|
| · |
seek
regulatory approvals for product candidates;
|
| · |
implement
additional internal systems and infrastructure; and
|
| · |
hire
additional personnel.
|
We
also
expect to experience negative cash flow for the foreseeable future as we fund
our operating losses and capital expenditures. This may result in a negative
impact on the value of our common stock.
We
have a limited operating history upon which to base an investment decision.
Prior
to
the Merger, ZIOPHARM was a development-stage company that was incorporated
in
September 2003. To date, we have not demonstrated an ability to perform the
functions necessary for the successful commercialization of any product
candidates. The successful commercialization of any product candidates will
require us to perform a variety of functions, including:
5
| · |
continuing
to undertake preclinical development and clinical
trials;
|
| · |
participating
in regulatory approval processes;
|
| · |
formulating
and manufacturing products; and
|
| · |
conducting
sales and marketing activities.
|
Our
operations have been limited to organizing and staffing our Company, acquiring,
developing and securing our proprietary product candidates, undertaking
preclinical trials and clinical trials of our product candidates ZIO-101 and
ZIO-201, and manufacturing ZIO-101 and ZIO- 201. These operations provide a
limited basis for you to assess our ability to commercialize our product
candidates and the advisability of investing in our securities.
We
may not obtain the necessary U.S. or worldwide regulatory approvals to
commercialize any product candidate.
We
may
not be able to obtain the approvals necessary to commercialize our product
candidates, ZIO-101 and ZIO-201, or any product candidate that we may acquire
or
develop in the future for commercial sale. We will need FDA approval to
commercialize our product candidates in the U.S. and approvals from regulatory
authorities in foreign jurisdictions equivalent to the FDA to commercialize
our
product candidates in those jurisdictions. In order to obtain FDA approval
of
any product candidate, we must submit to the FDA a New Drug Application, or
“NDA,” demonstrating that the product candidate is safe for humans and effective
for its intended use. This demonstration requires significant research and
animal tests, which are referred to as preclinical studies, as well as human
tests, which are referred to as clinical trials. Satisfaction of the FDA’s
regulatory requirements typically takes many years, depending upon the type,
complexity and novelty of the product candidate, and will require substantial
resources for research, development and testing. We cannot predict whether
our
research, development, and clinical approaches will result in drugs that the
FDA
considers safe for humans and effective for their intended uses. The FDA has
substantial discretion in the drug approval process and may require us to
conduct additional preclinical and clinical testing or to perform post-marketing
studies. The approval process may also be delayed by changes in government
regulation, future legislation or administrative action or changes in FDA policy
that occur prior to or during our regulatory review. Delays in obtaining
regulatory approvals may:
| · |
delay
commercialization of, and our ability to derive product revenues
from, our
product candidates;
|
| · |
impose
costly procedures on us; and
|
| · |
diminish
any competitive advantages that we may otherwise enjoy.
|
Even
if
we comply with all FDA requests, the FDA may ultimately reject one or more
of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance for
our product candidates, ZIO-101 and ZIO-201. Failure to obtain FDA approval
of
our product candidates will severely undermine our business by leaving us
without a saleable product, and therefore without any potential revenue source,
until another product candidate can be developed. There is no guarantee that
we
will ever be able to develop or acquire another product candidate.
In
foreign jurisdictions, we similarly must receive approval from applicable
regulatory authorities before we can commercialize any drugs. Foreign regulatory
approval processes generally include all of the risks associated with the FDA
approval procedures described above.
6
Our
product candidates are in early stages of clinical trials, and we cannot be
certain when we will be able to file an NDA with the FDA.
Our
product candidates, ZIO-101 and ZIO-201, are in early stages of development
and
require extensive clinical testing. In 2005 we initiated two ZIO-101 phase
I
clinical trials; one in hematological cancers and the other in solid tumors.
A
phase I trial for ZIO-201 was initiated in 2004. Notwithstanding our current
clinical trial plans for each of our existing product candidates, we may not
be
able to commence additional trials or see results from these trials within
our
anticipated timelines. As such, we cannot predict with any certainty if or
when
we might submit an NDA for regulatory approval of our product candidates or
whether such an NDA will be accepted.
Clinical
trials are very expensive, time-consuming and difficult to design and implement.
Human
clinical trials are very expensive and difficult to design and implement, in
part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time consuming. We estimate that clinical trials of our
product candidates will take at least several years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems
that cause us to abandon or repeat clinical trials. The commencement and
completion of clinical trials may be delayed by several factors,
including:
| · |
unforeseen
safety issues;
|
| · |
determination
of dosing issues;
|
| · |
lack
of effectiveness during clinical trials;
|
| · |
slower
than expected rates of patient recruitment;
|
| · |
inability
to monitor patients adequately during or after treatment; and
|
| · |
inability
or unwillingness of medical investigators to follow our clinical
protocols.
|
We
are
hopeful that we may be able to obtain “Fast Track” status from the FDA for one
or more of our product candidates. Fast Track status means that the FDA will
perform an expedited review of our data upon the completion of clinical trials,
which will thereby decrease the amount of time it will take a product candidate
that has achieved such designation to reach the commercial market. However,
there is no guarantee that any of our product candidates will be granted Fast
Track status by the FDA or that, even if such product candidate is granted
such
status, the product candidate’s clinical development and regulatory approval
process will not be delayed or will be successful.
In
addition, we or the FDA may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or if
the
FDA finds deficiencies in our IND submission or in the conduct of these trials.
Therefore, we cannot predict with any certainty the schedule for future clinical
trials.
The
results of our clinical trials may not support our product candidate claims.
Even
if
our clinical trials are completed as planned, we cannot be certain that their
results will support approval of our product candidates. Success in preclinical
testing and early clinical trials does not ensure that later clinical trials
will be successful, and we cannot be sure that the results of later clinical
trials will replicate the results of prior clinical trials and preclinical
testing. The clinical trial process may fail to demonstrate that our product
candidates are safe for humans and effective for indicated uses. This failure
would cause us to abandon a product candidate and may delay development of
other
product candidates. Any delay in, or termination of, our clinical trials will
delay the filing of our NDAs with the FDA and, ultimately, our ability to
commercialize our product candidates and generate product revenues. In addition,
our clinical trials involve small patient populations. Because of small sample
size, the results of these clinical trials may not be indicative of future
results.
7
Physicians
and patients may not accept and use our drugs. Even if the FDA approves our
product candidates, physicians and patients may not accept and use them.
Acceptance and use of our products will depend upon a number of factors
including:
| · |
perceptions
by members of the health care community, including physicians, regarding
the safety and effectiveness of our drugs;
|
| · |
cost-effectiveness
of our products relative to competing products;
|
| · |
availability
of reimbursement for our products from government or other healthcare
payers; and
|
| · |
effectiveness
of marketing and distribution efforts by us and our licensees and
distributors, if any.
|
Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of a drug to find market acceptance would harm our business and could
require us to seek additional financing in order to fund the development of
future product candidates.
Our
drug-development program materially depends upon third-party researchers who
are
outside our control.
We
materially rely upon independent investigators and collaborators, such as
universities and medical institutions, to conduct our preclinical and clinical
trials under agreements with us. These collaborators are not our employees
and
we cannot control the amount or timing of resources that they devote to our
programs. These investigators may not assign as great a priority to our programs
or pursue them as diligently as we would if we were undertaking such programs
ourselves. If outside collaborators fail to devote sufficient time and resources
to our drug development programs, or if their performance is substandard, the
approval of our FDA applications, if any, and our introduction of new drugs,
if
any, will be delayed. These collaborators may also have relationships with
other
commercial entities, some of whom may compete with us. If our collaborators
assist our competitors to our detriment, our competitive position would be
harmed.
We
rely exclusively on third parties to formulate and manufacture our product
candidates.
We
do not
have experience in drug formulation or manufacturing and do not intend to
establish our own manufacturing facilities. We lack the resources and expertise
to formulate or manufacture our own product candidates. We currently are
contracting for the commercial scale manufacture of our product candidates.
We
intend to contract with one or more manufacturers to manufacture, supply, store
and distribute drug supplies for our clinical trials. If a product candidate
we
develop or acquire in the future receives FDA approval, we will rely on one
or
more third-party contractors to manufacture our drugs. Our anticipated future
reliance on a limited number of third-party manufacturers exposes us to the
following risks:
| · |
We
may be unable to identify manufacturers on acceptable terms or at
all
because the number of potential manufacturers is limited and the
FDA must
approve any replacement contractor. This approval would require new
testing and compliance inspections. In addition, a new manufacturer
would
have to be educated in, or develop substantially equivalent processes
for,
production of our products after receipt of FDA approval, if any.
|
| · |
Our
third-party manufacturers might be unable to formulate and manufacture
our
drugs in the volume and of the quality required to meet our clinical
needs
and commercial needs, if any.
|
8
| · |
Our
future contract manufacturers may not perform as agreed or may not
remain
in the contract manufacturing business for the time required to supply
our
clinical trials or to successfully produce, store and distribute
our
products.
|
| · |
Drug
manufacturers are subject to ongoing periodic unannounced inspection
by
the FDA, the Drug Enforcement Administration (the “DEA”), and
corresponding state agencies to ensure strict compliance with good
manufacturing practices and other government regulations and corresponding
foreign standards. We do not have control over third-party manufacturers’
compliance with these regulations and standards.
|
| · |
If
any third-party manufacturer makes improvements in the manufacturing
process for our products, we may not own, or may have to share, the
intellectual property rights to the innovation.
|
Each
of
these risks could delay our clinical trials, the approval, if any, of our
product candidates by the FDA or the commercialization of our product candidates
or result in higher costs or deprive us of potential product
revenues.
We
do not have experience selling, marketing or distributing products and we have
no internal capability to do so.
We
currently have no marketing, sales or distribution capabilities. If and when
we
become reasonably certain that we will be able to commercialize our current
or
future products, we anticipate allocating resources to the marketing, sales
and
distribution of our proposed products in North America However, we cannot assure
that we will be able to market, sell and distribute our products successfully.
Our future success also may depend, in part, on our ability to enter into and
maintain collaborative relationships for such capabilities, the collaborator’s
strategic interest in the products under development and such collaborator’s
ability to successfully market and sell any such products. Although we intend
to
pursue collaborative arrangements regarding the sale and marketing of our
products, there can be no assurance that we will be able to establish or
maintain our own sales operations or affect collaborative arrangements, or
that
if we are able to do so, our collaborators will have effective sales forces.
There can also be no assurance that we will be able to establish or maintain
relationships with third party collaborators or develop in-house sales and
distribution capabilities. To the extent that we depend on third parties for
marketing and distribution, any revenues we receive will depend upon the efforts
of such third parties, and there can be no assurance that such efforts will
be
successful. In addition, there can also be no assurance that we will be able
to
market and sell our products in the United States or overseas.
If
we cannot compete successfully for market share against other drug companies,
we
may not achieve sufficient product revenues and our business will suffer.
The
market for our product candidates, ZIO-101 and ZIO-201, is characterized by
intense competition and rapid technological advances. If a product candidate
receives FDA approval, it will compete with a number of existing and future
drugs and therapies developed, manufactured and marketed by others. Existing
or
future competing products may provide greater therapeutic convenience or
clinical or other benefits for a specific indication than our products, or
may
offer comparable performance at a lower cost. If our products fail to capture
and maintain market share, we may not achieve sufficient product revenues and
our business will suffer.
We
will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies and other public and private research
organizations. Many of these competitors have products already approved or
in
development. In addition, many of these competitors, either alone or together
with their collaborative partners, operate larger research and development
programs or have substantially greater financial resources than we do, as well
as significantly greater experience in:
9
| · |
developing
drugs;
|
| · |
undertaking
preclinical testing and human clinical trials;
|
| · |
obtaining
FDA and other regulatory approvals of drugs;
|
| · |
formulating
and manufacturing drugs; and
|
| · |
launching,
marketing and selling drugs.
|
If
we fail to adequately protect or enforce our intellectual property rights or
secure rights to patents of others, the value of our intellectual property
rights would diminish.
Our
success, competitive position and future revenues will depend in part on our
ability and the abilities of our licensors to obtain and maintain patent
protection for our products, methods, processes and other technologies, to
preserve our trade secrets, to prevent third parties from infringing on our
proprietary rights and to operate without infringing the proprietary rights
of
third parties.
To
date,
we have exclusive rights to certain U.S. and foreign intellectual property.
We
anticipate filing additional patent applications both in the U.S. and in other
countries, as appropriate. However, we cannot predict:
| · |
the
degree and range of protection any patents will afford us against
competitors, including whether third parties will find ways to invalidate
or otherwise circumvent our patents;
|
| · |
if
and when patents will issue;
|
| · |
whether
or not others will obtain patents claiming aspects similar to those
covered by our patents and patent applications; or
|
| · |
whether
we will need to initiate litigation or administrative proceedings
which
may be costly whether we win or lose.
|
Our
success also depends upon the skills, knowledge and experience of our scientific
and technical personnel, our consultants and advisors as well as our licensors
and contractors. To help protect our proprietary know-how and our inventions
for
which patents may be unobtainable or difficult to obtain, we rely on trade
secret protection and confidentiality agreements. To this end, it is our policy
generally to require our employees, consultants, advisors and contractors to
enter into agreements which prohibit the disclosure of confidential information
and, where applicable, require disclosure and assignment to us of the ideas,
developments, discoveries and inventions important to our business. These
agreements may not provide adequate protection for our trade secrets, know-how
or other proprietary information in the event of any unauthorized use or
disclosure or the lawful development by others of such information. If any
of
our trade secrets, know-how or other proprietary information is disclosed,
the
value of our trade secrets, know-how and other proprietary rights would be
significantly impaired and our business and competitive position would
suffer.
If
we infringe the rights of third parties we could be prevented from selling
products, forced to pay damages, and defend against
litigation.
If
our
products, methods, processes or other technologies infringe the proprietary
rights of other parties, we could incur substantial costs and we may have
to:
| · |
obtain
licenses, which may not be available on commercially reasonable terms,
if
at all;
|
| · |
abandon
an infringing drug candidate;
|
| · |
redesign
our products or processes to avoid infringement;
|
| · |
stop
using the subject matter claimed in the patents held by others;
|
| · |
pay
damages; or
|
| · |
defend
litigation or administrative proceedings which may be costly whether
we
win or lose, and which could result in a substantial diversion of
our
valuable management resources.
|
10
Our
ability to generate product revenues will be diminished if our drugs sell for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our drugs, alone or with collaborators, will depend
in
part on the extent to which reimbursement will be available from:
| · |
government
and health administration authorities;
|
| · |
private
health maintenance organizations and health insurers; and
|
| · |
other
healthcare payers.
|
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available,
and
reimbursement levels may be inadequate, to cover our drugs. If government and
other healthcare payers do not provide adequate coverage and reimbursement
levels for our products, once approved, market acceptance of such products
could
be reduced.
We
may not be able to successfully manage our growth.
Our
success will depend upon the expansion of our operations and the effective
management of our growth, which will place a significant strain on our
management and on our administrative, operational and financial resources.
To
manage this growth, we must expand our facilities, augment our operational,
financial and management systems and hire and train additional qualified
personnel. If we are unable to manage our growth effectively, our business
may
be harmed.
Our
business will subject us to the risk of liability claims associated with the
use
of hazardous materials and chemicals.
Our
contract research and development activities may involve the controlled use
of
hazardous materials and chemicals. Although we believe that our safety
procedures for using, storing, handling and disposing of these materials comply
with federal, state and local laws and regulations, we cannot completely
eliminate the risk of accidental injury or contamination from these materials.
In the event of such an accident, we could be held liable for any resulting
damages and any liability could have a materially adverse effect on our
business, financial condition and results of operations. In addition, the
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of hazardous or radioactive materials and waste
products may require our contractors to incur substantial compliance costs
that
could materially adversely affect our business, financial condition and results
of operations.
We
rely on key executive officers and scientific and medical advisors, and their
knowledge of our business and technical expertise would be difficult to replace.
We
are
highly dependent on our principal scientific, regulatory and medical advisors.
We do not have “key person” life insurance policies on any of our officers. The
loss of the technical knowledge and management and industry expertise of any
of
our key personnel could result in delays in product development, loss of
customers and sales and diversion of management resources, which could adversely
affect our operating results.
11
If
we are unable to hire additional qualified personnel, our ability to grow our
business may be harmed.
We
will
need to hire additional qualified personnel with expertise in preclinical
testing, clinical research and testing, government regulation, formulation
and
manufacturing, as well as sales and marketing. We compete for qualified
individuals with numerous biopharmaceutical companies, universities and other
research institutions. Competition for such individuals is intense, and we
cannot be certain that our search for such personnel will be successful.
Attracting and retaining qualified personnel will be critical to our
success.
We
may incur substantial liabilities and may be required to limit commercialization
of our products in response to product liability lawsuits.
The
testing and marketing of medical products entail an inherent risk of product
liability. If we cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to limit
commercialization of our products. Our inability to obtain sufficient product
liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of
pharmaceutical products we develop, alone or with collaborators. We currently
carry clinical trial insurance and product liability insurance.
There
are certain interlocking relationships among us and certain affiliates of
Paramount, which may present potential conflicts of interest.
Lindsay
A. Rosenwald, M.D., who may be deemed to beneficially own approximately 20.13%
of our common stock, is Chairman and Chief Executive Officer of Paramount
BioCapital, Inc., an investment banking firm that served as placement agent
in
connection with a private placement of ZIOPHARM’s Series A Convertible Preferred
Stock that was completed in May 2005. Paramount also served as a finder in
connection with the Company’s option and research agreements with Southern
Research Institute. The Company paid fees and issued securities to Paramount
or
its designees in connection with these transactions and Paramount currently
has
a right of first refusal to act as the placement agent for the private sale
of
our securities until May 31, 2008. Dr. Michael Weiser and Timothy McInerney,
each of whom is a member of the Company’s board of directors, are also full-time
employees of Paramount. See “Certain Transactions and Relationships - ZIOPHARM
Transactions and Relationship.”
Paramount,
Dr. Rosenwald, Dr. Weiser, and Mr. McInerney are not obligated pursuant to
any
agreement or understanding with us to make any additional products or
technologies available to us, nor can there be any assurance that any biomedical
or pharmaceutical products or technologies identified in the future by such
parties will be made available to us. In addition, certain of our current
officers and directors, as well as officers or directors that may be hereafter
appointed, may from time to time serve as officers or directors of other
biopharmaceutical or biotechnology companies. There can be no assurance that
such other companies will not have interests in conflict with our own.
The
resale of shares covered by this registration statement could adversely affect
the market price of our common stock in the public market, which result would
in
turn negatively affect the Company’s ability to raise additional equity capital.
The
sale,
or availability for sale, of common stock in the public market pursuant to
this
registration statement may adversely affect the prevailing market price of
our
common stock and may impair our ability to raise additional capital by selling
equity or equity-linked securities. Once effective, this registration statement
will register the resale of a significant number of shares of our common stock.
In fact, the registration statement will make publicly available for resale
an
additional 4,870,281 shares of our common stock, assuming the issuance of all
shares of common stock offered hereunder. This figure represents approximately
67% of the shares of our common stock outstanding immediately after the
effectiveness of this registration statement, assuming the issuance of all
shares of common stock offered hereunder.
12
As
of
October 12, 2005, we had approximately 7,241,211 shares of common stock
outstanding, and approximately 0.1% of such shares were available for sale
without restriction. When the registration statement that includes this
prospectus is declared effective, all 4,870,281 shares being offered hereby
will
be available for resale. The resale of a substantial number of shares of our
common stock in the public market pursuant to this offering, and afterwards,
could adversely affect the market price for our common stock and make it more
difficult for you to sell our shares at times and prices that you feel are
appropriate. Furthermore, we expect that, because there is a large number of
shares registered hereunder, selling stockholders will continue to offer shares
covered by this registration statement for a significant period of time, the
precise duration of which we cannot predict. Accordingly, the adverse market
and
price pressures resulting from this offering may continue for an extended period
of time and continued negative pressure on the market price of our common stock
could have a material adverse effect on our ability to raise additional equity
capital.
Because
we became public by means of a reverse merger, we may not be able to attract
the
attention of major brokerage firms.
Additional
risks may exist as a result of our becoming a public reporting company through
a
“reverse merger.” Security analysts of major brokerage firms may not provide
coverage of the Company. Because we became public through a reverse merger,
there is no incentive to brokerage firms to recommend the purchase of our common
stock. No assurance can be given that brokerage firms will want to provide
analyst coverage of our Company in the future.
We
are subject to Sarbanes-Oxley and the reporting requirements of federal
securities laws, which can be expensive.
As
a
public reporting company, we are subject to the Sarbanes-Oxley Act of 2002,
as
well as the information and reporting requirements of the Securities Exchange
Act of 1934, as amended, and other federal securities laws. The costs of
compliance with the Sarbanes-Oxley Act and of preparing and filing annual and
quarterly reports, proxy statements and other information with the SEC, and
furnishing audited reports to stockholders, will cause our expenses to be higher
than they would be if ZIOPHARM had remained privately held and did not
consummate the Merger.
Our
common stock trades only in an illiquid trading market.
Trading
of our common stock is conducted on the over-the-counter bulletin board. This
has an adverse effect on the liquidity of our common stock, not only in terms
of
the number of shares that can be bought and sold at a given price, but also
through delays in the timing of transactions and reduction in security analysts’
and the media’s coverage of our Company and its common stock. This may result in
lower prices for our common stock than might otherwise be obtained and could
also result in a larger spread between the bid and asked prices for our common
stock.
There
is not now, and there may not ever be an active market for shares of our common
stock.
In
general, there has been very little trading activity in shares of the Company’s
common stock. The small trading volume will likely make it difficult for our
stockholders to sell their shares as and when they choose. Furthermore, small
trading volumes generally depress market prices. As a result, you may not always
be able to resell shares of our common stock publicly at the time and prices
that you feel are fair or appropriate.
13
Because
it is a “penny stock,” you may have difficulty selling shares of our common
stock.
Our
common stock is a “penny stock” and is therefore subject to the requirements of
Rule 15g-9 under the Securities and Exchange Act of 1934. Under this rule,
broker-dealers who sell penny stocks must provide purchasers of these stocks
with a standardized risk-disclosure document prepared by the Securities and
Exchange Commission. Under applicable regulations, our common stock will
generally remain a “penny stock” until and for such time as it meets certain per
share price requirements (as determined in accordance with SEC regulations),
or
until we meet certain net asset or revenue thresholds. These thresholds include
the possession of net tangible assets (i.e., total assets less intangible assets
and liabilities) in excess of $2,000,000 in the event we have been operating
for
at least three years or $5,000,000 in the event we have been operating for
fewer
than three years, and the recognition of average revenues equal to at least
$6,000,000 for each of the last three years. We do not anticipate meeting any
of
the foregoing thresholds in the foreseeable future.
The
penny
stock rules severely limit the liquidity of securities in the secondary market,
and many brokers choose not to participate in penny stock transactions. As
a
result, there is generally less trading in penny stocks. If you become a holder
of our common stock, you may not always be able to resell shares of our common
stock publicly at the time and prices that you feel are fair or
appropriate.
We
have never paid dividends and do not intend to do so for the foreseeable future.
We
have
never paid dividends on our capital stock and we do not anticipate that we
will
pay any dividends for the foreseeable future. Accordingly, any return on an
investment in our Company will be realized, if at all, only when you sell shares
of our common stock.
14
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements contained in this prospectus that are forward-looking in nature
are
based on the current beliefs of our management as well as assumptions made
by
and information currently available to management, including statements related
to the markets for our products, general trends in our operations or financial
results, plans, expectations, estimates and beliefs. In addition, when used
in
this prospectus, the words
“may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict”
and similar expressions and their variants, as they relate to us or our
management, may identify forward-looking statements. These statements reflect
our judgment as of the date of this prospectus with respect to future events,
the outcome of which is subject to risks, which may have a significant impact
on
our business, operating results or financial condition. You are cautioned that
these forward-looking statements are inherently uncertain. Should one or more
of
these risks or uncertainties materialize, or should underlying assumptions
prove
incorrect, actual results or outcomes may vary materially from those described
herein. We undertake no obligation to update forward-looking statements. The
risks identified under the heading “Risk Factors” in this prospectus, among
others, may impact forward-looking statements contained in this
prospectus.
15
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan
of Operation
Our
plan
of operation for the 12-month period commencing on the date of this prospectus,
is to continue implementing our business strategy, including the clinical
development of our two lead product candidates, ZIO-101 and ZIO-201. We also
intend to expand our drug candidate portfolio by seeking additional drug
candidates through in-licensing arrangements. We expect our principal
expenditures during the next 12 months to include:
| · |
fees
and milestone payments required under the license agreements relating
to
our existing product candidates;
|
| · |
clinical
trial expenses, including the costs incurred with respect to the
conduct
of clinical trials for ZIO-101 and ZIO-201 and preclinical costs
associated with back-up candidates ZIO-102 and ZIO-202;
|
| · |
costs
related to the scale-up and manufacture of ZIO-101 and
ZIO-201;
|
| · |
rent
for our facilities; and
|
| · |
general
corporate and working capital, including general and administrative
expenses.
|
As
part
of our plan for additional employees, we anticipate hiring at least three to
four additional full-time employees in medical, regulatory and administrative
support. In addition, we intend to use senior advisors, consultants, clinical
research organizations and third parties to perform certain aspects of product
development, manufacturing, clinical and preclinical development, and regulatory
and quality assurance functions.
At
our
current and desired pace of clinical development of our two product candidates,
over the next 12 months we expect to spend approximately $4.6 million on
clinical trials (including milestone payments that we expect to be triggered
under the license agreements relating to our product candidates), approximately
$3.7 million on manufacturing costs, $215,000 on facilities rent, and
approximately $6.8 million on general corporate and working capital.
We
believe we currently have sufficient capital to fund development and
commercialization activities of ZIO-101 and ZIO-201 into the second quarter
of
2006. Because our business does not generate any cash flow, however, we will
need to raise additional capital to continue development of the product
candidates beyond that time. We expect to raise such additional capital by
either borrowing money or by selling shares of our capital stock. To the extent
additional capital is not available when we need it, we may be forced to abandon
our development and commercialization efforts, which would have a material
adverse effect on the prospects of our business. Further, our assumptions
relating the expected costs of development and commercialization and timeframe
for completion are dependent on numerous factors other than available financing,
including significant unforeseen delays in the clinical trial and regulatory
approval process, which could be extremely costly. In addition, our estimates
assume that we will be able to enroll a sufficient number of patients in each
clinical trial.
Product
Candidate Development and Clinical Trials
ZIO-101,
organic arsenic, is being developed presently to treat advanced myeloma. As
a
follow-on to the ongoing phase I trials, a phase I/II trial in advanced multiple
myeloma is in the advanced planning stage. With the completion of this trial
in
2006, we expect to initiate a registration trial in advanced multiple myeloma.
We will continue to explore the use of ZIO-101 in solid tumors as well as a
phase II trial in advanced multiple myeloma using a different dosing regimen.
Preclinical development will continue with a back-up compound designated as
ZIO-102. Additional compounds are being synthesized under our agreement with
the
University of Texas M.D. Anderson Cancer Center and the Texas A&M University
System. Technology transfer and scale-up for the commercial manufacture of
the
active pharmaceutical ingredient, its lyophilization, and final product
specification will continue through the period leading to the expected
registration trial in the first half of 2007.
16
ZIO-201,
stabilized isophosphoramide mustard, is being developed presently to treat
advanced sarcoma. As follow-on to the ongoing phase I trial, a phase I/II trial
or a phase II trial in advanced sarcoma is in the advanced planning stage.
With
the completion of this trial in 2006, we expect to initiate a registration
trial
in advanced sarcoma in the first half of 2007. We will explore the potential
to
test ZIO-201 in pediatric sarcoma in a phase II trial. Preclinical development
will continue with back-up analogues, one of which we would expect to be
designated ZIO-202. Technology transfer and scale-up for the commercial
manufacture of the active pharmaceutical ingredient, its lyophilization, and
final product specification will continue through the period leading to the
expected registration trial in the first half of 2007.
Off-Balance
Sheet Arrangements
We
have
not entered into any off-balance sheet arrangements.
17
DESCRIPTION
OF BUSINESS
General
ZIOPHARM
Oncology, Inc. is a development-stage company that is seeking to develop and
commercialize a diverse, risk-sensitive portfolio of in-licensed cancer drugs
that address unmet medical needs. Our management and advisors are focused on
licensing proprietary drug candidate families that are related to cancer
therapeutics on the market where the application of new biological understanding
and our drug development expertise will lead to a lower risk for clinical
development failure while expediting clinical registration. We expect to
commercialize our products on our own in North America but recognize that
promising clinical trial results in cancers with a high incidence and prevalence
might also be addressed in a commercial partnership with another company with
the requisite financial resources. Currently, we are in U.S. Phase I studies
for
two product candidates known as ZIO-101 and ZIO-201. We currently intend to
continue with clinical development of ZIO-101 for advanced myeloma and ZIO-201
for advanced sarcoma.
Our
corporate office is located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036, and our telephone number is (646) 214-0700. Our business and
development operations are located in Charlestown, Massachusetts.
Cancer
Overview
Cancer
is
a group of diseases characterized by either the runaway growth of cells or
the
failure of cells to die normally. Often, cancer cells spread to distant parts
of
the body, where they can form new tumors. Cancer can arise in any organ of
the
body and, according to the American Cancer Society, strikes one of every two
American men and one of every three American women at some point in their lives.
It
is
reported that there are more than 100 different varieties of cancer divided
into
six major categories. Carcinomas, the most common type of cancer, originate
in
tissues that cover a surface or line a cavity of the body. Sarcomas begin in
tissue that connects, supports or surrounds other tissues and organs. Lymphomas
are cancers of the lymph system, the circulatory system that bathes and cleanses
the body’s cells. Leukemias involve blood-forming tissues and blood cells. As
their name indicates, brain tumors are cancers that begin in the brain, and
skin
cancers, including dangerous melanomas, originate in the skin. Cancers are
considered metastatic if they spread via the blood or lymphatic system to other
parts of the body to form secondary tumors.
Cancer
is
caused by a series of mutations, or alterations, in genes that control cells’
ability to grow and divide. Some mutations are inherited; others arise from
environmental factors such as smoking or exposure to chemicals, radiation,
or
viruses that damage cells’ DNA. The mutations cause cells to divide relentlessly
or lose their normal ability to die.
The
cost
of cancer to the healthcare system is significant. The National Institute of
Health estimates that the overall cost of cancer in 2003 was $189.5 billion.
This cost includes an estimate of $64.2 billion in direct medical expenses,
$16.3 billion in indirect morbidity costs, and $109 billion in indirect
mortality costs.
Cancer
Treatments
Major
treatments for cancer include surgery, radiotherapy, and chemotherapy. There
are
many different drugs that are used to treat cancer, including cytotoxics or
antineoplastics, hormones, and biologics. There are also many experimental
treatments under investigation including radiation sensitizers, vaccines, gene
therapy and immunotoxins. We believe cancer treatment represents a significant
unmet medical need.
18
Radiotherapy.
Also
called radiation therapy, radiotherapy is the treatment of cancer and other
diseases with ionizing radiation. Ionizing radiation deposits energy that
injures or destroys cells in the area being treated - the target tissue - by
damaging their genetic material, making it impossible for these cells to
continue growing. Although radiation damages both cancer cells and normal cells,
the latter are able to repair themselves and regain proper function.
Radiotherapy may be used to treat localized solid tumors, such as cancers of
the
skin, tongue, larynx, brain, breast, or uterine cervix. It can also be used
to
treat leukemia and lymphoma.
Scientists
are also looking for ways to increase the effectiveness of radiation therapy.
Two types of investigational drugs are being studied for their effect on cells
exposed to radiation. Radiosensitizers increase the damage done to tumor cells
by radiation; and radioprotectors protect normal tissues from the effects of
radiation.
Cytotoxics.
Cytotoxics are anticancer drugs that destroy cancer cells by stopping them
from
multiplying. Healthy cells can also be harmed with the use of cytotoxics,
especially those that divide quickly. Harm to healthy cells is what causes
side
effects. These cells usually repair themselves after chemotherapy. Chemotherapy
can be used for different purposes which include curing cancer (when the patient
remains free of evidence of cancer cells), controlling cancer (by preventing
the
cancer from spreading), and to relieving symptoms of cancer (such as pain,
helping patients live more comfortably).
Cytotoxic
agents act primarily on macromolecular synthesis, repair or activity, which
affects the production or function of DNA, RNA or protein. Although there are
many cytotoxic agents, there is a considerable amount of overlap in their
mechanisms of action. As such, the choice of a particular agent or group of
agents is generally not a consequence of a prior prediction of antitumor
activity by the drug, but instead the result of empirical clinical
trials.
Supportive
Care.
The
treatment of a cancer may include the use of chemotherapy, radiation therapy,
biologic response modifiers, surgery, or some combination of all of these or
other therapeutic options. All of these treatment options are directed at
killing or eradicating the cancer that exists in the patient’s body.
Unfortunately, the delivery of many cancer therapies adversely affects the
body’s normal organs. The undesired consequence of harming an organ not involved
with cancer is referred to as a complication of treatment or a side
effect.
Side
effects, or complications of treatment cause inconvenience, discomfort, and
occasionally, may even be fatal. Additionally and perhaps more importantly,
side
effects may also prevent doctors from delivering the prescribed dose of therapy
at the specific time and schedule of the treatment plan. Therefore, side effects
not only cause discomfort, but may also limit a patient’s ability to achieve the
best outcome from treatment by preventing the delivery of therapy at its optimal
dose and time.
In
addition to anemia, fatigue, hair-loss, reduction in blood platelets and white
and red blood cells, and bone pain, one of the most common side effects of
chemotherapy is nausea and vomiting. Several drugs have been developed to help
prevent and control chemotherapy-induced nausea and vomiting, which have led
to
improvements in the management of symptoms associated with this cancer
treatment, allowing for greater accuracy and consistency concerning the
administration of cancer treatment. Nausea and vomiting induced by chemotherapy
are treated by drugs such as 5HT3 receptor antagonists, like ondansetron, which
is a selective blocking agent of the hormone serotonin.
Product
Candidates
ZIO-101
General.
ZIO-101
is an organic arsenic compound covered by an issued U.S. patent and applications
internationally. A form of commercially available inorganic arsenic (arsenic
trioxide (Trisenox®)
or ATO)
has been approved for the treatment of acute promyelocytic leukemia (APL),
a
precancerous condition, and is on the compendia listing for the therapy of
multiple myeloma as well as having been studied for the treatment of various
other cancers. Nevertheless, ATO has been shown to be toxic to the heart and
liver, limiting its use as an anti-cancer agent. Inorganic arsenic has also
been
shown to cause cancer of the skin and lung in humans. The toxicity of arsenic
generally is correlated to its accumulation in organs and tissues. Our
preclinical studies demonstrated that ZIO-101 (and organic arsenic in general)
is considerably less toxic than inorganic arsenic, particularly with regard
to
heart toxicity.
19
In
vitro
testing
of ZIO-101 using the National Cancer Institute’s human cancer cell panel
detected activity against lung, colon, brain, melanoma, ovarian and kidney
cancer. Moderate activity was detected against breast and prostate
cancer.
In
addition to solid tumors, in
vitro
testing
in both the National Cancer Institute’s cancer cell panel and in
vivo
testing
in a leukemia animal model demonstrated substantial activity against
hematological cancers (cancers of the blood and blood-forming tissues) such
as
leukemia, lymphoma, myelodysplastic syndromes and multiple myeloma. Leukemia
is
a cancer that begins in blood-forming tissue such as the bone marrow and causes
large numbers of blood cells to be produced and enter the bloodstream. Lymphomas
are cancers that begin in cells of the immune system. Myelodysplastic syndromes,
also called preleukemia or smoldering leukemia, are diseases in which the bone
marrow does not function normally.
Clinical
Lead Indications: Multiple Myeloma.
Multiple myeloma, a common hematological malignancy, is among a group of plasma
cell cancers associated with the overproduction of monoclonal immunoglobulin
(M-protein). Primary treatment for multiple myeloma is systemic chemotherapy.
Approximately 15-20% of patients who have the disease are resistant to
aggressive primary treatment. Even with prompt institution of systemic
treatment, the drug-sensitive phase of the disease usually lasts only two to
three years for most patients before resistance appears (although in a small
patient population sensitivity to systemic therapy can last for five to ten
years). The median survival of patients with progressive or resistant disease
is
three to four years.
The
standard of care for progressive or resistant multiple myeloma may be in
transition. Recent clinical trials offer evidence supporting the use of
thalidomides and proteosome inhibitors, either alone or in combination with
other agents. Unfortunately, neither treatment is universally effective, each
can be quite toxic, and all patients who receive them will likely develop
progressive disease. As a result, we expect that the medical community will
continue to embrace new agents that provide incremental benefit to patients
without undue toxicity. We are hopeful that the novel mechanism of action of
ZIO-101, combined with its anticipated safety profile, will encourage its use
in
the treatment of advanced myeloma and possibly a variety of other tumors.
Currently, we expect that advanced myeloma will be the indication for which
it
is most likely to seek initial regulatory approval for ZIO-101.
Clinical
Development Plan for ZIO-101.
We have
commenced two phase I clinical trials (hematological and solid tumor) at the
University of Texas M.D. Anderson Cancer Center using ZIO-101 in refractory
disease. Phase I testing is primarily focused on assessing drug safety; however,
one patient in the solid tumor trial has evidenced a response without toxicity
(as reported by the investigator). The starting dose in both phase I trials
was
about 14 times the labeled dose of inorganic arsenic. The dose has been
escalated to the next level in one trial, and to date has been well tolerated.
The
goal
of the phase I trials are to determine dose-limiting toxicity and maximum
tolerated dose. In addition, assessments of pharmacokinetic data will be
obtained along with any indication of efficacy. We expect to follow these phase
I trials with a phase I/II trial in advanced myeloma. We currently anticipate
reporting some phase I/II trial results in the first half of 2006. A second
phase II trial in myeloma is under consideration for initiation in early 2006.
It is expected that a pivotal trial in multiple myeloma would begin in the
first
half of 2007.
20
The
solid
tumor trial is seeking to confirm data collected during preclinical studies
that
indicated activity in a variety of solid tumors. While the current focus for
product registration is myeloma, these phase I study results will be instructive
for further development plans in solid tumors.
ZIO-201
General.
ZIO-201, or isophosphoramide mustard (IPM), is a proprietary stabilized
metabolite of ifosfamide that is also related to cyclophosphamide. A patent
application for pharmaceutical composition has been filed. Cyclophosphamide
and
ifosfamide are alkylating agents. Cyclophosphamide is the most widely used
alkylating agent in cancer therapy and is used to treat breast cancer and
non-Hodgkin’s lymphoma. Ifosfamide has been shown to be effective in high dose
by itself, or in combination in treating sarcoma and lymphoma. Although
ifosfamide-based treatment generally represents the standard of care for
sarcoma, it is not licensed for this indication by the FDA.
Our
preclinical studies have shown that, in animal and laboratory models, IPM
evidences activity against leukemia and solid tumors. These studies also
indicate that ZIO-201 has a better pharmacokinetic and safety profile than
ifosfamide or cyclophosphamide, offering the possibility of safer and more
efficacious therapy with ZIO-201.
Ifosfamide
is metabolized to IPM. In addition to IPM, another metabolite of ifosfamide
is
acrolein, which is toxic to the kidneys and bladder. The presence of acrolein
can mandate extensive in-hospital hydration and the administration of a
protective agent called Mesna®,
which
is inconvenient and expensive. Chloroacetaldehyde is another metabolite of
ifosfamide and is toxic to the central nervous system, causing “fuzzy brain”
syndrome for which there is currently no protective measure. Similar toxicity
concerns pertain to high-dose cyclophosphamide, which is widely used in bone
marrow and blood cell transplantation. Because ZIO-201 is independently
active—without acrolein or chloroacetaldehyde metabolites—the Company believes
that the administration of ZIO-201 may avoid the toxicities of ifosfamide and
cyclophosphamide without compromising efficacy.
In
addition to anticipated lower toxicity, ZIO-201 may have other advantages over
ifosfamide and cyclophosphamide. ZIO-201 likely cross-links DNA differently
than
ifosfamide or cyclophosphamide metabolites, resulting in a different activity
profile. Moreover, in some instances ZIO-201 appears to show activity in
ifosfamide- and/or cyclophosphamide-resistant cancer cells.
Potential
Lead Indications for ZIO-201: Sarcomas.
Sarcomas are cancers of the bone, cartilage, fat, muscle, blood vessels, or
other connective or supportive tissue. Soft tissue sarcomas, the expected lead
indication for ZIO-201, are relatively rare; there are 8,000 to 10,000 new
cases
each year in adults in the United States. On the other hand, in children, soft
tissue sarcomas account for approximately 10% of all childhood cancers. There
are more than 50 histological or tissue types of soft tissue sarcomas. The
prognosis for patients with adult soft tissue sarcomas depends on several
factors, including the patient’s age, size of the primary tumor, histological
grade, and stage of the tumor. Factors associated with a poorer prognosis
include age greater than 60 years, tumors larger than five centimeters, and
high-grade histology. While small, low-grade tumors are usually curable by
surgery alone, higher-grade or larger sarcomas are associated with higher local
treatment failure rates and increased metastatic potential. Ifosfamide-based
chemotherapy is a frequent standard of care for the treatment of metastatic
tumors. It may also used in the adjuvant setting for high-risk primary
tumors.
ZIO-201
may be a useful agent that, either alone or in combination, can deliver
therapeutic activity with fewer to no side effects of the type that have been
associated with ifosfamide. In the United States, ifosfamide is regularly
included in combination regimens for the treatment of sarcomas, testicular
cancers, head and neck cancer and some types of non-Hodgkin’s lymphomas. We
believe that ZIO-201 may be able to replace ifosfamide in any or all of these
combination protocols.
21
Clinical
Development Plan for ZIO-201.
A phase
I clinical trial is being conducted at two centers with the objective of
establishing maximum tolerated dose. The current dose level in this phase I
trial is believed to be comparable to a relatively high dose of ifosfamide.
The
drug is being administered without Mesna®.
Furthermore, one patient has evidence of stable disease. We intend to initiate
a
phase I/II trial in advanced sarcoma and expects early results in the first
half
of 2006. We are also planning to implement a high dose phase I study in sarcoma
and is exploring a phase II study in pediatric sarcoma. These trials would
support the design and implementation of a phase III registration study in
the
first half of 2007.
Competition
The
development and commercialization for new products to treat cancer is highly
competitive, and there will be considerable competition from major
pharmaceutical, biotechnology, and specialty cancer companies. Many of our
competitors have substantially more resources than the Company, including both
financial and technical. In addition, many of these companies have more
experience than the Company in preclinical and clinical development,
manufacturing, regulatory, and global commercialization. The Company is also
competing with academic institutions, governmental agencies and private
organizations that are conducting research in the field of cancer. Competition
for highly qualified employees is intense.
There
are
a number of companies developing chemotherapies for cancer and in particular
for
multiple myeloma and sarcoma. Millennium Pharmaceuticals, Inc. and Celgene
Corporation have marketed products to treat multiple myeloma, and many other
product candidates are in clinical trials and preclinical research. There are
a
more limited number of competitors developing new approaches to treat sarcoma,
Ariad Pharmaceuticals principal among them.
In
addition to competitive companies, treatments for cancer that compete with
our
product candidates are summarized under the caption “Cancer
Treatments.”
License
Agreements and Intellectual Property
Our
goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other proprietary technologies, to preserve
our trade secrets, and to operate without infringing the proprietary rights
of
other parties, both in the United States and in other countries. Our policy
is
to actively seek the broadest possible intellectual property protection for
our
product candidates through a combination of contractual arrangements and
patents, both in the United States and abroad.
Patent
and Technology License Agreement — University of Texas M. D. Anderson Cancer
Center and the Texas A&M University System.
On
August 24, 2004, the Company entered into a Patent and Technology License
Agreement with The Board of Regents of the University of Texas System, acting
on
behalf of the University of Texas M. D. Anderson Cancer Center and the Texas
A&M University System (collectively, the “Licensors”). Under this agreement,
the Company was granted an exclusive, worldwide license to rights (including
rights to U.S. and foreign patent and patent applications and related
improvements and know-how) for the manufacture and commercialization of two
classes of organic arsenicals (water- and lipid-based) for human and animal
use.
The class of water-based organic arsenicals includes ZIO-101.
In
October 2004, we received a notice of allowance for U.S. Patent Application
No.
10/337969, entitled “S-dimethylarsino-thiosuccinic acid
S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
for cancer.” The patent was granted on June 28, 2005. The patent application
claims both therapeutic uses and pharmaceutical compositions containing a novel
class of organic arsenicals, including ZIO-101, for the treatment of cancer.
22
As
partial consideration for the license rights obtained by us, we paid the
Licensors an upfront, nonrefundable $125,000 fee and issued 250,487 shares
of
our common stock to University of Texas M. D. Anderson Cancer Center and granted
it an option to purchase an additional 50,222 shares of our common stock for
approximately $0.002 per share (such share amounts and option exercise price
have been adjusted to reflect to the Merger). The option will vest and become
exercisable with respect to 50% of its shares upon completion of the dosing
of
the last patient for both the blood and solid tumor phase I trials for ZIO-101.
Another 25% of the shares subject to the option will vest upon enrollment of
the
first patient in a multi-center pivotal clinical trial (i.e., a human clinical
trial intended to provide the substantial evidence of efficacy necessary to
support the filing of an approvable New Drug Application (“NDA”) for ZIO-101,
with the remaining 25% vesting upon the filing of an Investigational New Drug
(“IND”) for ZIO-101. As additional consideration for the license, the Licensors
are entitled to receive up to an aggregate of $4.85 million in cash payments,
payable in varying amounts, upon the achievement of certain milestones,
including $100,000 that we paid upon the commencement of the phase I clinical
trial for ZIO-101 in May 2005. The Licensors are entitled to receive royalty
payments from sales of a licensed product (should such a product be approved
for
commercial sale), as well and a portion of any fees that we may receive from
a
sublicensee. Finally, the license agreement provides that we will enter into
two
separate sponsored research agreements with the Licensors, each of which will
require that we make annual payments of $100,000 for no less than two years.
We
will have the exclusive right to all intellectual property rights resulting
from
such research pursuant to the terms of the agreements.
The
agreement also contains other provisions customary and common in similar
agreements within the industry, such as our right to sublicense our rights
under
the agreement. Nevertheless, if we sublicense our rights prior to the
commencement of a pivotal clinical trial (i.e., a human clinical trial intended
to provide the substantial evidence of efficacy necessary to support the filing
of an approvable NDA), the Licensors will generally be entitled to receive
a
share of the payments we receive in exchange for the sublicense (subject to
certain exceptions).
License
Agreement with DEKK-Tec, Inc.
On
October 15, 2004, we entered into a license agreement with DEKK-Tec, Inc.,
pursuant to which we were granted an exclusive, worldwide license to the second
of our lead product candidates, ZIO-201.
As
partial consideration for the license rights obtained by us, we paid DEKK-Tec
an
upfront, non-refundable $50,000 fee. In addition, DEKK-Tec is entitled to
receive cash payments in the aggregate amount of up to $3.9 million, which
are
payable in varying amounts upon the occurrence of certain milestone events.
The
majority of these milestone payments will be creditable against future royalty
payments, as referenced below. We also issued DEKK-Tec an option to purchase
up
to 27,616 shares of our common stock for approximately $0.02 per share (such
share amount and option exercise price have been adjusted to reflect to the
Merger), which option vested with respect to 6,904 post-Merger shares upon
the
execution of the license agreement. The option will vest with respect to the
remaining shares upon certain milestone events culminating with final FDA
approval of the first NDA submitted by us (or by our sublicensee) for ZIO-201.
Finally, DEKK-Tec also is entitled to receive royalty payments on the sales
of
ZIO-201 should it be approved for commercial sale. The license agreement also
contains other provisions customary and common in similar agreements within
the
industry.
Option
and Research Agreements with Southern Research Institute
(“SRI”).
On
December 22, 2004, we entered into an Option Agreement with SRI, pursuant to
which we were granted an exclusive option to obtain an exclusive license to
SRI’s interest in certain intellectual property, including exclusive rights
related to certain isophosphoramide mustard analogs. Also on December 22, 2004,
we entered into a Research Agreement with SRI pursuant to which we agreed to
spend a sum not to exceed $200,000 between the execution of the agreement and
December 21, 2006, including a $25,000 payment that we made simultaneously
with
the execution of the agreement, to fund research and development work by SRI
in
the field of isophosphoramide mustard analogs. Under the terms of the option
agreement, our exclusive right to exercise the option will expire 60 days after
the termination or expiration of the SRI’s research and development work in the
field of isophosphoramide mustard analogs, and the delivery of the certain
required reports.
23
Other
Intellectual Property Rights and Protection.
We
depend upon the skills, knowledge and experience of our scientific and technical
personnel, as well as those of our advisors, consultants and other contractors,
none of which is patentable. To help protect proprietary know-how, which is
not
patentable, and for inventions for which patents may be difficult to enforce,
we
currently rely, and in the future will continue to rely, on trade secret
protection and confidentiality agreements to protect our interests. To this
end,
we generally require employees, consultants, advisors and other contractors
to
enter into confidentiality agreements that prohibit the disclosure of
confidential information and, where applicable, require disclosure and
assignment to us of the ideas, developments, discoveries and inventions
important to our business.
Governmental
Regulation
The
research, development, testing, manufacture, labeling, promotion, advertising,
distribution, and marketing, among other things, of our products are extensively
regulated by governmental authorities in the United States and other countries.
In the United States, the FDA regulates drugs under the Federal Food, Drug,
and
Cosmetic Act, or the “FDCA,” and its implementing regulations. Failure to comply
with the applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending New Drug
Applications, warning letters, product recalls, product seizures, total or
partial suspension of production or distribution, injunctions, and/or criminal
prosecution.
Drug
Approval Process.
None of
our drugs may be marketed in the U.S. until the drug has received FDA approval.
The steps required before a drug may be marketed in the U.S.
include:
| · |
preclinical
laboratory tests, animal studies, and formulation studies;
|
| · |
submission
to the FDA of an IND for human clinical testing, which must become
effective before human clinical trials may begin;
|
| · |
adequate
and well-controlled human clinical trials to establish the safety
and
efficacy of the drug for each indication;
|
| · |
submission
to the FDA of an NDA;
|
| · |
satisfactory
completion of an FDA inspection of the manufacturing facility or
facilities at which the drug is produced to assess compliance with
current
good manufacturing practices, or “cGMPs”; and
|
| · |
FDA
review and approval of the NDA.
|
Preclinical
tests include laboratory evaluation of product chemistry, toxicity, and
formulation, as well as animal studies. The conduct of the preclinical tests
and
formulation of the compounds for testing must comply with federal regulations
and requirements. The results of the preclinical tests, together with
manufacturing information and analytical data, are submitted to the FDA as
part
of an IND, which must become effective before human clinical trials may begin.
An IND will automatically become effective 30 days after receipt by the FDA,
unless before that time the FDA raises concerns or questions about issues such
as the conduct of the trials as outlined in the IND. In such a case, the IND
sponsor and the FDA must resolve any outstanding FDA concerns or questions
before clinical trials can proceed. The Company cannot be sure that submission
of an IND will result in the FDA allowing clinical trials to begin.
Clinical
trials involve the administration of the investigational drug to human subjects
under the supervision of qualified investigators. Clinical trials are conducted
under protocols detailing the objectives of the study, the parameters to be
used
in monitoring safety, and the effectiveness criteria to be evaluated. Each
protocol must be submitted to the FDA as part of the IND.
24
Clinical
trials typically are conducted in three sequential phases, but the phases may
overlap. The study protocol and informed consent information for study subjects
in clinical trials must also be approved by an Institutional Review Board for
each institution where the trials will be conducted. Study subjects must sign
an
informed consent form before participating in a clinical trial. Phase I usually
involves the initial introduction of the investigational drug into people to
evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics
and pharmacologic actions, and, if possible, to gain an early indication of
its
effectiveness. Phase II usually involves trials in a limited patient population
to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible
adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy
of the drug for specific indications. Phase III trials usually further evaluate
clinical efficacy and test further for safety by using the drug in its final
form in an expanded patient population. There can be no assurance that phase
I,
phase II, or phase III testing will be completed successfully within any
specified period of time, if at all. Furthermore, a company or the FDA may
suspend clinical trials at any time on various grounds, including a finding
that
the subjects or patients are being exposed to an unacceptable health
risk.
The
FDCA
permits FDA and the IND sponsor to agree in writing on the design and size
of
clinical studies intended to form the primary basis of an effectiveness claim
in
an NDA application. This process is known as Special Protocol Assessment. These
agreements may not be changed after the clinical studies begin, except in
limited circumstances.
Assuming
successful completion of the required clinical testing, the results of the
preclinical studies and of the clinical studies, together with other detailed
information, including information on the manufacture and composition of the
drug, are submitted to the FDA in the form of an NDA requesting approval to
market the product for one or more indications. The testing and approval process
requires substantial time, effort, and financial resources. The agencies review
the application and may deem it to be inadequate to support the registration,
and companies cannot be sure that any approval will be granted on a timely
basis, if at all. The FDA may also refer the application to the appropriate
advisory committee, typically a panel of clinicians, for review, evaluation
and
a recommendation as to whether the application should be approved. The FDA
is
not bound by the recommendations of the advisory committee.
The
FDA
has various programs, including fast track, priority review, and accelerated
approval, that are intended to expedite or simplify the process for reviewing
drugs, and/or provide for approval on the basis surrogate endpoints. Generally,
drugs that may be eligible for one or more of these programs are those for
serious or life-threatening conditions, those with the potential to address
unmet medical needs, and those that provide meaningful benefit over existing
treatments. A company cannot be sure that any of its drugs will qualify for
any
of these programs, or that, if a drug does qualify, that the review time will
be
reduced.
Section
505(b)(2) of the FDCA allows the FDA to approve a follow-on drug on the basis
of
data in the scientific literature or a prior FDA approval of an NDA for a
related drug. This procedure potentially makes it easier for generic drug
manufacturers to obtain rapid approval of new forms of drugs based on
proprietary data of the original drug manufacturer.
Before
approving an NDA, the FDA usually will inspect the facility or the facilities
at
which the drug is manufactured and will not approve the product unless cGMP
compliance is satisfactory. If the FDA evaluates the NDA and the manufacturing
facilities as acceptable, the FDA may issue an approval letter, or in some
cases, an approvable letter followed by an approval letter. Both letters usually
contain a number of conditions that must be met in order to secure final
approval of the NDA. When and if those conditions have been met to the FDA’s
satisfaction, the FDA will issue an approval letter. The approval letter
authorizes commercial marketing of the drug for specific indications. As a
condition of NDA approval, the FDA may require post-marketing testing and
surveillance to monitor the drug’s safety or efficacy, or impose other
conditions.
25
After
approval, certain changes to the approved product, such as adding new
indications, making certain manufacturing changes, or making certain additional
labeling claims, are subject to further FDA review and approval. Before a
company can market products for additional indications, it must obtain
additional approvals from FDA. Obtaining approval for a new indication generally
requires that additional clinical studies be conducted. A company cannot be
sure
that any additional approval for new indications for any product candidate
will
be approved on a timely basis, or at all.
Post-Approval
Requirements.
Often
times, even after a drug has been approved by the FDA for sale, the FDA may
require that certain post-approval requirements be satisfied, including the
conduct of additional clinical studies. If such post-approval conditions are
not
satisfied, the FDA may withdraw its approval of the drug. In addition, holders
of an approved NDA are required to: (i) report certain adverse reactions to
the
FDA, (ii) comply with certain requirements concerning advertising and
promotional labeling for their products, and (iii) continue to have quality
control and manufacturing procedures conform to cGMP after approval. The FDA
periodically inspects the sponsor’s records related to safety reporting and/or
manufacturing facilities; this latter effort includes assessment of compliance
with cGMP. Accordingly, manufacturers must continue to expend time, money,
and
effort in the area of production and quality control to maintain cGMP
compliance. We intend to use third party manufacturers to produce our products
in clinical and commercial quantities, and future FDA inspections may identify
compliance issues at the facilities of our contract manufacturers that may
disrupt production or distribution, or require substantial resources to correct.
In addition, discovery of problems with a product after approval may result
in
restrictions on a product, manufacturer, or holder of an approved NDA, including
withdrawal of the product from the market.
Employees
As
of the
date of this current report, we have 11 employees, all of which are full-time
employees. We intend to hire an additional three to four employees prior to
the
end of 2005.
Description
of Property
Our
corporate office is located at 1180 Avenue of the Americas, 19th Floor, New
York, NY 10036. The New York office space is subject to a five-year lease
agreement that expires in June 2010. Under the terms of the lease, we lease
approximately 2,580 square feet and are required to make monthly rental payments
of approximately $10,100 until December 31, 2007, with such payments increasing
to approximately $11,000 thereafter through the remainder of the term of the
lease. Our business and development operations are located as 197 Eighth Street,
Suite 300, Charlestown, Massachusetts 02129. The Charlestown office space is
subject to a five-year lease agreement that expires in October 2009. Under
the
terms of the lease, we lease approximately 2,800 square feet and are required
to
make monthly rental payments that range from $4,200 during the first year of
the
lease to $4,900 during the last year of the lease. Effective November 2005,
we
amended our lease in Charlestown, Massachsuetts to expand our commercial
space by approximately 830 square feet.
Legal
Proceedings
We
are
not currently involved in any material legal proceedings.
26
MANAGEMENT
Directors
and Executive Officers
At
the
effective time of the Merger, our board of directors was reconstituted by the
appointment of Jonathan Lewis, Richard Bagley, Murray Brennan, James Cannon,
Senator Wyche Fowler, Jr., Gary S. Fragin, Timothy McInerney and Michael Weiser
as directors (all of whom were directors of ZIOPHARM immediately prior to the
Merger), and the resignations of David C. Olson and David Floor from their
roles
as our directors. Our executive management team was also reconstituted and
David
C. Olson resigned from his positions as our President, Treasurer and Secretary.
The following table sets forth the name, age and position of each of our
directors and executive officers as of the date of this prospectus.
|
Name
|
Age
|
Positions
|
||
|
Jonathan
Lewis, M.D., Ph.D.
|
47
|
Director
& Chief Executive Officer
|
||
|
Richard
Bagley
|
62
|
Director,
President, Chief Operating Officer & Treasurer
|
||
|
Robert
Peter Gale, M.D., Ph.D, DSc.
|
60
|
Senior
Vice President Research
|
||
|
Murray
Brennan, M.D.
|
65
|
Director
|
||
|
James
Cannon
|
67
|
Director
|
||
|
Senator
Wyche Fowler, Jr., JD
|
64
|
Director
|
||
|
Gary
S. Fragin
|
59
|
Director
|
||
|
Timothy
McInerney
|
44
|
Director
|
||
|
Michael
Weiser, M.D., Ph.D.
|
43
|
Director
|
The
biographies of the directors and executive officers listed above are set forth
below, all of whom began serving us in their respective positions at the
effective time of the Merger.
Jonathan
Lewis
is our
Chief Executive Officer and a director, and has served as Chief Executive
Officer and a director of ZIOPHARM since January 2004. From July 1994 until
June
2001, Dr. Lewis served as Professor of Surgery and Medicine at Memorial
Sloan-Kettering Cancer Center and he served as Chief Medical Officer and
Chairman of the Medical Board at Antigenics, Inc. from June 2000 until November
2003. He serves as a director on the Board of POPPA (the Police Organization
Providing Peer Assistance) of the New York Police Department
(NYPD).
Richard
Bagley
serves
as our President, Chief Operating Officer, Treasurer and Director and has served
as President and Chief Operating Officer of ZIOPHARM since July 2004 and as
ZIOPHARM’s Treasurer since March 2005. Prior to that, he served as a consultant
to ZIOPHARM while serving as a senior advisor to The University of Texas M.D.
Anderson Cancer Center. Mr. Bagley served in several capacities at Squibb
Corporation from 1985-1990, including as President E. R. Squibb & Sons, U.S.
in 1988 and 1989. He served as Director, Chief Executive Officer and
President of ImmuLogic Pharmaceutical Corporation from 1990 to 1994, as
Director, Chief Executive Officer and Chairman of ProScript, Inc. from 1994
to
1998, as Director, President and Chief Executive Officer of AltaRex Corp. from
1998 to May 2003, and thereafter as a part time consultant and advisor in life
sciences until joining ZIOPHARM full time. Mr. Bagley initiated a career in
pharmaceuticals in 1968 with Smith Kline and French Laboratories, leaving in
1985 after serving as President of the consumer products division.
Robert
Peter Gale is
our
Senior Vice President Research and has served ZIOPHARM in that capacity since
January 2004. Dr. Gale is also on the medical staff of UCLA School of Medicine
in the Department of Medicine, Division of Hematology and Oncology and is
Visiting Professor of Hematology at Imperial College of Science, Technology
and
Medicine, Hammersmith Hospital, London. Dr. Gale served as Senior Vice President
for Medical Affairs at Antigenics, Inc. from April 2001 until May 2002 and
as a
consultant to that company from May 2002 through May 2004.
27
Murray
Brennan
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Dr. Brennan has been Chairman of Memorial
Sloan-Kettering Cancer Center’s Department of Surgery since 1985, and is a
former Vice
President of the American College of Surgeons, a position he held from 2004
to
2005. Dr. Brennan is also a member of the National Academy of
Sciences.
He
served as director of the American Board of Surgery from 1984 to 1990,
Chairman
of the American College of Surgeons’ Commission on Cancer from 1992 to 1994,
President of the Society of Surgical Oncology from 1995 to 1996, and President
of the American Surgical Association from 2002 to 2003.
James
Cannon
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Mr. Cannon is Vice
Chairman, Chief Financial Officer and a member of the board of directors of
BBDO
Worldwide. Mr. Cannon
joined BBDO in 1967, was appointed Chief Financial Officer of the agency in
1984, and was elected to its board of directors in 1985. In 1986,
Mr.
Cannon
was appointed Comptroller
and a
member of the board of directors of Omnicom, a company affiliated with BBDO
Worldwide, and served in those capacities through May 2002. In 1987, Mr. Cannon
also served as Director of Financial Operations of the Omnicom Group from 1987
to 1989, when he rejoined BBDO Worldwide as Executive
Vice President and Chief Financial Officer. Mr. Cannon was appointed Vice
Chairman of BBDO Worldwide in 1990.
Senator
Wyche Fowler, Jr.
is a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Senator Fowler has been engaged in an
international business and law practice since May 2001, and has served as
chairman of the board of the Middle East Institute, a non-profit foundation
in
Washington, DC, since September 2001. Senator Fowler served as U.S. Senator
from
Georgia from January 1987 to January 1993, and had previously served in the
U.S.
House of Representatives from 1977 until his senatorial election. During his
time in the U.S. Senate, Senator Fowler served as a member of the Senate
Appropriations, Budget, Energy and Agriculture Committees. While in the U.S.
House of Representatives, he was a member of the House Ways and Means and
Foreign Affairs Committees, as well as the Select Committee on Intelligence.
President Clinton appointed Senator Fowler as Ambassador to the Kingdom of
Saudi
Arabia in 1996, where he served through 2001. Senator Fowler is a member of
the
board of directors of Brandywine Realty Trust, a real estate investment trust
traded on the New York Stock Exchange.
Gary
S. Fragin is
a
director of the Company and has served as a member of ZIOPHARM’s board of
directors since December 22, 2004. Mr. Fragin is currently managing partner
of
Osborn Partners, LP and managing partner of Fragin Asset Management, LP,
positions. Mr. Fragin was the General
Partner and Chief Administrative/Operating Officer of Steinhardt Organization,
prior to which he was a partner, Director
of Trading
and
member of the Management Committee and Executive Committee at Oppenheimer and
Co.
Timothy
McInerney is
a
director of the Company and has served on ZIOPHARM board of directors since
July
20, 2005. Since 1992, Mr. McInerney has been a Managing Director of Paramount
BioCapital, Inc. where he oversees the overall distribution of Paramount’s
private equity product. Prior to 1992, Mr. McInerney was a research analyst
focusing on the biotechnology industry at Ladenburg, Thalman & Co. Prior to
that, Mr. McInerney held equity sales positions at Bear, Stearns & Co. and
Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales and
marketing for Bristol-Myers Squibb.
Michael
Weiser
is a
director of the Company and has served on ZIOPHARM’s board of directors since
ZIOPHARM’s inception. Dr. Weiser is the Director of Research of Paramount
BioCapital. In addition to serving on the boards of directors of several
privately-held companies, Dr. Weiser currently serves on the board of directors
of Manhattan Pharmaceuticals, Inc., VioQuest Pharmaceuticals, Inc., Hana
BioSciences, Inc. and Chelsea Therapeutics, Inc., all publicly-traded
biotechnology companies.
28
The
board
of directors of ZIOPHARM, the Company’s wholly owned subsidiary after the
Merger, consists of the same persons currently serving as Company directors.
Furthermore, the executive officers of ZIOPHARM are the same persons currently
serving in such roles for the Company.
There
are
no family relationships among our executive officers or directors.
Audit
Committee
Effective
as of the Merger, we formed an audit committee of the board of directors. The
current members of the audit committee are Mr. James Cannon, who serves as
the
committee’s Chairman, and Messrs. Fragin and Bagley. The audit committee assists
the Board of Directors in fulfilling its responsibilities of ensuring that
management is maintaining an adequate system of internal controls such that
there is reasonable assurance that assets are safeguarded and that financial
reports are properly prepared; that there is consistent application of generally
accepted accounting principles; and that there is compliance with management’s
policies and procedures. In performing these functions, the audit committee
will
meet periodically with the independent auditors and management to review their
work and confirm that they are properly discharging their respective
responsibilities. In addition, the audit committee recommends the independent
auditors for appointment by the board of directors. Prior to the Merger, the
Company did not have an audit committee. Two members of the audit committee
are
independent, as independence is defined in Rule 4200(a)(15) of the Nasdaq
listing standards and Rule 10A-3 under the Securities Exchange Act of 1934.
The
board
of directors has determined that each of the audit committee members is able
to
read and understand fundamental financial statements. In addition, the board
of
directors has determined that at least one member of the audit committee, Mr.
James Cannon, is an “audit committee financial expert” as that term is defined
in Item 401(e)(2) of Regulation S-B promulgated under the Securities and
Exchange Act of 1934. Mr. Cannon’s relevant experience includes his current
service as the Chief Financial Officer of BBDO Worldwide, a position he has
held
for the past 20 years, and his past service as director of financial operations
of the Omnicom Group.
29
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation for awarded to
or
earned by (i) each individual serving as our chief executive officer
during
the fiscal year ended December 31, 2004; and (ii) each other individual that
served as an executive officer of us or of ZIOPHARM, Inc. as of December 31,
2004 and who received in excess of $100,000 in the form of salary and bonus
during such fiscal year (collectively, the “named executives”).
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
|||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation ($)
|
Securities
Underlying Options (#)
|
|||||||||||
|
Dr.
Jonathan Lewis,
|
||||||||||||||||
|
Chief
Executive Officer (1)
|
2004
|
344,167
|
500,000
|
(2)
|
9,099
|
|
268,653
|
|||||||||
|
Richard
Bagley,
|
||||||||||||||||
|
President,
Chief Operating Officer and Treasurer (3)
|
2004
|
43,750
|
75,000
|
(4)
|
4,057
|
150,668
|
||||||||||
|
Dr.
Robert Peter Gale,
|
||||||||||||||||
|
Senior
Vice President Research (5)
|
2004
|
239,583
|
150,000
|
(6)
|
2,543
|
25,110
|
||||||||||
|
David
C. Olson
|
||||||||||||||||
|
Former
Chief Executive Officer (7)
|
2004
|
0
|
—
|
—
|
—
|
|||||||||||
|
2003
|
0
|
—
|
—
|
—
|
||||||||||||
|
2002
|
0
|
—
|
—
|
—
|
||||||||||||
|
(1)
|
Dr.
Lewis became our Chief Executive Officer effective as of the
Merger. Prior
to the Merger, Dr. Lewis served as Chief Executive Officer
of ZIOPHARM,
Inc. since January 8, 2004.
|
|
(2)
|
Includes
a signing bonus of $250,000 paid on February 23, 2004 and a
guaranteed
bonus of $250,000 for work performed in fiscal 2004 that was
paid on April
22, 2005.
|
|
(3)
|
Mr.
Bagley became the President, Chief Operating Officer and Treasurer
of the
Company effective as of the Merger. Prior to the Merger, Mr.
Bagley served
President and Chief Operating Officer of ZIOPHARM, Inc. since
July 21,
2004 and as Treasurer of ZIOPHARM, Inc. since March, 2005.
|
|
(4)
|
Mr.
Bagley received a signing bonus of $50,000 on July 15, 2004
and was due
$25,000, a portion of his guaranteed bonus, as of December
31,
2004.
|
|
(5)
|
Dr.
Gale became the Company’s Senior Vice President Research effective as of
the Merger. Prior to the Merger, Dr. Gale served as Senior
Vice President
Research of ZIOPHARM, Inc. since January 15, 2004.
|
|
(6)
|
Includes
a guaranteed bonus of $150,000 for work performed in fiscal
2004 that was
paid on April 16, 2005.
|
|
(7)
|
During
fiscal year 2004, Mr. Olson received no cash compensation for
services
rendered in his capacity as our President, Chief Operating
Officer and
Treasurer. Mr. Olson resigned as an executive officer effective
upon the
Merger and, in connection with the Merger, we paid Mr. Olson
a one-time
fee of $57,500 pursuant to his December 9, 2004 employment
agreement.
|
30
Stock
Options
Upon
the
Merger, we assumed ZIOPHARM’s 2003 Stock Option Plan as our Stock Option Plan.
Since January 1, 2005, there have been 581,451 stock options awarded to the
named executives through September 13, 2005, and all such grants have been
made
under the 2003 Stock Option Plan. Prior to the Merger, we had an Incentive
Stock
Option Plan of EasyWeb, Inc. under which 175,000 shares of common stock were
reserved for issuance. That stock option plan was terminated effective as of
the
Merger.
Option
Grants in Last Fiscal Year
The
following table sets forth the information concerning individual grants of
stock
options made by us or ZIOPHARM to the named executives during the fiscal year
ended December 31, 2004. All share numbers and dollar amounts are set forth
on a
post-Merger basis.
|
Name
|
Number
of Securities Underlying Options Granted (#)
|
Percent
of Total Options Granted to Employees In Fiscal
Year
|
Exercise
of Base Price ($/share)
|
Expiration
Date(s)
|
|||||||||
|
Dr.
Jonathan Lewis (1)
|
25,674
|
5.2%
|
|
$0.08
|
1/8/14
|
||||||||
|
Dr.
Jonathan Lewis (1)
|
242,979
|
48.9%
|
|
$0.08
|
1/27/14
|
||||||||
|
Richard
Bagley (2)
|
150,668
|
30.4%
|
|
$1.70
|
7/1/14
|
||||||||
|
Dr.
Robert Peter Gale
|
2,567
|
0.5%
|
|
$0.44
|
1/15/14
|
||||||||
|
Dr.
Robert Peter Gale
|
22,543
|
4.5%
|
|
$0.44
|
1/27/14
|
||||||||
|
David
C. Olson
|
0
|
0%
|
|
—
|
—
|
||||||||
|
(1)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Dr. Lewis is entitled to purchase no
less than
5% of the Company’s common stock until such time as the Company has raised
$25 million in financing.
|
|
(2)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Mr. Bagley is entitled to purchase no
less
than 3% of the Company’s common stock until such time as the Company has
raised $25 million in financing.
|
31
Aggregated
Option Exercises and Fiscal Year-End Option Values
The
following table sets forth the total amount of shares acquired by the named
executives upon exercises of stock options during fiscal year 2004, the
aggregate dollar value realized upon such exercise, the total number of
securities underlying unexercised options held at the conclusion of fiscal
year
2004 (separately identifying then-exercisable and unexercisable options), and
the aggregate dollar value of in-the-money, unexercised options held at the
conclusion of fiscal year 2004 (separately identifying then-exercisable and
unexercisable options). All share numbers and dollar amounts with
respect to Dr. Lewis and Gale and Mr. Bagley have been adjusted to reflect
the
exchange of ZIOPHARM, Inc. securities in the Merger.
|
Name
|
Shares
Acquired on Exercise (#)
|
Value
Realized ($)
|
Number
of Unexercised Securities Underlying Options at FY-End (#) Exercisable
/
Unexercisable
|
Value
of Unexercised In-the-Money Options at FY-End ($) Exercisable /
Unexercisable(1)
|
|||||||||
|
Dr.
Jonathan Lewis
|
0
|
0
|
0
/
268,653
|
0
/
1,136,873
|
|||||||||
|
Richard
Bagley
|
0
|
0
|
0
/
150,668
|
0
/ 393,982
|
|||||||||
|
Dr.
Robert Peter Gale
|
0
|
0
|
0
/
25,110
|
0
/ 97,237
|
|||||||||
|
David
C. Olson
|
0
|
0
|
0
/
0
|
0
/
0
|
|||||||||
|
(1)
|
Value
of unexercised in-the-money options on December 31, 2004 is based
on a
$2.16 per share value of ZIOPHARM, Inc. stock ($4.31 per share of
the
Company's common stock on a post-Merger basis), as determined
by the
ZIOPHARM, Inc. Board of Directors at such time. As of December 31,
2004,
no trades of the Company’s common stock had been conducted on the
Over-the-Counter Bulletin Board.
|
Employment
and Change-in-Control Agreements
On
December 9, 2004, we entered into an employment agreement with David C. Olson.
Under the terms of the agreement, we agreed to pay Mr. Olson a one-time fee
of
$100,000 if and when we completed a merger, acquisition, or related transaction.
In connection with the Merger, Mr. Olson agreed to reduce this amount to the
extent that our unconsolidated liabilities immediately following the Merger
exceeded $425,000. On December 10, 2004, we entered into a management consulting
services agreement with David Floor. Under the terms of the agreement, we agreed
to pay Mr. Floor a one-time fee of $10,000 plus expenses, upon the closing
of
any transaction leaving us with a positive business direction and available
finances. In connection with the Merger, we paid Messrs. Olson and Floor $57,500
and $100,000, respectively, under the terms of their agreements with us. Each
such agreement was terminated in its entirety in connection with the Merger.
On
January 8, 2004, ZIOPHARM entered into a three-year employment agreement with
Dr. Jonathan Lewis, under which we succeeded to ZIOPHARM’s rights and
obligations upon the Merger. Under the agreement, Dr. Lewis receives an annual
base salary of $350,000 and a guaranteed annual bonus of $250,000. In addition,
Dr. Lewis is eligible to receive an annual discretionary bonus of up to 100%
of
his base salary, as determined by our board of directors. ZIOPHARM also paid
Dr.
Lewis a one-time bonus of $250,000 upon execution of his employment agreement.
Depending upon the events surrounding a possible termination of Dr. Lewis’
employment, he may continue to receive his base salary and, in certain
circumstances, his guaranteed bonus for one year following such termination.
In
addition, the vesting of Dr. Lewis’ stock options may accelerate in whole or in
part upon such termination. Dr. Lewis has agreed not to compete with us during
the term of the employment agreement and for a one-year period thereafter,
provided that we continue to pay his base salary and guaranteed bonus for that
one-year period.
32
Pursuant
to the terms of his employment agreement, we have granted Dr. Lewis options
to
purchase up to 410,603 shares of common stock at $0.08 per share (adjusted
to
give effect to the Merger). The options vest in three equal annual installments,
the first of which vested on January 8, 2005, with the remaining installments
vesting on January 8, 2006 and January 8, 2007. The option is subject to
anti-dilution protection from the issuance of equity securities in financing
transactions to the extent that Dr. Lewis will maintain potential equity
ownership of at least 5% of our stock until such time as we have received $25
million in gross proceeds from such transactions. The options are governed
by
our 2003 Stock Option Plan.
On
July
21, 2004, ZIOPHARM entered into a three-year employment agreement with Mr.
Richard Bagley, under which we succeeded to ZIOPHARM’s rights and obligations
upon the Merger. Under the agreement, Mr. Bagley receives an annual base salary
of $250,000 and a guaranteed annual bonus of $50,000. In addition, Mr. Bagley
is
eligible to receive an annual discretionary bonus, as determined by our board
of
directors. ZIOPHARM also paid Mr. Bagley a one-time bonus of $50,000 upon
execution of his employment agreement. Depending upon the events surrounding
a
possible termination of Mr. Bagley’s employment, he may continue to receive his
base salary and, in certain circumstances, his guaranteed bonus for one year
following such termination. In addition, the vesting of Mr. Bagley’s stock
options may accelerate in whole or in part upon such termination. Mr. Bagley
has
agreed not to compete with us during the term of the employment agreement and
for a one-year period thereafter, provided that we continue to pay his base
salary for that one-year period.
Pursuant
to the terms of his employment agreement, we granted Mr. Bagley options to
purchase up to 241,282 shares common stock at $1.70 per share (adjusted to
give
effect to the Merger). The options vest in three equal annual installments,
the
first of which vested on July 1, 2005, with the remaining installments vesting
on July 1, 2006 and July 1, 2007. The option is subject to certain anti-dilution
protections from the issuance of equity securities in financing transactions
so
that Mr. Bagley will maintain potential equity ownership of at least 3% of
our
stock until such time as we have received $25 million in gross proceeds from
such transactions. The options are governed by our 2003 Stock Option Plan.
On
January 14, 2004, ZIOPHARM entered into a three-year employment agreement with
Dr. Robert Peter Gale, under which we succeeded to ZIOPHARM’s rights and
obligations upon the Merger. Under the agreement, Dr. Gale receives an annual
base salary of $250,000 and a guaranteed annual bonus of $150,000. In addition,
Dr. Gale is eligible to receive an annual discretionary bonus, as determined
by
our board of directors. Depending upon the events surrounding a termination
of
Dr. Gale’s employment, he may continue to receive his base salary and, in
certain circumstances, his guaranteed bonus for one year following such
termination. In addition, the vesting of Dr. Gale’s stock options may accelerate
in whole or in part upon such termination. Dr. Gale has agreed not to compete
with us during the term of the employment agreement and for one-year following
the expiration of his employment agreement.
Pursuant
to the terms of his employment agreement, we granted Dr. Gale options to
purchase up to 25,110 shares of common stock at $0.44 per share, respectively
(adjusted to give effect to the Merger). The options vest in three equal annual
installments, the first of which vested on January 15, 2005, with the remaining
installments vesting on January 15, 2006 and January 15, 2007. The options
are
governed by our 2003 Stock Option Plan.
33
Compensation
of Directors
Prior
to
the Merger, our directors received no compensation pursuant to any standard
arrangement for their services as directors. Nevertheless, during the year
ended
December 31, 2004, we issued Mr. David Floor 5,000 shares of our common stock
(adjusted to reflect to the 1-for-40 share combination effected immediately
prior to the Merger) in exchange for directors fees.
Our
Board
of Directors currently schedules monthly telephonic board meetings and quarterly
in-person meetings held at our principal corporate office. Each director
receives quarterly compensation of $3,000 in arrears. The non-management members
of the Board also receive stock options as granted from time to time and as
recommended by the Compensation Committee.
34
SECURITY
OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table summarizes certain information regarding the beneficial
ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of our outstanding common stock as of September 29, 2005 by (i)
each person known by us to be the beneficial owner of more than 5% of our
outstanding common stock, (ii) each of our directors, (iii) each of the named
executives, and (iv) all current executive officers and directors as a group.
Except as indicated in the footnotes below, the persons listed below possess
sole voting and investment power with respect to their shares. Except
as
otherwise indicated, the address of the persons listed below is 1180 Avenue
of
the Americas, 19th
Floor,
New York, NY 10036.
|
Name
and Address of Beneficial Owner
|
Shares
of
Common
Stock
Beneficially
Owned (#)(1)
|
Percentage
of
Common
Stock
Beneficially
Owned (%)
|
|||||
|
Dr.
Jonathan Lewis (2)
|
136,868
|
1.88%
|
|||||
|
Richard
Bagley (3)
|
80,428
|
1.11%
|
|||||
|
Robert
Peter Gale (4)
|
8,371
|
*
|
|||||
|
Murray
Brennan
|
0
|
*
|
|||||
|
James
Cannon
|
0
|
*
|
|||||
|
Hon.
Wyche Fowler
|
0
|
*
|
|||||
|
Gary
Fragin
|
0
|
*
|
|||||
|
Timothy
McInerney (5)
|
79,972
|
1.11%
|
|||||
|
Michael
Weiser (6)
|
119,011
|
1.65%
|
|||||
|
All
current executive officers and directors
as
a group (7)
|
424,650
|
5.71%
|
|||||
|
Mibars,
LLC
365
West End Avenue
New
York, NY 10024
|
1,214,456
|
16.97%
|
|||||
|
Lindsay
A. Rosenwald (8)
787
Seventh Avenue, 48th Floor
New
York, NY 10019
|
1,498,087(8)
|
|
20.13%
|
||||
|
Atlas
Equity I, Ltd.
181
W. Madison, Suite 3600
Chicago,
IL 60602
|
695,797
|
9.72%
|
|||||
|
Lester
E. Lipschutz
1650
Arch Street, 22nd Floor
Philadelphia,
PA 19103
|
463,864(9)
|
|
6.48%
|
||||
|
David
C. Olson (10)
6025
South Quebec Street, Suite 135
Englewood,
CO 80111
|
54,008(10)
|
|
*
|
||||
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules, beneficial
ownership
includes any shares as to which the security or stockholder has sole
or
shared voting power or investment power, and also any shares which
the
security or stockholder has the right to acquire within 60 days of
the
date hereof, whether through the exercise or conversion of any stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
|
(2)
|
Includes
136,868 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
35
|
(3)
|
Includes
80,428 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(4)
|
Includes
8,371 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(5)
|
Includes
20,767 shares issuable upon the exercise of warrants that are currently
exercisable or will become exercisable within the next 60
days.
|
|
(6)
|
Includes
35,566 shares issuable upon the exercise of warrants that are currently
exercisable or will become exercisable within the next 60
days.
|
|
(7)
|
Includes
282,000 shares issuable upon the exercise of convertible securities
that
are currently exercisable or will become exercisable within the next
60
days.
|
|
(8)
|
Excludes
463,864 shares held by certain trusts for the benefit of Dr. Rosenwald
and
his family for which Dr. Rosenwald disclaims beneficial ownership.
Includes 221,011 shares issuable upon the exercise of warrants granted
to
Dr. Rosenwald and 62,621 shares issuable upon the exercise of warrants
granted to Paramount BioCapital Investments, LLC, of which Dr. Rosenwald
is the managing member, both such warrants are currently exercisable
or
will become exercisable within the next 60 days. Also includes 737,777
shares that Dr. Rosenwald has the right to acquire from existing
stockholders under certain circumstances pursuant to the terms of
pledge
agreements between Dr. Rosenwald and such
stockholders.
|
|
(9)
|
Includes
463,864 shares held by separate trusts for the benefit of Dr. Rosenwald
or
his family with respect to which Mr. Lifschutz is either trustee
or
investment manager and has investment and voting power. Dr. Rosenwald
disclaims beneficial ownership of these
shares.
|
|
(10)
|
Mr.
Olson served as the Company’s Chief Executive Officer for the full fiscal
years indicated until the consummation of the Merger. Share ownership
is
based on the Company’s most recent annual report on Form 10-KSB for the
year ended December 31, 2004, after giving effect to the 1-for-40
share
combination.
|
36
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Pre-Merger
Company Transactions and Relationships
Because
of their previous management positions, organizational efforts and/or percentage
share ownership (prior to the Merger), Messrs. David C. Olson and Robert J.
Zappa may be deemed to be “promoters,” as those terms are defined in the
Securities Act of 1933 and the applicable rules and regulations thereunder.
Because of the above-described relationships, transactions between and among
us
and Messrs. Olson and Zappa, such as the sale of our common stock to each of
them as described herein, should not be considered to have occurred at
arm’s-length.
Common
Stock Transactions
During
July 2005, we sold 333,333 shares of our common stock to David Floor for
$10,000, or $.03 per share.
In
August
and December 2004, David Olson loaned us a total of $1,300 for working capital.
During May 2005, Mr. Olson advanced us an additional $788. The loans carried
no
interest rate and were due on demand. On June 28, 2005, we issued Mr. Olson
69,600 shares of common stock as full repayment of the amounts stated above.
The
shares were valued at $.03 per share, or $2,088, based on contemporaneous common
stock sales to unrelated third parties.
On
May
13, 2004, the Company issued 400,000 shares of common stock to Summit Financial
Relations, Inc. (“Summit”) valued at $10,000, at $.025 per share as repayment
for expenses paid on behalf of us. The shares were valued based on
contemporaneous sales to unrelated third party investors. David Olson, who
was
then our President, Treasurer and one of our directors, is also Summit’s
President, director and sole stockholder.
During
May 2004, we issued 200,000 shares of common stock to Thomas Olson, the brother
of David Olson, in exchange for corporate governance services. The shares were
valued based on contemporaneous sales to unrelated third party investors, at
$.025 per share. The Company recorded stock-based compensation of $5,000 related
to the transaction.
During
May 2004, we issued 200,000 shares of common stock to David Floor in exchange
for director fees. The shares were valued based on contemporaneous sales to
unrelated third party investors, at $.025 per share. We recorded stock-based
compensation of $5,000 related to the transaction.
At
December 31, 2004, we owed Summit $12,268 for professional fees and other
administrative expenses paid on our behalf. David Olson, who was then our
President, Treasurer and one of our directors, is also Summit’s President,
director and sole stockholder. During the six months ended June 30, 2005, Summit
paid an additional $1,007 in expenses on our behalf. On February 4, 2005, the
Company repaid Summit $7,000 and on June 28, 2005 the Company issued Summit
209,180 shares of common stock as full repayment of all amounts stated above.
The shares issued to Summit were valued at $.03 per share, or $6,275, based
on
contemporaneous common stock sales to unrelated third parties.
During
January 2002, we sold 33,333 and 16,667 shares of our common stock to David
Olson and Barbara Petrinsky, respectively, at $.03 per share (gross proceeds
totaling $1,500). At the time of issuance, both Mr. Olson and Ms. Petrinsky
were
our officers.
37
Office
Space and Administrative Support
Summit
has contributed the use of office space and administrative support (including
reception, secretarial and bookkeeping services) to us for the years ended
December 31, 2004 and 2003. David Olson, who was our President, Treasurer and
one of our directors prior to the Merger, is also the President, director and
sole stockholder of Summit.
The
office space and administrative support contributed by Summit has a fair market
value of approximately $500 and $1,000 per month, respectively. We have
recognized expenses for rent and administrative support based on fair market
value. Any period in which the amount paid to Summit for office space and
administrative support was below the fair market value, the remaining balance
was considered contributed by Summit and recorded as a credit to additional
paid-in capital in our financial statements. During the years ended December
31,
2004 and 2003, we did not pay Summit for office space and we paid Summit $173
and $510, respectively, for administrative support. Accordingly, Summit
contributed the remaining fair values for the use of the office space and
administrative support. Contributed office space totaled $6,000 and $6,000,
and
contributed administrative support totaled $11,827 and $11,490 for the years
ended December 31, 2004 and 2003, respectively.
Related
Party Liabilities
In
August
and December 2004, Mr. Olson loaned us a total of $1,300 for working capital.
The loans carried no interest rate and were due on demand.
At
December 31, 2003, the Company owed Summit $18,111 for professional fees and
other administrative expenses it paid on our behalf. During the year ended
December 31, 2004, Summit paid expenses totaling $4,187 on our behalf. A portion
of the May 13, 2004 issuance of 400,000 restricted common described above under
“Certain Relationships and Related Transactions
- Common
Stock Transactions” was used to repay Summit for these fees. As of December 31,
2004, we owed Summit $12,298.
We
owed
Barbara Petrinsky, our former Secretary and Treasurer, $10,000 for the work
she
performed over the previous five years to keep our books and records, assist
in
all of our filings with regulatory authorities, states and the Internal Revenue
Service, among others.
All
of
the above-referenced liabilities were satisfied in their entirety immediately
following the Merger.
In
connection with the Merger, we paid Messrs. Olson and Floor $57,000 and
$100,000, respectively, pursuant to a December 9, 2004 employment agreement
with
David Olson and a December 10, 2004 management consulting services
agreement with David Floor.
Consulting
Agreement with Summit Financial
On
December 10, 2004, we entered into a consulting services fee agreement under
which Summit provided certain services to us including, but not limited to,
consultation related to mergers and acquisitions, reorganizations and
divestitures. Pursuant to the agreement, Summit lent us funds and helped us
raise funds at no extra cost. Under the terms of the agreement, we paid Summit
a
one-time fee of $106,697.90 in connection with the closing of the
Merger.
38
ZIOPHARM
Transactions and Relationships
In
connection with a private placement of its Series A Convertible Preferred Stock
that terminated in May 2005, ZIOPHARM and Paramount BioCapital, Inc.
(“Paramount”) entered into an introduction agreement in January 2005. Upon the
Merger, we succeeded to ZIOPHARM’s rights and obligations under such agreement.
Pursuant to the introduction agreement, ZIOPHARM agreed to compensate Paramount
or its designees for their services through the payment of (a) cash commissions
equal to 7% of the gross proceeds from the offering, and (b) warrants to acquire
an aggregate of 837,956 share of ZIOPHARM’s Series A Convertible preferred
Stock per share exercise price of $2.38. Upon the Merger, this warrant
was
exchanged for a warrant to purchase an aggregate of 419,772 shares of our common
stock at a per share exercise price of $4.75. Cash commissions will also be
payable by us if we sell additional of our securities, prior to May 31, 2006,
to
investors introduced to ZIOPHARM by the Paramount. Pursuant to the introduction
agreement, Paramount has the right of first refusal to act as the placement
agent for the private sale of our securities until May 31, 2008.
In
connection with ZIOPHARM’s December 22, 2004 Option Agreement with Southern
Research Institute (“SRI”), ZIOPHARM entered into an Finders Agreement dated
December 23, 2004 with Paramount, pursuant to which ZIOPHARM agreed to
compensate Paramount for services in connection with the ZIOPHARM’s introduction
to SRI through the payment of (a) a cash fee of $60,000 and (b) a warrant to
purchase 125,000 shares of ZIOPHARM’s common stock at a price of $2.38 per
share. Upon the Merger, this warrant was exchanged for a warrant to purchase
an
aggregate of 62,619 shares of our common stock at a per share exercise price
of
$4.75.
Lindsay
A. Rosenwald, M.D., who may beneficially own approximately 20.13% of our common
stock, is Chairman and Chief Executive Officer of Paramount and its affiliates.
Dr. Michael Weiser and Timothy McInerney, each of whom is a director of the
Company (and director of ZIOPHARM), are also full-time employees
of
Paramount.
39
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior
to
the consummation of the Merger, our common stock traded on the over-the-counter
bulletin board under the symbol “ESWB.” As a result of the Company’s name change
to ZIOPHARM Oncology, Inc., our common stock now trades under the symbol “ZIOP.”
The following table sets forth the high and low bid prices for our common stock
as reported by the over-the-counter bulletin board since our common stock began
trading over the counter in 2004. These quotations reflect inter-dealer prices,
without retail markup, markdown or commission, and may not represent actual
transactions. Throughout the periods indicated below, only one trade in our
common stock was consummated. Prices set forth below do not reflect the 1-for-40
share combination effected on August 24, 2005.
|
|
Price
Range
|
||||||
|
Fiscal
Year 2005 (Quarter Ended)
|
High
|
Low
|
|||||
|
June
30, 2005
|
$
|
0.05
|
$
|
0.00
|
|||
|
March
31, 2005
|
$
|
0.05
|
$
|
0.00
|
|||
|
Fiscal
Year 2004 (Quarter Ended)
|
High
|
Low
|
|||||
|
December
31, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
September
30, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
June
30, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
|
March
31, 2004
|
$
|
0.00
|
$
|
0.00
|
|||
The
approximate number of stockholders of record of our common stock as of September
29, 2005 was 306.
We
have never declared or paid a cash dividend on our common stock and do not
anticipate paying any cash dividends in the foreseeable future.
USE
OF PROCEEDS
We
will
not receive any proceeds from the resale of any of the shares offered by this
prospectus by the selling stockholders.
40
SELLING
STOCKHOLDERS
This
prospectus covers the resale by the selling stockholders identified below of
4,870,281 shares of our common stock, including 4,197,952 shares of our common
stock issued to the former stockholders of ZIOPHARM, Inc. in connection with
the
Merger, 482,407 shares issuable upon the exercise of warrants held by such
former ZIOPHARM, Inc. stockholders and 189,922 shares of which were outstanding
prior to the merger. The following table sets forth the number of shares of
our
common stock beneficially owned by the selling stockholders as of October 12,
2005, and after giving effect to this offering.
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Robert
Guercio
|
7,515
|
7,515
|
0
|
—
|
|
Ennio
DePianto
|
6,012
|
6,012
|
0
|
—
|
|
Millennium
Partners, L.P.
|
231,932
|
231,932
|
0
|
—
|
|
Michael
A. Mullen
|
5,010
|
5,010
|
0
|
—
|
|
Philip
J. Abdalla and Joyce V. Abdalla JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Frank
Calcutta
|
12,524
|
12,524
|
0
|
—
|
|
The
Henry H. Bahr QTIP Trust Dated 2/22/88
|
11,597
|
11,597
|
0
|
—
|
|
The
Bahr Family Limited Partnership
|
11,597
|
11,597
|
0
|
—
|
|
Robert
L. Bahr Revocable Trust 1985 U/A
dated 3-14-85 |
3,826
|
3,826
|
0
|
—
|
|
Stephen
C. Rabbitt
|
10,019
|
10,019
|
0
|
—
|
|
Delaware
Charter Guarantee Trust FBO
Richard S. Simms II Keogh Plan |
3,479
|
3,479
|
0
|
—
|
|
Lind
Family Investments LP
|
8,117
|
8,117
|
0
|
—
|
|
John
and Debbra Landsberger Family Trust
|
12,524
|
12,524
|
0
|
—
|
|
Balanced
Investment, LLC
|
46,386
|
46,386
|
0
|
—
|
|
Riverside
Contracting LLC
|
12,524
|
12,524
|
0
|
—
|
|
Walter
B. Martin and Paloma Munoz JTWROS
|
5,798
|
5,798
|
0
|
—
|
|
MSB
Family Trust DTD 6/25/93 Michael Blechman, TTEE
|
23,194
|
23,194
|
0
|
—
|
|
Richard
S. Simms II and Cynthia Simms JTWROS
|
3,479
|
3,479
|
0
|
—
|
|
Lawrence
M. Silver
|
23,194
|
23,194
|
0
|
—
|
|
Rick
J. Goad
|
10,019
|
10,019
|
0
|
—
|
|
Barry
Lind Revocable Trust
|
46,386
|
46,386
|
0
|
—
|
|
Stephen
N. Kitchens and Martha M. Kitchens JTWROS
|
23,194
|
23,194
|
0
|
—
|
41
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Wayne
K. Adams
|
11,597
|
11,597
|
0
|
—
|
|
Jerrold
Abrahams
|
6,958
|
6,958
|
0
|
—
|
|
Shoup
Revocable Trust DTD April 29, 2003
|
11,598
|
11,598
|
0
|
—
|
|
Shea
Ventures, LLC
|
23,193
|
23,193
|
0
|
—
|
|
James
J. Solano, Jr.
|
5,798
|
5,798
|
0
|
—
|
|
National
Investors Services Corp. FBO
Stephen J. Nelson |
23,194
|
23,194
|
0
|
—
|
|
James
C. Shepler and Diana B. Shepler JTWROS
|
6,958
|
6,958
|
0
|
—
|
|
Steven
Lisi
|
14,027
|
14,027
|
0
|
—
|
|
Phil
Lifshitz
|
23,195
|
23,195
|
0
|
—
|
|
Louis
Sanzo, Jr.
|
5,010
|
5,010
|
0
|
—
|
|
Barry
P. McIntosh
|
5,798
|
5,798
|
0
|
—
|
|
Hill
Blalock, Jr.
|
23,195
|
23,195
|
0
|
—
|
|
Joel
Braun
|
5,798
|
5,798
|
0
|
—
|
|
Far
Ventures
|
10,019
|
10,019
|
0
|
—
|
|
Brino
Investment Ltd.
|
5,798
|
5,798
|
0
|
—
|
|
Grapemeadow,
NV
|
115,966
|
115,966
|
0
|
—
|
|
Tisu
Investment Ltd.
|
17,395
|
17,395
|
0
|
—
|
|
Edmund
A. Debler
|
17,033
|
17,033
|
0
|
—
|
|
Daniel
Krieger
|
5,798
|
5,798
|
0
|
—
|
|
Andrew
W. Albstein and Carolyn Albstein JTWROS
|
23,194
|
23,194
|
0
|
—
|
|
Elizabeth
R. Moore
|
5,798
|
5,798
|
0
|
—
|
|
Ursuline
Co.
|
12,524
|
12,524
|
0
|
—
|
|
Carl
S. Sorenson
|
11,597
|
11,597
|
0
|
—
|
|
Carucci
Family Partners
|
34,790
|
34,790
|
0
|
—
|
|
Anthony
J. Ottavio
|
12,524
|
12,524
|
0
|
—
|
|
Daniel
J. Kevles and Betty Ann Kevles JTWROS
|
8,117
|
8,117
|
0
|
—
|
|
Gavin
Kent
|
5,798
|
5,798
|
0
|
—
|
|
Michael
Luftman
|
5,798
|
5,798
|
0
|
—
|
|
Anthony
J. Gerace
|
11,598
|
11,598
|
0
|
—
|
|
Isaac
R. Dweck
|
23,193
|
23,193
|
0
|
—
|
|
Fae
Moore
|
5,798
|
5,798
|
0
|
—
|
|
Ben
Heller
|
69,579
|
69,579
|
0
|
—
|
|
Elizabeth
Maas
|
5,798
|
5,798
|
0
|
—
|
|
Robert
Masters
|
11,597
|
11,597
|
0
|
—
|
42
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Klaus
Kretschmer
|
46,591
|
46,591
|
0
|
—
|
|
Dean
Glasser
|
3,757
|
3,757
|
0
|
—
|
|
Murry
J. McCabe
|
34,790
|
34,790
|
0
|
—
|
|
Cooper
A. McIntosh, MD
|
11,597
|
11,597
|
0
|
—
|
|
Harry
Newton and Susan Newton JTWROS
|
17,534
|
17,534
|
0
|
—
|
|
Nicholas
Ponzio
|
25,049
|
25,049
|
0
|
—
|
|
Gary
J. Strauss
|
23,194
|
23,194
|
0
|
—
|
|
Scott
D. Whitaker
|
11,597
|
11,597
|
0
|
—
|
|
Wolcot
Capital, Inc.
|
25,049
|
25,049
|
0
|
—
|
|
Joseph
J. Vale
|
115,966
|
115,966
|
0
|
—
|
|
Carolyn
N. Taylor
|
3,507
|
3,507
|
0
|
—
|
|
David
P. Luci
|
2,319
|
2,319
|
0
|
—
|
|
Atlas
Equity I, Ltd.
|
695,797
|
695,797
|
0
|
—
|
|
Alan
H. Auerbach
|
5,798
|
5,798
|
0
|
—
|
|
Gregory
J. Dovolis
|
10,019
|
10,019
|
0
|
—
|
|
Michele
Markowitz
|
5,798
|
5,798
|
0
|
—
|
|
Praful
Desai
|
5,010
|
5,010
|
0
|
—
|
|
Eric
Reed
|
5,010
|
5,010
|
0
|
—
|
|
Delaware
Charter Guarantee Trust FBO Mark Berg IRA
|
57,612
|
57,612
|
0
|
—
|
|
Nicole
Berg
|
57,612
|
57,612
|
0
|
—
|
|
Ivy
Scheinholz Revocable Trust U/A Dated 1/26/05
|
5,010
|
5,010
|
0
|
—
|
|
S.
Alan Lisenby
|
25,049
|
25,049
|
0
|
—
|
|
Judah
Schorr
|
34,790
|
34,790
|
0
|
—
|
|
Mark
Mazzer
|
6,262
|
6,262
|
0
|
—
|
|
Domaco
Venture Capital Fund
|
5,799
|
5,799
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Jack Polar IRA
|
5,799
|
5,799
|
0
|
—
|
|
Paul
D. Newman and Judith E. Newman JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Neil
J. Laird
|
6,012
|
6,012
|
0
|
—
|
|
Rachel
Family Partnership
|
34,790
|
34,790
|
0
|
—
|
|
Baruch
Z. Halberstam
|
5,798
|
5,798
|
0
|
—
|
|
Paul
J. Solit
|
5,798
|
5,798
|
0
|
—
|
|
David
Jaroslawicz
|
69,579
|
69,579
|
0
|
—
|
|
Lucile
Slocum
|
10,019
|
10,019
|
0
|
—
|
43
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Harvey
Lustig and Ronnie Lustig JTWROS
|
5,010
|
5,010
|
0
|
—
|
|
Stephen
H. Lebovitz
|
1,002
|
1,002
|
0
|
—
|
|
Joe
L. Key and Mary Lynn Key JTWROS
|
1,002
|
1,002
|
0
|
—
|
|
Delaware
Charter Guarantee & Trust Co. FBO Howard M. Tanning MD
IRA
|
25,049
|
25,049
|
0
|
—
|
|
Gitel
Family Partnership, LP
|
23,193
|
23,193
|
0
|
—
|
|
Joseph
Strassman and Barbara Strassman
|
6,958
|
6,958
|
0
|
—
|
|
David
G. Pudelsky and Nancy H. Pudelsky JTWROS
|
10,019
|
10,019
|
0
|
—
|
|
Louis
R. Reif
|
22,544
|
22,544
|
0
|
—
|
|
John
O. Dunkin
|
6,012
|
6,012
|
0
|
—
|
|
Michael
Pinney
|
2,505
|
2,505
|
0
|
—
|
|
Neel
B. Ackerman and Martha N. Ackerman JTWROS
|
25,049
|
25,049
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Ronald M. Lazar, STD IRA
|
5,799
|
5,799
|
0
|
—
|
|
RL
Capital Partners, LP
|
11,598
|
11,598
|
0
|
—
|
|
Neil
Herskowitz
|
6,262
|
6,262
|
0
|
—
|
|
Anthony
G. Polak “S”
|
5,799
|
5,799
|
0
|
—
|
|
Fiserv
Securities, Inc. A/C/F Anthony G. Polak Std. IRA
|
5,799
|
5,799
|
0
|
—
|
|
Tim
P. Cooper
|
4,634
|
4,634
|
0
|
—
|
|
Benito
Bucay
|
11,597
|
11,597
|
0
|
—
|
|
Edwin
A. Buckham and Wendy F. Buckham, JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Laya
Perlysky 2003 Grantor Retained Annuity Trust
|
23,193
|
23,193
|
0
|
—
|
|
Kinder
Investments L.P.
|
34,790
|
34,790
|
0
|
—
|
|
Reuben
Taub
|
12,524
|
12,524
|
0
|
—
|
|
Waterspout
Investments Pte Ltd
|
4,639
|
4,639
|
0
|
—
|
|
Matador
Investments Pte Ltd.
|
16,235
|
16,235
|
0
|
—
|
|
Ramsay
Investments Pte. Ltd.
|
2,319
|
2,319
|
0
|
—
|
|
Mega
International Corporation
|
8,581
|
8,581
|
0
|
—
|
|
Alfred
Abraham
|
4,639
|
4,639
|
0
|
—
|
|
Paul
Sallwasser and Teri Sallwasser JTWROS
|
17,395
|
17,395
|
0
|
—
|
44
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
William
S. Tyrell
|
11,597
|
11,597
|
0
|
—
|
|
Alan
J. Young
|
34,790
|
34,790
|
0
|
—
|
|
William
McCahey and Lisa Krivacka JTWROS
|
5,799
|
5,799
|
0
|
—
|
|
Dennis
F. Steadman
|
5,799
|
5,799
|
0
|
—
|
|
John
H. Miller, CGM IRA Custodian
Smith Barney #670-80424-18 |
6,262
|
6,262
|
0
|
—
|
|
Paul
Bermanski and Barbara Bermanski JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Tokenhouse
Trading Pte. Ltd.
|
46,386
|
46,386
|
0
|
—
|
|
James
E. Daly, CGM IRA Custodian #670-80477
|
6,262
|
6,262
|
0
|
—
|
|
Howard
Sorkin
|
23,193
|
23,193
|
0
|
—
|
|
Janis
H. Camp
|
5,798
|
5,798
|
0
|
—
|
|
Robert
McEntire
|
46,387
|
46,387
|
0
|
—
|
|
Andrew
H. Sabreen and Carol Sabreen JTWROS
|
11,597
|
11,597
|
0
|
—
|
|
Michael
Blechman and Barry J. Lind, Tenants in Common
|
11,597
|
11,597
|
0
|
—
|
|
Paul
F. Berlin
|
5,798
|
5,798
|
0
|
—
|
|
Eli
Jaconson
|
23,194
|
23,194
|
0
|
—
|
|
Andrew
W. Schonzeit
|
12,524
|
12,524
|
0
|
—
|
|
Nora
O’Donoghue
|
5,798
|
5,798
|
0
|
—
|
|
Mario
Pasquel and Begona Miranda JTWROS
|
16,235
|
16,235
|
0
|
—
|
|
Suzanne
Schiller
|
5,010
|
5,010
|
0
|
—
|
|
William
S. Silver and Elinor Silver JTWROS
|
6,012
|
6,012
|
0
|
—
|
|
Suzette
T. Seigel
|
5,798
|
5,798
|
0
|
—
|
|
Robert
J. Sechan II
|
5,798
|
5,798
|
0
|
—
|
|
Coqui
Capital Partners
|
57,984
|
57,984
|
0
|
—
|
|
Carolyn
P. Dietrich
|
6,007
|
6,007
|
0
|
—
|
|
Smithfield
Fiduciary LLC
|
231,932
|
231,932
|
0
|
—
|
|
Michael
S. Walsh
|
5,798
|
5,798
|
0
|
—
|
|
Vintage
Filings LLC
|
5,799
|
5,799
|
0
|
—
|
|
Keith
Rubenstein
|
5,798
|
5,798
|
0
|
—
|
|
Dr.
Jeffrey R. Shapiro
|
5,798
|
5,798
|
0
|
—
|
|
Bernard
Wachsman
|
5,798
|
5,798
|
0
|
—
|
|
Concordia
Partners L.P.
|
175,341
|
175,341
|
0
|
—
|
|
Bristol
Investment, Ltd.
|
69,579
|
69,579
|
0
|
—
|
45
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
The
Lindsay A. Rosenwald 2000 Irrevocable Trust U/A dated
5/24/2000
|
231,932
|
231,932
|
0
|
—
|
|
The
Lindsay Rosenwald 2000 Family Trust U/A dated 12/15/00
|
231,932
|
231,932
|
0
|
—
|
|
Mark
J. Ahn
|
5,798
|
5,798
|
0
|
—
|
|
Jeffrey
Kraws & Patricia Kraws
|
5,798
|
5,798
|
0
|
—
|
|
Jack
B. Petersen
|
5,798
|
5,798
|
0
|
—
|
|
Charles
Earl Cartmill
|
11,597
|
11,597
|
0
|
—
|
|
Robert
J. Whetten
|
11,597
|
11,597
|
0
|
—
|
|
Paramount
BioCapital, Inc.
|
62,621
|
0
|
62,621
|
—
|
|
Steven
Markowitz
|
6,480
|
0
|
6,480
|
—
|
|
Fabio
Migliaccio
|
2,504
|
0
|
2,504
|
—
|
|
Denise
Mormile-Liglino
|
1,252
|
0
|
1,252
|
—
|
|
Michael
Mullen
|
13,534
|
0
|
13,534
|
—
|
|
Robert
Petrozzo
|
11,083
|
0
|
11,083
|
—
|
|
Joseph
Sorbara
|
6,480
|
0
|
6,480
|
—
|
|
Robert
D. Millstone
|
3,479
|
0
|
3,479
|
—
|
|
Steven
A. Sherman
|
1,739
|
0
|
1,739
|
—
|
|
Sandgrain
Securities, Inc.
|
579
|
0
|
579
|
—
|
|
Lindsay
A. Rosenwald
|
1,498,087(3)
|
0
|
221,011
|
16.53%
|
|
Michael
Weiser
|
119,011
|
0
|
35,566
|
1.08%
|
|
Harris
Lydon
|
22,349
|
0
|
22,349
|
—
|
|
Timothy
McInerney
|
79,972
|
0
|
20,767
|
*
|
|
Michael
Rosenman
|
31,854
|
0
|
19,709
|
*
|
|
Scott
Katzman
|
28,817
|
0
|
19,709
|
*
|
|
Jill
Meleski
|
19,674
|
0
|
16,638
|
*
|
|
Bernard
Gross
|
10,285
|
0
|
8,767
|
*
|
|
Karl
Ruggeberg
|
9,368
|
0
|
7,850
|
*
|
|
Jeana
Somers
|
1,808
|
0
|
290
|
*
|
|
EasyWeb
Shareholders:
|
||||
|
Lawrence
Alpert
|
500
|
500
|
0
|
*
|
|
Associate
Capital Consulting Inc.
|
50
|
50
|
0
|
*
|
|
Vicki
D E Barone
|
25
|
25
|
0
|
*
|
|
Edward
W Bellarose
|
100
|
100
|
0
|
*
|
|
Black
Marlen Inc
|
100
|
100
|
0
|
*
|
|
Craig
M Blake
|
50
|
50
|
0
|
*
|
|
Darrell
J Brunken
|
25
|
25
|
0
|
*
|
46
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
Scot
Bryant
|
100
|
100
|
0
|
*
|
|
Charles
Schwab & Co. Inc.
|
100
|
100
|
0
|
*
|
|
John
Cleaver & Karen Cleaver JTTEN
|
100
|
100
|
0
|
*
|
|
William
D. Cronin
|
100
|
100
|
0
|
*
|
|
Paul
Dragul
|
10,418
|
10,418
|
0
|
*
|
|
Michael
M Edmonds
|
100
|
100
|
0
|
*
|
|
Doyle
S Elliott
|
25
|
25
|
0
|
*
|
|
David
W. Floor
|
18,334
|
18,334
|
0
|
*
|
|
Tyler
Floor
|
3,750
|
3,750
|
0
|
*
|
|
William
R Going
|
25
|
25
|
0
|
*
|
|
B
Kathleen Goldstone
|
25
|
25
|
0
|
*
|
|
Allen
R Goldstone
|
25
|
25
|
0
|
*
|
|
Timothy
S Greufe
|
150
|
150
|
0
|
*
|
|
C.
Eugene Gronning C. Eugene Gronning
|
1,250
|
1,250
|
0
|
*
|
|
Michael
Gundzik C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Johanna
Guttman & Robert Herskowitz JTEN
|
10,750
|
10,750
|
0
|
*
|
|
L.
Dee Hall
|
250
|
250
|
0
|
*
|
|
Mark
Hatsis C. Eugene Gronning
|
1,500
|
1.500
|
0
|
*
|
|
Anderson
J Henshaw C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Brad
Henshaw C. Eugene Gronning
|
100
|
100
|
0
|
*
|
|
Brent
Henshaw
|
13,709
|
13,709
|
0
|
*
|
|
Brent
Henshaw
|
250
|
250
|
0
|
*
|
|
Robert
Herskowitz
|
6,875
|
6,875
|
0
|
*
|
|
Al
Hoff
|
100
|
100
|
0
|
*
|
|
James
E Hosch
|
100
|
100
|
0
|
*
|
|
Joseph
W. Hovorka
|
1,667
|
1,667
|
0
|
*
|
|
Reed
Jensen
|
1,250
|
1,250
|
0
|
*
|
|
Key
Investments
|
2,500
|
2,500
|
0
|
*
|
|
Bryant
Kligerman
|
100
|
100
|
0
|
*
|
|
Harvey
Levin
|
25
|
25
|
0
|
*
|
|
VLA
LLP
|
50
|
50
|
0
|
*
|
|
Curtis
M McQueen
|
50
|
50
|
0
|
*
|
|
Mathew
Meister c/o Beeman Holdings
|
25
|
25
|
0
|
*
|
|
Gary
Mendenhall
|
25
|
25
|
0
|
*
|
|
Jeffrey
Myers
|
25
|
25
|
0
|
*
|
|
Jeffrey
Myers
|
1,667
|
1,667
|
0
|
*
|
|
Morri
L Namaste
|
100
|
100
|
0
|
*
|
47
|
Selling
Stockholder
|
Shares
Beneficially
Owned
Before
Offering
(1)
|
Number
of
Outstanding
Shares
Offered
by Selling
Stockholder
|
Number
of Shares
Offered
by Selling
Stockholder
upon
Exercise
of
Certain
Warrants
|
Percentage
Beneficial
Ownership
After
Offering
(2)
|
|
National
Financial Services LLC
|
25
|
25
|
0
|
*
|
|
NF
Clearing Inc.
|
75
|
75
|
0
|
*
|
|
Robert
E Ohman
|
25
|
25
|
0
|
*
|
|
David
C. Olson
|
43,616
|
43,616
|
0
|
*
|
|
Thomas
B. Olson
|
5,000
|
5,000
|
0
|
*
|
|
Butternut
Partners
|
5,000
|
5,000
|
0
|
*
|
|
Jeff
Peterson
|
1,250
|
1,250
|
0
|
*
|
|
Jonathan
Peterson
|
1,000
|
1,000
|
0
|
*
|
|
Barbara
Petrinsky
|
442
|
442
|
0
|
*
|
|
Merrill
Lynch Pierce Fenner & Smith Inc.
|
25
|
25
|
0
|
*
|
|
Brad
Rhodes
|
200
|
200
|
0
|
*
|
|
Jeff
Rodriguez
|
25
|
25
|
0
|
*
|
|
Lamar
F Schild
|
500
|
500
|
0
|
*
|
|
Sanford
Schwartz
|
25
|
25
|
0
|
*
|
|
Susan
Schwartz
|
25
|
25
|
0
|
*
|
|
Scott
Shovea
|
50
|
50
|
0
|
*
|
|
Don
F. Sims
|
50
|
50
|
0
|
*
|
|
Carlene
Smith
|
25
|
25
|
0
|
*
|
|
Ryan
Spencer
|
3,750
|
3,750
|
0
|
*
|
|
Michael
J Stallone
|
200
|
200
|
0
|
*
|
|
Summit
Financial Relations Inc.
|
17,314
|
17,314
|
0
|
*
|
|
James
H Swalwell & Judith A Swalwell JTTEN
|
50
|
50
|
0
|
*
|
|
Thomas
M. Vickers
|
5,000
|
5,000
|
0
|
*
|
|
James
J Trainor
|
125
|
125
|
0
|
*
|
|
Thomas
M. Vickers Revocable Trust
|
5,000
|
5,000
|
0
|
*
|
|
Thomas
M. Vickers
|
250
|
250
|
0
|
*
|
|
Douglas
a Wilkerson & Leola A Wilkerson JTTEN
|
25
|
25
|
0
|
*
|
|
Lyn
C Wilkerson
|
30
|
30
|
0
|
*
|
|
Derek
J. Zappa
|
100
|
100
|
0
|
*
|
|
Robert
J. Zappa
|
24,000
|
24,000
|
0
|
*
|
|
Albert
J. Zirkelbach
|
50
|
50
|
0
|
*
|
48
_______________
*
Less
than 1%
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules, beneficial
ownership
includes any shares as to which the security or stockholder has sole
or
shared voting power or investment power, and also any shares which
the
security or stockholder has the right to acquire within 60 days of
the
date hereof, whether through the exercise or conversion of any stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
|
(2)
|
Assumes
sales of all shares by each selling
stockholder.
|
|
(3)
|
In
addition to 221,011 shares issuable upon the exercise of warrants
being
offered hereunder, this amounts includes 476,678 shares of common
stock
held by Dr. Rosenwald, 62,621 shares issuable upon the exercise of
warrants granted to Paramount BioCapital Investments, LLC, of which
Dr.
Rosenwald is the managing member, and 737,777 shares that Dr. Rosenwald
has the right to acquire from existing stockholders under certain
circumstances pursuant to the terms of pledge agreements between
Dr.
Rosenwald and such stockholders. Excludes 463,864 shares held by
certain
trusts for the benefit of Dr. Rosenwald and his family for which
Dr.
Rosenwald disclaims beneficial
ownership.
|
49
PLAN
OF DISTRIBUTION
We
are
registering the resale of certain shares of common stock offered by this
prospectus on behalf of the selling stockholders. As used in this prospectus,
the term “selling stockholders” include donees, pledges, transferees and other
successors in interest selling shares received from the selling stockholders
after the date of this prospectus, whether as a gift, pledge, partnership
distribution or other form of transfer. All costs, expenses and fees in
connection with the registration of the shares of common stock offered hereby
will be borne by the Company. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of shares of common stock will be
borne by the selling stockholders.
Sales
of
shares of common stock offered hereby may be effected by the selling
stockholders from time to time in one or more types of transactions (which
may
include block transactions):
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as
agent, but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
| · |
broker-dealers
may agree with the selling stockholder to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may effect sales of shares of common stock offered hereby
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the
time
of sale, or at privately negotiated prices. Any of these transactions may or
may
not involve brokers or dealers. Any such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the selling
stockholders and/or the purchaser(s) of shares of common stock for whom those
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). The selling stockholders have advised us that they
have
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor
is
there any underwriter or coordinating broker acting in connection with the
proposed sale of shares of common stock by the selling
stockholders.
50
The
selling stockholders may, from time to time, pledge or grant a security interest
in some or all of the shares of common stock owned by them and registered hereby
and, if any such selling stockholder defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares
of
common stock, from time to time, under this prospectus, or under an amendment
to
this prospectus or other applicable provision of the Securities Act amending
the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
In
connection with the sale of our common stock or interests therein, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities, which require the delivery to such broker-dealer or
other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the selling stockholders from the sale of the common
stock
offered by them will be the purchase price of the common stock less discounts
or
commissions, if any. The selling stockholders reserve the right to accept and,
together with their agents from time to time, to reject, in whole or in part,
any proposed purchase of common stock to be made directly or through agents.
We
will not receive any of the proceeds from this offering.
The
selling stockholders may also resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that
rule.
The
selling stockholders and any broker-dealers that act in connection with the
sale
of securities might be deemed to be “underwriters” within the meaning of Section
2(11) of the Securities Act, and any commissions received by such broker-dealers
and any profit on the resale of the securities sold by them while acting as
principals might be deemed to be underwriting discounts or commissions under
the
Securities Act. In addition, each broker-dealer selling under this prospectus
for its own account or the account of an affiliate is an “underwriter” under
Section 2(11) of the Securities Act.
To
the
extent required, the shares of our common stock to be sold, the name of the
selling stockholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions
or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this
prospectus.
In
order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be
sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
We
have
advised the selling stockholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of shares in the market and to
the
activities of the selling stockholders and their affiliates. In addition, we
will make copies of this prospectus (as it may be supplemented or amended from
time to time) available to the selling stockholders for the purpose of
satisfying the prospectus-delivery requirements of the Securities Act. The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
51
We
are
unable to predict with certainty the effect which sales of the shares of common
stock offered by this prospectus might have upon our ability to raise additional
capital. Nevertheless, it is possible that the resale of shares offered hereby
could adversely affect the trading price of our common stock.
Shares
Eligible For Future Sale
Upon
completion of this offering and assuming the issuance of all of the shares
covered by this prospectus that are issuable upon the exercise of outstanding
warrants to purchase our common stock, there will be 7,723,618 shares of our
common stock issued and outstanding. The shares purchased in this offering
will
be freely tradable without registration or other restriction under the
Securities Act, except for any shares purchased by an “affiliate” of our Company
(as defined under the Securities Act).
Our
currently outstanding shares issued in connection with the Merger are deemed
“restricted securities” within the meaning of Rule 144 under the Securities Act.
Restricted securities may not be sold unless they are registered under the
Securities Act or are sold pursuant to an applicable exemption from
registration, including an exemption under Rule 144. Assuming that all of the
other requirements of Rule 144 are then satisfied, then the 6,967,941 restricted
shares of our common stock that were issued in connection with the Merger will
first be eligible for resale without registration on September,
2006.
In
general, under Rule 144, any person (or persons whose shares are aggregated)
including persons deemed to be affiliates, whose restricted securities have
been
fully paid for and held for at least one year from the later of the date of
issuance by us or acquisition from an affiliate, may sell such securities in
broker’s transactions or directly to market makers, provided that the number of
shares sold in any three-month period may not exceed the greater of one percent
of the then-outstanding shares of our common stock or the average weekly trading
volume of our shares of common stock in the over-the-counter market during
the
four calendar weeks preceding the sale. Sales under Rule 144 are also subject
to
certain notice requirements and the availability of current public information
about our Company. After two years have elapsed from the later of the issuance
of restricted securities by us or their acquisition from an affiliate, persons
who are not affiliates under the rule may sell such securities without any
limitation.
DESCRIPTION
OF CAPITAL STOCK
Our
authorized capital stock consists of 280,000,000 shares of common
stock, $.001 value per share. All shares of common stock have equal
voting
rights and are entitled to one vote per share on all matters to be voted upon
by
our stockholders. The shares of common stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully-paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted. In the event of our liquidation, each holder of our common stock
is
entitled to receive a proportionate share of our assets available for
distribution to stockholders after the payment of liabilities. All shares of
our
common stock issued and outstanding are fully-paid and
non-assessable.
Holders
of our common stock are entitled to share pro rata in dividends and
distributions with respect to the common stock when, as and if declared by
our
board of directors out of funds legally available therefor. We have not paid
any
dividends on our common stock and intend to retain earnings, if any, to finance
the development and expansion of our business. Future dividend policy is subject
to the discretion of our board of directors and will depend upon a number of
factors, including future earnings, capital requirements and our financial
condition.
52
The
transfer agent and registrar for our common stock is American Stock Transfer
and
Trust, 6201 15th Avenue, Brooklyn, New York, 11219. As of the date of this
prospectus, we had 7,241,211 shares of common stock outstanding held by
approximately 306 holders of record. Our common stock is eligible for trading
on
the over-the-counter bulletin board under the symbol “ZIOP.OB.”
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Pursuant
to our certificate of incorporation and bylaws, we may indemnify an officer
or
director who is made a party to any proceeding, because of his position as
such,
to the fullest extent authorized by Delaware General Corporation Law, as the
same exists or may hereafter be amended. In certain cases, we may advance
expenses incurred in defending any such proceeding.
To
the
extent that indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that, in the opinion of
the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. If
a
claim for indemnification against such liabilities (other than the payment
by us
of expenses incurred or paid by a director, officer or controlling person of
our
company in the successful defense of any action, suit or proceeding) is asserted
by any of our directors, officers or controlling persons in connection with
the
securities being registered, we will, unless in the opinion of our counsel
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of that issue.
ABOUT
THIS PROSPECTUS
This
prospectus is not an offer or solicitation in respect to these securities in
any
jurisdiction in which such offer or solicitation would be unlawful. This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission. The registration statement that contains this
prospectus (including the exhibits to the registration statement) contains
additional information about our company and the securities offered under this
prospectus. That registration statement can be read at the SEC web site or
at
the SEC’s offices mentioned under the heading “Where You Can Find More
Information.” We have not authorized anyone else to provide you with different
information or additional information. You should not assume that the
information in this prospectus, or any supplement or amendment to this
prospectus, is accurate at any date other than the date indicated on the cover
page of such documents.
WHERE
YOU CAN FIND MORE INFORMATION
Federal
securities law requires us to file information with the SEC concerning our
business and operations. Accordingly, we file annual, quarterly, and special
reports, proxy statements and other information with the SEC. You can inspect
and copy this information at the Public Reference Facility maintained by the
SEC
at Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549.
You
can receive additional information about the operation of the SEC’s Public
Reference Facilities by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that, like
us,
file information electronically with the SEC.
53
VALIDITY
OF COMMON STOCK
Legal
matters in connection with the validity of the shares offered by this prospectus
will be passed upon by Maslon Edelman Borman & Brand, LLP, Minneapolis,
Minnesota.
EXPERTS
The
consolidated financial statements of ZIOPHARM Oncology, Inc. as of December
31,
2004 and 2003, and for the years then ended and for the period from August
6,
2001 (date of inception) to December 31, 2004, included in this prospectus,
have
been included herein in reliance on the report, dated March 18, 2005, of
Cordovano and Honeck, P.C., independent registered public accounting firm,
given
on the authority of that firm as experts in accounting and
auditing.
The
financial statements of ZIOPHARM, Inc. for the years ended December 31, 2004
and
the period from inception (September 9, 2003) through December 31, 2003 included
in this prospectus have been audited by Vitale, Caturano & Company, Ltd.,
independent registered public accounting firm, as indicated in its report with
respect to such Statements are included herein in reliance upon the authority
of
said firm as experts in auditing and accounting.
54
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
||
|
Audited
Financial Statements of ZIOPHARM, Inc.:
|
||
|
Report
of Vitale, Caturano & Company
|
F-1
|
|
|
Balance
Sheets as at December 31, 2004 and December 31, 2003
|
F-2
|
|
|
Statements
of Operations for the Year Ended December 31, 2004 and For
the Periods
from Inception (September 9, 2003) through December 31, 2003
and 2004
|
F-3
|
|
|
Statements
of Stockholders’ Equity (Deficit) for the Year Ended December 31, 2004 and
For the Periods from Inception (September 9, 2003) through
December 31,
2003 and 2004
|
F-4
|
|
|
Statements
of Cash Flows for the Year Ended December 31, 2004 and For
the Periods
from Inception (September 9, 2003) through December 31, 2003
and 2004
|
F-5
|
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
|
Audited
Financial Statements of EasyWeb, Inc.:
|
||
|
Report
of Cordovano and Honeck, P.C.
|
F-21
|
|
|
Balance
Sheets as of December 31, 2004
|
F-22
|
|
|
Statements
of Operations for the Year Ended December 31, 2004, and December
31,
2003
|
F-23
|
|
|
Statement
of Stockholders’ Deficit for the Year Ended December 31,
2004
|
F-24
|
|
|
Statement
of Cash Flows for the Years Ended December 31, 2004, and December
31,
2003
|
F-25
|
|
|
Notes
to Financial Statements
|
F-26
|
|
|
Unaudited
Interim Financial Statements of EasyWeb, Inc.:
|
||
|
Condensed
Balance Sheets as of June 30, 2005
|
F-34
|
|
|
Condensed
Statements of Operations for the Three and the Six Months Ended
June 30,
2005
|
F-35
|
|
|
Condensed
Statement of Stockholders’ Deficit for the Six Months Ended June 30,
2005
|
F-36
|
|
|
Condensed
Statement of Cash Flows for the Six Months Ended June 30,
2005
|
F-37
|
|
|
Notes
to Condensed Financial Statements
|
F-38
|
|
|
Unaudited
Interim Financial Statements of ZIOPHARM, Inc.:
|
||
|
Balance
Sheets as of June 30, 2005
|
F-43
|
|
|
Statements
of Operations for the Three and the Six Months Ended June 30,
2005 and
2004
|
F-44
|
|
|
Statement
of Cash Flows for the Six Months Ended June 30, 2005 and
2004
|
F-45
|
|
|
Statement
of Changes in Convertible Preferred Stock and Stockholders’ Equity
(Deficit) for the Six Months Ended June 30, 2005
|
F-46
|
|
|
Notes
to Condensed Financial Statements
|
F-47
|
|
|
Unaudited
Pro Forma Combined Financial Statements of ZIOPHARM
Oncology,
Inc.:
|
||
|
Pro
Forma Combined Balance Sheet as at June 30, 2005
|
F-55
|
|
|
Pro
Forma Combined Statement of Operations Six Months ended June
30,
2005
|
F-56
|
|
|
Notes
to Unaudited Pro Forma Combined Financial Statements
|
F-57
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
ZIOPHARM,
Inc.
Charlestown,
Massachusetts
We
have
audited the accompanying balance sheets of ZIOPHARM, Inc. (a development
stage
enterprise) as of December 31, 2004 and 2003, and the related statements
of
operations, changes in stockholders’ equity (deficit), and cash flows for the
year ended December 31, 2004 and the periods from inception (September 9,
2003)
through December 31, 2003 and 2004. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but
not
for expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the
accounting principles used and significant estimates made by management,
as well
as evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of ZIOPHARM, Inc. as of December
31,
2004, and the results of its operations and its cash flows for the year ended
December 31, 2004 and for the periods from inception (September 9, 2003)
through
December 31, 2003 and 2004, in conformity with accounting principles generally
accepted in the United States of America.
Boston,
Massachusetts
August
5,
2005
(except
for Note 10, as to which the date is
September 13, 2005)
F-1
|
ZIOPHARM,
Inc.
|
||
|
(A
Development Stage Enterprise)
|
||
|
Balance
Sheets
|
||
|
December
31, 2004 and 2003
|
||
|
|
|
|
|
2004
|
2003
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
1,026,656
|
$
|
402,363
|
|||
|
Prepaid
expenses and other current assets
|
117,571
|
—
|
|||||
|
Total
current assets
|
1,144,227
|
402,363
|
|||||
|
Property
and equipment, net
|
240,733
|
—
|
|||||
|
Deposits
|
60,046
|
—
|
|||||
|
$
|
1,445,006
|
$
|
402,363
|
||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
709,947
|
$
|
62,499
|
|||
|
Accrued
expenses
|
879,376
|
—
|
|||||
|
Total
current liabilities
|
1,589,323
|
62,499
|
|||||
|
Commitments
and contingencies
|
|||||||
|
Stockholders'
equity (deficit):
|
|||||||
|
Series
A convertible preferred stock,
|
|||||||
|
$.001
par value; 20,000,000 shares authorized; no
|
|||||||
|
shares
issued and outstanding at December 31, 2004
|
|||||||
|
and
December 31, 2003, respectively
|
—
|
—
|
|||||
|
Common
stock, $.001 par value; 30,000,000 shares
authorized;
|
|||||||
|
5,512,500
and 500,000 shares issued and outstanding
|
|||||||
|
at
December 31, 2004 and December 31, 2003, respectively
|
5,513
|
500
|
|||||
|
Additional
paid-in capital
|
5,697,603
|
499,500
|
|||||
|
Deficit
accumulated during the development stage
|
(5,847,433
|
)
|
(160,136
|
)
|
|||
|
Total
stockholders' equity (deficit)
|
(144,317
|
)
|
339,864
|
||||
|
$
|
1,445,006 |
$
|
402,363 | ||||
The
accompanying notes are an integral part of these financial
statements.
F-2
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Operations
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through December
31, 2003
and 2004
|
|||
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Research
contract revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Operating
expenses:
|
||||||||||
|
Research
and development, including
|
||||||||||
|
costs
of research contracts
|
2,126,607
|
—
|
2,126,607
|
|||||||
|
General
and administrative
|
3,581,959
|
160,634
|
3,742,593
|
|||||||
|
Total
operating expenses
|
5,708,566
|
160,634
|
5,869,200
|
|||||||
|
Loss
from operations
|
(5,708,566
|
)
|
(160,634
|
)
|
(5,869,200
|
)
|
||||
|
Interest
income
|
21,269
|
498
|
21,767
|
|||||||
|
Net
loss
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
$
|
(5,847,433
|
)
|
|
|
Basic
and diluted net loss per share
|
$
|
(1.19
|
)
|
$
|
(1.02
|
)
|
||||
|
Weighted
average common shares outstanding
|
||||||||||
|
used
to compute basic and diluted net loss per share
|
4,794,692
|
156,336
|
||||||||
The
accompanying notes are an integral part of these financial
statements.
F-3
|
ZIOPHARM,
Inc.
|
|||||||
|
(A
Development Stage Enterprise)
|
|||||||
|
Statements
of Changes in Stockholders' Equity (Deficit)
|
|||||||
|
Year
Ended December 31, 2004 and
|
|||||||
|
For
the Periods from Inception (September 9, 2003) through December
31, 2003
and 2004
|
|||||||
|
|
|
Deficit
|
||||||||||||||||||||||
|
Series
A
|
Accumulated
|
Total
|
||||||||||||||||||||
|
Convertible
|
Additional
|
during
the
|
Stockholders'
|
|||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Development
|
Equity
|
||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||
|
Stockholders'
contribution, September 9, 2003
|
—
|
$
|
—
|
500,000
|
$
|
500
|
$
|
499,500
|
$
|
—
|
$
|
500,000
|
||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(160,136
|
)
|
(160,136
|
)
|
|||||||||||||
|
Balance
at December 31, 2003
|
—
|
—
|
500,000
|
500
|
499,500
|
(160,136
|
)
|
339,864
|
||||||||||||||
|
Issuance
of common stock
|
—
|
—
|
4,500,000
|
4,500
|
4,495,500
|
—
|
4,500,000
|
|||||||||||||||
|
Issuance
of common stock for services
|
—
|
—
|
512,500
|
513
|
438,326
|
—
|
438,839
|
|||||||||||||||
|
Fair
value of options/warrants issued for nonemployee services
|
—
|
—
|
—
|
—
|
264,277
|
—
|
264,277
|
|||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(5,687,297
|
)
|
(5,687,297
|
)
|
|||||||||||||
|
Balance
at December 31, 2004
|
—
|
$
|
—
|
5,512,500
|
$
|
5,513
|
$
|
5,697,603
|
$
|
(5,847,433
|
)
|
$
|
(144,317
|
)
|
||||||||
The
accompanying notes are an integral part of these financial
statements.
F-4
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Cash Flows
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through
December 31, 2003
and 2004
|
|||
|
|
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
$
|
(5,847,433
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
|
used
in operating activities:
|
||||||||||
|
Depreciation
and amortization
|
33,953
|
—
|
33,953
|
|||||||
|
Stock-based
compensation
|
703,116
|
—
|
703,116
|
|||||||
|
Change
in operating assets and liabilities:
|
||||||||||
|
(Increase)
in:
|
||||||||||
|
Prepaid
expenses and other current assets
|
(117,571
|
)
|
—
|
(117,571
|
)
|
|||||
|
Increase
(decrease) in:
|
||||||||||
|
Accounts
payable
|
647,448
|
62,499
|
709,947
|
|||||||
|
Accrued
expenses
|
879,376
|
—
|
879,376
|
|||||||
|
Deposits
|
(60,046
|
)
|
—
|
(60,046
|
)
|
|||||
|
Net
cash used in operating activates
|
(3,601,021
|
)
|
(97,637
|
)
|
(3,698,658
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
Purchases
of property and equipment
|
(274,686
|
)
|
—
|
(274,686
|
)
|
|||||
|
Net
cash used in investing activities
|
(274,686
|
)
|
—
|
(274,686
|
)
|
|||||
|
Cash
flows from financing activities:
|
||||||||||
|
Stockholders'
capital contribution
|
—
|
500,000
|
500,000
|
|||||||
|
Proceeds
from issuance of common stock
|
4,500,000
|
—
|
4,500,000
|
|||||||
|
Net
cash provided by financing activities
|
4,500,000
|
500,000
|
5,000,000
|
|||||||
|
Net
increase in cash and cash equivalents
|
624,293
|
402,363
|
1,026,656
|
|||||||
|
Cash
and cash equivalents, beginning of period
|
402,363
|
—
|
—
|
|||||||
|
Cash
and cash equivalents, end of period
|
$
|
1,026,656
|
$
|
402,363
|
$
|
1,026,656
|
||||
The
accompanying notes are an integral part of
these financial statements.
F-5
|
ZIOPHARM,
Inc.
|
|||
|
(A
Development Stage Enterprise)
|
|||
|
Statements
of Cash Flows…continued
|
|||
|
Year
Ended December 31, 2004 and
|
|||
|
For
the Periods from Inception (September 9, 2003) through
December 31, 2003
and 2004
|
|||
|
|
|
For
the Period
|
For
the Period
|
|||||||||
|
from
Inception
|
from
Inception
|
|||||||||
|
(September
9, 2003)
|
(September
9, 2003)
|
|||||||||
|
Year
Ended
|
through
|
through
|
||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||
|
2004
|
2003
|
2004
|
||||||||
|
Supplementary
disclosure of cash flow information:
|
||||||||||
|
Cash
paid for interest
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Cash
paid for income taxes
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
The
accompanying notes are an integral part of
these financial statements.
F-6
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
1. ORGANIZATION
ZIOPHARM,
Inc. (the “Company”) is a development stage biopharmaceutical company that
seeks
to
acquire,
develop and
commercialize, on
its
own or with other commercial partners, products for the treatment of
important
unmet medical needs in cancer.
The
Company has operated at a loss since its inception in 2003 and has no revenues.
The Company anticipates that losses may continue for the foreseeable future.
At
December 31, 2004, the Company’s accumulated deficit was approximately $5.8
million. The Company’s ability to continue operations after its current cash
resources are exhausted depends on its ability to obtain additional financing
and achieve profitable operations, as to which no assurances can be given.
Cash
requirements may vary materially from those now planned because of changes
in
the focus and direction of our research and development programs, competitive
and technical advances, patent developments or other developments. Additional
financing will be required to continue operations after we exhaust our current
cash resources and to continue our long-term plans for clinical trials and
new
product development.
On
June
6, 2005, the Company completed an offering of Series A Convertible Preferred
Stock (Series A Stock) offering. The Company issued 8,379,564 shares at $2.16
per share for gross proceeds of approximately $18.1 million. In
connection with the Series A Preferred Stock Offering, the Company compensated
Paramount, an affiliate for its services in connection with the Offering
through the payment of (a) cash commissions equal to 7% of the gross proceeds
from the sale of the shares of Series A Preferred Stock, and
(b)
placement warrants to acquire 837,956 shares of Series A Preferred Stock
(the
Series A Stock Warrants), exercisable for a period of 7 years from the Closing
Date at a per Share exercise price equal to 110% of the price per Share sold
in
the Offering. These commissions are also payable on additional sales by the
Company of securities (other than in a public offering) to investors introduced
to the Company by Paramount during the twelve (12) month period subsequent
to
the final closing of the Offering. The Company also paid Paramount an expense
allowance of $50,000 to reimburse Paramount for its out-of-pocket expenses
(the
“Expense Allowance”). Also, for a period of 36 months from the final Closing,
Paramount has the right of first refusal to act as the placement agent for
any
private sale of the Company’s securities. Lastly, the Company has agreed to
indemnify Paramount against certain liabilities, including liabilities under
the
Securities Act. The
net
proceeds were $16.8 million have been allocated between the Series A Stock
and
the Series A Stock warrants, based on their relative fair value. The Company
has
valued the warrants using the Black-Scholes model recording a cost of
$1,682,683. The
net
proceeds from the Offering will be used for research and development, licensing
fees and expenses, and for working capital and general corporate
purposes.
None
of the share or per share data included herein
have been adjusted to effect for the conversions effected as part of the
merger
(see Note 10).
F-7
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Use
of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
and Cash Equivalents
Cash
equivalents consist
of short-term, highly liquid investments with a maturity of three months
or less
when purchased.
Concentrations
of Credit Risk
Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents. The Company maintains
cash accounts in commercial banks, which may, at times, exceed federally
insured
limits. The Company has not experienced any losses in such accounts. The
Company
believes it is not exposed to any significant credit risk on cash and cash
equivalents.
Fair
Value of Financial Instruments
The
carrying amounts of cash equivalents, accounts payable and accrued expenses
approximate their fair value because of their short-term nature. Short-term
investments are carried at aggregate fair value. At December 31, 2004 and
2003,
there were no short-term investments.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the Company’s financial
statements or tax returns. Deferred tax assets and liabilities are determined
based upon the difference between the financial reporting basis and the tax
basis of existing assets and liabilities using enacted tax rates expected
to be
in effect in the year(s) in which the differences are expected to reverse.
A
valuation allowance is provided against deferred tax assets if it is more
likely
than not that such assets will not be realized.
Property
and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are provided
on
the straight-line method over the estimated useful lives of the related assets,
which is three years.
F-8
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES…continued
|
Research
and Development Costs
Costs
related to research and development are charged to expense when incurred.
Such
costs include proprietary research and development activities and expenses
associated with research and development contracts, whether performed by
the
Company or contracted with independent third parties.
Accounting
for Stock-Based Compensation
The
Company accounts for stock-based awards to employees using the intrinsic
value
method as prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting
for Stock Issued to Employees,
and
related interpretations. The Company follows the provisions of SFAS
No. 123, Accounting
for Stock-Based Compensation,
for
disclosure purposes (Note 9). All stock-based awards to nonemployees
are
accounted for at their fair value in accordance with SFAS No. 123
and
Emerging Issues Task Force (EITF) 96-18, Accounting
for Equity Instruments that are Issued to Other than Employees for Acquiring,
or
in Conjunction with Selling, Goods or Services.
The
Company has adopted the disclosure provisions of SFAS No. 148, Accounting
for Stock-Based Compensation – Transition
and
Disclosure – an amendment of SFAS No. 123,
for all
stock-based awards as of December 31, 2004.
The
following illustrates the effect on net loss had the Company applied the
fair
value recognition provisions of SFAS No. 123:
|
2004
|
2003
|
||||||
|
Net
loss:
|
|||||||
|
As
reported
|
$
|
(5,687,297
|
)
|
$
|
(160,136
|
)
|
|
|
Stock-based
compensation expense included in reported net loss
|
703,116
|
—
|
|||||
|
Stock-based
compensation expense under the fair value-based method
|
(813,095
|
)
|
—
|
||||
|
Pro
forma net loss
|
$
|
(5,797,276
|
)
|
$
|
(160,136
|
)
|
|
|
Basic
and diluted net loss per share:
|
|||||||
|
As
reported
|
$
|
(1.19
|
)
|
$
|
(1.02
|
)
|
|
|
Pro
forma
|
$
|
(1.21
|
)
|
$
|
(1.02
|
)
|
|
F-9
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES…continued
|
Accounting
for Stock-Based Compensation...continued
The
fair
value of each stock option is estimated at the date of grant using the
Black-Scholes option pricing model. The estimated weighted average fair value
of
stock options granted to employees in 2004 was approximately $0.66 per share.
The following table summarizes the assumptions used in the Black-Scholes
option
pricing model:
|
2004
|
2003
|
||
|
Expected
life
|
5
years
|
—
|
|
|
Expected
volatility
|
134%
|
—
|
|
|
Dividend
yield
|
3.6%
|
—
|
|
|
Weighted
average risk-free interest rate
|
0
%
|
—
|
Recently
Issued Pronouncements
In
December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123R, Share-Based Payment
("SFAS
No. 123R"). This Statement is a revision of SFAS No. 123, Accounting for
Stock-Based Compensation, and supersedes Accounting Principles Board Opinion
No.
25, Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS No. 123R focuses primarily on accounting for transactions
in
which an entity obtains employee services in share-based payment transactions.
The Statement requires entities to recognize stock compensation expense for
awards of equity instruments to employees based on the grant-date fair value
of
those awards (with limited exceptions). SFAS No. 123R is effective for the
first
fiscal year beginning after December 15, 2005. Based on current options
outstanding, the Company anticipates the adoption of this statement to result
in
approximately $313,009 of additional compensation costs to be recognized
in the
year of adoption.
|
3.
|
PROPERTY
AND EQUIPMENT
|
Property
and equipment at December 31, 2004 and 2003 consisted of the
following:
|
Estimated
|
||||||||||
|
Useful
Life
|
|
|||||||||
|
(Years)
|
2004
|
2003
|
||||||||
|
Computer
equipment
|
3
|
$
|
78,914
|
$
|
—
|
|||||
|
Office
equipment
|
3
|
|
179,193
|
—
|
||||||
|
Software
|
3
|
16,579
|
—
|
|||||||
|
274,686
|
—
|
|||||||||
|
Less
- accumulated depreciation and amortization
|
|
33,953
|
—
|
|||||||
|
$
|
240,733
|
$
|
—
|
|||||||
F-10
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
3.
|
PROPERTY
AND EQUIPMENT...continued
|
Depreciation
and amortization expense was $33,953 and $0 for the year ended December 31,
2004
and for the period from inception (September 9, 2003) to December 31, 2003,
respectively.
|
4.
|
ACCRUED
EXPENSES
|
Accrued
expenses at December 31, 2004 and December 31, 2003, consisted of the
following:
|
2004
|
2003
|
||||||
|
Employee
compensation
|
$
|
506,391
|
$
|
—
|
|||
|
Professional
services
|
42,767
|
—
|
|||||
|
Research
and development consulting services
|
258,218
|
—
|
|||||
|
Founders
Fee
|
60,000
|
—
|
|||||
|
Other
|
12,000
|
—
|
|||||
|
$
|
879,376
|
$
|
—
|
||||
|
5.
|
RELATED
PARTY TRANSACTIONS
|
The
Company has engaged Paramount
BioCapital, Inc.
(“Paramount”)
to
assist in placing shares of Series A Preferred Stock on a “best efforts” basis
(see Note 10). Lindsay A. Rosenwald, M.D. is Chairman and Chief Executive
Officer of Paramount. Dr.
Rosenwald is also managing member of Horizon BioMedical Ventures, LLC
(“Horizon”). On December 30, 2004, Horizon authorized the distribution of
4,848,376 shares of Common Stock (such shares, the “Horizon Distributed
Shares”), in equal installments of 2,424,188 shares of Common Stock to Mibars,
LLC (“Mibars”) and to Dr. Rosenwald and his designees (the “Designated Shares”).
The disposition of the Designated Shares will be subject to certain restrictions
as agreed to among Dr. Rosenwald and Dr. Rosenwald’s designees. Among other
things, under certain circumstances set forth in pledge agreements between
Dr.
Rosenwald and his designees, Dr. Rosenwald has the right to re-acquire the
Designated Shares from his designees. As a result of those rights, Dr. Rosenwald
may be deemed to be an affiliate of the Company.
In
connection with the December 22, 2004 Option Agreement with Southern Research
Institute (“SRI”), the Company entered into a Finders Agreement, dated December
23, 2004, with Paramount pursuant to which the Company has agreed to compensate
Paramount,
for
services in connection with the Company’s introduction to SRI through the
payment of (a) a cash fee of $60,000 and (b) warrants to purchase 125,000
shares
of the Company’s Common Stock at a price equal to $2.38 per share. The Company
has estimated the fair value of such warrants using the Black-Scholes model,
using an assumed risk-free rate of 3.93%, and expected life of 7 years,
volatility of 134% and dividend yield of 0%. In December 2004, the Company
expensed the $60,000 that was payable to Paramount and recognized compensation
expense in the amount of $251,037 for the issuance of the warrants.
F-11
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
5.
|
RELATED
PARTY TRANSACTIONS...continued
|
In
connection with the Series A Preferred Stock Offering (see Note 10), the
Company
and Paramount
entered
into an Introduction Agreement in January 2005 (the “Introduction Agreement”),
pursuant to which the Company has agreed to compensate Paramount for its
services in connection with the Offering through the payment of (a) cash
commissions equal to 7% of the gross proceeds from the sale of the shares
of
Series A Preferred Stock, and
(b)
placement warrants to acquire a number of shares of Series A Preferred Stock
equal to 10% of the number of shares of Series A Preferred Stock issued in
the
Offering, exercisable for a period of 7 years from the Closing Date at a
per
Share exercise price equal to 110% of the price per Share sold in the Offering.
These commissions are also payable on additional sales by the Company of
securities (other than in a public offering) to investors introduced to the
Company by Paramount
during
the twelve (12) month period subsequent to the final closing of the Offering.
The Company also agreed to pay to Paramount a
non-accountable expense allowance of $50,000 to reimburse the Paramount for
its
out-of-pocket expenses (the “Expense Allowance”). Also, for a period of 36
months from the final Closing, Paramount has
the
right of first refusal to act as the placement agent for the private sale
of the
Company’s securities. Lastly, the Company has agreed to indemnify Paramount against
certain liabilities, including liabilities under the Securities Act.
Dr.
Michael Weiser, who is a member of the Board of Directors of the Company,
is
also a full-time employee
of
Paramount.
In
addition, David M. Tanen, who is a member of the Board of Directors of the
Company, was a full-time employee of Paramount from
July
1996 through August 2004. Mr. John Knox, our treasurer, is a full time Paramount
employee.
|
6.
|
COMMITMENTS
AND CONTINGENCIES
|
Lease
Commitment
The
Company leases office space in two locations under agreements expiring in
2009.
The leases includes payment increases over the term of the agreements. The
total
amount of the lease payments is being charged to expense using the straight-line
method over the term of the agreement.
Future
minimum lease payments under noncancelable operating and capital leases as
of
December 31, 2004, were as follows:
|
Operating
|
||||
|
Leases
|
||||
|
2005
|
$
|
93,318
|
||
|
2006
|
103,434
|
|||
|
2007
|
114,103
|
|||
|
2008
|
121,455
|
|||
|
2009
|
87,699
|
|||
|
$
|
520,009
|
|||
F-12
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES...continued
|
License
Agreement
Patent
and Technology License Agreement- University of Texas M. D. Anderson Cancer
Center and the Texas A&M University System.
On
August
24, 2004, the Company entered into a patent and technology license agreement
with The Board of Regents of the University of Texas System, acting on behalf
of
the University of Texas M. D. Anderson Cancer Center and the Texas A&M
University System (collectively, the “Licensors”). Under this agreement, the
Company was granted an exclusive, worldwide license to rights (including
rights
to US and foreign patent and patent applications and related improvements
and
know-how) for the manufacture and commercialization of two classes of organic
arsenicals (water - and lipid-based) for human and animal use. The class
of
water-based organic arsenicals includes ZIO-101.
In
October 2004, the Company received a notice of allowance for US Patent
Application No. 10/337969, entitled “S-dimethylarsino-thiosuccinic acid
S-dimethylarsino-2-thiobenzoic acid S-(simethylarsino) glutathione as treatments
for cancer.” The patent application claims both therapeutic uses and
pharmaceutical compositions containing a novel class of organic arsenicals,
including ZIO-101, for the treatment of cancer.
As
partial consideration for the license rights obtained, the Company made an
upfront payment of $125,000 and granted the Licensors 500,000 shares of our
Common Stock, as well as options to purchase up to an additional 100,250
shares
of our Common Stock for $0.001 per share, following the successful completion
of
certain clinical milestones (the “Anderson Options”). The Company expensed the
$125,000 upfront payment and recognized research and development compensation
expense of $426,339 in connection with the issuance of the Common Stock in
the
year ended December 31, 2004. The Anderson Options will vest and become
immediately exercisable with respect to 25,063 shares of our Common Stock
upon
the filing of an Investigational New Drug Application (“IND”) for ZIO-101, will
vest and become exercisable with respect to an additional 50,125 shares upon
the
completion of dosing of the last patient for both Phase I clinical trials,
and
will vest and become exercisable with respect to an additional 25,062 shares
upon the commencement of a pivotal clinical trial. In addition, the Licensors
are entitled to receive certain milestone payments (the “Anderson Milestones”),
including $100,000 to be paid upon the commencement of phase I clinical trial.
The Company may be required to make additional payments upon achievement
of
certain other milestones, in varying amounts which on a cumulative basis
may
total $4,850,000. In addition, the Licensors are entitled to receive royalty
payments on sales from a licensed product should such a product be approved
for
commercial sale and sales of a licensed product be effected in the United
States, Canada, the European Union or Japan. The Licensors also will be entitled
to receive a portion of any fees that the Company may receive from a possible
sublicensee. Finally, the Company agreed to remit to the Licensors $100,000
for
at least each of the next two years to be used by the Licensors to conduct
scientific research funding. The Company will have the exclusive right to
all
intellectual property rights resulting from such research pursuant to the
terms
of the license agreement.
F-13
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES...continued
|
License
Agreement...continued
The
license agreement also contains other provisions customary and common in
similar
agreements within the industry, such as the right to sublicense our rights
under
the agreement. However, if we sublicense our rights prior to the commencement
of
a pivotal study (i.e.,
a human
clinical trial intended to provide the substantial evidence of efficacy
necessary to support the filing of an approvable NDA), the Licensors will
be
entitled to receive a share of the payments we receive in exchange for the
sublicense (subject to certain exceptions).
License
Agreement with DEKK-TEC, Inc.
On
October 15, 2004, the Company entered into a license agreement with DEKK-TEC,
Inc., pursuant to which it was granted an exclusive, worldwide license to
the
second lead product candidate, ZIO-201. As part of the signing of license
agreement with DEKK-TEC, the Company expensed a $50,000 up-front payment
in the
year ended December 31, 2004.
In
consideration for our license rights, DEKK-TEC is entitled to receive milestone
payments upon the occurrence of certain events. In consideration for our
license
rights, DEKK-TEC is entitled to receive milestone payments upon the occurrence
of certain events. The Company may be required to make payments upon
achievements of certain milestones, in varying amounts which on a cumulative
basis may total $3,900,000. Of the aggregate milestone payments, most of
the
total amount will be creditable against future royalty payments, as referenced
below. The Company also issued DEKK-TEC an option to purchase 55,125 shares
of
our Common Stock for $0.01 per share, which option vested with respect to
13,781
shares upon the execution of the license agreement. The
Company has estimated the fair value of such options using the Black-Scholes
model, using an assumed risk-free rate of 3.35%, and expected life of 5 years,
volatility of 134% and dividend yield of 0%. The
Company recorded a charge of $12,190 to research and development expense
for the
vested options. The option will vest with respect to the remaining shares
upon
certain milestone events, culminating with final FDA approval of the first
NDA
submitted by us (or by our sublicensee) for ZIO-201. Finally, DEKK-TEC also
is
entitled to receive royalty payments on the sales of ZIO-201 should it be
approved for commercial sale.
The
license agreement also contains other provisions customary and common in
similar
agreements within the industry.
Option
Agreement with Southern Research Institute (“SRI”)
On
December 22, 2004, the Company entered into an Option Agreement with SRI
(the
“Option Agreement”), pursuant to which the Company was granted an exclusive
option to obtain an exclusive license to SRI’s interest in certain intellectual
property, including exclusive rights related to certain isophosphoramide
mustard
analogs (the “SRI Option”).
F-14
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
6.
|
COMMITMENTS
AND CONTINGENCIES...continued
|
Option
Agreement with Southern Research Institute (“SRI”)...continued
Also
on
December 22, 2004, the Company entered into a Research Agreement with SRI
pursuant to which the Company agreed to spend a sum not to exceed $200,000
between the execution of the agreement and December 21, 2006, including a
$25,000 payment that we made simultaneously with the execution of the agreement,
to fund research and development work by SRI
in
the field of isophosphoramide mustard analogs (the “SRI Research Program”).
Under the terms of the Option Agreement, the Company’s exclusive right to
exercise the SRI Option will expire sixty days after the termination or
expiration of the SRI Research Program and the delivery of the reports required
thereunder.
Guarantees
and indemnification Obligations
Certain
officers and employees have agreements with the company that call for a
guarantee bonus that is payable 30 days after employee’s anniversary date.
Certain officer and employees also have specific severance agreements.
|
7.
|
INCOME
TAXES
|
The
components of the net deferred tax asset (liability) are as
follows:
|
December
31,
|
December
31,
|
||||||
|
2004
|
2003
|
||||||
|
Net
operating loss carryforwards
|
$
|
494,881
|
$
|
26,118
|
|||
|
Start-up
and organizational costs
|
1,502,217
|
—
|
|||||
|
Research
and development credit carryforwards
|
81,670
|
—
|
|||||
|
Accrued
bonus
|
200,343
|
—
|
|||||
|
Depreciation
|
(4,102
|
)
|
—
|
||||
|
Other
|
8,816
|
—
|
|||||
|
Net
deferred tax assets
|
2,283,825
|
26,118
|
|||||
|
Deferred
tax asset valuation allowance
|
(2,283,825
|
)
|
(26,118
|
)
|
|||
|
|
$ |
—
|
$
|
—
|
|||
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
|
We
have
authorized capital of 50,000,000 shares, of which 30,000,000 shares have
been
designated as common stock, par value $.001 per share (the “Common Stock”), and
20,000,000 shares have been designated as preferred stock, par value $.001
per
share.
F-15
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY...continued
|
Convertible
Preferred Stock
Voting
Rights
The
holders of Series A Preferred Stock will be entitled to vote together with
all
other holders of the Company’s voting stock on an “as-converted” basis on all
matters submitted to a vote of holders generally. The holders of Series A
Preferred Stock, voting as a separate class, will also have the right to
approve
by a 66% supermajority certain actions proposed to be taken by the
Company.
Dividend
Rights
The
holders of Series A Preferred Stock will be entitled to receive dividends
on an
equal basis with the holders of Common Stock when, as and if declared by
the
Board of Directors.
Liquidation
Preferences
The
Series A Preferred Stock shall rank senior to the Common Stock and any future
class of junior securities, and will be entitled to a liquidation
preference equal
to
the Stated Value, subject to adjustment (as defined in the Certificate of
Designations),
upon any
liquidation, dissolution or winding up of the Company
or upon
a voluntary or involuntary bankruptcy of the Company.
Conversion
Rights
Each
share of Series A Preferred Stock will be convertible into Common Stock at
any
time at the option of the holder thereof (the Series A Preferred Stock and
the
Common Stock issuable upon conversion of the Series A Preferred Stock are
sometimes herein collectively referred to as the “Securities”). All of the
outstanding shares of Series A Preferred Stock will automatically convert
into
Common Stock upon the first date (the “Trading Date”) on which the Common Stock
(or securities received in exchange for Common Stock) trades on a national
securities exchange or on NASDAQ, including the Over the Counter Bulletin
Board
(a “Trading Event”). The rate at which shares of Series A Preferred Stock will
convert into Common Stock will initially be one-for-one, subject to adjustment
in connection with certain anti-dilution protections and other
adjustments.
F-16
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
8.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY...continued
|
Convertible
Preferred Stock...continued
Conversion
Rights...continued
In
the
event of a reclassification, capital reorganization or other similar change
in
the outstanding shares of Common Stock,
a
consolidation or merger of the Company with or into another entity (other
than a
consolidation or merger in which the Corporation is the continuing entity
and
which does not result in a reclassification, capital reorganization or other
change of outstanding shares of Common Stock other than the number thereof),
or
a sale of the property of the Company as, or substantially as, an entirety
(other than a sale/leaseback, mortgage or other financing transaction), the
Series A Preferred Stock will become convertible into the kind and
number
of shares of stock or other securities or property (including cash) that
the
holders of Series A Preferred Stock would have received if the Series A
Preferred Stock had been converted into Common Stock immediately prior to
such
reclassification, capital reorganization or other change, consolidation,
merger
or sale.
Common
Stock
We
currently have issued and outstanding 5,512,500 shares of Common Stock and
no
shares of preferred stock.
In
September 2003, the Company issued 2,000,000 (before the split discussed
below)
shares of Common Stock at $0.25 per share for gross proceeds of
$500,000.
In
January 2004, the Company issued 18,000,000 (before the split discussed below)
shares of Common Stock at $0.25 per share for gross proceeds of
$4,500,000.
In
February 2004, the Company amended its articles of incorporation to provide
for
the combination of the Company’s common stock, par value $0.001 per share on a
1-for-4 basis (all other share amounts presented reflect the reverse
split).
F-17
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
|
9.
|
STOCK
OPTION PLAN
|
We
have
adopted the 2003 Stock Option Plan (the “Plan”), under which we have reserved
for the issuance of 2,500,000 shares of our Common Stock. The Plan was approved
by our stockholders on December 21, 2004. The Company has issued under its
2003
Stock Option Plan 1,170,826 shares that are issuable upon exercise of
outstanding options to purchase Common Stock. To date, we have issued to
our
employees options to purchase up to 990,326 shares of the Company’s Common
Stock. In addition, we have issued to our directors options to purchase up
to
180,000 shares of the Company’s Common Stock, as well as options to a consultant
in connection with services rendered to purchase up to 500 shares of the
Company’s Common Stock. The Company has estimated the fair value of such options
using the Black-Scholes model, using an assumed risk-free rate of 4.23%,
and
expected life of 10 years, volatility of 134% and dividend yield of 0%. The
options issued to the consultant were valued at $1,050, and recorded as a
charge
to compensation expense. We have also reserved an aggregate of 155,375
additional shares for issuance under options granted outside of the 2003
Stock
Option Plan and warrants to purchase 125,000 shares of the Company’s Common
Stock to the Paramount as compensation for services rendered in connection
with
our entering into an option agreement with Southern Research Institute. In
connection with the warrants issued, the Company recorded a charge of $251,037
to general and administrative expense. The Company has valued the options
using
the Black-Scholes model as of the issue date of the warrants. There are no
other
securities of the Company currently issued or outstanding.
Transactions
under the Plan for the year December 31, 2004 were as follows:
|
|
Weighted-
|
||||||
|
|
Average
|
||||||
|
Number
of
|
Exercise
|
||||||
|
Shares
|
Price
|
||||||
|
Outstanding,
January 1, 2004
|
—
|
$
|
—
|
||||
|
Granted
|
1,170,826
|
0.63
|
|||||
|
Exercised
|
—
|
—
|
|||||
|
Canceled
|
—
|
—
|
|||||
|
Outstanding,
December 31, 2004
|
1,170,826
|
$
|
0.63
|
||||
|
Options
available for future grants
|
1,329,174
|
||||||
F-18
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
9. STOCK
OPTION PLAN…continued
The
following table summarizes information about stock options outstanding at
December 31, 2004:
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
|
Exercise
Price
|
Number
Outstanding
|
Weighted-
Average
Remaining
Contractual
Life
(Years)
|
Weighted-
Average
Exercise
Price
|
Number
Exercisable
|
Weighted-
Average
Exercise
Price
|
|||||||||||
|
$0.04
|
536,263
|
9.03
|
$
|
0.04
|
—
|
$
|
—
|
|||||||||
|
$0.22
|
100,250
|
9.08
|
$
|
0.22
|
—
|
$
|
—
|
|||||||||
|
$0.85
|
353,813
|
9.51
|
$
|
0.85
|
—
|
$
|
—
|
|||||||||
|
$2.16
|
180,500
|
9.98
|
$
|
2.16
|
500
|
$
|
2.16
|
|||||||||
|
1,170,826
|
9.33
|
$
|
0.63
|
500
|
$
|
2.16
|
||||||||||
On
August, 3, 2005 the Company entered into an Agreement and Plan of Merger
dated
as of August 3, 2005 (as may be amended from time to time, the “Merger
Agreement”) with EasyWeb, Inc., a Delaware corporation (OTC:ESYW.OB)
(“EasyWeb”), and ZIO Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of EasyWeb (“ZIO Acquisition”). EasyWeb is a company that was
incorporated in September 1998 and has been in the business of designing,
marketing, selling and maintaining customized and template turnkey sites
on the
Internet that are hosted by third parties. Currently, however, EasyWeb has
no
operating business and has limited assets and liabilities. Pursuant to the
Merger Agreement, ZIO Acquisition merged with and into ZIOPHARM, with ZIOPHARM
remaining as the surviving company and a wholly-owned subsidiary of EasyWeb
(the
“Merger”). In connection with the Merger, which was effective as of September
13, 2005, ZIO Acquisition ceased to exist and the surviving company changed
its
corporate name to ZIOPHARM, Inc. In exchange for all of their shares of capital
stock in ZIOPHARM, the Stockholders received a number of shares of Common
Stock
of EasyWeb such that, upon completion of the Merger, the then-current
Stockholders held approximately 96.8% of the outstanding shares of Common
Stock
of EasyWeb on a fully-diluted basis. Upon completion of the Merger, EasyWeb
ceased all of its remaining operations, and adopted and continued implementing
the business plan of ZIOPHARM. Further, upon completion of the Merger, the
current officers and directors of EasyWeb resigned, the current officers
and
directors of ZIOPHARM were appointed officers and directors of EasyWeb, and
EasyWeb changed its name to ZIOPHARM Oncology, Inc. In conjunction with the
Merger, ZIOPHARM made certain payments not to exceed $425,000 to certain
affiliates of EasyWeb.
F-19
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
Year
Ended December 31, 2004 and
For
the
Periods from Inception (September 9, 2003) through December 31, 2003
and 2004
10. SUBSEQUENT
EVENTS…continued
On
June
6, 2005, the Company completed its Series A Convertible Preferred Stock
offering. (see Note 1).
On
May
26, 2005, the Company signed a lease for five years with USP 1180 Avenue
of the
Americas to lease approximately 2,580 square feet of office space.
On
April
25, 2005, the company entered into a Surrender and Termination Agreement
and an
Escrow agreement with WE George Street, L.L.C and Cohm Birnbaum & Shea P.C.
relating to the escrow of a termination fee for $90,000, for an early
termination to the New Haven, Connecticut office space.
F-20
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors and Shareholders:
EasyWeb,
Inc.
We
have
audited the accompanying balance sheet of EasyWeb, Inc. as of December 31,
2004,
and the related statements of operations, shareholders’ deficit and cash flows
for the years ended December 31, 2004 and 2003. These financial statements
are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of EasyWeb, Inc. as of December
31,
2004, and the results of its operations and its cash flows for the years
ended
December 31, 2004 and 2003 in conformity with accounting principles generally
accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company
will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has a net capital deficit at December 31, 2004 and has suffered
significant operating losses since inception. These factors raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s
plans regarding those matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
Cordovano
and Honeck, LLP
Denver,
Colorado
February
19, 2005
F-21
EASYWEB,
INC.
Balance
Sheet
|
Assets
|
||||
|
Current
Assets:
|
||||
|
Cash
|
$
|
21
|
||
|
Liabilities
and Shareholders’ Deficit
|
||||
|
Current
Liabilities:
|
||||
|
Accounts
payable
|
$
|
63
|
||
|
Accrued
liabilities
|
7,385
|
|||
|
Due
to officer (Note 2)
|
1,300
|
|||
|
Due
to affiliate (Note 2)
|
12,298
|
|||
|
Total
current liabilities
|
21,046
|
|||
|
Shareholders’
deficit (Notes 4 and 6):
|
||||
|
Common
stock, no par value; 30,000,000 shares authorized,
|
||||
|
5,746,200
shares issued and outstanding
|
156,050
|
|||
|
Stock
options outstanding
|
20,600
|
|||
|
Additional
paid-in capital
|
87,808
|
|||
|
Retained
deficit
|
(285,483
|
)
|
||
|
Total
shareholders’ deficit
|
(21,025
|
)
|
||
|
$
|
21
|
|||
See
accompanying notes to financial statements
F-22
EASYWEB,
INC.
Statements
of Operations
|
For
the Years Ended
|
|||||||
|
December
31,
|
|||||||
|
2004
|
2003
|
||||||
|
Operating
expenses:
|
|||||||
|
Stock-based
compensation (Note 2):
|
|||||||
|
Director
fees
|
$
|
5,000
|
$
|
—
|
|||
|
Related
party
|
5,000
|
—
|
|||||
|
Contributed
rent (Note 2)
|
6,000
|
6,000
|
|||||
|
Administrative
support
|
173
|
510
|
|||||
|
Contributed
administrative
|
|||||||
|
support
(Note 2)
|
11,827
|
11,490
|
|||||
|
Professional
fees
|
8,535
|
12,812
|
|||||
|
Web
site consulting and maintenance
|
150
|
120
|
|||||
|
Dues
and subscriptions
|
1,200
|
2,975
|
|||||
|
Depreciation
and amortization
|
—
|
486
|
|||||
|
Other
|
1,281
|
1,449
|
|||||
|
Total
operating expenses
|
39,166
|
35,842
|
|||||
|
Loss
before income taxes
|
(39,166
|
)
|
(35,842
|
)
|
|||
|
Income
tax provision (Note 3)
|
—
|
—
|
|||||
|
Net
loss
|
$
|
(39,166
|
)
|
$
|
(35,842
|
)
|
|
|
Basic
and diluted loss per share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
Basic
and diluted weighted average
|
|||||||
|
common
shares outstanding
|
5,439,533
|
4,672,867
|
|||||
See
accompanying notes to financial
statements
F-23
EASYWEB,
INC.
Statement
of Changes in Shareholders' Deficit
|
Outstanding
|
Additional
|
||||||||||||||||||
|
Common
Stock
|
Stock
|
Paid-In
|
Retained
|
||||||||||||||||
|
Shares
|
Amount
|
Options
|
Capital
|
Deficit
|
Total
|
||||||||||||||
|
Balance
at January 1, 2003
|
4,506,200
|
$
|
120,050
|
$
|
20,600
|
$
|
52,491
|
$
|
(210,475
|
)
|
$
|
(17,334
|
)
|
||||||
|
March
2003, sale of common stock
|
|||||||||||||||||||
|
($.05/share)
(Note 4)
|
200,000
|
10,000
|
—
|
—
|
—
|
10,000
|
|||||||||||||
|
Office
space and administrative support
|
|||||||||||||||||||
|
contributed
by an affiliate (Note 2)
|
—
|
—
|
—
|
17,490
|
—
|
17,490
|
|||||||||||||
|
Net
loss, year ended December 31, 2003
|
—
|
—
|
—
|
—
|
(35,842
|
)
|
(35,842
|
)
|
|||||||||||
|
Balance
at December 31, 2003
|
4,706,200
|
130,050
|
20,600
|
69,981
|
(246,317
|
)
|
(25,686
|
)
|
|||||||||||
|
March
2004, sale of common stock
|
|||||||||||||||||||
|
($.025/share)
(Note 4)
|
240,000
|
6,000
|
—
|
—
|
—
|
6,000
|
|||||||||||||
|
May
2004, common stock issued to an
|
|||||||||||||||||||
|
affiliate
to repay obligations ($.025/share)
|
|||||||||||||||||||
|
(Note
2)
|
400,000
|
10,000
|
—
|
—
|
—
|
10,000
|
|||||||||||||
|
May
2004, common stock issued to a
|
|||||||||||||||||||
|
related
party in exchange for services
|
|||||||||||||||||||
|
($.025/share)
(Note 2)
|
200,000
|
5,000
|
—
|
—
|
—
|
5,000
|
|||||||||||||
|
May
2004, common stock issued to a
|
|||||||||||||||||||
|
director
in exchange for director fees
|
|||||||||||||||||||
|
($.025/share)
(Note 2)
|
200,000
|
5,000
|
—
|
—
|
—
|
5,000
|
|||||||||||||
|
Office
space and administrative support
|
|||||||||||||||||||
|
contributed
by an affiliate (Note 2)
|
—
|
—
|
—
|
17,827
|
—
|
17,827
|
|||||||||||||
|
Net
loss, year ended December 31, 2004
|
—
|
—
|
—
|
—
|
(39,166
|
)
|
(39,166
|
)
|
|||||||||||
|
Balance
at December 31, 2004
|
5,746,200
|
$
|
156,050
|
$
|
20,600
|
$
|
87,808
|
$
|
(285,483
|
)
|
$
|
(21,025
|
)
|
||||||
See
accompanying notes to financial statements
F-24
EASYWEB,
INC.
Statements
of Cash Flows
|
For
the Years Ended
|
|||||||
|
December
31,
|
|||||||
|
2004
|
2003
|
||||||
|
Cash
flows from operating activities:
|
|||||||
|
Net
loss
|
$
|
(39,166
|
)
|
$
|
(35,842
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
|||||||
|
used
by operating activities:
|
|||||||
|
Depreciation
and amortization
|
—
|
486
|
|||||
|
Stock-based
compensation
|
10,000
|
—
|
|||||
|
Office
space and administrative support
|
|||||||
|
contributed
by an affiliate (Note 2)
|
17,827
|
17,490
|
|||||
|
Changes
in operating assets and liabilities:
|
|||||||
|
Accounts
payable, accrued expenses
|
|||||||
|
and
due to affiliate
|
4,027
|
8,534
|
|||||
|
Net
cash used in
|
|||||||
|
operating
activities
|
(7,312
|
)
|
(9,332
|
)
|
|||
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds
on loans from related parties
|
1,300
|
—
|
|||||
|
Repayment
of related party loans
|
—
|
(650
|
)
|
||||
|
Proceeds
from the sale of common stock
|
6,000
|
10,000
|
|||||
|
Net
cash provided by
|
|||||||
|
financing
activities
|
7,300
|
9,350
|
|||||
|
Net
change in cash
|
(12
|
)
|
18
|
||||
|
Cash,
beginning of period
|
33
|
15
|
|||||
|
Cash,
end of period
|
$
|
21
|
$
|
33
|
|||
|
Supplemental
disclosure of cash flow information:
|
|||||||
|
Cash
paid during the year for:
|
|||||||
|
Income
taxes
|
$
|
—
|
$
|
—
|
|||
|
Interest
|
$
|
—
|
$
|
—
|
|||
See
accompanying notes to financial statements
F-25
EASYWEB,
INC.
Notes
to Financial Statements
(1) Organization
and Summary of Significant Accounting Policies With Basis of
Presentation
Organization
EasyWeb,
Inc. (referenced as “we”, “us”, “our” in the accompanying footnotes) was
incorporated in Colorado on September 24, 1998 under the name NetEscapes,
Inc.
Our name was changed to EasyWeb, Inc. on February 2, 1999. We design, market,
sell and maintain web sites on the Internet, which are built and hosted by
third
party consultants. Our operations were very limited during the year ended
December 31, 2003. We did not perform any services or earn any revenue during
2004 due to the lack of working capital.
As
of
December 31, 2004, we have a net capital deficit and have suffered significant
operating losses since inception, which raises substantial doubt about our
ability to continue as a going concern. The financial statements do not include
any adjustments relating to the recoverability and classification of liabilities
that might be necessary should we be unable to continue as a going concern.
Inherent in our business are various risks and uncertainties, including our
limited operating history, historical operating losses, and dependence upon
our
officers and strategic alliances. We are currently dependent upon an affiliate,
Summit Financial Relations, Inc. (“Summit”), which has paid expenses on our
behalf, in order to maintain our limited operations. Our president has also
advanced us working capital to maintain our limited operations. There is
no
assurance that Summit or our president will continue to pay our expenses
in the
future.
Our
future success will be dependent upon our ability (1) to locate and consummate
a
merger or acquisition with an operating company, (2) to finance Internet
opportunities and, ultimately, (3) to attain profitability. There is no
assurance that we will be successful in consummating a merger or acquisition
with an operating company, financing Internet investments, or attaining
profitability. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Cash
equivalents and fair value of financial instruments
For
the
purposes of the statement of cash flows, we consider all highly liquid debt
instruments purchased with an original maturity of three months or less to
be
cash equivalents. We had no cash equivalents at December 31, 2004.
The
carrying amounts of cash, accounts payable and accrued liabilities approximate
fair value due to the short-term maturity of the instruments.
Use
of estimates
The
preparation of the financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions
that
affect certain reported amounts of assets and liabilities; disclosure of
contingent assets and liabilities at the date of the financial statements;
and
the reported amounts of revenues and expenses during the reporting period.
Accordingly, actual results could differ from those estimates.
Intangible
assets and amortization
Our
intangible assets consist of computer software and web site development costs.
We capitalize internal and external costs incurred to develop its web site
during the application development stage in accordance with Statement of
Position 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use”. Capitalized web site development costs are amortized
over an estimated life of three years commencing on the date the software
is
ready for its intended use. We commenced amortization of our web site
development costs on April 11, 2000. The web site development costs were
fully
amortized as of December 31, 2003. Amortization expense totaled $-0- and
$486,
respectively, for the years ended December 31, 2004 and 2003.
F-26
EASYWEB,
INC.
Notes
to Financial Statements
In
addition, we have adopted the Emerging Issues Task Force Issue No. 00-2 (“EITF
00-2”), “Accounting for Web Site Development Costs”. EITF 00-2 requires the
implementation of SOP 98-1 when software is used by a vendor in providing
a
service to a customer but the customer does not acquire the software or the
right to use it.
Impairments
on long-lived assets
We
evaluate the carrying value of our long-lived assets under the provisions
of
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.
Statement No. 144 requires impairment losses to be recorded on long-lived
assets
used in operations when indicators of impairment are present and the
undiscounted future cash flows estimated to be generated by those assets
are
less than the assets’ carrying amount. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying value or fair value, less costs
to
sell.
Loss
per common share
We
account for loss per share under the provisions of SFAS No. 128, “Earnings Per
Share”. Under SFAS No. 128, net loss per share-basic excludes dilution and is
determined by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period. Net loss per
share-diluted reflects the potential dilution that could occur if securities
and
other contracts to issue common stock were exercised or converted into common
stock. Common stock options outstanding at December 31, 2004 were not included
in the diluted loss per share as all 100,000 options were anti-dilutive.
Therefore, basic and diluted losses per share at December 31, 2004 were
equal.
Advertising
barter transactions
We
report
our advertising barter transactions in accordance with EITF 99-17, “Accounting
for Advertising Barter Transactions”. Under EITF 99-17, revenue and expense
should be recognized at fair value from an advertising barter transaction
only
if the fair value of the advertising surrendered in the transaction is
determinable based on the entity’s own historical transactions involving cash.
We did not recognize any revenues or expenses in connection with our advertising
barter transactions for the periods presented.
Stock-based
Compensation
We
account for stock-based compensation arrangements in accordance with SFAS
No.
123, “Accounting for Stock-Based Compensation,” which permits entities to
recognize as expense, over the vesting period, the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows entities
to
continue to apply the provisions of Accounting Principle Board (“APB”) Opinion
No. 25 and provide pro forma net earnings (loss) disclosures for employee
stock
option grants as if the fair value-based method defined in SFAS No. 123 had
been
applied. We have elected to continue to apply the provisions of APB Opinion
No.
25 and provide the pro forma disclosure provisions of SFAS No. 123. We did
not
report pro forma disclosures in the accompanying financial statements as
the
Company did not grant any employee stock options as of December 31,
2004.
Income
Taxes
Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes related
primarily to differences between the recorded book basis and the tax basis
of
assets and liabilities for financial and income tax reporting. The deferred
tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes are also recognized
for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
F-27
EASYWEB,
INC.
Notes
to Financial Statements
Recent
accounting standards
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
153, “Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29."
This Statement eliminates the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges
of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected
to
change significantly as a result of the exchange. This Statement is effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after
June
15, 2005. We do not expect the application of SFAS No. 153 to have a material
affect on our financial statements.
In
December 2004, the FASB issued a revision to SFAS No. 123, “Share-Based
Payment." This Statement supercedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and its related implementation guidance. It establishes
standards for the accounting for transactions in which an entity exchanges
its
equity instruments for goods or services. It also addresses transactions
in
which an entity incurs liabilities in exchange for goods or services that
are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those equity instruments. This Statement does
not
change the accounting guidance for share-based payment transactions with
parties
other than employees provided in Statement No. 123 as originally issued and
EITF
Issue No. 96-18. This Statement is effective for public entities that file
as
small business issuers as of the beginning of the first fiscal period that
begins after December 15, 2005. We do not expect the application of SFAS
No. 123
(revised) to have a material affect on our financial statements.
(2) Related
Party Transactions
Liabilities
In
August
and December 2004, an officer loaned us a total of $1,300 for working capital.
The loans carry no interest rate and are due on demand. The $1,300 is included
in the accompanying financial statements as “Due to officer”.
At
December 31, 2003, the Company owed Summit $18,111 for professional fees
and
other administrative expenses paid on behalf of the Company. During the year
ended December 31, 2004, Summit paid expenses totaling $4,187 on behalf of
the
Company. On May 13, 2004, the Company issued 400,000 restricted common shares
to
Summit valued at $10,000, or $.025 per share. The shares were valued based
on
contemporaneous sales to unrelated third party investors. As of December
31,
2004, the Company owed the affiliate $12,298, which is included in the
accompanying financial statements as “Due to affiliate”.
Common
stock
During
May 2004, the Company issued 200,000 to the brother of the Company’s principal
executive officer in exchange for corporate governance services. The shares
were
valued based on contemporaneous sales to unrelated third party investors,
or
$.025 per share. The Company recorded stock-based compensation of $5,000
related
to the transaction.
During
May 2004, the Company issued 200,000 to a director in exchange for director
fees. The shares were valued based on contemporaneous sales to unrelated
third
party investors, or $.025 per share. The Company recorded stock-based
compensation of $5,000 related to the transaction.
F-28
EASYWEB,
INC.
Notes
to Financial Statements
Rent
and administrative support
Rent
Summit
contributed office space to us during the years ended December 31, 2004 and
2003. Our management has estimated the fair market value of the office space
at
$500 per month, which is included in the accompanying financial statements
as
“Contributed rent” with an offsetting credit to “Additional paid-in capital”.
Administrative
support
Summit
contributed administrative services to the Company during the years ended
December 31, 2004 and 2003. Our management has estimated the fair market
value
of the services at $1,000 per month, which is included in the accompanying
condensed financial statements as “Contributed administrative support” with an
offsetting credit to “Additional paid-in capital”. We paid Summit $173 and $510,
respectively, for services during the years ended December 31, 2004 and 2003;
therefore, contributed administrative support totaled $11,827 and $11,490
for
the years ended December 31, 2004 and 2003, respectively.
Service
Agreements
The
Company entered into three service agreements with an officer, director and
an
affiliate (see Note 5).
(3) Income
Taxes
A
reconciliation of U.S. statutory federal income tax rate to the effective
rate
is as follows:
|
Years
Ended
|
|||
|
December
31,
|
|||
|
2004
|
2003
|
||
|
U.S.
statutory federal rate
|
15.00%
|
15.00%
|
|
|
State
income tax rate, net of federal benefit
|
3.94%
|
3.94%
|
|
|
Permanent
differences
|
-8.62%
|
-9.24%
|
|
|
Net
operating loss for which no tax
|
|||
|
benefit
is currently available
|
-10.32%
|
-9.70%
|
|
|
0.00%
|
0.00%
|
||
At
December 31, 2004, deferred taxes consisted of a net tax asset of $41,983
due to
operating loss carryforwards of $209,315, which was fully allowed for, in
the
valuation allowance of $41,983. The valuation allowance offsets the net deferred
tax asset for which there is no assurance of recovery. The changes in the
valuation allowance for the years ended December 31, 2004 and 2003 were $4,041
and $3,475, respectively. Net operating loss carryforwards will expire through
2024.
The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized.
At that
time, the allowance will either be increased or reduced; reduction could
result
in the complete elimination of the allowance if positive evidence indicates
that
the value of the deferred tax asset is no longer impaired and the allowance
is
no longer required.
Should
we
undergo an ownership change, as defined in Section 382 of the Internal Revenue
Code, our net tax operating loss carryforwards generated prior to the ownership
change will be subject to an annual limitation which could reduce or defer
the
utilization of those losses.
F-29
EASYWEB,
INC.
Notes
to Financial Statements
(4) Shareholders’
Deficit
Sale
of common stock
During
March 2004, we sold 240,000 shares of our common stock to an unrelated investor
for $6,000, or $.025 per share.
During
March 2003, we sold 200,000 shares of our common stock to an unrelated investor
for $10,000, or $.05 per share.
Stock
option plan
We
have
adopted an incentive stock option plan for the benefit of key personnel and
others providing significant services. An aggregate of 175,000 shares of
common
stock has been reserved under the plan. Options granted pursuant to the plan
will be exercisable at a price no less than 100 percent of fair market value
of
a common share on the date of grant.
Following
is a schedule of changes in our outstanding stock options for years ended
December 31, 2004 and 2003:
|
Weighted
|
Weighted
Avg
|
||||||||||||
|
Options
|
Avg
|
Remaining
|
|||||||||||
|
Description
|
Options
|
Exercisable
|
Exercise
Price
|
Life
|
|||||||||
|
Outstanding
at January 1, 2003
|
100,000
|
100,000
|
|
$0.25
|
9
years
|
||||||||
|
Granted
|
—
|
—
|
—
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Expired/Cancelled
|
—
|
—
|
|
—
|
—
|
||||||||
|
Outstanding
at December 31, 2003
|
100,000
|
100,000
|
|
$0.25
|
8
years
|
||||||||
|
Granted
|
—
|
—
|
—
|
—
|
|||||||||
|
Exercised
|
—
|
—
|
—
|
—
|
|||||||||
|
Expired/Cancelled
|
—
|
—
|
—
|
—
|
|||||||||
|
Outstanding
at December 31, 2004
|
100,000
|
100,000
|
|
$0.25
|
7
years
|
||||||||
(5) Commitments
On
October 1, 2004, the Company entered into a management consulting services
agreement whereby the consultant will provide services including, but not
limited to:
| a. |
Mergers
and acquisition;
|
| b. |
Due
diligence studies, reorganizations,
divestitures;
|
| c. |
Capital
structures, banking methods and
systems;
|
| d. |
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
| e. |
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
| f. |
Structural
recommendations to assist the Company’s capability to
finance.
|
Under
the
terms of the agreement, the Company has agreed to pay the consultant a one-time
fee of $120,000 on the date of closing of any of the above business transactions
or any transaction giving the Company a valid financial direction.
F-30
EASYWEB,
INC.
Notes
to Financial Statements
On
December 9, 2004, the Company entered into an employment agreement with its
president/CEO. Under the terms of the agreement, the Company has agreed to
pay
its president/CEO a one-time fee of $100,000 if and when the Company completes
a
merger, acquisition, reverse merger, financing, or any other related transaction
non-detrimental to the immediate future of the Company, that leaves the Company
in a position and direction better than it was prior to the
transaction.
On
December 10, 2004, the Company entered into a management consulting services
agreement with a director. Under the terms of the agreement, the Company
has
agreed to pay the director a one-time fee of $10,000 plus expenses, upon
the
closing of any transaction leaving the Company with a positive business
directive and available finances, non-detrimental to the survival of the
Company.
On
December 10, 2004, the Company entered into a consulting services agreement
whereby Summit will provide services including, but not limited to:
| a. |
Mergers
and acquisition;
|
| b. |
Due
diligence studies, reorganizations,
divestitures;
|
| c. |
Capital
structures, banking methods and
systems;
|
| d. |
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
| e. |
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
| f. |
Conclude
business and transactions necessary to keep the Company current
in all
public filings, a-float and in business until an aforementioned
business
transaction is closed, to include lending funds to the Company
when
absolutely necessary as has been done over the prior three years
at no
charge, allowing the Company to
survive.
|
Under
the
terms of the agreement, the Company has agreed to pay Summit a one-time fee
of
$120,000 on the date of closing of any transaction leaving the Company with
a
positive business directive and available finances, non-detrimental to the
survival of the Company.
(6) Subsequent
Events
On
February 28, 2005, the Company’s shareholders approved the following
proposals:
| a. |
Reincorporate
the Company in the State of
Delaware;
|
| b. |
Authorize
the Board of Directors to implement a reverse stock split at a
ratio no
greater than 40:1;
|
| c. |
Increase
the Company’s authorized capital by 250,000,000 shares (from 30,000,000 to
280,000,000);
|
As
of the
date of this report, the Company’s re-incorporation in the State of Delaware had
not yet been finalized and no reverse stock split had yet been
implemented.
During
January 2005, the Company sold 430,000 shares of its common stock to unrelated
investors for $13,200, or $.03 per share.
On
January 18, 2005, the Company sold a common stock option to an unrelated
third
party for $1,800. Under terms of the option agreement, the holder may purchase,
for an additional $1,000, 1% of the Company’s outstanding common stock as of the
exercise date. The option expires on June 7, 2005.
F-31
F-32
F-33
EASYWEB,
INC.
Condensed
Balance Sheet
June
30, 2005
|
Assets
|
||||
|
Current
Assets:
|
||||
|
Cash
|
$
|
1,118
|
||
|
Liabilities
and Shareholders’ Deficit
|
||||
|
Current
Liabilities:
|
||||
|
Accounts
payable and accrued liabilities
|
$
|
9,914
|
||
|
Total
current liabilities
|
9,914
|
|||
|
Shareholders’
deficit (Note 4):
|
||||
|
Common
stock, no par value; 280,000,000 shares authorized,
6,654,980 shares
issued and outstanding
|
183,613
|
|||
|
Additional
paid-in capital
|
118,353
|
|||
|
Retained
deficit
|
(310,762
|
)
|
||
|
Total
shareholders’ deficit
|
(8,796
|
)
|
||
|
$
|
1,118
|
|||
See
accompanying notes to condensed financial statements
F-34
EASYWEB,
INC.
Condensed
Statements of Operations
(Unaudited)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Operating
expenses:
|
|||||||||||||
|
Contributed
rent (Note 2)
|
$
|
1,500
|
$
|
1,500
|
$
|
3,000
|
$
|
3,000
|
|||||
|
Contributed
administrative
|
|||||||||||||
|
support
(Note 2)
|
2,805
|
2,925
|
5,145
|
5,925
|
|||||||||
|
Administrative
support (Note 2)
|
195
|
75
|
855
|
75
|
|||||||||
|
Stock-based
compensation
|
—
|
10,000
|
—
|
10,000
|
|||||||||
|
Professional
fees
|
4,122
|
1,299
|
12,730
|
3,127
|
|||||||||
|
Web
site consulting and maintenance
|
140
|
—
|
170
|
60
|
|||||||||
|
Dues
and subscriptions
|
—
|
—
|
1,250
|
—
|
|||||||||
|
Other
|
1,192
|
429
|
2,129
|
682
|
|||||||||
|
Total
operating expenses
|
9,954
|
16,228
|
25,279
|
22,869
|
|||||||||
|
Loss
before income taxes
|
(9,954
|
)
|
(16,228
|
)
|
(25,279
|
)
|
(22,869
|
)
|
|||||
|
Income
tax provision (Note 3)
|
—
|
—
|
—
|
—
|
|||||||||
|
Net
loss
|
$
|
(9,954
|
)
|
$
|
(16,228
|
)
|
$
|
(25,279
|
)
|
$
|
(22,869
|
)
|
|
|
Basic
and diluted loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
|
Basic
and diluted weighted average
|
|||||||||||||
|
common
shares outstanding
|
6,255,997
|
5,479,533
|
6,198,999
|
5,132,867
|
|||||||||
See
accompanying notes to condensed financial statements
F-35
EASYWEB,
INC.
Condensed
Statement of Changes in Shareholders' Equity
(Unaudited)
|
Additional
|
||||||||||||||||
|
Common
Stock
|
Paid-In
|
Retained
|
||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||
|
Balance
at January 1, 2005
|
5,746,200
|
$
|
156,050
|
$
|
108,408
|
$
|
(285,483
|
)
|
$
|
(21,025
|
)
|
|||||
|
January
2005, sale of common stock ($.03/share) (Note 4)
|
430,000
|
13,200
|
—
|
—
|
13,200
|
|||||||||||
|
January
2005, common stock option granted for cash (Note 4)
|
—
|
—
|
1,800
|
—
|
1,800
|
|||||||||||
|
June
2005, sale of common stock ($.03/share) (Note 4)
|
200,000
|
6,000
|
—
|
—
|
6,000
|
|||||||||||
|
June
2005, common stock issued to officer as repayment for
working capital
advances ($.03/share) (Note 2)
|
69,600
|
2,088
|
—
|
—
|
2,088
|
|||||||||||
|
June
2005, common stock issued to affiliate as repayment
for working capital
advances ($.03/share) (Note 2)
|
209,180
|
6,275
|
—
|
—
|
6,275
|
|||||||||||
|
Office
space and administrative support contributed by an
affiliate (Note
2)
|
—
|
—
|
8,145
|
—
|
8,145
|
|||||||||||
|
Net
loss, six months ended June 30, 2005
|
—
|
—
|
—
|
(25,279
|
)
|
(25,279
|
)
|
|||||||||
|
Balance
at June 30, 2005
|
6,654,980
|
$
|
183,613
|
$
|
118,353
|
$
|
(310,762
|
)
|
$
|
(8,796
|
)
|
|||||
See
accompanying notes to condensed financial statements
F-36
EASYWEB,
INC.
Condensed
Statements of Cash Flows
(Unaudited)
|
Six
Months Ended
|
|||||||
|
June
30,
|
|||||||
|
2005
|
2004
|
||||||
|
Net
cash used in operating activities
|
$
|
(19,903
|
)
|
$
|
(6,006
|
)
|
|
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds
from granting of stock option (Note 4)
|
1,800
|
—
|
|||||
|
Proceeds
from the sale of common stock (Note 4)
|
19,200
|
6,000
|
|||||
|
Net
cash provided by financing activities
|
21,000
|
6,000
|
|||||
|
Net
change in cash
|
1,097
|
(6
|
)
|
||||
|
Cash,
beginning of period
|
21
|
33
|
|||||
|
Cash,
end of period
|
$
|
1,118
|
$
|
27
|
|||
|
Supplemental
disclosure of cash flow information:
|
|||||||
|
Cash
paid during the period for:
|
|||||||
|
Income
taxes
|
$
|
—
|
$
|
—
|
|||
|
Interest
|
$
|
—
|
$
|
—
|
|||
|
Non-cash
financing transactions:
|
|||||||
|
Common
stock issued to officer to repay working capital advances
|
$
|
2,088
|
$
|
—
|
|||
|
Common
stock issued to affiliate to repay working capital
advances
|
$
|
6,275
|
$
|
—
|
|||
See accompanying notes to condensed financial statements
F-37
EASYWEB,
INC.
Notes
to Unaudited Condensed Financial Statements
Note
1: Basis of presentation
The
financial statements presented herein have been prepared by the Company
in
accordance with the accounting policies in its Form 10-KSB dated December
31,
2004, and should be read in conjunction with the notes thereto.
In
the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) which are necessary to provide a fair presentation of
operating
results for the interim period presented have been made. The results
of
operations for the periods presented are not necessarily indicative
of the
results to be expected for the year.
Financial
data presented herein are unaudited.
Note
2: Related party transactions
Rent
Summit
Financial Relations, Inc. (“Summit”), an affiliate under common control,
contributed office space to the Company during the six months ended
June 30,
2005. The Company’s management has estimated the fair market value of the office
space at $500 per month, which is included in the accompanying condensed
financial statements as Contributed Rent with an offsetting credit
to Additional
Paid-in Capital.
Administrative
support
Summit
contributed administrative services to the Company during the six months
ended
June 30, 2005. The Company’s management has estimated the fair market value of
the services at $1,000 per month, which is included in the accompanying
condensed financial statements as Contributed Administrative Support
with an
offsetting credit to Additional Paid-in Capital. During the six months
ended
June 30, 2005, the Company paid $855 for services, which reduced the
amount of
contributed services for the period from $6,000 to $5,145.
Indebtedness
to related parties
At
December 31, 2004, the Company owed Summit $12,268 for professional
fees and
other administrative expenses paid on behalf of the Company. During
the six
months ended June 30, 2005, Summit paid an additional $1,007 in expenses
on the
Company’s behalf. On February 4, 2005, the Company repaid Summit $7,000 and
on
June 28, 2005 the Company issued Summit 209,180 shares of common stock
for full
payment of all amounts owed to Summit. The shares issued to Summit
were valued
at $.03 per share, or $6,275, based on contemporaneous common stock
sales to
unrelated third parties. As of June 30, 2005, the balance owed to Summit
was
$-0-.
In
August
and December 2004, an officer loaned us a total of $1,300 for working
capital.
During May 2005, the officer advanced the Company an additional $788.
The loans
carried no interest rate and were due on demand. On June 28, 2005,
the Company
issued the officer 69,600 shares of common stock for full payment of
all amounts
owed to the officer. The shares issued to the officer were valued at
$.03 per
share, or $2,088, based on contemporaneous common stock sales to unrelated
third
parties. As of June 30, 2005, the balance owed to the officer was
$-0-.
Common
stock
During
June 2005, the Company sold 200,000 shares of its common stock to a
director for
$6,000, or $.03 per share.
F-38
Service
agreements
On
December 9, 2004, the Company entered into an employment agreement
with its
president/CEO. Under the terms of the agreement, the Company has agreed
to pay
its president/CEO a one-time fee of $100,000 if and when the Company
completes a
merger, acquisition, reverse merger, financing, or any other related
transaction
non-detrimental to the immediate future of the Company, that leaves
the Company
in a position and direction better than it was prior to the transaction
(see
Note 7).
On
December 10, 2004, the Company entered into a management consulting
services
agreement with a director. Under the terms of the agreement, the Company
has
agreed to pay the director a one-time fee of $10,000 plus expenses,
upon the
closing of any transaction leaving the Company with a positive business
directive and available finances, non-detrimental to the survival of
the Company
(see Note 7).
On
December 10, 2004, the Company entered into a consulting services agreement
whereby Summit will provide services including, but not limited to:
|
a.
|
Mergers
and acquisition;
|
|
b.
|
Due
diligence studies, reorganizations,
divestitures;
|
|
c.
|
Capital
structures, banking methods and
systems;
|
|
d.
|
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
|
e.
|
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
|
f.
|
Conclude
business and transactions necessary to keep the Company current
in all
public filings, a-float and in business until an aforementioned
business
transaction is closed, to include lending funds to the Company
when
absolutely necessary as has been done over the prior three
years at no
charge, allowing the Company to
survive.
|
Under
the
terms of the agreement, the Company has agreed to pay Summit a one-time
fee of
$120,000 on the date of closing of any transaction leaving the Company
with a
positive business directive and available finances, non-detrimental
to the
survival of the Company (see Note 7).
Note
3: Income taxes
The
Company records its income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes”. The Company incurred net operating losses during all periods
presented resulting in a deferred tax asset, which was fully allowed
for;
therefore, the net benefit and expense resulted in $-0- income
taxes.
Note
4: Shareholder’s deficit
Common
stock
During
January 2005, the Company sold 430,000 shares of its common stock to
unrelated
investors for $13,200, or $.03 per share.
Common
stock options
On
January 18, 2005, the Company sold a common stock option to an unrelated
third
party for $1,800. Under terms of the option agreement, the holder could
purchase, for an additional $1,000, 1% of the Company’s outstanding common stock
as of the exercise date. On July 30, 2005, the parties amended the
agreement
whereby the option holder is now entitled to purchase that number of
shares of
our common stock equal to the number of such shares the option holder
would have
received in the merger with ZIOPHARM, Inc. (see Note 7) had the option
holder
owned 1% of the ZIOPHARM’s capital stock immediately prior to such merger
(calculated on a fully-diluted basis). The aggregate exercise price
for such
option is $1,000.
F-39
Corporate
governance
On
February 28, 2005, the Company’s shareholders approved the following
proposals:
|
a.
|
Reincorporate
the Company in the State of
Delaware;
|
|
b.
|
Authorize
the Board of Directors to implement a reverse stock split
at a ratio no
greater than 40:1; and
|
|
c.
|
Increase
the Company’s authorized capital by 250,000,000 shares (from 30,000,000
to
280,000,000).
|
The
Company’s re-incorporation in the State of Delaware was completed on May 16,
2005. As of the date of this report, no reverse stock split had yet
been
implemented.
Note
5: Commitment
On
October 1, 2004, the Company entered into a management consulting services
agreement whereby the consultant will provide services including, but
not
limited to:
|
a.
|
Mergers
and acquisition;
|
|
b.
|
Due
diligence studies, reorganizations,
divestitures;
|
|
c.
|
Capital
structures, banking methods and
systems;
|
|
d.
|
Periodic
reporting as to the developments concerning the general financial
markets
and public securities markets and industry which may be relevant
or of
interest or concern to the Company or the Company’s
business;
|
|
e.
|
Guidance
and assistance in available alternatives for accounts receivable
financing
and/or other asset financing; and
|
|
f.
|
Structural
recommendations to assist the Company’s capability to
finance.
|
Under
the
terms of the agreement, the Company has agreed to pay the consultant
a one-time
fee of $120,000 on the date of closing of any of the above business
transactions
or any transaction giving the Company a valid financial direction (see
Note
7).
Note
6: Termination of Proposed Merger
On
May 6,
2005, the Company signed a term sheet with Zephyr Sciences, Inc. (“Zephyr”),
which outlined the conditions of a proposed merger between the two
parties.
Under
the
structure of the term sheet, the Company would form a wholly-owned
Delaware
subsidiary, which would merge into Zephyr and Zephyr would be the surviving
entity. Zephyr’s shareholders would then exchange their shares of common stock
for common stock in the Company, which would result in Zephyr becoming
the
Company’s wholly-owned subsidiary. The transaction would result in a change
in
control, whereby the Company’s directors would resign and the directors of
Zephyr would become the directors of the Company.
The
parties terminated the proposed transaction in June 2005.
F-40
Note
7: Subsequent
Events
Common
stock
During
July 2005, the Company sold 333,333 shares of its common stock to an
unrelated
investor for $10,000, or $.03 per share.
During
July 2005, the Company sold 333,333 shares of its common stock to a
director for
$10,000, or $.03 per share.
On
August
3, 2005, the Company sold 275,000 shares of its common stock to an
unrelated
third party for $24,000, or $.087 per share.
Agreement
and Plan of Merger
On
August
3, 2005, the Company signed an Agreement and Plan of Merger with ZIOPHARM,
Inc.
(“ZIOPHARM”), which outlines the conditions of a proposed merger between the two
parties.
In
connection with the Agreement and Plan of Merger, the Company has formed
a
wholly-owned Delaware subsidiary, Zio Acquisition Corp., which will
merge into
ZIOPHARM with ZIOPHARM remaining as the surviving entity and as a wholly-owned
subsidiary of the Company following the merger. Holders of ZIOPHARM’s capital
stock or securities convertible into such capital stock will be exchanged
for
shares of the Company’s common stock or securities convertible into such shares.
The transaction will result in a change in control, whereby the Company’s
directors will resign and the directors of ZIOPHARM will become the
directors of
the Company. On the closing date of the merger transaction, the consolidated
EasyWeb entity will pay all unconsolidated liabilities of the Company
then due,
a portion of which will be payable to David C. Olson and an entity
affiliated
with Mr. Olson. However, Mr. Olson and this affiliated entity have
agreed to
reduce the amount of the payments to which they are otherwise entitled
to the
extent that the unconsolidated liabilities of the Company immediately
following
the Merger exceed $425,000.
In
addition to a range of standard closing conditions set forth in the
Agreement
and Plan of Merger, the closing of the transaction is subject to the
follow
closing conditions:
| 1. |
The
merger transaction shall have been approved by the requisite
vote of
ZIOPHARM’s stockholders, with ZIOPHARM stockholders holding no more
than
4% of the issued and outstanding shares of Ziopharm capital
stock having
exercised their right to dissent from the transaction and
obtain the fair
value of their shares;
|
| 2. |
As
of the closing date, the Company’s common stock shall have traded and
shall continue to be eligible for trading on the
OTCBB;
|
| 3. |
ZIOPHARM
shall have received an opinion from its counsel stating that
the
transaction qualifies as a tax-free reorganization under
Section 368(a) of
the Internal Revenue Code of 1986, as
amended;
|
| 4. |
ZIOPHARM
shall have received an opinion from the Company’s counsel stating that the
issuance of the Company’s common stock in the merger is exempt from the
registration requirements of the Securities Act of 1933,
as amended;
and
|
| 5. |
The
Company’s shall have completed a 1-for-40 reverse stock
split.
|
Should
the Company close the above transaction, the Company will incur the
following
approximate charges subject to update at closing:
|
a.
|
Employment
agreement fee with president/CEO (Note 2)
|
|
$
|
100,000
|
|||
|
b.
|
Management
consulting services agreement with director (Note 2)
|
|
10,000
|
||||
|
c.
|
Consulting
agreement with affiliate (Note 2)
|
|
120,000
|
||||
|
d.
|
Management
consulting services agreement with consultant (Note 5)
|
|
120,000
|
||||
|
e.
|
Transaction
introduction fees
|
100,000
|
|||||
|
f.
|
Other
consulting fees
|
10,000
|
|||||
|
f.
|
Ongoing
business expenses
|
17,000
|
|||||
|
TOTAL
|
$
|
477,000
|
|||||
F-41
On
July
14, 2005, the Board of Directors approved a $50,000 fee for the Company’s
president in the event the above transaction does not close. The fee
is to be
paid for services provided in connection with the due diligence and
negotiations
related to the proposed merger as well as previous uncompleted transactions.
If
the proposed merger does close, the $50,000 fee will be inclusive within
and
covered by payment of the $100,000 employment agreement fee (see Note
2).
F-42
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Balance
Sheets
|
|
June
30, 2005
|
December
31, 2004
|
|||||
|
Unaudited
|
Audited
|
||||||
|
ASSETS
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
13,167,747
|
$
|
1,026,656
|
|||
|
Prepaid
expenses and other current assets
|
257,217
|
117,571
|
|||||
|
Total
current assets
|
13,424,964
|
1,144,227
|
|||||
|
Property
and equipment, net
|
193,996
|
240,733
|
|||||
|
Deposits
|
56,032
|
60,046
|
|||||
|
Other
non current assets
|
92,237
|
-
|
|||||
|
Total
assets
|
$
|
13,767,229
|
$
|
1,445,006
|
|||
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|||||||
|
Current
liabilities:
|
|||||||
|
Accounts
payable
|
$
|
448,593
|
$
|
709,947
|
|||
|
Accrued
expenses
|
993,047
|
879,376
|
|||||
|
Total
current liabilities
|
1,441,640
|
1,589,323
|
|||||
|
|
|
||||||
|
Commitments
and contingencies
|
|||||||
|
Convertible
preferred stock:
|
|||||||
|
Series
A convertible preferred stock, $.001 par value; 20,000,000
shares
authorized; 8,379,564 and 0 shares issued and outstanding
at June 30, 2005
and December 31, 2004, respectively
|
15,076,733
|
-
|
|||||
|
Warrants
to purchase Series A convertible preferred stock
|
1,682,863
|
-
|
|||||
|
Total
convertible preferred stock
|
16,759,596
|
-
|
|||||
|
Stockholders'
deficit:
|
|||||||
|
Common
stock, $.001 par value; 30,000,000 shares
authorized; and 5,512,500 shares issued and outstanding at
both June 30,
2005 and December 31, 2004
|
5,513
|
5,513
|
|||||
|
Additional
paid-in capital
|
5,697,603
|
5,697,603
|
|||||
|
Deficit
accumulated during the development stage
|
(10,137,123
|
)
|
(5,847,433
|
)
|
|||
|
Total
stockholders' deficit
|
(4,434,007
|
)
|
(144,318
|
)
|
|||
|
Total
liabilities, convertible preferred stock and stockholders'
deficit
|
$
|
13,767,229
|
$
|
1,445,006
|
|||
F-43
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statements
of Operations
For
the
three and six months ended June 30, 2005 and 2004 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
For
the Period
|
||||||||||||||||
|
|
|
For
the three
|
|
For
the three
|
|
For
the six
|
|
For
the six
|
|
from
Inception
|
|
|||||
|
|
|
months
|
|
months
|
|
months
|
|
months
|
|
(September
9, 2003)
|
|
|||||
|
|
|
ended
|
|
ended
|
|
ended
|
|
ended
|
|
through
|
|
|||||
|
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
||||||
|
Research
contract revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Operating
expenses and other income:
|
||||||||||||||||
|
Research
and development, including
|
||||||||||||||||
|
costs
of research contracts
|
1,362,508
|
-
|
2,961,079
|
-
|
5,087,686
|
|||||||||||
|
General
and administrative
|
746,229
|
915,584
|
1,412,090
|
1,717,910
|
5,154,683
|
|||||||||||
|
Total
operating expenses
|
2,108,737
|
915,584
|
4,373,169
|
1,717,910
|
10,242,369
|
|||||||||||
|
Loss
from operations
|
(2,108,737
|
)
|
(915,584
|
)
|
(4,373,169
|
)
|
(1,717,910
|
)
|
(10,242,369
|
)
|
||||||
|
Interest
income
|
79,607
|
6,141
|
83,479
|
10,242
|
105,246
|
|||||||||||
|
Net
loss
|
$
|
(2,029,130
|
)
|
$
|
(909,443
|
)
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
(10,137,123
|
)
|
||
|
Basic
and diluted net loss per share
|
$
|
(0.40
|
)
|
$
|
(0.18
|
)
|
$
|
(0.86
|
)
|
$
|
(0.40
|
)
|
||||
|
Weighted
average common shares outstanding used to compute
basic
and diluted net loss per share
|
5,012,500
|
5,012,500
|
5,012,500
|
4,216,920
|
||||||||||||
F-44
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statements
of Cash Flows
For
the
six months ended June 30, 2005 and 2004 (unaudited)
|
|
|
|
|
|
|
|||||
|
For
the Period
|
||||||||||
|
|
|
For
the
|
|
For
the
|
|
from
Inception
|
|
|||
|
|
|
Six
months
|
|
Six
months
|
|
(September
9, 2003)
|
|
|||
|
|
|
ended
|
|
ended
|
|
through
|
|
|||
|
|
|
June
30, 2005
|
|
June
30, 2004
|
|
June
30, 2005
|
||||
|
Cash
flows from operating activities:
|
||||||||||
|
Net
loss
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
$
|
(10,137,123
|
)
|
|
|
Adjustments
to reconcile net loss to net cash
|
||||||||||
|
used
in operating activities:
|
||||||||||
|
Depreciation
and amortization
|
45,789
|
-
|
79,742
|
|||||||
|
Stock-based
compensation
|
- | - | 703,116 | |||||||
|
Change
in operating assets and liabilities:
|
|
|||||||||
|
Increase
in:
|
||||||||||
|
Prepaid
expenses and other current assets
|
(139,646
|
)
|
-
|
(257,217
|
)
|
|||||
|
Other
noncurrent assets
|
(92,237
|
)
|
-
|
(92,237
|
)
|
|||||
|
Increase
(decrease) in:
|
||||||||||
|
Deposits
|
4,014
|
(83,687
|
)
|
(56,032
|
)
|
|||||
|
Accounts
payable
|
(261,354
|
)
|
42,728
|
448,593
|
||||||
|
Accrued
expenses
|
113,671
|
-
|
993,047
|
|||||||
|
Net
cash used in operating activates
|
(4,619,453
|
)
|
(1,748,627
|
)
|
(8,318,111
|
)
|
||||
|
Cash
flows from investing activities:
|
||||||||||
|
(Purchases)
returns of property and equipment
|
948
|
(39,834
|
)
|
(273,738
|
)
|
|||||
|
Net
cash provided by (used) in investing activities
|
948
|
(39,834
|
)
|
(273,738
|
)
|
|||||
|
Cash
flows from financing activities:
|
||||||||||
|
Stockholder's
capital contribution
|
-
|
-
|
500,000
|
|||||||
|
Proceeds
from issuance of common stock, net
|
-
|
4,500,000
|
4,500,000
|
|||||||
|
Proceeds
from issuance of preferred stock, net
|
16,759,596
|
-
|
16,759,596
|
|||||||
|
Net
cash provided by financing activities
|
16,759,596
|
4,500,000
|
21,759,596
|
|||||||
|
Net
increase in cash and cash equivalents
|
12,141,091
|
2,711,539
|
13,167,747
|
|||||||
|
Cash
and cash equivalents, beginning of period
|
1,026,656
|
402,363
|
- | |||||||
|
Cash
and cash equivalents, end of period
|
$
|
13,167,747
|
$
|
3,113,902
|
13,167,747
|
|||||
|
Supplementary
disclosure of cash flow information:
|
||||||||||
|
Cash
paid for interest
|
$
|
-
|
$
|
-
|
- | |||||
|
Cash
paid for income taxes
|
$
|
-
|
$
|
-
|
- | |||||
|
Supplementary
disclosure of noncash investing and financing
activities:
|
||||||||||
|
Warrants
issued to placement agent, in connection with
preferred stock
issuance
|
$
|
1,682,863
|
$
|
-
|
$
|
1,682,863
|
||||
F-45
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Statement
of Changes in Convertible Preferred Stock and Stockholders' Equity
(Deficit)
For
the
six months ended June 30, 2005, For the Year ended December 31, 2004
and
For
the
Period from Inception (September 9, 2003) to December 31, 2003
|
|
|
||||||||||||||||||||||||
|
Warrants
to
|
|
|
|||||||||||||||||||||||
|
Purchase
|
Deficit
|
||||||||||||||||||||||||
|
Series
A
|
Series
A
|
|
Accumulated
|
||||||||||||||||||||||
|
Convertible
|
Convertible
|
|
during
|
Total
|
|||||||||||||||||||||
|
Preferred
|
Preferred
|
Additional
|
the
|
Stockholders'
|
|||||||||||||||||||||
|
Stock
|
Stock
|
Common
Stock
|
Paid-in
|
Development
|
Equity/
|
||||||||||||||||||||
|
Shares
|
Amount
|
Warrants
|
Shares
|
Amount
|
Capital
|
Stage
|
(Deficit)
|
||||||||||||||||||
|
Stockholders'
contribution, September 9, 2003
|
-
|
$
|
-
|
$
|
-
|
500,000
|
$
|
500
|
$
|
499,500
|
$
|
-
|
$
|
500,000
|
|||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(160,136
|
)
|
(160,136
|
)
|
|||||||||||||||
|
Balance
at December 31, 2003 (audited)
|
-
|
-
|
-
|
500,000
|
500
|
499,500
|
(160,136
|
)
|
339,864
|
||||||||||||||||
|
Issuance
of common stock
|
-
|
-
|
-
|
4,500,000
|
4,500
|
4,495,500
|
-
|
4,500,000
|
|||||||||||||||||
|
Issuance
of common stock for services
|
512,500
|
513
|
438,326
|
-
|
438,839
|
||||||||||||||||||||
|
Fair
value of options/warrants issued for nonemployee services
|
-
|
-
|
-
|
-
|
-
|
264,277
|
-
|
264,277
|
|||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,687,297
|
)
|
(5,687,297
|
)
|
|||||||||||||||
|
Balance
at December 31, 2004 (audited)
|
-
|
-
|
-
|
5,512,500
|
$
|
5,513
|
5,697,603
|
(5,847,433
|
)
|
(144,317
|
)
|
||||||||||||||
|
Issuance
of Series A convertible preferred stock
|
8,379,564
|
15,076,733
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||
|
Fair
value of warrants to purchase Series A convertible preferred
stock
|
-
|
-
|
1,682,863
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,289,690
|
)
|
(4,289,690
|
)
|
|||||||||||||||
|
Balance
at June 30, 2005 (unaudited)
|
8,379,564
|
$
|
15,076,733
|
$
|
1,682,863
|
5,512,500
|
$
|
5,513
|
$
|
5,697,603
|
$
|
(10,137,123
|
)
|
$
|
(4,434,007
|
)
|
|||||||||
F-46
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
1.
|
BASIS
OF PRESENTATION AND
OPERATIONS
|
The
financial statements included herein have been prepared by ZIOPHARM,
Inc.
(“ZIOPHARM” or the “Company”) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and
footnote disclosures normally included in financial statements
prepared in
accordance with accounting principles generally accepted in the
United States of
America have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of management, the accompanying unaudited financial
statements
include all adjustments (consisting of normal recurring adjustments)
necessary
to present fairly the financial position, results of operations
and cash flows
of the Company at the dates and for the periods indicated. The
unaudited
financial statements included herein should be read in conjunction
with the
audited financial statements and the notes thereto included in
ZIOPHARM Oncology
Inc.’s Form 8-K filed on September 19, 2005 for the fiscal year ended
December
31, 2004.
ZIOPHARM
is a development stage biopharmaceutical company that seeks
to
acquire,
develop and
commercialize, on
its
own or with other commercial partners, products for the treatment
of
important
unmet medical needs in cancer.
The
Company has operated at a loss since its inception in 2003 and
has no revenues.
The Company anticipates that losses may continue for the foreseeable
future. At
June 30, 2005, the Company’s accumulated deficit was approximately $10.1
million. The Company’s ability to continue operations after its current cash
resources are exhausted depends on its ability to obtain additional
financing
and achieve profitable operations, as to which no assurances can
be given. Cash
requirements may vary materially from those now planned because
of changes in
the focus and direction of our research and development programs,
competitive
and technical advances, patent developments or other developments.
Additional
financing will be required to continue operations after we exhaust
our current
cash resources and to continue our long-term plans for clinical
trials and new
product development.
On
June
6, 2005, the Company completed an offering of Series A Convertible
Preferred
Stock (“Series A Stock”). The Company issued 8,379,564 shares at $2.16 per share
for gross proceeds of approximately $18.1 million. In
connection with the Series A Preferred Stock Offering, the Company
compensated
Paramount or its affiliates for its services through the payment
of (a) cash
commissions equal to 7% of the gross proceeds from the sale of
the shares of
Series A Preferred Stock, and
(b)
placement warrants to acquire 837,956 shares of Series A Preferred
Stock (the
Series A Stock Warrants), exercisable for a period of 7 years from
the Closing
Date at a per Share exercise price equal to 110% of the price per
Share sold in
the Offering. These commissions are also payable on additional
sales by the
Company of securities (other than in a public offering) to investors
introduced
to the Company by Paramount during the twelve (12) month period
subsequent to
the final closing of the Offering. The Company also paid Paramount
an expense
allowance of $50,000 to reimburse Paramount for its out-of-pocket
expenses (the
“Expense Allowance”). Also, for a period of 36 months from the final Closing,
Paramount has the right of first refusal to act as the placement
agent for any
private sale of the Company’s securities. Lastly, the Company has agreed to
indemnify Paramount against certain liabilities, including liabilities
under the
Securities Act.
F-47
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
1.
|
BASIS
OF PRESENTATION AND
OPERATIONS….continued
|
The
Company has valued the warrants using the Black-Scholes model recording
a
non-cash issuance cost of $1,682,683. The
net
proceeds from the Offering will be used for research and development,
licensing
fees and expenses, and for working capital and general corporate
purposes.
On
August, 3, 2005 the Company entered into an Agreement and Plan
of Merger dated
as of August 3, 2005 (as may be amended from time to time, the
“Merger
Agreement”) with EasyWeb, Inc., a Delaware corporation (OTC:ESYW.OB)
(“EasyWeb”), and ZIO Acquisition Corp., a Delaware corporation and wholly
owned
subsidiary of EasyWeb (“ZIO Acquisition”). EasyWeb is a company that was
incorporated in September 1998 and has been in the business of
designing,
marketing, selling and maintaining customized and template turnkey
sites on the
Internet that are hosted by third parties. Currently, however,
EasyWeb has no
operating business and has limited assets and liabilities. Pursuant
to the
Merger Agreement, ZIO Acquisition merged with and into ZIOPHARM,
with ZIOPHARM
remaining as the surviving company and a wholly-owned subsidiary
of EasyWeb (the
“Merger”). In connection with the Merger, which was effective as of September
13, 2005, ZIO Acquisition ceased to exist and the surviving company
changed its
corporate name to ZIOPHARM, Inc. In exchange for all of their shares
of capital
stock in ZIOPHARM, the Stockholders received a number of shares
of Common Stock
of EasyWeb such that, upon completion of the Merger, the then-current
Stockholders held approximately 96.8% of the outstanding shares
of Common Stock
of EasyWeb on a fully-diluted basis. Upon completion of the Merger,
EasyWeb
ceased all of its remaining operations and adopted and continued
implementing
the business plan of ZIOPHARM. Further, effective with the Merger,
the current
officers and directors of EasyWeb resigned, the current officers
and directors
of ZIOPHARM were appointed officers and directors of EasyWeb and
EasyWeb changed
its name to ZIOPHARM Oncology, Inc. In conjunction with the Merger,
ZIOPHARM
made certain payments not to exceed $425,000 to certain affiliates
of
EasyWeb.
The
results disclosed in the Statement of Operations for the six months
ended June
30, 2005 are not necessarily indicative of the results to be expected
for the
full year.
F-48
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
| 2. |
STOCK
BASED COMPENSATION
|
Accounting
for Stock-Based Compensation
The
Company accounts for stock-based awards to employees using the
intrinsic value
method as prescribed by Accounting Principles Board (APB) Opinion
No. 25,
Accounting
for Stock Issued to Employees,
and
related interpretations. The Company follows the provisions of
SFAS No. 123,
Accounting
for Stock-Based Compensation,
for
disclosure purposes. All stock-based awards to nonemployees are
accounted for at
their fair value in accordance with SFAS No. 123 and Emerging Issues
Task Force
(EITF) 96-18, Accounting
for Equity Instruments that are Issued to Other than Employees
for Acquiring, or
in Conjunction with Selling, Goods or Services.
The
Company has adopted the disclosure provisions of SFAS No. 148,
Accounting
for Stock-Based Compensation - Transition and Disclosure - an amendment
of SFAS
No. 123,
for all
stock-based awards as of December 31, 2004.
The
following illustrates the effect on net loss had the Company applied
the fair
value recognition provisions of SFAS No. 123:
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Net
loss:
|
$
|
(2,029,130
|
)
|
$
|
(909,443
|
)
|
$
|
(4,289,690
|
)
|
$
|
(1,707,668
|
)
|
|
|
As
reported
|
|||||||||||||
|
Stock-based
compensation expense included in reported net loss
|
—
|
—
|
—
|
—
|
|||||||||
|
Stock-based
compensation expense under the fair value-based method
|
(73,780
|
)
|
(14,180
|
)
|
(163,270
|
)
|
(26,726
|
)
|
|||||
|
Pro
forma net loss
|
$
|
(2,102,910
|
)
|
$
|
(923,623
|
)
|
$
|
(4,452,960
|
)
|
$
|
(1,734,394
|
)
|
|
|
Basic
and diluted net loss per share:
|
|||||||||||||
|
As
reported
|
$
|
(0.40
|
)
|
$
|
(0.18
|
)
|
$
|
(0.86
|
)
|
$
|
(0.40
|
)
|
|
|
Pro
forma
|
$
|
(0.42
|
)
|
$
|
(0.18
|
)
|
$
|
(0.89
|
)
|
$
|
(0.41
|
)
|
|
F-49
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
| 2. |
STOCK
BASED
COMPENSATION…..continued
|
Accounting
for Stock-Based Compensation...continued
The
fair
value of each stock option is estimated at the date of grant using
the
Black-Scholes option pricing model. The following table summarizes
the
assumptions used in the Black-Scholes option pricing model:
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||||||||||||
|
2005
|
2004
|
2005
|
2004
|
||||||||||
|
Expected
life
|
5
years
|
5
years
|
5
years
|
5
years
|
|||||||||
|
Expected
volatility
|
114%
|
134%
|
114%
|
114%
|
|||||||||
|
Dividend
yield
|
3.77%
|
3.60%
|
3.77%
|
3.60%
|
|||||||||
|
Weighted
average risk-free interest rat
|
0%
|
0%
|
0%
|
0%
|
|||||||||
Recently
Issued Pronouncements
In
December 2004, the Financial Accounting Standards Board ("FASB")
issued
Statement of Financial Accounting Standards No. 123R, Share-Based
Payment ("SFAS
No. 123R"). This Statement is a revision of SFAS No. 123, Accounting
for
Stock-Based Compensation, and supersedes Accounting Principles
Board Opinion No.
25, Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS No. 123R focuses primarily on accounting for transactions
in
which an entity obtains employee services in share-based payment
transactions.
The Statement requires entities to recognize stock compensation
expense for
awards of equity instruments to employees based on the grant-date
fair value of
those awards (with limited exceptions). SFAS No. 123R is effective
for the first
fiscal year beginning after December 15, 2005. Based on current
options
outstanding, the Company anticipates the adoption of this statement
to result in
approximately $723,918 of additional compensation cost to be recognized
in the
year of adoption.
F-50
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
3.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
|
On
June
6, 2005, the Company completed its Series A Convertible Preferred
Stock offering
(see Note 1).
We
have
authorized capital of 50,000,000 shares, of which 30,000,000 shares
have been
designated as common stock, par value $.001 per share (the “Common Stock”), and
20,000,000 shares have been designated as preferred stock, par
value $.001 per
share.
Convertible
Preferred Stock
Voting
Rights
The
holders of Series A Preferred Stock will be entitled to vote together
with all
other holders of the Company’s voting stock on an “as-converted” basis on all
matters submitted to a vote of holders generally. The holders of
Series A
Preferred Stock, voting as a separate class, will also have the
right to approve
by a 66% supermajority certain actions proposed to be taken by
the
Company.
Dividend
Rights
The
holders of Series A Preferred Stock will be entitled to receive
dividends on an
equal basis with the holders of Common Stock when, as and if declared
by the
Board of Directors.
Liquidation
Preferences
The
Series A Preferred Stock shall rank senior to the Common Stock
and any future
class of junior securities, and will be entitled to a liquidation
preference equal
to
the Stated Value, subject to adjustment (as defined in the Certificate
of
Designations),
upon any
liquidation, dissolution or winding up of the Company
or upon
a voluntary or involuntary bankruptcy of the Company.
Conversion
Rights
Each
share of Series A Preferred Stock will be convertible into Common
Stock at any
time at the option of the holder thereof (the Series A Preferred
Stock and the
Common Stock issuable upon conversion of the Series A Preferred
Stock are
sometimes herein collectively referred to as the “Securities”). All of the
outstanding shares of Series A Preferred Stock will automatically
convert into
Common Stock upon the first date (the “Trading Date”) on which the Common Stock
(or securities received in exchange for Common Stock) trades on
a national
securities exchange or on NASDAQ, including the Over the Counter
Bulletin Board
(a “Trading Event”). The rate at which shares of Series A Preferred Stock will
convert into Common Stock will initially be one-for-one, subject
to adjustment
in connection with certain anti-dilution protections and other
adjustments.
F-51
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
3.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’ EQUITY...continued
|
Convertible
Preferred Stock...continued
Conversion
Rights...continued
In
the
event of a reclassification, capital reorganization or other similar
change in
the outstanding shares of Common Stock,
a
consolidation or merger of the Company with or into another entity
(other than a
consolidation or merger in which the Corporation is the continuing
entity and
which does not result in a reclassification, capital reorganization
or other
change of outstanding shares of Common Stock other than the number
thereof), or
a sale of the property of the Company as, or substantially as,
an entirety
(other than a sale/leaseback, mortgage or other financing transaction),
the
Series A Preferred Stock will become convertible into the kind
and number of
shares of stock or other securities or property (including cash)
that the
holders of Series A Preferred Stock would have received if the
Series A
Preferred Stock had been converted into Common Stock immediately
prior to such
reclassification, capital reorganization or other change, consolidation,
merger
or sale.
Common
Stock
We
currently have issued and outstanding 5,512,500 shares of Common
Stock.
In
September 2003, the Company issued 2,000,000 (before the split
discussed below)
shares of Common Stock at $0.25 per share for gross proceeds of
$500,000.
In
January 2004, the Company issued 18,000,000 (before the split discussed
below)
shares of Common Stock at $0.25 per share for gross proceeds of
$4,500,000.
In
February 2004, the Company amended its articles of incorporation
to provide for
the combination of the Company’s common stock, par value $0.001 per share on a
1-for-4 basis (all other share amounts presented reflect the reverse
split).
|
4.
|
RELATED
PARTY TRANSACTIONS
|
The
Company had engaged Paramount
BioCapital, Inc.
(“Paramount”)
to
assist in placing shares of Series A Preferred Stock on a “best efforts” basis
(see Note 1). Lindsay A. Rosenwald, M.D. is Chairman and Chief
Executive Officer
of Paramount. Dr.
Rosenwald is also managing member of Horizon BioMedical Ventures,
LLC
(“Horizon”). On December 30, 2004, Horizon authorized the distribution of
4,848,376 shares of Common Stock (such shares, the “Horizon Distributed
Shares”), in equal installments of 2,424,188 shares of Common Stock to
Mibars,
LLC (“Mibars”) and to Dr. Rosenwald and his designees (the “Designated Shares”).
The disposition of the Designated Shares will be subject to certain
restrictions
as agreed to among Dr. Rosenwald and Dr. Rosenwald’s designees. Among other
things, under certain circumstances set forth in pledge agreements
between Dr.
Rosenwald and his designees, Dr. Rosenwald has the right to re-acquire
the
Designated Shares from his designees. As a result of those rights,
Dr. Rosenwald
may be deemed to be an affiliate of the Company.
F-52
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
4.
|
RELATED
PARTY TRANSACTIONS...continued
|
In
connection with the December 22, 2004 Option Agreement with Southern
Research
Institute (“SRI”), the Company entered into a Finders Agreement, dated December
23, 2004, with Paramount pursuant to which the Company had agreed
to compensate
Paramount,
for
services in connection with the Company’s introduction to SRI through the
payment of (a) a cash fee of $60,000 and (b) warrants to purchase
125,000 shares
of the Company’s Common Stock at a price equal to $2.38 per share. The Company
has estimated the fair value of such warrants using the Black-Scholes
model,
using an assumed risk-free rate of 3.93%, and expected life of
7 years,
volatility of 134% and dividend yield of 0%. In December 2004,
the Company
expensed the $60,000 that was payable to Paramount and recognized
compensation
expense in the amount of $251,037 for the issuance of the warrants.
In
connection with the Series A Preferred Stock Offering (see Note
1), the Company
and Paramount
entered
into an Introduction Agreement in January 2005 (the “Introduction Agreement”),
pursuant to which the Company has agreed to compensate Paramount
for its
services in connection with the Offering through the payment of
(a) cash
commissions equal to 7% of the gross proceeds from the sale of
the shares
of
Series A Preferred Stock, and
(b)
placement warrants to acquire a number of shares of Series A Preferred
Stock
equal to 10% of the number of shares of Series A Preferred Stock
issued in the
Offering, exercisable for a period of 7 years from the Closing
Date at a per
Share exercise price equal to 110% of the price per Share sold
in the Offering.
These commissions are also payable on additional sales by the Company
of
securities (other than in a public offering) to investors introduced
to the
Company by Paramount
during
the twelve (12) month period subsequent to the final closing of
the Offering.
The Company also agreed to pay to Paramount a
non-accountable expense allowance of $50,000 to reimburse the Paramount for
its
out-of-pocket expenses (the “Expense Allowance”). Also, for a period of 36
months from the final Closing, Paramount has
the
right of first refusal to act as the placement agent for the private
sale of the
Company’s securities. Lastly, the Company has agreed to indemnify Paramount against
certain liabilities, including liabilities under the Securities
Act.
Dr.
Michael Weiser, who is a member of the Board of Directors of the
Company, is
also a full-time employee
of
Paramount.
In
addition, David M. Tanen, who is a member of the Board of Directors
of the
Company, was a full-time employee of Paramount from
July
1996 through August 2004.
F-53
ZIOPHARM,
Inc.
(A
Development Stage Enterprise)
Notes
to
Financial Statements
For
the
three and six months ended June 30, 2005 and June 30, 2004
(Unaudited)
|
5.
|
STOCK
OPTION PLAN
|
The
Company has adopted the 2003 Stock Option Plan (the “Plan”), under which we have
reserved for the issuance of 2,500,000 shares of our Common Stock.
The Plan was
approved by our stockholders on December 21, 2004.
As
of
December 31, 2004, the Company has issued under its 2003 Stock
Option Plan
1,170,826 shares that are issuable upon exercise of outstanding
options to
purchase Common Stock. As of December 31, 2004, we had issued to
our employees
options to purchase up to 990,326 shares of the Company’s Common Stock. In
addition, we had issued to our directors options to purchase up
to 180,000
shares of the Company’s Common Stock, as well as options to a consultant in
connection with services rendered to purchase up to 500 shares
of the Company’s
Common Stock. The Company had estimated the fair value of such
options using the
Black-Scholes model, using an assumed risk-free rate of 4.23%,
and expected life
of 10 years, volatility of 134% and dividend yield of 0%. The options
issued to
the consultant were valued at $1,050, and recorded as a charge
to compensation
expense in December 2004. We have also reserved an aggregate of
155,375
additional shares for issuance under options granted outside of
the 2003 Stock
Option Plan and warrants to purchase 125,000 shares of the Company’s Common
Stock to Paramount as compensation for services rendered in connection
with our
entering into an option agreement with Southern Research Institute.
In
connection with the warrants issued, the Company recorded a charge
of $251,037
to general and administrative expense in December 2004. The Company
had valued
the options using the Black-Scholes model as of the issue date
of the warrants.
During
the three and six months ended June 30, 2005, 451,388 options were
granted and
no options were exercised and 34,416 options were cancelled under
the 2003 Stock
Option plan.
|
6.
|
COMMITMENTS
AND CONTIGENCIES
|
On
May
26, 2005, the Company signed five-year lease agreement for its
corporate office
located in New York that expires in June 2010. Under the terms
of the lease, the
Company leases approximately 2,580 square feet of office space
and is required
to make monthly rental payments of approximately $10,100 until
December 31,
2007, with such payments increasing to approximately $11,000 thereafter
through
the remainder of the term of the lease.
On
April
25, 2005, the company entered into a Surrender and Termination
Agreement and an
Escrow agreement with WE George Street, L.L.C and Cohm Birnbaum
& Shea P.C.
relating to the escrow of a termination fee for $90,000, for an
early
termination to the New Haven, Connecticut office space.
F-54
|
ZIOPHARM
Oncology, Inc.
|
|||||
|
(A
Development Stage Enterprise)
|
|||||
|
Pro
Forma Consolidated Balance Sheet
|
|||||
|
June
30, 2005
|
|||||
|
(Unaudited)
|
|
Proforma
|
ZIOPHARM
|
|||||||||||||||
|
|
EasyWeb,
Inc.
|
ZIOPHARM,
Inc.
|
Adjustments
|
|
Oncology,
Inc. (C)
|
|||||||||||
|
ASSETS
|
||||||||||||||||
|
Current
assets:
|
||||||||||||||||
|
Cash
and cash equivalents
|
$
|
1,118
|
$
|
13,259,983
|
$
|
(425,000
|
)
|
(E)
|
|
$
|
12,836,101
|
|||||
|
Prepaid
expenses and other current assets
|
—
|
257,217
|
—
|
257,217
|
||||||||||||
|
Total
current assets
|
1,118
|
13,517,200
|
(425,000
|
)
|
13,093,318
|
|||||||||||
|
Property
and equipment, net
|
—
|
193,996
|
—
|
193,996
|
||||||||||||
|
Deposits
|
—
|
56,032
|
—
|
56,032
|
||||||||||||
|
$
|
1,118
|
$
|
13,767,228
|
$
|
(425,000
|
)
|
$
|
13,343,346
|
||||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||
|
Current
liabilities:
|
||||||||||||||||
|
Accounts
payable
|
$
|
9,914
|
$
|
448,593
|
$
|
—
|
$
|
458,507
|
||||||||
|
Accrued
expenses
|
—
|
993,047
|
—
|
993,047
|
||||||||||||
|
Total
current liabilities
|
9,914
|
1,441,640
|
—
|
1,451,554
|
||||||||||||
|
Commitments
and contingencies
|
||||||||||||||||
|
Stockholders'
equity:
|
||||||||||||||||
|
Convertible
preferred stock
|
—
|
15,076,733
|
(15,076,733
|
)
|
(A)
|
|
(0
|
)
|
||||||||
|
Convertible
preferred stock warrants
|
—
|
1,682,863
|
(1,682,863
|
)
|
(A)
|
|
—
|
|||||||||
|
Common
stock
|
183,613
|
5,513
|
(181,968
|
)
|
(A)
|
|
7,158
|
|||||||||
|
Additional
paid-in capital
|
118,353
|
5,697,603
|
16,630,802
|
(A)
|
|
22,446,758
|
||||||||||
|
Deficit
accumulated during the development stage
|
(310,762
|
)
|
(10,137,124
|
)
|
(114,238
|
)
|
(A)(D)
|
|
(10,562,124
|
)
|
||||||
|
Total
stockholders' equity (deficit)
|
(8,796
|
)
|
12,325,588
|
(425,000
|
)
|
11,891,792
|
||||||||||
|
$
|
1,118
|
$
|
13,767,228
|
$
|
(425,000
|
)
|
$
|
13,343,346
|
||||||||
The
accompanying notes are an integral part of these financial
statements.
F-55
|
ZIOPHARM
Oncology, Inc.
|
|||||
|
(A
Development Stage Enterprise)
|
|||||
|
Pro
Forma Combined Statement of Operations
|
|||||
|
Six
Months ended June 30, 2005
|
|||||
|
(Unaudited)
|
|||||
|
|
|
ZIOPHARM
|
||||||||||||||||
|
Pro
Forma
|
Oncology,
Inc.
|
|||||||||||||||
|
EasyWeb,
Inc.
|
ZIOPHARM,
Inc.
|
Adjustments
|
|
Pro
Forma
|
||||||||||||
|
Research
contract revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
|
Operating
expenses and other income:
|
||||||||||||||||
|
Research
and development, including
|
||||||||||||||||
|
costs
of research contracts
|
—
|
2,867,919
|
—
|
2,867,919
|
||||||||||||
|
General
and administrative
|
9,954
|
1,505,250
|
514,575
|
(E)(F)
|
|
2,029,779
|
||||||||||
|
Total
operating expenses
|
9,954
|
4,373,169
|
514,575
|
4,897,698
|
||||||||||||
|
Operating
loss
|
(9,954
|
)
|
(4,373,169
|
)
|
(514,575
|
)
|
(4,897,698
|
)
|
||||||||
|
Interest
income
|
—
|
(83,479
|
)
|
—
|
(83,479
|
)
|
||||||||||
|
Net
loss
|
$
|
(9,954
|
)
|
$
|
(4,289,690
|
)
|
$
|
(514,575
|
)
|
$
|
(4,814,219
|
)
|
||||
The
accompanying notes are an integral part of
these financial statements.
F-56
Notes
to
Unaudited Pro Forma Consolidated Financial Statements for the six months
ended
June 30, 2005
1. Basis
of
Presentation
The
unaudited Pro Forma consolidated financial statements present the Pro Forma
consolidated financial position and results of operations of the companies
based
upon historical and projected financial information after giving effect
to the
merger of ZIOPHARM, Inc. (ZIOPHARM) with and into ZIO Acquisition Corp.
(ZIO
Acquisition) a wholly owned subsidiary of EasyWeb, Inc. (EasyWeb). The
unaudited
pro forma financial statements have been prepared to reflect certain adjustments
to our historical financial information, which are described in the Notes
to
Unaudited Pro Forma Financial Statements, to give effect to the merger,
as if it
had been completed on June 30, 2005 for balance sheet purposes and for
January
1, 2005 for the statement of operations.
The
unaudited Pro Forma consolidated financial statements are based on the
balance
sheets of the following:
a) EasyWeb
at June 30, 2005 (unaudited).
b) ZIOPHARM,
Inc. at June 30, 2005 (unaudited)
The
unaudited Pro Forma combined financial statements included the statements
of
operations for the following:
a) EasyWeb
for the six months ended at June 30, 2005 (unaudited).
b) ZIOPHARM,
Inc. for the six months ended June 30, 2005 (unaudited)
The
unaudited Pro Forma combined financial statements are not necessarily indicative
of the actual results that would have occurred had the merger occurred
on the
dates indicated and not necessarily indicative of future earnings or financial
position.
This
unaudited combined Pro Forma information should be read in conjunction
with the
annual audited financial statements of EasyWeb as of and for the year ended
December 31, 2004 included in EasyWeb’s Annual Report on From 10-KSB and the
quarterly report of EasyWeb on Form 10-QSB for the quarter ended June 30,
2005.
In addition, this unaudited combined Pro Forma information should be read
in
conjunction with the audited financial statements of ZIOPHARM, Inc. as
of
December 31, 2004 and for the year then ended, included as an Exhibit 99.2
in
this Current Report on Form 8-K.
F-57
2. Pro
Forma
Adjustments
The
unaudited combined financial statements include the following Pro Forma
adjustments:
| A) |
In
connection with the merger, ZIO Acquisition will merge with and
into
ZIOPHARM with ZIOPHARM remaining as the surviving corporation
and a wholly
owned subsidiary of EasyWeb, Inc. following the merger. In exchange
for
the shares of ZIOPHARM, Inc. capital stock, the holders of ZIOPHARM
Common
Stock and ZIOPHARM Preferred Stock received a number of shares
of common
stock, $.001 par value per share of EasyWeb, Inc. such that upon
completion of the Merger, ZIOPHARM’s current stockholders will hold
approximately 97.4% of the outstanding EasyWeb Common Stock on
a
fully-diluted basis. In order that ZIOPHARM, Inc. stockholders
obtain such
percentage of the EasyWeb Common stock following the merger,
each holder
of the ZIOPHARM Common Stock will receive approximately .50097
(the
“Exchange Ratio”) shares of EasyWeb’s Common stock (subject to appropriate
adjustment as provided for in the merger agreement) for each
share of
ZIOPHARM Common Stock held by such holder immediately prior to
the Merger,
and each holder of ZIOPHARM Preferred Stock will receive the
number of
shares of EasyWeb’s Common Stock equal to the product of the Exchange
Ratio multiplied by the number of shares of ZIOPHARM Common Stock
into
which shares of the holder’s ZIOPHARM Preferred Stock are convertible
immediately prior to the Merger.
|
| B) |
In
connection with the merger, EasyWeb will cease all of its remaining
operations, if any, and will adopt and continue implementing
the business
plan of ZIOPHARM.
|
| C) |
In
connection with the merger, the current officers and directors
of EasyWeb,
Inc. will resign, and the current officers and directors of ZIOPHARM,
Inc.
will be appointed officers and directors of EasyWeb. In connection
with
the merger, EasyWeb changed its name to ZIOPHARM Oncology, Inc.
|
| D) |
The
acquisition has been accounted for as a reverse merger of ZIOPHARM
with
and into a shell company, with ZIOPHARM being the surviving company.
|
| E) |
In
connection with the merger, ZIOPHARM, Inc. was to make certain
payments
not to exceed for $425,000.
|
| F) | As a public company, ZIOPHARM Oncology expects to incur, on a Pro Forma basis, professional fees (legal, accounting and transfer agent fees) and premium expense for directors and officers insurance of $179,150 per year, or $44,787.50 per quarter. |
F-58
ZIOPHARM
ONCOLOGY, INC.
4,870,281
shares of common stock
______________________
PROSPECTUS
______________________
,
2005
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of Directors and Officers.
Under
provisions of the certificate of incorporation and bylaws of the registrant,
directors and officers will be indemnified for any and all judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys fees,
in
connection with threatened, pending or completed actions, suits or proceedings,
whether civil, or criminal, administrative or investigative (other than an
action arising by or in the right of the registrant), if such director or
officer has been wholly successful on the merits or otherwise, or is found
to
have acted in good faith and in a manner he or she reasonably believes to be
in
or not opposed to the best interests of the registrant, and, with respect to
any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In addition, directors and officers will be indemnified
for reasonable expenses in connection with threatened, pending or completed
actions or suits by or in the right of registrant if such director or officer
has been wholly successful on the merits or otherwise, or is found to have
acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the registrant, except in the case of certain
findings by a court that such person is liable for negligence or misconduct
in
his or her duty to the registrant unless such court or the Delaware Court of
Chancery also finds that such person is nevertheless fairly and reasonably
entitled to indemnity. The registrant’s Certificate of Incorporation also
eliminates the liability of directors of the registrant for monetary damages
to
the fullest extent permissible under Delaware law.
Section
145 of the Delaware General Corporation Law states:
(a) A
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action arising by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or
proceeding if he acted in good faith and in a manner he reasonably believed
to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or
its equivalent, shall not, of itself, create a presumption that the person
did
not act in good faith and in a manner which he reasonably believed to be in
or
not opposed to the best interests of the corporation, and, with respect to
any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that he is or was a director, officer, employee or agent
of
the corporation, or is or was serving at the request of the corporation as
a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to
any
claim, issue or matter as to which such person shall have been adjudged to
be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all
the circumstances of the case, such person is fairly and reasonably entitled
to
indemnity for such expense which the Court of Chancery or such other court
shall
deem proper.
Item
25. Other Expenses Of Issuance And Distribution.
The
registrant estimates that expenses payable by the registrant is connection
with
the offering described in this registration statement will be as follows:
|
SEC
registration fee
|
$
|
9,171.71
|
||
|
Legal
fees and expenses
|
15,000.00
|
|||
|
Accounting
fees and expenses
|
5,000.00
|
|||
|
Printing
and engraving expenses
|
3,000.00
|
|||
|
Miscellaneous
|
2,000.00
|
|||
|
|
||||
|
Total
|
$
|
34,171.71
|
Item
26. Recent Sales of Unregistered Securities.
The
following summarizes all sales of unregistered securities by ZIOPHARM since
inception in September 2003 on a premerger basis:
On
September 25, 2003, in connection with ZIOPHARM’s incorporation, ZIOPHARM issued
500,000 shares of common stock for aggregate consideration of $500,000. On
October 7, 2003, ZIOPHARM issued 12,500 shares of common stock to a consultant
in exchange for certain consulting services. On March 14, 2004, ZIOPHARM issued
an additional 4,500,000 shares of common stock in exchange for aggregate
consideration of $4,500,000. On August 31, 2004, ZIOPHARM issued 500,000 shares
of common stock to the University of Texas M.D. Anderson Cancer Center pursuant
to the terms of the license agreement dated August 24, 2004.
In
connection ZIOPHARM’s license agreements with the University of Texas M. D.
Anderson Cancer Center and DEKK-Tec, Inc. ZIOPHARM issued warrants to such
parties to acquire an aggregate of 155,375 shares of common stock.
In
connection with ZIOPHARM’s December 22, 2004 Option Agreement with SRI, ZIOPHARM
issued a warrant to purchase 125,000 shares of common stock Paramount.
In
connection with an offering of Series A Convertible Preferred Stock of ZIOPHARM
that was completed on May 30, 2005, ZIOPHARM issued an aggregate of 8,379,564
shares of such Series A Convertible Preferred Stock in exchange for a purchase
price per share equal to $2.16. ZIOPHARM issued to placement agents in
connection with the offering warrants to purchase up to an aggregate of 837,956
share of ZIOPHARM’s Series A Convertible Preferred Stock.
Since
ZIOPHARM’s inception through the date of the Merger, ZIOPHARM granted
to directors, officers, employees and consultants options to purchase an
aggregate of 1,706,214 shares of common stock at exercise prices ranging from
$0.04 to $2.16 per share with a weighted average exercise price of $0.79 per
share. The issuances of these options were deemed to be exempt from registration
under the Securities Act by virtue of Rule 701 promulgated under Section 3(b)
of
the Securities Act as transactions pursuant to compensation benefits plans
and
contracts relating to compensation.
Except
as
noted above, the sales of the securities identified above were made pursuant
to
privately negotiated transactions that did not involve a public offering of
securities and, accordingly, ZIOPHARM believes that these transactions were
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof and rules promulgated thereunder. Each of the
above-referenced investors in ZIOPHARM’s stock represented to ZIOPHARM in
connection with their investment that they were “accredited investors” (as
defined by Rule 501 under the Securities Act) and were acquiring the shares
for
investment and not distribution, that they could bear the risks of the
investment and could hold the securities for an indefinite period of time.
The
investors received written disclosures that the securities had not been
registered under the Securities Act and that any resale must be made pursuant
to
a registration or an available exemption from such registration. All of the
foregoing securities are deemed restricted securities for purposes of the
Securities Act.
The
following summarizes the sales of unregistered securities by the Company (f/k/a
EasyWeb, Inc.) during the three years prior to and including the closing of
the
Merger:
During
January 2002, the Company sold 13,750 shares of its common stock (adjusted
for
the 1-for-40 share combination effected on August 24, 2005) for $16,500, or
$1.20 per share (as adjusted). Of the 13,750 shares sold, 1,250 shares were
sold
to officers of the Company and 12,500 shares were sold to unrelated third
parties. The shares were sold to seven persons pursuant Section 4(2) of the
Securities Act.
During
March 2003, the Company sold 5,000 shares of its common stock (adjusted for
the
1-for-40 share combination effected on August 24, 2005) for $10,000, or $2.00
per share (as adjusted). The shares were sold to an individual pursuant to
Section 4(2) of the Securities Act.
During
March 2004, the Company sold 6,000 shares of our common stock for $6,000, or
$1.00 per share. The shares were sold to an individual pursuant to Section
4(2)
of the Securities Act.
On
May
13, 2004, the Company issued 10,000 common shares (adjusted for the 1-for-40
share combination effected on August 24, 2005) to Summit Financial valued at
$10,000, or $1.00 per share (as adjusted). On May 13, 2004, we issued 5,000
common shares (adjusted for the 1-for-40 share combination effected on August
24, 2005) in exchange for corporate governance services. On May 13, 2004, we
issued 5,000 common shares (adjusted for the 1-for-40 share combination effected
on August 24, 2005) to a director in exchange for director fees. All shares
were
valued based on contemporaneous sales to unrelated third party investors. These
issuances were made pursuant to Section 4(2) of the Securities Act.
During
January 2005, the Company sold 10,750 common shares (adjusted for the 1-for-40
share combination effected on August 24, 2005) for $13,200, or $1.20 per share
(as adjusted). The shares were issued pursuant to Section 4(2) of the Securities
Act.
During
June 2005, the Company sold 5,000 shares of its common stock (adjusted for
the
1-for-40 share combination effected on August 24, 2005) to a director for
$6,000, or $1.20 per share (as adjusted). During July 2005, the Company sold
8,333 shares of its common stock (adjusted for the 1-for-40 share combination
effected on August 24, 2005) for $10,000, or $1.20 per share (as adjusted).
During August 2005, the Company sold 6,875 shares of its common stock (adjusted
for the 1-for-40 share combination effected on August 24, 2005) to a director
for $24,000, or $3.48 per share. These sales were made pursuant to Section
4(2)
of the Securities Act.
On
September 13, 2005 and in connection with the Merger, EasyWeb, Inc. issued
an
aggregate of 6,967,941 shares of its common stock to the former holders of
ZIOPHARM capital stock, and other securities having the right to purchase
approximately an additional 1,366,846 shares of EasyWeb’s common stock, all of
which were unregistered. For these issuances, EasyWeb relied on the exemption
from federal registration under Section 4(2) of the Securities Act of 1933.
EasyWeb relied on this exemption based on the fact that there were approximately
only 230 (excludes options and warrants) stockholders of ZIOPHARM who were
recipients of such unregistered shares in connection with the Merger, all of
whom, either alone or through a purchaser representative, had knowledge and
experience in financial and business matters such that each was capable of
evaluating the risks of the investment, and had access to information regarding
ZIOPHARM, EasyWeb and the Merger transaction.
Item
27. Exhibits.
|
Exhibit
No.
|
Description
|
|
|
|
|
2.1
|
Agreement
and Plan of Merger among the Registrant (formerly EasyWeb, Inc.),
ZIO
Acquisition Corp. and ZIOPHARM, Inc., dated August 3, 2005 (incorporated
by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed August 9,
2005).
|
|
3.1
|
Certificate
of Incorporation of the Registrant (formerly EasyWeb. Inc.), as filed
with
the Delaware Secretary of State on May 16, 2005.
|
|
3.2
|
Certificate
of Merger dated September 13, 2005, relating to the merger of ZIO
Acquisition Corp. with and into ZIOPHARM, Inc. (incorporated by reference
to Exhibit 3.1 to the Registrant’s Form 8-K filed September 19,
2005).
|
|
3.3
|
Certificate
of Ownership of the Registrant (formerly EasyWeb, Inc.) dated as
of
September 14, 2005, relating the merger of ZIOPHARM, Inc. with and
into
the Registrant and changing the Registrant’s corporate name from EasyWeb,
Inc. to ZIOPHARM Oncology, Inc. (incorporated by reference to Exhibit
3.2
to the Registrant’s Form 8-K filed September 19, 2005).
|
|
3.4
|
Bylaws,
as amended to date (incorporated by reference to Exhibit 3.3 to the
Registrant’s Form 8-K filed September 19, 2005).
|
|
4.1
|
Specimen
common stock certificate.
|
|
4.2
|
Form
of Warrant issued to placement agents in connection with ZIOPHARM,
Inc.
2005 private placement.
|
|
4.3
|
Schedule
identifying holders of Warrants in the form filed as Exhibit 4.2
to this
report.
|
|
4.4
|
Warrant
for the Purchase of Shares of Common Stock dated December 23,
2004.
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
2003
Stock Incentive Plan.
|
|
10.2
|
Employment
Agreement dated January 8, 2004, between the Registrant and Dr. Jonathan
Lewis.
|
|
10.3
|
Employment
Agreement dated January 15, 2004, between the Registrant and Dr.
Robert
Peter Gale.
|
|
10.4
|
Employment
Agreement dated July 21, 2004, between the Registrant and Richard
Bagley.
|
|
10.5
|
Patent
and Technology License Agreement dated August 24, 2004, among ZIOPHARM,
Inc. (predecessor to the Registrant), the Board of Regents of the
University of Texas System on behalf of the University of Texas M.D.
Anderson Cancer Center and the Texas A&M University System.++
|
|
10.6
|
License
Agreement dated October 15, 2004, between ZIOPHARM, Inc. (predecessor
to
the Registrant) and DEKK-Tec, Inc.++
|
|
10.7
|
Form
of subscription agreement between the ZIOPHARM, Inc. and the investors
in
ZIOPHARM, Inc.’s private placement.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - Vitale, Caturano
&
Company, Ltd.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - Cordovano and
Honeck,
LLP.
|
|
23.3
|
Consent
of Maslon, Edelman Borman & Brand, LLP (included as part of Exhibit
5.1)
|
|
24.1
|
Power
of Attorney (included on signature page
hereof)
|
____________________
|
++
|
Confidential
treatment has been requested as to certain portions of this exhibit
pursuant to Rule 406 of the Securities Act of 1933, as
amended.
|
Item
28. Undertakings.
(a)
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant
has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such
issue.
(b)
The undersigned registrant hereby undertakes:
(1)
To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus
any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or
in
the aggregate, represent a fundamental change in the information set forth
in
the registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
(2)
That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(3)
To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering;
and
(4)
That,
for
purposes of determining any liability under the Securities Act, each filing
of
the registrant’s annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement 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.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form SB-2 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New
York, State of New York, on October 14, 2005.
| ZIOPHARM Oncology, Inc. | ||
| |
|
|
| By: | /s/ Jonathan Lewis | |
|
Jonathan Lewis |
||
| Chief Executive Officer | ||
POWER
OF ATTORNEY
Each
person whose signature to this registration statement appears below hereby
constitutes and appoints Jonathan Lewis and Richard Bagley, and each of them,
as
his true and lawful attorney-in-fact and agent, with full power of substitution,
to sign on his or her behalf individually and in the capacity stated below
and
to perform any acts necessary to be done in order to file all amendments to
this
registration statement and any and all instruments or documents filed as part
of
or in connection with this registration statement or the amendments thereto
and
each of the undersigned does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitutes, shall do or cause to be done
by
virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1933, this registration
statement has been signed by the following persons in the capacities
indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/
Jonathan Lewis
|
Director
and Chief Executive Officer
|
October
14, 2005
|
||
|
Jonathan
Lewis
|
(Principal Executive Officer) | |||
|
/s/
Richard E. Bagley
|
Director,
President, Treasurer and Chief
|
October
14, 2005
|
||
|
Richard
Bagley
|
Operating Officer (Principal Accounting and Financial Officer) | |||
|
/s/
Murray Brennan
|
Director
|
October
14, 2005
|
||
|
Murray
Brennan
|
||||
|
/s/
James Cannon
|
Director
|
October
14, 2005
|
||
|
James
Cannon
|
||||
|
|
Director
|
|
||
|
Timothy
McInerney
|
||||
|
|
Director
|
|
||
|
Wyche
Fowler, Jr.
|
||||
|
|
Director
|
|
||
|
Gary
S. Fragin
|
||||
|
/s/
Michael Weiser
|
Director
|
October
14, 2005
|
||
|
Michael
Weiser
|
EXHIBIT
INDEX
|
3.1
|
Certificate
of Incorporation of the Registrant (formerly EasyWeb. Inc.), as filed
with
the Delaware Secretary of State on May 16, 2005.
|
|
4.1
|
Specimen
common stock certificate.
|
|
4.2
|
Form
of Warrant issued to placement agents in connection with ZIOPHARM,
Inc.
2005 private placement.
|
|
4.3
|
Schedule
identifying holders of Warrants in the form filed as Exhibit 4.2
to this
report.
|
|
4.4
|
Warrant
for the Purchase of Shares of Common Stock dated December 23,
2004.
|
|
5.1
|
Opinion
of Maslon Edelman Borman & Brand, LLP.
|
|
10.1
|
2003
Stock Incentive Plan.
|
|
10.2
|
Employment
Agreement dated January 8, 2004, between the Registrant and Dr. Jonathan
Lewis.
|
|
10.3
|
Employment
Agreement dated January 15, 2004, between the Registrant and Dr.
Robert
Peter Gale.
|
|
10.4
|
Employment
Agreement dated July 21, 2004, between the Registrant and Richard
Bagley.
|
|
10.5
|
Patent
and Technology License Agreement dated August 24, 2004, among ZIOPHARM,
Inc. (predecessor to the Registrant), the Board of Regents of the
University of Texas System on behalf of the University of Texas M.D.
Anderson Cancer Center and the Texas A&M University System.++
|
|
10.6
|
License
Agreement dated October 15, 2004, between ZIOPHARM, Inc. (predecessor
to
the Registrant) and DEKK-Tec, Inc.++
|
|
10.7
|
Form
of subscription agreement between the ZIOPHARM, Inc. and the investors
in
ZIOPHARM, Inc.’s private placement.
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm - Vitale, Caturano
&
Company, Ltd.
|
|
23.2
|
Consent
of Independent Registered Public Accounting Firm - Cordovano and
Honeck,
LLP
|
____________________
|
++
|
Confidential
treatment has been requested as to certain portions of this exhibit
pursuant to Rule 406 of the Securities Act of 1933, as
amended.
|
Exhibit
3.1
STATE
of
DELAWARE
CERTIFICATE
of
INCORPORATION
A
STOCK CORPORATION
|
·
|
First:
The name of this Corporation is EasyWeb,
Inc.
|
|
·
|
Second:
Its registered office in the State of Delaware is to be located
at 2711
Centerville Road, Suite 400, in the City of Wilmington, County
of New
Castle, Zip Code 19808. The registered agent in charge thereof
is
Corporation Service Company.
|
|
·
|
Third:
The purpose of the corporation is to engage in any lawful act or
activity
for which corporations may be organized under the General Corporation
Law
of Delaware.
|
|
·
|
Fourth:
The amount of the total stock of this corporation is authorized
to issue
280,000,000 shares (number of authorized shares) with a par value
of
$0.001 per share.
|
|
·
|
Fifth:
The name and mailing address of the incorporator are as
follows:
|
|
Name:
David Olson
|
||
|
Mailing
Address:
|
6025
South Quebec Street, Suite 135
|
|
|
Englewood,
Colorado 80111
|
|
·
|
I,
The Undersigned,
for the purpose of forming a corporation under the laws of the
State of
Delaware, do make, file and record this Certificate, and do certify
that
the facts herein stated are true, and I have accordingly hereunto
set my
hand this 6th
day of May, A.D. 2005.
|
| |
|
|
|
By:
|
/s/ David
Olson
|
|
|
(Incorporator)
|
||
|
NAME:
|
David
Olson
|
|
|
(type
or print)
|
||
|
State
of Delaware
Secretary
of State
Division
of Corporations
Delivered
10:00 AM 05/16/2005
FILED
10:00AM 051602005
SRV
050397760 - 3970466 FILE
|
||
Exhibit
4.2
THE
WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE THEREFOR.
ZIOPHARM,
INC.
Warrant
for the Purchase of Shares of
Series
A Convertible Preferred Stock
|
No.
[
]
|
[
]
Shares
|
Date:
[
], 2005
|
FOR
VALUE
RECEIVED, ZIOPHARM, INC., a Delaware corporation (the "Company"),
hereby certifies that PARAMOUNT
BIOCAPITAL, INC.,
its
designees or its permitted assigns is entitled to purchase from the Company,
in
whole or in part, at any time or from time to time commencing on the date
hereof
and prior to 5:00 P.M., New York City time, on the Expiration Date (as defined
below),
for
an
aggregate purchase price of $[________________]
(computed
on the basis of $2.38 per share) (the
“Aggregate
Warrant Price”), (a)
[______] ([___])
fully
paid and non-assessable shares (subject to adjustment pursuant to the provisions
hereof, the “Warrant
Shares”)
of the
Series A Convertible Preferred Stock, $0.001 par value per share, $2.16
stated
value per share, of the Company (together with any other equity securities
which
may be issued by the Company with respect thereto (other than upon conversion
thereof) or in substitution therefor, the “Preferred
Stock”)
or (b)
if all outstanding shares of Preferred Stock have been converted into Common
Stock, $0.001 par value, of the Company (the “Common
Stock”),
the
number of shares of Common Stock into which the Warrant Shares receivable
upon
the exercise of this Warrant are convertible (subject to adjustment pursuant
to
the provisions hereof, the “Conversion
Shares”).
Hereinafter, (i) the price payable (initially $2.38 per share, subject to
adjustment) for each of the Warrant Shares or the Conversion Shares, as the
case
may be, hereunder is referred to as the “Per
Share Warrant Price”;
(ii)
this Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the “Warrants”;
(iii)
the “Expiration
Date”
shall
be the date that is seven (7) years from the date hereof, (iv) the holder
of
this Warrant is referred to as the “Holder”
and the
holder(s) of this Warrant and all other Warrants, Warrant Shares and Conversion
Shares are referred to as the “Holders”
and
Holders of more than fifty percent (50%) of the outstanding Warrants, Warrant
Shares and Conversion Shares are referred to as the “Majority
of the Holders”;
and
(v) the then Current Market Price per share (the “Current
Market Price”)
as of
any date shall be deemed to be the last sale price of the Common Stock on
the
trading day prior to such date or, in case no such reported sales take place
on
such day, the average of the last reported bid and asked prices of the Common
Stock on such day, in either case on the principal national securities exchange
on which the Common Stock is admitted to trading or listed, or if not listed
or
admitted to trading on any such exchange, the representative closing bid
price
of the Common Stock as reported by the National Association of Securities
Dealers, Inc., Automated Quotations System (“NASDAQ”),
or
other similar organization if NASDAQ is no longer reporting such information,
or, if the Common Stock is not reported on NASDAQ, the high per share bid
price
for the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the fair
market value of the Common Stock as determined by agreement between the then
current Majority of the Holders and the Company’s Board of Directors. The then
“Current Market
Price Per Share of Preferred Stock”
shall
equal the then Current Market Price multiplied by the Conversion Rate (as
such
term is defined and used in the Certificate
of Designations of the Preferred Stock)
then in
effect with respect to the Preferred Stock.
The
Aggregate Warrant Price is not subject to adjustment. The Per Share Warrant
Price is subject to adjustment as hereinafter provided; in the event of any
such
adjustment, the number of Warrant Shares or Conversion Shares, as the case
may
be, deliverable upon exercise of this Warrant shall be adjusted by dividing
the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. Exercise
of Warrant.
(a) This
Warrant may be exercised, in whole at any time or in part from time to time,
commencing on the date hereof and prior to 5:00 P.M., New York City time,
on the
Expiration Date by the Holder:
(i) by
the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 9(a) hereof, together with
proper
payment of the Aggregate Warrant Price, or the proportionate part thereof
if
this Warrant is exercised in part, with payment for Warrant Shares or Conversion
Shares, as the case may be, made by certified or official bank check payable
to
the order of the Company or by wire transfer of immediately available funds;
or
(ii) by
the
surrender of this Warrant (with the cashless exercise form at the end hereof
duly executed) (a "Cashless
Exercise")
at the
address set forth in Section 9(a) hereof. Such presentation and surrender
shall
be deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part.
In the event of a Cashless Exercise, the Holder shall exchange its Warrant
for
that number of Warrant Shares or Conversion Shares, as the case may be, subject
to such Cashless Exercise multiplied by a fraction, the numerator of which
shall
be the difference between the then Current Market Price Per Share of Preferred
Stock (or the Common Stock into which the Preferred Stock is convertible)
and
the Per Share Warrant Price, and the denominator of which shall be the then
Current Market Price Per Share of Preferred Stock (or the Common Stock into
which the Preferred Stock is convertible). For purposes of any computation
under
this Section 1(a), the then Current Market Price shall be based on the trading
day prior to the Cashless Exercise.
(b) If
this
Warrant is exercised in part, this Warrant must be exercised for a number
of
whole shares of the Preferred Stock (or the Common Stock following conversion
of
all the Preferred Stock), and the Holder shall be entitled to receive a new
Warrant covering the Warrant Shares or Conversion Shares, as the case may
be,
which have not been exercised and setting forth the proportionate part of
the
Aggregate Warrant Price applicable to such Warrant Shares or Conversion Shares,
as the case may be. Upon surrender of this Warrant, the Company will (i)
issue a
certificate or certificates in the name of the Holder for the largest number
of
whole shares of the Preferred Stock (or the Common Stock following conversion
of
all the Preferred Stock) to which the Holder shall be entitled and, if this
Warrant is exercised in whole, in lieu of any fractional share of the Preferred
Stock (or the Common Stock following conversion of all the Preferred Stock)
to
which the Holder shall be entitled, pay to the Holder cash in an amount equal
to
the fair value of such fractional share (determined in such reasonable manner
as
the Board of Directors of the Company shall determine), and (ii) deliver
the
other securities and properties receivable upon the exercise of this Warrant,
or
the proportionate part thereof if this Warrant is exercised in part, pursuant
to
the provisions of this Warrant.
(c) If
this
Warrant is exercised on or after the date on which all shares of Preferred
Stock
have been converted into shares of Common Stock (the “Conversion
Date”),
then
this Warrant shall be exercisable only for Conversion Shares at the then
applicable Per Share Warrant Price (including any adjustment pursuant to
Section
3 below).
(d) The
Company shall mail notice to Holders not less than thirty (30) days prior
to the
occurrence of the Expiration Date, unless such a notice has previously been
given to the holders pursuant to any other provisions hereof.
2. Reservation
of Warrant Shares and Conversion Shares; Listing.
The
Company agrees that from the date hereof until the expiration of this Warrant,
the Company shall at all times (a) have authorized and in reserve, and shall
keep available, solely for issuance and delivery upon the exercise of this
Warrant, the shares of the Preferred Stock and other securities and properties
as from time to time shall be receivable upon the exercise of this Warrant,
free
and clear of all restrictions on sale or transfer, other than under Federal
or
state securities laws, and free and clear of all preemptive rights and rights
of
first refusal; (b) have authorized and in reserve, and shall keep available,
solely for issuance or delivery upon conversion of the Warrant Shares or
the
exercise of this Warrant for Conversion Shares, the shares of Common Stock
and
other securities and properties as from time to time shall be receivable
upon
such conversion, free and clear of all restrictions on sale or transfer,
other
than under Federal or state securities laws, and free and clear of all
preemptive rights and rights of first refusal; and (c) if the Company hereafter
lists its Common Stock on any national securities exchange, use its best
efforts
to keep the Conversion Shares authorized for listing on such exchange upon
notice of issuance.
2
3. Protection
Against Dilution.
(a) In
case
the Company shall distribute (other than a distribution in liquidation of
the
Company) to all or substantially all holders of its Preferred Stock, without
any
charge to such holders, evidences of its indebtedness or assets (excluding
cash
dividends or distributions out of earnings) or rights, options, warrants
or
convertible securities containing the right to subscribe for or purchase
Preferred Stock (excluding those referred to in Section 3(c)), then in each
case
the Company shall simultaneously distribute such evidences of its indebtedness
or assets or such rights, options, warrants or convertible securities pro
rata
to the Holders of Warrants on the record date or date of effectiveness, as
the
case may be, fixed for determining the holders of Preferred Stock entitled
to
participate in such distribution in an amount equal to the amount that such
Holders would have been entitled to receive had their Warrants been exercised
for Warrant Shares immediately prior to the time for determination of the
holders of Preferred Stock entitled to participate in such
distribution.
(b) In
case
the Company shall hereafter (i) pay a dividend or make a distribution on
its
capital stock in shares of Preferred Stock, (ii) subdivide its outstanding
shares of Preferred Stock into a greater number of shares, (iii) combine
its
outstanding shares of Preferred Stock into a smaller number of shares or
(iv)
issue by reclassification of its Preferred Stock any shares of capital stock
of
the Company (other than the Conversion Shares), the Per Share Warrant Price
shall be adjusted to be equal to a fraction, the numerator of which shall
be the
Aggregate Warrant Price and the denominator of which shall be the number
of
shares of Preferred Stock or other capital stock of the Company which the
Holder
would have owned immediately following such action had such Warrants been
exercised for Warrant Shares immediately prior thereto. An adjustment made
pursuant to this Section 3(b) shall become effective immediately after the
record date in the case of a dividend, or distribution, and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.
(c) In
the
event that following the conversion of all shares of Preferred Stock (other
than
shares of Preferred Stock issuable upon the exercise of Warrants) into shares
of
Common Stock, the Company shall sell
or
grant any Common Stock, any evidences of indebtedness, shares or other
securities directly or indirectly convertible into or exchangeable for Common
Stock, any rights, options or warrants to purchase or otherwise acquire Common
Stock or any other securities directly or indirectly convertible into or
exchangeable for Common Stock, in each case for a price per share or entitling
the holders thereof to purchase Preferred Stock at a price per share
(determined
by dividing (i) the total amount, if any, received or receivable by the Company
in consideration of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total
Consideration")
by
(ii) the number of additional shares of Common Stock issuable upon exercise
or
conversion of such securities) which is less than the Per Share Warrant Price
in
effect on the date of such issuance or sale, then the Per Share Warrant Price
shall be adjusted as of the date of such issuance or sale by multiplying
the Per
Share Warrant Price then in effect by a fraction, the numerator of which
shall
be (x) the sum of (A) the number of shares of Common Stock outstanding, on
a
fully diluted basis, on the record date of such issuance or sale plus (B)
the
Total Consideration divided by the current Per Share Warrant Price, and the
denominator of which shall be (y) the number of shares of Common Stock
outstanding, on a fully diluted basis, on the record date of such issuance
or
sale plus the maximum number of additional shares of Common Stock issued,
sold
or issuable upon exercise or conversion of such securities. Notwithstanding
the
foregoing, no adjustment in the Per Share Warrant Price shall be required
under
this Section 3(c) in the case of the issuance by the Company of Common Stock
pursuant to (i) the exercise of any Warrant; (ii) the exercise of any stock
options or warrants currently outstanding; (iii)
the
exercise of options and other stock rights granted pursuant to an employee
stock
option plan approved by the Company’s Board of Directors; and (iv) a stock
split, reverse stock split or other recapitalization of the Company for which
anti-dilution protection is provided elsewhere in this Section
3.
3
(d) In
case
of any capital reorganization or reclassification, or any consolidation or
merger to which the Company is a party other than a merger or consolidation
in
which the Company is the continuing corporation, or in case of any sale or
conveyance to another entity of the property of the Company as an entirety
or
substantially as a entirety, or in the case of any statutory exchange of
securities with another corporation (including any exchange effected in
connection with a merger of another corporation or other entity into the
Company), the Holder of this Warrant shall have the right thereafter to receive
on the exercise of this Warrant the kind and amount of securities, cash or
other
property which the Holder would have owned or have been entitled to receive
immediately after such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made
in the
application of the provisions set forth in this Section 3 with respect to
the
rights and interests thereafter of the Holder of this Warrant to the end
that
the provisions set forth in this Section 3 shall thereafter correspondingly
be
made applicable, as nearly as may reasonably be, in relation to any shares
of
stock or other securities or property thereafter deliverable on the exercise
of
this Warrant. The above provisions of this Section 3(d) shall similarly apply
to
successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the
issuer
of any shares of stock or other securities or property thereafter deliverable
on
the exercise of this Warrant to be responsible for all of the agreements
and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders
of
the Warrants not less than thirty (30) days prior to such event. A sale of
all
or substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(e) The
Company will not, by amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution, sale of assets or any
other
voluntary action, avoid or seek to avoid the observance or performance of
any of
the terms of this Warrant, but will at all times in good faith assist in
the
carrying out of all such terms and in the taking of all such action as may
be
necessary or appropriate in order to protect the rights of the Holders against
dilution or other impairment. In case there is a dispute between the Majority
of
the Holders and the Company as to application of this Section 3, or as to
protection of the rights of the Holders against dilution, then, in such case,
the Majority of the Holders may appoint a firm of independent public accountants
of recognized national standing reasonably acceptable to the Company, which
shall give their opinion as to the adjustment, if any, on a basis consistent
with the essential intent and principles established herein, necessary to
preserve the purchase rights represented by the Warrants. Upon receipt of
such
opinion, the Company will promptly mail a copy thereof to the Holder of this
Warrant and shall make the adjustments described therein. The fees and expenses
of such independent public accountants shall be borne by the
Company.
(f) No
adjustment in the Per Share Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least $0.01 per Warrant
Share; provided, however, that any adjustments which by reason of this Section
3(f) are not required to be made shall be carried forward and taken into
account
in any subsequent adjustment; provided, further, however, that adjustments
shall
be required and made in accordance with the provisions of this Section 3
(other
than this Section 3(f)) not later than such time as may be required in order
to
preserve the tax-free nature of a distribution to the Holder of this Warrant
or
the Warrant Shares or Conversion Shares issuable upon the exercise hereof.
All
calculations under this Section 3 shall be made to the nearest cent or to
the
nearest 1/100th of a share, as the case may be. Anything in this Section
3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Warrant Price, in addition to those required
by this
Section 3, as it in its discretion shall deem to be advisable in order that
any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made
by the
Company to its stockholders shall not be taxable.
(g) Whenever
the Per Share Warrant Price is adjusted as provided in this Section 3 and
upon
any modification of the rights of a Holder of Warrants in accordance with
this
Section 3, the Company shall promptly prepare a brief statement of the facts
requiring such adjustment or modification and the manner of computing the
same
and cause copies of such certificate to be mailed to the Holders of the
Warrants. The Company may, but shall not be obligated to unless requested
by a
Majority of the Holders, obtain, at its expense, a certificate of a firm
of
independent public accountants of recognized standing selected by the Company’s
Board of Directors (who may be the regular auditors of the Company) setting
forth the Per Share Warrant Price and the number of Warrant Shares or Conversion
Shares, as the case may be, after such adjustment or the effect of such
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
4
(h) If
the
Board of Directors of the Company shall declare any dividend or other
distribution with respect to the Preferred Stock or Common Stock other than
a
cash distribution out of earned surplus, the Company shall mail notice thereof
to the Holders of the Warrants not less than ten days prior to the record
date
fixed for determining stockholders entitled to participate in such dividend
or
other distribution.
(i) If,
as a
result of an adjustment made pursuant to this Section 3, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Preferred Stock
and
other capital stock of the Company, the Company’s Board of Directors (whose
determination shall be conclusive and shall be described in a written notice
to
the Holder of any Warrant promptly after such adjustment) shall determine
in
good faith
the
allocation of the adjusted Per Share Warrant Price between or among shares
or
such classes of capital stock or shares of Preferred Stock and other capital
stock.
(j) Notwithstanding
the foregoing or anything to the contrary in this Warrant, upon issuance
of the
Warrant Shares pursuant to the terms of this Warrant, each such share of
Preferred Stock shall have the same Conversion
Price (as defined in the Certificate of Designations of the Preferred Stock)
and
be convertible into the same number of shares of Common Stock which would
have
been applicable if the Warrant Shares had been issued on the original issue
date
of this Warrant and had been subject since such date to the adjustment
provisions of Section 4(e) of the Certificate of Designations of the Preferred
Stock. This
provision is intended to protect the rights of the Holders against dilution
or
other impairment and shall not be construed, by itself or in combination
with
any other provision of this Section 3, so as to result in "double dipping"
by
the Holder or any other inequitable adjustment.
(k) Notwithstanding
the foregoing or anything to the contrary in this Warrant, for
purposes of the anti-dilution protection contained in this Section 3, at
all
times following the conversion of all shares of Preferred Stock (other than
shares of Preferred Stock issuable upon the exercise of Warrants) into shares
of
Common Stock, the term Preferred Stock shall be read to be Common Stock,
context
permitting, so that the anti-dilution provisions of this Section 3 will continue
to protect the purchase rights represented by this Warrant after the conversion
of all the Preferred Stock into the Common Stock (other than Preferred Stock
issuable upon the exercise of Warrants) in accordance with the essential
intent
and principles of this Section 3 (it being understood that prior to such
conversion, the anti-dilution provisions of
the Certificate of Designations of
the
Preferred Stock shall protect the Holder from dilution, as contemplated by
Section 3(j) hereof). This provision is intended to protect the rights of
the
Holders against dilution or other impairment and shall not be construed,
by
itself or in combination with any other provision of this Section 3, so as
to
result in "double dipping" by the Holder or any other inequitable
adjustment.
(l) Upon
the
expiration of any rights, options, warrants or conversion privileges, if
such
shall not have been exercised, the Per Share Warrant Price, to the extent
this
Warrant has not then been exercised, shall, upon such expiration, be readjusted
to such amount as would have obtained had the adjustment made upon the granting
or issuance of such rights, options, warrants or conversion privileges been
made
based upon the issuance of only the number of shares of Preferred Stock actually
issued on exercise of such rights, options, warrants or conversion privileges;
provided, however, that no such readjustment shall have the effect of increasing
the Per Share Warrant Price by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion privileges.
4. Fully
Paid Stock; Taxes.
The
Company agrees that the shares of the Preferred Stock represented by each
and
every certificate for Warrant Shares delivered on the exercise of this Warrant
and the shares of Common Stock delivered upon the conversion of the Warrant
Shares or the exercise of this Warrant following the conversion of all shares
of
Preferred Stock into Common Stock, shall at the time of such delivery, be
duly
and validly issued and outstanding, fully paid and nonassessable, and not
subject to preemptive rights or rights of first refusal, and the Company
will
take all such actions as may be necessary to assure that the par value, if
any,
per share of the Preferred Stock and the Common Stock is at all times equal
to
or less than the then Per Share Warrant Price. The Company further covenants
and
agrees that it will pay, when due and payable, any and all Federal and state
stamp, original issue or similar taxes which may be payable in respect of
the
issue of any Warrant Share, Conversion Share or any certificate thereof to
the
extent required because of the issuance by the Company of such security;
provided, however, that if Warrant Shares or Conversion Shares are to be
delivered in a name other than the Holder, no such delivery shall be made
unless
the person requesting the same has paid to the Company the amount of transfer
taxes or charges incident thereto, if any.
5
5. Registration
Under Securities Act of 1933.
The
Holder shall have the right to participate in the registration rights granted
to
purchasers of Preferred Stock pursuant to Article V of the Subscription
Agreement (the “Subscription
Agreement”)
entered into between each such purchaser and the Company in connection with
the
issuance and sale of the Preferred Stock on or about the date hereof, to
the
same extent as if the Holder were a party thereto. The Company shall have
the
same obligations to the Holder as it has under Article V of the Subscription
Agreement to the “Subscribers” and the “Holders” thereunder, and the Holder
shall be entitled to enforce such obligations against the Company as if the
Holder were a party thereto. By acceptance of this Warrant, the Holder agrees
to
comply with the provisions in Article V of the Subscription Agreement to
the
same extent as if it were a party thereto.
6. Investment
Intent; Limited Transferability.
(a)
The
Holder represents, by accepting this Warrant, that it is an “accredited
investor” as that term is defined in Rule 501 promulgated under the Act and
understands that this Warrant and any securities issuable upon exercise of
this
Warrant have not been registered for sale under Federal or state securities
laws
or “Blue Sky” laws and are being offered and sold to the Holder pursuant to one
or more exemptions from the registration requirements of such securities
laws.
The Holder further represents to the Company that it is acquiring this Warrant
and will acquire any securities issuable upon exercise of this Warrant for
its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Act, and agrees that this
Warrant and any such securities will not be sold or otherwise transferred
unless
(i) a registration statement with respect to such transfer is effective under
the Act and any applicable state securities laws or “Blue Sky” laws or (ii) such
sale or transfer is made pursuant to one or more exemptions from the Act
and
under any state securities laws or “Blue Sky” laws.
(b)
This
Warrant and all rights hereunder are transferable, in whole or in part, upon
(i)
notice to the Company, (ii) surrender of the Warrant to the Company with
a
properly executed assignment (in the form attached at the end hereof) at
the
address set forth in Section 9(a) hereof, and (iii) upon delivery to the
Company
at such address of an executed agreement by which the transferee of the Warrant
agrees to be bound by all of the terms and conditions of this Warrant. The
Company will maintain a register containing the names and addresses of the
registered Holder of this Warrant. Any registered Holder may change such
registered holder's address as shown on the warrant register by written notice
to the Company requesting such change. The Company may treat the registered
Holder of this Warrant as he or it appears on the warrant register at any
time
as the Holder for all purposes. The Company shall permit any Holder of a
Warrant
or his duly authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All Warrants issued upon the transfer or
assignment of this Warrant will be dated the same date as this Warrant, and
all
rights of the holder thereof shall be identical to those of the
Holder.
7. Loss,
etc., of Warrant.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant, and of indemnity reasonably satisfactory to
the
Company, if lost, stolen or destroyed, and upon surrender and cancellation
of
this Warrant, if mutilated, the Company shall execute and deliver to the
Holder
a new Warrant of like date, tenor and denomination.
8. Warrant
Holder Not Stockholder.
This
Warrant does not confer upon the Holder any right to vote or to consent to
or
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder,
prior
to the exercise hereof; this Warrant does, however, require certain notices
to
Holders as set forth herein.
9. Communication.
All
notices under this Warrant shall be in writing and shall be deemed to have
been
given if one day after deposit with a nationally recognized overnight delivery
carrier or three days after mailing by U.S. certified or registered mail,
return
receipt requested, postage prepaid, addressed to:
6
(a) the
Company at 197 Eighth Street, Suite 300, Charlestown, MA 02129, or such other
address as the Company has designated in writing to the Holder, or
(b) the
Holder at c/o Paramount BioCapital, Inc., 787 Seventh Avenue, 48th
Floor,
New York, NY 10019 or other such address as the Holder has designated in
writing
to the Company.
10. Headings.
The
headings of this Warrant have been inserted as a matter of convenience and
shall
not affect the construction hereof.
11. Applicable
Law.
This
Warrant shall be governed by and construed in accordance with the law of
the
State of Delaware without giving effect to the principles of conflicts of
law
thereof.
12. Recovery
of Litigation Costs.
If any
legal action or other proceeding is brought for the enforcement of this Warrant,
or because of an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Warrant, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in addition to
any
other relief to which it or they may be entitled.
13. Amendment,
Waiver, etc.
Except
as expressly provided herein, neither this Warrant nor any term hereof may
be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that notwithstanding
the
foregoing any provisions hereof may be amended, waived, discharged or terminated
upon the written consent of the Company and the then current Majority of
the
Holders of the Warrants.
7
IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and attested to by its Secretary this
[ ] day
of
[______], 2005.
| ZIOPHARM, INC. | ||
| |
|
|
| By: | /s/ | |
|
Name: Dr. Jonathan Lewis |
||
| Title: Chief Executive Officer | ||
| ATTEST: | ||||
| By: | ||||
| Name:
Richard Bagley Title: President |
||||
|
|
||||
8
SUBSCRIPTION
The
undersigned, ___________________, pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe for and purchase ____________________
shares
of the Preferred Stock, par value $0.001 per share, stated value $ per share,
of
Ziopharm, Inc., covered by said Warrant, and makes payment therefor in full
at
the price per share provided by said Warrant.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
CASHLESS
EXERCISE
The
undersigned ___________________, pursuant to the provisions of the foregoing
Warrant, hereby elects to exchange its Warrant for ___________________ shares
of
Preferred Stock, par value $0.001 per share, stated value $ per share, of
Ziopharm, Inc., pursuant to the Cashless Exercise provisions of the
Warrant.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
ASSIGNMENT
FOR
VALUE
RECEIVED _______________ hereby sells, assigns and transfers unto
____________________ the foregoing Warrant and all rights evidenced thereby,
and
does irrevocably constitute and appoint _____________________, attorney,
to
transfer said Warrant on the books of Ziopharm, Inc.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED _______________ hereby assigns and transfers unto ____________________
the right to purchase _______ shares of the Preferred Stock, par value $0.001
per share, stated value $ per share, of Ziopharm, Inc., covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint ____________________,
attorney, to transfer that part of said Warrant on the books of Ziopharm,
Inc.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
9
Exhibit
4.3
Schedule
of Warrants issued to Placement Agents in
connection
with ZIOPHARM, Inc. 2005 Private Placement
|
No.
|
Name
|
Shares
of
ZIOPHARM
Oncology, Inc.
Common
Stock
Issuable
upon
exercise
of Warrant
|
||
|
PA-1
|
Steven
Markowitz
|
6,480
|
||
|
PA-2
|
Fabio
Migliaccio
|
2,504
|
||
|
PA-3
|
Denise
Mormile-Liglino
|
1,252
|
||
|
PA-4
|
Michael
Mullen
|
13,534
|
||
|
PA-5
|
Robert
Petrozzo
|
11,083
|
||
|
PA-6
|
Joseph
Sorbara
|
6,480
|
||
|
PA-7
|
Robert
D. Millstone
|
3,479
|
||
|
PA-8
|
Steven
A. Sherman
|
1,739
|
||
|
PA-9
|
Sandgrain
Securities, Inc.
|
579
|
||
|
PA-10
|
Lindsay
Rosenwald
|
221,011
|
||
|
PA-11
|
Michael
Weiser
|
35,566
|
||
|
PA-12
|
Harris
Lydon
|
22,349
|
||
|
PA-13
|
Timothy
McInerney
|
20,767
|
||
|
PA-14
|
Michael
Rosenman
|
19,709
|
||
|
PA-15
|
Scott
Katzman
|
19,709
|
||
|
PA-16
|
Jill
Meleski
|
16,638
|
||
|
PA-17
|
Bernard
Gross
|
8,767
|
||
|
PA-18
|
Karl
Ruggeberg
|
7,850
|
||
|
PA-19
|
Jeana
Somers
|
290
|
All
Warrants were issued on May 31, 2005 and are exercisable at $4.75 per
share.
Exhibit
4.4
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED
FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE PLEDGED, TRANSFERRED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR DELIVERY OF AN OPINION
OF
COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT
OR UNLESS SOLD IN FULL COMPLIANCE WITH RULE 144 UNDER THE ACT.
ZIOPHARM,
INC.
Warrant
for the Purchase of Shares of
Common
Stock
|
No. SRI
- 1
|
125,000 Shares
|
FOR
VALUE
RECEIVED, ZIOPHARM, INC., a Delaware corporation (the “Company”),
hereby certifies that Paramount
Biocapital Investments, LLC,
its
designee or its permitted assigns is entitled to purchase from the Company,
at
any time or from time to time commencing on December 23, 2004 and prior to
5:00
P.M., New York City time, on December 23, 2011 (the “Exercise
Period”),
fully
paid and non-assessable shares of common stock, $0.001 par value per share,
of
the Company for a purchase price per share of $2.38. Hereinafter, (i) said
common stock, $0.001 par value per share, of the Company, is referred to as
the
"Common
Stock";
(ii)
the shares of the Common Stock (subject to adjustment as set forth herein)
purchasable hereunder or under any other Warrant (as hereinafter defined) are
referred to as the “Warrant
Shares”;
(iii)
the aggregate purchase price payable for the Warrant Shares purchasable
hereunder is referred to as the “Aggregate
Warrant Price”;
(iv)
the price payable (initially $2.38 per share subject to adjustment as set forth
herein) for each of the Warrant Shares hereunder is referred to as the
“Per
Share Warrant Price”;
(v)
this Warrant, any similar Warrants issued on the date hereof and any warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the “Warrants”;
(vi)
the holder of this Warrant is referred to as the “Holder”
and the
holder of this Warrant and all other Warrants and Warrant Shares are referred
to
as the “Holders”
and
Holders of more than fifty percent (50%) of the Warrant Shares then issuable
upon exercise of then outstanding Warrants are referred to as the “Majority
of the Holders”;
and
(vii) the then “Current
Market Price”
per
share of the Common Stock shall be deemed to be the last reported sale price
of
the Common Stock on the Trading Day (as defined below) immediately prior to
such
date or, in case no such reported sales take place on such day, the average
of
the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing sale price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System (“NASDAQ”),
or
other similar organization if NASDAQ is no longer reporting such information,
or, if the Common Stock is not reported on NASDAQ, the per share sale price
for
the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the fair
market value of the Common Stock as determined in good faith by the Company’s
Board of Directors. A “Trading
Day”
shall
mean any day on which shares of the Company’s Common Stock are sold, or eligible
for sale, on the respective exchange, quotation system or over-the-counter
market. The Aggregate Warrant Price is not subject to adjustment.
This
Warrant, together with any warrants of like tenor, constituting in the aggregate
Warrants to purchase 125,000 Warrant Shares, was originally issued pursuant
to a
Finders
Agreement dated as of December 23, 2004 (the “Finders
Agreement”)
between the Company and the Holder.
1. Exercise
of Warrant.
(a) This
Warrant may be exercised in whole at any time, or in part from time to time,
by
the Holder during the Exercise Period:
(i) by
the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part
thereof
if this Warrant is exercised in part, with payment for the Warrant Shares
made
by certified or official bank check payable to the order of, or wire transfer
of
immediately available funds to, the Company; or
(ii) by
the
surrender of this Warrant (with the cashless exercise form at the end hereof
duly executed) (a “Cashless
Exercise”)
at the
address set forth in subsection 9(a) hereof. Such presentation and surrender
shall be deemed a waiver of the Holder's obligation to pay the Aggregate
Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part.
In the event of a Cashless Exercise, the Holder shall exchange its Warrant
for
that number of Warrant Shares subject to such Cashless Exercise multiplied
by a
fraction, the numerator of which shall be the difference between the then
Current Market Price and the Per Share Warrant Price, and the denominator
of
which shall be the then Current Market Price. For purposes of any computation
under this subsection 1(a), the then Current Market Price shall be based
on the
Trading Day immediately preceding such Cashless Exercise.
(b) If
this
Warrant is exercised in part, this Warrant must be exercised for a number
of
whole shares of the Common Stock and the Holder is entitled to receive a
new
Warrant covering the Warrant Shares that have not been exercised and setting
forth the proportionate part of the Aggregate Warrant Price applicable to
such
Warrant Shares. Upon surrender of this Warrant in connection with the exercise
of this Warrant pursuant to the terms hereof, the Company will (i) issue
a
certificate or certificates in the name of the Holder for the largest number
of
whole shares of the Common Stock to which the Holder shall be entitled upon
such
exercise and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof,
if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2
2. Reservation
of Warrant Shares; Listing.
The
Company agrees that, prior to the expiration of this Warrant, the Company
shall
at all times (a) have authorized and in reserve, and shall keep available,
solely for issuance and delivery upon the exercise of this Warrant, the shares
of the Common Stock and other securities and properties as from time to time
shall be receivable upon the exercise of this Warrant, free and clear of
all
restrictions on sale or transfer, other than under Federal or state securities
laws, and free and clear of all preemptive rights and rights of first refusal
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, the NASDAQ National Market or the NASDAQ Smallcap Market,
use its commercially reasonable efforts to keep the Warrant Shares authorized
for listing on such exchange upon notice of issuance.
3. Certain
Adjustments.
(a) In
case
the Company shall hereafter (i) pay a dividend or make a distribution on
its
Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares
of
Common Stock into a greater number of shares, (iii) combine or reverse-split
its
outstanding shares of Common Stock into a smaller number of shares or (iv)
issue
by reclassification of its Common Stock any shares of capital stock of the
Company, then the Per Share Warrant Price and the number of Warrant Shares
shall
forthwith be proportionately decreased and increased, respectively, in the
case
of a subdivision, distribution or stock dividend, or proportionately increased
and decreased, respectively, in the case of a combination or reverse stock
split. The Aggregate Warrant Price payable for the then total number Warrant
Shares available for exercise under this Warrant shall remain the same.
Adjustments made pursuant to this subsection 3(a) shall become effective
on the
record date in the case of a dividend or distribution, and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If such dividend, distribution, subdivision
or
combination is not consummated in full, the Per Share Warrant Price and Warrant
Shares shall be readjusted accordingly.
(b) In
case
of any capital reorganization or reclassification, or any consolidation or
merger to which the Company is a party other than a merger or consolidation
in
which the Company is the continuing corporation, or in case of any sale or
conveyance to another entity of all or substantially all of the assets of
the
Company, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger
of a
third corporation into the Company but excluding any exchange of securities
or
merger with another corporation in which the Company is a continuing corporation
and that does not result in any reclassification of or similar change in
the
Common Stock), the Holder of this Warrant shall have the right thereafter
to
receive on the exercise of this Warrant the kind and amount of securities,
cash
or other property which the Holder would have owned or have been entitled
to
receive immediately after such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance had this Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and in any such case, if necessary, appropriate adjustment shall be made
in the
application of the provisions set forth in this Section 3 with respect to
the
rights and interests thereafter of the Holder of this Warrant to the end
that
the provisions set forth in this Section 3 shall thereafter correspondingly
be
made applicable, as nearly as may reasonably be, in relation to any shares
of
stock or other securities or property thereafter deliverable on the exercise
of
this Warrant. The above provisions of this subsection 3(b) shall similarly
apply
to successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the
issuer
of any shares of stock or other securities or property thereafter deliverable
on
the exercise of this Warrant to be responsible for all of the agreements
and
obligations of the Company hereunder. A sale of all or substantially all
of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing
purposes.
3
(c) No
adjustment in the Per Share Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least $0.01 per share
of
Common Stock; provided,
however,
that
any adjustments which by reason of this subsection 3(c) are not required
to be
made shall be carried forward and taken into account in any subsequent
adjustment; provided,
further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this subsection 3(c)) not later
than
such time as may be required in order to preserve the tax-free nature of
a
distribution, if any, to the Holder of this Warrant or Common Stock issuable
upon the exercise hereof. All calculations under this Section 3 shall be
made to
the nearest cent or to the nearest 1/100th of a share, as the case may be.
Anything in this Section 3 to the contrary notwithstanding, the Company shall
be
entitled to make such reductions in the Per Share Warrant Price, in addition
to
those required by this Section 3, as it in its discretion shall deem to be
advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders
shall
not be taxable.
(d) Whenever
the Per Share Warrant Price is adjusted as provided in this Section 3 and
upon
any modification of the rights of a Holder of Warrants in accordance with
this
Section 3, the Company shall promptly prepare a brief statement of the facts
requiring such adjustment or modification and the manner of computing the
same
and cause copies of such certificate to be mailed to the Holders of the
Warrants. The Company may, but shall not be obligated to unless requested
by a
Majority of the Holders, obtain, at its expense, a certificate of a firm
of
independent public accountants of recognized standing selected by the Board
of
Directors (who may be the regular auditors of the Company) setting forth
the Per
Share Warrant Price and the number of Warrant Shares in effect after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the
same
and cause copies of such certificate to be mailed to the Holders of the
Warrants.
(e) If
the
Board of Directors of the Company shall declare any dividend or other
distribution with respect to the Common Stock other than a cash distribution
out
of earned surplus, the Company shall mail notice thereof to the Holders of
the
Warrants not less than ten (10) days prior to the record date fixed
for
determining stockholders entitled to participate in such dividend or other
distribution.
4
(f) If,
as a
result of an adjustment made pursuant to this Section 3, the Holder of any
Warrant thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common Stock
and
other capital stock of the Company, the Board of Directors (whose determination
shall be conclusive and shall be described
in a written notice to the Holder of any Warrant promptly after such adjustment)
shall determine,
in good
faith,
the
allocation of the adjusted Per Share Warrant Price between or among shares
or
such classes of capital stock or shares of Common Stock and other capital
stock.
(g) Upon
the
expiration of any rights, options, warrants or conversion privileges with
respect to the issuance of which an adjustment to the Per Share Warrant Price
had been made, if such option, right warrant or conversion shall not have
been
exercised, the number of Warrant Shares purchasable upon exercise of this
Warrant, to the extent this Warrant has not then been exercised, shall, upon
such expiration, be readjusted and shall thereafter be such as they would
have
been had they been originally adjusted (or had the original adjustment not
been
required, as the case may be) on the basis of (A) the fact that Common Stock,
if
any, actually issued or sold upon the exercise of such rights, options, warrants
or conversion privileges, and (B) the fact that such shares of Common Stock,
if
any, were issued or sold for the consideration actually received by the Company
upon such exercise plus the consideration, if any, actually received by the
Company for the issuance, sale or grant of all such rights, options, warrants
or
conversion privileges whether or not exercised; provided,
however,
that no
such readjustment shall have the effect of decreasing the number of Warrant
Shares purchasable upon exercise of this Warrant by an amount in excess of
the
amount of the adjustment initially made in respect of the issuance, sale
or
grant of such rights, options, warrants or conversion privileges.
(h) In
case
any event shall occur as to which the other provisions of this Section 3
are not
strictly applicable but as to which the failure to make any adjustment would
not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles of the adjustments set forth in
this
Section 3 then, in each such case, the Board of Directors of the Company
shall
in good faith determine the adjustment, if any, on a basis consistent with
the
essential intent and principles established herein, necessary to preserve
the
purchase rights represented by the Warrants. Upon such determination, the
Company will promptly mail a copy thereof to the Holder of this Warrant and
shall make the adjustments described therein.
4. Fully
Paid Stock; Taxes.
The
shares of the Common Stock represented by each and every certificate for
Warrant
Shares delivered on the exercise of this Warrant shall, subject to compliance
by
the Holder with the terms hereof, at the time of such delivery, be duly
authorized, validly issued and outstanding, fully paid and nonassessable,
and
not subject to preemptive rights or rights of first refusal imposed by any
agreement to which the Company is a party, and the Company will take all
such
actions as may be necessary to assure that the par value, if any, per share
of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company shall pay, when due and payable, any and all Federal
and state stamp, original issue or similar taxes which may be payable in
respect
of the issue of any Warrant Share or any certificate thereof to the extent
required because of the issuance by the Company of such
security.
5
5. Piggy-Back
Registration.
(a) The
Company agrees that if, at any time, and from time to time, after the earlier
to
occur of (i) the date of the initial offering of the Common Stock to the
public
pursuant to a registration statement under the Securities Act (the “IPO”);
and
(ii) the first date (the “Trading
Date”)
on
which the Common Stock (or securities received in exchange for Common Stock)
trades on a national securi-ties exchange or on the NASDAQ, including the
Over
the Counter Bulletin Board (a “Trading
Event”),
the
Board of Directors of the Company shall authorize the filing of a registration
statement under the Securities Act (other than the IPO or a registration
statement on Form S-8, Form S-4 or any other form that does not include
substantially the same information as would be required in a form for the
general registration of securities) in connection with the proposed offer
of any
of Common Stock by it or any of its stockholders, the Company shall: (A)
promptly notify each Holder that such registration statement will be filed
and
that the Warrant Shares then held by such Holder will be included in such
registration statement at such Holder’s request; (B) cause such registration
statement to cover all of such Warrant Shares issued to such Holder for which
such Holder requests inclusion, provided that the number of Warrant Shares
to be
included in such registration statement, when added to all the other shares
to
be included therein, does not exceed the number of shares which the Company
and
its underwriters, if any, reasonably fix for inclusion; (C) use best efforts
to
cause such registration statement to become effective as soon as practicable;
and (D) take all other reasonable action necessary under any Federal or state
law or regulation of any governmental authority to permit all such Warrant
Shares that have been issued to such Holder to be sold or otherwise disposed
of,
and will maintain such compliance with each such Federal and state law and
regulation of any governmental authority for the period necessary for such
Holder to promptly effect the proposed sale or other disposition.
(b) It
shall
be a condition precedent to the obligation of the Company to take any action
pursu-ant to this Section 5 with respect to the Warrant Shares of Holder
that
such Holder shall furnish to the Company such informa-tion regarding the
Holder,
the Warrant Shares held by such Holder, and the intended method of disposition
of such securi-ties as shall be reasonably required by the Company to effect
the
registration of such Holder’s Warrant Shares.
(c) If
the
shares to which such registration relates are to be sold in an underwritten
offering, Holder, as a condition to the inclusion of the Shares in the
registration statement, shall agree that the Shares will be sold only as
a part
of such underwritten offering and at the price and upon the terms fixed by
the
Company and its underwriters, subject to the right of Holder to withdraw
the
Shares therefrom. Nothing herein shall prevent the Company from, at any time,
abandoning or delaying any such registration initiated by it. Notwithstanding
anything to the contrary in this Section 5, the Company shall not be obligated
to include any Shares in a registration statement or keep a registration
statement effective with respect to such Warrant Shares if such Warrant Shares
are already covered by a registration statement, or if such securities are
available for resale under Rule 144 of the Securities Act. For clarity, this
Section 5 creates no obligation on the part of the Company to register any
or
all Shares upon the demand of Holder.
6
6. Investment
Intent; Limited Transferability.
(a) By
accepting this Warrant, the Holder represents to the Company that it understands
that this Warrant and any securities obtainable upon exercise of this Warrant
have not been registered for sale under Federal or state securities laws
and are
being offered and sold to the Holder pursuant to one or more exemptions from
the
registration requirements of such securities laws. In the absence of an
effective registration of such securities or an exemption therefrom, any
certificates for such securities shall bear the legend set forth on the first
page hereof. The Holder understands that it must bear the economic risk of
its
investment in this Warrant and any securities obtainable upon exercise of
this
Warrant for an indefinite period of time, as this Warrant and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless an
exemption from such registration is available. The Holder further represents
to
the Company, by accepting this Warrant, that it has full power and authority
to
accept this Warrant and make the representations set forth herein.
(b) The
Holder, by its acceptance of this Warrant, represents to the Company that
it is
acquiring this Warrant and will acquire any securities obtainable upon exercise
of this Warrant for its own account for investment and not with a view to,
or
for sale in connection with, any distribution thereof in violation of the
Act.
The Holder agrees, by acceptance of this Warrant, that this Warrant and any
such
securities issuable
under this Warrant will
not
be sold or otherwise transferred unless
(i) a registration statement with respect to such transfer is effective under
the Act and any applicable state securities laws or (ii) such sale or transfer
is made pursuant to one or more exemptions from the Act.
(c) In
addition to the limitations set forth in Section 1 and in accordance with
the
legend on the first page hereof, this Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities “blue sky” laws, and is so
transferable only upon the books of the Company which it shall cause to be
maintained for such purpose. The Company may treat the registered Holder
of this
Warrant as it appears on the Company's books at any time as the Holder for
all
purposes. The Company shall permit any Holder of a Warrant or its duly
authorized attorney, upon written request during ordinary business hours,
to
inspect and copy or make extracts from its books showing the registered Holders
of Warrant. All Warrants issued upon the transfer or assignment of this Warrant
will be dated the same date as this Warrant, and all rights of the holder
thereof shall be identical to those of the Holder unless, in each case,
otherwise prohibited by applicable law.
(d) The
Holder has been afforded (i) the opportunity to ask such questions as it
has
deemed necessary of, and to receive answers from, representatives of the
Company
concerning the terms and conditions of the Warrants or the exercise of the
Warrants; and (ii) the opportunity to request such additional information
which
the Company possesses or can acquire without unreasonable effort or
expense.
7
(e) The
Holder did not (i) receive or review any advertisement, article, notice or
other
communication published in a newspaper or magazine or similar media or broadcast
over television or radio, whether closed circuit, or generally available;
or
(ii) attend any seminar, meeting or investor or other conference whose attendees
were, to such Holder’s knowledge, invited by any general solicitation or general
advertising.
(f) The
Holder is an “accredited investor” within the meaning of Regulation D under the
Act. Such Holder is acquiring the Warrants for its own account and not with
a
present view to, or for sale in connection with, any distribution thereof
in
violation of the registration requirements of the Act, without prejudice,
however, to such Holder’s right, subject to the provisions of the Placement
Agency
Agreement and this
Warrant, at all times to sell or otherwise dispose of all or any part of
such
Warrants and Warrant Shares.
(g) Either
by
reason of such Holder’s business or financial experience or the business or
financial experience of its professional advisors (who are unaffiliated with
and
who are not compensated by the Company or any affiliate, finder or selling
agent
of the Company, directly or indirectly), such Holder has the capacity to
protect
such Holder’s interests in connection with the transactions contemplated by this
Warrant and the Placement
Agency
Agreement.
The
Holder, by its acceptance of this Warrant, represents to the Company that
it is
able to fend for itself, can bear the economic risk of its investment and
has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in this Warrant.
Holder also represents it has not been organized for the purpose of acquiring
this Warrant.
7. Loss,
etc., of Warrant.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon surrender
and cancellation of this Warrant, if mutilated, the Company shall execute
and
deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant
Holder Not Stockholder.
This
Warrant does not confer upon the Holder any right to vote on or consent to
or
receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, nor any other rights or liabilities as a stockholder,
prior
to the exercise hereof; this Warrant does, however, require certain notices
to
Holders as set forth herein.
9. Communication.
No
notice or other communication under this Warrant shall be effective or deemed
to
have been given unless, the same is in writing and is mailed by first-class
mail, postage prepaid, or via recognized overnight courier with confirmed
receipt, addressed to:
(a) the
Company at ZIOPHARM, Inc., 197 Eighth Street, Suite 300, Charlestown, MA
02129,
Attn: President, or other such address as the Company has designated in writing
to the Holder; or
8
(b) the
Holder, c/o Paramount BioCapital, Inc., at 787 Seventh Avenue, 48th
Floor,
New York, New York 10019, or other such address as the Holder has designated
in
writing to the Company.
10. Headings.
The
headings of this Warrant have been inserted as a matter of convenience and
shall
not affect the construction hereof.
11. Applicable
Law.
This
Warrant shall be governed by and construed in accordance with the law of
the
State of New York without giving effect to the principles of conflicts of
law
thereof.
12. Amendment,
Waiver, etc.
Except
as expressly provided herein, neither this Warrant nor any term hereof may
be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that any provisions
hereof may be amended, waived, discharged or terminated upon the written
consent
of the Company and the Majority of the Holders.
*
* * *
*
9
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to be signed by the undersigned duly authorized
officer as of this 23rd
day of
December, 2004.
| ZIOPHARM, INC. | ||
| |
|
|
| By: | /s/ Jonathan Lewis | |
| Name: | Jonathan Lewis | |
| Title: | Chief Executive Officer | |
10
SUBSCRIPTION (cash)
The
undersigned, ___________________, pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe for and purchase ____________________
shares
of the Common Stock, par value $0.001 per share, of ZIOPHARM, Inc. covered
by
said Warrant, and makes payment therefor in full at the price per share provided
by said Warrant.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
CASHLESS
EXERCISE
The
undersigned _____________, pursuant to the provisions of the foregoing Warrant,
hereby elects to exchange its Warrant for ___________________ shares of Common
Stock, par value $0.001 per share, of ZIOPHARM, Inc. pursuant to the Cashless
Exercise provisions of the Warrant.
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
11
ASSIGNMENT
FOR
VALUE
RECEIVED _______________ (“Assignor”) hereby sells, assigns and transfers unto
____________________ (“Transferee”) the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
ZIOPHARM, Inc. By acceptance of the foregoing Warrant, Transferee shall become
a
Holder under said Warrant and subject to the rights, obligations and
representations of Holder set forth in said Warrant.
ASSIGNOR:
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
TRANSFEREE:
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED _______________ (“Assignor”) hereby assigns and transfers unto
____________________ (“Transferee”) the right to purchase _______ shares of
Common Stock, par value $0.001 per share, of ZIOPHARM, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer such part of said Warrant on
the
books of ZIOPHARM, Inc. By acceptance of the proportionate part of foregoing
Warrant, Transferee shall become a Holder under said proportionate part of
said
Warrant and subject to the rights, obligations and representations of Holder
set
forth in said Warrant.
ASSIGNOR:
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
TRANSFEREE:
|
Dated:
|
Signature:
|
|||
|
Address:
|
||||
12
EXHIBIT
5.1
October
14, 2005
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Americas, 19th
Floor
New
York,
NY 10036
| RE: |
Registration
Statement on Form SB-2
|
Gentlemen:
We
have
acted as counsel to ZIOPHARM Oncology, Inc., a Delaware corporation (the
"Company") in connection with the preparation of a registration statement
on
Form SB-2 (the "Registration Statement") to be filed by the Company with
the
Securities and Exchange Commission on or about October 14, 2005 relating
to the
registration under the Securities Act of 1933, as amended (the "1933 Act"),
of
4,870,281 shares (the “Shares”) of the Company's common stock, $.001 par value
(the "Common Shares"), including 482,407 shares(the “Warrant Shares”) issuable
upon the exercise of outstanding certain warrants (the “Warrants”).
This
opinion is being furnished in accordance with the requirements of Item
601(b)(5)
of Regulation S-B under the 1933 Act.
In
connection with the rendering of this opinion, we have examined and are
familiar
with originals or copies, certified or otherwise identified to our satisfaction,
of (i) the Registration Statement; (ii) the Certificate of Incorporation
and the
Bylaws of the Company, as amended, each as currently in effect; (iii) certain
resolutions adopted by the Board of Directors of the Company relating to
the
issuance of the Shares and Warrants, the preparation and filing of the
Registration Statement and certain related matters; (iv) certain agreements,
certificates of public officials, certificates of other officers or
representatives of the Company or others; and (v) such other documents,
certificates and records as we deemed necessary or appropriate as a basis
for
the opinions expressed herein.
In
our
examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted
to us
as originals, the conformity to original documents of all documents submitted
to
us as certified, conformed or photostatic copies and the authenticity of
the
originals of such copies. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have
relied
upon statements and representations of officers and other representatives
of the
Company and others.
We
are
attorneys licensed to practice in the State of Minnesota and the opinions
expressed herein are limited to the laws of the State of Minnesota and
the
federal securities laws of the United States.
Based
upon and subject to the limitations, qualifications, exceptions and assumptions
set forth herein, it is our opinion that:
| 1. |
The
Common Shares have been duly authorized and are validly issued,
fully paid
and nonassessable; and
|
| 2. |
The
Warrant Shares have been duly authorized and, when issued
against payment
of the requisite exercise price under the respective Warrants,
will be
validly issued, fully paid and
nonassessable.
|
We
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement. We also consent to the reference to our name under the caption
"Validity of Common Stock " in the prospectus filed as part of the Registration
Statement.
This
opinion is furnished to you in connection with the filing of the Registration
Statement and, except as provided in the immediately preceding paragraph,
is not
to be used, circulated, quoted for any other purpose or otherwise referred
to or
relied upon by any other person without the express written permission
of this
firm.
| Very truly yours, | |||
| /s/ MASLON EDELMAN BORMAN & BRAND, LLP | |||
Exhibit
10.1
ZIOPHARM
Oncology, INC.
2003
STOCK OPTION PLAN
1. Purpose.
The
purpose of the 2003 Stock Option Plan (the “Plan”) of ZIOPHARM Oncology, Inc.
(the “Company”) is to increase stockholder value and to advance the interests of
the Company by furnishing a variety of economic incentives (“Incentives”)
designed to attract, retain and motivate employees, certain key consultants
and
directors of the Company. Incentives may consist of opportunities to purchase
or
receive shares of Common Stock, $0.001 par value per share, of the Company
(“Common Stock”) on terms determined under this Plan.
2. Administration.
The
Plan shall be administered by the board of directors of the Company (the
“Board
of Directors”) or by a stock option or compensation committee (the “Committee”)
of the Board of Directors. The Committee shall consist of not less than two
directors of the Company and shall be appointed from time to time by the
Board
of Directors. During any time period during which the Company has a class
of
equity securities registered under Section 12 of the Securities Exchange
Act of
1934 (including the regulations promulgated thereunder, the “1934 Act”), each
member of the Committee shall be (i) a “non-employee
director” within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934 (including the regulations promulgated thereunder, the
“1934 Act”)
(a
“Non-Employee Director”), and
(ii)
shall be an “outside director” within the meaning of Section 162(m) under the
Internal Revenue Code of 1986, as amended (the “Code”) and the regulations
promulgated thereunder. The Committee shall have complete authority to award
Incentives under the Plan, to interpret the Plan, and to make any other
determination which it believes necessary and advisable for the proper
administration of the Plan. The Committee’s decisions and matters relating to
the Plan shall be final and conclusive on the Company and its participants.
If
at any time there is no stock option or compensation committee, the term
“Committee”, as used in the Plan, shall refer to the Board of
Directors.
3. Eligible
Participants.
Officers of the Company, employees of the Company or its subsidiaries, members
of the Board of Directors, and consultants or other independent contractors
who
provide services to the Company or its subsidiaries shall be eligible to
receive
Incentives under the Plan when designated by the Committee. Participants
may be
designated individually or by groups or categories (for example, by pay grade)
as the Committee deems appropriate. Participation by officers of the Company
or
its subsidiaries and any performance objectives relating to such officers
must
be approved by the Committee. Participation by others and any performance
objectives relating to others may be approved by groups or categories (for
example, by pay grade) and authority to designate participants who are not
officers and to set or modify such targets may be delegated.
4. Types
of Incentives.
Incentives under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-statutory stock options
(section 6); (b) stock appreciation rights (“SARs”) (section 7); (c) stock
awards (section 8); (d) restricted stock (section 8); and (e) performance
shares
(section 9).
5. Shares
Subject to the Plan.
5.1. Number
of Shares.
Subject
to adjustment as provided in Section 10.6, the number of shares of Common
Stock
which may be issued under the Plan shall not exceed 2,500,000 shares of Common
Stock. Shares of Common Stock that are issued under the Plan or are subject
to
outstanding Incentives will be applied to reduce the maximum number of shares
of
Common Stock remaining available for issuance under the Plan.
5.2. Cancellation.
To the
extent that cash in lieu of shares of Common Stock is delivered upon the
exercise of an SAR pursuant to Section 7.4, the Company shall be deemed,
for
purposes of applying the limitation on the number of shares, to have issued
the
greater of the number of shares of Common Stock which it was entitled to
issue
upon such exercise or on the exercise of any related option. In the event
that a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised as to any shares of Common Stock, such shares may again be issued
under the Plan either pursuant to stock options, SARs or otherwise. In the
event
that shares of Common Stock are issued as restricted stock or pursuant to
a
stock award and thereafter are forfeited or reacquired by the Company pursuant
to rights reserved upon issuance thereof, such forfeited and reacquired shares
may again be issued under the Plan, either as restricted stock, pursuant
to
stock awards or otherwise. The Committee may also determine to cancel, and
agree
to the cancellation of, stock options in order to make a participant eligible
for the grant of a stock option at a lower price than the option to be
canceled.
5.3. Type
of Common Stock.
Common
Stock issued under the Plan in connection with stock options, SARs, performance
shares, restricted stock or stock awards, may be authorized and unissued
shares
or treasury stock, as designated by the Committee.
6. Stock
Options.
A stock
option is a right to purchase shares of Common Stock from the Company. Each
stock option granted by the Committee under this Plan shall be subject to
the
following terms and conditions:
6.1. Price.
The
option price per share shall be determined by the Committee, subject to
adjustment under Section 10.6.
6.2. Number.
The
number of shares of Common Stock subject to the option shall be determined
by
the Committee, subject to adjustment as provided in Section 10.6. The number
of
shares of Common Stock subject to a stock option shall be reduced in the
same
proportion that the holder thereof exercises a SAR if any SAR is granted
in
conjunction with or related to the stock option.
6.3. Duration
and Time for Exercise.
Subject
to earlier termination as provided in Section 10.4, the term of each stock
option shall be determined by the Committee but shall not exceed ten years
and
one day from the date of grant. Each stock option shall become exercisable
at
such time or times during its term as shall be determined by the Committee
at
the time of grant. The Committee may accelerate the exercisability of any
stock
option. Subject to the foregoing and with the approval of the Committee,
all or
any part of the shares of Common Stock with respect to which the right to
purchase has accrued may be purchased by the Company at the time of such
accrual
or at any time or times thereafter during the term of the
option.
2
6.4. Manner
of Exercise.
A stock
option may be exercised, in whole or in part, by giving written notice to
the
Company, specifying the number of shares of Common Stock to be purchased
and
accompanied by the full purchase price for such shares. The option price
shall
be payable (a) in United States dollars upon exercise of the option and may
be
paid by cash, uncertified or certified check or bank draft; (b) at the
discretion of the Committee, by delivery of shares of Common Stock in payment
of
all or any part of the option price, which shares shall be valued for this
purpose at the Fair Market Value on the date such option is exercised; or
(c) at
the discretion of the Committee, by instructing the Company to withhold from
the
shares of Common Stock issuable upon exercise of the stock option shares
of
Common Stock in payment of all or any part of the exercise price and/or any
related withholding tax obligations, which shares shall be valued for this
purpose at the Fair Market Value or in such other manner as may be authorized
from time to time by the Committee. The shares of Common Stock delivered
by the
participant pursuant to Section 6.4(b) must have been held by the participant
for a period of not less than six months prior to the exercise of the option,
unless otherwise determined by the Committee. Prior to the issuance of shares
of
Common Stock upon the exercise of a stock option, a participant shall have
no
rights as a stockholder.
6.5. Incentive
Stock Options.
Notwithstanding anything in the Plan to the contrary, the following additional
provisions shall apply to the grant of stock options which are intended to
qualify as Incentive Stock Options (as such term is defined in Section 422
of
the Code):
(a) The
aggregate Fair Market Value (determined as of the time the option is granted)
of
the shares of Common Stock with respect to which Incentive Stock Options
are
exercisable for the first time by any participant during any calendar year
(under all of the Company’s plans) shall not exceed $100,000. The determination
will be made by taking incentive stock options into account in the order
in
which they were granted. If such excess only applies to a portion of an
Incentive Stock Option, the Committee, in its discretion, will designate
which
shares will be treated as shares to be acquired upon exercise of an Incentive
Stock Option.
(b) Any
Incentive Stock Option certificate authorized under the Plan shall contain
such
other provisions as the Committee shall deem advisable, but shall in all
events
be consistent with and contain all provisions required in order to qualify
the
options as Incentive Stock Options.
(c) All
Incentive Stock Options must be granted within ten years from the earlier
of the
date on which this Plan was adopted by Board of Directors or the date this
Plan
was approved by the stockholders.
(d) Unless
sooner exercised, all Incentive Stock Options shall expire no later than
10
years after the date of grant.
3
(e) The
option price for Incentive Stock Options shall be not less than the Fair
Market
Value of the Common Stock subject to the option on the date of
grant.
(f) If
Incentive Stock Options are granted to any participant who, at the time such
option is granted, would own (within the meaning of Section 422 of the Code)
stock possessing more than 10% of the total combined voting power of all
classes
of stock of the employer corporation or of its parent or subsidiary corporation,
(i) the option price for such Incentive Stock Options shall be not less than
110% of the Fair Market Value of the Common Stock subject to the option on
the
date of grant and (ii) such Incentive Stock Options shall expire no later
than
five years after the date of grant.
6.6 Right
of Redemption.
The
agreement with the recipient evidencing a stock option grant may include
a
provision whereby the Company may elect, prior to the date of the first
registration of an equity security of the Company pursuant to the Exchange
Act
of 1934, as amended, to repurchase from a former Company employee, director,
consultant, advisor or other independent contractor, and their respective
successors and assigns, all or any part of the shares of Common Stock received
by a participant pursuant to the exercise of a stock option. Any such repurchase
must be made no earlier than six months following the termination of the
holder’s relationship with the Company giving rise to the stock option grant and
at fair market value, as determined by the Committee, on such date of
redemption.
7. Stock
Appreciation Rights.
An SAR
is a right to receive, without payment to the Company, a number of shares
of
Common Stock, cash or any combination thereof, the amount of which is determined
pursuant to the formula set forth in Section 7.4. An SAR may be granted (a)
with
respect to any stock option granted under this Plan, either concurrently
with
the grant of such stock option or at such later time as determined by the
Committee (as to all or any portion of the shares of Common Stock subject
to the
stock option), or (b) alone, without reference to any related stock option.
Each
SAR granted by the Committee under this Plan shall be subject to the following
terms and conditions:
7.1. Number.
Each
SAR granted to any participant shall relate to such number of shares of Common
Stock as shall be determined by the Committee, subject to adjustment as provided
in Section 10.6. In the case of an SAR granted with respect to a stock option,
the number of shares of Common Stock to which the SAR pertains shall be reduced
in the same proportion that the holder of the option exercises the related
stock
option.
7.2. Duration.
Subject
to earlier termination as provided in Section 10.4, the term of each SAR
shall
be determined by the Committee but shall not exceed ten years and one day
from
the date of grant. Unless otherwise provided by the Committee, each SAR shall
become exercisable at such time or times, to such extent and upon such
conditions as the stock option, if any, to which it relates is exercisable.
The
Committee may in its discretion accelerate the exercisability of any
SAR.
7.3. Exercise.
An SAR
may be exercised, in whole or in part, by giving written notice to the Company,
specifying the number of SARs which the holder wishes to exercise. Upon receipt
of such written notice, the Company shall, within 90 days thereafter, deliver
to
the exercising holder certificates for the shares of Common Stock or cash
or
both, as determined by the Committee, to which the holder is entitled pursuant
to Section 7.4.
4
7.4. Payment.
Subject
to the right of the Committee to deliver cash in lieu of shares of Common
Stock
(which, as it pertains to officers and directors of the Company, shall comply
with all requirements of the 1934 Act), the number of shares of Common Stock
which shall be issuable upon the exercise of an SAR shall be determined by
dividing:
(a) the
number of shares of Common Stock as to which the SAR is exercised multiplied
by
the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
of Common Stock subject to the SAR on the exercise date exceeds (1) in the
case
of an SAR related to a stock option, the purchase price of the shares of
Common
Stock under the stock option or (2) in the case of an SAR granted alone,
without
reference to a related stock option, an amount which shall be determined
by the
Committee at the time of grant, subject to adjustment under Section 10.6);
by
(b) the
Fair
Market Value of a share of Common Stock on the exercise date.
In
lieu
of issuing shares of Common Stock upon the exercise of a SAR, the Committee
may
elect to pay the holder of the SAR cash equal to the Fair Market Value on
the
exercise date of any or all of the shares which would otherwise be issuable.
No
fractional shares of Common Stock shall be issued upon the exercise of an
SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common
Stock
on the exercise date or to purchase the portion necessary to make a whole
share
at its Fair Market Value on the date of exercise.
8. Stock
Awards and Restricted Stock.
A stock
award consists of the transfer by the Company to a participant of shares
of
Common Stock, without other payment therefor, as additional compensation
for
services to the Company. A share of restricted stock consists of shares of
Common Stock which are sold or transferred by the Company to a participant
at a
price determined by the Committee (which price shall be at least equal to
the
minimum price required by applicable law for the issuance of a share of Common
Stock) and subject to restrictions on their sale or other transfer by the
participant. The transfer of Common Stock pursuant to stock awards and the
transfer and sale of restricted stock shall be subject to the following terms
and conditions:
8.1. Number
of Shares.
The
number of shares to be transferred or sold by the Company to a participant
pursuant to a stock award or as restricted stock shall be determined by the
Committee.
8.2. Sale
Price.
The
Committee shall determine the price, if any, at which shares of restricted
stock
shall be sold to a participant, which may vary from time to time and among
participants and which may be below the Fair Market Value of such shares
of
Common Stock at the date of sale.
5
8.3. Restrictions.
All
shares of restricted stock transferred or sold hereunder shall be subject
to
such restrictions as the Committee may determine, including, without limitation
any or all of the following:
(a) a
prohibition against the sale, transfer, pledge or other encumbrance of the
shares of restricted stock, such prohibition to lapse at such time or times
as
the Committee shall determine (whether in annual or more frequent installments,
at the time of the death, disability or retirement of the holder of such
shares,
or otherwise);
(b) a
requirement that the holder of shares of restricted stock forfeit, or (in
the
case of shares sold to a participant) resell back to the Company at his or
her
cost, all or a part of such shares in the event of termination of his or
her
employment or consulting engagement during any period in which such shares
are
subject to restrictions;
(c) such
other conditions or restrictions as the Committee may deem
advisable.
8.4. Escrow.
In
order to enforce the restrictions imposed by the Committee pursuant to Section
8.3, the participant receiving restricted stock shall enter into an agreement
with the Company setting forth the conditions of the grant. Shares of restricted
stock shall be registered in the name of the participant and deposited, together
with a stock power endorsed in blank, with the Company. Each such certificate
shall bear a legend in substantially the following form:
The
transferability of this certificate and the shares of Common Stock represented
by it are subject to the terms and conditions (including conditions of
forfeiture) contained in the 2003 Stock Option Plan of Ziopharm,
Inc. (the
“Company”), and an agreement entered into between the registered owner and the
Company. A copy of the Plan and the agreement is on file in the office of
the
secretary of the Company.
8.5. End
of
Restrictions.
Subject
to Section 10.5, at the end of any time period during which the shares of
restricted stock are subject to forfeiture and restrictions on transfer,
such
shares will be delivered free of all restrictions to the participant or to
the
participant's legal representative, beneficiary or heir.
8.6. Stockholder.
Subject
to the terms and conditions of the Plan, each participant receiving restricted
stock shall have all the rights of a stockholder with respect to shares of
stock
during any period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to vote
such
shares. Dividends paid in cash or property other than Common Stock with respect
to shares of restricted stock shall be paid to the participant
currently.
9. Performance
Shares.
A
performance share consists of an award which shall be paid in shares of Common
Stock, as described below. The grant of performance share shall be subject
to
such terms and conditions as the Committee deems appropriate, including the
following:
6
9.1. Performance
Objectives.
Each
performance share will be subject to performance objectives for the Company
or
one of its operating units to be achieved by the end of a specified period.
The
number of performance shares granted shall be determined by the Committee
and
may be subject to such terms and conditions, as the Committee shall determine.
If the performance objectives are achieved, each participant will be paid
in
shares of Common Stock or cash. If such objectives are not met, each grant
of
performance shares may provide for lesser payments in accordance with formulas
established in the award.
9.2. Not
Stockholder.
The
grant of performance shares to a participant shall not create any rights
in such
participant as a stockholder of the Company, until the payment of shares
of
Common Stock with respect to an award.
9.3. No
Adjustments.
No
adjustment shall be made in performance shares granted on account of cash
dividends which may be paid or other rights which may be issued to the holders
of Common Stock prior to the end of any period for which performance objectives
were established.
9.4. Expiration
of Performance Share.
If any
participant's employment or consulting engagement with the Company is terminated
for any reason other than normal retirement, death or disability prior to
the
achievement of the participant's stated performance objectives, all the
participant's rights on the performance shares shall expire and terminate
unless
otherwise determined by the Committee. In the event of termination of employment
or consulting by reason of death, disability, or normal retirement, the
Committee, in its own discretion may determine what portions, if any, of
the
performance shares should be paid to the participant.
10. General.
10.1. Effective
Date.
The
Plan will become effective upon its approval by the Company's stockholders.
Unless approved by the stockholders within one year after the date of the
Plan's
adoption by the Board of Directors, the Plan shall not be effective for any
purpose.
10.2. Duration.
The
Plan shall remain in effect until all Incentives granted under the Plan have
either been satisfied by the issuance of shares of Common Stock or the payment
of cash or been terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their issuance under
the
Plan have lapsed. No Incentives may be granted under the Plan after the tenth
anniversary of the date the Plan is approved by the stockholders of the
Company.
10.3. Non-transferability
of Incentives.
No
stock option, SAR, restricted stock or performance award may be transferred,
pledged or assigned by the holder thereof (except, in the event of the holder's
death, by will or the laws of descent and distribution to the limited extent
provided in the Plan or the Incentive), or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and the Company shall not be
required to recognize any attempted assignment of such rights by any
participant. Notwithstanding the preceding sentence, stock options may be
transferred by the holder thereof to Employee’s spouse, children, grandchildren
or parents (collectively, the “Family Members”), to trusts for the benefit of
Family Members, to partnerships or limited liability companies in which Family
Members are the only partners or shareholders, or to entities exempt from
federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended. During a participant’s lifetime, a stock option may be
exercised only by him or her, by his or her guardian or legal representative
or
by the transferees permitted by the preceding sentence.
7
10.4. Effect
of Termination or Death.
In the
event that a participant ceases to be an employee of or consultant to the
Company for any reason, including death or disability, any Incentives may
be
exercised or shall expire at such times as may be determined by the
Committee.
10.5. Additional
Condition.
Notwithstanding anything in this Plan to the contrary: (a) the Company may,
if
it shall determine it necessary or desirable for any reason, at the time
of
award of any Incentive or the issuance of any shares of Common Stock pursuant
to
any Incentive, require the recipient of the Incentive, as a condition to
the
receipt thereof or to the receipt of shares of Common Stock issued pursuant
thereto, to deliver to the Company a written representation of present intention
to acquire the Incentive or the shares of Common Stock issued pursuant thereto
for his or her own account for investment and not for distribution; and (b)
if
at any time the Company further determines, in its sole discretion, that
the
listing, registration or qualification (or any updating of any such document)
of
any Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state securities
or
blue sky law, or that the consent or approval of any governmental regulatory
body is necessary or desirable as a condition of, or in connection with the
award of any Incentive, the issuance of shares of Common Stock pursuant thereto,
or the removal of any restrictions imposed on such shares, such Incentive
shall
not be awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in part,
unless such listing, registration, qualification, consent or approval shall
have
been effected or obtained free of any conditions not acceptable to the
Company.
10.6. Adjustment.
In the
event of any recapitalization, stock dividend, stock split, combination of
shares or other change in the Common Stock, the number of shares of Common
Stock
then subject to the Plan, including shares subject to restrictions, options
or
achievements of performance shares, shall be adjusted in proportion to the
change in outstanding shares of Common Stock. In the event of any such
adjustments, the purchase price of any option, the performance objectives
of any
Incentive, and the shares of Common Stock issuable pursuant to any Incentive
shall be adjusted as and to the extent appropriate, in the discretion of
the
Committee, to provide participants with the same relative rights before and
after such adjustment.
10.7. Incentive
Plans and Agreements.
Except
in the case of stock awards, the terms of each Incentive shall be stated
in a
plan or agreement approved by the Committee. The Committee may also determine
to
enter into agreements with holders of options to reclassify or convert certain
outstanding options, within the terms of the Plan, as Incentive Stock Options
or
as non-statutory stock options and in order to eliminate SARs with respect
to
all or part of such options and any other previously issued
options.
8
10.8. Withholding.
(a) The
Company shall have the right to withhold from any payments made under the
Plan
or to collect as a condition of payment, any taxes required by law to be
withheld. At any time when a participant is required to pay to the Company
an
amount required to be withheld under applicable income tax laws in connection
with a distribution of Common Stock or upon exercise of an option or SAR,
the
participant may satisfy this obligation in whole or in part by electing (the
“Election”) to have the Company withhold from the distribution shares of Common
Stock having a value up to the minimum amount of withholding taxes required
to
be collected on the transaction. The value of the shares to be withheld shall
be
based on the Fair Market Value of the Common Stock on the date that the amount
of tax to be withheld shall be determined (“Tax Date”).
(b) Each
Election must be made prior to the Tax Date. The Committee may disapprove
of any
Election, may suspend or terminate the right to make Elections, or may provide
with respect to any Incentive that the right to make Elections shall not
apply
to such Incentive. An Election is irrevocable.
10.9. No
Continued Employment, Engagement or Right to Corporate Assets.
No
participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of
time
or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving
an
employee, a consultant, such persons' beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or creating
a trust
of any kind or a fiduciary relationship of any kind between the Company and
any
such person.
10.10. Deferral
Permitted.
Payment
of cash or distribution of any shares of Common Stock to which a participant
is
entitled under any Incentive shall be made as provided in the Incentive.
Payment
may be deferred at the option of the participant if provided in the
Incentive.
10.11. Amendment
of the Plan.
The
Board may amend or discontinue the Plan at any time. However, no such amendment
or discontinuance shall adversely change or impair, without the consent of
the
recipient, an Incentive previously granted. Further, no such amendment shall,
without approval of the shareholders of the Company, (a) increase the maximum
number of shares of Common Stock which may be issued to all participants
under
the Plan, (b) change or expand the types of Incentives that may be granted
under
the Plan, (c) change the class of persons eligible to receive Incentives
under
the Plan, or (d) materially increase the benefits accruing to participants
under
the Plan.
10.12
Sale,
Merger, Exchange or Liquidation.
Unless
otherwise provided in the agreement for an Incentive, in the event of an
acquisition of the Company through the sale of substantially all of the
Company's assets or through a merger, exchange, reorganization or liquidation
of
the Company or a similar event as determined by the Committee (collectively
a
“transaction”), the Committee shall be authorized, in its sole discretion, to
take any and all action it deems equitable under the circumstances, including
but not limited to any one or more of the following:
9
(1)
providing
that the Plan and all Incentives shall terminate and the holders of (i) all
outstanding vested options shall receive, in lieu of any shares of Common
Stock
they would be entitled to receive under such options, such stock, securities
or
assets, including cash, as would have been paid to such participants if their
options had been exercised and such participant had received Common Stock
immediately prior to such transaction (with appropriate adjustment for the
exercise price, if any), (ii) performance shares and/or SARs that
entitle
the participant to receive Common Stock shall receive, in lieu of any shares
of
Common Stock each participant was entitled to receive as of the date of the
transaction pursuant to the terms of such Incentive, if any, such stock,
securities or assets, including cash, as would have been paid to such
participant if such Common Stock had been issued to and held by the participant
immediately prior to such transaction, and (iii) any Incentive under this
Agreement which does not entitle the participant to receive Common Stock
shall
be equitably treated as determined by the Committee.
(2)
providing that participants holding outstanding vested Common Stock based
Incentives shall receive, with respect to each share of Common Stock issuable
pursuant to such Incentives as of the effective date of any such transaction,
at
the determination of the Committee, cash, securities or other property, or
any
combination thereof, in an amount equal to the excess, if any, of the Fair
Market Value of such Common Stock on a date within ten days prior to the
effective date of such transaction over the option price or other amount
owed by
a participant, if any, and that such Incentives shall be cancelled, including
the cancellation without consideration of all options that have an exercise
price below the per share value of the consideration received by the Company
in
the transaction.
(3)
providing that the Plan (or replacement plan) shall continue with respect
to
Incentives not cancelled or terminated as of the effective date of such
transaction and provide to participants holding such Incentives the right
to
earn their respective Incentives on a substantially equivalent basis (taking
into account the transaction and the number of shares or other equity issued
by
such successor entity) with respect to the equity of the entity succeeding
the
Company by reason of such transaction.
(4)
providing that all unvested, unearned or restricted Incentives, including
but
not limited to restricted stock for which restrictions have not lapsed as
of the
effective date of such transaction, shall be void and deemed terminated,
or, in
the alternative, for the acceleration or waiver of any vesting, earning or
restrictions on any Incentive.
The
Board
may restrict the rights of participants or the applicability of this
Section 10.12 to the extent necessary to comply with Section 16(b)
of the
Securities Exchange Act of 1934, the Internal Revenue Code or any other
applicable law or regulation. The grant of an Incentive award pursuant to
the
Plan shall not limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital
or
business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
10
10.13. Definition
of Fair Market Value.
For
purposes of this Plan, the “Fair Market Value” of a share of Common Stock at a
specified date shall, unless otherwise expressly provided in this Plan, be
the
amount which the Committee or the Board of Directors determines in good faith
to
be 100% of the fair market value of such a share as of the date in question;
provided, however, that notwithstanding the foregoing, if such shares are
listed
on a U.S. securities exchange or are quoted on the Nasdaq National Market
or
Nasdaq Small-Cap Market (“Nasdaq”), then Fair Market Value shall be determined
by reference to the last sale price of a share of Common Stock on such U.S.
securities exchange or Nasdaq on the applicable date. If such U.S. securities
exchange or Nasdaq is closed for trading on such date, or if the Common Stock
does not trade on such date, then the last sale price used shall be the one
on
the date the Common Stock last traded on such U.S. securities exchange or
Nasdaq.
Approved
by the Board of Directors of ZIOPHARM, Inc. on December 30, 2003.
Approved
by the stockholders of ZIOPHARM, Inc. on December 21, 2004.
Assumed
by ZIOPHARM Oncology, Inc. pursuant to merger effective September 13,
2005.
11
Exhibit
10.2
EMPLOYMENT
AGREEMENT
AGREEMENT
(the “Agreement”),
dated
as of January
8, 2004, by and between ZYLOGEN, INC., a Delaware corporation with principal
executive offices at 787 Seventh Avenue, 48th
Floor,
New York, NY 10019 (the “Company”),
and
DR. JONATHAN
LEWIS, residing at 1522 Fairfield Beach Road, Fairfield, CT 06824
(the
“Executive”).
W
I T N E S S E T H:
WHEREAS,
the Company desires to employ the Executive as President and Chief Executive
Officer of the Company, and the Executive desires to serve the Company in
those
capacities, upon the terms and subject to the conditions contained in this
Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. Employment.
(a) Services.
The
Executive will be employed by the Company as its President and Chief Executive
Officer. The Executive will report directly to the Board of Directors of
the
Company (the "Board") and shall perform such duties assigned by the Board
as are
consistent with his position as President and Chief Executive Officer
(the
“Services”).
The
Executive agrees to perform such duties faithfully, to devote substantially
all
of his business time, attention and energies to the business of the Company,
and
while he remains employed, not to engage in any other business activity that
is
in conflict with your duties and obligations to the Company; provided,
however,
that
the Executive may engage in the following activities to the extent that such
activities, individually or collectively, do not interfere with the performance
of the Executive’s duties and responsibilities hereunder, devoting such
reasonable time as may be necessary, but in no event more than five (5) business
days per annum (A) to fulfill civic responsibilities, (B) for personal financial
matters, (C) to respond to inquiries from former patients and their current
physicians, (D) to serve as an expert witness in cases involving Sarcoma,
(E) to
give and attend academic lectures in connection with the Executive’s affiliation
with the Yale Medical School and the National Academy of Sciences, (F) to
write
and edit medical, scientific and business textbooks and (G) to perform certain
other activities with the prior consent of the Company’s Board of Directors.
(b) Acceptance.
Executive hereby accepts such employment and agrees to render the
Services.
2. Term.
The
Executive's employment under this Agreement (the "Term") shall commence as
of
the Effective Date (as hereinafter defined) and shall continue for a term
of
three (3) years, unless sooner terminated pursuant to Section 9 of this
Agreement. Notwithstanding anything to the contrary contained herein, the
provisions of this Agreement governing protection of Confidential Information
shall continue in effect as specified in Section 6 hereof and survive the
expiration or termination hereof. The Term may be extended for additional
one
(1) year periods upon mutual written consent of the Executive and the
Board.
3. Best
Efforts; Place of Performance.
(a) The
Executive shall devote substantially all of his business time, attention
and
energies to the business and affairs of the Company and
shall
use his best efforts to advance the best interests of the Company and shall
not
during the Term be actively engaged in any other business activity, whether
or
not such business activity is pursued for gain, profit or other pecuniary
advantage, that will interfere with the performance by the Executive of his
duties hereunder or the Executive’s availability to perform such duties or that
will adversely affect, or negatively reflect upon, the Company.
(b) The
duties to be performed by the Executive hereunder shall be performed primarily
at the office of the Company in New York, New York, subject to reasonable
travel
requirements on behalf of the Company, or
such
other place as the Board may reasonably designate, subject to the provisions
of
Section 9(d) below.
4. Directorship.
The
Company shall use its best efforts to cause the Executive to be elected as
a
member of its Board of Directors throughout the Term and shall include him
in
the management slate for election as a director at every stockholders meeting
during the Term at which his term as a director would otherwise expire. The
Executive agrees to accept election, and to serve during the Term, as director
of the Company, without any compensation therefor other than as specified
in
this Agreement.
5. Compensation.
As full
compensation for the performance by the Executive of his duties under this
Agreement, the Company shall pay the Executive as follows:
(a) Base
Salary. The
Company shall pay Executive a salary (the “Base Salary”) equal to Three Hundred
Fifty Three Thousand Dollars ($350,000) per year. Payment shall be made
semi-monthly, on the fifteenth and the last day of each calendar
month.
(b) Signing
Bonus. The Company shall pay the Executive a one time bonus equal to Two
Hundred
Fifty Thousand Dollars ($250,000) within ten (10) business days of the Effective
Date of this Agreement.
(c) Guaranteed
Bonus. The Company shall pay the Executive a bonus (the “Guaranteed
Bonus”)
of Two
Hundred Fifty Thousand Dollars ($250,000) within 30 days following each
anniversary of the date of this Agreement during the Term, provided that
the
Executive is employed hereunder on such anniversary date.
The
Board of Directors of the Company shall annually review the Guaranteed Bonus
to
determine whether an increase in the amount thereof is warranted.
(d) Discretionary
Bonus. At the sole discretion of the Board of Directors of the Company, the
Executive shall receive an additional annual bonus (the “Discretionary
Bonus”)
in an
amount equal to up to 100% of his Base Salary, based upon his performance
on
behalf of the Company during the prior year. The Discretionary Bonus shall
be
payable either as a lump-sum payment or in installments as determined by
the
Board of Directors of the Company in its sole discretion. In addition,
the
Board
of Directors of the Company shall annually review the Bonus to determine
whether
an increase in the amount thereof is warranted.
2
(e) Withholding.
The Company shall withhold all applicable federal, state and local taxes
and
social security and such other amounts as may be required by law from all
amounts payable to the Executive under this Section 5.
(f) Stock
Options.
(i) As
additional compensation for the services to be rendered by the Executive
pursuant to this Agreement, the Company shall grant the Executive non-qualified
stock options (“Stock
Options”)
to
purchase 205,000 shares of Common Stock of the Company at a price equal to
$0.01
per share representing ten percent (10%) of the outstanding Common Stock
of the
Company, on a fully diluted basis, as
of the
Effective Date.
The
Stock
Options shall be governed by the Company’s 2003 Stock Option Plan and
shall
vest, if at all,
in
three equal installments on January 8, 2005, January 8, 2006 and January
8, 2007
of this Agreement, subject
in each
case
to the
provisions of Section 10 below. In connection with such grant, the Executive
shall enter into the Company’s standard stock option agreement, which will
incorporate the foregoing vesting schedule, exercise price and the Stock
Option
related provisions contained in Section 10 below.
The
Board of Directors of the Company shall annually review the number of Stock
Options granted to the Executive to determine whether an increase in the
number
thereof is warranted.
(ii) Anti-dilution
Protection. Until such time as the Company has raised gross proceeds equal
to
$25,000,000 from
the
issuance and sale of Equity Securities (as defined below).,
the
Company shall issue to the Executive a number of additional Stock Options
sufficient to maintain Executive’s ownership percentage at least equal to
percent (5%) of the outstanding Common Stock of the Company on a fully diluted
basis. Once the Company has raised $25,000,000 through the sale of its Equity
Securities, Executive shall be diluted pro rata along with all other holders
of
securities of the Company. As
used
herein “Equity Securities” shall mean shares of Common Stock, options, warrants
or other rights to purchase Common Stock or securities or evidences of
indebtedness convertible into or exchangeable for shares of Common
Stock.
(iii)
Notwithstanding the foregoing, Section 3(f)(iii) shall not apply to, and
the
Executive shall not be entitled to anti-dilution protection with respect
to, the
issuance of Excluded Equity Securities and Excluded Equity Securities shall
not
be included in calculating the fully diluted issued and outstanding shares
of
Common Stock of the Company for any purpose under this Agreement. “Excluded
Equity Securities” shall mean Equity Securities that are issued by the Company
pursuant to any transactions approved by the Board of Directors primarily
for
the purpose of: (1) incentivizing employees, directors or consultants to
the
Company following the issuance of up to five percent (5%) of the outstanding
shares of Common Stock of the Company for such purposes; (2) joint ventures,
strategic alliances or research and development activities, (3) purchase
or
licensing of technology, or (4) any other transactions involving current
or
potential partners that are primarily for purposes other than raising capital.
As long as the anti-dilution protection contained in this paragraph Section
3(f)(iii) remains in effect, the Executive shall be diluted pari passu with
all
other holders of Common Stock by the issuance by the Company of Excluded
Equity
Securities. Upon termination of such anti-dilution protection, the Executive
shall be diluted pari passu with all other holders of Common Stock by the
issuance of any Equity Securities.
3
(g) Expenses.
The Company shall reimburse the Executive for all reasonable out of pocket
expenses incurred by the Executive in furtherance of the business and affairs
of
the Company, including reasonable travel and entertainment (which shall include
business-class travel, unless unavailable and then first-class travel, for
trips
requiring air time longer than two (2) hours and the use of car service for
business-related activities), upon timely receipt by the Company of appropriate
vouchers or other proof of the Executive’s expenditures and otherwise in
accordance with any expense reimbursement policy as may from time to time
be
adopted by the Company.
(h) Life
and
Disability Insurance. The Company shall reimburse the Executive all premiums
paid by the Executive on life insurance policies covering the Executive in
amounts up to $800,000 and disability insurance policies covering the Executive
in amounts up to $20,000 per month.
(i) Vacation.
The Executive shall, during the Term, be entitled to a vacation of four (4)
weeks per annum,
in
addition to holidays observed by the Company.
The
Executive shall not be entitled to carry any vacation forward to the next
year
of employment and shall not receive any compensation for unused vacation
days.
(j) Piggyback
Registration Rights.
The
Company agrees that if, at any time, and from time to time, after an initial
public offering of its Common Stock, the Board shall authorize the filing
of a
registration statement under the Securities Act in connection with the proposed
offer of any of its securities by it or any of its stockholders, the Company
shall, subject to an underwriter lockup agreement, if any, and such
underwriter’s discretion, (A) cause such registration statement to cover all of
Common Stock underlying the vested Options of the Executive; (B) use its
commercially reasonable efforts to cause such registration statement to become
effective as soon as practicable; and (C) maintain such compliance with
applicable laws and regulations of any governmental authority for the period
of
two years or until the Executive has disposed all of his securities under
the
Registration Statement. Notwithstanding any other provision of this Section
3(j), the Company may at any time, abandon or delay any registration commenced
by the Company.
(k) Other
Benefits.
(i) The
Executive shall be entitled to all rights and benefits for which he shall
be
eligible under any benefit or other plans (including, without limitation,
dental, medical, medical reimbursement and hospital plans, pension plans,
employee stock purchase plans, profit sharing plans, bonus plans and other
so-called "fringe" benefits) as the Company shall make available to any of
its
senior executives from time to time.
(ii) The
Company shall reimburse the Executives for his reasonable medical licensing
fees
and other professional dues and memberships and journal subscriptions. In
addition, the Company shall reimburse the Executive up to $10,000 per annum
for
costs associated with a consulting group retained by the Executive for the
purpose of assisting the Executive corporate decision making.
4
6. Confidential
Information and Inventions.
(a) The
Executive recognizes and acknowledges that in the course of his duties he
is
likely to receive confidential or proprietary information owned by the Company,
its affiliates or third parties with whom the Company or any of such affiliates
has an obligation of confidentiality. Accordingly, during and after the Term,
the Executive agrees to keep confidential and not disclose or make accessible
to
any other person or use for any other purpose other than in connection with
the
fulfillment of his duties under this Agreement, any Confidential and Proprietary
Information (as defined below) owned by, or received by or on behalf of,
the
Company or any of its affiliates. “Confidential and Proprietary Information”
shall include, but shall not be limited to, confidential or proprietary
scientific or technical information, data, formulas and related concepts,
business plans (both current and under development), client lists, promotion
and
marketing programs, trade secrets, or any other confidential or proprietary
business information relating to development programs, costs, revenues,
marketing, investments, sales activities, promotions, credit and financial
data,
manufacturing processes, financing methods, plans or the business and affairs
of
the Company or of any affiliate or client of the Company. The Executive
expressly acknowledges the trade secret status of the Confidential and
Proprietary Information and that the Confidential and Proprietary Information
constitutes a protectable business interest of the Company. The Executive
agrees: (i) not to use any such Confidential and Proprietary Information
for
himself or others; and (ii) not to take any Company material or reproductions
(including but not limited to writings, correspondence, notes, drafts, records,
invoices, technical and business policies, computer programs or disks) thereof
from the Company’s offices at any time during his employment by the Company,
except as required in the execution of the Executive’s duties to the Company.
The Executive agrees to return immediately all Company material and
reproductions (including but not limited, to writings, correspondence, notes,
drafts, records, invoices, technical and business policies, computer programs
or
disks) thereof in his possession to the Company upon request and in any event
immediately upon termination of employment.
(b) Except
in
furtherance of the business of the Company, or otherwise with prior written
authorization by the Company, the Executive agrees not to disclose or publish
any of the Confidential and Proprietary Information, or any confidential,
scientific, technical or business information of any other party to whom
the
Company or any of its affiliates owes an obligation of confidence, at any
time
during or after his employment with the Company. Nothing in the foregoing
shall
be construed to prevent the Executive from disclosing or using any Confidential
or Proprietary Information that:
(i) Executive
can evidence through written documentation was in the Executive’s possession or
control prior to the date of disclosure;
(ii) Executive
can evidence through written documentation was in the public domain or enters
into the public domain through no improper act by Executive
(iii)
is
approved for public release by written authorization of the Company’ Board of
Directors;
(iv)
is
required to be disclosed by legal, administrative or judicial process;
or
(v) is
rightfully granted to Executive by sources independent of the Company, its
officers, employees, agents, affiliates and consultants.
5
(c) The
Executive agrees that all inventions, discoveries, improvements and patentable
or copyrightable works (“Inventions”)
initiated, conceived or made by him, either alone or in conjunction with
others,
during the Term
shall be
the sole property of the Company to the maximum extent permitted by applicable
law and, to the extent permitted by law, shall be “works made for hire” as that
term is defined in the United States Copyright Act (17 U.S.C.A., Section
101).
The Company shall be the sole owner of all patents, copyrights, trade secret
rights, and other intellectual property or other rights in connection therewith.
The Executive hereby assigns to the Company all right, title and interest
he may
have or acquire in all such Inventions; provided, however, that the Board
of
Directors of the Company may in its sole discretion agree to waive the Company’s
rights pursuant to this Section 6(c) with respect to any Invention that is
not
directly or indirectly related to the Company’s business. The Executive further
agrees to assist the Company in every proper way (but at the Company’s expense)
to obtain and from time to time enforce patents, copyrights or other rights
on
such Inventions in any and all countries, and to that end the Executive will
execute all documents necessary:
(i) to
apply
for, obtain and vest in the name of the Company alone (unless the Company
otherwise directs) letters patent, copyrights or other analogous protection
in
any country throughout the world and when so obtained or vested to renew
and
restore the same; and
(ii) to
defend
any opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.
(d) The
Executive acknowledges that while performing the services under this Agreement
the Executive may locate, identify and/or evaluate patented or patentable
inventions having commercial potential in the fields of pharmacy,
pharmaceutical, biotechnology, healthcare, technology and other fields which
may
be of potential interest to the Company or one of its affiliates (the
“Third
Party Inventions”).
The
Executive understands, acknowledges and agrees that all rights to, interests
in
or opportunities regarding, all Third-Party Inventions identified by the
Company, any of its affiliates or either of the foregoing persons’ officers,
directors, employees (including the Executive), agents or consultants during
the
Employment Term shall be and remain the sole and exclusive property of the
Company or such affiliate and the Executive shall have no rights whatsoever
to
such Third-Party Inventions and will not pursue for himself or for others
any
transaction relating to the Third-Party Inventions which is not on behalf
of the
Company.
(e) The
provisions of this Section 6 shall survive any termination of this
Agreement.
7. Non-Competition,
Non-Solicitation and Non-Disparagement.
6
(a) The
Executive understands and recognizes that his services to the Company are
special and unique and that in the course of performing such services the
Executive will have access to and knowledge of Confidential and Proprietary
Information (as defined in Section 6) and the Executive agrees that, during
the
Term and for a period of 12 months
thereafter, he shall not without the consent of the Company in any manner,
directly or indirectly, on behalf of himself or any person, firm, partnership,
joint venture, corporation or other business entity (“Person”),
enter
into or engage in any business which is engaged in any business directly
or
indirectly competitive with the Company’s Business (as defined below), either as
an individual for his own account, or as a partner, joint venturer, owner,
executive, employee, independent contractor, principal, agent, consultant,
salesperson, officer, director or shareholder of a Person in a business
competitive with the Company within the geographic area of the Company’s
Business, which is deemed by the parties hereto to be worldwide. The Executive
acknowledges that, due to the nature of the Company’s Business, and the
importance to the Company’s Business of its Confidential and Proprietary
Information, a violation of this Section 7(a) could cause substantial damage
to
the Company and its affiliates and, therefore, the Company has a strong
legitimate business interest in protecting the continuity of its business
interests and the restriction herein agreed to by the Executive narrowly
and
fairly serves such an important and critical business interest of the Company.
For purposes of this Agreement, the “Company’s Business” shall mean the business
or businesses set forth on the attached Schedule 7(a), which shall be amended
from time to time upon the mututal written agreement of the parties, but
which
will automatically include the research, development and commercialization
of
any technologies that are licensed or otherwise acquired by the Company.
Notwithstanding the foregoing, nothing contained in this Section 7(a) shall
be
deemed to prohibit the Executive from (i) acquiring or holding, solely for
investment, publicly traded securities of any corporation, some or all of
the
activities of which are competitive with the business of the Company so long
as
such securities do not, in the aggregate, constitute more than three percent
(3%) of any class or series of outstanding securities of such
corporation.
(b) During
the Term and for a period of 12 months thereafter, the Executive shall not,
directly or indirectly, without the prior written consent of the
Company:
(i) solicit
or induce any employee of the Company or any of its affiliates to leave the
employ of the Company or any such affiliate; or hire for any purpose any
employee of the Company or any affiliate or any employee who has left the
employment of the Company or any affiliate within six months of the termination
of such employee’s employment with the Company or any such affiliate or at any
time in violation of such employee’s non-competition agreement with the Company
or any such affiliate; or
(ii) solicit
or accept employment or be retained by any Person who, at any time during
the
term of this Agreement, was an agent, client or customer of the Company or
any
of its affiliates where his position will be related to the Company’s Business;
or
(iii) solicit
or accept the business of any agent, client or customer of the Company or
any of
its affiliates with respect to products, services or investments similar
to
those provided or supplied by the Company or any of its affiliates.
(c) The
Company and the Executive each agree that both during the Term and at all
times
thereafter, neither party shall directly or indirectly disparage, whether
or not
true, the name or reputation of the other party or any of its affiliates,
including but not limited to, any officer, director, employee or any stockholder
owning greater than five percent (5%) of the Company’s outstanding Common Stock.
This Section 7 shall not include (i) statements made by the Executive’s in
performing his duties in the ordinary course as Chief Executive Officer (e.g.,
employee evaluations and remarks made in private meetings of the Board) and
(ii)
statements made by the Executive under oath in a legal proceeding.
7
(d) In
the
event that the Executive breaches any provisions of Section 6 or this Section
7
or there is a threatened breach, then, in addition to any other rights which
the
Company may have, the Company shall (i) be entitled, without the posting
of a
bond or other security, to injunctive relief to enforce the restrictions
contained in such Sections and (ii) have the right to require the Executive
to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments and other benefits (collectively “Benefits”)
derived or received by the Executive as a result of any transaction constituting
a breach of any of the provisions of Sections 6 or 7 and the Executive hereby
agrees to account for and pay over such Benefits to the Company.
(e) Each
of
the rights and remedies enumerated in Section 7(d) shall be independent of
the
others and shall be in addition to and not in lieu of any other rights and
remedies available to the Company at law or in equity. If any of the covenants
contained in this Section 7, or any part of any of them, is hereafter construed
or adjudicated to be invalid or unenforceable, the same shall not affect
the
remainder of the covenant or covenants or rights or remedies which shall
be
given full effect without regard to the invalid portions. If any of the
covenants contained in this Section 7 is held to be invalid or unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power
to
reduce the duration and/or area of such provision and in its reduced form
such
provision shall then be enforceable. No such holding of invalidity or
unenforceability in one jurisdiction shall bar or in any way affect the
Company’s right to the relief provided in this Section 7 or otherwise in the
courts of any other state or jurisdiction within the geographical scope of
such
covenants as to breaches of such covenants in such other respective states
or
jurisdictions, such covenants being, for this purpose, severable into diverse
and independent covenants.
(f) In
the
event that an actual proceeding is brought in equity to enforce the provisions
of Section 6 or this Section 7, the Executive shall not urge as a defense
that
there is an adequate remedy at law nor shall the Company be prevented from
seeking any other remedies which may be available.
(g) The
provisions of this Section 7 shall survive any termination of this
Agreement.
8. Representations
and Warranties by the Executive.
The
Executive hereby represents and warrants to the Company as follows:
(a) Neither
the execution or delivery of this Agreement nor the performance by the Executive
of his duties and other obligations hereunder violate or will violate any
statute, law, determination or award, or conflict with or constitute a default
or breach of any covenant or obligation under (whether immediately, upon
the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Executive is a party or by which
he
is bound.
(b) The
Executive has the full right, power and legal capacity to enter and deliver
this
Agreement and to perform his duties and other obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of the Executive
enforceable against him in accordance with its terms. No approvals or consents
of any persons or entities are required for the Executive to execute and
deliver
this Agreement or perform his duties and other obligations
hereunder.
8
9. Termination.
The Executive’s employment hereunder shall be terminated upon the Executive’s
death and may be terminated as follows:
(a) The
Executive’s employment hereunder may be terminated by the Board of Directors of
the Company for Cause. Any of the following actions by the Executive shall
constitute “Cause”:
(i) The
willful misconduct, failure, disregard or refusal by the Executive to perform
any of the material duties of his employment hereunder including,
without limitation, insubordination with respect to written directions received
by the Executive from the Board of Directors of the Company,
provided, however, that Executive shall have one (1) opportunity to cure
any
breach of this section 9(a)(i) within five (5) business days (“Cure Period”) of
written notice to the Executive;
(ii) Any
willful, intentional or grossly negligent act by the Executive having the
effect
of injuring, in a material way (whether financial or otherwise and as determined
in good-faith by a majority of the Board of Directors of the Company), the
business or reputation of the Company or any of its affiliates, including
but
not limited to, any officer, director, executive of the Company or any
stockholder owning greater than five percent (5%) of the Company’s outstanding
Common Stock; provided, however, that the Executive shall be granted an
opportunity to appear personally before the Board during its deliberations
to
explain the reasons for such conduct;
(iii) The
Executive’s conviction of any felony or a misdemeanor involving moral turpitude
(including entry of a nolo contendere plea);
(iv) The
determination by the Company, after a reasonable and good-faith investigation
by
the Company following a written allegation by another employee of the Company,
that the Executive engaged in some form of harassment prohibited
by law
(including, without limitation, harassment that constitutes age, sex or race
discrimination),
unless
the Executive’s actions were specifically directed by the Board of Directors of
the Company;
(v) Any
misappropriation or embezzlement of the property of the Company or its
affiliates;
(vi) Breach
by
the Executive of any of the provisions of Sections
6, 7
or
8
of this
Agreement; and
(vii) Breach
by
the Executive of any provision of this Agreement other than those contained
in
Sections
6, 7
or
8
which is
not cured by the Executive within thirty (30) days after notice thereof is
given
to the Executive by the Company.
(b) The
Executive’s employment hereunder may be terminated by the Board of Directors of
the Company due to the Executive’s Disability. For purposes of this Agreement, a
termination for “Disability”
shall
occur upon rendering of a written termination notice by the Board of Directors
of the Company after the Executive has been unable to substantially perform
his
duties hereunder for 90 or more consecutive days, or more than 120 days in
any
consecutive 12 month period, by reason of any physical or mental illness
or
injury. For purposes of this Section 9(b), the Executive agrees to make himself
available and to cooperate in any reasonable examination by a reputable
independent physician retained by the Company.
9
(c) The
Executive’s employment hereunder may be terminated by the Board of Directors of
the Company (or its successor) upon the occurrence of a Change of Control.
For
purposes of this Agreement, “Change
of Control”
means
(i) the acquisition, directly or indirectly, following the date hereof by
any
person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), in one transaction or a series of related
transactions, of securities of the Company representing in excess of fifty
percent (50%) or more of the combined voting power of the Company’s then
outstanding securities if such person or his or its affiliate(s) do not own
in
excess of 50% of such voting power on the date of this Agreement, or (ii)
the
future disposition by the Company (whether direct or indirect, by sale of
assets
or stock, merger, consolidation or otherwise) of all or substantially all
of its
business and/or assets in one transaction or series of related transactions
(other than (i) a merger effected exclusively for the purpose of changing
the
domicile of the Company and (ii) financing activities in the ordinary course
in
which the Company sells its equity securities).
(d) The
Executive’s employment hereunder may be terminated by the Executive for Good
Reason. For purposes of this Agreement, “Good
Reason”
shall
mean any of the following: (i) the assignment to the Executive of
duties
inconsistent with the Executive's position, duties, responsibilities, titles
or
offices as described herein; (ii) any material reduction by the Corporation
of the Executive's duties and responsibilities; (iii) any reduction
by the
Corporation of the Executive's compensation or benefits payable hereunder
(it
being understood that a reduction of benefits applicable to all employees
of the
Corporation, including the Executive, shall not be deemed a reduction of
the
Executive's compensation package for purposes of this definition); (iv) a
material breach by the Company of this Agreement; (v) moving the regular
place
of business of the Company to a location that is more than 60 miles from
Fairfield, Connecticut; or (vi) upon a Change of Control (1) that (x) results
in
the elimination of the Board of Directors or (y) representatives of the Board
just prior to the event causing the Change of Control do not represent a
majority of the Board immediately subsequent to the event causing the Change
of
Control and (2) in which the fair market value of the Company’s Common Stock, in
the aggregate, as determined in good faith by the Board on the date of such
Change of Control, is greater than $50,000,000.
10. Compensation
upon Termination.
(a) If
the
Executive’s employment is terminated as a result of his death or Disability, the
Company shall pay to the Executive or to the Executive’s estate, as applicable,
his
Base
Salary for a period of one year following the date of termination and any
accrued but unpaid Bonus and expense reimbursement amounts through the date
of
his Death or Disability. All Stock Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Executive’s termination shall remain exercisable for a period of 90
days.
All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such
date.
(b) If
the
Executive’s employment is terminated by the Board of Directors of the Company
for Cause, then the Company shall pay to the Executive his Base Salary through
the date of his termination and any expense reimbursement amounts owed through
the date of termination. The Executive shall have no further entitlement
to any
other compensation or benefits from the Company. All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such date.
Any
Stock Options that have vested as of the date of the Executive’s termination for
Cause shall remain exercisable for a period of 90 days.
10
(c) If
the
Executive’s employment is terminated by the Company (or its successor) upon the
occurrence of a Change of Control and on the date of termination pursuant
to
this Section 10(c) the fair market value of the Company’s Common Stock, in the
aggregate, as determined in good faith by the Board on the date of such Change
of Control, is less than $50,000,000, then the Company (or its successor,
as
applicable) shall continue to pay to the Executive his Base Salary and benefits
for a period of one year following such termination as well as any expense
reimbursement amounts owed through the date of termination. All Stock Options
that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Executive’s termination shall remain exercisable for a period of 90
days.
(d) If
the
Executive’s employment is terminated by the Company other than as a result of
the Executive’s death or Disability and other than for reasons specified in
Sections 10(b), or if the Executive’s employment is terminated by the Executive
for Good Reason, then the Company shall (i) continue to pay to the Executive
his
Base Salary and Guaranteed Bonus for a period of one year following such
termination and (ii) pay the Executive any expense reimbursement amounts
owed
through the date of termination. All Stock Options scheduled
to vest at the end of the calendar year in which such termination occurs
shall
be
accelerated and deemed to have vested as of the termination date; provided,
however,
that if
on the date of termination pursuant to this Section 10(d) the fair
market value of the Company’s Common Stock, in the aggregate, as determined in
good faith by the Board on the date of such termination, is greater than
$50,000,000, then all of the Executive’s unvested Stock Options shall be
accelerated and deemed to have vested as of the termination
date. Any
Stock
Options that have vested (or been deemed pursuant to this Section 10(d))
as of
the date of the Executive’s termination shall remain exercisable for a period of
90 days.
(e) Following
expiration and non-renewal of the Term, should the Company, in its sole
discretion require that the Executive continue to comply with the terms of
Section 7 hereof, the Company shall pay the Executive his Base Salary and
Guaranteed Bonus for a period of one year following expiration of the
Term.
(f) This
Section 10 sets forth the only obligations of the Company with respect to
the
termination of the Executive’s employment with the Company, and the Executive
acknowledges that, upon the termination of his employment, he shall not be
entitled to any payments or benefits which are not explicitly provided in
Section 10.
(g) Upon
termination of the Executive’s employment hereunder for any reason, the
Executive shall be deemed to have resigned as director of the Company, effective
as of the date of such termination.
11
(h) The
provisions of this Section 10 shall survive any termination of this
Agreement.
11. Miscellaneous.
(a) This
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without giving effect to its principles
of conflicts of laws.
(b) Any
dispute arising out of, or relating to, this Agreement or the breach thereof
(other than Sections 6 or 7 hereof), or regarding the interpretation thereof,
shall be finally settled by arbitration conducted in New York City in accordance
with the Employment Dispute Rules of the American Arbitration Association
then
in effect before a single arbitrator appointed in accordance with such rules.
Judgment upon any award rendered therein may be entered and enforcement obtained
thereon in any court having jurisdiction. The arbitrator shall have authority
to
grant any form of appropriate relief, whether legal or equitable in nature,
including specific performance. For the purpose of any judicial proceeding
to
enforce such award or incidental to such arbitration or to compel arbitration
and for purposes of Sections 6 and 7 hereof, the parties hereby submit to
the
non-exclusive jurisdiction of the Supreme Court of the State of New York,
New
York County, or the United States District Court for the Southern District
of
New York, and agree that service of process in such arbitration or court
proceedings shall be satisfactorily made upon it if sent by registered mail
addressed to it at the address referred to in paragraph (g) below. The
costs
of such arbitration shall be borne proportionate to the finding of fault
as
determined by the arbitrator. Judgment on the arbitration award may be entered
by any court of competent jurisdiction.
(c) This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective heirs, legal representatives, successors and
assigns.
(d) This
Agreement, and the Executive’s rights and obligations hereunder, may not be
assigned by the Executive. The Company may assign its rights, together with
its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets and shall
cause the acquirer to assume all of its obligations under this
Agreement.
(e) This
Agreement cannot be amended orally, or by any course of conduct or dealing,
but
only by a written agreement signed by the parties hereto.
(f) The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed
as a
waiver or relinquishment of future compliance therewith, and such terms,
conditions and provisions shall remain in full force and effect. No waiver
of
any term or condition of this Agreement on the part of either party shall
be
effective for any purpose whatsoever unless such waiver is in writing and
signed
by such party.
(g) All
notices, requests, consents and other communications, required or permitted
to
be given hereunder, shall be in writing and shall be delivered personally
or by
an overnight courier service or sent by registered or certified mail, postage
prepaid, return receipt requested, to the parties at the addresses set forth
on
the first page of this Agreement, and shall be deemed given when so delivered
personally or by overnight courier, or, if mailed, five days after the date
of
deposit in the United States mails. Either party may designate another address,
for receipt of notices hereunder by giving notice to the other party in
accordance with this paragraph (g).
12
(h) This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject
matter
hereof. No representation, promise or inducement has been made by either
party
that is not embodied in this Agreement, and neither party shall be bound
by or
liable for any alleged representation, promise or inducement not so set
forth.
(i) As
used
in this Agreement, “affiliate” of a specified Person shall mean and include any
Person controlling, controlled by or under common control with the specified
Person.
(j) The
section headings contained herein are for reference purposes only and shall
not
in any way affect the meaning or interpretation of this Agreement.
(k) This
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which together shall constitute one and
the
same instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
| ZYLOGEN, INC. | ||
| |
|
|
| By: | /s/ David Tanen | |
|
Name: David Tanen |
||
| Title: President | ||
| EXECUTIVE | ||
| |
|
|
| By: | /s/ Jonathan Lewis | |
|
Name: Jonathan Lewis, M.D. |
||
13
SCHEDULE
7(a)
1. The
research, development, manufacture, commercialization and sale of organic
arsenicals for the treatment of cancer and human disease.
14
Exhibit
10.3
EMPLOYMENT
AGREEMENT
AGREEMENT
(the “Agreement”),
dated
as of January
15, 2004, by and between ZIOPHARM, INC., a Delaware corporation with principal
executive offices at 787 Seventh Avenue, 48th
Floor,
New York, NY 10019 (the “Company”),
and
ROBERT PETER GALE, M.D.,
Ph.D.,
residing at 11693 San Vicente Blvd., Suite 335, Los Angeles, CA 90049
(the
“Employee”).
W
I T N E S S E T H:
WHEREAS,
the Company desires to employ the Employee as Senior Vice
President of Research of
the
Company, and the Employee desires to serve the Company in that capacity,
upon
the terms and subject to the conditions contained in this
Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. Employment.
(a) Services.
The
Employee will be employed by the Company as its Senior Vice President of
Research on terms set forth herein. The Employee will report to the Chief
Executive Officer of the Company and shall perform such duties as are consistent
with your position with the Company (the
“Services”).
The
Employee agrees to perform such duties faithfully, to devote substantially
all
of his working time, attention and energies to the business of the Company,
and
while he remains employed, not to engage in any other business activity that
is
in conflict with his duties and obligations to the Company. Notwithstanding
the preceding sentence, the Company and Employee understand and agree that
the
Employee is not required to devote all of his working time, attention and
energies to the business of the Company, as contemplated pursuant to Section
3(a) herein.
(b) Acceptance.
Employee hereby accepts such employment and agrees to render the
Services.
2. Term.
The
Employee's employment under this Agreement (the "Term") shall commence as
of the
Effective Date (as hereinafter defined) and shall continue for a term of
three
(3) years,
unless sooner terminated pursuant to Section 8 of this Agreement.
Notwithstanding anything to the contrary contained herein, the provisions
of
this Agreement governing protection of Confidential Information shall continue
in effect as specified in Section 5 hereof and survive the expiration or
termination hereof. The Term may be extended for additional one (1) year
periods
upon mutual written consent of the Employee and the Board upon not less than
30
days prior written notice.
3. Best
Efforts; Place of Performance.
(a) The
Employee shall devote no less than 20 full calendar days per month (minimum
eight hours per day) to the business and affairs of the Company and
shall
use his best efforts to advance the best interests of the Company.
(b) The
duties to be performed by the Employee hereunder shall be performed at such
place or places as may be agreed to by the Company and the Employee.
4. Compensation.
As full
compensation for the performance by the Employee of his duties under this
Agreement, the Company shall pay the Employee as follows:
(a) Base
Salary. The
Company shall pay Employee a salary (the “Base Salary”) equal to Two Hundred
Fifty Thousand Dollars ($250,000) per year. Payment shall be made semi-monthly,
on the last day of each calendar month.
(b) Guaranteed
Bonus. The Company shall pay the Executive a bonus (the “Guaranteed
Bonus”)
of One
Hundred Fifty Thousand Dollars ($150,000) within 30 days following each
anniversary of the date of this Agreement during the Term, provided that
the
Executive is employed hereunder on such anniversary date.
(c) Discretionary
Bonus. At the sole discretion of the Board of Directors of the Company, the
Employee may receive an additional annual bonus based upon his performance
on
behalf of the Company during the prior year (the “Discretionary
Bonus”)
in an
amount to be determined by the Board. The Discretionary Bonus shall be payable
either as a lump-sum payment or in installments as determined by the Board
of
Directors of the Company in its sole discretion. In addition, the
Board
of Directors of the Company shall annually review the Bonus to determine
whether
an increase in the amount thereof is warranted.
(d) Withholding.
The Company shall withhold all applicable federal, state and local taxes
and
social security and such other amounts as may be required by law from all
amounts payable to the Employee under this Section 5.
(e) Stock
Options. As additional compensation for the services to be rendered by the
Employee pursuant to this Agreement, the Company shall grant the Employee
stock
options (“Stock
Options”)
to
purchase a number of shares of Common Stock of the Company
representing one percent (1%) of the outstanding common stock of the Company
as
of the date of this Agreement.
The
Stock
Options shall be governed by the Company’s 2003 Stock Option Plan and
shall
vest, if at all,
in
three equal installments on each anniversary of this Agreement,
subject
in each
case
to the
provisions of Section 9 below. In connection with such grant, the Employee
shall
enter into the Company’s standard stock option agreement which will incorporate
the foregoing vesting schedule and the Stock Option related provisions contained
in Section 9 below. Due
consideration will be by the Board annually to grant you additional options
reflecting your contributions to the Company and so that you may maintain
a
significant ownership position in the Company.
(f) Expenses.
The Company shall reimburse the Employee for all normal, usual and necessary
expenses incurred by the Employee in furtherance of the business and affairs
of
the Company, including reasonable travel and entertainment, upon timely receipt
by the Company of appropriate vouchers or other proof of the Employee’s
expenditures and otherwise in accordance with any expense reimbursement policy
as may from time to time be adopted by the Company.
(g) Other
Benefits. The Employee shall be entitled to all rights and benefits for which
he
shall be eligible under any benefit or other plans (including, without
limitation, dental, medical, medical reimbursement and hospital plans, pension
plans, employee stock purchase plans, profit sharing plans, bonus plans and
other so-called "fringe" benefits) as the Company shall make available to
its
senior executives from time to time. In addition, the Company shall reimburse
the Employees for his reasonable medical licensing fees and other professional
dues.
2
5. Confidential
Information and Inventions.
(a) The
Employee recognizes and acknowledges that in the course of his duties he
is
likely to receive confidential or proprietary information owned by the Company,
its affiliates or third parties with whom the Company or any such affiliates
has
an obligation of confidentiality. Accordingly, during and after the Term,
the
Employee agrees to keep confidential and not disclose or make accessible
to any
other person or use for any other purpose other than in connection with the
fulfillment of his duties under this Agreement, any Confidential and Proprietary
Information (as defined below) owned by, or received by or on behalf of,
the
Company or any of its affiliates. “Confidential and Proprietary Information”
shall include, but shall not be limited to, confidential or proprietary
scientific or technical information, data, formulas and related concepts,
business plans (both current and under development), client lists, promotion
and
marketing programs, trade secrets, or any other confidential or proprietary
business information relating to development programs, costs, revenues,
marketing, investments, sales activities, promotions, credit and financial
data,
manufacturing processes, financing methods, plans or the business and affairs
of
the Company or of any affiliate or client of the Company. The Employee expressly
acknowledges the trade secret status of the Confidential and Proprietary
Information and that the Confidential and Proprietary Information constitutes
a
protectable business interest of the Company. The Employee agrees: (i) not
to
use any such Confidential and Proprietary Information for himself or others;
and
(ii) not to take any Company material or reproductions (including but not
limited to writings, correspondence, notes, drafts, records, invoices, technical
and business policies, computer programs or disks) thereof from the Company’s
offices at any time during his employment by the Company, except as required
in
the execution of the Employee’s duties to the Company. The Employee agrees to
return immediately all Company material and reproductions (including but
not
limited, to writings, correspondence, notes, drafts, records, invoices,
technical and business policies, computer programs or disks) thereof in his
possession to the Company upon request and in any event immediately upon
termination of employment.
(b) Except
with prior written authorization by the Company, the Employee agrees not
to
disclose or publish any of the Confidential and Proprietary Information,
or any
confidential, scientific, technical or business information of any other
party
to whom the Company or any of its affiliates owes an obligation of confidence,
at any time during or after his employment with the Company.
(c) The
Employee agrees that all inventions, discoveries, improvements and patentable
or
copyrightable works (“Inventions”)
initiated, conceived or made by him, either alone or in conjunction with
others,
during the Term
shall be
the sole property of the Company to the maximum extent permitted by applicable
law and, to the extent permitted by law, shall be “works made for hire” as that
term is defined in the United States Copyright Act (17 U.S.C.A., Section
101).
The Company shall be the sole owner of all patents, copyrights, trade secret
rights, and other intellectual property or other rights in connection therewith.
The Employee hereby assigns to the Company all right, title and interest
he may
have or acquire in all such Inventions; provided, however, that the Board
of
Directors of the Company may in its sole discretion agree to waive the Company’s
rights pursuant to this Section 6(c) with respect to any Invention that is
not
directly or indirectly related to the Company’s business. The Employee further
agrees to assist the Company in every proper way (but at the Company’s expense)
to obtain and from time to time enforce patents, copyrights or other rights
on
such Inventions in any and all countries, and to that end the Employee will
execute all documents necessary:
3
(i) to
apply
for, obtain and vest in the name of the Company alone (unless the Company
otherwise directs) letters patent, copyrights or other analogous protection
in
any country throughout the world and when so obtained or vested to renew
and
restore the same; and
(ii) to
defend
any opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.
(d) The
Employee acknowledges that while performing the services under this Agreement
the Employee may locate, identify and/or evaluate patented or patentable
inventions having commercial potential in the fields of pharmacy,
pharmaceutical, biotechnology, healthcare, technology and other fields which
may
be of potential interest to the Company or one of its affiliates (the
“Third
Party Inventions”).
The
Employee understands, acknowledges and agrees that all rights to, interests
in
or opportunities regarding, all Third-Party Inventions identified by the
Company, any of its affiliates or either of the foregoing persons’ officers,
directors, employees (including the Employee), agents or consultants during
the
Employment Term shall be and remain the sole and exclusive property of the
Company or such affiliate and the Employee shall have no rights whatsoever
to
such Third-Party Inventions and will not pursue for himself or for others
any
transaction relating to the Third-Party Inventions which is not on behalf
of the
Company.
(e) The
provisions of this Section 6 shall survive any termination of this
Agreement.
6. Non-Competition,
Non-Solicitation and Non-Disparagement.
(a) The
Employee understands and recognizes that his services to the Company are
special
and unique and that in the course of performing such services the Employee
will
have access to and knowledge of Confidential and Proprietary Information
(as
defined in Section 5) and the Employee agrees that, during the Term and for
a
period of 12 months
thereafter, he shall not without the consent of the Company in any manner,
directly or indirectly, on behalf of himself or any person, firm, partnership,
joint venture, corporation or other business entity (“Person”),
enter
into or engage in any business which is engaged in any business directly
or
indirectly competitive with the Company’s Business (as defined below), either as
an individual for his own account, or as a partner, joint venturer, owner,
executive, employee, independent contractor, principal, agent, consultant,
salesperson, officer, director or shareholder of a Person in a business
competitive with the Company within the geographic area of the Company’s
Business, which is deemed by the parties hereto to be worldwide. The Employee
acknowledges that, due to the nature of the Company’s Business, and the
importance to the Company’s Business of its Confidential and Proprietary
Information, a violation of this Section 6(a) could cause substantial damage
to
the Company and its affiliates and, therefore, the Company has a strong
legitimate business interest in protecting the continuity of its business
interests and the restriction herein agreed to by the Employee narrowly and
fairly serves such an important and critical business interest of the Company.
For purposes of this Agreement, the “Company’s Business” shall mean the business
or businesses set forth on the attached Schedule 6(a), which shall be amended
from time to time upon the mutual written agreement of the parties, but which
will automatically include the research, development and commercialization
of
any technologies that are licensed or otherwise acquired by the Company.
Notwithstanding the foregoing, nothing contained in this Section 6(a) shall
be
deemed to prohibit the Employee from (i) acquiring or holding, solely for
investment, publicly traded securities of any corporation, some or all of
the
activities of which are competitive with the business of the Company so long
as
such securities do not, in the aggregate, constitute more than five percent
(5%)
of any class or series of outstanding securities of such
corporation.
4
(b) During
the Term and for a period of 12 months thereafter, the Employee shall not,
directly or indirectly, without the prior written consent of the
Company:
(i) solicit
or induce any employee of the Company or any of its affiliates to leave the
employ of the Company or any such affiliate; or hire for any purpose any
employee of the Company or any affiliate or any employee who has left the
employment of the Company or any affiliate within six months of the termination
of such employee’s employment with the Company or any such affiliate or at any
time in violation of such employee’s non-competition agreement with the Company
or any such affiliate; or
(ii) solicit
or accept employment or be retained by any Person who, at any time during
the
term of this Agreement, was an agent, client or customer of the Company or
any
of its affiliates where his position will be related to the Company’s Business;
or
(iii) solicit
or accept the business of any agent, client or customer of the Company or
any of
its affiliates with respect to products, services or investments similar
to
those provided or supplied by the Company or any of its affiliates.
(c) The
Company and the Employee each agree that both during the Term and at all
times
thereafter, neither party shall directly or indirectly disparage, whether
or not
true, the name or reputation of the other party or any of its affiliates,
including but not limited to, any officer, director, employee or any stockholder
owning greater than five percent (5%) of the Company’s outstanding Common Stock.
This Section 6 shall not include (i) statements made by the Employee’s in
performing his duties in the ordinary course as Senior Vice President of
Research (e.g., employee evaluations and remarks made in private meetings
of the
Board) and (ii) statements made by the Employee under oath in a legal
proceeding.
(d) In
the
event that the Employee breaches any provisions of Section 5 or this Section
6
or there is a threatened breach, then, in addition to any other rights which
the
Company may have, the Company shall (i) be entitled, without the posting
of a
bond or other security, to injunctive relief to enforce the restrictions
contained in such Sections and (ii) have the right to require the Employee
to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments and other benefits (collectively “Benefits”)
derived or received by the Employee as a result of any transaction constituting
a breach of any of the provisions of Sections 5 or 6 and the Employee hereby
agrees to account for and pay over such Benefits to the Company.
5
(e) Each
of
the rights and remedies enumerated in Section 6(d) shall be independent of
the
others and shall be in addition to and not in lieu of any other rights and
remedies available to the Company at law or in equity. If any of the covenants
contained in this Section 6, or any part of any of them, is hereafter construed
or adjudicated to be invalid or unenforceable, the same shall not affect
the
remainder of the covenant or covenants or rights or remedies which shall
be
given full effect without regard to the invalid portions. If any of the
covenants contained in this Section 6 is held to be invalid or unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power
to
reduce the duration and/or area of such provision and in its reduced form
such
provision shall then be enforceable. No such holding of invalidity or
unenforceability in one jurisdiction shall bar or in any way affect the
Company’s right to the relief provided in this Section 6 or otherwise in the
courts of any other state or jurisdiction within the geographical scope of
such
covenants as to breaches of such covenants in such other respective states
or
jurisdictions, such covenants being, for this purpose, severable into diverse
and independent covenants.
(f) In
the
event that an actual proceeding is brought in equity to enforce the provisions
of Section 5 or this Section 6, the Employee shall not urge as a defense
that
there is an adequate remedy at law nor shall the Company be prevented from
seeking any other remedies which may be available.
(g) The
Company shall have the option, in its sole discretion, upon the termination
of
this Agreement for any reason, to retain the Employee as a consultant
(“Consultant”) for a non-renewable period of 12 months from the date of
separation from the Company (“Consultancy Period”). During the Consultancy
Period, the Consultant shall have only such duties and responsibilities as
Company and Consultant shall mutually agree. During the Consultancy Period,
there is no minimum amount of time Consultant shall be required to devote
to the
business and affairs of the Company. During the Consultancy Period, Consultant
shall have no obligation to travel for or on behalf of Company.
(h) During
the Consultancy Period, the provisions of Section 6(a) of this Agreement
shall
apply, but those provisions shall not apply after the termination of the
Consultancy Period. Notwithstanding anything contained in this Agreement
to the
contrary, the provisions of Section 6(a) of this Agreement shall be deemed
fully
satisfied upon the later to occur of (i) the end of the Term of this Agreement
and (ii) the end of the Consultancy Period if and only if the Company elects,
in
its sole discretion, to retain Employee as a Consultant as herein
provided.
(i) During
the Consultancy Period, Consultant shall continue to receive each and every
component of compensation provided for pursuant to Section 4 of this
Agreement.
7. Representations
and Warranties.
(a) The
Employee hereby represents and warrants to the Company as follows:
(i) Neither
the execution or delivery of this Agreement nor the performance by the Employee
of his duties and other obligations hereunder violate or will violate any
statute, law, determination or award, or conflict with or constitute a default
or breach of any covenant or obligation under (whether immediately, upon
the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Employee is a party or by which
he is
bound.
6
(ii) The
Employee has the full right, power and legal capacity to enter and deliver
this
Agreement and to perform his duties and other obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of the Employee
enforceable against him in accordance with its terms. No approvals or consents
of any persons or entities are required for the Employee to execute and deliver
this Agreement or perform his duties and other obligations
hereunder.
(b) The
Company hereby represents and warrants to the Employee as follows:
(i) Neither
the execution or delivery of this Agreement nor the performance by the Company
of its duties and other obligations hereunder violate or will violate any
statute, law, determination or award, or conflict with or constitute a default
or breach of any covenant or obligation under (whether immediately, upon
the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Company is a party or by which
he is
bound.
(ii) The
Company has the full right, power and legal capacity to enter and deliver
this
Agreement and to perform its duties and other obligations hereunder.
This
Agreement constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms. No approvals
or
consents of any persons or entities are required for the Company to execute
and
deliver this Agreement or perform its duties and other obligations hereunder
and
contemplated herein.
8. Termination.
The Employee’s employment hereunder shall be terminated upon the Employee’s
death and may be terminated as follows:
(a) The
Employee’s employment hereunder may be terminated by the Board of Directors of
the Company for Cause. Any of the following actions by the Employee shall
constitute “Cause”:
(i) The
willful failure, disregard or refusal by the Employee to perform his duties
hereunder;
(ii) Any
willful, intentional or grossly negligent act by the Employee having the
effect
of injuring, in a material way (whether financial or otherwise and as determined
in good-faith by a majority of the Board of Directors of the Company), the
business or reputation of the Company or any of its affiliates, including
but
not limited to, any officer, director, executive or shareholder of the Company
or any of its affiliates;
(iii) Willful
misconduct by the Employee
in
respect of the duties or obligations of the Employee under this
Agreement,
including, without limitation, insubordination with respect to lawful directions
received by the Employee from the Executive or the Board of Directors of
the
Company
within
the scope of duties of the Employee;
(iv) The
Employee’s indictment of any felony or a misdemeanor involving moral turpitude
(including entry of a nolo contendere plea);
7
(v) The
determination by the Company, after a reasonable and good-faith investigation
by
the Company following a written allegation by another employee of the Company,
that the Employee engaged in some form of harassment prohibited
by law
(including, without limitation, age, sex or race discrimination),
unless
the Employee’s actions were specifically directed by the Board of Directors of
the Company;
(vi) Any
misappropriation or embezzlement of the property of the Company or its
affiliates (whether or not a misdemeanor or felony);
(vii) Breach
by
the Employee of any of the provisions of Sections
5, 6
or
7
of this
Agreement; and
(viii) Breach
by
the Employee of any provision of this Agreement other than those contained
in
Sections
5,
6
or
7
which
is not cured by the Employee within thirty (30) days after notice thereof
is
given to the Employee by the Company.
(b) The
Executive’s employment hereunder may be terminated by the Board of Directors of
the Company due to the Executive’s Disability. For purposes of this Agreement, a
termination for “Disability”
shall
occur upon rendering of a written termination notice by the Board of Directors
of the Company after the Executive has been unable to substantially perform
his
duties hereunder for 90 or more consecutive days, or more than 120 days in
any
consecutive 12 month period, by reason of any physical or mental illness
or
injury. For purposes of this Section 9(b), the Executive agrees to make himself
available and to cooperate in any reasonable examination by a reputable
independent physician retained by the Company.
(c) The
Employee’s employment hereunder may be terminated by the Board of Directors of
the Company (or its successor) upon the occurrence of a Change of Control.
For
purposes of this Agreement, “Change
of Control”
means
(i) the acquisition, directly or indirectly, following the date hereof by
any
person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), in one transaction or a series of related
transactions, of securities of the Company representing in excess of fifty
percent (50%) or more of the combined voting power of the Company’s then
outstanding securities if such person or his or its affiliate(s) do not own
in
excess of 50% of such voting power on the date of this Agreement, or (ii)
the
future disposition by the Company (whether direct or indirect, by sale of
assets
or stock, merger, consolidation or otherwise) of all or substantially all
of its
business and/or assets in one transaction or series of related transactions
(other than a merger effected exclusively for the purpose of changing the
domicile of the Company).
(d) The
Employee’s employment hereunder may be terminated by the Employee for Good
Reason. For purposes of this Agreement, “Good
Reason”
shall
mean any of the following: (i) the assignment to the Employee of duties
inconsistent with the Employee's position, duties, responsibilities, titles
or
offices as described herein; (ii) any material reduction by the Corporation
of the Employee's duties and responsibilities; or (iii) any reduction
by
the Corporation of the Employee's compensation or benefits payable hereunder
(it
being understood that a reduction of benefits applicable to all employees
of the
Corporation, including the Employee, shall not be deemed a reduction of the
Employee's compensation package for purposes of this definition, but that
a
reduction in the compensation described in Section 5 above will) (iv) a material
breach by the Company of this Agreement that is not cured within 30 days
of
receipt by the Company of written notice of such breach; or (v) upon a Change
of
Control (1) that (x) results in the elimination of the Board of Directors
or (y)
representatives of the Board just prior to the event causing the Change of
Control do not represent a majority of the Board immediately subsequent to
the
event causing the Change of Control and (2) in which the fair market value
of
the Company’s Common Stock, in the aggregate, as determined in good faith by the
Board on the date of such Change of Control, is greater than
$50,000,000.
8
(e) The
Consultancy described in Section 6(g) may be terminated by the Company for
any
reason during the Consultancy Period, provided that following such termination,
the Employee shall no longer be subject to the provisions of Section
6(a).
9. Compensation
upon Termination.
(a) If
the
Employee’s employment is terminated as a result of his death or Disability, the
Company shall pay to the Employee or to the Employee’s estate, as applicable,
his
Base
Salary for a period of one year following the date of termination and any
accrued but unpaid Bonus and expense reimbursement amounts through the date
of
his Death or Disability. All Stock Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Employee’s
termination shall remain exercisable for a period of 90 days.
All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such date.
(b) If
the
Employee’s employment is terminated by the Company for Cause, then the Company
shall pay to the Employee his Base Salary through the date of his termination
and any expense reimbursement amounts owed through the date of termination.
The
Employee shall have no further entitlement to any other compensation or benefits
from the Company. All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such date.
Any
Stock Options that have vested as of the date of the Executive’s termination for
Cause shall remain exercisable for a period of 90 days.
(c) If
the
Employee’s employment is terminated by the Company (or its successor) upon the
occurrence of a Change of Control and on the date of termination pursuant
to
this Section 9(c) the fair market value of the Company’s Common Stock, in the
aggregate, as determined in good faith by the Board on the date of such Change
of Control, is less than $50,000,000, then the Company (or its successor,
as
applicable) shall pay to the Employee his Base Salary and benefits for a
period
of one year or until the end of the Term, whichever is shorter, as well as
any
expense reimbursement amounts owed through the date of termination. All Stock
Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Employee’s
termination shall remain exercisable for a period of 90 days.
(d) If
the
Employee’s employment is terminated by the Company other than as a result of the
Employee’s death or Disability and other than for reasons specified in Sections
9(b), or if the Employee’s employment is terminated by the Employee for Good
Reason, then the Company shall (i) continue to pay to the Employee his Base
Salary and Guaranteed Bonus for a period of one year following such termination
and (ii) pay the Employee any expense reimbursement amounts owed through
the
date of termination. All Stock Options scheduled
to vest at the end of the calendar year in which such termination occurs
shall
be
accelerated and deemed to have vested as of the termination date.
Any
Stock Options that have vested (or been deemed pursuant to this Section 9(d))
as
of the date of the Executive’s termination shall remain exercisable for a period
of 90 days.
9
(e) This
Section 9 sets forth the only obligations of the Company with respect to
the
termination of the Employee’s employment with the Company, and the Employee
acknowledges that, upon the termination of his employment, he shall not be
entitled to any payments or benefits which are not explicitly provided in
Section 9.
(f) The
provisions of this Section 9 shall survive any termination of this
Agreement.
10. Miscellaneous.
(a) This
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without giving effect to its principles
of conflicts of laws.
(b) Any
dispute arising out of, or relating to, this Agreement or the breach thereof
(other than Sections 5 or 6 hereof), or regarding the interpretation thereof,
shall be finally settled by arbitration conducted in New York City in accordance
with the rules of the American Arbitration Association then in effect before
a
single arbitrator appointed in accordance with such rules. Judgment upon
any
award rendered therein may be entered and enforcement obtained thereon in
any
court having jurisdiction. The arbitrator shall have authority to grant any
form
of appropriate relief, whether legal or equitable in nature, including specific
performance. For the purpose of any judicial proceeding to enforce such award
or
incidental to such arbitration or to compel arbitration and for purposes
of
Sections 5 and 6 hereof, the parties hereby submit to the non-exclusive
jurisdiction of the Supreme Court of the State of New York, New York County,
or
the United States District Court for the Southern District of New York, and
agree that service of process in such arbitration or court proceedings shall
be
satisfactorily made upon it if sent by registered mail addressed to it at
the
address referred to in paragraph (g) below. The
costs
of such arbitration shall be borne proportionate to the finding of fault
as
determined by the arbitrator. Judgment on the arbitration award may be entered
by any court of competent jurisdiction.
(c) This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective heirs, legal representatives, successors and
assigns.
(d) This
Agreement, and the Employee’s rights and obligations hereunder, may not be
assigned by the Employee. The Company may assign its rights, together with
its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets.
(e) This
Agreement cannot be amended orally, or by any course of conduct or dealing,
but
only by a written agreement signed by the parties hereto.
10
(f) The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed
as a
waiver or relinquishment of future compliance therewith, and such terms,
conditions and provisions shall remain in full force and effect. No waiver
of
any term or condition of this Agreement on the part of either party shall
be
effective for any purpose whatsoever unless such waiver is in writing and
signed
by such party.
(g) All
notices, requests, consents and other communications, required or permitted
to
be given hereunder, shall be in writing and shall be delivered personally
or by
an overnight courier service or sent by registered or certified mail, postage
prepaid, return receipt requested, to the parties at the addresses set forth
on
the first page of this Agreement, and shall be deemed given when so delivered
personally or by overnight courier, or, if mailed, five days after the date
of
deposit in the United States mails. Either party may designate another address,
for receipt of notices hereunder by giving notice to the other party in
accordance with this paragraph (g).
(h) This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject
matter
hereof. No representation, promise or inducement has been made by either
party
that is not embodied in this Agreement, and neither party shall be bound
by or
liable for any alleged representation, promise or inducement not so set
forth.
(i) As
used
in this Agreement, “affiliate” of a specified Person shall mean and include any
Person controlling, controlled by or under common control with the specified
Person.
(j) The
section headings contained herein are for reference purposes only and shall
not
in any way affect the meaning or interpretation of this Agreement.
(k) This
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which together shall constitute one and
the
same instrument.
11
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
| ZIOPHARM, INC. | ||
| |
|
|
| By: | /s/ Jonathan Lewis | |
|
Name:
Jonathan Lewis, M.D.
Title:
Chief Executive Officer
|
||
| EMPLOYEE | ||
| |
|
|
| By: | /s/ Robert Peter Gale | |
|
Name: Robert Peter Gale, M.D., Ph.D. |
||
12
SCHEDULE
6(a)
13
Exhibit
10.4
EMPLOYMENT
AGREEMENT
AGREEMENT
(the “Agreement”),
dated
as of July
21,
2004, by and between ZIOPHARM, INC., a Delaware corporation with principal
executive offices at 787 Seventh Avenue, 48th
Floor,
New York, NY 10019 (the “Company”),
and
RICHARD BAGLEY, presently
residing at Two Beck Street, Newburyport, MA 01950 (the
“Employee”).
W
I T N E S S E T H:
WHEREAS,
the Company desires to employ the Employee as President of the Company, and
the
Employee desires to serve the Company in that capacity, upon the terms and
subject to the conditions contained in this Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. Employment.
(a) Services.
The
Employee will be employed by the Company as its President, starting July
1 ,
2004 on terms set forth herein. The Employee will report to the Chief Executive
Officer of the Company and shall perform such duties as are consistent with
your
position with the Company (the
“Services”).
The
Employee agrees to perform such duties faithfully, to devote all of his working
time, attention and energies to the business of the Company, and while he
remains employed, not to engage in any other business activity that is in
conflict with your duties and obligations to the Company.
(b) Acceptance.
Employee hereby accepts such employment and agrees to render the
Services.
2. Term.
The
Employee's employment under this Agreement (the "Term") shall commence as
of the
Effective Date (as hereinafter defined) and shall continue for a term of
three
(3) years,
unless sooner terminated pursuant to Section 8 of this Agreement.
Notwithstanding anything to the contrary contained herein, the provisions
of
this Agreement governing protection of Confidential Information shall continue
in effect as specified in Section 5 hereof and survive the expiration or
termination hereof. The Term may be extended for additional one (1) year
periods
upon mutual written consent of the Employee and the Board.
3. Best
Efforts; Place of Performance.
(a) The
Employee shall devote substantially all of his business time, attention and
energies to the business and affairs of the Company and
shall
use his best efforts to advance the best interests of the Company and shall
not
during the Term be actively engaged in any other business activity, whether
or
not such business activity is pursued for gain, profit or other pecuniary
advantage, that will interfere with the performance by the Employee of his
duties hereunder or the Employee’s availability to perform such duties or that
will adversely affect, or negatively reflect upon, the Company.
(b) The
duties to be performed by the Employee hereunder shall be performed primarily
at
the offices of the Company in Boston and New Haven and as necessary in New
York,
New York, all as requested by the Chief Executive Officer, subject to reasonable
travel requirements on behalf of the Company, or
such
other place as the Board may reasonably designate. The Company will reimburse
the Executive for reasonable commuting expenses.
4. Compensation.
As full
compensation for the performance by the Employee of his duties under this
Agreement, the Company shall pay the Employee as follows:
(a) Base
Salary. The
Company shall pay Employee a salary (the “Base Salary”) equal to Two Hundred
Fifty Thousand Dollars ($250,000) per year. Payment shall be made semi-monthly,
on the 15th
and last
day of each calendar month.
(b) Signing
Bonus. The Company shall pay the Executive a one time bonus equal to Fifty
Thousand Dollars ($50,000) within ten (10) business days of the Effective
Date
of this Agreement.
(c) Guaranteed
Bonus. The Company shall pay the Executive a bonus (the “Guaranteed
Bonus”)
of
Fifty Thousand Dollars ($50,000) within 30 days following each anniversary
of
the date of this Agreement during the Term, provided that the Executive is
employed hereunder on such anniversary date.
(d) Discretionary
Bonus. At the sole discretion of the Board of Directors of the Company, the
Employee may receive an additional annual bonus (the “Discretionary
Bonus”),
based
upon his performance on behalf of the Company during the prior year. The
Discretionary Bonus, if any, shall be payable either as a lump-sum payment
or in
installments as determined by the Board of Directors of the Company in its
sole
discretion. In addition, the
Board
of Directors of the Company shall annually review the Bonus to determine
whether
an increase in the amount thereof is warranted.
(e) Withholding.
The Company shall withhold all applicable federal, state and local taxes
and
social security and such other amounts as may be required by law from all
amounts payable to the Employee under this Section 5.
(f) Stock
Options. As additional compensation for the services to be rendered by the
Employee pursuant to this Agreement, the Company shall grant the Employee
stock
options (“Stock
Options”)
to
purchase a number of shares of Common Stock of the Company representing six
percent (6%) of the outstanding Common Stock of the Company as
of the
Effective Date.
The
Stock
Options shall be governed by the Company’s 2003 Stock Option Plan and
shall
vest, if at all,
in
three equal installments on each anniversary of the start date of employment,
subject
in each
case
to the
provisions of Section 9 below. In connection with such grant, the Employee
shall
enter into the Company’s standard stock option agreement which will incorporate
the foregoing vesting schedule and the Stock Option related provisions contained
in Section 9 below.
2
(g) Anti-dilution
Protection. Until such time as the Company has raised gross proceeds equal
to
$25,000,000 from
the
issuance and sale of Equity Securities (as defined below),
the
Company shall issue to the Executive a number of additional Stock Options
sufficient to maintain Executive’s ownership percentage at least equal to three
percent (3%) of the outstanding Common Stock of the Company on a fully diluted
basis. Once the Company has raised $25,000,000 through the sale of its Equity
Securities, Executive shall be diluted pro rata along with all other holders
of
securities of the Company. As
used
herein “Equity Securities” shall mean shares of Common Stock, options, warrants
or other rights to purchase Common Stock or securities or evidences of
indebtedness convertible into or exchangeable for shares of Common
Stock.
(h)
Notwithstanding the foregoing, Section 3(g) shall not apply to, and the
Executive shall not be entitled to anti-dilution protection with respect
to, the
issuance of Excluded Equity Securities and Excluded Equity Securities shall
not
be included in calculating the fully diluted issued and outstanding shares
of
Common Stock of the Company for any purpose under this Agreement. “Excluded
Equity Securities” shall mean Equity Securities that are issued by the Company
pursuant to any transactions approved by the Board of Directors primarily
for
the purpose of: (1) incentivizing employees, directors or consultants to
the
Company; (2) joint ventures, strategic alliances or research and development
activities, (3) purchase or licensing of technology, or (4) any other
transactions involving current or potential partners that are primarily for
purposes other than raising capital. As long as the anti-dilution protection
contained in this paragraph Section 3(g) remains in effect, the Executive
shall
be diluted pari passu with all other holders of Common Stock by the issuance
by
the Company of Excluded Equity Securities. Upon termination of such
anti-dilution protection, the Executive shall be diluted pari passu with
all
other holders of Common Stock by the issuance of any Equity
Securities.
(i) Expenses.
The Company shall reimburse the Employee for all normal, usual and necessary
expenses incurred by the Employee in furtherance of the business and affairs
of
the Company, including reasonable travel and entertainment, upon timely receipt
by the Company of appropriate vouchers or other proof of the Employee’s
expenditures and otherwise in accordance with any expense reimbursement policy
as may from time to time be adopted by the Company.
(j) Other
Benefits. The Employee shall be entitled to all rights and benefits for which
he
shall be eligible under any benefit or other plans (including, without
limitation, dental, medical, medical reimbursement and hospital plans, pension
plans, employee stock purchase plans, profit sharing plans, bonus plans and
other so-called "fringe" benefits) as the Company shall make available to
its
senior executives from time to time. In addition, the Company shall reimburse
the Employees for his reasonable professional dues.
(k) Vacation.
The Employee shall, during the Term, be entitled to a vacation of four (4)
weeks
per annum,
in
addition to holidays observed by the Company.
The
Employee shall not be entitled to carry any vacation forward to the next
year of
employment and shall not receive any compensation for unused vacation
days.
3
5. Confidential
Information and Inventions.
(a) The
Employee recognizes and acknowledges that in the course of his duties he
is
likely to receive confidential or proprietary information owned by the Company,
its affiliates or third parties with whom the Company or any such affiliates
has
an obligation of confidentiality. Accordingly, during and after the Term,
the
Employee agrees to keep confidential and not disclose or make accessible
to any
other person or use for any other purpose other than in connection with the
fulfillment of his duties under this Agreement, any Confidential and Proprietary
Information (as defined below) owned by, or received by or on behalf of,
the
Company or any of its affiliates. “Confidential and Proprietary Information”
shall include, but shall not be limited to, confidential or proprietary
scientific or technical information, data, formulas and related concepts,
business plans (both current and under development), client lists, promotion
and
marketing programs, trade secrets, or any other confidential or proprietary
business information relating to development programs, costs, revenues,
marketing, investments, sales activities, promotions, credit and financial
data,
manufacturing processes, financing methods, plans or the business and affairs
of
the Company or of any affiliate or client of the Company. The Employee expressly
acknowledges the trade secret status of the Confidential and Proprietary
Information and that the Confidential and Proprietary Information constitutes
a
protectable business interest of the Company. The Employee agrees: (i) not
to
use any such Confidential and Proprietary Information for himself or others;
and
(ii) not to take any Company material or reproductions (including but not
limited to writings, correspondence, notes, drafts, records, invoices, technical
and business policies, computer programs or disks) thereof from the Company’s
offices at any time during his employment by the Company, except as required
in
the execution of the Employee’s duties to the Company. The Employee agrees to
return immediately all Company material and reproductions (including but
not
limited, to writings, correspondence, notes, drafts, records, invoices,
technical and business policies, computer programs or disks) thereof in his
possession to the Company upon request and in any event immediately upon
termination of employment.
(b) Except
with prior written authorization by the Company, the Employee agrees not
to
disclose or publish any of the Confidential and Proprietary Information,
or any
confidential, scientific, technical or business information of any other
party
to whom the Company or any of its affiliates owes an obligation of confidence,
at any time during or after his employment with the Company.
(c) The
Employee agrees that all inventions, discoveries, improvements and patentable
or
copyrightable works (“Inventions”)
initiated, conceived or made by him, either alone or in conjunction with
others,
during the Term
shall be
the sole property of the Company to the maximum extent permitted by applicable
law and, to the extent permitted by law, shall be “works made for hire” as that
term is defined in the United States Copyright Act (17 U.S.C.A., Section
101).
The Company shall be the sole owner of all patents, copyrights, trade secret
rights, and other intellectual property or other rights in connection therewith.
The Employee hereby assigns to the Company all right, title and interest
he may
have or acquire in all such Inventions; provided, however, that the Board
of
Directors of the Company may in its sole discretion agree to waive the Company’s
rights pursuant to this Section 6(c) with respect to any Invention that is
not
directly or indirectly related to the Company’s business. The Employee further
agrees to assist the Company in every proper way (but at the Company’s expense)
to obtain and from time to time enforce patents, copyrights or other rights
on
such Inventions in any and all countries, and to that end the Employee will
execute all documents necessary:
(i) to
apply
for, obtain and vest in the name of the Company alone (unless the Company
otherwise directs) letters patent, copyrights or other analogous protection
in
any country throughout the world and when so obtained or vested to renew
and
restore the same; and
(ii) to
defend
any opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.
4
(d) The
Employee acknowledges that while performing the services under this Agreement
the Employee may locate, identify and/or evaluate patented or patentable
inventions having commercial potential in the fields of pharmacy,
pharmaceutical, biotechnology, healthcare, technology and other fields which
may
be of potential interest to the Company or one of its affiliates (the
“Third
Party Inventions”).
The
Employee understands, acknowledges and agrees that all rights to, interests
in
or opportunities regarding, all Third-Party Inventions identified by the
Company, any of its affiliates or either of the foregoing persons’ officers,
directors, employees (including the Employee), agents or consultants during
the
Employment Term shall be and remain the sole and exclusive property of the
Company or such affiliate and the Employee shall have no rights whatsoever
to
such Third-Party Inventions and will not pursue for himself or for others
any
transaction relating to the Third-Party Inventions which is not on behalf
of the
Company.
(e) The
provisions of this Section 6 shall survive any termination of this
Agreement.
6. Non-Competition,
Non-Solicitation and Non-Disparagement.
(a) The
Employee understands and recognizes that his services to the Company are
special
and unique and that in the course of performing such services the Employee
will
have access to and knowledge of Confidential and Proprietary Information
(as
defined in Section 5) and the Employee agrees that, during the Term and for
a
period of 12 months
thereafter, he shall not without the consent of the Company in any manner,
directly or indirectly, on behalf of himself or any person, firm, partnership,
joint venture, corporation or other business entity (“Person”),
enter
into or engage in any business which is engaged in any business directly
or
indirectly competitive with the Company’s Business (as defined below), either as
an individual for his own account, or as a partner, joint venturer, owner,
executive, employee, independent contractor, principal, agent, consultant,
salesperson, officer, director or shareholder of a Person in a business
competitive with the Company within the geographic area of the Company’s
Business, which is deemed by the parties hereto to be worldwide. The Employee
acknowledges that, due to the nature of the Company’s Business, and the
importance to the Company’s Business of its Confidential and Proprietary
Information, a violation of this Section 6(a) could cause substantial damage
to
the Company and its affiliates and, therefore, the Company has a strong
legitimate business interest in protecting the continuity of its business
interests and the restriction herein agreed to by the Employee narrowly and
fairly serves such an important and critical business interest of the Company.
For purposes of this Agreement, the “Company’s Business” shall mean the business
or businesses set forth on the attached Schedule 6(a), which shall be amended
from time to time upon the mutual written agreement of the parties, but which
will automatically include the research, development and commercialization
of
any technologies that are licensed or otherwise acquired by the Company.
Notwithstanding the foregoing, nothing contained in this Section 6(a) shall
be
deemed to prohibit the Employee from (i) acquiring or holding, solely for
investment, publicly traded securities of any corporation, some or all of
the
activities of which are competitive with the business of the Company so long
as
such securities do not, in the aggregate, constitute more than three percent
(3%) of any class or series of outstanding securities of such
corporation.
(b) During
the Term and for a period of 12 months thereafter, the Employee shall not,
directly or indirectly, without the prior written consent of the
Company:
5
(i) solicit
or induce any employee of the Company or any of its affiliates to leave the
employ of the Company or any such affiliate; or hire for any purpose any
employee of the Company or any affiliate or any employee who has left the
employment of the Company or any affiliate within six months of the termination
of such employee’s employment with the Company or any such affiliate or at any
time in violation of such employee’s non-competition agreement with the Company
or any such affiliate; or
(ii) solicit
or accept employment or be retained by any Person who, at any time during
the
term of this Agreement, was an agent, client or customer of the Company or
any
of its affiliates where his position will be related to the Company’s Business;
or
(iii) solicit
or accept the business of any agent, client or customer of the Company or
any of
its affiliates with respect to products, services or investments similar
to
those provided or supplied by the Company or any of its affiliates.
(c) The
Company and the Employee each agree that both during the Term and at all
times
thereafter, neither party shall directly or indirectly disparage, whether
or not
true, the name or reputation of the other party or any of its affiliates,
including but not limited to, any officer, director, employee or any stockholder
owning greater than five percent (5%) of the Company’s outstanding Common Stock.
This Section 6 shall not include (i) statements made by the Employee’s in
performing his duties in the ordinary course as President (e.g., employee
evaluations and remarks made in private meetings of the Board) and (ii)
statements made by the Employee under oath in a legal proceeding.
(d) In
the
event that the Employee breaches any provisions of Section 5 or this Section
6
or there is a threatened breach, then, in addition to any other rights which
the
Company may have, the Company shall (i) be entitled, without the posting
of a
bond or other security, to injunctive relief to enforce the restrictions
contained in such Sections and (ii) have the right to require the Employee
to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments and other benefits (collectively “Benefits”)
derived or received by the Employee as a result of any transaction constituting
a breach of any of the provisions of Sections 5 or 6 and the Employee hereby
agrees to account for and pay over such Benefits to the Company.
(e) Each
of
the rights and remedies enumerated in Section 6(d) shall be independent of
the
others and shall be in addition to and not in lieu of any other rights and
remedies available to the Company at law or in equity. If any of the covenants
contained in this Section 6, or any part of any of them, is hereafter construed
or adjudicated to be invalid or unenforceable, the same shall not affect
the
remainder of the covenant or covenants or rights or remedies which shall
be
given full effect without regard to the invalid portions. If any of the
covenants contained in this Section 6 is held to be invalid or unenforceable
because of the duration of such provision or the area covered thereby, the
parties agree that the court making such determination shall have the power
to
reduce the duration and/or area of such provision and in its reduced form
such
provision shall then be enforceable. No such holding of invalidity or
unenforceability in one jurisdiction shall bar or in any way affect the
Company’s right to the relief provided in this Section 6 or otherwise in the
courts of any other state or jurisdiction within the geographical scope of
such
covenants as to breaches of such covenants in such other respective states
or
jurisdictions, such covenants being, for this purpose, severable into diverse
and independent covenants.
6
(f) In
the
event that an actual proceeding is brought in equity to enforce the provisions
of Section 5 or this Section 6, the Employee shall not urge as a defense
that
there is an adequate remedy at law nor shall the Company be prevented from
seeking any other remedies which may be available.
(g) The
provisions of this Section 6 shall survive any termination of this
Agreement.
7. Representations
and Warranties by the Employee.
The
Employee hereby represents and warrants to the Company as follows:
(a) Neither
the execution or delivery of this Agreement nor the performance by the Employee
of his duties and other obligations hereunder violate or will violate any
statute, law, determination or award, or conflict with or constitute a default
or breach of any covenant or obligation under (whether immediately, upon
the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Employee is a party or by which
he is
bound.
(b) The
Employee has the full right, power and legal capacity to enter and deliver
this
Agreement and to perform his duties and other obligations hereunder. This
Agreement constitutes the legal, valid and binding obligation of the Employee
enforceable against him in accordance with its terms. No approvals or consents
of any persons or entities are required for the Employee to execute and deliver
this Agreement or perform his duties and other obligations
hereunder.
8. Termination.
The Employee’s employment hereunder shall be terminated upon the Employee’s
death and may be terminated as follows:
(a) The
Employee’s employment hereunder may be terminated by the Board of Directors of
the Company for Cause. Any of the following actions by the Employee shall
constitute “Cause”:
(i) The
willful failure, disregard or refusal by the Employee to perform his duties
hereunder;
(ii) Any
willful, intentional or grossly negligent act by the Employee having the
effect
of injuring, in a material way (whether financial or otherwise and as determined
in good-faith by a majority of the Board of Directors of the Company), the
business or reputation of the Company or any of its affiliates, including
but
not limited to, any officer, director, executive or shareholder of the Company
or any of its affiliates;
(iii) Willful
misconduct by the Employee
in
respect of the duties or obligations of the Employee under this
Agreement,
including, without limitation, insubordination with respect to lawful directions
received by the Employee from the Executive or the Board of Directors of
the
Company;
(iv) The
Employee’s indictment of any felony or a misdemeanor involving moral turpitude
(including entry of a nolo contendere plea);
7
(v) The
determination by the Company, after a reasonable and good-faith investigation
by
the Company following a written allegation by another employee of the Company,
that the Employee engaged in some form of harassment prohibited
by law
(including, without limitation, age, sex or race discrimination),
unless
the Employee’s actions were specifically directed by the Board of Directors of
the Company;
(vi) Any
misappropriation or embezzlement of the property of the Company or its
affiliates (whether or not a misdemeanor or felony);
(vii) Breach
by
the Employee of any of the provisions of Sections
5, 6
or
7
of this
Agreement; and
(viii) Breach
by
the Employee of any provision of this Agreement other than those contained
in
Sections
5,
6
or
7
which
is not cured by the Employee within thirty (30) days after notice thereof
is
given to the Employee by the Company.
(b) The
Executive’s employment hereunder may be terminated by the Board of Directors of
the Company due to the Executive’s Disability. For purposes of this Agreement, a
termination for “Disability”
shall
occur upon rendering of a written termination notice by the Board of Directors
of the Company after the Executive has been unable to substantially perform
his
duties hereunder for 90 or more consecutive days, or more than 120 days in
any
consecutive 12 month period, by reason of any physical or mental illness
or
injury. For purposes of this Section 9(b), the Executive agrees to make himself
available and to cooperate in any reasonable examination by a reputable
independent physician retained by the Company.
(c) The
Employee’s employment hereunder may be terminated by the Board of Directors of
the Company (or its successor) upon the occurrence of a Change of Control.
For
purposes of this Agreement, “Change
of Control”
means
(i) the acquisition, directly or indirectly, following the date hereof by
any
person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended), in one transaction or a series of related
transactions, of securities of the Company representing in excess of fifty
percent (50%) or more of the combined voting power of the Company’s then
outstanding securities if such person or his or its affiliate(s) do not own
in
excess of 50% of such voting power on the date of this Agreement, or (ii)
the
future disposition by the Company (whether direct or indirect, by sale of
assets
or stock, merger, consolidation or otherwise) of all or substantially all
of its
business and/or assets in one transaction or series of related transactions
(other than a merger effected exclusively for the purpose of changing the
domicile of the Company).
(d) The
Employee’s employment hereunder may be terminated by the Employee for Good
Reason. For purposes of this Agreement, “Good
Reason”
shall
mean any of the following: (i) the assignment to the Employee of duties
inconsistent with the Employee's position, duties, responsibilities, titles
or
offices as described herein; (ii) any material reduction by the Corporation
of the Employee's duties and responsibilities; or (iii) any reduction
by
the Corporation of the Employee's compensation or benefits payable hereunder
(it
being understood that a reduction of benefits applicable to all employees
of the
Corporation, including the Employee, shall not be deemed a reduction of the
Employee's compensation package for purposes of this definition) (iv) a material
breach by the Company of this Agreement that is not cured within 30 days
of
receipt by the Company of written notice of such breach; or (v) upon a Change
of
Control (1) that (x) results in the elimination of the Board of Directors
or (y)
representatives of the Board just prior to the event causing the Change of
Control do not represent a majority of the Board immediately subsequent to
the
event causing the Change of Control and (2) in which the fair market value
of
the Company’s Common Stock, in the aggregate, as determined in good faith by the
Board on the date of such Change of Control, is greater than
$50,000,000.
8
9. Compensation
upon Termination.
(a) If
the
Employee’s employment is terminated as a result of his death or Disability, the
Company shall pay to the Employee or to the Employee’s estate, as applicable,
his
Base
Salary for a period of one year following the date of termination and any
accrued but unpaid Bonus and expense reimbursement amounts through the date
of
his Death or Disability. All Stock Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Employee’s
termination shall remain exercisable for a period of 90 days.
All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such date.
(b) If
the
Employee’s employment is terminated by the Company for Cause, then the Company
shall pay to the Employee his Base Salary through the date of his termination
and any expense reimbursement amounts owed through the date of termination.
The
Employee shall have no further entitlement to any other compensation or benefits
from the Company. All
Stock
Options that have
not
vested as
of the
date of termination shall be deemed to have expired as of such date.
Any
Stock Options that have vested as of the date of the Executive’s termination for
Cause shall remain exercisable for a period of 90 days.
(c) If
the
Employee’s employment is terminated by the Company (or its successor) upon the
occurrence of a Change of Control and on the date of termination pursuant
to
this Section 9(c) the fair market value of the Company’s Common Stock, in the
aggregate, as determined in good faith by the Board on the date of such Change
of Control, is less than $50,000,000, then the Company (or its successor,
as
applicable) shall pay to the Employee his Base Salary and benefits for a
period
of one year or until the end of the Term, whichever is shorter, as well as
any
expense reimbursement amounts owed through the date of termination. All Stock
Options that are
scheduled to vest by the end of the calendar year in which such termination
occurs shall be accelerated and deemed to have vested as of the termination
date. Any Stock Options that have vested (or been deemed pursuant to the
immediately preceding sentence to have vested) as
of the
date of the Employee’s
termination shall remain exercisable for a period of 90 days.
(d) If
the
Employee’s employment is terminated by the Company other than as a result of the
Employee’s death or Disability and other than for reasons specified in Sections
9(b), or if the Employee’s employment is terminated by the Employee for Good
Reason, then the Company shall (i) continue to pay to the Employee his Base
Salary and Guaranteed Bonus for a period of one year following such termination
and (ii) pay the Employee any expense reimbursement amounts owed through
the
date of termination. All Stock Options scheduled
to vest at the end of the calendar year in which such termination occurs
shall
be
accelerated and deemed to have vested as of the termination date.
Any
Stock Options that have vested (or been deemed pursuant to this Section 9(d))
as
of the date of the Executive’s termination shall remain exercisable for a period
of 90 days.
9
(e) Following
expiration and non-renewal of the Term, should the Company, in its sole
discretion require that the Employee continue to comply with the terms of
Section 6 hereof, the Company shall pay the Employee his Base Salary for
a
period of one year following expiration of the Term.
(f) This
Section 9 sets forth the only obligations of the Company with respect to
the
termination of the Employee’s employment with the Company, and the Employee
acknowledges that, upon the termination of his employment, he shall not be
entitled to any payments or benefits which are not explicitly provided in
Section 9.
(g) The
provisions of this Section 9 shall survive any termination of this
Agreement.
10. Miscellaneous.
(a) This
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without giving effect to its principles
of conflicts of laws.
(b) Any
dispute arising out of, or relating to, this Agreement or the breach thereof
(other than Sections 5 or 6 hereof), or regarding the interpretation thereof,
shall be finally settled by arbitration conducted in New York City in accordance
with the rules of the American Arbitration Association then in effect before
a
single arbitrator appointed in accordance with such rules. Judgment upon
any
award rendered therein may be entered and enforcement obtained thereon in
any
court having jurisdiction. The arbitrator shall have authority to grant any
form
of appropriate relief, whether legal or equitable in nature, including specific
performance. For the purpose of any judicial proceeding to enforce such award
or
incidental to such arbitration or to compel arbitration and for purposes
of
Sections 5 and 6 hereof, the parties hereby submit to the non-exclusive
jurisdiction of the Supreme Court of the State of New York, New York County,
or
the United States District Court for the Southern District of New York, and
agree that service of process in such arbitration or court proceedings shall
be
satisfactorily made upon it if sent by registered mail addressed to it at
the
address referred to in paragraph (g) below. The
costs
of such arbitration shall be borne proportionate to the finding of fault
as
determined by the arbitrator. Judgment on the arbitration award may be entered
by any court of competent jurisdiction.
(c) This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
and their respective heirs, legal representatives, successors and
assigns.
(d) This
Agreement, and the Employee’s rights and obligations hereunder, may not be
assigned by the Employee. The Company may assign its rights, together with
its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets.
(e) This
Agreement cannot be amended orally, or by any course of conduct or dealing,
but
only by a written agreement signed by the parties hereto.
10
(f) The
failure of either party to insist upon the strict performance of any of the
terms, conditions and provisions of this Agreement shall not be construed
as a
waiver or relinquishment of future compliance therewith, and such terms,
conditions and provisions shall remain in full force and effect. No waiver
of
any term or condition of this Agreement on the part of either party shall
be
effective for any purpose whatsoever unless such waiver is in writing and
signed
by such party.
(g) All
notices, requests, consents and other communications, required or permitted
to
be given hereunder, shall be in writing and shall be delivered personally
or by
an overnight courier service or sent by registered or certified mail, postage
prepaid, return receipt requested, to the parties at the addresses set forth
on
the first page of this Agreement, and shall be deemed given when so delivered
personally or by overnight courier, or, if mailed, five days after the date
of
deposit in the United States mails. Either party may designate another address,
for receipt of notices hereunder by giving notice to the other party in
accordance with this paragraph (g).
(h) This
Agreement sets forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject
matter
hereof. No representation, promise or inducement has been made by either
party
that is not embodied in this Agreement, and neither party shall be bound
by or
liable for any alleged representation, promise or inducement not so set
forth.
(i) As
used
in this Agreement, “affiliate” of a specified Person shall mean and include any
Person controlling, controlled by or under common control with the specified
Person.
(j) The
section headings contained herein are for reference purposes only and shall
not
in any way affect the meaning or interpretation of this Agreement.
(k) This
Agreement may be executed in any number of counterparts, each of which shall
constitute an original, but all of which together shall constitute one and
the
same instrument.
11
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
| ZIOPHARM, INC. | ||
| |
|
|
| By: | /s/ Jonathan Lewis | |
|
Name:
Jonathan Lewis, M.D.
Title:
Chief Executive Officer
|
||
| EMPLOYEE | ||
| |
|
|
| By: | /s/ Richard Bagley | |
|
Name: Richard Bagley |
||
12
SCHEDULE
6(a)
1. The
research, development, manufacture, commercialization and sale of organic
arsenicals for the treatment of cancer and human disease.
13
Exhibit
10.5
Portions
herein identified by [***] have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. A complete
copy of this document has been filed separately with the Securities and Exchange
Commission.
PATENT
AND TECHNOLOGY LICENSE AGREEMENT
This
fifty-two (52) page AGREEMENT ("AGREEMENT") is made on this 24th
day of
August, 2004, by and between THE BOARD OF REGENTS ("BOARD") of THE UNIVERSITY
OF
TEXAS SYSTEM ("SYSTEM"), an agency of the State of Texas, whose address is
201
West 7th Street, Austin, Texas 78701, on behalf of THE UNIVERSITY OF TEXAS
M. D.
ANDERSON CANCER CENTER ("UTMDACC"), a component institution of SYSTEM, The
Texas
A&M University System (“A&M”), an agency of the State of Texas located
at College Station, Texas 77843, and Ziopharm
Inc., a Delaware corporation having a principal place of business located at
787
Seventh Avenue, 48th Floor, New York, NY 10019 ("LICENSEE").
TABLE
OF CONTENTS
|
RECITALS
|
Page
2
|
|
I.
EFFECTIVE DATE
|
Page
2
|
|
II.
DEFINITIONS
|
Page
2
|
|
III.
LICENSE
|
Page
6
|
|
IV.
CONSIDERATION, PAYMENTS AND REPORTS
|
Page
8
|
|
V.
SPONSORED RESEARCH
|
Page
16
|
|
VI.
PATENTS AND INVENTIONS
|
Page
17
|
|
VII.
INFRINGEMENT BY THIRD PARTIES
|
Page
19
|
|
VIII.
PATENT MARKING
|
Page
20
|
|
IX.
INDEMNIFICATION AND INSURANCE
|
Page
20
|
|
X.
USE OF BOARD AND UTMDACC'S NAME
|
Page
22
|
|
XI.
CONFIDENTIAL INFORMATION AND PUBLICATION
|
Page
23
|
|
XII.
ASSIGNMENT
|
Page
24
|
|
XIII.
TERM AND TERMINATION
|
Page
24
|
|
XIV.
DUE DILIGENCE
|
Page
26
|
|
XV.
WARRANTY: SUPERIOR RIGHTS
|
Page
27
|
|
XVI.
GENERAL
|
Page
29
|
|
SIGNATURES
|
Page
32
|
|
EXHIBIT
I—PATENT RIGHTS
|
Page
33
|
|
EXHIBIT
II—IMPROVEMENTS
AND NEW INVENTIONS FROM SPONSORED RESEARCH
|
Page
34
|
|
EXHIBIT
III—STOCK PURCHASE AGREEMENT
|
Page
35
|
|
EXHIBIT
IV—PREVIOUS AGREEMENTS
|
Page
42
|
|
EXHIBIT
V—OPTION
|
Page
43
|
RECITALS
|
A.
|
BOARD
and A&M own certain PATENT RIGHTS and TECHNOLOGY RIGHTS related to
LICENSED SUBJECT MATTER developed at UTMDACC and
A&M.
|
|
B.
|
BOARD,
through UTMDACC, and A&M desire to have the LICENSED SUBJECT MATTER
developed in the LICENSED FIELD and used for the benefit of LICENSEE,
BOARD, SYSTEM, UTMDACC, A&M, the inventor(s), and the
public.
|
|
C.
|
UTMDACC,
through an executed Commercialization Agreement (as amended) with
A&M
has the authority to negotiate the license contemplated
hereby.
|
|
D.
|
LICENSEE
wishes to obtain a license from BOARD and A&M to practice LICENSED
SUBJECT MATTER.
|
NOW,
THEREFORE, in consideration of the mutual covenants and promises herein
contained, the parties agree as follows:
I. EFFECTIVE
DATE
|
1.1
|
This
AGREEMENT is effective as of the date written above ("EFFECTIVE
DATE").
|
II. DEFINITIONS
As
used
in this AGREEMENT, the following terms have the meanings indicated:
2
|
2.1
|
AFFILIATE
means any business entity more than fifty percent (50%) owned by
LICENSEE,
any business entity which owns more than fifty percent (50%) of LICENSEE,
or any business entity that is more than fifty percent (50%) owned
by a
business entity that owns more than fifty percent (50%) of
LICENSEE.
|
|
2.2
|
FDA
means
United States Food and Drug
Administration.
|
|
2.3
|
IMPROVEMENTS
means
Board’s and A&M’s rights to any inventions (whether patentable or
not), information and data, or subsequent reductions to practice
of the
PATENT RIGHTS listed in Exhibit I that (1) the manufacture, use or
sale of
which would infringe an issued or pending claim within PATENT RIGHTS
listed on Exhibit I; (2) are conceived or reduced to practice as
of the
EFFECTIVE DATE, or after the EFFECTIVE DATE and before the fifth
anniversary thereof, by
any of the inventors listed in Exhibit I while such inventors are
employed
at UTMDACC or A&M, or those working under their direction while
employed at UTMDACC
or
A&M;
(3) are not obligated to a third party
by
a written agreement in effect prior to the EFFECTIVE DATE, and which
are
set forth on the attached Exhibit IV; and (4) are known to UTMDACC’s or
A&M’s respective technology transfer offices, any of which shall be
added to Exhibit II and made a part hereof.
|
|
2.4
|
IND
means
Investigational New Drug Application as defined by the rules and
regulations of the FDA.
|
|
2.5
|
LICENSED
FIELD
means all human and animal uses.
|
|
2.6
|
LICENSED
PRODUCTS
means any
product or service that is covered in whole or in part by a VALID
CLAIM
contained in the PATENT RIGHTS in the country in which the product
is
made, used, leased or sold.
|
3
|
2.7
|
LICENSED
SUBJECT MATTER
means PATENT RIGHTS, IMPROVEMENTS and TECHNOLOGY RIGHTS within
LICENSED
FIELD.
|
|
2.8
|
LICENSED
TERRITORY
means worldwide.
|
|
2.9
|
LICENSOR
means
collectively, the BOARD, UTMDACC, and
A&M.
|
|
2.10
|
MAJOR
MARKET COUNTRY
means the United States of America, Japan, Canada and the European
Union.
|
|
2.11
|
NDA
means New Drug Application as defined by the rules and regulations
of the
FDA.
|
|
2.12
|
NET
SALES
means the gross revenues received by LICENSEE or a sublicensee, as
appropriate, from a SALE less sales discounts actually granted, sales
and/or use taxes actually paid, import and/or export duties actually
paid,
outbound transportation actually prepaid or allowed, and amounts
actually
allowed or credited due to returns (not exceeding the original billing
or
invoice amount), all as recorded by LICENSEE or sublicensee, as
appropriate, in their official books and records in accordance with
generally accepted accounting practices and consistent with LICENSEE’s or
sublicensee’s, as appropriate, published financial statements and/or
regulatory filings with the United States Securities and Exchange
Commission.
|
|
2.13
|
PATENT
RIGHTS
means BOARD's and A&M’s rights in information or discoveries described
in invention disclosures on Exhibit I or in the subsequent reductions
to
practice of such information or discoveries (so long as such subsequent
reductions to practice are not obligated to a third party), or claimed
in
any patents, and/or patent applications, whether domestic or foreign,
based on such invention disclosures and such reductions to practice
(that
are not obligated to a third party) and all domestic and foreign
divisionals, continuations, continuations-in-part, reissues,
reexaminations or extensions thereof, including any foreign counterparts
thereto and any letters patent that issue thereon, including but
not
limited to: (a) Provisional Application entitled, “Compounds and Methods
for the Treatment of Cancer” filed July 16, 2004; (b) U.S. Application
Serial Number 60/346,492 filed January 7, 2002; (c) WO 2003/057012
filed
January 7, 2003; (d) U.S. Application Serial Number 10/337,969 filed
January 7, 2003; and (e) national stage filings for MDA01-063 in
Europe,
Japan, Canada and Australia.
|
4
|
2.14
|
PHASE
1
means a human clinical trial, the principal purpose of which is
to
determine toxicity, absorption, metabolism and/or safe dosage range
in
patients with the disease target being studied as required in 21
C.F.R.
§312 or a similar regulatory requirement in any MAJOR MARKET COUNTRY.
|
|
2.15
|
PHASE
2 means
a controlled clinical study conducted to obtain preliminary data
on
effectiveness of an investigational new drug for a particular indication,
as required in 21 C.F.R. §312 or a similar regulatory requirement in any
MAJOR MARKET COUNTRY.
|
|
2.16
|
PHASE
3 means
a human clinical trial, the principal purpose of which is to establish
safety and efficacy in patients with the disease target being studied
as
required in 21 C.F.R. §312 or a similar regulatory requirement in any
MAJOR MARKET COUNTRY. A PHASE 3 study shall also include a PIVOTAL
STUDY.
|
|
2.17
|
PIVOTAL STUDY
means human clinical trial intended to provide the substantial evidence
of
efficacy necessary to support the filing of an approvable NDA whether
or
not such study is a traditional PHASE 3 study (e.g., a combined PHASE
2/PHASE 3 study, or any PHASE 2 study in lieu of a PHASE 3 study)
or a
similar trial conducted in any MAJOR MARKET COUNTRY leading to an
approval
in any such MAJOR MARKET COUNTRY.
|
5
|
2.18
|
SALE
or SOLD
means the transfer or disposition of a LICENSED PRODUCT or product
for
which royalties are due under Section 4.1(c) (“Section 4.1(c) Product”) ,
or sold for value to a party other than LICENSEE or
AFFILIATE.
|
|
2.19
|
TECHNOLOGY
RIGHTS
means BOARD's and A&M’s rights in any technical information, know-how,
processes, procedures, compositions, devices, methods, formulae,
protocols, techniques, software, designs, drawings or data created
by the
inventor(s) listed in Exhibit I while employed at UTMDACC or A&M,
respectively, or by individuals working under the direction of such
inventors at UTMDACC or A&M, which are not claimed in PATENT RIGHTS
but that are necessary for practicing PATENT
RIGHTS.
|
|
2.20
|
VALID
CLAIM means,
an issued claim of any unexpired patent or claim of any pending patent
application included among the PATENT RIGHTS, which patent has not
been
held unenforceable, unpatentable or invalid by a decision of a court
or
governmental body of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, which has not been rendered
unenforceable through disclaimer or otherwise, and which has not
been lost
through an interference proceeding or
abandoned.
|
III. LICENSE
GRANT
|
3.1
|
BOARD,
through UTMDACC, and A&M hereby grant to LICENSEE, and LICENSEE hereby
accepts, a royalty-bearing, exclusive license under LICENSED SUBJECT
MATTER to make, have made, manufacture, have manufactured, use, import,
offer to sell, sell and/or have sold products within LICENSED TERRITORY
for use within LICENSED FIELD. This
grant is subject to Sections 15.2 and 15.3 herein below, the payment
by
LICENSEE to UTMDACC of all consideration as provided herein, and
is
further subject to the following rights retained by BOARD, UTMDACC
and
A&M to:
|
6
|
(a)
|
publish
the general scientific findings from research related to LICENSED
SUBJECT
MATTER, subject to the terms of Article XI-Confidential Information
and
Publication; and
|
|
(b)
|
use
LICENSED SUBJECT MATTER solely for its own internal, non-commercial
research, teaching, and other educationally-related purposes;
and
|
|
(c)
|
request
that the LICENSEE transfer LICENSED SUBJECT MATTER to academic or
research
institutions for non-commercial research use or for purposes of
collaboration upon terms reasonably acceptable to the LICENSEE and
such
third party; provided, however, that LICENSEE will not unreasonably
withhold consent to UTMDACC and A&M’s use of the LICENSED SUBJECT
MATTER in collaborations between UTMDACC, A&M, and/or the National
Cancer Institute (NCI).
|
|
3.2
|
LICENSEE
may extend the license granted herein to any AFFILIATE provided that
the
AFFILIATE consents in writing to be bound by this AGREEMENT to the
same
extent as LICENSEE. LICENSEE agrees to deliver such contract to UTMDACC
within 30 calendar days following execution
thereof.
|
|
3.3
|
LICENSEE
may grant sublicenses under LICENSED SUBJECT MATTER consistent with
the
terms of this AGREEMENT, provided that LICENSEE is responsible for
its
sublicensees relevant to this AGREEMENT, and for diligently collecting
all
amounts due LICENSEE from sublicensees. If a sublicensee pursuant
hereto
becomes bankrupt, insolvent or is placed in the hands of a receiver
or
trustee, LICENSEE, to the extent allowed under applicable law and
in a
timely manner, agrees to use all commercially reasonable efforts
to
collect all consideration owed to LICENSEE and to have the sublicense
agreement confirmed or rejected by a court of proper jurisdiction.
|
7
|
3.4
|
LICENSEE
shall deliver to UTMDACC a true and correct copy of each sublicense
granted by LICENSEE, and any modification or termination thereof,
within
30 calendar days after execution, modification, or
termination.
|
|
3.5
|
If
this AGREEMENT is terminated pursuant to Article XIII-Term and
Termination, BOARD, UTMDACC and A&M agree to accept as successors to
LICENSEE, existing sublicensees in good standing at the date of
termination provided that each such sublicensee consents in writing
to be
bound by all of the terms and conditions of this
AGREEMENT.
|
|
3.6
|
UTMDACC
and A&M shall promptly disclose any IMPROVEMENTS to LICENSEE, which
IMPROVEMENTS will be added to Exhibit II, considered as PATENT RIGHTS
hereunder and made a part hereof.
|
IV. CONSIDERATION,
PAYMENTS AND REPORTS
|
4.1
|
In
consideration for the rights granted to the LICENSEE hereunder, the
LICENSEE agrees to make the following payments or issue the following
shares and options:
|
|
(a)
|
As
partial consideration for the rights granted by the LICENSORS to
LICENSEE
under this AGREEMENT, LICENSEE will issue to the LICENSORS the following
securities, which will be allocated among the LICENSORS as they shall
direct LICENSEE in writing:
|
8
|
(i)
|
Five
Hundred Thousand (500,000) shares (the “SHARES”) of LICENSEE’s common
stock, par value of $0.001 per share (the “COMMON STOCK”); LICENSEE
represents and warrants to LICENSORS that the SHARES equal ten
percent
(10%) of the outstanding shares of COMMON STOCK of the LICENSEE
as of the
EFFECTIVE DATE; LICENSEE will issue the SHARES within 30 days of
the
EFFECTIVE DATE pursuant to the Stock Purchase Agreement attached
hereto as
Exhibit III; and
|
|
(ii)
|
Stock
options (the “OPTIONS”) to purchase One Hundred Thousand (100,000) shares
of COMMON STOCK at an exercise price (the “EXERCISE PRICE”) equal to
$0.001 per share; the OPTIONS will expire on the fifteenth anniversary
hereof. LICENSEE represents and warrants to the LICENSORS that the
shares
subject to the OPTIONS equal two percent (2%) of outstanding COMMON
STOCK
of LICENSEE as of the EFFECTIVE DATE. The OPTIONS will vest and become
exercisable according to the following schedule: (A) fifty percent
(50%)
upon completion of the dosing of the last patient for both
the blood and solid tumor
PHASE 1 trials for
the first LICENSED
PRODUCT; (B) twenty-five percent (25%) upon enrollment of
the first
patient in a multi-center PIVOTAL STUDY for a LICENSED PRODUCT; and
(C) twenty-five percent (25%) upon the filing of an IND on
any
LICENSED PRODUCT that is covered by the PATENT RIGHTS entitled
“Arsenic-Lipid Derivatives as a Treatment for Cancer” (MDA04-076). The
OPTIONS shall be in the form attached hereto as Exhibit V;
and
|
9
|
(b)
|
The
LICENSEE agrees to pay UTMDACC non-refundable quarterly royalties
in an
amount equal to [***] percent ([***]%) of NET SALES by the LICENSEE
of a
LICENSED PRODUCT, and either (i) [***] percent ([***]%) of NET
SALES by
any sublicensee of a LICENSED PRODUCT, or (ii) in the event of
a
sublicense prior to a PIVOTAL TRIAL, [***]% of any royalties received
by
LICENSEE from such sublicensee;
and
|
|
(c)
|
In
a country in which no patent application included in PATENT RIGHTS
is
filed (but there is a product or service manufactured, used or sold
in
such country that if manufactured, used or sold in any MAJOR MARKET
COUNTRY would be covered by a VALID CLAIM within PATENT RIGHTS in
such
country) and/or in which no patent included in PATENT RIGHTS has
issued
that would provide the LICENSEE with protection from competition,
LICENSEE
agrees to pay UTMDACC non-refundable royalties equal to [***] percent
([***]%) of NET SALES by LICENSEE or any sublicensee in such country;
and
|
|
(d)
|
LICENSEE
shall reimburse UTMDACC for all documented out-of-pocket expenses
incurred
by UTMDACC and A&M in filing, prosecuting, enforcing and maintaining
PATENT RIGHTS prior to the date on which LICENSEE assumes control
of the
prosecution of the PATENT RIGHTS, such amount not to exceed $[***]
(the
“PATENT EXPENSES”). UTMDACC will invoice LICENSEE within 30 calendar days
of the EFFECTIVE DATE for the PATENT EXPENSES. The invoiced amounts
will
be due and payable by LICENSEE within 30 calendar days of invoice;
and
|
10
|
(e)
|
LICENSEE
shall pay UTMDACC a nonrefundable license fee in the amount of
$125,000.
This fee will not reduce the amount of any other payment provided
for in
this ARTICLE IV, and is due and payable within 30 calendar days
after the
LICENSEE has received an invoice for the amount from UTMDACC;
and
|
|
(f)
|
LICENSEE
shall pay UTMDACC the following milestone fees, which shall be due
and
payable within 30 calendar days of such milestone event, whether
such
milestone event is achieved by the LICENSEE, its AFFILIATE
or
sublicensee:
|
|
(i)
|
$100,000
upon the dosing of the first patient in the first company sponsored
PHASE
1 clinical trial of the first LICENSED
PRODUCT;
|
|
(ii)
|
$[***]
upon [***] of the first LICENSED
PRODUCT;
|
|
(iii)
|
$[***]
upon [***] of the first LICENSED
PRODUCT;
|
|
(iv)
|
$[***]
[***] for a LICENSED PRODUCT; and
|
|
(v)
|
$[***]
[***] of the first LICENSED PRODUCT in a
MAJOR MARKET COUNTRY.
|
(g) In
the
event that the LICENSEE sublicenses its rights in any jurisdiction prior to
the
commencement of a PIVOTAL STUDY, then the LICENSEE shall pay UTMDACC the [***]
percent ([***]%) of all consideration received from such sublicense other than
(i) payments received by LICENSEE from a sublicense as a result of the purchase
or sale of debt or equity securities of LICENSEE by such sublicense, and (ii)
payments for research and development of the LICENSED PRODUCTS; and (iii)
royalties received from such sublicensee for the sale of LICENSED PRODUCTS
(as
this is addressed previously in this Section); provided, however, that any
such
sublicense payments shall be fully creditable against the milestone payments
described in section 4.1(f). For purposes of clarity, UTMDACC shall be entitled
to the receive the greater of (1) the amounts owed to UTMDACC as a result of
a
sublicense prior to a PIVOTAL TRIAL pursuant to this Section 4.1(g) and (2)
the
milestone payments owed to UTMDACC pursuant to Section 4.1(f).
11
|
4.2
|
Notwithstanding
the consideration due LICENSORS in Section
4.1:
|
|
(a)
|
No
multiple royalties shall be payable because the use, lease or sale
of any
LICENSED PRODUCT or Section 4.1(c) Product is, or shall be, covered
by
more than one valid and unexpired claim contained in the PATENT
RIGHTS;
and
|
|
(b)
|
In
the event that a LICENSED PRODUCT or Section 4.1(c) Product is sold
in the
form of a combination product containing one or more products or
technologies which are themselves not a LICENSED PRODUCT, the NET
SALES
for such combination product shall be calculated by multiplying the
sales
price of such combination product by the fraction A/(A+B) where A
is the
invoice price of the LICENSED PRODUCT (or if sold to an AFFILIATE,
A shall
be the fair market value of the LICENSED PRODUCT), and B is the total
invoice price of the other products or technologies (or if sold to
an
AFFILIATE, B shall be the fair market value of the LICENSED PRODUCT).
In
the case of a combination product which includes one or more LICENSED
PRODUCTS, the NET
SALES
for such combination product upon which the royalty due to UTMDACC
is
based shall not be less than the normal aggregate NET
SALES
for such LICENSED PRODUCT; and
|
12
|
(c)
|
To
the extent that the LICENSEE or any sublicensee is required, by
order or
judgment of any court to obtain in any jurisdiction any license
from a
third party in order to practice the rights granted to the LICENSEE
by the
LICENSORS hereunder under issued patents in such jurisdiction,
then up to
[***] percent ([***]%) of the royalties payable to such third party
may be
deducted from royalties otherwise payable to UTMDACC from the LICENSEE
or
sublicensee in that jurisdiction, provided that in no event shall
the
royalties payable to UTMDACC pursuant to Section 4.1 in any quarterly
period in such jurisdiction be reduced by more than [***] percent
([***]%)
as a result of any such deduction;
and
|
|
(d)
|
LICENSEE’s
royalty obligations under Section 4.1(b) shall terminate, on a
country-by-country basis, with respect to each LICENSED PRODUCT upon
the
expiration date in such country of the last to expire of any patent
included in the PATENT RIGHTS covering the sale of such LICENSED
PRODUCT
in such country; and
|
|
(e)
|
LICENSEE’s
royalty obligations under Section 4.1(c) shall terminate, on a
country-by-country basis ten years after commercialization of Section
4.1(c) Product in such country.
|
|
4.3
|
Unless
otherwise provided, all payments pursuant to Section 4.1 shall be
payable
within 30 calendar days after March 31, June 30, September 30 and
December
31 of each year during the term of this AGREEMENT, at which time
LICENSEE
will also deliver to UTMDACC a true and accurate report, giving such
particulars of the business conducted by LICENSEE and its sublicensees,
if
any exist, during the preceding three calendar months under this
AGREEMENT
as necessary for UTMDACC to account for LICENSEE's payments hereunder.
This report will include pertinent data, including, but not limited
to:
|
13
(a) accounting
methodologies used to account for and calculate the items included in the report
and any differences in such accounting methodologies used by LICENSEE since
the
previous report; and
(b) a
list of
LICENSED PRODUCTS and Section 4.1(c) Products produced for the preceding six
calendar months categorized by the technology it relates to under PATENT RIGHTS;
and
(c) total
quantities of LICENSED PRODUCTS and Section 4.1(c) Products produced by the
category listed in Section 4.2(b); and
(d) total
SALES by the category listed in Section 4.2(b); and
(e) the
calculation of NET SALES by the category listed in Section 4.2(b);
and
|
(f)
|
the
royalties so computed and due UTMDACC by the category listed in Section
4.2(b); and
|
|
(g)
|
all
consideration received from each sublicensee or assignee related
to this
license and payments due UTMDACC;
and
|
(h) all
other
amounts due UTMDACC herein.
Simultaneously
with the delivery of each such report, LICENSEE agrees to pay UTMDACC the amount
due, if any, for the period of such report. This report shall be regardless
of
whether any payments are due.
|
4.4
|
During
the term of this AGREEMENT and for one year thereafter, LICENSEE
agrees to
keep complete and accurate records of its and its sublicensees' SALES
and
NET SALES in sufficient detail to enable the royalties and other
payments
due hereunder to be determined. LICENSEE agrees to permit UTMDACC
or its
representatives, at UTMDACC's expense, to periodically examine LICENSEE’s
books, ledgers, and records during regular business hours for the
purpose
of and to the extent necessary to verify any report required under
this
AGREEMENT. If any amounts due UTMDACC are determined to have been
underpaid in an amount equal to or greater than [***] percent ([***]%)
of
the total amount due during the period so examined, then LICENSEE
will pay
the cost of the examination plus accrued interest at the highest
allowable
rate.
|
14
| 4.5 | Within 30 calendar days following each anniversary of the EFFECTIVE DATE, LICENSEE will deliver to UTMDACC a written progress report as to LICENSEE's (and any sublicensee’s) efforts and accomplishments during the preceding year in diligently commercializing LICENSED SUBJECT MATTER in the LICENSED TERRITORY and LICENSEE's (and sublicensees') commercialization plans for the upcoming year. Any such reports provided pursuant to this Section 4.5 shall be treated as Confidential Information pursuant to Article XI. |
|
4.6
|
All
amounts payable hereunder by LICENSEE will be paid in United States
funds
without deductions for taxes, assessments, fees, or charges of
any kind.
Checks are to be made payable to The University of Texas M. D.
Anderson
Cancer Center, and sent by United States mail to Box 297402, Houston,
Texas 77297, Attention: Manager, Sponsored Programs or by wire
transfer
to:
|
BANK
ONE
TEXAS
910
TRAVIS
15
HOUSTON,
TEXAS 77002
SWIFT:
[***]
ABA
ROUTING NO:
[***]
ACCOUNT
NAME: UNIV.
OF
TEXAS M. D. ANDERSON CANCER CENTER
ACCOUNT
NO: [***]
REFERENCE: include
title and EFFECTIVE DATE of AGREEMENT and type of payment (e.g., license
documentation fee, milestone payment, royalty [including applicable
patent/application identified by UTMDACC reference number and patent number
or
application serial number], or maintenance fee, etc.).
V. SPONSORED
RESEARCH
|
5.1
|
Within
60 days of the EFFECTIVE DATE, the parties shall enter into a sponsored
research agreement related to the LICENSED SUBJECT MATTER for $100,000
annually with UTMDACC to support work with Dr. Verstovsek and a separate
sponsored research agreement for $100,000 annually with A&M to support
work with Dr. Zingaro. LICENSEE shall maintain such sponsored research
agreements for at least a period of two years. For clarity, the total
amount of each sponsored research agreement for the two year period
will
be $200,000.
|
|
5.2
|
If
LICENSEE desires to sponsor additional research for or related to
the
LICENSED SUBJECT MATTER, and particularly where LICENSEE receives
payments
for sponsored research pursuant to a sublicense under this AGREEMENT,
LICENSEE (a) will notify UTMDACC and A&M in writing of all
opportunities to conduct this sponsored research (including clinical
trials, if applicable), (b) solicit research and/or clinical proposals
from UTMDACC and A&M for this purpose, and (c) will give good faith
consideration to funding the proposals at UTMDACC and/or
A&M.
|
16
|
5.3
|
LICENSOR
agrees that any and all intellectual property or know-how that
arises out
of the sponsored research as described in Section 5.1 shall be
added to
Exhibit II, considered as PATENT RIGHTS hereunder and be made a
part of
this AGREEMENT.
|
VI. PATENTS
AND INVENTIONS
|
6.1
|
Following
the EFFECTIVE DATE, LICENSEE shall be responsible for preparing,
filing,
prosecuting and maintaining the patent applications and patents included
within the PATENT
RIGHTS and
for paying all associated costs using patent counsel reasonably acceptable
to UTMDACC, which shall initially be Ropes & Gray. LICENSEE will
directly notify and provide copies to UTMDACC and their selected
outside
patent counsel, at no cost to LICENSEE, of any official communications
from United States and foreign patent offices relating to said prosecution
within 30 days of receipt as well as copies of communications to
the
various patent offices so that UTMDACC may be informed and apprised
of the
continuing prosecution of the patent applications and patents included
within the PATENT
RIGHTS. LICENSEE
shall give UTMDACC at least 10 business days to review and comment
on any
communications to the various patent offices. Additionally,
LICENSEE shall direct their counsel to consult with UTMDACC’s outside
patent counsel on patent strategy related to the PATENT RIGHTS.
|
|
6.2
|
LICENSEE
shall keep UTMDACC informed as to their plans to file and UTMDACC
will
have reasonable opportunities to participate in decision making on
decisions affecting filing, prosecution and maintenance of the patent
applications and patents included within the PATENT
RIGHTS,
including, without limitation reasonable opportunity to review the
abandonment of any patent applications and patents or change of inventors
on patent applications and patents included within the PATENT
RIGHTS,
and LICENSEE will use reasonable efforts to incorporate UTMDACC’s
reasonable suggestions regarding said prosecution. Additionally,
LICENSEE
will use reasonable efforts to amend any patent application to include
claims reasonably requested by UTMDACC to protect LICENSED
SUBJECT MATTER.
No case will be abandoned without giving UTMDACC at least 30 days
notice
and opportunity to pursue the application. If LICENSEE notifies UTMDACC
that it does not intend to file in any national jurisdiction, pay
the cost
of any application or of LICENSEE’s plans to abandon an application or
patent within PATENT RIGHTS, then UTMDACC and/or A&M may file or
pursue such application in that national jurisdiction, if applicable,
at
its own expense and LICENSEE will have no further rights to such
application or patent.
|
17
|
6.3
|
If
UTMDACC reasonably demonstrates that it is not being adequately
informed
or apprised of the continuing prosecution of patent applications
and
patents included within the PATENT
RIGHTS
or
that it is not being provided with reasonable opportunities to
participate
in decision making as indicated in the above paragraph, UTMDACC
shall be
entitled to engage, at LICENSEE’s reasonable expense, independent patent
counsel to review and evaluate patent prosecution and filing of
patents
and patent applications included in PATENT RIGHTS. Henceforth UTMDACC
and
LICENSEE shall share responsibility for patent prosecution, with
LICENSEE
reimbursing UTMDACC in full for any reasonable patent expenses
incurred by
UTMDACC.
|
|
6.4
|
The
Parties agree that they share a common legal interest to get valid
enforceable patents and that UTMDACC, A&M and LICENSEE will keep all
privileged information received pursuant to this Article VI
confidential.
|
18
VII. INFRINGEMENT
BY THIRD PARTIES
|
7.1
|
If
either LICENSEE or UTMDACC or A&M becomes aware of a product made,
used or sold in the LICENSED
TERRITORY,
which it believes infringes an issued VALID
CLAIM,
the Party obtaining such knowledge shall promptly advise the other
Parties
of all relevant facts and circumstances pertaining to the potential
infringement. LICENSEE shall have the first right to enforce any
patent
rights against such infringement, at its own expense. The LICENSORS
shall
cooperate with LICENSEE in such effort, at LICENSEE's expense, including
being joined as a party to such action, if necessary. After
reimbursement of LICENSEE’s reasonable legal costs and expenses related to
such recovery, LICENSEE agrees to pay UTMDACC [***] percent ([***]%)
of
any award for punitive damages and: (a) [***] percent ([***]%) of
any
monetary recovery that is for sales of LICENSED PRODUCTS lost due
to the
infringement; or (b) [***] percent ([***]%) of reasonable royalties
awarded in any recovery in which the award is for reasonable
royalties.
|
|
7.2
|
If
LICENSEE fails, within six (6) months after receiving notice from
UTMDACC
and/or A&M of a potential infringement, or providing UTMDACC and
A&M with notice of such infringement, to either (a) terminate such
infringement or (b) institute an action to prevent continuation thereof
and, thereafter to prosecute such action diligently, or if LICENSEE
notifies UTMDACC and A&M that it does not plan to terminate the
infringement or institute such action, then UTMDACC and A&M shall have
the right to do so at its own expense; provided however, that UTMDACC
and
A&M first consult with LICENSEE and gives due consideration to
LICENSEE’s reasons for not instituting actions to terminate or otherwise
prevent continuation of such infringement. If UTMDACC and/or A&M
decide to pursue such infringement, LICENSEE shall cooperate with
UTMDACC
and/or A&M in such effort including being joined as a party to such
action if necessary. UTMDACC and/or A&M shall be entitled to retain
all damages or costs awarded in such
action.
|
19
VIII. PATENT
MARKING
|
8.1
|
LICENSEE
agrees that all packaging containing individual LICENSED PRODUCT(S),
documentation therefor, and when possible for actual LICENSED PRODUCT(S)
SOLD by LICENSEE, AFFILIATES, and/or sublicensees of LICENSEE will
be
permanently and legibly marked with the number of any applicable
patent(s)
licensed hereunder in accordance with each country's patent laws,
including Title 35, United States
Code.
|
IX. INDEMNIFICATION
AND INSURANCE
| 9.1 | LICENSEE agrees to hold harmless and indemnify BOARD, SYSTEM, UTMDACC, A&M, their Regents, officers, employees, students and agents from and against any third-party claims, demands, or causes of action whatsoever, costs of suit and reasonable attorney’s fees, including without limitation, those costs arising on account of any injury or death of persons or damage to property (“CLAIMS”) caused by, or arising out of, or resulting from, the exercise or practice of the rights granted hereunder by LICENSEE, its officers, its AFFILIATES or their officers, employees, agents or representatives, other than with respect to CLAIMS arising out of or resulting from the willful misconduct or gross negligence of a LICENSOR. |
20
|
9.2
|
In
no event shall BOARD, SYSTEM, UTMDACC or A&M be liable for any
indirect, special, consequential or punitive damages (including,
without
limitation, damages for loss of profits or expected savings or
other
economic losses, or for injury to persons or property) arising
out of, or
in connection with, this AGREEMENT or its subject matter, regardless
of
whether BOARD, SYSTEM, UTMDACC or A&M knows or should know of the
possibility of such damages.
|
| 9.3 | Beginning at the time when any LICENSED SUBJECT MATTER is being distributed or sold (including for the purpose of obtaining regulatory approvals) by LICENSEE or by a sublicensee, LICENSEE shall, at its sole cost and expense, procure and maintain commercial general liability insurance in amounts not less than $2,000,000 per incident and $2,000,000 annual aggregate, and LICENSEE shall use reasonable efforts to have the BOARD, SYSTEM, UTMDACC, A&M, their Regents, officers, and employees named as additional insureds. Such commercial general liability insurance shall provide: (i) product liability coverage; (ii) broad form contractual liability coverage for LICENSEE's indemnification under this AGREEMENT; and (iii) coverage for litigation costs. The minimum amounts of insurance coverage required herein shall not be construed to create a limit of LICENSEE's liability with respect to its indemnification under this AGREEMENT. |
|
9.4
|
LICENSEE
shall provide UTMDACC and A&M with written evidence of such insurance
within 30 days of its procurement. Additionally, LICENSEE shall
provide
UTMDACC and A&M with written notice of at least fifteen (15) days
prior to the cancellation, non-renewal or material change in such
insurance.
|
21
| 9.5 | LICENSEE shall maintain such commercial general liability insurance beyond the expiration or termination of this AGREEMENT during: (i) the period that any LICENSED SUBJECT MATTER developed pursuant to this AGREEMENT is being commercially distributed or sold by LICENSEE or by a sublicensee or agent of LICENSEE; and (ii) the five (5) year period immediately after such period. |
X. USE
OF
BOARD AND UTMDACC’S NAME
|
10.1
|
LICENSEE
will not use the name of (or the name of any employee of) UTMDACC,
SYSTEM,
BOARD or A&M in any advertising, promotional or sales literature, on
its Web site, without the advance express written consent of the
following:
|
In
the
case of UTMDACC:
M.
D.
Anderson Services Corporation
7505
S.
Main, Suite 500, Unit 0525
Houston,
TX 77030
ATTENTION:
Natalie Wright
Email:
nwright@mdanderson.org
In
the
case of A&M:
Executive
Director
Technology
License Office
The
Texas
A&M University System
3369
TAMU
College
Station, Texas 77843-3369
Notwithstanding
the above, LICENSEE may use the name of (or name of employee of) UTMDACC,
SYSTEM, BOARD or A&M in routine business correspondence, or as may be
required by law, rule or regulation in connection with any financing without
express written consent.
22
XI. CONFIDENTIAL
INFORMATION AND PUBLICATION
|
11.1
|
UTMDACC,
A&M and LICENSEE each agree that all information related to this
AGREEMENT and contained in documents marked "confidential" and forwarded
to one by the other (i) are to be received in strict confidence,
(ii) are
to be used only for the purposes of this AGREEMENT, which may include
disclosure of certain confidential information to the FDA and foreign
regulatory agencies and which disclosures shall be expressly permitted
hereunder and (iii) are not to be disclosed by the recipient party
(except
as required by law or court order), its agents or employees without
the
prior written consent of the other party, except to the extent that
the
recipient party can establish competent written proof that such
information:
|
|
(a)
|
was
in the public domain at the time of disclosure;
or
|
|
(b)
|
later
became part of the public domain through no act or omission of the
recipient party, its employees, agents, successors or assigns;
or
|
|
(c)
|
was
lawfully disclosed to the recipient party by a third party having
the
right to disclose it and not under an obligation of confidence to
the
disclosing party; or
|
|
(d)
|
was
already known by the recipient party at the time of disclosure;
or
|
|
(e)
|
was
independently developed by the recipient without use of the other
party’s
confidential information; or
|
|
(f)
|
is
required by law or regulation to be disclosed.
|
|
11.2
|
Each
party’s obligation of confidence hereunder will be fulfilled by using at
least the same degree of care with the other party's confidential
information as it uses to protect its own confidential information,
but
always at least a reasonable degree of care. This obligation will
exist
while this AGREEMENT is in force and for a period of three (3) years
thereafter.
|
23
|
11.3
|
UTMDACC
and A&M reserve the right to publish the general scientific findings
from research related to LICENSED SUBJECT MATTER, with due regard
to the
protection of LICENSEE’s confidential information. UTMDACC and A&M
will submit the manuscript of any proposed publication to LICENSEE
at
least 30 calendar days before publication, and LICENSEE shall have
the
right to review and comment upon the publication in order to protect
LICENSEE’s confidential information and to protect any potential
inventions set forth therein. Upon LICENSEE’s request, publication may be
delayed up to 60 additional calendar days to enable LICENSEE to
secure
adequate intellectual property protection on inventions of UTMDACC
and/or
A&M that may be set forth in the publication and to which LICENSEE
has
rights under this AGREEMENT.
|
XII. ASSIGNMENT
|
12.1
|
Except
in connection with a merger, acquisition, sale or transfer of all
or
substantially all of LICENSEE's assets to a third party or an AFFILIATE,
this AGREEMENT may not be assigned by LICENSEE without the prior
written
consent of UTMDACC and A&M, which will not be unreasonably
withheld.
|
XIII. TERM
AND TERMINATION
|
13.1
|
Subject
to Sections 13.2 and 13.3 hereinbelow, the term of this AGREEMENT
is from
the EFFECTIVE DATE until the expiration of the last VALID CLAIM contained
in the PATENT RIGHTS.
|
24
|
13.2
|
Subject
to any rights herein which survive termination, this AGREEMENT
will
earlier terminate in its
entirety:
|
|
(a)
|
automatically,
if LICENSEE becomes bankrupt or insolvent and/or if the business
of
LICENSEE shall be placed in the hands of a receiver, assignee, or
trustee,
whether by voluntary act of LICENSEE or otherwise;
or
|
|
(b)
|
upon
30 calendar days written notice from UTMDACC, if LICENSEE breaches
or
defaults on the payment or report obligations of ARTICLE IV, or use
of
name obligations of ARTICLE X unless, before the end of the such
30-calendar day notice period, LICENSEE has cured the default or
breach to
UTMDACC’s satisfaction, and so notifies UTMDACC, stating the manner of the
cure; or
|
|
(c)
|
upon
90 calendar days written notice from UTMDACC if LICENSEE breaches
or
defaults on any other material obligation under this AGREEMENT, unless,
before the end of the such 90 calendar-day notice period, LICENSEE
has
cured the default or breach to UTMDACC’s satisfaction and so notifies
UTMDACC, stating the manner of the cure; or
|
|
(d)
|
at
any time by mutual written agreement between LICENSEE, UTMDACC and
A&M, subject to any terms herein which survive termination;
or
|
|
(e)
|
at
any time upon 90 days written notice from the LICENSEE to UTMDACC
and
A&M; or
|
|
(f)
|
if
LICENSEE has defaulted or been late on its payment obligations pursuant
to
the terms of this AGREEMENT on any three occasions in a 12 month
period.
|
13.3 Upon
termination of this AGREEMENT:
25
|
(a)
|
nothing
herein will be construed to release either party of any obligation
maturing prior to the effective date of the termination;
and
|
|
(b)
|
LICENSEE
covenants and agrees to be bound by the provisions of Articles IX
(Indemnification and Insurance), X (Use of Board and UTMDACC’s Name), and
XI (Confidential Information and Publication);
and
|
|
(c)
|
LICENSEE
may, after the effective date of the termination, sell all LICENSED
PRODUCTS and parts therefor that it has on hand at the date of
termination, if, to the extent covered by an issued VALID CLAIM,
LICENSEE
pays the earned royalty thereon and any other amounts due pursuant
to
Article IV of this AGREEMENT as a result of such SALES; and
|
|
(d)
|
LICENSEE
shall grant to BOARD and UTMDACC an option to negotiate a nonexclusive,
royalty bearing license with the right to sublicense others with
respect
to improvements made by LICENSEE in the LICENSED SUBJECT MATTER;
and
|
|
(e)
|
Subject
to Section 13.4(c), LICENSEE agrees to cease and desist any use and
all
SALE of the LICENSED SUBJECT MATTER and LICENSED PRODUCTS to the
extent
covered by an issued VALID
CLAIM.
|
XIV.
DUE
DILIGENCE
|
14.1
|
LICENSEE
shall use all commercially reasonable efforts to bring LICENSED
PRODUCTS
to
market in the MAJOR MARKET COUNTRIES through a thorough, vigorous
and
diligent program for exploitation of the LICENSED
SUBJECT MATTER, including
without limitation conducting pre-clinical and clinical, and
shall continue active, diligent marketing efforts for LICENSED
PRODUCTS
throughout the life of this
AGREEMENT.
|
26
XV. WARRANTY:
SUPERIOR-RIGHTS
|
15.1
|
Except
for the rights, if any, of the Government of the United States of
America
as set forth below, BOARD and A&M represent and warrant their belief
that (a) they are the owner of the entire right, title, and interest
in
and to LICENSED SUBJECT MATTER, (b) they have the sole right to grant
licenses thereunder, and (c) they have not knowingly granted a license
thereunder to any other entity that would restrict rights granted
hereunder except as stated herein.
|
|
15.2
|
LICENSEE
understands that the LICENSED SUBJECT MATTER may have been developed
under
a funding agreement with the Government of the United States of America
and, if so, that the Government may have certain rights relative
thereto.
This AGREEMENT is explicitly made subject to the Government's rights
under
any such agreement and any applicable law or regulation, including
P.L.
96-517 as amended by P.L. 98-620. To the extent that there is a conflict
between any such agreement, applicable law or regulation and this
AGREEMENT, the terms of such Government agreement, applicable law
or
regulation shall prevail.
|
|
15.3
|
As
of the EFFECTIVE DATE, to the knowledge and belief of UTMDACC’s and
A&M’s respective offices of technology transfer, there is no claim,
pending or threatened, of infringement, interference or invalidity
regarding, any part or all of the PATENT RIGHTS and their use as
contemplated in the underlying patent applications as presently
drafted.
|
27
|
15.4
|
LICENSEE
UNDERSTANDS AND AGREES THAT BOARD, UTMDACC AND A&M, BY
THIS AGREEMENT,
MAKE NO REPRESENTATIONS AND MAKE NO WARRANTIES OF ANY KIND, EITHER
EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY
OR
FITNESS FOR A PARTICULAR PURPOSE OR AS TO THE OPERABILITY OR FITNESS
FOR
ANY USE, SAFETY, EFFICACY, APPROVABILITY BY REGULATORY AUTHORITIES,
TIME
AND COST OF DEVELOPMENT, PATENTABILITY, AND/OR BREADTH OF THE LICENSED
SUBJECT MATTER. BOARD, UTMDACC AND A&M, BY THIS AGREEMENT, ALSO MAKE
NO REPRESENTATION AS TO WHETHER ANY PATENT COVERED BY PATENT RIGHTS
IS
VALID OR AS TO WHETHER THERE ARE ANY PATENTS NOW HELD, OR WHICH
WILL BE
HELD, BY OTHERS OR BY BOARD OR A&M DIRECTED TO LICENSED SUBJECT
MATTER, NOR DOES BOARD, UTMDACC OR A&M MAKE ANY REPRESENTATION THAT
THE INVENTIONS CONTAINED IN PATENT RIGHTS DO NOT INFRINGE ANY OTHER
PATENTS NOW HELD OR THAT WILL BE HELD BY OTHERS OR BY BOARD OR
A&M.
|
|
15.5
|
LICENSEE,
by execution hereof, acknowledges, covenants and agrees that LICENSEE
has
not been induced in any way by BOARD, SYSTEM, UTMDACC, A&M or
employees thereof to enter into this AGREEMENT, and further warrants
and
represents that (a) LICENSEE has conducted sufficient due diligence
with
respect to all items and issues pertaining to this AGREEMENT; and
(b)
LICENSEE has adequate knowledge and expertise, or has used knowledgeable
and expert consultants, to adequately conduct such due diligence,
and
agrees to accept all risks inherent
herein.
|
28
XVI. GENERAL
|
16.1
|
This
AGREEMENT constitutes the entire and only agreement between the parties
for LICENSED SUBJECT MATTER and all other prior negotiations,
representations, agreements and understandings are superseded hereby.
No
agreements altering or supplementing the terms hereof will be made
except
by a written document signed by both
parties.
|
|
16.2
|
Any
notice required by this AGREEMENT must be given by prepaid, first
class,
certified mail, return receipt requested, or other overnight delivery
service and addressed in the case of UTMDACC
to:
|
The
University of Texas M. D. Anderson Cancer Center
Office
of
Technology Commercialization
7515
S.
Main, Suite 490, Unit 0510
Houston,
Texas 77030
ATTENTION:
William J. Doty
or
in the
case of A&M to:
Executive
Director
Technology
Licensing Office
The
Texas
A&M University System
3369
TAMU
College
Station, Texas 77843-3369
or
in the
case of LICENSEE to:
Ziopharm,
Inc.
787
Seventh Avenue, 48th
floor
New
York,
NY 10019
ATTENTION:
President
or
other
addresses as may be given from time to time under the terms of this notice
provision.
29
|
16.3
|
LICENSEE
must comply with all applicable federal, state and local laws and
regulations in connection with its activities pursuant to this
AGREEMENT.
|
|
16.4
|
This
AGREEMENT will be construed and enforced in accordance with the laws
of
the United States of America and of the State of Texas, without regard
to
its conflict of law provisions.
|
|
16.5
|
Any
dispute or controversy arising out of or relating to this AGREEMENT,
its
construction or its actual or alleged breach will be decided by mediation.
If the mediation does not result in a resolution of such dispute
or
controversy, it will be finally decided by an appropriate method
of
alternate dispute resolution, including without limitation, arbitration,
conducted in the city of Houston, Harris County, Texas, in accordance
with
the applicable, then current, procedures of the American Arbitration
Association. The arbitration panel will include members knowledgeable
in
the evaluation of the LICENSED SUBJECT MATTER. Judgment upon the
award
rendered may be entered in the highest court or forum having jurisdiction,
state or federal. The provisions of this Section 16.5 will not apply
to
decisions on the validity of patent claims or to any dispute or
controversy as to which any treaty or law prohibits such arbitration.
The
decision of the arbitration must be sanctioned by a court of law
having
jurisdiction to be binding upon and enforceable by the
parties.
|
|
16.6
|
Failure
of BOARD, UTMDACC or A&M to enforce a right under this AGREEMENT will
not act as a waiver of right or the ability to later assert that
right
relative to the particular situation
involved.
|
|
16.7
|
LICENSEE
represents and warrants to LICENSORS that it is authorized to issue
20,000,000 shares
of COMMON
STOCK,
of which 5,000,000 are issued and outstanding as of the EFFECTIVE
DATE,
and 5,000,000 shares of PREFERRED
STOCK,
none of which are currently issued and outstanding. In addition,
LICENSEE
has
issued options to purchase 863,875 shares of Common Stock, which
options
vest, if at all, upon the occurrence of milestone and other
events.
|
30
|
16.8
|
Headings
included herein are for convenience only and will not be used to
construe
this AGREEMENT.
|
|
16.9
|
If
any part of this AGREEMENT is for any reason found to be unenforceable,
all other parts nevertheless will remain enforceable.
|
|
16.10
|
This
AGREEMENT will not be binding upon the parties until it has been
signed
below on behalf of each party, in which event, it shall be effective
as of
the date recited on page one.
|
|
16.11
|
Each
party hereto shall be excused from any breach of this AGREEMENT which
is
proximately caused by governmental regulation, act of war, strike,
act of
God or other similar circumstance normally deemed outside the control
of
the parties.
|
31
IN
WITNESS WHEREOF,
the
parties hereto have caused their duly authorized representatives to execute
this
AGREEMENT.
|
BOARD
OF REGENTS OF THE
UNIVERSITY OF TEXAS SYSTEM |
ZIOPHARM, INC. | |||
| By | /s/ John Mendelsohn, M.D. | By | /s/ Jonathan Lewis | |
|
John Mendelsohn, M.D.
President
The
University of Texas
M.
D. Anderson Cancer Center
|
Name: Jonathan Lewis, M.D.
Title: Chief Executive Officer
|
|||
|
Date: 8/17/04
|
Date: 8/16/04 | |||
|
THE
UNIVERSITY OF TEXAS
M.
D. ANDERSON CANCER CENTER
|
THE TEXAS A&M UNIVERSITY SYSTEM | |||
| By | /s/ Leon Leach | By | /s/ | |
|
Leon Leach
Executive
Vice President
The
University of Texas
M.
D. Anderson Cancer Center
|
Name:
Title: Vice Chancellor
|
|||
|
Date: 8/17/04
|
Date: 8/16/04 | |||
| Approved as to Content: | ||||
| By | /s/ William J. Doty | |||
|
William J. Doty
Managing
Director, Technology
Commercialization
M.
D. Anderson Cancer Center
|
|
|||
|
Date: 8/24/04
|
||||
32
EXHIBIT
I
MDA01-063
“New Organic Arsenic Derivatives as a Treatment for Cancer,” Srdan Verstovsek,
M.D., Ph.D., Ralph A. Zingaro Ph.D., Emil J. Freireich, M.D., Hatice Duzkale,
M.D., Hagop M. Kantarjian, M.D.
MDA04-076
“Arsenic-Lipid Derivatives as a Treatment for Cancer,” Srdan Verstovsek, M.D.,
Ph.D., Ralph A. Zingaro Ph.D., Hagop M. Kantarjian, M.D., M.
Gao
33
EXHIBIT
II
IMPROVEMENTS
AND NEW INVENTIONS FROM
SPONSORED
RESEARCH
34
EXHIBIT
III
STOCK
PURCHASE AGREEMENT
THIS
STOCK PURCHASE AGREEMENT ("Agreement")
is
entered into as of August 24, 2004, by and between the undersigned (the
"Purchaser") Ziopharm, Inc., a
Delaware Corporation having a business address at 787 Seventh Avenue, New
York,
NY 10019 (the “Corporation”).
R E C I T A L S
WHEREAS,
the Corporation and the Purchaser have entered into a License Agreement
of even
date herewith (the “License Agreement”);
WHEREAS,
as partial consideration for the License Agreement, the Corporation has
agreed
to issue to the Purchaser the number of shares of common stock, par value
$.001
per share, of the Corporation (which class of shares is referred to herein
as
"Common
Stock")
set
forth on the signature page hereof;
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing recitals and of the mutual
promises
herein contained, the parties hereby agree as follows:
1. Issuance
and Acquisition of Stock.
(a) In
consideration of the license granted by the Purchaser under the License
Agreement and for no other remuneration, immediately after the execution
of this
Agreement by the parties, the Corporation shall transfer to the Purchaser,
and
the Purchaser shall acquire from the Corporation, the number of shares
of Common
Stock listed beside the Purchaser's name on the signature page hereto (the
"Stock").
(b) Within
10
days of the execution of this Agreement, the Corporation shall deliver
to the
Purchaser a certificate or certificates evidencing the Stock, registered
in the
name of the Purchaser.
2. Violation
Of Transfer Provisions.
The
Corporation shall not be required to transfer on its books any shares of
Stock
which shall have been sold, transferred, assigned or pledged in violation
of any
of the provisions of this Agreement or to treat as owner of such shares
or to
accord the right to vote as such owner or to pay dividends to any transferee
to
whom such shares shall have been so sold, transferred, assigned or
pledged.
3. Rights
as Stockholder.
During
the term of this Agreement, except as otherwise provided herein, the Purchaser
shall exercise all rights and privileges of a stockholder of the Corporation
with respect to the Stock. Corporation will provide Purchaser with all
reports
and notices it is obligated in the future to provide generally to holders
of its
Common Stock or any of its preferred stock.
35
4. Representations
and Warranties by the Corporation.
The
Corporation represents, warrants and covenants with the Purchaser as
follows:
(a) The
Corporation has all necessary power and capacity to execute and deliver
this
Agreement, to perform its obligations hereunder and to consummate the
transaction contemplated hereby. This Agreement has been validly executed
and
delivered by the Corporation and constitutes the legal, valid and binding
obligation of the Corporation, enforceable against the Corporation in accordance
with its terms. The execution and delivery of this Agreement by the Corporation
do not and the performance of its obligations under this Agreement will
not
conflict with or result in any breach or constitute a default under any
contracts to which the Corporation is a party or by which the Corporation
or any
property or asset of the Corporation is bound or affected.
(b) The
Corporation has good title to the Stock and owns the Stock free and clear
of any
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances
of any
nature whatsoever (collectively, “Liens”) other than restrictions on transfer
imposed under the Securities Act of 1933, as amended (the “Securities Act”).
Upon delivery thereof to the Purchaser, the Purchaser shall acquire good
title
to the Stock, free and clear of any liens other than the restrictions set
forth
in this Agreement and under the Securities Act. The Stock is validly issued,
fully paid and non-assessable. The Corporation is transferring the Stock
to the
Purchaser hereunder pursuant to a valid exemption from registration under
the
Securities Act.
(c) The
Corporation is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. The Corporation has all
requisite corporate power and authority to own and operate its properties
and
assets and to carry on its business as now conducted. The Corporation is
duly
qualified, is authorized to transact business, and is in good standing
as a
foreign corporation in all jurisdictions in which the nature of its activities
and of its properties (both owned and leased) makes such qualification
necessary, except for those jurisdictions in which failure to do so would
not
have a material adverse effect on the Corporation or its business and
properties. Immediately
prior to the issuance of the Stock as contemplated by this
Agreement,
the
authorized capital stock of the Corporation will consist of: (i) 20,000,000
shares of Common Stock, par value $0.001 per share, of which 5,000,000
shares
are issued and outstanding, and (ii) 5,000,000 shares of Preferred Stock,
par
value $0.001 per share, none of which are issued and outstanding. No other
shares of capital stock are outstanding. Company has issued options to
purchase
863,875 shares of Common Stock, which options vest, if at all, upon the
occurrence of milestone and other events. All issued and outstanding shares
of
the Company's Common Stock have been duly and validly authorized and issued,
and
are fully paid and are nonassessable.
36
5. Representations
and Warranties by the Purchaser.
The
Purchaser represents, warrants and covenants with the Corporation as
follows:
(a) The
Purchaser has all necessary power and capacity to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transaction contemplated hereby. This Agreement has been validly executed
and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms. The execution and delivery of this Agreement by the Purchaser
do
not and the performance of its obligations under this Agreement will not
conflict with or result in any breach or constitute a default under any
contracts to which the Purchaser is a party or by which the Purchaser or
any
property or asset of the Purchaser is bound or affected.
(b) The
Stock
will be acquired by the Purchaser for his own account with the Purchaser's
own
funds for investment purposes and for the Purchaser's own account, not
as a
nominee or agent for any other person, firm or corporation, and not with
a view
to the sale or distribution of all or any part thereof, and the Purchaser
has no
present intention of selling, granting any participation in, or otherwise
distributing, any or all of the Stock. The Purchaser does not have any
contract,
undertaking, agreement or arrangement with any person, firm or corporation
to
sell, transfer or grant any participation to any person, firm or corporation
with respect to any or all of the Stock.
(c) The
Purchaser understands that the Stock will not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and that the Stock is being
issued and sold to the Purchaser based upon an exemption from registration
predicated in part on the accuracy and completeness of the Purchaser's
representations and warranties appearing herein.
(d) The
Purchaser agrees that in no event will the Purchaser sell, transfer, assign
or
pledge all or any part of the Stock or any interest therein, unless and
until
(i) the Purchaser shall have furnished the Corporation with an opinion
of
counsel satisfactory in form and content to the Corporation to the effect
that
(A) such disposition will not require registration of the Stock under the
Securities Act or compliance with applicable state securities laws, or
(B)
appropriate action necessary for compliance with the Securities Act and
applicable state securities laws has been taken; (ii) the Corporation shall
have
waived, expressly and in writing, its right under clause (i) of this subsection;
and (iii) the proposed transferee of the Stock shall have provided the
Corporation with a written agreement or undertaking by which such transferee
agrees to be bound by all terms, conditions and limitations of this Agreement
applicable to such transferee's transferor as if such transferee were a
party
hereto. The requirement of subparagraph (iii) shall not apply to any transfer
(A) pursuant to an offering registered under the Securities Act, (B) pursuant
to
Rule 144 under the Securities Act or (C) effected in a market transaction
otherwise exempt from registration under the Securities Act. Subject to
applicable law, in the event of the Purchaser’s death, the Corporation will
cooperate with the executor of the Purchaser’s estate to transfer the Stock to
the appropriate parties. Subject to the terms of this Agreement and applicable
laws, rules and regulations, the Corporation hereby acknowledges and agrees
that
Purchaser may transfer any of the stock to its employees and former employees
pursuant to its current and future policies and practices regarding transfer
of
equity received in consideration of a license.
37
(e) The
Purchaser is able to fend for himself in connection with the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters (including investments in development stage biotechnology
companies) as to be capable of evaluating the merits and risks of its investment
in the Corporation, has the ability to bear the economic risks of its investment
for an indefinite period of time and can afford a complete loss of its
investment and has had the opportunity prior to the Purchaser's purchase
of the
Stock to ask questions of and receive answers from representatives of the
Corporation concerning the finances, operations and business of the Corporation.
The Purchaser acknowledges and agrees that (i) except for the Corporation’s
representations and covenants herein and in the License Agreement, it is
not
relying upon any statement, promise or assurance of the Corporation or
any
investor in the Corporation (or any representative of the Corporation or
any
such investor) in arriving at the Purchaser's decision to purchase the
Stock,
and has not otherwise been induced to purchase the Stock by the Corporation
or
any such investor (or any representative of the Corporation or any such
investor); and that (ii) it has decided to purchase the Stock based upon
the
Purchaser's own analysis of the merits and risks of investing in the Corporation
without the intervention or assistance of any other person, firm or
corporation.
(f) The
Purchaser understands and acknowledges that the Purchaser will not be permitted
to sell, transfer, assign or pledge the Stock until it is registered under
the
Securities Act or an exemption from the registration and prospectus delivery
requirements of the Securities Act is available to the Purchaser, and that
there
is no assurance that such an exemption from registration will ever be available
or that the Purchaser will ever be able to sell any of the Stock.
(g) All
certificates representing the Stock and, until such time as the Stock is
sold in
an offering which is registered under the Securities Act or the Corporation
shall have received an opinion of counsel satisfactory in form and content
to
the Corporation that such registration is not required in connection with
a
resale (or subsequent resale) of the Stock, all certificates issued in
transfer
thereof or substitution therefor, shall, where applicable, have endorsed
thereon
the following (or substantially equivalent) legends:
(i) THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES OR "BLUE SKY"
LAWS,
AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO
THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
ZIOPHARM,
INC. THAT SUCH REGISTRATION IS NOT REQUIRED. ANY SUCH TRANSFER MAY ALSO
BE
SUBJECT TO APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS.
(ii) Any
legend required to be placed thereon by any applicable state securities
law.
38
(h) The
Corporation shall not be obligated to transfer any of the Stock if counsel
for
the Corporation determines that any applicable registration requirement
under
the Securities Act or any other applicable requirement of federal or state
law
has not been met.
6. General
Provisions.
(a) No
Assignments.
The
Purchaser shall not transfer, assign or encumber any of its rights, privileges,
duties or obligations under this Agreement without the prior written consent
of
the Corporation, and any attempt to so transfer, assign or encumber shall
be
void.
(b) Notices.
All
notices and other communications which are required or permitted to be
given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficiently given (i) if personally delivered, (ii) if sent by telex or
facsimile, provided that "answer-back" confirmation is received by the
sender or
(iii) upon receipt, if sent by registered or certified mail, postage paid
return
receipt requested in any case addressed as follows:
(i) If
to the
Corporation:
Ziopharm,
Inc.
787
Seventh Avenue, 48th
Floor
New
York,
NY 10019
Attn:
President
(ii) If
to the
Purchaser, to the address set forth on the signature page of this
Agreement.
The
address of a party, for the purposes of this Section 7(b)(ii), may be changed
by
giving written notice to the other party of such change in the manner provided
herein for giving notice. Unless and until such written notice is received,
the
addresses as provided herein shall be deemed to continue in effect for
all
purposes hereunder.
(c) Standoff
Agreement.
The
Purchaser agrees that, in connection with each underwritten public offering
registered under the Securities Act of shares of Common Stock or other
equity
securities of the Corporation by or on behalf of the Corporation, the Purchaser
shall not sell or transfer, or offer to sell or transfer, any shares of
Common
Stock or other equity securities of the Corporation for such period of
time as
all of the officers, directors and significant stock holders are also similarly
bound.
(d) Choice
of Law; Consent to Jurisdiction.
This
Agreement shall be governed by and construed in accordance with the internal
laws (without giving effect to the conflicts of law principles) of the
State of
New York.
(e) Severability.
The
parties hereto agree that the terms and provisions in this Agreement are
reasonable and shall be binding and enforceable in accordance with the
terms
hereof and, in any event, that the terms and provisions of this Agreement
shall
be enforced to the fullest extent permissible under law. In the event that
any
term or provision of this Agreement shall for any reason be adjudged to
be
unenforceable or invalid, then such unenforceable or invalid term or provision
shall not affect the enforceability or validity of the remaining terms
and
provisions of this Agreement, and the parties hereto hereby agree to replace
such unenforceable or invalid term or provision with an enforceable and
valid
arrangement which, in its economic effect, shall be as close as possible
to the
unenforceable or invalid term or provision.
39
(f) Successors.
All
references in this Agreement to the Corporation shall include any and all
successors in interest to the Corporation, whether by merger, consolidation,
sale of all or substantially all assets or otherwise, and this Agreement
shall
inure to the benefit of the successors and assigns of the Corporation and,
subject to the terms herein set forth, shall be binding upon the Purchaser,
its
successors and permitted assigns.
(g) Counterparts.
This
Agreement may be executed in two counterparts, each of which shall be deemed
an
original, but which together shall constitute one and the same
instrument.
(h) Modification,
Amendment and Waiver.
No
modification, amendment or waiver of any provision of this Agreement shall
be
effective against the Corporation unless the same shall be in a written
instrument signed by an officer of the Corporation on its behalf and such
instrument is approved by its Board of Directors. The failure at any time
to
enforce any of the provisions of this Agreement shall in no way be construed
as
a waiver of such provisions and shall not affect the right of either party
thereafter to enforce each and every provision hereof in accordance with
its
terms.
(i) Further
Assurances.
The
parties agree to execute such further instruments and to take such further
action as may reasonably be necessary to carry out the intent of this
Agreement.
(j) Integration.
This
Agreement constitutes the entire agreement of the parties with respect
to the
subject matter hereof.
(k) Headings.
The
headings of the Sections and paragraphs of this Agreement have been inserted
for
convenience of reference only and do not constitute a part of this
Agreement.
(l) Gender
and Number.
As used
in this Agreement, the masculine, feminine or neuter gender, and the singular
or
plural, shall be deemed to include the others whenever and wherever the
context
so requires. Additionally, unless the context requires otherwise, "or"
is not
exclusive.
40
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
or caused
this Agreement to be duly executed by their respective officers, partners
or
other representatives, thereunto duly authorized, all as of the day and
year
first above written.
| ZIOPHARM, INC. | ||
| |
|
|
| By: | /s/ | |
|
Name: Jonathan Lewis, M.D. |
||
| Title: Chief Executive Officer | ||
| PURCHASER: | ||
| |
|
|
| By: | ||
| Name: | ||
| Address: | ||
| EIN/SS#: | ||
NUMBER
OF
SHARES OF
COMMON STOCK PURCHASED: ______
COMMON STOCK PURCHASED: ______
41
EXHIBIT
IV
PREVIOUS
AGREEMENTS
|
·
|
SPORE
Grant for work by Dr. Verstovsek: Leukemia SPORE Development
Program:
|
|
Development
of Organic Arsenic Derivatives as New Therapy for
Leukemia.
|
|
·
|
Career
Development Award to Dr. Verstovsek from UTMDACC for work with
arsenicals
|
42
EXHIBIT
V
THE
SECURITIES REPRESENTED BY THIS OPTION ARE NOT TRANSFERABLE WITHOUT THE
EXPRESS
WRITTEN CONSENT OF ZIOPHARM, INC. (THE "COMPANY") AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM SUCH ACT.
ANY SUCH
TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES
LAWS.
ZIOPHARM,
INC.
Option
for the Purchase of Shares of
Common
Stock
|
No.
MDACC-1
|
50,000
Shares
|
FOR
VALUE
RECEIVED, ZIOPHARM, INC., a Delaware corporation (the "Company"), hereby
certifies that [_____________________] or its registered assigns (the "Holder")
is entitled to purchase from the Company, subject to the provisions of
this
Option, at any time following the Vesting Date (as defined below) and prior
to
5:00 P.M. Eastern Standard Time on the date that is five years from the
Vesting
Date (the "Termination Date"), Fifty Thousand (50,000) fully paid and
non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock") at an initial per share exercise price equal to
$0.001(the
"Per
Share Exercise Price"), or an aggregate exercise price of $500.00(the
"Aggregate Exercise Price"). The shares of Common Stock deliverable upon
such
exercise are sometimes referred to in this Option as the "Option Shares."
1) Exercise
of Option.
(a) Following
the Vesting Date and prior to the Termination Date, this Option may be
exercised
in whole or in part, from time to time, by the Holder by presentation and
surrender of this Option (with the subscription form attached to this Option
duly executed) at the address set forth in Section 8 of this Option, together
with payment, by certified or official bank check or wire transfer payable
to
the order of the Company, of the Aggregate Exercise Price or the proportionate
part of such Aggregate Exercise Price if exercised in part.
(b) If
this
Option is exercised only in part, the Company shall, upon presentation
of this
Option upon such exercise, execute and deliver (with the certificate for
the
Option Shares purchased) a new Option evidencing the rights of the Holder
of
this Option to purchase the balance of the Option Shares purchasable under
this
Option upon the same terms and conditions as set forth in this Option.
Upon
proper exercise of this Option, the Company promptly shall deliver certificates
for the Option Shares to the Holder duly legended as authorized by the
subscription form. No fractional shares shall be issued upon exercise of
this
Option. Any fractional number of shares called for upon exercise of this
Option
shall be rounded down to the nearest whole share.
43
2) Vesting
of Option.
The
Option shall vest and become exercisable for a percentage of the Option
Shares
as follows: (A) fifty percent (50%) upon completion of the dosing of the
last
patient for both
the
blood and solid tumor
PHASE 1
trials for
the
first LICENSED
PRODUCT; (B) [***] percent ([***]%) upon enrollment of the first patient
in a
multi-center PIVOTAL STUDY for a LICENSED PRODUCT; and (C) [***] percent
([***]%) upon the filing of an IND on any LICENSED PRODUCT that is covered
by
the PATENT RIGHTS entitled “Arsenic-Lipid Derivatives as a Treatment for Cancer”
(MDA04-076). The date any percentage begins exercisable shall be deemed
the
“Vesting Date” with respect to such percentage. The Option shall remain
exercisable for five years from the respective Vesting Dates for each given
percentage of Option Shares and shall thereafter become void. Each fully
capitalized term in this Section 2 shall have the meaning assigned to it
in the
Patent and Technology License Agreement of even date herewith among the
Board of
Regents of the University of Texas System, The University of Texas M. D.
Anderson Cancer Center, The Texas A&M University System and the
Company
3) Adjustment.
(a) In
case
the Company shall (i) pay a dividend or make a distribution on its capital
stock
in shares of Common Stock or any other capital stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares
or (iv) reclassify its Common Stock or effect a capital reorganization
of the
Company,
or
in
case of the consolidation of the Company with or the merger of the Company
with
or into any other company or of the sale of the properties and assets of
the
Company as, or substantially as, an entirety to any other company,
then the
number and type of unexercised Option Shares subject to this Option shall
be
proportionately adjusted so that the Holder shall be entitled to receive
the
aggregate number and type of shares or other property that, if the unexercised
Option Shares had been exercised in full immediately prior to such time,
the
Holder would have owned upon such exercise and been entitled to receive
upon
such dividend, subdivision, combination, reclassification or recapitalization.
Whenever the number of shares issuable upon exercise of this Option is
adjusted
pursuant to this Section 3(a), the Per Share Exercise Price shall simultaneously
be adjusted by multiplying the number of unexercised Option Shares issuable
upon
exercise of this Option by the Per Share Exercise Price in effect on the
date
thereof and dividing the product so obtained by the number of Option Shares
issuable upon exercise of the Option immediately following the adjustments
made
in 3(a) above. Such adjustment shall be made successively whenever any
event
listed in this paragraph 3(a) shall occur. An adjustment made pursuant
to this
Subsection 3(a) shall become effective immediately after the record date
in the
case of a dividend or distribution and shall become effective immediately
after
the effective date in the case of a subdivision, combination or
reclassification.
44
(b) If,
as a
result of an adjustment made pursuant to this Section 3, the Holder shall
become
entitled to receive shares of two or more classes of capital stock or shares
of
Common Stock and other capital stock of the Company upon surrender of this
Option , the Board of Directors (whose determination shall be conclusive
and
shall be described in a written notice to the Holder promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Exercise
Price between or among shares or such classes of capital stock or shares
of
Common Stock and other capital stock.
(c) When
any
adjustment is required to be made in the number or kind of shares purchasable
upon exercise of the Option, the Company shall promptly notify the Holder
of
such event and of the number of shares of securities or property thereafter
purchasable upon exercise of the Option. Whenever the Company intends to
declare
a dividend or other distribution on its Common Stock, it shall provide
Company
notice at least thirty (30) days prior to the record date for such dividend
or
distribution.
4) Reservation
of Option Shares; Fully Paid Shares; Taxes.
The
Company hereby undertakes until expiration of this Option to reserve for
issuance or delivery upon exercise of this Option, such number of shares
of the
Common Stock as shall be required for issuance and/or delivery upon exercise
of
this Option in full, and agrees that all Option Shares so issued and/or
delivered will be validly issued, fully-paid and non-assessable, and further
agrees to pay all taxes and charges that may be imposed upon such issuance
and/or delivery.
5) Limited
Transferability.
This
Option may not be sold, transferred, assigned or hypothecated by the Holder
except in compliance with the provisions of the Securities Act of 1933,
as
amended (the "Act"), and the applicable state securities or "blue sky"
laws, and
is so transferable only upon the books of the Company which the Company
shall
cause to be maintained for such purpose. The Company may treat the registered
holder of this Option as such holder appears on the Company's books at
any time
as the holder for all purposes. All Options issued upon the transfer or
assignment of this Option will be dated the same date as this Option, and
all
rights of the holder of such Option shall be identical to those of the
Holder
and upon such transfer or assignment, the Holder shall have no further
rights
under this Option.
6) Loss,
etc., of Option.
Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Option, and of indemnity satisfactory to the Company,
if
lost, stolen or destroyed, and upon surrender and cancellation of this
Option,
if mutilated, the Company shall execute and deliver to the Holder a new
Option
of like date, tenor and denomination.
7) Status
of Holder.
This
Option does not confer upon the Holder any right to vote or to consent
to or
receive notice as a stockholder of the Company, as such, in respect of
any
matters whatsoever, or any other rights or liabilities as a stockholder,
prior
to the exercise of this Option. If this Option is exercised only in part,
the
Holder shall have no such rights or liabilities with respect to any unexercised
portion of this Option.
45
8) Notices.
No
notice or other communication under this Option shall be effective unless,
but
any notice or other communication shall be effective and shall be deemed
to have
been given if, the same is in writing and is mailed by first-class mail,
postage
prepaid, addressed to:
If
to the
Holder:
If
to the
Company: Ziopharm,
Inc.
787
Seventh Avenue, 48th
Floor
New
York,
NY 10019
Attn:
Secretary
9) Investment
Intent.
(a) The
Holder represents by accepting this Option that it understands that this
Option
and any securities obtainable upon exercise of this Option have not been
registered for sale under Federal or state securities laws and are being
offered
and sold to the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. The Holder is an "accredited investor"
within the meaning of Regulation D under the Act. In the absence of an
effective
registration of such securities or an exemption from such registration
any
certificates for such securities shall bear the legend set forth on the
first
page of this Option. The Holder understands that it must bear the economic
risk
of its investment in this Option and any securities obtainable upon exercise
of
this Option for an indefinite period of time, as this Option and such securities
have not been registered under Federal or state securities laws and therefore
cannot be sold unless subsequently registered under such laws, unless as
exemption from such registration is available.
(b) The
Holder, by its acceptance of this Option, represents to the Company that
it is
acquiring this Option and will acquire any securities obtainable upon exercise
of this Option for its own account for investment and not with a view to,
or for
sale in connection with, any distribution of such securities in violation
of the
Act. The Holder agrees that this Option and any such securities will not
be sold
or otherwise transferred unless (i) a registration statement with respect
to
such transfer is effective under the Act and any applicable state securities
laws or (ii) such sale or transfer is made pursuant to one or more exemptions
from the Act.
10) Headings.
The
headings of this Option have been inserted as a matter of convenience and
shall
not affect the construction of this Option.
46
11) Applicable
Law.
This
Option shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to principles of conflicts of law. The
parties
agree to settle any disputes through binding arbitration in the city, county
and
State of New York.
The
Company has caused this Option to be signed by its President and attested
by its
Secretary on ____________, 2004.
| ZIOPHARM INC. | ||
| |
|
|
| Date: | By: | /s/ |
|
Name: Jonathan Lewis, M.D. |
||
| Title: Chief Executive Officer | ||
| ATTEST: | ||
|
David
M. Tanen
Secretary
|
||
47
SUBSCRIPTION
The
undersigned, ___________________, pursuant to the provisions of the foregoing
Option, hereby elects to exercise the foregoing Option to the extent of
purchasing ____________________ shares of Common Stock under such Option
and
hereby makes payment of $___________ by certified or official bank check
in
payment of the exercise price for such Option .
The
undersigned hereby represents and warrants to the Company that the undersigned
is acquiring the shares of the Company's Common Stock pursuant to exercise
of
the foregoing Option for investment purposes only. The undersigned hereby
further acknowledges that the undersigned understands that such shares
(a) have
not been registered under the Securities Act of 1933, as amended (the "Act"),
and are being issued to the undersigned by the Company in reliance upon
the
foregoing representation and warranty and (b) may not be resold except
in
accordance with the requirements of the Act, including Rule 144 under the
Act,
if applicable. The undersigned further consents to the placing of a legend
on
the certificates for the shares being purchased to the foregoing
effect.
|
Date:
|
_______________
|
Signature:
|
____________________
|
|
|
Address:
|
______________________
|
48
ASSIGNMENT
FOR
VALUE
RECEIVED, _______________ hereby sells, assigns and transfers unto
____________________ the foregoing Option and all rights evidenced by such
Option, and does irrevocably constitute and appoint _____________________,
attorney, to transfer such Option on the books of
____________________.
|
Date:
|
_______________
|
Signature:
|
____________________
|
|
|
Address:
|
______________________
|
49
PARTIAL
ASSIGNMENT
FOR
VALUE
RECEIVED, _______________ hereby assigns and transfers unto ____________________
the right to purchase _______ shares of the Common Stock of ZIOPHARM, INC.
covered by the foregoing Option, and a proportionate part of such Option
and the
rights evidenced by such Option, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of such Option on
the
books of ZIOPHARM, INC.
|
Date:
|
_______________
|
Signature:
|
____________________
|
|
|
Address:
|
______________________
|
50
Exhibit
10.6
Portions
herein identified by [***] have been omitted pursuant to a request for
confidential treatment under Rule 406 of the Securities Act of 1933. A complete
copy of this document has been filed separately with the Securities and Exchange
Commission.
LICENSE
AGREEMENT
This
License Agreement (hereinafter referred to as this "Agreement"), effective
as of
October
15, 2004 2004, (the “Effective Date”), is entered into by and between DEKK-TEK,
Inc., having an address at 4200 Canal Street, Suite A, New Orleans, LA, 70119
(the “Licensor”) and ZIOPHARM, Inc., having an address at 300 George St., Suite
5, New Haven, CT 06511 (the "Company").
WHEREAS,
the
Licensor has certain proprietary rights and intellectual property with respect
to Technology; and
WHEREAS,
the
Company desires to obtain from the Licensor, and the Licensor desires to
grant
to the Company, an exclusive, world-wide, royalty bearing license to develop
and
commercialize the Technology on the terms and conditions set forth herein;
and
NOW,
THEREFORE, in
consideration of the foregoing premises, the mutual promises and covenants
of
the Parties contained herein, and other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
ARTICLE
1 - DEFINITIONS
For
the
purposes of this License Agreement, the following words and phrases shall
have
the following meanings:
1.1 "Affiliate"
shall mean, with respect to any Entity (as hereinafter defined), any Entity
that
directly or indirectly Controls, is Controlled by, or is under common Control
with such Entity.
1.1.1 “Control”
shall mean, for this purpose, direct or indirect control of more than fifty
percent (50%) of the voting securities of an Entity or, if such Entity does
not
have outstanding voting securities, more than 50% of the directorships or
similar positions with respect to such Entity.
Page
1 of
18
1.1.2 “Entity”
shall mean any corporation, association, joint venture, partnership, trust,
university, business, individual, government or political subdivision thereof,
including an agency, or any other organization that can exercise independent
legal standing.
1.2 “FDA”
shall mean the United States Food and Drug Administration
1.3 “Improvements”
shall mean any inventions (whether patentable or not), information
and data that are developed by or on behalf of the Licensor during the term
of
this Agreement, the manufacture, use or sale of which would infringe an issued
or pending claim within the existing Patent Rights.
1.4 “IND”
shall mean Investigational New Drug Application as defined by the rules and
regulations of the FDA.
1.5 “Know-how”
shall mean all tangible information (other than those contained in the Patent
Rights) whether patentable or not and all physical objects related to the
Patent
Rights or the Licensed Product, including but not limited to formulations,
materials, data, drawings and sketches, designs, testing and test result,
regulatory information of a like nature, owned or controlled by
Licensor.
1.6 “Licensed
Product(s)” shall mean any product, the manufacture, use, lease or sale of which
is covered in whole or in part by a Valid Claim contained in the Patent Rights
in the country in which the product is made, used, leased or sold.
1.7 “NDA”
shall mean New Drug Application as defined by the rules and regulations of
the
FDA.
1.8 “Net
Sales” shall mean the total gross receipts for sales of Licensed Products by or
on behalf of the Company of any of its Affiliates or any sublicensee, less
the
sum of the following: (a) usual trade discounts to customers; (b) sales,
tariff
duties and/or use taxes directly imposed and with reference to particular
sales;
(c) outbound transportation prepaid or allowed and transportation insurance;
(d)
amounts allowed or credited on returns; (e) bad debt deductions actually
written
off during the accounting period; (f) sales commissions; and (g) packaging
and
freight charges. For purposes of determining Net Sales, a Licensed Product
shall
not include transfers, uses or dispositions for charitable, promotional,
pre-clinical, clinical, regulatory or governmental purposes. For purposes
of
calculating Net Sales, sales between or among the Company or its Affiliates
shall be excluded from the computation of Net Sales, but sales by the Company
or
its Affiliates to third parties shall be included in the computation of Net
Sales.
1.9 “Patent
Rights” shall mean all of Licensor’s interest in:
1.9.1 All
United States and foreign patents and patent applications and invention
disclosures set forth in Appendix A;
Page
2 of
18
1.9.2 All
United States and foreign patents and patent applications which cover an
invention included in the patents and/or patent applications or invention
disclosures set forth in Appendix A;
1.9.3 All
United States and foreign patents and patent applications which cover an
Improvement;
1.9.4 Any
continuations, divisionals, re-issue applications, continuation-in-part
applications, re-examinations or extensions or any other later filed
applications of any of the foregoing patent applications/patents set forth
in
1.9.1-1.9.3;
and
1.9.5
Any
United States and/or foreign patents issuing from any of the foregoing patent
applications/patents set forth in 1.9.1-1.9.4.
1.10 “Phase
II” shall mean a controlled clinical study in the United States conducted to
obtain preliminary data on effectiveness of an investigational new drug for
a
particular indication, as required in 21 C.F.R. Sec. 312.
1.11 “Phase
III” shall mean a controlled clinical study in the United States, the principal
purpose of which is to establish pivotal safety and pivotal efficacy in patients
with the disease target being studied, as required in 21 C.F.R.
Sec,312.
1.12 “Technology”
means Patent Rights, Improvements and Know-how.
1.13 “Valid
Claim” means an issued claim of any unexpired patent included in
Patent
Rights, which patent has not been held unenforceable, unpatentable or invalid
by
a decision of a court of a governmental body of competent jurisdiction,
unappealable or uanppealed within the time allowed for appeal, which has
not
been rendered unenforceable through disclaimer or otherwise, and which has
not
been lost through an interference proceeding or abandoned.
ARTICLE
2 - GRANT
2.1 The
Licensor hereby grants to the Company and the Company accepts, subject to
the
terms and conditions of this Agreement, an exclusive worldwide license in
all
fields of use to utilize the Technology, and to make, have made, use, have
used,
lease, import, offer to sell, sell, and/or have sold the Licensed Products,
to
the full end of the term for which the Patent Rights are granted, unless
sooner
terminated as hereinafter provided. Company may extend the license granted
herein to any Affiliate, provided that the Affiliate consents in writing
to be
bound by this Agreement to the same extent as Company.
2.2 To
the
best of Licensor’s knowledge and belief and upon due inquiry, the Licensor has
all right, title, and interest in and to the Patent Rights, including exclusive,
absolute, irrevocable right, title and interest thereto, free and clear of
all
liens, charges, encumbrances or other restrictions or limitations of any
kind
whatsoever and to best of Licensor’s knowledge and belief, and upon due inquiry,
there are no licenses, options, restrictions, liens, rights of third parties,
disputes, royalty obligations, proceedings or claims relating to, affecting,
or
limiting its rights or the rights of the Company under this Agreement with
respect to any part or all of the Patent Rights and their use as contemplated
in
the underlying patent applications as presently drafted.
Page
3 of
18
2.3 To
the
best of Licensor’s knowledge and belief and upon due inquiry, there is no claim,
pending or threatened, of infringement, interference or invalidity regarding,
any part or all of the Patent Rights and their use as contemplated in the
underlying patent applications as presently drafted. The validity or
enforceability of any of the Patent Rights or Technology has not been questioned
in any litigation, governmental inquiry or proceeding to which the Licensor
is a
party and, to the knowledge of the Licensor, not such litigation, governmental
inquiry or proceeding is threatened.
2.4 The
Licensor grants to the Company and its Affiliates the right to grant sublicenses
to third- parties under the license granted hereunder.
2.4.1 Within
thirty (30) days after execution or receipt thereof, as applicable, the Company
shall provide the Licensor with a confidential copy of each sublicense issued
hereunder.
2.4.2 Upon
the
termination of this Agreement, Licensor agrees to accept existing sublicensees
under the terms of such sublicense provided that such sublicensee is in good
standing, or restores its good standing within 90 days from the termination
of
this Agreement.
2.5 Upon
execution of this Agreement, Licensor shall promptly provide Know-how to
Company. Additionally, Licensor will promptly disclose to Company any
Improvements.
ARTICLE
3 - DUE DILIGENCE
3.1 The
Company, by itself or through its affiliates or sublicensees shall use all
reasonable commercial efforts to bring a product incorporating the Technology
to
market through a thorough, vigorous and diligent program. Such program shall
include the preclinical and clinical development of the product, including
research and development, manufacturing, laboratory and clinical testing
and
marketing. On or before each anniversary of this Agreement until the Company
markets a product incorporating the Technology, Licensor may request in writing
that the Company submit a report covering the preceding year, regarding the
Technology development progress. Should Licensor believe the Company is not
using all reasonable commercial efforts to bring a product incorporating
the
Technology to market, the Licensor will notify the Company of such concern
and
the Company and the Licensor will meet to discuss such concerns. If as a
result
of such meeting the Licensor is not satisfied the Company is using all
reasonable commercial efforts to bring a product incorporating the Technology
to
market, the parties shall proceed to dispute resolution in accordance with
Section 8.1 of this Agreement.
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ARTICLE
4 - ROYALTIES AND OTHER CONSIDERATION
4.1 As
partial consideration for the rights granted by Licensor to Company,
Company will issue to the Licensor stock options (“Options”) to purchase a total
of 50,000 shares (the “Shares”) of the Company’s common stock (the “Common
Stock”) at an exercise price per share equal to $0.01 per share, equal to one
percent (1%) of the outstanding shares of Common Stock of the Company on
a fully
diluted basis as of the Effective Date. The Options will vest and become
exercisable in accordance with the following schedule:
(i)
12,500
Shares upon the Effective Date;
(ii)
[***]
Shares
[***] of Licensed Product in the United States [***]; and
(iii)
[***] Shares upon the final approval by the FDA of the first NDA submitted
by
the Company or its sublicensee for a Licensed Product.
| (i) |
The
Options shall be granted under a Stock Option Agreement containing
such
terms and conditions as are customary for the Company.
|
| (ii) |
Upon
the occurrence of a Change of Control as defined below, all unvested
Options shall be accelerated and deemed to have vested as of the
date of
such Change of Control. For purposes of this section, “Change of Control”
shall mean (a) the acquisition, directly or indirectly, following
the date
hereof by any person (as such term is defined in Section 13(d)
and
14(d)(2) of the Securities Exchange Act of 1934, as amended), in
one
transaction or a series of related transactions, of securities
of the
Company representing in excess of fifty percent (50%) or more of
the
combined voting power of the Company’s then outstanding securities if such
person or his or its affiliate(s) do not own in excess of 50% of
such
voting power on the date of this Agreement, or (b) the future disposition
by the Company (whether direct or indirect, by sale of assets or
stock,
merger, consolidation or otherwise) of all or substantially all
of its
business and/or assets in one transaction or series of related
transactions (other than a merger effected exclusively for the
purpose of
changing the domicile of the
Company).
|
4.2 The
Company agrees to pay to Licensor royalties in an amount equal to [***] percent
[***] of Net Sales by the Company, or any Affiliate of the Company, or any
sublicensee thereof, of Licensed Products. The royalty obligations under
this
Section 4.2 shall
terminate, on a country-by-country basis, with respect to each Licensed Product
upon the expiration date in such country of the last to expire of any patent
included in the Patent Rights covering the sale of such Licensed Product
in such
country. Any payments pursuant to this section shall be payable on an annual
basis within thirty (30) calendar days of the end of the prior
year.
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4.3 On
sales
of Licensed Products by the Company to Affiliates or related parties that
are
end users of such Licensed Products, the value of Net Sales attributed under
this Article 4 shall be that which would have been received in an arms-length
transaction, based on sales of like quantity and quality products at or about
the time of such transaction.
4.4 No
multiple royalties shall be payable because the use, lease or sale of any
Licensed Product is, or shall be, covered by more than one valid and unexpired
claim contained in the Patent Rights.
4.5 In
the
event that a Licensed Product is sold in the form of a combination product
containing one or more products or technologies which are themselves not
a
Licensed Product, the Net Sales for such combination product shall be calculated
by multiplying the sales price of such combination product by the fraction
A/(A+B) where A is the invoice price of the Licensed Product or the Fair
Market
Value of the Licensed Product if sold to an Affiliate and B is the total
invoice
price of the other products or technologies or the Fair Market Value of the
other products or technologies if purchased from an Affiliate.
4.6 All
payments under this Agreement shall be paid in United States dollars. Royalty
payments shall be paid in United States dollars in New York, New York or
at such
other place as Licensor may reasonably designate consistent with the laws
and
regulations controlling in any foreign country. Any withholding taxes which
the
Company, its Affiliate or any sublicensee shall be required by law to withhold
on remittance of the royalty payments shall be deducted from such royalty
payment to Licensor. The Company shall furnish Licensor with the original
copies
of all official receipts for such taxes. If any currency conversion shall
be
required in connection with the payment of royalties hereunder, such conversion
shall be made by using the exchange rate prevailing at Citibank, N.A. in
New
York, New York on the last business day of the calendar quarterly reporting
period to which such royalty payments relate.
4.7 The
Company shall pay Licensor a nonrefundable licensee fee in the amount of
$50,000, which is due and payable within fifteen (15) calendar days after
the
Company has received an invoice of the amount from Licensor.
4.8 The
Company shall pay Licensor a fee in the amount of $[***] upon the issuance
of a United States patent included in Patent Rights which covers the use
of a
lysine salt of isophosphoramide mustard to treat cancer.
4.9 The
Company shall pay to Licensor the following milestone payments for the
particular milestone event achieved by the Company, its Affiliate or a
sublicensee, which shall be due and payable within thirty (30) calendar days
of
such milestone event:
4.9.1 [***]
Dollars ($[***]) upon [***]of Licensed Product in the United
States;
4.9.2 [***]
Dollars ($[***]) upon [***] of Licensed Product in the United
States;
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4.9.3 [***]
Dollars ($[***]) upon [***] Licensed Product; and
4.9.4 [***]
Dollars ($[***]) upon the final approval by the FDA of the first NDA for
a
Licensed Product, which milestone payment shall be fully creditable against
future royalties payments hereunder.
4.10 To
the
extent that the Company or any Affiliate of the Company or any sublicensee
thereof needs to obtain in any jurisdiction any license from a third party
in
order to practice the rights purported to be granted to the Company by Licensor
hereunder under issued patents in such jurisdiction, then up to [***] percent
([***]%) of the royalties payable under such license in such jurisdiction
may be
deducted from royalties otherwise payable to Licensor hereunder, provided
that
in no event shall the aggregate royalties payable to Licensor in any semi-annual
period in such jurisdiction be reduced by more than [***] percent ([***]%)
as a
result of any such deduction, provided further that any excess deduction
remaining as a result of such limitation may be carried forward to subsequent
periods.
4.11 From
and
after the termination of royalty obligations in accordance with Section 4.2
of
this Agreement, Company will have a paid up, royalty-free license under
Technology to make, have made, use, have used, sell and have sold products.
4.12 Upon
approval by Company of invoices attributable to the pharmacokinetic analysis
of
samples from a phase I study of Technology, Company shall reimburse Licensor
for
moneys paid by Licensor to conduct such analysis, in an amount not to exceed
[***] Dollars ($[***]).
ARTICLE
5 - REPORTS AND RECORDS
5.1 The
Company shall keep full, true and accurate books of account containing all
particulars that may be necessary for the purpose of showing the amounts
payable
to the Licensor by way of royalty and other payments as aforesaid. Said books
of
account shall be kept at the Company's principal place of business and the
supporting data shall be open up to twice per year upon reasonable notice
to the
Company, for two (2) years following the end of the calendar year to which
they
pertain, for inspection by the Licensors’ internal audit division and/or by
another designated auditor selected by the Licensor, except one to whom the
Company has reasonable objection, for the purpose of verifying the Company's
royalty statement and any other payment reports required under this License
Agreement. If an inspection shows an under reporting or underpayment in excess
of the greater of $[***] or [***] percent ([***]%) of royalties payable for
any
twelve (12) month period, then the Company shall reimburse the Licensor for
the
reasonable cost of the inspection at the time the Company pays the unreported
royalties, including any late charges as required by section 5.4 of this
Agreement. All payments required under this Article 5 shall be due within
sixty
(60) days of the date the Licensor provides the Company notice of the payment
due.
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5.2 Within
sixty (60) days from the end of each quarter of each calendar year for which
royalties are due hereunder, the Company shall deliver to the Licensor complete
and accurate reports, giving such particulars of the business conducted by
the
Company during the preceding quarter under this License Agreement as shall
be
pertinent to a royalty accounting hereunder. These shall include at least
the
following:
5.2.1 All
Licensed Products used, leased or sold, by or for the Company or its Affiliates
or sublicensees.
5.2.2 Total
amounts invoiced for Licensed Products used, leased or sold, by or for the
Company or its Affiliates or sublicensees.
5.2.3 Deductions
applicable in computed "Net Sales" as defined in Section 1.8.
5.2.4 Total
royalties due based on Net Sales by or for the Company or its Affiliates
or
sublicensees.
5.2.5 All
other
amounts due Licensor hereunder.
5.3 With
each
such report submitted, the Company shall pay to the Licensor the royalties
due
and payable under this Agreement. If no royalties shall be due, the Company
shall not be required to make a report pursuant to this Article 5.
5.4 Amounts
which are not paid when due and which are not the subject of a bona fide
dispute
shall accrue interest from the due date until paid, at a rate equal to the
then
prevailing prime rate of Citibank, N.A., plus [***] percent
([***]%).
5.5 The
Licensor agrees to hold in confidence each report delivered by the Company
pursuant to this Article 5. Notwithstanding the foregoing, the Licensor may
disclose any such information required to be disclosed pursuant to any judicial,
administrative or governmental request, subpoena, requirement or order, provided
that the Licensor takes reasonable steps to provide the Company with the
opportunity to contest such request, subpoena, requirement or order.
ARTICLE
6 - PATENT PROSECUTION AND MAINTENANCE
6.1 The
Company shall be responsible for prosecution and maintenance of the intellectual
property included in the Patent Rights including, but not limited to, the
filing
of patent applications which may be required or desirable. The Company agrees
to
keep the Licensor reasonably well informed with respect to the status and
progress of any such applications, prosecutions and maintenance activities
and
to consult in good faith with the Licensor and use reasonable efforts to
incorporate Licensor’s reasonable suggestions regarding such prosecution. Both
parties agree to provide reasonable cooperation to each other to facilitate
the
application and prosecution of patents pursuant to this Agreement.
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6.2 The
Company may, in its discretion, elect to abandon any patent applications
or
issued patent in the Patent Rights or not file a patent application in any
national jurisdiction.
Prior to
any such abandonment or decisions not to file in certain countries, the Company
shall give Licensor at least sixty (60) days notice and a reasonable opportunity
to take over prosecution of such Patent Rights. In such event, Licensor shall
have the right, but not the obligation, to commence or continue such prosecution
and to maintain any such Patent Rights under its own control and at its expense
and the Company shall then have no further rights to such Patent Rights and
no
further royalty or other obligation to Licensor in connection therewith.
ARTICLE
7 - TERMINATION
7.1 Should
the Company fail to make payment to the Licensor of royalties due in accordance
with the terms of this Agreement which are not the subject of a bona fide
dispute between the Licensor and the Company, the Licensor shall have the
right
to terminate this License Agreement within sixty (60) days after giving said
notice of termination unless the Company shall pay to the Licensor, within
the
60-day period, all such royalties due and payable. Upon the expiration of
the
60-day period, if the Company shall not have paid all such royalties due
and
payable, the rights, privileges and license granted hereunder shall, at the
option of the Licensor, immediately terminate. In the event of a bona fide
dispute over royalties, the parties shall resolve such dispute in accordance
with Article 8.
7.2 Upon
any
material breach or default of this License Agreement by the Company, other
than
as set forth in Section 7.1 above, the Licensor shall have the right to
terminate this Agreement and the rights, privileges and license granted
hereunder upon giving sixty (60) days notice to the Company. Such termination
shall become effective immediately unless the Company shall have cured any
such
breach or default prior to the expiration of such sixty (60) day
period.
7.3 The
Company shall have the right at any time to terminate this Agreement in whole
or
as to any country by giving thirty (30) days notice thereof in writing to
the
Licensor.
7.4 Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination or obligations under Sections 2.4.2, 4.11 and Articles
5,8,9, 10 and 14. The Company, its Affiliates and/or any sublicensee thereof
may, however, after the effective date of such termination and continuing
for a
period not to exceed six (6) months thereafter, sell all completed Licensed
Products, and any Licensed Products in the process of manufacture at the
time of
such termination, provided that the Company shall pay or cause to be paid
to the
Licensor the royalties thereon as required by Article 4 of this License
Agreement and shall submit the reports required by Article 5 hereof on the
sales
of Licensed Products.
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ARTICLE
8 - DISPUTE RESOLUTION
8.1 Any
dispute or controversy arising out of or relating to this Agreement, its
construction or its actual or alleged breach will be decided by mediation.
If
the mediation does not result in a resolution of such dispute or controversy,
it
will be finally decided by an appropriate method of alternate dispute
resolution, including without limitation, arbitration, in accordance with
the
applicable, then current, procedures of the American Arbitration Association.
The arbitration panel will include members knowledgeable in the evaluation
of
the Technology. Judgment upon the award rendered may be entered into the
highest
court or forum having jurisdiction, state or federal. The provisions of this
Section 8.1 will not apply to decisions on the validity of patent claims
or to
any dispute or controversy as to which any treaty or law prohibits such
arbitration. The decision of the arbitration must be sanctioned by a court
of
law having jurisdiction to be binding upon and enforceable by the parties.
ARTICLE
9 - INFRINGEMENT AND OTHER ACTIONS
9.1 During
the term of this Agreement, the Company and the Licensor shall promptly provide
written notice, to the other party, of any alleged infringement by a third
party
of the Patent Rights and provide such other party with any available evidence
of
such infringement. In the event that a claim or suit is asserted or brought
against the Company alleging that the manufacture or sale of any Licensed
Product by the Company, an Affiliate of the Company, or any sublicensee,
or the
use of such Licensed Product by any customer of any of the foregoing, infringes
proprietary rights of a third party, the Company may, in its sole discretion,
modify such Licensed Product to avoid such infringement and/or may settle
on
terms that it deems advisable in its sole discretion, subject to paragraph
9.2.
9.2 The
Company shall have the right, but not the obligation, to prosecute and/or
defend, at its own expense and utilizing counsel of its choice, any infringement
of, and/or challenge to, the Patent Rights occurring during the term of the
Agreement. In furtherance of such right, the Licensor hereby agrees that
the
Company may join the Licensor as a party in any such suit, without expense
to
the Licensor.
9.3 Any
recovery of damages by the Company, in any such suit, shall be applied first
in
satisfaction of any unreimbursed expenses and legal fees of the Company relating
to the suit and then to the Licensor for any royalties credited in accordance
with Section 9.4. The balance remaining from any such recovery shall be treated
as Net Sales and shared in accordance with Article 4 hereof.
9.4 The
Company may credit up to fifty percent (50%) of any litigation costs incurred
by
the Company in any country pursuant to this Article 9 and up to 50% of all
amounts paid in judgment or settlement of litigation within this Article
9 scope
against royalties thereafter payable to the Licensor hereunder for such country
and apply the same toward one-half of its actual, reasonable out-of-pocket
litigation costs. If one-half of such litigation costs in such country exceeds
50% of royalties payable to the Licensor in any year in which such costs
are
incurred than the amount of such costs, expenses and amounts paid in judgment
or
settlement, in excess of such 50% of the royalties payable shall be carried
over
and credited against royalty payments in future years for such country.
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9.5 If
within
six (6) months after receiving notice of any alleged infringement, the Company
shall have been unsuccessful in persuading the alleged infringer to desist,
or
shall not have brought and shall not be diligently prosecuting an infringement
action, or if the Company shall notify the Licensor, at any time prior thereto,
of its intention not to bring suit against the alleged infringer, then, and
in
those events only, the Licensor shall have the right, but not the obligation,
to
prosecute, at its own expense and utilizing counsel of its choice, any
infringement of the Patent Rights. The total cost of any such infringement
action commenced solely by the Licensor shall be borne by the Licensor and
the
Licensor shall keep any recovery or damages for infringement or otherwise
derived therefrom and such shall not be applicable to any royalty obligation
of
the Company.
9.7 In
any
suit to enforce and/or defend the Patent Rights pursuant to this License
Agreement, the party not in control of such suit shall, at the request and
reasonable expense of the controlling party, cooperate in all respects and,
to
the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and
the
like.
ARTICLE
10 - INDEMNITY
10.1 The
Company agrees to defend, indemnify and hold the Licensor harmless from and
against all third party claims, demands or causes of action arising on account
of any injury or death of persons or damage to property (“Claims”) caused by or
arising out of or resulting from the exercise or practice of the rights granted
hereunder by Company or its Affiliates to the extent not due to the Licensor’s
negligence of willful misconduct and provided that prompt written notice
of such
Claim is provided to Company. The Company agrees that any sublicense agreement
it enters relative to the Licensed Products shall contain a covenant by such
sub-licensee providing for the indemnification of the Licensor as provided
in
this Article.
ARTICLE
11 - ASSIGNMENT
This
Agreement and the rights and duties appertaining hereto may not be assigned
by
either party without first obtaining the written consent of the other which
consent shall not be unreasonably withheld. Any such purported assignment,
without the written consent of the other party, shall be null and of no effect.
Notwithstanding the foregoing, the Company may assign this Agreement without
the
consent of the Licensor (i) to a purchaser, merging or consolidating
corporation, or acquiror of substantially all of the Company's assets or
business to which this Agreement pertains and/or pursuant to any reorganization
qualifying under section 368 of the Internal Revenue Code of 1986 as amended,
as
may be in effect at such time, or (ii) to an Affiliate of the Company,
provided
that such assignee consents in writing to be bound by this Agreement to the
same
extent as Company.
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ARTICLE
12 - USE OF NAMES
12.1 Except
as
required by law, the Company or its Affiliates shall not use in advertising,
publicity, or other promotional activities any name, trade name, trademark,
or
other designation of the Licensor or any of its units (including contraction,
abbreviation or simulation of any of the foregoing) without the prior, written
consent of the Licensor which shall not be unreasonably withheld; provided,
however,
that
the Licensor acknowledges and agrees that the Company may use the names of
the
Licensor in various documents used by the Company for capital raising and
financing without such prior written consent. Except as required by law,
neither
party shall disclose to a third party the terms of this Agreement, except
to the
extent that such other party is under confidence and needs to know the terms
of
this Agreement for business reasons.
ARTICLE
13 - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
13.1 Any
payment, notice or other communication required or permitted to be given
pursuant to this Agreement shall be in writing and sent by certified first
class
mail, postage prepaid, by hand delivery or by facsimile if confirmed in writing,
or by overnight courier, in each case effective upon receipt, at the addresses
below or as otherwise designated by written notice given to the other
party:
In
the
case of Licensor:
Name:
_______________________
Title:
________________________
Tel:
Fax:
In
the
case of the Company:
Dr.
Jonathan Lewis
Chief
Executive Officer
ZioPharm,
Inc.
300
George St.
New
Haven, CT 06511
Tel:
(203) 848-6969
Fax:
(203) 848-6007
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ARTICLE
14 - CONFIDENTIALITY AND PUBLICATION
14.1 Licensor
and Company each agree that all information related to this Agreement and
contained in documents marked “confidential” and forwarded to one by the other
(i) are to be received in strict confidence, (ii) are to be used only for
the
purposes of this Agreement, which may include disclosure of certain confidential
information to the FDA and foreign regulatory agencies and which disclosures
shall be expressly permitted hereunder and (iii) except as set forth in
14.1
(ii)
above, are not to be disclosed by the recipient party (except as required
by law
or court order and then only provided reasonable notice of the impending
disclosure is provided to the disclosing party), its agents or employees
without
the prior written consent of the other party, except to the extent that the
recipient party can establish that such information:
| (a) |
was
in the public domain at the time of disclosure;
or
|
| (b) |
later
became part of the public domain through no fault of the recipient
party,
its employees, agents, successors or assigns;
or
|
| (c) |
was
lawfully disclosed to the recipient party by a third party having
the
right to disclose it and not under an obligation of confidence
to the
disclosing party; or
|
| (d) |
was
already known by the recipient party at the time of disclosure;
or
|
| (e) |
was
independently developed by the recipient without use of the other
party’s
confidential information.
|
14.2 Each
party’s obligation of confidence under this Article 14 will be fulfilled by
using at least the same degree of care with the other party’s confidential
information as it uses to protect its own confidential information, but always
a
reasonable degree of care. This obligation will exist while this Agreement
is in
force and for a period of three (3) years thereafter.
14.3 Licensor
reserves the right to publish the general scientific findings from research
related to Technology, with due regard to the protection of Company’s
confidential information. Licensor will submit the manuscript of any proposed
publication to Company at least thirty (30) calendar days before publication
in
order that Company have the right to delete its confidential information
review
and protect any potential inventions set forth therein. Upon Company’s request,
publication may be delayed up to sixty (60) additional days to enable Company
to
secure adequate intellectual property protection on inventions of Licensor
that
may be set forth in the publication and to which Company has rights under
this
Agreement.
ARTICLE
15 - REPRESENTATIONS AND WARRANTIES
15.1 The
Licensor represents and warrants to the Company, (i)
as
of the
date of this Agreement and (ii)
as
of the
date of each payment to be made by the Company to the Licensor under Article
4
hereof
solely
with respect to items under the control of Licensor,
that:
15.2 The
Licensor is a corporation
duly
organized, validly existing and in good standing under the laws of the
State
of
Delaware, the Licensor has the requisite corporate power and authority to
execute and deliver this Agreement and this Agreement is enforceable against
the
Licensor upon its terms.
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15.3 The
execution and delivery of this Agreement and the other agreements contemplated
hereby do not, and the consummation of the transactions contemplated hereby
and
thereby will not, (i) conflict
with, or result in any violation or breach of any provision of the certificate
of incorporation or bylaws of the Licensor, or (ii)
result
in (x) any violation or breach of, constitute (with or without notice or
lapse
of time or both) a default under or conflict with (or give rise to a right
of
termination, amendment, cancellation or acceleration of any material obligation
or loss of any benefit under) the provisions of any lease, contract or other
agreement to which the Licensor is a party or by which it or any of its
properties or assets is otherwise bound or (y) the imposition of any
lien,
pledge, hypothecation, mortgage, security interest, claim, lease, charge,
option, right of first refusal or first offer, easement, servitude, transfer
restriction, voting requirement or any other encumbrance, restriction or
limitation on any of the properties or assets of the Licensor.
15.4 No
consent, approval or authorization of, or declaration or filing with, any
Governmental Authority or Person (a “Consent”) is required on the part of the
Licensor in connection with its execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby or
in
connection with the Technology.
15.5 No
oral
or written communication has been received by the Licensor, and no
investigation, regulatory enforcement action (including seizure, injunction,
civil penalty or criminal action) or any related Governmental Authority review
is or, in respect of any Technology , was at any time pending or, to the
knowledge of the Licensor is threatened by any Governmental Authority with
respect to (i) any
alleged or actual violation by the Licensor of any permit, Law or other
requirement of any Governmental Authority relating to the operations conducted
by the Licensor with respect to any Technology or (ii) any
alleged or actual failure to have or maintain in effect all permits required
in
connection with the operations conducted by the Licensor with respect to
any
Technology. The Licensor has not received from the Federal Drug Administration
(“FDA”), the U.S. Drug Enforcement Administration (“DEA” or any similar state,
local or foreign Governmental Authority any written notice (i) regarding
the approvability or approval of any of the Technology , or (ii) alleging
any violation by the Licensor of any Law relating to any of the Technology.
No
product incorporating Technology has been withdrawn, suspended or discontinued
by the Licensor as a result of any action by the FDA, the DEA or any similar
state, local or foreign Governmental Authority, either within or outside
the
U.S. (whether voluntarily or otherwise.
15.6 There
are
no suits or actions, administrative, arbitration or other proceedings, or
governmental investigations pending or, to the knowledge of the Licensor,
threatened against or affecting the Licensor with respect to the Technology.
No
Entity has notified the Licensor of any material claim against the Licensor
alleging any personal property or economic injury, loss or damage incurred
as a
result of or relating to the use of the Technology. There is no judgment,
order,
injunction, decree, writ or award against the Licensor that is not satisfied
and
remains outstanding with respect to any Technology.
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15.7 The
US
and foreign patent applications and patents and invention disclosures itemized
on Appendix A set forth all of the patents and patent applications and
inventions relating to isophosphoramide mustard compounds, owned
by,
or licensed to, the Licensor as of the date of this Agreement.
15.8 The
Licensor has taken all reasonable actions necessary or appropriate to preserve
the confidentiality of all trade secrets, proprietary and other confidential
information material to the business and operations of the
Licensor.
15.9 There
are
no licenses, options, restrictions, liens, rights of third parties, disputes,
royalty obligations, proceedings or claims relating to, affecting, or limiting
the Licensor’s rights or the rights of the Company under this Agreement after
giving effect to this Agreement, or which may lead to a claim of infringement
or
invalidity regarding, any part or all of the Technology or its use.
15.9 The
Technology was not supported in whole or part by funding or grants by any
federal or state agency. The Licensor has provided the Company with copies
of
all documents reflecting support or funding for all or part of the research
leading to the Technology, and has listed all funding agencies on Appendix
B.
ARTICLE
16 - MISCELLANEOUS PROVISIONS
16.1 This
License Agreement shall be construed, governed, interpreted and applied in
accordance with the laws of the State of Connecticut, without regard to
principles of conflicts of laws.
16.2 The
parties hereto acknowledge that this Agreement, including the Appendices
and
documents incorporated by reference, sets forth the entire agreement and
understanding of the parties hereto as to the subject matter hereof, supersedes
all previous communications, representations or understandings, either oral
or
written between the parties relating to the subject matter hereof, and shall
not
be subject to any change of modification except by the execution of a written
instrument subscribed to by the parties hereto.
16.3 The
provisions of this License Agreement are severable, and in the event that
any
provision of this License Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability
of
the remaining provisions hereof.
16.4 The
failure of either party to assert a right hereunder or to insist upon compliance
with any term or condition of this License Agreement shall not constitute
a
waiver of that right or excuse a similar subsequent failure to perform any
such
term or condition by the other party.
Page
15
of 18
16.5 The
headings of the several articles are inserted for convenience of reference
only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.
16.6 This
Agreement will not be binding upon the parties until it has been signed below
on
behalf of each party, in which event, it shall be effective as of the date
recited on page one.
16.7 Each
party hereto shall be excused from any breach of this Agreement which is
proximately caused by governmental regulation, act of war, strike, act of
God or
other similar circumstance normally deemed outside the control of the
parties.
IN
WITNESS WHEREOF,
the
parties hereto have executed this License Agreement, in triplicate by proper
persons thereunto duly authorized.
| ZIOPHARM, INC. | DEKK-TEK | |||
| By: | /s/ Jonathan Lewis | By: | /s/ Lee Roy Morgan | |
|
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| Name: | Jonathan Lewis | Name: | Lee Roy Morgan | |
|
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|
|||
| Title: | CEO | Title: | CEO | |
|
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| Date: | 11/9/04 | Date: | 10/15/04 | |
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Page
16
of 18
APPENDIX
A
(All
United States and foreign patents and patent applications and invention
disclosures to be listed here)
Page
17
of 18
APPENDIX
B
None
Page
18
of 18
Exhibit
10.7
SUBSCRIPTION
AGREEMENT
SUBSCRIPTION
AGREEMENT (this “Agreement”) made as of the last date set forth on the signature
page hereof between Ziopharm, Inc. (the “Company”), and the undersigned (the
“Subscriber”).
W
I T N E
S S E T H:
WHEREAS,
the Company has retained Paramount BioCapital, Inc. (“Paramount”) to act as
exclusive placement agent, on a “best efforts” basis, in a private offering (the
“Offering”) consisting of shares of Series A Convertible Preferred Stock, par
value $.001 per share, stated value $2.16 per share (the “Preferred Stock” or
the Shares) of the Company, and in connection therewith has authorized Paramount
to engage one or more other firms to assist in finding qualified subscribers
for
the Preferred Stock (such other firms, if any, together with Paramount, the
“Placement Agent”);
WHEREAS,
the Company desires to issue a minimum of 6,944,445 shares of Preferred Stock
(the “Minimum Offering”) and a maximum of 11,574,075 shares of Preferred Stock
(the “Maximum Offering”) with an option in favor of Paramount to offer up to an
additional 2,314,815 shares of Preferred Stock to cover over-allotments (the
“Increased Maximum Offering”). The minimum investment is $100,001.52 (46,297
shares of Preferred Stock), although the Company and the Placement Agent, in
their sole discretion, may allow sales of a fewer number of Shares. Each share
of Preferred Stock is initially convertible at the option of the holder thereof
into one (1) share of common stock, par value $.001 per share, of the Company
(the "Common Stock"), subject to adjustment as provided in the form of
Certificate of Designations attached as Appendix B to the Confidential Private
Placement Memorandum dated January 18, 2005 (such memorandum, together with
all
amendments thereof and supplements and appendices thereto, the
“Memorandum”);
WHEREAS,
the Subscriber desires to purchase that number of shares of Preferred Stock
set
forth on the signature page hereof on the terms and conditions hereinafter
set
forth;
NOW,
THEREFORE, in consideration of the premises and the mutual representations
and
covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
|
I.
|
SUBSCRIPTION
FOR PREFERRED SHARES AND REPRESENTATIONS BY
SUBSCRIBER
|
1.1 Subject
to the terms and conditions hereinafter set forth and in the Memorandum,
the
Subscriber hereby irrevocably subscribes for and agrees to purchase from
the
Company such number of shares of Preferred Stock and the Company agrees to
sell
to the Subscriber such number of shares of Preferred Stock, as is set forth
on
the signature page hereof (the “Preferred Shares”) at a per share price equal to
$2.16 (the “Per Share Price”). The purchase price is payable by personal or
business check or money order made payable to “US Bank Trust National
Association as Escrow Agent for Paramount/Ziopharm” contemporaneously with the
execution and delivery of this Agreement by the Subscriber. Subscribers may
also
pay the subscription amount by, wire transfer of immediately available funds
to:
-
CONTINUED ON NEXT PAGE -
US
BANK TRUST N.A.
ST.
PAUL MN
ABA
Routing #:
Further
Credit to Account Name:
Account
Number:
Financial
Beneficiary Recipient/Sub acct: of Paramount Cap/Ziopharm
Inc.
SEI/Sub
acct #:
Attention:
Phone:
The
Subscriber understands, however, that the purchase and sale of the Preferred
Shares is contingent upon the Company making sales of the Minimum Offering
amount prior to the Offering Termination Date (as defined below).
1.2 The
Subscriber recognizes that the purchase of the Preferred Shares involves a
high
degree of risk including, but not limited to, the following: (a) the Company
remains a development stage business with limited operating history and requires
substantial funds in addition to the proceeds of the Offering; (b) an investment
in the Company is highly speculative, and only investors who can afford the
loss
of their entire investment should consider investing in the Company and the
Preferred Shares; (c) the Subscriber may not be able to liquidate its
investment; (d) transferability of the Preferred Shares and the shares of Common
Stock issuable upon conversion of the Preferred Shares (sometimes hereinafter
collectively referred to as the “Securities”) is extremely limited; (e) in the
event of a disposition, the Subscriber could sustain the loss of its entire
investment; and (f) the Company has not paid any dividends since its inception
and does not anticipate paying any dividends, even if declared by the Board
of
Directors pursuant to the terms of the Preferred Stock. Without limiting the
generality of the representations set forth in Section 1.5 below, the Subscriber
represents that the Subscriber has carefully reviewed the section of the
Memorandum captioned "Risk Factors."
1.3 The
Subscriber represents that the Subscriber is an “accredited investor” as such
term is defined in Rule 501 of Regulation D (“Regulation D”) promulgated under
the Securities Act of 1933, as amended (the “Securities Act”), as indicated by
the Subscriber’s responses to the questions contained in Article VII hereof, and
that the Subscriber is able to bear the economic risk of an investment in the
Preferred Shares.
1.4 The
Subscriber hereby acknowledges and represents that (a) the Subscriber has
knowledge and experience in business and financial matters, prior investment
experience, including investment in securities that are non-listed, unregistered
and/or not traded on a national securities exchange nor on the National
Association of Securities Dealers, Inc. (the “NASD”) automated quotation system
(“NASDAQ”), or the Subscriber has employed the services of a “purchaser
representative” (as defined in Rule 501 of Regulation D), attorney and/or
accountant to read all of the documents furnished or made available by the
Company both to the Subscriber and to all other prospective investors in the
Preferred Stock to evaluate the merits and risks of such an investment on the
Subscriber's behalf; (b) the Subscriber recognizes the highly speculative nature
of this investment; and (c) the Subscriber is able to bear the economic risk
that the Subscriber hereby assumes.
1.5 The
Subscriber hereby acknowledges receipt and careful review of this Agreement,
the
form of Certificate of Designations attached to the Memorandum as Appendix
B,
the Memorandum (which includes the Risk Factors ), including all appendices
thereto, and any documents which may have been made available upon request
as
reflected therein (collectively referred to as the “Offering Materials”) and
hereby represents that the Subscriber has been furnished by the Company during
the course of the Offering with all information regarding the Company, the
terms
and conditions of the Offering and any additional information that the
Subscriber has requested or desired to know, and has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the Company and
the
terms and conditions of the Offering.
2
1.6 (a) In
making
the decision to invest in the Preferred Shares the Subscriber has relied solely
upon the information provided by the Company in the Offering Materials. To
the
extent necessary, the Subscriber has retained, at its own expense, and relied
upon appropriate professional advice regarding the investment, tax and legal
merits and consequences of this Agreement and the purchase of the Preferred
Shares hereunder. The Subscriber disclaims reliance on any statements made
or
information provided by any person or entity in the course of Subscriber’s
consideration of an investment in the Preferred Shares other than the Offering
Materials. The Subscriber acknowledges and agrees that (i) the Company has
prepared the Offering Materials and that no other person, including without
limitation, the Placement Agent, has supplied any information for inclusion
in
the Offering Materials other than information furnished in writing to the
Company by the Placement Agent specifically for inclusion in those parts of
the
Offering Materials relating specifically to the Placement Agent, (ii) the
Placement Agent has no responsibility for the accuracy or completeness of the
Offering Materials and (iii) the Subscriber has not relied upon the independent
investigation or verification, if any, that may have been undertaken by the
Placement Agent.
(b) The
Subscriber represents that (i) the Subscriber was contacted regarding the sale
of the Preferred Shares by the Company or the Placement Agent (or an authorized
agent or representative of the Company or the Placement Agent) with whom the
Subscriber had a prior substantial pre-existing relationship and (ii) no shares
of Preferred Stock were offered or sold to it by means of any form of general
solicitation or general advertising, and in connection therewith, the Subscriber
did not (A) receive or review any advertisement, article, notice or other
communication published in a newspaper or magazine or similar media or broadcast
over television or radio, whether closed circuit, or generally available; or
(B)
attend any seminar meeting or industry investor conference whose attendees
were
invited by any general solicitation or general advertising.
1.7 The
Subscriber hereby represents that the Subscriber, either by reason of the
Subscriber's business or financial experience or the business or financial
experience of the Subscriber's professional advisors (who are unaffiliated
with
and not compensated by the Company or any affiliate or selling agent of the
Company, including the Placement Agent, directly or indirectly), has the
capacity to protect the Subscriber's own interests in connection with the
transaction contemplated hereby.
1.8 The
Subscriber hereby acknowledges that the Offering has not been reviewed by the
United States Securities and Exchange Commission (the “SEC”) nor any state
regulatory authority since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated thereunder. The Subscriber understands that the
Securities have not been registered under the Securities Act or under any state
securities or “blue sky” laws and agrees not to sell, pledge, assign or
otherwise transfer or dispose of the Securities unless they are registered
under
the Securities Act and under any applicable state securities or “blue sky” laws
or unless an exemption from such registration is available.
1.9 The
Subscriber understands that the Securities comprising the Preferred Shares
have
not been registered under the Securities Act by reason of a claimed exemption
under the provisions of the Securities Act that depends, in part, upon the
Subscriber's investment intention. In this connection, the Subscriber hereby
represents that the Subscriber is purchasing the Securities for the Subscriber's
own account for investment and not with a view toward the resale or distribution
to others. The Subscriber, if an entity, further represents that it was not
formed for the purpose of purchasing the Securities.
3
1.10 The
Subscriber understands that there is no public market for the Preferred Shares
nor the shares of Common Stock issuable upon conversion of the Preferred Shares
and that no market may develop for any of such Securities. The Subscriber
understands that even if a public market develops for such Securities, Rule
144
(“Rule 144”) promulgated under the Securities Act requires for non-affiliates,
among other conditions, a one-year holding period prior to the resale (in
limited amounts) of securities acquired in a non-public offering without having
to satisfy the registration requirements under the Securities Act. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register any of the Preferred Shares or any of the shares of
Common Stock issuable upon conversion of the Preferred Shares under the
Securities Act or any state securities or “blue sky” laws other than as set
forth in Article V.
1.11 The
Subscriber consents to the placement of a legend on any certificate or other
document evidencing the Securities that such Securities have not been registered
under the Securities Act or any state securities or “blue sky” laws and setting
forth or referring to the restrictions on transferability and sale thereof
contained in this Agreement. The Subscriber is aware that the Company will
make
a notation in its appropriate records with respect to the restrictions on the
transferability of such Securities. The legend to be placed on each certificate
shall be in form substantially similar to the following:
"THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES OR "BLUE
SKY LAWS", AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY
HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY AND
ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
1.12 The
Subscriber understands that the Placement Agent and/or the Company will review
this Agreement and are hereby given authority by the Subscriber to call
Subscriber's bank or place of employment or otherwise review the financial
standing of the Subscriber; and it is further agreed that the Placement Agent
and the Company, each at their sole discretion, reserve the unrestricted right,
without further documentation or agreement on the part of the Subscriber, to
reject or limit any subscription and to close the Offering to the Subscriber
at
any time and that the Company will issue stop transfer instructions to its
transfer agent with respect to such Securities. No subscriptions for fractional
shares of Preferred Stock will be accepted.
1.13 The
Subscriber hereby represents that the address of the Subscriber furnished by
Subscriber on the signature page hereof is the Subscriber's principal residence
if Subscriber is an individual or its principal business address if it is a
corporation or other entity.
1.14 The
Subscriber represents that the Subscriber has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement
and
to purchase the Preferred Shares and the shares of Common Stock issuable upon
conversion of the Preferred Shares. This Agreement constitutes the legal, valid
and binding obligation of the Subscriber, enforceable against the Subscriber
in
accordance with its terms.
4
1.15 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Keogh Plan, or other
tax-exempt entity, it is authorized and qualified to invest in the Company
and
the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so.
1.16 The
Subscriber acknowledges that if he or she is a Registered Representative of
an
NASD member firm, he or she must give such firm the notice required by the
NASD’s Rules of Fair Practice, receipt of which must be acknowledged by such
firm in Section 7.4 below.
1.17 The
Subscriber acknowledges that at such time, if ever, as the Securities are
registered (as such term is defined in Article V hereof), sales of the
Securities will be subject to state securities laws.
1.18
(a) Subject
to the provision below and Section 1.18(b), the Subscriber hereby agrees that
from the earlier to occur of (i) the date of the initial offering of the Common
Stock to the public pursuant to a registration statement under the Securities
Act (the “IPO”) or (ii) the first date (the “Trading Date”) on which the Common
Stock (or securities received in exchange for Common Stock) trades on a national
securities exchange or on the NASDAQ, including the Over the Counter Bulletin
Board (a “Trading Event”) and continuing for a period of 180 days thereafter or
such longer period as may be requested by the underwriter or underwriters,
in
the case of an IPO (the “Lock-Up Period”), the Subscriber will not, without the
prior written consent of the Company, offer, pledge, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, the Registrable Securities (as defined in Section 5.1) purchased
or
acquired by the Subscriber. In addition, the Subscriber agrees that during
the
period from the date that Subscriber was first contacted with respect to the
potential purchase of the Preferred Shares through the last date upon which
Subscriber holds any Securities or Registrable Securities, the Subscriber will
not directly or indirectly, through related parties, affiliates or otherwise
sell “short” or “short against the box” (as those terms are generally
understood) any equity security of the Company.
(b) In
connection with any subsequent public offering of the Company's securities,
the
Holder hereby agrees to be subject to a lock-up for a period of 60 days or
such
longer period following such public offering as and if required by the
underwriter or underwriters of such public offering. The foregoing lock-ups
shall be applicable regardless of whether the Securities are then registered
for
re-sale under the Securities Act. This Section 1.18 shall be binding upon any
transferee of the Securities.
(c) In
order
to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities (as defined below)
of
each Holder (as defined below) (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such
period.
1.19
(a) The
Subscriber agrees not to issue any public statement with respect to the
Subscriber’s investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company without the Company's
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
5
(b) The
Company agrees not to disclose the names, addresses or any other information
about the Subscribers, except as required by law; provided, that the Company
may
use the name (but not the address) of the Subscriber in any registration
statement filed pursuant to Article V in which the Subscriber’s shares are
included.
1.20 The
Subscriber represents and warrants that it has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly
or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. The Subscriber hereby agrees to
indemnify and hold harmless the Company from and against all fees, commissions
or other payments owing to any such person or firm acting on behalf of such
Subscriber hereunder.
1.21 The
Subscriber agrees to hold the Company and its directors, officers, employees,
affiliates, controlling persons and agents (including the Placement Agent and
their officers, directors, employees, counsel, controlling persons and agents)
and their respective heirs, representatives, successors and assigns harmless
and
to indemnify them against all liabilities, costs and expenses incurred by them
as a result of (a) any sale or distribution of the Securities by the Subscriber
in violation of the Securities Act or any applicable state securities or “blue
sky” laws; or (b) any false representation or warranty or any breach or failure
by the Subscriber to comply with any covenant made by the Subscriber in this
Agreement (including the Confidential Investor Questionnaire contained in
Article VII herein) or any other document furnished by the Subscriber to any
of
the foregoing in connection with this transaction.
|
II.
|
REPRESENTATIONS
BY AND COVENANTS OF THE COMPANY
|
The
Company hereby represents and warrants to the Subscriber that:
2.1 Organization,
Good Standing and Qualification.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to conduct its business.
2.2 Capitalization
and Voting Rights.
The
authorized, issued and outstanding capital stock of the Company is as set forth
in the Memorandum and
all
issued and outstanding shares of the Company are validly issued, fully paid
and
nonassessable. Except as set forth in the Memorandum, there are no outstanding
options, warrants, agreements, convertible securities, preemptive rights or
other rights to subscribe for or to purchase any shares of capital stock of
the
Company. Except as set forth in the Memorandum and
as
otherwise required by law, there are no restrictions upon the voting or transfer
of any of the shares of capital stock of the Company pursuant to the Company's
Amended Certificate of Incorporation (the “Certificate of Incorporation”),
By-Laws or other governing documents or any agreement or other instruments
to
which the Company is a party or by which the Company is bound.
2.3 Authorization;
Enforceability.
The
Company has all corporate right, power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and stockholders necessary
for
the (i) authorization execution, delivery and performance of this Agreement
by
the Company; and (ii) authorization, sale, issuance and delivery of the
Securities contemplated hereby and the performance of the Company's obligations
hereunder has been taken. This Agreement has been duly executed and delivered
by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or
other equitable remedies, and to limitations of public policy. The Preferred
Shares, when issued and fully paid for in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable. The Company
shall, at all times when any of the Preferred Shares remain outstanding, have
authorized and reserved for issuance a sufficient number of shares of Common
Stock to provide for conversion of the Preferred Stock. Upon the issuance and
delivery of the shares of Common Stock issuable upon conversion of the Preferred
Shares, such shares of Common Stock will be validly issued, fully paid and
nonassessable. The issuance and sale of the Preferred Shares contemplated hereby
and the issuance and sale of the Common Stock underlying the Preferred Stock,
will not give rise to any preemptive rights or rights of first refusal on behalf
of any person which have not been waived in connection with this
offering.
6
2.4 Terms
of Preferred Stock.
The
Preferred Stock has all of the rights, preferences and privileges as set forth
in the form of the Certificate of Designations attached as Appendix B to the
Memorandum.
2.5 No
Conflict; Governmental Consents.
(a) The
execution and delivery by the Company of this Agreement and the consummation
of
the transactions contemplated hereby will not result in the violation of any
material law, statute, rule, regulation, order, writ, injunction, judgment
or
decree of any court or governmental authority to or by which the Company is
bound, or of any provision of the Certificate of Incorporation or By-Laws of
the
Company, and will not conflict with, or result in a material breach or violation
of, any of the terms or provisions of, or constitute (with due notice or lapse
of time or both) a default under, any lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to which the Company
is a party or by which it is bound or to which any of its properties or assets
is subject, nor result in the creation or imposition of any lien upon any of
the
properties or assets of the Company.
(b) No
consent, approval, authorization or other order of any governmental authority
is
required to be obtained by the Company in connection with the authorization,
execution and delivery of this Agreement or with the authorization, issue and
sale of the Preferred Shares or the Securities comprising the Preferred Shares,
except such filings as may be required to be made with the SEC, NASD, NASDAQ
and
with any state or foreign blue sky or securities regulatory
authority.
2.6 Licenses.
Except
as otherwise set forth in the Memorandum, the Company has sufficient licenses,
permits and other governmental authorizations currently required for the conduct
of its business or ownership of properties and is in all material respects
complying therewith.
2.7 Litigation.
Except
as otherwise set forth in the Memorandum, the Company knows of no pending or
threatened legal or governmental proceedings against the Company which could
materially adversely affect the business, property, financial condition or
operations of the Company or which materially and adversely questions the
validity of this Agreement or any agreements related to the transactions
contemplated hereby or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which could materially adversely affect the business, property,
financial condition or operations of the Company. Except as otherwise set forth
in the Memorandum, there is no action, suit, proceeding or investigation by
the
Company currently pending in any court or before any arbitrator or that the
Company intends to initiate.
7
2.8 Disclosure.
The
information set forth in the Offering Materials as of the date hereof contains
no untrue statement of a material fact nor omits to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
2.9 Investment
Company
The
Company is not an “investment company” within the meaning of such term under the
Investment Company Act of 1940, as amended, and the rules and regulations of
the
SEC thereunder.
2.10 Placement
Agent.
The
Company has engaged, consented to and authorized the Placement Agent to act
as
agent of the Company solely in connection with the transactions contemplated
by
this Agreement. The Company will pay the Placement Agent a commission in the
form of both cash and warrants (the “Introduction Warrants”) and a
non-accountable expense allowance of $50,000.00, and the Company agrees to
indemnify and hold harmless the Subscribers from and against all fees,
commissions or other payments owing by the Company to Paramount or any other
person or firm acting on behalf of the Company hereunder.
2.11 Financial
Statements.
The
financial statements of the Company included in the Memorandum (the "Financial
Statements") fairly present in all material respects the financial condition
and
position of the Company at the dates and for the periods indicated; and have
been prepared in conformity with generally accepted accounting principles,
consistently applied throughout the periods covered thereby. Since the date
of
the most recent balance sheet included as part of the Financial Statements,
there has not been to the Company’s knowledge: (i) any change in the assets,
liabilities, financial condition or
operations of the Company from that reflected in the Financial Statements,
other
than changes in the ordinary course of business, none of which individually
or
in the aggregate has had or is reasonably expected to have a material adverse
effect on such assets, liabilities, financial condition or operations; or (ii)
any other event or condition of any character that, either individually or
cumulatively, has materially and adversely affected the business, assets,
liabilities, financial condition or
operations of the Company (a “Material Adverse Effect”), except for the expenses
incurred in connection with the transactions contemplated by this
Agreement.
2.12 Intellectual
Property.
Except
as would not reasonably be expected to have a Material Adverse Effect, (a)
to
its knowledge, the Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary
for
its business as now conducted and as presently proposed to be conducted, without
any known infringement of the rights of others; (b) except as disclosed in
the
Memorandum, there are no material outstanding options, licenses or agreements
of
any kind relating to the foregoing proprietary rights, nor is the Company bound
by or a party to any material options, licenses or agreements of any kind with
respect to the patents, trade secrets, licenses, and other proprietary rights
and processes of any other person or entity; (c) the Company has not received
any written communications from a third party alleging that the Company has
violated or, by conducting its business as presently proposed to be conducted,
would violate any of the patents or other proprietary rights of any other person
or entity.
2.13 Title
to Properties and Assets; Liens, Etc.
To its
knowledge, the Company has good and marketable title to its properties and
assets, including the properties and assets reflected in the most recent balance
sheet included in the Financial Statements, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (a) those resulting from taxes which have not yet become
delinquent; (b) liens and encumbrances which do not materially detract from
the
value of the property subject thereto or materially impair the operations of
the
Company; and (c) those that have otherwise arisen in the ordinary course of
business. The Company is in compliance with all material terms of each lease
to
which it is a party or is otherwise bound.
8
2.14 Obligations
to Related Parties.
Except
as disclosed in the Memorandum or as would not reasonably be expected to have
a
Material Adverse Effect, there are no obligations of the Company to officers,
directors, stockholders, or employees of the Company other than (a) for payment
of salary or other compensation for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness
of
any other person, firm or corporation.
|
III.
|
TERMS
OF SUBSCRIPTION
|
3.1 The
minimum investment that may be made by any prospective investor in the
Preferred
Stock is $100,001.52 (46,297 shares of Preferred Stock). Subscriptions
for
investment below the minimum investment may be accepted at the discretion
of the
Placement Agent and the Company.
3.2 Pending
the sale of the Preferred Shares, all funds paid hereunder shall be deposited
by
the Company in escrow with US Bank Trust, having a branch at 100 Wall Street,
Suite 1600, New York, New York 10005. If the Company shall not have obtained
subscriptions (including this subscription) for purchases of the Minimum
Offering amount on or before February 15, 2005, (subject to extension without
notice to subscribers by the Placement Agent) (such date, as it may be
so
extended, the “Offering Termination Date”), then this subscription shall be void
and all funds paid hereunder by the Subscriber, without interest, shall
be
promptly returned to the Subscriber. The Subscriber hereby authorizes and
directs the Company and the Placement Agent to direct the Escrow Agent
to return
any funds for unaccepted subscriptions to the same account from which the
funds
were drawn, without interest, including any customer account maintained
with the
Placement Agent.
3.3 Upon
receipt of the Minimum Offering amount on or prior to the Offering Termination
Date, the Company may conduct a closing of the purchase and sale of Preferred
Stock (a “Closing”) and may conduct subsequent Closings on an interim basis
until the Maximum Offering amount (or Increased Maximum Offering amount, if
applicable) has been obtained or until the Offering Termination Date, as
extended, if at all.
3.4 Certificates
representing the Preferred Shares purchased by the Subscriber pursuant to this
Agreement will be prepared for delivery to the Subscriber within 15 business
days following the Closing at which such purchase takes place. The Subscriber
hereby authorizes and directs the Company to deliver the certificates
representing the Preferred Shares purchased by the Subscriber pursuant to this
Agreement directly to the Subscriber's account maintained by Paramount, if
any,
or, if no such account exists, to the residential or business address indicated
on the signature page hereto.
3.5
Placement
of the shares of Preferred Stock will be made by the Company who will remit
certain compensation to the Placement Agent for introduction to investors and
other services.
| IV. |
CONDITIONS
TO OBLIGATIONS OF THE
SUBSCRIBERS
|
4.1 The
Subscriber’s obligation to purchase the Preferred Shares at the Closing at which
such purchase is to be consummated is subject to the fulfillment on or prior
to
such Closing of the following conditions, which conditions may be waived at
the
option of each Subscriber to the extent permitted by law:
9
(a) Representations
and Warranties Correct.
The
representations and warranties made by the Company in Article II hereof shall
be
true and correct in all material respects.
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the date of such Closing shall have been performed
or complied with in all material respects.
(c) No
Legal Order Pending.
There
shall not then be in effect any legal or other order enjoining or restraining
the transactions contemplated by this Agreement.
(d) No
Law
Prohibiting or Restricting Such Sale.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
such sale or requiring any consent or approval of any person, which shall not
have been obtained, to issue the Securities (except as otherwise provided in
this Agreement).
| V. |
REGISTRATION
RIGHTS
|
5.1 Definitions. As
used
in this Agreement, the following terms shall have the following
meanings.
(a) The
term
“Holder” shall mean any holder of Registrable Securities.
(b) The
terms
“register”, “registered” and “registration” refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or order of effectiveness of such
registration statement or document.
(c) The
term
“Registrable Securities” shall mean (i) the shares of Common Stock issuable upon
conversion of the shares of Preferred Stock sold in the Offering; (ii) the
shares of Common Stock issuable upon conversion of the shares of Preferred
Stock
underlying the Placement Warrants; and (iii) any shares of Common Stock issuable
(or issuable upon the conversion or exercise of any warrant, right or other
security that is issued) pursuant to a dividend or other distribution with
respect to or in replacement of any Securities; provided, however, that
securities shall only be treated as Registrable Securities if and only for
so
long as they (A) have not been disposed of pursuant to a registration statement
declared effective by the SEC; (B) have not been sold in a transaction exempt
from the registration and prospectus delivery requirements of the Securities
Act
so that all transfer restrictions and restrictive legends with respect thereto
are removed upon the consummation of such sale; (C) are held by a Holder or
a
permitted transferee of a Holder pursuant to Section 5.11; and (D) may not
be
disposed of under Rule 144(k) under the Securities Act without restriction.
5.2 Piggyback
Registration.
(a) The
Company agrees that if, at any time, and from time to time, after the earlier
to
occur of (i) an IPO and (ii) a Trading Event, the Board of Directors of the
Company (the “Board”) shall authorize the filing of a registration statement
under the Securities Act (other than the IPO or a registration statement on
Form
S-8, Form S-4 or any other form that does not include substantially the same
information as would be required in a form for the general registration of
securities) in connection with the proposed offer of any of its securities
by it
or any of its stockholders, the Company shall: (A) promptly notify each Holder
that such registration statement will be filed and that the Registrable
Securities then held by such Holder will be included in such registration
statement at such Holder’s request; (B) cause such registration statement to
cover all of such Registrable Securities issued to such Holder for which such
Holder requests inclusion; (C) use best efforts to cause such registration
statement to become effective as soon as practicable; and (D) take all other
reasonable action necessary under any Federal or state law or regulation of
any
governmental authority to permit all such Registrable Securities that have
been
issued to such Holder to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for such Holder to promptly
effect the proposed sale or other disposition.
10
(b) Notwithstanding
any other provision of this Section 5.2, the Company may at any time, abandon
or
delay any registration commenced by the Company. In the event of such an
abandonment by the Company, the Company shall not be required to continue
registration of shares requested by the Holder for inclusion, the Holder shall
retain the right to request inclusion of shares as set forth above and the
withdrawn registration shall not be deemed to be a registration request for
the
purposes of Section 5.2(c) below.
(c) Each
Holder shall have the right to request inclusion of any of its Registrable
Securities in a registration statement as described in this Section 5.2, up
to
three times.
5.3 Demand
Registration.
(a) Registration
on Request.
(i) The
Company agrees that if, at any time, and from time to time, but at least 180
days after the earlier to occur of (i) an IPO and (ii) a Trading Event, and
ending on the date that is five years from the final Closing, one or more of
the
Holders desire to effect the registration under the Securities Act of
outstanding Registrable Securities, such Holders may make a written request
that
the Company effect such registration; provided
that
such registration covers at least 51% of the Registrable Securities owned by
all
the Holders at such time; and provided,
further,
that the
Holders shall be entitled to no more than one such demand registration.
(ii) The
Company further agrees that if, at any time, and from time to time, after the
Company has qualified for the use of Form S-3 or any successor form, and ending
on the date that is five years from the final Closing, one or more of the
Holders desire to effect the registration under the Securities Act on Form
S-3
or any successor form (“Short-Form Registration”) of outstanding Registrable
Securities, such Holders may make a written request that the Company effect
a
Short-Form Registration; provided
that the
aggregate price to the public of the shares as to which such registration is
requested (based on the then current market price and before deducting
underwriting discounts and commissions) would equal or exceed $5,000,000. It
is
understood and agreed that the Holders may make good faith requests for
Short-Form Registrations on an unlimited number of occasions; provided that,
the
Company shall not be required to effect more than one Short Form Registration
in
any 12 month period.
(iii) Each
request made by one or more of the Holders pursuant to subsections (i) or (ii)
above (the “Initiating Holders”) will specify the number of shares of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. Following receipt of any such request, the
Company shall immediately notify all Holders other than the Initiating Holders
of receipt of such request and the Company shall use best efforts to file,
within 60 days of such request, the registration under the Securities Act of
the
Registrable Securities which the Company has been so requested to register
in
the request by the Initiating Holders (and in all notices received by the
Company from such other Holders within 30 days after the giving of such notice
by the Company), to the extent necessary to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities to be registered. If such method of disposition shall be an
underwritten public offering, the Holders of a majority of the shares of
Registrable Securities to be sold in such offering may designate the managing
underwriter of such offering, subject to the approval of the Company, which
approval shall not be unreasonably withheld or delayed. The Holders will be
permitted to withdraw Registrable Securities from a registration at any time
prior to the effective date of such registration; provided
the
remaining number of shares of Registrable Securities subject to a requested
registration is not less than the minimum amount required pursuant to this
Section 5.3.
11
(b) Limitations
on Demand Registration.
Notwithstanding Section 5.3(a),
(i) the
Company shall not be obligated to file a registration statement relating to
a
registration request pursuant to this Section 5.3 at any time during the 180-day
period immediately following the effective date of a registration statement
filed by the Company covering a firm commitment underwritten public offering
of
securities of the Company; and if the Board determines, in its good faith
judgment, that the Company should not file any registration statement otherwise
required to be filed pursuant to Section 5.3 or should withdraw any such
previously filed registration statement because the Company is engaged in or
in
good faith plans to engage in any financing, acquisition or other material
transaction which would be adversely affected by the filing or maintenance
of a
registration statement otherwise required to be filed or maintained pursuant
to
Section 5.3, or that the Company is in the possession of material nonpublic
information required to be disclosed in such registration statement or an
amendment or supplement thereto, the disclosure of which in such registration
statement would be materially disadvantageous to the Company (a “Disadvantageous
Condition”),
the
Company shall be entitled to postpone for the shortest reasonable period of
time
(but not exceeding 180 days from the date of the determination), the filing
of
such registration statement or, if such registration statement has already
been
filed, may withdraw such registration statement and shall promptly give the
Holders written notice of such determination, containing a general statement
of
the reasons for such postponement and an approximation of the anticipated delay.
If the Company shall so postpone the filing or effect the withdrawal of the
registration statement, the Holders who made the request for registration shall
have the right to withdraw the request for registration by giving written notice
to the Company within 30 days after receipt of the notice of postponement.
Upon
the receipt of any such notice, such Holders shall forthwith discontinue use
of
the prospectus contained in such registration statement and, if so directed
by
the Company, shall deliver to the Company all copies of the prospectus then
covering such Registrable Securities current at the time of receipt of such
notice (or, if no registration statement has yet been filed, all drafts of
the
prospectus covering such Registrable Securities). If any Disadvantageous
Condition shall cease to exist, the Company shall promptly notify the Holders
to
such effect. If any registration statement shall have been withdrawn, the
Company shall, at such time as it is possible or, if earlier, at the end of
the
180-day period following such withdrawal, file a new registration statement
covering the Registrable Securities that were covered by such withdrawn
registration statement, and the effectiveness of such registration statement
shall be maintained for such time as may be necessary so that the period of
effectiveness of such new registration statement, when aggregated with the
period during which such withdrawn registration statement was effective, if
any,
shall be such time as may be otherwise required by this Agreement. The Company’s
right to delay a request for registration or to withdraw a registration
statement pursuant to this Section 5.3 may not be exercised more than once
in
any one-year period.
5.4 Registration
Procedures.
Whenever required under this Article V to include Registrable Securities in
a
Company registration statement, the Company shall, as expeditiously as
reasonably possible:
12
(a) Use
best
efforts to (i) cause such registration statement to become effective, and (ii)
cause such registration statement to remain effective until the earliest to
occur of (A) such date as the sellers of Registrable Securities (the “Selling
Holders”) have completed the distribution described in the registration
statement and (B) such time that all of such Registrable Securities are no
longer, by reason of Rule 144(k) under the Act, required to be registered for
the sale thereof by such Holders. The Company will also use its best efforts
to,
during the period that such registration statement is required to be maintained
hereunder, file such post-effective amendments and supplements thereto as may
be
required by the Securities Act and the rules and regulations thereunder or
otherwise to ensure that the registration statement does not contain any untrue
statement of material fact or omit to state a fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading; provided, however,
that
if applicable rules under the Securities Act governing the obligation to file
a
post-effective amendment permits, in lieu of filing a post-effective amendment
that (i) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (ii) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the Company
may incorporate by reference information required to be included in (i) and
(ii)
above to the extent such information is contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement. In the event that the Company becomes qualified for the use of Form
S-3 or any successor form at a time when any registration statement on any
other
Form which includes Registrable Securities is required to be maintained
hereunder, the Company shall, upon the request of any Selling Holder, subject
to
Section 5.5, (i) as expeditiously as reasonably possible, use best efforts
to
cause a Short-Form Registration covering such Registrable Securities to become
effective and (ii) comply with each of the other requirements of this Section
5.4 which may applicable thereto. Upon the effectiveness of such Short-Form
Registration, the Company shall be relieved of its obligations hereunder to
keep
in effect the registration statement which initially covered the Registrable
Securities included in such Short-Form Registration.
(b) Prepare
and file with the SEC such amendments and supplements to such registration
statement, and the prospectus used in connection with such registration
statement, as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Make
available for inspection upon reasonable notice during the Company’s regular
business hours by each Selling Holder, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such Selling Holder or underwriter, all
financial and other records, pertinent corporate documents and properties of
the
Company, and cause the Company’s officers, directors and employees to supply all
information reasonably requested by any such Selling Holder, underwriter,
attorney, accountant or agent in connection with such registration
statement.
(d) Furnish
to the Selling Holders such numbers of copies of a prospectus, including a
preliminary prospectus as amended or supplemented from time to time, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(e) Use
best
efforts to register and qualify the securities covered by such registration
statement under such other federal or state securities laws of such
jurisdictions as shall be reasonably requested by the Selling Holders; provided,
however, that the Company shall not be required in connection therewith or
as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company
is
already subject to service in such jurisdiction and except as may be required
by
the Securities Act.
13
(f) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Selling Holder participating
in
such underwriting shall also enter into and perform its obligations under such
an agreement.
(g) Notify
each Holder of Registrable Securities covered by such registration statement,
at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, (i) when the registration statement or any post-effective
amendment and supplement thereto has become effective; (ii) of the issuance
by
the SEC of any stop order or the initiation of proceedings for that purpose
(in
which event the Company shall make every effort to obtain the withdrawal of
any
order suspending effectiveness of the registration statement at the earliest
possible time or prevent the entry thereof); (iii) of the receipt by the Company
of any notification with respect to the suspension of the qualification of
the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and (iv) of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
(h) Cause
all
such Registrable Securities registered hereunder to be listed on each securities
exchange or quotation service on which similar securities issued by the Company
are then listed or quoted or, if no such similar securities are listed or quoted
on a securities exchange or quotation service, apply for qualification and
use
best efforts to qualify such Registrable Securities for inclusion on the New
York Stock Exchange or listing on a quotation system of the National Association
of Securities Dealers, Inc.
(i) Provide
a
transfer agent and registrar for all Registrable Securities registered pursuant
hereunder and CUSIP number for all such Registrable Securities, in each case
not
later than the effective date of such registration.
(j) Cooperate
with the Selling Holders and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing the Registrable
Securities to be sold, which certificates will not bear any restrictive legends;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, shall request
at
least two business days prior to any sale of the Registrable Securities to
the
underwriters.
5.5 Furnish
Information. It
shall
be a condition precedent to the obligation of the Company to take any action
pursuant to this Article V with respect to the Registrable Securities of any
Selling Holder that such Holder shall furnish to the Company such information
regarding the Holder, the Registrable Securities held by the Holder, and the
intended method of disposition of such securities as shall be reasonably
required by the Company to effect the registration of such Holder's Registrable
Securities.
5.6 Registration
Expenses.
(a) Expenses
of Demand Registration.
The
Company shall bear and pay all expenses incurred in connection with any
registration, filing or qualification of Registrable Securities with respect
to
registrations pursuant to Section 5.3 for each Holder, including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto (“Registration Expenses”), but
excluding underwriting discounts and commissions relating to Registrable
Securities and excluding any professional fees or costs of accounting, financial
or legal advisors to any of the Holders.
14
(b) Expenses
of Company Registration.
The
Company shall bear and pay all Registration Expenses incurred in connection
with
any registration, filing or qualification of Registrable Securities with respect
to registrations pursuant to Section 5.2 for each Holder, but excluding
underwriting discounts and commissions relating to Registrable Securities and
excluding any professional fees or costs of accounting, financial or legal
advisors to any of the Holders.
5.7 Underwriting
Requirements.
In
connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall not be required under Section 5.2
to
include any of the Holders' Registrable Securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the Company
and
the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine
in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount
of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then
the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder who is
a
holder of Registrable Securities and is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates
and
family members of any such partners and retired partners and any trusts for
the
benefit of any of the foregoing persons shall be deemed to be a single “selling
stockholder”, and any pro-rata reduction with respect to such “selling
stockholder” shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
“selling stockholder”, as defined in this sentence.
5.8 Delay
of Registration.
No
Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that
might arise with respect to the interpretation or implementation of this
Article.
5.9 Indemnification.
In the
event that any Registrable Securities are included in a registration statement
under this Article V:
(a) To
the
extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder
and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, or the Exchange Act, insofar as such losses, claims, damages,
or
liabilities (or actions in respect thereof) arise out of or are based upon
any
of the following statements, omissions or violations (collectively a
“Violation”): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein
a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, or any rule or regulation
promulgated under the Securities Act, or the Exchange Act, and the Company
will
pay to each such Holder, underwriter or controlling person, as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section 5.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of
the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation
which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
15
(b) To
the
extent permitted by law, each Selling Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter, any other Holder selling securities in such registration statement
and any controlling person of any such underwriter or other Holder, against
any
losses, claims, damages, or liabilities (joint or several) to which any of
the
foregoing persons may become subject, under the Securities Act, or the Exchange
Act, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to
the extent (and only to the extent) that such Violation occurs in reliance
upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay,
as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 5.9(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided,
however,
that
the indemnity agreement contained in this Section 5.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided,
further,
that, in
no event shall any indemnity under this Section 5.9(b) exceed such Holder’s
investment pursuant to this Agreement as set forth on the signature page
attached hereto.
(c) Promptly
after receipt by an indemnified party under this Section 5.9 of notice of the
commencement of any action (including any governmental action), such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 5.9, deliver to the indemnifying party
a
written notice of the commencement thereof and the indemnifying party shall
have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly notified, to assume
the defense thereof with counsel selected by the indemnifying party and approved
by the indemnified party (whose approval shall not be unreasonably withheld);
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of
the commencement of any such action, if prejudicial to its ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 5.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that
it
may have to any indemnified party otherwise than under this Section
5.9.
(d) If
the
indemnification provided for in this Section 5.9 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
loss,
liability, claim, damage, or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party hereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one
hand and of the indemnified party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage, or expense
as
well as any other relevant equitable considerations. The relative fault of
the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
16
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The
obligations of the Company and Holders under this Section 5.9 shall survive
the
completion of any offering of Registrable Securities in a registration statement
under this Article V, and otherwise.
5.10 Reports
Under Securities Exchange Act of 1934.
With a
view to making available to the Holders the benefits of Rule 144 and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to
a
registration on Form S-3, the Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144, at all times after 90 days after the effective date of the
registration statement filed in connection with an IPO or Trading Event by
the
Company;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (ii)
such other information as may be reasonably requested in availing any Holder
of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
5.11 Permitted
Transferees.
The
rights to cause the Company to register Registrable Securities granted to the
Holders by the Company under this Article V may be assigned in full by a Holder
in connection with a transfer by such Holder of its Registrable Securities
if:
(a) such Holder gives prior written notice to the Company; (b) such transferee
agrees to comply with the terms and provisions of this Agreement; (c) such
transfer is otherwise in compliance with this Agreement; (d) such transfer
is
otherwise effected in accordance with applicable securities laws; and (e) such
Holder transfers at lease 10,000 shares of Registrable Securities to the
transferee. Except as specifically permitted by this Section 5.11, the rights
of
a Holder with respect to Registrable Securities as set out herein shall not
be
transferable to any other Person, and any attempted transfer shall cause all
rights of such Holder therein to be forfeited.
5.12 Termination
of Registration Rights
The
right of any Holder to request or demand inclusion in any registration pursuant
to Section 5.2 and Section 5.3 shall terminate if all shares of Registrable
Securities held by such Holder may immediately be sold under Rule
144(k).
17
| VI. |
MISCELLANEOUS
|
6.1 Any
notice or other communication given hereunder shall be deemed sufficient if
in
writing and sent by registered or certified mail, return receipt requested,
or
delivered by hand against written receipt therefor, addressed as
follows:
if
to the
Company, to it at:
Ziopharm,
Inc.
300
George Street,
New
Haven, Connecticut 06511
Attn:
Jonathan Lewis, M.D., Ph.D.
Chief
Executive Officer
With
a
copy to:
Paramount
BioCapital, Inc.
787
Seventh Avenue, 48th
Floor
New
York,
New York 10019
Attn:
Basil Christakos
if
to the
Subscriber, to the Subscriber’s address indicated on the signature page of this
Agreement.
Notices
shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or
delivered when received.
6.2 Except
as
otherwise provided herein, this Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
6.3 Subject
to the provisions of Section 5.11, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
6.4 Upon
the
execution and delivery of this Agreement by the Subscriber, this Agreement
shall
become a binding obligation of the Subscriber with respect to the purchase
of
Preferred Shares as herein provided, subject, however, to the right hereby
reserved by the Company to enter into the same agreements with other subscribers
and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING
THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO,
THE
PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO SUCH STATE’S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT
A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES
ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE STATE AND FEDERAL COURTS
LOCATED IN THE STATE OF DELAWARE. THE PARTIES HEREBY IRREVOCABLY CONSENT TO
THE
JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
18
6.6 In
order
to discourage frivolous claims the parties agree that unless a claimant in
any
proceeding arising out of this Agreement succeeds in establishing his claim
and
recovering a judgment against another party (regardless of whether such claimant
succeeds against one of the other parties to the action), then the other party
shall be entitled to recover from such claimant all of its/their reasonable
legal costs and expenses relating to such proceeding and/or incurred in
preparation therefor.
6.7 The
holding of any provision of this Agreement to be invalid or unenforceable by
a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect. If any provision of
this
Agreement shall be declared by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced in whole or in part, such provision
shall
be interpreted so as to remain enforceable to the maximum extent permissible
consistent with applicable law and the remaining conditions and provisions
or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
6.8 It
is
agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
6.9 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
6.10 This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original, but all of which shall together constitute one and the
same
instrument.
6.11 Nothing
in this Agreement shall create or be deemed to create any rights in any person
or entity not a party to this Agreement, except (a) for the holders of
Registrable Securities, (b) for the Placement Agent pursuant to Sections 1.6(a)
and 2.10 hereof, (c) for the indemnified parties (including without limitation
the Placement Agent and its sub agents, if any) pursuant to Section1.21 hereof,
and (d) that the Placement Agent may rely upon the representation and
acknowledgements of the Subscriber in Articles I and VII hereof.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
19
| VII. |
CONFIDENTIAL
INVESTOR QUESTIONNAIRE
|
7.1 The
Subscriber represents and warrants that he, she or it comes within one category
marked below, and that for any category marked, he, she or it has truthfully
set
forth, where applicable, the factual basis or reason the Subscriber comes within
that category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
CONFIDENTIAL. The undersigned agrees to furnish any additional information
which
the Company deems necessary in order to verify the answers set forth
below.
| Category A __ |
The
undersigned is an individual (not a partnership, corporation, etc.)
whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
|
Explanation.
In calculating net worth you may include equity in personal property and real
estate, including your principal residence, cash, short-term investments, stock
and securities. Equity in personal property and real estate should be based
on
the fair market value of such property less debt secured by such
property.
| Category B __ |
The
undersigned is an individual (not a partnership, corporation, etc.)
who
had an income in excess of $200,000 in each of the two most recent
years,
or joint income with his or her spouse in excess of $300,000 in each
of
those years (in each case including foreign income, tax exempt income
and
full amount of capital gains and losses but excluding any income
of other
family members and any unrealized capital appreciation) and has a
reasonable expectation of reaching the same income level in the current
year.
|
| Category C __ |
The
undersigned is a director or executive officer of the Company which
is
issuing and selling the Preferred
Shares.
|
| CategoryD__ |
The
undersigned is a bank; a savings and loan association; insurance
company;
registered investment company; registered business development company;
licensed small business investment company ("SBIC"); or employee
benefit
plan within the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank, savings
and
loan association, insurance company or registered investment advisor,
or
(b) the plan has total assets in excess of $5,000,000 or (c) is a
self
directed plan with investment decisions made solely by persons that
are
accredited investors. (describe
entity)
|
| Category E __ |
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of 1940. (describe
entity)
|
| Category F __ |
The
undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed for the specific
purpose of acquiring the Preferred Shares and with total assets in
excess
of $5,000,000. (describe entity)
|
20
| Category G __ |
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Preferred Shares,
where
the purchase is directed by a "sophisticated investor" as defined
in
Regulation 506(b)(2)(ii) under the
Act.
|
| Category H __ |
The
undersigned is an entity (other than a trust) in which all of the
equity
owners are "accredited investors" within one or more of the above
categories. If relying upon this Category alone, each equity owner
must
complete a separate copy of this Agreement. (describe
entity)
|
| Category I __ |
The
undersigned is not within any of the categories above and is therefore
not
an accredited investor.
|
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and
complete.
7.2 SUITABILITY
(please
answer each question)
(a)
For
an individual Subscriber, please describe your current employment, including
the
company by which you are employed and its principal business:
(b)
For
an individual Subscriber, please describe any college or graduate degrees held
by you:
(c)
For
all Subscribers, please list types of prior investments:
(d)
For
all Subscribers, please state whether you have you participated in other
private
placements
before:
YES_______ NO_______
21
(e)
If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private
placements
of:
|
Public
Companies
|
Private
Companies
|
Public
or Private
Biotechnology
Companies
|
|||
|
Frequently
|
|||||
|
Occasionally
|
|||||
|
Never
|
|
|
|
(f)
For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(g)
For
trust, corporate, partnership and other institutional Subscribers, do you expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(h)
For
all Subscribers, do you have any other investments or contingent liabilities
which you reasonably anticipate could cause you to need sudden cash requirements
in excess of cash readily available to you:
YES_______ NO_______
(i)
For
all Subscribers, are you familiar with the risk aspects and the non-liquidity
of
investments such as the securities for which you seek to subscribe?
YES_______ NO_______
(j)
For
all Subscribers, do you understand that there is no guarantee of financial
return on this investment and that you run the risk of losing your entire
investment?
YES_______ NO_______
7.3 MANNER
IN WHICH TITLE IS TO BE HELD.
(circle
one)
(a) Individual
Ownership
(b) Community
Property
| (c) |
Joint Tenant with Right of Survivorship
(both parties must
sign)
|
(d) Partnership*
(e) Tenants
in Common
(f) Company*
(g) Trust*
(h) Other
22
*If
Preferred Shares are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.
7.4 NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
7.5 The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article VII and such answers have been provided under the
assumption that the Company will rely on them.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
23
NUMBER
OF PREFERRED SHARES
X
Per Share Price
=
(the "Purchase Price")
|
Signature
|
Signature
(if purchasing jointly)
|
|
|
Name
Typed or Printed
|
Name
Typed or Printed
|
|
|
Entity
Name
|
Entity
Name
|
|
|
Address
|
Address
|
|
|
City,
State and Zip Code
|
City,
State and Zip Code
|
|
|
Telephone-Business
|
Telephone-Business
|
|
|
Telephone-Residence
|
Telephone-Residence
|
|
|
Facsimile-Business
|
Facsimile-Business
|
|
|
Facsimile-Residence
|
Facsimile-Residence
|
|
|
Tax
ID # or Social Security #
|
Tax
ID # or Social Security #
|
|
|
Name
in which securities should be issued:
|
Dated:
__________ , 2005
This
Subscription Agreement is agreed to and accepted as of
_________________ ,
2005.
| ZIOPHARM, INC. | ||
| |
|
|
| Date: | By: | |
|
Name: Dr. Jonathan Lewis, MD, Ph.D. |
||
| Title: Chief Executive Officer | ||
CERTIFICATE
OF SIGNATORY
(To
be
completed if Preferred Shares are
being
subscribed for by an entity)
I,____________________________,
am the ____________________________ of
__________________________________________ (the "Entity").
I
certify
that I am empowered and duly authorized by the Entity to execute and carry
out
the terms of the Subscription Agreement and to purchase and hold the Preferred
Shares, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN
WITNESS WHEREOF, I have set my hand this _____ day of _________________,
2005.
Exhibit
23.1
|
Accounting
|
||
|
and
Tax
|
||
|
Business
|
||
|
Solutions
|
Consent
of Independent Registered Public Accounting
Firm
|
|
|
Financial
|
||
|
Services
|
||
|
Technology
Services
|
As
independent public accountants, we hereby consent to the inclusion
of our
report, dated August 5, 2005 (except for Note 10 as to which the
date is
September 13, 2005), relating to the financial statements of ZIOPHARM,
Inc., included in this Registration Statement on Form SB-2 and
to the use
of our name as it appears under the caption “Experts”.
|
|
|
/s/
VITALE,
CATURANO & COMPANY, LTD.
|
||
|
VITALE,
CATURANO & COMPANY, LTD.
|
||
|
October
14, 2005
|
||
|
Boston,
Massachusetts
|
Certified
Public Accountants
An
Independent Member of Baker Tilly International
80
City Square, Boston, Massachusetts
02129
617 • 912 •
9000 FX
617 •
912 •
9001 www.vitale.com
Exhibit
23.2
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Securities
and Exchange Commission
Washington,
DC
We
consent to the use in this Registration Statement of ZIOPHARM Oncology, Inc.
on
Form SB-2, of our report dated February 19, 2005, appearing in the Prospectus.
We
also
consent to the reference to us under the heading "Experts" in such Prospectus.
| /s/ Cordovano and Honeck LLP | |
|
Cordovano
and Honeck LLP
Denver,
Colorado
October
14, 2005
|