May 29, 1998
Mr. T. Xxxxxxx Xxxxxxxx
President
Immtech International, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Via Fax and Regular Mail
Re: Binding Letter Agreement Between Immtech International, Inc. and Franklin
Research Group, Inc.
Dear Xxxxx:
The purpose of this letter is to set forth the principal terms of a proposed
transaction between Franklin Research Group, Inc. or its designee(s)
("Franklin") and Immtech International, Inc. ("Immtech"). Following the
execution of this letter by both parties, the parties shall proceed to enter
into one or more agreements consistent with the terms of this letter (such
agreement or agreements are hereinafter referred to as the ("Agreement"), and to
execute and deliver such other instruments, certificates, and documents as are
necessary to carry out the terms of this letter. The provisions of this letter
shall be binding on the parties hereto, and their respective successors and
assigns. The principal terms of the Agreement shall be as follows:
Purpose of Transaction. The purpose of the transaction will be to further
research and find commercial applications for the protein known as "modified
CRP" and hereinafter referred to as "mCRP."
Formation of Newco. A new C corporation shall be formed ("Newco"), the ownership
and capitalization of which shall be as follows:
1. In exchange for 330,000 shares of the capital stock of Newco, Immtech
shall contribute the following assets to Newco: (i) Immtech's domestic and
international patents relating to the manufacture, function and uses of
mCRP with the exception of uses in Sepsis and uses as an adjuvant in
vaccines as delineated in Schedule A attached hereto; (ii) Newco shall
grant to Immtech a non-exclusive license for the manufacture of mCRP
solely for the purpose of use in connection with Sepsis and as an adjuvant
in vaccines; (iii) In the event that Immtech's current licenses for use of
mCRP in the treatment of Sepsis and as an adjuvant for vaccines are
terminated for
1
any reason, then Immtech shall offer Newco licenses for such uses upon,
the same terms as the existing licenses; (iv) all of Immtech's proprietary
and non-proprietary information on mCRP, including any records and printed
material relating thereto; (v) all licensed rights relating to mCRP,
including, without limitation, any rights licensed from Northwestern
University; (vi) Newco will have access to all instruments and other
equipment currently owned by Immtech that are used in the research and
manufacturing of mCRP, including, without limitation, all personal
property located at 0000 Xxxxx Xxxxxx in Evanston, Illinois. During the
time that these assets are owned by Immtech, Newco shall have the
obligation to pay a reasonable share of any maintenance costs associated
with these assets. The ownership of these assets shall transfer to Newco
upon commencing the additional $6.5 million investment as outlined in
Section 4 below; and (vii) all other assets, tangible and intangible, of
Immtech primarily used in connection with mCRP. In addition, Immtech shall
make available to Newco, at reasonable times and for reasonable
compensation, Immtech employees and consultants who have knowledge
concerning mCRP and its development.
2. In exchange for 510,000 shares of the capital stock of Newco, Franklin
will contribute or cause to be contributed to Newco $1,350,000 in
accordance with the schedule attached hereto as Schedule B. An additional
160,000 shares of the capital stock of Newco shall be reserved for
issuance to Franklin in accordance with paragraph 4 below.
3. Newco shall utilize the $1,350,000 provided by Franklin to prepare for and
conduct Phase I human clinical trials on the safety and effectiveness of
mCRP. Such Phase I trial will include at least 30 patients and will be
conducted primarily as safety tests, but it is anticipated that this Phase
I trial will also provide preliminary but statistically significant data
evidencing that mCRP is therapeutically efficacious in the treatment of
cancer in humans. It is anticipated that these clinical trials will take
approximately 18 months to complete.
4. If Newco completes the milestones outlined in paragraph 3 above, then
Franklin shall invest an additional $6,500,000 in Newco in exchange for an
additional 160,000 shares of the capital stock of Newco. These funds shall
be used to conduct Phase II and III human clinical trials. The
determination as to whether the Phase I results meet the requirements for
the additional $6,500,000 investment shall be made by a Medical Advisory
Board appointed by Newco's Board of Directors which shall include no fewer
than three members. The Medical Advisory Board shall render a written
opinion within thirty days of receipt of data from the Phase I clinical
trial. The additional $6,500,000 investment shall be required if in the
opinion of a majority of the Medical Advisory Board the Phase I results
indicate that mCRP is safe for use in
2
humans and has a statistically significant therapeutically efficacious
effect on cancer in humans. If such an opinion is rendered, then within 90
days from the date of receipt of such opinion, Franklin shall provide not
less than $1,500,000 of the required additional investment of $6,500,000,
an additional $1,500,000 within 180 days of the date of receipt of such
opinion, and the remaining $3,500,000 within 270 days of the date of
receipt of such opinion. Notwithstanding the foregoing, Immtech shall have
the right to provide $1,625,000 of the additional investment of $6,500,000
by giving Newco notice of its intention to do so not later than ten days
after the receipt of the opinion of Newco's Medical Advisory Board. If
Immtech so notifies Newco, then Immtech shall receive 40,000 of the
additional 160,000 shares reserved for issuance to Franklin, and Immtech
shall pay such $1,650,000 ratably with the $4,875,000 Franklin is required
to provide ($375,000 within 90 days of receipt of the opinion, an
additional $375,000 within 180 days, and the balance or $900,000 within
270 days).
5. Upon formation of Newco, Xxxxxxxx X. Xxxxxxx shall receive 33,333 shares
of Newco and an option for an additional 30,000 shares. The option price
shall be nominal, and the option would vest upon the submission of a "new
drug application" in any major industrialized country by Newco for
regulatory approval of a product based upon mCRP, or the entering into of
a license by Newco with any entity that is required by the terms of the
license to file such an application. If there is a change in control of
Newco, the additional 30,000 options will automatically vest.
6. 100,000 shares of Newco shall be reserved for issuance pursuant to a stock
option plan for employees and consultants approved by Newco's Board of
Directors.
Additional Terms.
1. All shares of Newco shall be common shares and shall have identical terms
and rights except that the holders of the Franklin shares shall have the
right to elect five of seven members of the Board of Directors.
2. If Franklin fails to make any investment in Newco within thirty days of
the date that it is obligated to do so hereunder, and such failure occurs
while Franklin is obligated to make its initial $1,350,000 investment,
then Immtech shall have the option, exercisable during any time that such
failure continues, of (i) if Immtech is publicly traded (trading on the
electronic bulletin board shall not constitute "publicly traded") at the
time of Franklin's failure to invest, 90% of Franklin's investment will be
converted into Immtech stock at a price defined by the average of the
preceding 30 trading days; or (ii) to purchase for cash from Franklin all
of its shares for 90% of the amount actually contributed by Franklin to
Newco. If Immtech exercises its option to
3
repurchase, then it must do so within 90 days of the date of its notice.
If such failure occurs while Franklin is obligated to contribute the
additional $6,500,000 and Immtech is not public, then Immtech shall have
an option to purchase an additional number of shares of Newco for $1 per
share such that Immtech would have a majority of the issued and
outstanding stock of Newco, and thereafter, there shall be no special
rights in the Franklin shares or Immtech shares with respect to the
election of the Board of Directors of Newco. The parties agree that if
this situation occurs, cumulative voting will apply. Immtech and Franklin
shall each have a right of first refusal to purchase the shares owned by
the other party upon the same terms and conditions as are contained in any
third party offer. This right of first refusal shall not apply to
transfers to trusts for the benefit of any shareholder or his family
members, or direct transfers to family members, provided that the
transferee agrees to subject the transferred shares to the right of first
refusal.
3. Until completion of the Phase I human trials, Franklin and Immtech agree
that the entering into of any agreement relating to mCRP (as defined in
the "Formation of Newco," Section 1 above), including any license or
sub-license, with any person or entity that is related in any way to
Franklin or any other director or shareholder of Newco shall require the
unanimous approval of Newco's Board of Directors. Until the Phase I
clinical trials are complete and Franklin has made its additional
$6,500,000 investment, the following actions shall require unanimous
approval of Newco's Board of Directors: (i) the issuance of any stock
options in excess of the 100,000 shares initially reserved for options,
and (ii) the agreement to a merger, sale, or disposition of substantially
all of the assets of Newco; (iii) the liquidation, dissolution or
consolidation of Newco with another entity or the effectuation of any
transaction or series of related transactions in which is more than 50% of
the voting power of Newco is disposed.
4. Upon the fifth anniversary of the formation of Newco, Immtech shall have a
"put" right to sell to Newco all of Immtech's Newco stock for a price
equal to the lesser of (i) the fair market value of such shares as
determined by a national investment banking firm selected by the parties
with experience in valuing biotechnology companies, or (ii) $5 per share.
Such right must be exercised by written notice to Newco within 30 days of
such fifth anniversary. The cost of any appraisal shall be paid by
Immtech. Closing of the sale of the shares shall occur within 60 days of
the date upon which the price is determined, and the purchase price shall
be paid in cash.
Employment of Xx. Xxxxxxx. Xx. Xxxxxxx shall enter into a three (3) year
employment agreement with Newco, with an option on the part of Newco to extend
the agreement for an additional two (2) year period. Xx. Xxxxxxx shall be paid
an initial salary of $120,000, plus benefits provided to other employees of
Newco. Xx. Xxxxxxx shall receive bonuses
4
and salary increases as determined by Newco's CEO and/or Board of Directors. The
employment agreement shall contain non-competition provisions acceptable to
Newco and Xx. Xxxxxxx.
Payment of Patent Expenses. Newco shall pay for the maintenance and prosecution
of all patents transferred to Newco as set forth in Formation of Newco, Section
1 and as summarized in Schedule A. Newco shall not shall not bear any costs for
any Sepsis patents that have been issued.
Preparation of Agreement. Franklin shall produce the initial draft of the
Agreement. The parties agree to work diligently to execute the Agreement and any
other necessary documentation on or before June 22, 1998.
Board Approval. Each of Franklin and Immtech represents and warranties to the
other that all Board or other corporate approvals requisite to carrying out the
provisions of this letter have been obtained, and that no further corporate
approvals shall be necessary prior to the execution and delivery of the
Agreement and related documents.
Governing Law; Venue for Dispute Resolution. The Agreement shall be governed by
Delaware law and shall provide that any disputes are to be resolved in the
State and Federal courts located in Franklin County, Ohio.
Franklin Research Group, Inc. Immtech International, Inc.
By: /s/ Philipp D. Nick, President By: /s/ T. Xxxxxxx Xxxxxxxx
-------------------------------- ---------------------------------
Philipp D. Nick, President T. Xxxxxxx Xxxxxxxx, President
5
---------------------------
Immtech International, Inc.
---------------------------
PATENT STATUS - MCRP BIOLOGICALS
As of MAY 22, 1998
Schedule A
Patent US Australian Canadian EPO
Appl/Patent Number Appl/Patent Number Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued Date Filed/Issued Date Filed/Issued
========================================================================================================================
Cancer ISSUED ISSUED 2132001 93910710.8
(treatment with mCRP) P-5,283,238 No. 668168 4/22/93 (2545/80) 4/22/93 (2545/81)
2/1/94 (2545/31) 9/4/96 (2545/79)
------------------------------------------------------------------------------------------------------------------------
Imaging ISSUED
(mCRP diagnostics) P-5,474,904
12/12/95
(2545/55)
------------------------------------------------------------------------------------------------------------------------
Immune ISSUED ISSUED ISSUED ISSUED
Complex P-5,593,897 No. 633488 No. 1,339,290 No. 0411017
Binding 1/14/97 (2545/73) 6/11/93 (2545/24) 8/12/97 (2545/10) 3/6/96 (2545/93-97)
(mCRP) BE, FR, DE, IT, UK
------------------------------------------------------------------------------------------------------------------------
Monocional ISSUED ISSUED 2,057,058 90913619.4
Abs P-5,272,258 No. 642430 6/20/90 (2545/34) 6/20/90 (2545/35)
(mCRP specific) 12/21/93 (2545/16) 3/7/94 (2545/33)
------------------------------------------------------------------------------------------------------------------------
Recominant Notice of Allowance 94909837.0
mCRP (Substance) 7/97 8/26/94 (2545/87)
08/480.270
6/7/95 (2545/86)
------------------------------------------------------------------------------------------------------------------------
Patent Japan PCT
Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued
========================================================================
Cancer 5-519361 PCT/US93/03769
(treatment with mCRP) 4/22/93 (2545/82) 4/22/93 (2545/50)
------------------------------------------------------------------------
Imaging
(mCRP diagnostics)
------------------------------------------------------------------------
Immune 1-504716 PCT/US89/01247
Complex 3/31/89 (2545/28) 3/31/89 (2545/11)
Binding
(mCRP)
------------------------------------------------------------------------
Monocional 2-512688 PCT/US90/03487
Abs 6/20/90 (2545/36) 6/20/90 (2545/20)
(mCRP specific)
------------------------------------------------------------------------
Recominant 6-519333 PCT/US94/0218.1
mCRP (Substance) 2/24/94 (2546/88) 2/24/94 (2545/57)
------------------------------------------------------------------------
---------------------------
Immtech International, Inc.
---------------------------
PATENT STATUS - MCRP BIOLOGICALS
As of MAY 22, 1998
Schedule A
Patent US Australian Canadian EPO
Appl/Patent Number Appl/Patent Number Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued Date Filed/Issued Date Filed/Issued
=====================================================================================================================
Recombinant 08/480,270
mCRP (Divisional) 6/7/95 (2545/86)
---------------------------------------------------------------------------------------------------------------------
Sepsis ISSUED ISSUED 2123787 98900907 8
(mCRP therapy) [illegible] No. [illegible] 11/23/92 11/23/92 (2546/71)
1/23/96 (2545/70) (2545/69)
---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis (using ISSUED 95911884.5
mCRP) P-5,547,931 2/22/95 (2545/104)
8/20/98 (2545/58)
---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis (using Divisional
mCRP) 08/549,013
8/20/96 (2545/89)
---------------------------------------------------------------------------------------------------------------------
Thrombopoiesis Divisional
(ex vivo kits) 08/648,974
8/27/95 (2545/90)
---------------------------------------------------------------------------------------------------------------------
HIV treatment ISSUED ISSUED 2123786 92925395.3
(mCRP/rmCRP) p-5,585,349 No. 662787 11/23/92 11/23/92 (2545/87)
12/17/96 1/23/96 (2545/66) (2545/65)
(2545/53)
---------------------------------------------------------------------------------------------------------------------
Viral treatment CIP
(mCRP/rmCRP) 08/767,795
12/16/96
(2545/105)
---------------------------------------------------------------------------------------------------------------------
Patent Japan PCT
Appl/Patent Number Appl/Patent Number
Date Filed/Issued Date Filed/Issued
===============================================================================
Recombinant
mCRP (Divisional)
-------------------------------------------------------------------------------
Sepsis 6-510212 [illegible]
(mCRP therapy) 11/23/92 11/23/92 (2545/47)
(2545/68)
-------------------------------------------------------------------------------
Thrombopoiesis (using PCT/US95/02253
mCRP) 2/22/95 (2545/88)
-------------------------------------------------------------------------------
Thrombopoiesis (using
mCRP)
-------------------------------------------------------------------------------
Thrombopoiesis
(ex viva kits)
-------------------------------------------------------------------------------
HIV treatment 5-510209 PCT/US92/10126
(mCRP/rmCRP) 11/23/92 11/23/92 (2545/46)
(2545/84)
-------------------------------------------------------------------------------
Viral treatment
(mCRP/rmCRP)
-------------------------------------------------------------------------------
[illegible]
SCHEDULE B
PAYMENT OF
$1,350,000
DATE AMOUNT
---- ------
April, 1998 $ 50,000
June 4, 1998 $ 100,000
July 15, 1998 $ 50,000
July 31, 1998 $ 350,000
September 30, 1998 $ 350,000
December 31, 1998 $ 250,000
February 28,1998 $ 200,000
---------------- ----------
Total $1,350,000
