SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 20, 2005
PHASE III MEDICAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-10909 22-2343568
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Commission File Number IRS Employer
Identification No.
330 SOUTH SERVICE ROAD, SUITE 120, MELVILLE, NEW YORK 11747
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(Address of principal executive offices) (Zip Code)
631-574-4955
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Registrant's Telephone Number
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below): N/A
Item 3.02. Unregistered Sales of Equity Securities.
On April 20, 2005, Phase III Medical, Inc., a Delaware corporation
(the "Company"), and Catherine M. Vaczy, the Company's recently appointed
Executive Vice President and General Counsel (see below), entered into a stock
purchase agreement (the "Stock Purchase Agreement"), pursuant to which the
Company sold to Ms. Vaczy 1,666,666 shares of common stock, par value $0.001 per
share, of the Company ("Common Stock") in exchange for $100,000. Pursuant to the
Stock Purchase Agreement, for a period of 90 days from the date of the Stock
Purchase Agreement, Ms. Vaczy has the right to purchase up to an additional
$200,000 of Common Stock at a per share price equal to 85% of the average
closing price of one share of Common Stock on the National Association of
Securities Dealers, Inc. Over-the-Counter Bulletin Board (the "Bulletin Board")
(or other similar exchange or association on which the Common Stock is then
listed or quoted) for the five (5) consecutive trading days immediately
preceding the date of Ms. Vaczy's notice exercising the option; provided,
however, that if the Common Stock is not then quoted on the Bulletin Board or
otherwise listed or quoted on an exchange or association, the price shall be the
fair market value of one share of Common Stock as of the date of issue as
determined in good faith by the Board of Directors of the Company; and further
provided, that in no event shall the price be less than $.06.
Also on April 20, 2005, Ms. Vaczy loaned to the Company the sum of
$100,000 and accepted from the Company a promissory note (the "Note"). The Note
bears interest at a rate of 15% and matures on April 20, 2006. Ms. Vaczy has the
option to convert the Note into shares of Common Stock at any time up until the
90th day after the date of the Note at a per share price equal to 85% of the
average closing price of one share of Common Stock on the Bulletin Board (or
other similar exchange or association on which the Common Stock is then listed
or quoted) for the five (5) consecutive trading days immediately preceding the
date of Ms. Vaczy's notice; provided, however, that if the Common Stock is not
then quoted on the Bulletin Board or otherwise listed or quoted on an exchange
or association, the price shall be the fair market value of one share of Common
Stock as of the date of issue as determined in good faith by the Board of
Directors of the Company; and further provided, that in no event shall the price
be less than $.06. Following the 90th day after the date of the Note, Ms. Vaczy
is obligated, at any time prior to the date of maturity of the Note, to convert
the Note into shares of Common Stock unless Ms. Vaczy shall have provided to the
Company a notice terminating her employment with the Company pursuant to her
Letter Agreement with the Company (see below).
Pursuant to Ms. Vaczy's Letter Agreement with the Company, on the
Commencement Date she was granted an option to purchase 150,000 shares of Common
Stock (the "Option") pursuant to the Company's 2003 Equity Participation Plan
(the "2003 EPP"). The Option is an Incentive Stock Option pursuant to Section
422 of the Internal Revenue Code of 1986, as amended and is represented by an
Incentive Stock Option Agreement. The Option has an exercise price equal to $.10
per share and vests and becomes exercisable as to 50,000 shares on each of the
first, second and third year anniversaries of the Commencement Date and remains
exercisable as to any vested portion thereof in accordance with the terms of the
2003 EPP and the Incentive Stock Option Agreement. In the event Ms. Vaczy's
employment with the Company is terminated prior to the end of its term by the
Company without cause or by Ms. Vaczy for good reason the option shall vest and
become immediately exercisable in its entirety and remain exercisable in
accordance with its terms.
The offer and sale by the Company of the securities described above
were made in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), for
transactions by an issuer not involving a public offering. The offer and sale of
such securities were made without general solicitation or advertising and with
representations by the investors that they were "accredited investors," as such
term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
The description of the sale of the securities set forth in this Item
3.02 does not purport to be complete and is qualified in its entirety by
reference to the full text of the Stock Purchase Agreement, the Note and the
Stock Option Agreement, attached hereto as Exhibit 10.1, Exhibit 10.2 and 10.4,
respectively, and incorporated by this reference.
Item 5.02. Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
On April 25, 2005, the Company issued a press release pursuant to
which it announced the appointment of Catherine M. Vaczy, as its Executive Vice
President and General Counsel, effective as of April 20, 2005 (the "Commencement
Date").
Prior to joining the Company, Ms. Vaczy, 43, was Vice President and
Associate General Counsel of ImClone Systems Incorporated, a publicly traded
company developing a portfolio of targeted biologic treatments to address the
medical needs of patients with a variety of cancers. While at ImClone, Ms. Vaczy
served as a key advisor in the day-to-day operation of the company and helped
forge a number of important strategic alliances, including a $1 billion
co-development agreement for Erbitux(R), the company's targeted therapy
currently approved for the treatment of metastatic colorectal cancer. Prior to
this, Ms. Vaczy served as a corporate attorney advising clients in the life
science industries at the New York City law firm of Ross & Hardies.
On the Commencement Date, the Company entered into a letter agreement
(the "Letter Agreement") with Ms. Vaczy, pursuant to which the Company appointed
Ms. Vaczy as its Executive Vice President and General Counsel. Subject to the
terms and conditions of the Letter Agreement, the term of Ms. Vaczy's employment
in such capacity will be for a period of three (3) years from the Commencement
Date (the "Term").
In consideration for Ms. Vaczy's services under the Letter Agreement,
Ms. Vaczy will be entitled to receive an annual salary of $155,000 during the
first year of the Term, a minimum annual salary of $170,500 during the second
year of the Term, and a minimum annual salary of $187,550 during the third year
of the Term. Ms. Vaczy and the Company have agreed that from the Commencement
Date until the 90th day thereafter (the "Initial 90 Day Period"), Ms. Vaczy's
salary will be paid to her at a rate of 50% of the annual rate and accrue as to
the remainder. At the end of the Initial 90 Day Period, and at the end of each
additional 90 day period thereafter, whether to continue to accrue salary at
this rate and provision for payment of accrued amounts will be discussed in good
faith. Payment of accrued salary may be made in cash, or, upon mutual agreement,
shares of Common Stock. Any shares of Common Stock issued in payment of accrued
salary shall have a per share price equal to the average closing price of one
share of Common Stock on the Bulletin Board (or other similar exchange or
association on which the Common Stock is then listed or quoted) for the five (5)
consecutive trading days immediately preceding the date of issue of such shares;
provided, however, that if the Common Stock is not then quoted on the Bulletin
Board or otherwise listed or quoted on an exchange or association, the price
shall be the fair market value of one share of Common Stock as of the date of
issue as determined in good faith by the Board of Directors of the Company. The
number of shares of Common Stock for any issuance in payment of accrued salary
shall be equal to the quotient of the amount of the accrued salary divided by
the price. The shares issued will be subject to a one-year lock of up as of the
date of each grant and shall be registered with the Securities and Exchange
Commission on a Registration Statement on Form S-8.
In the event Ms. Vaczy's employment is terminated prior to the end of
the Term for any reason, earned but unpaid cash compensation and unreimbursed
expenses due as of the date of such termination will be payable in full. In
addition, in the event Ms. Vaczy's employment is terminated prior to the end of
the Term for any reason other than by the Company with Cause or Ms. Vaczy
without Good Reason, Ms. Vaczy or her executor of her last will or the duly
authorized administrator of her estate, as applicable, will be entitled in the
event the employment termination date is after April 20, 2006, to receive
severance payments equal to Ms. Vaczy's then one year's salary, paid in
accordance with the Company's standard payroll practices for executives of the
Company and (ii) in the event the employment termination date is before April
20, 2006 but after October 20, 2005, to receive severance payments equal to
one-sixth of Ms. Vaczy's then one year's salary, paid in accordance with the
Company's standard payroll practices for executives of the Company. In addition,
in the event Ms. Vaczy's employment is terminated prior to the end of the Term
by the Company without Cause or by Ms. Vaczy for Good Reason, the Option (as
defined below) shall vest and become immediately exercisable in its entirety and
remain exercisable in accordance with its terms. No other payments shall be
made, nor benefits provided, by the Company in connection with the termination
of employment prior to the end of the Term, except as otherwise required by law.
The description of the terms and conditions of Ms. Vaczy's employment
with the Company set forth herein does not purport to be complete and is
qualified in its entirety by reference to the full text of the Letter Agreement
attached hereto as Exhibit 10.3 and incorporated by this reference. Reference is
also made to the press release issued by the Company on April 25, 2005, the text
of which is attached hereto as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
Exhibit 10.1. Stock Purchase Agreement, dated April 20, 2005,
between Phase III Medical, Inc. and Catherine M.
Vaczy
Exhibit 10.2. Promissory Note made by the Company in favor of
Catherine M. Vaczy
Exhibit 10.3. Letter Agreement, dated April 20, 2005, between
Phase III Medical, Inc. and Catherine M. Vaczy
Exhibit 10.4. Stock Option Agreement dated April 20, 2005,
between Phase III Medical, Inc. and Catherine M.
Vaczy
Exhibit 99.1. Press Release dated April 25, 2005
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHASE III MEDICAL, INC.
By: /s/ Mark Weinreb
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Mark Weinreb
President and CEO
Dated: April 25, 2005
EXHIBIT INDEX
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Exhibit 10.1. Stock Purchase Agreement, dated April 20, 2005,
between Phase III Medical, Inc. and Catherine M.
Vaczy
Exhibit 10.2. Promissory Note made by the Company in favor of
Catherine M. Vaczy
Exhibit 10.3. Letter Agreement, dated April 20, 2005, between
Phase III Medical, Inc. and Catherine M. Vaczy
Exhibit 10.4. Stock Option Agreement dated April 20, 2005,
between Phase III Medical, Inc. and Catherine M.
Vaczy
Exhibit 99.1. Press Release dated April 25, 2005
Exhibit 10.1
PHASE III MEDICAL, INC.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April 20,
2005, is by and between Phase III Medical, Inc., a Delaware corporation (the
"Company"), and Catherine M. Vaczy (the "Investor").
WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, shares of common stock, $0.001
par value per share, of the Company (the "Common Stock"), upon and subject to
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements of the parties set forth in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
1. Purchase and Sale of the Shares.
1.1. Agreement to Sell and Purchase Shares. Subject to the terms and
conditions hereof, the Company agrees to issue and sell to the Investor and the
Investor agrees to purchase from the Company, at the Closing (as defined below),
an aggregate of 1,666,666 shares of Common Stock (the "Shares"), at a per share
purchase price (the "Per Share Purchase Price") equal to $.06 for an aggregate
purchase price of $100,000 (the "Purchase Price"), payable by check at the
Closing.
1.2. Delivery of Shares; Legend.
(a) As soon as reasonably practicable after the Closing, the
Company shall deliver to the Investor one or more certificates, registered in
the name of the Investor, representing the Shares.
(b) The certificates representing the Shares delivered pursuant
to Section 1.2(a), and any securities and any shares issued pursuant
to Section 1.4 hereof, shall bear a legend in substantially the
following form:
"The securities represented by this certificate
have not been registered under the Securities
Act of 1933, as amended. The securities may not
be sold, transferred or assigned in the absence
of an effective registration statement for the
securities under said Act, or an opinion of
counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is
not required under said Act or unless sold
pursuant to Rule 144 under said Act."
1.3. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place on the date hereof at the
offices of the Company or such other place as the parties may agree.
1.4 Option to Purchase Additional Shares. For a period of 90 days,
commencing with the date of this Stock Purchase Agreement, Investor has the
right to purchase from the Company up to an additional $200,000 of Common Stock
at a per share price equal to 85% of the average closing price of one share of
Common Stock on the National Association of Securities Dealers, Inc.
Over-the-Counter Bulletin Board (the "Bulletin Board") (or other similar
exchange or association on which the Common Stock is then listed or quoted) for
the five (5) consecutive trading days immediately preceding the date of
Investor's notice exercising the option hereunder; provided, however, that if
the Common Stock is not then quoted on the Bulletin Board or otherwise listed or
quoted on an exchange or association, the price shall be the fair market value
of one share of Common Stock as of the date of issue as determined in good faith
by the Board of Directors of the Company; and further provided, that in no event
shall the price be less than $.06.
2. Representations, Warranties and Covenants of the Investor.
2.1. Authorization; Enforceability. The Investor is (i) a bona fide
resident of the state contained in the address set forth on the signature page
as the Investor's home address, (ii) at least 21 years of age and (iii) legally
competent to execute this Agreement. This Agreement has been duly executed and
delivered by the Investor and, assuming the due authorization, execution and
delivery of this Agreement by the other party hereto, constitutes the legal,
valid and binding obligation of the Investor, enforceable against the Investor
in accordance with its terms, subject to the effects of any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
general laws of applicability affecting creditors' rights generally and to
general equitable principles.
2.2. No Conflict. The execution, delivery and performance by the
Investor of this Agreement will not result in the violation by the Investor of
any law, statute, rule, regulation, order, writ, injunction, judgment or decree
of any court or governmental authority to or by which the Investor is bound, and
will not conflict with, or result in a 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 Investor is a party or
by which she is bound or to which any of her properties or assets is subject.
2.3. Consents. No consent, approval, authorization or other order of
any governmental authority or other third party is required to be obtained by
the Investor in connection with the authorization, execution, delivery and
performance by the Investor of this Agreement.
2.4. Investment Representations.
(a) The Investor hereby represents and warrants to the Company
that the Investor is an "accredited investor" as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). Specifically, the Investor certifies that (initial all
appropriate spaces on the following pages):
/s/ CMV (1) The Investor is an accredited investor because
--------- she has an individual net worth, or with her
(Initial) spouse has a joint net worth, in excess of
$1,000,000. For purposes of this Agreement,
"net worth" means the excess of total assets
at fair market value, including home, home
furnishings and automobiles, over total
liabilities.
_________ (2) The Investor is an accredited investor because
(Initial) she has individual income (exclusive of any
income attributable to her spouse) of more
than $200,000 in each of the past two years,
or joint income with her spouse in excess of
$300,000 in each of those years, and such
investor reasonably expects to reach the same
income level in the current year.
_________ (3) The Investor is an accredited investor because
(Initial) she is a director, executive officer or
managing member of the Company.
(b) The Investor hereby certifies that she is not a non-resident
alien for purposes of income taxation (as such term is defined in the Internal
Revenue Code of 1986, as amended, and Income Tax Regulations). The Investor
hereby agrees that if any of the information in this Section 2.4(b) changes, the
Investor will notify the Company within 60 days thereof. The Investor
understands that the information contained in this Section 2.4(b) may be
disclosed to the Internal Revenue Service by the Company and that any false
statement contained in this Section 2.4(b) could be punished by fine,
imprisonment or both.
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(c) The Investor will not sell or otherwise transfer the Shares without
registration under the Securities Act or an exemption therefrom, and fully
understands and agrees that she must bear the economic risk of her investment
for an indefinite period of time because, among other reasons, the Shares have
not been registered under the Securities Act or under the securities laws of
certain states and, therefore, cannot be resold, pledged, assigned or otherwise
disposed of unless they are subsequently registered under the Securities Act and
under applicable securities laws of such states or an exemption from such
registration is available. The Investor understands that, except as provided
herein, the Company is under no obligation to register the Shares on her behalf
or to assist her in complying with any exemption from such registration under
the Securities Act, except that if any sale proposed by the Investor is exempt
from registration, the Company will cause its counsel, at the Company's expense,
to provide an appropriate opinion to that effect to the Company's transfer
agent. It also understands that sales or transfers of the Shares are further
restricted by state securities laws. The Investor further understands that the
Company is not registered as an investment company under the Investment Company
Act of 1940, as amended (the Investment Company Act").
(d) The Investor acknowledges that in making a decision to subscribe
for the Shares, the Investor has relied solely upon independent investigations
made by the Investor and the representations contained herein. The Investor
understands the business objectives and policies of, and the strategies which
may be pursued by, the Company. The Investor's investment in the Shares is
consistent with the investment purposes and objectives and cash flow
requirements of the Investor and will not adversely affect the Investor's
overall need for diversification and liquidity. The Investor acknowledges that
she is not subscribing pursuant hereto for any Shares as a result of or
subsequent to (a) any advertisement, article, notice or other communications
published on-line, in any newspaper, magazine or similar media or broadcast over
television or radio, or (b) any seminar or meeting whose attendees, including
the Investor, had been invited as a result of, subsequent to or pursuant to any
of the foregoing.
(e) The Investor has not reproduced, duplicated or delivered this
Agreement to any other person, except professional advisors to the Investor or
as instructed by the Company.
(f) The Investor has such knowledge and experience in financial and
business matters that the Investor is capable of evaluating the merits and risks
of the Investor's investment in the Shares and is able to bear such risks, and
has obtained, in the Investor's judgment, sufficient information from the
Company or its authorized representatives to evaluate the merits and risks of
such investment. The Investor has evaluated the risks of investing in the Shares
and has determined that the Shares is a suitable investment for the Investor.
(g) The Investor can afford a complete loss of the investment in the
Shares.
(h) The Investor is acquiring the Shares subscribed for herein for her
own account, for investment purposes only and not with a view to distribute or
resell such Shares in whole or in part.
(i) The Investor agrees and is aware that:
(1) the Company has a limited operating history under its
current business plan;
(2) no federal or state agency has passed upon the
Shares or made any findings or determination as to
the fairness of this investment; and
(3) there are substantial risks of loss of investment
incidental to the purchase of the Shares.
(j) The Investor and her advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Shares, which have been
requested by the Investor. The Investor and her advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
satisfactory answers to any such inquiries. Except as set forth in this
Agreement, the Company has made no representation or warranty on which the
Investor has relied to enter into this Agreement and acquire the Shares.
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(k) The Investor does not have a present intention to sell the Shares
nor a present arrangement or intention to effect any distribution of any of the
Shares to or through any person or entity for purposes of selling, offering,
distributing or otherwise disposing of any of the Shares.
(l) The Investor understands that the net proceeds to the Company
from this subscription will be used by the Company for general operating
expenses.
2.5. Brokers. There is no broker, investment banker, financial advisor,
finder or other person which has been retained by or is authorized to act on
behalf of the Investor who is entitled to any fee or commission in connection
with the execution of this Agreement.
3. Representations, Warranties and Covenants of the Company
3.1 Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is qualified to do business as a foreign corporation in each
jurisdiction in which qualification is required, except where failure to so
qualify would not reasonably be expected to have a material adverse effect upon
the business, financial condition, properties, or operations of the Company
taken as a whole (a "Material Adverse Effect").
3.2 Shares. All of the issued and outstanding shares of the Company's
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in material compliance with all federal and
state securities laws, and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. The
Shares to be sold pursuant to this Agreement and issued upon exercise of the
option granted to Investor in connection with Investor's employment with the
Company have been duly and validly authorized, and when issued and paid for in
accordance with the terms of this Agreement and the applicable option agreement,
will be duly and validly issued, fully paid and non-assessable.
3.3 Corporate Authority. The Company has all the requisite power and
authority to carry on its business as now conducted.
3.4 Authorization; Enforceability. This Agreement has been duly authorized,
executed and delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by the other party hereto, constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effects of any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
general laws of applicability affecting creditors' rights generally and to
general equitable principles.
3.5 No Conflict. The execution, delivery and performance by the Company of
this Agreement (i) will not result in the violation by the Company of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound, and will
not conflict with, or result in a 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 the Company is bound or to which any of the Company's properties or assets
are subject, and (ii) will not violate any provision of the certificate of
incorporation, by-laws or other organizational documents of the Company.
3.6 Consents. No consent, approval, authorization or other order of any
governmental authority or other third party is required to be obtained by the
Company in connection with the authorization, execution, delivery and
performance by the Company of this Agreement, including without limitation, the
issue and sale of the Shares, except filings as may be required to be made by
the Company with: (i) the Securities and Exchange Commission (the "Commission"),
and (ii) state blue sky or other securities regulatory authorities.
3.7 No Actions. There are no judicial, administrative or governmental
actions, suits, investigations or proceedings (collectively, "Legal
Proceedings") pending or to the knowledge of the Company, threatened to which
the Company is or may be a party or which property owned or leased by the
Company is or may be the subject, which, individually or in the aggregate, which
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are reasonably likely to result in a Material Adverse Effect. The Company is not
a party to or subject to the provisions of any material injunction, judgment,
decree or order of any court, regulatory body, administrative agency or other
governmental body.
3.8 No Material Change. Since the filing with the Commission of the
Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the
"2004 Form 10-K"), except as disclosed in subsequent filings made with the
Commission, the Company has not incurred or sustained any event or change that
has had a Material Adverse Effect.
3.9 Investment Company Act. The Company does not believe, after reasonable
inquiry, that it is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act, and
neither the sale of the Shares nor the transactions contemplated herein will
cause the Company to become an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act.
3.10 Accuracy of Disclosure. The information contained in the Company's
2004 Form 10-K, as of the date of the Form 10-K, and in all subsequent filings
made with the Commission, did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4. Indemnification. The Investor agrees to indemnify and hold harmless the
Company, and its managers, officers, directors, employees, agents and
shareholders, and each other person, if any, who controls or is controlled
by the Company, within the meaning of Section 15 of the Securities Act,
against any and all loss, liability, claim, damage, cost and expense
whatsoever (including, but not limited to, legal fees and disbursements and
any and all other expenses whatsoever incurred in investigating, preparing
for or defending against any litigation, arbitration proceeding, or other
action or proceeding, commenced or threatened, or any claim whatsoever)
arising out of or in connection with, or based upon or resulting from the
inaccuracy of any representation or warranty made by Investor herein. The
Company agrees to indemnify and hold harmless the Investor, against any and
all loss, liability, claim, damage, cost and expense whatsoever (including,
but not limited to, legal fees and disbursements and any and all other
expenses whatsoever incurred in investigating, preparing for or defending
against any litigation, arbitration proceeding, or other action or
proceeding, commenced or threatened, or any claim whatsoever) arising out
of or in connection with, or based upon or resulting from the inaccuracy of
any representation or warranty made by the Company herein.
5. Registration Rights. The Company agrees that it will provide Investor with
the opportunity to have the resale of the Shares, any additional shares
purchased by Investor (i) pursuant to Section 1.4 hereof, and (ii) upon any
conversion of the Promissory Note dated on or about the date hereof and accepted
by Investor from the Company, on any registration statement filed with the
Commission, so long as the inclusion of such shares on such registration
statement is permissible by the rules and regulations of the Commission and is
not objected to by any underwriter in an underwritten public offering.
6. Miscellaneous.
6.1. Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the address of such party set forth below or to such
changed address as such party may have fixed by written notice to the other
given in accordance with this Section 5.1; provided, however, that any notice of
change of address shall be effective only upon receipt:
If to the Company:
Phase III Medical, Inc.
330 South Service Road, Suite 120
Melville, NY 11747
Attn: Mark Weinreb, President and CEO
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If to the Investor:
Catherine M. Vaczy
140 East 28th Street
Apartment #11C
New York, New York 10016
6.2. Entire Agreement; Amendment. 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. This Agreement may be amended only by mutual
written agreement of the Company and the Investor. No course of dealing between
or among any persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
6.3. Successors and Assigns. This Agreement shall be binding upon the
Investor and her heirs, legal representatives, successors, and permitted assigns
and shall inure to the benefit of the Company and its successors and assigns.
The Investor shall not assign any of its obligations hereunder without the prior
written consent of the Company.
6.4. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York without regard to its choice of law
provisions.
6.5. Jurisdiction. The Investor hereby irrevocably agrees that any suit,
action or proceeding with respect to this Agreement and any or all transactions
relating hereto and thereto may be brought in U.S. federal and state courts in
the State of New York. The Investor hereby irrevocably submits to the
jurisdiction of such courts with respect to any such suit, action or proceeding
and agrees and consents that service of process as provided by U.S. federal and
New York law may be made upon the Investor in any such suit, action or
proceeding brought in any of said courts, and may not claim that any such suit,
action or proceeding has been brought in an inconvenient forum. The Investor
hereby further irrevocably consents to the service of process out of any of the
aforesaid courts, in any such suit, action or proceeding, by the mailing of
copies thereof, by certified or registered mail, return receipt requested,
addressed to the Investor at the address of the Investor then appearing on the
records of the Company. Nothing contained herein shall affect the right of the
Company to commence any action, suit or proceeding or otherwise to proceed
against the Investor in any other jurisdiction or to serve process upon the
Investor in any manner permitted by any applicable law in any relevant
jurisdiction.
6.6. Additional Information and Subsequent Changes to Representations.
(a) The Company may request from time to time such information as it
may deem necessary to determine the eligibility of the Investor to hold Stock or
to enable the Company's compliance with applicable regulatory requirements or
tax status, and the Investor shall provide such information as may reasonably be
requested.
(b) The Investor agrees that at any time in the future at which the
Investor may acquire additional shares of Common Stock, the Investor shall be
deemed to have reaffirmed, as of the date of such acquisition of additional
shares of Common Stock, each and every representation made by the Investor in
this Agreement, except to the extent modified in writing by the Investor and
consented to by the Company.
6.7. Severability. In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless the provision held
invalid shall substantially impair the benefit of the remaining portion of this
Agreement.
6.8. Headings. The headings of the sections hereof are inserted as a matter
of convenience and for reference only and in no way define, limit or describe
the scope of this Agreement or the meaning of any provision hereof.
6
6.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto to the same extent as if delivered personally.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above under penalties of perjury.
COMPANY:
PHASE III MEDICAL, INC.
By: /s/ Mark Weinreb
-------------------------------
Name: Mark Weinreb
Title: President and CEO
INVESTOR:
/s/ Catherine M. Vaczy
----------------------------------
Catherine M. Vaczy
Address: 140 East 28th Street
Apartment #11C
New York, New York 10016
7
Exhibit 10.2
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT."
PROMISSORY NOTE
---------------
$100,000 April 20, 2005
FOR VALUE RECEIVED, Phase III Medical, Inc., a Delaware corporation, ("Maker")
promises to pay to Catherine M. Vaczy, ("Payee"), in lawful money of the United
States of America, the principal sum of One Hundred Thousand Dollars
($100,000.00 ), together with interest thereon accruing at an annual rate equal
to 15%, in the manner provided below. Interest shall be calculated on the basis
of a year of 365 or 366 days, as applicable, and charged for the actual number
of days elapsed.
1. PAYMENTS
1.1 Principal and Interest.
Interest on the unpaid principal amount shall be payable monthly in arrears
until the entire principal amount shall be paid in full. Subject to Section 1.3,
all principal and accrued interest shall be paid in full on April 20, 2006 (12
months after the date of issuance of this Note).
1.2 Manner of Payment
All payments of principal and interest on this Note shall be made by check
to the order of Catherine M. Vaczy at 140 East 28th Street, #11C, New York, New
York 10016 or at such other place in the United States of America as Payee shall
designate to Maker in writing. If any payment of principal or interest on this
Note is due on a day which is not a Business Day, such payment shall be due on
the next succeeding Business Day. "Business Day" means any day other than a
Saturday, Sunday or legal holiday in the State of New York.
1.3 Conversion of Note
At any time up until the 90th day after the date of this Note, Payee has
the option to convert the principal amount, or any portion thereof, into that
number of shares of Maker's common stock, $.01 par value (the "Common Stock")
equal to the quotient of the principal amount being converted divided by 85% of
the average closing price (the "Price") of one share of Common Stock on the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board
(the "Bulletin Board") (or other similar exchange or association on which the
Common Stock is then listed or quoted) for the five (5) consecutive trading days
immediately preceding the date of notice of such conversion; provided that in no
event shall the Price be less than $.06. If the Common Stock is not then quoted
on the Bulletin Board or otherwise listed or quoted on an exchange or
association, the Price shall be the fair market value of one share of Common
Stock as of the date of issue as determined in good faith by the Board of
Directors of the Company. Following the 90th day after the date of this Note,
Payee shall become obligated, at any time prior to the date of maturity of the
Note, to convert the principal amount, or any remaining portion thereof, into
shares of Common Stock on the same terms set forth herein unless Payee shall
have provided to the Company a notice terminating Payee's employment with Maker
pursuant to the Letter Agreement dated on or about the date of this Note and
entered into between Payee and Maker.
1.3 Prepayment
Maker may, without premium or penalty, at any time and from time to time,
prepay all or any portion of the outstanding principal balance due under this
Note, provided that each such prepayment is accompanied by accrued interest on
the amount of principal prepaid calculated to the date of such prepayment. Any
partial prepayments shall be applied first to accrued interest and then to
principal.
2. DEFAULTS
2.1 Events of Default
The occurrence of any one or more of the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing its inability to pay its debts
as they become due.
(c If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case; (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for the Maker or substantially all of the Maker's properties; or (iii)
orders the liquidation of the Maker, and in each case the order is not dismissed
within 90 days.
(d) If Maker breaches any of its obligations to Payee under the Letter
Agreement entered into between Payee and Maker and dated on or about the date of
this Note.
2.2 Remedies
Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option, (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable,
and (ii) exercise all and any rights and remedies available to it under
applicable law, including, without limitation, the right to collect from maker
all sums due under this Note. Maker shall pay all reasonable costs and expenses
incurred by or on behalf of Payee in connection with Payee's exercise of any or
all of its rights and remedies under this Note, including, without limitation,
reasonable attorneys' fees and expenses.
3. REPRESENTATIONS BY PAYEE
Payee represents and warrants to Maker as follows:
(a) Payee has received and examined all information, including financial
statements, of or concerning Maker which Payee considers necessary to making an
informed decision regarding this Note. In addition, Payee has had the
opportunity to ask questions of, and receive answers from, the officers and
agents of Maker concerning Maker and to obtain such information, to the extent
such persons possessed the same or could acquire it without unreasonable effort
or expense, as Payee deemed necessary to verify the accuracy of the information
referred to herein.
(b) The Payee acknowledges and understands that (i) the Maker will use the
proceeds of this Note in its establishment of new business operations; (ii) the
proceeds of this Note will not be sufficient to provide Maker with the necessary
2
funds to achieve its current business plan; (iii) the Maker does not have
sufficient cash available to repay this Note; (iv) this Note will not be
guaranteed nor will it be secured by any assets of Maker nor senior to any other
indebtedness of Maker; and (v) Payee bears the economic risk of never being
repaid on this Promissory Note.
(c) The Payee hereby certifies that Payee is an "Accredited Investor" (as
that term is defined by Regulation D under the Securities Act of 1933, as
amended) because at least one of the following statements is applicable to
Payee:
(i) Payee is an Accredited Investor because the Payee had individual
income of more than $200,000 in each of the two prior calendar years and
reasonably expects to have individual income in excess of $200,000 during the
current calendar year.
(ii) The Payee is an Accredited Investor because the Payee and his
spouse together had income of more than $300,000 in each of the two prior
calendar years and reasonably expect to have joint income in excess of $300,000
during the current calendar year.
(iii) The Payee is an Accredited Investor because the Payee has an
individual net worth, or the Payee and his spouse have a joint net worth of more
than $1,000,000.
(d) Payee is acquiring this Note for Payee's own account, for investment
purposes only, and not with a view to the resale or distribution of all or any
part thereof.
(e) Payee acknowledges that this Note and the shares issuable upon
conversion of the Note (i) have not been registered under applicable securities
laws, (ii) will each be a "restricted security" as defined in applicable
securities laws, (iii) have been issued in reliance on the statutory exemptions
from registration contemplated by applicable securities laws based (in part) on
the accuracy of Payee's representations contained herein, and (iv) will not be
transferable without registration under applicable securities laws, unless an
exemption from such registration requirements is available.
(f) Payee has reviewed Maker's (i) Annual Report on Form 10-K for the
fiscal year ended December 31, 2004; and (ii) all Current Report on Form 8-K
filed since the filing of its last Form 10-K.
4. REGISTRATION RIGHTS
Any shares of Common Stock issued to Payee pursuant to this Note shall have
applicable to them the registration rights set forth in the Stock Purchase
Agreement.
5. MISCELLANEOUS
5.1 Waiver
The rights and remedies of Payee under this Note shall be cumulative
and not alternative. No waiver by Payee of any right or remedy under this Note
shall be effective unless it is in writing and signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum amount permitted by
applicable law, (a no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note.
Maker acknowledges that this Note and Maker's obligations under this
Note are, and shall at all times continue to be, absolute and unconditional in
all respects, and shall at all times be valid and enforceable. To the extent
permitted by applicable law, Maker hereby absolutely, unconditionally and
irrevocably forever waives any and all right to assert any defense, set-off,
off-set, counterclaim, cross-claim, or claim of any nature whatsoever with
respect to this Note or Maker's obligations hereunder.
3
5.2 Notices
Any notice or communication to be given hereunder by any party, to the
other party shall be in writing and shall be deemed to have been given when
personally delivered, or one day after the date sent by recognized overnight
courier or transmitted by facsimile, which transmission by facsimile has been
confirmed or 3 (three) days after the date sent by registered or certified mail,
postage prepaid, as follows:
If to Maker, addressed to it at:
Phase III Medical, Inc.
330 South Service Road
Suite 120
Melville, NY 11747
Attn: Mark Weinreb, President and CEO
Facsimile Number: (631) 574 4956
If to Payee, addressed to:
Name: Catherine M. Vaczy
Address: 140 East 28th Street
Apartment No. 11C
New York, New York 10016
Or persons or addresses as may be designated in writing by the party
to receive such notice.
5.3 Severability
If any provision of this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.4 Governing Law.
This Promissory Note will be governed by the laws of the State of New
York without regard to conflicts of laws principles.
5.5 Assignment; Parties in Interest
This Note shall bind Maker and its successors and assigns. This Note
shall not be assigned or transferred by Maker, without the express prior written
consent of Payee, and this Note will inure to the benefit of Payee and his
heirs, estates, representatives, administrators, successors and assigns.
5.6 Section Headings, Construction
The headings of Sections in this Note are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
4
5.7 Savings Clause
If, at any time, the rate of interest under this Note shall be deemed
by any competent court of law, governmental agency or tribunal to exceed the
maximum rate of interest permitted by the laws of any applicable jurisdiction or
the rules or regulations of any regulatory authority or agency, then during such
time as such rate of interest would be deemed excessive, that portion of each
interest payment attributable to that portion of such interest rate that exceeds
the maximum rate of interest so permitted shall be deemed a voluntary prepayment
of principal or, if all principal has been paid, that portion of each interest
payment attributable to that portion of such interest rate that exceeds the
maximum rate of interest so permitted shall be promptly refunded to Maker.
5.8 Waiver of Jury Trial
MAKER AND PAYEE EACH HEREBY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS NOTE, IT BEING AGREED THAT ALL SUCH TRIALS SHALL BE
CONDUCTED SOLELY BY A JUDGE. MAKER AND PAYEE EACH
CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
EITHER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE OTHER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS. MAKER AND PAYEE EACH
AGREE AND ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE OR
BEEN ADVISED THAT IT SHOULD BE REPRESENTED BY
INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE. IF
MAKER OR PAYEE HAS DECIDED NOT TO BE REPRESENTED BY
INDEPENDENT COUNSEL IN CONNECTION WITH THIS NOTE, IT
IRREVOCABLY AND FOREVER WAIVES ANY AND ALL DEFENSES
OR RIGHTS ARISING OUT OF OR RELATED TO SAID DECISION.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the
date first stated above.
PHASE III MEDICAL, INC.
By:/s/ Mark Weinreb
-----------------------------------------
Name: Mark Weinreb
Title: President and Chief Executive Officer
Accepted and agreed to:
/s/ Catherine M. Vaczy
- ------------------------------
Payee: Catherine M. Vaczy
5
Exhibit 10.3
PHASE III MEDICAL, INC.
330 South Service Road
Suite 120
Melville, New York 11747
631.574.4955
April 20, 2005
Ms. Catherine M. Vaczy
140 East 28th Street
Apartment #11C
New York, New York 10016
Dear Ms. Vaczy:
We are pleased to extend to you an invitation to become the Executive Vice
President and General Counsel ("General Counsel") of Phase III Medical, Inc.
(the "Company").
As you know, the Company is a public company that, among other things,
provides capital and guidance to companies, within the medical sector, in
exchange for revenues, royalties and other contractual rights known as "royalty
interests," that entitle it to receive a portion of revenue from the sale of
pharmaceuticals, medical devices and biotechnology products. As General Counsel,
you will be responsible for overseeing the Company's legal affairs, including
general corporate matters and compliance, preparing contracts relating to
various aspects of the Company's business and operations and assisting the
Company in reviewing and evaluating business, scientific and medical
opportunities, and for other discussions and meetings that may arise during the
normal course of the Company conducting its business. You shall report to the
Chief Executive Officer ("CEO").
We acknowledge that on or about the date of this Letter Agreement, you have
accepted a Promissory Note (the "Promissory Note") from us in the amount of
$100,000 and purchased shares of our common stock, $.001 par value (the "Common
Stock") pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement").
This Letter Agreement shall be effective as of April 20, 2005 (the
"Commencement Date") and shall continue for a period of three (3) years from the
Commencement Date, unless earlier terminated as provided hereunder (the "Term").
For all services rendered by you in any capacity hereunder during the Term, you
shall be entitled to an annual salary of $155,000 during the first year of the
Term, a minimum annual salary of $170,500 during the second year of the Term,
and a minimum annual salary of $187,550 during the third year of the Term,
payable within normal payroll practices for executives of the Company. You have
agreed that from the Commencement Date until the 90th day thereafter (the
"Initial 90 Day Period"), your salary will be paid to you at a rate of 50% of
the annual rate and accrue as to the remainder. At the end of the Initial 90 Day
Period, and at the end of each additional 90 day period thereafter, we will
discuss in good faith whether or not to continue to accrue at the rate of 50%
your salary. At such time we will also discuss in good faith provision for
payment to you of all accrued salary. Such payment of accrued salary may be made
in cash, or, upon mutual agreement, shares of Common Stock. Any shares of Common
Stock issued to you in payment of accrued salary shall have a per share price
(the "Price") equal to the average closing price of one share of Common Stock on
the National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board (the "Bulletin Board") (or other similar exchange or association on which
the Common Stock is then listed or quoted) for the five (5) consecutive trading
days immediately preceding the date of issue of such shares; provided, however,
that if the Common Stock is not then quoted on the Bulletin Board or otherwise
listed or quoted on an exchange or association, the Price shall be the fair
market value of one share of Common Stock as of the date of issue as determined
in good faith by the Board of Directors of the Company. The number of shares of
Common Stock for any issuance in payment of accrued salary shall be equal to the
quotient of the amount of the accrued salary divided by the Price. The shares
issued will be subject to a one-year lock of up as of the date of each grant and
shall be registered with the Securities and Exchange Commission on a
Registration Statement on Form S-8.
Your employment with the Company shall automatically terminate upon your
death or Disability (as defined below). The Company may terminate your
1
employment prior to the end of the Term with or without Cause (as defined below)
immediately upon written notice to you. You may terminate your employment upon
thirty (30) days' prior written notice to the Company. For purposes of this
Letter Agreement, the terms set forth below shall have the meanings ascribed to
them below:
"Cause" shall mean (i) willful engaging by you in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company; (ii)
your refusal to attempt to perform your obligations under this Letter Agreement
(other than resulting from illness or incapacity) which is materially and
demonstrably injurious to the Company which is not cured to the reasonable
satisfaction of the Company within fifteen (15) business days after notice
thereof; (iii) your conviction of, or entry of a plea of guilty to, or entry of
a plea of nolo contendre with respect to, any crime other than a traffic
violation or infraction which is a misdemeanor; or (iv) material breach by you
of any of your agreements in this Letter Agreement which is not cured to the
reasonable satisfaction of the Company within fifteen (15) business days after
notice thereof.
"Disability" shall mean your inability to perform the essential functions
of your duties and responsibilities to the Company by reason of a physical or
mental disability or infirmity, which inability has continued for a period of
more than six (6) consecutive months, or for a period aggregating more than six
(6) months, whether or not continuous, during any nine (9) month period.
"Good Reason" shall mean (i) the Company's reassignment of your base of
operations outside of the New York metropolitan area without your consent, (ii)
the material reduction by the Company of your duties during the Term, (iii) the
Company's material breach of the Company's obligations under this Letter
Agreement or the Promissory Note or Stock Purchase Agreement, (iv) the Company
not continuing to retain you as General Counsel during the Term, (v) your
ceasing to report to the CEO of the Company, or (vi) the departure of Mark
Weinreb as an executive officer of the Company.
In the event your employment is terminated prior to the end of the Term due
to your death or Disability, by the Company with or without Cause or upon your
resignation from your position as General Counsel for any reason, earned but
unpaid cash compensation, including any accrued salary, and unreimbursed
expenses due as of the date of such termination (the "Employment Termination
Date") shall be payable in full. In addition, in the event your employment is
terminated prior to the end of the Term for any of the reasons identified in the
preceding sentence other than by the Company with Cause or you without Good
Reason, you or your executor of your last will or the duly authorized
administrator of your estate, as applicable, will be entitled (i) in the event
the Employment Termination Date is after April 20, 2006, to receive severance
payments equal to your then one year's salary, paid in accordance with the
Company's standard payroll practices for executives of the Company and (ii) in
the event the Employment Termination Date is before April 20, 2006 but after
October 20, 2005, to receive severance payments equal to one-sixth of your then
one year's salary, paid in accordance with the Company's standard payroll
practices for executives of the Company. In addition, in the event your
employment is terminated prior to the end of the Term by the Company without
Cause or by you for Good Reason, the Option (as defined below) shall vest and
become immediately exercisable in its entirety and remain exercisable in
accordance with its terms. No other payments shall be made, nor benefits
provided, by the Company in connection with the termination of employment prior
to the end of the Term, except as otherwise required by law.
The Company shall pay or reimburse you for all reasonable travel or other
expenses (including, without limitation, digital subscriber line (DSL), car (at
$750 per month), cell phone, professional licenses and health insurance
expenses) incurred by you in connection with the performance of your duties and
obligations under this Letter Agreement, subject to your presentation of
appropriate vouchers in accordance with such procedures as the Company may from
time to time establish (including any procedures established to preserve any
deductions for Federal income taxation purposes to which the Company may be
entitled). We will also pay to your counsel reasonable legal fees incurred by
you in connection with the negotiation and preparation of this Letter Agreement,
the Incentive Stock Option Agreement representing the Option (as defined below),
the Promissory Note and the Stock Purchase Agreement, not expected to exceed
$2,000,. You shall also be eligible to participate in any incentive and employee
benefit plans or programs which may be offered by the Company and in all other
plans in which the Company executives participate and shall be entitled to
vacations in accordance with the policy of the Company with respect to its
senior management, in effect from time to time.
2
The Company shall indemnify you and hold you harmless from and against any
claim, liability and expense (including, without limitation, reasonable attorney
fees) made against or incurred by you in connection with your employment by the
Company, in a manner and to an extent that is not less favorable to you as the
indemnification protection that is afforded by the Company to any other senior
officer or director and that is consistent with industry custom and standards.
On the Commencement Date, you shall be granted an option to purchase
150,000 shares of Common Stock (the "Option") pursuant to the 2003 Equity
Participation Plan (the "2003 EPP"). The Option shall be an Incentive Stock
Option pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
and shall be represented by the Incentive Stock Option Agreement attached hereto
as Exhibit A. The Option shall have an exercise price equal to $.10 per share
and shall vest and become exercisable as to 50,000 shares on each of the first,
second and third year anniversaries of the Commencement Date and shall remain
exercisable as to any vested portion thereof in accordance with the terms of the
2003 EPP and the Incentive Stock Option Agreement. In addition, at the
discretion of the Board of Directors (or its applicable committee), you shall be
entitled to receive further grants of stock options, subject to the terms of the
2003 EPP.
All payments provided for under this Letter Agreement shall be paid in cash
from the general funds of the Company. The Company shall not be required to
establish a special or separate fund or other segregation of assets to assure
such payments, and, if the Company shall make any investments to aid it in
meeting its obligations hereunder, you shall have no right, title or interest
whatever in or to any such investments except as may otherwise be expressly
provided in a separate written instrument relating to such investments.
You acknowledge that, as General Counsel, you will have access to the
Company's confidential information and that all confidential information shall
be and remain the sole property of the Company and that you will not at any
time, now or in the future, disclose, disseminate or otherwise make public any
of the confidential information, except as your duties as an employee of the
Company require, without the express written permission of the Company. This
obligation of confidentiality shall not apply to confidential information that
otherwise becomes generally known to the public through no act of yours in
breach of this Letter Agreement or any other party in violation of an existing
confidentiality agreement with the Company or which is required to be disclosed
by court order or applicable law.
You acknowledge and agree that your services pursuant to this Letter
Agreement are unique and extraordinary; that the Company will be dependent upon
you for business and legal expertise; and that you will have access to and
control of confidential information of the Company. You further acknowledge that
the business of the Company is international in scope and cannot be confined to
any particular geographic area. You further acknowledge that the scope and
duration of the restrictions set forth in this paragraph are reasonable in light
of the specific nature and duration of the transactions contemplated by this
Letter Agreement. For the foregoing reasons and to induce the Company to enter
this Letter Agreement, you covenant and agree that during the Term and,
providing you are receiving severance payments hereunder, the period beginning
at the end of the Term and ending one (1) year after the end of the Term, you
shall not unless with written consent of the Company:
(i) engage in any business directly related to the business of providing
capital and guidance to companies within the medical, pharmaceutical and
biotechnology sector, or in any other business conducted by the Company during
the Term (collectively, the "Prohibited Activity") in the world for your own
account; provided, that it is understood and acknowledged that your acting as a
General Counsel to a company in the medical, pharmaceutical or biotechnology
sector shall not constitute a Prohibited Activity hereunder;
(ii) become interested in any individual, corporation, partnership or other
business entity (a "Person") engaged in any Prohibited Activity in the world,
directly or indirectly, as an individual, partner, shareholder, officer,
director, principal, agent, employee, trustee, consultant or in any other
relationship or capacity; provided, however, that you may own directly or
indirectly, solely as an investment, securities of any Person which are traded
on any national securities exchange if you (x) are not a controlling person of,
or a member of a group which controls, such person or (y) do not, directly or
indirectly, own 5% or more of any class of securities of such person; or
(iii) directly or indirectly hire, employ or retain any person who at any
time during the last twelve (12) months of the Term was an employee of the
Company or directly or indirectly solicit, entice, induce or encourage any such
person to become employed by any other person.
3
You hereby acknowledge that the covenants and agreements contained in the
immediately preceding paragraph are reasonable and valid in all respects and
that the Company is entering into this Letter Agreement on such acknowledgment.
If you breach, or threaten to commit a breach, of any of the restrictive
covenants set forth in this Letter Agreement (the "Restrictive Covenants"), the
Company shall have the following rights and remedies, each of which rights and
remedies shall be independent of the other and severally enforceable, and all of
which rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity: (i) the
right and remedy to have the Restrictive Covenants specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company and
that money damages will not provide an adequate remedy to the Company; and (ii)
the right and remedy to require you to account for and pay over to the Company
such damages as are recoverable at law as the result of any transactions
constituting a breach of any of the Restrictive Covenants.
You hereby represent and warrant that (i) you have the legal capacity to
execute and perform this Letter Agreement, (ii) this Letter Agreement is a valid
and binding agreement enforceable against you according to its terms, (iii) the
execution and performance of this Letter Agreement does not violate the terms of
any existing agreement or understanding to which you are a party or by which you
may be bound and (iv) you have, and will, maintain during the Term, all
requisite licenses, permits and approvals necessary to perform the duties of
General Counsel set forth herein.
This Letter Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without reference to the
choice of law principles thereof. Any claim, controversy or dispute between the
parties hereto, arising out of, relating to, or in connection with this Letter
Agreement or any aspect of your services to the Company hereunder, including but
not limited to the termination of this Letter Agreement and any and all claims
in tort or contract, shall be submitted to arbitration in Melville, New York,
pursuant to the American Arbitration Association ("AAA") National Arbitration
Rules for the Resolution of Employment Disputes. This provision shall apply to
claims against the Company and/or its affiliates and their respective current or
former employees, agents, managers, officers and/or directors. Any issue about
whether a claim is covered by this Letter Agreement shall be determined by the
arbitrator. There shall be one arbitrator, who (a) shall be chosen from a panel
provided by the AAA and who shall apply the substantive law of the State of New
York, (b) may award injunctive relief or any other remedy available from a
judge, including attorney fees and costs to the prevailing party, and (c) shall
not have the power to award punitive damages. Judicial review of the
arbitrator's award shall be strictly limited to the issue of whether said award
was obtained through fraud, corruption or misconduct.
This Letter Agreement shall be binding upon, and shall inure to the benefit
of, the Company and you and its and your respective permitted successors,
assigns, heirs, beneficiaries and representatives. This Letter Agreement is
personal to you and may not be assigned by you without the prior written consent
of the Company. Any attempted assignment in violation of this paragraph shall be
null and void. This Letter Agreement shall constitute the entire agreement among
the parties with respect to the matters covered hereby and shall supersede all
previous written, oral or implied understandings among them with respect to such
matters.
We are excited about your involvement with the Company and look forward to
a long and mutually rewarding scientific and business relationship.
For our records, I would appreciate your countersigning the attached copy
of this Letter Agreement and returning the same to me at your earliest
convenience.
Sincerely,
PHASE III MEDICAL, INC.
By:/s/ Mark Weinreb
---------------------------------
Mark Weinreb, President & CEO
Accepted and agreed to:
/s/ Catherine M. Vaczy
- ---------------------------
Catherine M. Vaczy
4
Exhibit 10.4
Stock Option Agreement
STOCK OPTION AGREEMENT, made as of the 20th day of April 2005 (the
"Agreement"), between PHASE III MEDICAL, INC., a Delaware corporation (the
"Company"), and Catherine M. Vaczy (the "Optionee").
WHEREAS, the Company has adopted the 2003 Equity Participation Plan (the
"Plan").
WHEREAS, concurrently herewith, the Company and the Optionee are entering
into an Employment Agreement of even date pursuant to which the Company has
agreed to grant to the Optionee an option to purchase Common Shares of the
Company pursuant to the Plan.
NOW, THEREFORE, in consideration of the foregoing, the Company hereby
grants to the Optionee the right and option to purchase Common Shares under and
pursuant to the terms and conditions of the Plan and upon and subject to the
following terms and conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to 150,000 Common Shares of the Company
(the "Option Shares") on the terms set forth herein during the period commencing
on the date hereof and terminating at 5:00 P.M. on April 19, 2015 (the
"Expiration Date"). The Option shall vest and become exercisable as to 50,000
Common Shares on each of April 20, 2006, April 20, 2007 and April 20, 2008.
2. NATURE OF OPTION. The Option is intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, relating to
"incentive stock options".
3. EXERCISE PRICE. The exercise price of each of the Option Shares shall be
$.10 (the "Exercise Price"). The Company shall pay all original issue or
transfer taxes on the exercise of the Option.
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance with
the provisions of the Plan. To the extent permitted by the Plan, the Optionee
may elect to have the Company reduce the number of shares otherwise issuable to
him upon exercise of the Option by a number of shares having a fair market value
(determined in accordance with the provisions of the Plan) equal to the Exercise
Price of the Option being exercised (a "Net Exercise"). As soon as practicable
after the receipt of notice of exercise and payment of the Option Price as
provided for in the Plan, or upon a Net Exercise, the Company shall tender to
the Optionee certificates issued in the Optionee's name evidencing the number of
Option Shares covered thereby.
5. TERMINATION OF SERVICE. The Option shall remain exercisable until the
Expiration Date notwithstanding any termination or cessation of service with the
Company for any reason whatsoever.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and hand delivered or sent by registered or
certified mail, return receipt requested, addressed to the Company, 330 South
Service Road, Suite 120, Melville, New York 11747, Attention: President and to
the Optionee at the address indicated below. Notices shall be deemed to have
been given on the date of hand delivery or mailing, except notices of change of
address, which shall be deemed to have been given when received.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof and may be modified only by an instrument executed by the party sought to
be charged.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PHASE III MEDICAL, INC.
By:/s/ Mark Weinreb
---------------------------
Mark Weinreb
President and CEO
Signature of Optionee
/s/ Catherine M. Vaczy
---------------------------
Catherine M. Vaczy
Name of Optionee:
Catherine M. Vaczy
Address of Optionee:
140 East 28th Street
Apartment #11C
New York, New York 10016
2
Exhibit 99.1
[Graphic omitted]
FOR IMMEDIATE RELEASE
---------------------
PHASE III MEDICAL APPOINTS CATHERINE M. VACZY AS
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
Seasoned Life Sciences Professional Strengthens Management Team by Bringing
Valuable Legal and Business Experience
MELVILLE, N.Y., April 25, 2005 -- Phase III Medical, Inc. (OTCBB:PHSM), an
innovative business that provides capital and guidance to companies in multiple
sectors of the healthcare and life science industries, announced today that it
has appointed Catherine M. Vaczy, Esq. to serve as Executive Vice President and
General Counsel. Ms. Vaczy will be an integral member of the management team,
responsible for overseeing the Company's legal affairs as well as assisting the
Company in reviewing and evaluating business, scientific and medical
opportunities. She also has made an investment in the Company.
Prior to joining the Company, Ms. Vaczy, 43, was Vice President and Associate
General Counsel of ImClone Systems Incorporated, a publicly traded company
developing a portfolio of targeted biologic treatments to address the medical
needs of patients with a variety of cancers. While at ImClone, Ms. Vaczy served
as a key advisor in the day-to-day operation of the company and helped forge a
number of important strategic alliances, including a $1 billion co-development
agreement for Erbitux(R), the company's targeted therapy currently approved for
the treatment of metastatic colorectal cancer. Prior to this, Ms. Vaczy served
as a corporate attorney advising clients in the life science industries at the
New York City law firm of Ross & Hardies.
Mark Weinreb, President and CEO of Phase III Medical, said, "We are very pleased
to have the good fortune of attracting an executive of Catherine's caliber. Her
extensive experience working with companies operating in the healthcare and life
science industries will be invaluable to our operations and will enhance the
depth of guidance we provide to our clients to help them achieve rapid
commercialization and revenue generation."
Said Catherine Vaczy, "I am delighted to have the opportunity to join a
management team as dynamic and creative as the team at Phase III and to be a
part of their exciting new approach to opportunities in the healthcare
industry."
About Phase III Medical
Phase III Medical (OTCBB:PHSM), a Delaware corporation, is an innovative,
publicly traded company positioned to capitalize on growth in multiple sectors
of the healthcare and life sciences industry by providing capital and guidance
in return for a percentage of revenues, royalty fees, licensing fees, and other
product sales of the medical company. Phase III seeks to partner with and
provide funds to medical companies with substantial potential or existing
revenues, which are seeking $250,000 to $2 million to complete late-stage
product development, fund marketing efforts, fund geographic expansion or pursue
follow-on licensing arrangements with larger distributors.
***************
Certain statements in this press release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements concerning developments in the medical field and growth
prospects for the Company. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors, which may cause the actual
results, performance or achievements of Phase III Medical, Inc. ("the Company"),
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. The Company's future operating results are dependent upon many
factors, including but not limited to the Company's ability to: (i) obtain
sufficient capital or a strategic business arrangement to fund its expansion
plans; (ii) build the management and human resources and infrastructure
necessary to support the growth of its business; (iii) competitive factors and
developments beyond the Company's control; and (iv) other risk factors discussed
in the Company's periodic filings with the Securities and Exchange Commission
which are available for review at www.sec.gov under "Search for Company
Filings."
CONTACT
Mark Weinreb
President & CEO
Tel: (631) 574-4955
Fax: (631) 574-4956
E-mail: mweinreb@phase3med.com