-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SljKIHw4i1KT2xg8P6pUJhD4xCiy+d8aVgG+FnvkMsvgGYQCTGlt4gvNIKrquON5 pP6fIkxm6GK9XMQgwJ8upg== 0001095811-01-502394.txt : 20010521 0001095811-01-502394.hdr.sgml : 20010521 ACCESSION NUMBER: 0001095811-01-502394 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HELIX BIOMEDIX INC CENTRAL INDEX KEY: 0000831749 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 841080717 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 033-20897 FILM NUMBER: 1642984 BUSINESS ADDRESS: STREET 1: 2151 EAST LAKESHORE DR CITY: BATON ROUGE STATE: LA ZIP: 70808 BUSINESS PHONE: 2253871112 MAIL ADDRESS: STREET 1: 2151 EAST LAKESHORE DRIVE CITY: BATON ROUGE STATE: LA ZIP: 70808 10KSB/A 1 v72847a1e10ksba.txt AMENDMENT NO 1. TO FORM 10-KSB 1 HELIX BIOMEDIX INC FILING TYPE: 10KSB DESCRIPTION: ANNUAL REPORT FILING DATE: APR 16, 2001 PERIOD END: DEC 31, 2000 PRIMARY EXCHANGE: OVER THE COUNTER INCLUDES OTC AND OTCBB TICKER: HXBM
2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-KSB/A ------------------------ [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________ . ------------------------ COMMISSION FILE NO. 33-20897-D HELIX BIOMEDIX, INC. DELAWARE 91-2099117 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
210 BARONNE ST., SUITE 1004 NEW ORLEANS, LA 70112 (504) 525-2090 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] Registrant's revenues for the fiscal year ending December 31, 2000: $ -0- As of December 31, 2000, there were 5,022,196 shares of common stock, $0.001 par value, of Helix BioMedix, Inc. issued and outstanding, and the aggregate market value of the common stock held by non-affiliates was approximately: $4,820,024. DOCUMENTS INCORPORATED BY REFERENCE: YES. SEE INDEX ON PAGE 23. Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 10KSB TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. DESCRIPTION OF THE BUSINESS................................. 1 ITEM 2. PROPERTIES.................................................. 5 ITEM 3. LEGAL PROCEEDINGS........................................... 5 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 5 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.... 7 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................................................... 8 ITEM 7. FINANCIAL STATEMENTS........................................ 14 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................... 14 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT................................................ 14 ITEM 10. EXECUTIVE COMPENSATION...................................... 17 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................. 18 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 19 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............................ 23
i 4 PART I ITEM 1. DESCRIPTION OF THE BUSINESS The following discussion in this annual report on Form 10-KSB contains forward-looking statements regarding Helix BioMedix, Inc., a Delaware corporation ("Helix BioMedix" or the "Company"), its business, prospects and results of operations that involve risks and uncertainties. The Company's actual results could differ materially from the results that may be anticipated by such forward-looking statements and discussed elsewhere herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed herein as well as those discussed under the captions "risk factors" and "management's discussion and analysis of financial condition and results of operations" as well as those discussed elsewhere throughout this annual report on Form 10-KSB. Forward-looking statements typically are identified by the use of such terms as "may," "will," "expect," "believe," "anticipate," "estimate," "plan," and similar words, although some forward-looking statements are expressed differently. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. The Company undertakes no obligation to revise any forward-looking statements in order to reflect on events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by the Company in this report and the Company's other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect the Company's business, prospects and results of operations. Helix BioMedix, Inc. is actively engaged in the research and development of lytic peptides (small bioactive proteins) and their commercial applications. The Company, through a predecessor entity, was incorporated in Colorado on February 2, 1988, and is headquartered in New Orleans, Louisiana. On December 29, 2000, following approval by its stockholders, the Company merged with a wholly-owned subsidiary that was incorporated in the State of Delaware (the "Merger"). As a result of the Merger, the Company adopted Delaware as its state of incorporation, adopted the subsidiary's certificate of incorporation and bylaws, and assumed the subsidiary's 2000 Stock Option Plan. A copy of the merger proposal, as approved by the shareholders, is attached hereto as Exhibit 2. Copies of the Delaware certificate of incorporation and bylaws are attached hereto as Exhibit 3-a and Exhibit 3-b respectively. (a) Description of Business During the Development Stage Incorporated herein by reference is Exhibit 13-a, the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999. That report presents a detailed history and discussion of the Company's business from inception through the year 1999 which complements the following summary discussion and update for developments during the year 2000. Since March 1989 the Company has been involved in the business of conducting research into the nature of and commercial uses for lytic peptides (i) in house; (ii) through a contract arrangement with Louisiana State University ("LSU"); (iii) through a collaboration with a private sector research company, Therapeutic Peptides Inc. ("TPI"); and (iv) by outsourcing certain laboratory testing to contract research organizations. A PLATFORM TECHNOLOGY -- THE "CYTOPORIN" PEPTIDES The Company refers to its lytic peptide technology as the Cytoporin technology. Briefly, cytoporins are small, synthetic peptides, which act upon biological cells by disrupting their membranes. Over the last twenty years, Membrane Disruptive Peptides (MDPs) were discovered in nature as major components in the antimicrobial protective systems of various animal species. These MDPs, generally called "lytic peptides," are small bioactive proteins which are a key to the host defense (immune) systems of many insects, amphibians, and mammals. In the giant silk moth, Hyalophora Cecropia, bacterial infection induces synthesis of special proteins which form pores in the cell membranes of invading pathogens, resulting in their death. One group of these proteins are lytic peptides called Cecropins. 1 5 Moving forward from their early research studies with Cecropins in 1986-87, scientists at Louisiana State University and the Company developed an entire new class of synthetic, non-naturally-occurring, MDPs which offer promise as (i) anti-infective agents; (ii) wound healing compounds; and (iii) anti-cancer drugs. These novel, highly bioactive compounds are proprietary to the Company and were named "Cytoporins." The Company believes it has created a powerful platform technology based upon these Cytoporins which has the potential to spawn the development of a broad array of both biopharmaceutical and non-drug products. The Company's lead Cytoporins are among a family of approximately fifty (50) proprietary compounds selected from testing of a library of hundreds of variations on the basic structure of this class of membrane-disruptive peptides. The Company has discovered that certain Cytoporins appear to offer promise as cancer therapy agents and other Cytoporins exhibit signs of unique wound healing properties. As encouraging as these prospective applications appear to be, the Company believes the centerpiece of its broad-based platform technology may be the discovery that some of the Cytoporins may synergistically enhance and restore the killing power of many conventional antibiotics, which are losing their effectiveness as a result of the emergence of antibiotic-resistant strains of bacteria. In addition to these antibacterial properties, the Cytoporins are capable of acting as broad spectrum anti-infectives which are active against many strains of viruses, fungi, and protozoa. COMPANY'S ACQUISITION OF ALL RIGHTS TO THE HELIX/LSU PATENT ESTATE Exhibit 13-a (1999 Annual Report on Form 10-KSB), incorporated herein by reference, details events from 1992 to 1998 surrounding a dispute between the Company and LSU concerning ownership and rights to the Patent Estate protecting the Cytoporin technology. During this period, arbitration procedures and threatened litigation over rights to the technology prevented the Company from raising additional capital or seeking strategic alliances to move the technology toward commercialization. In February 1998, the Company and LSU reached agreement whereby the Company received full assignment of all of the U.S. and foreign patents and patent applications derived from the research sponsored at LSU by the Company. As set forth in Exhibit 13-a this resolution of the disputes with LSU greatly strengthened the Company's patent rights. DEVELOPMENT OF COLLABORATION WITH THERAPEUTIC PEPTIDES, INC. ("TPI") Notwithstanding the above-described disputes over the Helix/LSU patents, in 1993 the Company established a joint venture relationship with a small, New Orleans based research company, Therapeutic Peptides, Inc. ("TPI") in 1993. Its president and chief scientist, Dr. Donald R. Owen, became a director and Chief Scientist of Helix BioMedix, Inc., serving until 1999. From 1993 until 1999 the Company continued development of its Cytoporin technology through its collaboration with TPI. On November 10, 1995 the Company and TPI formalized their collaboration by entering into a "Cooperative Endeavor Agreement," whereby TPI would, on a shared-cost contract basis, continue to advance the technology and move toward commercialization of the proprietary peptides. This agreement provided that any new patents which expanded upon the patent estate based on the earlier LSU research, would be assigned to the Company and that TPI would share in any future royalty flow from such new patents. Since 1993, the collaboration between the Company and TPI has resulted in the design and synthesis of a new "third generation" of novel, synthetic Cytoporin peptides which appear to hold substantially higher promise as lead compounds for future applications in both pharmaceutical (drug) and non-drug products. These new peptides are smaller, more active, more selective, less toxic, and more economical to manufacture than the earlier compounds derived from the LSU research. The Company believes that their patent applications filed on the composition and uses of the new proprietary compounds will be complementary to the issued patents and applications pending from the earlier work sponsored by the Company at LSU. During the years 1999 and 2000 the Company continued its support of the successful Cytoporin research and development work at TPI. As set forth in Item 12 -- Part III of Exhibit 13-a (the Company's 1999 Annual Report on form 10KSB Report, on September 30, 1999 the Company entered into a Research Alliance Agreement ("RAA") with TPI. The RAA is a novation of the Company's prior Cooperative 2 6 Endeavor Agreement with TPI, and it provides for outright assignment to the Company of all patent rights, without future royalty sharing, relating to TPI's past and future research on the Cytoporin Technology. (b) The Company's Patent Estate From its inception to December 31, 2000 the Company has invested more than $550,000 in legal costs and fees to prosecute the various patent applications based on (i) the early Cytoporin research conducted for the Company at LSU and on (ii) the more recent "third generation" Cytoporin technology developed through the collaboration with TPI. A brief summary of the current status of this patent portfolio is provided below: THE HELIX/LSU PATENT ESTATE All of the pending applications and issued patents have early priority dates (i.e., 1987-89) with little prior art cited. Many broad composition and use claims have been allowed. As discussed above, the Company has been assigned all rights to the Helix/LSU patent applications and patents. - Two (2) U.S. patents have issued, and a third U.S. patent is pending. Two additional divisional U.S. patent applications, with early priority dates, are also pending. - Twenty-two (22) foreign patents have issued, a Canadian application is pending, and a divisional application is pending in five European countries. The Company believes the early priority dates of the Helix/LSU patents may represent an important competitive advantage, and may provide opportunities for developing licensing revenues derived from commercializing lytic peptides for applications claimed in these patents. THE HELIX/TPI PATENT ESTATE As discussed above, TPI has assigned to the Company full title to all patent rights on the composition and use of Cytoporin compounds and the applications thereof, as developed at TPI since 1993. Prior to the date hereof, the Company filed in the U.S. patent office a standard utility patent application and a provisional patent application covering this "third generation" Cytoporin technology. Foreign counterpart applications will be filed hereafter. (c) Competition and the Company's Proprietary Position The Company has continued its efforts to establish a strong patent position with respect to the proprietary compositions and use of its Cytoporins and other lytic peptides. There is increasing interest in the biopharmaceutical industry in examining the potential for using such peptides as therapeutic drug agents. To the best of the Company's knowledge, there are six North American biotechnology companies actively working in the field of biopharmaceutical peptide research. These competitors have substantial financial resources available to them, and are pursuing product commercialization via clinical trials, strategic partnerships and other mechanisms to further develop the potential for commercialization of lytic peptides. Although the Company believes the early priority dates on its patents and patent applications represent a competitive asset, the Company has little or no control over how successful competitors may be in potential litigation affecting the Company's patent estate. However, the Company believes its experience in the field complements its patent estate and represents an asset that the Company will utilize in its attempts to commercialize the Cytoporins. The Company further believes that the activity of certain competitors is helping to accelerate the advance of this basic technology to the commercial stage. The Company's business plan embraces the concepts of (i) long-term strategic partnering for developing pharmaceutical products; and (ii) introduction of near-term proprietary non-drug products (e.g., topical antiseptics, industrial disinfectants and biocides) to niche markets that do not require an extensive regulatory approval process. 3 7 (d) Investment in Research and Development The Company's direct investment in research and development of its Cytoporin technology has aggregated $2,731,408 from inception (November 7, 1988) to December 31, 2000. Approximately $517,859 has been capitalized as legal costs incurred in patent prosecution. Other capitalized R & D costs include (i) $200,000 capitalized as a cost paid by promissory note to Helix International Corporation to acquire the Antimicrobial Technology at the Company's inception; (ii) $25,000 paid in the form of 10,000 shares of common stock as partial consideration for Antimicrobial Technology developed for the Company by TPI prior to entering of the Cooperative Endeavor Agreement in November 1995; and (iii) $42,000 paid in common stock issued (60,000 shares) issued to TPI and Dr. Donald R. Owen for their respective assignments to the Company of all patent rights to the "third generation" Cytoporin technology developed at TPI after 1995. The balance of $1,946,549 has been expensed as R & D costs as the Company incurred them. The Company's total investment in R & D and other operating and interest expenses to develop its Cytoporin Technology has aggregated $6,165,989 from the Company's inception through December 31, 2000. (e) Potential for Commercialization of the Company's Technology The Company's technology is based on the discovery that its proprietary bioactive Cytoporins appear to have the ability to destroy, in-vitro, a broad spectrum of bacteria, protozoa, fungi, and viruses, which cause pathogenic disease conditions in animals and humans. Some of these Cytoporins have demonstrated potential as growth factors to promote wound healing and to cause proliferation of white blood cells, which are subject to destruction by autoimmune diseases such as AIDS. Certain Cytoporins, in in-vitro tests, have shown promise for use as chemotherapeutic agents in cancer therapy. Additionally, with the on-going scientific and medical concern about the emergence of antibiotic-resistant bacteria, the use of Cytoporins as adjuvants or enhancers to boost the effect of existing antibiotics against resistant bacterial strains may open a new range of possible pharmaceutical applications for the Company's proprietary Cytoporin compounds. The cost and complexity of bringing new drugs to market has led Company management to conclude that it is prudent to seek strategic alliances and licensing arrangements with larger, well-financed companies to bring the Cytoporins through the clinical trials stage. While the Company is pursuing the long-term introduction of prescription drugs through a program of strategic-partnering, it will also focus in-house efforts on the near-term introduction of proprietary products in the area of topical antiseptics and industrial disinfectants. (f) Impact of Regulatory Factors The time and expense of bringing prescription drugs through the FDA regulatory approval process is a factor that has influenced the Company's decision to seek well-financed strategic partners. For this reason, the Company anticipates developing, for near-term market introduction, certain non-drug products. Such products are subject to less stringent regulatory approval processes than those imposed for prescription pharmaceuticals. (g) Implementation of a New Short Term Strategic Operating Plan in 1999 Exhibit 13-a (1999 Annual Report on Form 10-KSB) presents details of the Company's completion in October 1999 of a private offering of its securities. This offering raised approximately $2,000,000 in capital to fund the Company's strategic plan of action. This strategic plan was developed in 1999 to achieve certain Company goals for the Company by the end of the year 2000. These goals included: (1) Restructuring and strengthening management. (2) Increasing the visibility of the Company within its industry. (3) Increasing research and development activities. (4) Expanding the Company's patent estate. 4 8 (5) Developing collaborative partnerships and strategic alliances. A discussion of the Company's progress is set forth in detail in a later section of this Report; i.e., Item 6 of Part II (Management's Discussion and Analysis). ITEM 2. PROPERTIES The Company's principal place of business and corporate office is in the central business district of New Orleans, LA. Approximately 1,500 square feet of rented office space is shared with another entity affiliated with the Company's President and CEO. Under terms of an agreement between the parties (See Part III -- Item 11) the Company shares both office space and certain administrative services with the other entity for a monthly cash consideration of $7,500. The Company's lease at this location was for a one-year term ending December 31, 2000, automatically renewing for one-month terms thereafter. The address and telephone number for the Company office described above is: Corporate Office 210 Baronne St., Suite 1004 New Orleans, LA 70112 Tel: (504) 525-2090 Fax: (504) 525-2266 Research on the Company's proprietary Cytoporin compounds is primarily conducted at the laboratories of Therapeutic Peptides, Inc. (TPI) in Harahan, LA. Dr. Donald R. Owen is President of TPI and a former officer and director of the Company. The Company utilizes the TPI laboratories under the terms of the Research Alliance Agreement between the Company and TPI (See Part III -- Item 11 herein). The Company reimburses TPI for such contract research conducted for the account of the Company. The Company also utilizes the services and facilities of other contract research organizations. ITEM 3. LEGAL PROCEEDINGS The Company is currently not involved in any litigation or other legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On December 15, 2000 at a duly called Annual Meeting of the Shareholders of the Company two matters were submitted to a vote. The shareholders (i) approved the Merger of Helix BioMedix, Inc., a Colorado corporation, into its wholly-owned Delaware subsidiary (the "Merger"); and (ii) elected the existing slate of seven directors of the Colorado corporation to remain in effect until the effective date of the Merger. The interim directors elected were: R. Stephen Beatty Thomas L. Frazer Ralph Katz Keith P. Lanneau Dr. Jeffrey A. Miller Bernard Yomtov Lester J. Waldman The shareholder approval of the proposed Merger and election of the above interim directors was by unanimous vote of those shares which were entitled to vote and which shares were represented in person or by proxy at the meeting. Of a total of 4,952,855 shares of common stock issued and outstanding as of record date, 3,596,628 shares (72.6%) were voted in favor of the Merger and election of interim directors. 5 9 On December 29, 2000 the Merger was completed. The members of the Board of Directors of the successor Delaware corporation, now named Helix BioMedix, Inc., hold staggered terms as set forth below. The members of the board are as follows: Thomas L. Frazer (Class I) Carlyn J. Steiner, JD (Class I) Dr. Jeffrey A. Miller (Class II) R. Stephen Beatty (Class III) Ralph Katz (Class III) The initial term of office of Class I directors expires at the annual meeting of the Company's stockholders in 2001. The initial term of office of Class II directors shall expire at the annual meeting of stockholders in 2002. The initial term of office of Class III directors shall expire at the annual meeting of the Company's stockholders in the year 2003. Each director elected at an annual meeting of stockholders to succeed a director whose term is expiring shall hold office until the third annual meeting of stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. Upon the effective date of the Merger, the Company retained the existing officers of the Delaware subsidiary. Those officers consist of: President: R. Stephen Beatty Chief Executive Officer: R. Stephen Beatty Secretary: Elizabeth L. Scheer Treasurer: Thomas L. Frazer Complete procedural details on the Merger are presented herein in Exhibit 2. ("Proposal for Approval Of Reincorporation of Helix BioMedix, Inc., a Colorado corporation From Colorado to Delaware"). Exhibits 3-a and 3-b, respectively, are complete copies of the Articles of Incorporation and Bylaws of the new Delaware corporation which became the effective documents of governance for the Company on December 29, 2000. 6 10 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION Shares of the Company's common stock are traded on the Over-the-Counter Bulletin Board (the "OTCBB"). During 1998, no more than approximately 10,000 shares were traded in public transactions. After completion of the private placement of its securities in October of 1999, the Company began to implement its new short-term strategic plan of operations, and communications with shareholders and the public were increased. After that date and during the calendar year 2000 public trading transactions in the Company's common stock (as reported on the OTCBB) have fluctuated at low/high price ranges shown below: Fourth Quarter 1999.......................... $1.25 to $3.87 per share First Quarter 2000........................... $1.12 to $4.25 per share Second Quarter 2000.......................... $1.06 to $2.65 per share Third Quarter 2000........................... $2.03 to $3.00 per share Fourth Quarter 2000.......................... $1.62 to $3.00 per share
The quotations provided reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. After the third quarter of 1999 and during the year 2000 trading volumes of the common stock have increased, and average volumes of shares traded per market day by quarter are noted below: Fourth Quarter 1999......................................... 304 First Quarter 2000.......................................... 5,698 Second Quarter 2000......................................... 8,348 Third Quarter 2000.......................................... 7,330 Fourth Quarter 2000......................................... 2,292
HOLDERS OF COMMON STOCK As of December 31, 2000 there were approximately 700 stockholders of record with respect to the Company's common stock. The Company estimates an additional 800 individuals hold Company common stock in "street name" in brokerage accounts. DIVIDENDS Holders of common stock are entitled to receive such dividends as may be declared by the Board of Directors. No dividends have been paid with respect to the common stock since the Company's inception, and no dividends are anticipated to be paid in the foreseeable future. RECENT SALES OF UNREGISTERED SECURITIES In October, 1999, the Company completed a private placement of common stock and warrants to purchase common stock, conducted pursuant to Section 4(2) of the Securities Act of 1933 (the "Securities Act"). In this endeavor, the Company sold 2,890,643 shares of common stock to accredited investors as defined in Rule 501 under the Securities Act, generating proceeds to the Company of $1,923,130. The accredited status of each investor was established on a case-by-case basis through the use of an investor suitability questionnaire. The shares of common stock were sold in units, with each unit consisting of 150,000 shares of common stock and a warrant to purchase 150,000 shares of common stock. The warrants are exercisable at a price of $3.25 per share. For a period of three years, the warrants are callable at the option of the Company at a premium equal to the greater of market price less $3.25 or a price of $0.75 for the first year, $1.75 for the second year and $2.75 for the third year. To date, the Company has not exercised its option to call any of the outstanding warrants. 7 11 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RISK FACTORS THE COMPANY HAS A HISTORY OF NET LOSSES. THE COMPANY EXPECTS TO CONTINUE TO INCUR NET LOSSES AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY. THE COMPANY'S LIMITED OPERATING HISTORY MAY MAKE IT DIFFICULT TO EVALUATE ITS BUSINESS AND AN INVESTMENT IN ITS COMMON STOCK. The Company is a development stage company, in a pre-clinical stage of research, and has a limited operating history upon which an investor may evaluate operations and future prospects. The Company has incurred a cumulative operating loss of approximately $5,481,856 from inception (November 7, 1988) through December 31, 2000. The Company expects to make substantial expenditures to further develop and commercialize its product candidates and expects that its rate of spending will accelerate as the result of the increased costs and expenses associated with potential clinical trials, regulatory approvals and commercialization of its Cytoporin technologies. In the long-term, the Company will endeavor to identify lead compounds demonstrating the appearance of promise for commercially viable products. Development of these products will require extensive in-vitro and in-vivo testing. This testing, as well as the extension of existing pre-clinical testing, will require the establishment of strategic partnerships with third parties. See Risk Factors -- The Company will need to develop strategic alliances with third parties to develop, test and produce commercially viable products from its Cytoporin technologies. In the near-term, the Company expects revenues to be derived from the non-pharmaceutical license of proprietary compounds for development in applications not requiring FDA approval, such as cosmetics and commercial disinfectants. However, the Company's revenue and profit potential is unproven and its limited operating history makes future operating results difficult to predict. Consequently, an investment in the Company's common stock must be considered in light of the risks and uncertainties that may be encountered by a development stage biotechnology company, including the need for substantial capital to support the development of its products and technologies and its ability to manage growth. THE COMPANY WILL NEED TO DEVELOP STRATEGIC ALLIANCES WITH THIRD PARTIES TO DEVELOP, TEST AND PRODUCE COMMERCIALLY VIABLE PRODUCTS FROM ITS CYTOPORIN TECHNOLOGIES. A key element of the Company's strategy is to enhance development programs and fund capital requirements, in part, by entering into collaborative agreements with major pharmaceutical companies and other biotechnology companies. The Company has only recently begun to seek these strategic business alliances. Although the development of such alliances is one of the Company's objectives, there can be no assurance that the Company will succeed in attracting substantial collaborative partners who can materially assist in the development and commercialization of the Company's technology. The development of commercially viable products from the Company's technology will likely require the technical collaboration and financial assistance of other, significantly larger third parties, to bear most of the costs of pre-clinical and clinical testing and regulatory approval prior to commercial sale. Even if the Company is successful in attracting collaborative partners and those collaborations yield commercially viable products, the Company's receipt of revenues will be substantially dependent upon the decisions made by and the manufacturing and marketing resources of these strategic business partners. Further, there can be no assurance that the Company's interests will coincide with those of any future collaborative partner, that such a partner will not develop, independently or with third parties, products that could compete with those products contemplated by any agreement the Company may have with that partner, or that disagreements over rights, technology or other proprietary interests will not occur. The failure to develop strategic business alliances that facilitate the development, testing and commercialization of the Company's products will have a material adverse effect on its business, operating results and financial condition. THE COMPANY MAY CONTINUE TO NEED SIGNIFICANT AMOUNTS OF ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON FAVORABLE TERMS. The Company may need to raise significant amounts of additional capital. The Company's future capital requirements will be substantial and will depend on many factors, including the pace of its research and development efforts, its ability to identify pharmaceutical and non-pharmaceutical applications for its lytic 8 12 peptide compounds, its ability to enter into collaboration agreements and receive government grants (if any), the amount and timing of payments under such agreements and grants, the level and timing of its research and development expenditures, and other factors. If the Company is unable to raise sufficient additional capital it will have to curtail or cease operations. BECAUSE OF THE SPECIALIZED NATURE OF THE COMPANY'S BUSINESS, THE TERMINATION OF RELATIONSHIPS WITH KEY MANAGEMENT AND SCIENTIFIC PERSONNEL OR THE INABILITY TO RECRUIT AND RETAIN ADDITIONAL PERSONNEL COULD PREVENT THE COMPANY FROM DEVELOPING ITS TECHNOLOGIES, CONDUCTING CLINICAL TRIALS AND OBTAINING FINANCING. The Company is highly dependent upon several key individuals, including R. Stephen Beatty, Henry L. Niman and Keith P. Lanneau, all of whom have played a critical role in the Company's research and development programs, raising financing and conducting initial trials of its Cytoporin technologies. Additionally, the Company employs several scientific personnel with significant and unique experience in the antimicrobial peptide field, some of whom may not be replaceable. The loss of the services of these key members of management or these scientific personnel may prevent the Company from achieving its business objectives. The competition for qualified personnel in the biotechnology field is intense, and the Company relies heavily on its ability to attract and retain qualified scientific, technical and managerial personnel. The Company's future success depends upon its ability to attract, retain and motivate highly skilled employees. In order to commercialize its products successfully, the Company will be required to expand its workforce, possibly in the areas of manufacturing, clinical trials management, regulatory affairs, business development and sales and marketing. These activities will require the addition of new personnel, including management, and the development of additional expertise by existing management personnel. The Company faces intense competition for qualified individuals from numerous pharmaceutical, biopharmaceutical and biotechnology companies, as well as academic and other research institutions. To the extent the Company is unable to attract and retain these individuals on favorable terms, its business may be adversely affected. THE COMPANY IS AT AN EARLY STAGE OF PRODUCT DEVELOPMENT AND DOES NOT YET HAVE COMMERCIALLY MARKETABLE PRODUCTS TO PROVIDE REVENUES. Although the Company has been developing the Cytoporin peptide technology since 1987, it remains a development stage company and to date has generated no material revenue from product sales. The Company's strategic plan contemplates the development of both pharmaceutical and non-pharmaceutical products and applications for its proprietary compounds. However, there can be no assurance that products will be commercialized in either field as a result of continued development programs or from joint efforts with any future collaborative partner. The failure to develop safe, commercially viable pharmaceutical or non- pharmaceutical applications for the Company's technology will have a material adverse effect on the Company's business, operating results and financial condition. CLINICAL TRIALS FOR THE COMPANY'S PRODUCT CANDIDATES ARE EXPENSIVE AND TIME CONSUMING AND THEIR OUTCOME IS UNCERTAIN. Before the Company can obtain regulatory approval for the commercial sale of any pharmaceutical product that it may wish to develop, it will be required to complete preclinical development and extensive clinical trials in humans to demonstrate the safety and efficacy of the product. Each of these trials requires the investment of substantial expense and time. However, success in pre-clinical and early clinical trials will not ensure that large-scale trials will be successful and does not predict final results. Acceptable results in early trials may not be repeated in later trials. A number of companies in the biotechnology industry have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. Negative or inconclusive results or adverse medical events during a clinical trial could cause it to be restructured or terminated. In addition, failure to construct appropriate clinical trial protocols could result in the test or control group experiencing a disproportionate number of adverse events and could cause a clinical trial to be repeated or terminated. 9 13 THE COMPANY MAY CHOOSE TO, OR MAY BE REQUIRED TO, SUSPEND, REPEAT OR TERMINATE ANY INITIATED CLINICAL TRIALS IF THEY ARE NOT CONDUCTED IN ACCORDANCE WITH REGULATORY REQUIREMENTS, THE RESULTS ARE NEGATIVE OR INCONCLUSIVE OR THE TRIALS ARE NOT WELL DESIGNED. Clinical trials must be conducted in accordance with the FDA's guidelines and are subject to oversight by the FDA and institutional review boards at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced under the FDA's Good Manufacturing Practices, and may require large numbers of test patients. Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments. The FDA may suspend clinical trials at any time if it finds deficiencies in the conduct of these trials or it believes that these trials expose patients to unacceptable health risks. THE COMPANY WILL RELY ON COLLABORATORS TO ASSIST IN THE RESEARCH AND DEVELOPMENT ACTIVITIES NECESSARY FOR THE COMMERCIALIZATION OF ITS PRODUCT CANDIDATES. IF THE COMPANY'S COLLABORATORS DO NOT PERFORM AS EXPECTED, THE COMPANY MAY NOT BE ABLE TO COMMERCIALIZE ITS PRODUCT CANDIDATES. The Company intends to continue to develop alliances with third-party collaborators to develop and market its current and future product candidates. The Company may not be able to attract third-party collaborators to develop and market product candidates and may lack the capital and resources necessary to develop all its product candidates alone. If the Company is unable to locate collaborators, or if its collaborators do not prioritize and commit substantial resources to programs associated with the Company's product candidates, the Company may be unable to commercialize its product candidates, which would limit its ability to generate revenue and become profitable. THE COMPANY FACES SUBSTANTIAL COMPETITION IN ITS PRODUCT DEVELOPMENT EFFORTS FROM PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES, UNIVERSITIES AND OTHER NOT-FOR-PROFIT INSTITUTIONS. The Company faces significant competition in its attempts to develop applications of its Cytoporin peptide technology from entities that have substantially greater research and product development capabilities and financial, scientific, marketing and human resources. These entities include pharmaceutical and biotechnology companies, as well as universities and not-for-profit institutions. The Company expects that competition in development of products analogous to its Cytoporin peptide technology to intensify. The Company's competitors may succeed in developing products earlier than it does, entering into successful collaborations before the Company, obtaining approvals from the U.S. Food and Drug Administration or other regulatory agencies for such products before the Company, or developing products that are more effective than those the Company develops or proposes to develop. The success of any one competitor in these or other manners will have a material adverse effect on the Company's business, operating results and financial condition. THE COMPANY MAY ENCOUNTER DIFFICULTIES IN MANAGING ITS GROWTH. The Company may enter a period of rapid growth that may place a significant strain on its human and capital resources. The Company intends to increase the number of its employees during the next twelve months. The Company's ability to conduct research and development activities effectively may require it to continue to expend funds to improve its operational, financial and management controls, reporting systems and procedures. If the Company is unable to successfully implement improvements to its management information and control systems in an efficient and timely manner, or if the Company encounters deficiencies in existing systems and controls, management may not have adequate information to manage the Company's day-to-day operations. ISSUED PATENTS MAY NOT FULLY PROTECT THE COMPANY'S DISCOVERIES, AND THE COMPANY'S COMPETITORS MAY BE ABLE TO COMMERCIALIZE PRODUCTS SIMILAR TO THOSE COVERED BY ITS ISSUED PATENTS. Issued patents may not provide commercially meaningful protection against competitors. Other companies or entities may challenge the Company's or any prospective collaborators' patents or independently 10 14 develop products that could result in an interference proceeding in the Patent and Trademark Office or a legal action. In the event any single researcher or institution infringes upon the Company's or a prospective collaborators' patent rights, enforcing these rights may be difficult and can be time-consuming. Others may be able to design around these patents or develop unique products providing effects similar to the Company's products. In addition, others may discover uses for the Company's Cytoporin peptide technology, and these other uses may be separately patentable. Even if the Company has a patent claim on a particular Cytoporin peptide technology, the holder of a patent covering the use of that technology could exclude the Company from selling a product that is based on the same use of that technology. In addition, with respect to certain of the Company's patentable inventions, the Company may decide not to pursue patent protection outside the United States, both because management does not believe it is cost effective and because of confidentiality concerns. Accordingly, the Company's international competitors could develop and receive foreign patent protection for Cytoporin peptide technologies for which the Company has or is seeking U.S. patent protection. Failure of any of the Company's issued patents to provide meaningful protection against competition, or success by a competitor in the manner described, will have a material adverse effect on the Company's business, operating results and financial condition. THE COMPANY'S RIGHTS TO THE USE OF TECHNOLOGIES TO BE LICENSED FROM THIRD PARTIES ARE NOT WITHIN ITS CONTROL. The Company may need to rely, in part, on licenses to use certain technologies and materials, which are important to its business. The Company will not own the patents that underlie these licenses and there can be no assurance that the Company can obtain all the licenses necessary for its business. The Company's rights to use these technologies and practice the inventions claimed in the licensed patents are subject to the Company's licensors abiding by the terms of those licenses and not terminating them. In many cases, the Company will not control the prosecution or filing of the patents to which it may hold licenses. The Company will rely upon its licensors to prevent infringement of those patents. Certain of the licenses under which the Company may obtain rights will provide it with exclusive rights in specified fields, but there can be no assurance that the scope of these rights under these and other licenses will not be subject to dispute by its future licensors or third parties. Failure of its enjoyment of any necessary licenses will have a material adverse effect on the Company's business, operating results and financial condition. THE COMPANY FACES PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE INSURANCE TO PROTECT AGAINST LOSSES. The Company currently has no products that are available for commercial sale. However, the current use of any of the Company's product candidates in clinical trials and the sale of any approved products in the future may expose the Company to liability claims. These claims might be made directly by consumers and healthcare providers or indirectly by pharmaceutical companies, the Company's corporate collaborators or others selling such products. The Company may experience financial losses in the future due to product liability claims. The Company intends to expand its insurance coverage to include the sale of commercial products if marketing approval is obtained for product candidates in development. However, the Company may be unable able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect against losses. If a successful product liability claim or a series of claims is brought against the Company for uninsured liabilities or in excess of insured liabilities, Company assets may be insufficient to cover such claims and the Company's business operations could be impaired. PLAN OF OPERATION The Company's general plan of operation during its continuing developmental phase is outlined in Item 1 of Part I of this Report and in Exhibit 13-a (1999 Annual Report on Form 10-KSB) incorporated herein by reference. During 2000, the Company continued to pursue achievement of the goals set forth in the Near Term Strategic Operating Plan that it adopted in 1999. Progress made to date toward full implementation of the plan is discussed below. 11 15 The proceeds of the October 1999 private offering were projected to be adequate cash to fund projected Company operations through the Year 2000. As evidenced by the audited financial statements (Pages F-1 through F-17 herein) for the year ending December 31, 2000, the Company's current financial position requires further financing initiatives to continue the planned operating program. As of the date hereof, the Company believes that additional cash funding must be available by May 2001, to support operations at the present level and to provide adequate resources for implementing further expansion of operations planned for the next twelve months. The activities projected for the next year are discussed below. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In 1999 (as set forth in Exhibit 13-a) the Company (i) began to implement its short-term Strategic Plan for financial and managerial restructuring; (ii) successfully completed a major recapitalization through its October 1999 private offering of securities; (iii) executed a number of important agreements with related parties on September 30, 1999; and (iv) accelerated Company operations with the availability of adequate operating capital and a strengthened management organization. Throughout the year 2000 the Company made progress toward achieving goals of the Strategic Operating Plan outlined in Item 1 of Part I herein, as follows: (1) The October 1999 private offering raised approximately $2,000,000 to fund operations at the planned FY 2000 budget level. (2) The restructuring of management resulted in effective utilization of added key personnel to expand diversity of corporate skills, technical experience, and outside contacts in the business and financial communities. (3) Scientific visibility and credibility for the Company was substantially increased by (i) outside contacts by key management personnel; and (ii) Internet exposure through a newly created Company Website (www.HelixBioMedix.com). An original focus of this element of the strategic plan was to create a prominent Scientific Advisory Board ("SAB") for the Company. During fiscal year 2000, the Company has made technical presentations to various prominent members of the scientific community who are knowledgeable about membrane disruptive peptides. The Company believes that their recognition of the substance of and prospects for the Cytoporin platform technology will, during the next several months, attract several highly qualified members to the Company's SAB. (4) Research and development activities were increased by (i) a rise of more than 25% in expenditures for direct R & D over the level for 1999; and (ii) extensive use of outside technical consultants. Of particular significance is the fact that, during the year 2000, the Company completed an extensive in-vitro assay of its entire library of proprietary peptide compounds. These studies, conducted in outside contract research laboratories, corroborated the results of earlier research from 1987 to 1999 and provided data valuable in the preparation of additional patent applications and for use in technical presentations to prospective strategic alliances in the pharmaceutical community. Lead compounds for the different potential applications of Cytoporins have been identified among a family of approximately fifty (50) different proprietary compounds showing potential for commercial applications. By late 2000, the Company initiated in-vivo testing as the next step in selecting final lead compounds for clinical testing and/or out-licensing to pharmaceutical or other health care companies. (5) The filing and prosecution of patent applications continued. At December 31, 2000 the Company's total investment in legal costs, fees, and acquisition of patent rights associated with developing its patent estate had increased to $559,859 from a level of $440,581 at year end 1999. The completion of recent patent applications, covering work at TPI on the "third generation" Cytoporins, has been an important addition to the Company's patent estate. (6) The Company began to undertake efforts to develop collaborative partnerships and strategic alliances. During the past year numerous technical presentations were made, and this has developed into 12 16 on-going dialog and deliberations with several significant prospects for licenses and/or other partnering alliances. As of the date hereof, the Company has reached agreement in principle concerning a license, which the Company plans to grant to a company specializing in the manufacturing and sale of over-the-counter skin care products. Management believes the Company will be able to grant other licenses or enter into joint ventures to commercialize use of its Cytoporins in other non-drug applications. (7) The Company sought to better position itself in the market so as to obtain access to additional capital. Accordingly, in 2000 the Company presented itself to and sought expert advice from two consulting groups with extensive experience in assisting start-up and developing high technology companies in the areas of strategic and financial planning. These two groups are (i) The Paisley Group, LLC; and (ii) Dunsford Hill Capital Partners, Inc. These consulting groups have worked together with the Company in developing both an interim funding initiative and a longer term financing program for the Company. As set forth in [Item 12 of Part III] in this Report both groups entered into consulting agreements with the Company in October 2000. During 2001, the Company intends to take several additional steps in advancing its commercial prospects. First, the Company intends to seek out and retain a Chief Scientific Officer. Through the services of such an individual, the Company will endeavor to promote its proprietary Cytoporins, further refine its understanding of the mechanisms of those technologies, and develop commercially viable avenues for the utilization of those technologies. The Company's efforts on this front will be strengthened by the formation of an expanded Scientific Advisory Board, and by continuing to strengthen corporate governance through attracting qualified individuals to serve on the Board of Directors. The Company anticipates that it will continue its established program of research and development through the use of in-vivo testing to establish lead compounds for selected applications with apparent commercial promise. This research will emphasize those properties of the Company's Cytoporin technologies that demonstrate promise in commercially viable applications. In particular, the Company will emphasize areas of research that appear to show promise for the formulation and delivery of prescription pharmaceuticals to treat a wide-ranging selection of diseases. Such formulations and delivery mechanisms are expected to include compounds designed to enhance the efficacy of traditional antibiotics and adjuvant cancer therapies. Additionally, the Company expects to continue its work to develop commercially viable non-drug applications of its Cytoporin technologies, including but not limited to topical antiseptics and industrial biocides. The Company intends to actively evaluate its existing portfolio of proprietary technologies in an effort to determine which of these technologies the Company is best suited to commercially exploit internally. If the Company determines it does not have the internal capacity to exploit an existing opportunity, it will determine whether it is prudent to seek out third parties who may be interested in licencing the Company's technology. The Company believes that such licensing efforts may generate the potential for both near-term and long-term revenues, and may initiate contacts with strategic partners. The Company expects that its success may depend on its ability to enter into strategic partnerships and alliances with well-established companies to provide the necessary capital to develop the Company's platform technology to the stage of commercial viability. In this regard, the Company intends to seek out such relationships and may explore opportunities for amalgamation with other, more established, companies. YEAR 2000 ISSUE The Company has conducted an assessment of the impact of the Year 2000 issue on its operations. No problems have been encountered since December 31, 1999. Management believes that Year 2000 issues are not currently material to the Company's business, operations or financial condition, and the Company does not currently anticipate that it will incur any material expenses to remediate any Year 2000 issues it may yet encounter in 2001 or thereafter. 13 17 ITEM 7. FINANCIAL STATEMENTS Please see Pages F-1 through F-17. The following Financial Statements are filed as part of this report:
PAGE ------------ Report of Independent Certified Public Accountants.......... F-2 Balance sheet as of December 31, 2000....................... F-3 Statement of Operations for the periods ending December 31, 1999 and December 31, 2000 and for the period from inception (November 7, 1988) to December 31, 2000......... F-4 Statement of Stockholders' Equity (Deficit) for the period from inception (November 7, 1988) to December 31, 2000.... F-5 to F-7 Statements of Cash Flows for the period from inception (November 7, 1988) to December 31, 2000................... F-8 Notes to Financial Statements............................... F-9 to F-17
All schedules have been omitted, as the required information is inapplicable or the information is presented in the financial statements or the notes thereto. The financial statements should be read in connection with a review of the Company's audited financial statements for the fiscal year ended December 31, 1999 and the unaudited statements for the quarterly periods ending March 31, 2000, June 30, 2000, and September 30, 2000. All of these prior period statements are incorporated herein by reference as part of Exhibits 13-a, 13-b, 13-c, and 13-d, respectively. ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements between the Registrant and its independent accountants on any matter of accounting principles or practices or financial statement disclosure since the Registrant's inception. ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT (a) The Directors and Officers of the Registrant as at December 31, 2000 are as follows: Name: R. STEPHEN BEATTY Age: 51 Position: President & CEO, Director Tenure as Officer or Director: May 28, 1999 to September 30, 1999 as Director (and Consultant) October 1, 1999 to Present, as President & CEO and Director Name: THOMAS L. FRAZER Age: 53 Position: Vice President -- Treasurer & CFO, Director Tenure as Officer or Director: October 27, 1994 to September 30, 1999 as VP and Director October 1, 1999 to Present, as VP--Treasurer & CFO and Director Name: RALPH KATZ Age: 42 Position: Director (and Corporate Consultant) Tenure as Officer or Director: May 12, 1999 to Present as Director (and Corporate Consultant) Name: JEFFREY A. MILLER Age: 51 Position: Director (and Corporate Consultant) Tenure as Officer or Director: May 12, 1999 to Present as Director (and Corporate Consultant) 14 18 Name: ELIZABETH L. SCHEER Age: 50 Position: Vice President -- Investor Relations & Corporate Communications Tenure as Officer or Director: October 1, 1999 to Present as VP -- Investor Relations & Corporate Communications, January 12, 1999 to December 28, 2000 as VP -- Investor Relations & Corporate Communications, Assistant Secretary December 29, 2000 as VP -- Investor Relations & Corporate Communications, Secretary Name: CARLYN J. STEINER, JD Age: 56 Position: Director Tenure as Officer or Director: December 29, 2000 to Present Two key individuals with active involvement in the Corporation are not current directors or officers as of the merger of Helix Colorado with and into Helix Delaware. However, their involvement in 2000 was substantial and they are referenced below: Name: KEITH P. LANNEAU Age: 75 Position: Chairman of the Board & Vice President -- Technology, Director Tenure as Officer or Director: March 15, 1989 to March 10, 1990 as President & CEO and Director; November 13, 1991 to July 10, 1992 as a Director; July 10, 1992 to September 30, 1999 as President & CEO and Director; October 1, 1999 to December 28, 2000, as Board Chairman & VP -- Technology and Director. Name: HENRY L. NIMAN Age: 51 Position: Vice President -- Science Tenure as Officer or Director: October 1, 1999 to December 28, 2000 as Vice President -- Science All directors of the Company will hold office for the specified period of time as defined by Class until the next annual meeting of the shareholders and until their successors have been elected and qualified. The officers of the Company are elected by the Board of Directors at the first board meeting after each annual meeting of the shareholders. The following are brief resumes of each of the eight (8) Officers, Director, and/or key individuals listed in the table above: MR. BEATTY is a 1975 graduate of the University of South Alabama with a major in Mathematics and a minor in Economics. He obtained his MBA from University of New Orleans in 1997 where he continues his association as Co-Chairman of the Student Support Committee of the Business Alumni Council. Mr. Beatty has been President of Beatty Finance, Inc., since 1990 and is responsible for all aspects of company operations. Additionally, he serves as a consultant to businesses in south Louisiana. He was previously employed for 18 years with BellSouth (and South Central Bell) where he managed large software development projects and was responsible for re-engineering the business process flow for commercial accounts. Mr. Beatty was elected to the Board of Directors of the Company in May 1999 and was elected as the new President & CEO for the Company on October 1, 1999. MR. FRAZER, a practicing CPA, is a prominent business executive in Baton Rouge, LA. He was a founding director of a commercial bank and has served on the board of directors of a number of business corporations. Until 1994, he was a major shareholder and chairman of the board of Fifth Generations, Inc., a computer software company, which was subsequently acquired by Symantec, Inc. Mr. Frazer is a professional consultant and expert in company acquisitions, restructuring programs, and financial reorganizations. He is an active investor in a number of biotechnology and computer software companies. Mr. Frazer is a leader in 15 19 various public and private community affairs in Baton Rouge and New Orleans. A long time Director of the Company, Mr. Frazer was elected to the position of Vice President -- Treasurer and CFO on October 1, 1999. MR. KATZ is the President of KBR, Inc., a hedge fund. He has worked as a professional equity options trader and hedge fund manager for seventeen years. His work has frequently involved the evaluation of venture offerings and advice to venture investors. He is a principal in Katz-Miller Ventures, L.L.C., which has entered into a Consulting Agreement with the Company. (See Part III -- Item 12 herein). Mr. Katz, for his own account, is a substantial investor in the Company as well as other biotechnology companies and other high tech ventures. In addition to his service as a Director of the Company beginning in May 1999, Mr. Katz is a member of the Board of Directors of Simson Management Systems, Inc. He is also one of the ranking tournament bridge players in the world, placing second in Geneva in 1991 and fourth in Lille in 1998. He has represented the United States in world competition on many occasions. Mr. Katz holds a B.S. in Accounting from the University of Steubenville (1981). MR. LANNEAU founded Helix BioMedix, Inc. and served as Chief Executive Officer of the Company until October 1999 at which time he became Chairman of the Board. Effective with the reincorporation in Delaware on December 29, 2000, Mr. Lanneau became an advisor to the Board and remains an employee (VP Technology). He holds a B.S. degree in Physics from the Massachusetts Institute of Technology and an M.B.A. degree from Harvard. He is the author of numerous patents and publications. Throughout his business and professional career, he has actively served on the boards of various local and statewide civic organizations within Louisiana. Mr. Lanneau is an active scientific collaborator with Dr. Donald R. Owen, and he assumes primary responsibility for technical interfacing with patent attorneys and those outside companies with whom the Company seeks collaborations and strategic alliances. DR. MILLER, elected to the Company's Board of Directors in May 1999, is the CEO of two investment companies: Capital Market Research and New Arc Investments, Inc. Capital Market Research performs contract research for professionals trading in futures and options on major exchanges and provides support and staff services to start-up companies engaged in research services. NewArc Investments, Inc. manages individual, partnership, and institutional investments. Dr. Miller, in conjunction with Mr. Katz, has also advised venture capital investors for the last five years. He is a principal in Katz-Miller Ventures, L.L.C., which has entered into a Consulting Agreement with the Company (See Part III -- Item 12 herein). Dr. Miller holds a Ph.D. in Political Science (1975) from the University of Michigan. His academic background emphasizes public policy, administrative theory, economics and quantitative analysis. DR. NIMAN serves as Vice President -- Science and has a distinguished scientific career beginning with his work in the development of monoclonal antibody technology at Scripps Clinic and Research Foundation in 1979. He is the inventor of broad patents covering the combination of synthetic peptides and monoclonal antibody technologies. In 1983 he created "flu" monoclonal antibody, which remains one of the most widely used in biomedical research. Dr. Niman holds an undergraduate degree in Biochemistry from the University of Illinois and was awarded a Ph.D. in Biochemistry from the University of Southern California in 1978. MS. SCHEER is Vice-President for Investor Relations and Corporate Communications for the Company and was appointed Corporate Secretary effective December 29, 2000. She obtained a Master of Business Administration from the University of New Orleans in 1997. Ms. Scheer has served as Executive Director for one of the largest PHO organizations in the New Orleans area and lectured extensively on healthcare funding, policy and management issues both locally and nationally. Ms. Scheer graduated from the University of Southwestern Louisiana in 1973 with a Bachelor of Science in Nursing and completed a Master of Nursing at Louisiana State University Medical Center in 1976. CARLYN J. STIENER, JD, is a member of the Paisley Group, LLC, which is providing financial and management consulting services to the Corporation. Ms. Steiner graduated Cum Laude from Smith College with a Bachelor of Arts in 1967 and completed a Master of Arts degree in Political Science from the University of Chicago in 1971. In 1981 she graduated from the University of Washington School of Law with a J.D. and was a member of the Washington Law Review and received the Order of the Coif. In addition to 16 20 her consulting practice, Ms. Steiner has served on various for-profit corporate and not-for-profit corporate boards in the Seattle area. (b) Compliance with Section 16(a) of the Exchange Act No persons or entities holding the Company's securities or serving as Officers or Directors of the Company are subject to the reporting requirements of Section 16(a) of The Exchange Act. ITEM 10. EXECUTIVE COMPENSATION The five Directors of the Company are not compensated for their service with cash. It is anticipated that the established precedent of granting of stock and options will continue beginning in 2001 at a level determined by the Board. Since 1991 to December 31, 1998 the only Company officer who received compensation, directly or indirectly, for services was Keith P. Lanneau. From July 1, 1995 until September 30, 1999, such compensation was accrued and paid by promissory notes for a fee of $6,000 per month for Mr. Lanneau's continuing full time services as President and CEO of the Company. Commencing October 1, 1999 all compensation to Mr. Lanneau has been in cash. During 1999, compensation to Mr. Beatty has been paid in the form of cash and stock of the Company. Since inception of the Company no persons have received any monetary compensation for their services as Members of the Board of Directors. On December 31, 1997, in consideration of their past services as Directors of the Company the following persons were granted stock options to purchase common stock at a price of $1.00 per share, the number of shares being shown opposite the name of each director. These options replaced options previously granted to the same persons in 1995.
DIRECTOR NUMBER OF SHARES -------- ---------------- Thomas L. Frazer..................................... 20,000 Dr. Robert J. Love................................... 5,000 Michael K. Marcantel................................. 15,000 Dr. Donald R. Owen................................... 15,000 Keith P. Lanneau..................................... 20,000 ------ 75,000
Three of the previous directors elected to exercise their options in December 2000 and included: Thomas L. Frazer:.................................... 20,000 Dr. Robert J. Love:.................................. 5,000 Keith P. Lanneau:.................................... 20,000
SUMMARY ANNUAL COMPENSATION TABLE
BONUS OTHER NAME AND POSITION YEAR SALARY (STOCK) COMPENSATION ----------------- ---- ------- ------- --------------- Keith P. Lanneau................................ 1998 $60,000 None None President & CEO 1999 $76,500 None None Chairman; VP Technology 2000 $90,000 None None R. Stephen Beatty............................... 1998 -- -- -- President & CEO 1999 $56,100 None Options(1) $46,750 (stock) 2000 $78,000 None Options(2) $10,468 (stock)
- --------------- See Directors' Options in table above. (1) See Part III -- Item 12 herein. (2) 80,000 @ $0.70/share 17 21 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) Present Ownership The following table sets forth, as of December 31, 2000, the stock ownership of each person known by the Registrant to be the beneficial and/or record owner of five percent or more of the Registrant's Common Stock, each Officer and Director individually and all Officers and Directors of the Registrant as a group:
NAME AND ADDRESS NUMBER OF SHARES PERCENT ---------------- ---------------- ------- Keith P. Lanneau, Chairman until December 29, 2000........ 719,205 14.32% 2151 East Lakeshore Drive Baton Rouge, LA 70808 R. Stephen Beatty, Director............................... 63,637 1.27% 210 Baronne St., Suite 1004 New Orleans, LA 70112 Thomas L. Frazer, Director................................ 301,456 6.00% 7520 Perkins Rd. Suite 280 Baton Rouge, LA 70808 Elizabeth L. Scheer, VP................................... 66,997 1.33% 6 Erin Court Harahan, LA 70123 Ralph Katz, Director...................................... 297,487 5.92% 6529 Manor Dr. Burr Ridge, IL 60521 Jeffrey A. Miller, Director............................... 144,987 2.89% 876 Buttonwood Circle Naperville, IL 60540 Carlyn J. Steiner, Director............................... -0- 0% 811 34th Ave. East Seattle, WA 98112 Lester J. Waldman, Director until December 29, 2000....... 154,984 3.09% 301 Huey P. Long Ave. Gretna, LA 70053 Bernard Yomtov, Director until December 29, 2000.......... 19,984 0.38% 4 Center Street #1 Cambridge, MA 02139 --------- ------- All Officers & Directors as a group....................... 1,767,737 35.20% Frank T. Nickell.......................................... 450,000 9.7% 320 Park Avenue, 24th Floor New York, NY 10022 Non-Affiliate Shareholders................................ 2,804,459 55.84% ========= ======= Total Shares Outstanding........................ 5,022,196 100.0 % ========= =======
18 22 (b) Ownership Assuming Exercise or Conversion of all Options, Warrants, and Convertible Notes Outstanding at December 31, 2000 and Vesting (Earning) of all Bonus Shares for Which the Company is Contingently Obligated by Contract.
NAME AND ADDRESS NUMBER OF SHARES PERCENT ---------------- ---------------- ------- Keith P. Lanneau.......................................... 749,192 8.62% 2151 East Lakeshore Drive Baton Rouge, LA 70808 R. Stephen Beatty......................................... 179,874 2.07% 210 Baronne St., Suite 1004 New Orleans, LA 70112 Thomas L. Frazer.......................................... 462,693 5.33% 7520 Perkins Rd. Suite 280 Baton Rouge, LA 70808 Elizabeth L. Scheer....................................... 124,284 1.43% 6 Erin Court Harahan, LA 70123 Henry L. Niman............................................ -0- 0% 16 Tel Dr. Pittsburgh, PA 15238 Ralph Katz................................................ 622,474 7.16% 6529 Manor Dr Burr Ridge, IL 60521 Jeffrey A. Miller......................................... 319,974 3.68% 876 Buttonwood Circle Naperville, IL 60540 Carlyn J. Steiner......................................... -0- 0% 811 34th Ave. East Seattle, WA 98112 George Steiner -- Paisley Group, LLC...................... 130,000 1.50% 811 34th Ave. East Seattle, WA 98112 Randall Caudill -- Dunsford Hill Capital Partners, Inc.... 130,000 1.50% 1080 Chestnut Street, Apt. 16A San Francisco, CA 94108 --------- ------- All Officers & Directors as a group....................... 2,902,433 33.04% Frank T. Nickell.......................................... 900,000 10.1% 320 Park Avenue, 24th Floor New York, NY 10022 Non-Affiliate Shareholders................................ 4,886,599 56.24% ========= ======= Total shares outstanding........................ 8,689,032 100.0 % ========= =======
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On September 30, 1999, the Company entered into certain agreements with related parties. These are as follows: (a) With Therapeutic Peptides, Inc. (TPI) and Dr. Donald R. Owen The Company entered into a "Research Alliance Agreement" (RAA) with TPI and its president, Dr. Donald R. Owen. Dr. Owen had been a director of the Company until early 1999. This agreement amended certain portions of the 1995 Cooperative Endeavor Agreement among the parties to accelerate the research collaboration between the Company and TPI. The new agreement provided for (i) the assignment by TPI to the Company of all patent rights to Cytoporin Technology developed by TPI, and (ii) an agreement for TPI to continue certain research in its laboratories under contract support by the Company. The Company agreed to pay consideration to TPI consisting of (i) $100,000 in cash, (ii) forgiveness of a $25,000 promissory 19 23 note with accrued interest, and (iii) issuance of 50,000 shares of Company stock to TPI and 10,000 shares to Dr. Owen. As of the date hereof TPI has assigned the aforesaid patent rights to the Company, and the Company has fulfilled its obligation regarding payment of the aforesaid considerations. Other provisions of the RAA still remain in force. A copy of the RAA is attached to this Report as Exhibit 10-a. (b) With Katz-Miller Ventures, LLC The Company entered into a consulting agreement with Katz-Miller Ventures, LLC, Ralph Katz and Jeffrey A. Miller commencing October 1, 1999, and extending for a period of two years. Both Messrs. Katz and Miller are directors of the Company. This contract provides for the issuance of 40,000 shares of the Company's common stock upon execution of the agreement, and an additional 40,000 on the first anniversary of the agreement. The agreement also provides for additional bonus shares of up to 540,000 to be issued provided the strategic and financial planning provided by the collective consultant group causes a triggering event (specified increases in market value of the stock), as defined in the agreement. As of the date hereof the Company has issued a total of 280,000 shares of its common stock to Katz-Miller Ventures, LLC in connection with the aforesaid consulting agreement. Exhibit 10-b attached hereto is a copy of the agreement. (c) With Keith P. Lanneau The Company and Keith P. Lanneau entered into an agreement whereby Mr. Lanneau agreed to restructure certain debt of the Company owed to him. Lanneau agreed to cancellation of a $489,462 convertible promissory note payable upon demand, and to accept substitution therefor of three (3) promissory notes, each in the principal amount of $163,154, with maturities of one, two, and three years respectively. As of the date hereof the Company has paid the principal amount of the first due of the three notes along with interest accrued on all of the notes. Exhibit 10-c attached hereto is a copy of the agreement. (d) With Keith P. Lanneau and Thomas L. Frazer Keith P. Lanneau and Thomas L. Frazer agreed to the cancellation of outstanding warrants previously issued to them by the Company to purchase 119,200 shares (87,200 shares by Lanneau and 32,000 shares by Frazer) of common stock of the Company at a price of $1.00 per share. (e) With Henry L. Niman The Company entered into a consulting agreement with Henry L. Niman commencing October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one year period at the end of such initial term and each subsequent term and each renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. The Company's Board of Directors has extended the expiration date of this consulting agreement from time to time. As of the date hereof, timely notice has been given by the Company that the agreement will terminate effective June 30, 2001. Exhibit 10-d attached hereto is a copy of the original Consulting Agreement. (f) With Keith P. Lanneau The Company entered into an employment contract with its Chairman of the Board (until December 28, 2000), Keith P. Lanneau, commencing October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for two additional one year periods at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. 20 24 The Company's Board of Directors has extended the expiration date of this employment contract from time to time. As of the date hereof, timely notice has been given by the Company that the employment contract will terminate effective June 30, 2001. Thereafter, as set forth in a contract discussed below, Mr. Lanneau will continue his employment by the Company as a consultant for a period of two years commencing July 1, 2001. Exhibit 10-e attached hereto is a copy of the original Employment Contract. In addition to the above five contracts, on December 14, 1999 the Company agreed to enter into (i) employment agreements with its new President and CEO (Mr. Beatty) and with its new Vice President for Investor Relations and Corporate Communications (Ms. Scheer), both originally appointed to their respective offices on October 1, 1999; and (ii) an administrative services agreement with Beatty Finance, Inc. These three agreements are as follows: (g) With R. Stephen Beatty The Company agreed to enter into an Employment Contract with Mr. Beatty commencing January 1, 2000, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. This contract contains stock options to purchase 80,000 shares of the Company's common stock at an exercise price of $0.70 per share. The Company may terminate this contract at any time without cause provided that the employee shall be entitled to 50% of compensation (cash and stock options) due for the remaining portion of the initial one-year term. The Company's Board of Directors has extended the expiration date of this employment contract from time to time. As of the date hereof this contract will expire effective June 30, 2001. A copy of the original contract is attached hereto as Exhibit 10-f. (h) With Elizabeth L. Scheer The Company agreed to enter into an employment contract with Ms. Scheer commencing January 1, 2000, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. The contract provides for payment of salary in cash, for issuance of 29,315 shares of the Company's common stock upon signing, and for an additional 29,780 shares due in quarterly blocks over the initial one year term. The Company's Board of Directors has extended the expiration date of this employment contract from time to time. As of the date hereof this contract will expire effective June 30, 2001. A copy of the original contract is attached hereto as Exhibit 10-g. (i) With Beatty Finance, Inc. The Company agreed to enter into an Administrative Services, Financial Management and Office Sharing Agreement with Beatty Finance, Inc., a company related to the President and CEO of the Company. This agreement provides that beginning January 1, 2000 and through December 31, 2000, the principal office of the Company will be maintained at the offices of its President. After the initial term, the Agreement will automatically renew on a month-to-month basis. The contract calls for monthly payments of $7,500 and additional amounts to be billed for telephone expenses. For the year ended December 31, 1999, the Company paid $5,333 in cash and 37,400 shares of the Company's common stock to Beatty Finance Inc. as reimbursement for past consulting services provided. As of the date hereof this contract between the Company and Beatty Finance, Inc. is renewed on a month-to-month basis. A copy of the original contract is attached hereto as [Exhibit 10-h.] As set forth in Item 6 of Part II of this Report (Management's Discussion and Analysis) on October 27, 2000, the Company entered into consulting agreements with two separate, but closely cooperating, consulting groups. Both groups (The Paisley Group and Dunsford Hill Capital Partners) have been actively assisting the 21 25 Company in their areas of expertise, which include strategic planning and financial consulting for high technology companies. (j) With the Paisley Group, LLC The Company entered into this Consulting Agreement effective October 27, 2000. The principal of the Group is Mr. George M. Steiner, whose spouse, Carlyn J. Steiner, is a member of the Company's Board of Directors. The agreement provides that the Paisley Group, as compensation, shall be granted options to purchase an aggregate of 80,000 shares of Helix common stock, at a price of $1.50 per share, during periods commencing on dates upon which the options vest and ending on December 31, 2009. The Paisley Group shall also be granted options to purchase an additional 50,000 shares of common stock, at a price of $1.50 per share, the granting of such options to be dependent upon one or more trigger events. All options expire on December 31, 2009. A copy of the Company's Consulting Agreement with the Paisley Group is attached hereto as Exhibit 10-i. (k) With Dunsford Hill Capital Partners, Inc. The Company entered into this Consulting Agreement effective October 27, 2000. The principal of Dunsford Hill Capital Partners, Inc. is Mr. Randall Caudill, who frequently cooperates or affiliates in business matters with Mr. Steiner and/or the Paisley Group. The general provisions of this consulting agreement and the compensatory options to be granted are the same as those provided for in the Company's agreement with the Paisley Group. A copy of the Company's Consulting Agreement with Dunsford Hill Capital Partners, Inc. is attached hereto as Exhibit 10-j. (l) With Keith P. Lanneau (Two Contemporaneous Agreements) At the Annual Meeting of the Shareholders on December 15, 2000 Mr. Lanneau, as a major shareholder of the Company, voted all of his shares in favor of the proposed Merger, whereby he would cease to be an officer or director of the Company after December 28, 2000. To define Mr. Lanneau's continuing and future role in supporting the Company, on December 29, 2000 the Company and Mr. Lanneau entered into an Agreement: In this December 29, 2000 Agreement the parties agreed to certain provisions, including but not limited to the following: (i) that Mr. Lanneau would grant options to the Company for the purchase from him of blocks of the Company's common stock owned by him; (ii) that maturity dates would be extended on the three promissory notes of the Company payable to him in the aggregate principal amount of $489,462; (iii) that Mr. Lanneau's full time employment by the Company will terminate on June 30, 2001; and (iv) that contemporaneously with this agreement, the Company and Mr. Lanneau would enter into a separate Consulting Agreement whereby Mr. Lanneau would, on a part time basis, provide consulting services to the Company for a period of two years. This present Agreement grants short-term options to the Company to purchase from Mr. Lanneau (i) 250,000 shares of the Company's common stock at a price of $2.00 per share; (ii) 75,000 shares at $2.75 per share; and (iii) an additional 75,000 shares at $3.25 per share. The options expire at varying times until June 30, 2001. As of the date hereof the option for 250,000 shares expires on April 30, 2001, and the other options expire on June 30, 2001. A copy of this Agreement is attached hereto as Exhibit 10-k. The contemporaneous Consulting Agreement referred to above provides that the Company shall retain Mr. Lanneau's services on a part time basis for a period of two years commencing July 1, 2001. For a monthly retainer of $5,000 Mr. Lanneau will serve as a technical consultant and advisor to the Board of Directors. Exhibit 10-l attached hereto is a copy of the Consulting Agreement of December 29, 2000. 22 26 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NO. DESCRIPTION AND LOCATION ------- ------------------------ 2 Proposal for Approval of Reincorporation of Helix BioMedix, Inc., a Colorado corporation, From Colorado to Delaware 3-a Articles of Incorporation of Helix BioMedix, Inc. (Delaware) 3-b Bylaws of Helix BioMedix, Inc. (Delaware) 10-a 10-b 10-c 10-d 10-e 10-f 10-g SEE ITEM 12--PART III FOR CERTAIN RELATIONSHIPS 10-h 10-i 10-j 10-k 10-l
13-a Registrant's Form 10-KSB for the Year Ended December 31, 1999 Incorporated by Reference to Form 10-KSB for 1999 filed by Registrant with the SEC (File No. 33-20897-D) on April 14,2000. 13-b Registrant's Form 10-QSB for the Quarter Ended March 31, 2000 Incorporated by Reference to Form 10-QSB (First Quarter, 2000) filed by Registrant with the SEC (File No. 33-20897-D) on May 18, 2000. 13-c Registrant's Form 10-QSB for the Quarter Ended June 30, 2000 Incorporated by Reference to Form 10-QSB (Second Quarter, 2000) filed by Registrant with the SEC (File No. 33-20897-D) on August 14, 2000. 13-d Registrant's Form 10-QSB for the Quarter Ended September 30, 2000 Incorporated by Reference to Form 10-QSB (Third Quarter, 2000) filed by Registrant with the SEC (File No. 33-20897-D) on November 14, 2000 24-a Power of Attorney for Jeffrey A. Miller 24-b Power of Attorney for R. Stephen Beatty 24-c Power of Attorney for Thomas L. Frazer
(b) Reports on Form 8-K No reports on Form 8-K have been filed in the year ending December 31,2000. 23 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Registrant: HELIX BIOMEDIX, INC. Date: April 16, 2001 By: /s/ THOMAS L. FRAZER ------------------------------------ Thomas L. Frazer, Director and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ R. STEPHEN BEATTY Date: April 16, 2001 ------------------------------------------------- R. Stephen Beatty, Director and President -- CEO By: /s/ JEFFREY A. MILLER Date: April 16, 2001 ------------------------------------------------- Jeffrey A. Miller, Director By: /s/ THOMAS L. FRAZER Date: April 16, 2001 ------------------------------------------------- Thomas L. Frazer, Director, VP -- Treasurer and Chief Financial Officer
24 28 CONTENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Balance Sheet............................................... F-3 Statements of Operations.................................... F-4 Statement of Stockholders' Equity........................... F-5 to F-7 Statements of Cash Flows.................................... F-8 Notes to Financial Statements............................... F-9 to F-17
F-1 29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors Helix BioMedix, Inc. New Orleans, Louisiana We have audited the accompanying balance sheet of Helix BioMedix, Inc. as of December 31, 2000, and the related statements of operations, cash flows, and changes in stockholders' equity for each of the years ended December 31, 2000 and 1999, and for the period from inception (November 7, 1988) to December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Helix BioMedix, Inc. as of December 31, 2000, and the results of its operations, cash flows, and changes in its stockholders' equity for the year ended December 31, 2000 and 1999, and for the period from inception (November 7, 1988) to December 31, 2000 in conformity with generally accepted accounting principles. As noted in Footnote 7, the effect of the issuance of certain stock options was inadvertently omitted from the financial statements. In our original opinion, we expressed an unqualified opinion on the 2000 financial statements, and our opinion on the revised statements, as expressed herein, remains unqualified. /s/ COMISKEY & COMPANY PROFESSIONAL CORPORATION Denver, Colorado February 6, 2001 Except for Note 7 Which is dated May 14, 2001 F-2 30 HELIX BIOMEDIX, INC. BALANCE SHEET DECEMBER 31, 2000 ASSETS Current Assets Cash...................................................... $ 490,583 Prepaid expenses.......................................... 6,861 ----------- Total current assets.............................. 497,444 Property and Equipment Machinery and equipment................................... 1,591 Furniture and fixtures.................................... 393 ----------- 1,984 Less: accumulated depreciation....................... 556 ----------- 1,428 Other Assets Antimicrobial technology (net)............................ 98,750 Patents pending and approved (net)........................ 494,500 ----------- 593,250 ----------- Total assets...................................... $ 1,092,122 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable -- related party......................... $ 2,166 Payroll taxes payable..................................... 325 Notes payable -- related parties.......................... 326,308 ----------- Total current liabilities......................... 328,799 Long Term Liabilities -- Related Party...................... 163,154 Stockholders' Equity Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued or outstanding............ -- Common stock, $0.001 par value, 25,000,000 shares authorized, 5,022,196 shares issued and outstanding.... 5,022 Additional paid-in capital................................ 6,152,003 Deferred Compensation..................................... (75,000) Deficit accumulated during the development stage.......... (5,481,856) ----------- 600,169 ----------- Total liabilities and stockholders' equity........ $ 1,092,122 ===========
The accompanying notes are an integral part of the financial statements. F-3 31 HELIX BIOMEDIX, INC. STATEMENTS OF OPERATIONS FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000
FOR THE YEAR ENDED INCEPTION DECEMBER 31, TO DECEMBER 31, ------------------------- 2000 2000 1999 --------------- ----------- ---------- Revenue............................................ $ 19,500 $ -- $ -- Operating Expenses Research and development......................... 1,946,549 261,074 205,156 Amortization..................................... 192,262 38,074 24,944 Accounting, legal and professional............... 886,223 519,499 244,804 Advertising...................................... 13,566 -- 78 Consulting fees.................................. 1,320,833 618,485 42,100 Office expense................................... 196,559 6,052 18,591 Other general and administrative costs........... 509,217 410,077 86,041 ----------- ----------- ---------- Total Operating Expenses................. 5,065,209 1,853,261 621,714 ----------- ----------- ---------- Net loss from operations................. 5,045,709 1,853,261 (621,714) Other (Income) Expense Gain on settlement of lawsuit.................... (48,574) -- -- Interest expense................................. 557,305 49,884 44,492 Interest income.................................. (72,584) (50,322) (16,920) ----------- ----------- ---------- 436,147 (438) 27,572 ----------- ----------- ---------- Net loss.................................... $(5,481,856) $(1,852,823) $ (649,286) =========== =========== ========== Basic net loss per share.................... $ (3.81) $ (0.38) $ (0.27) =========== =========== ========== Weighted average shares outstanding......... 1,432,141 4,856,790 2,372,647 =========== =========== ==========
The accompanying notes are an integral part of the financial statements. F-4 32 HELIX BIOMEDIX, INC. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000
COMMON STOCK ----------------------- ADDITIONAL DEFERRED NUMBER PAID-IN COMPENSATION ACCUMULATED STOCKHOLDERS' OF SHARES AMOUNT CAPITAL COSTS DEFICIT EQUITY --------- ----------- ---------- ------------ ----------- ------------- Initial capitalization, November 7, 1988..... 1,000,000 $ 66,486 $ -- $ -- $ -- $ 66,486 Restated for recapitalization of the private company.................................... (370,000) -- -- -- -- -- Net loss for the period ended December 31, 1988....................................... -- -- -- -- (217,271) (217,271) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1988................... 630,000 66,486 -- -- (217,271) (150,785) Reverse acquisition of Helix BioMedix, Inc. by Cartel Acquisitions, Inc., March 20, 1989....................................... 151,262 855,292 -- -- -- 855,292 Net loss for the year ended December 31, 1989....................................... -- -- -- -- (705,641) (705,641) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1989................... 781,262 921,778 -- -- (922,912) (1,134) Net loss for the year ended December 31, 1990....................................... -- -- -- -- (267,541) (267,541) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1990................... 781,262 921,778 -- -- (1,190,453) (268,675) Net loss for the year ended December 31, 1991....................................... -- -- -- -- (206,878) (206,878) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1991................... 781,262 921,778 -- -- (1,397,331) (475,553) Issuance of stock for services rendered, December 1992, $2.50 per share............. 5,600 14,000 -- -- -- 14,000 Net loss for the year ended December 31, 1992....................................... -- -- -- -- (191,053) (191,053) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1992................... 786,862 935,778 -- -- (1,588,384) (652,606) Issuance of stock for services rendered, May 1993 $5.00 per share....................... 8,000 40,000 -- -- -- 40,000 Issuance of stock in partial settlement of accounts payable, May 1993, $5.00 per share...................................... 4,000 20,000 -- -- -- 20,000 Issuance of stock for debt conversion, September 1993, $2.50 per share............ 184,000 460,000 -- -- -- 460,000 Issuance of stock for current and prior services rendered, December 1993, $2.50 per share...................................... 9,490 23,724 -- -- -- 23,724 Fractional shares issued in connection with 1 for 500 reverse stock split................ 29 -- -- -- -- -- Net loss for the year ended December 31, 1993....................................... -- -- -- -- (222,049) (222,049) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1993................... 992,381 1,479,502 -- -- (1,810,433) (330,931) Issuance of stock for cash, March and December 1994, $2.50 per share............. 16,000 40,000 -- -- -- 40,000 Net loss for the year ended December 31, 1994....................................... -- -- -- -- (172,503) (172,503) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1994................... 1,008,381 1,519,502 -- -- (1,982,936) (463,434) Issuance of stock for debt conversion, April 1995, $2.50 per share...................... 41,732 104,331 -- -- -- 104,331 Issuance of stock for debt conversion, April 1995, $2.41 per share...................... 80,000 192,943 -- -- -- 192,943 Issuance of stock for cash, April 19, 1995, $2.50 per share............................ 4,800 12,000 -- -- -- 12,000 Issuance of stock for debt conversion, September 1995, $2.50 per share............ 14,731 36,828 -- -- -- 36,828 Issuance of stock consideration in cooperative endeavor agreement, November 10, 1995................................... 10,000 25,000 -- -- -- 25,000 Issuance of stock options.................... -- -- 137,400 -- -- 137,400 Net loss for the year ended December 31, 1995....................................... -- -- -- -- (323,508) (323,508) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1995................... 1,159,644 1,890,604 137,400 -- (2,306,444) (278,440) Issuance of stock for conversion of debt and accounts payable for consulting fees, December 1996, $1.00 per share............. 110,976 110,976 -- -- -- 110,976 Net loss for the year ended December 31, 1996....................................... -- -- -- -- (281,552) (281,552) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1996................... 1,270,620 2,001,580 137,400 -- (2,587,996) (449,016) Issuance of stock for conversion of debt and accounts payable for consulting fees, December 1997, $2.50 and $1.00 per share... 326,785 780,025 -- -- -- 780,025 Net loss for the year ended December 31, 1997....................................... -- -- -- -- (228,513) (228,513) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1997................... 1,597,405 2,781,605 137,400 -- (2,816,509) 102,496
F-5 33 HELIX BIOMEDIX, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000
COMMON STOCK ----------------------- ADDITIONAL DEFERRED NUMBER PAID-IN COMPENSATION ACCUMULATED STOCKHOLDERS' OF SHARES AMOUNT CAPITAL COSTS DEFICIT EQUITY --------- ----------- ---------- ------------ ----------- ------------- Issuance of stock for services rendered, March 31, 1998, $1.00 per share............ 4,900 $ 4,900 $ -- $ -- $ -- $ 4,900 Issuance of stock for cash March 31, 1998, $1.00 per share............................ 10,000 10,000 -- -- -- 10,000 Issuance of stock for conversion of accounts payable for consulting fees June 30, 1998, $1.00 per share............................ 1,395 1,395 -- -- -- 1,395 Issuance of stock for conversion of accounts payable for consulting fees September 30, 1998, $1.00 per share...................... 2,500 2,500 -- -- -- 2,500 Issuance of stock for services rendered, December 31, 1998, $1.00 per share......... 3,100 3,100 -- -- -- 3,100 Net loss for the year ended December 31, 1998....................................... -- -- -- -- (163,238) (163,238) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1998................... 1,619,300 2,803,500 137,400 -- (2,979,747) (38,847) Issuance of stock for conversion of accounts payable for consulting fees March 1999, $1.00 per share............................ 3,100 3,100 -- -- -- 3,100 Issuance of stock for cash in private placement, July - September 1999, $0.70 per share net of offering costs of $107,195.... 2,890,643 1,916,255 -- -- -- 1,916,255 Issuance of stock for compensation with respect to consulting agreement, September 1999, $0.70 per share...................... 40,000 28,000 -- -- -- 28,000 Escrow, but not issuance of stock for consulting agreement, September 1999, $0.70 per share.................................. -- 42,000 -- (42,000) -- -- Issuance of stock for compensation of past services provided to Company, September 1999, $1.25 per share...................... 73,215 91,519 -- -- -- 91,519 Issuance of stock for conversion of accounts payable for consulting fees, September 1999, $1.25 per share...................... 2,000 2,500 -- -- -- 2,500 Compensation and deferred compensation recorded for options granted, December 1999....................................... -- -- 50,875 (44,000) -- 6,875 Deferred compensation recorded for stock awards, December 1999...................... -- 87,225 -- (87,225) -- -- Amortization of deferred compensation costs...................................... -- -- -- 21,000 -- 21,000 Net loss for the year ended December 31, 1999....................................... -- -- -- -- (649,286) (649,286) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 1999................... 4,628,258 4,974,099 188,275 (152,225) (3,629,033) 1,381,116 Retirement of shares issued in December 1999....................................... (250) (313) -- -- -- (313) Stock and options issued for services -- January 2000................... 1,250 3,125 4,500 -- -- 7,625 Shares issued and options vested in connection with employment agreements, March 2000................................. 267,445 700,000 -- $ 41,306 -- 741,306 Director shares and options issued March 2000....................................... 7,747 18,399 12,976 -- -- 31,375 Director shares and options issued June 2000....................................... 8,750 16,953 10,828 -- -- 27,781 Revaluation of deferred compensation and options vested in connection with employment agreements, June 2000........... -- (27,919) 33,784 16,396 -- 22,261 Director shares and options issued September 2000....................................... 8,750 24,063 16,297 -- -- 40,360 Options issued in connection with two consulting agreements, October 2000........ -- -- 100,000 (75,000) -- 25,000 Options vested in connection with employment agreements, shares issued for services, and revaluation of options due to extension of exercise date, September 2000.............. 41,000 2,313 85,000 51,012 -- 138,325 Director shares and options issued December 2000....................................... 8,659 13,259 7,197 -- -- 20,456
F-6 34 HELIX BIOMEDIX, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000
COMMON STOCK ----------------------- ADDITIONAL DEFERRED NUMBER PAID-IN COMPENSATION ACCUMULATED STOCKHOLDERS' OF SHARES AMOUNT CAPITAL COSTS DEFICIT EQUITY --------- ----------- ---------- ------------ ----------- ------------- Options vested in connection with employment agreements, and shares issued for services, December 2000.............................. 4,987 $ 8,104 $ 4,613 $ 43,511 $ 56,228 $ 51,615 Compensation adjustment to variable plan options December 2000...................... -- -- (83,828) -- -- (83,828) Exercise of options @ $1.00/share............ 45,000 112,500 (67,500) -- -- 45,000 Exercise of options @ $0.50/share............ 600 1,500 (1,200) -- -- 300 Adjustment to par value stock for Delaware re-incorporation........................... -- (5,841,061) 5,841,061 -- -- -- Net loss for the year ended December 31, 2000....................................... -- -- -- -- (1,852,823) (1,852,823) --------- ----------- ---------- --------- ----------- ----------- BALANCE, DECEMBER 31, 2000................... 5,022,196 $ 5,022 $6,152,003 $ (75,000) $(5,481,856) $ 600,169 ========= =========== ========== ========= =========== ===========
The accompanying notes are an integral part of the financial statements. F-7 35 HELIX BIOMEDIX, INC. STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000
INCEPTION TO DECEMBER 31, DECEMBER 31, ------------------------- 2000 2000 1999 ------------ ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss.................................................. $(5,481,856) $(1,852,823) $ (649,286) Adjustments to reconcile net loss to net cash flows from operating activities: Stock and options for services.......................... 1,569,083 1,000,576 111,869 Accrued interest receivable............................. -- -- 5,342 Amortization............................................ 192,442 38,073 24,944 Depreciation expense.................................... 556 374 182 Research and development................................ 53,000 29,000 -- Increase (decrease) in prepaid expenses................. (6,851) 8,274 (15,125) Decrease (increase) in refund receivable................ -- 342 (342) Decrease in receivable.................................. -- -- 25,000 Increase (decrease) in accounts payable................. -- (54,170) 44,594 Increase (decrease) in accounts payable -- related party................................................. 346,102 323 (35,741) Increase (decrease) in payroll taxes payable............ 325 (2,849) 3,174 Increase (decrease) in accrued interest payable......... -- (19,370) 2,465 ----------- ----------- ---------- Net cash flows from operating activities............ (3,327,199) (852,250) (482,924) CASH FLOWS FROM INVESTING ACTIVITIES Investment in Helix Delaware.............................. (10) (10) -- Purchase of property and equipment........................ (1,984) -- (1,984) Patents................................................... (380,501) (77,277) (66,494) ----------- ----------- ---------- Net cash flows from investing activities............ (382,495) (77,287) (68,478) CASH FLOWS FROM FINANCING ACTIVITIES Cash received in reverse acquisition...................... 634,497 -- -- Notes payable............................................. 7,394 (36,000) (31,061) Related party notes payable (net)......................... 705,887 -- 80,140 Issuance of stock for cash................................ 2,019,680 300 1,957,380 Issuance of debt subsequently converted to stock.......... 832,819 -- -- ----------- ----------- ---------- Net cash flows from financing activities............ 4,200,277 (35,700) 2,006,459 ----------- ----------- ---------- Net increase (decrease) in cash..................... 490,583 (965,237) 1,455,057 Cash, beginning of period........................... -- 1,455,820 763 ----------- ----------- ---------- Cash, end of period................................. $ 490,583 $ 490,583 $1,455,820 =========== =========== ==========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES AND OTHER CASH INFORMATION
INCEPTION TO DECEMBER 31, DECEMBER 31, ------------------ 2000 2000 1999 ------------ ------- ------- Stock issued to acquire patents............................. $ 66,486 $ -- $ -- Debt issued to acquire technology........................... 200,000 -- -- Bridge loans outstanding at acquisition..................... 200,000 -- -- Patent costs included in accounts payable................... 99,859 -- -- Accounts payable converted to notes......................... 704,559 -- 4,500 Accrued interest rolled into notes.......................... 403,463 -- 27,796 Notes converted to equity................................... 1,639,548 -- -- Cash paid for interest...................................... 69,536 49,884 14,231 Cash paid for taxes......................................... -- -- --
The accompanying notes are an integral part of the financial statements. F-8 36 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF ENTITY Helix BioMedix, Inc. was originally formed under the laws of the state of Colorado on February 2, 1988 under the name Cartel Acquisitions, Inc. to create a corporate vehicle to seek and acquire a business opportunity. On March 20, 1989, the Company acquired 100% of the outstanding shares of Helix BioMedix, Inc., a Louisiana corporation, ("BioMedix of Louisiana") in exchange for 630,000 shares of the Company's common stock. The Company acquired its shares from Helix International Corporation ("Helix"). BioMedix of Louisiana was incorporated on November 7, 1988 as a separate corporate entity from Helix International, Inc., to develop therapeutic biopharmaceuticals for animal and human health care. On November 1, 2000, the Company incorporated a wholly owned subsidiary, Helix BioMedix, Inc. in the state of Delaware ("Helix-Delaware"), for the purpose of merging the Company into Helix-Delaware, with Helix-Delaware as the surviving corporation. This merger is reflected in the accompanying financial statements with an effective date of December 29, 2000. Unless otherwise noted, all references herein to ("the Company") refer to Helix BioMedix, Inc., the Delaware corporation, and its wholly owned subsidiary, Helix BioMedix, Inc. of Louisiana. DEVELOPMENT STAGE ACTIVITIES The Company has been involved in the business of conducting research both internally and in conjunction with a research and development arrangement with Louisiana State University ("LSU"), in the field of biotechnology. The Company applies genetic engineering techniques to the development of potential commercial products primarily in the fields of human therapeutics and agribusiness. In conjunction with the incorporation of BioMedix of Louisiana, Helix transferred to it, by way of an Assignment of Interest in Technology, all of Helix's right, title and interest in and to the technology and potential patent rights relating to the use of lytic peptides in animal and human health care. Furthermore, Helix granted to BioMedix of Louisiana all of Helix's rights and obligations associated with the Helix/LSU Antimicrobial Project relating to the use of lytic peptides in animal and human health care. In exchange for the transfer of technology, BioMedix of Louisiana issued 100% of its stock to Helix and signed a $200,000 promissory note to Helix. Concurrently with the aforementioned events, the Company entered into an agreement with Helix International which provided that the scientific employees of Helix continue to conduct the lytic peptide research on a contract basis for the account of the Company. Under the terms of the Agreement, Helix International provided research associates, laboratory and office facilities and all administrative services to the Company on a cost plus 15% basis until an aggregate of $500,000 in expenditures had been reached. This arrangement continued through February 1990. In March 1990, the Company's in-house research and development activities were curtailed pending additional financing. Concurrently, the Company underwent a de-facto change in control wherein Helix International sold the majority of its controlling stock interest in the Company to University Research Marketing, Inc. ("URM"). Concurrently with this action, the Company entered into an agreement with URM to provide administrative services and to continue its research and development for a flat fee of $20,000 per month plus patent and other out-of-pocket costs. URM performed such services and funded research at LSU on behalf of the Company from March 1990 until August 1991. In July 1992, de-facto control of the Company was returned to Helix International, and the Company, with the assistance of both URM and Helix International, began a series of negotiations with LSU which culminated in the February 1993 Agreement of Settlement, Compromise, and Release. This settlement F-9 37 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 agreement essentially released LSU, the Company, Helix International, URM, and Helix Phytonetix, a related company, from defaults under their original respective agreements. The settlement renewed the Company's exclusive license in five lytic peptide patents currently under development. Excluding research and development costs expensed to operations as incurred, the Company's investment in these patents was $494,500, net of amortization, at December 31, 2000. As part of the settlement, the Company executed a sublicense agreement with URM for the development and marketing of a portion of the patented technology. In 1993, the Company entered into an agreement with the Louisiana Partnership for Technology and Innovation to obtain assistance in the implementation of a financial and managerial restructuring plan for the Company, and in the development and implementation of licensing programs for the technology. In consideration for these services, the Company issued 8,000 shares of its common stock to the Partnership in May 1993. In late 1993, the Company entered into negotiations with Therapeutic Peptides, Inc. ("TPI"), the objective of which was to bring about a merger of TPI into Helix BioMedix, Inc., contingent upon the successful completion of the Company's financing plan. Since 1993 and through the present, TPI has continued to conduct lytic peptide research on behalf of the Company. In November 1995, the Company, in lieu of the proposed merger with TPI, entered into a cooperative endeavor agreement with Therapeutic Peptides, Inc. Upon consummation of the agreement, Therapeutic Peptides, Inc. received 10,000 shares of stock in Helix BioMedix, Inc., and a right to share in the royalties received by Helix BioMedix, Inc. with respect to the derivative peptides. The Company continues to fund research on its peptides at the laboratories of TPI. As is more fully described in later paragraphs, this agreement was amended in September 1999. In 1996, the Company agreed to an out of court settlement resulting from a suit filed by the Company and three other parties, Helix International, Inc., University Research and Marketing, Inc., and Helix Phytonetix, against former patent attorneys for the failure to renew patents held by the plaintiffs. The settlement resulted in a gain for the Company of $48,574. In March 1993, the Company, Helix, URM, and Helix Phytonetix, Inc. (a related company) entered into a Novated Agreement of Settlement with LSU which releases all the parties from any defaults arising from their former respective agreements. Under this Agreement, five U.S. patent applications (and their foreign counterparts), which had been prosecuted by Helix, URM, and the Company, became the property of LSU. Pursuant to this Agreement, the Company was granted by LSU a worldwide exclusive license to the technology of the lytic peptide patent estate with respect to all potential uses except in the area of plant technology. Additionally, the Company was granted a conditional right, without further funding from the Company, to obtain a license to certain future lytic peptide technology which LSU might develop. From the outset of its Agreement of Settlement with LSU in 1993, the Company contended its position as a patent licensee of the University to be one without proper cooperative support. In 1996 and early 1997, the Company formally notified LSU officials of its concerns about the deteriorating relationship. During the first quarter of 1997, continuing disputes between the Registrant and LSU resulted in each party's placing the other in default of the agreements between the two. During the second quarter of 1997, LSU formally terminated the Company's license of certain LSU patents relating to the Cytoporin technology. This termination of license and resolution of the alleged defaults of the parties were all subject to arbitration. The arbitration procedures were invoked, and the Company notified LSU of Registrant's intent to seek further relief in an appropriate court of law. F-10 38 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 In late 1997, the Company and LSU made substantial progress in good faith negotiations to settle all disputes. Continued progress in negotiations by year-end prompted the parties to place the arbitration proceedings in abeyance and to withhold contemplated legal actions pending the outcome of the negotiations. In March 1998, the Company and LSU reached final agreement on a "Novation of Prior Agreements." The parties terminated arbitration procedures. In consideration of the Company's dismissing and waiving its causes of action against LSU, LSU assigned to the Company all right, title, and interest to all of the U. S. and foreign patents and patent applications previously under license to the Company. Although the assignment was made for nominal consideration, with LSU entitled to no future royalties from licensing by the Company of patent rights, the Novation Agreement contains a provision by which Helix BioMedix may pay up to $1,000,000 to LSU upon final FDA approval of the first two pharmaceuticals falling within the scope of the patents and patent applications now assigned by LSU to the Company. In September 1999, the Company entered into a Research Alliance Agreement with TPI, Biosouth Research Laboratories, Inc. ("BRL") and Dr. Donald R. Owen ("OWEN"). This agreement amended certain portions of the 1995 cooperative endeavor agreement to include BRL and OWEN, and utilize the corporate funding provided by the Private Placement Memorandum, more fully described in Note 3, to accelerate the research collaboration between the Company and TPI. In September 1999, the Company entered into an employment contract with Keith P. Lanneau commencing October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for two additional one-year periods at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. During 2000, this contract was amended to extend the original term of the contract to December 31, 2000. In September 1999, the Company entered into a consulting agreement with Henry Niman, Ph.D. commencing October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one-year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. During 2000, this contract was amended to extend the original term of the contract to December 31, 2000. In September 1999, the Company entered into a consulting agreement with Katz-Miller Ventures, LLC ("KATZ-MILLER"), Ralph Katz ("KATZ") and Jeffery A. Miller ("MILLER") commencing October 1, 1999, and extending for a period of two years. This contract provides for the issuance of 40,000 shares of the Company's common stock upon execution of the agreement, and an additional 40,000 on the first anniversary of the agreement. This agreement also provides for additional bonus shares of up to 540,000 to be issued provided the strategic and financial planning provided by the collective consultant group causes a triggering event, as defined in the agreement. During the year ended December 31, 2000, KATZ-MILLER was awarded 200,000 bonus shares due to triggering events. In December 1999, the Company agreed to enter into an employment contract with its President and CEO, R. Stephen Beatty commencing January 1, 2000, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one-year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. Under this contract, Mr. Beatty was awarded stock options to purchase 80,000 shares of the Company's common stock at an exercise price of $0.70 per share. In December 1999, the Company agreed to enter into an employment contract with its Vice-president of Investor Relations, Elizabeth Scheer, commencing January 1, 2000, and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one-year period at the end of F-11 39 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation. Under this contract, Ms. Scheer was issued 36,760 shares of the Company's common stock and awarded stock options to purchase 27,300 shares of the Company's common stock at an exercise price of $0.70 per share. In October 2000, the Company entered into a consulting agreement with Dunsford Hill Capital Partners, Inc. ("Dunsford"), commencing October 27, 2000, and extending for a period of one year. This contract provides for the issuance of options to purchase 80,000 shares of the Company's common stock at an exercise price of $1.50 per share. Of these options, 6,666 vest upon execution of the agreement, an additional 6,666 options vest on the 27th of the each of the next ten months and 6,674 vest on the 27th day of the twelfth month. This agreement also provides for up to 50,000 of additional bonus shares to be issued, provided the strategic and financial planning provided by the consultant company causes a triggering event, as defined in the agreement. In October 2000, the Company entered into a consulting agreement with The Paisley Group, LLC. ("Paisley"), commencing on October 27, 2000, and extending for a period of one year. This contract provides for the issuance of options to purchase 80,000 shares of the Company's common stock at an exercise price of $1.50 per share. Of these options, 6,666 vest upon execution of the agreement, an additional 6,666 options vest on the 27th of the each of the next ten months and 6,674 vest on the 27th day of the twelfth month. This agreement also provides for up to 50,000 of additional bonus shares to be issued, provided the strategic and financial planning provided by the consultant company causes a triggering event, as defined in the agreement. The Company believes it is now prepared to implement a Business Plan providing for both near-term and long-term product introductions. This plan contemplates revenues from licensing and strategic alliances for long-term development of prescription pharmaceutical products, as well as introduction within the near term of products subject to less regulatory restraints. Management expects that achievement of projected progress milestones will establish the Company as a financially viable biotechnology firm with substantial public investor support. Due to the fact that the Company's research and development activities have begun, but there has been no significant revenue therefrom, the Company is in the development stage as defined in Statement of Financial Accounting Standards #7. SIGNIFICANT ACCOUNTING POLICIES Intangibles Patent costs, consisting primarily of legal, filing, and maintenance fees, are capitalized. Amortization is taken on the straight-line method over the life of each patent(s), commencing upon the issuance of the patents, not to exceed 17 or 20 years, depending on the date the patent was issued, or the date the application was filed. Antimicrobial technology, which was purchased in conjunction with the patents, has been capitalized at the basis of the debt issued for it. This technology is being amortized ratably over twenty years. Organization costs were amortized ratably over 60 months. Research and Development Research and development costs are expensed as incurred. F-12 40 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 Depreciation Cost of equipment used in operations has been capitalized and is depreciated using the straight-line method over useful lives of 5 to 7 years. Concentrations of Credit Risk From time-to-time, the Company maintains cash balances in excess of FDIC insured limits. The amount of such excess at December 31, 2000 was approximately $353,000. Statements of Cash Flows For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Loss per Share Loss per share has been computed using the weighted average number of shares outstanding during the period. Diluted loss per share has not been presented as the effect of potentially dilutive securities is estimated to be antidilutive. Use of Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Income Taxes For all periods presented, the Company has computed its income tax benefit under SFAS 109 -- Accounting for Income Taxes. Primary temporary differences relate to net operating loss carryforwards and R & D credit carryforwards, which are subject to a full valuation allowance. Reverse Stock Split On December 29, 1993, the Company underwent a 1 for 500 reverse stock split. All share and per share amounts have been retroactively restated to reflect the split. Fair Value of Financial Instruments Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments (none of which are held for trading purposes) approximate the carrying values of such instruments. F-13 41 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 2. NOTES PAYABLE The Company is obligated under the following notes at December 31, 2000: 8% note payable to shareholder, interest due quarterly, principal due January 2001...................................................... $163,154 8% note payable to shareholder, interest due quarterly, principal due September 2001.............................. 163,154 8% note payable to shareholder, interest due quarterly, principal due September 2002.............................. 163,154 -------- Total notes outstanding........................... 489,462 Less amount classified as current................. 326,308 -------- $163,154 ========
Each of the shareholder notes for $163,154 will be secured by a first security interest in technology and intellectual property rights or other assets of the Company in the event of default. Interest is payable quarterly in cash. Debt maturities over the next five years are as follows: due in 2001, $326,308; due in 2002, $163,154 and, due thereafter $0. 3. STOCKHOLDERS' EQUITY On December 29, 2000, the Company was re-incorporated in the State of Delaware. The Articles of Incorporation increase the number of authorized shares of stock to 27,000,000, $0.001 par value. Of these, 25,000,000 shares are to be designated as Common Stock and 2,000,000 are to be designated as Preferred Stock. Preferred Stock The Board of Directors may authorize the issuance of Preferred Stock from time to time in one or more series and shall have such voting, redemption, liquidation and dividend rights as the board may deem advisable. As of December 31, 2000, no preferred series shares had been designated by the Board. Stock Split On December 29, 1993, the Company underwent a 1 for 500 reverse stock split. All share and per share amounts in these financial statements have been retroactively restated to reflect this reverse split. F-14 42 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 Options A summary of option activity for the years ended December 31, 2000 and 1999 is as follows:
WEIGHTED WEIGHTED SHARES AVERAGE AVERAGE UNDER EXERCISE OPTIONS EXERCISE OPTION PRICE EXERCISABLE PRICE -------- -------- ----------- -------- Options outstanding December 31, 1998............. 194,800 $1.00 194,800 $1.00 Options granted................................... 92,500 0.70 12,500 0.70 Options cancelled................................. (119,200) 1.00 (119,200) 1.00 -------- -------- Options outstanding December 31, 1999............. 168,100 $0.83 88,100 $0.95 Options granted................................... 243,693 1.34 123,689 1.18 1999 Options vesting.............................. -- 0.70 80,000 0.70 Options cancelled................................. (30,000) 1.00 (30,000) 1.00 Options exercised................................. (45,600) 1.00 (45,600) 1.00 -------- -------- Options outstanding of December 31, 2000.......... 336,193 $1.16 216,189 $0.97 ======== ========
Some of the options granted expire on various dates in 2002, some on January 15, 2003 and the rest on December 31, 2009, and have the following vesting characteristics:
VESTED AT DECEMBER 31, NUMBER OF OPTIONS VESTING PERIOD 2000 ----------------- ----------------- ---------------------- 120,004............................... By September 2001 -- 216,189............................... Immediately 216,189 ======= ======= 336,193............................... 216,189 ======= =======
Pro Forma Disclosure The Company applies Accounting Principles Board No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its options. The Company considered the effects of recognizing compensation cost pursuant to the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (SFAS No. 123). Using the Black-Scholes option-pricing model, which takes into account the exercise price of the options, expected life, current price of the underlying stock, its expected volatility and dividends, and the risk-free interest rate, net loss would have been increased to the pro forma amounts as follows for the years ending December 31:
2000 1999 -------------------------- ------------------------ AS PRO AS PRO REPORTED FORMA REPORTED FORMA ----------- ----------- ----------- --------- Net Loss............... $(1,852,823) $(1,989,776) $(2,175,545) $(650,286) =========== =========== =========== =========
The average fair value of options granted during fiscal 2000 was $2.10. The fair value of options is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 7.0% for fiscal 2000; expected life of 12 months; dividend yield percentage of 0%; and, volatility of approximately 525% for the year ended December 31, 2000. On December 15, 2000, the shareholders of the Company approved the Helix BioMedix 2000 Stock Option Plan ("the 2000 Plan"). A total of 5,400,000 of the Company's authorized and unissued common shares are reserved for issuance under the 2000 Plan. The 2000 Plan is to be administered by non-employee directors, who shall be authorized to grant stock options to the Company's employees, consultants and/or directors. These options may be either Incentive Stock Options as defined and governed by Section 422 of the F-15 43 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 Internal Revenue Code, or Nonqualified Stock Options. The 2000 Plan specifically provides the Company with an option to repurchase, upon termination of an optionee's employment, up to ten thousand shares acquired by the optionee through the exercise of options granted thereunder at its then-current fair market value. As of December 31, 2000, no shares had been issued under the 2000 Plan. Stock Offering During 1999, the Company issued 2,890,643 shares of common stock in a private placement for $1,916,255, net of offering costs of $107,195. The shares were sold in units, each unit consisting of 150,000 common shares and 150,000 warrants. Each warrant entitles the holder to purchase one common share at an exercise price of $3.25 per share. For a period of three years, the warrants are callable at the option of the Company at a premium equal to the greater of market price less $3.25 or a price of $0.75 for the first year, $1.75 for the second year, and $2.75 for the third year. Deferred Compensation Costs During the year ended December 31, 1999, the Board of Directors approved and ratified certain consulting agreements and employment contracts. These agreements called for the issuance of stock and the granting of options, at various intervals during the year 2000. The Company recorded deferred compensation costs of $173,225 which were charged to operations $21,000 in 1999 and $152,225 in 2000. Other agreements signed during 2000 resulted in an amount of $75,000 recorded as deferred income as of December 31, 2000 to be charged to operations during the first three quarters of 2001. Stockholders' Equity and Comprehensive Income The Financial Accounting Standards Board has recently released Statement of Financial Accounting Standards No. 130 -- Reporting Comprehensive Income. SFAS 130 requires companies to present comprehensive income (consisting primarily of net income items plus other direct equity changes and credits) and its components as part of the basic financial statements. For the year ended December 31, 2000, the Company's financial statements do not contain any changes in equity that are required to be reported separately in comprehensive income. 4. INCOME TAXES The Company has federal net operating loss carryforwards totaling approximately $4.8 million which expire between 2003 and 2020. The Company also has approximately $140,000 in Federal Credits for Increasing Research Activities available to offset future taxable income and related tax. The following are the components of the Company's deferred tax assets and liabilities:
2000 1999 ----------- ----------- Non-benefited net operating loss carryforwards.... $ 4,760,000 $ 3,600,000 Research and development credits.................. 140,000 120,000 Valuation allowance............................... (4,900,000) (3,720,000) ----------- ----------- Total deferred tax assets......................... $ -- $ -- =========== =========== Deferred tax liabilities.......................... $ -- $ -- =========== ===========
5. RELATED PARTY TRANSACTIONS From March 1989 to March 1990, the Company contracted with Helix International, Inc., a principal shareholder, to conduct lytic peptide research on a contract basis for the account of the Company. The F-16 44 HELIX BIOMEDIX, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD FROM INCEPTION (NOVEMBER 7, 1988) TO DECEMBER 31, 2000 Company incurred a total of $655,321 in research costs paid or payable to Helix International during this period. At December 31, 1997, promissory notes totaling $752,902 were converted into common stock of the Company at $2.48 per share, for a total of 304,062 shares. In addition, $50,000 in debt payable to Helix International had been converted to equity in 1992 at $2.50 per share. From inception to December 14, 1999, the Company maintained its corporate offices in the offices of its former president, incurring $179,287 in rental and general office expense reimbursements during that period. Effective December 14, 1999, the Company began leasing office space from the current president of the Company for monthly payments of $7,500 and additional amounts to be billed for telephone expenses. For the year ended December 31, 2000 and 1999, the Company paid $90,088 and $5,333, respectively, under this agreement. The note receivable from Therapeutic Peptides, Inc. ("TPI"), a shareholder of the Company, was due June 30, 1996. This receivable along with the accrued interest receivable was forgiven as a condition of the Research Alliance Agreement described more fully in Note 1. The Company currently owes $489,462 to a shareholder, the former president of the Company as more fully described in Note 2. On December 29, 2000, the Company entered into an agreement by which the Company, at its option, may acquire up to 250,000 of its common shares from the shareholder at $2.00 per share through February 28, 2001 ("first option"), up to 75,000 shares at $2.75 per share through June 30, 2001 ("second option"), and up to 75,000 shares at $3.25 per share through June 30, 2001 ("third option"). Exercise of the first option will extend the due dates of $326,308 in debt maturing in September 2001 and 2002 by one year from the original date. 6. LEGAL PROCEEDINGS On November 3, 1995, the Company entered into a Loan Agreement with International Biochemicals Group, Inc. ("IBG") whereby IBG advanced to the Company and made a commitment for further lending. On November 3, 1995, the Company issued to IBG a promissory note for $25,000 due and payable May 3, 1996. The Company has not made payment on the note and advised IBG of its breach of various provisions of the lending agreement. From time to time, the due date of the note was extended, and the Company agreed to pay the note in full promptly following resolution of its disputes with LSU, in consideration of which the Company had offered to withdraw its allegations of IBG's default on the Loan Agreement. The protracted nature of the disputes between LSU and the Company and the termination of the Company's license by LSU prompted IBG to take legal action to collect the above referenced note. On September 16, 1997, IBG filed a petition in the Nineteenth Judicial District Court of Louisiana seeking judgment on the note. Corporate Counsel for the Company timely responded to the petition and filed a reconventional demand in support of Registrant's allegation of IBG's breach of the Loan Agreement. On August 19, 1998, the Court granted the judgment to Interbio for payment of principal and interest due on the note along with legal costs. During the year ended December 31, 2000, the Company settled this suit for $45,000 as full payment for the note and accrued interest charges. 7. CORRECTION OF AN ERROR The financial statements have been restated to reflect the issuance of options to purchase 160,000 shares of common stock. These options were inadvertently omitted from the original financial statements. The effect of the restatement was to increase net loss by $29,613, or $0.01 per share, for the year ended December 31, 2000. In addition, certain disclosures in Footnote 3 concerning option activity have been appropriately modified. F-17 EX-2 2 v72847a1ex2.txt EXHIBIT 2 1 EXHIBIT 2 PROPOSAL FOR APPROVAL OF REINCORPORATION OF HELIX BIOMEDIX, INC., A COLORADO CORPORATION FROM COLORADO TO DELAWARE For the reasons set forth below, the Board of Directors of Helix BioMedix, Inc., a Colorado corporation ("Helix Colorado") seeks shareholder approval for changing the Company's state of incorporation from Colorado to Delaware (the "Reincorporation"). The Reincorporation would be accomplished by a merger (the "Merger") with and into the Company's wholly-owned subsidiary, Helix BioMedix, Inc., a Delaware corporation ("Helix Delaware"). The Reincorporation has been approved by the Board of Directors. VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL Approval of the Reincorporation Proposal, which will also constitute approval of the (i) Merger Agreement, the Amended and Restated Certificate of Incorporation and the Bylaws of Helix Delaware, and (ii) revisions in the Company's indemnification agreements with its officers and Directors to conform those agreements to Delaware law, will require the affirmative vote of the holders of a majority of the outstanding shares of Helix Colorado Common Stock. ALL SHAREHOLDERS OF RECORD ARE BEING PROVIDED NOTICE OF THIS PROPOSAL AND ARE ENTITLED TO VOTE ON THE REINCORPORATION. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE. PRINCIPAL REASONS FOR THE REINCORPORATION Prominence, Predictability and Flexibility of Delaware Law. For many years, Delaware has followed a policy of encouraging incorporation in that state and, in furtherance of that policy, has been a leader in adopting, construing and implementing comprehensive, flexible corporate laws responsive to the legal and business needs of corporations organized under its laws. Many corporations have chosen Delaware initially as a state of incorporation or have subsequently changed corporate domicile to Delaware in a manner similar to that proposed by the Company. Because of Delaware's prominence as the state of incorporation for many major corporations, both the legislature and courts in Delaware have demonstrated an ability and a willingness to act quickly and effectively to meet changing business needs. The Delaware courts have developed considerable expertise in dealing with corporate issues and a substantial body of case law has developed construing Delaware law and establishing public policies with respect to corporate legal affairs. Increased Ability to Attract and Retain Qualified Directors. Both Colorado and Delaware law permit a corporation to include a provision in its Certificate of Incorporation, which reduces or limits the monetary liability of Directors for breaches of fiduciary duty in certain circumstances. The increasing frequency of claims and litigation directed against Directors and 2 officers has greatly expanded the risks facing Directors and officers of corporations in exercising their respective duties. The amount of time and money required to respond to such claims and to defend such litigation can be substantial. It is the Company's desire to reduce these risks to its Directors and officers and to limit situations in which monetary damages can be recovered against Directors so that the Company may continue to attract and retain qualified Directors who otherwise might be unwilling to serve because of the risks involved. The Company believes that, in general, Delaware law provides greater protection to Directors than Colorado law and that Delaware case law regarding a corporation's ability to limit Director liability is more developed and provides more guidance than Colorado law. Well Established Principles of Corporate Governance. There is substantial judicial precedent in the Delaware courts as to the legal principles applicable to measures that may be taken by a corporation and as to the conduct of the Board of Directors under the business judgment rule. The Company believes that its Stockholders will benefit from the well-established principles of corporate governance that Delaware law affords. ANTI-TAKEOVER IMPLICATIONS OF REINCORPORATION Delaware, like many other states, permits a corporation to adopt a number of measures through amendment of the Certificate of Incorporation or Bylaws or otherwise, which measures are designed to reduce a corporation's vulnerability to unsolicited takeover attempts. The Reincorporation Proposal is not being proposed in order to prevent an unsolicited takeover attempt, nor is it in response to any present attempt known to the Board of Directors to acquire control of the Company, obtain representation on the Board of Directors or take significant action that represents the company. Nevertheless, certain effects of the Reincorporation Proposal may be considered to have anti-takeover implications. Section 203 of the Delaware General Corporation Law ("Section 203"), from which Helix Delaware does not intend to opt out, restricts certain "business combinations" with "interested Stockholders" for three years following the date that a person or entity becomes an interested stockholder, unless the Board of Directors approves the business combination and/or other requirements that are met. See "Significant Differences between the Corporation Laws of Colorado and Delaware - Approval of Certain Business Combinations." Furthermore, the continued prohibition on cumulative voting could be viewed as having an anti-takeover effect in that it can make it more difficult for a minority stockholder to gain a seat on the Board. Other measures permitted under Delaware law, which the Company chooses to implement include the ability establishment of a staggered or classified Board of Directors and the elimination of the right of Stockholders controlling at least ten percent (10%) of the voting shares to call a special meeting of the Stockholders. In addition, while both Colorado and Delaware law permit a corporation to adopt such measures as stockholder rights plans, designed to reduce a corporation's vulnerability to unsolicited takeover attempts, there is substantial judicial precedent in the Delaware courts as to the legal principles applicable to such defensive measures and as to the conduct of a Board of Directors under the business judgment rule with respect to unsolicited takeover attempts. The Board of Directors has no present intention following the Proposed Reincorporation to amend 2 3 the Certificate of Incorporation or Bylaws to include provisions, which might deter an unsolicited takeover attempt. However, in the discharge of its fiduciary obligations to its Stockholders, the Board of Directors of the Company will continue to evaluate the Company's vulnerability to potential unsolicited bids to acquire the Company on unfavorable terms and to consider strategies to enhance the Board's ability to negotiate with an unsolicited bidder. PLAN OF MERGER Pursuant to the terms of an Agreement and Plan of Merger (the "Merger Agreement," a copy of which is attached as Exhibit A to this Proxy Statement), the Company will be merged with and into Helix Delaware, with Helix Delaware as the surviving corporation. Upon completion of the Merger, each outstanding share of common stock of the Company will automatically be converted into one share of common stock of Helix Delaware. Each outstanding certificate representing shares of common stock of the Company will represent the same number of shares of Helix Delaware. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING CERTIFICATES. It is expected that the common stock of Helix Delaware will continue to be traded in the over-the-counter market under the symbol HXBM following the Merger. The Proposed Reincorporation has been unanimously approved by Helix Colorado's Board of Directors. If approved by the Shareholders, it is anticipated that the Effective Date of the Merger will be as soon as reasonably practicable following the Annual Meeting of Shareholders. However, pursuant to the Merger Agreement, the Merger may be abandoned or the Merger Agreement may be amended by the Board of Directors (except that certain principal terms may not be amended without Shareholder approval) either before or after Shareholder approval has been obtained and prior to the Effective Date of the Proposed Reincorporation if, in the opinion of the Board of Directors of either company, circumstances arise that make it inadvisable to proceed. Shareholders of Helix Colorado will have no dissenters' rights of appraisal with respect to the Reincorporation Proposal. See "Significant Differences Between the Corporation Laws of Colorado and Delaware - Appraisal Rights." The discussion set forth below is qualified in its entirety by reference to the Merger Agreement, the Certificate of Incorporation and the Bylaws of Helix Delaware, copies of which are attached hereto as Exhibits A, B and C respectively. EFFECT OF REINCORPORATION AND MERGER The Merger would change the legal domicile of the Company and would cause other changes to the Articles of Incorporation and Bylaws, which are described below. The move will also result in the company being governed by Helix Delaware's existing Board of Directors. These individuals include: Thomas L. Frazer; Carlyn Steiner; Jeffrey A. Miller; R. Stephen Beatty; and Ralph Katz. These individuals serve on Helix Delaware's classified board. For a further discussion of this change, see "Differences in the Corporate Charters - Establishment of Classified Board of Directors" below. Also, the Merger will cause Helix Colorado to adopt the Helix Delaware 2000 Stock Option Plan. The Reincorporation and Merger will not result in any change in the business, management, location of the Company's principal executive offices, 3 4 assets, liabilities, corporate obligations under contracts, options or outstanding warrants to purchase common stock, net worth or accounting practices. The Merger will not give rise to any appraisal or dissenters' rights. Following completion of the Reincorporation, Helix Delaware will own all outstanding shares of Helix Colorado's wholly-owned subsidiary, Helix BioMedix, Inc., a Louisiana corporation ("Helix Louisiana"). Subsequent to completion of the Reincorporation, Helix Delaware intends to merge with and into Helix Louisiana, with Helix Delaware being the surviving entity. DIFFERENCES IN THE CORPORATE CHARTERS The provisions of the Helix Delaware Certificate of Incorporation and Bylaws are similar to those of the Helix Colorado Articles of Incorporation and Bylaws in many respects. However, the Reincorporation Proposal includes the implementation of certain provisions in the Helix Delaware Certificate of Incorporation and Bylaws that alter the rights of Stockholders and the powers of management. In addition, Helix Delaware could implement certain other changes by amending its Certificate of Incorporation and Bylaws. For a further discussion of such changes, see "Significant Differences Between the Corporation Laws of Colorado and Delaware." Establishment of Classified Board of Directors. The Current Charter Documents state that all Directors are elected at an annual meeting and hold office until the next annual meeting. Although Colorado law permits the operation of a staggered or classified Board of Directors, the Current Charter Documents do not so provide. A staggered or classified Board is one on which a certain number, but not all, of the Directors are elected on a rotating basis each year. This method of electing Directors makes changes in the composition of the Board of Directors more difficult, and thus a potential change in control of a corporation a lengthier and more difficult process. Although Helix Colorado qualifies to adopt a classified Board of Directors, its Board of Directors has no present intention of doing so. Delaware law permits, but does not require, a classified Board of Directors, pursuant to which the Directors can be divided into as many as three classes with staggered terms of office, with only one class of Directors standing for election each year. The Helix Delaware Certificate of Incorporation and Bylaws provide for a classified Board. To eliminate the staggered nature of the Board and thereafter reinstall a Board of Directors without such classification would require the approval of the stockholders of Helix Delaware. Change of Ability to Call Special Meetings. The Current Charter Documents state that a special meeting may be called by (i) the President, (ii) the Board of Directors, (iii) the holders of not less than one-tenth of all shares entitled to vote at the meeting; or (iv) the Company's legal counsel. The Proposed Charter Documents state that a special meeting may only be called by: (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, (iii) a majority of the Board of Directors, or (iv) by such Officer or Officers as a majority of the Board of Directors may authorize. Under the provisions of the Proposed Charter Documents, stockholders are not authorized to call special meetings on the basis of share ownership. Elimination of Action by Written Consent. The Current Charter Documents are silent on the issue of whether actions normally taken at a meeting may be taken through written consent. Accordingly, under Colorado law, any action by shareholders, which may be taken at a meeting, 4 5 may also be taken through unanimous prior written shareholder consent. The Proposed Charter Documents expressly state that stockholders may not act except at annual or special meetings. ADDITIONAL DIFFERENCES BETWEEN THE COMPANIES Stock Option Plan. Although Helix Colorado is authorized under its charter and the laws of Colorado to seek shareholder approval and thereby establish a Stock Option Plan for compensation of certain key employees, non-employee directors, and independent contractors, Helix Colorado has not done so. In November, 2000, the Board of Directors and the sole shareholder of Helix Delaware approved the Helix BioMedix, Inc. 2000 Stock Option Plan (the "Option Plan"), a copy of which is attached as Exhibit D. Pursuant to this plan, Helix Delaware may issue up to five million four hundred thousand (5,400,000) shares of Common Stock. Currently, Helix has not granted any stock options pursuant to the plan. However, any options granted under the plan following the Merger will, upon exercise, be dilutive to the interests of existing shareholders in the merged company. CERTAIN DIFFERENCES BETWEEN COLORADO AND DELAWARE CORPORATE LAWS The corporate laws of Delaware and Colorado differ in many respects. Although all the differences are not set forth in this proposal, certain provisions, which may materially affect the rights of Shareholders, are discussed below. Approval of Certain Business Combinations. In recent years a number of states have adopted special laws designed to make certain kinds of "unfriendly" corporate takeovers, or other transactions involving a corporation and one or more of its significant shareholders, more difficult. Under Section 203 of the Delaware General Corporation Law ("DGCL"), certain business combinations with interested stockholders of Delaware corporations are subject to a three-year moratorium unless specified conditions are met; no similar moratorium exists under Colorado law. Section 203 prohibits a Delaware corporation from engaging in a business combination with an interested stockholder for three years following the date that such person or entity becomes an interested stockholder. With certain exceptions, an interested stockholder is a person or entity who or which owns, individually or with or through certain other persons or entities, fifteen percent (15%) or more of the corporation's outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner, individually or with or through certain other persons or entities, of fifteen (15%) or more of such voting stock at any time within the previous three years, or is an affiliate or associate of any of the foregoing. For purposes of Section 203, the term "business combination" is defined broadly to include mergers with or caused by the interested stockholder; sales or other dispositions to the interested stockholder (except proportionately with the corporation's other stockholders) of assets of the corporation or a direct or indirect majority-owned subsidiary equal in aggregate market value to ten percent (10%) or more of the aggregate market value of either the corporation's consolidated assets or all of its outstanding stock; the issuance or transfer by the 5 6 corporation or a direct or indirect majority-owned subsidiary of stock of the corporation or such subsidiary to the interested stockholder (except for certain transfers in a conversion or exchange or a pro rata distribution or certain other transactions, none of which increase the interested stockholder's proportionate ownership of any class or series of the corporation's or such subsidiary's stock or of the corporation's voting stock); or receipt by the interested stockholder (except proportionately as a stockholder), directly or indirectly, of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation or a subsidiary. The three-year moratorium is imposed on business combinations by Section 203 if: (i) prior to the date on which such stockholder becomes an interested shareholder the Board of Directors approves either the business combination or the transaction that resulted in the person or entity becoming an interested stockholder; (ii) upon consummation of the transaction that made him or her an interested stockholder, the interested stockholder owns at least eighty-five percent (85%) of the corporation's voting stock outstanding at the time the transaction commenced (excluding from the eighty five percent (85%) calculation shares owned by Directors who are also officers of the target corporation and shares held by employee stock plans that do not give employee participants the right to decide confidentially whether to accept a tender or exchange offer); or (iii) on or after the date such person or entity becomes an interested stockholder, the Board approves the business combination and it is also approved at a shareholder meeting by sixty-six and two-thirds percent (66 2/3%) of the outstanding stock not owned by the interested stockholder. Section 203 only applies to corporations that have a class of voting stock that is (i) listed on a national securities exchange, (ii) authorized for quotation on the NASDAQ stock market or (iii) held of record by more than 2000 stockholders. Although a Delaware corporation to which Section 203 applies may elect not to be governed by Section 203, Helix Delaware does not intend to so elect. Section 203 will encourage any potential acquirer to negotiate with the Company's Board of Directors. Section 203 also might have the effect of limiting the ability of a potential acquirer to make a two-tiered bid for Helix Delaware in which all stockholders would not be treated equally. Shareholders should note however, that the application of Section 203 to Helix Delaware will confer upon the Board the power to reject a proposed business combination in certain circumstances, even though a potential acquirer may be offering a substantial premium for Helix Delaware's shares over the then-current market price. Section 203 would also discourage certain potential acquirers unwilling to comply with its provisions. See "Shareholder Voting" herein. Removal of Directors. Under Colorado law, unless the articles of incorporation provide otherwise, any Director or the entire Board of Directors may be removed, with or without cause, with the approval of a majority of the outstanding shares entitled to vote; however, if cumulative voting is in effect, no individual director may be removed if the number of votes cast against such removal would be sufficient to elect the Director under cumulative voting, and any Director elected by a voting group can only be removed by that voting group. Under Delaware law, a Director of a corporation that does not have a classified Board of Directors or cumulative voting may be removed with or without cause with the approval of a majority of the outstanding shares entitled to vote at an election of directors. In the case of a Delaware corporation having 6 7 cumulative voting, if less than the entire Board is to be removed, a Director may not be removed without cause if the number of shares voted against such removal would be sufficient to elect the Director under cumulative voting. A Director of a corporation with a classified Board of Directors may be removed only for cause, unless the Certificate of Incorporation otherwise provides. The Certificate of Incorporation and Bylaws for Helix Delaware provide for a classified Board of Directors but not for cumulative voting. The Articles of Incorporation of Helix Colorado also preclude cumulative voting. Indemnification and Limitation of Liability. Colorado and Delaware have similar laws respecting indemnification by a corporation of its officers, Directors, employees and other agents. The laws of both states also permit, with certain exceptions, a corporation to adopt a provision in its articles of incorporation or certificate of incorporation, as the case may be, eliminating the liability of a Director to the corporation or its shareholders for monetary damages for breach of the Director's fiduciary duty. There are nonetheless certain differences between the laws of the two states respecting indemnification and limitation of liability. The Articles of Incorporation of Helix Colorado eliminate the liability of Directors to the corporation or shareholders except where the director is liable for an unlawful distribution. Colorado law does not permit the elimination of monetary liability for breach of fiduciary duty as a Director where such liability is based on: (i) breach of the Director's duty of loyalty to the corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) unlawful distributions, (iv) any transaction from which the Director directly or indirectly derived an improper personal benefit, or (v) any act or omission occurring before he provision eliminating liability became effective. The Certificate of Incorporation of Helix Delaware also eliminates the liability of the Directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director to the fullest extent permissible under state law, as such law exists currently or as it may be amended in the future. The limitations imposed on such a provision under Delaware law are substantially similar to the limitations imposed by Colorado law as described in the preceding paragraph. Colorado law permits indemnification of a person made party to a proceeding because the person is or was a Director against liability incurred in the proceeding if: (i) the person conducted himself or herself in good faith; and (ii) the person reasonably believed, in the case of conduct in an official capacity with the corporation, that his or her conduct was in the corporation's best interests, and in all other cases, that his or her conduct was at least not opposed to the corporation's best interests. Additionally, in the case of any criminal proceeding, the person must have had no reasonable cause to believe his or her conduct was unlawful. Notwithstanding the foregoing, under Colorado law, a corporation may not indemnify a Director in connection with a derivative action in which the Director was adjudged liable to the corporation, or in connection with any other proceeding charging that the Director derived an improper personal benefit, and in which proceeding the Director was adjudged liable on the basis that he or she in fact derived such improper personal benefit. Also, in a derivative action, indemnification is expressly limited to the reasonable expenses incurred in connection with the proceeding. 7 8 Under Delaware law, a corporation may indemnify a Director against all liability (including expenses) in an action other than a derivative action if that person conducted himself or herself in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the corporation (without a distinction made, as in Colorado law, for actions taken in "official capacity"), and with respect to criminal actions, he or she had no reasonable cause to believe that his or her conduct was unlawful. In derivative actions, as in Colorado, indemnification is limited to reasonable expenses incurred (and is subject to the same standard of conduct for non-derivative actions), with the additional restriction that if the Director is adjudged liable to the corporation, the court deciding the proceeding must make the special determination that the Director is entitled to indemnification of expenses notwithstanding such adverse adjudication because such person is fairly and reasonable so entitled in view of all the circumstances. By comparison, under Colorado law, if a corporation elects not to indemnify a Director against expenses incurred in connection with a derivative action because the Director was found not to have acted within the requisite standard of conduct, a court may nevertheless award expenses if the court determines the Director is fairly and reasonably entitled to indemnification in light of all the circumstances. Under both Colorado and Delaware law, officers, employees and agents (as well as other fiduciaries, under Colorado law) may be indemnified to the same extent as Directors. Under both Colorado and Delaware law, a corporation must indemnify the person made party to a proceeding because such person was a Director against expenses (including attorney's fees) where such person is successful on the merits or otherwise in defense of such proceeding. Though, under Colorado law, this mandatory indemnification may be limited by the articles of incorporation, the Articles of Incorporation of Helix Colorado contain no such limitation. Also, under Delaware law, this mandatory indemnification is extended to persons made party to a proceeding because such person was an officer, employee or agent of the corporation; under Colorado law, the mandatory indemnification of expenses, as may be further limited by the articles of incorporation, is only extended to officers of the corporation. Under Delaware law, the corporation may advance the expenses incurred by a Director in connection with proceedings prior to final adjudication if the Director executes an undertaking to repay such amounts if it is ultimately determined that the Director is not entitled to indemnification. The Board may set other terms and conditions for the advance of expenses on behalf of employees and agents. Helix Delaware has no present intention to limit such advances. Under Colorado law, in addition to the undertaking referred to above (which must be an unlimited general obligation of the Director, but need not be secured), the Director must furnish a written affirmation of the Director's good faith belief that he or she has met the requisite standard of conduct heretofore described. Under both Delaware and Colorado law, a "determination" must be made, based on the facts then known to those making the determination, that indemnification would not be precluded under applicable law. The "determination" is made by the affirmative vote of a majority of Directors not party to the subject proceeding, by independent legal counsel, or by the shareholders. Colorado law allows for a determination by a committee where no quorum of non- 8 9 party Directors can be reached; Delaware law does not require a quorum of non-party Directors. Under Colorado law, the determination is made by shareholders only if the Board directs, or cannot approve because of a lack of non-party Directors; there is no such limitation on stockholder approval under Delaware law. The "determination" must be made in advance of indemnification and advancement of expenses under Colorado law; however, no prior determination is required for the advancement of expenses under Delaware law. The laws of both Delaware and Colorado authorize a corporation's purchase of insurance on behalf of Directors, officers, employees and agents, regardless of the corporation's statutory authority to indemnify such person directly. Colorado law specifically allows such insurance to be purchased from a company in which the corporation has equity or other interests. Under Colorado law, a corporation can indemnify officers, employees, fiduciaries and agents (but not Directors) to a greater extent than provided in the Colorado Business Corporations Act ("CBCA"), subject to public policy concerns, if such rights are set forth in the articles of incorporation, bylaws or Board or shareholder resolution, or by contract, though no such greater indemnification is currently provided by Helix Colorado. Colorado law does not provide for extended indemnification of Directors. By contrast, under Delaware law, a Director's rights to indemnification are not limited to those set forth in the DGCL, and may be expanded by bylaw, agreement, common law, or otherwise, though limitations could be imposed by a court on grounds of public policy. Dividends and Repurchases of Shares. Colorado law dispenses with the concepts of par value of shares as well as statutory definitions of capital, surplus and the like. The concepts of par value, capital and surplus are retained under Delaware law. Under Colorado law, a corporation may not make any distribution (including dividends, or repurchases and redemptions of shares) if, after giving effect to the distribution, (i) the corporation would not be able to pay its debts as they become due in the usual course of business, or (ii) the corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential liquidation rights of shareholders not receiving the distribution. Delaware law permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. In addition, Delaware law generally provides that a corporation may redeem or repurchase its shares only if the capital of the corporation is not impaired and such redemption or repurchase would not impair the capital of the corporation. Stockholder Voting. Under Delaware law, a majority of the stockholders of both acquiring and target corporations must approve statutory merger, except in certain 9 10 circumstances. Colorado law permits similar treatment but neither the Articles of Incorporation nor the Bylaws of Helix Colorado currently so provide. Also, under Delaware law, a sale of all or substantially all the assets of a corporation must be approved by a majority of the outstanding voting shares of the corporation transferring such assets. Such a requirement is permissible under Colorado law, but neither the Articles of Incorporation nor the Bylaws of Helix Colorado currently so provide. With certain exceptions, Colorado law also requires that mergers, share exchanges, certain sales of assets and similar transactions be approved by a majority vote of each voting group of shares outstanding. In contrast, Delaware law generally does not require class voting, except in certain transactions involving an amendment to the Certificate of Incorporation that adversely affects a specific class of shares. As a result, stockholder approval of such transactions may be easier to obtain under Delaware law for companies, which have more than one class of shares outstanding. Interested Director Transactions. Under both Colorado and Delaware law, certain contracts or transactions in which one or more of a corporation's Directors has an interest are not void or voidable because of such interest provided that certain conditions, such as obtaining the required approval and fulfilling the requirements of good faith and full disclosure, are met. With certain exceptions, the conditions are similar under Colorado and Delaware law. The most significant difference between the DGCL and the CBCA is that under Colorado law, a corporation cannot rely on ratification or authorization of a disinterested Board of Directors regarding a loan or guaranty benefitting a Director unless the shareholders have been given at least 10 days written notice. The Corporation is not aware of any plans of the Board of Directors to propose, authorize or ratify any such transaction for which notice would be required under Colorado law but not under Delaware law. Shareholder Derivative Suits. Colorado law provides that the corporation or the defendant in a derivative suit may require the plaintiff shareholder to furnish a security bond if the shareholder holds less than five percent (5%) of the outstanding shares of any class and such shares have a market value of less than $25,000. Delaware does not have a similar bonding requirement. Appraisal Rights. Under both Colorado and Delaware law, a shareholder of a corporation participating in certain major corporation transactions may, under varying circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair market value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction. Appraisal rights are available in response to similar transactions under both Delaware and Colorado law, except that under Colorado law, appraisal rights are also available to a shareholder in the event of (i) a share exchange to which the corporation is a party as the corporation whose shares will be acquired (a transaction not specifically authorized by Delaware law); (ii) a sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation or an entity which the corporation controls if a vote of the shareholders is otherwise required; and (iii) a reverse stock split if the split reduces the number of shares owned by the shareholder to a fraction of a share or to scrip and such fraction or scrip is to be acquired for cash or voided pursuant to the statutory procedure available under the CBCA. 10 11 In addition, there are differences in the timing of payments made to dissenting shareholders, the ability of a court to award attorneys' fees, and the manner of determining "fair value" which may make Colorado law more favorable from a shareholder's point of view. Under both Delaware and Colorado law, shareholders (i) receive prior notice of their rights to dissent, (ii) must deliver their notice of dissent prior to the corporate action giving rise to dissenter's rights, and (iii) will receive notice from the corporation of the effectiveness of the corporate action within 10 days. Under Delaware law, a dissenting stockholder has 120 days to obtain from the corporation a settlement of the fair value of his or her shares. If no settlement is reached at that time, the stockholder may petition the Delaware Court of Chancery to determine the fair value of the shares, after which the corporation will be instructed to pay to the dissenting stockholder the fair value, as determined. The court costs will be allocated among the corporation and the dissenting stockholders, as equitable, and the legal fees for dissenting stockholders who prosecute their claims may be spread among the dissenting stockholders as a group. Finally, in determining "fair value" the Court of Chancery is required to consider all relevant factors, and to include interest, but is statutorily prohibiting from including "any element of value arising from the accomplishment or expectation" of the transaction giving rise to appraisal rights. In contrast, under Colorado law, a dissenting shareholder may make a demand no later than 30 days following the notice from the corporation of the maturity of his or her appraisal rights. Upon receipt of such demand (or the effective date of the transaction, whichever is later), the corporation must pay each dissenter who has properly followed the procedure set forth in the CBCA an amount which the corporation estimates to be the fair value of the dissenter's shares, plus interest. In addition, the corporation must also deliver, among other things, financial statements, a statement of the estimate of fair value, and an explanation of how interest was calculated. If the dissenting shareholder is dissatisfied with this offer, he or she may then, within 30 days, keep the payment, but reject the corporation's calculation of fair value and present a counter-offer. If the corporation does not agree with the dissenting shareholder's counter-offer, the corporation is forced to commence an appraisal proceeding. A court will then determine the fair value of the dissenter's shares, taking into consideration all relevant factors. The court can also assess legal fees not only among the class of dissenters as under Delaware law, but also against the corporation if it is determined that it is equitable to do so and that the corporation did not substantially comply with the procedures set forth in the CBCA. Legal fees and expenses may also be awarded to any party if the opposing party is found to have acted arbitrarily, vexatiously or otherwise not in good faith. Unlike in Delaware, the CBCA does not specifically prohibit the court from taking into effect any appreciation in the fair value of the shares attributable to the "accomplishment or expectation" of the transaction giving rise to dissenter's rights. In addition, Colorado law is not well developed in the context of valuing dissenter's shares. Thus, the fair value of dissenter's shares assigned by a court interpreting the CBCA could differ significantly (and could be significantly lower) from the value assigned by a Delaware court. The procedure under Colorado laws will likely ensure that dissenters receive at least some value from the corporation for their shares at an earlier date than might be obtained in Delaware. 11 12 The Corporation believes that transactions in which the Corporation most likely would be involved would involve other public companies, in which case dissenter's rights would not be applicable under either Colorado or Delaware law. The Corporation does not presently intend to take any action, which would give rise to dissenter's rights. However, should such a transaction occur, the provisions under Colorado law may be viewed more favorable to a shareholder than the provisions under Delaware law. Dissolution. Under Colorado law, dissolution may be authorized by the adoption of a plan of dissolution by the Board of Directors, followed by the recommendation of the proposal to the shareholders (unless because of a conflict of interest or other circumstances the Board determines it cannot make any recommendation), then followed by the approval of shareholders entitled to vote thereon. The CBCA provides for the approval by a majority of each voting group entitled to vote thereon. Colorado law also provides for judicial dissolution of a corporation in an action taken by a shareholder upon a showing that (i) the Directors are deadlocked in management, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of shareholders generally because of the deadlock; (ii) the Director or those in control of the corporation are acting or will act in a manner which is illegal, oppressive, or fraudulent; (iii) the shareholders have been deadlocked over two annual meetings in the election of Directors; or (iv) the corporate assets are being misapplied or wasted. A Colorado corporation can also be dissolved judicially upon other grounds in a proceeding by the attorney general, or in a proceeding by creditors, as well as by the secretary of state. Under Delaware law, unless the Board of Directors approvals the proposal to dissolve, the dissolution must be approved by all the stockholders entitled to vote thereon. Only if the dissolution is initially approved by the Board of Directors may it be approved by a simple majority of the outstanding shares of the corporation's stock entitled to vote. In the event of such a Board-initiated dissolution, Delaware law allows a Delaware corporation to include in its Certificate of Incorporation a supermajority (greater than a simple majority) voting requirement in connection with dissolutions. Helix Delaware's Certificate of Incorporation contains no such supermajority voting requirement, however, and a majority of the outstanding shares entitled to vote, voting at a meeting at which a quorum is present, would be sufficient to approve a dissolution of Helix Delaware that had previously been approved by its Board of Directors. Delaware law provides for dissolution by operation of law for "abuse, misuse or nonuse of its corporate powers, privileges or franchises." Action by Consent. Under Colorado law, unless the articles of incorporation require that a particular action is taken at a meeting of shareholders, any action to be taken by shareholders may be taken instead by the unanimous written consent of all shareholders entitled to vote thereon. Under Delaware law, action in lieu of a meeting is also allowed unless specifically disclaimed in a company's Certificate of Incorporation. The Certificate of Incorporation for Helix Delaware eliminates the ability of stockholders to act through written consent. Filling Vacancies on the Board of Directors. Under Colorado law, any vacancy on the board of Directors other than one created by removal of a Director elected by a voting group of shareholders may be filled by the Board of Directors or the Shareholders. If the number of Directors is less than a quorum, a vacancy may be filled by the unanimous written consent of the 12 13 Directors then in office, by the affirmative vote of a majority of the Directors at a meeting held pursuant to notice or waivers of notice or by a sole remaining Director. A vacancy created by removal of a Director elected by a voting group of shareholders may be filled by the Board of Directors by the affirmative vote of a majority of the Directors elected by such voting group of shareholders, unless the articles of incorporation provide otherwise. Subject to any contrary provision in the articles of incorporation, such vacancy may also be filled by the affirmative vote of shareholders belonging to such voting group. There is no contrary provision in the Articles of Incorporation of Helix Colorado. Under Delaware law, vacancies and newly created Directorships may be filled by a majority of the Directors then in office (even though less than a quorum) or by a sole remaining Director, unless otherwise provided in the certificate of incorporation or bylaws (or unless the certificate of incorporation directs that a particular class of stock is to elect such Director(s), in which case a majority of the Directors elected by such class, or a sole remaining Director so elected, shall fill such vacancy or newly created Directorship). Loans to Officers and Employees. Under Colorado law, any loan or guaranty to or for the benefit of a Director of the corporation as a "conflicting interest transaction" requires either: (i) approval of the majority of disinterested Directors after disclosure of material facts, (ii) approval of the shareholders after disclosure of material facts, or (iii) that it be fair as to the corporation. Although the Bylaws of Helix Delaware do not currently so provide, the Board of Directors could, pursuant to Delaware law, amend the Bylaws to allow the Company to make loans to, guarantee the obligations of or otherwise assist its officers and other employees and those of its subsidiaries (including Directors who are also officers or employees) when such action, in the judgment of the Directors, may reasonably be expected to benefit the corporation. Voting by Ballot. Helix Colorado's Bylaws provide, consistent with Colorado law, that the election of Directors at a shareholders' meeting need not be performed by ballot. Under Delaware law, the right to vote by written ballot may be restricted if so provided in the bylaws. The Bylaws of Helix Delaware state that stockholder voting is to be accomplished by written or electronic ballot only. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The Proposed Reincorporation is intended to qualify as a tax-free "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, (the "Code"). Subject to the limitations, qualifications and exceptions described herein, and assuming the Proposed Reorganization qualifies as such a "reorganization," the following tax consequences generally should result: (a) No gain or loss should be recognized by the shareholders, Helix Colorado or Helix Delaware as a result of the Proposed Reincorporation; (b) The aggregate tax basis of the Helix Delaware Common Stock received by each stockholder in the Proposed Reincorporation should be equal to the aggregate tax basis of the Helix Colorado Common Stock surrendered by such shareholder in exchange therefore; and 13 14 (c) The holding period of the Helix Delaware Common Stock received by each stockholder should include the period for which such stockholder held the Helix Colorado Common Stock surrendered by him or her in exchange therefore, provided that such Helix Colorado Common Stock was held by such stockholder as a capital asset as of the effective date of the Proposed Reincorporation. The foregoing is a summary of certain federal income tax considerations that may be relevant to holders of Helix Colorado Common Stock who receive Helix Delaware Common Stock in exchange for their Helix Colorado Common Stock as a result of the Proposed Reincorporation. The discussion does not address all of the tax consequences of the Proposed Reincorporation that may be relevant to particular Helix Colorado shareholders, such as those Helix Colorado shareholders who are dealers in securities, foreign persons or shareholders who acquired their shares upon the exercise of stock options or in other compensatory transactions; nor does this summary address any tax consequences to holders of any Helix Colorado securities other than Helix Colorado Common Stock, such as any debt securities or options or warrants to acquire Helix Colorado Common Stock. Furthermore, no foreign, state, or local tax considerations are addressed herein. It should be noted that the Company has not requested a ruling from the Internal Revenue Service (the "IRS") with respect to any federal income tax consequences of the Proposed Reincorporation. IN VIEW OF THE VARYING AND INDIVIDUAL NATURE OF THE TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES THEREOF TO SUCH SHAREHOLDER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND/OR FOREIGN TAX LAWS. 14 15 Exhibit A AGREEMENT AND PLAN OF MERGER OF HELIX BIOMEDIX, INC., A COLORADO CORPORATION AND HELIX BIOMEDIX, INC., A DELAWARE CORPORATION THIS AGREEMENT AND PLAN OF MERGER dated as of November 6, 2000 (the "Agreement") is between Helix BioMedix, Inc., a Colorado corporation ("Helix Colorado") and Helix BioMedix, Inc., a Delaware corporation ("Helix Delaware"). Helix Colorado and Helix Delaware are sometimes referred to herein as the "Constituent Corporations." RECITALS A. Helix Delaware is a corporation duly organized and existing under the laws of the State of Delaware and has an authorized capital of twenty-seven million (27,000,000) shares, par value $0.001 per share, of which twenty-five million (25,000,000) are designated "Common Stock," and two million (2,000,000) are designated "Preferred Stock." The Preferred Stock of Helix Delaware is undesignated as to series, rights, preferences, privileges or restrictions. As of the date hereof, 1 share of Common Stock was issued and outstanding, which was held by Helix Colorado, and zero (0) shares of Preferred Stock were issued and outstanding. B. Helix Colorado is a corporation duly organized and existing under the laws of the State of Colorado and has an authorized capital of twelve million (12,000,000) shares, no par value, of which ten million (10,000,000) are designated "Common Stock" and two million (2,000,000) are designated "Preferred Stock." The Preferred Stock of Helix Colorado is designated Series A and has such rights, preferences, privileges and restrictions as are described in that certain Articles of Amendment to the Articles of Incorporation of Helix BioMedix, Inc. attached hereto as Appendix A. As of November 3, 2000, four million nine hundred fifty-two thousand eight hundred fifty-five (4,952,855) shares of Common Stock were issued and outstanding and zero (0) shares of Preferred Stock were issued and outstanding. Additionally, as of October 26, 2000, there are outstanding options to purchase one hundred ninety-five thousand nine hundred fifty-seven (195,957) shares of common stock and warrants exercisable to require two million eight hundred ninety-one thousand two hundred forty-three (2,891,243) shares of common stock upon the exercise of previously issued notes. C. The Board of Directors of Helix Colorado has determined that, for the purpose of effecting the reincorporation of Helix Colorado in the State of Delaware, it is advisable and in the best interests of Helix Colorado and its shareholders that Helix Colorado merge with and into Helix Delaware upon the terms and conditions herein provided. 15 16 D. The respective Boards of Directors of Helix Delaware and Helix Colorado have approved this Agreement and have directed that this Agreement be submitted to a vote of the respective shareholders of Helix Colorado and Helix Delaware and executed by the undersigned officers. NOW THEREFORE, in consideration of the mutual agreements and covenants as set forth herein, Helix Delaware and Helix Colorado hereby agree, subject to the terms and conditions hereinafter set forth, as follows: I. MERGER 1.1 Merger. In accordance with the provisions of this Agreement, the Delaware General Corporation Law and the Colorado Business Corporation Act, Helix Colorado shall be merged with and into Helix Delaware (the "Merger"), the separate existence of Helix Colorado shall cease and Helix Delaware shall survive the Merger and shall continue to be governed by the laws of the State of Delaware, and Helix Delaware shall be, and is herein sometimes referred to as, the "Surviving Corporation," and the name of the Surviving Corporation shall be Helix BioMedix, Inc. 1.2 Filing and Effectiveness. The Merger shall become effective when the following actions shall have been completed. (a) This Agreement and the Merger shall have been adopted and approved by the shareholders of each Constituent Corporation in accordance with the requirements of the Delaware General Corporation Law and the Colorado Business Corporation Act. (b) All of the conditions precedent to the consummation of the Merger specified in this Agreement shall have been satisfied or duly waived by the party entitled to the satisfaction thereof; (c) An executed Articles of Merger or an executed, acknowledged and certified counterpart of this Agreement meeting the requirements of the Delaware General Corporation Law shall have been filed with the Secretary of State of the State of Delaware; and (d) An executed Certificate of Merger or an executed counterpart of this Agreement meeting the requirements of the Colorado Business Corporation Act shall have been filed with the Secretary of State of the State of Colorado. The date and time when the Merger shall become effective, as aforesaid, is herein called the "Effective Date of the Merger." 1.3 Effect of the Merger. Upon the Effective Date of the Merger, the separate existence of Helix Colorado shall cease and Helix Delaware, as the Surviving Corporation, (i) shall continue to possess all of its assets, rights, powers and property as constituted immediately prior to the Effective Date of the Merger, (ii) shall be subject to all actions previously taken by its and Helix Colorado's Boards of Directors, (iii) shall succeed, without other transfer, to all of the assets, rights, powers and property of Helix Colorado in the manner as more fully set forth in 16 17 Section 259 of the Delaware General Corporation Law, (iv) shall continue to be subject to all of its debts, liabilities and obligations as constituted immediately prior to the Effective Date of the Merger, and (v) shall succeed, without other transfer, to all of the debts, liabilities and obligations, including granted stock options and stock purchase warrants, of Helix Colorado in the same manner as if Helix Delaware had itself incurred them, all as more fully provided under the applicable provisions of the Delaware General Corporation Law and the Colorado General Corporation Law. II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS 2.1 Certificate of Incorporation. The Certificate of Incorporation of Helix Delaware as in effect immediately prior to the Effective Date of the Merger, a copy of which is attached hereto as Appendix B, shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. 2.2 Bylaws. The Bylaws of Helix Delaware as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. 2.3 Directors and Officers. The directors and officers of Helix Delaware immediately prior to the Effective Date of the Merger shall be the directors and officers of the Surviving Corporation until their respective successors shall have been duly elected and qualified or until as otherwise provided by law, or the Certificate of Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation. III. MANNER AND CONVERSION OF STOCK 3.1 Helix Colorado Common Stock. Upon the Effective Date of the Merger, each share of Helix Colorado Common Stock, no par value, issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by the Constituent Corporations, the holder of such shares or any other person, shall be changed and converted into and may be, at the option of the owner of such shares, exchanged for one fully paid and nonassessable share of Common Stock, $0.001 par value, of the Surviving Corporation. 3.2 Helix Delaware Common Stock. Upon the Effective Date of the Merger, each share of Common Stock, $0.001 par value, of Helix Delaware issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by Helix Delaware, the holder of such shares or any other person, be canceled and returned to the status of authorized but unissued shares. 3.3 Exchange of Certificates. After the Effective Date of the Merger, each holder of an outstanding certificate representing shares of Helix Colorado Common Stock may, at the stockholder's option, surrender the same for cancellation to United Stock Transfer, Inc., as exchange agent (the "Exchange Agent"), and each such holder shall be entitled to receive in 17 18 exchange therefor a certificate or certificates representing the number of shares of the Surviving Corporation's Common Stock into which such holders' shares of Helix Colorado Common Stock were converted as herein provided. Unless and until so surrendered, each outstanding certificate theretofore representing shares of Helix Colorado Common Stock shall be deemed for all purposes to represent the number of whole shares of the Surviving Corporation's Common Stock into which such shares of Helix Colorado Common Stock were converted in the Merger. The registered owner on the books and records of the Surviving Corporation or the Exchange Agent of any shares of stock represented by such outstanding certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Surviving Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights with respect to and receive dividends and other distributions upon the shares of Common Stock of the Surviving Corporation represented by such outstanding certificate as provided above. Each certificate representing Common Stock of the Surviving Corporation so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of Helix Colorado so converted and given in exchange therefor, unless otherwise determined by the Board of Directors of the Surviving Corporation in compliance with the applicable laws. If any certificate for shares of Helix Delaware stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition of issuance therefor that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer, that such transfer otherwise be proper and that the person requesting such transfer pay to Helix Delaware or the Exchange Agent any transfer or other taxes payable by reason of the issuance of such new certificate in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of Helix Delaware that such tax has been paid or is not payable. IV. GENERAL 4.1 Covenants of Helix Delaware. Helix Delaware covenants and agrees that it will, on or before the Effective Date of the Merger: (a) Qualify to do business as a foreign corporation in the State of Colorado and in connection therewith irrevocably appoint an agent for service of process as required under the provisions of the Colorado Business Corporation Act; and (b) Take such other actions as may be required by the Colorado Business Corporation Act. 4.2 Further Assurances. From time to time, as and when required by Helix Delaware or by its successors or assigns, there shall be executed and delivered on behalf of Helix Colorado such deeds and other instruments, as there shall be taken or caused to be taken by Helix Delaware and Helix Colorado such further and other actions, as shall be appropriate or necessary 18 19 in order to vest or perfect in or conform of record or otherwise by Helix Delaware the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Helix Colorado and otherwise to carry out the purposes of this Agreement, and the officers and directors of Helix Delaware are fully authorized in the name and on behalf of Helix Colorado or otherwise to take any and all such action and to execute and deliver any and all such deeds or other instruments. 4.3 Abandonment. At any time before the filing of this Agreement with the Secretary of State of the State of Delaware, this Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of Directors of either Helix Colorado or Helix Delaware, or both, notwithstanding the approval of this Agreement by the shareholders of Helix Colorado or by the sole shareholder of Helix Delaware, or both. 4.4 Amendment. The Boards of Directors of the Constituent Corporations may amend this Agreement at any time prior to the filing of this Agreement (or certificate in lieu thereof) with the Secretaries of State of the States of Colorado and Delaware, provided that an amendment made subsequent to the adoption of this Agreement by the shareholders of either Constituent Corporation shall not: (1) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (2) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger, or (3) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any class of shares or series thereof of such Constituent Corporation. 4.5 Registered Office. The registered office of the Surviving Corporation in the State of Delaware is located at 1209 Orange Street, in the city of Wilmington, Delaware 19801, County of New Castle, and CT Corporation System is the registered agent of the Surviving Corporation at such address. 4.6 Agreement. Executed copies of this Agreement will be on file at the principal place of business of the Surviving Corporation at 210 Baronne Street Suite 1004, New Orleans, LA 70112-1722, and copies thereof will be furnished to any shareholder of either Constituent Corporation, upon request and without cost. 4.7 Governing Law. This Agreement shall in all respects be construed, interpreted and enforced in accordance with and governed by the laws of the State of Delaware and, so far as applicable, the merger provisions of the Colorado Business Corporation Act. 4.8 Counterparts. In order to facilitate the filing and recording of this Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 4.9 Service of Process. The Surviving Corporation shall be deemed to have authorized service of process on it in connection with any proceeding to enforce any obligation or rights of dissenting shareholders of Helix Colorado, if any, or in any proceeding based on a 19 20 cause of action arising with respect to Helix Colorado, if any, by registered or certified mail, return receipt requested, to the address of Helix Delaware as set forth in paragraph 4.6. IN WITNESS WHEREOF, this Agreement, having first been approved by resolutions of the Boards of Directors of Helix Delaware and Helix Colorado, is hereby executed on behalf of each of such two corporations and attested by their respective officers thereunto duly authorized. HELIX BIOMEDIX, INC. a Delaware corporation By: ------------------------------------- R. Stephen Beatty, President and Chief Executive Officer By: ------------------------------------- Elizabeth Scheer, Secretary HELIX BIOMEDIX, INC. a Colorado corporation By: ------------------------------------- R. Stephen Beatty, President and Chief Executive Officer By: ------------------------------------- -------------------, Secretary 20 21 Exhibit B CERTIFICATE OF INCORPORATION OF HELIX BIOMEDIX, INC. ARTICLE I NAME The name of the Corporation is "Helix BioMedix, Inc." ARTICLE II REGISTERED OFFICE AND REGISTERED AGENT The registered office of the Corporation in the State of Delaware is located at Corporate Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. ARTICLE III PURPOSE The purpose for which the Corporation is organized is to engage in any lawful acts and activities for which corporations may be organized under the General Corporation Law of the State of Delaware ("DGCL"). ARTICLE IV CAPITALIZATION Section 4.01. Authorized Capital. (a) The total number of shares of stock that the Corporation shall have the authority to issue is twenty-seven million (27,000,000) shares of capital stock, consisting of (i) two million (2,000,000) shares of preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii) twenty-five million (25,000,000) shares of common stock, par value $0.001 per share (the "Common Stock"). 22 (b) Subject to the provisions of this Certificate of Incorporation and the Preferred Stock Designation (as defined below) creating any series of Preferred Stock, the Corporation may issue shares of its capital stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors of the Corporation (the "Board of Directors"), which is expressly authorized to fix the same in its absolute discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. (c) The right to cumulate votes for the election of directors as provided in Section 214 of the DGCL shall not be granted and is hereby expressly denied. (d) No stockholder of the Corporation shall by reason of his or her holding shares of any class of capital stock of the Corporation have any preemptive or preferential right to acquire or subscribe for any additional, unissued or treasury shares (whether now or hereafter acquired) of any class of capital stock of the Corporation now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying any right, option or warrant to subscribe for or acquire shares of any class of capital stock of the Corporation now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures, bonds or other securities would adversely affect the dividends or voting or other rights of that stockholder. Section 4.02. Preferred Stock. (a) The Preferred Stock may be issued from time to time in one or more series. Authority is hereby expressly granted to and vested in the Board of Directors to authorize from time to time the issuance of Preferred Stock in one or more series. With respect to each series of Preferred Stock authorized by it, the Board of Directors shall be authorized to establish by resolution or resolutions, and by filing a certificate pursuant to applicable law of the State of Delaware (the "Preferred Stock Designation"), the following to the fullest extent now or hereafter permitted by the DGCL: (1) the designation of such series; (2) the number of shares to constitute such series; (3) whether such series is to have voting rights (full, special or limited) or is to be without voting rights; (4) if such series is to have voting rights, whether or not such series is to be entitled to vote as a separate class either alone or together with the holders of the Common Stock or one or more other series of Preferred Stock; (5) the preferences and relative, participating, optional, conversion or other special rights (if any) of such series and the qualifications, limitations or restrictions (if any) with respect to such series; 22 23 (6) the redemption rights and price(s), if any, of such series, and whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking funds or funds are to be established, the periodic amount thereof and the terms and provisions relative to the operation thereof; (7) the dividend rights and preferences (if any) of such series, including, without limitation, (i) the rates of dividends payable thereon, (ii) the conditions upon which and the time when such dividends are payable, (iii) whether or not such dividends shall be cumulative or noncumulative and, if cumulative, the date or dates from which such dividends shall accumulate and (iv) whether or not the payment of such dividends shall be preferred to the payment of dividends payable on the Common Stock or any other series of Preferred Stock; (8) the preferences (if any), and the amounts thereof, which the holders of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding-up of, or upon any distribution of the assets of, the Corporation; (9) whether or not the shares of such series, at the option of the Corporation or the holders thereof or upon the happening of any specified event, shall be convertible into or exchangeable for (i) shares of Common Stock, (ii) shares of any other series of Preferred Stock or (iii) any other stock or securities of the Corporation; (10) if such series is to be convertible or exchangeable, the price or prices or ratio or ratios or rate or rates at which such conversion or exchange may be made and the terms and conditions (if any) upon which such price or prices or ratio or ratios or rate or rates may be adjusted; and (11) such other rights, powers and preferences with respect to such series as may to the Board of Directors seem advisable. Any series of Preferred Stock may vary from any other series of Preferred Stock in any or all of the foregoing respects and in any other manner. (b) The Board of Directors may, with respect to any existing series of Preferred Stock but subject to the Preferred Stock Designation creating such series, (i) increase the number of shares of Preferred Stock designated for such series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series and (ii) decrease the number of shares of Preferred Stock designated for such series by a resolution subtracting from such series shares of Preferred Stock designated for such series (but not below the number of shares of such series then outstanding), and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock. (c) No vote of the holders of the Common Stock or the Preferred Stock shall, unless otherwise expressly provided in a Preferred Stock Designation creating any series of 23 24 Preferred Stock, be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation. Shares of any series of Preferred Stock that have been authorized for issuance pursuant to this Certificate of Incorporation and that have been issued and reacquired in any manner by the Corporation (including upon conversion or exchange thereof) shall be restored to the status of authorized and unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors and a Preferred Stock Designation as set forth above. Section 4.03. Common Stock. (a) The holders of shares of the Common Stock shall be entitled to vote upon all matters submitted to a vote of the common stockholders of the Corporation and shall be entitled to one vote for each share of the Common Stock held. (b) Subject to the prior rights and preferences (if any) applicable to shares of Preferred Stock of any series, the holders of shares of the Common Stock shall be entitled to receive such dividends (payable in cash, stock or otherwise) as may be declared thereon by the Board of Directors at any time and from time to time out of any funds of the Corporation legally available therefor. (c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the preferential or other rights (if any) of the holders of shares of the Preferred Stock in respect thereof, the holders of shares of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. For purposes of this paragraph (c), a liquidation, dissolution or winding-up of the Corporation shall not be deemed to be occasioned by or to include (i) any consolidation or merger of the Corporation with or into another corporation or other entity or (ii) a sale, lease, exchange or conveyance of all or a part of the assets of the Corporation. Section 4.04. Stock Options, Warrants, etc. Unless otherwise expressly prohibited in the Preferred Stock Designation creating any series of Preferred Stock, the Corporation shall have authority to create and issue warrants, rights and options entitling the holders thereof to purchase from the Corporation shares of the Corporation's capital stock of any class or series or other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued capital stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights or options; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. 24 25 ARTICLE V DIRECTORS Section 5.01. Number and Term. The number of directors of the Corporation shall from time to time be fixed exclusively by the Board of Directors in accordance with, and subject to the limitations set forth in, the bylaws of the Corporation (the "Bylaws"); provided, however, that the Board of Directors shall at all times consist of a minimum of three and a maximum of twelve members, subject, however, to increases above twelve members as may be required in order to permit the holders of any series of Preferred Stock to exercise their right (if any) to elect additional directors under specified circumstances. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Anything in this Certificate of Incorporation or the Bylaws to the contrary notwithstanding, each director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Section 5.02. Limitation of Personal Liability. (a) No person who is or was a director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. (b) If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the personal liability of the directors to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended from time to time. Section 5.03. Classification. The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively, all as nearly equal in number as possible, with each director then in office receiving the classification to be determined with respect to such director by the Board of Directors. The initial term of office of Class I directors shall expire at the annual meeting of the Corporation's stockholders in 2001. The initial term of office of Class II directors shall expire at the annual meeting of stockholders in 2002. The initial term of office of Class III directors shall expire at the annual meeting of stockholders in 2003. Each director elected at an annual meeting of stockholders to succeed a director whose term is then expiring shall hold office until the third annual meeting of stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. Increases and decreases in the number of directors shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. No decrease in the number of directors constituting the Corporation's Board of Directors shall shorten the term of any incumbent director. Section 5.04. Initial Directors. The initial directors of the Corporation, and their respective classes, shall be as follows: 25 26 Class I Thomas L. Frazer, 7520 Perkins Rd., Suite 280, Baton Rouge, LA 70808 Carlyn Steiner, 811 34th Avenue East, Seattle, WA 98112 Class II Jeffrey A. Miller, 931 West 75th St., Suite 137-264, Naperville, IL 60565 Class III R. Stephen Beatty, 210 Baronne St., Suite 1004, New Orleans, LA 70112 Ralph Katz, 6529 Manor Drive, Burr Ridge, IL 60521 Section 5.05. Nomination and Election. (a) Nominations of persons for election or reelection to the Board of Directors may be made by or at the direction of the Board of Directors. The Bylaws may set forth procedures for the nomination of persons for election or reelection to the Board of Directors and only persons who are nominated in accordance with such procedures (if any) shall be eligible for election or reelection as directors of the Corporation; provided, however, that such procedures shall not infringe upon (i) the right of the Board of Directors to nominate persons for election or reelection to the Board of Directors or (ii) the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances. (b) Each director shall be elected in accordance with this Certificate of Incorporation, the Bylaws and applicable law. Election of directors by the Corporation's stockholders need not be by written ballot unless the Bylaws so provide. Section 5.06. Removal. No director of any class may be removed before the expiration of his term of office except for cause and then only by the affirmative vote of the holders of not less than a majority in voting power of all the outstanding shares of capital stock of the Corporation entitled to vote generally in an election of directors, voting together as a single class. The Board of Directors may not remove any director, and no recommendation by the Board of Directors that a director be removed may be made to the Corporation's stockholders unless such recommendation is set forth in a resolution adopted by the affirmative vote of not less than 66-2/3% of the whole Board of Directors. Section 5.07. Vacancies. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation or removal, such vacancy may be filled only by a majority (or such higher percentage as may be specified in the Bylaws) of the directors remaining in office (though less than a quorum), or by the sole remaining director. The director so appointed shall serve for the unexpired term of his predecessor or until his successor is elected and qualified or until his earlier death, resignation or removal. If there are no directors then in office, an election of directors may be held in the manner provided by applicable law. (b) Any newly-created directorship resulting from any increase in the number of directors may be filled only by a majority (or such higher percentage as may be specified in 26 27 the Bylaws) of the directors then in office (though less than a quorum), or by the sole remaining director. The director so appointed shall be assigned to such class of directors as such majority of directors or the sole remaining director, as the case may be, shall determine; provided, however, that newly-created directorships shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. Each director so appointed shall hold office for the remaining term of the class to which he is assigned or until his successor is elected and qualified or until his earlier death, resignation or removal. (c) Except as expressly provided in this Certificate of Incorporation or as otherwise provided by applicable law, stockholders of the Corporation shall not have the right to fill vacancies on the Board of Directors, including newly-created directorships. Section 5.08. Subject to Rights of Holders of Preferred Stock. Notwithstanding the foregoing provisions of this Article V, if the Preferred Stock Designation creating any series of Preferred Stock entitles the holders of such Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances, then all provisions of such Preferred Stock Designation relating to the nomination, election, term of office, removal, filling of vacancies and other features of such directorships shall, as to such directorships, govern and control over any conflicting provisions of this Article V, and such directors so elected need not be divided into classes pursuant to this Article V unless expressly provided by the provisions of such Preferred Stock Designation. ARTICLE VI AMENDMENT OF BYLAWS The Board of Directors is expressly authorized and empowered to adopt, alter, amend or repeal the Bylaws. Stockholders of the Corporation shall have the power to alter, amend, expand or repeal the Bylaws but only by the affirmative vote of the holders of not less than 66-2/3% in voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class. ARTICLE VII ACTIONS AND MEETINGS OF STOCKHOLDERS Section 7.01. No Action by Written Consent. No action shall be taken by the stockholders of the Corporation except at an annual or special meeting of stockholders. Stockholders of the Corporation may not act by consent, written or electronically, in lieu of a meeting. 27 28 Section 7.02. Meetings. (a) Meetings of the stockholders of the Corporation (whether annual or special) may only be called by the Board of Directors or by such officer or officers of the Corporation as the Board of Directors may from time to time authorize to call meetings of the stockholders of the Corporation. Stockholders of the Corporation shall not be entitled to call any meeting of stockholders or to require the Board of Directors or any officer or officers of the Corporation to call a meeting of stockholders except as otherwise expressly provided in the Bylaws or in the Preferred Stock Designation creating any series of Preferred Stock. (b) Stockholders of the Corporation shall not be entitled to propose business for consideration at any meeting of stockholders except as otherwise expressly provided in the Bylaws or in the Preferred Stock Designation creating any series of Preferred Stock. (c) Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice or waivers of notice of such meeting. The person presiding at a meeting of stockholders may determine whether business has been properly brought before the meeting and, if the facts so warrant, such person may refuse to transact any business at such meeting which has not been properly brought before such meeting. Section 7.03. Appoint and Remove Officers, etc. The stockholders of the Corporation shall have no right or power to appoint or remove officers of the Corporation nor to abrogate the power of the Board of Directors to elect and remove officers of the Corporation. The stockholders of the Corporation shall have no power to appoint or remove directors as members of committees of the Board of Directors nor to abrogate the power of the Board of Directors to establish one or more such committees or the power of any such committee to exercise the powers and authority of the Board of Directors. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS The Corporation shall indemnify, to the fullest extent permitted by applicable law and pursuant to the Bylaws, each person who is or was a director or officer of the Corporation, and may indemnify each employee and agent of the Corporation and all other persons whom the Corporation is authorized to indemnify under the provisions of the DGCL. ARTICLE IX ELECTION TO BE GOVERNED BY SECTION 203 OF THE DGCL The Corporation hereby elects to be governed by Section 203 of the DGCL; provided, however, that the provisions of this Article IX shall not apply to restrict a business combination between the Corporation and an interested stockholder (as defined in Section 203 of the DGCL) 28 29 of the Corporation if either (i) such business combination was approved by the Board of Directors prior to the time that such stockholder became an interested stockholder or (ii) such stockholder became an interested stockholder as a result of, and at or prior to the effective time of, a transaction which was approved by the Board of Directors prior to the time that such stockholder became an interested stockholder. ARTICLE X AMENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by applicable law, and all rights conferred upon stockholders, directors or any other persons by or pursuant to this Certificate of Incorporation are granted subject to this reservation. Notwithstanding the foregoing or any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, the provisions of this Article X and of Articles V, VI, VII and VIII may not be repealed or amended in any respect, and no provision inconsistent with any such provision or imposing cumulative voting in the election of directors may be added to this Certificate of Incorporation, unless such action is approved by the affirmative vote of the holders of not less than 66-2/3% in voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class; provided, however, that any amendment or repeal of Section 5.02 or Article VIII of this Certificate of Incorporation shall not adversely affect any right or protection existing thereunder in respect of any act or omission occurring prior to such amendment or repeal and, provided further, that no Preferred Stock Designation shall be amended after the issuance of any shares of the Series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law. ARTICLE XI VOTING REQUIREMENTS NOT EXCLUSIVE The voting requirements contained in this Certificate of Incorporation shall be in addition to the voting requirements imposed by law or by the Preferred Stock Designation creating any series of Preferred Stock. 29 30 ARTICLE XII Incorporator The incorporator is LPSL Corporate Services, Inc., whose address is 1420 Fifth Avenue, Suite 4100, Seattle, Washington 98101-2338. IN WITNESS WHEREOF, the undersigned has executed these Articles on October 31, 2000. LPSL CORPORATE SERVICES, INC. By ------------------------------------- Jim D. Johnston, Vice President Incorporator 30 31 Exhibit C BYLAWS OF HELIX BIOMEDIX, INC. PREAMBLE These Bylaws are subject to, and governed by, the General Corporation Law of the State of Delaware ("DGCL") and the Certificate of Incorporation (the "Certificate of Incorporation") of Helix BioMedix, Inc. (the "Corporation"). In the event of a direct conflict between the provisions of these Bylaws and the mandatory provisions of the DGCL or the provisions of the Certificate of Incorporation, such provisions of the DGCL and the Certificate of Incorporation, as the case may be, will be controlling. ARTICLE I OFFICES AND RECORDS SECTION 1.1. REGISTERED OFFICE AND AGENT. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine or the business of the Corporation may require. SECTION 1.3. BOOKS AND RECORDS. The books and records of the Corporation may be kept at the Corporation's principal executive office or at such other locations as may from time to time be designated by the Board of Directors. Consents and notices may be received in the form of electronic communications provided that they are reproduced in paper form and delivered to the Corporation's principal executive office unless otherwise provided in the Certificate of Formation or the DGCL. The use of reproductions of consents including, but not limited to copies, faxes, and other reliable reproductions, may be used in lieu of the original writing for any and all purposes for which the original writing could be used, provided the reproduction is a complete reproduction of the entire original writing pursuant to the DGCL. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1. ANNUAL MEETINGS. An annual meeting of the Corporation's stockholders (the "Stockholders") shall be held each calendar year for the purposes of (i) electing directors as provided in Article III and (ii) transacting such other business as may properly be brought before 32 the meeting. Each annual meeting shall be held on such date (no later than 13 months after the date of the last annual meeting of Stockholders) and at such time as shall be designated by the Board of Directors and stated in the notice or waivers of notice of such meeting. SECTION 2.2. SPECIAL MEETINGS. Special meetings of the Stockholders, for any purpose or purposes, may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer and shall be called by the Secretary at the written request, or by resolution adopted by the affirmative vote, of a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board"), which request or resolution shall fix the date, time and place, and state the purpose or purposes, of the proposed meeting. Except as provided by applicable law, these Bylaws, or the Certificate of Incorporation, Stockholders shall not be entitled to call a special meeting of Stockholders or to require the Board of Directors or any officer to call such a meeting or to propose business at such a meeting. Business transacted at any special meeting of Stockholders shall be limited to the purposes stated in the notice or waivers of notice of such meeting. SECTION 2.3. PLACE OF MEETINGS. The Board of Directors may designate the place of meeting (either within or without the State of Delaware) for any meeting of Stockholders. If no designation is made by the Board of Directors, the place of meeting shall be held at the principal executive office of the Corporation. SECTION 2.4. NOTICE OF MEETINGS. (a) Written or electronic notice of each meeting of Stockholders shall be delivered to each Stockholder of record entitled to vote thereat, which notice shall (i) state the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called and (ii) be given not less than 10 nor more than 60 days before the date of the meeting. (b) Each notice of a meeting of Stockholders shall be given as provided in Section 9.1, except that if no address appears on the Corporation's books or stock transfer records with respect to any Stockholder, notice to such Stockholder shall be deemed to have been given if sent by first-class mail or telecommunication to the Corporation's principal executive office or if published at least once in a newspaper of general circulation in the county where such principal executive office is located. (c) If any notice addressed to a Stockholder at the address of such Stockholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the Stockholder at such address, all further notices to such Stockholder at such address shall be deemed to have been duly given without further mailing if the same shall be available to such Stockholder upon written demand of such Stockholder at the principal executive office of the Corporation for a period of one year from the date of the giving of such notice. (d) Any previously scheduled meeting of the Stockholders may be postponed by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting. 32 33 SECTION 2.5. VOTING LIST. At least 10 days before each meeting of Stockholders, the Secretary or other officer or agent of the Corporation who has charge of the Corporation's stock ledger shall prepare a complete list of the Stockholders entitled to vote at such meeting, arranged in alphabetical order and showing, with respect to each Stockholder, his address and the number of shares registered in his name. Such list shall be open to the examination of any Stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice or waivers of notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept open at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. The stock ledger of the Corporation shall be the only evidence as to who are the Stockholders entitled to examine any list required by this Section 2.5 or to vote at any meeting of Stockholders. SECTION 2.6. QUORUM AND ADJOURNMENT. The holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), present in person or by proxy, shall constitute a quorum at any meeting of Stockholders, except as otherwise provided by applicable law, the Certificate of Incorporation, or these Bylaws. If a quorum is present at any meeting of Stockholders, such quorum shall not be broken by the withdrawal of enough Stockholders to leave less than a quorum and the remaining Stockholders may continue to transact business until adjournment. If a quorum shall not be present at any meeting of Stockholders, the holders of a majority of the voting stock represented at such meeting or, if no Stockholder entitled to vote is present at such meeting, any officer of the Corporation may adjourn such meeting from time to time until a quorum shall be present. Notwithstanding anything in these Bylaws to the contrary, the chairman of any meeting of Stockholders shall have the right, acting in his sole discretion, to adjourn such meeting from time to time. SECTION 2.7. ADJOURNED MEETINGS. When a meeting of Stockholders is adjourned to another time or place, unless otherwise provided by these Bylaws, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, if an adjournment is for more than 30 days or if after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder entitled to vote thereat. At any adjourned meeting at which a quorum shall be present in person or by proxy, the Stockholders entitled to vote thereat may transact any business which might have been transacted at the meeting as originally noticed. SECTION 2.8. VOTING. (a) Election of directors at all meetings of Stockholders at which directors are to be elected shall be by written ballot or electronic communications and, except as otherwise provided in the Certificate of Incorporation, a plurality of the votes cast thereat shall elect. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the Stockholders at any meeting shall be decided by a majority of the votes cast with respect to such matter. Except as otherwise provided in the Certificate of Incorporation or by applicable law, (i) no Stockholder shall have any right of cumulative voting and (ii) each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Stockholders. 33 34 (b) Shares standing in the name of another corporation (whether domestic or foreign) may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by the executor or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardian, conservator, or trustee may be voted by such fiduciary, either in person or by proxy, but no fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A Stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee (or his proxy) may represent the stock and vote thereon. (c) If shares or other securities having voting power stand of record in the name of two or more persons (whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise) or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, his act binds all; (ii) if more than one votes, the act of the majority so voting binds all; and (iii) if more than one votes but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately or any person voting the shares, or a beneficiary, (if any) may apply to the Delaware Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the person so voting the shares, which shall then be voted as determined by a majority such persons and the person so appointed by the court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of the paragraph (c) shall be a majority or even-split in interest. SECTION 2.9. PROXIES. (a) At any meeting of Stockholders, each Stockholder having the right to vote thereat may be represented and vote either in person or by proxy executed in writing by such Stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation at or before the beginning of each meeting at which such proxy is to be voted. Unless otherwise provided therein, no proxy shall be valid after three years from the date of its execution. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by applicable law. 34 35 (b) A proxy shall be deemed signed if the Stockholder's name is placed on the proxy (whether by manual signature, telegraphic transmission or otherwise) by the Stockholder or his attorney-in-fact. In the event any proxy shall designate two or more persons to act as proxies, a majority of such persons present at the meeting (or, if only one shall be present, then that one) shall have and may exercise all the powers conferred by the proxy upon all the persons so designated unless the proxy shall otherwise provide. (c) Except as otherwise provided by applicable law, by the Certificate of Incorporation or by these Bylaws, the Board of Directors may, in advance of any meeting of Stockholders, prescribe additional regulations concerning the manner of execution and filing of proxies (and the validation of same) which may be voted at such meeting. SECTION 2.10. RECORD DATE. For the purpose of determining the Stockholders entitled to notice of or to vote at any meeting of Stockholders (or any adjournment thereof) or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors or be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. If no record date is fixed, (i) the record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) the record date for determining Stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of Stockholders of record entitled to notice of or to vote at a meeting of Stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 2.11. CONDUCT OF MEETINGS; AGENDA. (a) Meetings of the Stockholders shall be presided over by the officer of the Corporation whose duties under these Bylaws require him to do so; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, such meeting shall be presided over by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. At each meeting of Stockholders, the officer of the Corporation whose duties under these Bylaws require him to do so shall act as secretary of the meeting; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, the chairman of such meeting shall appoint a secretary. The order of business at each meeting of Stockholders shall be as determined by the chairman of the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him in order. (b) The Board of Directors may, in advance of any meeting of Stockholders, adopt an agenda for such meeting, adherence to which the chairman of the meeting may enforce. SECTION 2.12. INSPECTORS OF ELECTION; OPENING AND CLOSING OF POLLS. (a) Before any meeting of Stockholders, the Board of Directors may, and if required by law shall, appoint one or 35 36 more persons to act as inspectors of election at such meeting or any adjournment thereof. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint a substitute inspector. If no inspectors are appointed by the Board of Directors, the chairman of the meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint one or more inspectors at the meeting. Notwithstanding the foregoing, inspectors shall be appointed consistent with the mandatory provisions of Section 231 of the DGCL. (b) Inspectors may include individuals who serve the Corporation in other capacities (including as officers, employees, agents or representatives); provided, however, that no director or candidate for the office of director shall act as an inspector. Inspectors need not be Stockholders. (c) The inspectors shall (i) determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum and the validity and effect of proxies and (ii) receive votes or ballots, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes and ballots, determine the results and do such acts as are proper to conduct the election or vote with fairness to all Stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. The inspectors shall have such other duties as may be prescribed by Section 231 of the DGCL. (d) The chairman of the meeting may, and if required by the DGCL shall, fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at the meeting. SECTION 2.13. PROCEDURES FOR BRINGING BUSINESS BEFORE ANNUAL MEETINGS. (a) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting of Stockholders except in accordance with the procedures hereinafter set forth in this Section 2.13; provided, however, that nothing in this Section 2.13 shall be deemed to preclude discussion by any Stockholder of any business properly brought before any annual meeting of Stockholders in accordance with such procedures. (b) At any annual meeting of Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) properly brought before the meeting by a Stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a Stockholder, the Stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a Stockholder's notice must be delivered to or mailed and received at the principal executive office of the Corporation not less than 120 days nor more than 150 days in advance of the first anniversary of the date of the Corporation's proxy statement released to Stockholders in connection with the 36 37 previous year's annual meeting of Stockholders; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting of Stockholders has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, the notice must be received by the Corporation at least 80 days prior to the date the Corporation intends to distribute its proxy statement with respect to such meeting. Any meeting of Stockholders which is adjourned and will reconvene within 30 days after the meeting date as originally noticed shall, for purposes of any Stockholder's notice contemplated by this paragraph (b), be deemed to be a continuation of the original meeting, and no business may be brought before such adjourned meeting by any Stockholder unless timely notice of such business was given to the Secretary of the Corporation for the meeting as originally noticed. (c) Each notice given by a Stockholder as contemplated by paragraph (b) above shall set forth, as to each matter the Stockholder proposes to bring before the annual meeting, (i) the nature of the proposed business with reasonable particularity, including the exact text of any proposal to be presented for adoption and any supporting statement, which proposal and supporting statement shall not in the aggregate exceed 500 words, and his reasons for conducting such business at the annual meeting, (ii) any material interest of the Stockholder in such business, (iii) the name, principal occupation and record address of the Stockholder, (iv) the class and number of shares of the Corporation which are held of record or beneficially owned by the Stockholder, (v) the dates upon which the Stockholder acquired such shares of stock and documentary support for any claims of beneficial ownership and (vi) such other matters as may be required by the Certificate of Incorporation. (d) The foregoing right of a Stockholder to propose business for consideration at an annual meeting of Stockholders shall be subject to such conditions, restrictions and limitations as may be imposed by the Certificate of Incorporation. Nothing in this Section 2.13 shall entitle any Stockholder to propose business for consideration at any special meeting of Stockholders. (e) The chairman of any meeting of Stockholders shall determine whether business has been properly brought before the meeting and, if the facts so warrant, may refuse to transact any business at such meeting which has not been properly brought before the meeting. (f) Notwithstanding any other provision of these Bylaws, the Corporation shall be under no obligation to include any Stockholder proposal in its proxy statement or otherwise present any such proposal to Stockholders at a meeting of Stockholders if the Board of Directors reasonably believes that the proponents thereof have not complied with Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, and the Corporation shall not be required to include in its proxy statement to Stockholders any Stockholder proposal not required to be included in its proxy statement to Stockholders in accordance with the Exchange Act and such rules or regulations. (g) Nothing in this Section 2.13 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 of the Exchange Act. 37 38 (h) Reference is made to Section 3.4 for procedures relating to the nomination of any person for election or reelection as a director of the Corporation. SECTION 2.14. ACTION WITHOUT MEETING. No action shall be taken by Stockholders except at a meeting of Stockholders. Stockholders may not act by written consent in lieu of a meeting. ARTICLE III BOARD OF DIRECTORS -- POWERS, NUMBER, CLASSIFICATION, NOMINATIONS, RESIGNATIONS, REMOVAL, VACANCIES AND COMPENSATION SECTION 3.1. MANAGEMENT. The business and property of the Corporation shall be managed by and under the direction of the Board of Directors. In addition to the powers and authorities expressly conferred upon the Board of Directors by these Bylaws, the Board of Directors may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 3.2. NUMBER AND QUALIFICATION. The number of directors shall be fixed from time to time exclusively pursuant to resolution adopted by a majority of the Whole Board, but shall consist of not less than three nor more than 12 directors, subject, however, to increases above 12 members as may be required in order to permit the holders of any series of preferred stock of the Corporation to elect directors under specified circumstances. The directors need not be Stockholders or residents of the State of Delaware. Each director must have attained 21 years of age. SECTION 3.3 CLASSES OF DIRECTORS. The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively, all as nearly equal in number as possible, with each director then in office receiving the classification to be determined with respect to such director by the Board of Directors. SECTION 3.4. ELECTION; TERM OF OFFICE. (a) The initial term of office of Class I directors shall expire at the annual meeting of the Corporation's Stockholders in 2001. The initial term of office of Class II directors shall expire at the annual meeting of Stockholders in 2002. The initial term of office of Class III directors shall expire at the annual meeting of Stockholders in 2003. Subject to Sections 3.9 and 3.10, each director elected at an annual meeting of Stockholders to succeed a director whose term is expiring shall hold office until the third annual meeting of Stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. (b) Directors shall be elected by Stockholders only at annual meetings of Stockholders, except that if any such annual meeting is not held or if any director to be elected thereat is not elected, such director may be elected at any special meeting of Stockholders held for that purpose. 38 39 (c) No decrease in the number of directors constituting the Whole Board shall have the effect of shortening the term of any incumbent director. SECTION 3.5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors. SECTION 3.6. NOMINATIONS. (a) Notwithstanding anything in these Bylaws to the contrary, only persons who are nominated in accordance with the procedures hereinafter set forth in this Section 3.6 shall be eligible for election as directors of the Corporation. (b) Nominations of persons for election to the Board of Directors at a meeting of Stockholders may be made only (i) by or at the direction of the Board of Directors or (ii) by any Stockholder entitled to vote for the election of directors at the meeting who satisfies the eligibility requirements (if any) set forth in the Certificate of Incorporation and who complies with the notice procedures set forth in this Section 3.6 and in the Certificate of Incorporation; provided, however, Stockholders may not nominate persons for election to the Board of Directors at any special meeting of Stockholders unless the business to be transacted at such special meeting, as set forth in the notice of such meeting, includes the election of directors. Nominations by Stockholders shall be made pursuant to timely notice in writing to the Secretary. To be timely, a Stockholder's notice given in the context of an annual meeting of Stockholders shall be delivered to or mailed and received at the principal executive office of the Corporation not less than 120 days nor more than 150 days in advance of the first anniversary of the date of the Corporation's proxy statement released to Stockholders in connection with the previous year's annual meeting of Stockholders; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting of Stockholders has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, the notice must be received by the Corporation at least 80 days prior to the date the Corporation intends to distribute its proxy statement with respect to such meeting. To be timely, a Stockholder's notice given in the context of a special meeting of Stockholders shall be delivered to or mailed and received at the principal executive office of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such special meeting. For purposes of the foregoing, "public announcement" means the disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or in a 39 40 document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Any meeting of Stockholders which is adjourned and will reconvene within 30 days after the meeting date as originally noticed shall, for purposes of any notice contemplated by this paragraph (b), be deemed to be a continuation of the original meeting and no nominations by a Stockholder of persons to be elected directors of the Corporation may be made at any such reconvened meeting other than pursuant to a notice that was timely for the meeting on the date originally noticed. (c) Each notice given by a Stockholder as contemplated by paragraph (b) above shall set forth the following information, in addition to any other information or matters required by the Certificate of Incorporation: (i) as to each person whom the Stockholder proposes to nominate for election or re-election as a director, (A) the exact name of such person, (B) such person's age, principal occupation, business address and telephone number and residence address and telephone number, (C) the number of shares (if any) of each class of stock of the Corporation owned directly or indirectly by such person and (D) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor regulation thereto (including such person's notarized written acceptance of such nomination, consent to being named in the proxy statement as a nominee and statement of intention to serve as a director if elected); (ii) as to the Stockholder giving the notice, (A) his name and address, as they appear on the Corporation's books, (B) his principal occupation, business address and telephone number and residence address and telephone number, (C) the class and number of shares of the Corporation which are held of record or beneficially owned by him and (D) the dates upon which he acquired such shares of stock and documentary support for any claims of beneficial ownership; and (iii) a description of all arrangements or understandings between the Stockholder giving the notice and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such Stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a Stockholder's notice of nomination which pertains to the nominee. (d) The foregoing right of a Stockholder to nominate a person for election or reelection to the Board of Directors shall be subject to such conditions, restrictions, and limitations as may be imposed by the Certificate of Incorporation. (e) Nothing in this Section 3.6 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 of the Exchange Act. 40 41 (f) The chairman of a meeting of Stockholders shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in this Section 3.6 and, if any nomination is not in compliance with this Section 3.6, to declare that such defective nomination shall be disregarded. SECTION 3.7. RESIGNATIONS. Any director may resign at any time by giving notice, either written or by electronic communications, to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. SECTION 3.8. REMOVAL. No director may be removed before the expiration of his term of office except for cause and then only by the affirmative vote of the holders of not less than a majority of the voting power of all outstanding Voting Stock, voting together as a single class. The Board of Directors may not remove any director, and no recommendation by the Board of Directors that a director be removed may be made to the Stockholders unless such recommendation is set forth in a resolution adopted by the affirmative vote of not less than 66-2/3% of the Whole Board. SECTION 3.9. VACANCIES. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation or removal, such vacancy may be filled by a majority of the directors remaining in office (though less than a quorum) or by the sole remaining director. The director so appointed shall serve for the unexpired term of his predecessor or until his successor is elected and qualified or until his earlier death, resignation or removal. If there are no directors then in office, an election of directors may be held in the manner provided by applicable law. (b) Any newly-created directorship resulting from any increase in the number of directors constituting the Whole Board may be filled by a majority of the directors then in office (though less than a quorum), or by the sole remaining director. The director so appointed shall be assigned to such class of directors as such majority of directors, or the sole remaining director, as the case may be, shall determine; provided however, that newly-created directorships shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. Each director so appointed shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. (c) Except as expressly provided in these Bylaws or the Certificate of Incorporation or as otherwise provided by law, Stockholders shall not have any right to fill vacancies on the Board of Directors, including newly-created directorships. 41 42 (d) If, as a result of a disaster or emergency (as determined in good faith by the then remaining directors), it becomes impossible to ascertain whether or not vacancies exist on the Board of Directors, and a person is, or persons are, elected by the directors, who in good faith believe themselves to be a majority of the remaining directors, or the sole remaining director, to fill a vacancy or vacancies that such remaining directors in good faith believe exists, then the acts of such person or persons who are so elected as directors shall be valid and binding upon the Corporation and the Stockholders, although it may subsequently develop that at the time of the election (i) there was in fact no vacancy or vacancies existing on the Board of Directors or (ii) the directors, or the sole remaining director, who so elected such person or persons did not in fact constitute a majority of the remaining directors. SECTION 3.10. SUBJECT TO RIGHTS OF HOLDERS OF PREFERRED STOCK. Notwithstanding the foregoing provisions of this Article III, if the resolutions of the Board of Directors creating any series of preferred stock of the Corporation entitle the holders of such preferred stock, voting separately by series, to elect additional directors under specified circumstances, then all provisions of such resolutions relating to the nomination, election, term of office, removal, filling of vacancies and other features of such directorships shall, as to such directorships, govern and control over any conflicting provisions of this Article III. SECTION 3.11. COMPENSATION. The Board of Directors shall have the authority to fix, and from time to time to change, the compensation of directors. Each director shall be entitled to reimbursement from the Corporation for his reasonable expenses incurred in attending meetings of the Board of Directors (or any committee thereof) and meetings of the Stockholders. Nothing contained in these Bylaws shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV BOARD OF DIRECTORS -- MEETINGS AND ACTIONS SECTION 4.1. PLACE OF MEETINGS. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine. SECTION 4.2. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors. Except as otherwise provided by applicable law, any business may be transacted at any regular meeting of the Board of Directors. SECTION 4.3. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called by the Secretary at the request of the Chairman of the Board (if any) or the Chief Executive Officer on not less than 24 hours' notice to each director, specifying the time, place and purpose of the meeting. Special meetings shall be called by the Secretary on like notice at the request, in writing or by electronic communication, of any two directors, which request shall state the purpose of the meeting. 42 43 SECTION 4.4. QUORUM; VOTING. (a) At all meetings of the Board of Directors, a majority of the Whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time (without notice other than announcement at the meeting) until a quorum shall be present. A meeting of the Board of Directors at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors; provided, however, that no action of the remaining directors shall constitute the act of the Board of Directors unless the action is approved by at least a majority of the required quorum for the meeting or such greater number of directors as shall be required by applicable law, by the Certificate of Incorporation or by these Bylaws. (b) The act of a majority of the directors present at any meeting of the Board of Directors at which there is a quorum shall be the act of the Board of Directors unless, by express provision of law, the Certificate of Incorporation, or these Bylaws, a different vote is required, in which case such express provision shall govern and control. SECTION 4.5. CONDUCT OF MEETINGS. At meetings of the Board of Directors, business shall be transacted in such order as shall be determined by the chairman of the meeting unless the Board of Directors shall otherwise determine the order of business. The Board of Directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation. SECTION 4.6. PRESUMPTION OF ASSENT. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his dissent, either in writing or by electronic communication, to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to any director who voted in favor of such action. SECTION 4.7. ACTION WITHOUT MEETING. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all directors consent thereto in writing. All such written consents shall be filed with the minutes of proceedings of the Board of Directors. SECTION 4.8. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. 43 44 ARTICLE V COMMITTEES OF THE BOARD OF DIRECTORS SECTION 5.1. EXECUTIVE COMMITTEE. (a) The Board of Directors may, by resolution adopted by the affirmative vote of a majority of the Whole Board, designate an Executive Committee which, during the intervals between meetings of the Board of Directors and subject to Section 5.11, shall have and may exercise, in such manner as it shall deem to be in the best interests of the Corporation, all of the powers of the Board of Directors in the management or direction of the business and affairs of the Corporation, except as reserved to the Board of Directors or as delegated by the Board of Directors to another committee of the Board of Directors or as may be prohibited by law. The Executive Committee shall consist of not less than two directors, the exact number to be determined from time to time by the affirmative vote of a majority of the Whole Board. None of the members of the Executive Committee need be an officer of the Corporation. (b) Meetings of the Executive Committee may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer on not less than one day's notice to each member given verbally or in writing, which notice shall specify the time, place and purpose of the meeting. SECTION 5.2. OTHER COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the Whole Board, establish additional standing or special committees of the Board of Directors, each of which shall consist of two or more directors (the exact number to be determined from time to time by the Board of Directors) and, subject to Section 5.11, shall have such powers and functions as may be delegated to it by the Board of Directors. No member of any such additional committee need be an officer of the Corporation. SECTION 5.3. TERM. Each member of a committee of the Board of Directors shall serve as such until the earliest of (i) his death, (ii) the expiration of his term as a director, (iii) his resignation as a member of such committee or as a director and (iv) his removal as a member of such committee or as a director. SECTION 5.4. COMMITTEE CHANGES; REMOVAL. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to abolish any committee of the Board of Directors; provided, however, that no such action shall be taken in respect of the Executive Committee unless approved by a majority of the Whole Board. SECTION 5.5. ALTERNATE MEMBERS. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If no alternate members have been so appointed or each such alternate committee member is absent or disqualified, the committee member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. 44 45 SECTION 5.6. RULES AND PROCEDURES. (a) The Board of Directors may designate one member of each committee as chairman of such committee; provided, however, that, except as provided in the following sentence, no person shall be designated as chairman of the Executive Committee unless approved by a majority of the Whole Board. If a chairman is not so designated for any committee, the members thereof shall designate a chairman. (b) Each committee shall adopt its own rules (not inconsistent with these Bylaws or with any specific direction as to the conduct of its affairs as shall have been given by the Board of Directors) governing the time, place and method of holding its meetings and the conduct of its proceedings and shall meet as provided by such rules. (c) If a committee is comprised of an odd number of members, a quorum shall consist of a majority of that number. If a committee is comprised of an even number of members, a quorum shall consist of one-half of that number. If a committee is comprised of two members, a quorum shall consist of both members. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the Certificate of Incorporation, these Bylaws or the committee's rules as adopted in Section 5.6(b). (d) Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when requested. (e) Unless otherwise provided by these Bylaws or by the rules adopted by any committee, notice of the time and place of each meeting of such committee shall be given to each member of such committee as provided in these Bylaws with respect to notices of special meetings of the Board of Directors. SECTION 5.7. PRESUMPTION OF ASSENT. A member of a committee of the Board of Directors who is present at a meeting of such committee at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his dissent, in writing or by electronic communication, to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. SECTION 5.8. ACTION WITHOUT MEETING. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting if all members of such committee consent thereto in writing or by electronic communication. All such consents shall be filed with the minutes of proceedings of such committee. SECTION 5.9. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of any committee of the Board of Directors may 45 46 participate in a meeting of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5.10. RESIGNATIONS. Any committee member may resign at any time by giving notice, in writing or by electronic communication, to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. SECTION 5.11. LIMITATIONS ON AUTHORITY. Unless otherwise provided in the Certificate of Incorporation, no committee of the Board of Directors shall have the power or authority to (i) authorize an amendment to the Certificate of Incorporation, (ii) adopt an agreement of merger or consolidation, recommend to the Stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, (iii) recommend to the Stockholders a dissolution of the Corporation or a revocation of a dissolution, (iv) amend these Bylaws, (v) declare a dividend or other distribution on, or authorize the issuance, purchase or redemption of, securities of the Corporation, (vi) elect any officer of the Corporation or (vii) approve any material transaction between the Corporation and one or more of its directors, officers or employees or between the Corporation and any corporation, partnership, association or other organization in which one or more of its directors, officers or employees are directors or officers or have a financial interest; provided, however, that the Executive Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of preferred stock adopted by the Board of Directors as provided in the Certificate of Incorporation, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the decrease or increase of the shares of any such series. ARTICLE VI OFFICERS SECTION 6.1. NUMBER; TITLES; QUALIFICATION; TERM OF OFFICE. (a) The officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The Board of Directors from time to time may also elect such other officers (including, without limitation, a Chairman of the Board and one or more Vice Presidents) as the Board of Directors deems appropriate or necessary. Each officer shall hold office until his successor shall have been duly elected and shall have been qualified or until his earlier death, resignation or removal. Any two or more offices may be held by the same person, but no officer shall execute any instrument in more than one capacity if such instrument is required by law or any act of the Corporation to be executed or countersigned by two or more officers. None of the officers need be a Stockholder or a resident of the State of Delaware. No officer (other than the Chairman of the Board, if any) need be a director. 46 47 (b) The Board of Directors may delegate to the Chairman of the Board (if any) and/or the Chief Executive Officer the power to appoint one or more employees of the Corporation as divisional or departmental vice presidents and fix their duties as such appointees. However, no such divisional or departmental vice presidents shall be considered an officer of the Corporation, the officers of the Corporation being limited to those officers elected by the Board of Directors. SECTION 6.2. ELECTION. At the first meeting of the Board of Directors after each annual meeting of Stockholders at which a quorum shall be present, the Board of Directors shall elect the officers of the Corporation. SECTION 6.3. REMOVAL. Any officer may be removed, either with or without cause, by the Board of Directors; provided, however, that (i) the Chairman of the Board (if any) and the Chief Executive Officer may be removed only by the affirmative vote of a majority of the Whole Board and (ii) the removal of any officer shall be without prejudice to the contract rights, if any, of such officer. Election or appointment of an officer shall not of itself create contract rights. SECTION 6.4. RESIGNATIONS. Any officer may resign at any time by giving notice, in writing or by electronic communication, to the Board of Directors, the Chairman of the Board (if any) or the Chief Executive Officer. Any such resignation shall take effect on receipt of such notice or at any later time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. SECTION 6.5. VACANCIES. If a vacancy shall occur in any office because of death, resignation, removal, disqualification or any other cause, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. SECTION 6.6. SALARIES. The salaries of all officers of the Corporation shall be fixed by the Board of Directors or pursuant to its direction, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. SECTION 6.7. CHAIRMAN OF THE BOARD. The Chairman of the Board (if any) shall have all powers and shall perform all duties incident to the office of Chairman of the Board and such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. The Chairman of the Board, if present, shall preside at all meetings of the Board of Directors and of the Stockholders. During the time of any vacancy in the office of Chief Executive Officer or in the event of the absence or disability of the Chief Executive Officer, the Chairman of the Board shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.7 for the exercise by the Chairman of the Board of the powers of the Chief Executive Officer. SECTION 6.8. CHIEF EXECUTIVE OFFICER. (a) The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the 47 48 Board of Directors, shall have general supervision, direction and control of the business and officers of the Corporation with all such powers as may be reasonably incident to such responsibilities. He shall have the general powers and duties of management usually vested in the chief executive officer of a corporation. (b) During the time of any vacancy in the office of the Chairman of the Board or in the event of the absence or disability of the Chairman of the Board, the Chief Executive Officer shall have the duties and powers of the Chairman of the Board unless otherwise determined by the Board of Directors. During the time of any vacancy in the office of President or in the event of the absence or disability of the President, the Chief Executive Officer shall have the duties and powers of the President unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.8 for the exercise by the Chief Executive Officer of the powers of the Chairman of the Board or the President. SECTION 6.9. PRESIDENT. (a) The President shall be the chief operating officer of the Corporation and, subject to the supervision, direction and control of the Chief Executive Officer and the Board of Directors, shall manage the day-to-day operations of the Corporation. He shall have the general powers and duties of management usually vested in the chief operating officer of a corporation and such other powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or these Bylaws. (b) During the time of any vacancy in the offices of the Chairman of the Board and Chief Executive Officer or in the event of the absence or disability of the Chairman of the Board and the Chief Executive Officer, the President shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.9 for the exercise by the President of the powers the Chief Executive Officer. SECTION 6.10. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the President, shall perform all the duties of the President as chief operating officer of the Corporation, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President as chief operating officer of the Corporation. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.10 for the exercise by any Vice President of the powers of the President as chief operating officer of the Corporation. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer or the President. SECTION 6.11. TREASURER. The Treasurer shall (i) have custody of the Corporation's funds and securities, (ii) keep full and accurate account of receipts and disbursements, (iii) deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors and (iv) perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer. 48 49 SECTION 6.12. ASSISTANT TREASURERS. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or the President. In case of the absence or disability of the Treasurer, the Assistant Treasurer designated by the President (or, in the absence of such designation, the Treasurer) shall perform the duties and exercise the powers of the Treasurer during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.12 for the exercise by any Assistant Treasurer of the powers of the Treasurer under these Bylaws. SECTION 6.13. SECRETARY. (a) The Secretary shall keep or cause to be kept, at the principal office of the Corporation or such other place as the Board of Directors may order, a book of minutes of all meetings and actions of the Board of Directors, committees of the Board of Directors and Stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at meetings of the Board of Directors and committees thereof, the number of shares present or represented at Stockholders' meetings and the proceedings thereof. (b) The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or at the office of the Corporation's transfer agent or registrar, a share register, or a duplicate share register, showing the names of all Stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation. (c) The Secretary shall give, or cause to be given, notice of all meetings of the Stockholders and of the Board of Directors required by these Bylaws or by law to be given, and he shall keep the seal of the Corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer, the President or these Bylaws. (d) The Secretary may affix the seal of the Corporation, if one be adopted, to contracts of the Corporation. SECTION 6.14. ASSISTANT SECRETARIES. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer or the President. In case of the absence or disability of the Secretary, the Assistant Secretary designated by the President (or, in the absence of such designation, the Secretary) shall perform the duties and exercise the powers of the Secretary during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.14 for the exercise by any Assistant Secretary of the powers of the Secretary under these Bylaws. 49 50 ARTICLE VII STOCK SECTION 7.1. CERTIFICATES. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the Board of Directors. The certificates shall be signed (i) by the Chairman of the Board (if any), the President or a Vice President and (ii) by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. SECTION 7.2. SIGNATURES ON CERTIFICATES. Any or all of the signatures on the certificates may be a facsimile and the seal of the Corporation (or a facsimile thereof), if one has been adopted, may be affixed thereto. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 7.3. LEGENDS. The Board of Directors shall have the power and authority to provide that certificates representing shares of stock of the Corporation bear such legends and statements (including, without limitation, statements relating to the powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the shares represented by such certificates) as the Board of Directors deems appropriate in connection with the requirements of federal or state securities laws or other applicable laws. SECTION 7.4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors, the Secretary and the Treasurer each may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, in each case upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing such issue of a new certificate or certificates, the Board of Directors, the Secretary or the Treasurer, as the case may be, may, in its or his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the Board of Directors, the Secretary or the Treasurer, as the case may be, shall require and/or to furnish the Corporation a bond in such form and substance and with such surety as the Board of Directors, the Secretary or the Treasurer, as the case may be, may direct as indemnity against any claim, or expense resulting from any claim, that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 7.5. TRANSFERS OF SHARES. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation or its transfer 50 51 agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon the Corporation's books. SECTION 7.6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to treat the holder of record of any share of stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by the laws of the State of Delaware. SECTION 7.7. REGULATIONS. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of stock of the Corporation. The Board of Directors may (i) appoint and remove transfer agents and registrars of transfers and (ii) require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers. SECTION 7.8. STOCK OPTIONS, WARRANTS, ETC. Unless otherwise expressly prohibited in the resolutions of the Board of Directors creating any class or series of preferred stock of the Corporation, the Board of Directors shall have the power and authority to create and issue (whether or not in connection with the issue and sale of any stock or other securities of the Corporation) warrants, rights or options entitling the holders thereof to purchase from the Corporation any shares of capital stock of the Corporation of any class or series or any other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights and operations; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. ARTICLE VIII INDEMNIFICATION SECTION 8.1. THIRD PARTY ACTIONS. The Corporation (i) shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or is or was threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as a director, officer or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (ii) may, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or is or was threatened to be made a party to any threatened, pending or completed action, suit or 51 52 proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was an employee or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines and amounts paid or owed in settlement, actually and reasonably incurred by such person or rendered or levied against such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, in itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his conduct was unlawful. Any person seeking indemnification under this Section 8.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary is established. SECTION 8.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation (i) shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as a director, officer or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (ii) may, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was an employee or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees) actually and reasonably incurred by such person in connection with the defense or settlement or such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification. SECTION 8.3. EXPENSES. Expenses incurred by a director or officer of the Corporation or any of its direct or indirect subsidiaries in defending a civil or criminal action, suit or 52 53 proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses incurred by other employees and agents of the Corporation and other persons eligible for indemnification under this Article VIII may be paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 8.4. NON-EXCLUSIVITY. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any provision of law, the Certificate of Incorporation, the certificate of incorporation or bylaws or other governing documents of any direct or indirect subsidiary of the Corporation, under any agreement, vote of Stockholders or disinterested directors or under any policy or policies of insurance maintained by the Corporation on behalf of any person or otherwise, both as to action in his official capacity and as to action in another capacity while holding any of the positions or having any of the relationships referred to in this Article VIII. SECTION 8.5. ENFORCEABILITY. The provisions of this Article VIII (i) are for the benefit of, and may be enforced directly by, each director or officer of the Corporation the same as if set forth in their entirety in a written instrument executed and delivered by the Corporation and such director or officer and (ii) constitute a continuing offer to all present and future directors and officers of the Corporation. The Corporation, by its adoption of these Bylaws, (A) acknowledges and agrees that each present and future director and officer of the Corporation has relied upon and will continue to rely upon the provisions of this Article VIII in becoming, and serving as, a director or officer of the Corporation or, if requested by the Corporation, a director, officer or fiduciary or the like of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, (B) waives reliance upon, and all notices of acceptance of, such provisions by such directors and officers and (C) acknowledges and agrees that no present or future director or officer of the Corporation shall be prejudiced in his right to enforce directly the provisions of this Article VIII in accordance with their terms by any act or failure to act on the part of the Corporation. SECTION 8.6. INSURANCE. The Board of Directors may authorize, by a vote of the majority of the Whole Board, the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VIII. SECTION 8.7. SURVIVAL. The provisions of this Article VIII shall continue as to any person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, executors, administrators, heirs, legatees and devisees of any person entitled to indemnification under this Article VIII. 53 54 SECTION 8.8. AMENDMENT. No amendment, modification or repeal of this Article VIII or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future director or officer of the Corporation to be indemnified by the Corporation, nor the obligation of the Corporation to indemnify any such director or officer, under and in accordance with the provisions of this Article VIII as in effect immediately prior to such amendment, modification or repeal with respect to claims arising, in whole or in part, from a state of facts extant on the date of, or relating to matters occurring prior to, such amendment, modification or repeal, regardless of when such claims may arise or be asserted. SECTION 8.9. DEFINITIONS. For purposes of this Article VIII, (i) reference to any person shall include the estate, executors, administrators, heirs, legatees and devisees of such person, (ii) "employee benefit plan" and "fiduciary" shall be deemed to include, but not be limited to, the meaning set forth in Section 1002, subsections 3(3) and 21(A), respectively, of the Employee Retirement Income Security Act of 1974, as amended, (iii) references to the judgments, fines and amounts paid or owed in settlement or rendered or levied shall be deemed to encompass and include excise taxes required to be paid pursuant to applicable law in respect of any transaction involving an employee benefit plan and (iv) references to the Corporation shall be deemed to include any predecessor corporation or entity and any constituent corporation or entity absorbed in a merger, consolidation or other reorganization of or by the Corporation which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents and fiduciaries so that any person who was a director, officer, employee, agent or fiduciary of such predecessor or constituent corporation or entity, or served at the request of such predecessor or constituent corporation or entity as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the Corporation as such person would have with respect to such predecessor or constituent corporation or entity if its separate existence had continued. ARTICLE IX NOTICES AND WAIVERS SECTION 9.1. METHODS OF GIVING NOTICES. Whenever, by applicable law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any Stockholder, any director or any member of a committee of the Board of Directors and no provision is made as to how such notice shall be given, personal notice shall not be required and such notice may be given (i) in writing, by mail, postage prepaid, addressed to such Stockholder, director or committee member at his address as it appears on the books or (in the case of a Stockholder) the stock transfer records of the Corporation or (ii) by any other method permitted by law (including, but not limited to, overnight courier service, telegram, telex or telecopier). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given one business day after delivery to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex or telecopy shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 54 55 SECTION 9.2. WAIVER OF NOTICE. Whenever any notice is required to be given to any Stockholder, director or member of a committee of the Board of Directors by applicable law, the Certificate of Incorporation, or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a Stockholder (whether in person or by proxy), director or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. DIVIDENDS. Subject to applicable law and the provisions of the Certificate of Incorporation, dividends may be declared by the Board of Directors at any meeting and may be paid in cash, in property or in shares of the Corporation's capital stock. Any such declaration shall be at the discretion of the Board of Directors. A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officers as to the value and amount of the assets, liabilities or net profits of the Corporation or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared. SECTION 10.2. RESERVES. There may be created by the Board of Directors, out of funds of the Corporation legally available therefor, such reserve or reserves as the Board of Directors from time to time, in its absolute discretion, considers proper to provide for contingencies, to equalize dividends or to repair or maintain any property of the Corporation, or for such other purpose as the Board of Directors shall consider beneficial to the Corporation, and the Board of Directors may thereafter modify or abolish any such reserve in its absolute discretion. SECTION 10.3. CHECKS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation shall be signed by such officer or officers or by such employees or agents of the Corporation as may be designated from time to time by the Board of Directors. SECTION 10.4. CORPORATE CONTRACTS AND INSTRUMENTS. Subject always to the specific directions of the Board of Directors, the Chairman of the Board (if any), the President, any Vice President, the Secretary or the Treasurer may enter into contracts and execute instruments in the name and on behalf of the Corporation. The Board of Directors and, subject to the specific directions of the Board of Directors, the Chairman of the Board (if any) or the President may authorize one or more officers, employees or agents of the Corporation to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 10.5. ATTESTATION. With respect to any deed, deed of trust, mortgage or other instrument executed by the Corporation through its duly authorized officer or officers, the 55 56 attestation to such execution by the Secretary or an Assistant Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage or other instrument a valid and binding obligation of the Corporation unless the resolutions, if any, of the Board of Directors authorizing such execution expressly state that such attestation is necessary. SECTION 10.6 SECURITIES OF OTHER CORPORATIONS. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute and deliver any waiver, proxy or consent with respect to any such securities. SECTION 10.7. FISCAL YEAR. The fiscal year of the Corporation shall be January 1 through December 31, unless otherwise fixed by the Board of Directors. SECTION 10.8. SEAL. The seal of the Corporation shall be such as from time to time may be approved by the Board of Directors. SECTION 10.9. INVALID PROVISIONS. If any part of these Bylaws shall be invalid or inoperative for any reason, the remaining parts, so far as is possible and reasonable, shall remain valid and operative. SECTION 10.10. HEADINGS. The headings used in these Bylaws have been inserted for administrative convenience only and shall not limit or otherwise affect any of the provisions of these Bylaws. SECTION 10.11. REFERENCES/GENDER/NUMBER. Whenever in these Bylaws the singular number is used, the same shall include the plural where appropriate. Words of any gender used in these Bylaws shall include the other gender where appropriate. In these Bylaws, unless a contrary intention appears, all references to Articles and Sections shall be deemed to be references to the Articles and Sections of these Bylaws. SECTION 10.12. AMENDMENTS. These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of a majority of the Whole Board; provided, however, that no such action shall be taken at any special meeting of the Board of Directors unless notice of such action is contained in the notice of such special meeting. These Bylaws may not be altered, amended or rescinded, nor may new bylaws be adopted, by the Stockholders except by the affirmative vote of the holders of not less than 66-2/3% of the voting power of all outstanding Voting Stock, voting together as a single class. Each alteration, amendment or repeal of these Bylaws shall be subject in all respects to Section 8.7. 56 57 CERTIFICATE OF SECRETARY I, Elizabeth Scheer, the duly appointed Secretary of Helix Biomedix, Inc., hereby certify that the foregoing Bylaws constitute the bylaws of Helix Biomedix, Inc. as adopted by the Board of Directors on _______________________, 2000. ---------------------------------------- Elizabeth Scheer, Secretary 58 Exhibit D HELIX BIOMEDIX, INC. 2000 STOCK OPTION PLAN ADOPTED: NOVEMBER 6, 2000 1. INTRODUCTIONS AND DEFINITIONS 1.1 THE PLAN This 2000 Stock Option Plan (hereinafter, this "Plan") establishes the right of and procedures for Helix BioMedix, Inc. (the "Company") to grant stock options to its employees, consultants and/or directors. This Plan provides for the granting of two types of options, namely (1) Incentive Stock Options, as defined and governed by Section 422 of the Internal Revenue Code of 1986, as amended and (2) Nonqualified Stock Options. This Plan sets forth provisions applicable to both types of options, to Incentive Stock Options only and to Nonqualified Stock Options only. 1.2 DEFINITIONS Capitalized terms used in this Plan shall have the following meanings: "ACT" means the Securities Act of 1933, as from time to time amended, or any replacement act or legislation. "BOARD" means the Board of Directors of the Company. "CAUSE" means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, any act of disloyalty to the Company or any current or future subsidiary of the Company, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Board, whose determination shall be conclusive and binding. "CHANGE OF CONTROL EVENT" means a merger, consolidation, or sale of assets, as the case may be and as described in Subsections (1) and (2) of Section 2.5(a). "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITTEE" means a committee appointed by the Board, pursuant to Section 2.3 hereof, to administer the provisions of this Plan and in the absence of any such committee, references to the Committee shall mean the Board. "COMPANY" means Helix BioMedix, Inc., a Delaware corporation. "CONSULTANT" means any person engaged by the Company or any current or future subsidiary of the Company to perform services as a non-employee service provider, advisor or consultant pursuant to the terms of a written plan or contract. "Consultants" is the plural of Consultant. "DIRECTOR" means a member of the Board. "Directors" is the plural of Director. "DISABILITY" means "permanent and total disability" as that term is defined for purposes of Section 22(e)(3) of the Code. 58 59 "EMPLOYEE" means, for purposes of this Plan, persons continuously employed by the Company or by any current or future subsidiary of the Company on a regular basis, whether full-time or part-time, at any time during the duration hereof. "Employees" is the plural of Employee. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as from time to time amended, or any replacement act or legislation. "FAIR MARKET VALUE" of the Company's common stock for any class shall be the average of the high and low per share sales prices for the common stock as reported by the Nasdaq National Market for a single trading. If there is no such reported price for the common stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of the Fair Market Value. "GOOD REASON" means the occurrence of any one of the following events, in the event that the Optionee (i) has given the Successor Corporation written notice of such occurrence and the Successor Corporation has failed to cure such event within thirty (30) days, and (ii) Optionee resigns within sixty (60) days following the expiration of such thirty-day period: (a) relocation of the Optionee to any place greater than fifty (50) miles from his or her principal location prior to the occurrence of the Corporate Transaction, except for reasonably required travel on the Successor Corporation's business that is not materially greater than such travel requirements prior to the Corporate Transaction; or (b) substantial reduction of the Optionee's compensation package, unless such a reduction is made by the Company ratably with all other employees at similar levels of responsibility. "INCENTIVE STOCK OPTION" means an option issued by the Company to purchase shares of stock of the Company that meets the definition of "incentive stock option" contained in Section 422 of the Code and that is issued by the Company to be an Incentive Stock Option. "Incentive Stock Options" is the plural of Incentive Stock Option. "NONQUALIFIED STOCK OPTION" means an option issued by the Company to purchase shares of stock of the Company that is not an Incentive Stock Option. "Nonqualified Stock Options" is the plural of Nonqualified Stock Option. "OPTIONEE" means the recipient of a Stock Option pursuant to a Stock Option Agreement. "Optionees" is the plural of Optionee. "PLAN" means this Helix BioMedix, Inc. 2000 Stock Option Plan, which also may be referred to as the "Helix BioMedix, Inc. Stock Option Plan." "PLAN GUIDELINES" shall mean the guidelines, rules, policies, regulations, forms of notice and forms of agreements and instruments, if any, adopted and amended by the Board from time to time with respect to this Plan pursuant to Section 2.3. "SHARES" shall mean the Shares of the Company reserved for issuance under this Plan as further defined in Section 2.2. "STOCK OPTION" means an agreement entered into by the Company granting the recipient the right to purchase shares of stock of the Company, at certain times and under certain conditions, subject to certain obligations and responsibilities as defined in this Plan and in the written Stock Option Agreement, whether an Incentive Stock Option or a Nonqualified Stock Option. "Stock Options" is the plural of Stock Option. "STOCK OPTION AGREEMENT" means the written contract by which a Stock Option is granted by the Company to an Optionee. "Stock Option Agreements" is the plural of Stock Option Agreement. "SUCCESSOR CORPORATION" has the meaning set forth under Section 2.5(b). 2 60 2. GENERAL PROVISIONS APPLICABLE TO BOTH NONQUALIFIED STOCK OPTIONS AND INCENTIVE STOCK OPTIONS GRANTED BY THE COMPANY. 2.1 OBJECTIVES OF THIS PLAN The purpose of this Plan is to encourage ownership of Common Stock of the Company by Employees and to provide a means of granting Stock Options to Consultants and Directors. This Plan is intended to provide an incentive to Employees for maximum effort in the successful operation of the Company and is expected to benefit the shareholders by enabling the Company to attract and retain personnel of the best available talent through the opportunity to share in the increased value of the Company's shares to which such personnel have contributed. The benefits of this Plan are not a substitute for compensation otherwise payable to Employees pursuant to the terms of their employment. 2.2 STOCK RESERVED FOR THIS PLAN Subject to the provisions of Section 2.10, the number of shares reserved for issuance upon the exercise of Stock Options granted under this Plan shall be 5,400,000 shares of the Common Stock of the Company (the "Shares"), which Shares shall be reserved from the Company's authorized and unissued shares. Shares subject to any Stock Option under this Plan which are not exercised in full or Shares as to which the right to purchase is forfeited through default or otherwise, shall remain available for other Stock Options under this Plan. The aggregate number of Shares subject to Stock Options under this Plan or reserved for issuance by the Board shall not exceed the number approved by the shareholders at the time of adoption hereof unless such increase is approved by the Company's shareholders. Such approval shall be by the affirmative vote of shareholders holding a majority of the issued and outstanding shares of common stock of the Company entitled to vote at a meeting called to approve said increase. 2.3 ADMINISTRATION OF THIS PLAN (a) This Plan shall be administered by the Board, provided that at all times during which the Company is subject to the periodic reporting requirements of the Exchange Act each member of the Board who participates in administration must be a "Non-Employee Director" as that term is defined in Rule 16b-3 of the Exchange Act. (b) The Board may appoint a Board committee (the "Committee") to administer this Plan in the name of the Board. The Board or the Committee so appointed shall have full power and authority to administer and interpret this Plan and to adopt, from time to time, such guidelines, rules, policies, regulations, forms of notice and forms of agreements and instruments for the administration of this Plan (collectively, "Plan Guidelines") as the Board or such Committee, as the case may be, deems necessary or advisable. Such powers include, but are not limited to (subject to the specific limitations described herein), authority to determine the Employees, Consultants and Directors to be granted Stock Options under this Plan, to determine the size, type and applicable terms and conditions of grants to be made to such Employees, Consultants and Directors, to determine a time when Stock Options will be granted and to authorize grants to eligible Employees, Consultants and Directors. (c) The Board's interpretations of this Plan and all Stock Option Agreements, including the definitions of terms used herein and in Stock Option Agreements, and all actions taken and determinations made by the Board concerning any matter arising under or with respect to this Plan or any Stock Options granted pursuant to this Plan, shall be final, binding and conclusive on all interested parties, including the Company, its shareholders and all former, present and future Employees, Consultants and Directors of the Company. So long as the Company is not subject to the reporting requirements of the Exchange Act, the Board may delegate some or all of its power and authority hereunder to the duly elected officers of the Company, such delegation to be subject to such terms and conditions as the Board in its discretion shall determine. Such delegation of authority may be contained in the Plan Guidelines. The Board may, as to questions of accounting, rely conclusively upon any determinations made by independent public accountants of the Company. 3 61 2.4 ELIGIBILITY; FACTS TO BE CONSIDERED IN GRANTING STOCK OPTIONS The Board shall have the authority to determine the persons eligible to receive a Stock Option, the time or times at which the Shares may be purchased and whether all of the Stock Options may be exercised at one time or in increments. 2.5 RIGHTS OF OPTIONEE IN EVENT OF MERGER, CONSOLIDATION, SALE OF ASSETS OR DISSOLUTION (a) Except as provided in Section 2.5(b) hereof, and notwithstanding anything in this Plan to the contrary, the Optionee may conditionally purchase the amount of Shares for which the right to purchase has either vested or, according to the terms of the Stock Option Agreement relating to such Shares, is scheduled to vest within 12 months of the effective, closing, or filing date, as the case may be, of a merger, consolidation, sale of assets, or dissolution, as described below, during the following periods: (1) the period commencing ten (10) days and ending five (5) days prior to the scheduled effective date of a merger or consolidation (as such effective date may be delayed from time to time) wherein the Company is not to be the surviving corporation and the shareholders of the corporation immediately prior to the merger or consolidation are not to own a majority of the capital stock of the surviving corporation immediately after the merger or consolidation, provided such merger or consolidation is not between or among the Company and other corporations related to or affiliated with the Company; (2) the period commencing ten (10) days and ending five (5) days prior to the scheduled closing date of a sale of all or substantially all of the assets of the Company (as such closing date may be delayed from time to time); and (3) the period commencing the date the shareholders of the Company approve the dissolution of the Company and ending five (5) days prior to the date of filing its Articles of Dissolution. If the merger, consolidation, sale of assets (collectively, a "Change of Control Event"), or dissolution, as the case may be and as described in Subsections (1) through (3) of this Section 2.5(a), once commenced, is canceled or revoked, the conditional purchase of Shares for which the right to purchase would not have otherwise vested at the time of said cancellation or revocation, but for the operation of this Section 2.5, shall be rescinded. With respect to all other Shares conditionally purchased, the Optionee may rescind such purchase at Optionee's discretion. If the Change of Control Event does occur or Articles of Dissolution are filed, as the case may be and as described in Subsections (1) through (3) of this Section 2.5(a), all unexercised Stock Options that have not been assumed pursuant to Section 2.5(b) shall terminate on the effective, closing, or filing date, as the case may be. (b) The Optionee shall have no right to conditionally purchase Shares for which the right to purchase would not have otherwise vested but for the operation of this Section 2.5 if: (1) the Stock Option relating to such Shares, in connection with the Change of Control Event, is either to be assumed by the successor or purchasing corporation or parent thereof (the "Successor Corporation") or to be replaced with a comparable award for the purchase of shares of the capital stock of the Successor Corporation; or (2) the Stock Option relating to such Shares is to be replaced with a cash incentive program of the Successor Corporation that preserves the spread existing at the time of the Change of Control Event and provides for subsequent payout in accordance with the same vesting schedule applicable to such Stock Option. For purposes of this Section 2.5(b)(2), the spread existing at the time of a Change of Control Event means the difference between the exercise price per Share of the Stock Option and the Fair Market Value per Share on the closing or effective date of the Change of Control Event. The determination of Stock Option comparability shall be made by the Board, and its determination shall be conclusive and binding. In the event that an Optionee's Stock Options are assumed or replaced by a Successor Corporation in a Change of Control Event, and the Optionee's employment or services are terminated within one year after the Change of Control Event either by the Successor Corporation without Cause or by the Optionee 4 62 voluntarily for Good Reason, the Optionee shall have the right to purchase within ninety (90) days of termination the amount of Shares covered by such Stock Options for which the right to purchase is scheduled by the terms of the Stock Option Agreement to vest within 12 months of the date of termination. (c) If the Company shall be the surviving corporation in any merger or consolidation or is a party to a merger or consolidation which does not otherwise qualify as a Change of Control Event, any Stock Option granted hereunder shall pertain and apply to the securities to which a holder of the number of Shares of Common Stock subject to the Stock Option would have been entitled. (d) The grant of Stock Options will in no way affect the Company's right to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. (e) Nothing herein shall allow the Optionee to purchase Shares, the Stock Options for which have expired. 2.6 STOCK OPTION AGREEMENTS; TERMS AND EXPIRATION OF STOCK OPTIONS Each Stock Option granted under this Plan shall be pursuant to a written Stock Option Agreement in a form substantially similar to the form attached as Annex A, which shall designate whether the Stock Option is an Incentive Stock Option or Nonqualified Stock Option, shall be subject to such amendment or modification from time to time as the Board shall deem necessary or appropriate to comply with or take advantage of applicable laws or regulations and shall contain or be subject to provisions as to the following effect, together with such other provisions as the Board shall from time to time approve: (a) that, subject to the provisions of Section 2.6(b) below, the Stock Option, as to the whole or any part thereof, may be exercised only by the Optionee or Optionee's personal representative; (b) except as may be otherwise permitted pursuant to Section 2.13(c) or Section 3.3, that neither the whole nor any part of the Stock Option shall be transferable by the Optionee or by operation of law other than by will of, or by the laws of descent and distribution applicable to, a deceased Optionee and that the Stock Option and any and all rights granted to the Optionee thereunder and not theretofore effectively and completely exercised shall automatically terminate and expire upon any sale, transfer, or hypothecation or any attempted sale, transfer, or hypothecation of such rights or upon the bankruptcy or insolvency of the Optionee or Optionee's estate; (c) that subject to the foregoing provisions, a Stock Option may be exercised at different times for portions of the total number of Shares for which the right to purchase shall have vested provided that such portions are in multiples of ten (10) shares if the Optionee holds vested Stock Options for ninety-nine (99) or fewer Shares and otherwise in multiples of one hundred (100) Shares; (d) that no Optionee shall have the right to receive any dividend on or to vote or exercise any right in respect to any Shares unless and until the certificates for such Shares have been issued to such Optionee; (e) that the Stock Option shall expire with respect to vested Shares at the earliest of the following: (1) The date specified in the Stock Option Agreement; (2) With respect to any Employee, ninety (90) days after voluntary or involuntary termination of Optionee's employment for any reason other than termination as described in Paragraphs (5) or (6) below; (3) With respect to any Consultant, ninety (90) days after the earlier of (i) the date either the Company or Optionee notifies the other that the Company or the Optionee, as the case may be, is terminating the consultant relationship or (ii) the end of a period of one hundred twenty (120) days during which the Consultant has not performed any service for the Company, unless in either case, such termination is pursuant to events described in Paragraphs (5) or (6) below; 5 63 (4) With respect to a Director, ninety (90) days after resignation or removal from the Board of the Company or other cessation of service as a director other than cessation of service as described in Paragraphs (5) or (6) below; (5) Immediately upon the discharge of Optionee (removal from the Board, in the case of a Director) for "cause" as defined in any employment or consulting agreement between the Company and Optionee or, if there shall be no such employment or consulting agreement, for Cause as defined herein; (6) Twelve (12) months after Optionee's death or Disability; or (7) In the event of a Change of Control Event, or the filing of Articles of Dissolution, as the case may be and as described in Subsections (1) through (3) of Section 2.5(a), on the date specified in Section 2.5(a). However, if the Change of Control Event does not occur or if Articles of Dissolution are not filed, as the case may be and as described in Subsections (1) through (3) of Section 2.5(a), all Stock Options which are terminated pursuant to this Subsection (e)(7) shall be reinstated as if no action with respect to any of said events had been contemplated or taken by any party thereto and all Optionees shall be returned to their respective positions on the date of termination; (f) that, to the extent a Stock Option Agreement provides for the vesting of the right to purchase in increments, such vesting shall cease as of the date of the Optionee's death, Disability, or, in the case of any Employee, voluntary or involuntary termination of Optionee's employment with the Company for any reason or, in the case of any Consultant, (i) the date either the Company or Optionee notifies the other that the Company or the Optionee, as the case may be, is terminating the consultant relationship or (ii) the end of a period of one hundred twenty (120) days during which the Consultant has not performed any service for the Company or, in the case of a Director, upon his resignation or removal from the Board of the Company or other cessation of his services as a director; (g) that the time at which or the installments in which the Stock Option shall become exercisable, is as set forth in the Stock Option Agreement; provided that if not so set forth in the Stock Option Agreement, the Stock Option will become exercisable according to the following schedule, which may be waived or modified by the Board at any time:
Period of Optionee's Continuous Employment or Service With the Company or Its Subsidiaries Percent of Total Option From the Date Option Is Granted That Is Exercisable --------------------------------------------- ----------------------- After 6 months 25% Each 6-month period of continuous service An additional 25% completed thereafter After 2 years 100%
(h) that the terms of the Stock Option Agreement shall be a contract between the Company and the Optionee and the specific terms of any Stock Option Agreement shall govern over the more general terms hereof; and (i) with respect to Employees, subject to the Plan Guidelines, the Stock Option Agreement shall not be affected by any changes of duties or position so long as the Optionee shall continue to be an Employee, subject to the terms hereof. 6 64 2.7 RULE 16B-3 COMPLIANCE (a) Unless an Optionee could otherwise exercise a Stock Option or dispose of Shares delivered upon exercise of a Stock Option granted under the Plan without incurring liability under Section 16 of the Exchange Act ("Section 16"), at least six months shall elapse from the date of acquisition of the Stock Option to the date of disposition of its underlying Shares. (b) It is the intent of the Company that this Plan comply in all respects with applicable provisions of Rule 16b-3 or Rule 15a-1(c)(3) under the Exchange Act in connection with any grant of Stock Options to or other transaction by an Optionee who is subject to Section 16 (except for transactions exempted under alternative Exchange Act Rules or acknowledged in writing to be non-exempt by such Optionee). Accordingly, if any provision of this Plan or any Stock Option Agreement relating to a Stock Option does not comply with the requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to such transaction, such provision will be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Optionee shall avoid liability under Section 16(b). 2.8 NOTICE OF INTENT TO EXERCISE STOCK OPTION The Optionee (or other person or persons, if any, entitled hereunder) desiring to exercise a Stock Option as to all or part of the Shares covered thereby shall in writing notify the Company at its principal office, specifying the number of Shares to be purchased and, if required by the Company, representing in form satisfactory to the Company that the Shares are being purchased for investment and not with a view to resale or distribution. The Company from time to time may issue or specify to Optionees a written form for use in connection with any such exercise. With respect to any Shares conditionally purchased pursuant to Section 2.5(a) above and for which such purchase has not been voluntarily or otherwise rescinded pursuant to Section 2.5(a), the Optionee shall be deemed to have given to the Company the notice of exercise required by this Section 2.8 as of ten (10) days prior to the closing or effective date of the Change of Control Event or the filing of Articles of Dissolution, as the case may be and as described in Subsections (1) through (3) of Section 2.5(a). 2.9 METHOD OF EXERCISE OF STOCK OPTION Within ten (10) days after receipt by the Company of the notice provided in Section 2.8, but not later than the expiration date specified in Section 2.5(e), the Stock Option shall be exercised as to the number of Shares specified in the notice by payment by the Optionee to the Company of the amount specified below in Section 3.2 and Section 4.5, as applicable. Payment of such purchase price shall be made in cash, or in accordance with procedures for a "cashless exercise" as the same may have been established from time to time by the Company to facilitate exercises of Stock Options and sales of Shares under this Plan. The Company has no obligation and has made no commitments to establish a procedure for "cashless exercise". Payment in shares of the Company's Common Stock shall be deemed to be the equivalent of payment in cash at the Fair Market Value of those shares. For purposes of the preceding sentence, "Fair Market Value" shall be determined by the Board in the same manner as utilized in determining the Fair Market Value at the time other Stock Options are granted. 2.10 RECAPITALIZATION The aggregate number of Shares for which Stock Options may be granted hereunder, the number of Shares covered by each outstanding Stock Option and the price per Share thereof in each such Stock Option Agreement shall be proportionately adjusted for an increase or decrease in the number of outstanding shares of common stock of the Company resulting from a stock split or reverse split of shares or any other capital adjustment or the payment of a stock dividend or other increase or decrease in such shares effected without receipt of consideration by the Company excluding any decrease resulting from a redemption of shares by the Company. If the adjustment would result in a fractional Share the Optionee shall be entitled to one (1) additional Share, provided that the total number of Shares to be granted under this Plan shall not be increased above the equivalent number of Shares initially allocated or later increased by approved amendment to this Plan. Any adjustment shall be made by the Board whose determination shall be final, binding and conclusive. 7 65 If the Company's Common Stock is reclassified or converted into common stock or another class of common stock in accordance with the Company's Articles of Incorporation or otherwise, any then outstanding Stock Options shall automatically become options to purchase shares of stock of the Company into which the Common Stock is converted or reclassified; and all references to "Shares" herein shall refer to shares of the Company's stock into which the Common Stock is converted or reclassified. 2.11 SUBSTITUTIONS AND ASSUMPTIONS The Board shall have the right to substitute, replace, or assume options in connection with mergers, reorganizations, separations, or other "corporate transactions" as that term is defined in and said substitutions and assumptions are permitted by Section 425 of the Code and the regulations promulgated thereunder. The number of Shares reserved pursuant to Section 2.2 may be increased by the corresponding number of options assumed and, in the case of a substitution, by the net increase in the number of Shares subject to options before and after the substitution. 2.12 TERMINAL DATE OF PLAN This Plan shall not extend beyond a date ten (10) years from the date of adoption hereof by the Board, provided that any Stock Option to purchase shares duly granted hereunder prior to such date shall be exercisable pursuant to its terms and the terms hereof until expiration or earlier termination of such Stock Option. 2.13 GRANTING OF STOCK OPTIONS (a) The granting of any Stock Option pursuant to this Plan shall be entirely in the discretion of the Board and nothing herein contained shall be construed to give any person any right to participate under this Plan or to receive any Stock Option under it. (b) The granting of a Stock Option pursuant to this Plan shall not constitute any agreement or an understanding, express or implied on the part of the Company or a current or future subsidiary to employ or retain the Optionee for any specified period. (c) The Board shall have the authority to grant both transferable Stock Options and nontransferable Stock Options and to amend outstanding nontransferable Stock Options to provide for transferability. Each Stock Option intended to qualify as an Incentive Stock Option and each nontransferable Stock Option intended to qualify under Rule 16b-3 or otherwise shall provide by its terms that it is not transferable otherwise than by will or the laws of descent and distribution or, except in the case of Incentive Stock Options, pursuant to a "qualified domestic relations order" as defined by the Code and is exercisable, during the Optionee's lifetime, only by the Optionee. Each transferable Stock Option may provide for such limitations on transferability and exercisability as the Board may designate at the time the Stock Option is granted or is otherwise amended to provide for transferability. 2.14 WITHDRAWAL An Optionee may at any time elect in writing to abandon a Stock Option with respect to the number of Shares as to which the Stock Option shall not have been exercised. 2.15 GOVERNMENT REGULATIONS This Plan and the granting and exercise of any Stock Option hereunder and the obligations of the Company to sell and deliver Shares under any such Stock Option shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies as may be required. 2.16 PROCEEDS FROM SALE OF STOCK Proceeds of the purchase of Shares by an Optionee shall be used for the general business purposes of the Company. 8 66 2.17 SHAREHOLDER APPROVAL This Plan shall be submitted to the shareholders for their approval within twelve (12) months from the date hereof. The Company may grant Stock Options prior to such approval which shall be conditioned upon subsequent shareholder approval. 2.18 COMPLIANCE WITH SECURITIES LAWS The Board shall have the right to: (a) require an Optionee to execute, as a condition of exercise of a Stock Option, a letter evidencing Optionee's intent to acquire the Shares for investment and not with a view to the resale or distribution thereof; (b) place appropriate legends upon the certificate or certificates for the Shares; and (c) take such other acts as it deems necessary in order to cause the issuance of Shares to comply with applicable provisions of state and federal securities laws. In furtherance of the foregoing and not by way of limitation thereof, no Stock Option shall be exercisable unless such Stock Option and the Shares to be issued pursuant thereto shall be registered under appropriate federal and state securities laws, or shall be exempt therefrom, in the opinion of the Board upon advice of counsel to the Company. Each Stock Option Agreement shall contain adequate provisions to assure that there will be no violation of such laws. This provision shall in no way obligate the Company to undertake registration of Stock Options or Shares hereunder. Issue, transfer or delivery of certificates for Shares pursuant to the exercise of Stock Options may be delayed, at the discretion of the Board until the Board is satisfied that the applicable requirements of the federal and state securities laws have been met. The dollar value and number of Stock Options granted under this Plan are limited pursuant to Rule 701 promulgated by the Securities and Exchange Commission, which provides an exemption from the registration requirements under the Act. Any guidelines adopted pursuant to this Plan shall contain the current limitations specified in said Rule 701 until the Company is registered under the Act. 2.19 GOLDEN PARACHUTE TAXES In the event that any amounts paid or deemed paid to an employee under this Plan are deemed to constitute "excess parachute payments" as defined in Section 280G of the Code (taking into account any other payments made under this Plan and any other compensation paid or deemed paid to an employee), or if any employee is deemed to receive an "excess parachute payment" by reason of his or her vesting of Options pursuant to Section 2.5 herein, the amount of such payments or deemed payments shall be reduced (or, alternatively the provisions of Section 2.5 shall not act to vest options to such employee), so that no such payments or deemed payments shall constitute excess parachute payments. The determination of whether a payment or deemed payment constitutes an excess parachute payment shall be in the sole discretion of the Board. 3. PROVISIONS APPLICABLE SOLELY TO NONQUALIFIED STOCK OPTIONS In addition to the provisions of Section 2 above, the following paragraphs shall apply to any Stock Options granted under this Plan which are not Incentive Stock Options. 3.1 OPTION PRICE The option, or purchase, price of each Share optioned as a Nonqualified Stock Option under this Plan shall be determined by the Board and set forth in the Stock Option Agreement. 9 67 3.2 METHOD OF EXERCISE OF STOCK OPTION The amount to be paid by the Optionee upon exercise of a Nonqualified Stock Option shall be the exercise price provided for in the Stock Option Agreement, together with the amount of federal, state and local income and FICA taxes required to be withheld by the Company. If the Company has established procedures for a "cashless exercise" pursuant to Section 2.9, an Optionee may elect to pay Optionee's federal, state, or local income and FICA withholding tax by having the Company withhold shares of Company Common Stock having a value equal to the amount required to be withheld. The value of the shares to be withheld is deemed to equal the Fair Market Value of the shares on the day the Stock Option is exercised. An election by an Optionee to have shares withheld for this purpose will be subject to the following restrictions: (a) If an Optionee has received multiple Stock Option grants, a separate election must be made for each grant; (b) The election must be made prior to the day the Stock Option is exercised; (c) The election will be irrevocable; (d) The election will be subject to the disapproval of the Board; and (e) If the Optionee is an "officer" of the Company within the meaning of Section 16 as defined in Rule 16a-1 promulgated by the Securities and Exchange Commission, the election may not be made within six (6) months following the grant of the Stock Option. 3.3 ASSIGNMENT The Company may allow limited assignment rights for the gifting by Optionee of rights hereunder to vested Nonqualified Stock Options, on terms to be determined by the Board from time to time. 4. PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS In addition to the provisions of Section 2 above, the following paragraphs shall apply to any Stock Options granted under this Plan which are Incentive Stock Options. 4.1 CONFORMANCE WITH INTERNAL REVENUE CODE Stock Options granted under this Plan which are "Incentive Stock Options" shall conform to, be governed by and be interpreted in accordance with Section 422 of the Code and any regulations promulgated thereunder and amendments to the Code and regulations. Only Employees may be granted Incentive Stock Options hereunder--Consultants and non-employee Directors may not receive Incentive Stock Options hereunder. 4.2 OPTION PRICE The option, or purchase, price of each Share optioned as an Incentive Stock Option under this Plan shall be determined by the Board at the time of the action for the granting of the Stock Option and set forth in the Stock Option Agreement, but shall not, in any event, be less than the Fair Market Value of the Company's Common Stock on the date of grant. 4.3 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTION The aggregate Fair Market Value of the Shares, as determined on the date of grant, vesting in any one calendar year with respect to which an Employee has the right to purchase (under this Plan or any other plan of the Company which authorizes Incentive Stock Options) shall not exceed $100,000; and to the extent any Stock Option purporting to be an Incentive Stock Option grants an Employee the right to purchase Shares with an aggregate Fair Market Value vesting in any one calendar year in excess of $100,000, as so determined (under this Plan or any other 10 68 plan of the Company which authorizes Incentive Stock Options), shall be deemed a Nonqualified Stock Option for such excess amount. 4.4 LIMITATION ON GRANTS TO SUBSTANTIAL SHAREHOLDERS It is the Company's intent that it will not grant Incentive Stock Options to any Employee who, immediately prior to the grant of a Stock Option hereunder, owns stock in the Company representing more than ten percent (10%) of the voting power of all classes of stock of the Company, unless the per share option price specified by the Board for the Incentive Stock Options granted such an Employee is at least one hundred ten percent (110%) of the Fair Market Value of the Company's stock on the date of grant and such Stock Option, by its terms, is not exercisable after the expiration of five (5) years from the date such Stock Option is granted. Any Stock Option that by its terms purports to be an Incentive Stock Option that is issued to an Employee who owns stock in the Company representing more than ten percent (10%) of the voting power of all classes of stock of the Company that does not have an exercise price of at least one hundred ten percent (110%) of the Fair Market Value of the Company's stock on the date of grant or that is, by its terms, exercisable after the expiration of five (5) years from the date such Stock Option is granted, shall be deemed a Nonqualified Stock Option. 4.5 METHOD OF EXERCISE OF STOCK OPTION The amount to be paid by the Optionee upon exercise of an Incentive Stock Option shall be the purchase price per share provided for in the Stock Option Agreement. 5. COMPANY'S OPTION TO REPURCHASE 5.1 OPTION TO REPURCHASE Subject to the provisions of Section 5.3 below and unless otherwise specified by the Board, upon the termination of an Optionee's employment or business relationship with the Company or any current or future subsidiary, the Company shall have the right to repurchase up to Ten Thousand (10,000) Shares purchased upon the exercise of Stock Options (and any other shares of stock or other securities issued in connection with such Shares) granted while the Optionee was an Employee, Consultant or Director of the Company or a current or future subsidiary, as the case may be, at its then-current Fair Market Value, as determined by the Board. The Company shall give written notice to the Optionee of its intention to repurchase within the later of (i) sixty (60) days after the date of termination or (ii) sixty (60) days after the last day a Stock Option held by such Optionee might be exercised. The purchase price for the Shares to be repurchased shall be payable in cash within sixty (60) days after the notice is given and shall be offset against any amounts that may be due and owing to the Company. For purposes of this Section 5.1, "Fair Market Value" shall be determined by the Board in the same manner as utilized in determining the Fair Market Value for purposes of Stock Option grants at such time. The Board's determination of Fair Market Value shall be final. 5.2 RIGHT OF FIRST REFUSAL Subject to the provisions of Section 5.3 below and unless otherwise specified by the Board, the Optionee (or his personal representative) shall not sell or encumber the Shares purchased hereunder or any other shares issued in connection with those Shares, unless he or she has first offered to sell such Shares to the Company, as follows: If the Optionee proposes to encumber or transfer such Shares, he or she shall advise the Company of the name of the proposed recipient, the number and class of Shares and the proposed price and terms. The Company shall have an option, which option must be exercised in writing within forty-five (45) days after receipt of written notice of the proposed transfer, to purchase such Shares upon the same terms and conditions as are stated in the notice. The purchase price shall be paid by the Company within forty-five (45) days of the giving of its notice of intent to repurchase. In the event the Company does not elect to repurchase hereunder, the Optionee shall have the right to encumber or transfer such Shares in accordance with the price and terms and to the recipient stated in the notice for a period of ninety (90) days; but, if such Shares are not encumbered or transferred within said ninety (90) days, the Optionee shall not thereafter encumber or transfer such Shares without again complying with the requirements of this Section 5.2. By executing the appropriate acknowledgment on Stock Option Agreements, the spouses of Optionees shall agree and assent to the repurchase rights set forth in Sections 5.1 and 5.2. The Company may 11 69 require spouses of Optionees to execute similar acknowledgments in connection with the exercise of Stock Options. Notwithstanding the foregoing restrictions in this Section 5.2, an Optionee (the "Transferor") may, during his or her lifetime, give or otherwise transfer, outright or in trust, any or all of his or her Shares to one or more of the following persons: his or her spouse, his or her lineal ancestors, or descendants, or to an entity owned and controlled by such Optionee (the "Permitted Transferees"); provided that (i) each Permitted Transferee holds such Shares subject to the terms and conditions of this Section 5.2 and signs an agreement to that effect, and (ii) each Permitted Transferee makes no further transfer of any Shares, voluntarily or otherwise, except to the Transferor or to the Transferor's other Permitted Transferees. 5.3 TERMINATION OF COMPANY'S RIGHTS The Company's repurchase rights stated in Sections 5.1 and 5.2 above will terminate in the event the Company successfully concludes a registered public offering of its common stock under the Act. 6. TERMINATION AND AMENDMENT This Plan, the Plan Guidelines and all rules and regulations adopted in respect hereof may be terminated, suspended, or amended at any time by a majority vote of the Board, provided that no such action shall adversely affect any material rights of Optionees granted under this Plan prior to such action without the consent of such Optionees and provided further that to the extent required for compliance with Section 422 of the Code or any applicable law or regulation, shareholder approval will be required for any amendment that will (a) increase the total number of shares as to which Options may be granted under the Plan, (b) modify the class of persons eligible to receive Options, or (c) otherwise require shareholder approval under any applicable law or regulation. The Board may amend the terms and conditions of outstanding Stock Options, provided, however, that (i) no such amendment would be materially adverse to the holders of such Stock Options without their consent, (ii) no such amendment shall extend the period for exercise of a Stock Option, and (iii) the amended terms of a Stock Option would be permitted under this Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Optionee, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. 7. FOREIGN EMPLOYEES Without amending this Plan, the Board may grant Stock Options to eligible Employees who are foreign nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Board be necessary or desirable to foster and promote achievement of the purposes of this Plan, and, in furtherance of such purposes the Board may make such modifications, amendments, procedures, subplans, and the like as may be necessary or advisable to comply with the provisions of the laws in other countries in which the Company operates or has Employees. 8. REGISTRATION, LISTING AND QUALIFICATION OF SHARES Each Stock Option shall be subject to the requirement that if at any time the Board shall determine that the registration, listing, or qualification of the Shares covered thereby upon any securities exchange or under any foreign, federal, state, or local law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Stock Option or the purchase of shares thereunder, no such Stock Option may be exercised unless and until such registration, listing, qualification, consent, or approval shall have been effected or obtained free of any condition not acceptable to the Board. Any person exercising a Stock Option shall make such representations and agreements and furnish such information as the Board may request to assure compliance with the foregoing or any other applicable legal requirements. 9. NO RIGHTS TO STOCK OPTIONS OR EMPLOYMENT; NO RESTRICTIONS No Employee or other person shall have any claim or right to be granted a Stock Option under this Plan. Having received a Stock Option under this Plan shall not give an Employee or other person any right to receive any other grant or Stock Option under this Plan. An Optionee shall have no rights to or interest in any Stock Option except as set forth herein. Neither this Plan nor any action taken hereunder shall be construed as giving any 12 70 Employee any right to be retained in the employ of the Company or any Consultant or Director any right to be retained or engaged by the Company, or otherwise in any way affect any right and power of the Company to terminate the employment or engagement of any Employee, Consultant or Director at any time with or without assigning a reason therefor. Nothing in this Plan shall restrict the Company's rights to adopt other option plans pertaining to any or all of the Employees, Consultants or Directors covered under this Plan or other Employees, Consultants or Directors not covered under this Plan. Each Stock Option granted hereunder may be affected, with regard to both vesting schedule and termination, by leaves of absence, a reduction in the number of hours worked, partial disability and other changes in Optionee's Employee, Consultant or Director status, as the case may be. The Company's policies in such matters shall be contained in the Plan Guidelines adopted by the Board. The Plan Guidelines and the guidelines, rules, policies and regulations contained therein may be amended at any time and from time to time by the Board or the Committee, in its sole discretion and with or without notice. Optionee's rights hereunder or under any Stock Option granted hereunder at any time shall be governed by the Plan Guidelines in effect at the time of any change in Optionee's employment status as contemplated above. 10. COSTS AND EXPENSES Except as provided herein with respect to the payment of taxes, all costs and expenses of administering this Plan shall be borne by the Company and shall not be charged to any grant or any Optionee receiving a grant. 11. PLAN UNFUNDED This Plan shall be unfunded. Except for the Board's reservation of a sufficient number of authorized shares to the extent required by law to meet the requirements of this Plan, the Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure payment of any grant under this Plan. 12. GOVERNING LAW This Plan shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to the legislative or judicial conflict of laws rules of any state), except to the extent superseded by federal law, and venue for any action taken in connection herewith or related hereto shall exclusively reside in King County, Washington. 13. SPECIAL PROVISIONS RELATING TO CALIFORNIA RESIDENTS Notwithstanding anything to the contrary herein, the following provisions shall govern all options granted under the Plan to residents of the State of California (referred to herein as "California Options"). The following provisions are intended to comply with Rule 260.140.41 of the Regulations of the Department of Corporations of the State of California (the "California Regulations"). When issuing California options, the Company shall indicate on the options that they are issued subject to these special provisions. (a) The total number of shares granted pursuant to the Plan is as set forth in Section 2.2 of the Plan. (b) The option price or purchase price of each Share optioned under the Plan under a California Option shall be determined by the Board at the time of the action for the granting of the option but shall not, in any event, be less than eighty-five percent (85%) of the Fair Market Value of the Common Stock on the date of grant. With respect to any California Option granted to any person who owns stock possessing more than ten percent (10%) of the total combined voting power or value of all classes of stock of the Company, the option price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant. (c) The exercise period with respect to California Options shall not exceed one hundred twenty (120) months from the date of grant. 13 71 (d) California Options shall not be transferable other than by will or the laws of descent and distribution, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to "immediate family" as that term is defined in 17 C.F.R. 240.16a-1(e). (e) In the event of a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Company's stock, the number of shares subject to a California Option shall be adjusted in accordance with the provision of Section 2.9 of the Plan. (f) California Options shall, at a minimum, be exercisable at a rate of twenty percent (20%) per year from the date of grant. (g) Unless employment is terminated for cause as defined by applicable law, the terms of the Plan or option grant or a contract of employment, the right to exercise a California Option in the event of termination of employment with the Company, to the extent that the California Option is exercisable on the date of such termination of employment, is as follows: at least six (6) months from the date of termination if termination was caused by death or disability and at least thirty (30) days from the date of termination if termination was caused by other than death or disability. (h) There shall be no California Options granted under the Plan later than ten (10) years from the date the Plan was adopted or the date the Plan is approved by the shareholders, whichever is earlier. (i) The Plan shall be approved by the shareholders within twelve (12) months after the date of adoption of the Plan by the Board of Directors. No option may be exercised before shareholder approval is obtained. (j) The Company will comply with Section 260.140.46 of the California Code of Regulations regarding information required to be received by employees of the Company residing in the State of California. The provisions of Section 2.5(a) and (b) and paragraph (7) of subsection (e) of Section 2.6 of the Plan shall not apply to California Options with the effect that there shall be no reference in the Plan to the acceleration of the exercise period for California Options in relation to mergers, consolidations and takeovers in which the Company is not the surviving entity. 14. SEVERABILITY In the event any provision of this Plan or any Stock Option Agreement is found to be invalid or unenforceable, such provision shall be deemed reformed to the extent necessary to render it valid and enforceable. The invalidity or unenforceability of any provision in this Plan or any Stock Option Agreement shall not in any way affect the validity or enforceability of any other provision of this Plan or the Stock Option Agreement, as the case may be and this Plan and the Stock Option Agreement shall be construed in all respects as if such invalid or unenforceable provision had never been included. 14 72 ANNEX A Stock Option No. ______ [FORM OF] HELIX BIOMEDIX, INC. (THE "COMPANY") STOCK OPTION AGREEMENT FOR PURCHASE OF STOCK We are pleased to inform you that the Company has granted to you, as the individual named below (the "Optionee"), this Stock Option. This Stock Option Agreement is a contract between you and the Company. It grants to you certain defined rights, at certain times and under certain conditions, to purchase shares of the Company's Common Stock, and in exchange you accept certain obligations and responsibilities, as described below and in the Company's 2000 Stock Option Plan (adopted __________ __, ____) (the "Plan") and the attached Terms and Conditions. FOR VALUABLE CONSIDERATION, the Company does hereby grant to the Optionee, as of the Date of Option Grant specified below, the right and option to purchase the number of shares of Common Stock of the Company specified below (the "Option Shares") for the Exercise Price Per Share specified below, and the right to purchase the Option Shares under this Stock Option Agreement shall accrue and vest according to the Vesting Schedule specified below:
- -------------------------------------------------------------------------------- NAME OF OPTIONEE: - -------------------------------------------------------------------------------- TYPE OF OPTION: - -------------------------------------------------------------------------------- NUMBER OF OPTION SHARES: - -------------------------------------------------------------------------------- EXERCISE PRICE PER SHARE: - -------------------------------------------------------------------------------- DATE OF OPTION GRANT: - -------------------------------------------------------------------------------- TERM OF OPTION: - -------------------------------------------------------------------------------- VESTING SCHEDULE: - --------------------------------------------------------------------------------
EXECUTED as of the Date of Option Grant. HELIX BIOMEDIX, INC. By: ------------------------------------- Its: ------------------------------------ BY SIGNING BELOW AND ENTERING INTO THIS STOCK OPTION AGREEMENT, OPTIONEE AGREES TO THE TERMS HEREOF AND ALL OBLIGATIONS AND RESPONSIBILITIES AS DESCRIBED IN THE PLAN AND THE ATTACHED TERMS AND CONDITIONS. OPTIONEE , as Optionee --------------------------- BY SIGNING BELOW, OPTIONEE'S SPOUSE HEREBY ACKNOWLEDGES THAT, PURSUANT TO THE PLAN THE COMPANY WILL HAVE CERTAIN REPURCHASE RIGHTS WITH RESPECT TO ANY OPTION SHARES ISSUED TO OPTIONEE UPON EXERCISE OF THIS STOCK OPTION AND AS A CONDITION TO SUCH EXERCISE, THE UNDERSIGNED WILL EXECUTE SUCH DOCUMENTATION AS MAY BE REASONABLY REQUIRED BY THE COMPANY EVIDENCING THE UNDERSIGNED'S ACCEPTANCE OF AND AGREEMENT TO SUCH REPURCHASE RIGHTS. SPOUSE , as Spouse ----------------------------- 15 73 TERMS AND CONDITIONS OF STOCK OPTION AGREEMENT STOCK OPTIONS ARE SUBJECT TO THE TERMS HEREOF AND OF THE COMPANY'S 2000 STOCK OPTION PLAN (ADOPTED ________ __, ____) (THE "PLAN"). CAPITALIZED TERMS USED IN THIS STOCK OPTION AGREEMENT (THIS "AGREEMENT"), IF NOT OTHERWISE DEFINED, HAVE THE MEANINGS GIVEN THEM IN THE PLAN. 1. a. Any Option Shares which become purchasable ("vest") but are not purchased on a vesting date or anniversary date, as the case may be, may be purchased on any subsequent date, provided all options for the purchase of Option Shares must be exercised within the time periods specified in Section 2 below. b. Optionees shall have conditional purchase rights in the event of any Change of Control Event or dissolution as described in the Plan. 2. All UNVESTED options shall expire upon any termination of Optionee's employment with or provision of services to the Company for any reason, whether voluntary or involuntary, or upon the death or Disability of Optionee, as more fully described in the Plan. Subject to the terms hereof, all VESTED options (i.e., options for which the right to purchase has accrued) shall expire at the earliest of the following: a. The earlier of the end of the Term of Option specified on the first page of this Agreement or ten (10) years from the Date of Option Grant specified on the first page of this Agreement; b. If Optionee is or becomes an Employee, ninety (90) days after voluntary or involuntary termination of Optionee's employment other than termination as described in Paragraphs (e) or (f) below; c. If Optionee is or becomes a Consultant, ninety (90) days after the earlier of (i) the date either the Company or Optionee notifies the other that the Company or the Optionee, as the case may be, is terminating the consultant relationship or (ii) the end of a period of one hundred twenty (120) days during which the Consultant has not performed any service for the Company, unless in either case, such termination is pursuant to events described in Paragraphs (e) or (f) below; d. If Optionee is a Director, ninety (90) days after resignation or removal from the Board of the Company or other cessation of service as a director other than cessation of service as described in Paragraphs (e) or (f) below; e. Upon discharge of Optionee (removal from the Board, in the case of a Director) for "cause" as defined in any employment or consulting agreement between the Company and Optionee or, if there shall be no such employment or consulting agreement, for Cause, as defined in the Plan; f. Twelve (12) months after Optionee's death or Disability; or g. In the event of a Change of Control Event or dissolution as described in the Plan. However, if the Change of Control Event or dissolution, as the case may be and as described in the Plan, is not finalized, all options which are terminated pursuant to this Subsection (g) shall be reinstated as described in the Plan. Optionee agrees that all vested and unvested options granted pursuant to this Stock Option shall expire in accordance with the provisions of this paragraph 2 following involuntary or voluntary termination of Optionee's employment with, engagement by or services to the Company, as applicable, for any reason. Optionee hereby waives the right to recover as damages any vested or unvested stock options which expire according to this paragraph 2. This waiver shall include, but not be limited to, damages related to any claims Optionee may have against the Company to which Optionee may be entitled by virtue of employment with the Company or the termination of Optionee's employment. 3. This Stock Option may be exercised at different times for portions of the total number of Option Shares for which the right to purchase shall have accrued and vested hereunder, provided that such portions are in multiples of ten (10) shares if the Optionee holds vested portions for ninety-nine (99) or fewer shares and otherwise in multiples of one hundred (100) shares. 16 74 4. This Stock Option shall be adjusted for recapitalization, stock splits, stock dividends and the like as described in the Plan. 5. This is not an employment contract and while the benefits, if any, of this Stock Option may be an incident of the Optionee's employment with or provision of services to the Company, the terms and conditions of such employment or provision of services are otherwise wholly independent hereof. 6. Neither this Stock Option nor any right under this Agreement is assignable and rights under this Agreement may be exercised only by the Optionee or a person to whom the rights under this Agreement shall pass by will or the laws of descent and distribution. 7. The Optionee shall indicate Optionee's intention to exercise this Stock Option with respect to vested Option Shares by notifying the Company in writing of such intention in the form of the Notice of Exercise attached hereto as Exhibit A, indicating the number of Option Shares Optionee intends to purchase and, within ten (10) days thereafter, paying to the Company an amount sufficient to cover the total option price of such Option Shares together with the amount of federal, state and local income and FICA taxes required to be withheld by the Company, if any, as provided in the Plan. Payment of the Exercise Price Per Share specified on the first page of this Agreement shall be made in cash or in accordance with such procedures for a "cashless exercise" as may be established from time to time by the Company to facilitate exercises of Stock Options and sales of Option Shares under the Plan. 8. If the Optionee, immediately prior to the grant of an Incentive Stock Option hereunder, owns stock in the Company representing more than ten percent (10%) of the voting power of all classes of stock of the Company, the Exercise Price Per Share specified on the first page of this Agreement for Incentive Stock Options granted hereunder shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Company's Common Stock on the Date of Option Grant specified on the first page of this Agreement and such Incentive Stock Option shall not be exercisable after the expiration of five (5) years from said Date of Option Grant and notwithstanding any pricing or vesting terms hereof which appear at variance with the foregoing, all pricing and vesting terms hereof shall be deemed hereby to conform with the foregoing limitations. In lieu of the foregoing, the Optionee may elect to have a Stock Option that purports to be an Incentive Stock Option treated as a Non-Qualified Stock Option pursuant to the original terms of this Agreement. 9. Notwithstanding the foregoing, no Stock Option shall be exercisable and rights under this Agreement are not enforceable, unless and until all requirements imposed by or pursuant to Section 2.18 of the Plan are satisfied. SECTION 2.18 OF THE PLAN DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THIS OPTION CAN BE EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY OPTION SHARES TO THE OPTIONEE. AT THE PRESENT TIME THE PLAN IS NOT REGISTERED AND, ALTHOUGH SHARES MAY BE ISSUED UPON EXERCISE, THE SHARES SO ISSUED ARE NOT FREELY TRADABLE. THERE CAN BE NO ASSURANCE THAT THE EXEMPTION(S) ALLOWING ISSUANCE OF THE SHARES UPON EXERCISE WILL REMAIN AVAILABLE, NOR IS THERE ASSURANCE THAT ISSUED SHARES WILL BE REGISTERED OR THAT ONCE REGISTERED THE REGISTRATION WILL BE MAINTAINED. IF THE SHARES ARE NOT REGISTERED OR IF THE REGISTRATION IS NOT MAINTAINED, THE OPTIONEE WILL NOT BE ABLE TO TRADE SHARES OBTAINED UPON EXERCISE OF THIS STOCK OPTION UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO THE OPTIONEE PRIOR TO THE EXPIRATION OF THIS OPTION. AS A CONSEQUENCE OF THE FOREGOING, THE OPTIONEE MIGHT NOT HAVE AN OPPORTUNITY TO EXERCISE THIS OPTION AND TO RECEIVE OPTION SHARES UPON SUCH 17 75 EXERCISE AND, IF THE OPTIONEE IS ABLE TO EXERCISE THIS OPTION AND TO RECEIVE OPTION SHARES UPON SUCH EXERCISE, THE OPTIONEE MIGHT NOT HAVE THE OPPORTUNITY TO TRADE SUCH OPTION SHARES. 10. NO RIGHTS TO STOCK OPTIONS OR EMPLOYMENT; NO RESTRICTIONS Neither Optionee nor any other person shall have any claim or right to be granted a Stock Option under the Plan. Having received a Stock Option under the Plan shall not give Optionee any right to receive any other grant or option under the Plan. Optionee shall have no rights to or interest in any Option except as set forth herein, in the Plan, or in another Option specifically granted by the Company to Optionee. Neither this Option, the Plan, nor any action taken hereunder or under the Plan shall be construed as giving any Employee, Consultant or Director any right to be retained in the employ of, or be engaged as a Consultant to, or serve as a Director of, the Company, as the case may be, or otherwise in any way affect any right and power of the Company to terminate the employment or engagement of any Employee, Consultant or Director at any time with or without assigning a reason therefor. Nothing in the Plan restricts the Company's rights to adopt other option plans pertaining to any or all of the Employees, Consultants or Directors covered under the Plan or other Employees, Consultants or Directors not covered under the Plan. THIS AGREEMENT AND THE STOCK OPTION REPRESENTED HEREBY MAY BE AFFECTED, WITH REGARD TO BOTH VESTING SCHEDULE AND TERMINATION, BY LEAVES OF ABSENCE, A REDUCTION IN THE NUMBER OF HOURS WORKED, PARTIAL DISABILITY AND OTHER CHANGES IN OPTIONEE'S EMPLOYEE, CONSULTANT OR DIRECTOR STATUS, AS THE CASE MAY BE. THE COMPANY'S POLICIES IN SUCH MATTERS, IF ANY, SHALL BE CONTAINED IN THE PLAN GUIDELINES ADOPTED BY THE BOARD. THE PLAN GUIDELINES AND THE GUIDELINES, RULES, POLICIES AND REGULATIONS CONTAINED THEREIN MAY BE AMENDED AT ANY TIME AND FROM TIME TO TIME BY THE BOARD OF DIRECTORS OF THE COMPANY, OR THE COMMITTEE APPOINTED BY SUCH BOARD, IN ITS SOLE DISCRETION AND WITH OR WITHOUT NOTICE. OPTIONEE'S RIGHTS HEREUNDER OR UNDER THE PLAN AT ANY TIME SHALL BE GOVERNED BY THE PLAN GUIDELINES IN EFFECT AT THE TIME OF ANY CHANGE IN OPTIONEE'S STATUS AS CONTEMPLATED ABOVE. 11. The Stock Option represented by this Agreement is granted pursuant to and is controlled by the Plan and by the Plan Guidelines, if any, as adopted by the Board and amended from time to time. Optionee, by execution hereof, acknowledges receipt of the Plan and the Plan Guidelines as they currently exist and acceptance of the terms and conditions of the Plan, the Plan Guidelines and of this Agreement. 12. Optionee hereby acknowledges that, pursuant to the Plan and until the time the Company has made a public offering of its securities under the Securities Act of 1933, as amended, the Company will have certain repurchase rights with respect to any Shares issued to Optionee upon exercise of this Stock Option. As a condition to such exercise, Optionee shall cause his or her spouse, if any, to execute such documentation as may be reasonably required by the Company evidencing such spouse's acceptance of and agreement to such repurchase rights. 13. FOR CALIFORNIA RESIDENTS ONLY: IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. 14. If any provision of this Agreement is held to be unenforceable for any reason, it shall be modified rather than voided, if possible, in order to achieve the intent of the parties to this option to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent. 18 76 EXHIBIT A HELIX BIOMEDIX, INC. NOTICE OF EXERCISE OF STOCK OPTION TO: HELIX BIOMEDIX, INC. (the "Company") The undersigned hereby exercises Stock Option No. _______, granted on __________, _____, by the Company pursuant to its 2000 Stock Option Plan (adopted ________ __, ____), to purchase __________ Shares of Common Stock of the Company at a price of $________ per Share, for a total purchase price of $________. THE SHARES ARE BEING ACQUIRED BY THE UNDERSIGNED FOR INVESTMENT PURPOSES ONLY AND NOT WITH ANY PRESENT INTENTION TO TRANSFER OR DISTRIBUTE THE SAME. By this exercise, the undersigned agrees (i) to provide for the payment by the undersigned to the Company (in the manner designated by the Company) of the Company's withholding obligation, if any, relating to the exercise of the foregoing Stock Option and (ii) if this exercise relates to an Incentive Stock Option, to notify the Company in writing within fifteen (15) days after the date of any disposition of any of the Shares of Common Stock issued upon exercise of the foregoing Stock Option that occurs within two (2) years after the date of grant of such Stock Option or within one (1) year after such Shares of Common Stock are issued upon exercise of the foregoing Stock Option. - ------------------------- ---------------------------------------- DATE SIGNATURE ---------------------------------------- PRINT NAME EX-3.(A) 3 v72847a1ex3-a.txt EXHIBIT 3.(A) 1 EXHIBIT 3-A CERTIFICATE OF INCORPORATION OF HELIX BIOMEDIX, INC. ARTICLE I NAME The name of the Corporation is "Helix BioMedix, Inc." ARTICLE II REGISTERED OFFICE AND REGISTERED AGENT The registered office of the Corporation in the State of Delaware is located at Corporate Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. ARTICLE III PURPOSE The purpose for which the Corporation is organized is to engage in any lawful acts and activities for which corporations may be organized under the General Corporation Law of the State of Delaware ("DGCL"). ARTICLE IV CAPITALIZATION Section 4.01. Authorized Capital. (a) The total number of shares of stock that the Corporation shall have the authority to issue is twenty-seven million (27,000,000) shares of capital stock, consisting of (i) two million (2,000,000) shares of preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii) twenty-five million (25,000,000) shares of common stock, par value $0.001 per share (the "Common Stock"). 2 (b) Subject to the provisions of this Certificate of Incorporation and the Preferred Stock Designation (as defined below) creating any series of Preferred Stock, the Corporation may issue shares of its capital stock from time to time for such consideration (not less than the par value thereof) as may be fixed by the Board of Directors of the Corporation (the "Board of Directors"), which is expressly authorized to fix the same in its absolute discretion subject to the foregoing conditions. Shares so issued for which the consideration shall have been paid or delivered to the Corporation shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments in respect of such shares. (c) The right to cumulate votes for the election of directors as provided in Section 214 of the DGCL shall not be granted and is hereby expressly denied. (d) No stockholder of the Corporation shall by reason of his or her holding shares of any class of capital stock of the Corporation have any preemptive or preferential right to acquire or subscribe for any additional, unissued or treasury shares (whether now or hereafter acquired) of any class of capital stock of the Corporation now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying any right, option or warrant to subscribe for or acquire shares of any class of capital stock of the Corporation now or hereafter to be authorized, whether or not the issuance of any such shares or such notes, debentures, bonds or other securities would adversely affect the dividends or voting or other rights of that stockholder. Section 4.02. Preferred Stock. (a) The Preferred Stock may be issued from time to time in one or more series. Authority is hereby expressly granted to and vested in the Board of Directors to authorize from time to time the issuance of Preferred Stock in one or more series. With respect to each series of Preferred Stock authorized by it, the Board of Directors shall be authorized to establish by resolution or resolutions, and by filing a certificate pursuant to applicable law of the State of Delaware (the "Preferred Stock Designation"), the following to the fullest extent now or hereafter permitted by the DGCL: (1) the designation of such series; (2) the number of shares to constitute such series; (3) whether such series is to have voting rights (full, special or limited) or is to be without voting rights; (4) if such series is to have voting rights, whether or not such series is to be entitled to vote as a separate class either alone or together with the holders of the Common Stock or one or more other series of Preferred Stock; (5) the preferences and relative, participating, optional, conversion or other special rights (if any) of such series and the qualifications, limitations or restrictions (if any) with respect to such series; 2 3 (6) the redemption rights and price(s), if any, of such series, and whether or not the shares of such series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement and, if such retirement or sinking funds or funds are to be established, the periodic amount thereof and the terms and provisions relative to the operation thereof; (7) the dividend rights and preferences (if any) of such series, including, without limitation, (i) the rates of dividends payable thereon, (ii) the conditions upon which and the time when such dividends are payable, (iii) whether or not such dividends shall be cumulative or noncumulative and, if cumulative, the date or dates from which such dividends shall accumulate and (iv) whether or not the payment of such dividends shall be preferred to the payment of dividends payable on the Common Stock or any other series of Preferred Stock; (8) the preferences (if any), and the amounts thereof, which the holders of such series shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding-up of, or upon any distribution of the assets of, the Corporation; (9) whether or not the shares of such series, at the option of the Corporation or the holders thereof or upon the happening of any specified event, shall be convertible into or exchangeable for (i) shares of Common Stock, (ii) shares of any other series of Preferred Stock or (iii) any other stock or securities of the Corporation; (10) if such series is to be convertible or exchangeable, the price or prices or ratio or ratios or rate or rates at which such conversion or exchange may be made and the terms and conditions (if any) upon which such price or prices or ratio or ratios or rate or rates may be adjusted; and (11) such other rights, powers and preferences with respect to such series as may to the Board of Directors seem advisable. Any series of Preferred Stock may vary from any other series of Preferred Stock in any or all of the foregoing respects and in any other manner. (b) The Board of Directors may, with respect to any existing series of Preferred Stock but subject to the Preferred Stock Designation creating such series, (i) increase the number of shares of Preferred Stock designated for such series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series and (ii) decrease the number of shares of Preferred Stock designated for such series by a resolution subtracting from such series shares of Preferred Stock designated for such series (but not below the number of shares of such series then outstanding), and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock. (c) No vote of the holders of the Common Stock or the Preferred Stock shall, unless otherwise expressly provided in a Preferred Stock Designation creating any series of 3 4 Preferred Stock, be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation. Shares of any series of Preferred Stock that have been authorized for issuance pursuant to this Certificate of Incorporation and that have been issued and reacquired in any manner by the Corporation (including upon conversion or exchange thereof) shall be restored to the status of authorized and unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors and a Preferred Stock Designation as set forth above. Section 4.03. Common Stock. (a) The holders of shares of the Common Stock shall be entitled to vote upon all matters submitted to a vote of the common stockholders of the Corporation and shall be entitled to one vote for each share of the Common Stock held. (b) Subject to the prior rights and preferences (if any) applicable to shares of Preferred Stock of any series, the holders of shares of the Common Stock shall be entitled to receive such dividends (payable in cash, stock or otherwise) as may be declared thereon by the Board of Directors at any time and from time to time out of any funds of the Corporation legally available therefor. (c) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the preferential or other rights (if any) of the holders of shares of the Preferred Stock in respect thereof, the holders of shares of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Common Stock held by them. For purposes of this paragraph (c), a liquidation, dissolution or winding-up of the Corporation shall not be deemed to be occasioned by or to include (i) any consolidation or merger of the Corporation with or into another corporation or other entity or (ii) a sale, lease, exchange or conveyance of all or a part of the assets of the Corporation. Section 4.04. Stock Options, Warrants, etc. Unless otherwise expressly prohibited in the Preferred Stock Designation creating any series of Preferred Stock, the Corporation shall have authority to create and issue warrants, rights and options entitling the holders thereof to purchase from the Corporation shares of the Corporation's capital stock of any class or series or other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued capital stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights or options; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. 4 5 ARTICLE V DIRECTORS Section 5.01. Number and Term. The number of directors of the Corporation shall from time to time be fixed exclusively by the Board of Directors in accordance with, and subject to the limitations set forth in, the bylaws of the Corporation (the "Bylaws"); provided, however, that the Board of Directors shall at all times consist of a minimum of three and a maximum of twelve members, subject, however, to increases above twelve members as may be required in order to permit the holders of any series of Preferred Stock to exercise their right (if any) to elect additional directors under specified circumstances. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Anything in this Certificate of Incorporation or the Bylaws to the contrary notwithstanding, each director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Section 5.02. Limitation of Personal Liability. (a) No person who is or was a director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. (b) If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the personal liability of directors, then the personal liability of the directors to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended from time to time. Section 5.03. Classification. The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively, all as nearly equal in number as possible, with each director then in office receiving the classification to be determined with respect to such director by the Board of Directors. The initial term of office of Class I directors shall expire at the annual meeting of the Corporation's stockholders in 2001. The initial term of office of Class II directors shall expire at the annual meeting of stockholders in 2002. The initial term of office of Class III directors shall expire at the annual meeting of stockholders in 2003. Each director elected at an annual meeting of stockholders to succeed a director whose term is then expiring shall hold office until the third annual meeting of stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. Increases and decreases in the number of directors shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. No decrease in the number of directors constituting the Corporation's Board of Directors shall shorten the term of any incumbent director. Section 5.04. Initial Directors. The initial directors of the Corporation, and their respective classes, shall be as follows: 5 6 Class I Thomas L. Frazer, 7520 Perkins Rd., Suite 280, Baton Rouge, LA 70808 Carlyn Steiner, 811 34th Avenue East, Seattle, WA 98112 Class II Jeffrey A. Miller, 931 West 75th St., Suite 137-264, Naperville, IL 60565 Class III R. Stephen Beatty, 210 Baronne St., Suite 1004, New Orleans, LA 70112 Ralph Katz, 6529 Manor Drive, Burr Ridge, IL 60521 Section 5.05. Nomination and Election. (a) Nominations of persons for election or reelection to the Board of Directors may be made by or at the direction of the Board of Directors. The Bylaws may set forth procedures for the nomination of persons for election or reelection to the Board of Directors and only persons who are nominated in accordance with such procedures (if any) shall be eligible for election or reelection as directors of the Corporation; provided, however, that such procedures shall not infringe upon (i) the right of the Board of Directors to nominate persons for election or reelection to the Board of Directors or (ii) the rights of the holders of any class or series of Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances. (b) Each director shall be elected in accordance with this Certificate of Incorporation, the Bylaws and applicable law. Election of directors by the Corporation's stockholders need not be by written ballot unless the Bylaws so provide. Section 5.06. Removal. No director of any class may be removed before the expiration of his term of office except for cause and then only by the affirmative vote of the holders of not less than a majority in voting power of all the outstanding shares of capital stock of the Corporation entitled to vote generally in an election of directors, voting together as a single class. The Board of Directors may not remove any director, and no recommendation by the Board of Directors that a director be removed may be made to the Corporation's stockholders unless such recommendation is set forth in a resolution adopted by the affirmative vote of not less than 66-2/3% of the whole Board of Directors. Section 5.07. Vacancies. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation or removal, such vacancy may be filled only by a majority (or such higher percentage as may be specified in the Bylaws) of the directors remaining in office (though less than a quorum), or by the sole remaining director. The director so appointed shall serve for the unexpired term of his predecessor or until his successor is elected and qualified or until his earlier death, resignation or removal. If there are no directors then in office, an election of directors may be held in the manner provided by applicable law. (b) Any newly-created directorship resulting from any increase in the number of directors may be filled only by a majority (or such higher percentage as may be specified in 6 7 the Bylaws) of the directors then in office (though less than a quorum), or by the sole remaining director. The director so appointed shall be assigned to such class of directors as such majority of directors or the sole remaining director, as the case may be, shall determine; provided, however, that newly-created directorships shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. Each director so appointed shall hold office for the remaining term of the class to which he is assigned or until his successor is elected and qualified or until his earlier death, resignation or removal. (c) Except as expressly provided in this Certificate of Incorporation or as otherwise provided by applicable law, stockholders of the Corporation shall not have the right to fill vacancies on the Board of Directors, including newly-created directorships. Section 5.08. Subject to Rights of Holders of Preferred Stock. Notwithstanding the foregoing provisions of this Article V, if the Preferred Stock Designation creating any series of Preferred Stock entitles the holders of such Preferred Stock, voting separately by class or series, to elect additional directors under specified circumstances, then all provisions of such Preferred Stock Designation relating to the nomination, election, term of office, removal, filling of vacancies and other features of such directorships shall, as to such directorships, govern and control over any conflicting provisions of this Article V, and such directors so elected need not be divided into classes pursuant to this Article V unless expressly provided by the provisions of such Preferred Stock Designation. ARTICLE VI AMENDMENT OF BYLAWS The Board of Directors is expressly authorized and empowered to adopt, alter, amend or repeal the Bylaws. Stockholders of the Corporation shall have the power to alter, amend, expand or repeal the Bylaws but only by the affirmative vote of the holders of not less than 66-2/3% in voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class. ARTICLE VII ACTIONS AND MEETINGS OF STOCKHOLDERS Section 7.01. No Action by Written Consent. No action shall be taken by the stockholders of the Corporation except at an annual or special meeting of stockholders. Stockholders of the Corporation may not act by consent, written or electronically, in lieu of a meeting. 7 8 Section 7.02. Meetings. (a) Meetings of the stockholders of the Corporation (whether annual or special) may only be called by the Board of Directors or by such officer or officers of the Corporation as the Board of Directors may from time to time authorize to call meetings of the stockholders of the Corporation. Stockholders of the Corporation shall not be entitled to call any meeting of stockholders or to require the Board of Directors or any officer or officers of the Corporation to call a meeting of stockholders except as otherwise expressly provided in the Bylaws or in the Preferred Stock Designation creating any series of Preferred Stock. (b) Stockholders of the Corporation shall not be entitled to propose business for consideration at any meeting of stockholders except as otherwise expressly provided in the Bylaws or in the Preferred Stock Designation creating any series of Preferred Stock. (c) Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice or waivers of notice of such meeting. The person presiding at a meeting of stockholders may determine whether business has been properly brought before the meeting and, if the facts so warrant, such person may refuse to transact any business at such meeting which has not been properly brought before such meeting. Section 7.03. Appoint and Remove Officers, etc. The stockholders of the Corporation shall have no right or power to appoint or remove officers of the Corporation nor to abrogate the power of the Board of Directors to elect and remove officers of the Corporation. The stockholders of the Corporation shall have no power to appoint or remove directors as members of committees of the Board of Directors nor to abrogate the power of the Board of Directors to establish one or more such committees or the power of any such committee to exercise the powers and authority of the Board of Directors. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS The Corporation shall indemnify, to the fullest extent permitted by applicable law and pursuant to the Bylaws, each person who is or was a director or officer of the Corporation, and may indemnify each employee and agent of the Corporation and all other persons whom the Corporation is authorized to indemnify under the provisions of the DGCL. ARTICLE IX ELECTION TO BE GOVERNED BY SECTION 203 OF THE DGCL The Corporation hereby elects to be governed by Section 203 of the DGCL; provided, however, that the provisions of this Article IX shall not apply to restrict a business combination between the Corporation and an interested stockholder (as defined in Section 203 of the DGCL) 8 9 of the Corporation if either (i) such business combination was approved by the Board of Directors prior to the time that such stockholder became an interested stockholder or (ii) such stockholder became an interested stockholder as a result of, and at or prior to the effective time of, a transaction which was approved by the Board of Directors prior to the time that such stockholder became an interested stockholder. ARTICLE X AMENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by applicable law, and all rights conferred upon stockholders, directors or any other persons by or pursuant to this Certificate of Incorporation are granted subject to this reservation. Notwithstanding the foregoing or any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, the provisions of this Article X and of Articles V, VI, VII and VIII may not be repealed or amended in any respect, and no provision inconsistent with any such provision or imposing cumulative voting in the election of directors may be added to this Certificate of Incorporation, unless such action is approved by the affirmative vote of the holders of not less than 66-2/3% in voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class; provided, however, that any amendment or repeal of Section 5.02 or Article VIII of this Certificate of Incorporation shall not adversely affect any right or protection existing thereunder in respect of any act or omission occurring prior to such amendment or repeal and, provided further, that no Preferred Stock Designation shall be amended after the issuance of any shares of the Series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law. ARTICLE XI VOTING REQUIREMENTS NOT EXCLUSIVE The voting requirements contained in this Certificate of Incorporation shall be in addition to the voting requirements imposed by law or by the Preferred Stock Designation creating any series of Preferred Stock. 9 10 ARTICLE XII INCORPORATOR The incorporator is LPSL Corporate Services, Inc., whose address is 1420 Fifth Avenue, Suite 4100, Seattle, Washington 98101-2338. IN WITNESS WHEREOF, the undersigned has executed these Articles on October 31, 2000. LPSL CORPORATE SERVICES, INC. By ------------------------------------- Jim D. Johnston, Vice President Incorporator 10 EX-3.(B) 4 v72847a1ex3-b.txt EXHIBIT 3.(B) 1 EXHIBIT 3-B BYLAWS OF HELIX BIOMEDIX, INC. PREAMBLE These Bylaws are subject to, and governed by, the General Corporation Law of the State of Delaware ("DGCL") and the Certificate of Incorporation (the "Certificate of Incorporation") of Helix BioMedix, Inc. (the "Corporation"). In the event of a direct conflict between the provisions of these Bylaws and the mandatory provisions of the DGCL or the provisions of the Certificate of Incorporation, such provisions of the DGCL and the Certificate of Incorporation, as the case may be, will be controlling. ARTICLE I OFFICES AND RECORDS SECTION 1.1. REGISTERED OFFICE AND AGENT. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware. SECTION 1.2. OTHER OFFICES. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine or the business of the Corporation may require. SECTION 1.3. BOOKS AND RECORDS. The books and records of the Corporation may be kept at the Corporation's principal executive office or at such other locations as may from time to time be designated by the Board of Directors. Consents and notices may be received in the form of electronic communications provided that they are reproduced in paper form and delivered to the Corporation's principal executive office unless otherwise provided in the Certificate of Formation or the DGCL. The use of reproductions of consents including, but not limited to copies, faxes, and other reliable reproductions, may be used in lieu of the original writing for any and all purposes for which the original writing could be used, provided the reproduction is a complete reproduction of the entire original writing pursuant to the DGCL. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1. ANNUAL MEETINGS. An annual meeting of the Corporation's stockholders (the "Stockholders") shall be held each calendar year for the purposes of (i) electing directors as provided in Article III and (ii) transacting such other business as may properly be brought before the meeting. Each annual meeting shall be held on such date (no later than 13 months after the date of the last annual meeting of Stockholders) and at such time as shall be designated by the 2 Board of Directors and stated in the notice or waivers of notice of such meeting. SECTION 2.2. SPECIAL MEETINGS. Special meetings of the Stockholders, for any purpose or purposes, may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer and shall be called by the Secretary at the written request, or by resolution adopted by the affirmative vote, of a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board"), which request or resolution shall fix the date, time and place, and state the purpose or purposes, of the proposed meeting. Except as provided by applicable law, these Bylaws, or the Certificate of Incorporation, Stockholders shall not be entitled to call a special meeting of Stockholders or to require the Board of Directors or any officer to call such a meeting or to propose business at such a meeting. Business transacted at any special meeting of Stockholders shall be limited to the purposes stated in the notice or waivers of notice of such meeting. SECTION 2.3. PLACE OF MEETINGS. The Board of Directors may designate the place of meeting (either within or without the State of Delaware) for any meeting of Stockholders. If no designation is made by the Board of Directors, the place of meeting shall be held at the principal executive office of the Corporation. SECTION 2.4. NOTICE OF MEETINGS. (a) Written or electronic notice of each meeting of Stockholders shall be delivered to each Stockholder of record entitled to vote thereat, which notice shall (i) state the place, date and time of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called and (ii) be given not less than 10 nor more than 60 days before the date of the meeting. (b) Each notice of a meeting of Stockholders shall be given as provided in Section 9.1, except that if no address appears on the Corporation's books or stock transfer records with respect to any Stockholder, notice to such Stockholder shall be deemed to have been given if sent by first-class mail or telecommunication to the Corporation's principal executive office or if published at least once in a newspaper of general circulation in the county where such principal executive office is located. (c) If any notice addressed to a Stockholder at the address of such Stockholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the Stockholder at such address, all further notices to such Stockholder at such address shall be deemed to have been duly given without further mailing if the same shall be available to such Stockholder upon written demand of such Stockholder at the principal executive office of the Corporation for a period of one year from the date of the giving of such notice. (d) Any previously scheduled meeting of the Stockholders may be postponed by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting. SECTION 2.5. VOTING LIST. At least 10 days before each meeting of Stockholders, the Secretary or other officer or agent of the Corporation who has charge of the Corporation's stock 2 3 ledger shall prepare a complete list of the Stockholders entitled to vote at such meeting, arranged in alphabetical order and showing, with respect to each Stockholder, his address and the number of shares registered in his name. Such list shall be open to the examination of any Stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice or waivers of notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept open at the time and place of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. The stock ledger of the Corporation shall be the only evidence as to who are the Stockholders entitled to examine any list required by this Section 2.5 or to vote at any meeting of Stockholders. SECTION 2.6. QUORUM AND ADJOURNMENT. The holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), present in person or by proxy, shall constitute a quorum at any meeting of Stockholders, except as otherwise provided by applicable law, the Certificate of Incorporation, or these Bylaws. If a quorum is present at any meeting of Stockholders, such quorum shall not be broken by the withdrawal of enough Stockholders to leave less than a quorum and the remaining Stockholders may continue to transact business until adjournment. If a quorum shall not be present at any meeting of Stockholders, the holders of a majority of the voting stock represented at such meeting or, if no Stockholder entitled to vote is present at such meeting, any officer of the Corporation may adjourn such meeting from time to time until a quorum shall be present. Notwithstanding anything in these Bylaws to the contrary, the chairman of any meeting of Stockholders shall have the right, acting in his sole discretion, to adjourn such meeting from time to time. SECTION 2.7. ADJOURNED MEETINGS. When a meeting of Stockholders is adjourned to another time or place, unless otherwise provided by these Bylaws, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, if an adjournment is for more than 30 days or if after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder entitled to vote thereat. At any adjourned meeting at which a quorum shall be present in person or by proxy, the Stockholders entitled to vote thereat may transact any business which might have been transacted at the meeting as originally noticed. SECTION 2.8. VOTING. (a) Election of directors at all meetings of Stockholders at which directors are to be elected shall be by written ballot or electronic communications and, except as otherwise provided in the Certificate of Incorporation, a plurality of the votes cast thereat shall elect. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the Stockholders at any meeting shall be decided by a majority of the votes cast with respect to such matter. Except as otherwise provided in the Certificate of Incorporation or by applicable law, (i) no Stockholder shall have any right of cumulative voting and (ii) each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Stockholders. 3 4 (b) Shares standing in the name of another corporation (whether domestic or foreign) may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by the executor or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardian, conservator, or trustee may be voted by such fiduciary, either in person or by proxy, but no fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A Stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee (or his proxy) may represent the stock and vote thereon. (c) If shares or other securities having voting power stand of record in the name of two or more persons (whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise) or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one votes, his act binds all; (ii) if more than one votes, the act of the majority so voting binds all; and (iii) if more than one votes but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately or any person voting the shares, or a beneficiary, (if any) may apply to the Delaware Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the person so voting the shares, which shall then be voted as determined by a majority such persons and the person so appointed by the court. If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of the paragraph (c) shall be a majority or even-split in interest. SECTION 2.9. PROXIES. (a) At any meeting of Stockholders, each Stockholder having the right to vote thereat may be represented and vote either in person or by proxy executed in writing by such Stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation at or before the beginning of each meeting at which such proxy is to be voted. Unless otherwise provided therein, no proxy shall be valid after three years from the date of its execution. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by applicable law. (b) A proxy shall be deemed signed if the Stockholder's name is placed on the proxy (whether by manual signature, telegraphic transmission or otherwise) by the Stockholder 4 5 or his attorney-in-fact. In the event any proxy shall designate two or more persons to act as proxies, a majority of such persons present at the meeting (or, if only one shall be present, then that one) shall have and may exercise all the powers conferred by the proxy upon all the persons so designated unless the proxy shall otherwise provide. (c) Except as otherwise provided by applicable law, by the Certificate of Incorporation or by these Bylaws, the Board of Directors may, in advance of any meeting of Stockholders, prescribe additional regulations concerning the manner of execution and filing of proxies (and the validation of same) which may be voted at such meeting. SECTION 2.10. RECORD DATE. For the purpose of determining the Stockholders entitled to notice of or to vote at any meeting of Stockholders (or any adjournment thereof) or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors or be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. If no record date is fixed, (i) the record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) the record date for determining Stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of Stockholders of record entitled to notice of or to vote at a meeting of Stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 2.11. CONDUCT OF MEETINGS; AGENDA. (a) Meetings of the Stockholders shall be presided over by the officer of the Corporation whose duties under these Bylaws require him to do so; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, such meeting shall be presided over by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. At each meeting of Stockholders, the officer of the Corporation whose duties under these Bylaws require him to do so shall act as secretary of the meeting; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, the chairman of such meeting shall appoint a secretary. The order of business at each meeting of Stockholders shall be as determined by the chairman of the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him in order. (b) The Board of Directors may, in advance of any meeting of Stockholders, adopt an agenda for such meeting, adherence to which the chairman of the meeting may enforce. SECTION 2.12. INSPECTORS OF ELECTION; OPENING AND CLOSING OF POLLS. (a) Before any meeting of Stockholders, the Board of Directors may, and if required by law shall, appoint one or more persons to act as inspectors of election at such meeting or any adjournment thereof. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the 5 6 meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint a substitute inspector. If no inspectors are appointed by the Board of Directors, the chairman of the meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint one or more inspectors at the meeting. Notwithstanding the foregoing, inspectors shall be appointed consistent with the mandatory provisions of Section 231 of the DGCL. (b) Inspectors may include individuals who serve the Corporation in other capacities (including as officers, employees, agents or representatives); provided, however, that no director or candidate for the office of director shall act as an inspector. Inspectors need not be Stockholders. (c) The inspectors shall (i) determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum and the validity and effect of proxies and (ii) receive votes or ballots, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes and ballots, determine the results and do such acts as are proper to conduct the election or vote with fairness to all Stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. The inspectors shall have such other duties as may be prescribed by Section 231 of the DGCL. (d) The chairman of the meeting may, and if required by the DGCL shall, fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at the meeting. SECTION 2.13. PROCEDURES FOR BRINGING BUSINESS BEFORE ANNUAL MEETINGS. (a) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting of Stockholders except in accordance with the procedures hereinafter set forth in this Section 2.13; provided, however, that nothing in this Section 2.13 shall be deemed to preclude discussion by any Stockholder of any business properly brought before any annual meeting of Stockholders in accordance with such procedures. (b) At any annual meeting of Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) properly brought before the meeting by a Stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a Stockholder, the Stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a Stockholder's notice must be delivered to or mailed and received at the principal executive office of the Corporation not less than 120 days nor more than 150 days in advance of the first anniversary of the date of the Corporation's proxy statement released to Stockholders in connection with the previous year's annual meeting of Stockholders; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting of Stockholders has been changed 6 7 by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, the notice must be received by the Corporation at least 80 days prior to the date the Corporation intends to distribute its proxy statement with respect to such meeting. Any meeting of Stockholders which is adjourned and will reconvene within 30 days after the meeting date as originally noticed shall, for purposes of any Stockholder's notice contemplated by this paragraph (b), be deemed to be a continuation of the original meeting, and no business may be brought before such adjourned meeting by any Stockholder unless timely notice of such business was given to the Secretary of the Corporation for the meeting as originally noticed. (c) Each notice given by a Stockholder as contemplated by paragraph (b) above shall set forth, as to each matter the Stockholder proposes to bring before the annual meeting, (i) the nature of the proposed business with reasonable particularity, including the exact text of any proposal to be presented for adoption and any supporting statement, which proposal and supporting statement shall not in the aggregate exceed 500 words, and his reasons for conducting such business at the annual meeting, (ii) any material interest of the Stockholder in such business, (iii) the name, principal occupation and record address of the Stockholder, (iv) the class and number of shares of the Corporation which are held of record or beneficially owned by the Stockholder, (v) the dates upon which the Stockholder acquired such shares of stock and documentary support for any claims of beneficial ownership and (vi) such other matters as may be required by the Certificate of Incorporation. (d) The foregoing right of a Stockholder to propose business for consideration at an annual meeting of Stockholders shall be subject to such conditions, restrictions and limitations as may be imposed by the Certificate of Incorporation. Nothing in this Section 2.13 shall entitle any Stockholder to propose business for consideration at any special meeting of Stockholders. (e) The chairman of any meeting of Stockholders shall determine whether business has been properly brought before the meeting and, if the facts so warrant, may refuse to transact any business at such meeting which has not been properly brought before the meeting. (f) Notwithstanding any other provision of these Bylaws, the Corporation shall be under no obligation to include any Stockholder proposal in its proxy statement or otherwise present any such proposal to Stockholders at a meeting of Stockholders if the Board of Directors reasonably believes that the proponents thereof have not complied with Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, and the Corporation shall not be required to include in its proxy statement to Stockholders any Stockholder proposal not required to be included in its proxy statement to Stockholders in accordance with the Exchange Act and such rules or regulations. (g) Nothing in this Section 2.13 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 of the Exchange Act. 7 8 (h) Reference is made to Section 3.4 for procedures relating to the nomination of any person for election or reelection as a director of the Corporation. SECTION 2.14. ACTION WITHOUT MEETING. No action shall be taken by Stockholders except at a meeting of Stockholders. Stockholders may not act by written consent in lieu of a meeting. ARTICLE III BOARD OF DIRECTORS -- POWERS, NUMBER, CLASSIFICATION, NOMINATIONS, RESIGNATIONS, REMOVAL, VACANCIES AND COMPENSATION SECTION 3.1. MANAGEMENT. The business and property of the Corporation shall be managed by and under the direction of the Board of Directors. In addition to the powers and authorities expressly conferred upon the Board of Directors by these Bylaws, the Board of Directors may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 3.2. NUMBER AND QUALIFICATION. The number of directors shall be fixed from time to time exclusively pursuant to resolution adopted by a majority of the Whole Board, but shall consist of not less than three nor more than 12 directors, subject, however, to increases above 12 members as may be required in order to permit the holders of any series of preferred stock of the Corporation to elect directors under specified circumstances. The directors need not be Stockholders or residents of the State of Delaware. Each director must have attained 21 years of age. SECTION 3.3 CLASSES OF DIRECTORS. The Board of Directors shall be divided into three classes designated as Class I, Class II and Class III, respectively, all as nearly equal in number as possible, with each director then in office receiving the classification to be determined with respect to such director by the Board of Directors. SECTION 3.4. ELECTION; TERM OF OFFICE. (a) The initial term of office of Class I directors shall expire at the annual meeting of the Corporation's Stockholders in 2001. The initial term of office of Class II directors shall expire at the annual meeting of Stockholders in 2002. The initial term of office of Class III directors shall expire at the annual meeting of Stockholders in 2003. Subject to Sections 3.9 and 3.10, each director elected at an annual meeting of Stockholders to succeed a director whose term is expiring shall hold office until the third annual meeting of Stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. (b) Directors shall be elected by Stockholders only at annual meetings of Stockholders, except that if any such annual meeting is not held or if any director to be elected thereat is not elected, such director may be elected at any special meeting of Stockholders held for that purpose. 8 9 (c) No decrease in the number of directors constituting the Whole Board shall have the effect of shortening the term of any incumbent director. SECTION 3.5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation, and any newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors. SECTION 3.6. NOMINATIONS. (a) Notwithstanding anything in these Bylaws to the contrary, only persons who are nominated in accordance with the procedures hereinafter set forth in this Section 3.6 shall be eligible for election as directors of the Corporation. (b) Nominations of persons for election to the Board of Directors at a meeting of Stockholders may be made only (i) by or at the direction of the Board of Directors or (ii) by any Stockholder entitled to vote for the election of directors at the meeting who satisfies the eligibility requirements (if any) set forth in the Certificate of Incorporation and who complies with the notice procedures set forth in this Section 3.6 and in the Certificate of Incorporation; provided, however, Stockholders may not nominate persons for election to the Board of Directors at any special meeting of Stockholders unless the business to be transacted at such special meeting, as set forth in the notice of such meeting, includes the election of directors. Nominations by Stockholders shall be made pursuant to timely notice in writing to the Secretary. To be timely, a Stockholder's notice given in the context of an annual meeting of Stockholders shall be delivered to or mailed and received at the principal executive office of the Corporation not less than 120 days nor more than 150 days in advance of the first anniversary of the date of the Corporation's proxy statement released to Stockholders in connection with the previous year's annual meeting of Stockholders; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting of Stockholders has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, the notice must be received by the Corporation at least 80 days prior to the date the Corporation intends to distribute its proxy statement with respect to such meeting. To be timely, a Stockholder's notice given in the context of a special meeting of Stockholders shall be delivered to or mailed and received at the principal executive office of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such special meeting. For purposes of the foregoing, "public announcement" means the disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or in a 9 10 document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Any meeting of Stockholders which is adjourned and will reconvene within 30 days after the meeting date as originally noticed shall, for purposes of any notice contemplated by this paragraph (b), be deemed to be a continuation of the original meeting and no nominations by a Stockholder of persons to be elected directors of the Corporation may be made at any such reconvened meeting other than pursuant to a notice that was timely for the meeting on the date originally noticed. (c) Each notice given by a Stockholder as contemplated by paragraph (b) above shall set forth the following information, in addition to any other information or matters required by the Certificate of Incorporation: (i) as to each person whom the Stockholder proposes to nominate for election or re-election as a director, (A) the exact name of such person, (B) such person's age, principal occupation, business address and telephone number and residence address and telephone number, (C) the number of shares (if any) of each class of stock of the Corporation owned directly or indirectly by such person and (D) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor regulation thereto (including such person's notarized written acceptance of such nomination, consent to being named in the proxy statement as a nominee and statement of intention to serve as a director if elected); (ii) as to the Stockholder giving the notice, (A) his name and address, as they appear on the Corporation's books, (B) his principal occupation, business address and telephone number and residence address and telephone number, (C) the class and number of shares of the Corporation which are held of record or beneficially owned by him and (D) the dates upon which he acquired such shares of stock and documentary support for any claims of beneficial ownership; and (iii) a description of all arrangements or understandings between the Stockholder giving the notice and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such Stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a Stockholder's notice of nomination which pertains to the nominee. (d) The foregoing right of a Stockholder to nominate a person for election or reelection to the Board of Directors shall be subject to such conditions, restrictions, and limitations as may be imposed by the Certificate of Incorporation. (e) Nothing in this Section 3.6 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 of the Exchange Act. 10 11 (f) The chairman of a meeting of Stockholders shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in this Section 3.6 and, if any nomination is not in compliance with this Section 3.6, to declare that such defective nomination shall be disregarded. SECTION 3.7. RESIGNATIONS. Any director may resign at any time by giving notice, either written or by electronic communications, to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified. SECTION 3.8. REMOVAL. No director may be removed before the expiration of his term of office except for cause and then only by the affirmative vote of the holders of not less than a majority of the voting power of all outstanding Voting Stock, voting together as a single class. The Board of Directors may not remove any director, and no recommendation by the Board of Directors that a director be removed may be made to the Stockholders unless such recommendation is set forth in a resolution adopted by the affirmative vote of not less than 66-2/3% of the Whole Board. SECTION 3.9. VACANCIES. (a) In case any vacancy shall occur on the Board of Directors because of death, resignation or removal, such vacancy may be filled by a majority of the directors remaining in office (though less than a quorum) or by the sole remaining director. The director so appointed shall serve for the unexpired term of his predecessor or until his successor is elected and qualified or until his earlier death, resignation or removal. If there are no directors then in office, an election of directors may be held in the manner provided by applicable law. (b) Any newly-created directorship resulting from any increase in the number of directors constituting the Whole Board may be filled by a majority of the directors then in office (though less than a quorum), or by the sole remaining director. The director so appointed shall be assigned to such class of directors as such majority of directors, or the sole remaining director, as the case may be, shall determine; provided however, that newly-created directorships shall be apportioned among the classes of directors so that all classes will be as nearly equal in number as possible. Each director so appointed shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. (c) Except as expressly provided in these Bylaws or the Certificate of Incorporation or as otherwise provided by law, Stockholders shall not have any right to fill vacancies on the Board of Directors, including newly-created directorships. 11 12 (d) If, as a result of a disaster or emergency (as determined in good faith by the then remaining directors), it becomes impossible to ascertain whether or not vacancies exist on the Board of Directors, and a person is, or persons are, elected by the directors, who in good faith believe themselves to be a majority of the remaining directors, or the sole remaining director, to fill a vacancy or vacancies that such remaining directors in good faith believe exists, then the acts of such person or persons who are so elected as directors shall be valid and binding upon the Corporation and the Stockholders, although it may subsequently develop that at the time of the election (i) there was in fact no vacancy or vacancies existing on the Board of Directors or (ii) the directors, or the sole remaining director, who so elected such person or persons did not in fact constitute a majority of the remaining directors. SECTION 3.10. SUBJECT TO RIGHTS OF HOLDERS OF PREFERRED STOCK. Notwithstanding the foregoing provisions of this Article III, if the resolutions of the Board of Directors creating any series of preferred stock of the Corporation entitle the holders of such preferred stock, voting separately by series, to elect additional directors under specified circumstances, then all provisions of such resolutions relating to the nomination, election, term of office, removal, filling of vacancies and other features of such directorships shall, as to such directorships, govern and control over any conflicting provisions of this Article III. SECTION 3.11. COMPENSATION. The Board of Directors shall have the authority to fix, and from time to time to change, the compensation of directors. Each director shall be entitled to reimbursement from the Corporation for his reasonable expenses incurred in attending meetings of the Board of Directors (or any committee thereof) and meetings of the Stockholders. Nothing contained in these Bylaws shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV BOARD OF DIRECTORS -- MEETINGS AND ACTIONS SECTION 4.1. PLACE OF MEETINGS. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine. SECTION 4.2. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and place, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors. Except as otherwise provided by applicable law, any business may be transacted at any regular meeting of the Board of Directors. SECTION 4.3. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called by the Secretary at the request of the Chairman of the Board (if any) or the Chief Executive Officer on not less than 24 hours' notice to each director, specifying the time, place and purpose of the meeting. Special meetings shall be called by the Secretary on like notice at the request, in writing or by electronic communication, of any two directors, which request shall state the purpose of the meeting. 12 13 SECTION 4.4. QUORUM; VOTING. (a) At all meetings of the Board of Directors, a majority of the Whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time (without notice other than announcement at the meeting) until a quorum shall be present. A meeting of the Board of Directors at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors; provided, however, that no action of the remaining directors shall constitute the act of the Board of Directors unless the action is approved by at least a majority of the required quorum for the meeting or such greater number of directors as shall be required by applicable law, by the Certificate of Incorporation or by these Bylaws. (b) The act of a majority of the directors present at any meeting of the Board of Directors at which there is a quorum shall be the act of the Board of Directors unless, by express provision of law, the Certificate of Incorporation, or these Bylaws, a different vote is required, in which case such express provision shall govern and control. SECTION 4.5. CONDUCT OF MEETINGS. At meetings of the Board of Directors, business shall be transacted in such order as shall be determined by the chairman of the meeting unless the Board of Directors shall otherwise determine the order of business. The Board of Directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation. SECTION 4.6. PRESUMPTION OF ASSENT. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his dissent, either in writing or by electronic communication, to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to any director who voted in favor of such action. SECTION 4.7. ACTION WITHOUT MEETING. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all directors consent thereto in writing. All such written consents shall be filed with the minutes of proceedings of the Board of Directors. SECTION 4.8. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. 13 14 ARTICLE V COMMITTEES OF THE BOARD OF DIRECTORS SECTION 5.1. EXECUTIVE COMMITTEE. (a) The Board of Directors may, by resolution adopted by the affirmative vote of a majority of the Whole Board, designate an Executive Committee which, during the intervals between meetings of the Board of Directors and subject to Section 5.11, shall have and may exercise, in such manner as it shall deem to be in the best interests of the Corporation, all of the powers of the Board of Directors in the management or direction of the business and affairs of the Corporation, except as reserved to the Board of Directors or as delegated by the Board of Directors to another committee of the Board of Directors or as may be prohibited by law. The Executive Committee shall consist of not less than two directors, the exact number to be determined from time to time by the affirmative vote of a majority of the Whole Board. None of the members of the Executive Committee need be an officer of the Corporation. (b) Meetings of the Executive Committee may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer on not less than one day's notice to each member given verbally or in writing, which notice shall specify the time, place and purpose of the meeting. SECTION 5.2. OTHER COMMITTEES. The Board of Directors may, by resolution adopted by a majority of the Whole Board, establish additional standing or special committees of the Board of Directors, each of which shall consist of two or more directors (the exact number to be determined from time to time by the Board of Directors) and, subject to Section 5.11, shall have such powers and functions as may be delegated to it by the Board of Directors. No member of any such additional committee need be an officer of the Corporation. SECTION 5.3. TERM. Each member of a committee of the Board of Directors shall serve as such until the earliest of (i) his death, (ii) the expiration of his term as a director, (iii) his resignation as a member of such committee or as a director and (iv) his removal as a member of such committee or as a director. SECTION 5.4. COMMITTEE CHANGES; REMOVAL. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to abolish any committee of the Board of Directors; provided, however, that no such action shall be taken in respect of the Executive Committee unless approved by a majority of the Whole Board. SECTION 5.5. ALTERNATE MEMBERS. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If no alternate members have been so appointed or each such alternate committee member is absent or disqualified, the committee member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. 14 15 SECTION 5.6. RULES AND PROCEDURES. (a) The Board of Directors may designate one member of each committee as chairman of such committee; provided, however, that, except as provided in the following sentence, no person shall be designated as chairman of the Executive Committee unless approved by a majority of the Whole Board. If a chairman is not so designated for any committee, the members thereof shall designate a chairman. (b) Each committee shall adopt its own rules (not inconsistent with these Bylaws or with any specific direction as to the conduct of its affairs as shall have been given by the Board of Directors) governing the time, place and method of holding its meetings and the conduct of its proceedings and shall meet as provided by such rules. (c) If a committee is comprised of an odd number of members, a quorum shall consist of a majority of that number. If a committee is comprised of an even number of members, a quorum shall consist of one-half of that number. If a committee is comprised of two members, a quorum shall consist of both members. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the Certificate of Incorporation, these Bylaws or the committee's rules as adopted in Section 5.6(b). (d) Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when requested. (e) Unless otherwise provided by these Bylaws or by the rules adopted by any committee, notice of the time and place of each meeting of such committee shall be given to each member of such committee as provided in these Bylaws with respect to notices of special meetings of the Board of Directors. SECTION 5.7. PRESUMPTION OF ASSENT. A member of a committee of the Board of Directors who is present at a meeting of such committee at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his dissent, in writing or by electronic communication, to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. SECTION 5.8. ACTION WITHOUT MEETING. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting if all members of such committee consent thereto in writing or by electronic communication. All such consents shall be filed with the minutes of proceedings of such committee. SECTION 5.9. TELEPHONIC MEETINGS. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of any committee of the Board of Directors may 15 16 participate in a meeting of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 5.10. RESIGNATIONS. Any committee member may resign at any time by giving notice, in writing or by electronic communication, to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. SECTION 5.11. LIMITATIONS ON AUTHORITY. Unless otherwise provided in the Certificate of Incorporation, no committee of the Board of Directors shall have the power or authority to (i) authorize an amendment to the Certificate of Incorporation, (ii) adopt an agreement of merger or consolidation, recommend to the Stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, (iii) recommend to the Stockholders a dissolution of the Corporation or a revocation of a dissolution, (iv) amend these Bylaws, (v) declare a dividend or other distribution on, or authorize the issuance, purchase or redemption of, securities of the Corporation, (vi) elect any officer of the Corporation or (vii) approve any material transaction between the Corporation and one or more of its directors, officers or employees or between the Corporation and any corporation, partnership, association or other organization in which one or more of its directors, officers or employees are directors or officers or have a financial interest; provided, however, that the Executive Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of preferred stock adopted by the Board of Directors as provided in the Certificate of Incorporation, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the decrease or increase of the shares of any such series. ARTICLE VI OFFICERS SECTION 6.1. NUMBER; TITLES; QUALIFICATION; TERM OF OFFICE. (a) The officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The Board of Directors from time to time may also elect such other officers (including, without limitation, a Chairman of the Board and one or more Vice Presidents) as the Board of Directors deems appropriate or necessary. Each officer shall hold office until his successor shall have been duly elected and shall have been qualified or until his earlier death, resignation or removal. Any two or more offices may be held by the same person, but no officer shall execute any instrument in more than one capacity if such instrument is required by law or any act of the Corporation to be executed or countersigned by two or more officers. None of the officers need be a Stockholder or a resident of the State of Delaware. No officer (other than the Chairman of the Board, if any) need be a director. 16 17 (b) The Board of Directors may delegate to the Chairman of the Board (if any) and/or the Chief Executive Officer the power to appoint one or more employees of the Corporation as divisional or departmental vice presidents and fix their duties as such appointees. However, no such divisional or departmental vice presidents shall be considered an officer of the Corporation, the officers of the Corporation being limited to those officers elected by the Board of Directors. SECTION 6.2. ELECTION. At the first meeting of the Board of Directors after each annual meeting of Stockholders at which a quorum shall be present, the Board of Directors shall elect the officers of the Corporation. SECTION 6.3. REMOVAL. Any officer may be removed, either with or without cause, by the Board of Directors; provided, however, that (i) the Chairman of the Board (if any) and the Chief Executive Officer may be removed only by the affirmative vote of a majority of the Whole Board and (ii) the removal of any officer shall be without prejudice to the contract rights, if any, of such officer. Election or appointment of an officer shall not of itself create contract rights. SECTION 6.4. RESIGNATIONS. Any officer may resign at any time by giving notice, in writing or by electronic communication, to the Board of Directors, the Chairman of the Board (if any) or the Chief Executive Officer. Any such resignation shall take effect on receipt of such notice or at any later time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party. SECTION 6.5. VACANCIES. If a vacancy shall occur in any office because of death, resignation, removal, disqualification or any other cause, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. SECTION 6.6. SALARIES. The salaries of all officers of the Corporation shall be fixed by the Board of Directors or pursuant to its direction, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. SECTION 6.7. CHAIRMAN OF THE BOARD. The Chairman of the Board (if any) shall have all powers and shall perform all duties incident to the office of Chairman of the Board and such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. The Chairman of the Board, if present, shall preside at all meetings of the Board of Directors and of the Stockholders. During the time of any vacancy in the office of Chief Executive Officer or in the event of the absence or disability of the Chief Executive Officer, the Chairman of the Board shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.7 for the exercise by the Chairman of the Board of the powers of the Chief Executive Officer. SECTION 6.8. CHIEF EXECUTIVE OFFICER. (a) The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the 17 18 Board of Directors, shall have general supervision, direction and control of the business and officers of the Corporation with all such powers as may be reasonably incident to such responsibilities. He shall have the general powers and duties of management usually vested in the chief executive officer of a corporation. (b) During the time of any vacancy in the office of the Chairman of the Board or in the event of the absence or disability of the Chairman of the Board, the Chief Executive Officer shall have the duties and powers of the Chairman of the Board unless otherwise determined by the Board of Directors. During the time of any vacancy in the office of President or in the event of the absence or disability of the President, the Chief Executive Officer shall have the duties and powers of the President unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.8 for the exercise by the Chief Executive Officer of the powers of the Chairman of the Board or the President. SECTION 6.9. PRESIDENT. (a) The President shall be the chief operating officer of the Corporation and, subject to the supervision, direction and control of the Chief Executive Officer and the Board of Directors, shall manage the day-to-day operations of the Corporation. He shall have the general powers and duties of management usually vested in the chief operating officer of a corporation and such other powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or these Bylaws. (b) During the time of any vacancy in the offices of the Chairman of the Board and Chief Executive Officer or in the event of the absence or disability of the Chairman of the Board and the Chief Executive Officer, the President shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.9 for the exercise by the President of the powers the Chief Executive Officer. SECTION 6.10. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the President, shall perform all the duties of the President as chief operating officer of the Corporation, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President as chief operating officer of the Corporation. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.10 for the exercise by any Vice President of the powers of the President as chief operating officer of the Corporation. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer or the President. SECTION 6.11. TREASURER. The Treasurer shall (i) have custody of the Corporation's funds and securities, (ii) keep full and accurate account of receipts and disbursements, (iii) deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors and (iv) perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer. 18 19 SECTION 6.12. ASSISTANT TREASURERS. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or the President. In case of the absence or disability of the Treasurer, the Assistant Treasurer designated by the President (or, in the absence of such designation, the Treasurer) shall perform the duties and exercise the powers of the Treasurer during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.12 for the exercise by any Assistant Treasurer of the powers of the Treasurer under these Bylaws. SECTION 6.13. SECRETARY. (a) The Secretary shall keep or cause to be kept, at the principal office of the Corporation or such other place as the Board of Directors may order, a book of minutes of all meetings and actions of the Board of Directors, committees of the Board of Directors and Stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at meetings of the Board of Directors and committees thereof, the number of shares present or represented at Stockholders' meetings and the proceedings thereof. (b) The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or at the office of the Corporation's transfer agent or registrar, a share register, or a duplicate share register, showing the names of all Stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation. (c) The Secretary shall give, or cause to be given, notice of all meetings of the Stockholders and of the Board of Directors required by these Bylaws or by law to be given, and he shall keep the seal of the Corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer, the President or these Bylaws. (d) The Secretary may affix the seal of the Corporation, if one be adopted, to contracts of the Corporation. SECTION 6.14. ASSISTANT SECRETARIES. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer or the President. In case of the absence or disability of the Secretary, the Assistant Secretary designated by the President (or, in the absence of such designation, the Secretary) shall perform the duties and exercise the powers of the Secretary during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.14 for the exercise by any Assistant Secretary of the powers of the Secretary under these Bylaws. 19 20 ARTICLE VII STOCK SECTION 7.1. CERTIFICATES. Certificates for shares of stock of the Corporation shall be in such form as shall be approved by the Board of Directors. The certificates shall be signed (i) by the Chairman of the Board (if any), the President or a Vice President and (ii) by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer. SECTION 7.2. SIGNATURES ON CERTIFICATES. Any or all of the signatures on the certificates may be a facsimile and the seal of the Corporation (or a facsimile thereof), if one has been adopted, may be affixed thereto. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 7.3. LEGENDS. The Board of Directors shall have the power and authority to provide that certificates representing shares of stock of the Corporation bear such legends and statements (including, without limitation, statements relating to the powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the shares represented by such certificates) as the Board of Directors deems appropriate in connection with the requirements of federal or state securities laws or other applicable laws. SECTION 7.4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors, the Secretary and the Treasurer each may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, in each case upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing such issue of a new certificate or certificates, the Board of Directors, the Secretary or the Treasurer, as the case may be, may, in its or his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the Board of Directors, the Secretary or the Treasurer, as the case may be, shall require and/or to furnish the Corporation a bond in such form and substance and with such surety as the Board of Directors, the Secretary or the Treasurer, as the case may be, may direct as indemnity against any claim, or expense resulting from any claim, that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 7.5. TRANSFERS OF SHARES. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation or its transfer 20 21 agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon the Corporation's books. SECTION 7.6. REGISTERED STOCKHOLDERS. The Corporation shall be entitled to treat the holder of record of any share of stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by the laws of the State of Delaware. SECTION 7.7. REGULATIONS. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of stock of the Corporation. The Board of Directors may (i) appoint and remove transfer agents and registrars of transfers and (ii) require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers. SECTION 7.8. STOCK OPTIONS, WARRANTS, ETC. Unless otherwise expressly prohibited in the resolutions of the Board of Directors creating any class or series of preferred stock of the Corporation, the Board of Directors shall have the power and authority to create and issue (whether or not in connection with the issue and sale of any stock or other securities of the Corporation) warrants, rights or options entitling the holders thereof to purchase from the Corporation any shares of capital stock of the Corporation of any class or series or any other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights and operations; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof. ARTICLE VIII INDEMNIFICATION SECTION 8.1. THIRD PARTY ACTIONS. The Corporation (i) shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or is or was threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as a director, officer or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (ii) may, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or is or was threatened to be made a party to any threatened, pending or completed action, suit or 21 22 proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was an employee or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees), judgments, fines and amounts paid or owed in settlement, actually and reasonably incurred by such person or rendered or levied against such person in connection with such action, suit or proceeding, if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, in itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal action or proceeding, that the person had reasonable cause to believe that his conduct was unlawful. Any person seeking indemnification under this Section 8.1 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary is established. SECTION 8.2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation (i) shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as a director, officer or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (ii) may, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was an employee or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees) actually and reasonably incurred by such person in connection with the defense or settlement or such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification. SECTION 8.3. EXPENSES. Expenses incurred by a director or officer of the Corporation or any of its direct or indirect subsidiaries in defending a civil or criminal action, suit or 22 23 proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses incurred by other employees and agents of the Corporation and other persons eligible for indemnification under this Article VIII may be paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. SECTION 8.4. NON-EXCLUSIVITY. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any provision of law, the Certificate of Incorporation, the certificate of incorporation or bylaws or other governing documents of any direct or indirect subsidiary of the Corporation, under any agreement, vote of Stockholders or disinterested directors or under any policy or policies of insurance maintained by the Corporation on behalf of any person or otherwise, both as to action in his official capacity and as to action in another capacity while holding any of the positions or having any of the relationships referred to in this Article VIII. SECTION 8.5. ENFORCEABILITY. The provisions of this Article VIII (i) are for the benefit of, and may be enforced directly by, each director or officer of the Corporation the same as if set forth in their entirety in a written instrument executed and delivered by the Corporation and such director or officer and (ii) constitute a continuing offer to all present and future directors and officers of the Corporation. The Corporation, by its adoption of these Bylaws, (A) acknowledges and agrees that each present and future director and officer of the Corporation has relied upon and will continue to rely upon the provisions of this Article VIII in becoming, and serving as, a director or officer of the Corporation or, if requested by the Corporation, a director, officer or fiduciary or the like of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, (B) waives reliance upon, and all notices of acceptance of, such provisions by such directors and officers and (C) acknowledges and agrees that no present or future director or officer of the Corporation shall be prejudiced in his right to enforce directly the provisions of this Article VIII in accordance with their terms by any act or failure to act on the part of the Corporation. SECTION 8.6. INSURANCE. The Board of Directors may authorize, by a vote of the majority of the Whole Board, the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VIII. SECTION 8.7. SURVIVAL. The provisions of this Article VIII shall continue as to any person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, executors, administrators, heirs, legatees and devisees of any person entitled to indemnification under this Article VIII. 23 24 SECTION 8.8. AMENDMENT. No amendment, modification or repeal of this Article VIII or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future director or officer of the Corporation to be indemnified by the Corporation, nor the obligation of the Corporation to indemnify any such director or officer, under and in accordance with the provisions of this Article VIII as in effect immediately prior to such amendment, modification or repeal with respect to claims arising, in whole or in part, from a state of facts extant on the date of, or relating to matters occurring prior to, such amendment, modification or repeal, regardless of when such claims may arise or be asserted. SECTION 8.9. DEFINITIONS. For purposes of this Article VIII, (i) reference to any person shall include the estate, executors, administrators, heirs, legatees and devisees of such person, (ii) "employee benefit plan" and "fiduciary" shall be deemed to include, but not be limited to, the meaning set forth in Section 1002, subsections 3(3) and 21(A), respectively, of the Employee Retirement Income Security Act of 1974, as amended, (iii) references to the judgments, fines and amounts paid or owed in settlement or rendered or levied shall be deemed to encompass and include excise taxes required to be paid pursuant to applicable law in respect of any transaction involving an employee benefit plan and (iv) references to the Corporation shall be deemed to include any predecessor corporation or entity and any constituent corporation or entity absorbed in a merger, consolidation or other reorganization of or by the Corporation which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents and fiduciaries so that any person who was a director, officer, employee, agent or fiduciary of such predecessor or constituent corporation or entity, or served at the request of such predecessor or constituent corporation or entity as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the Corporation as such person would have with respect to such predecessor or constituent corporation or entity if its separate existence had continued. ARTICLE IX NOTICES AND WAIVERS SECTION 9.1. METHODS OF GIVING NOTICES. Whenever, by applicable law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any Stockholder, any director or any member of a committee of the Board of Directors and no provision is made as to how such notice shall be given, personal notice shall not be required and such notice may be given (i) in writing, by mail, postage prepaid, addressed to such Stockholder, director or committee member at his address as it appears on the books or (in the case of a Stockholder) the stock transfer records of the Corporation or (ii) by any other method permitted by law (including, but not limited to, overnight courier service, telegram, telex or telecopier). Any notice required or permitted to be given by mail shall be deemed to be delivered and given at the time when the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given one business day after delivery to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by telegram, telex or telecopy shall be deemed to be delivered and given at the time transmitted with all charges prepaid and addressed as aforesaid. 24 25 SECTION 9.2. WAIVER OF NOTICE. Whenever any notice is required to be given to any Stockholder, director or member of a committee of the Board of Directors by applicable law, the Certificate of Incorporation, or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a Stockholder (whether in person or by proxy), director or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. DIVIDENDS. Subject to applicable law and the provisions of the Certificate of Incorporation, dividends may be declared by the Board of Directors at any meeting and may be paid in cash, in property or in shares of the Corporation's capital stock. Any such declaration shall be at the discretion of the Board of Directors. A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officers as to the value and amount of the assets, liabilities or net profits of the Corporation or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared. SECTION 10.2. RESERVES. There may be created by the Board of Directors, out of funds of the Corporation legally available therefor, such reserve or reserves as the Board of Directors from time to time, in its absolute discretion, considers proper to provide for contingencies, to equalize dividends or to repair or maintain any property of the Corporation, or for such other purpose as the Board of Directors shall consider beneficial to the Corporation, and the Board of Directors may thereafter modify or abolish any such reserve in its absolute discretion. SECTION 10.3. CHECKS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation shall be signed by such officer or officers or by such employees or agents of the Corporation as may be designated from time to time by the Board of Directors. SECTION 10.4. CORPORATE CONTRACTS AND INSTRUMENTS. Subject always to the specific directions of the Board of Directors, the Chairman of the Board (if any), the President, any Vice President, the Secretary or the Treasurer may enter into contracts and execute instruments in the name and on behalf of the Corporation. The Board of Directors and, subject to the specific directions of the Board of Directors, the Chairman of the Board (if any) or the President may authorize one or more officers, employees or agents of the Corporation to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. SECTION 10.5. ATTESTATION. With respect to any deed, deed of trust, mortgage or other instrument executed by the Corporation through its duly authorized officer or officers, the 25 26 attestation to such execution by the Secretary or an Assistant Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage or other instrument a valid and binding obligation of the Corporation unless the resolutions, if any, of the Board of Directors authorizing such execution expressly state that such attestation is necessary. SECTION 10.6 SECURITIES OF OTHER CORPORATIONS. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute and deliver any waiver, proxy or consent with respect to any such securities. SECTION 10.7. FISCAL YEAR. The fiscal year of the Corporation shall be January 1 through December 31, unless otherwise fixed by the Board of Directors. SECTION 10.8. SEAL. The seal of the Corporation shall be such as from time to time may be approved by the Board of Directors. SECTION 10.9. INVALID PROVISIONS. If any part of these Bylaws shall be invalid or inoperative for any reason, the remaining parts, so far as is possible and reasonable, shall remain valid and operative. SECTION 10.10. HEADINGS. The headings used in these Bylaws have been inserted for administrative convenience only and shall not limit or otherwise affect any of the provisions of these Bylaws. SECTION 10.11. REFERENCES/GENDER/NUMBER. Whenever in these Bylaws the singular number is used, the same shall include the plural where appropriate. Words of any gender used in these Bylaws shall include the other gender where appropriate. In these Bylaws, unless a contrary intention appears, all references to Articles and Sections shall be deemed to be references to the Articles and Sections of these Bylaws. SECTION 10.12. AMENDMENTS. These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of a majority of the Whole Board; provided, however, that no such action shall be taken at any special meeting of the Board of Directors unless notice of such action is contained in the notice of such special meeting. These Bylaws may not be altered, amended or rescinded, nor may new bylaws be adopted, by the Stockholders except by the affirmative vote of the holders of not less than 66-2/3% of the voting power of all outstanding Voting Stock, voting together as a single class. Each alteration, amendment or repeal of these Bylaws shall be subject in all respects to Section 8.7. 26 27 CERTIFICATE OF SECRETARY I, Elizabeth Scheer, the duly appointed Secretary of Helix Biomedix, Inc., hereby certify that the foregoing Bylaws constitute the bylaws of Helix Biomedix, Inc. as adopted by the Board of Directors on _______________________, 2000. ---------------------------------------- Elizabeth Scheer, Secretary EX-10 5 v72847a1ex10.txt EXHIBIT 10 1 EXHIBIT 10 CONSULTING AGREEMENT This Agreement, dated December 29, 2000 but effective for all purposes as of July 1, 2001, is entered into by and between HELIX BIOMEDIX, INC., a Colorado corporation (the "Company"), and Keith P. Lanneau, a resident of Louisiana ("Lanneau" or "Consultant"). In consideration of the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT 1. Engagement Term. The Company hereby engages Lanneau as a consultant to render services to the Company as described below, commencing on July 1, 2001, and extending for a term of two years, and expiring on June 30, 2003. Consultant hereby accepts the engagement as a consultant with the Company pursuant to the terms and conditions hereof. Consultant agrees to consult with and on behalf of the Company, as requested by the Chief Executive Officer ("CEO") of the Company from time to time. Upon request, Consultant agrees to make himself available for such consulting services and agrees to perform such services in a professional manner, to the best of his ability. Except upon the prior written consent of the Board of Directors of the Company, Consultant shall not during the term of this Agreement engage, directly or indirectly, engage in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place him in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (as "Affiliated Company"). 2. Compensation. As sole compensation for Consultant's services to be rendered hereunder, the Company shall pay to Consultant, in arrears, a monthly retainer of $5,000; provided that in the event Consultant works more than 50 hours during any calendar month, he will be paid $100 per hour for each hour in excess of 50 (in addition to the retainer). 3. Termination of Engagement. This Agreement shall terminate upon the earliest of the following to occur: (i) mutual written consent of the Company and Lanneau to terminate this Agreement, (ii) written notice of termination by Lanneau, which termination shall be effective sixty days following the date such notice is delivered to the Company; (iii) written notice of termination by the Company to Lanneau, but only if the Company provides 2 to Lanneau written notice of default by Lanneau hereunder and Lanneau fails to remedy or cure such default within 15 days following such notice, or (iv) the death of Lanneau. Upon any such termination, the Company shall pay to Lanneau amounts due to him through the date of termination (prorated for any partial pay period). Consultant hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, and other documents, proprietary information, copies of any of the foregoing, and equipment furnished to or prepared by Employee in the course of or incident to his employment, belongs to the Company and shall be delivered to the Company upon termination of this Agreement. 4. Intellectual Property; Confidentiality; Non-Competition. 4.1 Intellectual Property. Consultant agrees to disclose to the Company promptly, all inventions, discoveries and/or original works of authorship or compilations thereof (hereinafter referred to as "Technologies") including without limitation products, processes, designs, formulas, specifications, prototype, models, samples, economies, reports or manuscripts as well as all improvements made thereto, that are conceived, developed and/or reduced to practice by Consultant during the term of this Agreement and within the scope of work and duties performed by Consultant for the Company. The Consultant also agrees to assign to the Company Consultant's entire right, title, and interest in said Technologies and to any patent(s), copyright(s), trademark(s) or service mark(s) which may be issued thereon by any of the various states, including Louisiana, the United States of America, and/or any foreign country and/or any political subdivision thereof, under any applicable state, federal, or foreign laws or international conventions. Further, Consultant agrees to make no other assignment, grant, mortgage, license or agreement affecting the rights and property to be assigned pursuant to this paragraph without first obtaining the express written consent of the Company. When requested to so do, during or subsequent to Consultant's employment with the Company, at no out-of-pocket expense to Consultant, Consultant agrees to communicate and deliver all facts, information and data concerning said Technologies and improvements thereto, if any, to the Company or its designee; to execute all initial, divisional, continuing, substitute, renewal, or reissue applications for letters patent or copyrights, trademarks and/or service marks, foreign or domestic, as well as make or execute all rightful oaths, declarations, assignments, powers of attorney and/or other documents, and generally, do everything reasonably necessary for securing, maintaining and enforcing the Company's rights in and to said Technologies and improvements thereto and for vesting title therein in the Company or its designee. The undertakings set forth in this Paragraph 4.1 shall survive the termination of this Agreement. 4.2 Confidentiality. Consultant acknowledges that during his engagement with the Company, Consultant may receive, make use of, or add to the Company's Confidential Information defined for the purposes of this Agreement as consisting of, but not limited to (a) proprietary information relating to compositions, structure and formulations of 3 membrane disruptive peptides (cytoporins) and applications thereof for pharmaceutical and non-drug use; (b) product designs, processes, formulas, specifications, prototypes, models, samples, economies, data, records, reports, manuscripts, and other materials of a proprietary nature; (c) records and policy matters relating to finance, accounting, sales, personnel, property, management, and operations; and (d) matters relating to the Company's operations such as its clients lists, its compilation of its clients' service requirements, its price and fee structures, its cost of services, and its cost of operations. Consultant understands and agrees that said Confidential Information is disclosed to Consultant in confidence and is to be used for the Company's benefit only. Consultant agrees that he/she will keep all such information confidential at all times during and for a period of two years after his engagement with the Company; will not disclose or communicate such Confidential Information to any third party without the express, written consent of the Company; and will not use such Confidential Information on his own behalf or on behalf of any third party. In view of the nature of the Confidential Information the Consultant will receive during the course of his engagement, Consultant understands and agrees that any unauthorized disclosure to third parties of said Confidential Information or other violation or threatened violation of this Agreement would cause irreparable damage to the trade secret status of the Confidential Information and to the Company and that the Company shall be entitled to seek a judicial injunction prohibiting Consultant from any such disclosure, attempted disclosures, violation or threatened violation. The undertakings set forth in this Paragraph 4.2 shall survive the termination of this Agreement. 4.3 Non-competition Covenants. Consultant covenants and agrees that, during the term of this Agreement and for a period of two years following termination of this Agreement, he shall not (i) engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or an Affiliated Company within the Parishes of East Baton Rouge, Jefferson and Orleans, Louisiana; or (ii) hire, solicit, or attempt to hire on behalf of himself or any other party any employee or exclusive consultant of the Company. For purposes of this Agreement, the Company's business is defined as (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, (ii) seeking patent protection to protect its proprietary technology, and (iii) licensing its technology and in seeking strategic corporate alliances for further development and commercialization of same. In view of the national nature of the Company's business, Consultant further agrees that during the term of this Agreement and for a period of two years following termination of this Agreement, Consultant shall not engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or any Affiliated Company, within any of the forty-nine states of the United States of America other than Louisiana. Anything contained herein to the contrary 4 notwithstanding, this paragraph only of this Section 4.3 shall be governed by and enforceable in accordance with the laws of the state in which it is being enforced against Consultant. If any court of proper jurisdiction finds that this covenant is overly broad or unenforceable for any reason whatsoever, then it is hereby agreed that this covenant will be reduced or amended to be enforceable to the extent allowable under applicable law. A violation of this covenant not to compete by Consultant shall entitle the Company to recover all damages for the loss sustained and the profit of which the Company has been deprived. Additionally, the Company is entitled to injunctive relief in enforcing the terms of this covenant not to compete without the necessity of proving irreparable injury. 5. Assignment: Successors and Assigns. Consultant shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Consultant's rights be subject to encumbrance or the claims of creditors. Any such purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, its acquisition by, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets or stock in an arm's length transaction (the foregoing are collectively referred to herein as an "Acquisition"), or the assignment by the Company of this Agreement and the performance of its obligations hereunder in connection with any such Acquisition or to any successor in interest or any Affiliated Company. Subject to the foregoing this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above. 6. Notices. All notices and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered personally or by overnight courier upon receipt or three days after deposit in the Untied States mail, return receipt requested, and addressed to the Consultant at: Keith P. Lanneau 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 or to the Company at: Helix BioMedix, Inc. 210 Baronne Street New Orleans, Louisiana 70112 Attn: Chief Executive Officer 5 Either party may change its address for purposes of this Section by giving notice as set forth above. 7. Entire Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof, and may be amended only by a writing signed by the parties hereto. This Agreement, along with any amendments hereto, supersede any prior negotiations, offers, or agreements between the Company and the Consultant with regard to the subject matter hereof. 8. Amendments: Waivers. This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by the Consultant and by a duly authorized representative of the Company other than Consultant. Either party may waive compliance by the other party with any provision of this Agreement; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. 9. Severability. If any provision of this Agreement, as applied to any person or circumstances, is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affect thereby. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. 11. Consultant Acknowledgment. Consultant acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. 12. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 6 13. Relationship of Parties. Consultant shall be deemed an independent contractor and not an employee of the Company. All letterhead, business cards and promotional materials used or distributed by Consultant shall present Consultant as a business consultant to, and not an employee or principal of, the Company. Consultant shall be responsible for all taxes associated with compensation (both cash and (if any) stock) paid to Consultant hereunder, including but not limited to income taxes and social security taxes. The parties have duly executed this Consulting Agreement as of the date first written above. WITNESSES: HELIX BIOMEDIX, INC. By: - ----------------------------- ------------------------------------- R. Stephen Beatty, President and - ----------------------------- Chief Executive Officer - ----------------------------- Consultant - ----------------------------- ----------------------------------------- Keith P. Lanneau 7 HELIX/TPI RESEARCH ALLIANCE AGREEMENT SEPTEMBER 30, 1999 * * * A NOVATION OF THE COOPERATIVE ENDEAVOR AGREEMENT OF NOVEMBER 10, 1995 EXHIBITS 8 A By Reference HBM PRIVATE PLACEMENT MEMORANDUM B Attached HBM/TPI COOPERATIVE ENDEAVOR AGREEMENT (1995) C Attached KPL MONOGRAPH IN THE BIOTECHNOLOGY REPORT D By Reference HELIX/LSU NOVATION OF PRIOR AGREEMENTS (1998) E By Reference FOLIO II--THE BIOMEDIX/LSU LYTIC PEPTIDE TECHNOLOGY F Attached THE DERIVATIVE PEPTIDES DEFINED G Attached OTHER HELIX TECHNOLOGY DEFINED H Attached SCOPE OF RESEARCH I Attached CONFIDENTIAL DISCLOSURE AGREEMENT 9 RESEARCH ALLIANCE AGREEMENT THIS AGREEMENT is made and entered into as of the 30th day of September, 1999 by and among: HELIX BIOMEDIX, INC., a Colorado corporation, whose permanent mailing address is 2151 East Lakeshore Drive, Baton Rouge, Louisiana 70808 (hereinafter "HBM"); and HELIX BIOMEDIX, INC., a Louisiana corporation and wholly owned subsidiary of HBM, whose permanent mailing address is 2151 East Lakeshore Drive, Baton Rouge, Louisiana 70808 (hereinafter "HBMLA"), (said HBM and HBMLA hereinafter referred to collectively as "HELIX"); and THERAPEUTIC PEPTIDES, INC., a Louisiana corporation, authorized to do and doing business in the State of Louisiana, herein represented by its President, Donald R. Owen, whose permanent mailing address is 5701 Crawford Street, Suite 1, Harahan, Louisiana 70123 (hereinafter "TPI"); and BIOSOUTH RESEARCH LABORATORIES, INC., a Louisiana corporation, represented by its President, Donald R. Owen, whose permanent mailing address is 5701 Crawford Street, Suite 1, Harahan, Louisiana 70123 (hereinafter "BRL"); and DONALD R. OWEN, individually, whose permanent mailing address is 5701 Crawford Street, Suite 1, Harahan, Louisiana 70123 (hereinafter "OWEN" OR "DR. OWEN") (TPI, BRL AND OWEN are collectively as the "TPI GROUP"). (the foregoing parties are hereinafter referred to collectively as "the Parties"). THIS AGREEMENT becomes effective as of its "EFFECTIVE DATE" which shall be the same as the date (hereinafter "CLOSING") upon which HBM breaks escrow on its private offering of securities pursuant to HBM's Private Placement Memorandum dated July 19, 1999 ("PPM"), which PPM is incorporated herein by reference as Exhibit A; provided, however, said CLOSING shall have occurred on or before September 30, 1999. 10 WITNESSETH: WHEREAS, HELIX, TPI, AND BRL have successfully participated since 1995 in a joint research and developmental endeavor in the field of bioactive, membrane disruptive peptides; said joint endeavor having been undertaken in accordance with the terms of that certain "Cooperative Endeavor Agreement" dated November 10, 1995, a copy of which Agreement is attached hereto as Exhibit B and made a part hereof; and WHEREAS, HELIX, TPI, AND BRL desire to continue their cooperative research program, but choose to amend certain terms of the aforesaid agreement, and further desire to include DR. OWEN, president of TPI and BRL, as a party to the amended agreement in view of his past and continuing personal contributions to the research activities; and WHEREAS, it is necessary for HELIX to obtain additional corporate financing to continue expansion of its research activities and development of a valuable patent estate; and WHEREAS, HELIX has reached the minimum level of funding pursuant to the PPM and the release of such funding from escrow is contingent upon execution of this amended agreement by and among the Parties; and WHEREAS, said funding will accelerate the research collaboration between HELIX and TPI and thereby materially enhance the efforts of HELIX to expand its patent portfolio, to attract strategic corporate alliances, and to commercialize HELIX's proprietary technology; NOW THEREFORE, the Parties do hereby enter into this "RESEARCH ALLIANCE AGREEMENT" which comprises amendments to and which constitutes a novation of the earlier aforesaid "Cooperative Endeavor Agreement" (Exhibit B); AND, NOW THEREFORE, in consideration of the mutual rights and obligations set forth below, THE PARTIES HERETO AGREE AS FOLLOWS: ARTICLE I. DEFINITIONS A. MEMBRANE DISRUPTIVE PEPTIDES ( "MD PEPTIDES" OR "MDPS") shall mean: small bioactive proteins (i.e. peptides) which interact with the plasma membrane of cells by forming trans-membrane pores or otherwise causing disruption of the membrane structure and thereby affecting the biological functioning of the cell; some of the properties of such MDPs being more fully described in Exhibit C herein (a technical monograph authored by Keith P. Lanneau and published in The Biotechnology Report 1994/95). 2 11 B. HELIX/LSU PEPTIDES shall mean: MDPs which are subject of various U.S. and foreign patents and/or patent applications previously assigned to Louisiana State University (hereinafter "LSU") and under exclusive license to HELIX, which patents and patent applications (hereinafter the HELIX/LSU PATENT ESTATE) have been fully assigned to HELIX effective January 15, 1998 under the terms of that certain agreement between HELIX and LSU entitled "Novation of Prior Agreements" dated February 19,1998. A copy of that agreement, defining the "HELIX/LSU PATENT ESTATE", has been made available to each of the parties hereto and is incorporated herein by reference as Exhibit D. The HELIX/LSU PEPTIDES and their properties and uses are described in the specifications of the cited patents and applications and are more fully described herein in Exhibit E entitled "Folio II--The BioMedix/LSU Lytic Peptide Technology". Exhibit E has also been made available to each of the parties hereto and is incorporated herein by reference. The HELIX/LSU PEPTIDES include peptides which may be lytic and/or proliferative, synergistic with other bioactive agents, and active as wound healing and cancer therapy compounds. C. HELIX/LSU PATENT ESTATE shall mean: as set forth above in ARTICLE I-B, those patents and patent applications defined in Exhibit D and any divisional patent applications and patents derived therefrom. Copies of all such patents and patent applications have heretofore been made available to each of the Parties to this agreement. D. DERIVATIVE PEPTIDES shall mean: all of those xenobiotic (not occurring in nature) MDPs heretofore designed and synthesized by TPI and hereafter to be designed and synthesized by TPI (pursuant to terms of this Agreement) and/or third parties, which MDPs are structural and/or sequence analogues derived from the general structural conformations of various of the HELIX/LSU PEPTIDES; which DERIVATIVE PEPTIDES are further described in Exhibit F attached hereto. Some of the previously screened DERIVATIVE PEPTIDES may constitute substantial improvements upon the HELIX/LSU PEPTIDES and may or may not fall within the scope of the specifications and claims of the HELIX/LSU PATENT ESTATE or the teachings of other prior art. E. CYTOPORIN TECHNOLOGY (described in part in Exhibit C) shall mean: those MDPs comprising the HELIX/LSU PEPTIDES and the DERIVATIVE PEPTIDES, all commercial applications and product formulations based upon use of such peptides, the further development of all such technology, protection of same by patents and know-how, and the commercialization of same, but specifically excluding those delivery systems and product formulations proprietary to the TPI GROUP. F. CYTOPORINS shall mean: those MDPs which fall within the meaning of CYTOPORIN TECHNOLOGY. G. CYTOPORIN PATENT ESTATE shall mean: both U.S. and foreign patents and/or patent applications comprised of the HELIX/LSU PATENT ESTATE, future patents and/or patent applications relating to the DERIVATIVE PEPTIDES and/or 3 12 CYTOPORIN TECHNOLOGY and such other patents and/or patent applications relating thereto and of which HELIX shall become the assignee or exclusive licensee of the rights thereunder. H. OTHER HELIX TECHNOLOGY shall mean: other technology and rights thereto which are proprietary to HELIX (and not to TPI or BRL), and which are outside the scope of the CYTOPORIN TECHNOLOGY and the cooperative Research Alliance relating thereto, as is contemplated by this Agreement; said OTHER HELIX TECHNOLOGY being more fully defined in Exhibit G herein. ARTICLE II. DISPOSITION OF THE DERIVATIVE PEPTIDES A. AGREEMENT AS TO OWNERSHIP AND PATENT ABILITY: It is acknowledged by the Parties that employees of TPI, at the expense of both HELIX and TPI, have heretofore designed and/or synthesized and/or conducted comparative bioassay tests on the DERIVATIVE PEPTIDES; that such tests indicate that such peptides may have certain properties equal to or superior to like properties of the HELIX/LSU PEPTIDES; and that the DERIVATIVE PEPTIDES may or may not be patentable in view of prior art, and may or may not infringe upon claims and pending claims within the HELIX/LSU PATENT ESTATE or upon the patent rights of third parties. B. FILING OF PATENT APPLICATIONS: In an effort to expand the scope of intellectual property protected within the CYTOPORIN TECHNOLOGY, for the mutual benefit of the Parties it is agreed that appropriate patent disclosures relating to the DERIVATIVE PEPTIDES and development of the CYTOPORIN TECHNOLOGY have been and shall (for so long as TPI conducts research for HELIX) continue to be documented by TPI and that promptly after the EFFECTIVE DATE of this Agreement several patent application(s) with respect to the DERIVATIVE PEPTIDES shall be filed by HELIX in the U.S. Patent and Trademark Office, and that various counterpart foreign applications shall be filed, all as may be deemed by HELIX to be necessary or desirable to protect such intellectual property. The responsibility for filing such patent applications, for prosecuting such applications, and maintaining patents which may be granted therefrom, shall lie with and be at the expense of HELIX, provided, however, TPI agrees to provide HELIX with information and other assistance as is reasonably requested by HELIX from time to time. In addition, within thirty days from the date hereof, TPI agrees to provide HELIX with a master list of substantially all documented DERIVATIVE PEPTIDES heretofore synthesized and screened (in vitro) by TPI, 4 13 which master list shall include sequences, amount of inventory on hand at TPI and summary asset data. C. ASSIGNMENT TO HELIX: In order to (1) minimize potential conflicts and to eliminate interference with the HELIX/LSU PATENT ESTATE in the herein proposed efforts to patent the DERIVATIVE PEPTIDES, and (2) incorporate the DERIVATIVE PEPTIDES into the realm of the CYTOPORIN TECHNOLOGY to facilitate effective marketing and commercialization of same, the TPI GROUP hereby assigns and transfers to HELIX all right, title and interest of the TPI GROUP in and to the DERIVATIVE PEPTIDES (including without limitation the inventions and patent applications relating thereto); thus, the rights to the DERIVATIVE PEPTIDES and related inventions of the TPI GROUP pertaining to the CYTOPORIN TECHNOLOGY shall upon execution hereof become a part of the CYTOPORIN PATENT ESTATE. The TPI GROUP agrees to execute, and to cause their respective employees and consultants to execute, from time to time written assignments evidencing the foregoing, in a form acceptable to HELIX. D. TERMINATION OF ROYALTY: Notwithstanding the earlier Cooperative Endeavor Agreement provisions whereby HELIX and TPI would share in future royalty fees which HELIX might receive in connection with the licensing or sub-licensing of any patent rights with respect to the DERIVATIVE PEPTIDES, it is now agreed herein by the Parties that such provisions are extinguished by this present agreement and that HELIX shall retain exclusive rights to any royalty stream which may result from the DERIVATIVE PEPTIDES or other inventions pertaining to the CYTOPORIN TECHNOLOGY. E. OWNERSHIP OF MATERIALS AND TECHNICAL DATA: TPI agrees that all technical data, documents, and materials (including the inventory of HELIX/LSU PEPTIDES, DERIVATIVE PEPTIDES and various other MDPs which have been used as control peptides in the studies conducted by TPI) in the possession of any member of the TPI GROUP and relating to the CYTOPORIN TECHNOLOGY, as of the EFFECTIVE DATE, shall become the property of HELIX and will be delivered to HELIX upon request. 5 14 ARTICLE III NOVATION AND WAIVERS This "Research Alliance Agreement" constitutes in all respects a novation of the earlier "Cooperative Endeavor Agreement" (Exhibit B) by, between, and among the Parties hereto; and this present Agreement extinguishes all the provisions and obligations of such earlier agreement. All vices of consent (if any) affecting the Cooperative Endeavor Agreement or any prior agreements among the Parties are hereby waived and released. Subject to the Parties' rights and obligations under this Agreement, each Party hereby forever releases, compromises, and waives any claim against any other Party for breach or default of any obligation (known or unknown) or for any other cause of action arising under or related in any way to the Cooperative Endeavor Agreement or any prior agreements among the Parties. Each Party hereto accepts the performance of every other Party under the Cooperative Endeavor Agreement and any prior agreements through the EFFECTIVE DATE of this novation. ARTICLE IV CASH, STOCK AND OTHER CONSIDERATION In consideration of (i) the expenses heretofore incurred by TPI directly in connection with synthesizing and testing the DERIVATIVE PEPTIDES, (ii) the agreement by TPI in ARTICLE II-C hereof to assign patents and patent applications to HELIX and to terminate TPI'S previous contractual right to participate in the potential patent royalty stream, and (iii) the mutual waivers and releases granted by the Parties in ARTICLE III hereof, the Parties agree to the following: A. CASH, STOCK AND OTHER CONSIDERATION TO BE PAID TO TPI: 1. CASH PAYMENT TO TPI: HELIX shall make a cash payment of One Hundred Thousand and no/100 Dollars ($100,000) to TPI on the EFFECTIVE DATE of this Agreement. 2. ISSUANCE OF STOCK TO TPI: In partial consideration of TPI'S execution of the earlier Cooperative Endeavor Agreement HBM issued and conveyed ten thousand (10,000) shares of its restricted common stock to TPI. Said shares shall remain the property of TPI notwithstanding this novation of that agreement. Within fifteen (15) days after the EFFECTIVE DATE of this present Agreement HBM shall issue to TPI an additional Fifty Thousand (50,000) shares of the restricted common stock of HBM. Certificate(s) evidencing the 50,000 shares shall be held in escrow by HBM (with a stock power to be executed by TPI) and released and delivered to TPI in accordance with the provisions of Article IV-C hereinbelow. 6 15 3. FORGIVENESS OF TPI NOTE PAYABLE TO HELIX: HELIX hereby agrees to forgive the indebtedness of TPI to HELIX on that certain promissory note dated December 13, 1995 in principal amount of $25,000.00 with interest accrued to the date hereof in the amount of $6,656.00. HELIX agrees to deliver this note to TPI for cancellation (marked "Paid in full-- $31,656.00") in accordance with the provisions of Article IV-C hereinbelow. 4. AGREEMENT TO FUND RESEARCH AT TPI: HELIX and TPI hereby agree that HELIX shall fund contract research at TPI for a minimum period of six (6) months, at a level of $12,500 per month. Said research shall be primarily in the areas specified in Exhibit H attached hereto. This research project shall commence as soon after CLOSING as is practicable and shall be in accordance with the terms of a research contract and work statement mutually agreed to by HELIX and TPI. Any discoveries (patentable or otherwise) from such contract work shall be the sole property of HELIX. 5. AGREEMENT TO NEGOTIATE LICENSE WITH TPI: It is understood by the parties that TPI desires to obtain a license from HELIX for the use of one or more of the DERIVATIVE PEPTIDES for topical applications in non-pharmaceutical skin care products. The parties hereto agree, as soon as practicable after CLOSING, to negotiate at arms length, and in good faith, to reach agreement with respect to terms of such a license. If such license agreement is entered into by the parties, the agreement shall provide for terms as customarily prevail in the industry. B. STOCK CONSIDERATION TO BE PAID TO OWEN: It is contemplated by HELIX that DR. OWEN, personally, will continue to make innovative contributions to development and commercialization of the CYTOPORIN TECHNOLOGY. In consideration of same HELIX shall give recognition to DR. OWEN'S past and prospective contributions to HELIX by HBM'S issuing in his name, personally, ten thousand (10,000) shares of the restricted common stock of HBM within fifteen (15) after the EFFECTIVE DATE hereof. A certificate evidencing such shares shall be held in escrow by HBM (with a stock power to be executed by DR. OWEN) to be released and delivered to DR. OWEN in accordance with Article IV-C hereinbelow. C. DELIVERY OF THE CONSIDERATIONS: The stock and forgiveness of note to be paid to TPI, as set forth in Articles IV-A-2 and IV-A-3 above, and the stock to be paid to DR. OWEN, as set forth in Article IV-B above, shall be released from escrow and delivered to TPI and DR. OWEN by HELIX at such time as: (i) TPI 7 16 has completed the six (6) months research provided for in Article IV-A-4 hereinabove, and (ii) TPI and DR. OWEN shall have executed assignments to HELIX (HBM OR HBMLA) of any inventions and patent applications on the DERIVATIVE PEPTIDES filed by HELIX within a period of eight (8) months from the EFFECTIVE DATE of this Agreement. ARTICLE V CONFIDENTIALITY AND SHARING OF TECHNICAL INFORMATION A. CONFIDENTIAL DISCLOSURE AGREEMENT: It is agreed that protection of the confidential and proprietary intellectual properties of the Parties is of the highest order of importance. In consideration of this the Parties hereto have executed a Confidential Disclosure Agreement attached hereto as Exhibit I and made a part hereof. B. SHARING OF TECHNICAL INFORMATION: The Parties agree that there shall be an extensive and on-going systematic exchange between them, in both verbal and written form, of all technical information which each Party possesses relative to development of the CYTOPORIN TECHNOLOGY and to the filing and prosecution of patent applications relating thereto. ARTICLE VI REPRESENTATIONS AND WARRANTIES 1. RECIPROCAL REPRESENTATIONS: Each Party hereto warrants that it or he has the right to enter this Research Alliance Agreement; and that it or he has no obligations, contractual or otherwise, which are inconsistent with this Agreement. Each Party hereto represents and warrants that, to the best of its or his knowledge, all information supplied by that Party in the Exhibits hereto is substantially true and complete. Notwithstanding the foregoing, no Party hereto makes any representation concerning the validity of any patents nor the question as to whether any of the CYTOPORIN TECHNOLOGY may infringe upon the patent rights of others. 8 17 2. REPRESENTATIONS OF TPI GROUP: The TPI GROUP represents and warrants to HELIX as follows: 1. No Prior Assignment or License by TPI GROUP. Each member of the TPI GROUP represents and warrants to HELIX that it/he has not heretofore assigned, sold or licensed, or agreed to assign, sell or license, any rights or interest he/it may have in and to either the DERIVATIVE PEPTIDES or the CYTOPORIN TECHNOLOGY, to any party other than HELIX. To the best knowledge of the TPI GROUP, no employee or consultant of any member of the TPI GROUP has made any claims of ownership or inventorship in respect of the DERIVATIVE PEPTIDES or CYTOPORIN TECHNOLOGY and no such employee or consultant has any proprietary rights therein. 2. Restricted Stock (a) TPI and OWEN recognize and understand that the shares of HBM stock to be issued to them hereunder (the "securities") will not upon initial issuance be registered under the Securities Act of 1933 ("Securities Act"), or under the securities laws of any state (the "securities laws"). The securities are not being so registered in reliance upon exemptions from the Securities Act and the securities laws which are predicated, in part, on the representations, warranties and agreements of the Consultant contained herein. (b) TPI and OWEN represent and warrant that (i) each of them has knowledge and experience in business, finance, securities and investments, such experience being based on actual participation therein, (ii) each of TPI and OWEN is capable of evaluating the merits and risks of an investment in the securities and the suitability thereof as an investment therefor, (iii) each of TPI and OWEN is an experienced and sophisticated investor in investments, including investments similar to that of the securities, (iv) the securities to be acquired by will be acquired solely for investment and not with a view toward resale or redistribution in violation of the securities laws, and no assurances have been made concerning the future results of HBM or as to the value of the securities, (v) each of TPI and OWEN is an "accredited investor" within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act. (c) TPI and OWEN has consulted with its own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which he is required to hold the securities, (ii) of the limitations on the transfer or disposition of the securities, and (iii) that the securities must be held indefinitely unless the transfer thereof is registered under the securities laws or an exemption from registration is available. (d) TPI and OWEN have each been furnished with a copy of the Annual Report on Form 10-KSB of Helix filed with the Commission under the Securities 9 18 Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1998, and the Form 10-QSB quarterly report for the period ended July 31, 1999. HBM has offered to, and agrees during the term of this Agreement, make available to TPI and OWEN upon request at any time all exhibits filed by HBM with the Commission as part of any of the reports filed therewith. ARTICLE VII SURVIVAL OF OBLIGATIONS The obligations of the Parties to: (i) maintain the confidentiality provided for in ARTICLE V-A of this Agreement, and (ii) assign patent rights to HELIX in accordance with ARTICLE II shall survive indefinitely. ARTICLE VIII MISCELLANEOUS A. GOVERNING LAW: The formation, construction, validity and performance of this Agreement and the procedural and substantive rights of the Parties hereto shall be governed in all respects by the laws of the State of Louisiana. B. NOTICE: Any notice or other communication required or permitted to be made to any Party hereunder shall be sufficiently made or given on the date of receipt if sent by certified mail to such other Party at its address given below, or such other address as shall hereafter be designated by the Party in writing. TO HELIX (HBM AND HBMLA): President, Helix BioMedix, Inc. 2151 East Lakeshore Drive Baton Rouge, LA 70808 TO TPI: President, Therapeutic Peptides, Inc. 5701 Crawford Street, Suite 1 Harahan, LA 70123 TO BRL: President, BioSouth Research Laboratories, Inc. 5701 Crawford Street, Suite 1 Harahan, LA 70123 TO OWEN: Donald R. Owen 5701 Crawford Street, Suite 1 10 19 Harahan, LA 70123 C. HOLD HARMLESS: HELIX shall hold THE TPI GROUP harmless against and from any claim, liability, loss or damage (including reasonably attorneys fees) incurred by the TPI GROUP by reason of a material breach of this Agreement by HELIX; and THE TPI GROUP shall hold HELIX harmless against and from any claim , liability, loss or damage (including reasonably attorneys fees) incurred by HELIX by reason of a material breach of this Agreement by the TPI GROUP. D. [INTENTIONALLY OMITTED] E. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement and understanding of the Parties hereto with respect to the subject matter of this Agreement and supersedes all prior discussions, agreements, understandings of any and every nature, whether written or oral, among the Parties with respect to the subject matter of this Agreement, and no condition, definition, warranty or representation other than expressly provided for in this Agreement with respect to the subject matter of this Agreement shall be binding upon any Party hereto. Any amendment, modification, change or alteration to this Agreement shall be made in writing, shall expressly refer to this Agreement and shall be signed by a duly authorized officer or representative of each of the Parties hereto. Without limiting the foregoing, the Parties acknowledge and agree that this Agreement supercedes the Cooperative Agreement dated November 20, 1995, in all respects. F. SEVERABILITY: Should any clause, term or provision of this Agreement be held to be illegal or in conflict with any laws, the validity of the remaining clauses, terms and provisions hereof shall not be affected thereby. G. CAPTIONS AND HEADINGS: The Article and Section headings throughout this Agreement are for convenience and reference only, and shall in no way be deemed to define, limit, or add to the meaning of any provision of this Agreement. H. BINDING EFFECT AND ASSIGNMENT: This Agreement shall be binding upon and inure to the benefit of HELIX, TPI, BRL, and OWEN and their respective successors, as the case may be, but no Party shall assign its respective interests in or obligations under this Agreement without the prior written consent of the other Parties hereto. I. TIME OF ESSENCE: Time is of the essence of this Agreement and of each and every provision thereof. J. MUTUAL COOPERATION: The Parties hereto shall cooperate with each other to achieve the purpose of this Agreement, and shall execute such other and further documents and take such other and further actions as may be necessary or convenient to effect the transactions described herein. K. FUTURE LEGAL COSTS: If any action or legal proceeding is brought for the enforcement of this Agreement, or because of an alleged breach of this Agreement, the successful or prevailing Party shall be entitled to recover its reasonable 11 20 attorney's fees, court costs, and reasonable litigation expenses incurred in connection with such action or proceeding in addition to any other relief which it is entitled, from the losing Party. L. SURVIVAL OF REPRESENTATIONS AND WARRANTIES: The representations, warranties, covenants and agreements of the Parties set forth in this Agreement or in any instrument, certificate, opinion, or other writing providing for in it, shall survive the CLOSING irrespective of any investigation made by or on behalf of any Party. M. EXHIBITS: As of the execution hereof, the Parties hereto have provided each other with the Exhibits referred to hereinabove, including any items referenced therein or required to be attached thereto. Any material changes to the Exhibits shall be immediately disclosed to the other Parties. * * * IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized officers or representatives as of the day and year first above written. WITNESS: HELIX BIOMEDIX, INC. (Colorado) BY: -------------------------------------- HELIX BIOMEDIX, INC. (Louisiana) BY: -------------------------------------- THERAPEUTIC PEPTIDES, INC. BY: -------------------------------------- DONALD R. OWEN, President 12 21 BIOSOUTH RESEARCH LABORATORIES, INC. BY: -------------------------------------- DONALD R. OWEN, President DONALD R. OWEN, INDIVIDUALLY BY: -------------------------------------- 13 22 EXHIBIT F THE DERIVATIVE PEPTIDES DEFINED "DERIVATIVE PEPTIDES" shall mean xenobiotic (not occurring in nature) MDP'S heretofore and hereafter designed and synthesized by TPI pursuant to the terms of this Agreement, which peptides are structural and/or sequence analogues derived from the general structural conformations of the various HELIX/LSU Peptides, expressly including, but not limited to, those peptides which HELIX and TPI have designated as "FLAK PEPTIDES", i.e., those peptides comprised predominantly, but not exclusively, by sequence combinations of the amino acids F, L, A, and K. (Phenylalanine, Leucine, Alanine, and Lysine). The DERIVATIVE PEPTIDES include peptides with diverse bioactive properties: including antibacterial, antiviral, antiprotozoan, and antifungal activity, inhibition of neoplastic cells, proliferation and stimulation of fibroblasts and lymphocytes, and synergistic action with other therapeutic agents. 23 EXHIBIT I CONFIDENTIAL DISCLOSURE AGREEMENT THIS AGREEMENT is made and entered into this____ day of September 1999 by, between and among Helix BioMedix, Inc., a Colorado corporation, and its wholly owned subsidiary Helix BioMedix, Inc., a Louisiana corporation, (hereinafter referred to collectively as "BIOMEDIX") and Therapeutic Peptides, Inc. and BioSouth Research Laboratories, Inc., both Louisiana corporations, and Donald R. Owen, a Louisiana resident, (hereinafter referred to collectively as the "TPI GROUP"). WITNESSETH: WHEREAS, BIOMEDIX and the TPI GROUP each possess certain confidential and proprietary information relating to membrane disruptive peptides, their applications, and their production; and confidential information relating to the business of BIOMEDIX and the TPI GROUP (hereinafter referred to as the "Confidential Information"); and WHEREAS, BIOMEDIX and the TPI GROUP desire to disclose such Confidential Information to each other to achieve the purposes of that certain "Research Alliance Agreement" entered into this date by the parties hereto; NOW, THEREFORE, the parties hereto agree as follows: 1. BIOMEDIX and the TPI GROUP shall disclose the Confidential Information to each other, and each party warrants that it is free to disclose such Confidential Information to the other party pursuant to the terms of this Agreement. 2. The parties agree that for a period of five (5) years from the date of this Agreement they shall: (a) make no use of any of the Confidential Information except for the purpose of performing the aforesaid Research Alliance Agreement; (b) not disclose any of the Confidential Information to third parties, except to affiliates or consultants, pursuant to a non-disclosure commitment; and (c) take such precautions as they normally take with their own, separate confidential and proprietary information to prevent unauthorized disclosure of the Confidential Information. 3. The obligation of each party under Section 2 above shall not, in any event, apply to any Confidential Information which: (a) at the time of disclosure is or thereafter becomes available to the public in published literature or otherwise through no fault of either party; or 1 24 (b) was known to, or otherwise in the possession of, the party, an affiliate, consultant or client prior to the receipt of such Confidential Information from the other party; or (c) is obtained from a source other than the other party and other than one who would be breaching a commitment of confidentiality to either party by disclosing confidential Information to the other party. 5. No right or license under any patent application, patent, trade secret or other proprietary right is granted hereunder by implication or otherwise. * * * IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. THERAPEUTIC PEPTIDES, INC. HELIX BIOMEDIX, INC. (CO) and and BIOSOUTH RESEARCH LABORATORIES, HELIX BIOMEDIX, INC. (LA) INC. BY: BY: ------------------------------ -------------------------------------- Donald R. Owen, President Keith P. Lanneau, President DONALD R. OWEN, INDIVIDUALLY BY: ------------------------------ Donald R. Owen EXHIBIT G OTHER HELIX TECHNOLOGY DEFINED Genetic alteration of mammalian cells by transfection with genes encoding for the in vivo production of MDPs. The applications include: 1. The production and breeding of transgenic animals other than humans. (e.g. farm animals, fish, etc.) 2 25 2. Use in human gene therapy for the treatment of disease in humans and to enhance immune responses in immuno-compromised patients. * * * 3 26 EXHIBIT H SCOPE OF RESEARCH The technical development work contemplated by this EXHIBIT shall include, but not be limited to, the following: (a) Obtaining such additional in vitro (and/or in vivo) data as may be required to complete successful prosecution of patent applications in the HELIX/LSU PATENT ESTATE and to file, as soon as possible, new patent applications on those DERIVATIVE PEPTIDES which have been designed and synthesized by TPI. (b) Optimization of the structure of CYTOPORINS by rational design to increase activity and/or selectivity, to reduce toxicity, to enhance compatibility with drug delivery systems, and to reduce product manufacturing costs. (c) Development of specific product formulations for various applications of both drug and non-drug products. (d) Development of drug delivery systems for specific applications. (e) Preclinical studies, both in-vitro and in-vivo, and/or clinical studies on the efficacy and toxicity of specific products within the CYTOPORIN TECHNOLOGY. (f) Development of cost effective peptide manufacturing technology based upon (i) scale-up of solid and/or solution phase chemical synthesis, (ii) cross linked enzyme reaction techniques, and/or (iii) recombinant production methods. 1 27 KM DRAFT 6/29/99 CONSULTING AGREEMENT This CONSULTING AGREEMENT (this "Agreement"), dated as of________________ ____________, 1999, is entered into by and among HELIX BIOMEDIX, INC., a Colorado corporation ("Helix"), KATZ-MILLER VENTURES L.L.C. ("Consultant"), and Ralph Katz, individually ("Katz"), and Jeffrey A. Miller, individually ("Miller") (Katz and Miller are sometimes referred to herein collectively as the "Consulting Principals"). PRELIMINARY RECITALS WHEREAS, Helix, headquartered in Baton Rouge, Louisiana, is a publicly owned biotechnology company which is engaged in (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, and (ii) licensing its proprietary technology and in seeking strategic corporate alliances for further development and commercialization of its technology (collectively, the "Business"), and WHEREAS, Helix desires outside professional assistance in various areas of strategic and financial planning and believes that Consultant has experience and expertise that will be valuable to Helix, and WHEREAS, Helix desires to engage Consultant as a consultant, and Consultant desires to perform consulting services for Helix, under the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Consulting. 1.1 Consulting Services. Helix hereby engages Consultant, and Consultant hereby accepts such engagement and agrees to serve as consultant to Helix concerning the Business for a period of two (2) years, beginning on the date hereof (the "Consulting Period"). In connection with the performance of its duties, Consultant shall (i) have access to Helix's offices, library, equipment, instruments, personnel and other resources, (ii) perform and keep records of its work in a manner compatible with Helix's accounting and other standard reporting and information systems, (iii) use Helix's professionals to the extent such work requires staffing other than Consultant, such use being subject to availability of staff or resource and shall be coordinated with other work of Helix in a timely fashion, and (iv) cause Consultant's duties hereunder to be performed primarily by the Consulting Principals. As members of the Board of Directors of Helix, the Consulting Principals shall be covered by Helix's directors' and officers' liability insurance policy. 28 1.2 Duties. Consultant shall faithfully and to the best of its ability perform the duties assigned by the Board of Directors of Helix and shall serve under the direction of the President of Helix. These duties shall include, without limitation, the following duties: (a) strategic planning, (b) recruitment of key scientists and management personnel, (c) assisting Helix in licensing its technology and developing joint ventures and other strategic alliances, (d) helping to restore Helix's stock to active trading, (e) enhancing shareholder value, and (f) reporting on a quarterly basis in summary written form, Consultant's progress in respect of duties assigned by Board. 1.3 Relationship of Parties. Consultant shall be deemed an independent contractor and not an employee of Helix. All letterhead, business cards and promotional materials used or distributed by Consultant shall present Consultant as a business consultant to, and not an employee or principal of, Helix. Consultant shall be responsible for all taxes associated with payment hereunder, including but not limited to income taxes and social security taxes. 1.4 Expenses. All ordinary and reasonable out-of-pocket expenses incurred by Consultant in connection with the performance of Consultant's services as assigned pursuant to Section 1.2 above, including reasonable travel and entertainment expenses, shall be reimbursed to Consultant by Helix, provided that Consultant shall have submitted an invoice together with other documentation of such expenses as Helix may reasonably require. 1.5 Compensation. In consideration for the services heretofore rendered and hereafter to be rendered by Consultant, its agreement not to compete with Helix and its agreement to promote services for and through Helix during the Consulting Period, Helix shall: (a) issue to Consultant 40,000 shares of Helix's common stock ("Helix Stock") upon the execution of this Agreement. (b) issue to Consultant 40,000 shares of Helix Stock upon the first anniversary of the execution of this Agreement. (c) award Consultant a bonus of Helix Stock, based upon the Triggering Event (as defined herein) at any time during the term of this Agreement, and issued within ten business days of the day on which Consultant notifies Helix of the occurrence of a Triggering Event, in accordance with the following Bonus Schedule if Consultant continues to be engaged by Helix (or an affiliate): BONUS SCHEDULE 29
Triggering Event Stock Price Bonus Amount (Dollars per share) (Number of Shares of Helix Stock) ---------------------------- --------------------------------- 2 1/2 60,000 2 7/8 60,000 3 5/8 80,000 4 1/4 80,000 4 7/8 80,000 5 3/8 80,000 5 7/8 100,000
The "Triggering Event Stock Price" of Helix Stock shall be determined by reference to the bid and ask prices for shares of such stock as reported on any stock exchange, the Nasdaq, or on the OTC bulletin board quotation system. For each Triggering Event Stock Price set forth above, the subject "Triggering Event" is the first to occur of the following: (i) the first time after November 1, 1999 that the average between the closing bid and ask price for Helix Stock is equal to or exceeds that applicable Triggering Event Stock Price for a period of six consecutive business days; or (ii) the first time after November 1, 1999 that an aggregate volume of 80,000 or more shares of Helix Stock are traded over a period of three consecutive business days at a price equal to or greater than the applicable Triggering Event Stock Price. All Helix Stock to be awarded to Consultant pursuant to this Agreement shall be duly issued and free and clear of all liens, liabilities or encumbrances (other than the restrictions resulting or related to its unregistered status). (d) Within six (6) months of the date hereof, Helix agrees to use its best efforts to file a registration statement with the SEC on Form S-3 covering all shares of Helix Stock which have been issued to Consultant prior to such filing; and at three additional and consecutive intervals of 6 months each file registration statements on Form S-3 to cover shares not previously registered but issued to Consultant pursuant to this Agreement. Notwithstanding the foregoing, Helix agrees upon written request from Consultant to accelerate the timing of S-3 filings after the first filing as follows: (i) a second filing upon issuance to Consultant of at least 160,000 shares of Helix Stock which have not previously been registered; (ii) a third filing upon issuance to Consultant of at least an additional 160,000 shares not previously registered; and (iii) a fourth filing at such time as shares are issued to Consultant pursuant to occurrence of the last Triggering Event during the term of this Agreement. In no event shall Helix be required to file more than four S-3 registration statements during the term of this Agreement. (e) In the event of any change in the outstanding shares of common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the maximum aggregate number and class of shares of common stock which may be delivered to Consultant hereunder will be equitably adjusted for such event. Furthermore, if there is an adjustment in the number of shares, no fraction of a share will be delivered with respect to the stock, although Helix will pay to Consultant, in cash and in lieu thereof, the fair market value of such fractional share. (1) Helix represents that as of the execution of this Agreement, Helix has no 30 outstanding stock other than common stock. 1.6 Restricted Stock (a) Consultant recognizes and understands that the shares of Helix Stock to be issued to Consultant hereunder (the "securities") will not upon initial issuance be registered under the Securities Act of 1933 ("Securities Act"), or under the securities laws of any state (the "securities laws"). The securities are not being so registered in reliance upon exemptions from the Securities Act and the securities laws which are predicated, in part, on the representations, warranties and agreements of the Consultant contained herein. (b) Consultant represents and warrants that (i) each of the Consulting Principals has knowledge and experience in business, finance, securities and investments, such experience being based on actual participation therein, (ii) each of the Consulting Principals is capable of evaluating the merits and risks of an investment in the Helix Stock and the suitability thereof as an investment therefor, (iii) each of the Consulting Principals is an experienced and sophisticated investor in investments, including investments similar to that of the Helix Stock, (iv) Helix Stock to be acquired by it will be acquired solely for investment and not with a view toward resale or redistribution in violation of the securities laws, and no assurances have been made concerning the future results of Helix or as to the value of the Helix Stock, (v) it (and each of the Consulting Principals) is an "accredited investor" within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act, and (vi) the Consulting Principals are the sole members/shareholders of Consultant. (c) Consultant has consulted with its own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which he is required to hold the securities, (ii) of the limitations on the transfer or disposition of the securities, and (iii) that the securities must be held indefinitely unless the transfer thereof is registered under the securities laws or an exemption from registration is available. (d) Consultant has been furnished with a copy of the Annual Report on Form 10-KSB of Helix filed with the Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1998, and the Form 10-QSB quarterly report for the period ended March 31, 1999. Helix has made available to Consultant the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they posses or could reasonably acquire the purpose of verifying the accuracy of the information furnished to Consultant as set forth herein or for the purpose of considering the transactions contemplated hereby. Helix has offered to, and agrees during the term of this Agreement, make available to Consultant upon request at any time all exhibits filed by Helix with the Commission as part of any of the reports filed therewith. 1.7 Restrictive Covenant. During the term of this Agreement and for a period of two years thereafter, neither Consultant nor any of the Consulting Principals shall either as an individual on his own account; as a partner, joint venturer, consultant, agent, salesman for any person; as an officer, director or stockholder (other than a beneficial holder of not more than 5% of the outstanding 31 voting stock of a company having at least 250 holders of voting stock) of a corporation; or otherwise, directly or indirectly: (a) enter into or engage in any business or consult with any business or entity competitive with Helix within any area of the United States in which Helix is then doing business; (b) solicit or attempt to solicit any of Helix customers with whom Consultant has had contact as a Consultant or employee of Helix with the intent or purpose to perform for such customer the same or similar services which Consultant performed for such customer during the term of his service hereunder or employment by Helix; (c) employ or solicit, or attempt to employ or solicit, for himself or any third party, the employment of any of Helix's employees; or (d) induce or attempt to induce any employee, consultant or agent of Helix to discontinue services to Helix. 2. Assignment. No party hereto may assign or delegate any of its rights or obligations hereunder without the prior written consent of the other party hereto. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall be binding and inure to the benefit of the respective legal representatives, heirs, successors affiliates and assigns of the parties hereto, whether so expressed or not. 3. Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent. 4. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same Agreement. 5. Descriptive Headings: Interpretation. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation. 6. Notices. All notices, demands or 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 duly given if (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt and postage prepaid, or (iii) transmitted by telecopy to the recipient with a confirmation copy to follow the next day to be delivered by overnight carrier. Such notices, demands and other communication shall be sent to the addresses indicated below: (a) If to Consultant, Katz and/or Miller: 32 Katz-Miller Ventures L.L.C. 710 East Ogden, Suite 630 Naperville, Illinois 60563 Attn: Jeffrey A. Miller E-mail Address: jmiller@newarc.com (b) If to Helix: Helix Biomedix, Inc. 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 Attn: Keith P. Lanneau E-mail Address: or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. The effective date of such notice shall be (w) the date such notice is personally delivered, (x) three days after the date of mailing if sent by certified or registered mail, (y) one day after date of delivery to the overnight courier if sent by overnight courier or (z) the next business day after the date of transmission by telecopy or e-mail. 7. Confidential Information and Discoveries. Consultant and each of the Consulting Principals agree that all information of a technical or business nature such as know-how, trade secrets, secret business information, plans, data, processes, techniques, customer information, inventions, discoveries, formulae, patterns, devices, etc., ("Confidential Information") pertaining to the business of Helix, is a valuable business property right of Helix. Consultant and the Consulting Principals agree that such Confidential Information, whether in written, verbal or model form, shall not be disclosed to anyone outside the employment of Helix or otherwise used by Consultant or the Consulting Principals for any purpose other than fulfillment of their respective obligations under this Agreement, without the express authorization of Helix. Confidential Information does not include information which Consultant or the Consulting Principals can demonstrate (i) has become generally available to the public other than as a result of a disclosure by Consultant or the Consulting Principals, (ii) has become available to Consultant or the Consulting Principals on a non-confidential basis from a source other than Helix, provided such source is not bound by a confidentiality agreement with Helix or otherwise prohibited from transmitting the information to Consultant or the Consulting Principals by a contractual, legal or fiduciary obligation. Any and all improvements, inventions, discoveries, formulae or processes in any way related to Helix's business which Consultant or the Consulting Principals may conceive or make during his regular working hours or otherwise shall be the sole and exclusive property of Helix and Consultant and the Consulting Principals will disclose the same to Helix and will, whenever requested by Helix to do so (either during the terms of this Agreement or thereafter), execute and assign any and all applications, assignments and/or other instruments and do all things which Helix may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents, copyrights, trademarks or other forms of protection, or in order to assign and convey or otherwise make available to Helix the sole and exclusive right, title and interest in and to said improvements, inventions, discoveries, formulae, processes, applications or patents. 33 No provision in this Agreement is intended to require assignment of any of the rights of Consultant or the Consulting Principals in an invention if no equipment, supplies, facilities, or trade secret information of Helix was used, and the invention was developed entirely on the Consultant's or Consulting Principals' own time; and the invention does not relate to the business of Helix or to Helix's actual or demonstrably anticipated research or development; and does not result from any work performed by the Consultant or the Consulting Principals for Helix. The provisions of this Section 7 shall survive the termination of this Agreement. 8. Return of Documents. Upon the termination of this Agreement for any reason, Consultant shall forthwith return and deliver to Helix and shall not retain any original or copies of any books, papers, price lists or customer contracts, bids or customer lists, files, books of account, notebooks and other documents and data (in printed, audio, video, electronic or other form) relating to the performance of services rendered by Consultant hereunder, all of which materials are hereby agreed to be the property of Helix. 9. Preliminary Recitals. The Preliminary Recitals set forth in the preamble hereto are hereby incorporated and made part of this Agreement. 10. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement sets forth the entire understanding of the parties, and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof. 11. Governing Law. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the laws of the State of Delaware. 12. Representations and Warranties. 12.1 Helix represents and warrants that: (i) Helix is a corporation, duly organized, validly existing and in good standing under the laws of the State of Colorado, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its Articles of Incorporation, Bylaws, or any contract or agreement by which it is bound; and (ii) This Agreement is valid and enforceable against Helix in accordance with its terms, and each instrument to be executed by Helix pursuant to this Agreement will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 12.2 Consultant and the Consulting Principals jointly and severally represent and warrant that: (i) Consultant is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its Articles of Organization, Operating Agreement, or any contract or agreement by which it is bound; and (ii) This Agreement is valid and enforceable against Consultant and the Consulting Principals in accordance with its terms, and each instrument to be executed by Consultant and the Consulting Principals pursuant to this Agreement 34 will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 13. Compliance with Laws. Consultant shall comply with all federal, state, and local laws, regulations, ordinances, orders, decrees, resolutions, and other acts of any governmental entity, including, but not limited to, securities laws and regulations that are applicable to this Agreement and the work and services performed or provided hereunder. 14. Attorney's Fees. If a dispute arises relating to the performance of the obligations of either Consultant (or the Consulting Principals) or Helix pursuant to the terms of this Agreement and legal or other costs are incurred, the prevailing party shall be entitled to recover all reasonable costs incurred in the defense or prosecution of the claim, including court costs, reasonable attorney's fees, and other claim-related expenses. 15. Termination. This Agreement may be terminated prior to the expiration of the two year term: (a) by the mutual written consent of Helix and Consultant; (b) by Consultant if Helix materially breaches the terms of this Agreement and fails to cure such breach within thirty (30) days following its receipt of written notice of such breach; or (c) by Helix if Consultant or either of the Consulting Principals materially breaches the terms of this Agreement and fails to cure such breach within thirty (30) days following its/his/their receipt of written notice of such breach. In the event of notification by either Helix or Consultant (or Consulting Principals) to the other party of breach of this Agreement, shares of Helix Stock thereafter issued to Consultant pursuant to Section 1.5 (Compensation) above shall be placed in escrow until either of the following occurs: (i) the parties agree the alleged breach or breaches do not exist or have been cured, or (ii) the matter is litigated and resolved by final judgment in a court of competent jurisdiction. In the event of litigation, if Helix is held to have breached the Agreement, the escrowed shares shall promptly be released to Consultant and Helix's obligations to Consultant under this Agreement shall continue; if Consultant or the Consulting Principals is/are held to have breached the Agreement, then the escrowed shares shall be released to Helix for cancellation and this Agreement shall be terminated with no further obligations of Helix to issue Helix Stock to Consultant, whereupon the Consulting Principals shall resign from the Board of Directors of Helix as of the effective date of termination of this Agreement. 35 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HELIX BIOMEDIX, INC. By: ------------------------------------- Name: ------------------------------------ Title: ---------------------------------- CONSULTANT: KATZ-MILLER VENTURES LLC By: ------------------------------------- Name: ------------------------------------ Title: ---------------------------------- By: ------------------------------------- Ralph Katz, an individual (but only with respect to the representations, warranties and covenants made by such individual in his individual capacity hereunder) By: ------------------------------------- Jeffrey A. Miller, an individual (but only with respect to the representations, warranties and covenants made by such individual in his individual capacity hereunder) 36 AGREEMENT TO RESTRUCTURE DEBT This AGREEMENT TO RESTRUCTURE DEBT (this "Agreement") is entered into as of September 30, 1999, by and among HELIX BIOMEDIX, INC., a Colorado corporation ("HBMCO") and its wholly owned subsidiary, HELIX BIOMEDIX, INC., a Louisiana corporation ("HBMLA") (hereinafter referred to collectively as "HELIX"), and Keith P. Lanneau, a resident of Louisiana ("LANNEAU"). PRELIMINARY RECITALS WHEREAS, HBMCO is a publicly owned biotechnology company substantially dependent upon both private and public financing to fund the development and commercialization of its technology, and WHEREAS, HELIX is currently indebted to LANNEAU in the aggregate amount of $552,386.00 ("INDEBTEDNESS"), a portion of which indebtedness is evidenced by a promissory note ("DEMAND NOTE") dated June 30, 1999, in the original principal amount of $462,218, a copy of which DEMAND NOTE is attached hereto as Exhibit A, WHEREAS, the parties hereto are mutually desirous of restructuring the aforesaid INDEBTEDNESS of HELIX to LANNEAU to improve the financial balance sheet of HELIX and to facilitate HELIX's ability to raise capital and to seek licensees for its proprietary technology, NOW, THEREFORE in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. CANCELLATION AND REPLACEMENT OF THE DEMAND NOTE. 1.1 Cancellation of the DEMAND NOTE (Exhibit A) LANNEAU agrees to the cancellation of the aforesaid DEMAND NOTE (Exhibit A) and herewith delivers the DEMAND NOTE to HELIX marked "CANCELED"; and HELIX hereby acknowledges receipt of same for cancellation and issuance to LANNEAU of three (3) replacement notes in the aggregate principal amount of $489,462.00 ("the REPLACEMENT NOTES"). 1.2 Issuance of REPLACEMENT NOTES (Exhibits B, C, D) HELIX agrees to issue to LANNEAU three (3) REPLACEMENT NOTES, each note having equal principal amounts of $163,154.00 with maturities from the date hereof of one (1), two (2), and three (3) years, respectively. The forms of each of the three REPLACEMENT NOTES are attached hereto and made a part hereof as Exhibit B, Exhibit C, and Exhibit D. HELIX 1 37 herewith delivers to LANNEAU the originals of these three notes, and LANNEAU hereby acknowledges receipt of same. HELIX further agrees that, so long as any balance of principal or accrued interest remains unpaid on any of the three REPLACEMENT NOTES, it shall not grant any security interest for any money borrowed from any other party, without the express written consent of LANNEAU or a holder in due course of any of the REPLACEMENT NOTES. 2. PAYMENT BY HELIX OF THE REMAINING INDEBTEDNESS. Upon the release of funds escrowed with Whitney National Bank, HELIX hereby agrees to pay in cash to LANNEAU the remaining INDEBTEDNESS in the amount of $62,924.00. 3. OTHER CONSIDERATIONS. 3.1 Agreement to Cancel Warrants (Exhibit E) The parties hereto agree to the cancellation of warrants for the purchase of 87,200 shares of common stock of HBMCO, which warrants were granted to the Estate of Joy G. Lanneau by resolutions of the Executive Committee of HBMCO adopted on December 29, 1998. LANNEAU is the executor and sole beneficiary of said estate, and has agreed to cancellation of said warrants in a separate agreement of this date entitled "Agreement to Cancel Warrants", a copy of which is attached hereto as Exhibit E and incorporated as a part hereof. 3.2 Lanneau Employment Agreement (Exhibit F). In further consideration of this "Agreement to Restructure Debt" the parties hereto agree that, so long as any balance of principal or accrued interest remains unpaid on any of the REPLACEMENT NOTES, LANNEAU, at his option, shall remain as an employee or consultant of HELIX on terms and conditions which are fair and reasonable by industry standards. Contemporaneously with execution of this Agreement LANNEAU and HELIX have entered into that certain "Employment Agreement," a copy of which is attached hereto and made a part hereof as Exhibit F. 3.3 Representation on the HELIX Board of Directors. The parties hereto further agree that, so long as any balance of principal or accrued interest remains unpaid on any of the REPLACEMENT NOTES, LANNEAU (at his option) shall be entitled to representation by himself, or his nominee, to one seat on the Board of Directors of HBMCO. 4. MISCELLANEOUS PROVISIONS 4.1 Assignment This Agreement shall be binding upon the legal and personal representatives, heirs, successors and assigns of the parties. 2 38 4.2 Severability Should any provision of this Agreement be unenforceable in the law, the remainder of the Agreement shall not be affected thereby. 4.3 Counterparts This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together shall constitute one and the same instrument. 4.4 Descriptive Headings: Interpretation The headings used in this Agreement are for convenience only and do not constitute matters to be construed in interpreting this Agreement. Except where the context indicates otherwise, words in the singular shall include the plural, and words in the masculine gender shall include the neuter and vice versa. 4.5 Preliminary Recitals The Preliminary Recitals set forth in the preamble hereto are hereby incorporated and made part of this Agreement. 4.6 Waivers No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against which it is sought to be enforced. No waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement. 4.7 Modification of Agreement No modification of this Agreement shall be binding unless in writing and signed by the party against whom or which it is sought to be enforced. 4.8 Entire Agreement This Agreement, including the Exhibits attached hereto, is the entire agreement among the parties hereto relating to the subject matter hereof. It supersedes all prior agreements pertaining to the subject matter hereof and may not be amended except in accordance with a writing executed by or on behalf of all the parties. 4.9 Governing Law This Agreement shall be governed and construed in accordance with the laws of the State of Louisiana. 4.10 Attorney's Fees If any action or legal proceeding is brought for the enforcement of this Agreement, or because of an alleged breach of this Agreement, the successful prevailing party shall be entitled to recover its reasonable attorney's fees, court costs, and reasonable litigation expenses incurred in connection with such action or proceeding in addition to any other relief which it is entitled, from the losing party. 4.11 Representations and Warranties HELIX represents and warrants that (i) HBMCO is a corporation, duly organized, validly existing and in good standing under the laws of the State of Colorado, has duly authorized the execution and performance of this 3 39 Agreement, and such execution and performance will not violate its Articles of Incorporation, By Laws, or any contract or agreement by which it is bound; and (ii) this Agreement is valid and enforceable against HELIX in accordance with its terms, and each instrument to be executed by HELIX pursuant to this Agreement, will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. LANNEAU represents and warrants that delivery herewith of (i) the REPLACEMENT NOTES and (ii) cash payment of the remaining INDEBTEDNESS satisfies in full the HELIX debt obligations to LANNEAU as of the date hereof, and that to the best of his knowledge and belief there are no remaining debt obligations of HELIX to the Estate of Joy Lanneau or to Arrowhead Technology Associates, Inc. LANNEAU further represents and warrants that this Agreement is valid and enforceable against LANNEAU in accordance with its terms, and will, when executed and delivered, be enforceable in accordance with its terms. 4.12 DEFAULT. NO PARTY HERETO SHALL BE DEEMED TO BE IN DEFAULT OF ITS OBLIGATIONS UNDER THIS AGREEMENT UNLESS AND UNTIL THE AGGRIEVED PARTY HAS PROVIDED WRITTEN NOTICE OF A BREACH OR ALLEGED BREACH TO THE DEFAULTING PARTY, AND THE DEFAULTING PARTY HAS FAILED TO CURE THE BREACH WITHIN 30 DAYS OF THE RECEIPT OF THE NOTICE OF THE BREACH. UPON LEARNING OF A BREACH OF THIS AGREEMENT, THE AGGRIEVED PARTY SHALL, BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, NOTIFY THE DEFAULTING PARTY THAT IT IS IN BREACH OF ITS AGREEMENT, AND IN SAID NOTICE SHALL PROVIDE SUFFICIENT DETAIL SO THAT DEFAULTING PARTY IS AWARE OF THE NATURE OF THE DEFAULT. IN THE EVENT THE DEFAULTING PARTY FAILS TO CURE SUCH DEFAULT WITHIN SAID THIRTY DAY PERIOD, THE AGGRIEVED PARTY SHALL BE ENTITLED TO ANY EQUITABLE OR MONETARY REMEDIES OTHERWISE PROVIDED BY THE LAW, INCLUDING, WITHOUT LIMITATION, RECOVERY FOR REASONABLE ATTORNEY'S FEES AND COSTS INCURRED TO ENFORCE HIS OR ITS RIGHTS HEREUNDER. THE PARTIES SPECIFICALLY AGREE THAT IN THE EVENT HELIX BREACHES ITS OBLIGATIONS UNDER SECTION 3.3 HEREOF, AND FAILS TO CURE SUCH BREACH WITHIN THIRTY (30) DAYS FOLLOWING WRITTEN NOTICE THEREOF, THEN LANNEAU MAY AT HIS OPTION ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE REPLACEMENT NOTES. 4.13 Notices All notices, demands or 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 duly given if (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt and postage prepaid, or (iii) transmitted by telecopy to the recipient with a confirmation copy to follow the next day to be delivered by overnight carrier. Such notices, demands and other communication shall be sent to the 4 40 addresses indicated below: a) To HELIX Helix Biomedix, Inc. 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 Attn: President FAX No.: ________________________ E-mail Address: _____________________________ b) To LANNEAU Keith P. Lanneau 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 FAX No.: (225) 338-9727 E-mail Address:_______________________________ 4.14 Termination of Existing Liens Upon delivery of the executed REPLACEMENT NOTES, LANNEAU agrees to terminate and cancel any and all liens and security interests which secure the INDEBTEDNESS, including security interests in the assets of HBMCO and/or a pledge of the stock of HBLMA. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HELIX BIOMEDIX, INC. (of Colorado) By: --------------------------------- Keith P. Lanneau, President 5 41 HELIX BIOMEDIX, INC. of (Louisiana) By: --------------------------------- Keith P. Lanneau, President ----------------------------- Keith P. Lanneau, Individually 6 42 PROMISSORY NOTE OF HELIX BIOMEDIX, INC. (CO) AND HELIX BIOMEDIX, INC. (LA) AMOUNT: $163,154.00 NOTE NO: KPL-12 DATE: SEPTEMBER 30, 1999 For value received, Helix BioMedix, Inc. (CO), a Colorado corporation, and its wholly owned subsidiary, Helix BioMedix, Inc. (LA), a Louisiana corporation (hereinafter collectively referred to as "MAKERS"), promise to pay to the order of KEITH P. LANNEAU, a Louisiana resident (hereinafter "OWNER") the principal sum of ONE HUNDRED SIXTY-THREE THOUSAND ONE HUNDRED FIFTY-FOUR AND NO/100 DOLLARS ($163,154.00) together with simple interest thereon from the date hereof at the rate of eight percent (8%) per annum, such principal and interest being payable at the principal office of OWNER in Baton Rouge, Louisiana, or at such other place either within or without the State as OWNER may from time to time designate. Interest accrued on the principal balance of this note shall be paid in cash to the OWNER every ninety (90) days from the date hereof through the maturity date. The full principal amount of this note and remaining interest accrued thereon shall be due and payable in cash to the owner one (1) year from the date of this note. Prepayment of interest and/or principal may be made by MAKERS at any time prior to the due dates without penalty. All payments of interest and principal shall be in lawful money of the United States. This promissory note is designated as Note No. KPL-12. As of the date hereof MAKERS have issued to OWNER two other promissory notes of same principal amount ($163,154.00 each), which other notes are designated respectively as Note No. KPL-13 (having a two year maturity) and Note No. KPL-14 (having a three year maturity). In the event that MAKERS shall default on payment of any interest or principal due on this note (Note No. KPL-12) or on either Note No. KPL-13 or Note No. KPL-14, and MAKERS fail to cure such default within thirty (30) days following receipt by MAKERS of written notice thereof, then OWNER shall be entitled, at his option, to any or all of the following: (i) accelerate the three notes and demand full payment of the principal and 1 43 interest due on each, (ii) secure from MAKERS a security interest in all the technology and intellectual property rights owned by MAKERS, (iii) receive from MAKERS a security interest in 100% of the capital stock of Helix BioMedix, Inc. (LA), and (iv) receive an assignment from MAKERS of any and all interest in revenues and/or receivables derived from the intellectual property owned by MAKERS. Notwithstanding the foregoing, MAKERS and OWNER stipulate and agree that the remedies reflected in (ii), (iii) and (iv) above are personal to OWNER and his heirs and shall not be available to and may not be exercised by any subsequent holder(s) of this note (other than OWNER's heirs). MAKERS further agree that, so long as any balance of principal or accrued interest remains unpaid on any of the three notes designated above, MAKERS shall not grant any security interest for any money borrowed from any other party than OWNER, without the express written consent of OWNER. It is hereby agreed that if default be made in any required payment of principal or interest on this promissory note as set forth above, then, upon notification and demand from OWNER by certified mail, MAKERS shall have thirty (30) days thereafter to remedy such default, or the entire amount of the principal and interest due on this note shall become and be due and collectible, with interest accruing thereon at the rate of then percent (10%) per annum from the date of notice of default until the remaining balance of principal and all interest thereon are paid in full. Except as otherwise provided herein, any future holder of this note shall be entitled to all of the rights granted herein to OWNER. The MAKERS of this note hereby waive presentation for payment, notice of non-payment and protest, and consent that, after demand, the time of payment may be extended without notice thereof, and in the event of any default in the payment of the principal sum or of the interest which shall accrue thereon, or any part of either, as above described, and this note is referred to an attorney for collection, they further agree to pay all attorney's fees incurred in the collection of this note, or any portion hereof, including interest, which fees are hereby fixed at ten percent (10%) of the amount to be collected. HELIX BIOMEDIX, INC. (CO) HELIX BIOMEDIX, INC. (LA) BY: BY: -------------------------- --------------------------------- KEITH P. LANNEAU, PRESIDENT KEITH P. LANNEAU, PRESIDENT 2 44 PROMISSORY NOTE OF HELIX BIOMEDIX, INC. (CO) AND HELIX BIOMEDIX, INC. (LA) AMOUNT: $163,154.00 NOTE NO: KPL-13 DATE: SEPTEMBER 30, 1999 For value received, Helix BioMedix, Inc. (CO), a Colorado corporation, and its wholly owned subsidiary, Helix BioMedix, Inc. (LA), a Louisiana corporation, (hereinafter collectively referred to as "MAKERS") promise to pay to the order of KEITH P. LANNEAU, a Louisiana resident, (hereinafter "OWNER") the principal sum of ONE HUNDRED SIXTY THREE THOUSAND ONE HUNDRED FIFTY FOUR AND NO/100 DOLLARS ($163,154.00) together with simple interest thereon from the date hereof at the rate of eight percent (8%) per annum, such principal and interest being payable at the principal office of OWNER in Baton Rouge, Louisiana, or at such other place either within or without the State as OWNER may from time to time designate. Interest accrued on the principal balance of this note shall be paid in cash to the OWNER every ninety (90) days from the date hereof through the maturity date. The full principal amount of this note and remaining interest accrued thereon shall be due and payable in cash to the owner two (2) years from the date of this note. Prepayment of interest and/or principal may be made by MAKERS at any time prior to the due dates without penalty. All payments of interest of and principal shall be in lawful money of the United States. This promissory note is designated as Note No. KPL-13. As of the date hereof MAKERS have issued to OWNER two other promissory notes of same principal amount ($163,154.00 each), which other notes are designated respectively as Note No. KPL-12 (having a one year maturity) and Note No. KPL-14 (having a three year maturity). In the event that MAKERS shall default on payment of any interest or principal due on this note (Note No. KPL-13) or on either Note No. KPL-12 or Note No. KPL-14 and MAKERS fail to cure such default within thirty (30) days following receipt by MAKERS of written notice thereof, then the OWNER shall be entitled, at his option, to any or all of the following: (i) accelerate the three notes and demand full payment of the principal and interest due on each, (ii) secure from MAKERS a security interest in all the technology and intellectual property rights owned by MAKERS, (iii) receive from MAKERS a security 1 45 interest in 100% of the capital stock of Helix BioMedix, Inc. (LA), and (iv) receive an assignment from MAKERS of any and all interest in revenues and/or receivables derived from the intellectual property owned by MAKERS. Notwithstanding the foregoing, MAKERS and OWNER stipulate and agree that the remedies reflected in (ii), (iii) and (iv) above are personal to OWNER and his heirs and shall not be available to and may not be exercised by any subsequent holder(s) of this note (other than OWNER's heirs). MAKERS further agree that, so long as any balance of principal or accrued interest remains unpaid on any of the three notes designated above, MAKERS shall not grant any security interest for any money borrowed from any other party than OWNER, without the express written consent of OWNER. It is hereby agreed that if default be made in any required payment of principal or interest on this promissory note as set forth above, then, upon notification and demand from OWNER by certified mail, MAKERS shall have thirty (30) days thereafter to remedy such default, or the entire amount of the principal and interest due on this note shall become and be due and collectible, with interest accruing thereon at the rate of ten percent (10%) per annum from the date of notice of default until the remaining balance of principal and all interest thereon are paid in full. Except as otherwise provided herein, any future holder of this note shall be entitled to all of the rights granted herein to OWNER. The MAKERS of this note hereby waive presentation for payment, notice of non-payment and protest, and consent that, after demand, the time of payment may be extended without notice thereof, and in the event of any default in the payment of the principal sum or of the interest which shall accrue thereon, or any part of either, as above described, and this note is referred to an attorney for collection, they further agree to pay all attorney's fees incurred in the collection of this note, or any portion hereof, including interest, which fees are hereby fixed at ten percent (10%) of the amount to be collected. HELIX BIOMEDIX, INC. (CO) AND HELIX BIOMEDIX, INC. (LA) BY: BY: ----------------------------- --------------------------------- KEITH P. LANNEAU, PRESIDENT KEITH P. LANNEAU, PRESIDENT 2 46 PROMISSORY NOTE OF HELIX BIOMEDIX, INC. (CO) AND HELIX BIOMEDIX, INC. (LA) AMOUNT: $163,154.00 NOTE NO: KPL-14 DATE: SEPTEMBER 30, 1999 For value received, Helix BioMedix, Inc. (CO), a Colorado corporation, and its wholly owned subsidiary, Helix BioMedix, Inc. (LA), a Louisiana corporation, (hereinafter collectively referred to as "MAKERS") promise to pay to the order of KEITH P. LANNEAU, a Louisiana resident, (hereinafter "OWNER") the principal sum of ONE HUNDRED SIXTY THREE THOUSAND ONE HUNDRED FIFTY FOUR AND NO/100 DOLLARS ($163,154.00) together with simple interest thereon from the date hereof at the rate of eight percent (8%) per annum, such principal and interest being payable at the principal office of OWNER in Baton Rouge, Louisiana, or at such other place either within or without the State as OWNER may from time to time designate. Interest accrued on the principal balance of this note shall be paid in cash to the OWNER every ninety (90) days from the date hereof through the maturity date. The full principal amount of this note and remaining interest accrued thereon shall be due and payable in cash to the owner three (3) years from the date of this note. Prepayment of interest and/or principal may be made by MAKERS at any time prior to the due dates without penalty. All payments of interest and principal shall be in lawful money of the United States. This promissory note is designated as Note No. KPL-14. As of the date hereof MAKERS have issued to OWNER two other promissory notes of same principal amount ($163,154.00 each), which other notes are designated respectively as Note No. KPL-12 (having a one year maturity) and Note No. KPL-13 (having a two year maturity). In the event that MAKERS shall default on payment of any interest or principal due on this note (Note No. KPL-14) or on either Note No. KPL-12 or Note No. KPL-13, and MAKERS fail to cure such default within thirty (30) days following receipt by MAKERS of written notice thereof, then the OWNER shall be entitled, at his option, to any or all of the following: (i) accelerate the three notes and demand full payment of the principal and interest due on each, (ii) secure from MAKERS a security interest in all the technology and intellectual property rights owned by MAKERS, (iii) receive from MAKERS a security interest in 100% of the capital stock of Helix BioMedix, Inc. (LA), and (iv) receive an 1 47 assignment from MAKERS of any and all interest in revenues and/or receivables derived from the intellectual property owned by MAKERS. Notwithstanding the foregoing, MAKERS and OWNER stipulate and agree that the remedies reflected in (ii), (iii) and (iv) above are personal to OWNER and his heirs and shall not be available to and may not be exercised by any subsequent holder(s) of this note (other than OWNER's heirs). MAKERS further agree that, so long as any balance of principal or accrued interest remains unpaid on any of the three notes designated above, MAKERS shall not grant any security interest for any money borrowed from any other party than OWNER, without the express written consent of OWNER. It is hereby agreed that if default be made in any required payment of principal or interest on this promissory note as set forth above, then, upon notification and demand from OWNER by certified mail, MAKERS shall have thirty (30) days thereafter to remedy such default, or the entire amount of the principal and interest due on this note shall become and be due and collectible, with interest accruing thereon at the rate of ten percent (10%) per annum from the date of notice of default until the remaining balance of principal and all interest thereon are paid in full. Except as otherwise provided herein, any future holder of this note shall be entitled to all of the rights granted herein to OWNER. The MAKERS of this note hereby waive presentation for payment, notice of non-payment and protest, and consent that, after demand, the time of payment may be extended without notice thereof, and in the event of any default in the payment of the principal sum or of the interest which shall accrue thereon, or any part of either, as above described, and this note is referred to an attorney for collection, they further agree to pay all attorney's fees incurred in the collection of this note, or any portion hereof, including interest, which fees are hereby fixed at ten percent (10%) of the amount to be collected. HELIX BIOMEDIX, INC. (CO) AND HELIX BIOMEDIX, INC. (LA) BY: BY: --------------------------- --------------------------------- KEITH P. LANNEAU, PRESIDENT KEITH P. LANNEAU, PRESIDENT 2 48 AMENDED AND RESTATED CONSULTING AGREEMENT This Agreement, effective for all purposes as of October 1, 1999, is entered into between Helix BioMedix, Inc., a Colorado corporation (the "Company"), and Henry Niman, Ph.D. ("Consultant"). The Company desires to obtain the services of Consultant and Consultant desires to perform services for the Company upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein contained, the parties agree as follows: AGREEMENT 1. Period of Engagement. The Company hereby engages Consultant as a consultant to render services to the Company in the position and with the duties and responsibilities described in Section 2 commencing on October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for an additional one-year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation, and in such event the Consultant's engagement hereunder shall terminate. The period of time covered by the Consultant's employment hereunder shall hereafter be referred to as the "Period of Engagement." The Company's policies as they may be established or amended from time to time in writing during the Period of Engagement ("Company Policies") shall apply to and govern the employment relationship between Consultant and the Company, provided that in the event of any conflict between Company Policies and the terms and conditions of this Agreement, the term and conditions of this Agreement shall apply. 2. Position, Duties, Responsibilities. 2.1 Position. Consultant hereby accepts the engagement as a consultant with the Company pursuant to the terms and conditions hereof. Consultant agrees to serve the Company in the position of Chairman, Scientific Advisory Board and Vice President - Science. Consultant shall report to the Chief Executive Officer ("CEO") of the Company. Consultant shall have the powers and duties commensurate with such position. Consultant shall devote his best efforts and attention to the performance of the services customarily incident to such office and to such other services as the Board of Directors ("Board") or CEO may reasonably request. Without limiting the generality of the foregoing, Consultant understands that he will be responsible for (i) establishing and recruiting members to serve on the Scientific Advisory Board of the Company, (ii) developing strategic alliances, joint ventures and similar relationships with third parties, (iii) seeking licensees for various applications of the Company's technology, (iv) seeking grant and contract research support for the Company, (v) advising the Board with respect to both internal and external initiatives for continued development of such technology and commercialization of same; and (vi) assisting management and the Company's consultants in presentations to enhance shareholder value and the Company's profile in the financial community. -1- 49 2.2 Other Activities. Except upon the prior written consent of the Board, Consultant shall not during the Period of Engagement engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place him in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (as "Affiliated Company"), provided that the Consultant may engage in the outside scientific/professional activities set forth on Exhibit A attached hereto. 3. Compensation, Benefits, Expenses. 3.1 Compensation. (a) Annual Salary. In consideration of the services to be rendered hereunder, including without limitation services to any Affiliated Company, Consultant shall be paid an annual salary which, during the first six months of the Period of Engagement shall be $10,000.00 per month, and during the latter six months of the Period of Engagement shall be $5,000.00 per month (the "Salary"). Consultant's Salary shall be payable in equal installments at the time and pursuant to the procedures regularly established, and as they may be amended, by the Company during the term of this Agreement. Unless otherwise agreed in writing by Employer and Consultant, Consultant's salary for any renewal term(s) of this Agreement shall be based upon an annual salary for full time employment of $120,000.00. (b) Bonuses. In addition to his Salary, the Board may, in its sole discretion, award stock bonuses to Consultant based upon the Board's assessment of Consultant's performance. Although no bonus is guaranteed, the parties agree that the following levels and subjective criteria generally describe the parameters which the Board intends to use in determining whether to award Consultant a stock bonus and the amount of the bonus for each level of accomplishment: Level I: Consultant performs duties hereunder to the satisfaction of the Board and attains certain early-stage milestones established by the Board. Potential Bonus: $25,000 to $150,000*. Level II: The Board determines that Consultant has excelled beyond expectations and has attained additional milestones established by the Board. Potential Bonus: $25,000 to $150,000*. Level III: The Board determines that Consultant's performance is superlative and that Consultant has attained substantially all of the goals established by the Board. Potential Bonus: $25,000 to $150,000*. * The value attributable to such bonus equates to the number of shares of common stock of the Company comprising such bonus, multiplied by the market price of such shares on the open market at the time such bonus is approved by the Board. Anything contained herein to the contrary -2- 50 notwithstanding, Consultant acknowledges and agrees that no bonus is guaranteed and the Board shall in its sole discretion determine the amount and frequency of any such bonus(es). 3.2 Expenses. The Company shall reimburse Consultant for reasonable travel and other business expenses incurred by Consultant in the performance of his duties hereunder in accordance with the Company Policies. 4. Termination of Engagement. 4.1 By Death. The Period of Engagement shall terminate automatically upon the death of the Consultant. In such event, the Company shall pay to Consultant's beneficiaries or his estate, as the case may be, any accrued Salary, any benefits under any plans of the Company in which Consultant is a participant to the full extent of Consultant's rights under such plans, and any appropriate business expenses incurred by Consultant in connection with his duties hereunder, all to the date of termination (collectively "Accrued Compensation"), but no other compensation or reimbursement of any kind, including, without limitation, severance compensation, and thereafter, the Company's obligations hereunder shall terminate. 4.2 By Disability. If the Consultant is prevented from properly performing his duties hereunder by reason of any physical or mental incapacity for a period of more than 45 days in the aggregate in any 365-day period, then, to the extent permitted by law, the Company may terminate the Period of Engagement on the 45th day of such incapacity. In such event, the Company shall pay to Consultant all Accrued Compensation through the effective date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Nothing in this Section shall affect Consultant's rights under any disability plan in which he is a participant. 4.3 By Company for Cause. The Company may terminate the Period of Engagement for Cause (as defined below) without liability at any time with or without advance notice to the Consultant. The Company shall pay Consultant all Accrued Compensation, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Termination shall be for "Cause" in the event of the occurrence of any of the following: (i) any action or failure to act by Consultant which was performed in bad faith and to the detriment of the Company; (ii) Consultant refuses or fails to act in accordance with any lawful and proper direction or order of the Board; (iii) Consultant willfully wantonly disregards performing the duties of employment; (iv) Consultant is convicted of a felony crime involving moral turpitude; or (v) Consultant intentionally breaches any material term of this Agreement ; provided that in the event that any of the foregoing events is capable of being cured, the Company shall provide written notice to the Consultant describing the nature of such event and the Consultant shall thereafter have ten (10) business days to cure such event. 4.4 By Company Without Cause. At any time, the Company may terminate the Period of Engagement without liability other than as set forth below, for any reason not specified in Section 4.3 above, by giving ninety (90) days advance written notice to the Consultant. If the -3- 51 Company elects to terminate Consultant pursuant to this Section 4.4, the Company shall pay to Consultant all Accrued Compensation and shall continue to pay to Consultant as provided herein Consultant's Salary over the period equal to the lesser of (i) the remainder of the Period of Engagement (but not less than ninety (90) days), or (ii) six months from the date of such termination, in either case less the amount of any compensation for services rendered received by Consultant from any third party during such period, as severance compensation and thereafter all obligations of the Company shall terminate. 4.5 Bonus. In no event shall any stock bonus be deemed to be earned prior to the date such bonus is formally authorized and approved by the Board. Accordingly, upon termination of this Agreement for any reason, Consultant shall be entitled only to Accrued Compensation (and to the extent applicable severance compensation under Section 4.4). 4.6 Termination Obligations. Consultant hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, and other documents, proprietary information, copies of any of the foregoing, and equipment furnished to or prepared by Consultant in the course of or incident to his employment, belongs to the Company and shall be delivered to the Company upon termination of the Period of Engagement. 5. Intellectual Property, Confidentiality, Non-Competition. 5.1 Intellectual Property. Consultant agrees to disclose to the Company promptly, all inventions, discoveries and/or original works of authorship or compilations thereof (hereinafter referred to as "Technologies") including without limitation products, processes, designs, formulas, specifications, prototype, models, samples, economies, reports or manuscripts as well as all improvements made thereto, that are conceived, developed and/or reduced to practice by Consultant during the term of this Agreement and within the scope of work and duties performed by Consultant for the Company. The Consultant also agrees to assign to the Company Consultant's entire right, title, and interest in said Technologies and to any patent(s), copyright(s), trademark(s) or service mark(s) which may be issued thereon by any of the various states, including Louisiana, the United States of America, and/or any foreign country and/or any political subdivision thereof, under any applicable state, federal, or foreign laws or international conventions. Further, Consultant agrees to make no other assignment, grant, mortgage, license or agreement affecting the rights and property to be assigned pursuant to this paragraph without first obtaining the express written consent of the Company. When requested to so do, during or subsequent to Consultant's employment with the Company, at the Company's expense, Consultant agrees to communicate and deliver all facts, information and data concerning said Technologies and improvements thereto, if any, to the Company or its designee; to execute all initial, divisional, continuing, substitute, renewal, or reissue applications for letters patent or copyrights, trademarks and/or service marks, foreign or domestic, as well as make or execute all rightful oaths, declarations, assignments, powers of attorney and/or other documents, and generally, do everything reasonably necessary for securing, maintaining and enforcing the Company's rights in and to said Technologies and improvements thereto and for vesting title therein in the Company or its designee. The undertakings set forth in this Paragraph 5.1 shall survive the termination of this Agreement. -4- 52 5.2 Confidentiality. Consultant acknowledges that during his employment with the Company, Consultant may receive, make use of, or add to the Company's Confidential Information defined for the purposes of this Agreement as consisting of, but not limited to (a) proprietary information relating to compositions, structure and formulations of membrane disruptive peptides (cytoporins) and applications thereof for pharmaceutical and non-drug use; (b) product designs, processes, formulas, specifications, prototypes, models, samples, economies, data, records, reports, manuscripts, and other materials of a proprietary nature; (c) records and policy matters relating to finance, accounting, sales, personnel, property, management, and operations; and (d) matters relating to the Company's operations such as its clients lists, its compilation of its clients' service requirements, its price and fee structures, its cost of services, and its cost of operations. Consultant understands and agrees that said Confidential Information is disclosed to Consultant in confidence and is to be used for the Company's benefit only. Consultant agrees that he/she will keep all such information confidential at all times during and after his employment with the Company; will not disclose or communicate such Confidential Information to any third party without the express, written consent of the Company; and will not use such Confidential Information on his own behalf or on behalf of any third party. In view of the nature of the Confidential Information the Consultant will receive during the course of his employment, Consultant understands and agrees that any unauthorized disclosure to third parties of said Confidential Information or other violation or threatened violation of this Agreement would cause irreparable damage to the trade secret status of the Confidential Information and to the Company and that the Company shall be entitled to seek a judicial injunction prohibiting Consultant from any such disclosure, attempted disclosures, violation or threatened violation. The undertakings set forth in this Paragraph 5.2 shall survive the termination of this Agreement. 5.3 Non-competition Covenants. Consultant covenants and agrees that, during the term of this Agreement and for a period of two years following termination of Consultant's employment with the Company, (except as otherwise provided in Exhibit "A" attached hereto) he shall not (i) engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or an Affiliated Company within the Parishes of East Baton Rouge, Jefferson and Orleans, Louisiana; or (ii) hire, solicit, or attempt to hire on behalf of himself or any other party any employee or exclusive consultant of the Company. For purposes of this Agreement, the Company's business is defined as (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, (ii) seeking patent protection to protect its proprietary technology, and (iii) licensing its technology and in seeking strategic corporate alliances for further development and commercialization of same. In view of the national nature of the Company's business, Consultant further agrees that during the term of this Agreement and for a period of two years following termination of Consultant's employment with the Company, Consultant shall not engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or any Affiliated Company, within any of the forty-nine states of the United States of America other than Louisiana. Anything contained herein to the contrary notwithstanding, this -5- 53 paragraph only of this Section 5.3 shall be governed by and enforceable in accordance with the laws of the state in which it is being enforced against Consultant. If any court of proper jurisdiction finds that this covenant is overly broad or unenforceable for any reason whatsoever, then it is hereby agreed that this covenant will be reduced or amended to be enforceable to the extent allowable under applicable law. A violation of this covenant not to compete by Consultant shall entitle the Company to recover all damages for the loss sustained and the profit of which the Company has been deprived. Additionally, the Company is entitled to injunctive relief in enforcing the terms of this covenant not to compete without the necessity of proving irreparable injury. 6. Assignment: Successors and Assigns. Consultant shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement (other than securities issued by the Company in accordance with applicable laws and the provisions of any document pursuant to which such securities are issued), nor shall Consultant's rights be subject to encumbrance or the claims of creditors. Any such purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, its acquisition by, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets or stock in an arm's length transaction (the foregoing are collectively referred to herein as an "Acquisition"), or the assignment by the Company of this Agreement and the performance of its obligations hereunder in connection with any such Acquisition or to any successor in interest or any Affiliated Company. Subject to the foregoing this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above. 7. Notices. All notices and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered personally or by overnight courier upon receipt or three days after deposit in the Untied States mail, return receipt requested, and addressed to the Consultant at: Henry Niman 16 Teal Drive Pittsburgh, PA 15238 or to the Company at: Helix BioMedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112-1722 Attn: Chief Executive Officer -6- 54 Either party may change its address for purposes of this Section by giving notice as set forth above. 8. Entire Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof, and may be amended only by a writing signed by the parties hereto. This Agreement, along with any amendments hereto, supersede any prior negotiations, offers, or agreements between the Company and the Consultant with regard to the subject matter hereof. Without limiting the foregoing, the parties acknowledge and agree that this Agreement supercedes and replaces in its entirety and serves as a novation of the Employment Agreement entered into between the parties as of October 1, 1999. 9. Amendments: Waivers. This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by the Consultant and by a duly authorized representative of the Company other than Consultant. Either party may waive compliance by the other party with any provision of this Agreement; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. 10. Severability. If any provision of this Agreement, as applied to any person or circumstances, is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affect thereby. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 11. Governing Law: Jurisdiction and Venue. Except as otherwise provided in Section 5.3 hereof, this Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. The parties consent to the jurisdiction of all federal and state courts in Louisiana, and venue shall lie exclusively in East Baton Rouge Parish, Louisiana. 12. Consultant Acknowledgment. Consultant acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. 13. Remedies. 13.1 Injunctive Relief. The parties agree that the services to be rendered by Consultant hereunder are of a unique nature and that in the event of any breach or threatened breach of any of the covenants contained herein, the damage or imminent damage to the value and the goodwill of the Company's business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive -7- 55 relief against Consultant in the event of any breach or threatened breach of any such provisions by Consultant, in addition to any other relief (including damages) available to the Company under this Agreement or under law. 13.2 Exclusive. Both parties agree that the remedy specified in Section 13.1 above is not exclusive of any other remedy for the breach by the Consultant of the terms hereof. 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 15. Relationship of Parties. Consultant shall be deemed an independent contractor and not an employee of the Company. All letterhead, business cards and promotional materials used or distributed by Consultant shall present Consultant as a business consultant to, and not an employee or principal of, the Company. Consultant shall be responsible for all taxes associated with compensation (both cash and (if any) stock) paid to Consultant hereunder, including but not limited to income taxes and social security taxes. 16. No Restrictions on Consultant. Consultant represents and warrants that his employment with the Company does not and will not breach any agreement or duty which Consultant has to any other person, including without limitation (i) rules or laws which restrict Consultant's employment with third parties, and (ii) confidentiality or non-competition agreements with third parties. 17. Restricted Stock (a) Consultant recognizes and understands that any shares of Company stock to be issued to Consultant hereunder (the "securities") will not upon initial issuance be registered under the Securities Act of 1933 ("Securities Act"), or under the securities laws of any state (the "securities laws"). The securities are not being so registered in reliance upon exemptions from the Securities Act and the securities laws which are predicated, in part, on the representations, warranties and agreements of the Consultant contained herein. (b) Consultant represents and warrants that (i) he has knowledge and experience in business, finance, securities and investments, such experience being based on actual participation therein, (ii) he is capable of evaluating the merits and risks of an investment in the Helix Stock and the suitability thereof as an investment therefor, (iii) he is an experienced and sophisticated investor in investments, including investments similar to that of the Company's stock (iv) any Company stock to be acquired by him will be acquired solely for investment and not with a view toward resale or redistribution in violation of the securities laws, and no assurances have been made concerning the future results of the Company or as to the value of such stock, and (v) he is an "accredited investor" within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act. (c) Consultant has consulted with its own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which he is required to hold the securities, (ii) of the limitations on the transfer or disposition of the securities, and (iii) that the securities must be held -8- 56 indefinitely unless the transfer thereof is registered under the securities laws or an exemption from registration is available. (d) Consultant has been furnished with a copy of the Annual Report on Form 10-KSB of the Company filed with the Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1998, and the Form 10-QSB quarterly reports filed with the SEC since that date. The Company has made available to Consultant the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they posses or could reasonably acquire the purpose of verifying the accuracy of the information furnished to Consultant as set forth herein or for the purpose of considering the transactions contemplated hereby. The parties have duly executed this Amended and Restated Consulting Agreement as of the date first written above. WITNESSES HELIX BIOMEDIX, INC. By: - ---------------------------- Title: ----------------------- - ---------------------------- Consultant: - ---------------------------- Henry Niman, Ph.D. - ---------------------------- -9- 57 EXHIBIT "A" TO AMENDED AND RESTATED CONSULTING AGREEMENT (Niman) For purposes of Paragraph 2.2 of the Amended and Restated Consulting Agreement, the parties agrees that Dr. Niman may participate in the following outside scientific and professional activities: - Membership and office appointments in professional societies - Membership and office appointments in professional foundation or educational institutions - Membership on editorial boards of scientific journals or books - Manuscript and grant review - Academic advisory boards or other similar types of activities - Scientific advisory boards of other company(s), as approved in advance by the Board of Helix BioMedix, Inc. The parties further agree that Dr. Niman's continued research and development of monoclonal antibodies with synthetic peptides shall not be deemed competitive with the business of Helix BioMedix, Inc.; provided, however, that the use of synthetic peptides for therapeutic applications, including without limitation gene therapy, shall be deemed the business of Helix BioMedix, Inc. and shall not be undertaken by Dr. Niman without the prior written consent of the Board of Helix BioMedix, Inc. -10- 58 EMPLOYMENT AGREEMENT This Agreement, dated as of September 30, 1999, is entered into by and among HELIX BIOMEDIX, INC., a Colorado corporation ("HBMCO") and its wholly owned subsidiary, HELIX BIOMEDIX, INC., a Louisiana corporation ("HBMLA") (hereafter referred to collectively as the "Company"), and Keith P. Lanneau, a resident of Louisiana ("LANNEAU" or the "Employee"). PRELIMINARY RECITALS WHEREAS, the Company is a publicly owned biotechnology company which is engaged in (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, (ii) seeking patent protection to protect its proprietary technology, (iii) licensing its technology and in seeking strategic corporate alliances for further development and commercialization of same, and (iv) obtaining both private and public funding to support the Company, (collectively, the "Business"), and WHEREAS, LANNEAU was the founder of the Company's predecessor in 1985 and has served as the Company's Chairman, President, and CEO since 1989 and is a major shareholder of the Company; and WHEREAS, LANNEAU has extensive experience in all areas of the Company's business; and WHEREAS, the Company has, during the last year, successfully undertaken a major financial and management restructuring to enhance the Company's future growth; and WHEREAS, the Company and LANNEAU agree that continuation of his services to the Company is in their mutual best interests; NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 59 AGREEMENT 1. Period of Employment. The Company hereby employs LANNEAU ("Employee") to render services to the Company in the position and with the duties and responsibilities described in Section 2 commencing on October 1, 1999, and extending for a term of one year thereafter, provided that such term shall automatically renew for two additional one year periods at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation, and in such event Employee's employment hereunder shall terminate. The period of time covered by the Employee's employment hereunder shall hereafter be referred to as the "Period of Employment." The Company's employment policies as they may be established or amended from time to time in writing during the Period of Employment ("Company Policies") shall apply to and govern the employment relationship between Employee and the Company, provided that in the event of any conflict between Company Policies and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall apply. 2. Position, Duties, Responsibilities. 2.1 Position. Employee hereby accepts employment with the Company pursuant to the terms and conditions hereof. Employee agrees to serve the Company in the position of Vice President-Technology ("VP-Technology"). Employee, in his capacity as VP-Technology, shall report to the Chief Executive Officer ("CEO") of the Company. Employee shall have the powers and duties commensurate with such position and as may be set forth in the By Laws of the Company. Employee shall devote his best efforts and attention to the performance of the services customarily incident to such offices and to such other services as the CEO may, from time to time, reasonably request. Without limiting the generality of the foregoing, Employee understands that he will be responsible for: (i) assisting other management personnel in assuming new responsibilities which may be assigned to them by the Board and CEO as an integral part of the Company's on-going restructuring program, (ii) continuing his past efforts in expanding and developing the prosecution of the Company's patent portfolio, (iii) serving as an interface in planning, and/or overseeing, and/or coordinating the technical activities involving the CEO, the Company's Scientific Advisory Board and Vice President-Science, and the Company's outside technical collaborators and contract research organizations (specifically including Therapeutic Peptides, Inc.), (iv) developing strategic alliances, joint ventures and similar relationships with third parties, (v) seeking licensees for various applications of the -2- 60 Company's technology, (vi) seeking grant and contract research support for the Company, (vii) advising the Board with respect to both internal and external initiatives for continued development of the Company's technology and commercialization of same; and (viii) assisting management and the Company's consultants in presentations to enhance shareholder value and the Company's profile in the financial community. Notwithstanding the foregoing, Employee shall not enter into any contracts or agreements on behalf of the Company, without the prior written consent of the Board. Because of the broad scope of Employee's responsibilities, he shall report to the CEO with respect to judicious assignment of priorities in execution of his employment duties. 2.2 Other Activities. Except upon the prior written consent of the Board, Employee shall not during the Period of Employment engage, directly or indirectly, engage in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place him in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (as "Affiliated Company"). 3. Compensation, Benefits, Expenses. 3.1 Compensation. (a) Annual Salary. In consideration of the services to be rendered hereunder, including without limitation services to any Affiliated Company, Employee shall be paid an annual salary of $90,000.00 for the first one year term of the Period of Employment. Employee's salary shall be payable in equal semi-monthly or monthly installments at the time and pursuant to the procedures regularly established, and as they may be amended, by the Company during the term of this Agreement. Unless otherwise agreed in writing by the Company and Employee, Employee's salary for any renewal term(s) of this Agreement shall be based upon an annual salary for full time employment of $90,000.00. 3.2 Benefits. Employee shall be entitled to participate in such general benefit programs as the Company may from time to time institute for the enjoyment and benefit of its employees, including, but not limited to, retirement programs, insurance plans, and stock option plans for officers, directors, and other key employees of the Company. 3.3 Expenses. The Company shall reimburse Employee for reasonable travel and other business expenses incurred by Employee in the performance of his duties hereunder in accordance with the Company Policies. 4. Termination of Employment. -3- 61 4.1 By Death. The Period of Employment shall terminate automatically upon the death of the Employee. In such event, the Company shall pay to Employee's beneficiaries or his estate, as the case may be, any accrued salary, any benefits under any plans of the Company in which Employee is a participant to the full extent of Employee's rights under such plans, and any appropriate business expenses incurred by Employee in connection with his duties hereunder, all to the date of termination (collectively "Accrued Compensation"), but no other compensation or reimbursement of any kind, including, without limitation, severance compensation, and thereafter, the Company's obligations hereunder shall terminate. 4.2 By Disability. If the Employee is prevented from properly performing his duties hereunder by reason of any physical or mental incapacity for a period of more than 45 days in the aggregate in any 365-day period, then, to the extent permitted by law, the Company may terminate the Period of Employment on the 45th day of such incapacity. In such event, the Company shall pay to Employee all Accrued Compensation through the effective date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Nothing in this Section shall affect Employee's rights under any disability plan in which he is a participant. 4.3 By Company for Cause. The Company may terminate the Period of Employment for Cause (as defined below) without liability at any time with or without advance notice to the Employee. The Company shall pay Employee all Accrued Compensation, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Termination shall be for "Cause" in the event of the occurrence of any of the following: (i) any action or failure to act by Employee which was performed in bad faith and to the detriment of the Company; (ii) Employee refuses or fails to act in accordance with any lawful and proper direction or order of the Board; (iii) Employee willfully wantonly disregards performing the duties of employment; (iv) Employee is convicted of a felony crime involving moral turpitude; or (v) Employee intentionally breaches any material term of this Agreement ; provided that in the event that any of the foregoing events is capable of being cured, the Company shall provide written notice to the Employee describing the nature of such event and the Employee shall thereafter have ten (10) days to cure such event. 4.4 By The Parties Without Cause. At any time the parties hereto may terminate the Period of Employment without cause by mutual agreement of the parties, the terms and conditions of such termination to be set forth in a written agreement between the Company and Employee. -4- 62 4.5 Termination Obligations. Employee hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, and other documents, proprietary information, copies of any of the foregoing, and equipment furnished to or prepared by Employee in the course of or incident to his employment, belongs to the Company and shall be delivered to the Company upon termination of the Period of Employment. 5. Intellectual Property, Confidentiality, Non-Competition. 5.1 Intellectual Property. Employee agrees to disclose to the Company promptly, all inventions, discoveries and/or original works of authorship or compilations thereof (hereinafter referred to as "Technologies") including without limitation products, processes, designs, formulas, specifications, prototype, models, samples, economies, reports or manuscripts as well as all improvements made thereto, that are conceived, developed and/or reduced to practice by Employee during the term of this Agreement and within the scope of work and duties performed by Employee for the Company. The Employee also agrees to assign to the Company Employee's entire right, title, and interest in said Technologies and to any patent(s), copyright(s), trademark(s) or service mark(s) which may be issued thereon by any of the various states, including Louisiana, the United States of America, and/or any foreign country and/or any political subdivision thereof, under any applicable state, federal, or foreign laws or international conventions. Further, Employee agrees to make no other assignment, grant, mortgage, license or agreement affecting the rights and property to be assigned pursuant to this paragraph without first obtaining the express written consent of the Company. When requested to so do, during or subsequent to Employee's employment with the Company, at no out-of-pocket expense to Employee, Employee agrees to communicate and deliver all facts, information and data concerning said Technologies and improvements thereto, if any, to the Company or its designee; to execute all initial, divisional, continuing, substitute, renewal, or reissue applications for letters patent or copyrights, trademarks and/or service marks, foreign or domestic, as well as make or execute all rightful oaths, declarations, assignments, powers of attorney and/or other documents, and generally, do everything reasonably necessary for securing, maintaining and enforcing the Company's rights in and to said Technologies and improvements thereto and for vesting title therein in the Company or its designee. The undertakings set forth in this Paragraph 5.1 shall survive the termination of this Agreement. 5.2 Confidentiality. Employee acknowledges that during his employment with the Company, Employee may receive, make use of, or add to the Company's Confidential Information defined for the purposes of this Agreement as consisting of, but not limited to (a) proprietary information relating to compositions, structure and formulations of membrane disruptive peptides (cytoporins) and applications thereof for pharmaceutical and non-drug use; (b) product designs, processes, formulas, specifications, prototypes, models, -5- 63 samples, economies, data, records, reports, manuscripts, and other materials of a proprietary nature; (c) records and policy matters relating to finance, accounting, sales, personnel, property, management, and operations; and (d) matters relating to the Company's operations such as its clients lists, its compilation of its clients' service requirements, its price and fee structures, its cost of services, and its cost of operations. Employee understands and agrees that said Confidential Information is disclosed to Employee in confidence and is to be used for the Company's benefit only. Employee agrees that he/she will keep all such information confidential at all times during and after his employment with the Company; will not disclose or communicate such Confidential Information to any third party without the express, written consent of the Company; and will not use such Confidential Information on his own behalf or on behalf of any third party. In view of the nature of the Confidential Information the Employee will receive during the course of his employment, Employee understands and agrees that any unauthorized disclosure to third parties of said Confidential Information or other violation or threatened violation of this Agreement would cause irreparable damage to the trade secret status of the Confidential Information and to the Company and that the Company shall be entitled to seek a judicial injunction prohibiting Employee from any such disclosure, attempted disclosures, violation or threatened violation. The undertakings set forth in this Paragraph 5.2 shall survive the termination of this Agreement. 5.3 Non-competition Covenants. Employee covenants and agrees that, during the term of this Agreement and for a period of two years following termination of Employee's employment with the Company, he shall not (i) engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or an Affiliated Company; or (ii) hire, solicit, or attempt to hire on behalf of himself or any other party any employee or exclusive consultant of the Company. 6. Assignment: Successors and Assigns. Employee shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Employee's rights be subject to encumbrance or the claims of creditors. Any such purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, its acquisition by, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets or stock in an arm's length transaction (the foregoing are collectively referred to herein as an "Acquisition"), or the assignment by the Company of this Agreement and the performance of its obligations hereunder in connection with any such Acquisition or to any successor in interest or any Affiliated Company. Subject to the foregoing this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above. -6- 64 7. Notices. All notices and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered personally or by overnight courier upon receipt or three days after deposit in the Untied States mail, return receipt requested, and addressed to the Employee at: Keith P. Lanneau 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 or to the Company at: Helix BioMedix, Inc. 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 Attn: Chief Executive Officer Either party may change its address for purposes of this Section by giving notice as set forth above. 8. Entire Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof, and may be amended only by a writing signed by the parties hereto. This Agreement, along with any amendments hereto, supersede any prior negotiations, offers, or agreements between the Company and the Employee with regard to the subject matter hereof. 9. Amendments: Waivers. This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by the Employee and by a duly authorized representative of the Company other than Employee. Either party may waive compliance by the other party with any provision of this Agreement; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. 10. Severability. If any provision of this Agreement, as applied to any person or circumstances, is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affect thereby. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, -7- 65 duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 11. Governing Law: Jurisdiction and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. The parties consent to the jurisdiction of all federal and state courts in Louisiana, and venue shall lie exclusively in East Baton Rouge Parish, Louisiana. 12. Employee Acknowledgment. Employee acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. 13. Remedies. 13.1 For the Company. The parties agree that the services to be rendered by Employee hereunder are of a unique nature and that in the event of any breach or threatened breach of any of the covenants contained herein, the damage or imminent damage to the value and the goodwill of the Company's business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive relief against Employee in the event of any breach or threatened breach of any such provisions by Employee, in addition to any other relief (including damages) available to the Company under this Agreement or under law. 13.2 For the Employee. The parties agree that in the event of any breach or default by the Company of any of the covenants contained herein, and the Company fails to cure such default within ten (10) days following receipt by the Company of written notice thereof, then the Employee shall be entitled to seek any and all remedies available to him under Louisiana law. 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 15. Withholdings. All compensation and benefits to Employee hereunder shall be subject to all federal, state, local and other withholdings and similar taxes and payments required by applicable law. -8- 66 16. No Restrictions on Employee. Employee represents and warrants that his employment with the Company does not and will not breach any agreement or duty which Employee has to any other person, including without limitation (i) rules or laws which restrict Employee's employment with third parties, and (ii) confidentiality or non-competition agreements with third parties. -9- 67 THE PARTIES HAVE DULY EXECUTED THIS EMPLOYMENT AGREEMENT AS OF THE DATE FIRST WRITTEN ABOVE. WITNESSES: HELIX BIOMEDIX, INC. (of Colorado) By: - ------------------------ ------------------------------- Title - ------------------------ ---------------------------- HELIX BIOMEDIX, INC. (of Louisiana) By - ------------------------ ------------------------------- Title: - ------------------------ ---------------------------- EMPLOYEE - ------------------------ --------------------------------- Keith P. Lanneau -10- 68 EMPLOYMENT AGREEMENT This Agreement, dated as of January 1, 2000 is entered into by and between HELIX BIOMEDIX, INC., a Colorado corporation (the "Company"), and R. Stephen Beatty, a resident of Louisiana ("Employee"). In consideration of the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT 1. Period of Employment. The Company hereby employs Employee to render services to the Company in the position and with the duties and responsibilities described in Section 2 commencing on January 1, 2000 (the "Commencement Date"), and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation, and in such event Employee's employment hereunder shall terminate. The period of time covered by the Employee's employment hereunder shall hereafter be referred to as the "Period of Employment." The Company's employment policies as they may be established or amended from time to time in writing during the Period of Employment ("Company Policies") shall apply to and govern the employment relationship between Employee and the Company, provided that in the event of any conflict between Company Policies and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall apply. 2. Position, Duties, Responsibilities. 2.1 Position. Employee hereby accepts full time employment with the Company pursuant to the terms and conditions hereof. Employee agrees to serve the Company in the position of Chief Executive Officer of the Company. Employee shall report to the Board of Directors of the Company. Employee shall have the powers and duties commensurate with such position and as may be set forth in the Bylaws of the Company. Employee shall devote his best efforts and attention to the performance of the services customarily incident to such office and to such other services as the Board may, from time to time, reasonably request. 69 2.2 Other Activities. Except upon the prior written consent of the Board, Employee shall not during the Period of Employment engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place him in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (as "Affiliated Company"). In addition, the Company acknowledges and agrees that Employee may work up to ten (10) hours per week for Beatty Finance, Inc., provided that such services do not impair Employee's ability to perform his services hereunder and do not otherwise prejudice the Company. 3. Compensation, Benefits, Expenses. 3.1 Compensation. (a) Cash Payment. In consideration of the services to be rendered hereunder, including without limitation services to any Affiliated Company, Employee shall be paid an annual salary of $78,000 (the "Cash Payment") plus stock options as described in Section 3.1(b) hereunder for the initial one year term of the Period of Employment. Employee's Cash Payment shall be payable in equal semi-monthly installments at the time and pursuant to the procedures regularly established, and as they may be amended, by the Company during the term of this Agreement. Unless otherwise agreed in writing by the Company and Employee, Employee's salary for any renewal term(s) of this Agreement shall be the same as the initial one year term. (b) Stock Options. Subject to the terms and conditions set forth herein, Employee shall have the option ("Option") to purchase 80,000 shares of the Company's common stock at an option price of $0.70 per share, during that period commencing on the date that the applicable Option(s) vest and ending on December 31, 2004, when all any and all unexercised Options granted herein shall expire and terminate. These Options shall vest quarterly in four equal blocks, as follows: Employee shall become vested in Options for 20,000 shares on each of March 31, 2000, June 30, 1999, September 30, 1999 and December 31, 2000, provided that (except as otherwise provided in Section 4.4 hereof) Employee remains employed by the Company as of each such vesting date. Except as otherwise provided in Section 4.4 hereof, upon termination of this Agreement, Employee shall be entitled only to those Options which have vested as of the date of termination. The number of shares of Company common stock covered by the above described Options, and the option price applicable thereto, shall be appropriately and equitably adjusted in the event of any stock dividend, stock split, combination or other similar recapitalization, such that the net economic position of Employee shall not change as a result thereof. All common stock of the Company issued to Employee pursuant to such Options shall not be registered pursuant to the Securities Act of 1933 or the laws of any state and will therefore be -2- 70 "restricted stock" for purposes of Rule 144. Such stock is sometimes referred to herein collectively as "Option Shares." Employee represents and warrants that (i) he has knowledge and experience in business finance, securities and investments, such experience being based on actual participation therein, (ii) he is capable of evaluating the merits and risks of an investment in the Option Shares and the suitability thereof as an investment therefor, (iii) he is an experienced and sophisticated investor in investments, including investments similar to that in the Company's stock, (iv) any Option Shares received hereunder will be acquired solely for investment and not with the view toward resale or redistribution in violation of applicable securities laws, and no assurances have been made concerning the future results of the Company or as to the value of the Company's stock, and (v) he is an "accredited investor within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933. Employee has consulted with his own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which he is required to hold the Company's stock, (ii) of the limitations on the transfer or disposition of the Company' stock, and (iii) that the Company' stock must be held indefinitely unless the transfer thereof is registered under applicable securities laws or an exemption from registration is available. Employee has been furnished with a copy of the Annual Report on Form 10-KSB of the Company filed with the Commission under the Securities Exchange Act of 1934 as amended for the fiscal year ending December 31, 1998 and the Forms 10-QSB which have filed with the Commission since that date. The Company has made available to Employee the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they possess or could reasonably acquire for the purpose of verifying the accuracy of the information furbished to Employee as set forth herein or for the purpose of considering the transactions contemplated hereby. The Company has offered, and agrees during the term of this Agreement, to make available to Employee upon request at any time all exhibits filed by the Company with the Commission as part of any of the reports filed therewith. 3.2 Benefits. Employee shall be entitled to participate in such general benefit programs as the Company may from time to time institute for the enjoyment and benefit of its employees, including, but not limited to, retirement programs and insurance plans for officers, directors, and other key employees of the Company. -3- 71 3.3 Expenses. The Company shall reimburse Employee for reasonable travel and other business expenses incurred by Employee in the performance of his duties hereunder in accordance with the Company Policies. 4. Termination of Employment. 4.1 By Death. The Period of Employment shall terminate automatically upon the death of the Employee. In such event, the Company shall pay to Employee's beneficiaries or his estate, as the case may be, any accrued but not yet paid Cash Payments and any vested Stock Options, any benefits under any plans of the Company in which Employee is a participant to the full extent of Employee's rights under such plans, and any appropriate business expenses incurred by Employee in connection with his duties hereunder, all through the date of termination (collectively "Accrued Compensation"), but no other compensation or reimbursement of any kind, including, without limitation, severance compensation, and thereafter, the Company's obligations hereunder shall terminate. 4.2 By Disability. If the Employee is prevented from properly performing his duties hereunder by reason of any physical or mental incapacity for a period of more than 45 days in the aggregate in any 365-day period, then, to the extent permitted by law, the Company may terminate the Period of Employment on the 45th day of such incapacity. In such event, the Company shall pay to Employee all Accrued Compensation through the effective date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Nothing in this Section shall affect Employee's rights under any disability plan in which he is a participant. 4.3 By Company for Cause. The Company may terminate Employee's employment for Cause (as defined below) without liability at any time with or without advance notice to the Employee. The Company shall pay Employee all Accrued Compensation, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Termination shall be for "Cause" in the event of the occurrence of any of the following: (i) any action or failure to act by Employee which was performed in bad faith and to the detriment of the Company; (ii) Employee refuses or fails to act in accordance with any lawful direction or order of the Board; (iii) Employee wantonly disregards performing the duties of employment; (iv) Employee is convicted of a crime involving Employer or any felony; or (v) Employee breaches any material term of this Agreement ; provided that in the event that any of the foregoing events is capable of being cured, the Company shall provide written notice to the Employee describing the nature of such event and the Employee shall thereafter have ten (10) days to cure such event. -4- 72 4.4 By the Company Without Cause. The Company may terminate this Agreement at any time for any reason other than death, disability or "cause" (as defined above), upon written notice thereof to Employee; provided, that if the Company so terminates Employee during the initial one year term of this Agreement, Employee shall be entitled to one-half (50%) of the compensation (salary and vesting in stock options) otherwise due Employee hereunder during the remaining portion of the initial one year term. 4.5 By The Parties Without Cause. At any time the parties hereto may terminate this Agreement by mutual agreement of the parties, the terms and conditions of such termination to be set forth in a written agreement between the Company and Employee. 4.6 Termination Obligations. Employee hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, and other documents, proprietary information, copies of any of the foregoing, and equipment furbished to or prepared by Employee in the course of or incident to his employment, belongs to the Company and shall be delivered to the Company upon termination of the Period of Employment. 5. Intellectual Property, Confidentiality, Non-Competition. 5.1 Intellectual Property. Employee agrees to disclose to the Company promptly, all inventions, discoveries and/or original works of authorship or compilations thereof (hereinafter referred to as "Technologies") including without limitation products, processes, designs, formulas, specifications, prototype, models, samples, economies, reports or manuscripts as well as all improvements made thereto, that are conceived, developed and/or reduced to practice by Employee during the term of this Agreement and within the scope of work and duties performed by Employee for the Company. The Employee also agrees to assign to the Company Employee's entire right, title, and interest in said Technologies and to any patent(s), copyright(s), trademark(s) or service mark(s) which may be issued thereon by any of the various states, including Louisiana, the United States of America, and/or any foreign country and/or any political subdivision thereof, under any applicable state, federal, or foreign laws or international conventions. Further, Employee agrees to make no other assignment, grant, mortgage, license or agreement affecting the rights and property to be assigned pursuant to this paragraph without first obtaining the express written consent of the Company. When requested to so do, during or subsequent to Employee's employment with the Company, at no out-of-pocket expense to Employee, Employee agrees to communicate and deliver all facts, information and data concerning said Technologies and improvements thereto, if any, to the Company or its designee; to execute all initial, divisional, continuing, substitute, renewal, or reissue applications for letters patent or copyrights, trademarks and/or service marks, foreign or domestic, as well as make or execute all rightful oaths, declarations, assignments, powers of attorney and/or other -5- 73 documents, and generally, do everything reasonably necessary for securing, maintaining and enforcing the Company's rights in and to said Technologies and improvements thereto and for vesting title therein in the Company or its designee. The undertakings set forth in this Paragraph 5.1 shall survive the termination of this Agreement. 5.2 Confidentiality. Employee acknowledges that during his employment with the Company, Employee may receive, make use of, or add to the Company's Confidential Information defined for the purposes of this Agreement as consisting of, but not limited to (a) proprietary information relating to compositions, structure and formulations of membrane disruptive peptides (cytoporins) and applications thereof for pharmaceutical and non-drug use; (b) product designs, processes, formulas, specifications, prototypes, models, samples, economies, data, records, reports, manuscripts, and other materials of a proprietary nature; (c) records and policy matters relating to finance, accounting, sales, personnel, property, management, and operations; and (d) matters relating to the Company's operations such as its clients lists, its compilation of its clients' service requirements, its price and fee structures, its cost of services, and its cost of operations. Employee understands and agrees that said Confidential Information is disclosed to Employee in confidence and is to be used for the Company's benefit only. Employee agrees that he/he will keep all such information confidential at all times during and after his employment with the Company; will not disclose or communicate such Confidential Information to any third party without the express, written consent of the Company; and will not use such Confidential Information on his own behalf or on behalf of any third party. In view of the nature of the Confidential Information the Employee will receive during the course of his employment, Employee understands and agrees that any unauthorized disclosure to third parties of said Confidential Information or other violation or threatened violation of this Agreement would cause irreparable damage to the trade secret status of the Confidential Information and to the Company and that the Company shall be entitled to seek a judicial injunction prohibiting Employee from any such disclosure, attempted disclosures, violation or threatened violation. The undertakings set forth in this Paragraph 5.2 shall survive the termination of this Agreement. 5.3 Non-competition Covenants. Employee covenants and agrees that, during the term of this Agreement and for a period of two years following termination of Employee's employment with the Company, he shall not (i) engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or an Affiliated Company within the Parishes of East Baton Rouge, Jefferson and Orleans, Louisiana; or (ii) hire, solicit, or attempt to hire on behalf of himself or any other party any employee or exclusive consultant of the Company. For purposes of this Agreement, the Company's business is defined as (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, (ii) seeking patent protection to -6- 74 protect its proprietary technology, and (iii) licensing its technology and in seeking strategic corporate alliances for further development and commercialization of same. In view of the national nature of the Company's business, Employee further agrees that during the term of this Agreement and for a period of two years following termination of Employee's employment with the Company, Employee shall not engage, directly or indirectly, in any other business activity that is competitive with, or that places him in a competing position to that of the Company or any Affiliated Company, within any of the forty-nine states of the United States of America other than Louisiana. Anything contained herein to the contrary notwithstanding, this paragraph only of this Section 5.3 shall be governed by and enforceable in accordance with the laws of the state in which it is being enforced against Employee. If any court of proper jurisdiction finds that this covenant is overly broad or unenforceable for any reason whatsoever, then it is hereby agreed that this covenant will be reduced or amended to be enforceable to the extent allowable under applicable law. A violation of this covenant not to compete by Employee shall entitle the Company to recover all damages for the loss sustained and the profit of which the Company has been deprived. Additionally, the Company is entitled to injunctive relief in enforcing the terms of this covenant not to compete without the necessity of proving irreparable injury. 6. Assignment: Successors and Assigns. Employee shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Employee's rights be subject to encumbrance or the claims of creditors. Any such purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, its acquisition by, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets or stock in an arm's length transaction (the foregoing are collectively referred to herein as an "Acquisition"), or the assignment by the Company of this Agreement and the performance of its obligations hereunder in connection with any such Acquisition or to any successor in interest or any Affiliated Company. Subject to the foregoing this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above. 7. Notices. All notices and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered personally or by overnight courier upon receipt or three days after deposit in the Untied States mail, return receipt requested, and addressed to the Employee at: R. Stephen Beatty -7- 75 --------------------- --------------------- or to the Company at: Helix BioMedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112 Attn: Chief Executive Officer Either party may change its address for purposes of this Section by giving notice as set forth above. 8. Entire Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof, and may be amended only by a writing signed by the parties hereto. This Agreement, along with any amendments hereto, supersede any prior negotiations, offers, or agreements between the Company and the Employee with regard to the subject matter hereof. 9. Amendments: Waivers. This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by the Employee and by a duly authorized representative of the Company other than Employee. Either party may waive compliance by the other party with any provision of this Agreement; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. 10. Severability. If any provision of this Agreement, as applied to any person or circumstances, is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affect thereby. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 11. Governing Law: Jurisdiction and Venue. Except as otherwise expressly provided in Section 5.3, this Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. The parties consent to the jurisdiction of all federal -8- 76 and state courts in Louisiana, and venue shall lie exclusively in East Baton Rouge Parish, Louisiana. 12. Employee Acknowledgment. Employee acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. 13. Remedies. 13.1 For the Company. The parties agree that the services to be rendered by Employee hereunder are of a unique nature and that in the event of any breach or threatened breach of any of the covenants contained herein, the damage or imminent damage to the value and the goodwill of the Company's business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive relief against Employee in the event of any breach or threatened breach of any such provisions by Employee, in addition to any other relief (including damages) available to the Company under this Agreement or under law. 13.2 For the Employee. The parties agree that in the event of any breach or default by the Company of any of the covenants contained herein, and the Company fails to cure such default within ten (10) days following receipt by the Company of written notice thereof, then the Employee shall be entitled to seek any and all remedies available to him under Louisiana law. 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 15. Withholdings. All compensation and benefits to Employee hereunder shall be subject to all federal, state, local and other withholdings and similar taxes and payments required by applicable law. 16. No Restrictions on Employee. Employee represents and warrants that his employment with the Company does not and will not breach any agreement or duty which Employee has to any other person, including without limitation (i) rules or laws which restrict Employee's employment with third parties, and (ii) confidentiality or non-competition agreements with third parties. THE PARTIES HAVE DULY EXECUTED THIS EMPLOYMENT AGREEMENT AS OF THE DATE FIRST WRITTEN ABOVE. -9- 77 WITNESSES: HELIX BIOMEDIX, INC. (of Colorado) By: - ------------------------ ------------------------------- Title - ------------------------ ---------------------------- EMPLOYEE - ------------------------ --------------------------------- R. Stephen Beatty -10- 78 EMPLOYMENT AGREEMENT This Agreement, dated as of January 1, 2000 is entered into by and between HELIX BIOMEDIX, INC., a Colorado corporation (the "Company"), and Elizabeth Scheer, a resident of Louisiana ("Employee"). In consideration of the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENT 1. Period of Employment. The Company hereby employs Employee to render services to the Company in the position and with the duties and responsibilities described in Section 2 commencing on January 1, 2000 (the "Commencement Date"), and extending for a term of one year thereafter, provided that such term shall automatically renew for one additional one year period at the end of such initial term and each subsequent renewal, unless 90 days prior to the date of such renewal either party shall give written notice to the other party of cancellation, and in such event Employee's employment hereunder shall terminate. The period of time covered by the Employee's employment hereunder shall hereafter be referred to as the "Period of Employment." The Company's employment policies as they may be established or amended from time to time in writing during the Period of Employment ("Company Policies") shall apply to and govern the employment relationship between Employee and the Company, provided that in the event of any conflict between Company Policies and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall apply. 2. Position, Duties, Responsibilities. 2.1 Position. Employee hereby accepts employment with the Company pursuant to the terms and conditions hereof. Employee agrees to serve the Company in the position of Vice President - Investor Relations and Corporate Communications. Employee shall report to the Chief Executive Officer ("CEO") of the Company. Employee shall have the powers and duties commensurate with such position and as may be set forth in the Bylaws of the Company. Employee shall devote her best efforts and attention to the performance of the services customarily incident to such offices and to such other services as the CEO may, from time to time, reasonably request. Without limiting the generality of the foregoing, Employee understands that she will be responsible for: (i) developing and maintaining a company website, (ii) initiating efforts 79 to expand and develop the corporate profile of the Company, and (iii) interfacing with shareholders, potential investors and others in the financial community. Notwithstanding the foregoing, Employee shall not enter into any contracts or agreements on behalf of the Company, without the prior written consent of the Board. 2.2 Other Activities. Except upon the prior written consent of the Board, Employee shall not during the Period of Employment engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place her in a competing position to that of the Company or any other corporation or entity that directly or indirectly controls, is controlled by, or is under common control with the Company (as "Affiliated Company"). 3. Compensation, Benefits, Expenses. 3.1 Compensation. (a) Cash Payment. In consideration of the services to be rendered hereunder, including without limitation services to any Affiliated Company, Employee shall be paid an annual salary of $67,000 (the "Cash Payment") plus stock in the amounts and pursuant to the method of distribution as described in Section 3.1(b) hereunder for the initial one year term of the Period of Employment. Employee's Cash Payment shall be payable in equal semi-monthly installments at the time and pursuant to the procedures regularly established, and as they may be amended, by the Company during the term of this Agreement. Unless otherwise agreed in writing by the Company and Employee, Employee's salary for any renewal term(s) of this Agreement shall be the same as the initial one year term. (b) Stock Issuances. In consideration of past services rendered to the Company by Employee, the Company hereby agrees to issue to Employee within thirty days following the Commencement Date, 29,315 shares of common stock of the Company. In addition, Employee shall also be issued 29,780 shares of common stock of the Company ("Stock Payment") in exchange for services rendered during the initial one year term of the Period of Employment. Subject to Employee being employed by the Company, the Stock Payment shall be issued in arrears in four quarterly issuances of 7,445 shares each, with the first such issuance to be made on or after March 31, 1999 and a like issuance to be made on or after the end of each of the three succeeding quarters. Each quarterly Stock Payment shall be deemed earned by Employee on the last day of each calendar quarter to which such Stock Payment relates; thus, upon termination of Employee's employment with the Company for any reason, Employee shall be entitled to those quarterly Stock Payments earned through the date of termination but no further Stock Payments (pro-rated or otherwise) shall be due Employee. All common stock of the Company issued to Employee hereunder shall not be -2- 80 registered pursuant to the Securities Act of 1933 or the laws of any state and will therefore be "restricted stock" for purposes of Rule 144. Employee represents and warrants that (i) she has knowledge and experience in business finance, securities and investments, such experience being based on actual participation therein, (ii) she is capable of evaluating the merits and risks of an investment in the Company's stock by virtue of the Stock Payments and the suitability thereof as an investment therefor, (iii) she is an experienced and sophisticated investor in investments, including investments similar to that in the Company's stock, (iv) the Stock Payments received hereunder will be acquired solely for investment and not with the view toward resale or redistribution in violation of applicable securities laws, and no assurances have been made concerning the future results of the Company or as to the value of the Company's stock, and (v) she is an "accredited investor within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933. Employee has consulted with her own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which she is required to hold the Company's stock, (ii) of the limitations on the transfer or disposition of the Company' stock, and (iii) that the Company' stock must be held indefinitely unless the transfer thereof is registered under applicable securities laws or an exemption from registration is available. Employee has been furnished with a copy of the Annual Report on Form 10-KSB of the Company filed with the Commission under the Securities Exchange Act of 1934 as amended for the fiscal year ending December 31, 1998 as well as the Forms 10-QSB filed with the Commission since that date. The Company has made available to Employee the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they possess or could reasonably acquire the purpose of verifying the accuracy of the information furnished to Employee as set forth herein or for the purpose of considering the transactions contemplated hereby. The Company has offered, and agrees during the term of this Agreement, to make available to Employee upon request at any time all exhibits filed by the Company with the Commission as part of any of the reports filed therewith. 3.2 Benefits. Employee shall be entitled to participate in such general benefit programs as the Company may from time to time institute for the enjoyment and benefit of its employees, including, but not limited to, retirement programs, insurance plans, and stock option plans for officers, directors, and other key employees of the Company. -3- 81 3.3 Expenses. The Company shall reimburse Employee for reasonable travel and other business expenses incurred by Employee in the performance of her duties hereunder in accordance with the Company Policies. 3.4 Furniture & Equipment. In the event Employee's employment is terminated by Employer during the Period of Employment for a reason other than (i) "Cause" (as defined in Section 4.3 below), or (ii) her death or disability, Employee shall be entitled to retain, free of charge, the computer and other furniture and equipment furnished to her by Employer for her home office. 4. Termination of Employment. 4.1 By Death. The Period of Employment shall terminate automatically upon the death of the Employee. In such event, the Company shall pay to Employee's beneficiaries or her estate, as the case may be, any accrued but not yet paid Cash Payments and any earned but yet unissued Stock Payments, any benefits under any plans of the Company in which Employee is a participant to the full extent of Employee's rights under such plans, and any appropriate business expenses incurred by Employee in connection with his duties hereunder, all to the date of termination (collectively "Accrued Compensation"), but no other compensation or reimbursement of any kind, including, without limitation, severance compensation, and thereafter, the Company's obligations hereunder shall terminate. 4.2 By Disability. If the Employee is prevented from properly performing her duties hereunder by reason of any physical or mental incapacity for a period of more than 45 days in the aggregate in any 365-day period, then, to the extent permitted by law, the Company may terminate the Period of Employment on the 45th day of such incapacity. In such event, the Company shall pay to Employee all Accrued Compensation through the effective date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Nothing in this Section shall affect Employee's rights under any disability plan in which she is a participant. 4.3 By Company for Cause. The Company may terminate Employee's employment for Cause (as defined below) without liability at any time with or without advance notice to the Employee. The Company shall pay Employee all Accrued Compensation, but no other compensation or reimbursement of any kind, including without limitation, severance compensation, and thereafter the Company's obligations hereunder shall terminate. Termination shall be for "Cause" in the event of the occurrence of any of the following: (i) any action or failure to act by Employee which was performed in bad faith and to the detriment of the Company; (ii) Employee refuses or fails to act in accordance with any -4- 82 lawful and proper direction or order of the Board; (iii) Employee willfully wantonly disregards performing the duties of employment; (iv) Employee is convicted of a crime involving Employer or any felony; or (v) Employee breaches any material term of this Agreement ; provided that in the event that any of the foregoing events is capable of being cured, the Company shall provide written notice to the Employee describing the nature of such event and the Employee shall thereafter have ten (10) days to cure such event. 4.4 By The Parties Without Cause. At any time the parties hereto may terminate this Agreement by mutual agreement of the parties, the terms and conditions of such termination to be set forth in a written agreement between the Company and Employee. 4.5 Termination Obligations. Employee hereby acknowledges and agrees that all personal property, including, without limitation, all books, manuals, records, reports, notes, contracts, lists, and other documents, proprietary information, copies of any of the foregoing, and equipment furnished to or prepared by Employee in the course of or incident to her employment, belongs to the Company and shall be delivered to the Company upon termination of the Period of Employment (except to the extent otherwise provided in Section 3.4 above). 5. Intellectual Property, Confidentiality, Non-Competition. 5.1 Intellectual Property. Employee agrees to disclose to the Company promptly, all inventions, discoveries and/or original works of authorship or compilations thereof (hereinafter referred to as "Technologies") including without limitation products, processes, designs, formulas, specifications, prototype, models, samples, economies, reports or manuscripts as well as all improvements made thereto, that are conceived, developed and/or reduced to practice by Employee during the term of this Agreement and within the scope of work and duties performed by Employee for the Company. The Employee also agrees to assign to the Company Employee's entire right, title, and interest in said Technologies and to any patent(s), copyright(s), trademark(s) or service mark(s) which may be issued thereon by any of the various states, including Louisiana, the United States of America, and/or any foreign country and/or any political subdivision thereof, under any applicable state, federal, or foreign laws or international conventions. Further, Employee agrees to make no other assignment, grant, mortgage, license or agreement affecting the rights and property to be assigned pursuant to this paragraph without first obtaining the express written consent of the Company. When requested to so do, during or subsequent to Employee's employment with the Company, at no out-of-pocket expense to Employee, Employee agrees to communicate and deliver all facts, information and data concerning said Technologies and improvements thereto, if any, to the Company or its designee; to execute all initial, divisional, continuing, substitute, renewal, or reissue applications for letters patent or copyrights, trademarks and/or service marks, foreign or domestic, as well as make or -5- 83 execute all rightful oaths, declarations, assignments, powers of attorney and/or other documents, and generally, do everything reasonably necessary for securing, maintaining and enforcing the Company's rights in and to said Technologies and improvements thereto and for vesting title therein in the Company or its designee. The undertakings set forth in this Paragraph 5.1 shall survive the termination of this Agreement. 5.2 Confidentiality. Employee acknowledges that during her employment with the Company, Employee may receive, make use of, or add to the Company's Confidential Information defined for the purposes of this Agreement as consisting of, but not limited to (a) proprietary information relating to compositions, structure and formulations of membrane disruptive peptides (cytoporins) and applications thereof for pharmaceutical and non-drug use; (b) product designs, processes, formulas, specifications, prototypes, models, samples, economies, data, records, reports, manuscripts, and other materials of a proprietary nature; (c) records and policy matters relating to finance, accounting, sales, personnel, property, management, and operations; and (d) matters relating to the Company's operations such as its clients lists, its compilation of its clients' service requirements, its price and fee structures, its cost of services, and its cost of operations. Employee understands and agrees that said Confidential Information is disclosed to Employee in confidence and is to be used for the Company's benefit only. Employee agrees that he/she will keep all such information confidential at all times during and after her employment with the Company; will not disclose or communicate such Confidential Information to any third party without the express, written consent of the Company; and will not use such Confidential Information on her own behalf or on behalf of any third party. In view of the nature of the Confidential Information the Employee will receive during the course of her employment, Employee understands and agrees that any unauthorized disclosure to third parties of said Confidential Information or other violation or threatened violation of this Agreement would cause irreparable damage to the trade secret status of the Confidential Information and to the Company and that the Company shall be entitled to seek a judicial injunction prohibiting Employee from any such disclosure, attempted disclosures, violation or threatened violation. The undertakings set forth in this Paragraph 5.2 shall survive the termination of this Agreement. 5.3 Non-competition Covenants. Employee covenants and agrees that, during the term of this Agreement and for a period of two years following termination of Employee's employment with the Company, she shall not (i) engage, directly or indirectly, in any other business activity that is competitive with, or that places her in a competing position to that of the Company or an Affiliated Company within the Parishes of East Baton Rouge, Jefferson and Orleans, Louisiana; or (ii) hire, solicit, or attempt to hire on behalf of himself or any other party any employee or exclusive consultant of the Company. For purposes of this Agreement, the Company's business is defined as (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the -6- 84 pharmaceutical and health care fields, (ii) seeking patent protection to protect its proprietary technology, and (iii) licensing its technology and in seeking strategic corporate alliances for further development and commercialization of same. In view of the national nature of the Company's business, Employee further agrees that during the term of this Agreement and for a period of two years following termination of Employee's employment with the Company, Employee shall not engage, directly or indirectly, in any other business activity that is competitive with, or that places her in a competing position to that of the Company or any Affiliated Company, within any of the forty-nine states of the United States of America other than Louisiana. Anything contained herein to the contrary notwithstanding, this paragraph only of this Section 5.3 shall be governed by and enforceable in accordance with the laws of the state in which it is being enforced against Employee. If any court of proper jurisdiction finds that this covenant is overly broad or unenforceable for any reason whatsoever, then it is hereby agreed that this covenant will be reduced or amended to be enforceable to the extent allowable under applicable law. A violation of this covenant not to compete by Employee shall entitle the Company to recover all damages for the loss sustained and the profit of which the Company has been deprived. Additionally, the Company is entitled to injunctive relief in enforcing the terms of this covenant not to compete without the necessity of proving irreparable injury. 6. Assignment: Successors and Assigns. Employee shall not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall Employee's rights be subject to encumbrance or the claims of creditors. Any such purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, its acquisition by, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets or stock in an arm's length transaction (the foregoing are collectively referred to herein as an "Acquisition"), or the assignment by the Company of this Agreement and the performance of its obligations hereunder in connection with any such Acquisition or to any successor in interest or any Affiliated Company. Subject to the foregoing this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above. 7. Notices. All notices and other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered personally or by overnight courier upon receipt or three days after deposit in the Untied States mail, return receipt requested, and addressed to the Employee at: -7- 85 Elizabeth Scheer ---------------------- ---------------------- or to the Company at: Helix BioMedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112 Attn: Chief Executive Officer Either party may change its address for purposes of this Section by giving notice as set forth above. 8. Entire Agreement. This Agreement represents the entire understanding of the parties with respect to the subject matter hereof, and may be amended only by a writing signed by the parties hereto. This Agreement, along with any amendments hereto, supersede any prior negotiations, offers, or agreements between the Company and the Employee with regard to the subject matter hereof. 9. Amendments: Waivers. This Agreement may not be modified, amended, or changed except by an instrument in writing, signed by the Employee and by a duly authorized representative of the Company other than Employee. Either party may waive compliance by the other party with any provision of this Agreement; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or in equity. 10. Severability. If any provision of this Agreement, as applied to any person or circumstances, is declared by a court of competent jurisdiction to be illegal, invalid or unenforceable the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affected thereby. If, moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to time, duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear. 11. Governing Law: Jurisdiction and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. The parties consent to -8- 86 the jurisdiction of all federal and state courts in Louisiana, and venue shall lie exclusively in East Baton Rouge Parish, Louisiana. 12. Employee Acknowledgment. Employee acknowledges (i) that she has consulted with or has had the opportunity to consult with independent counsel of her own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that she has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on her own judgment. 13. Remedies. 13.1 For the Company. The parties agree that the services to be rendered by Employee hereunder are of a unique nature and that in the event of any breach or threatened breach of any of the covenants contained herein, the damage or imminent damage to the value and the goodwill of the Company's business will be irreparable and extremely difficult to estimate, making any remedy at law or in damages inadequate. Accordingly, the parties agree that the Company shall be entitled to injunctive relief against Employee in the event of any breach or threatened breach of any such provisions by Employee, in addition to any other relief (including damages) available to the Company under this Agreement or under law. 13.2 For the Employee. The parties agree that in the event of any breach or default by the Company of any of the covenants contained herein, and the Company fails to cure such default within ten (10) days following receipt by the Company of written notice thereof, then the Employee shall be entitled to seek any and all remedies available to her under Louisiana law. 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 15. Withholdings. All compensation and benefits to Employee hereunder shall be subject to all federal, state, local and other withholdings and similar taxes and payments required by applicable law. 16. No Restrictions on Employee. Employee represents and warrants that her employment with the Company does not and will not breach any agreement or duty which Employee has to any other person, including without limitation (i) rules or laws which restrict Employee's employment with third parties, and (ii) confidentiality or non-competition agreements with third parties. -9- 87 THE PARTIES HAVE DULY EXECUTED THIS EMPLOYMENT AGREEMENT AS OF THE DATE FIRST WRITTEN ABOVE. WITNESSES: HELIX BIOMEDIX, INC. (of Colorado) By: - ------------------------ ------------------------------- R. Stephen Beatty, Chief Executive - ------------------------ Officer EMPLOYEE - ------------------------ - ------------------------ --------------------------------- Elizabeth Scheer -10- 88 ADMINISTRATIVE SERVICES, FINANCIAL MANAGEMENT AND OFFICE SHARING AGREEMENT THIS ADMINISTRATIVE SERVICES, FINANCIAL MANAGEMENT AND OFFICE SHARING AGREEMENT (the "Agreement") is made and entered into between BEATTY FINANCE, INC. ("BFI"), a Louisiana corporation with its principal offices located at 210 Baronne Street, Suite 1004, New Orleans, Louisiana 70112, appearing herein through its undersigned duly authorized officer; and HELIX BIOMEDIX, INC. ("Helix"), a Colorado corporation with its principal offices located at 210 Baronne Street, Suite 1004, New Orleans, Louisiana 70112, appearing herein through its undersigned duly authorized officer. In consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: I. ADMINISTRATIVE SERVICES AND FINANCIAL MANAGEMENT During the term of this Agreement, BFI agrees to perform general administrative and clerical services for Helix, including (i) maintaining the primary telephone and facsimile lines for Helix and answering the telephone during regular business hours, (ii) greeting guests and business associates of Helix, (iii) performing the general bookkeeping functions for Helix, (iv) performing all payroll services for Helix, (v) opening and routing incoming mail and faxes, and (vi) similar administrative and clerical functions designated by the Board of Directors of Helix. BFI also agrees to provide general financial management and consulting services to Helix from time to time on an as-needed basis. Such financial management and consulting services shall be provided by BFI's senior consultant, R. Stephen Beatty. BFI agrees to perform all of such services in a good, professional and timely manner. II. OFFICE SHARING During the term of this Agreement, BFI agrees to make available to Helix for use by Helix (i) the full time use of one office located within BFI's premises at 210 Baronne Street, Suite 1004, New Orleans, Louisiana 70112, and (ii) the periodic use of a conference room located within BFI's office suite, as requested by Helix from time to time. BFI represents and warrants to Helix that the arrangement contemplated herein does not violate BFI's lease agreement with the landlord, or to the extent it would otherwise violate the terms of such lease, BFI has obtained the written consent of the landlord. Helix agrees to provide BFI with reasonable advanced notice of its need for a conference room. 89 III. TERM This Agreement shall be effective as of January 1, 2000, and shall expire on December 31, 2000; thereafter, this Agreement shall automatically renew on a month to month basis unless either party elects to terminate this Agreement by thirty (30) days' prior written notice to the other party. Notwithstanding the foregoing, Helix may terminate this Agreement at any time upon written notice to BFI; provided, that if Helix terminates this Agreement during the initial one year term for a reason other than either of (a) BFI's default under this Agreement, or (b) the termination of R. Stephen Beatty's employment agreement dated of even date herewith for "cause" (as defined in such employment agreement), then BFI shall be entitled to one-half (50%) of the compensation which would otherwise have been due BFI hereunder for the then remaining portion of the initial one year term. The Board of Directors of Helix (or any officer other than Beatty designated by the Board) shall have the power and authority to act on behalf of Helix with respect to this Agreement. IV. COMPENSATION As compensation for all past services rendered by and all future services which may be rendered by BFI under this Agreement, Helix shall pay to BFI (i) $2,000 upon the full execution of this Agreement, and (ii) $7,500 per month during the term hereof, with such monthly payments being due and payable in advance on or before the 5th day of each month. BFI shall not be entitled to any other compensation or cost reimbursement, including the cost of or depreciation on furniture, fixtures and equipment or utilities charges; provided, however, that Helix shall pay all charges for the telephone line(s) devoted exclusively to Helix's use. V. ASSIGNABILITY Neither party hereto shall be entitled to assign this Agreement. VI. INDEMNITY BFI agrees to protect, defend and indemnify and hold Helix harmless for any loss, cost, damage, expense, liability, including reasonable attorney's fees, for any claims or charges, against Helix that are caused by or result from a material breach of this Agreement by BFI or the gross negligence or intentional misconduct of BFI. -2- 90 VII. NOTICES All notices, demands and requests shall be in writing and shall be given by hand, or by certified mail, return receipt requested, postage prepaid, deposited in the U.S. mails, or by telecopy addressed as follows: If to BFI: Beatty Finance, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112 If to Helix: Helix Biomedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112 With a copy to: Dean P. Cazenave KEAN, MILLER, HAWTHORNE, D'ARMOND, McCOWAN & JARMAN, L.L.P. P. O. Box 3513 (70821) Suite 2200, One American Place Baton Rouge, LA 70825 Telephone: (225)382-3483 Facsimile: (504) 388-9133 Notices shall be effective upon delivery if given by hand, or, if given by mail (as described above), shall be effective three (3) business days after deposit in the U.S. mails, properly addressed to the party to be notified, or, if given by facsimile, shall be effective on the business day following the day on which receipt was confirmed. Either party may change the address to which notices shall be given to it as required hereby by providing notice of such change in the manner provided therein. VIII. GOVERNING LAW This Agreement shall be governed and construed in accordance with the Laws of the State of Louisiana. -3- 91 IX. INDEPENDENT CONTRACTOR Nothing contained in this Agreement shall be deemed or construed by the parties hereto or by any third person to create the relationship of principal and agent, or of partnership, or of joint venture, or of any other association between the parties other than that of Independent Contractor. X. MISCELLANEOUS 10.1 Headings. Section headings are for convenience of reference only and shall not be used to construe the meaning of any provisions of this Agreement. 10.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall together constitute one Agreement. 10.3 Authority. Each individual signing this Agreement warrants that such execution has been duly authorized by the party for which he or she is signing. The execution and performance of this Agreement by each party has been duly authorized by all applicable laws and regulations and all necessary corporate action, and this Agreement constitutes the valid and enforceable obligation of each party in accordance with its terms. 10.4 Amendment. This Agreement may not be modified except in writing executed by the party to be charged. 10.5 Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes all prior agreements and representations with respect to the subject matter hereof, and the Agreement cannot be modified in any respect except by a writing executed by BFI and Helix. 10.6 Attorney's Fees. In the event that either party hereto brings legal action against the other arising out of the Agreement, the prevailing party shall be entitled to recover from the other party all costs of suit and reasonable attorney's fees. IN WITNESS WHEREOF, the undersigned have executed this agreement as of November 1, 1999. WITNESSES: BFI: BEATTY FINANCE, INC. a Louisiana corporation By: - ------------------------------- --------------------------------- R. Stephen Beatty, President - ------------------------------- -4- 92 WITNESSES: HELIX: HELIX BIOMEDIX, INC. a Colorado corporation By: - -------------------------------- -------------------------------------- Its: - -------------------------------- ---------------------------------- -5- 93 CONSULTING AGREEMENT This CONSULTING AGREEMENT (this "Agreement"), dated as of____________ _____, 2000, is entered into by and among HELIX BIOMEDIX, INC., a Colorado corporation ("Helix"), and THE PAISLEY GROUP, LLC, a Washington limited liability company ("Consultant"). PRELIMINARY RECITALS WHEREAS, Helix, headquartered in New Orleans Louisiana, is a publicly owned biotechnology company which is engaged in (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, and (ii) licensing its proprietary technology and in seeking strategic corporate alliances for further development and commercialization of its technology (collectively, the "Business"), and WHEREAS, Helix desires outside professional assistance in various areas of strategic and financial planning and believes that Consultant has experience and expertise that will be valuable to Helix, and WHEREAS, Helix desires to engage Consultant as a consultant outside and apart from his employment by Prudential Securities, Inc., and Consultant desires to perform consulting services for Helix outside and apart from his employment by Prudential Securities, Inc., under the terms and conditions set forth herein, and WHEREAS, Consultant has obtained the approval of Prudential Securities, Inc., to enter into this Agreement. NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Consulting. 1.1 Consulting Services. Helix hereby engages Consultant, and Consultant hereby accepts such engagement and agrees to serve as consultant to Helix concerning the Business for a period of one year, beginning on the date hereof (the "Consulting Period"). In connection with the performance of its duties, Consultant shall cause Consultant's duties hereunder to be performed primarily by George Steiner (the "Consulting Principal"). 1.2 Duties. Consultant shall faithfully and to the best of its ability perform the duties assigned by the Board of Directors of Helix and shall serve under the direction of the President 94 and Chief Executive Officer of Helix. These duties shall include, without limitation, the following duties: (a) strategic planning, (b) assisting Helix in developing and monitoring business and science plans, (c) assisting Helix in seeking additional financing, (d) assisting Helix with efforts to enhance shareholder value, and (e) reporting on a quarterly basis Consultant's progress in respect of duties assigned by Board, in a format reasonably requested by the Chief Executive Officer of Helix. 1.3 Relationship of Parties. Consultant shall be deemed an independent contractor and not an employee of Helix. All letterhead, business cards and promotional materials used or distributed by Consultant shall present Consultant as a business consultant to, and not an employee or principal of, Helix. Consultant shall be responsible for all taxes associated with payment hereunder, including but not limited to income taxes and social security taxes. 1.4 Expenses. All ordinary and reasonable out-of-pocket expenses incurred by Consultant solely as a result of the performance of Consultant's services as assigned pursuant to Section 1.2 above, including reasonable travel expenses, shall be reimbursed to Consultant by Helix, provided that Consultant shall have submitted an invoice together with other documentation of such expenses as Helix may reasonably require. 1.5 Compensation. (a) As the sole consideration for the services to be rendered by Consultant hereunder, its agreement not to compete with Helix and its agreement to promote services for and through Helix during the Consulting Period, Helix hereby grants to Consultant the option ("Option") to purchase an aggregate of 80,000 shares of the Helix's common stock at an option price of $1.50 per share, during that period commencing on the date that the applicable Option(s) vests and ending on December 31, 2009, when any and all unexercised Options granted herein shall expire and terminate. These Options shall vest in twelve blocks, as follows: Consultant shall become vested in Options for 6,666 shares upon execution of this Agreement, and shall become vested in Options for 6,666 on the same day of each of the next successive ten months, and shall become vested in Options for 6,674 on the date eleven months from the date of this Agreement, provided that this Agreement remains in effect and Consultant is not in default under this Agreement as of each such vesting date. Upon termination of this Agreement, Consultant shall be entitled only to those Options which have vested as of the date of termination. (b) In addition to the Options described in subparagraph (a) above, Helix hereby grants to Consultant Options to purchase up to an aggregate of 50,000 shares of common 2 95 stock of Helix, with such Options being subject to and conditional upon the occurrence of one or more "Trigger Events" (as defined below), at the price of $1.50 per share, and which Options shall expire on December 31, 2009. A "Trigger Event" is the first time during the term of this Agreement that an aggregate volume of 240,000 or more shares of common stock of Helix are traded on the OTCBB over a period of five consecutive business days at a price equal to or greater than the applicable "Triggering Event Stock Price", in accordance with the following:
Triggering Event Stock Price Options (Dollars per share) (Number of Shares of Helix Stock) ----------------------------- --------------------------------- 3 5/8 10,000 4 1/4 10,000 4 7/8 10,000 5 3/8 10,000 5 7/8 10,000
The "Triggering Event Stock Price" of Helix Stock shall be determined by reference to the prices for shares of such stock as reported on any stock exchange, the Nasdaq, or on the OTC bulletin board quotation system. (c) In the event of any change in the outstanding shares of common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the maximum aggregate number and class of shares of common stock which may be purchased by Consultant pursuant to the Options will be equitably adjusted for such event. (d) At the election of the Company in its discretion, the Options described in this Section 1.5 may be re-characterized as warrants which may or may not be evidenced by separate warrant certificates. 1.6 Restricted Stock (a) Consultant recognizes and understands that neither the Options nor the shares of Common Stock of Helix to be purchased by Consultant pursuant to the Options (collectively, the "Securities") will upon initial issuance be registered under the Securities Act of 1933 ("Securities Act"), or under the securities laws of any state (the "securities laws"). The securities are not being so registered in reliance upon exemptions from the Securities Act and the securities laws which are predicated, in part, on the representations, warranties and agreements of the Consultant contained herein. (b) Consultant represents and warrants that (i) the Consulting Principal has knowledge and experience in business, finance, securities and investments, such experience being based on actual participation therein, (ii) the Consulting Principal is capable of evaluating the merits and risks of an investment in the Securities and the suitability thereof as 3 96 an investment therefor, (iii) the Consulting Principal is an experienced and sophisticated investor in investments, including investments similar to that of the Securities, (iv) Securities to be acquired by it will be acquired solely for investment and not with a view toward resale or redistribution in violation of the securities laws, and no assurances have been made concerning the future results of Helix or as to the value of the Securities, (v) it (and the Consulting Principal) is an "accredited investor" within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act, and (vi) the Consulting Principal is the sole member/owner of Consultant. (c) Consultant has consulted with its own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which it is required to hold the Securities, (ii) of the limitations on the transfer or disposition of the Securities, and (iii) that the securities must be held indefinitely unless the transfer thereof is registered under the securities laws or an exemption from registration is available. (d) Consultant the Consulting Principal have been furnished with a copy of the Annual Report on Form 10-KSB of Helix filed with the Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1999, and the Form 10-QSB quarterly report for the period ended June 30, 2000. Helix has made available to Consultant the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they possess or could reasonably acquire the purpose of verifying the accuracy of the information furnished to Consultant as set forth herein or for the purpose of considering the transactions contemplated hereby. Helix has offered to, and agrees during the term of this Agreement, make available to Consultant upon request at any time all exhibits filed by Helix with the Commission as part of any of the reports filed therewith. 1.7 Company Information. In connection with Consultant's engagement, Helix will furnish Consultant and/or the Consulting Principal with all information concerning Helix which Consultant and/or the Consulting Principal shall reasonably request. Helix represents and warrants that all such information concerning Helix will be true and accurate in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make statements therein not misleading in light of the circumstances under which such statements are made. Helix acknowledges and agrees that Consultant and the Consulting Principal will be using and relying upon such information supplied by Helix and its officers, agents and others concerning Helix without independent investigation or verification thereof or independent appraisal by Consultant or the Consulting Principal. 1.8 Restrictive Covenant. Except as otherwise agreed to in writing by Helix, during the term of this Agreement and for a period of two years thereafter, neither Consultant nor the Consulting Principal shall either as an individual on his own account; as a partner, joint venturer, consultant, agent, salesman for any person; as an officer, director or stockholder (other than a beneficial holder of not more than 5% of the outstanding voting stock of a company having at least 250 holders of voting stock) of a corporation; or otherwise, directly or indirectly: (a) enter into or engage in any business or consult with any business or entity competitive with Helix anywhere in the world; 4 97 (b) solicit or attempt to solicit any of Helix customers with whom Consultant has had contact as a Consultant or employee of Helix with the intent or purpose to perform for such customer the same or similar services which Consultant performed for such customer during the term of his service hereunder or employment by Helix; (c) employ or solicit, or attempt to employ or solicit, for himself or any third party, the employment of any of Helix's employees; or (d) induce or attempt to induce any employee, consultant or agent of Helix to discontinue services to Helix. The provisions of this subsection 1.8 shall survive the termination of this Agreement. 2. Assignment. No party hereto may assign or delegate any of its rights or obligations hereunder without the prior written consent of the other party hereto. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall be binding and inure to the benefit of the respective legal representatives, heirs, successors affiliates and assigns of the parties hereto, whether so expressed or not. 3. Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent. 4. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same Agreement. 5. Descriptive Headings: Interpretation. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation. 6. Notices. All notices, demands or 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 duly given if (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt and postage prepaid, or (iii) transmitted by telecopy to the recipient with a confirmation copy to follow the next day to be delivered by overnight carrier. Such notices, demands and other communication shall be sent to the addresses indicated below: (a) If to Consultant: 5 98 --------------------- --------------------- (b) If to Helix: Helix Biomedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112-1722 Attn: Chief Executive Officer or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. The effective date of such notice shall be (w) the date such notice is personally delivered, (x) three days after the date of mailing if sent by certified or registered mail, (y) one day after date of delivery to the overnight courier if sent by overnight courier or (z) the next business day after the date of transmission by telecopy or e-mail. 7. Confidential Information and Discoveries. Consultant and the Consulting Principal agree that all information of a technical or business nature such as know-how, trade secrets, secret business information, plans, data, processes, techniques, customer information, inventions, discoveries, formulae, patterns, devices, etc., ("Confidential Information") pertaining to the business of Helix, is a valuable business property right of Helix. Consultant and the Consulting Principals agree that such Confidential Information, whether in written, verbal or model form, shall not be disclosed to anyone outside the employment of Helix or otherwise used by Consultant or the Consulting Principal for any purpose other than fulfillment of their respective obligations under this Agreement, without the express authorization of Helix. Confidential Information does not include information which Consultant or the Consulting Principal can demonstrate (i) has become generally available to the public other than as a result of a disclosure by Consultant or the Consulting Principal, (ii) has become available to Consultant or the Consulting Principal on a non-confidential basis from a source other than Helix, provided such source is not bound by a confidentiality agreement with Helix or otherwise prohibited from transmitting the information to Consultant or the Consulting Principal by a contractual, legal or fiduciary obligation. Any and all improvements, inventions, discoveries, formulae or processes in any way related to Helix's business which Consultant or the Consulting Principal may conceive or make during his regular working hours or otherwise shall be the sole and exclusive property of Helix and Consultant and the Consulting Principal will disclose the same to Helix and will, whenever requested by Helix to do so (either during the terms of this Agreement or thereafter), execute and assign any and all applications, assignments and/or other instruments and do all things which Helix may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents, copyrights, trademarks or other forms of protection, or in order to assign and convey or otherwise make available to Helix the sole and exclusive right, title and interest in and to said improvements, inventions, discoveries, formulae, processes, applications or patents. No provision in this Agreement is intended to require assignment of any of the rights of Consultant or the Consulting Principal in an invention if no equipment, supplies, facilities, or trade secret information of Helix was used, and the invention was developed entirely on the Consultant's or 6 99 Consulting Principal's own time; and the invention does not relate to the business of Helix or to Helix's actual or demonstrably anticipated research or development; and does not result from any work performed by the Consultant or the Consulting Principal for Helix. The provisions of this Section 7 shall survive the termination of this Agreement. 8. Return of Documents. Upon the termination of this Agreement for any reason, Consultant shall forthwith return and deliver to Helix and shall not retain any original or copies of any books, papers, price lists or customer contracts, bids or customer lists, files, books of account, notebooks and other documents and data (in printed, audio, video, electronic or other form) relating to the performance of services rendered by Consultant hereunder, all of which materials are hereby agreed to be the property of Helix. 9. Preliminary Recitals. The Preliminary Recitals set forth in the preamble hereto are hereby incorporated and made part of this Agreement. 10. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement sets forth the entire understanding of the parties, and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof. 11. Governing Law. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the laws of the State of Delaware. 12. Representations and Warranties. 12.1 Helix represents and warrants that: (i) Helix is a corporation, duly organized, validly existing and in good standing under the laws of the State of Colorado, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its Articles of Incorporation, Bylaws, or any contract or agreement by which it is bound; and (ii) this Agreement is valid and enforceable against Helix in accordance with its terms, and each instrument to be executed by Helix pursuant to this Agreement will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 12.2 Consultant represents and warrants that: (i) Consultant is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Washington, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its articles of organization, operating agreement, bylaws or any contract or agreement by which it is bound; and (ii) this Agreement is valid and enforceable against Consultant and the Consulting Principal in accordance with its terms, and each instrument to be executed by Consultant and the Consulting Principal pursuant to this Agreement will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 13. Compliance with Laws. Consultant shall comply with all federal, state, and local laws, regulations, ordinances, orders, decrees, resolutions, and other acts of any governmental entity, 7 100 including, but not limited to, securities laws and regulations that are applicable to this Agreement and the work and services performed or provided hereunder. 14. Attorney's Fees. If a dispute arises relating to the performance of the obligations of either Consultant (or the Consulting Principal) or Helix pursuant to the terms of this Agreement and legal or other costs are incurred, the prevailing party shall be entitled to recover all reasonable costs incurred in the defense or prosecution of the claim, including court costs, reasonable attorney's fees, and other claim-related expenses. 15. Indemnification. Helix shall (A) indemnify Consultant and Consulting Principal (jointly and/or severally, the "Indemnified Parties"), and hold them harmless to the fullest extent permitted by law against any losses, claims, damages or liabilities to which the Indemnified Parties may become subject in connection with (i) their use of information that is inaccurate in any respect (as a result of misrepresentation, omission, failure to update, or otherwise) that is provided to Indemnified Parties by Helix, its representatives, agents or advisers, regardless of whether the Indemnified Parties knew or should have known of such inaccuracy, or (ii) any other aspect of rendering such services, in the case of each of clauses (i) and (ii) above unless it is finally judicially determined that such losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of any of the Indemnified Parties, and (B) reimburse Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating, preparing to defend or defending any lawsuits, claims, or other proceedings arising in any manner out of or in connection with their performance of their duties pursuant to the engagement contemplated herein, unless it is finally judicially determined that the losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of the Indemnified Parties. If, for any reason, the foregoing indemnity is unavailable to the Indemnified Parties or is insufficient to hold the Indemnified Parties harmless (other than in the event that the losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of the Indemnified Parties), then Helix shall contribute to the amount paid or payable by Indemnified Parties as a result of such claims, liabilities, losses, damages, or expenses in such proportion as is appropriate to reflect not only the relative benefits received by Helix on the one hand and the Indemnified Parties on the other, but also the relative fault of Helix and the Indemnified Parties, as well as any equitable considerations. Notwithstanding the provisions of this Agreement, the aggregate contribution of the Indemnified Parties to all claims, liabilities, losses, damages and expenses shall not exceed the amount of the fees actually received by Consultant pursuant to its engagement by Helix. It is hereby further agreed that the relative benefits to Helix on the one hand and the Indemnified Parties on the other hand with respect to the transactions contemplated in the engagement referenced above shall be deemed to be in the same proportion as (i) the total value of the transaction bears to (ii) the fees paid to Consultant with respect to such transactions. Helix agrees that the indemnification and reimbursement commitments set forth in this agreement shall apply whether or not the Indemnified Parties are a formal party to any such lawsuits or other proceedings, that the Indemnified Parties are entitled to retain separate counsel of their choice in connection with any of the matters to which such commitments relate, that such commitments shall be in addition to any liability that Helix may have to the Indemnified Parties at common law or otherwise, and that such commitments shall extend upon the terms set forth in this Agreement to any controlling person, director, officer, employee, agent or affiliate of Indemnified Parties and shall survive any termination of this Agreement; provided that any such claim arising other than as a result of this indemnification procedure shall serve as a set-off against any claim hereunder. 8 101 16. Termination. This Agreement may be terminated by either party upon 30 days' advanced written notice to the other party. Any Options which have not vested pursuant to subsection 1.5(a) or have not otherwise been earned pursuant to subsection 1.5(b) as of the date of termination of this Agreement shall automatically be terminated and canceled and Helix shall have no further obligation to Consultant or the Consulting Principal in respect of such Options. Subsection 1.8 and Sections 7 and 15 of this Agreement shall survive the expiration or termination of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HELIX BIOMEDIX, INC. --------------------------------------- By: R. Stephen Beatty, President and Chief Executive Officer THE PAISLEY GROUP, LLC --------------------------------------- By: George Steiner, Authorized Member CONSULTING PRINCIPAL: --------------------------------------- George Steiner 9 102 CONSULTING AGREEMENT This CONSULTING AGREEMENT (this "Agreement"), dated as of________ _____, 2000, is entered into by and among HELIX BIOMEDIX, INC., a Colorado corporation ("Helix"), and DUNSFORD HILL CAPITAL PARTNERS, INC., a California corporation ("Consultant"). PRELIMINARY RECITALS WHEREAS, Helix, headquartered in New Orleans Louisiana, is a publicly owned biotechnology company which is engaged in (i) developing, testing, patenting, and manufacturing synthetic bioactive peptides (small proteins) having applications in the pharmaceutical and health care fields, and (ii) licensing its proprietary technology and in seeking strategic corporate alliances for further development and commercialization of its technology (collectively, the "Business"), and WHEREAS, Helix desires outside professional assistance in various areas of strategic and financial planning and believes that Consultant has experience and expertise that will be valuable to Helix, and WHEREAS, Helix desires to engage Consultant as a consultant, and Consultant desires to perform consulting services for Helix, under the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Consulting. 1.1 Consulting Services. Helix hereby engages Consultant, and Consultant hereby accepts such engagement and agrees to serve as consultant to Helix concerning the Business for a period of one year, beginning on the date hereof (the "Consulting Period"). In connection with the performance of its duties, Consultant shall cause Consultant's duties hereunder to be performed primarily by Randall Caudill (the "Consulting Principal"). 1.2 Duties. Consultant shall faithfully and to the best of its ability perform the duties assigned by the Board of Directors of Helix and shall serve under the direction of the President and Chief Executive Officer of Helix. These duties shall include, without limitation, the following duties: (a) strategic planning, (b) assisting Helix in developing and monitoring business and science plans, 103 (c) assisting Helix in seeking additional financing, (d) assist Helix with efforts to enhance shareholder value, and (e) reporting on a quarterly basis Consultant's progress in respect of duties assigned by Board, in a format reasonably requested by the Chief Executive Officer of Helix. 1.3 Relationship of Parties. Consultant shall be deemed an independent contractor and not an employee of Helix. All letterhead, business cards and promotional materials used or distributed by Consultant shall present Consultant as a business consultant to, and not an employee or principal of, Helix. Consultant shall be responsible for all taxes associated with payment hereunder, including but not limited to income taxes and social security taxes. 1.4 Expenses. All ordinary and reasonable out-of-pocket expenses incurred by Consultant solely as a result of the performance of Consultant's services as assigned pursuant to Section 1.2 above, including reasonable travel expenses, shall be reimbursed to Consultant by Helix, provided that Consultant shall have submitted an invoice together with other documentation of such expenses as Helix may reasonably require. 1.5 Compensation. (a) As the sole consideration for the services to be rendered by Consultant hereunder, its agreement not to compete with Helix and its agreement to promote services for and through Helix during the Consulting Period, Helix hereby grants to Consultant the option ("Option") to purchase an aggregate of 80,000 shares of the Helix's common stock at an option price of $1.50 per share, during that period commencing on the date that the applicable Option(s) vests and ending on December 31, 2009, when any and all unexercised Options granted herein shall expire and terminate. These Options shall vest in twelve blocks, as follows: Consultant shall become vested in Options for 6,666 shares upon execution of this Agreement, and shall become vested in Options for 6,666 on the same day of each of the next successive ten months, and shall become vested in Options for 6,674 on the date eleven months from the date of this Agreement, provided that this Agreement remains in effect and Consultant is not in default under this Agreement as of each such vesting date. Upon termination of this Agreement, Consultant shall be entitled only to those Options which have vested as of the date of termination. (b) In addition to the Options described in subparagraph (a) above, Helix hereby grants to Consultant Options to purchase up to an aggregate of 50,000 shares of common stock of Helix, with such Options being subject to and conditional upon the occurrence of one or more "Trigger Events" (as defined below), at the price of $1.50 per share, and which Options shall expire on December 31, 2009. A "Trigger Event" is the first time during the term of this Agreement that an aggregate volume of 240,000 or more shares of common stock of Helix are traded on the OTCBB over a period of five consecutive business days at a 2 104 price equal to or greater than the applicable "Triggering Event Stock Price", in accordance with the following:
Triggering Event Stock Price Options (Dollars per share) (Number of Shares of Helix Stock) ----------------------------- --------------------------------- 3 5/8 10,000 4 1/4 10,000 4 7/8 10,000 5 3/8 10,000 5 7/8 10,000
The "Triggering Event Stock Price" of Helix Stock shall be determined by reference to the prices for shares of such stock as reported on any stock exchange, the Nasdaq, or on the OTC bulletin board quotation system. (c) In the event of any change in the outstanding shares of common stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the maximum aggregate number and class of shares of common stock which may be purchased by Consultant pursuant to the Options will be equitably adjusted for such event. (d) At the election of the Company in its discretion, the Options described in this Section 1.5 may be re-characterized as warrants which may or may not be evidenced by separate warrant certificates. 1.6 Restricted Stock (a) Consultant recognizes and understands that neither the Options nor the shares of Common Stock of Helix to be purchased by Consultant pursuant to the Options (collectively, the "Securities") will upon initial issuance be registered under the Securities Act of 1933 ("Securities Act"), or under the securities laws of any state (the "securities laws"). The securities are not being so registered in reliance upon exemptions from the Securities Act and the securities laws which are predicated, in part, on the representations, warranties and agreements of the Consultant contained herein. (b) Consultant represents and warrants that (i) the Consulting Principal has knowledge and experience in business, finance, securities and investments, such experience being based on actual participation therein, (ii) the Consulting Principal is capable of evaluating the merits and risks of an investment in the Securities and the suitability thereof as an investment therefor, (iii) the Consulting Principal is an experienced and sophisticated investor in investments, including investments similar to that of the Securities, (iv) Securities to be acquired by it will be acquired solely for investment and not with a view toward resale or redistribution in violation of the securities laws, and no assurances have been made concerning the future results of Helix or as to the value of the Securities, (v) it (and the 3 105 Consulting Principal) is an "accredited investor" within the meaning of Regulation D promulgated by the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Act, and (vi) the Consulting Principal is the sole shareholder of Consultant. (c) Consultant has consulted with its own counsel in regard to the securities laws and is fully aware (i) of the circumstances under which it is required to hold the Securities, (ii) of the limitations on the transfer or disposition of the Securities, and (iii) that the securities must be held indefinitely unless the transfer thereof is registered under the securities laws or an exemption from registration is available. (d) Consultant the Consulting Principal have been furnished with a copy of the Annual Report on Form 10-KSB of Helix filed with the Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1999, and the Form 10-QSB quarterly report for the period ended June 30, 2000. Helix has made available to Consultant the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which they possess or could reasonably acquire the purpose of verifying the accuracy of the information furnished to Consultant as set forth herein or for the purpose of considering the transactions contemplated hereby. Helix has offered to, and agrees during the term of this Agreement, make available to Consultant upon request at any time all exhibits filed by Helix with the Commission as part of any of the reports filed therewith. 1.7 Company Information. In connection with Consultant's engagement, Helix will furnish Consultant and/or the Consulting Principal with all information concerning Helix which Consultant and/or the Consulting Principal shall reasonably request. Helix represents and warrants that all such information concerning Helix will be true and accurate in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make statements therein not misleading in light of the circumstances under which such statements are made. Helix acknowledges and agrees that Consultant and the Consulting Principal will be using and relying upon such information supplied by Helix and its officers, agents and others concerning Helix without independent investigation or verification thereof or independent appraisal by Consultant or the Consulting Principal. 1.8 Restrictive Covenant. Except as otherwise agreed to in writing by Helix, during the term of this Agreement and for a period of two years thereafter, neither Consultant nor the Consulting Principal shall either as an individual on his own account; as a partner, joint venturer, consultant, agent, salesman for any person; as an officer, director or stockholder (other than a beneficial holder of not more than 5% of the outstanding voting stock of a company having at least 250 holders of voting stock) of a corporation; or otherwise, directly or indirectly: (a) enter into or engage in any business or consult with any business or entity competitive with Helix anywhere in the world; 4 106 (b) solicit or attempt to solicit any of Helix customers with whom Consultant has had contact as a Consultant or employee of Helix with the intent or purpose to perform for such customer the same or similar services which Consultant performed for such customer during the term of his service hereunder or employment by Helix; (c) employ or solicit, or attempt to employ or solicit, for himself or any third party, the employment of any of Helix's employees; or (d) induce or attempt to induce any employee, consultant or agent of Helix to discontinue services to Helix. The provisions of this subsection 1.8 shall survive the termination of this Agreement. 2. Assignment. No party hereto may assign or delegate any of its rights or obligations hereunder without the prior written consent of the other party hereto. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall be binding and inure to the benefit of the respective legal representatives, heirs, successors affiliates and assigns of the parties hereto, whether so expressed or not. 3. Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent. 4. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same Agreement. 5. Descriptive Headings: Interpretation. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation. 6. Notices. All notices, demands or 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 duly given if (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt and postage prepaid, or (iii) transmitted by telecopy to the recipient with a confirmation copy to follow the next day to be delivered by overnight carrier. Such notices, demands and other communication shall be sent to the addresses indicated below: (a) If to Consultant: ---------------------- ---------------------- 5 107 (b) If to Helix: Helix Biomedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112-1722 Attn: Chief Executive Officer or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. The effective date of such notice shall be (w) the date such notice is personally delivered, (x) three days after the date of mailing if sent by certified or registered mail, (y) one day after date of delivery to the overnight courier if sent by overnight courier or (z) the next business day after the date of transmission by telecopy or e-mail. 7. Confidential Information and Discoveries. Consultant and the Consulting Principal agree that all information of a technical or business nature such as know-how, trade secrets, secret business information, plans, data, processes, techniques, customer information, inventions, discoveries, formulae, patterns, devices, etc., ("Confidential Information") pertaining to the business of Helix, is a valuable business property right of Helix. Consultant and the Consulting Principals agree that such Confidential Information, whether in written, verbal or model form, shall not be disclosed to anyone outside the employment of Helix or otherwise used by Consultant or the Consulting Principal for any purpose other than fulfillment of their respective obligations under this Agreement, without the express authorization of Helix. Confidential Information does not include information which Consultant or the Consulting Principal can demonstrate (i) has become generally available to the public other than as a result of a disclosure by Consultant or the Consulting Principal, (ii) has become available to Consultant or the Consulting Principal on a non-confidential basis from a source other than Helix, provided such source is not bound by a confidentiality agreement with Helix or otherwise prohibited from transmitting the information to Consultant or the Consulting Principal by a contractual, legal or fiduciary obligation. Any and all improvements, inventions, discoveries, formulae or processes in any way related to Helix's business which Consultant or the Consulting Principal may conceive or make during his regular working hours or otherwise shall be the sole and exclusive property of Helix and Consultant and the Consulting Principal will disclose the same to Helix and will, whenever requested by Helix to do so (either during the terms of this Agreement or thereafter), execute and assign any and all applications, assignments and/or other instruments and do all things which Helix may deem necessary or appropriate in order to apply for, obtain, maintain, enforce and defend patents, copyrights, trademarks or other forms of protection, or in order to assign and convey or otherwise make available to Helix the sole and exclusive right, title and interest in and to said improvements, inventions, discoveries, formulae, processes, applications or patents. No provision in this Agreement is intended to require assignment of any of the rights of Consultant or the Consulting Principal in an invention if no equipment, supplies, facilities, or trade secret information of Helix was used, and the invention was developed entirely on the Consultant's or Consulting Principal's own time; and the invention does not relate to the business of Helix or to Helix's actual or demonstrably anticipated research or development; and does not result from any work performed by the Consultant or the Consulting Principal for Helix. 6 108 The provisions of this Section 7 shall survive the termination of this Agreement. 8. Return of Documents. Upon the termination of this Agreement for any reason, Consultant shall forthwith return and deliver to Helix and shall not retain any original or copies of any books, papers, price lists or customer contracts, bids or customer lists, files, books of account, notebooks and other documents and data (in printed, audio, video, electronic or other form) relating to the performance of services rendered by Consultant hereunder, all of which materials are hereby agreed to be the property of Helix. 9. Preliminary Recitals. The Preliminary Recitals set forth in the preamble hereto are hereby incorporated and made part of this Agreement. 10. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement sets forth the entire understanding of the parties, and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof. 11. Governing Law. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Agreement shall be governed by, the laws of the State of Delaware. 12. Representations and Warranties. 12.1 Helix represents and warrants that: (i) Helix is a corporation, duly organized, validly existing and in good standing under the laws of the State of Colorado, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its Articles of Incorporation, Bylaws, or any contract or agreement by which it is bound; and (ii) this Agreement is valid and enforceable against Helix in accordance with its terms, and each instrument to be executed by Helix pursuant to this Agreement will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 12.2 Consultant represents and warrants that: (i) Consultant is a corporation duly organized, validly existing and in good standing under the laws of the State of California, has duly authorized the execution and performance of this Agreement, and such execution and performance will not violate its Articles of Incorporation, bylaws or any contract or agreement by which it is bound; and (ii) this Agreement is valid and enforceable against Consultant and the Consulting Principal in accordance with its terms, and each instrument to be executed by Consultant and the Consulting Principal pursuant to this Agreement will, when executed and delivered, be enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting creditors' rights generally. 13. Compliance with Laws. Consultant shall comply with all federal, state, and local laws, regulations, ordinances, orders, decrees, resolutions, and other acts of any governmental entity, including, but not limited to, securities laws and regulations that are applicable to this Agreement and the work and services performed or provided hereunder. 7 109 14. Attorney's Fees. If a dispute arises relating to the performance of the obligations of either Consultant (or the Consulting Principal) or Helix pursuant to the terms of this Agreement and legal or other costs are incurred, the prevailing party shall be entitled to recover all reasonable costs incurred in the defense or prosecution of the claim, including court costs, reasonable attorney's fees, and other claim-related expenses. 15. Indemnification. Helix shall (A) indemnify Consultant and Consulting Principal (jointly and/or severally, the "Indemnified Parties"), and hold them harmless to the fullest extent permitted by law against any losses, claims, damages or liabilities to which the Indemnified Parties may become subject in connection with (i) their use of information that is inaccurate in any respect (as a result of misrepresentation, omission, failure to update, or otherwise) that is provided to Indemnified Parties by Helix, its representatives, agents or advisers, regardless of whether the Indemnified Parties knew or should have known of such inaccuracy, or (ii) any other aspect of rendering such services, in the case of each of clauses (i) and (ii) above unless it is finally judicially determined that such losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of any of the Indemnified Parties, and (B) reimburse Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating, preparing to defend or defending any lawsuits, claims, or other proceedings arising in any manner out of or in connection with their performance of their duties pursuant to the engagement contemplated herein, unless it is finally judicially determined that the losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of the Indemnified Parties. If, for any reason, the foregoing indemnity is unavailable to the Indemnified Parties or is insufficient to hold the Indemnified Parties harmless (other than in the event that the losses, claims, damages or liabilities relating thereto arise only out of the gross negligence or willful misconduct of the Indemnified Parties), then Helix shall contribute to the amount paid or payable by Indemnified Parties as a result of such claims, liabilities, losses, damages, or expenses in such proportion as is appropriate to reflect not only the relative benefits received by Helix on the one hand and the Indemnified Parties on the other, but also the relative fault of Helix and the Indemnified Parties, as well as any equitable considerations. Notwithstanding the provisions of this Agreement, the aggregate contribution of the Indemnified Parties to all claims, liabilities, losses, damages and expenses shall not exceed the amount of the fees actually received by Consultant pursuant to its engagement by Helix. It is hereby further agreed that the relative benefits to Helix on the one hand and the Indemnified Parties on the other hand with respect to the transactions contemplated in the engagement referenced above shall be deemed to be in the same proportion as (i) the total value of the transaction bears to (ii) the fees paid to Consultant with respect to such transactions. Helix agrees that the indemnification and reimbursement commitments set forth in this agreement shall apply whether or not the Indemnified Parties are a formal party to any such lawsuits or other proceedings, that the Indemnified Parties are entitled to retain separate counsel of their choice in connection with any of the matters to which such commitments relate, that such commitments shall be in addition to any liability that Helix may have to the Indemnified Parties at common law or otherwise, and that such commitments shall extend upon the terms set forth in this Agreement to any controlling person, director, officer, employee, agent or affiliate of Indemnified Parties and shall survive any termination of this Agreement; provided that any such claim arising other than as a result of this indemnification procedure shall serve as a set-off against any claim hereunder. 8 110 16. Termination. This Agreement may be terminated by either party upon 30 days' advanced written notice to the other party. Any Options which have not vested pursuant to subsection 1.5(a) or have not otherwise been earned pursuant to subsection 1.5(b) as of the date of termination of this Agreement shall automatically be terminated and canceled and Helix shall have no further obligation to Consultant or the Consulting Principal in respect of such Options. Subsection 1.8 and Sections 7 and 15 of this Agreement shall survive the expiration or termination of this Agreement. 17. Activities of Consultant. In connection with this engagement, it is understood that Consultant and/or the Consulting Principal may identify and facilitate contact between Helix and corporations or individuals that may potentially become the Helix's joint venture partners, licensees, commercial collaborators, agents, directors, or investors. To the extent that Consultant and/or the Consulting Principal contact corporations or individuals as potential joint venture partners, licensees, commercial collaborators, agents, directors, or investors, Helix acknowledges that Consultant's and/or the Consulting Principal's sole role is to initially contact such potential joint venture partners, licensees, commercial collaborators, agents, directors, or investors and refer any resulting contact to Helix or its designated agent(s). Accordingly, Consultant and/or the Consulting Principal shall have no liability to Helix or any other person or party resulting from their so acting in connection with initiating such contacts referenced herein. It is explicitly agreed that Consultant's and/or the Consulting Principal's role under this engagement will not include, without limitation: performing due diligence; verifying information provided to Consultant an/or the Consulting Principal or, directly or indirectly, to other persons or parties pursuant to contacts made by Consultant and/or the Consulting Principal as contemplated by this paragraph; preparing any offering memoranda; or, negotiating or structuring any agreements, licenses, commercial collaborations, or investments by or with third parties. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HELIX BIOMEDIX, INC. ----------------------------------------- By: R. Stephen Beatty, President and Chief Executive Officer DUNSFORD HILL CAPITAL PARTNERS, INC. ----------------------------------------- By: Randall Caudill, President 9 111 CONSULTING PRINCIPAL: ----------------------------------------- Randall Caudill 10 112 AGREEMENT THIS AGREEMENT (this "Agreement") is entered into as of December 29, 2000, by and between HELIX BIOMEDIX, INC., a Colorado corporation ("Helix" or the "Company"), and Keith P. Lanneau, a resident of Louisiana ("Lanneau"). In consideration of the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Stock Transactions. 1.1 Options. In consideration of Ten Dollars ($10.00) and other good and valuable consideration, Lanneau hereby grants to and in favor of Helix or its assignee(s) the following rights and options: (a) an exclusive and irrevocable option ("First Option"), exercisable at any time on or before February 28, 2001 ("First Option Expiration Date"), to purchase 250,000 shares of Common Stock of the Company at a price of $2.00 per share ("First Option Price"); (b) an exclusive and irrevocable option ("Second Option"), exercisable at any time on or before June 30, 2001 ("Second Option Expiration Date"), to purchase up to 75,000 additional shares of Common Stock of the Company at a price of $2.75 per share; and (c) an exclusive and irrevocable option ("Third Option"), exercisable at any time on or before the Second Option Expiration Date, to purchase up to 75,000 additional shares of Common Stock at a price of $3.25 per share. The First Option, Second Option and Third Option are referred to herein collectively as the "Options." The Options may be exercised from time to time and shall be exercised by written notice to Lanneau; the Closing shall take place within 10 days following date of notice of exercise of the applicable Option and the applicable purchase price shall be paid in cash at the Closing. 1.2 Conditions to Exercise of First Option. The Company's right to exercise the First Option shall be subject to (a) the Company's having cooperated with Lanneau in connection with the preparation of patent applications on what has generally been referred to as the Company's "third generation peptides," which applications shall be 1 113 reviewed, revised and finalized by Lanneau (subject to approval of the Company's patent counsel), and subject to (i) the assignment of patent applications being executed by Dr. Owen as sole inventor, (ii) the completion of such applications by Lanneau, and (iii) final approval of such applications by counsel for the Company, the Company's having filed such patent applications with the USPTO; and (b) subject to the above described patent applications having been completed and filed, the Company's having tendered to Therapeutic Peptides, Inc. ("TPI"), a license agreement in substantially the form previously delivered to TPI by the Company. The parties agree that the foregoing conditions are intended to relate to those matters which the Company controls and that the acts or omissions of Lanneau, TPI and/or Dr. Owen shall have no effect on the Company's right to exercise the First Option. 1.3 Additional Option Consideration; Extension of First Option Period. Upon the earlier of (i) the Closing of the First Option, or (ii) February 28, 2001, Helix shall pay to Lanneau $25,000 as additional consideration for the Options. Nevertheless, if Helix (or its designee) exercises the First Option prior to February 28, 2001, in lieu of paying Lanneau $25,000 as additional option consideration in accordance with the preceding sentence, Helix may (at its option) elect to increase the First Option Price to $2.10 per share. Furthermore, the Company may at its option extend the First Option Expiration Date for up to sixty days (through April 29, 2001), in increments of thirty days each, by paying to Lanneau $3,333 for each thirty day extension, prior to February 28, 2001, and if applicable, March 29, 2001. 1.4 Legal Opinion. Upon exercise of the applicable Option, the parties' obligations to purchase and sell such Stock (as defined below) shall be subject to the delivery by the Company of an opinion of counsel reasonably acceptable to Lanneau and the Company to the effect that the proposed sale of Stock is exempt from the registration requirements of applicable securities laws. 1.5 Closing Deliveries. The shares of stock subject to sale and purchase under paragraph 1.1 above are referred to herein collectively as the "Stock." Upon exercise of the applicable Option, at the Closing, against the delivery to Lanneau of the applicable purchase price, Lanneau shall deliver the stock certificates representing the Stock, duly endorsed, and shall execute and deliver such other documents (including stock powers) as may be necessary or appropriate to fully and properly effect the sale of the Stock to the Company or its designee. 1.6 Escrow Arrangement. Contemporaneous with the execution of this Agreement, Lanneau shall surrender to Kean, Miller, Hawthorne, D'Armond, McCowan & Jarman, L.L.P. ("Kean Miller") stock certificates representing the Stock to 2 114 be held in escrow pending the closing or expiration of the applicable Option period, pursuant to the terms of an Escrow Agreement dated of even date herewith to be entered into among Lanneau, the Company and Kean Miller. 2. Notes. Lanneau is the holder of three promissory notes made by the Company, with each such note being in the original principal amount of $163,154.00, and such notes having maturity dates of September 30, 2000, September 30, 2001 and September 30, 2002, respectively (the "Notes"). The Company and Lanneau have agreed to defer payment of the Note which matured on its face on September 30, 2000; the Company agrees to pay such note in full on or before January 5, 2001. If the First Option is exercised, the maturity dates of those Notes maturing on September 30, 2001 and September 30, 2002, respectively, shall be extended to January 15, 2002 and January 15, 2003, respectively; to effect the extension of the maturity dates of such Notes, the Company may require Lanneau to surrender the original Notes, which shall be replaced with substitute notes which shall be substantially similar to such surrendered Notes, except with respect to the maturity dates. Lanneau agrees to not sell, discount, pledge or otherwise assign any of the Notes until the expiration of the First Option. 3. Termination of Employment Agreement; Consulting Arrangement. Lanneau acknowledges and agrees that his current employment contract with the Company shall expire June 30, 2001 and will not be renewed. Contemporaneously herewith, Lanneau and the Company shall execute and deliver a Consulting Agreement in the form attached, pursuant to which Lanneau agrees to consult with the Company for the two year period commencing July 1, 2001, on an as needed basis in exchange for a monthly retainer of $5,000; in the event Lanneau works more than 50 hours during any calendar month, he will be paid $100 per hour for each hour in excess of 50 (in addition to the retainer); Lanneau may terminate the consulting agreement upon sixty days written notice to the Company. 4. Piggyback Registration Rights. If during the three year period following the date hereof the Company at any time proposes to register shares of its Common Stock under the Securities Act of 1933 ("Securities Act") for sale by the Company to the public, it will give written notice to Lanneau of its intention to do so. Upon the written request of Lanneau made within 15 days after the receipt of any such notice (which request shall specify the shares intended to be disposed of by Lanneau and the intended method of disposition thereof), the Company will use reasonable efforts to effect the registration under the Securities Act of up to 200,000 shares of unregistered Common Stock of the Company owned by Lanneau which the Company has been so requested to register by Lanneau. If the underwriter(s) of such offering shall inform the Company by letter of its/their belief that the number of securities requested to be included in such registration 3 115 exceeds the number which can be sold in (or during the time of) such offering, then the Company may include in such offering all securities proposed by the Company to be sold for its own account and may decrease the number of Lanneau shares and other securities of the Company requested to be included in such registration by decreasing the number of Lanneau shares and other securities of the Company requested to be included in such registration (pro rata on the basis of the number of shares of such securities held by such person immediately prior to the filing of the registration statement with respect to such registration) to the extent necessary to reduce the number of securities to be included in the registration to the level recommended by the underwriter(s). Nothing herein shall be construed to obligate the Company to undertake or effect the registration of additional shares of its Common Stock at any time. 5. Other Matters. 5.1 Conditional Releases. (a) Lanneau does hereby, for himself and his successors and assigns, release, acquit and forever discharge the Company and its insurers, employees, successors, assigns, agents, directors and officers (hereinafter collectively referred to as the "Releasees"), of and from any and all claims, demands, losses, damages, expenses, causes of action and rights of action whatsoever, known and unknown, anticipated and unanticipated, which Lanneau has or may have and/or to which Lanneau may be entitled, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of the closing of the First Option. (b) The Company does hereby release, acquit and forever discharge Lanneau and and his heirs, successors and assigns, of and from any and all claims, demands, losses, damages, expenses, causes of action and rights of action whatsoever, known and unknown, anticipated and unanticipated, which the Company has or may have and/or to which the Company may be entitled, for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date of the closing of the First Option. (c) Notwithstanding the foregoing, in the event the First Option is not exercised, the mutual releases set forth in this section 5.1 shall be null and void and of no effect. 5.2 Delivery of Company Property. Within 30 business days following the date of this Agreement, Lanneau agrees to deliver to Company an index or catalog of all 4 116 Company documents and property in his possession; upon request, Lanneau agrees to deliver to the Company all or specified portions of such documents and property, provided, that Lanneau shall be entitled to retain copies thereof (which copies shall be at the Company's expense). Lanneau further agrees to use his best efforts to obtain and deliver to the Company, within 60 days following the date hereof, all Company property in the possession of Therapeutic Peptides, Inc. or its officers and employees. 5.3 Development of Procedures. Within 60 days following the date of this Agreement, Lanneau agrees to develop for the Company comprehensive written systems and procedures relating to all functions and responsibilities that he has performed for or on behalf of the Company since October of 1999 or is currently performing for or on behalf of the Company, and to train the individual(s) assuming such functions and responsibilities. 5.4 Board Seat. Pursuant to the terms of that certain Agreement to Restructure Debt dated September 30, 1999, between the Company and Lanneau, so long as any of the Notes are outstanding, Lanneau is entitled to nominate one member of the Board of Directors of the Company. Lanneau hereby waives any and all rights he has to nominate a member of the Board of Directors of the Company and agrees that neither he nor his nominee shall hereafter be entitled to be elected to the Board of Directors of the Company; provided, however, that in the event the First Option is not exercised, the waiver of rights provided in this paragraph shall be null and void and Lanneau shall be restored with all such rights relating to the nomination of a member of the Board of Directors, to the extent set forth in the Agreement to Restructure Debt. 6. Representations and Warranties. Lanneau represents and warrants that (i) he is, and at closing of the applicable Options will be, the sole record and beneficial owner of the Stock, free and clear of all liens, claims, encumbrances and options to purchase; (ii) upon delivery of the purchase price to Lanneau, the buyer(s) of Stock will have good and marketable title to the Stock, free and clear of all liens, claims, encumbrances and options to purchase; (iii) he is the holder of the Notes, he has not pledged or granted a security interest in the Notes, and no other person has any rights or interests in and to any of the Notes. 7. Default. No party hereto shall be deemed to be in default of its obligations under this Agreement unless and until the aggrieved party has provided written notice of a breach or alleged breach to the defaulting party, and the defaulting party has failed to cure the breach within 30 days of the receipt of the notice of the breach. Upon learning of a breach of this Agreement, the aggrieved party shall, by certified mail, return receipt requested, notify the defaulting party that it is in breach of its Agreement, and in said 5 117 notice shall provide sufficient detail so that defaulting party is aware of the nature of the default. In the event the defaulting party fails to cure such default within said thirty day period, the aggrieved party shall be entitled to any equitable or monetary remedies otherwise provided by the law, including, without limitation, recovery for reasonable attorney's fees and costs incurred to enforce his or its rights hereunder. 8. Miscellaneous Provisions. 8.1 Assignment This Agreement shall be binding upon the legal and personal representatives, heirs, successors and assigns of the parties. 8.2 Severability Should any provision of this Agreement be unenforceable in the law, the remainder of the Agreement shall not be affected thereby. 8.3 Counterparts This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together shall constitute one and the same instrument. 8.4 Descriptive Headings: Interpretation The headings used in this Agreement are for convenience only and do not constitute matters to be construed in interpreting this Agreement. Except where the context indicates otherwise, words in the singular shall include the plural, and words in the masculine gender shall include the neuter and vice versa. 8.5 Waivers No waiver of any provision of this Agreement shall be valid unless the same is in writing and signed by the party against which it is sought to be enforced. No waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement. 8.6 Modification of Agreement No modification of this Agreement shall be binding unless in writing and signed by the party against whom or which it is sought to be enforced. 8.7 Entire Agreement This Agreement, including the exhibits attached hereto, is the entire agreement among the parties hereto relating to the subject matter hereof. It supersedes all prior agreements pertaining to the subject matter hereof and may not be amended except in accordance with a writing executed by or on behalf of all the parties. 8.8 Governing Law This Agreement shall be governed and construed in accordance with the laws of the State of Louisiana. 6 118 8.9 Attorney's Fees If any action or legal proceeding is brought for the enforcement of this Agreement, or because of an alleged breach of this Agreement, the successful prevailing party shall be entitled to recover its reasonable attorney's fees, court costs, and reasonable litigation expenses incurred in connection with such action or proceeding in addition to any other relief which it is entitled, from the losing party. 8.10 Notices All notices, demands or 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 duly given if (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt and postage prepaid, or (iii) transmitted by telecopy to the recipient with a confirmation copy to follow the next day to be delivered by overnight carrier. Such notices, demands and other communication shall be sent to the addresses indicated below: a) To HELIX Helix BioMedix, Inc. 210 Baronne Street, Suite 1004 New Orleans, Louisiana 70112 Attn: Steve Beatty, President FAX No.: (504) 525-2266 b) To LANNEAU Keith P. Lanneau 2151 East Lakeshore Drive Baton Rouge, Louisiana 70808 FAX No.: (225) 338-9727 7 119 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HELIX BIOMEDIX, INC. By: --------------------------------- R. Stephen Beatty, President and Chief Executive Officer ----------------------------------- Keith P. Lanneau 8 EX-24.(A) 6 v72847a1ex24-a.txt EXHIBIT 24.(A) 1 EXHIBIT 24A POWER OF ATTORNEY JEFFREY A. MILLER KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Jeffrey A. Miller constitutes and appoints Jim D. Johnston or Brian B. DeFoe his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-KSB of Helix BioMedix, Inc., a Delaware corporation, for the fiscal year ended December 31, 2000, and any amendments or supplements thereto, and to file this Power of Attorney and the Form 10-KSB with all exhibits thereto, and to the documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may do or cause to be done by virtue hereof. Dated this 16th day of April, 2001. /s/ Jeffrey A. Miller - ----------------------------------------------- Jeffrey A. Miller, Director and VP-Treasurer Helix BioMedix, Inc. EX-24.(B) 7 v72847a1ex24-b.txt EXHIBIT 24.(B) 1 EXHIBIT 24B POWER OF ATTORNEY R. STEPHEN BEATTY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, R. Stephen Beatty constitutes and appoints Jim D. Johnston or Brian B. DeFoe his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-KSB of Helix BioMedix, Inc., a Delaware corporation, for the fiscal year ended December 31, 2000, and any amendments or supplements thereto, and to file this Power of Attorney and the Form 10-KSB with all exhibits thereto, and to the documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may do or cause to be done by virtue hereof. Dated this 16th day of April, 2001. /s/ R. Stephen Beatty - ----------------------------------------------- R. Stephen Beatty, Director, President and Chief Executive Officer Helix BioMedix, Inc. EX-24.(C) 8 v72847a1ex24-c.txt EXHIBIT 24.(C) 1 EXHIBIT 24C POWER OF ATTORNEY THOMAS L. FRAZER KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Thomas L. Frazer constitutes and appoints Jim D. Johnston or Brian B. DeFoe his true and lawful attorney-in-fact and agent, for him and his name, place and stead, in any and all capacities, to sign the Form 10-KSB of Helix BioMedix, Inc., a Delaware corporation, for the fiscal year ended December 31, 2000, and any amendments or supplements thereto, and to file this Power of Attorney and the Form 10-KSB with all exhibits thereto, and to the documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, may do or cause to be done by virtue hereof. Dated this 16th day of April, 2001. /s/ Thomas L. Frazer - ------------------------------------------------------ Thomas L. Frazer, Director and Chief Financial Officer Helix BioMedix, Inc. -----END PRIVACY-ENHANCED MESSAGE-----