AFFAIDAVIT OF LEE A. HENDERSON
I, LEE A. HENDERSON, under penalty of perjury, hereby
do state as follows:
1. I am the President and Scientific Director of Viral
Therapeutics, Inc., a Delaware corporation with offices in
Ithaca, New York. ("VTI"). This affidavit is provided at the
request of Paracelsian, Inc. ("Paracelsian"). I have personal
knowledge of the facts which are set forth herein.
2. On several occasions during January 1997 I met with
Mr. John Babish. I understand that Mr. Babish at that time
was a Director and the Chief Science Officer of Paracelsian.
The purpose of those meetings was, in part and substance,
to consider the possibility of joint ventures between VTI and
Paracelsian. During those meetings we discussed the
complimentary attributes of VTI and Paracelsian, and
considered options to combine and/or share the resources
of the respective companies and the synergy which such an
arrangement could produce.
3. As a result of those discussions, in February 1997 I
drafted a proposed Agreement for such a venture, and
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presented the same in person to Mr. Babish. He advised in
substance that he was very interested in the proposal, and
that he would deliver the same promptly to Mr. Keith
Rhodes, Paracelsian's Chief Executive Officer and Board
Chairman, and to the full Paraceslian Board of Directors, for
their consideration. A copy of the proposed Agreement is
attached hereto as Exhibit A.
4. I did not receive any response to this proposal during
the next several weeks from Mr. Babish or anyone else at
Paracelsian. I did not make any inquiries regarding this
proposal during that same time period.
5. In or about March 19, 1997 Mr. Babish came to my
office, and reported the following in part and in substance:
a. he had resigned from Paracelsian earlier that day;
b. he anticipated that the price of Paracelsian stock
would drop significantly upon release of the news
of his resignation;
c. he planned to buy a controlling interest in
Paracelsian if the price of Paracelsian stock
dropped "low enough" as a result of his departure;
d. he had sold much of his stock shortly before his
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resignation and "put away that money" in order to
allow him to purchase a controlling interest in the
company, should that opportunity arise as he
anticipated;
e. he advised that, if he did not acquire control of the
company in this manner, an unidentified Board
member would arrange to bring him back to
Paracelsian;
f. he said that, in such event, he would not again
become an employee of Paracelsian personally,
but would instead work for Paracelsian through a
new company which he planned to form;
g. his salary upon return was anticipated to be
$220,000 per year, plus benefits and stock rights;
h. he wanted his new company to enter into a
relationship with VTI similar to that which I had
proposed previously for Paracelsian, and to have
that new company in turn enter into an agreement
with Paracelsian, resulting in this new company
having insinuated itself into the middle of the
relationship;
i. he offered to split his anticipated $220,000 salary
with me if I would agree to such an arrangement
with his company in lieu of dealing directly with
Paracelsian;
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j. he explained further that, if he could not either
acquire control of Paracelsian or enter into a joint
venture as described above, then he would simply
do business through his new company;
k. he said that, if he did have to do business through
his company in this manner, he was "planning to
hire away some key people" from Paracelsian,
inculding Xinfang Ma, a Senior Scientist at
Paracelsian, and others, to assist him in that
project;
l. he proposed that we meet again in a week to
discuss the issues further, and I agreed to such a
meeting;
m. he asked that I keep the information he had
provided during this meeting "just between us."
6. After a rescheduling, I met again with Mr. Babish
about two weeks later. During that meeting he reported in
part and substance that he was forming his new company as
planned, and inquired whether VTI had any interest in
acquiring certain extracts from South American plants. I
advised in substance that VTI may have an interest in such
extracts, and requested that Mr. Babish provide additional
details regarding his proposal. Mr. Babish did not repeat or
reference any other
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information that provided during our March 19, 1997
meeting at that time, and I did not inquire about those
subjects.
7. Within about one week of this conversation I called
Mr. Babish, and left a message asking whether further
discussion about the South American extracts was
warranted. He returned that call by leaving a brief message
on my answering machine. I did not return that call,
howeverer, because by that time I had come to the opinion
that Mr. Babish's actions and intentions may be improper,
and so I declined to participate further in any discussions
with him.
8. To the best of my recollection, I have not met with or
otherwise communicated with Mr. Babish since that time.
9. About one week ago I met with Mr. Rhodes. During
our meeting I suggested that Paracelsian consider further
the proposal I had made previously to Mr. Babish regarding
a joint venture. Mr. Rhodes indicated that he did not know
what venture I was referring to, and that he had not received
any information on that subject from Mr. Babish at any time.
I then provided a copy of the draft Agreement to Mr. Rhodes
from my own
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files, and he advised that he had not seen that document
previously. Since that time, Mr. Rhodes and I have
continued our discussions on the subject of VTI and
Paracelsian cooperation options.
Lee A. Henderson, Ph.D.
142 Langmuir Labs
95 Brown Road
Ithaca, New York 14850
Sworn to before me this
24th day of April 1997
Notary Public
Judeth H. Poole
Notary Public, State of New York
No. 55-4528355
Qualified in Tompkins County
Commission Expires 4/30/98
______________________________________
THIS AGREEMENT made and entered into this __ day of
February, 1997 by and between Viral Therapeutics, Inc. a private
company incorporated in the State of. Delaware, USA located at 95
Brown Road, Ithaca New York 14850 (hereinafter "VTI") and
Paracelsian, Inc. a public company incorporated in the State of
Delaware, USA located at 95 Brown Road, Ithaca New York
14850 (hereinafter "PI")
Both parties have Agreed to the Articles here in mentioned
ARTICLE 1: PREAMBLE
1 a. Whereas VTI desires to utilize extracts for the purpose of
identifying lead antiviral compounds using its proprietary
technology.
1 b. Whereas PI desires to provide extracts from its library to
VTI for the purpose of Drug Discovery.
1c. Whereas VTI and PI agree to collaborate on drug discovery
for at least three antiviral assays to including HIV, one from the
hepatitis group and one from the herpes group of viruses.
1d. Whereas PI will pursue dietary supplement markets for
active antiviral extracts.
1e Whereas VTI will pursue identification of compounds and
pharrnaceutical drug development for active extracts.
ARTICLE 2:OBLIGATIONS OF VTI
2a. Screen extracts provided by PI and actively pursue the
identification of the active component of appropriately active
extracts using its HIV gp41 based screening assay and similar
assays to be developed for hepatitis and herpes viruses.
2b. Perform validation studies for antiviral activity of extracts to
be developed by PI.
2c. ldentify the active component of an extract and determine
its structure.
2d. Provide PI with timely reports of its results and
development of new antiviral assays.
ARTICLE 3: OBLIGATIONS OF PI
3a To provide VTI with quantities of extract suitable for
screening in a 96 well format and follow up with sufficient
quantities for identification of lead compounds.
3b. To provide VTI with $l5,000 for each assay employed (to
screen all extracts) to assist in the purchase or cost of reagents for
high through put screening once a screen is in place.
3c. Provide discovery fee to VTI of $_______ and a royalty
of___% of gross sales for identification and validation in vitro of
active antiviral axtracts that PI will develop for dietary supplement
market.
ARTICLE 4: SHARING OF COSTS
4a. The parties (VTI and PI) agree to share costs for HIV
antiviral drug discovery after an extract is determined to have
suitable activity to justify identification of a compound. VTI will
cover 70% of the direct costs of compound identification and PI
will cover 30% of the direct costs.
4c. The parties (VTI and PI) agree to share costs for Hepatitis
antiviral drug discovery after an extract is determined to have
suitable activity to justify identification of a compound. VTI will
cover 60% of the direct costs of compound identification and PI
will cover 40% of the direct costs.
4d The parties (VTI and PI) agree to share costs for Herpes
antiviral drug discovery after an extract is determined to have
suitable activity to justify identification of a compound. VTI will
cover 50% of the direct costs of compound identification and PI
will cover 50% of the direct costs.
ARTICLE 5: SHARING OF LICENSING REVENUES
5a. The parties (VTI and PI) agree to share in all HIV antiviral
drug revenues, royalties and licensing fees according to their
support of the costs ie. 70% to VTI and 30% to PI.
5b. The parties (VTI and PI) agree to share in all Hepatitis
antiviral drug revenues. royalties and licensing fees according to
their support of the costs ie. 60% to VTI and 40% to PI.
5c The parties (VTI and PI) agree to share in all Herpes
antiviral drug revenues, royalties and licensing fees according to
their support of the costs ie, 50% to VTI and 50% to PI.
ARTICLE 6: TERMS AND CONDITIONS
6a. The collaborative agreement is valid for three years from
the date of this agreement.
6b. This agreement applies only to compounds that are
discovered from the PI extract library and not to compounds
discovered from any other source.
6c. This agreement shall be automatically terminated should
one or both companies go bankrupt, insolvent or are prevented
from work for reasons beyond their control.
6d. If at the end of 6 months of screening PI extracts there is
insufficient data to support the identification of a single compound
for pharmaceutical development, all unused extracts will be
returned and the agreement pertaining to the assay in question shall
be terminated. |
