Xechem restructures royalty, distribution, cooperation agreement with Alembic

By E. Janene Geiss

Philadelphia, Jan. 6 - Xechem International, Inc. has restructured its royalty, distribution and joint cooperation agreement with Alembic Ltd., according to an 8-K filing with the Securities and Exchange Commission.

The companies decided to terminate their $3 million note agreement and enter into a new note that calls for Xechem to repay Alembic in full the outstanding principal and interest remaining with $1 million to be paid on or before Jan. 31 with the balance due on or before Dec. 31, 2006.

For every month beginning July 2006 in which any portion of the new note remains unpaid, Xechem is to pay Alembic $16,600 for a total of up to $99,600. If Xechem increases its initial payment to $1.5 million, then the $16,600 consideration payment will be reduced to $12,500. The new note will bear 8% interest and, unlike the old note, is not convertible into Xechem's common stock, the filing said.

As security for the new note, Xechem granted Alembic a security interest in 500,000 shares of restricted stock in CepTor Corp., owned by Xechem, 15% of the issued and outstanding shares of common stock of Xechem Nigeria and 5 million shares of common stock of Xechem. If Xechem increases its initial payment to $1.5 million, Alembic will release the CepTor shares.

As additional consideration of the old note, Xechem said it agreed to pay Alembic a fee during the 15-year license term of a percentage of the gross product sales of Nicosan/Hemoxin in Nigeria and other African countries. For the first five years, the percentage will be 15%, for the fifth to the 10th year the percentage will be 10% and for the 10th through 15th year, the percentage will be 5%, the filing said.

During the licensing term, the company also agreed to pay Alembic a U.S. export fee equal to 1% of the purchase price paid by the company for any Nicosan/Hemoxin sold in the United States and internationally, except Nigeria, the filing said.

In the filing, Xechem said it also issued Alembic a warrant to purchase 10 million shares of Xechem's common stock at an exercise price of $0.20 per share.

Alembic also agreed to provide certain production and regulatory compliance personnel to assist Xechem Nigeria. Payment will be on terms agreeable to the parties, the filing said.

The company also gave Alembic the right of first offer regarding the licensing of any distribution rights for Nicosan/Hemoxin in Africa and India.

Xechem is a New Brunswick, N.J., generic and proprietary drug development company.

Alembic is a Gujarat, India pharmaceutical company specializing in bulk penicillin and macrolides antibiotics.

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