FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended October 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10615
EMISPHERE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3306985
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15 Skyline Drive 10532
Hawthorne, New York (Zip Code)
(Address of principal executive
offices)
(914) 347-2220
(Registrant s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be files by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for at least the past 90 days. Yes X
No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of December 10, 1997 there were 10,707,537 Shares of common stock, $.01
par value, of the registrant outstanding.
Page 1 of 12
Exhibit Index on Page 10
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EMISPHERE TECHNOLOGIES, INC.
TABLE OF CONTENTS
October 31, 1997
Part I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statement of Stockholders' Equity 5
Condensed Statements of Cash Flows 6
Condensed Notes to Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
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EMISPHERE TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
July 31, October 31,
1997 1997
------------- ------------
Assets:
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,398,967 $ 18,554,464
Marketable securities 11,291,255 12,698,933
Receivable due from Ebbisham Ltd. 648,786 1,739,447
Prepaid expenses and other current assets 448,114 469,966
----------- ------------
Total current assets 34,787,122 33,462,810
----------- ------------
Equipment and leasehold improvements, at cost, net of
accumulated depreciation and amortization 2,046,087 2,238,536
Other assets 64,243 64,243
------------ ------------
Total assets $ 36,897,452 $ 35,765,589
============ ============
Liabilities and Stockholders Equity:
Current liabilities:
Accounts payable $ 254,715 $ 504,918
Accrued compensation 215,000 215,000
Accrued professional fees 288,000 159,900
Accrued expenses 166,858 17,569
Investment deficiency in Ebbisham Ltd. 2,539,958 3,454,042
------------ ------------
Total current liabilities 3,464,531 4,351,429
------------ ------------
Deferred lease liability 34,542 136,309
----------- ------------
Total liabilities 3,499,073 4,487,738
----------- ------------
Commitments and contingencies
Stockholders equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none issued and outstanding
Common stock, $.01 par value; 20,000,000 shares
authorized; 10,733,877 shares issued (10,690,377
outstanding) at July 31,1997; 10,750,117 shares
issued (10,706,617 outstanding) at October 31,1997 107,339 107,501
Additional paid-in capital 83,516,461 83,739,561
Accumulated deficit (50,057,115) (52,399,371)
Net unrealized gain on marketable securities 24,507 22,973
------------ ------------
33,591,192 31,470,664
Less, common stock held in treasury, at cost;
43,500 shares (192,813) (192,813)
----------- ------------
Total stockholders equity 33,398,379 31,277,851
------------ -------------
Total liabilities and stockholders equity $ 36,897,452 $ 35,765,589
============ =============
</TABLE>
See accompanying notes to financial statements. The July 31, 1997 Condensed
Balance Sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
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EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months
Ended October 31,
1996 1997
---------- -----------
Contract research revenues $1,994,450 $ 1,715,660
---------- -----------
Costs and expenses:
Research and development 1,661,547 2,666,518
Loss in Ebbisham Ltd. 991,934 914,084
General and administrative expenses 603,645 963,196
---------- ----------
Total operating expenses 3,257,126 4,543,798
---------- ----------
Operating loss (1,262,676) (2,828,138)
----------- -----------
Other income:
Investment income 256,319 485,882
---------- -----------
Net loss $(1,006,357) $(2,342,256)
============ ============
Net loss per share $ (0.11) $ (0.22)
============ ============
Weighted average number of shares outstanding 9,415,870 10,695,469
============ ===========
See accompanying notes to the financial statements
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EMISPHERE TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS EQUITY
For the three months ended October 31, 1997 (UNAUDITED)
<TABLE>
Net
Unrealized Common Stock
Common Stock Additional Gain Held In Treasury
------------------ Paid-in Accumulated (loss) on -------------------
Shares Amount Capital Deficit Securities Shares Amount Total
--------- -------- ---------- ----------- ----------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1997 10,733,877 $ 107,339 $ 83,516,461 $(50,057,115) $ 24,507 43,500 $(192,813) $ 33,398,379
Sale of common stock
under employee stock
purchase plans and
exercise of options 16,240 162 223,100 223,262
Change in net
unrealized gain(loss)
on marketable securities (1,534) (1,534)
Net loss (2,342,256) (2,342,256)
---------- --------- ------------ ----------- ---------- ------- ---------- ------------
Balance,October 31,1997 10,750,117 $ 107,501 $83,739,561 $(52,399,371) $ 22,973 43,500 $(192,813) $ 31,277,851
========== ========= =========== ============= =========== ======== ========== =============
</TABLE>
See accompanying notes to financial statements
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EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Increase (Decrease) in Cash and Cash Equivalents
Three Months
Ended October 31,
1996 1997
----------- ------------
Cash flows from operating activities
Net (loss) $(1,006,357) $(2,342,256)
------------ ------------
Adjustments to reconcile net loss to net
cash provided by (used in)
operating activities:
Loss in Ebbisham Ltd. 991,934 914,084
Depreciation and amortization 100,994 115,899
(Decrease) increase in deferred
lease liability (2,571) 101,767
Realized gain on sale of
marketable securities (44) 0
Changes in assets and liabilities:
Receivable due from Ebbisham Ltd.,
prepaid expenses and other
current assets (392,859) (1,112,513)
Accounts payable and accrued
expenses (57,681) (27,186)
Investment in Ebbisham Ltd. (9,998) 0
----------- ----------
Total adjustments 629,775 (7,949)
----------- ----------
Net cash (used in)
operating activities (376,582) (2,350,205)
----------- -----------
Cash flows from investing activities:
Capital expenditures (110,844) (308,348)
Purchases of marketable securities (4,478,856) (3,555,577)
Proceeds from sales of marketable securities 1,227,277 2,146,365
----------- ----------
Net cash (used in)
investing activities (3,362,423) (1,717,560)
----------- ----------
Cash flows from financing activities:
Proceeds from exercise of options and
employee stock purchases 540,075 223,262
----------- ----------
Net cash provided by
financing activities 540,075 223,262
------------ -----------
Net (decrease) in cash and
cash equivalents (3,198,930) (3,844,503)
------------ -----------
Cash and cash equivalents, beginning of period 11,904,674 22,398,967
------------- ------------
Cash and cash equivalents, end of period $ 8,705,744 $18,554,464
============ ============
See accompanying notes to financial statements
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EMISPHERE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
1. Interim Financial Statements:
The interim Condensed Statements of Operations and Condensed Statements of
Cash Flows for the three months ended October 31, 1996 and 1997, and the
Condensed Balance Sheets as of July 31, 1997 and October 31, 1997, of
Emisphere Technologies, Inc. (the "Company"), have been prepared in
accordance with the instructions to Form 10-Q and Article 10 of Regulation
SX. Accordingly, they do not include all information and disclosures
necessary for a presentation of the Company's financial position, results
of operations and cash flows in conformity with generally accepted
accounting principles. In the opinion of management, these financial
statements reflect all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for such periods. The
results of operations for any interim period are not necessarily
indicative of the results for the full year. These financial statements
should be read in conjunction with the financial statements and notes
thereto contained in the Company`s Annual Report on Form 10-K for the
fiscal year ended July 31, 1997.
2. Ebbisham Ltd.
During October 1996, the equally owned joint venture formed by the Company
and Elan Corporation plc ( Ebbisham Ltd. or the Venture ) commenced
operations. The Company accounts for its investment in the Venture in
accordance with the equity method of accounting. Since the Venture s
inception, the Company has contributed capital to the Venture of
approximately $10,000.
Contract revenue from the Venture, with respect to services provided by
the Company to the Venture, is recognized as the related service are
rendered. Such revenue for the three months ended October 31, 1997
totaled approximately $1,091,000 and for the three months ended October
31, 1996 totaled approximately $1,994,000.
Selected financial data of the Venture as of October 31,1997 and for the
three months ended October 31, 1997 and 1996 is as follows:
Balance Sheet Data
Current assets $ 716,000
Accounts payable 3,124,000
Subordinated debt 4,500,000
Stockholder s deficit 6,908,000
Statement of Operations Data
Three Months
Ended
October 31,
1996 1997
------ -------
Total Revenue $ 10,000 $ 8,000
Total expenses 1,994,000 1,836,000
---------- ----------
Net loss $ (1,984,000) $ (1,828,000)
============= =============
3. Impact of the Future Adoption of Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standard No. 128. Earnings Per Share ( SFAS 128").
SFAS 128 will require the Company to replace the current presentation of
primary per share data with basic and diluted per share data.
Currently, outstanding common stock equivalents are antidilutive and
therefore management estimates that the future adoption of SFAS 128 will
not have a material impact on the Company s per share data. SFAS 128 will
be adopted by the Company for periods ending after December 15, 1997.
4. Subsequent Event
On December 3, 1997, the Company and Novartis Pharma AG ( Novartis )
entered into a collaboration to investigate Emisphere s technology for
oral delivery of two selected Novartis compounds.
Under terms of the agreement Emisphere could receive initial fees,
research funding and milestone payments. Emisphere will also receive a
royalty on sales of any oral products which result from the collaboration.
Novartis will receive exclusive worldwide commercialization rights to oral
products which result from this collaboration. In addition, Novartis has
the right to purchase, in four tranches, up to $16 million of the
Company's common stock. Subject to certain limitations as to potential
share price variability with respect to the price for the first tranche,
the common stock purchaces by Novartis will be based on market prices. The
Company may, in its sole discretion, waive Novartis's right as to any or
all of the four tranches.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the caption Management s Discussion and
Analysis of Financial Conditions and Results of Operations and elsewhere in
this Annual Report on Form 10-Q constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the Reform
Act ). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
l o oking statements. Such factors include, among others, the following:
uncertainties related to future test results and viability of the Company s
product candidates, which are in the early stages of development; the need to
obtain regulatory approval for the Company s product candidates; the Company s
dependence on partnerships with pharmaceutical companies to develop, manufacture
and commercialize products using the Company s drug delivery technologies; the
Company's dependence on the success of its joint venture with Elan Corporation
plc (the Elan Joint Venture or Ebbisham Ltd. ) for the development and
commercialization of oral heparin and low molecular weight heparin product and
the strategic alliance with Eli Lilly & Company ( Lilly ) (The Lilly Strategic
Alliance ) for the development and commercialization of certain of Lilly s
t h erapeutic proteins; and its research collaboration with Novartis Pharma AG
("Novartis") to investigate Emisphere Technology for oral delivery of two
selected Novartis compounds (the "Novartis Collaboration") the risk of
technological obsolescence and risks
associated with the Company's highly competitive industry; the Company s
dependence on patents and proprietary rights; the Company s absence of
profitable operations and need for additional capital; the Company s dependence
on others to manufacture the Company s chemical compounds; the risk of product
liability and policy limits of product liability insurance; potential liability
for human clinical trials; the Company s dependence on key personnel; the
quality, judgment and strategic decisions of management and other personnel;
uncertain availability of third-party reimbursement for commercial medical
products; and general business and economic conditions; and other factors
referenced in Emisphere's report on Form 10-K for the fiscal year ended July 31,
1997.
General
Emisphere is a drug delivery company focused on the discovery and
application of proprietary synthetic chemical compounds that enable the oral
delivery of therapeutic macromolecules and other compounds that are not
currently deliverable by oral means. Since its inception in 1986, the Company
has devoted substantially all of its efforts and resources to research and
development conducted on its own behalf and through collaborations with
corporate partners and academic research institutions. The Company has had no
product sales to date. The major sources of the Company's working capital have
been proceeds from its initial public offering in 1989, a second public offering
in February 1993, a third public offering in July 1997, private equity
financing, the latest of which occurred with an affiliate of Elan in October
1995, reimbursement of expenses and other payments from corporate partners, the
registered sale of one million shares of Common Stock to two institutional
investors in April 1996, and income earned on the investment of available funds.
The Company's operations are not significantly affected by inflation or
seasonality.
Results of Operations
The Company has since its inception generated significant losses from
operations. The Company does not expect to achieve profitability in the
foreseeable future. Profitability will ultimately depend on the Company's
ability to develop its lead products, in conjunction with the Elan Joint Venture
and the Lilly Strategic Alliance or to develop other products in conjunction
with other partners. There can be no assurance that the development will be
completed or if completed, any regulatory agency will approve the final product.
Even if final products are developed and approved, there is no assurance that
sales will be sufficient to achieve profitability. If development of such
products is not achieved or approval not granted, the Company's prospects will
be materially affected.
The ability of the Company to reduce its operating losses in the near term
will be dependent upon, among other things, its ability to attract new
pharmaceutical and other companies who are willing to provide funding to the
Company for a portion of the Company's research and development with respect to
specific projects. While the Company is constantly engaged in discussions with
pharmaceutical and other companies, there can be no assurance that the Company
will enter into any additional agreements or that the agreements will provide
research and development revenues to the Company.
Three Months Ended October 31, 1997 vs. Three Months Ended October 31, 1996:
For the three months ended October 31, 1997, the Company recognized
$1,715,660 of contract revenue compared to $1,994,450 of contract revenue for
the three months ended October 31, 1996. Contract revenue for the three months
ended October 31, 1997 consisted of recognition of revenues from Ebbisham, Ltd.
of approximately $1,091,000 and a payment from Lilly under the research
collaboration and option agreement (the Lilly Agreement ) to combine Lilly s
therapeutic protein and formulation capabilities with the Company s carrier
technologies. Contract revenues for the three months ended October 31, 1996
consisted entirely of revenue from Ebbisham Ltd.
<PAGE> 8
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Total operating expenses for the fiscal quarter ended October 31, 1997
increased by approximately, $1,287,000 or 40%, as, compared to the fiscal
quarter ended October 31, 1996. The details of this increase are as follows:
Research and development costs increased by approximately $1,005,000, or
60%, in the fiscal quarter ended October 31, 1997, as compared to the fiscal
quarter ended October 31, 1996. This increase is mainly attributable to
increased personnel and laboratory supply costs in connection with the
collaboration agreement with Lilly and the ongoing clinical trials work for
heparin . The Company also experienced an increase in funding of outside
consultants and universities engaged to conduct studies to help advance the
Company s scientific research efforts, perform services related to the
manufacturing of the Company s carriers, and consult on the Company s ongoing
clinical studies with heparin. The Company believes that this level of research
and development spending will continue for the foreseeable future and may
increase if operations are expanded.
The loss in Ebbisham Ltd. decreased by approximately $78,000, or 8%, in
the fiscal quarter ended October 31, 1997, as compared to the fiscal quarter
ended October 31, 1996. This decrease is attributable to timing of costs
associated with ongoing clinical development of heparin. The costs associated
with Ebbisham may increase substantially depending upon the agreed timing and
scope of future research and development efforts.
General and administrative expenses increased by approximately $360,000,
or 60%, in the fiscal quarter ended October 31, 1997, as compared to the fiscal
quarter ended October 31, 1996. This increase is primarily the result of an
increase in legal and other professional fees in connection with the application
and issuance of patents on the Company s technology . The Company also incurred
costs associated with the initiation of a computer system upgrade which it
expects to complete by January 1999.
The Company's other income in the quarter ended October 31, 1997
increased by approximately $230,000 from that of the fiscal quarter ended
October 31, 1996. The increase was due to a larger investment portfolio.
Based on the above, the Company sustained a net loss for the first quarter
of fiscal 1998 of $2,342,256, a 133% increase over the 1997 fiscal first quarter
loss of $1,006,357.
Liquidity and Capital Resources
As of October 31, 1997, the Company had working capital of approximately
$29,111,000 as compared with approximately $31,323,000 at July, 31, 1997. Cash
and cash equivalents and marketable securities were approximately $31,253,000 as
of October 31, 1997, as compared to approximately $33,690,000 at July 31, 1997.
The decrease in the Company's cash and cash equivalents and marketable
securities was primarily due to cash used to fund operations in the first fiscal
quarter of 1998, partially offset by the exercise of options.
The Company entered into a ten-year noncancelable lease for new office and
laboratory space commencing August 1997. The annual minimum rental is
approximately $1,300,000. The Company also anticipates capital expenditures of
approximately $6,000,000 in connection with the occupation of the new space
during the next nine months.
The Company expects to continue to incur substantial research and
development expenses associated with the development of the Company's oral drug
delivery system. As a result of the ongoing research and development efforts of
the Company, management believes that the Company will continue to incur
operating losses and that, potentially, such losses could increase. The Company
expects to need substantial resources to continue its research and development
efforts. In addition, the Company is obligated to fund one-half of the Elan
Joint Venture s cash needs upon the Venture s request. The Company expects to
commence funding the Venture during the next quarter. Funding requirements are
established to initially be $500,000 over the next six months and depending upon
the agreed timing and scope of future research and development efforts may
increase substantially thereafter. Pursuant to the Elan Joint Venture, the
Company and Elan share the financial benefits and expense obligations of the
Venture on a 50/50 basis. The Company expects the research funding from Lilly
to approximate the costs to be incurred by the Company in connection with the
development of the Lilly therapeutic proteins. Under present operating
assumptions, the Company expects that cash, cash equivalents and marketable
securities will be adequate to meet its liquidity and capital requirements
through fiscal 1999. Thereafter, the Company would need to seek additional
funds, primarily in the public and private equity markets and, to the extent
necessary and available, through debt financing. The Company has no firm
agreements with respect to any additional financing and there can be no
assurance that the Company would be able to obtain adequate funds on acceptable
terms. If adequate funds were not available, the Company would be required to
delay, scale back , or eliminate one or more of its research and development
programs, or obtain funds, if available, through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates, or products that the Company would not
otherwise relinquish. The Company does not maintain any credit lines with
financial institutions.
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Impact of the Future Adoption of Recently Issued Accounting Standards:
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 128. Earnings Per Share ( SFAS 128"). SFAS 128 will
require the Company to replace the current presentation of primary per share
data with basic and diluted per share data. Currently, outstanding common
stock equivalents are antidilutive and therefore management estimates that the
future adoption of SFAS 128 will not have a material impact on the Company s per
share data. SFAS 128 will be adopted by the Company for periods ending after
December 15, 1997.
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Part II. OTHER INFORMATION
Item 5. Other Information
On December 3, 1997, the Company and Novartis Pharma AG ( Novartis )
entered into a collaboration to investigate Emisphere s technology for
oral delivery of two selected Novartis compounds.
Under terms of the agreement Emisphere could receive initial fees,
research funding and milestone payments. Emisphere will also receive a
royalty on sales of any oral products which result from the collaboration.
Novartis will receive exclusive worldwide commercialization rights to oral
products which result from this collaboration. In addition, Novartis has
the right to purchase, in four tranches, up to $16 million of the
Company's common stock. Subject to certain limitations as to potential
share price variability with respect to the price for the first tranche,
the common stock purchaces by Novartis will be based on market prices. The
Company may, in its sole discretion, waive Novartis's right as to any or
all of the four tranches.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Reearch Collaboration and Option Agreement dated as of December 3,
1997 between Emisphere Technologies, Inc. and Novartis Pharma AG
Basle. Portions of this exhibit have been omitted based on a request
for confidential treatment filed separatly with the Securities and
Exchange Commission.
11.1 Statement of computation of per share data for the three months
ended October 31, 1997.
27.1 Financial Data Schedule
(b) Reports
No reports on form 8-K were filed by the Registrant during the
quarter ended October 31, 1997.
<PAGE> 11
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SIGNATURE
Pursuant to the requirement 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.
Emisphere Technologies, Inc.
Dated: December 15, 1997 /s/Michael M. Goldberg,M.D.
-----------------------------
Michael M. Goldberg, M.D.
Chairman, and Chief Executive Officer
/s/Joseph D. Poveromo, C.P.A.
-------------------------------
Joseph D. Poveromo, C.P.A.
Controller Chief Accounting Officer
(Principal Financial and Accounting
Officer)
<PAGE> 12
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[DESCRIPTION] RESEARCH COLLABORATION & OPTION AGMT.
<PAGE>
Exhibit 10.1
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED
[^] .
RESEARCH COLLABORATION AND OPTION AGREEMENT
Research Collaboration and Option Agreement (the "Agreement"), dated
and effective as of December 3, 1997 (the "Effective Date") between Emisphere
Technologies, Inc., a Delaware corporation ("Emisphere"), and Novartis Pharma AG
Basle, a Swiss limited liability company ("Novartis").
WHEREAS, Emisphere is engaged in the research and development of
proprietary synthetic chemical compounds that enable the delivery of therapeutic
macromolecules and other compounds that are not currently deliverable by oral
means (including all related patents, patent applications, Know-How and other
intellectual property rights presently owned by Emisphere and all patents,
patent applications, Know-How and other intellectual property rights relating to
inventions developed by Emisphere pursuant to the Program [Program and Know-How
both defined below], the "Emisphere Technology"); and
WHEREAS, Novartis produces, or is engaged in research to produce,
therapeutic macromolecules and other compounds some of which are not currently
deliverable by oral means; and
WHEREAS, Emisphere and Novartis desire to collaborate in research
regarding the applicability of the Emisphere Technology to Novartis's compounds,
and to provide for certain rights and obligations of Emisphere and Novartis in
the event such research produces commercially viable applications; and
WHEREAS, Emisphere desires to grant certain options and rights to
Novartis to develop and market Novartis's products using the Emisphere
Technology.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
RESEARCH PROGRAM
1.1 Collaboration. Novartis and Emisphere hereby agree to
collaborate on a research and development program (the "Program") which will be
an integral part of this Agreement, and is specified in Exhibit A of this
Agreement, to research the use of the Emisphere Technology for oral delivery of
one of: [^] Novartis shall select the compound to be the subject of the Program
("Compound 1") within 15 days of the Effective Date and shall within that time
period communicate that selection to Emisphere in writing. Novartis will be
able to nominate a second compound ( Compound 2") during the Program. Emisphere
will make available to Novartis access to all Emisphere Technology relevant for
the Program. This shall include all relevant information with respect to the
proprietary synthetic chemical compounds, as defined by the Emisphere
Technology, that are used to facilitate transport of therapeutic compounds
through membranes (the "Carriers"), including oral, nasal, buccal, intraocular,
sublingual, subcutaneous, intramuscular, and pulmonary delivery thereof.
1.2 Program Management.
(a) Novartis and Emisphere shall establish a steering
committee (the "Steering Committee"). The function of the Steering Committee
shall be to plan, coordinate and manage the Program. The Steering Committee is
not intended to replace any internal management procedures of either Party or
continued and close collaboration by the Parties with respect to the Program.
Rather, it is intended to be a vehicle to ensure that the Program proceeds in a
timely, coordinated, and well-planned fashion. It shall be made up of up to a
maximum of [^] members, with an equal number appointed by each of Novartis and
Emisphere and with a central contact person appointed by each Party. Each Party
hereto shall name one member to be a co-chairperson of the Steering Committee.
The first responsibility of the Steering Committee shall be to establish and
approve a work plan to assure the timely completion of the Program. The second
responsibility of the Steering Committee shall be to define the acceptance
criteria [^] which [^] for oral delivery of Compound 1 (the "Criteria"). On at
least a quarterly basis, the Steering Committee shall meet to review the results
of the Program and to modify the work plan as necessary. [^] The Steering
Committee shall keep minutes of its meetings, and shall be responsible only for
the development and implementation of the work plan. If the members of the
Steering Committee cannot agree jointly on a task in the work plan, it will be
up to the Co-Chairman of each company to reach a decision.[^] Finally, meetings
of the Steering Committee will alternate between Emisphere s designated facility
and Novartis s designated facility. Each Party will bear all expenses
associated with attendance of its own employees at such meetings held at the
other Party s designated facility.
(b) It will be Emisphere s responsibility to develop new
Carriers as part of the Program.
1.3 Term; Termination; Damages.
(a) The Agreement is in effect as of the Effective Date.
Subject to articles 1.3(b), (c), (d), (e), and (f), the Program shall continue
for a minimum period of [^] or until results of the Phase I clinical trial for
the use of Emisphere Technology in the oral delivery of Compound 1 are
available, whichever is longer (the "Initial Funding Period"). [^] determine at
the end of the Initial Funding Period whether the Criteria have been met. If
the Criteria have been met, then Novartis shall continue for at least such
additional period of time as will be necessary to make the total duration of the
Program [^]. If the Criteria have not been met, then [^] whether the Program
shall continue for at least such additional period of time as will be necessary
to make the total duration of the Program [^]
[^]
(c) Either Party may terminate this Agreement upon written
notice to the other Party that such Party has made a material breach of this
Agreement if, within 60 days of receipt of such notice, such breach has not been
cured.
(d) Novartis shall have the right to terminate this Agreement
in favor of execution of a license agreement. For purposes of the resulting
license agreement, any such termination shall limit the scope of the Program to
the work already performed and the payment of fees under this Agreement to the
fees already accrued. If Novartis terminates this Agreement in favor of a
license for Compound 1 without having exercising its Compound 2 Right,[^]
(e) Termination or expiration of this Agreement shall not
affect the rights and obligations of the Parties accrued hereunder prior to
termination or expiration. To avoid doubt, it is hereby confirmed that
termination of this Agreement by Novartis because of a breach solely by
Emisphere shall not affect Novartis's options and rights as set forth in Article
II. To further avoid doubt, if Emisphere terminates this Agreement because of a
breach solely by Novartis, Novartis s options and rights under Article II shall
be terminated. However, termination of this Agreement shall not affect any
license entered into pursuant to such options and rights (whether Novartis or
Emisphere is the terminating Party).
(f) If the Steering Committee cannot agree on the
scope, Criteria and tentative timelines for the Program within 90 days of the
Effective Date, either party shall have the right to terminate the Agreement
within 60 days with all funds provided as of the termination date to be
reimbursed to Novartis.
1.4 Payments.
(a) As part of the work plan established by the Steering
Committee, the Parties shall jointly define the number of Emisphere Full Time
Equivalent personnel ("FTE's") required to complete the Program in a timely
manner. Novartis shall pay to Emisphere US [^] per quarter for each Emisphere
FTE required by the work plan. If the Program involves only Compound 1 or
Compound 2, then Novartis shall be required to fund up to a maximum of [^]
Emisphere FTE's, the actual number of Emisphere FTE's required being determined
according to the work plan. If the Program involves both Compound 1 and Compound
2, Novartis shall be required to fund up to the first [^] Emisphere FTE's
required by the work plan, [^] The first quarterly payment shall be paid by wire
transfer within 30 days following receipt of the invoice by Emisphere to
Novartis, following invoicing instruction timely provided by Novartis.
Emisphere will only invoice Novartis upon start of the work plan, and thereafter
upon each three month anniversary of the start of the work plan.
(b) "FTE" means a full-time equivalent scientific person
year directly related to the Program. Scientific work on or directly related to
the Program to be performed by Emisphere can include, but is not limited to,
experimental laboratory work, recording and writing up results, reviewing
literature and references, holding scientific discussions, managing and leading
scientific staff, and carrying out Program management duties or such other
activities as may be appropriate to the conduct of the Program.
(c) If Novartis desires to expand research beyond the scope
of the Program, if acceptable to Emisphere in its sole discretion, the Parties
hereto will mutually agree in writing upon the research programs to be added and
the number of Emisphere FTE's necessary to achieve the objectives of the
expanded research. The additional cost for each Emisphere FTE shall be US [^]
per quarter to be paid as follows: (i) an initial payment shall be made on the
next date a payment is due, pro-rated for the period between such day the
Emisphere FTE is added and the next quarterly payment due pursuant to Section
1.4(a), above, and (ii) all subsequent payments shall be made at the same time
as the payments for the Program.
(d) All payments by Novartis will be made following
the receipt of an invoice from Emisphere as per an invoicing structure to be
provided by Novartis.
1.5 Ownership of Intellectual Property.
(a) "Emisphere Know-How" means all trade secrets,
confidential scientific, technical and medical information, experimental results
and expertise from time to time developed, produced, created or acquired by or
on behalf of Emisphere either prior to the Effective Date and pertaining to the
Program or during the term and in the course of carrying out the Program,
including, but not limited to, unpatented inventions, discoveries, theories,
plans, ideas or designs (whether or not reduced to practice) relating to the
research and development, registration for marketing, use, or sale of the
Carriers or products utilizing the Carriers, preclinical toxicology and
manufacturing for the Carriers, and toxicological, pharmacological, analytical
and clinical data, bioavailability studies and formulations, control assays and
specification, methods of preparation, and stability data related thereto. [^]
[^]
(c) "Novartis Know-How" means all trade secrets, confidential
scientific, technical and medical information, experimental results and
expertise from time to time developed, produced, created or acquired by or on
behalf of Novartis either prior to the Effective Date and pertaining to the
Program or during the term and in the course of carrying out the Program,
including, but not limited to, unpatented inventions, discoveries, theories,
plans, ideas or designs (whether or not reduced to practice) relating to the
research and development, registration for marketing, use, or sale of the
Compounds or products utilizing the Compounds, preclinical toxicology and
manufacturing for the Compounds, and toxicological, pharmacological, analytical
and clinical data, bioavailability studies and formulations, control assays and
specification, methods of preparation, and stability data related thereto.[^]
[^]
(e) "Joint Improvements" shall mean any improvement made
jointly by the parties specifically relating to the Carriers or Compounds and
Carrier/Compound combinations arising from the collaboration of this Agreement.
(f) Emisphere shall have the right to use any preclinical and
toxicology data that are generated for the Program pertaining to the Carriers.
Novartis shall have the right to use any data that are generated for the Program
pertaining to Compounds 1 and 2 and the Compound/Carrier combinations.
[^]
(h) Intellectual Property" shall mean all patents, patent
applications, copyrights, Know-How and other intangible property rights relating
to the inventions and/or developments that pertain to the Program.
(i) With respect to Intellectual Property conceived and/or
developed by Emisphere or Novartis as a result of activities carried-out
pursuant to this Agreement, the extent of ownership of such Intellectual
Property shall be as follows:
i) if the Intellectual Property is made solely by an employee of
Emisphere, Emisphere shall own such Intellectual Property;
ii) if the invention is made solely by an employee of Novartis, Novartis
shall own such Intellectual Property;
iii) if the invention is made jointly by employees of Novartis and
Emisphere, Novartis and Emisphere shall each own an undivided
one-half interest in such Intellectual Property.
[^]
ARTICLE II
OPTIONS AND RIGHTS
2.1 The Options. Novartis is hereby granted the following options
and rights (the "Options and Rights") subject to the terms and for the
consideration set forth in this Article II:
(a) An option ("Option 1") to an exclusive worldwide (the
"Territory") license to develop in conjunction with Emisphere, make, have made,
use and sell products embodying the Emisphere Technology and Compound 1 [^] for
oral delivery thereof ("Product 1") as defined in the license. The terms of the
license are set forth in the Form of License Agreement attached hereto as
Exhibit C and the License Supplement attached hereto as Appendix 1.
(b) A right (the "Compound 2 Right") to commence a research
collaboration with Emisphere for a second compound, to be governed by the terms
of this Agreement. The second compound ("Compound 2") [^] Furthermore, Compound
2 may only be selected from among those compounds for which Emisphere is not
prevented by prior agreement or obligation to a third party from granting an
exclusive license in the Territory to develop, make, have made, use or sell
Products based on a Carrier/compound combination.
(c) An option ("Option 2"), arising solely upon exercise of
the Compound 2 Right, to an exclusive license in the Territory to develop in
conjunction with Emisphere, make, have made, use and sell products embodying the
Emisphere Technology and Compound 2 for oral delivery thereof ("Product 2").
The terms of the license are set forth in the Form of License Agreement attached
hereto as Exhibit C and the Form of License Supplement attached hereto as
Appendix 2.
2.2 The Option Price. In exchange for granting Novartis Option 1
and the Compound 2 Right, Novartis shall pay Emisphere US [^] by wire transfer
within 30 days upon execution of this Agreement. In exchange for granting
Option 2, Novartis shall pay Emisphere US [^] by wire transfer of immediately
available funds upon exercise by Novartis of the Compound 2 Right (purchase of
Option 2). [^]
2.3 The Exercise Price. Payments due to Emisphere upon exercise
of Option 1 are noted in Appendix 1 section A.1. Payments due to Emisphere upon
exercise of Option 2 are noted in Appendix 2 section A.1.
2.4 Option Period. Option 1 shall expire [^] following initiation
of a Phase I clinical trial of Product 1. Option 2, if it arises, shall expire
[^] following initiation of a Phase I clinical trial of Product 2. Subject to
article 1.3(d), the Compound 2 Right shall expire [^]
2.5 Exercising an Option or Right. An Option or Right shall be
exercised by Novartis by delivery of a written notice to Emisphere during the
relevant Option or Right period. With respect to Options 1 and 2, the license
attached in Appendix A shall automatically become effective after the exercise
by Novartis of the Option and the payment of the license fee noted in Article
2.3 above. Each of the Parties hereto shall execute the license agreement
relating to the Option that has been exercised within [^] of exercise thereof.
2.6 Responsibilities of the Parties during the Options and Rights
periods. During the Options and Rights periods Emisphere shall (i) assist in
the development of Carriers to deliver the relevant compound orally in vivo,
(ii) assist in the formulation of existing Carriers for a Phase I feasibility
study, (iii) assist in ensuring a sufficient supply of Carriers to support
required preclinical and clinical studies, and (iv) cooperate with Novartis for
future regulatory filings. Novartis shall (i) supply bulk Compounds for the
Program, (ii) provide necessary physical or chemical data on the Compounds,
(iii) take all responsibility for the necessary preclinical and clinical
studies, and (iv) take all responsibility for the regulatory filings necessary
for the Program. During the Program it is anticipated that Emisphere will
require a third party to manufacture the Carrier. Novartis shall reimburse
Emisphere for [^] for all such material used in the Program. It is understood
by the parties that the total number of kilograms of Carrier will have to be
specified in writing in the Program between the members of the Steering Commitee
of each Party. Emisphere warrants that the Carrier s quality provided by
Emisphere or its third party suppliers will meet all necessary requirements as
set forth by the Steering Committee and any governmental regulations or
requisites.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Due Incorporation. Each of the Parties hereto hereby
represents and warrants to the other that it is duly incorporated under the
relevant laws of incorporation and each has full corporate authority to enter
into and to perform its obligations under this Agreement.
3.2 Due Authorization. Each of the Parties hereto hereby
represents and warrants to the other that this Agreement has been fully
authorized, executed and delivered by it and it has full legal right, power and
authority to enter into and perform this Agreement, which constitutes a valid
and binding agreement between the Parties and that it does not conflict with or
result in a breach of the terms of any agreement to which such Party is a party.
3.3 Litigation. Each of the Parties hereto hereby represents and
warrants to the other that it is not engaged in any litigation or arbitration,
or in any dispute or controversy reasonably likely to lead to litigation,
arbitration or other proceeding, which would materially affect the validity of
this Agreement or such Party's ability to fulfill its respective obligations
under this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Confidentiality.
4.1.1 Emisphere Information. Novartis will maintain in
strictest confidence, and will ensure that its Affiliates and its and their
consultants, employees, agents and representatives maintain in strictest
confidence, all proprietary and confidential information which has been or is
provided by Emisphere to Novartis, including but not limited to, Emisphere s
inventions, discoveries, improvements and methods, business plans, marketing
techniques or plans, manufacturing and other plant designs, location of
operations, and any other information affecting the business operations of
Emisphere ( Emisphere Information ), and will not use for any purpose other than
the completion of the Agreement, and will not publish, disseminate, or disclose,
in any manner, to any person any Emisphere Information unless: (i) Novartis is
legally required to do so, (ii) the Emisphere Information has entered or enters
the public domain through no fault of Novartis, (iii) the Emisphere information
was already known by Novartis before receipt from Emisphere, or is developed
independently by Novartis without breach of this Agreement, in either case as
shown by comtemporaneous written records, or (iv) the Emisphere Information is
received by Novartis from a third party under no confidentiality obligation to
Emisphere.
4.1.2 Novartis Information. Emisphere will maintain in
strictest confidence, and will ensure that its Affiliates and its and their
consultants, employees, agents and representatives maintain in strictest
confidence, all proprietary and confidential information which has been or is
provided by Novartis to Emisphere, including but not limited to, Novartis s
inventions, discoveries, improvements and methods, business plans, marketing
techniques or plans, manufacturing and other plant designs, location of
operations, and any other information affecting the business operations of
Novartis ( Novartis Information ), and will not use for any purpose other than
the completion of the Agreement, and will not publish, disseminate, or disclose,
in any manner, to any person any Novartis Information unless: (i) Emisphere is
legally required to do so, (ii) the Novartis Information has entered or enters
the public domain through no fault of Emisphere, (iii) the Novartis Information
was already known by Emisphere before receipt from Novartis, or is developed
independently by Emisphere without breach of this Agreement, in either case as
shown by comtemporaneous written records, or (iv) the Novartis Information is
received by Emisphere from a third party under no confidentiality obligation to
Novartis.
4.1.3 Survival. The provisions of this Article 4 will survive the
termination or expiration of this Agreement
4.2 Indemnity.
4.2.1 Novartis shall indemnify, defend and hold harmless
Emisphere, its affiliates, agents, directors, officers and employees from and
against any loss, damage, action, proceeding, expense or liability (including
attorney s fees) ("Loss") arising from or in connection with the manufacture,
distribution, sale, possession or use of any Product prepared pursuant to the
Program, except for any Loss caused by Emisphere s gross negligence or
intentional misconduct.
4.2.2 Emisphere shall indemnify, defend and hold harmless
Novartis, its affiliates, agents directors, officers and employees from and
against any Loss arising from or in connections with the manufacture,
distribution, storage possession or use of any Carrier prepared and supplied by
Emisphere or its third party suppliers to Novartis, except for any Loss caused
by Novartis s gross negligence or intentional misconduct.
4.3 Public Disclosure. The Parties hereto agree to disclose
publicly through a joint press release, upon signing the Agreement, the nature
and scope of the Agreement. All press releases shall be approved in writing in
advance by both Parties, except for such disclosures permitted pursuant to
Section 4.1 above, such approval not to be unreasonably withheld or delayed.
Upon the occurrence of other significant events in the Program, Emisphere and
Novartis agree to make joint press releases.
4.4 Standstill. Clause 8.1 and 8.2 of the Stock Purchase
Agreement dated December 3, 1997 shall apply to this Agreement and are
incorporated here by reference attached as Exhibit D.
4.5 Change of Control. Upon any occurrence of a change in control
of Emisphere prior to commercial introduction of Product 1 (or of Product 2, if
earlier), Novartis shall have the right to terminate this Agreement. Under such
circumstances, if Novartis elects to exercise any such right, Emisphere shall
refund all development funding, milestones, fees, option exercise payments or
other payments provided for hereunder (exclusive of any equity infusion by
Novartis), and Novartis shall relinquish any and all rights to the Emisphere
Technology provided for hereunder.
For purposes of this Section 4.5 a change of control shall mean that (A) sole
control of Emisphere's management is vested in a person, persons, entity, or
entities, none of which, as of the Effective Date, control, or participate in
control of, Emisphere's management; and (B) an entity owns 50% or more of
Emisphere's capital or business assets, has the power to exercise 50% or more of
the voting rights or to appoint 50% or more of the Board of Directors of
Emisphere, or otherwise has the right to control Emisphere's affairs. A change
in management personnel does not in and of itself indicate a change of control.
For purposes of this section 4.5, the parties understand and agree that any
person or entity which owns less than 20% of Emisphere s outstanding shares of
capital stock as of the Effective Date of this Agreement shall not be deemed to
control or participate in control of Emisphere s Management.
4.6 Amendment. No amendment, waiver or consent to this Agreement
shall be effective unless signed in writing by both Parties hereto.
4.7 Assignment. Neither Party may assign its rights or
obligations under this Agreement without the prior written consent of the other
Party, except that a Party hereto may, without such prior written consent,
assign any of its rights or obligations to an Affiliate in the pharmaceutical
business.
4.8 Entire Agreement. This Agreement constitutes the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence and understandings
between the Parties with respect to the subject matter hereof, whether oral or
in writing.
4.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
4.10 Notices. All notices and other communications pursuant to
this Agreement shall be in writing, shall be effective when received, and shall
be deemed to have been received on the date of delivery if delivered personally;
or on the second business day after the business day of deposit with Federal
Express or other similar courier for overnight delivery, freight prepaid; in
each such case, addressed as follows (until any such address is changed by
notice duly given):
to Novartis: Novartis Pharma AG
License Department
Lichtstrasse 35
CH-4002 Basel, Switzerland
Attention: [^]
Telecopy: [^]
to Emisphere: Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne, NY 10532
Attention: [^]
Telecopy: (914) 347-2498
with copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Edwin S. Maynard
Telecopy: (212) 757-3990
4.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.12 Diligence. Each Party will use diligent efforts to conduct
the tasks assigned to it hereunder. Each Party, further, agrees to conduct such
tasks at least as diligently as the Party conducts research and development for
other projects of similar commercial potential and at similar stages of
development. Neither Party will be responsible for delays due to factors beyond
its control.
4.13 No Agency. It is understood and agreed that Emisphere and
Novartis each shall have the status of independent contractors under this
Agreement and that nothing in this Agreement shall be construed as authorization
for either Party to act as agent for the other. Members of the Steering
Committee who are employees of Emisphere shall be and shall remain employees of
Emisphere and Novartis shall not incur any liability for any act or failure to
act by such employees. Members of the Steering Committee who are employees of
Novartis shall be and shall remain employees of Novartis and Emisphere shall not
incur any liability for any act or failure to act by such employees.
4.14 Force Majeure. Each Party hereto shall be relieved of its
obligations hereunder to the extent that fulfillment of such obligations shall
be prevented by acts beyond its reasonable control.
4.15 Titles. The titles of the Articles and Sections of this
Agreement are for general information and reference only, and this Agreement
shall not be construed by reference to such titles.
4.16 Severability. Each Party agrees that, should any provision of
this Agreement be determined by a court of competent jurisdiction to violate or
contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.
4.17 Waiver. Failure by either Party to enforce any rights under
this Agreement shall not be construed as a waiver of such rights nor shall a
waiver by either Party in one or more instances be construed as constituting a
continuing waiver or as a waiver in other instances.
4.18 No Strict Construction. This Agreement has been prepared
jointly and shall not be strictly construed against either Party.
4.19 Dispute Resolution. Any dispute regarding this Agreement or
the enforcement of a Party's rights or obligations hereunder shall be submitted
[^]
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first above written.
EMISPHERE TECHNOLOGIES, INC.
By: ___________________________
Name:
Title:
NOVARTIS PHARMA AG
with offices at Lichtstrasse 35,
CH-4002 Basel, Switzerland
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
Exhibit A
Oral Delivery Project
Novartis Compound
[^]
Exhibit B
List of Patents and Patent Applications
[attached]
Exhibit C
FORM OF LICENSE AGREEMENT
[attached]
Appendix 1
LICENSE SUPPLEMENT FOR OPTION 1
[^]
Appendix 2
FORM OF LICENSE SUPPLEMENT FOR OPTION 2
[^]
Exhibit D
Stock Purchase Agreement
[see attachment]
This Agreement is made the _____ day of ________, 19__
BY AND BETWEEN<PAGE>
Novartis Pharma AG
A Swiss limited liability company with offices at Lichtstrasse 35, CH-4002
Basel, Switzerland
Emisphere Technologies, Inc.
A Delaware Corporation with offices at 15 Skyline Drive, Hawthorne, New York
10532
LICENSE AGREEMENT
TABLE OF CONTENTS
Section Page
1. DEFINITIONS . . . . . . . . . .. . . . . . . . 2
2. GRANT OF RIGHTS . . . . . . . . . . . . . . . 11
3. IMPROVEMENTS . . . . . . . . . . . . . . . . 12
4. MANUFACTURING . . . . . . . . . . . . . . . 12
5. RESEARCH AND DEVELOPMENT . . . . . . . . . . 13
6. PRODUCT(S) MANUFACTURING . . . . . . . . . . 14
7. EXPLOITATION OF LICENSED TECHNOLOGY . . . . . 14
8. FINANCIAL PROVISIONS . . . . . . . . . . . . 15
9. RIGHT OF AUDIT AND INSPECTION . . . . . . . . 16
10. PATENTS . . . . . . . . . . . . . . . . . . . 17
11. CONFIDENTIAL INFORMATION . . . . . . . . . . 22
12. TERM OF AGREEMENT . . . . . . . . . . . . . . 23
13. WARRANTIES/INDEMNITIES . . . . . . . . . . . 26
14. REGULATORY APPROVALS . . . . . . . . . . . . 31
15. INSURANCE . . . . . . . . . . . . . . . . . . 32
16. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE 33
17. SETTLEMENT OF DISPUTES; PROPER LAW . . . . . 33
18. ASSIGNMENT . . . . . . . . . . . . . . . . . 33
19. NOTICES . . . . . . . . . . . . . . . . . . . 34
20. MISCELLANEOUS CLAUSES . . . . . . . . . . . . 34
WHEREAS
A. Emisphere is beneficially entitled to the use of various patents and
other intellectual property, including the Emisphere Patents which have
been granted or are pending under various international conventions in
relation to the Emisphere Technology.
B. Emisphere is knowledgeable in the discovery and use of compounds which
can interact with therapeutic agents in a manner to improve the transport
of such therapeutic agents through biological membranes.
C. Novartis is knowledgeable in the research, development, manufacture and
marketing of pharmaceutical formulations and Novartis has rights to, owns
and possesses patented therapeutic agents and other technologies and
related intellectual property.
D. Emisphere and Novartis have previously entered into a Research
Collaboration and Option Agreement regarding the application of the
Emisphere Technology to oral delivery of Novartis therapeutic agents.
E. Novartis desires to enter into this Agreement with Emisphere so as to
permit Novartis to exclusively utilize the Emisphere Technology and the
Emisphere Program Technology, in combination with the Novartis Program
Technology and any jointly developed technology, in the research,
development, manufacture, distribution and sale of the Products in the
Field.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
1.1 In this present Agreement, including the Recitals and Appendix, the
following definitions shall prevail unless the context otherwise
requires:
"Acquired" means a transfer of intellectual property or
information from an Independent Third Party to
Emisphere or Novartis, as the case may be, to the
extent to which there are no obligations or
restrictions in respect of that intellectual
property or information which prohibit use by or
disclosure to Novartis or Emisphere, as
appropriate;
[^]
"Affiliate" means any corporation or business entity which
Novartis or Emisphere, directly or indirectly, owns
or controls, is under common ownership with, or
which owns one of the Parties to this Agreement.
Ownership or control shall exist when an entity
owns 50% or more of the capital or business assets
of another entity; has the power to exercise 50% or
more of the voting rights or to appoint 50% or more
of the Board of Directors of another entity; or has
the right to control the affairs of another entity,
it being understood that the direct or indirect
ownership of a lesser percentage of such shares
shall not necessarily preclude the existence of
control;
"Agreement" means this license agreement (which expression
shall be deemed to include the Recitals and
Schedule hereto, and any other document(s)
incorporated herein by reference);
"Carriers" means various proprietary synthetic compounds
described by the Emisphere Technology that are used
to facilitate transport through membranes via a
number of different Routes of Administration to
deliver the Compound;
"Compound" means the therapeutic agent, specified by Novartis
in the Activation Letter, [^]
"Cost" [^]
"Effective Date" means the date when Novartis exercises the Option
and makes the payment foreseen in the Option
Agreement under Article 2.3 thereof;
"Emisphere" means Emisphere Technologies, Inc., its Affiliates,
successors and permitted assignees;
"Emisphere Know-How" means all existing proprietary trade secrets, confidential
scientific, technical and medical information and
expertise from time to time developed, produced, created
or Acquired by or on behalf of Emisphere, on or before the
Effective Date, including, but not limited to, unpatented
inventions, discoveries, theories, plans, ideas or designs
relating to the research and development, registration for
marketing, use or sale of the Carriers or formulations of
Compounds and Carriers, needed relevant data on the
Carriers, preclinical toxicity and manufacturing data for
the Carriers and prototype Compound/Carrier
formulation(s), and toxicological, pharmacological,
analytical and clinical data, bioavailability studies,
other formulations, control assays and specifications,
methods of preparation and stability data with respect to
Carriers and prototype Compound/Carrier formulation(s);[^]
"Emisphere Patents" means all and any existing patents, utility models
and any applications therefor in the Territory
(other than the Emisphere Program Patents or Joint
Patents) that are or subsequently may be owned or
Acquired by, or assigned or licensed to, Emisphere
(including any and all divisions, continuations,
continuations-in-part, extensions, additions,
registrations, confirmations, reexaminations,
Supplementary Protection Certificates, renewals or
reissues thereto or thereof) as of the Effective
Date and that would be infringed by the
development, manufacture, use, disposal, sale,
offer of disposal or sale, or importation of the
Product(s) in the Territory and/or relate to the
Field; the Emisphere Patents as of the effective
date are included in the Schedule I hereto;
"Emisphere Program
Know-How" means all trade secrets, confidential scientific,
technical and medical information and expertise
developed, produced, created or Acquired by or on
behalf of Emisphere pursuant to the Research and
Development Program (other than Emisphere Know-How
and Joint Know-How), including, but not limited to,
unpatented inventions, discoveries, theories,
plans, ideas or designs (whether or not reduced to
practice), and relating to the research and
development, registration for marketing, use or
sale of the Carriers or the Product(s), needed
relevant data on the Carriers, preclinical toxicity
and manufacturing data for the Carriers and
prototype Product(s), and toxicological,
pharmacological, analytical and clinical data,
bioavailability studies, formulations, control
assays and specifications, methods of preparation
and stability data with respect to the Carriers and
prototype Product(s);
"Emisphere Program
Patents" means all and any patents, utility models and
applications therefor in the Territory (including
any and all divisions, continuations,
continuations-in-part, extensions, additions,
registrations, confirmations, reexaminations,
Supplementary Protection Certificates, renewals or
reissues thereto or thereof) on or for any
inventions or discoveries that have been or
subsequently may be conceived or made by employees
or agents of Emisphere pursuant to the Research and
Development Program;
"Emisphere Program
Technology" means the Emisphere Program Patents, the Emisphere
Program Know-How and/or Emisphere s share of the
Joint Patents and the Joint Know-How, as well as
any other Emisphere intellectual property rights
(such as copyright or data rights) created or
arising during the term of this Agreement and
relevant to the Field;
"Emisphere Technology" means the Emisphere Patents and/or the Emisphere
Know-How, as well as any other Emisphere
intellectual property rights (such as copyright or
data rights) created or arising before the term of
this Agreement and relevant to the Field;
"Field" means the research, development and optimization of
the Compound and all uses of the Compound utilizing
one or more Carriers for all medical ailments or
indications for the oral Route of Administration as
well as the manufacture, use, promotion,
distribution, marketing and sale of the Product(s);
"FTEs" means full time equivalent persons employed by one
of the Parties as defined in the Option Agreement;
[^] means the following costs:
[^]
"Health Authority" means any relevant regulatory authority the
approval of which is necessary to market a product
in any country of the Territory and which in the
United States is the Food and Drug Administration
(FDA) or any successors or agency the approval of
which is necessary to market a product in the
United States of America;
"Improvements" means any intellectual property rights of Emisphere
relevant to the Field created or arising outside
the scope of this Agreement, but during the term of
this Agreement;
"INDA" means any Investigational New Drug Application or
similar application in relation to a Product(s)
filed by Novartis or its approved designee with the
relevant Health Authority;
"Independent Third Party" means any person other than Novartis, Emisphere or
any of their Affiliates;
"Joint Know-How" means know-how which is jointly developed by the
Parties in pursuance of the Program under the
Option Agreement and during the term of this
License Agreement (i.e., pursuant to the Research
and Development Program);
"Joint Patents" means all and any patents, utility models and any
applications therefor in the Territory (including
any and all divisions, continuations,
continuations-in-part, extensions, additions,
registrations, confirmations, reexaminations,
Supplementary Protection Certificates, renewals or
reissues thereto or thereof) on or for any
inventions or discoveries which are jointly
conceived by the Parties in pursuance of the
Program under the Option Agreement and during the
term of this License Agreement (i.e., pursuant to
the Research and Development Program);
"Launch" means the first commercial sale of a Product; the
date thereof shall be determined on a
country-by-country basis;
"Milestone" means milestones as specified in the Appendices to
the Option Agreement;
"NDA" means any New Drug Application or similar application in
relation to a Product(s) filed by Novartis or its approved
designee with the relevant Health Authority;
"Net Sales" means with respect to the Product(s) the gross
invoice price of Product sold by Novartis and its
sublicensees to independent, non-Affiliated third
parties in bona fide, arms-length transactions,
from which shall be subtracted, if not previously
deducted in the amount invoiced or received, (i)
quantity and/or cash discounts actually allowed or
taken, (ii) freight, postage and shipping insurance
[^](iii) customs duties and taxes, if any, directly
related to the sale, (iv) amounts repaid or
credited by reasons of rejections, return of goods
and retroactive price reductions specifically
identifiable as relating to Product, (v) amounts
incurred resulting from government (or an agency
thereof) mandated rebate programs, (vi) third party
rebates and chargebacks related to the sale of
Product to the extent actually allowed, (vii)
amounts that are uncollectible because of, for
example, the bankruptcy of a customer, (viii) as
agreed by the Parties in writing, any specifically
identified amounts included in the Product s gross
sales that were or ultimately will be credited and
are substantially similar to those listed above.
The amount of Net Sales for any period shall be
determined on the basis of sales recorded in such
period in accordance with accepted accounting
practices [^].
"Novartis" means Novartis Pharma AG, its
Affiliates, successors and
permitted assignees;
"Novartis Know-How" means all existing proprietary trade secrets,
confidential scientific, technical and medical
information and expertise from time to time
developed, produced, created or Acquired by or on
behalf of Novartis, on or before the Effective
Date, including, but not limited to, unpatented
inventions, discoveries, theories, plans, ideas or
designs relating to the research and development,
registration for marketing, use or sale of the
Compound, needed relevant data on the Compounds,
preclinical toxicity and manufacturing data for the
Compound, and toxicological, pharmacological,
analytical and clinical data, bioavailability
studies, other formulations, control assays and
specifications, methods of preparation and
stability data with respect to the Compound;
"Novartis Patents" means all and any existing patents, utility models
and any applications therefor in the Territory
(other than the Novartis Program Patents or Joint
Patents) that are or subsequently may be owned or
Acquired by, or assigned or licensed to, Novartis
(including any and all divisions, continuations,
continuations-in-part, extensions, additions,
registrations, confirmations, reexaminations,
Supplementary Protection Certificates, renewals or
reissues thereto or thereof) as of the Effective
Date and that would be relevant and necessary to
develop, make, use, or sell Product(s) in the
Territory and/or relate to the Field;
"Novartis Program
Know-How" means all trade secrets, confidential scientific,
technical and medical information and expertise
developed, produced, created or Acquired by or on
behalf of Novartis pursuant to the Research and
Development Program (other than Novartis Know-How
and Joint Know-How), including, but not limited to,
unpatented inventions, discoveries, theories,
plans, ideas or designs (whether or not reduced to
practice), and relating to the research and
development, registration for marketing, use or
sale of the Compound or the Product(s), needed
relevant data on the Compound, preclinical toxicity
and manufacturing data for the Compound, and
toxicological, pharmacological, analytical and
clinical data, bioavailability studies,
formulations, control assays and specifications,
methods of preparation and stability data with
respect to the Compound and prototype Product(s);
"Novartis Program
Patents" means all and any patents, utility models and
applications therefor in the Territory (including
any and all divisions, continuations,
continuations-in-part, extensions, additions,
registrations, confirmations, reexaminations,
Supplementary Protection Certificates, renewals or
reissues thereto or thereof) on or for any
inventions or discoveries that have been or
subsequently may be conceived or made by employees
or agents of Novartis pursuant to the Research and
Development Program;
"Novartis Program
Technology" means the Novartis Program Patents, the Novartis
Program Know-How and/or Novartis s share of the
Joint Patents and the Joint Know-How, as well as
any other Novartis intellectual property rights
(such as copyright or data rights) created or
arising during the term of this Agreement and
relevant to the Field;
"Novartis Technology" means the Novartis Patents and/or the Novartis
Know-How, as well as any other Novartis
intellectual property rights (such as copyright or
data rights) created or arising before the term of
this Agreement and relevant to the Field;
"Option" means an option to enter into a license agreement
in the form of this Agreement, as provided for in
the Option Agreement;
"Option Agreement" means the Research Collaboration and Option
Agreement, dated as of December 3, 1997, between
Emisphere and Novartis, incorporated herein by
reference;
"Option Exercise
Payment" means a payment specified in an Appendix to the
Option Agreement and the payment of which is
required upon the exercise of the Option;
"Parties" means Novartis and Emisphere;
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint
stock company, trust, unincorporated association,
joint venture, or other entity of whatever nature;
"Product(s)" means, one or more commercial formulations of the
Compound(s) with one or more of the Carriers for
the oral Route of Administration that complies with
the Specifications, and licensed hereunder;
"Research and
Development Program" means the joint program of research and development work,
with respect to the Field and the Product, being conducted
or to be conducted by, inter alia, Novartis and Emisphere
for and on behalf of Novartis, for which both Parties are
responsible, and which has been devised by and approved by
the Steering Committee and is outside of the scope of the
Program defined in the Option Agreement; the Research and
Development Program shall not include work for which
Novartis alone is responsible, such as clinical trials of
Product(s);
"Route(s) of Administration means administration of the Compound(s) by
routes including, but not limited to, oral,
nasal, buccal, intraocular, sublingual,
injectable (such as by subcutaneous, depot,
intramuscular, intraperitoneal or intra-
venous injection), vaginal and pulmonary
dosing; only the oral route is licensed
hereunder;
"Specifications" means the specifications for each of the Carriers
or Product(s) as approved by the relevant Health
Authority, as well as such other specifications
which may be agreed upon by the Parties in writing;
"Steering Committee" means the management committee appointed by
Emisphere and Novartis to oversee the Research and
Development Programs related to the Product(s), as
provided for in the Option Agreement;
"Territory" means all the countries of the world.
1.2 In this Agreement:
1.2.1 The singular includes the plural and vice versa as may be
necessary.
1.2.2 Any reference to a Clause shall, unless otherwise specifically
provided, be to a Clause of this Agreement.
1.2.3 The headings of this Agreement are for ease of reference only and
shall not affect its construction or interpretation.
2. GRANT OF RIGHTS
In consideration of the receipt of [^] specifying the Compound to be licensed
for the oral Route of Administration and simultaneous receipt by Emisphere of
the payment specified in the Option Agreement and relevant Appendix (both from
Novartis), the receipt and adequacy of which is acknowledged by Emisphere to
Novartis by Emisphere's receipt of [^] and Option payment, and the payment of
Milestone payments and royalties as provided for herein and in the relevant
Option Agreement Appendix, Novartis will have the [^] right in the Territory to
develop the Products and/or exploit the licensed Emisphere Technology in the
Field. Emisphere grants to Novartis for the term of this Agreement:
2.1 [^] license in the Territory to develop, make, have made, use, and sell
Products under the Emisphere Technology and Emisphere Program Technology
for the Field. All proprietary rights and rights of ownership with
respect to the Emisphere Technology and Emisphere Program Technology
shall at all times remain solely with Emisphere unless otherwise
specified in this Agreement. Novartis shall not have any rights to use
the Emisphere Technology or Emisphere Program Technology other than
insofar as they relate directly to the Field and are expressly granted
herein.
2.2 Novartis shall have the right to sublicense the rights granted to it by
Emisphere pursuant to this Agreement. Insofar as the obligations owed by
Novartis to Emisphere are concerned, Novartis shall remain responsible
for all acts and omissions of any sublicensee as if they were by
Novartis. Novartis shall forthwith notify Emisphere of any sublicense
granted by Novartis except for sublicenses to any of its Affiliates. In
all cases royalties shall be paid by Novartis on all Net Sales of
Products in the Territory at the rate provided for herein (e.g., in
accordance with the relevant Option Agreement Appendix);
In consideration of the obligations assumed by Emisphere in this Agreement,
Novartis grants to Emisphere, solely for the purposes of carrying out the
latter s obligations hereunder:
2.3 a non-exclusive license to use the Novartis Technology and the Novartis
Program Technology solely for the purposes of completing Emisphere s
responsibilities hereunder. All proprietary rights and rights of
ownership with respect to the Novartis Technology and the Novartis
Program Technology shall at all times remain solely with Novartis, unless
otherwise specified in this Agreement.
2.4 Emisphere shall have no right to sublicense the rights granted to it by
Novartis pursuant to this Agreement except as expressly authorized by
Novartis. Insofar as the obligations owed by Emisphere to Novartis are
concerned, Emisphere shall remain responsible for all acts and omissions
of any approved sublicensee as if they were by Emisphere.
[^]
3. IMPROVEMENTS
3.1 If Emisphere shall develop or have developed by an Independent Third
Party any Improvements during the term of this Agreement, Emisphere
shall, to the extent that it is not prohibited by any undertaking given
to any Independent Third Party, communicate to Novartis such Improvements
and shall provide to Novartis such rights, licenses, information and
explanations as Novartis may reasonably require to be able effectively to
utilize the Improvements for the life of this Agreement in carrying out
the purposes thereof. Any such license shall be non-exclusive and
royalty free and limited to the term of this Agreement.
4. MANUFACTURING
4.1 [^] the final Product(s) in the Territory. Emisphere will manufacture
the Carrier needed for Product sales. Novartis will pay Emisphere the
latter's [^] on all Carrier used for sales of Products. Emisphere's
manufacturing operations will meet all required regulatory agency's
specifications for registration. Carrier pricing will be established in
an exhibit to this Agreement with such exhibit to be revised annually.
[^]
4.2 Novartis reserves the right to audit the facility of Emisphere, including
its processes, records, and other facets of the operation as may be
necessary to assure that all applicable relevant Health Authority or
similar government regulations have been met. Emisphere shall permit
duly authorized representatives of Novartis to audit all research,
development and manufacturing areas and operations as they apply to
Emisphere projects or Carriers for Novartis at reasonable times with a
prior appointment. The right to audit will also apply to Carrier used in
trials to support product registration. These audits will be conducted
to assure compliance with all pertinent acts, regulations, and guidelines
promulgated by the relevant Health Authority and other regulatory
authorities. Such audits will be permitted during normal business hours
and will be performed with a minimum of disruption. Novartis shall
furnish to Emisphere summaries of all reports prepared as a result of
these audits. Novartis agrees to notify Emisphere within thirty (30)
days of any concerns that it may have regarding Carrier(s). Novartis
will also have the right to audit Emisphere s financial manufacturing
records in accordance with Clause 9.2.
5. RESEARCH AND DEVELOPMENT
5.1 Subject to any and all specific provisions included in the Option
Agreement or relevant Appendix, if Novartis desires to conduct and if
Emisphere has the requisite capability or resources, Novartis agrees to
use Emisphere, where possible, to conduct the Research and Development
Program on terms to be negotiated in good faith, subject to Steering
Committee approval and with consideration to the best interest of both
Novartis and Emisphere. Upon agreement in writing, and which will be
attached as an Annex to this Agreement by the Parties as to the
appropriate amount of compensation to Emisphere therefor, Emisphere shall
conduct its portion of such Research and Development Program, which will
be specified in an annex to this Agreement.
5.2 Subject to any and all specific provisions included in the Option
Agreement or relevant Appendix, the research and development work
conducted jointly by the Parties shall be in accordance with the Research
and Development Program devised by the Steering Committee. Both Parties
shall use reasonably diligent efforts, consistent with their efforts on
other projects of similar commercial importance and state of development,
to conduct their respective portions of the Research and Development
Program.
5.3 The Research and Development Program shall be directed by the Steering
Committee. In conducting the Research and Development Program, each
Party shall co-operate fully with the Steering Committee. Each Party
shall maintain the facilities used by it for the performance of the
Research and Development Program in compliance with the applicable
requirements of the relevant Health Authority and other regulatory
authorities, including then-current Good Manufacturing Practices and
then-current Good Laboratory Practices standards.
6. PRODUCT(S) MANUFACTURING
6.1 Any chemical (not including the Carriers) or formulation components
required to make use of the Emisphere Technology for the purposes of this
Agreement shall be procured by Novartis at its own expense. Novartis
shall ensure that supplies of the Product(s) are produced as diligently
as any of its products of similar commercial importance.
6.2 In no case will Novartis appoint a third party to manufacture the
Product(s) without the written consent of Emisphere if Emisphere
Know-How is required for such manufacture.
7. EXPLOITATION OF LICENSED TECHNOLOGY
7.1 Novartis will have the exclusive right in the Territory to develop the
Products and/or exploit the licensed Emisphere Technology and Program
Technology in the Field. In order to commercialize the Product(s),
Novartis shall use commercially reasonable efforts (consistent with its
efforts on products of similar commercial importance) to obtain marketing
approval for and Launch the Product(s) in such countries in the Territory
as is determined by normal Novartis business practices. It may be
necessary to file an INDA or NDA and perform clinical testing in more
than one country. The conduct of such clinical trials and the obtaining
of regulatory approvals shall be controlled and completed by Novartis.
7.2 The strategy for the registration and the commercialization of the
Product(s) shall be determined by Novartis. Novartis shall advise
Emisphere as to its general commercialization strategy on a semi-annual
basis. For each country in which the Product is Launched, Novartis shall
inform Emisphere of the Launch at least [^] prior to the expected date
therefor.
7.3 Novartis shall exert its reasonable efforts to commercialize the
Product(s) in each country of the Territory where Novartis has Launched
Product(s). Such efforts shall be consistent with Novartis s efforts on
products of similar commercial importance.
7.4 Novartis will be solely responsible for ensuring that the manufacture,
promotion, distribution, marketing and sale of the Product(s) within each
country of the Territory is in strict accordance with all the legal and
regulatory requirements of each country of the Territory.
7.5 All advertising, promotional materials and marketing costs needed to
exploit the Product(s) are to be paid by Novartis. Incorporation of
Emisphere trademarks and Logos by Novartis on package inserts and labels
shall be made upon discussion between Emisphere and Novartis with respect
to the appropriate protection of Emisphere s trademark, service mark or
trade name rights. Emisphere hereby grants Novartis a non-exclusive,
royalty-free license to use such trademark, service mark and trade name
rights if desired or required by Novartis.
8. FINANCIAL PROVISIONS
8.1 In consideration of the research and development work conducted by
Emisphere for and on behalf of Novartis pursuant to the Research and
Development Program, Novartis shall pay Emisphere the sums agreed to by
the Parties pursuant to Clause 5.1, above, or as provided for in the
relevant Option Agreement, if applicable.
8.2 In consideration of the granting of a license for the Emisphere
Technology and Program Technology to Novartis, Novartis shall make
Milestone payments and pay royalties on Net Sales of the Product(s) at
rates set forth in the Appendices of the Option Agreement. The
applicable Option Agreement Appendix, and hence Milestone and royalty
schedule, shall be determined by reference to the Activation Letter.
8.3 Novartis's obligation to pay royalties shall expire on a
country-by-country basis upon the conclusion of the term of this
Agreement, as set forth in Clause 12.1.
8.4 Payment of royalties shall be made quarterly within [^] after the expiry
of the calendar quarter; provided, that if the information necessary to
make such payments is not available within such [^] period, Novartis
shall have an additional [^] days to make such payments. The method of
payment shall be by wire transfer to an account specified by Emisphere,
or by such other manner as is mutually acceptable to the Parties. Each
payment made to Emisphere shall be accompanied by a written report,
prepared and signed by the appropriate royalty administration personnel
of Novartis. The report shall indicate at least the Net Sales of Product
for the calendar quarter for which payment is being made.
8.5 Novartis shall maintain and keep clear, detailed, complete, accurate and
separate records so:
8.5.1 as to enable any royalties on Net Sales of the Product(s) which
shall have accrued hereunder to be determined; and
8.5.2 that any deductions made in arriving at the Net Sales can be
determined.
8.6 All payments due hereunder shall be made in United States Dollars. [^]
exchange rate methodology will be employed for the translation of sales
in other currencies into United States Dollars. [^]
8.8 Emisphere and Novartis agree to co-operate in all respects necessary to
take advantage of any double taxation agreements or similar agreements as
may, from time to time, be available.
8.9 All taxes levied on payment of royalties accruing to Emisphere under this
Agreement shall be paid by Emisphere. If applicable laws or regulations
require withholding taxes by Novartis, the taxes will be deducted by
Novartis from remittable royalties and will be paid by Novartis on
account of Emisphere to the appropriate government tax authority.
9. RIGHT OF AUDIT AND INSPECTION
9.1 Within the term of this Agreement and within one year after its
termination, Emisphere shall not more than [^] each year have the right
at its expense to have a firm of independent certified public accountants
inspect and audit Novartis s records for any of the two preceding years
for the purpose of determining the accuracy of royalty payments. The
auditors must be acceptable to Novartis whose acceptance shall not be
unreasonably withheld. The independent certified accountants shall keep
confidential any information obtained during such inspection and shall
report to Emisphere only the amounts of Net Sales and royalties due and
payable. Only those records that pertain to the Product need be shown to
the auditors. Any such inspection of Novartis's records shall be at the
expense of Emisphere, except that if any such inspection reveals a
deficiency in the amount of the royalty actually paid to Emisphere
hereunder in any calendar year of [^] or more of the amount of any
royalty actually due to Emisphere hereunder, then the expense of such
inspection shall be borne solely by Novartis. Any amount of deficiency
shall be confirmed by Novartis and paid promptly to Emisphere. If such
inspection reveals a surplus in the amount of royalty actually paid to
Emisphere by Novartis, Emisphere shall reimburse Novartis the surplus.
9.2 Within the term of this Agreement and within one year after its
termination, Novartis shall not more than [^] each year have the right at
its expense to have a firm of independent certified public accountants
inspect and audit Emisphere s records and accompanying reports (and all
associated documentation) for any of the two preceding years for the
purpose of determining the accuracy of Emisphere s reported, [^] and
Costs with respect to any Research and Development Program. The auditors
must be acceptable to Emisphere whose acceptance shall not be
unreasonably withheld. The independent certified public accountants
shall keep confidential all materials subject to third-party
confidentiality agreements and all materials not directly relevant to the
purpose of their audit. Only those records that pertain to the Product
need be shown to the auditors. Any such inspection of Emisphere's records
shall be at the expense of Novartis, except that if any such inspection
reveals an overpayment in the amount of such costs paid to Emisphere
hereunder in any calendar year of [^] or more of the amount of such Costs
actually due to Emisphere hereunder, then the expense of such inspection
shall be borne solely by Emisphere instead of by Novartis. Any surplus
over the Costs properly payable by Novartis to Emisphere shall be
confirmed by Emisphere and refunded promptly to Novartis. If such
inspection reveals a deficit in the amount of the Costs properly payable
to Emisphere by Novartis, Novartis shall pay the deficit to Emisphere.
9.3 In the event of any unresolved dispute regarding any alleged deficiency
or overpayment of royalty payments or Cost payments hereunder, the matter
will be referred to the independent firm of certified public accountants
mutually accepted by both parties for a resolution of such dispute. The
decision of said firm of certified public accountants shall be binding on
the Parties.
10. PATENTS
10.1 Emisphere shall disclose promptly to Novartis potentially patentable
inventions conceived and/or reduced to practice by or on behalf of
Emisphere in connection with the performance of the Research and
Development Program, any potentially patentable inventions and
discoveries within the Emisphere Know-How that relate to the Field, the
Emisphere Program Know-How and any potentially patentable Improvements
developed by or on behalf of Emisphere (other than pursuant to the
Research and Development Program).
10.2 The Parties shall discuss in good faith all material issues relating to
preparing, filing, prosecution and maintenance of Emisphere Patents
(insofar as the Emisphere Patents are of relevance to the Field), the
Emisphere Program Patents, any potentially patentable inventions and
discoveries within the Emisphere Program Know-How that relate to the
Field, and any potentially patentable Improvements developed by or on
behalf of Emisphere (other than pursuant to the Research and Development
Program). Subject to agreement to the contrary the following provisions
shall apply:
10.2.1 Emisphere at its expense shall make a good faith effort (a) to
secure the grant of any patent applications within the Emisphere
Patents and Emisphere Program Patents (in so far as they relate
specifically to Carriers); (b) to prepare, file and prosecute
patent applications on patentable inventions and discoveries
within the Emisphere Program Know-How and patentable Improvements
developed by or on behalf of Emisphere (other than pursuant to the
Research and Development Program); (c) to defend all such
applications or patents as the case may be against third party
oppositions and similar actions; and (d) to maintain in force any
issued letters patent within the Emisphere Patents and Emisphere
Program Patents (including any letters patent that may issue
covering any Improvements). Emisphere shall have the right in its
reasonable business discretion to control such preparation,
filing, prosecution, defense and maintenance. Emisphere shall
not refuse any reasonable request by Novartis regarding the
preparation, filing, prosecution and maintenance, of a patent in
any country in the Territory. Should Emisphere believe it
necessary for commercial or other reasons to abandon or amend such
as to restrict the scope of the protection in any country any
patent or patent application pertaining to the Emisphere Patents
or the Emisphere Program Patents, it shall first consult with
Novartis.
10.2.2 In the event that Emisphere informs Novartis that it does not
intend to prepare or file patent applications on patentable
inventions and discoveries within the Emisphere Program Know-How
that relate to the Field or patentable Improvements developed by
or on behalf of Emisphere (other than pursuant to the Research and
Development Program) in one or more countries in the Territory or
fails to prepare or file such an application within a reasonable
period of time, but in no event less than four (4) months after
disclosure to Novartis pursuant to Clause 10.1, at Emisphere's
election, Novartis shall have the right, but not the obligation,
at Emisphere's sole expense, to prepare, file and prosecute such
patent application(s) in the name of Emisphere, and Emisphere,
upon written request from Novartis, shall execute all documents,
forms and declarations and do all things as shall be reasonably
necessary to enable Novartis to exercise such right. In the event
that Emisphere so elects and Novartis prepares and files any such
application, such application shall be, as appropriate, considered
an Emisphere Patent or an Emisphere Program Patent.
10.3 Emisphere shall assist Novartis in good faith regarding all material
issues that arise from the Research and Development Program relating to
preparation, filing, prosecution and maintenance of Novartis Patents
(insofar as the Novartis Patents are of relevance to the Field), the
Novartis Program Patents and any patentable inventions and discoveries
within the Novartis Know-How or Novartis Program Know-How that relate to
the Field or Carriers. Such assistance will be provided, however, only
upon Novartis's request. Subject to agreement to the contrary, the
following provisions shall apply:
10.3.1 Novartis shall be solely responsible for all facets of
preparation, filing and prosecuting patent applications and
maintaining and defending patents within the Novartis Patents and
the Novartis Program Patents (in so far as the Novartis Program
Patents are of relevance to the Field), including all expenses
pertaining thereto.
10.3.2 Any assistance from Emisphere requested by Novartis with respect
to its obligations as set forth in this Clause 10.3 shall be
provided at Novartis's expense. Emisphere will use its best
reasonable efforts to provide such assistance in the manner
requested by Novartis.
10.4 With respect to any Joint Patents (relating to the Field), Novartis shall
have the right, but not the obligation to prepare and file patent
applications on behalf of both Parties and will diligently prosecute
same. Prior to the contemplated filing, Novartis shall submit a
substantially completed draft of such patent applications to Emisphere
for approval, which approval shall not be unreasonably withheld or
delayed. In the event of an imminent statutory bar to patenting,
Novartis shall have the right to file a patent application, for the
invention on which a patent would be barred, without first receiving
approval from Emisphere, in order to preserve the patent rights to such
invention. Novartis and Emisphere shall equally bear the reasonable
costs of preparing, filing, prosecuting and maintaining any patent
applications and patents falling within this Clause 10.4. Should
Novartis not wish to prepare, file, prosecute, maintain or issue any
patent application falling within this Clause 10.4, or maintain a patent
issuing from any such patent applications, in any particular country,
Novartis will grant Emisphere any necessary authority to file, prosecute,
maintain or issue such patent application, or maintain such patent, in
the name of Emisphere. However, in such case, such patent application or
patent for such country shall be considered to be an Emisphere Program
Patent. Likewise, should Emispehre not wish to prepare, file, prosecute,
maintain or issue any patent application falling with this Clause 10.4,
or maintain a patent issuing from such patent applications, in any
particular country, Emisphere will grant Novartis any necessary authority
to prepare, file, prosecute, issue and maintain such patent application,
or maintain such a patent, in the name of Novartis. However, in such
case, such patent application or patent for such country shall be
considered to be a Novartis Program Patent.
10.5 Emisphere and Novartis shall promptly inform the other in writing of any
alleged infringement or misappropriation of any intellectual property
rights within the Emisphere Technology or the Emisphere Program
Technology by a third party of which the Party becomes aware and provide
the other with any available evidence of such infringement or
misappropriation.
10.5.1 (a) Emisphere shall have the primary right, but not the
obligation, to institute, prosecute and control any action or
proceeding with respect to any infringement of any of the
Emisphere Technology, the Emisphere Program Technology (to the
extent it relates specifically to Carriers), or the Novartis
Technology (to the extent it relates specifically to Carriers) by
counsel of its own choice. Novartis shall cooperate with
Emisphere at Emisphere's request in the prosecution of such action
or proceeding. If Emisphere reasonably determines that Novartis
is an indispensable Party to the action, Novartis hereby consents
to be joined. In such event, Novartis shall have the right to be
represented in that action by counsel of its own choice and at
Novartis's expense.
(b) If Emisphere fails to bring an action or proceeding within
a period of [^] after receiving written notice from Novartis or
otherwise having knowledge of infringement of the Emisphere
Technology, the Emisphere Program Technology (to the extent it
relates specifically to Carriers), or the Novartis Technology (to
the extent it relates specifically to Carriers) in the Field,
Novartis shall have the right to bring and control any such action
by counsel of its own choice and at its own expense. If Novartis
reasonably determines that Emisphere is an indispensable Party to
the action, Emisphere hereby consents to be joined. In such
event, Emisphere shall have the right to be represented in that
action by counsel of its own choice and at Emisphere's expense.
(c) No settlement, consent judgment or other voluntary final
disposition of a suit under this Clause 10.5.1 may be entered into
without the joint consent of Novartis and Emisphere (which consent
shall not be withheld unreasonably or delayed by either Party).
(d) If Emisphere brings an action hereunder, any damages or
other monetary awards recovered by Emisphere attributable to sales
of Product shall be applied first to defray the costs and expenses
incurred in the action. If any balance remains, Emisphere shall
pay Novartis [^] of such balance.
(e) If Emisphere fails to bring an action hereunder and
Novartis brings action, any damages or other monetary awards
recovered by Novartis attributable to sales of Product shall be
applied first to defray the costs and expenses incurred in the
action. If any balance remains, Novartis shall pay Emisphere [^]
of such balance.
(f) In the alternative, the Parties may agree to institute
such proceedings in their joint names and shall reach agreement as
to the proportion in which they will share the proceeds of any
such proceedings, and the expense of any costs not recovered.
(g) If the infringement or misappropriation of rights with
respect to the Emisphere Technology or the Emisphere Program
Technology affects the Field as well as other products being
developed or commercialized by Emisphere or its commercial
partners, the Parties shall agree as to the manner in which the
proceedings should be instituted and shall reach agreement as to
the proportion in which they will share the proceeds of any such
proceedings, and the expense of any costs not recovered.
10.5.2 During the term of this Agreement, Novartis shall have the first
right but not the obligation to bring suit or otherwise take
action against any alleged infringement or misappropriation of
rights with respect to the Novartis Program Technology (as it
relates to Products). In the event that Novartis takes such
action, Novartis shall do so solely at its own cost and expense
and all damages and monetary award recovered in or with respect to
such action shall be the property of Novartis. At Novartis's
reasonable request, Emisphere will co-operate with any such action
at Novartis's sole cost and expense.
10.5.3 During the term of this Agreement, Novartis shall have the first
right to bring suit or otherwise take action against any alleged
infringement of the Joint Patents or alleged misappropriation of
the Joint Know-How as both relate to the Field, Emisphere shall
have the first right to bring suit or otherwise take action
against any alleged infringement of the Joint Patents or alleged
misappropriation of the Joint Know-How as both relate specifically
to the Carriers. Each Party shall be obligated to inform the
other of any infringement or misappropriation of which they become
aware. The Parties shall jointly determine in good faith how to
manage any action with respect to any such infringement or
misappropriation. In the alternative, or if one party desires to
take such an action and the other does not, the Party that takes
such action shall do so solely at its own cost and expense and all
damages and monetary award recovered in or with respect to such
action shall be the property of that Party. At such Party's
reasonable request, the other Party will co-operate with any such
action at the requesting Party's sole cost and expense.
10.6 Emisphere may defend against any third party claim that challenges
Emisphere's intellectual property rights in the Emisphere Technology or
the Emisphere Program Technology. Novartis shall cooperate with
Emisphere as may be reasonably requested by Emisphere in such defense and
shall have the right to be represented by counsel of its own choice at
Novartis's expense provided that Emisphere shall (i) keep Novartis fully
informed with regard to the defense of such third party claim and (ii)
obtain Novartis's prior written approval before entering into any
settlement in connection with such third party claims, such approval not
to be unreasonably withheld or delayed.
If within [^] of receiving notice of such third party claim, Emisphere
fails to defend against such third party claim, Novartis may, at its own
cost, defend against such third party claim; provided that Novartis shall
(i) keep Emisphere fully informed with regard to the defense of such
third party claim, and (ii) obtain Emisphere's prior written approval
before entering into any settlement in connection with such third party
claim, such approval not be unreasonably withheld or delayed. Emisphere
shall cooperate with Novartis as may reasonably be requested by Novartis
in such defense and shall have the right to be represented by counsel of
its own choice at Emisphere's expense. If royalties or lump sum payments
are due to the third party by reason of a court order or litigation
settlement, such payment shall be solely the responsibility of Novartis,
provided that such third party royalties or lump sum payments shall be
offset against royalties payable to Emisphere under this Agreement, not
to exceed [^] of the royalties due Emisphere, as also set forth in Clause
13.1.
10.7 Except as provided in Clauses 10.6 and 13.1, Emisphere shall have no
liability to Novartis whatsoever or howsoever arising for any losses
incurred by Novartis as a result of having to cease selling Product(s) or
having to defer the Launch of Product(s) as a result of any infringement
proceedings or similar process instituted by any third party.
11. CONFIDENTIAL INFORMATION
11.1 Novartis will maintain in strictest confidence, and will ensure that its
Affiliates and its and their consultants, employees, agents and
representatives maintain in strictest confidence, all proprietary and
confidential information which has been or is provided by Emisphere to
Novartis, including but not limited to, Emisphere s inventions,
discoveries, improvements and methods, business plans, marketing
techniques or plans, manufacturing and other plant designs, location of
operations, and any other information affecting the business operations
of Emisphere, and will not use for any purpose other than the completion
of the Agreement, and will not publish, disseminate, or disclose, in any
manner, to any person any Emisphere Information unless: (i) Novartis is
legally required to do so, (ii) the Emisphere Information has entered or
enters the public domain through no fault of Novartis, (iii) the
Emisphere information was already known by Novartis before receipt from
Emisphere, or is developed independently by Novartis without breach of
this Agreement, in either case as shown by comtemporaneous written
records, or (iv) the Emisphere Information is received by Novartis from a
third party under no confidentiality obligation to Emisphere.
11.2 Emisphere will maintain in strictest confidence, and will ensure that its
Affiliates and its and their consultants, employees, agents and
representatives maintain in strictest confidence, all proprietary and
confidential information which has been or is provided by Novartis to
Emisphere, including but not limited to, Novartis s inventions,
discoveries, improvements and methods, business plans, marketing
techniques or plans, manufacturing and other plant designs, location of
operations, and any other information affecting the business operations
of Novartis ,and will not use for any purpose other than the completion
of the Agreement, and will not publish, disseminate, or disclose, in any
manner, to any person any Novartis Information unless: (i) Emisphere is
legally required to do so, (ii) the Novartis Information has entered or
enters the public domain through no fault of Emisphere, (iii) the
Novartis Information was already known by Emisphere before receipt from
Novartis, or is developed independently by Emisphere without breach of
this Agreement, in either case as shown by comtemporaneous written
records, or (iv) the Novartis Information is received by Emisphere from a
third party under no confidentiality obligation to Novartis.
11.3 The provisions of this Clause 11 will survive the termination or
expiration of this Agreement.
12. TERM OF AGREEMENT
12.1 This Agreement will be effective on the Effective Date. Subject to the
provisions for earlier termination set out in Clauses 12.2, 12.3, and
12.6 and the provisions regarding the payment of royalties in Clause 8,
the term of this Agreement shall be a period commencing as of the
Effective Date and expiring on a country by country basis on the last to
occur of:
12.1.1 [^] years from the first date of Launch of the Product(s) [^] for
countries where no patent protection exists; or
12.1.2 expiration of the last to expire patent included in the Emisphere
Patents, and/or the Emisphere Joint Patents (existing as of the
Effective Date) to the extent that any such patents disclose and
claim Products(s).
Upon expiration of the Agreement pursuant to this clause 12.1, Novartis shall
have a fully paid up license for the Emisphere Technology. To the extent
permitted by law this Agreement shall be continued for successive one year
periods, unless either party serves a termination notice on the other party
(such notice not to be served later than 6 months from the end of the original
or any successive period).
12.2 In addition to the rights of early or premature termination provided for
elsewhere in this Agreement, in the event that any of the terms or
provisions hereof are incurably breached by either Party, the
non-breaching Party may immediately terminate this Agreement by written
notice. Subject to the other provisions of this Agreement, in the event
of any other breach, the non-breaching Party may terminate this Agreement
by giving written notice to the breaching Party that this Agreement will
terminate on the sixtieth (60th) day from notice unless cure is sooner
effected. If the breaching Party has proposed a course of action to
rectify the breach and is acting in good faith to rectify same but has
not cured the breach by the sixtieth (60th) day, said period shall be
extended by such period as is reasonably necessary to enable the breach
to be cured. This provision shall not be construed to be a waiver of any
other remedies for breach that may be available to either Party.
12.3 As used in this Clause 12, the term Event of Bankruptcy relating to
either Party shall mean:
(a) an application or petition for bankruptcy, whether voluntary or
involuntary, under the law of any applicable jurisdiction that is
not discharged within thirty (30) days;
(b) a declaration of bankruptcy or insolvency by the relevant
authority under the law of the applicable jurisdiction;
(c) an assignment for the benefit of creditors, whether voluntary or
involuntary; or
(d) a dissolution, winding-up, confiscation or sequestration of
substantially all of a Party's assets under the law of the
applicable jurisdiction.
12.3.1 If at any time during the term of this Agreement, an Event of
Bankruptcy (as defined above) relating to Emisphere occurs,
Novartis shall have, in addition to all other legal and equitable
rights and remedies available hereunder, the option to terminate
this Agreement upon thirty (30) days written notice, given within
sixty (60) days following the date that Novartis becomes aware of
the Event of Bankruptcy. Upon such termination by Novartis,
Novartis shall be entitled to solely continue the activities
conducted or to be conducted pursuant to this Agreement but for
the Event of Bankruptcy.
12.3.2 If at any time during the term of this Agreement, an Event of
Bankruptcy (as defined above) relating to Novartis occurs,
Emisphere shall have, in addition to all other legal and equitable
rights and remedies available hereunder, the option to terminate
this Agreement upon thirty (30) days written notice, given within
sixty (60) days following the date that Emisphere becomes aware of
the Event of Bankruptcy. Upon such termination by Emisphere,
Emisphere shall be entitled to the continued benefits of any
license granted to it pursuant to the Option Agreement, Section
1.5(l).
12.4 Upon exercise of those rights of termination as specified in Clause 12.1
to Clause 12.3 inclusive or elsewhere within the Agreement, this
Agreement shall, subject to the other specific provisions of the
Agreement to the contrary, automatically terminate forthwith and be of no
further legal force or effect.
12.5 Upon expiration or termination of the Agreement:
12.5.1 any sums that were due from Novartis to Emisphere on Net Sales in
the Territory or in such particular country or countries in the
Territory, as the case may be, prior to the expiration or
termination of this agreement as set forth herein shall be paid in
full within [^](or [^] if the information necessary to make such
payment is not available within such [^] period) of the expiration
or termination of this Agreement for the Territory or for such
particular country or countries in the Territory, as the case may
be;
12.5.2 all confidentiality provisions set out herein shall remain in full
force and effect;
12.5.3 all responsibilities and warranties shall insofar as are
appropriate remain in full force and effect;
12.5.4 the rights of inspection and audit set out in Clause 9 shall
continue in force for a period of one year;
12.5.5 in the event of termination as opposed to expiration under 12.1,
except as expressly provided for under Clauses 12.2 and 12.5.7 all
rights and licenses granted in and pursuant to this Agreement
shall cease for the Territory or for such particular country or
countries in the Territory, as the case may be;
12.5.6 to the extent this Agreement is terminated (as opposed to
expiration under 12.1) in the Territory or any particular country
in the Territory, Novartis shall promptly make an accounting to
Emisphere of the inventory of the Product(s) which it or its
sublicensees has in the Territory or for such particular country
or countries in the Territory, as the case may be, if any, as of
the date of such termination and Novartis shall have the right for
a period of [^] after said termination to sell such inventory of
the Product(s) in the Territory or in such particular country or
countries in the Territory, as the case may be, or, if appropriate
and legally permissible, to transport such inventory of Product(s)
for sale in another country or countries in the Territory within
such [^] period; provided that the Net Sales thereof shall be
subject to the royalty provisions of Clause 8 and so payable to
Emisphere. Thereafter, any remaining inventory of Product(s)
shall be disposed of by mutual agreement of the Parties in
accordance with regulatory requirements;
12.5.7 upon the expiration of the term of this Agreement under clause
12.1 in any particular country, Novartis shall have a fully
paid-up, non-exclusive license to make or use the Emisphere
Know-How for the Products in the Field in that country. Upon
expiration of the term of this Agreement in any particular
country, no royalty payment on Net Sales will be due to Emisphere
(except for those royalties that are due and have not yet been
paid prior to such conclusion of the term of this Agreement) for
the Products in that country, except as may be agreed by the
Parties to the extent that Products in the Field continue to
require a license for Emisphere Program Know-How, to the extent
any such requirement is permissible under the law of the
applicable jurisdiction.
12.6 Novartis shall have the option at any time to terminate the Agreement
upon [^] prior written notice to Emisphere. Novartis shall pay for any
and all external (to Novartis) research and development commitments by
Emisphere in place at the time of such notice of termination pertaining
to this Agreement to the extent that Emisphere cannot terminate the same
without penalty.
If Novartis terminates this Agreement for reasons other than safety of
the Carriers, clinical results of the Product, or the Emisphere
Technology efficiency, the Parties will issue a joint press release which
states that the termination was not due to the Emisphere Technology, and
that Novartis may evaluate the Emisphere Technology with respect to other
Novartis therapeutic compounds.
13. WARRANTIES/INDEMNITIES
13.1 Emisphere represents and warrants that it has the sole, exclusive and
unencumbered right to grant the licenses and rights herein granted to
Novartis, and that it has not granted any option, license, right or
interest in or to the Emisphere Technology, the Emisphere Program
Technology, the Carriers or the Product(s) to any third party which would
conflict with the rights granted by this Agreement.
In the case where application of the Emisphere Technology or the
Emisphere Program Technology to the Product in the Field is covered by a
patent or patents (or other intellectual property rights) held by an
Independent Third Party, and both Emisphere and Novartis agree that a
license is required under any such patent (or other intellectual property
right) for the Parties to utilize the Emisphere Technology or the
Emisphere Program Technology for the purposes of this Agreement, Novartis
shall be permitted to obtain such a license and deduct from royalties
otherwise due to Emisphere the costs of obtaining the license, up to a
limit of [^] of all royalty payments due to Emisphere hereunder. In any
such case, Novartis, in its negotiations with the Independent Third Party
with respect to the amount of compensation for such a license, shall act
in good faith vis a vis Emisphere. In the alternative, at Novartis's
election and upon its request, Emisphere shall obtain the license and pay
the the costs thereof, up to a limit of [^] of all royalty payments due
to Emisphere hereunder. In any such case, Emisphere, in its negotiations
with the Independent Third Party with respect to the amount of
compensation for such a license, shall act in good faith vis a vis
Novartis.
If the license is required for utilization of the Emisphere Technology or
Emisphere Program Technology outside the Field as well as within the
Field, then Emisphere shall be required to obtain the license and, with
respect to Net Sales of the Product, Novartis shall pay the royalty or
other licensing cost to the Independent Third Party and deduct from
royalties otherwise due to Emisphere the costs of the license, up to a
limit of [^] of all royalty payments due to Emisphere hereunder. In any
such case, Emisphere, in its negotiations with the Independent Third
Party with respect to the amount of compensation for such a license,
shall act in good faith vis a vis Novartis.
13.2 Emisphere represents and warrants that to the best of its knowledge, the
true inventors of the subject matter claimed are named in the Emisphere
Patents and all such inventors have irrevocably assigned all their rights
and interests therein to Emisphere.
13.3 Emisphere represents and warrants that it is not aware of any information
material to the examination of the Emisphere Patents that was not
disclosed to the United States Patent Office or similar patent
examining body in other jurisdictions where a patent has been
applied for.
13.4 Emisphere and Novartis represent and warrant for the benefit of each
other that the execution of this Agreement by them and the full
performance and enjoyment of their rights under this Agreement will not
breach the terms and conditions of any license, contract, understanding
or agreement, whether express, implied, written or oral between them and
any third party.
13.5 Emisphere and Novartis represent and warrant for the benefit of each
other that as of the Effective Date of this Agreement, to the best of
their knowledge no patents, trade secrets or any other proprietary rights
of any third party would be infringed by the manufacture, use or sale of
the Product(s).
13.6 Emisphere represents and warrants that with respect to all regulatory
filings to obtain NDA approvals, to the best of Emisphere's knowledge,
the data and information in Emisphere's submission(s) are and shall be
free from fraud or material falsity, that the NDA approvals have not been
and will not be obtained either through bribery or the payment of illegal
gratuities, that the data and information in Emisphere's submissions are
and shall be accurate and reliable for purposes of supporting approval of
the submissions, and that the NDA approvals are and shall be obtained
without illegal or unethical behavior of any kind.
13.7 Novartis represents and warrants that with respect to all regulatory
filings to obtain NDA approvals, to the best of Novartis's knowledge, the
data and information in Novartis's submission(s) are and shall be free
from fraud or material falsity, that the NDA approvals have not been and
will not be obtained either through bribery or the payment of illegal
gratuities, that the data and information in Novartis's submissions are
and shall be accurate and reliable for purposes of supporting approval of
the submissions, and that the NDA approvals are and shall be obtained
without illegal or unethical behavior of any kind.
13.8 Novartis represents and warrants that the Product(s) sold by Novartis
under this Agreement shall conform to the Specifications and be in
accordance with all regulations and requirements of the relevant Health
Authority or other relevant governmental body, including the then-current
Good Manufacturing Practice or similar regulations which apply to the
manufacture and supply of the Product(s). Novartis represents and
warrants that the Product(s) sold by it shall not be adulterated or
mis-branded as defined by the US Federal Food, Drug and Cosmetic Act for
Products sold in the US, or similar acts of other countries within the
Territory, and shall not be a product which would violate any section of
such US acts if introduced in interstate or other commerce in the US.
EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13, ALL OTHER WARRANTIES,
CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY EXCLUDED AND NOVARTIS
SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR ANY LOSS, DAMAGE,
EXPENSE OR INJURY OF ANY KIND WHATSOEVER, CONSEQUENTIAL OR OTHERWISE,
ARISING OUT OF OR IN CONNECTION WITH THE PRODUCT(S) OR ANY DEFECT IN THE
PRODUCT(S) OR FROM ANY OTHER CAUSE.
13.9 Emisphere represents and warrants that the Carrier(s) sold by Emisphere
under this Agreement shall conform to the Specifications and be in
accordance with all regulations and requirements of the relevant Health
Authority or other relevant governmental body, including the then-current
Good Manufacturing Practice or similar regulations which apply to the
manufacture and supply of the Carrier(s). Emisphere represents and
warrants that the Carrier(s) sold by it shall not be adulterated or
mis-branded as defined by the US Federal Food, Drug and Cosmetic Act for
Carriers sold in the US, or similar acts of other countries within the
Territory, and shall not be a product which would violate any section of
such US acts if introduced in interstate or other commerce in the US.
EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13, ALL OTHER WARRANTIES,
CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE CARRIER(S) ARE HEREBY EXCLUDED AND EMISPHERE
SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR ANY LOSS, DAMAGE,
EXPENSE OR INJURY OF ANY KIND WHATSOEVER, CONSEQUENTIAL OR OTHERWISE,
ARISING OUT OF OR IN CONNECTION WITH THE CARRIER(S) OR ANY DEFECT IN THE
CARRIER(S) OR FROM ANY OTHER CAUSE.
13.10 Novartis is fully cognizant of all applicable statutes, ordinances and
regulations of the Territory with respect to the manufacture of the
Product(s) including, but not limited to, the U.S. Federal Food, Drug and
Cosmetic Act and regulations thereunder, current Good Laboratory
Practices and current Good Manufacturing Practices. Novartis shall
manufacture the Product(s) in conformance with the Specifications and the
Drug Master File (which Novartis shall own), to the extent any such Drug
Master File exists, and in a manner which fully complies with such
statutes, ordinances, regulations and practices.
13.11 Emisphere is fully cognizant of all applicable statutes, ordinances and
regulations of the Territory with respect to the manufacture of the
Carrier including, but not limited to, the U.S. Federal Food, Drug and
Cosmetic Act and regulations thereunder, current Good Laboratory
Practices and current Good Manufacturing Practices. Emisphere shall
manufacture the Carrier in conformance with the Specifications and the
Drug Master File and in a manner which fully complies with such statutes,
ordinances, regulations and practices. Emisphere shall own the Drug
Master File with respect to the Carriers, and Novartis shall have access
and a right of review thereto with respect to its or third parties'
manufacture of Carriers and its regulatory filings.
13.12 In addition to any other indemnifications provided for herein, Emisphere
shall indemnify and hold harmless Novartis and its Affiliates and their
respective employees, agents, partners, officers and directors from and
against any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Novartis arising
out of or in connection with (a) any breach of any representation,
covenant, warranty or obligation by Emisphere hereunder, or (b) any act
or omission on the part of Emisphere or any of its agents or employees in
the performance of this Agreement.
13.13 In addition to any other indemnifications provided for herein, Novartis
shall indemnify and hold harmless Emisphere and its Affiliates and their
respective employees, agents, partners, officers and directors from and
against any claims, losses, liabilities or damages (including reasonable
attorney's fees and expenses) incurred or sustained by Emisphere arising
out of or in connection with (a) any breach of any representation,
covenant, warranty or obligation by Novartis hereunder, or (b) any act or
omission on the part of Novartis or any of its agents or employees in the
performance of this Agreement.
13.14 Novartis shall assume the sole and entire responsibility and shall
indemnify and hold harmless Emisphere from any and all claims,
liabilities, expenses, including reasonable attorney's fees,
responsibilities and damages by reason of any claim, proceedings, action,
liability or injury arising out of any faults of the Product(s) resulting
from the manufacturing, transport, packaging, storage, handling,
distribution, marketing or sale of the Product(s) by Novartis, to the
extent that it was caused by the negligence or wrongful acts or omissions
on the part of Novartis.
13.15 Emisphere shall assume the sole and entire responsibility and shall
indemnify and hold harmless Novartis from any and all claims,
liabilities, expenses, including reasonable attorney s fees,
responsibilities and damages by reason of any claim, proceeding, action,
liability or injury arising out of any faults of the Carrier(s) resulting
from the manufacturing, transport, packaging, storage, handling or
distribution of the Carrier(s) by Emisphere, to the extent that it was
caused by the negligence or wrongful acts or omissions on the part of
Emisphere.
13.16 As a condition of obtaining an indemnity in the circumstances set out
above, the Party seeking an indemnity shall:
13.16.1 fully and promptly notify the other Party of any claim or
proceeding, or threatened claim or proceeding;
13.16.2 permit the indemnifying Party to take full care and
control of the defense of such claim or proceeding;
13.16.3 cooperate in the investigation and defense of such claim
or proceeding;
13.16.4 not compromise or otherwise settle any such claim or
proceeding without the prior written consent of the other
Party, which consent shall not be unreasonably withheld,
conditioned or delayed; and
13.16.5 take all reasonable steps to mitigate any loss or
liability in respect of any such claim or proceeding.
13.17 Emisphere shall not recommend to the Steering Committee as part of the
Research and Development Program any proposal for work that Emisphere
believes infringes on patents or would infringe on a patent that may
issue from a published patent application of a third party.
14. REGULATORY APPROVALS
14.1 Any and all INDAs, NDAs and other applications for regulatory approval
filed hereunder for the Product(s) shall be the responsibility and
property of Novartis. Novartis shall allow Emisphere access thereto to
enable Emisphere to fulfill its obligations and exercise its rights under
this Agreement. Novartis will be responsible for all regulatory filings
in all countries and shall allow Emisphere access to related
correspondence, to the extent such access is necessary or useful to
enable Emisphere to fulfill its obligations and exercise its rights under
this Agreement. In particular, Novartis agrees to inform Emisphere
should any such correspondence reasonably pertain to the Emisphere
Technology or the Emisphere Program Technology. The Parties shall
collaborate in relation to obtaining the approval of the relevant Health
Authority for final approved labeling.
14.2 Save as otherwise outlined in this Agreement, the costs and expenses of
any filings and proceedings made by Novartis to the relevant Health
Authority, including post approval studies required by the relevant
Health Authority in respect of the Product(s), and to maintain the
relevant Health Authority approval hereunder shall be paid by Novartis.
14.3 Should the Parties receive a notice of regulatory inspection from any
governmental agency, or if the Parties receive notice of any potential
regulatory action, relative to the Carrier, the Parties will have an
obligation to notify each other of same.
14.4 Emisphere will prepare and provide Novartis with all information deemed
necessary by Novartis for worldwide regulatory submission of the Product
(Novartis will provide Emisphere with a template for such submissions,
which Emisphere shall prepare and provide the relevant information to
Novartis). Emisphere shall also provide Novartis with necessary access
to any regulatory filings worldwide relevant to the Product and Novartis
shall be entitled to use the information contained therein in its own
regulatory filings on the Product. Should Emisphere wish, at any time
during the term of this Agreement, to modify its regulatory filings
relating to the Product, Emisphere shall provide Novartis with written
notification of its intentions. If Emisphere modification results in
additional costs for Novartis, Emisphere will reimburse Novartis for said
costs. Finally, to the extent details of the regulatory filing process
are not set forth in this section or elsewhere in the Agreement, the
Steering Committee shall decide any such matters.
15. INSURANCE
15.1 Novartis shall maintain comprehensive general liability insurance,
including product liability insurance on the Product(s) manufactured
and/or sold in such prudent amount as shall be determined by Novartis
management for the duration of this Agreement and for a period of [^]
thereafter.
15.2 Emisphere shall maintain comprehensive general liability insurance,
including product liability insurance on the Carrier(s) manufactured for
and/or sold to Novartis in such prudent amount as shall be determined by
Emisphere management for the duration of this Agreement and for a period
of [^] thereafter.
16. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
16.1 Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results
from causes beyond its reasonable control, including, without limitation,
acts of God, fires, strikes, acts of war, or intervention of a government
authority, but any such delay or failure shall be remedied by such Party
as soon as practicable.
17. SETTLEMENT OF DISPUTES; PROPER LAW
17.1 The Parties will attempt in good faith to resolve any dispute arising out
of or relating to this Agreement promptly by negotiation between the [^]
In the event that such negotiations do not result in a mutually
acceptable resolution, the Parties agree to consider other dispute
resolution mechanisms including mediation. [^]
17.2 This Agreement shall be governed by and construed in accordance with the
laws of New York without reference to conflicts of laws principles.
18. ASSIGNMENT
18.1 This Agreement may not be assigned by either Party without the prior
written consent of the other, which consent shall not be unreasonably
withheld, conditioned or delayed, save that either Party may assign this
Agreement to its Affiliate or to any successor by merger or sale of
substantially all of the assets of its business unit to which this
Agreement relates without such consent, provided that such assignment
does not have any material adverse tax consequences on the other Party.
19. NOTICES
19.1 Any notice to be given under this Agreement shall be sent in writing in
English by commercial courier or telefaxed to the following addresses:
If to Novartis:
Novartis Pharma AG
Lichtstrasse 35
CH-4002 Basel
Switzerland
Attention:[^]
Telephone: [^]
Telefax: [^]
If to Emisphere:
Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne, NY 10532
Attention: [^]
Telephone: (914) 347-2220
Telefax: (914) 347-2498
or to such other address(es) and telefax number(s) as may from time to
time be notified by either Party to the other hereunder.
19.2 Any notice sent by courier shall be deemed to have been delivered within
[^] working days after dispatch and any notice sent by telefax shall be
deemed to have been delivered within [^] of the time of receipt of
confirmation of delivery thereof. Notice of change of address shall be
effective upon receipt. Termination notices shall be made by registered
mail.
20. MISCELLANEOUS CLAUSES
20.1 No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any other breach or failure to perform or of any
other right arising under this Agreement.
20.2 If any provision in this Agreement is agreed by the Parties to be, or is
deemed to be, or becomes invalid, illegal, void or unenforceable under
any law that is applicable hereto, (i) such provision will be deemed
amended to conform to applicable laws so as to be valid and enforceable
or, if it cannot be so amended without materially altering the intention
of the Parties, it will be deleted, with effect from the date of such
agreement or such earlier date as the Parties may agree, and (ii) the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be impaired or affected in any way.
20.3 The Parties shall use their respective reasonable endeavors to ensure
that the Parties and any necessary third party shall do, execute and
perform all such further deeds, documents, assurances, acts and things as
any of the Parties hereto may reasonably require by notice in writing to
the other Party or such third party to carry out the provisions of this
Agreement.
20.4 This Agreement shall be binding upon and inure to the benefit of the
Parties hereto, their successors and permitted assigns and sublicensees.
20.5 No provision of this Agreement shall be construed so as to negate, modify
or affect in any way the provisions of any other agreement between the
Parties unless specifically referred to, and solely to the extent
provided, in any such other agreement. In the event of a conflict
between the provisions of this Agreement and the provisions of the Option
Agreement, the terms of the Option Agreement shall prevail unless this
Agreement specifically provides otherwise.
20.6 No amendment, modification or addition hereto shall be effective or
binding on either Party unless set forth in writing and executed by a
duly authorized representative of each Party.
20.7 This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken
together shall constitute this Agreement.
20.8 Each of the Parties undertakes to do all things reasonably within its
power which are necessary or desirable to give effect to the spirit and
intent of this Agreement.
20.9 Each of the Parties hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein.
20.10 Nothing contained in this Agreement is intended or is to be construed to
constitute Emisphere and Novartis as partners, or Emisphere as an
employee of Novartis, or Novartis as an employee of Emisphere. Neither
Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other
Party or to bind the other Party to any contract, agreement or
undertaking with any third party.
20.11 This Agreement has been jointly prepared and shall not be strictly
construed against any Party.
20.12 The parties hereto agree to disclose publicly through a joint press
release previously agreed to in writing, upon signing this Agreement, the
nature and scope of the Agreement. All press releases and disclosures of
Confidential Information shall be approved in writing in advance by both
parties, except for such disclosures permitted pursuant to Clause 11,
above, such approval not to be unreasonably withheld or delayed. Upon
the occurrence of other significant events in the Research and
Development Program or other activities hereunder, Emisphere and Novartis
agree to make joint press releases previously agreed in writing by the
Parties.
IN WITNESS THEREOF the Parties hereto have executed this Agreement in
duplicate.
SIGNED BY and BY
For and on behalf of
Novartis Pharma AG
in the presence of:
SIGNED BY
For and on behalf of
Emisphere Technologies, Inc.
in the presence of:
SCHEDULE I
List of Emisphere Patents
[to be supplied prior to execution of this Agreement]
STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT is made as of the 3rd day of
December, 1997, by and between Novartis Pharma AG ( Novartis or the
Investor ), a Corporation organized under the laws of Switzerland, with its
principal place of business at Lichtstrasse 35, CH-4002, Basel, Switzerland and
Emisphere Technologies, Inc. ( Emisphere or the Company ), a Delaware
corporation with its principal place of business at 15 Skyline Drive, Hawthorne,
New York.
The Company and the Investor have, on this date, entered into a
Research Collaboration and Option Agreement, a copy of which is attached hereto
as Exhibit A (the Collaboration Agreement ). Capitalized terms used herein but
not otherwise defined herein shall have the respective meanings ascribed to such
terms in the Collaboration Agreement. The Collaboration Agreement provides the
Investor with an exclusive option ( Option 1") to enter into a License Agreement
with respect to Product 1 as described and set forth in the Collaboration
Agreement. If the Investor exercises Option 1, it shall purchase common stock,
par value $.01 per share, of the Company ( Common Stock ) from the Company, as
provided in Section 1.1 below (i) for [^] upon execution of the License
Agreement with respect to Product 1 (the First Contingent Investment ) and (ii)
for [^] upon [^] (the Second Contingent Investment ), in each case unless the
Company waives such stock purchase obligations, all as more fully described
pursuant to the terms of this Agreement. The Collaboration Agreement also
provides the Investor with an exclusive option ( Option 2") to enter into a
License Agreement with respect to Product 2 as described and set forth in the
Collaboration Agreement. If the Investor exercises Option 2, it shall purchase
Common Stock from the Company, as provided in Section 1.2 below (i) for [^] upon
execution of the License Agreement with respect to Product 2 (the Third
Contingent Investment ) and (ii) for [^] upon [^] (the Fourth Contingent
Investment ), in each case unless the Company waives such stock purchase
obligations, all as more fully described pursuant to the terms of this
Agreement. Shares of Common Stock issued pursuant to Sections 1.1 and 1.2
hereof are referred to herein as the Shares.
THE PARTIES HEREBY AGREE AS FOLLOWS:
2. Purchase and Sale of Common Stock.
2.1 Purchase in Connection with Option 1.
(a) First Contingent Investment. If the Investor exercises
Option 1, then upon execution of the License Agreement with respect to Product
1, subject to the terms and conditions of this Agreement, at the First
Contingent Closing (as hereinafter defined) the Company shall sell and issue to
the Investor, and the Investor shall purchase and receive from the Company, the
number of Shares to which the Investor is entitled for the First Contingent
Investment, priced at the [^]
(b) Second Contingent Investment. If the Investor exercises
Option 1, then upon the first Major Market regulatory submission for Product 1,
subject to the terms and conditions of this Agreement, at the Second Contingent
Closing (as hereinafter defined) the Company shall sell and issue to the
Investor, and the Investor shall purchase and receive from the Company, the
number of Shares to which the Investor is entitled for the Second Contingent
Investment, priced at [^]<PAGE>
2.2 Purchase in Connection with Option 2.
(a) Third Contingent Investment. If the Investor exercises
Option 2, then upon execution of the License Agreement with respect to
Product 2, subject to the terms and conditions of this Agreement, at the Third
Contingent Closing (as hereinafter defined) the Company shall sell and issue to
the Investor, and the Investor shall purchase and receive from the Company, the
number of Shares to which the Investor is entitled for the Third Contingent
Investment, priced at [^]
(b) Fourth Contingent Investment. If the Investor exercises
Option 2, then upon the first Major Market regulatory submission for Product 2,
subject to the terms and conditions of this Agreement, at the Second Contingent
Closing (as hereinafter defined) the Company shall sell and issue to the
Investor, and the Investor shall purchase and receive from the Company, the
number of Shares to which the Investor is entitled for the Fourth Contingent
Investment, priced at [^]
2.3 Registration of Shares. Shares issued pursuant to Sections 1.1
and 1.2 shall be issued pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the Securities
Act ).
(a) Shelf Registration. Within fourteen days of each of (i)
the receipt of notice constituting the Investor's exercise of Option 1, (ii) the
receipt of notice constituting the Investor's exercise of Option 2, [^] the
Company shall prepare and file with the Securities and Exchange Commission (the
"Commission") a Registration Statement for an offering to be made by the
Investor on a continuous basis pursuant to Rule 415 of all of the Shares (the
"Registrable Securities") that the Investor is entitled to purchase in
connection with the respective above-mentioned event pursuant to Sections 1.1 or
1.2 (each an "Initial Shelf Registration"). Each Initial Shelf Registration
shall be on Form S-3, if available, or another appropriate form permitting
registration of such Registrable Securities for resale by the Investor or any
Affiliate (as defined in Section 1.5 hereof) to which the Investor has assigned
its rights hereunder in ordinary course broker-dealer transactions, block trades
or otherwise (not including any underwritten public offerings of Registrable
Securities with an aggregate value of less than $10 million). The Company shall
use commercially reasonable efforts to cause each Initial Shelf Registration to
be declared effective under the Securities Act as soon as practicable after
filing (the "Effectiveness Date") and to keep each Initial Shelf Registration
continuously effective under the Securities Act during the period (the
"Effectiveness Period") ending upon the earlier to occur of (i) the sale of all
Registrable Securities covered by such Initial Shelf Registration or any
Subsequent Shelf Registration (as defined herein) in the manner set forth and as
contemplated in such Initial Shelf Registration and (ii) the Investor's ability
to sell the Registrable Securities, without volume limitation, under Rule 144
under the Securities Act, as confirmed by counsel to the Company reasonably
acceptable to the Investor.
(b) Subsequent Shelf Registrations. If any Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company shall use
commercially reasonable efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 45 days of
such cessation of effectiveness amend such Initial Shelf Registration in a
manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Securities covered by such Initial Shelf
Registration (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company shall use commercially reasonable efforts to
cause the Subsequent Shelf Registration to be declared effective under the
Securities Act as soon as practicable after such filing and to keep such
Registration Statement continuously effective for the remainder of the
Effectiveness Period. As used herein the term "Shelf Registration" means any
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the holders of a majority of the Registrable Securities covered by
such Shelf Registration.
(d) Piggyback Registration. If, at any time after the date of
the First Contingent Investment, the Second Contingent Investment, the Third
Contingent Investment or the Fourth Contingent Investment, as the case may be,
the Company proposes to register any of its Common Stock under the Securities
Act in connection with an underwritten public offering of such securities, the
Investor shall be entitled to have the Company include the Registrable
Securities in such proposed registration.
(e) Additional Covenants with respect to Registration Rights.
The Company shall pay all filing fees and related registration expenses relating
thereto, including, without limitation, the reasonable fees and disbursements of
one counsel to the Investor and the accountants and counsel for the Company.
The parties agree to the additional covenants set forth in Section 9 of this
Agreement relating to the registration of the Shares.
2.4 Reservation of Shares. Prior to the First Contingent Closing, the
Company shall have reserved for issuance the number of Shares required for
issuance pursuant to Sections 1.1 and 1.2.
2.5 Assignability to Affiliate. The parties agree that, subject to
Section 10.3 hereof, the Investor may assign the right and obligation to
purchase the Shares to any person controlling, controlled by or under common
control with the Company (an "Affiliate").
2.6 Waiver of Share Purchase Obligations. Notwithstanding the
foregoing provisions in this Section 1 of the Agreement, if the Investor
exercises the Option and:
(a) not less than [^] prior to the execution of the License
Agreement with respect to Product 1, the Company by written Notice given
pursuant to Section 10.9 hereof, waives its right to sell and issue the Shares
contemplated by Section 1.1(a), then the Company shall not be obligated to sell
or issue Shares to the Investor, and the Investor shall not be obligated to make
the First Contingent Investment, nor pay any consideration in lieu thereof;
(b) not less than [^] prior to [^] the Company, by written
Notice given pursuant to Section 10.9 hereof, waives its right to sell and issue
the Shares contemplated by Section 1.1(b), then the Company shall not be
obligated to sell or issue the Shares to the Investor, and the Investor shall
not be obligated to make the Second Contingent Investment, nor pay any
consideration in lieu thereof;
(c) not less than [^] prior to the execution of the License
Agreement with respect to Product 2, the Company by written Notice given
pursuant to Section 10.9 hereof, waives its right to sell and issue the Shares
contemplated by Section 1.2(a), then the Company shall not be obligated to sell
or issue such Shares to the Investor, and the Investor shall not be obligated to
make the Third Contingent Investment, nor pay any consideration in lieu thereof;
and
(d) not less than [^] prior to [^] the Company, by written
Notice given pursuant to Section 10.9 hereof, waives its right to sell and issue
the Shares contemplated by Section 1.2(b), then the Company shall not be
obligated to sell or issue such Shares to the Investor, and the Investor shall
not be obligated to make the Fourth Contingent Investment, nor pay any
consideration in lieu thereof.
3. Closing Date, Delivery.
3.1 Closing Date. The Closing of the First Contingent Investment (the
First Contingent Closing ) shall be held simultaneously with the execution of
the License Agreement with respect to Product 1 or such other date as the
Company and the Investor may agree in writing. The Closing of the Second
Contingent Investment (the Second Contingent Closing ) shall take place [^]
with respect to Product 1 or such other date as the Company and the Investor may
agree in writing. The Closing of the Third Contingent Investment (the Third
Contingent Closing ) shall be held simultaneously with the execution of the
License Agreement with respect to Product 2 or such other date as the Company
and the Investor may agree in writing. The Closing of the Fourth Contingent
Investment (the Fourth Contingent Closing ) shall take place [^] with respect
to Product 2 or such other date as the Company and the Investor may agree in
writing. The First Contingent Closing, the Second Contingent Closing, the Third
Contingent Closing and the Fourth Contingent Closing are referred to
collectively herein as the Closings.
3.2 Delivery. At each of the respective Closings, the Company will
deliver to the Investor a certificate, registered in the name of the Investor or
the Investor's designee, representing the Shares to be issued at each such
Closing, in each case upon receipt of the purchase price therefor by wire
transfer of same day funds per the Company s wiring instructions.
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor as follows:
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
corporate authority to own and operate its properties and assets, to carry on
its business as now conducted and as proposed to be conducted, to enter into
this Agreement, to sell the Shares and to carry out the other transactions
contemplated hereunder. The Company and each of its subsidiaries is qualified
to transact business and is in good standing in each jurisdiction in which the
failure to qualify would have a material adverse effect on the business,
properties or financial condition of the Company and its subsidiaries taken as a
whole (a Material Adverse Effect ). The Company has delivered to the Investor
true, correct and complete copies of its Restated Certificate of Incorporation
(the Restated Certificate ) and Bylaws in effect on the date hereof.
4.2 Capitalization and Voting Rights.
(a) The authorized capital of the Company as of the date
hereof consists of: 20,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock, $.01 par value per share. The number, rights, privileges and
preferences of the Series A Junior Participating Preferred Stock are as stated
in the Restated Certificate.
(b) Except as set forth in Schedule 3.2 (b) of Exhibit B to
this Agreement or in the Company's Annual Report on Form 10-K for the fiscal
year ended July 31, 1997 or any proxy statement, Quarterly Report on Form 10-Q
or Current Report on Form 8-K as of any date or for any period subsequent to
July 31, 1997 filed by the Company with the Commission (collectively, the
Company's Public Filings ), there are (i) no outstanding options, warrants,
rights (including conversion or preemptive rights) or agreements pursuant to
which the Company is or may become obligated to issue, sell, repurchase or
redeem any shares of its capital stock or any other securities of the Company or
any of its subsidiaries; (ii) no restrictions on the transfer of capital stock
of the Company imposed by the Restated Certificate or Bylaws of the Company, any
agreement to which the Company is a party, any order of any court or any
governmental agency to which the Company is subject, or any statute other than
those imposed by relevant state and federal securities law; (iii) no cumulative
voting rights for any of the Company s capital stock; (iv) no registration
rights under the Securities Act with respect to shares of the Company's Capital
Stock and (v) no shares of its Common Stock reserved for issuance pursuant to
the exercise of existing options or options to be granted in the future.
(c) Except as set forth in Schedule 3.2 (c) of Exhibit B to
this Agreement or in the Company's Public Filings, the Company is not a party to
or is not subject to any agreement or understanding relating to, and to the
Company s knowledge there is no agreement or understanding between any persons
and/or entities which affects or relates to, the voting of shares of capital
stock of the Company or the giving of written consents by a shareholder or
director of the Company.
4.3 Subsidiaries. Except as set forth in Schedule 3.3 of Exhibit B to
this Agreement or in the Company's Public Filings, the Company does not
presently own or control, directly or indirectly, any other corporation,
association, or other business entity. Each of the Company s subsidiaries is
duly organized and existing under the laws of its jurisdiction or organization
and is in good standing under such laws. None of the Company s subsidiaries
owns or leases property or engages in any activity in any jurisdiction that
might require its qualification to do business as a foreign corporation and in
which failure to do so would have a Material Adverse Effect.
4.4 Authorization. All corporate action on the part of the Company
and its stockholders necessary for the authorization, execution and delivery of
this Agreement, the performance of all obligations of the Company hereunder and
the authorization, issuance and delivery of the Shares to be sold hereunder has
been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and similar laws affecting creditor rights. The
execution, delivery and performance of this Agreement and compliance with the
provisions hereof by the Company, will not:
(a) violate any provision of law, statute, ordinance, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body, except for such
violations as would not result in a Material Adverse Effect, and will not
require any filing or registration by the Company with any federal or state
administrative agency or other governmental body other than filing pursuant to
the Hart-Scott-Rodino Pre-Merger Notification Act ( HSR Act ), if applicable,
and other than filings pursuant to federal and state securities laws, in each
case to the extent applicable, except for such filing or registrations the
failure of which to complete or obtain would not result in a Material Adverse
Effect;
(b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under (i) any agreement, document, instrument, contract, note,
indenture, mortgage or lease to which the Company is a party or under which the
Company or any of its assets is bound or affected, other than any such breaches
or defaults that would not result in a Material Adverse Effect, (ii) the
Company s Restated Certificate or (iii) the Bylaws of the Company; or
(c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company which
would result in a Material Adverse Effect.
4.5 Valid Issuance of Common Stock.
(a) The Shares, when issued, sold and delivered in accordance
with the terms hereof for the consideration expressed herein, will be duly
authorized and validly issued, fully paid and nonassessable and, except as set
forth in Schedule 3.5(a) of Exhibit B to this Agreement or in the Company's
Public Filings, not subject to any preemptive rights, rights of first refusal or
similar rights imposed by the Company.
(b) The outstanding shares of Common Stock are duly authorized
and validly issued, fully paid and nonassessable, and were issued in compliance
in all material respects with all applicable federal and state securities laws.
4.6 Litigation. Except as set forth in Schedule 3.6 of Exhibit B to
this Agreement or in the Company's Public Filings:
(a) There is no action, suit, proceeding or investigation
pending or, to the Company s knowledge, currently threatened against the Company
which questions the validity of this Agreement or the right of the Company to
enter into it, or to consummate the transactions contemplated hereby, or which
reasonably would be expected to have, either individually or in the aggregate, a
Material Adverse Effect, or result in any change in the current equity ownership
of the Company, nor is the Company aware that there is any basis for the
foregoing.
(b) To the Company s knowledge, there are no legal actions
pending or threatened involving the employment by or with the Company of any of
the Company s current employees, their use in connection with the Company s
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers.
(c) The Company is not a party to any order, writ, injunction,
judgment or decree of any court.
4.7 Employees. Except as set forth in Schedule 3.7 of Exhibit B to
this Agreement or in the Company's Public Filings:
(a) To the Company s knowledge, none of its employees is
obligated under any contract (including licenses, covenants or contracts of any
nature) or other agreement, or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with the use of his best
efforts to promote the interests of the Company or that would conflict with the
Company s business as currently conducted. Neither the execution nor delivery
of this Agreement, nor the carrying on of the Company s business by the
employees of the Company, nor the conduct of the Company s business as currently
conducted, will, to the Company s knowledge, conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under, any
material contract, covenant or instrument under which any of such employees is
now obligated.
(b) Each employee of, or consultant to the Company, who has or
is proposed to have access to confidential or proprietary information of the
Company is a signatory to, and is bound by, an agreement with the Company
relating to noncompetition, nondisclosure of proprietary information, and
assignment of patent, copyright and other intellectual property rights.
(c) To the Company s knowledge, no employee of, or consultant
to, the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement or any other contract or
agreement with the Company including, but not limited to, those matters relating
to (i) the relationship of any such employee with the Company or to any other
party as a result of the nature of the Company s business as currently
conducted, or (ii) unfair competition, trade secrets or proprietary information.
4.8 Patents and Trademarks. Except as set forth in Schedule 3.8 of
Exhibit B to this Agreement or in the Company's Public Filings, there are no
outstanding options, licenses, or agreements of any kind relating to the
Company s patents, service marks, trademarks, copyrights, trade secrets,
proprietary rights or other intellectual property (hereinafter collectively the
Intellectual Property ); nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the Intellectual Property of
any other person or entity. The Company has not received any written
communications alleging that the Company has violated or, by conducting its
business, would violate any of the Intellectual Property of any other person or
entity. To the Company s knowledge, all patents owned by or licensed to the
Company were validly obtained and are valid and enforceable by the Company.
4.9 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of the Restated Certificate or the
Company s Bylaws or of any judgment, order, writ or decree to which it is a
party or by which it is bound which default could have a Material Adverse
Effect.
4.10 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby and
as set forth in Schedule 3.10(a) of Exhibit B to this Agreement, there are no
agreements, understandings, transactions or proposed transactions between the
Company and any of its officers, directors, or affiliates, or any affiliate
thereof or any entities in which such persons have an interest that are required
to be disclosed in or included as an exhibit to the Company's Public Filings
that are not so disclosed or included.
(b) Except as set forth in Schedule 3.10(b) of Exhibit B to
this Agreement, there are no agreements, understandings, instruments, contracts,
transactions or proposed transactions to which the Company is a party or by
which it is bound that are required to be disclosed in or included as an exhibit
to the Company's Public Filings that are not so disclosed or included.
(c) The Company has not admitted in writing its inability to
pay its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other laws of the United
States or any other jurisdiction.
(d) To the Company s knowledge, the Company is in compliance
with all obligations, agreements and conditions contained in any evidence of
indebtedness or any loan agreement or other contract or agreement (whether or
not relating to indebtedness) to which the Company is a party or is subject
(collectively, the Obligations ) except where such non-compliance would not
result in a Material Adverse Effect. To the Company s knowledge, all other
parties to such Obligations are in compliance with the terms and conditions of
such Obligations.
4.11 Title to Property and Assets. Except as set forth in the
Company s most recent audited Balance Sheet included in the Company's Public
Filings, and the related notes thereto, the Company has good, legal and
merchantable title to all of its assets, including all properties and assets
reflected on such Balance Sheet free and clear of all mortgages, liens,
restrictions or encumbrances (other than those described therein), except those
assets disposed of since the date of such Balance Sheet in the ordinary course
of business, none of which assets either alone or in the aggregate are material
either in nature or amount, to the business of the Company. Each lease of real
or personal property to which the Company is a party is valid, subsisting and
enforceable with such exceptions as do not materially interfere with the
business of the Company. Each such lease constitutes a valid and binding
obligation of, and is enforceable in accordance with its terms against, the
Company and, to the Company s knowledge, the other parties thereto. Except as
set forth in Schedule 3.11 of Exhibit B to this Agreement or in the Company's
Public Filings, with respect to the property and assets it leases, the Company
is in all material respects in compliance with such leases and has not received
notice of any allegations that it is in default thereunder in any material
respect.
4.12 Financial Statements. The Company's Public Filings include the
Company's (i) audited financial statements (Balance Sheets, Statements of
Operations, Statements of Shareholder s Equity and Statements of Cash Flow) at
July 31, 1997 and for the fiscal year then ended (the Audited Financial
Statements ), and (ii) its unaudited financial statements as of and for any
quarterly period ended subsequent to July 31, 1997 for which financial
statements are required to be filed with the Commission (the Unaudited
Financial Statements and, together with the Audited Financial Statements, the
Financial Statements ). The Financial Statements have been prepared in
accordance with generally accepted accounting principles (GAAP) applied on a
consistent basis throughout the periods indicated and fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein. Except as set forth in the Financial
Statements, in Schedule 3.12 of Exhibit B to this Agreement or in the Company's
Public Filings, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to July 31, 1997 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. Except as disclosed in the Financial
Statements, in Schedule 3.12 of Exhibit B to this Agreement or in the Company's
Public Filings, the Company is not a guarantor or indemnitor of any indebtedness
of any other person, firm or corporation. The Company maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
4.13 Tax Returns, Payments and Elections. The Company has filed all
tax returns and reports as required by law, including without limitation, all
federal, state and local income, excise or franchise tax returns, real estate
and personal property tax returns, sales and use tax returns, payroll tax
returns and other tax returns or reports required to be filed by it. These
returns and reports are true and correct in all material respects. The Company
has paid or made provision for the payment of all accrued and unpaid taxes and
other charges to which the Company is subject and which are not currently due
and payable. The Company has not agreed to an extension of the statute of
limitations with respect to any of its tax years. Neither the Internal Revenue
Service nor any other taxing authority is now asserting, nor, to the Company s
knowledge, is threatening to assert, against the Company any deficiency or claim
for additional taxes or interest thereon or penalties in connection therewith
that would have a Material Adverse Effect. The Company has not made any
elections pursuant to the Internal Revenue Code of 1986, as amended ( Code )
(other than elections which relate solely to methods of accounting, depreciation
or amortization) which would have a Material Adverse Effect.
4.14 Insurance. The Company maintains insurance of the types and in
the amounts which it believes are reasonably adequate for its businesses, all of
which insurance is in full force and effect.
4.15 Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
Material Adverse Effect, nor is the Company aware of any labor organization
activity involving its employees. The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Except as set forth in
Schedule 3.15 of Exhibit B to this Agreement, the Company's Public Filings
disclose or include the material terms of all of the Company's employment
agreements with key executive officers of the Company.
4.16 Real Property Holding Corporation. The Company is not, and has
not been at any time a United States real property holding corporation as
defined in Section 897 of the Internal Revenue Code of 1986, as amended.
4.17 Offering. Subject to the accuracy of the Investor s
representations set forth in Section 4 of this Agreement, the offer, sale and
issuance of the Shares to be issued in conformity with the terms of this
Agreement constitute transactions exempt from the registration requirements of
the Securities Act, and from all applicable state registration or qualification
requirements, other than those with which the Company has complied or will
comply.
4.18 Environmental and Safety Laws. Except as set forth in Schedule
3.18 of Exhibit B to this Agreement or in the Company's Public Filings:
(a) To the Company s knowledge, the Company is not in
violation of any Environmental Law (as hereinafter defined) in any material
respect and to its knowledge, no material expenditures not currently budgeted
for or anticipated are or will be required in order to comply with any
Environmental Law. As used in this Agreement, Environmental Law shall mean
any applicable federal, state and local law, ordinance, rule or regulation that
regulates, fixes liability for, or otherwise relates to, the handling, use
(including use in industrial processes, in construction, as building materials,
or otherwise), the treatment, storage and disposal of hazardous and toxic wastes
and substances, or the discharge, leakage, presence, migration, actual Release
(as hereinafter defined) or threatened Release (whether by disposal, a discharge
into any water source or system or into the air, or otherwise) of any pollutant
or effluent.
(b) The Company has not used, generated, manufactured,
refined, treated, transported, stored, handled, disposed, transferred, produced,
processed or released (hereinafter together defined as Release ) any Hazardous
Materials (as hereinafter defined) on, from or affecting any Property (as
hereinafter defined) in any manner or by any means in violation of any
Environmental Laws in any material respect and to the Company s knowledge, there
is no threat of such Release. As used herein, the term Property shall
include, without limitation, land, buildings and laboratory facilities owned or
leased by the Company or as to which the Company now has any duties,
responsibilities (for cleanup, remedy or otherwise) or liabilities under any
Environmental Laws, or as to which the Company or any subsidiary of the Company
may have such duties, responsibilities or liabilities because of past acts or
omissions of the Company or any such subsidiary or their predecessors, or
because the Company or any such subsidiary or their predecessors in the past was
such an owner or operator of, or bore some other relationship with, such land,
buildings or laboratory facilities. The term Hazardous Materials shall
include, without limitation, any flammable explosives, petroleum products,
petroleum by-products, radioactive materials, hazardous wastes, hazardous
substances, toxic substances or related materials as defined by Environmental
Laws.
(c) The Company has not received written notice that the
Company is a party potentially responsible for costs incurred at a cleanup site
or corrective action under any Environmental Laws. The Company has not received
any written requests for information in connection with any inquiry by any
Governmental Authority (as hereinafter defined) concerning disposal sites or
other environmental matters other than routine requests sent to all business
entities in the Company's business. As used herein, Governmental Authority
shall mean any nation or government, any federal, state, municipal, local,
provincial, regional or other political subdivision thereof, and any entity or
person exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
(d) The stockholders of the Company, acting as stockholders,
have had no control over, or authority with respect to, the waste disposal
operations of the Company.
4.19 Licenses and Other Rights; Compliance with Laws. The Company has
all franchises, permits, licenses and other rights and privileges necessary to
permit it to own its properties and to conduct its business as presently
conducted, other than such franchises, permits, licenses and other rights and
privileges which the failure to have would not have a Material Adverse Effect.
The Company is in compliance in all material respects under each, and the
transactions contemplated by this Agreement will not cause a violation under
any, of such franchises, permits, licenses and other rights and privileges. The
Company is in compliance in all material respects with all laws and governmental
rules and regulations applicable to its businesses, properties and assets, and
to the products and services sold by it, including, without limitation, all such
rules, laws and regulations relating to fair employment practices, occupational
safety and health and public safety. The Company is in compliance in all
material respects with the applicable provisions of the Clinical Laboratories
Improvement Act of 1967, as amended.
4.20 Employee Benefit Plans. To the Company's knowledge, the Company is
in compliance with applicable laws governing the Company's employee benefit
plans as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, except where the failure to so comply would
not have a Material Adverse Effect.
4.21 Reliance. The Company understands that the foregoing
representations and warranties shall be deemed material and to have been relied
upon by the Investor. No representation or warranty by the Company in this
Agreement, and no written statement contained in any document, certificate or
other writing delivered by the Company to the Investor contains any untrue
statement of material fact or omits to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
5. Representations, Warranties and Covenants of the Investor. The Investor
hereby represents and warrants the following:
5.1 Authorization, Governmental Consents and Compliance with Other
Instruments. All corporate action on the part of the Investor necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Investor hereunder has been taken or will be taken prior
to the Closing. This Agreement constitutes a valid and legally binding
obligation of the Investor, enforceable in accordance with its terms, except as
such enforcement is limited by bankruptcy, insolvency and similar laws affecting
creditor rights. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Investor is
required in connection with the consummation of the transactions contemplated by
this Agreement other than compliance with the HSR Act, if applicable. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any provision of the Investor's Articles of
Incorporation or Bylaws or any instrument, judgment, order, writ, decree or
contract to which the Investor is a party or by which it is bound or an event
which results in the creation of any lien, charge or encumbrance upon any assets
of the Investor.
5.2 Purchase Entirely for Own Account. The Investor is aware that the
Company is entering into this Agreement in reliance upon the Investor s
representation to the Company, which by the Investor s execution of this
Agreement the Investor hereby confirms, that the Shares will be acquired for
investment for the Investor s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the Shares. By executing this Agreement, the Investor
further represents that the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares. The Investor represents that it has full power and authority to enter
into this Agreement.
5.3 Investment Experience and Accredited Investor Status. The Investor
is an accredited investor (as defined in Regulation D promulgated under the
Act). The Investor is an investor in securities of companies in the development
stage and acknowledges that it is able to fend for itself, and bear the economic
risk of its investment and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Common Stock hereunder. The Investor is not a United States
Person as that term is defined in Regulation S of the Act, as amended and is not
acquiring the Common Stock for the account or benefit of any United States
Person.
5.4 Restricted Securities. The Investor understands that the Shares,
when issued, will be restricted securities under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only in certain
limited circumstances. In this connection, the Investor represents that it is
familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
5.5 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Investor further represents, warrants and
agrees that it will not make any disposition of all or any portion of the Shares
(except to an Affiliate in accordance with Section 10.3 of this Agreement)
unless and until:
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(b) the disposition is made pursuant to Rule 144 or similar
provisions of the federal securities laws as in effect from time to time; or
(c) (i) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, the Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such Shares under the Act.
5.6 Legends. It is understood that the certificates evidencing the
Shares will bear the following legends:
(a) These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required under the Securities Act of
1993.
(b) Any legend required by applicable state securities laws.
6. Conditions to Closing of Investor. The Investor s obligations hereunder
are subject to the fulfillment of the following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the date of each respective Closing as though such
representations and warranties had been made on and as of each such date, except
that:
(a) there shall be delivered at each such Closing a certificate,
signed by an officer of the Company, which contains the representation and
warranty set forth in Section 3.2, but substituting the then-current numbers of
shares for the numbers of shares set forth in Section 3.2;
(b) for the purposes of the representation and warranty set forth
in Section 3.12, Audited Financial Statements shall be deemed to refer to the
most recent audited financial statements of the Company filed with the
Commission and Unaudited Financial Statements shall be deemed to refer to any
unaudited financial statements filed with the Commission subsequent to the date
of such Audited Financial Statements;
(c) references to the Company's Public Filings shall be deemed to
include all filings made by the Company from July 31, 1997 through such Closing;
and
(d) there shall have been delivered at least 10 business days
before each respective Closing amendments to the Schedules set forth on Exhibit
B to this Agreement, containing such information concerning developments or
occurrences since the date of the most recently delivered Schedules or (or
amendment thereto) as is necessary to cause the representations and warranties
contained in Section 3 to be true and correct, and no development or occurrence
reflected in any such amendment, either alone or in the aggregate shall
constitute a material adverse change in the business or prospects of the Company
and its subsidiaries taken as a whole.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to each respective
Closing shall have been performed or complied with in all material respects.
All proceedings to have been taken and all waivers and consents to be obtained
in connection with the transactions contemplated by this Agreement shall have
been taken or obtained, and all documents incidental thereto shall be
satisfactory to the Investor and its counsel, and the Investor and its counsel
shall have received copies (executed or certified, as may be appropriate) of all
documents which the Investor or its counsel may reasonably have requested in
connection with such transactions.
6.3 Compliance Certificate. The Company shall have delivered to the
Investor, at each respective Closing, a certificate executed by the President
and Chief Executive Officer of the Company in form and substance reasonably
satisfactory to the Company and the Investor, certifying to the fulfillment of
the conditions specified in Sections 5.1 and 5.2 of this Agreement.
6.4 Legal Opinion. At each respective Closing, all legal matters
incident to the purchase of the Shares shall be satisfactory to the Investor s
counsel, and the Investor shall have received from counsel for the Company
reasonably satisfactory to the Investor, such counsel s opinion addressed to the
Investor and dated the date of such Closing, substantially in the form of
Exhibit C hereto.
6.5 License Agreement. The Company and the Investor shall have entered
into the License Agreement with respect to Product 1 or Product 2, as the case
may be, in substantially the form as reflected in Exhibit A.
6.6 Certification of Resolutions and Officers. The Company shall have
delivered to the Investor, within fourteen days of the date hereof and upon and
dated as of each respective Closing, a certificate or certificates of the
Secretary of the Company certifying as to (a) the resolutions of the Board of
Directors (and the vote of the stockholders, if necessary) authorizing the
execution and delivery of this Agreement, the issuance to the Investor of the
Shares, the execution and delivery of such other documents and instruments as
may be required by this Agreement, and the consummation of the transactions
contemplated hereby, and certifying that such resolutions were duly adopted and
have not been rescinded or amended as of said date (b) the name and the
signature of the officers of the Company authorized to sign, as appropriate,
this Agreement and the other documents and certificates to be delivered pursuant
to this Agreement by either the Company or any of its officers and (c) a
specimen certificate representing the Common Stock.
6.7 Certification of No Material Adverse Change. At each respective
Closing, the Company shall have delivered to the Investor a certificate, dated
the date of such Closing, of the Chief Financial Officer of the Company
certifying that since July 31, 1997, there has not been any material adverse
change in the financial condition or operations of the Company, and that, except
to the extent reflected in the financial statements referred to in Section 3.12
(or in such later financial statements, as the case may be), and except for
liabilities arising in the ordinary course of business (none of which
liabilities either alone or in the aggregate are material either in nature or
amount to the business of the Company), the Company has no material accrued or
contingent liabilities which are not specifically described in such financial
statements or the Company's Public Filings.
7. Condition to Closing of the Company. It shall be a condition precedent to
the obligations of the Company hereunder that the representations and warranties
of the Investor contained herein shall be true and correct as of the dates of
each respective Closing.
8. Mutual Conditions to Closing.
The obligations of each of the Investor and the Company to consummate each
respective Closing are subject to the fulfillment as of the dates of each
respective Closing of the following conditions:
8.1 Qualifications. All consents, permits, approvals, qualifications
and registrations required to be obtained or effected with any governmental
authority, including, without limitation, necessary Blue Sky law permits and
qualifications required by any state for the offer and sale to the Investor of
the Shares, shall have been obtained or effected, and any filings required under
the HSR Act shall have been made and the required waiting period shall have
elapsed.
8.2 Absence of Litigation. There shall be no injunction, actions,
suits, proceedings or investigations pending or currently threatened against the
Company or the Investor which questions the validity of this Agreement or the
right of the Company or the Investor to enter into it, or to consummate the
transactions contemplated hereby.
9. Standstill Agreement.
9.1 Standstill. Subject to Section 8.2 of this Agreement, for the
period beginning on the date of this Agreement and ending [^] without the
express written consent of the Company, the Investor will not:
(a) acquire beneficial ownership of any securities of the Company
entitled to vote in the election of directors ( Voting Stock ), any securities
convertible into or exchangeable for Voting Stock, or any other right to acquire
Voting Stock (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of any Voting Stock
generally), or make a tender, exchange or other offer to acquire Voting Stock,
if after giving effect to such acquisition, the Investor would beneficially own
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the Securities Exchange Act ) more than [^] of the voting power represented by
all Voting Stock of the Company; provided, however, that notwithstanding the
provisions of this clause (a), if the number of shares constituting Voting Stock
is reduced or if the aggregate ownership of the Investor is increased as a
result of a recapitalization of the Company or as a result of any other action
taken by the Company, the Investor will not be required to dispose of any of its
holding of Voting Stock even though such action resulted in the Investor s
ownership exceeding [^] of the voting power which the Investor would otherwise
have been permitted to own;
(b) propose, nominate or support for election to the Board of
Directors any person whose nomination has not been approved by a majority of the
full Board of Directors, or vote or cause to be voted in favor of any such
person any Voting Stock; or
(c) encourage or support a tender, exchange or other offer or
proposal by any other person, entity or group (an Offeror ) the consummation of
which would result in a change of control of the Company (an Acquisition
Proposal ). For purposes of this Section 8, a change of control shall mean
(i) a merger or consolidation to which the Company is a party and as a result of
which the persons who were stockholders of the Company immediately prior to the
effective date of such merger or consolidation beneficially own (as defined in
Rule 13d-3 under the Securities Exchange Act) less than [^] of the Voting Stock
outstanding immediately following the effectiveness of such merger or
consolidation; (ii) the acquisition by the Offeror of beneficial ownership of
Voting Stock which, when combined with all other Voting Stock beneficially owned
by the Offeror, represents [^] or more of the voting power represented by the
issued and outstanding Voting Stock; (iii) a sale of all or substantially all of
the Company s assets (other than to a wholly owned subsidiary of the Company);
or (iv) a liquidation or dissolution of the Company.
9.2 Termination of Standstill. The restrictions contained in
Section 8.1 shall terminate upon the public announcement by an Offeror of an
Acquisition Proposal; the acquisition by an Offeror of beneficial ownership of
more than [^] of the voting power represented by all Voting Stock of the
Company; or the conduct by the Company of substantive negotiations with any
person or group (not related to Investor and not affiliated with the Company) to
enter into any transaction with that person or an affiliate of such person: (i)
that would result in the then-current owners of the Company's Voting Securities
holding less than [^] of the Voting Securities of the entity surviving a
contemplated merger or consolidation, or (ii) that would result in the sale of
all or substantially all of the Company's assets, or (iii) that would result in
a change of control.
10. Additional Covenants and Agreements with Respect to Registration of
Shares.
10.1 Obligations of the Company. Whenever required under Section 1.3 to
effect the registration of any Shares, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(b) Furnish to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the Investor may
reasonably request in order to facilitate the disposition of the Shares.
(c) Use commercially reasonable efforts to register and qualify
the securities covered by such registration under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the Investor,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any other states or jurisdictions.
(d) In the event of any underwritten public offering, the
underwriter(s) shall be reasonably satisfactory to the Company and the Company
shall enter into and perform its obligations under a customary underwriting
agreement for such offering satisfactory to the Investor, such underwriter(s)
and the Company.
(e) Promptly notify the Investor at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
10.2 Indemnification. In the event any Shares are included in a
registration statement under Section 1.3:
(a) The Company will indemnify and hold harmless the Investor, any
underwriter (as defined in the Securities Act) for the Investor and each person,
if any, who controls the Investor or such underwriter within the meaning of the
Securities Act or the Securities Exchange Act, against any and all losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Securities Exchange Act, or any other
statute or common law of the United States of America or any other country or
political subdivision thereof, including any amount paid in settlement of any
litigation commenced or threatened (including any amounts paid pursuant to or in
settlement of claims under the indemnification or contribution provisions of any
underwriting or similar agreement entered into by the Investor in connection
with any offering or sale of securities covered by this Agreement), and shall
promptly reimburse them, as and when incurred, for any legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a Violation ): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Securities Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act or the Securities Exchange Act; provided,
however, that the indemnity provided for in this subsection 9.2(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by the Investor seeking indemnification
or an underwriter.
(b) The Investor will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, and any controlling person of any such
underwriter, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Securities Act, the Securities Exchange Act, or any other statute or common law
of the United States of America or any other country or political subdivision
thereof, including any amounts paid in settlement of any litigation commenced or
threatened (including any amount paid pursuant to or in settlement of claims
made under the indemnification or contribution provisions of any underwriting or
similar agreement entered into by the Company in connection with any offering or
sale of securities covered by the Agreement), and shall promptly reimburse them,
as and when incurred, for any legal or other expenses incurred by them in
connection with investigating any claims and defending any actions, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by the Investor expressly for use
in connection with such registration; and the Investor will pay, as and when
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 9.2(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
9.2(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Investor, which consent shall not be unreasonably withheld; provided,
that, in no event shall any indemnity under this subsection 9.2(b) exceed the
gross proceeds from the offering received by the Investor.
(c) Promptly after receipt by an indemnified party under this
Section 9.2 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9.2, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.2 to the extent of such prejudice, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 9.2.
(d) The obligations of the Company and the Investor under this
Section 9.2 shall survive the completion of any offering of the Shares in a
registration statement under Section 1.3 and otherwise.
10.3 Further Obligations and Agreements Regarding Registration Rights.
(a) Priority for Piggyback Registrations. If in connection with a
registration under Section 1.3(d) hereof, the managing underwriter of such
underwritten offering shall advise the Company and the Investor in writing that
if all the Stock requested to be included in such registration were so included,
in its reasonable opinion, the number of shares of Common Stock proposed to be
included in such registration would exceed the number of shares of Common Stock
which could be sold in such offering within a price range acceptable to the
Company, then the Company shall include in such registration, to the extent of
the number of shares which the Company is so advised can be sold in such
offering, (i) first, securities that the Company proposes to issue and sell for
its own account and (ii) second, Common Stock requested to be registered by the
Investor and any other holder of Common Stock exercising piggyback registration
rights in connection with such public offering, pro rata on the basis of the
aggregate amount of Common Stock requested to be registered by the Investor and
such other holders of Common Stock.
(b) Holdback. The Company agrees not to effect any public offering
or distribution of any Common Stock during the 10 days prior to the date on
which any underwritten registration pursuant to Section 1.3(d) hereof has become
effective and until 90 days after the effective date of such underwritten
registration, except as part of such underwritten registration. Investor
agrees, if so required by the managing underwriter for any underwritten offering
pursuant to Section 1.3(d), not to effect any sale or distribution of any Common
Stock during the 10 days prior to the date on which an underwritten registration
of Stock pursuant to Section 1.3(d) hereof becomes effective and until 90 days
after the effective date of such underwritten registration, except as part of
such underwritten registration. Investor further agrees that if required by the
managing underwriter for any underwritten offering pursuant to the Company's
existing shelf registration statement on Form S-3 (Registration No. 333-23423),
not to effect any sale or distribution of any Common Stock during the 10 days
prior to the date such offering commences and until 90 days after such offering
commences.
(c) Other Transactions. The Company shall not be obligated to file
any registration statement, or file any amendment or supplement to any
registration statement, and may suspend Investor's right to make sales pursuant
to any effective registration statement, at any time when the Company, in the
good faith judgment of its board of directors, reasonably believes that the
filing thereof at the time requested, or the offering of securities pursuant
thereto, would adversely affect a pending or proposed public offering of the
Company's securities, a material financing, or a material acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction, or
negotiations, discussions or pending proposals with respect thereto. The filing
of a registration statement, or any amendment or supplement thereto, by the
Company cannot be deferred, and the Investor's right to make sales pursuant to
an effective registration statement cannot be suspended, pursuant to the
provisions of the preceding sentence for more than ten days after the
abandonment or consummation of any of the foregoing proposals or transactions or
for more than 60 days after the date of the board of directors' determination
referenced in the preceding sentence. Notwithstanding the foregoing, the
aggregate number of days (whether or not consecutive) during which the Company
may delay the filing of a registration statement, or any amendment or supplement
thereto or suspend the Investor's right to make sales pursuant to an effective
registration statement pursuant to this section 9.3(c) shall in no event exceed
90 days during any 12-month period.
11. Miscellaneous.
11.1 Survival of Warranties; Indemnification. The warranties and
representations of the Company and the Investor contained in this Agreement
(other than those contained in Section 3.18) or in any certificate or other
instrument delivered upon execution of this Agreement, at any Closing, or at any
other time as contemplated by this Agreement, shall survive for a period of one
year following each respective Closing. The representations and warranties of
the Company set forth in Section 3.18 shall survive indefinitely until, by their
respective terms, they are no longer operative. The Company shall indemnify,
defend and hold the Investor and the Investor s directors, officers, employees,
agents and affiliates harmless against any and all liabilities, loss, cost or
damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses), arising from, relating to,
or connected with (i) the untruth, inaccuracy or breach of any statements,
representations, warranties or covenants of the Company contained in Section
3.18 or (ii)(A) any Release on, from or affecting any property of the Company or
any Subsidiary, whether on the premises of the Company or any Subsidiary or
through other Persons, and whether by the Company or any Subsidiary or any
predecessor to any of the businesses or assets of the Company or any Subsidiary,
of any hazardous materials, whether or not disclosed pursuant to this Agreement,
(B) any noncompliance by the Company or any Subsidiary (or by any other Person
with respect to any of the Company s or any Subsidiary s property) with any
Environmental Law, whether or not disclosed pursuant to this Agreement, or (C)
any environmental remediation expenses associated with any property owned or
leased at any time by the Company or any Subsidiary, or the storage,
transportation or disposal practices of the Company or any Subsidiaries for
pollutants, toxic or hazardous material, hazardous substances, hazardous
constituents or waste of any kind, whether or not disclosed pursuant to this
Agreement; provided, however, that the Company s obligation of indemnity under
this Section 10.1 shall not apply to any loss in value of the Shares resulting
from any of the above matters or any liability, loss, cost or damage caused by
or resulting from the negligence or willful misconduct of the Investor or as a
result of any operations conducted jointly by the Company and the Investor. The
foregoing indemnification shall survive the termination of this Agreement for
any reason.
11.2 Remedies. In case any one or more of the covenants or agreements
set forth in this Agreement shall have been breached by any party hereto, the
party or parties entitled to the benefit of such covenants or agreements may
proceed to protect and enforce their rights either by suit in equity or action
at law, including, but not limited to, an action for damages as a result of any
such breach or an action for specific performance of any such covenant or
agreement contained in this Agreement. The rights, powers and remedies of the
parties under this Agreement are cumulative and not exclusive of any other
right, power or remedy which such parties may have under any other agreement or
law. No single or partial assertion or exercise of any right, power or remedy
of a party hereunder shall preclude any other or further assertion or exercise
thereof.
11.3 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the parties. This Agreement and the rights and duties of the Investor set
forth herein may be freely assigned, in whole or in part, by the Investor only
to an Affiliate of the Investor that agrees in writing to be bound by all of the
terms of this Agreement; provided, that the Investor shall remain obligated to
perform in full all of its covenants and obligations under this agreement until
released therefrom in writing by the Company. In addition and subject to the
foregoing proviso, the Investor may assign its rights under Sections 1 and 9
hereof in connection with any permitted transfer by the Investor of all of the
Shares to an Affiliate that agrees in writing to be bound by all of the terms of
this Agreement. Neither this Agreement, nor any of the rights or duties of the
Company set forth herein, shall be assigned by the Company, in whole or in part,
without having first received the written consent of the Investor, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing sentence, the
Company may assign this Agreement, and the rights and the duties of the Company
set forth herein, to an entity or person which purchases all or substantially
all of its assets or voting securities, so long as the successor agrees in
writing to be bound by all the terms of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
11.4 Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings, whether
written or oral, with respect thereto; provided, however, that this Agreement is
not intended to supersede the Research Collaboration Agreement of even date
herewith between the Company and the Investor.
11.5 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York (without regard to the conflict of law
principles thereof).
11.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
11.8 Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and vice-
versa.
11.9 Notices. Unless otherwise provided, all notices, requests, consents
and other communications hereunder to any party shall be given in writing and
shall be deemed effectively given upon personal delivery to the party to be
notified or duly sent by recognized courier service, postage or delivery fee
prepaid, or telecopied with a confirmation copy by recognized courier service,
and addressed or telecopied to the party to be notified at the address or
telecopier number indicated for such party at the address or telecopier number,
as the case may be, set forth below or such other address or telecopier number,
as the case may be, as may hereafter be designated in writing by the addressee
to the addressor listing all parties:
To the Company: Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne, New York
Attention: [^]
Telecopier No.: (914) 374-2498
With a copy (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Edwin S. Maynard
Telecopier No.: (212) 757-3990
To the Investor: Novartis Pharma AG
Lichtstrasse 35
CH-4002 Basel
Switzerland
Attention: [^]
Telecopier No.: 41-61-324-2322
With a copy (which shall not constitute notice) to:
Jeff Benjamin, Esq.
Vice President and Associate
General Counsel
Novartis Corporation
564 Morris Avenue
Summit, New Jersey 07901
Telecopier No.: (908) 277-2598
All such notices, requests, consents and other communications shall
be deemed to have been received: (a) in the case of personal delivery, on the
date of such delivery; (b) in the case of courier service, on the second
business day following the date of such mailing; and (c) in the case of
facsimile transmission, when confirmed by facsimile machine report.
11.10 Finder s Fee. The Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the nature
of a finders fee (and the reasonable costs and expenses of defending against
such liability or asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless the Investor from any liability for any
commission or compensation in the nature of a finders fee (and the reasonable
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.
11.11 Expenses. Each party shall pay its own fees and expenses with
respect to this Agreement. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to the reimbursement of reasonable attorney s fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
11.12 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor.
11.13 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be ineffective,
and the balance of the Agreement shall be interpreted as if such provision were
so excluded, without invalidating the remaining provisions of this Agreement.
11.14 Confidentiality and Publicity. Neither the Company nor the Investor
will disclose to any person (other than its attorneys, accountants, employees,
officers, and directors) the existence or terms of this Agreement or any of the
transactions contemplated hereby without the prior written consent of the other
party, except as may, in the reasonable opinion of such party s counsel, be
required by law (in which event the disclosing party will first consult with the
other party with respect to such disclosure). If the Company is required to
provide a copy of this Agreement or any related document to any third party, the
Company shall redact from such document, to the extent permitted by law, all
confidential information, and shall consult with the Investor regarding such
redaction prior to submission of this Agreement or any related document to such
third party. The Company and the Investor will consult and reach agreement with
one another as to the form and substance of any press release or any other
public disclosure of the existence or terms of this Agreement or the
transactions contemplated hereby.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.
NOVARTIS PHARMA AG
By:___________________________
Name:________________________
Title:_________________________
By:___________________________
Name:________________________
Title:_________________________
EMISPHERE TECHNOLOGIES, INC.
By:___________________________
Name:________________________
Title:_________________________
EXHIBIT A
Collaboration Agreement
EXHIBIT B
Exceptions to Representations and Warranties
None.
EXHIBIT C
Form of Company Counsel Opinion
[DESCRIPTION] STATEMENT OF COMPUTATION (3 MONTHS)
<PAGE>
Exhibit 11.1
EMISPHERE TECHNOLOGIES, INC.
STATEMENT OF COMPUTATION OF PER SHARE DATA
<TABLE>
Three months ended
-----------------------------------------
October 31, 1996 October 31, 1997
-------------------------- ----------------------------
Primary Fully Primary Fully
Diluted Diluted
---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Net loss $ (1,006,357) $ (1,006,357) $ (2,342,256) $ (2,342,256)
Interest earned on excess
proceeds 79,658 171,311
--------------- ------------ ------------- -------------
Adjusted net loss $ (1,006,357) $ (926,699) $ (2,342,256) $ (2,170,945)
=============== ============== ============= ===============
Weighted average number of
common shares outstanding 9,415,870 9,415,870 10,695,469 10,695,469
Shares issuable upon
exercise of outstanding
options and warrants 3,485,221 4,227,653
Shares assumed to be
repurchased under the
treasury stock method (1,881,452) (2,141,323)
-------------- ------------- ----------- -------------
9,415,870 11,019,639 10,695,469 12,781,799
============== ============= =========== =============
$ (0.11) $ (0.08) $ (0.22) $ (0.17)
============== ============== ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMERY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS, CONDENSED STATEMENTS OF OPERATIONS AND CONDENSED
STATEMENTS OF STOCKHOLDER'S EQUITY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 18,554,464
<SECURITIES> 12,698,933
<RECEIVABLES> 1,739,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 469,966
<PP&E> 5,386,573
<DEPRECIATION> 3,148,038
<TOTAL-ASSETS> 35,765,589
<CURRENT-LIABILITIES> 4,351,429
<BONDS> 0
<COMMON> 107,501
0
0
<OTHER-SE> 31,170,350
<TOTAL-LIABILITY-AND-EQUITY> 35,765,589
<SALES> 1,715,660
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4,543,798
<OTHER-EXPENSES> (485,882)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,342,256)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,342,256)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,342,256)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.17)
</TABLE>
