<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 0-24424
CIMA LABS INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1569769
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10000 Valley View Road, Eden Prairie, Minnesota 55344-9361
(Address of principal executive offices including zip code)
(612) 947-8700
(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 filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.01 par value 9,591,394 Shares
---------------------------------- ----------------------------------
(Class) (Outstanding at November 10, 1997)
1
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CIMA LABS INC.
TABLE OF CONTENTS
PAGE NUMBER
-----------
COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of September 30, 1997
and December 31, 1996 3
Condensed Statements of Operations for the three-
month and nine-month periods ended September 30, 1997
and 1996 and the period from December 12, 1986
(inception) to September 30, 1997 4
Condensed Statements of Cash Flows for the nine-month
periods ended September 30, 1997 and 1996 and the period
from December 12, 1986 (inception) to September 30, 1997 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 12
ITEM 2. CHANGES IN SECURITIES. 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 12
ITEM 5. OTHER INFORMATION. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 13
SIGNATURE 14
EXHIBIT INDEX 15
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CIMA LABS INC.
(A Development Stage Company)
Condensed Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
-------------- --------------
1997 1996
(Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,089,860 $2,666,032
Short-term investments 3,503,541 7,597,162
Accounts receivable 1,369,753 247,578
Inventories--Note B 933,638 534,587
Prepaid expenses 210,906 71,880
-------------- --------------
Total current assets 8,107,698 11,117,239
Property, plant and equipment 13,966,652 13,377,085
Less accumulated depreciation (3,572,457) (2,972,474)
-------------- --------------
10,394,195 10,404,611
Other assets:
Lease deposits 40,651 290,650
Patents and trademarks, net of amortization 236,669 252,404
-------------- --------------
277,320 543,054
-------------- --------------
-------------- --------------
Total assets $18,779,213 $22,064,904
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $349,792 $264,370
Accrued expenses 1,390,037 529,402
Advance royalties 250,000 250,000
-------------- --------------
Total current liabilities 1,989,829 1,043,772
Commitments and contingencies
Stockholders' equity
Convertible Preferred Stock, $.01 par value:
Authorized shares--5,000,000; issued and outstanding shares-- none
Common Stock, $.01 par value:
Authorized shares--20,000,000; issued and outstanding shares--
9,591,318--September 30, 1997; 9,411,589--December 31, 1996 95,913 94,116
Additional paid-in capital 57,176,371 56,586,958
Deficit accumulated during the development stage (40,482,900) (35,659,942)
-------------- --------------
Total stockholders' equity 16,789,384 21,021,132
-------------- --------------
Total liabilities and stockholders' equity $18,779,213 $22,064,904
-------------- --------------
-------------- --------------
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
3
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CIMA LABS INC.
(A Development Stage Company)
Condensed Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Period from
December 12,
Three Months Ended Nine Months Ended 1986
-------------------------- --------------------------- (Inception) to
September 30, September 30, September 30,
-------------------------- --------------------------- -------------
1997 1996 1997 1996 1997
-------------------------- --------------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $825,117 $0 $1,657,689 $0 $15,408,573
Research and development fees & 800,884 504,425 1,258,996 1,171,560 6,605,586
Licensing revenues
-------------------------- --------------------------- -------------
1,626,001 504,425 2,916,685 1,171,560 22,014,159
Costs and expenses:
Cost of goods sold 1,323,096 0 2,891,202 0 20,722,617
Research and product development 594,773 1,228,632 2,579,434 3,903,428 23,102,282
Selling, general and administrative 739,751 782,544 2,628,110 2,363,303 20,272,185
-------------------------- --------------------------- -------------
2,657,620 2,011,176 8,098,746 6,266,731 64,097,084
Other income (expense):
Interest income, net 68,783 200,096 262,487 367,574 1,381,887
Other income (expense) 1,418 (1,876) 125,640 (4,700) 395,670
-------------------------- --------------------------- -------------
70,201 198,220 388,127 362,874 1,777,557
Net loss and deficit accumulated
during the development stage ($961,418) ($1,308,531) ($4,793,934) ($4,732,297) ($40,305,368)
-------------------------- --------------------------- -------------
-------------------------- --------------------------- -------------
Net loss per share:
Primary $(0.10) $(0.14) $(0.50) $(0.55) $(11.96)
Fully diluted $(0.10) $(0.14) $(0.50) $(0.55) $(8.82)
Weighted average shares outstanding:
Primary 9,556,054 9,405,846 9,498,266 8,633,939 3,370,411
Fully diluted 9,556,054 9,405,846 9,498,266 8,633,939 4,568,497
</TABLE>
See notes to condensed financial statements.
4
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CIMA LABS INC.
(A Development Stage Company)
Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Period from
December 12,
Nine Months Ended 1986
September 30, (Inception) to
--------------------------- September 30,
1997 1996 1997
--------------------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ($4,793,934) ($4,732,297) ($40,305,368)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 695,145 442,374 4,715,708
Preferred stock issued for accrued interest 0 0 141,448
Gain on sale of property, plant and equipment 0 0 (53,270)
Changes in operating assets and liabilities:
Accounts receivable (1,122,175) (226,761) (1,369,753)
Inventories (399,051) (25,173) (933,638)
Other current assets (139,026) 175,028 (210,906)
Accounts payable 85,422 (148,575) 349,788
Accrued expenses 860,635 293,809 1,390,037
Advance royalties 0 0 250,000
--------------------------- --------------
Net cash used in operating activities (4,812,984) (4,221,595) (36,025,954)
INVESTING ACTIVITIES
Purchase of and deposits on property, plant and equipment (588,969) (404,268) (15,050,305)
Purchase of short-term investments (1,257,262) 0 (27,401,564)
Proceeds from sale of property, plant & equipment 0 0 471,883
Proceeds of maturities of short-term investments 5,350,885 0 23,898,025
Patents and trademarks (80,030) (81,959) (695,458)
--------------------------- --------------
Net cash used in investing activities 3,424,624 (486,227) (18,777,419)
FINANCING ACTIVITIES
Proceeds from issuance of stock:
Common Stock 562,188 13,083,130 31,394,363
Preferred Stock 0 0 25,458,690
Lease financing of equipment 0 0 2,441,650
Security deposits on leases 250,000 0 (40,651)
Proceeds from issuance of notes payable and warrants 0 0 1,923,951
Payments on notes payable 0 0 (1,823,700)
Payments on capital leases 0 0 (2,441,650)
Organization costs 0 0 (19,420)
--------------------------- --------------
Net cash (used in) provided by financing activities 812,188 13,083,130 56,893,233
--------------------------- --------------
Increase (decrease) in cash and cash equivalents (576,172) 8,375,308 2,089,860
Cash and cash equivalents at beginning of period 2,666,032 3,558,743 -
--------------------------- --------------
Cash and cash equivalents at end of period $2,089,860 $11,934,051 $2,089,860
--------------------------- --------------
--------------------------- --------------
Supplemental schedule of noncash investing and financing activities:
Note payable exchanged for issuance of common stock $1,517,500
Common stock issued for note receivable 50,000
</TABLE>
See notes to condensed financial statements.
5
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CIMA LABS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month and
nine-month periods ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1997. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1996.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or fair
market value.
September 30, December 31,
1997 1996
------------- ------------
Raw materials $426,413 $534,587
Work in process 141,404 --
Finished products 365,821 --
------------- ------------
$933,638 $534,587
NOTE C - INITIAL PUBLIC OFFERING
The Company completed its initial public offering ("IPO") of its Common Stock in
August 1994. Outstanding shares of Series A, B, C, D and E Preferred Stock were
automatically converted on a one-for-one basis to shares of Common Stock on the
closing date of August 4, 1994.
NOTE D - NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding during the period. Common equivalent shares from stock
options and warrants are excluded from the computation as their effect is
antidilutive. In February 1997, the Financial Accounting Standards Board
(FASB) issued FASB Statement No. 128, "EARNINGS PER SHARE." This Statement
replaces the presentation of primary earnings per share (EPS) with basic EPS
and also requires dual presentation of basic and diluted EPS for entities
with complex capital structures. This Statement is effective for the fiscal
year ended December 31, 1997. For the quarter ended September 30, 1997,
there is no difference between basic earnings per share under Statement No.
128 and primary net loss per share as reported.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. WHEN USED HEREIN, THE WORDS "ANTICIPATE," "EXCEPT," "ESTIMATE"
AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THE
SUCCESS OF THE COMPANY IN MANUFACTURING PRODUCTS USING THE COMPANY'S TECHNOLOGY,
THE AVAILABILITY OF ADEQUATE FUNDS FOR THE COMPANY'S OPERATIONS, THE SUCCESS OF
THE COMPANY IN COMMERCIALIZING ITS NEW DRUG DELIVERY PROGRAMS, AND THE COMPANY'S
RELIANCE ON ITS KEY PERSONNEL AND COLLABORATIVE PARTNERS, AS WELL AS THOSE
DISCUSSED IN "BUSINESS RISKS" BELOW.
GENERAL
CIMA, founded in 1986, is a drug delivery company focused primarily on
the development and manufacture of pharmaceutical products based upon its
patented OraSolv-REGISTERED TRADEMARK- technology for marketing by
multinational pharmaceutical companies. OraSolv is an oral dosage formulation
incorporating microencapsulated active drug ingredients into a tablet which
dissolves quickly in the mouth without chewing or water and which effectively
masks the taste of the medication being delivered. OraSolv's fast-dissolving
capability may enable patients in certain age groups or those with a variety
of conditions that limit their ability to swallow conventional tablets to
receive medication in a more convenient oral dosage form. The Company
believes that OraSolv is more convenient than traditional tablet-based oral
dosages as it does not require water to be ingested, thereby enabling
immediate medication at the onset of symptoms. In addition, OraSolv can
provide more accurate administration of doses than liquid or suspension
formulations as no measuring is required. The Company believes OraSolv's
ease of use and effective taste-masking may foster greater patient compliance
with recommended dosage regimens, both for over-the-counter ("OTC") and
prescription products, thereby improving therapeutic outcomes and reducing
costs in the healthcare system.
CIMA's business strategy is to commercialize its OraSolv technology
through collaborations with multinational pharmaceutical companies with
emphasis on products which command a large market share and/or are in large
market segments. Product differentiation and brand name identity are critical
to the successful marketing of pharmaceutical products. The Company believes
that OraSolv affords pharmaceutical companies a means to significantly
differentiate their products in the competitive pharmaceutical marketplace.
Because it is a patented technology, OraSolv affords more enduring product
differentiation than the more traditional approaches of changing product
flavor or packaging innovations, which can be easily replicated. The Company
has entered into agreements with a number of pharmaceutical companies for
development, manufacture and commercialization of OraSolv products.
The Company is currently focusing on developing OraSolv products for
selected prescription drug applications. The Company believes that such
prescription OraSolv products should result in improved taste acceptance and
ease of administration, and so enhance patient compliance with the
recommended dosage regimen for such prescription pharmaceuticals. This
quarter the Company signed its first two pharmaceutical product development
agreements with two major multinational pharmaceutical companies. The
Company has also initiated the development of new drug technologies. These
technologies include a new oral solid delivery system, DuraSolv-TM-; a unique
sustained-released delivery system, OraSolv-REGISTERED TRADEMARK- SR; and an
improved efficacy delivery system. One of the Company's recently signed
agreements will utilize the unique sustained-released technology. The goal
of the Company is to focus on drug delivery technologies that improve
efficacy.
7
<PAGE>
At September 30, 1997, the Company had accumulated losses of
approximately $ 40,305,000. The Company recorded its first commercial sales
using the Company's OraSolv technology in the three month period ending March
31, 1997. Prior to this the Company's revenues have been from sales using
the Company's AutoLution (a liquid effervescent) technology, license fees
paid by corporate partners in consideration of the transfer of rights under
collaboration agreements, and research and development fees paid by corporate
partners to fund the Company's research and development efforts for products
developed under such agreements. To date, such revenues have been derived
primarily from manufacturing agreements with third parties for liquid
effervescent, other products, and products using OraSolv technology, the
latter generated in the last seven months. To a lesser extent revenue has
been generated from research and development fees and licensing arrangements,
primarily in the last five years. The Company is not currently manufacturing
liquid effervescent products, and has not recognized any revenues from such
products since 1995. The Company expects to continue generating revenue from
manufacturing OraSolv products. In addition to revenues from manufacturing,
research and development and licensing, the Company has funded operations
from private and public sales of equity securities, realizing net proceeds of
approximately $25,963,000 from private sales of equity securities and
$16,379,000 and $12,038,000 from the Company's July 1994 initial public
offering and May 1996 public offering of its Common Stock, respectively. The
total shares outstanding at September 30, 1997 were 9,591,318.
The Company's ability to generate revenues is dependent upon its ability
to develop new, innovative drug delivery technologies and to enter into and
be successful in collaborative arrangements with pharmaceutical and other
healthcare companies for the development and manufacture of OraSolv products
to be marketed by these corporate partners. The Company is highly dependent
upon the efforts of the corporate partners to successfully market OraSolv
products. Although the Company believes these partners have and will have an
economic motivation to market these products vigorously, the amount and
timing of resources to be devoted to marketing are not within the control of
the Company. These partners independently could make material marketing and
other commercialization decisions which could adversely affect the Company's
future revenues. Moreover, certain of the Company's products are seasonal in
nature and the Company's revenues could vary materially from quarter to
quarter depending on which of such products, if any, are then being marketed.
The Company expects that losses will continue through at least 1998,
even though CIMA expects to continue generating sales revenue from
manufacturing OraSolv products in 1997 and 1998. Research and development
expenses will increase as CIMA investigates new drug delivery technologies,
including the possibility of utilizing microencapsulation for the development
of sustained released systems, as well as sublingual systems which could
deliver faster absorption of drug ingredients. Personnel costs for research
and development are expected to remain relatively stable as the majority of
the necessary personnel for this function has already been hired. Personnel
costs for administration may decrease slightly in an effort to reduce
corporate overhead. As CIMA continues production, additional operations
personnel may need to be added to meet corporate partners' orders.
Manufacturing infrastructure costs should not need to increase materially as
there is capacity to meet short-term production needs.
In the fourth quarter of 1996, the Company signed a Supply Agreement
with Bristol-Myers Squibb, a major pharmaceutical company. The Agreement
covers full-scale production of an over-the-counter product in CIMA's OraSolv
dosage form. CIMA began commercial production for this product during the
first quarter of 1997. The product was officially launched in September
1997. In the second quarter of 1997, the Company expanded its relationship
with Bristol-Myers Squibb and signed a global non-exclusive license agreement
which covers multiple products. In the third quarter, the first two
prescription product license and development agreements were signed. Each
agreement is for a product which is currently marketed by the Company's
partners, Schering-Plough and Zeneca.
In recent years the Company has actively marketed its OraSolv technology
to the pharmaceutical industry. The Company is presently engaged in product
development and manufacturing scale-up efforts and negotiations with several
different pharmaceutical companies regarding a variety of potential products.
There can be no assurance, however, that these activities or discussions will
result in license agreements or the marketing of products using the OraSolv
technology. The Company believes that mergers and acquisitions in the
pharmaceutical industry in recent years, together with changes in product
plans by potential partners, may have had an adverse effect on the progress
of certain projects, and the eventual marketing of products incorporating the
Company's technology.
8
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RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
The Company's results of operations for the three- and nine-month
periods ended September 30, 1997 reflect an increased emphasis on the
manufacturing of an OraSolv product for a commercial launch by Bristol-Myers
Products in 1997. Net product sales increased to $825,000 and $1,658,000 in
the three- and nine-month periods ended September 30, 1997 from zero in the
first nine months in 1996. The majority of sales in 1997 relate to the first
commercial sales of a product using the OraSolv technology, which began in
March 1997. Research and development fees and licensing revenues were
$801,000 and $1,259,000 for the three- and nine-month periods ended September
30, 1997, respectively, compared to $504,000 and $1,172,000, respectively, in
the comparable periods of 1996. These fees and revenues reflect the signing
of license option and development agreements with multinational
pharmaceutical companies that provide for licensing fees, product development
fees, milestone payments, royalties and manufacturing fees. The 1997
revenues are for agreements that relate to Prescription ("Rx"), Rx to OTC
switch, and OTC products. The 1996 revenues are only for agreements that
relate to OTC, and Rx to OTC switch products. So long as the Company has
relatively few agreements with corporate partners, research and development
fees will tend to fluctuate on a quarter to quarter basis.
Cost of goods sold increased to $1,323,000 and $2,891,000 in the three-
and nine-month periods ended September 30, 1997, respectively, from zero in
the first nine months of 1996. Costs in cost of goods sold include the
manufacturing infrastructure costs necessary to meet future anticipated sales
levels. These costs caused the cost of goods sold to exceed the net sales
price for the products in the first nine months of 1997. The Company
anticipates this situation will not improve until production significantly
increases, and it approaches full manufacturing capacity. In 1996, these
costs were classified as product development expenses. Research and
development expenses decreased to $595,000 and $2,579,000 in the three- and
nine-month periods ended September 30, 1997, respectively, from $1,229,000
and $3,903,000 in the three- and nine-month periods ended September 30, 1996,
respectively. After accounting for the reclassification of manufacturing
infrastructure costs, as noted above, research and development expenses
actually increased on a like-to-like comparison by approximately $76,000, and
$446,000 for the three- and nine-month periods ended September 30, 1997, over
the corresponding prior year periods, respectively. The increase, which was
mostly in the first three-months of 1997, was due to expenses related to the
hiring of the new Vice President of Research and Development, additional
efforts on the development of future technologies, and product development
expenses related to the transition to commercial production. Selling, general
and administrative expenses decreased to $740,000 from $783,000 in the
three-month period ended September 30, 1997 and 1996, respectively. The
decrease was related to the reduction of outside consulting services.
Selling, general and administrative expenses, however, increased to
$2,628,000 for the nine-month period ended September 30, 1997 from $2,363,000
for the same period in 1996. This increase is primarily due to spending on
consumer studies to support OraSolv marketing claims. Net interest income
decreased to $69,000, and $262,000, respectively, in the three- and
nine-month periods ended September 30, 1997 from $200,000 and $368,000,
respectively, for the same periods in 1996. This decrease is due to the
reduced cash position of the Company. Other income (expense) increased to
$1,000 and $126,000, respectively, in the three- and nine-month periods ended
September 30, 1997 from ($2,000) and ($5,000) respectively, for the same
periods in 1996. The major component for the increase is a $120,000 state
sales and use tax refund for previously purchased fixed assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through
private and public sales of its equity securities and revenues from
manufacturing agreements. Through September 30, 1997, CIMA had received net
offering proceeds from such private and public sales of approximately
$57,176,000 and had net sales from manufacturing agreements of approximately
$15,409,000. Cash, cash equivalents and short-term investments were
approximately $5,593,000 at September 30, 1997, a decrease of $4,670,000 from
$10,263,000 at December 31, 1996. However, the net cash position only has
decreased by approximately $900,000 in the third quarter ending September 30,
1997 to $5,593,000 from $6,492,000 at the end of the second quarter ending
June 30, 1997.
9
<PAGE>
The Company's long-term capital requirements will depend upon numerous
factors, including the status of the Company's collaborative arrangements,
the progress of the Company's research and development programs and receipt
of revenues from the collaborative agreements, sales of the Company's
products and the need to expand production capacity. The Company believes
that its currently available funds, including any license fees product
development fees, and sales revenue anticipated to be received in the future,
will meet its needs through 1998. Thereafter, or sooner if conditions make it
necessary, the Company will need to raise additional funds through research
and development relationships with suitable potential corporate partners
and/or through public or private financings, including equity financing which
may be dilutive to stockholders. There can be no assurance that the Company
will be able to raise additional funds if its capital resources are
exhausted, or that funds will be available on terms attractive to the Company.
The Company has not generated taxable income through September 1997. At
December 31, 1996, the net operating losses available to offset taxable
income were approximately $35,247,000. Because the Company has experienced
ownership changes, pursuant to Internal Revenue Code regulations, future
utilization of the operating loss carryforwards will be limited in any one
fiscal year. The carryforwards expire beginning in 2001. As a result of the
annual limitation, a portion of these carryforwards may expire before
ultimately becoming available to reduce potential federal income tax
liabilities.
BUSINESS RISKS
The Company has recently initiated commercial production of its first
product in CIMA's OraSolv dosage form, and must be evaluated in light of the
uncertainties and complications present for any company that has just
recently began to derive product revenues and, in particular, a company in
the pharmaceutical industry. The Company has accumulated aggregate net
losses from inception through September 30, 1997 of $40,305,000. Losses have
resulted principally from costs incurred in research and development of the
Company's technologies and from general and administrative costs. These
costs have exceeded Company's revenues, which until recently have been
derived primarily from the manufacturing of AutoLution-REGISETRED TRADEMARK-
(a liquid effervescent) and other non-OraSolv products for which the Company
no longer manufactures. In more recent years, the Company has also received
revenue from its commercial partners for product development and licensing of
OraSolv, and to a lesser extent, OraSolv for which commercial production
commenced in the first quarter of 1997 for Bristol-Myers Products. The
Company expects to continue to incur losses at least through 1998. There can
be no assurance that the Company will ever generate substantial revenues or
achieve profitability.
The Company is dependent upon its ability to enter into and perform
under collaborative arrangements with pharmaceutical companies for the
development and commercialization of its products. Failure of these partners
to market the Company's products successfully could have a material adverse
effect on the Company's financial condition and results of operations. The
Company's revenues are also dependent upon ultimate consumer acceptance of
the OraSolv drug delivery system and newly developed technologies as
alternatives to conventional oral dosage forms. The Company expects that
OraSolv products will be priced slightly higher than conventional swallow
tablets. Although the Company believes that initial consumer research has
been encouraging, there can be no assurance that market acceptance for the
Company's OraSolv products will ever develop or be sustained.
The Company began manufacturing OraSolv products in commercial
quantities in February 1997. Commercial sales have been made and revenue has
been recognized from sales of OraSolv products. To achieve future desired
levels of production, the Company will be required to increase its
manufacturing capabilities. There can be no assurance that manufacturing can
be scaled-up in a timely manner to allow production in sufficient quantities
to meet the needs of the Company's corporate partners. Furthermore, the
Company has only one manufacturing facility capable of manufacturing OraSolv
products. If this facility becomes damaged or becomes incapable of
manufacturing products due to natural disaster, governmental regulatory
issues or otherwise, the Company would have no other means of producing
OraSolv products.
10
<PAGE>
The Company intends to increase its research and development
expenditures to enhance its current technologies, and to pursue internal
proprietary drug delivery technologies that are being developed. Even if
these technologies appear promising during various stages of development,
they may not reach the commercialization stage for a number of reasons. Such
reasons include the possibilities of not finding a partner to market the
product, the product being difficult to manufacture on a large scale or of
being uneconomical to market.
The Company has conducted an initial review regarding the effect the
upcoming year 2000 will have on its computer applications. The Company has
determined that there will be little to no impact for the Company, and
minimal financial and human resources will be utilized to address this issue.
The Company computer support is provided by a server supported, PC-based,
LAN system. Software vendors for the software used by the Company are aware
of the issue and the Company has been informed that they have taken necessary
steps to address the date-field issue. However, the conversion is an
uncertainty and there can be no assurance that unforeseen problems will not
arise in connection with this issue.
The foregoing risks reflect the Company's stage of development and the
nature of the Company's industry and products. Also inherent in the
Company's stage of development and the nature of the Company's industry is a
range of additional risks, including competition, uncertainties regarding the
effects of healthcare reform on the pharmaceutical industry, including
pressures exerted on the prices charged for pharmaceutical products, and
uncertainties regarding protection of patents and proprietary rights.
11
<PAGE>
CIMA LABS INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On October 29, 1997, the Company instituted an opposition
proceeding in the European Patent Office seeking cancellation
of a patent owned by Laboratoires Prographarm of Chateauneuf,
France ("Prographarm"). The Company has alleged in the
opposition proceeding that publications exist which are prior
art against the European patent, including an international
patent application owned by the Company which was published
prior to the priority date of the European patent.
On February 27, 1997, the United States Patent and Trademark
Office ("USPTO") suspended prosecution of a U.S. patent
application owned by the Company to consider the Company's
request that an interference proceeding be declared between a
pending U.S. patent application owned by the Company and a
U.S. patent owned by Prographarm. The Company is seeking a
determination by the USPTO that either (i) the Company's
personnel are the prior inventors of the invention encompassed
by the Prographarm U.S. patent and accordingly that the
Company is entitled to claims directed to the same invention
in a new patent to be owned by the Company, or (ii) in the
alternative, a determination that the claims are unpatentable
to the Company or Prographarm. Either holding would result in
cancellation of the Prographarm U.S. patent. The Company's
factual allegations are the same as in the European
opposition, and further include the Company's pending U.S.
patent application itself and the priority date of such
pending application.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Item Description
---- -----------
10.28 Development and Option Agreement between Schering
Corporation and the Company, dated August 11,
1997.(1)
10.29 Development and License Option Agreement between IPR
PHARMACEUTICALS, INC. and the Company, dated
September 10, 1997.(1)
10.30 Employment Agreement, dated October 29, 1997,
between the Company and John M. Siebert, Ph.D.
27 Financial Data Schedule.
___________
(1) Confidential treatment has been requested for this exhibit.
13
<PAGE>
CIMA LABS INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
CIMA LABS INC.
Date: November 14, 1997 By: /s/ John M. Siebert
--------------------- --------------------------------------
John M. Siebert
President and Chief Executive Officer
Date: November 14, 1997 By: /s/ Keith P. Salenger
--------------------- --------------------------------------
Keith P. Salenger
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
14
<PAGE>
EXHIBIT INDEX
NO. OF EXHIBIT DESCRIPTION
- -------------- -----------
10.28 Development and Option Agreement between Schering
Corporation and the Company, dated August 11, 1997.(1)
10.29 Development and License Option Agreement between IPR
PHARMACEUTICALS,INC. and the Company, dated
September 10, 1997.(1)
10.30 Employment Agreement, dated October 29, 1997, between the
Company and John M. Siebert, Ph.D.
27 Financial Data Schedule.
____________
(1) Confidential treatment has been requested for this exhibit.
15
<PAGE>
Exhibit 10.28
*** TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
DEVELOPMENT AND OPTION AGREEMENT
BETWEEN
SCHERING CORPORATION
AND
CIMA LABS, INC.
<PAGE>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Basic License Terms". . . . . . . . . . . . . . . . . . . . . . 1
1.3 "CIMA Know-How". . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 "CIMA Patent Rights" . . . . . . . . . . . . . . . . . . . . . . 2
1.5 "Confidential Information" . . . . . . . . . . . . . . . . . . . 2
1.6 "Delivery System". . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Field". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Final Prototype". . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Initial Prototype". . . . . . . . . . . . . . . . . . . . . . . 2
1.10 "Invention". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "License Agreement" . . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 "Option Period". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 "Patent Rights". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "Product". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "Prototype Development Plan" . . . . . . . . . . . . . . . . . . 3
1.17 "Schering Confidential Information". . . . . . . . . . . . . . . 3
2. Grant of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Option Grant. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Option Exercise. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 License Agreement. . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Research Licenses. . . . . . . . . . . . . . . . . . . . . . . . 4
3. Prototype Development. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Development Schedule.. . . . . . . . . . . . . . . . . . . . . . 5
3.3 Facilities Visits. . . . . . . . . . . . . . . . . . . . . . . . 5
4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Option Fee.. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Development and Milestone Fees. . . . . . . . . . . . . . . . . 5
4.3 Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Manner of Payment. . . . . . . . . . . . . . . . . . . . . . . . 6
5. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Secrecy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Publications.. . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
6. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Inventions Arising Under This Agreement; License.. . . . . . . . 7
6.2 Filing of Patent Applications. . . . . . . . . . . . . . . . . . 8
6.3 Status of Patent Applications. . . . . . . . . . . . . . . . . . 8
6.4 Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. Representations and Warranties . . . . . . . . . . . . . . . . . . . . 8
7.1 Representations and Warranties of Each Party.. . . . . . . . . . 8
7.2 CIMA's Representations.. . . . . . . . . . . . . . . . . . . . . 9
7.3 Disclosure of Technology . . . . . . . . . . . . . . . . . . . . 10
7.4 No Inconsistent Agreements . . . . . . . . . . . . . . . . . . . 10
7.5 Warranty Disclaimer. . . . . . . . . . . . . . . . . . . . . . . 10
8. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Indemnification by Schering. . . . . . . . . . . . . . . . . . . 10
8.2 Indemnification by CIMA. . . . . . . . . . . . . . . . . . . . . 11
8.3 Conditions to Indemnification. . . . . . . . . . . . . . . . . . 11
8.4 Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.5 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . 12
8.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Term/Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Term and Expiration. . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Termination by Schering. . . . . . . . . . . . . . . . . . . . . 12
9.3 Termination for Cause. . . . . . . . . . . . . . . . . . . . . . 12
9.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 13
9.5 Accrued Rights.. . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.1 Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.2 Independent Contractors. . . . . . . . . . . . . . . . . . . . . 13
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 14
11.5 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . 14
11.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.7 Descriptive Headings.. . . . . . . . . . . . . . . . . . . . . . 15
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.9 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.11 Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . 15
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBITS AND ATTACHMENTS
Exhibit 1.2 Basic License Terms
Attachment 3.3 Development, Scale-Up and Commercialization
Activities for a [. . . *** . . .]
Attachment 4.3 Preliminary Cost of Goods Estimate
Exhibit 1.4 CIMA Patent Rights
Exhibit 1.8 Final Prototype - General Specifications
Exhibit 1.16 Prototype Development Plan
Exhibit 5.3 Press Release
Exhibit 11.5 Arbitration Provisions
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
2 DEVELOPMENT AND OPTION AGREEMENT
THIS DEVELOPMENT AND OPTION AGREEMENT ("Agreement") is made effective as
of the last date on the signature page hereof (the "Effective Date") by and
between SCHERING CORPORATION, a New Jersey corporation having its principal
place of business at 2000 Galloping Hill Road, Kenilworth, New Jersey 07033
(hereinafter "Schering") and CIMA LABS, INC., a Delaware corporation having
its principal place of business at 10,000 Valley View Road, Eden Prairie,
Minnesota 55344 (hereinafter "CIMA"). References to Schering and CIMA shall
include their respective Affiliates (as hereinafter defined).
WHEREAS, CIMA owns or has rights to certain patented oral drug-delivery
technology referred to as ORASOLV, which has applications in the field of
pharmaceutical product formulation; and
WHEREAS, Schering wishes to sponsor the development by CIMA of a
prototype of a certain pharmaceutical product formulation for Schering's
evaluation, subject to the granting by CIMA to Schering of an option to enter
into a license agreement with CIMA on terms further described herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms, whether used
in the singular or plural, shall have the respective meanings set forth below:
1.1 "AFFILIATE" shall mean any individual or entity directly or
indirectly controlling, controlled by or under common control with, a party
to this Agreement. For purposes of this Agreement, the direct or indirect
ownership of fifty percent (50%) or more of the outstanding voting securities
of an entity, or the right to receive fifty percent (50%) or more of the
profits or earnings of an entity shall be deemed to constitute control. Such
other relationship as in fact results in actual control over the management,
business and affairs of an entity shall also be deemed to constitute control.
1.2 "BASIC LICENSE TERMS" shall mean the terms set forth in Exhibit 1.2
of this Agreement.
1.3 "CIMA KNOW-HOW" shall mean any and all Confidential Information of
CIMA's necessary or useful to the development, registration, manufacture, use
or sale of the Product and which is owned, controlled or licensed to CIMA,
prior to or during the term of this Agreement.
1
<PAGE>
1.4 "CIMA PATENT RIGHTS" shall mean all Patent Rights necessary or
useful for the development, registration, manufacture, use or sale of the
Product (including, without limitation, all Patent Rights covering the
Delivery System) and which are owned or controlled by CIMA prior to or during
the term of this Agreement or licensed to CIMA with rights to sublicense as
of the Effective Date of this Agreement or during the term of this Agreement,
including, without limitation, the Patent Rights on Exhibit 1.4.
1.E "CONFIDENTIAL INFORMATION" shall mean all Inventions, research
materials, information relating to Patent Rights, copyrights, and any other
developments, techniques, methods, materials, reagents, processes,
procedures, data, results, conclusions, apparatus, products, trade secrets or
other proprietary information or materials, improvements thereto,
modifications thereof and know-how, whether patentable or not, which is
disclosed by a party or arises under this Agreement (i) during discussions or
negotiations in connection with this Agreement (including, without
limitation, the terms of this Agreement), (ii) during the term of this
Agreement, or (iii) which is developed by or becomes known by either party as
a result of the receipt and use of the other party's Confidential
Information, including, without limitation, by use of the other party's
materials.
1.F "DELIVERY SYSTEM" shall mean CIMA's effervescent, fast-dissolving,
oral drug-delivery tablet technology including that technology known as
ORASOLV-REGISTERED TRADEMARK- which includes, to the extent applicable to the
formulation of a product, an active ingredient of which is [. . . *** . . .]
(i) the inventions disclosed in the Patents Rights owned, controlled or
licensed (with the right to sublicense) by CIMA during the term of this
Agreement, and (ii) all CIMA Know-How.
1.G "FIELD" shall mean over-the-counter and prescription pharmaceutical
products incorporating the Delivery System with a [. . . *** . . .] as an
active ingredient intended [. . . *** . . .].
1.H "FINAL PROTOTYPE" shall mean the prototype of the Product to be
developed by CIMA pursuant to the Prototype Development Plan (Exhibit 1.16)
and in accordance with the general specifications set forth in Exhibit 1.8
and any further specifications agreed by the parties.
1.I "INITIAL PROTOTYPE" shall mean the Product which meets the
description under Section B of the Prototype Development Plan.
1.J "INVENTION" shall mean any new invention, development, derivative
material, biological material, discovery or innovation, whether patentable or
not, arising during and as a result of the performance of the Prototype
Development Plan or arising from the use of materials and/or Confidential
Information of the other party.
1.K "LICENSE AGREEMENT" shall mean an agreement negotiated and executed
by CIMA and Schering pursuant to the exercise of the Option and containing
the Basic License Terms.
2
<PAGE>
1.L "OPTION" shall mean the exclusive right to enter into the License
Agreement.
1.M "OPTION PERIOD" shall mean the period beginning on the Effective
Date and expiring (unless extended in accordance with this Agreement) on the
earlier of (i) the [. . . *** . . .], or (ii) the date on which
[. . . *** . . .]. In the event that the Final Prototype is not delivered by
CIMA to Schering within [. . . *** . . .] from the date of initiation of
phase B of the Prototype Development Plan, then the Option Period shall be
automatically extended for a period of time equal to the time elapsed between
the date of the delivery of the Final Prototype and [. . . *** . . .] from
the date of initiation of phase B of the Prototype Development Plan.
1.N "PATENT RIGHTS" shall mean any patents and/or patent applications
which are owned, controlled or, if applicable under this Agreement, licensed,
with rights to sublicense, by a party to this Agreement, including any
substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection certificates or the like, or provisional
applications of any such patents and patent applications.
1.O "PRODUCT" shall mean the pharmaceutical dosage form which is
formulated using the Delivery System and which contains [. . . *** . . .].
1.P "PROTOTYPE DEVELOPMENT PLAN" shall mean the plan set forth on
Exhibit 1.16 for the development of the Final Prototype.
1.Q "SCHERING CONFIDENTIAL INFORMATION" shall mean any and all
Confidential Information relating to [. . . *** . . .] and which is owned,
controlled or licensed to Schering prior to or during the term of this
Agreement or which arises out of this Agreement and relates to the
[. . . *** . . .]provided to CIMA by Schering. Nothing in this definition
shall be construed to cover the existing Delivery System and any improvements
specifically and solely to the Delivery System.
2. GRANT OF RIGHTS.
2.A OPTION GRANT. Effective upon the Effective Date and subject to the
terms and conditions set forth herein, CIMA hereby grants to Schering the
Option to enter into the License Agreement to utilize the Delivery System for
the development, marketing, distribution and sale of Products in the Field in
the Territory (as defined in the Basic License Terms). The term of such
Option shall be the Option Period. The Option Period may be extended by
mutual written agreement of the parties.
2.B OPTION EXERCISE. Schering, in its sole discretion, may exercise the
Option by (i) providing CIMA with written notice thereof and (ii) negotiating
and executing the License
- ----------
*CONFIDENTIAL TREATMENT REQUESTED 3
<PAGE>
Agreement prior to the end of the Option Period. After the expiration of the
Option Period and if Schering does not exercise its Option and execute the
License Agreement, CIMA's obligations under Article 2 hereof shall terminate
and CIMA shall be free to enter into any license agreement with respect to
Products in the Field with any third party, on any terms CIMA may, in its
sole discretion, deem appropriate.
2.C LICENSE AGREEMENT.
(I) FINALIZATION. In the event that Schering elects to exercise the
Option, Schering and CIMA shall use good faith efforts to finalize the
License Agreement and enter into such License Agreement. The License
Agreement shall include the Basic License Terms and include such other terms
and conditions, consistent with the Basic License Terms as are reasonable and
customary in the industry for such agreements.
(II) UNRESOLVED TERMS. In the event that Schering and CIMA are
unable, after exercising good faith efforts, to reach agreement on all of the
terms and conditions of the License Agreement during the Option Period, then
the Vice President, Marketing & Sales, Key Pharmaceuticals of Schering and
the Vice President, Business Development of CIMA shall have a
[. . . *** . . .] to meet and use good faith efforts to reach agreement on
the unresolved terms and conditions.
(III) In the event that a party gives notice of arbitration
under Section 11.5 hereof regarding unresolved terms or conditions of the
License Agreement, the parties hereby agree that the arbitration mechanism
set forth in Section 11.5 shall be utilized as a mediation mechanism with the
objective of resolving the unresolved terms or conditions.
2.D EXCLUSIVITY. In consideration for the Option Fee, CIMA hereby
agrees that from the Effective Date until the expiration or termination of
the Option Period, CIMA shall not enter into any negotiations or agreements
with any third party relating to the development or commercialization of
Products in the Field.
2.E RESEARCH LICENSES.
(I) LICENSE TO SCHERING. CIMA hereby grants to Schering a
[. . . *** . . .], under the CIMA Patent Rights and CIMA Know-How for the
sole purpose of performing the Prototype Development Plan and evaluating the
Initial Prototype and Final Prototype.
(II) LICENSE TO CIMA. Schering hereby grants to CIMA a
[. . . *** . . .], under the Schering Know-How and Patent Rights of
Schering's relating to [. . . *** . . .] for the sole purpose of performing
the Prototype Development Plan.
3. PROTOTYPE DEVELOPMENT.
- ----------
*CONFIDENTIAL TREATMENT REQUESTED 4
<PAGE>
3.A GENERAL. In consideration for certain development fees set forth
below, CIMA will use [. . . *** . . .] to perform the Prototype Development
Plan and to develop and deliver to Schering a Final Prototype, subject to the
terms of this Agreement and in accordance with the specifications set forth
on Exhibit 1.9. CIMA shall keep Schering informed as to the progress related
to the performance of the Prototype Development Plan and will provide results
and supporting data from time to time relating to the performance of the
Prototype Development Plan and the development of the Initial Prototype and
Final Prototype. Upon receipt of the Final Prototype, Schering will conduct
or have conducted [. . . *** . . .] within [. . . *** . . .].
3.B DEVELOPMENT SCHEDULE.
(I) Following the Effective Date and receipt of the materials from
Schering delineated under phase A of the Prototype Development Plan, CIMA
shall initiate development of the Initial Prototype.
(II) CIMA and Schering each acknowledge and agree that the Prototype
Development Plan is expected to be completed within approximately
[. . . *** . . .] from the date of initiation of phase B of the Prototype
Development Plan. To that end, during the implementation of the Prototype
Development Plan, Schering agrees [. . . *** . . .] of the Initial Prototype
and/or [. . . *** . . .] and respond to CIMA within [. . . *** . . .] of
receipt thereof. Schering's response will indicate the acceptability of such
proposed Initial Prototype and/or the need, if any, for modification of the
specifications in light of the results of Schering's evaluation.
(III) CIMA will develop the Final Prototype in [. . . *** . . .]
to be determined by mutual agreement.
3.C FACILITIES VISITS. During the term of this Agreement, CIMA shall
allow personnel of Schering, at Schering's expense, to visit the
manufacturing and research facilities of CIMA and to consult with CIMA
personnel, [. . . *** . . .], to discuss and review the development of the
Initial Prototype, Final Prototype and Product.
4. PAYMENTS.
4.A OPTION FEE. In consideration for the exclusivity obligations set
forth in Section 3.2 and the Option granted in Section 3.1, Schering shall
pay to CIMA the sum of [. . . *** . . .] (the "Option Fee") within
[. . . *** . . .]of the Effective Date.
4.B DEVELOPMENT AND MILESTONE FEES. (i) In consideration for CIMA's
development and production of the Initial Prototype and Final Prototype in
accordance with this Agreement, Schering shall make the following
non-refundable payments to CIMA:
(1) [. . . *** . . .] within [. . . *** . . .] of the
Effective Date;
- ----------
*CONFIDENTIAL TREATMENT REQUESTED 5
<PAGE>
(2) [. . . *** . . .] upon [. . . *** . . .] by CIMA under
[. . . *** . . .] of the Prototype Development Plan, including
[. . . *** . . .], and delivery to Schering of [. . . *** . . .] in
accordance with [. . . *** . . .]of the Prototype Development Plan;
(3) [. . . *** . . .] upon written request by Schering for up
to [. . . *** . . .] of the approved formulation of the Product; and
(4) [. . . *** . . .] after shipment by CIMA to Schering of up
to [. . . *** . . .] of the approved formulation of the Product.
(II) PAYMENT OF MILESTONE FEES. Schering shall pay to CIMA the
appropriate milestone payment due under Subsections 4.2(a)(ii), (iii) and
(iv) within [. . . *** . . .] after receipt by Schering of an invoice from
CIMA for such milestone payment. The applicable milestone payment shall be
payable only once upon the completion of each such milestone and no amounts
shall be due hereunder for subsequent or repeated achievement of such
milestone.
4.C OTHER COSTS. Except as expressly set forth in this Agreement, each
of Schering and CIMA shall be solely responsible for its own out-of-pocket
costs and disbursements incurred, and for providing the necessary facilities,
supplies, personnel and other resources necessary, in the performance of its
obligations under this Agreement.
4.D MANNER OF PAYMENT. All payments due hereunder shall be paid in U.S.
dollars via wire transfer to Northwest Bank Minnesota, N.A., Northwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479, Account Number:
[. . . *** . . .], and with confirmation to CIMA when such wire transfer has
been made. Alternatively, payments may be made to such other bank account as
otherwise instructed in writing by CIMA.
5. CONFIDENTIALITY.
5.A SECRECY. Except as provided in Section 5.2, each of CIMA and
Schering shall use only in accordance with this Agreement and shall not
disclose to any third party any Confidential Information, without the prior
written consent of the other party. The foregoing obligations shall survive
the expiration or termination of this Agreement for a period of
[. . . *** . . .]. These obligations shall not apply to Confidential
Information that:
(1) is known by the receiving party at the time of its receipt, and
not through a prior disclosure by the disclosing party, as documented by the
receiving party's business records;
(2) is at the time of disclosure, or thereafter becomes, published
or otherwise part of the public domain without breach of this Agreement by
the receiving party;
(3) is obtained from a third party who has the legal right to make
such disclosure and without any confidentiality obligation to the disclosing
party;
- ----------
*CONFIDENTIAL TREATMENT REQUESTED 6
<PAGE>
(4) is independently developed by the receiving party without the
use of Confidential Information received from the disclosing party and such
independent development can be documented by the receiving party;
(5) is disclosed to governmental or other regulatory agencies in
order to obtain patents, PROVIDED that such disclosure may be made only to
the extent reasonably necessary to obtain such patents or authorizations and
PROVIDED FURTHER that any patent application filings shall only be made in
accordance with this Agreement and the License Agreement; or
(6) is required by law, regulation, rule, act or order of any
governmental authority or agency to be disclosed, PROVIDED that notice of
such impending required disclosure by the receiving party is promptly
delivered by the receiving party to the disclosing party in order to provide
the disclosing party with an opportunity to seek a protective order or other
similar order with respect to such Confidential Information and thereafter
that the receiving party discloses only the minimum Confidential Information
required to be disclosed in order to comply with the request or order,
whether or not a protective order or other similar order is obtained by the
disclosing party.
5.B PUBLICATIONS. [. . . *** . . .] of the work carried out pursuant to
this Agreement [. . . *** . . .] and only [. . . *** . . .] of the Public
Presentation (as defined below) prior to submission for publication. CIMA and
Schering each acknowledges and agree that, during the term of this Agreement,
no Public Presentation shall contain any Confidential Information of the
other party without the prior written consent of such party, which consent
[. . . *** . . .]. For purposes of this Article 5, the term "Public
Presentation" shall mean any manuscript, abstracts or other forms of public
presentation, including, without limitation, slides and texts of oral or
other public presentations, and texts of any transmission through any
electronic media, e.g., any computer access system such as the Internet,
World Wide Web, etc. Nothing in this Section 5.2 shall limit the disclosures
permitted by Section 5.3.
5.C PUBLICITY. A party may not use the name of the other party, or its
Affiliates, in any publicity or advertising and may not issue a press release
or otherwise publicize or disclose any information related to the existence
of this Agreement or the terms or conditions hereof, without the prior
written consent of the other party. Nothing in the foregoing, however, shall
prohibit a party from making such disclosures to the extent deemed necessary
under applicable federal or state securities laws or any rule or regulation
of any nationally recognized securities exchange. In such event, however,
such party shall use good faith efforts to consult with the other party prior
to such disclosure and, where applicable, shall request confidential
treatment to the extent available. Notwithstanding the foregoing, the parties
consent to a press release announcing this Agreement in substantially the
form attached hereto as Exhibit 5.3. In addition, the parties agree to
consult regarding any disclosures of the terms of this Agreement to potential
investors, acquirers or financial advisors, it being understood no disclosure
shall be made without the written consent of the other party.
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6. INTELLECTUAL PROPERTY.
6.A INVENTIONS ARISING UNDER THIS AGREEMENT; LICENSE.
(I) Each of Schering and CIMA shall promptly notify the other party
of any Invention arising in connection with the Prototype Development Plan or
arising from the use of the other party's Confidential Information. Such
notice shall provide sufficient detail regarding the Invention, and upon
request of the notifying party shall provide the other party with any
underlying background data and information, so as to enable the party
receiving such notice to properly evaluate the inventorship of such Invention
in accordance with U.S. Patent Laws. Ownership of such Inventions shall be
determined based on the scope of the claims and in accordance with the
following guidelines:
(1) Inventions conceived and reduced to practice
[. . . *** . . .];
(2) Inventions conceived and reduced to practice
[. . . *** . . .]; and
(3) Inventions conceived and reduced to practice
[. . . *** . . .].
(II) Notwithstanding anything contained herein to the contrary, with
respect to all Inventions arising hereunder, both parties may only use such
Inventions [. . . *** . . .] and each party [. . . *** . . .]; PROVIDED,
HOWEVER, the above limitation on [. . . *** . . .].
6.B FILING OF PATENT APPLICATIONS. Inventions by a party shall be
promptly and fully disclosed in writing to the other party. With regard to
Inventions which are solely owned by a party to this Agreement, any patent
applications considered necessary in the reasonable legal and business
judgment of the owning party shall be prepared and filed by such owning party
at such party's sole expense. Each of CIMA and Schering agree, at the other
party's request and expense, to provide the other party with reasonable
assistance in preparing, filing, prosecuting and maintaining patent
applications covering Inventions owned by such other party, including causing
the execution and delivery of any assignments or other related documents.
With regard to Inventions which are jointly owned, each party will cooperate
fully with the other party to prepare and file jointly owned patent
applications and the expenses therefore shall be shared equally.
6.C STATUS OF PATENT APPLICATIONS. CIMA shall keep Schering advised of
the status of patent applications filed in accordance with Section 6.2. CIMA
further agrees that with respect to any such patent applications it shall
provide to Schering, upon request and at Schering's expense, copies of any
substantive papers, including, without limitation, copies of such patent
applications and copies of any substantive communications with any national
Patent Office related to the filing, prosecution and maintenance of such
patent applications.
6.D ABANDONMENT. Each party shall provide written notice to the other
at least [. . . *** . . .] prior to the lapse, revocation, surrender,
invalidation or abandonment of any Patent
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*CONFIDENTIAL TREATMENT REQUESTED 8
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Rights which are subject to the Option, and shall promptly give written
notice to the other party of the grant of any such Patent Rights.
7. REPRESENTATIONS AND WARRANTIES.
7.A REPRESENTATIONS AND WARRANTIES OF EACH PARTY. Each of CIMA and
Schering hereby represents, warrants and covenants to the other party hereto
as follows:
(I) it is a corporation duly organized and validly existing under
the laws of the state or other jurisdiction of its incorporation or formation;
(II) the execution, delivery and performance of this Agreement by
such party has been duly authorized by all requisite corporate action;
(III) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(IV) the execution, delivery and performance by such party of this
Agreement and its compliance with the terms and provisions hereof does not
and will not conflict with or result in a breach of any of the terms and
provisions of, or constitute a default under, (i) a loan agreement, guaranty,
financing agreement, agreement affecting a product, or other agreement or
instrument binding or affecting it or its property; (ii) the provisions of
its charter documents or bylaws; or (iii) any order, writ, injunction or
decree of any court or governmental authority entered against it or by which
any of its property is bound;
(V) the execution, delivery and performance of this Agreement by
such party does not require the consent, approval, or authorization of, or
notice, declaration, filing or registration with, any governmental or
regulatory authority, and the execution, delivery or performance of this
Agreement will not violate any law, rule or regulation applicable to such
party;
(VI) this Agreement has been duly authorized, executed and delivered
and constitutes such party's legal, valid and binding obligation enforceable
against it in accordance with its terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to the
availability of particular remedies under general equity principles; and
(VII) it shall comply with all applicable material laws and
regulations relating to its activities under this Agreement.
7.B CIMA'S REPRESENTATIONS. CIMA hereby represents, warrants and
covenants to Schering as follows:
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*CONFIDENTIAL TREATMENT REQUESTED 9
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(I) to the best of CIMA's knowledge, the CIMA Patent Rights and CIMA
Know-How are subsisting and are not invalid or unenforceable, in whole or in
part (it being understood that CIMA has a license to U.S. Patent No. 5,252,197);
(II) CIMA has the full right, power and authority to grant all of the
right, title and interest in the Option granted under Article 2 hereof, and in
the licenses granted under the License Agreement;
(III) it has not previously assigned, transferred, conveyed or
otherwise encumbered (nor will it do so with any third party during the Option
Period) its right, title and interest in the CIMA Patent Rights or the CIMA
Know-How in any way that would encumber the use thereof with the Product as
contemplated by this Agreement;
(IV) to the best of CIMA's knowledge, CIMA is the sole and exclusive
owner of the CIMA Patent Rights (except U.S. Patent No. 5,225,197) and CIMA
Know-How, which are free and clear of any liens, charges and encumbrances, and
no other person, corporate or other private entity, or governmental entity or
subdivision thereof, has or shall have any claim of ownership with respect to
the CIMA Patent Rights or CIMA Know-How, whatsoever;
(V) to the best of CIMA's knowledge, the practice of the CIMA Patent
Rights does not interfere or infringe the claims of any third party patent nor
are there any such third party claims that would provide any basis for such an
allegation of infringement;
(VI) to the best of CIMA's knowledge, there are no third party
pending patent applications having claims which, if issued, may cover the
development, manufacture, use or sale of the CIMA Patent Rights; and
(VII) to the best of CIMA's knowledge, there are no claims,
judgments or settlements against or owed by CIMA, or any pending or threatened
claims or litigation relating to the CIMA Patent Rights or CIMA Know-How.
7.C DISCLOSURE OF TECHNOLOGY. During the term of this Agreement, CIMA
will use reasonable efforts to disclose (i) all relevant CIMA Patent Rights and
CIMA Know-How to Schering which are necessary or useful to Schering's
performance of the Prototype Development Plan and/or the development,
manufacture, use or sale of the Products.
7.D NO INCONSISTENT AGREEMENTS. As of the Effective Date neither party has
in effect, and after the Effective Date neither party shall enter into, any oral
or written agreement or arrangement that would be inconsistent with its
obligations under this Agreement.
7.E WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY PATENT RIGHTS OR KNOW-HOW,
SERVICES, GOODS OR OTHER SUBJECT MATTER
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OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
8. INDEMNIFICATION.
8.A INDEMNIFICATION BY SCHERING. Except to the extent caused by CIMA's
negligence or willful misconduct, and subject to the limitations set forth in
Section 8.5, Schering shall indemnify, defend and hold harmless CIMA and each of
its employees, officers, directors and agents (each, a "CIMA Indemnified Party")
from and against any and all liability, loss, damage, cost, and expense
(including reasonable attorneys' fees) (collectively, a "Liability") which the
CIMA Indemnified Party may incur, suffer or be required to pay resulting from or
arising in connection with (i) the breach by Schering of any covenant,
representation or warranty contained in this Agreement, (ii) any third party
claim of infringement relating to CIMA's use of the Schering Confidential
Information arising under the Prototype Development Plan or in the performance
of this Agreement, (iii) any negligent act or omission, or willful misconduct of
Schering in the performance of the Prototype Development Plan which is the
proximate cause of injury, death or property damage to a third party, or (iv)
the successful enforcement by a CIMA Indemnified Party of any of the foregoing.
8.B INDEMNIFICATION BY CIMA. Except to the extent caused by Schering's
negligence or willful misconduct and subject to the limitations set forth in
Section 8.5, CIMA shall indemnify, defend and hold harmless Schering and each of
its employees, officers, directors and agents (each, a "Schering Indemnified
Party") from and against any Liability which the Schering Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with
(i) the breach by CIMA of any covenant, representation or warranty contained in
this Agreement, (ii) any third party claim of infringement relating to
Schering's use of the CIMA Know-How arising under the Prototype Development Plan
or in the performance of this Agreement, (iii) any negligent act or omission, or
willful misconduct of CIMA in performance of the Prototype Development Plan
which is the proximate cause of injury, death or property damage to a third
party, or (iv) the successful enforcement by a Schering Indemnified Party of any
of the foregoing.
8.C CONDITIONS TO INDEMNIFICATION. The obligations of the indemnifying
party under Sections 8.1 and 8.2 are conditioned upon the delivery of written
notice to the indemnifying party of any potential Liability promptly after the
indemnified party becomes aware of such potential Liability. The indemnified
party, its employees and agents shall cooperate fully with the indemnifying
party and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification. The indemnifying party shall have the
right to assume the defense of any suit or claim related to the Liability if it
has assumed responsibility for the suit or claim in writing. Notwithstanding the
foregoing, if in the reasonable judgment of the indemnified party, such suit or
claim involves an issue or matter which could have a materially adverse effect
on the business operations or assets of the indemnified party, the indemnified
party may waive its rights to indemnity under this Agreement and control the
defense or settlement thereof, but in no event shall any such waiver be
construed as a waiver of any indemnification rights such party may have
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at law or in equity. If the indemnifying party defends the suit or claim, the
indemnified party may participate in (but not control) the defense thereof at
its sole cost and expense.
8.D SETTLEMENTS. Neither party may settle a claim or action related to a
Liability without the consent of the other party, if such settlement would
impose any monetary obligation on the other party or require the other party to
submit to an injunction or otherwise limit the other party's rights under this
Agreement, which consent shall not be unreasonably withheld. Any payment made by
a party to settle any such claim or action shall be at its own cost and expense.
8.E LIMITATION OF LIABILITY. With respect to any claim by one party
against the other arising out of the performance or failure of performance of
the other party under this Agreement, the parties expressly agree that the
liability of such party to the other party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a party be liable for: (i) punitive, exemplary or consequential
damages, or (ii) the cost of procurement of substitute goods, technology or
services.
8.F INSURANCE. Each party acknowledges that they each maintain and
shall, during the term of this Agreement, maintain adequate insurance and/or
a self-insurance program for liability insurance, including products
liability and contractual liability insurance, adequately covering such
party's obligations under this Agreement. Each party shall provide the other
party with evidence of such insurance and/or self-insurance program, upon
request.
9. TERM/TERMINATION.
9.A TERM AND EXPIRATION. The term of this Agreement shall commence on the
Effective Date and, unless terminated earlier pursuant to Section 9.2 or 9.3,
shall continue in full force and effect until [. . . *** . . .].
9.B TERMINATION BY SCHERING. Notwithstanding anything contained herein to
the contrary, Schering shall have the unilateral right to terminate this
Agreement, with or without cause, at any time by giving [. . . *** . . .]
advance written notice to CIMA.
9.C TERMINATION FOR CAUSE. This Agreement may be terminated by written
notice by either party at any time during the term of this Agreement as follows:
(I) TERMINATION FOR BREACH. If the other party is in breach of its
material obligations hereunder by causes and reasons within its control and has
not cured such breach within [. . . *** . . .] after notice of the breach; or
(II) TERMINATION FOR INSOLVENCY. Upon the filing or institution of
bankruptcy, reorganization, liquidation or receivership proceedings, or upon an
assignment of a substantial portion of the assets for the benefit of creditors
by the other party or in the event a receiver or custodian is appointed for such
party's business, or if a substantial portion of such party's business is
subject to attachment or similar process; PROVIDED, HOWEVER, in the case of any
involuntary
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bankruptcy proceeding such right to terminate shall only become effective if
such proceeding is not dismissed within [. . . *** . . .] after the filing
thereof. The Option and related rights to licenses granted thereunder or
pursuant to this Agreement by CIMA to Schering are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses
of rights to "intellectual property" as defined under Section 101(52) of the
Bankruptcy Code. The parties agree that Schering, as a licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the Bankruptcy Code. The parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or
against CIMA under the Bankruptcy Code, Schering shall be entitled to a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property upon
written request therefore by Schering. Such intellectual property and all
embodiments thereof shall be promptly delivered to Schering (i) upon any such
commencement of a bankruptcy proceeding upon written request therefor by
Schering, unless CIMA elects to continue to perform all of its obligations
under this Agreement or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of CIMA upon written request
therefor by Schering.
9.D EFFECT OF TERMINATION. In the event this Agreement is terminated,
Schering shall pay to CIMA [. . . *** . . .] as of the date of notice [. . . ***
. . .] of notice of termination.
9.E ACCRUED RIGHTS. Expiration or termination of this Agreement shall not
release either party from any obligation accruing prior to or upon such
expiration or termination. Accordingly, the following provisions shall survive
expiration or termination of this Agreement: Article 4, Article 5, Article 6,
Article 7, Article 8, Section 9.4 and Section 11.5.
11. MISCELLANEOUS.
11.1 ASSIGNABILITY. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party. The
foregoing notwithstanding, either CIMA or Schering may, without the other
party's consent, assign its rights and obligations under this Agreement (i) to
any Affiliate, or (ii) in connection with a merger, consolidation or sale of all
or substantially all of such party's assets pertaining to this Agreement to an
unrelated third party, PROVIDED, HOWEVER,, that the assigning party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction. Any purported assignment in violation of the preceding
sentence shall be void. Any permitted assignee shall assume all obligations of
its assignor under this Agreement.
11.2 INDEPENDENT CONTRACTORS. It is expressly agreed that CIMA and
Schering shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency. Neither
CIMA nor Schering shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other party to do so.
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11.3 NOTICES. Notices, invoices and communications hereunder shall be
deemed made (i) five (5) days after having been sent by registered or certified
mall, postage prepaid, or (ii) on the day of hand delivery, or (iii) on the day
of facsimile transmission, upon confirmation of receipt, if addressed to the
party to receive such notice, invoice or communication at the addresses given
below, or such other address as may hereafter be designated by notice in
writing.
If to CIMA:
CIMA Labs, Inc.
10,000 Valley View Road
Eden Prairie, Minnesota 55344
Attention: Vice President, Business Development
Fax- (612)947-8770
cc: Cooley Godward llp
5 Palo Alto Square
5000 El Camino Real
Palo Alto, CA 94306
Attention: Barbara Kosacz, Esq.
If to Schering:
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07032
Attention: Vice President, Business Development
Fax- (908) 298-5379
cc: Law Department -- Senior Director, Licensing
Fax - (908) 298-2739
11.4 ENTIRE AGREEMENT. This Agreement, together with the exhibits hereto,
contains the entire understanding of the parties with respect to the subject
matter hereof. All previous agreements are superseded hereby and all express or
implied agreements and understandings, either oral or written, heretofore made
are expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by authorized representatives of both parties hereto.
11.5 DISPUTE RESOLUTION.
(a) COOPERATION. In the event that Schering and CIMA are unable,
after exercising good faith efforts, to reach agreement on an issue relating to
this Agreement, then upon written notice to the other party, the issue shall be
referred to the Vice President, Marketing &
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*CONFIDENTIAL TREATMENT REQUESTED 14
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Sales, Key Pharmaceuticals of Schering and the Vice President, Business
Development of CIMA, who shall meet and use good faith efforts to reach
agreement on the issue ("Dispute"). In the event that such representatives of
Schering and CIMA are unable to reach agreement on the Dispute in such
meeting, then either party shall have the right to submit the Dispute to
arbitration in accordance with the provisions of Section 11.5(b) by providing
written notice to the other party within [. . . *** . . .] after such meeting.
(b) ARBITRATION. All Disputes arising in connection with this
Agreement shall be finally settled under the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as modified by the
provisions set forth in Exhibit 11.5.
11.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of New Jersey, without giving effect to the choice of
laws provisions thereof.
11.7 DESCRIPTIVE HEADINGS. The captions to the several Articles and
Sections hereof are not a part of this Agreement, and are merely guides or
labels to assist in locating and reading the several Articles and Sections
hereof.
11.8 COUNTERPARTS. This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. 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.
11.9 FORCE MAJEURE. Failure of any party to perform its obligations under
this Agreement (except the obligation to make payments when properly due) shall
not subject such party to any liability or place them in breach of any term or
condition of this Agreement if such failure is caused by any cause beyond the
reasonable control of such non-performing party, including without limitation,
acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo,
strikes or other labor trouble, failure in whole or in part of suppliers to
deliver on schedule materials, equipment or machinery, interruption of or delay
in transportation, a national health emergency or compliance with any order or
regulation of any government entity acting with color of right, PROVIDED,
HOWEVER, that the party affected shall promptly notify, the other party of the
condition constituting force majeure as defined herein and shall exert
reasonable efforts to eliminate, cure and overcome any such causes and to resume
performance of its obligations with all possible speed. If a condition
constituting force majeure as defined herein exists for more than [. . . *** . .
.], the parties shall meet to negotiate a mutually satisfactory solution to the
problem, if practicable.
11.10 SEVERABILITY. If any provision of this Agreement is declared
illegal, invalid or unenforceable by a court having competent jurisdiction, it
is mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by order of such court, PROVIDED, HOWEVER,, that in the
event that the terms and conditions of this Agreement are materially
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altered, the parties shall, in good faith, renegotiate the terms and
conditions of this Agreement to reasonably substitute such invalid or
unenforceable provision in light of the intent of this Agreement.
11.11 FURTHER ACTIONS. Each party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute and deliver this Agreement as of the last date set forth below.
SCHERING CORPORATION CIMA LABS, INC.
By: /s/ Marty Driscoll By:/s/ Jack Khattar
--------------------------------- -------------------------------------
Title: V.P. Marketing & Sales Title: V.P. Business Development
Date: 8/8/97 Date: 8/11/97
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EXHIBIT 1.2
BASIC LICENSE TERMS
1. DEFINITIONS.
1.1 As used in the License Agreement, the following capitalized terms,
whether used in the singular or plural, shall have the respective meanings set
forth in this Article 1. In addition to the definitions set forth below and
herein, this Article 1 shall include those definitions from Article 1 of the
Development and Option Agreement that relate to the License Agreement and such
definitions are incorporated herein by reference.
1.2 "CIMA PATENT RIGHTS" as defined in Article 1 of the Development and
Option Agreement shall also include any patents or patent applications covering
any CIMA Inventions arising thereunder.
1.3 "COMPETITIVE PRODUCT" shall mean a product in the Field with a quick
dissolving formulation substantially equivalent or similar to the Delivery
System.
1.4 "EFFECTIVE DATE" shall mean, for purposes of this License Agreement,
the date on which the License Agreement has been signed by duly authorized
representatives of each of the parties to said License Agreement.
1.5 "FDA" shall mean the United States Food and Drug Administration or any
successor agency thereto.
1.6 "NET SALES" shall mean, in the Territory, the [. . . *** . . .] in the
Territory, less the [. . . *** . . .] from such gross amounts including:
(i) [. . . *** . . .];
(ii) credits or allowances actually granted for damaged goods, returns
or rejections of Product and retroactive price reductions;
(iii) [. . . *** . . .]; and
(iv) freight, postage, shipping, customs (i.e. import or export)
duties and insurance charges.
1.7 "TERRITORY" shall mean [. . . *** . . .].
1.8 "VALID CLAIM" means a claim of an issued and unexpired patent included
within the Patent Rights, which has not been revoked or held unenforceable or
invalid by a decision of a court of other governmental agency of competent
jurisdiction, unappealable or unappealed with
1
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the time allowed for appeal, and which has not been disclaimed, denied or
admitted to be invalid or unenforceable through reissued or disclaimer or
otherwise.
2. LICENSES.
2.1 LICENSE GRANT TO SCHERING.
(a) CIMA shall grant to Schering an exclusive (even as
to CIMA) [. . . *** . . .] in the Territory under the CIMA Patent Rights and
the CIMA Know-How to make, use, offer for sale, sell and have made, used,
offered for sale and sold, Products.
(b) The license granted in Section 2. l(a) above includes the right
to sublicense to third parties and Affiliates the right to sell, make, offer to
sell, and have sold, made and offered for sale, Products.
2.2 DUE DILIGENCE BY SCHERING.
(a) DILIGENT EFFORTS. Schering shall, [. . . *** . . .], consistent
with [. . . *** . . .] in pursuing the [. . . *** . . .] a Product in the
Territory where [. . . *** . . .] to do so.
(b) The diligence obligations of Schering under Section 2.2(a) are
expressly conditioned upon the continuing absence of any adverse condition or
event which warrants a delay in development, clinical testing or
commercialization of the Product, including, without limitation, (i) failure of
CIMA to perform its obligations under the License Agreement, including, without
limitation, its obligation to provide Schering with adequate supplies of
materials needed for such development, testing or commercialization, and/or (ii)
unanticipated negative toxicological or pharmacological test results, and/or
(iii) an adverse condition or event relating to the safety or efficacy of the
Product, and/or (iv) delays arising due to action or inaction by the United
States Food and Drug Administration once the application has been filed, and/or
(v) unfavorable labeling, and/or (vi) the issuance of a dominating third party
patent required for Licensed Product. In the event of such event or condition,
the parties agree to discuss such event or condition and appropriate mechanisms
to address it. The obligation of Schering to develop, test or market such
Product shall be delayed or suspended so long as in Schering's opinion any such
condition or event exists; PROVIDED, HOWEVER,, there must be [. . . *** . . .]
and Schering must use [. . . *** . . .] consistent with [. . . *** . . .], to
address such adverse condition or event.
3. PAYMENTS AND ROYALTIES.
3.1 LICENSE ISSUANCE FEE. In consideration for the licenses granted
hereunder, Schering shall pay to CIMA a one time license fee of [. . . *** . .
.] for the grant of license to the CIMA Patent Rights and CIMA Know-How for a
Product.
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3.2 MILESTONE PAYMENTS. Subject to the terms and conditions contained in
the License Agreement, Schering shall pay to CIMA the following milestone
payments:
(i) [. . . *** . . .] upon the successful [. . . *** . . .] of
Product;
(ii) [. . . *** . . .] upon successful [. . . *** . . .] of Product;
(iii) [. . . *** . . .] upon successful [. . . *** . . .] of Product;
(iv) [. . . *** . . .] upon the submission [. . . *** . . .] of the
Product; and
(v) [. . . *** . . .] upon [. . . *** . . .] for the Product.
3.3 DEVELOPMENT COSTS. Subject to the terms and conditions in the License
Agreement, Schering shall pay to CIMA the costs set forth on Attachment 3.3 for
actual work performed for the development, scale-up and commercialization of the
Product. Such amounts shall be payable within [. . . *** . . .] after invoice
therefore. In the event additional activities other than those set forth on
Attachment 3.3 are necessary for the development, scale-up and commercialization
of the Product, then the parties shall confer and agree on such activities, and
Schering shall reimburse CIMA for the costs therefore as agreed between the
parties and in an amount consistent with the applicable costs for similar
activities set forth on Attachment 3.3.
3.4 ROYALTIES.
(a) Scherings hall pay to CIMA earned royalties on a Product-by-
Product basis in an amount equal to:
(i) [. . . *** . . .] of Products where such Product is covered
by a Valid Claim of a CIMA Patent Right; or
(ii) [. . . *** . . .] of Product if such Product is not covered
by a Valid Claim of a CIMA Patent Right and [. . . *** . . .] in the Territory.
(iii) [. . . *** . . .] of Product if such Product is not
covered by a Valid Claim of a CIMA Patent Right and [. . . *** . . .] in the
Territory.
(b) Notwithstanding Subsection 3.4(a) above, Schering shall pay to
CIMA minimum royalties in an amount equal to the following:
(i) [. . . *** . . .] for the [. . . *** . . .] of the Product;
(ii) [. . . *** . . .] for the [. . . *** . . .] of the Product;
and
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 3
<PAGE>
(iii) [. . . *** . . .] for the [. . . *** . . .] of the
Product and for [. . . *** . . .] thereafter.
In the event that earned royalties payable in a year do not equal or exceed
the minimum royalties due during such year, then Schering shall pay
[. . . *** . . .] with such payment being made with the [. . . *** . . .] in
such year. For purposes of this subsection, a year shall be calculated based
on a twelve month period beginning on the [. . . *** . . .] of the Product
and each subsequent year shall begin on the anniversary of such date in such
[. . . *** . . .].
3.5 TERM OF ROYALTY OBLIGATION; CERTAIN CONDITIONS. Royalties on each
Product at the rate set forth in Section 3.4 shall be effective as of the date
of first commercial sale of Product and shall continue until either: (i) the
expiration of the last applicable CIMA Patent Right in the case of sales for
which there is a Valid Claim; or (ii) in the case of sales of Product for which
there is not a Valid Claim (or if the patent application did not issue), until
[. . . *** . . .] after the first commercial sale of the Product.
3.6 THIRD PARTY PATENT LICENSES. In the event that patent licenses from
third parties relating to the Delivery System being utilized in the Product
are required by Schering, its Affiliates and sublicensees in order to
develop, make, have made, use or sell Product (hereinafter "Third Party
Patent Licenses"), up to [. . . *** . . .] of royalties and/or payments
actually paid under such Third Party Patent Licenses by Schering for sale of
such Product for such calendar quarter shall be creditable against the
royalty payments due CIMA by Schering, PROVIDED, HOWEVER, that in no event
shall the royalty payments due CIMA under Sections 3.3(i) or 3.3(ii) be
[. . . *** . . .].
4. MANUFACTURING RIGHTS AND ACTIVITIES.
4.1 SUPPLY OF SCHERING'S REQUIREMENTS. CIMA shall manufacture and
supply to Schering, and Schering shall purchase from CIMA, Schering's
Requirements of the Product. The term "Requirements" shall mean all
quantities of the Product that shall be required by Schering, its Affiliates
and its sublicensees for clinical trial materials and for distribution,
marketing and sale of the Product in the Territory during the term hereof.
4.2 SELF-sUPPLY BY SCHERING AND ITS AFFILIATES. At any time after the
[. . . *** . . .] after the [. . . *** . . .] of the Product, Schering and
its Affiliates shall have the right at their sole discretion, from time to
time during the term of the Agreement, to self-supply any portion of, or all
of, its Requirements of the Product. The License Agreement shall contain the
terms and conditions for notice and for the transfer of technology and
know-how to Schering to enable it to self-supply the Product. In addition,
Schering shall pay [. . . *** . . .] the Product. The License Agreement shall
set forth the calculation for such amount, which shall be based upon
[. . . *** . . .] (it being understood that nothing contained herein shall be
construed to obligate CIMA to disclose its profit margins for supplied
Product).
- -----------------
*CONFIDENTIAL TREATMENT REQUESTED 4
<PAGE>
4.3 SUPPLY PRICE. The parties hereto agree that the supply price for
the Product shall be calculated and consistent with Attachment 4.3. The
License Agreement shall include the terms and conditions for price adjustment
and maximum price increase of Product.
4.4 DEVELOPMENT PROGRAM. Subject to Section 3.3, CIMA shall perform the
development, scale-up and validation activities as necessary for the
regulatory approval of the Product in the Territory, including, without
limitation, the activities set forth in Attachment 3.3 hereto.
5. PATENTS.
5.1 INVENTIONS. The License Agreement shall set forth the provisions for
determining the ownership of Inventions arising during the performance of the
development program during the License Agreement. It is agreed that such
terms and provisions shall be substantially in accordance with the
corresponding terms and provisions of the Development and Option Agreement.
5.2 FILING, PROSECUTION AND MAINTENANCE. CIMA shall diligently file,
prosecute and maintain in the Territory, at its expense, the CIMA Patent
Rights licensed to Schering under the License Agreement.
5.3 SCHERING'S OPTION TO PROSECUTE AND MAINTAIN PATENTS. CIMA shall
notify Schering of any decision to cease prosecution and/or maintenance of
CIMA Patent Rights, and Schering shall have the right, in its sole
discretion, to take over responsibility for the prosecution and maintenance
of such CIMA Patent Rights, at Schering's expense. The License Agreement
shall set forth in detail the specific rights and responsibilities of the
parties with respect to CIMA Patent Rights for which Schering assumes
responsibility under this Section 5.3.
5.4 ENFORCEMENT.
(A) NOTICE AND DISCONTINUANCE OF INFRINGEMENT. Each of CIMA and
Schering shall promptly notify the other party in writing in the event that
it becomes aware of any infringement by a third party in the Territory of any
issued patent within the Patent Rights. Any such notification shall include
evidence to support an allegation of infringement by such third party. Each
of Schering and CIMA shall have primary responsibility for obtaining a
discontinuance of such infringement or bringing suit against such third party
infringer with respect to Patent Rights for which it has responsibility under
the License Agreement. The License Agreement shall set forth additional
provisions, to be negotiated by the parties, detailing the parties'
responsibilities and obligations with regard to resolution of any alleged
third party infringement and for apportionment between the parties of any
recovery or damages awarded from a suit or action brought by CIMA and/or
Schering.
(b) CONTINUANCE OF INFRINGEMENT. The License Agreement shall set
forth provisions, to be negotiated by the parties, whereby each party shall have
the right, but not the
5
<PAGE>
obligation, to assume responsibility and control of the resolution of any
third party infringement matter relating to the Patent Rights in the event
that party having responsibility under Section 5.4(a) fails to take
appropriate enforcement action against such third party infringer within a
reasonable time period to be established by the parties.
5.5 INFRINGEMENT - THIRD PARTY LICENSES. The License Agreement shall
set forth terms, to be negotiated by the parties, defining the rights and
responsibilities of each party in the event that Schering's making, having
made, using, distributing, marketing, promoting, offering for sale or selling
of Products will infringe or is alleged to infringe any third party patents.
6. TERM AND TERMINATION.
6.1 TERM AND EXPIRATION. The License Agreement shall be effective as of
the Effective Date and unless terminated earlier pursuant to Sections 6.2 below,
the term of the License Agreement shall continue in effect until the later of
the expiration of the last to expire CIMA Patent Right or [. . . *** . . .] from
[. . . *** . . .] of the Product. Upon expiration of the License Agreement,
Schering's licenses shall become fully paid-up, perpetual licenses.
6.2 TERMINATION BY SCHERING. Notwithstanding anything herein to the
contrary, Schering shall have the unilateral right to terminate the License
Agreement, with or without cause, at any time by giving [. . . *** . . .]
advance written notice to CIMA. In the event of such termination, the rights
and obligations thereunder, including any payment obligations not due and
owing as of the termination date, shall terminate and the licenses granted to
Schering shall revert back to CIMA. In the event Schering terminates this
Agreement without cause, Schering shall pay CIMA a termination fee in an
amount equal to (i) [. . . *** . . .], plus (ii) [. . . *** . . .] in order
to perform its obligations under this Agreement.
6.3 TERMINATION.
(A) TERMINATION FOR CAUSE. The License Agreement may be terminated
by written notice by either party at any time during the term of this
Agreement:
(I) if the other party is in breach of its material
obligations thereunder by causes and reasons within its control and has not
cured such breach or taken steps to substantially cure such breach within
[. . . *** . . .], after notice requesting cure of the breach; or
(II) upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership proceedings, or upon an
assignment of a substantial portion of the assets for the benefit of
creditors by the other party or in the event a receiver or custodian is
appointed for such party's business, or if a substantial portion of such
party's business is subject to attachment or similar process, PROVIDED,
HOWEVER, in the case of any involuntary bankruptcy
- -----------------
*CONFIDENTIAL TREATMENT REQUESTED 6
<PAGE>
proceeding such right to terminate shall only become effective if the
proceeding is not dismissed within [. . . *** . . .] after the filing thereof.
The License Agreement shall provide that in the event that there is a dispute
as to whether a party can terminate under Subsections 6.3(a)(i) or (ii), the
issue shall be referred to arbitration which shall be conducted under the
terms and conditions set forth in Exhibit 11.5 and such issue shall be
decided by the arbitrator in order for the rights and remedies in Section
(b)(i) and (ii) to take effect.
(B) EFFECT OF TERMINATION FOR CAUSE ON LICENSE.
(I) In the event Schering properly terminates the License
Agreement under Section 6.3(a)(i) under circumstances where Schering suffers
material harm or where such breach causes a competitive disadvantage to
Schering, then Schering's license under the License Agreement shall continue
to be royalty-bearing but at a royalty rate reduced by [. . . *** . . .] of
the applicable royalty rate for period not to exceed [. . . *** . . .].
(II) In the event CIMA properly terminates the License
Agreement under Section 6.3(a)(i), Schering shall pay CIMA a termination fee
in an amount equal to (i) [. . . *** . . .], plus (ii) [. . . *** . . .] in
order to perform its obligations under this Agreement.
(III) With respect to termination of the License Agreement
under Section 6.3(a)(ii), the licenses granted under or pursuant to the
License Agreement by CIMA to Schering are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights
to "intellectual property" as defined under Section 101(52) of the Bankruptcy
Code. The parties agree that Schering, as a licensee of such rights under
this Agreement, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code. The parties further agree that, in the
event of the commencement of a bankruptcy proceeding by or against CIMA under
the Bankruptcy Code, Schering shall be entitled to a complete duplicate of
(or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property upon written request therefore
by Schering. Such intellectual property and all embodiments thereof shall be
promptly delivered to Schering (i) upon any such commencement of a bankruptcy
proceeding upon written request therefore by Schering, unless CIMA elects to
continue to perform all of its obligations under this Agreement or (ii) if
not delivered under (i) above, upon the rejection of this Agreement by or on
behalf of CIMA upon written request therefore by Schering.
7. OTHER PROVISIONS
The License Agreement will have additional customary terms and provisions
including, without limitation, those relating to royalty reports, maintenance of
royalty records, audit rights of CIMA, confidentiality and publication, patent
prosecution, maintenance and enforcement, representations and warranties of each
party, indemnification provisions, dispute resolution
- -----------------
*CONFIDENTIAL TREATMENT REQUESTED 7
<PAGE>
mechanisms and miscellaneous provisions relating to assignment, governing
law, export control, force majeure and notices.
- -----------------
*CONFIDENTIAL TREATMENT REQUESTED 8
<PAGE>
ATTACHMENT 3.3
Development, Scale-Up and Commercialization Activities for a
[. . . *** . . .]
<TABLE>
<CAPTION>
Estimated
Estimated* Time to
Cost/(000's) Completion
--------------- ----------------
<S> <C> <C> <C>
I Prototype Development (per Exhibit 1.16 and Section 3
of Development Agreement) $[. . . *** . . .] [. . . *** . . .]
II Initial Scale-Up at R&D Facility [. . . *** . . .]
A. [. . . *** . . .]. $[. . . *** . . .]
B. Manufacture [. . . *** . . .] for use in [. . . *** $[. . . *** . . .]
. . .].
C. Stability for [. . . *** . . .] under [. . . *** . . .] $[. . . *** . . .]
(SEE ATTACHED TABLE)
III Full-Scale Manufacturing/Optimization [. . . *** . . .]
A. Manufacture up to [. . . *** . . .] $[. . . *** . . .]
B. Manufacture [. . . *** . . .] follow-up $[. . . *** . . .]
C. Stability on [. . . *** . . .] (SEE ATTACHED TABLE) $[. . . *** . . .]
D. Preparation of CMC, in Schering's approved format. $[. . . *** . . .]
IV. Validation/Commercialization [. . . *** . . .]
A. Manufacture [. . . *** . . .]
1. If Saleable $[. . . *** . . .]
2. If Not Saleable $[. . . *** . . .]
B. Stability studies on above [. . . *** . . .] (SEE $[. . . *** . . .]
ATTACHED TABLE)
C. Validation labor costs $[. . . *** . . .]
Tooling lead time** [. . . *** . . .]
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
* Cost estimate does not include capital and tooling costs that may be
needed to accommodate the [. . . *** . . .]. These are estimated at
$[. . . *** . . .] for tooling and $[. . . *** . . .] for needed
modifications to the packaging line.
** If tooling for tablet size/packaging configuration is ordered upon the
completion of Phase I above; i.e., upon Schering's approval of final
formulation, CIMA expects the addition of [. . . *** . . .] to the
timeline due to tooling lead times. If the decision to order tooling is
pushed back to wait for the results from [. . . *** . . .], the timeline
will be further extended by the waiting period.
</TABLE>
- -----------------
*CONFIDENTIAL TREATMENT REQUESTED 1
<PAGE>
ATTACHMENT 3.3 (cont.)
STABILITY STUDIES SUMMARY
Item II C
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
Item III C; Item IV B
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X X X X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 2
<PAGE>
ATTACHMENT 4.3
PRELIMINARY COST OF GOODS ESTIMATE
3/12/97
Product Cost per Tablet (cents)
- ------- -----------------------
[. . . *** . . .]
- - Cost does not include cost of [. . . *** . . .].
- - Volumes of [. . . *** . . .].
- - Pricing assumes finished product to ship FOB point of manufacture.
- - Packages of [. . . *** . . .], packed [. . . *** . . .].
- - Quality Control procedures normal to CIMA which include:
a) Testing and release of raw materials, packaging components, and
finished product.
b) In-process sampling and testing.
- - Released finished product not to be stored at CIMA.
- - [. . . *** . . .] as mandated by regulatory revisions (i.e., plate and die
charges due to label changes and product identification requirements, etc.)
- - [. . . *** . . .].
- - Cost does not include [. . . *** . . .].
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*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT 1.4
CIMA PATENT RIGHTS
Country Patent/Application No. Filing/Issue Date
- ------- ---------------------- -----------------
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](1) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
US [. . . *** . . .](2) [. . . *** . . .]
- --------------------
(1) Issued Patents
(2) Pending Patent Applications
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT 1.8
FINAL PROTOTYPE - GENERAL SPECIFICATIONS
- - TABLET SIZE/SHAPE
[. . . *** . . .]
- - FLAVOR
Tablet flavor(s) to be determined mutually by the parties based upon (i)
optimum taste-masking characteristics and (ii) market appeal.
- - COLOR
Tablet color(s) will be determined mutually by the parties.
- - TABLET DISINTEGRATION
Targeted tablet disintegration time [. . . *** . . .].
- - PACKAGING
The tablet will be [. . . *** . . .].
- - STABILITY
Prototype development (implementation of the Development Plan) will include
[. . . *** . . .].
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT 1.16
PROTOTYPE DEVELOPMENT PLAN
REVISED 7/17/97
A. Schering to provide CIMA within [. . . *** . . .] from Effective Date with:
1) [. . . *** . . .] of the [. . . *** . . .] form of [. . . *** . . .]
for development work at [. . . *** . . .].
2) Safety handling data (MSDS) for [. . . *** . . .].
3) Analytical methods and reference standard for [. . . *** . . .].
4) Clean-up procedures for active [. . . *** . . .].
5) Any other technical information deemed by Schering to be
beneficial.
B. CIMA to develop [. . . *** . . .] formulations of OraSolv-Registered
Trademark- tablets for [. . . *** . . .] by Schering [. . . *** . . .].
NOTE: Multiple formulations with no more than [. . . *** . . .] will
be produced and evaluated by CIMA and Schering. The best formulations
will be provided to Schering. Up to [. . . *** . . .] may be undertaken
if necessary in the judgment of Schering. Further formulation cycles
may be undertaken on terms to be mutually agreed by the parties.
C. Schering approves [. . . *** . . .].
D. CIMA develops the analytical method(s) for testing, release and stability
assessment of the Prototype.
E. CIMA to manufacture [. . . *** . . .] and set up sufficient samples for
conducting [. . . *** . . .].
F. CIMA to deliver to Schering [. . . *** . . .] of the approved prototype
formulation together with the results of the [. . . *** . . .].
G. CIMA to continue the [. . . *** . . .] at [. . . *** . . .] and provide
results to Schering. (SEE ATTACHED TABLE)
H. CIMA to produce [. . . *** . . .] of the approved formulation of the
Product, as requested by Schering.
Duration of prototype development activities at CIMA is estimated at
[. . . *** . . .] from receipt by CIMA of the [. . . *** . . .] from Schering.
This does not include timing of Schering's activities.
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 1
<PAGE>
EXHIBIT 1.16 (cont.)
STABILITY STUDIES SUMMARY
Item E-G
- ------------------------------------------------------------
- ------------------------------------------------------------
Storage Conditions
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
[. . . *** . . .]
- ------------------------------------------------------------
[. . . *** . . .] X X X
- ------------------------------------------------------------
- ------------------------------------------------------------
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 2
<PAGE>
EXHIBIT 5.3
PROPOSED PRESS RELEASE
CIMA LABS INC. ANNOUNCES AGREEMENT WITH SCHERING
CORPORATION
SUSTAINED RELEASE PRESCRIPTION PRODUCT TO BE COMBINED WITH
ORASOLV-Registered Trademark-
Minneapolis, MN, xxxx xx, 199x - CIMA LABS INC. (NASDAQ: CIMA) today
announced an exclusive development and license option agreement with Schering
Corporation, a wholly-owned subsidiary of Schering-Plough Corporation (NYSE:
SGP). The agreement pertains to one of Schering-Plough's currently marketed
prescription products and represents CIMA's first collaboration on developing
a fast dissolve formulation of a sustained release product. In exchange for
its development work and license option, CIMA will receive an option fee and
development fees.
"We are excited to announce our first corporate partner for the combination
of a sustained release prescription drug with our fast dissolve technology,"
commented John M. Siebert, Ph.D., President and Chief Executive Officer of
CIMA LABS INC. "This agreement tracks our corporate goal to develop
relationships in the prescription marketplace and we look forward to working
with the Schering-Plough team."
OraSolv-Registered Trademark- is a patented oral dosage form which
incorporates microencapsulated drug ingredients into tablets that dissolve
quickly in the mouth. OraSolv-Registered Trademark- is designed to improve
taste acceptance, address difficulty of swallowing traditional tablets and
capsules, while offering a convenient oral dosage form that can be taken
anywhere and anytime, therefore increasing compliance.
CIMA LABS INC. is a drug delivery company that develops and manufactures
product based upon its OraSolv-Registered Trademark- technology for marketing
by multinational pharmaceutical companies to improve patient compliance and
drug efficacy. CIMA was founded in 1986 and has been publicly held since
July 1994. The Company's corporate headquarters and manufacturing facility
are located in Eden Prairie, MN and its Research & Development facility is
located in Brooklyn Park, MN.
<PAGE>
EXHIBIT 11.5
ARBITRATION PROVISIONS
l) Within [. . . *** . . .] after the receipt of the notice provided
for in Section 11.5(a) of this Agreement, each party shall appoint an
independent expert, knowledgeable in the field concerning the Dispute, to
serve on the special arbitration panel (the "Panel"). The two independent
experts so appointed by the parties, shall, within [. . . *** . . .]
thereafter, appoint a neutral third independent expert, knowledgeable in the
field concerning the Dispute. Such neutral third independent expert shall
serve as the chairperson of the Panel. Each of the members of the Panel shall
be required to sign a secrecy agreement, acceptable in form to both parties,
with respect to any information provided by either party during the
arbitration procedure.
2) Within [. . . *** . . .] after the chairperson of the Panel is
appointed, each party shall submit to each member of the Panel, and to the
other party, a written statement setting forth the relevant facts with
respect to the Dispute and arguments supporting such party's position with
respect to the resolution of the Dispute.
3) Within [. . . *** . . .] after such written statements are
provided to the Panel, the Panel and appropriate representatives of each
party shall meet so that the parties can present oral arguments to the Panel,
and the Panel can have the opportunity to ask questions of the parties. The
location of such meeting shall be at Schering's facility in Kenilworth, New
Jersey if CIMA requests the arbitration and at CIMA's facility in Eden
Prairie, Minnesota if Schering requests the arbitration. Each party shall
have [. . . *** . . .] to present its arguments to the Panel and
[. . . *** . . .] to rebut the arguments made by the other party. The party
requesting the arbitration shall be the first to present its oral argument to
the Panel.
4) Within [. . . *** . . .] after such meeting, the Panel shall
render a decision on the Dispute, which decision shall be reduced to writing
by the chairperson of the Panel and signed by each member of the Panel. The
chairperson of the Panel shall be responsible for immediately providing a
copy of the written decision to each party. Such decision shall be binding
with respect to any Disputes under this Agreement.
5) Each party shall be responsible for its own costs incurred in such
arbitration procedures and the cost of the Panel shall be shared equally by
the parties.
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
*** TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
CIMA LABS INC.
DEVELOPMENT AND LICENSE OPTION AGREEMENT
WITH
IPR PHARMACEUTICALS, INC.
THIS DEVELOPMENT AND LICENSE OPTION AGREEMENT (the "Agreement") is entered
into by and between CIMA LABS INC., a Delaware corporation ("CIMA") and IPR
PHARMACEUTICALS, INC., ("IPR"), on this 10th day of September, 1997 (the
"EFFECTIVE DATE").
RECITALS
WHEREAS, CIMA owns or has rights to certain patented oral drug-delivery
technology referred to as OraSolv-Registered Trademark-, which has
applications in the field of pharmaceutical product formulation; and
WHEREAS, IPR has an exclusive license to make, have made, use and sell
[...***...] on a [...***...] and has access to substantial expertise and
experience in the development, commercialization and marketing of human
pharmaceutical products; and
WHEREAS, the parties desire to explore the possibility of entering into
future agreements regarding the development and commercialization of
OraSolv-Registered Trademark- formulations of a certain pharmaceutical product
for sale in the prescription markets worldwide; and
WHEREAS, IPR wishes to sponsor the development by CIMA of a prototype of
a certain pharmaceutical product formulation for IPR's evaluation, subject to
the granting by CIMA to IPR of an option to enter into a license agreement
with CIMA on terms further described herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, the parties hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "AFFILIATE" means with respect to each party, any corporation or other
business entity which (a) directly or indirectly owns, is owned by or is under
common ownership with a party to this Agreement to the extent of at least fifty
percent (50%) of the equity (or such lesser percentage which is the maximum
allowed to be owned by a foreign organization in a particular jurisdiction)
having the power to vote or direct the affairs of such entity, or (b) directly
or indirectly controls, is controlled by or is under common control with such
party. As used herein, the term "control" means possession of the power to
direct, or cause the
- ----------
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
direction of the management and policies of a corporation or other entity
whether through the ownership of voting securities, by contract or otherwise.
1.2 "DEVELOPMENT AND SCALE-UP PLAN" shall mean the plan set forth on
Exhibit A for the development of the Prototype and its scale-up.
1.3 "FIELD" shall mean prescription pharmaceutical products
incorporating the OraSolv-Registered Trademark- Technology containing as
active ingredient in any formulation or dosage, [...***...], or any other
[...***...] compound for the treatment of [...***...], including without
limitation, the Product for sale in prescription markets [...***...].
1.4 "FINAL PROTOTYPE" shall mean the product which meets the general
specifications as set forth in Exhibit C as agreed to by the parties and any
further specifications agreed to by the parties.
1.5 "OPTION" shall have the meaning assigned thereto in Section 3.1.
1.6 "ORASOLV-Registered Trademark- TECHNOLOGY" shall mean CIMA's
effervescent, fast-dissolving, oral drug-delivery tablet technology which
includes, to the extent applicable to the formulation of a product which
meets the criteria set forth on Exhibit D, (i) the inventions disclosed in
patents and patent applications owned, controlled or licensed (with the right
to sublicense) by CIMA during the term of this Agreement, including those
listed on Exhibit B, and (ii) all know-how, technology, trade secrets, data,
processes and methods, or other information owned, controlled or licensed
(with the right to sublicense) by CIMA during the term of this Agreement.
1.7 "PRODUCT" shall mean the pharmaceutical dosage form which is
formulated using the OraSolv-Registered Trademark- Technology and which
contains [...***...] as its active ingredient, whether [...***...].
1.8 "PROTOTYPE" shall mean the prototype of the Product to be developed
by CIMA pursuant to the Development and Scale-Up Plan and in accordance with
the general specifications set forth on Exhibit C, and any further
specifications agreed to by the parties.
ARTICLE 2. PROTOTYPE DEVELOPMENT
2.1 GENERAL. In consideration for certain development fees set forth
below, CIMA will use all commercially reasonable efforts to develop and
deliver to IPR a Prototype, subject to the terms of this Agreement and in
accordance with the specifications set forth on Exhibit C (and any further
specifications agreed to by the parties) and the schedule set forth in
Section 2.2. Upon receipt of the Prototype, IPR will evaluate the Prototype
in accordance with the schedule set forth in Section 2.2. In consideration
for certain fees set forth in, and subject to the terms of, this Agreement,
CIMA shall grant to IPR the license option with respect to the
commercialization of the Product further described below.
2.2 DEVELOPMENT SCHEDULE. Following the Effective Date and receipt of the
materials from IPR delineated under Phase I of the Development and Scale-Up Plan
in such quantities as may be necessary from
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time to time to complete the Development and Scale-Up Plan, CIMA shall
initiate development of the Prototype. CIMA will develop the Final Prototype
in [...***...] to be determined by mutual agreement as described in Exhibit
C. CIMA and IPR each acknowledge and agree that Phase I of the Development
and Scale-Up Plan is expected to be completed within approximately [...***...]
from the date of initiation of Phase I of the Development and Scale-Up Plan
(which date shall be agreed upon and recorded in writing by the parties) (the
"Initiation Date"). To that end, during the implementation of Phase I of the
Development and Scale-Up Plan, IPR agrees to evaluate promptly each iteration
of the Prototype and/or report of results delivered by CIMA and use all
commercially reasonable efforts to respond to CIMA within [...***...] of
receipt thereof. IPR's response will indicate the acceptability of such
proposed Prototype and/or the need, if any, for modification of the
specifications in light of the results of IPR's evaluation. In the event of
any unanticipated changes in the regulatory environment, or extreme market
conditions or similar unforeseen events which affect the development of the
Prototype and which are beyond the parties' control (including but not
limited to IPR's failure to respond to CIMA within [...***...] of IPR's
receipt of any iteration of the Prototype or report of results), the parties
will discuss such changed circumstances, the appropriate mechanisms to
address them and their impact on the Development and Scale-Up Plan schedule.
2.2.1 TIMELINESS PAYMENTS. In addition to the Development Fees
set forth in Section 2.3 below, IPR will pay to CIMA, at the same time as the
payment due under Section 2.3.3, a bonus of $[...***...] if CIMA completes Phase
I of the Development and Scale-Up Plan in less than [...***...] after the
Initiation Date. If CIMA completes Phase I of the Development and Scale-Up Plan
after the expiration of [...***...] from the Effective Date, due solely to
circumstances within CIMA's control, IPR may deduct $[...***...] from the
payment due CIMA under Section 2.3.3 of this Agreement; PROVIDED, HOWEVER, that
if the parties determine that the Prototype must be reformulated, CIMA shall
have an additional [...***...], for a total of [...***...], to complete Phase I
of the Development and Scale Up Plan without deduction from the payment due CIMA
under Section 2.3.3. For the purposes of this Agreement, completion of Phase I
of the Development and Scale-Up Plan shall be deemed to occur when [...***...].
2.3 DEVELOPMENT FEES. In consideration for CIMA's development and
production of the Prototype in accordance with this Agreement, IPR shall make
the following non-refundable payments to CIMA:
2.3.1 [...***...] within [...***...] of the Effective Date;
2.3.2 [...***...] within [...***...] of shipment by CIMA of
[...***...] as outlined in [...***...] of Phase I of the Development and
Scale-Up Plan; and
2.3.2 [...***...] within [...***...] of completion of Phase I of
the Development and Scale-Up Plan.
2.4 DEVELOPMENT PROGRAM CONTACTS. The parties will each communicate and
cooperate with the other, through their designated contact persons, to the
extent necessary to implement the Development and Scale-Up Plan. Exhibit E sets
out the appropriate contact person at each of CIMA and IPR for the various tasks
within each phase of the Development and Scale-Up Plan, and may be amended from
time to time to reflect changes in the amending party's designated contact
persons.
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ARTICLE 3. OPTION, EXCLUSIVITY, LICENSE
3.1 OPTION. Effective upon delivery of the Option Fee described in
Section 3.3 below, CIMA hereby grants to IPR an option to enter into an
exclusive license agreement to utilize the OraSolv-Registered Trademark-
Technology for the development, marketing, distribution and sale of the
Product [...***...] (the "Option"). The term of such Option shall extend
from the Effective Date until the earlier of (i) [...***...] after completion
of data analysis from the pilot bio-study of the Final Prototype developed
pursuant to Section 2.2, or (ii) [...***...], unless otherwise agreed by the
parties or unless the U.S. Food and Drug Administration requests or requires
the parties to perform efficacy and/or stability studies in addition to, or
instead of, those activities provided in the Development and Scale-Up Plan,
in which case the parties shall establish a mutually acceptable extension of
the Option term. IPR may exercise the Option by (i) providing CIMA with
written notice thereof, and (ii) negotiating and entering into a license
agreement with CIMA in accordance with the terms set forth in Section 3.4
below (the "License Agreement") prior to the end of the Option term. In the
event that the parties fail to negotiate and enter into the License Agreement
by the end of the Option term, CIMA's obligations under Section 3.2 hereof
shall terminate and CIMA shall be free to enter into any license agreement
with respect to the Field with any third-party, on any terms CIMA may, in its
sole discretion, deem appropriate.
3.2 EXCLUSIVITY.
3.2.1 CIMA. In consideration for the Option Fee, CIMA hereby
agrees that from the Effective Date until the expiration or termination of
the Option term set forth in Section 3.1, CIMA shall not enter into any
negotiations or agreements with any third party relating to the development
or commercialization of products containing as an active ingredient
[...***...] compound in the Field.
3.2.2 IPR. In consideration for the Option granted hereunder,
IPR hereby agrees that from the Effective Date until the expiration or
termination of the Option term set forth in Section 3.1, IPR shall not
develop or commercialize, or enter into any negotiations or agreements with
any third party relating to the development or commercialization of,
[...***...] compound that disintegrates or dissolves in the mouth [...***...]
by either placing on the tongue or by chewing.
3.3 OPTION FEE. In consideration for the exclusivity obligations set
forth in Section 3.2 and the Option granted in Section 3.1, IPR shall pay to
CIMA the sum of [...***...] (the "Option Fee"). CIMA acknowledges that
[...***...], creditable against the Option Fee, has been paid by IPR to CIMA
as of the Effective Date. IPR shall pay the balance due on the Option Fee,
[...***...] within [...***...] of the Effective Date. The total Option Fee
payable hereunder shall be creditable against the upfront license fee payable
to CIMA upon execution of the License Agreement as set forth on Exhibit F.
3.4 TERMS OF LICENSE. The terms of the proposed License Agreement shall
include, but not be limited to, the terms set forth on Exhibit F.
3.5 SUPPLY AGREEMENT. Simultaneously (unless otherwise agreed by the
parties) with the execution of the License Agreement, the parties shall enter
into a commercialization and supply agreement pursuant to which CIMA shall be
the exclusive supplier of IPR's commercial requirements of the Product with
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the exception that IPR may negotiate manufacturing rights to the Product.
Such agreement shall include, but not be limited to, the terms set forth on
Exhibit G and shall also set forth the obligations of CIMA with respect to
finalization of development, scale-up and validation of the Product.
Scale-up and commercialization costs shall be paid by IPR and are delineated
in Exhibit H.
3.6 FACILITIES VISITS. During the term of this Agreement, CIMA shall
allow personnel of IPR and/or Zeneca Limited, at IPR's expense, to visit the
manufacturing and research facilities of CIMA and to consult with CIMA
personnel, at mutually agreeable times and upon reasonable notice, to discuss
and review the development of the Product, PROVIDED, HOWEVER, that such
personnel shall not be permitted to visit any area of the manufacturing and
research facilities of CIMA which contain confidential information or
materials of a third party which cannot be removed or protected from such
personnel's view. However, CIMA acknowledges that infrequently for
regulatory or similar compliance reasons, all areas of the manufacturing and
research facilities of CIMA may need to be visited and inspected by such
personnel and CIMA shall use all reasonable commercial efforts to manage its
manufacturing and site arrangements to permit such "all areas" visits and
inspections, but CIMA shall not be required by virtue of this provision or
otherwise to breach any confidentiality or other provisions in its agreements
with any third party.
ARTICLE 4. GENERAL PROVISION
4.1 LIMITATIONS ON USE. IPR and CIMA agree that each shall use the
Prototype and the Confidential Information (as defined in Section 4.3.1) of
the other solely for the purposes specified in this Agreement and for no
other purpose, including without limitation, use of the Prototype or
Confidential Information relating to [...***...] in any research or
commercial activities other than those which relate directly to the purposes
specified herein. Each party's permitted use of [...***...] and the
Prototype shall be in compliance with all applicable laws and regulations.
Unless the parties enter into the License Agreement, upon expiration or
termination of the Agreement, each party shall return or destroy, all
Confidential Information of the other party, as directed by said other party,
including all unused quantities of the Prototype or samples of [...***...],
and also including information related to [...***...]and copies of any and
all information, data and results obtained from conduct of evaluations under
this Agreement or relating to the use of the Prototype (the "Results").
However, one copy of the other party's Confidential Information may be
retained by each party solely for the purpose of determining its continuing
obligations under this Agreement. Neither party shall sell, transfer,
disclose or otherwise provide access to Confidential Information concerning
[...***...], the Prototype or the Results, any method or process relating
thereto or any material that could not have been made but for access to the
foregoing, to any person or entity without the prior expressed written
consent of the party owning the Confidential Information, except that either
party may allow access to the Confidential Information to employees,
subcontractors or agents during the term of, and solely for purposes
consistent with, this Agreement. Each party will make diligent efforts to
ensure that such employees, agents and subcontractors will use the
Confidential Information in a manner consistent with the terms of this
Agreement.
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4.2 TERM AND TERMINATION.
4.2.1 TERM. Unless sooner terminated in accordance with Section
4.2.2 or 4.2.3 below, this Agreement shall expire upon the expiration or
termination of the Option.
4.2.2 TERMINATION FOR BREACH. Either party may terminate this
Agreement upon [...***...] written notice to the other in the event the other
commits a material breach of a provision of this Agreement and fails to cure
such breach prior to the end of such [...***...] period.
4.2.3 TERMINATION BY IPR. IPR shall have the right to terminate
this Agreement prior to exercise of the Option upon [...***...] written notice
to CIMA.
4.2.4 EFFECT OF TERMINATION. Upon termination or expiration of
this Agreement pursuant to Sections 4.2.1 or 4.2.3 above, or termination by CIMA
pursuant to Section 4.2.2 above, IPR shall [...***...]. Upon termination by IPR
pursuant to Section 4.2.2, CIMA shall [...***...] pursuant to Section 3.3.
Nothing in this Agreement shall be construed to relieve either party of any
obligations incurred by it hereunder prior to the effective date of termination
hereof. This Article 4 shall survive any termination or expiration of this
Agreement.
4.3 CONFIDENTIALITY. Each of the parties shall be bound by the following
terms and conditions:
4.3.1 Subject to the limitations set forth in Section 4.3.2
below, all information disclosed to the other party and identified by the
disclosing party as confidential shall be deemed "Confidential Information"
of the disclosing party. In particular, Confidential Information shall be
deemed to include, but not be limited to, the Prototype and any documentation
relating thereto, information related to [...***...], the Results, any
patent application or drawing or potential patent claim the subject matter of
which is directly or indirectly derived from information disclosed hereunder,
any trade secret, information, invention, idea, samples, process, method,
procedures, formulations, packaging designs and materials, test data relating
to any research project, work in process, future development, engineering,
manufacturing, regulatory, marketing, servicing, financing, or personnel
matter relating to the disclosing party, its present or future products,
sales, suppliers, clients, customers, employees, investors or business,
whether in oral, written, graphic or electronic form.
4.3.2 The term "Confidential Information" shall not be deemed to
include information which (i) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally known or
available; (ii) is known by the receiving party at the time of receiving such
information, as evidenced by its records except where the same was previously
disclosed by the disclosing party to the receiving party or its Affiliates
under the terms of a Confidentiality Agreement; (iii) is hereafter furnished
to the receiving party by a third party, as a matter of right and without
restriction on disclosure; (iv) is independently developed by the receiving
party without use of Confidential Information of the other party; (v) is the
subject of a written permission to disclose provided by the disclosing party
(vi) is required to be disclosed by law; or (vii) is required to be disclosed
to establish rights or enforce obligations under this Agreement, but only to
the extent such disclosure is necessary.
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4.3.3 During the term of this Agreement and for a period of
[...***...] after termination hereof [...***...] with respect to information
pertaining to manufacturing processes and know-how), each party shall
maintain all Confidential Information in trust and confidence and shall not
disclose any Confidential Information to any third party or use any
Confidential Information for any unauthorized purpose. Each party may use
such Confidential Information only to the extent required to accomplish the
purposes of this Agreement. Confidential Information shall not be used for
any purpose or in any manner that would constitute a violation of any laws or
regulations, including without limitation the export control laws of the
United States. Each party hereby agrees that it will not in any way attempt
to obtain, either directly or indirectly, any information regarding any
Confidential Information from any third party who has been employed by,
provided consulting services to, or received in confidence information from,
the other party.
4.3.4 The parties under this Agreement shall advise their
employees who might have access to Confidential Information of the
confidential nature thereof and agree that their employees and agents shall
be bound by the terms of this Agreement. No Confidential Information shall
be disclosed to any employee who does not have a need for such information.
Each party may disclose Confidential Information to its Affiliates to the
extent required to accomplish the purposes of this Agreement.
4.4 OWNERSHIP. Title and ownership rights in the OraSolv Technology and
other Confidential Information of CIMA shall remain at all times with CIMA.
IPR acknowledges that the OraSolv Technology and such Confidential
Information shall remain the sole property of CIMA and IPR will acquire no
title thereto as a result of this Agreement. Title and ownership rights in
IPR's Confidential Information shall remain at all times with IPR. CIMA
acknowledges that the Confidential Information of IPR shall remain the sole
property of IPR and CIMA will acquire no title thereto as a result of this
Agreement. Nothing in this Agreement shall be construed as conferring on
either party an expressed or implied license or option to license any
disclosed Confidential Information, technology, or any patent or patent
application except as expressly provided herein.
4.4.1 INVENTIONS. CIMA shall solely own all right, title and
interest in and to any technology invented during the course of the
development work for IPR under this Agreement, whether patentable or not,
that is necessary or useful to the manufacture or distribution of the Product
("New Technology"). Any such New Technology shall be included in the OraSolv
Technology (except to the extent that such New Technology would otherwise be
excluded from the definition of Orasolv Technology pursuant to the Product
Criteria set forth in Exhibit D), and as such shall be subject to the terms
of the License Agreement. CIMA may, in its sole discretion and at its sole
expense, file and prosecute patent applications on New Technology and obtain
and enforce patents issuing from such applications. CIMA shall solely own all
such patent applications and patents. If CIMA files and prosecutes patent
applications on any New Technology relating to [...***...], it will consult
with IPR regarding the content of any filings made with the United States
Patent and Trademark Office (or any foreign equivalent thereof) with respect
to such applications and shall keep IPR informed of the progress of such
patent prosecution efforts and related proceedings. IPR agrees to execute
such documents and render such assistance to CIMA as may be necessary or
appropriate to enable CIMA to obtain and maintain title to any New Technology
and to any patent application or patent on such New Technology, and to
enforce any such patents.
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4.5 Representations and Warranties.
4.5.1 CIMA WARRANTS THAT DEVELOPMENT AND PILOT-SCALE MANUFACTURE
BY CIMA OF THE PROTOTYPE SHALL BE CONDUCTED IN A WORKMANLIKE MANNER USING
REASONABLE SKILL AND CARE AND IN ACCORDANCE WITH CURRENT GOOD MANUFACTURING
PRACTICES PROMULGATED BY THE U.S. FDA. EXCEPT AS SET FORTH ABOVE, THE
PROTOTYPE IS BEING SUPPLIED TO IPR WITH NO WARRANTIES OF ANY KIND, EXPRESSED
OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR THAT IT IS FREE FROM THE RIGHTFUL CLAIM OF ANY THIRD
PARTY, BY WAY OF INFRINGEMENT OR THE LIKE, OF ANY PATENT OR OTHER PROPRIETARY
RIGHTS OF SUCH PARTY. TO THE BEST OF CIMA'S KNOWLEDGE WITHOUT INVESTIGATION,
CIMA HAS NOT BEEN SERVED WITH OR NOTIFIED OF ANY CLAIM OR POTENTIAL CLAIM OF
ANY THIRD PARTY THAT THE ORASOLV TECHNOLOGY INFRINGES ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF SUCH PARTY AND NEITHER IS IT AWARE OF ANY PATENT OR
OTHER PROPERTY OF ANY THIRD PARTY WHICH INFRINGES THE ORASOLV TECHNOLOGY.
4.5.2 CIMA represents and warrants that:
(i) CIMA is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware, with full right, power and
authority to enter into and perform this Agreement and to grant all of the
rights, powers and authorities herein granted.
(ii) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which CIMA is a party, or
CIMA's Certificate of Incorporation or Bylaws.
(iii) This Agreement has been duly executed and delivered by
CIMA and is a legal, valid and binding obligation enforceable against CIMA in
accordance with its terms.
4.5.3 IPR represents and warrants that:
(i) IPR is a corporation duly organized, existing and in good
standing under the laws of Puerto Rico, with full right, power and authority to
enter into and perform this Agreement and to grant all of the rights, powers and
authorities herein granted.
(ii) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which IPR is a party, or
IPR's Certificate of Incorporation or Bylaws.
(iii) This Agreement has been duly executed and delivered by
IPR, and is a legal, valid and binding obligation enforceable against IPR in
accordance with its terms.
4.6 INDEMNITY.
4.6.1 CIMA agrees to and hereby does indemnify and hold IPR and
its Affiliates harmless from and against all claims, suits and proceedings,
and all damages, losses, costs, recoveries and expenses,
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including reasonable legal expenses and costs (including attorneys' fees),
which IPR or its Affiliates may incur, arising out of any third party claim
of property damages or personal injury or death arising from CIMA's
application of the OraSolv Technology to [...***...] or CIMA's negligent or
willful misconduct in its performance of this Agreement or any breach of a
representation or warranty given herein by CIMA; PROVIDED, HOWEVER, that in
no event shall CIMA be liable for any such claims, damages, losses, costs or
expenses to the extent arising out of or resulting from materials supplied by
IPR to CIMA, or IPR's negligence or willful misconduct.
4.6.2 IPR agrees to and hereby does indemnify and hold CIMA and
its Affiliates harmless from and against all claims, suits and proceedings,
and all damages, losses, costs, recoveries and expenses, including reasonable
legal expenses and costs (including attorneys' fees) which CIMA or its
Affiliates may incur, arising out of any third party claim relating to the
Prototype developed by CIMA for IPR hereunder or any aspect of IPR's
performance of this Agreement, to the extent such liability results from the
negligence or willful misconduct of IPR, or any breach of a representation or
warranty given herein by IPR, PROVIDED, HOWEVER, that in no event shall IPR
be liable for any such claims, damages, losses, costs or expenses to the
extent arising out of or resulting from materials supplied by CIMA to IPR, or
CIMA's negligence or willful misconduct.
4.7 INDEPENDENT CONTRACTORS. The parties shall perform their
obligations under this Agreement as independent contractors and nothing
contained in this Agreement shall be construed to be inconsistent with such
relationship or status. This agreement shall not constitute, create or in
any way be interpreted as a joint venture or partnership of any kind.
4.8 PUBLICITY. Any public disclosure of this Agreement or of the
activities or rights hereunder, including but not limited to press releases,
shall be reviewed and consented to by each party prior to such disclosure;
PROVIDED, HOWEVER, that the foregoing shall not apply to make such
disclosures (a) as may be required by law (including securities laws),
provided that the party subject to such law shall seek confidential treatment
of key commercial and scientific terms to the extent such treatment is
available under law; (b) made in connection with an assertion of its rights
under this Agreement; (c) made under a binder of confidentiality to any
person or entity who may be interested in investing in or acquiring all or
substantially all of the assets or securities of such party, or (d) made to
its financial advisors provided that such party has used its best efforts in
good faith to obtain a binder of confidentiality. Any consent required
hereunder shall not be untimely or unreasonably withheld by either party.
Notwithstanding the foregoing, the parties consent to a press release
announcing this Agreement, in the form attached hereto as Exhibit J.
4.9 FINAL AGREEMENT; AMENDMENTS. This Agreement sets forth the complete
and final agreement of the parties and supersedes all prior and
contemporaneous negotiations, understandings and agreements with respect to
the subject matter hereof. No subsequent amendment or modification to this
Agreement shall be binding upon the parties hereto unless reduced to writing
and signed by the respective officers of the parties hereto.
4.10 ASSIGNMENT. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder will be assignable in part or in whole
by any party without the prior written consent of the other; PROVIDED,
HOWEVER, that either party may assign or transfer its rights and obligations
under this Agreement to an Affiliate or a purchaser of all or substantially
all of the stock or assets of such party or to an entity into
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which such party is merged, without such consent. This Agreement will be
binding upon the successors and permitted assigns of the parties and the name
of a party appearing herein will be deemed to include the names of such
party's successors and permitted assigns to the extent necessary to carry out
the intent of this Agreement. Any assignment which is not in accordance with
this Section 4.10 will be void.
4.11 MISCELLANEOUS. This Agreement shall be governed by the laws of the
State of Delaware. If any provision of this Agreement is found by a proper
authority to be unenforceable, that provision shall be severed and the
remainder of this Agreement will continue in full force and effect. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original.
4.12 NOTICES. Any notices required or permitted hereunder shall be given
in writing to the appropriate party at the address specified below or at such
other address as the party shall specify in writing.
4.13 SUBCONTRACTING. CIMA acknowledges that IPR and Zeneca Limited have
entered into certain agreements regarding the performance of development
activities (the "Zeneca/IPR Agreements") relevant to IPR's obligations under
this Agreement, and that IPR may subcontract certain development activities
set forth in the Development and Scale-Up Plan to Zeneca Limited pursuant to
the Zeneca/IPR Agreements upon prior notice of such subcontracting to CIMA.
IN WITNESS WHEREOF, the parties have by duly authorized persons, executed
this Agreement, as of the date first written above.
CIMA LABS INC. IPR PHARMACEUTICALS, INC.
10000 Valley View Road P.O. Box 1967
Eden Prairie, Minnesota 55344 Carolina
USA Puerto Rico 00984
Tel: (612) 947-8700 Tel: (809) 750-5353
Fax: (612) 947-8770 Fax: (809) 750-5332
By:/s/ Jack Khattar By:/s/ B.J. Thorpe
-------------------------- ----------------------
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Title: V.P. Business Development Title: Chairman
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EXHIBIT A
PROTOTYPE DEVELOPMENT AND SCALE-UP PLAN
PHASE I
A. CIMA to develop and scale-up a [...***...] using [...***...]. CIMA will
validate the coating process and place a [...***...] batch and [...***...]
(see attached [...***...]).
IPR to provide CIMA, at no cost to CIMA, an [...***...] for the initial
development of the coating process. Additional material, [...***...], will
be provided to CIMA, at no cost to CIMA, for the scale-up and validation of
the coating process and manufacture of batches in part E of this plan. IPR
will provide [...***...] drug substance.
CIMA will validate the coated drug substance analytical testing methods.
IPR will supply reference standards for [...***...] and key degradents or
impurities. [...***...] based on taste characteristics described to CIMA by
IPR. If [...***...] is required time and cost estimates will have to be
determined.
B. CIMA to manufacture [...***...] formulations of OraSolv Tablet Formulations
containing [...***..] selected by IPR. CIMA will provide [...***...] for
IPR to conduct consumer testing. IPR will complete the consumer testing and
select [...***...] to be carried forward in development. If IPR does not
complete the evaluation in the time allotted [...***...] the Development
and scale-up timeline will be extended accordingly.
CIMA to develop [...***...] OraSolv Tablet formulations. [...***...]
formulations containing [...***...] drug substance (developed in part A of
this plan) and [...***...] formulations containing [...***...] drug
substance. CIMA will develop and validate both cleaning verification and
final product testing analytical methods. CIMA will validate the final
product testing microbial test methods. IPR will provide CIMA current
analytical testing methods and validation documents for cleaning
verification and product release of [...***...].
CIMA will perform excipient compatibility experiments between [...***...].
No other excipient compatibility work will be conducted.
D. CIMA to manufacture and release [...***...] of the [...***...] developed in
part C of this plan ([...***...]). CIMA will place these [...***...] on
[...***...]. IPR will evaluate the [...***...] batches within [...***...]
after receiving [...***...] and make a final [...***...] selection. If IPR
does not complete the evaluation in the time allotted the Development and
Scale-up timeline will be extended accordingly. The stability studies for
the [...***...] will be carried forward. The [...***...] will be
discontinued [...***...]. Of the [...***...] will be [...***...]. This
decision will be made before the [...***...] time point of the [...***...]
is reached.
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Up to [...***...] may be undertaken if necessary in the judgment of IPR.
If a [...***...] is initiated, [...***...] will be added to the development
schedule. [...***...] can not be initiated based on a request for a
[...***...] selected in Part B of this development plan. [...***...] may
be undertaken only under terms to be mutually agreed by the parties.
E1. CIMA will scale-up the tablet manufacturing process for the [...***...]
selected in Part D of this plan up to a scale representing [...***...] of
the eventual production size batch or [...***...], whichever is greater. A
production size batch is expected to be [...***...]. CIMA will manufacture
[...***...] or [...***...], whichever is greater, of each formulation
selected in Part D of this agreement for use in a bioequivalence study.
CIMA will place these batches on [...***...]. CIMA will write the required
CMC documents, in IPR's required format, for the submission of an IND. IPR
will supply to CIMA sample documents, templates or documentation to enable
CIMA to write the CMC documents in IPR's preferred format. IPR will
conduct the bioequivalence study and report the results back to CIMA within
[...***...] of receiving released material. Tablet specification for
[...***...] will be established based on formulation and process
capabilities. For a minimum of Phase I, data will be collected for
information only on [...***...].
[...***...] will attempt to match the current [...***...], if possible
[...***...]. Only [...***...] will be supplied in the final product. This
evaluation will be performed before the manufacture of the definitive
stability batches. Some additional capital expense may be incurred for
tablet tooling. Specifics will be discussed with IPR before any
expenditures are made and will be billed to IPR separately.
E2. CIMA will manufacture an additional [...***...] batches or [...***...]
batches, whichever is greater, of each formulation and place them on
stability at the agreed upon conditions. The [...***...] referred to in
Part E1 and E2 will be initiated at the same time, estimated to be
[...***...]. The batches will be packaged [...***...]. The tablet layout
will likely be [...***...] for development batches, even though the
commercial format will be [...***...]. CIMA will completely package (in
unlabeled [...***...]) at least [...***...] of each formulation for use in
clinical studies in [...***...].
F. CIMA will manufacture and package in unlabeled [...***...] to deliver at
least [...***...] for use in clinical studies during [...***...].
Once the bioequivalence results are known, IPR will select [...***...].
The [...***...] for the selected formulation will be carried out to
completion (see attached [...***...]), the other [...***...] will be
discontinued. This selection of a formulation for final scale-up will be
made prior to the [...***...] for the relevant [...***...] studies is
reached.
[...***...] has been estimated for completion up to but not including
Part E2 of Phase I of this development plan. If an [...***...], an
additional [...***...] will be added to the schedule or [...***...] will be
required to complete up to but not including Part E2 of Phase I. The work
outlined in Part E2 may require [...***...] and will be completed while IPR
is conducting bioequivalence testing. Any time delays in receiving
required drug substance supplies or decisions ([...***...]
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE>
selection, prototype evaluation etc.) from IPR will increase the time
allotted to CIMA to complete the development program.
PHASE II
CIMA will scale up the formulation selected in Part E of this plan by
manufacturing [...***...] batches. A full scale GMP batch will be manufactured
and placed on [...***...] (see attached [...***...]). The full scale GMP batch
will be sampled and tested according to the agreed process validation protocol.
A full scale batch is expected to be approximately [...***...]. CIMA will write
the required CMC documents in the appropriate IPR format. The stability plan
will include [...***...] on [...***...] and [...***...] on [...***...] (see
attached [...***...]). The batch will be packaged in the exact components as
the intended commercial product. The tablet layout will likely be [...***...]
for development batches, even though the commercial format will be [...***...].
If IPR elects to proceed forward with a [...***...], CIMA will place an
additional [...***...] batches [...***...] on bulk drug stability (see attached
[...***...]).
Process validation batches are not included in Phase II of the development plan.
Process validation batches will be manufactured at IPR's request and will be
billed separately. The cost of the validation batches will be negotiated based
on the agreed upon validation protocol. The validation protocol will be
negotiated and agreed upon prior to regulatory submission in order to have the
signed protocol available at the time of a PAI. Validation batches will not be
manufactured prior to a PAI and are expected to be manufactured just prior to or
just after the first regulatory approval ([...***...]). The first commercial
manufacturing campaign will consist of at [...***...], IPR will order this
minimal quantity even if this represents a quantity in excess of the first years
commercial requirements.
MONITORING
CIMA will issue update reports within [...***...] of key milestone events. A
series of key milestone events will be mutually agreed to between the CIMA and
IPR. At the end of Phase I, a full development report(s) will be written within
[...***...] of initiating the last definitive stability study.
Two key dates have been identified for meetings in Minneapolis:
- - [...***...] (after [...***...] and prior to [...***...]).
- - [...***...] and prior to [...***...].
Scheduled visits of IPR personnel to CIMA Labs:
- - [...***...]
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE>
- - Monitor of GMP batch manufacture
- - Additional visits will be scheduled as needs arise
A minimum of [...***...] will be made by CIMA to IPR based upon a mutually
agreed to [...***...] schedule.
[...***...]
[...***...]
[...***...]
[...***...]
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE>
EXHIBIT B
PATENTS AND PATENT APPLICATIONS
COUNTRY PATENT/APPLICATION NO. FILING/ISSUE DATE
------- ---------------------- -----------------
United States [...***...] [...***...]
United States [...***...] [...***...]
United States [...***...] [...***...]
United States [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
[...***...] [...***...] [...***...]
________________________
1 Issued Patents
2 Pending Patent Applications
* Licensed Technology
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT C
GENERAL SPECIFICATIONS
- - Dose
----
[...***...]
- - Tablet Size/Shape
-----------------
[...***...]
- - Flavor
------
[...***...] to be determined [...***...].
- - Color
-----
[...***...]
- - Tablet disintegration
---------------------
[...***...]
- - Packaging
---------
[...***...]
- - Stability
---------
Sufficient to give a [...***...].
- - Bioavailability
---------------
Bioequivalent to conventional [...***...]. Variability in [...***...]
within ranges acceptable to the regulatory authorities [...***...].
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT D
PRODUCT CRITERIA
(FOR PURPOSES OF SECTION 1.6)
- - Tablets contain [...***...] compound for the treatment of [...***...].
- - Tablets that disintegrate or dissolve in the mouth in [...***...] by either
placing on the tongue or by chewing, such disintegration or dissolution
time to be measured in accordance with the in vitro test specification set
out below.
- - Tablets that include either a [...***...].
OraSolv Technology will not include any CIMA technology that is specifically
designed to increase or enhance the rate and/or the extent of absorption of
active drug substances [...***...], regardless of the in-vitro or in-vivo
disintegration/dissolution time. This exclusion also extends to enhanced
absorption in the oral cavity (sublingual or buccal) or upon ingestion
throughout the GI tract (stomach, intestines and colon).
[...***...]
- ----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT E
CONTACT PERSONS
AREA OF RESPONSIBILITY CIMA ZENECA (ON BEHALF OF IPR)
---------------------- ---- -------------------------
Business Development Jack Khattar Bob Nolan
Research and Development John Hontz John Shatwell
Mfg. and Packaging Brian Jones John Thornton
Accounting and Finance Keith Salenger Katrina Starkie
Regulatory John Kosewick Frances Duffy-Warren
<PAGE>
EXHIBIT F
PRINCIPAL LICENSE TERMS
1. DEFINITIONS. The License Agreement shall include those definitions from
the Development and Option Agreement which are applicable to the License
Agreement and such other definitions as are appropriate.
1.1 IMPROVEMENTS. The definition of OraSolv-Registered Trademark-
Technology will include improvements thereto to the extent the improvement is
necessary or useful to the manufacture of the Product.
2. LICENSES.
2.1 LICENSE GRANT. CIMA will grant to IPR an exclusive (even as to
CIMA), [...***...], royalty-bearing license (with the right to sublicense) in
the Field to utilize the OraSolv-Registered Trademark- Technology for the
development, marketing, distribution and sale of the Product.
2.2 TERM OF LICENSE. The term of the license granted under Section 2.1
shall expire on a country-by-country basis on the later of (i) the last to
expire of the licensed patents or (ii) [...***...] after the effective date of
the License Agreement. The parties shall jointly consider ways of extending the
term of such license to the extent permitted by applicable law or regulation.
2.3 EXCLUSIVITY. In consideration for the license granted under Section
2.1, IPR will not, from the Effective Date until the expiration or termination
of the License Agreement, develop or commercialize, either internally or through
its Affiliates, or enter into any negotiations or agreements with any third
party relating to the development or commercialization of, a formulation of
[...***...] compound that disintegrates or dissolves in the mouth in [...***...]
by either placing on the tongue or by chewing. This provision shall be subject
to IPR's right to self-supply as described in Exhibit G of this Agreement.
3. COMMERCIALIZATION AND MARKETING.
3.1 COMMERCIALIZATION DILIGENCE. IPR will file its application for FDA
approval to market the Product in the United States and [...***...] (such
countries together with the United States hereafter called "Major Countries")
within [...***...] of final stability data for the Product being available to
IPR. Such filing timetable is based upon the following assumptions: that
regulatory authorities will approve the Product on the basis of a successful
bioequivalence study only, and that an efficacy study is not required; and that
the following stability data will be sufficient for regulatory approval:
[...***...]
[...***...]
[...***...]
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 1
<PAGE>
If either clinical efficacy data or additional stability data is
required, IPR's filing timetable will be amended to be not more than [...***...]
after the last required data becomes available to IPR. IPR will launch the
Product in each Major Country in which it receives regulatory and pricing
approval to market the Product within [...***...] of receiving the later
received approval.
3.1.1 FAILURE OF IPR TO MEET COMMERCIALIZATION DILIGENCE
OBLIGATIONS. In the event IPR fails to meet any of the commercialization
diligence milestones set forth in Section 3.1, CIMA may, [...***...]. If CIMA
elects to terminate the license, CIMA shall give IPR [...***...] notice of
termination, during which period the parties shall discuss the circumstances
which caused IPR to fail to meet the relevant milestone and IPR may propose
appropriate strategies to cure its failure. CIMA may, in its discretion, elect
to permit IPR to implement its proposed strategy for such time as the parties
may agree. If at the end of such agreed upon period IPR still has not met the
relevant milestone, CIMA may terminate the license in the relevant Major Country
upon [...***...] written notice to IPR.
3.1.2 REGULATORY ASSISTANCE. CIMA will provide, such assistance
to IPR in connection with IPR's application for approval to market the Product
in any country as may reasonably be necessary to assist IPR in obtaining such
approval. CIMA will provide [...***...] of assistance per annum at CIMA's
expense, with any further assistance to be provided at IPR's expense.
3.2 MARKETING DILIGENCE. IPR will use commercially reasonable efforts to
market the Product consistent with IPR's usual practice in commercializing and
marketing products of similar market potential.
3.3 MINIMUM SALES. Commencing on the [...***...] of the later of (i)
[...***...] of the Product in [...***...] or (ii) [...***...] of the Product in
[...***...], IPR will meet an annual minimum sales target of [...***...] of its
projected sales for the Product as set forth on Exhibit K. The minimum sales
targets form the basis for calculating a material component of CIMA's
compensation under this Agreement; as such, they will not be amended except by
mutual agreement of the parties. In any event, Exhibit K shall not be subject
to revision or amendment by virtue of the forecasting and ordering procedures
set out in any Supply Agreement which the parties may enter. In the event that
IPR fails to gain marketing and/or price approval for the Product in one or more
Major Countries, the parties will meet to agree a fair and reasonable adjustment
to the projected sales for the Product as set forth on Exhibit K to take account
of such non-approval.
3.3.1 FAILURE TO MEET MINIMUM SALES REQUIREMENTS. In the event
IPR fails to meet the minimum sales target in any year in which such minimum
sales target applies set forth above (i) the [...***...], and (ii) CIMA will be
free to license the OraSolv Technology in the Field to third parties. CIMA will
have no financial or accounting obligations to IPR as a result of any license by
CIMA of the OraSolv Technology to third parties under Section 3.3.1(ii). Prior
to exercising any of the rights set out in parts (i) and (ii) of this Section
3.3.1, CIMA shall [...***...], and if IPR elects to make such payment, the
License Agreement shall continue on an exclusive basis in full force and effect.
3.4 ADDITIONAL LANGUAGE. The License Agreement will contain such
additional language as is appropriate to govern the parties' respective
commercialization, marketing and diligence obligations.
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 2
<PAGE>
4. PAYMENTS AND ROYALTIES.
4.1 LICENSE FEE. In consideration for the license granted under the
License Agreement, IPR will pay to CIMA within [...***...] of the effective date
of the License Agreement a one-time fee of [...***...] PROVIDED, HOWEVER, that
the License Option Fee of [...***...] paid pursuant to the Development and
License Option Agreement shall be credited against the License Fee due under
this Section 4.1.
4.2 MILESTONE PAYMENTS. Subject to the terms and conditions of the
License Agreement, IPR will pay to CIMA the following milestone payments:
4.2.1 [...***...] within [...***...] of successful [...***...];
4.2.2 [...***...] within [...***...] of successful [...***...] of
the Product;
4.2.3 [...***...] within [...***...] of [...***...] of the
Product, of which [...***...] shall be creditable against earned royalties on
net sales of the Product, PROVIDED, HOWEVER,, that IPR may not take as a credit
an amount in excess of [...***...] and any excess credit shall be carried over
to the next royalty period until all such credit is exhausted;
4.2.4 [...***...] within [...***...] days of the earlier of (i)
[...***...] the Product, or (ii) the [...***...] the Product [...***...] in the
Territory.
4.3 ROYALTIES. IPR shall pay to CIMA royalties on worldwide annual net
sales of the Product at the marginal royalty rates set forth below:
ANNUAL NET SALES RATE
(i) [...***...] [...***...]
(ii) [...***...] [...***...]
(iii) [...***...] [...***...]
The net sales amounts set forth above shall be subject to annual
increases as provided herein. Within [...***...] after the end of each calendar
year in which IPR sells the Product pursuant to this Agreement, IPR shall report
to CIMA the percentages of worldwide net sales of the Product during that
calendar year resulting from the sale of the Product both within and outside of
the United States. The sales levels marked by * and ** above ("Trigger Point I"
and "Trigger Point II", respectively) shall be increased for the purpose of
calculating royalties payable to CIMA during the following calendar, as follows:
First, the applicable percentage increase in the Trigger Points shall
be calculated:
C = [...***...], where
A = [...***...];
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 3
<PAGE>
B = [...***...];
C = [...***...].
Then, the Trigger Points shall be increased for the following calendar
year according to the following formulae:
Trigger Point I = [...***...]
Trigger Point II = [...***...].
For example, if during the first calendar year of Product sales the
net sales of the Product within the United States equal [...***...] of the
Product during that calendar year, then the percentage increase for each of the
Trigger Points for the following calendar year shall equal [...***...]. Trigger
Point I for the second calendar year of sales would therefore equal [...***...],
and Trigger Point II for the second calendar year of sales would therefore equal
[...***...]. If during the second calendar year of Product sales the net sales
of the Product within the United States equal [...***...] of the Product during
that calendar year, then the percentage increase for each of the Trigger Points
for the following calendar year shall equal [...***...]. Trigger Point I for
the third calendar year of sales would therefore equal [...***...], and Trigger
Point II for the third year of sales would therefore equal [...***...].
In the event that IPR has to pay a license fee to any third party to
enable IPR to continue to use the OraSolv Technology, the amounts payable to
CIMA under this Section 4.3 shall be correspondingly reduced such that
[...***...], provided however, that such reduction shall not exceed [...***...]
and that any unused credit may be carried forward and applied in accordance
herewith.
If at any time during the term of the License Agreement the
manufacture, use, sale, offer for sale or import of the Product in a Major
Country would, but for the license granted to IPR pursuant to the License
Agreement, infringe a patent included in the OraSolv Technology, and if all
claims of such patents in such country subsequently become invalid, then the
royalty rates set out above in this Section 4.3 on net sales of the Product in
such Major Country shall be reduced by [...***...] for so long as the
manufacture, use, sale, offer for sale or import of the Product in such Major
Country would not, but for the licenses granted pursuant to this Agreement,
infringe a patent included in the Orasolv Technology.
4.4 TERM OF ROYALTY OBLIGATION. The royalties set forth in Section 4.3
above shall be effective as of the date of [...***...] and shall continue on a
country-by-country basis until the later of (i) the expiration of the last to
expire of the licensed patents in such country, or (ii) [...***...] of the
Product in such country.
5. INTELLECTUAL PROPERTY
5.1 OWNERSHIP. Title and ownership rights in the OraSolv Technology and
other Confidential Information of CIMA shall remain at all times with CIMA. IPR
acknowledges that the OraSolv Technology and such Confidential Information shall
remain the sole property of CIMA and IPR will acquire no title thereto
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 4
<PAGE>
as a result of this Agreement. Title and ownership rights in IPR's
Confidential Information shall remain at all times with IPR. CIMA
acknowledges that the Confidential Information of IPR shall remain the sole
property of IPR and CIMA will acquire no title thereto as a result of this
Agreement. Nothing in this Agreement shall be construed as conferring on
either party an expressed or implied license or option to license any
disclosed Confidential Information, technology, or any patent or patent
application except as expressly provided herein.
5.2 NEW INVENTIONS. CIMA shall solely own all right, title and interest
in and to any technology invented during the course of the development work for
IPR under this Agreement, whether patentable or not, that is necessary or useful
to the manufacture or distribution of the Product ("New Technology"). Any such
New Technology shall be included in the OraSolv Technology (except to the extent
that such New Technology would otherwise be excluded from the definition of
Orasolv Technology pursuant to the Product Criteria set forth in Exhibit D), and
as such shall be subject to the terms of the License Agreement. CIMA may, in
its sole discretion and at its sole expense, file and prosecute patent
applications on New Technology and obtain and enforce patents issuing from such
applications. CIMA shall solely own all such patent applications and patents.
If CIMA files and prosecutes patent applications on any New Technology relating
to [...***...], it will consult with IPR regarding the content of any filings
made with the United States Patent and Trademark Office (or any foreign
equivalent thereof) with respect to such applications and shall keep IPR
informed of the progress of such patent prosecution efforts and related
proceedings. IPR agrees to execute such documents and render such assistance to
CIMA as may be necessary or appropriate to enable CIMA to obtain and maintain
title to any New Technology and to any patent application or patent on such New
Technology, and to enforce any such patents.
5.3 PROSECUTION OF PATENTS. The License Agreement shall provide that CIMA
will have the right, but not the obligation, to prosecute all patents
encompassed by the OraSolv Technology and the New Technology, and that if CIMA
elects to abandon or otherwise not prosecute such patents, IPR may assume
prosecution of such patents.
5.4 ENFORCEMENT AND DEFENSE OF PATENTS. The License Agreement will
contain appropriate provisions for the enforcement of the OraSolv Technology and
New Technology (at CIMA's cost and expense) against infringement and for the
defense of third party claims that the OraSolv Technology or the New Technology
infringes such third party's intellectual property rights.
6. TERMINATION. The License Agreement shall provide that in the event of
termination by IPR for any reason (other than because of CIMA's breach of the
License Agreement), or by CIMA because of IPR's breach of the License Agreement,
IPR shall pay to CIMA a termination fee in an amount equal to (i) [...***...]
plus (ii) [...***...] in order to perform its obligations under the License
Agreement or the Supply Agreement.
7. ADDITIONAL PROVISIONS. The License Agreement shall contain such additional
provisions as are customary, including without limitation, provisions relating
to royalty reports, audit rights, maintenance of royalty records,
confidentiality, publicity, representations and warranties of each party,
indemnification, dispute resolution, assignment, governing law, export control,
force majeure and notices.
5
<PAGE>
EXHIBIT G
PRINCIPAL SUPPLY TERMS
1. SUPPLY OF PRODUCT. CIMA shall manufacture and supply to IPR, and IPR shall
purchase from CIMA, IPR's Requirements of the Product. As used herein, the term
"Requirements" shall mean all quantities of the Product required by IPR, its
Affiliates and sublicensees for clinical trial materials and for distribution,
marketing and sale of the Product during the term of the Supply Agreement.
1.1 CIMA will grant to IPR an option to manufacture or have
manufactured up to one hundred percent (100%) of its requirements of the
Product for distribution, marketing and sale by IPR, its Affiliates and
sublicensees ("Self-Supply") commencing at any time after the [...***...]
after commercial launch of the Product, except as provided in Section 1.2.
IPR may exercise such option by so notifying CIMA in writing at least
[...***...] before IPR requires the Technology Transfer to begin that IPR
intends to Self-Supply. If IPR exercises its option to Self-Supply, IPR
shall pay an Option fee (the "Self-Supply Option Fee") equal to [...***...]
of which amount shall be paid to CIMA within [...***...] after IPR notifies
CIMA that it will Self-Supply and the remaining [...***...] of which amount
shall be paid to CIMA within [...***...] after the facility at which IPR will
manufacture or have manufactured the Product receives the necessary
regulatory approval(s) by the U.S. Food and Drug Administration (or
equivalent regulatory agency, if applicable).
1.2 If CIMA is unable to supply IPR with IPR's requirements of the Product
for any reason other than force majeure of a duration less than [...***...], IPR
may elect to manufacture the Product or have it manufactured by its Affiliates
and sublicensees. In such situation, if IPR has already elected to Self-Supply
at the time CIMA becomes unable to supply the balance of IPR's requirements, IPR
will receive a refund of any portion of the Self-Supply Option Fee that IPR has
paid to CIMA. However, IPR shall in such circumstances continue to be obligated
to pay to CIMA the per tablet fee referred to in Section 1.3 below.
If CIMA subsequently becomes able to again supply IPR with IPR's
requirements of the Product and IPR elects to purchase any portion of its
requirements of the Product from CIMA or elects to have CIMA reserve
manufacturing capacity for manufacture of any portion of IPR's requirements of
the Product, IPR shall repay to CIMA that portion of the Self-Supply Option fee
refunded to IPR under this Section 1.2.
1.3 If IPR elects to Self-Supply or to manufacture under Section 1.2, in
addition to the technology transfer fee, IPR shall pay to CIMA either
(i) [...***...] manufactured by IPR, if at the time IPR elects to self-supply
CIMA is supplying finished packaged Product to IPR, or (ii) [...***...]
manufactured by IPR, if at the time IPR elects to Self-Supply CIMA is supplying
[...***...] to IPR.
1.4 If IPR elects to Self-Supply or to manufacture, under Section 1.2, IPR
will have [...***...] without CIMA's written consent, may not use or permit its
Affiliates or sublicensees to use the technology for any purpose other than to
manufacture the Product, and may not permit its Affiliates or sublicensees to
further transfer the technology. If IPR ceases to utilize the manufacturing
technology to manufacture the Product, the manufacturing license will
automatically terminate and revert to CIMA.
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 1
<PAGE>
1.5 If IPR elects to Self-Supply or to manufacture under Section 1.2, CIMA
will provide to IPR, its Affiliates and/or sublicensees, at IPR's sole expense,
technical support and assistance to ensure the smooth and satisfactory
establishment of the OraSolv Technology at the new manufacturing site.
2. SUPPLY PRICE. The supply price will be calculated consistent with Exhibit
I. Such price shall not in any event exceed [...***...] during the life of the
Supply Agreement, based on IPR taking delivery of [...***...] Product. If IPR
elects to take delivery of [...***...] of the Product from CIMA, CIMA shall
adjust such [...***...] to [...***...] for the term of the Supply Agreement.
The parties acknowledge that for the purposes of the Supply Agreement, the
[...***...] will nonetheless contain certain variable data (such as
[...***...]). The definitive Supply Agreement will contain language appropriate
to address these requirements.
3. PACKAGING. CIMA shall supply [...***...] or [...***...] of the Product to
IPR, whichever IPR in its sole discretion elects to purchase. The Supply
Agreement will contain appropriate terms concerning packaging and labeling the
Product. IPR will provide all approved and final art and copy for the Product
packaging and labeling.
4. ADDITIONAL PROVISIONS. The Supply Agreement will have additional customary
terms and provisions, including without limitation, provisions relating to
forecasting and firm orders, manufacturing requirements, regulatory
requirements, risk of loss, rejection of Product, warranties, compliance with
specifications and law, records, quality control, term and termination,
inability to supply and indemnification, audits, manufacturing change control
mechanism, performance criteria and measurement. In addition, the parties will
enter a quality assurance agreement in substantially the form attached hereto as
Exhibit L.
- -------------------
*CONFIDENTIAL TREATMENT REQUESTED 2
<PAGE>
EXHIBIT H
DEVELOPMENT, SCALE-UP AND COMMERCIALIZATION COSTS
[...***...] (REVISED 8/18/97)
<TABLE>
<CAPTION>
<S> <C>
PHASE I. DEVELOPMENT AND SCALE-UP [...***...]
A. Develop [...***...] $ [...***...]
[...***...] [...***...]
[...***...] [...***...]
--------------------
Cost of [...***...] [...***...]
B. Cost to [...***...] [...***...]
([...***...] tablets per [...***...])
C. Product Development Costs [...***...]
Analytical Support [...***...]
Method Validation(1) [...***...]
--------------------
COST OF FORMULA AND METHOD DEVELOPMENT $ [...***...]
D. [...***...] $ [...***...]
Micro Testing [...***...]
Prototype Stability Costs(2) [...***...]
--------------------
COST OF [...***...] AND STABILITY $ [...***...]
E. Initial Formulation(s) Scale-up $ [...***...]
Preparation of CMC Docs [...***...]
[...***...] [...***...]
Micro Testing [...***...]
Definitive Stability Cost(3) [...***...]
--------------------
COST OF SCALE-UP AND BIO BATCH(S) $ [...***...]
F. Cost to [...***...] $ [...***...]
([...***...] Tablets)
TOTAL PHASE I [...***...]
--------------------
--------------------
PHASE II
Shipping Study [...***...](4) $ TBD
[...***...] Stability [...***...]*
Final Scale-up Batches [...***...]
[...***...] [...***...]
Micro Testing [...***...]
Stability Costs [...***...]
Preparation of CMC Docs [...***...]
--------------------
TOTAL PHASE II $ [...***...]
--------------------
--------------------
</TABLE>
- -----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(1)Includes validation of analytical and microbial testing methods.
(2)Price discount based on [...***...] initiated at the same time.
(3)Price discounted based on [...***...] initiated at the same time.
(4)Conditions, etc.
* If required.
- -----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT I
[...***...]
PRELIMINARY COST OF GOODS ESTIMATE
6/26/97
MAXIMUM COST PER TABLET: [...***...]
[...***...]
KEY ASSUMPTIONS:
- - Pricing assumes shipments to be FOB point of manufacture.
- - A Product supplied by CIMA will be in the configuration of [...***...].
- - Quality Control procedures normal to CIMA, which include:
- testing and release of raw material, packaging components, and
finished product.
- in-process sampling and testing.
- - Released finished product not to be stored at CIMA for more than
[...***...]
- - Costs incurred by CIMA as mandated by regulatory revisions (i.e. plate and
die charges due to label changes and product identification requirements,
etc.) shall be additional and paid for by IPR.
- - Pricing does not include [...***...].
- - Costs of Goods based on CIMA manufacturing 100% of IPR's production
requirements.
- - IPR provides raw drug substance, [...***...], at no cost to CIMA.
*[...***...] shall be subject to the provisions of Section 2 of Exhibit G.
- -----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT J
FOR IMMEDIATE RELEASE: Contact: JOHN M. SIEBERT, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CIMA LABS INC.
(612) 947-8700
KEITH P. SALENGER
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CIMA LABS INC.
(612) 947-8731
CIMA LABS AND ZENECA ANNOUNCE
DEVELOPMENT AND LICENSE OPTION AGREEMENT
ZENECA'S PRESCRIPTION PRODUCT TO BE COMBINED WITH ORASOLV-Registered Trademark-
Eden Prairie, MN, __/__/97 - CIMA LABS INC. (NASDAQ: CIMA) AND ZENECA.
(NYSE:ZEN) today announced the signing of an exclusive development and
license option agreement pertaining to one of Zeneca's currently marketed
prescription products. This represents CIMA's second collaboration on
developing a fast-dissolve formulation of a prescription product. In
exchange for its development work and license option, CIMA will receive an
option fee and development fees.
"Our partnership with Zeneca to combine one of their major prescription drugs
with our fast-melt technology is a significant milestone for CIMA LABS,"
commented John M. Siebert, Ph.D., President and Chief Executive Officer of
CIMA LABS INC. "We are pleased to announce that as a result of market
research and consumer testing, the outstanding acceptance of our
OraSolv-Registered Trademark- formulation was a key factor in Zeneca's
decision to team up with CIMA."
"Providing value-added proprietary delivery of medication to our patients is
a primary concern," commented Robert Nolan, Ph.D., of Product Licensing at
ZENECA. "We believe OraSolv-Registered Trademark- offers us a superior drug
delivery vector for our product."
OraSolv-Registered Trademark- is patented oral dosage form which incorporates
microencapsulated drug ingredients into tablets that dissolve quickly in the
mouth. OraSolv-Registered Trademark- is designed to improve taste
acceptance, address difficulty of swallowing traditional tablets and
capsules, while offering a convenient oral dosage form that can be taken
anywhere and anytime, therefore increasing compliance.
CIMA LABS INC. is a drug delivery company that develops and manufactures
products based upon its OraSolv-Registered Trademark- technology for
marketing by multinational pharmaceutical companies to improve patient
compliance and drug efficacy. CIMA was founded in 1986 and has been publicly
held since July 1994. The Company's corporate headquarters and manufacturing
facility is located in Eden Prairie, MN, and its Research and Development
facility is located in Brooklyn Park, MN.
Zeneca is a broadly-based, bioscience group comprising international
pharmaceuticals, agrochemicals and specialties businesses. All three
businesses invent, develop, manufacture and market products designed to meet
human needs around the world. Zeneca had total sales of GBP5.4bn in 1996.
In pharmaceuticals, the main therapeutic areas of interest are
cardiovascular, cancer, anti-infection, central nervous system disorders,
anesthetics and respiratory disease, with an annual Research and Development
expenditure of around GBP390m. In 1996, sales in pharmaceuticals amounted to
GBP2.4bn.
1
<PAGE>
EXHIBIT K
ORASOLV-Registered Trademark- FAST MELT VOLUME PROJECTIONS
FOR MINIMUM SALES TARGET CALCULATIONS
[...***...]
YEAR TABLETS [...***...]
[...***...] [...***...]
[...***...] [...***...]
[...***...] [...***...]
[...***...] [...***...]
[...***...] [...***...]
The parties will agree on a mutually acceptable method for converting the
above volume targets and, where necessary, related agreement provisions to a
calendar year basis to avoid unnecessary accounting effort.
- -----------
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
CIMA LABS INC.
EMPLOYMENT AGREEMENT
WITH JOHN M. SIEBERT
THIS AGREEMENT is entered into effective as of the date of signing by
and between CIMA LABS INC., a Delaware corporation (the "Company"), and John
M. Siebert, Ph.D. (the "Employee").
WHEREAS the Company desires to engage the Employee in the position of
President and Chief Executive Officer to render services for the Company on
the terms and conditions set forth in this Agreement;
WHEREAS, the Employee desires to be retained by the Company as its
President and Chief Executive Officer; and
WHEREAS, both parties recognize the critical importance to the Company,
its employees, and its investors of preserving the confidentiality of the
Company's trade secrets and confidential information and of protecting the
Company against competition from former executives or other key employees of
the Company following their separation from the Company;
NOW, THEREFORE, in consideration of the foregoing premises and the
parties' mutual covenants and undertakings contained in this Agreement, the
sufficiency of which is hereby acknowledged, the Company and the Employee
agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions herein
provided, the Company hereby continues employment of the Employee, and the
Employee hereby accepts employment by the Company, for a term continuing as
of January 1, 1998 and thereafter for three (3) years to January 1, 2001.
The employment term of the Employee will expire at the expiration of this
(3) year employment continuation term, without further obligation for either
party. On or before January 1, 2000, the Company expects to indicate to the
Employee whether the Company is interested in continuing employment of the
Employee with respect to a new employment agreement.
Notwithstanding the foregoing, the Company may terminate the Employee's
employment for cause and without notice and without further obligation of any
kind to the Employee. For purposes of this Agreement, "cause" means:
(a) any felony conviction;
(b) use of intoxicating beverages or chemical abuse that negatively
affects job performance (following at least one written warning);
(c) an act or acts of personal dishonesty taken by the Employee and
intended to result in personal enrichment of the Employee at the expense of
the Company;
(d) any material breach of the Employee's obligations under this
Agreement;
16
<PAGE>
(e) the willful misconduct or gross negligence of the Employee in
connection with the performance of his duties, responsibilities,
agreements, and covenants hereunder, or his failure to comply with the
reasonable rules, regulations, policies, directions, and restrictions as
may be established from time to time by the Board of Directors, and which
misconduct, negligence, or failure shall continue for a period of thirty
(30) days after written notice to the Employee; or
(f) willful conduct of the Employee which brings discredit to the Company,
its products, or its services.
It is further agreed that the term of the Employee's employment under
this Agreement shall automatically terminate in the event of the Employee's
death. In the event the Employee becomes mentally or physically disabled
during the term of employment hereunder, his employment under this Agreement
shall terminate as of the date such disability is established. As used in
this paragraph, the term "disabled" shall have the meaning as set forth in
the Americans with Disabilities Act, as amended. Upon termination for
disability, the Employee shall be entitled to receive continuation of his
base salary (as herein defined) for a period of one hundred eighty (180)
days. If the Company maintains a disability policy covering the employee,
then the amount of payment to be made by the Company to the Employee pursuant
to this provision shall be reduced by any amount so paid to the Employee
under any such insurance policy. Upon termination in the event of the
Employee's death, the Company shall continue to pay the Employee's base
salary (as herein defined) for a period of one hundred eighty (180) days.
2. DUTIES AND REPRESENTATIONS OF THE EMPLOYEE. During the Employee's
employment hereunder, he shall serve as the Company's President and Chief
Executive Officer. The Employee shall devote his full time, attention,
knowledge, and skill exclusively to the loyal service of the Company. The
Employee represents and warrants to the Company that: (a) his acceptance of
employment under this Agreement and his performance of the duties
contemplated herein are not in conflict with any obligation, undertaking, or
agreement between the Employee and any third party; and (b) he has not and
will not, during the course of his employment with the Company, disclose or
utilize without permission, any confidential or proprietary information,
trade secrets, materials, documents, or property owned by any third party.
The Company through the Compensation Committee expects to evaluate the
Employee's performance every twelve (12) months during the term of this
Agreement.
3. COMPENSATION. The Company shall pay to the Employee the following
compensation:
(a) BASE SALARY. The Company shall pay to the Employee an annual base
salary of $255,000 beginning January 1, 1998, less legally required
deductions and withholdings, payable in periodic installments in accordance
with the standard payroll practices of the Company in effect from
time-to-time. On January 1, 1999, the annual base salary will be adjusted
upwards by 5%. On January 1, 2000, the annual base salary will be adjusted
upwards from the 1999 increase by an incremental 5%. In the event of change
of control of the Company which leads to the termination or separation of the
Employee (1) because the position is eliminated, (2) because continuing to
work in the position would require the Employee to transfer to a work site
outside a 100-mile radius of his work location at the time of change in
control and Employee is unwilling to relocate, or because his
responsibilities change so substantially that the Employee has effectively
been removed from the position held by him prior to the change in control,
the Employee will automatically get an additional twelve (12) months of
compensation or the remainder of his contract (less any amount of salary
received in a subsequent job during such twelve (12) month period or
remainder of contract, as applicable), whichever is
17
<PAGE>
longer, in addition to the benefits of any corporate severance plan, during
which time the terms of the Agreement will remain in full force and effect.
(b) INCENTIVE BONUS. The Employee will be entitled to receive an
incentive bonus award of up to fifty percent (50%) of his base salary
depending upon the achievement of objectives defined and agreed to by the
Compensation Committee of the Board of Directors prior to the last Board
meeting of each calendar year. The award for achievement that occurs against
objectives in that year will be agreed-upon by the Compensation Committee and
paid before February 1 of the next year. The determination of whether and
when any of the objectives are achieved shall be in the reasonable discretion
of the Compensation Committee. The determination of any additional incentive
bonus programs shall be in the sole discretion of the Compensation Committee.
In the event of change of control of the Company, a minimum bonus of
$100,000 will be paid for each year of compensation remaining under the terms
of this Agreement for which a bonus has not yet been paid.
(c) PARTICIPATION IN BENEFIT PLANS. The Employee shall also be
entitled to participate in all employee benefit plans or programs of the
Company, including any disability and life insurance group plans, to the
extent that his position, title, tenure, salary, age, health, and other
qualifications make him eligible to participate. The Company will provide a
life insurance policy with minimum payout of $500,000 in the event the
Employee is killed or disabled during travel which is undertaken in the
course of business.
(d) VACATION. During the term of the Employee's employment under this
Agreement, the Employee shall be entitled to take twenty (20) days of
vacation per year with pay, at such times as shall be mutually convenient to
the Company and the Employee. Vacation time may be accumulated throughout
the term of this and any prior Agreements. Two weeks before the final Board
meeting of each year, the Vice President, CFO will provide the Compensation
Committee with a report outlining the Employee's paid time off (PTO) taken
and remaining for that year.
(e) EMPLOYMENT-RELATED EXPENSES. The Company shall pay or reimburse
the Employee for all reasonable and necessary out-of-pocket expenses incurred
by him in the performance of his duties under this Agreement, subject to the
presentment of appropriate vouchers in accordance with the Company's normal
policies for expenses verification.
(f) CAR ALLOWANCE. The Employee will be paid a car allowance in the
amount of six hundred fifty dollars ($650.00) per month, consistent with the
Company's payroll and accounting practices.
(g) STOCK OPTION. Subject to the terms of the Company's Equity
Incentive Plan, and subject to the Employee executing this document, the
Company shall issue to the Employee an incentive stock option to purchase one
hundred thousand (100,000) shares of common stock in the Company effective at
the date of signing this Agreement. This award will vest as follows: (i)
thirty-three percent (33%) of the shares subject to the option will vest on
December 31, 1998; (ii) thirty-three percent (33%) of the shares subject to
the option will vest on December 31, 1999; (iii) thirty-three percent (33%)
of the shares subject to the option will vest on December 31, 2000; subject
to accelerated vesting as provided in the Equity Incentive Plan.
Any payment or benefit hereunder shall be reduced to the extent that,
due to the excise tax on excess parachute payments under Section 4999 of the
Internal Revenue Code of 1986, such reduction would increase the Employee's
after-tax income. The Employee shall determine which payments or benefits
shall be so reduced."
18
<PAGE>
4. CONFIDENTIAL INFORMATION. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any
time thereafter, the Employee shall not divulge, furnish, or make accessible
to anyone or use in any way (other than in the ordinary course of business of
the Compete) any confidential or secret knowledge of the Company which the
Employee has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of the period of his employment by
the Company, whether developed by himself or by others, concerning any trade
secrets, confidential or secret designs, processes, formulae, plans, devices,
or materials (whether or not patented or patentable), directly or indirectly
useful in any aspect of the business of the Company, any customer or supplier
list of the Company, any confidential or secret development or research work
of the Company. or any other confidential information or secret aspects of
the business of the Company. The Employee acknowledges that the
above-described knowledge or information constitutes a unique and valuable
asset of the Company and represents a substantial investment of time and
expense by the Company and its predecessors, and that any disclosure or other
use of such knowledge or information other than for the sole benefit of the
Company would be wrong and would cause irreparable harm to the Company. Both
during and after the term of this Agreement, the Employee will refrain from
any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is now
published or which subsequently becomes generally publicly known in the form
in which it was obtained from the Company, other than as a direct or indirect
result of a breach of this Agreement by the Employee.
5. RETURN OF PROPRIETARY PROPERTY. The Employee agrees that all
property in the Employee's possession belonging to the Company, including
without limitation, all documents, reports, manuals, memoranda, computer
print-outs, customer lists, credit cards, keys, identification, products,
access cards, and all other property relating in any way to the business of
the Company are the exclusive property of the Company, even if the Employee
authored, created, or assisted in authoring or creating such property. The
Employee shall return to the Company all such documents and property
immediately upon termination of employment or at such earlier time as the
Company may reasonably request.
6. RESTRICTIVE COVENANT. The Employee acknowledges that the Company
needs to be protected against the potential for unfair competition and
impairment of the Company's good will by the Employee's use of the Company's
training, assistance, confidential information, and trade secrets in direct
competition with the Company. The Employee therefore agrees that for a
period of one (1) year from the date of termination of his employment
hereunder, the Employee shall not operate, join, control, be employed by, or
participate in ownership, management, operation, or control of, or be
connected in any manner as an independent contractor, consultant, or
otherwise, with any person or organization engaged in any business activity
which is the same as, or directly competitive with any business of the
Company or any successor of the Company as of the date of the termination of
his employment hereunder within the states of the United States of America.
The Employee expressly agrees that the provisions of this paragraph 6 shall
survive the termination of the Employee's employment hereunder or the
termination of this Agreement for a period of one (1) year, whether such
termination be voluntary or involuntary or with or without cause.
7. COVENANT NOT TO RECRUIT. The Employee recognizes that the
Company's work force constitutes an important and vital aspect of its
business. The Employee agrees that for a period of one (1) year following
the termination of his employment hereunder or the termination of this
Agreement for any reason whatsoever, he shall not recruit, or assist anyone
else in the solicitation of, any of the Company's then current employees to
terminate their employment with the Company and to become employed by any
business enterprise with which the Employee may then be associated or
connected, whether as an owner, employee, partner, agent, investor,
consultant, contractor or otherwise.
19
<PAGE>
8. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The Employee may not assign this
Agreement or any rights hereunder. Any purported or attempted assignment or
transfer by the Employee of this Agreement or any of the Employee's duties,
responsibilities, or obligations hereunder shall be void.
9. NOTICES. For purposes of this Agreement, notices provided in this
Agreement shall be in writing; and shall be deemed to have been given when
personally served, sent by courier or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, to the last known
residence address of the Employee or, in the case of the Company, to its
principal office to the attention of the Board of Directors, or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
10. CONSTRUCTION AND SEVERABILITY. The validity, interpretation,
performance, and enforcement of this Agreement shall be governed by the laws
of the State of Minnesota. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, said illegality or
invalidity will not in any way affect the legality or validity of any other
provision hereof. It is the intention of the parties hereto that the Company
be given the broadest possible protection respecting its confidential
information and trade secrets; and respecting competition by the Employee
following his separation by the Company.
11. ARBITRATION. Except as provided in this paragraph, any claims or
disputes of any nature between the parties arising from or related to the
performance, breach, termination, expiration, application, or meaning of this
Agreement or any matter relating to the Employee's employment and the
termination of that employment by the Company, shall be resolved exclusively
by arbitration before the American Arbitration Association in Minneapolis,
Minnesota, in accordance with the applicable rules then obtaining of the
American Arbitration Association.
The decision of the arbitrator(s) shall be final and binding upon both
parties Judgment of the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof. In the event of submission of any
dispute to arbitration, each party shall, not later than thirty (30) days
prior to the date set for hearing, provide to the other party and to the
arbitrator(s) a copy of all exhibits upon which the party intends to rely at
the hearing and a list of all persons each party intends to all at the
hearing.
This paragraph shall have no obligation to claims by the Company
asserting a violation of or seeking to enforce, by injunction or otherwise,
the terms of paragraphs 4, 5, 6 and 7 above. Such claims may be maintained
by the Company in a lawsuit subject to the terms of paragraph 12 below. The
Employee agrees that, in addition to, but not to the exclusion of any other
available remedy, the Company shall have the right to enforce the provisions
of paragraphs 4, 5, 6 and 7 by applying for and obtaining temporary and
permanent restraining orders or injunctions from a court of competent
jurisdiction without the necessity of filing a bond therefore, and the
Company shall be entitled to recover from the Employee its reasonable
attorneys' fees and costs in enforcing the provisions of paragraphs 4, 5, 6
and 7.
12. VENUE. Any action at law, suit in equity, or judicial proceeding
arising directly, indirectly, or otherwise in connection with, out of,
related to or from this Agreement or any provision hereof, shall be litigated
only in the courts of the State of Minnesota, County of Hennepin. The
Employee waives any right the Employee may have to transfer or change the
venue of any litigation brought against the Employee by the Company.
20
<PAGE>
13. ENTIRE AGREEMENT. This Agreement sets forth the entire Agreement
between the Company and the Employee with respect to his employment by the
Company and there are no undertakings, covenants, or commitments other than
as set forth herein. This Agreement may not be altered or amended, except by
a writing executed by the party against whom such alteration or amendment is
to be enforced. This Agreement supersedes any and all prior understandings
or agreements between the parties.
14. COUNTERPARTS. This Agreement may be simultaneously executed in any
number of counterparts, and such counterparts executed and delivered, each as
an original, shall constitute but one and the same instrument.
15. CAPTIONS AND HEADINGS. The captions and paragraph headings used in
this Agreement are for convenience of reference only, and shall not affect
the construction or interpretation of this Agreement or any of the provisions
hereof.
16. SURVIVAL. The parties expressly acknowledge and agree that the
provisions of this Agreement which by their express or implied terms extend
beyond the expiration of this Agreement or the termination of the Employee's
employment hereunder, shall continue in full force and effect,
notwithstanding the Employee's termination of employment hereunder or the
expiration of this Agreement.
17. WAIVERS. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof, or the
exercise of any other right or remedy granted hereby or by any related
document or by law. No single or partial waiver of rights or remedies
hereunder, nor any course of conduct of the parties, shall be construed as a
waiver of rights or remedies by either party (other than as expressly and
specifically waived).
18. RELIANCE BY THIRD PARTIES. This Agreement is intended for the
exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors, and
permitted assigns, and no other person or entity shall have any right to rely
on this Agreement or to claim or derive any benefit therefrom, absent the
express written consent of the party to be charged with such reliance or
benefit.
IN WITNESS WHEREOF, the parties have signed this Agreement. This
Agreement terminates the prior Agreement.
CIMA LABS INC.
Dated: OCTOBER 29, 1997 By: /s/ Terrence W. Glarner
---------------- -----------------------------------
Its: Chairman
-----------------------------------
Dated: OCTOBER 29, 1997 /s/ John M. Siebert
--------------- -----------------------------------
John M. Siebert, Ph.D.
21
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<PAGE>
<ARTICLE> 5
<CIK> 0000833298
<NAME>CIMA LABS INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,089,860
<SECURITIES> 3,503,541
<RECEIVABLES> 1,369,753
<ALLOWANCES> 0
<INVENTORY> 933,638
<CURRENT-ASSETS> 8,107,698
<PP&E> 13,966,652
<DEPRECIATION> 13,572,457
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<CURRENT-LIABILITIES> 1,989,829
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0
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<COMMON> 95,913
<OTHER-SE> 57,176,371
<TOTAL-LIABILITY-AND-EQUITY> 18,779,213
<SALES> 1,657,689
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<CGS> 2,891,202
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