--------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________to____________
Commission File No. 0-19153
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VIMRx PHARMACEUTICALS INC.
(Exact name of Registrant as specified in its Charter)
---------------------
Delaware 06-1192468
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
2751 Centerville Road, Suite 210,Wilmington,Delaware 19808
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 998-1734
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
The aggregate number of Registrant's shares outstanding on May 12,
1997 was 54,629,937 shares of Common Stock, $.001 par value.
------------------------------------------
<PAGE>
VIMRx PHARMACEUTICALS INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997
(unaudited) and December 31, 1996..................... 3
Consolidated Statements of Operations (unaudited) for the
Three Months Ended March 31, 1997 and 1996,
and for the Period from Inception through
March 31, 1997.................................... 4
Consolidated Statements of Cash Flows (unaudited) for the
Three Months Ended March 31, 1997 and 1996,
and for the Period from Inception through
March 31, 1997.................................... 5
Notes to Financial Statements (unaudited)............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................ 8
Item 2. Changes in Securities.................................... 8
Item 3. Defaults upon Senior Securities.......................... 8
Item 4. Submission of Matters to a Vote of Security Holders...... 8
Item 5. Other Information........................................ 9
Item 6. Exhibits and Reports on Form 8-K......................... 10
SIGNATURES............................................................. 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
VIMRx PHARMACEUTICALS INC. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
March 31,
1997 December 31,
(unaudited) 1996
------------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,430,000 $ 8,611,000
Short-term investments 37,252,000 38,300,000
Other current assets 283,000 348,000
---------------- ---------------
Total current assets 41,965,000 47,259,000
Equipment - net 3,044,000 2,650,000
Marketable equity securities 286,000 286,000
Other assets 261,000 261,000
Goodwill 1,133,000 1,236,000
----------------- ---------------
T O T A L $ 46,689,000 $ 51,692,000
================= ===============
LIABILITIES
Current liabilities:
Accounts payable and
accrued expenses $ 1,592,000 $ 1,903,000
Innovir note payable - warrantholder
current portion includes accrued
interest of $5,000 36,000 36,000
Capital lease - current portion 472,000 472,000
-------------- -------------
Total current liabilities 2,100,000 2,411,000
Innovir note payable - warrantholder,
includes accrued interest
of $39,000 227,000 227,000
Capital leases 379,000 463,000
-------------- ------------
Total liabilities 2,706,000 3,101,000
-------------- ------------
Minority interest in subsidiary 1,944,000 2,381,000
-------------- ------------
SHAREHOLDERS' EQUITY
Common stock; $0.001 par value, 120,000,000 shares
authorized, 54,629,937 and 54,429,887 shares
issued and outstanding at March 31, 1997
and December 31, 1996 respectively 55,000 54,000
Additional paid-in capital 90,177,000 89,478,000
Unearned compensation (665,000) (800,000)
Unrealized (loss) on investment (459,000) (143,000)
Cumulative translation adjustment (16,000) (8,000)
Deficit accumulated during
the development stage (47,051,000) (42,371,000)
-------------- -------------
Total shareholders' equity 42,040,000 46,210,000
TOTAL $ 46,689,000 $ 51,692,000
=============== ==============
</TABLE>
3
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<TABLE>
<CAPTION>
VIMRx PHARMACEUTICALS INC. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
December 30, 1986
Three months ended March 31, (inception) to
1997 1996 March 31, 1997
------------- ------------ --------------
Operating expenses:
<S> <C> <C> <C>
Research and development $ 3,217,000 371,000 $19,156,000
Purchased research and development 1,200,000 - 15,684,000
Termination of agreement - (464,000) -
Amortization of goodwill 103,000 - 103,000
General and administrative 1,597,000 967,000 15,379,000
------------ ------------ ------------
6,117,000 874,000 50,322,000
------------ ------------ ------------
Other (income) expenses:
Royalty payments 50,000 100,000 350,000
Interest (income) (681,000) (18,000) (3,632,000)
Interest expense 37,000 106,000 450,000
Provision for losses on notes receivable 135,000
Investment in and advances to research and
development entities charged to expense 700,000
Minority interest in net loss of
consolidated subsidiary (947,000) - (1,063,000)
Other - net 104,000 - (211,000)
------------ ------------ ------------
(1,437,000) 188,000 (3,271,000)
------------ ------------ ------------
NET LOSS 4,680,000 $ 1,062,000 $ 47,051,000
============= ============== ============
NET LOSS PER SHARE $ .09 $ .05
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 54,482,634 19,980,850
========== ==========
</TABLE>
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<TABLE>
<CAPTION>
VIMRx PHARMACEUTICALS INC. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended March 31,
-----------------------------------
December 30, 1986
(Inception) to March
1997 1996 31, 1997
----------- ----------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(4,680,000) $ (1,062,000) $ (47,051,000)
Adjustments to reconcile net (loss) to net
cash
(used in) operating activities:
Depreciation and amortization 225,000 7,000 479,000
Amortization of debt discount 46,000 200,000
Interest expense settled through
issuance of stock 72,000
Consulting fees settled through
issuance of stock 41,000 75,000
Research and development expenses to be
settled through the issuance of stock (464,000)
Provision for losses on notes
receivable 135,000
Investment in and advances to research
and development entities charged to
expense 700,000
(Gain) on sale of subsidiaries (2,889,000)
Noncash compensation 135,000 714,000
Purchased in process research and 698,000 18,072,000
development
Loss from disposal of equipment 20,000
Transfer of collaborative rights 509,000 509,000
Deferred financing cost 78,000 310,000
Minority interest in net loss (947,000) (1,063,000)
Changes in operating assets and
liabilities:
(Increase) in organization costs (3,000)
(Increase) decrease in other current
assets and other assets 64,000 23,000 (135,000)
Increase (decrease) in accounts
payable and accrued expenses (310,000) 118,000 ( 194,000)
----------- ----------- ---------------
Net cash (used in) operating (4,306,000) (1,213,000) (30,049,000)
activities
------------ ----------- ----------------
Cash flows from investing activities:
Net (purchases) sales of short-term 731,000 (37,548,000)
investments
Payment for acquisition, net of cash (2,011,000)
acquired
Purchase of marketable securities (450,000)
Purchases of equipment (515,000) (1,555,000)
Proceeds from sale of equipment 39,000
Loans to DNA Pharmaceuticals, Inc. (296,000)
Repayment of DNA Pharmaceuticals, Inc. 161,000
loans
Loans to Ribonetics GmbH (600,000)
Investment in and loan to CambES, Ltd. (325,000)
Net cash provided by (used in)
investing
-------------- ------------- -------------------
activities 216,000 (42,585,000)
-------------- ------------- -------------------
Cash flows from financing activities:
Proceeds from sales of preferred and
common stock, net 24,836,000
Proceeds from issuance of common stock in
connection with the exercise of 2,094,000 51,111,000
warrants/options
Purchase of treasury stock (8,000)
Proceeds from bridge loans 3,141,000
Repayment of bridge loans (2,500,000)
Repayment of leased obligations (83,000) (83,000)
Issuance of convertible demand notes 600,000
payable
Return of capital (14,000)
-------------- ------------- -----------------
Net cash (used in) financing (83,000) 2,094,000 77,083,000
activities
-------------- ------------- -----------------
Effect of exchange rate changes on cash (8,000) (19,000)
-------------- ------------- -----------------
NET INCREASE AND DECREASE IN CASH AND CASH
EQUIVALENTS (4,181,000) 881,000 4,430,000
Cash and cash equivalents at beginning of 8,611,000 2,219,000
period
-------------- ------------- ------------------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $4,430,000 3,100,000 $ 4,430,000
============== ============= ==================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 124,000
</TABLE>
5
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VIMRx PHARMACEUTICALS INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
(1) Financial Statement Presentation
The unaudited financial statements of VIMRx Pharmaceuticals Inc. and
subsidiaries (the "Company") herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the opinion
of management, reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the results of operations for the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such rules and
regulations. However, management believes that the disclosures are adequate to
make the information presented not misleading. These financial statements and
the notes thereto should be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996. The results for the interim periods are
not necessarily indicative of the results for the full fiscal year.
(2) Principle of Consolidation
Consolidated Financial Statements include the accounts of VIMRx Pharmaceuticals
Inc., Innovir Laboratories, Inc., and all subsidiaries which are at least
majority owned. All significant inter-company transactions and balances have
been eliminated.
(3) Cash Flows and Supplemental Cash Flow Disclosures
For purposes of the statements of cash flows, the Company considers investments
with original maturities of up to 90 days to be cash equivalents.
(4) Royalty Payments
Royalty payments represents the annual $50,000 minimum royalty payment under the
Company's license agreement with New York University Medical Center and the
Weizmann Institute of Science in Israel.
(5) Research Agreements
On March 7, 1997, the Company entered into a research agreement with Columbia
University whereby the Company, through a newly established subsidiary, VIMRx
Genomics, Inc., will provide $30 million in funding to Columbia over the next
five years at approximately $5 million per year in exchange for the right to
exclusively license technology developed by Columbia. Columbia has a 10%
interest in VIMRx Genomics, Inc. (valued at $500,000), and has received 200,000
common shares of the Company (valued at $700,000), which collectively ($1.2
million) have been allocated to purchased research and development.
On March 28, 1997, the Company entered into a research agreement with
Columbia University whereby the Company will provide $2.7 million in funding
over 3 years to research and develop Blood Factor IXai.
6
<PAGE>
VIMRx PHARMACEUTICALS INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q and with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996. The Company is in the development stage and
has had no operating revenues since its organization in December 1986.
Three Months Ended March 31, 1997 and 1996
Total operating expenses increased by $5,243,000, or 600%, due to a $2,846,000
increase in research and development expenses, a $1,200,000 purchased research
and development charge, a $630,000 increase in general and administrative
expenses, a $464,000 credit for termination of agreement recorded in 1996 and a
$103,000 amortization of goodwill.
Research and development expenses increased $2,846,000 due to the inclusion of
the New York operations of Innovir Laboratories, Inc. ("Innovir"), a majority
interest of which was acquired by the Company on December 23, 1996 ($1,046,000),
increased operations in Europe ($390,000), funding paid under the collaboration
agreement with Columbia University by VIMRx Genomics Inc. ($1,175,000) and
increases in expenses related to clinical trials and other expenses.
The purchased research and development ($1,200,000) relates to the issuance of
common stock of the Company and VIMRx Genomics Inc. to Columbia University, and
reflects the value placed on the ongoing research and development made available
to the Company.
General and administrative expenses increased $630,000 (65%) principally due to
the inclusion of Innovir's operations ($550,000) and increased compensation
expenses net of decreases in director's consulting fees and legal fees.
Goodwill, which was recorded in the acquisition of Innovir, will be amortized
over three years.
Interest income increased $663,000 (368%), due to an increase in funds available
for investment (see "Liquidity and Capital Resources") and a higher effective
interest rate. Interest expense decreased $69,000 (65%) due to the repayment of
a bridge loan in June 1996.
The minority interest in the net loss of consolidated subsidiaries ($947,000)
results from the interest of minority stockholders in Innovir and VIMRx
Genomics, Inc., two of the Company's subsidiaries.
Other expenses increased $104,000 due to capital losses on short-term
investments.
The foregoing resulted in a $3,618,000 increase in the net loss for the three
month period ended March 31, 1997.
7
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Liquidity and Capital Resources
The Company is in the development stage, has realized no operating
revenues and has financed its operations through the sale of its securities.
The Company had $41,682,000 in cash, cash equivalents and marketable
securities held for sale at March 31, 1997, as compared to $46,911,000 at
December 31, 1996 and working capital of $39,865,000 at March 31, 1997, as
compared to $44,848,000 at December 31, 1996. The decrease in cash and working
capital position results from the funds expended in operations and the expansion
and upgrade of Innovir's laboratory facilities.
The Company expects to incur substantial expenditures in the
foreseeable future for the research and development and commercialization of its
proposed products. Based on current projections, which are subject to change,
the Company's management believes that the present balance of cash, cash
equivalents and marketable securities held for sale is sufficient to fund its
operations for over two years, assuming no capital infusions or revenues are
received (it is management's belief, however, that such capital infusions and
revenues will occur). Thereafter, the Company will require additional funds,
which it may seek to raise through public or private equity or debt financings,
collaborative or other arrangements with corporate sources, or through other
sources of financing.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Change in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
8
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Item 5. Other Information.
On March 28, 1997, Registrant acquired an exclusive worldwide license
from Columbia University with respect to Blood Factor IXai protein in
consideration for $100,000 and future royalties. Concurrently, Registrant
entered into a research agreement to provide Columbia $2.7 million in funding in
quarterly installments over a three-year period for the research and development
of Blood Factor IXai. One of the individuals directing research under such
agreement is Eric A. Rose, M.D., a director of Registrant. In pre-clinical
studies, Blood Factor IXai has demonstrated the ability to selectively prevent
blood clots that can lead to stroke during surgery while reducing the potential
for bleeding complications associated with currently available anti-coagulation
therapies. Eric A. Rose, M.D., a director of Registrant, is a Surgeon-in-Chief
at Columbia Presbyterian Medical Center In New York, an affiliate of Columbia,
and has served as Chairman of the Department of Surgery at the College of
Physicians and Surgeons of Columbia since 1984 and as a Director of the Division
of Cardiothoracic Surgery of the Department since 1990. Michael Weiner, M.D., a
director of Registrant, is the Hellinger Professor of Clinical Pediatrics at
Columbia's College of Physicians and Surgeons and is an attending physician at
Columbia Presbyterian Medical Center.
In May 1997, Registrant entered into an employment agreement with
Richard E. Kouri, Ph.D., pursuant to which Dr. Kouri serves as Senior Vice
President, Research, of Registrant, and as Chief Executive Officer of Genomics,
Inc. ("Genomics"), Registrant's 90%-owned subsidiary. The agreement provides for
a base annual salary of $160,000 and an annual cash bonus based on performance
criteria, with an initial cash bonus targeted to be at least 33% of Dr. Kouri's
base compensation. Dr. Kouri is entitled to four weeks' vacation and to
participate in Registrant's medical, dental, life and long-term disability
insurance and other benefit programs. Dr. Kouri also will be reimbursed for all
reasonable expenses incurred by him in relocating to New York. Pursuant to the
agreement, Dr. Kouri was granted stock options to purchase 75,000 shares of
Common Stock at an exercise price of $2.125 per share (the closing price of the
Common Stock on The Nasdaq Stock Market on the date immediately preceding the
date of grant), exercisable cumulatively at the rate of 25,000 shares (33%) per
annum commencing May 5, 1998 (one year from the date of grant). In addition, Dr.
Kouri will be granted a stock option to purchase shares of Common Stock of
Genomics. Dr. Kouri's employment may be terminated by Registrant for cause, or
without cause upon 60 days' notice by either Registrant or Dr. Kouri. In the
event Dr. Kouri's employment is terminated by Registrant without cause, or in
the event Dr. Kouri terminates his employment following certain actions by
Registrant (including a material reduction in Dr. Kouri's duties or a relocation
of Registrant's principal offices), Dr. Kouri is entitled to receive a severance
payment equal to twelve months' of his base salary, payable in monthly
installments. The agreement contains certain non-competition and confidentiality
provisions, and provides that Registrant may obtain "key man" life insurance on
the life of Dr. Kouri for Registrant's benefit. Dr. Kouri received a $30,000
signing bonus upon execution of the agreement.
9
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Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
10.22 Copy of Factor IX Research Agreement dated March 28, 1997
between Registrant and The Trustees of Columbia University in the City of New
York.
10.23 Copy of Employment Agreement dated May 5, 1997 between
Registrant and Richard E. Kouri, Ph.D.
b) Reports on Form 8-K:
Pursuant to a Report on Form 8-K filed on January 4, 1997 (as
amended on Form 8-K/A filed on March 10, 1997), Registrant reported acquiring an
approximate 66% ownership interest in Innovir Laboratories Inc. (Nasdaq
SmallCap: INVR) pursuant to an agreement dated November 21, 1996, as amended.
Pursuant to a Report on Form 8-K filed on March 24, 1997,
Registrant reported entering into a research and development agreement with
Columbia University whereby Registrant, through an newly established subsidiary,
VIMRx Genomic Inc., 90%-owned by Registrant and 10%-owned by Columbia, will
provide $30 million in funding over a five-year period to the Columbia Genome
Center.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1997
VIMRx PHARMACEUTICALS INC.
a Delaware Corporation
(Registrant)
By: __/s/ Richard L. Dunning
Richard L. Dunning
President and
Chief Executive Officer
By: __/s/ Francis M. O'Connell
Francis M. O'Connell
Chief Financial Officer
11
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Exhibit 10.22
FACTOR IX RESEARCH AGREEMENT
(Blood Factor IXai)
FACTOR IX RESEARCH AGREEMENT (this "Agreement"), effective as
of March 28, 1997 (the "Effective Date"), between THE TRUSTEES OF COLUMBIA
UNIVERSITY IN THE CITY OF NEW YORK, a New York corporation ("Columbia" or
"Columbia Innovation Enterprise"), and VIMRx PHARMACEUTICALS INC., a Delaware
corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Columbia has established a laboratory at its Health
Sciences Division to conduct research in the field of coagulation and
anticoagulants; and
WHEREAS, the Company wishes to provide financial support for
research in the laboratory as described in Section 1 of this Agreement and in
order to obtain certain rights with respect to the results of the research;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
Article I.
RESEARCH
1.1. Conduct of Research. Columbia will conduct, in a
laboratory at its Health Sciences campus, under the direction of Dr. Eric Rose
and Dr. David Stern, research on Factor IX-Related Coagulation Inhibitors in
accordance with the proposal set forth in Exhibit A hereto ("Research"). The
parties may mutually agree to change the scope of the research proposal at any
time.
1.2. Columbia Governance of Research. (a) Columbia will be
solely responsible for the governance of all Research conducted under this
Agreement.
(b) All Columbia faculty members, researchers, students,
post-doctoral students and other scientists (hereinafter "Investigators")
working on Research hereunder, as well as senior administrative staff with
access to Confidential Information and/or VIMRx Information (each as hereinafter
defined), will be required to sign a letter agreement substantially in the form
of Exhibit B hereto (hereinafter, an "Investigator Letter"), and no Investigator
who has not signed an Investigator Letter shall participate in Research
hereunder. Promptly after receipt thereof, Columbia shall deliver to the Company
a copy of each Investigator Letter received by it during the term of this
Agreement.
<PAGE>
1.3. No Specific Result. Nothing in this Agreement will be
construed as a promise by Columbia to achieve any specific research result.
1.4. Title to Property. Except with respect to any equipment
provided by the Company pursuant to Section 2.1(b) below, title to all equipment
acquired by Columbia to conduct research hereunder and all materials and other
tangible results of research conducted hereunder will vest in Columbia upon
acquisition. The foregoing shall not be construed so as to prevent the Company
from purchasing equipment (and retaining title thereto), or leasing equipment
(with the lessor thereof retaining title thereto) and loaning such equipment to
Columbia for the purpose of conducting Research hereunder.
1.5. Company Access. To permit and facilitate the Company's
performance of its obligations and exercise of its rights hereunder, Columbia
will ensure that Company personnel have regular and meaningful access to all
Principal Investigators and all Investigators conducting Research hereunder.
1.6. Independent Contractors. The Company and Columbia are
independent contractors and neither is an agent, joint venturer or partner of
the other.
Article II.
SUPPORT FOR THE CENTER
2.1. Support for the Laboratory. (a) During the three-year
period beginning on the Effective Date of this Agreement, the Company will pay
$2,700,000 to Columbia for the support of the Research.
(b) In addition to the above-described support, the Company
will supply to Columbia the material to be used as a source of the Coagulation
Factor IX protein either from blood or prepared by recombinant DNA synthesis,
and any specialized equipment necessary to conduct the Research. The Company
will also provide sufficient funds to enable Columbia to obtain antibodies to
Factor IX and Factor XI that will be needed to conduct the Research.
2.2. Payment. The above payments shall be made in quarterly
installments in advance, with the first payment due on the fifth business day
following the Effective Date, and all subsequent payments due on the first day
of each succeeding calendar quarter beginning after the Effective Date. In the
event any payment is due on a day on which the banks in New York City are
authorized or required to close, such payment shall be due and payable on the
next succeeding business day.
2.3. Government Funding. Columbia may, consistent with the
provisions of this Agreement, solicit or obtain government funding for the
Research and the Company shall cooperate with such efforts. If any such
2
<PAGE>
government funding is solicited, Columbia agrees to elect to retain or obtain
any government patent rights arising from any governmentally funded Research in
accordance with the provisions of 35 U.S.C. Sec. 202, et seq.
Article III.
REPORTS AND NOTICES
3.1. Reports of Research. (a) Columbia Innovation Enterprise
will promptly prepare and deliver an Invention Disclosure Report in form and
substance reasonably satisfactory to the Company with respect to any new and
useful process, machine, manufacture or composition of matter conceived of or
first reduced to practice by any Investigator during the term of this Agreement
and arising from any Research hereunder ("Invention").
(b) Columbia will furnish the Company semiannually with (i) a
written report summarizing in reasonable detail Research activity not previously
reported pursuant to Section 3.1(a) hereof, which shall include a Research
Information Report in form and substance reasonably satisfactory to the Company
with respect to information and tangible physical materials, including any
chemical compound or substances, biological cell, or component thereof, whether
derived from biological material or synthesized (hereinafter, "Materials")
developed in the course of Research hereunder, but which does not constitute an
Invention ("Research Information").
3.2. Financial Records and Reports. (a) Columbia will
maintain records of its expenditures of funds received under this Agreement in
accordance with its customary accounting policies and procedures. On or before
April 30, 1998, 1999 and 2000, Columbia will provide the Company with a complete
accounting of expenditures hereunder during the preceding calendar year and, on
the date falling 120 days after the expiration or earlier termination of this
Agreement, Columbia will provide the Company with a complete accounting of
expenditures hereunder during the period beginning January 1 prior to such
expiration or termination through the date of such expiration or termination.
(b) For two years after the termination of this Agreement, the
Company, at its own expense and on reasonable notice and during normal business
hours, may examine Columbia's accounting records with respect to expenditures
under this Agreement for the year.
3.3. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be either personally
delivered (including by recognized overnight delivery services such as FedEx) or
sent by certified mail (return receipt requested), postage or other charges
prepaid,
3
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if to Columbia, to: Executive Director
Columbia Innovation Enterprise
Columbia University
500 West 120th St., Mail Code 2206
363 Engineering Terrace
New York, New York 10027
copy to: General Counsel
Columbia University
535 West 116th St., Mail Code 4308
110 Low Memorial Library
New York, New York 10027
if to the Company, to: VIMRx Pharmaceuticals, Inc.
2751 Centerville Road
Wilmington, Delaware 19808
Attn: Mr. Richard L. Dunning
copy to: Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attn: Lowell S. Lifschultz, Esq.
or to such other address as a party may specify by notice given in accordance
with the terms hereof. All notices shall be deemed given upon receipt.
Article IV.
CONFIDENTIALITY AND RELATED OBLIGATIONS
REVIEW AND FREEDOM OF PUBLICATION
4.1. Company Obligations; VIMRx Information. (a) The Company
will treat as confidential all reports and information disclosed to it under
Article III, as well as any other reports, information and materials furnished
hereunder which Columbia has designated as "Confidential." Accordingly, except
to the extent permitted under a license agreement entered into pursuant to this
Agreement, or as required by law or appropriate for the performance or
enforcement of this Agreement, for the term of this Agreement, and for a period
of two years thereafter, the Company will not disclose or use for its own or any
third party's benefit (other than as contemplated hereby) or make available any
information disclosed hereunder to any third party (other than independent
contractors retained by the Company in connection with its performance of this
Agreement who are under an obligation of confidentiality with respect to this
Agreement), without Columbia's written permission and will use information only
for the purpose of evaluating its interest in future research or possible
commercial development of the results of research in the Center, or in
connection with possible investment in or sale of the Company, provided,
4
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however, that the Company does not need Columbia's consent to disclose such
information to third parties, provided such disclosure is pursuant to a written
confidentiality agreement, for the purpose of evaluating future research or
possible commercial development of such information, or possible investment in
or sale of the Company.
(b) Neither party will use the name, logo, insignia, or
symbols of the other, including but not limited to those of the faculties or
departments of Columbia), or any variation or combination thereof, or the name
of any officer, director, trustee, faculty member, other employee, or student of
either party for any purpose whatsoever without the other party's prior written
consent, such consent not to be unreasonably withheld; and provided further that
either party shall be deemed to have granted its consent to any request by the
other to use such name, logo/insignia or symbol if such party fails to respond
to such request within ten business days of its receipt of such a request.
(c) The Company may, but is not obligated to, disclose
proprietary or otherwise confidential information of the Company ("VIMRx
Information") to Columbia. Columbia may, but is not obligated to, receive VIMRx
Information from the Company. VIMRx Information shall only include information
which the Company has designated in writing as "Confidential" and which the
Company submits (at the time of, or within fifteen days after, disclosure) so
marked to Columbia Innovation Enterprise.
4.2. Freedom of Publication. The Company acknowledges that
Columbia is dedicated to free scholarly exchange and to public dissemination of
the results of its scholarly activities. Except for Columbia's obligations of
confidence set forth in Section 4.3 and the obligations, set forth in their
respective Investigator Letters, of the individuals conducting research, nothing
in this Agreement shall restrict the right of Columbia and its faculty and other
employees to publish, disseminate or otherwise disclose research conducted
pursuant to this Agreement.
4.3. Review of Disclosures. Columbia Innovation Enterprise
will promptly deliver to the Company copies of all proposed public disclosures
of Confidential Information (as hereinafter defined) it receives pursuant to
Investigator Letters or otherwise, but no later than ten business days after
receipt. The Company will promptly review the proposed public disclosures, and,
if, as determined by the Company in its sole discretion, it can do so without
compromising its present or potential patent rights, waive all or a portion of
the applicable review periods set forth in Exhibit B. The Company will review
portions of proposed public disclosures, as they are made available, and will
conduct its review of such portions in a manner comparable to its review of
complete proposed public disclosures. Material alteration of reviewed and
approved disclosures prior to disclosure will necessitate initiation of a new
review cycle with its associated review period set forth in Exhibit B. At the
end of the review periods set forth in Exhibit B, the authors will have the
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<PAGE>
right, in their sole discretion, to make such proposed public disclosures. For
clarity, it is understood and agreed that this Section 4.3 applies to proposed
public disclosures of Confidential Information only. Any and all disclosures of
VIMRx Information shall require the prior written consent of the Company, which
may be granted or withheld in its sole discretion.
4.4. Columbia Obligations. (a) Except as set forth in Section
4.3 above, or in Section 4.5, or (subject to the provisions of Section 4.6) as
required by law or appropriate for the performance or enforcement of this
Agreement, until the expiration or termination of this Agreement, or, if
earlier, until such time as Columbia becomes free to enter into a license
agreement with a third party with respect to such Inventions, reports,
information or other intellectual property, pursuant to the provisions of
Article VI hereof:
(i) Columbia will not, without the Company's written permission,
publicly disclose or use for its own or any third party's benefit (other than as
contemplated hereby) or make available any to any third party (other than
independent contractors retained by Columbia in connection with its performance
of this Agreement who are under an obligation of confidentiality with respect to
this Agreement) any Inventions, reports or information arising out of or related
to Research (herein, "Confidential Information"); and
(ii) Columbia will treat as confidential all VIMRx Information, will
not disclose or use for its own or any third party's benefit (other than as
contemplated hereby) or make available any such VIMRx Information to any third
party (other than independent contractors retained by Columbia in connection
with its performance of this Agreement who are under an obligation of
confidentiality with respect to this Agreement) without the Company's written
permission.
(b) For purposes of this Article IV, "disclosure" means any
communication of information deemed to be disclosure by the U.S. Patent and
Trademark Office, examples of which include but are not limited to publication
in scientific journals or other print or electronic media, oral or written
presentation of information at scientific meetings, and public presentation of
information to any individual or group of individuals not bound by a
confidentiality obligation with respect to nondisclosure of the information.
(c) The parties recognize and agree that Columbia is from time
to time required to disclose inventions to agencies of the United States
government pursuant to the provisions of 35 U.S.C.
ss. 202(c)(1), and shall mark all such disclosures as "confidential."
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4.5. Exceptions to Confidentiality. The obligations of
confidentiality and non-use under Sections 4.1 and 4.4 do not apply to any
information which:
(a) was known, other than pursuant to this
Agreement or the research contemplated
hereby, to the party receiving the
information prior to receipt thereof from
the other party;
(b) was or becomes a matter of public
information or publicly available by reason
of filing for patent protection or otherwise
through no fault of the party receiving the
information or persons acting for it or on
its behalf;
(c) is acquired, other than pursuant to this
Agreement or the research contemplated
hereby, by the party receiving the
information from a third party entitled to
disclose the information to it; or
(d) the other party develops independently,
other than pursuant to this Agreement or the
research contemplated hereby.
4.6. Disclosure by Law. In the event that either party or any
principal, affiliate, director, officer, employee, agent, controlling person or
other representative (including attorneys, accountants, and financial and
scientific advisors) of such party (hereinafter, "Representative") of either
party is requested pursuant to, or required by, applicable law or regulation or
by legal process to disclose any Confidential Information (and in the event any
Representative of Columbia is so requested or required to disclose VIMRx
Information), such party agrees that as soon as practicable and, in any event,
prior to compliance with any such request or legal process, it will provide the
other party with written notice of such request or legal process to enable the
other party to seek an appropriate protective order. In the event that such
protective order or other remedy is not obtained, such party agrees to furnish
only that portion of the Confidential Information or VIMRx Information which, in
the opinion of counsel, it is legally compelled to disclose and to use
reasonable efforts to obtain assurance that, if possible, confidential treatment
will be accorded the Confidential Information and/or VIMRx Information. Any such
disclosure of Confidential Information or VIMRx Information (except any
disclosure of VIMRx Information by the Company) shall be made after prior
consultation with the other party as to the content, timing and manner of
dissemination of such disclosure. It is understood and agreed that the foregoing
provisions of this Section 4.6 shall not apply to disclosures made pursuant to
Section 4.4(c) hereof.
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Article V.
PATENT PROSECUTION
5.1. Preparation, Filing and Prosecution. Subject to the
provisions of Section 4.3 hereof and any license agreement subsequently entered
into between the parties hereto, the preparation, filing and prosecution of
patent applications covering Inventions hereunder, and the decisions as to
whether and where to seek patent protection, shall be solely within the
discretion of Columbia and at Columbia's expense, provided, however, that
Columbia shall consult with the Company regarding such matters and shall submit
to the Company for its review and comment a copy of all proposed patent
applications and other patent filings relating to any Invention at least 10 days
prior to filing thereof.
5.2. Reimbursement. If the Company licenses any Invention, it
shall promptly reimburse Columbia for reasonable and documented patent
prosecution and maintenance expenses, and shall assume responsibility for all
further such expenses, all as set forth in, and subject to, the applicable
license agreement.
5.3. Abandonment. Columbia will notify the Company in writing
if it decides not to seek patent protection for any Invention or to abandon an
application already filed, and will allow the Company to license such Invention
on the terms and conditions of the form of License Agreement attached hereto as
Exhibit C.
Article VI.
INTELLECTUAL PROPERTY RIGHTS
6.1. Company Licenses. (a) Subject to any limitations imposed
by law or by the terms of any government grant, government contract, or
Cooperative Research and Development Agreement with a government agency
("CRADA"), Columbia will grant to the Company a license in substantially the
form attached hereto as Exhibit C, at royalty rates and other payment terms as
set forth therein, for any Invention or Research Information. The Company at any
time may request that Columbia enter into such a license by notice in writing to
Columbia accompanied by a completed written license agreement in substantially
the form attached hereto as Exhibit C, executed on behalf of the Company by an
authorized representative of the Company.
(b) Columbia may at any time, and prior to entering into any
license agreement for any Invention or Research Information with any third
party, shall, request the Company to enter into a license to such Invention or
Research Information. Such request shall be by notice in writing, shall be
captioned "Request to Enter Into License" and shall reference this section of
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this Agreement. If the Company does not tender to Columbia a license of such
Invention or Research Information on substantially the terms and conditions of
the form of License Agreement attached hereto as Exhibit C within six months of
such written request, Columbia shall be free to enter into a license agreement
with a third party.
(c) In the event the Company, by notice in writing, tenders to
Columbia a license of any Invention, Research Information or Material, whether
pursuant to Columbia's request to the Company or the Company's request to
Columbia, and Columbia fails to deliver an executed counterpart thereof to the
Company within 90 days of the date such license is tendered, either party may
commence an arbitration pursuant to the provisions of Section 9.3 hereof. The
arbitration panel shall resolve all disputed issues related to such License,
including, if applicable, (i) whether the tendered license conforms to the terms
and conditions of Exhibit C hereof, and (ii) whether the commercialization
schedule set forth in such license is reasonable in light of prevailing industry
and market conditions and the Company's resources. The panel shall decide
whether any license to the intellectual property proposed to be licensed is
required to be granted under the terms hereof, and shall render a written
decision on all disputed issues. If a license is required to be granted under
the terms of this Agreement, and the parties so request, the panel shall engage
a neutral attorney to draft the text of any disputed provisions, which draft
text shall incorporate the panel's decision on any such disputed provisions.
Columbia shall be required to execute and deliver to the Company a license
agreement incorporating the panel's decision and otherwise on the terms and
conditions of Exhibit C hereof (the "Arbitral License"). In the event the
Company declines to accept a license agreement on such form, Columbia shall be
free to enter into one or more licenses, with any third party, of the Invention,
Research Information or Material to have been licensed pursuant to the Arbitral
License.
6.2. Title to Inventions and Research Information. Subject to
the Company's license rights described in this Article VI, Columbia will have
sole right, title, and interest to any Inventions and Research Information.
6.3. Invention Expenses. In the event Columbia grants to any
third party a license of any Invention or grants or assigns any other
intellectual property rights subject to or contemplated by this Agreement,
Columbia shall so advise the Company, and the Company at its option may submit
to Columbia an accounting of all reasonable expenditures made by the Company
arising out of or related to such Invention or other intellectual property,
including direct support of the project from which the Invention or other
intellectual property was conceived, and costs and expenses of patent
prosecution paid by the Company ("Invention Expenses"). In each such event,
Columbia shall remit to the Company fifty percent (50%) of all royalties and
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other payments received by it in respect of such license, assignment or other
rights until such time as all Invention Expenses in respect of such Invention or
other intellectual property are reimbursed to the Company.
Article VII.
REPRESENTATIONS AND WARRANTIES
7.1. Representations and Warranties of Columbia. Columbia
represents and warrants to the Company, as of the date hereof, as follows:
(a) Columbia is a not-for-profit corporation organized and in
good standing under the law of the State of New York.
(b) Columbia has all requisite corporate power and authority
and all necessary licenses and permits to own and operate its properties and to
carry on the activities contemplated by this Agreement.
(c) The execution and delivery of this Agreement, any license
agreement substantially in the form of Exhibit C hereto, and any other documents
or transactions contemplated hereby are within the corporate powers of, and have
been duly and effectively authorized by, all necessary corporate and other
action on the part of Columbia and do not violate, conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or asset of Columbia pursuant to any indenture,
loan agreement, or other agreement or instrument or corporate restriction to
which Columbia is a party or by which Columbia, its properties or operations may
be bound, and such action will not result in any violation of the provisions of
the certificate of incorporation or bylaws or similar incorporating or governing
documents of Columbia or any laws, ordinances, governmental rules or regulations
of courts or other governmental orders to which Columbia, its properties or
operations is subject.
(d) No consent, approval or authorization of any third party,
or filing, registration or qualification with any governmental authority (other
than those, if any, already obtained) is required on the part of Columbia as a
condition to the execution and delivery of this Agreement.
(e) This Agreement is a legal, valid and binding obligation of
Columbia enforceable against Columbia in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium, preference,
fraudulent conveyance or other laws affecting the enforcement of creditors'
rights or remedies generally, now or hereafter in effect, and subject to the
application of equitable principles and the availability of equitable remedies.
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7.2. Representations and Warranties of the Company. The
Company represents and warrants to Columbia as of the date hereof, as follows:
(a) The Company is a corporation organized and in good
standing under the law of the State of Delaware.
(b) The Company has all requisite corporate power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its activities as now conducted and as currently
proposed to be conducted.
(c) The execution and delivery of this Agreement, any license
agreement substantially in the form of Exhibit C hereto, and any other documents
or transactions contemplated hereby are within the corporate powers of, and have
been duly and effectively authorized by, all necessary corporate and other
action on the part of the Company and do not violate, conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or asset of the Company pursuant to any indenture,
loan agreement, or other agreement or instrument or corporate restriction to
which the Company is a party or by which the Company, its properties or
operations may be bound, and such action will not result in any violation of the
provisions of the certificate of incorporation or bylaws or similar
incorporating or governing documents of the Company or any laws, ordinances,
governmental rules or regulations of courts or other governmental orders to
which the Company, its properties or operations is subject.
(d) No consent, approval or authorization of any third party,
or filing, registration or qualification with any governmental authority (other
than those, if any, already obtained or effected) is required on the part of the
Company as a condition to the execution and delivery of this Agreement.
(e) This Agreement is a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, moratorium, preference,
fraudulent conveyance or other laws affecting the enforcement of creditors'
rights or remedies generally, now or hereafter in effect, and subject to the
application of equitable principles and the availability of equitable remedies.
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Article VIII.
TERM AND TERMINATION.
8.1. Initial Term. This Agreement shall be effective as of
the Effective Date and shall continue in full force and effect, unless earlier
terminated as herein provided, for three years thereafter.
8.2. Termination. (a) Upon 30 days' prior written notice
either party may terminate this Agreement by reason of a material breach of this
Agreement by the other party, if such breach has not been cured within 30 days
after written notice of the breach has been given.
(b) Either party may terminate this agreement by three months'
notice to the other given at any time on or after the date falling eighteen
months from the date of this Agreement in the event that such party, in good
faith and after consultation with the other party, believes that the milestones
set forth in Exhibit A to be achieved by Columbia, including any modifications
thereof made by mutual agreement, have not been achieved.
(c) This Agreement shall automatically terminate if either
party commits any act of bankruptcy, becomes insolvent, files a petition under
any bankruptcy or insolvency act or has any such petition filed against it.
8.3. Effect of Termination. (a) On termination of this
Agreement because of the Company's material breach, the Company will have no
further rights hereunder, all licenses granted pursuant to Article VI shall
automatically terminate on the effective date of termination of this Agreement,
and any sublicenses granted by the Company under any such license shall be
assigned to and assumed by Columbia, and each sublicense shall so provide.
(b) For purposes of this Agreement, "material breach" by the
Company shall mean a breach of its payment obligations under Article II hereof
which shall not be remedied after all applicable notice and cure periods have
elapsed.
8.4. Survival. (a) The Company's obligations under Section
4.1 and Article V and, except for termination because of the Company's material
breach hereof, the Company's rights under licenses granted under Article VI
prior to termination shall survive the termination of this Agreement.
(b) Unless this Agreement is terminated by reason of the
Company's material breach hereof, the Company's rights under Article VI to
obtain licenses to Inventions and Research Project Information developed prior
to the effective date of termination hereof shall survive the termination of
this Agreement and shall be subject to the terms, conditions and time limits set
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forth in Article VI. All rights to any Invention or Research Information not
licensed to the Company pursuant to this Agreement shall revert to Columbia.
Article IX.
MISCELLANEOUS
9.1. Assignment. This Agreement may not be assigned by either
party without the consent of the other party, provided, however, the Company may
assign this Agreement to a person or entity who acquires, by purchase, merger or
otherwise, all or substantially all the assets of the Company, and who assumes
all the obligations of the Company hereunder, without obtaining the consent of
Columbia. Any purported assignment or delegation in violation of this Section
9.1 shall be null and void ab initio.
9.2. Entire Agreement; Amendment. This Agreement sets forth
the entire agreement between the parties relating to the subject matter hereof
and supersedes all previous agreements, written or oral. This Agreement may be
amended only by an instrument in writing duly executed on behalf of the parties.
9.3. Governing Law; Arbitration. (a) This Agreement shall be
governed by New York law applicable to agreements made and to be performed in
New York. Each party hereby submits to the jurisdiction of the state and federal
courts sitting in the County of New York, and agrees that service of process may
be effected by written notice given in accordance with the terms hereof.
(b) In the event of any dispute which pursuant to this
Agreement is to be resolved by arbitration, whether hereunder or under any
License Agreement to be entered into pursuant hereto, such arbitration shall be
conducted in New York, New York before three arbitrators, by the American
Arbitration Association ("AAA") pursuant to its Commercial Arbitration Rules, as
the same may be amended from time to time. The panel shall consist of three
arbitrators. Two of the arbitrators shall be nominated by the respective parties
within fifteen (15) days of commencement of the arbitration, and the third (who
shall serve as chairman of the panel) shall be nominated by the party-nominated
arbitrators within thirty (30) days of commencement of the arbitration. Each
party shall nominate, and the party-nominated arbitrators shall nominate,
arbitrators with qualifications appropriate to decide the issues in dispute.
Each party hereto agrees to participate therein diligently and in good faith.
The determination made in any such arbitration shall be binding on the parties
hereto and may be entered for judgment in any court of competent jurisdiction.
All fees and expenses of the arbitrator(s) and of the AAA itself shall be borne
equally by the parties.
9.4. Waiver of Breach. The waiver by a party of a breach or
violation by the other party of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach or violation by any
party of the same or any other provision of this Agreement. No such waiver shall
be effective unless in writing signed by the party claimed to have made the
waiver.
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9.5. Headings. The headings of the sections and paragraphs of
this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.IX.5. Headings. The headings of the sections and
paragraphs of this Agreement are inserted for convenience of reference only and
shall not constitute a part hereof.
9.6. Multiple Counterparts. This Agreement may be signed in
any number of counterparts which taken together shall constitute one and the
same instrument.
9.7. Exhibits, Schedules. All Exhibits and Schedules referred
to in this Agreement are attached hereto and are incorporated herein by
reference as if fully set forth herein.
9.8. Construction. The language in all parts of this
Agreement shall in all cases be construed as a whole according to its fair
meaning, strictly neither for nor against any party hereto, and without implying
a presumption that the terms thereof shall be more strictly construed against
one party by reason of the rule of construction that a document is to be
construed more strictly against the person who himself or through his agent
prepared the same, it being agreed that representatives of both parties have
participated in the preparation hereof.
9.9. Number and Gender. Whenever in this Agreement the
singular is used, it shall include the plural if the context so requires, and
whenever the masculine gender is used in this Agreement, it shall be construed
as if the masculine, feminine or neuter gender, respectively, has been used
where the context so dictates, with the rest of the sentence being construed as
if the grammatical and terminological changes thereby rendered necessary have
been made.
IN WITNESS WHEREOF, Columbia and the Company have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first written above.
THE TRUSTEES OF COLUMBIA UNIVERSITY
IN THE CITY OF NEW YORK
By /s/ Jack M. Granowitz
----------------------------
Executive Director, Columbia
Innovation Enterprise
VIMRx PHARMACEUTICALS, INC.
By /s/ Richard L. Dunning
--------------------------
Richard L. Dunning
President
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Exhibit 10.23
VIMRx Pharmaceuticals Inc.
2751 Centerville Road
Suite 210, Little Falls II
Wilmington, Delaware 19808
May 5, 1997
<PAGE>
Richard E. Kouri, Ph.D.
May 5, 1997
Page 7
Richard E. Kouri, Ph.D.
4236 Buckskin Lake Drive
Ellicott City, MD 21042
Dear Dick:
This letter agreement sets forth in all respects the agreement
between you and VIMRx Pharmaceuticals Inc. ("VIMRx") as to the terms and
conditions of your employment by VIMRx.
I. You will be employed as Senior Vice President, Research of
VIMRx and President and Chief Executive Officer of VIMRx Genomics, Inc.
("Genomics"). In your capacity as an officer of VIMRx, your will report as
mutually agreed; in your capacity as an officer of Genomics, you will report to
the Board of Directors of Genomics. VIMRx shall cause you to be elected to the
Board of Directors of Genomics and, at the option of the Board of Directors of
VIMRx, you agree to serve, for no additional compensation, as a director and/or
officer of any or all of VIMRx's subsidiaries throughout the term of your
employment. The place of employment will be at the offices of Genomics, which
offices will be established in New York, New York in the near future. You will
be expected to relocate to the New York, New York area before September 30,
1998.
2. The term of your employment will commence on May 1, 1997,
and shall continue until terminated under the provisions of Paragraph 6 below.
You will be a full-time employee of VIMRx and you agree to devote your business
and professional time, energy and skills to the affairs of VIMRx and its
subsidiaries and to serve VIMRx faithfully and to the best of your ability.
3. (a) As compensation for the services to be rendered by you
hereunder, VIMRx will pay you (i) a signing bonus of $30,000 payable on your
execution and delivery of this letter agreement, and (ii) a base salary of
$160,000 per annum, payable in installments in accordance with VIMRx's regular
payroll practices, and (iii) an annual cash bonus to be determined in accordance
with the provisions of subparagraph 3(d).
(b) As additional compensation, VIMRx shall award you,
effective upon your execution and delivery of this Agreement, Incentive Stock
Options to purchase 75,000 shares of VIMRx Common Stock pursuant to VIMRx's 1990
Incentive and Non-Incentive Stock Option Plan (the "Plan"), subject to approval
of the Board of Directors of VIMRx and approval of certain amendments to the
<PAGE>
Plan by the Shareholders of VIMRx. Such options will become exercisable in three
equal increments of 25,000 shares each on the first, second and third
anniversaries, respectively, of the date your employment commences. Subject to
the provisions of the Plan and the Inventive Stock Option Agreement to be
entered into pursuant to the Plan regarding termination of employment, the
exercisability of all options subject to the Option Agreement shall expire ten
years from the date of grant.
(c) As an additional incentive, VIMRx will cause Genomics
to enter into a Stock Option Agreement with you, which agreement shall be in
substantially the form of Exhibit A hereto.
(d) You will be eligible to participate in VIMRx's medical,
dental, life and long-term disability insurance and other benefit programs,
including any 401(k) or other retirement plans, from time to time in effect for
VIMRx's senior executives, your participation in any such plans to be in
accordance with their respective terms and conditions.
(e) Your performance will be reviewed annually by VIMRx's
Board of Directors, in connection with which your annual cash bonus and possible
increases in your base compensation for the future will be discussed, it being
understood that any such decisions shall be within the discretion of VIMRx's
Board of Directors and/or its Compensation Committee (or other similar committee
duly appointed by VIMRx's Board of Directors). However, it is further understood
that the annual cash bonus is initially targeted at at least 33% of base
compensation, assuming satisfactory performance.
(f) VIMRx shall reimburse you, or cause you to be
reimbursed for all reasonable expenses incurred by you in relocating to New
York, including closing costs associated with the sale of your current residence
and the purchase of your new residence, in an amount to be mutually agreed upon
by VIMRx and you.
(g) Upon execution of this Agreement, you will commence
good faith efforts to sell your current principal residence (the "Residence") at
a reasonable price in light of currently prevailing residential real estate
market conditions in the area where the Residence is located. In the event you
sell the Residence (without regard to the contents thereof) for an amount less
than the total invested cost to you of the Residence, as evidenced by
documentation reasonably satisfactory to VIMRx (hereinafter, the "Base Amount"),
VIMRx shall reimburse you for such loss. In the event the sale of your Residence
would result in a loss to you, VIMRx shall have the right, exercisable within
three (3) days of receipt of your notice, to purchase your Residence at a price
equal to the Base Amount, closing of which shall be promptly effected following
notice by VIMRx of its intention to do so. You shall provide evidence of loss by
delivery to VIMRx of a closing statement, and other documentation reasonably
requested by VIMRx, setting forth the financial details of the sale of the
Residence.
<PAGE>
4. You will be entitled to take up to an aggregate of four
weeks of vacation each calendar year as business conditions permit. VIMRx shall
not be required to provide any additional compensation to you for vacation time
not utilized by you.
5. (a) VIMRx will reimburse you for all reasonable and
documented business expenses incurred by you on behalf of VIMRx during the term
of your employment hereunder consistent with VIMRx's expense reporting policy
(as the same may be modified from time to time). Notwithstanding anything herein
to the contrary, the provisions of this Paragraph 5(a) shall survive the
effective date of termination of this Agreement for a period of six months.
(b) VIMRx will pay, or reimburse you for, reasonable
expenses of lodging in, and commuting to, the New York, New York area incurred
by you on or prior to May 5, 1998.
6. (a) Your employment hereunder may be terminated at any
time by VIMRx for cause (as such term is hereinafter defined) or, upon at least
60 days' prior written notice by you or by VIMRx, without cause.
(b) In the event your employment is terminated by VIMRx
without cause, this Agreement shall terminate immediately on the effective date
of termination of your employment; provided, however, that:
(i) you will be paid one year's base salary as severance
in monthly installments (in arrears) beginning the first full month following
the cessation of your employment with VIMRx;
(ii) VIMRx will pay the cost of health care benefits
substantially equivalent to those provided by VIMRx at the time of termination,
for one year following termination; and
(iii) you will be entitled to receive any accrued but
unpaid salary earned by you through the effective date of such termination.
(c) No severance shall be paid or payable to you in the
event your employment is terminated for cause, or you voluntarily resign from
your employment with VIMRx, in which events this Agreement shall terminate
immediately upon the effective date of termination of your employment or upon
the effective date of your resignation, respectively; provided, however, that
VIMRx shall nonetheless be obligated to pay you any accrued but unpaid salary
earned by you through the date of such termination.
<PAGE>
(d) For purposes of this Agreement, termination for "cause"
shall mean termination due to any or more of the following: (i) if you are
indicted for committing a felony or a decision or determination is rendered by
any court or governmental authority that you have committed any act involving
fraud, willful misconduct, dishonesty, breach of trust or moral turpitude; (ii)
if you willfully breach your duty of loyalty to, or commit an act of fraud or
dishonesty upon, VIMRx; (iii) if you demonstrate gross negligence or willful
misconduct in connection with your employment; (iv) if, in the reasonable, good
faith opinion of a majority of VIMRx's whole Board of Directors (excluding
yourself, if you shall then be a director of VIMRx), you engage in personal
misconduct of such a material nature as to render your presence as an officer of
VIMRx detrimental to VIMRx or its reputation and you fail to cure the same
within five days after notice thereof from VIMRx; or (v) if you commit a
material breach of or a default under any of the terms or conditions of this
Agreement and you fail to cure such breach or default within ten days after
prior written notice thereof from VIMRx.
(e) Your employment hereunder shall terminate immediately
upon your death or "permanent disability" (as such term is hereinafter defined).
In either such event, this Agreement shall terminate immediately upon the
cessation of your employment; provided, however, you (or your legal
representative, as the case may be) will be entitled to receive any accrued but
unpaid salary earned by you through the date of such termination, plus severance
in monthly installments (in arrears), beginning the first full month following
the date of such termination, in an aggregate amount equal to the positive
difference, if any, between (x) the base salary you would have received
hereunder for the six months immediately following such termination date had
your employment continued for such six month period, and (y) the total monies
paid or payable to you with respect to such six month period under the long-term
disability insurance policy or policies maintained by VIMRx for your benefit, if
any. For purposes of this Agreement, the term "permanent disability" shall have
the meaning set forth in the long-term disability insurance policy or policies
then maintained by VIMRx for the benefit of its employees, or if no such policy
shall then be in effect, or if more than one such policy shall then be in effect
in which the term "permanent disability" shall be assigned different
definitions, then the term "permanent disability" shall be defined for purposes
hereof to mean any physical or mental disability or incapacity which renders you
incapable of fully performing the services required of you in accordance with
your obligations hereunder for a period aggregating 120 days during any
twelve-month period.
(f) In the event of occurrence of any of the following
events, you shall have the right to terminate your employment with VIMRx on at
least 60 days' notice. Subject to the foregoing provisions of this Paragraph 6,
in the event such notice is given by you within 30 days of any one or more of
such events, such termination of employment shall be deemed termination of your
employment by VIMRx without "cause" within the meaning of this Paragraph 6:
<PAGE>
(i) a material breach of or default under this Agreement
by VIMRx which is not cured by VIMRx within ten (10) days after its receipt of
written notice thereof from you;
(ii) a material reduction in your duties by VIMRx's Board
of Directors (not arising from any physical or mental disability you may
sustain) which would be inconsistent with the position of Senior Vice
President-Research of VIMRx or such other executive position to which you may be
assigned and the same shall not have been alleviated by VIMRx's Board of
Directors within ten (10) days after its receipt of written notice thereof from
you, it being expressly understood and agreed, however, that in the event (i)
either or both of the positions of Senior Vice President-Research, of VIMRx and
President and CEO of Genomics are dissolved for any reason, and you are offered
an executive position within VIMRx or any subsidiary of VIMRx, or (ii) you no
longer hold an executive position with VIMRx but continue in the position of CEO
of Genomics, whether or not Genomics is then a subsidiary of VIMRx, you will not
be entitled to any severance pay or benefits by reason of any such event.
7. You hereby agree that you shall not, directly or
indirectly, during the term of your employment hereunder and until the
expiration of one year after you cease to be so employed by VIMRx, own, manage,
operate, join, control or become employed by, or render any services of an
advisory nature or otherwise, or participate in the ownership, management,
operation or control of, or otherwise be connected in any manner with, any
business competitive with the business of VIMRx or any of its directly or
indirectly, wholly or partially owned subsidiaries without VIMRx's prior written
consent.
8. (a) You further hereby covenant and agree that you will not
at any time during, or (a) for a period of three (3) years following the
termination of, your employment with VIMRx, reveal, divulge or make known to any
person or entity any secrets or confidential information (whether oral, written,
or electronically encoded) whatsoever, of or concerning VIMRx or any of its
directly or indirectly, wholly or partially owned subsidiaries or its business
or anything connected therewith, all of which is and shall remain the property
of VIMRx and shall be returned by you to VIMRx (including all copies)
immediately upon any termination of your employment (or earlier, if requested by
VIMRx), or (b) for a period of three (3) years following the termination of your
employment with VIMRx, directly or indirectly entice away from VIMRx's
employment, retain or otherwise engage, any employee of VIMRx, or attempt to do
any of the foregoing.
(b) For purposes hereof, confidential information shall
not include any information which: (i) is or becomes generally available to the
public other than as a result of a wrongful disclosure by you or your
representatives; (ii) was known by you on a non-confidential basis prior to its
disclosure to you by VIMRx or its representatives; (iii) becomes available to
you from a source other than VIMRx or its representatives, provided that such
source is not bound by a confidentiality agreement with VIMRx or its
<PAGE>
representatives and otherwise has a right to disclose the same; or (iv) is
required to be disclosed by any governmental or judicial authority, provided, in
such case, that you shall use your best efforts to notify VIMRx immediately of
any such requirement so that VIMRx shall have an opportunity to contest it.
9. In the event of any breach or threatened breach by you of
any one or more of the provisions of Paragraphs 7 (relating to non-competition)
or 8 (relating to non-disclosure and non-enticement of employees) above, VIMRx
will be entitled, in addition to any remedy hereunder or under any applicable
law or in equity, to an injunction restraining the breach of such provisions
hereof.
10. You agree that VIMRx may, in its discretion, apply for and
take out in its name and at its own expense, and solely for its benefit, key man
life insurance on you in any amount deemed advisable by VIMRx to protect its
interests, and you agree that you shall have no right, title or interest therein
and further agree to submit to any medical or other examination and to execute
and deliver any application or other instruments in writing reasonably necessary
to effectuate such insurance.
11. You represent and warrant that you are not under any
obligation, restriction or limitation, including but not limited to
confidentiality and/or non-competition restrictions, contractual or otherwise,
to any other individual or entity which would prohibit or impede you from
performing your duties and responsibilities hereunder, except as are set forth
in that certain Proprietary Information and Inventions Agreement by and between
you and Gene Logic, Inc. and substantially in the form of the unexecuted draft
thereof delivered to the Company on May 2, 1997, and that you are free to enter
into and perform the terms and provisions of this Agreement.
12. Notwithstanding anything herein to the contrary, the
provisions of Paragraphs 7, 8, 9 and 11 hereof shall expressly survive the
expiration or termination of this Agreement regardless of the reason for, or
cause of, any such termination.
13. All notices, requests, demands, and other communications
provided for by this Agreement shall be in writing and shall be either
personally delivered (including by couriers such as FedEx) or sent by pre-paid
certified mail, return receipt requested, addressed to the address stated below
of the party to which notice is given, or to such changed address as such party
may have fixed by notice given in accordance with the terms hereof:
<PAGE>
TO VIMRx: VIMRx Pharmaceuticals Inc.
c/o Richard L. Dunning, President
2971 Centerville Road
Suite 210, Little Falls II
Wilmington, Delaware 19808
WITH A COPY TO: Lowell S. Lifschultz
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177-0077
TO DR. KOURI: Richard E. Kouri, Ph.D.
4236 Buckskin Lake Drive
Ellicott City, MD 21042
WITH A COPY TO: David Dembert
Jacobs & Dembert, P.A.
1 South Street, Suite 1919
Baltimore, MD 21202-3201
Any notice, sent as provided above, shall be deemed given upon receipt at the
address provided for above (or, in the event delivery is refused, the first date
on which delivery was tendered).
14. This Agreement contains the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes any and all prior understandings, agreements and representations,
written or oral, expressed or implied, with respect thereto.
15. This Agreement may not be amended, modified, altered or
terminated (other than pursuant to its terms) except by an instrument in writing
signed by the parties.
16. In case any one or more of the provisions of this
Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby.
17. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed entirely therein (without giving effect to
the conflict of law rules thereof).
Kindly indicate your agreement with the foregoing by
countersigning the enclosed duplicate copy of this letter agreement and
returning it to me on behalf of VIMRx.
On behalf of VIMRx, we look forward to a long and mutually
rewarding relationship.
Sincerely,
VIMRx PHARMACEUTICALS INC.
By: /s/ Richard L. Dunning
----------------------------
Richard L. Dunning, President
ACCEPTED AND AGREED TO THIS
5th DAY OF MAY, 1997
/s/ Richard E. Kouri
Richard E. Kouri
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