SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 1, 1998
NEOSE TECHNOLOGIES, INC.
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(Exact Name of Registrant Specified in Charter)
Delaware 0-27718 13-3549286
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
102 Witmer Road, Horsham, Pennsylvania 19044
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 441-5890
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
On June 1, 1998, Neose Technologies, Inc. (the "Company") entered into a
Research and Development Agreement with the Pharmaceutical Research Institute of
Bristol-Meyers Squibb Company, a Delaware corporation ("BMS"), to develop
proprietary processes for the manufacture of complex carbohydrates for two
cancer vaccines being developed by BMS (the "R&D Agreement"). The R&D Agreement
provides for the Company to receive payments upon the completion of certain
milestones. BMS may terminate the R&D Agreement upon ninety days prior
written notice. If BMS decides to purchase any complex carbohydrates from the
Company after commercializing either of its vaccines, the Company and BMS will
need to negotiate the terms of a manufacturing supply agreement.
On October 12, 1999, the Company entered into an Operating Agreement with
McNeil PPC, Inc., acting through its division McNeil Specialty Products Company
("McNeil"), for the purpose of forming Magnolia Nutritionals LLC, a limited
liability company organized under the laws of the State of Delaware, to develop
the cost-effective production of certain complex carbohydrates (the "Operating
Agreement"). The joint venture replaces and expands the previous research and
development agreement between the Company and McNeil.
On November 3, 1999, the Company entered into a Collaboration and License
Agreement (the "Collaboration Agreement") with American Home Products
Corporation, acting through its subsidiary company, Wyeth-Ayerst International
Inc. ("Wyeth"), to develop and commercialize a bioactive milk-based carbohydrate
for use in infant and pediatric nutritional formulas marketed by Wyeth. Under
the Collaboration Agreement, the two companies will conduct a joint research and
development program, with Wyeth's activities focused on use of the ingredient in
its pediatric products, and with the Company's activities focused on the
development of commercial scale manufacturing capabilities for the novel
bioactive carbohydrate ingredient. The Collaboration Agreement provides for
development fees payable to the Company prior to commercialization, and
anticipates that the Company will manufacture and sell novel ingredients to
Wyeth, and will receive royalties upon commercialization.
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The R&D Agreement, the Operating Agreement and the Collaboration Agreement
are filed as Exhibits 99.1, 99.2 and 99.3, respectively, to this Current Report
on Form 8-K. This summary description of the transaction is qualified in its
entirety by reference to the documents filed as exhibits hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
Exhibit Number Description
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99.1* Research and Development Agreement, dated June 1,
1998, between Neose Technologies, Inc. and the
Pharmaceutical Research Institute of Bristol-Myers
Squibb Company.
99.2* Operating Agreement of Magnolia Nutritionals LLC,
dated October 12, 1999, between Neose
Technologies, Inc. and McNeil PPC, Inc., acting
through its division McNeil Specialty Products
Company.
99.3* Collaboration and License Agreement, dated
November 3, 1999, between Neose Technologies, Inc.
and American Home Products Corporation.
Explanation of Footnotes to List of Exhibits
* The Company has intentionally omitted portions of the exhibits from this
filing. The Company has submitted an application for confidential treatment,
which includes the omitted portions, to the Securities and Exchange Commission.
The application for confidential treatment was filed as specified in Rule 24b-2
of the Securities Exchange Act of 1934.
SIGNATURE
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 hereunto duly authorized.
NEOSE TECHNOLOGIES, INC.
By: /s/ P. Sherrill Neff
-------------------------------------
P. Sherrill Neff
President and Chief Financial Officer
Dated: February 2, 2000
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Exhibit Index
Exhibit Number Description
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99.1* Research and Development Agreement, dated June 1, 1998,
between Neose Technologies, Inc. and the Pharmaceutical
Research Institute of Bristol-Myers Squibb Company.
99.2* Operating Agreement of Magnolia Nutritionals LLC, dated
October 12, 1999, between Neose Technologies, Inc. and
McNeil PPC, Inc., acting through its division McNeil
Specialty Products Company.
99.3* Collaboration and License Agreement, dated November 3,
1999, between Neose Technologies, Inc. and American Home
Products Corporation.
* The Company has intentionally omitted portions of the exhibits from this
filing. The Company has submitted an application for confidential
treatment, which includes the omitted portions, to the Securities and
Exchange Commission. The application for confidential treatment was filed
as specified in Rule 24b-2 of the Securities Exchange Act of 1934.
Exhibit 99.1
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
RESEARCH AND DEVELOPMENT AGREEMENT
THIS AGREEMENT, made effective this 1st day of June, 1998 by and among the
PHARMACEUTICAL RESEARCH INSTITUTE of Bristol-Myers Squibb Company, a Delaware
corporation, Route 206 & Provinceline Road, Princeton, New Jersey 08540 ("BMS")
and NEOSE TECHNOLOGIES, INC., 102 Witmer Road, Horsham, Pennsylvania 19044
("NTI")
WITNESSETH
WHEREAS, BMS is engaged in the research, development, manufacture and sale
of pharmaceutical products, and
WHEREAS NTI has skill and expertise in research, development and production
of hetero-oligosaccharides, and
WHEREAS, BMS desires NTI to engage in a research and development project
which will result in the production of certain quantities of specific
hetero-oligosaccharides and new technology associated therewith;
NOW, THEREFORE, BMS and NTI intending to be legally bound, have agreed as
follows:
Article 1 - The Project
1.1 NTI agrees to produce and supply to BMS (a) [*] of ganglioside GM2; and
(b) [*] ganglioside GD2 in accordance with the prices and timetables get forth
in Appendix A attached herewith and fully incorporated herein. NTI further
agrees to supply to BMS at no charge all quantities of gangliosides GMS and GD2
prepared in the course of process optimization trials
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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conducted prior to delivery of the aforementioned [*] quantities except that NTI
may retain such quantities of GMS and GD2 as are necessary for the maintenance
of standards, analytical testing and quality control. After delivery of the mg
quantities specified herein, NTI and BMS will mutually develop quality targets
and/or specifications.
1.2 NTI agrees to produce and thereafter to supply BMS with (a) [*] of
ganglioside GM2; and (b) up to [*] of ganglioside GD2 (total GD2 requirement to
be defined by BMS prior to its manufacture being initiated by NTI). These
quantities of ganglioside will be manufactured under GMP conditions, unless NTI
is otherwise instruction by BMS, in accordance with the timetable set forth in
Appendix A. These quantities of ganglioside will also be manufactured to meet
all quality targets and/or specifications as mutually agreed to by BMS and NTI
in accordance with Article 1.1 hereinabove.
1.3 Articles 1.1 and 1.2 taken together and in their entirety shall
hereinafter be referred to as the "PROJECT."
1.4 NTI agrees to commence work on the PROJECT upon the effective dat of
this Agreement, which shall be the first date written hereinabove (the
"Effective Date") and to use its best efforts to expeditiously complete the
PROJECT within the timetables set forth in Appendix A.
1.5 NTI acknowledges that all quantities of gangliosides GM2 and GD2
produced by NTI under the terms of this Agreement are the exclusive property of
BMS and may be used by BMS for any legitimate business purpose within the Field
(as defined in Article 9.3 of this Agreement) subject to the provisions of
Article 9 of this Agreement. In the event NTI produces any quantities of GMS or
GD2 materials in excess of quantities set forth in this Agreement, NTI shall
either transfer any and all such excess quantities to BMS based on the prices
set forth in Appendix A or, alternatively, at the sole discretion of BMS, NTI
shall destroy any and all of such excess quantities of GM2 and GD2 materials.
1.6 NTI agrees to perform all activities connected with the PROJECT in
accordance with all applicable laws, rules, regulations or other requirements of
local, state and federal governmental authorities.
1.7 With regard to any and all GMS and GD2 materials delivered to BMS by
NTI under the terms of this Agreement, NTI MAKES NO REPRESENTATIONS AND EXTENDS
NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED WITH RESPECT TO THE
SUITABILITY OF GM2 AND GD2 MATERIALS FOR ANY PARTICULAR PURPOSE OR USE AND NTI
EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF
[ ] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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MERCHANTABILITY AND OF FITNESS FOR ANY PARTICULAR PURPOSE OR USE OF GM2 AND GD2
MATERIALS BY BMS.
Article 2 - Compensation
2.1 In consideration of the research and development services provided by
NTI in connection with the PROJECT and the quantities of GM2 and GD2 material
provided by NTI to BMS hereunder, BMS shall pay to NTI the amounts set forth in
Appendix A in accordance with the payment schedule therein.
2.2 In the event the PROJECT is canceled prior to completion by any early
termination of this Agreement pursuant to the terms of Article 7, NTI shall
receive payment from BMS adjusted to an amount equal to the pro rata portion of
work performed by NTI in accordance with Appendix A.
2.3 All payments made by BMS to NTI hereunder shall be by BMS corporate
check forwarded to:
NEOSE Technologies, Inc.
C/o Matthew Cramer
Director, Business Development
102 Witmer Road
Horsham, PA 19044
Article 3 - Reports and Conference
3.1 Oral reports and interim written status reports of the progresses of
the PROJECT (including invention disclosure reports, where appropriate) shall be
provided by NTI to BMS at mutually agreed upon intervals. Significant
developments shall be communicated promptly to BMS. A final report summarizing
the results of the PROJECT shall be submitted to BMS within thirty (30) days of
the conclusion of the PROJECT or any early termination thereof, unless said
termination arises due to breach of a material obligation hereunder by BMS.
3.2 BMS representatives will have reasonable opportunities to consult
informally with NTI representatives by telephone and, upon reasonable notice, to
visit NTI's facility during normal business hours to verify and discuss the
progress and results of the PROJECT.
3.3 From time to time upon reasonable prior notice and at reasonable times
during regular business hours, NTI agrees to permit BMS Quality Assurance and
Drug Regulatory Affairs personnel to inspect NTI's facility and review NTI's
operating procedures and systems to assure that all requirements for GMP
manufacture of GMS and GD2 materials have been satisfied.
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Article 4 - Publicity
4.1 No party hereunder will use the name of the other party in any
promotion or advertising without the prior written approval of an authorized
representative of the other party. If required by law, a party hereunder may
acknowledge the existence of this Agreement and/or the general nature of the
investigations conducted hereunder, provided that prior notice of any such
acknowledgment shall have been given to the other party.
Article 5 - Publications
5.1 NTI may not publish the results of the PROJECT or any portion thereof
without the prior written permission of BMS.
Article 6 - Independent Contractor
6.1 For purposes of this Agreement and in the performance of all services
hereunder, the relationship of the parties hereto shall be one of independent
contractors and not as agents, partners, or employees of one another.
Article 7 - Term and Termination
7.1 This Agreement shall become effective upon the date first hereinabove
written and shall continue in effect until the conclusion of the PROJECT, unless
this Agreement is sooner terminated (i) by mutual written agreement, (ii) by the
nonbreaching party, for breach of a material obligation hereunder by the other
party (which breach is not cured within sixty (60) days following written notice
of such breach) delivered by the nonbreaching party, (iii) by BMS without cause,
upon ninety (90) days written notice to NTI.
7.2 Termination of this Agreement by either party for any reason shall not
affect the rights and obligations of the parties accrued prior to the effective
date of termination of this Agreement. No termination of this Agreement, however
effectuated, shall affect or release the parties hereto from their rights and
obligations under Articles 8, 9 and 10 or under any other provision herein
which, by its intent or meaning, is intended to survive such termination.
Notwithstanding the foregoing, in the event of termination by NTI for reason of
a breach of a material obligation of this Agreement by BMS, the rights and
licenses granted to BMS by NTI under Article 9 of this Agreement shall terminate
and revert to NTI.
7.3 NTI shall be free to manufacture GM2 and GD2 for any purpose outside
the Field upon conclusion of the PROJECT, or upon any early termination pursuant
to the terms of Article 7.
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Article 8 - Confidential Information
8.1 In furtherance of completion of the PROJECT, either party hereunder may
elect to disclose to the other party information which the disclosing party
considers confidential or proprietary ("Confidential Information"). Such
Confidential Information shall be reduced to writing and clearly indicated as
being confidential at the time of disclosure (or, in the case of verbal
information reduced to writing and so marked within a reasonable time
thereafter). Without the prior written consent of the disclosing party, each
party agrees to hold in confidence all of such Confidential Information
disclosed to it hereunder, and will not use any Confidential Information for any
purpose except furtherance of the PROJECT. Each party agrees to take reasonable,
necessary and prudent precautions to protect and to obligate its employees,
contractors and other researchers to protect all Confidential Information
disclosed by the other party to it pursuant to this Agreement. These obligations
shall apply equally to copies and to extracts made of the other party's
Confidential Information. This obligation of confidentiality shall not, however,
apply to information which:
(i) Was known to the receiving party prior to the time of disclosure,
as can be demonstrated by competent written evidence;
(ii) Was part of the public domain prior to the time of disclosure;
(iii) Becomes part of the public domain after the time of disclosure
other than through the act or omission of the receiving party in breach of
this Agreement.
(iv) Becomes known to the receiving party without restriction from a
third party not under an obligation of confidentiality, direct or indirect,
to the disclosing party not to disclose such information to others, as can
be demonstrated by competent proof; or
(v) Is independently developed by the receiving party without regard
to the information disclosed to it by the other party hereunder, as can be
demonstrated by competent proof.
Confidentiality Information may be disclosed as required by applicable law,
provided that the party required to disclose same gives notice to the party from
whom it received the information, and seeks confidential treatment of such
disclosure to the maximum extent permitted by applicable law. Nothing in this
Article 8 is intended or shall be construed as creating or implying any right or
license under any patent rights or other intellectual property rights owned or
controlled by either party by virtue of such party's disclosure of Confidential
Information.
8.2 The parties further agree that all technical information and data
produced in the course of completing the PROJECT shall be deemed
Confidential Information and shall not be
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disclosed by either party to any third party without the prior written consent
of the other party hereunder.
8.3 The obligations of confidentiality set forth in this Article 9 shall be
effective for the duration of this Agreement and for a period of five (5) years
following any termination thereof.
Article 9 - Intellectual Property
9.1 BMS acknowledges that NTI currently holds issued United States Patent
No. 5,180, 674 as well as international equivalents thereof which claim
processes for enzyme synthesis, including a number of process steps which may be
required to synthesize GM2 and GD2 gangliosides from ceramide glucose starting
materials ("NTI Patent Rights").
9.2 BMS and NTI agree that NTI shall own any new technology developed by
NTI in the course of completing the PROJECT ("NTI PROJECT Technology"),
including that technology embodied in a patent application in preparation
relating to the synthesis of GM2 and GD2 from plant ceramide starting material.
9.3 NTI hereby grants BMS an exclusive, worldwide, fully paid-up,
royalty-free license to use NTI Patent Rights for the sole purpose of preparing
GM2 and GD2 gangliosides for any oncologic vaccine or related product for the
term of this Agreement and any extension or continuation thereof.
Article 10 - Indemnification
10.1 BMS agrees to indemnify and hold NTI harmless from any loss, damage or
claim (including, without limitation, attorneys fees) arising from BMS' use of
the GM2 and GD2 materials supplied by NTI hereunder for any purpose, including
clinical studies involving human subjects, except to the extent such claims
primarily arise from the negligence or willful misconduct of NTI in the
preparation of such materials.
Article 11 - Miscellaneous
11.1 This Agreement, together with all Exhibits annexed hereto, constitutes
the entire understanding between BMS and NTI with respect to the PROJECT hereof,
and supersedes and replaces all prior agreements, understandings and writings
between these parties as to said subject matter. Any inconsistency or conflict
between the terms of this Agreement and any Exhibit shall be resolved in favor
of the text of this Agreement.
11.2 Legal notices hereunder shall be deemed made if given by registered or
certified mail, postage prepaid or by any other methods capable of providing
reasonable proof of receipt
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thereof, and addressed to the party to receive such notice at the address first
set forth above or at such other address as may hereafter be designated by a
party in writing.
11.3 This Agreement may be amended or supplemented only by a written
instrument executed by all parties. No provision of this Agreement may be waived
by any act, omission or knowledge of a party or its agents or employees, but
only by a writing expressly waiving such provision and signed by the waiving
party. The failure of a party at any time or times to require performance of any
provision hereof shall in no manner affect its rights at a later time to enforce
the same. No waiver by a party of any condition, remedy or term or any other
condition, remedy or term of any successive occasion.
11.4 No obligations or rights under this Agreement may be assigned or
delegated by NTI without the prior written consent of BMS.
11.5 This Agreement shall be construed, interpreted and governed by the
laws of the State of New Jersey. Captions and paragraph headings are for
convenience only and shall not form an interpretative part of this Agreement.
This Agreement shall not be strictly construed against either party hereto.
11.6 Each party hereby assumes any and all risks of personal injury and
property damage attributable to the acts or omissions of that party and its
trustees, directors, officers, employees, contractors, representatives,
students, post-docs, faculty, and agents in the course of completing the
PROJECT.
11.7 NTI hereby certifies to BMS that NTI will not use the services of any
person debarred under the Generic Drug Enforcement Act of 1992, as amended, in
any capacity in connection with any provided to BMS. NTI shall promptly notify
BMS of any change in the truth of this certification.
IN WITNESS WHEREOF, the parties through their duly authorized
representatives have executed this Agreement in multiple counterparts as of the
date and year first above written.
BRISTOL-MYERS SQUIBB NEOSE TECHNOLOGIES, INC.
PHARMACEUTICAL RESEARCH
INSTITUTE
By: /s/ Christopher M. Cimarusti By: /s/ P. Sherrill Neff
-------------------------------------- -----------------------------
Christopher M. Cimarusti, Ph.D. Title: Presdient and CFO
Vice President
Process Research & Development
Date: 6/11/98 Date: 6/11/98
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Tax I.D. No. 13-354-9286
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APPENDIX A
PROJECT SCOPE - GANGLIOSIDE SUPPLY
FROM NEOSE TECHNOLOGIES
Project Goal
NTI shall produce and supply to BMS (1) [*] of ganglioside GM2,
manufactured under GMP conditions from plant derived ceramide within seven (7)
months of the Effective Date of the Agreement and (2) [*], manufactured under
GMP conditions from plant derived ceramide within twelve (12) months of the
Effective Date of the Agreement. The manufacturing process will be designed to
[*]. The [*] of each ganglioside material will be made in three (3) batches of
[*] each.
Project Assumptions
1. Project start date will be the Effective Date of the Research
and Development Agreement.
2. GM2 and GD2 will be developed from a [*] starting material.
3. Milligram quantities [*] of non-GMP GM2 material will be
available within thirteen (13) weeks of project start date.
4. NTI will deliver [*] batch of cGMP GM2 material within
fourteen (14) weeks of delivering a [*] sample of GM2 to BMS.
Upon approval of BMS, NTI will manufacture and deliver two (2)
additional [*] batches of cGMP GM2 to BMS on a biweekly basis.
At NTI's discretion, NTI may complete an intermediate scale of
GM2 batch prior to the first [*] delivery, provided that there
is no impact on the Project Schedule as described in this
Appendix.
5. Milligram quantities [*] of non-GMP GD2 material will be
available within thirty-six (36) weeks of project start date.
6. NTI will deliver [*] batch of cGMP GD2 material within
fourteen (14) weeks of delivering a [*] sample of GD2 to BMS.
Upon approval of BMS, NTI will manufacture and delivery two
(2) additional [*] batches of
- --------------------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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cGMP GD2 to BMS on a biweekly basis. At NTI's discretion, NTI may
complete an intermediate scale GD2 batch prior to the first [*]
delivery, provided that there is no impact on the Project Schedule as
described in this Appendix. At BMS' discretion, BMS may reduce the
specified batch size (stated herein as [*]) prior to start of
manufacture, as clinical needs are established.
The research and development program required to meet the project
assumptions stated above will be funded according to the following payment
structure:
1. Project Start (Project Initiation Fee) $[*]
2. Delivery of mg quantities of non-GMP GM2 $[*]
3. Delivery of full [*] of cGMP GM2 $[*]
4. Delivery of mg quantities of non-GMP GD2 $[*]
5. Delivery of full [*] of cGMP GD2 $[*]
The total cost for this Research and Development Agreement will be $[*] and
include all costs associated with the preparation of documentation required for
cGMP practices as well as the actual manufacturing costs of non-GMP and GMP
deliveries of both gangliosides.
In the event that BMS requests the [*] deliveries of either ganglioside be
manufactured without strict cGMP controls (as may be occasioned by the granting
of "Starting Material" status by the FDA), the royalty payment will be modified
as follows:
Item No. 3 - Delivery of full [*] of cGMPGM2: $[*]
Item No. 5 - Delivery of full [*] of cGMP GD2 $[*]
NTI will commit to supplying all quantities of ganglioside required by BMS
for product development purpose (process development and validation, product
stability, clinical trials, etc.) For requirements in excess of the [*] batches
of each GM2 and GD2, the price per gram shall be $[*] for cGMP material and $[*]
for non-GMP material.
Development Terms
1. NTI will reserve all quantities of gangliosides prepared
during the process development trials (regardless of quality)
for transfer to BMS, except that NTI may retain such
quantities of GM2 and GD2 as are necessary for the maintenance
of standards, analytical methods and quality control. Excess
quantities of ganglioside transferred to BMS hereunder will be
used to assist BMS in refining analytical methods and
developing specifications for the gangliosides.
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
2
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2. BMS and NTI will develop complete documentation of the
manufacturing process for the preparation of GM2 and GD2. In
the event that NTI is incapable of meeting or unwilling to
meet BMS' production requirements for either GM2 or GD2, BMS
and NTI will work together to transfer NTI technology to a
mutually agreed upon third party or to BMS' internal
manufacturing network.
3. In the event NTI is unable to offer acceptable quality
ganglioside material derived from plant ceramide in the time
agreed to in the Research and Development Agreement, NTI will,
upon request from BMS, revert to the production of
gangliosides from [*]. Monies paid to support the [*] route
will be transferred directly the [*] process development
effort.
- ----------------------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
3
Exhibit 99.2
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND SUCH PORTIONS HAVE BEEN
FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
OPERATING AGREEMENT
OF
MAGNOLIA NUTRITIONALS LLC
OCTOBER 12, 1999
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<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. DEFINITIONS....................................................................... 1
2. GENERAL PROVISIONS................................................................10
2.1 Formation of the Company; Termination of Joint Development Agreement.....10
2.2 Company Name and Address.................................................10
2.3 Term.....................................................................10
2.4 Purpose of the Company...................................................10
2.5 Partition................................................................11
2.6 Fiscal Year..............................................................11
2.7 Title to Company Property................................................11
2.8 Meetings.................................................................11
2.9 Meetings of Members......................................................12
2.10 Relationship of Members..................................................14
2.11 Business Transactions of Member or Manager with the Company..............14
2.12 Interested Transactions..................................................14
3. MANAGEMENT........................................................................15
3.1 Management Committee.....................................................15
3.2 Authority................................................................15
3.3 Qualifications of Managers...............................................15
3.4 Management Committee Meetings............................................16
3.5 Management Committee Quorum..............................................16
3.6 Manner of Acting.........................................................16
3.7 Authority and Certain Powers of Management Committee.....................16
3.8 Reliance by Third Parties................................................17
3.9 Approval of Certain Matters by the Members...............................17
3.10 Liability for Certain Acts...............................................18
3.11 Reliance on Reports and Information by Member or Manager.................18
3.12 Bank Accounts............................................................19
3.13 Resignation..............................................................19
3.14 Removal..................................................................19
3.15 Vacancies................................................................19
3.16 Compensation.............................................................19
4. BUSINESS OF THE COMPANY...........................................................19
4.1 Primary Purpose..........................................................19
4.2 Joint Development........................................................19
4.3 Operating Budget.........................................................20
4.4 Construction of Manufacturing Facilities.................................20
4.5 Regulatory Matters.......................................................20
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<TABLE>
<S> <C> <C>
5. SPECIAL RIGHTS AND PROVISIONS.....................................................21
5.1 Purchase of [*]..........................................................21
5.2 Loans....................................................................22
5.3 Rejected Proposals.......................................................22
5.4 Personnel and Research Services..........................................23
6. CONTRIBUTIONS AND CAPITAL ACCOUNTS................................................23
6.1 Capital Contributions....................................................23
6.2 Neose's Option to Increase Percentage Interest...........................24
6.3 Maintenance of Capital Accounts..........................................24
6.4 Withdrawal of Capital....................................................24
6.5 Additional Capital Contributions.........................................24
6.6 Interest on Capital Contribution.........................................24
6.7 Priority and Return of Capital...........................................24
6.8 Limitation Upon Liability of Members.....................................24
6.9 Loans....................................................................24
7. INTELLECTUAL PROPERTY.............................................................25
7.1 Contributions to Capital.................................................25
7.2 Grants by Neose..........................................................25
7.3 Grants by MSPC...........................................................25
7.4 Grants by the Company....................................................25
7.5 Rights Upon Termination..................................................26
7.6 Prompt Disclosure........................................................26
7.7 Patent Prosecution.......................................................26
7.8 Cost of Prosecution. ...................................................26
7.9 Option to Pursue Patent Rights...........................................26
7.10 Extension of Term........................................................27
7.11 Patent Infringement.....................................................27
7.12 Product Marking..........................................................28
8. ALLOCATION OF INCOME AND LOSSES...................................................28
8.1 Income...................................................................28
8.2 Losses...................................................................28
8.3 Special Allocations......................................................28
8.4 Company Nonrecourse Deductions...........................................30
8.5 Member Nonrecourse Deduction.............................................30
8.6 Allocation to Members....................................................30
8.7 Change in Member's Interest..............................................30
8.8 Reporting for Tax Purposes...............................................30
9. DISTRIBUTIONS OF NET CASH FLOW....................................................30
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
9.1 Declaration and Payment of Distributions.................................30
</TABLE>
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<TABLE>
<S> <C> <C>
9.2 Limitations on Distributions.............................................31
9.3 Amounts of Tax Paid or Withheld..........................................31
9.4 Distribution in Kind.....................................................31
10. TRANSFERABILITY...................................................................31
10.1 Restriction on Transfer..................................................31
10.2 Effect of Transfer.......................................................32
10.3 No Resignation of Members................................................32
11. INDEMNIFICATION...................................................................33
11.1 Indemnification by the Company...........................................33
11.2 Proceedings Initiated by Indemnified Representatives.....................33
11.3 Advancing Expenses.......................................................33
11.4 Securing of Indemnification Obligations..................................34
11.5 Payment of Indemnification...............................................34
11.6 Contribution.............................................................34
11.7 Contract Rights; Amendment or Repeal.....................................34
11.8 Scope of Section.........................................................34
11.9 Reliance on Provisions...................................................35
12. DISSOLUTION AND TERMINATION.......................................................35
12.1 Dissolution..............................................................35
12.2 Earlier Termination By Buyout............................................35
12.3 Earlier Termination for Cause: Breach....................................36
12.4 Closing of Buyout or Termination.........................................37
12.5 Transfer of Interest, Properties and Rights..............................37
12.6 Activities of the Company Pending Liquidation............................37
12.7 Winding Up and Liquidation...............................................37
12.8 Distribution of Assets...................................................38
12.9 Cancellation of Certificate..............................................39
13. COVENANTS NOT TO COMPETE..........................................................39
13.1 Mutual Covenant Not to Compete...........................................39
13.2 Covenants Not to Compete Upon Sale or Termination........................40
14. BOOKS; REPORTS TO MEMBERS; TAX ELECTIONS..........................................40
14.1 Books and Records........................................................40
14.2 Tax Information..........................................................41
14.3 Annual Reports...........................................................41
14.4 Monthly Reports..........................................................42
14.5 Tax Matters Member.......................................................42
14.6 Tax Audits/Special Assessments...........................................43
14.7 Tax Elections............................................................43
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
15. CONFIDENTIALITY...................................................................43
15.1 Non-disclosure...........................................................43
15.2 Procedure to Deem Confidential...........................................43
15.3 Exceptions...............................................................44
15.4 Public Disclosure........................................................44
15.5 No Third Party Obligations...............................................44
15.6 No Right or License......................................................44
15.7 Duration.................................................................44
16. DISPUTE RESOLUTION................................................................45
16.1 Arbitration..............................................................45
16.2 Disputes.................................................................46
17. INVESTMENT REPRESENTATION..........................................................46
17.1 Investment Purpose.......................................................46
17.2 No Registration..........................................................46
18. MISCELLANEOUS.....................................................................46
18.1 Binding Effect...........................................................46
18.2 Entire Agreement.........................................................47
18.3 Amendments...............................................................47
18.4 Choice of Law............................................................47
18.5 Notices..................................................................47
18.6 Headings.................................................................48
18.7 Pronouns.................................................................48
18.8 Waivers..................................................................48
18.9 Severability.............................................................48
18.10 Publicity................................................................48
18.11 No Third Party Beneficiaries.............................................48
18.12 Interpretation...........................................................48
18.13 Further Assurances.......................................................49
18.14 Counterparts.............................................................49
18.15 Survival of Rights and Obligations.......................................49
18.16 Representations and Warranties...........................................49
EXHIBITS
Exhibit 1.49
Exhibit 1.56
Exhibit 6.1
Exhibit 7.1
</TABLE>
iv
<PAGE>
OPERATING AGREEMENT
of
MAGNOLIA NUTRITIONALS LLC
This Operating Agreement (this "Agreement") is made and entered into as of
October 12, 1999 by and among Neose Technologies, Inc., a Delaware corporation
("Neose") and McNeil PPC, Inc., a Pennsylvania corporation acting through its
division McNeil Specialty Products Company ("MSPC"), for the purpose of forming
Magnolia Nutritionals LLC, a limited liability company organized under the laws
of the State of Delaware (the "Company"). Neose and MSPC, together with such
other persons who become members of the Company in the future in accordance with
the terms hereof, are sometimes referred to herein individually as a "Member"
and collectively as the "Members."
BACKGROUND
MSPC and Neose entered into a Joint Development Agreement, dated as of July
1, 1997 and amended on January 12, 1999 (the "Joint Development Agreement"), for
the purpose of achieving the inexpensive production of oligosaccharides. The
parties desire to form the Company to continue the Joint Development to explore
the inexpensive production of enzymatically synthesized complex carbohydrates
consisting only of [*] and to construct a manufacturing facility for the
low-cost production thereof.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:
TERMS
1. DEFINITIONS. For convenience and brevity, certain terms used in this
Agreement are defined below instead of when first used in this Agreement. Each
defined term used in this Agreement has been identified by capitalizing the
first letter in such term.
1.1 "Act" shall mean the Delaware Limited Liability Company Act of 1992, as
amended from time to time.
1.2 "Actual Cost" shall mean the fully-burdened actual cost, including
without limitation appropriate allocated costs, of a product under GAAP
consistently applied.
1.3 "Affiliate" shall mean any entity that directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with a party hereto. "Control" (including, with correlative meanings,
the terms "controlled by" and "under common control with")
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
1
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shall mean the ownership or control of securities possessing at least 50% of the
voting power of all outstanding voting securities of an entity or the power to
otherwise direct or cause the direction of the management and policies of such
entity, whether through the ownership of voting stock or similar rights. For the
purposes of this definition, partnerships, joint ventures or similar entities, a
majority-in-interest of whose partners, venturers or other owners is a party
hereto and/or an Affiliate of a party shall be deemed to be Affiliates of such
party.
1.4 "Agreement" shall mean this Operating Agreement.
1.5 "Buyout Options" shall have the meaning given to such term in Section
12.2.
1.6 "Capital Account" shall mean, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
1.6.1 Each Member's Capital Account shall be credited with (i) such
Member's Capital Contributions as set forth in Exhibit 6.1, (ii) such
Member's distributive share of Income and any items in the nature of income
or gain that are specially allocated to such Member pursuant to Section 8.3
(other than Section 8.3.1), (iii) the amount of any Company liabilities
that are assumed by such Member or that are secured by any Company property
distributed to such Member, and (iv) the amount of cash and the Gross Asset
Value of any property contributed to the Joint Venture.
1.6.2 Each Member's Capital Account shall be debited by (i) the amount
of cash and the Gross Asset Value of any Company property distributed to
such Member pursuant to any provision of this Agreement, (ii) such Member's
distributive share of Losses and any items in the nature of expenses or
losses that are specially allocated to such Member pursuant to Section 8.3
(other than Section 8.3.1 and 8.3.2), (iii) such Member's distributive
share of noncapital, nondeductible expenditures of the Company under Code
Section 705(a)(2)(B) (including items treated as such expenditures pursuant
to Treasury Regulation 1.704-1(b)(2)(iv)(i)), and (iv) the amount of any
liabilities of such Member that are assumed by the Company or that are
secured by any property contributed by such Member to the Company.
1.6.3 In the event any Member transfers all or any portion of its
Interest in accordance with the terms of this Agreement, the transferee
shall succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest.
1.6.4 In the event the Gross Asset Value of Company property is
adjusted pursuant to this Agreement, the Capital Accounts of all Members
shall be adjusted simultaneously to reflect the aggregate net adjustment as
if the Company recognized gain or loss in the amount of such aggregate net
adjustment.
1.6.5 In determining the amount of any liability for purposes of this
Agreement, there shall be taken into account Code Section 752(c) and other
applicable Code sections and Treasury Regulations.
1.6.6 The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulation
2
<PAGE>
Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with the Treasury Regulations. In the event the Management
Committee determines that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities that are secured by
contributed or distributed property or that are assumed by the Company or
the Members), are computed in order to comply with such Treasury
Regulations, the Management Committee may make such modification.
1.7 "Capital Account Deficit" shall mean, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
1.7.1 Crediting such Capital Account with any amounts which such
Member is obligated to restore (pursuant to the terms of any promissory
note of such Member or otherwise) or is deemed to be obligated to restore
pursuant to the Treasury Regulations; and
1.7.2 Debiting such Member's Capital Account by the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations.
The foregoing definition of Capital Account Deficit is intended to comply with
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
1.8 "Capital Contribution" shall have the meaning set forth in Section 6.1.
1.9 "Certificate" shall have the meaning given to such term in Section
2.1.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
1.11 "Company" shall mean the limited liability company governed by this
Agreement.
1.12 "Company Minimum Gain" shall have the meaning ascribed to such term
under Treasury Regulation Section 1.704-2(d).
1.13 "Company Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulation Section 1.704-2(c).
1.14 "Company Nonrecourse Liability" shall have the meaning set forth in
Treasury Regulation Sections 1.704-2(b)(3) and 1.752-1(a)(2).
1.15 "Construction Budget" shall mean the construction budget as may be
adopted and modified from time to time by the Management Committee in accordance
with Section 4.4.
1.16 "Construction Plan" shall mean the plan for the construction of the
manufacturing facilities to be built pursuant to Section 4.4, as such plan may
be adopted and modified from time to time by the Management Committee in
accordance with Section 4.4.
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<PAGE>
1.17 "Consumer Product" shall mean a product which will not and may not be
further processed before being used by the ultimate consumer, whether or not
such ultimate consumer is the purchaser from the seller of such product.
1.18 "Designated Representative" shall mean, in the case of Neose, Stephen
A. Roth, Chief Executive Officer, and, in the case of MSPC, Steven J. Catani,
Vice President-Operations, or such other person in either case as may be
designated by notice given hereunder.
1.19 "Dissolution Event" shall have the meaning given to such term in
Section 12.1.
1.20 "Exempt Income" shall mean the income and gain of the Company that is
exempt from federal income tax.
1.21 "Existing Joint Information" shall mean the "Joint Information" as
such term is defined in the Joint Development Agreement.
1.22 "Existing Joint Invention" shall mean an invention (whether or not
patentable or susceptible to intellectual property protection) in the Field,
conceived by personnel of MSPC or Neose or of both pursuant to the Joint
Development Agreement from July 1, 1997 until the date hereof.
1.23 "Field" shall mean the development, manufacture, and commercialization
of enzymatically synthesized carbohydrates consisting of only [*].
1.24 "Fiscal Year" shall have the meaning given to such term in Section 2.6
hereof.
1.25 "GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
1.26 "Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
1.26.1 The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset,
as determined by the contributing Member and the Company;
1.26.2 The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Management Committee, as of the following times: (a) the acquisition of an
additional interest in the Company by any new Member in exchange for more
than a de minimis Capital Contribution; (b) the distribution by the Company
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
4
<PAGE>
to a Member of more than a de minimis amount of Company property other than
money, unless all Members receive simultaneous distributions of undivided
interests in the distributed property in proportion to their interests in the
Company; (c) the liquidation of the Company within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g); and (d) the termination of the Company
for federal income tax purposes pursuant to Code Section 708(b)(1)(B); and
1.26.3 The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).
1.27 "Income" and "Losses" mean, for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (and for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss
and including deductions attributable to nonrecourse debt), with the following
adjustments:
1.27.1 Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Income or Losses
pursuant to this Subsection shall be added to such taxable income or loss;
1.27.2 Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulation Section 1.704-l(b)(2)(iv)(i), and not otherwise
required to be taken into account in computing Income or Losses pursuant to
this Subsection, shall be subtracted from such taxable income or loss;
1.27.3 All items of income, gain, loss or deduction with respect to
property which has been revalued shall be computed by reference to the
Gross Asset Value of such property, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value;
1.27.4 In the event that the Gross Asset Value of any Company asset is
adjusted pursuant to this Agreement, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for
purposes of computing Income and Losses;
1.27.5 To the extent that an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required under Treasury Regulation 1.704-l(b)(2)(iv)(m)(4) to be taken into
account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Member's interest in the Company, the amount of
such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or an item of loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and
shall be taken into account for purposes of computing Income or Losses; and
5
<PAGE>
1.27.6 Any items that are specially allocated pursuant to Section
8.3.1 shall not be taken into account in computing Income or Losses.
1.28 "Indemnified Capacity" shall mean any and all past, present and future
service by an indemnified representative in one or more capacities as a Member,
Manager, officer, employee or agent of the Company, or, at the request of the
Company, as a member, manager, officer, employee, agent, fiduciary or trustee of
another limited liability company, corporation, partnership, joint venture,
trust, employee benefit plan or other entity or enterprise.
1.29 "Indemnified Representative" shall mean any and all Members, Managers
and officers of the Company and any other person designated as an indemnified
representative by the Members or Managers of the Company (which may, but need
not, include any person serving at the request of the Company, as a member,
manager, officer, employee, agent, fiduciary or trustee of another limited
liability company, corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise).
1.30 "Information" shall mean any discovery, technique, invention (whether
or not patentable or otherwise susceptible to intellectual property protection),
methods, practices, know-how, material, composition, substance, data,
description, process, system, formulation, design or knowledge relating to the
Field.
1.31 "Interest" shall mean an ownership interest.
1.32 "IRS" shall mean the Internal Revenue Service.
1.33 [*]
1.34 "JDC" shall mean the Joint Development Committee formed pursuant to
Section 4.2.
1.35 "Joint Development" shall mean all work in the Field to be performed
individually or together by MSPC and Neose under the Joint Development Plan and
otherwise under this Agreement. All Joint Development from and after the date of
this Agreement shall be governed by this Agreement, which supersedes the Joint
Development Agreement.
1.36 "Joint Development Budget" shall mean the joint development budget as
may be adopted and modified from time to time in accordance with Section 4.2.
1.37 "Joint Development Costs" shall mean such costs as are incurred in the
course of the Joint Development and consistent with the Joint Development
Budget, including without limitation costs attributed to salaries, special
compensation, benefits, supplies, travel, contract services, consulting
services, training, legal fees, and capital expenditures, but excluding costs
attributed to utilities, company management, office space, existing equipment
and property taxes. The costs
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
6
<PAGE>
attributed to salaries, special compensation and benefits included as Joint
Development Costs shall mean only those costs incurred by MSPC or Neose
personnel in the course of performing the Joint Development as assigned by the
JDC.
1.38 "Joint Development Plan" shall mean the plan outlining the nature and
timing of the parties' obligations in carrying out the Joint Development, as
such Plan may be adopted and modified from time to time by the JDC or the
Management Committee in accordance with Section 4.2.3.
1.39 "Joint Information" shall mean the Information that is conceived,
discovered, reduced to practice, synthesized, acquired, or generated by the
Company, MSPC or Neose in the conduct of the Joint Development from the date
hereof until the termination of this Agreement.
1.40 "Joint Invention" shall mean an invention (whether or not patentable
or susceptible to intellectual property protection) in the Field, conceived by
personnel of any one or more of the Company, MSPC or Neose, in the conduct of
the Joint Development.
1.41 "Joint Patent Rights" shall mean all Patents and Patent Applications
claiming Joint Inventions or Existing Joint Inventions.
1.42 "Liability" shall mean any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with respect to
an employee benefit plan, or cost or expense of any nature (including, without
limitation, attorneys' fees and disbursements).
1.43 "Liable Member" shall have the meaning given to such term in Section
2.10.
1.44 "Liquidator" shall have the meaning given to such term in Section
12.7.1.
1.45 "Management Committee" shall mean the committee formed to manage the
Company pursuant to Section 3.1.
1.46 "Manager" shall mean a member of the Management Committee.
1.47 "Majority-In-Interest" shall mean Members holding a Percentage
Interest of at least 50.01% of the Percentage Interests held by all Members.
1.48 "MSPC Information" shall mean the Information which, prior to July 1,
1997, was owned or controlled by MSPC or to which, prior to such date, MSPC had
a right to grant a license.
1.49 "MSPC Patent Rights" shall mean the Patents and Patent Applications
listed in Exhibit 1.49 hereto, as well as any Patents issuing from such Patent
Applications.
1.50 [*]
1.51 "Member Minimum Gain" shall mean an amount determined in accordance
with Treasury Regulation Section 1.704-2(i)(3).
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
7
<PAGE>
1.52 "Member Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
1.53 "Member Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
1.54 "Member" or "Members" shall have the meaning given to such term in the
introductory paragraph hereof.
1.55 "Neose Information" shall mean the Information which, prior to July 1,
1997, was owned or controlled by Neose or to which, prior to such date, Neose
had a right to grant a license.
1.56 "Neose Patent Rights" shall mean the Patents and Patent Applications
listed in Exhibit 1.56 hereto, as well as any Patents issuing from such Patent
Applications.
1.57 "Net Cash Flow" shall mean with respect to any fiscal period, the
gross receipts of the Company from all sources (as determined in accordance with
the cash receipts and disbursements method of accounting) reduced by the sum of
(i) all expenditures of the Company (as determined under the aforesaid method of
accounting) during such period, (ii) all amounts applied during such period in
payment of interest or principal on any borrowing of the Company, including
amounts paid to any Member as a lender, and (iii) any amount added during such
period by the Management Committee to reserves for working capital,
contingencies, replacements, expansions, acquisitions, or other expenditures of
the Company. Releases and additions to the reserves described in this definition
shall be made by the Management Committee.
1.58 "1933 Act" shall mean the Securities Act of 1933, as amended.
1.59 "Nondeductible Expenditure" shall mean an expenditure described in
Code Section 705(a)(2)(B) or treated as such an expenditure under Treasury
Regulations Section 1.704-1(b)(2)(iv)(i).
1.60 "Operating Budget" shall mean the annual operating budget of the
Company adopted by the Management Committee in accordance with Section 4.3, as
modified from time to time in accordance with Section 4.3.
1.61 "Other Member" shall have the meaning given to such term in Section
12.2 hereof.
1.62 "Patent" shall mean an issued U.S. or foreign patent or supplemental
protection certificate, including all provisional applications, substitutions,
renewals, divisions, continuations, continuations-in-part and inventors'
certificates and all foreign counterparts thereof, reissues, reexaminations,
extensions, patents of addition, and patents of incorporation thereof.
8
<PAGE>
1.63 "Patent Application" shall mean all applications for Patents, as well
as all continuations, continuations-in-part and divisions thereof.
1.64 "Percentage Interest" shall mean the percentage ownership interest of
each Member in the Company calculated in accordance with Section 6.1.
1.65 "Person" or "person" shall mean any individual or entity, and the
heirs, executors, administrators, legal representatives, successors and assigns
of such person as the context may require.
1.66 "Proceeding" shall mean any threatened, pending or completed action,
suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the Company, a class of its Members or security holders or
otherwise.
1.67 "Tax Matters Member" shall have the meaning given to such term in
Section 14.5 hereof.
1.68 "Term" shall have the meaning given to such term in Section 2.3
hereof.
1.69 "Terminating Member" shall have the meaning given to such term in
Section 12.2 hereof.
1.70 "Termination Closing Date" shall have the meaning given to such term
in Section 12.4 hereof.
1.71 "Territory" shall mean all countries and territories of the world.
1.72 "Treasury Regulations" shall mean the income tax Treasury Regulations
promulgated under the Code, as may be amended from time to time (including
corresponding provisions of succeeding Treasury Regulations).
2. GENERAL PROVISIONS.
2.1 Formation of the Company; Termination of Joint Development Agreement.
2.1.1 By execution of this Agreement and upon the filing of the
Certificate of Formation (the "Certificate") with the Secretary of State of
the State of Delaware, the Members hereby form the Company pursuant to the
Act for the purposes hereinafter set forth. The Company is being formed as
a limited liability company to be managed by the Management Committee under
the laws of the State of Delaware, upon the terms and conditions set forth
in this Agreement. The parties intend that the Company shall be taxed as a
partnership. Promptly following the execution hereof, the Members shall
execute or cause to be executed all necessary certificates and documents,
and shall make all such filings and recordings, and shall do all other acts
as may be necessary or appropriate from time to time to comply with all
requirements for the formation, continued existence
9
<PAGE>
and operation of a limited liability company in the State of Delaware. This
Agreement is intended to serve as a "limited liability company agreement"
as such term is defined in ss. 18-101(7) of the Act.
2.1.2 By execution of this Agreement, the Members hereby agree that
the Joint Development Agreement shall terminate upon the filing of the
Certificate with the Secretary of State of the State of Delaware, and that
upon such termination such Joint Development Agreement shall have no
further force or effect, provided that Section 6.3 of the Joint Development
Agreement shall survive such termination. Article 17 of the Joint
Development Agreement, which provides for the survival of certain
provisions of the Joint Development Agreement, shall also be terminated and
of no further force or effect, and such provisions shall not survive the
termination effected hereby. The provisions of this Agreement supersede in
full the provisions of the Joint Development Agreement.
2.2 Company Name and Address. The Company shall do business under the name
Magnolia Nutritionals LLC or such other name as the Management Committee may
determine from time to time. The Management Committee shall promptly notify the
Members of any change of name of the Company. The initial registered agent for
the Company shall be CT Corporation. The initial registered office of the
Company in the State of Delaware shall be Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware. The registered office and the registered agent may
be changed from time to time by action of the Management Committee by filing
notice of such change with the Secretary of State of the State of Delaware. The
Management Committee will promptly notify the Members of any change of the
registered office or registered agent. The Company may also have offices at such
other places within or outside of the State of Delaware as the Management
Committee may from time to time determine.
2.3 Term. The Company shall commence operating as of the date the
Certificate is filed with the Secretary of the State of Delaware, and, unless
earlier terminated or dissolved pursuant to Section 12 of this Agreement, the
Company shall continue for perpetuity (the "Term").
2.4 Purpose of the Company. The Company may carry on any lawful business,
purpose or activity for which limited liability companies may be organized under
the Act. The Company shall possess and may exercise all the powers and
privileges granted by the Act or by any other law, together with any powers
incidental thereto, so far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business, purposes or
activities of the Company.
2.5 Partition. No Member, nor any successor-in-interest to any Member,
shall have the right, while this Agreement remains in effect, to have the
property of the Company partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the Company partitioned,
and each of the Members, on behalf of itself and its successors, representatives
and assigns, hereby irrevocably waives any such right.
2.6 Fiscal Year. The fiscal year of the Company shall begin on the Monday
following the Sunday nearest December 31 of each calendar year (the "Fiscal
Year").
2.7 Title to Company Property. Subject to Section 7 of this Agreement, all
property owned by the Company, whether real or personal, tangible or intangible,
shall be deemed to be
10
<PAGE>
owned by the Company, and no Member individually shall have any interest in such
property. Title to all such property may be held in the name of the Company or a
designee, which designee may be a Member or an entity affiliated with a Member.
2.8 Meetings.
2.8.1 Notice Generally. A notice of meeting shall specify the place,
day and hour of the meeting and any other information required by any
provision of the Act, the Certificate or this Agreement. When a meeting is
adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the business to be transacted at an adjourned meeting, other
than by announcement at the meeting at which the adjournment is taken,
unless the adjournment is for more than sixty (60) days or the Members or
the Management Committee fix a new record date for the adjourned meeting in
which event notice shall be given in accordance with Section 2.8.2 or
Section 2.8.3, as applicable.
2.8.2 Notice of Meetings of Management Committee. Either Member can
call a meeting of the Management Committee by notice to the other. Notice
of every meeting of the Management Committee shall be given to each Manager
by telephone or in writing at least twenty-four (24) hours (in the case of
notice by telephone, telex, TWX or facsimile transmission) or forty-eight
(48) hours (in the case of notice by telegraph, courier service or express
mail) or five (5) days (in the case of notice by first class mail) before
the time at which the meeting is to be held. Every such notice shall state
the time and place of the meeting. Neither the business to be transacted
at, nor the purpose of, any meeting of the Management Committee need be
specified in a notice of the meeting.
2.8.3 Notice of Meetings of Members. Written notice of every meeting
of the Members shall be given to each Member of record entitled to vote at
the meeting by contacting each Member's Designated Representative at least
(a) ten (10) days prior to the day named for a meeting called to consider a
merger, consolidation or sale of all or substantially all of the assets of
the Company or (b) five (5) days prior to the day named for the meeting in
any other case. If the Management Committee neglects or refuses to give
notice of a meeting, the person or persons calling the meeting may do so.
2.8.4 Waiver of Notice. Whenever any written notice is required to be
given under the provisions of the Act, the Certificate or this Agreement, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of the notice. Neither the business to be
transacted at, nor the purpose of, a meeting need be specified in the
waiver of notice of the meeting. Attendance of a person at any meeting
shall constitute a waiver of notice of the meeting except where a person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting was not
lawfully called or convened.
2.8.5 Use of Conference Telephone and Similar Equipment. Any Manager
may participate in any meeting of the Management Committee, and any Member
may participate in any meeting of the Members, by means of conference
telephone or similar communications equipment
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by means of which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this Section shall constitute
presence in person at the meeting.
2.8.6 Consent in Lieu of Meeting. Any action required or permitted to
be taken at a meeting of the Management Committee or the Members may be
taken without a meeting if, prior or subsequent to the action, written
consents describing the action to be taken are signed by each Manager or
Member, respectively, entitled to vote thereon. Any action required or
permitted to be taken at a meeting of the Management Committee or Members
may be taken without a meeting if, prior or subsequent to the action,
written consents describing the action to be taken are signed by the
minimum number of Managers or Members that would be necessary to authorize
the action at a meeting at which all Managers or Members entitled to vote
thereon were present and voting. The consents shall be filed with the
Management Committee. Prompt notice of the taking of the Company action
without a meeting by less than unanimous written consent shall be given to
those Members who have not consented in writing.
2.9 Meetings of Members. Meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Manager
or by any Member.
2.9.1 Place. The Management Committee or Member calling a meeting
pursuant to Section 2.9 may designate any place as the place for any
meeting of the Members. If no designation is made, the place of meeting
shall be the principal office of the Company.
2.9.2 Record Date. For the purpose of determining Members entitled to
notice of, or to vote at, any meeting of Members or any adjournment of the
meeting, or Members entitled to receive payment of any distribution, or to
make a determination of Members for any other purpose, the date on which
notice of the meeting is mailed or the date on which the resolution
declaring the distribution or relating to such other purpose is adopted, as
the case may be, shall be the record date for the determination of Members.
Only Members of record on the date fixed shall be so entitled
notwithstanding any permitted transfer of a Member's Interest in the
Company after any record date fixed as provided in this Section. When a
determination of Members entitled to vote at any meeting of Members has
been made as provided in this Section, the determination shall apply to any
adjournment of the meeting.
2.9.3 Quorum. A meeting of Members of the Company duly called shall
not be organized for the transaction of business unless a quorum is
present. The presence of a Majority-In-Interest represented in person or by
proxy shall constitute a quorum at any meeting of Members. In the absence
of a quorum at any meeting, Members who own a majority of the Percentage
Interests so represented may adjourn the meeting from time to time for a
period not to exceed 60 days without further notice. However, if the
adjournment is for more than 60 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the
meeting. At an adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The Members present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during the meeting of Members whose absence
would cause less than a quorum.
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2.9.4 Manner of Acting. Except as otherwise provided in the Act or the
Certificate or this Agreement, whenever any Company action is to be taken
by vote of the Members of the Company, it shall be authorized upon
receiving the affirmative vote of a Majority-In-Interest of the Members.
Such vote shall be taken by such Member's Designated Representative.
2.9.5 Voting Rights of Members. Unless otherwise provided in the
Certificate, every Member of the Company shall be entitled to a percentage
of the total votes equal to that Member's then current Percentage Interest.
2.9.6 Proxies.
2.9.6.1 At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. The proxy shall be filed with the Management
Committee of the Company before or at the time of the meeting. No
proxy shall be valid after 11 months from the date of its execution,
unless otherwise provided in the proxy.
2.9.6.2 Where two or more proxies of a Member are present, the
Company shall, unless otherwise expressly provided in the proxy,
accept as the vote of the Member represented thereby, the vote cast by
a majority of them, and, if a majority of the proxies cannot agree
whether to vote or upon the manner of voting, the voting shall be
divided equally among those persons.
2.9.6.3 A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy
shall not be effective until written notice thereof has been given to
the secretary of the Company. A proxy shall not be revoked by the
death or incapacity of the maker unless, before the vote is counted or
the authority is exercised, written notice of the death or incapacity
is given to the secretary of the Company.
2.10 Relationship of Members. Except as otherwise expressly and
specifically provided in or as authorized pursuant to the Certificate or this
Agreement or as authorized by the unanimous consent of the Management Committee
pursuant to the Certificate or this Agreement, (a) in the event that any Member
(or any of such Member's shareholders, partners, members, owners, or Affiliates
(collectively, the "Liable Member")) has incurred any indebtedness or obligation
prior to the date of this Agreement that relates to or otherwise affects the
Company, neither the Company nor any other Member shall have any liability or
responsibility for or with respect to such indebtedness or obligation unless
such indebtedness or obligation is assumed by the Company pursuant to this
Agreement or a written instrument signed by all Members; (b) neither the Company
nor any Member shall be responsible or liable for any indebtedness or obligation
that is incurred after the date of this Agreement by any Liable Member, and in
the event that a Liable Member, whether prior to or after the date hereof,
incurs (or has incurred) any debt or obligation that neither the Company nor any
of the other Members is to have any responsibility or liability for, the Liable
Member shall indemnify and hold harmless the Company and the other Members from
any liability or obligation they may incur in respect thereof; (c) nothing
contained herein shall render any Member personally liable for any debts,
obligations or liabilities incurred by the other Members or the Company whether
arising in contract, tort or otherwise or for the acts or omissions of any other
Member, Manager, agent or employee of the Company; (d) no Member shall be
constituted an agent of the other Members or the
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Company; (e) nothing contained herein shall create any Interest on the part of
any Member in the business or other assets of the other Members; (f) nothing
contained herein shall be deemed to restrict or limit in any way the carrying on
of separate businesses or activities by any Member now or in the future, even if
such businesses or activities are competitive with the Company; and (g) no
Member shall have any authority to act for, or to assume any obligation on
behalf of, the other Members or the Company.
2.11 Business Transactions of Member or Manager with the Company. A Member
or Manager may, with the approval of the Management Committee, lend money to,
borrow money from, act as a surety, guarantor or endorser for, guarantee or
assume one or more obligations of, provide collateral for, and transact other
business with the Company and, subject to other applicable law, has the same
rights and obligations with respect to any such matter as a person who is not a
Member or Manager.
2.12 Interested Transactions.
2.12.1 General Rule. A contract or transaction between the Company and
one or more of its Members, Managers or officers or between the Company and
another limited liability company, corporation, partnership, joint venture,
trust or other enterprise in which one or more of its Members, Managers or
officers are members, managers or officers or have a financial or other
interest, shall not be void or voidable solely for that reason, or solely
because the Member, Manager or officer is present at or participates in the
meeting of the Members or Management Committee that authorizes the contract
or transaction, or solely because his, her or their votes are counted for
that purpose, if:
2.12.1.1 the material facts as to its relationship or interest
and as to the contract or transaction are disclosed or are known to
all the Managers, and the contract or transaction is specifically
approved by vote of the disinterested Managers, even though the
disinterested Managers are less than a quorum; or
2.12.1.2 the material facts as to its relationship or interest
and as to the contract or transaction are disclosed or are known to
all the Members, and the contract or transaction is specifically
approved by vote of the Members.
2.12.2 Quorum. Common or interested Managers or Members, as
applicable, may be counted in determining the presence of a quorum at a
meeting of the Managers or Members, as applicable, which authorizes a
contract or transaction specified in Section 2.12.1.
3. MANAGEMENT.
3.1 Management Committee. A Management Committee will be formed to manage
the business and affairs of the Company. The Management Committee will consist
of six Managers, three of whom will be appointed by Neose and three of whom will
be appointed by MSPC.
3.2 Authority. Unless authorized to do so by this Agreement or by the
Management Committee of the Company, no attorney-in-fact, employee, officer or
agent of the Company other
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than the Management Committee shall have any power or authority to bind the
Company in any way, to pledge its credit or to render it liable to pay any
amount of money for any purpose. No Member shall have any power or authority to
bind the Company unless the Member has been expressly authorized by the
Management Committee to act as an agent of the Company. Except for situations in
which the approval of the Members is expressly required by this Agreement or by
non-waivable provision of the Act, the Management Committee shall have full and
complete authority, power and discretion to direct, manage and control the
business, affairs and properties of the Company, to make all decisions regarding
those matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
3.3 Qualifications of Managers. Each Manager of the Company shall be an
employee of either MSPC or Neose and a natural person at least 21 years of age
who need not be a resident of the State of Delaware.
3.4 Management Committee Meetings. Meetings of the Management Committee
shall be held at such time and place within or outside of the State of Delaware
as shall be designated from time to time by resolution of the Management
Committee.
3.5 Management Committee Quorum. A majority of the members of the
Management Committee shall be necessary to constitute a quorum for the
transaction of business and, except as otherwise required by this Agreement, the
acts of a majority of the members of the Management Committee present and voting
at a meeting at which a quorum is present shall be the acts of the Management
Committee.
3.6 Manner of Acting. Except where unanimity is required by Section 4, each
Member, regardless of the number of members appointed by it to the Management
Committee, will be entitled to vote on matters before the Management Committee
in accordance with its Percentage Interest.
3.7 Authority and Certain Powers of Management Committee. Without limiting
the generality of Section 3.2 above and unless otherwise prohibited in this
Agreement, the Management Committee shall have power and authority, on behalf of
the Company:
3.7.1 To do and perform all acts as may be necessary or appropriate to
the conduct of the Company's business;
3.7.2 To purchase, hold, sell, exchange, transfer and otherwise
acquire and dispose of and exercise all rights, powers, privileges and
other incidents of ownership or possession with respect to real and
personal property, whether tangible or intangible, held by the Company;
3.7.3 To purchase liability and other insurance to protect the
Company's property and business;
3.7.4 To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements,
financing statements, documents providing
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for the acquisition, mortgage or disposition of the Company's property,
assignments, bills of sale, leases, partnership agreements, operating
agreements of other limited liability companies and any other instruments
or documents necessary, in the opinion of the Management Committee, to the
business of the Company;
3.7.5 To employ accountants, legal counsel, managing agents, or other
experts or consultants to perform services for the Company and to
compensate them from Company funds; and
3.7.6 To enter into any and all other agreements on behalf of the
Company, with any other person for any purpose, in such forms as the
Management Committee may approve.
3.8 Reliance by Third Parties. Persons dealing with the Company are
entitled to rely conclusively upon a certificate of the Management Committee to
the effect that they are then acting as the Management Committee and upon the
power of the Management Committee as herein set forth.
3.9 Approval of Certain Matters by the Members. Notwithstanding any
provision of this Agreement to the contrary, the following matters require the
unanimous approval of the Members through their Designated Representatives:
3.9.1 Merger or consolidation of the Company with any other entity;
3.9.2 Sale, transfer, assignment, license or voluntary encumbrance of
all or substantially all the assets of the Company or of any substantial
asset of the Company;
3.9.3 Division or conversion of the Company;
3.9.4 Payment of compensation to any Manager for acting in such
capacity;
3.9.5 The admission of additional Members to the Company;
3.9.6 Any modification of the Field;
3.9.7 Any change in the purpose or business of the Company;
3.9.8 Except as permitted by Section 4.2.3, Section 4.3 or Section
5.3.1, any material change in the products developed or manufactured by the
Company;
3.9.9 Except as permitted by Section 4.2.3, Section 4.3 or Section
5.3.1, the commencement or termination of any product development program
of the Company;
3.9.10 Any changes to an approved Operating Budget in excess of 25% of
the gross amount thereof for any Fiscal Year;
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3.9.11 Any changes to the Construction Budget, which changes (i) in
the case of individual changes, are equal to or exceed five percent (5%) of
the original Construction Budget; (ii) in the aggregate equal or exceed
fifteen percent (15%) of the original Construction Budget; or (iii) would
result in the expenditure by the Company of more than $100,000.00 in
addition to the amount previously budgeted;
3.9.12 The requiring of additional capital contributions;
3.9.13 The incurring of any capital expenditure not in the Company's
annual budget;
3.9.14 The incurring of any debt for borrowed money in excess of
$100,000, unless included in a budget approved in accordance with this
Agreement;
3.9.15 The entering into any agreement or arrangement with any Member
or Manager or their respective Affiliates;
3.9.16 The licensing of all or any part of the Joint Information to
any third party;
3.9.17 The hiring of any executive-level employees; and
3.9.18 Fees to be paid for personnel services provided by a Member
pursuant to Section 5.4.
3.10 Liability for Certain Acts. The Managers shall perform their
managerial duties in good faith, in a manner reasonably believed to be in the
best interests of the Company, and with such care and business judgment as an
ordinarily prudent person in a like position would use under similar
circumstances, including the reliance in good faith upon the records of the
Company and upon such information, opinions, reports or statements presented to
the Company by the Management Committee, Members, officers, employees or
committees of the Company or by any other person, as to matters the Management
Committee reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Company. The Management Committee does not, in any way, guarantee the
return of the Members' Capital Contributions or a profit for the Members from
the operations of the Company. The individuals who so perform the duties of the
Management Committee shall not be personally liable to the Company or to any
Member for any loss or damage sustained by the Company or any Member, unless (i)
the Manager has breached or failed to perform the duties of his or her position
under the Act, the Certificate or this Agreement and (ii) the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness by the
Manager. Nothing in this Section shall apply to the liability of a Manager
pursuant to any criminal statute, or for the payment of taxes pursuant to
applicable law.
3.11 Reliance on Reports and Information by Member or Manager. A Member or
Manager shall be fully protected in relying in good faith upon the records of
the Company and upon such information, opinions, reports or statements presented
to the Company by any Managers, Members, officers, employees or committees of
the Company, or by any other person, as to matters the Member or Manager
reasonably believes are within such other person's professional or expert
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competence and who has been selected with reasonable care by or on behalf of the
Company, including without limitation information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which distributions to Members might properly be paid.
3.12 Bank Accounts. The Management Committee may from time to time open
bank accounts in the name of the Company, and the Management Committee, or any
Manager or any officer of the Company designated by the Management Committee, as
may be determined from time to time by the Management Committee, shall be the
sole signatory or signatories thereon, unless the Management Committee
determines otherwise.
3.13 Resignation. A Manager may resign at any time by giving written notice
to the Company. The resignation of a Manager shall be effective upon receipt of
such notice or at such later time as shall be specified in the notice. Unless
otherwise specified in the notice, the acceptance of the resignation shall not
be necessary to make such resignation effective. The resignation of a Manager
who is also a Member shall not affect the Manager's rights as a Member and shall
not constitute a withdrawal of a Member.
3.14 Removal. Any individual Manager may be removed from office at any
time, without assigning any cause, by the Member who designated such Manager.
The removal of a Manager who is also a Member shall not affect the Manager's
rights as a Member and shall not constitute a withdrawal of a Member.
3.15 Vacancies. Any vacancy with respect to a Manager occurring for any
reason may be filled by the Member who originally appointed such Manager.
3.16 Compensation. Without the unanimous approval of all the Members, the
Managers will not be entitled to compensation for their services on the
Management Committee. The Company shall, however, reimburse the Managers for
their reasonable out-of-pocket expenses incurred in connection with their
services to the Company.
4. BUSINESS OF THE COMPANY.
4.1 Primary Purpose. The primary purpose of the Company is the development,
manufacture, and commercialization of products in the Field and the construction
of manufacturing facilities to achieve this purpose. The Company will carry out
such purpose in accordance with the provisions of this Section 4.
4.2 Joint Development.
4.2.1 Conduct. The Company will conduct the Joint Development in
accordance with the Joint Development Plan and the Joint Development
Budget.
4.2.2 JDC. A Joint Development Committee will be established,
consisting of two representatives, one of whom will be appointed by and
represent MSPC and one of whom will be appointed by and represent Neose.
Either Member may replace its representative at its own option
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upon notice to the other Member. All decisions of the JDC must be
unanimous. The JDC shall oversee Joint Development according to the Joint
Development Plan, and shall assign each task thereunder to the Member (or
Members) it deems most appropriate to carry out such task. As necessary,
the JDC shall establish reliable and auditable methods for justifying and
reviewing each Member's Joint Development activities under this Agreement,
to the extent that such methods are not already established under the other
provisions of this Agreement.
4.2.3 Adoption and Modification of the Joint Development Plan and
Budget. The Joint Development Plan shall be adopted and may be modified
from time to time by the JDC or the unanimous approval of the Management
Committee. The Joint Development Budget shall be adopted and may be
modified from time to time by the JDC or the unanimous approval of the
Management Committee, or by unanimous approval of the Members as may be
required by Section 3.9.
4.2.4 Reimbursement of Joint Development Costs. Neose and MSPC will be
reimbursed by the Company for any Joint Development Costs incurred by them
in the conduct of the Joint Development. The JDC will submit to the
Management Committee, within thirty (30) days after the end of each
calendar quarter, a report showing in reasonable detail the Joint
Development Costs incurred by each of Neose and MSPC during such quarter.
The Company will reimburse such Joint Development Costs within fifteen (15)
days after receipt of such report. MSPC and Neose shall maintain complete
and accurate records of costs related or allocated to Joint Development
Costs, copies of which shall be provided upon request to the other Member
and the Management Committee. Such records shall be open, upon reasonable
notice and no more than once every six months, during reasonable business
hours for a period of two years after the end of the Fiscal Year in which
they were created for examination by an independent public accountant
selected by the Management Committee and subject to appropriate
confidentiality undertakings.
4.3 Operating Budget. The Operating Budget will be adopted and may be
modified by the unanimous approval of the Management Committee or by unanimous
approval of the Members if required by Section 3.9.10. The Company will be
operated in accordance with the Operating Budget.
4.4 Construction of Manufacturing Facilities. As soon as practicable, the
Management Committee will adopt, by unanimous approval, a Construction Plan and
Construction Budget for the construction of manufacturing facilities. The
Construction Budget and Construction Plan may be modified from time to time by
unanimous approval of the Members if required by Section 3.9.11 or otherwise by
a majority of the Management Committee.
4.5 Regulatory Matters. MSPC will be responsible for and have the authority
to control all U.S. Food and Drug Administration regulatory matters relating to
the manufacture and commercialization of [*]. MSPC will provide Neose copies of
all documents, including correspondence and filings, relating thereto. Prior to
filing any documents MSPC will provide Neose with a reasonable opportunity for
review and comment. Further, MSPC will provide Neose with reasonable notice of
and an opportunity to attend and contribute to any meetings with regulators
pertaining to such matters. The Management Committee will be responsible for
regulatory matters pertaining to products other than [*].
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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5. SPECIAL RIGHTS AND PROVISIONS.
5.1 Purchase of [*].
5.1.1 MSPC Purchase Rights. Subject to Sections 5.1.2 and 5.1.3, MSPC
(or its Affiliates) will have the right to purchase [*] from the Company
for incorporation into [*], at a price equal to the Actual Cost plus [*]
per pound for such [*]. Other than as part of an [*], MSPC shall not sell
any [*] purchased from the Company without Neose's prior written consent.
The Company shall not sell or cause to be sold any [*] for use in the
manufacture of a product that directly competes with any [*]. MSPC will
have the right to purchase [*] for use in the manufacture of MSPC products
other than [*] on terms at least as favorable as the most favorable terms
given to any third party.
5.1.2 Production Forecasts. During the term of this Agreement, MSPC
shall provide to the Company no later than 60 days prior to the first day
of each calendar quarter a forecast of MSPC's orders for [*] for the next
12 calendar months. The first calendar quarter of each such forecast shall
be referred to as the "First Quarter Forecast". The second quarter of each
such forecast may be adjusted by MSPC for each [*] in the next subsequent
calendar quarter's forecast (at which point in time the second quarter
forecast becomes the First Quarter Forecast), provided that no such
adjustment shall (absent the consent of Neose) cause such First Quarter
Forecast to be greater than 115% or less than 85% of the second quarter
forecast for such [*] contained in the immediately preceding forecast
submitted under this Section.
5.1.3 Purchase Orders. All purchase orders for [*] must be submitted
in accordance with the Company's procedures for the receipt and filling of
purchase orders. Prior to the date of notice to MSPC of the Company's
procedures for the receipt and filing of purchase orders, the Company shall
employ the analogous procedures of MSPC for such processes. As long as it
has adequate production capacity, the Company shall be obligated to supply
[*] pursuant to such purchase orders to the extent the purchase orders do
not exceed by an amount greater than 15% the latest First Quarter Forecast.
MSPC shall at all times be obliged to purchase the quantity of [*] equal to
at least 85% of each First Quarter Forecast during the calendar quarter to
which such First Quarter Forecast relates.
5.1.4 Invoice and Payment for [*]. The Company shall invoice MSPC for
[*] sold to MSPC upon shipment as follows:
5.1.4.1 With respect to [*] to be included in [*], the invoiced
amount per pound of [*] shall be equal to the estimated Actual Cost
thereof as established from time to time by the Management Committee
pursuant to Section 5.1.5 plus [*]. MSPC will pay such invoiced amount
within 30 days after receipt. Within 60 days after the end of each
Fiscal Year, the Management Committee shall determine the Actual Cost
of the [*] sold to MSPC from the accounting records of the Company for
such year and shall send a notice to MSPC
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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indicating the results of such determination. If MSPC does not dispute
such determination, the Company or MSPC, as the case may be, shall
make an adjusting payment to the other within 10 days after receipt of
such notice as may be required to assure that MSPC has paid only the
agreed price for such [*] purchased during such Fiscal Year. If MSPC
disputes the determination of such Actual Cost, and the Designated
Representatives cannot resolve such dispute within 10 days after the
Company has received notice that MSPC disputes such determination, an
independent certified public accountant will be asked by the
Management Committee to make a final determination within 60 days.
5.1.4.2 With respect to all other [*] purchased by MSPC, the
Company will invoice MSPC and MSPC will pay such invoice in accordance
with the terms in effect for sales to third parties.
5.1.5 Estimate of Actual Cost. Within 60 days after receipt of each
First Quarter Forecast, the Management Committee will provide to MSPC an
estimate of the Actual Cost of the [*] to be sold pursuant to such
Forecast.
5.2 Loans. Until the Company generates sufficient Income in excess of
Losses, MSPC will from time to time make non-interest bearing, non-recourse
loans to the Company as necessary to fund (i) operating losses and (ii) the
Construction Budget in excess of $[*], such loans to be payable out of the
Company's Net Cash Flow ratably over a seven-year period commencing on the
earlier of (i) September 30, 2006 or (ii) the date on which Neose attains a
Percentage Interest of 50% after having had a lesser Percentage Interest.
5.3 Rejected Proposals.
5.3.1 New Products. In the event one party, either as a Member,
through the Managers appointed by it or through the members of the Joint
Development Committee appointed by it, as applicable, rejects a proposal to
pursue a new product, the "Rejecting Member" may elect to (i) allow the
"Developing Member" to pursue the new product outside the Company, in which
case the Joint Information will be sublicensed to the Developing Member for
the sole purpose of the development, manufacture and commercialization of
such new product or (ii) allow the Developing Member to invest in the
Company as a capital contribution, with an appropriate adjustment in
Percentage Interests, all amounts relating to the development of such new
product. Such election will be made within sixty (60) days after such
rejection by notice given to the Developing Member. The Developing Member
will have one hundred and eighty (180) days in which to pursue the option
offered by such election without having to resubmit the proposal to the
Rejecting Member.
5.3.2 Expansion of Capacity. In the event one party, either as a
Member or through the Managers appointed by it, as applicable, rejects a
proposal to expand production capacity by constructing additional
manufacturing capacity, the "Rejecting Member" may elect to (i) allow the
"Manufacturing Member" to construct such manufacturing capacity outside the
Company, in which case the Joint Information will be sublicensed to the
Manufacturing Member for the sole
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
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purpose of constructing and operating such manufacturing capacity and
selling the products thereof or (ii) allow the Manufacturing Member to
invest in the Company as a Capital Contribution, with an appropriate
adjustment in Percentage Interests, the amount of capital expenditures
required to construct such manufacturing capacity. Such election will be
made within sixty (60) days after such rejection by notice given to the
Manufacturing Member. The Manufacturing Member will have one hundred and
eighty (180) days in which to pursue the option offered by such election
without having to resubmit the proposal to the Rejecting Member.
5.3.3 Sale or License of Products and Technology. A "Proposing Member"
may propose the sale or license to a third party of any of the Company's
technology or products not then in commercial production, subject to
Section 5.1.1. If the "Objecting Member" objects to such sale or license,
it shall give written notice to the Proposing Member of its objection
("Objection Notice") within thirty (30) days after such proposal. If
Objection Notice is given, the Objecting Member shall have the right within
thirty (30) days after such Objection Notice to give notice to the
Proposing Member of the terms and conditions on which the Objecting Member
would purchase such product or license such technology ("Objector's
Terms"). If (i) the Objecting Member does not give its Objection Notice
within the specified time period, (ii) the Objecting Member does not give
notice of its Objector's Terms within the specified time period, or (iii)
the Members cannot agree on the Objector's Terms within thirty (30) days
after the Objector's Terms have been given, the Proposing Member may
require the Company to sell such product or license such technology to a
third party on terms and conditions more favorable to the Company than
those contained in the Objector's Terms.
5.4 Personnel and Research Services. From time to time as agreed by the
Members, either Member may provide personnel and research services to the
Company. The Members shall negotiate in good faith the fees for such services to
be paid by the Company to the Member providing such services.
6. CONTRIBUTIONS AND CAPITAL ACCOUNTS.
6.1 Capital Contributions. Each Member shall make capital contributions (a
"Capital Contribution") to the Company in accordance with Exhibit 6.1. In
addition, upon execution of this Agreement, each Member shall make non-cash
Capital Contributions to the Company as specified in Section 7.1. The Members
shall receive Percentage Interests in the Company which reflect the percentage
of all Capital Contributions hereunder contributed by such Member.
6.2 Neose's Option to Increase Percentage Interest. Neose will have the
option, exercisable from time to time until September 30, 2006, to increase its
Percentage Interest to up to 50% by making payments ("Payments") to MSPC in
exchange for MSPC transferring a portion of its Percentage Interest to Neose
until the combined total of Payments and Capital Contributions by Neose equals
50% of the combined Capital Contributions of both Neose and MSPC. With respect
to each payment made by Neose under this Section, the Percentage Interests of
each Member in the Company will be recalculated in accordance with the last
sentence of Section 6.1.
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6.3 Maintenance of Capital Accounts. The Company shall maintain a Capital
Account for each Member.
6.4 Withdrawal of Capital. A Member shall not be entitled to withdraw any
part of such Member's Capital Account or to receive any distribution from the
Company, except as provided in this Agreement.
6.5 Additional Capital Contributions. No Member shall be required to make
any additional capital contribution to the Company or to restore any deficit in
such Member's Capital Account, except as provided in this Agreement, and such
deficit, if any, shall not be considered a debt owed to the Company or to any
other person for any purpose.
6.6 Interest on Capital Contribution. No interest shall be due from the
Company on any Capital Contribution of any Member.
6.7 Priority and Return of Capital. Except as may be expressly provided in
this Agreement, no Member shall have priority over any other Member either for
the return of Capital Contributions or for Net Cash Flow, provided that this
Section shall not apply to loans (as distinguished from Capital Contributions)
which a Member has made or may make to the Company pursuant to Section 5.2
or 6.9.
6.8 Limitation Upon Liability of Members. Except as may be expressly
provided in this Agreement or under the Certificate, the personal liability of
each Member to the Company, to the other Members, or to the creditors of the
Company or any third party for losses, debts or liabilities of the Company shall
be limited to the amount of its Capital Contribution which has not theretofore
been returned to it as a distribution (including a distribution upon
liquidation). For purposes of the foregoing sentence, except for payments to
MSPC pursuant to Section 5.2 and payments to any Member to repay loans made in
accordance with Section 6.9, distributions to a Member shall first be deemed to
be a return of its Capital Contribution. No Member shall at any time be liable
or held accountable to the Company, to other Members, to creditors of the
Company or to any other third party for or on account of any negative balance in
its Capital Account.
6.9 Loans. If any Member makes any loan or loans to the Company, or
advances money on its behalf, the amount of any such loan or advance shall not
be deemed an increase in, or contribution to, the Capital Account of the lending
Member or entitle the lending Member to any increase in his, her or its share of
the distributions of the Company. Except as provided in Section 5.2, interest
shall accrue on any such loan at an annual rate agreed to by the Company and the
lending Member.
7. INTELLECTUAL PROPERTY
7.1 Contributions to Capital. Each of Neose and MSPC hereby assigns to and
contributes to the capital of the Company all of its right, title and Interest
in and to the Existing Joint Information and any Joint Patent Rights existing as
of the date of this Agreement and listed in Exhibit 7.1. The parties hereby
agree to assist the Company, at the Company's expense, in every proper way
(including, without limitation, becoming a nominal party) to evidence, record
and perfect
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such assignment and to apply for and obtain recordation of and from time to time
enforce, maintain, and defend such right.
7.2 Grants by Neose.
7.2.1 To the Company. Neose hereby grants to the Company, for the Term
of this Agreement, the exclusive (except as to Neose and MSPC for the
conduct of the Joint Development), worldwide, royalty-free right and
license, with the right to sublicense, under the Neose Patent Rights and
Neose Information to engage in the Joint Development, and to use, sell,
make, have made, import, export and offer to sell any product in the Field.
7.2.2 To MSPC. Neose hereby grants to MSPC, for the Term of this
Agreement, a non-exclusive, royalty-free, world-wide right and license,
without the right to sublicense (other than to Affiliates), to use the
Neose Patent Rights and Neose Information solely for the purpose of the
Joint Development.
7.3 Grants by MSPC.
7.3.1 To the Company. MSPC hereby grants to the Company, for the Term
of this Agreement, the exclusive (except as to Neose and MSPC for the
conduct of the Joint Development), world-wide, royalty-free right and
license, with the right to sublicense, under the MSPC Patent Rights and
MSPC Information to engage in the Joint Development, and to use, sell,
make, have made, import, export and offer to sell any product in the Field.
7.3.2 To Neose. MSPC hereby grants to Neose, for the Term of this
Agreement, a non-exclusive, royalty-free, worldwide right and license,
without the right to sublicense, to use the MSPC Patent Rights and MSPC
Information solely for the purpose of the Joint Development.
7.4 Grants by the Company. The Company hereby grants to each of Neose and
MSPC, for the Term of this Agreement, a non-exclusive, royalty-free, worldwide
right and license, without the right to sublicense (other than to Affiliates of
MSPC or Neose, as the case may be), to use the Existing Joint Information and
Joint Information solely for the purpose of the Joint Development.
7.5 Rights Upon Termination. Upon termination of this Agreement, Neose
shall not have rights under MSPC Patent Rights or MSPC Information absent
written consent from MSPC, and MSPC shall not have rights under Neose Patent
Rights or Neose Information absent written consent from Neose. However, both
parties will have a non-exclusive, worldwide, perpetual, royalty-free right and
license to any Joint Information and Existing Joint Information.
7.6 Prompt Disclosure. In support of the provisions of Section 7.7, Neose
and MSPC shall promptly disclose to each other all Joint Inventions made, as
well as inventions reasonably believed to be Joint Inventions.
7.7 Patent Prosecution. The Company shall diligently endeavor to prosecute
and maintain the U.S. and foreign Patents and Patent Applications comprising
Joint Patent Rights using counsel of its choice at its own expense. Company
shall provide Members with copies of all relevant
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documentation so that Members may be informed of the continuing prosecution, and
Members agree to keep this documentation confidential.
7.7.1 The Company's counsel will take instructions only from the
Manager designated by the Management Committee to give such instructions
and all such Patents and Patent Applications under this Agreement will be
assigned solely to the Company.
7.7.2 The Management Committee will consult with Members on patent
strategy in general and specifically on individual Patents and Patent
Applications before making any substantive decisions or taking any
substantive positions on issues relating to patentability.
7.7.3 Members' comments shall be incorporated where reasonably
practicable; however, final decisions on patent prosecution matters shall
be made by the Company.
7.7.4 The Company shall use all reasonable efforts to amend any Patent
or Patent Application included within the Joint Patent Rights to include
claims reasonably requested by the Members to protect the products
contemplated to be sold under this Agreement.
7.8 Cost of Prosecution. The Company shall bear the costs of preparing,
filing, prosecuting and maintaining all U.S. and foreign Joint Patent Rights
contemplated by this Agreement. Company shall be required to pay costs that may
be incurred for all patent prosecution matters, including but not limited to
patentability opinions, re-examination, re-issue, interferences, opposition
proceedings or inventorship determinations. The Management Committee shall
advise Members of any potentially expensive patent matters, such as pending
interferences or opposition proceedings, before making any substantive decisions
or taking any substantive positions on such matters. Members' opinions shall be
given full consideration, however, final decisions shall be made by the
Management Committee.
7.9 Option to Pursue Patent Rights. If the Company determines not to pursue
patent protection for a Joint Invention, it shall so inform the Members. The
Company shall notify Members of its decision not to obtain or maintain a Patent
not less than sixty (60) days prior to the deadline for any payment, filing or
action to be taken in connection therewith. This notice concerning filing must
be in writing and must identify the countries and pertinent deadlines. The
absence of such a notice from the Company to Members will be considered an
election to obtain or maintain rights. A Member may file, prosecute or maintain
Patents and Patent Applications with respect to a Joint Invention at its own
expense in any country in which the Company has elected not to file, prosecute
or maintain a Patent or Patent Application therefor in accordance with this
Section and Patent Applications and resulting Patents will be owned by the
Member obtaining them and will not be subject to this Agreement.
7.10 Extension of Term. A Member has the option to apply for an extension
of the term of any patent included within Joint Patent Rights if appropriate
under the Drug Price Competition and Patent Term Restoration Act of 1984 and/or
European, Japanese and other foreign counterparts of this Law. The requesting
Member shall prepare all documents and the Company agrees to execute the
documents and to take additional action as the requesting Member reasonably
requests in connection therewith.
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7.11 Patent Infringement
7.11.1 If any Member or the Company receives notice pertaining to
infringement or potential infringement of any issued Patent included within
Joint Patent Rights, Neose Patent Rights, or MSPC Patent Rights, the person
receiving such notice shall notify the other Members and the Company, as
appropriate, within ten (10) days after receipt.
7.11.2 If any Member or the Company learns of the substantial
infringement of any Patent included within Joint Patent Rights, Neose
Patent Rights, or MSPC Patent Rights, the person receiving such notice
shall notify the others in writing and provide reasonable evidence of
infringement. Neither the Company nor any Member will notify a third party
of the infringement of any Patent Rights without first obtaining consent of
the all Members, which consent will not be unreasonably denied.
7.11.3 A Member may request that the Company take legal action against
the infringement of Joint Patent Rights. If the Company has not commenced
suit within ninety (90) days following the date of such request, the
requesting Member will have the right to bring suit for patent infringement
of Joint Patent Rights, at its own expense, if and only if the Company
elects not to commence suit and if the infringement occurred during the
period and in a jurisdiction where the Company had exclusive rights under
this Agreement. If, however, Member elects to bring suit in accordance with
this Section, the Company may thereafter join that suit at its own expense.
7.11.5 Legal action will be at the expense of the party bringing suit
and all damages recovered thereby will belong to the party bringing suit,
but legal action brought jointly by Members and fully participated in by
both will be at the joint expense of the parties and all recoveries will be
shared jointly by them in proportion to the share of expense paid by each
party.
7.11.6 Each Member and the Company shall cooperate with each other in
litigation proceedings instituted hereunder but at the expense of the party
bringing suit. Litigation will be controlled by the party bringing the
suit, except that the Company may be represented by counsel of its choice
in any suit brought by a Member.
7.12 Product Marking. The Company and the parties shall mark all products
made, used or sold under the terms of this Agreement, or their containers, in
accordance with the applicable patent marking laws.
8. ALLOCATION OF INCOME AND LOSSES.
8.1 Income. After giving effect to the special allocations set forth in
Section 8.3, Income for any Fiscal Year shall be allocated as follows:
8.1.1 First, to MSPC to the extent of prior allocations of Loss
pursuant to Section 8.2.1; and
8.1.2 Second, to the members in accordance with their respective
Percentage Interests.
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8.2 Losses. After giving effect to the special allocations set forth in
Section 8.3, Losses for any Fiscal Year shall be allocated as follows:
8.2.1 First, to MSPC to the extent such Losses are attributable to any
loans provided to the Company pursuant to Section 5.2; and
8.2.2 Second, to the members in accordance with their respective
Percentage Interests.
8.3 Special Allocations. The following special allocations shall be made in
the following order and priority:
8.3.1 In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and its Gross Asset Value.
8.3.2 In the event the Gross Asset Value of any Company asset is
adjusted pursuant to this Agreement, subsequent allocations of income,
gain, loss and deduction with respect to such asset shall take account of
any variation between the adjusted basis of such asset for federal income
tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Treasury Regulations thereunder.
8.3.3 Any elections or other decisions relating to Sections 8.3.1 or
8.3.2 shall be made by the Management Committee in a manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant
to Sections 8.3.1 or 8.3.2 are solely for purposes of federal, state and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Income, Losses, other
items, or distributions pursuant to any provision of this Agreement.
8.3.4 If there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Member's share of the net decrease in Company Minimum
Gain (determined in accordance with Treasury Regulation Section
1.704-2(g)(2)). Allocations pursuant to the preceding sentence shall be
made in proportion to the respective amounts required to be allocated to
each Member. The items to be so allocated shall be determined in accordance
with Treasury Regulation Section 1.704- 2(i). This Section 8.3.4 is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulation Section 1.704-2(f) and shall be interpreted consistent with such
Section.
8.3.5 Notwithstanding any other provision of this Section 8.3 except
the foregoing provisions of this Section 8, if there is a net decrease in
Member Minimum Gain during any Fiscal Year, each Member who has a share of
the Member Minimum Gain attributable to such Member Nonrecourse Debt
(determined in accordance with Treasury Regulation
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Section 1.704-2(i)(5)) shall be specially allocated items of Company income
and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Member's share of the net decrease in Member Minimum Gain
(determined in accordance with Treasury Regulation Section 1.704-2(i)(4)).
Allocations pursuant to the preceding sentence shall be made in proportion
to the respective amounts required to be allocated to each Member. The
items to be so allocated shall be determined in accordance with Treasury
Regulation Section 1.704-2(j)(2)(ii). This Section 8.3.5 is intended to
comply with the minimum gain chargeback requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistent with such
Section.
8.3.6 In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a Member's
Capital Account Deficit as of the end of the taxable year to which such
allocation, distribution or adjustment relates, then items of Company
income and gain shall be specially allocated (prior to any other allocation
required by Section 8.1, but after the allocations required by the
foregoing provisions of this Section 8.3) to such Member in an amount and
manner sufficient to eliminate (to the extent required by the Treasury
Regulations) the Capital Account Deficit balances if any, created by such
adjustments, allocations, or distributions as quickly as possible; provided
that an allocation pursuant to this Section 8.3.6 shall be made only if and
to the extent that such Member would have a Capital Account Deficit after
all other allocations provided for in this Section 8 have been tentatively
made as if this Section 8.3.6 was not in the Agreement. This Section 8.3.6
is intended to comply with the Qualified Income Offset Rules of the
Treasury Regulations and shall be interpreted consistent with such rules.
8.4 Company Nonrecourse Deductions. Any Company Nonrecourse Deductions for
any Fiscal Year or other period shall be allocated among the Members in
accordance with their respective Percentage Interests.
8.5 Member Nonrecourse Deduction. Any Member Nonrecourse Deductions for any
Fiscal Year or other period shall be allocated to the Member bearing the
economic risk of loss for the debt to which such Deductions are attributable, as
provided in Treasury Regulation Section 1.704-2(i).
8.6 Allocation to Members. Allocations to be made to Members having
negative balances in their Capital Accounts shall be made to each such Member in
the proportion that the negative balance in his Capital Account bears to the
aggregate negative balances in the Capital Accounts of all such Members.
8.7 Change in Member's Interest. If during any Fiscal Year of the Company
there is a change in any Member's Percentage Interest, then for purposes of
complying with Section 706(d) of the Code, the determination of items of Income
and Loss allocable to any such period shall be made by using any method
permissible under the Code or Treasury Regulations as may be determined by the
Management Committee.
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8.8 Reporting for Tax Purposes. The Members agree to be bound by the
provisions of this Section 8 in reporting their shares of Company Income and
Loss for tax purposes.
9. DISTRIBUTIONS OF NET CASH FLOW.
9.1 Declaration and Payment of Distributions.
9.1.1 Except as provided in Section 12.8, Net Cash Flow shall be
determined by the Management Committee and shall be distributed to the
Members no less frequently than annually in accordance with their
respective Percentage Interests.
9.1.2 For purposes of this Section 9.1, the Members acknowledge that,
in accordance with the definition of Net Cash Flow, the Management
Committee may, in their sole discretion, adjust the amount which would
otherwise constitute Net Cash Flow by establishing, adding amounts to, and
releasing amounts from, such reserves as it deems, in its sole discretion,
to be necessary or advisable for working capital, contingencies,
replacements, expansions, acquisitions, or other expenditures of the
Company
9.2 Limitations on Distributions.
9.2.1 The Company shall not make a distribution to a Member to the
extent that at the time of the distribution, after giving effect to the
distribution, all liabilities of the Company, other than liabilities to
Members on account of their Interests in the Company and liabilities for
which the recourse of creditors is limited to specified property of the
Company, exceed the fair value of the assets of the Company, except that
the fair value of property that is subject to a liability for which the
recourse of creditors is limited shall be included in the assets of the
Company only to the extent that the fair value of that property exceeds
that liability.
9.2.2 A Member who receives a distribution in violation of Section
9.2.1, and who knew at the time of the distribution that the distribution
violated this Section, shall be liable to the Company for the amount of the
distribution. A Member who receives a distribution in violation of this
Section, and who did not know at the time of the distribution that the
distribution violated this Section, shall not be liable for the amount of
the distribution. Subject to Section 9.2.3, this Section shall not affect
any obligation or liability of a Member under other applicable law for the
amount of a distribution.
9.2.3 A Member who receives a distribution from the Company shall have
no liability under this Section, the Act or other applicable law for the
amount of the distribution after the expiration of three years from the
date of the distribution unless an action to recover the distribution from
such Member is commenced prior to the expiration of the said three-year
period and an adjudication of liability against such Member is made in the
action.
9.3 Amounts of Tax Paid or Withheld. All amounts paid or withheld pursuant
to the Code or any provision of any state or local tax law with respect to any
Member shall be treated as amounts distributed to the Member pursuant to this
Section for all purposes under this Agreement.
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9.4 Distribution in Kind.
9.4.1 No Member, regardless of the nature of its Capital Contribution,
shall have a right to demand and receive any distribution in any form other
than cash.
9.4.2 No Member shall be compelled to accept a distribution of any
asset in kind to the extent that the percentage of the asset distributed to
the Member exceeds a percentage of that asset that is equal to the
percentage in which the Member shares in distributions from the Company
generally.
10. TRANSFERABILITY.
10.1 Restriction on Transfer. No Member shall have the right to sell,
assign, pledge, hypothecate, transfer, exchange, give or otherwise transfer all
or any part of its Interest in the Company; provided, however, that a Member may
transfer its Interest in the Company (a) to any Affiliate without the need for
the consent of the Members or the Management Committee, or (b) to any other
Person with the prior unanimous consent of the Members.
10.2 Effect of Transfer.
10.2.1 In addition to satisfaction of the requirements of Section 10.1
above, no assignee or transferee of all or part of an Interest in the
Company shall have the right to become admitted as a Member, unless and
until:
10.2.1.1 the assignee or transferee has executed an instrument
reasonably satisfactory to the Management Committee accepting and
adopting the provisions of this Agreement;
10.2.1.2 the assignee or transferee has paid all reasonable
expenses of the Company requested to be paid by the Management
Committee in connection with the admission of such assignee or
transferee as a Member;
10.2.1.3 if requested by any Manager, the transferee has
delivered to the Company an opinion of counsel reasonably satisfactory
to such Manager that such transfer is exempt from the registration
requirements of the 1933 Act and applicable state securities laws; and
10.2.1.4 such assignment or transfer shall be reflected in a
revised Exhibit 6.1 to this Agreement.
10.2.2 A person who acquires an Interest in the Company without
satisfying Section 10.1 and this Section 10.2 shall be entitled to receive
only the allocations and distributions attributable to the acquired
Interest in the Company, if any, but shall not be entitled to any other
rights of a Member.
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10.2.3 A person who is an assignee of an Interest in the Company may
be admitted to the Company as a Member and may receive an Interest in the
Company without making a contribution or being obligated to make a
contribution to the Company.
10.3 No Resignation of Members. A Member may not withdraw or resign from
the Company prior to dissolution or winding up of the Company. If a Member who
is an individual dies or a court of competent jurisdiction adjudges the
individual to be incompetent to manage the person or property of the individual,
the executor, administrator, guardian, conservator or other legal representative
of the Member may exercise all of the rights of the Member for the purpose of
settling the estate or administering the property of the Member, including the
power under this Agreement of an assignee to become a Member. If a Member is a
corporation, trust or other entity and is dissolved or terminated, the powers of
that Member may be exercised by its legal representative or successor.
11. INDEMNIFICATION.
11.1 Indemnification by the Company.
11.1.1 The Company shall indemnify an Indemnified Representative
against any Liability incurred in connection with any Proceeding in which
the Indemnified Representative may be involved as a party or otherwise by
reason of the fact that such person is or was serving in an Indemnified
Capacity, including, without limitation, liabilities resulting from any
actual or alleged breach or neglect of duty, error, misstatement or
misleading statement, negligence, gross negligence or act giving rise to
strict or products liability, except (a) where such indemnification is
expressly prohibited by applicable law; (b) where the conduct of the
Indemnified Representative has been finally determined (i) to constitute
willful misconduct or recklessness sufficient in the circumstances to bar
indemnification against liabilities arising from the conduct, or (ii) to be
based upon or attributable to the receipt by the Indemnified Representative
from the Company of a personal benefit to which the Indemnified
Representative is not legally entitled; or (c) to the extent such
indemnification has been finally determined in a final adjudication to be
otherwise unlawful.
11.1.2 If an Indemnified Representative is entitled to indemnification
in respect of a portion, but not all, of any Liabilities to which such
person may be subject, the Company shall indemnify such Indemnified
Representative to the maximum extent for such portion of the Liabilities to
which he or she is entitled.
11.1.3 The termination of a proceeding by settlement shall not create
a presumption that the Indemnified Representative is not entitled to
indemnification.
11.1.4 To the extent that an Indemnified Representative of the Company
has been successful on the merits or otherwise in defense of any proceeding
or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including without limitation attorneys' fees
and disbursements) actually and reasonably incurred by such person in
connection therewith.
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11.2 Proceedings Initiated by Indemnified Representatives. Notwithstanding
any other provision of this Section, the Company shall not indemnify under this
Section an Indemnified Representative for any liability incurred in a proceeding
initiated (which shall not be deemed to include counterclaims or affirmative
defenses) or participated in as an intervenor or amicus curiae by the person
seeking indemnification unless such initiation of or participation in the
proceeding is authorized, either before or after its commencement, by the
unanimous vote of the Members or Managers in office. This Section does not apply
to reimbursement of expenses incurred in successfully prosecuting or defending
the rights of an Indemnified Representative granted by or pursuant to this
Section.
11.3 Advancing Expenses. The Company shall pay the expenses (including
attorneys' fees and disbursements) incurred in good faith by an Indemnified
Representative in advance of the final disposition of a proceeding described in
Section 11.1 or the initiation of or participation in which is authorized
pursuant to Section 11.2 upon receipt of an undertaking by or on behalf of the
Indemnified Representative to repay the amount if it is ultimately determined
that such person is not entitled to be indemnified by the Company pursuant to
this Section. The financial ability of an Indemnified Representative to repay an
advance shall not be a prerequisite to the making of such advance.
11.4 Securing of Indemnification Obligations. To further effect, satisfy or
secure the indemnification obligations provided in this Section or otherwise,
the Company may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Company, or use any other mechanism
or arrangement whatsoever in such amounts, at such costs, and upon such other
terms and conditions as the Members or Management Committee shall deem
appropriate. Absent fraud, the determination of the Members or Management
Committee with respect to such amounts, costs, terms and conditions shall be
conclusive against all Members, security holders, officers and Managers and
shall not be subject to voidability.
11.5 Payment of Indemnification. An Indemnified Representative shall be
entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the Company. The
indemnification pursuant to this Section shall be made only from the assets of
the Company, and no Member shall be personally liable therefor.
11.6 Contribution. If the indemnification provided for in this Section or
otherwise is unavailable for any reason in respect of any liability or portion
thereof, the Company shall contribute to the liabilities to which the
indemnified representative may be subject in such proportion as is appropriate
to reflect the intent of this Section or otherwise.
11.7 Contract Rights; Amendment or Repeal. All rights under this Section
shall be deemed a contract between the Company and the Indemnified
Representative pursuant to which the Company and each Indemnified Representative
intend to be legally bound. Any repeal, amendment or modification hereof shall
be prospective only and shall not affect any rights or obligations then
existing.
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11.8 Scope of Section. The rights granted by this Section shall not be
deemed exclusive of any other rights to which those seeking indemnification,
contribution or advancement of expenses may be entitled under any statute,
agreement, vote of disinterested Members or disinterested Managers or otherwise,
both as to action in an indemnified capacity and as to action in any other
capacity. The indemnification, contribution and advancement of expenses provided
by or granted pursuant to this Section shall continue as to a person who has
ceased to be an indemnified representative in respect of matters arising prior
to such time, and shall inure to the benefit of the heirs, executors,
administrators and personal representatives of such a person.
11.9 Reliance on Provisions. Each person who shall act as an indemnified
representative of the Company shall be deemed to be doing so in reliance upon
the rights of indemnification, contribution and advancement of expenses provided
by this Section.
12. DISSOLUTION AND TERMINATION.
12.1 Dissolution. The Company shall be dissolved upon the occurrence of any
of the following events (each, a "Dissolution Event"):
12.1.1 By the consent of all Members;
12.1.2 Upon the sale by the Company of all or substantially all of its
assets;
12.1.3 Upon the entry of a decree of judicial dissolution under
ss.18-802 of the Act; or
12.1.4 Upon exercise by the Other Members of their right under Section
12.2.3 to cause a liquidation of the Company.
12.2 Earlier Termination By Buyout. If, at any time during the Term of this
Agreement, any Member (the "Terminating Member") desires to terminate its
Interest in the Company, the Terminating Member shall so notify the other Member
(the "Other Member"), and the following options (the "Buyout Options") shall be
pursued in the following manner and order:
12.2.1 Procedure. The Terminating Member may elect to first proceed
under Buyout Option #1. If pursuit of Buyout Option #1 fails to terminate a
Member's Interest in the Company and interest in this Agreement, the
Terminating Member may then next proceed under Buyout Option #2. Proceeding
under Buyout Option #2 will necessarily result in the termination of the
Terminating Member's Interest in the Company and its interest in this
Agreement, unless the Terminating Member does not give notice of the offer
referred to in the second sentence of Section 12.2.3 (which describes
Buyout Option #2) or does not complete its sale to a third party purchaser
within the 90 day time period specified in Section 12.2.3 In the event such
notice is not so given or such sale is not completed within the 90 day time
period, then at the expiration of the one-year period, the Buyout Options
shall again be available to any Member in the manner specified in this
Section 12.2.
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12.2.2 Buyout Option #1: Among the Members. The Terminating Member
shall negotiate in good faith with the Other Member to sell not less than
all the Terminating Member's Interest in the Company to the Other Member,
or to buy not less than all the Other Member's Interest in the Company, at
a price and on terms to be mutually agreed upon. This Buyout Option shall
continue to be available to the Terminating Member until the occurrence of
either of the following: (i) negotiations have not commenced or, if
commenced, have not resulted in a written agreement signed by all parties
within 120 days following the Terminating Member's notice described above;
or (ii) all of the Members mutually agree in writing to omit this Buyout
Option. Upon the cessation of availability of this Buyout Option, the
Terminating Member may then elect to proceed under Buyout Option #2. If the
Terminating Member and Other Member agree to a buyout under this Section
12.2.2, the Interest of the Terminating Member in the Company and its
interest in this Agreement will terminate upon the closing of such buyout
or as otherwise provided in the buyout agreement.
12.2.3 Buyout Option #2: Terminating Member's Offer and Liquidation
Right. The Terminating Member may, subject to this Section 12.2.3, seek a
third party purchaser of not less than all of its Interest in the Company.
The Terminating Member shall first offer to sell not less than all of its
Interest in the Company to the Other Member on the terms and conditions set
forth in such offer ("Offer Terms"). The Other Member shall have the
option, exercisable by notice to the Terminating Member given within 60
days after receipt of the Offer Terms, to purchase the Terminating Member's
Interest on the Offer Terms ("Purchase"). If the Other Member accepts such
offer, the Interest of the Terminating Member in the Company and its
interest in the Agreement will terminate upon the closing of the Purchase.
If the Other Member does not exercise its Purchase option, the Terminating
Member shall have the right to sell not less than all of its Interest in
the Company to a third party on terms and conditions no more favorable to
the third party than the Offer Terms within 90 days after the expiration of
such 60 day period, provided that the Other Member shall have the right,
exercisable by notice to the Terminating Member given within 15 days after
the expiration of such 60-day period, to cause a liquidation of the Company
pursuant to Section 12.7. This Buyout Option shall continue to be available
to the Terminating Member until the occurrence of any of the following: (i)
the Terminating Member has not completed its sale to a third party
purchaser within the specified 90 day time period; (ii) the Other Member
has exercised its right to cause a liquidation of the Company; (iii) the
parties have agreed to the Offer Terms; or (iv) all of the Members agree in
writing to omit this Buyout Option #2.
12.3 Earlier Termination for Cause: Breach.
12.3.1 Grounds. Any Member shall have the right to terminate another
Member's rights and Interest in the Company on 45 days written notice, if
it so elects, in the event the other Member commits a material breach of
any of its obligations under this Agreement, and has not cured such breach
within 90 days after such notice is given or, if such breach is not
susceptible of cure within such period, has not commenced and continued
appropriate steps within such period to cure such breach as soon as
practicable.
12.3.2 Procedure by Forced Sale. In the event the non-breaching Member
elects to terminate the breaching Member's right and Interest in the
Company pursuant to this Section 12.3.2, it shall have the right to require
the breaching Member to sell its entire Interest in the
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Company to it at a price equal to product of the book value of the tangible
assets of the Company multiplied by the breaching Member's Percentage
Interest, less the cost of curing the breach, but in no event less than
zero.
12.3.3 Preservation of Remedies. Nothing in this Section 12.3.3 is
intended to preclude or in any way restrict any other action for damages
and/or injunctive relief which may be available to the non-breaching Member
or to the Company against the breaching Member.
12.3.4 Payment for Breaching Member's Interest. In the event the
breaching Member's rights and Interest in the Company are terminated
pursuant to this Section 12.3.4, no payment shall be made by the
non-breaching Member to the breaching Member for the latter's Interest in
the Company until all contractual obligations of the breaching Member to
the Company have been fully performed.
12.3.5 No Waiver. Failure of the non-breaching Member to elect to
terminate the other Member's rights and Interest in the Company in the
event of a material breach by the other Member shall not constitute a
waiver by the non-breaching Member of its right to terminate the other
Member's rights and Interest in the Company in the event of any subsequent
material breach by the other Member.
12.4 Closing of Buyout or Termination. The place of the closing of any sale
under this Section 12 shall be the principal office of the purchaser or as
otherwise mutually agreed by the Members. The date of such closing (the
"Termination Closing Date") shall be as mutually agreed upon but in no event
shall such date be later than 30 days after the date the Other Member has
exercised its right to purchase the Interest of the Terminating Member or as
otherwise agreed in the agreement of sale executed by the Terminating Member and
the purchaser subject only to such extension of the Termination Closing Date as
the parties may agree upon in order to finalize the transaction.
12.5 Transfer of Interest, Properties and Rights. All Interests, properties
and rights to be transferred pursuant to this Section 12 shall be transferred by
proper bills of sale and other instruments of conveyance, assignment,
endorsement or transfer. From time to time after such sale, the selling Member,
without the payment of any further consideration by the buying Member, shall
execute and deliver such further instruments of conveyance, assignment and
transfer and take such other action as counsel for the buying Member may
reasonably request in order to convey and transfer more effectively such
property and rights. The buying Member or Company, as applicable, shall be
responsible for the payment of taxes, filing fees and other related charges
(other than seller's attorneys' fees, seller's income taxes, sales taxes, and
appraisal fees incurred pursuant to Section 12.2.3) resulting from any transfer
pursuant to this Section 12.
12.6 Activities of the Company Pending Liquidation. Upon the occurrence of
a Dissolution Event, the continuing operation of the Company's business shall be
confined to those activities reasonably necessary to wind up the Company's
affairs, discharge its obligations, and preserve and distribute its assets.
12.7 Winding Up and Liquidation.
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12.7.1 Upon dissolution of the Company, the Management Committee or a
liquidator or liquidating committee selected by the Management Committee
(the "Liquidator") shall be responsible for the winding up of the affairs
of the Company and the distribution of its assets. In connection with a
winding up of the affairs of the Company, the Liquidator shall cause an
accounting to be made of the assets and liabilities of the Company. If any
liability is contingent or uncertain in amount, a reserve will be
established in such amount as the Liquidator deems reasonably necessary.
Upon satisfaction or other discharge of such contingency, the amount of the
reserve not required, if any, will be distributed as provided in this
Section 12.7.
12.7.2 The Liquidator shall be entitled to receive such compensation
for its services as may be approved by the Management Committee. The
Liquidator shall agree not to resign at any time without fifteen (15) days'
prior written notice and may be removed at any time, with or without cause,
by notice of removal signed by the Management Committee. Upon dissolution,
removal or resignation of the Liquidator, a successor and substitute
Liquidator (who shall have and succeed to all rights, powers and duties of
the original Liquidator) shall within thirty (30) days thereafter be
selected by the Management Committee. The right to appoint a successor or
substitute Liquidator in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidator are
authorized to continue under the provisions hereof, and every reference
herein to the Liquidator will be deemed to refer also to any such successor
or substitute Liquidator appointed in the manner herein provided. Except as
expressly provided in this Section 12, the Liquidator appointed in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the Members, all of the powers conferred
upon the Liquidator under the terms of this Agreement (but subject to all
of the applicable limitations, contractual and otherwise, upon the exercise
of such powers) to the extent necessary or desirable in the good faith
judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to
complete the winding up and liquidation of the Company as provided for
herein.
12.7.3 The Liquidator shall liquidate the assets of the Company and
apply and distribute the proceeds of such liquidation in the order of
priority set forth in Section 12.8, unless otherwise required by mandatory
provisions of applicable law.
12.7.4 The Liquidator shall be authorized to sell any, all or
substantially all of the assets of the Company for deferred payment
obligations, and to hold, collect and otherwise administer any such
obligations or any other deferred payment obligations held or acquired as
assets of the Company.
12.7.5 A reasonable time, including, without limitation, any time
required to collect deferred payment obligations, shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to enable the Liquidator to reasonably
minimize any losses attendant upon the liquidation.
12.8 Distribution of Assets.
12.8.1 In the event of a dissolution of the Company, upon the winding
up of the Company, its assets shall be distributed in the following manner
and order of priority:
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12.8.1.1 First, to creditors, including without limitation
Members and Managers who are creditors, to the extent otherwise
permitted by law, in satisfaction of liabilities of the Company
(whether by payment or the making of reasonable provision for payment
thereof) other than liabilities for which reasonable provision for
payment has been made;
12.8.1.2 Second, to the establishment of any reserves as the
Liquidator may deem reasonably necessary for contingent, conditional
or unmatured claims or obligations of the Company arising out of or in
connection with the Company or its liquidation. Such reserves shall be
held by the Liquidator for the purpose of disbursing such reserves in
payment of any of the aforementioned contingencies, and, as soon as
practicable, to distribute the balance thereafter remaining in the
manner provided in the following subdivisions of this Section 12.8;
and
12.8.1.3 Third, to the Members in proportion to the positive
balances of their respective Capital Accounts, as determined after
taking into account all adjustments to such Capital Accounts for the
Fiscal Year of the Company during which such distribution occurs as
promptly as practicable, but in any event within the time required by
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2).
12.8.2 The Company following dissolution shall pay or make reasonable
provision to pay all claims and obligations, including all contingent,
conditional or unmatured claims and obligations, known to the Company and
all claims and obligations which are known to the Company but for which the
identity of the claimant is unknown. If there are sufficient assets, such
claims and obligations shall be paid in full and any such provision for
payment made shall be made in full. If there are insufficient assets, such
claims and obligations shall be paid or provided for according to their
priority and, among claims and obligations of equal priority, ratably to
the extent of assets available therefor. Any remaining assets shall be
distributed as provided in Subsection 12.8.1. Any Liquidator winding up the
affairs of the Company who has complied with this Section shall not be
personally liable to the claimants of the dissolved Company by reason of
such person's actions in winding up the Company.
12.9 Cancellation of Certificate. The Certificate of the Company shall be
canceled upon the dissolution and the completion of winding up of the Company.
13. COVENANTS NOT TO COMPETE.
13.1 Mutual Covenant Not to Compete. Each of Neose and MSPC agrees that,
while it is a Member, neither it nor any of its direct or indirect subsidiaries
will, directly or indirectly, engage in, have any equity or profit interest in,
make any loan to or for the benefit of, guaranty the repayment of any funds by,
or render services to, or license any Information to, any business conducting
operations in the Territory which are competitive with the business activities
of the Company, including without limitation the development, production and
commercialization of products in the Field, provided that nothing herein shall
be deemed to prohibit either Neose or MSPC from buying compounds from a third
party not then produced by the Company.
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13.2 Covenants Not to Compete Upon Sale or Termination. Any Member selling
its Interest in the Company and its interest in this Agreement under Section
12.2 or 12.3 will not, for a period of 5 years from the date of such sale or
termination, directly or indirectly, engage in, have any equity or profit
interest in, make any loan to or for the benefit of, guaranty the repayment of
any funds by, or render services to, or license any Information to, any business
conducting operations in the Territory which are competitive with the business
activities of the Company, including without limitation the development,
production and commercialization of products in the Field as the Field exists on
the date of sale or termination.
14. BOOKS; REPORTS TO MEMBERS; TAX ELECTIONS.
14.1 Books and Records.
14.1.1 The Company shall maintain separate books of account which
shall show a true and accurate record of all costs and expenses incurred,
all charges made, all credits made and received and all income derived in
connection with the conduct of the Company and the operation of its
business, and, to the extent inconsistent therewith, in accordance with
this Agreement.
14.1.2 Except as and until otherwise required by the Code, the books
of the Company shall be kept in accordance with the accrual method of
accounting.
14.1.3 Each Member of the Company has the right, subject to such
reasonable standards (including standards governing what information and
documents are to be furnished at what time and location and at whose
expense) as may be established by the Management Committee, to obtain from
the Company from time to time upon reasonable demand for any purpose
reasonably related to the Member's Interest as a Member of the Company:
14.1.3.1 True and full information regarding the status of the
business and financial condition of the Company;
14.1.3.2 Promptly after they become available, a copy of the
federal, state and local income tax returns for each year of the
Company;
14.1.3.3 A current list of the name and last known business,
residence or mailing address of each Member and Manager;
14.1.3.4 A copy of this Agreement, the Certificate and all
amendments thereto;
14.1.3.5 True and full information regarding the amount of cash
and a description and statement of the agreed value of any other
property or services contributed by each Member and which each Member
has agreed to contribute in the future, and
14.1.3.6 Other information regarding the affairs of the Company
as is just and reasonable.
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14.1.4 Each Manager shall have the right to examine all of the
information described in Subsection 14.1.3 of this Section for a purpose
reasonably related to its position as a Manager.
14.1.5 The Management Committee of the Company shall have the right to
keep confidential from the Members, for such period of time as the
Management Committee deems reasonable, any information which the Management
Committee reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Management Committee in good faith
believes is not in the best interest of the Company or could damage the
Company or its business or which the Company is required by law or by
agreement with a third party to keep confidential.
14.1.6 The Company may maintain its records in other than a written
form if such form is capable of conversion into written form within a
reasonable time.
14.1.7 Any demand by a Member under this Section shall be in writing
and shall state the purpose of such demand.
14.2 Tax Information. Within ninety (90) days after the end of each Fiscal
Year, the Company shall supply to each Member all information necessary and
appropriate to be included in each Member's income tax returns with respect to
that Fiscal Year.
14.3 Annual Reports. Within ninety (90) days after the end of each Fiscal
Year, the Company shall cause to be prepared, and each Member furnished with,
financial statements accompanied by a report thereon of the Company's
accountants stating that such statements are prepared and fairly stated in all
material respects in accordance with GAAP, and, to the extent inconsistent
therewith, in accordance with this Agreement, including the following:
14.3.1 A copy of the balance sheet of the Company as of the last day
of such Fiscal Year;
14.3.2 A statement of income or loss for the Company for such Fiscal
Year; and
14.3.3 A statement of the Members' Capital Accounts, changes thereto
for such Fiscal Year and Percentage Interests at the end of such Fiscal
Year.
14.4 Monthly Reports. Within ten (10) days after the end of each month, the
Company shall cause to be prepared, and each Member furnished with, unaudited
financial statements of the Company prepared in accordance with GAAP, and, to
the extent inconsistent therewith, in accordance with this Agreement, including
the following:
14.4.1 A copy of the balance sheet of the Company as of the last day
of such month;
14.4.2 A statement of income or loss for the Company for such month;
and
14.4.3 A statement of the Members' Capital Accounts, changes thereto
for such Fiscal Year and Percentage Interests at the end of such month.
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14.5 Tax Matters Member.
14.5.1 The Management Committee shall, from time to time, appoint a
"Tax Matters Member" within the meaning of Section 6231(a)(7) of the Code
for so long as it is not the subject of bankruptcy or similar proceedings
and otherwise is entitled to act as the Tax Matters Member. The initial Tax
Matters Member shall be MSPC. The Tax Matters Member may file a designation
of itself as such with the IRS. The Tax Matters Member shall (i) furnish to
each Member affected by an audit of the Company income tax returns a copy
of each notice or other communication received from the IRS or applicable
state authority, (ii) keep each Member informed of any administrative or
judicial proceeding, as required by Section 6223(g) of the Code, and (iii)
allow each Member an opportunity to participate in all such administrative
and judicial proceedings. The Tax Matters Member shall take such action as
may be reasonably necessary to constitute the other Member a "notice
Member" within the meaning of Section 6231(a)(8) of the Code, provided that
the other Member provides the Tax Matters Member with the information that
is necessary to take such action.
14.5.2 The Company shall not be obligated to pay any fees or other
compensation to the Tax Matters Member in its capacity as such. However,
the Company shall reimburse the expenses (including without limitation
reasonable attorneys' and other professional fees) incurred by the Tax
Matters Member in such capacity. Each Member who elects to participate in
Company administrative tax proceedings shall be responsible for its own
expenses incurred in connection with such participation. In addition, the
cost of any adjustments to a Member and the cost of any resulting audits or
adjustments of a Member's tax return shall be borne solely by the affected
Member.
14.5.3 The Company shall indemnify and hold harmless the Tax Matters
Member from and against any loss, liability, damage, cost or expense
(including without limitation reasonable attorneys' fees) sustained or
incurred as a result of any act or decision concerning Company tax matters
and within the scope of such Member's responsibilities as Tax Matters
Member, so long as such act or decision was not the result of gross
negligence, fraud, bad faith or willful misconduct by the Tax Matters
Member. The Tax Matters Member shall be entitled to rely on the advice of
legal counsel as to the nature and scope of its responsibilities and
authority as Tax Matters Member, and any act or omission of the Tax Matters
Member pursuant to such advice shall in no event subject the Tax Matters
Member to liability to the Company or either Member.
14.6 Tax Audits/Special Assessments. If the federal tax return of either
the Company or an individual Member with respect to an item or items of Company
income, loss, deduction, etc., potentially affecting the tax liability of the
Members generally is subject to an audit by the IRS, the Management Committee
may, in the exercise of their business judgment, determine that it is necessary
to contest proposed adjustments to such return or items. If such a determination
is made, the Management Committee will finance the contest of the proposed
adjustments out of the Net Cash Flow.
14.7 Tax Elections. The Company will elect to amortize organizational
costs. In the event of the distribution of property, upon the transfer of an
Interest in the Company or the issuance of an Interest in the Company to a new
Member, the Company shall, at the request of the transferor Member, file an
election, in accordance with applicable Treasury Regulations, to cause the
basis of
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the Company's property to be adjusted for federal income tax purposes as
provided by Sections 734, 743 and 754 of the Code. The determination whether to
make and file any such election shall be made by the Management Committee in
their sole discretion.
15. CONFIDENTIALITY.
15.1 Non-disclosure. Each Member agrees to keep the other Member's
Information and the Company's Information in strict confidence and not to
disclose or otherwise use the other Member's Information or the Company's
Information for any purpose other than for purposes of the Company. The Company
agrees to keep the Members' Information and Company's Information in strict
confidence and not to disclose or otherwise use such Information for any purpose
other than for purposes of the Company. Accordingly, each Member and the Company
agree to treat the Information which it receives as it would its own proprietary
Information and to take all reasonable precautions to prevent the unauthorized
disclosure to any third party of the Information which it receives hereunder;
provided, however, that nothing herein shall prevent either Member from
disclosing the other Member's Information to an Affiliate; further provided that
the Affiliate accepts the Information under the same obligations as stated
herein.
15.2 Procedure to Deem Confidential. In order to be deemed confidential,
the Information shall be supplied to the receiving Member in written form and
identified as being confidential or, if disclosed orally, shall be confirmed in
writing within thirty (30) days of its oral disclosure. All such Information
properly identified as confidential shall at the disclosing Member's request be
returned to it except that one (1) copy shall be retained by counsel for the
receiving Member to ensure compliance hereunder. The foregoing procedure shall
also apply to all Information exchanged by the parties prior to the execution of
this Agreement, to which Information this Section 15 shall also apply.
15.3 Exceptions. The above notwithstanding, the receiving Member's
obligation of confidence with respect to the Information disclosed hereunder
shall not include:
(a) Information which, at the time of disclosure to the receiving
Member is published, known publicly or is otherwise in the public domain;
(b) Information which, after disclosure to the receiving Member is
published or becomes known publicly or otherwise becomes part of the public
domain, through no fault of the receiving Member;
(c) Information which, prior to the time of disclosure to the
receiving Member, is known to the receiving Member, as evidenced by its
written records;
(d) Information which has been or is disclosed to the receiving Member
in good faith by a third party who was not, or is not, under any obligation
of confidence or secrecy to the other Member at the time said third party
discloses to the receiving Member and without requiring any further
restrictions on disclosure; and
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(e) Information which is independently developed by or on behalf of
the receiving Member, without reliance on the Information received
hereunder.
15.4 Public Disclosure. Except as permitted under Section 18.10, the above
provisions notwithstanding, each Member agrees to keep in strict confidence and
not to disclose the identity, interest and participation of the other Member in
the Company or any of the material terms of this Agreement.
15.5 No Third Party Obligations. Each Member represents that it is under no
obligation to any third party that would interfere with its disclosing
Information to the other Member and, further, that any Information which it
transmits or has transmitted or otherwise discloses or has disclosed to the
other party is not Information with respect to which the disclosing party is
under any obligation to keep confidential or which the disclosing party knows to
be the proprietary property of any third party.
15.6 No Right or License. No right or license to use any Information
disclosed hereunder, either express or implied, is granted by either party to
this Agreement, other than the right to use such Information for the parties'
own activities in furtherance of the activities of the Company.
15.7 Duration. The obligations of confidentiality and nonuse set forth
herein shall remain in effect for five (5) years after the termination of this
Agreement.
16. DISPUTE RESOLUTION.
16.1 Arbitration. Any controversy, dispute or claim among the parties
arising out of or relating to (i) the validity, inducement or breach of or the
interpretation of any provision of this Agreement, (ii) the interpretation or
application of law, or (iii) the ownership of any intellectual property that
cannot be amicably settled by the parties, shall be decided by arbitration in
accordance with the rules of the American Arbitration Association for Commercial
Arbitration in effect at the time the dispute arises, unless the parties hereto
mutually agree otherwise. To the extent such rules are inconsistent with this
provision, this provision will control.
16.1.1 Any demand for arbitration must be made in writing to the other
party.
16.1.2 There will be a panel of three arbitrators, one selected by
MSPC, one selected by Neose, and one selected by mutual agreement of the
arbitrators selected by MSPC and Neose. If the arbitrators selected by MSPC
and Neose cannot agree on a third arbitrator within thirty (30) days, then
the American Arbitrators Association ("AAA") shall select the third
arbitrator. Any arbitration involving patent rights, other intellectual
property rights or intellectual property shall be heard by arbitrators who
are experts in such areas. Otherwise, the arbitrator shall be (i) an
attorney specializing in corporate and finance law or business litigation
who has at least 15 years of experience with a law firm of over 25 lawyers
or (ii) a former judge of a court of general jurisdiction.
16.1.3 The arbitration shall be held in Wilmington, Delaware, or such
other place as the parties agree. The arbitrators shall apply the
substantive law of Delaware, without regard to conflicts of laws and except
that the interpretation and enforcement of this arbitration provision shall
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be governed by the Federal Arbitration Act. Within thirty (30) days after
initiation of arbitration, the parties shall reach agreement upon and
thereafter follow procedures assuring that the arbitration will be
concluded and the award rendered within no more than six months from
selection of the arbitrator. Failing such agreement, the AAA will design
and the parties will follow such procedures. The arbitrators shall render a
written opinion setting forth findings of fact and conclusions of law.
16.1.4 Except as provided in Section 16.1.5, neither party shall have
the right independently to seek recourse from a court of law or other
authorities in lieu of arbitration, but each party has the right before or
during the arbitration to seek and obtain from the appropriate court
provisional remedies to avoid irreparable harm, maintain the status quo or
preserve the subject matter of the arbitration. There shall be a
stenographic record of the proceedings. The decision of the arbitrators
shall be made by majority vote and shall be final and binding upon both
parties. The arbitrators shall render a written opinion setting forth
findings of fact and conclusions of law.
16.1.5 The parties hereby consent to the jurisdiction of the Federal
District Court for the District of Delaware for the enforcement of these
provisions and the entry of judgment on any award rendered hereunder. If
the arbitrators' award exceeds $5,000,000, the court may, upon motion of a
party, vacate, modify or correct any award but only to the extent the
arbitrators' findings of fact or conclusions of law are clearly erroneous.
It is the intention of the parties that the court shall undertake the same
review as if it were a Federal appellate court reviewing a district court's
findings of fact and conclusions of law rendered after a bench trial.
Should such court for any reason lack jurisdiction, any court with
jurisdiction shall enforce this Section and enter judgment on any award.
16.1.6 Reasonable expenses of the arbitration shall be borne equally
by the parties. Each party shall bear the expenses of its counsel and other
experts.
16.1.7 EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY
JURY. THE ARBITRATOR SHALL NOT AWARD ANY PARTY PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
TO SEEK SUCH DAMAGES, PROVIDED THAT A PARTY MAY BE AWARDED CONSEQUENTIAL
DAMAGES FROM THE OTHER IF THE FORSEEABILITY AND AMOUNT OF SUCH DAMAGES ARE
PROVEN BY CLEAR AND CONVINCING EVIDENCE.
16.2 Disputes. To the extent that any dispute or difference arises between
the parties or between a party and the Company during the Term of this
Agreement, other than a dispute or difference subject to Section 16.1, then the
dispute shall be referred for resolution, if possible, to the Chief Executive
Officer of Neose and the President of MSPC.
17. INVESTMENT REPRESENTATION.
17.1 Investment Purpose. Each Member represents and warrants to the Company
and to each other Member that it has acquired the Interest in the Company for
such Member's own account, for investment only and not with a view to the
distribution thereof, except to the extent provided in or contemplated by this
Agreement.
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17.2 No Registration. The Interests in the Company have not been registered
with the Securities and Exchange Commission under the 1933 Act or under similar
laws of any states in reliance upon exemptions under those acts. The sale or
other disposition of the Interests in the Company is restricted as provided in
this Agreement.
18. MISCELLANEOUS.
18.1 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. If a
Member who is an individual dies or a court of competent jurisdiction adjudges
him to be incompetent to manage his person or his property, the executor,
administrator, guardian, conservator or other legal representative of the Member
may exercise all of the rights of the Member for the purpose of settling such
Member's estate or administering such Member's property, including the power the
Member had to give an assignee the right to become a Member. If a Member is a
corporation, trust or other entity and is dissolved or otherwise terminated, the
powers of that Member may be exercised by its legal representatives or
successors. The successor of a Member shall succeed to the right of the Member
to receive allocations and distributions hereunder, and may be admitted as a
Member in accordance with the provisions of Section 10.2, but shall not be
deemed a Member, and shall not be entitled to voting rights hereunder, unless
and until so admitted.
18.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto concerning the subject matter hereof and any
representation, promise or condition in connection therewith, not incorporated
herein, shall not be binding upon either party. Before signing this Agreement
the parties have had numerous conversations, including preliminary discussions,
formal negotiations and informal conversations at meals and social occasions,
and have generated correspondence and other writings, in which the parties
discussed the transaction which is the subject of this Agreement and their
aspirations for success. In such conversations and writings, individuals
representing the parties may have expressed their judgments and beliefs
concerning the intentions, capabilities, and practices of the parties, and may
have forecasted future events. The parties recognize that such conversations and
writings often involve an effort by both sides to be positive and optimistic
about the prospects for the transactions. However, it is also recognized, that
all business transactions contain an element of risk, as does the transaction
contemplated by this Agreement, and that it is normal business practice to limit
the legal obligations of contracting parties to only those promises and
representations which are essential to their transaction so as to provide
certainty as to their respective future rights and remedies. Accordingly, this
Agreement is intended to define the full extent of the legally enforceable
undertakings of the parties hereto, and no promise or representation, written or
oral, which is not set forth explicitly in this Agreement is intended by either
party to be legally binding. This Agreement expressly supersedes that certain
Confidential Disclosure Agreement effective as of September 12, 1996 between the
parties and the Joint Development Agreement. Both parties acknowledge that in
deciding to enter into this Agreement and to consummate the transaction
contemplated hereby neither has relied upon any statements or representations,
written or oral, other than those explicitly set forth herein.
18.3 Amendments. The Certificate and this Agreement may not be amended
except by the written agreement of all of the Members.
44
<PAGE>
18.4 Choice of Law. Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Delaware (without regard to any conflicts of law principles.) Each of the
Members hereby expressly submits itself generally and unconditionally to the
personal jurisdiction of any United States or state court for any matter not
resolved pursuant to Section 16 hereof.
18.5 Notices. Except as otherwise provided in this Agreement, any notice,
demand or communication required or permitted to be given by any provision of
this Agreement shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if delivered personally or sent by facsimile
transmission (with answer back received) or overnight express to the party or to
an executive officer of the party to whom the same is directed or, if sent by
registered or certified mail, postage and charges prepaid, addressed to the
Member's address:
Neose Technologies, Inc.
102 Witmer Road
Horsham, PA 19044
McNeil Speciality Products Company
c/o McNeil PPC, Inc.
501 George Street
New Brunswick, NJ 08933
and to the Company at its principal place of business, or at such other address
as a Member may direct in writing.
18.6 Headings. The headings of the Sections of this Agreement are for
convenience of reference only and are not to be considered in construing the
terms and provisions of this Agreement.
18.7 Pronouns. All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
18.8 Waivers. The failure of any party to seek redress for violation of or
to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, that would have originally
constituted a violation, from having the effect of an original violation.
18.9 Severability. If any provision of this Agreement or its application to
any person or circumstance shall be invalid, illegal or unenforceable to any
extent, the remainder of this Agreement and its application shall not be
affected and shall be enforceable to the fullest extent permitted by law.
18.10 Publicity. No press release or other public announcement related to
this Agreement or the Company or the transactions contemplated hereby shall be
issued by any Member without the prior approval of the Management Committee,
except that any Member may make such public disclosure which it believes in good
faith to be required by law or by the terms of any listing
45
<PAGE>
agreement with a securities exchange (in which case such Member shall make a
reasonable effort to consult with the Members prior to making such disclosure).
18.11 No Third Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any person other than
the Members and their respective successors and assigns.
18.12 Interpretation. It is the intention of the Members that, during the
term of this Agreement, the rights of the Members and their
successors-in-interest shall be governed by the terms of this Agreement, and
that the right of any Member or successor-in-interest to assign, transfer, sell
or otherwise dispose of any Interest in the Company shall be subject to
limitations and restrictions set forth in this Agreement.
18.13 Further Assurances. Each Member shall execute all such certificates
and other documents and shall do all such other acts as the Management Committee
may reasonably deem appropriate to comply with (a) the requirements of law for
the formation of the Company, (b) any laws, rules, Treasury Regulations and
third-party requests relating to the acquisition, operation or holding of the
property of the Company or (c) the intent and purposes of this Agreement.
18.14 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument. This Agreement may be signed and
delivered to the other party by facsimile transmission and such transmission
shall be deemed to be a valid signature.
18.15 Survival of Rights and Obligations. In the event of a termination of
this Agreement, the rights and obligations of the parties during the Term of
this Agreement under Sections 7.5, 7.9, 8, 11, 12.5, 12.6, 12.7, 12.8, 12.9, 13,
14, 15, 16 and 18.4 shall survive and continue in full force and effect.
18.16 Representations and Warranties. Each party represents and warrants to
the other party that as of the date of this Agreement, (a) it has the legal
right and authority to extend the rights granted in this Agreement, (b) it has
the legal right and authority to enter into this Agreement and to perform all of
its obligations hereunder; (c) all consents, approvals and authorizations of all
governmental authorities and other persons required to be obtained by such party
in connection with this Agreement and its responsibilities and activities
hereunder have been obtained; (d) its execution, delivery and performance of
this Agreement does not and will not (i) conflict with, or constitute a
breach or default under, or require the consent of any third party under, its
charter documents or any material license, loan or other agreement, contract,
commitment or instrument to which it is a party or by which any of its assets
are bound or (ii) violate any provision of law, statute, rule or regulation or
any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body; (e) when executed by both
parties, this Agreement will constitute the valid and legally binding obligation
of such party and shall be enforceable against such party in accordance with its
terms; (f) it has not previously granted, and during the term of this Agreement
will not make any commitment of, or grant, any rights which in any way conflict
with the rights granted herein; and (g) there are no existing or threatened
actions, suits or claims pending or, to the best of its
46
<PAGE>
knowledge, threatened against it that may affect the performance of its
obligations under this Agreement.
[Remainder of page intentionally left blank.]
47
<PAGE>
IN WITNESS WHEREOF, the undersigned Members, intending to be legally bound,
have executed this Agreement as of the date first above written.
NEOSE TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
MCNEIL SPECIALITY PRODUCTS COMPANY
By:
--------------------------------
Name:
Title:
48
<PAGE>
EXHIBIT 6.1
CAPITAL CONTRIBUTIONS
A. Simultaneously with the execution of this Agreement, Neose has made the
following Capital Contributions:
<TABLE>
<S> <C>
1. [*] Costs under the Joint Development Agreement................... $ [*]
----------
2. [*] costs expended under the Joint Development Agreement.......... [*]
---------
Total Capital Account of Neose.................................... 2,401,334
---------
B. Simultaneously with the execution of this Agreement, MSPC has made the
following Capital Contributions:
1. [*] Costs under the Joint Development Agreement................... $ [*]
----------
2. [*] costs expended under the Joint Development Agreement.......... [*]
----------
Total Capital Account of MSPC..................................... [*]
----------
</TABLE>
C. The Members will make additional Capital Contributions as follows:
1. Neose will contribute as Capital Contributions 15% of the
[*] costs of the Company as set forth in the Construction Budget, up
to a maximum of $1,850,000 ($3 million less amounts already credited
in A.2.). MSPC will contribute as Capital Contributions 85% of the [*]
costs of the Company as set forth in the Construction Budget, up to a
maximum of $15,850,000 ($17 million less amounts previously credited in
B.2.).
Such Capital Contributions will be made in accordance with the timetable
unanimously approved by the Management Committee.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
49
<PAGE>
EXHIBIT 1.49
MSPC PATENT RIGHTS
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
50
<PAGE>
EXHIBIT 1.56
NEOSE PATENT RIGHTS
Neose-owned and Neose-licensed patents and patent applications that are relevant
to the Field.
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
8. [*]
9. [*]
10. [*]
11. [*]
12. [*]
13. [*]
14. [*]
15. [*]
16. [*]
17. [*]
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
51
<PAGE>
18. [*]
19. [*]
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
52
<PAGE>
EXHIBIT 7.1
JOINT PATENT RIGHTS
1. [*]
2. [*]
3. [*]
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
53
Exhibit 99.3
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND SUCH PORTIONS HAVE BEEN
FILED WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
COLLABORATION AND LICENSE AGREEMENT
This Agreement is entered into as of this 3rd day of November, 1999, by and
between American Home Products Corporation, and/or its affiliates, organized
under the laws of the state of Delaware, having its principal place of business
at Five Giralda Farms, Madison, New Jersey, 07940, U.S.A. acting through its
subsidiary company, Wyeth-Ayerst International Inc. division having an address
at P.O. Box 8299, Philadelphia, Pennsylvania 19101 (hereinafter "Wyeth-Ayerst")
and Neose Technologies, Inc., organized under the laws of the State of Delaware
having its principal place of business at 102 Witmer Road, Horsham,
Pennsylvania, 19044 (hereinafter "Neose").
WITNESSETH
WHEREAS, Neose has expertise in the production and isolation of
oligosaccharides, including [*];
WHEREAS, Wyeth-Ayerst has expertise in the formulation and manufacture of
milk-based compositions, including, but not limited to, Pediatric Nutritional
Compositions;
WHEREAS, Neose is interested in conducting research relating to the process for
producing and/or isolating [*] or mixtures thereof;
WHEREAS, Wyeth-Ayerst is interested in obtaining from Neose compositions
containing [*] or mixtures thereof; and
WHEREAS, Neose is interested in supplying to Wyeth-Ayerst the compositions
containing [*] or mixtures thereof.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
premises, covenants and conditions contained in this Agreement, the Parties
agree as follows:
1. DEFINITIONS
1.1 "Affiliates" shall mean, in the case of either party, any corporation,
joint venture or other business entity which directly or indirectly
controls, is controlled by or is under common control with that party.
"Control" as used herein shall mean the ownership, directly or
indirectly, of fifty percent (50%) or more of the outstanding equity
securities of a corporation which is entitled to vote in the election
of directors, or a fifty percent (50%) or greater interest in the net
assets or profits of an entity which is not a corporation.
Notwithstanding the foregoing, for purposes of this Agreement, [*]
shall not be considered to be an Affiliate of Wyeth-Ayerst.
1.2 "Clinical Research Organization" shall mean Third Party organizations
contracted by Wyeth-Ayerst to manage the Clinical Studies hereunder.
1.3 "Clinical Studies" shall mean human clinical trials conducted with
Pediatric Nutritional Compositions
1.4 "Commercially Reasonable Efforts" shall mean efforts and resources
normally used by a party for a product owned by it or to which it has
rights, which is of similar market potential at a similar stage in its
product life, taking into account the competitiveness of the market
place, the proprietary position of the product, the regulatory
structure involved, the profitability of the products and other
relevant factors.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-2-
<PAGE>
1.5 "Covered Compound" shall mean pure [*] or a mixture of both or [*] in
accordance with the Specifications.
1.6 "Effective Date" shall mean the date upon which this Agreement is
executed by both parties.
1.7 "Field" shall mean the use of the Covered Compound in Pediatric
Nutritional Compositions, in both powder and liquid form.
1.8 "Final Product" shall mean the form of the Covered Compound that will
be used in toxicological or clinical testing as agreed to by the JDC.
1.9 "Final Report" shall mean the written, comprehensive final progress
report to be prepared by each party and detailing the results of the
activities it has conducted under the Research Program and which is
submitted to the other party within ninety (90) days after completion
of the Research Program. The Final Report shall set forth all data
relevant to the Research Program including, but not limited to, the
research results, supporting data and details of the achievement of
the objective of the Research Program.
1.10 "Good Manufacturing Practice" or "GMP" shall mean the current
standards for the manufacture of pharmaceuticals, as set forth in the
United States Federal Food, Drug and Cosmetics Act and applicable
regulations promulgated thereunder, as amended from time to time, and
such standards of good manufacturing practice as are required by the
European Union and other organizations and governmental agencies in
countries in which the Products are intended to be sold, to the extent
such standards are not inconsistent with United States GMP.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-3-
<PAGE>
1.11 "Guaranteed Minimum Supply" shall have the meaning set forth in
Section 7 hereof.
1.12 "Joint Development Committee" or "JDC" shall mean the committee
appointed by the parties as set forth in Section 2.
1.13 "Major Market" shall mean the following countries in the Territory:
[*]
1.14 "Manufacturing and Supply Agreement" shall have the meaning set forth
in Section 7 hereof.
1.15 "Master Regulatory Dossier" shall mean a dossier containing at least
the following documents: a free sale certificate; a GMP statement; a
statement of composition; finished product specifications; a
certificate of analysis; a stability report; medical/scientific
rationale; an authorization letter; labels; samples; lot code key;
license certification specifications; 100g/100ml statement; amino acid
composition statement; fat blend composition statement; methods of
analysis (raw and finished); Codex/EU compliance statement (if
necessary); expiration dating statement; packaging/container;
production flow and processing; "BSE-free" statement; pesticide
content; pricing certification; and country listing.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-4-
<PAGE>
1.16 "Neose Know-How" shall mean all proprietary technical information and
data relating to the process used by Neose for the production of
[*] in general and Covered Compound in particular, whether or not
covered by the Neose Patents and whether or not patentable, which is
owned or controlled by Neose and which is known as of the Effective
Date or which is developed or acquired by Neose in the conduct of the
Research Program or which is developed or acquired by Neose, subject
to the rights of Third Parties, whether now or hereafter existing,
outside of the Research Program during the term of this Agreement.
1.17 "Neose Patents" shall mean all patents or patent applications, in each
country of the Territory, and all divisionals, continuations,
continuations-in-part, reissues, reexaminations and foreign
counterparts thereof, owned by, licensed to or assigned to Neose or
jointly owned by (i) Neose and (ii) Wyeth-Ayerst or a Third Party,
existing as of the Effective Date or filed or issuing during the term
of this Agreement, at least one claim of which relates to Neose's
process for the manufacture of [*] and/or Covered Compound,
compositions containing [*] and/or methods of using [*]. Neose Patents
include, but are not limited to, the patents set forth in Exhibit A
and the patents set forth in Exhibit B originally assigned to Cytel
Corporation ("Cytel") and assigned to Neose pursuant to the terms of
the Asset Purchase Agreement between Neose and Cytel dated March 26,
1999.
1.18 "Neose Technology" shall mean all Neose Know-How and all Neose Patents
relating to Products, Covered Compound, [*], methods for the
manufacture of [*] and/or Covered Compound and methods of using [*].
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-5-
<PAGE>
1.19 "Net Sales" shall mean proceeds from sales of Products by
Wyeth-Ayerst, its Affiliates or sublicensees, as appropriate, to Third
Parties, less the sum of (a) and (b) where (a) is a provision,
determined under Generally Accepted Accounting Principles in the
United States, for (i) reasonable trade, cash and quantity discounts
or rebates (other than price discounts granted at the time of sale),
reasonable service allowances and reasonable required agent's
commissions, if any, allowed or paid, (ii) credits or allowances
actually given or made for rejection or return of, previously sold
products or for retroactive price reductions (including Medicare,
Medicaid, and/or discounts and similar types or rebates and/or
discounts), (iii) taxes, duties or other governmental charges levied
on or measured by the billing amount (excluding income and franchise
taxes), as adjusted for rebates and refunds, (iv) charges actually
incurred for freight and insurance directly related to the
distribution of Products (excluding amounts reimbursed by Third Party
customers), (v) bad debt actually written off by Wyeth in accordance
with Wyeth accounting policies, and (vi) credits or allowances
actually given or made for wastage replacement, and (b) is a periodic
adjustment of the provision determined in (a) to reflect amounts
actually incurred for (i), (ii), (iii), (iv) and (v). A "sale" of a
Product is deemed to occur upon the invoicing, or if no invoice is
issued, upon the earlier of shipment or transfer of title in the
Product to a Third Party. In the event that Product is sold or
distributed for use in combination with or as a component of another
product or products (a "Combination Product"), the calculation of Net
Sales from such Combination Product would be determined above by a
fraction, the numerator of which is the fair market value of the
Product in such Combination Product, and the denominator of which is
the fair market value of the Combination Product. In the event that
Wyeth-Ayerst would sell Product together with other products of
Wyeth-Ayerst to Third Parties, and the price attributable to the
Product is less than the average price of "arms length" sales to Third
Parties for the reporting period in which sales occur (such sales to
be excluded from the calculation of the average price of "arms length"
sales), Net Sales for any such sales would be average price of "arms
length" sales by Wyeth-Ayerst to Third Parties during the reporting
period in which such sales relate.
1.20 "Pediatric Nutritional Compositions" shall mean infant and pediatric
(up to 10 years of age) formulas, including but not limited to low
birth weight and premature infant formulas, pediatric medical foods
and meal replacement beverages, whether in powder or liquid form,
which are useful as a food, a source of nutrition, the sole source of
nutrition or as a nutritional supplement.
-6-
<PAGE>
1.21 "Product(s)" shall mean any Pediatric Nutritional Composition(s)
containing Covered Compound.
1.22 "Research Program" shall mean a program for the evaluation and
development of data relating to the preparation of Pediatric
Nutritional Compositions containing Covered Compound as defined in
Section 2 of this Agreement. A description of the Research Program as
proposed is set forth as Exhibit C to this Agreement. The Research
Program will be written and adopted by the JDC.
1.23 "Regulatory Approval" shall mean all authorizations by the competent
authorities which are required for the regular marketing, promotion,
pricing and sale of Covered Compound, [*] or Product in a given
country or regulatory jurisdiction.
1.24 "Regulatory Authority(ies)" shall mean any national, supranational
(e.g., the European Commision, the Council of the European Union or
the European Agency for the Evaluation of Medicinal Products),
regional, state or local regulatory agency, department, bureau,
commission, council or other governmental entity involved in the
granting of Regulatory Approval for the Product.
1.25 "Specifications" shall mean specifications for or concerning the
manufacture, testing, quality assurance and packaging of Covered
Compound as may be agreed upon by the parties from time to time,
provided however that such Specifications shall comply with all
applicable Regulatory Approvals for the manufacture and sale of
Covered Compound or Product.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-7-
<PAGE>
1.26 [*] shall mean [*].
1.27 "Territory" shall mean worldwide (excluding Japan).
1.28 "Third Party(ies)" shall mean any person(s) or entity(ies) other than
Wyeth-Ayerst, Neose or their respective Affiliates.
1.29 "Valid Claim" shall mean an unexpired claim of an issued patent
forming part of the Neose Patents, which claim has not been declared
invalid or unenforceable by a court or other tribunal of competent
jurisdiction.
1.30 "Wyeth-Ayerst Know-How" shall mean the proprietary technical and
clinical information, data and know-how relating to Pediatric
Nutritional Compositions owned or controlled by Wyeth-Ayerst, its
Affiliates, or licensed by a Third Party to Wyeth-Ayerst prior to or
during the term of this Agreement. Know-How shall include, without
limitation, all processes, formulas, discoveries and inventions
relating to biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, manufacturing, regulatory,
safety, quality control and clinical data.
1.31 "Wyeth-Ayerst Major Competitors": [*]
1.32 "$" shall mean United States dollars.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-8-
<PAGE>
2. COLLABORATION
2.1 General. The parties have agreed on a Research Program, a copy of
which is attached hereto as Exhibit A. Under the Research Program,
Wyeth-Ayerst shall conduct research and development activities
relating to the use of Covered Compound in Pediatric Nutritional
Compositions and Neose shall conduct research and development
activities relating to improving the methods for the production and/or
isolation of Covered Compound and optimization of the Covered Compound
for use in Pediatric Nutritional Compositions. The Research Program
shall include, but shall not be limited to, preclinical and clinical
studies necessary to demonstrate the safety and efficacy of Product.
The Research Program will commence on the Effective Date and will
terminate three (3) years thereafter if not earlier terminated in
accordance with any of the provisions set forth herein unless extended
upon the mutual agreement of the parties as set forth in writing.
2.1.1 Supply of Covered Compound. In order to further the progress of
the Research Program, Neose shall supply Wyeth-Ayerst with
Covered Compound containing at least [*] which meets the
Specifications during the course of the Research Program at no
cost to Wyeth-Ayerst. The date(s) for delivery of Covered
Compound to Wyeth-Ayerst shall be established by the JDC. If
Wyeth-Ayerst requires additional Covered Compound during the
course of the Research Program, the parties shall negotiate in
good faith to reach agreement on an appropriate compensation and
delivery schedule related thereto.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-9-
<PAGE>
2.2 Joint Development Committee. The parties agree that the Collaboration,
including the Research Program shall be managed by a Joint Development
Committee (the "JDC").
2.2.1 Composition. No later than thirty (30) days after the Effective
Date, each of the parties shall appoint two (2) representatives
to the JDC. The chairperson of the JDC will be one of the
Wyeth-Ayerst representatives. A party may change any of its
representatives at any time by giving notice to the other party.
2.2.2 Responsibilities. The JDC will:
(a) monitor the progress of and compliance with the Research
Program and approve any change in the Research Program;
(b) develop research protocols; and
(c) review and evaluate the results of the Research Program.
2.2.3 Meetings of the JDC. The chairperson of the JDC shall call
meetings when deemed appropriate, at mutually convenient times
on reasonable notice, currently anticipated to be no less
frequently
-10-
<PAGE>
than once every three (3) months. If possible, the meetings
shall be held in person, or otherwise by video or telephone
conference. When held in person the location of the meeting
shall alternate between Wyeth-Ayerst's facilities and Neose's
facilities. The chairperson shall prepare an agenda for the
meeting, and shall include in the agenda items proposed by
Neose's representatives. Additional participants may be invited
by any member to attend meetings where appropriate (e.g.,
outside consultants). Such additional participants shall have no
vote. Minutes of each meeting of the JDC shall be exchanged for
review and comment by the members. Thereafter, they shall be
signed by the chairperson and distributed to each of the
parties. Each party shall be responsible for the expense
incurred by its representatives in attending such meetings.
2.2.4 Voting. The JDC shall make decisions by majority vote, with at
least one consenting vote of each party's JDC members. If the
required majority decision cannot be found and all the members
of each party take the same opposing positions in a matter which
either party deems to be of importance, the matter shall be
handled pursuant to Section 2.2.6 hereof. Voting by proxy is
permissible. Urgent matters may be decided by unanimous vote of
the chairperson and a representative of Neose.
2.2.5 Role of Chairperson. Except as explicitly set forth herein, in
no event shall the chairperson of the JDC have any additional
power or responsibilities beyond those delegated to such person
by such person's membership on the JDC. Without limiting the
foregoing, it is understood that, except as a voting member of
the JDC, the chairperson shall not have the power to control or
dictate decisions or to veto any decisions reached by the
committee under the decision making process set forth in Section
2.2.4 hereof.
-11-
<PAGE>
2.2.6 Dispute Resolution. If the JDC is unable to resolve, after
thirty (30) days, a dispute regarding any issue presented to it
or arising in it, such dispute shall be referred to the
President of Neose and the President of Wyeth-Ayerst
Laboratories or his designee for good faith resolution, for a
period of ninety (90) days. If such dispute is not resolved by
the end of this ninety (90) day period, the parties shall be
free to pursue any legal or equitable remedy available to them.
2.3 Technology and Information Transfer. Neose agrees to supply
Wyeth-Ayerst with all Neose Technology required by Wyeth-Ayerst to
carry out its activities under the Research Program and to
manufacture, package, and obtain Regulatory Approval for Products.
Wyeth-Ayerst agrees to supply Neose with all Wyeth-Ayerst Know-How
necessary for Neose to carry out its activities under the Research
Program. All information transferred, provided or exchanged under this
Section 2.2 shall be subject to the confidentiality provisions of
Section 12 hereof.
2.4 Record Keeping. Each party shall maintain records in sufficient detail
and in good scientific manner as appropriate for Regulatory Approval
and patent purposes.
2.5 Reporting. Each party shall supply the other with a written report
summarizing its activities under the Research Program within thirty
(30) days after the end of each calendar quarter. Each party will
supply the other with a Final Report on the results of the Research
Program within ninety (90) days after completion of the Research
Program
2.6 Funding of the Research Program.
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<PAGE>
2.6.1 Funding. Wyeth-Ayerst shall pay Neose the sum of [*] per year,
payable quarterly, for a period not to exceed three (3) calendar
years, to begin on the Effective Date. The funds are to be used
by Neose to carry out its obligations under the Research Program
and for the development and optimization of a process for the
manufacture of Covered Compound, the isolation of Covered
Compound, the enhancement of Covered Compound for use by
Wyeth-Ayerst in Pediatric Nutritional Compositions and any other
expenses, except for capital expenditures, incurred by Neose in
carrying out the Research Program.
2.6.2 Reconciliation. Within thirty (30) days after the end of each
calendar year during the three (3) year period beginning January
1, 2000, Neose shall submit to Wyeth-Ayerst a report setting
forth under Generally Accepted Accounting Principles in the
United States, the total expenses incurred by Neose during the
previous calendar year in performing its obligations under the
Research Program and the payments made by Wyeth-Ayerst to Neose
pursuant to Section 2.6 hereof.
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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2.7 Regulatory Approvals. Wyeth-Ayerst shall file all regulatory dossiers
for the Covered Compound and the Products under its or its Affiliates
names. Wyeth-Ayerst shall own all Regulatory Approvals for Covered
Compound or Product. Wyeth-Ayerst shall be responsible for all
communications with Regulatory Authorities with respect to Products.
2.8 Exclusivity. Unless and until Wyeth-Ayerst has converted the license
granted hereunder to a non-exclusive license pursuant to Section 5.2,
Neose will not conduct any research and development activities, either
independently or with Third Parties, with respect to Products in the
Field and will not provide [*] to any Third Party for the purpose of
conducting research and development activities with respect to
Products in the Field except to carry out the Research Program.
Notwithstanding the foregoing, Neose and Wyeth-Ayerst recognize that,
from time to time, it may be desirable or necessary to retain
consultants to assist in the Research Program. In such event, the
Parties shall enter into a consulting agreement with each such
consultant, which consulting agreement shall, in both form and
substance, be reasonably acceptable to both parties.
3. GRANT OF RIGHTS
3.1 License Grant. Subject to the provisions of Section 10.3 hereof, Neose
hereby grants to Wyeth-Ayerst an exclusive license (exclusive even as
to Neose) in the Territory under Neose Technology to use, sell, have
sold, offer for sale, import and export Products in the Field.
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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3.2 Sublicense. Subject to the following conditions, as long as
Wyeth-Ayerst has not converted the license granted hereunder to a
non-exclusive license pursuant to Section 5.2 hereof, Wyeth-Ayerst
shall have the right to sublicense all or part of the rights granted
to it under Section 3.1 hereof to an Affiliate or a Third Party in any
country of the Territory. Wyeth-Ayerst shall not be required to obtain
Neose's approval of any sublicense.
3.2.1 All sublicenses shall include terms and conditions consistent
with the terms and conditions of this Agreement. Wyeth-Ayerst
shall provide to Neose documentation evidencing such sublicense
relationship within fourteen (14) business days of execution of
such sublicense. No sublicensee shall be permitted to further
any of its rights under any sublicense. Any sublicense not in
compliance with this Section 3.2 shall be void.
3.2.2 Notwithstanding the granting of a sublicense to a Third Party or
an Affiliate, Wyeth-Ayerst shall retain full responsibility and
liability to Neose for the performance of all obligations of
Wyeth-Ayerst, its Affiliates or any sublicensee. Any act or
omission by a sublicensee or an affiliate that would be a breach
of this Agreement if performed or not performed by Wyeth-Ayerst
will be considered a breach by Wyeth-Ayerst of this Agreement.
Nothing herein shall preclude Wyeth-Ayerst and its Affiliates
from utilizing a distributor to promote and/or distribute
Product in any country.
3.2.3 Notwithstanding the foregoing, prior to granting such
sublicense, Wyeth-Ayerst shall obtain the written agreement of
the sublicensee that it shall (i) protect the confidentiality of
Neose Technology and (ii) shall utilize Neose Technology only in
accordance with the terms of this Agreement.
3.2.4 Upon the expiration or early termination of this Agreement for
any reason in whole or in part, or with respect to any given
country or countries, each sublicense shall automatically
terminate on the same basis as this Agreement, unless otherwise
requested by Neose in which event such sublicense shall be
assigned to Neose.
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3.2.5 In the event Wyeth-Ayerst becomes subject to a bankruptcy event
as defined in Section 7.6(ii) hereof, all payments thereafter
due and owing to Wyeth-Ayerst from its sublicensees shall
thereupon, and without any notice from Neose to such sublicensee
become payable directly to Neose for the account of
Wyeth-Ayerst; provided that Neose shall remit to Wyeth-Ayerst
any amount by which such payments exceed the amounts owed by
Wyeth-Ayerst to Neose.
4. FUNDING
4.1 Development Fee. Wyeth-Ayerst agrees to pay Neose the sum of [*] upon
execution of this Agreement in consideration of Neose's agreement to
participate in the collaboration.
4.2 Development Payments. In addition to the Development Fee set forth in
Section 4.1 hereof, Wyeth-Ayerst shall pay Neose the additional sums
as set forth below:
(i) [*] upon delivery by Neose to Wyeth-Ayerst of Covered
Compound containing at least [*] for use by Wyeth-Ayerst
in clinical testing of Products;
(ii) [*] upon successful completion by Neose of a manufacturing
plant capable of producing Covered Compound in quantities
sufficient to deliver the Guaranteed Minimum Supply of
Covered Compound according to the Specifications as set
forth in the Manufacturing and Supply Agreement pursuant
to the provisions of Section 7.1 hereof; and
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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(iii) [*] upon first commercialization of Product in any country
in the Territory.
4.3 Effect of Early Termination. In the event this Agreement is terminated
by Wyeth-Ayerst under the provisions of Section 7.2 hereof,
Wyeth-Ayerst shall be under no obligation to make any payment to Neose
which shall become due subsequent to the date of such termination.
4.4 Method of Payment. All payments made under this Section 4 shall be
made by wire transfer to Neose within thirty (30) days from the date
corresponding to the event triggering such payment, provided, however,
that the payment due under Section 4.1 hereof shall be made by way of
wire transfer to Neose on the Effective Date.
5. ROYALITIES
5.1 Royalty Payments. In further consideration of the license granted to
Wyeth-Ayerst under Section 3 hereof, Wyeth-Ayerst shall pay to Neose a
royalty of [*] of annual Net Sales in the Territory of Products which
[*] on an annual basis.
5.2 Competitive Launch. In the event that one or more of Wyeth-Ayerst's
Major Competitors launches a Pediatric Nutritional Composition
enriched with [*], which Pediatric Nutritional Composition is the same
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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or similar to Product ("Competing Product"), in any brand, in any
country in the Territory, upon twelve (12) months prior written notice
from Wyeth-Ayerst to Neose, Wyeth-Ayerst may choose, at its sole
discretion, to convert the license granted hereunder to a
non-exclusive license on a country by country basis. In the event that
Wyeth-Ayerst chooses to convert the license to a non-exclusive license
in more than one (1) country in a given Region, Wyeth-Ayerst can
choose to convert the license to a non-exclusive license in the entire
Region at its sole discretion. The "Region(s)" as used herein are
defined as follows:
North Asia: China, Hong Kong, Taiwan, and Korea;
Asian: Philippines, Singapore, Malaysia, Thailand, Vietnam, and
Indonesia;
Mid Asia: India, Pakistan, and Afghanistan;
Pacific: Australia and New Zealand;
Western Europe (Southern): Spain, Portugal, Italy, Greece and Turkey;
Western Europe (Northern): United Kingdom, Ireland, France, Germany,
Netherlands, Switzerland, Austria, and Belgium;
Scandinavia: Denmark, Sweden, Norway, Iceland, and Finland;
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Eastern Europe: Poland, Hungary, Romania, Russia, the Baltic countries
and all former Soviet Union countries;
Middle East: Saudi Arabia, U.A.E., Qatar, Israel, Syria, Jordan,
Kuwait, Iran, Iraq and Egypt;
Latin America: Mexico, the Caribbean;
Central America: all countries;
South America: all countries;
North America: United States and Canada.
In the event Wyeth-Ayerst chooses to so convert the license to a
non-exclusive license, the royalty payable by Wyeth-Ayerst to Neose
royalties hereunder and the and set forth in Section 5.1 hereof shall
be reduced by [*] effective immediately upon expiration of the twelve
(12) months notice period.
5.2.1 Third Party Licenses. Where the license granted to Wyeth-Ayerst
under this Agreement is converted by Wyeth-Ayerst into a
non-exclusive license under Section 5.2 hereof, Neose agrees
that in the event it enters into a commercial arrangement, with
a Third Party relating to the use of [*] in Pediatric
Nutritional Compositions, it shall immediately notify
Wyeth-Ayerst of the commercial terms of such arrangement and,
where the terms of such Third Party arrangement, with respect to
its royalty and manufacturing and supply provisions are, taken
as a whole, more favorable than the royalty provisions hereunder
and the Manufacturing and Supply Agreement between Neose and
Wyeth-Ayerst under the provisions of Section 7.1 hereof,
Wyeth-Ayerst shall have the right to revise the terms of its
Manufacturing and Supply Agreement and the royalties hereunder
with Neose to contain those terms.
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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5.3 Method of Payment of Royalties. Wyeth-Ayerst shall deliver to Neose
within sixty (60) days of the end of each calendar quarter, a report
certified by Wyeth-Ayerst as accurate to the best of its ability based
upon information then available for such calendar quarter, on a
country-by- country basis: (i) Net Sales of Product in each country;
(ii) the basis for any adjustments to the royalty payable to Neose for
the sale of Product in such country; and (iii) the total royalty due
for the sale of the Product in each such country. The total royalty
due to Neose during such calendar quarter shall be remitted at the
time such report is made in accordance with the following:
(i) the total royalty due for such calendar quarter shall accompany
the report for that quarter; (ii) the royalty shall be paid in
United States dollars; (iii) any currency translations that are
necessary to calculate the royalty shall be made at the exchange
rate applicable on the date of payment as used by Wyeth-Ayerst
for financial accounting purposes in accordance with generally
accepted accounting principals; and (iv) royalty checks are to
be made payable to Neose and mailed to the address specified in
Section 16.5.1 hereof.
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5.4 If by reason of any restrictive exchange laws or regulations,
Wyeth-Ayerst shall be unable to convert to U.S. dollars amounts
equivalent to the total royalty due and payable by Wyeth-Ayerst
hereunder in respect to Products sold for funds other than U.S.
dollars, Wyeth-Ayerst shall notify Neose promptly with an explanation
of the circumstances. In such event all royalties due hereunder in
respect of the transaction so restricted (or the balance thereof due
hereunder) shall be deferred and paid in U.S. dollars as soon as
reasonably possible after, and to the extent that such restrictive
exchange laws or regulations are lifted so as to permit such
conversion to U.S. dollars, of which lifting Wyeth-Ayerst shall
promptly notify Neose. At its option, Neose shall have the right to
request payment, and upon such request Wyeth-Ayerst shall pay or cause
to be paid, all such amounts or portions thereof as specified by Neose
in funds other than U.S. dollars as designated by Neose under the
existing restrictive exchange laws or regulations.
5.5 Any and all taxes levied on account of royalties paid from a country
in which a provision is made in the law or by regulation for
withholding shall be deducted from such royalty paid to Neose
hereunder and proof of payment of such taxes shall be received and
reported in the reports described in Section 5.3 hereof.
6. ACCOUNTS AND RECORDS
6.1 Record Keeping by Wyeth-Ayerst. After commercial launch of Product in
any country in the Territory, Wyeth-Ayerst shall and shall cause its
Affiliates and/or sublicensees, if any, to keep accurate books and
accounts of record in connection with the sale by or for it of the
Products in sufficient detail to permit accurate determination of all
figures necessary for verification of payments required to be paid
hereunder. Wyeth-Ayerst shall and shall cause its Affiliates and/or
sublicenses to maintain such records for a period of three (3) years
after the end of the year in which they were generated.
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6.2 Audit by Neose. Neose, through an independent certified public
accountant reasonably acceptable to Wyeth-Ayerst, shall have the
right, at its own expense, to access the books and records of
Wyeth-Ayerst its Affiliates or sublicensees as the case may be, for
the sole purpose of determining whether a payment under Section 5 has
become due and the accuracy thereof. Such access shall be conducted
after reasonable prior written notice to Wyeth-Ayerst and during
ordinary business hours and shall not be more frequent than once per
calendar year. Wyeth-Ayerst may require such independent certified
public accountant to sign a customary confidential disclosure
agreement prior to permitting such independent certified public
accountant to have access to its books, records or facilities. The
parties agree that such independent certified public accountant shall
disclose to Neose only, for the period covered by such audit, the Net
Sales of Product in each country, the basis for any adjustments to the
royalty payable to Neose for the sale of Product in such countrty, and
the total royalty due for the sale of Product in each such country.
Neose agrees to keep in strict confidence all information learned in
the course of such audit, except when it is necessary to reveal such
information in order to enforce its rights under this Agreement.
Neose's right to have such records examined shall survive termination
or expiration of this Agreement. In the event such audit reveals an
underpayment, Wyeth-Ayerst shall promptly pay to Neose the amount of
such underpayment. In the event that such audit reveals an
underpayment of five percent (5%) or more of the amount actually due,
Wyeth-Ayerst shall also promptly reimburse Neose for the reasonable
out-of-pocket expenses incurred by Neose in conducting such audit.
6.3 Record Keeping by Neose. Neose shall keep accurate books and accounts
of record in connection with the activities conducted by it in
carrying out
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the Research Program in sufficient detail to verify that the amounts
received by Neose pursuant to Section 2.6 hereof have been expended in
accordance with the Research Program. Neose shall maintain such
records for a period of three (3) years after the end of the last year
in which funds were received by Neose in accordance with Section 2.6
hereof.
6.4 Audit by Wyeth-Ayerst. Wyeth-Ayerst, through an independent certified
public accountant reasonably acceptable to Neose, shall have the
right, at its own expense, to access the books and records of Neose
for the sole purpose of verifying that the amounts received by Neose
pursuant to Section 2.6 hereof have been expended in accordance with
the Research Program. Such access shall be conducted after reasonable
prior written notice to Neose and during ordinary business hours and
shall not be more frequent than once per calendar year. Neose may
require such independent certified public accountant to sign a
customary confidential disclosure agreement prior to permitting such
independent certified public accountant to have access to its books,
facilities or records. The parties agree that such independent
certified public accountant shall disclose to Wyeth-Ayerst only
whether such amounts were expended in accordance with the Research
Program. Wyeth-Ayerst agrees to keep in strict confidence all
information learned in the course of such audit, except when it is
necessary to reveal such information in order to enforce its rights
under this Agreement. Wyeth-Ayerst's right to have such records
examined shall survive termination or expiration of this Agreement.
7. TERM AND TERMINATION OF LICENSE
7.1 Term. This Agreement shall be effective as of the Effective Date and,
unless earlier terminated as set forth below, shall continue in full
force and effect, on a country by country basis, until the later of
(i) the expiration of the last to expire Neose Patent incorporating at
least one Valid Claim in such country or (ii) ten (10) years after the
date of first commercial sale of
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Products by Wyeth-Ayerst hereunder. Upon the expiration of the
Agreement, Wyeth-Ayerst's license shall become a fully paid-up,
perpetual, exclusive license in each such country subject only to any
sublicenses granted by Wyeth-Ayerst, provided that to the extent
Wyeth-Ayerst has converted the license granted hereunder to
non-exclusive license pursuant to Section 5.2, such license will be
non-exclusive.
7.2 Unilateral Termination by Wyeth-Ayerst. Wyeth-Ayerst shall have the
right to unilaterally terminate this Agreement, on a country by
country basis, upon thirty (30) days prior written notice to Neose. In
the event of such termination, all of Wyeth-Ayerst's rights in and to
the Neose Technology in such country shall revert to Neose.
7.3 Unilateral Termination by Neose--Pre-Clinical Studies. Neose shall
have the right to unilaterally terminate this Agreement, upon thirty
(30) days prior written notice to Wyeth-Ayerst as follows:
7.3.1 If Wyeth-Ayerst does not:
(i) complete toxicology studies of the Final Product within
twenty four (24) months after its receipt of sufficient
material from Neose to begin such studies.
(ii) complete Clinical Studies of Final Product within thirty
six (36) months after its receipt of sufficient material
from Neose to begin such studies, which material has
satisfied the requirements of the toxicology studies
conducted in accordance with Section 7.3.1(i) above.
7.4 Unilateral Termination by Neose - Post Clinical Studies. Neose shall
have the right to unilaterally terminate this Agreement, on a
country-by-country
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basis, upon thirty (30) days prior written notice to Wyeth-Ayerst as
follows:
(i) If Wyeth-Ayerst fails to file for Regulatory Approval in
any Major Market within twelve (12) months after
completion of Clinical Studies. For purposes of this
section, "completion of Clinical Studies" shall mean (a)
receipt of a positive outcome from said Clinical Studies
based upon standards of infant safety growth and tolerance
as established in the protocol for such Clinical Study and
(b) the receipt of a final audited report from all
Clinical Research Organization in a form reasonably
acceptable to Wyeth-Ayerst. The twelve (12) month period
referred to herein shall not commence until a Master
Regulatory Dossier is completed. It is understood and
agreed that the Master Regulatory Dossier shall take up to
nine (9) months to complete. Neose agrees to provide its
full cooperation in the completion of the Master
Regulatory Dossier.
(1) In the event Wyeth-Ayerst does not receive a positive
outcome from the Clinical Studies as set forth in
Section 7.4 (i)(a) hereof, the JDC shall establish
appropriate timelines for conducting a follow-up
Clinical Study. In the event Wyeth-Ayerst decides
that it shall not conduct a follow-up Clinical Study,
or, if after commencing a follow-up Clinical Study,
Wyeth-Ayerst fails to complete such study within the
timeline established by JDC, Neose may terminate the
Agreement on thirty (30) days prior written notice to
Wyeth-Ayerst.
(ii) If Wyeth-Ayerst does not launch Licensed Product in any
Major Market within twelve (12) months after receiving
Regulatory Approval in that Major Market.
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(iii) If Wyeth-Ayerst does not launch Licensed Product in any
single Major Market within eight (8) years from the
Effective Date.
7.5 The parties agree that the JDC shall determine appropriate timelines
for the completion of the Research Program and the supply of Covered
Compound by Neose to Wyeth-Ayerst. In the event Neose fails to perform
under the timelines established by the JDC for the completion of the
Research Program and the supply of Covered Compounds, all time periods
set forth in Sections 7.3 and 7.4 hereof shall be extended for a
period equivalent to Neose's delay in performing under such timelines.
7.6 Termination for Cause. This Agreement may be terminated upon prior
written notice by either party at any time during the term of this
Agreement:
(i) for material breach by the other party, which breach
remains uncured for sixty (60) days after written notice
of said breach is given to the breaching party or, if such
breach is not susceptible to cure within such sixty (60)
day period, and the breaching party utilizes diligent good
faith efforts to cure such breach, the period shall be
extended to one hundred twenty (120) days from the date on
which the written notice is provided to the breaching
party; 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 of 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, that in the case of any
involuntary bankruptcy proceeding, such right to terminate
shall only become effective if the proceeding is not
dismissed within sixty (60) days after the filing thereof.
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7.7 Termination for Cause - Effect. Termination of this Agreement for
cause under Section 7.6 hereof shall have the following effect:
(i) In the event Wyeth-Ayerst terminates this Agreement under
Section 7.6(i) hereof, the license granted to Wyeth-Ayerst
pursuant to Section 3.1 shall become a fully paid-up,
perpetual license in each country of the Territory.
(ii) In the event that Neose terminates this Agreement under
Section 7.6(i) hereof, then the rights and licenses
granted to Wyeth-Ayerst hereunder shall terminate and all
rights to the Neose Technology shall revert to Neose.
(iii) In the event that Wyeth-Ayerst terminates this Agreement
under Section 7.6(ii) or this Agreement is otherwise
terminated under Section 7.6(ii), the parties agree that
Wyeth-Ayerst shall retain all rights and licenses granted
to it hereunder and the license granted to Wyeth-Ayerst
under Section 3.1 hereof shall become a perpetual license
under which Wyeth-Ayerst shall remain obligated to pay
royalties to Neose as set forth in Section 5 hereof.
7.8 Insolvency.
7.8.1 Effect on Licenses. All rights and licenses granted under or
pursuant to this Agreement by Neose to Wyeth-Ayerst are, for all
purposes of Section 365(n) of Title 11 of the United States Code
("Title 11") licenses of rights to "intellectual property" as
defined in Title 11. Neose agrees that Wyeth-Ayerst, as licensee
of such rights under this Agreement shall retain and may fully
exercise all
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of its rights and elections under Title 11. Neose agrees during
the term of this Agreement to create and maintain current copies
or, if not amenable to copying, detailed descriptions or other
appropriate embodiments, to the extent feasible, of all such
intellectual property. If a case is commenced by or against
Neose under Title 11, Neose (in any capacity, including
debtor-in-possession) and its successors and assigns (including
without limitation, a Title 11 Trustee) shall:
(i) as Wyeth-Ayerst may elect in a written request,
immediately upon such request:
(a) perform all of the obligations provided in this
Agreement to be performed by Neose including, where
applicable and without limitation, providing to
Wyeth-Ayerst portions of such intellectual property
(including embodiments thereof) held by Neose and
such successors and assigns or otherwise available to
them; or
(b) provide to Wyeth-Ayerst all such intellectual
property (including all embodiments thereof) held by
Neose and such successors and assigns or otherwise
available to them; and
(ii) not interfere with the rights of Wyeth-Ayerst under this
Agreement, or any agreement supplemental hereto, to such
intellectual property, including any right to obtain such
intellectual property from another entity.
7.8.2 Rights to Intellectual Property. If a Title 11 case is commenced
by or against Neose and this Agreement is rejected as provided
in Title 11, and Wyeth-Ayerst elects to retain its rights
hereunder as provided in
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Title 11, then Neose (in any capacity, including
debtor-in-possession) and its successors and assigns (including,
without limitation, Title 11 Trustee) shall provide to
Wyeth-Ayerst all such intellectual property (including all
embodiments thereof) held by Neose and such successors and -
assigns, or otherwise available to them, immediately upon
Wyeth-Ayerst's written request. Whenever Neose or any of its
successors or assigns provides to Wyeth-Ayerst any of the
intellectual property licensed hereunder (or any embodiment
thereof) pursuant to this Section 7.8, Wyeth-Ayerst shall have
the right to perform the obligations of Neose hereunder with
respect to such intellectual property, but neither such
provision nor such performance by Wyeth-Ayerst shall release
Neose from any such obligation or liability for failing to
perform it.
7.8.3 Wyeth-Ayerst's Rights. All rights, powers and remedies of
Wyeth-Ayerst provided herein are in addition to and not in
substitution for any and all other rights, powers and remedies
now or hereafter existing at law or in equity (including,
without limitation, Title 11) in the event of the commencement
of a Title 11 case by or against Neose. Wyeth-Ayerst, in
addition to the rights, powers and remedies expressly provided
herein, shall be entitled to exercise all other such rights and
powers and resort to all other such remedies as may now or
hereafter exist at law or in equity (including, without
limitation, Title 11) in such event. The parties agree that they
intend the foregoing Wyeth-Ayerst rights to extend to the
maximum extent permitted by law, including, without limitation,
for purposes of Title 11:
(i) the right of access to any intellectual property of Neose
or any Third Party with whom Neose contracts to perform an
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obligation of Neose under this Agreement, and, in this
case of a Third Party, which is necessary for the
development, registration, manufacturing and marketing of
Covered Compound and/or Products; and
(ii) the right to contract directly with any Third Party
described in (i) above to complete the contracted work.
7.9 Prior Obligations. Termination or expiration of this Agreement shall
not operate to deprive either party of any rights or remedies either
at law or in equity or to relieve either party of any of its
obligations incurred prior to the date of such termination or
expiration.
7.10 Survival. Except as otherwise noted, the provisions of Sections 2.6.2,
2.7, 6, 11, 12, 13.1, 14, 16.5, 16.6 and 16.10 shall survive
expiration or earlier termination of this Agreement.
8. MANUFACTURE OF PRODUCT
8.1 Product Manufacture. Wyeth-Ayerst shall be responsible for the
manufacture of all quantities of Products according to GMP standards.
9. MANUFACTURE AND SUPPLY
9.1 Covered Compound Manufacture and Supply. Neose shall manufacture or
have manufactured and supply to Wyeth-Ayerst, and Wyeth-Ayerst shall
purchase from Neose, all of Wyeth-Ayerst's requirements of Covered
Compound for use in Products. The manufacture of Covered Compound
shall be in accordance with Specifications and all quality assurance
standards and ingredient testing as may be required by Wyeth-Ayerst
and attached to the Manufacturing and Supply Agreement as a
mutually-agreed upon schedule.
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9.1.1 Manufacturing and Supply Agreement. The parties agree to meet no
later than [*] after the Effective Date, to negotiate and
conclude a Manufacturing and Supply Agreement. The parties agree
to negotiate in good faith to conclude the Manufacturing and
Supply Agreement within [*] of the Effective Date. In the event
that the Manufacturing and Supply Agreement is not executed by
both parties within [*] after the Effective Date, this
Collaboration and License Agreement shall immediately terminate.
This period may be extended for sixty (60) days upon the mutual
written consent of the parties.
9.1.2 Terms of the Manufacturing and Supply Agreement. The parties
agree that the Manufacturing and Supply Agreement shall contain
at least the following terms:
(i) The Manufacturing and Supply Agreement shall include a
Guaranteed Minimum Supply;
(ii) Under the Manufacturing and Supply Agreement, Neose shall
be responsible for the production of Covered Compound in
accordance with the Specifications.
(iii) It shall be Neose's responsibility to develop, construct
and operate a manufacturing facility capable of producing
Covered Compound in quantities sufficient to deliver
Wyeth-Ayerst's requirements of Covered Compound.
(iv) Neose shall consult with Wyeth-Ayerst regarding the
location of the manufacturing facility referred to in
Section 7.1.2(iii) hereof. The final location of the
manufacturing facility shall be mutually agreed upon by
the parties.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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(v) Neose shall provide Covered Compound to Wyeth-Ayerst on
the following basis and at the following costs:
(a) Neose shall use its commercially reasonable efforts
to provide the Covered Compound required by
Wyeth-Ayerst at the lowest price possible, not to
exceed [*] per kilogram of the [*] component of the
Covered Compound (hereinafter "the Target Price")
plus [*] paid by Wyeth-Ayerst over the previous six
(6) month period, FOB Neose plant.
(b) In the event the Target Price is less than [*], Neose
will, subject to subsection (c) below sell the
Covered Compound to Wyeth-Ayerst at a price per
kilogram equal to [*].
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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(c) In the event that the price to Wyeth-Ayerst of the
[*] component of the Covered Compound exceeds [*] of
Wyeth-Ayerst's net selling price of Products, the
parties agree to re-negotiate in good faith the
provisions of the Manufacturing and Supply Agreement
relevant to the price of the [*] to arrive at such
terms as are fair and equitable to both parties.
(d) In the event that the cost to Wyeth-Ayerst of a
kilogram of the [*] component of the Covered Compound
calculated on a [*] basis as set forth in Section
9.1.2(v)(b) hereof is lower than the Target Price,
the actual price of the [*] component of the Covered
Compound to be charged to Wyeth-Ayerst shall be equal
to [*].
9.3 Exclusive Purchase. Wyeth-Ayerst agrees to purchase all of its
requirements of Covered Compound exclusively from Neose, subject to
Neose's ability to supply all of Wyeth-Ayerst's requirements of
Covered Compound in a given period, consistent with reasonable
forecasts by Wyeth-Ayerst of its requirements. In the event Neose is
unable to supply all of Wyeth-Ayerst's requirements of Covered
Compound, Wyeth-Ayerst shall have the right, at its sole discretion,
to manufacture its required quantities of Covered Compound or to
designate a Third Party manufacturer to supply its required quantities
of Covered Compound. Wyeth-Ayerst shall continue to have such right
until such time Neose is able to demonstrate to Wyeth-Ayerst's
reasonable satisfaction that it is able to supply Wyeth-Ayerst's
requirements of Covered Compound. Neose agrees to provide Wyeth-Ayerst
and/or its designated Third Party manufacturer with all of the Neose
Technology necessary to manufacture Covered Compound according to
Specifications.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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<PAGE>
10. REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of Each Party. Each of Neose and
Wyeth-Ayerst hereby represents, warrants and covenants to the other
party hereto as follows:
(a) it is a corporation or entity duly organized and validly
existing under the laws of the state or other jurisdiction
of incorporation or formation;
(b) the execution, delivery and performance of this Agreement
by each party has been duly authorized by all requisite
corporate action and do not require any shareholder action
or approval;
(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
(d) 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 or operative 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; and
(e) it shall comply with all applicable material laws and
regulations relating to its activities under this
Agreement.
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<PAGE>
10.2 Representations and Warranties of Neose. In addition to the
Representations and Warranties made by Neose under Section 10.1
hereof, Neose hereby further represents and warrants to Wyeth-Ayerst
that, to the best of its knowledge:
(a) as of the Effective Date, the Neose Patents and Neose
Know-How are existing and are not invalid or
unenforceable, in whole and in part;
(b) as of the Effective Date, it has the full right, power and
authority to grant the licenses granted by it hereunder
and it has not previously granted, and during the term of
the Agreement will not grant, any rights which conflict
with the licenses granted hereunder;
(c) subject to the provisions of Section 10.3 hereof, it is
the sole and exclusive owner or licensee in the Field of
the Neose Patents, Neose Technology and Neose Know-How
existing as of the Effective Date, all of 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 Neose
Patents Neose Technology or Neose Know-How existing as of
the Effective Date, whatsoever;
(d) the Neose Patents, Neose Technology and Neose Know-How,
and the development, manufacture, use, distribution,
marketing, promotion and sale of [*] and Products do not,
as of the Effective Date, interfere with or infringe on
any intellectual property rights owned or possessed by any
Third Party;
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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<PAGE>
(e) the manufacture of [*] is covered by one or more Valid
Claims of the Neose Patents;
(f) none of the Neose Patents is the subject of any reissue,
reexamination, interference, opposition or other similar
proceeding;
(g) as of the Effective Date, there are no claims, judgments
or settlements against or owed by Neose or, pending or
threatened claims or litigation relating to the Neose
Patents, Neose Technology or related Neose Know-How;
(h) during the Term of this Agreement it will use diligent
efforts not to diminish the rights under the Neose
Patents, Neose Technology and Neose Know-How in the Field
licensed to Wyeth-Ayerst hereunder, unless previously
considered and agreed to by the JDC, including without
limitation, by not committing or permitting any actions or
omissions which would cause (i) the Neose Patents to lapse
or to otherwise become abandoned or (ii) the breach of any
agreements between itself and Third Parties which provide
for intellectual property rights applicable to the
development, manufacture, use or sale of Products, that it
will provide Wyeth-Ayerst promptly with notice of any such
alleged breach, and that as of the Effective Date, it is
in compliance in all material respects with any agreements
with Third Parties relating to the Neose Patents, Neose
Technology and related Know-How, and/or the Products; and
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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<PAGE>
(i) pursuant to the Research and License Agreement dated
December 30, 1992 between Neose and Abbott Laboratories
("Abbott"), as amended, Neose has the right to convert the
licenses granted therein to Abbott ("Abbott License") to a
non-exclusive license, and, as of the Effective Date,
Neose will have taken all actions required to convert the
Abbott License to a non-exclusive license. [*].
Except as expressly set forth herein, Wyeth-Ayerst and Neose
make no representations or warranties regarding the subject
matter of this Agreement.
10.3 Research and License Agreement - Neose and Abbott Laboratories. The
parties acknowledge that Neose is party to a Research and License
Agreement with Abbott Laboratories ("Abbott") and a subsequent
Amendment Agreement (collectively the "Abbott Agreements"). Neose
warrants that it has the right to convert the license granted under
the Abbott Agreements to a non-exclusive license. [*].
10.3.1 [*]
10.4 Rights of Abbott. Notwithstanding anything contained herein to the
contrary, Wyeth-Ayerst acknowledges that the license granted to
Wyeth-Ayerst pursuant to Section 3.1 hereof is not exclusive as to
Abbott with respect to any Neose Patents, Neose Know-How, or Neose
Technology existing as of the Effective Date.
10.5 Inconsistent Activities. 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.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-37-
<PAGE>
10.6 Legal Representation. Each party hereto represents that it has been
represented by legal counsel in connection with this Agreement and
acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement,
the parties agree that no presumption shall exist or be implied
against the party which drafted such terms and provisions.
11. TRADEMARKS
11.1 Wyeth-Ayerst. Wyeth-Ayerst shall select and own the trademarks for
marketing Products in all countries in the Territory. All expenses for
(i) registration of such trademarks and (ii) bringing, maintaining,
and prosecuting any action to defend such trademarks shall be borne by
Wyeth-Ayerst and Wyeth-Ayerst shall retain all recoveries therefrom.
11.2 Neose. Neose shall have the right to select and own trademarks for the
Covered Compound. All expenses for (i) the registration of such
trademarks and (ii) bringing, maintaining, and prosecuting any action
to defend such trademarks shall be borne by Neose and Neose shall
retain all recoveries therefrom. Wyeth-Ayerst shall have the right to
use such trademarks in the Field in connection with the sale of
Products containing Covered Compound.
-38-
<PAGE>
12. CONFIDENTIAL INFORMATION
12.1 Non-Disclosure Obligation. Each of Wyeth-Ayerst and Neose shall use
only in accordance with the terms of this Agreement and shall not
disclose to any Third Party, any information received by it from the
other party in connection with this Agreement, including but not
limited to Wyeth-Ayerst Know-How and Neose Know-How, without the prior
written consent of the other party. These obligations shall survive
the expiration or termination of this Agreement for a period of five
(5) years. Notwithstanding the foregoing, the parties agree that
Wyeth-Ayerst may disclose information received under this Agreement,
including information relating to the Neose Patents and Neose
Technology, to its sublicensees, so long as such sublicensees agree to
be bound by obligations of Confidentiality no less strict than those
set forth herein. These obligations shall not apply to information
that:
(i) is known by the receiving party, as evidenced by its
records, at the time of its receipt and not through a
prior disclosure by the disclosing party;
(ii) is at the time of disclosure or thereafter becomes
published or otherwise part of the public domain through
no fault of the receiving party;
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<PAGE>
(iii) is subsequently disclosed to the receiving party as
evidenced by its records, by a Third Party having the
right to make such a disclosure;
(iv) is developed by the receiving party as evidenced by its
records independently of information received by it from
the disclosing party hereunder;
(v) is disclosed to any Regulatory Authority in order to
obtain approval to market the Product, but such disclosure
may be made only to the extent necessary to obtain such
approval; or
(vi) is required by law, regulation, rule, act or order of any
governmental authority or agency to be disclosed by a
party, provided that notice is promptly given to the other
party in order to provide an opportunity to seek a
protective order or the like with respect to such
information and the disclosing party discloses only the
minimum information required to be disclosed in order to
comply with the request.
12.2 Permitted Disclosure. Information provided under this Agreement may be
disclosed to employees, agents, consultants, sublicensees, or
suppliers of the receiving party, but only to the extent required to
accomplish the purposes of this Agreement and only after the receiving
party obtains the prior agreement of its employees, agents,
consultants, sublicensees or suppliers to whom disclosure is to be
made to hold in confidence and not make use of such information for
any purpose other than that permitted by this Agreement.
12.3 Publicity. Except as required by law, all publicity, press releases
and other announcements relating to this Agreement or the transactions
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<PAGE>
contemplated hereby shall be reviewed in advance by, and shall be
subject to the approval of, both parties.
12.4 Publication. The parties shall cooperate in the appropriate
publication of the results of research and development work performed
pursuant to this Agreement, but subject to their predominating
interest in obtaining patent protection for any patentable subject
matter. The determination of authorship for any paper shall be in
accordance with accepted scientific practice. Notwithstanding anything
in this Section 12.4, all publications and presentations of the
results of research and development work performed under this
Agreement must be approved in advance by both parties.
13. INTELLECTUAL PROPERTY RIGHTS
13.1 Ownership of Inventions. Wyeth-Ayerst shall own all inventions and
discoveries whether or not patentable (i) made solely by its employees
and agents during the term of this Agreement and (ii) relating solely
to the use of Covered Compound in the Field, made jointly by the
employees or agents of Neose and Wyeth-Ayerst. Neose shall own all
inventions and discoveries whether or not patentable (i) made solely
by its employees and agents during the term of this Agreement and (ii)
relating to the manufacture of Covered Compound and [*], made jointly
by the employees or agents of Neose and Wyeth-Ayerst. All other
inventions and discoveries made jointly by employees and agents of
Wyeth-Ayerst and Neose shall be owned jointly by the parties. All the
determinations of inventorship shall be made in accordance with United
States law.
- ----------
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
-41-
<PAGE>
13.1.1 Patent Procurement. Neose and Wyeth-Ayerst shall each disclose
to the other and discuss any inventions and discoveries arising
during the term of this Agreement and the desirability of
filing one or more patent applications covering such inventions
or discoveries. The party owning the invention or discovery
shall make the final decision with respect to any such filings
and shall have the right to select patent counsel and to take
other actions as appropriate to prepare, file, prosecute, and
maintain patent protection with respect to its inventions and
discoveries arising under this Section 13.1. With respect to
jointly owned inventions, the parties shall meet to determine
in which countries, if any, the patent applications claiming
such joint inventions and discoveries should be filed. In the
event that either party does not wish to share in the expenses
of both filing and prosecuting patent applications claiming
such joint inventions and discoveries in any country of the
Territory, such party shall promptly assign or cause to be
assigned to the other party all of its right, title, and
interest in and to such joint inventions and discoveries and
thereafter, such joint inventions and discoveries shall be
treated as an invention or discovery solely owned by the other
party for all purposes of this Agreement. In the event the
parties decide to share in the expenses for applying for,
obtaining and maintaining patents claiming such a joint
invention or discovery in one or more countries of the
Territory, Wyeth-Ayerst shall file and prosecute any such
patent applications in such countries and the out-of-pocket
expenses incurred by Wyeth-Ayerst in preparing, filing and
prosecuting joint patent applications and maintaining patents
issuing therefrom shall be shared equally by the parties.
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<PAGE>
13.2 Prosecution and Maintenance of Patent Rights. Each party shall be
responsible for prosecuting and maintaining its own patent rights
throughout the Territory.
13.3 Cooperation. Each of the parties shall execute or have executed by its
employees, representatives, agents and contractors such documents as
may be reasonably necessary to obtain, perfect or maintain any patent
rights which would be filed pursuant to this Agreement, and to
cooperate with the other party as far as reasonably necessary with
respect to furnishing all information and data in its possession to
obtain patent rights.
13.4 Patent Infringement. Wyeth-Ayerst shall give immediate notice in
writing to Neose of any known or presumed infringement in the Field in
the Territory of any of the Neose Patents and will provide Neose its
full cooperation in the protection and enforcement of the Neose
Patents. Any award or recovery from an infringement suit against or a
settlement with such infringer shall be first applied to the
reimbursement of legal fees, costs and expenses incurred by the
parties and the remainder, if any, shall be divided eighty percent
(80%) to Neose and twenty percent (20%) to Wyeth-Ayerst between the
parties. In any and all settlements between such alleged infringer of
Neose Patents and Neose, the prior written consent thereto by
Wyeth-Ayerst shall be obtained by Neose, such consent not to be
unreasonably withheld. If Neose fails to either bring suit against or
to enter into negotiations for a settlement with such alleged
infringer of a Neose Patent within a reasonable time after written
notice of the alleged infringement shall have been given to Neose by
Wyeth-Ayerst, then, to the extent such an infringement occurs in a
country in the Territory, Wyeth-Ayerst may seek to prevent such
infringement in such country at its cost in either or both of the
names of the parties hereto. If Wyeth-Ayerst commences an infringement
action, Neose shall cooperate fully with Wyeth-Ayerst and any recovery
obtained by Wyeth-Ayerst as the result of its proceedings by court
action, settlement or otherwise, shall be the
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<PAGE>
property of Wyeth-Ayerst after reimbursement of twenty-five percent
(25%) of the legal fees incurred by Neose in cooperating with
Wyeth-Ayerst in such infringement action. In any and all settlements
between such an alleged infringer of Neose Patents and Wyeth-Ayerst,
the prior written consent thereto by Neose shall be obtained by
Wyeth-Ayerst, such consent not to be unreasonably withheld.
13.5 Infringement of Third Party Patent Rights. In the event Wyeth-Ayerst
should be of the opinion that it can not make, import, use, market
and/or sell Products in any country of the Territory under Neose
Patents and Neose Technology under this Agreement without infringing a
Third Party patent, it shall notify Neose. The parties shall then seek
an opinion of patent counsel acceptable to both parties. If such
patent counsel concurs with Wyeth-Ayerst's opinion, they shall, at
Wyeth-Ayerst's sole option, endeavors to secure a license from the
Third Party on terms reasonably acceptable to the parties.
13.5.1 Opinion of Counsel. If, in the opinion of patent counsel
selected under Section 13.5, the Third Party patent, if
litigated, would be found invalid or not infringed by the
manufacture, use or sale of Product, or if the parties
otherwise mutually agree to obtain a license to such Third
Party patent, the parties shall proceed in accordance with the
terms of this Agreement, unless an action for infringement is
brought against one or both parties.
13.5.2 Defense against Claim of Infringement. If either party is sued
for infringement of any Third Party patent arising out of the
manufacture, use, sale, importation or exportation of a Product
in any country of the Territory, the parties shall promptly
meet to discuss the course of action to be taken to resolve or
defend any such infringement litigation. Each party shall
provide the other with such assistance as is reasonably
necessary and shall
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<PAGE>
cooperation in the defense of any such action. The cost/expense
of defending such an action and any damages imposed shall be
shared equally by the parties. Payments due Neose pursuant to
this Agreement shall be reduced if Wyeth-Ayerst is required to
obtain a royalty-bearing license from such Third Party under
any patent of said Third Party which would be infringed by the
sale of Product by Wyeth-Ayerst and the infringement of such
patent cannot be reasonably avoided.
14. INDEMNIFICATION AND INSURANCE
14.1 Indemnification by Wyeth-Ayerst. Wyeth-Ayerst shall indemnify, defend
and hold harmless Neose and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each an "Neose
indemnified party") from and against all liability, loss, damage, cost
and expense (including reasonable attorneys fees) which the Neose
indemnified party may incur, suffer or be required to pay resulting
from or arising in connection with (i) the breach by Wyeth-Ayerst of
any representation or warranty contained in this Agreement; or (ii)
the promotion, distribution, use, testing, marketing, sale or other
disposition of the Product by Wyeth-Ayerst, its Affiliates or
sublicenses. Notwithstanding the foregoing, Wyeth-Ayerst shall have no
obligation to indemnify, defend or hold harmless any Neose indemnified
party with respect to claims, demands, costs or judgments which result
from the willful misconduct or negligent acts or omissions of Neose,
its Affiliates or any of their respective employees, officers,
directors or agents.
14.2 Indemnification by Neose. Neose shall indemnify, defend and hold
harmless Wyeth-Ayerst and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each a
"Wyeth-Ayerst indemnified party") from and against any and all
liability, loss, damage, cost and expense (including reasonable
attorneys fees) which the Wyeth-Ayerst
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<PAGE>
indemnified party may incur, suffer, or be required to pay resulting
from or arising in connection with the breach by Neose of any
representation or warranty contained in this Agreement.
Notwithstanding the foregoing, Neose shall have no obligation under
this Agreement to indemnify, defend and hold harmless any Wyeth-Ayerst
indemnified party with respect to claims, demands, costs or judgements
which result from the willful misconduct or negligent acts or
omissions of Wyeth-Ayerst, its Affiliates or any of their respective
employees, officers, directors or agents.
14.3 Conditions to Indemnification. The obligations of the indemnifying
party under Sections 14.1 and 14.2 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 liability.
The indemnifying party shall have the right to assume the defense of
any part or claim related to the potential liability if it has assumed
responsibility for the suit or claim in writing. The indemnified party
shall cooperate with the indemnifying party in the defense of any such
suit or claim.
14.4 Settlements. Neither party may settle a suit or claim related to a
potential liability without the consent of the other party if such
settlement would impose any monetary obligations 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.
14.5 Insurance. Each party agrees to use its Commercially Reasonable
Efforts to obtain and maintain, during the term of this Agreement,
Commercial General Liability Insurance, including Products Liability
Insurance, with reputable and financially secure insurance carriers to
cover its indemnification obligations under this Section 14, or in the
case of Wyeth-Ayerst, self-insurance, with a limit of not less than
one million dollars ($1,000,000) per occurance and five million
dollars ($5,000,000) in the aggregate. Each party shall furnish the
other with a certificate of insurance evidencing liability overage
upon request.
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<PAGE>
15. ASSIGNMENT
15.1 Assignment by Neose. Neose may assign any of its rights or obligations
under this Agreement in any country to any of its Affiliates. Neose
may also assign its rights and obligations hereunder in connection
with a merger or a similar reorganization or sale of all or
substantially all of its assets. Neose may not otherwise assign any of
its rights or obligations under this Agreement without the prior
written consent of Wyeth-Ayerst. Any assignment by Neose under this
Section 15.1, shall not relieve Neose of its responsibilities for the
performance of its obligations under this Agreement.
15.2 Assignment by Wyeth-Ayerst. Wyeth-Ayerst may assign any of its rights
or obligations under this Agreement in any country to any of its
Affiliates. Wyeth-Ayerst shall notify Neose, in writing, upon making
any such assignment. Wyeth-Ayerst may also assign its rights or
obligations under this Agreement in connection with a merger or
similar reorganization or the sale of all or substantially all of its
assets or a sale of that part of its business relating to the subject
matter of this Agreement. Any assignment by Wyeth-Ayerst under this
Section 15.2, shall not relieve Wyeth-Ayerst of its responsibilities
for the performance of its obligations under this Agreement.
15.3 Binding Nature. This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the parties. Any
assignment not in accordance with this Section 15 shall be void.
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<PAGE>
16. MISCELLANEOUS
16.1 Force Majeure. Neither party shall be liable to the other for delay or
failure in the performance of the obligations on its part contained in
this Agreement if and to the extent that such failure or delay is due
to circumstances beyond its control which it could not have avoided by
the exercise of reasonable diligence. It shall notify the other party
promptly should such circumstances arise, giving an indication of the
likely extent and duration thereof, and shall use all commercially
reasonable efforts to resume performance of its obligations as soon as
practicable.
16.2 No Waiver. The failure of either party to require performance by the
other party of any of that other party's obligations hereunder shall
in no manner affect the right of such party to enforce the same at a
later time. No waiver by any party hereto of any condition, or of the
breach of any provision, term, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or of any other
condition or of the breach of any other provision, term,
representation or warranty hereof.
16.3 Severability. If a court or other tribunal of competent jurisdiction
should hold any term or provision of this Agreement to be excessive,
or invalid, void or unenforceable, the offending term or provision
shall be deleted, and, if possible, replaced by a term or provision
which, so far as practicable, achieves the legitimate aims of the
parties.
16.4 Relationship Between the Parties. Both parties are independent
contractors under this Agreement. Nothing herein contained shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the parties hereto or any of their agents or
employees, or any other legal arrangement that would impose liability
upon one party for the act or failure to act of the other party.
Neither party shall have any express or implied power to enter into
any contracts or commitments or to incur any liabilities in the name
of, or on behalf of, the other party, or to bind the other party in
any respect whatsoever.
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<PAGE>
16.5 Correspondence and Notices. Correspondence, reports, documentation,
and any other communication in writing between the parties in the
course of implementation of this Agreement shall be in writing and
sent by prepaid air mail, or by facsimile confirmed by prepaid
registered or certified air mail letter, and shall be deemed to have
been properly served to the addressee upon receipt of such written
communication.
16.5.1 Address for Notices. In the case of Neose, the proper address
for communications and for all payments shall be:
Neose Technologies, Inc.
102 Witmer Road
Horsham, Pennsylvania 19044
Attn: President
cc: Morgan, Lewis and Bockius LLP
1701 Market Street
Philadelphia PA 19103-2921
Attn: David R. King, Esq.
and it the case of Wyeth-Ayerst, the proper address for
communications and for all payments shall be:
Wyeth-Ayerst International Inc.
P.O. Box 8299
Philadelphia, Pennsylvania 19101
Attn: Senior Vice President, Global Business Development
With a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
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<PAGE>
16.6 Choice of Law. This Agreement is subject to and governed by the
laws of the Commonwealth of Pennsylvania, U.S.A. (without
regard to conflict of law principles).
16.7 Entire Agreement; Amendment. This Agreement, including the
Exhibits and Schedules hereto and thereto and all the
covenants, promises, agreements, warranties, representations,
conditions and understandings contained herein and therein sets
forth the complete, final and exclusive agreement between the
parties and supersedes and terminates all prior and
contemporaneous agreements and understandings between the
parties, whether oral or in writing. There are no covenants,
promises, agreements, warranties, representations, conditions
or understandings, either oral or written, between the parties
other than as are set forth in this Agreement. No subsequent
alteration, amendment, change, waiver or addition to this
Agreement shall be binding upon the parties unless reduced to
writing and signed by an authorized officer of each party. No
understanding, agreement, representation or promise, not
explicitly set forth herein, has been relied on by either party
in deciding to execute this Agreement.
16.8 Headings. The headings and captions used in this Agreement are
solely for the convenience of reference and shall not affect
its interpretation.
16.9 Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of
which shall constitute together the same document.
16.10 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as
may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement including, without
limitation, any filings with any antitrust agency which may be
required.
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IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed by their duly authorized representatives.
American Home Products Corporation Neose Technologies, Inc.
By: _________________________ By: _________________________
Name: ______________________ Name: _______________________
Title: ______________________ Title: ______________________
Date: ______________________ Date: _______________________
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<TABLE>
<CAPTION>
EXHIBIT A
Neose Technologies Patents/Patent Applications
- --------------------------------------------------------------------------------------------------------------
Title Inventor Country Serial No. Filing Date Patent/Pub No. Issue Date
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*] [*]
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[*] [*] [*] [*] [*]
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[*] [*] [*]
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[*] [*] [*]
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[*] [*] [*] [*]
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[*] [*] [*] [*] [*]
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[*] [*] [*] [*] [*] [*] [*]
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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<TABLE>
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<S> <C> <C> <C> <C>
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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<TABLE>
<CAPTION>
EXHIBIT B
Former Cytel Corporation Patents/Patent Applications
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Title Inventor Country Serial No. Filing Date Patent/Pub No. Issue Date
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</TABLE>
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[*] We are seeking confidential treatment of the terms that have been omitted.
The confidential portions have been filed separately with the Securities and
Exchange Commission.
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<PAGE>
EXHIBIT C
o [*]
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[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portions have been filed separately with the
Securities and Exchange Commission.
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