<PAGE>
FORM 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-19732
CORVAS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0238812
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3030 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices and zip code)
(619) 455-9800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
-- --
At July 31, 1997, there were 13,900,579 shares of Common Stock, $0.001
par value, of the Registrant issued and outstanding.
<PAGE>
CORVAS INTERNATIONAL, INC.
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Balance Sheets as of June 30, 1997 (unaudited) and
December 31, 1996 1
Unaudited Condensed Statements of Operations for the Three and
Six Months Ended June 30, 1997 and 1996 2
Unaudited Condensed Statements of Cash Flows for the Three and
Six Months Ended June 30, 1997 and 1996 3
Notes to Condensed Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3 Quantitative and Qualitative Disclosures About Market Risk 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 9
None
Item 3 Defaults Upon Senior Securities 9
None
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 10
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits 11
(b) Reports on Form 8-K 11
None
SIGNATURES 12
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CORVAS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 861 $ 2,202
Short-term debt securities held to maturity
and time deposits, partially restricted 27,460 26,394
Receivables 236 438
Notes receivable from related parties 200 200
Other current assets 728 312
------------- ------------
Total current assets 29,485 29,546
Property and equipment, net 1,364 1,093
------------- ------------
$ 30,849 $ 30,639
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 253 $ 358
Accrued expenses 1,213 713
Accrued vacation 225 194
Current portion of capital lease obligation 0 27
Deferred revenue 4,444 4,000
------------- ------------
Total current liabilities 6,135 5,292
------------- ------------
Deferred revenue 0 1,000
Stockholders' equity:
Preferred stock - Series A 1 1
Preferred stock - Series B 0 0
Common stock 14 14
Additional paid-in capital 92,001 91,629
Accumulated deficit (67,302) (67,297)
------------- ------------
Total stockholders' equity 24,714 24,347
------------- ------------
Commitments and contingencies
$ 30,849 $ 30,639
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to condensed financial statements.
1
<PAGE>
CORVAS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
In thousands, except per share amounts (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Revenue from collaborative agreements $ 1,244 $ 1,085 $ 2,319 $ 3,170
License fees & milestones 250 0 4,100 0
Net product sales 153 25 163 46
Royalties 21 0 57 81
-------- -------- -------- --------
Total revenues 1,668 1,110 6,639 3,297
-------- -------- -------- --------
COSTS AND EXPENSES:
Research and development 2,693 3,617 5,042 5,916
General and administrative 1,391 894 2,239 1,687
Cost of products sold 74 30 78 54
-------- -------- -------- --------
Total costs and expenses 4,158 4,541 7,359 7,657
-------- -------- -------- --------
Loss from operations (2,490) (3,431) (720) (4,360)
OTHER INCOME:
Interest income, net 327 301 715 569
Other income 0 0 0 30
-------- -------- -------- --------
327 301 715 599
-------- -------- -------- --------
Net loss $ (2,163) $ (3,130) $ (5) $ (3,761)
-------- -------- -------- --------
-------- -------- -------- --------
Net loss per share $ (0.15) $ (0.25) $ (0.00) $ (0.30)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in calculation
of net loss per share 13,850 12,609 13,832 12,350
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed financial statements.
2
<PAGE>
CORVAS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
IN THOUSANDS (UNAUDITED)
Six Months Ended
June 30,
----------------------
1997 1996
-------- ---------
Cash flows from operating activities:
Net loss $ (5) $ (3,761)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 311 411
Amortization of premiums and discounts on investments 26 (7)
Stock compensation expense 6 1
Change in assets and liabilities:
(Increase) decrease in receivables 202 (119)
Increase in other current assets (416) (145)
Increase in accounts payable, accrued
expenses, accrued vacation, and accrued
litigation settlement expenses 426 611
Decrease in deferred rent 0 (23)
Decrease in deferred revenue (556) (2,200)
-------- ---------
Net cash used in operating activities (6) (5,232)
-------- ---------
Cash flows from investing activities:
Purchases of investments held to maturity (27,329) (15,887)
Proceeds from maturity of investments held to maturity 26,485 6,100
Purchases of property and equipment (803) (216)
Loans to related parties 0 (440)
-------- ---------
Net cash used in investing activities (1,647) (10,443)
-------- ---------
Cash flows from financing activities:
Principal payments under capital lease obligation (20) (38)
Net proceeds from issuance of common stock 332 15,078
-------- ---------
Net cash provided by financing activities 312 15,040
-------- ---------
Net decrease in cash and cash equivalents (1,341) (635)
Cash and cash equivalents at beginning of period 2,202 1,427
-------- ---------
Cash and cash equivalents at end of period $ 861 $ 792
-------- ---------
-------- ---------
Supplemental disclosures:
Interest paid $ 0 $ 4
-------- ---------
-------- ---------
Noncash financing activities -
Common stock issued under litigation
settlement agreement $ 0 $ 298
-------- ---------
-------- ---------
See accompanying notes to condensed financial statements.
3
<PAGE>
CORVAS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) THE COMPANY
Corvas International, Inc. (the "Company") was incorporated on March 27,
1987 under the laws of the State of California. In July 1993, the Company
reincorporated in the State of Delaware. The Company is engaged in the design
and development of a new generation of therapeutic agents for the prevention
and treatment of major cardiovascular, inflammatory and other diseases.
(2) BASIS OF PRESENTATION
The interim financial information contained herein is unaudited but, in
management's opinion, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. The financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto for the year ended December 31, 1996.
Results for the interim periods are not necessarily indicative of results
for other interim periods or for the full year.
(3) NET LOSS PER SHARE
Net loss per share for the three and six months ended June 30, 1997 and
1996 is computed using the weighted average number of common share equivalents
outstanding. Common equivalent shares are not included in the per share
calculation since the effect of their inclusion would be anti-dilutive.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THIS SECTION AND THOSE DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
OVERVIEW
Formed in 1987, Corvas International, Inc. ("Corvas" or the "Company") is
a biopharmaceutical firm engaged in the design and development of a new
generation of therapeutic agents for the prevention and treatment of major
cardiovascular, inflammatory and other diseases. To date, the Company has not
generated significant revenues from product sales. The Company has not been
profitable on an annual basis since inception and expects to incur substantial
additional operating losses on an annual basis over the next several years as
the Company attempts to sustain, and possibly expand, its research and
development and clinical trial efforts. No assurance can be given that the
Company will generate sufficient revenues to become profitable on a sustained
basis or at all. At June 30, 1997, the Company had an accumulated deficit of
$67,302,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Operating revenues increased from $1,110,000 for the quarter ended June
30, 1996 to $1,668,000 in the same quarter of 1997. This $558,000 increase is
mainly attributable to fees and collaborative revenues recognized in the
second quarter of 1997 pursuant to an agreement recently entered into with
Schering Corporation ("Schering-Plough"). This agreement, the Company's
third collaboration with Schering-Plough, covers the design and development
of orally-bioavailable inhibitors of a key protease necessary for hepatitis C
virus replication.
Total costs and expenses decreased from $4,541,000 in the second quarter
of 1996 to $4,158,000 in the corresponding quarter of 1997. Research and
development expenditures decreased by $924,000, primarily due to scale-up and
manufacturing of a development candidate, rNAPc2, in the second quarter of
1996. Comparing the second quarters of 1996 and 1997, general and
administrative expenses increased by $497,000 as a result of business
development expenses associated with the hepatitis C collaboration and the
option agreement for the vascular targeting technology discussed in the Capital
Resources section which follows.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Comparing the six month periods ended June 30, operating revenues
increased from $3,297,000 in 1996 to $6,639,000 in 1997. This increase is
principally due to a $3,000,000 milestone payment received from Schering-Plough
in the first quarter of 1997 pursuant to the companies' strategic alliance
agreement to develop oral thrombin inhibitors. Also in the first quarter of
1997, a license fee of $850,000 and collaborative revenues of $75,000 were
recognized in connection with the Company's collaboration with Pfizer Inc.
("Pfizer") for the development of neutrophil inhibitory factor ("NIF"), an anti-
inflammatory agent.
5
<PAGE>
The Company's total costs and expenses decreased from $7,657,000 in the
first half of 1996 to $7,359,000 in the corresponding period one year later.
Research and development expenditures decreased by $874,000 comparing these
same periods, mainly due to clinical supplies manufacturing costs incurred in
1996 for rNAPc2. This decrease was partially offset by a $552,000 increase in
general and administrative expenses, primarily due to business development
expenses.
Total other income increased from $599,000 in the first six months of 1996
to $715,000 in the same period of 1997. Increased interest income resulting
from higher cash and investment balances accounted for this change.
Subject to the availability of additional capital, the Company expects its
expenses to increase over the next several years as the Company's research and
development programs progress. The Company also expects its losses to
fluctuate from quarter to quarter and that such fluctuations may, at times, be
substantial.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's operations have been funded primarily
through public offerings and private placements of equity securities, revenues
from collaborative agreements, license fees, milestone payments and research
grants, and interest income earned on cash and investment balances. The
Company's principal sources of liquidity are its cash and cash equivalents,
time deposits and debt securities which, net of a restricted time deposit,
totaled $28,261,000 as of June 30, 1997. Working capital at June 30, 1997 was
$23,350,000. Available cash is invested in accordance with an investment
policy set by the Board of Directors, which has objectives to preserve
principal, maintain adequate liquidity and maximize income. The policy
provides guidelines concerning the quality, term and liquidity of investments.
The Company presently invests its excess cash in U.S. government securities.
Strategic collaborations with Schering-Plough and Pfizer provide for
payments to the Company if and when certain milestones are met. However, there
can be no assurance that any of these milestones will be achieved. A
development compound was selected by Schering-Plough in the thrombin inhibitor
program during the first quarter, which triggered a $3,000,000 milestone
payment; the next milestone in this program, if achieved, is $1,000,000 to be
paid upon filing by Schering-Plough of an Investigational New Drug Application
("IND") or its equivalent for initiating clinical trials in the U.S. or any
corresponding foreign application, registration or certification. The next
milestone in the collaboration with Pfizer, if achieved, is $1,000,000 to be
paid upon notification to a regulatory authority, such as the U.S. Food and
Drug Administration, of a plan for clinical trials for NIF. In addition to
these and certain other contractually-required payments, the Company may also
receive capital resources from additional milestone payments and royalties on
sales of products in connection with its existing alliances, as well as from
potential future alliances. If all of the milestones on all of the Company's
existing collaborations are met, Corvas could receive up to a total of
$97,850,000 in milestone payments over the next several years. However, there
can be no assurance that the Company will successfully develop and
commercialize any products or that the Company will receive any additional
amounts under these or future alliances.
6
<PAGE>
Corvas recently entered into an option agreement to purchase Vascular
Genomics Inc., a private company with a proprietary position in a novel
vascular targeting technology. If this option is exercised, the purchase will
be made with newly-issued Corvas common stock. Depending on the timing of
exercise within the option period, the aggregate purchase price will range
between $12,960,000 and $19,960,000. If Corvas elects not to exercise its
option, Vascular Genomics may require Corvas to purchase 19.9% of its
outstanding stock for $3,960,000 in Corvas common stock. During the option
period, Corvas will make option payments to Vascular Genomics, which will in
turn fund certain research and development activities at Corvas. Although the
net impact of these payments will not be material to Corvas, the Company may
incur substantial additional costs to develop this technology. Corvas may
enter into one or more collaborative relationships to develop and commercialize
this technology. However, there can be no assurance that the Company will be
able to establish such relationships on satisfactory terms, that such
relationships will successfully reduce the costs associated with research and
development of this technology, that the option will be exercised, or that this
technology will prove to be effective.
The Company expects to incur substantial additional costs in the
foreseeable future, including costs related to sustaining, and possibly
expanding, research and development activities and preclinical and clinical
testing. The Company expects such costs to continue to increase and, as a
result, expects to experience substantial additional operating losses over the
next several years. The Company presently expects to file an IND in early 1998
for rNAPc2, an anticoagulant for which a Phase Ia clinical trial has recently
been completed and a Phase Ib trial is expected to begin during the third
quarter of 1997. The Company believes its capital resources and interest
earned thereon will satisfy its funding requirements through the middle of
1999, taking into consideration the funds expected from Schering-Plough under
the companies' strategic alliance agreement to develop inhibitors of Factor Xa
and the increased costs anticipated in conjunction with the Company's vascular
targeting program.
Future funding requirements of Corvas will depend on many factors,
including, but not limited to, the following: continued scientific progress in
its drug discovery programs; the magnitude of these programs; progress of
preclinical testing and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs involved in filing, prosecuting,
maintaining and enforcing patent claims; competing technological and market
developments; changes in its existing research relationships; the ability of
the Company to establish and to maintain collaborative or licensing
arrangements; the cost of manufacturing scale-up; and effectiveness of
activities and arrangements to commercialize existing and potential products.
The Company leases its laboratory and office facilities under an operating
lease. The Company expects to acquire additional property and equipment as
research and development activities progress. In addition, the Company
anticipates that it will need to expand its laboratory and office facilities
over the next several years.
The Company's business is subject to significant risks, including, but not
limited to, the risks associated with its research and development efforts,
obtaining and enforcing patents, the lengthy and expensive regulatory approval
process, product reimbursement levels, competition from other products,
dependence on collaborative partners and other third parties, the possibility
of early termination of corporate collaborations, and the availability of
capital. Even if the Company's products appear promising at an early stage of
development, they may not reach the market for a number of reasons, including
the possibility that such potential products will be ineffective or found to be
unsafe during clinical trials, will not receive necessary regulatory approvals,
will be difficult to manufacture on a large scale, will be uneconomical to
market or will be precluded from commercialization by proprietary rights of
third parties.
7
<PAGE>
Uncertainties associated with the duration and expense of preclinical and
clinical testing of any of the Company's products make it difficult to predict
the Company's capital requirements, and unexpected developments and/or
regulatory requirements could greatly increase the cost of development of such
products and affect the timing of anticipated product revenues. Failure by the
Company to obtain regulatory approval for any product will preclude the sale of
such product. In addition, failure by the Company to obtain patent protection
may make certain of its products commercially unattractive.
To continue its product development efforts, the Company must raise
substantial additional funds through public or private sales of its securities,
collaborative arrangements or other methods of financing. The Company's
ability to raise additional funds through sales of securities depends in part
on investors' perceptions of the biotechnology industry, in general, and of the
Company, in particular. The market for biotechnology company stocks has
historically been highly volatile and, accordingly, there can be no assurance
that additional funding will be available, or, if available, that it will be
available on acceptable terms. The Company may enter into additional
collaborative relationships to develop and commercialize certain of its
technologies or products. There can be no assurance that the Company will be
able to establish such relationships on satisfactory terms, if at all, or that
agreements with its collaborators will successfully reduce the Company's
funding requirements. In addition, the Company has no established bank
financing arrangements, and there can be no assurance that it will be able to
establish such arrangements on satisfactory terms, if at all. If adequate
funds are not available, the Company may be required to significantly delay,
scale back or eliminate one or more of its drug discovery programs or obtain
funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies,
product candidates or products that the Company would not otherwise relinquish.
In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
interference to determine the priority of invention between a patent for which
some rights are licensed to the Company (the "Licensed Patent") and a patent
application for which rights are held by other parties (the "First Patent
Application"). During the third quarter of 1996, the USPTO added a second
patent application to the proceeding (the "Second Patent Application") and
redeclared the interference. Rights to the Second Patent Application are held
by other parties, at least some of which also hold rights in the First Patent
Application. The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho Diagnostic Systems, Inc.
("Ortho"), a Johnson & Johnson company, to determine the blood clotting
abilities of patients. The Company is contesting the other parties' claims of
prior invention; however, there can be no assurance that the Licensed Patent
will be upheld.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
8
<PAGE>
PART II -- OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an
interference to determine the priority of invention between a patent for which
some rights are licensed to the Company (the "Licensed Patent") and a patent
application for which rights are held by other parties (the "First Patent
Application"). During the third quarter of 1996, the USPTO added a second
patent application to the proceeding (the "Second Patent Application") and
redeclared the interference. Rights to the Second Patent Application are held
by other parties, at least some of which also hold rights in the First Patent
Application. The subject matter of the patent and these applications is
recombinant tissue factor, which is used by Ortho, a Johnson & Johnson company,
to determine the blood clotting abilities of patients. The Company is
contesting the other parties' claims of prior invention; however, there can be
no assurance that the Licensed Patent will be upheld.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 15,
1997. The matters described below were submitted to a vote of stockholders.
The Company had 13,827,079 shares of common stock, 1,000,000 shares of Series A
preferred stock and 250,000 shares of Series B preferred stock outstanding as
of March 17, 1997, the record date for the annual meeting. At the annual
meeting, holders of a total of 13,556,204 shares of common and preferred stock
were present in person or represented by proxy.
9
<PAGE>
a. Election of Class II Directors for a three-year term expiring at the 2000
annual meeting:
Name Shares voting for Shares Withheld
---- ----------------- ---------------
John H. Fried, Ph.D. 13,537,471 18,733
Michael Sorell, M.D. 13,537,662 18,542
Nicole Vitullo 13,537,662 18,542
Class I Directors continuing in office until the 1999 annual meeting:
Gerard Van Acker
W. Leigh Thompson, M.D., Ph.D.
Class III Directors continuing in office until the 1998 annual meeting:
M. Blake Ingle, Ph.D.
Randall E. Woods
b. A proposal to ratify the appointment of KPMG Peat Marwick LLP as
independent auditors for the Company for the fiscal year ending
December 31, 1997.
For 13,527,534
Against 16,615
Abstain 12,055
Item 5. OTHER INFORMATION
None
10
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit Number Description
-------------- -----------
10.58 License and Collaboration Agreement
between the Company and Schering Corporation,
dated as of June 11, 1997.(1)
10.59 License and Collaboration Agreement
between the Company and Schering-Plough Ltd.,
dated as of June 11, 1997.(1)
10.60 Option Agreement between the Company and
Vascular Genomics Inc., dated as of June 29,
1997, with exhibits.(1)
10.61 Research and Development Agreement between
the Company and Vascular Genomics Inc., dated
as of June 29, 1997, with exhibits.(1)
27.1 Financial Data Schedule.
b. Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended June 30,
1997.
11
- -----------------------------
(1) Confidential treatment has been requested from the Securities and Exchange
Commission for portions of this exhibit.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORVAS INTERNATIONAL, INC.
Date: August 13, 1997 By: /s/RANDALL E. WOODS
----------------------------
Randall E. Woods
President and Chief Executive Officer
Date: August 13, 1997 By: /s/JOHN E. CRAWFORD
----------------------------
John E. Crawford
Executive Vice President
and Chief Financial Officer
12
<PAGE>
LICENSE AND COLLABORATION AGREEMENT
BETWEEN
SCHERING CORPORATION
AND
CORVAS INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS................................................................. 1.
1.1 "ACCEPTANCE CRITERIA".............................................. 1.
1.2 "ADDITIONAL ACTIVITY COMPOUNDS".................................... 1.
1.3 "AFFILIATE"........................................................ 1.
1.4 "BACK-UP COMPOUNDS"................................................ 2.
1.5 "CANDIDATE COMPOUNDS............................................... 2.
1.6 "CEO".............................................................. 2.
1.7 "CORVAS INDEMNIFIED PARTY"......................................... 2.
1.8 "CORVAS INVENTIONS"................................................ 2.
1.9 "CORVAS KNOW-HOW".................................................. 2.
1.10 "CORVAS PATENT RIGHTS"............................................. 2.
1.11 "DESCRIPTION OF DISPUTE"........................................... 2.
1.12 "DISPUTE".......................................................... 2.
1.13 "EARNED ROYALTY"................................................... 2.
1.14 "EPO".............................................................. 3.
1.15 "FDA".............................................................. 3.
1.16 "FIELD"............................................................ 3.
1.17 "FTE".............................................................. 3.
1.18 "GLP".............................................................. 3.
1.19 "HCV ACTIVITY COMPOUNDS"........................................... 3.
1.20 "HRD".............................................................. 3.
1.21 "IND".............................................................. 3.
1.22 "INDEPENDENT INVENTIONS"........................................... 3.
1.23 "INITIAL LEAD CRITERIA"............................................ 3.
1.24 "JOINT INVENTIONS"................................................. 3.
1.25 "KNOW-HOW"......................................................... 3.
1.26 "LICENSED PRODUCT"................................................. 3.
1.27 "NDA".............................................................. 4.
1.28 "NET SALES"........................................................ 4.
1.29 "NON-COLLABORATION COMPOUNDS"...................................... 4.
1.30 "PRODUCT PLAN"..................................................... 4.
1.31 "PUBLICATION NOTICE"............................................... 4.
1.32 "REPRESENTATIVES".................................................. 4.
1.33 "RESEARCH COMMITTEE"............................................... 4.
1.34 "RESEARCH PROGRAM"................................................. 4.
1.35 "RESEARCH PROGRAM TERM"............................................ 4.
1.36 "SCHERING INDEMNIFIED PARTY"....................................... 4.
1.37 "SCHERING INDEPENDENT RESEARCH".................................... 4.
1.38 "SCHERING INVENTIONS".............................................. 5.
1.39 "SCHERING KNOW-HOW"................................................ 5.
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
1.40 "SCHERING PATENT RIGHTS"........................................... 5.
1.41 "SCHERING-PLOUGH AGREEMENT"........................................ 5.
1.42 "SCHERING TECHNOLOGY".............................................. 5.
1.43 "TERRITORY"........................................................ 5.
1.44 "TITLE 11"......................................................... 5.
1.45 "TRADEMARK"........................................................ 5.
1.46 "VALID CLAIM"...................................................... 5.
1.47 "WORLDWIDE NET SALES".............................................. 5.
ARTICLE 2
RESEARCH PROGRAM............................................................ 6.
2.1 Corvas Work........................................................ 6.
2.2 Schering Work...................................................... 6.
2.3 Research Program Funding........................................... 6.
2.4 Research Committee................................................. 6.
2.5 Candidate Compound Acceptance; Back-up Compounds................... 7.
2.6 Research Program Reports........................................... 8.
2.7 Research Program Term.............................................. 8.
2.8 Research Program Term Extension.................................... 8.
ARTICLE 3
LICENSE GRANTS; SUBLICENSES................................................. 8.
3.1 Exclusive License Grant............................................ 8.
3.2 Sublicenses........................................................ 9.
3.3 Non-exclusive License Grant........................................ 9.
3.4 Research License Grant.............................................10.
3.5 First Negotiation..................................................10.
3.6 No Corvas Obligation with Respect to Non-Collaboration HCV Activity
Compound...........................................................10.
3.7 Additional Activity Compound.......................................11.
ARTICLE 4
PAYMENTS.....................................................................11.
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
4.1 License Fee........................................................11.
4.2 Initial Lead Identification Payment................................11.
4.3 First Candidate Compound Acceptance Payment........................12.
4.4 Milestone Payments.................................................12.
4.5 Royalty Payment Dates..............................................12.
4.6 Direct Affiliate Licenses..........................................13.
4.7 Place of Royalty Payment and Currency Conversions..................13.
4.8 Royalties on Resales...............................................13.
4.9 Duration of Royalty Payments.......................................14.
4.10 Maintenance of Royalty Records.....................................14.
4.11 Compulsory Royalties...............................................14.
ARTICLE 5
DILIGENCE...................................................................14.
5.1 Schering Reports...................................................14.
5.2 Schering Diligence.................................................15.
ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY..........................................15.
6.1 Corvas Intellectual Property.......................................15.
6.2 Schering Intellectual Property.....................................16.
6.3 Joint Intellectual Property........................................16.
6.4 Independent Inventions.............................................16.
ARTICLE 7
CONFIDENTIALITY OBLIGATIONS.................................................16.
ARTICLE 8
INTELLECTUAL PROPERTY.......................................................17.
8.1 Trademarks.........................................................17.
8.2 Patents............................................................17.
8.3 Prosecution and Maintenance........................................18.
8.4 Patent Extensions..................................................18.
8.5 Third Party Infringements..........................................19.
iii.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 9
TERM AND TERMINATION........................................................19.
9.1 Term...............................................................19.
9.2 Termination for Breach.............................................19.
9.3 Voluntary Schering Termination.....................................20.
9.4 Automatic Termination..............................................20.
9.5 Post Termination Royalties.........................................20.
9.6 Post Termination Product Sales.....................................20.
9.7 Insolvency and Bankruptcy..........................................21.
9.8 Rights Upon Termination............................................22.
ARTICLE 10
WARRANTIES AND COVENANTS....................................................23.
10.1 Authority..........................................................23.
10.2 No Conflicting Undertakings........................................23.
10.3 No Conflicting Future Actions......................................23.
10.4 No Guarantee of Research Program Success...........................23.
10.5 Corvas Ownership of Patents........................................23.
10.6 Compliance with Agreement and Laws.................................23.
10.7 No Government Rights to Licensed Property..........................24.
10.8 No Third Party Rights to Compounds.................................24.
10.9 Negative Covenants. ...............................................24.
ARTICLE 11
INDEMNITY...................................................................24.
11.1 Schering Indemnity.................................................24.
11.2 Corvas Indemnity...................................................24.
11.3 Indemnity Obligations..............................................25.
11.4 Liability Insurance................................................25.
ARTICLE 12
MISCELLANEOUS...............................................................25.
12.1 Waiver.............................................................25.
12.2 Notices............................................................25.
12.3 Applicable Law.....................................................26.
iv.
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
12.4 Dispute Resolution................................................26.
12.5 Captions..........................................................27.
12.6 Entire Agreement and Amendment....................................27.
12.7 Assignment........................................................27.
12.8 Survival of Terms.................................................27.
12.9 No Agency.........................................................27.
12.10 Severability......................................................27.
12.11 Express and Implied Licenses......................................28.
12.12 Force Majeure.....................................................28.
12.13 Publicity.........................................................28.
12.14 Counterparts......................................................28.
12.15 Cooperation.......................................................28.
12.16 Publication.......................................................28.
EXHIBITS:
A - Research Program
B - Initial Lead Criteria
C - Acceptance Criteria
D - Licensed Products
E - Corvas Schedule of Exceptions
F - Arbitration
G - Press Release
H - HCV Activity Criteria
I - Back-up Compound Criteria
J - Additional Activity Criteria
v.
<PAGE>
INDEX OF OCCURRENCE OF DEFINED TERMS
TERM PAGE NO.
Acceptance Criteria 1., 7., 8., 20.
Additional Activity Compounds 1., 11.
Affiliate 1., 4., 13., 24., 27.
Back-up Compounds 2., 8., 16.
Candidate Compounds 2., 7., 16., 20., 22., 24.
CEO 2., 26.
Corvas Indemnified Party 2., 24.
Corvas Inventions 2., 16.
Corvas Know-How 2., 9., 16.
Corvas Patent Rights 2., 5., 9., 17., 18., 19., 23.
Description of Dispute 2., 26.
Dispute 2., 26.
Earned Royalty 2., 13., 14.
EPO 3., 18.
FDA 3., 12., 28.
Field 3., 16.
FTE 3., 6.
GLP 3., 11.
HCV Activity Compounds 3., 9.
HRD 3., 15.
IND 3., 12.
Independent Inventions 3., 16.
Initial Lead Criteria 3., 7., 11., 12., A-2, A-3
Joint Inventions 2., 3., 5., 16., 18.
Know-How 3., 5., 16.
Licensed Product 2., 3., 4., 5., 7., 12., 13., 14., 15.,
16., 17., 18.,20., 21., 22., 24.,...
NDA 4., 12., 14., 15.
Net Sales 4., 12., 13., 14., 19., 20.
Non-Collaboration Compounds 4.
Product Plan 4., 14.
Publication Notice 4., 28., 29.
Representatives 4., 26.
Research Committee 4., 6., 7., 11., 20.
Research Program 2., 3., 4., 5., 6., 7., 8., 16., 23.
Research Program Term 2., 4., 5., 6., 7., 8., 20.
Schering Indemnified Party 4., 25.
Schering Independent Research 4., 16.
Schering Inventions 5., 16.
vi.
<PAGE>
Schering Know-How 5.
Schering Patent Rights 5.
Schering-Plough Agreement 5.
Schering Technology 5., 20., 22.
Territory 2., 4., 5., 9., 14., 20., 22., 23., 24.
Title 11 5., 21.
Trademark 5., 17.
Valid Claim 5., 9., 14.
Worldwide Net Sales 2., 5.
vii.
<PAGE>
LICENSE AND COLLABORATION AGREEMENT
THIS LICENSE AND COLLABORATION AGREEMENT ("AGREEMENT"), effective as of the
11th day of June, 1997 (the "EFFECTIVE DATE"), is made by and between CORVAS
INTERNATIONAL, INC., a corporation of the State of Delaware ("CORVAS"), and
SCHERING CORPORATION, a corporation of the State of New Jersey ("SCHERING").
W I T N E S S E T H:
WHEREAS, Corvas owns certain technology relating to design and development
of transition state-based chemical entities that may be inhibitors of proteases
of the Hepatitis C virus;
WHEREAS, Schering has experience and a unique commercial position in the
field of treatment of Hepatitis C;
WHEREAS, Schering desires an exclusive license to chemical entities that
are transition state-based inhibitors of proteases of the Hepatitis C virus that
are suitable for treatment of Hepatitis C and Corvas desires to grant such an
exclusive license, pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions hereinafter set forth, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following meanings,
and the singular shall include the plural and vice versa as the context
requires:
1.1 "ACCEPTANCE CRITERIA" shall mean those standards described on Exhibit
C hereto, as such Exhibit may be amended from time to time by mutual written
agreement of the parties.
1.2 "ADDITIONAL ACTIVITY COMPOUNDS" means HCV Activity Compounds meeting
the "Additional Activity Criteria" set forth in Exhibit J.
1.3 "AFFILIATE" means any company or organization controlling, controlled
by, or under common control with Schering or Corvas, as the case may be. For
this purpose, the terms control, controlled and controlling mean the possession
of the power to direct or cause the direction of the management and the policies
of an entity, whether through ownership directly or indirectly of over fifty
percent (50%) of the stock entitled to vote, and for non-stock
1.
<PAGE>
organizations, the right to receive over fifty percent (50%) of the profits by
contract or otherwise.
1.4 "BACK-UP COMPOUNDS" means Candidate Compounds meeting the criteria set
forth in Exhibit I.
1.5 "CANDIDATE COMPOUNDS" means chemical entities designed or identified
by Corvas as of the Effective Date or pursuant to the Research Program that are
inhibitors of at least [ *** ] of the Hepatitis C virus.
1.6 "CEO" shall have the meaning assigned to it in Paragraph 12.4.
1.7 "CORVAS INDEMNIFIED PARTY" shall have the meaning assigned to it in
Paragraph 11.1.
1.8 "CORVAS INVENTIONS" shall have the meaning assigned to it in Paragraph
6.1.
1.9 "CORVAS KNOW-HOW" means any Know-How which is necessary for making,
using or selling any Licensed Product and which is owned or controlled by Corvas
or a Corvas Affiliate, as of the Effective Date or during the Research Program
Term, and which Corvas or such Affiliate has a right to disclose and license to
Schering, including Corvas' rights in Joint Inventions to the extent not
included in Corvas Patent Rights. Expressly excluded from Corvas Know-How is
Know-How directly related to (i) technology generally useful to impart oral
activity to a molecule or (ii) technology generally useful for the design,
preparation or screening of transition state chemical libraries.
1.10 "CORVAS PATENT RIGHTS" means Corvas' rights in all patents (including
inventors' certificates, reissues, reexaminations, extensions or other
governmental actions which extend any of the subject matter of a patent, and any
substitutions, confirmations, registrations or additions of or to any of the
foregoing) issuing from any application (including any provisionals,
divisionals, continuations and continuations-in-part) filed to protect Corvas
Inventions or Corvas' interest in Joint Inventions, or otherwise filed to
protect either (i) a transition state-based inhibitor of the [ *** ] of the
Hepatitis C virus existing within Corvas Know-How as of the Effective Date or
(ii) an inhibitor of the Hepatitis C viral proteases within Corvas Know-How
arising from the Research Program. Expressly excluded from Corvas Patent Rights
are Corvas' rights in any patent, directly related to (i) technology generally
useful to impart oral activity to a molecule or (ii) technology generally useful
for the design, preparation or screening of transition state chemical libraries.
1.11 "DESCRIPTION OF DISPUTE" shall have the meaning assigned to it in
Paragraph 12.4.
1.12 "DISPUTE" shall have the meaning assigned to it in Paragraph 12.4.
1.13 "EARNED ROYALTY" means [ *** ] of annual Net Sales of each Licensed
Product in the Territory during any calendar year based upon Worldwide Net Sales
of each
* CONFIDENTIAL TREATMENT REQUESTED
2.
<PAGE>
Licensed Product during each such calendar year of up to [ *** ] and [ *** ] of
each such Net Sales based upon Worldwide Net Sales in excess of [ *** ] during
any calendar year.
1.14 "EPO" shall have the meaning assigned to it in Paragraph 8.3.
1.15 "FDA" means the United States Food and Drug Administration or any
corresponding foreign drug registration governmental authority.
1.16 "FIELD" means the treatment or prevention of Hepatitis C infections in
humans and/or animals.
1.17 "FTE" means a full-time equivalent of one scientific or technical
person performing work as part of the Research Program.
1.18 "GLP" means the standard for good laboratory practices as promulgated
by the FDA in effect at a particular time.
1.19 "HCV ACTIVITY COMPOUNDS" means Candidate Compounds (other than
Licensed Products or Back-Up Compounds) or Non-Collaboration Compounds meeting
the "HCV Activity Criteria" set forth in Exhibit H.
1.20 "HRD" means a health registration dossier or its equivalent filed in
any country outside the United States and which is analogous to an NDA
including, where applicable, applications for pricing, pricing reimbursement
approval, labeling and regulatory approval.
1.21 "IND" means an Investigational New Drug Application or its equivalent
for initiating clinical trials in the United States or any corresponding foreign
application, registration or certification.
1.22 "INDEPENDENT INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.4.
1.23 "INITIAL LEAD CRITERIA" means the criteria set forth in Exhibit B.
1.24 "JOINT INVENTIONS" shall have the meaning assigned to it in Paragraph
6.3.
1.25 "KNOW-HOW" means all ideas, inventions, data, results, instructions,
processes, formulas, expert opinion and information, including, without
limitation, biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical, safety, manufacturing and
quality control data and information.
1.26 "LICENSED PRODUCT" means anything containing or derived from a
Candidate Compound accepted by Schering for development pursuant to Paragraph
2.5.
* CONFIDENTIAL TREATMENT REQUESTED
3.
<PAGE>
1.27 "NDA" means a New Drug Application, Product License Application or its
equivalent in the United States.
1.28 "NET SALES" means the gross amounts received from sales in the
Territory of Licensed Products by Schering, its Affiliates and sublicensees to
third party customers after deduction of (i) normal and customary trade, cash
and quantity discounts, allowances and credits actually allowed; (ii) credits or
allowances actually granted for damaged goods, returns or rejections of Licensed
Product and retroactive price reductions; (iii) sales or similar taxes
(including duties or other governmental charges levied on, absorbed or otherwise
imposed on the sale of Licensed Product including, without limitation, value
added taxes or other governmental charges otherwise measured by the billing
amount), when included in billing; (iv) freight, postage, shipping, customs
(i.e. import or export) duties and insurance charges paid for and separately
identified on the invoice or other documentation maintained in the ordinary
course of business; (v) charge back payments and rebates granted to managed
health care organizations or to federal, state and local governments, their
agencies, and purchasers and reimbursers or to trade customers, including but
not limited to, wholesalers and chain and pharmacy buying groups. A "sale" of a
Licensed Product is deemed to occur upon the earliest of invoicing, shipment or
transfer of title in the Licensed Product to a person or entity other than
Schering or its Affiliate or sublicensee.
1.29 "NON-COLLABORATION COMPOUNDS" means chemical entities (i) designed or
identified by Corvas after the Effective Date and outside of the Research
Program but (ii) covered by a Valid Claim that also covers a composition of
matter of a Licensed Product or a Back-up Compound.
1.30 "PRODUCT PLAN" shall have the meaning assigned to it in Paragraph 5.1.
1.31 "PUBLICATION NOTICE" shall have the meaning assigned to it in
Paragraph 12.16.
1.32 "REPRESENTATIVES" shall have the meaning assigned to it in
Paragraph 12.4.
1.33 "RESEARCH COMMITTEE" shall have the meaning assigned to it in
Paragraph 2.4(a).
1.34 "RESEARCH PROGRAM" means the program of research conducted pursuant to
Article 2.
1.35 "RESEARCH PROGRAM TERM" shall have the meaning assigned to it in
Paragraph 2.7.
1.36 "SCHERING INDEMNIFIED PARTY" shall have the meaning assigned to it in
Paragraph 11.2.
1.37 "SCHERING INDEPENDENT RESEARCH" shall have the meaning assigned to it
in Paragraph 6.4.
4.
<PAGE>
1.38 "SCHERING INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.2.
1.39 "SCHERING KNOW-HOW" means any Know-How which is necessary for making,
using or selling any Candidate Compound, Licensed Product or Back-up Compound
and which is owned or controlled by Schering or a Schering Affiliate, as of the
Effective Date or during the Research Program Term, and which Schering has a
right to disclose and license to Corvas.
1.40 "SCHERING PATENT RIGHTS" means Schering's rights in all patents
(including inventors' certificates, reissues, reexaminations, extensions or
other governmental actions which extend any of the subject matter of a patent,
and any substitutions, confirmations, registrations or additions of or to any of
the foregoing) issuing from any application (including any provisionals,
divisionals, continuations and continuations-in-part) filed to protect Schering
Inventions or Schering's interest in Joint Inventions.
1.41 "SCHERING-PLOUGH AGREEMENT" means the License and Collaboration
Agreement between Schering-Plough Ltd. and Corvas International, Inc. dated June
11, 1997.
1.42 "SCHERING TECHNOLOGY" means all Schering Inventions (to the extent not
included within Schering Patent Rights), Schering Patent Rights, Schering
Know-How and other intellectual property acquired by Schering whether by an
assignment or a license (with the right to sublicense) in connection with the
Research Program, or in connection with the discovery, evaluation, development
or testing of any Licensed Product.
1.43 "TERRITORY" means the United States, its territories, commonwealths
and possessions.
1.44 "TITLE 11" shall mean Title 11 of the United States Code, as amended
from time to time.
1.45 "TRADEMARK" means any trademark selected and registered by Schering,
its Affiliates or sublicensees worldwide for the marketing of a Licensed
Product.
1.46 "VALID CLAIM" means any claim contained in any issued patent included
within the Corvas Patent Rights or Schering Patent Rights which has not been
abandoned or declared invalid in a non-appealable order, as the case may be, and
which would be infringed by the manufacture, use, sale, offer for sale or import
of a Licensed Product in the absence of the license granted in this Agreement.
1.47 "WORLDWIDE NET SALES" means the sum of (i) Net Sales as defined in
this Agreement and (ii) Net Sales as defined in the Schering-Plough Agreement.
5.
<PAGE>
ARTICLE 2
RESEARCH PROGRAM
2.1 CORVAS WORK. During the Research Program Term, Corvas shall use
commercially reasonable efforts to conduct the activities assigned to it under
the Research Program as described in Exhibit A. From time to time during the
Research Program Term Schering shall provide Corvas materials and information as
described in, and to the extent necessary for Corvas to perform its obligations
under, the Research Program as described in Exhibit A.
2.2 SCHERING WORK. During the Research Program Term, Schering shall use
commercially reasonable efforts to conduct the activities assigned to it under
the Research Program as described in Exhibit A.
2.3 RESEARCH PROGRAM FUNDING. Schering shall fund the first year of the
Research Program by paying to Corvas [ *** ] to support [ *** ] FTEs for
[ *** ], due within ten (10) days of the execution of this Agreement. In the
event that Schering extends the Research Program pursuant to Paragraph 2.8
below, Schering shall continue to support the Research Program at Corvas by
paying to Corvas research funding for each additional [ *** ] extension year at
the rate of [ *** ] per FTE for a minimum of [ *** ] and a maximum of [ *** ]
FTEs per year, with the actual number of FTEs in each extension year to be
determined by the Research Committee, to be paid on or within ten (10) days of
the commencement of each extension of the Research Program Term.
2.4 RESEARCH COMMITTEE.
(a) MEMBERS. Promptly after the Effective Date of this Agreement,
the parties will establish a research committee ("RESEARCH COMMITTEE")
consisting of six (6) members, three (3) from and selected by each of the
parties hereto, with [ *** ] Ph.D., to serve as the initial chairman. The
initial Corvas members shall be [ *** ] The initial Schering members shall be
[ *** ] From time to time each party may make substitutions for one or more of
its representatives, in its sole discretion, effective upon notice to the other
party of such change.
(b) MEETINGS. The Research Committee will hold its initial meeting
at Corvas' facilities within thirty (30) days following the Effective Date and
will meet thereafter regularly at the call of the Chairman at least quarterly
while the Research Program is being undertaken. The location of such meetings
shall alternate between Corvas' and Schering's United States facilities.
Alternatively, the Research Committee may meet by means of conference call,
video conference or other similar communications equipment. The Research
Committee shall appoint a secretary from among its members for each meeting.
The Chairman for each meeting shall be responsible for preparing and issuing
minutes of each meeting within fifteen (15) days
* CONFIDENTIAL TREATMENT REQUESTED
6.
<PAGE>
thereafter. Meeting minutes will be approved and countersigned by a Research
Committee representative from each of Schering and Corvas before they are
issued. Additional non-voting representatives or consultants may from time to
time be invited by Schering or Corvas to attend and participate in Research
Committee meetings (e.g., to evaluate and advise on business or scientific
issues). All decisions of the Research Committee shall be based upon unanimous
vote of at least a quorum of the members, with each of Schering and Corvas
having one (1) vote. Two (2) representatives of each party shall constitute a
quorum of the Research Committee. Each party shall bear its own meeting and
travel expenses, and each party may designate successor Research Committee
members on notice to the other party.
(c) RESPONSIBILITIES. The purpose of the Research Committee shall be
to act as an advisory committee with respect to all scientific, technical,
regulatory and other matters falling within the scope of the Research Program.
The Research Committee also shall be responsible for identification of the first
Candidate Compound meeting the Initial Lead Criteria pursuant to Paragraph 4.2
and for submitting each Candidate Compound to Schering for acceptance for
development as a Licensed Product pursuant to Paragraph 2.5. The Research
Committee will review the progress of activities performed under the Research
Program to date, evaluate the work performed in relation to the objectives of
the Research Program, exchange such other information as may be required by the
Research Program or as reasonably requested by Schering and/or Corvas relating
to the Research Program objectives or performance of the Research Program. The
Research Committee will also discuss and approve any proposed amendments to the
Research Program and Exhibit A. Schering and Corvas shall each appoint a person
("PROJECT LEADER") from among its representatives on the Research Committee to
coordinate its performance of the Research Program. The Project Leaders shall
be the primary contact between the parties with respect to the Research Program.
Each party shall notify the other within thirty (30) days of the date of this
Agreement of the appointment of its Project Leader and shall notify the other
party as soon as practicable upon changing this appointment.
2.5 CANDIDATE COMPOUND ACCEPTANCE; BACK-UP COMPOUNDS.
(a) CANDIDATE COMPOUNDS. During the Research Program Term, all
information concerning Candidate Compounds shall be submitted, from time to
time, to the Research Committee. The Research Committee shall (i) determine
which Candidate Compounds meet the Acceptance Criteria; (ii) notify Schering and
Corvas thereof; and (iii) submit such supporting data to Schering as is
reasonably necessary to permit independent confirmation by Schering that the
Acceptance Criteria have been met. Schering shall review such supporting data
for each such Candidate Compound and notify Corvas whether it shall accept such
Candidate Compound for development within ninety (90) days of the Research
Committee's notice. Schering shall also have the right to accept a Candidate
Compound for development even if such Candidate Compound does not meet the
Acceptance Criteria and even if it is not submitted to Schering by the Research
Committee. Each accepted Candidate Compound shall thereupon become a Licensed
Product. Each Licensed Product shall be listed in Exhibit D hereto. In the
event that on the ninetieth (90th) day following the expiration or termination
of the Research Program Term, Schering has not accepted for development at least
[ *** ] Candidate [ *** ] this Agreement shall terminate pursuant to Paragraph
9.4. In the event a dispute
* CONFIDENTIAL TREATMENT REQUESTED
7.
<PAGE>
shall arise as to whether or not a Candidate Compound meets the Acceptance
Criteria, such matter shall be resolved in accordance with the provisions of
Paragraph 12.4. The time periods specified in this Paragraph 2.5(a) shall be
suspended during the pendency of the proceedings contemplated by Paragraph 12.4.
(b) BACK-UP COMPOUNDS. At any time after acceptance of the first
Candidate Compound pursuant to Section 2.5(a) and prior to final approval of an
NDA or HRD for the first Licensed Product, Schering shall have the right to
designate any Back-up Compound as a Licensed Product and Schering shall notify
Corvas promptly thereof. Upon receipt by Corvas of such notice, such Back-up
Compound shall become a Licensed Product and Exhibit D hereto shall be modified
accordingly.
2.6 RESEARCH PROGRAM REPORTS. During the Research Program Term, Corvas
shall provide to Schering semi-annual written reports of its research and
development activities, Research Program progress and results, and any pertinent
information related to Hepatitis C that becomes available to it and that it has
a right to disclose, in a form mutually agreed on by both parties. During the
Research Program Term, Schering shall provide semi-annual written reports of its
research and development activities under the Research Program, including,
without limitation, progress and results of the Research Program. Corvas will
also permit Schering to establish an electronic computer link with Corvas, at
the option and at the expense of Schering, which will permit Schering to
electronically access scientific data generated and stored by Corvas and arising
out of the Research Programs, provided that Schering shall take such measures to
insure the security of such link as Corvas shall reasonably request including,
without limitation, restricting access thereto and regulating the information
communicated pursuant thereto for purposes of maintaining confidentiality.
2.7 RESEARCH PROGRAM TERM. The Research Program term shall commence on
the Effective Date of this Agreement and shall expire [ *** ] from such
Effective Date, unless extended by the parties in accordance with Paragraph 2.8
or earlier terminated in accordance with Paragraph 9.3 ("RESEARCH PROGRAM
TERM").
2.8 RESEARCH PROGRAM TERM EXTENSION. Schering may extend the Research
Program Term beyond the [ *** ] period for up to [ *** ] periods by giving
Corvas a sixty (60) days written notice of such extension prior to the
expiration of the Research Program Term and paying research and development
funding as set forth in Paragraph 2.3.
ARTICLE 3
LICENSE GRANTS; SUBLICENSES
3.1 EXCLUSIVE LICENSE GRANT.
(a) LICENSED PRODUCTS. Subject to the terms and conditions of this
Agreement, Corvas hereby grants to Schering an exclusive, even as to Corvas,
license under the
* CONFIDENTIAL TREATMENT REQUESTED
8.
<PAGE>
Corvas Patent Rights and Corvas Know-How, with the right to grant sublicenses,
to make, use, sell, offer for sale, import and export Licensed Products for all
uses in the Territory.
(b) BACK-UP COMPOUNDS. Subject to the terms and conditions of this
Agreement, Corvas hereby grants to Schering an exclusive, even as to Corvas,
license under the Corvas Patent Rights and Corvas Know-How, with the right to
grant sublicenses, to make, use, offer for sale, import and export Back-up
Compounds for all uses in the Territory. The license granted in this
Section 3.1(b) shall expire when Back-up Compounds become Licensed Products in
accordance with Section 2.5(b).
(c) HCV ACTIVITY COMPOUNDS. Subject to the terms and conditions of
this Agreement, Corvas hereby grants to Schering an exclusive, even as to
Corvas, license under the Corvas Patent Rights to make, use, offer for sale,
import and export any HCV Activity Compounds solely within the Field in the
Territory. For the purposes of Paragraphs 4.4, 4.5, 4.7, 4.9, 4.10, 4.11, 5.1,
9.5, 9.6, 10.4 and Article 8, such HCV Activity Compounds shall be deemed
Licensed Products.
3.2 SUBLICENSES. The right of Schering to grant sublicenses under
Paragraph 3.1(a) of this Agreement is subject to the conditions that:
(i) each sublicense shall be consistent with all relevant and
applicable terms and conditions of this Agreement;
(ii) Schering shall remain responsible to Corvas for all of each
sublicensee's obligations under the sublicense;
(iii) each sublicense shall provide for its continuation following
early termination of Schering's license rights from Corvas and its assignment to
Corvas, or at Corvas' election, its termination; and
(iv) Schering shall provide Corvas a copy of each sublicense agreement
granting rights to the manufacturing, selling, promotion, marketing or
distribution of Licensed Products within thirty (30) days of its execution other
than sublicense agreements which are limited licenses incidental to development
and commercialization activities on behalf of Schering.
3.3 NON-EXCLUSIVE LICENSE GRANT. In the event that the development,
making, having made, importing, exporting, use, offering for sale or sale of
Licensed Products by Schering, its Affiliates or sublicensees would infringe
during the term of this Agreement a claim contained in any issued patent owned
or controlled by Corvas which has not been abandoned or declared invalid in a
non-appealable order, as the case may be, and which patent is not included
within the grants to Schering under Paragraph 3.1 hereof, to the extent it is
free to do so under other agreements that may be in place with third parties,
Corvas hereby grants to Schering a non-exclusive license under any such patents
to develop, make, have made, import, export, use, offer for sale and sell
Licensed Products for all uses in the Territory.
9.
<PAGE>
3.4 RESEARCH LICENSE GRANT.
(a) CORVAS GRANT. Subject to the terms and conditions of this
Agreement, and to the extent it is free to do so under other agreements that may
be in place with third parties, Corvas hereby grants to Schering a non-exclusive
license under its patents, trademarks and other intellectual property only to
the extent necessary to carry out Schering's obligations and responsibilities
under the Research Program and to develop and commercialize a Licensed Product.
Such research license shall remain in full force and effect until, and shall
terminate upon, the expiration or termination of this Agreement.
(b) SCHERING GRANT. Subject to the terms and conditions of this
Agreement, and to the extent it is free to do so under other agreements that may
be in place with third parties, Schering hereby grants to Corvas a non-exclusive
license under its patents, trademarks and other intellectual property only to
the extent necessary to carry out Corvas' obligations and responsibilities under
the Research Program. Such research license shall remain in full force and
effect until, and shall terminate upon, the expiration or termination of the
Research Program Term.
3.5 FIRST NEGOTIATION.
(a) FIRST NEGOTIATION RIGHT. In the event Corvas decides to initiate
negotiations with any third party to license it compounds, other than Candidate
Compounds, developed by or on behalf of Corvas for inhibition of a viral
protease other than a Hepatitis C virus protease, Corvas shall notify Schering
in writing prior to initiating or soliciting such negotiations. For a period of
thirty (30) days following receipt of such notice from Corvas, during which
period Corvas shall not discuss such compounds with any third party, Schering
may notify Corvas of its desire to initiate good faith negotiations, on a
non-exclusive basis, with regard to such compounds. If Corvas and Schering
shall not have entered into a binding agreement within ninety (90) days of
Schering's notice, during which period Corvas shall have conducted such
negotiations in good faith, Corvas shall be free to enter into an agreement with
respect to such compounds with any third party and shall have no further
obligation or liability to Schering with respect thereto or obligation to offer
or disclose to Schering the terms offered to such third party.
(b) TERM OF FIRST NEGOTIATION RIGHT. The rights granted under this
Paragraph 3.5 shall remain in full force and effect for a period of five (5)
years from the Effective Date.
3.6 NO CORVAS OBLIGATION WITH RESPECT TO NON-COLLABORATION HCV ACTIVITY
COMPOUND. With respect to the license granted in Section 3.1(c), Corvas shall
have no obligation to synthesize or test any Non-Collaboration Compound which is
also an HCV Activity Compound and shall have no obligation to routinely perform,
or permit the performance of, assays or otherwise identify any such HCV Activity
Compound. Notwithstanding the foregoing, in the event Corvas identifies such
HCV Activity Compound, it shall promptly notify Schering of the structure and
activity of such compound.
10.
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3.7 ADDITIONAL ACTIVITY COMPOUNDS.
(a) NON-COLLABORATION ADDITIONAL ACTIVITY COMPOUNDS IDENTIFIED BY
SCHERING. In the event that (i) Schering identifies a Non-Collaboration
Compound which is also an Additional Activity Compound, and (ii) such compound
does not meet the criteria set forth in Exhibit I, and (iii) Schering has not
already commenced clinical development in the Field of such compound, the rights
to such Additional Activity Compound granted to Schering under Section 3.1(c)
shall revert to Corvas.
(b) COLLABORATION ADDITIONAL ACTIVITY COMPOUNDS IDENTIFIED BY
SCHERING. In the event that Schering identifies a Candidate Compound which is
also an Additional Activity Compound, Schering shall retain rights to such
Additional Activity Compound granted to it under Section 3.1(c)
(c) RIGHT TO NEGOTIATE FOR ADDITIONAL ACTIVITY COMPOUNDS IDENTIFIED
BY SCHERING. Schering shall immediately notify Corvas of Schering's
identification of any Additional Activity Compound and for a period of one
hundred twenty (120) days following the receipt of such notice by Corvas,
Schering shall have the right to conduct good faith negotiations, on an
exclusive basis, with regard to such field or fields of use for such Additional
Activity Compound as the parties may agree. If Corvas and Schering shall not
have entered into such binding agreement within such 120-day period, Corvas
shall be free to enter into an agreement with respect to Additional Activity
Compound with any third party and shall have no further obligation or liability
to Schering with respect thereto.
(d) ADDITIONAL ACTIVITY COMPOUNDS DISCOVERED BY CORVAS OR ITS
PARTNERS. In the event that (i) Corvas or its partner identifies an Additional
Activity Compound (which specifically excludes Licensed Products and Back-up
Compounds) and (ii) Schering has not already commenced a six (6) month GLP
toxicology testing program of such compound in the Field, Corvas shall
immediately notify Schering of such identification and all rights to such
compound granted to Schering under Section 3.1(c) shall revert to Corvas.
ARTICLE 4
PAYMENTS
4.1 LICENSE FEE. Within ten (10) days of the Effective Date, Schering
shall pay a license fee of [ *** ] to Corvas by wire transfer of immediately
available funds to an account designated by Corvas.
4.2 INITIAL LEAD IDENTIFICATION PAYMENT. Upon recommendation by the
Research Committee that a Candidate Compound meets the Initial Lead Criteria,
the Research Committee shall, if Schering shall have not previously accepted a
Candidate Compound as meeting the Initial Lead Criteria as hereinafter in this
Paragraph 4.2 provided, provide notice thereof to Schering and Corvas and submit
to Schering such supporting data as is reasonably necessary to
* CONFIDENTIAL TREATMENT REQUESTED
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permit independent confirmation that the Initial Lead Criteria set forth in
Schedule B have been met. Schering shall have forty-five (45) days to review
such supporting data and to determine whether it shall accept such Candidate
Compound as meeting the Initial Lead Criteria. [ *** ]
4.3 FIRST CANDIDATE COMPOUND ACCEPTANCE PAYMENT. [ *** ]
4.4 MILESTONE PAYMENTS. Milestone payments shall be payable with respect
to any Licensed Product on the first achievement of the milestones listed below
in this Paragraph 4.4. Such payments shall be payable one time only regardless
of how many Licensed Products are developed hereunder.
- ------------------------------------------------------------
- ------------------------------------------------------------
MILESTONE AMOUNT
- ------------------------------------------------------------
- ------------------------------------------------------------
1. [ *** ] [ *** ]
- ------------------------------------------------------------
2. [ *** ] [ *** ]
- ------------------------------------------------------------
3. [ *** ] [ *** ]
- ------------------------------------------------------------
4. [ *** ] [ *** ]
- ------------------------------------------------------------
5. [ *** ] [ *** ]
- ------------------------------------------------------------
* [ *** ] means the earlier of (i) [ *** ] (ii) [ *** ] or (iii) [ *** ]
** [ *** ] means the earlier of (i) [ *** ] (ii) [ *** ] or (iii) [ *** ]
Schering will advise Corvas of the accomplishment of each of the milestones
described in this Paragraph 4.4 within thirty (30) days thereof, and will at the
time of such notification remit any payments due.
4.5 ROYALTY PAYMENT DATES. On the last business day of June, September,
December and March in each and every calendar year during the term of this
Agreement, following the commencement of marketing of applicable Licensed
Products hereunder, Schering shall furnish and deliver to Corvas a full and true
accounting of its Worldwide Net Sales of Licensed Products hereunder during the
three (3) month period ending with the previous March 31st, June 30th,
September 30th and December 31st and shall simultaneously pay to Corvas, for
Schering's account or for the account of the applicable Schering Affiliate or
* CONFIDENTIAL TREATMENT REQUESTED
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sublicensee, as the case may be, a sum equal to the aggregate of the Earned
Royalty due thereon. Accountings shall be made separately for each Licensed
Product. Schering's accounting of Earned Royalties shall identify Net Sales of
each Licensed Product by country, the price at which the Licensed Products were
sold, and the amount and nature of any deductions made by Schering when
calculating Net Sales. Any Earned Royalties that are not paid when due shall
bear interest from the due date to the date of payment at an annual rate equal
to the then prevailing prime interest rate in the United States as publicly
announced by Chase Manhattan Bank. It is understood and agreed that only one
Earned Royalty shall be due with respect to a Licensed Product regardless of the
number of Patent Rights which cover it.
4.6 DIRECT AFFILIATE LICENSES. Whenever Schering shall reasonably
demonstrate to Corvas that, in order to facilitate direct royalty payments by an
Affiliate, it is desirable that a separate license agreement be entered into
between Corvas and such Affiliate, Corvas will grant such licenses directly to
such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that Schering shall reimburse Corvas for its
reasonable attorneys' fees and costs incurred in connection with any such
separate license agreement, and Schering guarantees the Affiliate's obligations
thereunder or otherwise provides to Corvas assurances of performance
satisfactory to Corvas in its sole discretion.
4.7 PLACE OF ROYALTY PAYMENT AND CURRENCY CONVERSIONS. Earned Royalty
shall be deemed payable by the entity making the Net Sales from the country in
which earned in local currency and subject to foreign exchange regulations then
prevailing. Earned Royalty payments shall be made in United States dollars to
the extent that unrestricted conversion to United States dollars is permitted.
The rate of exchange to be used in any such conversion from the currency in the
country where such Net Sales are made shall be the commercial rate of exchange
prevailing in the United States on the last day of the calendar quarter for
which such payments are made as customarily quoted for use for currency
conversions between Schering and its Affiliates. If, due to restrictions or
prohibitions imposed by national or international authority, payments cannot be
made as aforesaid, the parties shall consult with a view to finding a prompt and
acceptable solution, and Schering will, from time to time, deal with such monies
as Corvas may lawfully direct at no additional out-of-pocket expense to
Schering. Notwithstanding the foregoing, if Earned Royalties in any country
cannot be remitted to Corvas for any reason within six (6) months after the end
of the calendar quarter during which they are earned, then Schering shall be
obligated to deposit the Earned Royalties in a bank account in such country in
the name of Corvas. Earned Royalty payable by Schering shall be net of any
foreign withholding taxes due and paid by Schering, it being understood that
such withholding taxes are the obligation of Corvas. Schering shall forward to
Corvas in a timely manner all tax receipts relating to such withholding taxes
and shall reasonably cooperate with Corvas in assessing its obligations with
respect thereto. Schering will provide written notice to Corvas of any foreign
tax withholding applicable to Earned Royalty sufficiently in advance of the date
such taxes are payable to provide Corvas an opportunity to review or contest the
applicability of such tax.
4.8 ROYALTIES ON RESALES. No Earned Royalty shall be payable in respect
of sales between and among Schering, its Affiliates and sublicensees, it being
understood that royalties are to be paid on resale of Licensed Products to
independent third parties.
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4.9 DURATION OF ROYALTY PAYMENTS. With respect to Net Sales of any
Licensed Product in any country in the Territory for which Earned Royalties are
due hereunder, Earned Royalty shall be paid hereunder with respect to Net Sales
of such Licensed Product for the longer period of (i) ten (10) years from the
date of first commercial sale of such Licensed Product hereunder in such country
or (ii) for so long as the manufacture, use, sale, offer for sale or import in
such country of such Licensed Product is subject to a Valid Claim in such
country. Upon expiration of the obligation to pay Earned Royalty on Net Sales
hereunder with respect to a Licensed Product in any country in the Territory,
the license granted to Schering in Article 3 shall become fully paid and
irrevocable with respect to such country and Schering, its Affiliates and
sublicensees shall thereafter be free at no cost to use any remaining
proprietary rights of Corvas granted pursuant to Article 3 herein to
commercialize the applicable Licensed Product in such country.
4.10 MAINTENANCE OF ROYALTY RECORDS. Schering shall maintain and cause its
Affiliates to maintain books of account and adequate records of all Net Sales of
Licensed Products, including those made by sublicensees. Corvas shall have the
right, by an independent public accounting firm reasonably acceptable to
Schering, employed by it and at its own expense, to examine pertinent books and
records of Schering at all reasonable times (but not more often than once each
calendar year) for the purpose of determining and reporting to Corvas the
correctness of royalty payments made hereunder; it being understood that such
examination with respect to any quarterly accounting period hereunder shall take
place not later than three (3) years following the expiration of said period.
The costs and expenses of such accounting firm shall be paid by Schering with
respect to any audit disclosing an underpayment by Schering of more than five
percent (5%). Any overpayments shall be promptly refunded to Schering. The
accounting firm representatives shall execute customary confidential agreements
prior to any examination.
4.11 COMPULSORY ROYALTIES. If the Earned Royalty set forth herein is
higher than the maximum royalty permitted by the law or regulations in any
country, the royalty payable for Net Sales of Licensed Products in such country
shall be equal to the maximum permitted royalty under such law or regulations.
ARTICLE 5
DILIGENCE
5.1 SCHERING REPORTS. During the term of this Agreement, beginning upon
the existence of a Licensed Product and continuing until Schering commences
paying royalties to Corvas with respect to such Licensed Product in accordance
with Paragraph 4.5, Schering will provide semi-annual reports to Corvas
regarding the applicable Licensed Products (i) describing the results of its
evaluation of Licensed Products; and (ii) showing in reasonable detail,
sufficient to allow Corvas to make an independent assessment of the program's
progress, the efforts to develop and commercialize Licensed Products hereunder
through the first NDA filing ("PRODUCT PLAN"). Corvas shall have the right,
upon notice to Schering, to meet with Schering twice each
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year within thirty (30) days of its receipt of semi-annual report, for the
purpose of reviewing and discussing Schering's progress thereunder. In the
event Corvas is acquired, whether by merger, sale of stock, sale of assets or
other transaction, by an entity that is a "Major Pharmaceutical Company," as
defined below, Schering's reporting obligations under this Paragraph 5.1 shall
thereafter be limited to providing a brief annual status report of progress in
the development and commercialization of Licensed Products sufficient to allow
such Major Pharmaceutical Company to monitor Schering's diligence under this
Agreement. In the event of such an acquisition, the contents of all such annual
status reports, as well as any annual reports received from Schering prior to
such acquisition, shall be treated as confidential, shall be used solely for
purposes of monitoring Schering's diligence in the commercialization of Licensed
Products, and shall only be made available to those individuals within the Major
Pharmaceutical Company who are responsible for such monitoring activities. For
purposes of this Paragraph 5.1, the term "Major Pharmaceutical Company" shall
mean any entity (including any corporation, joint venture, partnership or
unincorporated entity), as well as any Affiliates or division(s) of such entity,
that is engaged in the research, development, manufacturing, registration and
marketing of drug products that are approved under NDAs, HRDs, ANDAs or Product
License Applications (including, without limitation, any entity that is a member
of PhRMA).
5.2 SCHERING DILIGENCE. Schering shall be obligated to make continuing
diligent efforts to develop and commercialize itself or through Affiliate(s) or
sublicensee(s) at least [ *** ] commercially viable Licensed Product. Diligent
efforts shall be comparable to those efforts Schering makes with respect to its
own pharmaceutical products of comparable market potential at a comparable stage
of development. If Schering fails to exercise such diligent efforts, then
Corvas shall have the right to give Schering written notice thereof stating in
reasonable detail the particular failure. If Schering shall not correct the
failure within [ *** ] of such notice or, with respect to any failure which
cannot reasonably be cured within [ *** ], shall not initiate within [ *** ] of
such notice and thereafter diligently pursue action reasonably expected to cure
such failure (even if requiring longer to cure than the [ *** ] specified in
Paragraph 9.2), then such failure shall constitute a material breach of this
Agreement, and Corvas shall have the right to terminate this Agreement pursuant
to Paragraph 9.2 herein, but without any further right to cure such breach
notwithstanding anything to the contrary in Paragraph 9.2. In the event a
dispute shall arise as to whether a failure to exercise due diligence has
occurred or whether Schering is diligently pursuing action reasonably expected
to cure such failure, such matter shall be resolved in accordance with the
provisions of Paragraph 12.4. The periods specified in this Paragraph 5.2 shall
be suspended during the pendency of the proceedings contemplated by Paragraph
12.4.
ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY
6.1 CORVAS INTELLECTUAL PROPERTY. All rights to inventions, developments,
discoveries or improvements (whether or not patentable), which are made by
Corvas employees, agents or contractors, without inventive contribution of a
Schering employee, agent or contractor and in
* CONFIDENTIAL TREATMENT REQUESTED
15.
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direct connection with or arising from Corvas' work pursuant to the Research
Program ("CORVAS INVENTIONS") shall be owned by Corvas. Expressly excluded from
Corvas Inventions are all inventions, developments, discoveries or improvements
(whether or not patentable) which are directly related to (i) technology
generally useful to impart oral activity to a molecule and (ii) technology
generally useful for the design, preparation or screening of transition state
chemical libraries.
6.2 SCHERING INTELLECTUAL PROPERTY. All rights to inventions,
developments, discoveries or improvements (whether or not patentable), which are
made by Schering employees, agents or contractors, without inventive
contribution of a Corvas employee, agent or contractor, and in direct connection
with or arising from Schering's work pursuant to the Research Program ("SCHERING
INVENTIONS") shall be owned by Schering.
6.3 JOINT INTELLECTUAL PROPERTY. All rights to inventions, developments,
discoveries or improvements (whether or not patentable), which are made by at
least one employee, agent or contractor of Schering and at least one employee,
agent or contractor of Corvas in direct connection with or arising from work
pursuant to the Research Program ("JOINT INVENTIONS") shall be jointly owned by
Schering and Corvas.
6.4 INDEPENDENT INVENTIONS. Schering has informed Corvas, and Corvas
acknowledges, that Schering has an ongoing internal research program in the
Field and that such research may be performed by Schering or in collaboration
with one or more third parties (collectively and individually, "SCHERING
INDEPENDENT RESEARCH"). Schering shall not provide to its third party
collaborators in the Field any Corvas Know-How, Corvas Inventions and Candidate
Compounds, including but not limited to Back-up Compounds and Licensed Products.
All inventions, developments, discoveries, Know-How, and materials which arise
solely from the performance of the Schering Independent Research (individually
and collectively, "INDEPENDENT INVENTIONS") are and shall remain the sole
property of Schering or its third party collaborator(s). Any compounds arising
solely from the Schering Independent Research and not from the Research Program
which are inhibitors of a protease specific to the Hepatitis C virus (including,
without limitation, the [ *** ]) shall not be Candidate Compounds or Licensed
Products. Nothing herein shall be construed as granting to Corvas any license
or other rights to such Independent Inventions or to any patent applications or
patents relating thereto.
ARTICLE 7
CONFIDENTIALITY OBLIGATIONS
Except as necessary for the proper exercise of its rights and obligations
under this Agreement, each party agrees that it and its Affiliates, employees,
directors, agents, consultants and outside contractors (and sublicensees in the
case of Schering) will not publish or otherwise divulge, or use for its or their
own benefit apart from this Agreement, confidential information furnished to it
by the other party without the prior written approval of such other party in
each instance. The foregoing obligation shall not be imposed on a party with
respect to any
* CONFIDENTIAL TREATMENT REQUESTED
16.
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information which it can demonstrate by competent written evidence (i) was at
the time of disclosure to it (or shall thereafter, but prior to its publication,
divulgence or use for the benefit of a party or any of its Affiliates, become,
through no fault of such party or its Affiliates) a part of the public domain by
publication or otherwise; or (ii) was already properly and lawfully in its
possession at the time it was received from the other party; or (iii) was
lawfully received from a third party who was under no obligation of
confidentiality to the disclosing party with respect thereto; (iv) is
independently invented, discovered or developed by the receiving party without
use or reference to such information, (v) is required by law to be disclosed
(but only to the extent of such required disclosure and only after the
disclosing party provides a reasonable opportunity under the circumstances for
the other party to review the planned disclosure and discuss the need for same);
or (vi) is published with the mutual agreement of the parties. This obligation
shall extend until the later to occur of (i) the expiration of this Agreement,
or (ii) ten (10) years following any termination of this Agreement prior to
expiration thereof. The parties acknowledge that breach of the confidentiality
restrictions contained in this Paragraph will cause immediate and irreparable
harm for which money damages are an inadequate remedy and agree that an
aggrieved party shall be entitled to seek injunctive relief in a court of
competent jurisdiction, in addition to any other rights to remedies provided
under this Agreement or by law.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 TRADEMARKS. Schering, its Affiliates and sublicensees shall be free
to use and to register in any trademark office worldwide any Trademark for use
with Licensed Products they desire in their sole discretion. Schering shall own
all right, title and interest in and to the Trademark in its own name or that of
its Affiliates or sublicensees during and after the term of this Agreement.
8.2 PATENTS. As long as Schering has rights to Licensed Products
hereunder, Corvas shall, as hereinafter provided, prepare, file and prosecute,
to the extent feasible, and maintain patent applications and issued patents
within applicable Corvas Patent Rights in accordance with the terms of this
Article. In the case of patents to Joint Inventions which include generic or
specific compound claims covering one or more Licensed Products or Back-up
Compounds, Schering shall have the responsibility, at Schering's expense, for
preparing, filing, prosecuting and maintaining any patent applications and
patents issuing thereon. Schering will use diligent efforts to seek patents of
comparable quality and scope as customarily obtained by pharmaceutical companies
for comparable inventions. Corvas shall provide Schering reasonable assistance,
upon Schering's request and at Schering's expense, to prepare, file, prosecute
and maintain any patent applications or patents covering Joint Inventions for
which Schering has responsibility, including causing the execution of any
reasonably necessary documents. Schering shall provide timely disclosures and
notices to Corvas regarding the preparation and prosecution of patent
applications, and Schering shall provide Corvas with a reasonable opportunity to
review and comment upon such applications and prosecution in the various
countries and shall give good
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faith consideration to Corvas' comments. In the case of all other Joint
Inventions, the parties shall mutually determine which party shall file,
prosecute, maintain and bear the expenses of patent applications and patents
issuing therefrom.
8.3 PROSECUTION AND MAINTENANCE. Subject to Paragraph 8.2, Corvas shall
prepare, file, prosecute and maintain, at its expense, patent applications and
issued patents relating to the applicable subject matter described in Paragraph
8.2 of this Article in the United States of America. Corvas will use diligent
efforts to seek patents of comparable quality and scope as customarily obtained
by pharmaceutical companies for comparable inventions. Notwithstanding the
foregoing, Corvas shall have the right, consistent with its reasonable business
judgment, to abandon any patent application or issued patent in the United
States of America as part of its overall patent strategy, in a manner and based
on considerations consistent with Schering's development and commercialization
efforts for Licensed Products and a well conceived patent strategy of an
established biopharmaceutical company for projects of similar value and status.
In the event of such abandonment, Corvas shall give Schering reasonable advance
written notice thereof and an opportunity to continue the preparation or
prosecution of any such patent application or maintenance of any such issued
patent, at Schering's expense, and Corvas shall have no further obligation
thereafter with respect to such patent application or issued patent; PROVIDED,
HOWEVER, such an act of abandonment shall not affect ownership of patent rights.
If Schering desires patent protection in Europe (e.g., through the European
Patent Office ("EPO")), Japan or Canada, it shall so direct and Corvas shall
prepare, file, prosecute and maintain such patent applications and issued
patents, and Schering shall, at Corvas' election, either advance costs or
reimburse Corvas for [ *** ] of its reasonable out-of-pocket expenses incurred
after the Effective Date and properly documented. If Schering desires patent
protection in any additional jurisdictions, it shall so direct and Corvas shall
prepare, file, prosecute and maintain such patent applications and issued
patents, and Schering shall, at Corvas' election, either advance costs or
reimburse Corvas for its reasonable out-of-pocket expenses incurred after the
Effective Date and properly documented. In the event Schering no longer desires
to continue prosecution in any such jurisdiction, or never directs that a patent
application be filed in any certain jurisdiction, then Schering shall so notify
Corvas and Corvas may discontinue such prosecution, or continue or begin such
prosecution, as the case may be, at its own expense. In the event Schering
discontinues prosecution or never directs prosecution in any certain
jurisdiction, and Corvas continues or begins prosecution in that jurisdiction,
then Corvas shall recover its costs of filing, prosecution and maintenance in
such jurisdiction from any sales by Schering or its sublicensees of Licensed
Products in such jurisdiction in addition to royalties or other payments in
respect of Net Sales in such jurisdiction. Corvas shall provide timely
disclosures and notices to Schering regarding the preparation and prosecution of
patent applications, and Corvas shall provide Schering with a reasonable
opportunity to review and comment upon such applications and prosecution in the
various countries.
8.4 PATENT EXTENSIONS. With respect to any issued patent included within
Corvas Patent Rights licensed to Schering hereunder, Corvas will designate
Schering as its agent for obtaining an extension of such patent or governmental
equivalent which extends the exclusivity of any of the patent subject matter
where available in any country worldwide or, if not feasible, at Schering's
option, permit Schering to file in Corvas's name or diligently obtain such
extension
* CONFIDENTIAL TREATMENT REQUESTED
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for Schering, its Affiliate(s) or sublicensee(s) at Schering expense.
Furthermore, Corvas agrees to provide reasonable assistance, at no out-of-pocket
expense, to facilitate Schering's efforts to obtain any extension.
8.5 THIRD PARTY INFRINGEMENTS. Each party shall promptly notify the other
of its knowledge of any potential infringement of the Corvas Patent Rights.
Corvas shall have the right, but not the obligation, to take all reasonable
legal action necessary to (i) protect the licensed Corvas Patent Rights against
infringements by third parties and (ii) enforce the Corvas Patent Rights against
infringement by third parties by the sale of products competing with Licensed
Products in the Field. If, within three (3) months following receipt by the
receiving party of the notice referred to in the first sentence of this
Paragraph, Corvas fails to take such action to halt the alleged infringement,
Schering shall, in its sole discretion, have the right to take such action as it
deems warranted in its own name or in the name of Corvas or jointly. The
foregoing notwithstanding, in the event that an alleged third party infringer
certifies pursuant to 21 U.S.C. Section 355(b)(2)(A)(iv) against a granted
patent within the scope of the Corvas Patent Rights and covering a Licensed
Product, the party receiving notice of such certification shall immediately
notify the other party of such certification, and if fourteen (14) days prior to
expiration of the forty-five (45) day period set forth in 21 U.S.C. Section
355(c)(3)(C), Corvas fails to commence an infringement action, Schering, in its
sole discretion, shall be entitled to bring such infringement action. Each
party agrees to render such reasonable assistance as the prosecuting party may
request. Costs of maintaining any such action and damages recovered therefrom
shall be paid by and belong to the party bringing the action. In each case the
party not initiating the action shall have the right, at its own expense, to
join into the prosecution of such action, including becoming a party to such
action and being represented by separate counsel of its choice. However, if
Schering, in its sole discretion, consents to grant a sublicense under Corvas
patent Rights to any third party, who, but for such license, would infringe
claims of issued patents included in the Corvas Patent Rights, then, after
deduction by Schering of any costs and expenses incurred by Schering in the
prosecution of such action prior to granting the license to such party, Corvas
and Schering shall divide the running royalty payments received from any such
third party, in the proportion of [ *** ] to Schering and [ *** ] to Corvas; in
such case, sales of such products by such third party shall not be included as a
part of Net Sales.
ARTICLE 9
TERM AND TERMINATION
9.1 TERM. Unless sooner canceled or terminated under the provisions
hereof, this Agreement shall expire upon the expiration of all royalty
obligations hereunder.
9.2 TERMINATION FOR BREACH. Either party may, at its option, terminate
this Agreement by giving to the other party prior notice in writing to that
effect of not less than [ *** ] in the event that the other party shall commit a
material breach of this Agreement and shall fail to cure such breach during the
[ *** ] period following receipt
* CONFIDENTIAL TREATMENT REQUESTED
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of said notice from the non-breaching party, or such longer period (not to
exceed [ *** ] as may be necessary, provided the breaching party has commenced
and continues its diligent efforts to cure. Notwithstanding the foregoing, if
the breach specifically relates solely to a specific Licensed Product, this
Agreement shall be terminable by Corvas only with respect to the Licensed
Product to which such breach specifically relates. Such cancellation and
termination shall not release the breaching party from any obligations hereunder
incurred prior thereto nor prejudice any other rights or remedies of the
non-breaching party. In the event of termination of this Agreement by Corvas
pursuant to this Paragraph 9.2, Corvas and Schering shall have the rights and
obligations set forth in the applicable provisions of Paragraphs 9.5 and 9.6
hereof, and Corvas shall also have, at its option, (i) as its sole legal right
and remedy arising out of the termination the rights set forth in Paragraph 9.8
or (ii) such rights and remedies as may be available at law and in equity
including, without limitation, damages but not indirect or consequential damages
or lost profits. Election by Corvas of its option rights shall be made within
[ *** ] of termination.
9.3 VOLUNTARY SCHERING TERMINATION. Schering may terminate this Agreement
at any time upon [ *** ] prior written notice to Corvas, and in such event the
parties shall have the rights and obligations set forth in the applicable
provisions of Paragraphs 9.5, 9.6 and 9.8 hereof.
9.4 AUTOMATIC TERMINATION. In the event that on the [ *** ] following
expiration or termination of the Research Program Term Schering has not accepted
for development at least [ *** ] Candidate [ *** ] pursuant to Paragraph
2.5(a), this Agreement shall terminate and all rights granted to Schering
hereunder, including all applicable rights to Licensed Products, Candidate
Compounds and Non-Collaboration Compounds and all intellectual property
rights therein, shall revert to Corvas. In such event Schering shall grant
Corvas an exclusive license, with the right to sublicense, under Schering
Technology in the Territory as it relates to each Candidate Compound
submitted to Schering by the Research Committee.
9.5 POST TERMINATION ROYALTIES. Upon any Agreement cancellation,
expiration or termination, all Earned Royalties due for Net Sales of Licensed
Products to the effective date of said cancellation or termination shall accrue
and become due and payable on the sixtieth (60th) day thereafter.
9.6 POST TERMINATION PRODUCT SALES. In the event of the cancellation or
termination of any license rights in a jurisdiction with respect to a Licensed
Product, other than for reason of material breach of this Agreement by Schering,
prior to the expiration thereof or termination of this Agreement, inventory of
Licensed Product may be sold in such jurisdiction for up to six (6) months
after date of termination, provided Earned Royalties are paid thereon, and (i)
the obligations of confidentiality under Article 7 herein shall survive for the
period specified therein, and (ii) all obligations of either party accruing
prior to such termination shall survive.
* CONFIDENTIAL TREATMENT REQUESTED
20.
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9.7 INSOLVENCY AND BANKRUPTCY.
(a) TERMINATION UPON CORVAS INSOLVENCY. In the event that (i) Corvas
shall make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of custodian, receiver or any trustee for it or a
substantial part of its assets, or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect other than Title 11; or (ii) if there shall have been filed any such bona
fide petition or application, or any such proceeding shall have been commenced
against Corvas, in which an order for relief is entered or which remains
undismissed for a period of ninety (90) days or more; or (iii) Corvas by any act
or omission of act shall indicate its consent to, approval of or acquiescence in
any such petition, application, or proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or any substantial part
of its property, or shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of ninety (90) days or more;
and Corvas has not complied with or is unable to comply with its material
obligations under this Agreement, then Schering shall have the following rights.
Schering will have the right (including, without limitation, the right and
ability to cure any and all defaults) to complete any work which is designated
as the responsibility of Corvas under the Agreement and to contract directly
with third parties, if any, involved in contracted arrangements with Corvas with
respect to such work. The parties hereby acknowledge and agree that Schering
will have complete right of access to all information and data of Corvas or any
third party necessary to complete the development and registration of and to
manufacture the Licensed Products.
(b) SCHERING RIGHTS UPON CORVAS BANKRUPTCY.
(i) All rights and licenses granted under or pursuant to this
Agreement by Corvas to Schering are, for all purposes of Section 365(n) of Title
11, licenses of rights to intellectual property as defined in Title 11. If a
case is commenced by or against Corvas under Title 11, then, unless and until
this Agreement is rejected as provided in Title 11, Corvas (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 Trustee) shall, as Schering may elect in a
written request, immediately upon such request (i) perform all of the
obligations provided in this Agreement to be performed by Corvas or (ii) provide
to Schering all such intellectual property (including all embodiments thereof)
held by Corvas and such successors and assigns or otherwise available to them.
(ii) If a Title 11 case is commenced by or against Corvas, this
Agreement is rejected as provided in Title 11 and Schering elects to retain its
rights hereunder as provided in Title 11, then Corvas (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 Trustee) shall provide to Schering all such
intellectual property (including all embodiments thereof) held by Corvas and
such successors and assigns or otherwise available to them immediately upon
Schering's written request therefor. Whenever Corvas or any of its successors
or assigns provides to Schering any of the intellectual property licensed
hereunder (or any embodiment thereof) pursuant to this Paragraph 9.7, Schering
shall have the right to perform the obligations of Corvas hereunder with
21.
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respect to such intellectual property, but neither such provision nor such
performance by Schering shall release Corvas from any such obligation or
liability for failing to perform it.
(iii) All rights, powers and remedies of Schering 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 Corvas. Schering, in addition to the rights, power 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 in the event of a rejection of this Agreement as provided
in Title 11 and Schering election to retain its rights hereunder as provided in
Title 11, they intend the foregoing Schering rights to extend to the maximum
extent permitted by law, including without limitation for purposes of Title 11,
(i) the right of access to such intellectual property (including all embodiments
thereof) of Corvas, or any third party with whom Corvas contracts to perform an
obligation of Corvas under this Agreement, and, in the case of the third party,
which is necessary for the development, registration and manufacture of Licensed
Products and (ii) the right to contract directly with any third party described
in clause (i) in this sentence to complete the contracted work.
9.8 RIGHTS UPON TERMINATION. In the event of termination of this
Agreement pursuant to Paragraph 9.2 or Paragraph 9.3, the licenses set forth in
Paragraphs 3.1, 3.3 and 3.4 hereof applicable to the portions terminated (which
may be the entire portion or a part thereof) shall immediately terminate and all
applicable rights to any HCV Activity Compound, Back-up Compound and Licensed
Product and all intellectual property rights therein, shall revert to Corvas
and, except in the instance of termination under Paragraph 9.2 due to breach by
Corvas, Schering shall grant to Corvas, upon Corvas' request, an exclusive
license in the Territory, with the right to sublicense, under Schering
Technology solely as it relates to any and all Candidate Compounds, including
but not limited to Back-up Compounds and Licensed Products. Such license shall
be for use within the Field; PROVIDED, HOWEVER, that in the case of Candidate
Compounds included within Joint Inventions, such license shall be for all uses.
Corvas shall pay to Schering (A) royalties on its net sales of products based on
any such Candidate Compound or Licensed Product ("Corvas Product") so licensed
to Corvas of (i) [ *** ] for Corvas Products for which [ *** ] as evidenced by
[ *** ] on the effective date of termination and (ii) [ *** ] for Corvas
Products for which [ *** ] as evidenced by [ *** ] on the effective date of
termination plus (B) an [ *** ] received by Corvas and its Affiliates from any
third party with respect to a grant of rights under Schering Technology; such
royalties and amounts shall be payable in a manner consistent with the terms of
Article 4 hereof. Corvas shall, and shall endeavor to cause its sublicensees
to, indemnify and hold harmless Schering and its Affiliates, employees,
officers, directors, shareholders and agents from and against all liabilities,
losses, damages, costs or expenses, including reasonable attorney's fees which
such party may incur, suffer or be required to pay resulting from or arising in
connection with any product liability or other claims arising from the sale or
use by any person of any Corvas Product manufactured, marketed, sold or
distributed by Corvas or any Corvas
* CONFIDENTIAL TREATMENT REQUESTED
22.
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Affiliate or sublicensee pursuant to this Paragraph 9.8, which obligation of
indemnification shall be consistent with the procedures set forth in Paragraph
11.3 hereof. In addition, Schering shall grant to Corvas, to the extent
consistent with Schering's other marketing efforts, an exclusive license in the
Territory to utilize Schering Trademarks which were used with Corvas Products;
such license shall continue for a reasonable period, not to exceed [ *** ]
necessary to permit Corvas to phase in its trademarks. Promptly after the
termination Schering shall return to Corvas or dispose of any Corvas Know-How
described in Paragraph 1.9 herein which is covered by the portion of the
Agreement terminated, to the extent feasible, as requested by Corvas.
ARTICLE 10
WARRANTIES AND COVENANTS
Each party makes the warranties, covenants and representations set forth in
this Article 10 as follows:
10.1 AUTHORITY. Each party represents and warrants to the other party that
it has the legal power, authority and right to enter into this Agreement and to
perform all of its respective obligations set forth herein, including the
Exhibits hereto.
10.2 NO CONFLICTING UNDERTAKINGS. Each party represents and warrants that
as of the Effective Date of this Agreement it is not a party to any agreement,
arrangement or understanding with any third party which in any material way
conflicts with such party's ability to fulfill any of its obligations under the
terms of this Agreement, including the Exhibits hereto.
10.3 NO CONFLICTING FUTURE ACTIONS. Each party covenants (and Corvas also
represents and warrants with respect to the grant of rights to Schering under
Article 3) that it will not commit any material acts or fail to take any act
which it knows or should know would cause a material omission or permit any acts
or omissions to occur which it knows or should know would be in conflict with
its obligations under this Agreement and the Exhibits hereto or diminish the
potential scope of the grant of rights to Schering hereunder in any material
respect.
10.4 NO GUARANTEE OF RESEARCH PROGRAM SUCCESS. Corvas makes no express or
implied warranties, statutory or otherwise, concerning the quality, commercial
utility, freedom from infringement or any other characteristics of any Licensed
Products, and makes no warranty that a Licensed Product will arise or result
from the Research Program.
10.5 CORVAS OWNERSHIP OF PATENTS. Corvas represents and warrants that,
except for the rights herein granted to Schering and as otherwise permitted
under this Agreement, it has the right, title and interest in and to the Corvas
Patent Rights which it purports to have.
10.6 COMPLIANCE WITH AGREEMENT AND LAWS. Each party shall comply in all
material respects with the terms of this Agreement and with all laws, rules and
regulations applicable to
* CONFIDENTIAL TREATMENT REQUESTED
23.
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the discovery, development, manufacture, distribution, import and export and
sale of pharmaceutical products pursuant to this Agreement.
10.7 NO GOVERNMENT RIGHTS TO LICENSED PROPERTY. Corvas represents and
warrants that the license rights granted by it to Schering with respect to
Licensed Products shall not be subject to any retained rights of any state,
federal or foreign government or governmental entity, including without
limitation rights of the United States government under the Bayh-Dole Act,
except as set forth on the Corvas Schedule of Exceptions attached hereto as
Exhibit E.
10.8 NO THIRD PARTY RIGHTS TO COMPOUNDS. Corvas represents and warrants
that as of the Effective Date it has no agreements, understandings or
undertakings with any third parties or entities which would substantially impair
its ability to perform its obligations hereunder or to grant the rights which it
purports to grant hereunder or with respect to Candidate Compounds and Licensed
Products.
10.9 NEGATIVE COVENANTS.
(a) DEVELOPMENT FOR HCV USE. Schering shall not seek approval for
marketing of any Candidate Compound outside of the Field unless it first obtains
approval for marketing in the United States of such Candidate Compound in the
Field.
(b) OFF-LABEL USE. Except as provided in this Agreement, Corvas
shall not, during the term of this Agreement, grant any license or sublicense to
any third party to make, use, sell, offer for sale or import an HCV Activity
Compound in the Territory under Corvas Patent Rights or Corvas Know-How if at
the time of such grant Corvas has information from which it could reasonably be
concluded that any products to be based on such HCV Activity Compound will be
used for the treatment of Hepatitis C.
ARTICLE 11
INDEMNITY
11.1 SCHERING INDEMNITY. Schering will indemnify and hold harmless Corvas
and its Affiliates, employees, officers, directors, shareholders and agents
("CORVAS INDEMNIFIED PARTY") from and against any and all liabilities, losses,
damages, costs, or expenses (including reasonable attorneys' fees) which the
Corvas Indemnified Party may incur, suffer or be required to pay resulting from
or arising in connection with (i) the breach by Schering of any covenant,
representation or warranty contained in this Agreement, (ii) any product
liability or other claims arising from the use by any person of any Licensed
Product that was manufactured, marketed, sold or distributed by Schering or any
Affiliate or sublicensee, or (iii) the successful enforcement by a Corvas
Indemnified Party of any of the foregoing.
11.2 CORVAS INDEMNITY. Corvas will indemnify and hold harmless Schering
and its Affiliates, employees, officers, directors, shareholders and agents
("SCHERING INDEMNIFIED
24.
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PARTY") from and against any and all liabilities, losses, damages, costs or
expenses (including reasonable attorneys' fees) which the Schering Indemnified
Party may incur, suffer or be required to pay resulting from or arising in
connection with (i) the breach by Corvas of any covenant, representation or
warranty contained in this Agreement, (ii) any product liability or other claims
arising from the use by any person of any Licensed Product that was manufactured
by Corvas or a Corvas Affiliate to the extent caused by or arising from any act,
omission or negligence of Corvas or a Corvas Affiliate, or (iii) the successful
enforcement by a Schering Indemnified Party of any of the foregoing.
11.3 INDEMNITY OBLIGATIONS. The aforesaid obligations of the indemnifying
party shall be subject to the indemnified party fulfilling the following
obligations:
(i) The indemnified party shall fully cooperate with the indemnifying
party in the defense of any claims, actions, etc., which defense shall be
controlled by the indemnifying party, and
(ii) The indemnified party, shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any claim or
suit without the prior written consent of the indemnifying party, which such
party shall not be required to give.
11.4 LIABILITY INSURANCE. Schering shall procure and maintain, at its sole
expense, broad form comprehensive general liability insurance, including
products and completed operations coverage, in amounts which are commercially
reasonable in light of the business being conducted by Schering pursuant to this
Agreement, providing insurance coverage for claims and suits arising from the
development, manufacture, use, distribution or sale of any Licensed Product in
any country worldwide. Corvas shall be named an additional insured on the
policy of insurance, and a certificate of insurance will be provided to Corvas.
Notwithstanding anything to the contrary in the foregoing provisions of this
Paragraph 11.4, upon prior to notice to Corvas Schering may self-insure for such
claims and suits to the extent, and in such manner and with such procedures and
safeguards, as shall be reasonable and shall be consistent with customary
practices in the pharmaceutical industry in comparable circumstances.
ARTICLE 12
MISCELLANEOUS
12.1 WAIVER. The failure on the part of Schering or Corvas to exercise or
enforce any right conferred upon it hereunder shall not be deemed to be a waiver
of any such right, nor operate to bar the exercise or enforcement thereof at any
time or times thereafter.
12.2 NOTICES. Any notice required or permitted to be given by the terms of
this Agreement by a party shall be given by prepaid, registered air mail or by
express delivery service, such as Federal Express or DHL properly addressed to
the address of the other party
25.
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set forth below, or to such other address as may, from time to time, be
designated in writing by such other party, and shall be deemed to have been
given upon receipt:
As to Schering: Schering Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
Attn: Vice President, Business Development
With copy to: Legal Director Licensing
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
As to Corvas: Corvas International, Inc.
3030 Science Park Road
San Diego, CA 92121
Attn: Corporate Secretary
With copy to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Brian C. Cunningham
12.3 APPLICABLE LAW. This Agreement shall be construed and interpreted
according to the law of the State of Delaware without giving effect to its
conflict of law provisions.
12.4 DISPUTE RESOLUTION. The parties shall follow the procedures set forth
below to resolve any dispute or issue which, by the express terms of this
Agreement, is to be resolved pursuant to this Paragraph 12.4 ("DISPUTE").
Within thirty (30) days after notice from either party to the other of such
Dispute, the parties shall hold a meeting, attended by Corvas' and Schering's
respective Directors of Research and Development (or the equivalent position)
("REPRESENTATIVES") to attempt in good faith to negotiate a resolution of the
Dispute, which resolution shall be subject to approval by the parties'
respective Chief Executive Officers or their designated representatives
("CEOS"). If, within thirty (30) days after such meeting, the parties have not
succeeded in negotiating a resolution of the Dispute, the Representatives shall
promptly give notice to the CEOs describing the specific nature of the Dispute,
including references to the relevant portions of this Agreement and possible
conditions for the resolution of the Dispute ("DESCRIPTION OF DISPUTE"). The
CEOs shall attempt in good faith to resolve the Dispute but if no successful
resolution of the Dispute has been mutually agreed to within thirty (30) days
after the CEOs' receipt of the Description of Dispute, either party may initiate
arbitration of the dispute in accordance with the procedures set forth in
Exhibit F hereto.
26.
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12.5 CAPTIONS. The captions to the Articles and Paragraphs of this
Agreement are for convenience only, and shall not be deemed of any force or
effect whatsoever in construing this Agreement.
12.6 ENTIRE AGREEMENT AND AMENDMENT. The terms and provisions contained
herein, including the Exhibits hereto, constitute the entire agreement between
the parties and shall supersede all previous communications, representations,
agreements or understandings, either oral or written, between the parties hereto
with respect to the subject matter hereof. No amendment to this Agreement
varying or extending the terms hereof will be binding upon either party hereto
unless in writing, signed by duly authorized officers of the respective parties,
and referencing this Agreement. Each party hereto represents that it has been
represented by 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.
12.7 ASSIGNMENT. This Agreement shall not be assignable by either party,
except (i) to an Affiliate of such party, provided the assigning party
guarantees the performance of the Affiliate, (ii) as mutually agreed to in
writing in advance or (iii) to a successor to the entire pharmaceutical business
of such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted assignment shall be binding on the successors of the
assigning party. Any assignment or attempted assignment by either party in
violation of the terms of this Paragraph 12.7, shall be null and void and of no
legal effect.
12.8 SURVIVAL OF TERMS. The terms of this Agreement which by their intent
or meaning have validity beyond the term of this Agreement shall survive the
early termination or expiration of this Agreement.
12.9 NO AGENCY. Nothing herein shall be deemed to constitute either party
as the agent or representative of the other party or both parties as joint
venturers or partners for any purpose. Corvas shall be an independent
contractor, not an employee or partner of Schering. Neither party shall be
responsible for the acts or omissions of the other party, and neither party will
have authority to speak for, represent or obligate the other party in any way
without prior written authority from the other party.
12.10 SEVERABILITY. In the event that any provisions of this Agreement is
held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, (i) the
validity of the remaining provisions shall not be affected, (ii) the particular
provision shall to the extent permitted by law be reasonably construed and
equitably reformed to be valid and enforceable, and (iii) the rights and
obligations of the parties hereto shall be construed and enforced as if the
Agreement did not contain the unreformed, particular provisions held to be
unenforceable.
27.
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12.11 EXPRESS AND IMPLIED LICENSES. Only the licenses granted pursuant to
the express terms of this Agreement shall be of any legal force and effect. No
other license rights shall be created by implication or estoppel.
12.12 FORCE MAJEURE. In the event that either party is prevented from
performing or is unable to perform any of its obligations under this Agreement,
including without limitation payment obligations, due to any act of God; fire;
casualty; flood; any act, exercise, assertion or requirement of governmental
authority; epidemic; destruction of production facilities; riots; insurrection;
inability to procure or use materials, labor, equipment, transportation or
energy; or any the cause beyond the reasonable control of the party invoking
this Paragraph 12.12 if such party shall have used diligent efforts to avoid
such occurrence, such party shall give notice to the other party in writing
promptly, and thereupon the affected party's performance shall be excused and
the time for performance shall be extended for the period of delay or inability
to perform due to such occurrence.
12.13 PUBLICITY. Each party agrees not to issue a press release or
otherwise publicize this Agreement or the contents of this Agreement except (i)
on the advice of its counsel, as required by law (e.g., any Securities and
Exchange Commission filings and disclosures) and provided the party who will be
disclosing has consulted with the other party to the extent feasible prior to
disclosure with respect to the substance of the disclosure, or (ii) as consented
to in advance by the other party in writing. Notwithstanding the foregoing,
each party shall have the right to issue an initial press release, in the form
attached hereto as Exhibit G. Any matter disclosed as permitted pursuant to
this Paragraph 12.13 may be thereafter disclosed by either party as it shall see
fit, provided that any such further disclosure shall not be more extensive than
the original disclosure.
12.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
12.15 COOPERATION. Corvas agrees to cooperate with Schering to furnish
such information as shall be reasonably requested by the FDA or other
governmental authorities with respect to Licensed Products.
12.16 PUBLICATION. Any manuscript by Schering or Corvas and their
Affiliates describing the scientific results of the Research Program shall be
subject to the prior review of the non-publishing party at least thirty (30)
days prior to submission. Further, to avoid loss of patent rights as a result
of premature public disclosure of patentable information, the receiving party
shall notify the disclosing party in writing within thirty (30) day after
receipt of a disclosure whether the receiving party desires to file a patent
application on any invention disclosed in such scientific results in accordance
with Article 8 ("PUBLICATION NOTICE"). In the event that the receiving party
desires to file such a patent application, the disclosing party shall withhold
publication or disclosure of such scientific results until the earlier of (i) a
patent application is filed thereon, (ii) the parties determine after
consultation that no patentable invention exists or (iii) ninety (90) days after
receipt by the disclosing party of the Publication Notice of the receiving
party's desire to file such patent application; PROVIDED, HOWEVER, that in
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the event the receiving party reasonably designates in good faith such results
or a portion thereof as commercially very important within thirty (30) days
after receipt of the Publication Notice, then such results shall not be
published until after earlier of (i) publication anywhere of a patent
application containing or based on such results or (ii) eighteen (18) months
after such receipt of the Publication Notice. Further, if such scientific
results contain the information of the receiving party that is subject to use
and nondisclosure restrictions under Article 7, the disclosing party agrees to
remove such information from the proposed publication or disclosure.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.
SCHERING CORPORATION CORVAS INTERNATIONAL, INC.
By: /s/ DAVID POORVIN By: /s/ JOHN E. CRAWFORD
-------------------------------- -------------------------------------
Title: Vice President Title: Executive Vice President
----------------------------- ----------------------------------
and Chief Financial Officer
-------------------------------
29.
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EXHIBIT A
RESEARCH PROGRAM
HEPATITIS C VIRUS (HCV) PROTEASE INHIBITOR PROGRAM
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
A-1
<PAGE>
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
A-2
<PAGE>
EXHIBIT B
INITIAL LEAD CRITERIA
HEPATITIS C PROTEASE INHIBITOR PROGRAM
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT C
ACCEPTANCE CRITERIA
Any compound submitted to Schering pursuant to Paragraph 2.5 shall satisfy each
of the following criteria, to the extent applicable, unless waived by Schering:
A. Novel, patentable structure;
B. Appropriate physical form, i.e., a soluble solid or salt;
C. Workable chemical synthesis;
D. IN VITRO inhibition of an HCV protease with [ *** ]
E. Oral anti-viral activity in [ *** ] models at appropriate doses, to be
determined by the Research Committee;
F. Suitable pharmacokinetics for [ *** ]
G. Consistent absorption (as determined by blood level) in [ *** ] as defined
by [ *** ] excluding outliers due to documented technical reasons;
H. No other clinically significant toxicities as determined in general
pharmacological screens, including activities against [ *** ] at an acceptable
multiple of the anti-viral dose. These will include an assessment of the
effects of the test compound on [ *** ] assessment of the effects of the
compound on [ *** ] assessment of the effect of the compound on [ *** ] and
assessment of the effects of the compound on [ *** ] and
I. Absence of significant potential for [ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT D
LICENSED PRODUCTS
<PAGE>
EXHIBIT E
CORVAS SCHEDULE OF EXCEPTIONS
Collaborative Research and Materials Transfer Agreement between Corvas
International, Inc. and University of Florida and its employee, Ben M. Dunn;
effective August 26, 1996, for a twelve (12) month period. See Section 10.7.
<PAGE>
EXHIBIT F
ARBITRATION
(a) INITIATION OF ARBITRATION. A party ("COMPLAINING PARTY") which
intends to begin an arbitration to resolve a Dispute as contemplated by
Paragraph 12.4 of the Agreement ("ARBITRATION") shall initiate the Arbitration
by providing written notice ("ARBITRATION REQUEST") of such intent by certified
or registered mail or properly documented overnight delivery to the other party
("RESPONDING PARTY"). The Arbitration Request shall include a copy of the
Description of Dispute, set forth a proposed solution to the Dispute, and
include a suggested time frame within which the parties must act to effect such
solution. Contemporaneously with sending the Arbitration Request, the
Complaining Party shall submit a copy of the Arbitration Request to the American
Arbitration Association in the city in which the Arbitration is to be conducted
as provided in Paragraph (d) below.
(b) SELECTION OF ARBITRATION. Any and all Disputes to be resolved
pursuant to Arbitration shall be submitted to a neutral arbitrator
("ARBITRATOR"). The parties shall select the Arbitrator by mutual agreement but
if the parties are unable to agree, then the Arbitrator shall be selected in
accordance with the procedures of the American Arbitration Association. The
Arbitrator shall be a former judge of a state or federal court who shall not be
a current or former employee, director or shareholder of, or otherwise have any
current or previous relationship with, either party or its respective
affiliates.
(c) AMERICAN ARBITRATION ASSOCIATION RULES. The Arbitration shall be
conducted in accordance with the rules of the American Arbitration Association
then in effect, subject to the time periods and other provisions of this Exhibit
or as otherwise set forth in the Agreement.
(d) HEARING. Consistent with the time schedule established pursuant to
this paragraph (d) and Paragraph (e) below, the Arbitrator shall hold a hearing
("HEARING") to resolve each of the issues identified in the Description of
Dispute. To the extent practicable taking into account the nature of the
Dispute and the availability of the Arbitrator, the Hearing shall be conducted
over a period not to exceed two (2) consecutive business days, with each party
entitled to approximately half of the allotted time unless otherwise ordered by
the Arbitrator. In the event that Corvas initiates the Arbitration, the Hearing
shall be conducted in Newark, New Jersey. In the event that Schering initiates
the Arbitration, the Hearing shall be conducted in San Diego, California.
(e) DISCOVERY. Within ten (10) days of receipt by the Responding Party of
the Arbitration Request the parties shall negotiate in good faith the scope and
schedule of discovery, including depositions, document production and other
discovery devices, taking into account the nature of the Dispute submitted for
resolution. If the parties are unable to reach agreement as to the scope and
schedule of discovery, the Arbitrator may order such discovery as he or she
deems necessary. In either case, such discovery shall be completed within sixty
(60) days from the date of the selection of the Arbitrator. At the hearing,
which shall commence within twenty (20) days after the completion of discovery
unless the Arbitrator otherwise orders, the parties
F-1
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may present testimony (either live witness or deposition), subject to
cross-examination, and documentary evidence.
(f) HEARING SUBMISSION. At least twenty (20) business days prior to the
date set for the Hearing, each party shall submit to each other and the
Arbitrator a list of all documents on which such party intends to rely in any
oral or written presentation at the Hearing, a list of all witnesses, if any,
such party intends to call at the Hearing and a brief summary of each witness'
testimony. At least five (5) business days prior to the Hearing, each party
must submit to the Arbitrator and serve on each other party proposed findings of
fact and conclusions of law on each issue to be resolved. Within five (5) days
following the close of the Hearing, each party shall each submit such
post-Hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.
(g) ARBITRATOR'S DUTIES AND AUTHORITY. The Arbitrator shall preside over
and resolve any disputes between the parties in connection with the Arbitration.
The Arbitrator shall have sole discretion with regard to the admissibility of
any evidence and all other matters relating to the conduct of the Hearing. The
Arbitrator shall, in rendering its decision, apply the substantive law of
Delaware. The decision of the Arbitrator shall be final and not appealable,
except in the case of fraud or bad faith on the part of the Arbitrator in
connection with the conduct of such proceedings.
(h) DECISION AND AWARD. The Arbitrator shall render a decision and award
as expeditiously as possible but in no event more than thirty (30) days after
the close of the hearing. In making the award the Arbitrator shall rule on each
disputed issue. Nothing contained herein shall be construed to permit the
Arbitrator or any court or any other forum to award punitive, exemplary or any
similar damages. By entering into the Agreement and exercising their rights to
arbitrate, the parties expressly waive any claim for punitive, exemplary or any
similar damages. The only damages recoverable under this Agreement are
compensatory damages.
(i) COSTS AND EXPENSES. Each party shall pay its own costs (including,
without limitation, reasonable attorneys' fees) and expenses in connection with
the Arbitration; PROVIDED, HOWEVER, that if the Arbitrator determines that the
action of any party was arbitrary, frivolous or in bad faith, the Arbitrator may
award such costs and expenses to the prevailing party.
(j) CONFIDENTIALITY. The Arbitration shall be confidential and, except as
required by law, neither party shall make (or instruct the Arbitrator to make)
any public announcement with respect to the proceedings or decision of the
Arbitrator without the prior written consent of the other party. The existence
of any Dispute, and the award of the Arbitrator, shall be kept in confidence by
the parties and the Arbitrator, except as required in connection with the
enforcement of such award or as otherwise required by applicable law.
(k) JURISDICTION TO ENFORCE AWARD. For the purposes of these arbitration
provisions, the parties acknowledge their diversity of citizenship and agree to
accept the jurisdiction of the
F-2
<PAGE>
Federal District Court in Newark, New Jersey or San Diego, California (as
selected by the party seeking to enforce) for the purposes of enforcing awards
entered pursuant to these arbitration provisions and for enforcing the
agreements reflected in this Paragraph (k).
(l) EXCLUSIVE PROCEDURES. The procedures specified herein shall be the
sole and exclusive procedures for the resolution of Disputes between the parties
which are expressly identified for resolution in accordance with these
arbitration provisions.
F-3
<PAGE>
EXHIBIT G
PRESS RELEASE
Contact: Ronald Asinari
Schering-Plough
(201) 822-7402
Angela L. Hartley
Director, Investor Relations
(619) 455-9800 ext. 104
SCHERING-PLOUGH AND CORVAS ANNOUNCE
COLLABORATION ON HEPATITIS RESEARCH
MADISON, N.J., and SAN DIEGO, June XX, 1997 -- Schering-Plough Corporation
(NYSE: SGP) and Corvas International, Inc. (Nasdaq: CVAS) today announced an
agreement to seek orally bioavailable inhibitors of a key protease necessary for
hepatitis C virus (HCV) replication.
The agreement represents the third collaborative effort between the two
companies focusing on the discovery and development of protease inhibitors and
the first that will utilize Corvas' proprietary combinatorial chemistry program
to identify and optimize lead protease inhibitors.
Under terms of the agreement, Schering-Plough will receive an exclusive
worldwide license for products developed from Corvas compounds under the
research agreement. Schering-Plough will be responsible for all development,
manufacturing and marketing of the products. Corvas will receive licensing
fees, research and development funding, and payments upon reaching certain
milestones, in addition to royalties on sales. Further details of the agreement
are not being disclosed.
"Hepatitis is an increasingly widespread and potentially fatal disease," said
Jonathan R. Spicehandler, M.D., president of Schering-Plough Research Institute.
"This collaboration complements and enhances our internal antiviral research
program and may offer a potential new pathway to discover innovative therapies
for this medical area," Spicehandler said.
"We have proven our ability to use our combinatorial approach to protease
inhibitor discovery in our core cardiovascular research area," said George P.
Vlasuk, Ph.D., Corvas' executive vice president, research and development.
"This agreement provides a model opportunity to apply this capability to other
research areas, such as hepatitis C, while our internal resource remain focused
on the targets we know best. Schering-Plough's leadership in the area of
antiviral therapeutics makes them an excellent partner to capitalize on the
specific protease inhibitor candidates for hepatitis C that may be generated
from this alliance," Vlasuk said.
G-1
<PAGE>
Discovery of oral serine protease inhibitors using proprietary drug design and
combinatorial chemistry approaches is a key strength at Corvas. Schering-Plough
and Corvas have previously teamed to develop an oral inhibitor of thrombin, and
are working together to discover inhibitors of Factor Xa, both of which are key
protease enzymes in the blood coagulation cascade. The hepatitis C virus
contains a vital enzyme that belongs to the family of serine proteases. Through
use of its proprietary combinatorial chemistry program, Corvas hopes to rapidly
identify and optimize promising lead inhibitors to be evaluated for possible
clinical development under the agreement with Schering-Plough.
Corvas International, Inc. is a biopharmaceutical company engaged in the design
and development of a new generation of therapeutic agents for the prevention and
treatment of major cardiovascular and inflammatory diseases.
Schering-Plough is a research-based company engaged in the discovery,
development, manufacturing and marketing of pharmaceutical and health care
products worldwide.
G-2
<PAGE>
EXHIBIT H
HCV ACTIVITY CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be assays that were routinely in use during
the Research Program or such assays as the Parties may otherwise agree upon.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT I
BACK-UP COMPOUND CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be assays that were routinely in use during
the Research Program or such assays as the Parties may otherwise agree upon.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT J
ADDITIONAL ACTIVITY CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be as agreed upon by the Parties.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
LICENSE AND COLLABORATION AGREEMENT
BETWEEN
SCHERING-PLOUGH LTD.
AND
CORVAS INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "ACCEPTANCE CRITERIA". . . . . . . . . . . . . . . . . . . . . 1
1.2 "ACT". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 "ADDITIONAL ACTIVITY COMPOUNDS". . . . . . . . . . . . . . . . 1
1.4 "AFFILIATE". . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 "BACK-UP COMPOUNDS". . . . . . . . . . . . . . . . . . . . . . 2
1.6 "CANDIDATE COMPOUNDS . . . . . . . . . . . . . . . . . . . . . 2
1.7 "CEO". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "CORVAS INDEMNIFIED PARTY" . . . . . . . . . . . . . . . . . . 2
1.9 "CORVAS INVENTIONS". . . . . . . . . . . . . . . . . . . . . . 2
1.10 "CORVAS KNOW-HOW". . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "CORVAS PATENT RIGHTS" . . . . . . . . . . . . . . . . . . . . 2
1.12 "DESCRIPTION OF DISPUTE" . . . . . . . . . . . . . . . . . . . 2
1.13 "DISPUTE". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "EARNED ROYALTY" . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 "EPO". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 "FDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "FIELD". . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "FTE". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "GLP". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "HCV ACTIVITY COMPOUNDS" . . . . . . . . . . . . . . . . . . . 3
1.21 "HRD". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 "IND". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "INDEPENDENT INVENTIONS" . . . . . . . . . . . . . . . . . . . 3
1.24 "INITIAL LEAD CRITERIA". . . . . . . . . . . . . . . . . . . . 3
1.25 "JOINT INVENTIONS" . . . . . . . . . . . . . . . . . . . . . . 3
1.26 "KNOW-HOW" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 "LICENSED PRODUCT" . . . . . . . . . . . . . . . . . . . . . . 3
1.28 "NDA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.29 "NET SALES". . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.30 "NON-COLLABORATION COMPOUNDS". . . . . . . . . . . . . . . . . 4
1.31 "PRODUCT PLAN" . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 "PUBLICATION NOTICE" . . . . . . . . . . . . . . . . . . . . . 4
1.33 "REPRESENTATIVES". . . . . . . . . . . . . . . . . . . . . . . 4
1.34 "RESEARCH COMMITTEE" . . . . . . . . . . . . . . . . . . . . . 4
1.35 "RESEARCH PROGRAM" . . . . . . . . . . . . . . . . . . . . . . 4
1.36 "RESEARCH PROGRAM TERM". . . . . . . . . . . . . . . . . . . . 4
1.37 "SCHERING INDEMNIFIED PARTY" . . . . . . . . . . . . . . . . . 4
1.38 "SCHERING INDEPENDENT RESEARCH". . . . . . . . . . . . . . . . 4
1.39 "SCHERING INVENTIONS". . . . . . . . . . . . . . . . . . . . . 5
i.
<PAGE>
1.40 "SCHERING KNOW-HOW". . . . . . . . . . . . . . . . . . . . . . 5
1.41 "SCHERING PATENT RIGHTS" . . . . . . . . . . . . . . . . . . . 5
1.42 "SCHERING CORPORATION AGREEMENT" . . . . . . . . . . . . . . . 5
1.43 "SCHERING TECHNOLOGY". . . . . . . . . . . . . . . . . . . . . 5
1.44 "TERRITORY". . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.45 "TITLE 11" . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.46 "TRADEMARK". . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.47 "VALID CLAIM". . . . . . . . . . . . . . . . . . . . . . . . . 5
1.48 "WORLDWIDE NET SALES". . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 2
RESEARCH PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Corvas Work. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Schering Work. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Research Program Funding . . . . . . . . . . . . . . . . . . . 6
2.4 Research Committee . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Candidate Compound Acceptance; Back-up Compounds . . . . . . . 7
2.6 Research Program Reports . . . . . . . . . . . . . . . . . . . 8
2.7 Research Program Term. . . . . . . . . . . . . . . . . . . . . 8
2.8 Research Program Term Extension. . . . . . . . . . . . . . . . 8
ARTICLE 3
LICENSE GRANTS; SUBLICENSES. . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Exclusive License Grant. . . . . . . . . . . . . . . . . . . . 8
3.2 Sublicenses. . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Non-exclusive License Grant. . . . . . . . . . . . . . . . . . 9
3.4 Research License Grant . . . . . . . . . . . . . . . . . . . . 10
3.5 First Negotiation. . . . . . . . . . . . . . . . . . . . . . . 10
3.6 No Corvas Obligation with Respect to Non-Collaboration HCV
Activity Compound. . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Additional Activity Compound . . . . . . . . . . . . . . . . . 11
ARTICLE 4
PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 License Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Initial Lead Identification Payment. . . . . . . . . . . . . . 11
ii.
<PAGE>
4.3 First Candidate Compound Acceptance Payment. . . . . . . . . . 12
4.4 Milestone Payments . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Royalty Payment Dates. . . . . . . . . . . . . . . . . . . . . 12
4.6 Direct Affiliate Licenses. . . . . . . . . . . . . . . . . . . 13
4.7 Place of Royalty Payment and Currency Conversions. . . . . . . 13
4.8 Royalties on Resales . . . . . . . . . . . . . . . . . . . . . 14
4.9 Duration of Royalty Payments . . . . . . . . . . . . . . . . . 14
4.10 Maintenance of Royalty Records . . . . . . . . . . . . . . . . 14
4.11 Compulsory Royalties . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5
DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Schering Reports . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Schering Diligence . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . 16
6.1 Corvas Intellectual Property . . . . . . . . . . . . . . . . . 16
6.2 Schering Intellectual Property . . . . . . . . . . . . . . . . 16
6.3 Joint Intellectual Property. . . . . . . . . . . . . . . . . . 16
6.4 Independent Inventions . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 7
CONFIDENTIALITY OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 8
INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Patents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Prosecution and Maintenance. . . . . . . . . . . . . . . . . . 18
8.4 Patent Extensions. . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Third Party Infringements. . . . . . . . . . . . . . . . . . . 19
iii.
<PAGE>
ARTICLE 9
TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2 Termination for Breach . . . . . . . . . . . . . . . . . . . . 20
9.3 Voluntary Schering Termination . . . . . . . . . . . . . . . . 20
9.4 Automatic Termination. . . . . . . . . . . . . . . . . . . . . 20
9.5 Post Termination Royalties . . . . . . . . . . . . . . . . . . 20
9.6 Post Termination Product Sales . . . . . . . . . . . . . . . . 21
9.7 Insolvency and Bankruptcy. . . . . . . . . . . . . . . . . . . 21
9.8 Rights Upon Termination. . . . . . . . . . . . . . . . . . . . 22
ARTICLE 10
WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 No Conflicting Undertakings. . . . . . . . . . . . . . . . . . 23
10.3 No Conflicting Future Actions. . . . . . . . . . . . . . . . . 23
10.4 No Guarantee of Research Program Success . . . . . . . . . . . 23
10.5 Corvas Ownership of Patents. . . . . . . . . . . . . . . . . . 24
10.6 Compliance with Agreement and Laws . . . . . . . . . . . . . . 24
10.7 No Government Rights to Licensed Property. . . . . . . . . . . 24
10.8 No Third Party Rights to Compounds . . . . . . . . . . . . . . 24
10.9 Negative Covenants. . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 11
INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Schering Indemnity . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Corvas Indemnity . . . . . . . . . . . . . . . . . . . . . . . 25
11.3 Indemnity Obligations. . . . . . . . . . . . . . . . . . . . . 25
11.4 Liability Insurance. . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 12
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.1 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.3 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . 26
iv.
<PAGE>
12.4 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 26
12.4A Foreign Corrupt Practices Act. . . . . . . . . . . . . . . . . 27
12.5 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.6 Entire Agreement and Amendment . . . . . . . . . . . . . . . . 27
12.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.8 Survival of Terms. . . . . . . . . . . . . . . . . . . . . . . 27
12.9 No Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.11 Express and Implied Licenses . . . . . . . . . . . . . . . . . 28
12.12 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . 28
12.13 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.15 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.16 Publication. . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.17 Provisions Controlled by the Schering Corporation Agreement . 29
EXHIBITS:
A - Research Program
B - Initial Lead Criteria
C - Acceptance Criteria
D - Licensed Products
E - Corvas Schedule of Exceptions
F - Arbitration
G - Press Release
H - HCV Activity Criteria
I - Back-up Compound Criteria
J - Additional Activity Criteria
v.
<PAGE>
INDEX OF OCCURRENCE OF DEFINED TERMS
TERM PAGE NO.
Acceptance Criteria 1, 7, 8, 20
Act 1, 27
Additional Activity Compounds 1, 11
Affiliate 1, 4, 13, 25, 27
Back-up Compounds 2, 8, 16
Candidate Compounds 2, 7, 16, 20, 22, 24
CEO 2, 27
Corvas Indemnified Party 2, 24, 25
Corvas Inventions 2, 16
Corvas Know-How 2, 9, 16
Corvas Patent Rights 2, 5, 9, 17, 19, 24
Description of Dispute 2, 27
Dispute 2, 26
Earned Royalty 3, 13, 14
EPO 3, 18
FDA 3, 12, 28
Field 3, 16
FTE 3, 6
GLP 3, 11
HCV Activity Compounds 3, 9
HRD 3, 15
IND 3, 12
Independent Inventions 3, 16
Initial Lead Criteria 3, 7, 11, 12, A-2, A-3
Joint Inventions 2, 3, 5, 16, 18
Know-How 3, 5, 16
Licensed Product 2, 3, 4, 5, 7, 12, 14, 15, 16, 17, 18, 20,
21, 22, 24,25, 28
NDA 4, 12, 15
Net Sales 4, 12, 13, 14, 19, 20
Non-Collaboration Compounds 4
Product Plan 4, 15
Publication Notice 4, 29
Representatives 4, 26, 27
Research Committee 4, 6, 7, 11, 20
Research Program 2, 3, 4, 5, 6, 7, 8, 16, 23
Research Program Term 2, 4, 5, 6, 7, 8, 20
Schering Indemnified Party 4, 25
Schering Independent Research 4, 16
Schering Inventions 5, 16
vi.
<PAGE>
Schering Know-How 5
Schering Patent Rights 5
Schering Corporation Agreement 5, 29
Schering Technology 5, 20, 22
Territory 3, 5, 9, 14, 20, 22, 23, 24
Title 11 5, 21
Trademark 5, 17
Valid Claim 5, 9, 14
Worldwide Net Sales 3, 5
vii.
<PAGE>
LICENSE AND COLLABORATION AGREEMENT
THIS LICENSE AND COLLABORATION AGREEMENT ("AGREEMENT"), effective as of the
11th day of June, 1997 (the "EFFECTIVE DATE"), is made by and between CORVAS
INTERNATIONAL, INC., a corporation of the State of Delaware ("CORVAS"), and
SCHERING-PLOUGH LTD., a Swiss corporation ("SCHERING").
W I T N E S S E T H:
WHEREAS, Corvas owns certain technology relating to design and development
of transition state-based chemical entities that may be inhibitors of proteases
of the Hepatitis C virus;
WHEREAS, Schering has experience and a unique commercial position in the
field of treatment of Hepatitis C;
WHEREAS, Schering desires an exclusive license to chemical entities that
are transition state-based inhibitors of proteases of the Hepatitis C virus that
are suitable for treatment of Hepatitis C and Corvas desires to grant such an
exclusive license, pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions hereinafter set forth, the parties agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following meanings,
and the singular shall include the plural and vice versa as the context
requires:
1.1 "ACCEPTANCE CRITERIA" shall mean those standards described on
Exhibit C hereto, as such Exhibit may be amended from time to time by mutual
written agreement of the parties.
1.2 "ACT" shall have the meaning assigned to it in Paragraph 12.4A.
1.3 "ADDITIONAL ACTIVITY COMPOUNDS" means HCV Activity Compounds
meeting the "Additional Activity Criteria" set forth in Exhibit J.
1.4 "AFFILIATE" means any company or organization controlling,
controlled by, or under common control with Schering or Corvas, as the case may
be. For this purpose, the terms control, controlled and controlling mean the
possession of the power to direct or cause the direction of the management and
the policies of an entity, whether through ownership directly
1.
<PAGE>
or indirectly of over fifty percent (50%) of the stock entitled to vote, and for
non-stock organizations, the right to receive over fifty percent (50%) of the
profits by contract or otherwise.
1.5 "BACK-UP COMPOUNDS" means Candidate Compounds meeting the criteria
set forth in Exhibit I.
1.6 "CANDIDATE COMPOUNDS" means chemical entities designed or
identified by Corvas as of the Effective Date or pursuant to the Research
Program that are inhibitors of at least [ *** ] of the Hepatitis C virus.
1.7 "CEO" shall have the meaning assigned to it in Paragraph 12.4.
1.8 "CORVAS INDEMNIFIED PARTY" shall have the meaning assigned to it in
Paragraph 11.1.
1.9 "CORVAS INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.1.
1.10 "CORVAS KNOW-HOW" means any Know-How which is necessary for making,
using or selling any Licensed Product and which is owned or controlled by Corvas
or a Corvas Affiliate, as of the Effective Date or during the Research Program
Term, and which Corvas or such Affiliate has a right to disclose and license to
Schering, including Corvas' rights in Joint Inventions to the extent not
included in Corvas Patent Rights. Expressly excluded from Corvas Know-How is
Know-How directly related to (i) technology generally useful to impart oral
activity to a molecule or (ii) technology generally useful for the design,
preparation or screening of transition state chemical libraries.
1.11 "CORVAS PATENT RIGHTS" means Corvas' rights in all patents
(including inventors' certificates, reissues, reexaminations, extensions or
other governmental actions which extend any of the subject matter of a patent,
and any substitutions, confirmations, registrations or additions of or to any of
the foregoing) issuing from any application (including any provisionals,
divisionals, continuations and continuations-in-part) filed to protect Corvas
Inventions or Corvas' interest in Joint Inventions, or otherwise filed to
protect either (i) a transition state-based inhibitor of the [ *** ] of the
Hepatitis C virus existing within Corvas Know-How as of the Effective Date or
(ii) an inhibitor of the Hepatitis C viral proteases within Corvas Know-How
arising from the Research Program. Expressly excluded from Corvas Patent Rights
are Corvas' rights in any patent, directly related to (i) technology generally
useful to impart oral activity to a molecule or (ii) technology generally useful
for the design, preparation or screening of transition state chemical libraries.
1.12 "DESCRIPTION OF DISPUTE" shall have the meaning assigned to it in
Paragraph 12.4.
1.13 "DISPUTE" shall have the meaning assigned to it in Paragraph 12.4.
*CONFIDENTIAL TREATMENT REQUESTED
2.
<PAGE>
1.14 "EARNED ROYALTY" means [ *** ] of annual Net Sales of each Licensed
Product in the Territory during any calendar year based upon Worldwide Net Sales
of each Licensed Product during each such calendar year of up to [ *** ] and
[ *** ] of each such Net Sales based upon Worldwide Net Sales in excess of
[ *** ] during any calendar year.
1.15 "EPO" shall have the meaning assigned to it in Paragraph 8.3.
1.16 "FDA" means the United States Food and Drug Administration or any
corresponding foreign drug registration governmental authority.
1.17 "FIELD" means the treatment or prevention of Hepatitis C infections
in humans and/or animals.
1.18 "FTE" means a full-time equivalent of one scientific or technical
person performing work as part of the Research Program.
1.19 "GLP" means the standard for good laboratory practices as
promulgated by the FDA in effect at a particular time.
1.20 "HCV ACTIVITY COMPOUNDS" means Candidate Compounds (other than
Licensed Products or Back-Up Compounds) or Non-Collaboration Compounds meeting
the "HCV Activity Criteria" set forth in Exhibit H.
1.21 "HRD" means a health registration dossier or its equivalent filed
in any country outside the United States and which is analogous to an NDA
including, where applicable, applications for pricing, pricing reimbursement
approval, labeling and regulatory approval.
1.22 "IND" means an Investigational New Drug Application or its
equivalent for initiating clinical trials in the United States or any
corresponding foreign application, registration or certification.
1.23 "INDEPENDENT INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.4.
1.24 "INITIAL LEAD CRITERIA" means the criteria set forth in Exhibit B.
1.25 "JOINT INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.3.
1.26 "KNOW-HOW" means all ideas, inventions, data, results,
instructions, processes, formulas, expert opinion and information, including,
without limitation, biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical, safety, manufacturing and
quality control data and information.
1.27 "LICENSED PRODUCT" means anything containing or derived from a
Candidate Compound accepted by Schering for development pursuant to Paragraph
2.5.
* CONFIDENTIAL TREATMENT REQUESTED
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1.28 "NDA" means a New Drug Application, Product License Application or
its equivalent in the United States.
1.29 "NET SALES" means the gross amounts received from sales in the
Territory of Licensed Products by Schering, its Affiliates and sublicensees to
third party customers after deduction of (i) normal and customary trade, cash
and quantity discounts, allowances and credits actually allowed; (ii) credits or
allowances actually granted for damaged goods, returns or rejections of Licensed
Product and retroactive price reductions; (iii) sales or similar taxes
(including duties or other governmental charges levied on, absorbed or otherwise
imposed on the sale of Licensed Product including, without limitation, value
added taxes or other governmental charges otherwise measured by the billing
amount) when included in billing; (iv) freight, postage, shipping, customs (i.e.
import or export) duties and insurance charges paid for and separately
identified on the invoice or other documentation maintained in the ordinary
course of business; (v) commissions paid to third parties other than sales
personnel and sale representatives or sales agents; and (vi) charge back
payments and rebates (or equivalents thereof) granted to or charged by national,
state or local governmental authorities, their agencies, purchasers and
reimbursers in countries other than the United States. A "sale" of a Licensed
Product is deemed to occur upon the earliest of invoicing, shipment or transfer
of title in the Licensed Product to a person or entity other than Schering or
its Affiliate or sublicensee.
1.30 "NON-COLLABORATION COMPOUNDS" means chemical entities (i) designed
or identified by Corvas after the Effective Date and outside of the Research
Program but (ii) covered by a Valid Claim that also covers a composition of
matter of a Licensed Product or a Back-up Compound.
1.31 "PRODUCT PLAN" shall have the meaning assigned to it in Paragraph
5.1.
1.32 "PUBLICATION NOTICE" shall have the meaning assigned to it in
Paragraph 12.16.
1.33 "REPRESENTATIVES" shall have the meaning assigned to it in
Paragraph 12.4.
1.34 "RESEARCH COMMITTEE" shall have the meaning assigned to it in
Paragraph 2.4(a).
1.35 "RESEARCH PROGRAM" means the program of research conducted pursuant
to Article 2.
1.36 "RESEARCH PROGRAM TERM" shall have the meaning assigned to it in
Paragraph 2.7.
1.37 "SCHERING INDEMNIFIED PARTY" shall have the meaning assigned to it
in Paragraph 11.2.
1.38 "SCHERING INDEPENDENT RESEARCH" shall have the meaning assigned to
it in Paragraph 6.4.
4.
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1.39 "SCHERING INVENTIONS" shall have the meaning assigned to it in
Paragraph 6.2.
1.40 "SCHERING KNOW-HOW" means any Know-How which is necessary for
making, using or selling any Candidate Compound, Licensed Product or Back-up
Compound and which is owned or controlled by Schering or a Schering Affiliate,
as of the Effective Date or during the Research Program Term, and which Schering
has a right to disclose and license to Corvas.
1.41 "SCHERING PATENT RIGHTS" means Schering's rights in all patents
(including inventors' certificates, reissues, reexaminations, extensions or
other governmental actions which extend any of the subject matter of a patent,
and any substitutions, confirmations, registrations or additions of or to any of
the foregoing) issuing from any application (including any provisionals,
divisionals, continuations and continuations-in-part) filed to protect Schering
Inventions or Schering's interest in Joint Inventions.
1.42 "SCHERING CORPORATION AGREEMENT" means the License and
Collaboration Agreement between Schering Corporation and Corvas International,
Inc. dated June 11, 1997.
1.43 "SCHERING TECHNOLOGY" means all Schering Inventions (to the extent
not included within Schering Patent Rights), Schering Patent Rights, Schering
Know-How and other intellectual property acquired by Schering whether by an
assignment or a license (with the right to sublicense) in connection with the
Research Program, or in connection with the discovery, evaluation, development
or testing of any Licensed Product.
1.44 "TERRITORY" means all of the countries and territories in the
world, excluding the United States, its territories, commonwealths and
possessions.
1.45 "TITLE 11" shall mean Title 11 of the United States Code, as
amended from time to time.
1.46 "TRADEMARK" means any trademark selected and registered by
Schering, its Affiliates or sublicensees worldwide for the marketing of a
Licensed Product.
1.47 "VALID CLAIM" means any claim contained in any issued patent
included within the Corvas Patent Rights or Schering Patent Rights which has not
been abandoned or declared invalid in a non-appealable order, as the case may
be, and which would be infringed by the manufacture, use, sale, offer for sale
or import of a Licensed Product in the absence of the license granted in this
Agreement.
1.48 "WORLDWIDE NET SALES" means the sum of (i) Net Sales as defined in
this Agreement and (ii) Net Sales as defined in the Schering Corporation
Agreement.
5.
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ARTICLE 2
RESEARCH PROGRAM
2.1 CORVAS WORK. During the Research Program Term, Corvas shall use
commercially reasonable efforts to conduct the activities assigned to it under
the Research Program as described in Exhibit A. From time to time during the
Research Program Term Schering shall provide Corvas materials and information as
described in, and to the extent necessary for Corvas to perform its obligations
under, the Research Program as described in Exhibit A.
2.2 SCHERING WORK. During the Research Program Term, Schering shall
use commercially reasonable efforts to conduct the activities assigned to it
under the Research Program as described in Exhibit A.
2.3 RESEARCH PROGRAM FUNDING. Schering shall fund the first year of
the Research Program by paying to Corvas [ *** ] to support [ *** ] FTEs for
[*** ], due within ten (10) days of the execution of this Agreement. In the
event that Schering extends the Research Program pursuant to Paragraph 2.8
below, Schering shall continue to support the Research Program at Corvas by
paying to Corvas research funding for each additional [ *** ] extension year at
the rate of [ *** ] per FTE for a minimum of [ *** ] and a maximum of [ *** ]
FTEs per year, with the actual number of FTEs in each extension year to be
determined by the Research Committee, to be paid on or within ten (10) days of
the commencement of each extension of the Research Program Term.
2.4 RESEARCH COMMITTEE.
(a) MEMBERS. Promptly after the Effective Date of this
Agreement, the parties will establish a research committee ("RESEARCH
COMMITTEE") consisting of six (6) members, three (3) from and selected by each
of the parties hereto, with [ *** ] Ph.D., to serve as the initial chairman.
The initial Corvas members shall be [ *** ] The initial Schering members shall
be [ *** ] From time to time each party may make substitutions for one or more
of its representatives, in its sole discretion, effective upon notice to the
other party of such change.
(b) MEETINGS. The Research Committee will hold its initial
meeting at Corvas' facilities within thirty (30) days following the Effective
Date and will meet thereafter regularly at the call of the Chairman at least
quarterly while the Research Program is being undertaken. The location of such
meetings shall alternate between Corvas' and Schering's United States
facilities. Alternatively, the Research Committee may meet by means of
conference call, video conference or other similar communications equipment.
The Research Committee shall appoint a secretary from among its members for each
meeting. The Chairman for each meeting shall be responsible for preparing and
issuing minutes of each meeting within fifteen (15) days
* CONFIDENTIAL TREATMENT REQUESTED
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thereafter. Meeting minutes will be approved and countersigned by a Research
Committee representative from each of Schering and Corvas before they are
issued. Additional non-voting representatives or consultants may from time to
time be invited by Schering or Corvas to attend and participate in Research
Committee meetings (e.g., to evaluate and advise on business or scientific
issues). All decisions of the Research Committee shall be based upon unanimous
vote of at least a quorum of the members, with each of Schering and Corvas
having one (1) vote. Two (2) representatives of each party shall constitute a
quorum of the Research Committee. Each party shall bear its own meeting and
travel expenses, and each party may designate successor Research Committee
members on notice to the other party.
(c) RESPONSIBILITIES. The purpose of the Research Committee
shall be to act as an advisory committee with respect to all scientific,
technical, regulatory and other matters falling within the scope of the Research
Program. The Research Committee also shall be responsible for identification of
the first Candidate Compound meeting the Initial Lead Criteria pursuant to
Paragraph 4.2 and for submitting each Candidate Compound to Schering for
acceptance for development as a Licensed Product pursuant to Paragraph 2.5. The
Research Committee will review the progress of activities performed under the
Research Program to date, evaluate the work performed in relation to the
objectives of the Research Program, exchange such other information as may be
required by the Research Program or as reasonably requested by Schering and/or
Corvas relating to the Research Program objectives or performance of the
Research Program. The Research Committee will also discuss and approve any
proposed amendments to the Research Program and Exhibit A. Schering and Corvas
shall each appoint a person ("PROJECT LEADER") from among its representatives on
the Research Committee to coordinate its performance of the Research Program.
The Project Leaders shall be the primary contact between the parties with
respect to the Research Program. Each party shall notify the other within
thirty (30) days of the date of this Agreement of the appointment of its Project
Leader and shall notify the other party as soon as practicable upon changing
this appointment.
2.5 CANDIDATE COMPOUND ACCEPTANCE; BACK-UP COMPOUNDS.
(a) CANDIDATE COMPOUNDS. During the Research Program Term, all
information concerning Candidate Compounds shall be submitted, from time to
time, to the Research Committee. The Research Committee shall (i) determine
which Candidate Compounds meet the Acceptance Criteria; (ii) notify Schering and
Corvas thereof; and (iii) submit such supporting data to Schering as is
reasonably necessary to permit independent confirmation by Schering that the
Acceptance Criteria have been met. Schering shall review such supporting data
for each such Candidate Compound and notify Corvas whether it shall accept such
Candidate Compound for development within ninety (90) days of the Research
Committee's notice. Schering shall also have the right to accept a Candidate
Compound for development even if such Candidate Compound does not meet the
Acceptance Criteria and even if it is not submitted to Schering by the Research
Committee. Each accepted Candidate Compound shall thereupon become a Licensed
Product. Each Licensed Product shall be listed in Exhibit D hereto. In the
event that on the ninetieth (90th) day following the expiration or termination
of the Research Program Term, Schering has not accepted for development at least
[ *** ] Candidate [ *** ], this Agreement shall terminate pursuant to Paragraph
9.4. In the event a dispute
* CONFIDENTIAL TREATMENT REQUESTED
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shall arise as to whether or not a Candidate Compound meets the Acceptance
Criteria, such matter shall be resolved in accordance with the provisions of
Paragraph 12.4. The time periods specified in this Paragraph 2.5(a) shall be
suspended during the pendency of the proceedings contemplated by Paragraph 12.4.
(b) BACK-UP COMPOUNDS. At any time after acceptance of the
first Candidate Compound pursuant to Section 2.5(a) and prior to final approval
of an NDA or HRD for the first Licensed Product, Schering shall have the right
to designate any Back-up Compound as a Licensed Product and Schering shall
notify Corvas promptly thereof. Upon receipt by Corvas of such notice, such
Back-up Compound shall become a Licensed Product and Exhibit D hereto shall be
modified accordingly.
2.6 RESEARCH PROGRAM REPORTS. During the Research Program Term, Corvas
shall provide to Schering semi-annual written reports of its research and
development activities, Research Program progress and results, and any pertinent
information related to Hepatitis C that becomes available to it and that it has
a right to disclose, in a form mutually agreed on by both parties. During the
Research Program Term, Schering shall provide semi-annual written reports of its
research and development activities under the Research Program, including,
without limitation, progress and results of the Research Program. Corvas will
also permit Schering to establish an electronic computer link with Corvas, at
the option and at the expense of Schering, which will permit Schering to
electronically access scientific data generated and stored by Corvas and arising
out of the Research Programs, provided that Schering shall take such measures to
insure the security of such link as Corvas shall reasonably request including,
without limitation, restricting access thereto and regulating the information
communicated pursuant thereto for purposes of maintaining confidentiality.
2.7 RESEARCH PROGRAM TERM. The Research Program term shall commence on
the Effective Date of this Agreement and shall expire [ *** ] from such
Effective Date, unless extended by the parties in accordance with Paragraph 2.8
or earlier terminated in accordance with Paragraph 9.3 ("RESEARCH PROGRAM
TERM").
2.8 RESEARCH PROGRAM TERM EXTENSION. Schering may extend the Research
Program Term beyond the [ *** ] period for up to [ *** ] periods by giving
Corvas a sixty (60) days written notice of such extension prior to the
expiration of the Research Program Term and paying research and development
funding as set forth in Paragraph 2.3.
ARTICLE 3
LICENSE GRANTS; SUBLICENSES
3.1 EXCLUSIVE LICENSE GRANT.
(a) LICENSED PRODUCTS. Subject to the terms and conditions of
this Agreement, Corvas hereby grants to Schering an exclusive, even as to
Corvas, license under the
* CONFIDENTIAL TREATMENT REQUESTED
8.
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Corvas Patent Rights and Corvas Know-How, with the right to grant sublicenses,
to make, use, sell, offer for sale, import and export Licensed Products for all
uses in the Territory.
(b) BACK-UP COMPOUNDS. Subject to the terms and conditions of
this Agreement, Corvas hereby grants to Schering an exclusive, even as to
Corvas, license under the Corvas Patent Rights and Corvas Know-How, with the
right to grant sublicenses, to make, use, offer for sale, import and export
Back-up Compounds for all uses in the Territory. The license granted in this
Section 3.1(b) shall expire when Back-up Compounds become Licensed Products in
accordance with Section 2.5(b).
(c) HCV ACTIVITY COMPOUNDS. Subject to the terms and conditions
of this Agreement, Corvas hereby grants to Schering an exclusive, even as to
Corvas, license under the Corvas Patent Rights to make, use, offer for sale,
import and export any HCV Activity Compounds solely within the Field in the
Territory. For the purposes of Paragraphs 4.4, 4.5, 4.7, 4.9, 4.10, 4.11, 5.1,
9.5, 9.6, 10.4 and Article 8, such HCV Activity Compounds shall be deemed
Licensed Products.
3.2 SUBLICENSES. The right of Schering to grant sublicenses under
Paragraph 3.1(a) of this Agreement is subject to the conditions that:
(i) each sublicense shall be consistent with all relevant and
applicable terms and conditions of this Agreement;
(ii) Schering shall remain responsible to Corvas for all of each
sublicensee's obligations under the sublicense;
(iii) each sublicense shall provide for its continuation following
early termination of Schering's license rights from Corvas and its assignment to
Corvas, or at Corvas' election, its termination; and
(iv) Schering shall provide Corvas a copy of each sublicense
agreement granting rights to the manufacturing, selling, promotion, marketing or
distribution of Licensed Products within thirty (30) days of its execution other
than sublicense agreements which are limited licenses incidental to development
and commercialization activities on behalf of Schering.
3.3 NON-EXCLUSIVE LICENSE GRANT. In the event that the development,
making, having made, importing, exporting, use, offering for sale or sale of
Licensed Products by Schering, its Affiliates or sublicensees would infringe
during the term of this Agreement a claim contained in any issued patent owned
or controlled by Corvas which has not been abandoned or declared invalid in a
non-appealable order, as the case may be, and which patent is not included
within the grants to Schering under Paragraph 3.1 hereof, to the extent it is
free to do so under other agreements that may be in place with third parties,
Corvas hereby grants to Schering a non-exclusive license under any such patents
to develop, make, have made, import, export, use, offer for sale and sell
Licensed Products for all uses in the Territory.
9.
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3.4 RESEARCH LICENSE GRANT.
(a) CORVAS GRANT. Subject to the terms and conditions of this
Agreement, and to the extent it is free to do so under other agreements that may
be in place with third parties, Corvas hereby grants to Schering a non-exclusive
license under its patents, trademarks and other intellectual property only to
the extent necessary to carry out Schering's obligations and responsibilities
under the Research Program and to develop and commercialize a Licensed Product.
Such research license shall remain in full force and effect until, and shall
terminate upon, the expiration or termination of this Agreement.
(b) SCHERING GRANT. Subject to the terms and conditions of this
Agreement, and to the extent it is free to do so under other agreements that may
be in place with third parties, Schering hereby grants to Corvas a non-exclusive
license under its patents, trademarks and other intellectual property only to
the extent necessary to carry out Corvas' obligations and responsibilities under
the Research Program. Such research license shall remain in full force and
effect until, and shall terminate upon, the expiration or termination of the
Research Program Term.
3.5 FIRST NEGOTIATION.
(a) FIRST NEGOTIATION RIGHT. In the event Corvas decides to
initiate negotiations with any third party to license it compounds, other than
Candidate Compounds, developed by or on behalf of Corvas for inhibition of a
viral protease other than a Hepatitis C virus protease, Corvas shall notify
Schering in writing prior to initiating or soliciting such negotiations. For a
period of thirty (30) days following receipt of such notice from Corvas, during
which period Corvas shall not discuss such compounds with any third party,
Schering may notify Corvas of its desire to initiate good faith negotiations, on
a non-exclusive basis, with regard to such compounds. If Corvas and Schering
shall not have entered into a binding agreement within ninety (90) days of
Schering's notice, during which period Corvas shall have conducted such
negotiations in good faith, Corvas shall be free to enter into an agreement with
respect to such compounds with any third party and shall have no further
obligation or liability to Schering with respect thereto or obligation to offer
or disclose to Schering the terms offered to such third party.
(b) TERM OF FIRST NEGOTIATION RIGHT. The rights granted under
this Paragraph 3.5 shall remain in full force and effect for a period of five
(5) years from the Effective Date.
3.6 NO CORVAS OBLIGATION WITH RESPECT TO NON-COLLABORATION HCV ACTIVITY
COMPOUND. With respect to the license granted in Section 3.1(c), Corvas shall
have no obligation to synthesize or test any Non-Collaboration Compound which is
also an HCV Activity Compound and shall have no obligation to routinely perform,
or permit the performance of, assays or otherwise identify any such HCV Activity
Compound. Notwithstanding the foregoing, in the event Corvas identifies such
HCV Activity Compound, it shall promptly notify Schering of the structure and
activity of such compound.
10.
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3.7 ADDITIONAL ACTIVITY COMPOUNDS.
(a) NON-COLLABORATION ADDITIONAL ACTIVITY COMPOUNDS IDENTIFIED
BY SCHERING. In the event that (i) Schering identifies a Non-Collaboration
Compound which is also an Additional Activity Compound, and (ii) such compound
does not meet the criteria set forth in Exhibit I, and (iii) Schering has not
already commenced clinical development in the Field of such compound, the rights
to such Additional Activity Compound granted to Schering under Section 3.1(c)
shall revert to Corvas.
(b) COLLABORATION ADDITIONAL ACTIVITY COMPOUNDS IDENTIFIED BY
SCHERING. In the event that Schering identifies a Candidate Compound which is
also an Additional Activity Compound, Schering shall retain rights to such
Additional Activity Compound granted to it under Section 3.1(c)
(c) RIGHT TO NEGOTIATE FOR ADDITIONAL ACTIVITY COMPOUNDS
IDENTIFIED BY SCHERING. Schering shall immediately notify Corvas of Schering's
identification of any Additional Activity Compound and for a period of one
hundred twenty (120) days following the receipt of such notice by Corvas,
Schering shall have the right to conduct good faith negotiations, on an
exclusive basis, with regard to such field or fields of use for such Additional
Activity Compound as the parties may agree. If Corvas and Schering shall not
have entered into such binding agreement within such 120-day period, Corvas
shall be free to enter into an agreement with respect to Additional Activity
Compound with any third party and shall have no further obligation or liability
to Schering with respect thereto.
(d) ADDITIONAL ACTIVITY COMPOUNDS DISCOVERED BY CORVAS OR ITS
PARTNERS. In the event that (i) Corvas or its partner identifies an Additional
Activity Compound (which specifically excludes Licensed Products and Back-up
Compounds) and (ii) Schering has not already commenced a six (6) month GLP
toxicology testing program of such compound in the Field, Corvas shall
immediately notify Schering of such identification and all rights to such
compound granted to Schering under Section 3.1(c) shall revert to Corvas.
ARTICLE 4
PAYMENTS
4.1 LICENSE FEE. Within ten (10) days of the Effective Date, Schering
shall pay a license fee of [ *** ] to Corvas by wire transfer of immediately
available funds to an account designated by Corvas.
4.2 INITIAL LEAD IDENTIFICATION PAYMENT. Upon recommendation by the
Research Committee that a Candidate Compound meets the Initial Lead Criteria,
the Research Committee shall, if Schering shall have not previously accepted a
Candidate Compound as meeting the Initial Lead Criteria as hereinafter in this
Paragraph 4.2 provided, provide notice thereof to Schering and Corvas and submit
to Schering such supporting data as is reasonably necessary to
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permit independent confirmation that the Initial Lead Criteria set forth in
Schedule B have been met. Schering shall have forty-five (45) days to review
such supporting data and to determine whether it shall accept such Candidate
Compound as meeting the Initial Lead Criteria. [ *** ]
4.3 FIRST CANDIDATE COMPOUND ACCEPTANCE PAYMENT. [ *** ]
4.4 MILESTONE PAYMENTS. Milestone payments shall be payable with
respect to any Licensed Product on the first achievement of the milestones
listed below in this Paragraph 4.4. Such payments shall be payable one time
only regardless of how many Licensed Products are developed hereunder.
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- ------------------------------------------------------------
MILESTONE AMOUNT
- ------------------------------------------------------------
- ------------------------------------------------------------
1. [ *** ] [ *** ]
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2. [ *** ] [ *** ]
- ------------------------------------------------------------
3. [ *** ] [ *** ]
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4. [ *** ] [ *** ]
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5. [ *** ] [ *** ]
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6. [ *** ] [ *** ]
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* [ *** ] means the earlier of (i) [ *** ], (ii) [ *** ], or (iii) [ *** ].
** [ *** ] means the earlier of (i) [ *** ], (ii) [ *** ], or (iii) [ *** ].
Schering will advise Corvas of the accomplishment of each of the milestones
described in this Paragraph 4.4 within thirty (30) days thereof, and will at the
time of such notification remit any payments due.
4.5 ROYALTY PAYMENT DATES. On the last business day of June,
September, December and March in each and every calendar year during the term of
this Agreement, following the commencement of marketing of applicable Licensed
Products hereunder, Schering shall furnish and deliver to Corvas a full and true
accounting of its Worldwide Net Sales of Licensed Products hereunder during the
three (3) month period ending with the previous
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March 31st, June 30th, September 30th and December 31st and shall simultaneously
pay to Corvas, for Schering's account or for the account of the applicable
Schering Affiliate or sublicensee, as the case may be, a sum equal to the
aggregate of the Earned Royalty due thereon. Accountings shall be made
separately for each Licensed Product. Schering's accounting of Earned Royalties
shall identify Net Sales of each Licensed Product by country, the price at which
the Licensed Products were sold, and the amount and nature of any deductions
made by Schering when calculating Net Sales. Any Earned Royalties that are not
paid when due shall bear interest from the due date to the date of payment at an
annual rate equal to the then prevailing prime interest rate in the United
States as publicly announced by Chase Manhattan Bank. It is understood and
agreed that only one Earned Royalty shall be due with respect to a Licensed
Product regardless of the number of Patent Rights which cover it.
4.6 DIRECT AFFILIATE LICENSES. Whenever Schering shall reasonably
demonstrate to Corvas that, in order to facilitate direct royalty payments by an
Affiliate, it is desirable that a separate license agreement be entered into
between Corvas and such Affiliate, Corvas will grant such licenses directly to
such Affiliate by means of an agreement which shall be consistent with all of
the provisions hereof, provided that Schering shall reimburse Corvas for its
reasonable attorneys' fees and costs incurred in connection with any such
separate license agreement, and Schering guarantees the Affiliate's obligations
thereunder or otherwise provides to Corvas assurances of performance
satisfactory to Corvas in its sole discretion.
4.7 PLACE OF ROYALTY PAYMENT AND CURRENCY CONVERSIONS. Earned Royalty
shall be deemed payable by the entity making the Net Sales from the country in
which earned in local currency and subject to foreign exchange regulations then
prevailing. Earned Royalty payments shall be made in United States dollars to
the extent that unrestricted conversion to United States dollars is permitted.
The rate of exchange to be used in any such conversion from the currency in the
country where such Net Sales are made shall be the commercial rate of exchange
prevailing in the United States on the last day of the calendar quarter for
which such payments are made as customarily quoted for use for currency
conversions between Schering and its Affiliates. If, due to restrictions or
prohibitions imposed by national or international authority, payments cannot be
made as aforesaid, the parties shall consult with a view to finding a prompt and
acceptable solution, and Schering will, from time to time, deal with such monies
as Corvas may lawfully direct at no additional out-of-pocket expense to
Schering. Notwithstanding the foregoing, if Earned Royalties in any country
cannot be remitted to Corvas for any reason within six (6) months after the end
of the calendar quarter during which they are earned, then Schering shall be
obligated to deposit the Earned Royalties in a bank account in such country in
the name of Corvas. Earned Royalty payable by Schering shall be net of any
foreign withholding taxes due and paid by Schering, it being understood that
such withholding taxes are the obligation of Corvas. Schering shall forward to
Corvas in a timely manner all tax receipts relating to such withholding taxes
and shall reasonably cooperate with Corvas in assessing its obligations with
respect thereto. Schering will provide written notice to Corvas of any foreign
tax withholding applicable to Earned Royalty sufficiently in advance of the date
such taxes are payable to provide Corvas an opportunity to review or contest the
applicability of such tax.
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4.8 ROYALTIES ON RESALES. No Earned Royalty shall be payable in
respect of sales between and among Schering, its Affiliates and sublicensees, it
being understood that royalties are to be paid on resale of Licensed Products to
independent third parties.
4.9 DURATION OF ROYALTY PAYMENTS. With respect to Net Sales of any
Licensed Product in any country in the Territory for which Earned Royalties are
due hereunder, Earned Royalty shall be paid hereunder with respect to Net Sales
of such Licensed Product for the longer period of (i) ten (10) years from the
date of first commercial sale of such Licensed Product hereunder in such country
or (ii) for so long as the manufacture, use, sale, offer for sale or import in
such country of such Licensed Product is subject to a Valid Claim in such
country. Upon expiration of the obligation to pay Earned Royalty on Net Sales
hereunder with respect to a Licensed Product in any country in the Territory,
the license granted to Schering in Article 3 shall become fully paid and
irrevocable with respect to such country and Schering, its Affiliates and
sublicensees shall thereafter be free at no cost to use any remaining
proprietary rights of Corvas granted pursuant to Article 3 herein to
commercialize the applicable Licensed Product in such country.
4.10 MAINTENANCE OF ROYALTY RECORDS. Schering shall maintain and cause
its Affiliates to maintain books of account and adequate records of all Net
Sales of Licensed Products, including those made by sublicensees. Corvas shall
have the right, by an independent public accounting firm reasonably acceptable
to Schering, employed by it and at its own expense, to examine pertinent books
and records of Schering at all reasonable times (but not more often than once
each calendar year) for the purpose of determining and reporting to Corvas the
correctness of royalty payments made hereunder; it being understood that such
examination with respect to any quarterly accounting period hereunder shall take
place not later than three (3) years following the expiration of said period.
The costs and expenses of such accounting firm shall be paid by Schering with
respect to any audit disclosing an underpayment by Schering of more than five
percent (5%). Any overpayments shall be promptly refunded to Schering. The
accounting firm representatives shall execute customary confidential agreements
prior to any examination.
4.11 COMPULSORY ROYALTIES. If the Earned Royalty set forth herein is
higher than the maximum royalty permitted by the law or regulations in any
country, the royalty payable for Net Sales of Licensed Products in such country
shall be equal to the maximum permitted royalty under such law or regulations.
ARTICLE 5
DILIGENCE
5.1 SCHERING REPORTS. During the term of this Agreement, beginning
upon the existence of a Licensed Product and continuing until Schering commences
paying royalties to Corvas with respect to such Licensed Product in accordance
with Paragraph 4.5, Schering will provide semi-annual reports to Corvas
regarding the applicable Licensed Products (i) describing
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the results of its evaluation of Licensed Products; and (ii) showing in
reasonable detail, sufficient to allow Corvas to make an independent assessment
of the program's progress, the efforts to develop and commercialize Licensed
Products hereunder through the first NDA filing ("PRODUCT PLAN"). Corvas shall
have the right, upon notice to Schering, to meet with Schering twice each year
within thirty (30) days of its receipt of semi-annual report, for the purpose of
reviewing and discussing Schering's progress thereunder. In the event Corvas is
acquired, whether by merger, sale of stock, sale of assets or other transaction,
by an entity that is a "Major Pharmaceutical Company," as defined below,
Schering's reporting obligations under this Paragraph 5.1 shall thereafter be
limited to providing a brief annual status report of progress in the development
and commercialization of Licensed Products sufficient to allow such Major
Pharmaceutical Company to monitor Schering's diligence under this Agreement. In
the event of such an acquisition, the contents of all such annual status
reports, as well as any annual reports received from Schering prior to such
acquisition, shall be treated as confidential, shall be used solely for purposes
of monitoring Schering's diligence in the commercialization of Licensed
Products, and shall only be made available to those individuals within the Major
Pharmaceutical Company who are responsible for such monitoring activities. For
purposes of this Paragraph 5.1, the term "Major Pharmaceutical Company" shall
mean any entity (including any corporation, joint venture, partnership or
unincorporated entity), as well as any Affiliates or division(s) of such entity,
that is engaged in the research, development, manufacturing, registration and
marketing of drug products that are approved under NDAs, HRDs, ANDAs or Product
License Applications (including, without limitation, any entity that is a member
of PhRMA).
5.2 SCHERING DILIGENCE. Schering shall be obligated to make continuing
diligent efforts to develop and commercialize itself or through Affiliate(s) or
sublicensee(s) at least [ *** ] commercially viable Licensed Product. Diligent
efforts shall be comparable to those efforts Schering makes with respect to its
own pharmaceutical products of comparable market potential at a comparable stage
of development. If Schering fails to exercise such diligent efforts, then
Corvas shall have the right to give Schering written notice thereof stating in
reasonable detail the particular failure. If Schering shall not correct the
failure within [*** ] of such notice or, with respect to any failure which
cannot reasonably be cured within [ *** ] shall not initiate within [ *** ] of
such notice and thereafter diligently pursue action reasonably expected to cure
such failure (even if requiring longer to cure than the [ *** ] specified in
Paragraph 9.2), then such failure shall constitute a material breach of this
Agreement, and Corvas shall have the right to terminate this Agreement pursuant
to Paragraph 9.2 herein, but without any further right to cure such breach
notwithstanding anything to the contrary in Paragraph 9.2. In the event a
dispute shall arise as to whether a failure to exercise due diligence has
occurred or whether Schering is diligently pursuing action reasonably expected
to cure such failure, such matter shall be resolved in accordance with the
provisions of Paragraph 12.4. The periods specified in this Paragraph 5.2 shall
be suspended during the pendency of the proceedings contemplated by Paragraph
12.4.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY
6.1 CORVAS INTELLECTUAL PROPERTY. All rights to inventions,
developments, discoveries or improvements (whether or not patentable), which are
made by Corvas employees, agents or contractors, without inventive contribution
of a Schering employee, agent or contractor and in direct connection with or
arising from Corvas' work pursuant to the Research Program ("CORVAS INVENTIONS")
shall be owned by Corvas. Expressly excluded from Corvas Inventions are all
inventions, developments, discoveries or improvements (whether or not
patentable) which are directly related to (i) technology generally useful to
impart oral activity to a molecule and (ii) technology generally useful for the
design, preparation or screening of transition state chemical libraries.
6.2 SCHERING INTELLECTUAL PROPERTY. All rights to inventions,
developments, discoveries or improvements (whether or not patentable), which are
made by Schering employees, agents or contractors, without inventive
contribution of a Corvas employee, agent or contractor, and in direct connection
with or arising from Schering's work pursuant to the Research Program ("SCHERING
INVENTIONS") shall be owned by Schering.
6.3 JOINT INTELLECTUAL PROPERTY. All rights to inventions,
developments, discoveries or improvements (whether or not patentable), which are
made by at least one employee, agent or contractor of Schering and at least one
employee, agent or contractor of Corvas in direct connection with or arising
from work pursuant to the Research Program ("JOINT INVENTIONS") shall be jointly
owned by Schering and Corvas.
6.4 INDEPENDENT INVENTIONS. Schering has informed Corvas, and Corvas
acknowledges, that Schering has an ongoing internal research program in the
Field and that such research may be performed by Schering or in collaboration
with one or more third parties (collectively and individually, "SCHERING
INDEPENDENT RESEARCH"). Schering shall not provide to its third party
collaborators in the Field any Corvas Know-How, Corvas Inventions and Candidate
Compounds, including but not limited to Back-up Compounds and Licensed Products.
All inventions, developments, discoveries, Know-How, and materials which arise
solely from the performance of the Schering Independent Research (individually
and collectively, "INDEPENDENT INVENTIONS") are and shall remain the sole
property of Schering or its third party collaborator(s). Any compounds arising
solely from the Schering Independent Research and not from the Research Program
which are inhibitors of a protease specific to the Hepatitis C virus (including,
without limitation, the [ *** ]) shall not be Candidate Compounds or Licensed
Products. Nothing herein shall be construed as granting to Corvas any license
or other rights to such Independent Inventions or to any patent applications or
patents relating thereto.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 7
CONFIDENTIALITY OBLIGATIONS
Except as necessary for the proper exercise of its rights and obligations
under this Agreement, each party agrees that it and its Affiliates, employees,
directors, agents, consultants and outside contractors (and sublicensees in the
case of Schering) will not publish or otherwise divulge, or use for its or their
own benefit apart from this Agreement, confidential information furnished to it
by the other party without the prior written approval of such other party in
each instance. The foregoing obligation shall not be imposed on a party with
respect to any information which it can demonstrate by competent written
evidence (i) was at the time of disclosure to it (or shall thereafter, but prior
to its publication, divulgence or use for the benefit of a party or any of its
Affiliates, become, through no fault of such party or its Affiliates) a part of
the public domain by publication or otherwise; or (ii) was already properly and
lawfully in its possession at the time it was received from the other party; or
(iii) was lawfully received from a third party who was under no obligation of
confidentiality to the disclosing party with respect thereto; (iv) is
independently invented, discovered or developed by the receiving party without
use or reference to such information, (v) is required by law to be disclosed
(but only to the extent of such required disclosure and only after the
disclosing party provides a reasonable opportunity under the circumstances for
the other party to review the planned disclosure and discuss the need for same);
or (vi) is published with the mutual agreement of the parties. This obligation
shall extend until the later to occur of (i) the expiration of this Agreement,
or (ii) ten (10) years following any termination of this Agreement prior to
expiration thereof. The parties acknowledge that breach of the confidentiality
restrictions contained in this Paragraph will cause immediate and irreparable
harm for which money damages are an inadequate remedy and agree that an
aggrieved party shall be entitled to seek injunctive relief in a court of
competent jurisdiction, in addition to any other rights to remedies provided
under this Agreement or by law.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 TRADEMARKS. Schering, its Affiliates and sublicensees shall be
free to use and to register in any trademark office worldwide any Trademark for
use with Licensed Products they desire in their sole discretion. Schering shall
own all right, title and interest in and to the Trademark in its own name or
that of its Affiliates or sublicensees during and after the term of this
Agreement.
8.2 PATENTS. As long as Schering has rights to Licensed Products
hereunder, Corvas shall, as hereinafter provided, prepare, file and prosecute,
to the extent feasible, and maintain patent applications and issued patents
within applicable Corvas Patent Rights in accordance with the terms of this
Article. In the case of patents to Joint Inventions which include generic or
specific compound claims covering one or more Licensed Products or Back-up
Compounds,
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Schering shall have the responsibility, at Schering's expense, for preparing,
filing, prosecuting and maintaining any patent applications and patents issuing
thereon. Schering will use diligent efforts to seek patents of comparable
quality and scope as customarily obtained by pharmaceutical companies for
comparable inventions. Corvas shall provide Schering reasonable assistance,
upon Schering's request and at Schering's expense, to prepare, file, prosecute
and maintain any patent applications or patents covering Joint Inventions for
which Schering has responsibility, including causing the execution of any
reasonably necessary documents. Schering shall provide timely disclosures and
notices to Corvas regarding the preparation and prosecution of patent
applications, and Schering shall provide Corvas with a reasonable opportunity to
review and comment upon such applications and prosecution in the various
countries and shall give good faith consideration to Corvas' comments. In the
case of all other Joint Inventions, the parties shall mutually determine which
party shall file, prosecute, maintain and bear the expenses of patent
applications and patents issuing therefrom.
8.3 PROSECUTION AND MAINTENANCE. Subject to Paragraph 8.2, Corvas
shall prepare, file, prosecute and maintain, at its expense, patent applications
and issued patents relating to the applicable subject matter described in
Paragraph 8.2 of this Article in the United States of America. Corvas will use
diligent efforts to seek patents of comparable quality and scope as customarily
obtained by pharmaceutical companies for comparable inventions. Notwithstanding
the foregoing, Corvas shall have the right, consistent with its reasonable
business judgment, to abandon any patent application or issued patent in the
United States of America as part of its overall patent strategy, in a manner and
based on considerations consistent with Schering's development and
commercialization efforts for Licensed Products and a well conceived patent
strategy of an established biopharmaceutical company for projects of similar
value and status. In the event of such abandonment, Corvas shall give Schering
reasonable advance written notice thereof and an opportunity to continue the
preparation or prosecution of any such patent application or maintenance of any
such issued patent, at Schering's expense, and Corvas shall have no further
obligation thereafter with respect to such patent application or issued patent;
PROVIDED, HOWEVER, such an act of abandonment shall not affect ownership of
patent rights. If Schering desires patent protection in Europe (e.g., through
the European Patent Office ("EPO")), Japan or Canada, it shall so direct and
Corvas shall prepare, file, prosecute and maintain such patent applications and
issued patents, and Schering shall, at Corvas' election, either advance costs or
reimburse Corvas for [ *** ] of its reasonable out-of-pocket expenses incurred
after the Effective Date and properly documented. If Schering desires patent
protection in any additional jurisdictions, it shall so direct and Corvas shall
prepare, file, prosecute and maintain such patent applications and issued
patents, and Schering shall, at Corvas' election, either advance costs or
reimburse Corvas for its reasonable out-of-pocket expenses incurred after the
Effective Date and properly documented. In the event Schering no longer desires
to continue prosecution in any such jurisdiction, or never directs that a patent
application be filed in any certain jurisdiction, then Schering shall so notify
Corvas and Corvas may discontinue such prosecution, or continue or begin such
prosecution, as the case may be, at its own expense. In the event Schering
discontinues prosecution or never directs prosecution in any certain
jurisdiction, and Corvas continues or begins prosecution in that jurisdiction,
then Corvas shall recover its costs of filing, prosecution and maintenance in
such jurisdiction from any sales by Schering or its sublicensees of Licensed
Products in such jurisdiction in addition to royalties or
* CONFIDENTIAL TREATMENT REQUESTED
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other payments in respect of Net Sales in such jurisdiction. Corvas shall
provide timely disclosures and notices to Schering regarding the preparation and
prosecution of patent applications, and Corvas shall provide Schering with a
reasonable opportunity to review and comment upon such applications and
prosecution in the various countries.
8.4 PATENT EXTENSIONS. With respect to any issued patent included
within Corvas Patent Rights licensed to Schering hereunder, Corvas will
designate Schering as its agent for obtaining an extension of such patent or
governmental equivalent which extends the exclusivity of any of the patent
subject matter where available in any country worldwide or, if not feasible, at
Schering's option, permit Schering to file in Corvas's name or diligently obtain
such extension for Schering, its Affiliate(s) or sublicensee(s) at Schering
expense. Furthermore, Corvas agrees to provide reasonable assistance, at no
out-of-pocket expense, to facilitate Schering's efforts to obtain any extension.
8.5 THIRD PARTY INFRINGEMENTS. Each party shall promptly notify the
other of its knowledge of any potential infringement of the Corvas Patent
Rights. Corvas shall have the right, but not the obligation, to take all
reasonable legal action necessary to (i) protect the licensed Corvas Patent
Rights against infringements by third parties and (ii) enforce the Corvas Patent
Rights against infringement by third parties by the sale of products competing
with Licensed Products in the Field. If, within three (3) months following
receipt by the receiving party of the notice referred to in the first sentence
of this Paragraph, Corvas fails to take such action to halt the alleged
infringement, Schering shall, in its sole discretion, have the right to take
such action as it deems warranted in its own name or in the name of Corvas or
jointly. The foregoing notwithstanding, in the event that an alleged third
party infringer certifies pursuant to 21 U.S.C. Section 355(b)(2)(A)(iv) against
a granted patent within the scope of the Corvas Patent Rights and covering a
Licensed Product, the party receiving notice of such certification shall
immediately notify the other party of such certification, and if fourteen (14)
days prior to expiration of the forty-five (45) day period set forth in
21 U.S.C. Section 355(c)(3)(C), Corvas fails to commence an infringement action,
Schering, in its sole discretion, shall be entitled to bring such infringement
action. Each party agrees to render such reasonable assistance as the
prosecuting party may request. Costs of maintaining any such action and damages
recovered therefrom shall be paid by and belong to the party bringing the
action. In each case the party not initiating the action shall have the right,
at its own expense, to join into the prosecution of such action, including
becoming a party to such action and being represented by separate counsel of its
choice. However, if Schering, in its sole discretion, consents to grant a
sublicense under Corvas patent Rights to any third party, who, but for such
license, would infringe claims of issued patents included in the Corvas Patent
Rights, then, after deduction by Schering of any costs and expenses incurred by
Schering in the prosecution of such action prior to granting the license to such
party, Corvas and Schering shall divide the running royalty payments received
from any such third party, in the proportion of [ *** ] to Schering and [ *** ]
to Corvas; in such case, sales of such products by such third party shall not be
included as a part of Net Sales.
* CONFIDENTIAL TREATMENT REQUESTED
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ARTICLE 9
TERM AND TERMINATION
9.1 TERM. Unless sooner canceled or terminated under the provisions
hereof, this Agreement shall expire upon the expiration of all royalty
obligations hereunder.
9.2 TERMINATION FOR BREACH. Either party may, at its option, terminate
this Agreement by giving to the other party prior notice in writing to that
effect of not less than [ *** ] in the event that the other party shall commit a
material breach of this Agreement and shall fail to cure such breach during the
[ *** ] period following receipt of said notice from the non-breaching party, or
such longer period (not to exceed [ *** ] as may be necessary, provided the
breaching party has commenced and continues its diligent efforts to cure.
Notwithstanding the foregoing, if the breach specifically relates solely to a
specific Licensed Product, this Agreement shall be terminable by Corvas only
with respect to the Licensed Product to which such breach specifically relates.
Such cancellation and termination shall not release the breaching party from any
obligations hereunder incurred prior thereto nor prejudice any other rights or
remedies of the non-breaching party. In the event of termination of this
Agreement by Corvas pursuant to this Paragraph 9.2, Corvas and Schering shall
have the rights and obligations set forth in the applicable provisions of
Paragraphs 9.5 and 9.6 hereof, and Corvas shall also have, at its option, (i) as
its sole legal right and remedy arising out of the termination the rights set
forth in Paragraph 9.8 or (ii) such rights and remedies as may be available at
law and in equity including, without limitation, damages but not indirect or
consequential damages or lost profits. Election by Corvas of its option rights
shall be made within [ *** ] of termination.
9.3 VOLUNTARY SCHERING TERMINATION. Schering may terminate this
Agreement at any time upon [ *** ] prior written notice to Corvas, and in such
event the parties shall have the rights and obligations set forth in the
applicable provisions of Paragraphs 9.5, 9.6 and 9.8 hereof.
9.4 AUTOMATIC TERMINATION. In the event that on the [ *** ] following
expiration or termination of the Research Program Term Schering has not accepted
for development at least [ *** ] Candidate [ *** ] pursuant to Paragraph
2.5(a), this Agreement shall terminate and all rights granted to Schering
hereunder, including all applicable rights to Licensed Products, Candidate
Compounds and Non-Collaboration Compounds and all intellectual property
rights therein, shall revert to Corvas. In such event Schering shall grant
Corvas an exclusive license, with the right to sublicense, under Schering
Technology in the Territory as it relates to each Candidate Compound
submitted to Schering by the Research Committee.
9.5 POST TERMINATION ROYALTIES. Upon any Agreement cancellation,
expiration or termination, all Earned Royalties due for Net Sales of Licensed
Products to the effective date of said cancellation or termination shall accrue
and become due and payable on the sixtieth (60th) day thereafter.
* CONFIDENTIAL TREATMENT REQUESTED
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9.6 POST TERMINATION PRODUCT SALES. In the event of the cancellation
or termination of any license rights in a jurisdiction with respect to a
Licensed Product, other than for reason of material breach of this Agreement by
Schering, prior to the expiration thereof or termination of this Agreement,
inventory of Licensed Product may be sold in such jurisdiction for up to six (6)
months after date of termination, provided Earned Royalties are paid thereon,
and (i) the obligations of confidentiality under Article 7 herein shall survive
for the period specified therein, and (ii) all obligations of either party
accruing prior to such termination shall survive.
9.7 INSOLVENCY AND BANKRUPTCY.
(a) TERMINATION UPON CORVAS INSOLVENCY. In the event that
(i) Corvas shall make an assignment for the benefit of creditors, petition or
apply to any tribunal for the appointment of custodian, receiver or any trustee
for it or a substantial part of its assets, or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect other than Title 11; or (ii) if there shall have been filed
any such bona fide petition or application, or any such proceeding shall have
been commenced against Corvas, in which an order for relief is entered or which
remains undismissed for a period of ninety (90) days or more; or (iii) Corvas by
any act or omission of act shall indicate its consent to, approval of or
acquiescence in any such petition, application, or proceeding or order for
relief or the appointment of a custodian, receiver or trustee for it or any
substantial part of its property, or shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of ninety (90)
days or more; and Corvas has not complied with or is unable to comply with its
material obligations under this Agreement, then Schering shall have the
following rights. Schering will have the right (including, without limitation,
the right and ability to cure any and all defaults) to complete any work which
is designated as the responsibility of Corvas under the Agreement and to
contract directly with third parties, if any, involved in contracted
arrangements with Corvas with respect to such work. The parties hereby
acknowledge and agree that Schering will have complete right of access to all
information and data of Corvas or any third party necessary to complete the
development and registration of and to manufacture the Licensed Products.
(b) SCHERING RIGHTS UPON CORVAS BANKRUPTCY.
(i) All rights and licenses granted under or pursuant
to this Agreement by Corvas to Schering are, for all purposes of Section
365(n) of Title 11, licenses of rights to intellectual property as defined in
Title 11. If a case is commenced by or against Corvas under Title 11, then,
unless and until this Agreement is rejected as provided in Title 11, Corvas
(in any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee) shall, as
Schering may elect in a written request, immediately upon such request (i)
perform all of the obligations provided in this Agreement to be performed by
Corvas or (ii) provide to Schering all such intellectual property (including
all embodiments thereof) held by Corvas and such successors and assigns or
otherwise available to them.
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(ii) If a Title 11 case is commenced by or against Corvas,
this Agreement is rejected as provided in Title 11 and Schering elects to
retain its rights hereunder as provided in Title 11, then Corvas (in any
capacity, including debtor-in-possession) and its successors and assigns
(including, without limitation, a Title 11 Trustee) shall provide to Schering
all such intellectual property (including all embodiments thereof) held by
Corvas and such successors and assigns or otherwise available to them
immediately upon Schering's written request therefor. Whenever Corvas or any
of its successors or assigns provides to Schering any of the intellectual
property licensed hereunder (or any embodiment thereof) pursuant to this
Paragraph 9.7, Schering shall have the right to perform the obligations of
Corvas hereunder with respect to such intellectual property, but neither such
provision nor such performance by Schering shall release Corvas from any such
obligation or liability for failing to perform it.
(iii) All rights, powers and remedies of Schering 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 Corvas. Schering, in addition to the rights, power 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 in the event of a rejection of this Agreement as
provided in Title 11 and Schering election to retain its rights hereunder as
provided in Title 11, they intend the foregoing Schering rights to extend to the
maximum extent permitted by law, including without limitation for purposes of
Title 11, (i) the right of access to such intellectual property (including all
embodiments thereof) of Corvas, or any third party with whom Corvas contracts to
perform an obligation of Corvas under this Agreement, and, in the case of the
third party, which is necessary for the development, registration and
manufacture of Licensed Products and (ii) the right to contract directly with
any third party described in clause (i) in this sentence to complete the
contracted work.
9.8 RIGHTS UPON TERMINATION. In the event of termination of this
Agreement pursuant to Paragraph 9.2 or Paragraph 9.3, the licenses set forth in
Paragraphs 3.1, 3.3 and 3.4 hereof applicable to the portions terminated (which
may be the entire portion or a part thereof) shall immediately terminate and all
applicable rights to any HCV Activity Compound, Back-up Compound and Licensed
Product and all intellectual property rights therein, shall revert to Corvas
and, except in the instance of termination under Paragraph 9.2 due to breach by
Corvas, Schering shall grant to Corvas, upon Corvas' request, an exclusive
license in the Territory, with the right to sublicense, under Schering
Technology solely as it relates to any and all Candidate Compounds, including
but not limited to Back-up Compounds and Licensed Products. Such license shall
be for use within the Field; PROVIDED, HOWEVER, that in the case of Candidate
Compounds included within Joint Inventions, such license shall be for all uses.
Corvas shall pay to Schering (A) royalties on its net sales of products based on
any such Candidate Compound or Licensed Product ("Corvas Product") so licensed
to Corvas of (i) [ *** ] for Corvas Products for which [ *** ] as evidenced by
[ *** ] on the effective date of termination and (ii) [ *** ] for Corvas
Products for which [ *** ] as evidenced by [ *** ] on the effective date of
termination plus (B) an
* CONFIDENTIAL TREATMENT REQUESTED
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[ *** ] received by Corvas and its Affiliates from any third party with respect
to a grant of rights under Schering Technology; such royalties and amounts shall
be payable in a manner consistent with the terms of Article 4 hereof. Corvas
shall, and shall endeavor to cause its sublicensees to, indemnify and hold
harmless Schering and its Affiliates, employees, officers, directors,
shareholders and agents from and against all liabilities, losses, damages, costs
or expenses, including reasonable attorney's fees which such party may incur,
suffer or be required to pay resulting from or arising in connection with any
product liability or other claims arising from the sale or use by any person of
any Corvas Product manufactured, marketed, sold or distributed by Corvas or any
Corvas Affiliate or sublicensee pursuant to this Paragraph 9.8, which obligation
of indemnification shall be consistent with the procedures set forth in
Paragraph 11.3 hereof. In addition, Schering shall grant to Corvas, to the
extent consistent with Schering's other marketing efforts, an exclusive license
in the Territory to utilize Schering Trademarks which were used with Corvas
Products; such license shall continue for a reasonable period, not to exceed
[ *** ] necessary to permit Corvas to phase in its trademarks. Promptly after
the termination Schering shall return to Corvas or dispose of any Corvas
Know-How described in Paragraph 1.9 herein which is covered by the portion of
the Agreement terminated, to the extent feasible, as requested by Corvas.
ARTICLE 10
WARRANTIES AND COVENANTS
Each party makes the warranties, covenants and representations set forth in
this Article 10 as follows:
10.1 AUTHORITY. Each party represents and warrants to the other party
that it has the legal power, authority and right to enter into this Agreement
and to perform all of its respective obligations set forth herein, including the
Exhibits hereto.
10.2 NO CONFLICTING UNDERTAKINGS. Each party represents and warrants
that as of the Effective Date of this Agreement it is not a party to any
agreement, arrangement or understanding with any third party which in any
material way conflicts with such party's ability to fulfill any of its
obligations under the terms of this Agreement, including the Exhibits hereto.
10.3 NO CONFLICTING FUTURE ACTIONS. Each party covenants (and Corvas
also represents and warrants with respect to the grant of rights to Schering
under Article 3) that it will not commit any material acts or fail to take any
act which it knows or should know would cause a material omission or permit any
acts or omissions to occur which it knows or should know would be in conflict
with its obligations under this Agreement and the Exhibits hereto or diminish
the potential scope of the grant of rights to Schering hereunder in any material
respect.
10.4 NO GUARANTEE OF RESEARCH PROGRAM SUCCESS. Corvas makes no express
or implied warranties, statutory or otherwise, concerning the quality,
commercial utility, freedom
* CONFIDENTIAL TREATMENT REQUESTED
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from infringement or any other characteristics of any Licensed Products, and
makes no warranty that a Licensed Product will arise or result from the Research
Program.
10.5 CORVAS OWNERSHIP OF PATENTS. Corvas represents and warrants that,
except for the rights herein granted to Schering and as otherwise permitted
under this Agreement, it has the right, title and interest in and to the Corvas
Patent Rights which it purports to have.
10.6 COMPLIANCE WITH AGREEMENT AND LAWS. Each party shall comply in all
material respects with the terms of this Agreement and with all laws, rules and
regulations applicable to the discovery, development, manufacture, distribution,
import and export and sale of pharmaceutical products pursuant to this
Agreement.
10.7 NO GOVERNMENT RIGHTS TO LICENSED PROPERTY. Corvas represents and
warrants that the license rights granted by it to Schering with respect to
Licensed Products shall not be subject to any retained rights of any state,
federal or foreign government or governmental entity, including without
limitation rights of the United States government under the Bayh-Dole Act,
except as set forth on the Corvas Schedule of Exceptions attached hereto as
Exhibit E.
10.8 NO THIRD PARTY RIGHTS TO COMPOUNDS. Corvas represents and warrants
that as of the Effective Date it has no agreements, understandings or
undertakings with any third parties or entities which would substantially impair
its ability to perform its obligations hereunder or to grant the rights which it
purports to grant hereunder or with respect to Candidate Compounds and Licensed
Products.
10.9 NEGATIVE COVENANTS.
(a) DEVELOPMENT FOR HCV USE. Schering shall not seek approval
for marketing of any Candidate Compound outside of the Field unless it first
obtains approval for marketing in the United States of such Candidate Compound
in the Field.
(b) OFF-LABEL USE. Except as provided in this Agreement, Corvas
shall not, during the term of this Agreement, grant any license or sublicense to
any third party to make, use, sell, offer for sale or import an HCV Activity
Compound in the Territory under Corvas Patent Rights or Corvas Know-How if at
the time of such grant Corvas has information from which it could reasonably be
concluded that any products to be based on such HCV Activity Compound will be
used for the treatment of Hepatitis C.
ARTICLE 11
INDEMNITY
11.1 SCHERING INDEMNITY. Schering will indemnify and hold harmless
Corvas and its Affiliates, employees, officers, directors, shareholders and
agents ("CORVAS INDEMNIFIED PARTY") from and against any and all liabilities,
losses, damages, costs, or expenses (including
24.
<PAGE>
reasonable attorneys' fees) which the Corvas Indemnified Party may incur, suffer
or be required to pay resulting from or arising in connection with (i) the
breach by Schering of any covenant, representation or warranty contained in this
Agreement, (ii) any product liability or other claims arising from the use by
any person of any Licensed Product that was manufactured, marketed, sold or
distributed by Schering or any Affiliate or sublicensee, or (iii) the successful
enforcement by a Corvas Indemnified Party of any of the foregoing.
11.2 CORVAS INDEMNITY. Corvas will indemnify and hold harmless Schering
and its Affiliates, employees, officers, directors, shareholders and agents
("SCHERING INDEMNIFIED PARTY") from and against any and all liabilities, losses,
damages, costs or expenses (including reasonable attorneys' fees) which the
Schering Indemnified Party may incur, suffer or be required to pay resulting
from or arising in connection with (i) the breach by Corvas of any covenant,
representation or warranty contained in this Agreement, (ii) any product
liability or other claims arising from the use by any person of any Licensed
Product that was manufactured by Corvas or a Corvas Affiliate to the extent
caused by or arising from any act, omission or negligence of Corvas or a Corvas
Affiliate, or (iii) the successful enforcement by a Schering Indemnified Party
of any of the foregoing.
11.3 INDEMNITY OBLIGATIONS. The aforesaid obligations of the
indemnifying party shall be subject to the indemnified party fulfilling the
following obligations:
(i) The indemnified party shall fully cooperate with the
indemnifying party in the defense of any claims, actions, etc., which defense
shall be controlled by the indemnifying party, and
(ii) The indemnified party, shall not, except at its own cost,
voluntarily make any payment or incur any expense with respect to any claim or
suit without the prior written consent of the indemnifying party, which such
party shall not be required to give.
11.4 LIABILITY INSURANCE. Schering shall procure and maintain, at its
sole expense, broad form comprehensive general liability insurance, including
products and completed operations coverage, in amounts which are commercially
reasonable in light of the business being conducted by Schering pursuant to this
Agreement, providing insurance coverage for claims and suits arising from the
development, manufacture, use, distribution or sale of any Licensed Product in
any country worldwide. Corvas shall be named an additional insured on the
policy of insurance, and a certificate of insurance will be provided to Corvas.
Notwithstanding anything to the contrary in the foregoing provisions of this
Paragraph 11.4, upon prior to notice to Corvas Schering may self-insure for such
claims and suits to the extent, and in such manner and with such procedures and
safeguards, as shall be reasonable and shall be consistent with customary
practices in the pharmaceutical industry in comparable circumstances.
25.
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ARTICLE 12
MISCELLANEOUS
12.1 WAIVER. The failure on the part of Schering or Corvas to exercise
or enforce any right conferred upon it hereunder shall not be deemed to be a
waiver of any such right, nor operate to bar the exercise or enforcement thereof
at any time or times thereafter.
12.2 NOTICES. Any notice required or permitted to be given by the terms
of this Agreement by a party shall be given by prepaid, registered air mail or
by express delivery service, such as Federal Express or DHL properly addressed
to the address of the other party set forth below, or to such other address as
may, from time to time, be designated in writing by such other party, and shall
be deemed to have been given upon receipt:
As to Schering: Schering Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
Attn: Vice President, Business Development
With copy to: Legal Director Licensing
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
As to Corvas: Corvas International, Inc.
3030 Science Park Road
San Diego, CA 92121
Attn: Corporate Secretary
With copy to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Brian C. Cunningham
12.3 APPLICABLE LAW. This Agreement shall be construed and interpreted
according to the law of the State of Delaware without giving effect to its
conflict of law provisions.
12.4 DISPUTE RESOLUTION. The parties shall follow the procedures set
forth below to resolve any dispute or issue which, by the express terms of this
Agreement, is to be resolved pursuant to this Paragraph 12.4 ("DISPUTE").
Within thirty (30) days after notice from either party to the other of such
Dispute, the parties shall hold a meeting, attended by Corvas' and Schering's
respective Directors of Research and Development (or the equivalent position)
("REPRESENTATIVES") to attempt in good faith to negotiate a resolution of the
Dispute, which resolution shall be subject to approval by the parties'
respective Chief Executive Officers or their
26.
<PAGE>
designated representatives ("CEOS"). If, within thirty (30) days after such
meeting, the parties have not succeeded in negotiating a resolution of the
Dispute, the Representatives shall promptly give notice to the CEOs describing
the specific nature of the Dispute, including references to the relevant
portions of this Agreement and possible conditions for the resolution of the
Dispute ("DESCRIPTION OF DISPUTE"). The CEOs shall attempt in good faith to
resolve the Dispute but if no successful resolution of the Dispute has been
mutually agreed to within thirty (30) days after the CEOs' receipt of the
Description of Dispute, either party may initiate arbitration of the dispute in
accordance with the procedures set forth in Exhibit F hereto.
12.4A FOREIGN CORRUPT PRACTICES ACT. Schering will comply with the
requirements of the United States Foreign Corrupt Practices Act, as amended from
time to time ("ACT"), and will refrain from any payments to third parties which
would cause Schering or Corvas to violate the Act and will indemnify and hold
Corvas harmless from any breach of this Paragraph.
12.5 CAPTIONS. The captions to the Articles and Paragraphs of this
Agreement are for convenience only, and shall not be deemed of any force or
effect whatsoever in construing this Agreement.
12.6 ENTIRE AGREEMENT AND AMENDMENT. The terms and provisions contained
herein, including the Exhibits hereto, constitute the entire agreement between
the parties and shall supersede all previous communications, representations,
agreements or understandings, either oral or written, between the parties hereto
with respect to the subject matter hereof. No amendment to this Agreement
varying or extending the terms hereof will be binding upon either party hereto
unless in writing, signed by duly authorized officers of the respective parties,
and referencing this Agreement. Each party hereto represents that it has been
represented by 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.
12.7 ASSIGNMENT. This Agreement shall not be assignable by either
party, except (i) to an Affiliate of such party, provided the assigning party
guarantees the performance of the Affiliate, (ii) as mutually agreed to in
writing in advance or (iii) to a successor to the entire pharmaceutical business
of such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted assignment shall be binding on the successors of the
assigning party. Any assignment or attempted assignment by either party in
violation of the terms of this Paragraph 12.7, shall be null and void and of no
legal effect.
12.8 SURVIVAL OF TERMS. The terms of this Agreement which by their
intent or meaning have validity beyond the term of this Agreement shall survive
the early termination or expiration of this Agreement.
12.9 NO AGENCY. Nothing herein shall be deemed to constitute either
party as the agent or representative of the other party or both parties as joint
venturers or partners for any purpose. Corvas shall be an independent
contractor, not an employee or partner of Schering.
27.
<PAGE>
Neither party shall be responsible for the acts or omissions of the other party,
and neither party will have authority to speak for, represent or obligate the
other party in any way without prior written authority from the other party.
12.10 SEVERABILITY. In the event that any provisions of this Agreement
is held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, (i) the
validity of the remaining provisions shall not be affected, (ii) the particular
provision shall to the extent permitted by law be reasonably construed and
equitably reformed to be valid and enforceable, and (iii) the rights and
obligations of the parties hereto shall be construed and enforced as if the
Agreement did not contain the unreformed, particular provisions held to be
unenforceable.
12.11 EXPRESS AND IMPLIED LICENSES. Only the licenses granted pursuant
to the express terms of this Agreement shall be of any legal force and effect.
No other license rights shall be created by implication or estoppel.
12.12 FORCE MAJEURE. In the event that either party is prevented from
performing or is unable to perform any of its obligations under this Agreement,
including without limitation payment obligations, due to any act of God; fire;
casualty; flood; any act, exercise, assertion or requirement of governmental
authority; epidemic; destruction of production facilities; riots; insurrection;
inability to procure or use materials, labor, equipment, transportation or
energy; or any the cause beyond the reasonable control of the party invoking
this Paragraph 12.12 if such party shall have used diligent efforts to avoid
such occurrence, such party shall give notice to the other party in writing
promptly, and thereupon the affected party's performance shall be excused and
the time for performance shall be extended for the period of delay or inability
to perform due to such occurrence.
12.13 PUBLICITY. Each party agrees not to issue a press release or
otherwise publicize this Agreement or the contents of this Agreement except (i)
on the advice of its counsel, as required by law (e.g., any Securities and
Exchange Commission filings and disclosures) and provided the party who will be
disclosing has consulted with the other party to the extent feasible prior to
disclosure with respect to the substance of the disclosure, or (ii) as consented
to in advance by the other party in writing. Notwithstanding the foregoing,
each party shall have the right to issue an initial press release, in the form
attached hereto as Exhibit G. Any matter disclosed as permitted pursuant to
this Paragraph 12.13 may be thereafter disclosed by either party as it shall see
fit, provided that any such further disclosure shall not be more extensive than
the original disclosure.
12.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
12.15 COOPERATION. Corvas agrees to cooperate with Schering to furnish
such information as shall be reasonably requested by the FDA or other
governmental authorities with respect to Licensed Products.
28.
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12.16 PUBLICATION. Any manuscript by Schering or Corvas and their
Affiliates describing the scientific results of the Research Program shall be
subject to the prior review of the non-publishing party at least thirty (30)
days prior to submission. Further, to avoid loss of patent rights as a result
of premature public disclosure of patentable information, the receiving party
shall notify the disclosing party in writing within thirty (30) day after
receipt of a disclosure whether the receiving party desires to file a patent
application on any invention disclosed in such scientific results in accordance
with Article 8 ("PUBLICATION NOTICE"). In the event that the receiving party
desires to file such a patent application, the disclosing party shall withhold
publication or disclosure of such scientific results until the earlier of (i) a
patent application is filed thereon, (ii) the parties determine after
consultation that no patentable invention exists or (iii) ninety (90) days after
receipt by the disclosing party of the Publication Notice of the receiving
party's desire to file such patent application; PROVIDED, HOWEVER, that in the
event the receiving party reasonably designates in good faith such results or a
portion thereof as commercially very important within thirty (30) days after
receipt of the Publication Notice, then such results shall not be published
until after earlier of (i) publication anywhere of a patent application
containing or based on such results or (ii) eighteen (18) months after such
receipt of the Publication Notice. Further, if such scientific results contain
the information of the receiving party that is subject to use and nondisclosure
restrictions under Article 7, the disclosing party agrees to remove such
information from the proposed publication or disclosure.
12.17 PROVISIONS CONTROLLED BY THE SCHERING CORPORATION AGREEMENT. For
the purposes of Article 2 ("Research Program") and Paragraphs 6.3 ("Joint
Intellectual Property"), 6.4 ("Independent Inventions"), 8.2 ("Patents"), 8.3
("Prosecution and Maintenance"), 8.4 ("Patent Extensions") and 8.5 ("Third Party
Infringements"), this Agreement shall be governed by the corresponding
provisions of the Schering Corporation Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.
SCHERING-PLOUGH LTD. CORVAS INTERNATIONAL, INC.
By: /s/ DAVID POORVIN By: /s/ JOHN E. CRAWFORD
--------------------------- ------------------------------------
Title: Prokurist Title: Executive Vice President and
------------------------ ---------------------------------
Chief Financial Officer
---------------------------------
29.
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EXHIBIT A
RESEARCH PROGRAM
HEPATITIS C VIRUS (HCV) PROTEASE INHIBITOR PROGRAM
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
A-1
<PAGE>
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
A-2
<PAGE>
EXHIBIT B
INITIAL LEAD CRITERIA
HEPATITIS C PROTEASE INHIBITOR PROGRAM
[ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT C
ACCEPTANCE CRITERIA
Any compound submitted to Schering pursuant to Paragraph 2.5 shall satisfy each
of the following criteria, to the extent applicable, unless waived by Schering:
A. Novel, patentable structure;
B. Appropriate physical form, i.e., a soluble solid or salt;
C. Workable chemical synthesis;
D. IN VITRO inhibition of an HCV protease with an [ *** ]
E. Oral anti-viral activity in [ *** ] models at appropriate doses, to be
determined by the Research Committee;
F. Suitable pharmacokinetics for [ *** ]
G. Consistent absorption (as determined by blood level) in [ *** ] as defined
by [ *** ] excluding outliers due to documented technical reasons;
H. No other clinically significant toxicities as determined in general
pharmacological screens, including activities against [ *** ] at an acceptable
multiple of the anti-viral dose. These will include an assessment of the
effects of the test compound on [ *** ] assessment of the effects of the
compound on [ *** ] assessment of the effect of the compound on [ *** ] and
assessment of the effects of the compound on [ *** ] and
I. Absence of significant potential for [ *** ]
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT D
LICENSED PRODUCTS
<PAGE>
EXHIBIT E
CORVAS SCHEDULE OF EXCEPTIONS
Collaborative Research and Materials Transfer Agreement between Corvas
International, Inc. and University of Florida and its employee, Ben M. Dunn;
effective August 26, 1996, for a twelve (12) month period. See Section 10.7.
<PAGE>
EXHIBIT F
ARBITRATION
(a) INITIATION OF ARBITRATION. A party ("COMPLAINING PARTY") which
intends to begin an arbitration to resolve a Dispute as contemplated by
Paragraph 12.4 of the Agreement ("ARBITRATION") shall initiate the Arbitration
by providing written notice ("ARBITRATION REQUEST") of such intent by certified
or registered mail or properly documented overnight delivery to the other party
("RESPONDING PARTY"). The Arbitration Request shall include a copy of the
Description of Dispute, set forth a proposed solution to the Dispute, and
include a suggested time frame within which the parties must act to effect such
solution. Contemporaneously with sending the Arbitration Request, the
Complaining Party shall submit a copy of the Arbitration Request to the American
Arbitration Association in the city in which the Arbitration is to be conducted
as provided in Paragraph (d) below.
(b) SELECTION OF ARBITRATION. Any and all Disputes to be resolved
pursuant to Arbitration shall be submitted to a neutral arbitrator
("ARBITRATOR"). The parties shall select the Arbitrator by mutual agreement but
if the parties are unable to agree, then the Arbitrator shall be selected in
accordance with the procedures of the American Arbitration Association. The
Arbitrator shall be a former judge of a state or federal court who shall not be
a current or former employee, director or shareholder of, or otherwise have any
current or previous relationship with, either party or its respective
affiliates.
(c) AMERICAN ARBITRATION ASSOCIATION RULES. The Arbitration shall be
conducted in accordance with the rules of the American Arbitration Association
then in effect, subject to the time periods and other provisions of this Exhibit
or as otherwise set forth in the Agreement.
(d) HEARING. Consistent with the time schedule established pursuant to
this paragraph (d) and Paragraph (e) below, the Arbitrator shall hold a hearing
("HEARING") to resolve each of the issues identified in the Description of
Dispute. To the extent practicable taking into account the nature of the
Dispute and the availability of the Arbitrator, the Hearing shall be conducted
over a period not to exceed two (2) consecutive business days, with each party
entitled to approximately half of the allotted time unless otherwise ordered by
the Arbitrator. In the event that Corvas initiates the Arbitration, the Hearing
shall be conducted in Newark, New Jersey. In the event that Schering initiates
the Arbitration, the Hearing shall be conducted in San Diego, California.
(e) DISCOVERY. Within ten (10) days of receipt by the Responding Party
of the Arbitration Request the parties shall negotiate in good faith the scope
and schedule of discovery, including depositions, document production and other
discovery devices, taking into account the nature of the Dispute submitted for
resolution. If the parties are unable to reach agreement as to the scope and
schedule of discovery, the Arbitrator may order such discovery as he or she
deems necessary. In either case, such discovery shall be completed within sixty
(60) days from the date of the selection of the Arbitrator. At the hearing,
which shall commence within twenty (20) days after the completion of discovery
unless the Arbitrator otherwise orders, the parties
F-1
<PAGE>
may present testimony (either live witness or deposition), subject to
cross-examination, and documentary evidence.
(f) HEARING SUBMISSION. At least twenty (20) business days prior to
the date set for the Hearing, each party shall submit to each other and the
Arbitrator a list of all documents on which such party intends to rely in any
oral or written presentation at the Hearing, a list of all witnesses, if any,
such party intends to call at the Hearing and a brief summary of each witness'
testimony. At least five (5) business days prior to the Hearing, each party
must submit to the Arbitrator and serve on each other party proposed findings of
fact and conclusions of law on each issue to be resolved. Within five (5) days
following the close of the Hearing, each party shall each submit such
post-Hearing briefs to the Arbitrator addressing the evidence and issues to be
resolved as may be required or permitted by the Arbitrator.
(g) ARBITRATOR'S DUTIES AND AUTHORITY. The Arbitrator shall preside
over and resolve any disputes between the parties in connection with the
Arbitration. The Arbitrator shall have sole discretion with regard to the
admissibility of any evidence and all other matters relating to the conduct of
the Hearing. The Arbitrator shall, in rendering its decision, apply the
substantive law of Delaware. The decision of the Arbitrator shall be final and
not appealable, except in the case of fraud or bad faith on the part of the
Arbitrator in connection with the conduct of such proceedings.
(h) DECISION AND AWARD. The Arbitrator shall render a decision and
award as expeditiously as possible but in no event more than thirty (30) days
after the close of the hearing. In making the award the Arbitrator shall rule
on each disputed issue. Nothing contained herein shall be construed to permit
the Arbitrator or any court or any other forum to award punitive, exemplary or
any similar damages. By entering into the Agreement and exercising their rights
to arbitrate, the parties expressly waive any claim for punitive, exemplary or
any similar damages. The only damages recoverable under this Agreement are
compensatory damages.
(i) COSTS AND EXPENSES. Each party shall pay its own costs (including,
without limitation, reasonable attorneys' fees) and expenses in connection with
the Arbitration; PROVIDED, HOWEVER, that if the Arbitrator determines that the
action of any party was arbitrary, frivolous or in bad faith, the Arbitrator may
award such costs and expenses to the prevailing party.
(j) CONFIDENTIALITY. The Arbitration shall be confidential and, except
as required by law, neither party shall make (or instruct the Arbitrator to
make) any public announcement with respect to the proceedings or decision of the
Arbitrator without the prior written consent of the other party. The existence
of any Dispute, and the award of the Arbitrator, shall be kept in confidence by
the parties and the Arbitrator, except as required in connection with the
enforcement of such award or as otherwise required by applicable law.
(k) JURISDICTION TO ENFORCE AWARD. For the purposes of these
arbitration provisions, the parties acknowledge their diversity of citizenship
and agree to accept the jurisdiction of the
F-2
<PAGE>
Federal District Court in Newark, New Jersey or San Diego, California (as
selected by the party seeking to enforce) for the purposes of enforcing awards
entered pursuant to these arbitration provisions and for enforcing the
agreements reflected in this Paragraph (k).
(l) EXCLUSIVE PROCEDURES. The procedures specified herein shall be the
sole and exclusive procedures for the resolution of Disputes between the parties
which are expressly identified for resolution in accordance with these
arbitration provisions.
F-3
<PAGE>
EXHIBIT G
PRESS RELEASE
Contact: Ronald Asinari
Schering-Plough
(201) 822-7402
Angela L. Hartley
Director, Investor Relations
(619) 455-9800 ext. 104
SCHERING-PLOUGH AND CORVAS ANNOUNCE
COLLABORATION ON HEPATITIS RESEARCH
MADISON, N.J., and SAN DIEGO, June XX, 1997 -- Schering-Plough Corporation
(NYSE: SGP) and Corvas International, Inc. (Nasdaq: CVAS) today announced an
agreement to seek orally bioavailable inhibitors of a key protease necessary for
hepatitis C virus (HCV) replication.
The agreement represents the third collaborative effort between the two
companies focusing on the discovery and development of protease inhibitors and
the first that will utilize Corvas' proprietary combinatorial chemistry program
to identify and optimize lead protease inhibitors.
Under terms of the agreement, Schering-Plough will receive an exclusive
worldwide license for products developed from Corvas compounds under the
research agreement. Schering-Plough will be responsible for all development,
manufacturing and marketing of the products. Corvas will receive licensing
fees, research and development funding, and payments upon reaching certain
milestones, in addition to royalties on sales. Further details of the agreement
are not being disclosed.
"Hepatitis is an increasingly widespread and potentially fatal disease," said
Jonathan R. Spicehandler, M.D., president of Schering-Plough Research Institute.
"This collaboration complements and enhances our internal antiviral research
program and may offer a potential new pathway to discover innovative therapies
for this medical area," Spicehandler said.
"We have proven our ability to use our combinatorial approach to protease
inhibitor discovery in our core cardiovascular research area," said George P.
Vlasuk, Ph.D., Corvas' executive vice president, research and development.
"This agreement provides a model opportunity to apply this capability to other
research areas, such as hepatitis C, while our internal resource remain focused
on the targets we know best. Schering-Plough's leadership in the area of
antiviral therapeutics makes them an excellent partner to capitalize on the
specific protease inhibitor candidates for hepatitis C that may be generated
from this alliance," Vlasuk said.
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Discovery of oral serine protease inhibitors using proprietary drug design and
combinatorial chemistry approaches is a key strength at Corvas. Schering-Plough
and Corvas have previously teamed to develop an oral inhibitor of thrombin, and
are working together to discover inhibitors of Factor Xa, both of which are key
protease enzymes in the blood coagulation cascade. The hepatitis C virus
contains a vital enzyme that belongs to the family of serine proteases. Through
use of its proprietary combinatorial chemistry program, Corvas hopes to rapidly
identify and optimize promising lead inhibitors to be evaluated for possible
clinical development under the agreement with Schering-Plough.
Corvas International, Inc. is a biopharmaceutical company engaged in the design
and development of a new generation of therapeutic agents for the prevention and
treatment of major cardiovascular and inflammatory diseases.
Schering-Plough is a research-based company engaged in the discovery,
development, manufacturing and marketing of pharmaceutical and health care
products worldwide.
G-2
<PAGE>
EXHIBIT H
HCV ACTIVITY CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be assays that were routinely in use during
the Research Program or such assays as the Parties may otherwise agree upon.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT I
BACK-UP COMPOUND CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be assays that were routinely in use during
the Research Program or such assays as the Parties may otherwise agree upon.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT J
ADDITIONAL ACTIVITY CRITERIA
Inhibition of at least [ *** ] at a concentration of [ *** ] Assays used for
determination of such activity shall be as agreed upon by the Parties.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Option Agreement") is entered into as of June 29,
1997 by and between CORVAS INTERNATIONAL, INC., a Delaware corporation
("Corvas"), VASCULAR GENOMICS INC., a Delaware corporation ("VGI"), and the
Stockholders of VGI listed on Exhibit A (the "Stockholders").
RECITALS
A. Corvas and VGI are parties to that certain Standstill Agreement dated
February 27, 1997 (the "Standstill Agreement"), pursuant to which the parties
have negotiated this Option Agreement.
B. VGI and its Stockholders desire to grant to Corvas, on the terms and
conditions of this Option Agreement, an exclusive option to acquire VGI through
a tax-deferred Merger pursuant to an Agreement and Plan of Merger and
Reorganization in the form of Exhibit B ("Merger Agreement") and for the
consideration set forth herein. Except as otherwise defined in this Agreement,
each term with the initial letter capitalized shall have the same meaning
ascribed to such term in the Merger Agreement or that certain Research and
Development Agreement executed contemporaneously herewith ("R&D Agreement").
AGREEMENT
The parties to this Option Agreement agree as follows:
1. GRANT OF OPTION AND EXERCISE.
1.1 GRANT OF OPTION. VGI and each of its Stockholders hereby grants to
Corvas an irrevocable and exclusive option (the "Option"), to acquire at any
time on or before 5:00 p.m. Pacific Standard Time June 30, 2000 ("Option
Expiration Date"), all of the outstanding capital stock of VGI, including any
options, warrants, subscriptions or other rights to acquire capital stock
through a Merger pursuant to the Merger Agreement and for the consideration set
forth in this Option Agreement. Corvas shall have the right to terminate the
Option at any time prior to the Option Expiration Date and for any reason upon
30 days' written notice to VGI and each of its Stockholders of its election to
terminate the Option. The expiration or valid termination of the Option is
referred to as the "Option Termination."
1.2 OPTION PAYMENTS. In consideration of the grant of the Option, Corvas
shall pay each Stockholder of VGI monthly option payments during the term of the
Option equal to each Stockholder's proportionate share of VGI Common Stock
multiplied by $83,333 ("Option Payments"), or prorated portion thereof, with the
first prorated payment
1.
<PAGE>
due upon the execution of this Agreement and all remaining payments due on the
first day of each calendar month thereafter. Corvas shall pay the Option
Payments to the Stockholders' Agent and Stockholders' Agent shall endorse and
deposit all of the checks into the bank account maintained by VGI (with each of
the Stockholders making a capital contribution to VGI in the amount of such
Stockholder's proportionate share of each Option Payment). Pursuant to the
Standstill Agreement, Corvas is entitled to a credit of $50,000 against the
first Option Payment payable under this Agreement, but Corvas has waived its
right to the credit.
1.3 TERMINATION OF OPTION. The Option may be terminated by VGI only upon
the occurrence of one or more of the following events of default, and under no
other event or circumstance except with the written consent of Corvas: (i)
failure of Corvas to pay any Option Payment when due, provided that Corvas fails
to cure such breach within 15 days of written notice from the Stockholders'
Agent; (ii) failure of Corvas to spend the research and developments funds
received from VGI under the R&D Agreement, less administrative costs, patent
preparation, filing, prosecution, enforcement and maintenance costs and license
fees paid to the University of California and Beth Israel Hospital, on research
and development using the Patent Rights and Improvements, provided that Corvas
fails to use reasonable efforts to commence curing such breach within 30 days of
written notice from the Stockholders' Agent and/or (iii) [ *** ].
1.4 MERGER CONSIDERATION. If the Option is exercised, then Corvas shall
deliver the following Merger consideration in accordance with the Merger
Agreement: (i) 633,600 shares of Corvas common stock, $.001 par value ("Corvas
Common Stock")("Fixed Shares"); plus (ii) the number of shares of Corvas Common
Stock determined by dividing (a) the dollar amount indicated below ("Dollar
Amount") based upon the Exercise Date (as defined in Section 1.6); by (b) the
greater of (x) the average of the closing prices of Corvas Common Stock on the
Nasdaq National Market (or the primary market on which Corvas Common Stock is
then traded) for the 20 trading days immediately before (but excluding) the
Exercise Date or June 30, 1999 (whichever is earlier), as reported in THE WALL
STREET JOURNAL ("Average Price") and (y) $6.00 ("Subsequent Shares") (the Fixed
Shares and the Subsequent Shares are referred to collectively as the "Total
Shares"). If the Average Price is less than $6.00 per share, then each
Stockholder shall have the option to accept his proportionate share of the
Dollar Amount (i) solely in Corvas Common Stock valued at $6.00 per share or
(ii) in a combination of cash and Corvas Common Stock equal in value to the
Dollar Amount, with the Subsequent Shares valued at the Average Price. The
Average Price shall have no effect on the Fixed Shares. If a Stockholder elects
option (ii), then Corvas shall have the
2.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
sole right to determine the percentage of cash and the percentage of Corvas
Common Stock and may chose a combination of cash and securities that precludes a
tax-deferred Merger. Each Stockholder shall be deemed to accept option (i),
unless such Stockholder notifies Corvas in writing within 15 days following the
Exercise Date of his irrevocable election to receive a combination of cash and
Corvas Common Stock. The Exchange Ratio for an all stock transaction shall
equal the quotient of the Total Shares divided by the total number of shares of
VGI Common Stock then outstanding. If any Promissory Note is outstanding at the
time of exercise, then the outstanding balance of the Promissory Note shall be
offset against the Dollar Amount prior to the calculation of the Subsequent
Shares with the proviso that the Promissory Note will be reduced by an amount
equal to one-half of any outstanding amounts that were used by VGI to prepare,
file, prosecute or maintain Patent Rights or Improvements or to obtain an
injunction or similar relief to stop the infringement of the Patent Rights or
Improvements.
EXERCISE DATE DOLLAR AMOUNT
-------------------- --------------------
Prior to 6/30/97 $ 9,000,000
7/1/97 to 7/31/97 $ 9,144,997
8/1/97 to 8/31/97 $ 9,292,329
9/1/97 to 9/30/97 $ 9,442,036
10/1/97 to 10/31/97 $ 9,594,154
11/1/97 to 11/30/97 $ 9,748,723
12/1/97 to 12/31/97 $ 9,905,782
1/1/98 to 1/31/98 $10,065,371
2/1/98 to 2/28/98 $10,227,532
3/1/98 to 3/31/98 $10,392,305
4/1/98 to 4/30/98 $10,559,733
5/1/98 to 5/31/98 $10,729,858
6/1/98 to 6/30/98 $10,902,724
7/1/98 to 7/31/98 $11,078,375
8/1/98 to 8/31/98 $11,256,856
9/1/98 to 9/30/98 $11,438,212
10/1/98 to 10/31/98 $11,622,490
11/1/98 to 11/30/98 $11,809,737
12/1/98 to 12/31/98 $12,000,000
1/1/99 to 1/31/99 $12,193,329
2/1/99 to 2/28/99 $12,389,773
3/1/99 to 3/31/99 $12,589,381
4/1/99 to 4/30/99 $12,792,205
5/1/99 to 5/31/99 $12,998,297
6/1/99 to 6/30/99 $13,207,710
7/1/99 to 7/31/99 $13,420,495
3.
<PAGE>
EXERCISE DATE DOLLAR AMOUNT
-------------------- --------------------
8/1/99 to 8/31/99 $13,636,710
9/1/99 to 9/30/99 $13,856,406
10/1/99 to 10/31/99 $14,079,643
11/1/99 to 11/30/99 $14,306,476
12/1/99 to 12/31/99 $14,536,964
1/1/00 to 1/31/00 $14,771,166
2/1/00 to 2/29/00 $15,009,140
3/1/00 to 3/31/00 $15,250,948
4/1/00 to 4/30/00 $15,496,652
5/1/00 to 5/31/00 $15,746,315
6/1/00 to 6/30/00 $16,000,000
1.5 ADVANCES. Upon execution of this Agreement, Corvas shall advance to
VGI up to $75,000 to enable VGI to (i) pay $30,000 in consulting fees to certain
Persons and (ii) to pay some or all of legal, travel and other expenses accrued
as of the date of this Option Agreement (subject to VGI providing receipts to
Corvas for any expenses to be reimbursed to Stockholders) ("Advance"). The
Fixed Shares have been reduced to reflect a $40,000 adjustment for the
consulting fees. VGI shall repay the balance of the Advance solely through the
operating reserve created through the Stockholders' monthly contribution of
Option Payments to VGI, net of VGI's monthly payment of research and development
fees under the R&D Agreement ("Reserve"). To the extent that VGI has an
adequate Reserve to fund its current out-of-pocket expenses for its compliance
with the Option Agreement and R&D Agreement, then the Stockholders' Agent shall
authorize Corvas to reduce the monthly Option Payment by up to $3,333 as a
credit against the Advance. Corvas shall not be obligated under any
circumstance to make any future advances to VGI to cover any of its operating or
other expenses, including VGI or its Stockholders' legal expenses.
1.6 OPTION EXERCISE. Corvas may exercise the Option at any time prior to
the Option Termination by delivering to VGI and each of its Stockholders a
written notice (the date of which being herein referred to as the "Exercise
Date") specifying the date on which it intends to close the Merger, which shall
not be earlier than 15 business days nor later than 45 business days after the
Exercise Date. The parties shall execute and deliver the Merger Agreement
within 15 business days after the Exercise Date. The closing of the Merger
Agreement (the "Closing") shall occur on the date specified in such written
notice (the "Closing Date"); provided, however, that: (i) if the Merger cannot
be consummated by reason of any applicable judgment, decree, order, Legal
Requirement or other legal impediment, such Closing Date may be extended by
Corvas or VGI to a date not more than 30 days after the date on which such
impediment is removed; and (ii) if prior notification to or approval of any
Governmental Body or Stockholder Approval is
4.
<PAGE>
required in connection with the Merger, VGI (in the case of a governmental
approval) and Corvas (in the case of its Stockholder Approval) shall promptly
cause to be filed, and shall expeditiously process, the required notice or
application for approval or proxy statement (and VGI shall cooperate with Corvas
in the filing of any such notice or application required to be filed by Corvas
and the obtaining of any such approval required to be obtained by Corvas), and
such Closing Date may be extended by Corvas or VGI to a date not more than 30
days after the later of (a) the date on which any required notification or
waiting period has expired or been validly terminated or (b) the date on which
any required approval has been obtained.
1.7 MILESTONE. At any time prior to the Option Termination, if Corvas
enters into any agreement or sublicense with any Person pursuant to which such
Person is permitted to use all or a portion of the rights granted to Corvas by
VGI under the R&D Agreement (provided that if the agreement relates to more than
one technology then the VGI technology must be a primary purpose of the
agreement or sublicense) and such agreement or sublicense has an aggregate value
equal to the [***] that would be applicable pursuant to Section 1.4 if the
Option were exercised as of the date of execution of the agreement or
sublicense, and at least [ *** ] of aggregate value of the agreement or
sublicense is guaranteed to Corvas, Corvas shall be deemed to have exercised
the Option on the date such agreement or sublicense is executed, which date
shall be deemed to be the Exercise Date. For purposes of this subsection,
the aggregate value of the agreement or sublicense will include all cash or
assets of any kind payable as research and development fees, license fees or
as an equity investment in Corvas securities, whether subject to milestones
or other contingencies or the payment of which is otherwise delayed, without
any discount to present value, but excluding [ *** ]. For purposes of this
subsection, "guaranteed" means payable in all events but an actual breach or
default by Corvas.
2. REPRESENTATIONS AND WARRANTIES.
VGI and the Stockholders jointly and severally represent and warrant to
Corvas that each of the representations and warranties of VGI and the
Stockholders as set forth in Section 2 of the Merger Agreement and incorporated
herein by reference is true and complete as of the date of this Option
Agreement. Notwithstanding the foregoing, the phrase "or except as could
reasonably be determined by Corvas prior to the Option Exercise Date based upon
its actual knowledge prior to the Option Exercise Date" shall be disregarded for
purposes of this Agreement. Corvas represents and warrants to VGI and the
Stockholders that each of the representations and warranties of as set forth in
Section 3 of the Merger Agreement and incorporated herein by reference is true
and complete as of the date of this Option Agreement, except that the
representation and warranty set forth in Section 3.1 of the Merger Agreement
shall relate to the Corvas Annual Report on Form 10-K for the year ended
December 31, 1996, and the Quarterly
5.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Report on Form 10-Q for the quarter ended March 31, 1997, and any Current Report
on Form 8-K filed since the Form 10-K. References in said Sections to the
issuance of stock, "Merger," or the "Merger Agreement" shall, for purposes of
this Agreement, include the exercise of the Put Rights. Each Stockholder shall
also execute the investment letter in the form attached hereto as Exhibit C.
3. COVENANTS OF VGI.
3.1 INVESTIGATION. During the period from the date of this Agreement
through the earlier of (i) the date of the expiration or exercise of the Put
Right following the Option Termination and (ii) the Closing Date of the Merger
(the "Option Period"), VGI shall, and shall cause its Representatives to: (a)
provide Corvas and Corvas' Representatives with reasonable access to VGI's
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to VGI; and
(b) provide Corvas and Corvas' Representatives with copies of such existing
books, records, Tax Returns, work papers, patent and licensing files and other
documents and information relating to VGI, and with such additional financial,
operating and other data and information regarding VGI, as Corvas may reasonably
request.
3.2 OPERATION OF VGI'S BUSINESS. During the Option Period,
(a) VGI shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Option Agreement, except that VGI shall
retain Corvas to conduct further research and development pursuant to the R&D
Agreement;
(b) VGI shall use reasonable efforts to cause Jan Schnitzer and Bruce
Jacobson to comply with the applicable terms and conditions of the R&D Agreement
and any consulting agreements between either of them and Corvas;
(c) VGI shall keep in full force all insurance policies identified in
Part 2.17 of the Disclosure Schedule;
(d) Upon request from Corvas, VGI shall promptly cause its officers
to report to Corvas concerning the status of VGI's business;
(e) VGI may establish a Reserve to fund its out-of-pocket expenses in
connection with its compliance with this Option Agreement and the R&D Agreement;
provided that the Reserve funds are expended in accordance with a budget
reasonably approved by Corvas, provided that no funds received from Corvas as
Option Payments or payments under the Standstill Agreement are ever used to
bring any action or proceeding against Corvas or any of its assets or to
challenge or question the validity of the R&D
6.
<PAGE>
Agreement or any Patent Rights or Improvements licensed or otherwise made
available to Corvas by VGI under the R&D Agreement;
(f) VGI shall not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and shall
not repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities;
(g) Except with respect to the Stockholders signing this Agreement,
VGI shall not sell, issue or authorize the issuance of (i) any capital stock or
other security, (ii) any option or right to acquire any capital stock or other
security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security, except with the prior written consent of Corvas
or as expressly authorized by Corvas in the R&D Agreement and subject to the
stockholder executing an investment letter and signing this Option Agreement as
a Stockholder;
(h) neither VGI nor any of the Stockholders shall amend or permit the
adoption of any amendment to VGI's certificate of incorporation or bylaws, or
effect or permit VGI to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction, except with the prior written consent of Corvas;
(i) VGI shall not form any subsidiary or acquire any equity interest
or other interest in any other Entity;
(j) VGI shall not make any capital expenditure other than the
expenditures listed on Schedule 3.2 without the prior written consent of Corvas;
(k) VGI shall not (i) enter into, or permit any of the assets owned
or used by it to become bound by, any Contract, (ii) amend or prematurely
terminate, or waive any material right or remedy under, any Contract without the
prior written consent of Corvas, (iii) provide (or allow its Stockholders to
provide) any of its material assets, [ *** ] to any Person whether under a
material transfer agreement or otherwise, or disclose any of its confidential
information, including, without limitation, [ *** ].
(l) VGI shall not (i) acquire, lease or license any material right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any material right or other asset (excluding cash) to any other
Person, or (iii) waive or relinquish any material right, without the prior
written consent of Corvas;
7.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(m) VGI shall not (i) lend money to any Person (other than pursuant
to routine travel advances made to employees, founders and consultants in the
ordinary course of business), or (ii) incur or guarantee any indebtedness to any
Person (other than Corvas) for borrowed money;
(n) VGI shall not (i) establish, adopt or amend any Employee Benefit
Plan, (ii) pay any bonus or make any profit sharing payment, cash incentive
payment or similar payment to, or increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, or (iii) hire any new employee
without the prior written consent of Corvas;
(o) VGI shall not change any of its methods of accounting or
accounting practices in any material respect without the prior written consent
of Corvas;
(p) VGI shall not make any Tax election;
(q) VGI shall not commence or settle any material Legal Proceeding;
(r) VGI shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
3.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Option Period, VGI shall promptly notify Corvas in
writing of:
(i) the discovery of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of this Agreement and that
caused or constitutes a material inaccuracy in or a material breach of any
representation or warranty made by VGI or any of the Stockholders in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in or material breach of any representation or
warranty made by VGI or any of the Stockholders in this Agreement if such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance; and
(iii) any material breach of any covenant or obligation of VGI or
any of the Stockholders under this Option Agreement or the R&D Agreement.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 3.3 (a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the
8.
<PAGE>
Disclosure Schedule were dated as of the date of the occurrence, existence or
discovery of such event, condition, fact or circumstance, then VGI shall
promptly deliver to Corvas an update to the Disclosure Schedule specifying such
change. No such update shall be deemed to supplement or amend the Disclosure
Schedule for the purpose of determining the accuracy of any of the
representations and warranties made by VGI or any of the Stockholders in this
Option Agreement, except that VGI may make updates with respect to any
information that was omitted in good faith at the time the Disclosure Schedule
was prepared that individually and in the aggregate is not material to the
business, operations, assets, properties, liabilities, obligations or condition
(financial or otherwise) of VGI and VGI may make such other changes to the
Disclosure Schedule as are approved in advance by Corvas in its sole discretion.
3.4 NO NEGOTIATION. During the Option Period, neither VGI nor any of the
Stockholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Corvas) relating to a possible Acquisition
Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non public information to, any Person (other than
Corvas) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Corvas) relating to a possible Acquisition Transaction.
VGI shall promptly notify Corvas in writing of any material inquiry, proposal or
offer relating to a possible Acquisition Transaction that is received by VGI or
any of the Stockholders during the Option Period.
3.5 AUDIT. Upon the request of Corvas, at any time prior to the Option
Termination, VGI shall use best efforts to have annual financial statements for
VGI prepared, in accordance with generally accepted accounting principles, for
such periods as are required by Corvas and shall have such financial statements
audited by a nationally recognized accounting firm or firm otherwise approved by
Corvas, and shall provide such audited financial statements to Corvas. Corvas
shall reimburse VGI for the cost of the audit, so long as VGI complies with this
covenant and VGI obtains Corvas' prior written approval of the auditors' budget.
4. INTELLECTUAL PROPERTY RIGHTS.
(a) Concurrent with the execution of this Option Agreement, VGI and
Corvas shall enter into the exclusive research and development agreement in the
form of Exhibit D ("R&D Agreement").
9.
<PAGE>
(b) Upon termination of the R&D Agreement, Corvas shall have the
exclusive right for a period of 60 days following such termination to enter into
good faith negotiations with VGI for the grant of an exclusive, worldwide
license, under the Patent Rights and Improvements, to make, use, sell, offer for
sale, and import compositions and/or methods in one specified field, except that
Corvas shall have no rights hereunder to designate the cancer field as the
"specified field". Corvas shall designate such field within 30 days of the date
of the termination of the R&D Agreement.
5. TRANSFER, VOTING OF SUBJECT SHARES.
5.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES. Each Stockholder
hereby covenants and agrees that, prior to the Expiration Date (as defined
below), Stockholder will not, directly or indirectly, (i) offer, sell, offer to
sell, contract to sell, grant any option to purchase or otherwise dispose of or
transfer (or announce any offer, sale, offer of sale, contract of sale or grant
of any option to purchase or other disposition or transfer of) any of the VGI
capital stock (the "Subject Shares") to any Person, (ii) create or permit to
exist any Encumbrance on any of the Subject Shares or (iii) reduce his
beneficial ownership of, interest in or risk relating to any of the Subject
Shares. Notwithstanding any other provisions of this Agreement, each Stockholder
may offer, sell, offer to sell, contract to sell, grant options to purchase,
hypothecate, pledge, create Encumbrances, reduce his beneficial ownership of,
interest in or risk relating to, or otherwise dispose of or transfer: (a) the
Subject Shares to any Stockholder or to his children or to any trust established
for any Stockholder or his child(ren) provided that the Stockholder retains
voting power over the Subject Shares; or (b) up to fifty percent (50%) of the
Subject Shares owned by such Stockholder on the date of this Agreement, so long
as any transferee of the Subject Shares is or becomes a party to this Agreement,
the transferee signs an investment letter in the form attached hereto as Exhibit
C prior to the transfer, and any such transfer will not cause Corvas to lose all
available exemptions from the registration requirements of the Securities Act of
1933, as amended, for the exchange of securities under the Merger Agreement in
Corvas' sole determination. As used in this Agreement, the term "Expiration
Date" shall mean the earliest of the date of the Option Termination, the date on
which the Merger Agreement is validly terminated or the date upon which the
Merger becomes effective.
5.2 TRANSFER OF VOTING RIGHTS. Each Stockholder covenants and agrees
that, prior to the Expiration Date, Stockholder will not deposit any of the
Subject Shares into a voting trust or grant a proxy or enter into a voting
agreement or similar agreement with respect to any of the Subject Shares.
5.3 PRE-TERMINATION VOTING AGREEMENT. Each Stockholder hereby agrees that
prior to the Expiration Date, at any meeting of the stockholders of VGI, however
10.
<PAGE>
called, and in any written action by consent of stockholders of the VGI, unless
otherwise directed in writing by Corvas, Stockholder shall vote the Subject
Shares:
(a) in favor of the Merger, the execution and delivery by VGI of the
Merger Agreement and the adoption and approval of the terms thereof and in favor
of each of the other actions contemplated by the Merger Agreement and any action
required in furtherance hereof or thereof;
(b) against any action or agreement that would result in a breach in
any material respect of any representation, warranty, covenant or obligation of
VGI in this Agreement or the Merger Agreement; and
(c) against the following actions (other than the Merger and the
transactions contemplated by the Merger Agreement): (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving VGI or any subsidiary of VGI; (B) any sale, lease or
transfer of a material amount of assets of VGI or any subsidiary of VGI; (C) any
reorganization, recapitalization, dissolution or liquidation of VGI or any
subsidiary of VGI; (D) any amendment to VGI's certificate of incorporation other
than the name change authorization pursuant to Section 3.5; (E) any change in
the capitalization of VGI or VGI's corporate structure; or (F) any other action
which is intended, or could reasonably be expected to, impede, interfere with,
delay, postpone, discourage or adversely affect the contemplated economic
benefits to Corvas of the Merger or any of the other transactions contemplated
by the Merger Agreement or this Option Agreement.
Prior to the Expiration Date, no Stockholder shall enter into any agreement
or understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(a)", "(b)" or "(c)" of the preceding sentence.
5.4 WAIVER OF APPRAISAL RIGHTS. Each Stockholder hereby waives any rights
of appraisal and any dissenters' rights that Stockholder may have in connection
with the Merger.
5.5 LEGEND. Stockholder shall instruct VGI to cause each certificate of
Stockholder evidencing the Subject Shares to bear a legend in the following
form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS
AND CONDITIONS OF THE OPTION AGREEMENT DATED AS OF __________, 1997, AS IT
MAY BE AMENDED, BETWEEN THE ISSUER AND THE REGISTERED HOLDER OF THIS
CERTIFICATE,
11.
<PAGE>
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
5.6 NEW ISSUANCES.
(a) [ *** ]. Corvas shall have recourse against the Stockholders
under this Section 5.6(a) and such recourse shall not be subject to any
limitations on liability in this Option Agreement, the R&D Agreement or the
Merger Agreement or be included in the Damages used to determine whether
limitations on liability have been reached.
(b) [ *** ]
12.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
[ *** ]. Corvas shall have recourse against the Stockholders under this
Section 5.6(b) and such recourse shall not be subject to any limitations on
liability in this Option Agreement, the R&D Agreement or the Merger Agreement
or be included in the Damages used to determine whether limitations on
liability have been reached.
6. PUT RIGHTS.
6.1 OPTION TERMINATION. Notwithstanding any provision to the contrary
contained herein or in the R&D Agreement, upon the Option Termination (including
a termination under Section 1.3 herein, but not including a termination as the
result of completing the Merger), the Stockholders shall have the option, for 30
business days following the date of the Option Termination, to give notice to
Corvas to purchase, and Corvas shall purchase, 19.9 percent of the outstanding
VGI capital stock on a fully diluted basis ("Put Right") in exchange for
$3,960,000 in Corvas Common Stock, as adjusted in accordance with this Option
Agreement ("Put Price"). If any Promissory Note is outstanding at the time of
the exercise of the Put Right, then the outstanding balance of such Promissory
Note shall be offset against the Put Price prior to the determination of
issuable Corvas Common Stock. The number of shares of Corvas Common Stock shall
be determined based upon the average closing price of Corvas Common Stock on
the Nasdaq National Market (or the primary market on which Corvas Common Stock
is then traded) for the 20 trading days immediately before (and including) the
earlier of the date of the exercise of the Put Right or June 30, 1999, and the
20 trading days immediately after the earlier of the date of exercise of the Put
Right or June 30, 1999, as reported in THE WALL STREET JOURNAL. Unless
otherwise agreed by the Stockholders, the Stockholders have a pro rata right to
participate in the sale of VGI capital stock through the exercise of the Put
Right. Each Stockholder may exercise his Put Right by delivering to Corvas a
notice of exercise signed by the Stockholder exercising the right and
specifying: (a) the number of shares of VGI Common Stock being put by such
Stockholder, which number shall not exceed 19.9% of such Stockholders shares of
VGI Common Stock and (b) a date by which the closing shall take place, which
shall not be fewer than 30 business days following the date of such notice.
6.2 CONDITIONS TO CORVAS' OBLIGATION TO PURCHASE. The sole conditions to
Corvas' obligation to purchase the VGI capital stock shall be (a) the valid
exercise of the Put Right; (b) the execution by VGI and each exercising
Stockholder of a certificate ("Put Closing Certificate") that the
representations and warranties set forth in Sections 2.1, 2.3, 2.6, 2.19, and
2.20 of the Merger Agreement are deemed made by them jointly and severally as of
the date of exercise of the Put Right and as of the date of closing of the put
transaction ("Put Closing"), (c) the truth and completeness of the
representations and warranties set forth in the Put Closing Certificate as of
the dates made, and (d) the
13.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
execution and delivery by each Stockholder of the Escrow Agreement as set forth
in Section 6.6.
6.3 CORVAS REPRESENTATIONS AND WARRANTIES. If the Put Right is exercised,
Corvas shall be deemed to have made the representations and warranties set forth
in Sections 3.2, 3.3, 3.4 and 3.5 of the Merger Agreement as of the date of the
exercise of the Put Right and as of the Put Closing. All representations and
warranties made by Corvas shall terminate and expire upon the Put Closing and
any liability of Corvas with respect to such representations and warranties
shall thereupon cease.
6.4 LEGENDS. Each certificate evidencing a share or shares of Corvas
Common Stock issued to the Stockholders as purchase price for the VGI capital
stock shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO VGI THAT SUCH
REGISTRATION IS NOT REQUIRED.
6.5 CORVAS LIMITATION ON LIABILITY. VGI and the Stockholders agree that
the Put Right (whether such person elects to exercise the Put Right or not) is
their sole and exclusive remedy for any claim (other than a claim for fraud)
under any theory of contract, fiduciary duty, tort or otherwise, against Corvas
or its directors, officers, stockholders, employees, agents, and
representatives, successors or permitted assigns, for termination of the Option,
with or without cause, or failure to exercise the Option or to consummate the
Merger, including any claim that Corvas caused or contributed to any events,
circumstances or conditions that affected in any way the decision to not
exercise the Option or the failure to consummate the Merger or that Corvas
breached the R&D Agreement or adversely affected the value of any of VGI's
assets. The parties acknowledge that this Put Right and limitation on liability
is part of a bargained for allocation of risk that is reflected in the Put Right
and in the Merger consideration.
6.6 ESCROW HOLDBACK. If the Put Right is exercised, each Stockholder
shall be a party to the Escrow Agreement substantially in the form of Exhibit E
to the Merger Agreement ("Escrow Agreement") and shall be entitled to receive,
upon surrender of certificates in accordance with Section 6.1, that number of
whole shares of Corvas Common Stock into which his shares of VGI Common Stock is
converted, less the Escrow Fund, which shares shall be delivered to the Escrow
Agent, to be held in accordance with the Escrow Agreement. For purposes of this
Section 6.6, the Escrow
14.
<PAGE>
Fund shall consist of that number of whole shares of Corvas Common Stock equal
in value to [ *** ] less the actual dollar amount of any adjustment to the Put
Price made pursuant to Section 8.4(a) of the Option Agreement, with the Corvas
Common Stock valued at the same price used to calculate the Put Price. In
addition, if the Put Right is exercised by any Stockholder, each of the
Stockholders jointly and severally shall indemnify, defend and hold Corvas
harmless from and against any tax liabilities incurred by VGI or any of the
Stockholders with respect to VGI ("Tax Indemnity"). The Tax Indemnity is not
subject to the Escrow Fund or the other limitations on liability set forth in
this Option Agreement and shall not be included in any Damages used to determine
whether a limitation on liability has been reached.
7. DISPUTE RESOLUTION.
7.1 NEGOTIATION OF DISPUTES. If a dispute arises between the parties
relating to the interpretation or performance of this Option Agreement or the
grounds for the termination thereof, and the parties cannot resolve the dispute
within thirty days of a written request by either party to the other, such
dispute shall be referred to the Chief Executive Officer of Corvas the
Stockholders' Agent of VGI for resolution. The Chief Executive Officer and
Stockholders' Agent shall hold a meeting to attempt in good faith to negotiate a
resolution of the dispute prior to pursuing other available remedies. If within
30 days after such meeting, the Chief Executive Officer and the Stockholders'
Agent have not succeeded in negotiating a resolution of the dispute, such
dispute shall be submitted to arbitration as set forth in Section 7.2 below.
7.2 ARBITRATION. Disputes that have not been successfully resolved
pursuant to Section 7.1 above shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitrations in
La Jolla, California. The arbitration shall be conducted by three arbitrators,
one selected by each party to the arbitration and one selected by arbitrators
appointed by the parties. If the arbitrators cannot agree on a third
arbitrator, the third arbitrator shall be selected in accordance with the AAA
rules. If a party fails to designate an arbitrator within the time limits set
by the AAA rules, the arbitrator selected by the other party shall be the sole
arbitrator. All arbitrators must be knowledgeable in the subject matter at
issue in the dispute. Each of the parties shall be entitled to conduct
discovery under the California Rules of Civil Procedure then in effect. Each
party shall initially bear its own costs and legal fees associated with such
arbitration. The prevailing party in any such arbitration shall be entitled to
recover from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such arbitration. The
decision of the arbitrator(s) shall be final and may be sued on or enforced by
the party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement or
15.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
the grounds for the termination thereof, shall survive the expiration or
termination of this Agreement for any reason. The arbitrator(s) shall be
empowered to award specific performance, injunctive relief and other equitable
remedies as well as damages, but shall not award any damages in excess of any
limitations set forth in this Agreement.
8. MISCELLANEOUS.
8.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
for the purpose of carrying out or evidencing any of the transactions
contemplated by this Option Agreement.
8.2 SURVIVAL OF REPRESENTATIONS, ETC.
(a) All representations and warranties of VGI and the
Stockholders shall terminate on the Option Termination unless the Put Right is
exercised; provided however, that if Corvas terminates the Option for any reason
and prior to or concurrent with such termination any Corvas Indemnitee (acting
in good faith) delivers to the Stockholders' agent a written notice alleging the
existence of an inaccuracy in or a breach of any of the representations and
warranties made by the Stockholders (and setting forth in reasonable detail the
basis for such Corvas Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 8.3 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the Option Termination until such time as such claim is fully and
finally resolved. If the Put Right is exercised, the only representations and
warranties made by the exercising Stockholders shall be set forth in the
Stockholders' Put Closing Certificate and shall survive the Put Closing and
shall expire on the first anniversary of the exercise of the Put Right;
provided, however, that if, at any time prior to the expiration of any
representations or warranties, any Corvas Indemnitee (acting in good faith)
delivers to the Stockholders' Agent a written notice alleging the existence of
an inaccuracy in or a breach of any of the representations and warranties made
by the Stockholders (and setting forth in reasonable detail the basis for such
Corvas Indemnitee's belief that such an inaccuracy or breach may exist) and
asserting a claim for recovery under Section 8.3 based on such alleged
inaccuracy or breach, then the claim asserted in such notice shall survive the
first anniversary of the Closing until such time as such claim is fully and
finally resolved, provided that the Corvas Indemnitee pursues such resolution in
good faith and with due diligence.
(b) Except as otherwise expressly set forth in this Option
Agreement, the representations, warranties, covenants and obligations of VGI and
the Stockholders, and the rights and remedies that may be exercised by the
Corvas Indemnitees, shall not be limited or otherwise affected by or as a result
of any information furnished to, or any
16.
<PAGE>
investigation made by or knowledge of, any of the Corvas Indemnitees or any of
their Representatives.
(c) For purposes of this Agreement, each statement or other item
of information set forth in the Disclosure Schedule shall be deemed to be a
representation and warranty made by VGI and the Stockholders as of the date of
this Agreement and each statement or other item of information set forth in an
update to the Disclosure Schedule shall be deemed to be a representation and
warranty made by VGI and the Stockholders as of the date of the update.
8.3 INDEMNIFICATION BY VGI AND STOCKHOLDERS. Subject to the
limitation on liability set forth below, VGI and the Stockholders, jointly and
severally, shall hold harmless and indemnify each of the Corvas Indemnitees from
and against, and shall compensate and reimburse each of the Corvas Indemnitees
for, any Damages which are directly or indirectly suffered or incurred by any of
the Corvas Indemnitees or to which any of the Corvas Indemnitees may otherwise
become subject (regardless of whether or not such Damages relate to any third
party claim) and which arise from or as a result of, or are directly or
indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 2 (as modified in accordance
with the terms of this Option Agreement) or in any Stockholder's Put Closing
Certificate; (ii) any breach of any covenant or obligation of VGI (including the
covenants set forth in Section 3); or (iii) any Legal Proceeding relating to any
inaccuracy or breach of the type referred to in clause "(i)" or "(ii)" above
(including any Legal Proceeding commenced by any Corvas Indemnitee for the
purpose of enforcing any of its rights under this Section 8.3). If prior to the
exercise of the Option, VGI or its Stockholders disclose in writing to Corvas
the existence of any inaccuracy or breach of the representations and warranties
of VGI and the Stockholders or the occurrence of the breach of any covenants or
obligations of VGI or the Stockholders and certifies in good faith as to the
actual or contingent Damages to the extent subject to estimation, and if Corvas
elects to exercise the Option notwithstanding such disclosure, then the Corvas
Indemnitees shall be deemed to have waived any claim for Damages (other than
those pursuant to Section 5.6(a) or (b)) with respect only to the matters as
disclosed.
8.4 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding against any Corvas
Indemnitee with respect to which any of the Stockholders or VGI may become
obligated to hold harmless, indemnify, compensate or reimburse any Indemnitee
pursuant to Section 8.3 Corvas shall have the right, at its election, to proceed
with the defense of such claim or Legal Proceeding on its own. If Corvas so
proceeds with the defense of any such claim or Legal Proceeding:
17.
<PAGE>
(a) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by VGI. For
claims arising prior to the Option Termination or Option Exercise, VGI shall
fund the defense costs through its available Reserves (after funding all of
VGI's obligations under the R&D Agreement). Any defense costs or other Damages
not reimbursed by VGI shall be accrued and shall be credited dollar for dollar
against the Put Price if the Put Right is exercised and shall be credited fifty
percent of each dollar against the Dollar Amount if the Option is exercised. If
the Legal Proceeding is continuing at the time of the Option exercise or Put
Closing, then the claim for any subsequent defense costs or other Damages shall
be a claim subject to the Escrow Fund created under the Merger Agreement or
pursuant to this Option Agreement upon the exercise of the Put Rights.
(b) each Stockholder and VGI shall make available to Corvas any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(c) Corvas shall have the right to settle, adjust or compromise
such claim or Legal Proceeding with the consent of the Stockholders' Agent;
provided, however, that such consent shall not be unreasonably withheld.
Corvas shall give the Stockholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Corvas or a Corvas Indemnitee; provided,
however, that any failure on the part of Corvas to so notify the Stockholders'
Agent shall not limit any of the obligations of the Stockholders under this
Agreement (except to the extent such failure materially prejudices the defense
of such Legal Proceeding).
8.5 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Option Agreement shall be paid by the party incurring such costs and expenses.
8.6 NOTICES. Any notice or other communication required or permitted
to be delivered to either party under this Option Agreement shall be in writing
and shall be deemed properly delivered, given and received when delivered (by
hand, by registered or certified mail (return receipt requested), by courier or
express delivery service or by facsimile, with the original by mail) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other party hereto):
18.
<PAGE>
if to VGI, the Stockholders or the Stockholders' Agent:
Harry E. Gruber, MD
P.O. Box 675272
Rancho Santa Fe, CA 92067
Facsimile No: (619) 756-8158
with a copy to:
Kevin M. Bagley, Esq.
Dysart, Dubick & Bagley, LLP
701 B Street, Suite 1525
San Diego, California 92101
Facsimile No: (619) 696-6280
if to Corvas:
Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
Facsimile No. (619) 455-7895
Attention: Corporate Secretary
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92123
Facsimile No. (619) 453-3555
Attention: M. Wainwright Fishburn, Jr., Esq.
8.7 SEVERABILITY. Any term or provision of this Option Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Option Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Option Agreement in any other jurisdiction. If any
provision of this Option Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
8.8 ENTIRE AGREEMENT. This Option Agreement and any documents delivered
by the parties in connection herewith constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings between the parties with respect
thereto. No addition to or
19.
<PAGE>
modification of any provision of this Option Agreement shall be binding upon any
party hereto unless made in writing and signed by all parties hereto.
8.9 ASSIGNMENT; BINDING EFFECT. Except as provided herein, neither this
Option Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties, except that
Corvas may assign all or any of its rights and obligations hereunder to any
affiliate of Corvas; provided that no other property may be substituted for the
Corvas Common Stock as the Merger or Put Right consideration and Corvas shall
remain liable for performance. Subject to the preceding sentence, this Option
Agreement shall be binding upon and shall inure to the benefit of (i) VGI and
its successors and assigns (ii) Corvas and its successors and assigns and (iii)
the Stockholders and their respective heirs, representatives, estates,
successors and assigns. Notwithstanding anything contained in this Option
Agreement to the contrary, nothing in this Option Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective heirs, successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Option Agreement.
8.10 OTHER AGREEMENTS. Except as otherwise provided herein, nothing in
this Option Agreement shall limit any of the rights, duties, obligations,
benefits or remedies of Corvas, VGI or the Stockholders under the Merger
Agreement or the R&D Agreement.
8.11 PUBLIC ANNOUNCEMENTS. Corvas and VGI agree that the public
announcement of the execution of this Agreement shall be in the form of a press
release to be agreed upon by Corvas and VGI and thereafter Corvas and Dr. Harry
Gruber or Dennis Berman as representatives of VGI shall be entitled to make or
publish any public statement consistent with the contents thereof. Except as
provided in the foregoing sentence, Corvas and VGI will jointly discuss and
agree on any statement to the public regarding this Agreement or any aspect of
this Agreement subject in each case to disclosure otherwise required by law or
regulation as determined in good faith by Corvas and VGI. The principles to be
observed by Corvas and VGI in such public disclosures will be: accuracy,
compliance with applicable laws and regulations, the requirements for
confidentiality, and the advantage a competitor of Corvas may gain from any
public statements under this Section 8.11.
8.12 GOVERNING LAW. This Option Agreement shall be construed in accordance
with, and governed in all respects by the internal laws of the State of
California (without giving effect to principles of conflicts of laws).
20.
<PAGE>
8.13 COUNTERPARTS. This Option Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument.
8.14 LIMITATION ON LIABILITY OF VGI AND STOCKHOLDERS. The maximum
liability of VGI, the Stockholders and/or their respective directors, officers,
stockholders, employees, agents, representatives, successors, heirs or permitted
assigns, for any claim under any theory of contract, indemnity, fiduciary duty,
tort or otherwise, including but not limited to any breach or default of any
representation, warranty, or covenant under this Option Agreement, but excluding
a claim for fraud and excluding claims under Sections 5.6(a) and (b), shall not
exceed an aggregate of [ *** ] (measured based upon the dollar amount of any
adjustment to the Dollar Amount upon an Option exercise or the Put Price upon
the exercise of the Put Rights and, following the creation of an Escrow Fund, if
ever, measured as the number of shares of Corvas Common Stock in the Escrow Fund
as the limitation without regard to the value of such shares). Notwithstanding
any other provision in this Agreement, (a) the Stockholders shall not be
personally liable for any Damages or any other liability incurred under this
Option Agreement, including claims under Section 8.2, except in the case of such
Stockholder's fraud and pursuant to Sections 5.6(a) and 5.6(b); provided that
the Dollar Amount or the Put Price may be adjusted in accordance with Section
8.3 and any remaining claims shall be paid solely from the shares of Corvas
Common Stock in the Escrow Fund created in the Merger Agreement or upon the
exercise of the Put Rights, as the case may be; and (b) the maximum liability of
the Stockholders for the representations and warranties in the Put Closing
Certificate shall not exceed, and shall be paid solely from, the shares of
Corvas Common Stock in the Escrow Fund, except in the case of such Stockholder's
fraud and pursuant to Sections 5.6(a), 5.6(b) and 6.6. The parties acknowledge
that this limitation on liability is part of a bargained for allocation of risk
that is reflected in the Option.
8.15 CONSTRUCTION.
(a) Headings of the Sections of this Option Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Option Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
21.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Option Agreement.
(d) As used in this Option Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(e) Except as otherwise indicated, all references in this Option
Agreement to "Sections" are intended to refer to Sections of this Option
Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
22.
<PAGE>
IN WITNESS WHEREOF, Corvas, VGI and the Stockholders have caused this Option
Agreement to be executed, as of the date first written above.
VASCULAR GENOMICS INC.
By: /s/ HARRY GRUBER
-------------------------
Harry Gruber, President
CORVAS INTERNATIONAL, INC.
By: /s/ JOHN E. CRAWFORD
-------------------------
Name: John E. Crawford
Title: Executive Vice President and
Chief Financial Officer
STOCKHOLDERS
/s/ JAN SCHNITZER
-------------------------------
Jan Schnitzer
/s/ HARRY GRUBER
-------------------------------
Harry Gruber
/s/ DENNIS BERMAN
-------------------------------
Dennis Berman
/s/ BRUCE JACOBSON
-------------------------------
Bruce Jacobson
/s/ ISAAC WILLIS
-------------------------------
Isaac Willis
SIGNATURE PAGE TO OPTION AGREEMENT
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
Jan Schnitzer
Harry Gruber
Dennis Berman
Bruce Jacobson
Isaac Willis
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of ____________, 199_, by and among: CORVAS INTERNATIONAL,
INC., a Delaware corporation ("Corvas"); [MERGER SUB ACQUISITION CORP]., a
Delaware corporation and a wholly owned subsidiary of Corvas ("Merger Sub");
VASCULAR GENOMICS INC., a Delaware corporation ("VGI") and the parties
identified on Exhibit A (the "Stockholders"). Certain other capitalized terms
used in this Agreement are defined in Exhibit B.
RECITALS
A. Corvas, Merger Sub and VGI intend to effect a merger of Merger Sub
into VGI in accordance with this Agreement and the Delaware General Corporation
Law (the "Merger"). Upon consummation of the Merger, Merger Sub will cease to
exist, and VGI will become a wholly owned subsidiary of Corvas.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a purchase.
C. This Agreement has been approved by the respective boards of directors
of Corvas, Merger Sub and VGI.
D. The Stockholders own a total of 1,020,408 shares of the common stock,
$.001 par value, of VGI ("VGI Common Stock"), constituting all of the
outstanding capital stock of VGI.
AGREEMENT
The parties to this Agreement agree as follows:
1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO VGI. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into VGI, and the separate
existence of Merger Sub shall cease. VGI will continue as the surviving
corporation in the Merger after the Effective Time (the "Surviving
Corporation").
<PAGE>
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California
92121, or such other place agreed to by the parties, at 10:00 a.m. on
______________, or at such other time and date not earlier than 15 business days
and not later than 45 business days following the Option Exercise Date
(provided, however, that in the event Corvas is required to obtain Stockholder
Approval prior to the consummation of the transactions contemplated by this
Agreement, the designated date may be set at a reasonable date later than 45
business days following the Option Exercise Date) Corvas may designate upon not
less than five business days prior notice to VGI (the "Scheduled Closing Time").
(The date on which the Closing actually takes place is referred to in this
Agreement as the "Closing Date.") Contemporaneously with or as promptly as
practicable after the Closing, a properly executed agreement of merger
conforming to the requirements of Subchapter IX of the Delaware General
Corporation Law shall be filed with the Secretary of State of the State of
Delaware. The Merger shall become effective at the time such agreement of
merger is filed with and accepted by the Secretary of State of the State of
Delaware (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless otherwise determined by Corvas and VGI prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time in such form as
reasonably determined by Corvas;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals determined by
Corvas.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.7(c) and 1.8, at the Effective Time, by
virtue of the Merger and without any further action on the part of Corvas,
Merger Sub, VGI or any stockholder of VGI:
(i) each share of VGI Common Stock outstanding immediately prior
to the Effective Time shall be converted into the right to receive _______
shares of
2.
<PAGE>
common stock, $.001 par value, of Corvas ("Corvas Common Stock"). The ratio
____ is sometimes referred to herein as the "Exchange Ratio";
(ii) each share of the common stock, $.001 par value, of Merger
Sub outstanding immediately prior to the Effective Time shall be converted into
one share of common stock of the Surviving Corporation; and
(iii) each Stockholder shall be a party to the Escrow Agreement
substantially in the form of Exhibit C ("Escrow Agreement") and shall be
entitled to receive, upon surrender of certificates in accordance with Section
1.7, that number of whole shares of Corvas Common Stock into which his, her or
its shares of VGI Common Stock is converted, less [ *** ] of the Fixed Shares
(as defined in the Option Agreement) and less that number of shares of Corvas
Common Stock equal to [ *** ] of the Dollar Amount (as defined in the Option
Agreement) prior to any adjustment pursuant to Section 8.4(a) of the Option
Agreement, less the actual dollar amount of any adjustment made pursuant to
Section 8.4(a) of the Option Agreement, with the Corvas Common Stock valued
at the same price used to calculate the Subsequent Shares (as defined in the
Option Agreement) ("Escrow Fund"), which shares shall be delivered to the
Escrow Agent, to be held in accordance with the Escrow Agreement; provided,
however, that in the event the Stockholders are to receive cash, or a
combination of cash and stock, as consideration for their shares of VGI
Common Stock, then the composition of the Escrow Fund shall correspond
therewith so that the Escrow Fund shall consist of cash or a combination of
cash and stock of equal value to the consideration that would otherwise have
been deposited in the Escrow Fund if all of the consideration were stock.
(b) If any shares of VGI Common Stock outstanding immediately prior
to the Effective Time are unvested or are subject to a repurchase option, risk
of forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with VGI, then the shares of Corvas Common Stock
issued in exchange for such shares of VGI Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Corvas Common Stock may
accordingly be marked with appropriate legends.
1.6 CLOSING OF VGI'S TRANSFER BOOKS. At the Effective Time, holders of
certificates representing shares of VGI's capital stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
stockholders of VGI, and the stock transfer books of VGI shall be closed with
respect to all shares of such capital stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of VGI's capital stock
shall be made on such stock transfer books after the Effective Time. If, after
the Effective Time, a valid certificate previously representing any of such
shares of VGI's capital stock (a "VGI Stock Certificate") is presented to the
3.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Surviving Corporation or Corvas, such VGI Stock Certificate shall be canceled
and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) On the Closing Date, the Stockholders will surrender their VGI
Stock Certificates to Corvas in exchange for certificates representing Corvas
Common Stock. Upon surrender of a VGI Stock Certificate to Corvas for exchange,
the holder of such VGI Stock Certificate shall receive in exchange therefor a
certificate representing the number of whole shares of Corvas Common Stock that
such holder has the right to receive pursuant to the provisions of this Section
1 and the VGI Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.7, and except as further provided
in this Section 1.7, each VGI Stock Certificate shall be deemed, from and after
the Effective Time, to represent only the right to receive under this Agreement
upon such surrender a certificate representing shares of Corvas Common Stock
(and cash in lieu of any fractional share of Corvas Common Stock) as
contemplated by this Section 1, including shares to be held by the Escrow Agent.
If any VGI Stock Certificate shall have been lost, stolen or destroyed, Corvas
may, in its discretion and as a condition precedent to the issuance of any
certificate representing Corvas Common Stock, require the owner of such lost,
stolen or destroyed VGI Stock Certificate to provide an appropriate affidavit
and to deliver a bond (in such sum as Corvas may reasonably direct) as indemnity
against any claim that may be made against Corvas or the Surviving Corporation
with respect to such VGI Stock Certificate. Notwithstanding the foregoing, if
the parties have elected to pay and receive cash in lieu of some portion of the
stock under Section 1.4 of the Option Agreement, then such cash consideration
shall be substituted for the stock consideration Corvas would otherwise be
required to deliver pursuant to this Section 1.7. Any cash consideration (less
any amounts held in escrow pursuant to Section 1.5(a)(iii)) shall be paid on the
Closing Date.
(b) No dividends or other distributions declared or made with respect
to Corvas Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered VGI Stock Certificate with respect to the
shares of Corvas Common Stock represented thereby, and no cash payment in lieu
of any fractional share shall be paid to any such holder, until such holder
surrenders such VGI Stock Certificate in accordance with this Section 1.7 (at
which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) No fractional shares of Corvas Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of VGI who would otherwise be entitled to receive a fraction of a share of
Corvas Common Stock (after aggregating all fractional shares of Corvas Common
Stock issuable to such holder) shall,
4.
<PAGE>
upon surrender of such holder's VGI Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the Corvas Stock Price.
(d) Corvas and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of VGI pursuant to this Agreement such
amounts as Corvas or the Surviving Corporation may be required to deduct or
withhold therefrom under the Code or under any provision of state, local or
foreign tax law. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the Person to whom such amounts would otherwise have been paid.
(e) Neither Corvas nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of VGI for any shares of Corvas
Common Stock (or dividends or distributions with respect thereto), or for any
cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
(f) The Corvas Common Stock delivered to the Stockholders (including
shares to be held by the Escrow Agent) shall be endorsed with the following, or
substantially similar, legend and, to the extent necessary, with any other
legend required pursuant to applicable federal and state securities laws:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO CORVAS, THAT SUCH REGISTRATION IS NOT REQUIRED.
(g) Any legends endorsed on the certificates evidencing shares of
Corvas Common Stock pursuant to Section 1.7(f) shall be removed, and Corvas
shall issue certificates without restrictive legends to the holder of such
shares, if, and to the extent that, such shares are registered under the
Securities Act and qualified under applicable state securities law or if the
holder provides to Corvas an opinion of counsel for such holder, in form and
substance reasonably satisfactory to Corvas, to the effect that a sale,
transfer, or assignment of such shares may be made without registration under
the Securities Act or qualification under applicable state securities laws.
Except to the extent
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as may be required pursuant to a written agreement containing an effective grant
of registration rights, Corvas shall have no obligation to cause such shares to
be registered under the Securities Act or qualified under applicable state
securities laws.
1.8 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares of VGI Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by stockholders who have not voted
such shares in favor of the Merger in accordance with Section 262 of the
Delaware General Corporation Law ("Dissenting Shares") shall not be canceled and
converted into shares of Corvas Common Stock in accordance with the Exchange
Ratio unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to appraisal and payment
under the Delaware General Corporation Law. If such holder shall have so failed
to perfect, or shall have effectively withdrawn or lost such right, such
holder's shares of VGI Common Stock shall thereupon be deemed to have been
canceled and converted as described in Section 1.5(a) at the Effective Time. VGI
shall not, except with the prior written consent of Corvas, make any payment
with respect to, or settle or offer to settle, any such demands. From and after
the Effective Time, no stockholder of VGI who has demanded appraisal rights as
provided in Section 262(d) of the Delaware General Corporation Law shall be
entitled to vote such holder's shares of VGI Common Stock for any purpose or to
receive payment of dividends or other distributions with respect to such
holder's shares (except dividends and other distributions payable to
stockholders of record at a date which is prior to the Effective Time).
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement and the
agreement of merger described in Section 1.3 as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations.
1.10 ACCOUNTING TREATMENT. For accounting purposes, the Merger is intended
to be treated as a "purchase."
1.11 FURTHER ACTION. If, at any time after the Effective Time, any further
action is determined by Corvas to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Corvas with
full right, title and possession of and to all rights and property of Merger Sub
and VGI, the officers and directors of the Surviving Corporation and Corvas
shall be fully authorized (in the name of Merger Sub, in the name of VGI and
otherwise) to take such action.
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2. REPRESENTATIONS AND WARRANTIES OF VGI AND THE STOCKHOLDERS
VGI and the Stockholders jointly and severally represent and warrant, to and
for the benefit of the Corvas Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) VGI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power and
authority: (i) to conduct its business in the manner in which its business is
currently being conducted; (ii) to own and use its assets in the manner in which
its assets are currently owned and used; and (iii) to perform its obligations
under all VGI Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, VGI
has not conducted any business under or otherwise used, for any purpose or in
any jurisdiction, any fictitious name, assumed name, trade name or other name,
other than the name "TopoGen Inc." and "Vascular Technologies, Inc."
(c) VGI is not and has not been required to be qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on VGI. VGI is in good standing as a foreign corporation in each of the
jurisdictions identified in Part 2.1 of the Disclosure Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of VGI's board of directors, (ii) the names of the members
of each committee of VGI's board of directors, and (iii) the names and titles of
VGI's officers.
(e) VGI does not own and has never owned, beneficially or otherwise
any controlling interest in any Entity and has not agreed and is not obligated
to make any future investment in or capital contribution to any Entity. VGI has
not guaranteed and is not primarily liable for any obligation of any Entity
other than itself.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. VGI has delivered
to Corvas accurate and complete copies of: (1) VGI's certificate of
incorporation and bylaws, including all amendments thereto; (2) the stock
records of VGI; and (3) except as set forth in Part 2.2 of the Disclosure
Schedule, the minutes and other records of the formal meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the Stockholders of VGI, the board of directors of VGI and all
committees of the board of directors of VGI. There have been no formal meetings
or other proceedings of the stockholders of VGI, the board of directors of VGI
or any committee of the board of directors of VGI that are not fully reflected
in such minutes or
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other records. Except as set forth in Part 2.2 of the Disclosure Schedule,
there has not been any violation of any of the provisions of VGI's certificate
of incorporation or bylaws, and VGI has not taken any action that is
inconsistent in any material respect with any resolution adopted by VGI's
stockholders, VGI's board of directors or any committee of VGI's board of
directors. The books of account, stock records, minute books and other records
of VGI are accurate, up to date and complete in all material respects.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of VGI consists of: (i) 3,000,000
shares of common stock, $.001 par value, of which 1,020,408 shares have been
issued and are outstanding as of the date of this Agreement. All of the
outstanding shares of VGI Common Stock have been duly authorized and validly
issued, and are fully paid and non assessable. Part 2.3 of the Disclosure
Schedule provides an accurate and complete description of the terms of each
repurchase option which is held by VGI and to which any of such shares is
subject.
(b) There is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of VGI; (ii) outstanding security, instrument
or obligation that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of VGI; (iii) Contract under
which VGI is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities; or (iv) to the best of the knowledge
of VGI and the Stockholders, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of VGI.
(c) All outstanding shares of VGI Common Stock have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) VGI has never repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities of VGI.
2.4 FINANCIAL STATEMENTS.
(a) VGI has used best efforts to deliver to Corvas the following
financial statements and notes (collectively, the "VGI Financial Statements").
(i) [This Section 2.4(a)(i) to be included if Corvas elects to
have an audit completed pursuant to Section 3.6 of the Option Agreement.] The
[audited] balance sheets of VGI as of the last two fiscal years most recently
ended prior to the
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Option Exercise Date, and the related [audited] income statements, statements of
stockholders' equity and statements of cash flows of VGI for the years then
ended, together with the notes thereto and the report and opinion of
___________________, whether qualified or not, relating thereto; and
(ii) The unaudited balance sheet of VGI as of the month ended
most recently prior to the Option Exercise Date (the "Unaudited Interim Balance
Sheet"), and the related unaudited income statement of VGI for the number of
months since the first day of the current fiscal year then ended.
(b) VGI Financial Statements are accurate and complete in all
material respects and present fairly the financial position of VGI as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 2.4(a)(i)) cash flows of VGI for the
periods covered thereby. VGI Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except as noted therein and except that
the financial statements referred to in Section 2.4(a)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Disclosure
Schedule, since the date of the Unaudited Interim Balance Sheet ("Balance Sheet
Date"):
(a) there has not been any material adverse change in VGI's business,
condition, assets, liabilities, operations, financial performance or prospects
and, to the best of the knowledge of VGI and the Stockholders, no event has
occurred that will, or could reasonably be expected to, have a Material Adverse
Effect on VGI;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of VGI's assets (whether or not
covered by insurance);
(c) VGI has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, and has
not repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities;
(d) VGI has not sold, issued or authorized the issuance of (i) any
capital stock or other security, (ii) any option or right to acquire any capital
stock or any other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
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(e) VGI has not amended or waived any of its rights under, or
permitted the acceleration of vesting under any restricted stock purchase
agreement or stock option;
(f) there has been no amendment to VGI's certificate of incorporation
or bylaws, and VGI has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(g) VGI has not formed any subsidiary or acquired any equity interest
or other interest in any other Entity;
(h) Other than payments made in connection with the R&D Agreement and
any Sponsored Research Agreement described therein, VGI has not made any capital
expenditure which, when added to all other capital expenditures made by or on
behalf of VGI exceeds $50,000;
(i) VGI has not (i) entered into or permitted any of the assets owned
or used by it to become bound by any Contract, or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such Contract;
(j) VGI has not (i) acquired, leased or licensed any right or other
asset from any other Person, (ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset (excluding cash) to any other Person, or
(iii) waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of and except as
reasonably approved by Corvas;
(k) VGI has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) VGI has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets;
(m) VGI has not (i) lent money to any Person (other than pursuant to
routine travel advances made to employees, founders and consultants in the
ordinary course of business), or (ii) incurred or guaranteed any indebtedness to
any Person (other than Corvas) for borrowed money;
(n) VGI has not (i) established or adopted any Employee Benefit Plan,
(ii) paid any bonus or made any profit sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees, or (iii) hired any new employee;
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(o) VGI has not changed any of its methods of accounting or
accounting practices in any respect;
(p) VGI has not made any Tax election;
(q) VGI has not commenced or settled any Legal Proceeding;
(r) VGI has not entered into any material transactions; and
(s) VGI has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS.
(a) VGI owns, leases or licenses and has good, valid and marketable
title to, all assets listed in Part 2.6 of the Disclosure Schedule. Except as
set forth in Part 2.6 of the Disclosure Schedule, all of said assets are owned
by VGI free and clear of any liens or other Encumbrances, except for (x) any
lien for current taxes not yet due and payable, and (y) minor liens that have
arisen in the ordinary course of business and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of VGI.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that
are material to the business of VGI and that are being leased or licensed to
VGI.
(c) All tangible assets owned or leased by VGI are in good condition
and repair (ordinary wear and tear expected) and are adequate for the conduct of
VGI's business in the manner in which such business is currently being
conducted.
2.7 BANK ACCOUNTS. Part 2.7 of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of VGI
at any bank or other financial institution.
2.8 NO REAL PROPERTY; LEASEHOLD. VGI does not own or lease any real
property or any interest in real property.
2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth a list of
each VGI Proprietary Asset registered with any Governmental Body or for which an
application has been filed with any Governmental Body, with (i) a brief
description of such Proprietary Asset, (ii) the names of the jurisdictions
covered by any applicable registration or application, and (iii) identification
of each Proprietary Asset licensed to VGI by any Person and the license
agreement under which such Proprietary Asset is being licensed to
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VGI. Except as set forth in Part 2.9(a)(ii) of the Disclosure Schedule, or
except as could reasonably be determined by Corvas prior to the Option Exercise
Date based upon Corvas' actual knowledge prior to the Option Exercise Date, VGI
has good, valid and marketable title to, or the valid right to use, all
Proprietary Assets identified in Part 2.9(a)(i) of the Disclosure Schedule, free
and clear of all liens and other Encumbrances. Except as set forth in Part
2.9(a)(iii) of the Disclosure Schedule, VGI is not obligated to make any payment
to any Person for the use of any VGI Proprietary Asset and VGI has not developed
jointly with any other Person any VGI Proprietary Asset with respect to which
such other Person has any rights.
(b) Except as set forth in Part 2.9(b) of the Disclosure Schedule, or
except as could reasonably be determined by Corvas prior to the Option Exercise
Date based upon Corvas' actual knowledge prior to the Option Exercise Date, VGI
has taken all reasonable measures and precautions under the circumstances
necessary to protect and maintain the confidentiality and secrecy of all VGI
Proprietary Assets (except VGI Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all VGI Proprietary Assets.
(c) Except as set forth in Part 2.9(c) of the Disclosure Schedule, or
except as could reasonably be determined by Corvas prior to the Option Exercise
Date based upon Corvas' actual knowledge, prior to the Option Exercise Date, (i)
none of the issued patents licensed to VGI infringes or conflicts with any
issued patent owned or used by any other Person; (ii) VGI is not infringing,
misappropriating or making any unlawful use of, and VGI has not at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful use of, any
Proprietary Asset owned or used by any other Person; and (iii) to the best of
the knowledge of VGI and the Stockholders, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset owned
or used by any other Person infringes or conflicts with, any issued patents
licensed to VGI. VGI further represents and warrants it is not aware of, and
based on its reasonable diligence, has no reason to know of, any fact from any
activity or published or unpublished document that is reasonably likely to
render any part of the Patent Rights invalid or unenforceable. VGI represents
and warrants that it has no knowledge of any foreign or domestic patent or
patent application which is reasonably expected by VGI to restrict Corvas from
practicing within the Patent Rights (as defined in the Research and Development
Agreement). VGI represents and warrants that it has disclosed certain
information to Corvas regarding VGI's patent applications currently pending in
the United States and in all foreign patent offices and, to the extent it has
knowledge of any fact from any activity or published or unpublished document
that is reasonably likely to render unpatentable a significant part of the
subject matter of such pending patent applications, that it has disclosed such
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knowledge to Corvas, in a context appropriate to make Corvas aware of the fact
and its possible relevance.
(d) The VGI Proprietary Assets constitute all the Proprietary Assets
necessary to enable VGI to conduct its business in the manner in which such
business has been and is being conducted. Except as set forth in Part 2.9(d) of
the Disclosure Schedule, (i) VGI has not licensed any of VGI Proprietary Assets
to any Person on an exclusive or nonexclusive basis (except to Corvas), and (ii)
VGI has not entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to transact business
in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e) of the Disclosure Schedule,
(i) all current and former employees of VGI have executed and delivered to VGI
an agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially similar to the form of Confidential Disclosure
Agreement previously delivered to Corvas, and (ii) all current and former
consultants and independent contractors to VGI have executed and delivered to
VGI an agreement (containing no exceptions to or exclusions from the scope of
its coverage) that is substantially similar to the form of Confidential
Disclosure Agreement.
2.10 CONTRACTS.
(a) Part 2.10 of the Disclosure Schedule identifies all VGI
Contracts, including any insurance policies.
(b) Except as set forth in Part 2.10 of the Disclosure Schedule, VGI
has delivered to Corvas accurate and complete copies of all written VGI
Contracts including all amendments thereto. Part 2.10 of the Disclosure
Schedule provides an accurate description of the terms of each VGI Contract that
is not in written form. Except as set forth in Part 2.10 of the Disclosure
Schedule, each VGI Contract is valid and in full force and effect, and, to the
best of the knowledge of VGI and the Stockholders, is enforceable by VGI in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule, and
to the best knowledge of VGI and the Stockholders:
(i) VGI has not materially violated or materially breached, or
committed any material default under any VGI Contract, and, to the best of the
knowledge of VGI and the Stockholders, no other Person has materially violated
or materially breached, or committed any material default under, any VGI
Contract;
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(ii) no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, (A) result in a material violation or material breach of any of
the provisions of any VGI Contract, (B) give any Person the right to declare a
default or exercise any material remedy under any VGI Contract, (C) give any
Person the right to accelerate the maturity or performance of any VGI Contract,
or (D) give any Person the right to cancel, terminate or modify any VGI
Contract;
(iii) VGI has not received any notice or other communication
regarding any actual or possible material violation or material breach of, or
material default under, any VGI Contract; and
(iv) VGI has not waived any of its material rights under any VGI
Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any VGI Contract to renegotiate, any amount paid or payable to VGI under any
VGI Contract or any other material term or provision of any VGI Contract.
(e) The VGI Contracts collectively constitute all of the Contracts
necessary to enable VGI to conduct its business in the manner in which its
business is currently being conducted.
(f) VGI has no noncompleted milestones or deliverables under VGI
Contracts.
2.11 LIABILITIES. VGI has no accrued, contingent or other liabilities of
any nature, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for liabilities identified
on Part 2.11 of the Disclosure Schedule or liabilities incurred in the ordinary
course of business.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Part 2.12
of the Disclosure Schedule, VGI is, and has been at all times since inception,
been, in compliance with all applicable Legal Requirements, except where the
failure to comply with such Legal Requirements has not had and will not have a
Material Adverse Effect on VGI. VGI has not received any notice or other
communication from any Governmental Body regarding any violation of, or failure
to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by VGI, and VGI has
delivered to Corvas accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in
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Part 2.13 of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable VGI
to conduct its business in the manner in which its business is currently being
conducted.
2.14 TAX MATTERS.
(a) Except as set forth on Part 2.14(a) of the Disclosure Schedule,
all Tax Returns required to be filed by or on behalf of VGI with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date (the "VGI Returns") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date), and (ii) have
been, or will be when filed, accurately and completely prepared in all material
respects in compliance with all applicable Legal Requirements. All amounts
shown on VGI Returns to be due on or before the Closing Date have been or will
be paid on or before the Closing Date. VGI has delivered to Corvas accurate and
complete copies of all VGI Returns filed since VGI's inception which have been
requested by Corvas.
(b) No VGI Return relating to income Taxes has ever been examined or
audited by any Governmental Body. No extension or waiver of the limitation
period applicable to any of VGI Returns has been granted (by VGI or any other
Person), and no such extension or waiver has been requested from VGI.
(c) No claim or Proceeding is pending or has been threatened against
or with respect to VGI in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by VGI with respect to any Tax. There are no liens
for Taxes upon any of the assets of VGI except liens for current Taxes not yet
due and payable. VGI has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code.
(d) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of VGI that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
VGI is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
(e) [THIS SECTION TO BE REVISED IF VGI'S STATUS AS AN S CORPORATION
HAS TERMINATED AS OF THE DATE OF THIS AGREEMENT.] Since July 1, 1996, VGI has
been an S corporation within the meaning of Section 1361(a)(1) of the Code and
has used the
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calendar year as its taxable year. Since July 1, 1996, VGI has not conduced any
business in any state or political subdivision in which the disposition of any
of its assets including goodwill in a transaction in which gain or income would
be realized would result in the imposition by that state or political
subdivision of a corporate level tax, except that VGI is subject to taxation
under the Delaware state franchise tax laws. VGI and its Stockholders have not
taken any action which will result in (i) the termination or revocation prior to
the consummation of the Merger of VGI's status as an S corporation within the
meaning of Section 1361(a)(1) of the Code or (ii) the imposition of a tax on VGI
under the provisions of Section 1374 of the Code. VGI is not a party to any
agreement or arrangement with its Stockholders to make distributions to its
Stockholders to pay any tax imposed on the Stockholders, except as described in
Part 2.14(e) of the Disclosure Schedule.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
Except as set forth in Part 2.15 of the Disclosure Schedule:
(a) VGI has no employees and has had no employees since its inception
and VGI is not obligated to any person to pay or provide salary, bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance
pay, termination pay, hospitalization, medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program or agreement (collectively, the "Plans") sponsored, maintained,
contributed to or required to be contributed to by VGI for the benefit of any
employee of VGI ("Employee").
(b) VGI does not maintain, sponsor or contribute to, and, to the best
of the knowledge of VGI and the Stockholders, has not at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees (a "Pension Plan") or under any employee welfare benefit plans (as
defined in Section 3(1) of ERISA, whether or not excluded from coverage under
specific Titles or Merger Subtitles of ERISA) (the "Welfare Plan"), including
any multi-employer plan (within the meaning of Section 3(37) of ERISA).
(c) VGI is not required to be, and, to the best of the knowledge of
VGI and the Stockholders, has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code. VGI has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code.
VGI has never made a complete or partial withdrawal from a multi-employer plan,
as such term is defined in Section 3(37) of ERISA, resulting in "withdrawal
liability," as such term is defined in Section 4201 of ERISA (without
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regard to subsequent reduction or waiver of such liability under either Section
4207 or 4208 of ERISA).
(d) VGI does not have any plan or commitment to create any Plan,
Welfare Plan or any Pension Plan.
(e) Neither the execution, delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions contemplated
by this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former officer or director of
VGI (whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or vesting
of any such benefits.
(f) VGI is in compliance in all material respects with all applicable
Legal Requirements and Contracts relating to employment, employment practices,
wages, bonuses and terms and conditions of employment, including employee
compensation matters.
2.16 ENVIRONMENTAL MATTERS. VGI is in compliance in all material respects
with all applicable Environmental Laws, which compliance includes the possession
by VGI of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof, necessary for the conduct of its business as presently conducted. VGI
has not received any notice or other communication (in writing or otherwise),
whether from a Governmental Body, citizens group, employee or otherwise, that
alleges that VGI is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by VGI pursuant to Environmental Laws
are identified in Part 2.16 of the Disclosure Schedule. (For purposes of this
Section 2.16: (i) "Environmental Law" means any federal, state, local or foreign
Legal Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern; and (ii) "Materials of Environmental Concern" include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or hereafter regulated by
any Environmental Law or that is otherwise a danger to health, reproduction or
the environment.)
2.17 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.17 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since inception of VGI had, any direct or indirect material interest in any
material asset used in
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or otherwise relating to the business of VGI; (b) no Related Party is, or has at
any time since inception of VGI been, indebted to VGI; (c) since inception of
VGI, no Related Party has entered into, or has had any direct or indirect
material financial interest in, any material Contract, transaction or business
dealing involving VGI; (d) no Related Party is competing, or has at any time
since inception of VGI competed, directly or indirectly, with VGI (other than to
the extent research completed by Drs. Schnitzer and Jacobson in their
laboratories prior to the date of the Option Agreement is deemed competition);
and (e) no Related Party has any claim or right against VGI (other than rights
to receive compensation for services performed as an employee of VGI or to
receive reimbursement for expenses). (For purposes of the Section 2.17 each of
the following shall be deemed to be a "Related Party": (i) each of the
Stockholders; (ii) each individual who is, or who has at any time since
inception been, an officer of VGI; (iii) each member of the immediate family of
each of the individuals referred to in clauses "(i)" and "(ii)" above; and (iv)
any trust or other Entity (other than VGI) in which any one of the individuals
referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)
2.18 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.18 of the Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of VGI
and the Stockholders) no Person has threatened to commence any Legal Proceeding:
(i) against VGI or any of the material assets owned or used by VGI or any Person
whose liability VGI has or may have retained or assumed, either contractually or
by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the best of
the knowledge of VGI and the Stockholders, except as set forth in Part 2.18 of
the Disclosure Schedule, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) Except as set forth in Part 2.18 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against
VGI.
(c) There is no order, writ, injunction, judgment or decree to which
VGI, or any of the assets owned or used by VGI, is specifically subject. None
of the Stockholders is subject to any order, writ, injunction, judgment or
decree that specifically relates to VGI's business or to any of the assets owned
or used by VGI. To the best of the knowledge of VGI and the Stockholders, no
officer or other employee of VGI is subject to any order, writ, injunction,
judgment or decree that prohibits such officer or other
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employee from engaging in or continuing any conduct, activity or practice
relating to VGI's business.
2.19 AUTHORITY; BINDING NATURE OF AGREEMENT. VGI has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
VGI of this Agreement have been duly authorized by all necessary action on the
part of VGI and its board of directors. This Agreement constitutes the legal,
valid and binding obligation of VGI, enforceable against VGI in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.20 NON CONTRAVENTION; CONSENTS. Except as set forth in Part 2.20 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of VGI's certificate of incorporation or bylaws, or (ii) any
resolution adopted by VGI's stockholders, VGI's board of directors or any
committee of VGI's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which VGI, or any of the assets owned or used by VGI, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by VGI or that otherwise relates to VGI's business or to any of the
assets owned or used by VGI;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any material provision of any VGI Contract or give
any Person the right to (i) declare a default or exercise any remedy under any
such VGI Contract, (ii) accelerate the maturity or performance of any material
provision of such VGI Contract, or (iii) cancel, terminate or modify any such
VGI Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by VGI (except for
minor liens that will
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not, in any case or in the aggregate, materially detract from the value of the
assets subject thereto or materially impair the operations of VGI).
(f) Except as set forth in Part 2.20 of the Disclosure Schedule, VGI
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.21 FULL DISCLOSURE.
This Agreement (including the Disclosure Schedule) does not, and the
Stockholders' Closing Certificate will not, (i) contain any representation,
warranty or information that is false or misleading with respect to any material
fact, or (ii) omit to state any fact material or necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
2.22 NO OTHER WARRANTIES.
Notwithstanding any other provision contained herein, in the Option
Agreement or in the R&D Agreement, Corvas acknowledges that drug discovery and
development is an inherently risky undertaking and that neither VGI nor the
Stockholders can assure Corvas that any drug candidate will ever be discovered,
that any drug candidate which is discovered will ever be developed, or that
VGI's Proprietary Assets will prove to be commercially valuable. VGI MAKES NO
REPRESENTATIONS OR WARRANTIES OTHER THAN THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN SECTION 2 OF THIS AGREEMENT. SPECIFICALLY, VGI DOES NOT WARRANT
THAT ITS PROPRIETARY ASSETS WILL PERFORM FOR THEIR INTENDED PURPOSE OR FOR ANY
PURPOSE AT ALL. VGI DISCLAIMS ALL OTHER WARRANTIES WITH RESPECT TO THE
PROPRIETARY ASSETS, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
3. REPRESENTATIONS AND WARRANTIES OF CORVAS AND MERGER SUB
Corvas and Merger Sub jointly and severally represent and warrant to and for
the benefit of VGI and the Stockholders as follows:
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3.1 SEC Filings; Financial Statements.
(a) Corvas has delivered to VGI accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Corvas with the SEC
between _________________ [date that is one year prior to the date of
execution], and the date of this Agreement (the "Corvas SEC Documents"). As of
the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i) each
of the Corvas SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Corvas SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the Corvas SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of Corvas and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Corvas and its subsidiaries for the periods covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Corvas and Merger Sub have
the absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Corvas and Merger Sub of this Agreement (including the contemplated issuance of
Corvas Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Corvas and Merger Sub and
their respective boards of directors. No vote of Corvas' stockholders will be
needed to approve the Merger or issue the Corvas Common Stock except for matters
requiring Stockholder Approval. This Agreement constitutes the legal, valid and
binding obligation of Corvas and Merger Sub, enforceable against them in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.3 VALID ISSUANCE. The Corvas Common Stock to be issued in the Merger
will, when issued in accordance with the provisions of this Agreement, be
validly issued, fully paid and nonassessable.
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3.4 NON CONTRAVENTION; CONSENTS. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Corvas' certificate of incorporation or bylaws, or (ii) any
resolution adopted by Corvas' stockholders, Corvas' board of directors or any
committee of Corvas' board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which Corvas, or any of the assets owned or used by Corvas, is
subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Corvas which could reasonably relate to Corvas' use of the
Proprietary Assets; or
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any material provision of any Corvas Contract
which could have a Materially Adverse Effect on Corvas.
Corvas is not and will not be required to make any filing with or give any
notice to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement.
3.5 COMPLIANCE WITH LEGAL REQUIREMENTS. Corvas is in substantial
compliance with all applicable Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a material
adverse effect on Corvas' business, condition, assets, liabilities, operations
and financial performance, taken as a whole.
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4. ADDITIONAL COVENANTS OF THE PARTIES
4.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. VGI shall
(upon request) promptly deliver to Corvas a copy of each such filing made, each
such notice given and each such Consent obtained by VGI. Corvas shall (upon
request) promptly deliver to VGI a copy of each such filing made, each such
notice given and each such Consent obtained by Corvas.
4.2 VGI STOCKHOLDERS' MEETING. VGI shall, in accordance with its
certificate of incorporation and bylaws and the applicable requirements of the
Delaware General Corporation Law, call and hold a special meeting of its
stockholders as promptly as practicable for the purpose of permitting them to
consider and to vote upon and approve the Merger and this Agreement (the "VGI
Stockholders' Meeting").
4.3 PUBLIC ANNOUNCEMENTS.
Corvas and VGI agree that the public announcement of the execution of this
Agreement shall be in the form of a press release to be agreed upon by Corvas
and VGI and thereafter each party shall be entitled to make or publish any
public statement consistent with the contents thereof. Except as provided in
the foregoing sentence, Corvas and VGI will jointly discuss and agree on any
statement to the public regarding this Agreement or any aspect of this Agreement
subject in each case to disclosure otherwise required by law or regulation as
determined in good faith by Corvas and VGI. The principles to be observed by
Corvas and VGI in such public disclosures will be: accuracy, compliance with
applicable laws and regulations, the requirements for confidentiality, and the
advantage a competitor of Corvas may gain from any public statements under this
Section 4.3.
4.4 BEST EFFORTS. During the Pre Closing Period, (a) VGI and each
Stockholder shall use their best efforts to cause the conditions set forth in
Section 5 to be satisfied on a timely basis, and (b) Corvas and Merger Sub shall
use their best efforts to cause the conditions set forth in Section 6 to be
satisfied on a timely basis.
4.5 NOTIFICATION AND UPDATES. If any event, condition, fact or
circumstance that is required to be disclosed prior to the Closing requires any
change in the Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a
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change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then VGI shall promptly deliver to Corvas an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of determining the
accuracy of any of the representations and warranties made by VGI or any of the
Stockholders in this Agreement, except that VGI may make updates with respect to
any information that was omitted in good faith at the time the Disclosure
Schedule was prepared that individually and in the aggregate is not material to
the business, operations, assets, properties, liabilities, obligations or
condition (financial or otherwise) of VGI and VGI may make such other changes to
the Disclosure Schedule as are approved in advance by Corvas in its sole
discretion.
4.6 FIRPTA MATTERS. At the Closing, (a) VGI shall deliver to Corvas a
statement (in such form as may be reasonably requested by counsel to Corvas)
conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the United
States Treasury Regulations, and (b) VGI shall deliver to the Internal Revenue
Service the notification required under Section 1.897 - 2(h)(2) of the United
States Treasury Regulations.
4.7 RELEASES. At the Closing, each of the Stockholders shall execute and
deliver to VGI a Release in the form attached hereto as Exhibit D.
4.8 RESALE LIMITATIONS. Each of the Stockholders hereby covenants with
Corvas that the number of shares sold or transferred in any manner by an
individual Stockholder of Corvas Common Stock issued pursuant to this Agreement
after the Closing Date shall not, during any three-month period, in the
aggregate, exceed the number of shares equal to the lower of: (a) the number of
shares such Stockholder is eligible to sell pursuant to the volume and other
limitations set forth in Rule 144 promulgated under the Securities Act; and (b)
ten percent (10%) of the Corvas Common Stock deemed held by such Stockholder as
of the Effective Time.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF CORVAS AND MERGER SUB
The obligations of Corvas and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
5.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by VGI and the Stockholders in this Agreement and in each of the
other agreements and instruments delivered to Corvas in connection with the
transactions contemplated by this Agreement, as updated in accordance with the
terms of this Agreement, shall have been accurate in all material respects as of
the date of this Agreement, and shall be
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accurate in all material respects as of the Scheduled Closing Time as if made at
the Scheduled Closing Time.
5.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
VGI and the Stockholders are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in all material
respects.
5.3 STOCKHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of at least 99% of the shares of VGI
Common Stock entitled to vote with respect thereto.
5.4 CONSENTS. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.20 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
5.5 AGREEMENTS AND DOCUMENTS. Corvas and VGI shall have received the
following agreements and documents, each of which shall be executed by all
required parties thereto:
(a) Releases in the form attached as Exhibit D, executed by the
Stockholders.
(b) Registration Rights Agreement in the form attached as Exhibit E.
(c) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Corvas, executed by all employees and former
employees of VGI and by all consultants and independent contractors and former
consultants and former independent contractors to VGI who have not already
signed such agreements (including the individuals identified in Part 2.9(e) of
the Disclosure Schedule);
(d) a legal opinion of Dysart, Dubick & Bagley, LLP, dated as of the
Closing Date, substantially in the form of Exhibit F;
(e) a legal opinion of Cooley, Godward, LLP, dated as of the Closing
Date, substantially in the form of Exhibit G;
(f) a certificate executed by the Stockholders and containing the
representation and warranty of each Stockholder that each of the representations
and warranties set forth in Section 2 is accurate in all material respects as of
the Closing Date as if made on the Closing Date and that the conditions set
forth in Sections 5.1, 5.2, 5.3
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and 5.4 have been duly satisfied in all material respects (the "Stockholders'
Closing Certificate");
(g) written resignations of all directors of VGI, effective as of the
Effective Time; and
(h) the Escrow Agreement in the form of Exhibit C executed by each
Stockholder, the Stockholders' Agent, Corvas and VGI, and the Stock Powers
referred to therein executed by each Stockholder.
5.6 FIRPTA COMPLIANCE. VGI shall have filed with the Internal Revenue
Service the notification referred to in Section 4.8(b).
5.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted that makes
consummation of the Merger illegal.
5.8 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Corvas of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF VGI
The obligations of VGI to effect the Merger and otherwise consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing, of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Corvas and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Corvas and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
6.3 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted that makes
consummation of the Merger illegal.
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6.4 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Corvas of any material right pertaining to its ownership of
stock of the Surviving Corporation.
7. TERMINATION
7.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Corvas at or after the Scheduled Closing Time if any condition
set forth in Section 5 has not been satisfied by the Scheduled Closing Time;
(b) by VGI at or after the Scheduled Closing Time if any condition
set forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(c) by Corvas if the Closing has not taken place on or before 45
business days following the Option Exercise Date (other than as a result of any
failure on the part of Corvas to comply with or perform any covenant or
obligation of Corvas set forth in this Agreement or in any other agreement or
instrument delivered to VGI);
(d) by VGI if the Closing has not taken place on or before 45
business days following the Option Exercise Date (other than as a result of the
failure on the part of VGI or any of the Stockholders to comply with or perform
any covenant or obligation set forth in this Agreement or in any other agreement
or instrument delivered to Corvas); or
(e) by the mutual consent of Corvas and VGI.
7.2 TERMINATION PROCEDURES. If Corvas wishes to terminate this Agreement
pursuant to Section 7.1(a), Section 7.1(c) or Section 7.1(e), Corvas shall
deliver to VGI a written notice stating that Corvas is terminating this
Agreement and setting forth a brief description of the basis on which Corvas is
terminating this Agreement. If VGI wishes to terminate this Agreement pursuant
to Section 7.1(b), Section 7.1(d) or Section 7.1(e), VGI shall deliver to Corvas
a written notice stating that VGI is terminating this Agreement and setting
forth a brief description of the basis on which VGI is terminating this
Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither VGI nor Corvas shall be relieved
of any obligation or liability arising from any prior breach by such party of
any provision of this Agreement;
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(b) the parties shall, in all events, remain bound by and continue to be subject
to the provisions set forth in Section 9; (c) VGI shall, in all events, remain
bound by and continue to be subject to Section 8.1; (d) the Stockholders shall
be entitled to exercise their Put Rights pursuant to the Option Agreement
including, but not limited to, Section 6 thereof; and (e) the limitations of
liability set forth in the Option Agreement shall apply.
8. INDEMNIFICATION, ETC.
8.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties made by the Stockholders
(including the representations and warranties set forth in Section 2 (as updated
in accordance with the terms of this Agreement) and the representations and
warranties set forth in the Stockholders' Closing Certificate) shall survive the
Closing and shall expire on the first anniversary of the Closing Date; provided,
however, that if, at any time prior to the first anniversary of the Closing
Date, any Corvas Indemnitee (acting in good faith) delivers to any of the
Stockholders a written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the Stockholders
(and setting forth in reasonable detail the basis for such Corvas Indemnitee's
belief that such an inaccuracy or breach may exist) and asserting a claim for
recovery under Section 8.2 based on such alleged inaccuracy or breach, then the
claim asserted in such notice shall survive the first anniversary of the Closing
until such time as such claim is fully and finally resolved, provided the Corvas
Indemnitee pursues such resolution in good faith and with due diligence. All
representations and warranties made by Corvas and Merger Sub shall terminate and
expire as of the Effective Time, and any liability of Corvas or Merger Sub with
respect to such representations and warranties shall thereupon cease.
Notwithstanding the foregoing, this provision is not intended to limit such
rights and remedies any Stockholder may have under the Securities Act, the
Exchange Act or any other law or rule applicable to the regulation of
securities.
(b) The representations, warranties, covenants and obligations of VGI
and the Stockholders, and the rights and remedies that may be exercised by the
Corvas Indemnitees, shall not be limited or otherwise affected by or as a result
of any information furnished to, or any investigation made by or knowledge of,
any of the Corvas Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
VGI and the Stockholders in this Agreement. If Corvas elects to continue with
the transactions contemplated by this Agreement, notwithstanding VGI or its
Stockholders' written disclosure to Corvas of the existence of any inaccuracy or
breach of the representations
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and warranties of VGI and the Stockholders prior to the Closing and the good
faith certification by VGI or its Stockholders as to the actual or contingent
Damages to the extent subject to estimation, then the Corvas Indemnitees shall
be deemed to have waived any claim for Damages (not including any claims for
Damages as set forth in Section 5.6 of the Option Agreement) with respect only
to the matters as disclosed.
8.2 INDEMNIFICATION BY STOCKHOLDERS.
(a) From and after the Effective Time (but subject to Section
8.1(a)), the Stockholders, jointly and severally, shall hold harmless and
indemnify each of the Corvas Indemnitees from and against, and shall compensate
and reimburse each of the Corvas Indemnitees for, any Damages which are directly
or indirectly suffered or incurred by any of the Corvas Indemnitees or to which
any of the Corvas Indemnitees may otherwise become subject (regardless of
whether or not such Damages relate to any third party claim) and which arise
from or as a result of, or are directly or indirectly connected with: (i) any
inaccuracy in or breach of any representation or warranty set forth in Section 2
or in the Stockholders' Closing Certificate; (ii) any breach of any covenant or
obligation of VGI or any of the Stockholders (including the covenants set forth
in Section 4 and the covenants in the Option Agreement); or (iii) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any
Corvas Indemnitee for the purpose of enforcing any of its rights under this
Section 8).
(b) The Stockholders acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as an Corvas Indemnitee) Corvas shall
also be deemed, by virtue of its ownership of the stock of the Surviving
Corporation, to have incurred Damages as a result of and in connection with such
inaccuracy or breach.
8.3 THRESHOLD; CEILING.
(a) The Stockholders shall not be required to make any
indemnification payment pursuant to Section 8.2(a) for any inaccuracy in or
breach of any of their representations, covenants or obligations set forth
herein until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies in or breaches of any representations or warranties) that
have been directly or indirectly suffered or incurred by any one or more of the
Corvas Indemnitees, or to which any one or more of the Corvas Indemnitees has or
have otherwise become subject, exceeds [ *** ] in the aggregate. If the total
amount of such Damages exceeds [ *** ], then the Corvas Indemnitees shall be
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<PAGE>
entitled to be indemnified against and compensated and reimbursed only for the
portion of such Damages exceeding [ *** ]
(b) Notwithstanding any other provision in this Agreement, the
Stockholders shall not be personally liable for any Damages or any other
liability incurred under this Agreement (except as set forth in Section 5.6 of
the Option Agreement). The maximum liability of the Stockholders under this
Agreement shall not exceed, and shall be paid solely from, the shares of Corvas
Common Stock in the Escrow Fund except in the case of fraud. Corvas agrees that
claims under Section 8.2 constitute the sole and exclusive remedy for any claim
under any theory of contract, fiduciary duty, tort or otherwise, against VGI or
its directors, officers, stockholders, employees, agents, and representatives,
successors or permitted assigns, for any breach of this Agreement and that the
shares of Corvas Common Stock in the Escrow Fund shall constitute the sole
source of payment for any such Damages or liabilities. The parties acknowledge
that this limitation on liability is part of a bargained for allocation of risk
that is reflected in the Merger consideration.
8.4 NO CONTRIBUTION. Each Stockholder waives, and acknowledges and agrees
that he shall not have and shall not exercise or assert (or attempt to exercise
or assert), any right of contribution, right of indemnity or other right or
remedy against the Surviving Corporation in connection with any indemnification
obligation or any other liability to which he may become subject under or in
connection with this Agreement or the Stockholders' Closing Certificate.
8.5 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Corvas or against any other Person) with respect
to which any of the Stockholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Corvas Indemnitee pursuant to this
Section 8, Corvas shall have the right, at its election, to proceed with the
defense of such claim or Legal Proceeding on its own with counsel selected by
Corvas and approved by VGI, which approval shall not be unreasonably withheld.
If Corvas so proceeds with the defense of any such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be recovered by Corvas from the Escrow Fund at any time;
(b) each Stockholder shall make available to Corvas any documents and
materials in his possession or control that may be necessary to the defense of
such claim or Legal Proceeding; and
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(c) Corvas shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Stockholders' Agent (as
defined in Section 9.1); provided, however, that such consent shall not be
unreasonably withheld. Consent may not be withheld if each Corvas Indemnitee
against whom the claim has been made receives, as part of the settlement or
compromise, an unconditional release relating to such claim.
Corvas shall give the Stockholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Corvas or the Surviving Corporation; provided,
however, that any failure on the part of Corvas to so notify the Stockholders'
Agent shall not limit any of the obligations of the Stockholders under this
Section 8 (except to the extent such failure materially prejudices the defense
of such Legal Proceeding).
8.6 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN CORVAS. No Corvas
Indemnitee (other than Corvas or any successor thereto or assign thereof) shall
be permitted to assert any indemnification claim or exercise any other remedy
under this Agreement unless Corvas (or any successor thereto or assign thereof)
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
9. MISCELLANEOUS PROVISIONS
9.1 STOCKHOLDERS' AGENT. The Stockholders hereby irrevocably appoint
Harry E. Gruber as their agent for purposes of Section 8 (the "Stockholders'
Agent"), and Harry E. Gruber hereby accepts his appointment as the
Stockholders' Agent. Corvas shall be entitled to deal exclusively with the
Stockholders' Agent on all matters relating to Section 8, and shall be entitled
to rely conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Stockholder by
the Stockholders' Agent, and on any other action taken or purported to be taken
on behalf of any Stockholder by the Stockholders' Agent, as fully binding upon
such Stockholder. If the Stockholders' Agent shall die, become disabled or
otherwise be unable to fulfill his responsibilities as agent of the
Stockholders, then the Stockholders shall, within ten business days after such
death or disability, appoint a successor agent and, promptly thereafter, shall
notify Corvas of the identity of such successor. Any such successor shall
become the "Stockholders' Agent" for purposes of Section 9 and this Section
10.1. If for any reason there is no Stockholders' Agent at any time, all
references herein to the Stockholders' Agent shall be deemed to refer to the
Stockholders.
9.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the
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Closing) for the purpose of carrying out or evidencing any of the transactions
contemplated by this Agreement.
9.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Corvas and its Representatives with
respect to VGI's business (and the furnishing of information to Corvas and its
Representatives in connection with such investigation and review), (b) the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule) and all agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement, (c) the preparation and submission of any filing
or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of any Consent
required to be obtained in connection with any of such transactions, and (d) the
consummation of the Merger; PROVIDED, HOWEVER, that, to the extent the total
amount of all such fees, costs and expenses incurred by or for the benefit of
VGI (including all such fees, costs and expenses incurred prior to the date of
this Agreement) is between $3,000 and $6,000 in the aggregate, 50% of any amount
over $3,000 and under $6,000 shall be borne and paid by the Stockholders of VGI
and any amount of such fees, costs and expenses over $6,000 shall be borne and
paid by the Stockholders and not by VGI.
9.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
9.5 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered or certified mail (return receipt requested), by courier or express
delivery service, or by facsimile, with the original by mail) to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other party hereto):
if to Corvas:
Corvas International, Inc.
3030 Science Park Road
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San Diego, California 92121
Facsimile No.(619) 455-7895
Attention: Corporate Secretary
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121-2128
Facsimile No. (619) 453-3555
Attn: M. Wainwright Fishburn, Jr., Esq.
if to VGI, the Stockholders or the Stockholders' Agent:
Harry E. Gruber, MD
P.O. Box 675272
Rancho Santa Fe, CA 92067
Facsimile No: (619) 756-8158
with a copy to:
Dysart, Dubick & Bagley, LLP
701 B Street, Suite 1525
San Diego, California 92101
Facsimile No. (619) 699-6280
Attn: Kevin M. Bagley, Esq.
9.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 4.3, on and at all times after the Closing Date, each
Stockholder and Corvas shall keep confidential, and shall not use or disclose to
any other Person, any non public document or other non-public information in
their possession that relates to the business of VGI or Corvas.
9.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
9.8 HEADINGS. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
9.9 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
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9.10 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
9.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: VGI and
its successors and assigns (if any); the Stockholders and their respective
personal representatives, executors, administrators, estates, heirs, successors
and assigns (if any); Corvas and its successors and assigns (if any); and Merger
Sub and its successors and assigns (if any). This Agreement shall inure to the
benefit of: VGI; the Stockholders; Corvas; Merger Sub; the other Corvas
Indemnitees (subject to Section 8.7); and the respective successors and assigns
(if any) of the foregoing. No voluntary assignments by any Stockholder may be
made without the express written consent of Corvas, which consent shall not be
unreasonably withheld. No voluntary assignments by Corvas may be made without
the express written consent of the Stockholders' Agent, which consent shall not
be unreasonably withheld. If a Corvas assignment would result in the
Stockholders receiving stock other than Corvas Common Stock, the Stockholders'
Agent's refusal to consent shall be deemed to be reasonable.
9.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
9.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in
the specific instance in which it is given.
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9.14 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
9.15 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
9.16 PARTIES IN INTEREST. Except for the provisions of Section 8, none of
the provisions of this Agreement is intended to provide any rights or remedies
to any Person other than the parties hereto and their respective successors and
permitted assigns (if any).
9.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that the Option Agreement executed
on behalf of Corvas on and VGI on __________, 1997 shall not be superseded by
this Agreement and shall remain in effect in accordance with its terms until the
earlier of (a) the Effective Time, or (b) the date on which such Option
Agreement is terminated in accordance with its terms.
9.18 NEGOTIATION OF DISPUTES. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement or the grounds
for the termination thereof, and the parties cannot resolve the dispute within
thirty days of a written request by either party to the other, such dispute
shall be referred to the Chief Executive Officer of Corvas and the Stockholders'
Agent for resolution. Such persons shall hold a meeting to attempt in good
faith to negotiate a resolution of the dispute prior to pursuing other available
remedies. If within 10 business days after such meeting, the Chief Executive
Officer of Corvas and the Stockholders' Agent have not succeeded in negotiating
a resolution of the dispute, such dispute shall be submitted to arbitration as
set forth in Section 9.19 below.
9.19 ARBITRATION. Disputes that have not been successfully resolved
pursuant to Section 9.18 above shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitration in La
Jolla, California. The arbitration shall be conducted by three arbitrators,
one selected by each party to the arbitration and one selected by arbitrators
appointed by the parties. If the arbitrators cannot agree on a third
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<PAGE>
arbitrator, the third arbitrator shall be selected in accordance with the AAA
rules. If a party fails to designate an arbitrator within the time limits set
by the AAA rules, the arbitrator selected by the other party shall be the sole
arbitrator. All arbitrators must be knowledgeable in the subject matter at
issue in the dispute. Each of the parties shall be entitled to conduct
discovery under the California Rules of Civil Procedure then in effect. Each
party shall initially bear its own costs and legal fees associated with such
arbitration. The prevailing party in any such arbitration shall be entitled to
recover from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such arbitration. The
decision of the arbitrator(s) shall be final and may be sued on or enforced by
the party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement or the grounds for the termination thereof, shall survive the
expiration or termination of this Agreement for any reason. The arbitrator(s)
shall be empowered to award specific performance, injunctive relief and other
equitable remedies as well as damages, but shall not be empowered to award
punitive or exemplary damages or award any damages in excess of any limitations
set forth in this Agreement.
9.20 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
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The parties hereto have caused this Agreement to be executed and delivered
as of ________________, 199_.
CORVAS INTERNATIONAL, INC.,
a Delaware corporation
By:
-------------------------------
MERGER SUB ACQUISITION CORP.,
a Delaware corporation
By:
-------------------------------
VASCULAR GENOMICS INC.,
a Delaware corporation
By:
-------------------------------
STOCKHOLDERS:
----------------------------------
Jan Schnitzer
----------------------------------
Harry Gruber
----------------------------------
Dennis Berman
----------------------------------
Bruce Jacobson
----------------------------------
Isaac Willis
37.
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Exhibit A - Stockholders
Exhibit B - Certain Definitions
Exhibit C Form of Escrow Agreement
Exhibit D - Form of Release
Exhibit E - Form of Registration Rights Agreement
Exhibit F - Form of legal opinion of Dysart, Dubick & Bagley LLP
Exhibit G - Form of legal opinion of Cooley Godward LLP
<PAGE>
EXHIBIT A
LIST OF STOCKHOLDERS
Jan Schnitzer
Harry Gruber
Dennis Berman
Bruce Jacobson
Isaac Willis
<PAGE>
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
1. the sale, license, disposition or acquisition of all or a material
portion of VGI's business or assets;
2. the issuance, disposition or acquisition of (i) any capital stock or
other equity security of VGI (other than common stock issued to
employees of VGI, upon exercise of VGI Options or otherwise, in
routine transactions in accordance with VGI's past practices), (ii)
any option, call, warrant or right (whether or not immediately
exercisable) to acquire any capital stock or other equity security of
VGI (other than stock options granted to employees of VGI in routine
transactions in accordance with VGI's past practices), or (iii) any
security, instrument or obligation that is or may become convertible
into or exchangeable for any capital stock or other equity security of
VGI; or
3. any merger, consolidation, business combination, reorganization or
similar transaction involving VGI.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
CORVAS CONTRACT. "Corvas Contract" shall mean any Contract: (a) to which
Corvas is a party; (b) by which Corvas or any of its material assets is or may
become bound or under which Corvas has, or may become subject to, any material
obligation; or (c) under which Corvas has or may acquire any material right or
interest.
1.
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CORVAS INDEMNITEES. "Corvas Indemnitees" shall mean the following Persons:
(a) Corvas; (b) Corvas' current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above; provided,
however, that the Stockholders shall not be deemed to be "Corvas Indemnitees."
CORVAS STOCK PRICE. "Corvas Stock Price" shall mean the closing price of a
share of Corvas Common Stock on the Nasdaq National Market, or on the exchange
or interdealer quotation system on which the Corvas Common Stock is then traded
or quoted, on the Closing Date.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature (including expense
incurred in defending against any of the foregoing).
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Corvas on behalf of VGI and the
Stockholders.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, VGI (including any limited liability
company or joint stock company), firm or other enterprise, association,
organization or entity.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
2.
<PAGE>
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit or body and any court or other
tribunal).
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel, but shall not include patent prosecutions not
involving an administrative appeal or court actions.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to have
a "Material Adverse Effect" on VGI if such violation or other matter (considered
together with all other matters that would constitute exceptions to the
representations and warranties set forth in the Agreement or in the
Stockholders' Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) would have a material adverse effect on
VGI's business, condition, assets, liabilities, operations, financial
performance or prospects, taken as a whole.
OPTION. "Option" shall mean the Option described in the Option Agreement.
OPTION AGREEMENT. "Option Agreement" shall mean that certain Option
Agreement dated as of June 29, 1997 by and among Corvas, VGI and the
Stockholders.
OPTION EXERCISE DATE. "Option Exercise Date" shall mean the Exercise Date
of the Option, as described in the Option Agreement.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PRE-CLOSING PERIOD. "Pre-Closing Period" shall mean the period from the
date of this Agreement through the Effective Time.
3.
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PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933, as
amended.
STOCKHOLDER APPROVAL. "Stockholder Approval" shall mean any approval by the
stockholders of Corvas, provided such approval is a Legal Requirement or
required by a rule of the Nasdaq National Market.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
VGI CONTRACT. "VGI Contract" shall mean any Contract: (a) to which VGI is
a party; (b) by which VGI or any of its material assets is or may become bound
or under which VGI has, or may become subject to, any material obligation; or
(c) under which VGI has or may acquire any material right or material interest.
4.
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VGI PROPRIETARY ASSET. "VGI Proprietary Asset" shall mean any Proprietary
Asset owned by or licensed to VGI.
5.
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EXHIBIT C
ESCROW AGREEMENT
AGREEMENT, made as of ________________ by and among Corvas International,
Inc., a Delaware corporation ("Corvas"), John Crawford (the "Escrow Agent"),
Harry Gruber ("Stockholders' Agent") and the stockholders set forth on the
signature lines hereto (hereafter collectively called the "Stockholders") of
Vascular Genomics Inc. a Delaware corporation (the "Company").
RECITALS
1. Corvas, the Stockholders and the Company are parties to an Option
Agreement dated June ___, 1997 (the "Option Agreement"), pursuant to which: (a)
a wholly owned subsidiary of Corvas may acquire all the Stockholders' Company
stock in accordance with the terms of an Agreement and Plan of Merger
Reorganization (the "Merger Agreement," the form of which is attached to the
Option Agreement as Exhibit B); or (b) the Stockholders' may acquire Corvas
Common Stock pursuant to certain Put Rights.
2. Pursuant to the provisions of Article 8 of the Merger Agreement and
Sections 8.2, 8.3 and 8.4 of the Option Agreement, the Stockholders have agreed
to indemnify Corvas Indemnitees against certain liabilities, damages, losses,
claims, demands, costs or expenses and are required to deliver in escrow to the
Escrow Agent (i) shares of Corvas Common Stock valued at [ *** ] less the total
dollar value of any claims for Damages under the Option Agreement that are
accrued and paid to Corvas through an adjustment of the Put Price as set forth
in Section 6.6 of the Option Agreement, or (ii) [ *** ] of the Fixed Shares (as
defined in the Option Agreement) and that number of shares of Corvas Common
Stock equal to [ *** ] of the Dollar Amount (as defined in the Option Agreement)
prior to any adjustment pursuant to Section 8.4(a) of the Option Agreement, less
the actual dollar amount of any adjustment made pursuant to Section 8.4(a) of
the Option Agreement, with the Corvas Common Stock valued at the same price used
to calculate the Subsequent Shares (as defined in the Option Agreement);
provided, however, that in the event the Stockholders are to receive cash, or a
combination of cash and stock, as consideration for their shares of VGI Common
Stock, then the composition of the Escrow Fund shall correspond therewith so
that the Escrow Fund shall consist of cash or a combination of cash and stock of
equal value to the consideration that would otherwise have been deposited in the
Escrow Fund if all of the consideration were stock.
3. All capitalized terms in this Escrow Agreement shall have the meanings
set forth herein or in the Option Agreement and Merger Agreement.
Accordingly, it is hereby mutually agreed as follows:
1.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ARTICLE I
CREATION OF THE ESCROW FUND
1.01 THE MERGER AND OPTION AGREEMENT. The Escrow Agent hereby acknowledges
receipt of copies of the Option Agreement and the Merger Agreement but, except
for reference thereto for definitions of certain words or terms not defined
herein, the Escrow Agent is not charged with any duties or responsibilities with
respect thereto. The Stockholders have agreed in the Option Agreement (in the
case of the exercise of the Put Rights) and in the Merger Agreement to indemnify
and hold Corvas Indemnitees harmless from and against Damages. The Stockholders
hereby grant Corvas a security interest in the Escrow Fund to secure the payment
of any indemnification obligations, subject to the limitations, and in the
manner provided, in this Agreement.
1.02 RECEIPT OF ESCROW SHARES. The Escrow Agent hereby acknowledges the
receipt of Corvas Common Stock of certificates representing the number of shares
of Corvas Common Stock listed under the column "Escrow Shares" on Appendix A
hereto issued in the name of the Escrow Fund for the benefit of the Stockholders
designated in such Appendix A, together with duly executed stock powers endorsed
in blank (with medallion signature guarantees) as to the Escrow Shares and cash
in the amount of $_________. Any release of Escrow Shares or cash shall be
allocated among the Stockholders in proportion to the Escrow Shares issued in
their respective names.
The term "Escrow Shares" shall refer to such shares, together with any
additional shares delivered to Escrow Agent hereunder, less any Escrow Shares
delivered to Corvas or the Stockholders pursuant to the terms hereof. The Escrow
Shares and any cash held by the Escrow Agent shall constitute the Escrow Fund.
1.03 CREATION OF ESCROW. The Escrow Agent agrees to hold the Escrow Fund
in escrow in the names of the respective Stockholders until such time as it is
required to deliver the cash or Escrow Shares as herein provided.
1.04 ADDITIONS TO ESCROW FUND. The Stockholders agree that, in the event
at any time during which the Escrow Agent holds any of the Escrow Shares, Corvas
shall make any distribution with respect to Corvas Common Stock by way of stock
dividend, stock split, recapitalization, reclassification or corporate
reorganization, they will immediately thereafter deposit with the Escrow Agent
such number of additional shares of Corvas Common Stock or any other securities
or property (other than ordinary cash dividends, which shall be paid directly to
the Stockholders) resulting from such distribution, as they may receive in
connection therewith and as may be attributable to the Escrow Shares. The
Escrow Agent agrees to hold all such additional shares, or other securities or
property so deposited, in the same manner and subject to the same conditions as
is herein provided for the Escrow Shares. Each Stockholder irrevocably directs
Corvas, and any paying agent or exchange agent, to deliver certificates
representing all such additional shares or securities and to deliver such
property directly to the Escrow Agent as aforesaid. Each Stockholder agrees to
deliver blank stock powers completed in the same manner as provided in section
1.02 hereof to the Escrow Agent as to such shares
2.
<PAGE>
simultaneously with any such deposit with, and promptly after any such direct
delivery to, the Escrow Agent.
1.05 OWNERSHIP RIGHTS. Notwithstanding any other provision hereof, as
long as any Escrow Shares are held by the Escrow Agent, the Stockholders
shall be entitled at all times to vote and to give waivers and consents with
respect to the Escrow Shares held by the Escrow Agent. The interest of the
Stockholders in the Escrow Shares shall not be assignable or transferable,
other than by operation of law.
ARTICLE II
DISTRIBUTION OF ESCROW FUND
2.01 DISTRIBUTIONS. The Escrow Agent will distribute and deliver the
Escrow Fund immediately upon the occurrence of any of the following events
and in the manner hereinafter provided:
(a) Immediately upon receipt from Corvas of a written notice that a
specified amount of cash and/or number of Escrow Shares held by the Escrow Agent
are to be delivered to the Stockholders, or any of them, such cash and number of
shares shall be so delivered and the accounts of each Stockholder receiving a
distribution shall be reduced accordingly.
(b) Upon the receipt of a certificate signed jointly by Corvas and the
Stockholders' Agent that a Corvas Indemnitee is entitled to payment in a stated
amount on account of a claim or claims made by a Corvas Indemnitee pursuant to
Article III hereof ("Notice of Claim Allowance") or upon receipt of a Decision
(as defined herein) which makes an award to a Corvas Indemnitee, the Escrow
Agent shall deliver to such Corvas Indemnitee, in satisfaction of such claim,
that amount of cash or, if the cash is insufficient, that number of whole Escrow
Shares which shall be as nearly equal as may be practicable in Market Value (as
defined herein) to the remaining amount of such payment. If the certificate
designates that the payment is to be charged against some Stockholders, but not
others, the accounts of each Stockholder so designated shall be reduced
accordingly.
(c) Notwithstanding the provisions set forth in subsection (b), in the
event Corvas proceeds with the defense of a third party claim as set forth in
Section 8.5 of the Merger Agreement, then Corvas shall be entitled to recover
such expenses from the Escrow Fund. Upon submission of appropriate
documentation of such expenses by Corvas to the Escrow Agent, the Escrow Agent
shall deliver to Corvas that amount of cash or, if the cash is insufficient,
that number of whole Escrow Shares which shall be as nearly equal as may be
practicable in Market Value (as defined herein) to the remaining amount of such
payment.
(d) On the first anniversary of the Effective Time or the exercise of the
Put Rights, as the case may be, (the "Termination Date") if the Escrow Agent
shall hold in the Escrow Fund Escrow Shares having a Market Value determined as
of the Termination Date (plus cash in the Escrow Fund) in excess of one hundred
twenty percent (120%) of any amount set forth in a claim or claims, if any, of
Corvas Indemnitees filed pursuant to Article III, the Escrow Agent shall
3.
<PAGE>
deliver to the Stockholders that number of whole Escrow Shares which shall be as
nearly equal as may be practicable in Market Value (as defined herein) to the
amount of such excess. If the Market Value of the Escrow Shares is insufficient
to account for such excess, cash in the remaining amount shall also be
distributed to the Stockholders. In the event no such claim has theretofore been
filed, the Escrow Agent shall at that time without further written instructions
from any of the parties to this Agreement deliver all the Escrow Fund to the
Stockholders in accordance with their respective interests therein.
(e) Upon the disposition of any claim or claims filed by Corvas
Indemnitees pursuant to Article III in respect to which Escrow Shares have been
retained pursuant to subsection (d) above, Corvas shall thereafter promptly
deliver to the Escrow Agent a written direction to deliver to the Stockholders
such number of Escrow Shares such that the remaining Escrow Fund has a Market
Value determined on Termination Date equal to one hundred twenty percent (120%)
of any amount set forth in any remaining claim or claims of Corvas Indemnitees
for which Escrow Funds have been retained pursuant to subsection (d) above. If
the Market Value of the Escrow Shares is insufficient to make the required
distribution, cash from the Escrow Fund in the remaining amount shall also be
distributed to the Stockholders. The Escrow Agent's sole responsibility with
respect to any claims filed by Corvas Indemnitees pursuant to Article III shall
be to distribute the Escrow Fund in accordance with the terms of this Agreement.
(f) Each delivery of shares or cash to the Stockholders or Corvas
Indemnitees pursuant to subsections (a) through (e) above shall be in proportion
to the ratio that the number of Escrow Shares originally contributed to the
Escrow Fund by such Stockholder bears to the total number of Escrow Shares
originally contributed to the Escrow Fund or in such other proportions as may be
directed in writing by the Stockholders. Distribution of Escrow Shares shall be
determined in the case of each Stockholder to the nearest whole share.
2.02 MARKET VALUE. As used herein, "Market Value" shall be determined as
the average of the closing prices of Corvas Common Stock on the Nasdaq National
Market (or the primary market on which Corvas Common Stock is then traded) for
the 20 days immediately before (but excluding) the date on which the Escrow
Shares are delivered to Corvas in satisfaction of a claim.
ARTICLE III
CLAIMS
3.01 NOTICE OF CLAIM. During the term of this Agreement, if a Corvas
Indemnitee shall incur or receive notice of the existence of any Damages,
said Corvas Indemnitee shall promptly give written notice thereof containing
a reasonably detailed description for the basis of the claim to the
Stockholders' Agent and shall deliver a claim therefor to the Escrow Agent
("Notice of Claim"). Stockholders' Agent may at anytime deliver to Corvas a
Notice of Claim Allowance specifying that all or a portion of the claim
asserted in the Notice of Claim is approved by the Stockholders or notify
Corvas of its good faith dispute of the such claim with a reasonably detailed
description of the basis of the claim ("Disputed Claim"). If Stockholders'
Agent fails to respond to any Notice of Claim, the claim will be deemed to be
allowed.
4.
<PAGE>
3.02 NEGOTIATION OF DISPUTED CLAIMS. A Disputed Claim shall be referred
to the Chief Executive Officer of Corvas and Stockholders' Agent for
resolution. The Chief Executive Officer of Corvas and Stockholders' Agent
shall hold a meeting to attempt in good faith to negotiate a resolution of
the Disputed Claim prior to pursuing other available remedies. If within 10
business days after such meeting, the Chief Executive Officer of Corvas and
Stockholders' Agent have not succeeded in negotiating a resolution of the
Disputed Claim, such Disputed Claim shall be submitted to arbitration as set
forth in Section 3.03, below.
3.03 ARBITRATION. Disputed Claims that have not been successfully
resolved pursuant to Section 3.02 above shall be submitted to final and
binding arbitration under the then current commercial rules and regulations
of the American Arbitration Association ("AAA") relating to voluntary
arbitration in La Jolla, California. The arbitration shall be conducted by
three arbitrators, one selected by each party to the arbitration and one
selected by arbitrators appointed by the parties. If the arbitrators cannot
agree on a third arbitrator, the third arbitrator shall be selected in
accordance with the AAA rules. If a party fails to designate an arbitrator
within the time limits set by the AAA rules, the arbitrator selected by the
other party shall be the sole arbitrator. All arbitrators must be
knowledgeable in the subject matter at issue in the dispute. Each of the
parties shall be entitled to conduct discovery under the California Rules of
Civil Procedure then in effect. Each party shall initially bear its own
costs and legal fees associated with such arbitration. The prevailing party
in any such arbitration shall be entitled to recover from the other party the
reasonable attorneys' fees, costs and expenses incurred by such prevailing
party in connection with such arbitration. The decision of the arbitrator(s)
("Decision"), which shall be final and may be sued on or enforced by the
party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party, shall be delivered to the Escrow Agent. The
rights and obligations of the parties to arbitrate any dispute relating to
Disputed Claims shall survive the expiration or termination of this Agreement
for any reason. The arbitrator(s) shall be empowered to award specific
performance, injunctive relief and other equitable remedies as well as
damages, but shall not award any damages in excess of any limitations set
forth in this Agreement.
ARTICLE IV
MISCELLANEOUS
4.01 PRIORITY. It is the agreement and intent of Corvas and the
Stockholders that the rights of Corvas and Corvas Indemnitees hereunder and
the subjection of the Escrow Fund to this Agreement shall be prior and
superior to any interest of any present or future creditor of the
Stockholders in the Escrow Fund. If any portion of the Escrow Fund is at any
time attached, garnished or levied upon under any court order, or the
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or any order, judgment or decree shall
be made or entered by any court affecting such property or any part thereof,
then and in any of such events, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel of its own choosing is binding
upon it; and if it complies with any such order, writ, judgment or
5.
<PAGE>
decree, it shall not be liable to anyone for so doing even though such order,
writ, judgment or decree may subsequently be reversed, modified, annulled set
aside or vacated. The Escrow Agent shall give prompt notice to the Stockholders
and Corvas of receipt by it of any such order, writ, judgment or decree, but the
Escrow Agent shall not be liable to anyone for failure or delay in giving such
notice.
4.02 RELIANCE. In fulfilling its obligations hereunder, the Escrow
Agent may rely on any document reasonably believed by it to be genuine and it
shall not be liable to Corvas or the Stockholders hereunder for any actions
or failure to act on its part in good faith and shall be liable only in case
of its own bad faith or willful misconduct or negligence. In addition, the
Escrow Agent may retain legal counsel to advise it as to the performance of
its duties hereunder.
4.03 FEES AND EXPENSES. All fees and expenses of the Escrow Agent,
including the reasonable fees of any counsel retained by Escrow Agent in
connection herewith, shall be paid by Corvas. All reasonable expenses
(including attorneys' fees) incurred by the Stockholders' Agent in connection
with the performance of his duties hereunder shall be reimbursed to the
Stockholders' Agent by the Stockholders.
4.04 NOTICES. Any notice or other communication required or permitted
to be delivered to either party under this Escrow Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered or certified mail (return receipt
requested), by courier or express delivery service, or by facsimile with the
original by mail) to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given
to the other party hereto):
IF TO CORVAS:
Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
Facsimile No.(619) 455-7895
Attention: Corporate Secretary
WITH A COPY TO:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121-2128
Facsimile No. (619) 453-3555
Attn: M. Wainwright Fishburn, Jr., Esq.
IF TO THE STOCKHOLDERS OR THE STOCKHOLDERS' AGENT:
Harry E. Gruber, MD
P.O. Box 675272
6.
<PAGE>
Rancho Santa Fe, CA 92067
Facsimile No: (619) 756-8158
WITH A COPY TO:
Dysart, Dubick & Agreement, LLP
701 B Street, Suite 1525
San Diego, California 92101
Facsimile No. (619) 699-6280
Attn: Kevin M. Bagley, Esq.
IF TO THE ESCROW AGENT:
John M. Crawford
Chief Financial Officer
Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
Facsimile No.(619) 455-7895
4.05 SUCCESSORS. This Agreement is binding upon and shall inure to the
benefit of the respective parties hereto and their respective heirs,
executors, administrators, successors and assigns.
4.06 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
7.
<PAGE>
IN WITNESS WHEREOF, Corvas, the Escrow Agent, and the Stockholders have
caused this Escrow Agreement to be duly executed on the day and year first above
written.
CORVAS INTERNATIONAL, INC.,
a Delaware corporation
By:
--------------------------
ESCROW AGENT
-----------------------------
John Crawford
STOCKHOLDERS' AGENT:
-----------------------------
Harry Gruber
STOCKHOLDERS:
-----------------------------
Jan Schnitzer
-----------------------------
Harry Gruber
-----------------------------
Dennis Berman
-----------------------------
Bruce Jacobson
-----------------------------
Issac Willis
SIGNATURE PAGE TO ESCROW AGREEMENT
<PAGE>
EXHIBIT D
GENERAL RELEASE
THIS GENERAL RELEASE ("General Release") is being executed and
delivered as of ______________, 199__, on behalf of the parties identified on
the signature page to this General Release (all of whom are referred to
collectively as the "Stockholders," and each of whom is referred to individually
as a "Stockholder") to and in favor of, and for the benefit of, VASCULAR
GENOMICS INC., a Delaware corporation ("VGI") (formerly known as TopoGen Inc.)
and the other Releasees (as defined in Section 2).
RECITALS
A. Contemporaneously with the execution and delivery of this General
Release, the Stockholders are entering an Agreement and Plan of Merger and
Reorganization dated as of _________, 199__ (the "Merger Agreement") with VGI
and Corvas International, Inc, a Delaware corporation ("Corvas").
B. VGI and Corvas have required, as a condition to consummating the
transactions contemplated by the Merger Agreement, that the Stockholders execute
and deliver this General Release.
C. All capitalized terms shall have the meanings set forth herein or in
the Merger Agreement.
AGREEMENT
For other valuable consideration (the receipt and sufficiency of which
are hereby acknowledged by the Stockholders), the Stockholders hereby covenant
and agree as follows:
1. RELEASE. Each Stockholder, for himself and for each of such
Stockholder's Associated Parties (as defined in Section 2), hereby generally,
irrevocably, unconditionally and completely releases and forever discharges each
of the Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. DEFINITIONS.
(a) The term "ASSOCIATED PARTIES," when used herein with respect to a
Stockholder, shall mean and include: (i) such Stockholder's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Stockholder's
past, present and future assigns, agents and representatives; (iii) each entity
that such Stockholder has the power to bind (by such Stockholder's acts or
signature) or over which such Stockholder directly
1.
<PAGE>
or indirectly exercises control; and (iv) each entity of which such Stockholder
owns, directly or indirectly, at least 50% of the outstanding equity,
beneficial, proprietary, ownership or voting interests.
(b) The term "RELEASEES" shall mean and include: (i) VGI; (ii) each
of the direct and indirect subsidiaries of VGI; (iii) each other affiliate of
VGI; and (iv) the successors and past, present and future assigns, directors,
officers, employees, agents, attorneys and representatives of the respective
entities identified or otherwise referred to in clauses "(i)" through "(iii)" of
this sentence, other than the Stockholders.
(c) The term "CLAIMS" shall mean and include all past, present and
future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by a Stockholder in such Stockholder's capacity as
a stockholder, director, officer or employee of VGI or in any other capacity;
and (iii) any claim, right or cause of action based upon any breach of any
express, implied, oral or written contract or agreement.
(d) The term "RELEASED CLAIMS" shall mean and include each and every
Claim that (i) any Stockholder or any Associated Party of any Stockholder may
have had in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises directly or indirectly out of, or
relates directly or indirectly to, any circumstance, agreement, activity,
action, omission, event or matter occurring or existing on or prior to the date
of this General Release (excluding only such Stockholder's rights, if any, under
the Merger Agreement, Option Agreement or Research and Development Agreement).
3. CIVIL CODE SECTION 1542. Each Stockholder (a) represents, warrants
and acknowledges that such Stockholder has been fully advised by his attorney of
the contents of Section 1542 of the Civil Code of the State of California, and
(b) hereby expressly waives the benefits thereof and any rights such Stockholder
may have thereunder. Section 1542 of the Civil Code of the State of California
provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor."
Each Stockholder also hereby waives the benefits of, and any rights such
Stockholder may have under, any statute or common law principle of similar
effect in any jurisdiction.
4. REPRESENTATIONS AND WARRANTIES. Each Stockholder represents and
warrants that:
2.
<PAGE>
(a) such Stockholder has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of such Stockholder's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) no Associated Party of such Stockholder has or had any Claim
against any of the Releasees;
(d) to the best of such Stockholder's knowledge, no Associated Party
of such Stockholder will in the future have any Claim against any Releasee that
arises directly or indirectly from or relates directly or indirectly to any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or before the date of this General Release;
(e) this General Release has been duly and validly executed and
delivered by such Stockholder;
(f) this General Release is a valid and binding obligation of such
Stockholder and such Stockholder's Associated Parties, and is enforceable
against such Stockholder and each of such Stockholder's Associated Parties in
accordance with its terms;
(g) there is no action, suit, proceeding, dispute, litigation, claim,
complaint or investigation by or before any court, tribunal, governmental body,
governmental agency or arbitrator pending or, to the best of the knowledge of
such Stockholder, threatened against such Stockholder or any of such
Stockholder's Associated Parties that challenges or would challenge the
execution and delivery of this General Release or the taking of any of the
actions required to be taken by such Stockholder under this General Release;
(h) neither the execution and delivery of this General Release nor
the performance hereof will (i) result in any violation or breach of any
agreement or other instrument to which such Stockholder or any of such
Stockholder's Associated Parties is a party or by which such Stockholder or any
of such Stockholder's Associated Parties is bound, or (ii) result in a violation
or any law, rule, regulation, treaty, ruling, directive, order, arbitration
award, judgment or decree to which such Stockholder or any of such Stockholder's
Associated Parties is subject; and
(i) no authorization, instruction, consent or approval of any person
or entity is required to be obtained by such Stockholder or any of such
Stockholder's
3.
<PAGE>
Associated Parties in connection with the execution and delivery of this General
Release or the performance hereof.
5. MISCELLANEOUS.
(a) This General Release sets forth the entire understanding of the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between any of the Stockholders and
Releasees relating to the subject matter hereof.
(b) If any provision of this General Release or any part of any such
provision is held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity or
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this General Release. If any provision
of this General Release or any part of such provision is held to be
unenforceable against any Stockholder, then the unenforceability of such
provision or part thereof against such Stockholder shall not affect the
enforceability thereof against any other Stockholder. Each provision of this
General Release is separable from every other provision of this General Release,
and each part of each provision of this General Release is separable from every
other part of such provision.
(c) This General Release shall be construed in accordance with, and
governed in all respects by, the laws of the State of California (without giving
effect to principles of conflicts of laws).
(d) Disputes relating to this General Release or the enforcement of
any provision of this General Release shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitrations in
La Jolla, California. The arbitration shall be conducted by three arbitrators,
one selected by each party to the arbitration and one selected by arbitrators
appointed by the parties. If the arbitrators cannot agree on a third
arbitrator, the third arbitrator shall be selected in accordance with the AAA
rules. If a party fails to designate an arbitrator within the time limits set
by the AAA rules, the arbitrator selected by the other party shall be the sole
arbitrator. All arbitrators must be knowledgeable in the subject matter at
issue in the dispute. Each of
4.
<PAGE>
the parties shall be entitled to conduct discovery under the California Rules of
Civil Procedure then in effect. Each party shall initially bear its own costs
and legal fees associated with such arbitration. The prevailing party in any
such arbitration shall be entitled to recover from the other party the
reasonable attorneys' fees, costs and expenses incurred by such prevailing party
in connection with such arbitration. The decision of the arbitrator(s) shall be
final and may be sued on or enforced by the party in whose favor it runs in any
court of competent jurisdiction at the option of the successful party. The
rights and obligations of the parties to arbitrate any dispute relating to the
interpretation or performance of this General Release or the grounds for the
termination thereof, shall survive the expiration or termination of this General
Release for any reason. The arbitrator(s) shall be empowered to award specific
performance, injunctive relief and other equitable remedies as well as damages.
(e) This General Release may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(f) Each Stockholder shall execute and/or cause to be delivered to
each Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this General Release.
(g) If any arbitration procedure relating to this General Release or
the enforcement of any provision hereof is initiated by any Stockholder or
Releasee pursuant to Section 5(d), the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements to the extent
actually incurred (in addition to any other relief to which the prevailing party
may be entitled).
(h) This General Release shall be effective with respect to, and
shall be binding upon and enforceable against, each Stockholder who executes
this General Release, regardless of whether any of the other Stockholders
executes this General Release.
(i) Whenever required by the context, the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
(j) Any rule of construction to the effect that ambiguities are to
be resolved against the drafting party shall not be applied in the construction
or interpretation of this General Release.
5.
<PAGE>
(k) As used in this General Release, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
IN WITNESS WHEREOF, the Stockholders have caused this General Release to be
executed as of the date first above written.
STOCKHOLDERS:
__________________________
Jan Schnitzer
__________________________
Harry Gruber
__________________________
Dennis Berman
__________________________
Bruce Jacobson
__________________________
Isaac Willis
6.
<PAGE>
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of the ____ day of ________, 19__, by and among Corvas International, Inc., a
Delaware corporation (the "Company"), and the Stockholders of Vascular Genomics
Inc. ("VGI") (formerly known as TopoGen Inc.) as set forth on the signature page
(the "Stockholders").
RECITALS
WHEREAS, on June ___, 1997, the Company and VGI entered into an Option
Agreement (the "Option Agreement") pursuant to which (i) VGI and the
Stockholders granted to the Company an exclusive option to acquire VGI (the
"Option") through a tax-deferred merger pursuant to an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement") and for the consideration set
forth in the Option Agreement, and (ii) the Company granted rights to the
Stockholders to acquire shares of the Company's Common Stock in the event the
Option was not exercised (the "Put Rights").
WHEREAS, the Company agreed in the Merger Agreement, among other things, to
provide the Stockholders with certain registration rights with respect to the
shares issuable to the Stockholders upon exercise of the Option or the Put
Rights; and
WHEREAS, the Company desires to grant such registration rights on the terms
and conditions set forth herein.
NOW, THEREFORE, the parties mutually agree as follows:
1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"Holder" means any person owning of record Registrable Securities.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (i) Common Stock of the Company issued or
issuable to the Stockholders upon the Company's exercise of the Option and
consummation of the merger as contemplated by the Merger Agreement or upon
exercise
1.
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by the Stockholders of their Put Rights; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferror's rights under Section 2 of this Agreement are not assigned.
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with Sections 2.2 and 2.3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration, other than the
Selling Expenses.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities pursuant to this
Agreement, as well as fees and disbursements of legal counsel for the selling
Holders.
"SEC" or "Commission" means the Securities and Exchange Commission.
2. PIGGYBACK REGISTRATION RIGHTS
2.1 NOTICE OF PIGGYBACK REGISTRATION AND INCLUSIONS OF REGISTRABLE
SECURITIES. The Company shall notify all Holders of Registrable Securities in
writing at least thirty (30) days prior to the filing of any registration
statement under the Securities Act for purposes of a public offering of Company
securities (but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
2.
<PAGE>
2.2 UNDERWRITING IN PIGGYBACK REGISTRATION.
(a) NOTICE OF UNDERWRITING IN PIGGYBACK REGISTRATION. If the
registration statement under which the Company gives notice under this Section
2.2 is for an underwritten offering, the Company shall so advise the Holders of
Registrable Securities as a part of the written notice given pursuant to Section
2.1. In such event, the right of any such Holder to be included in a
registration pursuant to this Section 2.2 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting. The Holders
shall have no right to participate in the selection of the underwriters for an
offering pursuant to this Section 2.2 and the Company shall have the right to
delay or terminate an offering in its sole discretion.
(b) MARKETING LIMITATION IN PIGGYBACK REGISTRATION. Notwithstanding
any other provision of the Agreement, if the underwriter determines in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the holders of the
Company's securities who have requested to be included in such registration
pursuant to the piggy-back registration provisions of agreements entered by the
Company prior to the date of the Option Agreement ("Prior Agreements") and who
hold priority rights pursuant to such Prior Agreements; third, to the Holders
and to any other holders of the Company's securities who have requested to be
included in such registration pursuant to the piggy-back registration provisions
of Prior Agreements and who do not hold priority rights pursuant to such Prior
Agreements on a pro rata basis; and fourth, to any shareholder of the Company
(other than a Holder) on a pro rata basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting and any or all of the Registrable Securities
of the Holders may be excluded in accordance with the immediately preceding
sentence.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration under Section 2 herein shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered pro
rata on the basis of the number of shares so registered.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
3.
<PAGE>
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of any Holder
requesting registration of his Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration,
4.
<PAGE>
in form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect five
(5) years after the date of this Agreement. In addition, a Holder's
registration rights shall expire if all Registrable Securities held by and
issuable to such Holder (and its affiliates, partners and former partners) may
be sold under Rule 144 during any ninety (90) day period.
2.6 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(B) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2 that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
their Registrable Securities.
2.7 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Section 2.2:
(a) COMPANY'S INDEMNIFICATION OF HOLDERS. To the extent permitted by
law, the Company will indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended, (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the 1934 Act or other federal or state law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement,
5.
<PAGE>
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any other federal
law, any state securities law or any rule or regulation promulgated under the
Securities Act, the 1934 Act, any other federal law or any state securities law
in connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 2.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for inclusion in
such registration by such Holder, or any partner, officer, director, underwriter
or controlling person of such Holder.
(b) HOLDER INDEMNIFICATION OF COMPANY. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, or partner, director, officer or controlling person of such
other Holder may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder, or any partner, officer, director, underwriter or controlling person of
such Holder, under an instrument duly executed by such Holder, or any partner,
officer, director, underwriter or controlling person of such Holder and stated
to be specifically for inclusion in such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder, or any
partner, officer, director or controlling person of such Holder in connection
with investigating or defending any such loss, claim, damage, liability or
action if it is judicially determined that there was such a Violation; provided,
however, that the
6.
<PAGE>
indemnity agreement contained in this Section 2.7(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.7 exceed the proceeds from the offering received
by such Holder.
(c) INDEMNIFICATION PROCEDURE. Promptly after receipt by an
indemnified party under this Section 2.7 of notice of the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 2.7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.7.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 2.7 is held by an arbitration decision to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
7.
<PAGE>
(e) CONDITION TO INDEMNITY. The foregoing indemnity agreements of
the Company and Holders are subject to the condition that, insofar as they
relate to any Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
2.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities may be assigned by a Holder to a transferee or assignee of
Registrable Securities which is (i) a subsidiary, parent, general partner or
limited partner of a Holder, or (ii) acquires at least 50,000 shares of
Registrable Securities (as adjusted for stock splits and combinations);
provided, however, (A) the transferor shall, within ten (10) days after such
transfer, furnish to the Company written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and (B) such transferee shall agree to be
subject to all restrictions set forth in this Agreement..
2.9 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with
this Section 2.9 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Section 2, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Investor of
the Company's voting securities shall not sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Investor (other than those included in the registration) for a
period specified by the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
8.
<PAGE>
3. MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects under
the laws of the State of California.
3.2 CONFIDENTIALITY OF RECORDS.
(a) Each Investor agrees not to use Confidential Information (as
hereinafter defined) of the Company for its own use or for any purpose except to
evaluate and enforce its equity investment in the Company. Except as permitted
under subsection 3.2(b) below, each Investor agrees to use its best efforts not
to disclose such Confidential Information to any third parties. Each Investor
shall undertake to treat such Confidential Information in a manner consistent
with the treatment of its own information of such proprietary nature and agrees
that it shall protect the confidentiality of and use reasonable best efforts to
prevent disclosure of the Confidential Information to prevent it from falling
into the public domain or the possession of unauthorized persons. Each
transferee of any Investor who receives Confidential Information shall agree to
be bound by such provisions. For purposes of this Section, "Confidential
Information": means any information, technical data, or know-how, including, but
not limited to, the Company's research, products, software, services,
development, inventions, processes, designs, drawings, engineering, marketing,
or finances, disclosed by the Company either directly or indirectly in writing,
orally or by drawings or inspection of parts or equipment.
(b) Confidential Information does not include information, technical data
or know-how which (i) is in the Investor's possession at the time of disclosure
as shown by Investor's files and records immediately prior to the time of
disclosure; (ii) before or after it has been disclosed to the Investor, it is
part of the public knowledge or literature, not as a result of any action or
inaction of the Investor; or (iii) is approved for release by written
authorization of Company. The provisions of this Section shall not apply (i) to
the extent that an Investor is required to disclose Confidential Information
pursuant to any law, statute, rule or regulation or any order of any court or
jurisdiction process or pursuant to any direction, request or requirement
(whether or not having the force of law but if not having the force of law being
of a type with which institutional investors in the relevant jurisdiction are
accustomed to comply) of any self-regulating organization or any governmental,
fiscal, monetary or other authority; (ii) to the disclosure of Confidential
Information to an Investor's employees, counsel, accountants or other
professional advisors; (iv) to the extent that an Investor needs to disclose
Confidential Information for the protection of any of such Investor's rights or
interest against the Company, whether under this Agreement or otherwise; or (v)
to the disclosure of Confidential Information to a prospective transferee of
securities which agrees to be bound by the provisions of this Section in
connection with the receipt of such Confidential Information.
9.
<PAGE>
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
3.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
3.5 AMENDMENT AND WAIVER. This Agreement may be amended or modified only
upon the written consent of the Company and the holders of at least a majority
of the Registrable Securities; provided, however, that parties may be added to
this Agreement without the written consent of the holders of the Registrable
Securities. The rights of a party hereto may be waived only with the written
consent of that party.
3.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
3.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile (with a
hard copy to follow by U.S. mail) if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the party to be notified at the
address as set forth on the
10.
<PAGE>
signature pages hereof or at such other address as such party may designate by
ten (10) days advance written notice to the other parties hereto.
3.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.9 ARBITRATION. Disputes relating to this Agreement or the enforcement
of any provision of this Agreement shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitrations in
La Jolla, California. The arbitration shall be conducted by three arbitrators,
one selected by each party to the arbitration and one selected by arbitrators
appointed by the parties. If the arbitrators cannot agree on a third
arbitrator, the third arbitrator shall be selected in accordance with the AAA
rules. If a party fails to designate an arbitrator within the time limits set
by the AAA rules, the arbitrator selected by the other party shall be the sole
arbitrator. All arbitrators must be knowledgeable in the subject matter at
issue in the dispute. Each of the parties shall be entitled to conduct
discovery under the California Rules of Civil Procedure then in effect. Each
party shall initially bear its own costs and legal fees associated with such
arbitration. The prevailing party in any such arbitration shall be entitled to
recover from the other party the reasonable attorneys' fees, costs and expenses
incurred by such prevailing party in connection with such arbitration. The
decision of the arbitrator(s) shall be final and may be sued on or enforced by
the party in whose favor it runs in any court of competent jurisdiction at the
option of the successful party. The rights and obligations of the parties to
arbitrate any dispute relating to the interpretation or performance of this
Agreement or the grounds for the termination thereof, shall survive the
expiration or termination of this Agreement for any reason. The arbitrator(s)
shall be empowered to award specific performance, injunctive relief and other
equitable remedies as well as damages, but shall not award any damages in excess
of any limitations set forth in this Agreement.
3.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the first paragraph hereof.
COMPANY:
CORVAS INTERNATIONAL, INC.
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
STOCKHOLDERS:
-------------------------------------
Jan Schnitzer
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Harry Gruber
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Dennis Berman
-------------------------------------
Bruce Jacobson
-------------------------------------
Isaac Willis
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT F
FORM OF OPINION OF DYSART, DUBICK & BAGLEY, LLP
1. VGI has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware. VGI has
no subsidiaries.
2. VGI has the requisite corporate power to own or lease its
property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business and is in good standing in each jurisdiction in the
United States in which the ownership of its property or the conduct of its
business requires such qualification and where any statutory fines or penalties
or any corporate disability imposed for the failure to qualify would materially
and adversely affect its assets, financial condition or operations.
3. All corporate action on the part of VGI, its Board of Directors
and stockholders necessary for the authorization, execution, delivery and
performance of the Merger Agreement, Certificate of Merger and Escrow Agreement
(collectively, the "Agreements") and the consummation of the transactions
contemplated therein has been taken. The Agreement and Certificate of Merger
have been duly and validly authorized, executed and delivered by VGI, and the
Escrow Agreement has been duly and validly authorized, executed and delivered
[by VGI] and the VGI Stockholders. Each of the Agreements (with respect to VGI)
and the Escrow Agreement (with respect to the VGI Stockholders) constitutes the
valid and binding agreement of VGI and the VGI Stockholders enforceable against
VGI and the VGI Stockholders, respectively, in accordance with their terms,
except as rights to indemnity under Section 8 of the Agreement or Section 2(b)
of the Escrow Agreement may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
4. Immediately prior to the Effective Time of the Merger, the
authorized capital stock of VGI consisted of 3,000,000 shares of Common Stock of
which 1,020,408 shares were issued and outstanding. The outstanding shares of
capital stock of VGI have been duly authorized, validly issued, fully paid and
nonassessable. To the best of our knowledge, there are no outstanding
subscriptions, options, warrants, rights to convert, capital stock equivalents,
stock appreciation rights or other rights to purchase or otherwise acquire any
of VGI's capital stock or other securities, or rights under phantom stock plans
or similar plans or arrangements except for Corvas' rights under the Merger
Agreement.
1.
<PAGE>
5. The execution and delivery of the Agreements by VGI and the
consummation of the transactions contemplated thereby do not violate any
provision of its Certificate of Incorporation or Bylaws, do not constitute a
default under the provisions of any material agreement known to us to which VGI
is a party or by which it is bound and, do not violate or contravene (a) any
governmental statute, rule or regulation applicable to VGI, or (b) any order,
writ, judgment, injunction, decree, determination or award which has been
entered against VGI and of which we are aware, the violation or contravention of
which would materially and adversely affect VGI, its assets, financial condition
or operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against VGI before any court or
administrative agency that questions the validity of the Agreements or that
might result, either individually or in the aggregate, in any material adverse
change in the assets, financial condition or operations of VGI.
7. All consents, approvals, authorizations or orders of, and
filings, registrations and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by VGI or
the VGI Stockholders of the transactions contemplated by the Agreements have
been made or obtained.
8. Upon filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and the Merger will be effective with the effect
stated in the Certificate of Merger and Section 251 of the General Corporation
Law of the State of Delaware.
2.
<PAGE>
EXHIBIT G
FORM OF OPINION OF COOLEY GODWARD LLP
1. Each of Corvas and MergerSub has been duly incorporated and is a
validly existing corporation in good standing under the laws of the State of
Delaware.
2. Each of Corvas and MergerSub has the requisite corporate power to
own or lease its property and assets and to conduct its business as it is
currently being conducted and, to the best of our knowledge, is qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
in the United States in which the ownership of its property or the conduct of
its business requires such qualification and where any statutory fines or
penalties or any corporate disability imposed for the failure to qualify would
materially and adversely affect the assets, financial condition or operations of
Corvas or MergerSub, taken as a whole.
3. All corporate action on the part of Corvas and its Board of
Directors necessary for the authorization, execution, delivery and performance
of the Merger Agreement and the Escrow Agreement and the consummation of the
transactions contemplated therein has been taken. Each of the Agreement and the
Escrow Agreement has been duly and validly authorized, executed and delivered by
Corvas and constitutes a valid and binding agreement of Corvas enforceable
against Corvas in accordance with its terms, except as rights to indemnity under
Section 8 of the Agreement or Section 2(b) of the Escrow Agreement may be
limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
4. All corporate action on the part of MergerSub and its Board of
Directors and stockholder necessary for the authorization, execution, delivery
and performance of the Agreement and the consummation of the transactions
contemplated therein has been taken. The Agreement has been duly and validly
authorized, executed and delivered by MergerSub and constitutes a valid and
binding agreement of MergerSub enforceable against MergerSub in accordance with
its terms, except as rights to indemnity under the Agreement may be limited by
applicable laws and except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights and subject to general equity principles and to
limitations on availability of equitable relief, including specific performance.
[5. Immediately prior to the Effective Time of the Merger, the
authorized capital stock of Corvas consisted of 50,000,000 shares of Common
Stock, par value
1.
<PAGE>
$.001, of which ______________ shares of Common Stock were issued and
outstanding, and 10,000,000 shares of Preferred Stock, par value $.001, of which
1,000,000 shares are designated Series A Preferred Stock, of which ___________
were issued or outstanding and 250,000 shares are designated Series B Preferred
Stock, of which _____________ were issued and outstanding. MergerSub's
authorized capital stock consists of _____ shares of Common Stock, par value
$.01, all of which are outstanding and held by Corvas.] [To be eliminated if
converted to cash deal.]
6. The shares of Corvas Common Stock issuable pursuant to Section
1.5 of the Merger Agreement have been duly authorized, and upon issuance and
delivery thereof in accordance with the terms of the Merger Agreement, such
shares will be validly issued, outstanding, fully paid and nonassessable.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against Corvas or MergerSub before
any court or administrative agency that questions the validity of the Agreements
or that might result, either individually or in the aggregate, in any material
adverse change in the assets, financial condition or operations of Corvas or
MergerSub.
8. All consents, approvals, authorizations, or orders of, and
filings, registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by Corvas
and MergerSub of the transactions contemplated by the Agreement have been made
or obtained, except for any filing with state blue sky authorities which filings
are not required to be made prior to the Closing.
2.
<PAGE>
EXHIBIT C
Corvas International, Inc.
3030 Science Park Road
San Diego, CA 92121
Ladies and Gentlemen:
The undersigned hereby makes the following certifications and representations
with respect to the grant of the option to Corvas International, Inc. (the
"Company") under that certain Option Agreement whereby the Company has the right
to issue Common Stock of the Company in exchange for Common Stock of Vascular
Genomics Inc., a Delaware corporation. The undersigned acknowledges that he has
made an investment decision with regard to the granting of the option to the
Company and the acquisition of Common Stock upon the Company's exercise of such
option (the "Company Shares"). In connection therewith, the undersigned
acknowledges receipt of (i) the Company's Annual Report on Form 10-K for the
period ended December 31, 1996 and the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1997, (ii) the Company's 1996 Annual Report to
Stockholders, (iii) the Notice and Proxy Statement for the Company's 1997 Annual
Meeting of Stockholders, and (iv) a brief discussion of the Company's
outstanding Capital Stock.
The undersigned represents and warrants that he is granting the option for the
purpose of acquiring the Company Shares solely for its account for investment
and not with a view to or for sale or distribution of said Company Shares or any
part thereof. The undersigned also represents that the entire legal and
beneficial interests of the option granted and the Company Shares issuable upon
exercise of the option will be acquired for, and will be held for, his account
only.
The undersigned understands that the Company Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), on the basis that no
distribution or public offering of the Company Shares is to be effected. The
undersigned realizes that the basis for the exemption may not be present if,
notwithstanding its representations, he has in mind merely acquiring the
securities for a fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. The undersigned has no such
present intention.
The undersigned recognizes that the Company Shares must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is
1.
<PAGE>
Corvas International, Inc.
Page 2
available. The undersigned recognizes that the Company has no obligation to
register the Company Shares or to comply with any exemption from such
registration, except as set forth in that certain Registration Rights Agreement
to be executed concurrently with the Merger Agreement (as defined in the Option
Agreement) entered following the Company's exercise of the option granted under
the Option Agreement.
The undersigned is aware that the Company Shares may not be sold pursuant to
Rule 144 adopted under the Act unless certain conditions are met and until the
undersigned has held the Company Shares for at least one year.
The undersigned further agrees not to make any disposition of all or any part of
the Company Shares being acquired in any event unless and until the undersigned
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition (except that with respect to Section (2) below, the
undersigned shall notify the Company's transfer agent and provide all
documentation required by the Company's transfer agent) and:
(1) The Company shall have received a letter secured by the undersigned
from the Securities and Exchange Commission stating that no action will be
recommended to the Commission with respect to the proposed disposition; or
(2) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(3) The undersigned shall have furnished the Company with an opinion of
counsel for the undersigned to the effect that such disposition will not require
registration of such shares under the Act; or
(4) The undersigned has furnished the Company with satisfactory evidence
of compliance with Rule 144.
The undersigned understands and agrees that all certificates evidencing the
Company Shares to be issued to the undersigned may bear the following legends:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE
2.
<PAGE>
Corvas International, Inc.
Page 3
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
Very truly yours,
By
-----------------------------------
(Signature)
Name
---------------------------------
Title
--------------------------------
(IF APPLICABLE)
Date: June 29, 1997
3.
<PAGE>
EXHIBIT D
RESEARCH AND DEVELOPMENT
AGREEMENT
(Filed with this Form 10-Q as Exhibit 10.61)
<PAGE>
RESEARCH AND DEVELOPMENT
AGREEMENT
THIS RESEARCH AND DEVELOPMENT AGREEMENT (the "Agreement") is entered into
as of this 29th day of June, 1997 (the "Effective Date") by and between Corvas
International, Inc., a Delaware corporation ("Corvas") and Vascular Genomics
Inc., a Delaware corporation ("VGI").
RECITALS
A. VGI is the owner, licensee or holder of certain Patent Rights (as
defined in Exhibit A-1);
B. Corvas and VGI have entered into that certain Option Agreement of even
date herewith (the "Option Agreement");
C. VGI desires to retain Corvas to conduct certain research and
development during the term of this Agreement; and
D. In furtherance of this Agreement, VGI desires to grant to Corvas, and
Corvas desires to accept from VGI, an exclusive worldwide license to practice
the inventions covered by such Patent Rights and any Improvements (as defined in
Exhibit A-1), with the right to grant sublicenses approved by VGI, during the
term of the Option Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the covenants
contained in this Agreement, the parties agree as follows:
ARTICLE 1
DEFINITIONS
Except as otherwise defined in this Agreement (including those definitions
contained in Exhibit A attached hereto), each term with the initial letter
capitalized shall have the same meaning ascribed to such term in the Option
Agreement or the Merger Agreement.
1.
<PAGE>
ARTICLE 2
RESEARCH AND DEVELOPMENT
2.1 VGI PAYMENTS. During the term of this Agreement, VGI shall make
research and development payments to Corvas in the amount of $80,000 per month
(commencing as of the first Option Payment under the Option Agreement) to fund
Corvas research and development projects using the Patent Rights and
Improvements.
2.2 CORVAS RESEARCH AND DEVELOPMENT. During the term of this Agreement,
Corvas, directly or indirectly through collaborations or third party research
and development agreements (which shall all be subject to the provisions of
Section 3.2, below), shall conduct research and development using the Patent
Rights and Improvements either alone or in conjunction with one or more third
parties. The nature and scope of the research and development shall initially
concern attempts to identify molecules useful for targeting therapeutics or
other compositions to vascular endothelium associated with cancer cells and/or
tumors through the use of the Patent Rights and Improvements. Corvas shall have
the sole right to determine the methods, protocols, manner and schedule for such
research and development, the staffing levels for such research and development
and the overall scope of the efforts. Upon request, Corvas shall promptly
report to Dr. Harry Gruber concerning the research and development project
(subject to Dr. Gruber's execution of Corvas' standard confidentiality
agreement). Upon reasonable notice, and to the extent Corvas is not restricted
by agreements with third parties, and otherwise has the right to do so, Corvas
shall permit an authorized representative of VGI access to all information, data
and know-how, in whatever media, developed by Corvas, Corvas' Affiliates,
sublicensees or collaborators in connection with Corvas' activities under this
Agreement (subject to such authorized representative's execution of Corvas'
standard confidentiality agreement). VGI shall not request research reports or
access to information, data and know-how any more frequently than one time each
month. So long as Corvas is spending the funds received from VGI under Section
2.1 pursuant to the terms of this Agreement, Corvas shall have the sole
discretion to discontinue (whether temporarily or permanently) conducting any
such research or development, or pursuing any preclinical or clinical trials of
any drugs or devices using or arising from use of the Patent Rights or
Improvements, at any time and for any reason regardless of the impact of Corvas'
decision on the value or potential value of the Patent Rights or Improvements,
the value or potential value of VGI, or the likelihood of exercise by Corvas of
its option under the Option Agreement.
2.
<PAGE>
ARTICLE 3
GRANT OF RIGHTS
3.1 LICENSE GRANT. VGI hereby grants to Corvas an exclusive fully paid,
royalty-free worldwide license, with the right to grant sublicenses in
accordance with the provisions of Section 3.2, below, to fully practice within
the Patent Rights and Improvements, including, without limitation, the right to
develop, make, have made, use, offer for sale, sell and import any material or
method within the Patent Rights and Improvements.
3.2 SUBLICENSES. Corvas will have the right to grant sublicenses to
practice within the Patent Rights and Improvements, provided that such
sublicenses are approved in advance by VGI, which approval shall be within VGI's
reasonable discretion in light of VGI's residual interests in the Patent Rights
and Improvements, excluding any economic considerations not directly related to
the value of the Patent Rights or Improvements. Notwithstanding any other
provision contained herein, upon termination of this Agreement (except a deemed
termination as the result of the completion of the proposed merger under the
Merger Agreement), each sublicense granted by Corvas will remain in effect
according to its terms and Corvas shall assign any and all such sublicenses to
VGI.
3.3 SPONSORED RESEARCH.
(a) Corvas shall promptly negotiate and enter into an agreement ("BI
Sponsored Research Agreement") with Beth Israel Hospital, which agreement must
be reasonably approved by VGI in advance. The BI Sponsored Research Agreement
shall provide: (a) Corvas shall grant a nonexclusive, fully paid, royalty-free
worldwide sublicense, without the right to grant sublicenses, to Dr. Schnitzer,
laboratory personnel under his direction and control, and any collaborator
reasonably approved by Corvas in light of Corvas' interests to practice within
the Patent Rights and Improvements during the term of this Agreement in such
fields (other than a field with initial focus directed to tumor vasculature) as
are mutually agreed by VGI, Corvas and Dr. Schnitzer; (b) the same publication
rights and conditions as set forth in Section 8.3 of this Agreement; and (c)
that Corvas, during the first year following execution of this Agreement while
this Agreement is in effect, shall fund the BI sponsored research at [***] per
year during such time as Dr. Schnitzer is on sabbatical (or such greater amount
in Corvas' sole discretion), and [***] per year during such time as Dr.Schnitzer
has returned to Beth Israel Hospital from sabbatical (or such greater amount in
Corvas' sole discretion), such funding to be calculated on a per month basis.
In addition, the BI Sponsored Research Agreement will provide that Corvas shall,
during the [ *** ] following execution of this Agreement while this Agreement
is in effect, fund the BI sponsored research at up to [***] per year during
such time as Dr. Schnitzer is on sabbatical and
3.
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
up to [***] per year during such time as Dr. Schnitzer has returned to Beth
Israel Hospital from sabbatical (the full amount of [***] or [***], as
applicable, to be allocated by Corvas between Beth Israel Hospital and the
University of Massachusetts in its sole discretion), and calculated on a per
month basis. Notwithstanding the foregoing, in the event that Dr. Schnitzer is
retained as a full-time employee by Corvas, such funding may be discontinued by
Corvas at any time. The obligation of Corvas to enter into the BI Sponsored
Research Agreement shall be conditioned solely on whether Beth Israel Hospital
will agree to the terms of the BI Sponsored Research Agreement set forth herein,
and that any rights retained by Beth Israel Hospital in the research conducted
pursuant to the BI Sponsored Research Agreement shall be licensed or otherwise
made available to Corvas under terms substantially similar to the those
contained in the letter of intent described in Section 5 of Exhibit A-1 attached
hereto and that [ *** ]. If the conditions specified in the preceding
sentence are not met, then Corvas shall have no obligation to enter into the
BI Sponsored Research Agreement or grant the sublicense contemplated herein.
Corvas shall also cooperate in good faith with VGI and Dr. Schnitzer in
negotiations with potential collaborators for such sponsored research,
provided Corvas, in its reasonable discretion in light of Corvas' interests,
has approved the potential collaboration for the sponsored research and shall
grant such rights to the collaborator as may be necessary and appropriate.
(b) Corvas shall promptly negotiate and enter into a Sponsored
Research Agreement with the University of Massachusetts (the "UM Sponsored
Research Agreement"), which agreement must be reasonably approved by VGI in
advance. The UM Sponsored Research Agreement shall provide: (a) Corvas shall
grant a nonexclusive, fully paid, royalty-free worldwide sublicense, without the
right to grant sublicenses, to Dr. Jacobson and laboratory personnel under his
direction and control to practice within the Patent Rights and Improvements in
such fields (other than a field with initial focus directed to tumor
vasculature) as are mutually agreed by VGI, Corvas and Dr. Jacobson during the
term of this Agreement; (b) the same publication rights and conditions as set
forth in Section 8.3 of this Agreement; and (c) that Corvas, during the [ *** ]
following execution of this Agreement while this Agreement is in effect,
shall fund the sponsored research at [***] per year (or such greater amount in
Corvas' sole discretion), such funding to be calculated on a per month basis.
In addition, the UM Sponsored Research Agreement will provide that Corvas shall,
during the [ *** ] following execution of this Agreement provided this
Agreement is in effect, fund the sponsored research at up to [***] per year
during such time as Dr. Schnitzer is on sabbatical and up to [***] per year
when Dr. Schnitzer has returned to Beth Israel Hospital from
4.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
sabbatical (the full amount of [***] or [***], as applicable to be allocated by
Corvas between Beth Israel Hospital and the University of Massachusetts in its
sole discretion and to be calculated on a per month basis); provided however
that if Dr. Schnitzer is retained by Corvas as a full-time employee, such
aggregate amount of funding allocated between BI and UM shall be reduced to
[***] per year (or such greater amount in Corvas' sole discretion). The
obligation of Corvas to enter into the UM Sponsored Research Agreement shall be
conditioned on whether the University of Massachusetts will agree to the terms
of the UM Sponsored Research Agreement as set forth herein, and the University
of Massachusetts and Corvas can reasonably agree upon the rights, if any, to be
retained by University of Massachusetts in the research conducted pursuant to
the UM Sponsored Research Agreement and [ *** ]. If the conditions specified
in the preceding two sentences are not met, then Corvas shall have no
obligation to enter into the UM Sponsored Research Agreement or grant the
sublicense contemplated herein
ARTICLE 4
OWNERSHIP; INTELLECTUAL PROPERTY
4.1 PRESERVATION OF TITLE. During the term of this Agreement, VGI shall
use its best efforts to preserve and maintain full ownership and title to and in
the Patent Rights and Improvements. Notwithstanding any other provision of this
Agreement, VGI shall have the sole authority to negotiate any amendments or
changes to the BI License or the UC License. In the event Corvas requests an
amendment or change, VGI shall negotiate such amendment or change unless such
amendment or change is unreasonable in light of VGI's residual interests in the
Patent Rights and Improvements. Any finally negotiated proposed amendment or
change shall be subject to Corvas' consent, which consent shall not be withheld
unless such amendment or change is unreasonable in light of Corvas' interests
under this Agreement and its rights under the Option Agreement. VGI shall
execute any amendments or changes to the BI License or UC License negotiated
pursuant to this Section 4.1.
5.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
4.2 FILING, PROSECUTION AND MAINTENANCE OF PATENT APPLICATIONS.
The parties acknowledge that the UC License and the BI License held by
VGI have provisions governing the prosecution and maintenance of patents and
patent applications. During the term of this Agreement, Corvas shall be deemed
to have "stepped into the shoes" of VGI with respect to such licenses and,
except as expressly stated herein or in the Option Agreement to the contrary,
shall be deemed to have all the rights, obligations and duties of VGI
thereunder, including directing the preparation, filing prosecution and
maintenance of Patent Rights and Improvements as provided under the UC License
and the BI License and as set forth herein below. VGI and Corvas shall consult
and cooperate on the exercise of any such rights, obligations and duties. After
the receipt from the University of California or Beth Israel Hospital of a
notice of the occurrence of an event of default by Corvas under the UC License
or BI License, respectively, [ *** ]. If any provision of this Agreement and
either of the respective licenses conflict, the provisions of the subject
license shall prevail. Subject to the foregoing, the parties shall allocate
the rights, obligations and duties regarding the prosecution and maintenance
of patents and patent applications among themselves as follow:
(a) VGI shall have the right to reasonably approve any outside
patent counsel selected by Corvas with respect to preparation, filing,
prosecution and maintenance of Patent Rights and Improvements. VGI and Corvas
will keep each other and their respective patent counsel advised of the status
of such preparation, filing, prosecution and maintenance and shall provide each
other and such counsel with copies of all official communications, amendments
and responses with respect to the patent applications, patents and licenses
contained in the Patent Rights and Improvements. All such official
communications received by either VGI or Corvas shall be provided promptly to
the other, and proposed responses and amendments shall be provided by Corvas to
VGI for VGI's review sufficiently prior to filing to allow for review and
comment by VGI; provided that VGI's responses will be provided in a timely
fashion. Corvas will use all reasonable efforts to implement reasonable requests
by VGI with respect to the foregoing. In the event that VGI disagrees with the
actions proposed to be taken by Corvas pursuant to this Section 4.2, then VGI
and Corvas shall each present to Dr. Harry Gruber their respective positions
with regard to such disagreement and Dr. Gruber shall make a decision as to the
appropriate action to be taken.
(b) Corvas shall pay for all of its Patent Costs during the term
of this Agreement. "Patent Costs" as used in this Agreement shall mean
out-of-pocket expenses incurred by Corvas during the term of this Agreement in
connection with the preparation, filing, prosecution and maintenance of patent
applications, patents and
6.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
licenses included or to be included within the Patent Rights and any
Improvements, including the fees and expenses of attorneys and patent agents
retained by Corvas, filing fees and maintenance fees (including, but not limited
to, license payments or fees) and any costs associated with its patent
infringement actions pursuant to Section 4.3.
(c) VGI will cooperate with Corvas in the preparation, filing
and maintenance and prosecution of the patent applications, patents and licenses
included or to be included in the Patent Rights or any Improvements by
disclosing such information as may be useful, necessary, or appropriate,
including but not limited to by promptly executing such documents as Corvas may
reasonably request to effect such efforts.
(d) If Corvas decides, at any time, not to file or maintain a
patent application or patent within the Patent Rights and any Improvements, then
VGI shall have the right, but not the obligation, to file and maintain such
application or patent at its own expense. In the event that VGI elects to file
or maintain an application or patent pursuant to this Section 4.2(d), Corvas
agrees to loan up to $150,000 (less any amounts previously loaned pursuant to
Section 4.3(c)) to the Stockholders for Patent Costs related thereto pursuant to
a promissory note in the form attached hereto as Exhibit B (the "Promissory
Note").
4.3 PATENT ENFORCEMENT.
As set forth above, during the term of this Agreement, Corvas shall be
deemed to have "stepped into the shoes" of VGI with respect to the UC License
and the BI License and, except as expressly stated herein or in the Option
Agreement to the contrary, shall be deemed to have all the rights, obligations
and duties of VGI thereunder, including enforcement of Patent Rights and
Improvements as provided under the UC License and the BI License and as set
forth herein below. VGI and Corvas shall consult and cooperate on the exercise
of any such rights, obligations and duties. Subject to the foregoing, the
parties shall allocate the rights, obligations and duties regarding the
enforcement of patents and patent applications among themselves as follow:
(a) During the term of this Agreement, if either party becomes
aware of the infringement of any Patent Rights or Improvements, it shall
promptly notify the other in writing, but in all events within thirty days and
provide all relevant information known to such party.
(b) Corvas shall be responsible for defending and enforcing the
Patent Rights or Improvements and shall pay all expenses related thereto.
However, VGI shall receive notice of and shall have the right, at its expense,
to participate in the protection and defense of the Patent Rights or
Improvements. All recoveries, damages and awards resulting from such
enforcement, after reimbursement of any outstanding
7.
<PAGE>
litigation expenses incurred by Corvas, shall belong to VGI. VGI agrees to
cooperate reasonably in any such litigation initiated by Corvas, including
participating as a necessary party, supplying documentary evidence and making
witnesses in VGI's employment available.
(c) If Corvas does not, within 120 days after receiving notice
or otherwise becoming aware of a third party infringement of any of the Patent
Rights or Improvements, cause the infringement to cease or commence an action to
restrain or enjoin such third party infringement, VGI shall have the right, but
not the obligation, to take such legally permissible action as it deems
necessary or appropriate to enforce the Patent Rights or Improvements and
restrain such infringement, providing such action is permitted by the UC License
or the BI License, as the case may be. In such event, all costs, fees and
expenses incurred in connection with the defense and enforcement of the Patent
Rights or Improvements shall be borne by VGI. In the event VGI incurs any fees
and expenses in connection with the defense and enforcement of the Patent Rights
or Improvements pursuant to this Section 4.3(c), Corvas agrees to loan up to
$150,000 (less any amounts previously loaned pursuant to Section 4.2(d)) to the
Stockholders for such costs pursuant to a Promissory Note in the form attached
hereto as Exhibit B. In addition, to the extent that VGI requires additional
funds in connection with the defense and enforcement of the Patent Rights or
Improvements, VGI may conduct an equity financing with the reasonable consent of
Corvas so long as each purchaser of VGI's equity securities in such financing
becomes a party to the Option Agreement and signs an investment letter in the
form attached as Exhibit C to the Option Agreement prior to the closing of such
financing, and such financing by VGI will not cause Corvas to lose any available
exemptions from the registration requirements of the Securities Act of 1933, as
amended, for the exchange of securities under the Agreement and Plan of Merger
and Reorganization attached as Exhibit B to the Option Agreement in Corvas' sole
determination. Corvas agrees to cooperate reasonably in any such litigation
initiated by VGI, including participating as a necessary party, supplying
documentary evidence and making witnesses in Corvas' employment available. Any
recoveries arising from such proceedings shall belong to VGI.
ARTICLE 5
TERM; TERMINATION
5.1 TERM. This Agreement will commence as of the Effective Date of this
Agreement and, unless sooner terminated as provided hereunder, will terminate
upon the earlier of the expiration or termination of the Option Period (as
defined in the Option Agreement).
8.
<PAGE>
5.2 TERMINATION BY EITHER PARTY. This Agreement may be terminated by
either party only in the event the other party substantially fails to perform or
otherwise materially breaches any of the material terms, covenants or provisions
of this Agreement or the Option Agreement. Such termination will be effected by
giving written notice of intent to terminate to the breaching party stating the
grounds therefor. The party receiving the notice shall have 30 days thereafter
to correct such breach. If such breach is not corrected within said 30 days
after notice as aforesaid, then this Agreement shall automatically terminate.
Termination pursuant to this Section 5.2 shall not relieve the defaulting party
from liability or damages to the other party as a result of defaulting party's
breach of this Agreement.
5.3 RIGHTS UPON TERMINATION. Notwithstanding any other provision of this
Agreement, upon any termination of this Agreement for any reason other than a
deemed termination as the result of the completion of the proposed merger under
the Merger Agreement, the licenses granted hereunder shall terminate. Upon such
termination, Corvas shall have no right to practice within the Patent Rights or
Improvements and all right, title and interest in, or other incidents of
ownership under, the Patent Rights and Improvements shall revert to, and become
the sole property of, VGI. Upon any such termination and upon VGI's request,
Corvas shall promptly return all materials, samples, documents, information, and
other materials which embody or disclose Patent Rights or Improvements. Except
in the event of a deemed termination as the result of the completion of the
proposed merger under the Merger Agreement, Corvas shall grant to VGI a
worldwide, royalty-free, nonexclusive license, with the right to sublicense, any
Proprietary Asset owned or licensed to Corvas which is necessary for practice of
Improvements and which Corvas has a right to grant for use with such
Improvements. Any such termination shall not relieve either party from any
obligations accrued to the date of such termination and each party shall be
required to abide by its confidentiality obligations as described in Section
7.1. Notwithstanding any termination of this Agreement, Corvas shall: (a)
continue to abide by its obligations to indemnify VGI as described in Section
6.1, (b) cooperate reasonably in any such litigation maintained by, or assigned
to, VGI, including participating as a necessary party, supplying documentary
evidence and making witnesses in Corvas' employment available; and (c) execute
such assignments, grants, agreements, licenses, sublicenses or other documents
reasonably necessary to vest VGI with all right, title and interest to the
Patent Rights and Improvements.
ARTICLE 6
INDEMNIFICATION
6.1 INDEMNIFICATION. Corvas agrees to indemnify VGI, its directors,
officers, shareholders and employees and to hold such parties harmless from any
action, claim, or
9.
<PAGE>
liability, including without limitation liability for death, personal injury,
and/or property damage, arising out of (i) the manufacture, use, sale or other
disposition of products developed under this Agreement during the term of this
Agreement by Corvas or its Affiliates or sublicensees, or (ii) the use of the
Patent Rights or Improvements pursuant to this Agreement; provided, however,
that such indemnification shall not apply to any claims resulting from the
willful misconduct, negligence or fraud of VGI, its directors, officers,
stockholders or employees. In the event of the assertion or commencement by any
Person of any claim or Legal Proceeding (whether against VGI, the Stockholders
or against any other Person) with respect to which Corvas may become obligated
to hold harmless, indemnify, compensate or reimburse any indemnitee pursuant to
this Section 6.1, Corvas shall defend such claim or Legal Proceeding, subject to
the following:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by Corvas;
(b) each Stockholder and VGI shall make available to Corvas any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(c) Corvas shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the reasonable consent of the Stockholders'
Agent. Consent may not be withheld if VGI or any Stockholder against whom the
claim has been made receives, as part of the settlement or compromise, an
unconditional release relating to such claim or Legal Proceeding.
Stockholders' Agent shall give Corvas prompt notice of the commencement of
any such Legal Proceeding against VGI or the Stockholders; provided, however,
that any failure on the part of Stockholders' Agent to so notify Corvas shall
not limit any of the obligations of Corvas under this Agreement (except to the
extent such failure materially prejudices the defense of such Legal Proceeding).
6.2 LIMITATION OF LIABILITY. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT, IN NO EVENT WILL EITHER PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR AFFILIATES BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, WHETHER BASED UPON A CLAIM OR
ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR
OTHERWISE, ARISING OUT OF THIS AGREEMENT.
10.
<PAGE>
ARTICLE 7
CONFIDENTIALITY
7.1 CONFIDENTIALITY. During the term of this Agreement, and for a period
of five years thereafter, each party hereto will maintain in confidence all
Confidential Information disclosed by the other party hereto, with the proviso
that each party will maintain Confidential Information of the other that is
directly related to the Patent Rights, Improvements ("Patent Confidential
Information") in confidence unless and until the other party provides written
authorization for such Patent Confidential Information to be disclosed. Neither
party will use, disclose nor grant use of Confidential Information except as
required to perform under this Agreement. To the extent that disclosure is
authorized by this Agreement, the disclosing party will obtain prior agreement
from its employees, agents, consultants, Affiliates, sublicensees or clinical
investigators to whom disclosure is to be made to hold in confidence and not
make use of such information for any purpose other than those permitted by this
Agreement. Each party will use at least the same standard of care as it uses to
protect its own Confidential Information to ensure that such employees, agents,
consultants, Affiliates, sublicensees and clinical investigators do not disclose
or make any unauthorized use of such Confidential Information. Each party will
promptly notify the other upon discovery of any unauthorized use or disclosure
of the Confidential Information. "Confidential Information" shall not include
any information which:
(a) was already known to the receiving party other than by
disclosure of the disclosing party, at the time of disclosure by the other
party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the other party;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;
(d) was independently developed by the receiving party separate
from the efforts contemplated by this Agreement as supported by competent
written proof; or
(e) was disclosed to the receiving party by a third party who
had no obligation to the other party not to disclose such information to others.
The parties agree that the material financial terms of this Agreement will also
be considered Confidential Information of both parties.
11.
<PAGE>
7.2 AUTHORIZED DISCLOSURE. Each party may disclose the Confidential
Information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation or
complying with applicable governmental regulations, provided that if such party
is required to make any such disclosure of the Confidential Information it will
to the extent practicable give reasonable advance notice to the other party of
such disclosure requirement and, except to the extent inappropriate in the case
of patent applications, will use its best efforts to secure confidential
treatment of such information required to be disclosed.
7.3 PUBLICATIONS. Corvas agrees that VGI and the Stockholders shall have
the right to publish in accordance with customary academic practices and
policies. For purposes of this Section 7.3, "publish" and "publication" shall
refer to oral, written or visual public disclosure. However, prior to
publication, VGI or the respective Stockholders, as the case may be, shall
submit to Corvas copies of proposed publications which contain subject matter
relating to Patent Rights or Improvements and afford Corvas thirty days to
review the publication(s). Upon timely written request by Corvas, VGI, or the
respective Stockholders, as the case may be, shall delay any such publication
until the preparation and filing of a patent application, which delay shall not
exceed an additional 60 days. VGI or the respective Stockholders, as the case
may be, shall remove any Confidential Information provided by Corvas upon
request by Corvas.
ARTICLE 8
DISPUTE RESOLUTION
8.1 NEGOTIATION OF DISPUTES. If a dispute arises between the parties
relating to the interpretation or performance of this Agreement or the grounds
for the termination thereof, and the parties cannot resolve the dispute within
thirty days of a written request by either party to the other, such dispute
shall be referred to the Chief Executive Officers of each party for resolution.
The Chief Executive Officers shall hold a meeting to attempt in good faith to
negotiate a resolution of the dispute prior to pursuing other available
remedies. If within 30 days after such meeting, the Chief Executive Officers
have not succeeded in negotiating a resolution of the dispute, such dispute
shall be submitted to arbitration as set forth in Section 8.2 below.
8.2 ARBITRATION. Disputes that have not been successfully resolved
pursuant to Section 8.1 above shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitrations in
La Jolla, California. The arbitration shall be conducted by three arbitrators,
one selected by each party to the arbitration and one selected by arbitrators
appointed by the parties. If the arbitrators cannot agree on a third
arbitrator, the third arbitrator shall be selected in accordance with the AAA
rules. If a
12.
<PAGE>
party fails to designate an arbitrator within the time limits set by the AAA
rules, the arbitrator selected by the other party shall be the sole arbitrator.
All arbitrators must be knowledgeable in the subject matter at issue in the
dispute. Each of the parties shall be entitled to conduct discovery under the
California Rules of Civil Procedure then in effect. Each party shall initially
bear its own costs and legal fees associated with such arbitration. The
prevailing party in any such arbitration shall be entitled to recover from the
other party the reasonable attorneys' fees, costs and expenses incurred by such
prevailing party in connection with such arbitration. The decision of the
arbitrator(s) shall be final and may be sued on or enforced by the party in
whose favor it runs in any court of competent jurisdiction at the option of the
successful party. The rights and obligations of the parties to arbitrate any
dispute relating to the interpretation or performance of this Agreement or the
grounds for the termination thereof, shall survive the expiration or termination
of this Agreement for any reason. The arbitrator(s) shall be empowered to award
specific performance, injunctive relief and other equitable remedies as well as
damages, but shall not award any damages in excess of any limitations set forth
in this Agreement.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 INDEPENDENT CONTRACTORS. In making and performing this Agreement,
Corvas and VGI act and shall act at all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between Corvas and
VGI. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party except as specifically provided
herein.
9.2 NO FIDUCIARY RELATIONSHIP; RELEASE. Nothing in this Agreement or in
the Option Agreement shall be interpreted to impose upon Corvas any fiduciary
duty to or fiduciary relationship with respect to VGI or any of its directors,
officers or stockholders. VGI hereby agrees not to sue Corvas for and to
release Corvas from any and all claims for breach of fiduciary duty towards VGI
or its Stockholders arising out of this Agreement or the Option Agreement.
9.3 FURTHER ASSURANCE. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request for
the purpose of carrying out or evidencing any of the transactions contemplated
by this Agreement.
9.4 EXPENSES. Except as otherwise provided herein, all costs and expenses
incurred in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such costs and expenses.
13.
<PAGE>
9.5 ASSIGNMENT; BINDING EFFECT. Except as provided herein, during the
term of this Agreement neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except that Corvas may assign all or any of its rights and
obligations hereunder to any Affiliate of Corvas, provided that Corvas shall
remain liable for performance. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of (i) VGI and
its successors and permitted assigns, (ii) Corvas and its successors and
permitted assigns and (iii) the Stockholders and their respective heirs,
representatives, estates, successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
9.6 NOTICES. Any notice or other communication required or permitted to
be delivered to either party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered or certified mail (return receipt requested), by courier or express
delivery service or by facsimile, with the original by mail) to the address or
facsimile telephone number set forth beneath the name of such party below (or to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other party hereto):
If to VGI:
Harry E. Gruber, MD
P.O. Box 675272
Rancho Santa Fe, CA 92067
Facsimile No: (619) 756-8158
with a copy to:
Kevin M. Bagley, Esq.
Dysart, Dubick & Bagley, LLP
701 B Street, Suite 1525
San Diego, California 92101
Facsimile No: (619) 696-6280
if to Corvas:
Corvas International, Inc.
3030 Science Park Road
San Diego, California 92121
14.
<PAGE>
Facsimile No. (619) 455-7895
Attention: Corporate Secretary
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92123
Facsimile No. (619) 453-3555
Attention: M. Wainwright Fishburn, Jr., Esq.
9.7 AMENDMENT. No amendment, modification or supplement of any provision
of this Agreement will be valid or effective unless made in writing and signed
by a duly authorized officer of each party.
9.8 WAIVER. No provision of this Agreement, unless such provision
otherwise provides, will be waived by any act, omission or knowledge of a party
or its agents or employees except by an instrument in writing expressly waiving
such provision and signed by a duly authorized officer of the waiving party.
9.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.10 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement between the
parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings between the parties with respect thereto.
No addition to or modification of any provision of this Agreement shall be
binding upon either party hereto unless made in writing and signed by both
parties hereto.
9.11 OTHER AGREEMENTS. Except as expressly set forth in this Agreement,
nothing in this Agreement shall limit any of the rights, remedies or obligations
of the parties under any other agreement between Corvas and VGI and/or a
Stockholder of VGI.
9.12 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of law).
15.
<PAGE>
9.13 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
9.14 CONSTRUCTION.
(a) Headings of the Sections of this Agreement are for the
convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
(b) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(c) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(d) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(e) Except as otherwise indicated, all references in this Agreement
to "Sections" are intended to refer to Sections of this Agreement.
16.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement.
CORVAS INTERNATIONAL, INC. VASCULAR GENOMICS INC.
By: /s/ JOHN E. CRAWFORD By: /s/ HARRY GRUBER
------------------------------ ----------------------------
Title: Executive Vice President Harry Gruber, President
& Chief Executive Officer
17.
<PAGE>
EXHIBIT A
DEFINITIONS
1. "Affiliate" means any entity that directly or indirectly Owns, is
Owned by or is under common Ownership, with a party to this Agreement, where
"Owns" or "Ownership" means direct or indirect possession of at least 50 percent
of the outstanding voting securities of a corporation or a comparable equity
interest in any other type of entity.
2. "BI License" shall mean the rights held by VGI under that certain term
sheet set forth in Section 5 of Exhibit A-1 and any final license agreement
negotiated pursuant to such term sheet.
3. "Confidential Information" means any confidential or proprietary
information including Patent Confidential Information and any other information
relating to any research project, work in process, future development,
scientific, engineering, manufacturing, marketing, business plan, financial or
personnel matter relating to either party, its present or future products,
sales, suppliers, customers, employees, investors or business, whether in oral,
written, graphic or electronic form, that is disclosed by a disclosing party to
a receiving party.
4. "Improvements" mean all inventions, data, know-how, methods, materials
or discoveries, whether patentable or not, conceived, discovered, enhanced or
developed either directly or indirectly through use by VGI, Corvas or their
Affiliates of Patent Rights provided by VGI to Corvas during the term of this
Agreement. Each party agrees to promptly provide the other with notice of any
Improvement it becomes aware of during this Agreement, such notice being of
sufficient detail to allow a party to evaluate the scientific and economic
aspects of the Improvement.
5. "Patent Rights" means VGI's rights, either by ownership, assignment or
by license with a right to sublicense, to all inventions or discoveries, and
information directly related thereto, including inventions and the patents and
patent applications listed on Exhibit A-1 hereto, and any and all patents
issuing therefrom. "Patents" as used in this Agreement will include, without
limitation, all patents, regular and provisional patent applications,
substitutions, divisionals, reissues, continuations, continuations in part,
inventors' certificates, and all foreign counterparts of the aforementioned that
are within Patent Rights.
6. "Stockholders" means the individuals listed on Exhibit A of the Option
Agreement.
7. "UC License" means the agreement set forth in Section 4 of Exhibit
A-1.
18.
<PAGE>
EXHIBIT A-1
VGI PATENT RIGHTS
1. Three issued U.S. patents (US 5,281,700, US 5,587,297 and US
5,610,008; assigned to U.C. Regents);
2. [***] provisional and [***] regular pending U.S. patent
applications [***], subject to issuance of license pursuant to item 5,
herein below;
3. One PCT application (published as WO94/04559; assigned to U.C.
Regents) that has entered the national stage in the [***];
4. An exclusive license agreement, dated as of April 25, 1996, between
U.C. Regents and Vascular Technologies, Inc., a predecessor in interest to VGI,
to rights held by U.C. Regents to the inventions, including U.C. Regents' rights
derived from Dr. Jacobson and Dr. Schnitzer;
5. A binding letter of intent outlining the terms and conditions of an
exclusive license to be granted by Beth Israel Hospital to VGI to rights held
by Beth Israel to certain patent rights referenced in item 2 above, [***];
6. Two written agreements between Dr. Jacobson and University of
Massachusetts, whereby University waived its rights in Invention Disclosure No.
[***], and assigned sole [***]; and
7. Material Transfer Agreements, [***], with the following researchers
who signed on behalf of their respective employers: [***].
8. One PCT application (International Application No. PCT/US 96/14177
filed September 6, 1996).
19.
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$_________ ___________, 199__
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to pay
to the order of CORVAS INTERNATIONAL, INC., a Delaware corporation (the
"Company"), at 3030 Science Park Road, San Diego California 92121, or at such
other place as the holder hereof may designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of _________ Dollars without interest. The outstanding amount hereunder
shall be due and payable in full on _________, _____; PROVIDED, HOWEVER, that in
the event, prior to payment in full of this Note, the Company exercises its
option as set forth in Section 1.4 of that certain Option Agreement, dated June
29, 1997, between the Company, TopoGen Inc. and the stockholders of TopoGen (the
"Option Agreement"), this Note shall be canceled and the balance of the Note
shall be offset against the Dollar Amount prior to the calculation of Subsequent
Shares as set forth in Section 1.4 of the Option Agreement.
This Note may be prepaid at any time without penalty.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed______________________________________
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